<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/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
February 28, 1997
To our Shareholders:
You are cordially invited to attend the 1997 Annual Meeting of Shareholders
of L.A. Gear, Inc., to be held Tuesday, April 15, 1997 at 10:00 a.m. at the
Company's Corporate Headquarters at 2850 Ocean Park Boulevard, Santa Monica,
California 90405. 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 April 15th.
Sincerely,
[LOGO]
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 APRIL 15, 1997
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 Company's Corporate Headquarters at
2850 Ocean Park Boulevard, Santa Monica, California 90405, on Tuesday, April 15,
1997, 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:
<TABLE>
<S> <C>
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
</TABLE>
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS. To
ratify the Board of Directors' selection of Price Waterhouse LLP as the
Company's independent accountants for the fiscal year ending November
30, 1997.
3. OTHER BUSINESS. To consider and act upon such other business as may
properly come before the meeting.
Section 2.11(b) of the Company's Bylaws provides for the nomination of
directors to be elected by holders of the Company's Common Stock in the
following manner:
Notice of intention to make any nomination, other than by the Board of
Directors, shall be made in writing and shall be received by the President of
the Company no more than sixty (60) days prior to any meeting of shareholders
called for the election of directors, and no more than ten (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 ten (10) days' notice of the
meeting is given to shareholders, such notice of intention to nominate shall be
received by the President of the Company not later than the time fixed in the
notice of the meeting for the opening of the meeting. Such notification shall
contain the following information to the extent known to the notifying
shareholder: (a) the name and address of each proposed nominee; (b) the
principal occupation of each proposed nominee; (c) the number of shares of
voting stock of the Company owned by each proposed nominee; (d) the name and
residence address of the notifying shareholder; and (e) the number of shares of
voting stock of the Company owned by the notifying shareholder. Nominations not
made in accordance herewith shall be disregarded by the then chairman of the
meeting, and the inspectors of election shall then disregard all votes cast for
each such nominee.
Only shareholders of record at the close of business on February 25, 1997
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
[LOGO]
William R. Sherman
Secretary
Dated: February 28, 1997
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
APRIL 15, 1997
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 1997 Annual Meeting of Shareholders
to be held at the Company's Corporate Headquarters at 2850 Ocean Park Boulevard,
Santa Monica, California 90405 on Tuesday, April 15, 1997, at 10:00 a.m., Los
Angeles time, and at any adjournment thereof (the "Meeting"). The Company
expects to mail its proxy soliciting materials for the Meeting on or about
February 28, 1997.
Enclosed is a Proxy for the shares of stock held by you as of the close of
business on February 25, 1997 (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 the ratification of the Board's selection of Price
Waterhouse LLP as the Company's independent accountants for the fiscal year
ending November 30, 1997 and in the discretion of the persons named on the Proxy
with respect to any other matters brought before the meeting.
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 22,958,070 shares of common stock, without par value ("Common Stock"), and
1,161,337 shares of Series B Cumulative Convertible 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 Stock is convertible on the Record Date)
for a total of 17,204,993 votes. Each share of Common Stock entitles the holder
to cast one vote, for a total of 22,958,070 votes. Accordingly, an aggregate of
40,163,063 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 20,081,533 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 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 number of directors to be elected multiplied by
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
<PAGE>
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 proposal to ratify the appointment of Price Waterhouse LLP as the
Company's independent accountants for the fiscal year ending November 30, 1997
requires 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 10,040,767 votes in favor of this proposal is required
to approve such proposal.
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.
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, 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 is
unable or unwilling to serve as a director of the Company, the persons named in
the Proxy intend to vote for such substitute as may be nominated by the Board.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE BOARD OF DIRECTORS'
NOMINEES FOR DIRECTORS 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 has served as a Director of the Company since April 1995.
Mr. Benford has served as a Managing Director of Shamrock Capital Advisors, Inc.
("SCA") since February 1997. SCA is a company which provides management and
consulting services, including services to Trefoil and companies in which
Trefoil invests. From September 1991 until February 3, 1997, Mr. Benford was
employed by the Company in a variety of positions, including as President and
Chief Operating Officer from June 1994 until November 30, 1996. 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. Age: 54.
WALTER C. BLADSTROM has served as a Director of the Company since 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: 65.
2
<PAGE>
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:
65.
WILLIE D. DAVIS has served as a Director of the Company since 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: 62.
STANLEY P. GOLD has served as a Director of the Company 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 SCA. Mr. Gold is also a
director of The Walt Disney Company (DIS-NYSE), an international company engaged
in family entertainment, and Koor Industries Limited ("Koor Industries") (KOR-
NYSE), Israel's largest industrial group engaged primarily in telecommunications
equipment, agricultural chemicals and building materials, energy and food. Age:
54.
STEPHEN A. KOFFLER has served as a Director of the Company since September
1991. Mr. Koffler has served as the President of Koffler & 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. From October 1991 to June
1994 he was Executive Vice President and Director of Investment Banking of Sutro
& Co., Inc., a brokerage and investment banking firm. 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
of and consultant to Merrill Lynch through September 1991. Age: 54.
ANN E. MEYERS has served as a Director of the Company since June 1992. Ms.
Meyers has worked for various network and cable television stations 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: 42.
CLIFFORD A. MILLER has served as a Director of the Company since September
1992. 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: 68.
ROBERT G. MOSKOWITZ has served as a Director of the Company 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: 44.
VAPPALAK A. RAVINDRAN has served as a Director of the Company since
September 1992. Mr. Ravindran has served as the Managing Director and President
of Paracor Finance Inc. ("Paracor Finance"), a
3
<PAGE>
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. Age: 49.
RATIFICATION OF THE SELECTION OF INDEPENDENT ACCOUNTANTS
The Board has selected the accounting firm of Price Waterhouse LLP 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,
1997. Price Waterhouse LLP acted as independent accountants for the Company in
respect of its fiscal year ended November 30, 1996. In accordance with the
Board's resolution, its selection of Price Waterhouse LLP 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 LLP 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 LLP 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 LLP AS THE INDEPENDENT ACCOUNTANTS OF THE
COMPANY.
4
<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 February 21, 1997 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>
TITLE OF AMOUNT AND NATURE OF PERCENT
CLASS NAME AND ADDRESS OF BENEFICIAL OWNERS BENEFICIAL OWNERSHIP(1) OF CLASS
- ------------ -------------------------------------------------------------- ----------------------- -----------
<S> <C> <C> <C>
Common Trefoil Capital Investors, L.P. .............................. 18,204,993(2) 45.35%
c/o Trefoil Investors, Inc.
4444 Lakeside Drive
Burbank, CA 91505
Roy E. Disney................................................. 18,204,993(3) 45.35%
Patricia A. Disney............................................ 18,204,993(3) 45.35%
Stanley P. Gold............................................... 19,114,993(4) 47.62%
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. .............................. 1,161,337 100.00%
c/o Trefoil Investors, Inc.
4444 Lakeside Drive
Burbank, CA 91505
Roy E. Disney................................................. 1,161,337(6) 100.00%
Patricia A. Disney............................................ 1,161,337(6) 100.00%
Stanley P. Gold............................................... 1,161,337(6) 100.00%
</TABLE>
- ------------------------
(1) Unless otherwise indicated, each named entity has sole voting and investment
power over the shares beneficially owned by it.
(2) These shares include 17,204,993 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 17,204,993 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.
5
<PAGE>
(4) Includes (i) 750,000 shares which Mr. Gold has the right to acquire within
60 days after February 21, 1997 by exercise of stock options vested pursuant
to the 1993 Stock Incentive Plan, 20,000 shares which Mr. Gold has the right
to acquire within 60 days after February 21, 1997 by exercise of stock
options vested pursuant to the Company's 1986 Stock Option Plan, and 20,000
shares which Mr. Gold has the right to acquire within 60 days after February
21, 1997 by exercise of stock options vested pursuant to the Company's 1992
Stock Option Plan for Eligible Nonemployee Directors (the "1992 Stock Option
Plan") and (ii) the shares owned by Trefoil, the General Partner of which is
TII, including 18,204,993 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.
6
<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 (as defined in
Regulation 229.402(a)(3)) and all current directors and executive officers of
the Company as a group (12 persons). This information has been provided by each
of the directors and executive officers as of February 21, 1997 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, 1992 Stock Option Plan,
and 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................................................ 431,565(3) 1.85%
Walter C. Bladstrom............................................... 45,000(4) *
Allan E. Dalshaug................................................. 45,000(4) *
Willie D. Davis................................................... 45,000(4) *
Stanley P. Gold................................................... 910,000(5) 3.84%
Stephen A. Koffler................................................ 65,000(6)
Ann E. Meyers..................................................... 46,000(4) *
Clifford A. Miller................................................ 55,000(4) *
Robert G. Moskowitz............................................... 40,000(7) *
Vappalak A. Ravindran............................................. 45,000(8) *
Named Executive Officers**
Victor J. Trippetti............................................... 55,260(9) *
Thomas F. Larkins................................................. 93,578(10) *
Tracey C. Doi..................................................... 52,714(11) *
David F. Gatto.................................................... 3,642(12) *
James V. Moodhe................................................... 51,534(13) *
All current directors and executive officers as a group (12
persons)........................................................ 1,876,403(14) 7.60%
</TABLE>
- ------------------------
* Less than 1%.
** Messrs. Gold and Benford are also Named Executive Officers. The "Named
Executive Officers" include the Company's Chief Executive Officer and the
next four highest paid executive officers in fiscal 1996 including the
Company's former President and Chief Operating Officer who ceased serving in
that capacity in November 1996. Also included for purposes of this report
are the Company's former Executive Vice President--Sales, Merchandising and
Operations, Senior Vice President-- Marketing, Design and Development and
Vice President and Controller, who ceased serving in those capacities in
June 1996, August 1996 and January 1997, respectively.
(1) All shares held are Common Stock. Unless otherwise indicated, each named
individual has sole voting and investment power over the shares
beneficially owned by him or her.
(2) Shares which the person (or group) has the right to acquire within 60 days
after February 21, 1997 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 277,317 shares which Mr. Benford has the right to acquire within
60 days after February 21, 1997 by exercise of stock options vested
pursuant to the 1993 Stock Incentive Plan, and 149,365 shares
7
<PAGE>
which Mr. Benford has the right to acquire within 60 days after February
21, 1997 by exercise of stock options vested pursuant to the Company's 1986
Stock Option Plan. Mr. Benford left the Company in February 1997. Of the
options granted to Mr. Benford, options for 319,118 shares expire on or
prior to May 3, 1997.
(4) Consists of 40,000 shares which the individual has the right to acquire
within 60 days after February 21, 1997 by exercise of stock options vested
pursuant to the 1992 Stock Option Plan and 5,000 shares which the
individual has the right to acquire within 60 days after February 21, 1997
by exercise of stock options vested pursuant to the Company's 1986 Stock
Option Plan.
(5) Includes 750,000 shares which Mr. Gold has the right to acquire within 60
days after February 21, 1997 by exercise of stock options vested pursuant
to the 1993 Stock Incentive Plan, 20,000 shares which Mr. Gold has the
right to acquire within 60 days after February 21, 1997 by exercise of
stock options vested pursuant to the Company's 1986 Stock Option Plan and
20,000 shares which Mr. Gold has the right to acquire within 60 days after
February 21, 1997 by stock options vested pursuant to the 1992 Stock Option
Plan.
(6) Consists of 20,000 shares which Mr. Koffler has the right to acquire within
60 days after February 21, 1997 by exercise of stock options vested
pursuant to the 1992 Stock Option Plan and 45,000 shares which Mr. Koffler
has the right to acquire within 60 days after February 21, 1997 by exercise
of stock options vested pursuant to the Company's 1986 Stock Option Plan.
(7) Consists of 20,000 shares which Mr. Moskowitz has the right to acquire
within 60 days after February 21, 1997 by exercise of stock options vested
pursuant to the Company's 1992 Stock Option Plan and 20,000 shares which
Mr. Moskowitz has the right to acquire by exercise of stock options vested
pursuant to the Company's 1986 Stock Option Plan.
(8) Consists of 20,000 shares which Mr. Ravindran has the right to acquire
within 60 days after February 21, 1997 by exercise of stock options vested
pursuant to the 1992 Stock Option Plan and includes 25,000 shares which Mr.
Ravindran has the right to acquire within 60 days after February 21, 1997
by exercise of stock options vested pursuant to the 1986 Stock Option Plan.
(9) Includes 28,961 shares which Mr. Trippetti has the right to acquire within
60 days after February 21, 1997 by exercise of stock options vested
pursuant to the 1993 Stock Incentive Plan, and 22,651 shares which Mr.
Trippetti has the right to acquire within 60 days after February 21, 1997
by exercise of stock options vested pursuant to the 1986 Stock Option Plan.
(10) Consists of 16,409 shares which Mr. Larkins has the right to acquire within
60 days after February 21, 1997 by exercise of stock options vested
pursuant to the 1993 Stock Incentive Plan, and 77,169 shares which Mr.
Larkins has the right to acquire within 60 days after February 21, 1997 by
exercise of stock options vested pursuant to the Company's 1986 Stock
Option Plan. Mr. Larkins, pursuant to the Company's 1996 Restructuring Plan
(as defined on page 18), will be leaving the Company in the next few months
after completion of certain special projects on behalf of the Company.
(11) Includes 30,176 shares which Ms. Doi has the right to acquire within 60
days after February 21, 1997 by exercise of stock options vested pursuant
to the 1993 Stock Incentive Plan, and 19,028 shares which Ms. Doi has the
right to acquire within 60 days after February 21, 1997 by exercise of
stock options vested pursuant to the 1986 Stock Option Plan. Ms. Doi left
the Company in January 1997. All her options expire on or prior to May 3,
1997.
(12) Consists of 3,642 shares which Mr. Gatto acquired pursuant to the Company's
Employee Stock Savings Plan. Mr. Gatto left the Company in June 1996. All
his options expired on or prior to September 21, 1996.
8
<PAGE>
(13) Includes 51,534 shares which Mr. Moodhe has the right to acquire within 60
days after February 21, 1997 by exercise of stock options vested pursuant
to the 1986 Stock Option Plan. Mr. Moodhe left the Company in August 1996.
All his options expire on or prior to June 11, 1997.
(14) Includes 1,736,872 shares which the members of the group have the right to
acquire within 60 days after February 21, 1997 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. Excludes shares beneficially
owned by Tracey C. Doi, who left the Company in January 1997, shares
beneficially owned by David F. Gatto, who left the Company in June 1996,
and shares beneficially owned by James V. Moodhe, who left the Company in
August 1996.
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 executive
officers or directors of the Company, and persons who beneficially owned more
than ten percent of a registered class of stock of the Company, during or with
respect to fiscal 1996, 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 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 composed 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 the
Company's internal accounting procedures and control with the Company's
independent accountants, 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.
The Stock Option Committee for the fiscal year ended November 30, 1996 was
composed of Mr. Gold, who chaired the Committee, and Mr. Moskowitz. The primary
purposes of the Stock Option Committee are to (i) determine individuals to whom
options, stock appreciation rights, restricted stock, performance units and
performance shares (collectively, "Awards") will be granted under the 1993 Stock
9
<PAGE>
Incentive Plan and the terms and conditions on which such Awards will be made
and (ii) make periodic reports to the Board as to the status of the Company's
1986 Stock Option Plan (which has expired) and 1993 Stock Incentive Plan. Due to
new rules issued in 1996 by the Securities and Exchange Commission ("SEC") under
Section 16 of the Exchange Act, the membership of the Stock Option Committee was
reconstituted for the fiscal year beginning December 1, 1996. The Stock Option
Committee of the Board now consists of Stephen A. Koffler, who chairs the
committee, Allan E. Dalshaug and Willie D. Davis.
During the fiscal year ended November 30, 1996, the Board held eleven
meetings, the Executive Committee held one meeting, the Audit Committee held
three meetings, the Compensation Committee held one meeting, the Nominating
Committee held one meeting, and the Stock Option Committee held two meetings.
During the fiscal year ended November 30, 1996, each person who was a director
of the Company during that fiscal year 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.
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....................... 54 Chairman of the Board and Chief Executive Officer
Bruce W. MacGregor.................... 38 President and Chief Operating Officer
Victor J. Trippetti................... 48 Senior Vice President and Chief Financial Officer
Thomas F. Larkins..................... 35 Senior Vice President
</TABLE>
Stanley P. Gold was appointed Chairman of the Board and Chief Executive
Officer of the Company in January 1992 and has served as a Director since
September 1991. Mr. Gold has served since 1987 as President, Chief Executive
Officer and a director of Shamrock. 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 SCA. See "Nominees for
Election".
Bruce W. MacGregor was appointed President and Chief Operating in November
1996. Mr. MacGregor joined the Company as Senior Vice President-Product
Marketing in August 1996, after serving as a consultant to the Company from
February 1996 to August 1996. Prior to joining the Company, Mr. MacGregor served
as Co-Founder, President and Chief Executive Officer for Deja Shoe, Inc., an
adult footwear company, from 1991 to 1995. Prior to that, Mr. MacGregor served
in various capacities with Avia Group International, Inc., an international
footwear company, from 1983 to 1991, including most recently as Vice President
of Marketing from 1985 to 1991.
Victor J. Trippetti was appointed Senior Vice President and Chief Financial
officer in November 1996. Most recently, Mr. Trippetti served as Vice President
and Treasurer from January 1994. He has served in various finance and treasury
capacities since joining the Company in 1989.
Thomas F. Larkins has served as Senior Vice President since February 1994.
He served as Chief Administrative Officer of the Company from September 1995 to
November 1996 and as General Counsel and Secretary from February 1994 to
February 1997. Prior to joining the Company, Mr. Larkins was associated with the
law firm of Fried, Frank, Harris, Shriver and Jacobson from June 1989 to January
1994. Mr. Larkins, pursuant to the Company's 1996 Restructuring Plan, will be
leaving the Company in the next few months after completion of certain special
projects on behalf of the Company.
10
<PAGE>
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, 1996, 1995 and 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------
OTHER AWARDS
ANNUAL ----------------------------
ANNUAL COMPENSATION COMPEN- RESTRICTED SECURITIES
--------------------------------------- SATION STOCK UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) (2) AWARDS($) OPTIONS(#)
- ----------------------------------- --------- ----------- --------------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Stanley P. Gold.................... 1996 0(1) 0 0 0 20,000
Chairman of the Board 1995 23,250(1) 0 0 0 0
and Chief Executive Officer 1994 21,000(1) 0 0 0 0
Victor J. Trippetti................ 1996 140,000 0 0 0 23,333
Senior Vice President and 1995 141,115 0 0 0 14,589
Chief Financial Officer 1994 140,047 0 0 0 14,206
William L. Benford................. 1996 500,000 0 250,000(5) 0 79,365
Former President and Chief 1995 500,000 0 0 0 28,199
Operating Officer(4) 1994 401,058 0 0 0 319,118
Thomas F. Larkins.................. 1996 242,962 0 245,000(6) 0 27,169
Sr. Vice President(4) 1995 213,231 0 0 0 59,743
1994 169,231 0 0 0 30,000
Tracey C. Doi...................... 1996 150,060 0 0 0 14,028
Former Vice President and 1995 141,981 0 0 0 27,981
Controller(4) 1994 130,110 0 0 0 14,029
David F. Gatto..................... 1996 217,004 0 0 0 0
Former Executive Vice 1995 279,863 0 0 0 45,310
President-Sales, 1994 275,000 0 0 0 76,179
Merchandising and Operations(4)
James V. Moodhe.................... 1996 286,767 0 0 0 16,534
Former Sr. Vice President-- 1995 52,885 0 0 0 75,000
Marketing, Design and
Development(4)
<CAPTION>
ALL
PAYOUTS OTHER
----------------- COMPEN-
LTIP SATION
NAME AND PRINCIPAL POSITION PAYOUTS($) ($)
- ----------------------------------- ----------------- ------------
<S> <C> <C>
Stanley P. Gold.................... 0 0
Chairman of the Board 0 0
and Chief Executive Officer 0 0
Victor J. Trippetti................ 0 2,913(3)
Senior Vice President and 0 4,038(3)
Chief Financial Officer 0 3,629(3)
William L. Benford................. 0 8,599(3)
Former President and Chief 0 4,500(3)
Operating Officer(4) 0 4,620(3)
Thomas F. Larkins.................. 0 0
Sr. Vice President(4) 0 0
0 0
Tracey C. Doi...................... 0 3,119(3)
Former Vice President and 0 4,085(3)
Controller(4) 0 3,903(3)
David F. Gatto..................... 0 2,909(3)
Former Executive Vice 0 4,500(3)
President-Sales, 0 4,992(3)
Merchandising and Operations(4)
James V. Moodhe.................... 0 0
Former Sr. Vice President-- 0 0
Marketing, Design and
Development(4)
</TABLE>
- ------------------------------
(1) In fiscal 1996, 1995 and 1994, Mr. Gold earned $0, $23,250 and $21,000
respectively, for his service as a director of the Company. The fees paid to
Mr. Gold for his service as a director in fiscal 1994 and 1995 and the stock
options granted in lieu of fees paid to Mr. Gold in fiscal 1996 are the
customary fees paid to non-employee directors for those fiscal years. See
"Director Compensation".
(2) Perquisites and other personal benefits paid to each Named Executive Officer
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 SEC.
(3) Each of Mr. Trippetti, 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 1996 represents a
contribution, valued at $2,913, $8,599, $2,909 and $3,119, respectively, for
Mr. Trippetti, Mr. Benford, Mr. Gatto, and Ms. Doi made by the Company
pursuant to the employee stock ownership plan portion of its Employee Stock
Savings Plan. Fifty percent of the matching contribution is held in shares
of the Company's Common Stock. Messrs. Trippetti, Benford and Gatto and Ms.
Doi are currently fully vested under the Employee Stock Savings Plan.
(4) Mr. Benford left the Company in February 1997. Ms. Doi left the Company in
January 1997. Mr. Gatto left the Company in June 1996. Mr. Moodhe left the
Company in August 1996. Mr. Larkins, pursuant to the Company's 1996
Restructuring Plan, will be leaving the Company in the next few months after
completion of certain special projects on behalf of the Company.
(5) Accrued severance payment which will be paid to Mr. Benford in fiscal 1997.
(6) Accrued severance payment which will be paid to Mr. Larkins in fiscal 1997.
11
<PAGE>
STOCK OPTIONS GRANTED IN FISCAL 1996. The following table sets forth
information concerning individual grants of stock options made by the Company
during the fiscal year ended November 30, 1996 to each of the Named Executive
Officers. The Company did not grant any stock appreciation rights during fiscal
1996.
OPTION GRANTS
IN THE FISCAL YEAR ENDED NOVEMBER 30, 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(7)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME GRANTED(#) FISCAL YEAR(5) ($/SHARE)(6) DATE 5%($) 10%($)
- ----------------------------------- ------------- ----------------- --------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Stanley P. Gold.................... 20,000(2) 2.45% $ 3.62 06/11/06 45,580 115,380
Victor J. Trippetti................ 13,333(1) 1.63% $ 1.75 12/19/05 14,680 37,199
10,000(3) 1.22% $ 2.16 02/21/06 15,060 36,800
William L. Benford(8).............. 79,365(1) 9.72% $ 1.75 12/19/05 87,381 221,428
David F. Gatto(8).................. 36,574(4) 0% $ 1.75 09/28/96 0 0
Thomas F. Larkins(8)............... 27,169(1) 3.33% $ 1.75 12/19/05 29,913 75,802
James V. Moodhe(8)................. 16,534(1) 2.03% $ 1.75 6/11/97 2,182 4,415
Tracey C. Doi(8)................... 14,028(1) 1.72% $ 1.75 5/3/97 1,711 3,451
</TABLE>
- ------------------------
(1) These options were granted pursuant to the Company's 1986 Stock Option Plan
on December 19, 1995. The total number of options granted were exercisable
on and after December 1, 1996.
(2) These options were granted pursuant to the Company's 1992 Stock Option Plan
on June 11, 1996.
(3) These options were granted pursuant to the Company's 1993 Stock Incentive
Plan on February 21, 1996. One-third of the total number of options granted
became exercisable on and after February 21, 1997 and an additional
one-third of the options are exercisable on and after each of February 21,
1998 and February 21, 1999. 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.
(4) These options were granted pursuant to the Company's 1986 Stock Option Plan
on December 19, 1995. These options expired on September 28, 1996.
(5) In fiscal 1996, the Company granted options to purchase an aggregate of
796,469 shares of Common Stock to employees.
(6) 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.
(7) 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
12
<PAGE>
under the Internal Revenue Code of 1986, as amended ("Internal Revenue
Code"), and any applicable state laws.
(8) Mr. Benford left the Company in February 1997. Ms. Doi left the Company in
January 1997. Mr. Gatto left the Company in June 1996. Mr. Moodhe left the
Company in August 1996. Mr. Larkins, pursuant to the Company's 1996
Restructuring Plan, will be leaving the Company in the next few months after
completion of certain special projects on behalf of the Company.
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, 1996 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, 1996 AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF SECURITIES "IN-THE-MONEY"
UNDERLYING UNEXERCISED OPTIONS AT FISCAL
OPTIONS AT FISCAL YEAR-END(#) YEAR-END($)(1)
----------------------------- -------------------
SHARES ACQUIRED VALUE EXERCISABLE EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) ("E")/UNEXERCISABLE ("U") UNEXERCISABLE
- ----------------------------------- ----------------- ----------------- ----------------------------- -------------------
<S> <C> <C> <C> <C>
Stanley P. Gold.................... 0 0 790,000(E)/0(U) $0/$0
Victor J. Trippetti................ 0 0 28,279(E)/33,167(U) $0/$7,567
William L. Benford(2).............. 0 0 317,317(E)/179,365(U) $0/$39,683
David F. Gatto(3).................. 0 0 0(E)/0(U) $0/$0
Thomas F. Larkins(4)............... 0 0 46,409(E)/70,503(U) $0/$13,585
James V. Moodhe(5)................. 0 0 189,118(E)/228,199(U) $0/$8,267
Tracey C. Doi(6)................... 0 0 28,509(E)/32,529(U) $0/$7,014
</TABLE>
- ------------------------
(1) Options are "in-the-money" at the fiscal year end if the fair market value
of the underlying securities on such date exceeds the exercise price of the
option.
(2) Mr. Benford left the Company in February 1997. Of options granted to Mr.
Benford, options for 319,118 shares expire on or prior to May 3, 1997.
(3) Mr. Gatto left the Company in June 1996.
(4) Mr. Larkins, pursuant to the Company's 1996 Restructuring Plan, will be
leaving the Company in the next few months after completion of certain
special projects for the Company.
(5) Mr. Moodhe left the Company in August 1996. His options expire on or prior
to June 11, 1997.
(6) Ms. Doi left the Company in January 1997. Her options expire on or prior to
May 3, 1997.
13
<PAGE>
DIRECTOR COMPENSATION
During fiscal 1996, Mr. Gold and each non-employee director received no cash
compensation for attending scheduled Board and Committee Meetings. At the 1996
annual meeting held on June 11, 1996, the shareholders of L.A. Gear approved an
amendment to the 1992 Stock Option Plan. Under the amended 1992 Stock Option
Plan, (i) each eligible non-employee director automatically receives a one-time
grant of an option to purchase 20,000 shares of L.A. Gear Common Stock upon his
or her initial election or appointment to the L.A. Gear Board, and (ii) each
eligible non-employee director, as well as the Chief Executive Officer of the
Company if he is a director and is not paid a salary, receives options to
purchase Common Stock in lieu of cash fees traditionally paid to such directors
for years in which certain earnings targets are not met. The amendment also
increased the number of shares subject to options under the 1992 Stock Option
Plan from 600,000 to 1,000,000. Subsequent to the 1996 annual meeting, options
to purchase 20,000 of Common Stock were issued to each of Mr. Gold and all
non-employee directors at an exercise price of $3.62 per share, the average fair
market value of the Company's Common Stock for the five days preceding the date
of the grant.
During fiscal 1996, a special committee of independent directors was formed
for the purpose of reviewing the terms of the Share Exchange Transaction (as
described below under the caption "Certain Relationships and Related
Transactions--Exchange of Series A Preferred Stock for Series B Preferred
Stock") and certain other matters. This committee was chaired by Mr. Koffler and
its members were Messrs. Dalshaug and Davis and Ms. Meyers. During fiscal 1996,
Mr. Koffler was paid an aggregate of $25,000, each of Messrs. Dalshaug and Davis
were paid an aggregate of $17,000 and Ms. Meyers was paid an aggregate of
$16,000 for meeting fees associated with their services on this committee.
Pursuant to a one-year agreement dated as of June 1, 1996 (the "Services
Agreement"), L.A. Gear has retained SCA to assist the Company with respect to
the identification, negotiation and/or structuring of acquisition opportunities.
During fiscal 1996, Mr. Gold was President and Managing Director of SCA and Mr.
Moskowitz was a Managing Director of SCA. In February 1997, Mr. Benford also
became a Managing Director of SCA. Pursuant to the Services Agreement, if L.A.
Gear acquires a controlling interest in any company or business (a
"Transaction") during the term of the Services Agreement, or for six months
thereafter if the transaction involves parties introduced to L.A. Gear by SCA,
then L.A. Gear shall pay to SCA a fee equal to (i) 1 1/2% of the Aggregate Value
(as defined in the agreement) of the Transaction up to $50 million, plus 1% of
the Aggregate Value in excess of $50 million, if SCA has acted as the sole
financial advisor to the Company with respect to the Transaction, or (ii) 1% of
the Aggregate Value of the Transaction up to $50 million, plus 1/2% of the
Aggregate Value in excess of $50 million, if another financial or investment
advisor or valuation firm has advised the Company, in addition to or instead of
SCA, with respect to the Transaction. L.A. Gear also agreed to reimburse SCA for
all of its out-of-pocket expenses payable to third parties incurred in
connection with SCA's services under the Services Agreement.
1993 STOCK INCENTIVE PLAN. In April 1993, the Company adopted, and the
shareholders approved, a Stock Incentive Plan (the "1993 Plan") for eligible
employees, directors, officers and consultants of the Company. Incentive stock
options, non-qualified stock options, stock appreciation rights, restricted
stock, performance units and performance shares may be granted under the 1993
Plan. Up to 2,500,000 shares of Common Stock may be issued or transferred
pursuant to the 1993 Plan. Options granted under this plan may be exercisable
for a period of up to ten years from the date of grant. Options granted to date
under the 1993 Plan have been granted at an exercise price equal to the average
closing price of the Common Stock on the New York Stock Exchange composite tape
for each of the five consecutive trading days immediately preceding the grant
time.
INDEMNIFICATION AGREEMENTS. The Company has entered into indemnification
agreements with each of its directors and 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
14
<PAGE>
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 to 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.
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 served as President and Chief Operating Officer of
the Company. The agreement had a three-year term which expired on November 30,
1996. Under the agreement, Mr. Benford received an annual base salary of
$500,000 and was eligible to participate in the Company's management bonus plan.
No cash bonus was paid by the Company for the fiscal years ended November 30,
1994, 1995 and 1996. As severance, pursuant to the Company's 1996 Reorganization
Plan, Mr. Benford will receive $250,000.
Pursuant to an employment agreement, dated as of February 15, 1994, Thomas
F. Larkins served as Senior Vice President and Chief Administrative Officer of
the Company. The agreement had a three-year term, expiring on February 28, 1997.
Under the agreement, Mr. Larkins received an annual base salary of $245,000 and
was eligible to participate in the Company's management bonus plan. No cash
bonus was paid by the Company for the fiscal years ended November 30, 1994, 1995
and 1996. As severance, pursuant to the Company's 1996 Reorganization Plan, Mr.
Larkins will receive $245,000.
Pursuant to an employment agreement, dated as of February 1, 1996, Tracey C.
Doi served as Vice President and Controller of the Company. The agreement had a
one year term, which was extended until July 31, 1997. Under the agreement, Ms.
Doi received an annual base salary of not less than $150,000 during each year of
her employment term and was eligible to participate in the management bonus
plan. No cash bonus was paid by the Company for the fiscal year ended November
30, 1996. As severance, pursuant to the Company's 1996 Reorganization Plan, Ms.
Doi received $79,219.
Pursuant to an employment agreement, dated as of August 26, 1996, Bruce W.
MacGregor served as Senior Vice President--Product Marketing until November 26,
1996 when Mr. MacGregor assumed the responsibilities of President and Chief
Operating Officer. The agreement has a one year term, but will be extended for
an additional six-month period on each six-month anniversary of the agreement
unless the Company delivers written notice of non-renewal to Mr. MacGregor at
least six months prior to the end of the term. Mr. MacGregor receives an annual
base salary of $275,000 and is eligible to participate in the Company's 1997
Employee Incentive Plan. Also under the agreement, at the first meeting of the
Board of Directors following Mr. MacGregor's employment, the Company granted Mr.
MacGregor non-qualified stock options to purchase an aggregate of 70,000 shares
of Common Stock to vest over a three-year period. No cash bonus was paid by the
Company for the fiscal year ended November 30, 1996.
Pursuant to an employment agreement, dated as of February 1, 1996, Victor J.
Trippetti served as Vice President and Treasurer until November 26, 1996, when
Mr. Trippetti was elected Senior Vice President and Chief Financial Officer. The
agreement has a one year term which expires August 1, 1997. Mr. Trippetti
receives an annual base salary of $175,000 and is eligible to participate in the
Company's 1997 Employee Incentive Plan. No cash bonus was paid by the Company
for the fiscal year ended November 30, 1996.
Pursuant to an employment agreement dated as of March 11, 1996, James Moodhe
served as Senior Vice President--Marketing, Design and Development of the
Company. The agreement had a one year term under which Mr. Moodhe was to receive
an annual salary of not less than $275,000. Mr. Moodhe left the Company on
August 23, 1996. Mr. Moodhe continues to be paid in accordance with the
compensation provisions of his employment agreement through March 11, 1997.
15
<PAGE>
Pursuant to an employment agreement dated as of December 7, 1993, David
Gatto served as Senior Vice President--International. The agreement had a three
year term. Under the terms of the agreement, Mr. Gatto received a base salary of
not less than $275,000. Mr. Gatto was appointed Executive Vice President of the
Company in September, 1995. Mr. Gatto resigned his position with the Company on
June 28, 1996.
L.A. Gear is not currently bound by any employment agreements with
change-in-control provisions. However, the Company has adopted a Reduction in
Force Severance Plan with respect to key management personnel whose positions
are terminated in fiscal 1997 (other than due to voluntary resignation, death,
disability or cause). Based upon length of employment with the Company, an
employee at the Vice President level or above will receive a severance payment
equaling from 20 weeks to 28 weeks of his or her salary (or 12 weeks to 20 weeks
for an employee in a director-level position) upon termination.
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, in the fiscal year ended November 30, 1996, consisted of Stanley P.
Gold and Robert G. Moskowitz. Due to new rules issued in 1996 by the SEC under
Section 16 of the Exchange Act, the Stock Option Committee membership was
reconstituted for the fiscal year beginning December 1, 1996. The Stock Option
Committee of the Board now consists of Stephen A. Koffler (Chair), Allen E.
Dalshaug and Willie D. Davis.
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, and which Mr. Benford joined as a Managing Director in
February 1997.
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REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEES
ON EXECUTIVE COMPENSATION
GENERAL
The Compensation Committee is currently composed 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 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 review and approval.
The Stock Option Committee, in the fiscal year ended November 30, 1996,
consisted of Stanley Gold (chair) and Robert Moskowitz. The primary duties of
the Stock Option Committee are to (i) 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 (ii)
make periodic reports to the Board as to the status of the Company's 1986 Stock
Option Plan (which has expired) and 1993 Stock Incentive Plan. Due to new rules
issued in 1996 by the SEC under Section 16 of the Exchange Act, the Stock Option
Committee membership was reconstituted for the fiscal year beginning December 1,
1996. The Stock Option Committee of the Board now consists of Stephen A. Koffler
(Chair), Allen E. Dalshaug and Willie D. Davis.
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) given that none of
its executive officers is expected to receive compensation in excess of $1
million during fiscal 1997.
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 in
relation to incremental shareholder value.
The Company's executive compensation program consists of three basic
elements--base salaries, cash, 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 and individual experience. As part of its
expense reduction efforts and in light of the loss experienced by the Company in
1996, the Company did not implement any across-the-board salary increases for
employees at the beginning of fiscal 1997.
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Executive salaries are reviewed by the Compensation Committee on an annual
basis. In determining executive salaries in light of the significant losses
experienced by the Company, the Compensation Committee currently considers: (i)
the assumption of increased responsibilities by the executive (whether by reason
of promotion or otherwise), (ii) the achievement of various managerial
objectives and personal development goals; and (iii) the executive's business
results. Once the Company returns to profitability, in addition to the
aforementioned considerations, salary increases, if any, will be based 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, and (iv) return to shareholders.
In November 1996, the Company announced a corporate reorganization pursuant
to which it, among other expense reduction measures, reduced its workforce by
52% and realigned senior management such that certain individuals were required
to assume additional responsibilities (the "1996 Restructuring Plan"). In
connection with the 1996 Restructuring Plan: (i) Bruce W. MacGregor was
appointed President and Chief Operating Officer from Senior Vice
President--Marketing and his base salary was increased from $225,000 to $275,000
and (ii) Victor J. Trippetti was appointed Senior Vice President and Chief
Financial Officer from Vice President--Treasurer and his base salary was
increased from $140,000 to $175,000. No other discretionary salary increases
were granted to the Named Executive Officers or executive officers of the
Company in fiscal 1996.
CASH BONUSES AND STOCK OPTIONS
The Company uses stock option grants to attract and retain qualified
managers and to provide incentives for employees 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 of employment and to retaining such
candidates once employed (including in connection with any required relocation).
Pursuant to 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 vesting schedule for the initial award of grants under the Triennial Stock
Option Grant Program was accelerated in 1995 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.
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. All employees of the
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<PAGE>
Company received options under the 1996 Shared Success Award. The purpose of the
1996 Shared Success Award was 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 year and the increased demands placed on such employees in light of the
reduction in workforce effected by the Company pursuant to the 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. Under the 1996 Shared Success Award, the number of
options received by employees was set by first assuming that each participant
earned a theoretical payout at 100% of his or her bonus opportunity under a
former management incentive plan. 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. Options to purchase an aggregate
of approximately 482,384 shares were granted to 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 vested in full
on December 1, 1996, the first day of the Company's 1997 fiscal year.
1997 EMPLOYEE INCENTIVE PLAN. While recognizing that attempting to reduce
cash expenditures is an important objective in light of the Company's 1996
Restructuring Plan and current cash position, the Compensation Committee and
Stock Option Committee believed that in light of the significant additional
responsibilities undertaken by the remaining employees after implementation of
the 1996 Restructuring Plan without any year-end salary increases, the benefit
to the Company of continuing to retain employees familiar with the Company's
operations, and the need to continue to attract a limited number of additional
highly qualified employees in the future, a limited incentive compensation plan
was appropriate for fiscal 1997. Accordingly, in December 1996, the Board of
Directors adopted and approved the 1997 Employee Incentive Plan (the "1997
Plan") for all full-time employees of the Company as well as employees joining
the Company after December 1, 1996 (on a pro-rata basis commencing on the first
day of the fiscal quarter following such employee's commencement date). The 1997
Plan combines equity and cash components and includes incentives for all
employees to assist the Company in its turnaround efforts. Under the terms of
the 1997 Plan, employees are placed in one of four cash award tiers and five
option award tiers, in each case based on job title. The cash awards have both
guaranteed and profit-triggered components. The guaranteed cash award component
is calculated as a fixed percentage of the employee's salary (ranging from 15%
for the highest paid employees to 6% for employees in the fourth tier), and vest
one-half on May 31, 1997 and one-half on November 30, 1997, except for vice
president-level positions and above, which vest in full on December 1, 1997;
provided, in all cases, pro-rata portions of awards shall vest on the
elimination of the employee's position with the Company prior to the vesting
date. Stock option awards for all employees vest on December 1, 1997. No payout
of vesting occurs if there is a termination of employment due to voluntary
resignation, death, disability or for cause.
CHIEF EXECUTIVE OFFICER
At Mr. Gold's request, he did not receive any salary or other cash
compensation during fiscal 1996 for his services as Chief Executive Officer of
the Company. In light of the foregoing and subsequent to the 1996 annual meeting
of shareholders, which approved an amendment to the 1992 Stock Option Plan to
provide for stock options to be paid in lieu of cash fees traditionally paid to
non-employee directors (and any director who is the Chief Executive Officer but
is not paid a salary) for years in which certain earnings targets are not met,
Mr. Gold was granted options to purchase 20,000 shares of Common Stock of the
Company at an exercise price of $3.62 per share, the average fair market value
of the Company's Common Stock for the five days immediately preceding the date
of the grant. The other non-employee directors of the Company received the same
grant pursuant to the amendment to the 1992 Stock Option Plan.
The Compensation Committee has 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
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<PAGE>
of stock options without any guaranteed compensation thereby honoring Mr. Gold's
request that he not receive any cash compensation (other than directors' fees
paid in 1994 and 1995 from the Company). In order to analyze the competitive
market, a 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 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 estimate of a competitive four year total
compensation package for a newly hired chief executive officer of a turnaround
company of similar size. 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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<PAGE>
The Compensation Committee reconsidered Mr. Gold's compensation package in
fiscal 1995 and fiscal 1996 and determined that no adjustments were required to
be made. 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 FOR THE FISCAL
YEAR ENDED NOVEMBER 30, 1996
Stanley P. Gold, Chairman
Robert G. Moskowitz
STOCK OPTION COMMITTEE FOR THE FISCAL
YEAR BEGINNING DECEMBER 1, 1996
Stephen A. Koffler, Chairman
Allan E. Dalshaug
Willie D. Davis
February 28, 1997
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.
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<PAGE>
PERFORMANCE GRAPH FOR L.A. GEAR COMMON STOCK
("PERFORMANCE GRAPH")
The Performance Graph compares the yearly percentage change in 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, 1991 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)
NOVEMBER INDEXED RETURNS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOTAL SHAREHOLDER RETURNS
<S> <C> <C> <C>
S&P 500 L.A. GEAR, INC S&P
INDEX SHOE INDEX
1991 $ 100 $ 100 $ 100
1992 118.47 115.29 129.67
1993 130.44 107.06 96.1
1994 131.8 50.59 113.32
1995 180.54 15.29 144.49
1996 230.84 21.18 264.57
</TABLE>
22
<PAGE>
TOTAL SHAREHOLDER RETURNS
(DIVIDENDS REINVESTED)
<TABLE>
<CAPTION>
INDEXED RETURNS
YEARS ENDING
BASE PERIOD -----------------------------------------------------
COMPANY/INDEX NOV91 NOV92 NOV93 NOV94 NOV95 NOV96
- ------------------------------------------------------ ----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
LA Gear Inc........................................... 100 115.29 107.06 50.59 15.29 21.18
Footwear-500.......................................... 100 129.67 94.10 113.32 144.49 264.57
S&P 500 Index......................................... 100 118.47 130.44 131.80 180.54 230.84
</TABLE>
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<PAGE>
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 1,161,337 shares of Series B Preferred Stock are currently
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
was 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 and the quarterly
stock dividends paid in additional shares of Series B Preferred Stock in lieu of
cash in fiscal 1996, Trefoil's voting power in the Company, on an as-converted
basis, increased from 33% to 45% as of November 30, 1996.
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 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 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 agreement dated as of June 1, 1996 (the "Services
Agreement"), L.A. Gear has retained SCA to assist the Company with respect to
the identification, negotiation and/or structuring of
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<PAGE>
acquisition opportunities. Pursuant to the Services Agreement, if L.A. Gear
acquires a controlling interest in any company or business (a "Transaction")
during the term of the Services Agreement, or for six months thereafter if the
transaction involves parties introduced to L.A. Gear by SCA, then L.A. Gear
shall pay to SCA a fee equal to (i) 1 1/2% of the Aggregate Value (as defined in
the agreement) of the Transaction up to $50 million, plus 1% of the Aggregate
Value in excess of $50 million, if SCA has acted as the sole financial advisor
to the Company with respect to the Transaction, or (ii) 1% of the Aggregate
Value of the Transaction up to $50 million, plus 1/2% of the Aggregate Value in
excess of $50 million, if another financial or investment advisor or valuation
firm has advised the Company, in addition to or instead of SCA, with respect to
the Transaction. L.A. Gear also agreed to reimburse SCA for all of its
out-of-pocket expenses payable to third parties incurred in connection with
SCA's services under 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, (a) 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); (b) any tender or exchange offer, merger or other
business combination involving the Company or any of its subsidiaries; (c) any
recapitalization, restructuring, liquidation, dissolution or other extraordinary
transaction with respect to the Company or any of its subsidiaries; (d) any
"solicitation" of "proxies" (as such terms are used in the proxy rules of the
SEC or consents to vote any voting securities of the Company; or (e) 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 (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.
SOURCING AGREEMENT
Pursuant to the Sourcing Agreement, dated as of April 28, 1992 and as
amended as of January 1, 1995 (as amended, the "Sourcing Agreement"), a Pentland
affiliate was appointed as non-exclusive 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 receives a sourcing fee based on the greater of: (i) a
specified minimum amount, or (ii) a percentage of the
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<PAGE>
aggregate U.S. dollar price of certain products manufactured for the Company by
manufacturers or suppliers 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 Pentland Registration Rights
Agreement (which concerns registration rights relating to the Common Stock
purchased by Ventures). 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 or all or
substantially all of the Company's assets, or (iii) upon certain consolidations
or mergers involving the Company.
CONSULTING AGREEMENTS
Bruce MacGregor, the Company's President and Chief Operating Officer, served
as a consultant for the Company in connection with strategic business
development pursuant to a consulting agreement dated as of February 1, 1996. He
was compensated in the aggregate amount of $120,000 during fiscal 1996 for such
services and was reimbursed for reasonable out-of-pocket expenses incurred in
performing his consulting services.
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended November 30, 1996 (the
"1996 Annual Report") was mailed to shareholders on or about February 28, 1997
along with this Proxy Statement. The 1996 Annual Report contains consolidated
financial statements of the Company and its subsidiaries and the report thereon
of Price Waterhouse LLP, independent accountants.
REVOCATION OF PROXY
The accompanying Proxy may be revoked by a shareholder at any time before it
is voted, either by delivering a subsequent proxy or other written notice of
revocation to the Company at its above address or by attending the Meeting and
voting in person. All shares represented by each properly signed and returned
proxy card in the accompanying form, unless revoked, will be voted at the
Meeting in accordance with the shareholder's instructions indicated on the proxy
card. If no instructions are marked on the proxy card, the shares will be voted
in favor of the proposals described in this Proxy Statement.
PROXY SOLICITATION
The cost of soliciting proxies will be paid by the Company. Georgeson &
Company Inc., Wall Street Plaza, New York, New York 10005 has been retained to
solicit proxies by mail, telephone or personal solicitation for a fee of $4,500
plus expenses. The Company has also arranged for reimbursement, at the rate
suggested by the New York Stock Exchange, of brokerage houses, nominees,
custodians and fiduciaries for the forwarding of proxy materials to the
beneficial owners of shares held of record. Proxies may also be solicited by
directors, officers and employees of the Company, but such persons will not be
specially compensated for such services.
PROPOSALS OF SHAREHOLDERS
Under certain circumstances, shareholders are entitled to present proposals
at shareholder meetings. Any such proposal to be included in the Proxy Statement
for the Company's 1998 Annual Meeting of Shareholders must be submitted by a
shareholder prior to November 1, 1997, in a form that complies with applicable
regulations.
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<PAGE>
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. The SEC also maintains a Web site that
contains reports, proxy statements and other information regarding registrants
that file electronically with the SEC. The address of the Web site is
(http://www.sec.gov).
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,
[LOGO]
William R. Sherman
SECRETARY
February 28, 1997
27
<PAGE>
L.A. GEAR, INC.
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 15, 1997
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, Bruce W.
MacGregor and Victor J. Trippetti 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 Company's
Corporate Headquarters at 2850 Ocean Park Boulevard, Santa Monica, California
90405 on April 15, 1997 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" PROPOSAL 2. THE PROXY, WHEN
PROPERLY EXECUTED, SHALL BE VOTED AS DIRECTED BY THE UNDERSIGNED
SHAREHOLDERS(S). IF NO DIRECTION IS MADE FOR A GIVEN PROPOSAL, THE PROXY
SHALL BE VOTED "FOR" THE ELECTION OF DIRECTORS NOMINATED BY THE BOARD OF
DIRECTORS AND "FOR" PROPOSAL 2.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE REVERSE SIDE)
<PAGE>
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR all nominees listed
(except as marked to the WITHHOLD
contrary). Discretionary AUTHORITY
authority to cumulate to vote for all
votes is granted. nominees listed.
1. ELECTION OF DIRECTORS / / / /
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, write the name of the nominee or nominees in the space below.)
________________________________________________________
FOR AGAINST ABSTAIN
2. RATIFICATION OF APPOINTMENT / / / / / /
OF INDEPENDENT PUBLIC
ACCOUNTANTS.
3. OTHER BUSINESS. In their discretion, the Proxy Holders are authorized to
vote upon such other business incident to the conduct of the Meeting and at
any 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.
FOR AGAINST ABSTAIN
/ / / / / /
I/WE WILL / /
ATTEND THE
MEETING
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 and the Proxy
Statement furnished herewith.
_______________________________________
(NUMBER OF SHARES)
_______________________________________
(PLEASE PRINT NAME)
SIGNATURE(S) OF HOLDER(S) OF COMMON STOCK ______________________________________
_____________DATED_________, 1997
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.
