<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
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), 14a-6(i)(1), 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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[LOGO OF LA GEAR]
May 6, 1996
To our Shareholders:
You are cordially invited to attend the 1996 Annual Meeting of
Shareholders of L.A. Gear, Inc., to be held Tuesday, June 11, at 10:00 a.m.
at the Ritz-Carlton Hotel, 4375 Admiralty Way, Marina del Rey, California
90292. 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 would like to thank you for your
continued support and look forward to seeing you on June 11th.
Sincerely,
/s/ Stanley P. Gold
Stanley P. Gold
Chairman of the Board
and Chief Executive Officer
<PAGE>
L.A. GEAR, INC.
2850 OCEAN PARK BLVD.
SANTA MONICA, CALIFORNIA 90405
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 11, 1996
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 Ritz Carlton Hotel, 4375
Admiralty Way, Marina del Rey, California 90292, on Tuesday, June 11, 1996, 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:
William L. Benford Stephen A. Koffler
Walter C. Bladstrom Ann E. Meyers
Allan E. Dalshaug Clifford A. Miller
Willie D. Davis Robert G. Moskowitz
Stanley P. Gold Vappalak A. Ravindran
2. APPROVAL OF AMENDMENT TO 1992 STOCK OPTION PLAN FOR ELIGIBLE
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NONEMPLOYEE DIRECTORS. To approve an amendment to the Company's 1992
---------------------
Stock Option Plan for Eligible Nonemployee Directors to provide for
the granting of options to purchase Common Stock to members of the
Company's Board of Directors in lieu of any cash compensation for
their services on the Board.
3. 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, 1996.
4. 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
<PAGE>
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.
Only shareholders of record at the close of business on April 22, 1996
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: May 6, 1996
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>
L.A. GEAR, INC.
2850 OCEAN PARK BOULEVARD
SANTA MONICA, CALIFORNIA 90405
(310) 452-4327
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
JUNE 11, 1996
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 1996 Annual Meeting of Shareholders
to be held at the Ritz Carlton Hotel, 4375 Admiralty Way, Marina del Rey,
California 90292 on Tuesday, June 11, 1996 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 May 10, 1996.
Enclosed is a Proxy for the shares of stock held by you as of the close
of business on April 22, 1996 (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, FOR approval of the proposed amendment to the 1992 Stock
Option Plan for Eligible Nonemployee Directors, 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, 1996.
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 1,107,902 shares of Series B Preferred Stock ("Series B Preferred
Stock"). Trefoil Capital Investors, L.P. ("Trefoil") is the holder of all of
the issued and outstanding shares of Series B Preferred Stock.
The Company's Restated Articles of Incorporation, as amended (the
"Restated Articles"), provide that the Common Stock and Series B Preferred Stock
of the Company vote together as a single class on all matters, including the
election of directors, submitted to a vote of the holders of Common Stock. Each
share of Series B Preferred Stock entitles the holder to cast 14.815 votes (the
number of votes which could be cast by the number of whole shares of Common
Stock into which each share of Series B Preferred is convertible on the Record
Date) for a total of 16,413,568 votes. Each share of Common Stock entitles the
holder to cast one vote, for a total of 22,936,433 votes. Accordingly, an
aggregate of 39,350,001 votes may be cast by the holders of Common Stock and
Series B Preferred Stock.
A majority of the voting power of the outstanding shares of capital stock
of the Company, represented in person or by Proxy, will constitute a quorum for
the transaction of business at the Meeting (the "Quorum"). Shares representing
an aggregate of 19,675,001 votes will constitute the Quorum for purposes of
holding the Annual Meeting. 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
<PAGE>
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.
Each shareholder 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 or deemed to be 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 shareholder 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
shareholder gives such notice, then every shareholder entitled to vote may
cumulate his votes for candidates in nomination.
The ten directors to be elected by the shareholders shall be the ten
candidates receiving the highest number of votes cast. Discretionary authority
to cumulate votes is hereby solicited by the Board and return of the Proxy shall
grant such authority.
The proposals to amend the Company's 1992 Stock Option Plan for Eligible
Nonemployee Directors and to ratify the appointment of Price Waterhouse as the
Company's independent accountants for the fiscal year ending November 30, 1996
each require the affirmative vote of a majority of the Common Stock and Series B
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).
Accordingly, a minimum of 9,837,501 votes in favor of each of these proposals
are required to approve such proposals. Trefoil has advised the Company that it
intends to vote all shares of Series B Preferred Stock in favor of the
proposals.
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 B Preferred Stock and Common Stock, voting together as a
single class, to elect all of the directors. The directors so elected will
serve until the next annual meeting of shareholders and until their successors
are elected and have qualified.
Prior to the exchange of all outstanding shares of Series A Cumulative
Convertible Preferred Stock (the "Series A Preferred Stock") for a newly created
class of Series B Preferred Stock (see "Certain Relationships and Related
Transactions--Exchange of Series A Preferred Stock for Series B Preferred
Stock"), Trefoil, the holder of the Series A Preferred Stock, was entitled to
elect three of the ten directors, and the holders of Common Stock were entitled
to elect the remaining seven. However, under the terms of the Series B
Preferred Stock the holders of Common Stock and Series B Preferred Stock vote
together on all matters, including the election of directors. The three
directors originally elected by the holders of the Series A Preferred Stock,
Stanley P. Gold, Robert G. Moskowitz and Vappalak A. Ravindran, will be part of
the slate of directors to be elected by the Common Stock and Series B Preferred
Stock at the Annual Meeting, voting together as a class.
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, Stanley P. Gold, Stephen A. Koffler, Ann E. Meyers and Clifford A.
Miller, Robert G. Moskowitz and Vappalak A. Ravindran on behalf of the holders
of Common Stock and Series B Preferred Stock.
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.
2
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE BOARD OF DIRECTORS'
---
NOMINEES FOR DIRECTOR TO BE ELECTED BY THE HOLDERS OF COMMON STOCK AND SERIES B
PREFERRED STOCK, VOTING TOGETHER AS A SINGLE CLASS.
NOMINEES FOR ELECTION
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: 53.
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: 64.
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., a manufacturer of women's clothing. Age:
64.
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 Capital Management Fund and Rally's Inc. Age: 61.
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 1987 as President, Chief
Executive Officer and a director of Shamrock Holdings, Inc. ("Shamrock"), a
holding company engaged primarily in 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 Shamrock Capital
Advisors, Inc. ("SCA"), a company which provides management and consulting
services, including services to Trefoil and companies in which Trefoil invests.
Mr. Gold is also a director of The Walt Disney Company, an international company
engaged in family entertainment, and Koor Industries Limited ("Koor
Industries"), Israel's largest industrial group engaged primarily in
telecommunications equipment, agricultural chemicals, building materials, energy
and food. Age: 53.
3
<PAGE>
STEPHEN A. KOFFLER was elected to the Board in September 1991. Mr.
Koffler has served as the President of Koffler and Company, an investment
banking and financial advisory firm, since April 1996. He served as Managing
Director, Investment Banking of Smith Barney, Inc., a brokerage and investment
banking firm, from July 1994 to March 1996. 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: 53.
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 and Prime Network) as a broadcaster and sports commentator since 1983. Ms.
Meyers played both amateur and professional women's 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: 41.
CLIFFORD A. MILLER was first elected to the Board by Trefoil 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
since 1978 and is a director of First American Corporation and First American
Bankshares, Inc. Age: 67.
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 and is a Director of Koor Industries. Age: 43.
VAPPALAK A. RAVINDRAN was first elected to the Board by Trefoil 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: 48.
4
<PAGE>
PROPOSAL TO AMEND THE L.A. GEAR, INC.
1992 STOCK OPTION PLAN FOR ELIGIBLE NONEMPLOYEE DIRECTORS
1992 STOCK OPTION PLAN -- GENERAL
On June 9, 1992, the Company's shareholders approved and adopted the L.A.
Gear, Inc. 1992 Stock Option Plan for Eligible Nonemployee Directors (the "1992
Stock Option Plan"). The 1992 Stock Option Plan had two important purposes.
First, it was intended to strengthen the Company by enabling the Company to
secure and retain the services of persons best qualified to serve as directors
of the Company and to provide incentives for such persons to exert maximum
efforts for the success of the Company. Second, it was intended that the
directors who participated in the 1992 Stock Option Plan would qualify as
disinterested persons, pursuant to Rule 16b-3 under the Securities Exchange Act
of 1934, as amended, for purposes of administrating certain other compensation
plans of the Company.
PROPOSED AMENDMENT
The Company's Board of Directors has approved, subject to the approval of
the shareholders at the 1996 Annual Meeting, an amendment to the 1992 Stock
Option Plan (the "Proposed Amendment") to provide for an annual grant of stock
options to each Eligible Nonemployee Director and to each Eligible Executive
Officer (defined as the Chief Executive Officer provided he or she is a director
and is not paid a salary by the Company) in lieu of his or her annual cash
retainer, meeting attendance fees and committee attendance fees. Additionally,
in order to accommodate the additional options to be granted, the Proposed
Amendment increases the number of shares subject to options under the 1992 Stock
Option Plan from 600,000 to 1,000,000.
The primary purpose of the Proposed Amendment is to preserve the
Company's cash resources by providing the nonemployee directors and the
Company's current Chief Executive Officer with their compensation for serving on
the Company's Board in the form of options at fair market value instead of cash
fees. If the Proposed Amendment had been in place in fiscal 1995, Board members
would have been granted options to purchase an aggregate of 180,000 shares of
Common Stock and the Company would have saved a total of $241,250 in director
retainer and meeting fees. The Company also believes that the amendment
furthers the original goals of the 1992 Stock Option Plan to (1) attract and
retain qualified individuals to serve on the Company's Board, and (2) provide
incentive and reward opportunities to the nonemployee directors and Chief
Executive Officer to encourage them to enhance the profitable growth of the
Company. The Proposed Amendment, once approved, will operate automatically and
without any discretion on the part of the Board of Directors or any members
thereof until its expiration on November 30, 1999. Additionally, as described
below, the amendment includes a feature by which the compensation of nonemployee
directors and the Chief Executive Officer will revert back to cash at an annual
rate of $24,000 per director for any fiscal year in which, during the prior
fiscal year, the Company reported earnings applicable to Common Stock of at
least $1,000,000. Consequently, directors will not be paid in cash for their
services as Board members unless the Company meets the earnings target, and even
in years in which they are paid cash, such fees will be paid at an established
rate on a lump sum basis and will not be calculated based on attendance at
meetings.
As of April 29, 1996, 320,000 of 400,000 authorized shares remain
available under the 1992 Stock Option Plan. If the Proposed Amendment is
approved it will become effective immediately and options to purchase 180,000
shares will be granted on June 11, 1996 to optionees as compensation for their
service on the Board and its committees during fiscal 1996. The Proposed
Amendment will increase the authorized number of shares which may be granted
under the Plan to 1,000,000, and thus a total of 740,000 shares will be
available for grant following the fiscal 1996 grant. Thereafter grants will be
made on the first day of each fiscal year through the remaining term of the
plan.
The principal provisions of the 1992 Stock Option Plan, in its current
form and as proposed to be amended, are summarized below. This summary,
however, does not purport to be complete and is qualified in
5
<PAGE>
its entirety by the terms of the 1992 Stock Option Plan, including the Proposed
Amendment, the entire text of which is attached as Appendix A and incorporated
by reference. All defined terms used below have the meaning set forth in the
1992 Stock Option Plan, unless otherwise indicated.
DESCRIPTION OF THE 1992 STOCK OPTION PLAN AND PROPOSED AMENDMENT
Administration. The 1992 Stock Option Plan is administered by the Board.
--------------
Since the plan provides only for fixed "formula awards," the Board does not have
the authority or discretion to vary the provisions of the 1992 Stock Option Plan
with respect to who may receive awards under the 1992 Stock Option Plan (other
than as a consequence of exercising its power to nominate individuals for
election to the Board and/or appoint individuals to fill vacancies on the Board
and/or authorize the payment of a salary to the Chief Executive Officer) or the
price, timing or quantity of such awards. The Board, however, is authorized to
construe and interpret the terms of the plan and establish and amend rules for
the administration of the plan consistent with its purpose.
The annual stock option grants called for under the Proposed Amendment
will also be "formula awards" and the Board will not have the authority or
discretion to vary either who receives the options or how many they receive.
Term and Shares Available. The 1992 Stock Option Plan in its current
-------------------------
form is scheduled to terminate in the year 2002 and a maximum of 400,000 shares
are available for grant. The Proposed Amendment will shorten the duration of
the 1992 Stock Option Plan to November 30, 1999, and no options may be granted
under the plan after that date. Further, the Proposed Amendment will increase
the maximum number of shares available under the plan to 1,000,000 shares of
Common Stock, which number is subject to adjustment in the event of a Change in
Capitalization (as defined in the 1992 Stock Option Plan). As of April 29,
1996, 320,000 shares remain available under the 1992 Stock Option Plan.
Awards. The 1992 Stock Option Plan currently provides that upon election
------
or appointment to the Board, each "Eligible Nonemployee Director" will receive a
one-time grant of an option to purchase 20,000 shares of Common Stock at a price
equal to the Fair Market Value (as defined in the 1992 Stock Option Plan) of
those shares on the date the option is granted (the "New Member Grant"). For
purposes of the 1992 Stock Option Plan, an Eligible Nonemployee Director is a
director of the Company who is elected to the Board by a vote of the holders of
the Company's Common Stock or appointed by the Board to fill a vacancy created
by the termination of the directorship (for any reason) of any director who had
previously been elected by the holders of the Company's Common Stock; provided
that such new director is not an employee of or consultant to the Company at the
time of election or appointment. Under the Proposed Amendment, the definition
of "Eligible Nonemployee Director" will be revised to reflect the fact that,
following the completion of the Share Exchange Transaction described herein (see
"Certain Relationships and Related Transactions -- Exchange of Series A
Preferred Stock for Series B Preferred Stock") the outstanding shares of Common
Stock and Series B Preferred Stock vote together as a class on the election of
directors and on all other matters. As a result, all new directors will be
eligible for such grants.
The Proposed Amendment also specifies that each Eligible Nonemployee
Director and each Eligible Executive Officer will receive, in lieu of his or her
annual cash retainer, Board meeting attendance fees and committee meeting
attendance fees, an annual grant of an option to purchase the lesser of (1)
20,000 shares of Common Stock and (2) a number of shares of Common Stock equal
to 80,000 divided by the Fair Market Value of those shares on the business day
immediately preceding the Annual Grant Date (as defined in the 1992 Stock Option
Plan) (the "Annual Grant"); provided, however, that in the event the Company's
earnings applicable to Common Stock is at least $1,000,000 in any Fiscal Year,
as reported on the Company's audited year end financial statements, no Annual
Grant will be made in respect of the immediately following Fiscal Year. Board
members will continue to be reimbursed for expenses under the Company's current
policies. In the event that no Annual Grant is made under the 1992 Stock Option
Plan in respect of a Fiscal Year, the
6
<PAGE>
Board will pay to each Eligible Nonemployee Director and each Eligible Executive
Officer an annual cash retainer in respect of such Fiscal Year equal to $24,000
(or such other amount as the Board may establish in its discretion), payable in
equal monthly installments. As a result of the foregoing conditions, directors
will never receive options to purchase more than 20,000 shares under the plan,
and will receive fewer to the extent that the stock price is greater than $4.00.
Further, the director fees will revert to cash in any year for which in the
prior year the Company's earnings (after dividends to Preferred Stock) were at
least $1,000,000.
Terms and Conditions of Awards. Under the 1992 Stock Option Plan in its
------------------------------
current form, New Member Grant options become exercisable with respect to 5,000
shares immediately upon grant and become exercisable with respect to an
additional 5,000 shares on the dates following each of the first, second and
third anniversaries of the grant date, provided that the optionee remains a
director of the Company on such dates. This vesting schedule will not change
for New Member Grants under the Proposed Amendment. The proposed Annual Grant
options will be exercisable immediately.
Notwithstanding the foregoing vesting schedules, the plan currently
provides that in the event of a merger of the Company with another company or a
dissolution or liquidation of the Company, all options outstanding under the
1992 Stock Option Plan, whether vested or non-vested, will be canceled in return
for a payment to the optionee of the same consideration as that which is
received by the holders of Common Stock as a result of the merger, dissolution
or liquidation, as the case may be, reduced by the exercise price payable with
respect to the option. This provision will not change under the Proposed
Amendment.
Under the existing plan, the New Member Grant options are exercisable for
a maximum period of ten (10) years from the grant date, but terminate earlier if
the optionee's service as a director of the Company terminates. If the
optionee's service as a director terminates for Cause (as defined in the 1992
Stock Option Plan), his or her options terminate immediately. If the optionee's
service as a director terminates for other reasons, however, the optionee is
given a period of time to exercise his or her vested options or vested portions
thereof. The period of time ranges from three to twelve months depending on the
circumstances of the optionee's termination of service. Options under the 1992
Stock Option Plan are not transferable other than by the laws of descent and
distribution. The exercise of options granted under the 1992 Stock Option Plan
and the sale of any shares received upon exercise of such options are subject to
compliance with the Company's Insider Trading Policy Statement. Upon the
exercise of an option, the purchase price must be paid in full by any one or a
combination of the following methods: (i) cash or (ii) transfer of shares of
Common Stock. These provisions will not change under the Proposed Amendment and
generally will apply in the same manner to the Annual Grant options.
Termination and Amendment. Under the existing plan, the Board is
-------------------------
authorized to amend, modify, suspend or terminate the 1992 Stock Option Plan at
any time, provided that (i) no such change or termination shall impair or
adversely alter any options or rights already granted under the plan; (ii) no
such amendment shall materially increase the benefits or the number of shares
authorized under the plan or materially modify the award eligibility
requirements, unless shareholder approval is first obtained, and (iii) the terms
of the plan governing the number, price, timing and circumstance of grant of
awards may not be amended more often than once every six months, except to
comply with changes in the Internal Revenue Code of 1986, as amended (the
"Code"), or the Employee Retirement Income Security Act of 1974, as amended.
These termination and amendment provisions will not change under the Proposed
Amendment.
Closing Price. On April 29, 1996, the closing price of the Common Stock
-------------
as reported on the New York Stock Exchange was $2.75 per share.
7
<PAGE>
FEDERAL TAX IMPLICATIONS
Optionees will not recognize taxable income upon receiving stock options
pursuant to the 1992 Stock Option Plan. Upon exercising an option, the optionee
will generally realize ordinary income in an amount equal to the excess of the
fair market value of the shares acquired over the exercise price paid for such
shares. However, if an optionee exercises an option within six months of
receiving the option and the optionee does not make an election under Section 83
of the Code, then the recognition of income (and the determination of the amount
of income) is deferred until the date which is six months after the date the
option was received by the optionee.
The Company is entitled to a federal income tax deduction, subject to the
limitation under Section 162(m) of the Code, equal to the amount of ordinary
income realized by any optionee from the exercise of an option granted under the
1992 Stock Option Plan, provided that such amount constitutes an ordinary and
necessary business expense of the Company and such amount is reasonable.
Section 162(m) generally disallows a federal income tax deduction to any
publicly-held corporation for compensation paid in excess of $1 million in any
taxable year to the chief executive officer or any of the four other most highly
compensated executive officers who are employed by the Company on the last day
of the taxable year. The Company has not adopted 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
1996 based on the fact that none of its executive officers is expected to
receive compensation in excess of $1 million during fiscal 1996.
If an optionee exercises an option by delivering previously held shares
in payment of the exercise price, the optionee does not recognize gain or loss
on the exchange of the delivered shares, even if their then fair market value is
different from the optionee's tax basis in the shares. The optionee, however,
will still recognize ordinary income in an amount equal to the excess of the
fair market value of the shares acquired upon exercise over the fair market
value of all consideration (shares and/or cash) tendered by the optionee as the
option exercise payment. The Company generally is entitled to a deduction, in
the same way that it would be if the optionee had paid the exercise price in
cash.
Under certain circumstances, the cancellation and payout of options
granted under the 1992 Stock Option Plan upon a merger (as described above)
might result in all or a portion of the consideration received by the optionee
being deemed an "excess parachute payment" for purposes of Section 280G of the
Code. To the extent it is so considered, the optionee may be subject to a 20%
excise tax and the Company may be denied an income tax deduction.
8
<PAGE>
NEW PLAN BENEFITS
Under the terms of the existing 1992 Stock Option Plan, and the plan as
proposed to be amended, the Board has no authority to determine when and to whom
options will be granted. New Member Grant options are issued to all new
directors, and the determination of whether Annual Grant options will be granted
is made objectively based on the Company's earnings applicable to Common Stock
for the prior fiscal year. Further, the number of Annual Grant options to be
issued, if at all, in any given year is determined by a formula linked to the
Fair Market Value of the Company's Common Stock. The Company, therefore, cannot
determine the benefits that will be granted under the 1992 Stock Option Plan in
any future period.
The following table sets forth the number of shares subject to options
that would have been granted during fiscal 1995, assuming that the 1992 Stock
Option Plan, as amended, had been in effect during fiscal 1995, to (i) the Chief
Executive Officer of the Company and the five other most highly compensated
executive officers of the Company for the fiscal year ended November 30, 1995,
including a former executive officer who left the Company in fiscal 1995
(collectively, the "Named Executive Officers"), (ii) each nominee for election
as a director, (iii) the executive officers as a group, (iv) nonemployee
directors as a group, and (v) all employees excluding executive officers. Under
the Proposed Amendment, only nonemployee directors and the Chief Executive
Officer of the Company (provided he is a director and is not paid a salary by
the Company) are eligible to receive the Annual Grants. The amounts shown below
are not necessarily indicative of the amounts which may be granted in future
periods under the 1992 Stock Option Plan.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
1992 STOCK OPTION PLAN
------------------------
NAME AND POSITION NUMBER OF UNITS
- ----------------- ---------------
(SHARES)
--------
<S> <C>
Stanley P. Gold
Chairman of the Board and Chief
Executive Officer................................. 20,000
William L. Benford
President and Chief Operating
Officer........................................... 0
David F. Gatto
Executive Vice President-Sales,
Merchandising and Operations...................... 0
Thomas F. Larkins
Sr. Vice President and Chief
Administrative Officer............................ 0
Tracey C. Doi
Vice President and Controller..................... 0
Christopher M. Walsh
Former Senior Vice President,
Operations........................................ 0
</TABLE>
9
<PAGE>
Directors:
William L. Benford.................................. 0
Walter C. Bladstrom................................. 20,000
Allan E. Dalshaug................................... 20,000
Willie D. Davis..................................... 20,000
Stanley P. Gold..................................... 20,000
Stephen A. Koffler.................................. 20,000
Ann E. Meyers....................................... 20,000
Clifford A. Miller.................................. 20,000
Robert G. Moskowitz................................. 20,000
Vappalak A. Ravindran............................... 20,000
Executive Officers as a Group....................... 20,000
Nonemployee Directors as a Group.................... 160,000
All Employees Excluding Executive................... 0
Officers
SHAREHOLDER APPROVAL
The Amended and Restated 1992 Stock Option Plan requires approval by the
affirmative vote of a majority of the issued and outstanding shares of Common
Stock and Series B Preferred Stock represented and voting together as a single
class at the 1996 Annual Meeting. If the 1992 Stock Option Plan is approved by
shareholders at the 1996 Annual Meeting, options to purchase approximately
20,000 shares of Common Stock will be granted immediately thereunder to each of
the Eligible Nonemployee Directors and Eligible Executive Officers, provided
that, where applicable, each is elected by shareholders to serve as a director.
The complete text of the Amended and Restated 1992 Stock Option Plan is set
forth in Appendix A, and the foregoing description of the plan is qualified in
its entirety by reference to the plan text.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDED
AND RESTATED L.A. GEAR, INC. 1992 STOCK OPTION PLAN FOR ELIGIBLE NONEMPLOYEE
DIRECTORS AND ELIGIBLE EXECUTIVE OFFICERS.
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,
1996. Price Waterhouse acted as independent accountants for the Company in
respect of its fiscal year ended November 30, 1995. 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.
10
<PAGE>
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 April 29, 1996 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 B Preferred Stock.
Unless otherwise indicated, the address for all natural persons listed in the
table below is 4444 Lakeside Drive, Burbank, California 91505.
<TABLE>
<CAPTION>
Amount and
Title Name and Address Nature of Percent
of Class of Beneficial Owners Beneficial Ownership (1) of Class
--------- --------------------- ------------------------ --------
<C> <S> <C> <C>
Common Trefoil Capital Investors, L.P. 17,413,568(2) 44.25%
c/o Trefoil Investors, Inc.
4444 Lakeside Drive
Burbank, CA 91510
Roy E. Disney 17,413,568(3) 44.25%
Patricia A. Disney 17,413,568(3) 44.25%
Stanley P. Gold 18,303,568(4) 45.62%
Common Pentland Ventures Ltd. 1,244,445 5.43%
c/o Pentland Group plc.
The Pentland Centre
Lakeside, Squires Lane
Finchley N3 2QL
England
Robert Stephen Rubin 1,244,445(5) 5.43%
c/o Pentland Group plc.
The Pentland Centre
Lakeside, Squires Lane
Finchley N3 2QL
England
Preferred Trefoil Capital Investors, L.P. 1,107,902 100.00%
c/o Trefoil Investors, Inc.
4444 Lakeside Drive
Burbank, CA 91510
Roy E. Disney 1,107,902(6) 100.00%
Patricia A. Disney 1,107,902(6) 100.00%
Stanley P. Gold 1,107,902(6) 100.00%
</TABLE>
11
<PAGE>
(1) Unless otherwise indicated, each named entity has sole voting and
investment power over the shares beneficially owned by it.
(2) These shares include 16,413,568 shares representing the shares of the
Company's Common Stock issuable upon conversion of the shares of Series B
Preferred Stock owned by Trefoil.
(3) These shares are owned by Trefoil, the General Partner of which is TII,
and include 16,413,568 shares representing the shares of the Company's
Common Stock issuable upon conversion of the shares of Series B Preferred
Stock owned by Trefoil. Roy E. Disney, Patricia A. Disney and Stanley P.
Gold collectively control more than 50% of the voting stock of TII.
(4) Includes (i) 750,000 shares which Mr. Gold has the right to acquire
within 60 days after April 29, 1996 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 April 29, 1996 by
exercise of stock options vested pursuant to the Company's 1986 Stock
Option Plan and (ii) the shares owned by Trefoil, the General Partner of
which is TII, including 16,413,568 shares representing the shares of the
Company's Common Stock issuable upon conversion of the shares of Series B
Preferred Stock owned by Trefoil. Roy E. Disney, Patricia A. Disney and
Stanley P. Gold collectively control more that 50% of the voting stock of
TII.
(5) These shares are owned by Pentland Ventures Ltd., all of the outstanding
stock of which, based on a 13D filed by Pentland Ventures, Ltd. on April
28, 1992, is owned by Pentland Group plc. The 1992 13D also disclosed
that Mr. Rubin owned 56.49% of the outstanding shares of Pentland Group
plc., and therefore Mr. Rubin may be deemed to be a beneficial owner of
Pentland Ventures Ltd.
(6) These shares are owned by Trefoil, the General Partner of which is TII.
Roy E. Disney, Patricia A. Disney and Stanley P. Gold collectively
control more than 50% of the voting stock of TII.
12
<PAGE>
OWNERSHIP OF COMMON STOCK BY DIRECTORS AND OFFICERS
The following table sets forth certain information regarding the shares
of Common Stock beneficially owned by the Named Executive Officers and all
current directors and executive officers of the Company as a group (15 persons).
This information has been provided by each of the directors and executive
officers as of April 29, 1996 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"), and 1993
Stock Incentive Plan (the "1993 Stock Incentive Plan"). No shares of the
Company's outstanding Series B Preferred Stock are held by such individuals.
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Name Beneficial Ownership (1) of Class (2)
- ---- ------------------------- ------------
<S> <C> <C>
Directors:
William L. Benford............................. 251,084 (3) 1.08%
Walter C. Bladstrom............................ 25,000 (4) *
Allan E. Dalshaug.............................. 25,000 (5) *
Willie D. Davis................................ 25,000 (6) *
Stanley P. Gold................................ 890,000 (7) 3.75%
Stephen A. Koffler............................. 45,000 (5)
Ann E. Meyers.................................. 26,000 (8) *
Clifford A. Miller............................. 35,000 (9) *
Robert G. Moskowitz............................ 20,000 (5) *
Vappalak A. Ravindran.......................... 29,000 (10) *
Named Executive Officers**
David F. Gatto................................. 144,739 (11) *
Thomas F. Larkins.............................. 39,743 (12) *
Tracey C. Doi.................................. 27,923 (13) *
Christopher M. Walsh........................... 0 (14) *
All current directors and executive officers
as a group (15 persons)..................... 1,615,706 (15) 6.62%
- --------------
</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 April 29, 1996 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 177,317 shares which Mr. Benford has the right to acquire within
60 days after April 29, 1996 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 April 29, 1996 by exercise of
stock options vested pursuant to the Company's 1986 Stock Option Plan.
13
<PAGE>
(4) Consists of 20,000 shares which Mr. Bladstrom has the right to acquire
within 60 days after April 29, 1996 by exercise of stock options pursuant
to the 1992 Stock Option and 5,000 shares which Mr. Bladstrom has the
right to acquire within 60 days after April 29, 1996 by exercise of stock
options vested pursuant to the Company's 1986 Stock Option Plan.
(5) Consists of shares which the individual has the right to acquire within
60 days after April 29, 1996 by the exercise of stock options vested
pursuant to the Company's 1986 Stock Option Plan.
(6) Consists of 20,000 shares which Mr. Davis has the right to acquire within
60 days after April 29, 1996 by exercise of stock options pursuant to the
1992 Stock Option Plan and 5,000 shares which Mr. Davis has the right to
acquire within 60 days after April 29, 1996 by exercise of stock options
vested pursuant to the Company's 1986 Stock Option Plan.
(7) Includes 750,000 shares which Mr. Gold has the right to acquire within 60
days after April 29, 1996 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 April 29, 1996 by exercise of stock
options vested pursuant to the Company's 1986 Stock Option Plan.
(8) Includes 20,000 shares which Ms. Meyers has the right to acquire within
60 days after April 29, 1996 by the exercise of stock options vested
pursuant to the Company's 1992 Stock Option Plan and 5,000 shares which
Ms. Meyers has the right to acquire within 60 days after April 29, 1996
by exercise of stock options vested pursuant to the Company's 1986 Stock
Option Plan.
(9) Includes 20,000 shares which Mr. Miller has the right to acquire within
60 days after April 29, 1996 by the exercise of stock options vested
pursuant to the Company's 1992 Stock Option Plan and 5,000 shares which
Mr. Miller has the right to acquire within 60 days after April 29, 1996
by exercise of stock options vested pursuant to the Company's 1986 Stock
Option Plan.
(10) Includes 25,000 shares which Mr. Ravindran has the right to acquire
within 60 days after April 29, 1996 by exercise of stock options vested
pursuant to the 1986 Stock Option Plan.
(11) Includes 71,486 shares which Mr. Gatto has the right to acquire within 60
days after April 29, 1996 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 April 29, 1996 by exercise of stock
options vested pursuant to the 1986 Stock Option Plan.
(12) Consists of 9,743 shares which Mr. Larkins has the right to acquire
within 60 days after April 29, 1996 by exercise of stock options vested
pursuant to the 1993 Stock Incentive Plan, and 30,000 shares which Mr.
Larkins has the right to acquire within 60 days after April 29, 1996 by
exercise of stock options vested pursuant to the Company's 1986 Stock
Option Plan.
(13) Includes 19,176 shares which Ms. Doi has the right to acquire within 60
days after April 29, 1996 by exercise of stock options vested pursuant
to the 1993 Stock Incentive Plan, and 5,000 shares which Ms. Doi has the
right to acquire within 60 days after April 29, 1996 by exercise of stock
options vested pursuant to the 1986 Stock Option Plan.
(14) Mr. Walsh left the Company in 1995. All his options expired on or prior
to January 6, 1996.
(15) Includes 1,466,001 shares which the members of the group have the right
to acquire within 60 days after April 29, 1996 by the exercise of stock
options vested pursuant to the Company's 1986 Stock Option Plan, 1992
Stock Option Plan and 1993 Stock Incentive Plan.
14
<PAGE>
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 1995, 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 in fiscal 1995,
with the following exceptions: (1) the Form 3 required to be filed by James
Moodhe upon becoming an executive officer of the Company was inadvertently filed
more than ten days following his appointment to such position; and (2) in
connection with the acquisition of the Series A Preferred Stock by Trefoil and
subsequent acquisitions of Common Stock, TII, as general partner of Trefoil,
executed and filed Forms 3, 4 and 5 for Trefoil. However, as a result of a
change in law, separate filings by TII may have been required even though TII
does not have a sufficient pecuniary interest in the capital stock of the
Company to be deemed a holder of 10% or more of the Company. In connection with
the acquisition of the Series B Preferred Stock by Trefoil, TII filed Forms 3
and 4 dated May 1, 1996.
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. 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.
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.
15
<PAGE>
The Stock Option Committee is comprised of Mr. Gold, who chairs the
Committee, and Mr. Moskowitz. 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, 1995, the Board held seven
meetings, the Audit Committee held three meetings, the Compensation Committee
held two 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, 1995 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. Officers are appointed by and serve at the
discretion of the Board.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Stanley P. Gold 53 Chairman of the Board and Chief
Executive Officer
William L. Benford 53 President and Chief Operating Officer
David F. Gatto 34 Executive Vice President - Sales, Merchandising and Operations
Thomas F. Larkins 34 Senior Vice President, Chief
Administrative Officer, General
Counsel and Secretary
James V. Moodhe 48 Senior Vice President- Marketing,
Design and Development
Tracey C. Doi 35 Vice President and Controller
Victor J. Trippetti, Jr. 48 Vice President and Treasurer
</TABLE>
16
<PAGE>
Stanley P. Gold was appointed Chairman of the Board and Chief Executive
Officer of the Company in January 1992. Mr. Gold has served since 1987 as
President, Chief Executive Officer and a director of Shamrock, a holding company
engaged primarily in real estate development and the making of investments.
Since January 1, 1990, Mr. Gold has also served as President and Managing
Director of TII, the general partner of Trefoil, as well as President and
Managing Director of Shamrock Capital Advisors, Inc. ("SCA"), a company which
provides management and consulting services, including services to Trefoil and
companies in which Trefoil invests. Mr. Gold is also a director of The Walt
Disney Company, an international company engaged in family entertainment, and
Koor Industries Limited ("Koor Industries"), Israel's largest industrial group
engaged primarily in telecommunications equipment, agricultural chemicals,
building materials, energy and food.
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.
David F. Gatto was appointed Executive Vice President - Sales,
Merchandising and Operations in September 1995. He joined the Company in
September 1991 as Senior Vice President - Strategic Planning, and served as
Senior Vice President - International from January 1993 to September 1995.
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 Chief Administrative Officer of the
Company in September 1995. He has served as Senior Vice President, General
Counsel and Secretary since 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.
James V. Moodhe was appointed Senior Vice President - Marketing, Design
and Development in September 1995. From May 1995 to September 1995 he served as
a consultant to the Company. From May 1991 to July 1992, he was the President
of Guess Athletic, a new athletic shoe division of Guess? Inc. From July 1992 to
April 1995, he was the President of Pan Pacific Designs, Inc., the exclusive
licensee of the Guess Athletic brand. From October 1988 to May 1991, Mr. Moodhe
was with K-Swiss Inc., an athletic shoe company, serving in the capacities of
Vice President of Sales, Domestic and Vice President of Sales, International.
Prior to that, he was a founding member of the management of Nike Inc.
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.
17
<PAGE>
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. Prior to that, Mr. Trippetti
was Director -Financial Planning of Host Marriott Corporation, an international
hospitality corporation, from June 1986 to October 1989.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the
--------------------------
compensation (cash and non-cash, plan and non-plan) paid to the Named Executive
Officers for services rendered in all capacities to the Company during the three
fiscal years ended November 30, 1995, 1994 and 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL ---------------------------------
COMPENSATION AWARDS PAYOUTS
------------ ------ -------
OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
NAME AND PRINCIPAL FISCAL COMPENSATION STOCK UNDERLYING LTIP COMPENSATION
POSITION YEAR SALARY($) BONUS($) ($) (2) AWARDS($) OPTIONS(#) PAYOUTS($) ($)
- ---------------- ------- ------- ------ ------------ --------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stanley P. Gold 1995 23,250 (1) 0 0 0 0 0 0
Chairman of the Board 1994 21,000 (1) 0 0 0 0 0 0
and Chief Executive 1993 25,750 (1) 0 0 0 750,000 0 0
Officer
William L. Benford 1995 500,000 0 0 0 28,199 0 4,500(4)
President and Chief 1994 401,058 0 0 0 319,118 0 4,620(4)
Operating Officer 1993 325,000 0 0 0 0 0 4,497(4)
David F. Gatto 1995 279,863 0 0 0 45,310 0 4,500(4)
Executive Vice President- 1994 275,000 0 0 0 76,176 0 4,992(4)
Sales, Merchandising 1993 275,000 0 0 0 0 0 4,125(4)
and Operations
Thomas F. Larkins 1995 213,231 0 0 0 59,743 0 0
Sr. Vice President and 1994 169,231 0 0 0 30,000 0 0
Chief Administrative 1993 0 0 0 0 0 0 0
Officer
Tracey C. Doi 1995 141,981 0 0 0 27,981 0 4,085(4)
Vice President and 1994 130,110 0 0 0 14,029 0 3,903(4)
Controller 1993 102,306 0 0 0 0 0 3,000(4)
Christopher M. Walsh 1995 214,628 15,000 0 0 12,248 0 0
Former Senior Vice 1994 220,000 0 0 0 72,941 0 0
President-Operations 1993 220,000 0 2,447(3) 0 0 0 0
</TABLE>
18
<PAGE>
(1) In fiscal 1995, 1994 and 1993, Mr. Gold earned $23,250, $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 for those fiscal years. See "Director
Compensation".
(2) Perquisites and other personal benefits paid to each Named Executive
Officer (other than Mr. Walsh, 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.
(3) These amounts were reimbursed by the Company during fiscal 1993 for the
payment of taxes.
(4) Each of Mr. Benford, Mr. Gatto and Ms. Doi deferred a portion of his or
her annual salary pursuant to the 401(k) portion of the Company's
Employee Stock Savings Plan. The amount shown for fiscal 1995 represents
a contribution, valued at $4,500, $4,500 and $4,085, respectively, for
Mr. Benford, Mr. Gatto, and Ms. Doi made by the Company pursuant to the
employee stock ownership plan portion of its Employee Stock Savings Plan.
The Matching Contribution is held in shares of the Company's Common
Stock. Messrs. Benford and Gatto will be fully vested under the Employee
Stock Savings Plan on November 30, 1996 and Ms. Doi is currently fully
vested under the Employee Stock Savings Plan.
Stock Options Granted in Fiscal 1995. The following table sets forth
------------------------------------
information concerning individual grants of stock options made by the Company
during the fiscal year ended November 30, 1995 to each of the Named Executive
Officers. The Company did not grant any stock appreciation rights during fiscal
1995.
19
<PAGE>
OPTION GRANTS
IN THE FISCAL YEAR ENDED NOVEMBER 30, 1995
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (9)
---------------------------------------- -----------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SAR'S EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS/SAR'S EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR(6) ($/SHARE) DATE 5%($) 10%($)
---- -------------- ------------- -------- ---------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Stanley P. Gold 0 0 0 N/A 0 0
William L. Benford 28,199 (1) 5.76% $5.18 (7) 12/13/04 77,688 210,111
David F. Gatto 15,310 (1) 3.13% $5.18 (7) 12/13/04 42,179 114,075
30,000 (2) 6.13% $2.66 (7) 09/12/05 54,600 134,250
Thomas F. Larkins 30,000 (3) 6.13% $4.75 (8) 12/13/04 95,550 236,430
9,743 (1) 1.99% $5.18 (7) 12/13/04 26,842 72,595
20,000 (2) 4.09% $2.66 (7) 09/12/05 36,400 89,500
Tracey C. Doi 9,500 (4) 1.94% $5.18 (7) 12/13/04 26,173 70,785
5,481 (1) 1.12% $5.18 (7) 12/13/04 15,100 40,839
13,000 (2) 2.66% $2.66 (7) 09/12/05 23,660 58,175
Christopher M. Walsh 12,248 (5) 2.50% $5.18 (7) 01/06/96 33,743 91,260
</TABLE>
- ------------
(1) These options were granted pursuant to the Company's 1993 Stock Incentive
Plan on December 13, 1994. The total number of options granted were
exercisable on and after December 1, 1995.
(2) These options were granted pursuant to the Company's 1993 Stock Incentive
Plan on September 12, 1995. One-third of the total number of options
granted are exercisable on and after each of September 12, 1996, 1997 and
1998. 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 1986 Stock Option
Plan on December 13, 1994. One-third of the total number of options
granted became exercisable on and after December 13, 1995 and an
additional one-third of the options are exercisable on and after each of
December 13, 1996 and 1997. Vesting may be accelerated in the event of a
change in control (as defined in the Company's 1986 Stock Option Plan) of
the Company.
(4) These options were granted pursuant to the Company's 1993 Stock Incentive
Plan on December 13, 1994. One-third of the total number of options
granted became exercisable on and after December 13, 1995 and an
additional one-third of the options are exercisable on and after each of
December 13, 1996 and December 13, 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.
(5) These options were granted pursuant to the Company's 1993 Stock Incentive
Plan on December 13, 1994. These options expired on January 6, 1996.
20
<PAGE>
(6) In fiscal 1995, the Company granted options to purchase an aggregate of
489,417 shares of Common Stock to employees.
(7) 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, regular
way, on the New York Stock Exchange (NYSE) Composite Tape) of such stock
on the date the 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.
(8) Exercise price is equal to the fair market value of the Company's common
stock, based upon the last reported sales price, regular way, for the
Corporation's common stock on the New York Stock Exchange at the close of
business on the date of grant. 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.
(9) Potential realizable value is based upon the per share fair market value
of options on the date of grant and an annual appreciation of such fair
market value through the expiration date of such option 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, 1995 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, 1995 AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/AT "IN-THE-MONEY"
SHARES FISCAL YEAR-END (#) OPTIONS AT
ACQUIRED ON VALUE EXERCISABLE ("E") / FISCAL YEAR-END ($)(1)
NAME EXERCISE (#) REALIZED UNEXERCISABLE ("U") EXERCISABLE/UNEXERCISABLE
- ---- ------------- --------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Stanley P. Gold 0 0 770,000(E) / 0(U) $0 / $0
William L. Benford 0 0 189,118(E) / 228,199(U) $0 / $0
David F. Gatto 0 0 106,176(E) / 85,310(U) $0 / $0
Thomas F. Larkins 0 0 10,000(E) / 79,743(U) $0 / $0
Tracey C. Doi 0 0 12,029(E) / 34,981(U) $0 / $0
Christopher M. Walsh 0 0 0(E) / 125,189(U) $0 / $0
</TABLE>
21
<PAGE>
- ------------
(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, 1995 did not exceed the exercise price of the any of the
reported options.
DIRECTOR COMPENSATION
During fiscal 1995, the Company paid 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
reimbursed 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
1995, Mr. Gold earned $23,250 in directors' fees. An aggregate of $241,250 was
paid in director and meeting fees to all directors for fiscal 1995.
If the proposal to amend the Company's 1992 Stock Option is approved by
the shareholders, beginning in fiscal 1996 Mr. Gold and all nonemployee
directors will receive options to purchase Common Stock in lieu of the cash fees
traditionally paid to such directors (for years in which certain earnings
targets are not met). See "Proposal to Amend the L.A. Gear, Inc. 1992 Stock
Option Plan for Eligible Nonemployee Directors."
Pursuant to a one-year management agreement, dated September 12, 1994,
between the Company and SCA (the "Services Agreement"), SCA consulted with, and
provided advice to, the officers and employees of the Company. The Services
Agreement expired by its terms in September 1995. See "Certain Relationships and
Related Transactions -- Services Agreement". Mr. Gold is 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. The Company also (i) reimbursed 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) paid customary directors' fees to
the officers and directors of SCA serving as directors of the Company.
Under the current form of 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 1995. This feature of the 1992 Stock Option Plan will not change upon
the amendment of such plan as described herein.
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.
22
<PAGE>
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. The agreement has a three-year term expiring on November 30, 1996.
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, 1993, 1994 and 1995.
Pursuant to an employment agreement, dated as of December 7, 1993 (as
amended), David F. Gatto serves as Executive Vice President - Sales,
Merchandising and Operations 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 $300,000 and is eligible to participate in the MIP. No
cash bonus was paid by the Company for the fiscal years ended November 30, 1993,
1994 and 1995.
Pursuant to an employment agreement, dated as of February 15, 1994,
Thomas F. Larkins serves as Senior Vice President and Chief Administrative
Officer of the Company. The agreement has a three-year term, expiring on
February 28, 1997. Under the agreement, Mr. Larkins receives an annual base
salary of $245,000 and is eligible to participate in the MIP. No cash bonus was
paid by the Company for the fiscal years ended November 30, 1994 and 1995.
Pursuant to an employment agreement, dated as of February 1, 1996, Tracey
C. Doi serves as Vice President and Controller of the Company. The agreement
has a one year term, but will renew automatically from year to year unless the
Company gives Ms. Doi notice of non-renewal at least six months prior to the end
of its term. Under the agreement, Ms. Doi receives an annual base salary of not
less than $150,000 during each year of her employment term and is eligible to
participate in the MIP. No cash bonus was paid by the Company for the fiscal
years ended November 30, 1993, 1994 and 1995.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Compensation Committee of the Board consists of Stephen A. Koffler,
Walter C. Bladstrom, Allan E. Dalshaug and Willie D. Davis. The Stock Option
Committee consists of Stanley P. Gold and Robert G. Moskowitz.
Mr. Gold, the Chief Executive Officer of the Company, is also a member of
the Board of Directors of SCA, a company for which Mr. Moskowitz serves as an
executive officer.
Ann Meyers, a member of the Stock Option Committee until April 1995,
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 1995 for such services. Her consulting agreement
expired in November 1995 and was not renewed.
23
<PAGE>
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEES
ON EXECUTIVE COMPENSATION
GENERAL
The Compensation 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 duties of the Compensation 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. The Chairman of the Board and the President may jointly approve the
employment of individuals (other than executive officers) with an annual base
compensation between $150,000 and $250,000, provided they give prompt notice of
such approval to the Compensation Committee. Decisions regarding annual
compensation levels of $250,000 or greater (and the annual compensation levels
of all executive officers) are subject to Compensation Committee approval.
The Stock Option Committee consists of Stanley Gold (chair) and Robert
Moskowitz. 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.
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.
The Company has not adopted 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 1996 based on the fact
that none of its executive officers is expected to receive compensation in
excess of $1 million during fiscal 1996.
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.
24
<PAGE>
In fiscal 1993, the Company retained an independent compensation
consulting firm (the "Consultant") to assist the Compensation 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. The Company has continued
the policies adopted based on the Consultant's report as the goals and
objectives of its executive compensation program have 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. The Compensation Committee believes that the Company's
-------------
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 Consultant's report 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 24. The
Compensation Committee did not survey the Compensation Peer Group in connection
with salary decisions in fiscal 1995.
The Compensation Committee believes that its incentive bonus plan and
fixed share stock option grant guidelines allow for 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 part of its
expense reduction efforts and in light of the loss experienced by the Company in
1995, the Company did not implement any across-the-board salary increases for
management employees in fiscal 1995. In fact, the overall management payroll
significantly decreased during fiscal 1995 as the number of Vice Presidents
employed by the Company decreased by 39% (from 18 to 11) in line with the
Company's efforts to streamline its organizational structure. Although the
Compensation Committee believes that modest salary increases were made among the
Compensation Peer Group, it continues to believe that the Company's salary
levels for management employees remain above the median level among the
Compensation Peer Group (although not to the same extent as fiscal 1993 and
1994), and that such position is necessary for the Company to continue to
attract and retain qualified executives.
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 Compensation 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 September 1995, the Company underwent a corporate
reorganization pursuant to which it, among other expense reduction measures,
reduced its workforce by 30% and realigned senior management such that certain
individuals were required to assume additional responsibilities (the "1995
Corporate Reorganization"). In connection with the 1995 Corporate
Reorganization: (i) David Gatto was appointed Executive Vice President - Sales,
Merchandising and Operations and his base salary was increased from $275,000 to
$300,000, (ii) Thomas Larkins was appointed Senior Vice President and Chief
Administrative Officer and his base salary was increased from $210,000 to
$245,000, and (iii) Tracey Doi's responsibilities as Vice President and
Controller were expanded and broadened and her base salary was increased from
$140,000 to $150,000. No other salary increases were
25
<PAGE>
granted to the Named Executive Officers of the Company in fiscal 1995. For
purposes of this report, the "Named Executive Officers" include the Company's
Chief Executive Officer, the next four highest paid executive officers in fiscal
1995, and the Company's former Senior Vice President--Operations, who left the
Company in fiscal 1995. No other discretionary salary increases were granted to
executive officers during fiscal 1995 due to the Company's failure to meet the
foregoing criteria.
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 Compensation 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 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; provided, however, that negative bank balances cannot
exist until contributions are initially made to the bonus bank and a bonus bank
balance is thus established. There is no cap on the bonus awards that can be
achieved for superior levels of excess EVA improvement.
The Compensation 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 generally the Compensation 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. However, the Compensation Committee believed it was
necessary to increase management's share of excess EVA improvement for fiscal
1996 to enable the MIP to provide a meaningful performance incentive to
management and to allow the Company to retain qualified management employees,
particularly in light of (i) the significant level of expected EVA improvement
required to be reached prior to management commencing to share in excess EVA
improvement, and (ii) the failure of the MIP to pay cash bonuses to management
in either fiscal 1994 or fiscal 1995.
Target bonuses for plan participants reflect a premium above median
competitive bonus opportunities. The Compensation Committee believes that the
premium is appropriate in light of the risk of the MIP. The Compensation
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
Compensation 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. The Company's stock
option grant policy with respect to senior management is aimed at inducing
qualified candidates to accept offers
26
<PAGE>
of employment and to retaining such candidates once employed (including in
connection with any required relocations). 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.
Triennial Stock Option Grant Program. In fiscal 1994, the Compensation
------------------------------------
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 at an exercise price of $7.78 per share. 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
Compensation Committee determined that such accelerated vesting schedule would
more effectively accomplish the Company's retention objectives.
It is the Compensation 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 Compensation 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
guidelines relative to competitive long-term incentive values has, and will
continue to, fluctuate based on the performance of the Company's stock.
1996 Shared Success Award. As an additional incentive separate from the
-------------------------
Triennial Stock Option Grant Program, in December 1995 the Compensation
Committee and Stock Option Committee adopted and approved the 1996 Shared
Success Award for all employees of the Company. In contrast to the MIP, under
which only certain management level employees are eligible to receive options,
all employees of the Company received options under the 1996 Shared Success
Award. The purpose of the 1996 Shared Success Award is to: (i) instill a sense
of ownership in the Company in all employees; (ii) assist the Company in
retaining qualified employees; (iii) recognize the contributions of the
Company's employees during the past year and the increased demands placed on
such employees in light of the reduction in workforce effected by the Company
pursuant to the 1995 Corporate Reorganization in September 1995; and (iv)
provide added performance incentive to increase shareholder value with a minimum
dilutive effect on earnings per share of common stock. The Compensation
Committee and Stock Option Committee believe the Shared Success Award can assist
the Company in achieving the foregoing objectives at a reasonable cost and
without requiring the Company to make any additional cash payout. Under the
1996 Shared Success Award, the number of options received by management
employees was set by first assuming that each participant earned a theoretical
payout at 100% of his or her bonus opportunity under the 1995 MIP. This amount
was then divided by the daily average closing price of the Common Stock during
fiscal 1995 ($3.15) to determine the number of options to be granted, with each
management employee being granted options to purchase a minimum of 2,000 shares.
Options to purchase an aggregate of approximately 482,384 shares were granted to
management employees under the 1996 Shared Success Award. All options were
issued at the fair market value of the Company's Common Stock on December 19,
1995, the date of grant ($1.75), and vest in full on December 1, 1996, the first
day of the Company's 1997 fiscal year.
27
<PAGE>
CHIEF EXECUTIVE OFFICER
At Mr. Gold's request, he did not receive any salary or other cash
compensation during fiscal 1995 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 1995, Mr. Gold earned $23,250 in
directors' fees.
During fiscal 1993, the Compensation 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 Compensation 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 Compensation Committee also evaluated whether Mr.
Gold's compensation should be adjusted in view of the Services Agreement between
the Company and SCA. See "Certain Relationships and Related Transactions --
Services Agreement". Mr. Gold is a director, shareholder and president of SCA.
The Compensation Committee reviewed with members of senior management the
services provided by SCA under the 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 Compensation
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 Compensation
Committee concluded that the compensation to be awarded to Mr. Gold as Chief
Executive Officer should not be reduced by virtue of the Services Agreement.
However, the Compensation Committee did conclude that an adjustment to the
indicated compensation based on peer group analysis 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 Compensation
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 Compensation 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
Compensation 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.
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The Compensation Committee reconsidered Mr. Gold's compensation package
in fiscal 1995 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 1995 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
Stanley P. Gold, Chairman
Robert G. Moskowitz
February 21, 1996
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.
29
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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, 1990 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)
[TOTAL RETURN TO SHAREHOLDERS GRAPH]
30
<PAGE>
TOTAL SHAREHOLDER RETURNS - DIVIDENDS REINVESTED
<TABLE>
<CAPTION>
November Indexed Returns
------------------------
Company/Index 1990 1991 1992 1993 1994 1995
- ------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
S&P 500 INDEX............. 100 120.34 142.57 156.97 158.61 217.27
L.A. GEAR, INC............ 100 91.40 105.38 97.85 46.24 13.98
S&P SHOE INDEX............ 100 190.79 247.39 179.53 216.19 275.67
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
EXCHANGE OF SERIES A PREFERRED STOCK FOR SERIES B PREFERRED STOCK
In December 1995, the Company entered into a Share Exchange Agreement
with Trefoil, the holder of all of the Company's Series A Cumulative Convertible
Preferred Stock (the "Series A Preferred Stock"), which agreement provided for
the exchange of all $100 million of the Company's Series A Preferred Stock,
together with all accrued and unpaid dividends, for a new issue of Series B
Preferred Stock (the "Share Exchange Transaction"). Mr. Gold serves as
President and Managing Director of TII, the general partner of Trefoil, and Mr.
Moskowitz is an executive officer of TII. The Share Exchange Transaction was
recommended by a Special Committee of independent members of the Board of
Directors and approved by the Board of Directors. It was further approved by
the shareholders of the Company on April 9, 1996 and completed on April 12,
1996. As a result, there are no shares of Series A Preferred Stock currently
outstanding, and an aggregate of 1,107,902 shares of Series B Preferred Stock
outstanding.
The terms of the Series B Preferred Stock provide for, among other
things, the elimination of the mandatory redemption feature of the Series A
Preferred Stock and a reduction in the conversion price from $10.00 to $6.75 per
common share. In addition, under the terms of the Series B Preferred Stock, the
Company is entitled, at its option, to pay dividends during the fiscal year
ending November 30, 1996 either in additional shares of Series B Preferred Stock
or in cash. The coupon rate of 7.5% per annum for dividends with respect to the
Series B Preferred Stock remains unchanged from that of the Series A Preferred
Stock. The Series B Preferred Stock votes together with the Common Stock on
all matters submitted to a vote of the holders of the Common Stock, with voting
power equal to the number of shares of Common Stock into which the Series B
Preferred Stock is then convertible. In addition, the Series B Preferred Stock
has the right to vote as a separate class with respect to the authorization or
issuance of any additional shares of Series B Preferred Stock or the creation of
any class or series of the Company's capital stock which would rank senior to or
on a par with the Series B Preferred Stock, or with respect to any other action
that would adversely affect the rights, preferences and privileges of the Series
B Preferred Stock. As a result of the Share Exchange Transaction, Trefoil's
voting power in the Company, on an as-converted basis, increased from 33% to
44.25%.
In connection with the Share Exchange Transaction, the Company and
Trefoil amended the Registration Rights Agreement, dated as of May 27, 1991 (the
"Registration Rights Agreement"), pursuant to which Trefoil was originally given
the right to request registration under the Securities Act of 1933, as amended,
of the underlying shares of Common Stock issued or issuable upon conversion of
the Series A Preferred Stock. The amendment, which was entered into on April
12, 1996, (i) changed all references to Series A Preferred Stock to Series B
Preferred Stock, and (ii) expanded Trefoil's registration rights to include the
right to require the registration of the Series B Preferred Stock in addition to
the registration of the Common Stock into which the Series B Preferred Stock is
convertible. The Company is only obligated to effect a total of three
registrations at Trefoil's request, and the Company may not include in any such
registration shares issued for its own account. Whenever the Company effects a
registration pursuant to the Registration Rights Agreement, as amended, the
Company must 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
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account on a Form S-3 registration statement, at the request of holders of the
Series B Preferred Stock, the Company must, subject to certain limitations,
include the holders' requested 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 consulted
with, and provided 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. The Services
Agreement expired by its terms in September 1995. Mr. Gold is a member of the
Board of Directors of SCA and Mr. Moskowitz is an executive officer of SCA. The
Services Agreement replaced a prior three-year agreement entered into between
the Company and SCA for substantially similar management services. SCA's
compensation for such management and consulting services under the Services
Agreement was $500,000. The Company also (i) reimbursed SCA for all of its
reasonable out-of-pocket costs and expenses incurred in connection with the
performance of its services under the Services Agreement and (ii) paid customary
directors' fees to the officers and directors of SCA serving as directors of the
Company. See "Director Compensation". The Company 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 did 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 the expiration
of the Services Agreement.
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
32
<PAGE>
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 is
entitled to terminate the Sourcing Agreement (defined below) without liability
thereunder.
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 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). These options
expired on April 28, 1996.
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, 1997 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
prior to its expiration (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 prior to its
expiration (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.
CONSULTING AGREEMENTS
Pursuant to a Consulting Agreement, dated as of May 30, 1995 (the "Moodhe
Agreement"), James Moodhe served as a consultant to the Company on an exclusive,
full-time basis, providing advice on operational and organizational matters.
Although the term of the Moodhe Agreement ran through November 30, 1995, Mr.
Moodhe was appointed Senior Vice President, Marketing, Design and Development in
September 1995 and the Moodhe Agreement was terminated at that time. Under the
Moodhe Agreement, Mr. Moodhe was paid a monthly consulting fee of $20,833, for
an aggregate of $78,577, and was reimbursed for reasonable out-of-pocket
expenses incurred in performing his consulting services.
Ann E. Meyers, a member of the Board of Directors, served as a consultant
for the Company in connection with the establishment of a women'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 1995
for such services.
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended November 30, 1995
(the "1995 Annual Report") was mailed to shareholders on or about March 4, 1996
and preceded this Proxy Statement. The 1995 Annual Report contains consolidated
financial statements of the Company and its subsidiaries and the report thereon
of Price Waterhouse, independent accountants.
33
<PAGE>
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, 1996, 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.
34
<PAGE>
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
May 6, 1996
35
<PAGE>
APPENDIX A
L.A. GEAR, INC.
1992 STOCK OPTION PLAN FOR ELIGIBLE
NONEMPLOYEE DIRECTORS AND ELIGIBLE EXECUTIVE OFFICERS
(Amended and Restated as of March 19, 1996)
1. PURPOSE. (a) The purpose of this Plan is to provide a means by
which (1) nonemployee directors who are elected by the Shareholders of the
Company, or appointed to replace such a director, and (2) certain key executive
officers who are also directors may be given an opportunity to purchase stock of
the Company.
(b) The Company, by means of the Plan, seeks to secure and retain
the services of persons best qualified to serve as directors of the Company and
to provide incentives for such persons to exert maximum efforts for the success
of the Company.
(c) This Plan is intended to be an ongoing formula award plan (as
described in Rule 16b-3(c)(2)(ii) under the Exchange Act) such that the awards
granted hereunder shall not affect the recipients' disinterested status for
purposes of administering any stock-related plans of the Company established
pursuant to Rule 16b-3 under the Exchange Act.
(d) The Company intends that the options issued under the Plan
shall be options which do not qualify as incentive stock options for purposes of
Section 422 of the Code.
2. DEFINITIONS. For purposes of the Plan:
(a) "Agreement" means the written agreement between the Company
and an Optionee evidencing the grant of an Option and setting forth the terms
and conditions thereof.
(b) "Annual Grant Date" means the date of the Company's 1996
annual meeting of shareholders, and the March 1 of each Fiscal Year thereafter.
(c) "Board" means the Board of Directors of the Company.
(d) "Cause" means the commission of an act of fraud or
intentional misrepresentation or an act of embezzlement, misappropriation or
conversion of assets or opportunities of the Company or of any direct or
indirect majority-owned subsidiary of the Company.
<PAGE>
(e) "Change in Capitalization" means any exchange of Shares for a
different number of or kind of shares or other securities of the Company, by
reason of a reclassification, recapitalization, consolidation, reorganization,
spin-off, split-up, issuance of warrants or rights or debentures, stock
dividend, stock split or reverse stock split, cash dividend, property dividend,
combination or exchange of shares or repurchase of shares.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Company" means L.A. Gear, Inc., a California corporation.
(h) "Director" means a director of the Company.
(i) "Disability" means physical or mental infirmity which impairs
the Optionee's ability to perform substantially his or her duties for a period
of one hundred eighty (180) consecutive days.
(j) "Eligible Executive Officer" means the Chief Executive
Officer of the Company provided he is a Director and is not paid a salary by the
Company.
(k) "Eligible Nonemployee Director" means an individual who (1)
is initially elected to serve on the Board for the first time after June 8,
1992, by vote of the holders of Shares or appointed 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, pursuant to the Company's bylaws and articles of incorporation, as then
in effect and (2) is not at the time of such election or appointment an
employee, consultant or officer of the Company. Nothing contained in this Plan
prohibits an Eligible Nonemployee Director from being appointed as an officer,
employee or consultant of the Company at any time after election to the Board.
Nor does anything contained in this Plan specifically require an Eligible
Nonemployee Director to surrender or forfeit an award granted hereunder solely
because he or she accepts an appointment as an officer, employee or consultant
of the Company at any time after election to the Board.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" on any date means the closing price for
Shares on the New York Stock Exchange on such date, or if such Shares are not so
listed or admitted to trading, the arithmetic mean of the per Share closing bid
price and the per Share closing asked price on such date as quoted on the
National Association of Securities Dealers Automated Quotation System or such
other market in which such prices are regularly quoted, or, if there have been
no published bid or asked quotations
2
<PAGE>
with respect to Shares on such date, the Fair Market Value shall be the value
established by the Board in good faith and in accordance with Section 422 of the
Code.
(n) "Fiscal Year" means the twelve month period beginning on
December 1 of each year and ending on November 30 of each year.
(o) "Grant Date" means (A) the New Member Grant Date for purposes
of the New Member Grant (as defined in Section 5(b)(1)) and (B) the Annual Grant
Date for purposes of the Annual Grant (as defined in Section 5(b)(2)).
(p) "New Member Grant Date" means, for each Eligible Nonemployee
Director, the date which is the earlier of (1) the date on which he or she is
initially elected to serve as a Director by vote of the holders of Shares and
(2) the date on which he or she is initially appointed to serve as a Director by
the members of the Board, pursuant to the Company's bylaws and articles of
incorporation, as then in effect.
(q) "Option" means an option to purchase Shares granted pursuant
to the terms of the Plan.
(r) "Optionee" means a person to whom an Option has been granted
under the Plan.
(s) "Plan" means the L.A. Gear 1992 Stock Option Plan for
Eligible Nonemployee Directors, as amended and restated effective March 19,
1996.
(t) "Shares" means the common stock of the Company and the Series
B Preferred Stock of the Company, voting together as a class.
(u) "Subsidiary" means any corporation which is a subsidiary
corporation (within the meaning of Section 424(f) of the Code) with respect to
the Company.
(v) "Successor Corporation" means a corporation, or a parent or
subsidiary thereof within the meaning of Section 424(a) of the Code, which
issues or assumes a stock option in a transaction to which Section 424(a) of the
Code applies.
(w) "Transaction" means any of the following: (1) dissolution or
liquidation of the Company; (2) a merger or consolidation in which the Company
is not the surviving corporation; (3) a reverse merger in which the Company is
the surviving corporation but the Shares outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (4) any other capital reorganization
in which more than fifty percent (50%) of the Shares entitled to vote are
exchanged.
3
<PAGE>
3. ADMINISTRATION. (a) The Plan shall be administered by the
Board. The Board shall have no authority, discretion or power to select the
individuals who are or will be eligible to receive Options or other awards under
this Plan (other than as a consequence of exercising its power to nominate
individuals for election to the Board and/or appoint individuals to fill
vacancies on the Board). The Board shall not have any discretion to determine
the amount, price or timing of any Options or other awards granted or to be
granted hereunder, except in the sense of administering the Plan pursuant to its
express terms and except in accordance with the terms and provisions of the
Plan.
(b) Subject to the foregoing, the Board shall have the power,
subject to, and within the limitations of, the express provisions of the Plan:
(1) To construe and interpret the Plan and any Option, to
construe and interpret any condition or restrictions imposed on Shares
acquired pursuant to the exercise of an Option, to define the terms used
herein and to establish, amend and revoke rules and regulations for
administration of the Plan. The Board, in the exercise of this power, may
correct any defect, omission or inconsistency in the Plan or in any
Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.
(2) To amend, modify, suspend or terminate the Plan in
accordance with Section 8 herein, and to recommend to shareholders
amendments to the Plan or termination of the Plan.
(3) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best
interests of the Company.
4. SHARES SUBJECT TO THE PLAN. (a) Subject to the provisions of
Section 7 relating to adjustments upon changes in the Shares, the Shares that
may be sold pursuant to Options shall not exceed the aggregate of one million
(1,000,000) Shares. If any Option shall for any reason expire, be canceled, or
otherwise terminate without having been exercised in full, the Shares not
purchased under such Option shall again become available for grant under the
Plan.
(b) The Shares subject to the Plan may be unissued Shares or
reacquired Shares, purchased on the market or otherwise.
5. ELIGIBILITY AND GRANTS.
(a) Eligibility. Only Eligible Nonemployee Directors and Eligible
Executive Officers shall be entitled to receive Options pursuant to this Plan
and not other directors (such as directors elected, appointed or ratified by the
holders of
4
<PAGE>
preferred stock of the Company) or other officers, employees or consultants of
the Company.
(b) Grants. (1) New Member Grants. Subject to the availability
-----------------
of an adequate number of Shares designated for grants under the Plan, each
Eligible Nonemployee Director shall receive a one-time grant of an Option to
purchase 20,000 Shares (the "New Member Grant Option") effective as of the New
Member Grant Date.
(2) Annual Grants. Subject to the availability of an
-------------
adequate number of Shares designated for grants under the Plan, each Eligible
Nonemployee Director and each Eligible Executive Officer shall receive on the
Annual Grant Date a grant of an Option to purchase 20,000 Shares; provided,
however, that in the event the Fair Market Value of a Share on the business day
immediately preceding the Annual Grant Date is greater than $4.00 (the
"Threshold Price"), each Eligible Nonemployee Director and each Eligible
Executive Officer shall receive an Option to purchase the number of Shares equal
to the result obtained by dividing 80,000 by the Fair Market Value of a Share on
the business day immediately preceding the Annual Grant Date (the "Annual Grant
Option"); provided, further, however, that in the event that the Company's
income applicable to common stock is at least $1,000,000 in any Fiscal Year, as
reported on the Company's audited year end financial statements, no Annual Grant
Option shall be made in respect of the immediately following Fiscal Year.
(c) Purchase Price. The purchase price for Shares under each
Option shall be equal to 100% of the Fair Market Value of such Shares on the
Grant Date of the Option.
(d) Vesting. (1) New Member Grant. Subject to Section 5(e)
----------------
hereof, each New Member Grant Option shall become exercisable with respect to
5,000 Shares effective immediately as of the New Member Grant Date and shall
become exercisable with respect to an additional 5,000 Shares effective as of
each of the dates immediately following the first, second and third
anniversaries of the New Member Grant Date; provided, however, that the Optionee
continues to serve as a Director as of such dates. If an Optionee ceases to
serve as a Director for any reason, the Optionee shall have no rights with
respect to that portion of an New Member Grant Option which has not then vested
pursuant to the preceding sentence and the Optionee shall automatically forfeit
that portion of the New Member Grant Option which remains unvested.
(2) Annual Grant. Subject to Section 5(e) hereof, each
------------
Annual Grant Option shall become exercisable in full on the Grant Date.
5
<PAGE>
(e) Duration.
(1) New Member Grant Option. Each New Member Grant Option
-----------------------
shall terminate on the date which is the tenth anniversary of the New Member
Grant Date, unless terminated earlier as follows:
(A) if an Optionee's service as a Director terminates
for any reason other than Disability, death or Cause, the Optionee may for
a period of three (3) months after such termination exercise his or her New
Member Grant Option to the extent, and only to the extent, that such New
Member Grant Option or portion thereof was vested and exercisable as of the
date the Optionee's service as a Director terminated, after which time the
New Member Grant Option shall automatically terminate in full;
(B) if an Optionee's service as a Director terminates
by reason of the Optionee's resignation or removal from the Board due to
Disability, the Optionee may, for a period of one (1) year after such
termination, exercise his or her New Member Grant Option to the extent, and
only to the extent, that such New Member Grant Option or portion thereof
was vested and exercisable as of the date the Optionee's service as a
Director terminated, after which time the New Member Grant Option shall
automatically terminate in full;
(C) if an Optionee's service as a Director terminates
for Cause, the New Member Grant Option granted to the Optionee hereunder
shall immediately terminate in full and no rights thereunder may be
exercised;
(D) if an Optionee dies while a Director or within
three (3) months after termination of service as a Director as described in
clause (A) or (B) of this Section 5(e)(1), the New Member Grant Option
granted to the Optionee may be exercised at any time within eighteen (18)
months after the Optionee's death by the person or persons to whom such
rights under the New Member Grant Option shall pass by will, or by the laws
of descent and distribution, after which time the New Member Grant Option
shall terminate in full; provided, however, that an New Member Grant Option
may be exercised to the extent, and only to the extent, that the New Member
Grant Option or portion thereof was exercisable on the date of death or
earlier termination of the Optionee's services as a Director.
(2) Annual Grant Option. Each Annual Grant Option shall
-------------------
terminate on the date which is the tenth anniversary of the respective Annual
Grant Date, unless terminated earlier as follows:
(A) if an Optionee's service as a Director terminates
for any reason other than disability, death or Cause, the Optionee may for
a period
6
<PAGE>
of one hundred eighty (180) days after such termination exercise each of
his or her Annual Grant Options to the extent, and only to the extent, that
each such Annual Grant Option or portion thereof was vested and exercisable
as of the date the Optionee's service as a Director terminated, after which
time all of his or her Annual Grant Options shall automatically terminate
in full;
(B) if an Optionee's service as a Director terminates
by reason of the Optionee's resignation or removal from the Board due to
Disability, the Optionee may, for a period of one (1) year after such
termination, exercise each of his or her Annual Grant Options to the
extent, and only to the extent, that each such Annual Grant Option was
vested and exercisable as of the date the Optionee's service as a Director
terminated, after which time all of his or her Annual Grant Options shall
automatically terminate in full;
(C) if an Optionee's service as a Director terminates
for Cause, the Annual Grant Options granted to the Optionee hereunder shall
immediately terminate in full and no rights thereunder may be exercised;
(D) if an Optionee dies while a Director or within
thirty (30) days after termination of service as a Director as described in
clause (A) of this Section 5(e)(2) or within three (3) months after
termination of service as a Director as described in clause (B) of this
Section 5(e)(2), each Annual Grant Option granted to the Optionee may be
exercised at any time within eighteen (18) months after the Optionee's
death by the person or persons to whom such rights under the Annual Grant
Option shall pass by will, or by the laws of descent and distribution,
after which time the Annual Grant Option shall terminate in full; provided,
however, that an Annual Grant Option may be exercised to the extent, and
only to the extent, that the Annual Grant Option or portion thereof was
exercisable on the date of death or earlier termination of the Optionee's
services as a Director.
This Section 5(e) shall not be construed to extend the term of any
Option or to permit anyone to exercise any Option after expiration of its term,
nor shall it be construed to increase the number of Shares as to which an Option
is exercisable from the amount exercisable on the date of termination of the
Optionee's service as a Director.
6. TERMS AND CONDITIONS APPLICABLE TO ALL OPTIONS.
(a) Non-transferability. No Option granted hereunder shall be
transferable by the Optionee to whom it was granted otherwise than by will or
the laws of descent and distribution, and an Option may be exercised during the
lifetime of the Optionee only by such Optionee or his or her guardian or legal
representative. The terms of such Option shall be final, binding and conclusive
upon the beneficiaries, executors, administrators, heirs and successors of the
Optionee.
7
<PAGE>
(b) Method of Exercise. To the extent vested, Options may be
exercised by ten (10) days' written notice delivered in person or by mail to the
Secretary of the Company at the Company's principal executive office, specifying
the number of Shares with respect to which the Option is being exercised and
accompanied by payment for such Shares and otherwise in accordance with the
Agreement pursuant to which the Option was granted. The purchase price for any
Shares purchased pursuant to the exercise of an Option or portion thereof shall
be paid by any one or a combination of the following: (1) cash payment or (2)
transferring Shares to the Company upon such terms and conditions as determined
by the Board. The written notice pursuant to this Section 6(b) may also provide
instructions from the Optionee to the Company that upon receipt of the purchase
price in cash from the Optionee's broker or dealer, designated as such on the
written notice, in payment for any Shares purchased pursuant to the exercise of
an Option, the Company shall issue such Shares directly to the designated broker
or dealer. Any Shares transferred to the Company as payment of the purchase
price under an Option shall be valued at their Fair Market Value on the business
day preceding the date of exercise of such Option. If requested by the Board,
the Optionee shall deliver the Agreement evidencing the Option to the Secretary
of the Company who shall endorse thereon a notation of such exercise and return
such Agreement to the Optionee. No fractional Shares (or cash in lieu thereof)
shall be issued upon exercise of an Option and the number of Shares that may be
purchased upon exercise shall be rounded to the nearest number of whole Shares.
(c) Limitations on Exercise. Notwithstanding anything contained
in the Plan or any Agreement to the contrary, no Option or portion thereof may
be exercised (1) during the period commencing on the last day of any fiscal year
of the Company and ending on the fifth trading day on the New York Stock
Exchange following the date of the public release of the Company's year-end
earnings in respect of such fiscal year, (2) during the period commencing on the
last day of any fiscal quarter of the Company and ending on the fifth trading
day on the New York Stock Exchange following the public release of the Company's
quarterly earnings in respect of such fiscal quarter or (3) during any period in
which such exercise is otherwise prohibited pursuant to the terms of the
Company's Insider Trading Policy Statement, as amended.
(d) Rights of Optionees. No Optionee shall be deemed for any
purpose to be the owner of any Shares subject to any Option unless and until (1)
the Option shall have been exercised pursuant to the terms thereof, (2) the
Company shall have issued and delivered the Shares to the Optionee and (3) the
Optionee's name shall have been entered as a stockholder of record on the books
of the Company. Thereupon, the Optionee shall have full voting, dividend and
other ownership rights with respect to such Shares.
(e) Effect of a Transaction. Notwithstanding anything contained
in the Plan or any Agreement to the contrary, in the event of a Transaction, the
Board and
8
<PAGE>
the board of directors of any surviving or continuing corporation shall take all
actions necessary and appropriate to cancel all Options outstanding and
unexercised (vested and non-vested) and provide in consideration therefor a
payment to each Optionee identical in form, amount and payment time to the
consideration received by the holders of Shares for each Share as a result of
the Transaction multiplied by the number of Shares with respect to which the
Optionee's Options remain unexercised (whether vested or non-vested) as of the
effective date of the Transaction and reduced approximately in amount and/or
quantity to reflect and to simulate payment by the Optionee of the Option
exercise prices with respect to such Shares.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) Notwithstanding anything contained in the Plan or any
Agreement to the contrary, upon a Change in Capitalization, the Board shall
conclusively determine the appropriate adjustments, if any, to (1) the maximum
number and class of Shares or other stock or securities with respect to which
Options may be granted under the Plan, (2) the number of Shares and the
Threshold Price referred to in Section 5(b)(2) hereof and (3) the number and
class of Shares or other stock or securities which are subject to outstanding
Options granted under the Plan and the purchase price therefor, if applicable.
(b) If, by reason of a change in Capitalization, an Optionee
shall be entitled to exercise an Option with respect to new, additional or
different shares of stock or securities, such new, additional or different
shares shall thereupon be subject to all of the conditions which were applicable
to the Shares subject to the Option prior to such Change in Capitalization.
8. AMENDMENT AND TERMINATION OF THE PLAN. The amended and restated
Plan shall terminate on November 30, 1999, and no Option may be granted
thereafter. The Board may sooner terminate the Plan and the Board may from time
to time amend, modify or suspend the Plan; provided, however, that:
(a) No such amendment, modification, suspension or termination
shall impair or adversely alter any Options or rights theretofore granted under
the Plan, except with the consent of the Optionee, nor shall any amendment,
modification, suspension or termination deprive any Optionee of any Shares which
he or she may have acquired through or as a result of the Plan.
(b) No such amendment or modification shall be made without the
approval of the shareholders of the Company where such changes would: (1)
materially increase the benefits accruing to participants under the Plan; (2)
materially increase the number of securities which may be issued under the Plan;
or (3) materially modify the requirements as to eligibility for participation in
the Plan; and
9
<PAGE>
(c) The provisions of the Plan governing:
(1) the number of Options to be awarded to Eligible
Nonemployee Directors and Eligible Executive Officers;
(2) the number of Shares to be covered by each such Option;
(3) the exercise price per Share under each such Option;
(4) when and under what circumstances each such Option will
be granted; and
(5) the period within which each such Option may be exercised
shall not be amended more often than once every six months, other than
to comport with changes in the Code, the Employee Retirement Income Security Act
of 1974, as amended, or the rules promulgated thereunder.
9. LIMITATION OF LIABILITY. As illustrative of the limitations of
liability of the Company, but not intended to be exhaustive thereof, nothing in
the Plan shall be construed to:
(a) give any person any right to be granted an Option other than
as specifically set forth herein;
(b) give any person any rights whatsoever with respect to Shares
except as specifically provided in the Plan;
(c) limit in any way the right of the Company's shareholders or
the Board to terminate the service of any person as a Director or Officer
pursuant to the Company's bylaws and articles of incorporation; or
(d) be evidence of any agreement or understanding expressed or
implied, that the Company will appoint or employ any person as a Director
or Officer at any particular rate of compensation or for any particular
period of time.
10. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW.
(a) This Plan and the rights of all persons claiming hereunder
shall be construed and determined in accordance with the laws of the State of
California.
10
<PAGE>
(b) The obligation of the Company to sell or deliver Shares with
respect to Options granted under the Plan shall be subject to all applicable
laws, rules and regulations, including all applicable federal and state
securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Board.
(c) The Plan is intended to comply with Rule 16b-3 promulgated
under the Exchange Act and the Board shall interpret and administer the
provisions of the Plan or any Agreement in a manner consistent therewith. Any
provisions inconsistent with such Rule shall be inoperative and shall not affect
the validity of the Plan.
(d) Each Option is subject to the requirement that, if at any
time the Board determines, in its discretion, that the listing, registration or
qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Option or the issuance of
Shares, no Options shall be granted or payment made or Shares issued, in whole
or in part, unless listing, registration, qualification, consent or approval has
been effected or obtained free of any conditions as acceptable to the Board.
(e) Notwithstanding anything contained in the Plan or any
agreement to the contrary, in the event that the disposition of Shares acquired
pursuant to the Plan is not covered by a then current registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), and is not
otherwise exempt from such registration, such Shares shall be restricted against
transfer to the extent required by the Securities Act and Rule 144 or other
regulations thereunder. The Board may require any individual receiving Shares
pursuant to the Plan, as a condition precedent to receipt of such Shares upon
exercise of an Option, to represent and warrant to the Company in writing that
the Shares acquired by such individual are acquired without a view to any
distribution thereof and will not be sold or transferred other than pursuant to
an effective registration thereof under said Act or pursuant to an exemption
applicable under the Securities Act or the rules and regulations promulgated
thereunder. The certificates evidencing any of such Shares shall be
appropriately amended to reflect their status as restricted securities as
aforesaid.
11. MISCELLANEOUS.
(a) Withholding of Taxes. The Company shall have the right to
deduct from any distribution of cash to any Optionee, an amount equal to the
federal, state and local income taxes and other amounts as may be required by
law to be withheld (the "Withholding Taxes") with respect to any Option. In
addition, the Board may require any Optionee as a precondition to exercising an
Option or portion thereof, or as a precondition to receiving any Shares pursuant
to such exercise, to deliver a cash payment
11
<PAGE>
to the Company in an amount equal to the applicable Withholding Taxes (reduced
by any amount withheld pursuant to the preceding sentence in connection with
such exercise).
(b) Designation of Beneficiary. Each Optionee may designate a
person or persons to receive, in the event of his or her death, any Option or
any amount payable pursuant thereto, to which he or she would then be entitled.
Such designation will be made upon forms supplied by and delivered to the
Company and may be revoked in writing. If an Optionee fails effectively to
designate a beneficiary, then his or her estate will be deemed to be the
beneficiary.
(c) Periodic Reports. The Company shall provide to each Optionee
the periodic reports required to be provided to the shareholders of Shares
pursuant to Section 1501 of the California General Corporation law.
(d) Indemnification of Administrators. The Company shall
indemnify and hold harmless the members of the Board in any action brought
against any member in connection with the administration of the Plan to the
maximum extent permitted by then applicable law, except in the case of willful
misconduct or gross misfeasance by such member in connection with the Plan and
its administration.
(e) Use of Proceeds from Shares. Proceeds from the sale of
Shares pursuant to Options shall constitute general funds of the Company.
12. EFFECTIVE DATE. The effective date of the amended and
restated Plan shall be the date of its adoption by the Board, subject only to
the approval by the affirmative vote of a majority of the issued and outstanding
Shares and Series B Preferred Stock represented and voting together as a single
class at a meeting of shareholders; provided such vote is duly taken within
twelve (12) months of the Board's adoption of the Plan and in accordance with
the applicable provisions of the Company's bylaws and articles of incorporation,
as then in effect, and the applicable laws of the State of California. Any
grants made in accordance with the provisions of the amended and restated Plan
shall be subject to such approval of the Company's shareholders.
12
<PAGE>
L.A. GEAR, INC.
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 11, 1996
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 the Ritz-Carlton
Hotel, 4375 Admiralty Way, Marina del Rey, California 90292, on June 11, 1996 at
10:00 a.m., Pacific Daylight 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" PROPOSALS 2 AND 3. 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" PROPOSALS 2
AND 3.
(Continued, and to be marked, dated and signed, on the other side)
<PAGE>
Please mark your votes as indicated in this example
[X]
1. ELECTION OF DIRECTORS.
FOR all nominees listed (except as marked to the contrary), Discretionary
authority to cumulate votes is granted.
[_]
WITHHOLD AUTHORITY to vote for all nominees listed.
[_]
Nominees: William L. Benford, Walter C. Bladstrom, Allan E. Dalshaug,
Willie D. Davis, Stanley P. Gold, Stephen A. Koffler, Ann E.
Meyers, Clifford A. Miller, Robert G. Moskowitz and Vappalak A.
Ravindran.
(Instruction: To withhold authority to vote for any individual
nominee or nominees in the space below.)
---------------------------------------------------------------
2. APPROVAL OF AMENDMENT TO 1992 STOCK OPTION PLAN FOR ELIGIBLE NON-EMPLOYEE
DIRECTORS.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. OTHER BUSINESS. In their discretion, the Proxy Holders are authorized to
vote upon such other business incident to the conduct of 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.
I/WE WILL ATTEND THE MEETING [_]
I/WE WILL NOT ATTEND THE 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 all applications thereto.
- ---------------------------------------
(NUMBER OF SHARES)
- ---------------------------------------
(PLEASE PRINT NAME)
SIGNATURE(S) OF HOLDER(S) OF COMMON STOCK
------------------------------------
DATED: , 1996
---------------------------
NOTE: 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.
