<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
NAUTICA ENTERPRISES, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
NAUTICA ENTERPRISES, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------
New York, New York
June 6, 2000
To the Stockholders of
NAUTICA ENTERPRISES, INC.
The Annual Meeting of Stockholders of Nautica Enterprises, Inc. will be
held on July 6, 2000 at the offices of the Company, 40 West 57th Street, New
York, New York, at 10:00 a.m. for the following purposes:
(1) To elect directors to serve until the next annual meeting of
stockholders or until their successors are duly elected and qualified;
and
(2) To transact such other business as may properly come before the meeting
and any adjournment or adjournments thereof.
Only stockholders of record at the close of business on May 30, 2000 are
entitled to notice of and to vote at the meeting and any adjournment or
adjournments thereof.
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING IN PERSON, BUT WISH
THEIR STOCK TO BE VOTED ON MATTERS TO BE PRESENTED TO THE MEETING, ARE URGED TO
REVIEW THE ATTACHED PROXY STATEMENT PROMPTLY AND THEN COMPLETE AND RETURN THE
ENCLOSED PROXY IN THE ACCOMPANYING POSTAGE-PAID, ADDRESSED ENVELOPE, OR VOTE BY
TELEPHONE OR VIA THE INTERNET BY FOLLOWING THE INSTRUCTIONS FOR VOTING SET FORTH
IN THE ATTACHED PROXY STATEMENT AND ON THE PROXY CARD. IF YOU ATTEND THE
MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR SHARES PERSONALLY.
By Order of the Board of
Directors
HARVEY SANDERS,
Chairman
<PAGE> 3
NAUTICA ENTERPRISES, INC.
40 WEST 57TH STREET
NEW YORK, NEW YORK 10019
------------------------
PROXY STATEMENT
------------------------
This proxy statement is furnished with respect to the solicitation of
proxies by the Board of Directors of Nautica Enterprises, Inc. (the "Company")
for the Annual Meeting of Stockholders of the Company to be held at 10:00 a.m.
on July 6, 2000 and at any adjournment or adjournments thereof, at 40 West 57th
Street, 7th floor, New York, New York. The approximate date on which the proxy
statement and form of proxy was first sent or given to stockholders was June 6,
2000.
As of the close of business on May 30, 2000, the date for determining the
stockholders of record entitled to notice of and to vote at the Annual Meeting
and any adjournment or adjournments thereof, there were issued and outstanding
31,532,171 shares of the Company's Common Stock, the holders thereof being
entitled to one vote per share. The presence at the Annual Meeting of a majority
of such shares, in person or by proxy, are required for a quorum. All shares
that have been properly voted, whether by telephone, Internet or mail, and not
revoked, will be treated as being present for the purpose of determining the
presence of a quorum at the Annual Meeting and will be voted at the Annual
Meeting.
The form of proxy solicited by the Board of Directors affords stockholders
the ability to specify a choice among approval of, disapproval of, or abstention
with respect to, each matter to be acted upon at the Annual Meeting. Shares
represented by the proxy will be voted and, where the solicited stockholder
indicates a choice with respect to any matter to be acted upon, the shares will
be voted as specified. If any other matters are properly presented for
consideration at the Annual Meeting, the persons named in the proxy will have
the discretion to vote on those matters.
The expense of the solicitation of proxies for the meeting, including the
cost of mailing, will be borne by the Company. In addition to mailing copies of
the enclosed proxy materials to stockholders, the Company may request persons,
and reimburse them for their expenses with respect thereto, who hold stock in
their names or custody or in the names of nominees for others to forward copies
of such materials to those persons for whom they hold stock of the Company and
to request authority for the execution of the proxies. In addition to the
solicitation of proxies by mail, it is expected that some of the officers,
directors, and regular employees of the Company, without additional
compensation, may solicit proxies on behalf of the Board of Directors by
telephone, telefax, and personal interview.
Stockholders of record may vote by telephone, via the Internet or by mail.
A toll-free telephone number and web site address are included on the proxy
card. For stockholders who choose to vote by mail, a postage-paid envelope is
provided.
Voting by Telephone. Stockholders of record may vote by using the
toll-free number listed on the proxy card. Telephone voting is available 24
hours a day. Easy-to-follow voice prompts allow stockholders to vote their
shares and confirm that their instructions have been properly recorded. The
Company's telephone voting procedures are designed to authenticate stockholders
by using individual control numbers provided on each
<PAGE> 4
proxy card. Stockholders who vote by telephone need not return the proxy card.
Please see the proxy card for specific instructions.
Voting via the Internet. Stockholders of record may also vote via the
Internet as instructed on the proxy card. Internet voting is available 24 hours
a day. As with telephone voting, stockholders will be given the opportunity to
confirm that votes have been properly recorded. The Company's Internet voting
procedures are designed to authenticate stockholders by using individual control
numbers provided on each proxy card. Stockholders who vote via the Internet need
not return the proxy card. Please see the proxy card for specific instructions.
Voting by Mail. If a stockholder chooses to vote by mail, the proxy card
should be signed, dated and returned in the postage-paid envelope provided. If a
proxy card is signed, dated and mailed without indicating how it should be
voted, it will be voted as recommended by the Board of Directors.
ELECTION OF DIRECTORS
The persons named in the accompanying proxy intend to vote for the election
as directors the eight nominees listed herein. All of the nominees have
consented to serve if elected. All directors will be elected to hold office
until the next annual meeting of stockholders, and, in each case, each director
will serve until his successor is elected and qualified or until his earlier
resignation or removal. If a nominee should be unable to act as a director,
which is not anticipated, the persons named in the proxy will vote for any
nominee who shall be designated by the present Board of Directors to fill the
vacancy. Each of the nominees presently serves as a director.
Set forth below is biographical information for each of the nominees.
Unless otherwise indicated, each has served in his stated capacity for the last
five years:
Robert B. Bank, age 53, has been a Director of the Company since 1989. He
is President of Robert B. Bank Advisory Services, a venture capital investment
firm.
David Chu, age 45, joined the Company in 1984 and became a Director in
1987. He has served as Executive Vice President of the Company since 1989 and
President of Nautica International, Inc. and Nautica Apparel, Inc., each wholly
owned subsidiaries of the Company, since 1984. He is a director of Danskin, Inc.
George Greenberg, age 78, has been a Director of the Company since 1988. He
is Vice Chairman and a Director of Guilford Mills, Inc., a textile manufacturer.
Mr. Greenberg is the father-in-law of Harvey Sanders, Chairman of the Board and
President of the Company.
Israel Rosenzweig, age 52, has been a Director of the Company since 1990.
He is a Senior Vice President of BRT Realty Trust and has served in this
capacity since April 1, 1998. On March 31, 2000, Mr. Rosenzweig became President
of GP Partners, Inc., a newly organized corporation, which will render advice to
a private fund engaged in investing in securities of real estate investment
trusts. He was a Director of Bankers Federal Savings FSB, a savings and loan
association from 1993 through April 1997, and was its Executive Vice President
and Chief Lending Officer from November 1994 through April 30, 1997. From May 1,
1997 to March 31, 1998, Mr. Rosenzweig was associated on a full-time basis with
Gould Investors, L.P., a limited
2
<PAGE> 5
partnership which owns a diverse real estate portfolio. He was a Trustee of BRT
Realty Trust from 1984 to December 1996, its President and Chief Executive
Officer from 1984 to March 1995, and Vice Chairman of its Board from March 1996
to December 1996.
Harvey Sanders, age 50, has been President, Chief Executive Officer and a
Director of the Company since 1977 and Chairman of the Board since October 1993.
Charles H. Scherer, age 56, has been a Director of the Company since May
1994. He is managing partner of Hughes Hubbard & Reed LLP, an international law
firm which provides legal services to the Company.
John Varvatos, age 45, has been a director of the Company since April 2000.
He has served as Senior Vice President of the Company since September 1998 and
President of John Varvatos Company since October 1999. From July 1994 to August
1998, he was Senior Vice President of Men's Design for Polo/Ralph Lauren.
Ronald G. Weiner CPA, age 54, has been a Director of the Company since
October 1995. He is President of Perelson Weiner LLP, a certified public
accounting firm based in New York City.
Shares represented by proxies solicited by the Board of Directors will,
unless contrary instructions are given, be voted in favor of the election as
Directors of the nominees named above. If a stockholder wishes to withhold
authority to vote for any nominee, such stockholder can do so by following the
directions set forth on the form of proxy solicited by the Board of Directors or
on the ballot distributed at the Annual Meeting if such stockholder wishes to
vote in person. Directors shall be elected by a plurality vote of the shares of
Common Stock present in person or represented by proxy at the meeting.
Abstentions and broker non-votes will not have the effect of votes in opposition
to a person nominated as a Director.
During fiscal year 2000, the Board of Directors held six meetings. The
Compensation Committee of the Board of Directors is comprised of Messrs. Bank,
Rosenzweig and Weiner. The Compensation Committee reviews the Company's
compensation policies and practices and develops recommendations with respect to
compensation for the Company's senior executives. The Audit Committee of the
Board of Directors is comprised of Messrs. Bank, Rosenzweig and Weiner. The
Audit Committee reviews the audit plan with the Company's independent
accountants, the scope and results of their audit and other related audit and
accounting issues. During fiscal year 2000, the Compensation Committee held
three meetings and the Audit Committee held one meeting. The Board of Directors
as a whole proposes nominees for election to the Board of Directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding ownership of
the Company's Common Stock as of May 22, 2000 (May 12, 2000 with respect to FMR
Corp.) by all stockholders known to the Company to have been beneficial owners
of more than five percent of its Common Stock, by each nominee for Director, by
3
<PAGE> 6
each of the executive officers of the Company included in the Summary
Compensation Table below, and all directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER(1) OWNED(2)(3) CLASS(%)
--------------------------- ------------------- ----------
<S> <C> <C>
Robert B. Bank........................................... 71,750 *
David Chu................................................ 1,445,416 4.4
George Greenberg......................................... 56,184 *
Paulette McCready........................................ 90,400 *
Israel Rosenzweig........................................ 28,000 *
Harvey Sanders........................................... 4,418,440 13.4
Charles H. Scherer....................................... 26,000 *
John Varvatos............................................ 29,000 *
Ronald G. Weiner......................................... 23,500 *
John Wetzler............................................. 153,800 *
All Directors and Executive Officers as a group.......... 6,342,490 18.2
FMR Corp.(4)............................................. 3,610,000 11.4
T. Rowe Price Associates, Inc.(5)........................ 2,100,600 6.7
</TABLE>
---------------
* Indicates holdings of less than 1%.
(1) The address for each of the executives named in the table above is c/o
Nautica Enterprises, Inc., 40 West 57th Street, New York, New York 10019.
(2) Directly and indirectly. The inclusion of securities owned by others as
beneficially owned by the respective nominees and officers does not
constitute an admission that such securities are beneficially owned by them.
All of the named individuals have, except as set forth in Note 3 below, sole
voting and investment powers with respect to the aforesaid shares.
(3) Includes the following shares which may be acquired pursuant to existing
stock options which are exercisable on or before July 21, 2000: Robert B.
Bank -- 61,750; David Chu -- 1,408,964; George Greenberg -- 22,000; Paulette
McCready -- 68,800; Israel Rosenzweig -- 28,000; Harvey Sanders --
1,282,000; Charles H. Scherer -- 25,000; John Varvatos -- 29,000; Ronald G.
Weiner -- 16,000; and, John Wetzler -- 153,800. With respect to Mr. Sanders,
includes 1,200,000 shares owned by the Harvey Sanders Grantor Retained
Income Trust. Such trust has sole voting and investment power with respect
to such shares.
(4) FMR Corp. is deemed to have sole dispositive power with respect to 3,610,000
shares of the Company and sole voting power with respect to no shares.
Fidelity Management and Research Company, a wholly owned subsidiary of FMR
Corp., is the beneficial owner of the 3,610,000 shares. The address for FMR
Corp. and Fidelity Management and Research Company is 82 Devonshire Street,
Boston, Massachusetts 02109.
(5) Includes 1,750,000 shares beneficially owned by T. Rowe Price New Horizons
Fund, Inc. ("Horizons"). T. Rowe Price Associates ("Associates") serves as
an investment advisor to Horizons. Associates is deemed to have sole voting
power with respect to 264,800 shares of the Company and sole dispositive
power with respect to 2,100,600 shares, and Horizons is deemed to have sole
voting power with respect to 1,750,000 shares. The address for Horizons and
Associates is 100 East Pratt Street, Baltimore, Maryland 21202.
4
<PAGE> 7
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ended March 4, 2000,
February 27, 1999 and February 28, 1998, the cash compensation paid by the
Company and its subsidiaries, to the Company's Chief Executive Officer and each
of the four most highly compensated executive officers of the Company other than
the Company's Chief Executive Officer as of March 4, 2000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
----------------- ------------ ALL OTHER
SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)(1)
--------------------------- ---- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Harvey Sanders............................... 2000 906,907 756,000 200,000 2,601
Chairman of the Board, 1999 846,022 727,900 200,000 2,554
Chief Executive Officer and President 1998 822,050 921,000 175,000 2,513
David Chu.................................... 2000 802,750 604,800 200,000 5,797
Executive Vice President and 1999 814,730 582,500 200,000 5,569
President/CEO -- Nautica International, 1998 796,547 734,900 175,000 5,411
Inc. and Nautica Apparel, Inc.,
wholly-owned subsidiaries of the Company
Paulette McCready............................ 2000 441,538 225,000 100,000 2,250
President -- Nautica Jeans Company, Inc., 1999 379,259 211,000 33,500 2,250
a wholly-owned subsidiary of the Company 1998 341,089 201,000 25,000 2,250
John Varvatos(2)............................. 2000 663,500 330,000 125,000 --
President -- John Varvatos Company, 1999 277,923 300,000 20,000 --
a wholly-owned subsidiary of the Company
John Wetzler................................. 2000 315,719 125,000 90,000 2,250
President -- Nautica Retail USA, Inc., 1999 293,550 161,000 42,000 2,250
a wholly owned subsidiary of the Company 1998 285,000 261,000 40,000 2,250
</TABLE>
---------------
(1) "All Other Compensation" is comprised of contributions made by the Company
to the named executives pursuant to the Company's 401(k) Plan and, with
respect to Messrs. Sanders and Chu, additional amounts of $351 and $3,547,
respectively, representing the economic value attributable to each of them
for split-dollar life insurance.
(2) Mr. Varvatos joined the Company in September 1998 as Senior Vice President,
became President of John Varvatos Company in October 1999, and was elected
to the Board of Directors in April 2000.
5
<PAGE> 8
STOCK OPTIONS
The following table contains information concerning the grant of stock
options during fiscal year 2000 under the Company's 1996 Stock Incentive Plan to
each of the Company's executives listed in the Summary Compensation Table above
receiving stock options during such period.
The table also illustrates the Grant Date Present Value of those stock
options based upon the Black-Scholes Model of Valuation, without giving effect
to the non-transferability or vesting requirements of the options.
No matter what theoretical value is placed on a stock option on the date of
grant, its ultimate value will be dependent on the market value of the Company's
Common Stock at a future date. If the price of the Company's Common Stock
increases, all stockholders will benefit commensurably with the optionees.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR GRANT DATE
OPTIONS GRANTED TO EMPLOYEES BASE PRICE EXPIRATION PRESENT
NAME (#)(1) IN FISCAL YEAR ($/SH) DATE VALUE($)(2)
---- --------------- --------------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Harvey Sanders............. 200,000 11.04 11.28 4/9/09 1,360,000
David Chu.................. 200,000 11.04 11.28 4/9/09 1,360,000
Paulette McCready.......... 100,000 5.52 11.28 4/9/09 680,000
John Varvatos.............. 125,000 6.90 11.28 4/9/09 850,000
John Wetzler............... 90,000 4.97 11.28 4/9/09 612,000
</TABLE>
---------------
(1) All options were granted at market value at the date of grant, April 9,
1999, for a term of ten years, subject to earlier termination in certain
instances related to termination of employment. All option grants are
exercisable cumulatively in five equal annual installments commencing one
year following the date of grant.
(2) The amounts shown assume a value based on the Black-Scholes Model of
Valuation. The assumptions used were as follows: volatility -- 50%;
risk-free rate of return -- 6%; and, assumed time of exercise -- 7 years. No
adjustments were made for non-transferability or risk-of-forfeiture. There
can be no assurance that the rate of appreciation assumed for purposes of
this table will be achieved. The stock options will have no value to the
executives named above or other optionees if the price of the Company's
Common Stock does not increase above the exercise price of the option.
6
<PAGE> 9
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Company's
executives listed in the Summary Compensation Table above, concerning the
exercise of options during the last fiscal year and unexercised options held as
of the end of the 2000 fiscal year:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END (#) AT FY-END ($)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Harvey Sanders.......... -- -- 1,202,000/470,000 5,010,030/19,000
David Chu............... -- -- 1,328,964/470,000 8,059,667/19,000
Paulette McCready....... 8,400 34,266 42,100/141,600 6,000/ 9,500
John Varvatos........... -- -- 4,000/141,000 0/11,875
John Wetzler............ -- -- 127,400/147,600 151,110/ 8,550
</TABLE>
DIRECTOR COMPENSATION
During fiscal year 2000, each nonemployee Director received compensation of
$2,000 for each Board and committee meeting attended, and an annual fee of
$20,000. No fees are payable to officers and employees of the Company who serve
as Directors. During fiscal year 2000, each of Messrs. Bank, Greenberg,
Rosenzweig, Scherer and Weiner were granted 8,000 options at an exercise price
of $11.28 per share. The options are exercisable cumulatively in two equal
annual installments commencing one year from the date of grant.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company and Messrs. Sanders and Chu have entered into an agreement that
provides that upon the death of either of them, the Company will purchase a
portion of the shares of Common Stock of such stockholder. The Company has
obtained policies of life insurance on the lives of such stockholders for the
purpose of utilizing the proceeds from such insurance for the purchase of the
shares. The agreement provides for the Company to purchase the shares of the
deceased stockholder at a value which is equal to the average of the last sale
price as reported on the National Market List of the NASDAQ (or the closing
price if the shares are listed on a national securities exchange) for the thirty
trading days prior to the date of death of the deceased stockholder. The
Company's obligation to purchase the Common Stock of the deceased stockholder is
limited to the life insurance proceeds received by the Company on the death of
such stockholder. The agreement also provides, as soon after the death of the
stockholder as is practicable, for the filing of a registration statement with
the Securities and Exchange Commission for a secondary offering to provide for
the sale of the balance of the shares owned by the deceased stockholder.
Mr. David Chu, Executive Vice President of the Company and President of
Nautica Apparel, Inc. and Nautica International, Inc., both wholly-owned
subsidiaries of the Company, is entitled to receive 50% of the net income
Nautica Apparel, Inc. receives from all royalty income earned with respect to
the Nautica name
7
<PAGE> 10
and trademarks. For the fiscal year ended March 4, 2000, Mr. Chu earned net
royalty income of $5,747,607. Through a separate arrangement, Mr. Chu is
entitled to receive, subject to certain conditions, a design fee of up to 1.5%
of the net sales of certain new products. For the year ended March 4, 2000, Mr.
Chu received payments of $1,013,724 based upon the net sales of such products.
During fiscal year 2000, the Company paid $1,227,371 to the law firm of
Hughes Hubbard & Reed LLP for professional services rendered to the Company.
Samuel Sultanik, Esq., the brother-in-law of Harvey Sanders, Chairman of the
Board, Chief Executive Officer and President of the Company, is a partner of
Hughes Hubbard & Reed LLP and Charles H. Scherer, Esq., a Director of the
Company, is managing partner of Hughes Hubbard & Reed LLP.
During fiscal year 2000, the Company paid $200,712 to the firm of
Chu/Pettersen Interior Design, Inc. for interior design and related services
provided to the Company. Mr. Peter Chu, the brother of David Chu, Executive Vice
President of the Company, is a stockholder and Vice President in such firm.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
its Common Stock to file reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "Commission"). Officers, directors and
greater than ten percent stockholders are required by the Commission to furnish
the Company with copies of all Section 16(a) forms they file.
The Company believes that, based solely on its review of the copies of such
forms received by it, or written representations from certain reporting persons
that no reports on Form 5 were required for those persons, during fiscal year
2000 all filing requirements applicable to its officers, directors and greater
than ten percent stockholders were complied with.
EMPLOYEE CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Company has entered into agreements with Messrs. Sanders, Chu and
Wetzler providing that in the event of a change in control of the Company, as
defined in the agreements, each has the right to receive a lump sum payment upon
termination of employment other than for cause or permanent disability or upon
resignation for good reason within three years after the change in control. At
March 4, 2000, the maximum amount payable to Mr. Sanders, Mr. Chu and Mr.
Wetzler under such agreements was $4,957,700, $4,218,200 and $1,413,900,
respectively.
The Company has entered into split-dollar agreements with trusts
established by each of Mr. Sanders and Mr. Chu, and with Mr. Varvatos. Pursuant
to each of the agreements, the Company pays the annual premium on specified life
insurance policies owned by each of the trusts and by Mr. Varvatos, net of the
amount of the "economic benefit" attributable to each of the employees. The
amount of the premiums paid by the Company constitutes indebtedness from each of
the trusts and Mr. Varvatos to the Company and is secured by collateral
assignments of each of the insurance policies to the Company. The annual premium
payable by the Company for the benefit of Mr. Sanders' trust is $57,232, for Mr.
Chu's trust, $48,113 and for Mr. Varvatos, $89,336. Upon termination of each of
the agreements, the Company is entitled to receive from each of the trusts the
8
<PAGE> 11
amount equal to the aggregate premiums which it has paid. The face value of the
policy for Mr. Sanders' trust is $5,000,000, for Mr. Chu's trust, $4,950,000 and
for Mr. Varvatos, $5,000,000.
The Company has entered into an employment agreement with Mr. Varvatos
which provides for continued service by Mr. Varvatos in his present position as
President of John Varvatos Company ("JVC") until February 28, 2002, subject to
extension for additional three year segments unless either the Company or Mr.
Varvatos provides notice of non-extension. During fiscal year 2001, Mr. Varvatos
is entitled to receive a salary of $700,000. Thereafter, any increases are
determined by the Board of Directors, subject to a minimum increase of no less
than 5%. Mr. Varvatos is entitled to annual bonuses in accordance with the
Company's policies in effect from time to time. The employment agreement
provides that upon a change in control of the Company, as defined in the
agreement, Mr. Varvatos has the right to receive a lump sum payment upon his
resignation. At March 4, 2000, the maximum amount payable to Mr. Varvatos under
such provision was $3,014,700. It also provides that if during the term of
employment Mr. Sanders is no longer employed by the Company then the Company
shall exercise one of the following options: (i) spin-off to the Company's
shareholders the shares of JVC with Mr. Varvatos serving as its Chief Executive
Officer; (ii) sell JVC to Mr. Varvatos at fair market value, or (iii) pay to Mr.
Varvatos an annual amount equal to 10% of JVC's net income (after taxes) for so
long as he remains JVC's Chief Executive Officer. The Company can elect to cease
making the annual payments provided for in clause (iii) above by making a lump
sum payment to the executive in an amount equal to two times the JVC average
annual net income (after taxes) for the prior three years; provided, however,
such sum shall not exceed $50 million. Mr. Varvatos has assigned to the Company
all of his right, title and interest in and to the names John Varvatos, Varvatos
and John Varvatos Company, and any derivations thereof.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert B. Bank, Israel Rosenzweig and Ronald G. Weiner served as members of
the compensation committee (the "Compensation Committee") of the Board of
Directors during fiscal year 2000.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors consists of three
non-employee directors. The Committee reviews the Company's executive
compensation policies and practices and develops recommendations to the Board
with respect to compensation for the Company's senior executives. In fiscal year
1998, the Board adopted an executive compensation program to provide a framework
for administering the Company's executive compensation program. The Committee
also administers the Company's Incentive Compensation Plan and the 1996 Stock
Incentive Plan.
The goals of the Company's compensation policies are as follows:
- to attract, retain, reward and motivate executive officers and employees
by establishing compensation levels generally competitive with the
marketplace;
- to align executive compensation with the Company's business objectives;
- to position compensation to reflect the individual's performance as well
as the level of responsibility, skill and strategic value of the
executive; and
9
<PAGE> 12
- to align the interests of the Company's employees with those of its
stockholders.
In setting compensation, the Compensation Committee reviews, with the
assistance of independent compensation consultants, available information for
similar positions or levels at comparable companies. Such companies include a
diverse range of apparel manufacturers with sales within, below and above the
range of sales of the Company. The Compensation Committee has adopted a policy
to seek to maintain executive compensation within the deduction cap of Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
The Company's executive compensation program consists of three main
components: base salary, cash bonus or incentive awards, and long-term
stock-based incentives. Base salaries are determined with reference to a
competitive norm and job grades with consideration given to the executive's
strategic value, experience, proficiency and performance. Ranges of salary are
assigned to each grade with a minimum salary representing the lowest entry
level, a midpoint salary representing a market value of experienced good
performers and a maximum salary representing the highest value for the most
experienced and proficient employees. Cash bonuses to eligible employees are
based upon a formula to provide a direct "pay-for-performance" vehicle. The
annual bonus also serves to focus executives on those activities that most
directly affect shareholder value which are within their control and for which
they are held accountable. At the beginning of the fiscal year, specific
performance measures and goals are established based upon corporate and/or
business unit profitability and individual performance. Each participant is
assigned a target bonus award opportunity that relates to his or her level. That
target award level represents the level of bonus payment the participant can
expect to earn in the event all performance goals are achieved at 100% during
the ensuing fiscal year. When performance levels exceed or fall below
expectations, actual awards are proportionately increased or decreased from the
target, with bonuses "at risk." In fiscal year 2000, the target levels
established at the corporate and business unit levels were based upon earnings
before income taxes.
With respect to certain senior executives, including Harvey Sanders, the
Chairman of the Board, President and Chief Executive Officer of the Company,
David Chu, the Executive Vice President of the Company, and John Varvatos,
President of John Varvatos Company, a wholly-owned subsidiary of the Company,
annual incentive award opportunities are set in accordance with the Company's
Incentive Compensation Plan (the "Plan"). At the start of each fiscal year, the
Compensation Committee, in consultation with management, establishes target
levels of either earnings before income taxes, net earnings and/or return on
equity for the Company or a business unit. In fiscal year 2000, threshold levels
of earnings were established. If the designated minimum level of earnings was
not achieved, the participants would have received no incentive award for fiscal
year 2000 performance under the Plan (although in its discretion, the
Compensation Committee could have authorized an award outside of the Plan).
During such year, the threshold level was exceeded and the participants received
an incremental proportionately greater payment than the minimum. The
Compensation Committee has established target levels for fiscal year 2001 based
on earnings and has granted incentive award opportunities for such year to each
of Messrs. Sanders, Chu and Varvatos.
The Company's senior executives are eligible to receive stock options
and/or restricted stock in accordance with the Company's 1996 Stock Incentive
Plan. The objectives of such participation are to align executive and
stockholder long term interests and to enable executives to develop a stock
ownership position in the Company. The Compensation Committee has the
responsibility of granting stock options and restricted
10
<PAGE> 13
stock awards to executive and management employees. In granting stock options,
the Compensation Committee takes into account Company performance, subsidiary
performance and individual performance, utilizing the same factors as those used
in the determination of cash compensation. The Compensation Committee also takes
into account the number of options held by an individual and the total number of
stock options outstanding. All of the stock options granted to senior executives
in fiscal year 2000 were exempt from the deduction cap of Section 162(m) of the
Code in accordance with the regulations promulgated thereunder.
The Chairman of the Board, President and Chief Executive Officer of the
Company is Harvey Sanders. The criteria by which the Compensation Committee
determines salary, bonus and the grant of stock options for senior executives,
as set forth above, is also utilized by the Compensation Committee in
determining cash compensation and stock option awards for Mr. Sanders.
Compensation Committee
Robert B. Bank
Israel Rosenzweig
Ronald G. Weiner
11
<PAGE> 14
PERFORMANCE GRAPH
The following performance graph assumes $100 invested in Nautica
Enterprises, Inc. Common Stock, the NASDAQ Stock Market (U.S.) and S&P Textiles
Index on March 1, 1995. Where applicable, it assumes reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
NAUTICA ENTERPRISES, INC., NASDAQ STOCK MARKET (U.S.) AND
S&P TEXTILES INDEX FOR THE FIVE YEARS ENDED FEBRUARY 29, 2000
<TABLE>
<CAPTION>
NASDAQ STOCK MARKET
NAUTICA ENTERPRISES, INC. (U.S.) S&P TEXTILES INDEX
------------------------- ------------------- ------------------
<S> <C> <C> <C>
1995 100.00 100.00 100.00
1996 197.59 139.36 115.66
1997 240.96 166.28 162.17
1998 277.71 227.28 181.46
1999 144.58 296.02 143.95
2000 109.64 630.81 94.06
</TABLE>
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<PAGE> 15
APPOINTMENT OF ACCOUNTANTS
The Board of Directors has selected Grant Thornton LLP as the Company's
independent accountants who will make an examination of the accounts of the
Company for the year ending March 3, 2001. A representative of Grant Thornton
LLP is expected to be present at the annual meeting to respond to appropriate
questions and to make a statement if that representative so desires.
PROPOSALS BY STOCKHOLDERS -- 2001 ANNUAL MEETING
All proposals by stockholders intended to be presented at the next annual
meeting of stockholders (scheduled to be held in July 2001) must be received by
the Company at its office at 40 West 57th Street, New York, New York 10019, no
later than March 8, 2001 in order to be included in the proxy statement and form
of proxy relating to such meeting. All such proposals must comply with
applicable Securities and Exchange Commission rules and regulations.
OTHER BUSINESS
Management is not aware of any matters to be presented at the meeting other
than those set forth in this Proxy Statement. However, should any other business
properly come before the meeting, or any adjournment or adjournments thereof,
the enclosed proxy confers upon the persons entitled to vote the shares
represented by such proxies, discretionary authority to vote the same in respect
to any such other business in accordance with their best judgment in the
interest of the Company.
MANAGEMENT UNDERTAKES TO PROVIDE ITS STOCKHOLDERS WITHOUT CHARGE, UPON
WRITTEN OR VERBAL REQUEST BY ANY SUCH STOCKHOLDER BY FIRST CLASS MAIL WITHIN ONE
BUSINESS DAY OF RECEIPT OF SUCH REQUEST, A COPY OF THE COMPANY'S ANNUAL REPORT
ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULE FILED THEREWITH.
WRITTEN REQUEST FOR SUCH REPORT SHOULD BE ADDRESSED TO W. DONALD PENNINGTON,
CHIEF FINANCIAL OFFICER, NAUTICA ENTERPRISES, INC., 40 WEST 57TH STREET, NEW
YORK, NEW YORK 10019. VERBAL REQUESTS SHOULD BE MADE BY TELEPHONE TO SUCH PERSON
AT (212) 541-5990.
Stockholders are urged to vote the enclosed proxy, solicited on behalf of
the Board of Directors, or vote by telephone or the via the Internet. Unless a
contrary direction is indicated, proxies will be voted for the election as
directors of the nominees listed in this Proxy Statement and for the other
proposal contained in this Proxy Statement. The proxy does not affect the right
to vote in person at the meeting and may be revoked by the stockholder any time
prior to its being voted.
By Order of the Board of
Directors
HARVEY SANDERS,
Chairman
June 6, 2000
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<PAGE> 16
<TABLE>
<S> <C>
------------------------------------------------------------------------------------------------------------------------------------
PROXY PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
NAUTICA ENTERPRISES, INC.
PROXY - ANNUAL MEETING OF STOCKHOLDERS, JULY 6, 2000
The undersigned hereby appoints Harvey Sanders and David Chu, and each of them, proxies and
attorneys-in-fact of the undersigned, with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of common stock of Nautica Enterprises,
Inc. held of record by the undersigned on May 30, 2000 at the Annual Meeting of Stockholders to be held
on July 6, 2000 or any adjournment thereof.
(Continued and to be signed on reverse side.)
------------------------------------------------------------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
</TABLE>
<PAGE> 17
<TABLE>
<S> <C>
------------------------------------------------------------------------------------------------------------------------------------
NAUTICA ENTERPRISES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
[ ]
1. ELECTION OF DIRECTORS: For Withhold For All
Nominees: All All Except*
01 Robert B. Bank 02 David Chu
03 George Greenberg 04 Israel Rosenzweig [ ] [ ] [ ]
05 Harvey Sanders 06 Charles H. Scherer
07 John Varvatos 08 Ronald G. Weiner
In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the meeting.
*INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name in the blank space below.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL "1".
-------------------------------------------------------------------------------- Dated:
| | --------------------------------------------
| |
| | --------------------------------------------------
| |
| | --------------------------------------------------
| | Signature of Stockholder(s)
| THIS SPACE RESERVED FOR ADDRESSING | Please sign exactly as your name or names appear
| (key lines do not print) | to the left hereof. When shares are held by joint
| | tenants, both should sign. When signing as
| | attorney, as executor administrator, trustee or
| | guardian, please give full title as such. If a
| | corporation, please sign in full corporate name by
| | President or other authorized officer. If a
| | partnership, please sign in partnership name by
-------------------------------------------------------------------------------- authorized person.
------------------------------------------------------------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
CONTROLNUMBER
--------------------------------
| |
| | YOU CAN VOTE BY TELEPHONE OR INTERNET!
| |
| CLEAR AREA | AVAILABLE 24 HOURS A DAY * 7 DAYS A WEEK
--------------------------------
Instead of mailing your proxy, you may choose one of the two voting methods outlined below to vote
your proxy. Have this proxy card in hand when you call.
TO VOTE BY PHONE
----------------
(WITHIN THE U.S. AND CANADA ONLY)
- Call toll free 877-892-7892 from a touch tone telephone. There is NO CHARGE for this call.
- Enter the six-digit Control Number located above and then follow the voting instructions.
- If you choose to vote as the Board of Directors recommends on the proposal, press 1.
When asked please confirm your vote by pressing 1 again.
TO VOTE ON THE INTERNET
-----------------------
- Go to the following web site: www.harrisbank.com/wproxy
- Enter the information requested on your computer screen, including your six-digit Control Number
located above, then follow the voting instructions on the screen.
IF YOU VOTE BY TELEPHONE OR THE INTERNET, DO NOT MAIL BACK THIS PROXY CARD.
PROXIES SUBMITTED BY TELEPHONE OR THE INTERNET MUST BE RECEIVED BY 12:00 MIDNIGHT,
CENTRAL TIME, ON JULY 5, 2000.
THANK YOU FOR VOTING!
</TABLE>
