<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of
the Commission Only (as
[X] Definitive Proxy Statement Permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
VANS, 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):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 material.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------
<PAGE> 2
[LOGO]
15700 SHOEMAKER AVENUE
SANTA FE SPRINGS, CALIFORNIA 90670
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 22, 1997
Dear Stockholders:
The 1997 Annual Meeting of Stockholders of Vans, Inc., a Delaware
corporation (the "Company"), will be held on Wednesday, October 22, 1997, at
10:00 a.m., Pacific Time, at the Sheraton Cerritos Hotel, 12725 Center Court
Drive, Cerritos, California, for the following purposes:
1. To elect nine directors to serve for the ensuing year and until their
successors are duly elected and qualified;
2. To consider and act upon a proposal to amend Section 1 of Article V of
the Company's Restated Certificate of Incorporation to provide for a
classified Board of Directors;
3. To consider and act upon a proposal to adopt the Company's Vanstastic
Employee Stock Option Plan;
4. To consider a non-binding resolution to re-ratify and re-approve the
Company's Stockholder Rights Plan, which was first ratified and approved
by the stockholders at the 1994 Annual Meeting;
5. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for fiscal 1998; and
6. To transact such other business as may be properly brought before the
Annual Meeting or any adjournment thereof.
In accordance with the Company's Restated By-Laws, the Board of Directors
has fixed the close of business on August 25, 1997, as the record date for the
purpose of determining stockholders entitled to receive notice of and to vote at
the Annual Meeting or any adjournment or adjournments thereof. The stock
transfer books will not be closed.
A list of the stockholders entitled to vote at the Annual Meeting may be
examined at the Company's executive offices, located at 15700 Shoemaker Avenue,
Santa Fe Springs, California, during the 10-day period preceding the Annual
Meeting.
YOUR VOTE IS VERY IMPORTANT. Therefore, whether or not you plan to attend
the Annual Meeting in person, please sign and return the enclosed proxy in the
envelope provided. If you attend the Annual Meeting and desire to vote in
person, you may do so even though you have previously sent a proxy.
By Order of the Board of Directors,
/s/ CRAIG E. GOSSELIN
--------------------------
Craig E. Gosselin
Vice President, General Counsel,
and Corporate Secretary
September 15, 1997
Santa Fe Springs, California
<PAGE> 3
[LOGO]
15700 SHOEMAKER AVENUE
SANTA FE SPRINGS, CALIFORNIA 90670
------------------------
PROXY STATEMENT
------------------------
INFORMATION RELATING TO VOTING AT THE ANNUAL MEETING
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Vans, Inc., a Delaware corporation (the
"Company"), for use at the Annual Meeting of Stockholders (the "Annual Meeting")
of the Company to be held on Wednesday, October 22, 1997, and at any adjournment
thereof. The approximate date of mailing of this Proxy Statement and the
accompanying proxy card is September 15, 1997.
The Board of Directors of the Company has selected August 25, 1997, as the
record date for the Annual Meeting. Only those stockholders of record at the
close of business on that date will be entitled to notice of and to vote at the
Annual Meeting. The Company had a total of 13,203,401 shares of $.001 par value
common stock (the "Common Stock") outstanding at August 25, 1997. The Common
Stock is the only outstanding class of voting securities of the Company.
Stockholders will be entitled to one vote for each share of stock held by them
of record at the close of business on the record date on any matter that may be
presented for consideration and action by the stockholders at the Annual
Meeting. Stockholders are not entitled to cumulate their votes and have no
rights of appraisal with respect to the proposals described herein.
All valid proxies received in response to this solicitation will be voted
in accordance with the instructions indicated thereon by the stockholders giving
such proxies. If no contrary instructions are given, proxies received will be
voted in favor of the election of the nine director nominees named in this Proxy
Statement and in favor of the other proposals described herein. Proxies
solicited hereby may be voted for adjournment of the Annual Meeting (whether or
not a quorum is present for the transaction of business) in order to permit
further solicitation of proxies if the Board of Directors of the Company
determines that such adjournment would be advisable in order to obtain
sufficient votes for approval of the matters to be voted upon at the Annual
Meeting.
The Board of Directors does not know of any other business to be presented
for action at the Annual Meeting. If any other business is properly presented at
the Annual Meeting and may properly be voted upon, the proxies solicited hereby
will be voted on such matters in accordance with the best judgment of the proxy
holders named in such proxies. A stockholder's proxy may be revoked at any time
before it is voted at the Annual Meeting by giving written notice of such
revocation to the Corporate Secretary of the Company (which notice may be given
by the filing of a duly executed proxy bearing a later date) or by attending the
Annual Meeting and voting in person.
The costs of this proxy solicitation will be paid by the Company. To the
extent necessary, proxies may also be solicited by personnel of the Company in
person, by telephone, or through other forms of communication, or through a
solicitation firm. Company personnel who participate in this solicitation will
not receive any additional compensation for such solicitation. Any solicitation
firm engaged by the Company will be paid at such firm's usual rates. The Company
will request record holders of shares beneficially owned by others to forward
this Proxy Statement and related materials to the beneficial owners of such
shares and will reimburse such record holders for their reasonable expenses
incurred in doing so.
<PAGE> 4
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of August 25, 1997: (i) by each
person who is known by the Company to own beneficially more than 5% of the
Company's Common Stock; (ii) by each director; (iii) the executive officers
named in the Summary Compensation Table; and (iv) by all directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME OF BENEFICIAL OWNERSHIP(1) OF CLASS
- ------------------------------------------------------------- -------------------------- --------
<S> <C> <C>
McCown De Leeuw & Co......................................... 1,000,001(2) 7.6%
3000 Sand Hill Road
Bldg. 3, Suite 290
Menlo Park, CA 94025
Wall St. Associates.......................................... 744,000(3) 5.6%
1200 Prospect St.
Suite 100
La Jolla, CA 92038-8589
AIM Management Group, Inc.................................... 668,200(4) 5.1%
11 Greenway Plaza
Suite 1919
Houston, TX 77046
George E. McCown............................................. 1,020,001(5) 7.7%
David E. De Leeuw............................................ 1,000,001(6) 7.6%
Walter E. Schoenfeld......................................... 255,000(7) 1.9%
Philip H. Schaff, Jr......................................... 118,892(8) *
Wilbur J. Fix................................................ 34,667(9) *
James R. Sulat............................................... 12,501(10) *
Kathleen M. Gardarian........................................ 10,001(11) *
Gary H. Schoenfeld........................................... 146,000(12) 1.1%
Lisa M. Douglas.............................................. 6,667(13) *
Neal R. Lyons................................................ 14,930(14) *
Sari K. Ratsula.............................................. 35,830(15) *
Craig E. Gosselin............................................ 16,940(16) *
Kyle B. Wescoat.............................................. 10,834(17) *
All directors and executive officers as a group (22 1,729,772(18) 13.1%
persons)...................................................
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "Commission") and generally
includes voting or investment power with respect to securities. Except as
indicated by footnote, and subject to community property laws where
applicable, the persons named in the table above have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them. Percentage of beneficial ownership is based on
shares of Common Stock outstanding as of August 25, 1996.
(2) Includes 83,661 shares held by MDC/JAFCO Ventures ("MDC/JAFCO"), an
affiliate of McCown De Leeuw & Co. ("MDC") .
(3) Based on a Schedule 13G filed by Wall St. Associates for the year ended
December 31, 1996.
(4) Based on a Schedule 13G filed for the year ended December 31, 1996, by AIM
Management Group, on behalf of itself and its wholly-owned subsidiaries,
AIM Advisors, Inc. and AIM Capital Management, Inc.
(5) Includes 916,340 shares held by MDC and 83,661 shares held by MDC/JAFCO.
See Note 2 above. Mr. McCown is a general partner of MDC Management
Company, the general partner of MDC and MDC/JAFCO, and may be deemed to own
beneficially all of the shares held by MDC and MDC/JAFCO.
(6) Includes 916,340 shares held by MDC and 83,661 shares held by MDC/JAFCO.
See Note 2 above. Mr. De Leeuw is a general partner of MDC Management
Company, the general partner of MDC and
2
<PAGE> 5
MDC/JAFCO, and may be deemed to own beneficially all of the shares held by
MDC and MDC/JAFCO. Mr. De Leeuw has no direct ownership of any Common
Stock.
(7) Includes 199,141 shares of Common Stock that are subject to stock options
which are exercisable within 60 days of August 25, 1997. Excludes 42,000
shares of Common Stock that are subject to stock options which are not
exercisable within 60 days of August 25, 1997.
(8) Excludes 1,000,001 shares held by MDC and its affiliate, MDC/JAFCO. Mr.
Schaff is a limited partner of MDC and is entitled to receive a portion of
such shares upon distribution by the partnership. MDC currently controls
the power to vote and dispose of such shares, therefore, Mr. Schaff
disclaims beneficial ownership of such shares. Excludes 19,999 shares of
Common Stock that are subject to non-statutory stock options which are not
exercisable within 60 days of August 25, 1997. Includes 38,181 shares of
Common Stock that are subject to non-statutory stock options which are
exercisable within 60 days of August 25, 1997.
(9) Includes 20,667 shares of Common Stock that are subject to non-statutory
stock options which are exercisable within 60 days of August 25, 1997.
Excludes 28,999 shares of Common Stock that are subject to non-statutory
stock options which are not exercisable within 60 days of August 25, 1997.
(10) Represents shares of Common Stock that are subject to non-statutory stock
options which are exercisable within 60 days of August 25, 1997. Excludes
4,999 shares of Common Stock that are subject to the same non-statutory
stock options which are not exercisable within 60 days of August 25, 1997.
(11) Represents shares of Common Stock that are subject to non-statutory stock
options which are exercisable within 60 days of August 25, 1997. Excludes
7,499 shares of Common Stock that are subject to the same non-statutory
options which are not exercisable within 60 days of August 25, 1997.
(12) Includes 89,714 shares of Common Stock that are subject to incentive stock
options which are exercisable within 60 days of August 25, 1997. Excludes
66,000 shares of Common Stock that are subject to the same stock options
which are not exercisable within 60 days of August 25, 1997.
(13) Represents shares of Common Stock that are subject to non-statutory options
which are exercisable within 60 days of August 25, 1997. Excludes 5,833
shares of Common Stock that are subject to the same non-statutory stock
options which are not exercisable within 60 days of August 25, 1997.
(14) Includes 5,001 shares of Common Stock that are subject to incentive stock
options which are exercisable within 60 days of August 25, 1997. Excludes
19,999 shares of Common Stock that are subject to the same options which
are not exercisable within 60 days of August 25, 1997.
(15) Includes 35,775 shares of Common Stock that are subject to incentive stock
options which are exercisable within 60 days of August 25, 1997. Excludes
43,777 shares of Common Stock that are subject to the same options which
are not exercisable within 60 days of August 25, 1997.
(16) Includes 16,440 shares of Common Stock that are subject to incentive stock
options which are exercisable within 60 days of August 25, 1997. Excludes
22,333 shares of Common Stock that are subject to the same options which
are not exercisable within 60 days of August 25, 1997, and 5,773 shares of
restricted stock which will not vest unless Mr. Gosselin is employed by the
Company on September 17, 1997.
(17) Includes 10,834 shares of Common Stock that are subject to incentive stock
options which are exercisable within 60 days of August 25, 1997. Excludes
23,666 shares of Common Stock that are subject to the same options which
are not exercisable within 60 days of August 25, 1997.
(18) Includes an aggregate of 1,000,001 shares held by MDC and MDC/JAFCO,
entities affiliated with George E. McCown and David E. De Leeuw, both of
whom are directors and officers of the Company. See Notes 2, 5, and 6
above. Also includes 512,716 shares that are subject to non-statutory and
incentive stock options which are exercisable within 60 days of August 25,
1997 and held by certain executive officers and directors of the Company.
3
<PAGE> 6
PROPOSAL 1
ELECTION OF DIRECTORS
The Restated By-laws of the Company, as amended, provide for no less than
five and no more than 11 directors, as determined from time to time by the
Board. The Board has currently fixed the number of directors at nine. Proxies
cannot be voted for a greater number of persons than the nominees listed below.
The Restated By-laws currently provide that the directors shall be elected
annually. However, if the proposal to create a classified Board is adopted, each
class of directors will stand for election once every three years. See "Proposal
2 -- Classified Board of Directors."
Set forth below are the names of the persons nominated by the Board of
Directors for election as directors at the Annual Meeting, together with their
ages, principal occupations and business experience during the last five years,
present directorships and the year each first became a director of the Company.
All of the nominees are presently directors. If any nominees are unable to serve
as a director, the person or persons voting the proxies solicited hereby will
select another nominee in his or her place. The Company has no reason to believe
that any of the nominees will be unable or unwilling to serve if elected. The
vote of a plurality of the total votes cast in person or by proxy at the Annual
Meeting is required to elect each of the nominees. Pursuant to the Restated
By-laws, abstentions and broker non-votes will not be deemed votes cast.
<TABLE>
<CAPTION>
FIRST
BECAME
NOMINEES FOR ELECTION AGE POSITION HELD IN THE COMPANY A DIRECTOR
- ------------------------ --- ---------------------------------------------- ----------
<S> <C> <C> <C>
Walter E. Schoenfeld 66 Director and Chairman of the Board 1991
Director; President and Chief Executive
Gary H. Schoenfeld 34 Officer 1995
George E. McCown 62 Director and Vice Chairman of the Board 1988
David E. De Leeuw 53 Director and Vice Chairman of the Board 1988
Philip H. Schaff, Jr. 76 Director 1989
Wilbur J. Fix 70 Director 1993
James R. Sulat 47 Director 1994
Kathleen M. Gardarian 52 Director 1994
Lisa M. Douglas 38 Director 1995
</TABLE>
WALTER E. SCHOENFELD has served as a director since August 1991 and has
served as Chairman of the Board since July 1996. He served as Chief Executive
Officer from May 1995 to February 1997 and was President from May 1995 to July
1996. He previously held the positions of President and Chief Executive Officer
from July 1993 to September 1994. From April 1993 to July 1993, he served as
Acting President and Chief Executive Officer. Mr. Schoenfeld was a Vice Chairman
of the Board from March 1993 to July 1996. Mr. Schoenfeld has served as Chairman
of the Board of Schoenfeld Group Ltd., a private consulting and investment
company, since 1987, and as Chairman of the Board of Access Long Distance
Telephone Company since 1991. From 1983 to 1987, he was Chairman of the Board
and Chief Executive Officer of Schoenfeld Neckwear Company, a leading neckwear
company. Mr. Schoenfeld founded Britannia Sportswear Company in 1971 and served
as Chairman of the Board and Chief Executive Officer of Schoenfeld Industries,
Inc., its parent company. From 1976 to 1982, he was a General and Limited
Partner of the Seattle Mariners Baseball Club. He is a limited partner of two
partnerships affiliated with MDC, which partnerships do not hold any stock of
the Company. Mr. Schoenfeld is the father of Gary H. Schoenfeld, a director and
President and the Chief Executive Officer of the Company. Mr. Schoenfeld
received a B.B.A. from the University of Washington.
GARY H. SCHOENFELD has served as a director since November 1995. He became
President in July 1996 and Chief Executive Officer in February 1997. He served
as the Company's Chief Operating Officer from September 1995 to February 1997.
Prior to joining the Company, Mr. Schoenfeld was a partner of MDC. During his
employment with MDC from July 1988 to August 1995, Mr. Schoenfeld was a director
of five MDC-affiliated companies, and has been involved with the Company since
1989. Prior to joining MDC, Mr. Schoenfeld was employed for two years by David
H. Murdock, a private financier, and was previously involved in a variety of
projects with Brittania Sportswear Company, including offshore sourcing
operations in
4
<PAGE> 7
Hong Kong. Mr. Schoenfeld is a director of Fitness Holdings, Inc., an MDC
portfolio company. Mr. Schoenfeld is the son of Walter E. Schoenfeld, the
Company's Chairman of the Board. Mr. Schoenfeld received a B.A. from the
University of California at Los Angeles and an M.B.A. from Stanford University.
GEORGE E. MCCOWN has served as Vice Chairman of the Board since July 1996.
From February 1988 to July 1996, he was Chairman of the Board. From February
until July 1988, he served as President/Chief Executive Officer. Mr. McCown was
co-founder and has been a managing general partner of MDC Management Company,
the general partner of MDC, since 1984. MDC is a significant stockholder of the
Company. See "Security Ownership of Management and Certain Beneficial Owners."
He also serves as Chairman of the Board and a director of FiberMark, a publicly
traded corporation, and is a director of Specialty Paperboard, Inc., a publicly
traded corporation, Nimbus CD International, a publicly traded corporation, and
several other MDC portfolio companies. Mr. McCown received a B.S. from Stanford
University and an M.B.A. from Harvard University.
DAVID E. DE LEEUW became Vice Chairman of the Board and Chief Financial
Officer in February 1988. He became Secretary in July 1988 and resigned as Chief
Financial Officer in June 1991. He resigned as Secretary in May 1993. Mr. De
Leeuw was co-founder and has been a managing general partner of MDC Management
Company, the general partner of MDC, since 1984. MDC is a significant
stockholder of the Company. See "Security Ownership of Management and Certain
Beneficial Owners." Mr. De Leeuw also serves as a director of Nimbus CD
International, a publicly traded corporation, and several other MDC portfolio
companies. Mr. De Leeuw received a B.A. from Lafayette College and an M.B.A.
from Columbia University.
PHILIP H. SCHAFF, JR. has served as a director of the Company since January
1989. Mr. Schaff has owned and operated his own investment and consulting firm,
Phil Schaff Enterprises, since 1983. From 1947 to 1983, Mr. Schaff was employed
by Leo Burnett Co., Inc., a leading advertising agency, eventually becoming its
Chairman of the Board and Chief Executive Officer. Mr. Schaff is a limited
partner of MDC, a significant stockholder of the Company. See "Security
Ownership of Management and Certain Beneficial Owners." He is a former Trustee
of Princeton University and has been President of several not-for-profit
institutions.
WILBUR J. FIX has served as a director of the Company since February 1993.
He is Vice Chairman of Access Long Distance Telephone Company and Chairman of
the Board of Fix Management Group. From 1980 to 1993, Mr. Fix was Chairman of
the Board and Chief Executive Officer of The Bon Marche, a Seattle-based chain
of department stores which was acquired by Campeau Corporation in 1986. Mr. Fix
ultimately became Senior Vice President of Allied Stores Corporation, the parent
company of The Bon Marche, and a member of the Boards of Directors of Allied
Stores and Federated Stores. Mr. Fix began his career at The Bon Marche in 1950
as a trainee, and held several positions at that company prior to his
appointment as Chairman of the Board and Chief Executive Officer. He is a
limited partner of a partnership affiliated with MDC, which partnership does not
hold any Common Stock of the Company. Mr. Fix is a member of the Board of
Directors of Savi, a privately-held retailer of ready-to-wear apparel, Access
Long Distance Telephone Company and BMC West Corporation, a publicly traded
corporation. Mr. Fix received a B.A. from the University of Washington.
JAMES R. SULAT has served as a director of the Company since October 1994.
He is the Chief Financial Officer of Stanford Health Services, a not-for-profit
health care provider which operates the Stanford University hospital and clinic.
From 1990 to 1993 Mr. Sulat was Chief Financial Officer and Vice President of
Operations of Esprit de Corp, a San Francisco-based apparel company. From 1983
to 1990 he was Vice President of Waverly Associates, a Palo Alto-based
investment company. He is a limited partner of a partnership affiliated with
MDC, which partnership does not hold any Common Stock of the Company. Mr. Sulat
received a B.S. from Yale University and an M.B.A. and M.S. from Stanford
University.
KATHLEEN M. GARDARIAN has served as a director of the Company since
December 1994. She has been, since 1988, the owner and President of Qualis
International, Inc., an Irvine, California-based international trading and
distribution company. Prior to founding Qualis, Ms. Gardarian was a
manufacturer's representative for Fuji Electro-Chemical Co. of Japan. Ms.
Gardarian is a founding Trustee and Board member of the World Business Academy,
an international network of business executives, and is on the
5
<PAGE> 8
Advisory Board of The Gorbachev U.S.A. Foundation. She is also on the Board of
the Institute of Transpersonal Psychology in Palo Alto, and is active in the
Woman President's Organization, and the Forum for Corporate Directors. Ms.
Gardarian received a B.A. from the University of California at Los Angeles.
LISA M. DOUGLAS has served as a director since November 1995. Ms. Douglas
is President of Nufitness Corporation, a producer of fitness-related television,
audio, visual aids and wellness programs. Prior to founding Nufitness in 1991,
Ms. Douglas was Director of Corporate Sales for Koala Blue, a women's sportswear
manufacturer. Ms. Douglas currently serves on the Board of the Steering
Committee of the Associates of Cedars-Sinai Medical Center and the Douglas
Family Foundation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE ABOVE
NOMINEES TO THE BOARD.
Effect of Creation of Classified Board of Directors. In the event that the
proposal to create a classified Board of Directors is adopted by the
stockholders (see "Proposal 2 -- Classified Board of Directors"), the terms of
office for all of the directors will no longer be one year. Instead, the Board
will be divided into three classes as follows: David E. De Leeuw, Kathleen M.
Gardarian and Philip H. Schaff, Jr. will hold office until the 1998 Annual
Meeting; Wilbur J. Fix, James R. Sulat and Lisa M. Douglas will hold office
until the 1999 Annual Meeting; and Walter E. Schoenfeld, Gary H. Schoenfeld and
George E. McCown will hold office until the 2000 Annual Meeting.
Board Committees. The Board of Directors has a Compensation Committee,
which makes recommendations concerning salaries and incentive compensation for
officers and employees of the Company; an Audit Committee, which reviews the
results and scope of the audit and other services provided by the Company's
independent auditors, and approves the Company's investment policies; an
Executive Committee, which reviews the operations of the Company on a periodic
basis; a Real Estate Committee, which reviews the Company's real estate and
retail store operations; a Mergers and Acquisitions Committee, which considers
appropriate acquisitions for the Company; and a Nominating Committee, which
considers and recommends appropriate candidates for the Board. The Nominating
Committee does not, at this time, consider nominees for the Board recommended by
stockholders.
The members of the Compensation Committee are Wilbur J. Fix, Chairman,
Philip H. Schaff, Jr. and Lisa M. Douglas. The Compensation Committee met, or
acted pursuant to Written Consent, nine times during fiscal 1997. The members of
the Audit Committee are David E. De Leeuw, Chairman, Philip H. Schaff, Jr.,
Wilbur J. Fix and James R. Sulat. The Audit Committee met six times during
fiscal 1997. The members of the Executive Committee are George E. McCown,
Chairman, Walter E. Schoenfeld, David E. De Leeuw and Gary H. Schoenfeld. The
Executive Committee met four times during fiscal 1997. The members of the Real
Estate Committee are Wilbur J. Fix, Chairman, Walter E. Schoenfeld, and Kathleen
M. Gardarian. The Real Estate Committee met one time during fiscal 1997. The
members of the Mergers and Acquisitions Committee are James R. Sulat, Chairman,
Walter E. Schoenfeld and Gary H. Schoenfeld. The members of the Nominating
Committee are Walter E. Schoenfeld, Chairman, George E. McCown, Lisa M. Douglas,
and Gary H. Schoenfeld. Neither the Mergers and Acquisitions Committee nor the
Nominating Committee met during fiscal 1997.
Compensation of Directors. It is the Company's policy to pay its outside
directors (who are currently Messrs. Schaff, Fix and Sulat, Ms. Gardarian and
Ms. Douglas) a quarterly fee of $3,000 plus a fee of $2,000 for in-person Board
and Committee meetings and $1,000 for telephonic Board and Committee meetings,
as compensation for their services. All directors are reimbursed for expenses
incurred in connection with attendance at Board and Committee meetings. Pursuant
to a management agreement, MDC Management Company, the general partner of MDC,
has provided management, consulting and financial services to the Company.
Services rendered by MDC Management Company include, but are not necessarily
limited to, advice and assistance concerning any and all aspects of the
operation, planning and financing of the Company. The agreement currently
provides for a fixed annual fee of $350,000, paid on a monthly basis, and ends
in May 1998. See "Certain Transactions." MDC is a significant stockholder of the
Company and George E. McCown and David E. De Leeuw, each of whom is a director
and officer of the Company, are general partners
6
<PAGE> 9
of MDC Management Company. Messrs. McCown and De Leeuw receive no director
compensation. See "Security Ownership of Management and Certain Beneficial
Owners."
Meetings of the Board of Directors. During fiscal 1997, there were nine
regularly scheduled and special meetings of the Board of Directors of the
Company. The Board also acted pursuant to Written Consent one time during fiscal
1997.
Each nominee for the Board attended at least 75% of the aggregate of (i)
the total number of Board meetings, and (ii) the total number of meetings held
by all Committees on which he or she served.
Information Relating to Executive Officers. Set forth below are the names
and ages of the executive officers of the Company, other than Walter E. and Gary
H. Schoenfeld and George E. McCown and David E. De Leeuw (see "Proposal
1 -- Election of Directors"), together with the positions held by these persons.
<TABLE>
<CAPTION>
NAME AGE TITLE
- ----------------------- ---- -----------------------------------------------------------
<S> <C> <C>
Sari K. Ratsula 32 Senior Vice President -- Sales and Product Development
Kyle B. Wescoat 45 Vice President -- Chief Financial Officer
Steven J. Van Doren 41 Vice President -- Promotions
Neal R. Lyons 40 Vice President -- Retail Stores
John T. Dickinson 31 Vice President -- International Sales and Licensing
Craig E. Gosselin 37 Vice President -- General Counsel, and Corporate Secretary
Charles C. Kupfer 36 Vice President and Assistant Corporate Secretary
Gary L. Dunlap 52 Vice President -- Management Information Systems
Robert H. Camarena 31 Vice President -- Distribution and Corporate Logistics
Jay E. Wilson 50 Vice President -- Marketing
John P. Walker 36 Vice President -- Merchandising
Ralph Serna 40 Vice President -- Design and Product Development
</TABLE>
SARI K. RATSULA has been Senior Vice President -- Sales and Product
Development since December 1996. Prior to that time, she was Vice
President -- Design and Product Development from June 1994 to December 1996. She
has been employed by the Company since 1989, and has been involved in all facets
of the design and development of the Company's product line, ultimately becoming
Director of Product Development, a position she held from 1991 to June 1994. Ms.
Ratsula received an M.S. from the Helsinki School of Economics and Business
Administration.
KYLE B. WESCOAT has served as Vice President -- Chief Financial Officer
since February 1996. From November 1995 to February 1996, Mr. Wescoat served as
Assistant to the President of Equity Management Inc., a marketing services
company that specializes in brand extension licensing. From January 1994 to
October 1995, Mr. Wescoat was Chief Financial Officer of Shirmar Corporation, an
industrial products company. From August 1990 to January 1994, Mr. Wescoat
served as Chief Financial Officer of PLC Leather, a manufacturer, wholesaler and
importer of women's fashion accessories. Mr. Wescoat received a B.S. from Drexel
University and an M.B.A. from the University of Michigan.
STEVEN J. VAN DOREN has been a Vice President since May 1990. He is
currently primarily responsible for the Company's promotional efforts. Mr. Van
Doren has been employed by the Company in various capacities since the formation
of the predecessor of the Company in 1966. Mr. Van Doren is the son of Paul Van
Doren, a founder of the predecessor of the Company.
NEAL R. LYONS has been Vice President -- Retail Stores since February 1995.
Prior to joining the Company, Mr. Lyons was Director of Stores for Reebok from
June 1994 to February 1995. From September 1989 to June 1994, he was President
of Midlantic Footwear, a large-scale footwear and apparel organization and a
division of Intershoe Inc.
JOHN T. DICKINSON has been a Vice President of the Company since July 1996.
He joined the Company in May 1995 as Director-Licensing, and assumed
responsibility for international sales in October 1995. Prior to joining the
Company, Mr. Dickinson was International General Manager of Maui and Sons Inc.
from
7
<PAGE> 10
February 1994 to March 1995. From May 1992 to February 1994, he was Vice
President of Sales and Marketing for Hobie Snowboards Inc. Mr. Dickinson
received a B.B.A. from Loma Linda University, an M.B.A. in International
Business from San Diego State University, and a Certificate of Advanced Study
from American Graduate School of International Management.
CRAIG E. GOSSELIN has been Vice President -- General Counsel of the Company
since July 1992. He became Secretary in May 1993. He was an Assistant Secretary
of the Company from February 1988 to May 1993. From March 1990 to June 1992, Mr.
Gosselin was a Partner of the law firm of Cooper & Dempsey. Mr. Gosselin
received a B.B.A. from Loyola Marymount University and a J.D. from Southwestern
University School of Law.
CHARLES C. KUPFER has been a Vice President and Assistant Corporate
Secretary of the Company since July 1996. He was the Company's Controller from
September 1994 to October 1996 when he took charge of the Company's production
and sourcing efforts. From July 1995 to December 1995 he was Acting Chief
Financial Officer of the Company. He served as Assistant Controller of the
Company from August 1992 until September 1994. Mr. Kupfer received a B.A. from
the University of California at Irvine and a second B.A. from the California
State University at Fullerton.
GARY L. DUNLAP has been Vice President -- Management Information Systems
since May 1995. Prior to joining the Company, he was Vice
President -- Information Services for OroAmerica, Inc. from March 1992 to April
1995, and held the same position at Berkshire Properties & Development from July
1985 to March 1992. Mr. Dunlap received a B.S. from Lycoming College.
ROBERT H. CAMARENA has been Vice President -- Operations since February
1996. Prior to that time, from May 1995 to February 1996, Mr. Camarena was
Director of Distribution and Corporate Logistics. Prior to joining the Company,
Mr. Camarena was General Manager of Silver America and Vice President of
Operations for OroAmerica, Inc. from May 1992 to May 1995. From May 1991 to May
1992, Mr. Camarena was Director of Distribution for Cecil Sayda Co.
CASEY G. WAID has been Vice President -- Apparel of the Company since
December 1996. She joined the Company in June 1996 as Director of Apparel. Prior
to joining the Company, she was employed by Adidas America Inc. from June 1992
to June 1996 in various positions, eventually becoming a Senior Marketing
Manager for Apparel. Ms. Waid received a B.A. from the University of North
Texas.
JAY E. WILSON has been Vice President -- Marketing of the Company since
December 1996. Prior to joining the Company, Mr. Wilson was a consultant for
Dark Horse Distribution from February 1995 to December 1996, focusing on extreme
sports brands. From March 1994 to February 1995, he was a Managing Partner of
Brand Building Communications, a venture providing brand building expertise to
clients such as Disney Americast, Rhino Records and Kids Mart. From December
1990 to March 1994, he was Creative Director of Lintas Campbell Ewald, an
advertising agency located in Los Angeles. Mr. Wilson received a B.A. from the
Pasadena-based Art College of Design.
JOHN P. WALKER has been Vice President -- Merchandising of the Company
since February 1997. From July 1993 to February 1996, Mr. Walker was a buyer and
merchandiser for Journeys, a division of Genesco. From 1991 to February 1992, he
was in charge of product design and national sales for Shando International, a
sourcing company for private label brands and U.S. wholesalers. Mr. Walker
received a B.A. from Lenoir Rhyne College, and a Masters in Sports
Administration from the University of North Carolina.
RALPH SERNA has been Vice President -- Design and Product Development of
the Company since June 1997. Prior to becoming a Vice President, Mr. Serna was
Director -- Product Design of the Company from June 1996 to July 1997. From June
1995 to June 1996, Mr. Serna was Director of Running, Basketball and Classic
Footwear for Reebok International Ltd. From February 1994 to June 1995, he was
Director of International Footwear Design and Development for Muzuno Inc., and
from September 1990 to February 1994, he was Director of Design and Development
for Etonic Inc. Mr. Serna received a B.A. in Fine Arts from the University of
California at Irvine.
8
<PAGE> 11
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table discloses compensation for the three fiscal years ended
May 31, 1997 received by (i) the Company's two Presidents and Chief Executive
Officers during fiscal 1997 and the four remaining most highly paid executive
officers as of May 31, 1997 (collectively, the "named executive officers").
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------
SECURITIES
FISCAL YEAR ANNUAL COMPENSATION RESTRICTED UNDERLYING
NAME AND PRINCIPAL ENDED ----------------------------- STOCK OPTIONS/ ALL OTHER
POSITION MAY 31 SALARY($) BONUS($) OTHER($) AWARDS($) SARS(#) COMPENSATION($)
- -------------------------- ----------- ------- ------- ------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Walter E. Schoenfeld 1997 226,627 -0- 117,356(2) -0- -0- -0-
Chairman of the 1996 196,297 -0- 64,490(3) -0- -0- -0-
Board(1) 1995 112,312 -0- -0- -0- 200,000 121,185(4)
Gary H. Schoenfeld 1997 289,713 147,500 -0- -0- 200,000 -0-
President and Chief 1996 183,654(5) 44,874 -0- -0- 100,000 108,650(6)
Executive Officer 1995 -0- -0- -0- -0- -0- -0-
Neal R. Lyons 1997 182,407 60,000 -0- -0- 10,000 -0-
Vice President- 1996 170,254 45,885 -0- -0- 5,000 -0-
Retail Sales 1995(7) 44,369 10,000 -0- -0- 10,000 -0-
Sari K. Ratsula 1997 171,782 52,000 -0- -0- 20,000 -0-
Senior Vice President- 1996 119,366 25,000 -0- -0- 16,667 -0-
Sales and Prod. Dev. 1995 89,423 28,198 -0- -0- 35,000 -0-
Craig E. Gosselin 1997 175,607 26,392 -0- -0- 2,000 -0-
Vice President- 1996 169,616 33,750 -0- -0- 2,000 -0-
General Counsel 1995 149,615 28,474 -0- -0- 10,000 -0-
and Corporate Secretary
Kyle B. Wescoat 1997 160,000 24,000 -0- -0- 9,500 -0-
Vice President- 1996(8) 40,000 -0- -0- -0- 25,000 -0-
Chief Financial Officer 1995(8) N/A N/A N/A N/A N/A N/A
</TABLE>
- ---------------
(1) Mr. Schoenfeld became President and Chief Executive Officer of the Company
on May 11, 1995. He became Chairman of the Board in July 1996, relinquishing
the title of President. In February 1997, he relinquished the title of Chief
Executive Officer.
(2) Includes $60,000 paid by the Company for an automobile to replace the
automobile previously leased for Mr. Schoenfield. In accordance with Board
policy, the Company no longer leases Company vehicles. Also includes (i)
$31,356 paid by the Company for accommodations at a temporary residence Mr.
Schoenfeld maintained in fiscal 1997, and (ii) $26,000 paid by the Company
to reimburse Mr. Schoenfeld for the expense of maintaining secretarial
support in Seattle, which is his home, for purposes of conducting Company
business there.
(3) Consists of (i) $40,490 paid by the Company for the residence referred to in
footnote (2) above, and (ii) $24,000 paid by the Company to reimburse Mr.
Schoenfeld for the secretarial support referred to in footnote (2) above.
(4) Represents amounts paid to Mr. Schoenfeld pursuant to a Consulting Agreement
he entered into with the Company in September 1994.
(5) Mr. Schoenfeld joined the Company on September 1, 1995. He became President
of the Company in July 1996 and Chief Executive Officer in February 1997.
Pursuant to his employment agreement, as amended, his annual salary is no
less than $350,000 per year.
(6) Represents (i) amounts paid to Mr. Schoenfeld to reimburse him for
relocating his residence to Southern California when he joined the Company,
and (ii) amounts paid to Mr. Schoenfeld to reimburse him for certain costs
associated with the sale of his former residences.
(7) Mr. Lyons joined the Company in February 1995.
(8) Mr. Wescoat joined the Company in February 1996.
9
<PAGE> 12
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in fiscal 1997 to
the named executive officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------
PERCENT POTENTIAL REALIZABLE VALUE
OF TOTAL AT ASSUMED ANNUAL RATES
NUMBER OF OPTIONS/SARS OF STOCK PRICE APPRECIATION
SECURITIES GRANTED TO EXERCISE MARKET FOR OPTION TERM
UNDERLYING EMPLOYEES OF VALUE ON ---------------------------
OPTIONS/ IN BASE GRANT 0% 5% 10%
SARS FISCAL PRICE EXPIRATION DATE APPRECIATION APPRECIATION APPRECIATION
NAME GRANTED(#) 1997 ($/SHARE) DATE ($/SHARE) ($) ($) ($)
- ----------------- ----------- ------------ --------- ---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Walter E.
Schoenfeld..... -0- N/A N/A N/A N/A N/A N/A N/A
Gary H.
Schoenfeld..... 1. 100,000(1) 22.2% 13.56 8/22/06 13.56 -0- 852,781 2,161,115
2. 100,000(2) 22.2% 11.25 5/19/07 11.25 -0- 707,506 1,792,960
Neal R. Lyons.... 1. 10,000(2) 2.2% 11.25 5/19/07 11.25 -0- 70,751 179,296
Sari K.
Ratsula........ 1. 10,000(1) 2.2% 13.25 6/24/06 13.25 -0- 83,329 211,171
2. 10,000(1) 2.2% 11.125 12/29/06 11.125 -0- 69,965 177,304
Craig E. Gosselin. 1. 2,000(2) * 11.25 5/19/07 11.25 -0- 14,150 35,859
Kyle B.
Wescoat........ 1. 7,500(1) 1.7% 13.56 8/22/06 13.56 -0- 63,959 162,084
2. 2,000(2) * 11.25 5/19/07 11.25 -0- 14,150 35,859
</TABLE>
- ---------------
* Less than 1%.
(1) Each of these options is an incentive stock option which expires 10 years
after the date of grant. The options are exercisable in three annual
increments of 33.33% commencing on the first anniversary of the grant date.
The options also become fully exercisable in the event of a change in
control of the Company.
(2) Each of these options is an incentive stock option which expires 10 years
after the date of grant. The options are exercisable in five annual
increments of 20% commencing on the first anniversary of the grant date.
Exercisability of the option accelerates if the Company meets certain
pre-established earnings per share targets. The options also become fully
exercisable in the event of a change in control of the Company.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
The following table provides information on option/SAR exercises in fiscal
1997 by the named executive officers, and the value of such officers'
unexercised options/SARs at May 30, 1997, the last trading day of fiscal 1997.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY OPTIONS/
OPTIONS/SARS AT FISCAL SARS AT FISCAL
SHARES YEAR-END(#) YEAR-END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Walter E. Schoenfeld.................. -0- N/A 199,141 42,000 1,282,308 262,500
Gary H. Schoenfeld.................... -0- N/A 80,000 200,000 440,000 125,000(2)
Neal R. Lyons......................... 3,333(3) -0-(3) 5,001 19,999 26,855 66,195
Sari K. Ratsula....................... -0- N/A 32,064 47,488 231,582 179,192(4)
Craig E. Gosselin..................... -0- N/A 16,286 25,847 101,975 146,894
Kyle B. Wescoat....................... -0- N/A 8,334 26,166 N/A(5) 2,500(6)
</TABLE>
- ---------------
(1) Calculated by multiplying the number of shares by the difference between (i)
$12.50, the closing sales price of the Company's Common Stock on May 30,
1997, the last trading day of fiscal 1997, and (ii) the exercise prices of
those options which were in-the-money as of that date.
(2) An option for 100,000 of these shares was not in-the-money at May 30, 1997.
(footnotes continued on next page)
10
<PAGE> 13
(3) Mr. Lyons exercised this portion of an option and held the underlying
shares. Therefore, no dollar value was realized by him.
(4) An option for 10,000 of these shares was not in-the-money at May 30, 1997.
(5) This option was not in-the-money at May 30, 1997.
(6) Options for 24,166 of these shares were not in-the-money at May 30, 1997.
DEFERRED COMPENSATION PLAN
The Company has established a deferred compensation plan for the benefit of
Walter E. Schoenfeld, the Company's Chairman of the Board, and his spouse. Under
the plan, the Company has established a trust which will hold and disperse
assets pursuant to the terms of the plan. The Company will, for a period of five
years commencing as of July 1, 1996, deposit $200,000 per year with the trustee
of the trust. The trust funds will be invested by the trustee in accordance with
instructions given by the Company. Commencing in 2001 the trustee will pay Mr.
Schoenfeld $100,000 per year from the trust funds. Such payments will continue
for the remainder of Mr. Schoenfeld's life and then will be paid to his spouse,
if she survives him.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended (the "Securities
Act"), or the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
that might incorporate future filings, including this Proxy Statement in whole
or in part, the following report and the Performance Graph on page 14 shall not
be incorporated by reference into any such filings.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL
Decisions on compensation of the Company's executives generally are made by
the three-member Compensation Committee of the Board. Each member of the
Compensation Committee is an "outside director," as such term is defined under
the final regulations promulgated by the Internal Revenue Service under Section
162(m) of the Internal Revenue Code of 1986 (the "Code") (collectively, "IRC
Section 162(m)"). All decisions relating to the compensation of the Company's
executive officers, including decisions about grants or awards under the
Company's 1991 Long-Term Incentive Plan (the "Incentive Plan"), and the recently
adopted Vanstastic Employee Stock Option Plan, are made solely by the
Compensation Committee. Set forth below is a report submitted by the
Compensation Committee addressing the Company's compensation policies for fiscal
1997 as they affected the named executive officers.
COMPENSATION POLICIES TOWARD EXECUTIVE OFFICERS
The Compensation Committee's executive compensation policies are designed
to provide competitive levels of compensation that integrate pay with the
Company's annual and long-term performance goals, reward above-average corporate
performance, recognize individual initiative and achievements, and assist the
Company in attracting and retaining qualified executives. Target levels of the
executive officers' overall compensation are intended to be consistent with
others in the Company's industry, but are increasingly being weighted toward
programs contingent upon the Company's medium- to longer-term (generally three
to five years) performance. Certain key managers also are eligible for selection
as participants in the Company's executive compensation plans. As a result of
the increased emphasis on tying executive compensation to corporate performance,
in any particular year the Company's executives may be paid more or less than
the executives of the Company's competitors, depending upon the Company's
performance. It is the goal of the Compensation Committee, through the grant or
award of incentive compensation tied to corporate performance, to pay the
Company's executives and key managers more than the executives and key managers
of competitors if the Company performs well. Increased orientation of executive
compensation policies toward long-term performance has been accompanied by
increased utilization of objective performance criteria.
11
<PAGE> 14
The Compensation Committee also endorses the position that stock ownership
by management and stock-based performance compensation arrangements are
beneficial in aligning management's and stockholders' interests in the
enhancement of stockholder value. Thus, the Committee has also increasingly
utilized these elements in the Company's compensation packages for its executive
officers and for certain key managers.
RELATIONSHIP OF COMPANY PERFORMANCE TO EXECUTIVE COMPENSATION
Compensation paid to the named executive officers (other than Walter E.
Schoenfeld) and to the Company's other executive officers for fiscal 1997,
consisted of the following elements: (i) base salary; (ii) in some cases,
long-term incentive compensation in the form of awards of incentive stock
options under the Incentive Plan; and (iii) bonus compensation.
Base Salary. It is the policy of the Compensation Committee to approve only
cost-of-living adjustments to executive officer salaries unless an officer's
responsibilities have been significantly increased or such officer's performance
has been superior. In fiscal 1997, the base salary for Mr. Gosselin was set on
the basis of a cost-of-living adjustment equal to 3.5% of his individual base
salary in effect as of July 1, 1996. Generally, all other executive officers
received the same percentage increases. Mr. Wescoat's salary was not adjusted as
of July 1, 1996, since he joined the Company in February 1996. The base salaries
of Ms. Ratsula and Mr. Lyons were increased above the cost-of-living percentage
due to their superior performance in fiscal 1996.
Long-term Incentive Compensation. During fiscal 1997, the Committee
approved grants of incentive stock options under the Incentive Plan to each of
the named executive officers, other than Walter E. Schoenfeld, and to certain
key managers. The grants of options to Gary H. Schoenfeld were based on his
promotion to President in July 1996 and to Chief Executive Officer in February
1997, and the increased responsibilities relating thereto. The grants to Mr.
Wescoat were based on obligations to him under the terms of his employment
agreement, and his superior performance in fiscal 1997. The grants to Ms.
Ratsula were based on her superior performance during fiscal 1996, and the
increased responsibility she undertook when she became Vice President of Sales
in December 1996. The grant to Messrs. Gosselin and Lyons were based on their
superior performance in fiscal 1997. In determining the size and other terms of
the grants, the Compensation Committee considered the value of the services
provided by these officers, the value and number of such officers' previously
granted options, and the value and number of options previously granted to
officers of comparable levels. The exercise prices of the options were based on
the closing sales price of the Common Stock on the dates of grant.
Annual Bonus. Generally, it is the Company's policy that annual bonuses may
be earned by each named executive officer (other than Walter E. Schoenfeld),
each other executive officer of the Company, and certain key managers, under
Bonus Programs adopted each fiscal year by the Compensation Committee, solely on
the basis of (i) whether the Company achieves corporate performance targets, and
(ii) whether the executive or key manager achieves individual performance goals
and adequately controls his or her budget. Under the Fiscal 1997 Bonus Program,
the named executive officers, the other executive officers, and certain managers
were entitled to receive bonuses equal to a percentage of their base salaries if
certain objectives were met during the year. Such bonuses were dependent on the
Company meeting budgeted sales, gross margin and net income goals and the
satisfaction of individual performance objectives. Even though the Company met
its budgeted sales and net income goals, it did not meet all of its budgeted
objectives for fiscal 1997, therefore, full bonuses were not paid to any of the
named executive officers or any of the other executive officers of the Company.
CEO COMPENSATION
Under Gary H. Schoenfeld's employment agreement, as amended, his salary
compensation may not be set below $350,000 per year. When Mr. Schoenfeld was
appointed President in July 1996, his salary was increased to $295,000 to
reflect his increased responsibilities. When he was appointed Chief Executive
Officer in February 1997, his salary was increased to $350,000 to reflect the
increased responsibilities of that position. It is the intention of the
Committee to tie most of Mr. Schoenfeld's future annual compensation to the
12
<PAGE> 15
performance of the Company. In that regard, it is the intention of the Committee
to only increase Mr. Schoenfeld's future salary compensation in accordance with
cost of living standards, and to provide him with bonus opportunities equal to
100% of his salary if the Company meets sales, earnings per share, gross margin
and other targets set by the Committee at the beginning of each fiscal year.
CERTAIN TAX CONSIDERATIONS
IRC Section 162(m) limits the Company to a deduction for federal income tax
purposes of not more than $1 million of compensation paid to certain executive
officers in a taxable year. Compensation above $1 million may be deducted if it
is "performance-based compensation" within the meaning of the Code. Generally,
options granted (i) by a Compensation Committee consisting solely of outside
directors, (ii) under a Plan approved by stockholders, and (iii) at the fair
market value of the underlying securities, are considered "performance-based" if
the Plan contains a limitation on the number of shares which can be granted to
an individual in any one fiscal year.
The Compensation Committee concluded that it is in the best interests of
the Company to establish restrictions on the granting of options under the
Incentive Plan and the recently enacted Vanstastic Employee Stock Option Plan
(the "Vanstastic Plan") to assist in the qualification of compensation
recognized on the exercise of such options as "performance-based." As a result,
it adopted Amendment No. 3 to the Incentive Plan in July 1994, which limits the
aggregate number of shares which may be granted under the Plan to any one
individual to 300,000 in any one fiscal year. This Amendment was approved by the
Stockholders at the 1994 Annual Meeting of Stockholders. The Committee also
included a similar provision in the Vanstastic Plan. See "Proposal 3 -- Approval
of Vanstastic Employee Stock Option Plan." The Compensation Committee does not
believe that other components of the Company's annual cash compensation will be
likely to exceed $1 million in the foreseeable future and, therefore, concluded
that no further action, with respect to qualifying such compensation for
deductibility, was necessary at this time. The Compensation Committee will
continue to evaluate the advisability of qualifying the deductibility of such
compensation in the future.
Respectfully Submitted
by the Compensation Committee
Wilbur J. Fix
Philip H. Schaff, Jr.
Lisa M. Douglas
13
<PAGE> 16
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total stockholder
return among the Company, the NASDAQ Index and a Peer Group Index, from August
30, 1991 (the last business day of the first month after the date of the
Company's initial public offering) through May 30, 1997, the last trading day of
fiscal 1997. Note: the stock price performance shown on the graph is not
necessarily indicative of future price performance.
COMPARISON OF CUMULATIVE TOTAL SHAREHOLDER RETURN
AMONG VANS, INC., NASDAQ INDEX, AND SELECTED FOOTWEAR MANUFACTURERS
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) VANS, INC. NASDAQ PEER GROUP INDEX*
<S> <C> <C> <C>
05/29/92 100 100 100
08/31/92 54 96 89
11/30/92 87 112 115
02/28/93 57 115 115
05/28/93 49 120 128
08/31/93 42 127 133
11/30/93 36 130 140
02/28/94 35 136 161
05/31/94 29 127 149
08/31/94 40 132 170
11/30/94 36 130 160
02/28/95 40 138 161
05/31/95 27 151 171
08/31/95 41 178 202
11/30/95 43 186 243
02/29/96 78 193 214
05/31/96 119 219 249
08/30/96 90 201 257
11/29/96 92 227 274
02/28/97 81 230 340
05/30/97 75 246 369
</TABLE>
*The peer group index, based on revised SEC regulations, is weighted based on
beginning market capitalization and is comprised of the following nine footware
manufacturers: R.G. Barry Corp., Hyde Athletic Industries, Inc., K-Swiss, McRae
Industries Inc., Ryka Inc., Sam & Libby Inc., Wellco Enterprises, Inc., Weyco
Group Inc. and Wolverine World Wide Inc.
EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
The Company is a party to employment agreements with each of the named
executive officers.
Walter Schoenfeld's employment agreement was amended in fiscal 1997 to
provide for an annual salary of $288,000. The term of the agreement was extended
to May 31, 1999. Under the agreement, as amended, Mr. Schoenfeld is entitled to
participation in the Company's stock option and bonus plans, as well as any
medical or insurance plans established by the Company, and to reimbursement of
expenses incurred by him in the performance of his duties. The Company
reimburses Mr. Schoenfeld for the reasonable expenses of his spouse when she
accompanies him on business trips, and for the expense of maintaining
secretarial support in Seattle, where he lives, for purposes of conducting
Company business there.
Mr. Gosselin's agreement was amended in fiscal 1997 to be extended until
September 2000. His agreement entitles him to an annual salary of no less than
$176,000. Mr. Gosselin is also entitled to participation in the Company's stock
option and bonus plans, as well as any medical or insurance plans established by
the Company. Mr. Gosselin is entitled to a severance payment equal to one year's
salary if he is terminated without cause or resigns from the Company for a good
reason, or resigns or is terminated after a "Change in Control" of the Company
during the term of his agreement. The term "Change of Control" includes mergers
or acquisitions involving the Company and material changes in the composition of
the Board of Directors.
14
<PAGE> 17
The terms of Gary Schoenfeld's, Mr. Lyons', Mr. Wescoat's and Ms. Ratsula's
agreements are generally the same as Mr. Gosselin's, with the following
differences: Mr. Schoenfeld's minimum base compensation is $350,000, and the
Company leases an automobile for him; Mr. Lyons' minimum base compensation is
$160,000, and his severance payment is equal to six month's pay; Mr. Wescoat's
minimum base compensation is $160,000 and his severance payment is equal to six
months pay; and Ms. Ratsula's minimum base compensation is $200,000 and her
severance payment is equal to six months pay. Ms. Ratsula's agreement was
recently extended to June 2000, as well.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file with the SEC initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Officers, directors and greater than 10%
stockholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file. To the Company's knowledge, based solely
on a review of the copies of such reports furnished to the Company and written
representations that no other reports were required during the fiscal year ended
May 31, 1997, all Section 16(a) filing requirements applicable to its officers,
directors, and greater than 10% owners were compiled with, except that one
report for both George E. McCown and David E. De Leeuw, covering the same
transaction, was filed one month late.
CERTAIN TRANSACTIONS
Pursuant to a management agreement, MDC Management Company, the general
partner of MDC has provided management, consulting and financial services to the
Company for a fixed annual fee. Services rendered by MDC Management Company
include, but are not necessarily limited to, advice and assistance concerning
any and all aspects of the operation, planning and financing of the Company. The
agreement terminates on May 31, 1998 and provides for a fixed annual fee of
$350,000.
MDC is a significant stockholder of the Company and George E. McCown and
David E. De Leeuw, each of whom is a director and officer of the Company, are
general partners of MDC Management Company. Additionally, Gary H. Schoenfeld,
the Company's President and Chief Executive Officer and a director, is a former
partner of that firm. See "Security Ownership of Management and Certain
Beneficial Owners."
The Company is a party to a consulting agreement with Taryn McCown, the
daughter of George E. McCown, an officer and director of the Company. Pursuant
to the agreement, Ms. McCown acts as the coordinator for the Company's European
distributors in exchange for a monthly consulting fee. For the fiscal year ended
May 31, 1997, the Company paid Ms. McCown consulting fees of $60,000. The
agreement was extended for one year during fiscal 1997 and expires in October
1997.
PROPOSAL 2
CLASSIFIED BOARD OF DIRECTORS
PROPOSAL
The Company proposes to amend Section 1 of Article V of the Restated
Certificate of Incorporation to provide that the directors shall be divided into
three classes, designated Class I, Class II, and Class III. See "Proposal
1 -- Election of Directors -- Effect of Creation of Classified Board of
Directors" above, for the identity of the directors who will be designated as
Class I, Class II and Class III directors, and for their initial respective
terms of office, which will range from one to three years. At each annual
meeting of stockholders of the Company, commencing in 1998, successors of the
class of directors whose term expires at that annual meeting will be elected for
a three-year term. If the number of directors is changed, any increase or
decrease is to be apportioned among the Class III directors so as to maintain
the number or directors in each class as nearly equal as possible. Any director
elected to fill a vacancy or a newly created directorship resulting from an
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increase in the authorized number of directors shall hold office for a term
coinciding with the remaining term of the other directors of the same class. In
no case will a decrease in the number of directors shorten the term of any
incumbent director.
This proposal was previously submitted to the stockholders at the 1992
Annual Meeting. Although the proposal received approximately 61% of the votes
cast at that meeting, it failed to pass because it did not receive a majority of
the outstanding shares of Common Stock, as required by Delaware law. The Board
of Directors continues to believe that including a classified Board provision in
the Restated Certificate of Incorporation will be advantageous to the Company
and its stockholders because, by providing that directors will serve three-year
terms rather than one-year terms, it will enhance the likelihood of continuity
and stability in the composition of the Board of Directors and in the policies
formulated by the Board, and will attract more quality directors, who often
demand terms in office longer than one year. The Board of Directors believes
that this, in turn, will permit the Board more effectively to represent the
interests of all stockholders.
With a classified Board of Directors, it will generally take a majority
stockholder two annual meetings of stockholders to elect a majority of the Board
of Directors. As a result, a classified Board may discourage proxy contests for
the election of directors or purchases of a substantial block of stock because
its provisions could operate to prevent obtaining of control of the Board in a
relatively short period of time. Stockholders should also consider the factors
listed under "Proposal 4 -- Re-Ratification and Re-Approval of the Company's
Stockholder Rights Plan -- Existing Anti-Takeover Provisions."
The text of the proposed amendment to Section 1 of Article V of the
Restated Certificate of Incorporation is set forth in Annex I attached hereto
and incorporated herein by this reference. Stockholders are urged to carefully
read the proposed amendment.
REQUIRED VOTE
The affirmative vote of stockholders holding a majority of the Common Stock
is required to approve the proposed amendment. Pursuant to the Restated By-laws,
abstentions and broker non-votes will not be deemed votes cast.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
ADOPTION OF THE PROPOSED AMENDMENT TO SECTION 1 OF ARTICLE V.
PROPOSAL 3
APPROVAL OF VANSTASTIC EMPLOYEE STOCK OPTION PLAN
PROPOSAL
The Vanstastic Employee Stock Option Plan (the "Plan") was adopted by the
Board of Directors of the Company on July 22, 1997. The Plan will terminate by
its own terms in 2007.
The Plan was adopted to provide all full-time employees, and part-time
employees working more than 1,400 hours per fiscal year, an opportunity to own
Company stock and benefit from increases in the Company's stock price. The Board
believes that the Plan is an important tool to motivate employees to align their
interests with those of the Company and its existing stockholders, since
employees will only benefit from option grants if the Company's stock price
continues to increase.
Options will be granted annually. Options granted under the Plan may be
either incentive stock options, within the meaning of Section 422 of the Code,
or non-statutory options. The Plan is not a qualified deferred compensation plan
under Code Section 401(a) and is not subject to the provisions of the Employee
Retirement Income Security Act of 1974.
A total of 400,000 shares have been reserved for issuance under the Plan.
No options have been granted thereunder.
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SUMMARY OF THE PLAN
Administration; Limits on Grants
The Plan is administered by the Compensation Committee, which currently
consists of three members of the Board, all of whom currently qualify as outside
directors under IRC Section 162(m). The Compensation Committee has sole
discretion to interpret any provision of the Plan. This determination is final
and conclusive. Members of the Compensation Committee receive no cash
compensation for administering the Plan.
The Plan limits the discretion of the Compensation Committee in granting
stock options to employees. This limitation is intended to preserve the
Company's ability to deduct for federal income tax purposes the compensation
expense relating to stock options granted to certain executive officers under
the Plan. This limitation provides that an employee may be granted, in any one
fiscal year, no more than 150,000 shares through stock options under the Plan.
Without this limitation, new IRC Section 162(m) might not allow the Company to
deduct such compensation expense. See "Tax Information."
Eligibility
The Plan provides that options may be granted to the Company's full-time
employees, Company part-time employees working at least 1,400 hours per fiscal
year, and to the full-time employees of the Company's majority-owned
subsidiaries. The Company has approximately 1,270 employees, of whom
approximately 700 are currently eligible to participate in the Plan.
Terms of Options
Each option granted under the Plan is evidenced by a written stock option
agreement between the Company and the optionee and is subject to the following
additional terms and conditions:
(a) Duration and Termination of Options. Options granted under the
Plan have a maximum term of ten years from the date of grant. An incentive
stock option granted to a person who, immediately before the grant of such
option, owns more than 10% of the voting power or value of all classes of
stock of the Company, may not have a term of more than five years. No
option may be exercised after the expiration of its term.
(b) Amount of Grant. The Compensation Committee has the sole
discretion to determine the amount of shares subject to each option. The
Committee will use the following guidelines in determining such amounts:
(i) 20% of the salary level of each executive officer; (ii) 15% of the
salary level of each department head other than an executive officer; and
(iii) 10% of the salary level of all other employees.
(c) Exercise of the Option. Each option granted under the Plan will
vest over a five-year period. Options are only exercisable for vested
portions. Options are not exercisable for a fraction of a share. An option
granted under the Plan is exercised by giving written notice of exercise to
the Company, specifying the number of shares of Common Stock to be
purchased and tendering payment of the purchase price to the Company.
Payment for shares issued upon exercise of an option may, depending on the
terms of the option agreement, consist of cash, check, promissory notes,
surrender of shares of Common Stock owned by the optionee or such other
consideration as determined by the Compensation Committee.
(d) Exercise Price. The exercise price of options granted under the
Incentive Plan is determined by the Compensation Committee. The exercise
price of options may not be less than 100% of the fair market value of the
Common Stock on the date the option is granted. The Common Stock is
currently traded on the NASDAQ National Market System. It is the policy of
the Compensation Committee that, while the Company's stock is traded on the
NASDAQ National Market System, the fair market value of the Common Stock is
the reported closing sales price. If the Common Stock is listed on a stock
exchange, the fair market value will be the closing sales price on such
exchange.
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(e) Termination of Employment. If an optionee's employment by the
Company is terminated, the option is exercisable for 90 days from the date
of termination to the extent vested on the date of termination. The option
cannot be exercised beyond the expiration date of the option.
(f) Death or Permanent Disability. If an optionee dies or becomes
permanently disabled while employed by the Company, the option may be
exercised by the optionee's legal representative within 18 months after the
date of death or disability, to the extent exercisable on such date.
However, the option cannot be exercised beyond the expiration date of the
option.
(g) Non-transferability of Options. An option is not transferable by
the optionee, other than by will or the laws of descent and distribution,
or if the transfer is to a trust for the benefit of the optionee or his or
her immediate family. During the optionee's lifetime, only the optionee may
exercise the options.
(h) Other Provisions. The option agreement may contain other
provisions not inconsistent with the Plan as determined by the Compensation
Committee.
CHANGES IN CAPITALIZATION
In the event of changes in the Common Stock by reason of stock dividends,
split-ups or combinations of shares, reclassifications, recapitalizations,
mergers, consolidations, reorganizations or liquidations, the Compensation
Committee will adjust the exercise price and the number and class of shares
subject to each option as the Compensation Committee deems appropriate. Such
adjustment is final and conclusive.
REPORTS
The Company will provide optionees with all required annual reports
regarding options granted under the Plan and will give notice to participants of
the grant of options. In addition, the Company will respond to reasonable
requests for information regarding options on an informal basis from time to
time.
AMENDMENT AND TERMINATION
The Board may, at any time, amend or terminate the Plan without approval of
the stockholders, unless such amendment: (i) increases the number of shares
under the Plan; (ii) modifies the requirements for eligibility under the Plan;
or (iii) modifies the Plan in any other way that requires stockholder approval
under Rule 16b-3 under the Exchange Act or Section 422(b) of the Code. Any
amendment or termination of the Plan is subject to the rights of optionees under
agreements entered into prior to such amendment or termination.
TAX INFORMATION
The Omnibus Budget Reconciliation Act of 1993 added IRC Section 162(m) to
the Code. Under IRC Section 162(m), the allowable deduction for compensation
paid or accrued with respect to the chief executive officer and each of the four
most highly compensated executive officers of a publicly held corporation is
limited to no more than $1,000,000 per year for fiscal years beginning on or
after January 1, 1994. To enable the Company to preserve the benefit of
receiving a tax deduction for the full amount of income recognized by the
Company's executive officers upon exercise of stock options, the Board of
Directors included a provision in the Plan to limit the number of shares that
may be granted to an employee in any one fiscal year. See "-- Administration;
Limits on Grants."
The following is a brief summary of the federal income tax consequences of
transactions made under the Plan based on federal income tax laws in effect as
of August 25, 1997. This summary is not intended to be
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exhaustive and does not discuss the tax consequences of a participant's death or
provisions of the income tax laws of any municipality, state or foreign country
in which an optionee may reside.
INCENTIVE STOCK OPTIONS
No taxable income is recognized by the optionee upon grant or exercise of
an incentive stock option (unless the alternative minimum tax rules apply). If
Common Stock is issued to an optionee pursuant to the exercise of an incentive
stock option, and if no disqualifying disposition of such shares is made by such
optionee within two years after the date of grant or within one year after the
transfer of such shares to such optionee, then (i) upon the resale of such
shares, any amount realized in excess of the option exercise price will be
treated as long-term capital gain and any loss sustained will be long-term
capital loss, and (ii) no deduction will be allowed to the Company for federal
income tax purposes. The exercise of an incentive stock option may result in
alternative minimum tax liability for the optionee.
If Common Stock acquired upon the exercise of an incentive stock option is
disposed of before the expiration of either holding period described above,
generally (i) the optionee will recognize income in the year of disposition in
an amount equal to the excess (if any) of the fair market value of the shares at
exercise (or, if less, the amount realized on the disposition of the shares)
over the option exercise price paid for such shares, and (ii) the Company is
entitled to a tax deduction in the same amount. Any further gain or loss
realized by the optionee will be taxed as short-term or long-term capital gain
or loss, as the case may be, and will not result in any deduction by the
Company. Different rules may apply if shares are purchased by any optionee who
is subject to Section 16(b) of the Exchange Act and the optionee subsequently
disposes of such shares prior to the expiration of statutory holding periods.
NON-STATUTORY STOCK OPTIONS
Generally, with respect to non-statutory stock options: (i) no income is
recognized by the optionee at the time the option is granted; (ii) at exercise,
ordinary income is recognized by the optionee in an amount equal to the
difference between the option exercise price paid for the shares and the fair
market value of the shares on the date of exercise, and the Company is entitled
to a tax deduction in the same amount; and (iii) at disposition, any gain or
loss is treated as capital gain or loss if the shares are held for no less than
12 months. In the case of an optionee who is also an employee, any income
recognized upon exercise of a non-statutory stock option will constitute wages
for which withholding will be required.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of the
Common Stock voting in person or by proxy on this proposal at the Annual Meeting
is required to approve the Plan. Pursuant to the Restated By-laws, abstentions
and broker non-votes will not be deemed votes cast.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU APPROVE THE PLAN.
PROPOSAL 4
RE-RATIFICATION AND RE-APPROVAL OF THE COMPANY'S
STOCKHOLDER RIGHTS PLAN
On February 22, 1994, the Board of Directors of the Company unanimously
adopted a Stockholder Rights Plan (the "Rights Plan"), pursuant to which it
declared a dividend distribution of one preferred stock purchase right (a
"Right") for each outstanding share of the Common Stock. The State of Wisconsin
Investment Board, a former stockholder, asked the Company, and the Company
agreed, to submit the Rights Plan to a non-binding vote of the stockholders at
the 1994 Annual Meeting and every three years thereafter. The Rights Plan was
ratified and approved by approximately 66% of the shares voting at the 1994
Annual Meeting. On December 17, 1996, the Rights Plan was unanimously extended
until February 22, 2007 by the Board of Directors and the purchase price of the
Rights was set at $65.00.
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GENERAL
The Rights dividend was payable on March 8, 1994 (the "Rights Record
Date"), to the holders of record of shares of Common Stock on that date. Each
Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of the Company's Series A Junior Participating
Preferred Stock, par value $.001 per share (the "Series A Preferred Stock"), at
a price of $65.00 per one one-hundredth of a share (the "Purchase Price"),
subject to adjustment. A description of the terms and conditions of the Rights
are set forth in a Rights Agreement dated as of February 22, 1994, as amended on
December 17, 1996 (collectively, the "Rights Agreement"), between the Company
and ChaseMellon Shareholder Services, L.L.C., successor to Chemical Trust
Company of California, as Rights Agent (the "Rights Agent").
DISTRIBUTION DATE; TRANSFER OF SHARES OF COMMON STOCK
Until the earlier to occur of (i) the 10th business day following the date
(the "Stock Acquisition Date") of a public announcement that a person or a group
of affiliated or associated persons (an "Acquiring Person") has acquired
beneficial ownership of 15% or more of the outstanding shares of Common Stock,
or (ii) the 10th business day (or such later date as may be determined by action
of the Board of Directors prior to such time as a person or a group of
affiliated or associated persons becomes an Acquiring Person) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in the person or group
making the offer becoming an Acquiring Person (the earlier of the dates
described in clauses (i) and (ii) being called the "Distribution Date"), the
Rights will be evidenced, with respect to all Common Stock certificates
outstanding as of the Rights Record Date, by such Common Stock certificates, to
each of which certificates a copy of a Summary of Rights shall be attached. The
Rights Agreement provides that until the Distribution Date (or the earlier
redemption or expiration of the Rights), the Rights will be transferred with and
only with the shares of Common Stock. Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Stock certificates issued
after the Rights Record Date, either upon transfer of outstanding shares of
Common Stock or the original issuance of additional shares of Common Stock, will
bear a legend incorporating the Rights Agreement by reference, and the surrender
for transfer of any certificate evidencing shares of Common Stock outstanding as
of the Rights Record Date (even without such legend being attached to that
certificate) also will constitute transfer of the Rights associated with the
shares of Common Stock evidenced by that certificate. As soon as practicable
following the Distribution Date, separate certificates evidencing the Rights
("Rights Certificates") will be mailed to holders of record of the shares of
Common Stock as of the close of business on the Distribution Date, and
thereafter such separate Right Certificates alone will evidence the Rights.
A Right (and Rights Certificate) also will be issued in respect of, and
concurrently with, each share of Common Stock issued after the Distribution Date
and prior to the earlier of the redemption or expiration of the Rights pursuant
to the exercise of any option, warrant or other purchase right (other than the
Rights) or to the conversion or exchange of any convertible or exchangeable
security, which purchase right, option or warrant was issued by the Company
prior to the Distribution Date, unless the Board of Directors expressly provides
to the contrary at the time of issuance of the purchase rights or convertible or
exchangeable securities.
None of the Company, any subsidiary of the Company, any employee benefit
plan of the Company or any of its subsidiaries or any person or entity holding
shares of Common Stock for or pursuant to the terms of any such plan will
constitute an "Acquiring Person," and McCown De Leeuw & Co. (which company as of
the original date of the Rights Agreement beneficially owned approximately 19%
of the outstanding shares of Common Stock) will not be deemed an Acquiring
Person unless and until McCown De Leeuw & Co. purchases or otherwise becomes (as
a result of actions taken by McCown De Leeuw or its affiliates and associates),
the beneficial owner of additional shares of Common Stock which thereafter makes
McCown De Leeuw & Co. the beneficial owner of 25% or more of the shares of
Common Stock then outstanding.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on February 22, 2007 (the "Scheduled Expiration Date"), unless prior
thereto the Distribution Date occurs or unless the Scheduled
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Expiration Date is extended or the Rights are earlier redeemed or exchanged by
the Company, in each case as described below. The date on which the Rights
actually expire is referred to herein as the "Expiration Date."
SERIES A PREFERRED STOCK
Each share of Series A Preferred Stock purchasable upon exercise of the
Rights will be entitled to a minimum preferential quarterly dividend payment of
$1.00 per share, but will be entitled to an aggregate dividend of 100 times the
dividend declared per share of Common Stock. In the event the Company's assets
are liquidated, the holders of the shares of Series A Preferred Stock will be
entitled to an aggregate payment of 100 times the payment made per share of
Common Stock. Each share of Series A Preferred Stock will have 100 votes, voting
together with the shares of Common Stock. Finally, in the event of any merger,
consolidation or other transaction in which shares of Common Stock are
exchanged, each share of Series A Preferred Stock will be entitled to receive
100 times the amount received per share of Common Stock. All of the rights
described in this paragraph are protected by customary anti-dilution provisions,
and shares of Series A Preferred Stock will not be redeemable.
Because of the nature of the dividend, liquidation and voting rights of the
shares of Series A Preferred Stock, the value of the one one-hundredth share of
Series A Preferred Stock purchasable upon exercise of a Right should approximate
the value of one share of Common Stock.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
EXERCISE OF RIGHTS FOR COMMON STOCK
In the event that (i) a person or group of affiliated or associated persons
becomes an Acquiring Person, other than pursuant to a tender or exchange offer
for all then outstanding shares of Common Stock, which offer is determined by a
majority of the Disinterested Directors (as hereinafter defined) who are not
then officers of the Company, to be at a price that is fair to, and otherwise in
the best interests of, the Company and its stockholders, (ii) the Company is the
surviving corporation in a merger with an Acquiring Person and the outstanding
shares of Common Stock are not changed or exchanged, (iii) an Acquiring Person
engages in certain "self-dealing" transactions specified in the Rights
Agreement, or (iv) during such time as there is an Acquiring Person, an event
occurs (e.g., a reverse stock split) that results in that Acquiring Person's
ownership interest in the Company being increased by more than 1%, proper
provision will be made so that at any time following the Distribution Date, each
holder of record of a Right (other than Rights that are, or under certain
circumstances specified in the Rights Agreement were beneficially owned by the
Acquiring Person, which Rights have become null and void) will have the right to
receive, upon exercise of that Right, that number of shares of Common Stock (or
in certain circumstances cash, property or other securities of the Company)
having a value equal to two times the Purchase Price then in effect. Under no
circumstances may a Right be exercised following the occurrence of a transaction
described in this paragraph prior to the expiration of the Company's right of
redemption.
EXERCISE OF RIGHTS FOR SHARES OF THE ACQUIRING COMPANY
In the event that, at any time after a person or a group of affiliated or
associated persons have become an Acquiring Person, (i) the Company is acquired
in a merger or other business combination transaction (other than a merger
described in the immediately preceding paragraph or (under certain
circumstances) a merger that follows an offer described in the immediately
preceding paragraph), or (ii) 50% or more of the Company's consolidated assets
or earning power is sold or otherwise transferred (in one transaction or a
series of transactions other than in the ordinary course of business), proper
provision will be made so that each holder of a Right (other than Rights that
previously have been voided as set forth above) thereafter will have the right
to receive, upon exercise of that Right, that number of shares of Common Stock
of the acquiring company that at the time of the transaction have an aggregate
value equal to two times the Purchase Price then in effect.
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ADJUSTMENTS TO PURCHASE PRICE
The Purchase Price payable, and the number of shares of Series A Preferred
Stock (or other securities or property) issuable, upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution (i) in the event
of a stock dividend on, or a subdivision, combination or reclassification of,
the shares of the Series A Preferred Stock, (ii) upon the grant to holders of
shares of Series A Preferred Stock of certain options, warrants or rights to
subscribe for or purchase shares of Series A Preferred Stock at a price (or
securities convertible into or exchangeable for shares of Series A Preferred
Stock with a conversion or exchange price) less than the current market price of
the shares of Series A Preferred Stock, or (iii) upon the distribution to
holders of shares of the Series A Preferred Stock of evidences of indebtedness
or assets (excluding cash dividends paid out of earnings or retained earnings or
dividends paid in shares of Series A Preferred Stock) or of options,
subscription rights or warrants (other than those referred to above). The number
of outstanding rights and the number of one one-hundredths of a share of Series
A Preferred Stock issuable upon exercise of each Right are also subject to
adjustment in the event of a stock dividend on the shares of Common Stock, or a
subdivision, combination or reclassification of the shares of Common Stock,
occurring prior to the Distribution Date.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
the then current Purchase Price. No fractional share of Series A Preferred Stock
will be issued (other than fractions that are integral multiples of one
one-hundredth of a share, which may, at the election of the Company, be
evidenced by depository receipts), and in lieu thereof, a payment in cash will
be made based on the market price of the shares of Series A Preferred Stock on
the last trading day prior to the date of exercise.
REDEMPTION AND EXCHANGE OF RIGHTS
At any time prior to the earlier of (i) the 10th business day after the
Stock Acquisition Date, or (ii) the Expiration Date, the Company may redeem the
Rights, in whole but not in part, at a price (the "Redemption Price") of $.01
per Right, appropriately adjusted to reflect any dividend payable in shares of
Series A Preferred Stock, any subdivision or combination of the shares of Series
A Preferred Stock or any similar transaction occurring after the Rights Record
Date; provided, however, that under certain circumstances specified in the
Rights Agreement, the Rights may not be redeemed unless there are Disinterested
Directors then in office and the redemption is approved by a majority of such
Disinterested Directors. As used in the Rights Agreement, the term
"Disinterested Director" means any member of the Company's Board of Directors
who is not affiliated with an Acquiring Person (or any affiliate or associate of
an Acquiring Person) and was a member of the Company's Board of Directors prior
to the time that an Acquiring Person became such and any successor of a
Disinterested Director who is unaffiliated with an Acquiring Person or any
affiliate or associate thereof and is recommended to succeed a Disinterested
Director by a majority of the Disinterested Directors then on the Company's
Board of Directors. The redemption of the Rights may be made effective at such
time, on such basis and with such conditions as the Board of Directors in its
sole discretion may establish. After the redemption period has expired, the
Company's right of redemption may be reinstated under the circumstances
specified in the Rights Agreement, which include the concurrence of a majority
of the Disinterested Directors, if an Acquiring Person shall have reduced to 15%
or less the number of outstanding shares of Common Stock beneficially owned by
that Acquiring Person in a transaction or series of transactions not involving
the Company and not constituting specified transactions. Immediately upon any
redemption of the Rights (which action will be announced by the Company), the
right to exercise the Rights will terminate, and the only right of the holders
of Rights will be to receive the Redemption Price.
At any time after a person or group becomes an Acquiring Person, and prior
to the acquisition by that person or group of 50% or more of the outstanding
shares of Common Stock, the Board of Directors of the Company may exchange the
Rights (other than Rights owned by the Acquiring Person, which Rights will have
become void), in whole or in part, at an exchange ratio of one share of Common
Stock or one one-hundredth of a share of Series A Preferred Stock (or of another
class or series of the Company's Preferred Stock having equivalent rights,
preferences and privileges) per Right, subject to adjustment as provided in the
Rights Agreement.
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AMENDMENTS TO TERMS OF THE RIGHTS
Prior to the Distribution Date, the terms of the Rights may be amended or
supplemented by the Board of Directors of the Company in any manner.
After the Distribution Date, the provisions of the Rights Agreement may be
amended or supplemented by the Board of Directors, without the consent of the
holders of the Rights, in order to cure any ambiguity, inconsistency or defect
or to make other changes that do not adversely affect the interests of the
holders of the Rights (other than any Acquiring Person); provided, however, that
the Rights Agreement cannot be amended after the Distribution Date (i) to
lengthen any time period relating to when the Rights may be redeemed if at such
time the Rights are not then redeemable, or (ii) to lengthen any other time
period unless (1) there is then in office at least one Disinterested Director
and such lengthening is approved by a majority of the Disinterested Directors
then in office, and (2) such lengthening is for the purpose of protecting,
enhancing or clarifying the rights of, and/or the benefits to, the holders of
record of the Rights (other than an Acquiring Person or an Affiliate or
Associate of an Acquiring Person). In addition, (i) from and after the
Distribution Date, no supplement or amendment may be made to the Rights
Agreement which supplement or amendment changes the Redemption Price, the
Purchase Price or the number or kind of shares or other assets for which a Right
is exercisable; (ii) the duration of the Rights may not be shortened without the
written consent of the holders of record thereof (other than by redemption); and
(iii) no amendment shall be made to those provisions of the Rights Agreement
that require, under certain circumstances specified in the Rights Agreement,
that any redemption of the Rights be authorized and approved by a majority of
the Disinterested Directors then in office, unless such amendment is approved by
a majority of the Disinterested Directors then in office.
EFFECT AND ADVANTAGES OF THE RIGHTS PLAN
The Rights Plan will not prevent a bidder from making a tender offer for
the Company, but may result in a higher price for all the stockholders if an
offer is made. The Rights Plan is a short-term plan designed to prevent an
acquirer from gaining control of the Company without offering all stockholders
what the Board believes to be the full value of their investment. In particular,
the Rights Plan is designed to prevent coercive or abusive takeover practices,
such as two tiered, partial or "bust-up" tender offers and market sweeps. The
basic objective of the Rights Plan is to encourage prospective acquirers to come
forward with a sound offer at the earliest possible time and to negotiate with
the Board. It is well recognized that the price an acquirer is ultimately
willing to pay for a company's stock can far exceed the initial offer,
especially when the acquirer must negotiate with the target's board of
directors.
The Board believes that adoption of the Rights Plan, and its subsequent
extension and amendment, was an essential exercise of its fiduciary obligations
to the stockholders. Such exercises of a Board's authority have been
consistently supported by Delaware case law. The Delaware Supreme Court has held
that adoption of a rights plan is a valid exercise of a board's business
judgment. In addition, the Delaware courts, as well as courts in many other
jurisdictions, have recognized the appropriateness of rights plans and their
value when used in a manner consistent with the fiduciary obligations of a board
of directors. The Rights Plan was not adopted or amended and extended in
response to any threatened or perceived takeover threat, and the Company has no
knowledge of such a threat as of the date of this Proxy Statement. The Rights
Plan is not part of a plan by management to adopt a series of anti-takeover
measures. However, the Company already has in place a number of Charter or
By-law provisions which may be deemed to render more difficult, or discourage,
takeovers or changes in control of the Company. See "-- Existing Anti-Takeover
Provisions." The Company also is proposing that the stockholders adopt and
approve an amendment to the Restated Certificate of Incorporation creating a
classified Board of Directors, an action which could discourage proxy contests
for the election of directors. See "Proposal 2 -- Classified Board of
Directors." At present, management does not intend to propose other
anti-takeover measures in future proxy solicitations.
23
<PAGE> 26
DISADVANTAGES OF THE RIGHTS PLAN
The Rights Plan could have the effect of deterring tender offers or
takeover attempts, even though such an offer or attempt might appear to
stockholders to be beneficial. In addition, it has been argued that rights
plans, in general, have the effect of entrenching management by discouraging
certain takeovers which are not favored by management.
EXISTING ANTI-TAKEOVER PROVISIONS
As discussed more fully below, the following factors, and the potential for
each to have an anti-takeover effect, should be reviewed in evaluating this
proposal.
Preferred Stock. The Company's Restated Certificate of Incorporation
provides for, among other things, the issuance of up to 5,000,000 shares of
Preferred Stock, $.001 par value (the "Preferred Stock"). The Preferred Stock
may be issued from time to time at the discretion of the Board of Directors
without stockholder approval. The Board of Directors is authorized to issue the
Preferred Stock in different series and, with respect to each series, to
determine the dividend rate, the redemption provisions, conversion provisions,
liquidation preference, and other rights and privileges not in conflict with the
Restated Certificate of Incorporation. While issuance of Preferred Stock could
provide needed flexibility in connection with possible acquisitions and other
corporate purposes, such issuance could also make it more difficult for a third
party to acquire a majority of the outstanding voting stock of the Company and
deter an attempt to gain control of the Company. In addition, the Board of
Directors, without stockholder approval, can issue shares of Preferred Stock
with voting and conversion rights, which could adversely affect the voting power
and other rights of the holders of Common Stock.
Section 203 of the Delaware General Corporation Law. The Company is subject
to the provisions of Section 203 of the Delaware General Corporation Law. Such
section provides, with certain exceptions, that a Delaware corporation may not
engage in any of a broad range of business combinations with a person or
affiliate, or associate of such person, who is an "interested stockholder" for a
period of three years from the date that such person became an interested
stockholder unless: (i) the transaction resulting in a person becoming an
interested stockholder, or the business combination, is approved by the board of
directors of the corporation before the person becomes an interested
stockholder; (ii) the interested stockholder acquires 85% or more of the
outstanding voting stock of the corporation in the same transaction that makes
it an interested stockholder (excluding shares owned by persons who are both
officers and directors of the corporation, and shares held by certain employee
stock ownership plans); or (iii) on or after the date the person becomes an
interested stockholder, the business combination is approved by the
corporation's board of directors and by the holders of at least 66.7% of the
corporation's outstanding voting stock at an annual or special meeting,
excluding shares owned by the interested stockholder. Under Section 203, an
"interested stockholder" is defined as any person that is (i) the owner of 15%
or more of the outstanding voting stock of the corporation, or (ii) an affiliate
or associate of the corporation which was the owner of 15% or more of the
outstanding voting stock of the corporation at any time within the three-year
period immediately prior to the date on which it is sought to be determined
whether such person is an interested stockholder.
Change-in-Control Arrangements. The Company is a party to employment
agreements with all of its executive officers. Each such agreement contains a
provision which states that, in the event an officer is terminated during the
six-month period following a change-in-control of the Company, the employee
would be entitled to a severance payment equal to six months compensation,
although two such agreements provide for severance payments equal to twelve
months compensation, and one provides for nine months of severance payments. The
purposes of such provisions are to (i) provide an incentive of stable employment
to the executive officers; (ii) encourage the executive officers to focus on the
business in the event of a change-in-control; and (iii) provide an incentive to
the executive officers to be objective in evaluating a proposed change-
in-control.
No Stockholder Action by Written Consent. The Restated Certificate of
Incorporation provides that stockholder action may be taken only at an annual or
special meeting and not by written consent.
24
<PAGE> 27
REQUIRED VOTE
The vote of stockholders on this proposal is not binding on the Board of
Directors. However, if stockholders holding a majority of the total votes
eligible to be cast at the Annual Meeting vote against the proposal, the Board
will consider redeeming the Rights. Pursuant to the Restated By-laws,
abstentions and broker non-votes will not be deemed votes cast. The result of
the vote of the stockholders will not limit or otherwise affect the power of the
Board to amend or supplement the Rights Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU RE-RATIFY AND RE-APPROVE THE
RIGHTS PLAN.
PROPOSAL 5
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
GENERAL
KPMG Peat Marwick LLP have been the independent auditors of the Company
since November 1, 1990 and, upon recommendation of the Audit Committee, have
been appointed by the Board of Directors as the auditors for fiscal 1998. The
stockholders of the Company are requested to ratify this appointment. A
representative of KPMG Peat Marwick LLP is expected to be present at the Annual
Meeting with the opportunity to make a statement if he or she so desires and to
respond to appropriate questions.
REQUIRED VOTE
The vote required to ratify the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors is an affirmative vote by stockholders holding a
majority of the total votes cast in person or by proxy at the Annual Meeting.
Pursuant to the Restated By-laws, abstentions and broker non-votes will not be
deemed votes cast.
Delaware law does not require the Company to submit the Board's appointment
of the Company's independent auditors to the stockholders for ratification;
however, the Company has chosen to do so in order to give stockholders an
opportunity to express their views on the Company's independent auditors. If
less than the vote required to ratify KPMG Peat Marwick LLP is received, the
Board and the Audit Committee will decide whether to select other independent
auditors for fiscal 1998.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU RATIFY THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR
FISCAL 1998.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
With the exception of Proposals 2, 3 and 4 described herein, none of the
directors or executive officers of the Company, none of the persons who have
been directors or executive officers of the Company since May 31, 1996, no
nominee for the Board of Directors and no associate of any of the foregoing, has
any material interest, direct or indirect, by way of beneficial ownership of
securities or otherwise, in any matter to be acted upon at the Annual Meeting.
With respect to Proposal 2, directors could be deemed to have an interest in the
Proposal based on the argument that classified Boards of Directors make it more
difficult for the removal of directors by stockholders. With respect to Proposal
3, officers could be deemed to have an interest in the granting of options to
them under the Plan. With respect to Proposal 4, directors and officers of the
Company could be deemed to have an interest in such Proposal based on the
argument that stockholder rights plans make it more difficult for a hostile
takeover to be completed when it is opposed by management.
25
<PAGE> 28
STOCKHOLDER PROPOSALS
Any stockholder of the Company wishing to have a proposal considered for
inclusion in the Company's 1998 proxy solicitation materials must set forth such
proposal in writing and file it with the Corporate Secretary of the Company on
or before June 20, 1998. The Board of Directors of the Company will review any
stockholder proposals which are filed as required and will determine whether
such proposals meet applicable criteria for inclusion in its 1998 proxy
solicitation materials.
OTHER REPORTS
The Company's Annual Report to Stockholders for the fiscal year ended May
31, 1997 has been distributed to stockholders with this Proxy Statement. Upon
written request of any stockholder solicited hereby, the Company will provide,
free of charge, a copy of its Annual Report on Form 10-K (excluding exhibits)
for the fiscal year ended May 31, 1997, which has been filed with the Securities
and Exchange Commission. Requests should be directed to Craig E. Gosselin, Vice
President, General Counsel, and Corporate Secretary, Vans, Inc., 15700 Shoemaker
Avenue, Santa Fe Springs, California 90670.
By Order of the Board of Directors,
/s/ CRAIG E. GOSSELIN
------------------------------------
Craig E. Gosselin
Vice President, General Counsel,
and Corporate Secretary
26
<PAGE> 29
ANNEX I
PROPOSED AMENDED SECTION 1 OF ARTICLE V
OF THE RESTATED CERTIFICATE OF INCORPORATION
Section 1 of Article V of the Restated Certificate of Incorporation is
proposed to be amended as follows:
"1. The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors, the exact number of
directors to be determined from time to time by resolution adopted by the
Board of Directors. The directors shall be divided into three classes,
designated Class I, Class II and Class III. Each class shall consist, as
nearly as may be possible, of one-third of the total number of directors
constituting the entire Board of Directors. The term of the initial Class I
directors shall terminate on the date of the 1998 annual meeting of
stockholders; the term of the initial Class II directors shall terminate on
the date of the 1999 annual meeting of stockholders; and the term of the
initial Class III directors shall terminate on the date of the 2000 annual
meeting of stockholders. At each annual meeting of stockholders beginning
in 1998, successors to the class of directors whose term expires at that
annual meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among
the classes so as to maintain the number or directors in each class as
nearly equal as possible, and any additional directors of any class elected
to fill a vacancy resulting from an increase in such class shall hold
office for a term that shall coincide with the remaining term of that
class, but in no case will a decrease in the number of directors shorten
the term of any incumbent director. A director shall hold office until the
annual meeting for the year in which his term expires and until his
successor shall be elected and shall qualify, subject, however, to prior
death, resignation, retirement, disqualification, or removal from office.
Any vacancy on the Board of Directors, howsoever resulting, may be filled
by a majority of the directors then in office, even if less than a quorum,
or by a sole remaining director. Any director elected to fill a vacancy
shall hold office for a term that shall coincide with the term of the class
to which such director shall have been elected."
27
<PAGE> 30
FORM
OF
PROXY
VANS, INC.
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 22, 1997
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned stockholder of VANS, INC., a Delaware corporation (the
"Company"), hereby acknowledges receipt of the Proxy Statement and the Notice of
the Annual Meeting of Stockholders of the Company (the "Annual Meeting") to be
held on Wednesday, October 22, 1997, at 10:00 a.m., Pacific Time, at the
Sheraton Cerritos Hotel, 12725 Center Court Drive, Cerritos, California, and
hereby further revokes all previous proxies and appoints Gary H. Schoenfeld and
Craig E. Gosselin and each of them, as proxy of the undersigned, with full power
of substitution for and in the name of the undersigned, at the Annual Meeting
and any adjournments thereof with the same effect as if the undersigned were
present, for the following purposes:
(Continued and to be signed on reverse side)
<PAGE> 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Please
mark your
votes as [X]
indicated
in this
example
AUTHORITY GRANTED AUTHORITY
to vote for all WITHHELD
nominees listed to vote
except as for all FOR AGAINST ABSTAIN
indicated to the nominees
contrary below listed.
(1) The election of the following [ ] [ ] (2) An amendment to the Company's [ ] [ ] [ ]
persons as directors of the Restated Certificate of
Company to serve until the next Incorporation to provide for a
Annual Meeting of Stockholders classified Board of Directors
and until their respective
successors are elected and
qualified:
Walter E. Schoenfeld Gary H. Schoenfeld (3) Adoption of the Vanstastic [ ] [ ] [ ]
George E. McCown David E. De Leeuw Employee Stock Option Plan
Philip H. Schaff, Jr. Wilbur J. Fix
James R. Sulat Kathleen M. Gardarian
Lisa M. Douglas
(INSTRUCTION: To vote against (4) A non-binding resolution to [ ] [ ] [ ]
any one nominee, write that re-ratify and re-approve the
nominee's name in the space Company's Stockholder Rights
provided below.) Plan
(5) The ratification of the [ ] [ ] [ ]
_________________________________________ appointment of KPMG Peat
Marwick LLP as the independent
auditors of the Company for
fiscal 1998.
</TABLE>
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS YOU HAVE
INDICATED ABOVE. IF NO INDICATION HAS BEEN MADE, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE ABOVE NOMINEES AND
IN FAVOR OF THE ABOVE PROPOSALS, AND, AS THE PROXY DEEMS ADVISABLE,
ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL
MEETING.
Signature(s)_________________________________________Dated:_________________1997
Sign exactly as your name appears on your stock certificate. When signing as
attorney, executor, administrator, trustee or guardian, please give full title.
If more than one trustee, all should sign. All joint owners should sign. If a
corporation, sign in full corporation name by resident or other authorized
officer. If a partnership, sign in partnership name by authorized person.
Persons signing in a fiduciary capacity should indicate their full title in such
capacity.
