SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
THE CHILDREN'S PLACE RETAIL STORES, INC.
(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)(4) and 0-11.
(1) Title of each class of securities to which
transaction applies:______________________________________________
(2) Aggregate number of securities to which
transaction applies:_______________________________________________
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11 (set
forth the amount on which the filing fee is calculated and
state how it was determined):
___________________________________________________________________
(4) Proposed maximum aggregate value of transaction:___________________
(5) Total fee paid:____________________________________________________
[ ] Fee previously paid with preliminary materials. [ ] Check box if
any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:____________________________________________
(2) Form, Schedule or Registration Statement No.:______________________
(3) Filing Party:______________________________________________________
(4) Date Filed:________________________________________________________
<PAGE>
[The Children's Place Retail Stores, Inc. Logo]
THE CHILDREN'S PLACE RETAIL STORES, INC.
ONE DODGE DRIVE
WEST CALDWELL, NJ 07006
Dear Stockholder:
On behalf of the Board of Directors of The Children's Place Retail Stores,
Inc., it is my pleasure to invite you to attend the Annual Meeting of
Stockholders, which will be held at the Radisson Hotel, 690 Route 46 East,
Fairfield, NJ 07004, on Thursday, May 28, 1998, at ten o'clock in the morning,
local time.
The business to be transacted at the meeting is set forth in the Notice of
Meeting and is more fully described in the accompanying proxy statement.
It is important that your shares be represented at the meeting, regardless
of how many you hold. Whether or not you can be present in person, please fill
in, sign, date and return your proxy in the enclosed postage paid envelope as
soon as possible. If you do attend the meeting and wish to vote in person, your
proxy may be revoked at your request.
We appreciate your support and look forward to seeing you at the meeting.
Sincerely yours,
/s/ Ezra Dabah
-----------------
Ezra Dabah
Chairman of the Board &
Chief Executive Officer
<PAGE>
[The Children's Place Retail Stores, Inc. Logo]
THE CHILDREN'S PLACE RETAIL STORES, INC.
-----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 1998
-----------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of The
Children's Place Retail Stores, Inc. (the "Company") will be held at the
Radisson Hotel, 690 Route 46 East, Fairfield, NJ 07004 on May 28, 1998 at 10:00
a.m. for the following purposes:
1. To elect two Class I Directors to serve for a three-year term and
until such directors' successors are duly elected and qualified;
2. To ratify the selection of Arthur Andersen LLP as independent
public accountants of the Company for the fiscal year ending
January 30, 1999; and
3. To transact such other business as may properly come before the
meeting, or any adjournment thereof.
Stockholders of record at the close of business on April 28, 1998,
shall be entitled to notice of, and to vote at, the meeting.
By order of the Board of Directors,
Steven Balasiano
Secretary
Dated: West Caldwell, New Jersey
May 1, 1998
IMPORTANT: PLEASE FILL IN, SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED
PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED TO ASSURE THAT YOUR SHARES ARE
REPRESENTED AT THE MEETING.
<PAGE>
THE CHILDREN'S PLACE RETAIL STORES, INC.
ONE DODGE DRIVE
WEST CALDWELL, NEW JERSEY 07006
---------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 1998
---------------
The accompanying proxy is solicited by the Board of Directors of The
Children's Place Retail Stores, Inc., a Delaware corporation (the "Company"),
for use at the Annual Meeting of Stockholders to be held on May 28, 1998, at
10:00 a.m., at the Radisson Hotel, 690 Route 46 East, Fairfield, NJ 07004 or any
adjournment thereof, at which stockholders of record at the close of business on
April 28, 1998, shall be entitled to vote. The Annual Meeting is being held for
the purposes set forth in the accompanying Notice of Annual Meeting to
Stockholders. The cost of solicitation of proxies will be borne by the Company.
The Company may use the services of its Directors, officers, employees and
others to solicit proxies, personally or by telephone; arrangements also may be
made with brokerage houses and other custodians, nominees, fiduciaries and
stockholders of record to forward solicitation material to the beneficial owners
of stock held of record by such persons. The Company may reimburse such
solicitors for reasonable out-of-pocket expenses incurred by them in soliciting,
but no compensation will be paid for their services. Any proxy granted as a
result of this solicitation may be revoked at any time before its exercise.
The Annual Report to Stockholders for the fiscal year ended January
31, 1998, accompanies this Proxy Statement. The date of this Proxy Statement is
the approximate date on which this Proxy Statement and form of proxy were first
sent or given to stockholders. The Company will furnish without charge (other
than a reasonable charge for any exhibit requested) to any stockholder of the
Company who so requests in writing, a copy of the Company's Annual Report on
Form 10-K, including the financial statements and the schedules thereto, for the
fiscal year ended January 31, 1998, as filed with the Securities and Exchange
Commission. Any such request should be directed to The Children's Place Retail
Stores, Inc., One Dodge Drive, West Caldwell, New Jersey 07006, Attention:
Secretary.
If the accompanying proxy card is properly signed and returned to the
Company and not revoked, it will be voted in accordance with the instructions
contained therein. Unless contrary instructions are given, the persons
designated as proxy holders in the proxy card will vote FOR the election of the
nominees proposed by the Board of Directors, FOR ratification of the appointment
of Arthur Andersen LLP as the Company's independent public accountants for the
fiscal year ending January 30, 1999, and as recommended by the Board of
Directors with regard to all other matters or, if no such recommendation is
given, in their own discretion. Each stockholder may revoke a previously granted
proxy at any time before it is exercised by filing with the Secretary of the
Company a revoking instrument or a duly executed proxy bearing a later date. The
powers of the proxy holders will be suspended if the person executing the proxy
attends the Annual Meeting in person and so requests. Attendance at the Annual
Meeting will not, in itself, constitute revocation of a previously granted
proxy.
Pursuant to the By-laws, the Board of Directors has fixed the time and
date for the determination of stockholders entitled to vote at the meeting,
notwithstanding any transfer of any stock on the books of the Company
thereafter. The presence at the Annual Meeting, in person or by proxy, of the
holders of a majority of the shares of common stock outstanding on April 28,
1998, will constitute a quorum. Abstentions and broker non-votes are counted for
purposes of determining the presence or absence of a quorum. If a quorum is
present, (i) a plurality of the votes cast at the Meeting is required for
election as a director, and (ii) the affirmative vote of the majority of the
shares present, in person or by proxy, at the Annual Meeting and entitled to
vote is required for all other matters. On April 28, 1998, the Company had
outstanding and entitled to vote with respect to all matters to be acted upon at
the meeting 24,712,195 shares of common stock. Each holder of common stock is
entitled to one vote for each share of stock held by such holder. Abstentions
are counted in the calculation of the votes cast with respect to any of the
matters submitted to a vote of stockholders, whereas broker non-votes are not
counted for purposes of determining whether a proposal has been approved. If the
proxy is signed and returned without specifying choices, the shares will be
voted in favor of the election of the nominee proposed by the Board of Directors
and in favor of the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ended January 30, 1999.
It is expected that the following business will be considered at the
meeting and action taken thereon:
ITEM 1: ELECTION OF DIRECTORS
The Company's Articles of Incorporation and Bylaws provide for a
classified Board of Directors comprised of Classes I, II and III, whose members
serve staggered terms. The Class I, Class II and Class III Directors are
scheduled to be elected at the Annual Meetings of Stockholders to be held in
1998, 1999 and 2000, respectively, to serve for a three year term and until
their successors are duly elected and qualified. The nominees for Class I
Directors are set forth below.
Unless authorization is withheld, the persons named as proxies will
vote FOR the nominees for director listed below unless otherwise specified by
the stockholder. If a nominee is unable or declines to serve as a director at
the time of the Annual Meeting, the proxies will be voted for any nominee who
shall be designated by the present Board of Directors to fill the vacancy. If
additional persons are nominated for election as director, the proxy holders
intend to vote all proxies received by them for the nominees listed below and
against any other nominees. As of the date of this Proxy Statement, the Board of
Directors is not aware that any nominee is unable or will decline to serve as
director. The nominees listed below are already serving as directors of the
Company.
The election to the Board of Directors of the nominees identified in
this Proxy Statement will require a plurality of the votes cast, in person or by
proxy, at the Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR EACH OF THE NOMINEES FOR DIRECTOR.
DIRECTORS
The following table sets forth certain information with respect to the
nominees for election as Class I directors at the Annual Meeting of
Stockholders, as well as the continuing directors of the Company:
NAME AGE POSITION CLASS OF DIRECTOR
Ezra Dabah............. 44 Chairman of the Board of Directors II
and Chief Executive Officer
Stanley B. Silver.......59 President, Chief Operating Officer III
and Director
Stanley Silverstein.....73 Director I
John F. Megrue..........39 Director II
David J. Oddi...........28 Director I
NOMINEES FOR ELECTION IN CLASS I
STANLEY SILVERSTEIN has been a Director of the Company since July
1996. Mr. Silverstein also serves as Chairman of the Board of Directors of Nina
Footwear, a company he founded with his brother in 1952. Mr. Silverstein is the
father of Nina Miner, Vice President, Design and Product Development, and Ezra
Dabah's father-in- law.
DAVID J. ODDI has been a Director of the Company since April 1997. Mr.
Oddi joined Saunders, Karp & Megrue, L.P. ("SKM") as an Associate in 1994 and is
currently a Principal of SKM. Prior to joining SKM, Mr. Oddi was a financial
analyst in the Leveraged Finance Group at Salomon Brothers Inc.
CONTINUING DIRECTORS
EZRA DABAH has been Chief Executive Officer of the Company since 1991
and Chairman of the Board of Directors since purchasing the Company in 1989 with
certain members of his family. From 1972 to May 1993, Mr. Dabah was a director
and an executive officer of The Gitano Group, Inc. and its affiliates
(collectively, "Gitano"), a company of which Mr. Dabah and certain members of
his family were principal stockholders and which became a public company in
1988. From 1973 until 1983, Mr. Dabah was in charge of product design,
merchandising and procurement for Gitano. In 1983, Mr. Dabah founded and became
President of a children's apparel importing and manufacturing division for
Gitano which later became an incorporated subsidiary, Eva Joia Incorporated
("E.J. Gitano"). Mr. Dabah is Stanley Silverstein's son-in-law and Nina Miner's
brother-in-law.
STANLEY B. SILVER has been President and Chief Operating Officer of
the Company since June 1996 and prior to that served as the Company's Executive
Vice President and Chief Operating Officer since joining the Company in 1991.
Mr. Silver has been a Director of the Company since July 1996. Before joining
the Company in 1991, Mr. Silver held various posts at Grand Met PLC and
Mothercare PLC in the United Kingdom and The Limited, Inc. in the United States.
Mr. Silver currently serves as Chairman of the Retail Council of New York State.
JOHN F. MEGRUE has been a Director of the Company since July 1996. Mr.
Megrue has been a partner of SKM Partners, L.P., which serves as the general
partner of The SK Equity Fund, L.P. and SK Investment Fund, L.P. (collectively,
the "SK Funds") and of SKM, since 1992. From 1989 to 1992, Mr. Megrue was a Vice
President and Principal at Patricof & Co. and prior thereto he served as a Vice
President at C.M. Diker Associates. Mr. Megrue also serves as Vice Chairman of
the Board and Director of Dollar Tree Stores, Inc. and Chairman of the Board and
Director of Hibbett Sporting Goods, Inc.
INFORMATION REGARDING THE BOARD OF DIRECTORS
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has two standing committees: the Compensation
Committee and the Audit Committee. Messrs. Dabah and Megrue serve on the
Compensation Committee. The Compensation Committee reviews and sets the
compensation of the Company's management and administers the Company's Employee
Stock Purchase Plan, employee stock option plans and Management Incentive Plan.
Messrs. Silver, Silverstein and Megrue serve on the Audit Committee. The Audit
Committee is responsible for recommending independent auditors, reviewing the
audit plan, the adequacy of internal procedures and controls, the audit report
and the management letter, and performing such other duties as the Board of
Directors may from time to time prescribe.
MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended January 31, 1998, there were three
meetings of the Board of Directors, one meeting of the Compensation Committee
and no meetings of the Audit Committee. Each incumbent Director of the Company
attended in excess of 75% of the aggregate of the total number of meetings of
the Board of Directors and committees thereof on which such Director served.
COMPENSATION OF DIRECTORS
The Company pays each director who is not an officer of the Company or
an affiliate of the SK Funds compensation of $15,000 per annum and a fee of
$1,000 for each meeting of the Board of Directors that he attends, plus
reimbursement of expenses for each such meeting. All directors may be granted
awards from time to time pursuant to the Company's stock option plans.
Information concerning executive officers of the Company who are not
also directors is set forth in the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 1998. Officers serve at the discretion of the
Board of Directors and under the terms of any employment agreement which may
exist.
LEGAL PROCEEDINGS
Except as described below, there have been no material administrative,
civil or criminal actions against the Company or its executive officers during
the preceding five years.
DABAH FAMILY AND GITANO LEGAL PROCEEDINGS
Ezra Dabah, certain members of his family and D.G. Acquisition Corp.,
a company owned by Mr. Dabah and certain members of his family, filed petitions
for reorganization under chapter 11 of the United States Bankruptcy Code in
November 1992. In October 1993, a plan of reorganization was confirmed and all
of the debtors' pre-bankruptcy obligations were discharged. With the express
approval of the creditors' committee, the plan permitted Mr. Dabah and his
family members to retain their ownership of the Company. Pursuant to the terms
of such plan of reorganization, certain proceedings, not related to the Company,
were initiated by the liquidating trustee appointed as part of the Dabah family
bankruptcy case and are currently continuing.
In March 1994, Gitano filed a petition under the United States
Bankruptcy Code and its assets were subsequently sold to an unaffiliated third
party. On several occasions Gitano stockholders initiated litigation against
Gitano and certain of its officers, including Mr. Dabah, asserting claims under
the federal securities laws, which litigation was ultimately settled. The claims
against Mr. Dabah and the other defendants primarily related to alleged
misleading and inaccurate statements in public documents in violation of Rule
10b-5 promulgated under the Securities Exchange Act of 1934. These claims were
settled with the establishment of a settlement fund for the benefit of the
plaintiff class. Pursuant to the terms of the settlement, the plaintiffs
withdrew any claims they had asserted against Mr. Dabah.
CLASS ACTION SUITS
On October 16, 1997, Stephen Brosious and Rudy Pallastrone, who
allegedly purchased shares of the Company's common stock in an initial public
offering on or about September 19, 1997 (the "IPO"), filed a lawsuit against the
Company, several of the Company's directors and officers, and the underwriters
of the IPO (the "Defendants") in the United States District Court for the
District of New Jersey (the "Court"). The named plaintiffs purport to maintain a
class action on behalf of all persons, other than the Defendants, who purchased
the Company's common stock issued in connection with the IPO on or about
September 19, 1997 through October 13, 1997. The complaint alleges that the
Defendants violated federal securities laws by making materially false or
misleading statements and/or omissions in connection with the IPO. The
plaintiffs seek monetary damages of an unspecified amount, rescission or
rescissory damages and fees and costs. Since October 16, 1997, fifteen
additional putative class actions making substantially similar allegations and
seeking substantially similar relief have been filed against some or all of the
Defendants. On January 13, 1998, the sixteen putative class actions were
consolidated in the Court and on February 26, 1998 the plaintiffs served and
filed their amended consolidated complaint. No discovery has been taken. The
Company has filed a motion to dismiss this complaint which is currently pending
before the Court. The Company believes that the allegations made in this
complaint are untrue and totally without merit and intends to defend them
vigorously.
On October 27, 1997, Bulldog Capital Management, L.P., a limited
partnership that serves as a general partner for a series of investment funds
which allegedly purchased shares of the Company's common stock issued in
connection with the IPO, also filed a lawsuit against the Company and several of
the Company's directors and officers in the Superior Court of New Jersey, Essex
County Division. The complaint alleges that by making materially false or
misleading statements and/or omissions in connection with the IPO, the Company
and several of the Company's directors and officers violated provisions of
federal and state law. The plaintiff seeks monetary damages of an unspecified
amount, rescission or rescissory damages and fees and costs. On November 20,
1997 the plaintiff filed its first request for production of documents from the
defendants. No discovery has been taken. The action is presently stayed, pending
resolution of the Defendants' motion to dismiss in the class action lawsuit
described above. The Company believes that the allegations made in this
complaint are untrue and totally without merit and intends to defend them
vigorously.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information at April 1, 1998, with
respect to ownership of Common Stock by (i) each beneficial owner of five
percent or more of the Company's Common Stock known to the Company, (ii) each
director of the Company and nominee for director, (iii) each of the Company's
five most highly compensated executive officers in fiscal 1997 and (iv) all
directors and executive officers as a group. For the purpose of computing the
percentage of the shares of Common Stock owned by each person or group listed in
this table, any shares not outstanding which are subject to options or warrants
exercisable within 60 days after April 1, 1998 have been deemed to be
outstanding and owned by such person or group, but have not been deemed to be
outstanding for the purpose of computing the percentage of the shares of Common
Stock owned by any other person. Except as indicated in the footnotes to this
table, the persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
Shares
Beneficially Percent
Name and Address of Beneficial Owner Owned of Class
The SK Equity Fund, L.P. (1)(2)................ 7,659,889 31.1%
SK Investment Fund, L.P. (1) (2)............... 7,659,889 31.1%
John F. Megrue (1)(2)(3)....................... 7,661,889 31.1%
Allan W. Karp (1)(2) (4)....................... 7,661,889 31.1%
Thomas A. Saunders III (1)(2).................. 7,659,889 31.1%
Christopher K. Reilly (1)(2)(5)................ 7,661,389 31.1%
David J. Oddi (1)(6)........................... 3,000 *
Ezra Dabah (7) (8)............................. 9,913,332 40.2%
Stanley B. Silver (7) (9)...................... 603,600 2.4%
Stanley Silverstein (7) (10)................... 6,249,360 25.4%
Diane M. Timbanard (7) (11).................... 39,840 *
Nina L. Miner (7) (12)......................... 64,260 *
Mark L. Rose (7) (11).......................... 59,760 *
All Directors and Executive Officers as a Group
(16 persons) (11)............................ 19,782,297 78.4%
* Less than 1%
(1) The address of this person is Two Greenwich Plaza, Suite 100, Greenwich CT
06830.
(2) Includes (i) 7,458,445 shares owned by The SK Equity Fund, L.P., (ii)
108,108 shares owned by SK Investment Fund, L.P. and (iii) 93,336 shares
owned by a former consultant to SKM, as to which The SK Equity Fund, L.P.
has certain rights. SKM Partners, L.P. is the general partner of each of
the SK Funds. Messrs. Karp, Megrue, Reilly and Saunders are general
partners of SKM Partners, L.P., and therefore may be deemed to have
beneficial ownership of the shares shown as being owned by the SK Funds.
Messrs. Karp, Megrue, Reilly and Saunders disclaim beneficial ownership of
such shares, except to the extent that any of them has a limited
partnership interest in SK Investment Fund, L.P.
(3) Includes 2,000 shares purchased by Mr. Megrue.
(4) Includes 2,000 shares purchased by Mr. Karp.
(5) Includes 1,500 shares purchased by Mr. Reilly.
(6) Includes 3,000 shares purchased by Mr. Oddi and does not include
shares owned by The SK Equity Fund, L.P. or SK Investment Fund, L.P. Mr.
Oddi is a principal of SKM and has a limited partnership interest in SK
Investment Fund, L.P.
(7) The address of this person is c/o The Children's Place Retail Stores, Inc.,
One Dodge Drive, West Caldwell, New Jersey 07006.
(8) Includes (i) 6,549,000 shares held by trusts or custodial accounts for the
benefit of Mr. Dabah's children and certain other family members, of which
Mr. Dabah or his wife is a trustee or custodian and as to which Mr. Dabah
or his wife, as the case may be, has voting control, and as to which shares
Mr. Dabah disclaims beneficial ownership, (ii) 39,600 shares held by Mr.
Dabah's wife, and (iii) 19,932 shares subject to options exercisable within
60 days after April 1, 1998. Does not include (i) 1,098,480 shares
beneficially owned by Stanley Silverstein, Mr. Dabah's father-in-law, (ii)
a total of 868,800 shares beneficially owned by other members of Mr.
Dabah's family and (iii) 59,760 shares issuable upon exercise of
outstanding stock options exercisable within 60 days after April 1, 1998,
which are beneficially owned by Nina Miner, Mr. Dabah's sister-in-law.
(9) Includes 99,600 shares issuable upon exercise of outstanding stock options
exercisable within 60 days of April 1, 1998.
(10) Includes 5,150,880 shares held by trusts for the benefit of Mr.
Silverstein's children and grandchildren, of which Mr. Silverstein's wife
is a trustee, and as to which Mrs. Silverstein has voting control, and as
to which shares Mr. Silverstein disclaims beneficial ownership. Does not
include (i) 4,762,452 shares beneficially owned by Ezra Dabah, Mr.
Silverstein's son-in-law, or Mr. Dabah's wife, and (ii) 59,760 shares
issuable upon exercise of outstanding stock options exercisable within 60
days after April 1, 1998, which are beneficially owned by Nina Miner, Mr.
Silverstein's daughter.
(11) Reflects shares issuable upon exercise of outstanding stock options
exercisable within 60 days of April 1, 1998.
(12) Includes 4,500 shares purchased by Ms. Miner's husband, as to which Ms.
Miner disclaims beneficial ownership and 59,760 shares issuable upon
exercise of outstanding stock options exercisable within 60 days of April
1, 1998.
As of April 1, 1998, Ezra Dabah and certain members of his family
beneficially own 11,944,872 shares of the Company's Common Stock, constituting
approximately 47.2% of the outstanding Common Stock. SKM and the SK Funds
(collectively, the "SKM Investors") own 7,659,889 shares or approximately 30.3%
of the outstanding Common Stock. Pursuant to the Amended Stockholders Agreement
described below, the SKM Investors and certain other stockholders, who own in
the aggregate 79.0% of the outstanding Common Stock, have agreed to vote for the
election of two nominees of the SKM Investors and three nominees of Ezra Dabah
to the Company's Board of Directors. As a result, the SKM Investors and Ezra
Dabah are able to control the election of the Company's directors. In addition,
if the SKM Investors and Mr. Dabah were to vote together, they would be able to
determine the outcome of any matter submitted to a vote of the Company's
stockholders for approval.
AMENDED STOCKHOLDERS AGREEMENT
On September 24, 1997, prior to consummation of the Company's initial
public offering, the Company and all of its existing stockholders, who currently
own in the aggregate 79.0% of the Common Stock, entered into an Amended and
Restated Stockholders Agreement (the "Amended Stockholders Agreement"). The
Amended Stockholders Agreement places certain limitations upon the transfer in
privately negotiated transactions of shares of Common Stock beneficially owned
by Ezra Dabah, Stanley Silver and the SKM Investors. In addition, the Amended
Stockholders Agreement provides that (i) so long as Ezra Dabah, together with
members of his family, beneficially owns shares representing at least 25% of the
shares of Common Stock owned by such parties on the date of the Amended
Stockholders Agreement, the Company's existing stockholders will be obligated to
vote all shares as to which they have voting rights in a manner such that the
Board will at all times include three directors nominated by Ezra Dabah and (ii)
so long as the SKM Investors beneficially own shares representing at least 25%
of the shares of Common Stock owned by such parties on the date of the Amended
Stockholders Agreement, the Company's existing stockholders will be obligated to
vote all shares as to which they have voting rights in a manner such that the
Board will at all times include two directors nominated by the SKM Investors.
Should the number of directors comprising the Board of Directors be increased,
nominees for the remaining director positions will be designated by the
Company's Board of Directors. Pursuant to the Amended Stockholders Agreement,
Ezra Dabah, Stanley Silver and Stanley Silverstein were designated as director
nominees by Mr. Dabah and were elected to the Board, and John Megrue and David
Oddi were designated as director nominees by the SKM Investors and were elected
to the Board.
The Amended Stockholders Agreement provides that so long as the SKM
Investors beneficially own shares representing at least 25% of the outstanding
Common Stock, the Company will not, without the affirmative vote of at least one
director nominated by the SKM Investors, engage in specified types of
transactions with certain of its affiliates (not including the SKM Investors),
take action to amend the Company's Bylaws or Certificate of Incorporation or
increase or decrease the size of the entire Board of Directors. The Amended
Stockholders Agreement also provides that certain specified types of corporate
transactions and major corporate actions will require the approval of at least
two-thirds of the members of the Board of Directors.
Under the terms of the Amended Stockholders Agreement, the rights of
any party thereunder will terminate at the time that such party's Common Stock
constitutes less than 25% of the shares of Common Stock owned by such party on
the date of the Amended Stockholders Agreement. All the provisions of the
Amended Stockholders Agreement will terminate when no party to the Amended
Stockholders Agreement beneficially owns shares representing at least 25% of the
outstanding Common Stock owned by such party on the date of the Amended
Stockholders Agreement. The Amended Stockholders Agreement is a revised version
of a Stockholders Agreement that was originally entered into by all of the
Company's stockholders in June 1996 as a condition to the 1996 Private
Placement.
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF EXECUTIVE COMPENSATION
The following table summarizes the compensation for fiscal 1997 and
fiscal 1996 for the Company's Chief Executive Officer and each of its four other
most highly compensated executive officers:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- ----------------------------------------------------------------------------------------------------------------------------------
Annual Long-Term All Other
Compensation (1) Compensation (2) Compensation
---------------------- ---------------- -------------
Securities
FISCAL SALARY BONUS Underlying
Name and Principal Position YEAR ($) ($) Options (#) ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ezra Dabah ................................... 1997 $528,008 $120,648 99,660 $ 4,000 (3)
Chairman of the Board and Chief 1996 490,403 383,604 0 708 (3)
Executive Officer
- -----------------------------------------------------------------------------------------------------------------------------------
Stanley B. Silver............................. 1997 350,012 63,980 0 15,035 (4)
President and Chief Operating Officer 1996 325,778 203,934 249,000 133,980 (5)
- -----------------------------------------------------------------------------------------------------------------------------------
Diane M. Timbanard............................ 1997 245,000 27,991 0 4,000 (3)
Vice President, Merchandising Manager 1996 228,846 89,396 99,600 590 (3)
- ------------------------------------------------------------------------------------------------------------------------------------
Nina L. Miner................................ 1997 206,000 24,477 0 4,000 (3)
Vice President, Design and Product 1996 191,461 77,957 149,400 456 (3)
Development
- -----------------------------------------------------------------------------------------------------------------------------------
Mark L. Rose................................. 1997 190,000 21,708 0 4,000 (3)
Vice President, Sourcing and Production 1996 173,634 68,544 149,400 647 (3)
- -----------------------------------------------------------------------------------------------------------------------------------
(1) For fiscal 1997, bonuses were earned and paid in fiscal 1997. For fiscal
1996, includes bonuses earned in fiscal 1996, portions of which were paid
in fiscal 1997. Other annual compensation did not exceed $50,000 or 10% of
the total salary and bonus for any of the named executive officers.
(2) Excluding Mr. Dabah, each of the options granted becomes exercisable at the
rate of 20% on or after six months following the date of grant and 20% on
or after each of the first, second, third and fourth anniversaries of the
date of grant. Mr. Dabah's options become exercisable at the rate of 20% on
or after December 31, 1997 and 20% on or after each of the first, second,
third and fourth anniversaries of the date of the grant.
(3) Amounts shown consist of the Company's matching contributions under The
Children's Place 401(k) Savings and Investment Plan.
(4) Reflects the value of (i) insurance premiums of $11,035 paid by the Company
with respect to term life insurance for the benefit of Mr. Silver, and (ii)
Company matching contributions of $4,000 under The Children's Place 401(k)
Savings and Investment Plan.
(5) Reflects the value of (i) the purchase for $50,000, of shares of Common
Stock valued at approximately $173,600 at the time of purchase, pursuant to
an exercise of an option, and (ii) insurance premiums of $10,380 paid by
the Company with respect to term life insurance for the benefit of Mr.
Silver.
</TABLE>
STOCK OPTIONS
The following table sets forth certain information concerning options
granted during fiscal 1997 to Mr. Dabah. No options were granted during 1997 to
the other executive officers named in the Summary Compensation Table. To date,
no options have been exercised.
<TABLE>
<CAPTION>
OPTIONS GRANTED IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------------------------------------------------------
Potential Realizable
Number of Value at Assumed
Securities % of Total Annual Rates of Stock
Underlying Options Granted In Exercise Expiration Price Appreciation for
Name Granted (1) Fiscal 1997 Price (2) Date Option Term (3)
5% 10%
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ezra Dabah.... 99,660 18.1% $15.40 9/18/07 $737,935 $2,084,129
- ----------------------------------------------------------------------------------------------------------------------------------
(1) Each of the options granted becomes exercisable at the rate of 20% on or
after December 31, 1997 following the date of grant and 20% on or after
each of the first, second, third and fourth anniversaries of the date of
grant.
(2) The exercise price was fixed at the date of the grant and represented 110%
of the fair market value per share of Common Stock on such date in
accordance with the 1997 Plan for options granted to a 5% owner.
(3) In accordance with the rules of the Securities and Exchange Commission, the
amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5%
and 10% compounded annually from the date the respective options were
granted to their expiration date and do not reflect the Company's estimates
or projections of future Common Stock prices. The gains shown are net of
the option exercise price, but do not include deductions for taxes or other
expenses associated with the exercise. Actual gains, if any, on stock
option exercises will depend on the future performance of the Common Stock,
the option holders' continued employment through the option period, and the
date on which the options are exercised.
</TABLE>
<PAGE>
The following table sets forth certain information with respect to
stock options exercised by the named executive officers during fiscal 1997,
including the aggregate value of gains on the date of the exercise. In addition,
the table sets forth the number of shares covered by stock options as of fiscal
year end, and the value of "in-the-money" stock options, which represents the
positive spread between the exercise price of a stock option and the year-end
market price of the shares subject to such option at fiscal year end. None of
the named executives hold stock appreciation rights (SARs).
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
- ----------------------------------------------------------------------------------------------------------------------------------
Number of Value of
Securities Unexercised
Shares Underlying In-the-Money
Acquired Unexercised Options at
on Value Options at 1/31/98 1/31/98 (1)
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ezra Dabah................ None -- 19,932 79,728 $ 0 $ 0
- -----------------------------------------------------------------------------------------------------------------------------------
Stanley B. Silver........ None -- 99,600 149,400 $461,496 $692,544
- -----------------------------------------------------------------------------------------------------------------------------------
Diane M. Timbanard....... None -- 39,840 59,760 $184,678 $277,017
- -----------------------------------------------------------------------------------------------------------------------------------
Nina L. Miner............ None -- 59,760 89,640 $277,017 $415,526
- -----------------------------------------------------------------------------------------------------------------------------------
Mark L. Rose............. None -- 59,760 89,640 $277,017 $415,526
- -----------------------------------------------------------------------------------------------------------------------------------
(1) The market value of the Company's stock at the close of business on
January 30, 1998 was $7 5/16.
</TABLE>
EMPLOYMENT AGREEMENTS
The Company is a party to employment agreements with Ezra Dabah and
Stanley Silver.
EZRA DABAH
Mr. Dabah's employment agreement (the "Dabah Agreement") provides that
he will serve as Chairman and Chief Executive Officer of the Company from June
27, 1996 through June 27, 1999, at an initial salary of $480,000 per year,
subject to annual review. Mr. Dabah's service after June 27, 1999 shall continue
for successive three year periods, subject to termination in accordance with the
termination provisions of the Dabah Agreement. Mr. Dabah is also entitled to
receive a semi-annual bonus in an amount equal to the product of (x) 50% of his
semi-annual base salary multiplied by (y) a pre-determined bonus percentage
fixed by the Board of Directors for any stated six-month period of not less than
20% nor more than 200%, based on the Company's performance during such six-month
period. The Dabah Agreement also provides for certain insurance and other
benefits to be maintained and paid by the Company.
The Dabah Agreement provides that if Mr. Dabah's employment is
terminated by the Company without cause or for disability, or by Mr. Dabah for
good reason or following a change in control (as each such term is defined in
the Dabah Agreement), the Company will be required to pay Mr. Dabah three times
his base salary then in effect, which amount will be payable within 30 days
following his termination. Mr. Dabah also will be entitled to receive any
accrued but unpaid bonus compensation and all outstanding stock options under
the Company's stock option plans will immediately vest. If Mr. Dabah's
employment is terminated for any of the above reasons, the Company also will be
required, with certain exceptions, to continue to maintain life insurance,
medical benefits and other benefits for Mr. Dabah for three years. The Dabah
Agreement also provides that Mr. Dabah will not, with certain exceptions, engage
or be engaged in a competing business for a period of five years following
termination of his employment.
STANLEY B. SILVER
Mr. Silver's employment agreement (the "Silver Agreement") provides
that he will serve as President and Chief Operating Officer of the Company from
June 27, 1996, and that such service shall continue unless terminated in
accordance with the termination provisions of the Silver Agreement, at an
initial salary of $320,000 per year, subject to annual review. Mr. Silver also
is entitled to receive a semi-annual bonus in an amount equal to the product of
(x) 40% of his semi-annual base salary multiplied by (y) a pre-determined bonus
percentage fixed by the Board of Directors for any stated six-month period of
not less than 20% nor more than 200%, based on the Company's performance during
such six-month period. The Silver Agreement also provides for certain insurance
and other benefits to be maintained and paid by the Company.
The Silver Agreement provides that if Mr. Silver's employment is
terminated without cause by the Company (as such term is defined in the Silver
Agreement), the Company will be required to pay Mr. Silver an amount equal to
his base salary then in effect for two years, which amount is payable in equal
monthly installments over a two year period following his termination. Mr.
Silver will also be entitled to receive any accrued but unpaid bonus
compensation and the Company will be required, with certain exceptions, to
continue to maintain life insurance, medical benefits and other benefits for Mr.
Silver for two years. If Mr. Silver's employment is terminated without cause
following a change in control, all outstanding stock options issued to Mr.
Silver under the Company's stock option plans shall immediately vest. The Silver
Agreement also provides that Mr. Silver will not, with certain exceptions,
engage or be engaged in a competing business for a period of two years following
termination of his employment.
OTHER EMPLOYMENT AGREEMENTS
The Company has also entered into employment agreements with certain
of its other executive officers which provide for the payment of severance equal
to the officer's salary for a period of six to nine months following any
termination without cause.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's executive officers and directors, and persons who
own more than 10% of the Company's common stock to file reports of ownership and
changes in ownership with the Securities and Exchange Commission and the Nasdaq
Stock Market. Officers, Directors and greater than ten-percent stockholders are
required by Securities and Exchange Commission regulations to furnish the
Company with copies of all such reports they file.
Based solely on a review of the copies of such reports furnished to
the Company, or written representations that no Form 5 was required, the Company
believes that all Section 16(a) filing requirements applicable to its officers,
directors and greater than ten-percent beneficial owners were complied with
through April 1, 1998, except that each of Mr. Oddi and Mr. Megrue reported on a
Form 4 filed late one transaction involving the purchase of Common Stock in an
open market transaction in September 1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Members of the Compensation Committee from September 17, 1997 through
the end of the fiscal year ended January 31, 1998 were Messrs. Dabah and Megrue.
Mr. Dabah is the Chief Executive Officer and Chairman of the Board of Directors
of the Company, and has entered into certain related transactions with the
Company as disclosed below. Mr. Megrue is a general partner of SKM Partners,
L.P., which serves as the general partner of SKM, which has entered into an
advisory agreement with the Company, as disclosed below.
Prior to September 17, 1997, the Company did not have a formal
Compensation Committee. However, Messrs. Dabah and Silver participated in
deliberations of the Company's Board of Directors concerning executive officer
compensation.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN INDEBTEDNESS
On December 28, 1993, the Company agreed to be a co-maker of two
installment notes issued as of that date by Ezra Dabah and certain of his family
members in connection with their bankruptcy proceedings. Although the Company
was a co-maker of the installment notes, the notes expressly provided that they
were non-recourse to the Company. The Company agreed to be a co-maker of these
installment notes in consideration for the waiver of certain claims in the
amount of $20.0 million for repayment of funds previously loaned to the Company
by its stockholders. One such installment note, in the principal amount of
$2,650,000 ("Note A"), was non-interest bearing and provided for three annual
principal payments. Note A was secured by a pledge of shares of the Company's
Common Stock held by Ezra Dabah and certain of his family members. Note A was
repaid by the Company on July 1, 1996 with a portion of the net proceeds from
the private placement transactions consummated in July 1996 with the SKM
Investors and Nomura Holding America Inc. (the "1996 Private Placement"). The
other installment note, in the principal amount of $2,110,000 ("Note B" and,
collectively with Note A, the "Installment Notes"), provided for monthly
principal payments of $50,000, commencing November 30, 1995 and continuing
through October 31, 1998, with the remaining balance of $310,000 due on November
30, 1998. Interest on Note B accrued at the rate of 5% per annum for the first
two years only, of which 3% per annum was payable monthly and the remaining 2%
was added to the principal balance, to be paid at final maturity. Note B was
secured by a lien on certain personal assets of Ezra Dabah and certain of his
family members. The Company repaid Note B on May 28, 1997.
Management believes that the transactions described in the preceding
paragraph were upon terms and conditions at least as favorable to the Company as
could have been obtained from unaffiliated third parties.
1996 PRIVATE PLACEMENT AND ADVISORY AGREEMENT
In July 1996, the SKM Investors purchased shares of the Company's
newly issued Series B Common Stock for an aggregate purchase price of $20.5
million. Under the terms of the Series B Common Stock, such shares were entitled
to a liquidation preference over the outstanding Series A Common Stock held by
the Company's other stockholders and carried certain special voting and other
rights. The shares of Series B Common Stock purchased by the SKM Investors were
convertible into 7,659,889 of Common Stock. Such conversion was effected
immediately prior to consummation of the Company's initial public offering.
In connection with the 1996 Private Placement, the Company entered
into an advisory agreement with SKM, a limited partnership under the control of
SKM Partners, L.P., of which Messrs. Saunders, Karp, Megrue and Reilly are
general partners, pursuant to which SKM agreed to provide certain financial
advisory services to the Company in connection with the Company's ongoing
business and financial matters, including operating and cash flow requirements,
corporate liquidity and other corporate finance concerns. In consideration for
these services, SKM is entitled to receive an annual fee of $150,000, payable
quarterly in advance. The Company also agreed to indemnify SKM for certain
losses arising out of the provision of its advisory services and to reimburse
certain of SKM's out-of- pocket expenses. Pursuant to the advisory agreement,
the Company incurred fees and expenses to SKM of approximately $153,000 during
fiscal 1997.
RELATED PARTY LOANS
During fiscal 1994, Ezra Dabah forwarded funds in the amount of
$488,000 to the Company for the subscription for shares to be issued to Mr.
Dabah, subject to approval of the Company's Board of Directors, at a future
date. During July 1997, the Board of Directors determined to not issue such
shares and to refund the $488,000 to Mr. Dabah prior to July 31, 1997.
<PAGE>
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
COMPENSATION POLICY
The Company's employee compensation policy in general is to offer a
package including a competitive salary, an incentive bonus based upon
performance goals, competitive benefits, and an efficient workplace environment.
The Company also encourages broad-based employee ownership of the Company's
Common Stock through the Employee Stock Purchase Plan and by granting stock
options to employees at many levels within the Company.
The Compensation Committee of the Board of Directors reviews and
approves individual officer salaries, bonus plan and financial performance
goals, and stock option grants. The Compensation Committee also reviews
guidelines for compensation, bonus, and stock option grants for non-officer
employees.
Key personnel of the Company are paid salaries in line with their
responsibilities. These salaries are structured to be competitive with salaries
paid by a peer group consisting of similar companies in the retail apparel
industry. Executives participate in the Company's Management Incentive Program,
which offers cash incentives based on the Company's performance. Under the
Company's 1996 and 1997 Stock Option Plans, and at the discretion of the Board
of Directors, the Company also grants executive officers stock options. The
Company's performance and return on equity are of vital importance to the
executive officers due to these equity holdings and cash incentives. Benefits
extended to the executive officers vary by recipient and may include disability
and life insurance, and participation in the Company's 401(k) Savings and
Investment Plan. Salaries for executive officers are adjusted based on
individual job performance and the Company's performance and, in certain cases,
changes in the individual's responsibilities.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Compensation Committee reviews and approves the compensation of
Ezra Dabah, the Company's Chief Executive Officer. Pursuant to Mr. Dabah's
Employment Agreement and based on the Company's performance in the preceding
fiscal year, Mr. Dabah's base salary for the fiscal year ended January 31, 1998
was $528,008, an increase of 7.7% from the prior year. In addition, Mr. Dabah is
entitled to receive a bonus based on the Company's earnings. Mr. Dabah's
performance bonus for the fiscal year ended January 31, 1998 was $120,648.
DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code imposes a limitation on
the deductibility of nonperformance- based compensation in excess of $1 million
paid to executive officers. The Compensation Committee believes that the Company
will be able to continue to manage its executive compensation program to
preserve federal income tax deductions.
Submitted by the Compensation Committee
Ezra Dabah John F. Megrue
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative stockholder return on the
Company's common stock with the return on the Total Return Index for the Nasdaq
Stock Market (US) and the Nasdaq Retail Trade Stocks. The graph assumes that
$100 was invested on the date of the Company's initial public offering,
September 18, 1997.
[In lieu of the graph, the information is presented in tabular format]
<TABLE>
<CAPTION>
9/18/97 9/30/97 10/31/97 11/30/97 12/31/97 1/31/98
<S> <C> <C> <C> <C> <C> <C>
The Children's Place $ 100.00 $103.57 $42.86 $35.71 $36.61 $52.24
Retail Stores, Inc.
Nasdaq Stock Market (US) 100.00 100.64 95.44 95.91 94.41 97.43
Nasdaq Retail Trade Stocks 100.00 99.05 93.81 95.87 95.72 97.06
</TABLE>
ITEM 2: RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has selected the accounting firm
of Arthur Andersen LLP as independent public accountants of the Company for the
fiscal year ending January 30, 1999. Arthur Andersen LLP has served as the
Company's independent public accountants since 1994. A representative of Arthur
Andersen LLP is expected to be present at the meeting with the opportunity to
make a statement if such representative so desires and to respond to appropriate
questions.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR APPROVAL
OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS.
ITEM 3: OTHER MATTERS
At the date of this Proxy Statement, the only business which the Board
of Directors intends to present or knows that others will present at the meeting
is that hereinabove set forth. If any other matter or matters are properly
brought before the meeting, or any adjournment thereof, it is the intention of
the persons named in the accompanying form of proxy to vote the proxy on such
matters in accordance with their judgment.
STOCKHOLDER PROPOSALS: 1999 ANNUAL MEETING
Proposals of stockholders intended to be presented at the Company's
1999 Annual Meeting of Stockholders must be received by the Company on or prior
to December 31, 1998, to be eligible for inclusion in the Company's Proxy
Statement and form of proxy to be used in connection with the 1999 Annual
Meeting.
By order of the Board of Directors,
Steven Balasiano
Secretary
West Caldwell, New Jersey
May 1, 1998
