<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CHARMING SHOPPES, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
COLIN D. STERN, Executive Vice President and General Counsel
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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:
Not Applicable
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
Not Applicable
- - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
Not Applicable
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
Not Applicable
- - --------------------------------------------------------------------------------
/ / 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:
Not Applicable
- - --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
Not Applicable
- - --------------------------------------------------------------------------------
(3) Filing party:
Not Applicable
- - --------------------------------------------------------------------------------
(4) Date filed:
Not Applicable
- - --------------------------------------------------------------------------------
- - ---------------
(1)Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
CHARMING SHOPPES, INC.
450 WINKS LANE
BENSALEM, PENNSYLVANIA 19020
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 28, 1994
------------------------
TO OUR SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Charming
Shoppes, Inc. will be held at the offices of Charming Shoppes, Inc. at 450 Winks
Lane, Bensalem, Pennsylvania 19020, on June 28, 1994 at 10:00 A.M. for the
following purposes:
1. To elect three Class A Directors of the Company.
2. To approve the Employee Stock Purchase Plan.
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only Shareholders of record at the close of business on May 16, 1994 will
be entitled to notice of and to vote at the meeting.
A Proxy Statement, Proxy Card, Annual Report and postage-paid return
envelope are enclosed.
By Order of the Board of Directors
BERNARD BRODSKY
Secretary
May 20, 1994
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING.
SHAREHOLDERS UNABLE TO ATTEND THE MEETING IN PERSON ARE REQUESTED TO VOTE, DATE
AND SIGN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE, AND TO MAIL THE SAME
IN THE ENVELOPE ENCLOSED FOR THAT PURPOSE. NO POSTAGE IS REQUIRED IF IT IS
MAILED IN THE UNITED STATES.
<PAGE> 3
CHARMING SHOPPES, INC.
450 WINKS LANE
BENSALEM, PA 19020
------------------------
PROXY STATEMENT
------------------------
Execution and return of the enclosed Proxy Card is being solicited by the
Board of Directors of Charming Shoppes, Inc. (the "Company") for use at the
Annual Meeting of Shareholders to be held on June 28, 1994 at 10:00 A.M. at the
offices of the Company at 450 Winks Lane, Bensalem, Pennsylvania 19020, or at
any adjournments thereof (the "Meeting"). Shares of the Company's Common Stock
represented by any unrevoked Proxy in the enclosed form, if such Proxy is
properly executed and is received prior to the Meeting, will be voted in
accordance with the specifications made on such Proxy. Any properly executed
Proxy received on a timely basis on which no specification has been made by the
Shareholder will be voted "FOR" the election as Directors of the nominees listed
herein (or for such substitute nominee as may be nominated by the Board of
Directors in the event any initial nominee becomes unavailable), "FOR" the
Proposal to adopt the Employee Stock Purchase Plan (the "Employee Stock Purchase
Plan"), and, in the discretion of the Proxy Committee, upon all other matters
requiring a vote of Shareholders which may come before the Meeting, and of which
the Board of Directors was not aware a reasonable time before this solicitation.
This Proxy Statement, the accompanying Notice of Annual Meeting of Shareholders
and Proxy Card and the Company's 1994 Annual Report have been mailed on or about
May 20, 1994. Only Shareholders of record as of the close of business on May 16,
1994 are entitled to notice of and to vote at the Meeting.
The Proxy Committee consists of David V. Wachs, Chairman of the Board of
Directors, and Philip Wachs, President. Any Shareholder who executes and
delivers a Proxy may revoke it at any time prior to its use by delivering a duly
executed Proxy bearing a later date or by sending notice to the Secretary of the
Company at the address of the Company listed above. Any Shareholder may choose
to attend the Meeting and vote in person, in which case any Proxy previously
executed by such Shareholder will be revoked.
As of May 16, 1994 the Company had outstanding 102,784,656 shares of Common
Stock, the holders of which are entitled to one vote per share. Presence at the
Meeting, in person or by proxy, of the holders of a majority of the shares of
Common Stock entitled to vote is necessary to constitute a quorum. The election
of Directors will be determined by a plurality of the votes cast, while the
adoption of the Employee Stock Purchase Plan will require the affirmative vote
of a majority of the votes cast. With regard to the election of Directors, votes
may be cast in favor or withheld; votes that are withheld will be excluded
entirely from the vote and will have no effect. Abstentions may be specified on
the proposal concerning the Employee Stock Purchase Plan. Under the Pennsylvania
Business Corporation Law if a Shareholder records the fact of abstention in
person or by proxy, or if a nominee, broker or other person holding shares on
behalf of a beneficial owner specifies that shares are not to be voted on a
given matter (a "non-vote") such action would not be considered a "vote cast"
and would have no effect on the outcome of the proposal concerning the Employee
Stock Purchase Plan.
ELECTION OF DIRECTORS
GENERAL
Pursuant to the Company's Restated Articles of Incorporation, which
provides for a classified Board of Directors, the Board of Directors consists of
three classes of Directors with overlapping three year terms. One class of
Directors is to be elected each year with terms expiring on the third succeeding
Annual Meeting after such election and until their successors shall have been
duly elected and qualified. The terms of three Class A Directors, namely
Mordechay Kafry, Marvin L. Slomowitz and Geoffrey W. Levy, are scheduled to
expire as of the date of the Meeting. Therefore, at the Meeting these three
Class A Directors will be nominated to serve for an additional three year term
and until their successors shall have been duly elected and qualified.
<PAGE> 4
Messrs. Kafry and Slomowitz were last elected as Class A Directors to the Board
at the Company's Annual Meeting held on June 20, 1991 for terms expiring at the
1994 Annual Meeting of Shareholders.
On January 21, 1993 Geoffrey W. Levy was elected a Class A Director by the
Board of Directors for a term expiring at the 1994 Annual Meeting of
Shareholders to fill the vacancy created by the resignation of Ellis Wachs.
Ellis Wachs, who was elected as an Alternate Director to Mordechay Kafry at the
Company's Annual Meeting held on June 29, 1993, resigned from that position on
October 14, 1993.
Unless otherwise directed, the Proxy solicited hereby will be voted for the
election of Mordechay Kafry, Marvin L. Slomowitz and Geoffrey W. Levy as Class A
Directors.
If any of the nominees refuses or is unable to serve as a Director (which
event is not now anticipated), discretionary authority may be exercised by the
Proxy Committee to vote for a substitute to be named by the present Board of
Directors. The election of Directors will be determined by a plurality of the
votes cast.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ALL THE
NOMINEES.
BIOGRAPHICAL INFORMATION
The following information is submitted as of April 15, 1994, concerning
each nominee for election as a Director and each person whose term of office as
a Director will continue after the Annual Meeting:
NOMINEES FOR DIRECTOR
<TABLE>
<CAPTION>
POSITION HELD YEAR FIRST TERM
NAME WITH THE COMPANY AGE BECAME DIRECTOR TO EXPIRE
- - ----------------------------- ----------------------------- --- --------------- ---------
<S> <C> <C> <C> <C>
Mordechay Kafry.............. Executive Vice President -- 41 1990 1997
Merchandise Procurement and
Director
Marvin L. Slomowitz.......... Director 64 1990 1997
Geoffrey W. Levy............. Director 46 1993 1997
</TABLE>
DIRECTORS WHOSE TERMS OF OFFICE CONTINUE
<TABLE>
<S> <C> <C> <C> <C>
Joseph L. Castle II.......... Director 61 1990 1995
Michael Solomon.............. Director 46 1990 1995
Philip Wachs................. President, Chief Operating 38 1988 1995
Officer and Vice Chairman of
the Board
David V. Wachs............... Chairman of the Board and 67 1969(1) 1996
Chief Executive Officer
Samuel Sidewater............. Executive Vice President -- 56 1988 1996
Business Development and
Director
Alan Rosskamm................ Director 44 1992 1996
</TABLE>
- - ---------------
(1) Prior to 1969, David V. Wachs was a Director of the Company's predecessor
corporations.
Philip Wachs is the son of David V. Wachs.
Mordechay Kafry has been a Director of the Company since January 1990 and
has been employed by the Company for more than five years. He has been Executive
Vice President -- Merchandise Procurement since February 1988. Prior to that
time, he served as Vice President -- Far East Operations from 1986 to February
1988 and as Director of Far East Operations from 1984 to 1986.
2
<PAGE> 5
Marvin L. Slomowitz has been a Director of the Company since March 1990. He
has served as Chairman of the Board and Chief Executive Officer of Mark Centers
Trust since June 1993 and as President of Mark Centers Trust from June 1993 to
February 1994. He has also served as Chairman of the Board of Directors,
President and Chief Executive Officer of the predecessor to Mark Centers Trust,
Mark Development Company, from 1955 through June, 1993. Mark Centers Trust is
principally engaged in the development of shopping centers.
Geoffrey W. Levy has been a Director of the Company since January 1993.
Since 1969 he has been principally engaged in the development of shopping
centers in the northeastern section of the United States. He has also acted as a
consultant to national and regional retail chains providing them with advisory
services on site selection and lease negotiations. Prior to 1988, Mr. Levy owned
and operated twenty-five movie theaters in the northeastern section of the
United States. Since that time Mr. Levy has served as President of Southbridge
Cinema, Inc. which owns and operates a movie theater in Massachusetts and as
Treasurer of Fishkill Cinema, Inc. which owns and operates a movie theater in
New York. Mr. Levy is also the general partner of Wakefield Mall Associates
which owns and operates a shopping center in Wakefield, Rhode Island.
Joseph L. Castle II has been a Director of the Company since January 1990.
He has served as Chairman of the Board of Castle Energy Corporation ("CEC")
since December 1993. He has also served as President, Chief Executive Officer
and a Director of CEC since December 1985 and was the President and Chairman of
the Board of Directors of its predecessor (which merged with a subsidiary of CEC
in December 1985) from February 1981 through December 1985. He is the managing
general partner of various partnerships engaged in the production and sale of
oil and gas. Mr. Castle has been, for more than five years, a financial
consultant. He is also a Director of The Reading Company, Comcast Corporation,
Mark Centers Trust and Independence Capital Management, Inc., a subsidiary of
Penn Mutual Insurance Company.
Michael Solomon has been a Director of the Company since March 1990. He has
been associated with the investment banking firm of Lazard Freres & Co. since
1981 and is currently a general partner of that firm.
Philip Wachs has been President and Chief Operating Officer since March
1990 and Vice Chairman of the Board since June 1989. Prior to his appointment as
President, he served as Executive Vice President -- Real Estate for over five
years.
David V. Wachs has been Chairman of the Board of Directors of the Company
since 1971 and Chief Executive Officer since February 1988. He served as
President of the Company from January 1989 until March 1990 when he was
succeeded as President by Philip Wachs. Mr. Wachs is also a Director of The Pep
Boys -- Manny, Moe and Jack and Developers Diversified Realty Corporation.
Samuel Sidewater has been a Director since September 1988. He served as
Executive Vice President -- Merchandising for more than five years until
December 6, 1990 when he was appointed Executive Vice President -- Business
Development.
Alan Rosskamm has been a Director of the Company since March 1992. He has
been Chairman of the Board of Directors of Fabri-Centers of America, Inc. since
July 1992. He has also been President and Chief Executive Officer and a Director
of Fabri-Centers of America, Inc. for more than five years. Its principal
business is conducted in the retail fabric industry through specialty fabric
stores which sell a wide variety of fashion and decorator fabrics plus notions,
crafts, patterns and sewing accessories.
Information concerning the beneficial ownership of the Company's shares of
Common Stock by each nominee for election as a Director and each person whose
term of office as a Director will continue is set forth under "PRINCIPAL
SHAREHOLDERS AND MANAGEMENT OWNERSHIP".
COMMITTEES OF THE BOARD
The Board of Directors has an Audit Committee, a Compensation Committee,
and certain Stock Option Committees. During the Company's 1994 fiscal year,
Joseph L. Castle II and Alan Rosskamm were members of the Audit Committee. In
addition, Marvin L. Slomowitz was a member of the Audit Committee until June 29,
1993 when he was replaced by Geoffrey W. Levy. The Audit Committee monitors the
activities of
3
<PAGE> 6
the Company's independent auditors and the Company's internal audit functions.
The Audit Committee met twice during the Company's 1994 fiscal year. During the
Company's 1994 fiscal year Joseph L. Castle II, Michael Solomon and Marvin L.
Slomowitz were members of the Compensation Committee and Stock Option
Committees. The Compensation Committee reviews the compensation of the Company's
Executive Officers. See "REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEES
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION". The Compensation Committee
met six times during the Company's 1994 fiscal year and, on one occasion, acted
by unanimous consent. The Stock Option Committees have the responsibility to
administer the Company's employee stock option and stock incentive plans; to
determine the individuals from among those eligible under these plans to whom,
and the time or times at which, options and awards shall be granted and the
number of shares to be subject to each option or award; and to make all other
determinations necessary or advisable for the administration of these plans. The
Stock Option Committees met three times during the Company's 1994 fiscal year
and, on one occasion, acted by unanimous consent. During the Company's 1994
fiscal year, David V. Wachs, Philip Wachs and Samuel Sidewater were members of
the Board of Director's Administration Committee (the "Administration
Committee"). The Administration Committee is authorized to exercise the
authority of the Board of Directors on matters of a routine nature between
meetings of the Board of Directors. The Administration Committee acted by
unanimous consent on two occasions. The Board has no standing nominating
committee as the selection of nominees for the Board of Directors is deemed to
be the responsibility of the entire Board.
Six meetings of the Board of Directors were held during the Company's
fiscal year ended January 29, 1994. Each incumbent Director attended at least
75% of the meetings of the Board and Committees on which he served (held at a
time at which he was a Director), with the exception of Samuel Sidewater who
attended 66% of the meetings.
COMPENSATION OF DIRECTORS
Directors who are not also employees of the Company are paid $20,000 per
year for their service on the Board and any Committees. Such non-employee
Directors also participate in the Company's 1989 Non-Employee Director Stock
Option Plan (the "1989 Plan") and the Non-Employee Directors' Restricted Stock
Plan (the "Restricted Stock Plan").
The 1989 Plan provides that each person who after the inception of the 1989
Plan becomes a non-employee Director of the Company shall automatically receive
an option under the 1989 Plan, as of the date of such Director's commencement of
service as a non-employee Director, to purchase 30,000 shares of Common Stock
upon exercise of such option. The exercise price for the shares of Common Stock
to be purchased upon exercise of an option granted pursuant to the 1989 Plan is
equal to the fair market value of the shares covered by such option on the date
of grant. Options granted under the 1989 Plan generally have a term of ten years
and become cumulatively exercisable as to 20% of the shares subject to the
option on each of the first five anniversaries of the date of grant. At the time
of their respective appointments to the Board of Directors, options to purchase
30,000 shares were granted to Joseph L. Castle II at an exercise price of $4.625
per share, to each of Michael Solomon and Marvin L. Slomowitz at an exercise
price of $4.50 per share, to Alan Rosskamm at an exercise price of $15.25 per
share and to Geoffrey W. Levy at an exercise price of $17.00 per share. These
options were the only options outstanding under the 1989 Plan at the end of the
1994 fiscal year at which time options to purchase 60,000 shares were
exercisable.
The Restricted Stock Plan provides for a one-time grant of 5,000 shares of
restricted stock to each non-employee Director who was serving at the effective
date of the Restricted Stock Plan and, during the five-year life of the
Restricted Stock Plan, a pro-rata grant to each newly elected or appointed
non-employee Director who at the time he joins the Board is not related to
another Director and has not been an employee of the Company for at least three
years. Directors pay no cash consideration for the restricted stock granted to
them. A total of 40,000 shares of the Company's Common Stock has been reserved
for issuance under the Restricted Stock Plan. Restricted stock will vest at a
rate of 1,000 shares per year, or earlier upon a termination of the Director's
service due to death, disability and other circumstances (including in
connection with a change in control of the Company) in which event the
restricted stock would not be forfeited. Joseph L. Castle II, Michael Solomon
and Marvin L. Slomowitz have each received grants of 5,000 shares of restricted
stock. In
4
<PAGE> 7
addition, Alan Rosskamm and Geoffrey W. Levy, who became Directors of the
Company in March 1992 and January 1993, respectively, have received pro-rata
grants of 4,084 shares and 3,250 shares of restricted stock under the Restricted
Stock Plan, respectively.
In March 1990, Ellis Wachs and the Company entered into an employment and
consulting agreement pursuant to which Mr. Wachs agreed to be employed by the
Company until April 27, 1991 and thereafter to provide consulting services to
the Company at the request of the Board of Directors or the Chairman and Chief
Executive Officer of the Company for a period of five years ("Consulting Term").
During his Consulting Term, Mr. Wachs is paid $221,000 per year and continues to
receive certain insurance benefits. Some or all of the remaining cash
compensation and benefits are payable to Mr. Wachs or his estate, as the case
may be, in the event he is unable, prior to the expiration of the agreement, to
perform his duties by reason of his death, illness, injury or incapacity. Mr.
Wachs provides consulting services to the Company relating primarily to
merchandising and real estate locations. Mr. Wachs resigned as an Alternate
Director of the Company on October 14, 1993. He was not separately compensated
for his services as an Alternate Director.
A Director who is also a Company employee is not separately compensated for
his service as a Director.
A Hong Kong subsidiary of the Company (the "Tenant") leases an apartment in
Hong Kong from a corporation owned and controlled by Mordechay Kafry, the
Company's Executive Vice President -- Merchandise Procurement and a Director,
pursuant to a lease agreement (the "Lease Agreement"). Mr. Kafry's corporate
duties and functions require that he reside in Hong Kong on a permanent basis.
In furtherance of this requirement the Tenant permits Mr. Kafry to occupy the
apartment on a rent-free basis. The Tenant pays rental of approximately $9,000
per month and maintenance, utility, management and insurance charges under the
Lease Agreement. The term of the Lease Agreement is two years, expiring on
September 30, 1994. The Company believes that the terms thereof are no less
favorable to the Company than the Company could have negotiated with an
unaffiliated third party.
5
<PAGE> 8
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid during each of the Company's last three fiscal years (ended January 29,
1994, January 30, 1993 and February 1, 1992) to the Company's Chief Executive
Officer and each of the Company's four other most highly compensated Executive
Officers, based on salary and bonus earned during the 1994 fiscal year.
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND FISCAL COMPENSATION UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) ($)(2)(3) OPTIONS(#) ($)(3)(4)(5)
- - ---------------------------------- ------ --------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
David V. Wachs.................... 1994 $ 570,000 -- -- 135,000 $ 112,040
Chairman of the Board and Chief 1993 525,000 $ 472,500 -- -- 100,598
Executive Officer 1992 485,000 363,750 -- 80,000 --
Philip Wachs...................... 1994 360,000 -- -- 135,000 11,586
Vice Chairman of the Board, 1993 330,000 297,000 -- 70,000 11,435
President and Chief Operating
Officer 1992 300,000 225,000 -- 190,000 --
Mordechay Kafry................... 1994 460,000 -- $ 134,012 115,800 39,428
Executive Vice President -- 1993 420,000 315,000 134,012 70,000 35,745
Merchandise Procurement and 1992 385,000 231,000 -- 190,000 --
Director
Ivan M. Szeftel................... 1994 325,000 -- -- 104,700 12,208
Executive Vice President -- 1993 285,000 213,750 -- 50,000 11,533
Finance 1992 260,000 117,000 -- 160,000 --
Colin D. Stern.................... 1994 300,000 -- -- 89,000 24,868
Executive Vice President and 1993 265,000 198,750 -- 40,000 24,804
General Counsel 1992 242,000 108,900 -- 120,000 --
</TABLE>
- - ---------------
(1) The Company has an annual incentive plan for key employees (the
"Participants"). Each Participant receives a specified percentage of his or
her base salary on a graduated scale as a bonus, if and to the extent the
performance goals prescribed for that Participant are met. The performance
goals vary in accordance with the functions of each Participant. The plan
and the performance goals are reviewed and approved by the Compensation
Committee prior to implementation. See "REPORT OF THE COMPENSATION AND STOCK
OPTION COMMITTEES OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION". The
table sets forth under the caption "Bonus" the bonuses paid to or accrued
for the named Executive Officers with respect to the 1992, 1993 and 1994
fiscal years. Each named Executive Officer received the maximum amount
payable under the annual incentive plan for the 1992 and 1993 fiscal years.
No bonuses were paid to or accrued for the named Executive Officers with
respect to the 1994 fiscal year.
(2) The amount set forth under the caption "Other Annual Compensation" with
respect to Mordechay Kafry includes $107,692 attributable to him for the
rent-free use of an apartment in Hong Kong. No amount has been disclosed
under the caption "Other Annual Compensation" with respect to the other
named Executive Officers as the value of perquisites or other personal
benefits received by each such Executive Officer does not equal or exceed
the lesser of $50,000 or 10% of the total annual salary and bonus reported
for each such Executive Officer.
(3) As permitted by transition rules of the Securities and Exchange Commission,
disclosures under the captions "Other Annual Compensation" and "All Other
Compensation" are omitted for the 1992 fiscal year.
Notes continued on following page
6
<PAGE> 9
(4) The Company has enabled David V. Wachs, Philip Wachs, Mordechay Kafry, Ivan
M. Szeftel and Colin D. Stern to obtain life insurance pursuant to "Split
Dollar" arrangements. The Company is either the owner or the assignee of
these policies and is the beneficiary under such policies either to the
extent of the premiums paid by it or to the extent of the greater of the
cash value or premiums paid by it. Accordingly, the dollar value of this
benefit to each named Executive Officer included under the caption "All
Other Compensation" with respect to the 1994 fiscal year are as follows:
David V. Wachs, $104,035; Mordechay Kafry, $2,349; Philip Wachs, $3,581;
Ivan M. Szeftel, $4,203; and Colin D. Stern, $10,863. Also included under
the caption "All Other Compensation" with respect to Mr. Stern are premiums
in the amount of $6,000 paid by the Company on behalf of Mr. Stern for a
cash-value type insurance policy on the life of Mr. Stern. See "MANAGEMENT
COMPENSATION -- Employment and Change of Control Agreements". With respect
to the life insurance coverage for David V. Wachs, see "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS".
(5) Included under the caption "All Other Compensation" are contributions in the
following amounts made or accrued by the Company under its defined
contribution plan on behalf of the named Executive Officers during the 1994
fiscal year: Mordechay Kafry, $37,079; David V. Wachs, $8,005; Philip Wachs,
$8,005; Ivan M. Szeftel, $8,005; and Colin D. Stern, $8,005.
OPTION GRANTS DURING 1994 FISCAL YEAR
The following table provides information relating to options granted to the
named Executive Officers during the 1994 fiscal year and the potential
realizable value of such options assuming the options are exercised immediately
prior to their expiration date and assuming the occurrence of the specified
compounded rates of appreciation of the Company's Common Stock over the term of
such options. The potential realizable value is approximately equal to the
amount a purchaser of Company Common Stock would realize, exclusive of brokerage
commissions, assuming (i) the purchase of an equivalent number of shares of
Company Common Stock at the closing market price on the date of grant of the
options depicted, (ii) the sale of such shares immediately prior to the
expiration date of such options at the closing market price on such date and
(iii) the occurrence of the specified compounded rates of appreciation of the
Company's Common Stock over such holding period. This table is presented solely
for purposes of complying with the Securities and Exchange Commission rules, and
there can be no assurance that the optionees or any purchaser of the Company's
Common Stock under the circumstances described herein will actually realize the
returns assumed herein under the circumstances depicted or under any other
circumstances. The actual amounts realized by an optionee or the purchaser of
Company Common Stock will be dependent upon a number of factors, including the
future performance of the Company and overall stock market conditions.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------
NUMBER OF POTENTIAL REALIZABLE VALUE
SECURITIES % OF TOTAL AT ASSUMED ANNUAL RATES
UNDERLYING OPTIONS OF STOCK PRICE APPRECIATION
OPTIONS GRANTED TO EXERCISE FOR OPTION TERM(1)(2)
GRANTED EMPLOYEES PRICE EXPIRATION ---------------------------------------------
(#)(3) IN FISCAL YEAR ($/SH) DATE 0%($) 5%($) 10%($)
---------- -------------- -------- ---------- ----- ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
David V. Wachs.......... 67,500(4) 5.3% $15.125 4/7/03 $ 0 $642,062 $1,627,111
67,500(5) 5.3% 15.125 4/7/03 0 642,062 1,627,111
Philip Wachs............ 67,500(4) 5.3% 15.125 4/7/03 0 642,062 1,627,111
67,500(5) 5.3% 15.125 4/7/03 0 642,062 1,627,111
Mordechay Kafry......... 54,000(4) 4.3% 15.125 4/7/03 0 513,650 1,301,689
61,800(5) 4.9% 15.125 4/7/03 0 587,844 1,489,711
Ivan M. Szeftel......... 54,000(4) 4.3% 15.125 4/7/03 0 513,650 1,301,689
50,700(5) 4.0% 15.125 4/7/03 0 482,260 1,222,141
Colin D. Stern.......... 54,000(4) 4.3% 15.125 4/7/03 0 513,650 1,301,689
35,000(5) 2.8% 15.125 4/7/03 0 332,921 843,687
All Shareholders........ N/A N/A N/A N/A 0 975.1 million(6) 2.47 billion(6)
</TABLE>
- - ---------------
(1) The potential realizable value of the options depicted above does not take
into account provisions of certain options providing for termination of the
options following the termination of employment, the
Notes continued on following page
7
<PAGE> 10
non-transferability of the options or the vesting requirements of the
options. For the named Executive Officers and "All Shareholders", the
occurrence of the assumed annual compounded rates of stock appreciation of
5% and 10% from a base price of $15.125 per share (i.e., the exercise price
of the options depicted) over the option term will result in prices per
share of Company Common Stock of approximately $24.64 and $39.23,
respectively. These prices represent certain assumed rates of appreciation
only. There can be no assurance that these prices will be achieved.
(2) The potential realizable value for "All Shareholders" represents the product
of the number of shares of Company Common Stock outstanding as of April 7,
1993 (the date of grant of the options depicted) multiplied by the
difference between (i) the assumed net amount realized, exclusive of
brokerage commissions, upon the sale of one share of Company Common Stock at
the closing market price on April 7, 2003 (i.e., the expiration date of the
options depicted) assuming the specified compounded rates of return between
April 7, 1993 and April 7, 2003 and (ii) the purchase price, exclusive of
brokerage commissions, of one share of Company Common Stock at the closing
market price of $15.125 on April 7, 1993 (the exercise price of the options
depicted). These amounts represent certain assumed rates of appreciation
only. There can be no assurance that the amounts reflected in this table
will be achieved.
(3) All of these options to acquire shares of Common Stock of the Company are
non-qualified options and were granted with an exercise price equal to the
fair market value of the Company's shares of Common Stock on the date of the
grant. Such options have a term of ten years subject to earlier expiration
at or following termination of employment in certain circumstances. The
option exercise price may be paid in cash, or with the approval of the Stock
Option Committee in shares of Common Stock owned by the Executive Officer or
a combination of cash and such shares. In the event of a change of control
of the Company, any unexercisable portion of the options will become
immediately exercisable. See "MANAGEMENT COMPENSATION -- Employment and
Change of Control Agreements". An Executive Officer can elect to have the
Company withhold shares upon exercise to satisfy tax withholding
obligations.
(4) These options become exercisable as to one-fifth of the shares subject
thereto on each of the first, second, third, fourth and fifth anniversaries
of the date of grant.
(5) These performance-accelerated options will become cumulatively exercisable
as to one-fifth of the shares subject to the option on each of the fifth,
sixth, seventh, eighth and ninth anniversaries of the date of grant. Such
options will, however, become exercisable on an accelerated basis if the
Company's compounded rate of growth of its earnings per share over any
period of three consecutive fiscal years from fiscal 1994 through fiscal
1998 equals or exceeds a certain percentage determined by the Stock Option
Committee; if such performance is achieved, the options will become
cumulatively exercisable as to one-half of the shares subject to the option
on each of the next two anniversaries of the date of grant.
(6) No gain to the optionees is possible without an appreciation in stock price,
which will benefit all Shareholders commensurately. A zero percent gain in
the stock price will result in zero dollar gain for the optionee.
8
<PAGE> 11
AGGREGATED OPTION EXERCISES DURING 1994 FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information relating to options exercised by
the named Executive Officers during the 1994 fiscal year and the number and
value of options held at fiscal year-end. A significant portion of the value of
unexercised in-the-money options depicted below corresponds to the appreciation
in the value of the Company's Common Stock price during the past four fiscal
years. See "STOCK PERFORMANCE CHART". From the beginning of the 1991 fiscal year
to the end of the 1994 fiscal year, the Company's aggregate market
capitalization rose 110% from approximately $569,543,000 to approximately
$1,194,299,000 with 105% of such increase related to the appreciation in the
value of the Company Common Stock during such period.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(1)(2)
SHARE ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - --------------------------- ------------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David V. Wachs............. -- -- 1,670,000 1,065,000 $12,578,750 $ 7,346,250
Philip Wachs............... -- -- 514,166 460,834 3,811,034 2,276,466
Mordechay Kafry............ -- -- 416,584 447,884 2,774,185 2,398,185
Ivan M. Szeftel............ -- -- 335,834 394,284 2,247,403 2,179,122
Colin D. Stern............. -- -- 102,500 274,000 637,969 1,342,188
</TABLE>
- - ---------------
(1) The closing price for the Company's Common Stock as reported by the Nasdaq
National Market on January 28, 1994 was $11.625. Value is calculated on the
basis of the aggregate of the difference between the option exercise price
of in-the-money options and $11.625 multiplied by the number of shares of
Common Stock underlying such options.
(2) See "REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEES OF THE BOARD OF
DIRECTORS ON EXECUTIVE COMPENSATION".
EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS
On October 3, 1989 Colin D. Stern entered into an employment agreement with
the Company pursuant to which Mr. Stern is employed as the Company's General
Counsel at an annual salary of $215,000, subject to increases in such salary at
the discretion of the Company's Board of Directors, for an initial term
commencing on November 1, 1989 and expiring on November 15, 1992. Upon
expiration of the initial or any additional term, Mr. Stern's employment will
continue for an additional term of one year, unless, not later than 180 days
prior to the expiration of the then current term, written notice is given by
either party of his or its election to terminate the employment at the end of
the current term. In addition to a motor vehicle allowance and the payment by
the Company of premiums on a cash-value type insurance policy with an initial
$500,000 coverage amount, Mr. Stern's employment agreement provided for the
grant of options to purchase 20,000 shares of the Company's Common Stock at a
price of $.50 per share and to purchase 20,000 shares of the Company's Common
Stock at a price equal to the fair market value thereof on the date of such
grant.
The agreements evidencing options granted to each of the named Executives
under the Company's stock option plans provide that in the event of a change of
control of the Company the options become fully exercisable. In the case of
options granted under the 1993 Employees' Stock Incentive Plan and the 1990
Employees' Stock Incentive Plan, a change of control is defined to mean an
acquisition of shares giving a person or group beneficial ownership of more than
20% of the voting power of the Company's voting securities, a change in the
Board's membership such that the current members, or those elected or nominated
by vote of two-thirds of the current members and successors elected or nominated
by them, cease to represent a majority of the Board, certain mergers,
recapitalizations, reorganizations, or similar transactions substantially
reducing the percentage of voting power held by pre-existing shareholders of the
Company (unless otherwise determined by the Board), and liquidation or sale of
all or substantially all of the assets of the Company, except that transactions
involving subsidiaries or employee benefit plans of the Company or parties whose
acquisitions of shares in excess of ten percent of the voting power of the
Company have been approved in each
9
<PAGE> 12
case in advance by the Board of Directors will not trigger a change of control.
In the case of options granted under the 1988 Key Employee Stock Option Plan and
the 1986 Employees' Stock Option Plan, a change of control will be deemed to
occur if any person, together with such person's affiliates and associates,
becomes a beneficial owner (including through any right to acquire) of
securities having 20% or more of the votes entitled to be cast for the election
of directors, or if, in connection with or during the two years following an
extraordinary transaction, the persons who were directors immediately before the
transaction cease to constitute a majority of the Board of the Company or a
successor corporation (not counting terminations due to death, disability or
normal retirement), except that the Board of Directors may determine in advance
that a given event will not be a change of control.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEES OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
Compensation Strategy
The primary objectives of the Compensation and Stock Option Committees of
the Company's Board of Directors (collectively, the "Committee") are to assure
that the Company's executive compensation and benefit program:
- reflects the Company's unique, entrepreneurial and customer-focused
orientation;
- is competitive with other profitable and growing retail industry
organizations;
- is effective in driving performance to achieve financial goals and
create Shareholder value;
- is cost-efficient and fair to employees, management and
Shareholders; and
- is well communicated and understood by program participants.
The Committee, which is comprised of independent, non-employee Directors of
the Company (See "ELECTION OF DIRECTORS -- Committees of the Board"),
periodically engages an independent compensation and benefits consulting firm to
review the Company's compensation and benefits program. In this regard
consideration is given to:
- business direction and strategy;
- comparisons of compensation forms and levels with other strong
growth peer companies in the retail industry; and
- interests of Shareholders, customers, communities, management and
other employees.
The Company's executive compensation and benefits program reflects its
entrepreneurial business strategy and its need to retain and attract high
quality key employees. The Company's compensation strategy is to place the major
portion of total compensation at risk in the form of annual incentives and
long-term, stock-based compensation programs. The program gives great weight to
stock compensation opportunities thereby aligning management's interests with
those of the Company's Shareholders. These stock compensation programs have been
critical factors in attracting and retaining key employees and have contributed
to a high level of employee commitment to the Company's business success.
The Company's target total compensation levels (base salary, annual bonus
and long-term incentives) for Executives are set to reflect the Company's size
and financial performance as compared to the size, financial performance and
corresponding compensation levels of a group of high growth, retail industry
companies (the "Compensation Peer Group"). Cash compensation (base salary and
cash bonuses) targets for each Executive are set at no more than the performance
and size adjusted median level of cash compensation of the Compensation Peer
Group. The Company's Executives can achieve total compensation in excess of the
performance and size adjusted median level of total compensation of such
Compensation Peer Group when annual and long-term performance significantly
exceed established goals (see "Annual Incentive Plan") and Shareholders are
rewarded through stock price growth. See "Long-Term Incentive Plans". Likewise,
the
10
<PAGE> 13
Company Executives' total compensation levels could fall below the performance
and size adjusted median compensation level of such Compensation Peer Group when
established goals are not achieved and Shareholder value is not created. These
results are consistent with the Company's business strategy and its compensation
philosophy of placing the major portion of total compensation opportunity at
risk.
Each year, the Committee reviews the selection of peer companies which
comprise the Compensation Peer Group. The Committee believes that the Company's
most direct competitors for executive talent are not necessarily restricted to
those specialty apparel retail companies that are included in the
line-of-business industry index used to compare Shareholder returns, but
encompass a broader group of companies which are engaged in the recruitment and
retention of executive talent in competition with the Company. Thus, the
Compensation Peer Group is not the same as, and is broader than, the companies
comprising the specialty apparel retail industry index in the graph under the
caption "Comparison of Five-Year Cumulative Total Returns". See "STOCK
PERFORMANCE CHART".
Base Salaries
Executive base salaries reflect the Company's operating philosophy, culture
and business direction, with each salary determined by an annual assessment of a
number of factors, including job responsibilities, impact on development and
achievement of business strategy, labor market compensation data, corporate
performance, individual performance relative to job requirements and relative
job and industry experience criteria. Determinations of base salary increases
are most heavily influenced by overall corporate performance, although no
specific weighting criteria are utilized among the various factors considered
and some of the factors considered are subjective. Executive salaries are
targeted to be no more than the performance and size adjusted median level of
salaries of the Compensation Peer Group.
Annual Incentive Plan
The 1994 annual incentive program established annual incentive
opportunities for Executives ranging from zero to a maximum 90% of salary at the
end of the 1994 fiscal year. The amount of these incentive payments was
dependent on the extent to which individual performance goals were met or
exceeded and/or the extent to which the Company achieved earnings per share
goals (reflecting earnings growth). These goals were set in expectation of a
stretch performance level (target performance) and were approved by the
Compensation Committee prior to implementation.
The target performance incentive payment opportunity for each named
Executive Officer was based on factors similar to those used to determine base
salary (discussed above) and ranged from 50% to 60% of fiscal year-end salaries.
If minimum (threshold) performance was achieved the level at which each
Executive Officer could earn an incentive payment ranged from 25% to 30% of
fiscal year-end salaries to a maximum incentive payment in a range from 75% to
90% of fiscal year-end salaries. These minimum and maximum payment levels were
prescribed by the Compensation Committee at the beginning of the 1994 fiscal
year.
The annual incentive payment opportunities for David V. Wachs and Philip
Wachs were based entirely on the quantitative corporate earnings per share
(including earnings growth) goal achievement. The annual incentive award
opportunities for the other named Executive Officers were based 50% on the
quantitative corporate earnings per share (including earnings growth) goal
achievement and 50% on performance relative to individual (and business unit,
where applicable) responsibilities and objectives as quantitatively and
subjectively assessed by the Committee upon the recommendation of the Chief
Executive Officer. No awards could be granted if corporate earnings per share
(reflecting earnings growth) performance did not reach the established minimum
performance level.
On the recommendation of its independent compensation and benefits
consulting firm, the Committee revised the Company's annual incentive plan for
the 1995 fiscal year to provide for the payment of awards for performance in
excess of target performance in the form of restricted stock rather than in cash
as is presently the case under the Company's annual incentive plan. For the
named Executive Officers, restricted stock awards, when granted as a result of
above-target financial performance, will vest commencing on the third
11
<PAGE> 14
anniversary of the award at the rate of 33.3% per year. This revision is
intended to further align compensation awards with Shareholder interests, and
encourage continued, long-term service.
Under the 1995 fiscal year annual incentive plan, the maximum incentive
award opportunity for David V. Wachs has been increased from 90% to 120% of his
salary at the fiscal year-end. For other named Executive Officers, maximum
incentive award opportunities are from 100% to 120% of fiscal year-end salaries.
These maximum incentive award opportunities for David V. Wachs and the other
named Executive Officers were increased to provide greater incentive to exceed
prescribed goals. Award opportunities for the named Executive Officers at target
remain the same as under the 1994 fiscal year annual incentive plan described
above. No awards may be granted if corporate earnings per share (reflecting
earnings growth) performance does not reach the established minimum performance
level.
Long-Term Incentive Plans
The Company's long-term executive incentive program currently consists of
"market value" stock options (having a per share exercise price of 100% of fair
market value of the Company's stock on the date of grant),
performance-accelerated stock options ("PSO's") also having a per share exercise
price of 100% of the fair market value of the Company's stock on the date of
grant and "below market" stock options used primarily to attract new executives
and retain key employees. The Committee did not award "below market" options to
the named Executive Officers during the 1994 fiscal year and no such awards are
currently expected to be made to these Executive Officers. See "MANAGEMENT
COMPENSATION -- Summary Compensation Table". Long-term incentives involving
market value stock options and PSO's reward the Executives for successful
Company performance as reflected by appreciation in the market price of the
Company's stock. The Company's long-term executive incentive program currently
consists of the following plans:
1. The 1990 Employees' Stock Incentive Plan (the "1990 Plan")
authorizes the granting of a variety of stock-based awards. To date, the
Company has only granted "market value" stock options under the 1990 Plan.
These options generally become exercisable at the rate of 25% per year
commencing with the first anniversary of the date of grant. As a result of
the adoption of the 1993 Employees' Stock Incentive Plan, the Company will
no longer grant options under the 1990 Plan.
2. The 1988 Key Employee Stock Option Plan ("KESOP") authorizes the
granting of "below market" options to senior executives and other key
employees. The KESOP has also been used as an important recruiting tool to
attract new employees. Options under the KESOP generally become exercisable
in one-third increments at the end of the third, fourth and fifth years
after the date of grant.
3. The 1993 Employees' Stock Incentive Plan (the "1993 Plan")
authorizes the granting of a variety of stock-based awards. The Company has
granted options with an exercise price equal to 100% of the fair market
value of the Company's stock at the date of grant up to target award levels
to the named Executive Officers and other key employees. These option
grants continue to align the major portion of long-term compensation
opportunities with the creation of Shareholder value. These options have a
longer vesting (exercisability) schedule than options currently outstanding
under the 1990 Plan in order to encourage continued long-term service.
Thus, they generally become exercisable at the rate of 20% per year
commencing with the first anniversary of the date of grant.
Under the 1993 Plan, the Company has granted PSO's which have an
exercise price equal to 100% of the fair market value of the Company's
stock at the date of grant. The exercisability of these options can vary
depending on the Company's performance. These options generally become
exercisable on an accelerated basis if the Company's compounded rate of
growth of its earnings per share (exclusive of unusual events as
determined by the Committee) over any period of three consecutive fiscal
years from 1994 through fiscal 1998 equals or exceeds a percentage
target determined by the Stock Option Committee. If such performance is
achieved, the options will become cumulatively exercisable as to 50% of
the shares subject to the option on each of the next two anniversaries
of the date of grant. If such performance target is not achieved, these
options generally become cumulatively exercisable as to 20% of the
shares subject to the option on each of the fifth, sixth, seventh,
eighth, and ninth anniversaries of the date of grant. See also
"MANAGEMENT COMPENSATION -- Employment and Change of Control
Agreements".
12
<PAGE> 15
In accordance with its business strategy and compensation philosophy, the
Company has granted stock options to a significant number of employees to afford
them an opportunity to participate in the Company's future growth and to focus
them on their contributions which are necessary for the financial success and
business growth of the Company and, thereby, the creation of value for its
Shareholders.
Compensation of the Chief Executive Officer and other Named Executive Officers
for
the 1994 Fiscal Year
The Company's success has been accomplished by a talented management team
led by the Chief Executive Officer, David V. Wachs. David V. Wachs and his
management team have created a culture that is highly entrepreneurial,
risk-taking and willing to experiment with new ideas and methods. In recognition
of the Company's financial success and the increase in its stock price under his
leadership through the beginning of the 1994 fiscal year, David V. Wachs
received a salary increase of 8.6% effective February 1, 1993 bringing his
salary for the 1994 fiscal year to $570,000.
As a result of the 1994 fiscal year financial performance falling below the
threshold levels for the 1994 fiscal year annual incentive plan, the Committee
determined that salaries for David V. Wachs and the other named Executive
Officers would not be increased for the 1995 fiscal year. This determination is
consistent with the Company's compensation strategy of adjusting compensation
awards to reflect performance.
On the basis of the Committee's review and certification of the Company's
1994 fiscal year earnings per share performance, no annual incentive payments
were made to David V. Wachs and the other named Executive Officers as the
Company's performance fell below the pre-established threshold level for awards
under the annual incentive plan.
Effective April 7, 1993, David V. Wachs was granted 67,500 market value
options and 67,500 PSO's at an exercise price of $15.125 per share. Such
exercise price was equal to the fair market value of the Company's stock at the
date of grant. A total of 229,500 market value options and 215,000 PSO's were
also granted to other named Executive Officers effective April 7, 1993 at the
same exercise price. These grants were made to reflect the performance of the
Company through the beginning of the 1994 fiscal year with the objective of
continuing to focus a significant portion of the overall executive compensation
program on the achievement of earnings growth and earnings per share targets and
the creation of Shareholder value. The number of market value options granted to
each Executive was determined by the portion of that Executive's target total
compensation level which was allocated to the long-term incentive component. The
market value options granted to each Executive corresponded with the performance
and size adjusted median level of the Compensation Peer Group's long-term
incentive component applicable to such Executive. The grants of PSO's to each
Executive, when added to the market value option grants, exceeded that median
level. PSO's were granted as an additional incentive to exceed prescribed
long-term earnings per share goals in conformity with the Company's compensation
philosophy which is to link a significant portion of compensation to the
Company's long-term performance. These grants of market value options and PSO's
were not related to the amount of long-term incentive awards which were made in
prior years.
During the 1994 fiscal year, total compensation for David V. Wachs was
below the performance and size adjusted median level of total compensation
levels for the Compensation Peer Group. In addition, during the 1994 fiscal
year, total compensation for the other named Executive Officers in the aggregate
was below the performance and size adjusted median level of total compensation
levels for the Compensation Peer Group. In particular, base salaries were below
the performance and size adjusted median level of base salary levels for the
Compensation Peer Group while no incentive payments were made to David V. Wachs
and the other named Executive Officers under the annual incentive plan.
Long-term incentive awards in the form of both market value stock option grants
and grants of PSO's to David V. Wachs and the other named Executive Officers
during the 1994 fiscal year exceeded the performance and size adjusted median
level of long-term incentive award levels for the Compensation Peer Group.
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<PAGE> 16
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code subjects public companies to
limits on the deductibility of certain executive compensation for taxable years
beginning on or after January 1, 1994. It limits deductible compensation for the
Executive Officers named in the Summary Compensation Table to $1 million per
year. See "MANAGEMENT COMPENSATION". Certain forms of compensation are exempt
from this deductibility limit, primarily performance-based compensation which is
approved by Shareholders.
In December, 1993 the Internal Revenue Service ("IRS") issued proposed
regulations implementing this legislation. The regulations will not become final
until after a period for public comment and possibly public hearings thereafter.
The Committee recognizes that a portion of compensation which may be paid to
Executive Officers in future years may not qualify for exemption under the
legislation; however, the Committee does not believe it is appropriate to make
changes in the program at this time based upon tax regulations that are not
final. When these regulations are final, the Committee will determine what
actions, if any, are appropriate to change the compensation program.
While the annual incentive plan described above consists of
performance-based awards, it does not comply with the requirements for exemption
from the deductibility limit under the proposed regulations as Shareholders have
not been asked to approve the stated performance goals. For the same reasons,
annual incentive plan awards in restricted stock (resulting from above target
annual incentive plan achievement) will not meet the requirements for
performance-based awards.
Outstanding market value stock options and PSO awards appear to meet the
exemption requirements for performance-based compensation under Section 162(m)
and the proposed regulations. Awards of "below market" stock options to any of
the named Executive Officers which were made under written agreements prior to
February 17, 1993 should meet the exemption requirements under certain
transition rules as long as these awards are not materially modified.
Compensation Committee and Stock Option
Committees:
Joseph L. Castle II
Michael Solomon
Marvin L. Slomowitz
14
<PAGE> 17
STOCK PERFORMANCE CHART
The following graph shows a five-year comparison of cumulative total
returns on Common Stock for the Company, the Standard and Poor's 500 Composite
Index, and the Dow Jones Retailers -- Specialty Apparel Index. The Company's
fiscal year ends on the Saturday nearest January 31 in each year. The dates
plotted on the chart below correspond with the last trading day of each fiscal
year.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
CHARMING SHOPPES, INC., S&P 500 COMPOSITE INDEX AND
DOW JONES RETAILERS -- SPECIALTY APPAREL INDEX
<TABLE>
<CAPTION>
DOW JONES
RETAILERS -
S&P 500 SPECIAL TY
MEASUREMENT PERIOD CHARMING COMPOSITE APPAREL IN-
(FISCAL YEAR COVERED) SHOPPES, INC. INDEX DEX
<S> <C> <C> <C>
1/27/89 100 100 100
2/2/90 56 116 107
2/1/91 70 125 118
1/31/92 163 154 180
1/29/93 225 170 171
1/28/94 145 191 158
</TABLE>
The chart above assumes $100 invested on January 27, 1989 in Charming
Shoppes, Inc., the S&P 500 Composite Index, and the Dow Jones
Retailers -- Specialty Apparel Index, and was plotted using the above data.
APPROVAL OF EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors has adopted the Charming Shoppes, Inc. Employee
Stock Purchase Plan (the "Plan"), subject to approval by Shareholders of the
Company. The Plan provides a means for employees (other than certain "highly
compensated" Directors and Executive Officers) to authorize payroll deductions
on a voluntary basis to be used for the periodic purchase of the Company's
Common Stock. It is not expected that any Executive Officer of the Company will
be eligible to participate in the Plan.
Under the Plan, the Company will initially sell shares to participants at a
price equal to the lesser of 85% of the fair market value of Common Stock at the
beginning of a three-month offering period or 85% of the fair market value of
Common Stock on the purchase date after the end of the offering period. The Plan
permits the Company to change the manner in which purchases are made so that,
instead of the Company selling shares at such a discount, the Company would make
a matching contribution equal to 15% of an employee's payroll contribution which
funds would then be used for market purchases of Common Stock. The Plan is
intended to qualify as an "employee stock purchase plan" under Section 423 of
the Internal Revenue Code of 1986, as amended (the "Code").
The Board of Directors believes that the Plan will further encourage
broader stock ownership by employees of the Company and thereby provide an
incentive for non-executive employees to contribute to the
15
<PAGE> 18
profitability and success of the Company. In particular, the Board intends that
the Plan offer a convenient means for such employees who might not otherwise own
Common Stock in the Company to purchase and hold Common Stock, and that the
discounted sale and matching contribution features of the Plan provide a
meaningful inducement to participate. The Board believes that employees'
continuing economic interest, as Shareholders, in the performance and success of
the Company will further enhance the entrepreneurial spirit of the Company,
which can greatly contribute to the long-term growth and profitability of the
Company.
The Plan will replace a Common Stock purchase program that has been
available to employees through a securities brokerage firm. Such program, which
did not provide for discounts or matching contributions by the Company and did
not give participants certain tax advantages available under the Plan, currently
has approximately 380 participants. The Company believes that the more favorable
terms of the Plan, when communicated to employees, should result in broader
participation in the Plan than in the existing program.
Description of the Plan
The Plan is set forth in full as Exhibit "A" to this Proxy Statement. The
following description of the material features of the Plan is qualified in its
entirety by reference to Exhibit "A".
Under the terms of the Plan, the shares of the Company's Common Stock which
are to be purchased by participants may either be purchased directly from the
Company or purchased in the market. The maximum number of shares that may be
purchased under the Plan from all sources is 2,000,000, subject to appropriate
adjustment in the case of any extraordinary dividend or other distribution,
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange, or other
similar corporate transaction or event affecting the Common Stock. Shares
purchased from the Company will be either authorized but unissued shares or
treasury shares.
The Plan will be administered by the Board of Directors, although the Board
may delegate some or all of its administrative duties to a Board committee or a
committee of employees. The Board or such committee will have authority to
interpret the Plan, construe terms, adopt rules and regulations, prescribe
forms, and make all determinations under the Plan, including the determination
of whether the Company will sell shares directly to participants at a discount
(operating as a "discount plan") or will instead make matching contributions for
market purchases (operating as a "matching plan"). If a participant is a member
of a committee administering the Plan, such person may not decide any matter
relating to his or her participation in the Plan.
Any full or part-time employee of the Company or any subsidiary will be
eligible to participate in the Plan beginning 90 days after commencing
employment, excluding any person who is at any time during the offering period
both a Director or Executive Officer of the Company (i.e. any person subject to
the reporting requirements of Section 16(a) of the Securities Exchange Act of
1934, as amended) and a "highly compensated employee" within the meaning of
Section 414(q) of the Code) and excluding any other employee who owns five
percent or more of the total combined voting power or value of all outstanding
shares of all classes of securities of the Company or any subsidiary.
Approximately 14,000 employees of the Company currently would be eligible to
participate in the Plan.
An eligible employee may enroll for any three-month offering period,
commencing January 1, April 1, July 1, and October 1 of each year, by filing an
enrollment form with the Company at least 15 days before the commencement of the
offering period. After initial enrollment in the Plan, the employee will be
automatically re-enrolled in the Plan for subsequent offering periods unless he
or she files a notice of withdrawal before such offering period begins,
terminates employment or otherwise becomes ineligible to participate.
Upon enrollment in the Plan, the employee must elect a rate at which he or
she will make payroll contributions for the purchase of Common Stock. An
employee generally may elect to make contributions in an amount not less than
one percent nor more than ten percent of such employee's regular earnings (or
such higher or lower rates as the Board may specify), although an employee's
contributions will be adjusted downward (or refunded) to the extent necessary to
ensure that he or she will not purchase during any offering period Common Stock
that has a fair market value, as of the beginning of the offering period, in
excess of
16
<PAGE> 19
$6,250 (representing an annual limitation of $25,000). All employee
contributions will be made by means of direct payroll deduction. The
contribution rate elected by a participant will continue in effect until
modified by the participant, except that an employee may not increase a
previously elected contribution rate during a given offering period.
The contributions of an employee will be credited to an account maintained
on behalf of such employee by a brokerage firm (or a successor appointed by the
Board of Directors), designated as custodian under the Plan. The Plan provides
that purchases of Common Stock are to be made on the fifth business day after
the end of each offering period. As described above, for so long as the Plan is
operated as a "discount plan," the Company will sell shares directly to the
custodian for employees' accounts at a price equal to the lesser of 85% of the
fair market value of Common Stock at the beginning of the three-month offering
period or 85% of the fair market value of Common Stock on such purchase date. If
the Board designates the Plan as a "matching plan," such discounted sales by the
Company would be discontinued, but the Company instead would make a matching
contribution equal to 15% of an employee's payroll contributions to be used by
the custodian to make market purchases of Common Stock at or promptly after such
purchase date.
Pursuant to either of the above methods, shares of the Company's Common
Stock will be purchased on a given purchase date in the aggregate for all
accounts under the Plan. Shares purchased will be credited to the accounts
maintained by the custodian for each participant based upon the average cost of
all shares purchased. No interest will be credited on payroll contributions
pending investment in Common Stock. Dividends paid on Common Stock credited to
participants' accounts will be automatically reinvested in additional shares by
the custodian, either through purchases in the market or directly from the
Company (no matching contributions or discounts will apply to such dividend
reinvestment purchases). Participants will have the exclusive right to vote or
direct the voting of shares credited to their accounts, and will be permitted to
withdraw, transfer, or sell their shares without restriction. Participants'
rights under the Plan are nontransferable except pursuant to the laws of descent
and distribution.
A participant's enrollment in the Plan may be terminated at any time,
effective for payroll periods or offering periods beginning after the filing of
a notice of termination of enrollment. Enrollment will also terminate upon
termination of a participant's employment by the Company and its subsidiaries,
or if a participant becomes a "highly compensated" Director or Executive
Officer. Upon termination of enrollment, uninvested cash amounts resulting from
previous payroll contributions will be repaid to the participant. The custodian
will continue to hold Common Stock for the account of such a participant until
the participant sells or withdraws the Common Stock, but in no event more than
one year after the participant ceases to be employed by the Company and its
subsidiaries. A participant may also reduce or eliminate future contributions
for future payroll periods without thereby terminating enrollment. In such case,
previous payroll contributions held in the participant's cash account will be
used for the purchase of Common Stock at the next purchase date.
The Company will pay costs and expenses incurred in the administration of
the Plan and maintenance of accounts, and will pay brokerage fees and
commissions for purchases. The Company will not pay brokerage fees and expenses
relating to sales by participants, and participants may be charged reasonable
fees by the custodian for withdrawals of share certificates and other specified
services. The custodian will be responsible for furnishing account statements to
participants.
The Board of Directors may amend, alter, suspend, discontinue or terminate
the Plan without further Shareholder approval, except Shareholder approval must
be obtained within one year after the effectiveness of such action if required
by law or regulation or under the rules of any automated quotation system (such
as the Nasdaq National Market) or securities exchange on which the Common Stock
is then quoted or listed, or if such Shareholder approval is necessary in order
for the Plan to continue to meet the requirements of Section 423 of the Code.
Thus, Shareholder approval will not necessarily be required for amendments which
might increase the cost of the plan or broaden eligibility. The Plan will
continue until terminated by action of the Board, although as noted above the
number of shares authorized under the Plan is limited.
On May 10, 1994, the last reported sale price of the Company's Common Stock
on the Nasdaq National Market was $10.125 per share.
17
<PAGE> 20
Federal Income Tax Consequences
The Company believes that under present law the following federal income
tax consequences would generally result under the Plan. Rights to purchase
shares under the Plan are intended to constitute "options" issued pursuant to an
"employee stock purchase plan" within the meaning of Section 423 of the Code:
(1) No taxable income results to the participant upon the grant of a
right to purchase or upon the purchase of shares for his or her account
under the Plan (although the amount of a participant's payroll
contributions under the Plan will be taxable as ordinary income to the
participant).
(2) If the participant disposes of shares less than two years after
the first day of an offering period with respect to which he or she
purchased the shares, then at that time the participant will recognize as
ordinary income an amount equal to the excess of the fair market value of
the shares on the date of purchase over the amount of the participant's
payroll contributions used to purchase the shares.
(3) If the participant holds the shares for at least two years after
the first day of an offering period with respect to which he or she
purchased the shares, then at the time of the disposition the participant
will recognize as ordinary income an amount equal to the lesser of (i) the
excess of the fair market value of the shares on the first day of the
offering period over the amount of the participant's payroll contributions
used to purchase the shares, and (ii) the excess of the fair market value
of the shares on the date of disposition over the amount of the
participant's payroll contributions used to purchase the shares.
(4) In addition, the participant will recognize a long-term or
short-term capital gain or loss, as the case may be, in an amount equal to
the difference between the amount realized upon any sale of the Common
Stock and the participant's basis in the Common Stock (i.e., the purchase
price plus the amount, if any, taxed to the participant as ordinary income,
as noted in (2) and (3) above).
(5) If the statutory holding period described in (2) and (3) above is
satisfied, the Company will not receive any deduction for federal income
tax purposes with respect to any discount in the sale price of Common Stock
or matching contribution applicable to such participant. If such statutory
holding period is not satisfied, the Company generally should be entitled
to a deduction in an amount equal to the amount taxed to the participant as
ordinary income.
The foregoing provides only a general description of the application of
federal income tax laws to the Plan. The summary does not address the effects of
other federal taxes or taxes imposed under state, local, or foreign tax laws.
Because of the complexities of the tax laws, participants are encouraged to
consult a tax advisor as to their individual circumstances.
Adoption of the proposal to approve the Plan requires the affirmative vote
of a majority of the votes cast.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
EMPLOYEE STOCK PURCHASE PLAN.
18
<PAGE> 21
PRINCIPAL SHAREHOLDERS AND MANAGEMENT OWNERSHIP
The following table shows the beneficial ownership of the Company's Common
Stock of (1) each person or group known to the Company to be beneficial owners
of more than five percent of the outstanding shares of Common Stock; (2) each
Director individually; (3) each of the Company's named Executive Officers for
the 1994 fiscal year and (4) all current Directors and all current Executive
Officers of the Company as a group. Unless otherwise indicated, beneficial
ownership is as of April 15, 1994.
<TABLE>
<CAPTION>
COMMON STOCK(1)
---------------------------
NUMBER OF PERCENT OF
NAME OF BENEFICIAL OWNER SHARES OWNED CLASS
----------------------------------------------------- ------------ ----------
<S> <C> <C>
David V. Wachs....................................... 6,643,188(2) 6.3%
Samuel Sidewater..................................... 2,234,070(3) 2.2%
Philip Wachs......................................... 1,853,174(4) 1.8%
Mordechay Kafry...................................... 592,801(5) (13)
Michael Solomon...................................... 79,000(6) (13)
Marvin L. Slomowitz.................................. 29,000(7) (13)
Joseph L. Castle II.................................. 16,000(7) (13)
Alan Rosskamm........................................ 17,484(7) (13)
Geoffrey W. Levy..................................... 9,250(7) (13)
Ivan M. Szeftel...................................... 589,342(8) (13)
Colin D. Stern....................................... 202,466(9) (13)
J.P. Morgan & Co., Inc............................... 9,445,733(10) 9.2%
FMR Corp............................................. 7,004,823(11) 6.8%
All current Directors and all current
Executive Officers as
a Group (16 persons)............................... 13,228,144(12) 12.2%
</TABLE>
- - ---------------
(1) Unless otherwise indicated, the persons named have sole voting and
investment power over the number of shares of the Company's Common Stock
shown as being beneficially owned by them.
(2) Includes an aggregate of 693,524 shares owned by three irrevocable trusts
and a charitable foundation of which David V. Wachs is co-trustee, as to
which shares David V. Wachs disclaims any beneficial ownership. Includes
also 2,533,500 shares as to which Mr. Wachs holds options exercisable
within sixty days.
(3) Includes 426,060 shares owned by an irrevocable trust of which Mr.
Sidewater is beneficiary, 21,150 shares owned by a charitable foundation of
which Mr. Sidewater is a trustee and 56,000 shares owned by a member of Mr.
Sidewater's immediate family, with respect to all of which shares Mr.
Sidewater disclaims any beneficial interest. Also includes 121,340 shares
as to which Mr. Sidewater holds options exercisable within sixty days.
(4) Includes 200,916 shares owned by an irrevocable trust of which Philip Wachs
is a beneficiary and of which David V. Wachs is a co-trustee. These shares
owned by the trust are also included in the number of shares reflected as
beneficially owned by David V. Wachs. Also includes 60,000 shares owned by
a charitable foundation of which Philip Wachs is a co-trustee and 703,500
shares as to which Philip Wachs holds options exercisable within sixty
days.
(5) Includes 592,801 shares as to which Mr. Kafry holds options exercisable
within sixty days.
(6) Includes 20,000 shares owned by a trust for the benefit of Mr. Solomon's
daughter, as to which shares Mr. Solomon disclaims any beneficial interest.
Also includes 30,000 shares owned by Mr. Solomon's profit sharing and
savings plan, 5,000 shares which were granted to Mr. Solomon under the
Company's Non-Employee Directors' Restricted Stock Plan and 24,000 shares
as to which Mr. Solomon holds options exercisable within sixty days. See
"ELECTION OF DIRECTORS -- Compensation of Directors".
19
<PAGE> 22
(7) Includes 4,000 shares for Mr. Castle, 5,000 shares for Mr. Slomowitz, 4,084
shares for Mr. Rosskamm, and 3,250 shares for Mr. Levy which were granted
under the Company's Non-Employee Directors' Restricted Stock Plan. Also
includes 12,000 shares for Mr. Castle, 24,000 shares for Mr. Slomowitz,
12,000 shares for Mr. Rosskamm and 6,000 shares for Mr. Levy, as to which
such persons hold options exercisable within sixty days. See "ELECTION OF
DIRECTORS -- Compensation of Directors".
(8) Includes 491,218 shares as to which Mr. Szeftel holds options exercisable
within sixty days.
(9) Includes 202,466 shares as to which Mr. Stern holds options exercisable
within sixty days.
(10) The source of this information is a Schedule 13G dated December 31, 1993,
filed by J.P. Morgan & Co., Inc. which has sole power to vote or direct the
vote of 5,523,703 shares and sole power to dispose or to direct the
disposition of 9,333,503 shares, shared power to vote or direct the vote of
113,930 shares and shared power to dispose or direct the disposition of
111,230 shares. The address of J.P. Morgan & Co., Inc. is 60 Wall Street,
New York, New York 10260.
(11) The source of this information is a Schedule 13G dated February 11, 1994,
filed by FMR Corp. (reporting beneficial ownership at December 31, 1993)
which has sole power to vote or direct the vote of 83,227 shares and sole
power to dispose or to direct the disposition of 7,004,823 shares. The
address of FMR Corp. is 82 Devonshire Street, Boston, Massachusetts 02109.
(12) Includes 5,222,954 shares as to which Directors and Executive Officers hold
options exercisable within sixty days.
(13) The percentage of shares of Common Stock beneficially owned does not exceed
one percent of the Company's issued and outstanding shares of Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Philip Wachs, Michael Wachs and members of their immediate families own
equity interests in three entities which own shopping centers in which the
Company leases stores. In addition, Ivan M. Szeftel and Colin D. Stern own
equity interests in one of these entities. The amount (including rent, common
area maintenance charges, taxes, insurance and other charges payable under the
lease) (the "Lease Amount") paid by the Company for the 1994 fiscal year with
respect to each store in each shopping center and the locations of each shopping
center are as follows: Massena, New York: $73,700; Newark, New York: $60,204;
and Logan, West Virginia: $43,484. Philip Wachs, Michael Wachs, and members of
their immediate families and Ivan M. Szeftel own equity interests in an entity
which owned a shopping center in Mt. Vernon, Illinois in which the Company
leases a store. This shopping center has been sold. The Lease Amount paid by the
Company during the 1994 fiscal year and through December 1993, with respect to
the lease of that store is $90,867. The foregoing leases involve fewer than one
percent of the Company's stores, and are not individually or in the aggregate,
material to the Company. The Company believes that the terms thereof are no less
favorable to the Company than the Company could have negotiated with an
unaffiliated third party.
The Company provides additional life insurance coverage for David V. Wachs.
Under this "split dollar" arrangement, the Company will pay annual premiums of
$514,923, provided, however, that the proceeds of such policies shall be first
used to repay all premiums paid by the Company plus interest thereon at a
compounded rate of 4 1/2% per annum. Under this arrangement, a sufficient amount
of insurance coverage will be in place at all times to insure, at a minimum,
that the amount of all premiums paid by the Company will be repaid plus such
interest. The balance of such policy proceeds will be paid to certain designated
beneficiaries. See also, "MANAGEMENT COMPENSATION -- Summary Compensation Table:
Footnote 4".
A Hong Kong subsidiary of the Company (the "Tenant") leases an apartment in
Hong Kong from a corporation owned and controlled by Mordechay Kafry, the
Company's Executive Vice President -- Merchandise Procurement and a Director,
pursuant to a lease agreement. Information regarding this lease agreement is set
forth under the caption "ELECTION OF DIRECTORS".
20
<PAGE> 23
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Marvin L. Slomowitz, a Director of the Company and a member of the
Compensation Committee and Stock Option Committee, is also Chairman of the
Board, Chief Executive Officer and a shareholder of Mark Centers Trust which is
the general partner of Mark Centers Limited Partnership (the "Partnership"). See
"ELECTION OF DIRECTORS". Mr. Slomowitz is also a principal shareholder of the
Partnership which owns shopping centers in which the Company leased eleven
stores during the 1994 fiscal year. Two of these stores were closed during the
1994 fiscal year. The aggregate amounts (including rents, common area
maintenance charges, taxes, insurance and other charges payable under the leases
(the "Lease Amounts")) paid by the Company for the 1994 fiscal year with respect
to these eleven stores are approximately $576,900 which is less than two percent
of the aggregate revenues of the Partnership. The Company also leases two stores
in shopping centers located in Honesdale and Pittston, Pennsylvania. Mr.
Slomowitz owns mortgages over these two shopping centers. The Lease Amounts paid
by the Company for the 1994 fiscal year with respect to the Honesdale and
Pittston stores are approximately $76,600 and $52,600, respectively. Such leases
currently involve fewer than one percent of the Company's stores, and are not
individually or in the aggregate, material to the Company. The Company believes
that the terms thereof are no less favorable to the Company than the Company
could have negotiated with an unaffiliated third party.
OTHER BUSINESS
The management of the Company knows of no other matters to be presented to
the Annual Meeting. However, if any matters other than those referred to herein
should properly come before the Meeting, it is the intention of the persons
named in the enclosed Proxy Card to vote in accordance with their best judgment.
RELATIONSHIP WITH AUDITORS
The firm of Ernst & Young was the Company's independent auditors for the
fiscal year ended January 29, 1994. Ernst & Young has no direct financial
interest and no material indirect financial interest in the Company.
Representatives of the auditors are expected to be present at the Annual Meeting
and available to make a statement, if they desire, or to answer appropriate
questions.
The Board of Directors selects the independent auditors of the Company upon
recommendation by the Audit Committee. The Board has not yet selected the
independent auditors for the current fiscal year.
PROPOSALS FOR 1995 ANNUAL MEETING
Any proposals of Shareholders that are intended to be presented at the
Company's 1995 Annual Meeting of Shareholders must be received at the Company's
principal executive offices no later than January 23, 1995 and must comply with
all other applicable legal requirements, in order to be included in the
Company's Proxy Statement and Proxy Card for that Meeting.
COST OF SOLICITATION
The cost of soliciting Proxies in the accompanying form will be borne by
the Company. The solicitation will be conducted primarily by mail, although
Directors, Officers and employees of the Company may solicit Proxies personally
or by telephone or telegram. Arrangements will be made with brokerage firms and
other custodians, nominees and fiduciaries, for proxy material to be sent to
their principals, and the Company will reimburse them for their reasonable
expenses in so doing.
ADDITIONAL INFORMATION
A copy of the Annual Report of the Company for the fiscal year ended
January 29, 1994, which contains financial statements audited by the Company's
independent auditors, accompanies this Proxy Statement.
A copy of the Company's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission (including financial statements and schedules
thereto) will be furnished without charge to Shareholders upon written request
to Bernard Brodsky, Secretary, at 450 Winks Lane, Bensalem, Pennsylvania 19020.
21
<PAGE> 24
It is important that your shares be represented at the Meeting. If you are
unable to be present in person, you are respectfully requested to sign the
enclosed Proxy Card and return it in the enclosed stamped and addressed envelope
as promptly as possible.
By Order of the Board of Directors
BERNARD BRODSKY
Secretary
Bensalem, Pennsylvania
May 20, 1994
22
<PAGE> 25
EXHIBIT "A"
CHARMING SHOPPES, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of this Employee Stock Purchase Plan (the "Plan")
of Charming Shoppes, Inc. (the "Company") is to encourage stock ownership by
employees of the Company and its Subsidiaries and thereby provide employees with
an incentive to contribute to the profitability and success of the Company. The
Plan, which is intended to qualify as an "employee stock purchase plan" meeting
the requirements of Section 423 of the Code, is for the exclusive benefit of
eligible employees of the Company and its Subsidiaries.
2. Definitions.
For purposes of the Plan, in addition to the terms defined in Section 1,
terms are defined as set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Cash Account" means the account maintained on behalf of the
Participant by the Custodian for the purpose of holding cash contributions
pending investment in Stock.
(c) "Code" means the Internal Revenue Code of 1986, as amended from
time to time. References to any provision of the Code will be deemed to
include successor provisions thereto and regulations thereunder.
(d) "Custodian" means the broker-dealer or other financial
institution, including any successor appointed by the Board to act as
custodian under the Plan.
(e) "Discount Plan" means the Plan for any Offering Period for which
the Plan has been designated a Discount Plan in accordance with Section
3(c).
(f) "Earnings" means that portion of a Participant's salary or wages
which is designated as "regular pay" under the payroll system of the
Company and its Subsidiaries and received by a Participant for services
rendered during a specified pay period.
(g) "Enrollment Date" means the first business day of each Offering
Period.
(h) "Fair Market Value" means the closing sale price of Stock reported
in the table entitled "NASDAQ National Market Issues" or any successor
table in The Wall Street Journal (or, if Stock is then principally traded
on a national securities exchange, in the table reporting composite
transactions for such exchange) for such date or, if no shares of Stock
were traded on that date, on the next preceding day on which there was such
a trade.
(i) "Matching Plan" means the Plan for any Offering Period for which
the Plan has been designated a Matching Plan in accordance with Section
3(c).
(j) "Offering Period" means the three-month period beginning on
January 1, April 1, July 1, or October 1 of each year, with the first
Offering Period to begin July 1, 1994 or October 1, 1994 (as designated by
the Board).
(k) "Participant" means an employee of the Company or a Subsidiary who
is participating in the Plan.
(l) "Purchase Date" means the fifth business day after the end of each
Offering Period.
(m) "Purchase Right" means a Participant's option to purchase shares
which is deemed to be outstanding during an Offering Period. A Purchase
Right represents an "option" as such term is used under Section 423 of the
Code.
(n) "Stock" means the Common Stock, par value $.10 per share, of the
Company, and such other securities as may be substituted or resubstituted
for Stock under Section 4.
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<PAGE> 26
(o) "Stock Account" means the account maintained on behalf of the
Participant by the Custodian for the purpose of holding Stock acquired upon
investment under the Plan.
(p) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns
stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
3. Administration.
(a) Board Administration. The Plan will be administered by the Board;
provided, however, that the Board may delegate any administrative duties and
authority (other than authority to amend the Plan) to any Board committee or to
any officers or employees or committee thereof as the Board may designate (in
which case references herein to the Board will be deemed to mean the
administrator to which such duties and authority have been delegated). The Board
will have full authority to adopt, amend, suspend, waive, and rescind such rules
and regulations and appoint such agents as it may deem necessary or advisable to
administer the Plan, to correct any defect or supply any omission or reconcile
any inconsistency in the Plan and to construe and interpret the Plan and rules
and regulations thereunder, to furnish to the Custodian such information as the
Custodian may require, and to make all other decisions and determinations under
the Plan (including factual determinations and determinations relating to
eligibility). Any determination hereunder shall be final and binding on all
parties. No person acting in connection with the administration of the Plan
will, in that capacity, participate in deciding any matter relating to his or
her participation in the Plan.
(b) The Custodian. The Custodian will act as custodian under the Plan, and
will perform such duties as are set forth in the Plan and in any agreement
between the Company and the Custodian. The Custodian will establish and
maintain, as agent for Participants, Cash and Stock Accounts and any other
subaccounts as may be necessary or desirable for the administration of the Plan.
(c) Designation of Plan As Matching Plan or Discount Plan. The Plan will
be a Discount Plan for the initial Offering Period after the effective date of
the Plan. With respect to subsequent Offering Periods, the Board may designate
the Plan as either a Matching Plan or a Discount Plan for any Offering Period
that has not yet commenced; provided, however, that, in the absence of any such
designation by the Board for a particular Offering Period, the Plan will
continue to operate as the same type of Plan most recently designated in this
Section 3(c) or by the Board. Any change in the type of Plan under this Section
3(c) must be communicated to Participants and eligible employees at least 30
days in advance of the first Offering Period for which the change will be
effective.
(d) Waivers. The Board may waive or modify any requirement that a notice
or election be made or filed under the Plan a specified period in advance in an
individual case or by adoption of a rule or regulation under the Plan, without
the necessity of an amendment to the Plan.
(e) Other Administrative Provisions. The Company will furnish information
from its records as directed by the Board, and such records, including as to a
Participant's Earnings, will be conclusive on all persons unless determined by
the Board to be incorrect. Each Participant and other person claiming benefits
under the Plan must furnish to the Company in writing an up-to-date mailing
address and any other information as the Board or Custodian may reasonably
request. Any communication, statement, or notice mailed with postage prepaid to
any such Participant or other person at the last mailing address filed with the
Company will be deemed sufficiently given when mailed and will be binding upon
the named recipient. The Plan will be administered on a reasonable and
nondiscriminatory basis. All Participants will have equal rights and privileges
(subject to the terms of the Plan) with respect to Purchase Rights outstanding
during any given Offering Period.
4. Stock Subject to Plan. Subject to adjustment as hereinafter provided,
the total number of shares of Stock reserved and available for issuance or which
may be otherwise acquired upon exercise of Purchase Rights under the Plan will
be 2,000,000. Any shares of Stock delivered by the Company under the Plan may
consist, in whole or in part, of authorized and unissued shares or treasury
shares. The number and kind of such shares of Stock subject to the Plan will be
proportionately adjusted, as determined by the Board, in the event
A-2
<PAGE> 27
of any extraordinary dividend or other distribution, recapitalization, forward
or reverse split, reorganization, merger, consolidation, spin-off, combination,
repurchase, or share exchange, or other similar corporate transaction or event
affecting the Stock.
5. Enrollment and Contributions.
(a) Eligibility. A full or part-time employee of the Company or a
Subsidiary may be enrolled in the Plan for any Offering Period if such employee
was continuously so employed during the 90 days preceding the Enrollment Date,
unless one of the following applies to the employee:
(i) Such person is at any time during the Offering Period both a
director or executive officer of the Company (i.e. any person subject to
the reporting requirements of Section 16(a) of the Securities Exchange Act
of 1934, as amended) and a "highly compensated employee" within the meaning
of Section 414(q) of the Code.
(ii) Such person would, immediately upon enrollment, be deemed to own,
for purposes of Section 423(b)(3) of the Code, an aggregate of five percent
or more of the total combined voting power or value of all outstanding
shares of all classes of the Company or any Subsidiary; or
(iii) Such person is no longer employed by the Company or a
Subsidiary.
The Company will notify an employee of the date as of which he or she is
eligible to enroll in the Plan, and will make available to each eligible
employee the necessary enrollment forms.
(b) Initial Enrollment. An employee who is eligible under Section 5(a) (or
who will become eligible on or before a given Enrollment Date) may, after
receiving current information about the Plan, initially enroll in the Plan by
executing and filing with the Company's Human Resources Department a properly
completed enrollment form, including thereon the employee's election as to the
rate of payroll contributions for the Offering Period. To be effective for any
Offering Period, such enrollment form must be filed at least 15 days before the
Enrollment Date for the Offering Period.
(c) Automatic Reenrollment for Subsequent Offering Periods. A Participant
whose enrollment in and payroll contributions under the Plan continues
throughout an Offering Period will automatically be reenrolled in the Plan for
the next Offering Period unless (i) the Participant terminates enrollment before
the Enrollment Date for the next Offering Period in accordance with Section 7(a)
or (ii) on such Enrollment Date he or she is ineligible to participate under
Section 5(a). The initial rate of payroll contributions for a Participant who is
automatically reenrolled for an Offering Period will be the same as the rate of
payroll contribution in effect at the end of the preceding Offering Period,
unless the Participant files a new enrollment form at least 15 days before the
Enrollment Date for the Offering Period designating a different rate of payroll
contributions.
(d) Payroll Contributions. A Participant will make contributions under the
Plan by means of payroll deductions from each payroll period which ends during
the Offering Period, at the rate elected by the Participant in his or her
enrollment form filed nearest to, but not later than, 15 days before the
Enrollment Date for the Offering Period (except that such rate may be changed
during the Offering Period to the extent permitted below). The rate of payroll
contributions elected by a Participant may not be less than one percent nor more
than ten percent of the Participant's Earnings for each payroll period, and only
whole percentages may be elected; provided, however, that the Board may specify
a lower minimum rate and higher maximum rate, subject to Section 8(c) hereof.
The foregoing and any election of a Participant notwithstanding, a Participant's
rate of payroll contributions will be adjusted downward by the Company at any
time or from time to time as necessary to ensure that the limit on the amount of
Stock purchased with respect to an Offering Period set forth in Section
6(a)(iii) or Section 4 is not exceeded. A Participant may elect to increase,
decrease, or discontinue payroll contributions for future Offering Periods by
filing a new enrollment form at least 15 days before the Enrollment Date for the
Offering Period designating a different rate of payroll contributions. In
addition, a Participant may elect to decrease or discontinue payroll
contributions during an Offering Period by filing a new enrollment form, such
change to be effective for any payroll period beginning at least 15 days after
such filing.
A-3
<PAGE> 28
(e) Crediting Participant Payroll Contributions to Cash Accounts. All
payroll contributions by a Participant under the Plan will be credited to a Cash
Account maintained by the Custodian on behalf of the Participant. The Custodian
will credit payroll contributions upon receipt by the Custodian from the Company
of information, in such form as may be specified by the Custodian, identifying
the amount of payroll contribution to be deposited for each Participant. The
Company will deposit with the Custodian an amount equal to the aggregate payroll
contributions for the Offering Period (not otherwise repaid to Participants
under Section 7(b)) on or before the Purchase Date for such Offering Period.
(f) Crediting Company Matching Allocations to Cash Accounts. On or before
the Purchase Date for an Offering Period for which the Plan is a Matching Plan,
the Company will allocate to each Cash Account an amount equal to 15% of the
amount credited to such Cash Account during such Offering Period as payroll
contributions and then remaining in such Account to be applied to the purchase
of Stock upon exercise of the Purchase Right for such Offering Period. Such
allocation by the Company will be rounded to the nearest whole cent ($.01).
(g) No Interest on Cash Accounts. No amounts of interest will be credited
or payable by the Company on payroll contributions or by the Custodian on cash
balances in Participants' Cash Accounts pending investment in Stock.
6. Purchases of Stock.
(a) Purchase Rights. Enrollment in the Plan for any Offering Period by a
Participant will constitute a grant by the Company of a Purchase Right to such
Participant for such Offering Period. Each Purchase Right will be subject to the
following terms:
(i) The purchase prices at which Stock will be purchased under a
Purchase Right will be as specified in Section 6(c).
(ii) Except as limited in (iii) below, the number of shares of Stock
that may be purchased upon exercise of the Purchase Right for an Offering
Period will equal the number of shares (including fractional shares) that
can be purchased at the purchase price specified in Section 6(c) with the
aggregate amount credited to the Participant's Cash Account as of the
Purchase Date (including, for any Offering Period for which the Plan is a
Matching Plan, amounts credited as a result of the Company's matching
allocation under Section 5(f)).
(iii) The number of shares of Stock subject to a Participant's
Purchase Right for any Offering Period will not exceed the number derived
by dividing $6,250 by 100% of the Fair Market Value of one share of Stock
on the Enrollment Date for the Offering Period.
(iv) The Purchase Right will be automatically exercised on the
Purchase Date for the Offering Period.
(v) Payments by a Participant for Stock purchased under a Purchase
Right will be made only through payroll deduction in accordance with
Section 5(d) and (e).
(vi) The Purchase Right will expire on the earlier of the Purchase
Date for the Offering Period or the date on which the Participant's
enrollment in the Plan terminates.
(b) Purchase of Stock. At or as promptly as practicable after the Purchase
Date for an Offering Period, amounts credited to each Participant's Cash Account
as of such Purchase Date (including, for any Offering Period for which the Plan
is a Matching Plan, amounts credited as a result of the Company's matching
allocation under Section 5(f)) will be applied by the Custodian to the purchase
of shares of Stock, in accordance with the terms of the Plan. For any Offering
Period for which the Plan is a Matching Plan, shares of Stock will be purchased
by the Custodian in transactions on the NASDAQ National Market System, any
securities exchange upon which Stock is traded, otherwise in the
over-the-counter market, or in negotiated transactions. For any Offering Period
for which the Plan is a Discount Plan, shares of Stock will be purchased by the
Custodian from the Company; shares sold by the Company may be authorized but
unissued shares or treasury shares, as permitted under Section 4 hereof. The
Custodian will aggregate the amounts in all Cash
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<PAGE> 29
Accounts when purchasing Stock, and shares so purchased will be allocated to
each Participant's Stock Account in proportion to the cash amounts withdrawn
from such Participant's Cash Account. Upon completion of purchases in respect of
a Purchase Date (which will be completed in not more than 30 days after the
Purchase Date), all shares of Stock so purchased for a Participant will be
credited to the Participant's Stock Account.
(c) Purchase Price. The purchase price of each share of Stock purchased in
respect of a Purchase Date will be determined as follows:
(i) For any Offering Period for which the Plan is a Matching Plan, the
purchase price of each share will equal 100% of the average cost of all
shares of Stock acquired in respect of such Purchase Date.
(ii) For any Offering Period for which the Plan is a Discount Plan,
the purchase price of each share will equal 85% of the lesser of (A) the
Fair Market Value of a share of Stock on the Enrollment Date or (B) the
Fair Market Value of a share of Stock on the Purchase Date.
(d) Dividend Reinvestment; Other Distributions. Cash dividends on any
Stock credited to a Participant's Stock Account will be automatically reinvested
in additional shares of Stock; such amounts will not be available in the form of
cash to Participants. All cash dividends paid on Stock credited to Participants'
Stock Accounts will be paid over by the Company to the Custodian at the dividend
payment date. The Custodian will aggregate all purchases of Stock in connection
with dividend reinvestment for a given dividend payment date. Purchases of Stock
for purposes of dividend reinvestment will be made as promptly as practicable
(but not more than 30 days) after a dividend payment date. The Custodian will
make such purchases, as directed by the Board, either (i) in transactions on the
NASDAQ National Market System, any securities exchange upon which Stock is
traded, otherwise in the over-the-counter market, or in negotiated transactions,
or (ii) directly from the Company at 100% of the Fair Market Value of a share of
Stock on the dividend payment date. Any shares of Stock distributed as a
dividend or distribution in respect of shares of Stock or in connection with a
split of the Stock credited to a Participant's Stock Account will be credited to
such Account. In the event of any other non-cash dividend or distribution in
respect of Stock credited to a Participant's Stock Account, the Custodian will,
if reasonably practicable and at the direction of the Board, sell any property
received in such dividend or distribution as promptly as practicable and use the
proceeds to purchase additional shares of Common Stock in the same manner as
cash paid over to the Custodian for purposes of dividend reinvestment.
(e) Voting Rights. Each Participant will be entitled to vote the number of
shares of Stock credited to his or her Stock Account (including any fractional
shares credited to such account) on any matter as to which the approval of the
Company's shareholders is sought. If a Participant does not vote or grant a
valid proxy with respect to shares credited to his or her Stock Account, such
shares will not be voted. Similar procedures will apply in the case of any
consent solicitation of Company shareholders.
(f) Withdrawals and Transfers. Shares of Stock may be withdrawn from a
Participant's Stock Account, in which case one or more certificates for whole
shares may be issued in the name of, and delivered to, the Participant, with
such Participant receiving cash in lieu of fractional shares based on the Fair
Market Value of a share of Stock on the date of withdrawal. Alternatively, whole
shares of Stock may be withdrawn from a Participant's Stock Account by means of
a transfer to another broker-dealer or financial institution that maintains an
account for the Participant, together with the transfer of cash in lieu of
fractional shares based on the Fair Market Value of a share of Stock on the date
of withdrawal. Participants may not designate any other person to receive shares
of Stock withdrawn or transferred under the Plan. A Participant seeking to
withdraw or transfer shares of Stock must give instructions to the Custodian in
such manner and form as may be prescribed by the Custodian, which instructions
will be acted upon as promptly as practicable. Withdrawals and transfers will be
subject to any fees imposed in accordance with Section 8(a) hereof.
(g) Excess Account Balances. If any amounts remain in a Cash Account
following a Purchase Date as a result of the limitation set forth in Section
6(a)(iii), such amounts which resulted from payroll contributions will be
returned to the Participant by the Custodian as promptly as practicable, and
such amounts which
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<PAGE> 30
resulted from matching allocations by the Company will be returned to the
Company by the Custodian as promptly as practicable.
7. Termination and Distributions.
(a) Termination of Enrollment. A Participant's enrollment in the Plan will
terminate upon (i) the beginning of any payroll period or Offering Period that
begins after he or she files a written notice of termination of enrollment with
the Company, provided that such Participant will continue to be deemed to be
enrolled with respect to any completed Offering Period for which purchases have
not been completed, (ii) such time as the Participant becomes ineligible to
participate under Section 5(a)(i) of the Plan, or (iii) the termination of the
Participant's employment by the Company and its Subsidiaries. An employee whose
enrollment in the Plan terminates may again enroll in the Plan as of any
subsequent Enrollment Date that is at least 90 days after such termination of
enrollment if he or she satisfies the eligibility requirements of Section 5(a)
as of such Enrollment Date. A Participant's election to discontinue payroll
contributions will not constitute a termination of enrollment.
(b) Distributions. As soon as practicable after a Participant's enrollment
in the Plan terminates, amounts in the Participant's Cash Account which resulted
from payroll contributions will be repaid to the Participant and amounts in the
Participant's Cash Account which resulted from matching allocations by the
Company will be repaid to the Company. (If amounts credited to the Participant's
Cash Account have not yet been deposited by the Company with the Custodian, the
Company rather than the Custodian will make the repayment to the Participant).
The Custodian will continue to maintain the Participant's Stock Account for the
Participant until the earlier of such time as the Participant directs the sale
of all Stock in the Account, withdraws or transfers all Stock in the Account, or
one year after the Participant ceases to be employed by the Company and its
Subsidiaries. If a Participant's termination of enrollment results from his or
her death, all amounts payable will be paid to his or her estate.
8. General.
(a) Costs. Costs and expenses incurred in the administration of the Plan
and maintenance of Accounts will be paid by the Company, to the extent provided
in this Section 8(a). Any brokerage fees and commissions for the purchase of
Stock under the Plan (including Stock purchased upon reinvestment of dividends
and distributions) will be paid by the Company, but any brokerage fees and
commissions for the sale of Stock under the Plan by a Participant will be borne
by such Participant. The rate at which such fees and commissions will be charged
to Participants will be determined by the Custodian or any broker-dealer used by
the Custodian (including an affiliate of the Custodian), and communicated from
time to time to Participants. In addition, the Custodian may impose or pass
through a reasonable fee for the withdrawal of Stock in the form of stock
certificates (as permitted under Section 6(f)), and reasonable fees for other
services unrelated to the purchase of Stock under the Plan, to the extent
approved in writing by the Company and communicated to Participants.
(b) Statements to Participants. The Custodian will reflect payroll
contributions, matching allocations (if any), purchases, sales, and withdrawals
and transfers of shares of Common Stock and other Plan transactions by
appropriate adjustments to the Participant's Accounts. The Custodian will, not
less frequently than quarterly, provide or cause to be provided a written
statement to the Participant showing the transactions in his or her Accounts and
the date thereof, the number of shares of Stock purchased or sold, the aggregate
purchase price paid or sales price received, the purchase or sales price per
share, the brokerage fees and commissions paid (if any), the total shares held
for the Participant's Stock Account (computed to at least three decimal places),
and other information.
(c) Compliance with Section 423. It is the intent of the Company that this
Plan comply in all respects with applicable requirements of Section 423 of the
Code and regulations thereunder. Accordingly, if any provision of this Plan does
not comply with such requirements, such provision will be construed or deemed
amended to the extent necessary to conform to such requirements.
A-6
<PAGE> 31
9. General Provisions.
(a) Compliance With Legal and Other Requirements. The Plan, the granting
and exercising of Purchase Rights hereunder, and the other obligations of the
Company and the Custodian under the Plan will be subject to all applicable
federal and state laws, rules, and regulations, and to such approvals by any
regulatory or governmental agency as may be required. The Company may, in its
discretion, postpone the issuance or delivery of Stock upon exercise of Purchase
Rights until completion of such registration or qualification of such Stock or
other required action under any federal or state law, rule, or regulation,
listing or other required action with respect to any automated quotation system
or stock exchange upon which the Stock or other Company securities are
designated or listed, or compliance with any other contractual obligation of the
Company, as the Company may consider appropriate, and may require any
Participant to make such representations and furnish such information as it may
consider appropriate in connection with the issuance or delivery of Stock in
compliance with applicable laws, rules, and regulations, designation or listing
requirements, or other contractual obligations.
(b) Limits on Encumbering Rights. No right or interest of a Participant
under the Plan, including any Purchase Right, may be pledged, encumbered, or
hypothecated to or in favor of any party, subject to any lien, obligation, or
liability of such Participant, or otherwise assigned, transferred, or disposed
of except pursuant to the laws of descent or distribution, and any right of a
Participant under the Plan will be exercisable during the Participant's lifetime
only by the Participant.
(c) No Right to Continued Employment. Neither the Plan nor any action
taken hereunder, including the grant of a Purchase Right, will be construed as
giving any employee the right to be retained in the employ of the Company or any
of its Subsidiaries, nor will it interfere in any way with the right of the
Company or any of its Subsidiaries to terminate any employee's employment at any
time.
(d) Taxes. The Company or any Subsidiary is authorized to withhold from
any payment to be made to a Participant, including any payroll and other
payments not related to the Plan, amounts of withholding and other taxes due in
connection with any transaction under the Plan, and a Participant's enrollment
in the Plan will be deemed to constitute his or her consent to such withholding.
In addition, Participants may be required to advise the Company of sales and
other dispositions of Stock acquired under the Plan in order to permit the
Company to comply with tax laws and to claim any tax deductions to which the
Company may be entitled with respect to the Plan.
(e) Changes to the Plan. The Board may amend, alter, suspend, discontinue,
or terminate the Plan without the consent of shareholders or Participants,
except that any such action will be subject to the approval of the Company's
shareholders within one year after such Board action if such shareholder
approval is required by any federal or state law or regulation or the rules of
any automated quotation system or stock exchange on which the Stock may then be
quoted or listed, or if such shareholder approval is necessary in order for the
Plan to continue to meet the requirements of Section 423 of the Code, and the
Board may otherwise, in its discretion, determine to submit other such actions
to shareholders for approval; provided, however, that, without the consent of an
affected Participant, no amendment, alteration, suspension, discontinuation, or
termination of the Plan may materially and adversely affect the rights of such
Participant with respect to outstanding Purchase Rights relating to any Offering
Period that has been completed prior to such Board action. The foregoing
notwithstanding, upon termination of the Plan the Board may elect to terminate
all outstanding Purchase Rights at such time as the Board may designate; in the
event of such termination of any Purchase Right prior to its exercise, all
amounts contributed to the Plan which remain in a Participant's Cash Account
will be returned to the Participant (without interest) as promptly as
practicable.
(f) No Rights to Participate; No Shareholder Rights. No Participant or
employee will have any claim to participate in the Plan with respect to Offering
Periods that have not commenced, and the Company will have no obligation to
continue the Plan. No Purchase Right will confer on any Participant any of the
rights of a shareholder of the Company unless and until Stock is duly issued or
transferred and delivered to the Participant (or credited to the Participant's
Stock Account).
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<PAGE> 32
(g) Fractional Shares. Unless otherwise determined by the Board, purchases
of Stock under the Plan executed by the Custodian may result in the crediting of
fractional shares of Stock to the Participant's Stock Account. Such fractional
shares will be computed to at least three decimal places. Fractional shares will
not, however, be issued by the Company, and certificates representing fractional
shares will not be delivered to Participants under any circumstances.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the shareholders of the Company for approval will be
construed as creating any limitations on the power of the Board to adopt such
other compensatory arrangements as it may deem desirable, including, without
limitation, the granting of stock options otherwise than under the Plan, and
such arrangements may be either applicable generally or only in specific cases.
(i) Plan Year. The Plan will operate on a plan year which begins on the
first day of the first Offering Period and ends December 31, 1994, and
thereafter coincides with the calendar year.
(j) Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan will be determined in accordance
with the Pennsylvania Business Corporation Law, to the extent applicable, other
laws (including those governing contracts) of the Commonwealth of Pennsylvania,
without giving effect to principles of conflicts of laws, and applicable federal
law.
(k) Effective Date. The Plan will become effective at such time as the
Plan has been approved by shareholders of the Company, at a meeting thereof, by
a vote sufficient to meet the requirements of Section 423(b)(2) of the Code.
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<PAGE> 33
CHARMING SHOPPES, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints David V. Wachs and Philip
Wachs, and each of them, Proxies of the undersigned, with full power of
substitution, to vote and act as designated on the reverse side with respect to
all shares of Common Stock of Charming Shoppes, Inc. ("Company") which the
undersigned would be entitled to vote, as fully as the undersigned could vote
and act if personally present, at the Annual Meeting of Shareholders of the
Company to be held on Tuesday, June 28, 1994 and at any adjournments thereof.
UNLESS OTHERWISE INDICATED ON THE REVERSE SIDE, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES FOR DIRECTOR AND "FOR"
THE APPROVAL OF THE EMPLOYEE STOCK PURCHASE PLAN AS SET FORTH IN THE PROXY
STATEMENT.
(continued on reverse side)
<PAGE> 34
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE: WRITE
THAT NOMINEES NAME BELOW.)
Mordechay Kafry Marvin L. Slomowitz Geoffrey W. Levy
- - --------------------------------------------------------------------------------
1. ELECTION OF CLASS A DIRECTORS
/ / Vote FOR all nominees (except as marked to the contrary)
/ / Vote WITHHELD
2. PROPOSAL TO APPROVE THE EMPLOYEE STOCK PURCHASE PLAN
/ / FOR
/ / AGAINST
/ / ABSTAIN
The Proxies are authorized to vote
in their discretion upon such
other matters as may properly come
before the Meeting.
The undersigned acknowledges
receipt of the Annual Report, the
Notice of Annual Meeting of
Shareholders and the Proxy
Statement, and revokes all
previously granted Proxies.
DATED:----------------------, 1994
----------------------------------
Signature
----------------------------------
Signature
Please date and sign as name
appears hereon and return
promptly. If the stock is
registered in the name of two or
more persons, each should sign.
Executors, administrators,
trustees, guardians, attorneys and
corporate officers should add
their titles. Please note any
change in your address as it
appears on this Proxy.
"PLEASE MARK INSIDE BLUE BOXES SO THAT DATA PROCESSING EQUIPMENT WILL RECORD
YOUR VOTES"
