SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant /x/
Filed by a party other than 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 Rule 14a-11(c) or Rule 14a-12
THE BOMBAY COMPANY, INC.
(Name of Registrant as Specified in Its Charter)
Michael J. Veitenheimer, Vice President, Secretary and General Counsel
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transactions
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 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:
_______________________________________________________________________________
THE BOMBAY COMPANY, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 21, 1998
To the Shareholders:
The Annual Meeting of Shareholders of The Bombay Company, Inc. will
be held at the Dorothea Leonhardt Lecture Hall at the Botanic Garden Center
Complex, 3220 Botanic Garden Blvd., Fort Worth,Texas, on May 21, 1998, at
9:00 a.m. (C.D.T.) for the following purposes:
1. To elect three directors in Class A to serve for three-year
terms expiring in 2001, or until their successors are
elected and qualified; and
2. To approve an amendment to the Company's 1991 Director Stock
Option Plan to increase the number of shares of Common Stock
available for issuance thereunder by 90,000 shares;
3. To transact such other business as may properly come before
the meeting or any adjournment(s) thereof.
By resolution of the Board of Directors, only shareholders of record
as of the close of business on March 25, 1998, are entitled to notice of,
and to vote at, the Annual Meeting. The transfer books will not be closed.
The Annual Report of the Company, including financial statements for the
fiscal year ended January 31, 1998, has been mailed to all shareholders.
By Order of the Board of Directors
MICHAEL J. VEITENHEIMER
Vice President, Secretary
and General Counsel
Fort Worth, Texas
April 10, 1998
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THIS MEETING.
WHETHER OR NOT YOU EXPECT TO ATTEND IN PERSON, PLEASE SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES
NO POSTAGE IF MAILED IN THE UNITED STATES.
THE BOMBAY COMPANY, INC.
550 Bailey Avenue
Fort Worth, Texas 76107
(817) 347-8200
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 21, 1998
SOLICITATION AND REVOCABILITY OF PROXY
This Proxy Statement and the accompanying proxy, first mailed to
shareholders on April 10, 1998,is furnished in connection with the
solicitation of proxies by the Board of Directors of The Bombay Company,
Inc. (the "Company") for use at the annual meeting of shareholders for the
fiscal year ended January 31, 1998, which meeting is to be held on
May 21, 1998, (the "Annual Meeting") or at any adjournment(s) thereof.
Giving the proxy will not in any way affect a shareholder's right to attend
the Annual Meeting and to vote in person. A proxy may be revoked at any
time before it is exercised by requesting its return in writing to the
Secretary at the office of the Company prior to or at the Annual Meeting,
by the attendance and voting by a shareholder at the Annual Meeting or by
the execution and delivery to the Company of a proxy dated subsequent to
a prior proxy.
A proxy in the accompanying form which is properly signed, dated,
returned and not revoked will be voted in accordance with the instructions
contained therein. Unless authority to vote for the election of directors
(or for any one or more nominees) is withheld, proxies will be voted for
the slate of three directors as proposed by the Board, and, if no contrary
instructions are given, proxies will be voted for the amendment to the
Director Stock Option Plan and for approval of any remaining item on the
proxy. Discretionary authority is provided in the proxy as to any matters
not specifically referred to therein. Management is not aware of any other
matters which are likely to be brought before the Annual Meeting. However,
if any such matters are properly raised, it is understood that the proxy
holder or holders are fully authorized to vote thereon in accordance with
his or their judgment and discretion.
The cost of soliciting proxies in the accompanying form has been,
or will be, paid by the Company. In addition to the solicitation of proxies
by use of the mails, certain officers and regular employees (who will
receive no compensation therefore in addition to their regular salaries) may
be used to solicit proxies personally and by telephone. In addition, banks,
brokers and other custodians, nominees and fiduciaries will be requested to
forward copies of the proxy material to their principals and to request
authority for the execution of proxies. The Company will reimburse such
persons for their expenses in so doing. To the extent necessary in order to
assure sufficient representation, a commercial proxy solicitation firm may
be engaged to assist in the solicitation of proxies. Whether such a measure
will be necessary depends entirely upon how promptly proxies are received.
No outside proxy solicitation firm has been selected or employed with
respect to the Annual Meeting as of the date of this Proxy Statement, and
the costs of any such services cannot be estimated at this time.
RECORD DATE AND VOTING SECURITIES
The Board of Directors has fixed the close of business on
March 25, 1998, as the record date for the determination of shareholders
entitled to notice of, and to vote at, the Annual Meeting. As of the
record date for the Annual Meeting, there were outstanding 38,118,949
shares of Common Stock. Each holder of Common Stock is entitled to one
vote for each share held by such person.
SECURITY OWNERSHIP
Principal Shareholders
The following table sets forth information based upon the records
of the Company and filings with the Securities and Exchange Commission as
of March 25, 1998, with respect to each person known to be the beneficial
owner of more than five percent (5%) of any class of the Company's voting
securities.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Ownership Beneficial Ownership(l) of Class
<S> <C> <C> <C>
Common Stock The Crabbe Huson Special Fund, Inc., 5,701,630 shares (2) 14.96%
The Crabbe Huson Small Cap Fund, and
The Crabbe Huson Group, Inc.
121 SW Morrison, Suite 1400
Portland, OR 97204
Common Stock State of Wisconsin Investment Board 3,694,300 shares (3) 9.72%
P.O. Box 7842
Madison, WI 53707
___________
<FN>
(l) Shares are deemed to be "beneficially owned" by a person if such
person, directly or indirectly, has or shares (i) the voting power thereof,
including the power to vote or to direct the voting of such shares,or
(ii) the investment power with respect thereto, including the power to
dispose or direct the disposition of such shares. In addition, a person
is deemed to beneficially own any shares of which such person has the right
to acquire beneficial ownership within 60 days.
(2) The Crabbe Huson Special Fund, Inc., The Crabbe Huson Small Cap
Fund and The Crabbe Huson Group, Inc. by letter dated March 5, 1998,
reported ownership of 5,701,630 shares of Common Stock.
(3) The State of Wisconsin Investment Board filed with the Securities
and Exchange Commission an Amended Schedule 13G dated January 20, 1998,
reporting ownership of 3,694,300 shares of Common Stock.
</TABLE>
Securities Owned by Management
The table below sets forth as of March 25, 1998, the numbers of
shares of Common Stock beneficially owned by each of the directors of the
Company, each executive officer or former executive officer named in the
Summary Compensation Table and all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
Title of
Class Name of Beneficial Ownership Amount and Nature Percent
of Beneficial of Class
Ownership(1)
<S> <C> <C> <C>
Common Stock Barbara Bass 66,562(2) *
Common Stock Edmund H. Damon 62,186(3) *
Common Stock Glenn E. Hemmerle 0 *
Common Stock James E. Herlihy 72,011(4) *
Common Stock Robert S. Jackson 58,812(5) *
Common Stock Brent A. Magnuson 42,209(6) *
Common Stock A. Roy Megarry 21,800(7) *
Common Stock Carmie Mehrlander 0 *
Common Stock Clayton E. Niles 85,624(8) *
Common Stock Robert E. Runice 33,312(9) *
Common Stock J. Michael Smith 10,400(10) *
Common Stock Carson R. Thompson 257,787(11) *
Common Stock Michael J. Veitenheimer 119,856(12) *
Common Stock Shirley Young 33,850(13) *
Common Stock All present executive officers 965,832(14) 2.51%
and directors as a group
(15 persons)
_______________
<FN>
*Less than one percent (1%)
(1) Directors and executive officers have sole voting and investment
powers of the shares shown unless otherwise indicated below. Includes
shares which may be acquired by the exercise of options within sixty days
after March 25, 1998. Does not include units under Director Stock Deferral
Plan which may not be acquired within 60 days.
(2) Includes 40,062 shares which may be acquired upon exercise of
options. Ms. Bass disclaims beneficial ownership of 20,000 shares listed
above which are owned by her spouse.
(3) Includes 45,124 shares which may be acquired upon exercise of
options. Mr. Damon disclaims beneficial ownership of 6,157 shares listed
above which are owned by his spouse and a trust for the benefit of his
children.
(4) Represents the last known share ownership information for
Mr. Herlihy, who left the Company on October 4, 1997, and includes 25,316
shares which may be acquired upon exercise of options.
(5) Includes 28,812 shares which may be acquired upon exercise of
options.
(6) Includes 33,600 shares which may be acquired upon exercise of
options.
(7) Includes 11,600 shares which may be acquired upon exercise of
options. Mr. Megarry disclaims beneficial ownership of 4,700 shares
listed above which are owned by his spouse.
(8) Includes 14,750 shares which may be acquired upon exercise of
options.
(9) Includes 19,812 shares which may be acquired upon exercise of
options.
(10) Includes 10,400 shares which may be acquired upon exercise of
options.
(11) Includes 14,750 shares which may be acquired upon exercise of
options.
(12) Includes 46,489 shares which may be acquired upon exercise of
options.
(13) Includes 13,850 shares which may be acquired upon exercise of
options. Ms. Young resigned from the Board effective March 26, 1998.
(14) Includes 403,211 shares which may be acquired upon exercise of
options held by executive officers and directors. Does not include shares
or vested options owned by Mr. James E. Herlihy, who ceased being an
executive officer on October 4, 1997 or Mr. Gerald A. Cook, who ceased
being an executive officer on April 6, 1998.
</TABLE>
ELECTION OF DIRECTORS
(Item 1)
The Certificate of Incorporation of the Company provides that the
members of The Bombay Company, Inc. Board of Directors shall be divided
into three classes, as nearly equal in number as possible, each of which
is to serve for three years, with one class being elected each year. The
terms of office of the directors in Class A expire with this Annual Meeting.
Ms. Shirley Young resigned from the Board on March 27, 1998, due to her
international business commitments for General Motors. Mr. Clayton E. Niles
will retire from the Board at the Board meeting immediately following the
Annual Meeting in compliance with the Board's mandatory retirement policy.
To be elected as a director, each nominee must receive the favorable
vote of a plurality of the shares represented and entitled to be voted at
the Annual Meeting. The persons named in the enclosed form of Proxy, unless
otherwise directed, intend to vote such Proxy FOR the election of the
nominees named below as directors for the term specified. If any nominee
becomes unavailable for any reason, the persons named in the form of Proxy
are expected to consult with management in voting the shares represented by
them. Management has no reason to doubt the availability of any of the
nominees to serve and no reason to believe that any of the nominees will be
unavailable or unwilling to serve if elected to office. Except as limited
by the Certificate of Incorporation or bylaws, to the knowledge of
management, the nominees intend to serve the term for which election is
sought. Cumulative voting is not permitted by the Certificate of
Incorporation.
The Board of Directors has nominated three persons for election as
directors in Class A at this Annual Meeting to serve for three-year terms
expiring in 2001 or until their successors are elected and qualified. All
nominees are currently serving as directors and have consented to serve upon
election.
<TABLE>
Present Directors Who Are Nominated For Re-Election
<CAPTION>
Principal Director Term to
Director's Name Age Occupation Since Expire
<S> <C> <C> <C> <C>
Barbara Bass 47 Private Investor 1993 2001
Robert S. Jackson 52 Chief Executive Officer 1991 2001
of the Company
A. Roy Megarry 61 Corporate Director and 1994 2001
Former Chairman and
Publisher, The Globe and
Mail and Consultant to
Thomson Newspapers
</TABLE>
<TABLE>
Continuing Directors Whose Terms Are Not Expiring
<CAPTION>
Principal Director Term to
Director's Name Age Occupation Since Expire
<S> <C> <C> <C> <C>
Edmund H. Damon 68 Private Investor and 1984 2000
former President and
Chief Executive Officer,
Pantasote, Inc.
Robert E. Runice 68 Private Investor and retired 1985 2000
Vice President and President,
Commercial Development
Division, US West, Inc.
Glenn E. Hemmerle 52 President and Chief Executive 1997 2000
Officer, The Johnny Rockets
Group, Inc.
Carmie Mehrlander 46 President and Chief Operating 1998 1999
Officer of the Company
Clayton E. Niles 71 Chairman of the Board 1982 1999
of the Company
Carson R. Thompson 59 Former President and Chief 1978 1999
Executive Officer of the
Company,Chairman of the Board
and Chief Executive Officer,
PawnMart, Inc.
</TABLE>
Additional information regarding the three nominees for election as
directors and the continuing directors of the Company is as follows:
Nominees
Barbara Bass has been a director of the Company since
February 17, 1993. She previously served as President and Chief Executive
Officer of the Emporium Weinstock division of Carter Hawley Hale Stores,
Inc., a department store chain, from 1989 to 1992. During 1987 and 1988
Ms. Bass served as Chairman of the Board and Chief Executive Officer of
I. Magnum, a division of Federated Department Stores. Prior thereto, from
1980 until 1987 Ms. Bass was employed by Bloomingdales, a division of
Federated Department Stores, serving as Executive Vice President from 1985
until 1987, Senior Vice President from 1983 until 1985, Merchandising Vice
President from 1981 until 1983 and Operating Vice President during 1980 and
1981. Prior to joining Bloomingdales, Ms. Bass spent eight years in fashion
retailing at Macy's California and Burdine's. Ms. Bass also serves on the
Board of Directors for DFS Group Limited, Starbucks Corporation and bebe
(REGISTERED TRADEMARK).
Robert S. Jackson was appointed Chief Executive Officer of the
Company on February 2, 1998, after serving as acting President and Chief
Executive Officer of the Company since March 29, 1997. He has been a member
of the Board of Directors since 1991. Prior to joining Bombay as an
officer, he was a private investor and business consultant after having
served as President and Chief Executive Officer of USPCI, Inc., a former
waste management subsidiary of Union Pacific Corporation from May 1991 until
December 1994. From December 1981 until May 1991, Mr. Jackson was employed
by Union Pacific Resources, the oil and gas and hard minerals subsidiary of
Union Pacific Corporation, serving as its Vice President of Finance and
Administration from 1984 until 1988 and as its Executive Vice President and
Chief Financial Officer from 1988 until 1991.
A. Roy Megarry was elected to the Board on October 13, 1994. He
serves as Corporate Director and was formerly Chairman of The Globe and
Mail, a major Canadian newspaper headquartered in Uxbridge, Ontario since
1993. In connection therewith, he also acts as a consultant to Thomson
Newspapers. Prior thereto, from 1978 to 1992, Mr. Megarry served as
Publisher and Chief Executive Officer of The Globe and Mail newspaper.
Mr. Megarry also serves on the Board of Directors of Hewlett-Packard
(Canada) Ltd. and GST Telecommunications.
Continuing Directors
Edmund H. Damon joined the Board of Directors in 1984 and is a
private investor after having served as President and Chief Executive
Officer of Pantasote, Inc. from January 1, 1986, to September 22, 1989, and
as President and Chief Operating Officer from May 1983 through December
1985. Mr. Damon served as Vice President of Mainstream Access, Inc. from
September 1982 to May 1983, and as Vice President and a member of the
Management Committee of The Singer Co. for more than three years prior to
September 1982. Mr. Damon also serves on the Board of Directors of Newflo
Corporation.
Robert E. Runice joined the Board of Directors in 1985 and is a
private investor and business consultant. He has been associated with the
telecommunication industry for over forty years and from 1983 to 1991 was a
Vice President of US West, Inc. and President, Commercial Development
Division of US West, Inc. US West, Inc. is a telecommunications service
corporation headquartered in Englewood, Colorado. Mr. Runice also serves
on the Boards of Directors of Tandy Brands Accessories, Inc. and Utilx, Inc.
Glenn E. Hemmerle was elected to the Board of Directors on
May 1, 1997. He currently serves as President and Chief Executive Officer
of The Johnny Rockets Group, Inc., a chain of 94 restaurants with locations
in the United States, Australia, the Middle East, Japan and Canada.
Prior to joining Johnny Rockets on February 12, 1997, Mr. Hemmerle was
President and Chief Executive Officer of Pearle Vision, a subsidiary of
Grand Metropolitan, P.L.C. from August 1994 to September 1996. Prior
thereto, he served as President and Chief Executive Officer of Crown Books
from 1992 to 1994 and held the same position at Athlete's Foot Group, Inc.
from 1987 until 1992. Mr. Hemmerle also serves on the Board of Directors
of Monarch Dental Corporation.
Carmie Mehrlander was named President and Chief Operating Officer of
the Company on February 12, 1998, and was elected to fill a vacancy on the
Board of Directors on March 26, 1998. Prior to joining the Company,
Ms. Mehrlander served as Executive Vice President-Merchandising for Home
Shopping Network from June 1996 to June 1997 and as Divisional Vice
President of Sears Merchandise Group from August 1993 to June 1996. Prior
to joining Sears, she was Group Vice President of Macy's South from July
1990 to August 1993 following 13 years of fashion retailing at Abraham &
Strauss and Macy's (Bamberger's).
Clayton E. Niles has been a member of the Board of Directors since
1982 and was elected Chairman of the Board on September 5, 1996. Mr. Niles
has become a private investor since his retirement on May 1, 1986, as
Chairman of the Board of Communications Industries, Inc., a position held
since January 1, 1980. Communications Industries, Inc., acquired by Pacific
Telesis Group, is a supplier of mobile telephone services. Mr. Niles served
as Chief Executive Officer of Communications Industries, Inc. from
January 1, 1976, until July 1, 1982, and thereafter re-assumed the office of
President and Chief Executive Officer from July 1, 1983 until July 1, 1985.
Carson R. Thompson is President and Chief Executive Officer of
PawnMart, Inc. Prior thereto, he served as Chairman of the Board of the
Company from November 1982 until September 5, 1996, when he resigned the
position in connection with being appointed President and Chief Executive
Officer of the Company. Mr. Thompson resigned as President and Chief
Executive Officer on March 29, 1997. Mr. Thompson previously retired from
the Company on June 30, 1991, after having served as Chief Executive Officer
since July 1, 1982, and as President from July 1, 1982, to June 20, 1990.
Prior thereto, Mr. Thompson served as President of Tex Tan Welhausen Co.,
a division of the Company, from 1974 until elected Vice President of the
Company in May 1978 and thereafter elected Executive Vice President in
September 1980. Mr. Thompson served as President and Chief Operating
Officer of the Company from August 1981 to July 1982.
Meetings and Committees of the Board
For the fiscal year ended January 31, 1998, the Board of Directors
met 11 times. No director who served the entire fiscal year attended less
than seventy-five percent (75%) of the meetings except Ms. Shirley Young.
The Board has three standing Committees, described below. Committee
appointments are reviewed by the Board at its meeting following each annual
meeting of shareholders.
The Board of Directors has an Audit and Finance Committee currently
composed of the following directors: A. Roy Megarry (Chairman),
Glenn E. Hemmerle, Carson R. Thompson and Robert E. Runice. The Audit and
Finance Committee is primarily concerned with the effectiveness of the
Company's accounting policies and practices, financial reporting, and
internal controls. Specifically, the Committee reviews and approves the
scope of the annual examination of the books and records of the Company and
reviews the findings and recommendations of the outside auditors on
completion of the audit; considers the organization, scope and adequacy of
the Company's internal controls function; monitors the extent to which the
Company has implemented changes recommended by the independent auditors to
the Committee; and provides oversight with respect to accounting principles
employed in the Company's financial reporting. The Committee, comprised
entirely of non-employee directors, met four times during the fiscal year.
The Board of Directors has a Compensation and Human Resources
Committee currently composed of the following directors: Barbara Bass
(Chair), Edmund H. Damon and Robert E. Runice. The Compensation and Human
Resources Committee is primarily concerned with the Company's organization,
salary and non-salary compensation and benefit programs, succession planning
and related human resources matters. The Committee also recommends to the
Board of Directors annual salaries, bonus programs and administers certain
retirement, stock option and other plans covering executive officers. The
Committee, comprised entirely of non-employee directors, met three times
during the fiscal year.
The Board of Directors has an Executive Committee currently composed
of the following directors: Edmund H. Damon (Chairman), Barbara Bass,
Clayton E. Niles, A. Roy Megarry and Robert S. Jackson. The Executive
Committee is primarily concerned with the Company's strategic planning
and also has the responsibility for director affairs, including the
recommendation of nominees for new or vacant Board positions. The Committee
will consider persons brought to its attention by shareholders. The names
of the proposed nominees should be sent to the Chief Executive Officer or
Secretary of the Company at the address shown on the cover of this Proxy
Statement. The Committee met one time during the fiscal year.
Compensation of Directors
A. Cash Compensation. A director who is an employee of the
Company is not compensated for service as a member of the Board of
Directors or any committee of the Board. For the fiscal year ended
January 31, 1998, non-employee directors received cash compensation
consisting of an annual retainer of $18,500, and an $1,000 fee for each
Board meeting and each committee meeting attended. Committee Chairpersons
received an additional annual retainer of $4,000 for committee work.
Mr. Clayton E. Niles was paid an annual retainer of $40,000 for serving as
Chairman of the Board for the fiscal year. These amounts reflect modest
changes in director cash compensation after no changes were made for the
prior two fiscal years. The Company also reimburses its directors for
travel, lodging and related expenses incurred in attending Board and
committee meetings, and provides each director with travel accident and
directors' and officers' liability insurance.
B. Director Stock Option Plan. The 1991 Director Stock Option
Plan (the "Director Plan") was adopted by the Board of Directors on
August 14, 1991, and approved by the Company's shareholders on
November 12, 1991. The Director Plan provides for the granting of
non-qualified stock options to members of the Board of Directors who are
not employees of the Company or any of its subsidiaries (the "Non-Employee
Directors").
The Director Plan provides for both an initial grant of an option
to new directors and an automatic annual grant of an option to continuing
directors on the third business day after the Company issues its press
release summarizing the Company's performance for the prior fiscal year.
The initial and automatic annual option grant is the lesser of 5,000 shares
or $75,000 in face value.
The Board of Directors is proposing and recommending that
shareholders approve an additional 90,000 shares for use under the Director
Plan. See "Proposed Amendment to 1991 Director Stock Option Plan" (Item 2)
at page 9.
C. Director Stock Deferral Plan. The 1993 Stock Deferral Plan for
Non-Employee Directors (the "Director Deferral Plan") was adopted by the
Board of Directors on June 24, 1993, and approved by shareholders on
October 13, 1993. Under the Director Deferral Plan, non-employee directors
are given an election to defer the receipt of annual and Committee chair
retainers and meeting fees, which are then credited in stock units
equivalent to Common Stock and held by the Company in an account for the
benefit of each participating director. The stock units, which at all times
are fully vested, become payable in the form of Common Stock upon retirement
from the Board or otherwise as specified in the director's election notice.
The stock units are adjusted for stock dividends, stock splits,
combinations, reclassifications, recapitalizations or other capital
adjustments. In the event of a change in control, as defined in the
Director Deferral Plan, all units are immediately payable.
The Board of Directors may terminate, suspend or amend the Director
Deferral Plan unless such amendment must be submitted for shareholder
approval for the Director Deferral Plan to satisfy the requirements of the
exemption from the short-swing profits rules under Section 16 of the
Securities Exchange Act of 1934, as amended.
D. Director Stock Ownership Guidelines. On June 24, 1993, the
Board of Directors approved stock ownership guidelines for the Company's
non-employee directors. The guidelines provide that each outside director
is expected to achieve a stock ownership position equal to five times annual
cash compensation no later than the completion of such director's fifth
year of service on the Board. For purposes of the guidelines, annual cash
compensation is defined as the annual retainer plus meeting fees, assuming
attendance at four Board meetings and three Committee meetings. Stock
beneficially owned by the directors and stock units held pursuant to the
Director Deferral Plan count toward the satisfaction of the guidelines, but
stock options, even if vested, are not considered owned for such purposes.
The Executive Committee reviews compliance and progress toward satisfaction
of the guidelines annually.
PROPOSAL TO AMEND THE BOMBAY COMPANY, INC.
1991 DIRECTOR STOCK OPTION PLAN
(Item 2)
The 1991 Director Stock Option Plan (the "Director Plan") was
adopted by the Board of Directors on August 14, 1991, and approved by the
Company's shareholders on November 12, 1991. The Director Plan provides
for the granting of non-qualified stock options to members of the Board of
Directors who are not employees of the Company or any of its subsidiaries
(the "Non-Employee Directors"). The Director Plan is designed to promote
the interests of the Company by providing an increased opportunity for
existing and potential new directors to acquire an investment in the
Company, thereby maintaining and strengthening their desire to remain with
or join the Company's Board of Directors and align their interests and
efforts with those of the shareholders. The Board believes that in order
to continue to enable the Company to attract and retain the best available
personnel who are not employees of the Company to serve as outside
directors, the Director Plan should be amended to increase the number of
shares of the Company's Common Stock reserved for issuance under the
Director Plan to add an additional 90,000 shares. The Director Plan will
expire in the year 2001. The Board anticipates that the additional
requested shares will satisfy the needs under the plan for the next two
years.
The Director Plan, as amended, provides for an initial grant of an
option to purchase the lesser of 5,000 shares or that number of shares
equal to $75,000 at face value to each Non-Employee Director upon the date
of his or her election or appointment (the "Initial Option"); and an annual
grant of an option to purchase the same number of shares of Common Stock
on the third business day after the Company issues its press release
summarizing the Company's performance for the prior fiscal year
(the "Annual Option").
The exercise price of the options under the Director Plan is equal
to the closing price of the Company's Common Stock on the date of grant.
The Initial Option becomes exercisable at the rate of twenty percent (20%)
per year commencing one year after the date of grant. Each Annual Option
grant is exercisable in full six months following the date of grant.
Payment for shares upon exercise shall be in cash.
When approved in 1991 shareholders authorized 75,000 shares of
Common Stock for issuance under the Director Plan, subject to adjustments
for recapitalizations or similar events affecting the Common Stock. During
1992 and 1993 the Company's Common Stock split four times on the basis of
three for two splits. As a result, due to the anti-dilution provision in
the plan, the shares authorized under the plan increased proportionately .
As of the beginning of fiscal 1998 there were options outstanding covering
202,372 shares. The automatic grant for fiscal 1998 was scheduled to occur
on March 16, 1998 (three days following the release of annual results).
Due to the shortfall in the number of available shares, this grant is
subject to approval by shareholders of the proposed amendment.
Summary of the Director Plan and Amendment
The material features of the Director Plan are outlined below.
The only change to the existing Director Plan effected by the proposed
amendment is a 90,000 share increase in the number of shares available for
issuance. Accordingly, the only benefit to Non-Employee Directors is an
increase in the number of shares reserved for options to which they already
are, or will be, entitled under the Director Plan. The table below shows
the options that Non-Employee Directors will be granted during Fiscal 1998
based on the current formulas of the Director Plan.
AMENDED PLAN BENEFITS
OPTIONS TO BE GRANTED
NAME OF INDIVIDUAL OR GROUP DURING FISCAL 1998 (1)
Non-Employee Directors as a Group (seven) 35,000
(1) The exercise price for all grants will be at the fair market value
of the Company's Common Stock on the date of grant.
Purposes
The purposes of the Director Plan are to attract and retain the best
available personnel to serve as Non-Employee Directors of the Company and to
encourage ownership in the Company by such Non-Employee Directors. Options
granted under the Director Plan are non-qualified stock options not entitled
to special tax treatment under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), or its applicable regulations.
Administration
The Director Plan is administered by the Board of Directors of the
Company. The interpretation and construction of any provision of the
Director Plan by the Board is final and binding. Members of the Board
receive no separate compensation for their services in connection with the
administration of the Director Plan.
Eligibility
The Director Plan provides that options may be granted only to
Non-Employee Directors. The Company currently has a total of nine
directors, seven of whom are Non-Employee Directors.
Grant of Options
All grants of options under the Director Plan are automatic and
nondiscretionary. Accordingly, no person shall have any discretion to
select which Non-Employee Directors shall be granted options or to
determine when such options shall be granted. The number of shares to be
covered by options granted to Non-Employee Directors is subject to change
by the Board of Directors provided such number of options is within the
maximum number approved by shareholders, as subsequently adjusted. All
grants of options are made in strict accordance with the provisions of the
Director Plan.
Option Price
The option price under the Director Plan is 100% of the fair market
value of the Company's Common Stock on the date of grant. Fair market
value shall be determined by reference to the closing sales price on the
New York Stock Exchange. The closing sales price per share of the Company's
Common Stock on March 25, 1998, was $4.9375.
Termination of Status as a Director Through Death, Disability or Otherwise
Under the Director Plan, options become fully exercisable upon the
death or disability of an optionee or upon an optionee ceasing to be a
director of the Company, provided the director has served at least five
years on the Board. All options granted prior to 1994 expire three months
from the date an optionee terminates his or her performance of services for
the Company except in the cases of death or disability in which event the
three month period is extended to twelve months. An amendment covering all
options granted after 1994 extended the exercise period from three months to
thirty-six months upon death, disability or a director's retirement from
the Board, provided such departing director had at least ten years of
service or if such retirement was due to the Company's mandatory retirement
age for directors. A subsequent amendment restated the exercise period by
providing one year to exercise vested options for each three-year term or
portion thereof completed by a departing director, to a maximum of three
years. However, in no event may an option be exercised once its ten year
term has expired.
Nonassignability of Options
Options granted pursuant to the Director Plan are nonassignable and
nontransferable by the optionee, other than by will or by the laws of the
descent and distribution and may be exercised, during the lifetime of the
optionee, only by the optionee.
Adjustment Upon Changes in Capitalization and Corporate Transactions
In the event any changes, such as stock splits or dividends, are
made in the capitalization of the Company, which changes result in an
increase or decrease in the number of outstanding shares of Common Stock
without receipt of consideration by the Company, appropriate adjustments
shall be made in the number of shares which have been reserved for issuance
under the Director Plan and the price per share covered by each outstanding
option.
Change of Control
Notwithstanding anything in the Director Plan or in a stock option
agreement evidencing an option to the contrary, in the event a change of
control, as defined in the Director Plan, occurs, then each option shall
become exercisable during the period beginning on the date of the
occurrence of the change of control and ending on the sixtieth day
following such date, for the purchase of the full number of shares subject
to the option.
Amendment and Termination
The Board of Directors may amend the Director Plan at any time from
time to time or may terminate the Director Plan without approval of the
shareholders. No action by the Board or the shareholders may unilaterally
alter or impair any rights previously granted under the Director Plan
without the consent of the optionee, except as may be necessary for
compliance with Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). In any event, the Director Plan will
terminate in the year 2001. Shareholder approval is required for
amendments of the Director Plan only if required by Rule 16b-3 under the
Exchange Act.
Federal Tax Consequences
Options granted under the Director Plan are nonqualified stock
options not entitled to special tax treatment under the Code. Generally,
an optionee will not recognize any taxable income for the purposes of
federal income tax liability at the time the optionee is granted a
nonqualified option. However, upon the exercise of the option, the
optionee will recognize ordinary income for income tax purposes equal to
the excess of the then market value of the shares over the option exercise
price. The Company will be entitled to a deduction in the same amount as
the ordinary income recognized by the optionee.
The foregoing is not a complete description of the federal income
tax aspects of options granted under the Director Plan. Furthermore, no
information is given herein with respect to any state and local taxes or
any non-U.S. taxes which may be applicable.
Vote Required; Recommendation of Board of Directors
The affirmative vote of a majority of the votes cast on the
proposal at the Annual Meeting is required to approve this proposal. An
abstention will have the same effect as a vote against the proposal and,
pursuant to Delaware law, a broker non-vote will not be treated as voting
in person or by proxy on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
THE INCREASE IN THE NUMBER OF SHARES OF COMMON STOCK RESERVED UNDER
THE 1991 DIRECTOR STOCK OPTION PLAN.
<TABLE>
EXECUTIVE OFFICERS OF THE COMPANY
Current Executive Officers
The executive officers of the Company, their respective ages,
positions held and tenure as officers are as follows:
<CAPTION>
Position(s) Held with Officer of the
Name Age the Company Company Since
<S> <C> <C> <C>
Robert S. Jackson 52 Chief Executive Officer 1997
Carmie Mehrlander 46 President and Chief Operating 1998
Officer
Brent A. Magnuson 35 Senior Vice President,Merchandising 1996
and Marketing
Daniel L. Lawrence 49 Senior Vice President, Merchandise 1996
Development and International Sourcing
Elaine D. Crowley 39 Vice President, Finance 1996
and Treasurer
J. Michael Smith 43 Vice President, Human Resources 1996
Michael J. 41 Vice President, Secretary 1985
Veitenheimer and General Counsel
</TABLE>
Business Experience
Information concerning the business experience of Mr. Jackson and
Ms. Mehrlander is provided under the section entitled "Election of
Directors."
Mr. Brent A. Magnuson was named Senior Vice President,
Merchandising and has served as Interim Senior Vice President of Marketing
effective September 1996 after serving as Vice President, Merchandise
Management since January 1996. He was elected a corporate officer on
February 21, 1996. From September 1995 to December 1995, Mr. Magnuson was
Vice President, Strategic Planning and from May 1994 to August 1995 was
Director, Information Services of the Company. Mr. Magnuson joined Bombay
from Price Waterhouse where from 1991 to 1994 he was a Manager in the
Management Horizons Division and, from 1989 to 1991 he served as
Senior Consultant to that group.
Mr. Daniel L. Lawrence has served as Senior Vice President,
Multinational Sourcing since 1992 and, in September 1996 was named to the
position of Senior Vice President, Merchandise Development, assuming the
additional responsibilities of product development and quality assurance.
He was elected a corporate officer on February 21, 1996. From 1990 to 1992
he acted as Vice President, Merchandising for the former Bombay division
of the Company. Mr. Lawrence joined Bombay after serving as Senior Vice
President, Merchandising for Michael's Stores, Inc. and holding various
positions at Pier 1 Imports from 1975 to 1988, including Vice President,
Divisional Merchandise Director from 1986 to 1988.
Ms. Elaine D. Crowley was named Vice President, Finance and
Treasurer effective January 25, 1996, after having served as Corporate
Controller since January 1995. Prior thereto, Ms. Crowley acted as
Executive Vice President, Operations of The Bombay Company division from
January 1994 to January 1995, Vice President and Controller from
January 1991 to December 1994 and Controller from August 1990 to
December 1990. Prior thereto, Ms. Crowley was with Price Waterhouse from
1981 to 1990.
Mr. J. Michael Smith joined The Bombay Company, Inc. as Vice
President, Human Resources on December 9, 1996. Prior thereto, from
June 1992 to December 1996 Mr. Smith was Retail Vice President of
Pearle, Inc., the world's largest retail eye wear supplier and a U.S.
subsidiary of Grand Metropolitan, PLC. Before joining Pearle, Inc.,
Mr. Smith was employed by the Burger King Corporation, as Vice President,
Human Resources - USA Retail from March 1991 to June 1992, as Human
Resources Director - Distribution Services from October 1990 to March 1991,
and as Human Resources Director, Southeast Operations from May 1989 to
October 1990. Previous work assignments included various human resources
positions at Grand Metropolitan, PLC Companies, including an expatriate
assignment at the company's Corporate Center in London, as well as
positions at Nissan Motor Manufacturing Corporation USA in Tennessee and
Texas Instruments, Inc.
Mr. Michael J. Veitenheimer was named Vice President effective
August 4, 1994, and has served as Secretary of the Company since
July l, 1985, and General Counsel since December 1983. From 1983 to
1985 he was Assistant Secretary of the Company. Prior thereto,
Mr. Veitenheimer was in private practice of law in Fort Worth, Texas.
Terms of Office: Relationships
The officers of the Company are elected annually by the Board of
Directors at a meeting held immediately following each Annual Meeting of
Shareholders, or as soon thereafter as necessary and convenient in order to
fill vacancies or newly created offices. Each officer holds office until
his or her successor is duly elected and qualified or until his or her
death, resignation or removal, if earlier. Any officer or agent elected
or appointed by the Board of Directors may be removed by the Board of
Directors whenever in its judgment the best interests of the Company will
be served thereby, but such removal shall be without prejudice to the
contractual rights, if any, of the person so removed.
There are no family relationships among the executive officers,
and there are no arrangements or understandings between any officer and
any other person pursuant to which that officer was selected.
EXECUTIVE COMPENSATION
Summary Compensation Table
The Summary Compensation Table includes individual compensation
information on the Chief Executive Officer, the four other most highly
paid executive officers as of January 31, 1998, a former chief executive
officer and a former executive officer who would have been included in the
table but for the fact that the individual was not serving as an executive
officer at the end of the last completed fiscal year.
<TABLE>
Summary Compensation Table
<CAPTION>
Long-Term
Compensation
Awards
Name and Principal Fiscal Annual Other
Position Year Compensation Annual All
Compen- Restricted Stock Other
Salary Bonus sation(1) Stock(2) Options Compensation(3)
($) ($) ($) ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Robert S. Jackson
President & Chief 1997 313,462 160,000 - 0 100,000 19,086(5)
Executive Officer(4)
Gerald A. Cook, Senior 1997 182,000 42,000 - $237,500 0 5,464(3)
Vice President, Stores(6) 1996 193,750 0 - 0 135,000 6,060
Brent A. Magnuson, 1997 175,000 42,000 - $237,500 0 10,536(3)
Senior Vice President, 1996 157,644 0 - 0 135,000 17,019
Merchandising
J. Michael Smith, Vice 1997 165,000 33,000 - 0 32,000 71,890(7)
President, Human
Resources
Michael J. Veitenheimer, 1997 160,000 42,000 - 0 33,000 10,169(3)
Vice President, General 1996 149,880 0 - 0 22,489 19,727
Counsel & Secretary 1995 131,481 0 - 0 15,374 18,402
Carson R. Thompson, 1997 69,384 0 - 0 4,000(8) 117,512(9)
Former Chief Executive 1996 181,077 0 - 0 8,995
Officer(8)
James E. Herlihy, Former 1997 154,235 0 - 0 0 170,971(11)
Executive Vice President 1996 219,928 0 - 0 221,959 30,658
& Chief Financial 1995 194,135 0 - 0 46,896 26,656
Officer(10)
<FN>
(1) "Other Annual Compensation" is intended to cover forms of annual
compensation not properly categorized as salary or bonus, including
perquisites. No named executive received such compensation or perquisites
which exceeded a threshold level for disclosure purposes.
(2) At the end of fiscal 1997 the Company had restricted stock awards
outstanding covering 100,000 of stock, with a total value of $475,000 based
upon the closing market price on the date of grant. The restricted shares
vest upon completion of the fourth year following the date of grant.
Dividends will not be paid on the restricted stock.
(3) The totals in this column reflect the aggregate value of the
Company contribution to each named executive under the 401(k) Savings Plan,
Stock Purchase Program, Supplemental Stock Plan, Executive Disability Plan
and life insurance. For the fiscal period ended January 31, 1998, these
amounts were as follows: Robert S. Jackson: $0; $0; $0; $1,594 and $868.
Gerald A. Cook: $2,729; $578; $0; $1,275 and $882. Brent A. Magnuson:
$8,246; $409; $505; $589 and $787. J. Michael Smith: $2,308; $0; $0;
$1,213 and $560. Michael J. Veitenheimer: $8,116; $0; $0; $1,275 and
$778. Carson R. Thompson: $3,808; $1,058; $0; $388 and $675.
James E. Herlihy: $5,683; $1,058; $1,298; $1,361 and $1,129.
(4) Mr. Robert S. Jackson, a non-employee director, was named interim
President and Chief Executive Officer on March 29, 1997. He was named to
continue as Chief Executive Officer on February 12, 1998.
(5) Includes, in addition to the amounts reflected in Note 2 above,
non-employee director fees totaling $16,625.
(6) Mr. Gerald A. Cook separated from the Company on April 6, 1998.
(7) Includes, in addition to the amounts reflected in Note 2 above,
relocation expenses totaling $67,809.
(8) Mr. Carson R. Thompson resigned as President and Chief Executive
Officer on March 29, 1997, to become President and Chief Executive Officer
of PawnMart, Inc. He continues to serve on the Board of Directors.
Options were granted as part of annual grant of 4,000 options to
non-employee directors.
(9) Includes, in addition to the amounts reflected in Note 2 above,
transition consulting fees of $90,000 in association with Mr. Thompson's
resignation as President and Chief Executive Officer, and non-employee
director fees totaling $21,583.
(10) Mr. James E. Herlihy separated from the Company on October 4, 1997.
(11) Includes, in addition to the amounts reflected in Note 2 above,
severance related compensation in the amount of $160,442. See
"Termination Agreements" at page 18.
</TABLE>
Stock Option Grants
The following table provides information, with respect to
individual grants under the 1986 Stock Option Plan or the 1996 Long-Term
Incentive Stock Plan to the individuals named in the Summary Compensation
Table, during the fiscal year ended January 31, 1998.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Percent of Exercise or Expiration Potential Realizable Value
Options total options base price Date at Assumed Annual Rates of
Granted granted to ($ share)(2) Stock Price Appreciation
Name (#)(1) employees in for the Option Term ($)(3)
fiscal year 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Robert S. Jackson 100,000 16.4% $4.75 12/4/07 298,420 751,030
Gerald A. Cook 0 - - - - -
Brent A. Magnuson 0 - - - - -
J. Michael Smith 32,000 5.2% $4.75 3/11/07 95,494 242,250
Michael J. Veitenheimer 33,000 5.4% $4.75 3/11/07 98,479 249,820
Carson R. Thompson 4,000(4) N/A $4.50 3/17/07 N/A N/A
James E. Herlihy 25,316 4.1% $4.59 10/4/00 11,898 24,303
<FN>
(1) Grants of options to purchase shares of Common Stock under the 1986
Stock Option Plan and 1996 Long-Term Incentive Stock Plan generally vest
from the date of grant at a rate of 20% per year for five years and expire
on the tenth anniversary of the date of grant. The Plan contains a
provision which provides that, in the event of a change in control, as
defined therein, all options granted under the plan immediately vest and
become exercisable for a period of 60 days after the effective date of
such change in control.
(2) Exercise price is equal to the closing price of the Common Stock on
the New York Stock Exchange Composite Tape on the date of the grant.
(3) These amounts represent assumed rates of stock price appreciation
of 5% and 10% which are specified in applicable federal securities
regulations. Actual gains, if any, on stock option exercises and Common
Stock holdings are dependent on the future performance of the Common Stock
and overall stock market conditions. There can be no assurances that the
amounts reflected in the table will be achieved or maintained through the
life of the option. The amounts shown represent the assumed value of the
stock options, less the exercise price, at the end of the ten-year period,
beginning on the date of grant and ending on the option expiration date.
For example, based upon a ten-year period beginning on the date of grant on
March 11, 1997, with a price of the Common Stock of $4.75, a share of
Common Stock would have a value on March 11, 2007 of approximately $7.74
at an assumed appreciation rate of 5% and approximately $12.32 at an
assumed appreciation rate of 10%. The closing price of the Company's stock
on March 25, 1998, was $4.94 per share.
(4) Represents options granted under the Company's 1991 Director Stock
Option Plan which were granted to Mr. Thompson after his resignation as
President and Chief Executive Officer.
(5) Pursuant to Mr. Herlihy's severance contract, any options exercised
by him during the 90 days following his separation resulted in his being
granted a new option or stock appreciation right exercisable by Mr. Herlihy
at any time during the 21 months following such grant. Options were
granted on January 4, 1998.
</TABLE>
Stock Option Exercises and Holdings
The following table provides information with respect to the
exercise of options by the individuals named in the Summary Compensation
Table during the last fiscal year and the value of unexercised options
held as of January 31, 1998.
<TABLE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR AND YEAR END OPTION VALUES
<CAPTION>
Number of Value of
Shares Unexercised Unexercised In-the-
Acquired Value Options at 1/31/98 Money Options at
Name on Exercise Realized Exercisable/ 1/31/98(1)
(#) ($) Unexercisable ($) Exercisable/
Unexercisable
<S> <C> <C> <C> <C>
Robert S. Jackson 6,187 $ 28,812/100,000 8,800/0
Gerald A. Cook 0 0 13,000/132,000 0/0
Brent A. Magnuson 0 0 14,200/131,800 0/0
J. Michael Smith 0 0 4,000 / 48,000 0/0
Michael J. Veitenheimer 8,374 19,365 32,689/ 56,800 0/0
Carson R. Thompson 0 0 14,750/ 0 240/0
James E. Herlihy 25,316 29,713 25,316/ 0 0/0
<FN>
(1) The closing price of the Company's Common Stock on
January 30, 1998, was $4.56 per share.
</TABLE>
Termination Agreements
On December 8, 1992, the Company entered into Executive Severance
and Non-Competition Agreements (the "Agreements") with the then President
and Chief Executive Officer and Executive Vice Presidents of the Company.
The Agreements were intended to provide non-competition protection to the
Company for a two year period following termination of employment and
prohibit at any time the unauthorized disclosure or use of trademarks,
trade secrets or other proprietary information or property of the Company
other than in the service of the Company. In exchange, the officers were
entitled to certain severance benefits in the event of the termination of
employment including the payment of base salary and bonus prorated through
the date of termination. These Agreements had three year terms with
automatic annual one year extensions unless otherwise elected by the
Company. In the event the officer was terminated without cause or
following an involuntary reduction of his or her responsibilities, position
or compensation, such officer was entitled to receive his or her base
salary, projected bonus and health benefits for up to a two year period
following termination. Further, the officer was entitled to immediate
vesting of all or a part of any stock options granted to the officer more
than 12 months prior to the termination date. To the extent certain of
such stock options were exercised during the three months following
termination of employment, the officer was also entitled to receive stock
appreciation rights or equivalent new options exercisable for a 21 month
period thereafter. Stock appreciation rights, if granted, or measures
taken by the Company to offset the costs of the rights should an exercise
occur, would likely constitute an expense to the Company and a charge to
earnings in the period exercised.
On October 4, 1997, Mr. James E. Herlihy separated from the
Company. His severance arrangement was governed by the agreement
discussed above. Total severance costs during the fiscal year was
$160,442. The maximum potential severance cost, assuming full two-year
payout and no offsetting income from future employment during the second
year, is approximately $800,000.
Mr. J. Michael Smith was hired as Vice President, Human Resources
on December 9, 1996. His letter of employment provides for severance
payments equivalent to 12 months salary if he is terminated not for cause
during the first two years of his service to the Company, and six months
severance thereafter.
Compensation and Human Resources Committee Report
The Compensation and Human Resources Committee of the Board of
Directors (the "Committee") is responsible for reviewing and approving the
Company's compensation policies and the compensation paid to executive
officers. The Committee consists of four independent, non-employee
directors. All decisions by the Committee relating to the compensation of
the Company's executive officers are reviewed by the full Board.
Compensation Philosophy. The Company's long-standing compensation
philosophy is one of emphasizing performance-based compensation incentives
which create a strong focus on growth in earnings per share and the
enhancement of shareholder value. This focus is maintained through a
program of competitive base salaries, a bonus program based on successfully
achieving predetermined financial performance goals and a heavy emphasis on
executive equity ownership. These compensation elements address both
short-term and long-term performance goals and serve as the primary
vehicles to attract and retain executives with abilities to further the
growth and success of the Company. During Fiscal 1997 the compensation
program was modified to incorporate an individual performance element in
addition to total Company results. This change is discussed under the
section entitled "Annual Incentive Bonus."
The Company has elected to use the Standard & Poors Retail Stores
Composite Index to compare the performance of the Company to that of a
broad index of other retailers for purposes of the Shareholders' Total
Return Graph presented elsewhere in this Proxy Statement. However, in
reviewing compensation issues, the Committee focused on a narrower, more
analogous group of retailers (the "Comparative Group"), along with
national survey data. The Comparative Group is reviewed by the Committee
annually and changes to the group are made as necessary for comparability
purposes. The Committee is of the opinion that these companies reflect
a group with which Bombay competes for executive talent. Prior to
beginning Fiscal 1997 the Company examined its peer group companies to
ensure that, on a continuing basis, the peer group reflected similarity to
the Company as closely as possible. Specifically, the following criteria
were used: first, the company was in the business of specialty retail, with
revenues of at least $250 million, but in no event more than $1 billion;
and second, a preference was given to home furnishings retailers (mall
and non-mall) and to mall-based retailers in other merchandise categories
with operating, growth and earnings characteristics similar to the Company.
The Comparative Group consists of 14 companies, the majority of which were
not in the Retail Stores Composite Index: Ann Taylor, Bed Bath and Beyond,
CML Group, Dress Barn, Gymboree, Haverty Furniture, Lechter's, Pier 1
Imports, Rhodes, Sports and Recreation, Sunglass Hut, Talbots, Tiffany &
Co. and Williams-Sonoma. In the opinion of the Committee, these retailers
were a more representative sampling of comparable companies for purposes
of comparing CEO and executive officer compensation packages than the
Standard & Poors Retail Stores Composite Index, which is made up of
substantially larger companies. For purposes of comparability, the
Committee also reviewed compensation practices for a modified peer group
containing the five companies in the Comparative Group closest to Bombay
in net sales volume.
Base Salaries. The Committee reviews and approves salaries for
the CEO and the other executive officers on an annual basis. Recommended
base salaries are reviewed and set based on information derived from the
Comparative Group and national surveys of compensation data, as well as
evaluations of the individual executives' positions, future performance and
contribution. In making salary decisions, the Committee exercises its
discretion and judgment with no specific formula being applied to determine
salary levels. Historically, salaries of Company executives were generally
set at or below median levels. The Committee determined, after a review of
comparative data for Fiscal 1995 and 1996, that the salary levels at some
positions were not at competitive levels, which placed the Company at risk
of losing executive management talent. As a result, for Fiscal 1997 the
Committee continued the process aimed at gradually moving base salaries
upward to achieve median competitive base salary levels in relation to the
Comparative Group. No base salary increases were given to the CEO and two
other executive positions. In the executive officer group, salaries for
the fiscal year represented a range of 40% to 65% of projected total annual
compensation.
Annual Incentive Bonus. Annual incentive bonuses for executive
officers are designed to satisfy the Committee's belief that a significant
portion of the annual compensation of each executive officer should be
contingent upon Company performance. To carry out this philosophy, the
Company implemented the Executive Management Incentive Compensation Plan
(the "Incentive Plan") effective July 4, 1994. The Incentive Plan,
approved by shareholders on October 13, 1994, is a pay-for-performance plan
intended to motivate and reward executive officers by directly linking cash
bonuses to specific corporate financial targets.
The Incentive Plan provides that bonus pools are created based upon
profitability and return on assets. The bonus pool based upon profitability
is derived by setting aside a fixed percentage of pre-tax profits and
contains a profit threshold that must be met for the payment of any bonus
based on profitability. The bonus pool based upon return on assets is
derived by allocating a pre-set amount of bonus dollars for each percentage
increase in the calculated return on assets above an established minimum.
The profit percentage, return on assets schedule and applicable minimum
thresholds are established by the Committee and approved annually by the
Board of Directors, as are paid bonuses. See Summary Compensation Table.
If the threshold levels for profits and return on assets are met,
the Incentive Plan permits bonus results to be adjusted through the
application of a "growth factor" based upon earnings per share compared to
the prior year. Since Fiscal 1997 was perceived as a turnaround year for
the Company, the growth factor was not included in the compensation plan
for the year.
In prior years, bonus results were based entirely on financial
measures and discretion was not used to determine or adjust bonus amounts.
The Committee determined that, with the maturing of the Company, the
Incentive Plan should be amended to provide that once the Board approved
minimum financial thresholds were met and a bonus pool established, a
portion of annual incentive bonus should be based upon individual
performance of the officer. This amendment, adopted in May 1997, was made
applicable to Fiscal 1997 results.
At the time the amendment was made, the Board and the Committee
replaced previously established "target bonuses" with a new program
providing for the accrual of bonus dollars as a percentage of pre-tax
profits up to a minimum profit threshold, with such bonus dollars being
available for distribution at the Committee's discretion based upon
individual officer performance. Profitability in excess of the threshold
would generate bonus dollars which were divided between discretionary and
automatic formula awards based upon predetermined allocations of the bonus
pool dollars. Achievement of the business plan provided bonus dollars
available for distribution with approximately 60% based upon Company
performance and with the balance based upon individual performance. With
the implementation of this new program, the 1997 profit targets and bonus
thresholds originally set in March 1997 were revised with the net effect
being that each executive officer's original target bonus was reduced
approximately 40% based upon the revised business plan.
Compensation Results. The Company's performance for the period
ended January 31, 1998, met the minimum thresholds of the compensation
criteria established in May 1997 which reflected substantial improvement
over the prior years' results, but did not achieve the revised business
plan. As a result the executive officers were paid bonuses for the fiscal
period as noted in the Summary Compensation Table, with such payments
representing approximately 60% of bonus levels at plan.
Stock Options/Equity Ownership. The Company's compensation program
is also intended to create long-term incentives for executives to act in
ways that will create long-term growth in shareholder value. In 1997, to
further its long-term pay practice, restricted stock awards were granted to
two Senior Vice Presidents which vest in full upon the completion of four
years from the date of grant. The remaining members of Senior Management
were awarded non-qualified stock options. These grants, made by the
Committee under the 1996 Long Term Incentive Stock Plan, are reflected in
the "Summary Compensation" and "Option Grants in Last Fiscal Year" tables
contained in this Proxy Statement.
Pursuant to the 1996 Long-Term Incentive Stock Plan, awards are
granted at the discretion of the Committee, usually once per year. The
number of shares covered by such awards are determined based upon
benchmarks for comparable positions and an assessment of the individuals'
performance. The Committee considers the recommendation of and relies on
information provided by the CEO in determining awards to be granted to the
non-CEO executive officers. Other than the two restricted stock awards
referred to above, the Company has used only stock options which, when
awarded, are granted with an exercise price equal to the fair market value
of the Company's Common Stock on the date of grant. Options typically vest
over a five-year period (20% per year) and are not dependent on further
individual performance criteria. The Committee believes that the periodic
grant of time-vested stock options provides an incentive that focuses the
executives' attention on managing the business from the perspective of
owners with an equity stake in the Company. It further motivates
executives to maximize long-term growth and profitability because value is
created in the options only as the Company's stock price increases after
the option is granted.
CEO Compensation. Mr. Robert S. Jackson served as President and
CEO from March 31, 1997, through the end of the fiscal year. He was paid
a base salary of $313,462.00 for the period plus a bonus of $160,000.00
based upon the Company's progress in its turnaround for the balance of the
fiscal year. On December 4, 1997, Mr. Jackson was granted nonqualified
stock options covering 100,000 shares, priced at $4.75 per share with a
five year vesting schedule. Prior to Mr. Jackson's appointment,
Mr. Carson R. Thompson served as President and CEO. Mr. Thompson's base
salary for the fiscal year was set at $440,000 per year, with a bonus
opportunity of $232,000 for Fiscal 1997. Mr. Thompson resigned as an
executive officer on March 31, 1997, to become President and Chief
Executive Officer of PawnMart, Inc.
Impact of Section 162(m) of the Internal Revenue Code. The
Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code, which imposes a $1 million limit per year on the
corporation tax deduction for compensation (including stock-based
compensation such as stock options) paid with respect to the top five
executive officers of publicly-held corporations, unless, in general, such
compensation is performance-based and approved by shareholders. It is the
Company's present intention that all amounts paid to its executives be
fully deductible under the applicable tax laws. To maintain this
deductibility, the Committee adopted and the Board of Directors and
shareholders approved the Incentive Plan, along with the 1986 Stock Option
Plan and the 1996 Long-Term Incentive Stock Plan.
The Committee believes that the quality and motivation of
management makes a significant difference in the performance of the
Company, and that a compensation program which is tied to performance is in
the best interests of shareholders. The Committee is of the opinion that
the Company's compensation plans meet these important requirements.
Barbara Bass, Chair
Edmund H. Damon
Robert E. Runice
Shirley Young
1993 - 1998 Shareholders' Total Return Graph
The following graph compares the Company's cumulative shareholder
return to the returns for all the companies in the S&P 500 Index and those
companies comprising the S&P Retail Stock Composite Index for the five year
period ended January 1998. The return values are based on an assumed
investment of $100, as of the close of business on the last day of
January 1993, in the Company's Common Stock and in each of the two
comparator groups, with all dividends treated as reinvested and each
comparator group weighted by each component company's market capitalization
on the last day of January for each subsequent year through January 1998.
<TABLE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG BOMBAY, S&P 500 AND S&P RETAIL COMPOSITE
<CAPTION>
JAN-93 JAN-94 JAN-95 JAN-96 JAN-97 JAN-98
<S> <C> <C> <C> <C> <C> <C>
BOMBAY $100.0 $184.6 $59.8 $38.8 $31.2 $30.8
S&P 500 $100.0 $112.8 $113.4 $157.2 $198.5 $251.9
S&P RETAIL COMPOSITE $100.0 $96.5 $89.3 $96.3 $115.0 $170.5
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires
executive officers and directors, and certain persons or groups who
beneficially own more than ten percent (10%) of the Company's stock, to
file initial reports of ownership and reports of changes in ownership with
the Securities and Exchange Commission and the applicable national stock
exchange. Such officers, directors and beneficial owners are required by
Securities and Exchange Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to
the Company and written representations from the executive officers and
directors, the Company believes that all Section 16(a) filing requirements
applicable to its executive officers, directors and beneficial owners in
excess of ten percent (10%) were complied with during the fiscal year ended
January 31, 1998 except that Mr. Michael J. Veitenheimer, an officer,
failed to timely file one Form 4 reflecting the sale of 500 shares in
June, 1997. The transaction was reported on Form 4, filed in September 1997.
CERTAIN TRANSACTIONS
On November 20, 1996, the Board of Directors approved a $75,000
loan to Mr. Michael J. Veitenheimer, Vice President of the Company,
incident to the servicing of debt related to the exercise of stock options
resulting in the purchase of Company stock in 1993. The loan bears interest
at floating prime, and $75,000 had been loaned as of March 24, 1997.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Price Waterhouse LLP as
independent accountants to audit the books, records and accounts of the
Company for fiscal year 1997. Price Waterhouse LLP has served as the
Company's independent accountants since 1975 and is, therefore, familiar
with the affairs and financial procedures of the Company. To the knowledge
of management, neither such firm nor any of its members has any direct or
material indirect financial interest in the Company nor any connection with
the Company in any capacity otherwise than as independent accountants.
Audit and audit related services performed by Price Waterhouse LLP
during the fiscal period ended January 31, 1998, included the audit of the
financial statements of the Company.
A representative of Price Waterhouse LLP is expected to be present
at the Annual Meeting on May 21, 1998, to answer questions and, if
necessary, will be afforded an opportunity to make a statement regarding
the financial statements.
PROPOSALS OF SHAREHOLDERS
The Annual Meeting of Shareholders for the 1998 fiscal year is
expected to be held on or about May 20, 1999, with the mailing of Proxy
materials for such Meeting to be made on or about April 8, 1999. If a
shareholder intends to submit a proper proposal for presentation at such
Annual Meeting, the proposal must be received by the Company at its
principal executive offices on or before December 10, 1998, in order to be
considered for inclusion in the Proxy Statement and Proxy relating to such
Meeting.
GENERAL
The Company will furnish without charge to each person whose Proxy
is being solicited, upon request of any such person, a copy of the Annual
Report of the Company on Form 10-K for the fiscal year ended
January 31, 1998, as filed with the Securities and Exchange Commission,
including the financial statements and schedules. Such report will be
filed with the Securities and Exchange Commission on or before May 1, 1998.
Requests for copies of such report should be directed to Michael J.
Veitenheimer, Vice President, Secretary and General Counsel, The Bombay
Company, Inc., 550 Bailey Avenue, Suite 700, Fort Worth, Texas 76107.
Report to Shareholders
The Annual Report to shareholders of the Company for the fiscal
year ended January 31, 1998, has been forwarded to all shareholders. The
Annual Report, which includes audited financial statements, does not form
any part of the material for the solicitation of Proxies.
Please date, sign and return the enclosed Proxy at your earliest
convenience in the enclosed envelope. No postage is required for mailing
in the United States. A prompt return of your Proxy will be appreciated
as it will save the expense of further mailings.
By Order of the Board of Directors
MICHAEL J. VEITENHEIMER
Vice President, Secretary
and General Counsel
