<PAGE>
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
The Stride Rite Corporation
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
The Stride Rite Corporation
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
4) Proposed maximum aggregate value of transaction:
* Set forth the amount on which the filing is calculated and state how it
was determined.
[_] 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:
Notes:
<PAGE>
THE STRIDE RITE CORPORATION
----------------
NOTICE OF ANNUAL MEETING
----------------
Cambridge, Massachusetts
February 27, 1995
To the Stockholders of
The Stride Rite Corporation
The Annual Meeting of Stockholders of The Stride Rite Corporation, a
Massachusetts corporation, will be held at The First National Bank of Boston,
first floor auditorium, 100 Federal Street, Boston, Massachusetts, on
Wednesday, April 12, 1995, at 10:00 A.M. (Boston time), for the following
purposes:
1. To elect to the Board of Directors of The Stride Rite Corporation those
directors in the class of directors whose term expires at the 1995
Annual Meeting;
2. To consider and act upon a proposal to adopt The Stride Rite Corporation
1995 Long-Term Growth Incentive Plan;
3. To consider and act upon the matter of ratifying the selection of
Coopers & Lybrand L.L.P. as auditors of The Stride Rite Corporation for
the current fiscal year; and
4. To consider and act upon a shareholder proposal regarding the annual
election of directors;
5. To consider and act upon any other matters which may properly come
before the meeting or any adjournment(s) or postponement(s) thereof.
Only holders of record at the close of business on February 23, 1995 are
entitled to receive notice of and to vote at the 1995 Annual Meeting.
By Order of the Board of Directors
Karen K. Crider, Clerk
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN
THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
<PAGE>
THE STRIDE RITE CORPORATION
FIVE CAMBRIDGE CENTER, CAMBRIDGE, MASSACHUSETTS 02142
----------------
PROXY STATEMENT
FOR THE 1995 ANNUAL MEETING OF STOCKHOLDERS
----------------
GENERAL INFORMATION
This Proxy Statement is being furnished to holders of common stock, par value
$.25 per share (the "Common Stock"), of THE STRIDE RITE CORPORATION (the
"Company") in connection with the solicitation of proxies by the Board of
Directors to be used at the Annual Meeting of Stockholders on April 12, 1995
and at any adjournment(s) or postponement(s) thereof.
All proxies delivered pursuant to this solicitation are revocable at the
option of the person executing the same at any time before the voting thereof.
A proxy may be revoked in writing delivered to Karen K. Crider, Clerk, at the
principal executive offices of the Company prior to the Annual Meeting, or by
attending the Annual Meeting and voting in person. Submission of a later dated
proxy will revoke any earlier dated proxy. Unless previously revoked, proxies
so delivered will be voted at the meeting. Where a choice or instruction is
specified by the stockholder thereon, the proxy will be voted in accordance
with such specification. Where a choice or instruction is not specified by such
stockholder, the proxy will be voted as recommended by the directors.
Only stockholders of record at the close of business on February 23, 1995 are
entitled to receive notice of and to vote at the Annual Meeting. The transfer
books will not be closed. As of the close of business on February 17, 1995
there were outstanding and entitled to vote 49,541,864 shares of Common Stock.
Each share is entitled to one vote.
The representation in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote at the meeting is necessary
to constitute a quorum for the transaction of business. Votes withheld from any
nominee for election as director, abstentions and broker "non-votes" are
counted as present or represented for purposes of determining the presence or
absence of a quorum for the meeting. A "non-vote" occurs when a nominee holding
shares for a beneficial owner votes on one proposal, but does not vote on
another proposal because, in respect of such other proposal, the nominee does
not have discretionary voting power and has not received instructions from the
beneficial owner. The vote on each matter submitted to stockholders is
tabulated separately. Abstentions are included in the number of shares present
or represented and voting on each matter. Broker "non-votes" are not so
included.
This Proxy Statement, the related form of proxy and the Company's Annual
Report for the fiscal year ended December 2, 1994 are being mailed together on
or about February 27, 1995 to stockholders entitled to notice of and to vote at
the meeting.
The principal executive offices of the Company are located at Five Cambridge
Center, Cambridge, Massachusetts 02142.
<PAGE>
I. ELECTION OF DIRECTORS
Pursuant to the provisions of Massachusetts law, the Company has three
classes of directors of approximately equal size who serve staggered terms.
Serving in Class II of the Board of Directors, the term of which expires at
the 1995 Annual Meeting of Stockholders, are Donald R. Gant, Robert C. Siegel
and W. Paul Tippett, Jr. Serving in Class III of the Board of Directors, the
term of which expires at the 1996 Annual Meeting of Stockholders, are Theodore
Levitt and Margaret A. McKenna. Serving in Class I of the Board of Directors,
the term of which expires at the 1997 Annual Meeting of Stockholders, are
Robert L. Seelert, Myles J. Slosberg and Jeanette S. Wagner. Upon election at
the respective Annual Meeting of Stockholders, nominees will then serve as
directors for staggered three-year terms.
The Board of Directors recommends that the stockholders elect Donald R.
Gant, Robert C. Siegel and W. Paul Tippett, Jr., who have been duly nominated
by the Board of Directors, to serve a term of office as Class II directors
expiring at the 1998 Annual Meeting of Stockholders.
It is the intention of the persons named as proxies to vote the proxies,
unless authority to vote is specifically withheld, to elect as directors the
three nominees listed below to the class of directors whose term expires at
the 1998 Annual Meeting of Stockholders. Mr. Gant was last elected as director
by the stockholders at the Annual Meeting of Stockholders in 1992, Mr. Tippett
was elected a director by the Board of Directors in February 1993 and Mr.
Siegel was elected a director by the Board of Directors in December 1993. The
nominees were selected by the Nominating Committee of the Board of Directors.
The Company believes that each nominee will be able and willing to serve
during the ensuing term. If any one or more of them should be unable or choose
not to serve, the Board of Directors may determine to reduce the number of
directors for the ensuing term to such lesser number as will equal the number
of nominees able to serve, or the persons named as proxies may vote in favor
of such other person or persons as the Board of Directors at the time
recommends.
INFORMATION AS TO DIRECTORS AND NOMINEES FOR DIRECTOR
Set forth below is the name and age of each director currently in office and
of each nominee for director, his or her principal occupation for the past
five years, the year each became a director of the Company and the names of
certain other companies in which he or she serves as a director. The
information set forth below is as of February 17, 1995. Jeanette S. Wagner was
elected as a director by the Board of Directors on June 30, 1994, to fill a
vacancy.
<TABLE>
<CAPTION>
YEAR FIRST
DIRECTORS, NOMINEES FOR DIRECTOR, ELECTED
PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE DIRECTOR
- -------------------------------------- --- ----------
<S> <C> <C>
Donald R. Gant(1) (Class II).................................... 66 1987
Limited Partner of The Goldman Sachs Group, L.P., an investment
banking firm, since 1990. Mr. Gant was a General Partner of
Goldman, Sachs & Co. for more than five years prior thereto.
Mr. Gant is a director of Diebold, Incorporated and of ABC
Rail Products Corporation.
Theodore Levitt (Class III)..................................... 69 1990
Edward W. Carter Professor of Business Administration Emeritus,
Harvard Business School since 1990. Professor Levitt was a
professor on the Harvard Business School faculty from 1959 to
1990, and is the former Editor of the Harvard Business Review.
Professor Levitt is a director of Consolidated Natural Gas
Co., Melville Corporation, Saatchi & Saatchi Co., PLC,
Landmark Graphics, Inc. and Sanford C. Bernstein Fund, Inc.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
DIRECTORS, NOMINEES FOR DIRECTOR, ELECTED
PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE DIRECTOR
- -------------------------------------- --- ----------
<S> <C> <C>
Margaret A. McKenna (Class III).................................. 49 1988
President of Lesley College since August 1985. Ms. McKenna is a
director of Consolidated Natural Gas Co. and Best Products Co.,
Inc.
Robert L. Seelert (Class I)...................................... 52 1993
Private investor since February 1994. Mr. Seelert was President
and Chief Executive Officer of Kayser-Roth Corporation, a
legwear company, from May 1991 to February 1994. From 1989 to
1991, Mr. Seelert was President and Chief Executive Officer of
Topco Associates, a supplier of private-label goods and
perishables. Mr. Seelert is a director of Senior Tour Players
Development, Inc.
Robert C. Siegel(1) (Class II)................................... 58 1993
Chairman of the Board, President and Chief Executive Officer of
the Company since December 1993. Previously, Mr. Siegel was
President of the Dockers and Menswear divisions of Levi Strauss
& Co., an apparel manufacturer and distributor, from 1986 to
1993.
Myles J. Slosberg (Class I)...................................... 58 1961
Attorney in private practice since July 1994. From 1991 to July
1994, Mr. Slosberg was an Assistant Attorney General for the
Commonwealth of Massachusetts and from September 1990 to March
1991 was an associate with Stoneman, Chandler & Miller of
Boston, Massachusetts. From September 1989 to August 1990 Mr.
Slosberg was a Law Clerk for the Honorable Rya W. Zobel, U.S.
District Court, District of Massachusetts. Mr. Slosberg was
employed with the Company from 1959 to 1986. He served as the
Executive Vice President of the Company from 1961 to 1986, as
President of Stride Rite International, Inc., the predecessor
to Stride Rite Sourcing International, Inc., from 1985 to 1986,
as President of The Keds Corporation from 1980 to 1985, as
President of Stride Rite Footwear Corp., the predecessor of
Stride Rite Children's Group, Inc.'s wholesale business from
1974 to 1980 and as President of Stride Rite Retail Corp., the
predecessor to Stride Rite Children's Group, Inc.'s retail
business from 1971 to 1974.
W. Paul Tippett, Jr.(1) (Class II)............................... 62 1993
Principal of Ann Arbor Partners, a consulting firm, since 1990.
Mr. Tippett was the Chairman and Chief Executive Officer of the
Council of Great Lakes Industries, an alliance of Canadian and
United States firms in the Great Lakes region, from 1992 to
August 1994 and was President and a Director of Springs
Industries, Inc., a major manufacturer of finished fabrics,
home furnishings and industrial fabrics from 1985 to 1989.
Prior to 1985, Mr. Tippett was Chairman of the Board and Chief
Executive Officer of American Motors Corp., an automobile
manufacturer. Mr. Tippett is a director of Lukens, Inc.
Jeanette S. Wagner (Class I)..................................... 65 1994
President, Estee Lauder International, Inc., a cosmetics
company, since 1975. Mrs. Wagner is a director of American
Greetings Corporation.
</TABLE>
- --------
(1) A current director and a nominee for director at the Company's 1995 Annual
Meeting of Stockholders.
3
<PAGE>
OWNERSHIP OF EQUITY SECURITIES
The following table shows the beneficial ownership, reported to the Company
as of the close of business on February 17, 1995, of Common Stock of the
Company, including shares as to which a right to acquire beneficial ownership
within 60 days exists (for example, through the exercise of stock options,
conversions of securities or through various trust arrangements) within the
meaning of Rule 13d-3(d)(1) under the Securities Exchange Act of 1934, as
amended, (the "1934 Act") of each director and nominee for director, the chief
executive officer, the other executive officers listed in the summary
compensation table and, as a group, of the directors and executive officers.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED PERCENT OF
NAME FEBRUARY 17, 1995(1) CLASS
---- ---------------------- ----------
<S> <C> <C>
Donald R. Gant............................... 14,150(2) (3)
Theodore Levitt.............................. 106,150(4) (3)
Margaret A. McKenna.......................... 7,650(5) (3)
Robert L. Seelert............................ 4,800(6) (3)
Robert C. Siegel............................. 92,000(7) (3)
Myles J. Slosberg............................ 166,230(8) (3)
W. Paul Tippett, Jr. ........................ 11,300(9) (3)
Jeanette S. Wagner........................... 500 (3)
John J. Phelan............................... 0(10) (3)
Robert B. Moore, Jr. ........................ 50,000(11) (3)
Jonathan D. Caplan........................... 50,955(12) (3)
Margaret C. Whitman(13)...................... 741 (3)
John M. Kelliher............................. 62,646(14) (3)
All of the above and other executive officers
as a group (18 persons)..................... 658,372(15) 1.33
</TABLE>
- --------
(1) Based on information furnished by the director, executive or former
executive listed.
(2) Included in the number of shares listed are currently exercisable options
to purchase 5,000 shares, granted pursuant to the Company's 1994 Non-
Employee Director Stock Ownership Plan (the "Directors' Plan"). Not
included in the number of shares listed are 10,603 shares of which
Goldman, Sachs & Co., an investment banking firm with which Mr. Gant is
affiliated as Limited Partner of The Goldman Sachs Group, L.P., is the
beneficial owner. Mr. Gant disclaims beneficial ownership of these 10,603
shares.
(3) Less than 1% of the outstanding shares of Common Stock.
(4) Included in the number of shares listed are currently exercisable options
to purchase 5,000 shares, granted pursuant to the Directors' Plan.
(5) Included in the number of shares listed are currently exercisable options
to purchase 5,000 shares, granted pursuant to the Directors' Plan. Not
included in the number of shares listed are 1,000 shares held in trust for
the benefit of Ms. McKenna's sister, of which Ms. McKenna disclaims
beneficial ownership.
(6) Included in the number of shares listed are options, both currently
exercisable and exercisable within 60 days, to purchase 3,300 shares,
granted pursuant to the Directors' Plan.
(7) Included in the number of shares listed are 90,000 shares Mr. Siegel is
entitled to purchase under the Company's 1975 Executive Incentive Stock
Purchase Plan (the "Incentive Plan").
(8) Included in the number of shares listed are currently exercisable options
to purchase 5,000 shares, granted pursuant to the Directors' Plan. Not
included in the number of shares listed are (a) 26,300 shares of Common
Stock held in an irrevocable trust created on May 11, 1976 of which Mr.
Slosberg is the settlor and Mr. Slosberg's wife is one of two trustees,
for the benefit of the Slosberg's children, and under certain
circumstances, for the benefit of Mr. Slosberg's wife, as a remainder
interest and (b) 175,400 shares of Common Stock held in an irrevocable
trust created on December 2, 1942 of which Mr. Slosberg's father was the
settlor and Mr. Slosberg's brother is one of two trustees, as of May 22,
1991, for the benefit of Mr. Slosberg's mother and for Mr. Slosberg and
his siblings. Mr. Slosberg disclaims beneficial ownership of these 201,700
shares of Common Stock.
(9) Included in the number of shares listed are options, both currently
exercisable and exercisable within sixty (60) days, to purchase 3,300
shares, granted pursuant to the Directors' Plan.
(10) Mr. Phelan, who is deceased as of February 17, 1995, served as President
and Chief Executive Officer in a consulting capacity from June 27, 1993
to December 13, 1993.
4
<PAGE>
(11) Consists of 50,000 shares Mr. Moore is entitled to purchase under the
Incentive Plan.
(12) Includes 50,000 shares Mr. Caplan is entitled to purchase under the
Incentive Plan.
(13) Ms. Whitman resigned as President of Stride Rite Children's Group, Inc.
effective February 17, 1995.
(14) Included in the number of shares listed are currently exercisable options
to purchase 18,600 shares, granted pursuant to the Incentive Plan and
2,000 shares held in trust for Mr. Kelliher's children.
(15) Includes 500 shares and currently exercisable options to purchase 90,750
shares under the Incentive Plan beneficially owned by executive officers
not separately listed above.
According to a Schedule 13G, dated February 7, 1995, filed with the
Securities and Exchange Commission (the "SEC") by The Prudential Insurance
Company of America, Prudential Plaza, Newark, NJ 07102-3777, such entity
beneficially owned 3,905,926 shares of the Company's Common Stock as of
December 31, 1994, or 7.88% of the Common Stock outstanding as of February 17,
1995. According to such Schedule 13G, such entity had sole power to vote or
direct the vote with respect to 1,800,620 shares, shared power to vote or
direct the vote with respect to 1,953,206 shares, sole power to dispose or
direct the disposition with respect to 1,800,620 shares and shared power to
dispose or direct the disposition with respect to 2,105,306 shares. According
to such Schedule 13G, such entity holds 7,300 shares of the Company's Common
Stock for its own account and 3,898,626 shares of the Company's Common Stock
for the benefit of its clients by its separate accounts, externally managed
accounts, registered investment companies, subsidiaries or other affiliates.
As of February 17, 1995, the Company was not aware of any other person who was
the beneficial owner of more than 5% of the Common Stock.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During the Company's 1994 fiscal year, which ended December 2, 1994, the
Board of Directors held eight meetings. All of the directors attended at least
75% of the total number of meetings of the Board of Directors during the
period they served as such and all of the committees of the Board on which
they respectively served during the 1994 fiscal year.
As permitted by the By-Laws of the Company, the Board has established
certain committees to assist it in the discharge of its responsibilities.
These committees are appointed annually by the Board. The Board had standing
Audit, Compensation, Nominating and Investment Committees during the 1994
fiscal year.
The Audit Committee met five times during the 1994 fiscal year and is
composed of Messrs. Gant (Chairman), Seelert and Slosberg and, since June 30,
1994, Mrs. Wagner. The Audit Committee recommends the selection of independent
auditors to the Board of Directors, reviews the overall scope of, as well as
the results of, the annual audit, and reviews the overall internal controls of
the Company.
The Compensation Committee met eight times during the 1994 fiscal year and
is composed of Ms. McKenna (Chairperson), Mr. Gant, Professor Levitt and Mr.
Tippett. Members of the Compensation Committee are non-employee directors of
the Company and are not eligible to participate in any Company compensation
plan administered by the Committee or the Board of Directors. The Compensation
Committee reviews executives' salaries, administers various incentive
compensation plans and recommends action to the Board of Directors on matters
related to compensation for officers and other key employees of the Company
and its subsidiaries. The Compensation Committee Report for the 1994 fiscal
year is set forth herein, commencing on page 15.
The Nominating Committee met two times during the 1994 fiscal year and is
composed of Professor Levitt (Chairman), Ms. McKenna, Mr. Tippett and Mrs.
Wagner. The Nominating Committee recommends
5
<PAGE>
to the Board of Directors the selection of directors to be nominated. With
respect to the 1996 Annual Meeting, the Nominating Committee will consider
nominees recommended by security holders received by the Company on or before
October 30, 1995, addressed to the Office of the Clerk, The Stride Rite
Corporation, Five Cambridge Center, Cambridge, Massachusetts 02142.
The Investment Committee met five times during the 1994 fiscal year. It is
composed of Mr. Slosberg (Chairman) and Messrs. Seelert and Siegel. Prior to
the 1994 Annual Meeting of Stockholders, at which Arnold Hiatt did not stand
for reelection, Mr. Hiatt also served on the Investment Committee. The
Investment Committee recommends the selection of independent investment
managers for the investment of the Company's pension funds and monitors the
performance of these investments.
COMPENSATION OF DIRECTORS
During the 1994 fiscal year, each director who was not an employee of the
Company or any of its subsidiaries received an annual retainer of $18,500 and a
meeting fee of $750 for each meeting of the Board and any of its standing
committees attended held in connection with a Board meeting (except that if
such director acted as a committee chairperson, he or she received a meeting
fee of $1,000 for each such committee meeting he or she chaired). In addition,
directors received a meeting fee of $1,500 for each non-telephonic committee
meeting not held in association with a Board meeting (except that if such
director acted as a committee chairperson, he or she received a meeting fee of
$2,000 for each such non-telephonic committee meeting not held in association
with a Board meeting he or she chaired). Each director receives reimbursement
for expenses incurred in attending Board and committee meetings.
In addition, each non-employee director received an option to purchase 5,000
shares of the Common Stock of the Company and an award of 500 shares of Common
Stock on July 5, 1994, pursuant to, and upon the effectiveness of, the
Directors' Plan. The Directors' Plan provides that each non-employee director
will receive a grant of 500 shares of Common Stock on the first business day
following each annual meeting of stockholders and that each non-employee
director will receive an option to purchase 5,000 shares of Common Stock, upon
becoming a director. Accordingly, each non-employee director will receive an
award of 500 shares of Common Stock on April 13, 1995.
Options under the Directors' Plan are granted with an exercise price equal to
the market price on the date of grant, defined as the closing price for the
Company's Common Stock on the New York Stock Exchange--Composite Tape. The
exercise price for all currently outstanding options is thus $12.875 per share,
the market price of the Common Stock on July 5, 1994. Each option under the
Director's Plan is granted with a term of ten years from the date of grant, and
becomes exercisable in three installments: as to 1,600 shares on the first
anniversary of the grant and with respect to an additional 1,700 shares on each
of the second and third anniversaries of the date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Goldman, Sachs & Co., an investment banking firm of which Donald R. Gant, a
member of the Compensation Committee, was a General Partner until December
1990, serves as financial advisor to the Company. Mr. Gant is currently a
limited partner of the Goldman Sachs Group, L.P., an affiliate of Goldman,
Sachs & Co. The Company paid Goldman, Sachs & Co. a fee of $100,000 plus
expenses for services rendered during the 1994 fiscal year. Goldman Sachs Asset
Management, a subsidiary of Goldman, Sachs & Co., provides investment
management services for the Company's pension plans and was paid a fee by such
6
<PAGE>
plans of $156,575 for services rendered in fiscal 1994. Also, in fiscal 1994,
Goldman, Sachs & Co. purchased and sold securities for the Company and was paid
gross commissions (before the deduction of expenses) of $40,720.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table shows the compensation for the past three fiscal years of
the Chief Executive Officer and each of the other four most highly compensated
executive officers (the "named executive officers") as of the end of the
Company's 1994 fiscal year.
7
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------- ------------------------------
OTHER
ANNUAL ALL OTHER
COMPEN- LTIP COMPEN-
NAME AND FISCAL SALARY BONUS SATION OPTIONS PAYOUTS SATION
PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) (#)(3) ($)(4) ($)(5)
- ------------------ ------ ------- ------- ------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert C. Siegel 1994(6) 467,714 225,000 65,083(7) 370,000(8) -- 114,126
Chairman of the Board, 1993 -- -- -- -- -- --
President & Chief Exec-
utive Officer 1992 -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------
Robert B. Moore, Jr. 1994 210,000 92,794 2,640 55,000(9) -- 18,179
President, Sperry Top-
Sider, Inc., 1993 200,000 42,555(10) 183 10,000(9) 32,445(10) 13,505
a subsidiary of the
Company 1992(11) 33,333 6,298 46,303(12) 15,000(9) 5,710 2,481
- -----------------------------------------------------------------------------------------------------------------
Jonathan D. Caplan 1994 222,715 78,750 47,340(13) 65,000(14) -- 25,574
President, The Keds
Corporation, 1993 200,000 95,550 4,397 10,000(15) 39,634 12,555
a subsidiary of the
Company(16) 1992(17) 95,000 58,745 17,213(18) 15,000(19) 16,255 2,479
- -----------------------------------------------------------------------------------------------------------------
Margaret C. Whitman 1994 197,404 46,200 2,858 15,000(20) -- 21,774
President, Stride Rite
Children's 1993 183,333 28,863 -- 10,000(20) 28,403 15,580
Group, Inc., a subsidi-
ary of the 1992 29,167 8,923 -- 15,000(20) 4,981 1,455
Company(21)
- -----------------------------------------------------------------------------------------------------------------
John M. Kelliher 1994 183,000 31,993 -- 20,000(22) -- 11,810
Vice President, Fi-
nance, 1993 176,000 20,328 -- 5,000 59,656 12,097
Treasurer and Control-
ler 1992 153,000 50,725 -- -- 66,709 9,401
</TABLE>
- --------
(1) Amounts awarded under the Annual Incentive Compensation Plan for the
respective fiscal years. The amounts awarded to Mr. Siegel and Mr. Caplan
for 1994 were guaranteed pursuant to Mr. Siegel's employment agreement
with the Company and an agreement made with Mr. Caplan when he became
President of The Keds Corporation, respectively. The amount awarded to Mr.
Caplan for 1992, together with the LTIP payout for 1992, were guaranteed
pursuant to an agreement made with Mr. Caplan when he was hired by the
Company.
(2) Amounts reimbursed by the Company for the payment of taxes on non-
deductible relocation expenses and/or imputed interest on zero-interest
loans. Except for Mr. Siegel with respect to fiscal 1994, Mr. Moore with
respect to fiscal 1992 and Mr. Caplan with respect to fiscal 1994 and
1992, no amounts for executive perquisites and other personal benefits,
securities or property are shown because the aggregate dollar amount per
executive is less than the lesser of either $50,000 or 10% of annual
salary and bonus.
(3) Amounts for 1992, 1993 and 1994 (with respect to grants made within fiscal
1994) awarded under the 1975 Executive Incentive Stock Purchase Plan (the
"Incentive Plan"). Awards made in fiscal 1995, with respect to fiscal
1994, were granted under the proposed 1995 Long-Term Growth Incentive Plan
(the "1995 Plan"), the grants of which are subject to stockholder approval
and the effectiveness of a registration statement covering the options and
Common Stock underlying options or otherwise issuable under the 1995 Plan.
(4) Cash and market value of Common Stock (as of the date of award) awarded
pursuant to the Key Executive Long-Term Incentive Plan. No further awards
will be made under this Plan, and outstanding awards payable for the
cycles ending in 1995 and 1996 will be canceled, after the effectiveness
of the 1995 Plan.
(5) Amounts awarded include (i) payments of dividend equivalents on shares of
Common Stock subject to unexercised options to purchase granted under the
Incentive Plan of $110,200 for Mr. Siegel in respect of fiscal 1994,
$11,875, $6,200 and $1,275 for Mr. Moore in respect of fiscal 1994, 1993
and 1992, respectively, $19,000, $5,250 and $1,600 for Mr. Caplan in
respect of fiscal 1994, 1993 and 1992, respectively, $15,200, $8,750 and
$1,275 for Ms. Whitman in respect of fiscal 1994, 1993 and 1992,
respectively and $8,841, $8,844 and $6,283 for Mr. Kelliher in respect of
fiscal 1994, 1993 and 1992, respectively, (ii) Company contributions to
the executive's Employee Savings and Investment Plan account of $2,726 for
Mr. Siegel in respect of fiscal 1994, $2,310 and $2,249 for Mr. Moore in
respect of fiscal 1994 and 1993, respectively, $2,310 and $2,249 for Mr.
Caplan in respect of fiscal 1994 and 1993, respectively, $2,310 and $2,192
for Ms. Whitman in respect of fiscal 1994 and 1993, respectively, and
$2,310, $2,249 and $2,182 for Mr. Kelliher in respect of fiscal 1994, 1993
and 1992, respectively, (iii) amounts of insurance premiums paid by the
Company for
8
<PAGE>
the term life insurance for the benefit of the executive of $1,200 for Mr.
Siegel in respect of fiscal 1994, $720, $1,140 and $204 for Mr. Moore in
respect of fiscal 1994, 1993 and 1992, respectively, $720, $1,140 and $581
for Mr. Caplan in respect of fiscal 1994, 1993 and 1992, respectively,
$720, $1,069 and $180 for Ms. Whitman in respect of fiscal 1994, 1993 and
1992, respectively, and $659, $1,004 and $936 for Mr. Kelliher in respect
of fiscal 1994, 1993 and 1992, respectively, and (iv) imputed interest at
the applicable federal rate on outstanding zero-interest loan balances of
$3,274, $3,916 and $1,002 for Mr. Moore for fiscal 1994, 1993 and 1992,
respectively, $3,544, $3,916 and $298 for Mr. Caplan in respect of fiscal
1994, 1993 and 1992, respectively, and $3,544 and $3,569 for Ms. Whitman in
respect of fiscal 1994 and 1993 respectively.
(6) Mr. Siegel became Chairman of the Board, President and Chief Executive
Officer of the Company on December 13, 1993. Between December 3, 1993 and
December 13, 1993, John J. Phelan, a consultant to the Company, served as
Interim President and Chief Executive Officer. For serving in this capacity
from June 27, 1993 to December 13, 1993, Mr. Phelan received $135,000 as a
consulting fee; information with respect to Mr. Phelan's compensation
during this period is contained in the Company's Proxy Statement for the
1994 Annual Meeting.
(7) Consists of a reimbursement for tax planning of $805, a payment to cover
taxes of $49,890 relating to relocation expenses and an automobile leasing
allowance of $14,388.
(8) Consists of options to purchase 290,000 shares granted pursuant to Mr.
Siegel's October 21, 1993 employment agreement with the Company under the
Incentive Plan and options to purchase 80,000 shares granted pursuant to
the 1995 Plan.
(9) Includes options for 30,000 shares granted in fiscal 1995 in respect of
fiscal 1994, under the 1995 Plan and options for 25,000, 10,000 and 15,000
shares granted in respect of fiscal 1994, 1993 and 1992, respectively under
the Incentive Plan, pursuant to Mr. Moore's employment arrangement with the
Company.
(10) Mr. Moore's employment arrangement included a guaranteed aggregate payment
for annual bonus and long-term incentive plan payouts of $75,000, in
respect of fiscal 1993.
(11) Mr. Moore became an employee of the Company on October 5, 1992.
(12) Consists of a payment to cover taxes of $44,636 relating to relocation
expenses, and an automobile leasing allowance of $1,667.
(13) Consists of a reimbursement for tax planning of $3,500, a payment to cover
taxes of $33,215 relating to relocation expenses and an automobile leasing
allowance of $10,625.
(14) Includes options for 40,000 shares granted in fiscal 1995 in respect of
fiscal 1994, under the 1995 Plan and options for 25,000 shares, under the
Incentive Plan, pursuant to Mr. Caplan's promotion as President of The
Keds Corporation.
(15) Amounts awarded, under the Incentive Plan, pursuant to Mr. Caplan's
employment arrangement with the Company.
(16) Mr. Caplan became President of The Keds Corporation on February 11, 1994;
prior to that date, Mr. Caplan was President of Stride Rite Children's
Group, Inc.
(17) Mr. Caplan became an employee of the Company on June 1, 1992.
(18) Consists of a payment to cover taxes of $12,563 relating to relocation
expenses and an automobile leasing allowance of $4,650.
(19) Includes options for 5,000 shares granted in fiscal 1993 in respect of
fiscal 1992, and options for 10,000 shares, each under the Incentive Plan,
pursuant to Mr. Caplan's employment arrangement with the Company.
(20) Includes options for 15,000, 10,000 and 15,000 shares granted in respect
of fiscal 1994, 1993 and 1992, respectively under the Incentive Plan,
pursuant to Ms. Whitman's employment arrangement with the Company, which
were forfeited due to Ms. Whitman's resignation effective February 17,
1995.
(21) Ms. Whitman became President of Stride Rite Children's Group, Inc. on
February 11, 1994 and resigned from such position effective February 17,
1995; prior to that date Ms. Whitman was Executive Vice President of The
Keds Corporation from October 1993 to February 1994, Senior Vice President
of Marketing and Product Development of The Keds Corporation from January
1993 to October 1993 and Vice President, Strategic Planning of the Company
from October 1992 to January 1993.
(22) Options granted in fiscal 1995 in respect of fiscal 1994, under the 1995
Plan.
9
<PAGE>
Stock Option Grants
The following table shows information concerning options to purchase Company
Common Stock granted with respect to fiscal 1994 to the named executive
officers pursuant to the Incentive Plan and the proposed 1995 Plan. The grants
under the 1995 Plan are subject to stockholder approval and the registration
of the options and stock issuable under the 1995 Plan under the Securities Act
of 1933, as amended, (the "1933 Act"). See Item 2 of this Proxy Statement.
OPTION GRANTS FOR FISCAL YEAR 1994
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
POTENTIAL
% OF REALIZABLE VALUE AT
TOTAL ASSUMED ANNUAL
OPTIONS MARKET RATES OF STOCK PRICE
GRANTED TO EXERCISE PRICE ON APPRECIATION
OPTIONS EMPLOYEES OR BASE DATE OF EXPIRA- FOR OPTION TERM(1)
GRANTED FOR FISCAL PRICE GRANT TION -----------------------------
NAME (#)(2) YEAR ($/SH) ($/SH) DATE 0%($) 5%($) 10%($)
---- ---------- ---------- -------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert C. Siegel........ 30,000(3) 2.90 0.25 18.75 12/13/03 555,000 908,753 1,451,480
60,000(4) 5.80 0.25 18.75 12/13/03 1,110,000 1,817,506 2,902,960
200,000(5) 19.33 15.875(6) 18.75 12/13/03 575,000 2,933,355 6,551,534
80,000(7) 7.73 12.25 12.25 2/10/05 0 616,317 1,561,868
- -----------------------------------------------------------------------------------------------------------
Robert B. Moore, Jr..... 25,000(8) 2.42 0.25 13.875 10/01/04 340,625 558,773 893,454
30,000(7) 2.90 12.25 12.25 2/10/05 0 231,119 585,700
- -----------------------------------------------------------------------------------------------------------
Jonathan D. Caplan...... 25,000(8) 2.42 0.25 15.75 2/10/04 387,500 635,127 1,015,036
40,000(7) 3.87 12.25 12.25 2/10/05 0 308,158 780,934
- -----------------------------------------------------------------------------------------------------------
Margaret C. Whitman(9).. 15,000(8) 1.45 0.25 15.75 2/10/04 232,500 381,076 609,022
- -----------------------------------------------------------------------------------------------------------
John M. Kelliher........ 20,000(7) 1.93 12.25 12.25 2/10/05 0 154,079 390,467
</TABLE>
- --------
(1) Based upon the market price on the date of grant and an annual
appreciation at the rate stated of such market price through the
expiration date of such options. The dollar amounts under these columns
are the result of calculations at 0% and at the 5% and 10% rates set by
the SEC and therefore are not intended to forecast possible future
appreciation, if any, of the Company's stock price. The Company did not
use an alternative formula for a grant date valuation, as the Company is
not aware of any formula which will determine with reasonable accuracy a
present value based on future unknown or volatile factors.
(2) The options were granted by the Compensation Committee under the Incentive
Plan and the 1995 Plan to Mr. Siegel on December 13, 1993 and February 10,
1995, respectively, to Mr. Moore under the Incentive Plan and the 1995
Plan on October 1, 1994 and February 10, 1995, respectively, to Mr. Caplan
under the Incentive Plan and the 1995 Plan on February 10, 1994 and
February 10, 1995, respectively, to Ms. Whitman under the Incentive Plan
on February 10, 1994 and to Mr. Kelliner under the 1995 Plan on February
10, 1995, all with respect to the 1994 fiscal year.
(3) Options were exercisable upon grant on December 13, 1993.
(4) Mr. Siegel's right to purchase these shares vested 20,000 shares on
December 13, 1994; and will vest 20,000 shares on December 13, 1995 and
20,000 shares on December 13, 1996.
(5) Mr. Siegel's right to purchase these shares vested 40,000 shares on
October 21, 1994; and will vest 40,000 shares on October 21, 1995, 40,000
shares on October 21, 1996, 40,000 shares on October 21, 1997 and 40,000
shares on October 21, 1998.
(6) The New York Stock Exchange--Composite Tape closing price on October 21,
1993, the date of Mr. Siegel's employment agreement with the Company.
(7) Options become exercisable as to one-third of the number granted on the
first, second and third anniversaries of the date of grant.
(8) Options are immediately exercisable but carry restrictions on resale or
other transfer of any Common Stock purchased pursuant to the grants. The
restrictions lapse as to one-third of the granted shares at the end of the
third year, the fourth year and the fifth year following the date of
grant, provided the executive is then employed by the Company.
(9) Ms. Whitman forfeited these options upon her resignation, effective
February 17, 1995.
10
<PAGE>
Aggregated Option Exercises and Option Values
The following table shows information concerning the exercise of stock
options during fiscal 1994 by each of the named executive officers and the
fiscal year-end value of unexercised options.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1994
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED UNEXERCISED IN-
OPTIONS AT THE-MONEY
SHARES ACQUIRED VALUE FY-END (#) FY-END ($)(1)
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE EXERCISABLE
---- --------------- ------------ --------------------- ---------------
<S> <C> <C> <C> <C>
Robert C. Siegel........ 0 0 70,000(2) $345,000
- ----------------------------------------------------------------------------------------------
Robert B. Moore, Jr. ... 0 0 50,000(3) $575,000
- ----------------------------------------------------------------------------------------------
Jonathan D. Caplan...... 0 0 50,000(3) $575,000
- ----------------------------------------------------------------------------------------------
Margaret C. Whitman..... 0 0 40,000(3)(4) $460,000
- ----------------------------------------------------------------------------------------------
John M. Kelliher........ 2,668 $41,354(5) 22,600(3) $259,900
</TABLE>
- --------
(1) Represents the difference between the closing price of the Company's Common
Stock on December 2, 1994 ($11.75) and the exercise price of the options,
multiplied by the number of shares represented by such options.
(2) Represents options to purchase 30,000 shares exercisable on December 13,
1993 (the date of grant) at an exercise price of $.25 per share, and
options to purchase 40,000 shares at an exercise price of $15.875, which
represents the closing price of the Company's Common Stock on the date the
Company entered into an employment agreement with Mr. Siegel (October 21,
1993).
(3) Options are immediately exercisable but carry restrictions on resale of any
Common Stock purchased pursuant to the grants. The restrictions lapse as to
one-third of the granted shares at the end of the third year, the fourth
year and the fifth year following the date of grant (provided the executive
is employed by the Company through such date).
(4) Ms. Whitman forfeited her options upon her resignation effective February
17, 1995.
(5) Represents the difference between the closing price of the Company's Common
Stock on February 14, 1994 ($15.75), the date of exercise, and the $.25
exercise price.
11
<PAGE>
Long-Term Incentive Plan Awards
The following table shows the number of performance shares awarded to each
named executive officer for fiscal 1994 under Cycle 10 of the Company's Key
Executive Long-Term Incentive Plan. This Plan will be terminated and all
outstanding awards canceled if the proposed 1995 Plan is approved by
stockholders; see Item 2 of this Proxy Statement.
LONG-TERM INCENTIVE PLAN AWARDS IN FISCAL 1994
<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE OR
SHARES, UNITS OTHER PERIOD
OR OTHER UNTIL MATURA-
NAME RIGHTS (#)(1) TION OF PAYOUT
---- ------------- -----------------
<S> <C> <C>
Robert C. Siegel.............................. 14,174 November 29, 1996
- --------------------------------------------------------------------------------
Robert B. Moore, Jr. ......................... 3,946 November 29, 1996
- --------------------------------------------------------------------------------
Jonathan D. Caplan............................ 4,021 November 29, 1996
- --------------------------------------------------------------------------------
Margaret C. Whitman........................... 3,523 November 29, 1996
- --------------------------------------------------------------------------------
John M. Kelliher.............................. 3,439 November 29, 1996
</TABLE>
- --------
(1) Performance shares are earned on achievement of a specified level of
aggregate dollar amount of income at the end of each period of three
consecutive fiscal years. If the income goal is achieved in the amount
targeted, the payment to which a participant will be entitled is an amount
equal to the fair market value of the Company's Common Stock (the average
of the closing prices on the ten trading days prior to and including the
end of the period and the ten trading days after the end of the period)
times the number of performance shares earned. The payout will be reduced
by 3 1/3% for each percentage point by which achievement fell short of
100% of the goal and will be increased by 3 1/3% for each percentage point
by which achievement exceeded 100% of the goal. No payout will be made
unless the goal was achieved at least at an 85% level or for achievement
in excess of 115% of the goal.
EMPLOYMENT AGREEMENT
On October 21, 1993, the Company entered into an Employment Agreement with
Robert C. Siegel for Mr. Siegel's service to the Company as Chairman of the
Board, President and Chief Executive Officer. Mr. Siegel's employment period
commenced on December 13, 1993 and will continue, unless earlier terminated as
provided in the Employment Agreement, through December 31, 1996. Mr. Siegel's
employment shall be terminated under the terms of the Employment Agreement if
Mr. Siegel is not reelected to serve as a director of the Company.
Mr. Siegel's initial annual salary was $480,000. His agreement provides for
periodic annual reviews and increases in such rate as shall be determined in
the sole discretion of the Board of Directors. The Board has determined that
Mr. Siegel's annual salary will be $520,000 for fiscal 1995. In addition, Mr.
Siegel shall be paid additional incentive compensation, as follows: (i) an
annual bonus pursuant to the Company's Annual Incentive Compensation Plan,
pursuant to which Mr. Siegel's "bonus percentage" will be 50%, with a minimum
bonus of $225,000 with respect to fiscal 1994, (ii) compensation pursuant to
the Company's Key Executive Long-Term Incentive Plan, (iii) options pursuant
to the Company's 1975 Executive Incentive Stock Purchase Plan to purchase (a)
60,000 shares of the Company's Common Stock at a purchase price of $.25 per
share, which vest as to 20,000 shares on each of December 13, 1994, 1995 and
1996, (b) 30,000 shares of the Company's Common Stock at a purchase price of
$.25 per share, which is immediately exercisable and (c) 200,000 shares of the
Company's Common Stock at a purchase price per share equal to the closing
price of such Common Stock on the New York Stock Exchange--Composite Tape on
October 21, 1993 ($15.875),
12
<PAGE>
which rights to purchase vest with respect to 40,000 shares on each of October
21, 1994, 1995, 1996, 1997 and 1998.
Mr. Siegel is also entitled to receive certain enumerated perquisites and to
participate in the various employee benefit plans which the Company maintains
or adopts during the employment period.
The Company also paid, pursuant to his Employment Agreement, various expenses
in connection with Mr. Siegel's relocation to the Boston area including (i)
certain expenses with respect to the sale of his principal residence in
California, (ii) Mr. Siegel's reasonable expenses incurred in connection with
moving Mr. Siegel's personal property and family to the Boston area, (iii)
certain living expenses incurred by Mr. Siegel from the date of his Employment
Agreement to the date Mr. Siegel established a permanent residence in the
Boston area and (iv) certain travel expenses between Boston and California
until the time Mr. Siegel established a permanent residence in the Boston area.
In addition and also in accordance with his Employment Agreement, the Company
purchased Mr. Siegel's residence in California, for an amount equal to
$1,663,840, including expenses of purchase.
The Employment Agreement also provides for severance payments to Mr. Siegel
in the event that the Company terminates Mr. Siegel's employment during the
employment period as stated in the Agreement, for any reason other than cause,
equal to the greater of the remaining payments due under the Employment
Agreement or 12 months' salary plus continued participation in benefit plans.
For purposes of Mr. Siegel's Agreement, cause is defined as (i) act or acts of
dishonesty, (ii) the commission of a felony or an act of moral turpitude, (iii)
a wrongful act resulting in or intended to result in gain or personal
enrichment at the expense of the Company, (iv) a willful act constituting a
material violation of the federal securities laws, (v) material insubordination
or a material violation of the Company's conflict of interest statement or
other policies or (vi) a breach by Mr. Siegel of a material provision of the
Employment Agreement, which is not timely cured. Mr. Siegel has also entered
into a Severance Agreement with the Company as described under the heading
"Executive Termination Agreements" below.
RETIREMENT INCOME PLAN
The Company's Retirement Income Plan, as amended effective as of January 1,
1989 (the "Retirement Plan"), is a non-contributory defined benefit pension
plan. For salaried, management, sales and non-production hourly employees, the
Retirement Plan covers basic compensation received from the Company and its
participating subsidiaries, excluding overtime payments, commissions, bonuses
and any other additional compensation, and for commissioned sales personnel
whose compensation is derived wholly from commissions, the Retirement Plan
covers 80% of the commissions received (the "Earnings"). The Retirement Plan
provides for an annual pension at normal retirement age, 65 (with a minimum of
five years of service), determined as follows: (i) for credited service (the
"Credited Service") prior to January 1, 1984, 1% of average annual Earnings
(based on 1981, 1982 and 1983 Earnings) up to $9,000 and 1.75% of average
annual Earnings in excess of $9,000 multiplied by the number of years of
Credited Service prior to January 1, 1984, plus (ii) for Credited Service after
January 1, 1984 but prior to January 1, 1989, 1.25% of Earnings up to $15,000
for each year of service and 2% of Earnings in excess of $15,000 for each year
of service and (iii) for Credited Service after January 1, 1989, 1.35% of
Earnings up to $15,000 for each year of service and 2% of Earnings in excess of
$15,000 for each year of service. If the total number of years of Credited
Service exceeds 34 years, an amount equal to 1.80% of annual Earnings for each
additional year of service will be added to the retirement benefit.
13
<PAGE>
The following table shows, as to each of the named executive officers, his or
her (i) number of years of Credited Service as of February 17, 1995 and (ii)
estimated annual benefits payable upon retirement at age 65. The amounts
presented are on a straight-life annuity basis, but alternative methods of
payment are available at the option of the participant. In no event shall
benefits payable under the Retirement Plan exceed the maximum allowed under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The
benefit payment under the Retirement Plan are not subject to any deductions for
Social Security benefits or other offset amounts.
<TABLE>
<CAPTION>
NUMBER OF YEARS OF ESTIMATED ANNUAL
CREDITED SERVICE BENEFITS PAYABLE
AS OF UPON RETIREMENT
NAME FEBRUARY 17, 1995 AT AGE 65*
- ---- ------------------ ----------------
<S> <C> <C>
Robert C. Siegel............................ 1 $20,076
Robert B. Moore, Jr. ....................... 2 $63,129
Jonathan D. Caplan.......................... 2 $75,030
Margaret C. Whitman......................... 2 $ 0**
John M. Kelliher............................ 13 $88,846
</TABLE>
- --------
* Assumes continued service until age 65 at current salary levels.
** Ms. Whitman is not eligible to receive benefits under the Retirement Plan
due to her resignation effective February 17, 1995.
EXECUTIVE TERMINATION AGREEMENTS
The Company has entered into severance agreements with 11 key executive
officers, including each of the named executive officers in the summary
compensation table. These agreements provide that, if within two years after a
change in control of the Company, the Company chooses to terminate the
executive's employment (other than for cause, death, disability or retirement)
or if the executive chooses to leave for good reason, the Company must provide
certain specified severance benefits. A change in control of the Company
includes the acquisition by a person of 25% of the Company's voting securities,
a change of a majority of the members of the Board of Directors of the Company,
or approval by the stockholders of the Company of a reorganization, merger,
consolidation, liquidation or dissolution of the Company or a sale of
substantially all of the Company's assets.
Severance benefits under the agreements include the present value, using a
10% discount rate, of three years or one and one-half years (depending on the
executive) of base salary, annual bonus, long-term incentive awards and
dividend equivalents under the 1975 Executive Incentive Stock Purchase Plan,
based on certain assumptions contained in the agreements. In addition,
executives are entitled to receive an additional payment in an amount
sufficient to make them whole for any excise tax on excess parachute payments
imposed under Section 4999 of the Internal Revenue Code of 1986, as amended,
(the "Code"). All amounts earned by the executive but not yet distributed to
him or her under the incentive plans, and an amount equal to the present value
of additional retirement benefits which would have been earned by the executive
had he or she remained in the Company's employ for an additional period of 36
months or 18 months, depending on the individual, are to be paid to the
executive. The agreements also provide for the lapse, upon a change in control,
of all restrictions on options granted under the 1975 Executive Incentive Stock
Purchase Plan and any successor plan, including the proposed 1995 Long-Term
Growth Incentive Plan.
Each agreement expired December 31, 1994 and was then extended for an
additional one-year period. Each agreement will be further extended
automatically for additional one-year periods thereafter unless the
14
<PAGE>
Company gives notice three months in advance of its expiration that the Company
does not wish to extend such agreement for another year. Each agreement was
restated and re-executed as of February 17, 1995. In addition, if a change in
control of the Company occurs during the term of such agreement, the agreement
provides that it will remain in effect for an additional two years. No amounts
have to date been paid to any person under the agreements.
COMPENSATION COMMITTEE REPORT
The Compensation Committee is composed of Ms. McKenna (Chairperson), Mr.
Gant, Professor Levitt and Mr. Tippett. The four members of the Compensation
Committee are non-employee directors and are ineligible to participate in any
of the compensation plans which are administered by the Committee or the Board
of Directors.
This report relates to Robert C. Siegel and all of the executive officers of
the Company. The executive officers of the Company covered by the SEC's rules
regarding disclosure of detailed compensation information for the 1994 fiscal
year are: Robert C. Siegel, Robert B. Moore, Jr., Jonathan D. Caplan, Margaret
C. Whitman and John M. Kelliher. On December 13, 1993, Robert C. Siegel joined
the Company as Chairman of the Board, President and Chief Executive Officer.
Mr. John J. Phelan served as Interim President and Chief Executive Officer for
ten days during the fiscal year and was discussed in the Compensation Committee
Report in the 1994 Proxy Statement. Jonathan D. Caplan and Margaret C. Whitman
assumed their positions as President, The Keds Corporation, and President,
Stride Rite Children's Group, Inc., respectively, on February 10, 1994, having
served in other capacities with the Company prior to that date. Ms. Whitman
resigned as President of Stride Rite Children's Group, Inc. effective February
17, 1995.
Compensation Philosophy
The Company's executive compensation program is designed to be closely linked
to corporate performance and returns to stockholders. To this end, the Company
has developed an overall compensation strategy and specific compensation plans
that tie a significant portion of executive compensation to the Company's
success in meeting specified performance goals and to appreciation in the price
of the Company's Common Stock. The overall objectives of this strategy are to
attract and retain high quality executive talent, to motivate these executives
to achieve the Company's strategic goals and to link executive and stockholder
interests.
Each year the Compensation Committee reviews Company, division and personal
performance and compares stock price appreciation with executive compensation
levels. An independent executive compensation consultant is used to assess the
competitiveness of the current executive compensation program in relation to
those of other public corporations with which the Company competes for
executive talent. The corporations whose compensation practices are studied as
part of this comparative review are not limited to the S & P Shoe Index
participant companies but rather include the full range of corporations with
which the Company competes for executive talent both within and outside the
shoe industry. One result of the review conducted by the Compensation Committee
in 1994 is the proposal to adopt The Stride Rite Corporation 1995 Long-Term
Growth Incentive Plan (the "1995 Plan") in lieu of both the 1975 Executive
Incentive Stock Purchase Plan (the "Incentive Plan") and the Company's Key
Executive Long-Term Incentive Plan for future years, and the amendment of the
Annual Incentive Compensation Plan (the "Annual Plan"), all as described more
fully below.
15
<PAGE>
The key elements of the Company's executive compensation in 1994 consisted of
four components, each of which was intended to serve the overall compensation
philosophy: base salary, the Annual Plan, the Key Executive Long-Term Incentive
Plan and the Incentive Plan. While the elements of compensation described below
are considered separately, the Compensation Committee also evaluates the full
compensation package afforded by the Company to each individual, including
pension benefits, severance plans, insurance and other benefits.
Effective beginning in the Company's fiscal year 1995, publicly traded
corporations will not be permitted to deduct compensation in excess of
$1,000,000 paid to certain top executives, unless the compensation qualifies as
"performance-based compensation". The Compensation Committee is still studying
the effect of this limitation on the Company's compensation programs, but has
determined that it is unlikely that any compensation paid by the Company in
fiscal 1995 will be nondeductible as a result of the $1,000,000 limit.
Base Salary
Base salaries for executive officers are determined by evaluating the
responsibilities of the position held and the experience of the individual, and
by reference to the competitive marketplace for executive talent, including a
comparison to base salaries for comparable positions at other companies.
Executives' base salaries are reviewed by the Compensation Committee on an
annual basis and adjustments are determined by (i) evaluating the performance
of the Company and of each executive officer, (ii) considering changes in
responsibilities for executives, (iii) with respect to executive officers with
responsibility for a particular business unit, considering the unit's financial
results and (iv) considering increases in median pay levels for comparable
positions at other companies and salary increases granted to other employees of
the Company, aiming to implement similar increases to maintain a competitive
position.
The base salary for Mr. Siegel in 1994 was $480,000 per year and was
negotiated with him, based on his experience, to attract him to join the
Company. The Board of Directors voted on February 10, 1995 to increase this
base salary to $520,000 in recognition of his performance in 1994 and to make
his salary more consistent with the salaries of other chief executive officers
of comparable companies.
Annual Incentives
Under the Company's Annual Plan as in effect for fiscal 1994, executive
officers were eligible for annual cash bonuses equal to a specified percentage
of base salary, based on the extent to which certain performance goals,
established at the beginning of the fiscal year by the Compensation Committee
in consultation with the Chief Executive Officer, were met. The performance
goals included a threshold consolidated pre-tax income goal; minimum
consolidated pre-tax income goals; divisional pre-tax income goals, where
appropriate; and goals for individual achievement. Because the minimum
consolidated pre-tax income goals for 1994 were not achieved, the only bonuses
that were paid under the Annual Plan for 1994 were based upon the achievement
of individual goals and, in some instances, divisional goals.
Mr. Siegel received a bonus of $225,000 for 1994. This amount was guaranteed
by his Employment Agreement with the Company in order to attract Mr. Siegel to
join the Company.
16
<PAGE>
Long-Term Incentives
Under the Company's Key Executive Long-Term Incentive Plan, performance
shares are granted to the executive officers at the start of each period of
three consecutive fiscal years (the "Performance Cycle") based on their
relative positions in the Company, salary level and such other factors as the
Compensation Committee deems appropriate. The performance shares are earned on
the basis of achievement of aggregate income goals set for each Performance
Cycle by the Compensation Committee. To the extent performance shares are
earned, participants receive payments in cash, stock or a combination of the
two, as determined by the Compensation Committee, based on the fair market
value of the Common Stock at the end of the Performance Cycle. Because the
minimum income goal for the Performance Cycle that ended in fiscal 1994 was not
achieved, no payments were made for the Performance Cycle to any participant,
including Mr. Siegel, a fact which demonstrates the link between corporate
performance and compensation paid. As discussed below in this report and in
Item 2 of this Proxy Statement, the Key Executive Long-Term Incentive Plan will
be terminated if the stockholders approve the 1995 Plan, and all outstanding
awards for Performance Cycles that have not yet ended (including 12,668 and
14,174 performance shares awarded to Mr. Siegel for the Performance Cycles for
fiscal 1993 through fiscal 1995 and fiscal 1994 through fiscal 1996,
respectively) will be canceled.
Restricted Stock Options
Under the Company's Incentive Plan, the Compensation Committee may grant
rights to purchase Common Stock for $.25 per share or such higher price as the
Compensation Committee may determine. The Compensation Committee sets
guidelines for such awards based on factors including competitive compensation
data, corporate performance and individual performance against objectives. The
grant generally carries restrictions on resale of such Common Stock that lapse
on the third, fourth and fifth anniversaries of the grant if the executive is
then employed with the Company. Dividend equivalents on any shares of Common
Stock subject to an unexercised right to purchase are also paid. Because of the
adoption by the Board of Directors of the 1995 Plan to replace the Incentive
Plan and the Key Executive Long-Term Incentive Plan (see below), the Board did
not make any grants under the Incentive Plan in February, 1995 for fiscal 1994
performance, except as required to fulfill commitments to two executives, in
accordance with agreements executed at the time each was hired. The Incentive
Plan will be terminated if the 1995 Plan is approved by stockholders.
Mr. Siegel was granted a vested option to purchase 30,000 shares of Common
Stock at $.25 per share, an option to purchase 60,000 shares of Common Stock at
$.25 per share, vesting one-third on each of the first, second and third
anniversaries of the December 13, 1993 grant date and an option to purchase
200,000 shares at $15.875 (the closing price of the Company's Common Stock on
the New York Stock Exchange--Composite Tape, on October 21, 1993, the date of
Mr. Siegel's Employment Agreement with the Company), vesting one-fifth on each
of the first five anniversaries of October 21, 1993. The amount and terms of
these options were determined in the negotiation of the terms of his employment
and were designed to attract Mr. Siegel to join the Company.
Changes for 1995
Effective beginning in fiscal 1995, the Board of Directors has amended the
Annual Plan to establish bonus pools for groups of participants with the same
performance goals and to allow bonus awards from each bonus pool within a
range. This changes the method of allocation of bonus funds and deletes the
formula-specified portion allocable to individual performance, but does not
change the amount of funds
17
<PAGE>
allocable to bonuses. Personal performance remains a factor in the
determination of each individual bonus award. The Board believes that the
amendments to the Annual Plan create an even greater link between compensation
and corporate performance.
In addition, as noted above, as a result of its annual review of the
executive compensation levels of the Company in relation to performance, the
Compensation Committee determined that the long-term incentive features of the
Company's compensation program should be redesigned to more closely link
compensation to increases in stockholder value. Accordingly it recommended, and
the Board has adopted, the 1995 Plan, which is presented for stockholder
approval as Item 2 of this Proxy Statement. The 1995 Plan provides for the
award of stock options with exercise prices equal to the fair market value of
the Common Stock on the grant date. By contrast, the Incentive Plan (which will
be replaced by the 1995 Plan upon its approval by stockholders) permits the
grant of options with below-market exercise prices, and the Key Executive Long-
Term Incentive Plan (which will also be replaced by the 1995 Plan) provides for
performance shares which, if earned, have value regardless of whether the
Common Stock has appreciated in value.
The Committee made awards of options on February 10, 1995 under the 1995 Plan
with respect to 516,400 shares, subject to stockholder approval of the 1995
Plan, which are further described in "New Plan Benefits" in Item 2 below. The
exercise price of these options is $12.25, the market price of the Common Stock
on the date of grant. The Committee took into account in determining the size
of these awards the current holdings of, and recent grants of similar awards
to, the grantees. Options with respect to 245,000 shares, or approximately 47.4
percent of the total granted, were granted to executive officers as a group.
On February 10, 1995, subject to stockholder approval of the 1995 Plan, Mr.
Siegel was awarded an option under the 1995 Plan to purchase 80,000 shares of
Common Stock for $12.25 (the market price on the date of grant), vesting one-
third on each of the first, second and third anniversaries of the date of
grant. Mr. Siegel's option represents approximately 15.5 percent of the total
options granted under the 1995 Plan. In determining the size and terms of Mr.
Siegel's grant, the Committee took into account his current stock ownership and
other stock options, the termination of the Incentive Plan and the Key
Executive Long-Term Incentive Plan and the cancellation of Mr. Siegel's
outstanding awards under the Key Executive Long-Term Incentive Plan, and the
equity awards granted to chief executive officers of comparable companies. The
Committee believes that the fact that a large majority of options granted to
Mr. Siegel are market-price options further demonstrates the Committee's
philosophy of close association between performance and compensation.
Conclusion
Through the programs described above, a portion of the Company's executive
compensation is linked directly to individual and corporate performance and
stock price appreciation. Additionally, the Committee believes that this bond
will be strengthened by the adoption of the 1995 Plan. In 1994, approximately
12% of the Company's executive compensation consisted of performance-based
variable elements; had the Company's performance for 1994 been stronger, the
percentage would have been more comparable to the percentage of performance-
based compensation in recent years, which exceeded 50%. Although Mr. Siegel's
compensation included guaranteed incentive compensation, his compensation would
also have been higher had the Company performed significantly better. Moreover,
beginning in 1995, he will have no guaranteed incentive compensation, so that
the link between his incentive compensation and corporate performance will be
18
<PAGE>
strengthened. The Compensation Committee intends to continue the policy of
linking executive compensation to corporate performance and returns to
stockholders.
COMPENSATION COMMITTEE
Margaret A. McKenna
(Chairperson)
Donald R. Gant
Theodore Levitt
W. Paul Tippett, Jr.
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total stockholder
return on the Company's Common Stock, based on the market price of the Common
Stock and assuming reinvestment of dividends, with the cumulative total return
of companies on the Standard & Poor's 500 Stock Index and the Standard & Poor's
Shoes Index (a performance indicator of peer group companies), for a period of
five fiscal years commencing December 1, 1989 and ending December 2, 1994. The
Standard & Poor's Shoes Index consists of Reebok International Ltd., Nike,
Inc., Genesco Inc., Brown Group Inc. and the Company.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG THE STRIDE RITE CORPORATION
S&P 500, AND S&P SHOES INDEX
[GRAPH APPEARS HERE SHOWING COMPARISON OF THE STRIDE RITE CORPORATION, S&P 500
AND S&P SHOE INDEX]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The Stride Rite Corporation 100 98.85 188.58 152.04 144.47 99.19
S&P Shoe Index 100 90.79 173.22 224.61 163.00 196.29
S&P 500 Index 100 96.53 116.17 137.62 151.52 153.11
--------------------------------------------------------
</TABLE>
19
<PAGE>
CERTAIN TRANSACTIONS WITH MANAGEMENT
Goldman, Sachs & Co., an investment banking firm of which Mr. Donald R. Gant,
a director of the Company, was a General Partner until December 1990 and
currently is affiliated as a Limited Partner of The Goldman Sachs Group, L.P.,
serves as financial advisor to the Company. The Company paid Goldman, Sachs &
Co. a fee of $100,000 for services plus expenses rendered during the 1994
fiscal year. Goldman Sachs Asset Management, a subsidiary of Goldman, Sachs &
Co., provides investment management services for the Company's pension plans
and was paid a fee by such plans of $156,575 for services rendered in fiscal
1994. Also, in fiscal 1994, Goldman, Sachs & Co. purchased and sold securities
for the Company and was paid gross commissions (before the deduction of
expenses) of $40,720.
During fiscal 1994, the Company extended Dennis Garro, President of the
retail division of Stride Rite Children's Group, Inc., in connection with his
relocation to the Boston area, an interest-free loan in the amount of $99,000
and a loan bearing interest at 3.5% in the amount of $156,400; the highest
amount outstanding during 1994 was $255,400. As of February 17, 1995, $222,400
was outstanding, $33,000 having been paid on the interest-free loan. Further,
in fiscal 1994, the Company extended Gerrald B. Silverman, President of Stride
Rite International Corp., in connection with his relocation to the Boston area,
an interest-free loan in the amount of $99,000, which was the highest amount
outstanding in 1994. As of February 17, 1995, $66,000 was outstanding on this
loan. Moreover, in December 1993 and January 1994, the Company extended to
Robert C. Siegel, Chairman of the Board of the Company, President and Chief
Executive Officer, in connection with his relocation to the Boston area, a loan
bearing interest at 3.5% in the amount of $740,000. Mr. Siegel repaid this loan
in its entirety in April 1994.
During fiscal 1993, the Company extended to Karen K. Crider, General Counsel,
Clerk and Secretary of the Company, in connection with her relocation to the
Boston area, an interest-free loan in the amount of $99,000. The highest amount
outstanding during the fiscal year was $99,000. As of February 17, 1995,
$66,000 was outstanding. In addition, in fiscal 1993, the Company extended to
Margaret C. Whitman, President of Stride Rite Children's Group, Inc. until her
resignation, effective February 17, 1995, and formerly an officer of the
Company and of its subsidiary, The Keds Corporation, an interest-free loan in
the amount of $99,000 in connection with her relocation to the Boston area. The
highest amount outstanding during fiscal 1994 was $99,000. Ms. Whitman paid
this loan in full during fiscal 1995 in connection with her resignation from
the Company.
In fiscal 1992, the Company extended to Robert B. Moore, Jr., the President
of Sperry Top-Sider, Inc, a subsidiary of the Company, and his wife jointly, an
interest-free loan in the amount of $224,000 in connection with his relocation
to the Boston area. The highest amount outstanding during fiscal 1994 was
$99,000. As of February 17, 1995, the outstanding balance of the loan was
$33,000. Further, in fiscal 1992, the Company extended to Jonathan D. Caplan,
the President of The Keds Corporation, a subsidiary of the Company, formerly
President of Stride Rite Children's Group, Inc., a subsidiary of the Company,
an interest-free loan in the amount of $99,000 in connection with his
relocation to the Boston area. The highest amount outstanding during fiscal
year 1994 was $99,000. As of February 17, 1995, the outstanding balance of the
loan was $33,000.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the "1934
Act") requires the Company's executive officers and directors to file initial
reports of ownership and reports of changes in
20
<PAGE>
ownership with the SEC. Executive officers and directors are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms which
they file with the SEC. During fiscal 1994, Robert J. Lambert, a former Vice
President of the Company, failed to file with the SEC on a timely basis one
report relating to one transaction. In making this disclosure, the Company has
relied solely on written representations of its directors and executive
officers and copies of the reports that have been received by the Company.
2. 1995 LONG-TERM GROWTH INCENTIVE PLAN
GENERAL
On February 10, 1995, the Board of Directors unanimously adopted, subject to
stockholder approval, and the effectiveness of a registration statement under
the 1933 Act covering the options and underlying Common Stock, the 1995 Long-
Term Growth Incentive Plan (the "1995 Plan"). The 1995 Plan is designed to
encourage and provide opportunities for stock ownership by employees in order
to more closely align employees' interests with those of the stockholders. The
Board of Directors believes that the 1995 Plan will enable the Company to
attract and retain key employees who will make significant contributions
towards the successful management, growth and protection of the Company. The
Board of Directors also believes that the 1995 Plan (which is intended to
replace the existing Key Executive Long-Term Incentive Plan and the 1975
Executive Stock Purchase Plan) will directly link compensation with the
achievement of long-term business goals and increases in shareholder value and
has adopted the 1995 Plan for these reasons and the reasons stated in the
Compensation Committee Report, above.
The 1995 Plan has a term of three years from the date of approval by the
stockholders. The maximum number of shares of the Company's Common Stock which
may be awarded or purchased upon exercise of options under the 1995 Plan is
2,400,000, subject to adjustments as provided under the heading "Operation of
the 1995 Plan" below. All statements set forth in this Proxy Statement relating
to the 1995 Plan are qualified in their entirety by reference to the complete
statement of the 1995 Plan which is set forth as Appendix A to this Proxy
Statement. The 1995 Plan is intended to qualify under Rule 16b-3 of the 1934
Act. If any of the terms or provisions of the 1995 Plan conflict with the
requirements of Rule 16b-3, then such terms and provisions shall be deemed
inoperative to the extent of such conflict.
ADMINISTRATION
The 1995 Plan will be administered by a committee consisting of not less than
two non-employee members of the Board of Directors, appointed by the Board of
Directors (the "Committee"). The Committee will consist of members who qualify
to administer the 1995 Plan as contemplated by Rule 16b-3 and item 402(i) of
Regulation S-K promulgated under the 1934 Act and Section 162(m) under the
Internal Revenue Code of 1986, as amended (the "Code"). To the extent permitted
by applicable law and the terms and conditions of the Plan, the Committee may
delegate to one or more employee members of the Board of Directors the power to
make stock or option awards to 1995 Plan participants who are not executive
officers pursuant to Section 16 of the 1934 Act (or any successor provision)
and are not "covered individuals" within the meaning of Section 162(m) of the
Code (or any successor provision).
21
<PAGE>
PARTICIPANTS
Awards of shares of Common Stock and options to purchase shares of Common
Stock may be granted pursuant to the 1995 Plan to any key executive of the
Company plus, on a highly selective basis, other employees of the Company whom
the Committee determines are key contributors to the business of the Company,
provided that such awards do not jeopardize the 1995 Plan's compliance with
Rule 16b-3 under the 1934 Act (or any successor provision) (the
"Participants").
OPERATION OF THE 1995 PLAN
In the event the 1995 Plan is approved by stockholders, upon the
effectiveness of a registration statement under the 1933 Act covering the
options, Common Stock underlying options and Common Stock which may be awarded
under the 1995 Plan, each Participant will be granted the number of shares of
Common Stock and options to purchase Common Stock determined by the Committee
on February 10, 1995, as set forth under the heading "1995 Long-Term Growth
Incentive Plan--New Plan Benefits" below. Thereafter, during the term of
effectiveness of the 1995 Plan, the Committee may grant awards of Common Stock
and/or options to Participants, in its discretion. Options may be incentive
stock options as defined by Section 422 of the Code or may be non-qualified
stock options; the Committee will specify at the time of grant whether an
option is an incentive stock option or a non-qualified stock option. The
exercise price of options will be as determined by the Committee, but not less
than the fair market value of the stock on the date of grant, defined as the
last reported sale price at which the Common Stock is traded, except that in
the event the Participant owns or is deemed to own 10% or more of the
outstanding Common Stock of the Company, the exercise price of an incentive
stock option shall not be less than 110% of the fair market value of the Common
Stock on the date of grant. The aggregate fair market value at the time of
grant of incentive stock options exercisable by any one Participant in a
calendar year shall not exceed $100,000 or other limit imposed by the Code. The
term of each option shall be as set by the Committee, not to exceed 10 years.
Stock options shall become exercisable one-third in each year over a three-year
period, or as otherwise determined by the Committee.
Common Stock awards shall confer on a Participant the right to receive a
specified number of shares of Common Stock subject to the terms and conditions
of the award set by the Committee, which may include forfeitability
contingencies based on continued employment with the Company, on meeting
performance criteria or both. The shares awarded may be subject to restrictions
lapsing in equal installments on the third, fourth and fifth anniversaries of
grant, or such other restrictions as determined by the Committee.
Awards of options and shares of Common Stock may be made for a period of
three years from the date of approval by stockholders, unless the 1995 Plan is
earlier terminated. The maximum number of shares of the Company's Common Stock
which may be awarded or purchased upon exercise of options under the 1995 Plan
is 2,400,000, and the minimum number of shares that may be awarded to or so
purchased by any individual under the 1995 Plan is 500,000, in each case
subject to adjustments as provided below. If any Common Stock which underlies
options awarded under the 1995 Plan are forfeited or canceled, such shares or
options to purchase such shares may, to the extent permitted by Rule 16b-3
promulgated under the 1934 Act, again be awarded under the 1995 Plan. In the
event of any change in the outstanding shares of Common Stock of the Company by
reason of any stock dividend, stock split, combination or exchange of shares,
merger, consolidation, spin-off or other distribution (other than normal cash
dividends) of the Company's assets to stockholders or any other change
affecting the Common Stock, the Committee may make such proportionate
adjustments, if any, as it, in its discretion, may deem appropriate to reflect
such change with
22
<PAGE>
respect to (i) the aggregate number and kind of shares that may be issued under
the 1995 Plan; (ii) the number and kind of shares covered by each outstanding
award made under the 1995 Plan and (iii) the option, base or purchase price per
share for any outstanding option and other awards granted under the 1995 Plan,
provided that any such actions are consistently and equitably applicable to all
affected Participants. In addition, any Common Stock issued by the Company
through the assumption or substitution of outstanding grants or grant
commitments from an acquired entity shall not reduce the shares available for
issuance under the 1995 Plan.
The mere grant of stock options under the 1995 Plan will not entitle the
Participant to any interest in any dividend, voting or other rights of a
stockholder. Neither the 1995 Plan nor any action taken thereunder will be
construed as giving any person a right to be retained as an employee of the
Company, nor will any action taken thereunder be construed as entitling the
Company to the services of any Participant for any period of time.
Notwithstanding any other provision of the 1995 Plan to the contrary, in the
event of a change of control, (i) any stock options outstanding as of the date
of change of control that are not then exercisable and vested shall become
fully exercisable and vested and all restrictions applicable to Common Stock
awarded under the 1995 Plan shall lapse and (ii) unless determined otherwise by
the Committee at the time of grant, and subject to certain conditions set forth
in Section 8(g) of the 1995 Plan, options may be surrendered in exchange for an
amount of cash as specified in the 1995 Plan. For purposes of the 1995 Plan, a
change of control shall mean, subject to the conditions and exceptions
specified in the 1995 Plan, (i) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the 1934 Act) of voting securities of the Company where such acquisition
causes such Person to own 20 percent or more of the combined voting power of
the then outstanding voting securities of the Company entitled to vote
generally in the election of directors; (ii) individuals who, as of February
10, 1995, constitute the Board of Directors (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board of Directors;
provided, however, that any individual becoming a director subsequent to that
date whose election, or nomination for election by the Company's stockholders,
was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a member
of the Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board; (iii) the approval by the
stockholders of the Company of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company ("Business Combination") or, if consummation of such Business
Combination is subject, at the time of such approval by stockholders, to the
consent of any government or government agency, the obtaining of such consent
(either explicitly or implicitly by consummation); or (iv) approval by the
stockholders of the Company of a complete liquidation or dissolution of the
Company.
NON-TRANSFERABILITY
Options granted pursuant to the 1995 Plan may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner other than by will or
under the laws of descent and distribution. An option may be exercised, during
the lifetime of Participant, only by such Participant or his or her legal
representative. If so permitted by the Committee, a Participant may designate a
beneficiary or beneficiaries to exercise such Participant's rights and receive
any distributions under the 1995 Plan upon the Participant's death. To the
23
<PAGE>
extent required to comply with regulations and rules under the 1934 Act,
including Rule 16b-3, any contrary requirements shall prevail over the
provisions set forth above in regards to executive officers subject to Section
16 of the 1934 Act.
GOVERNING LAW
The 1995 Plan will be construed and governed in accordance with the laws of
the Commonwealth of Massachusetts.
NEW PLAN BENEFITS
The following grants were made by the Board of Directors on February 10,
1995, subject to approval of the 1995 Plan by stockholders and the
effectiveness of a registration statement under the 1933 Act covering the
options and Common Stock issuable under the 1995 Plan. The options are
exercisable one-third on each of the first three anniversaries of the date of
grant, at an exercise price equal to $12.25, the closing price of the Common
Stock on the New York Stock Exchange--Composite Tape on the date of grant. The
closing price of the Common Stock on February 17, 1995 was $12.25.
1995 LONG-TERM GROWTH INCENTIVE PLAN
<TABLE>
<CAPTION>
NAME AND POSITION UNITS(#)
- ----------------- --------
<S> <C>
Robert Siegel....................................................... 80,000
Robert B. Moore, Jr................................................. 30,000
Jonathan D. Caplan.................................................. 40,000
Margaret C. Whitman(1).............................................. 0
John M. Kelliher.................................................... 20,000
Executive Officers as a group (11 persons).......................... 245,000
Employees as a group (98 persons)................................... 516,400(2)
</TABLE>
- --------
(1) Ms. Whitman was not granted any options or shares under the 1995 Plan
because she resigned as President of Stride Rite Children's Group, Inc.,
effective February 17, 1995.
(2) Includes Executive Officers.
FEDERAL INCOME TAX CONSIDERATIONS
The Company has been advised that, based on the present provisions of the
Code and regulations promulgated thereunder, the federal income tax
consequences of the grant, vesting and exercise of Awards under the Plan and
the subsequent disposition of stock acquired thereby will be as described
below.
THE FOLLOWING DISCUSSION ADDRESSES ONLY THE GENERAL FEDERAL INCOME TAX
CONSEQUENCES OF AWARDS. HOLDERS OF AWARDS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE IMPACT OF FEDERAL, STATE AND LOCAL TAXES, THE FEDERAL
ALTERNATIVE MINIMUM TAX, AND SECURITIES LAWS RESTRICTIONS, GIVEN THEIR
INDIVIDUAL SITUATIONS.
Non-Qualified Options
(a) Generally, an optionee will not recognize any taxable income, and the
Company will not be allowed a tax deduction, upon the granting of a Non-
Qualified Stock Option ("NQSO").
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<PAGE>
(b) Upon the exercise of a NQSO, the optionee realizes ordinary income in an
amount equal to the excess, if any, of the fair market value of the shares
acquired at the time the NQSO is exercised over the exercise price for such
shares. At that time, the Company will be allowed a tax deduction equal to the
amount of ordinary taxable income recognized by the optionee, if applicable
withholding requirements are satisfied.
(c) When an optionee exercises a NQSO by paying the exercise price solely in
cash, the basis in the shares acquired is equal to the fair market value of the
shares on the date ordinary income is recognized, and the holding period for
such shares begins on the day after the shares are received.
(d) When an optionee exercises a NQSO by exchanging previously acquired
shares of Common Stock held as capital assets in partial or full payment of the
exercise price, shares of Common Stock received by the optionee equal in number
to the previously acquired shares exchanged therefor will be received free of
tax and will have the same basis and holding period as such previously acquired
shares. The optionee will recognize ordinary taxable income equal to the fair
market value of any additional shares received by the optionee, less the amount
of any cash paid by the optionee. The optionee will have a basis in such
additional shares equal to their fair market value on the date ordinary income
is recognized and the holding period of such shares will commence on the day
after they are transferred to the optionee.
(e) Upon subsequent disposition of shares acquired upon exercise of a NQSO,
the difference between the amount realized on the sale and the basis in the
shares is treated as long-term or short-term capital gain or loss, depending on
the holding period for the shares. Long-term capital gain treatment is
applicable if the shares are held for more than one year. The subsequent
disposition of shares acquired by exercise of a NQSO will not result in any
additional tax consequences to the Company.
Incentive Stock Options
(a) Generally, an optionee will not recognize any taxable income and the
Company will not be allowed a tax deduction upon the granting of an Incentive
Stock Option ("ISO").
(b) Upon the exercise of an ISO, the optionee will not realize ordinary
taxable income and the Company will not be allowed a tax deduction, as long as
the optionee is an employee of the Company (or of a participating subsidiary)
from the time of the grant through the date three months before the ISO was
exercised. (The foregoing requirement is waived with respect to exercises by
the estate of an optionee who dies while employed, or within three months after
the termination of his or her employment, and the three-month period is
extended to one year in the case of a termination because of total and
permanent disability.) If the foregoing requirement is not met, the exercise of
an ISO is treated in the same manner as the exercise of a NQSO (see above). The
basis for the shares so acquired equals the exercise price, and the holding
period for the shares begins on the day after the date the shares are received.
(c) Generally, upon the disposition of shares acquired through the exercise
of an ISO, the optionee will recognize long-term capital gain or loss to the
extent the amount realized on the sale of such shares is greater than or less
than the exercise price, as long as the disposition is not a "disqualifying
disposition" (see paragraph (d) below).
(d) A "disqualifying disposition" generally occurs if shares acquired upon
exercise of an ISO are disposed of by the optionee prior to the expiration of
two years from the date of grant of the Option or within one year of the date
of transfer of shares to the optionee. (However, disposition by the estate of a
deceased
25
<PAGE>
employee is not considered a disqualifying disposition even if it occurs after
these dates.) Upon a disqualifying disposition, the optionee realized ordinary
taxable income (and the Company will be allowed a tax deduction, if applicable
withholding requirements are satisfied) in an amount equal to the excess, if
any of (A) the lesser of (i) the fair market value of the shares on the date
the ISO is exercised, or (ii) the amount realized on such disqualifying
disposition over (B) the exercise price. The excess, if any, of the amount
realized upon such disqualifying disposition over the fair market value of the
shares on the date of exercise will be taxed as long-term or short-term capital
gain depending on the holding period involved. Long-term capital gain treatment
is applicable if the shares were held for more than one year.
(e) Generally, if the optionee exchanges previously acquired shares of Common
stock in partial or full payment of the exercise price of an ISO, the exchange
will not affect the ISO treatment of the exercise and, except as otherwise
described herein, no gain or loss or other income will be recognized upon the
disposition of the previously acquired shares. Shares of Common Stock received
by the optionee equal in number to the previously acquired shares exchanged
therefor will have the same basis (increased by the amount of ordinary income,
if any recognized on the exchange) and the same holding period for capital
gains purposes as the previously acquired shares. Optionees will not, however,
be able to use the old holding period for purposes of satisfying the holding
period requirement for avoiding a disqualifying disposition of the ISO. Shares
of Common Stock received by the optionee in excess of the number of previously
acquired shares will have a basis of zero and a holding period which commences
on the day after the date the shares are received upon exercise of the ISO. If
payment of the exercise price is made using shares of Common Stock acquired
upon exercise of an ISO, the delivery of these previously acquired shares to
the Company will be considered a disposition of the shares for the purpose of
determining whether a disqualifying disposition has occurred.
Stock Awards
Generally, a participant will not recognize any taxable income, and the
Company will not be allowed a tax deduction, upon the grant of a Stock Award.
Upon the lapsing of restrictions on a Stock Award, the holder will recognize
ordinary income equal to the fair market value of the shares on the date of
such lapse, and the Company is entitled to a deduction in the equal amount, if
applicable withholding requirements are satisfied and if the deduction is not
disallowed as a result of the limitation on deductibility of executive
compensation in excess of $1 million (discussed in the Compensation Committee
Report above).
Change of Control
The vesting of Stock Options and Stock Awards upon a Change of Control is
considered to result in a "parachute payment", some or all of which could be an
"excess parachute payment" to the holder. Excess parachute payments are subject
to a 20 percent excise tax imposed on the holder and are nondeductible by the
Company. In addition, the vesting of ISOs on a Change of Control would cause
ISOs to cease to qualify for ISO status, and to be taxed as NQSOs, to the
extent ISOs on more than $100,000 worth of Common Stock (determined at the time
of grant) became exercisable in a single year. Finally, the exercise of a right
following a Change of Control to have Stock Options cancelled in exchange for a
payment in cash or Common Stock would result in ordinary taxable income to the
holder in an amount equal to the sum of any cash received and the fair market
value of any Common Stock received. The optionee's basis in any shares of
Common Stock received would be equal to the amount of ordinary income
recognized with respect to such shares, and, upon subsequent disposition, any
further gain or loss would be either short-term or long-term capital gain or
loss, depending on the holding period of the shares. The holding period for
such shares would
26
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commence on the day after the shares were received. Subject to the excess
parachute rules discussed above, the Company would be allowed a tax deduction
equal to the amount of ordinary income recognized by the holder, if applicable
withholding requirements are satisfied.
Withholding
The Company has a right to withhold any sum required by federal, state or
local tax laws with respect to the exercise or cancellation of any Option or
the lapse of restrictions on any Stock Award, or to require payment of such
amounts before delivery of shares.
THE FOREGOING DISCUSSION IS INTENDED FOR GENERAL INFORMATION PURPOSES ONLY,
NOT AS SPECIFIC TAX ADVICE. IT DOES NOT ADDRESS THE IMPACT OF STATE AND LOCAL
TAXES, THE FEDERAL ALTERNATIVE MINIMUM TAX, AND SECURITIES LAWS RESTRICTIONS.
PARTICIPANTS IN THE PLAN ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING
THE TAX EFFECT OF AWARDS IN THEIR OWN INDIVIDUAL CIRCUMSTANCES.
VOTE REQUIRED
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 1995 PLAN, FOR
THE REASONS STATED ABOVE. Approval of the 1995 Plan requires (assuming a quorum
is present) the affirmative vote of the holders of a majority of the shares of
Common Stock entitled to vote and represented in person or by proxy at the
meeting. Abstentions and broker non-votes will be counted to determine whether
there is a quorum at the meeting, but will not be counted as affirmative votes.
3. SELECTION OF AUDITORS
Although Massachusetts law no longer requires that the Company's auditors be
approved each year by the stockholders, the Board of Directors continues the
practice of submitting such selection to the stockholders for their approval
because the Board deems it appropriate to do so. The Board of Directors has
selected Coopers & Lybrand L.L.P., which has acted as auditors of the Company
since 1972, to act as auditors for its current fiscal year. In the event that
the stockholders do not approve of Coopers & Lybrand L.L.P., the Board of
Directors will reconsider the appointment of Coopers & Lybrand L.L.P.
A representative of Coopers & Lybrand L.L.P. will be present at the meeting,
will be provided the opportunity to make a statement if he or she desires to do
so and will be available to respond to appropriate questions from the
stockholders.
The Company's consolidated financial statements for the 1994 fiscal year were
examined and reported upon by Coopers & Lybrand L.L.P. In connection with that
examination, they also reviewed the Company's Annual Report and the Company's
filings with the SEC, and provided consultations on financial statement
implications of matters under consideration. Coopers & Lybrand L.L.P. also
examined and reported upon the financial statements of the Company's retirement
and pension plans.
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4. STOCKHOLDER PROPOSAL
Set forth below is a stockholder proposal, which may be presented at the
Annual Meeting. As set forth below under "Recommendation of the Board of
Directors" THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE PROPOSAL, FOR
THE REASONS SET FORTH BELOW.
PROPOSAL
Mr. William Steiner, 4 Radcliff Dr., Great Neck, New York, who states he is
the owner of 200 shares of Common Stock, has informed the Company he intends to
present the following resolution at the Annual Meeting:
"Resolved, that the stockholders of the Company request that the Board of
Directors take the necessary steps, in accordance with state law, to
declassify the Board of Directors so that all directors are elected
annually, such declassification to be effected in a manner that does not
affect the unexpired terms of directors previously elected."
Mr. Steiner's statement in support of this proposal is as follows:
"The election of directors is the primary avenue for stockholders to
influence corporate governance policies and to hold management accountable for
it's implementation of those policies. I believe that the classification of the
Board of Directors, which results in only a portion of the Board being elected
annually, is not in the best interests of the Company and it's stockholders.
"The Board of Directors of the Company is divided into three classes serving
staggered three-year terms. I believe that the Company's classified Board of
Directors maintains the incumbency of the current Board and therefore of
current management, which in turn limits management's accountability to
stockholders.
"The elimination of the Company's classified Board would require each new
director to stand for election annually and allow stockholders an opportunity
to register their views on the performance of the Board collectively and each
director individually. I believe this is the one of the best methods available
to stockholders to insure that the Company will be managed in a manner that is
in the best interests of the stockholders.
"As a founding member of the Investors Rights Association of America I
believe that concerns expressed by companies with classified boards that the
annual election of all directors could leave companies without experienced
directors in the event that all incumbents are voted out by stockholders, are
unfounded. In my view, in the unlikely event that stockholders vote to replace
all directors, this decision would express stockholder dissatisfaction with the
incumbent directors and reflect the need for change.
I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION."
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors believes that public policy in Massachusetts, with
respect to Massachusetts chartered companies, favors classified boards since
Section 50A of Chapter 156B of the Massachusetts General Laws provides a
general requirement for the boards of publicly held companies to be classified
into three classes. Further, the Board of Directors believes that the
classification of the Board is desirable to provide continuity and stability in
the Company's policies and management, as it ensures that, at all times,
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the majority of the Board of Directors will have some familiarity and
experience with the Company's business. Moreover, the Board of Directors
believes that a classified Board of Directors offers some protection to
stockholders in the event of an attempted hostile takeover. Accordingly, the
Board of Directors urges the stockholders to vote against this proposal.
VOTE REQUIRED
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOREGOING RESOLUTION FOR
THE REASONS STATED ABOVE. Approval of the proposal requires the affirmative
vote of a majority of the shares outstanding. Abstentions and broker non-votes
will not be counted as affirmative votes.
5. OTHER MATTERS
The Board of Directors of the Company is not aware of any other matters which
may come before the meeting. If any other matters shall properly come before
the meeting, it is the intention of the persons named in the enclosed proxy to
vote the proxy in accordance with their judgment on any such matters.
PROXY SOLICITATION
The solicitation of proxies will be principally by mail, and may be followed
by telephone and personal contacts by officers, directors or regular employees
of the Company, or by employees of D.F. King & Co., Inc., proxy solicitors for
the Company. The cost of soliciting proxies will be borne by the Company. The
Company does not yet have a written agreement with D.F. King & Co., Inc.
regarding the proxy solicitation. It is anticipated that the agreement with
D.F. King & Co., Inc. will be on customary terms. The costs of proxy
solicitation are not anticipated to exceed $10,000, unless circumstances
require otherwise. Brokers and others holding shares of Common Stock in their
names or in the names of their nominees will be expected to forward copies of
the Company's proxy soliciting material to beneficial owners of such shares and
to seek authority for execution of proxies and will be reimbursed by the
Company for their reasonable expenses.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1996 Annual Meeting of
Stockholders must be received by the Company on or before October 30, 1995 to
be considered for inclusion in the proxy material for that meeting. Any such
proposal should be addressed as follows:
Office of the Clerk
The Stride Rite
Corporation
Five Cambridge Center
Cambridge, Massachusetts
02142
February 27, 1995
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APPENDIX A
THE STRIDE RITE CORPORATION
1995 LONG-TERM GROWTH INCENTIVE PLAN
SECTION 1: PURPOSE
The purpose of The Stride Rite Corporation 1995 Long-Term Growth Incentive
Plan (the "Plan") is to enable The Stride Rite Corporation (the "Corporation")
and its Subsidiaries to attract and retain key employees who will make
significant contributions towards the successful management, growth and
protection of the Corporation and to provide meaningful incentives to such
employees who are more directly linked to the achievement of long-term business
goals and increase in shareholder value. In addition, the Plan is designed to
encourage and provide opportunities for stock ownership by such employees which
will more closely align their interests with those of the stockholders of the
Corporation.
SECTION 2: DEFINITION OF TERMS
(a) Award means any Stock Option or Stock Award granted under the Plan.
(b) Board means the Board of Directors of the Corporation.
(c) Code means the Internal Revenue Code of 1986, as amended from time to
time.
(d) Committee means a committee of not less than two non-employee members of
the Board, appointed by the Board to administer the Plan. The Committee shall
be comprised of members who qualify to administer this Plan as contemplated by
(a) both Rule 16b-3 and item 402(i) under the 1934 Act or any successor rule,
and (b) Section 162(m) under the Code.
(e) Common Stock means the Common Stock of the Corporation.
(f) Corporation means The Stride Rite Corporation, a corporation established
under the laws of the Commonwealth of Massachusetts, and its Subsidiaries.
(g) Fair Market Value means, with respect to Common Stock, the fair market
value of such property as determined by the Committee in good faith in such
manner as shall be established by the Committee from time to time. Under no
circumstances shall the Fair Market Value be less than the par value of the
Common Stock. Any time that the Common Stock is traded on a public market, Fair
Market Value means the last reported sale price at which the Common Stock is
traded on such date or, if no Common Stock is traded on such date, the most
recent date on which Common Stock was traded, as reflected on such public
market.
(h) Incentive Stock Option (ISO) means a Stock Option to purchase Shares
awarded to a Participant which is intended to be an "Incentive Stock Option"
within the meaning of Section 422 of the Code or any successor provision.
(i) Non-Qualified Stock Option (NQSO) means a Stock Option to purchase Shares
of Common Stock awarded to a Participant which is not intended to be an
incentive stock option within the meaning of Section 422 of the Code or any
successor provision.
(j) 1934 Act means the Securities Exchange Act of 1934, as amended from time
to time.
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(k) Participant means a person selected by the Committee (or its delegate as
provided under Section 4) to receive an Award under the Plan.
(l) Reporting Person means an individual who is subject to Rule 16 of the
1934 Act or any successor rule.
(m) Shares means of the Common Stock of the Corporation.
(n) Stock Award means an Award to a Participant comprised of Common Stock or
valued by reference to Common Stock granted under Section 7c of the Plan.
(o) Stock Option means an Award in the form of the right to purchase a
specified number of Shares at a specified price during a specified period.
(p) Subsidiary means any entity that, directly or through one or more
intermediaries, is controlled by, controls or is under common control with the
Corporation or any entity in which the Corporation has a significant equity
interest as determined by the Committee.
SECTION 3: EFFECTIVE DATES
The Plan shall be effective as of the date the stockholders approve the Plan.
No Awards may be made under the Plan after three years from the date of
approval or earlier termination of the Plan by the Board. However, unless
otherwise expressly provided in the Plan or in an applicable Award agreement,
any Award granted prior to the termination date may extend beyond such date,
and, to the extent set forth in the Plan, the authority of the Committee to
amend, alter, adjust, suspend, discontinue or terminate any such Award, or to
waive any conditions or restrictions with respect to any such Award, and the
authority of the Board to amend the Plan, shall extend beyond such date.
SECTION 4: ADMINISTRATION
The Plan shall be administered by the Committee. Unless otherwise expressly
provided in the Plan, all designations, determinations, interpretations, and
other decisions under or with respect to the Plan or any Award shall be within
the sole discretion of the Committee, may be made at any time, and shall be
final, conclusive and binding upon all persons, including the Corporation, any
Subsidiary, any Participant, any holder or beneficiary of any Award,
stockholder and any employee of the Corporation or of any Subsidiary. The
Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the operation of the
Plan as it shall from time to time consider advisable. To the extent permitted
by applicable law and the terms and provisions of the Plan, the Committee may
delegate to one or more employee members of the Board the power to make Awards
to Participants who are not Reporting Persons and are not "covered individuals"
within the meaning of Section 162(m) of the Code or any successor provision.
SECTION 5: ELIGIBILITY
Key executives of the Corporation and its Subsidiaries plus, on a highly
selective basis, other employees of the Corporation and its Subsidiaries whom
the Committee determines are key contributors to the business of the
Corporation and its Subsidiaries shall be eligible to receive an Award under
the Plan, provided that such participation would not jeopardize the Plan's
compliance with Rule 16b-3 under the 1934 Act or any successor rule.
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SECTION 6: STOCK AVAILABLE FOR AWARDS
(a) Common Shares Available. Subject to adjustment as provided in Section
6(c) below, the maximum number of Shares available for Awards under the Plan
shall be 2,400,000, plus, to the extent permitted by Rule 16b-3 under the 1934
Act or any successor rule, the number of shares added back pursuant to Section
6(d).
(b) Share Usage Limits. For the period that the Plan is in effect, the
aggregate number of Shares that shall be granted as Awards shall not exceed
200,000 for Stock Awards. Additionally, the aggregate number of Shares that
shall be awarded to any one Participant of the Plan over the period that the
Plan is in effect shall not exceed 500,000 Shares.
(c) Adjustments. In the event of any stock dividend, stock split, combination
or exchange of Shares, merger, consolidation, spin-off or other distribution
(other than normal cash dividends) of the Corporation's assets to shareholders,
or any other change affecting Shares, such proportionate adjustments, if any,
as the Committee in its discretion may deem appropriate to reflect such change
shall be made with respect to (i) the aggregate number and kind of shares that
may be issued under the Plan; (ii) the number and kind of shares covered by
each outstanding Award made under the Plan; (iii) the option, base or purchase
price per share for any outstanding Stock Option and other Awards granted under
the Plan, provided that any such actions are consistently and equitably
applicable to all affected Participants. In addition, any shares issued by the
Corporation through the assumption or substitution of outstanding grants or
grant commitments from an acquired entity shall not reduce the shares available
for issuance under the Plan.
(d) Common Stock Usage. Subject to Rule 16b-3 under the 1934 Act or any
successor rule, the Shares of Common Stock underlying any Awards which are
forfeited, cancelled, reacquired by the Corporation, satisfied without the
issuance of Common Stock or otherwise terminated (other than by exercise) shall
be added back to the Shares of Common Stock available for issuance under the
Plan so long as the Participants to whom such Awards had been previously
granted received no benefits of ownership of the underlying Shares of Common
Stock to which the Award related.
(e) Accounting for Awards. The number of Shares covered by an Award under the
Plan, or to which such Award relates, shall be counted on the date of grant of
such Award against the number of Shares available for granting Awards under the
Plan.
SECTION 7: AWARDS
(a) General. The Committee shall determine the number and type(s) of Award(s)
(as set forth below) to be made to each Participant and shall approve the terms
and conditions of all such Awards in accordance with Sections 4 and 8 of the
Plan. Awards may be granted singly, in combination or in tandem such that the
settlement of one Award automatically reduces or cancels the other. Awards may
also be made in replacement of, as alternatives to or as forms of payment for
grants or rights under any other employee compensation plan or arrangement of
the Corporation, including the plans of any acquired entity.
(b) Stock Options. A Stock Option shall confer on a Participant the right to
purchase a specified number of Shares from the Corporation subject to the terms
and conditions of the Stock Option grant. The Committee shall establish the
option price at the time each Stock Option is awarded, provided that the per-
share price shall not be less than 100% of the Fair Market Value of a Share on
the date of grant. Stock
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Options may be in the form of ISOs or NQSOs, and the Committee shall specify at
the time of grant whether the Stock Option is an ISO or a NQSO. If a
Participant owns or is deemed to own (by reason of the attribution rules
applicable under Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Corporation or any subsidiary or
parent corporation and an ISO is awarded to such Participant, the option price
shall not be less than 110% of the Fair Market Value at the time such ISO is
awarded. The aggregate Fair Market Value at time of grant of the Shares covered
by ISOs exercisable by any one optionee in any calendar year shall not exceed
$100,000 (or such other limit as may be required by the Code). The term of each
Stock Option shall be fixed by the Committee, provided, however, that in no
event shall the term of any Stock Option exceed a period of ten years from the
date of its grant. A Stock Option shall become exercisable over a three year
period (one third in each year) or, alternatively, in such manner and within
such period or periods and in such installments or otherwise as shall be
determined by the Committee. The recipient of a Stock Option grant shall pay
for the Shares at the time of exercise in cash or such other forms as the
Committee may approve, including Shares valued at their Fair Market Value on
the date of exercise, or in a combination of form(s). The Committee may also
permit Participants to have the option price delivered to the Corporation by a
broker pursuant to an arrangement whereby the Corporation, upon irrevocable
instructions from a Participant, delivers the exercised Shares to the broker.
(c) Stock Awards. A Stock Award shall confer on a Participant the right to
receive a specified number of Shares subject to the terms and conditions of the
Award, which may include forfeitability contingencies based on continued
employment with the Corporation or on meeting performance criteria or both. The
restriction period for Stock Awards will be a five year restriction period with
restrictions lapsing in equal installments in years three, four and five or any
other such terms as the Committee shall establish. Such Stock Awards may be
subject to the attainment of specified performance goals or targets, as
determined by the Committee and set forth in the specific Stock Award
agreements. The Committee shall determine the restrictions and restriction or
performance period, and any other terms, conditions and rights relating to a
grant of Stock Awards, including the determination to adjust performance goals
(up or down) as business conditions so warrant. The Committee may also grant
Stock Awards that are not subject to any restrictions.
SECTION 8: GENERAL PROVISIONS APPLICABLE TO AWARDS
(a) Transferability and Exercisability. Any Award under this Plan will be
non-transferable and accordingly shall not be assignable, alienable, saleable
or otherwise transferable by the Participant other than by will or the laws of
descent and distribution.
If so permitted by the Committee, a Participant may designate a beneficiary
or beneficiaries to exercise the Participant's rights and receive any
distributions under this Plan upon the Participant's death. To the extent
required to comply with regulations and rules under the 1934 Act, including
Rule 16b-3, any contrary requirements shall prevail over the provisions set
forth above in regards to Reporting Persons.
(b) General Restrictions. Each Award shall be subject to the requirement
that, if at any time the Committee shall determine, in its sole discretion,
that the listing, registration or qualification of any Award under the Plan
upon any securities exchange or under any state or federal law, or the consent
or approval of any government regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of such Award or the grant or
settlement thereof, such Award may not be exercised or settled in whole or in
part unless such listing, registration, qualification, consent or approval have
been effected or obtained free of any conditions not acceptable to the
Committee.
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(c) Grant Terms and Conditions. Subject to the terms and conditions of this
Plan, the Committee shall determine the provisions and duration of grants made
under this Plan, including the option prices for all Stock Options, the
consideration, if any, to be required from Participants for Stock Awards, and
the conditions under which a Participant will retain rights under this Plan in
the event of the Participant's termination of employment while holding any
outstanding Awards.
(d) Tax Withholding. No later than the date as of which an amount first
becomes includible in the gross income of a Participant for federal income tax
purposes with respect to any Award under this Plan, the Participant shall pay
to the Corporation, or make arrangements satisfactory to the Corporation
regarding the payment of, any federal, state, local or foreign taxes of any
kind required by law to be withheld with respect to such amount. Unless
otherwise determined by the Committee, withholding obligations may be settled
with Shares, including Shares that are part of the Award that gives rise to the
withholding requirement. The obligations of the Corporation under this Plan
shall be conditional on such payment or arrangements, and the Corporation and
its Subsidiaries shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment otherwise due to the Participants. The
Committee may establish such procedures as it deems appropriate, including the
making of irrevocable elections, for the settlement of withholding obligations
with Shares. Shares that are used to satisfy withholding obligations shall be
valued at their Fair Market Value on the date the tax withholding is effective.
(e) Documentation of Grants. Awards made under the Plan shall be evidenced by
written agreements or such other appropriate documentation as the Committee
shall prescribe. The Committee need not require the execution of any instrument
or acknowledgment of notice of an Award under the Plan, in which case
acceptance of such Award by the respective Participant will constitute
agreement to the terms of the Award.
(f) Settlement. The Committee shall determine, at the time of grant or
settlement of an Award, whether such Award will be settled in whole or in part
in cash, Shares, or other Awards subject, in the case of Participants subject
to Section 16(b) of the 1934 Act, to compliance with such Rule. The Committee
may require or permit a Participant to defer all or any portion of a payment
under the Plan, including the crediting of interest on deferred amounts
denominated in cash.
(g) Change of Control. Notwithstanding any other provision of this Plan to
the contrary, in the event of a Change of Control (as hereinafter defined), the
provisions of this Section 8(g) shall apply.
(i) Any Stock Options outstanding as of the date of Change of Control
that are not then exercisable and vested shall become fully exercisable and
vested and all restrictions applicable to any then-outstanding Stock Award
shall lapse, upon the occurrence of a Change of Control.
(ii) During the 60-day period from and after a Change of Control (the
"Exercisable Period"), unless the Committee shall determine otherwise at
the time of grant, each holder of a Stock Option (an "Optionee") shall have
the right, whether or not such Stock Option is then fully exercisable and
in lieu of the payment of the exercise price for the Shares being purchased
under the Stock Option and by giving notice to the Corporation, to elect
(within the Exercisable Period) to surrender all or part of the Stock
Option to the Corporation and to receive cash, within 30 days of such
notice, in an amount equal to the amount by which the Change of Control
Price (as hereinafter defined) per Share on the date of such election shall
exceed the exercise price per Share under the Stock Option (the "Spread"),
multiplied by the number of Shares granted under the Stock Option as to
which the right granted under this Section 8(g)(ii) shall have been
exercised; provided, however, that if the Change of Control is within six
months after the date of grant of a particular Stock Option held by an
Optionee who is an officer or director of
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the Corporation and is subject to Section 16(b) of the 1934 Act, no such
election shall be made by such Optionee with respect to such Stock Option
prior to six months from the date of grant. However, if the end of such 60-
day period from and after a Change of Control is within six months after
the date of grant of a Stock Option held by an Optionee who is an officer
or director of the Corporation and is subject to Section 16(b) of the 1934
Act, such Stock Option shall be cancelled in exchange for a cash payment to
the Optionee, effected on the day which is six months and one day after the
date of grant of such Option, equal to the Spread multiplied by the number
of Shares granted under the Stock Option. Notwithstanding the foregoing, if
any right granted pursuant to this Section 8(g)(ii) would make a Change of
Control transaction ineligible for pooling of interest accounting under APB
No. 16 that but for this Section 8(g)(ii) would otherwise be eligible for
such accounting treatment, the Committee shall have the ability to
substitute for the cash payable pursuant to this Section 8(g)(ii), Shares
with a Fair Market Value equal to the cash that would otherwise be payable
hereunder.
(iii) Definition of Change of Control. For purposes of this Plan, a
"Change of Control" shall mean any of the following events:
(A) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the 1934 Act) of voting securities of the Corporation where such
acquisition causes such Person to own 20 percent or more of the
combined voting power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of directors
(the "Outstanding Corporation Voting Securities"); provided, however,
that for purposes of this subsection (A), the following acquisitions
shall not be deemed to result in a Change of Control: (i) any
acquisition directly from the Corporation, (ii) any acquisition by the
Corporation, (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Corporation or any
corporation controlled by the Corporation, or (iv) any acquisition by
any corporation pursuant to a transaction that complies with clauses
(i), (ii) and (iii) of subsection (C) below: and provided, further,
that if any Person's beneficial ownership of the Outstanding
Corporation Voting Securities reaches or exceeds 20 percent as a result
of a transaction described in clause (i) or (ii) above, and such Person
subsequently acquires beneficial ownership of additional voting
securities of the Corporation, such subsequent acquisition shall be
treated as an acquisition that causes such Person to own 20 percent or
more of the Outstanding Corporation Voting Securities; or
(B) individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming
a director subsequent to the date hereof whose election, or nomination
for election by the Corporation's shareholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board;
or
(C) The approval by the shareholders of the Corporation of a
reorganization, merger or consolidation or sale or other disposition of
all or substantially all of the assets of the Corporation ("Business
Combination") or, if consummation of such Business Combination is
subject, at the time of such approval by shareholders, to the consent
of any government or governmental agency, the
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obtaining of such consent (either explicitly or implicitly by
consummation); excluding, however, such a Business Combination pursuant
to which (i) all or substantially all of the individuals and entities
who were the beneficial owners of the Outstanding Corporation Voting
Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined voting power of
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation that as a result of such transaction owns the Corporation
or all or substantially all of the Corporation's assets either directly
or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Corporation Voting Securities, (ii) no
Person (excluding any employee benefit plan (or related trust) of the
Corporation or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to
the Business Combination and (iii) at least a majority of the members
of the Board of Directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of
the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(D) approval by the shareholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
(iv) Change of Control Price. For purposes of this Plan, "Change of
Control Price" means the higher of (i) the highest reported sales price of
a Share in any transaction reported on the New York Stock Exchange
Composite Tape during the 60-day period prior to and including the date of
a Change of Control and (ii) if the Change of Control is the result of a
tender or exchange offer or a Business Combination, the highest price per
share of Stock paid in such tender or exchange offer or Business
Combination; provided, however, that (x) in the case of a Stock Option
which (A) is held by an Optionee who is an officer or director of the
Corporation and is subject to Section 16(b) of the 1934 Act and (B) was
granted within 240 days of the Change of Control, then the Change of
Control Price for such Stock Option shall be the Fair Market Value of the
Stock on the date such Stock Option is exercised or cancelled and (y) in
the case of ISOs, the Change of Control Price shall be in all cases the
Fair Market Value of the Stock on the date such ISO is exercised. To the
extent that the consideration paid in any such transaction described above
consists all or in part of securities or other non-cash consideration, the
value of such securities or other non-cash consideration shall be
determined in the sole discretion of the Committee.
SECTION 9: MISCELLANEOUS
(a) Plan Amendment. The Board may amend, alter, suspend, discontinue or
terminate the Plan as it deems necessary or appropriate to better achieve the
purposes of the Plan except that no amendment shall be made which would (i)
increase the total number of Shares available for issuance under the Plan; or
(ii) cause the Plan not to comply with Rule 16b-3 of the 1934 Act or any
successor rule.
(b) No Right to Employment. No person shall have any claim or right to be
granted an Award, and the grant of an Award shall not be construed as giving a
Participant the right to continued employment. The
A-7
<PAGE>
Corporation expressly reserves the right at any time to dismiss a Participant
free from any liability or claim under the Plan, except as expressly provided
by an applicable Award.
(c) No Rights as Shareholder. Only upon issuance of Shares to a Participant
(and only with respect to such Shares) shall the Participant obtain the rights
of a shareholder, subject, however, to any limitations imposed by the terms of
the applicable Award.
(d) No Fractional Shares. No fractional shares shall be issued under the
Plan, however, the Committee may provide for a cash payment as settlement in
lieu of any fractional shares.
(e) Other Corporate Benefit and Compensation Programs. Except as expressly
determined by the Committee, settlements of Awards received by Participants
under this Plan shall not be deemed as part of a Participant's regular,
recurring compensation for purposes of calculating payments or benefits from
any Corporate benefit or severance program (or severance pay law of any
country). The above notwithstanding, the Corporation may adopt other
compensation programs, plans or arrangements as it deems appropriate or
necessary.
(f) Unfunded Plan. The Plan shall be unfunded and shall not create (or be
construed to create) a trust or a separate fund(s). Likewise, the Plan shall
not establish any fiduciary relationship between the Corporation and any
Participant or other person. To the extent any person holds any rights by
virtue of an Award granted under the Plan, such right shall be no greater than
the right of an unsecured general creditor of the Corporation.
(g) Successors and Assignees. The Plan shall be binding on all successors and
assignees of a Participant, including, without limitation, the estate of such
Participant and the executor, administrator or trustee of such estate, or any
receiver or trustee in bankruptcy or representative of the Participant's
creditors.
(h) Governing Law. The validity, construction and effect to the Plan and any
actions taken under or relating to the Plan shall be determined in accordance
with the laws of the Commonwealth of Massachusetts and applicable federal law.
A-8
<PAGE>
PROXY
THE STRIDE RITE CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints ROBERT C. SEIGEL and STEPHEN R. DUMONT, and
each of them acting solely, proxies, with full power of substitution and with
all powers the undersigned would possess if personally present, to represent and
vote, as designated below, all of the shares of Common Stock, par value $.25 per
share, of The Stride Rite Corporation (the "Company") which the undersigned is
entitled to vote at the Annual Meeting of Stockholders of the Company to be held
at The First National Bank of Boston, first floor auditorium, 100 Federal
Street, Boston, Massachusetts, on Wednesday, April 12, 1995, at 10:00 A.M.
(Boston time), and at any adjournment(s) or postponement(s) thereof, upon the
matters set forth on the reverse side hereof and described in the Notice of
Annual Meeting of Stockholders and accompanying Proxy Statement and upon such
other matters as may properly be brought before such meeting and any
adjournment(s) or postponement(s) thereof.
The undersigned hereby revokes any proxy previously given and acknowledges
receipt of the Notice of and Proxy Statement for the aforesaid meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREBY BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" PROPOSALS 1, 2 AND 3 AND "AGAINST" PROPOSAL 4.
(PLEASE SIGN AND DATE ON REVERSE SIDE
AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE)
-----------
SEE REVERSE
SIDE
-----------
<PAGE>
Please mark
[X] votes as in
this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3 AND AGAINST
PROPOSAL 4.
1. Election of Directors.
NOMINEES: Donald R. Gant, Robert C. Siegel, and W. Paul Tippett, Jr.
FOR WITHHELD
[_] [_]
[_]
---------------------------------------
For all nominees except as noted above
2. Proposal to adopt the 1995 Long-Term Growth Incentive Plan.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. Proposal to ratify selection of Coopers & Lybrand LLP as Auditors of the
Company.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. Proposal to adopt a shareholder proposal.
FOR AGAINST ABSTAIN
[_] [_] [_]
MARK HERE
FOR ADDRESS [_]
CHANGE AND
NOTE AT LEFT
Sign exactly as name appears on this Proxy. If the shares are registered in the
names of two or more persons, each should sign. Executors, administrators,
trustees, partners, custodians, guardians, attorneys and corporate officers
should add their full titles as such.
Signature: Date:
-------------------------------------- -----------------------
Signature: Date:
-------------------------------------- -----------------------
