B.B. WALKER COMPANY
414 East Dixie Drive, P.O. Drawer ll67, Asheboro, North Carolina 27204
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH l8, l996
TO THE HOLDERS OF COMMON STOCK OF B.B. WALKER COMPANY
You are cordially invited to attend the Annual Meeting of the Shareholders
of B. B. Walker Company scheduled to be held on Monday, March l8, l996 at
7:00 p.m. EST in the executive offices of the Company at 4l4 East Dixie
Drive, Asheboro, North Carolina. The purposes of the meeting are:
(l) To elect 6 Directors of the Company.
(2) To consider ratifying the appointment by the Board of
Directors of Price Waterhouse as the independent public
accountants of the Company.
(3) To transact such other business as may properly be brought
before the meeting or any adjournment thereof.
Only holders of common stock of record at the close of business on February
26, l996 will be entitled to vote at the meeting. The stock transfer books of
the Company will not be closed.
IMPORTANT - YOUR PROXY CARD IS ENCLOSED
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO COMPLETE,
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. THIS WILL INSURE THAT
YOUR VOTE IS COUNTED, WHETHER OR NOT YOU ARE ABLE TO BE PRESENT. YOUR PROXY
CARD WILL BE RETURNED TO YOU IF YOU ARE PRESENT AT THE MEETING AND SO REQUEST.
PLEASE USE THE ENCLOSED POSTAGE PAID RETURN ENVELOPE FOR MAILING YOUR PROXY
CARD.
You have been mailed a copy of the Company's Annual Report, including
financial statements for the fiscal year ended October 28, l995.
By Order of the Board of Directors
DOROTHY W. CRAVEN
----------------------------
Dorothy W. Craven, Secretary
Date of Mailing:
February 26, l996
Cover
B.B. WALKER COMPANY
414 East Dixie Drive, P.O.Drawer ll67,Asheboro, North Carolina 27204
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PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
March l8, l996 and Adjournments
SOLICITATION OF PROXY
The enclosed Proxy, mailed on February 26, l996, is solicited by the Board of
Directors of B.B. WALKER COMPANY, (the Company) for use at its Annual Meeting
of Shareholders to be held in the executive offices of the Company at 414 East
Dixie Drive, Asheboro, North Carolina, at 7:00 p.m. EST on Monday, March l8,
l996 or any adjournments thereof.
The Company will bear the cost of solicitation of proxies, including the
charges and expenses of brokerage firms and others for forwarding solicitation
material to beneficial owners of stock. In addition to the use of the mails,
proxies may be solicited by personal interview or by telephone and telegram.
Proxies and correspondence should be addressed to Dorothy W. Craven, Corporate
Secretary.
REVOCATION OF PROXY
Execution and return of a Proxy given in response to this solicitation will
not affect a Shareholder's right to attend the meeting and vote in person.
Any Shareholder signing and returning a Proxy in the form enclosed with this
statement may revoke it at any time before it is exercised by giving notice
thereof to the Company in writing or in open meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The Board of Directors has fixed the close of business on February 26, l996 as
the record date for Shareholders entitled to notice of and to vote at the
meeting and any adjournment. On February 26, l996, the Company had issued
l,726,535 shares of common stock all of which were outstanding and entitled to
vote. Each share of common stock is entitled to one vote. As of January 8,
l996, all Directors and Officers of the Company as a group (l0 persons) owned
or controlled 832,881 shares or 48.24% of the outstanding shares of the
Company's common stock. Included in the solicitation of proxies is the
solicitation of discretionary authority to transact such other business as may
properly be brought before the meeting or any adjournments. The presence, in
person or by proxy, of the holders of a majority of the outstanding shares of
B.B. Walker Company common stock entitled to vote, is necessary to
constitute a quorum.
1
As of January 8, 1996, the Company was aware of the following four direct and
beneficial owners of more than 5% of the outstanding shares of the Company's
common stock:
(l) James P. McDermott, a Director of the Company, as well as
Trustee of the Employee Stock Ownership Plan of B.B.
Walker Company (the ESOP), as Trustee, holds of record or
beneficially, 454,720 shares or 26.34% of the outstanding
common stock of B.B. Walker Company. Under the Plan he
is authorized as Trustee to vote all shares held by the ESOP
in the best interests of the participants. This total
does not include 26,420 shares owned directly and
beneficially by Mr. McDermott in his individual capacity.
(2) Mrs. Nellie Jean Richardson, widow of the late former
Executive Vice President and former Director of the Company
together with members of her family, holds of record and
beneficially, l94,260 shares or ll.3% of the outstanding
common stock of the Company.
(3) Edna A. Walker who is President of the B.B. Walker Foundation
and a Director of the Company, together with members of her
family, holds of record and beneficially, a total of l08,697
shares or 6.30% of the outstanding common stock of the
Company.
(4) Kent T. Anderson, Chairman, President, Chief Executive
Officer and a Director of the Company holds of record and
beneficially a total of l62,927 shares or 9.44% of the
outstanding shares of common stock of the Company. The
total shown includes 38,750 shares under unexercised
stock option grants.
l. ELECTION OF DIRECTORS
---------------------
Six Directors are to be elected at the forthcoming Annual Meeting. The
recommendation of the Nominating Committee of the Board of Directors that the
existing six member Board be reelected, was accepted and the Board directed
that the six persons be its director nominees for consideration by the
shareholders. It is intended that the two persons named in the accompanying
Proxy will vote for the six director nominees named on the following pages
unless authority to vote is directed otherwise. Directors shall be elected by
a plurality of the votes cast at the meeting.
A Director is elected to serve until the next Annual Meeting of the
Shareholders or until a successor shall be elected and shall qualify. Each
nominee for Director has agreed to serve and, so far as the Board is aware,
will serve if elected. If any nominee is unable to serve, the proxies will be
voted by those named therein for the election of a substitute nominee selected
by the Board of Directors.
Of the six nominees for director, one is presently an employee and three are
retired employees. The Company provides Directors and Officers Liability
insurance coverages. There are no family relationships between any of the
nominees and the executive officers of the Company or its subsidiary.
2
Board Meetings and Directors' Attendance
The Board of Directors meets on a quarterly basis. The Annual Meeting of the
Board of Directors is held immediately following the Annual Meeting of the
Shareholders. Special meetings of the Board may be called at any time when
necessary as provided for in the By-Laws. There were 5 Board meetings held in
l995. All Directors attended all meetings of the Board and of the Committees
on which he or she served during fiscal l995.
Board Committees
The Board has 3 committees: an Audit Committee; a Compensation & Stock Option
Committee; and a Nominating Committee.
The Audit Committee, which held l meeting in l995, meets with the independent
public accountants and reviews the scope and results of the audit by the
independent auditing firm. The Committee makes recommendations to the Board
as to the selection of the independent public accountants and as to services
provided. In addition it reviews the system of internal control and
accounting policies. The Audit Committee is composed entirely of Directors
who are not employees of the Company or of its subsidiary. The five Members
of the Audit Committee are: James P. McDermott, Chairman; George M. Ball;
Robert L. Donnell, Jr.; Michael C. Miller and Edna A. Walker.
The Compensation & Stock Option Committee met twice during the year; once when
consideration was given to the issuance of stock option grants to key
employees and once when when financial results were available for its review.
The Committee is directly responsible for determining the compensation of the
Chairman and Chief Executive Officer of the Company. The Committee is also
responsible for the establishment and oversight of executive compensation,
benefit and retirement plans of the Company. The Committee also reviews the
recommendations of management for the issuance of Stock Option Grants under
the 1987 and 1995 Incentive Stock Option Plans of the Company. The Committee
presents its recommendations to the Board of Directors for its consideration.
The Committee is composed of the 5 non-employee outside Directors, namely
George M. Ball, Chairman; Robert L. Donnell, Jr.; James P. McDermott; Michael
C. Miller and Edna A. Walker.
The Nominating Committee, composed of three non-employee directors who are not
officers of the Company or its subsidiary, held l meeting in 1995. The
Committee reviews information for the selection of qualified candidates for
director nominee and recommends to the Board of Directors for its
consideration the names of qualified director nominees who are willing to
serve if nominated and elected. This Committee has no current plans to
consider nominees recommended by security holders. The 3 Members of the
Nominating Committee are: Michael C. Miller, Chairman; Edna A. Walker
and George M. Ball.
3
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
Name, Age & Year Equity Securities of
First Elected Principal Occupation Company, beneficially
a Director For Last Five Years owned on January 8,l996(l)
Common Preferred
Shares(6) Shares
--------- ---------
Kent T. Anderson Chairman of the Board (1992) l62,927 -
(53)(l985) President (1984) & Chief (9.44%)
Executive Officer(l986)
George M. Ball Chairman, Philpott, l,000 -
(6l)(l993) Ball & Co., Investment (.06%)
Bankers, Charlotte, N. C.(4)
Robert L. Donnell, Jr. Retired. Formerly Executive 3,l46 -
(64) (l968) Vice President - Operations (.l8%)
l968-l99l (5)
James P. McDermott Retired. Formerly Vice 26,420 -
(75)(l986) President & General (l.36%)
Counsel l974-l992.
Formerly Corporate
Secretary l984-l993.(2)
Michael C. Miller President & Chief Executive l,000 -
(44) (l993) Officer, First National (.06%)
Bank & Trust Co.,
Asheboro, N.C.(3)
Edna A. Walker President l08,697 35
(7l)(l952) B. B. Walker Foundation (6.30%) (4.2%)
(l) The By-Laws and the Corporate Charter do not require Directors
to be Shareholders. The number of shares of common stock
shown includes shares held in the names of spouses, minor
children or certain relatives, as to which beneficial
ownership is disclaimed. The totals shown in the table
include shares subject to currently exercisable options
granted by the Company. Kent T. Anderson, who holds
currently exercisable stock option grants for 38,750 shares,
is the only director nominee whose stock option grants are
included in the above table.
4
(2) The above set forth total of common stock beneficially owned
by James P. McDermott does not include the 454,720 shares of
common stock constituting 26.34% of the total shares
outstanding, held by him as Trustee of the Employee Stock
Ownership Plan and Trust of B.B. Walker Company for the
benefit of all Plan participants. Under the Plan,
participants exercise no voting control over shares of stock
allocated to their accounts so long as they are participants
in the Plan, unless required by North Carolina law. Shares
cannot be distributed to nor disposed of by participants while
employed. Equitable ownership by participants of shares
allocated to their accounts depends upon their being vested in
their accounts, which vesting is based upon their length of
service. Reference is made to subparagraph (l) under the
heading "VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF" on
page 2 of this Proxy Statement.
James P. McDermott, subsequent to his retirement in February
l992 as Vice President, General Counsel & Secretary of the
Company, was retained by the Company as a Consultant to render
services in two specialized areas. (l) James P. McDermott
oversees the administration and preparation of the annual
report filings with the IRS of the Company's three ERISA
qualified employee benefit plans. Under the Consulting
Agreement he serves as Trustee and Plan Administrator for the
three qualified Plans. (2) In addition under the Consulting
Agreement he is responsible for the preparation and filing of
the Annual Report to the Securities and Exchange Commission,
Washington, D.C., (the Form No. l0-K) and the preparation
of the Proxy Statement for filing with the SEC, which Proxy
Statement is sent to Shareholders for the Annual Meeting of
the Shareholders. James P. McDermott was paid $30,697 during
fiscal l995 for services rendered.
(3) Michael C. Miller, elected to the Board of Directors of B.B.
Walker Company on July 6, l993 has been President since
l99l of First National Bank & Trust Company, Asheboro, N.C.
He was elected Chief Executive Officer of the bank in January
l994. In January l994 he was elected President and Chief
Executive Officer of FNB Corp., the parent company of the
bank. He has been associated with First National Bank since
l985 serving as Executive Vice President until l99l when he
was elected President. He is a Director of the bank's parent
holding company. Prior to joining the First National Bank, he
was an attorney engaged in the private practice of law in
Asheboro, N.C. Mr. Miller is a graduate of the University of
North Carolina at Chapel Hill, N.C. He holds a Masters of
Business Administration Degree in Management from Wake Forest
University and a Juris Doctor Degree from the Wake Forest
University School of Law. First National Bank has entered into a
mortgage loan transaction with the Company and holds a first lien
on the Company's manufacturing facility in Somerset, Pennsylvania.
First National Bank is also a major participant with Mellon Bank,
Pittsburgh, Pennsylvania, in a term loan to the Company secured
by a first lien on the Company's manufacturing facility in
Asheboro, North Carolina.
5
(4) George M. Ball, elected to the Board of Directors of B.B.
Walker Company on September 7, l993, has been Chairman of
Philpott, Ball & Co., an investment banking firm in Charlotte,
N.C. since l99l. Prior to the founding of Philpott, Ball &
Co., he was Senior Vice President in charge of the Merger &
Acquisitions Department at Interstate/Johnson Lane Securities,
a regional securities firm in Charlotte, N.C. George Ball has
been involved on an executive level in corporate finance and
management and with securities firms since l968. He presently
serves on the Board of Directors of Juno Lighting, Inc., a
publicly held lighting equipment manufacturing company located
in Des Plaines, Illinois. Mr. Ball is a graduate of Yale
University following which he served for a number of years as
a pilot in the United States Marine Corps. George M. Ball, on
behalf of his employer Philpott, Ball & Company, has served
the B.B. Walker Company as a management consultant for a
number of years advising management on various matters of
corporate finance and restructuring. Philpott, Ball & Company
was paid $l36,512 for its services rendered during fiscal
l995.
(5) Robert L. Donnell, Jr., upon his disability retirement as
Executive Vice President-Operations from the Company in l99l,
was retained by the Company under a Consulting Agreement to
confer with management from time to time as needed on changes
and improvements in the area of footwear manufacturing and
distribution. During fiscal l995, Robert L. Donnell, Jr. was
paid $l8,000 under his contract.
(6) DIRECTOR AND OFFICER SECURITIES REPORTS
Federal securities laws require the Company's directors
and executive officers to file with the Securities and
Exchange Commission, Washington, D. C. initial reports of
ownership and reports of changes in ownership of B.B.
Walker Company common stock. To the best of the Company's
knowledge, all persons subject to these reporting
requirements with respect to B.B. Walker Company's common
stock, filed the required reports on a timely basis during
fiscal l995.
6
EXECUTIVE COMPENSATION AND RELATED INFORMATION
The following table sets forth information concerning the annual compensation
for services in all capacities to the Corporation for the fiscal years ended
in October l995, l994 and l993, of those persons who were, at October 28, l995
(i) the chief executive officer and (ii) the other four most highly compensated
executive officers of the Corporation, ("The Named Officers") who were paid
compensation of $l00,000 or more per year:
SUMMARY COMPENSATION TABLE
--------------------------
ANNUAL COMPENSATION
-------------------
(a) (b) (c) (d) (e) (g) (i)
Long Term
Other Compensation
Name and Annual Awards
Principal Compen- Options/ All Other
Position Year Salary(1) Bonus sation SAR(#) Compensation(2)(3)
- -------- ---- --------- ------- ------ ------------ ------------------
Kent. T.Anderson l995 $2l5,000 $ - $ - (1) 20,000 Sh $ 2,l26
Chief Executive l994 l98,l8l l7,000 - (l) 6,250 Sh $ 2,049
Officer l993 l57,885 l59,000 - (l) l2,500 Sh. $ 7,874
"NO EXECUTIVE OFFICER OTHER THAN THE CHIEF EXECUTIVE OFFICER EARNED $l00,000
OR MORE IN BASE SALARY AND COMPENSATION DURING FISCAL l995."
(1) Salary data shown for the Named Officer is prior to any deduction or
offset for participation in the Company's Thrift Plan, a Section 40l(k)
Plan. Since January l, l989, the Company has sponsored for the benefit
of all employees, including the Named Officer, the Retirement Savings
Plan of B. B. Walker Company. Participants may contribute through
payroll deduction each month on a pre-tax basis. The Board of Directors
for fiscal l995 authorized a matching contribution to the Plan of ten
(l0%) percent of actual payroll deductions made during the year by active
participants in the Plan who were employed as of December 3l, l995. As
indicated in Column (e) in the table, the Named Officer, Kent T. Anderson
received a matching contribution of $884 to his account for fiscal l995.
Such amount is included in column (i) All Other Compensation.
(2) The Named Officer is a participant in the Employee Stock Ownership Plan
of B.B. Walker Company and subsidiary, (the ESOP). This Plan, which
has been in effect since l96l, is a defined contribution Plan under the
Employee Retirement Income Security Act of l974, (ERISA), and has
accumulated for the exclusive benefit of employee participants just under
26.34% of the outstanding common stock of the Company. The employees do
not contribute to the ESOP and participation is mandatory. The
contribution is allocated to individual participant accounts by a formula
under which all participants have the same percentage of their fiscal
year compensation contributed to their accounts. The "Named Officer"
received $l,242 from the $65,000 contribution for fiscal l995 as
authorized by the Board of Directors and is included in column (i) All
Other Compensation.
7
(3) The Company provides a special life insurance program of various amounts
for Officers, Directors, truck drivers, salesmen and other key employees
of the Company and its subsidiary, with the Company and employees sharing
the premium cost. A total of 84 employees are insured of which l0 are
Officers and Directors of the Company and its subsidiary and 74 are truck
drivers, salesmen, supervisors and other key employees. In fiscal l995
the Company and its subsidiary's share of the premium cost amounted to
$28,451. The amount applicable to Officers and Directors is not included
in the compensation shown in Column(i) All Other Compensation, in the
above table. The Company share during Fiscal l995 of the total cost of
the special life insurance coverage for all l0 executive officers and
directors as a group was $9,374 or 32.9 % of the total Company cost. The
portion of such cost applying to the director nominees amounted to $2,894
or 10.2% of the total Company cost for the class of employees covered.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
-------------------------------------
No SAR's were granted by the Board of Directors to any key employee during
fiscal l995. The Board of Directors under both Incentive Stock Option Plans
issued stock option grants totalling 88,000 shares of common stock to 21 key
employees at the fair market value price of $3.50 per share on April 3, 1995.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
---------------------------------------------------
The following table shows stock options exercised by Named Officers during
fiscal l995, including the aggregate value of gains on the date of exercise.
In addition, this table includes the number of shares covered by both
exercisable and non-exercisable stock options as of October 28, l995. Also
reported are the values for "in-the-money" options which represent the
positive spread between the exercise price of any such existing stock options
and the year-end price of Common Stock.
(a) (b) (c) (d) (e)
Value of
Number of Unexercised
Unexercised In-the-Money
Shares Options/SARs at Options/SARs at
Acquired on Value FY-End(#)(2) FY-End($)(3)
Name Exercise(#)(l)(4) Realized($)(3) Exercisable Unexercisable Exercisable Unexercisable
- ---------------- ----------------- -------------- ----------- ------------- ----------- -------------
Kent T. Anderson -0- -0- 28,750 l0,000 ($l5,000) ($l5,000)
* Fair Market Value at Fiscal Year End 10/28/95 was $2.00 per share based on
the Bid Price of $1.50 per share and the Ask Price of $2.50 per share.
(l) Upon exercise of an option grant, the optionee must pay the
exercise price in cash.
8
(2) Options shown in column (d) were made under the l987 Incentive Stock
Option Plan. All grants provide that only one-half of the number of
shares granted may be exercised at time of grant and the other half after
l2 months. Shares purchased at exercise of grant may not be sold without
penalty for a period of two years. Under the ISO Plan any profit or gain
realized is not taxable to the grantee at time of exercise of the grant,
but is taxable to the grantee at time of sale of the stock.
(3) Represents the difference between the fair market value of the common
stock underlying option and the exercise price at exercise or fiscal year
end respectively. The value of B.B. Walker Company common stock at
October 28, l995, as published in the Over the Counter section of the
financial pages of local and regional newspapers was $l.50 per share Bid
and $2.50 per share Ask.
(4) Of the key employees in management who have borrowed Company funds for
the purchase of B.B. Walker Company stock, a total of 4 persons borrowed
funds from the Company with which to exercise stock options for the
purchase of shares of B.B. Walker Company common stock. Such loans were
made under the "l989 Plan For The Lending Of Company Funds To Officers
and Directors For The Purchase of B.B. Walker Company Stock". The
lending of B.B. Walker Company funds to officers, directors and other key
employees in management, as authorized under North Carolina law, was
instituted initially by shareholder approval granted in l966. In l989
the loan program was updated and was approved by the Shareholders at the
Annual Meeting held on March l3, l989.
The loan program is in accord with a long standing Company policy of
encouraging officers, directors and other key employees in management to
become shareholders. The Board believes that employee stock ownership
will benefit the Company and its shareholders by encouraging key
employees to work diligently to increase the profitability of the
Company. Stock ownership by employees will identify their interests with
those of the Company's non-employee shareholders.
All loans are made in the sole and absolute discretion of the Board of
Directors. All borrowings are made solely to enable the employee to
purchase B.B. Walker Company stock from various sources, including the
exercise of all or part of any outstanding stock option grant. Loans are
made for a period of up to l0 years, and are repayable through payroll
deduction. Interest is charged at 2% below the lower of the prime rate
charged by the First National Bank and Trust Company, Asheboro, N.C. or
by the NationsBank of Charlotte, N.C., as determined by the Board of
Directors. Each loan is made under a negotiable promissory note and is
secured or collateralized by the pledge of all shares purchased with the
loan proceeds. All loans presently outstanding as of l0/28/95, totaling
$l39,112, are at 4% per annum which rate is charged monthly on the
outstanding unpaid balance. All loans in the aggregate cannot and have
not exceeded $350,000 at any time.
The Chief Executive Officer is the only one of four executive officers
under the Plan who owes in excess of $60,000. At January 8, l996, his
unpaid principal balance was $73,025.
9
EMPLOYMENT CONTRACT AND TERMINATION OF EMPLOYMENT
AND CHANGE IN CONTROL ARRANGEMENTS
-------------------------------------------------
Kent T. Anderson, as President and Chief Executive Officer and the
Company, entered into an Employment Agreement on October 2, l989, five years
after the Chief Executive Officer was employed. The initial term was for
three years starting November l, l989 with an automatic annual extension
provision providing for the Agreement to be for no less than three years at
all times. The Agreement provided for the Chief Executive Officer's
employment at a minimum base salary of $l25,000 per year and for an annual
increase on January l of each year thereafter, of at least five (5%) percent
of his current base salary. The Agreement provides that the Board of
Directors may, in its discretion, grant merit increases to the Chief Executive
Officer from time to time. The Chief Executive Officer's salary at October
28, l995 was $2l5,000. The Chief Executive Officer advised the Compensation &
Stock Option Committee that he was voluntarily waiving the 5% automatic
increase of $10,750 at 1/1/96 as an example to other employees.
This Agreement may not be terminated by the Company for any reason whatsoever
without penalty, other than for cause. It may be terminated with three years
prior written notice of termination. However, the Board may exercise its
statutory authority to remove the Chief Executive Officer from his present
elected office and function, at any time. This would require immediate
payment of the three year compensation amount provided for in the Agreement.
By Amendment No.l dated July 6, l990, the Employment Agreement was modified to
comply with certain tax provisions of the Internal Revenue Code. The Chief
Executive Officer may, at his option, elect to reduce the total amount due him
under the Agreement so that no portion of the amounts received by him will be
subject to the excise tax imposed by the Internal Revenue Code on some
severance payments.
The Chief Executive Officer may terminate his employment under the Agreement
in the event: (i) The Company merges or consolidates with another person or
group or undertakes any other reorganization where the Company is not the
Surviving Entity; or (ii) the Company sells or transfers substantially all of
its business or assets to another person; or (iii) 50% or more of the capital
stock of the Company presently outstanding is acquired by a person or group at
any time after the date of this Agreement. In the event of such termination,
the Chief Executive Officer is entitled to receive immediately the full amount
of his current base salary for three years. Subject to the above mentioned
Amendment, unless the Chief Executive Officer elects to reduce the total
amount to be paid to him, the three years pay as of the end of fiscal l995
would be $645,000. Such payment, if made, is to be made in full in cash and
without limitation. The Board of Directors, with the exception of Kent T.
Anderson who was not present, was unanimous in authorizing the execution of
this Employment Agreement.
10
COMPENSATION OF OUTSIDE DIRECTORS
---------------------------------
Five of the six Directors are non-employees of the Company. The Company
provides Directors and Officers Liability Insurance coverage. Non-employee
outside Directors receive a meeting fee of $l,200 for each Board or Board
Committee Meeting, unless the Board and Committee meetings are held on the
same day. Directors who are full time employees of the Company or of its
subsidiary, namely Kent T. Anderson, do not receive any additional
compensation by reason of membership on or attendance at meetings of the Board
of Directors or Board Committees. Four quarterly Board Meetings are scheduled
each fiscal year in addition to the Annual Meeting of the Board of Directors
held immediately following the Annual Meeting of the Shareholders.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
-------------------------------------------------------
The Compensation & Stock Option Committee of the Board of Directors, ("the
Committee"), is composed of the five outside non-employee directors and is
responsible for the establishment and oversight of the Company's policies for
executive compensation, as well as benefit and retirement plans of the
Company. The Committee is also responsible for the initiation and operation
of the Company's incentive stock option plans. The Committee recommends to
the Board of Directors on an annual basis, the compensation of the Chief
Executive Officer relating his compensation to performance. The Board (other
than the Chief Executive Officer) must approve all compensation actions
regarding the Chief Executive Officer. The Company does not utilize outside
compensation consultants, but does have available to it independent
compensation data of other companies. The Committee has prepared the
following report for inclusion in this Proxy Statement.
The Company's executive compensation policies have two primary goals: (1) to
attract and retain the highest quality executive officers and (2) to reward
those officers for superior corporate performance measured by the Company's
financial results and strategic achievements.
From the Company's inception its corporate philosophy concerning employee
compensation, as established by the Board of Directors (and concurred in by
the Committee since its inception), has been for the Board to delegate to the
Chief Executive Officer, subject to review by the Board, the responsibility
for establishing rates of pay and bonus allocations for all employees,
including executive officers, with the exception of the Chief Executive
Officer's own compensation (salary and bonus).
The Chief Executive Officer is a Certified Public Accountant who had worked
for a number of years in the management services division of a world renowned
public accounting firm. He is a hands on executive and knowledgeable about
all aspects of footwear manufacturing, marketing and distribution activities,
including compensation and affordable employee benefits in those areas. The
Chief Executive Officer has a broad general knowledge of compensation levels
in other footwear manufacturing concerns and in communities wherein such are
located. The fact that no management employee has voluntarily left employment
with the Company permanently, for greater pay and/or fringe benefits during
the Chief Executive Officer's tenure, confirms the soundness of this
delegation of Board function.
11
The Committee believes the Chief Executive Officer is more qualified than the
Committee or the Board to judge the merits of employee compensation levels as
well as those for individual management employees. Due to the size of the
Company, the Chief Executive Officer, who is also the Chief Operating Officer,
is familiar with and works with all management personnel on a day to day
basis. Delegation of authority on a report back basis is widely used by him.
The Company, with its flexible internal communication relationship in
management and its open door policy for questions, suggestions and complaints,
etc., is not staffed as and does not operate as a bureaucracy. Salary
increases and bonus allocation amounts are based on merit and are generally
made by the Chief Executive Officer in conjunction with input from the
department heads subject to review by the Compensation Committee.
EXECUTIVE OFFICER COMPENSATION PROGRAM
--------------------------------------
The Chief Executive Officer's compensation program is comprised of base
salary, annual cash performance plan compensation and long-term incentive
compensation in the form of stock options. In addition the Committee believes
that basic management compensation should be adequate but not excessive and
should be coupled with incentive compensation awards based on the individual's
performance and his/her contribution to the overall Company effort and
results. The Compensation Committee, in the interests of employee morale and
motivation, plans to continue supporting and recommending to the Board of
Directors and to the Chief Executive Officer, improvements in and to simple
and plain incentive compensation plans for management personnel in the areas
of:
(1) Merit salary increases based on the individual's level of
responsibility and on above average individual work
performance and goal achievement.
(2) Incentive Stock Option Plans for key management employees
and executive officers, based on merit, above average
performance and goal achievement. The ISO Plan is intended to
motivate key management employees who hold stock option
grants to work for long term Company growth and
profitability, which will benefit the key employee
shareholder, as well as benefit all other shareholders.
Based on Fiscal 1995 results grants were made on April 3, 1995
under the 1987 Incentive Stock Option Plan as well as under the
l995 Incentive Stock Option Plan, which had been approved by
the Shareholders on March 20, 1995. Based on the
recommendations of the Committee, the Board issued Stock Option
Grants for 88,000 shares at fair market value to 21 key
employees of the Company, including 4 executive officers.
12
(3) The 1992 Incentive Compensation (Bonus) Plan was established to
provide a fair and equitable formula for the sharing of Company
profits with those management employees who help make profits
possible. If there is a loss or if profits are minimal, no
bonus awards will be made. When the Company is adequately
profitable, graduated awards are made based on the individual's
level of responsibility and his/her performance thereunder.
The more responsible a key management employee's function is,
the greater the reward when pre-established goals are met or
exceeded.
Cash awards under the two-part Bonus Plan are based on the
Company meeting or exceeding during the fiscal year specified
income levels for each part. This two part Plan is designed
to share the Company profit on a merit and performance basis,
first with all management personnel and second with key
executive management. Payments under both parts are geared to
individuals achieving budgets and/or meeting specific
performance goals. In certain instances sharing is among
several individuals where group effort is to be rewarded.
The Compensation Committee reviews the base salary and the annual incentive
compensation of the Chief Executive Officer following the close of each fiscal
year. This review is made in light of his handling of his responsibilities,
his performance during the year and the financial results for the fiscal year.
BASE SALARY
The Chief Executive Officer's base salary is presently $215,000 per year, as
established by the Board on the recommendation of the Compensation Committee
on January 3, 1995. The Committee believes the base salary to be somewhat on
the low side compared with CEO base compensation at other companies of similar
size. However, as stated earlier the Compensation Committee favors modest
salaries and generous incentive bonuses that may be generated under the
established Bonus Plan or granted in addition to such.
The Chief Executive Officer's 3 year continuing Employment Contract provides
for an automatic increase of 5% of base salary on January l following the
close of each fiscal year. The base salary by contract thus provides a floor
which from which merit increases based on performance may be made. The
Compensation Committee independently determines merit increases in the base
salary for the Chief Executive Officer by evaluating the Company's performance
against its pre-set goals; examining the Company's performance within the
industry and evaluating the overall performance of the Chief Executive Officer
in operating the Company during the fiscal year.
The Company was not profitable in Fiscal 1995 suffering a net loss of $1.2
Million. The Committee believes the footwear market and other factors faced
by the Company in fiscal l995 were beyond anyone's control. A major factor
was the restraint on shipments due to the overstocked inventory condition of
footwear dealers and retailers throughout the country causing a substantial
decline in sales and profit margins as well as continuing higher than expected
employee medical claims and coverage costs. The Committee believes the Chief
Executive Officer handled his responsibilities well during fiscal l995 despite
the operating results. The Chief Executive Officer has in place substantial
changes in response to the major factor underlying the Fiscal 1995 operating
loss.
13
The Chief Executive Officer has notified the Committee that due to business
conditions and as an example to all employees he is voluntarily waiving the
annual automatic 5% cost of living increase in his base salary as provided in
his employment contract. The Committee concurred with the Chief Executive
Officer's decision to waive his January 1, 1996 automatic pay increase and
The Board of Directors established his base salary at $215,000 per year.
ANNUAL INCENTIVE COMPENSATION
Since Fiscal l995 generated an operating loss no provision was made for the
payment of any bonuses under the 1992 Incentive Compensation (Bonus) Plan.
STOCK OPTION GRANTS
The Committee is responsible for reviewing and granting incentive stock
options under the l987 Incentive Stock Option Plan and under the 1995
Incentive Stock Option Plan to key employees of the Company. Incentive stock
option grants totalling 88,000 shares of common stock were made under both
Plans on April 3, 1995 to 21 key employees, including 5 officers.
DIRECTORS AND MEMBERS OF THE
COMPENSATION & STOCK OPTION COMMITTEE
George M. Ball, Chairman
R.L. Donnell, Jr.
James P. McDermott
Michael C. Miller
Edna A. Walker
CERTAIN TRANSACTIONS
--------------------
MAE, Inc. ("MAE" hereinafter), of Asheboro, North Carolina, is an advertising
agency and public relations firm owned by Maggie Anderson and her husband Kent
T. Anderson, Chairman and Chief Executive Officer of B. B. Walker Company,
("Walker" hereinafter). During fiscal l995, Maggie Anderson, as the only
active principal and owner, rendered technical and creative services to
Walker in the areas of design, layout, color separation, photography and other
services, including the placement of Walker advertisements and ad copy in
trade publications, footwear magazines and other related media means. Other
services rendered include assistance in producing printed material,
coordinating public relations events and press conferences for the Company;
arranging interviews with print and electronic media and developing
promotional projects. During fiscal l995 Walker paid MAE a total of $494,7l9
for services rendered. As advertising agent for Walker, MAE received certain
funds for the placing of Company advertising in various trade publications,
which funds were than transferred in payment therefore, and were net of her
standard commission. A substantial portion of the payments are for creative
work in design, layout, writing copy, etc.
14
This relationship was disclosed to and approved by the Board of Directors at
inception and updated in October l994. Walker is the largest of the half dozen
accounts or clients serviced by MAE. Maggie Anderson, her four associates and
certain free-lance personnel work directly with all marketing department
officials at Walker in fulfilling corporate advertising and related
requirements. The Board believes the services rendered to Walker by MAE and
paid for are competitive as to price and equal to or superior in quality to
others available in this area.
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
-------------------------------------------
Set forth below is a table comparing the annual percentage change in the
Company's common stock with the percentage change in the NASDAQ Composite Index
and an index of peer companies ("Peer Group") selected by the Company.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
(B.B. Walker Company, NASDAQ Composite Index, Peer Group)
NASDAQ
Measurement Period B.B. Walker Composite Peer
(Fiscal Year) Company Index Group
------------------ ----------- --------- -----
Measurement Point -
November 3, 1990 $ 100 $ 100 $ 100
November 2, 1991 $ 111 $ 165 $ 124
October 31, 1992 $ 178 $ 183 $ 150
October 30, 1993 $ 489 $ 236 $ 284
October 29, 1994 $ 289 $ 236 $ 208
October 28, 1995 $ 67 $ 315 $ 171
This graph depicts the total cumulative appreciation of a $l00
investment made on October 3l, l990 through October 28, l995
in B. B. Walker Company ,the NASDAQ Composite Index and the
Peer Group.
The Peer Group is comprised of the following public companies:
Brown Group, Genesco, Justin Industries, McRae Industries,
Rocky Shoes & Boots, Timberland, Wellco Enterprises, Weyco
Group and Wolverine World Wide. These companies operate in
the same or similar markets and produce same or similar
products. The Peer Group appreciation is the average total
appreciation of the companies within the group.
15
2. APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
---------------------------------------------
The Board of Directors of the Company at its January 4 , l996 meeting, on the
recommendation of the Audit Committee, again selected the firm of Price
Waterhouse LLP, Winston-Salem, North Carolina, to continue as independent
public accountants of B.B. Walker Company and its subsidiary for the fiscal
year ending November 2, l996, subject to ratification by the Shareholders.
Unless otherwise specified by the Shareholders, votes will be cast pursuant to
the proxies hereby solicited in favor of the approval of the selection by the
Board of Price Waterhouse LLP, as independent public accountants, to audit the
books and accounts of the Company for the l996 fiscal year and until their
successors are selected. Price Waterhouse LLP has acted in such capacity
since April l973.
The Board of Directors and the Audit Committee are satisfied as to the
professional competence and standing of Price Waterhouse LLP. The Audit
Committee meets with representatives of Price Waterhouse LLP to review the
audit scope and estimated fees for the coming year and to review the results
of the audit of the prior fiscal year.
Price Waterhouse LLP plans to have one or more representatives present at the
Annual Meeting who will have the opportunity to make a statement if desired
and to respond to appropriate questions which any Shareholders might have.
Management knows of no direct or indirect material financial interests or
relationships that any members of such firm have with B.B. Walker Company.
The vote of a majority of shares present is necessary to ratify the Board of
Directors' selection of Price Waterhouse LLP.
The submission of Price Waterhouse LLP for shareholder approval at the
forthcoming meeting is not mandatory under North Carolina law or the rules and
regulations of the Securities and Exchange Commission. In the event the
Shareholders do not approve of the action of the Board of Directors, the Board
will take prompt action to select another competent independent public
accounting firm of equal ability and standing to perform the services
presently being rendered by Price Waterhouse LLP.
3. SHAREHOLDER PROPOSALS
---------------------
Proposals from Shareholders for inclusion in the Proxy Statement of B.B.
Walker Company relating to the next Annual Meeting of the Shareholders, must
be received at the principal office of B.B. Walker Company for consideration
by November 2, l996.
4. OTHER MATTERS
-------------
The management of the Company knows of no other matters which may come before
this meeting. However, if any matters other than those referred to above
should come before the meeting, it is the intention of the persons named in
the enclosed Proxy to vote such proxy in accordance with their best judgment.
16
BY ORDER OF THE BOARD OF DIRECTORS, THIS 26TH DAY OF FEBRUARY, l996.
DOROTHY W. CRAVEN
----------------------------
Dorothy W. Craven, Secretary
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE AND SIGN THE
ENCLOSED PROXY CARD. RETURN THE CARD PROMPTLY IN THE
ACCOMPANYING POSTPAID PRE-ADDRESSED ENVELOPE. THANK YOU.
17
B.B. WALKER COMPANY THIS PROXY IS SOLICITED ON BEHALF OF THE
4l4 East Dixie Drive BOARD OF DIRECTORS
P.O. Drawer ll67
Asheboro, N.C. 27204
P The undersigned hereby appoints Dorothy W.
R Craven and Rebecca S. Rich or either of
O them, as Proxies, each with the power to
X appoint a substitute and hereby authorizes
Y them to represent and to vote as designated
below, all of the shares of common stock of
B. B. Walker Company held of record by the
undersigned on February 26, l996 at the
Annual Meeting of Shareholders to be held
at 7:00 p.m. EST on March l8, l996 or any
adjournment thereof.
l. ELECTION OF [ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
DIRECTORS (Except as marked to the to vote for all
contrary) nominees
K.T. Anderson; G.M. Ball, R.L. Donnell, Jr., J.P. McDermott
M.C. Miller and E.A. Walker
INSTRUCTION: To withhold authority to vote for one or more
individual nominees, write the name(s) of such
nominees(s) in the space provided below.
-------------------------------------------------------------
2. TO CONSIDER RATIFYING THE APPOINTMENT OF PRICE WATERHOUSE AS THE
INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. WITH DISCRETIONARY AUTHORITY UPON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
YOUR PROXY MAY BE RESCINDED AT ANY TIME BEFORE IT IS EXERCISED AND WILL BE
RETURNED TO YOU ON REQUEST. THIS PROXY WILL BE VOTED AS SPECIFIED AND IF NO
SPECIFICATION IS MADE, SHALL BE VOTED IN FAVOR OF THE AFOREMENTIONED
PROPOSALS. PLEASE SIGN AND DATE THIS PROXY AND RETURN AT ONCE IN THE ENCLOSED
BUSINESS REPLY ENVELOPE. MANAGEMENT RECOMMENDS A VOTE FOR EACH OF THE ABOVE
PROPOSITIONS.
DATED
--------------------------------------
(SEAL)
--------------------------------------
Signature
(SEAL)
--------------------------------------
Signature
IMPORTANT: Please sign this Proxy exactly as your name appears hereon. If
shares are held jointly, both owners must sign. Others signing
in a representative capacity should give their full titles.