<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
L.A. GEAR, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
[LA GEAR LOGO]
February 28, 1995
To our Shareholders:
It is a pleasure to invite you to attend the 1995 Annual Meeting of
Shareholders of L.A. Gear, Inc., to be held Tuesday, April 18, at 10:00 a.m. at
the Loews Santa Monica Beach Hotel, 1700 Ocean Avenue, Santa Monica, California.
The formal notice and proxy statement for the Annual Meeting are attached to
this letter.
It is important that your shares be represented at the Annual Meeting.
Accordingly, whether or not you plan to attend the meeting, we urge you to
complete, date and sign the enclosed proxy card as soon as possible and return
it in the envelope provided. If you decide to attend, you can still vote your
shares in person, if you wish.
On behalf of the Board of Directors, I extend our thanks and appreciation
to all shareholders for your support and cooperation and look forward to seeing
you on April 18th.
Sincerely,
/s/ Stanley P. Gold
---------------------------
Stanley P. Gold
Chairman of the Board
and Chief Executive Officer
<PAGE> 3
L.A. GEAR, INC.
2850 OCEAN PARK BLVD.
SANTA MONICA, CALIFORNIA 90405
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 18, 1995
TO THE SHAREHOLDERS OF L.A. GEAR, INC.
Notice is hereby given that the annual meeting of shareholders of L.A.
Gear, Inc. (the "Company") will be held at the Loews Santa Monica Beach Hotel,
1700 Ocean Avenue, Santa Monica, California, on Tuesday, April 18, 1995, at
10:00 a.m., Los Angeles time, for the following purposes:
1. ELECTION OF DIRECTORS. To elect a total of ten persons to the Board of
Directors to serve until the next annual meeting of shareholders and
until their successors are elected and have qualified as follows:
a. To elect seven Directors by vote of the holders of Common Stock,
voting as a separate class. The Board of Directors' nominees are:
William L. Benford
Stephen A. Koffler
Walter C. Bladstrom
Ann E. Meyers
Allan E. Dalshaug
Clifford A. Miller
Willie D. Davis
b. To elect three Directors by vote of the holders of Series A
Cumulative Convertible Preferred Stock, voting as a separate
class. The Series A nominees are:
Stanley P. Gold
Robert G. Moskowitz
Vappalak A. Ravindran
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS. To
ratify the Board of Directors' selection of Price Waterhouse as the
Company's independent accountants for the fiscal year ending November
30, 1995.
3. OTHER BUSINESS. To consider and act upon such other business as may
properly come before the meeting.
Section 2.11(b) of the Company's Bylaws provides for the nomination of
directors to be elected by holders of the Company's Common Stock in the
following manner:
Notice of intention to make any nomination, other than by the Board of
Directors, shall be made in writing and shall be received by the President of
the Company no more than 60 days prior to any meeting of shareholders called for
the election of directors, and no more than 10 days after the date the notice of
such meeting is sent to shareholders pursuant to Section 2.2 of these bylaws;
provided, however, that if only 10 days' notice of the meeting is given to
shareholders, such notice of intention to nominate shall be received by the
President of the Company not later than the time fixed in the notice of the
meeting for the opening of the meeting. Such notification shall contain the
following information to the extent known to the notifying shareholder: (a) the
name and address of each proposed nominee; (b) the principal occupation of each
proposed nominee; (c) the number of shares of voting stock of the Company owned
by each proposed nominee; (d) the name and residence address of the notifying
shareholder; and (e) the number of shares of voting stock of the Company owned
by the notifying shareholder. Nominations not made in accordance herewith shall
be disregarded by the then chairman of the meeting, and the inspectors of
election shall then disregard all votes cast for each such nominee.
<PAGE> 4
Only shareholders of record at the close of business on February 21, 1995
will be entitled to notice of the annual meeting and to vote at the annual
meeting and at any adjournments thereof.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Thomas F. Larkins
---------------------
Thomas F. Larkins
Secretary
Dated: February 28, 1995
WHETHER OR NOT YOU CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. YOU MAY
REVOKE YOUR PROXY IF YOU DECIDE TO ATTEND THE ANNUAL MEETING AND WISH TO VOTE
YOUR SHARES IN PERSON.
<PAGE> 5
L.A. GEAR, INC.
2850 OCEAN PARK BOULEVARD
SANTA MONICA, CALIFORNIA 90405
(310) 452-4327
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 18, 1995
GENERAL
This Proxy Statement is furnished to the shareholders of L.A. Gear, Inc.
(the "Company") in connection with the solicitation by its Board of Directors
(the "Board") of proxies to be voted at the 1995 Annual Meeting of Shareholders
to be held at Loews Santa Monica Beach Hotel, 1700 Ocean Avenue, Santa Monica,
California on Tuesday, April 18, 1995 at 10:00 a.m. Los Angeles time and at any
adjournment thereof (the "Meeting"). The Company expects to mail its proxy
soliciting materials for the Meeting on or about February 28, 1995.
A separate form of Proxy applies to the Company's Common Stock and Series A
Preferred Stock. Enclosed is a Proxy for the shares of stock held by you as of
the close of business on February 21, 1995 (the "Record Date"). Unless otherwise
indicated on the Proxy, shares represented by any Proxy will, if the Proxy is
properly executed and timely received by the Company, be voted FOR the
applicable nominees for director and FOR the ratification of the Board's
selection of Price Waterhouse as the Company's independent accountants for the
fiscal year ending November 30, 1995.
VOTING
Only shareholders of record as of the Record Date are entitled to vote at
the Meeting. The outstanding capital stock of the Company on that date consisted
of 22,936,433 shares of common stock, without par value ("Common Stock"), and
1,000,000 shares of Series A Cumulative Convertible Preferred Stock ("Series A
Preferred Stock"). Trefoil Capital Investors, L.P. ("Trefoil") is the holder of
all of the issued and outstanding shares of Series A Preferred Stock. A majority
of the voting power of the outstanding shares of capital stock of the Company,
represented in person or by Proxy, shall constitute a quorum for the transaction
of business at the Meeting (the "Quorum"). Abstentions will be treated as shares
that are present and entitled to vote for purposes of determining the presence
of a quorum but as unvoted for purposes of determining the approval of any
matter submitted to the shareholders for a vote. If a broker indicates on the
Proxy that it does not have discretionary authority as to certain shares to vote
on a particular matter, those shares will not be considered as present and
entitled to vote with respect to that matter.
With respect to the election of directors, the Company's Restated Articles
of Incorporation, as amended (the "Restated Articles"), provide that as long as
shares of Series A Preferred Stock having an aggregate stated value of at least
$25 million are outstanding, and as long as Trefoil (or any successor which is
controlled, directly or indirectly, by the officers or directors of Shamrock
Capital Advisors, Inc. ("SCA"), a company which provides management and
consulting services, including to Trefoil and companies in which Trefoil invests
(which includes the Company)) owns beneficially or of record more than a
majority of the outstanding shares of Series A Preferred Stock (collectively,
the "Requisite Conditions"), the holders of Series A Preferred Stock have the
right, voting separately as a series, to elect three directors of the Company
and the holders of Common Stock, voting separately as a single class are
entitled to elect the remaining directors.
<PAGE> 6
Except as set forth below, in the election of directors, the holders of all
classes of capital stock of the Company are entitled to one vote per share. Each
holder of Common Stock may cumulate his votes for directors, giving one
candidate a number of votes equal to the product of the number of directors to
be elected times the number of shares of Common Stock held by such holder, or he
may distribute his votes on the same principle among as many candidates as he
shall see fit. For a holder of Common Stock to exercise his cumulative voting
rights, he must give notice at the Meeting, prior to the commencement of voting,
of his intention to cumulate his votes. If any holder of Common Stock gives such
notice, then every holder of Common Stock entitled to vote may cumulate his
votes for candidates in nomination.
The seven directors to be elected by the holders of Common Stock, voting as
a separate class, shall be the seven candidates receiving the highest number of
votes cast by holders of Common Stock. Discretionary authority to cumulate votes
is hereby solicited by the Board and return of the Proxy shall grant such
authority.
The three directors to be elected by the holders of Series A Preferred
Stock, voting as a separate class, shall be the three candidates receiving the
highest number of votes cast by holders of Series A Preferred Stock. Trefoil,
the holder of all of the outstanding shares of Series A Preferred Stock, has
advised the Company that it intends to vote all shares of Series A Preferred
Stock in favor of the individuals nominated by the holder of the Series A
Preferred Stock.
As to matters other than the election of directors, the Restated Articles
provide that the holders of Common Stock and Series A Preferred Stock vote
together as a single class. With respect to such matters, each share of Common
Stock entitles the holder thereof to one vote; each share of Series A Preferred
Stock entitles the holder thereof to ten votes (the number of votes which could
be cast in such vote by the holder of the number of whole shares of Common Stock
into which each share of Series A Preferred Stock is convertible on the Record
Date), with the Series A Preferred Stock having an aggregate of 10 million votes
on such matters. As to matters other than the election of directors, an
aggregate of 32,936,433 votes may be cast by the holders of Common Stock and
Series A Preferred Stock.
The proposal to ratify the appointment of Price Waterhouse as the Company's
independent accountants for the fiscal year ending November 30, 1995 requires
the affirmative vote of a majority of the Common Stock and Series A Preferred
Stock represented and voting together as a single class at the Meeting (provided
that such affirmative vote also represents a majority of the Quorum). Trefoil
has advised the Company that it intends to vote all shares of Series A Preferred
Stock in favor of the ratification of the appointment of Price Waterhouse as the
Company's independent accountants.
ELECTION OF DIRECTORS
The Company's Bylaws give the Board the power to set the number of
directors at no less than eight nor more than fifteen. The size of the Company's
Board is currently set at ten. The Restated Articles provide for the holders of
Series A Preferred Stock, voting separately as a series, to elect three of the
directors and for the holders of outstanding Common Stock to elect the balance.
Accordingly, the Series A Preferred shareholders will elect three of the ten
directors and the holders of Common Stock will elect seven directors. The
directors so elected will serve until the next annual meeting of shareholders
and until their successors are elected and have qualified.
If an amount equal to three full quarterly dividends with respect to the
Series A Preferred Stock is at any time in arrears (provided certain conditions
are satisfied), the number of directors will be increased from ten to fourteen
and the holders of the Series A Preferred Stock will be entitled to elect an
additional four directors. Such additional directors will continue in office and
the holders of Series A Preferred Stock will continue to have such additional
voting rights, until such time as all accrued and unpaid dividends on the Series
A Preferred Stock have been paid in full, at which time the terms of such
additional directors will expire.
The persons named as proxies in the enclosed form of Proxy were selected by
the Board, and have advised the Board that, unless authority is withheld, they
intend to vote the shares represented by them at the Meeting for the election of
William L. Benford, Walter C. Bladstrom, Allan E. Dalshaug, Willie D. Davis,
Stephen A. Koffler, Ann E. Meyers and Clifford A. Miller, on behalf of the
holders of Common Stock, and for the
2
<PAGE> 7
election of Stanley P. Gold, Robert G. Moskowitz, and Vappalak A. Ravindran, on
behalf of the holders of Series A Preferred Stock. All nominees except William
L. Benford, President and Chief Operating Officer of the Company, are current
members of the Board of the Company. Mr. Benford is being nominated to fill the
vacancy created by the resignation of Mark Goldston as a director and officer of
the Company in June 1994.
The Board knows of no reason why any nominee for director would be unable
to serve as a director. If at the time of the Meeting any of the named nominees
are unable or unwilling to serve as directors of the Company, the persons named
in the Proxy intend to vote for such substitutes as may be nominated by the
Board or the holders of the outstanding shares of Series A Preferred Stock, as
applicable.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE BOARD OF DIRECTORS'
NOMINEES FOR DIRECTOR TO BE ELECTED BY THE HOLDERS OF COMMON STOCK.
NOMINEES FOR ELECTION BY HOLDERS OF COMMON STOCK
WILLIAM L. BENFORD was appointed President and Chief Operating Officer in
June 1994, and prior to that served as Executive Vice President and Chief
Financial Officer from January 1993 to June 1994. He joined the Company in
September 1991 as Senior Vice President and Chief Financial Officer. Prior to
joining the Company, Mr. Benford served as a Vice President of Shamrock Holdings
of California, Inc. from January 1991 to September 1991. From September 1985 to
December 1990, he was Senior Vice President, Chief Financial Officer and
Treasurer of Central Soya Company, Inc., an international agri-business
operation. Mr. Benford has also served as Vice President and Treasurer of Dekalb
Agresearch, Inc. from 1981 to 1984 and Vice President and Assistant Treasurer of
The Firestone Tire & Rubber Company in Akron, Ohio from 1978 to 1981. Age: 52.
WALTER C. BLADSTROM was elected to the Board in April 1993. Mr. Bladstrom
has served as an advisor to Fulcrum International, Ltd. ("Fulcrum"), an
investment and financial advisory firm specializing in mergers and acquisitions,
since 1991. Prior to that time, Mr. Bladstrom served as the Chairman of the
Board and Chief Executive Officer of Fulcrum since 1987. Mr. Bladstrom has also
served as a member of the Advisory Board of the Snider Entrepreneurial Center at
The Wharton School since 1989. Mr. Bladstrom owns a 0.1 percent limited
partnership interest in Trefoil. Age: 62.
ALLAN E. DALSHAUG has served as a Director of the Company since May 1986.
Mr. Dalshaug has been Chairman of the Board, President and Chief Executive
Officer of Sterling West Bancorp, a publicly held bank holding company, and
Chief Executive Officer of its subsidiary, Sterling Bank, since 1980. He also
serves as a director of Jalate, Ltd. Age: 63.
WILLIE D. DAVIS was elected to the Board in June 1992. Mr. Davis has served
as President and Chief Executive Officer of All Pro Broadcasting, Inc., a Los
Angeles broadcasting company, since 1977. Mr. Davis played professional football
for ten years with the Green Bay Packers and for two years with the Cleveland
Browns and was inducted into The Professional Football Hall of Fame in 1981. Mr.
Davis also serves as a director of Wicor, Inc.; Sara Lee Corporation; Alliance
Bank; MGM Grand Company; Kmart Corporation; Dow Chemical Company, Johnson
Controls Inc., Strong Fund and Rally's Inc. Age: 60.
STEPHEN A. KOFFLER has served as a Director of the Company since September
1991. Mr. Koffler has served as Managing Director, Investment Banking of Smith
Barney, Inc., a brokerage and investment banking firm, since July 1994. Prior to
that, he was Executive Vice President and Director of Investment Banking of
Sutro & Co., Inc., a brokerage and investment banking firm, since October 1991.
From May 1981 until September 1991, Mr. Koffler was employed by Merrill Lynch &
Co. ("Merrill Lynch") and predecessor companies, and, until March 1991, was a
Managing Director in the Investment Banking Division of Merrill Lynch. Mr.
Koffler resigned as an officer of Merrill Lynch in March 1991 and acted as an
employee and consultant to Merrill Lynch through September 1991. Age: 52.
ANN E. MEYERS was elected to the Board in June 1992. Ms. Meyers has worked
for various network and cable television stations (including CBS, ESPN, WTBS,
Prime Network and Prime Ticket) as a broadcaster and sports commentator since
1983. Ms. Meyers played both amateur and professional women's
3
<PAGE> 8
basketball and participated in the Pan Am Games in 1975 and 1979 and the 1976
Olympic Games. Ms. Meyers was inducted into the Basketball Hall of Fame in 1993.
Age: 39.
CLIFFORD A. MILLER was first elected to the Board by Trefoil (as the holder
of all of the issued and outstanding shares of Series A Preferred Stock) in
September 1992, with a term of service which expired on February 26, 1993. On
February 17, 1993, Mr. Miller was re-appointed to the Board, effective February
26, 1993, to fill a vacancy on the Board. Mr. Miller has continued to serve as a
director of the Company since that date. Mr. Miller has served as Chairman of
The Clifford Group, Inc., a national business consulting organization, since
January 1992. From December 1986 through December 1991, Mr. Miller was an
Executive Vice President and a Director of Great Western Financial Corporation
and Great Western Bank. Mr. Miller has also served as a Senior Consultant to
Shamrock Holdings, Inc. ("Shamrock") since 1978 and is a director of First
American Corporation and First American Bankshares, Inc. Age: 66.
NOMINEES FOR ELECTION BY HOLDERS OF SERIES A PREFERRED STOCK
STANLEY P. GOLD has served as a Director since September 1991 and has held
the positions of Chairman of the Board and Chief Executive Officer of the
Company since January 1992. Mr. Gold has served since prior to 1987 as
President, Chief Executive Officer, and a director of Shamrock, a holding
company engaged primarily in radio and television broadcasting, real estate
development and the making of investments. Since January 1, 1990, Mr. Gold has
also served as President and Managing Director of Trefoil Investors, Inc.
("TII"), the general partner of Trefoil, as well as President and Managing
Director of SCA. Mr. Gold is also a director of The Walt Disney Company, an
international company engaged in family entertainment. Age: 52.
ROBERT G. MOSKOWITZ has served as a Director since September 1991. Since
January 1990, Mr. Moskowitz has served as a Managing Director of TII and SCA.
Mr. Moskowitz has also served as Executive Vice President of Shamrock since
March 1989. Age: 42.
VAPPALAK A. RAVINDRAN was first elected to the Board by Trefoil (as the
holder of all of the issued and outstanding Shares of Series A Preferred Stock)
in September 1992, with a term of service which expired on February 26, 1993.
Effective February 26, 1993, Mr. Ravindran was appointed as one of the three
directors elected by Trefoil. Mr. Ravindran has continued to serve as a director
of the Company since that date. Mr. Ravindran has served as the Managing
Director and President of Paracor Finance Inc. ("Paracor Finance"), a merchant
bank and investment company, since July 1987. Paracor Finance is an indirect
wholly-owned subsidiary of Fosters Brewing Group Ltd. of Australia. An affiliate
of Paracor Finance is a limited partner in Trefoil. Mr. Ravindran is a director
of Northwest Airlines, Inc., a commercial airline. Age: 47.
RATIFICATION OF THE SELECTION OF INDEPENDENT ACCOUNTANTS
The Board has selected the accounting firm of Price Waterhouse to audit the
Company's financial statements for, and otherwise act as the Company's
independent accountants with respect to, the fiscal year ending November 30,
1995. Price Waterhouse acted as independent accountants for the Company in
respect of its fiscal year ended November 30, 1994. In accordance with the
Board's resolution, its selection of Price Waterhouse as the Company's
independent accountants for the current fiscal year is being presented to
shareholders for ratification at the Meeting. The Company knows of no direct or
material indirect financial interest of Price Waterhouse in the Company or any
connection of that firm with the Company in the capacity of promoter,
underwriter, voting trustee, officer or employee.
Members of Price Waterhouse will be present at the Meeting, will have an
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICE WATERHOUSE AS THE INDEPENDENT ACCOUNTANTS OF THE COMPANY.
4
<PAGE> 9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the shares of
Common Stock beneficially owned as of February 21, 1995 by each person or entity
who, insofar as the Company has been able to ascertain, beneficially owned more
than 5% of the Company's Common Stock as of such date. The table also reflects
the ownership of the issued and outstanding shares of Series A Preferred Stock.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
TITLE NAME AND ADDRESS BENEFICIAL PERCENT
OF CLASS OF BENEFICIAL OWNERS OWNERSHIP(1) OF CLASS
- ---------- --------------------------------- ------------ --------
<S> <C> <C> <C>
Common Trefoil Capital Investors, L.P. 11,000,000(2) 33.40%
c/o Trefoil Investors, Inc.
4444 Lakeside Drive
Burbank, CA 91510
Common The Goldman Sachs Group, L.P. 2,534,087(3) 11.0%
85 Broad Street
New York, NY 10004
Common Pentland Ventures Ltd. 1,644,445(4) 7.05%
c/o Pentland Group plc.
The Pentland Centre
Lakeside, Squires Lane
Finchley N3 2QL
England
Preferred Trefoil Capital Investors, L.P. 1,000,000 100.00%
c/o Trefoil Investors, Inc.
4444 Lakeside Drive
Burbank, CA 91510
</TABLE>
- ---------------
(1) Unless otherwise indicated, each named entity has sole voting and investment
power over the shares beneficially owned by it.
(2) Includes 10,000,000 shares that represent the shares of the Company's Common
Stock issuable upon conversion of the shares of Series A Preferred Stock.
(3) In a joint filing on Schedule 13G, dated February 10, 1995, by The Goldman
Sachs Group, L.P. and Goldman Sachs & Co., The Goldman Sachs Group, L.P. and
Goldman Sachs & Co. reported shared voting power and shared dispositive
power with respect to all of the reported shares.
(4) Includes 400,000 shares which Pentland Ventures Ltd. presently has the right
to acquire by the exercise of options granted pursuant to the Stock Option
Agreement, dated as of April 28, 1992, between L.A. Gear, Inc. and Pentland
Ventures Ltd.
OWNERSHIP OF COMMON STOCK BY DIRECTORS AND OFFICERS
The following table sets forth certain information regarding the shares of
Common Stock beneficially owned by (a) each director and nominee for director of
the Company (all nominees for election as directors are current members of the
Board with the exception of William Benford), (b) the Company's Chief Executive
Officer, the four other most highly compensated executive officers of the
Company for the fiscal year ended November 30, 1994, and Mark Goldston, the
former President and Chief Operating Officer of the Company (collectively, the
"Named Executive Officers") and (c) all current directors and executive officers
of the Company as a group (16 persons). This information has been provided by
each of the directors, nominees and executive officers as of February 21, 1995
at the request of the Company, and includes the number of shares which such
persons have the right to acquire within 60 days of such date by the exercise of
stock options vested pursuant to the Company's 1986 Stock Option Plan (the "1986
Stock Option Plan"), 1992 Stock Option Plan for Eligible Nonemployee Directors
(the "1992 Stock Option Plan for Eligible Nonemployee Directors"), and 1993
Stock Incentive Plan (the "1993 Stock Incentive Plan"). No shares of the
Company's outstanding Preferred Stock are held by such individuals.
5
<PAGE> 10
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME OWNERSHIP(1) OF CLASS(2)
---- ------------ -----------
<S> <C> <C>
DIRECTORS ELECTED BY HOLDERS OF COMMON STOCK:
William L. Benford.................................................. 120,265(3) *
Stephen A. Koffler.................................................. 40,000(4) *
Allan E. Dalshaug................................................... 20,000(4) *
Clifford A. Miller.................................................. 25,000(5) *
Ann E. Meyers....................................................... 16,000(6) *
Walter C. Bladstrom................................................. 15,000(6) *
Willie D. Davis..................................................... 15,000(6) *
SERIES A DIRECTORS
Stanley P. Gold..................................................... 890,000(7) 3.75%
Robert G. Moskowitz................................................. 20,000(4) *
Vappalak A. Ravindran............................................... 17,000(8) *
NAMED EXECUTIVE OFFICERS**
Robert H. Landes.................................................... 82,717(9) *
David F. Gatto...................................................... 107,136(10) *
Christopher M. Walsh................................................ 72,941(11) *
Mark R. Goldston.................................................... 527,895(12) 1.29%
All directors and executive officers as a group (16 persons)........ 1,341,970(13) 5.32%
</TABLE>
- ---------------
* Less than 1%.
** Messrs. Gold and Benford are also Named Executive Officers.
(1) All shares held are Common Stock. Unless otherwise indicated, each named
individual has sole voting and investment power over the shares
beneficially owned by him or her.
(2) Shares which the person (or group) has the right to acquire within 60 days
after February 21, 1995 are deemed to be outstanding in calculating the
percentage ownership of the person (or group), but are not deemed to be
outstanding as to any other person (or group).
(3) Includes 49,118 shares which Mr. Benford has the right to acquire within
60 days after February 21, 1995 by exercise of stock options vested
pursuant to the 1993 Stock Incentive Plan, and 70,000 shares which Mr.
Benford has the right to acquire within 60 days after February 21, 1995 by
exercise of stock options vested pursuant to the 1986 Stock Option Plan.
(4) Consists of shares which the individual has the right to acquire within 60
days after February 21, 1995 by the exercise of stock options vested
pursuant to the Company's 1986 Stock Option Plan.
(5) Includes 15,000 shares which Mr. Miller has the right to acquire within 60
days after February 21, 1995 by the exercise of stock options vested
pursuant to the Company's 1992 Stock Option Plan for Eligible Nonemployee
Directors.
(6) Includes 15,000 shares which the individual has the right to acquire
within 60 days after February 21, 1995 by the exercise of stock options
vested pursuant to the Company's 1992 Stock Option Plan for Eligible
Nonemployee Directors.
(7) Includes 750,000 shares which Mr. Gold has the right to acquire within 60
days after February 21, 1995 by exercise of stock options vested pursuant
to the 1993 Stock Incentive Plan, and 20,000 shares which Mr. Gold has the
right to acquire within 60 days after February 21, 1995 by exercise of
stock options vested pursuant to the 1986 Stock Option Plan.
(8) Includes 15,000 shares which Mr. Ravindran has the right to acquire within
60 days after February 21, 1995 by exercise of stock options vested
pursuant to the 1986 Stock Option Plan.
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<PAGE> 11
(9) Includes 33,235 shares which Mr. Landes has the right to acquire within 60
days after February 21, 1995 by exercise of stock options vested pursuant
to the 1993 Stock Incentive Plan, and 49,232 shares which Mr. Landes has
the right to acquire within 60 days after February 21, 1995 by exercise of
stock options vested pursuant to the 1986 Stock Option Plan.
(10) Includes 36,176 shares which Mr. Gatto has the right to acquire within 60
days after February 21, 1995 by exercise of stock options vested pursuant
to the 1993 Stock Incentive Plan, and 70,000 shares which Mr. Gatto has
the right to acquire within 60 days after February 21, 1995 by exercise of
stock options vested pursuant to the 1986 Stock Option Plan.
(11) Includes 32,941 shares which Mr. Walsh has the right to acquire within 60
days after February 21, 1995 by exercise of stock options vested pursuant
to the 1993 Stock Incentive Plan, and 40,000 shares which Mr. Walsh has
the right to acquire within 60 days after February 21, 1995 by exercise of
stock options vested pursuant to the 1986 Stock Option Plan.
(12) Includes 44,118 shares which Mr. Goldston has the right to acquire within
60 days after February 21, 1995 by exercise of stock options vested
pursuant to the 1993 Stock Incentive Plan, and 483,333 shares which Mr.
Goldston has the right to acquire within 60 days after February 21, 1995
by exercise of stock options vested pursuant to the 1986 Stock Option
Plan.
(13) Includes 1,337,527 shares which the members of the group have the right to
acquire within 60 days after February 21, 1995, by the exercise of stock
options vested pursuant to the Company's 1986 Stock Option Plan, 1992
Stock Option Plan for Eligible Nonemployee Directors and 1993 Stock
Incentive Plan. Does not include shares or options held by Mr. Goldston.
Relying solely on (i) its review of Forms 3, 4 and 5 (and any amendments
thereto) furnished to the Company pursuant to Section 16 of the Securities
Exchange Act of 1934 (the "Exchange Act") by individuals who served as an
executive officer or director of the Company, and persons who beneficially owned
more than ten percent of a registered class of stock of the Company, during
fiscal 1994 and (ii) written representations of the officers and directors of
the Company, the Company believes that all of such Forms required to be filed by
the foregoing reporting persons were filed on a timely basis, with the following
exceptions. After timely filing a Form 3 upon becoming executive officers of the
Company, Tracey C. Doi, Vice President and Controller of the Company, and Victor
J. Trippetti, Jr., Vice President and Treasurer of the Company, each discovered
that her and his respective ownership report on Form 3 inadvertently omitted
certain holdings relating to shares held in their employee stock savings plan
accounts, and they each promptly filed an amended Form 3 reflecting the
respective holdings that were inadvertently omitted. In fiscal 1994, Trefoil
filed two Forms 5, dated May 2, 1994, relating to two grants of stock options to
Mr. Gold (one in 1991 and one in 1993) and one grant of stock options to Mr.
Moskowitz (in 1991) in which Trefoil belatedly determined it had a pecuniary
interest.
MEETINGS AND COMMITTEES OF THE BOARD
The Board has various standing committees, including an Executive
Committee, an Audit Committee, a Compensation Committee, a Nominating Committee
and a Stock Option Committee.
The Executive Committee is comprised of Mr. Gold, who chairs the committee,
and Mr. Moskowitz. Mr. Goldston was also a member of the committee prior to his
resignation in June 1994. The Executive Committee may exercise, with certain
exceptions, all of the authority of the Board in the management of the business
and affairs of the Company. The Executive Committee is intended to serve in the
event that action must be taken by the Board at a time when convening a meeting
of the entire Board is not feasible.
The Audit Committee is chaired by Mr. Dalshaug, and its members are Messrs.
Koffler and Miller. The primary purposes of the Audit Committee are (i) to
review the scope of the audit to be performed, (ii) to meet with the Company's
independent accountants to review the results of the audit, (iii) to review with
the Company's independent accountants the Company's internal accounting
procedures and control, and (iv) to make recommendations regarding the selection
of the Company's independent accountants.
7
<PAGE> 12
The Compensation Committee is chaired by Mr. Koffler, and its members are
Messrs. Bladstrom, Dalshaug and Davis. The primary purpose of the Compensation
Committee is to review the recommendations of the Chief Executive Officer and
the President as to appropriate compensation for the Company's principal
executive officers and certain other highly paid members of senior management
and to make recommendations regarding compensation of such executive officers
and members of senior management to the Board.
The Nominating Committee is chaired by Mr. Miller, and its members are
Messrs. Bladstrom and Ravindran and Ms. Meyers. The procedures for nominating
directors, other than by the Board itself, are set forth in the Bylaws of the
Company and in the Notice of Annual Meeting of Shareholders which accompanies
this Proxy Statement. The Nominating Committee will consider any nominees
recommended by shareholders in accordance with Section 2.11(b) of the Company's
Bylaws which is set forth in full in the Notice of Annual Meeting of
Shareholders. Such nominations should be delivered to Mr. Miller in care of the
Company.
The Stock Option Committee is comprised of Mr. Davis, who chairs the
Committee, and Ms. Meyers. The primary purposes of the Stock Option Committee
are to (i) determine individuals to whom stock options will be granted under the
Company's 1986 Stock Option Plan and the terms on which such options will be
granted, (ii) determine individuals to whom options, stock appreciation rights,
restricted stock, performance units and performance shares (collectively,
"Awards") will be granted under the 1993 Stock Incentive Plan and the terms and
conditions on which such Awards will be made and (iii) make periodic reports to
the Board as to the status of the Company's 1986 Stock Option Plan and 1993
Stock Incentive Plan.
During the fiscal year ended November 30, 1994, the Board held six
meetings, the Audit Committee held three meetings, the Compensation Committee
held four meetings, the Nominating Committee held one meeting, and the Stock
Option Committee held two meetings. Each person who was a director of the
Company during the fiscal year ended November 30, 1994, with the exception of
Ann Meyers, attended at least 75% of the aggregate of (i) the total number of
meetings held by the Board during the period in which he or she was a director
and (ii) the total number of meetings held by all committees of the Board on
which he or she served during such year.
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is certain information regarding each of the current
executive officers of the Company. Further information about Mr. Gold is
presented in "ELECTION OF DIRECTORS -- Nominees for Election by Holders of
Series A Preferred Stock." Further information about Mr. Benford is presented in
"ELECTION OF DIRECTORS -- Nominees for Election by Holders of Common Stock."
Officers are appointed by and serve at the discretion of the Board.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Stanley P. Gold 52 Chairman of the Board and Chief Executive
Officer
William L. Benford 52 President and Chief Operating Officer
Robert H. Landes 39 Executive Vice President -- Sales and
Marketing
David F. Gatto 33 Senior Vice President -- International
Thomas F. Larkins 33 Senior Vice President, General Counsel and
Secretary
Christopher M. Walsh 43 Senior Vice President -- Operations
Tracey C. Doi 34 Vice President and Controller
Victor J. Trippetti, Jr. 46 Vice President and Treasurer
</TABLE>
Stanley P. Gold was appointed Chairman of the Board and Chief Executive
Officer of the Company in January 1992, and was elected to the Company's Board
in September 1991.
8
<PAGE> 13
William L. Benford was appointed President and Chief Operating Officer in
June 1994, and prior to that served as Executive Vice President and Chief
Financial Officer from January 1993 to June 1994. He joined the Company in
September 1991 as Senior Vice President and Chief Financial Officer.
Robert H. Landes was appointed Executive Vice President -- Sales and
Marketing in June 1994, and served as Senior Vice President -- Sales from
January to June 1994. He joined the Company as Vice President -- Sales National
Accounts in March 1992, and from December 1992 to December 1993 was Vice
President -- Sales. Prior to joining the Company, from May 1990 to March 1992,
Mr. Landes was Regional Sales Manager of and a member of the Design and Review
Board of Gorham/Dansk, a division of Brown-Forman Corporation, a manufacturer
and distributor of fine tabletop ware and gifts. From September 1987 to May
1990, Mr. Landes was Director of Investment Properties of Raskin Matza Cohen
Corp., a real estate management and investment properties company.
David F. Gatto was appointed Senior Vice President -- International in
January 1993. He joined the Company in September 1991 as Senior Vice
President -- Strategic Planning. Prior to joining the Company, he was a Manager
of the L/E/K Partnership, a Boston-based management consulting firm, since July
1988.
Thomas F. Larkins was appointed Senior Vice President, General Counsel and
Secretary of the Company in February 1994. Prior to joining the Company, he was
associated with the law firm of Fried, Frank, Harris, Shriver & Jacobson from
June 1989 to January 1994.
Christopher M. Walsh joined the Company in December 1991 as Senior Vice
President -- Operations. From January 1989 to November 1991, Mr. Walsh was Vice
President of Production at Reebok International, Ltd., an international footwear
company.
Tracey C. Doi was appointed Vice President and Controller of the Company in
January 1994. She joined the Company in April 1990 as General Accounting
Manager, and served as Assistant Controller from July 1990 to December 1993.
Prior to that, Ms. Doi was Director of Financial Reporting of Management Company
Entertainment Group, Inc., a diversified, international entertainment company,
from July 1988 to April 1990.
Victor J. Trippetti, Jr. was appointed Vice President and Treasurer of the
Company in January 1994. He joined the Company as Manager -- Budgets in October
1989, served as Director -- Financial Planning from April 1990 to June 1992 and
has served as Treasurer from July 1992.
9
<PAGE> 14
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the
compensation (cash and non-cash, plan and non-plan) paid to each of the Named
Executive Officers for services rendered in all capacities to the Company during
the three fiscal years ended November 30, 1994, 1993 and 1992.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------------
ANNUAL AWARDS
COMPENSATION --------- PAYOUTS
------------------ OTHER ANNUAL RESTRICTED SECURITIES ---------- ALL OTHER
NAME AND PRINCIPAL FISCAL COMPENSATION STOCK UNDERLYING LTIP COMPENSATION
POSITION YEAR SALARY($) BONUS($) ($)(4) AWARDS($) OPTIONS(#) PAYOUTS($) ($)
- --------------------- ------ --------- -------- ------------ --------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stanley P. Gold 1994 21,000(1) 0 0 0 0 0 0
Chairman of the 1993 25,750(1) 0 0 0 750,000 0 0
Board and Chief 1992 32,000(2) 0 0 0 0 0 0
Executive Officer
William L. Benford 1994 401,058 0 0 0 319,118 0 4,620(9)
President and Chief 1993 325,000 0 0 0 0 0 4,497(9)
Operating Officer 1992 325,000 0 0 0 0 0 4,364(9)
Robert H. Landes 1994 262,727 0 57,661(5) 0 103,235 0 0
Executive Vice 1993 224,308 0 0 0 40,000 0 0
President Sales 1992 127,365 0 0 0 22,566 0 0
and Marketing
David F. Gatto 1994 275,000 0 0 0 76,176 0 4,992(9)
Senior Vice President 1993 275,000 0 0 0 0 0 4,125(9)
International 1992 244,981 0 0 0 0 0 0
Christopher M. Walsh 1994 220,000 0 0 0 72,941 0 0
Senior Vice President 1993 220,000 0 2,477(6) 0 0 0 0
Operations 1992 211,538 0 52,756(7) 0 40,000 0 0
Mark R. Goldston 1994 406,250 0 0 0 44,118 0 344,615(9)(10)
1993 750,000 0 4,617(6) 0 250,000 0 4,497(9)
1992 750,015 100,000 (3) 179,690(8) 0 0 0 0
</TABLE>
- ---------------
(1) In fiscal 1994 and 1993, Mr. Gold earned $21,000 and $25,750, respectively,
for his service as a director of the Company. The fees paid to Mr. Gold for
his service as a director are the customary fees paid to nonemployee
directors. See "Director Compensation."
(2) In fiscal 1992, Mr. Gold earned $32,000 for his service as a director of
the Company. Such amount excludes $11,500 earned by Mr. Gold for service as
a director during fiscal 1991 and paid to Mr. Gold during fiscal 1992.
(3) Pursuant to his employment agreement with the Company, Mr. Goldston
received a $200,000 sign-on bonus, of which $100,000 was paid on each of
October 15, 1991 and April 15, 1992.
(4) Perquisites and other personal benefits paid to each Named Executive
Officer (other than Messrs. Landes, Walsh and Goldston, as disclosed under
"Other Annual Compensation") in each instance aggregated less than the
lesser of $50,000 and ten percent (10%) of the total of annual salary and
bonus reported for such Named Executive Officer under "Salary" and "Bonus."
Accordingly, such information is omitted from the Summary Compensation
Table as permitted by the rules and regulations of the Securities and
Exchange Commission.
(5) Pursuant to his employment agreement with the Company, Mr. Landes was paid
$57,661 in reimbursement of certain relocation and temporary living
expenses.
(6) These amounts were reimbursed by the Company during fiscal 1993 for the
payment of taxes.
(7) Pursuant to his employment agreement with the Company, Mr. Walsh was paid
$52,756 in reimbursement of certain relocation and temporary living
expenses, including $16,503 of tax liability reimbursed by the Company.
(8) Pursuant to his employment agreement with the Company, Mr. Goldston was
paid $125,000 in reimbursement for certain relocation expenses (including
$57,294 of tax liability reimbursed by the
10
<PAGE> 15
Company). During fiscal 1992, the Company also approved the payment of
$54,690 to Mr. Goldston as reimbursement of additional relocation expenses.
(9) Each of Messrs. Benford, Gatto and Goldston deferred a portion of his
annual salary pursuant to the 401(k) portion of the Company's Employee
Stock Savings Plan. The amount shown for fiscal 1994 represents a
contribution, valued at $4,620, $4,992 and $865, respectively, for Messrs.
Benford, Gatto and Goldston made by the Company pursuant to the employee
stock ownership plan portion of its Employee Stock Savings Plan. The
Matching Contribution is held in shares of the Company's Common Stock.
Messrs. Benford, Gatto and Goldston will be fully vested under the Employee
Stock Savings Plan on November 30, 1996.
(10) Includes $343,750 paid to Mr. Goldston in fiscal 1994 pursuant to a letter
agreement with the Company entered into upon his resignation as an officer
and director in June 1994.
Stock Options Granted in Fiscal 1994. The following table sets forth
information concerning individual grants of stock options made by the Company
during the fiscal year ended November 30, 1994 to each of the Named Executive
Officers. The Company did not grant any stock appreciation rights during fiscal
1994.
OPTION GRANTS
IN THE FISCAL YEAR ENDED NOVEMBER 30, 1994
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SAR'S EXERCISE PRICE APPRECIATION
UNDERLYING GRANTED TO OR BASE FOR OPTION TERM(6)
OPTIONS/SAR'S EMPLOYEES IN PRICE(5) EXPIRATION ---------------------
NAME GRANTED(#) FISCAL YEAR(4) ($/SHARE) DATE 5%($) 10%($)
---- ------------- -------------- --------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Stanley P. Gold.......... 0 0 0 N/A 0 0
William L. Benford....... 109,118(1) 7.02% $ 7.775 01/15/04 508,053 1,311,162
210,000(2) 13.51% $ 6.300 08/19/04 972,300 2,152,500
Robert H. Landes......... 73,235(1) 4.71% $ 7.775 02/15/04 340,982 879,992
30,000(2) 1.93% $ 6.300 08/19/04 138,900 307,500
David F. Gatto........... 76,176(1) 4.90% $ 7.775 02/15/04 354,675 915,331
Christopher M. Walsh..... 72,941(1) 4.69% $ 7.775 02/15/04 339,613 876,459
Mark R. Goldston......... 44,118(3) 2.84% $ 7.775 02/15/04 205,413 530,122
</TABLE>
- ---------------
(1) These options were granted pursuant to the Company's 1993 Stock Incentive
Plan on February 15, 1994. Approximately 46% of the total number of options
granted were exercisable on and after December 1, 1994, and an additional
27% of the options are exercisable on and after December 1, 1995 and
December 1, 1996. Vesting may be accelerated in the event of a change in
control (as defined in the Company's 1993 Stock Incentive Plan) of the
Company.
(2) These options were granted pursuant to the Company's 1993 Stock Incentive
Plan on August 19, 1994. 33% of the total number of options granted are
exercisable on and after each of August 19, 1995, 1996, and 1997. Vesting
may be accelerated in the event of a change in control (as defined in the
Company's 1993 Stock Incentive Plan) of the Company.
(3) These options were granted pursuant to the Company's 1993 Stock Incentive
Plan on February 15, 1994. The total number of options granted were
exercisable on and after December 1, 1994.
(4) In fiscal 1994, the Company granted 1,554,178 options to employees.
(5) Exercise price is equal to the fair market value (determined by the average
price, for each of the five consecutive trading days immediately preceding
the grant date, of the last sales price of a share of a regular way on the
New York Stock Exchange (NYSE) Composite Tape) of such stock on the date the
11
<PAGE> 16
options were granted. The exercise price and tax withholding obligations
related to exercise may be paid by delivery of already owned shares or by
offset of the underlying shares, subject to certain conditions.
(6) Potential realizable value is based upon the per share fair market value
options on the date of grant and an annual appreciation of such fair market
value through the expiration date of such options at the stated rate. These
amounts represent assumed rates of appreciation only and may not necessarily
be achieved. Actual gains, if any, are dependent on the future performance
of the Common Stock, as well as upon the option holder's continued
employment through the vesting period. The potential realizable values
indicated have not taken into account amounts required to be paid as income
tax under the Internal Revenue Code of 1986, as amended, and any applicable
state laws.
Aggregated Option Exercises. The following table sets forth information
(on an aggregated basis) concerning each exercise of stock options during the
fiscal year ended November 30, 1994 by each of the Named Executive Officers and
the fiscal year-end value of unexercised options. The Company has no outstanding
stock appreciation rights, either freestanding or in tandem with options.
AGGREGATED OPTION EXERCISES
IN THE FISCAL YEAR ENDED NOVEMBER 30, 1994 AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SAR'S AT "IN-THE-MONEY"
SHARES VALUE FISCAL YEAR-END(#) OPTIONS AT FISCAL
ACQUIRED ON REALIZED EXERCISABLE("E")/ YEAR-END($)(1)
NAME EXERCISE(#) $ UNEXERCISABLE("U") EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------------- --------------------------
<S> <C> <C> <C> <C>
Stanley P. Gold....... 0 0 597,500(E)/172,500(U) $0/$0
William L. Benford.... 0 0 70,000(E)/319,118(U) $0/$0
Robert H. Landes...... 0 0 28,377(E)/137,424(U) $0/$0
David F. Gatto........ 0 0 70,000(E)/76,176(U) $0/$0
Christopher M.
Walsh............... 0 0 26,666(E)/86,275(U) $0/$0
Mark R. Goldston...... 0 0 483,333(E)/210,785(U) $0/$0
</TABLE>
- ---------------
(1) Options are "in-the-money" at the fiscal year end if the fair market value
of the underlying securities on such date exceeds the exercise price of the
option. The closing price of the Company's Common Stock on November 30, 1994
did not exceed the exercise price of any of the reported options.
DIRECTOR COMPENSATION
The Company pays to Mr. Gold and each nonemployee director $1,250 per
month, $1,000 for each Board meeting attended and $1,000 ($1,250 for the
committee chairperson) for each committee meeting attended and reimburses such
person for all expenses incurred by him or her in his or her capacity as a
director of the Company. In light of Mr. Gold not receiving any salary or other
cash compensation for services rendered as an officer of the Company, the Board
authorized the payment to Mr. Gold of directors' fees in the amount customarily
paid to the Company's nonemployee directors. During fiscal 1994, Mr. Gold earned
$21,000 in directors' fees. See "REPORT OF THE COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION -- Chief Executive Officer."
Pursuant to a one-year management agreement, dated September 12, 1994,
between the Company and SCA (the "Services Agreement"), SCA consults with, and
provides advice to, the officers and employees of the Company concerning matters
(i) relating to the Company's financial policies and the development and
implementation of the Company's business plans and (ii) generally arising out of
the business affairs of the Company. Mr. Gold is the President and a member of
the Board of Directors of SCA and Mr. Moskowitz is an executive officer of SCA.
Mr. Gold's services to the Company are provided in his capacity as Chairman of
the Board and Chief Executive Officer and he is separately compensated for such
services. See "REPORT OF
12
<PAGE> 17
THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION -- Chief Executive
Officer." The Services Agreement replaces a prior three-year agreement entered
into between the Company and SCA for substantially similar management services
and will be automatically renewed for a one-year period unless either party
delivers a notice of termination by July 14, 1995. SCA renders such services to
the Company on a non-exclusive basis. SCA's compensation for such management and
consulting services is $500,000, which is payable in quarterly installments. The
Company also (i) reimburses SCA for all of its reasonable out-of-pocket costs
and expenses (including, without limitation, the fees and disbursements of its
counsel) incurred in connection with the performance of its services under the
Services Agreement and (ii) pays customary directors' fees to the officers and
directors of SCA serving as directors of the Company. See "DIRECTOR
COMPENSATION."
The Services Agreement may be terminated at any time, with or without
cause, by SCA or the Company. Except in the circumstances described below, any
such termination of the Services Agreement by the Company will not relieve the
Company from its obligations to pay to SCA any unpaid portion of the total
amount of fees due to SCA thereunder and to reimburse SCA for any and all
expenses incurred by SCA in connection with, the performance of its services
thereunder. If Trefoil's investment in the Company, at any time during the term
of the Services Agreement, is less than $25 million, then the independent
directors of the Company may elect to terminate the Services Agreement and, upon
such termination, the Company will be obligated to pay to SCA all amounts due
thereunder, other than compensation not yet due and payable to SCA under the
agreement. The Company has also agreed to indemnify SCA against all claims,
liabilities, expenses, losses or damages (or actions in respect thereof) related
to or arising out of actions taken (or omitted to be taken) by SCA pursuant to
the terms of the Services Agreement; provided that such liabilities do not
result primarily from actions taken, or omitted to be taken, by SCA in bad faith
or due to SCA's gross negligence or willful misconduct. The Company's
obligations to indemnify SCA survive any termination of the Services Agreement
by the Company or SCA.
Under the 1992 Stock Option Plan for Eligible Nonemployee Directors (the
"1992 Stock Option Plan"), each eligible nonemployee director automatically
receives a one-time grant of an option to purchase 20,000 shares of Common Stock
upon his or her (i) initial election to the Board or (ii) appointment by the
Board to fill a vacancy left by the termination of the directorship (for any
reason) of any director who had previously been elected to the Board by vote of
the holders of shares of Common Stock of the Company. No options were granted
under the 1992 Stock Option Plan in fiscal 1994.
Ann Meyers served as a consultant for the Company in connection with the
establishment of a woman's basketball promotion program pursuant to a consulting
agreement effective as of November 1, 1993. She was compensated in the aggregate
amount of $75,000 during fiscal 1994 for such services and her consulting
agreement has been renewed for fiscal 1995 at the same rate.
In fiscal 1994, Walter Bladstrom provided consulting services to the
Company with respect to its international operations for which he was paid an
aggregate of $16,000 (plus expenses totalling approximately $10,000).
Indemnification Agreements. The Company has entered into indemnification
agreements with each of its directors and executive officers pursuant to which
the Company has agreed to indemnify such persons against expenses, judgments,
fines, penalties or amounts paid in settlement actually and reasonably incurred
by such person in connection with legal proceedings in which the person was
involved by reason of being a director or officer of the Company. The
indemnification generally is available if such person acted in good faith and in
a manner he or she reasonably believed to be in the best interests of the
Company and, with respect to criminal proceedings, had no reasonable cause to
believe his or her conduct was unlawful. Such person is not indemnified in
respect of matters as to which he or she has been adjudged liable to the Company
unless a court determines that, under the circumstances, he or she is reasonably
entitled to such indemnification.
13
<PAGE> 18
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS
Pursuant to an employment agreement, dated as of December 7, 1993 (as
amended), William L. Benford serves as President and Chief Operating Officer of
the Company for a three-year term. Under the agreement, Mr. Benford receives an
annual base salary of $500,000 and is eligible to participate in the Company's
management bonus plan based on excess return on capital (the "MIP"). No cash
bonus was paid by the Company for the fiscal years ended November 30, 1992, 1993
and 1994. In addition, in connection with his appointment as President and Chief
Operating Officer in June 1994, Mr. Benford was granted stock options for
210,000 shares of Common Stock at an exercise price equal to $6.30 per share,
the closing price of the Common Stock on August 19, 1994, the date the options
were granted.
Pursuant to an employment agreement, dated as of December 7, 1993 (as
amended), Robert H. Landes serves as Executive Vice President -- Sales and
Marketing of the Company. The agreement (as amended) has a three-year term.
Under the agreement, Mr. Landes receives an annual base salary of $310,000 and
is eligible to participate in the MIP. No cash bonus was paid by the Company for
the fiscal years ended November 30, 1992, 1993 and 1994. In addition, in
connection with his appointment as Executive Vice President in June 1994, Mr.
Landes was granted stock options for 30,000 shares of Common Stock at an
exercise price equal to $6.30 per share, the closing price of the Common Stock
on August 19, 1994, the date the options were granted.
Pursuant to an employment agreement, dated as of December 7, 1993, David F.
Gatto serves as Senior Vice President -- International of the Company. The
agreement has a three-year term, expiring on November 30, 1996. Under the
agreement, Mr. Gatto receives an annual base salary of not less than $275,000
during each year of his employment term. Under this agreement, Mr. Gatto is
eligible to participate in the MIP. No cash bonus was paid by the Company for
the fiscal years ended November 30, 1992, 1993 and 1994.
Pursuant to an employment agreement, dated as of August 1, 1994,
Christopher M. Walsh serves as Senior Vice President -- Operations of the
Company. The agreement expires on November 30, 1996. Under the agreement, Mr.
Walsh receives an annual base salary of not less than $220,000 and is eligible
to participate in the MIP. No cash bonus was paid by the Company for the fiscal
years ended November 30, 1992, 1993 and 1994. Under the agreement, Mr. Walsh is
entitled to reimbursement for certain additional moving costs and expenses and
brokerage commissions in an amount not to exceed $18,687.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Compensation Committee of the Board consists of Stephen A. Koffler
(chair), Walter C. Bladstrom, Allan E. Dalshaug and Willie D. Davis.
Ann E. Meyers, a member of the Stock Option Committee, served as a
consultant for the Company in connection with the establishment of a woman's
basketball promotion program pursuant to a consulting agreement effective as of
November 1, 1993. She was compensated in the aggregate amount of $75,000 during
fiscal 1994 for such services and her consulting agreement has been renewed for
fiscal 1995 at the same rate.
Mr. Bladstrom owns a 0.1 percent limited partnership interest in Trefoil.
In fiscal 1994, Mr. Bladstrom provided consulting services to the Company with
respect to its international operations for which he was paid an aggregate of
$16,000 (plus expenses totalling approximately $10,000).
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEES
ON EXECUTIVE COMPENSATION
GENERAL
The Compensation Committee (the "Committee") is currently comprised of
Stephen A. Koffler (chair), Walter C. Bladstrom, Allan E. Dalshaug and Willie D.
Davis, four non-employee directors. The primary
14
<PAGE> 19
duties of the Committee include (i) reviewing the compensation levels of the
Company's principal executive officers and certain other members of senior
management, (ii) administering the Company's incentive bonus plans, (iii)
consulting with and making recommendations to the Company's Stock Option
Committee regarding the Company's overall stock option grant policy and/or
awards to be granted under the Company's 1986 Stock Option Plan and 1993 Stock
Incentive Plan and (iv) related matters. Prior to February 1994, decisions
regarding the employment of any person with annual compensation of $125,000 or
greater (or raises to a new annual compensation rate of $125,000 or greater)
were required to be approved by the Committee, and decisions regarding annual
compensation levels of $150,000 or greater, or employment terms in excess of two
years, were required to be reviewed with the Board and were subject to Board
approval. In February 1994, the Board of Directors authorized the Chairman of
the Board and the President to jointly approve the employment of anyone (other
than an executive officer) with an annual base compensation between $150,000 and
$250,000, provided they give prompt notice of such approval to the Committee.
Decisions regarding annual compensation levels of $250,000 or greater (and the
annual compensation levels of all executive officers) are subject to Committee
approval.
The Stock Option Committee consists of Mr. Davis (chair) and Ann E. Meyers.
The primary duties of the Stock Option Committee are to (i) determine
individuals to whom stock options will be granted under the Company's 1986 Stock
Option Plan and the terms on which such options will be granted, (ii) determine
individuals to whom options, stock appreciation rights, restricted stock,
performance units and performance shares (collectively, "Awards") will be
granted under the 1993 Stock Incentive Plan and the terms and conditions on
which such Awards will be made and (iii) make periodic reports to the Board as
to the status of the Company's 1986 Stock Option Plan and 1993 Stock Incentive
Plan.
Recently enacted Section 162(m) of the Internal Revenue Code generally
places restrictions on the deductibility of compensation paid to specified
executive officers in excess of $1 million per year (on a per person basis),
with certain exceptions. This limit on deductibility is applicable only with
respect to taxable years beginning on or after January 1, 1994. The Company's
fiscal year begins on December 1st of each calendar year. Accordingly, Section
162(m) did not apply to compensation paid by the Company during fiscal 1994. The
Company does not presently plan to consider adoption of a policy with respect to
qualifying compensation paid to its executive officers for deductibility under
Section 162(m) as it does not believe such a policy will be necessary for fiscal
1995 based on the fact that none of its executive officers is expected to
receive compensation in excess of $1 million during fiscal 1995.
COMPENSATION PHILOSOPHY
The key objectives of the Company's executive compensation programs are to:
- Attract and retain qualified management.
- Provide substantial incentives for management to maximize the value
of the Company.
- Limit the shareholder cost of management incentive compensation to a
reasonable percentage of incremental shareholder value.
In fiscal 1993, the Company retained an independent compensation consulting
firm (the "Consultant") to assist the Committee in reviewing the Company's
executive compensation programs for fiscal 1993 and in accomplishing any
modifications of existing programs, or the establishment of new programs, which
would better enable the Company to achieve the overall objectives of its
executive compensation philosophy. In fiscal 1994, the Company continued the
policies adopted based on the 1993 report because the goals and objectives of
its executive compensation program remained the same.
The Company's executive compensation program consists of three basic
elements -- base salaries, cash and deferred incentive bonuses and stock
options.
Base Salaries. Base salaries for management employees reflect competitive
salary levels for positions of similar responsibility, individual experience and
the riskiness of the Company's total compensation program. The Committee
believes that its incentive bonus plan and fixed share stock option grant
guidelines allow for
15
<PAGE> 20
substantially greater compensation risk than typical competitive bonus and stock
option plans and that it is therefore appropriate to provide base salaries that
exceed median competitive levels. In fiscal 1993, the level of base salaries
paid by the Company to its management employees (other than Mr. Gold) was
approximately 18% above the median level relative to the Compensation Peer Group
(as defined below). In fiscal 1994, the Company implemented median salary
increases of approximately 4%, which the Committee believes will again place the
Company above the median level relative to the Compensation Peer Group. However,
the salary of the Company's new President and Chief Operating Officer is
approximately one-third less than the salary paid to the Company's prior
President and Chief Operating Officer.
In fiscal 1993, the Company used the compensation levels of consumer
products companies, apparel companies and footwear companies, adjusted for
differences in company size and position responsibility, to determine
competitive compensation levels (the "Compensation Peer Group"). Most of the
companies in the Compensation Peer Group are in the S&P 500 and some are in the
S&P Shoes Index, each of which indices has been used for purposes of comparison
in the Stock Performance Graph at page 20. The Committee did not survey the
Compensation Peer Group in connection with salary decisions in fiscal 1994.
Executive salaries are reviewed by the Compensation Committee on an annual
basis and may be increased at that time. Salary increases, if any, are based
primarily on the overall performance of the Company during the preceding fiscal
year, as measured in terms of roughly equally-weighted criteria such as (i)
annual long-term sales and earnings growth, (ii) market share gains, (iii)
progress toward achieving the Company's long-term objectives (principally a
return to profitability on an annual basis) and (iv) return to shareholders. The
Committee also considers the individual performance of the executive, measured
in terms of (i) the executive's business results (i.e., divisional or
departmental results as appropriate), (ii) the achievement of various managerial
objectives and personal development goals, and (iii) the assumption of increased
responsibilities by the executive (whether by reason of promotion or otherwise).
In connection with his appointment as President and Chief Operating Officer in
June 1994 and accompanying increase in responsibilities, Mr. Benford's base
salary increased from $325,000 to $500,000. In connection with his appointment
as Executive Vice President -- Sales and Marketing in June 1994 and accompanying
increase in responsibilities, Mr. Landes' base salary increased from $225,000 to
$310,000. No other salary increases were granted to the Named Executive Officers
of the Company for 1994 or 1995. For purposes of this report, the "Named
Executive Officers" include the Company's Chief Executive Officer, the next four
highest paid senior executive officers, and the Company's former President and
Chief Operating Officer. In connection with new employment agreements entered
into with the Company in August 1994 and the assumption of increased
responsibilities, Ms. Doi's base salary increased from $125,000 to $140,000 and
Mr. Trippetti's base salary increased from $112,500 to $140,000. No other
discretionary salary increases were granted to executive officers during fiscal
1994 due to the Company's failure to meet the foregoing criteria.
In connection with his resignation as an officer and director of the
Company, Mr. Goldston entered into a letter agreement with the Company in June
1994 pursuant to which he agreed to provide consulting and advisory services to
the Company through October 31, 1998 at the rate of $750,000 per year, the
salary rate in effect under his then-current employment agreement. Mr. Goldston
was eligible to participate in the 1994 Management Incentive Program on a pro
rata basis based on the number of months he was employed by the Company;
however, no cash bonus was paid by the Company for the fiscal year ended
November 30, 1994. Amounts Mr. Goldston earns from another employer or from
personal services rendered to a third party as an independent consultant prior
to October 31, 1998 will be offset against the payments required to be made
under the letter agreement. The Company determined Mr. Goldston's compensation
level to be appropriate in light of the potential future benefits to the Company
from Mr. Goldston becoming a consultant to the Company and the employment
arrangement with the Company in effect at the time of his resignation.
Cash and Deferred Incentive Bonuses. Management employees (other than the
Chief Executive Officer) participate in a management incentive program (the
"MIP") implemented in fiscal 1994 and administered by the Committee which
provides generally for bonus awards based on improvements in economic value
added ("EVA"). EVA is a measure of economic profit after all costs including the
cost of the Company's equity and equity related capital. The MIP is based on
three key concepts: a target bonus; a fixed share of EVA improvement in excess
of expected EVA improvement ("excess EVA improvement"); and a
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<PAGE> 21
bonus bank. The EVA bonus earned is equal to the sum of the target bonus plus
the fixed share of excess EVA improvement (which may be negative). The bonus
earned is credited to the bonus bank, and the bonus paid is equal to the amount
of the bonus bank balance, up to the amount of the target bonus, plus 1/3 of the
bonus bank balance in excess of the target bonus. No bonus is paid when the
bonus bank balance is negative (or when the Company has a net operating loss
after tax), and negative bonus bank balances are carried forward to offset
future bonuses earned. There is no cap on the bonus awards that can be achieved
for superior levels of excess EVA improvement.
The Committee believes that excess EVA improvement provides the best
operating performance measure of shareholder returns in excess of the cost of
equity and equity related capital. The plan is designed to provide strong
performance incentives for the Company's management by aligning management
compensation with increases in shareholder value represented by excess EVA
improvement. It is the Committee's intention that management's share of excess
EVA improvement will not be increased to offset the effects of poor performance
nor reduced to offset the effects of superior performance. The expected EVA
improvements required to earn a target bonus will calibrate on the basis of the
Company's stock price at the time the plan is adopted and are intended to be
consistent with investor expectations at that time.
Target bonuses for plan participants reflect a premium above median
competitive bonus opportunities. The Committee believes that the premium is
appropriate in light of the risk of the MIP. The Committee believes that the MIP
provides very strong performance incentives as well as a reasonable balance
between the Company's retention objectives and acceptable shareholder cost.
In addition, if the operating performance objectives are met, the MIP also
provides that a portion of an individual's target bonus may be excluded from the
bonus calculation based on EVA improvement and be allocated to bonus awards
based on individual performance objectives to be determined by the Committee in
consultation with senior management. Bonus awards based on individual
performance objectives would be subject to caps.
STOCK OPTIONS
The Company uses stock option grants to attract and retain qualified
managers and to provide incentives for management to increase shareholder value.
The Company also uses stock option grants as a way to provide incentives to
management during years in which cash bonuses are not paid. During the past
three and a half years, the Company's stock option grant policy with respect to
senior management had been aimed at inducing qualified candidates to accept
offers of employment or promotion (including any required relocations). In
fiscal 1994, the Committee adopted a stock option grant policy (the "Triennial
Stock Option Grant Program") to help ensure equity between recently hired and
longer tenured employees and to continue to provide strong performance
incentives to increase shareholder value.
Under the Triennial Stock Option Grant Program, a fixed number of stock
options are granted to senior management once every three years, pursuant to
option grant guidelines established for each level of the Company's management
employees. The options are granted at an exercise price equal to the fair market
value of the Company's Common Stock on the grant date, and vest in thirds on
each of the first, second and third anniversaries of the grant date. The first
round of grants under the Triennial Stock Option Grant Program were made in
fiscal 1994. The vesting schedule for the initial award of grants under the
Triennial Stock Option Grant Program was accelerated so that options would vest
one-third upon grant and one-third upon each of the first and second
anniversaries of the grant date. The Committee determined that such accelerated
vesting schedule would more effectively accomplish the Company's retention
objectives.
It is the Committee's intention to maintain the proposed stock option grant
guidelines on a fixed share basis and not make adjustments to maintain the
expected value of the triennial grant at a targeted competitive level. It is the
Committee's belief that competitive adjustments substantially weaken
management's performance incentive because they offset poor performance by
increasing the number of shares granted and penalize superior performance by
reducing the number of shares granted. The recommended grant guidelines were
established at share levels that initially provided options with an expected
value in excess of the median long-term incentive values of the Compensation
Peer Group. However, the expected value of the proposed grant
17
<PAGE> 22
guidelines relative to competitive long-term incentive values has, and will
continue to, fluctuate based on the performance of the Company's stock.
As an additional incentive separate from the Triennial Stock Option Grant
Program, and based upon the recommendations of the Company's Chief Executive
Officer and President, in December 1994 the Stock Option Committee determined
that the Company's current employees (other than Mr. Gold) who were eligible to
participate in the Company's 1994 MIP be awarded a special grant of stock
options (the "Special Grant"). The number of options to be granted pursuant to
the Special Grant was set by first assuming that each participant earned a
theoretical payout at 100% of his or her bonus opportunity under the 1994 MIP.
This amount was then divided by the daily average closing price of the Common
Stock during fiscal 1994. As a result, options to purchase approximately 230,000
shares were granted under the Special Grant. These options were issued at the
fair market value of the Company's Common Stock on December 13, 1994, the date
of grant, and vest on December 1, 1995, the first day of the Company's 1996
fiscal year.
The Stock Option Committee believes that the Special Grant is an
appropriate recognition of the contributions made by the Company's new
management team during the past year, a period in which no cash bonuses were
paid to senior management. Furthermore, the Stock Option Committee believes that
the Special Grant also provides significant short term performance incentives to
increase shareholder value, with a minimal potential dilutive effect on earnings
per share of common stock outstanding. The Stock Option Committee also concluded
that the Special Grant would serve to assist the Company in achieving its
retention objectives regarding the Company's management personnel at a
reasonable cost and without requiring the Company to make any additional cash
payout.
Pursuant to the 1986 Stock Option Plan and the 1993 Stock Incentive Plan,
the Stock Option Committee has sole discretion regarding the grant of options.
CHIEF EXECUTIVE OFFICER
At Mr. Gold's request, he did not receive any salary or other cash
compensation during fiscal 1994 for his services as Chief Executive Officer of
the Company. In light of the foregoing, the Board authorized the payment to Mr.
Gold of directors' fees in the amount customarily paid only to non-employee
directors of the Company. During fiscal 1994, Mr. Gold earned $21,000 in
directors' fees.
During fiscal 1993, the Committee sought to create a compensation
arrangement for Mr. Gold which (i) is equitable in relation to the fair (i.e.,
risk adjusted expected) value of compensation packages offered to chief
executive officers in other turnaround situations and (ii) provides the entire
fair value in the form of stock options without any guaranteed compensation
(thereby honoring Mr. Gold's request that he not receive any cash compensation
(other than directors' fees) from the Company). In order to analyze the
competitive market, the Consultant identified seventeen "turnaround" companies,
each of which met two or more of the following criteria: (i) chief executive
officer hired from outside the company, (ii) deteriorating performance prior to
the hiring of a new chief executive officer, (iii) consumer products industries,
and (iv) similar size to the Company.
In reaching its recommendations, the Committee also reviewed Mr. Gold's
performance since his appointment to the post of Chief Executive Officer in
January 1992 and the progress the Company was making in achieving its turnaround
objectives. The Committee also evaluated whether Mr. Gold's compensation should
be adjusted in view of the management services agreement then existing between
the Company and SCA. Mr. Gold is a director, shareholder and president of SCA.
The Committee reviewed with members of senior management the services provided
by SCA under the management services agreement and the payments made to SCA by
the Company with respect thereto and concluded that Mr. Gold's services as Chief
Executive Officer were unrelated to, and not duplicative of, the management
services provided under the Services Agreement. The Committee also noted that
the Services Agreement was entered into simultaneously with Trefoil's $100
million investment in September 1991 and at a time when Mr. Gold was not an
employee of the Company. Accordingly, the Committee concluded that the
compensation to be awarded to Mr. Gold as Chief Executive Officer should not be
reduced by virtue of the management services agreement. However, the Committee
did conclude that an adjustment to the indicated compensation based on peer
group analysis
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<PAGE> 23
should be made in light of Mr. Gold's outside business commitments which would
preclude him from devoting his exclusive business energies on behalf of the
Company. The Committee also concluded that an adjustment to Mr. Gold's
compensation should not be made to account for the September 1991 grant to Mr.
Gold of 20,000 stock options (with an exercise price equal to the fair market
value of a share of the Company's Common Stock on the grant date) upon Mr.
Gold's appointment to the Board. The Committee believed that such grant was
unrelated to the services Mr. Gold was performing as the Company's Chief
Executive Officer and that similar grants are made to non-employee directors
upon their first election or appointment to the Board.
In arriving at the number of options to be granted to Mr. Gold, the
Committee relied on the Consultant's estimate of a competitive four year total
compensation package for a newly hired chief executive officer of a turnaround
company of similar size. The Consultant's estimate was based on a regression
analysis which related the hire date expected value of such chief executive
officer's four year total compensation package to the market value of the
turnaround company at the hire date. The competitive compensation value,
adjusted for Mr. Gold's partial time commitment to the Company as described
above, was converted into a one-time stock option grant based on a Black-Scholes
ratio value of .625, and a vesting discount factor of .940. The 750,000 options
were granted to Mr. Gold pursuant to the Company's 1993 Stock Incentive Plan on
October 19, 1993. All of such options are currently exercisable, and remain
exercisable for two years following termination of Mr. Gold's service as a
director of the Company. The exercise price of the options is $11.55 per share,
the average fair market value of the Company's Common Stock for the five trading
days immediately preceding the date of grant.
The Committee reconsidered Mr. Gold's compensation package in fiscal 1994
and determined that no adjustments were required to be made, as it concluded
that the compensation granted in 1993 (excluding director fees) was designed to
compensate Mr. Gold for services in 1994 as well. The Company believes that Mr.
Gold's compensation arrangement reflects the above-described executive
compensation philosophy of the Company designed to align management compensation
closely with improved financial performance and increased shareholder value.
COMPENSATION COMMITTEE
Stephen A. Koffler, Chairman
Walter C. Bladstrom
Allan E. Dalshaug
Willie D. Davis
STOCK OPTION COMMITTEE
Willie D. Davis, Chairman
Ann E. Meyers
February 14, 1995
The Report of the Compensation and Stock Option Committees on Executive
Compensation shall not be deemed incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing under
the Securities Act of 1933, as amended (the "Securities Act") or under the
Exchange Act and shall not otherwise be deemed filed under such Acts.
19
<PAGE> 24
PERFORMANCE GRAPH FOR L.A. GEAR COMMON STOCK
("PERFORMANCE GRAPH")
The Performance Graph compares the cumulative total return (assuming
reinvestment of dividends) on the Company's Common Stock ( ) with (i) the
Standard & Poor's 500 Stock Index ( / / ) and (ii) the Standard & Poor's Shoes
Index which is comprised of Reebok, Nike, Stride Rite Corporation and Brown
Group, Inc. ( ), and assumes an investment of $100 on December 1, 1989 in each
of the Common Stock, the stocks comprising the Standard & Poor's 500 Stock Index
and the Standard & Poor's Shoes Index.
The historical stock price performance of the Common Stock shown on the
Performance Graph set forth below is not necessarily indicative of future price
performance.
The Performance Graph which is set forth below shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act or under the
Exchange Act and shall not otherwise be deemed filed under such Acts.
PERFORMANCE GRAPH
FOR L.A. GEAR COMMON STOCK
TOTAL SHAREHOLDER RETURNS
(DIVIDENDS REINVESTED)
<TABLE>
<CAPTION>
Measurement Period L.A. GEAR, S&P 500 S&P SHOES
(Fiscal Year Covered) INC. INDEX INDEX
<S> <C> <C> <C>
1989 100 100 100
1990 32.29 96.53 90.79
1991 29.51 116.17 173.22
1992 34.03 137.62 224.61
1993 31.60 151.52 163.00
1994 14.93 153.11 196.29
</TABLE>
20
<PAGE> 25
TOTAL SHAREHOLDER RETURNS -- DIVIDENDS REINVESTED
<TABLE>
<CAPTION>
NOVEMBER
INDEXED RETURNS
------------------------------------------------
COMPANY/INDEX 1989 1990 1991 1992 1993 1994
- ------------- ---- ----- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
S&P 500 INDEX..................................... 100 96.53 116.17 137.62 151.52 153.11
L.A. GEAR, INC.................................... 100 32.29 29.51 34.03 31.60 14.93
S&P SHOES INDEX................................... 100 90.79 173.22 224.61 163.00 196.29
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS IN CONNECTION WITH THE SALE OF SERIES A PREFERRED STOCK
The Series A Preferred Stock was sold to Trefoil pursuant to the Stock
Purchase Agreement, dated as of May 27, 1991 and amended as of July 25, 1991
(the "Stock Purchase Agreement"). Mr. Gold serves as President and Managing
Director of TII, the general partner of Trefoil, and Mr. Moskowitz is an
executive officer of TII. Pursuant to the Stock Purchase Agreement, Trefoil has
agreed to deliver to the Company or its nominee an irrevocable proxy to vote all
of the then outstanding shares of Series A Preferred Stock owned by Trefoil in
favor of any merger of the Company with or into another corporation if all of
the following conditions are satisfied: (i) a definitive agreement of merger has
been signed, (ii) the market price of the Common Stock for the twenty
consecutive trading days immediately prior to execution of a definitive
agreement of merger is at least 175% of the conversion price (which is $10.00,
subject to certain antidilution provisions (the "Conversion Price")), (iii) the
per share merger consideration to be received by the holders of Common Stock is
at least 175% of the Conversion Price, and (iv) the per share merger
consideration to be received by the holders of Series A Preferred Stock is at
least equal to the per share consideration payable to the holders of Common
Stock multiplied by the conversion ratio which is the Stated Value divided by
the Conversion Price.
The Company has entered into a Registration Rights Agreement, dated as of
May 27, 1991, with Trefoil (the "Trefoil Registration Rights Agreement"),
pursuant to which the Company has agreed that upon the request of one or more
holders of shares of Common Stock issued or issuable upon conversion of the
Series A Preferred Stock or shares of Common Stock acquired by Trefoil after
September 12, 1991, (collectively, the "Registrable Securities"), the Company
will effect registration under the Securities Act of all or part of such
holders' Registrable Securities. The Company is only obligated to effect three
such registrations. The Company may not include in any such registration shares
issued for its own account. Whenever the Company shall effect a registration
pursuant to the Trefoil Registration Rights Agreement, the Company will be
required to pay the costs of any such registration of securities, other than
underwriting discounts or commissions. In addition, if the Company is
registering securities for sale of its own account, at the request of holders of
Registrable Securities, the Company must, subject to certain limitations,
include such securities in any such registration.
SERVICES AGREEMENT
Pursuant to a one-year management services agreement, dated September 12,
1994, between the Company and SCA (the "Services Agreement"), SCA consults with,
and provides advice to, the officers and employees of the Company concerning
matters (i) relating to the Company's financial policies and the development and
implementation of the Company's business plans and (ii) generally arising out of
the business affairs of the Company. Mr. Gold is the President and a member of
the Board of Directors of SCA and Mr. Moskowitz is an executive officer of SCA.
The Services Agreement replaces a prior three-year agreement entered into
between the Company and SCA for substantially similar management services and
will be automatically renewed for a one-year period unless either party delivers
a notice of termination by July 14, 1995. SCA renders such services to the
Company on a non-exclusive basis. SCA's compensation for such management and
consulting services is $500,000, which is payable in quarterly installments. The
Company also (i) reimburses SCA for all of its reasonable out-of-pocket costs
and expenses (including,
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<PAGE> 26
without limitation, the fees and disbursements of its counsel) incurred in
connection with the performance of its services under the Services Agreement and
(ii) pays customary directors' fees to the officers and directors of SCA serving
as directors of the Company. See "DIRECTOR COMPENSATION."
The Services Agreement may be terminated at any time, with or without
cause, by SCA or the Company. Except in the circumstances described below, any
such termination of the Services Agreement by the Company will not relieve the
Company from its obligations to pay to SCA any unpaid portion of the total
amount of fees due to SCA thereunder and to reimburse SCA for any and all
expenses incurred by SCA in connection with, the performance of its services
thereunder. If Trefoil's investment in the Company, at any time during the term
of the Services Agreement, is less than $25 million, then the independent
directors of the Company may elect to terminate the Services Agreement and, upon
such termination, the Company will be obligated to pay to SCA all amounts due
thereunder, other than compensation not yet due and payable to SCA under the
agreement. The Company has also agreed to indemnify SCA against all claims,
liabilities, expenses, losses or damages (or actions in respect thereof) related
to or arising out of actions taken (or omitted to be taken) by SCA pursuant to
the terms of the Services Agreement; provided that such liabilities do not
result primarily from actions taken, or omitted to be taken, by SCA in bad faith
or due to SCA's gross negligence or willful misconduct. The Company's
obligations to indemnify SCA survive any termination of the Services Agreement
by the Company or SCA.
TRANSACTIONS IN CONNECTION WITH THE SALE OF COMMON STOCK
The Company sold 1,244,445 newly issued shares of Common Stock for an
aggregate purchase price of approximately $14 million to Pentland Ventures, Ltd.
("Ventures"), an affiliate of Pentland Group plc, pursuant to a Stock Purchase
Agreement, dated as of April 28, 1992, between the Company and Ventures (the
"Pentland Stock Purchase Agreement"). Under the Pentland Stock Purchase
Agreement, until the earlier of (i) April 28, 1997 and (ii) the date 60 days
after Trefoil or any Affiliate (as defined in the Stock Purchase Agreement) or
Associate (as defined in the Stock Purchase Agreement) of Trefoil or any
successor to Trefoil that is directly or indirectly controlled by the directors
or executive officers of SCA (collectively, the "Trefoil Group"), collectively
cease to own at least 10% of the outstanding Common Stock of the Company on a
fully diluted basis, Ventures and its Affiliates and Associates shall not,
directly or indirectly, alone or in concert with others:
(1) effect or seek, offer or propose to effect, or cause or
participate in, (V) any acquisition of any securities (or beneficial
ownership thereof) or assets of the Company or any of its subsidiaries
(except by way of distribution made available to holders of Common Stock
generally and except for acquisitions of Common Stock if, after giving
effect to such acquisition, Ventures together with its Affiliates and
Associates beneficially own no more than 9.9% of the outstanding Common
Stock at the time of such acquisition); (W) any tender or exchange offer,
merger or other business combination involving the Company or any of its
subsidiaries; (X) any recapitalization, restructuring, liquidation,
dissolution or other extraordinary transaction with respect to the Company
or any of its subsidiaries; (Y) any "solicitation" of "proxies" (as such
terms are used in the proxy rules of the Securities and Exchange Commission
(the "SEC")) or consents to vote any voting securities of the Company; or
(Z) any sale, transfer, pledge, or disposal of any shares of Common Stock
to a person who, after giving effect to such transaction, would, together
with its Affiliates and Associates, to the knowledge of Ventures after
reasonable inquiry, beneficially own 10% or more of the outstanding shares
of Common Stock (subject to certain exceptions); (2) take any other action
to seek to control the management, Board of Directors or policies of the
Company; (3) take any action which might force the Company to make a public
announcement regarding any of the types of matters set forth in clause 1
above; (4) solicit the Company to repurchase any of the shares of Common
Stock that are subject to the Pentland Stock Purchase Agreement or shares
of Common Stock that are the subject of the Stock Option Agreement (defined
below); or (5) enter into any discussions or arrangements with any third
party with respect to any of the foregoing.
In the event of a breach of the Pentland Stock Purchase Agreement by
Ventures, in addition to its remedies at law or in equity, the Company shall be
entitled to terminate the Sourcing Agreement (defined
22
<PAGE> 27
below) without liability thereunder. The Pentland Stock Purchase Agreement also
provides that for a period of four years from April 28, 1992, neither Pentland
nor any of its Subsidiaries (as defined in the Pentland Stock Purchase
Agreement) shall solicit to employ any executive, senior management or other key
employee of the Company or any of its Affiliates.
Pursuant to a Stock Option Agreement, dated as of April 28, 1992 (as
amended to date), between the Company and Ventures (the "Stock Option
Agreement"), the Company has granted to Ventures an irrevocable option (the
"Option") to purchase up to 400,000 additional shares of Common Stock at
exercise prices of $13.50 (for 200,000 of such shares) and $16.125 (for the
remaining 200,000 shares of Common Stock subject to the Option). The number of
shares subject to the Option and the exercise price therefore are subject to
adjustment in certain circumstances. The Options became exercisable by Ventures
on October 28, 1992, and may be exercised from time to time until April 28,
1996.
Pursuant to a Registration Rights Agreement, dated as of April 28, 1992 (as
amended to date), between the Company and Ventures (the "Pentland Registration
Rights Agreement"), Ventures has been granted the right (i) to require, subject
to certain limitations, the Company to register the shares of Common Stock
issued to Ventures under the Securities Act ("Demand Registration") and (ii) to
include, subject to certain limitations, such shares of Common Stock in certain
other registrations of the Company's shares of Common Stock under the Securities
Act ("Incidental Registration"). Ventures is entitled to one Demand Registration
which must be made in respect of no more than 400,000 and no less than 300,000
shares of Common Stock. The Company is not required to effect any Demand
Registration prior to the earlier of October 28, 1994 and the date the Trefoil
Group ceases to own 10% of the Common Stock then outstanding on a fully-diluted
basis (the "Sale Date") and after April 28, 1996. The Company is not required to
effect the Incidental Registration of more than 200,000 shares of Common Stock
in any twelve-month period. The Company is not required to effect any Incidental
Registration prior to the earlier of April 28, 1993 and the Sale Date or after
April 28, 1996. The Company is obligated to pay certain registration expenses in
connection with a Demand Registration. The Company and Ventures have agreed to
indemnify each other against certain liabilities and claims arising from or
based upon certain violations of applicable securities laws or regulations. The
Company may terminate the Pentland Registration Rights Agreement without
liability if Ventures has breached the Pentland Stock Purchase Agreement, the
Stock Option Agreement or the Sourcing Agreement (defined below).
SOURCING AGREEMENT
Pursuant to the Sourcing Agreement, dated as of April 28, 1992 (the
"Sourcing Agreement"), a Pentland affiliate was appointed as the sourcing
representative of the Company with respect to certain footwear manufacturers
located in various countries in the Far East. In consideration of its services
under the Sourcing Agreement, the Pentland affiliate will receive a sourcing fee
based on the aggregate U.S. dollar price of certain products manufactured for
the Company by manufacturers sourced by the Pentland affiliate. Unless otherwise
terminated in accordance with its terms, the Sourcing Agreement shall remain in
force until December 31, 1995 and shall continue in force thereafter unless
terminated by either the Company or the Pentland affiliate on six months' prior
written notice. The Sourcing Agreement may be terminated by the Company (i) if
defective products exceed certain agreed percentages, (ii) upon certain
bankruptcy events with respect to the Pentland affiliate or an affiliate
thereof, or (iii) upon the breach of the Stock Option agreement and the Pentland
Registration Rights Agreement. The Sourcing Agreement also may be terminated by
the Pentland affiliate (i) upon certain bankruptcy events with respect to the
Company, (ii) upon the sale or transfer of all or substantially all of the
Company's assets, or (iii) upon certain consolidations or mergers involving the
Company.
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended November 30, 1994
(the "1994 Annual Report") was mailed to shareholders on or about February 28,
1995 and preceded or accompanies this Proxy
23
<PAGE> 28
Statement. The 1994 Annual Report contains consolidated financial statements of
the Company and its subsidiaries and the report thereon of Price Waterhouse,
independent accountants.
REVOCATION OF PROXY
The accompanying Proxy may be revoked by a shareholder at any time before
it is voted, either by delivering a subsequent proxy or other written notice of
revocation to the Company at its above address or by attending the Meeting and
voting in person. All shares represented by each properly signed and returned
proxy card in the accompanying form, unless revoked, will be voted at the
Meeting in accordance with the shareholder's instructions indicated on the proxy
card. If no instructions are marked on the proxy card, the shares will be voted
in favor of the proposals described in this Proxy Statement.
PROXY SOLICITATION
The cost of soliciting proxies will be paid by the Company. Georgeson &
Company Inc., Wall Street Plaza, New York, New York 10005 has been retained to
solicit proxies by mail, telephone or personal solicitation for a fee of $4,500
plus expenses. The Company has also arranged for reimbursement, at the rate
suggested by the New York Stock Exchange, of brokerage houses, nominees,
custodians and fiduciaries for the forwarding of proxy materials to the
beneficial owners of shares held of record. Proxies may also be solicited by
directors, officers and employees of the Company, but such persons will not be
specially compensated for such services.
PROPOSALS OF SHAREHOLDERS
Under certain circumstances, shareholders are entitled to present proposals
at shareholder meetings. Any such proposal to be included in the Proxy Statement
for the Company's 1996 Annual Meeting of Shareholders must be submitted by a
shareholder prior to November 1, 1995, in a form that complies with applicable
regulations.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports, proxy statements and other
information with the SEC. Reports, proxy statements and other information filed
by the Company may be inspected and copied at the public reference facilities
maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the SEC's Regional Offices located at 7 World
Trade Center (13th Floor), New York, New York 10048 and Suite 1400, Northwest
Atrium Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
materials can be obtained by mail from the Public Reference Section of the SEC
at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In
addition, such material may also be inspected and copied at the offices of the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005 and at
the offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006-1506.
24
<PAGE> 29
OTHER MATTERS
The Board knows of no matters other than those listed in the attached
Notice of Annual Meeting which are likely to be brought before the Meeting.
However, if any other matter properly comes before the Meeting, the persons
named on the enclosed proxy card will vote the proxy in accordance with their
best judgment on such matter.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Thomas F. Larkins
---------------------
Thomas F. Larkins
Secretary
February 28, 1995
25
<PAGE> 30
Please mark
/X/ your votes
at this
----------------
COMMON
1. ELECTION OF DIRECTORS:
Nominees: William L. Benford,
Walter C. Bladstrom, Allan E. Dalshaug,
Willie D. Davis, Stephen A. Koffler,
Ann E. Meyers and Clifford A. Miller.
WITHHOLD
FOR AUTHORITY
all nominees listed / / / / to vote for
(except as indicated all nominees
to the contrary)Dis- listed
cretionary authority
to cumulate votes is
granted.
(Instruction: To withhold authority to vote for any individual nominee or
nominees, write the name of the nominee or nominees in the space below.)
- -------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT
PUBLIC ACCOUNTANTS. / / / / / /
3. OTHER BUSINESS. In their discretion, the Proxy Holders are authorized to vote
upon such other business as properly may come before the Meeting and at any
and all adjournments and postponements thereof. The Board of Directors at
present knows of no other business to be presented by or on behalf of the
Company or the Board of Directors at the Meeting.
WILL NOT
I WILL attend this meeting in person
/ / / /
The Undersigned hereby ratifies and confirms all that the Proxy
Holders, or any of them, or their substitutes, shall lawfully do or
cause to be done by virtue hereof, and hereby revokes any and all
proxies heretofore given by the undersigned to vote at the Meeting.
The undersigned acknowledges receipt of the Notice of Annual Meeting
of Shareholders, the Proxy Statement accompanying said Notice and the
1994 Annual Report delivered with or prior to said Notice.
Dated: _____________________________________, 1995
--------------------------------------------------
(Please Print Name)
--------------------------------------------------
(Signature of Holder of Common Stock)
(Please date this proxy and sign above as your
name(s) appear(s) on this card. Joint owners each
should sign personally. Corporate proxies should be
signed by an authorized officer. Executors,
administrators, trustees, etc. should give their
full titles.)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT TO THE COMPANY
PLEASE SIGN AND RETURN YOUR PROXY BY
TEARING OFF THE TOP PORTION OF THE SHEET
AND RETURNING IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE
<PAGE> 31
L.A. GEAR, INC.
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 18, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder(s) of Common Stock of L.A. Gear, Inc. (the "Company")
hereby nominate(s), constitute(s) and appoint(s) Stanley P.Gold, Allan E.
Dalshaug and William L. Benford, and each of them, the attorneys, agents and
proxies of the undersigned, with full powers of substitution to each, to attend
and act as proxy or proxies of the undersigned at the annual meeting of
shareholders (the "Meeting") of the Company to be held at Loews Santa Monica
Beach Hotel, 1700 Ocean Avenue, Santa Monica, California on April 18, 1995 at
10:00 a.m., local time, or at any and all adjournments and postponements
thereof, and to vote as specified herein the number of shares which the
undersigned, if personally present, would be entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS
NOMINATED BY THE BOARD OF DIRECTORS AND "FOR" PROPOSAL 2. THE PROXY WHEN
PROPERLY EXECUTED SHALL BE VOTED IN ACCORDANCE AS DIRECTED. IF NO DIRECTION IS
MADE FOR A GIVEN PROPOSAL, THE PROXY WILL BE VOTED "FOR" THE ELECTION OF
DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS AND "FOR" PROPOSAL 2.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE.)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
[LA GEAR LOGO]
