SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<Table>
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
</Table>
R. G. BARRY CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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:
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(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):
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[ ] 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:
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R. G. BARRY CORPORATION
13405 YARMOUTH ROAD N.W.
PICKERINGTON, OHIO 43147
April __, 2004
To Our Shareholders:
You are cordially invited to attend the 2004 Annual Meeting of
Shareholders of R. G. Barry Corporation, which will be held at 11:00 a.m.,
Columbus, Ohio time, on Thursday, May 27, 2004, at our executive offices located
at 13405 Yarmouth Road N.W., Pickerington, Ohio 43147.
The formal Notice of Annual Meeting of Shareholders and Proxy Statement
are enclosed. The Board of Directors has nominated one director for a term to
expire at the 2007 Annual Meeting of Shareholders. The Board recommends that you
vote FOR the nominee.
You are also being asked to consider and vote on a proposal to adopt
amendments to Article IV of the Company's Regulations to clarify and separate
the roles of officers. The Board recommends that you vote FOR the adoption of
the proposed amendments to Article IV of our Regulations.
On behalf of the Board and management, I cordially invite you to attend
the Annual Meeting. Whether or not you plan to attend the Annual Meeting and
regardless of the number of common shares you own, it is important that your
common shares be represented and voted at the Annual Meeting. Accordingly, after
reading the enclosed Proxy Statement, please complete, sign and date the
enclosed proxy card and mail it promptly in the reply envelope provided for your
convenience.
Thank you for your continued support.
Very truly yours,
Thomas M. Von Lehman,
President and Chief Executive Officer
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
R. G. BARRY CORPORATION
13405 YARMOUTH ROAD N.W.
PICKERINGTON, OHIO 43147
(614) 864-6400
Pickerington, Ohio
April __, 2004
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of R. G.
Barry Corporation (the "Company") will be held at the executive offices of the
Company at 13405 Yarmouth Road N.W., Pickerington, Ohio 43147, on Thursday, May
27, 2004, at 11:00 a.m., Columbus, Ohio time, for the following purposes:
1. To elect one director to serve for a term of three years.
2. To consider and vote on a proposal to adopt amendments to
Article IV of the Company's Regulations to clarify and
separate the roles of officers.
3. To transact any other business which properly comes before the
Annual Meeting or any adjournment.
Shareholders of record at the close of business on April 1, 2004, will
be entitled to receive notice of and to vote at the Annual Meeting and any
adjournment.
You are cordially invited to attend the Annual Meeting. The vote of
each shareholder is important, whatever the number of common shares held.
Whether or not you plan to attend the Annual Meeting, please sign, date and
return your proxy card promptly in the enclosed envelope. If you are a
registered shareholder and attend the Annual Meeting, you may revoke your proxy
and vote in person. Attendance at the Annual Meeting will not, in and of itself,
constitute revocation of a proxy.
By Order of the Board of Directors,
Thomas M. Von Lehman,
President and Chief Executive Officer
R. G. BARRY CORPORATION
13405 YARMOUTH ROAD N.W.
PICKERINGTON, OHIO 43147
(614) 864-6400
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors (the "Board") of R. G. Barry Corporation (the
"Company", "we" or "us") of proxies for use at the Annual Meeting of
Shareholders to be held on Thursday, May 27, 2004 (the "Annual Meeting"), or at
any adjournment. The Annual Meeting will be held at 11:00 a.m., Columbus, Ohio
time, at our executive offices located at 13405 Yarmouth Road N.W.,
Pickerington, Ohio. The facility is located east of Columbus, Ohio, immediately
south of the intersection of Interstate 70 and State Route 256. This Proxy
Statement and the accompanying proxy card were first sent or given to
shareholders on or about April __, 2004.
You may ensure your representation at the Annual Meeting by completing,
signing, dating and promptly returning the enclosed proxy card. A return
envelope, which requires no postage if mailed in the United States, has been
provided for your use. You may revoke your proxy at any time before it is
actually voted at the Annual Meeting (i) by giving written notice of revocation
to the Secretary of the Company, at the address shown on the cover page of this
Proxy Statement; (ii) by executing and returning a later-dated proxy card which
is received by the Company prior to the Annual Meeting; or (iii) if you are the
registered shareholder, by attending the Annual Meeting and giving notice of
revocation in person. Attendance at the Annual Meeting will not, in and of
itself, revoke a previously appointed proxy.
Shareholders holding common shares in "street name" with a broker,
financial institution or other holder of record may be eligible to appoint their
proxy electronically via the Internet or telephonically and may incur costs
associated with electronic access, such as usage charges from Internet access
providers and telephone companies. Shareholders holding common shares in "street
name" should review the information provided to them by the holder of record.
This information will describe the procedures to be followed in instructing the
holder of record how to vote the "street name" common shares and how to revoke
previously given instructions.
We will bear the costs of preparing, printing and mailing this Proxy
Statement, the accompanying proxy card and any other related materials as well
as all other costs incurred in connection with the solicitation of proxies on
behalf of the Board, other than the Internet access and telephone usage charges
described above. The Company has engaged D. F. King & Co., Inc. to assist in the
solicitation of proxies from shareholders at a fee of not more than $5,000, plus
reimbursement of reasonable out-of-pocket expenses. Proxies will be solicited by
mail and may be further solicited by further mailing, personal contact,
telephone, electronic mail or facsimile by directors, officers and regular
employees of the Company, none of whom will receive additional compensation for
these solicitation activities. We will also pay the standard charges and
expenses of brokerage houses, voting trustees, financial institutions and other
custodians, nominees and fiduciaries, who are record holders of common shares
not beneficially owned by them, for forwarding materials to, and obtaining
proxies from, the beneficial owners of common shares entitled to vote at the
Annual Meeting.
Our Annual Report to Shareholders for the fiscal year ended January 3,
2004 (the "2003 fiscal year"), which includes the Company's Annual Report on
Form 10-K for the 2003 fiscal year, is being delivered with this Proxy
Statement.
VOTING AT ANNUAL MEETING
Only shareholders of record at the close of business on April 1, 2004,
are entitled to receive notice of and to vote at the Annual Meeting and any
adjournment. At the close of business on the record date, 9,836,602 common
shares were outstanding and entitled to vote. Each common share entitles the
holder thereof to one vote on each matter to be submitted to shareholders at the
Annual Meeting. There is no cumulative voting in the election of directors. A
quorum for the Annual Meeting is a majority of the outstanding common shares.
The results of shareholder voting will be tabulated by the inspectors
of election appointed for the Annual Meeting. Common shares represented by
properly executed proxies returned to the Company prior to the Annual Meeting
will be counted toward the establishment of a quorum for the Annual Meeting even
though they are marked "ABSTAIN" or "AGAINST" or to withhold authority on any or
all matters or are not marked at all.
Under the applicable rules of the New York Stock Exchange ("NYSE"),
both the election of directors and the adoption of the proposed amendments to
Article IV of the Company's Regulations are considered "routine" items upon
which brokers, who hold their clients' common shares in street name, may vote in
their discretion on behalf of their clients if those clients have not furnished
voting instructions within the required time frame before the Annual Meeting.
Those common shares represented by properly executed proxies which are
received prior to the Annual Meeting and not revoked will be voted as directed
by the shareholders. All valid proxies received prior to the Annual Meeting
which do not specify how common shares should be voted will be voted FOR the
Board's nominee listed below under "ELECTION OF DIRECTORS (ITEM 1 ON PROXY)" and
will be voted FOR the adoption of the proposed amendments to Article IV of the
Company's Regulations.
SHARE OWNERSHIP
The following table furnishes information regarding the beneficial
ownership of common shares by each person known to the Company to beneficially
own more than 5% of the outstanding common shares as of April 1, 2004 (unless
otherwise indicated):
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
---------------------------------------------------------------------------------
SHARED SOLE SHARED PERCENT
NAME AND ADDRESS SOLE VOTING VOTING DISPOSITIVE DISPOSITIVE OF
OF BENEFICIAL OWNER POWER POWER POWER POWER TOTAL CLASS (1)
- --------------------------------- -------------- ------------- ---------------- ------------- ----------------- ----------
Rutabaga Capital Management 543,200 (2) 804,250 (2) 1,347,450 (2) -- 1,347,450 (2) 13.7%
64 Broad Street, 3rd Floor
Boston, MA 02109
Harris Associates L.P. -- 1,027,500 (3) 127,500 (3) 900,000 (3) 1,027,500 (3) 10.4%
Harris Associates Inc.
Harris Associates Investment
Trust, series designated The
Oakmark Small Cap Fund
Two North LaSalle Street,
Suite 500
Chicago, IL 60602-3790
2
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
---------------------------------------------------------------------------------
SHARED SOLE SHARED PERCENT
NAME AND ADDRESS SOLE VOTING VOTING DISPOSITIVE DISPOSITIVE OF
OF BENEFICIAL OWNER POWER POWER POWER POWER TOTAL CLASS (1)
- --------------------------------- -------------- ------------- ---------------- ------------- ----------------- ----------
Gordon Zacks 986,758 (4)(5) -- 539,632 (4)(5) -- 986,758 (4)(5) 9.8%
13405 Yarmouth Road N.W.
Pickerington, OH 43147
Dimensional Fund Advisors Inc. 674,389 (6) -- 674,389 (6) -- 674,389 (6) 6.9%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Yale University -- 543,250 (7) -- 543,250 (7) 543,250 (7) 5.5%
Investments Office
55 Whitney Avenue, 5th Floor
New Haven, CT 06510-1300
Steven C. Leonard 91,203 (8) -- 91,203 (8) 419,324 (8) 510,527 (8) 5.2%
P.O. Box 710
Rancho Santa Fe, CA 92067
(1) The percent of class is based upon the sum of 9,836,602 common shares
outstanding on April 1, 2004, and the number of common shares, if any,
as to which the named person has the right to acquire beneficial
ownership upon the exercise of options which are currently exercisable
or which will become exercisable by May 30, 2004.
(2) Based on information contained in a Schedule 13G amendment filed with
the Securities and Exchange Commission (the "SEC") on February 4, 2004,
Rutabaga Capital Management, a registered investment adviser, had sole
voting power as to 543,200 common shares, shared voting power as to
804,250 common shares and sole dispositive power as to 1,347,450 common
shares as of December 31, 2003.
(3) Based on information contained in Schedule 13G amendments filed with
the SEC on February 13, 2004, Harris Associates L.P., a registered
investment adviser ("Harris"), and its general partner Harris
Associates Inc. ("Harris G/P") may be deemed to have beneficially
owned, as of December 31, 2003, a total of 1,027,500 common shares,
including 900,000 common shares (9.1% of the outstanding common shares)
held by Harris Associates Investment Trust ("Harris Trust") in the
series designated The Oakmark Small Cap Fund. 127,500 of the common
shares reported by Harris and Harris G/P have been acquired on behalf
of other advisory clients of Harris. Harris has been granted the power
to vote common shares in circumstances it determines to be appropriate
in connection with assisting its advised clients to whom it renders
financial advice in the ordinary course of business, by either
providing information or advice to the persons having that power, or by
exercising the power to vote. In addition, Harris serves as investment
adviser to the Harris Trust and several of Harris' officers and
directors are also officers and trustees of the Harris Trust. Harris
does not consider the Harris Trust to be controlled by such persons.
Harris has shared voting and dispositive power with respect to the
900,000 common shares held in The Oakmark Small Cap Fund due to Harris'
power to manage the investments of Harris Trust.
3
(4) Includes 171,392 common shares held of record by Mr. Zacks, and 230,310
common shares as to which Mr. Zacks has the right to acquire beneficial
ownership upon the exercise of options which are currently exercisable
or will become exercisable by May 30, 2004. 10,000 of the common shares
held of record by Mr. Zacks remain subject to restrictions on transfer
until May 13, 2004 unless there occurs an earlier vesting event. Mr.
Zacks is not permitted to dispose of or otherwise transfer the common
shares. See footnote (3) to the Summary Compensation Table. Excludes
14,967 common shares held of record and owned beneficially by the
spouse of Mr. Zacks as to which Mr. Zacks has no voting or dispositive
power and disclaims beneficial ownership.
(5) Gordon Zacks is the voting trustee of the Zacks-Streim Voting Trust
(the "Voting Trust") and exercises sole voting power as to the 585,056
common shares deposited in the Voting Trust. The owners of the common
shares deposited in the Voting Trust retain dispositive power with
respect to those common shares (subject to certain limitations on the
right to remove the common shares from the Voting Trust). Mr. Zacks is
the owner of, and retains dispositive power as to, 137,930 of the
common shares deposited in the Voting Trust. Mr. Zacks' mother,
Florence Zacks Melton, as trustee under a trust created by the will of
Aaron Zacks, deceased, is the owner of the remaining 447,126 common
shares deposited in the Trust. Mr. Zacks is the remainder beneficiary
of the trust created by that will. The Voting Trust will continue in
existence until October 29, 2005, unless extended or terminated in
accordance with its terms.
(6) Based on information contained in a Schedule 13G amendment filed with
the SEC on February 6, 2004, Dimensional Fund Advisors Inc., a
registered investment adviser ("Dimensional"), may be deemed to have
beneficially owned 674,389 common shares as of December 31, 2003, all
of which were held in portfolios of four investment companies to which
Dimensional furnishes investment advice and of other commingled group
trusts and separate accounts for which Dimensional serves as investment
manager. In its role as investment advisor and investment manager,
Dimensional possesses voting and dispositive power over the common
shares owned by these portfolios. Dimensional disclaims beneficial
ownership of these common shares.
(7) Based on information contained in a Schedule 13G filed with the SEC on
February 17, 2003, Yale University, through an endowment fund, may be
deemed to have beneficially owned 543,250 common shares as of December
31, 2003, as to which it had shared voting and dispositive power. The
common shares reported include (i) 475,950 common shares held of record
by Yale University in an externally managed account terminable on
notice of 60 days or less and (ii) 67,300 common shares held of record
by the Yale University Retirement Plan for Staff Employees ("YURPSE"),
which has shared power to direct the vote or disposition of such common
shares, in an externally managed account with the same investment
manager, also terminable on notice of 60 days or less. YURPSE is a
noncontributory, defined benefit plan for staff employees. Yale
University disclaims beneficial ownership of the common shares held by
YURPSE.
(8) Based on information contained in a Schedule 13G amendment filed with
the SEC on February 18, 2004, Mr. Leonard may be deemed to have
beneficially owned 510,527 common shares as of December 31, 2003, of
which 419,324 common shares were beneficially owned by Pacifica Capital
Investments, LLC ("PCI"), a registered investment adviser. Mr. Leonard
is the managing member of PCI. All common shares beneficially owned by
PCI are held in managed accounts. PCI possesses dispositive power, but
not voting power, over its managed accounts.
4
The following table furnishes information regarding the beneficial
ownership of common shares, as of April 1, 2004, for each of the current
directors, the nominee for election as a director, each of the individuals named
in the Summary Compensation Table on page ___ and all current executive officers
and directors as a group:
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP (1)
------------------------------------------------
COMMON SHARES
WHICH CAN BE
ACQUIRED UPON
EXERCISE OF OPTIONS
CURRENTLY EXERCISABLE
OR WHICH WILL BECOME PERCENT
NAME OF COMMON SHARES EXERCISABLE WITHIN OF
BENEFICIAL OWNER PRESENTLY HELD 60 DAYS TOTAL CLASS (2)
- --------------------------------- -------------- --------------------- --------- ---------
Philip G. Barach................. 15,831 6,250 22,081 (3)
Christian Galvis................. 73,315(4) 86,754 160,069 1.6%
David P. Lauer .................. 0 6,250 6,250 (3)
Roger E. Lautzenhiser............ 11,000 6,250 17,250 (3)
Janice Page...................... 2,000 6,250 8,250 (3)
Edward M. Stan................... 34,557(5) 6,250 40,807 (3)
Daniel D. Viren.................. 2,500 54,000 56,500 (3)
Harvey A. Weinberg............... 2,825 6,250 9,075 (3)
Gordon Zacks .................... 756,448(6) 230,310 986,758 10.0%
Harry F. Miller.................. 13,830 21,000 34,830 (3)
Donald G. Van Steyn.............. 4,900 21,000 25,900 (3)
Thomas F. Coughlin (7)........... 0 0 0 (3)
All current directors and
executive officers as a
group (numbering 12)(8)....... 917,206 450,564 1,367,770 13.9%
(1) Unless otherwise indicated, the beneficial owner has sole voting and
dispositive power as to all of the common shares reflected in the
table.
(2) See footnote (1) to the preceding table.
(3) Represents ownership of less than 1% of the outstanding common shares
of the Company.
(4) Excludes 572 common shares held of record and owned beneficially by Mr.
Galvis' spouse as to which he exercises no voting or dispositive power
and disclaims beneficial ownership. 5,200 of the common shares shown
remain subject to restrictions on transfer under the terms of a
Restricted Stock Agreement, dated March 23, 2000, between Mr. Galvis
and the Company. See footnote (3) to the Summary Compensation Table.
(5) Includes 2,200 common shares held jointly by Mr. Stan and his spouse.
(6) See footnotes (4) and (5) to preceding table.
(7) Mr. Coughlin resigned his position as an executive officer of the
Company effective December 1, 2003.
5
(8) Includes the nine directors identified in the table, Messrs. Miller and
Van Steyn and Thomas M. Von Lehman who was named the President and
Chief Executive Officer of the Company on March 10, 2004.
ELECTION OF DIRECTORS
(ITEM 1 ON PROXY)
There are currently nine individuals serving as members of the Board -
three in the class whose terms expire at the Annual Meeting, three in the class
whose terms expire in 2005 and three in the class whose terms expire in 2006.
Only one director in the class of directors whose terms expire in 2004, Edward
M. Stan, has been nominated for reelection at the Annual Meeting. Philip G.
Barach and Daniel D. Viren have decided not to seek reelection to the Board. The
Nominating and Governance Committee is seeking qualified candidates to replace
Mr. Barach and Mr. Viren. Because the Committee does not expect to have
identified candidates by the time of the Annual Meeting, the Board is only
nominating one candidate for election to the Board of Directors at the Annual
Meeting. The proxies cannot be voted for more than one nominee for election as a
director at the Annual Meeting
On August 21, 2003, based upon a recommendation from the Nominating and
Governance Committee, the Board appointed David P. Lauer to serve as a director
of the Company in the class of directors whose terms expire at the 2006 Annual
Meeting of Shareholders. Mr. Lauer filled the vacancy on the Board which had
existed since the retirement of Harvey M. Krueger from the Board at the
Company's 2003 Annual Meeting. Mr. Lauer had been recommended to the Nominating
and Governance Committee and the Board by several directors of the Company.
The Board has reviewed, considered and discussed each director's
relationships, either directly or indirectly, with the Company and its
subsidiaries and the compensation each director receives, directly or
indirectly, from the Company and its subsidiaries in order to determine whether
such director meets the independence requirements of the applicable sections of
the NYSE Listed Company Manual (the "NYSE Rules") and the applicable rules and
regulations of the SEC (the "SEC Rules") and has determined that the Board has
at least a majority of independent directors. The Board has determined that each
of Philip G. Barach, David P. Lauer, Janice Page, Edward M. Stan and Harvey A.
Weinberg has no relationship with the Company either directly or indirectly,
including, without limitation, any commercial, industrial, banking, consulting,
legal, accounting, charitable or familial relationship, other than serving as a
director and holding common shares of the Company (and in the case of Mr. Stan,
receiving retirement benefits as a former executive officer of the Company whose
employment ended in 1985) and thus qualifies as independent. Christian Galvis,
Roger E. Lautzenhiser, Daniel D. Viren and Gordon Zacks do not qualify as
independent directors.
The Board proposes that the nominee identified below be elected for a
new term of three years, and until his successor is elected and qualified. The
individuals named as proxies in the accompanying proxy card intend to vote the
common shares represented by the proxies received under this solicitation for
the Board's nominee unless otherwise instructed on the proxy card. Common shares
as to which the authority to vote is withheld will not be counted toward the
election of directors or toward the election of the individual nominee specified
on the proxy card.
The following information, as of April 1, 2004, concerning the age,
principal occupation, other affiliations and business experience of Mr. Stan,
the only nominee for election, has been furnished to the Company by Mr. Stan.
6
DIRECTOR OF
POSITION(S) HELD THE COMPANY NOMINEE
WITH THE COMPANY AND CONTINUOUSLY FOR TERM
NOMINEE AGE PRINCIPAL OCCUPATION(S) SINCE EXPIRING IN
- --------------------------- --- ----------------------------------- ------------ -----------
Edward M. Stan............. 79 Director of the Company; President, 1971 2007
Edward M. Stan and Associates,
importers
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEE NAMED
ABOVE.
While it is contemplated that Mr. Stan will stand for election, if at
the time of the Annual Meeting he should be unavailable or unable to serve as a
candidate for election as a director, the individuals designated to vote the
proxies reserve full discretion to vote the common shares represented by the
proxies they hold for the election of a substitute nominee designated by the
Board upon recommendation by the Nominating and Governance Committee. The Board
knows of no reason why Mr. Stan will be unavailable or unable to serve if
reelected to the Board.
The following information, as of April 1, 2004, concerning the age,
principal occupation, other affiliations and business experience of the
directors of the Company whose terms extend beyond the Annual Meeting has been
furnished to the Company by each director.
DIRECTOR OF
POSITION(S) HELD THE COMPANY
WITH THE COMPANY AND CONTINUOUSLY TERM
NAME AGE PRINCIPAL OCCUPATION(S) SINCE EXPIRES IN
- --------------------------- --- ----------------------------------------------- ------------ ----------
Gordon Zacks............... 71 Senior Chairman of the Board since March 10, 1959 2005
2004, Chairman of the Board from 1979 to
March 10, 2004, Chief Executive Officer
from 1979 to March 10, 2004, President
from 1992 to February 1999 and from
August 2002 to March 10, 2004, and a
Director of the Company
(1)
Christian Galvis........... 62 Executive Vice President - Operations since 1992 2005
1992, President - Operations of Barry Comfort
Group since 1998, and a Director of the
Company
7
DIRECTOR OF
POSITION(S) HELD THE COMPANY
WITH THE COMPANY AND CONTINUOUSLY TERM
NAME AGE PRINCIPAL OCCUPATION(S) SINCE EXPIRES IN
- --------------------------- --- ----------------------------------------------- ------------ ----------
Roger E. Lautzenhiser...... 50 Director of the Company; Managing Partner, 1999 2005
Cincinnati office, since November 2000,
and Partner, Columbus office, from 1986
to November 2000, Vorys, Sater, Seymour
and Pease LLP, attorneys at law (2)
Janice Page................ 55 Director of the Company; consultant on 2000 2006
merchandising, buying, marketing, retail
store operations and management since 1997;
Senior (Group) Vice President, Sears, Roebuck
and Co. from 1992 to 1997 (3)
Harvey A. Weinberg......... 66 Director of the Company; private investor; 2001 2006
former Chairman of the Board and Chief
Executive Officer of Hartmarx Corporation,
clothiers (4)
David P. Lauer............. 61 Director of the Company; President and Chief 2003 2006
Operating Officer of Bank One, Columbus, NA
from June 1997 until his retirement in
January 2001; Office Managing Partner of
Deloitte & Touche LLP from January 1989 until
he retired in June 1997; Certified Public
Accountant since 1968 (5)
(1) On March 10, 2004, Mr. Zacks and the Company entered into a separation
agreement pursuant to which Mr. Zacks retired as President and Chief
Executive Officer of the Company. The separation agreement terminated
Mr. Zacks' existing employment agreement under which the Company had
been obligated to cause Mr. Zacks to be nominated as a director. See
"EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN
CONTROL ARRANGEMENTS."
(2) Vorys, Sater, Seymour and Pease LLP rendered legal services to the
Company during the 2003 fiscal year and continues to do so.
(3) Ms. Page is also a director of Kellwood Company and a member of the
board of trustees of Glimcher Realty Trust.
(4) Mr. Weinberg is also a director of Syms Corp and a member of the board
of trustees of Glimcher Realty Trust.
(5) Mr. Lauer is also a director of Wendy's International, Inc., AirNet
Systems, Inc., Huntington Bancshares Incorporated and Diamond Hill
Investment Group, Inc.
There are no family relationships among any of the directors, the
nominee for election as director and executive officers of the Company.
8
MEETINGS OF AND COMMUNICATIONS WITH THE BOARD
The Board held twenty meetings during the 2003 fiscal year. Each
director attended 75% or more of the aggregate of the total number of meetings
held by the Board and the number of meetings held by the Board committees on
which he or she served, in each case during the period he or she served in the
2003 fiscal year, except for Mr. Lauer, who attended 73% of such meetings.
Although the Company does not have a formal policy requiring members of
the Board to attend annual meetings of the shareholders, the Company encourages
all incumbent directors and director nominees to attend each annual meeting of
shareholders. All of the eight then incumbent directors attended the Company's
2003 Annual Meeting of Shareholders held on May 8, 2003.
In accordance with the Company's Corporate Governance Guidelines and
applicable NYSE Rules, the non-management directors of the Company meet (without
management present) at regularly scheduled executive sessions. The executive
sessions are chaired by the Chair of the Audit Committee, the Compensation
Committee or the Nominating and Governance Committee, as determined prior to or
at the beginning of each executive session by the non-management directors.
The Board believes it is important for shareholders to have a process
to send communications to the Board and its individual members. Accordingly,
shareholders who wish to communicate with the Board, the non-management
directors as a group or a particular director may do so by sending a letter to
such individual or individuals, in care of Daniel D. Viren, Secretary, at the
Company's executive offices, 13405 Yarmouth Road N.W., Pickerington, Ohio 43147.
The mailing envelope must contain a clear notation indicating that the enclosed
letter is a "Shareholder - Non-Management Director Communication," "Shareholder
- - Board Communication" or "Shareholder - Director Communication," as
appropriate. All such letters must identify the author as a shareholder and
clearly state whether the intended recipients are all members of the Board or
certain specified individual directors. The Company's Secretary will make copies
of all such letters and circulate them to the appropriate director or directors.
There is no screening process in respect of shareholder communications.
COMMITTEES OF THE BOARD
The Board has three standing committees -- the Audit Committee, the
Compensation Committee and the Nominating and Governance Committee.
AUDIT COMMITTEE
The Audit Committee currently consists of Philip G. Barach, David P.
Lauer, Edward M. Stan and Harvey A. Weinberg. The Board has determined that each
member of the Audit Committee qualifies as an independent director under the
applicable NYSE Rules and under SEC Rule 10A-3.
The Board has also determined that each of David P. Lauer and Edward M.
Stan qualifies as an "audit committee financial expert" for purposes of Item
401(h) of SEC Regulation S-K. In addition to the qualification of Messrs. Lauer
and Stan as "audit committee financial experts," the Board strongly believes
that each member of its Audit Committee is highly qualified to discharge his or
her duties on behalf of the Company and its subsidiaries and satisfies the
financial literacy requirement of the NYSE Rules.
David P. Lauer currently serves on the audit committees of five public
companies, including the Company. The Board has determined that such
simultaneous service does not and will not impair his ability to serve
effectively on the Company's Audit Committee.
9
The Audit Committee is organized and conducts its business pursuant to
a written charter. The Audit Committee Charter, as amended, is attached as
Appendix A to this Proxy Statement. A copy of the Audit Committee's charter is
also posted on the "Investors/Board of Directors" page of the Company's website
at www.rgbarry.com. At least annually, the Audit Committee will review and
reassess the adequacy of its charter and will recommend changes to the full
Board as necessary.
The Audit Committee's duties and responsibilities are set forth in its
charter. The primary functions of the Audit Committee are to assist the Board in
its oversight of: (1) the integrity of the Company's financial statements; (2)
the Company's compliance with legal and regulatory requirements; (3) the
independent auditors' qualifications and independence; and (4) the performance
of the Company's internal audit function and independent auditors. The Audit
Committee's specific responsibilities include: (1) selecting, appointing and
retaining the Company's independent auditors for each fiscal year and
determining the terms of engagement, including the proposed fees and terms of
service; (2) overseeing and evaluating the work of the independent auditors; (3)
reviewing and approving in advance all audit and all permitted non-audit
services; (4) reviewing the independence and objectivity of the independent
auditors; (5) determining hiring policies for employees or former employees of
the independent auditors; (6) reviewing the Company's accounting policies and
practices; (7) reviewing the activities of the Company's independent auditors
and personnel responsible for the internal audit function; (8) preparing an
annual report for inclusion in the Company's proxy statement; and (9) other
matters required by applicable NYSE Rules and SEC Rules.
The Audit Committee met ten times during the 2003 fiscal year. The
Audit Committee's report relating to the 2003 fiscal year begins on page ___.
COMPENSATION COMMITTEE
The Compensation Committee is currently comprised of Philip G. Barach,
Janice Page and Harvey A. Weinberg. The Board has determined that each member of
the Compensation Committee qualifies as independent under applicable NYSE Rules
and SEC Rules. The Compensation Committee is organized and conducts its business
pursuant to a written charter adopted by the Board on February 4, 2004. A copy
of the Compensation Committee's charter is posted on the "Investors/Board of
Directors" page of the Company's website at www.rgbarry.com. The Compensation
Committee annually reviews and reassesses the adequacy of its charter and may
recommend changes to the full Board as necessary.
The Compensation Committee's charter sets forth the duties and
responsibilities of the Compensation Committee, which include: (1) reviewing,
approving and overseeing the process and substance of the Company's compensation
policy; (2) evaluating the performance of the Chief Executive Officer of the
Company in light of corporate goals and objectives approved by the Compensation
Committee and determining the Chief Executive Officer's compensation based on
that evaluation; (3) establishing the long-term incentive component of the Chief
Executive Officer's compensation; (4) determining whether the Company should
enter into employment agreements with its executive officers; (5) approving the
annual salary, bonus, stock options and other benefits, direct and indirect, of
the other senior executives of the Company; (6) administering the Company's
stock option plans; (7) reviewing new executive compensation programs and, on a
periodic basis, the operation of the Company's existing executive compensation
programs; (8) making recommendations to the full Board with respect to
incentive-compensation plans and equity-based plans; (9) determining director
and committee member/chairperson compensation for non-employee directors; and
(10) preparing an annual report on executive compensation for inclusion in the
Company's proxy statement.
The Compensation Committee met six times during the 2003 fiscal year.
The Compensation Committee's report on executive compensation for the 2003
fiscal year begins at page ___.
10
NOMINATING AND GOVERNANCE COMMITTEE
The Nominating and Governance Committee consists of Janice Page, Edward
M. Stan and Harvey A. Weinberg. The Board has determined that each member of the
Nominating and Governance Committee qualifies as independent under applicable
NYSE Rules and SEC Rules. The Nominating and Governance Committee is organized
and conducts its business pursuant to a written charter adopted by the Board on
February 4, 2004 . A copy of the Nominating and Governance Committee's charter
is posted on the "Investors/Board of Directors" page of the Company's website at
www.rgbarry.com. The Nominating and Governance Committee annually evaluates
whether the charter appropriately addresses the matters that are or should be
within its scope, and will recommend changes to the full Board as necessary.
The Nominating and Governance Committee's primary responsibility is to
create and monitor the overall corporate governance principles and policies for
the Company. The duties and responsibilities of the Nominating and Governance
Committee include: (1) recommending policies to enhance the Board's
effectiveness; (2) developing and annually reviewing the Company's corporate
governance policies; (3) creating and maintaining a code of conduct for
directors, officers and employees; (4) approving service by directors of the
Company on the boards of directors of other publicly traded companies; (5)
assessing on a regular basis the qualifications needed by the Board in the
context of the current status of the Board; (6) conducting annual director
evaluations; (7) recommending to the Board the slate of nominees to be elected
by the shareholders; and (8) recommending the directors to be selected for
membership on Board committees, including chairpersons of committees. The
Nominating and Governance Committee met once during the 2003 fiscal year.
NOMINATING PROCEDURES
As described above, the Company has a standing Nominating and
Governance Committee that is responsible for overseeing a broad range of issues
surrounding the composition and operation of the Board, including identifying
candidates qualified to become directors and recommending director nominees to
the Board.
When considering candidates for the Board, the Nominating and
Governance Committee evaluates the entirety of each candidate's credentials and
does not have specific eligibility requirements or minimum qualifications that
must be met by a Nominating and Governance Committee-recommended nominee. The
Nominating and Governance Committee considers those factors it considers
appropriate, including maturity in judgment, diversity, experience, skills,
accountability and integrity, financial literacy, high performance standards,
time, other board appointments, industry knowledge, networking/contacts and
degree of independence from management. Depending on the current needs of the
Board, the Nominating and Governance Committee may weigh certain factors more or
less heavily. The Nominating and Governance Committee does, however, believe
that all members of the Board should have the highest character and integrity, a
reputation for working constructively with others, sufficient time to devote to
Board matters and no conflict of interest that would interfere with performance
as a director.
The Nominating and Governance Committee considers candidates for the
Board from any reasonable source, including shareholder recommendations, and
does not evaluate candidates differently based on who has made the
recommendation. Pursuant to its charter, the Nominating and Governance Committee
has the authority to retain consultants and search firms to assist in the
process of identifying and evaluating candidates and to approve the fees and
other retention terms for any consultant or search firm so retained. No such
consultant or search firm has been used to date and, accordingly, no fees have
been paid to any such consultant or search firm.
11
Shareholders may recommend director candidates for consideration by the
Nominating and Governance Committee by giving written notice of the
recommendation to Janice Page, Chair of the Nominating and Governance Committee,
c/o R. G. Barry Corporation, 13405 Yarmouth Road N.W., Pickerington, Ohio 43147.
The recommendation should include the candidate's name, age, business address,
residence address and principal occupation or employment as well as a
description of the candidate's qualifications, attributes and other skills. A
written statement from the candidate consenting to serve as a director, if
elected, and a commitment by the candidate to meet personally with the
Nominating and Governance Committee members, should accompany any such
recommendation. The Nominating and Governance Committee will consider candidate
recommendations from shareholders for the 2005 Annual Meeting of Shareholders
which are submitted not later than November 1, 2004. Any shareholder who wishes
to formally nominate one or more individuals must follow the procedures
described below.
The Board, taking into account the recommendations of the Nominating
and Governance Committee, selects nominees for election as directors at each
annual meeting of shareholders. In addition, shareholders who wish to nominate
one or more individuals for election as a director at an annual meeting of
shareholders may do so provided they comply with the nomination procedures set
forth in the Company's Articles of Incorporation. Each director nomination must
be received by the Secretary of the Company not less than 30 days nor more than
60 days prior to any meeting of shareholders called for the election of
directors. However, if less than 35 days' notice of the meeting is given to the
shareholders, the nomination must be mailed or delivered to the Company's
Secretary not later than the close of business on the seventh day following the
day on which the notice of the meeting was mailed. Each shareholder nomination
must contain the following information: (a) the name, age, business address and,
if known, residence address of the nominee; (b) the principal occupation or
employment of the nominee; (c) the number of common shares beneficially owned by
the nominee and by the nominating shareholder and (d) any other information
concerning the nominee that must be disclosed of nominees in proxy solicitations
under applicable SEC Rules. Each nomination must be accompanied by the written
consent of the proposed nominee to serve as a director. Notice of nominations
for the Annual Meeting must be received by the Company's Secretary by April
____, 2004.
CORPORATE GOVERNANCE GUIDELINES
In accordance with NYSE Rules, the Board adopted the R. G. Barry
Corporation Board of Directors Corporate Governance Guidelines to promote the
effective functioning of the Board and its committees and to reflect the
Company's commitment to the highest standards of corporate governance. The Board
periodically reviews the Corporate Governance Guidelines to ensure they are in
compliance with all applicable requirements. The Corporate Governance Guidelines
are available on the Company's website at www.rgbarry.com.
CODE OF BUSINESS CONDUCT AND ETHICS
In accordance with NYSE Rules and SEC Rules, the Board has adopted the
R. G. Barry Corporation Code of Business Conduct and Ethics which is available
on the Company's website at www.rgbarry.com.
12
REPORT OF
THE COMPENSATION COMMITTEE
OF
R. G. BARRY CORPORATION ON EXECUTIVE COMPENSATION
The Compensation Committee is comprised entirely of non-employee
directors. Decisions on compensation of the executive officers generally are
made by the Compensation Committee, although compensation levels for executive
officers other than the Company's Chief Executive Officer have historically been
recommended to the Compensation Committee by the Chief Executive Officer, who
has substantially greater knowledge of the contributions made by the individual
executive officers.
COMPENSATION POLICIES TOWARD EXECUTIVE OFFICERS
In determining the compensation of executive officers, the Compensation
Committee has sought to create a compensation program that links compensation to
the operational results of the Company and/or the operating division in which an
executive officer is employed, recognizes individual contribution and
achievement and assists the Company in attracting and retaining executive
officers and other key employees. Executive compensation is set at levels that
the Compensation Committee, with the advice of the Company's executive
compensation consultants, believes to be competitive with the compensation paid
by other companies that compete with the Company for executive officers and
other key employees having the experience and abilities that are necessary to
manage the Company's business.
BASE SALARIES
The base salaries of the executive officers and subsequent adjustments
to those base salaries are determined relative to the following factors: (i) the
importance to the Company of the executive officer's job function; (ii) the
individual's performance in his position; (iii) the individual's potential to
make a significant contribution to the Company in the future; and (iv) a
comparison of industry pay practices. The Compensation Committee believes that
all of these factors are important and the relevance of each factor varies from
individual to individual. The Compensation Committee has not assigned any
specific weight to any of these factors in the evaluation of any executive
officer's base salary.
An executive officer's individual performance is measured against goals
and objectives that have been previously discussed with the executive officers.
Consideration is given to the individual's contribution to the management team
and the individual's overall value and contribution to the Company. The
Compensation Committee historically has relied on the Company's Chief Executive
Officer to make recommendations to the Committee regarding the appropriate base
salaries of the executive officers other than the Chief Executive Officer.
Before making salary recommendations to the Compensation Committee, the Chief
Executive Officer has reviewed survey information from one or more executive
compensation consulting firms to determine competitive compensation levels in
each of the Company's senior management positions. The Company has generally
sought to provide base salary to its executive officers that falls within the
75th to 90th percentiles of base compensation offered by small to medium-
sized consumer product companies to individuals holding comparable positions.
The Compensation Committee believes that it is important for the Company to
remain competitive in its management salaries in order to attract and retain the
small group of senior managers who are key to the Company's operations.
13
The Company has entered into employment agreements with several of its
senior executive officers which provide for a minimum base salary during the
term of the employment agreement. These employment agreements restrict the
ability of the Compensation Committee to reduce the base salaries of these
executive officers below the minimum levels specified. The Compensation
Committee concluded that these employment agreements were important in order for
the Company to hire and/or retain its key executives. The minimum base salaries
were established by the Compensation Committee based upon advice from a
nationally recognized executive consulting firm.
ANNUAL INCENTIVE PLAN
Based on the recommendation of the Compensation Committee, the Board
adopted a 2003 annual incentive plan for the Company's salaried employees,
including its executive officers. Under the annual incentive plan, an
individual's potential annual bonus award is based on various measures depending
on his or her level in the Company. Award attainment is based on the achievement
of pre-established corporate and divisional financial performance goals and
strategic objectives, as well as on individual performance, with each category
being weighted differently depending on an employee's position in the Company.
Minimum levels are established each year such that performance below these
levels results in zero payment for all incentive awards. The Company's 2003
fiscal year results did not reach the minimum levels established by the Board
for Company financial performance and the Company's strategic objectives were
not achieved, and, as a result, no bonus awards were made under the 2003 annual
incentive plan.
MR. ZACKS' 2003 COMPENSATION
Effective July 1, 2001, Mr. Zacks and the Company entered into an
employment agreement under which Mr. Zacks was entitled to receive a minimum
annual salary of $490,000 plus other specified benefits. The minimum base salary
in the employment agreement was recommended by the Compensation Committee and
approved by the Board based upon advice from the Company's executive
compensation consulting firm that such base salary was consistent with base
salaries paid to chief executive officers of comparable companies. The
employment agreement terminated in March 2004 when Mr. Zacks retired as
President and Chief Executive Officer of the Company.
Mr. Zacks' base salary for 2003 was the minimum base salary established
in his employment agreement when it was entered into in 2001. Every year since
the date of the employment agreement, the Compensation Committee evaluated Mr.
Zacks' base salary to determine whether an increase was warranted based on the
Committee's consideration of a number of subjective and objective criteria.
Because of the Company's disappointing financial performance, the Committee did
not increase the minimum base salary provided for in the employment agreement.
Mr. Zacks' employment agreement also provided that during the
employment term, he was entitled to participate in the annual incentive plan at
an annual level of 40% of base salary if target performance levels were met and
100% of base salary if maximum performance levels were met or exceeded. Under
the terms of the annual incentive plan for 2003, Mr. Zacks was entitled to
receive an incentive award of 40% of base salary if the threshold performance
levels were met. In his position, 75% of his potential annual incentive award
was based on the achievement of pre-established corporate financial performance
goals and 25% was based on the achievement of pre-established corporate
strategic objectives. As mentioned previously, none of the Company's executive
officers, including Mr. Zacks, received an incentive bonus award under the 2003
annual incentive plan.
14
STOCK-BASED COMPENSATION PLANS
The Company's long-term compensation program consists primarily of
options granted under the Company's stock incentive plans and restricted common
shares. All options are granted with exercise prices at least equal to the
market value of the Company's common shares on the dates of grant. If there is
no appreciation in the market value of the Company's common shares, the options
are valueless. The Compensation Committee grants options based on its subjective
determination of the relative current and future contribution that each
prospective optionee has or may make to the long-term welfare of the Company.
Typically, options are granted to the executive officers on an annual basis. The
table under "COMPENSATION OF EXECUTIVE OFFICERS - GRANTS OF OPTIONS" shows the
options granted to each of the named individuals during the 2003 fiscal year.
From time to time, the Compensation Committee has also awarded
restricted common shares to executive officers of the Company. The Compensation
Committee believes that restricted stock awards which vest over a period of time
can provide powerful incentives to an executive to remain with the Company and
to strive to build shareholder value. Restricted stock awards also provide a
means to increase share ownership by Company executives.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended,
generally prohibits the Company from deducting non-performance-based
compensation in excess of $1,000,000 per taxable year paid to the Chief
Executive Officer and the four other most highly compensated executive officers
serving as such at the end of the Company's fiscal year. The Company may
continue to deduct compensation paid to such executive officers in excess of
$1,000,000 if the payment of that compensation qualifies for an exception,
including an exception for certain "performance-based" compensation.
The Compensation Committee does not have a policy that requires its
executive compensation programs to qualify as performance-based compensation
under Section 162(m), although the Committee will continue to work to structure
components of its executive compensation package to achieve maximum
deductibility under Section 162(m) while at the same time considering the goals
of its executive compensation philosophy.
ADDITIONAL COMPENSATION PLANS
At various times in the past, the Company has adopted broad-based
employee benefit plans in which the executive officers are permitted to
participate on the same terms as non-executive officer employees who meet
applicable eligibility criteria, subject to legal limitations on the amounts
that may be contributed or the benefits that may be payable under the plans.
Benefits under these plans are not tied to performance.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS:
Philip G. Barach Janice Page Harvey A. Weinberg
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
SUMMARY OF CASH AND OTHER COMPENSATION
The following table shows, for the last three fiscal years, the cash
compensation and other benefits paid or provided by the Company to the
individual who served as Chief Executive Officer during the 2003 fiscal year and
the other named individuals. All dollar amounts are rounded down to the nearest
whole dollar.
15
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
-----------------------
ANNUAL COMPENSATION AWARDS
----------------------------------------- -----------------------
NAME AND COMMON
PRINCIPAL POSITION RESTRICTED SHARES ALL OTHER
DURING 2003 FISCAL SALARY BONUS OTHER ANNUAL STOCK UNDERLYING COMPENSATION
FISCAL YEAR YEAR ($) ($) COMPENSATION($) AWARD(S)($) OPTIONS(#) ($)
- ----------------------- ------ --------- -------- --------------- ----------- ---------- ------------
Gordon Zacks: 2003 $ 490,000 $ 0 $ 27,653 (2) -- (3) 0 $ 9,651 (4)
Chairman of the 2002 $ 490,000 $ 0 $ 42,485 (2) -- 50,000 $10,261
Board, Chief 2001 $ 490,000 $ 49,000 $ 46,103 (2) -- 0 $13,393
Executive Officer,
President (1)
Christian Galvis: 2003 $ 258,000 $ 0 $ 21,900 (5) -- (3) 50,000 $ 4,568 (4)
Executive Vice 2002 $ 258,000 $ 0 $ 22,875 (5) -- (5) 25,000 $ 6,031
President - 2001 $ 258,000 $ 46,440 $ 23,936 (5) -- (5) 52,350 $ 7,251
Operations, President
- Operations of
Barry Comfort Group
Daniel D. Viren: 2003 $ 220,000 $ 0 $ 21,004 (6) -- 15,000 $ 4,044 (4)
Senior Vice President 2002 $ 220,000 $ 0 $ 15,971 (6) -- 15,000 $ 3,267
- Finance, Chief 2001 $ 220,000 $ 38,200 $ 17,571 (6) -- 0 $ 3,300
Financial Officer,
Secretary, Treasurer
Donald G. Van Steyn: 2003 $ 150,272 $ 0 $ 19,600 (7) -- 15,000 $ 6,239 (4)
Vice President - 2002 $ 150,272 $ 0 $ 19,600 (7) -- 15,000 $ 5,810
Chief Information 2001 $ 150,272 $ 9,016 $ 19,600 (7) -- 3,188 $ 7,249
Officer
Harry F. Miller: 2003 $ 138,000 $ 0 $ 19,700 (8) -- 15,000 $ 7,037 (4)
Vice President - 2002 $ 138,000 $ 0 $ 19,215 (8) -- 15,000 $ 6,676
Human Resources 2001 $ 138,000 $ 8,280 $ 19,694 (8) -- 27,064 $ 8,872
Thomas F. Coughlin: 2003 $ 300,000 $110,000 (10) $152,448 (11) -- 50,000 $ 647 (4)
Former Executive Vice 2002 $ 231,250 $100,000 (10) $ 57,131 (11) -- 100,000 $ 80
President - Sales & 2001 -- -- -- -- -- --
Marketing (9)
(1) Mr. Zacks assumed the additional position of President of the Company
following the resignation of William Lenich on August 19, 2002. As
previously discussed, Mr. Zacks retired from his positions as President
and Chief Executive Officer of the Company effective March 10, 2004.
(2) "Other Annual Compensation" for Mr. Zacks includes: (a) a premium
payment of $5,603 in 2003 and $19,088 in each of 2002 and 2001, to
continue a life insurance policy providing a level of death benefits
not available under the standard group life insurance program; (b) the
amounts of $7,433, $12,183 and $19,522 reflecting his personal use of a
Company-furnished automobile in 2003, 2002 and 2001, respectively; (c)
payments of $9,163, $5,800 and $5,264 made during 2003, 2002 and 2001,
respectively, to cover his portion of the insurance premiums on a life
insurance policy on his life; (d) payments of $3,225 and $3,185 made
during 2003 and 2002, respectively, to cover his estimated tax
liability with respect to those premium payments; and (e) a travel
allowance of $2,229 in each of 2003, 2002 and 2001.
16
(3) On May 13, 1999, Mr. Zacks was awarded 50,000 restricted common shares
under the terms of a restricted stock agreement with the Company. The
per share value of the Company's common shares on that date was $8.375.
The restrictions on transfer generally were to lapse on 20% of the
common shares on the first through fifth anniversaries of the grant
date. Restrictions on transfer lapsed as to 10,000 common shares on
each of May 13, 2000, 2001, 2002 and 2003. Under the terms of his
separation agreement with the Company, the restrictions will lapse on
the remaining 10,000 restricted common shares on May 13, 2004. See
"EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN
CONTROL ARRANGEMENTS."
On March 23, 2000, Mr. Galvis was awarded 26,000 restricted common
shares under the terms of a restricted stock agreement with the
Company. The per share value of the Company's common shares on that
date was $3.00. The restrictions on transfer generally lapse on 20% of
the common shares on the first through fifth anniversaries of the grant
date. Restrictions on transfer lapsed as to 5,200 common shares on each
of March 23, 2001, 2002, 2003 and 2004. In addition, if Mr. Galvis dies
or becomes totally disabled prior to the fifth anniversary of the grant
date or if there is a change of control of the Company, all remaining
restrictions will lapse. If Mr. Galvis' employment is terminated by the
Company for cause or if Mr. Galvis voluntarily terminates his
employment, he will forfeit any common shares whose restrictions have
not lapsed. If Mr. Galvis' employment is terminated by the Company
without cause, all remaining restrictions will lapse. Mr. Galvis
exercises all voting rights and is entitled to receive any dividends
payable on the restricted common shares.
As of January 3, 2004, the aggregate holdings of restricted common
shares by Mr. Zacks and Mr. Galvis and the market value (net of
consideration paid by the executive officer) of such holdings were: Mr.
Zacks, 10,000 common shares, $44,000, and Mr. Galvis, 10,400 common
shares, $45,734.
(4) "All Other Compensation" for 2003 includes: (a) interest in the amounts
of $7,222, $3,076, $706, $3,632, $4,480 and $447 credited to the
accounts of Messrs. Zacks, Galvis, Viren, Van Steyn, Miller and
Coughlin, respectively, under the R. G. Barry Corporation Deferred
Compensation Plan (the "Deferred Compensation Plan")*; (b)
contributions in the amounts of $2,000, $2,000, $2,000 and $200 to the
Deferred Compensation Plan on behalf of Messrs. Viren, Van Steyn,
Miller and Coughlin, respectively; and (c) contributions in the amounts
of $2,429, $1,492, $1,338, $607 and $557 to the R. G. Barry Corporation
401(k) Savings Plan on behalf of Messrs. Zacks, Galvis, Viren, Van
Steyn and Miller, respectively, to match 2003 pre-tax elective deferral
contributions (included under "Base Salary") made by each individual.
* The Deferred Compensation Plan was amended on February 20, 2004 to
provide that no further deferrals could be made after February 21,
2004.
(5) "Other Annual Compensation" for Mr. Galvis includes: (a) premium
payments of $9,700, $9,700 and $8,340 in 2003, 2002 and 2001,
respectively, to continue a life insurance policy providing a level of
death benefits not available under the standard group life insurance
program; (b) the amounts of $9,600, $9,600 and $8,471 reflecting his
personal use of a Company-furnished automobile and/or a car allowance
paid to him in 2003, 2002 and 2001, respectively; and (c) the amounts
of $2,600, $3,575 and $7,125, reflecting the fair market value of 1,250
common shares issued to him on March 1, 2004, March 3, 2003 and March
1, 2002, respectively, under a stock grant agreement. See "EQUITY
COMPENSATION PLAN INFORMATION - NON-SHAREHOLDER APPROVED EQUITY
ARRANGEMENTS."
17
(6) "Other Annual Compensation" for Mr. Viren includes: (a) a premium
payment of $7,400 in each of 2003, 2002 and 2001, to continue a life
insurance policy providing a level of death benefits not available
under the standard group life insurance program; and (b) the amounts of
$13,033, $8,000 and $9,600 reflecting his personal use of a
Company-furnished automobile or a car allowance paid to him in 2003,
2002 and 2001, respectively.
(7) "Other Annual Compensation" for Mr. Van Steyn includes: (a) a premium
payment of $9,400 in each of 2003, 2002 and 2001, to continue a life
insurance policy providing a level of death benefits not available
under the standard group life insurance program; and (b) car allowances
of $9,600 in each of 2003, 2002 and 2001.
(8) "Other Annual Compensation" for Mr. Miller includes: (a) premium
payment of $9,500 in each of 2003 and 2002 and $8,308 in 2001 to
continue a life insurance policy providing a level of death benefits
not available under the standard group life insurance program; and (b)
the amounts of $11,386, $9,600 and $9,600 reflecting his personal use
of a Company-furnished automobile or a car allowance paid to him in
2003, 2002 and 2001, respectively.
(9) Mr. Coughlin became Executive Vice President - Sales & Marketing on
August 19, 2002 and served as Executive Vice President - Sales from
April 15, 2002 until August 19, 2002. Mr. Coughlin resigned his
position as an executive officer of the Company effective December 1,
2003.
(10) In connection with the hiring of Mr. Coughlin, on April 30, 2002, the
Company paid Mr. Coughlin the first $50,000 installment of a $100,000
hiring bonus. The second installment of Mr. Coughlin's hiring bonus was
paid on March 18, 2003. Following Mr. Coughlin's assumption of
additional responsibilities due to the resignation of Mr. Lenich on
August 19, 2002, Mr. Coughlin was paid a "retention" bonus of $100,000,
which was paid in two installments of $50,000 each in September 2002
and April 2003. The amount shown for 2003 includes the amount of
$10,000 representing payment for unused vacation.
(11) "Other Annual Compensation" for Mr. Coughlin includes: (a) premium
payments of $4,828 and $3,000 in 2003 and 2002, respectively, to
continue a life insurance policy providing a level of death benefits
not available under the standard group life insurance program; (b) car
allowances of $8,800 and $6,800 in 2003 and 2002, respectively; and (c)
payment of moving expenses in the amount of $138,820 and $47,331 in
2003 and 2002, respectively.
GRANTS OF OPTIONS
The following table summarizes information concerning individual grants
of options during the 2003 fiscal year to each of the individuals named in the
Summary Compensation Table. No stock appreciation rights were granted during the
2003 fiscal year.
18
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL
NUMBER OF REALIZABLE VALUE AT
COMMON % OF TOTAL ASSUMED ANNUAL
SHARES OPTIONS RATES
UNDERLYING GRANTED TO EXERCISE OF SHARE PRICE
OPTIONS EMPLOYEES PRICE EXPIRATION APPRECIATION
NAME GRANTED(#) IN FISCAL YEAR ($/SHARE) DATE FOR OPTION TERM (1)
- ------------------------ ------------- -------------- --------- ---------- ----------------------
5% 10%
-------- ---------
Gordon Zacks............ 0 -- -- -- -- --
Christian Galvis........ 40,000 (2)(3) 15.28% $3.27 5/6/13 $ 82,259 $ 208,462
10,000 (4)(5) 3.82% $3.27 5/6/13 $ 20,565 $ 52,115
Daniel D. Viren......... 15,000 (2)(3) 5.73% $3.27 5/6/13 $ 30,847 $ 78,173
Donald G. Van Steyn..... 15,000 (2)(3) 5.73% $3.27 5/6/13 $ 30,847 $ 78,173
Harry F. Miller......... 12,000 (2)(3) 4.58% $3.27 5/6/13 $ 24,678 $ 62,538
3,000 (4)(5) 1.15% $3.27 5/6/13 $ 6,169 $ 15,635
Thomas F. Coughlin...... 10,000 (2)(3) 3.82% $3.27 3/1/04 $ 20,565 $ 52,115
40,000 (4)(5) 15.28% $3.27 3/1/04 $ 82,259 $ 208,462
- --------------------------
(1) The dollar amounts reflected in this table are the result of
calculations at the 5% and 10% annual appreciation rates set by the SEC
for illustrative purposes, and assume the options are held until their
respective expiration dates. These dollar amounts are not intended to
forecast future performance or possible future appreciation in the
price of the Company's common shares. Shareholders are, therefore,
cautioned against drawing any conclusions from the appreciation data
shown, aside from the fact that optionees will only realize value from
the option grants shown if the price of the Company's common shares
appreciates, which benefits all shareholders of the Company
commensurately.
(2) These incentive stock options were granted on May 7, 2003 and become
exercisable as follows: (a) for Mr. Galvis as to 10,000 common shares
on each of the second, third, fourth and fifth anniversaries of the
grant date; (b) for each of Messrs. Viren and Van Steyn as to 3,000
common shares on each of the first, second, third, fourth and fifth
anniversaries of the grant date; and (c) for Mr. Miller as to 3,000
common shares on each of the second, third, fourth and fifth
anniversaries of the grant date. Mr. Coughlin's incentive stock options
expired on March 1, 2004 following his termination of employment
effective December 1, 2003.
(3) Each of these options becomes fully exercisable in the event of defined
changes in control of the Company. If an optionee's employment is
terminated by reason of death or long-term disability, these options
may thereafter be exercised in full for a period of twelve months,
subject to their stated term. If an optionee's employment is terminated
for any other reason, any exercisable options held by him at the date
of termination may be exercised for a period of three months, subject
to their stated term. If an optionee's employment is terminated for
cause, his options are immediately forfeited.
19
(4) These non-qualified stock options were granted on May 7, 2003 and
become exercisable as follows: (a) for Mr. Galvis as to all 10,000
common shares on the first anniversary of the grant date; and (b) for
Mr. Miller as to all 3,000 common shares on the first anniversary of
the grant date. Mr. Coughlin's non-qualified stock options expired on
March 1, 2004 following his termination of employment effective
December 1, 2003.
(5) Each of these options becomes fully exercisable in the event of defined
changes in control of the Company. If an optionee's employment is
terminated by reason of death, long-term disability or retirement,
these options may, thereafter, be exercised in full for a period of
twelve months, subject to their stated term. If an optionee's
employment is terminated for any other reason, any exercisable options
held by him at the date of termination may be exercised for a period of
three months, subject to their stated term. If an optionee's employment
is terminated for cause, his options are immediately forfeited.
OPTION EXERCISES AND HOLDINGS
The following table summarizes information concerning options exercised
during, and unexercised options held as of the end of, the 2003 fiscal year by
each of the individuals named in the Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF
COMMON NUMBER OF COMMON SHARES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
UNDERLYING AT FISCAL YEAR-END (#)(1)(2) FISCAL YEAR-END ($)(3)
OPTIONS VALUE ------------------------------ ----------------------------
NAME EXERCISED REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- ---------- ------------ ----------- ------------- ----------- -------------
Gordon Zacks........... 0 -- 217,810 37,500(4) -- --
Christian Galvis....... 0 -- 68,954 126,850 $11,760 $64,340
Daniel D. Viren........ 0 -- 48,000 57,000 $29,250 $36,450
Donald G. Van Steyn.... 0 -- 12,000 36,188 $12,600 $25,350
Harry F. Miller........ 1,000 $758 12,000 70,743 $12,600 $25,350
Thomas F. Coughlin..... 0 -- 20,000 130,000 -- $56,500
- --------------------------
(1) Reflects adjustments for 4-for-3 share split on June 1, 1994, for
4-for-3 share split on September 1, 1995, and for 5-for-4 share split
on June 3, 1996.
(2) Outstanding options that are not fully exercisable will become so in
the event of certain defined changes in control of the Company.
(3) The value of "in-the-money" options is calculated by multiplying the
number of options by the excess of the closing price of the Company's
common shares on January 2, 2004 ($4.40 per share) over the exercise
price of the option. None of the options held by Mr. Zacks were
in-the-money on January 3, 2004. None of the exercisable options held
by Mr. Coughlin were in-the-money on January 3, 2004.
(4) Under the terms of his separation agreement with the Company, all of
the options held by Mr. Zacks will become fully exercisable on July 1,
2004. See "EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE IN CONTROL ARRANGEMENTS."
20
EQUITY COMPENSATION PLAN INFORMATION
The Company maintains six equity compensation plans (the "Plans") under
which common shares may be issued to eligible directors, officers and employees:
(i) the R. G. Barry Corporation 1988 Stock Option Plan (the "1988 Plan"); (ii)
the R. G. Barry Corporation 1994 Stock Option Plan (the "1994 Plan"); (iii) the
R. G. Barry Corporation Stock Option Plan for Non-Employee Directors (the
"Directors Plan"); (iv) the R. G. Barry Corporation 1997 Incentive Stock Plan
(the "1997 Plan"); (v) the R. G. Barry Corporation 2002 Stock Incentive Plan
(the "2002 Plan"); and (vi) the R. G. Barry Corporation Employee Stock Purchase
Plan (the "Stock Purchase Plan"). No new options may be granted under the 1988
Plan, the Directors Plan or, as of March 2004, the 1994 Plan. Each of the Plans
has been approved by the shareholders of the Company.
In addition, as of January 3, 2004, the Company was party to an
individual stock grant agreement with Christian Galvis, its Executive Vice
President - Operations and President - Operations of Barry Comfort Group,
providing for the issuance of common shares over a period of years. This
individual equity compensation arrangement was not approved by the shareholders.
The following table shows for the Plans, as a group, the number of
common shares issuable upon exercise of outstanding options, the
weighted-average exercise price of outstanding options and the number of common
shares remaining available for future stock option grants, in each case as of
January 3, 2004. The following table also shows comparable information, as of
January 3, 2004, for the stock grant agreement with Mr. Galvis.
NUMBER OF COMMON
SHARES REMAINING
AVAILABLE FOR FUTURE
NUMBER OF COMMON ISSUANCE UNDER EQUITY
SHARES TO BE ISSUED WEIGHTED-AVERAGE COMPENSATION PLANS
UPON EXERCISE OF EXERCISE PRICE OF (EXCLUDING COMMON
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, SHARES REFLECTED IN
WARRANTS AND RIGHTS WARRANTS AND RIGHTS COLUMN (a))
PLAN CATEGORY (a)* (b)* (c)*
- -------------------------------- -------------------- -------------------- ---------------------
Equity compensation plans
approved by shareholders........ 1,349,174(1) $6.19(2) 765,988(3)
Equity compensation plans not
approved by share-
holders......................... 2,500(4) n/a n/a
Total........................... 1,351,674 $6.19 765,988
- --------------------------
*Reflects adjustments for changes in the Company's capitalization.
21
(1) Includes 83,877 common shares issuable upon exercise of options granted
under the 1988 Plan, 235,451 common shares issuable upon exercise of
options granted under the 1994 Plan, 31,250 common shares issuable upon
exercise of options granted under the Directors Plan, 703,346 common
shares issuable upon exercise of options granted under the 1997 Plan
and 295,250 common shares issuable upon exercise of options granted
under the 2002 Plan. There are no options outstanding under the Stock
Purchase Plan, as Term X of that Plan ended on February 28, 2002 and
Term XI has not yet commenced.
(2) Represents the weighted-average exercise price of options outstanding
under the Plans.
(3) Includes 89,754 common shares remaining available for future issuance
under the 1997 Plan, 154,750 common shares remaining available for
future issuance under the 2002 Plan, 506,099 common shares remaining
available for future issuance under the Stock Purchase Plan and 15,385
common shares remaining available for future issuance under the 1994
Plan. No further options may be granted under the 1988 Plan or the
Directors Plan and, as of March 2004, the 1994 Plan.
(4) Represents 2,500 common shares remaining issuable to Mr. Galvis in
accordance with the terms of his stock grant agreement.
NON-SHAREHOLDER APPROVED EQUITY ARRANGEMENTS
Mr. Galvis and the Company are parties to a stock grant agreement,
dated as of January 4, 1998, which provides for the issuance of an aggregate of
up to 10,000 common shares over a period of up to eight years. As of April 1,
2004, a total of 2,500 common shares remains unissued under such agreement. Mr.
Galvis has been entitled to receive 1,250 common shares on the last business day
of each fiscal year, beginning with the 1998 fiscal year, so long as he remains
employed by the Company on that date. In addition, he will receive an additional
1,250 common shares in respect of any fiscal year in which the Company achieves
120% of the "target profit goal" established by the Board of Directors for that
fiscal year. If Mr. Galvis' employment with the Company terminates for any
reason (other than as a result of his death or within two years following a
"change in control") he will forfeit his right to receive any common shares
other than those previously earned under the terms of the stock grant agreement.
If his employment is terminated by reason of his death or by the Company without
"cause" (as defined in the stock grant agreement) or by Mr. Galvis for "good
reason" (as defined in the stock grant agreement), in each case within two years
following a "change in control" (as defined in the stock grant agreement), Mr.
Galvis or his estate, as appropriate, will be entitled to be issued all of the
common shares subject to the stock grant agreement which have not previously
been issued. Mr. Galvis has received 1,250 common shares in respect of each of
the last six fiscal years of the Company.
On March 10, 2004, the Company granted an option to purchase 50,000
common shares to Thomas M. Von Lehman as an inducement for him to agree to serve
as the Company's President and Chief Executive Officer. This option was not
granted pursuant to a shareholder approved plan. Mr. Von Lehman was also granted
a second option to purchase 50,000 shares under the shareholder approved 2002
Plan. For more information on these option grants, see "EMPLOYMENT CONTRACTS AND
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS" on page ___ of
this Proxy Statement.
PENSION PLANS
The Company's pension plan provides for the payment of monthly benefits
to salaried employees at age 65 based upon 48% of a participant's "final average
monthly compensation" (subject to a limitation imposed by law on the amount of
annual compensation upon which benefits may be based) less a
22
designated percentage of the participant's primary social security benefits.
Benefits under the pension plan are reduced by 1/30th for each year of credited
service less than 30 years. The Company's two supplemental retirement plans -
the supplemental retirement plan and the benefit restoration plan - provide for
the payment of additional monthly retirement benefits based upon 2-1/2% of an
eligible participant's "final average monthly compensation" reduced by a
designated percentage of the participant's primary social security benefits with
the difference multiplied by the participant's years of credited service up to a
maximum of 24 years, and the resulting product then reduced by the participant's
monthly pension payable under the pension plan. The benefit to which any
employee who was a participant in the supplemental retirement plans on December
31, 1988 is entitled will not be less than 60% of the participant's "final
average monthly compensation," reduced by (i) the participant's monthly pension
payable under the pension plan and (ii) a designated percentage of the
participant's primary social security benefits.
On February 20, 2004, the Company's pension plan, supplemental
retirement plan and benefit restoration plan were amended to freeze all benefits
at the level accrued at March 31, 2004 under the respective plans. Consequently,
no employee will earn further benefits under the plans after March 31, 2004.
The following table shows the estimated pension benefits payable under
the pension plan and the supplemental retirement plans at age 65 to individuals
who were participants in the supplemental retirement plans on December 31, 1988,
based on compensation that is covered by the pension plan and the supplemental
retirement plans, years of service with the Company and payment in the form of a
lifetime annuity:
PENSION PLANS TABLE
(MINIMUM BENEFIT FOR INDIVIDUALS WHO WERE PARTICIPANTS
IN THE SUPPLEMENTAL RETIREMENT PLAN ON DECEMBER 31, 1988)
ESTIMATED ANNUAL PENSION BENEFITS
FINAL AVERAG BASED ON CREDITED YEARS OF SERVICE INDICATED
ANNUAL --------------------------------------------------------------------------------------
COMPENSATION 10 15 20 25 30
- ------------- -------- -------- -------- -------- --------
$125,000 $ 75,000 $ 75,000 $ 75,000 $ 75,000 $ 75,000
175,000 105,000 105,000 105,000 105,000 105,000
225,000 135,000 135,000 135,000 135,000 135,000
275,000 165,000 165,000 165,000 165,000 165,000
325,000 195,000 195,000 195,000 195,000 195,000
375,000 225,000 225,000 225,000 225,000 225,000
425,000 255,000 255,000 255,000 255,000 255,000
475,000 285,000 285,000 285,000 285,000 285,000
525,000 315,000 315,000 315,000 315,000 315,000
575,000 345,000 345,000 345,000 345,000 345,000
625,000 375,000 375,000 375,000 375,000 375,000
675,000 405,000 405,000 405,000 405,000 405,000
725,000 435,000 435,000 435,000 435,000 435,000
Annual benefits are shown before deduction of 50% of primary social
security benefits.
The following table shows the estimated pension benefits payable under
the pension plan and the supplemental retirement plans at age 65 to individuals
who became participants in the supplemental retirement plans after December 31,
1988, based on compensation that is covered by the pension plan and the
supplemental retirement plans, years of service with the Company and payment in
the form of a lifetime annuity:
23
PENSION PLANS TABLE
(MINIMUM BENEFIT FOR INDIVIDUALS WHO BECAME PARTICIPANTS
IN THE SUPPLEMENTAL RETIREMENT PLAN AFTER DECEMBER 31, 1988)
ESTIMATED ANNUAL PENSION BENEFITS
FINAL AVERAG BASED ON CREDITED YEARS OF SERVICE INDICATED
ANNUAL --------------------------------------------------------------------------------------
COMPENSATION 10 15 20 25 30
- ------------- -------- -------- -------- -------- --------
$125,000 $ 31,250 $ 46,875 $ 62,500 $ 75,000 $ 75,000
175,000 43,750 65,625 87,500 105,000 105,000
225,000 56,250 84,375 112,500 135,000 135,000
275,000 68,750 103,125 137,500 165,000 165,000
325,000 81,250 121,875 162,500 195,000 195,000
375,000 93,750 140,625 187,500 225,000 225,000
425,000 106,250 159,375 212,500 255,000 255,000
475,000 118,750 178,125 237,500 285,000 285,000
525,000 131,250 196,875 262,500 315,000 315,000
575,000 143,750 215,625 287,500 345,000 345,000
625,000 156,250 234,375 312,500 375,000 375,000
675,000 168,750 253,125 337,500 405,000 405,000
725,000 181,250 271,875 362,500 435,000 435,000
Annual benefits are shown before a deduction of 20.83% of primary
social security benefits after 10 years of service, 31.25% after 15 years of
service, 41.67% after 20 years of service, 50% after 25 years of service and 50%
after 30 years of service.
A participant's "final average monthly compensation" for purposes of
the Company's pension plan and supplemental retirement plans is the average of
the participant's compensation (salary and commissions but excluding cash
bonuses and overtime pay) during the five consecutive calendar years of the last
ten years in which such total compensation is highest. However, for individuals
who became participants in the supplemental retirement plans on or before
December 31, 1988, compensation used in determining "final average annual
compensation" includes bonuses and incentives. The "final average annual
compensation" as of the end of the 2003 fiscal year was $601,540, $258,000,
$182,422, $146,741 and $134,819 for Messrs. Zacks, Galvis, Viren, Van Steyn and
Miller, respectively. Messrs. Zacks, Galvis, Viren, Van Steyn and Miller have
approximately 48, 13, 15, 15 and 11 years, respectively, of credited service
under the pension plan and the supplemental retirement plan. Mr. Zacks was a
participant in the supplemental retirement plans on December 31, 1988. Messrs.
Galvis, Viren, Van Steyn and Miller became participants in the supplemental
retirement plan after December 31, 1988. Mr. Coughlin had approximately two
years of credited service under the pension plan and the supplemental retirement
plans prior to resigning his position with the Company effective December 1,
2003. Since no benefits are payable under the pension plan or the supplemental
retirement plans unless a participant has at least five years of credited
service, Mr. Coughlin will receive no benefits under any of these plans. Mr.
Zacks began receiving benefits under the pension plan in April 2004 because of
provisions in the Internal Revenue Code that require payments under a qualified
pension plan commence not later than April 1 of the calendar year following the
year in which the participant reaches age 70-1/2. Mr. Zacks will begin receiving
benefits under the non-qualified supplemental retirement plans in July 2004
after his employment with the Company terminates.
24
DIRECTORS' COMPENSATION
Each director who is not an employee of the Company (a "Non-Employee
Director") receives $17,000 annually for services as a director. In addition,
each Non-Employee Director receives $1,000 for each regular meeting and $500 for
each telephonic meeting of the Board attended. All members of standing
committees of the Board receive a fee of $500 for each meeting attended that
occurs on the same day as a Board meeting, a fee of $1,000 for attending a
committee meeting that does not occur on the same day as a Board meeting and a
fee of $500 for participating in a telephonic meeting of a committee. Board
committee chairs may receive additional fees for serving in that capacity,
however, none of the committee chairs are currently receiving additional fees.
Each Non-Employee Director has been granted a non-qualified stock
option to purchase 6,250 common shares with an exercise price equal to the fair
market value of the common shares on the grant date. These options have terms of
ten years and become exercisable six months after the grant date. All options
held by current Non-Employee Directors, other than Mr. Lauer, were granted
pursuant to the Directors Plan which terminated on May 16, 2001. Mr. Lauer's
non-qualified stock option was granted under the 2002 Plan.
OTHER COMPENSATION
In 1952, the Company obtained from Florence Zacks Melton, the mother of
Gordon Zacks, the exclusive right to manufacture and sell various slipper styles
and other product designs created and owned by her, including future styles and
designs. Under a royalty agreement with the Company, Mrs. Melton receives 1% of
the Company's net sales of products utilizing her designs. The royalty agreement
terminates five years after the death of Mrs. Melton. During 2003, the Company
accrued royalty payments (which will be paid in 2004) totaling $60,000 pursuant
to the royalty agreement. In October 2000, the royalty agreement was amended to
give the Company an option to purchase Mrs. Melton's product designs and related
patent rights. This option is exercisable by the Company for a period of six
months following the death of Mrs. Melton or a change of control of the Company.
The option price for Mrs. Melton's ownership interest in the product designs and
patent rights is $750,000 if the option is exercised following a change of
control of the Company that occurs prior to the death of Mrs. Melton and
$500,000 if the option is exercised following the death of Mrs. Melton if her
death occurs prior to a change of control. The royalty agreement was also
amended to grant to Mrs. Melton the right to require the Company to purchase her
product designs and patent rights for a period of six months following a change
of control of the Company that occurs prior to her death for a purchase price of
$750,000. Upon the Company's purchase of Mrs. Melton's design rights, the
royalty agreement will terminate.
Mrs. Melton is also a party to a consulting services agreement with the
Company pursuant to which she has agreed to provide consulting services to the
Company in regard to product design and construction and to promote and enhance
the Company's image and reputation through participation in employee meetings
and Company communications. The consulting services agreement provides for
quarterly payments of $15,000 each. The initial term of the agreement began on
January 1, 2000 and ended on December 31, 2001. The term of the agreement was
automatically renewed and will continue to be automatically renewed for
additional 12-month periods unless either party elects not to renew.
On January 8, 2004, the Company engaged The Meridian Group ("Meridian")
to assist the Company in developing a new operating plan for its business and to
assist the Company in securing external financing. With the assistance of
Meridian, the Company developed a new business plan which it is in the process
of implementing. In addition, through the efforts of Meridian, the Company
secured a financing facility with The CIT Group/Commercial Services. Prior to
his appointment as President and Chief Executive Officer of the Company, Thomas
Von Lehman was Senior Project Director of Meridian. Mr. Von Lehman is currently
is on leave of absence from Meridian. Mr. Von Lehman's spouse, Margaret Good, is
25
the President and sole owner of Meridian. Since the Company engaged Meridian, it
has paid or will pay to Meridian a total of approximately $350,000 for
consulting services, excluding travel and out of pocket expenses, in connection
with the development of the new business plan, and a fee of approximately
$227,500 for securing the financing with The CIT Group/Commercial Services.
Meridian has substantially completed its work for the Company under its existing
agreement, although the Company may engage Meridian from time to time to provide
additional consulting services.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Gordon Zacks retired as the President and Chief Executive Officer of
the Company on March 10, 2004, pursuant to a separation agreement with the
Company. The separation agreement terminated the existing employment agreement
between the Company and Mr. Zacks discussed below. Effective on the date of the
separation agreement, Mr. Zacks left his position as President and Chief
Executive Officer and became a non-operational employee of the Company. His
final retirement and termination of employment will be effective July 1, 2004.
Mr. Zacks will continue to receive his current salary ($490,000 on an
annual basis) and benefits until his final retirement and termination on July 1,
2004. At such time, he will be paid all of his compensation previously deferred
under the Company's Deferred Compensation Plan. He will receive benefits under
the Company's pension plans and other benefit plans in accordance with the terms
of those plans. Until he reaches age 75 (age 85 if his final retirement and
termination occurs following a change in control) or his earlier death, the
Company will continue to provide Mr. Zacks with the life, medical and dental
insurance benefits that he was entitled to at the time of his retirement. The
Company will also continue Mr. Zacks' life insurance benefits until he reaches
age 75, and for such period as the Company can maintain such insurance without
additional premium costs. In addition, pursuant to the terms of the separation
agreement, all of the options held by Mr. Zacks will become fully exercisable on
July 1, 2004, and the restrictions on all of his restricted common shares will
lapse on May 13, 2004. If Mr. Zacks attains the age of 75, the Company will use
the cash value that the Company would have had under the split-dollar policy of
insurance maintained for the benefit of Mr. Zacks (without regard to any
borrowings thereof by the Company) to continue the policy's death benefit for
each policy period until Mr. Zacks' death unless doing so for a policy period
will result in reducing such cash value (without regard to any borrowings by the
Company) to an amount less than the aggregate amounts of all premiums paid by
the Company over the life of the policy and its predecessor policy. The Company
must also provide to Mr. Zacks office space for a five-year period beginning
September 1, 2004, and full time secretarial support for a one-year period
beginning September 1, 2004.
Mr. Zacks was designated Senior Chairman of the Board and will preside
over meetings of the Company's shareholders and of the Board until a Chairman of
the Board is duly elected. If the proposed amendments to Article IV of the
Company's Regulations, that would permit the Chairman of the Board to be someone
other than the Chief Executive Officer, are adopted by the shareholders at the
Annual Meeting, it is the intention of the Board to nominate and elect Mr. Zacks
as Chairman of the Board. However, there is no obligation on the part of the
Company or the Board to so nominate Mr. Zacks.
Mr. Zacks will continue as a member of the Board subject to election by
the Company's shareholders and will receive director's fees on the same basis as
the Non-Employee Directors. Mr. Zacks' retainer compensation for 2004 will be
pro-rated based upon his months of service following the termination of his
employment. It is the present intention of the Board and the members of the
Nominating and Governance Committee to nominate Mr. Zacks to stand for election
as a Board member at the 2005 Annual Meeting of Shareholders; however, there is
no obligation to do so.
26
Mr. Zacks had been party to an employment agreement with the Company,
dated July 1, 2001, the initial term of which was to end on July 1, 2004. Under
the terms of the employment agreement, the Company had been obligated to cause
Mr. Zacks to be nominated as a director during the employment term. Mr. Zacks
had been entitled to receive a minimum annual base salary of $490,000, subject
to increases that the Board of Directors may grant. In addition to his annual
base salary, Mr. Zacks had been entitled to participate in the Company's annual
incentive plan at an annual level of 40% of base salary if the target
performance levels were met and 100% of base salary if the maximum performance
levels were met or exceeded. He was also entitled to receive certain health and
life insurance coverages, pension and retirement benefits and other employee
benefits. As discussed above, this agreement has been terminated.
Under an agreement dated September 27, 1989, as amended, the Company
agreed, upon the death of Mr. Zacks, to purchase from his estate, at the
estate's election, up to $4 million of the common shares held by Mr. Zacks at
the time of his death. The common shares would be purchased at their fair market
value at the time the estate exercises its put right. The estate's put right
expires after the second anniversary of Mr. Zacks' death. The Company agreed to
fund its potential obligation to purchase the common shares by purchasing and
maintaining life insurance during Mr. Zacks' lifetime. In addition, Mr. Zacks
agreed that, for a period of 24 months following his death, the Company will
have a right of first refusal to purchase any common shares owned by Mr. Zacks
at his death if his estate elects to sell the common shares. This agreement
remains in effect.
Thomas M. Von Lehman was named President and Chief Executive Officer of
the Company on March 10, 2004 and, at that time, the Company entered into an
employment contract with Mr. Von Lehman. The employment contract provides for an
initial six-month term that may be extended for additional three-month periods
upon the agreement of the Company and Mr. Von Lehman.
Pursuant to the employment contract, Mr. Von Lehman will receive
$50,000 per month in salary and will be eligible to participate in all benefits
plans made available to the Company's senior executive officers. The employment
contract also provides for the payment of a $100,000 cash bonus to Mr. Von
Lehman if the Company achieves an EBITDA (earnings before interest, taxes,
depreciation and amortization) target to be established by the Board for the
2004 fiscal year. The cash bonus will be increased to $200,000 if the Company
achieves the EBITDA target and Mr. Von Lehman serves out the initial term and a
first extension of the employment contract.
Mr. Von Lehman was also granted options covering 100,000 common shares
at an exercise price of $2.20 per share. These options have a two-year term and
will vest at the end of the initial six-month term of the employment contract
unless certain events occur prior to such time. Mr. Von Lehman will receive
additional options covering an additional 50,000 common shares if and when the
employment contract is extended beyond the initial six-month term. These options
will have an exercise price equal to the market price of the Company's common
shares on the date of grant, will have a two-year term and will vest at the end
of extended employment period unless certain events occur prior to that time.
If the Company is involved in a "sale transaction" (as defined in the
employment contract) prior to the second anniversary of the last day of the
initial six-month term of the employment contract (except as otherwise set forth
in the employment contract), Mr. Von Lehman will receive a transaction success
fee. The amount of the fee will be one percent of the aggregate amount of
consideration received by the Company in the particular sale transaction,
including any indebtedness of the Company assumed by the purchaser.
27
If Mr. Von Lehman's employment is terminated by the Company without
"cause" (as defined in the employment contract) or by Mr. Von Lehman for "good
reason" (as defined in the employment contract), Mr. Von Lehman will be entitled
to a one-time cash payment equal to the monthly base salary of $50,000
multiplied by the number of months remaining on the then-current term of the
employment contract. Further, by its terms, the employment contract will
terminate at the end of the initial six-month term if it is not extended and
will terminate immediately if Mr. Von Lehman dies. The Company may terminate the
contract upon written notice to Mr. Von Lehman if Mr. Von Lehman becomes
"disabled" (as defined in the employment contract) and has not recovered and
returned to his duties within 30 days.
Christian Galvis, Executive Vice President - Operations and President -
Operations of Barry Comfort Group, is a party to an executive employment
agreement with the Company, dated as of January 5, 2004. Under this agreement,
Mr. Galvis is entitled to receive a minimum annual base salary of $258,000. In
addition to his annual base salary, Mr. Galvis is entitled to participate in the
annual incentive plan, at a maximum annual level equal to 60% of his base
salary, and to receive certain health and life insurance coverages, pension and
retirement benefits and other employee benefits. If Mr. Galvis' employment is
terminated by the Company without "cause" (as defined in his employment
agreement) or by Mr. Galvis for "good reason" (as defined in the employment
agreement), he will be entitled to receive a severance payment equal to the
total compensation (including bonus) paid to or accrued for his benefit for
services rendered during the 12-month period immediately preceding the date of
termination. Mr. Galvis' employment agreement also provides for the continuation
of his salary for a period of time following his permanent and total disability.
In addition, so long as Mr. Galvis remains in the employment of the Company on
May 31, 2006, the Company has agreed to retain Mr. Galvis as a consultant to the
Company for a two-year period beginning June 1, 2006, if Mr. Galvis wishes to
provide such consulting services. During the consulting period, the Company will
pay Mr. Galvis a monthly consulting payment of $10,750. Mr. Galvis and the
Company are also parties to the stock grant agreement described above under
"EQUITY COMPENSATION PLAN INFORMATION - NON-SHAREHOLDER APPROVED EQUITY
ARRANGEMENTS."
Daniel D. Viren, Senior Vice President - Finance and Chief Financial
Officer, Secretary and Treasurer, is a party to an executive employment
agreement with the Company, dated as of June 5, 2000, which originally provided
for the employment of Mr. Viren for a term of three years. On June 5, 2003, Mr.
Viren and the Company, with the approval of its Compensation Committee and Board
of Directors, agreed to extend the term of this executive employment contract by
two years. All other provisions of Mr. Viren's original employment agreement
with the Company remain in full force and effect for the term of his employment,
which now ends on June 5, 2005. Under the executive employment agreement, as
amended, Mr. Viren is entitled to receive a minimum annual salary of $220,000,
subject to increases that the Board of Directors may grant. Mr. Viren is
entitled to participate in the annual incentive plan, at a maximum annual level
equal to 60% of his base salary, and to receive certain health and life
insurance coverages, pension and retirement benefits and other employee
benefits. On June 5, 2000, pursuant to his employment agreement, Mr. Viren was
granted options covering 75,000 common shares, with an exercise price of $3.75.
If Mr. Viren's employment is terminated by the Company without "cause" (as
defined in his employment agreement) or by Mr. Viren for "good reason" (as
defined in his employment agreement), he will be entitled to receive a severance
payment equal to the total compensation (including bonus) paid to or accrued for
his benefit for services rendered during the 12-month period immediately
preceding the date of termination. Mr. Viren's employment agreement also
provides for the continuation of his salary for a period of time following his
permanent and total disability.
28
Harry F. Miller, Vice President -- Human Resources of the Company, is a
party to an executive employment agreement with the Company, dated as of January
5, 2004, which provides for the employment of Mr. Miller for a term of three
years. Mr. Miller is entitled to receive a minimum annual base salary of
$150,000. In addition to his annual base salary, Mr. Miller is entitled to
participate in the annual incentive plan, at a maximum level equal to 60% of his
base salary, and to receive certain health and life insurance coverages, pension
and retirement benefits and other employee benefits. If Mr. Miller's employment
is terminated by the Company without "cause" (as defined in the employment
agreement) or by Mr. Miller for "good reason" (as defined in the employment
agreement), he will be entitled to receive a severance payment equal to the
total compensation (including bonus) paid to or accrued for his benefit for
services rendered during the 12-month period immediately preceding the date of
termination. Mr. Miller's employment agreement also provides for the
continuation of his salary for a period of time following his permanent and
total disability.
PERFORMANCE GRAPH
The following line graph compares the yearly percentage change in the
cumulative total shareholder return on the Company's common shares with an index
for shares listed on NYSE (the "New York Stock Exchange Index") and an index for
Media General Industry Group, Textile-Apparel Clothing (the "Textile Apparel
Index"), for the five-year period ended January 2, 2004 (the last trading day
during the Company's 2003 fiscal year).
COMPARISON OF FIVE-YEAR CUMULATIVE
TOTAL RETURNS OF R. G. BARRY CORPORATION
COMMON SHARES, NEW YORK STOCK EXCHANGE INDEX
AND TEXTILE APPAREL INDEX
[PERFORMANCE GRAPH]
[PLOT POINTS TO COME]
ASSUMES $100 INVESTED ON JANUARY 1, 1999
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING JANUARY 3, 2004
29
PROPOSAL TO ADOPT AMENDMENTS TO ARTICLE IV OF THE COMPANY'S
REGULATIONS TO CLARIFY AND SEPARATE THE ROLES OF OFFICERS
(ITEM 2 ON PROXY)
PURPOSE OF THE AMENDMENTS
Article IV, Section 4 of our Regulations provides that the Chairman of
the Board of the Company must also be the Chief Executive Officer of the
Company. The proposed amendments, if adopted, would no longer require the same
person to be both the Chairman of the Board and the Chief Executive Officer and
would create a separate officer position of Chief Executive Officer. The
amendments also provide that the positions of Chairman of the Board and Chief
Executive Officer are not mandatory and the Board is not required to fill these
positions, although it may do so if it desires. We are seeking to separate these
roles for two reasons. First, the Board needs to have the flexibility to assign
titles to management of the Company to more accurately represent the
responsibilities of the officers. Second, the Company has entered into a
separation agreement with Mr. Zacks (discussed above the heading "COMPENSATION
OF EXECUTIVE OFFICERS AND DIRECTORS - EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS"), pursuant to which Mr. Zacks has
retired as President and Chief Executive Officer of the Company. As part of this
separation agreement, the Company stated its intention to seek shareholder
approval of the proposed amendment to separate the position of Chairman from
that of the Chief Executive Officer and its intention to nominate Mr. Zacks to
serve as Chairman of the Board if the amendment is approved. Although he is
still a director of the Company and has the title "Senior Chairman of the
Board", Mr. Zacks is currently unable to serve as Chairman of the Board under
the existing Regulations because he has retired and is no longer the Company's
Chief Executive Officer. If the amendments are approved, the Board intends to
name Mr. Zacks as Chairman of the Board.
PROPOSAL
We are asking our shareholders to adopt amendments to our Regulations
to separate the offices of Chairman of the Board and Chief Executive Officer and
eliminate the requirement that the offices of Chairman of the Board and Chief
Executive Officer be held by the same person. We also are creating a separate
officer position of Chief Executive Officer. Specifically, we propose that
Article IV of our Code of Regulations be amended to do the following:
(i) amend the first two sentences of Article IV, Section
1 to read "The officers of the Corporation shall be
chosen by the Board of Directors and shall be a
President, a Secretary and a Treasurer. The Board of
Directors, in its discretion, may also choose a
Chairman of the Board, a Chief Executive Officer, one
or more Vice-Presidents, Assistant Secretaries,
Assistant Treasurers and other officers.";
(ii) delete current Sections 4 and 5 of Article IV and
replace them in their entirety with the new Sections
4, 5 and 6 set forth below; and
(iii) renumber existing Sections 6 through 11 of Article IV
as Sections 7 through 12, respectively.
The text of new Sections 4, 5 and 6 would read as follows:
SECTION 4. Chairman of the Board. The Chairman of the
Board, if there shall be one, shall preside at all meetings of
the directors and of the shareholders. He shall
30
perform such other duties and may exercise such other powers
as from time to time may be assigned to him by these
Regulations or by the Board of Directors.
SECTION 5. Chief Executive Officer. The Chief
Executive Officer, if there shall be one, shall have, subject
to the control of the Board of Directors, general supervision
of and management over the business of the Corporation and
over its officers and employees and shall see that all orders
and resolutions of the Board of Directors are carried into
effect. Except where by law the signature of the President is
required, the Chief Executive Officer shall possess the same
power as the President to sign all contracts, certificates and
other instruments of the Corporation which may be authorized
by the Board of Directors. The Chief Executive Officer shall
also perform such other duties and may exercise such other
powers as from time to time may be assigned to him by these
Regulations or by the Board of Directors.
SECTION 6. President. The President of the
Corporation shall have, subject to the control of the Board of
Directors and the Chief Executive Officer, if there shall be
one, general and active supervision of and management over the
business of the Corporation and over its officers and
employees and shall see that all orders and resolutions of the
Board of Directors are carried into effect. He shall execute
all bonds, mortgages, contracts and other instruments of the
Corporation requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be
otherwise signed and executed and except that the other
officers of the Corporation may sign and execute documents
when so authorized by these Regulations, the Board of
Directors, the Chief Executive Officer or the President. The
President shall also perform such other duties and may
exercise such other powers as from time to time may be
assigned to him by these Regulations or by the Board of
Directors.
RECOMMENDATION AND VOTE
Adoption of the proposed amendments is being sought because the Ohio
General Corporation Law and the Company's Regulations require shareholder
adoption of any amendment to the Regulations. The proposed amendments to Article
IV of our Regulations require the affirmative vote of the holders of a majority
of our outstanding common shares on April 1, 2004. Common shares represented by
proxies duly executed and returned prior to the Annual Meeting will be voted for
adoption of the proposed the amendments unless contrary instructions are set
forth on your proxy. Abstentions will have the same legal effect as a vote
against adoption of the proposed amendments. If adopted by the shareholders, the
proposed amendments to the Regulations will become effective immediately without
any additional action by the Company.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THE
AMENDMENTS TO ARTICLE IV OF OUR REGULATIONS.
31
AUDIT COMMITTEE MATTERS
REPORT OF THE AUDIT COMMITTEE FOR THE FISCAL YEAR ENDED JANUARY 3, 2004
In accordance with applicable SEC Rules, the Audit Committee has issued
the following report:
ROLE OF THE AUDIT COMMITTEE
The Audit Committee currently consists of four directors and operates
under the charter adopted by the Company's Board of Directors. Each member of
the Audit Committee qualifies as independent for purposes of the NYSE's
corporate governance standards as currently in effect. In accordance with that
charter, the purpose of the Audit Committee is to (a) assist the Board of
Directors with respect to its oversight of: (i) the integrity of the Company's
financial statements; (ii) the Company's compliance with legal and regulatory
requirements; (iii) the independent auditor's qualifications and independence;
and (iv) the performance of the Company's internal audit function and
independent auditors; and (b) prepare an audit committee report that, in
accordance with applicable SEC Rules, is required to be included in the
Company's annual proxy statement. The Audit Committee Charter was recently
amended upon review by the Audit Committee and is included as Appendix A to this
Proxy Statement.
REVIEW AND DISCUSSION WITH INDEPENDENT AUDITORS
In fulfilling its oversight responsibility as to the audit process, the
Audit Committee obtained from KPMG LLP ("KPMG") a written statement describing
all relationships between the Company and KPMG that might bear on KPMG's
independence consistent with Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, as amended. The Audit Committee
discussed with KPMG any relationships or services that may impact the
objectivity and independence of KPMG and satisfied itself as to KPMG's
independence. In addition, the Audit Committee discussed and reviewed with KPMG
all communications required by auditing standards generally accepted in the
United States of America, including those described in Statement on Auditing
Standards No. 61, Communication with Audit Committees, as amended, and, with and
without management present, discussed and reviewed the results of KPMG's
examination of the Company's consolidated financial statements.
REVIEW AND DISCUSSION WITH MANAGEMENT
The Audit Committee has reviewed and discussed the audited consolidated
financial statements of the Company as of and for the fiscal year ended January
3, 2004 with management and KPMG. Management has the responsibility for the
preparation of the Company's consolidated financial statements and KPMG has the
responsibility for the audit of those statements. Management has represented to
the Audit Committee that the Company's audited consolidated financial statements
as of and for the year ended January 3, 2004, were prepared in accordance with
accounting principles generally accepted in the United States.
CONCLUSION
Based on the Audit Committee's discussions with management and KPMG and
its review of the report of KPMG to the Audit Committee, the Audit Committee
recommended to the Board of Directors (and the Board approved) that the
Company's audited consolidated financial statements be included in the Company's
Annual Report on Form 10-K for the fiscal year ended January 3, 2004 that was
filed with the SEC on April 2, 2004.
32
SUBMITTED BY THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS:
Philip G. Barach David P. Lauer Edward M. Stan Harvey A. Weinberg
PRE-APPROVAL POLICIES AND PROCEDURES
Under applicable SEC Rules, the Audit Committee is required to
pre-approve the audit and non-audit services performed by the independent
auditors in order to ensure that they do not impair the auditors' independence
from the Company. The SEC Rules specify the types of non-audit services that an
independent auditor may not provide to its audit client and establish the Audit
Committee's responsibility for administration of the engagement of the
independent auditors.
Consistent with the SEC Rules, the charter of the Audit Committee
requires that the Audit Committee review and pre-approve all audit services and
permitted non-audit services provided by the independent auditors to the Company
or any of its subsidiaries. The Audit Committee may delegate pre-approval
authority to a member of the Audit Committee and if it does, the decisions of
that member must be presented to the full Audit Committee at its next scheduled
meeting.
FEES OF INDEPENDENT AUDITORS
On July 13, 2003, the Audit Committee appointed KPMG to serve as the
independent auditors of the Company for the 2003 fiscal year. Fees billed for
services rendered by KPMG for each of the 2003 fiscal year and the 2002 fiscal
year were as follows:
AUDIT FEES
The aggregate audit fees billed by KPMG for the 2003 fiscal year and
the 2002 fiscal year were approximately $433,300 and $386,000, respectively.
These amounts include fees for professional services rendered by KPMG in
connection with the audit of the Company's annual consolidated financial
statements, the review of the interim consolidated financial statements included
in the Company's Quarterly Reports on Form 10-Q and statutory audits of the
Company's Mexican and French subsidiaries.
AUDIT-RELATED FEES
The aggregate audit-related fees billed by KPMG for the 2003 fiscal
year and the 2002 fiscal year were $33,500 and $26,000, respectively. The fees
under this category relate to audits of the Company's employee benefit plans.
TAX FEES
The aggregate fees for tax services rendered by KPMG for the 2003
fiscal year and the 2002 fiscal year were $266,230 and $205,000, respectively.
Tax fees include preparation of the Company's Federal and State corporate tax
returns, tax consulting advice and assisting with the Company's Internal Revenue
Service examination.
ALL OTHER FEES
The Company did not pay any other fees to KPMG for any other services
in either the 2003 fiscal year or the 2002 fiscal year.
33
All of the services rendered by KPMG to the Company and its
subsidiaries during the 2003 fiscal year were pre-approved by the Audit
Committee.
INDEPENDENT AUDITORS
As previously noted, the Company engaged KPMG as its independent
auditors to audit its consolidated financial statements for the 2003 fiscal
year. KPMG, together with its predecessors, has served as the Company's
independent auditors since 1966. The Audit Committee will make its selection of
the independent auditors for the 2004 fiscal year later in the year.
Representatives of KPMG are expected to be present at the Annual
Meeting, will be given the opportunity to make a statement if they desire to do
so, and will be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS FOR 2005 ANNUAL MEETING
Proposals of shareholders intended to be presented at the 2005 Annual
Meeting of Shareholders must be received by the Company no later than
______________, 2004, to be eligible for inclusion in the Company's proxy
materials relating to the 2005 Annual Meeting. Such proposals may be included in
next year's proxy materials if they comply with applicable SEC Rules.
The SEC has promulgated rules relating to the exercise of discretionary
voting authority under proxies solicited by the Board. If a shareholder intends
to present a proposal at the 2005 Annual Meeting of Shareholders and does not
notify the Company of the proposal by ______________, 2005, the management
proxies of the Company will be entitled to use their discretionary voting
authority, to the extent permitted by applicable law, should the proposal then
be raised, without any discussion of the matter in the Company's proxy statement
for the 2005 Annual Meeting.
In each case, written notice must be given to the Company's Secretary,
at the following address: Daniel D. Viren, Secretary, R. G. Barry Corporation,
13405 Yarmouth Road N.W., Pickerington, Ohio 43147.
Shareholders desiring to nominate candidates for election as directors
at the 2005 Annual Meeting or to recommend candidates to the Nominating and
Governance Committee of the Board must follow the procedures described in
"ELECTION OF DIRECTORS - NOMINATING PROCEDURES."
HOUSEHOLDING OF ANNUAL MEETING MATERIALS
The SEC has implemented rules regarding the delivery of proxy materials
(i.e., annual reports, proxy statements, proxy statements combined with a
prospectus or any information statements provided to shareholders) to
households. This method of delivery, often referred to as "householding," would
permit the Company to send a single annual report and/or a single proxy
statement to any household at which two or more different shareholders reside if
the Company believes such shareholders are members of the same family or
otherwise share the same address or in which one shareholder has multiple
accounts, in each case if such shareholder(s) have not opted out of the
householding process. Each shareholder would continue to receive a separate
notice of any meeting of shareholders and proxy card. The householding procedure
reduces the volume of duplicate information you receive and reduces the
Company's expenses. The Company may institute householding in the future and
will notify registered shareholders who will be affected by householding at that
time.
34
Many brokers and other holders of record have instituted householding.
If your family has one or more "street name" accounts under which you
beneficially own common shares of the Company, you may have received
householding information from your broker, financial institution or other
nominee in the past. Please contact the holder of record directly if you have
questions, require additional copies of this Proxy Statement or our Annual
Report to Shareholders for the 2003 fiscal year or wish to revoke your decision
to household and thereby receive multiple copies. You should also contact the
holder of record if you wish to institute householding. These options are
available to you at any time.
OTHER MATTERS
As of the date of this Proxy Statement, the Board knows of no matter
that will be presented for action at the Annual Meeting of Shareholders other
than those discussed in this Proxy Statement. If any other matter requiring a
vote of the shareholders properly comes before the Annual Meeting or any
adjournment, the individuals acting under the proxies solicited by the Board
will vote and act according to their best judgments in light of the conditions
then prevailing.
It is important that your proxy card be completed and returned
promptly. Shareholders who do not expect to attend the Annual Meeting in person
are urged to fill in, sign and return the enclosed proxy card in the
self-addressed envelope provided.
By Order of the Board of Directors,
Thomas M. Von Lehman,
President and Chief Executive Officer
April __, 2004
35
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF R. G. BARRY CORPORATION
I. PURPOSE
The purpose of the Audit Committee (or the "Committee") of the Board of
Directors of R. G. Barry Corporation (the "Company") is to (a) assist
the Board of Directors with respect to its oversight of: (i) the
integrity of the Company's financial statements; (ii) the Company's
compliance with legal and regulatory requirements; (ii) the independent
auditor's qualifications and independence; and (iv) the performance of
the Company's internal audit function and independent auditors; and (b)
prepare an audit committee report that in accordance with the rules and
regulations promulgated by the Securities and Exchange Commission
("SEC"), is required to be included in the Company's annual proxy
statement.
II. MEMBERSHIP
The Audit Committee shall be comprised of three or more independent
directors.
The members of the Audit Committee shall be qualified to serve on the
Committee pursuant to the requirements of the New York Stock Exchange
and the Sarbanes-Oxley Act of 2002 (the "Act") and the rules and
regulations promulgated by the SEC pursuant to the Act.
No director may serve as a member of the Audit Committee if such
director serves on the audit committee of more than two other public
companies unless the Board of Directors determines that such
simultaneous service would not impair the ability of such director to
effectively serve on the Audit Committee.
All members of the Audit Committee shall be, or within a reasonable
time after appointment shall become, financially literate. As required
by the New York Stock Exchange, at least one member of the Audit
Committee shall have accounting or related financial management
expertise as interpreted by the Board of Directors in its business
judgment. At least one member of the Audit Committee shall be a
"financial expert," as such term is defined in the rules and
regulations promulgated by the SEC pursuant to the Act.
The members of the Audit Committee shall be nominated by the Nominating
and Corporate Governance Committee of the Board of Directors (the
"Nominating Committee") and appointed by the Board of Directors. The
Nominating Committee shall recommend, and the Board of Directors shall
designate, one member of the Audit Committee as Chair. Members shall
serve until their resignation, retirement, removal by the Board of
Directors or until their successors shall be appointed and qualified.
No
member of the Audit Committee shall be removed except by majority
vote of the independent directors then in office.
III. MEETINGS AND PROCEDURES
The Audit Committee shall meet once every fiscal quarter or more
frequently as it believes is necessary or appropriate to fulfill its
duties and responsibilities.
The Committee or its Chairperson shall also meet at least quarterly
with (a) the Company's management, (b) the Company personnel
responsible for the internal control function and (c) the Company's
independent auditors.
The Committee may fix its own rules of procedure, which shall be
consistent with the Company's Regulations and this Charter. The
Chairperson of the Audit Committee or a majority of the members of the
Committee may call a special meeting of the Audit Committee. A majority
of the members of the Audit Committee shall constitute a quorum.
If the Committee deems it necessary, the Committee, at its sole
discretion, may retain special accounting, legal or other advisors to
assist it, the cost of such independent expert advisors to be borne by
the Company. The Committee shall have access to all books, records,
facilities and personnel of the Company. The Committee may request any
Company personnel, or outside legal counsel or outside auditors, to
meet with the Committee or any of its members or advisors. The Company
shall also bear the ordinary administrative expenses of the Audit
Committee that are necessary or appropriate in carrying out its duties,
as determined by the Audit Committee.
Following each of its meetings, the Audit Committee shall deliver a
report (oral or written) of the meeting to the Board of Directors,
including a description of all actions taken by the Audit Committee at
the meeting. The Audit Committee shall keep written minutes of its
meetings, which minutes shall be maintained with the books and records
of the Company.
IV. DUTIES AND RESPONSIBILITIES
The Audit Committee shall:
OUTSIDE AUDITORS
1. At its sole discretion, select, appoint and retain the
Company's independent auditors for each fiscal year, and
determine the terms of engagement, including the proposed
fees and terms of service.
2. Have direct responsibility for the oversight and evaluation
of the work of the independent auditors and, at its sole
discretion, make decisions regarding the termination of the
independent auditors when circumstances warrant.
-2-
3. In consultation with management, review and, at the sole
discretion of the Audit Committee, approve in advance all
audit, and as provided in the Act, all permitted non-audit
services. Approval of audit and permitted non-audit services
may be made by one or more members of the Audit Committee as
shall be designated by the Audit Committee, and the person or
persons granted such approval shall report such approval to
the Audit Committee at the next scheduled meeting of the
Audit Committee.
4. At least annually, obtain and review a report by the
independent auditors addressing: the independent auditor's
internal quality-control procedures, any material issues
raised by the most recent internal quality-control review, or
peer review, of the firm, or by any inquiry or investigation
by governmental or professional authorities, within the
preceding five years, respecting one or more independent
audits carried out by the firm, and any steps taken to
address such issues; and (to assess the auditor's
independence) all relationships between the independent
auditor and the Company.
5. Discuss with the independent auditors any disclosed
relationships or services that may affect their objectivity
and/or independence.
6. Consider whether it is the Company's best interest to rotate
independent auditors or lead and reviewing audit partners,
and monitor the independent auditor's compliance with
administrative rules and regulations, other legal
requirements and requirements of the New York Stock Exchange
that the lead and reviewing audit partner be rotated at least
every five years.
7. Determine hiring policies for employees or former employees
of the independent auditor.
8. Instruct the Company's independent auditors that they are
ultimately accountable to the Audit Committee and that the
Audit Committee is responsible for the selection, oversight,
evaluation and termination of the independent auditors.
9. Attempt to resolve all disagreements between the Company's
independent auditors and management regarding financial
reporting.
10. Receive and review a report from the independent auditors on
matters including:
(a) Critical accounting policies and practices to be used;
(b) Alternative GAAP treatments of financial information
that have been discussed with management, the
ramifications of these alternative treatments and the
independent auditor's preferred method; and
-3-
(c) All written communications between the independent
auditors and management, such as management letters or
schedules of unadjusted differences.
FINANCIAL STATEMENTS AND AUDIT RESULTS
11. At least quarterly as may be appropriate, direct that one or
more of its members discuss with management and the
independent auditors the results of the independent auditors'
review of the Company's interim financial statements, prior
to the Company's quarterly earnings release or to filing of
its Form 10-Q, whichever is earlier, as well as the Company's
disclosure under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" ("MD&A").
12. Review and discuss the Company's annual audited financial
statements, the related auditor's report and the Company's
MD&A with management and the independent auditors prior to
recommending inclusion of the annual financial statements in
the Company's Form 10-K to the Board. In particular, during
and after the audit process:
(a) Discuss with financial management and the independent
auditors any new auditing and accounting principles and
practices that must or may be adopted and their impact
on the Company's financial statements.
(b) Determine through discussion with the independent
auditors that no limitations were placed by management
on the scope of their audit or its implementation and
that there was a free exchange of information between
Company personnel and the independent auditors.
(c) Discuss with the independent auditors their judgment
about the quality, as well as the acceptability, of the
accounting principles that the Company applies in its
financial reporting.
(d) Periodically discuss areas of known financial risk and
uncertainty with management and management's plans to
deal with these risks and uncertainties.
13. At least annually, the Committee must also review: (i) any
major issues regarding accounting principles and financial
statement presentations (including significant changes in the
Company's selection or application of accounting principles)
and the adequacy of the Company's internal controls and
special audit steps adopted in light of material control
deficiencies; (ii) any analyses prepared by management or the
independent auditors setting forth significant financial
reporting issues and judgments made in connection with the
preparation of financial statements (including analysis of
the effects of alternative GAAP
-4-
methods on the financial statements); and (iii) the effect of
regulatory and accounting initiatives on the Company's
financial statements.
INTERNAL ACCOUNTING PROCEDURES AND CONTROLS
14. Review with management, including the Company's executives
responsible for internal auditing, and the independent
auditors, reports and recommendations relating to the
integrity of the Company's internal accounting procedures and
controls, including, but not limited to:
(a) All significant deficiencies in the design or operation
of internal controls which could adversely affect the
Company's ability to record, process, summarize, and
report financial data, including any material
weaknesses in internal controls identified by the
independent auditor.
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant
role in the Company's internal controls.
(c) Any significant changes in internal controls or in
other factors that could significantly affect internal
controls, including corrective actions with regard to
significant deficiencies and material weaknesses.
15. Review and monitor the Company's plans for implementing any
necessary or desirable improvements to its internal
accounting procedures and controls.
16. Review and evaluate the performance of the internal auditing
function, including a review of the performance of the
Company's executive or executives responsible for internal
auditing and, if appropriate, recommend the selection of a
new person or persons.
PROXY STATEMENT REPORTS
17. Prepare, for inclusion in the Company's proxy statement, the
annual Committee report required by the rules of the SEC.
MISCELLANEOUS
18. Discuss generally earnings press releases as well as
financial information and earnings guidance provided to
analysts and rating agencies.
19. Discuss risk management and risk assessment policies.
20. Establish procedures for (i) the receipt, review, retention
and treatment of accounting, internal control or auditing
complaints received by the Company, and (ii) the confidential
anonymous submission by the Company employees of concerns
regarding questionable accounting or auditing matters.
-5-
V. LIMITS OF RESPONSIBILITY
The Committee shall be mindful that its role is one of oversight and
that it is not the duty or responsibility of the Committee to conduct
audits or to determine if the Company's financial statements are
complete and accurate and in accordance with generally accepted
accounting principles. It is the responsibility of the Company's
management to prepare the financial statements and the responsibility
of the Company's independent auditors to conduct the audit.
VI. PERFORMANCE EVALUATION
The Audit Committee shall conduct an annual self-evaluation of its
performance. In conducting this review, the Audit Committee shall
address all matters that it considers relevant to its performance,
including at least the following: the adequacy, appropriateness and
quality of the information and recommendations presented by the Audit
Committee to the Board of Directors, the manner in which they were
discussed or debated, and whether the number and length of meetings of
the Audit Committee were adequate for the Audit Committee to complete
its work in a thorough and thoughtful manner, and whether this Charter
appropriately addresses the matters that are or should be within its
scope.
The Audit Committee shall deliver to the Board of Directors a report
setting forth the results of its evaluation, including any recommended
amendments to this Charter and any recommended changes to the policies
and procedures of the Company and/or its Board of Directors.
-6-
R. G. BARRY CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 27, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder(s) of common shares of R. G. Barry Corporation
(the "Company") hereby constitutes and appoints Gordon Zacks, Thomas M. Von
Lehman and Daniel D. Viren, and each of them, the lawful agents and proxies of
the undersigned, with full power of substitution in each, to attend the Annual
Meeting of Shareholders of the Company to be held on Thursday, May 27, 2004, at
the Company's executive offices, 13405 Yarmouth Road N.W., Pickerington, Ohio,
at 11:00 a.m., local time, and any adjournment, and to vote all of the common
shares which the undersigned is entitled to vote at such Annual Meeting or at
any adjournment.
WHERE A CHOICE IS INDICATED, THE COMMON SHARES REPRESENTED BY THIS
PROXY WHEN PROPERLY EXECUTED WILL BE VOTED OR NOT VOTED AS SPECIFIED. IF NO
CHOICE IS INDICATED, THE COMMON SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
FOR THE ELECTION OF THE NOMINEE LISTED IN ITEM NO. 1 AS A DIRECTOR OF THE
COMPANY AND FOR PROPOSAL NO. 2. IF ANY OTHER MATTERS ARE PROPERLY BROUGHT BEFORE
THE ANNUAL MEETING OR ANY ADJOURNMENT OR IF THE NOMINEE FOR ELECTION AS A
DIRECTOR NAMED IN THE PROXY STATEMENT IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL
NOT SERVE, THE COMMON SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE
DISCRETION OF THE INDIVIDUALS DESIGNATED TO VOTE THE PROXY, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, ON SUCH MATTERS OR FOR SUCH SUBSTITUTE NOMINEE AS
THE DIRECTORS MAY RECOMMEND.
All proxies previously given or executed by the
undersigned are hereby revoked. The undersigned
acknowledges receipt of the accompanying Notice
of Annual Meeting of Shareholders and Proxy R. G. BARRY CORPORATION
Statement for the May 27, 2004 meeting and P.O. BOX 11094
Annual Report to Shareholders for the fiscal NEW YORK, NY 10203-0094
year ended January 3, 2004, including the
Company's Annual Report on Form 10-K for the
fiscal year ended January 3, 2004.
(Continued, and to be executed and dated on other side.)
[ ] PLEASE FILL IN, SIGN, [X]
DATE AND RETURN VOTES MUST BE
PROMPTLY USING THE INDICATED (X) IN
ENCLOSED ENVELOPE. BLACK OR BLUE INK.
1. ELECTION OF ONE DIRECTOR OF THE COMPANY. 2. APPROVAL OF AMENDMENTS TO ARTICLE IV OF THE
COMPANY'S REGULATIONS.
FOR [ ] WITHHOLD [ ]
AUTHORITY [ ] FOR [ ] AGAINST [ ] ABSTAIN
NOMINEE: EDWARD M. STAN 3. THE INDIVIDUALS DESIGNATED TO VOTE THIS PROXY ARE
AUTHORIZED TO VOTE, IN THEIR DISCRETION, UPON SUCH
OTHER MATTERS (NONE KNOWN AT THE TIME OF
SOLICITATION OF THIS PROXY) AS MAY PROPERLY COME
BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT.
TO CHANGE YOUR ADDRESS, PLEASE MARK THIS BOX. [ ]
Please sign exactly as your name appears hereon. When common
shares are registered in two names, both shareholders should
sign. When signing as attorney, executor, administrator,
guardian or trustee, please give full title as such. If
shareholder is a corporation, please sign in full corporate
name by President or other authorized officer. If shareholder
is a partnership or other entity, please sign in entity name by
authorized person. (Please note any change of address on this
proxy card.)
Date Shareholder sign here Co-Shareholder sign here
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