<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>
[LOGO OF THE STRIDE RITE CORPORATION APPEARS HERE]
191 SPRING STREET
P.O. BOX 9191
LEXINGTON, MASSACHUSETTS 02173-9191
February 27, 1998
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
The Stride Rite Corporation to be held at our executive offices, 191 Spring
Street, Lexington, Massachusetts, on Thursday, April 16, 1998, 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's business strategy,
the product lines of our brands and our 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
February 27, 1998
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 Thursday, April 16, 1998, 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 1998
Annual Meeting and one additional nominee;
2. To consider and act upon a proposal to approve The Stride Rite
Corporation 1998 Long-Term Growth Incentive Plan;
3. To consider and act upon a proposal to approve The Stride Rite
Corporation 1998 Non-Employee Director Stock Ownership Plan;
4. To consider and act upon a proposal to approve The Stride Rite
Corporation Senior Executive Annual Incentive Compensation Plan;
5. 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;
6. 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 17, 1998 are
entitled to receive notice of and to vote at the 1998 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 1998 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 16, 1998
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 the
Company's 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 17, 1998
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,
1998 there were outstanding and entitled to vote 47,213,742 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. Neither
abstentions nor broker "non-votes" are counted as affirmative votes on any
matter.
This Proxy Statement, the related form of proxy and the Company's Annual
Report for the fiscal year ended November 28, 1997 are first being mailed
together on or about February 27, 1998 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>
1. 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
II for terms expiring at the 1998 Annual Meeting of Stockholders 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 and Frank R. Mori. Serving in
Class I for terms expiring at the 2000 Annual Meeting 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. Jeanette S.
Wagner resigned as a director effective February 12, 1998 because of the
demands of her principal occupation.
The Board of Directors recommends that the stockholders elect Warren Flick,
Donald R. Gant and W. Paul Tippett, Jr., who have been duly nominated by the
Board of Directors, to serve as the Class II directors for a term of office
expiring at the 2001 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 2001 Annual Meeting of Stockholders. The nominees were selected and
reviewed with respect to their qualifications by the Committee on the Board
and Mr. Gant and Mr. Tippett have been previously elected by the Stockholders.
The Company believes that the nominees will be able and willing to serve. If
any of them should be unable or choose not to take office, the persons named
as proxies may vote in favor of such other person or persons as the Board of
Directors at the time recommends. Pursuant to the Company's current guidelines
on director retirement, it is expected that Mr. Gant will resign from the
Board effective as of the 1999 Annual Meeting of Stockholders, having reached
age 70.
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 II DIRECTORS:
Warren Flick, age 54 .........................................
Private investor since January 1998, Mr. Flick was the
President and Chief Operating Officer of U.S. K-Mart Stores,
a mass merchant discount department store, from 1995 to 1997
and was Chairman, President and Chief Executive Officer of
Sears de Mexico, a subsidiary of Sears Roebuck and Co., a
retailer, from 1994 to 1995 and was Group Vice President of
Sears Roebuck and Co. from 1988 to 1994.
Donald R. Gant, age 69 ....................................... 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.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION, DIRECTOR TERM
BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE EXPIRES
- ------------------------------------- -------- -------
<S> <C> <C>
W. Paul Tippett, Jr., age 65 .................................. 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.
CONTINUING DIRECTORS:
CLASS III DIRECTORS
Margaret A. McKenna, age 52 ................................... 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 57 ......................................... 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.
CLASS I DIRECTORS
Robert L. Seelert, age 55 ..................................... 1993 2000
Chief Executive Officer, Saatchi & Saatchi, plc, an
advertising and marketing communications firm, since December
1997. From July 1995 to December 1997, Mr. Seelert was Chief
Executive Officer of Cordiant plc, an advertising and
marketing communications firm. 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 Saatchi & Saatchi plc and of Senior
Tour Players Development, Inc.
Robert C. Siegel, age 61 ...................................... 1993 2000
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>
3
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION, DIRECTOR TERM
BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE EXPIRES
- ------------------------------------- -------- -------
<S> <C> <C>
Myles J. Slosberg, age 61 .................................... 1961 2000
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.
</TABLE>
4
<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, the directors and executive
officers, reported to the Company as of the close of business on February 17,
1998, except as otherwise provided below. 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 PERCENT OF
NAME BENEFICIALLY OWNED(1) CLASS
---- ---------------------- ----------
<S> <C> <C>
Nicholas-Applegate Capital Management ....... 2,657,128(2) 5.6%
600 West Broadway
29th Floor
San Diego, CA 92101
Salomon Smith Barney Holdings Inc. .......... 2,389,265(3) 5.1%
Travelers Group Inc.
388 Greenwich Street
New York, NY 10013
Warren Flick................................. 0
Donald R. Gant............................... 15,650(4) (5)
Margaret A. McKenna.......................... 9,650(6) (5)
Frank R. Mori................................ 7,100(7) (5)
Robert L. Seelert............................ 8,000(8) (5)
Robert C. Siegel............................. 471,411(9) (5)
Myles J. Slosberg............................ 174,130(10) (5)
W. Paul Tippett, Jr.......................... 14,500(11) (5)
John R. Ranelli.............................. 32,053(12) (5)
Diane M. Sullivan............................ 76,667(13) (5)
Joanna M. Jacobson........................... 302,112(14) (5)
Howard B. Collins, Jr........................ 13,334(15) (5)
The Directors and Officers listed above and
other executive officers as a group (24 per-
sons)....................................... 1,609,714(16) 3.4%
</TABLE>
- --------
(1) With respect to directors and executive officers, based on information
furnished by the nominee, director or executive listed. Unless otherwise
indicated, the persons listed above have sole voting and dispositive power
with respect to shares beneficially owned.
(2) According to a Schedule 13G filed with the Securities and Exchange
Commission (the "SEC") on February 13, 1998 by Nicholas-Applegate Capital
Management, such entity beneficially owned 2,657,128 shares of the
Company's Common Stock as of December 31, 1997, of which such entity had
sole power to vote or direct the vote with respect to 1,628,677 shares,
sole power to dispose or to direct the disposition of 2,657,128 shares and
shared power to vote or to direct the vote of 11,484 shares.
(3) According to a Schedule 13G filed with the SEC on February 13, 1998 by
Salomon Smith Barney Holdings Inc. ("SSB Holdings") and Travelers Group
Inc. ("TRV"), which is the sole stockholder of SSB Holdings, TRV and SSB
Holdings beneficially owned 2,389,255 shares of the Company's Common Stock
as of December 31, 1997, and had shared power to vote or direct the vote
and to dispose or direct the disposition of all such shares. By the same
filing, SSB Holdings & TRV have also disclaimed beneficial ownership of
such 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.
5
<PAGE>
(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 1,600 shares, granted
pursuant to the 1994 Directors' Plan.
(8) Includes currently exercisable options to purchase 5,000 shares, granted
pursuant to the 1994 Directors' Plan.
(9) Includes 200,000 shares Mr. Siegel is entitled to purchase under the
Company's 1975 Executive Incentive Stock Purchase Plan (the "1975
Plan")and 171,667 shares Mr. Siegel is entitled to purchase under the
Company's 1995 Long-Term Growth Incentive Plan (the "1995 Plan").
(10) Includes currently exercisable options to purchase 5,000 shares, granted
pursuant to the 1994 Directors' Plan and 99,400 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, 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
110,700 shares of Common Stock.
(11) Includes currently exercisable options to purchase 5,000 shares, granted
pursuant to the 1994 Directors' Plan.
(12) Includes 30,000 shares Mr. Ranelli is entitled to purchase under the 1995
Plan.
(13) Shares Ms. Sullivan is entitled to purchase under the 1995 Plan.
(14) Includes 133,333 shares Ms. Jacobson is entitled to purchase under the
1995 Plan.
(15) Shares Mr. Collins is entitled to purchase under the 1995 Plan.
(16) Includes 89,442 shares and currently exercisable options to purchase
120,167 shares under the 1975 Plan and currently exercisable options to
purchase 275,498 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.
(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.
6
<PAGE>
(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 1997 fiscal year, which ended November 28, 1997, the
Board of Directors held six meetings. During fiscal 1997, the Board had
standing Audit, Compensation and Investment Committees, and a Committee on the
Board. All of the directors attended more than 75% of the aggregate of (i) the
meetings of the Board of Directors held while they served and (ii) the total
number of meetings held by all committees on which they served.
The Committee on the Board met two times during the 1997 fiscal year and is
currently composed of Mr. Gant (Chairman), Ms. McKenna and Mr. 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 1999 Annual Meeting, the Committee on the Board will consider nominees
recommended by stockholders received by the Company on or before November 4,
1998, addressed to the Office of the Clerk, The Stride Rite Corporation, 191
Spring Street, P.O. Box 9191, Lexington, Massachusetts 02173-9191.
The Audit Committee met three times during the 1997 fiscal year and is
currently composed of Messrs. Seelert (Chairman), Mori and Slosberg. 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.
7
<PAGE>
The Compensation Committee met five times during the 1997 fiscal year and is
composed of Mr. Mori (Chairman), Messrs. Gant and Tippett and Ms. McKenna.
Members of the Compensation Committee are non-employee directors of the
Company. 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 1997 fiscal year is included in this proxy statement,
commencing on page 13.
The Investment Committee met three times during the 1997 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
Each director receives a flat annual retainer of $30,000. There is no
meeting attendance fee and no committee fees. This compensation structure
replaces the former fee structure of an annual retainer of $18,500 and
additional fees for attendance at meetings and for acting as a committee
chairperson. During fiscal year 1997, the directors received fees averaging
$27,500. Each director receives reimbursement for expenses incurred in
attending Board and committee meetings.
Each director receives, pursuant to the 1994 Non-Employee Stock Ownership
Plan (the "1994 Director 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. The 1994
Directors' Plan will terminate upon the approval of the 1998 Non-Employee
Director Stock Ownership Plan by the shareholders (see "1998 Non-Employee
Director Stock Ownership Plan" below).
Under the proposed 1998 Director Stock Ownership Plan, each director will
receive 500 shares of stock and an option, with an exercise price equal to the
market value on the date of grant, to purchase 5,000 shares of Common Stock on
the day after each annual meeting of shareholders commencing in 1999, and on
the day after the effectiveness of the registration statement with respect to
such plan in 1998.
8
<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 1997 fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS
------------------- ------
OTHER
ANNUAL RESTRICTED ALL OTHER
COMPEN- STOCK COMPEN-
NAME AND FISCAL SALARY BONUS SATION AWARDS OPTIONS SATION
PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) ($) (#)(3) ($)(4)
- ------------------ ------ ------- ------- ------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert C. Siegel 1997 545,000 817,500 -- -- 100,000 49,992
Chairman of the Board, 1996 520,000 -- -- -- 75,000 57,865
President & Chief Exec-
utive Officer 1995 520,000 -- -- -- 100,000 100,287
- -----------------------------------------------------------------------------------------
John R. Ranelli 1997 278,103 275,000 172 -- 80,000 1,777
Executive Vice Presi-
dent 1996(5) 68,750 -- -- -- 150,000 120
1995 -- -- -- -- -- --
- -----------------------------------------------------------------------------------------
Diane M. Sullivan 1997 259,266 200,000 -- -- 60,000 3,077
Group President, Li-
censed Brands 1996 212,032 40,000 -- -- 60,000 720
1995(6) 114,487 38,800 -- -- 70,000 480
- -----------------------------------------------------------------------------------------
Joanna M. Jacobson 1997 282,500 111,000 -- -- 60,000 720
President, The Keds
Corporation, a 1996(7) 169,936 37,000 -- 215,582(8) 225,000 420
subsidiary of the Com-
pany 1995 -- -- -- -- -- --
- -----------------------------------------------------------------------------------------
Howard B. Collins, Jr. 1997 222,482 156,000 3,495 -- 20,000 1,108
President, Stride Rite
Sourcing 1996(9) 40,051 20,000 -- -- 40,000 60
International, Inc., a
subsidiary of the Com-
pany 1995 -- -- -- -- -- --
</TABLE>
- --------
(1) Amounts awarded under the Annual Incentive Compensation Plan for the
respective fiscal years. The amount awarded (i) 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., (ii) to Ms. Jacobson for 1996 was guaranteed
pursuant to her employment arrangement with the Company, and (iii) to Mr.
Collins for 1996 was guaranteed pursuant to Mr. Collins' employment
arrangement with the Company.
(2) Amounts reimbursed by the Company for the payment of taxes on non-
deductible relocation expenses. Amounts for executive perquisites and
other personal benefits, securities or property are not 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) Awards made in fiscal 1996 and 1997 with respect to fiscal 1995 and 1996
were awarded under the 1995 Plan. Awards made in fiscal 1998 with respect
to fiscal 1997 were awarded under the 1998 Plan. For Mr. Ranelli for 1996,
consists of options to purchase 150,000 shares granted pursuant to Mr.
Ranelli'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 Ms. Jacobson in
1996, consists of options to purchase 150,000 shares granted pursuant to
Ms. Jacobson's employment arrangement with the Company and 75,000 shares
granted in fiscal 1997 in respect of fiscal 1996. For Mr. Collins in 1996,
consists of options to purchase 20,000 shares granted pursuant to Mr.
Collins' employment arrangement with the Company and 20,000 shares granted
in fiscal 1997 in respect of fiscal 1996.
(4) Amounts awarded include (i) payments of dividend equivalents on shares of
Common Stock subject to unexercised options granted under the 1975 Plan of
$48,000, $55,500 and $97,150 for Mr. Siegel in respect of fiscal 1997,
1996 and 1995, respectively; (ii) Company
9
<PAGE>
contributions to the executive's Employee Savings and Investment Plan
account of $792, $1,165 and $1,937 for Mr. Siegel in respect of fiscal 1997,
1996 and 1995, respectively, $1,057 for Mr. Ranelli in respect of fiscal
1997, $2,357 for Ms. Sullivan in respect of fiscal 1997 and $388 for Mr.
Collins in respect of fiscal 1997; (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 1997, 1996
and 1995, respectively, $720 and $120 for Mr. Ranelli in respect of fiscal
1997 and 1996, respectively, $720, $720 and $480 for Ms. Sullivan in respect
of fiscal 1997, 1996 and 1995, respectively, $720 and $420 for Ms. Jacobson
in respect of fiscal 1997 and 1996, respectively, and $720 and $60 for Mr.
Collins in respect of fiscal 1997 and 1996, respectively.
(5) Mr. Ranelli joined the Company on September 1, 1996.
(6) Ms. Sullivan joined the Company on April 24, 1995.
(7) Ms. Jacobson joined the Company on April 18, 1996.
(8) Ms. Jacobson, as part of her employment agreement on April 18, 1996,
received 20,779 shares of restricted stock at a fair market value of
$10.375 on the date of the award. The restrictions on resale lapsed on
July 1, 1996. Ms. Jacobson received one dividend payment of $1,038.95 with
respect to these restricted shares during the restricted period.
(9) Mr. Collins joined the Company on September 26, 1996.
Stock Option Grants
The following table shows information concerning options to purchase Company
Common Stock granted with respect to fiscal 1997 to the named executive
officers pursuant to the 1998 Plan (except as set forth in footnote 2 below).
OPTION GRANTS FOR FISCAL YEAR 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------
POTENTIAL
% OF REALIZABLE VALUE AT
TOTAL ASSUMED ANNUAL
OPTIONS MARKET RATES OF STOCK PRICE
GRANTED TO EXERCISE PRICE ON APPRECIATION
OPTIONS EMPLOYEES OR BASE DATE OF EXPIRA- FOR OPTION TERM(1)
GRANTED FOR FISCAL PRICE GRANT TION -----------------------
NAME (#) YEAR ($/SH) ($/SH) DATE 0%($) 5%($) 10%($)
---- ------- ---------- -------- -------- -------- ----- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert C. Siegel........ 100,000 10.8 11.00 11.00 12/11/07 0 691,784 1,753,117
- ------------------------------------------------------------------------------------------------
John R. Ranelli......... 20,000 2.2 13.38 13.38 6/18/07 0 168,229 426,326
60,000 6.5 11.00 11.00 12/11/07 0 415,070 1,051,870
- ------------------------------------------------------------------------------------------------
Diane M. Sullivan....... 60,000 6.5 11.00 11.00 12/11/07 0 415,070 1,051,870
- ------------------------------------------------------------------------------------------------
Joanna M. Jacobson...... 60,000 6.5 11.00 11.00 12/11/07 0 415,070 1,051,870
- ------------------------------------------------------------------------------------------------
Howard B. Collins, Jr... 20,000 2.2 11.00 11.00 12/11/07 0 138,357 350,623
</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) Options were granted by the Compensation Committee under the 1998 Plan to
Messrs. Siegel, Ranelli and Collins and Ms. Sullivan and Ms. Jacobson on
December 11, 1997, with respect to fiscal 1997. Options were granted by
the Compensation Committee under the 1995 Plan to Mr. Ranelli on June 18,
1997 with respect to fiscal 1997. 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 1997 by each of the named executive officers and
the fiscal year-end value of unexercised options.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997
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........ 0 0 286,666 208,334 607,082 330,731
- -----------------------------------------------------------------------------------------------------------
John R. Ranelli......... 0 0 30,000 140,000 103,125 412,500
- -----------------------------------------------------------------------------------------------------------
Diane M. Sullivan....... 0 0 33,333 96,667 55,832 152,918
- -----------------------------------------------------------------------------------------------------------
Joanna M. Jacobson...... 0 0 66,667 158,333 154,167 244,270
- -----------------------------------------------------------------------------------------------------------
Howard B. Collins, Jr... 0 0 6,667 33,333 19,584 52,916
</TABLE>
- --------
(1) Represents the difference between the closing price of the Company's
Common Stock on November 28, 1997 ($11 15/16) and the exercise price of
the options, multiplied by the number of shares represented by such
options.
EMPLOYMENT AGREEMENT
On November 4, 1997, 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 employment period
from December 1, 1997 through December 15, 1998 (the "Employment Agreement").
The Employment Agreement replaces Mr. Siegel's previous employment agreement,
which expired pursuant to its terms.
Mr. Siegel's annual rate of base salary under the Employment Agreement is
$650,000. In addition, the Employment Agreement provides for eligibility for
an annual bonus for the Company's 1998 fiscal year with a "bonus percentage"
of 50% of base salary. Pursuant to the Employment Agreement, on December 11,
1997, in order to replace long-term benefits forfeited by Mr. Siegel by
leaving his prior employment, the Company paid Mr. Siegel a cash payment of
$306,000, which payment was equal to the excess of (A) $966,000 over (B) (i)
the aggregate fair market value of 60,000 shares of the Company's common
stock, as of such date (the number of shares subject to options granted
pursuant to the employment agreement with Mr. Siegel dated October 21, 1993),
plus (ii) the aggregate gain, if any, realized by Mr. Siegel on any of the
option shares acquired and resold after December 13, 1993 at a price in excess
of $15.875 per share. Pursuant to the Employment Agreement, for the Company's
1997 fiscal year, Mr. Siegel received on February 16, 1998, an annual
incentive bonus of $817,500, based upon the Company achieving corporate
incentive goals of 125% or greater under the Company's Annual Incentive
Compensation Plan (the "Annual Incentive Plan").. 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 for any reason other than cause, including the failure by
the Company to further extend the term of Mr. Siegel's employment by December
11, 1998 (in which case his employment will be deemed terminated on December
15, 1998), equal to 12 months'
11
<PAGE>
salary plus continued participation in medical and dental plans through the
end of the employment period. Mr. Siegel has also entered into a change of
control employment agreement with the Company as described under the heading
"Change of Control Employment Agreements" below.
CHANGE OF CONTROL EMPLOYMENT AGREEMENTS
On February 12, 1998 the Company entered into new change of control
employment agreements with each of the named executive officers in the summary
compensation table, and with certain other executive officers. The change of
control employment agreements are for two-year terms, which terms extend for
one-year upon each anniversary unless a notice not to extend is given by the
Company. These agreements provide generally that the executive's terms and
conditions of employment (including position, location, compensation and
benefits) will not be adversely changed during the two-year period after a
change of control of the Company. If the Company terminates the executive's
employment (other than for cause, death, disability or retirement) or if the
executive terminates for good reason during such two-year period (or upon
certain terminations within 18 months prior to a change of control in
connection with or in anticipation of a change of control), the Company must
provide certain specified severance benefits. For purposes of the agreements,
a change of control shall mean, subject to the conditions and exceptions
specified in the change of control employment agreements, (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 securities of the
Company where such acquisition causes such Person to own 20 percent or more of
the Common Stock or 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 12, 1998, constitute the Board
of Directors cease to constitute at least a majority of the Board of
Directors; (iii) consummation of certain reorganizations, mergers or
consolidations or sales or other dispositions of all or substantially all of
the assets of the Company or the acquisition of assets of another entity; or
(iv) approval by the stockholders of the Company of a complete liquidation or
dissolution of the Company.
Severance benefits under the agreements with each of the named executive
officers (other than Mr. Collins) include three times the sum of the
executive's base salary, target bonus, and dividend equivalents under the 1975
Plan, and three years of continued welfare insurance plan coverage. The 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 three years would also be paid to the executive. Mr. Collins would
receive severance payments and other benefits based upon a 2-year severance
multiple. In addition, the 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 agreements also provide for the lapse upon a
change of control of all restrictions on options granted under the 1975 Plan.
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
12
<PAGE>
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 17, 1998 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 17, 1998 AT AGE 65*
- ---- ------------------ ----------------
<S> <C> <C>
Robert C. Siegel............................ 4 $21,052
John R. Ranelli............................. 1 $45,750
Diane M. Sullivan........................... 2 $75,800
Joanna M. Jacobson.......................... 1 $87,634
Howard B. Collins, Jr....................... 1 $44,450
</TABLE>
- --------
* Assumes continued service until age 65 at current salary levels.
COMPENSATION COMMITTEE REPORT
The Compensation Committee consists of four non-employee directors: Mr. Mori
(Chairman), Ms. McKenna and Messrs. Gant and Tippett. This report relates to
compensation paid for the Company's 1997 fiscal year to Robert C. Siegel,
Chairman, President and Chief Executive Officer of the Company 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
principal 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 these goals, the Compensation Committee reviews Company, division
and personal performance, stock price and executive compensation levels. An
independent executive compensation consultant has been used
13
<PAGE>
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 include the
full range of corporations with which the Company competes for executive
talent both within and outside the footwear industry.
The key elements of the Company's executive compensation in fiscal 1997
consisted 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 1998 Long-Term Growth Incentive
Plan (the "1998 Plan"). As described more fully below, consistent with the
Company's compensation strategy, the Board of Directors has adopted the 1998
Plan, which is proposed for approval by the stockholders at the Annual Meeting
to succeed the 1995 Plan, which is expiring pursuant to its terms.
While the elements of compensation described below are considered
separately, the Compensation Committee also evaluates the full compensation
package provided by the Company to each individual, including pension
benefits, severance plans, insurance and other benefits.
Under Section 162(m) of the Internal Revenue Code of 1986, as amended, (the
"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". Certain
compensation paid to Mr. Siegel with respect to fiscal year 1997 will be non-
deductible as a result of the $1,000,000 limit. While it is the Company's
intention to take appropriate steps to maximize the Company's compensation
deduction, the Compensation Committee believes it is important to maintain the
flexibility to take actions it considers to be in the best interests of the
Company and its stockholders, which may be based on considerations in addition
to Section 162(m), and it is possible that situations may arise again in the
future in which non-deductible compensation may be paid. In order to maximize
such deductibility in future years, the Company is seeking approval of a
Senior Executive Annual Incentive Plan by the stockholders of the Company at
the Annual Meeting, which plan would replace the Annual Plan for certain
executive officers who are or may be subject to Section 162(m).
Base Salary
Base salaries for executive officers are determined by evaluating the
responsibilities of the executive's position 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 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.
Mr. Siegel's base salary for fiscal year 1997 was $545,000 pursuant to the
Employment Agreement between the Company and Mr. Siegel dated December 11,
1996. Mr. Siegel's base salary for fiscal year 1998 will be $650,000 pursuant
to his new Employment Agreement dated November 4, 1997, in recognition of Mr.
Siegel's performance in 1997 and to make his salary more consistent with the
salaries of chief executives of comparable companies.
14
<PAGE>
Annual Incentives
Under the Annual Incentive Plan as in effect for fiscal 1997, 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, a
consolidated pre-tax income goal and divisional pre-tax income goals, where
appropriate. The Annual Incentive 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 1997, the Company's
performance met the minimum threshold for payment under the Annual Incentive
Plan, and bonus payments were made. Mr. Siegel was paid a bonus of $817,500
for fiscal year 1997 in recognition of the fact that the consolidated pre-tax
income goal was exceeded. The proposed Senior Executive Annual Incentive Plan,
which if approved will become effective for fiscal year 1998, is described
under "Senior Executive Annual Incentive Plan", below. The Committee
recommends that Mr. Siegel's incentive compensation for fiscal 1998 be
determined in accordance with the new Senior Executive Plan.
Stock Options
Under the Company's proposed 1998 Plan, the Compensation Committee may grant
options to purchase Common Stock at its then current market value. The
Compensation Committee sets guidelines for the number of such awards based on
factors including competitive compensation data, the importance of the
executive's position, incentive towards achievement of future long-term goals,
corporate performance and individual performance against objectives agreed
upon 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.
Subject to shareholder approval of the 1998 Plan, Mr. Siegel was granted an
option to purchase 100,000 shares of Common Stock at $11.00 per share (the
closing price of the Company's Common Stock on the New York Stock Exchange--
Composite Tape, on December 11, 1997, the date of grant), vesting one-third on
each of the first, second and third anniversaries of the December 11, 1997
grant date. The amount and terms of these options were determined in
recognition of his 1997 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 of options
currently held by Mr. Siegel and the exercise prices of such options.
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. 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
Frank R. Mori
(Chairman)
Donald R. Gant
Margaret A. McKenna
W. Paul Tippett, Jr.
15
<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 Index, the Standard & Poor's Smallcap
600 Index, the Standard & Poor's Footwear--500 Index (the prior performance
indicator of peer group companies) and the Standard & Poor's Footwear--Smallcap
Index (the current performance indicator of peer group companies), for a period
of five fiscal years commencing November 29, 1992 and ending November 28, 1997.
The reason the two new components in the stock performance graph were added is
because in October, 1997, the Company was moved from the Standard & Poor's 500
Stock Index to the Standard & Poor's Smallcap 600 Index. The Standard & Poor's
Footwear--500 Index consists of Reebok International Ltd. and Nike, Inc.--Class
B. The Standard & Poor's Footwear--Smallcap Index consists of Brown Group,
Inc., Justin Industries, K-Swiss Inc.--Class A, Timberland Co.--Class A,
Wolverine World Wide and the Company.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Company....................... 100 95.02 65.24 47.52 55.55 67.37
S&P Footwear--Smallcap Index.. 100 128.48 97.95 94.78 129.62 177.25
S&P Smallcap--600 Index....... 100 118.71 114.36 149.77 182.55 227.35
S&P Footwear--500 Index....... 100 72.57 87.39 111.43 204.03 182.08
S&P 500 Index................. 100 110.10 111.25 152.39 194.85 250.41
</TABLE>
CERTAIN TRANSACTIONS WITH MANAGEMENT
During fiscal 1994, the Company extended to Dennis Garro, President of Stride
Rite International Corp., a loan in the amount of $99,000. The highest amount
outstanding on this loan since the beginning of fiscal 1997
16
<PAGE>
was $66,000. As of February 17, 1998, $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 1997 was
$66,000. As of February 17, 1998, no balance was outstanding with respect to
Ms. Crider's loan. Such loans bear interest at a rate of six (6%) percent per
annum.
2. 1998 LONG-TERM GROWTH INCENTIVE PLAN
GENERAL
On December 11, 1997, the Board of Directors unanimously adopted the 1998
Long-Term Growth Incentive Plan (the "1998 Plan"), subject to stockholder
approval and the effectiveness of a registration statement under the
Securities Exchange Act of 1933 (the "1933 Act") covering the Common Stock
issuable under the 1998 Plan. The 1998 Plan is intended to replace the 1995
Plan which is expiring, and is designed to continue 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 1998 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 1998 Plan will directly link compensation with the
achievement of long-term business goals and increases in shareholder value and
has adopted the 1998 Plan for these reasons and the reasons stated in the
Compensation Committee Report, above. The 1998 Plan will not become effective
unless it is approved by the stockholders of the Company.
The 1998 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 1998 Plan is
2,400,000, subject to adjustments as provided under the heading "Operation of
the 1998 Plan" below. All statements set forth in this Proxy Statement
relating to the 1998 Plan are qualified in their entirety by reference to the
text of the 1998 Plan which is set forth as Appendix A to this Proxy
Statement.
ADMINISTRATION
The 1998 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 1998 Plan as contemplated by Rule 16b-3 and
Section 162(m) under 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 1998 Plan participants who are not executive officers
pursuant to Section 16 of the 1934 Act (or any successor provision) and are
not "covered employees" within the meaning of Section 162(m) of the Code (or
any successor provision).
PARTICIPANTS
Awards of shares of Common Stock and options to purchase shares of Common
Stock may be granted pursuant to the 1998 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
(the "Participants").
17
<PAGE>
OPERATION OF THE 1998 PLAN
In the event the 1998 Plan is approved by stockholders, each named executive
officer (and executive officers and employees in the aggregate) will be
granted the number of shares of Common Stock and options to purchase Common
Stock determined by the Committee on December 11, 1997, as set forth under the
heading "1998 Long-Term Growth Incentive Plan--New Plan Benefits" below.
Thereafter, during the term of effectiveness of the 1998 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 shall not be less than the fair market value of the stock
on the date of grant, 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. Fair market value on any given date is defined as
the last reported sale price of the Common Stock on the last trading date on
which the Common Stock was traded preceding the specified date. The term of
each option shall be as set by the Committee, not to exceed 10 years. Stock
options shall become exercisable as to one-third of the shares of Common Stock
underlying the Stock Option on each of the first three anniversaries of the
date of grant, 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 not be made following the
third anniversary of the date of approval of the 1998 Plan by stockholders, or
following the earlier termination of the 1998 Plan. The maximum aggregate
number of shares of the Company's Common Stock which may be awarded or
purchased upon exercise of options under the 1998 Plan is 2,400,000, and the
maximum number of shares that may be awarded to or so purchased by any
individual under the 1998 Plan is 500,000, in each case subject to adjustments
as provided below. Awards of shares under the 1998 Plan shall not exceed
200,000 shares. If any options or other awards under the 1998 Plan are
forfeited or canceled, the shares underlying such options or awards may, to
the extent permitted by applicable law, again be awarded or be subject to
options under the 1998 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 respect to (i) the aggregate
number and kind of shares that may be issued under the 1998 Plan; (ii) the
number and kind of shares covered by each outstanding award made under the
1998 Plan; (iii) the option, base or purchase price per share for any
outstanding option and other awards granted under the 1998 Plan; and/or (iv)
the aggregate number of shares of Common Stock that may be awarded under
awards to any one Participant, 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 1998 Plan.
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<PAGE>
The grant of stock options under the 1998 Plan will not entitle the
Participant to any interest in any dividend, voting or other rights of a
stockholder. Neither the 1998 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 1998 Plan to the contrary, in the
event of a change of control, (i) any stock options outstanding as of the date
of the 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 1998 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 1998 Plan, options may be surrendered in exchange
for an amount of cash as specified in the 1998 Plan. For purposes of the 1998
Plan, a change of control shall mean, subject to the conditions and exceptions
specified in the 1998 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 securities of the Company where such
acquisition causes such Person to own 20 percent or more of the Common Stock
or 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 December 11, 1997, constitute the Board of Directors
cease to constitute at least a majority of the Board of Directors; (iii) the
approval by the stockholders of the Company of certain reorganizations,
mergers or consolidations or sales or other dispositions of all or
substantially all of the assets of the Company or the acquisition of assets of
another entity 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 1998 Plan may not be assignable, alienable,
saleable or otherwise transferable by a participant other than by will or
under the laws of descent and distribution. 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 1998 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 regard to executive
officers subject to Section l6 of the 1934 Act. A stock option may be
exercised, during the lifetime of the Participant, only by such Participant or
such Participant's legal representative.
NEW PLAN BENEFITS
The following grants were made by the Board of Directors on December 11,
1997 with respect to fiscal 1997, subject to approval of the 1998 Plan by
stockholders and the effectiveness of a registration statement under the 1933
Act covering the Common Stock issuable under the 1998 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 $11.00, the closing price of the Common
Stock on the New York Stock Exchange--Composite Tape on the date of grant,
December 11, 1997.
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<PAGE>
1998 LONG-TERM GROWTH INCENTIVE PLAN
<TABLE>
<CAPTION>
NAME AND POSITION STOCK OPTIONS
----------------- -------------
<S> <C>
Robert C. Siegel................................................. 100,000
John R. Ranelli.................................................. 60,000
Diane M. Sullivan................................................ 60,000
Joanna M. Jacobson............................................... 60,000
Howard B. Collins, Jr............................................ 20,000
Executive Officers as a group (15 persons)....................... 510,000
Employees as a group (152 persons)(1)............................ 800,250
</TABLE>
- --------
(1) 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 stock options 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 stock options and is not intended as tax advice to
any individual. Holders of stock options are urged to consult their own tax
advisors regarding the impact of federal, state and local taxes, and the
federal alternative minimum tax, 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").
(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.
(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,
20
<PAGE>
depending on the holding period for the shares, and the long-term capital gain
or loss rate may vary based upon the holding period for the shares. 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 one year from the date of
transfer of shares to the optionee. (However, disposition by the estate of a
deceased employee is not considered a disqualifying disposition even if it
occurs before these dates.) Upon a disqualifying disposition, the optionee
will realize ordinary taxable income (and the Company will be allowed a tax
deduction) 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, and the long-term capital gain or loss rate may vary based
upon the holding period for the shares.
(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,
21
<PAGE>
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.
Change of Control
The vesting of Stock Options 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 fair market value of Common Stock
(determined at the time of grant) become exercisable in a single year.
Finally, the exercise of a right following a change of control to have Stock
Options canceled in exchange for a payment in cash or Common Stock would
result in ordinary 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 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.
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 Stock
Option, or to require payment of such amounts before delivery of shares.
VOTE REQUIRED
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 1998 PLAN.
Approval of the 1998 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.
3. 1998 NON-EMPLOYEE DIRECTOR STOCK OWNERSHIP PLAN
GENERAL
On February 12, 1998, the Board of Directors unanimously adopted the 1998
Non-Employee Director Stock Ownership Plan (the "1998 Director Plan"), subject
to stockholder approval and the effectiveness of a registration statement
under the 1933 Act covering the Common Stock issuable under the 1998 Director
Plan. The Board of Directors believes that offering long-term incentive
opportunities to directors gives directors added incentive to further the
long-term profitability of the Company and thereby benefit the stockholders of
the Company. The Board of Directors also wishes to assure that its director
compensation arrangements remain competitive with those offered elsewhere in
order to be able to attract and retain non-employee directors of outstanding
ability. The 1998 Director Plan will replace the 1994 Director Plan, which was
adopted by the Board of Directors and approved by the stockholders in 1994.
The 1994 Director Plan provided for annual grants to each director of 500
shares of Common Stock. The 1998 Plan provides for an additional annual grant
to each director of fair market value options to purchase 5,000 shares of
Common Stock. The Board of Directors believes
22
<PAGE>
that this change will further the goal of aligning the directors' interest
with those of the stockholders because such options will only have value if
the market value of the Common Stock increases. Accordingly, the Board
recommends that the stockholders approve the 1998 Director Plan.
All statements set forth in this Proxy Statement relating to the 1998
Director Plan are qualified in their entirety by reference to the text of the
1998 Director Plan which is set forth as Appendix B to this Proxy Statement.
ADMINISTRATION
The 1998 Director Plan will be self-governing. Questions of interpretation,
if any, will be resolved by the Board of Directors.
PARTICIPANTS
Awards of shares of Common Stock and options to purchase shares of Common
Stock may be granted pursuant to the 1998 Director Plan to any director who is
not an employee of the Company coincident with or subsequent to stockholder
approval of the 1998 Director Plan. As of February 27, 1998, all of the
directors other than Mr. Siegel (six persons) were eligible to participate in
the 1998 Director Plan.
OPERATIONS OF THE 1998 DIRECTOR PLAN
During the term of the 1998 Director Plan, on the day after the date of the
effectiveness of the registration under the 1933 Act of the shares of Common
Stock to be issued upon exercise of options granted under the 1998 Director
Plan, and on the day after each annual meeting of stockholders beginning in
1999, until the 1998 Director Plan is terminated or amended, the Company will
issue to each non-employee director a grant of 500 shares of Common Stock and
fair market value options to purchase 5,000 shares of Common Stock. The
registration will be effective as soon as practicable following the date of
the 1998 Annual Meeting. The option exercise price will be the fair market
value of a share of Common Stock on the date of grant, defined as the last
reported sale price of the Common Stock on the last trading date on which the
Common Stock was traded preceding the grant date. Each Option will have a term
of ten years and will become exercisable as to the purchase of 1,600 shares of
the Common Stock one year after the date of grant, 1,700 shares of Common
Stock two years after the date of grant and 1,700 shares of Common Stock three
years after the date of grant. Unvested options are forfeited upon the
director ceasing to serve on the Board of Directors. Upon a change of control
of the Company (as described above in "1998 Long-Term Growth Incentive Plan--
Operation of the 1998 Plan"), any stock options outstanding as of the date of
the change of control which are not then exercisable and vested, shall become
fully exercisable and vested, effective immediately prior to the occurrence of
such change of control.
The maximum number of shares of Common Stock which may be purchased upon
exercise of stock options and grants of Common Stock under the 1998 Director
Plan is 300,000, subject to adjustments as provided below. If any options
awarded under the 1998 Director Plan are forfeited, canceled, reacquired by
the Company, satisfied without issuance of Common Stock or otherwise
terminated (except by exercise), the shares which underlie such options may
again be awarded under the 1998 Director Plan. In the event of any change in
the outstanding shares of Common Stock by reason of any stock dividend, stock
split, combination of shares, exchanges of shares, warrants or rights
offerings to purchase Common Stock at a price below its fair market
23
<PAGE>
value, recapitalization, reclassification, merger, consolidation, spinoff or
other similar changes in capitalization, then the 1998 Director Plan provides
for the adjustment of (i) the aggregate number and kind of shares reserved for
issuance under the 1998 Director Plan, (ii) the number of options and/or
shares of Common Stock issuable pursuant to the automatic grants described
above, and (iii) the number, kind and exercise price of shares of the Common
Stock subject to outstanding stock options, as required to ensure that the
proportionate interests of the holders of options granted under the 1998
Director Plan will be maintained.
TERMINATION OF AWARDS
If for any reason, a non-employee director ceases to be a director of the
Company one year or more after such director's initial election or appointment
to the Board, while such director holds an option granted under the 1998
Director Plan which has vested, such option shall continue to be exercisable
for a period of three years or the remainder of the option term, whichever is
shorter. If for any reason other than death, a non-employee director ceases to
be a director of the Company within one year of such director's initial
election or appointment to the Board, any options granted under the 1998
Director Plan to such director shall be canceled as of the date of such
cessation. In the event a non-employee director dies within one year of his or
her initial election or appointment to the Board, any options held by such
director at the time of his or her death shall be exercisable by the
transferee who received the option pursuant to a will or in accordance with
the laws of descent and distribution for a period of three years following
such director's death.
NON-TRANSFERABILITY
Options granted pursuant to the 1998 Director 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 a non-employee director, only by such non-
employee director or his or her legal representative.
TERM OF THE 1998 DIRECTOR PLAN
Subject to the approval of the 1998 Director Plan by the stockholders of the
Company, as provided below, the 1998 Director Plan will be in effect as of
April 16, 1998 for a term of ten years, unless earlier terminated by the Board
of Directors.
NEW PLAN BENEFITS
1998 NON-EMPLOYEE DIRECTOR STOCK OWNERSHIP PLAN
<TABLE>
<CAPTION>
ANNUAL ANNUAL
OPTIONS TO STOCK TO
NAME AND POSITION BE GRANTED BE GRANTED
----------------- ----------- -----------
<S> <C> <C>
Non-employee Directors as a group (6 persons)........... 30,000 3,000
</TABLE>
FEDERAL INCOME TAX CONSIDERATIONS
Based on the present provisions of the Code and regulations promulgated
thereunder, the federal income tax consequences of the grant, vesting and
exercise of options under the 1998 Director Plan and the subsequent
24
<PAGE>
disposition of stock acquired thereby will be as described below. The
following discussion addresses only the general federal income tax
consequences of stock options and is not intended as tax advice to any
individual. Holders of stock options are urged to consult their own tax
advisors regarding the impact of federal, state and local taxes, and the
federal alternative minimum tax, given their individual situations.
A director will not recognize any taxable income, and the Company will not
be allowed a tax deduction, upon the grant of an option under the 1998
Director Plan. Upon the exercise of an option, the director will have ordinary
income in an amount equal to the excess, if any, of (i) the fair market value
on the date of exercise of the shares of Common Stock so acquired over (ii)
the option exercise price. The director's basis in the shares so acquired will
equal the amount of such ordinary income, and the Company will be allowed a
tax deduction in the same amount.
Upon subsequent disposition of shares of Common Stock acquired upon exercise
of an option under the 1998 Director Plan, the director will recognize the
difference between the amount realized on the sale and the basis in the shares
as long-term or short-term capital gain or loss, depending on the holding
period for the shares.
VOTE REQUIRED
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 1998 DIRECTOR
PLAN. Approval of the 1998 Director 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.
4. SENIOR EXECUTIVE ANNUAL INCENTIVE COMPENSATION PLAN
GENERAL
The Stride Rite Corporation Senior Executive Annual Incentive Compensation
Plan (the "Bonus Plan") was adopted by the Board of Directors on February 12,
1998, subject to the approval of the Company's stockholders, in order to
continue providing incentives to certain senior executive officers to enhance
the value of the Company by tying financial awards to important operating
objectives, while at the same time preserving the deductibility of such
incentive compensation as performance-based compensation pursuant to Section
162(m) of the Code.
Employees of the Company who are officers of the Company who are or who may
be "covered employees" as defined under Section 162(m) are eligible for
selection by the Compensation Committee to participate in the Bonus Plan.
Covered employees include the Company's chief executive officer and the other
four executive officers included in the Summary Compensation Table in the
annual Proxy Statement from time to time. For fiscal 1998, only the Company's
chief executive officer will be a covered employee who would participate in
the Bonus Plan. The Bonus Plan provides for awards based on the attainment of
established pre-tax income goals for the Company and for one or more of its
divisions, and limits individual bonus awards to $1.5 million for any fiscal
year.
If approved by the stockholders, the Bonus Plan will be effective for bonus
awards beginning with respect to fiscal 1998. Any employee who participates in
the Bonus Plan will not participate in the Company's Annual Incentive
Compensation Plan.
All statements set forth in this Proxy Statement relating to the Bonus Plan
are qualified in their entirety by reference to the text of the Bonus Plan
which is set forth as Appendix C to this Proxy Statement.
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<PAGE>
ADMINISTRATION
The Bonus Plan is administered by the Compensation Committee, which has
powers under the Bonus Plan to determine the persons who may receive awards
and the targets and awards under the Bonus Plan and to certify the attainment
of performance goals.
PARTICIPANTS
The Compensation Committee designates the participants in the Bonus Plan for
a plan year from among the employees of the Company who are or may be covered
employees under Section 162(m) of the Code with respect to such plan year.
OPERATION OF THE BONUS PLAN
The Compensation Committee establishes a threshold corporate result, a
corporate income goal and division income goals for each plan year. The
threshold corporate result is the minimum level of corporate income that must
be generated for any bonus awards to be paid. The corporate income goal is
based on pre-tax income generated by the Company. The divisional income goal
is based on pre-tax income for a specified division of the Company.
The corporate income goal will represent 50% of a participant's bonus
opportunity, and a specific divisional goal (or combined divisional goals)
will represent the other 50% of the bonus opportunity.
If the threshold corporate result has been met, bonus awards allocated to
the corporate income goal or any divisional goals are payable, provided that
achievement of the goal is at least 85%. Bonus awards of varying percentages
of a participant's bonus percentage (up to 300%) may be paid, but not in
excess of $1.5 million, depending on the achievement of the applicable goals
from 85% to 150%. Bonus percentages may be up to 50% of base salary.
Notwithstanding the attainment of any goals for a plan year, the
Compensation Committee shall have the authority to eliminate or reduce bonus
awards in its discretion.
TERM AND AMENDMENTS OF THE BONUS PLAN
The Bonus Plan has no fixed term, but may be terminated or amended by the
Company at any time.
NEW PLAN BENEFITS
Bonuses for future years are not determinable because they are based upon
bonus percentages and performance goals determined by the Compensation
Committee in its discretion.
VOTE REQUIRED
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THIS
PROPOSAL. Approval of this proposal 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.
26
<PAGE>
5. 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 1997 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.
6. 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.
The Company does not yet have a written agreement with D.F. King & Company,
Inc. regarding the proxy solicitation. It is anticipated that the agreement
with D.F. King & Company, Inc. will be on customary terms. The costs of proxy
solicitation are not anticipated to exceed $20,000, 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.
27
<PAGE>
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1999 Annual Meeting of
Stockholders must be received by the Company on or before October 30, 1998 to
be considered for inclusion, pursuant to Rule 14a-8 under the 1934 Act, 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
February 27, 1998
28
<PAGE>
APPENDIX A
THE STRIDE RITE CORPORATION
1998 LONG-TERM GROWTH INCENTIVE PLAN
SECTION 1: PURPOSE
The purpose of The Stride Rite Corporation 1998 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) Rule 16b-3 under the 1934 Act or any successor rule, and (b) Section
162(m) under the Code.
(e) Common Stock means the common stock, $.25 par value, 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 on any given date the last reported sale price
of the Common Stock on the last trading date on which the Common Stock was
traded preceding the specified date or, if no Common Stock was traded on such
date, the most recent date on which Common Stock was traded preceding the
specified date, as reflected on The New York Stock Exchange--Composite Tape
or, if not listed on such exchange, on any other national securities exchange
on which the Common Stock is listed or on the National Association of
Securities Dealers Automated Quotation system, or par value of Common Stock if
greater.
(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
ISO.
(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 16b-3 of the
1934 Act or any successor rule.
(m) Shares means shares 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 7(c) 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 shareholders of the Company
approve the Plan, subject to the registration of the Shares issuable pursuant
to the Plan. No Awards may be made under the Plan after three years from the
date of shareholder 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 three years following shareholder
approval or any earlier 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, any
shareholder 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 employees"
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.
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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 under applicable law, 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 Stock Awards shall not
exceed 200,000. Additionally, the aggregate number of Shares that shall be
awarded to any one Participant as Awards 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 and/or (iv) the aggregate number of Shares
that may be awarded to any one Participant under Awards, 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. To the extent permitted by applicable law, the
Shares underlying any Awards which are forfeited, canceled, 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
available for issuance under the Plan.
(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 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 an 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
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Corporation or any subsidiary or parent corporation of the corporation (within
the meaning of Section 424 of the Code) 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 the
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 with respect to 1/3 of the Shares subject to such
Stock Option on each of the first three anniversaries of the date of grant 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. Any ISO which in
whole or in part cannot be treated as an ISO following its grant shall be
treated as an NQSO to the extent ISO treatment no longer applies.
(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 on the third, fourth and fifth
anniversaries of the date of grant or on 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 and the consideration, if any, required from Participants for Stock
Awards. 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. A Stock Option may be exercised, during the lifetime
of the Participant, only by such Participant or the Participant's legal
representative.
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
has 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, in addition to its determinations under Section 7(b) and/or 7(c) the
Committee shall determine the provisions and duration of grants made under
this Plan, 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 Rule 16b-3 of the 1934
Act. 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. 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
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have the ability to substitute for the cash payable pursuant to this
Section 8(g)(ii) Shares, or the securities into which such Shares are
converted, 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 20% or more of either (i) the then outstanding
Shares (the "Outstanding Corporation Common Stock") or (ii) 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 constitute 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, (iv) any acquisition by any corporation
pursuant to a transaction that complies with clauses (i), (ii) and
(iii) of subsection (C) below, or (v) any acquisition of less than 25%
of the Outstanding Corporation Common Stock or Outstanding Corporation
Voting Securities by a Person who certifies that such securities are
not being acquired or held for the purpose of and will not have the
effect of changing or influencing the control of the Corporation and
are not being acquired in connection with or as a participant in any
transaction having such purpose or effect, only for so long as such
Person can continue to make such certification; or
(B) Individuals who, as of December 11, 1997, 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 or the
acquisition of assets of another entity ("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 obtaining of such consent (either explicitly
or implicitly by consummation), in each case, unless following such
Business Combination: (i) all or substantially all of the individuals
and entities who were the beneficial owners, respectively of the
Outstanding Corporation Common Stock or the Outstanding Corporation
Voting Securities immediately prior to such Business Combination will
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
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proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Corporation Common Stock or the
Outstanding Corporation Voting Securities, as the case may be, (ii) no
Person (excluding any employee benefit plan (or related trust) of the
Corporation or such corporation resulting from such Business
Combination) will beneficially own, 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 will have been 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 in the case of ISOs, the Change of
Control Price shall be in all cases the Fair Market Value of the Common
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 or Termination. The Board may amend, alter, suspend,
discontinue or terminate the Plan as it deems necessary or appropriate except
that no amendment shall be made (i) without shareholder approval, if such
amendment would increase the total number of Shares available for issuance
under the Plan or if such approval is otherwise necessary under any applicable
law or stock exchange rule; or (ii) to cause the Plan not to comply with Rule
16b-3 of the 1934 Act or any successor rule. No amendment, alteration,
suspension, discontinuation or termination of the Plan may impair any
Participant's rights under the Plan under an Award theretofore granted with
the written consent of the Participant.
(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 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.
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(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 to be 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 rights shall be no greater
than the rights 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.
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APPENDIX B
THE STRIDE RITE CORPORATION
1998 NON-EMPLOYEE DIRECTOR STOCK OWNERSHIP PLAN
SECTION 1: PURPOSE
The Stride Rite Corporation 1998 Non-Employee Director Stock Ownership Plan
(the "Plan") has been adopted to promote the long-term growth and financial
success of The Stride Rite Corporation (the "Company") by attracting and
retaining non-employee directors of outstanding ability and assisting the
Company in promoting a greater identity of interest between the Company's non-
employee directors and its stockholders.
SECTION 2: DEFINITIONS
As used in the Plan, the following terms have the respective meanings as set
forth below.
--Award means any Stock Option or Stock Award granted under the Plan.
--Board means the Company's Board of Directors.
--Common Stock means the Common Stock, $.25 par value, of the Company.
--Company means The Stride Rite Corporation, a corporation established
under the laws of the Commonwealth of Massachusetts, and any entity that
is directly or indirectly controlled by the Company.
--Fair Market Value means on any given date the last reported sale price of
the Common Stock on the last trading date on which the Common Stock was
traded preceding the specified date or, if no Common Stock was traded on
such date, the most recent date on which Common Stock was traded preceding
the specified date, as reflected on The New York Stock Exchange--Composite
Tape or, if not listed on such exchange, on any other national securities
exchange on which the Common Stock is listed or on the National
Association of Securities Dealers Automated Quotation system, or par value
of Common Stock if greater.
--1934 Act means the Securities Exchange Act of 1934, as amended from time
to time.
--Participant means a Director of the Board who is not an employee of the
Company coincident with or subsequent to shareholder approval of the Plan.
--Shares means shares of the Common Stock.
--Stock Award means an Award to a Participant comprised of Common Stock
granted under Section 6 of the Plan.
--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
granted under Section 6 of the Plan.
SECTION 3: EFFECTIVE DATES
(a) The Plan shall be in effect as of April 16, 1998, subject to approval by
the Company's stockholders and registration of the Shares issuable pursuant to
the grant of Stock Awards and the exercise of Stock Options pursuant to the
Securities Act of 1933, as amended. No Awards may be made under the Plan after
ten years from the date of approval or earlier termination of the Plan by the
Board.
(b) The Stride Rite Corporation 1994 Non-Employee Director Stock Ownership
Plan shall terminate with respect to the grant of additional awards under such
Plan on the date of shareholder approval of this Plan.
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SECTION 4: PLAN OPERATION
The Plan is intended to be self-governing and requires no discretionary
action by any administrative body with regard to any transaction under the
Plan. To the extent, if any, that any questions of interpretation arise, these
shall be resolved by the Board.
SECTION 5: STOCK AVAILABLE FOR AWARDS
(a) Common Shares Available. The maximum number of Shares available for
Awards under the Plan may not exceed 300,000 shares of Common Stock of the
Company.
(b) Adjustments and Reorganizations. In the event of any change in the
Common Stock by reason of any stock dividend, stock split, combination of
shares, exchange of shares, warrants or rights offering to purchase Common
Stock at a price below its fair market value, reclassification,
recapitalization, merger, consolidation, spin-off or other change in
capitalization of the Company, other than a transaction in which the Stock
Options would be assumed pursuant to Section 7(b) hereof, the aggregate number
and kind of shares reserved for issuance under the Plan, the number of Stock
Options and Stock Awards issuable pursuant to the automatic grant provisions
of Section 6 hereof, and the number, kind and option price of shares subject
to outstanding Stock Options, shall be automatically adjusted such that the
proportionate interests of the holders of Stock Options granted under the Plan
will be maintained as before the occurrence of such event; provided, however,
that the number of shares subject to any Award shall always be a whole number.
(c) Common Stock Usage. The number of Shares of Common Stock underlying any
Awards granted under the Plan which are forfeited, canceled, reacquired by the
Company, satisfied without issuance of Common Stock or otherwise terminated
(other than by exercise) shall again be available for granting of additional
Awards under the Plan.
SECTION 6: AWARDS
(a) On the day after the date of the effectiveness of the Registration
Statement for the Shares and the day after each annual meeting of stockholders
commencing with the 1999 annual meeting of stockholders, the Company will
issue to each Participant a stock grant of 500 Shares (the "Annual Stock
Award") and a non-qualified Stock Option to purchase 5,000 shares (the "Annual
Stock Option") until the Plan is terminated or amended.
(b) Each Annual Stock Option shall have a term of ten years and shall become
exercisable as follows: with respect to 1,600 Shares one year after grant;
with respect to 1,700 Shares two years after grant and with respect to 1,700
Shares three years after grant.
(c) The Stock Option exercise price shall be the Fair Market Value of a
Share on the date of grant, payable at the time of exercise in cash or Shares
(held at least six months prior to exercise, unless purchased by the
Participant on the open market) valued at their Fair Market Value, or in a
combination thereof.
SECTION 7: EFFECT OF CHANGES OF CONTROL AND BUSINESS COMBINATIONS
(a) 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 7 shall apply.
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(i) Any Stock Options outstanding as of the date a Change of Control
occurs, which are not then exercisable and vested, shall become fully
exercisable and vested, effective immediately prior to the occurrence of
such Change of Control.
(ii) Definition of Change of Control. For purposes of this Plan, a
"Change of Control" shall mean the happening of 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 20% or more of either (i) the then outstanding
Shares (the "Outstanding Company Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for
purposes of this subsection (A) the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from the
Company, (ii) any acquisition by the Company, (iii) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company, (iv) any
acquisition pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (C) below; or (v) any acquisition of less
than 25% of the Outstanding Company Common Stock or Outstanding Company
Voting Securities by a Person who certifies that such securities are
not being acquired or held for the purpose of and will not have the
effect of changing or influencing the control of the Company and are
not being acquired in connection with or as a participant in any
transaction having such purpose or effect, only for so long as such
Person can continue to make such certification; 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 Company'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.
(C) The approval by the shareholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of
all or substantially all of the assets of the Corporation or the
acquisition of assets of another entity (each a "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 obtaining of such consent (either
explicitly or implicitly by consummation), in each case, unless
following such Business Combination, (i) all or substantially all of
the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Stock or the Outstanding
Company Voting Securities immediately prior to such Business
Combination will 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 Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership,
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immediately prior to such Business Combination, of the Outstanding
Company Common Stock or the Outstanding Company Voting Securities, as
the case may be, (ii) no Person (excluding any employee benefit plan
(or related trust) of the Company or such corporation resulting from
such Business Combination) will beneficially own, 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 will have been 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 Company of a complete
liquidation or dissolution of the Company.
(b) In the event of a Business Combination, outstanding Stock Options shall
be assumed by the successor or acquiror corporation, as the case may be, or a
parent thereof, or be replaced with a comparable option to purchase shares of
the capital stock of such successor, acquiror or parent, provided that each
outstanding Stock Option which is assumed in connection with a Business
Combination or is otherwise to continue in effect shall be appropriately
adjusted, immediately after such Business Combination, to apply and pertain to
the number and class of securities which would have been issuable, upon the
consummation of such Business Combination, to an actual holder of the same
number of shares of Common Stock as are subject to such Stock Option
immediately prior to such Business Combination, and provided further that,
should the consideration to be received in the Business Combination by the
holders of Common Stock be cash in whole or in part, the holder of each Stock
Option shall be entitled to receive that amount of cash that would be payable
upon the consummation of such Business Combination, to an actual holder of the
same number of shares of Common Stock as are subject to such Stock Option
immediately prior to such Business Combination, less the exercise price per
share subject to such Stock Option. In the event that Stock Options are
assumed or otherwise continue in effect, in whole or in part, appropriate
adjustments shall also be made to the exercise price payable per share,
provided the aggregate exercise price payable for such securities shall remain
the same, and, in addition, the class and number of securities available for
issuance under the Plan and the automatic grant provisions of Section 6 hereof
following the consummation of the Business Combination shall be appropriately
adjusted.
(c) The grant of Stock Options and Stock Awards under this Plan shall in no
way affect the right of the Company to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
SECTION 8: GENERAL PROVISIONS APPLICABLE TO AWARDS
(a) Non-Transferability of Stock Options. Stock Options granted under
Section 6 hereof 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. The designation of a beneficiary shall not constitute a
transfer. A Stock Option may be exercised, during the lifetime of the
Participant, only by such Participant or his legal representative.
(b) Termination of Directorship. If for any reason a Participant ceases to
be a Director of the Company one year or more after the Director's initial
election or appointment to the Board while holding a Stock Option granted
under this plan, any Stock Option which has vested shall continue to be
exercisable for a period of three years or the remainder of the option term
whichever is shorter (the "post termination period"). If for any reason other
than death a Participant ceases to be a Director of the Company within one
year of the Director's initial
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election or appointment to the Board, any Stock Option awarded under this plan
and held by the Director shall be canceled as of the date of such termination.
In the event a Participant dies within one year of initial election or
appointment to the Board, the Stock Options shall be exercisable by the
transferee who received such Stock Option pursuant to a will or in accordance
with the laws of descent and distribution for a period of three years
following the date of death.
(c) Documentation of Grants. Awards made under the Plan shall be evidenced
by written agreements or such other appropriate documentation as the Board
shall prescribe. The Board 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.
(d) Plan Amendment or Termination. The Board may suspend the Plan or any
portion of the Plan or terminate the Plan. The Board may also amend the Plan
if deemed to be in the best interests of the Company and its stockholders;
provided, however, that no such suspension, termination or amendment may
impair any Participant's right regarding any outstanding Awards without his or
her consent.
(e) Governing Law. The validity, construction and effect of the Plan and any
such 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.
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APPENDIX C
THE STRIDE RITE CORPORATION
SENIOR EXECUTIVE ANNUAL INCENTIVE COMPENSATION PLAN
ARTICLE I
Introduction
The purpose of The Stride Rite Corporation Senior Executive Annual Incentive
Compensation Plan is to provide incentives to the Chief Executive Officer and
certain other senior executive officers of the Company or any of its
subsidiaries, to enhance the value of the Company. By offering annual
financial rewards, the Plan can recognize contributions made by individual
senior executives in the attainment of important operating objectives. It is
also anticipated that the Plan will help the Company attract and retain the
highest quality employees available.
ARTICLE II
Definitions
2.1 "Board" shall mean the Board of Directors of the Company.
2.2 "Bonus Award" shall mean the amount of award (if any) made to a
Participant under the Plan in a Plan Year in accordance with Section 4.4(b).
2.3 "Bonus Percentage" shall mean that percentage of a Participant's annual
base salary rate (as of the date the Bonus Percentage is determined) upon
which a Bonus Award is calculated. Bonus Percentage may not exceed 50%.
2.4 "Code" means the Internal Revenue Code of 1986, as amended.
2.5 "Combined Divisional Goal" shall mean, for any Plan Year, the sum of all
Divisional Goals.
2.6 "Committee" shall mean the Compensation Committee of the Board.
2.7 "Company" shall mean The Stride Rite Corporation and its successors and
assigns and any of its subsidiaries.
2.8 "Corporate Income" shall mean, for any Plan Year, the consolidated pre-
tax income generated by the Company. For purposes of the Plan, Corporate
Income for any Plan Year shall be determined by the Committee in accordance
with generally accepted accounting principles and after accounting for non-
operating income or expenses and before accounting for income taxes.
2.9 "Corporate Income Goal" shall mean, for any Plan Year, that amount of
Corporate Income which the Committee targets for achievement in the Plan Year.
2.10 "Covered Employee" means an employee of the Company or any of its
subidiaries designated by the Committee prior to the Plan Year (or within the
first 90 days after the beginning of the Plan Year), as an employee who is or
may be a "covered employee" within the meaning of Section 162(m) of the Code
with respect to such Plan Year.
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2.11 "Divisional Goal" shall mean, for any Plan Year, that amount of pre-tax
income which the Committee targets for achievement in the Plan Year for a
division of the Company.
2.12 "Incentive Goal" shall mean, for any Participant, the Corporate Income
Goal and/or Combined Divisional Goal or Divisional Goal assigned to the
Participant.
2.13 "Participant" shall mean any Covered Employee who has been designated
as such by the Committee pursuant to Article III to participate in the Plan
for a Plan Year.
2.14 "Plan" shall mean The Stride Rite Corporation Senior Executive Annual
Incentive Compensation Plan.
2.15 "Plan Year" shall mean the fiscal year of the Company.
2.16 "Threshold Corporate Result" shall mean, for any Plan Year, the minimum
level of Corporate Income which the Committee determines must be generated in
a Plan Year as a condition precedent to the payment of any Bonus Award for the
Plan Year.
2.17 "Total Disability" shall mean the permanent inability of a Participant,
as a result of accident or sickness, to perform any and every duty pertaining
to such Participant's occupation or employment for which the Participant is
suited by reason of the Participant's previous training, education and
experience.
ARTICLE III
Eligibility
For each Plan Year the Committee shall designate Participants from among
Covered Employees who are employee-directors of the Company or who hold the
title of Chief Executive Officer and certain other senior executives who
report directly to the Chief Executive Officer of the Company.
Participants shall be selected prior to the commencement of each Plan Year
or within the first 90 days after the beginning of the Plan Year. Following
the period referred to in the preceding sentence, other Participants may be
added by the Committee because of promotion, hiring or other reasons
warranting their inclusion or Participants may be excluded by the Committee by
reason of demotion or other reasons warranting exclusion.
ARTICLE IV
Annual Bonuses
4.1. ESTABLISHMENT OF CORPORATE INCOME GOAL AND DIVISIONAL GOALS. Before the
beginning of each Plan Year or within the first 90 days after the beginning of
the Plan Year, the Committee shall establish the Threshold Corporate Result,
Corporate Income Goal, Combined Divisional Goal and Divisional Goal for each
of the Company's divisions, pursuant to which annual bonuses shall be payable,
if at all, under the Plan to a Participant with respect to performance in such
Plan Year.
4.2 ASSIGNMENT OF INCENTIVE GOALS.
(a) At the time each Covered Employee is designated as a Participant
pursuant to Article III, he or she shall be notified of such designation by
the Committee and shall be assigned Incentive Goals by the Committee. If the
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Committee determines that a Participant's position is substantially tied to
and functional at the divisional level, one of the Incentive Goals shall be
the Corporate Income Goal, which shall be 50% of the Participant's bonus
opportunity in any Plan Year. Such a Participant shall also be assigned as a
second Incentive Goal, the Divisional Goal of his or her respective Division,
which shall also be weighted at 50%. A Participant whose position is not
determined to be substantially tied to and functional at the divisional level
shall be assigned a Corporate Income Goal which shall represent 50% of the
Participant's bonus opportunity. The other 50% of such a Participant's bonus
opportunity will be based on the Combined Divisional Goal.
(b) The Bonus Percentage shall be confirmed and Incentive Goals assigned by
(i) the Committee with respect to the Chairman and Chief Executive Officer of
the Company, and (ii) the Committee upon the recommendation of the Chief
Executive Officer of the Company with respect to other Participants.
4.3 REVIEW OF PERFORMANCE. As soon as practicable after the close of a Plan
Year, the Company's independent auditors shall advise the Committee of income
generated by the Company for its fiscal year just ended and of the degree to
which the Threshold Corporate Result, Corporate Income Goal and Combined
Divisional Goal have been achieved, if at all. To the extent necessary, the
Committee shall also determine the degree to which the Divisional Goals have
been met, if at all, in accordance with generally accepted accounting
principles and after accounting for capital charges allocable to the relevant
division. Achievement of each goal assigned to each Participant shall be
rated; a rating of 100% of an assigned goal shall indicate full achievement of
targeted performance and lesser or greater achievement shall be rated below
100% or up to 150% as appropriate. Following the end of each Plan Year, the
Committee shall approve and certify the attainment of the performance goals
and the amount of Bonus Awards hereunder.
4.4 BONUS AWARDS.
(a) No Bonus Award shall be payable to any Participant for any goal unless
the Threshold Corporate Result set for the Plan Year is achieved. If the
Threshold Corporate Result has been met, Bonus Awards allocated to any of the
Corporate Income Goal, Combined Divisional Goal or Divisional Goal shall be
payable, provided that achievement of the goal is at least at 85%. Except as
provided in Section 4.4 or in Section 4.5, Bonus Awards shall be equal to the
Participant's Bonus Percentage (as increased or decreased pursuant to Section
4.4(b)) times the Participant's annual base salary. No Participant may earn a
Bonus Award of more than $1.5 million with respect to any Plan Year.
(b) If achievement of all of the Incentive Goals assigned to a Participant
is at 100%, then a Bonus Award equal to the Participant's Bonus Percentage
will be paid to such Participant. If achievement of any Incentive Goal is at
least 85%, but less than 100%, the Bonus Award allocated to that goal shall be
equal to the Participant's Bonus Percentage reduced by one-half if at 85%, and
prorated for achievement at 85% to 99%, and then such Bonus Award shall be
paid to such Participant. If achievement of any Incentive Goal is in excess of
100% up to 125%, then the Bonus Award allocated to that goal shall be equal to
the Participant's Bonus Percentage doubled if 125%, and prorated for
achievement at 101% to 124%, and then such Bonus Award shall be paid to such
Participant. If the achievement of any Incentive Goal is in excess of 125% up
to 150%, then the Bonus Award allocated to that goal shall be equal to the
Participant's Bonus Percentage tripled if 150%, and prorated for achievement
at 126% to 149%, and then such Bonus Award shall be paid to such Participant.
(c) All Bonus Awards to be made under the Plan shall be paid to eligible
Participants in cash less applicable withholding taxes (as set forth in
Section 6.2) as soon as possible after the review of performance of all
Participants has been completed.
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(d) Notwithstanding the attainment of any goals for a Plan Year, the
Committee shall have the authority to eliminate or reduce Bonus Awards in its
discretion.
4.5 TERMINATION OF EMPLOYMENT.
(a) In the event a Participant terminates employment with the Company before
the completion of a Plan Year because of death, Total Disability, or Early,
Normal or Late Retirement under The Stride Rite Corporation Retirement Income
Plan, such Participant, or, in the case of the Participant's death, the
Participant's surviving spouse (or the Participant's estate if there is no
surviving spouse), shall receive, subject to Section 4.4(a), a prorated Bonus
Award. A prorated Bonus Award shall be determined by multiplying the amount
equal to the Bonus Award that would have been earned in view of actual results
for the Plan Year by a fraction the numerator of which is the number of full
months of the Plan Year during which the employee was a Participant in the
Plan and the denominator of which is twelve.
(b) In the event a Participant's employment with the Company is terminated
before the completion of a Plan Year for any reason other than death, Total
Disability, or Retirement, the Participant shall not be entitled to receive
any Bonus Award for that Plan Year.
4.6. NO LIMITATION TO CORPORATE ACTION. Nothing in this Article IV shall
preclude the Committee or the Board, as each or either shall deem necessary or
appropriate, from authorizing the payment to the Participant of compensation
outside the parameters of the Plan, including, without limitation, base
salaries, awards under any other plan of the Company, any other bonuses
(whether or not based on the attainment of performance objectives) and
retention or other special payments.
ARTICLE V
Plan Administration
5.1. POWERS OF THE COMMITTEE. The Committee shall have the authority,
subject to the terms of the Plan, to determine each Participant's Bonus Award,
if any, and to make all other determinations under the Plan and to interpret
and administer the Plan, taking into account its purposes and such other
factors as the Committee may deem relevant. The Committee shall have complete
control over the administration of the Plan and complete control and authority
to determine, in its sole discretion, the rights and benefits and all claims,
demands and actions arising out of the provisions of the Plan of any
Participant or other person having or claiming to have any interest under the
Plan and the Committee's determinations shall be conclusive and binding on all
such parties. Neither the Committee nor any member thereof nor the Company
shall be liable for any action or determination made in good faith with
respect to the Plan or the rights of any Participant under the Plan.
5.2. DUTIES OF THE COMMITTEE. Subject to the limitations of the Plan, the
Committee from time to time shall establish rules for the administration of
the Plan and the transaction of its business. All actions and determinations
of the Committee shall be conclusive and binding on all Participants, their
beneficiaries and estates.
5.3. ACTION TAKEN IN GOOD FAITH. The members of the Committee and the
Company and its officers, directors and employees shall be entitled to rely
upon all certificates and reports made by any accountant, and upon all
opinions given by any legal counsel, and the members of the Committee, the
Company and its officers, directors and employees shall be fully protected in
respect of any action taken or suffered by them in good faith
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in reliance upon any such certificates, reports, opinions or other advice of
any accountant or legal counsel, and all action so taken or suffered,
including, without limitation, the payment of any Bonus Award, shall be
conclusive upon each of them and upon all Participants and their
beneficiaries.
5.4. INDEMNIFICATION. In addition to all other rights of indemnification
that may exist, the Company shall indemnify the Committee, each of its
respective members, and officers and employees of the Company who assist in
the administration and operation of the Plan from and against any liability,
joint and/or several, arising out of or connected with their duties hereunder,
except such liability as may arise from their gross negligence or willful
misconduct.
5.5. EXPENSES OF ADMINISTRATION. The Company shall pay all expenses of
administration of the Plan, including, without limitation, all expenses
incurred by the Committee, accounting and legal fees and expenses, and any
other expenses related to the administration of the Plan.
ARTICLE VI
Miscellaneous
6.1 AMENDMENT AND TERMINATION. The Company shall have authority, in its sole
discretion, to amend or terminate the Plan at any time, in whole or in part,
and in any manner. Any such amendment or termination may be made by vote of
the Committee or the Board and may be made by the Committee or the Board
retroactively to apply to Bonus Awards not yet paid to Participants.
6.2. TAX WITHHOLDING. The Company shall have the power to withhold, or
require a Participant to remit to the Company, an amount sufficient to satisfy
Federal, State and local withholding tax requirements on any amount payable
under the Plan, and the Company may defer the payment of any amount until such
requirements are satisfied.
6.3. INALIENABILITY OF INTERESTS. Except as otherwise provided by applicable
law, the Participant's interests under the Plan shall not be subject to
alienation, assignment, garnishment, execution or levy of any kind, and any
attempt to cause any benefits to be so subjected shall not be recognized.
6.4 NO FUNDING. Nothing in this Plan will be construed to give any
Participant or any other person rights to any specific assets of the Company,
or of any other person. The Participant shall have only the rights of an
unsecured general creditor of the Company with respect to his or her interest
under the Plan. Any Bonus Award which become payable hereunder shall be paid
from the general assets of the Company in accordance with the terms hereof.
6.5. LIMITED EFFECT. Neither the establishment of the Plan nor participation
in the Plan shall be construed as creating any contract of employment between
the Company and any Participant, employee or other person, nor shall anything
contained in the Plan give any person the right to be retained in the employ
of the Company or otherwise restrain the Company's right to deal with its
employees, including Participants, and their hiring, discharge, layoff,
compensation, and all other conditions of employment in all respects as though
the Plan did not exist.
6.6. EFFECT ON OTHER PLANS, PROGRAMS OR ARRANGEMENTS. The adoption of the
Plan shall have no effect on awards made or to be made or compensation paid or
to be paid pursuant to other plans, programs, or
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arrangements covering employees of the Company, its subsidiaries or parent, or
any predecessors or successors thereto, except that amounts paid hereunder may
be taken into account as "compensation" for purposes of determining the
Participant's benefits under such other plan to the extent provided therein.
6.7. GOVERNING LAW. All questions pertaining to the construction, validity
and effect of the Plan, or to the rights of any person under the Plan, shall
be determined in accordance with the laws of the Commonwealth of
Massachusetts.
6.8. STOCKHOLDER APPROVAL. Bonus Awards shall not be paid under this Plan
prior to approval of the Plan by the stockholders of the Company.
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0865-PS-98
<PAGE>
DETACH HERE
PROXY
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 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 its executive offices, 191 Spring Street, Lexington, Massachusetts, on
Thursday, April 16, 1998 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 1,2,3,4 AND 5.
-------------
(PLEASE SIGN AND DATE ON REVERSE SIDE SEE REVERSE
AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE) SIDE
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<PAGE>
DETACH HERE
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3, 4 AND 5.
1. Election of Directors.
Nominees: Warren Flick, Donald R. Gant and W. Paul Tippett, Jr.
FOR WITHHELD
[_] [_]
[_]
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For all nominees except as noted above
FOR AGAINST ABSTAIN
2. Proposal to approve The Stride Rite Corporation
1998 Long-Term Growth Incentive Plan. [_] [_] [_]
3. Proposal to approve The Stride Rite Corporation
1998 Non-Employee Director Stock Ownership Plan. [_] [_] [_]
4. Proposal to approve The Stride Rite Corporation
Senior Executive Annual Incentive Compensation
Plan. [_] [_] [_]
5. Proposal to ratify selection of 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:
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Signature: Date:
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