<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (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] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
(3) Filing Party:
________________________________________________________________________
(4) Date Filed:
________________________________________________________________________
<PAGE>
[THE STRIDE RITE LOGO APPEARS HERE]
191 SPRING STREET
P.O. BOX 9191
LEXINGTON, MASSACHUSETTS 02173-9191
March 3, 1997
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
The Stride Rite Corporation to be held at its executive offices, 191 Spring
Street, Lexington, Massachusetts, on Wednesday, April 23, 1997, at 10:00 A.M.
Registration will begin at 9:30 A.M.
I believe that the Annual Meeting provides an excellent opportunity for
stockholders to become better acquainted with Stride Rite and its directors
and officers. I hope that you will be able to attend.
Whether or not you plan to attend, the prompt execution and return of your
proxy card will both assure that your shares are represented at the meeting
and minimize the cost of proxy solicitation. I thank you for your continued
interest and support.
Sincerely,
/s/Robert C. Siegel
----------------------
Robert C. Siegel
Chairman of the Board,
President and Chief
Executive Officer
<PAGE>
THE STRIDE RITE CORPORATION
----------------
NOTICE OF ANNUAL MEETING
----------------
Lexington, Massachusetts
March 3, 1997
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 its executive offices, 191 Spring
Street, Lexington, Massachusetts, on Wednesday, April 23, 1997, 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 1997
Annual Meeting;
2. 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;
3. To consider and act upon any other matters which may properly come
before the meeting or any adjournments or postponements thereof.
Only holders of record at the close of business on February 25, 1997 are
entitled to receive notice of and to vote at the 1997 Annual Meeting.
By Order of the Board of
Directors
/s/ Karen K. Crider
------------------------
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
191 SPRING STREET, LEXINGTON, MASSACHUSETTS 02173
----------------
PROXY STATEMENT
FOR THE 1997 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 23, 1997
and at any adjournments or postponements of such meeting.
All proxies delivered in response to this solicitation are revocable at the
option of the person executing the proxy at any time before the voting of such
proxies at the meeting. 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 on a proxy, 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 25, 1997
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 25,
1997 there were outstanding and entitled to vote 49,202,513 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 that 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 November 29, 1996 are first being mailed
together on or about March 3, 1997 to stockholders entitled to notice of and
to vote at the meeting.
The principal executive offices of the Company are located at 191 Spring
Street, Lexington, Massachusetts 02173.
<PAGE>
I. ELECTION OF DIRECTORS
Pursuant to the provisions of Massachusetts law, the Board of Directors of
the Company has three classes of directors who serve staggered three-year
terms. The classes are as nearly equal in size as possible. Serving in Class I
for terms expiring at the 1997 Annual Meeting of Stockholders, are Robert L.
Seelert, Robert C. Siegel and Myles J. Slosberg. Robert C. Siegel was a member
of Class II until December 11, 1996, when he was reassigned to Class I.
Serving in Class II for terms expiring at the 1998 Annual Meeting are Donald
R. Gant and W. Paul Tippett, Jr. Serving in Class III for terms expiring at
the 1999 Annual Meeting are Margaret A. McKenna, Frank R. Mori and Jeanette S.
Wagner.
The Board of Directors recommends that the stockholders elect Robert L.
Seelert, Robert C. Siegel and Myles J. Slosberg, who have been duly nominated
by the Board of Directors, to serve as the Class I directors for a term of
office expiring at the 2000 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 above to the class of directors whose term expires at
the 2000 Annual Meeting of Stockholders. The nominees were selected and
reviewed with respect to their qualifications by the Committee on the Board
and all have been previously elected by the Stockholders. The Company believes
that the nominees will be able and willing to serve during their term of
office. If any of them should be unable or choose not to serve, 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 are the name and age of each director currently in office
and of the nominees 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.
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION, DIRECTOR TERM
BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE EXPIRES
- ------------------------------------- -------- -------
<S> <C> <C>
NOMINEES FOR CLASS I DIRECTORS:
Robert L. Seelert, age 54..................................... 1993 1997
Chief Executive Officer, Cordiant plc, an advertising and
marketing communications firm, since July 1995. Mr. Seelert
was a private investor from February 1994 to July 1995, the
President and Chief Executive Officer of Kayser-Roth
Corporation, a legwear company, from May 1991 to February
1994, and President and Chief Executive Officer of Topco
Associates, a supplier of private-label goods and
perishables, from 1989 to 1991. Mr. Seelert is a director of
Cordiant plc and of Senior Tour Players Development, Inc.
Robert C. Siegel, age 60...................................... 1993 1997
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. Mr. Siegel is a director of London Fog
Industries, Inc.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION, DIRECTOR TERM
BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE EXPIRES
- ------------------------------------- -------- -------
<S> <C> <C>
Myles J. Slosberg, age 60...................................... 1961 1997
Attorney in private practice since July 1994. From March 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. 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, Ltd., 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, Inc., 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.
CONTINUING DIRECTORS:
CLASS II DIRECTORS
Donald R. Gant, age 68......................................... 1987 1998
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.
W. Paul Tippett, Jr., age 64................................... 1993 1998
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.
CLASS III DIRECTORS
Margaret A. McKenna, age 51.................................... 1988 1999
President of Lesley College since August 1985. Prior to
becoming President of Lesley College, Ms. McKenna served as
Vice President of Radcliffe College from 1981 to 1985, as
Deputy Undersecretary of the United States Department of
Education and Deputy Counsel to the President of the United
States from 1977 to 1981 and as a trial attorney for the
United States Department of Justice from 1970 to 1977. Ms.
McKenna is a director of Consolidated Natural Gas Co. and
Best Products Co., Inc.
Frank R. Mori, age 56.......................................... 1996 1999
Since 1986, President and CEO of Takihyo, Inc., which owns the
Anne Klein group of companies, a women's apparel
manufacturing organization, including Anne Klein & Company,
of which Mr. Mori has been President and CEO since 1975.
Jeanette S. Wagner, age 67..................................... 1994 1999
President, Estee Lauder International, Inc., a cosmetics
company, since 1986. Mrs. Wagner is a director of American
Greetings Corporation.
</TABLE>
3
<PAGE>
OWNERSHIP OF EQUITY SECURITIES
The following table shows the beneficial ownership of Common Stock of (i)
each person or entity known to the Company to be the beneficial owner of more
than 5% of the Common Stock and (ii) 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, reported to the Company as of the close of business on February 25,
1997. The numbers disclosed include 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").
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED PERCENT OF
NAME FEBRUARY 25, 1997(1) CLASS
---- ---------------------- ----------
<S> <C> <C>
FMR Corp. ................................... 3,442,815(2) 7.0
82 Devonshire Street
Boston, MA 02199
Pioneering Management Corp. ................. 2,745,900(3) 5.6
60 State Street
Boston, MA 02109
Donald R. Gant............................... 15,150(4) (5)
Margaret A. McKenna.......................... 9,150(6) (5)
Frank R. Mori................................ 5,000 (5)
Robert L. Seelert............................ 7,500(7) (5)
Robert C. Siegel............................. 301,918(8) (5)
Myles J. Slosberg............................ 193,630(9) (5)
W. Paul Tippett, Jr. ........................ 14,000(7) (5)
Jeanette S. Wagner........................... 4,800(10) (5)
Robert B. Moore, Jr. ........................ 83,333(11) (5)
Diane M. Sullivan............................ 33,333(12) (5)
Gerrald B. Silverman......................... 74,667(13) (5)
Dennis Garro................................. 71,666(14) (5)
The Directors and Officers listed above and
other executive officers as a group (20
persons).................................... 1,178,606(15) 2.4
</TABLE>
- --------
(1) With respect to directors and executive officers, based on information
furnished by the director or executive listed.
(2) According to a Schedule 13G, dated February 13, 1997, filed with the
Securities and Exchange Commission (the "SEC") by FMR Corp., such entity
beneficially owned 3,442,815 shares of the Company's Common Stock as of
December 31, 1996. According to such Schedule 13G, such entity had sole
power to vote or direct the vote with respect to 183,467 shares and sole
power to dispose or direct the disposition with respect to 3,442,815
shares. According to such Schedule 13G, 3,225,348 shares are beneficially
owned by Fidelity Management & Research Company, a wholly-owned subsidiary
of FMR Corp. and an investment advisor registered under Section 203 of the
Investment Advisors Act of 1940, which acts as investment adviser to
various investment companies, and 217,467 shares are beneficially owned by
Fidelity Management Trust Company, a wholly-owned subsidiary of FMR Corp.,
and a bank as defined in Section 3 (a) (6) of the 1934 Act as amended.
Edward C. Johnson, 3d, Chairman of FMR Corp, FMR Corp., through its
control of Fidelity Management & Research Company, and the Fidelity Funds
each has sole power to dispose of the 3,225,348 shares owned by the
Fidelity Funds. Johnson and FMR Corp., through its control of Fidelity
Management Trust Company, each has sole dispositive power over the 217,467
shares beneficially owned by Fidelity Management Trust Company and sole
power to vote or direct the voting of 183,467 such shares.
4
<PAGE>
(3) According to a Schedule 13G, dated January 23, 1997, filed with the SEC by
Pioneering Management Corporation, such entity beneficially owned
2,745,900 shares of the Company's Common Stock as of December 31, 1996, of
which such entity had sole power to vote or direct the vote with respect
to 2,745,900 shares, sole power to dispose or to direct disposition of
37,000 shares and shared power to dispose or to direct disposition of
2,708,900 shares.
(4) Includes currently exercisable options to purchase 5,000 shares, granted
pursuant to the Company's 1994 Non-Employee Director Stock Ownership Plan
(the "1994 Directors' Plan").
(5) Less than 1% of the outstanding shares of Common Stock.
(6) Includes currently exercisable options to purchase 5,000 shares, granted
pursuant to the 1994 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.
(7) Includes currently exercisable options to purchase 5,000 shares, granted
pursuant to the 1994 Directors' Plan.
(8) Includes 160,000 shares Mr. Siegel is entitled to purchase under the
Company's 1975 Executive Incentive Stock Purchase Plan (the "1975 Plan")
and 86,666 shares Mr. Siegel is entitled to purchase under the Company's
1995 Long-Term Growth Incentive Plan (the "1995 Plan").
(9) Includes currently exercisable options to purchase 5,000 shares, granted
pursuant to the 1994 Directors' Plan and 119,400 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 is one of two trustees,
as of March 10, 1995, for the benefit of Mr. Slosberg's mother and for Mr.
Slosberg and his siblings. Not included in the number of shares listed are
11,300 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. Mr. Slosberg disclaims beneficial ownership of these
130,700 shares of Common Stock.
(10) Includes currently exercisable options to purchase 3,300 shares, granted
pursuant to the 1994 Directors Plan.
(11) Consists of 50,000 shares Mr. Moore is entitled to purchase under the
1975 Plan and 33,333 shares Mr. Moore is entitled to purchase under the
1995 Plan.
(12) Shares Ms. Sullivan is entitled to purchase under the 1995 Plan.
(13) Includes 50,000 shares Mr. Silverman is entitled to purchase under the
1975 Plan and 24,667 shares Mr. Silverman is entitled to purchase under
the 1995 Plan.
(14) Includes 50,000 shares Mr. Garro is entitled to purchase under the 1975
Plan and 20,666 shares Mr. Garro is entitled to purchase under the 1995
Plan.
(15) Includes 224,126 shares and currently exercisable options to purchase
14,834 shares under the 1975 Plan and currently exercisable options to
purchase 125,499 shares under the 1995 Plan beneficially owned by
executive officers not separately listed above.
POLICIES WITH RESPECT TO THE COMPOSITION AND PROCEDURES OF THE BOARD OF
DIRECTORS
In 1995, the Board of Directors adopted five guidelines with respect to the
composition of the Board: (1) the Board should represent a balance of
experience (including general management, sourcing, retailing, marketing,
legal, product development, finance) and skills in dealing with product
liability, environmental protection, and with ethnic, racial and gender
issues; (2) while the preponderance of Board seats would be held by those with
extensive business experience, skills and talents from academia, government
and the non-profit sector should also be strongly considered; (3) there should
be a balance on the Board with respect to age; (4) there should be mandatory
retirement at age 70; and (5) as a matter of policy, a majority of the
directors should be independent, non-employee directors.
The Board of Directors has also adopted eleven fundamental operating
procedures and policies, which are briefly described below.
(1) The Board should be organized into at least four committees:
Compensation, Investment, Audit and the Committee on the Board (which replaced
the Nominating Committee). Only independent Directors may serve on the Audit
and Compensation Committees. The Committee on the Board is to consist of
independent Directors and is to include the Chairman of the Board and/or the
Chief Executive Officer, in an advisory capacity.
(2) The Board itself should be responsible, in fact as well as procedure,
for selecting its own members, who are to be screened by the Committee on the
Board.
5
<PAGE>
(3) The Chairman is to make recommendations to the Committee on the Board
with respect to committee memberships, on the basis of the experience and
knowledge of the individual directors, their preferences and the need for
continuity in certain areas.
(4) The independent directors are to meet in executive session at least once
per year, and to communicate the results of such meeting to the Chief
Executive Officer.
(5) Periodic reports are to be made to the Compensation Committee on
executive compensation, with reference to executive compensation at comparable
companies, and recommendations with respect to executive compensation are to
be made to the Board of Directors by the Compensation Committee. The Committee
on the Board should make recommendations to the Board of Directors on director
compensation.
(6) The full Board is to evaluate the Chief Executive Officer annually.
(7) At least once every three years, the Committee on the Board should
determine if each director's continued participation is in the best interests
of the Company.
(8) A working minimum of seven directors and maximum of eleven is desirable.
(9) Board members should have access to the management of the Company.
(10) There should be, and is, a mechanism for any director to call an
executive session of the independent directors, at any time such director
deems appropriate.
(11) To help correlate the economic interests of directors and stockholders,
a meaningful portion of director compensation should be in Common Stock of the
Company.
The Board of Directors has adopted these guidelines for the composition of
the Board and operating policies and procedures as part of its on-going
efforts to determine appropriate corporate governance procedures for the
Company. The Board expects that it will continue to evaluate such guidelines,
policies and procedures consistent with that goal.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During the Company's 1996 fiscal year, which ended November 29, 1996, the
Board of Directors held six meetings. All of the directors attended all of the
meetings of the Board of Directors during the period they served. During
fiscal 1996, the Board had standing Audit, Compensation and Investment
Committees, and a Committee on the Board. All of the directors attended all of
the meetings of committees of the Board on which they served.
The Committee on the Board met two times during the 1996 fiscal year and is
composed of Mr. Gant (Chairman), Ms. McKenna, Messrs. Mori and Tippett. The
Committee on the Board reviews the performance of directors and recommends to
the Board of Directors the selection of directors to be nominated and
considers and recommends issues relating to Director compensation, pursuant to
the Board of Directors' policies and procedures outlined above. With respect
to the 1998 Annual Meeting, the Committee on the Board will consider nominees
recommended by stockholders received by the Company on or before November 3,
1997, addressed to the Office of the Clerk, The Stride Rite Corporation, 191
Spring Street, P.O. Box 9191, Lexington, Massachusetts 02173-9191.
6
<PAGE>
The Audit Committee met three times during the 1996 fiscal year and is
composed of Messrs. Seelert (Chairman), Mori and Slosberg and Mrs. Wagner. The
Audit Committee recommends the selection of independent auditors to the Board
of Directors, reviews the overall scope, as well as the results, of the annual
audit, and reviews the overall internal controls of the Company.
The Compensation Committee met four times during the 1996 fiscal year and is
composed of Ms. McKenna (Chairperson), Messrs. Gant and Tippett and Mrs.
Wagner. Members of the Compensation Committee are non-employee directors of
the Company and are not eligible to participate in any Company employee
compensation plan administered by the Compensation 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 1996 fiscal year is set forth herein, commencing on page 14.
The Investment Committee met two times during the 1996 fiscal year. It is
composed of Messrs. Slosberg (Chairman), Seelert and Tippett. The Investment
Committee recommends the selection of independent investment managers for the
investment of the Company's pension funds and reviews and monitors the
performance of the Company's pension funds. The Investment Committee also
reviews the Company's short-term investment of the Company's available funds.
COMPENSATION OF DIRECTORS
During the 1996 fiscal year, each Director received an annual retainer of
$18,500 and a meeting fee of $750 for each meeting of the Board of Directors.
Each Director also received a fee of $750 for each meeting of a committee
attended held in connection with a Board meeting, and if a Director acted as a
committee chairperson, he or she received a meeting fee of $1,000. In
addition, each Director receives a meeting fee of $1,500 for each non-
telephonic committee meeting not held in association with a Board meeting, and
if a Director acts as a committee chairperson, he or she receives a meeting
fee of $2,000. No such meetings were held this year. Each Director received
reimbursement for expenses incurred in attending Board and committee meetings.
Each Director receives, pursuant to the 1994 Directors' Plan, a grant of 500
shares of Common Stock on the first business day following each Annual Meeting
of Stockholders. In addition, each Director received, upon implementation of
the same plan, and each person receives upon becoming a Director, a one-time
option to purchase 5,000 shares of Common Stock with an exercise price equal
to the market price on the date of grant, defined as the closing price for the
Company's Common Stock on the New York Stock Exchange--Composite Tape. Each
option is granted with a term of ten years from the date of grant, and becomes
exercisable in three installments: 1,600 shares on the first anniversary of
the grant and 1,700 shares on each of the second and third anniversaries of
the grant.
7
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table shows the compensation for the past three fiscal years
of the Chief Executive Officer and each of the other four most highly
compensated executive officers (the "named executive officers") as of the end
of the Company's 1996 fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS
------------------- ------
OTHER
ANNUAL ALL OTHER
COMPEN- COMPEN-
NAME AND FISCAL SALARY BONUS SATION OPTIONS SATION
PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) (#)(3) ($)(4)
- ------------------ ------ ------- ------- ------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Siegel 1996 520,000 -- -- 75,000 57,865
Chairman of the Board,
President and Chief 1995 520,000 -- -- 100,000 100,287
Executive Officer
1994(5) 467,714 225,000 65,083 370,000 114,126
- -----------------------------------------------------------------------------------
Robert B. Moore, Jr. 1996 249,500 -- -- 25,000 12,921
President, Sperry
Top-Sider, Inc., 1995 230,583 -- -- 40,000 22,113
a subsidiary of the
Company 1994 210,000 92,794 2,640 55,000 18,179
- -----------------------------------------------------------------------------------
Diane M. Sullivan 1996 212,032 40,000 -- 60,000 720
President,
Stride Rite Children's 1995(6) 114,487 38,800 -- 70,000 480
Group, Inc.,
a subsidiary of the 1994 -- -- -- -- --
Company
- -----------------------------------------------------------------------------------
Gerrald B. Silverman 1996 199,500 35,000 -- 44,000 14,266
Sr. Vice President,
Sales, 1995 199,500 -- -- 76,000 16,096
The Keds Corporation, a
subsidiary of the 1994(7) 125,936 44,300 71,755 33,000 9,181
Company
- -----------------------------------------------------------------------------------
Dennis Garro 1996 218,400 -- -- 30,000 14,186
President, Retail
Division 1995 218,400 -- 119,191 64,000 65,903
1994(8) 132,192 49,000 46,004 33,000 9,100
</TABLE>
- --------
(1) Amounts awarded under the Annual Incentive Compensation Plan for the
respective fiscal years. The amount awarded (i) to Mr. Siegel for 1994 was
guaranteed pursuant to Mr. Siegel's employment agreement with the Company,
(ii) to Ms. Sullivan for 1995 was guaranteed pursuant to Ms. Sullivan's
employment arrangement with the Company and for 1996 was in recognition of
her performance and the attainment of financial goals by the Wholesale
Division of Stride Rite Children's Group, Inc., (iii) to Mr. Silverman for
1996 was awarded pursuant to his employment arrangement for assuming the
responsibilities of Senior Vice President of Sales for The Keds
Corporation, and (iv) to Mr. Garro for 1994 was guaranteed pursuant to Mr.
Garro's employment arrangement with the Company.
(2) Amounts reimbursed by the Company for the payment of taxes on non-
deductible relocation expenses and/or imputed interest on loans, except as
specified below. Except for Mr. Siegel and Mr. Silverman with respect to
fiscal 1994 and Mr. Garro with respect to fiscal 1995 and fiscal 1994, 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.
Amounts shown for (i) Mr. Siegel consist 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, (ii)
Mr. Silverman consist of a reimbursement for tax planning of $2,500, a
payment to cover taxes of $62,958 relating to relocation expenses and an
automobile allowance of $6,297 and (iii) Mr. Garro for 1995 include
reimbursement for tax planning of $5,875, a payment to cover taxes of
$99,177 relating to relocation expenses and an automobile leasing
allowance of $14,139 and for 1994 include reimbursement for tax planning
of $2,500, a payment to cover taxes of $39,285 relating to relocation
expenses and an automobile leasing allowance of $4,219.
8
<PAGE>
(3) Amounts for 1994 (with respect to grants made within fiscal 1994) awarded
under the 1975 Plan. Awards made in fiscal 1995, 1996 and 1997, with
respect to fiscal 1994, 1995 and for 1996, were awarded under the 1995
Plan. For Mr. Siegel in 1994, consists of options to purchase 290,000
shares granted pursuant to Mr. Siegel's October 21, 1993 employment
agreement with the Company under the 1975 Plan and options to purchase
80,000 shares granted pursuant to the 1995 Plan. For Mr. Moore for 1994,
awards include options for 30,000 shares granted in fiscal 1995 in respect
of fiscal 1994, under the 1995 Plan and options for 25,000 shares granted
in respect of fiscal 1994, under the 1975 Plan, pursuant to Mr. Moore's
employment arrangement with the Company. For Ms. Sullivan in 1995,
consists of options to purchase 30,000 shares granted pursuant to Ms.
Sullivan's employment arrangement with the Company and 40,000 shares
granted in fiscal 1996 in respect of fiscal 1995. For Mr. Silverman for
1995, consists of options to purchase 44,000 shares granted in fiscal 1996
in respect of fiscal 1995, under the 1995 Plan, and options to purchase
32,000 shares granted in fiscal 1995 under the 1975 Plan, pursuant to Mr.
Silverman's employment arrangement with the Company. For Mr. Silverman for
1994, consists of options to purchase 15,000 shares granted in fiscal 1995
in respect of fiscal 1994, under the 1995 Plan, and options to purchase
18,000 shares, granted in fiscal 1994 under the 1975 Plan, pursuant to Mr.
Silverman's employment arrangement with the Company. For Mr. Garro for
1995, consists of options to purchase 32,000 shares granted in fiscal 1996
in respect of fiscal 1995, under the 1995 Plan, and options to purchase
32,000 shares granted in fiscal 1995 under the 1975 Plan, pursuant to Mr.
Garro's employment arrangement with the Company. For Mr. Garro for 1994,
consists of options to purchase 15,000 shares granted in fiscal 1995 in
respect of fiscal 1994, under the 1995 Plan, and options to purchase
18,000 shares, granted in fiscal 1994 under the 1975 Plan, pursuant to Mr.
Garro's employment arrangement with the Company.
(4) Amounts awarded include (i) payments of dividend equivalents on shares of
Common Stock subject to unexercised options granted under the 1975 Plan of
$55,500, $97,150 and $110,200 for Mr. Siegel in respect of fiscal 1996,
1995 and 1994, respectively, $10,000, $16,750 and $11,875 for Mr. Moore in
respect of fiscal 1996, 1995 and 1994, respectively, $9,200, $9,870 and
$4,845 for Mr. Silverman in respect of fiscal 1996, 1995 and 1994,
respectively, and $9,200, $9,870 and $5,130 for Mr. Garro in respect of
fiscal 1996, 1995 and 1994, respectively; (ii) Company contributions to
the executive's Employee Savings and Investment Plan account of $1,165,
$1,937 and $2,726 for Mr. Siegel in respect of fiscal 1996, 1995 and 1994,
respectively, $2,037, $1,969 and $2,310 for Mr. Moore in respect of fiscal
1996, 1995 and 1994, respectively, $2,574, $1,971 and $1,258 for Mr.
Silverman in respect of fiscal 1996, 1995 and 1994, respectively and
$2,648, $2,023 and $1,094 for Mr. Garro in respect of fiscal 1996, 1995
and 1994, respectively; (iii) amounts of insurance premiums paid by the
Company for the term life insurance for the benefit of the executive of
$1,200, $1,200 and $1,200 for Mr. Siegel in respect of fiscal 1996, 1995
and 1994, respectively, $720, $720 and $720 for Mr. Moore in respect of
fiscal 1996, 1995 and 1994, respectively, $720 and $480 for Ms. Sullivan
in respect of fiscal 1996 and 1995, respectively, $720, $720 and $456 for
Mr. Silverman in respect of fiscal 1996, 1995 and 1994, respectively, and
$720, $720 and $480 for Mr. Garro in respect of fiscal 1996, 1995 and
1994, respectively; (iv) imputed interest at the applicable federal rate
on outstanding zero-interest loan balances of $164, $2,674 and $3,274 for
Mr. Moore in respect of fiscal 1996, 1995 and 1994, respectively $1,772,
$3,535 and $2,622 for Mr. Silverman in respect of fiscal 1996, 1995 and
1994, respectively, and $1,618, $3,290 and $2,396 for Mr. Garro in respect
of fiscal 1996, 1995 and 1994, respectively; and (v) reimbursement for
loss on sale of a home of $50,000 for Mr. Garro in respect of fiscal 1995.
(5) Mr. Siegel became Chairman of the Board, President and Chief Executive
Officer of the Company on December 13, 1993.
(6) Ms. Sullivan joined the Company on April 24, 1995.
(7) Mr. Silverman joined the Company on April 4, 1994.
(8) Mr. Garro joined the Company on April 14, 1994.
9
<PAGE>
Stock Option Grants
The following table shows information concerning options to purchase Company
Common Stock granted with respect to fiscal 1996 to the named executive
officers pursuant to the 1995 Plan.
OPTION GRANTS FOR FISCAL YEAR 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------
POTENTIAL
% OF REALIZABLE VALUE AT
TOTAL ASSUMED ANNUAL
OPTIONS MARKET RATES OF STOCK PRICE
GRANTED TO EXERCISE PRICE ON APPRECIATION
OPTIONS EMPLOYEES OR BASE DATE OF EXPIRA- FOR OPTION TERM(1)
GRANTED FOR FISCAL PRICE GRANT TION -----------------------
NAME (#) YEAR ($/SH) ($/SH) DATE 0%($) 5%($) 10%($)
---- --------- ---------- -------- -------- -------- ----- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert C. Siegel........ 75,000(2) 6.3 11.25 11.25 12/11/06 0 530,630 1,344,720
- --------------------------------------------------------------------------------------------------
Robert B. Moore, Jr..... 25,000(2) 2.1 11.25 11.25 12/11/06 0 176,877 448,240
- --------------------------------------------------------------------------------------------------
Diane M. Sullivan....... 60,000(2) 5.0 11.25 11.25 12/11/06 0 424,504 1,075,776
- --------------------------------------------------------------------------------------------------
Gerrald B. Silverman.... 44,000(2) 3.7 11.25 11.25 12/11/06 0 311,303 788,903
- --------------------------------------------------------------------------------------------------
Dennis Garro............ 30,000(2) 2.5 11.25 11.25 12/11/06 0 212,252 537,888
</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 1995 Plan
to Messrs. Siegel, Moore, Silverman and Garro and Ms. Sullivan on December
11, 1996, with respect to fiscal 1996. Options are exercisable as to one-
third of the shares underlying the options on each of the first, second and
third anniversaries of the date of grant.
10
<PAGE>
Aggregated Option Exercises and Option Values
The following table shows information concerning the exercise of stock
options during fiscal year 1996 by each of the named executive officers and
the fiscal year-end value of unexercised options.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END (#) OPTIONS AT FY-END ($)(1)
SHARES ACQUIRED VALUE --------------------------- -------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Siegel........ 50,000 381,250 166,666(2) 253,334(3) 195,000 420,000
- --------------------------------------------------------------------------------------------------------------
Robert B. Moore, Jr. ... 0 0 60,000(4) 60,000(5) 487,500 90,000
- --------------------------------------------------------------------------------------------------------------
Diane M. Sullivan....... 0 0 10,000(6) 60,000(7) -- 90,000
- --------------------------------------------------------------------------------------------------------------
Gerrald B. Silverman.... 0 0 55,000(8) 54,000(9) 243,750 99,000
- --------------------------------------------------------------------------------------------------------------
Dennis Garro............ 0 0 55,000(10) 42,000(11) 243,750 72,000
</TABLE>
- --------
(1) Represents the difference between the closing price of the Company's
Common Stock on November 29, 1996 ($10.00) and the exercise price of the
options, multiplied by the number of shares represented by such options.
(2) Represents options to purchase 20,000 shares exercisable on December 13,
1995 at an exercise price of $.25 per share, options to purchase 120,000
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) and options to
purchase 26,666 shares exercisable on February 10, 1996 at an exercise
price of $12.25 per share.
(3) Represents options to purchase 20,000 shares at an exercise price of $.25,
exercisable on December 13, 1996, options to purchase 40,000 shares at an
exercise price of $15.875, exercisable on each of October 21, 1997 and
1998, options to purchase 26,667 shares at a purchase price of $12.25,
exercisable on each of February 10, 1997 and 1998, and options to purchase
33,333 shares at a purchase price of $7.75, exercisable on each of
December 12, 1996, 1997 and 1998.
(4) Represents options to purchase 50,000 shares at an exercise price of $.25,
which are immediately exercisable but carry restrictions on resale of any
Company Stock purchased pursuant to the grants. The restrictions lapse as
to one-third of the granted shares at the end of the third, fourth and
fifth year following the date of grant (provided the executive is employed
by the Company through such date). Also options to purchase 10,000 shares
exercisable on February 10, 1996 at an exercise price of $12.25 per share.
(5) Represents options to purchase 10,000 shares at a purchase price of
$12.25, exercisable on each of February 10, 1997 and 1998, and options to
purchase 13,333 shares at a purchase price of $7.75, exercisable on each
of December 12, 1996, 1997 and 1998.
(6) Represents options to purchase 10,000 shares exercisable on April 24, 1996
at an exercise price of $12.00 per share.
(7) Represents options to purchase 10,000 shares at a purchase price of
$12.00, exercisable on each of April 24, 1997 and 1998, and options to
purchase 13,333 shares at a purchase price of $7.75, exercisable on each
of December 12, 1996, 1997 and 1998.
(8) Represents options to purchase 25,000 shares at an exercise price of $.25
and 25,000 shares at an exercise price of $14.50, which are immediately
exercisable but carry restrictions on resale of any Company Stock
purchased pursuant to the grants. The restrictions lapse as to one-third
of the granted shares at the end of the third, fourth and fifth year
following the date of the grant (provided the executive is employed by the
Company through such date). Also options to purchase 5,000 shares
exercisable on February 10, 1996 at an exercise price of $12.25 per share.
(9) Represents options to purchase 5,000 shares at a purchase price of $12.25,
exercisable on each of February 10, 1997 and 1998, and options to purchase
14,666 shares at a purchase price of $7.75, exercisable on each of
December 12, 1996, 1997 and 1998.
(10) Represents options to purchase 25,000 shares at an exercise price of $.25
and 25,000 shares at an exercise price of $13.375, which are immediately
exercisable but carry restrictions on resale of any Company Stock
purchased pursuant to the grants. The restrictions lapse as to one-third
of the granted shares at the end of the third, fourth and fifth year
following the date of the grant (provided the executive is employed by
the Company through such date). Also options to purchase 5,000 shares
exercisable on February 10, 1996 at an exercise price of $12.25 per
share.
(11) Represents options to purchase 5,000 shares at a purchase price of
$12.25, exercisable on each of February 10, 1997 and 1998, and options to
purchase 10,666 shares at a purchase price of $7.75, exercisable on each
of December 12, 1996, 1997 and 1998.
11
<PAGE>
EMPLOYMENT AGREEMENT
On December 11, 1996, the Company entered into a new Employment Agreement
with Robert C. Siegel for Mr. Siegel's service to the Company as Chairman of
the Board, President and Chief Executive Officer for the period December 15,
1996 through December 15, 1997, replacing Mr. Siegel's previous contract,
which expired pursuant to its terms. 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 at the April 23, 1997 Annual
Meeting of Stockholders.
Mr. Siegel's base salary under the Contract for the fiscal year 1997 is
$545,000, representing an increase of $25,000 over the $520,000 salary that he
received in each of fiscal years 1995 and 1996. In addition, the agreement
provides for additional incentive compensation, as follows: (i) eligibility
for an annual bonus pursuant to the Company's Annual Incentive Compensation
Plan with a "bonus percentage" of 50%, and (ii) a cash amount equal to the
excess, if any, of (A) $951,000 over (B) the aggregate fair market value of
60,000 shares of the Company's common stock, corresponding to the number of
shares subject to options granted pursuant to an employment agreement with Mr.
Siegel dated October 21, 1993 under the Company's 1975 Executive Incentive
Stock Purchase Plan, whether or not the shares have actually been acquired or
disposed of by Mr. Siegel, plus the aggregate gain, if any, realized by him on
any of the option shares acquired and resold during the Employment Period at a
price exceeding $15.875 per share, less the aggregate purchase price paid or
payable for such shares, upon the occurrence of the first of the following
events: (i) if during the year from December 15, 1996 to December 15, 1997 his
employment is terminated by the Company; (ii) if on or before October 15, 1997
the Agreement is not extended or replaced by a new agreement covering Mr.
Siegel's employment beyond December 15, 1997; (iii) following any renewal of
Mr. Siegel's employment, if at any time after December 15, 1997 either Mr.
Siegel or the Company terminates his employment with the Company; or (iv) upon
his death.
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 his employment period.
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,
including the failure by the Company, by October 15, 1997, to further extend
the term of Mr. Siegel's employment (in which case his employment will be
deemed terminated on December 15, 1997), equal to 12 months' salary plus
continued participation in benefit plans. Mr. Siegel has also entered into a
Severance Agreement with the Company as described under the heading "Executive
Termination Agreements" below.
EXECUTIVE TERMINATION AGREEMENTS
The Company currently maintains severance agreements with ten 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 of base salary, annual bonus, long-term
incentive awards and dividend equivalents under the 1975 Plan, based on
certain assumptions contained in the agreements. In addition, executives are
entitled to receive an additional
12
<PAGE>
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 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 Plan and any successor plan,
including the 1995 Plan.
Each severance agreement expires annually at the end of the calendar year
and will be further extended automatically for additional one-year periods
unless the Company gives notice three months in advance of the expiration of
an agreement that the Company does not wish to extend it for another year. 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. To date, no amounts have to date been paid to any person
under the severance agreements.
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.
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 25, 1997 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 is 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 25, 1997 AT AGE 65*
- ---- ------------------ ----------------
<S> <C> <C>
Robert C. Siegel............................ 3 $20,076
Robert B. Moore, Jr. ....................... 4 $63,129
Diane M. Sullivan........................... 1 $71,106
Gerrald B. Silverman........................ 2 $82,957
Dennis Garro................................ 2 $52,003
</TABLE>
- --------
* Assumes continued service until age 65 at current salary levels.
13
<PAGE>
COMPENSATION COMMITTEE REPORT
The Compensation Committee consists of four non-employee directors: Ms.
McKenna (Chairperson), Messrs. Gant and Tippett and Mrs. Wagner. Members of
the Compensation Committee do not participate in any employee compensation
plans administered by the Committee or the Board of Directors.
This report is required by the SEC disclosure requirements and relates to
compensation paid for the Company's 1996 fiscal year to Robert C. Siegel,
Chairman, President and Chief Executive Officer and all of the executive
officers of the Company.
Compensation Philosophy
The Company's executive compensation program is designed to closely link
compensation to corporate performance and returns to stockholders. 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. 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.
To meet this goal, the Compensation Committee reviews Company, division and
personal performance, stock price and executive compensation levels. An
independent executive compensation consultant has been used from time to time
to assess the competitiveness of the executive compensation program in
relation to those of other public corporations with which the Company competes
for executive talent. The corporations whose compensation practices have been
studied as part of this comparative review are not limited to the Standard &
Poor's Footwear 500 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.
The key elements of the Company's executive compensation consist of three
components, each of which is intended to serve the Company's overall
compensation philosophy: base salary, the Annual Incentive Compensation Plan
(the "Annual Plan") and the 1995 Long-Term Growth Incentive Plan (the "1995
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.
Under the Internal Revenue Code, publicly traded corporations such as the
Company are not 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 has determined that no
compensation paid by the Company in fiscal 1996 was nondeductible as a result
of the $1,000,000 limit. While it is the Company's intention to take all
appropriate steps to maximize the Company's compensation deduction, it is
possible that situations may arise in which non-deductible compensation may be
paid.
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.
14
<PAGE>
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.
On November 16, 1995, the Board of Directors determined to defer most salary
increases as a result of the Company's 1995 financial performance. The base
salary for Mr. Siegel for fiscal year 1996 was $520,000 per year, which was
the same as his base salary for fiscal year 1995. Mr. Siegel's base salary for
fiscal year 1997 was increased to $545,000 in the Employment Agreement between
the Company and Mr. Siegel dated December 11, 1996.
Annual Incentives
Under the Company's Annual Plan as in effect for fiscal 1996, 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 were
met. These performance goals were established at the beginning of the fiscal
year by the Compensation Committee, in consultation with the Chief Executive
Officer, and included a threshold consolidated pre-tax income goal, minimum
consolidated pre-tax income goals and divisional pre-tax income goals, where
appropriate. The Annual Plan establishes bonus pools for groups of
participants with the same performance goals and allows bonus awards from each
bonus pool within a range. With respect to fiscal 1996, however, because
Company performance did not meet the minimum threshold for payment under the
Annual Plan, bonus payments were not made, with the exception of payments made
to Gerrald Silverman and one executive officer not included among the named
executive officers, who received payments because of prior employment
commitments and Diane Sullivan in recognition of her performance and the
attainment of financial goals by the Wholesale Division of Stride Rite
Children's Group, Inc. Mr. Siegel did not receive a bonus for fiscal years
1995 or 1996 as the threshold consolidated pre-tax income goal had not been
met.
Stock Options
Under the Company's 1995 Plan, the Compensation Committee may grant rights
to purchase Common Stock at its then current market value. The Compensation
Committee sets guidelines for such awards based on factors including
competitive compensation data, the importance of the position, incentive
towards achievement of future long-term goals, corporate performance and
individual performance against objectives agreed between each employee and his
or her manager. The options granted generally vest on the first, second and
third anniversaries of the grant if the executive is then employed with the
Company.
Pursuant to the 1995 Plan, Mr. Siegel was granted an option to purchase
75,000 shares of Common Stock at $11.25 per share (the closing price of the
Company's Common Stock on the New York Stock Exchange-- Composite Tape, on
December 11, 1996, the date of grant), vesting one-third on each of the first,
second and third anniversaries of the December 11, 1996 grant date. The amount
and terms of these options were determined in recognition of his 1996
performance against the individual goals established by the Committee, the
importance of his position and as an incentive for future performance. The
Committee also considered the number and prices for options currently held by
Mr. Siegel.
15
<PAGE>
Conclusion
Through the programs described above, a substantial portion of the Company's
executive compensation is linked directly to individual and corporate
performance and stock price appreciation. In fiscal 1996, the Company's
performance did not reach the thresholds necessary to trigger any performance-
based compensation for Mr. Siegel. No executive officer received a bonus
payment for fiscal 1996 other than three, two of which were paid because of
employment arrangements and one paid in recognition of performance. The
Compensation Committee intends to continue the policy of directly linking a
significant portion of executive compensation to corporate performance and
stockholder returns.
COMPENSATION COMMITTEE
Margaret A. McKenna
(Chairperson)
Donald R. Gant
W. Paul Tippett, Jr.
Jeanette S. Wagner
16
<PAGE>
PERFORMANCE GRAPH
Set forth below is a 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
Footwear--500 Index (a performance indicator of peer group companies), for a
period of five fiscal years commencing November 29, 1991 and ending November
29, 1996. The Standard & Poor's Footwear--500 Index consists of Reebok
International Ltd., Nike, Inc. and the Company.
[PEFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Company................................. 100 80.62 76.61 52.60 38.32 44.79
S&P Footwear--500 Index................. 100 129.67 94.10 113.32 144.49 264.57
S&P 500 Index........................... 100 118.47 130.44 131.80 180.54 230.84
</TABLE>
17
<PAGE>
CERTAIN TRANSACTIONS WITH MANAGEMENT
During fiscal 1994, the Company extended Dennis Garro, President of the
Retail Division, a loan in the amount of $99,000. The highest amount
outstanding on this loan since the beginning of fiscal 1996 was $66,000. As of
February 25, 1997, $66,000 was outstanding on this loan. Further, in fiscal
1994, the Company extended Gerrald B. Silverman, Senior Vice President, Sales
of The Keds Corporation, a loan in the amount of $99,000. The highest amount
outstanding on this loan since the beginning of fiscal 1996 was $66,000. As of
February 25, 1997, $33,000 was outstanding on this loan. During fiscal 1993,
the Company extended to Karen K. Crider, General Counsel, Clerk and Secretary
of the Company, a loan in the amount of $99,000. The highest amount
outstanding on this loan since the beginning of fiscal 1996 was $66,000. As of
February 25, 1997, $66,000 was outstanding. 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, a loan in the amount of
$224,000. The highest amount outstanding since the beginning of fiscal 1996
was $33,000. As of February 25, 1997, $33,000 was outstanding. The outstanding
balance on each of the four loans bears interest at a rate of six (6%) percent
per annum.
2. 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 1996 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.
3. 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 & Company, Inc., proxy solicitors
for the Company. The cost of soliciting proxies will be borne by the Company.
18
<PAGE>
The agreement with D.F. King & Company, Inc. is 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 1998 Annual Meeting of
Stockholders must be received by the Company on or before November 3, 1997 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
191 Spring Street
P.O. Box 9191
Lexington, Massachusetts
02173-9191
March 3, 1997
19
<PAGE>
0865-PS-97
<PAGE>
THE STRIDE RITE CORPORATION
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints ROBERT C. SIEGEL and JOHN R.
RANELLI, and each of them acting solely, proxies, with full power of
P substitution and with all powers the undersigned would possess if
personally present, to represent and vote, as designated below, all of
R 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
O the Annual Meeting of Stockholders of the Company to be held at its
executive offices, 191 Spring Street, Lexington, Massachusetts, on
X Wednesday, April 23, 1997, at 10:00 A.M. (Boston time), and at any
adjournment(s) or postponement(s) thereof, upon the matters set forth on
Y 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 AND 2.
-------------
(PLEASE SIGN AND DATE ON REVERSE SIDE SEE REVERSE
AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE) SIDE
-------------
- --------------------------------------------------------------------------------
[X] Please mark
votes as in
this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2
1. Election of Directors
Nominees: Robert L. Seelert, Robert C. Seigel and
Myles J. Slosberg
FOR WITHHELD
[_] [_]
[_]
---------------------------------------
For all nominees except as noted above
2. Proposal to ratify selection of FOR AGAINST ABSTAIN
Coopers & Lybrand LLP as [_] [_] [_]
Auditors of the Company.
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:
-------------------------------- ----------------
