Section 240.14a-101 Schedule 14A.
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 Section 240.14a-11(c) or Section
240.14a-12
AUTHENTIC FITNESS CORPORATION
.................................................................
(Name of Registrant as Specified In Its Charter)
AUTHENTIC FITNESS CORPORATION
.................................................................
(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)(1)
and 0-11
(1) Title of each class of securities to which transaction
applies:
............................................................
(2) Aggregate number of securities to which transaction
applies:
.......................................................
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
.......................................................
(4) Proposed maximum aggregate value of transaction:
.......................................................
(5) Total fee paid:
.......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
.......................................................
(2) Form, Schedule or Registration Statement No.:
.......................................................
(3) Filing Party:
.......................................................
(4) Date Filed:
.......................................................
NOTES. * * *
AUTHENTIC FITNESS CORPORATION
6040 BANDINI BLVD.
COMMERCE, CALIFORNIA 90040
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------
The 1996 Annual Meeting of the stockholders of Authentic Fitness
Corporation will be held at the Century Plaza Hotel, 2025 Avenue of the Stars,
Century City, CA 90067, on November 14, 1996 at 2:00 p.m. for the following
purposes:
1. To elect one Class III director for a term to expire at the 1998
Annual Meeting of the stockholders.
2. To elect two Class I directors for a term to expire at the 1999
Annual Meeting of the stockholders.
3. To transact such other business as may properly come before the
meeting and any and all adjournments or postponements thereof.
The Board of Directors has fixed the close of business on October 14, 1996,
as the record date for the determination of the stockholders entitled to notice
of and to vote at the meeting and at any adjournments or postponements thereof.
Stockholders are invited to attend the meeting. Whether or not you expect
to attend, WE URGE YOU TO SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD
IN THE ENCLOSED POSTAGE PREPAID ENVELOPE. If you attend the meeting, you may
vote your shares in person, which will revoke any previously executed proxy.
Representatives of Ernst & Young LLP, the Company's independent auditors, are
expected to attend the 1996 Annual Meeting, where they will have the opportunity
to make a statement if they wish to do so and will be available to answer
appropriate questions from the stockholders.
If your shares are held of record by a broker, bank or other nominee and
you wish to attend the meeting, you must obtain a letter from the broker, bank
or other nominee confirming your beneficial ownership of the shares and bring it
to the meeting. In order to vote your shares at the meeting, you must obtain
from the record holder a proxy issued in your name.
Regardless of how many shares you own, your vote is very important. Please
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD TODAY.
By order of the Board of Directors,
WILLIAM W. CHAN,
Vice President and Secretary
Commerce, California
October 14, 1996
AUTHENTIC FITNESS CORPORATION
6040 BANDINI BLVD.
COMMERCE, CA 90040
------------------------
PROXY STATEMENT
------------------------
INTRODUCTION
This proxy statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Authentic Fitness Corporation, a
Delaware corporation (the 'Company'), for the 1996 Annual Meeting of the
stockholders of the Company (the '1996 Annual Meeting') on Thursday, November
14, 1996. The Notice of Annual Meeting, this proxy statement and the
accompanying proxy are first being mailed on or about October 14, 1996 to
stockholders of record as of the close of business on October 14, 1996. You can
ensure that your shares are voted at the meeting by signing, dating and promptly
returning the enclosed proxy in the envelope provided. Sending in a signed proxy
will not affect your right to attend the meeting and vote in person. You may
revoke your proxy at any time before it is voted by notifying the Company's
Transfer Agent, The Bank of New York, 101 Barclay Street, New York, NY 10286 in
writing, or by executing a subsequent proxy, which revokes your previously
executed proxy.
The Company's principal executive offices are located at 6040 Bandini
Blvd., Commerce, CA 90040.
VOTING OF PROXIES
Proxies will be voted as specified by the stockholders. Where specific
choices are not indicated, proxies will be voted for proposals 1 and 2.
Abstentions, broker non-votes or instructions on the accompanying proxy card to
withhold authority to vote for the nominated director will result in such
proposal or proposals receiving fewer votes. Under the Delaware General
Corporation Law and the Company's Restated Certificate of Incorporation and the
Company's Bylaws, the affirmative vote of a plurality of the outstanding shares
of Common Stock entitled to vote and present, in person or by properly executed
proxy, will be required to elect or reelect a nominated director. Stockholders
will not be entitled to appraisal rights in connection with any of the matters
to be voted on at the 1996 Annual Meeting.
1. ELECTION OF CLASS III DIRECTOR
At the 1996 Annual Meeting, one Class III director is to be elected to
serve for a term to expire at the 1998 Annual Meeting of the stockholders. The
nominee for reelection is Mr. Robert D. Walter. Information regarding the
Board's nominee is set forth on page 2. Information regarding the three
directors whose terms expire in 1997 and 1998 is set forth on pages 3 and 4.
The accompanying proxy will be voted for the reelection of the Board's
nominee unless contrary instructions are given. If the Board's nominee is unable
to serve, which is not anticipated, the persons named as proxies intend to vote,
unless the number of nominees is reduced by the Board of Directors, for such
other person or persons as the Board of Directors may designate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE REELECTION OF MR. WALTER AS A
CLASS III DIRECTOR WHICH IS DESIGNATED AS PROPOSAL NO. 1 ON THE ENCLOSED PROXY
CARD.
NOMINEE FOR ELECTION TO THE BOARD OF DIRECTORS FOR A TWO-YEAR TERM
TO EXPIRE AT THE 1998 ANNUAL MEETING OF STOCKHOLDERS
Mr. Robert D. Walter, 66, has been a Director of the Company since November
1992. Mr. Walter served as a Vice President and Chief Financial Officer of The
Warnaco Group, Inc. ('Warnaco') from June 1986 to February 1988 pursuant to a
consulting contract. Mr. Walter served successively as Treasurer, Vice President
and Chief Accounting Officer, and Senior Vice President and Chief Financial
Officer and Member of the Office of the Chairman of Norton Simon Inc., a
diversified consumer products company, from 1971 to 1983. Since 1983, Mr. Walter
has served as a consultant to several companies and non-profit organizations,
including TLC Group, the New York Mission Society and the National Health
Foundation.
2. ELECTION OF CLASS I DIRECTORS
At the 1996 Annual Meeting, two Class I directors are to be elected to
serve for a term to expire at the 1999 Annual Meeting of the stockholders. The
nominees for reelection are Messrs. Stanley S. Arkin and Joseph A. Califano, Jr.
Information regarding the Board's nominees is set forth on page 2 and 3.
Information regarding the three directors whose terms expire in 1997 and 1998 is
set forth on pages 3 and 4.
The accompanying proxy will be voted for the reelection of the Board's
nominees unless contrary instructions are given. If any of the Board's nominees
is unable to serve, which is not anticipated, the persons named as proxies
intend to vote, unless the number of nominees is reduced by the Board of
Directors, for such other person or persons as the Board of Directors may
designate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE REELECTION OF MESSRS. ARKIN AND
CALIFANO AS CLASS I DIRECTORS WHICH IS DESIGNATED AS PROPOSAL NO. 2 ON THE
ENCLOSED PROXY CARD.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS FOR A THREE-YEAR TERM
TO EXPIRE AT THE 1999 ANNUAL MEETING OF STOCKHOLDERS
Mr. Stanley S. Arkin, 58, has been a Director of the Company since October
1995. Mr. Arkin is the Senior Partner of the New York law firm Arkin Schaffer &
Kaplan LLP, and is of counsel to the Los Angeles law firm of Alschuler, Grossman
& Pines LLP. He is a fellow of the American College of Trial Lawyers and has
been Chairman of the Association of the Bar of the City of New York City's
Committee on the Criminal Courts, Law and Procedure, and its Committee on
Professional Discipline, and has been a member of the Association's Executive
Committee. He is the author of several treatises and writes a regular column for
the New York Law Journal. Mr. Arkin is also a member of the Board of Directors
for the American Committee of the Weizmann Institute of Science and a member of
the Board of Directors for the American Craft Museum.
Mr. Joseph A. Califano, Jr., 65, has been a Director of the Company since
November 1993. Mr. Califano is Chairman and President of the Center on Addiction
and Substance Abuse at Columbia University. He is a director of Automatic Data
Processing, Inc., Chrysler Corporation, Kmart
2
Corporation, New York and New England Telephone Companies, Travelers Group Inc
and Warnaco. Mr. Califano is a Trustee of New York University , Georgetown
University, and the Twentieth Century Fund and a Governor of New York Hospital.
He serves as Chairman of the Board of the Institute for Social and Economic
Policy in the Middle East at the Kennedy School of Government at Harvard
University, and as a member of the governing council of the Institute of
Medicine of the National Academy of Sciences. Mr. Califano served as Secretary
of the United States Department of Health, Education and Welfare from 1977 to
1979. He was Special Assistant for Domestic Affairs to the President of the
United States for the period 1965 to 1969. He is the author of nine books.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE;
TERMS EXPIRE AT THE 1997 ANNUAL MEETING OF STOCKHOLDERS
Mr. Stuart D. Buchalter, 59, has been a Director of the Company since May
1990. Mr. Buchalter served as Chairman of the Board until June 1995 and Chairman
of the Board and Chief Executive Officer of The Art Stores until January 1995.
Mr. Buchalter is of counsel to the law firm of Buchalter, Nemer, Fields and
Younger. From August 1980 to June 1993 he served as Chairman of the Board and
Chief Executive Officer of Standard Brands Paint Company. On February 11, 1992,
Standard Brands Paint Company filed for protection from creditors pursuant to
Chapter 11 of the United States Bankruptcy Code. The Company's plan of
reorganization was confirmed on May 14, 1993 and became effective on June 15,
1993. In 1975, Mr. Buchalter was a Special Counsel to the Division of
Enforcement of the Securities and Exchange Commission in Washington, D.C., and
was a Lecturer at Law at the UCLA School of Law in 'Securities Regulation' in
Spring, 1990. Mr. Buchalter also serves as a director of City National Corp.
(bank holding company) and Farroudja Images, Inc. (video imaging enhancement
company). He is Vice Chairman of the Board of Trustees of Otis College of Art
and Design and the President of the Jewish Community Foundation of Greater Los
Angeles and served as a Director of the California Chamber of Commerce until
December 1993.
Mr. William S. Finkelstein, 48, has been a Director of the Company since
May 1992. Mr. Finkelstein has been Senior Vice President of Warnaco since May
1992 and Chief Financial Officer of Warnaco since May 1995. Mr. Finkelstein
served as Vice President (until May 1992) and Senior Vice President and
Controller of Warnaco from November 1988 until his appointment as Chief
Financial Officer. Mr. Finkelstein served as Senior Vice President, Treasurer
and Secretary of the Company from May 1990 to May 1992. Mr. Finkelstein served
as Vice President of Finance of Warnaco's Activewear and Olga Divisions from
March 1988 until his appointment as Controller and as Vice President of Warnaco
in November 1988. Mr. Finkelstein served as Vice President and Controller of SPI
Pharmaceuticals Inc. from February 1986 to March 1988 and held various financial
positions including Assistant Corporate Controller with Max Factor and Company,
between 1977 and 1985. Mr. Finkelstein also serves as a Director of Warnaco.
MEMBER OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE;
TERM EXPIRES AT THE 1998 ANNUAL MEETING OF THE STOCKHOLDERS
Mrs. Linda J. Wachner, 50, has been a Director, Chairman of the Board and
Chief Executive Officer of the Company since its inception in May 1990. Mrs.
Wachner concurrently serves as and has been a Director, President and Chief
Executive Officer of Warnaco since August 1987, and the Chairman of the Board of
Warnaco since August 1991. Mrs. Wachner was a Director and President of Warnaco
from March 1986 to August 1987. Mrs. Wachner held various positions, including
President
3
and Chief Executive Officer, with Max Factor and Company from December 1978 to
October 1984. Mrs. Wachner also serves as a Director of Travelers Group Inc. and
Applied Graphics Technologies, Inc.
COMMITTEES OF THE BOARD -- BOARD MEETINGS
The Board of Directors held seven meetings in fiscal 1996. All of the
Directors attended at least 75% of the meetings of the Board and the respective
Committees of the Board of which they were a member during fiscal 1996.
The Board of Directors has the following standing committees:
AUDIT COMMITTEE
The Audit Committee, which met three times in fiscal 1996, recommends the
appointment of the Company's external auditors and meets with both internal and
external auditors to review the scope of their audits and the results thereof.
In addition, the Audit Committee reviews and comments on the proposed plans of
the internal and external auditors, audit fee proposals, financial statements
and other documents submitted to stockholders and regulators and reviews the
internal control policies and procedures of the Company.
The members of the Audit Committee are Mr. Buchalter, Mr. Finkelstein and
Mr. Walter. Mr. Walter serves as chairman of the Audit Committee.
COMPENSATION COMMITTEE
The Compensation Committee, which met twice in fiscal 1996, reviews and
approves the remuneration arrangements for the officers and directors of the
Company and reviews and recommends new executive compensation or stock plans in
which the officers and/or directors are eligible to participate, including the
granting of stock options.
The members of the Compensation Committee are Mr. Califano and Mr. Arkin.
Mr. Califano serves as chairman of the Compensation Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following individuals served on the Compensation Committee of the
Company's Board of Directors during fiscal 1996: Mr. Califano, and Mr. Arkin
(since October 5, 1995.) Mr. Finkelstein also served until October 5, 1995 and
Mr. R. Stephen Rubin served until July 15, 1996. Mr. Finkelstein was formerly an
officer of the Company. Mr. Finkelstein also serves as a Director and an
executive officer of Warnaco. Mrs. Wachner, an executive officer of the Company,
serves on the Board of Directors of Warnaco. Mr. Califano serves on the Board of
Directors of Warnaco. Mr. Rubin is Executive Chairman of Pentland Group PLC.
The Company acquired substantially all of the business of the Activewear
Division of Warnaco in 1990. Warnaco, a Delaware corporation, designs,
manufactures and markets a broad line of women's intimate apparel, such as bras,
panties and sleepwear, and men's dress and sport shirts, neckwear, underwear and
accessories, including jewelry and small leather goods, all of which are sold
under a variety of internationally recognized owned and licensed brand names.
During fiscal 1996 the Company rented certain office facilities in Van Nuys,
California from Warnaco pursuant to a lease that expired in
4
2002. The Company and Warnaco terminated the lease agreement in September 1996.
The Company rents certain office facilities in New York, New York and Los
Angeles, California from Warnaco pursuant to month to month leases. Payments for
the leased facilities amounted to approximately $1.0 million for fiscal 1996.
The Company purchased certain contract labor for production, telephone and
utilities services related to leased facilities from Warnaco, as well as
laboratory testing and other services, all of which are charged at Warnaco's
costs. Payments for such services totalled approximately $2.7 million for fiscal
1996.
In fiscal 1994 the Company and Warnaco entered into a license agreement for
the production of certain mens' and women's sportswear under the Catalina'r'
name. The Company recorded royalty income of approximately $0.6 million under
this agreement in fiscal 1996. In June 1995, the Company entered into a
sub-license agreement with Warnaco for the production of certain intimate
apparel under the Speedo'r' name. Royalty income related to this agreement was
approximately $0.2 million in fiscal 1996. In addition, the Company sells
merchandise to Warnaco from time to time for sale in Warnaco's retail outlet
stores. Sales of such merchandise totalled approximately $4.3 million for fiscal
1996. The Company provides certain design and development services to Warnaco.
Payments for such services amounted to $1.3 million in fiscal 1996. All such
services are charged to Warnaco at the Company's cost.
In May 1996 the Company made a strategic decision to close its closeout
outlet stores. In July 1996, the Company closed several of its closeout outlet
stores, assigned the leases on the remaining stores to Warnaco and sold the
existing store inventory to Warnaco for $2.4 million.
The Company believes that arrangements with Warnaco are on approximately
the same terms as could be obtained from third persons.
See also 'Certain Relationships and Certain Transactions' on page 7.
COMPENSATION OF DIRECTORS
The Company does not pay any additional remuneration to employees for
serving as directors. Directors of the Company who are not employees receive an
annual retainer fee of $20,000 and receive $1,500 per day of each Board of
Directors meeting and $1,000 for each committee meeting attended. In addition,
Mr. Walter, Mr. Buchalter and Mr. Arkin received $25,000 plus out-of-pocket
expenses for their services as members of a special committee of the Board of
Directors. Directors of the Company are also reimbursed for out-of-pocket
expenses, including reasonable travel and lodging expenses.
At the 1994 Annual Meeting, the Company's stockholders adopted The
Authentic Fitness Corporation 1993 Stock Plan for Non-Employee Directors (the
'Director Stock Plan'), Pursuant to the Director Stock Plan, each outside
director of the Company will be granted an option to purchase 15,000 shares of
the Company's common stock upon initial election to the Board of Directors, and
will be granted an option to purchase 5,000 shares of the Company's common stock
immediately following each annual meeting of stockholders. The exercise price of
any such option will be 100% of the fair market value of the underlying shares
on the date of grant of such option. As of September 1, 1996, the Company has
granted options to purchase 170,000 shares of common stock to eligible directors
under the Director Stock Plan of which 20,000 options have been exercised and
15,000 options were cancelled.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock by each of the Company's
directors and nominees, each of the four most highly compensated executive
officers who were serving as executive officers at the end of fiscal 1996,
5
other than the Chief Executive Officer, all directors, nominees and officers as
a group and each person who is known by the Company to beneficially own five
percent or more of any class of the Company's voting securities as of October
14, 1996.
SHARES BENEFICIALLY OWNED
COMMON STOCK
--------------------------------
NUMBER
NAME OF SHARES PERCENT
- ----------------------------------------------------------------------- --------- ----------
DIRECTORS, NOMINEES AND OFFICERS(a)
Linda J. Wachner (b)................................................... 2,836,462 12.1%
Nicolette Sohl (c)..................................................... 16,667 *
William W. Chan (d).................................................... 48,402 *
Kathryn Van Ness (e)................................................... 70,000 *
Susan Guensch (f)...................................................... 100,577 *
Stanley S. Arkin (g)................................................... 17,600 *
Stuart D. Buchalter (h)................................................ 41,600 *
Joseph A. Califano, Jr. (h)............................................ 27,000 *
William S. Finkelstein (h)............................................. 144,714 *
Robert D. Walter (h)................................................... 27,000 *
All directors, nominees and officers as a group (10 persons) (i)....... 3,330,022 14.1%
OTHER 5% STOCKHOLDERS
Pentland Ventures Ltd. ................................................ 5,067,468 22.7%
Pentland Center
Lakeside, Squires Lane
Finchley N3
London, England
General Electric Capital Corporation .................................. 1,809,179 8.1%
260 Long Ridge Road
Stamford, Connecticut 06902
- ------------------
* Less than 1%
(a) The business address of each of the directors, nominees and officers is c/o
Authentic Fitness Corporation, 6040 Bandini Blvd., Commerce, California
90040.
(b) Includes options pursuant to the 1992 Long-Term Stock Incentive Plan to
purchase 1,050,000 shares of Common Stock.
(c) Includes options pursuant to the 1992 Long-Term Stock Incentive Plan to
purchase 16,667 shares of Common Stock.
(d) Includes options pursuant to the 1992 Long-Term Stock Incentive Plan to
purchase 10,000 shares of Common Stock.
(e) Includes options pursuant to the 1992 Long-Term Stock Incentive Plan to
purchase 70,000 shares of Common Stock.
(f) Includes options pursuant to the 1992 Long-Term Stock Incentive Plan to
purchase 84,000 shares of Common Stock.
(footnotes continued on next page)
6
(footnotes continued from previous page)
(g) Includes options pursuant to the 1993 Stock Option Plan for Non-Employee
Directors to purchase 15,000 shares of Common Stock.
(h) Includes options pursuant to the 1993 Stock Option Plan for Non-Employee
Directors to purchase 25,000 shares of Common Stock.
(i) Includes options pursuant to the 1992 Long-Term Stock Incentive Plan and
the 1993 Non-Employee Directors Stock Plan to purchase 1,320,667 shares of
common stock.
CERTAIN RELATIONSHIPS AND CERTAIN TRANSACTIONS
Speedo Holdings B.V., which is an affiliate of Pentland Ventures Ltd., has
licensed the Company to design, manufacture and market certain men's, women's
and children's apparel and accessories under the Speedo'r' trademark and certain
related trademarks including Speedo'r' Surf Walker'tm' and Speedo'r' Authentic
Fitness'r'. Such license was granted in perpetuity and is exclusive in the
United States, its territories and possessions, Canada, Mexico and the Caribbean
Islands. The Company has paid royalties and other fees pursuant to the licensing
agreements with Speedo Holdings B.V. of approximately $6.2 million for fiscal
1996.
ASCO International Sourcing Limited and Soaring Force Limited
(collectively, 'ASCO'), both affiliates of Pentland Ventures Ltd., act as
exclusive buying agents on behalf of the Company in certain Far East countries,
including China, Hong Kong, India, Japan, Korea, the Philippines, Singapore and
Thailand. The Company has agreed to pay ASCO an amount equal to 6% of the FOB
price in U.S. dollars indicated on the manufacturers' or suppliers' commercial
invoices for the merchandise shipped on behalf of the Company. ASCO also extends
credit to the Company on a secured basis and guarantees payments to
manufacturers and suppliers (by means of letters of credit or otherwise) in
exchange for the Company's payment of all direct bank charges and certain other
charges, which are approximately 0.6% of the FOB price. The Company has paid
interest, commissions and other fees associated with the Company's Buying Agency
Agreement with ASCO of approximately $2.5 million in fiscal 1996.
An affiliate of Pentland Ventures Ltd. also purchases certain merchandise
from the Company, principally goggles. Sales of such merchandise aggregated
approximately $1.3 million for fiscal 1996.
EXECUTIVE COMPENSATION
Set forth below are tables prescribed by the proxy rules of the Securities
and Exchange Commission which present compensation information for the Company's
chief executive officer and the four other most highly compensated executive
officers whose aggregate cash compensation exceeds $100,000 per year (the 'Named
Executives').
7
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
----------------------------------------- LONG TERM COMPENSATION
OTHER ------------------------------ ALL
ANNUAL RESTRICTED OTHER
NAME AND PRINCIPAL FISCAL COMPEN- STOCK OPTIONS/ LTIP COMPEN-
POSITION YEAR SALARY BONUS SATION AWARDS SARS (#) PAYOUTS SATION
- ------------------------------------------ ------ -------- ---------- -------- ---------- -------- ------- --------
Linda J. Wachner ......................... 1996 $975,000 $ -- $ (3) -- 500,000 -- $ --
Chairman and Chief 1995 975,000 -- (3) -- 250,000 -- --
Executive Officer 1994 975,000 2,500,000(1) (3) -- 200,000 -- 800,000(2)
Susan Guensch (4) ........................ 1996 181,101 48,280 (3) -- 40,000 -- --
President Speedo'r' 1995 -- -- -- -- -- -- --
Division 1994 -- -- -- -- -- -- --
Nicolette Sohl (5) ....................... 1996 250,000 27,306 (3) -- -- -- --
Senior Vice President and Chief 1995 -- -- -- -- 50,000 -- --
Financial Officer 1994 -- -- -- -- -- -- --
Beth Ravit (6) ........................... 1996 186,923 120,000 (3) -- 25,000 -- --
President of Retail Stores and Special 1995 205,127 20,000 (3) -- 50,000 -- --
Merchandising 1994 200,000 100,000(1) (3) -- 20,000 -- --
Kathryn Van Ness ......................... 1996 289,635 200,000 (3) -- 50,000 -- --
President Swimwear 1995 256,599 98,077 (3) -- 50,000 -- 46,289(8)
Division (7) 1994 163,461 50,000 (3) -- 30,000 -- 86,468(8)
- ------------
(1) Includes discretionary bonuses awarded to Mrs. Wachner and Ms. Ravit in the
amounts of $2,500,000 and $100,000, respectively, in recognition of such
executives' strategic accomplishments in completing the acquisition of
Catalina/Cole swimwear brands and in the timely disposition of certain
assets acquired therewith that were not required to accomplish the Company's
strategy.
(2) Includes a signing bonus of $800,000 in connection with the amendment and
extension of Mrs. Wachner's employment agreement in December 1993.
(3) Other compensation was less than $50,000 and 10% of such officer's annual
salary and bonus for such year.
(4) Ms. Guensch was appointed President of the Speedo'r' Division on September
27, 1996.
(5) Ms. Sohl was appointed Senior Vice President and Chief Financial Officer on
April 8, 1995.
(6) Ms. Ravit's employment with the Company terminated on February 23, 1996 and
as a result, all outstanding unvested stock options were cancelled.
(7) Ms. Van Ness' employment with the Company terminated on September 27, 1996.
(8) Includes relocation expenses of $46,289 and $86,468 paid to Ms. Van Ness in
fiscal 1995 and fiscal 1994, respectively.
8
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-------------------------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE
NUMBER OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS/SARS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(3),(4)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------------------
NAME GRANTED(5) FISCAL 1995 $ PER SHARE DATE 0% 5% 10%
- --------------------------- ------------ -------------- -------------------- ------------- ---- ------------- -------------
Linda J. Wachner(1)........ 500,000 42.2% $20.875 Aug 11, 2005 0 $4,528,000 $13,393,000
Susan Guensch(2)........... 40,000 3.3% $20.875 Aug 11, 2005 0 $362,000 $1,074,000
Nicolette Sohl............. -- -- -- -- 0 $ -- $ --
Beth Ravit(2)(6)........... 25,000 2.1% $20.875 Aug 11, 2005 0 $ -- $ --
Kathryn Van Ness(2)........ 50,000 4.2% $20.875 Aug 11, 2005 0 $452,797 $1,339,000
All stockholders........... -- -- -- -- 0 $202,254,000 $598,214,000
All optionees.............. 1,185,000 100% $19.750 - $20.875 Aug 11, 2005 0 $10,731,000 $31,740,000
- ------------
(1) All of such options were granted on August 11, 1995 and are fully vested as
of such date. Such options have stock-for-stock exercise and tax withholding
features which allow the holders, in lieu of paying cash for the exercise
price and any tax withholding, to have the Company commensurately reduce the
number of such shares of common stock to which the optionee would otherwise
be entitled upon exercise of such options.
(2) All of such options were granted on August 11, 1995 and one-third of such
options vest annually until fully vested on August 11, 1998. Such options
have stock-for-stock exercise and tax withholding features which allow the
holders, in lieu of paying cash for the exercise price and any tax
withholding, to have the Company commensurately reduce the number of such
shares of common stock to which the optionee would otherwise be entitled
upon exercise of such options.
(3) The dollar amounts under these columns are the result of calculations at 0%
and at the 5% and 10% rates set by the Securities and Exchange Commission
based upon the closing price of the Company's common stock on July 5, 1996.
These amounts are not intended to forecast future appreciation, if any, of
the Company's stock price.
(4) No gain to optionees is possible without an increase in stock price
appreciation, which will benefit all stockholders commensurately. A zero
percent gain in stock price appreciation will result in zero dollars for the
optionees.
(5) All such options expire ten years from the date of grant.
(6) Ms. Ravit's employment with the Company terminated on February 23, 1996, and
as a result all of such options were cancelled.
9
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
JULY 6, 1996 JULY 6, 1996
--------------- -------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
--------------- ----------- --------------- -------------------
Linda J. Wachner........................... 0 $0 1,050,000/0 $3,318,750/$0
Susan Guensch.............................. 0 $0 84,000/40,000 $482,333/$41,667
Nicolette Sohl............................. 0 $0 16,667/33,333 $47,917/$95,833
Beth Ravit................................. 129,970 $1,540,472 -- --
Kathyrn Van Ness........................... 0 $0 70,000/60,000 $169,167/$84,583
EMPLOYMENT AGREEMENT
The Company and Mrs. Wachner have entered into an employment agreement,
which was amended on November 1, 1993 (the 'Employment Agreement'), pursuant to
which the Company has agreed to employ Mrs. Wachner as the Chief Executive
Officer of the Company and of Authentic Fitness Products, Inc. through October
31, 1998, with automatic one-year renewals thereafter, and to use its best
efforts to ensure that she is elected to serve as a director of the Company for
two successive three-year terms. In connection with the amendment of the
Employment Agreement in November 1993, Mrs. Wachner was awarded a signing bonus
of $800,000. The amended Employment Agreement provides for Mrs. Wachner to
receive a base salary of $975,000 per year for the term of the Employment
Agreement with automatic cost of living increases beginning January 1, 1996.
Under the Employment Agreement, Mrs. Wachner is also eligible for annual
bonuses, as determined by the Compensation Committee. In this regard, the
stockholders approved the Executive Incentive Compensation Plan ('Executive
Plan'), at the 1994 Annual Meeting of Stockholders.
The Employment Agreement provides that Mrs. Wachner shall devote such time
to the business and affairs of the Company as is reasonably necessary to perform
the duties of her position, except that she is not required to perform any
duties or responsibilities which would be likely to result in non-compliance
with or breach or violation of her employment contract with Warnaco.
In the event that Mrs. Wachner's employment is terminated by the Company
other than for 'cause,' or by Mrs. Wachner for 'good reason,' in each case as
defined in the Employment Agreement, she will be entitled to receive a lump-sum
payment equal to the present value of base salary payments owing pursuant to the
Employment Agreement through the end of the then current term of employment, all
other accrued but unpaid amounts owing to her in connection with her employment,
and a lump-sum termination payment of $2,000,000. If Mrs. Wachner's employment
is terminated by the Company for cause or if she voluntarily terminates her
employment without good reason, she will be entitled to receive any amounts
owing to her under the Employment Agreement through the date of termination. In
the case of any other termination of employment, Mrs. Wachner will receive
continued payments of base salary through the end of the term of employment.
10
COMPENSATION COMMITTEE REPORT TO STOCKHOLDERS
The Compensation Committee of the Board of the Directors has been delegated
the authority to determine the salaries and other compensation of executive
officers of the Company and to administer the Company's executive compensation
plans and arrangements. Each member of the Committee, whose names are set forth
following this report, is an outside, non-employee Director of the Company.
GENERAL POLICIES REGARDING COMPENSATION OF EXECUTIVE OFFICERS
The Committee's goals in establishing compensation levels and administering
executive compensation plans are (1) to attract and retain individuals of
superior ability and managerial talent, (2) to reward executives for superior
individual contributions to the achievement of the Company's business objectives
and (3) to motivate executive officers to increase Company performance. The
Company's compensation structure consists of base salary, variable annual cash
bonuses and stock based long-term incentive awards.
Salary. The Committee establishes base salaries at levels that reflect the
Committee's subjective assessment of prevailing salary levels among the
Company's competitors. The Company's competitors, for this purpose, include
certain of the companies included in the industry peer group index used for
comparison with the Company's performance in the performance graph following
this report as well as other companies with which, in the Committee's view, the
Company competes for executive talent. This group of companies may include
nonpublic companies and companies in related industries such as retailing or
general apparel manufacturing.
In general, the Committee attempts to set base salaries at levels that will
attract and retain highly qualified individuals. In selected cases, the
Committee may feel that excellent executive talent may only be attracted and
retained by compensation in excess of prevailing levels among the Company's
competitors.
In establishing the appropriate compensation level for any particular
officer, as well as in determining which companies should form the comparison
group for this purpose, the Committee from time to time may consult with
independent compensation consultants. However, the Committee ultimately reviews
the case of each executive officer individually, relying heavily on the
recommendations of the Chief Executive Officer as well as on its members' own
subjective judgment. The Committee did not engage outside consultants during
fiscal 1996.
Annual Bonus. The Committee generally believes that, at higher executive
levels, a greater percentage of an individual's total annual cash compensation
opportunity should consist of variable compensation tied to the Company's
performance. Annual bonus opportunities for executive officers, other than Mrs.
Wachner, range from 70% to 100% of base salary. Starting with fiscal 1995, Mrs.
Wachner's annual bonus has been determined in accordance with the Executive
Incentive Compensation Plan.
The Committee's practice with regard to awarding annual bonuses to
executive officers other than Mrs. Wachner has been to establish those measures
of corporate performance which the Committee has determined in its sole
discretion to be appropriate under the circumstances, and to assign such
relative weight to any such factors as it determines to be appropriate. The
Committee focuses particularly on such factors as growth in earnings (measured
by earnings before interest, taxes, depreciation and amortization (EBITDA)),
cash flow, distribution of product as well as discretionary factors in
determining whether or not bonuses are paid. The Committee also pays bonuses to
selected individuals
11
on an ad hoc basis in connection with or in recognition of special events or
projects such as major acquisitions, financings and licensing arrangements. In
making all of such determinations, the Committee takes into consideration and
gives significant weight to the recommendations of the Chief Executive Officer
with respect to bonuses of executive officers other than herself.
For fiscal 1997, the Committee generally intends to maintain its customary
approach to determining annual bonuses as described above.
Long-Term Incentive Compensation. Stock-based incentives, at the present
time consisting solely of stock options granted at 100% of the stock's fair
market value on the grant date, constitute the long-term incentive portion of
the Company's executive compensation package. Stock options provide an incentive
for executives to increase the Company's stock price and, therefore, the return
to the Company's shareholders. The Committee has not heretofore granted stock
appreciation rights ('SARs') or other stock-based awards, although it has the
authority to do so under the 1992 Stock Plan. The Committee reserves the
discretion to consider any factors its considers relevant, and to give all
factors considered the relative weight it considers appropriate under the
circumstances then prevailing, in reaching its determination regarding the size
and timing of option grants.
Limitations on Deductibility of Executive Compensation. Section 162(m) of
the Internal Revenue Code, enacted as part of the Revenue Reconciliation Act of
1993, limits the deductibility of compensation paid to certain executive
officers of the Company beginning with the Company's 1995 fiscal year. To
qualify for deductibility under Section 162(m), compensation in excess of
$1,000,000 per year paid to the Chief Executive Officer and the four other most
highly compensated executive officers at the end of such fiscal year generally
must be 'performance-based' compensation, as determined under Section 162(m). In
order to be considered 'performance-based,' for this purpose, compensation must
be paid solely on account of the attainment of one or more pre-established
performance goals established by a committee of two or more 'outside directors,'
pursuant to an arrangement that has been disclosed to and approved by
shareholders. Also, in order for an arrangement to give rise to fully deductible
'performance-based' compensation, the terms of the arrangement must preclude the
exercise of any discretion in the administration of the plan that would have the
effect of increasing compensation paid thereunder.
The Company generally intends to comply with the requirements for full
deductibility of executive compensation under Section 162(m). However, the
Committee will balance the costs and burdens involved in such compliance against
the value of the tax benefits to be obtained by the Company thereby, and may in
certain instances pay compensation that is not fully deductible if in its
determination such costs and burdens outweigh such benefits.
COMPENSATION FOR FISCAL YEAR 1996
The amounts shown as 1996 bonus in the Summary Compensation Table for Ms.
Ravit, Ms. Van Ness, and Ms. Sohl reflect bonuses awarded in fiscal 1996 in
connection with the Company's incentive compensation plan for the 1995 fiscal
year.
In awarding the options granted to the named executive officers as shown in
the table labelled Option/SAR Grants in Last Fiscal Year, the Committee
considered the number of option shares available for grant under the Company's
stock option plan and the shareholder dilution represented by the total number
of options authorized and outstanding under all such plans. The Committee then
determined in its discretion the number of options it wished to grant during
fiscal 1996 and allocated the
12
options available for grant among executive officers based on its subjective
assessment of individual performance, seniority and relative position level. In
making such assessments, the Committee reviewed the number of outstanding
options held by each executive officer. In making these determinations and
allocations, the Committee also relied on the recommendations of the Chief
Executive Officer.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mrs. Wachner's cash compensation is determined by the terms of her
employment agreement with the Company, which is described on page 10.
Mrs. Wachner received a grant of 500,000 options during fiscal year 1996.
These options were granted at $20.875, 100% of the market price on the date of
grant. This option grant was based on the factors described above under
'Compensation for Fiscal Year 1996'. In October 1995 the Committee determined
that it was appropriate to amend the vesting schedule of options previously
granted to Mrs. Wachner to provide that they would be fully vested as of such
date.
Joseph A. Califano, Jr.
Stanley S. Arkin
13
STOCK PRICE PERFORMANCE GRAPH
The Stock Price Performance Graph below compares cumulative total return of
the Company, the Wilshire 5000 Total Return Composite Index and a comparable
industry index selected by the Company. The stock price performance shown on the
graph below is not necessarily indicative of future price performance.
[PERFORMANCE GRAPH]
6/28/92 7/3/93 7/2/94 7/1/95 7/6/96
------- ------ ------ ------ ------
Authentic Fitness........................................................ 100 148 200 239 263
Wilshire 5000............................................................ 100 117 120 149 185
S&P Textiles............................................................. 100 98 86 89 109
Note: Assumes $100 invested on 6/30/92 in Authentic Fitness Corporation, The
Wilshire 5000 Total Return Index and the S&P Textile-Apparel Index. Assumes
reinvestment of dividends on a daily basis.
OUTSTANDING VOTING SECURITIES
On October 14, 1996, the record date for the 1996 Annual Meeting, there
were outstanding and entitled to vote 22,333,908 shares of Common Stock of the
Company, entitled to one vote per share.
14
SOLICITATION OF PROXIES
The cost of soliciting proxies for the 1996 Annual Meeting will be borne by
the Company. In addition to solicitation by mail, solicitations may also be made
by personal interview, telegram and telephone. The Company may use the services
of outside consultants to assist in soliciting proxies. The Company expects that
fees for such services, if necessary, will be less than $10,000. Arrangements
will be made with brokerage houses and other custodians, nominees and
fiduciaries to send proxies and proxy material to their principals, and the
Company will reimburse them for expenses in so doing. Consistent with the
Company's confidential voting procedure, directors, officers and other regular
employees of the Company, as yet undesignated, may also request the return of
proxies by telephone or telegram, or in person.
ANNUAL REPORT
The Annual Report of the Company for the fiscal year ended July 6, 1996, is
being mailed to all stockholders with this proxy statement.
STOCKHOLDER PROPOSALS
In general, stockholder proposals intended to be presented at an Annual
Meeting, including proposals for the nomination of directors, must be received
by the Company not less than 60 days nor more than 90 days in advance of the
anniversary date of the immediately preceding annual meeting, or by September
11, 1996, to be considered for the 1996 Annual Meeting. The requirements for
submitting such proposals are set forth in the Company's Bylaws.
Stockholder proposals intended to be considered for inclusion in the proxy
statement for presentation at the 1997 Annual Meeting must be received by the
Company by June 17, 1997.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers, directors and shareholders who own more than ten percent
of the Company's common stock to file with the Securities and Exchange
Commission ('SEC') initial reports of ownership of common stock and other equity
securities of the Company. Officers, directors and shareholders who own more
than 10% are required by SEC regulation to furnish the Company with copies of
all Section 16(a) reports they file.
Based solely upon a review of the copies of such reports furnished to the
Company and written representations from such officers, directors and
shareholders who own more than 10% of the Company's common stock that no other
reports were required to be made, the Company believes that there was full
compliance for the fiscal year ended July 6, 1996 with all Section 16(a) filing
requirements applicable to the Company's officers, directors and stockholders
who own more than 10% of the Company's common stock.
OTHER MATTERS
The Board of Directors does not know of any matter other than those
described in this proxy statement that will be presented for action at the
meeting. If other matters properly come before the meeting, the persons named as
proxies intend to vote the shares they represent in accordance with their
judgment.
15
APPENDIX 1
PROXY CARD
AUTHENTIC FITNESS CORPORATION
COMMERCE, CALIFORNIA 90040
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Linda J. Wachner, William S. Finkelstein
and William W. Chan, and each of them acting solely, proxies with full power of
substitution and with all powers the undersigned would possess if personally
present, to represent and to vote at the Annual Meeting of stockholders to be
held on November 14, 1996 and at any adjournments or postponements thereof, as
designated on the reverse side hereof and in their discretion with respect to
any other matters as may properly come before such meeting, all of the shares of
Common Stock of Authentic Fitness Corporation held of record by the undersigned
as of the close of business on October 14, 1996.
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1 AND 2.
(Continued and to be signed and dated on
reverse side.)
AUTHENTIC FITNESS CORPORATION
P.O. BOX 11154
NEW YORK, N.Y. 10203-0154
1. Proposal to elect one FOR the nominee [X] WITHHOLD AUTHORITY to vote [X]
Class III director listed below for the nominee listed below
for a term of two
years.
Nominee: Robert D. Walter
2. Proposal to elect FOR all nominees [X] WITHHOLD AUTHORITY to vote for [X] *EXCEPTIONS [X]
two Class III listed below all nominees listed below
directors for a
term of three
years.
Nominees: Stanley S. Arkin and Joseph A. Califano, Jr.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the 'Exceptions' box and write that
nominee's name on the space below.)
*Exceptions
----------------------------------------------------------------------------------------------------------
3. To transact such other business as may properly come before the meeting and any and all adjournments or postponements
thereof.
Change of Address and [X]
or Comments Mark Here
Please sign exactly as name appears. When
shares are held by joint tenants, both
should sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title as such.
If a corporation, please sign in full
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
Date ______________________________, 1996
_________________________________________
_________________________________________
Signature(s)
VOTES MUST BE INDICATED [X]
(X) IN BLACK OR BLUE INK.
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.
STATEMENT OF DIFFERENCES
------------------------
The registered trademark symbol shall be expressed as 'r'