<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 / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CHARMING SHOPPES, INC.
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(Name of Registrant as Specified in Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
--------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
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/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
CHARMING SHOPPES, INC.
450 WINKS LANE
BENSALEM, PENNSYLVANIA 19020
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 29, 1995
------------------------
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 29, 1995 at 10:00 A.M. for the
following purposes:
1. To elect three Class B Directors of the Company.
2. 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 12, 1995 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 25, 1995
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 29, 1995 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 which event is
not anticipated), 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 1995 Annual Report have been
mailed on or about May 25, 1995. Only Shareholders of record as of the close of
business on May 12, 1995 are entitled to notice of and to vote at the Meeting.
On May 17, 1995 David V. Wachs resigned from his offices as Chairman of the
Board, Chief Executive Officer and a Director of the Company. The Company has
entered into an agreement with David V. Wachs pursuant to which he will continue
to render services to the Company as a non-officer employee. See "MANAGEMENT
COMPENSATION -- Employment and Change of Control Agreements". Philip Wachs, the
Company's President and Chief Operating Officer, was elected to the office of
Chairman of the Board. He has also assumed the role of acting Chief Executive
Officer while the Company conducts a search for a new President and Chief
Executive Officer. Once the search is successfully completed, Philip Wachs will
continue to serve the Company in the office of Chairman of the Board.
The Proxy Committee consists of Philip Wachs, Chairman of the Board of
Directors, President, Chief Operating Officer and acting Chief Executive
Officer, and Samuel Sidewater, Executive Vice President -- Business Development.
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 12, 1995 the Company had outstanding 102,997,160 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. 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.
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 B Directors, namely Joseph
L. Castle, II, Michael Solomon and Philip Wachs, are scheduled to expire as of
the
<PAGE> 4
date of the Meeting. Therefore, at the Meeting these three Class B Directors
will be nominated to serve for an additional three-year term and until their
successors shall have been duly elected and qualified. Messrs. Castle, Solomon
and Philip Wachs were last elected as Class B Directors to the Board at the
Company's Annual Meeting held on June 18, 1992 for terms expiring at the 1995
Annual Meeting of Shareholders.
Unless otherwise directed, the Proxy solicited hereby will be voted for the
election of Joseph L. Castle, II, Michael Solomon and Philip Wachs as Class B
Directors.
If any of the nominees refuses or is unable to serve as a Director (which
event is not 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 May 18, 1995, 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>
Joseph L. Castle, II......... Director 62 1990 1998
Michael Solomon.............. Director 47 1990 1998
Philip Wachs................. Chairman of the Board, 39 1988 1998
President, Chief Operating
Officer and acting Chief
Executive Officer
<CAPTION>
DIRECTORS WHOSE TERMS OF OFFICE CONTINUE
<S> <C> <C> <C> <C>
Samuel Sidewater............. Executive Vice President -- 57 1988 1996
Business Development and
Director
Alan Rosskamm................ Director 45 1992 1996
Mordechay Kafry.............. Executive Vice President -- 42 1990 1997
Merchandise Procurement and
Director
Marvin L. Slomowitz.......... Director 65 1990 1997
Geoffrey W. Levy............. Director 47 1993 1997
</TABLE>
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. LLC
since 1981 and is currently Managing Director of that firm.
2
<PAGE> 5
Philip Wachs has been President and Chief Operating Officer since March
1990 and Chairman of the Board and acting Chief Executive Officer since May 17,
1995. Prior to his appointment as Chairman of the Board, he served as Vice
Chairman of the Board for over five years. Prior to his appointment as
President, he served as Executive Vice President -- Real Estate for over five
years.
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 and notions,
crafts, patterns and sewing accessories.
Mordechay Kafry has been a Director of the Company since January 1990 and
Executive Vice President -- Merchandise Procurement since February 1988. Prior
to that time, he served as Vice President -- Far East Operations from 1986 to
1988 and as Director of Far East Operations from 1984 to 1986.
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.
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 1995 fiscal year,
Joseph L. Castle, II, Alan Rosskamm and Geoffrey W. Levy were members of the
Audit Committee. The Audit Committee monitors the activities of the Company's
independent auditors and the Company's internal audit functions. The Audit
Committee met twice during the Company's 1995 fiscal year. During the Company's
1995 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 had
six meetings during the Company's 1995 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 had six meetings during the Company's 1995 fiscal year
and, on one occasion, acted
3
<PAGE> 6
by unanimous consent. During the Company's 1995 fiscal year, David V. Wachs,
Philip Wachs and Samuel Sidewater were members of the Board of Directors'
Administration Committee (the "Administration Committee"). Geoffrey W. Levy will
fill the vacancy resulting from the resignation of David V. Wachs. 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 five
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.
Five meetings of the Board of Directors were held during the Company's
fiscal year ended January 28, 1995. 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).
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.
The exercise price for the shares of Common Stock to be purchased upon exercise
of such option 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 1995 fiscal year at which time options to purchase
90,000 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 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.
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. During the 1995 fiscal year Tenant paid rental
of approximately $12,800 per month and maintenance, utility, management and
insurance charges under the Lease Agreement. The term of the Lease Agreement is
two
4
<PAGE> 7
years, expiring on September 30, 1996. The Company believes that the terms
thereof are no less favorable to the Company than the Company could have
negotiated with an unaffiliated third party.
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid during each of the Company's last three fiscal years (ended January 28,
1995, January 29, 1994 and January 30, 1993) to the Company's Chief Executive
Officer and each of the Company's four other most highly compensated Executive
Officers, based on salary and bonus earned during the 1995 fiscal year.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
ANNUAL COMPENSATION AWARDS
--------------------------------------- -------------
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND FISCAL COMPENSATION UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) ($)(2) OPTIONS(#) ($)(3)(4)
---------------------------------- ------ --------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
David V. Wachs.................... 1995 $ 570,000 -- -- 210,000(5) $ 102,161
Former Chairman of the Board 1994 570,000 -- -- 135,000 112,040
and Chief Executive Officer 1993 525,000 $ 472,500 -- -- 100,598
Philip Wachs...................... 1995 360,000 -- -- 210,000 77,490
Chairman of the Board 1994 360,000 -- -- 135,000 11,586
President, Chief Operating
Officer, 1993 330,000 297,000 -- 70,000 11,435
and acting Chief Executive Officer
Mordechay Kafry................... 1995 460,000 -- $ 162,000 173,700 39,028
Executive Vice President -- 1994 460,000 -- 134,012 115,800 39,428
Merchandise Procurement and 1993 420,000 315,000 134,012 70,000 35,745
Director
Ivan M. Szeftel................... 1995 325,000 -- -- 157,500 8,547
Executive Vice President -- 1994 325,000 -- -- 104,700 12,208
Finance 1993 285,000 213,750 -- 50,000 11,533
Colin D. Stern.................... 1995 300,000 -- -- 133,500 22,220
Executive Vice President 1994 300,000 -- -- 89,000 24,868
and General Counsel 1993 265,000 198,750 -- 40,000 24,804
</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 1993, 1994 and 1995
fiscal years. Each named Executive Officer received the maximum amount
payable under the annual incentive plan for the 1993 fiscal year. No bonuses
were paid to or accrued for the named Executive Officers with respect to the
1994 and 1995 fiscal years.
(2) The amount set forth under the caption "Other Annual Compensation" with
respect to Mordechay Kafry includes $154,000 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) 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
Notes continued on following page
5
<PAGE> 8
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 1995 fiscal year
are as follows: David V. Wachs, $96,536; Philip Wachs, $71,865; Mordechay
Kafry, $1,682; Ivan M. Szeftel, $2,922; and Colin D. Stern, $10,595. 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".
(4) 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 1995
fiscal year: David V. Wachs, $5,625; Philip Wachs, $5,625; Mordechay Kafry,
$37,346; Ivan M. Szeftel, $5,625; and Colin D. Stern, $5,625.
(5) The options reflected herein which were granted to David V. Wachs were
cancelled on his resignation. See "MANAGEMENT COMPENSATION -- Employment and
Change of Control Agreements".
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information relating to options granted to the
named Executive Officers during the 1995 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 Common Stock would realize, exclusive of brokerage
commissions, assuming (i) the purchase of an equivalent number of shares of
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 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 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, if any, realized by an optionee or the purchaser of 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 ---------------------------------------------
NAME (#)(3) IN FISCAL YEAR ($/SH) DATE 0%($) 5%($) 10%($)
------------------------- --------- -------------- -------- ---------- ----- ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
David V. Wachs(4)........ 105,000(5) 4.8% $11.125 2/1/04 $ 0 $734,628 $1,861,690
105,000(6) 4.8% 11.125 2/1/04 0 734,628 1,861,690
Philip Wachs............. 105,000(5) 4.8% 11.125 2/1/04 0 734,628 1,861,690
105,000(6) 4.8% 11.125 2/1/04 0 734,628 1,861,690
Mordechay Kafry.......... 80,000(5) 3.6% 11.125 2/1/04 0 559,716 1,418,431
93,700(6) 4.2% 11.125 2/1/04 0 655,568 1,661,337
Ivan M. Szeftel.......... 80,000(5) 3.6% 11.125 2/1/04 0 559,716 1,418,431
77,500(6) 3.5% 11.125 2/1/04 0 542,225 1,374,105
Colin D. Stern........... 80,000(5) 3.6% 11.125 2/1/04 0 559,716 1,418,431
53,500(6) 2.4% 11.125 2/1/04 0 374,310 948,576
All Shareholders......... N/A N/A N/A N/A 0 718.8 million(7) 1.82 billion(7)
</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
6
<PAGE> 9
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 $11.125 per share (i.e. the exercise price
of the options depicted) over the option term will result in prices per
share of the Company's Common Stock of approximately $18.12 and $28.86,
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 the Company's Common Stock outstanding as of
February 1, 1994 (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 Common Stock at the
closing market price on February 1, 2004 (i.e., the expiration date of the
options depicted) assuming the specified compounded rates of return between
February 1, 1994 and February 1, 2004 and (ii) the purchase price,
exclusive of brokerage commissions, of one share of Common Stock at the
closing market price of $11.125 on February 1, 1994 (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 the Company's Common Stock are
non-qualified options and were granted with an exercise price equal to the
fair market value of the 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) The options reflected herein which were granted to David V. Wachs were
cancelled on his resignation. See "MANAGEMENT COMPENSATION -- Employment
and Change of Control Agreements".
(5) 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.
(6) 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 1995 through fiscal
1999 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.
(7) 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.
7
<PAGE> 10
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information relating to options exercised by
the named Executive Officers during the 1995 fiscal year and the number and
value of options held at fiscal year-end.
<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(3)........... -- -- 2,560,166 384,834 $ 5,961,663 $ 313,337
Philip Wachs................ -- -- 733,500 451,500 1,687,815 357,188
Mordechay Kafry............. -- -- 631,134 407,034 1,174,775 430,837
Ivan M. Szeftel............. -- -- 529,551 358,067 1,011,100 394,481
Colin D. Stern.............. -- -- 219,132 290,868 404,263 276,518
</TABLE>
---------------
(1) The closing price for the Company's Common Stock as reported by the Nasdaq
National Market on January 27, 1995 was $6.375. Value is calculated on the
basis of the aggregate of the difference between the option exercise price
of in-the-money options and $6.375 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".
(3) At the time of his resignation on May 17, 1995, David V. Wachs surrendered
previously granted options to purchase 135,000 shares of the Company's
Common Stock at $15.125 and options to purchase 210,000 shares of the
Company's Common Stock at $11.125. See "MANAGEMENT COMPENSATION --
Employment and Change of Control Agreements".
EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS
On May 17, 1995, David V. Wachs resigned from his positions as a Director
of the Company as well as the Company's Chairman of the Board and Chief
Executive Officer. In connection therewith, the Company and Mr. Wachs entered
into an agreement which provides for Mr. Wachs to continue to render services to
the Company as a non-officer employee for six years. Mr. Wachs will be
compensated at an annual rate of $427,500 per year during the first five years
of the agreement and at an annual rate of $200,000 during the final year of the
agreement. The Company's obligations to continue paying premiums on certain
Split Dollar life insurance policies remain unaffected. See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS". In connection with the agreement, Mr.
Wachs surrendered previously granted options to purchase 135,000 shares of the
Company's Common Stock at $15.125 and options to purchase 210,000 shares at
$11.125.
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 (currently $300,000), 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. The employment agreement provides for 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.
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
8
<PAGE> 11
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 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 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 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
9
<PAGE> 12
"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 Company's
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 subjectively 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 (earnings per share), individual performance
relative to job requirements and relative job and industry experience criteria.
No specific weighting criteria are utilized among these factors. 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 1995 annual incentive program established annual incentive
opportunities for Executives ranging from zero to a maximum 120% of salary at
the end of the 1995 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 100% to
120% of fiscal year-end salaries. These minimum and maximum payment levels were
prescribed by the Compensation Committee at the beginning of the 1995 fiscal
year. No awards may be granted if corporate earnings per share (reflecting
earnings growth) performance does not reach the established minimum performance
level.
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.
10
<PAGE> 13
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
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.
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 the
fair market value of the Company's Common 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 1995 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 Common 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 stockbased 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 no
longer grants 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 stockbased awards. The Company has
granted options with an exercise price equal to 100% of the fair market
value of the Company's Common 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
Common Stock at the date of grant. The exercisability of these options can
vary depending on the Company's performance. The 1995 fiscal year grants of
PSO's 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 1995 through fiscal 1999 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".
11
<PAGE> 14
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 1995 Fiscal Year
As a result of the 1994 fiscal year financial performance, specifically
earnings per share, falling below the threshold levels for the 1994 fiscal year
annual incentive plan and other subjective factors (see "Base Salaries"), the
Committee determined that salaries for David V. Wachs and the other named
Executive Officers would not be increased for the 1995 fiscal year. No specific
weighting criteria are utilized among these factors. 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
1995 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 February 1, 1994, David V. Wachs was granted 105,000 market value
options and 105,000 PSO's at an exercise price of $11.125 per share. Such
exercise price was equal to the fair market value of the Company's Common Stock
at the date of grant. A total of 345,000 market value options and 329,900 PSO's
were also granted to other named Executive Officers effective February 1, 1994
at the same exercise price. These grants were made 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 1995 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 1995 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 for David
V. Wachs and the other named Executive Officers in the aggregate were below the
performance and size adjusted median level of base salary levels for the
Compensation Peer Group. 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
1995 fiscal year exceeded the performance and size adjusted median level of
long-term incentive award levels for the Compensation Peer Group.
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 under
plans approved by Shareholders.
12
<PAGE> 15
In December 1993 the Internal Revenue Service ("IRS") issued proposed
regulations implementing this legislation. Additional proposed regulations were
issued in December 1994. These regulations will not become final until after a
period for public comment and possibly public hearings thereafter. No
compensation paid during the 1995 fiscal year was subject to the limitation on
deductibility under Section 162(m). 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 yet final. As these circumstances change, 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.
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
13
<PAGE> 16
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
S&P 500 RETAILERS -
MEASUREMENT PERIOD CHARMING COMPOSITE SPECIALTY
(FISCAL YEAR COVERED) SHOPPES, INC. INDEX APPAREL INDEX
<S> <C> <C> <C>
2/2/90 100 100 100
2/1/91 124 107 110
1/31/92 290 132 168
1/29/93 401 146 160
1/28/94 259 164 148
1/27/95 144 166 135
</TABLE>
The chart above assumes $100 invested on February 2, 1990 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.
14
<PAGE> 17
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 1995 fiscal year and (4) all Directors and all Executive Officers of the
Company as a group. Unless otherwise indicated, beneficial ownership information
is presented as of April 14, 1995.
<TABLE>
<CAPTION>
COMMON STOCK (1)
---------------------------
NUMBER OF PERCENT OF
NAME OF BENEFICIAL OWNER SHARES OWNED CLASS
------------------------------------------------------------- ------------ ----------
<S> <C> <C>
David V. Wachs............................................... 6,074,830(2) 5.8%
Samuel Sidewater............................................. 2,178,510(3) 2.1%
Philip Wachs................................................. 1,985,274(4) 1.9%
Mordechay Kafry.............................................. 708,767(5) (14)
Michael Solomon.............................................. 110,000(6) (14)
Marvin L. Slomowitz.......................................... 35,000(7) (14)
Joseph L. Castle, II......................................... 22,000(7) (14)
Alan Rosskamm................................................ 23,484(7) (14)
Geoffrey W. Levy............................................. 20,250(7) (14)
Ivan M. Szeftel.............................................. 691,975(8) (14)
Colin D. Stern............................................... 332,499(9) (14)
J. P. Morgan & Co., Inc. .................................... 9,725,595(10) 9.4%
Goldman, Sachs & Co. and The Goldman Sachs Group, L.P. ...... 8,556,662(11) 8.3%
FMR Corp. ................................................... 7,605,043(12) 7.4%
All Directors and all Executive Officers
as a Group (18 persons).................................... 13,194,171(13) 12.1%
</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 80,000 shares owned by a charitable foundation of which David V.
Wachs is co-trustee, as to which shares David V. Wachs disclaims any
beneficial ownership. Also includes 2,594,666 shares as to which David V.
Wachs holds options exercisable within sixty days.
(3) Includes 426,060 shares owned by an irrevocable trust of which Mr.
Sidewater is beneficiary and 36,150 shares owned by a charitable foundation
of which Mr. Sidewater is a trustee, with respect to all of which shares
Mr. Sidewater disclaims any beneficial interest. Also includes 124,180
shares as to which Mr. Sidewater holds options exercisable within sixty
days.
(4) Includes 60,000 shares owned by a charitable foundation of which Philip
Wachs is a co-trustee and 810,500 shares as to which Philip Wachs holds
options exercisable within sixty days. Also includes 39,600 shares owned by
five irrevocable trusts of which Philip Wachs is co-trustee, as to which
Philip Wachs disclaims any beneficial ownership. The shares owned by these
trusts are also included in the number of shares reflected as beneficially
owned by Colin D. Stern. Excludes 4,650 shares held by three irrevocable
trusts for the benefit of Philip Wachs' children.
(5) Includes 708,767 shares as to which Mr. Kafry holds options exercisable
within sixty days.
(6) Includes 45,000 shares owned by a trust for the benefit of Mr. Solomon's
daughter, as to which shares Mr. Solomon disclaims any beneficial
ownership. 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
30,000 shares as to which Mr. Solomon holds options exercisable within
sixty days. See "ELECTION OF DIRECTORS -- Compensation of Directors".
15
<PAGE> 18
(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 18,000 shares for Mr. Castle, 30,000 shares for Mr. Slomowitz,
18,000 shares for Mr. Rosskamm and 12,000 shares for Mr. Levy, as to which
such persons hold options exercisable within sixty days. See "ELECTION OF
DIRECTORS -- Compensation of Directors".
(8) Includes 593,851 shares as to which Mr. Szeftel holds options exercisable
within sixty days.
(9) Includes an aggregate of 57,400 shares owned by nine irrevocable trusts of
which Mr. Stern is co-trustee, as to which shares Mr. Stern disclaims any
beneficial ownership. The shares owned by five of these trusts in the
aggregate amount of 39,600 are included in the number of shares reflected
as beneficially owned by Philip Wachs. Also includes 275,099 shares as to
which Mr. Stern holds options exercisable within sixty days.
(10) The source of this information is an amendment to Schedule 13G dated
December 30, 1994, filed by J.P. Morgan & Co., Inc., reporting that it had
sole power to vote or direct the vote of 6,111,685 shares and sole power to
dispose or to direct the disposition of 9,724,595 shares at that date. 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 10, 1995,
filed by The Goldman Sachs Group, L.P. and Goldman, Sachs & Co., reporting
that each had shared power to vote or direct the vote of 8,556,662 shares
and shared power to dispose or direct the disposition of 8,556,662 shares.
The address of The Goldman Sachs Group, L.P. and Goldman, Sachs & Co. is 85
Broad Street, New York, New York 10004.
(12) The source of this information is an amendment to Schedule 13G dated
February 13, 1995, filed by FMR Corp. and certain other persons and
reporting beneficial ownership at December 31, 1994. FMR Corp. reported
that it had sole voting power over 72,827 shares and sole dispositive power
over 7,605,043 shares. Edward C. Johnson, 3rd, reported in that Schedule
13G amendment that he and certain of his family members and trusts form a
controlling group with respect to FMR Corp. so that he also had beneficial
ownership of 7,605,043 shares (which shares are the same shares as those
beneficially owned by FMR Corp.), including sole voting power over 72,827
shares and sole dispositive power over 7,605,043 shares. In addition, the
Schedule 13G amendment stated that Fidelity Management & Research Company,
a wholly owned subsidiary of FMR Corp. and a registered investment advisor,
was a beneficial owner of 7,532,216 shares (which shares are included in
the shares beneficially owned by FMR Corp.). The address of FMR Corp. is 83
Devonshire Street, Boston, Massachusetts 02109.
(13) Includes 5,812,555 shares as to which Directors and Executive Officers hold
options exercisable within sixty days.
(14) 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 owns equity interests in one
of these entities. Colin D. Stern also owned equity interests in one of these
entities. As of January 1, 1995, Mr. Stern ceased to own any interest in such
entity. 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 1995 fiscal year with respect to each store in each
shopping center and the locations of each shopping center are as follows:
Massena, New York: $37,242; Newark, New York: $79,032; and Logan, West Virginia:
$113,029. 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. Certain amounts remain outstanding on account of
payment of the purchase price. The Lease Amount paid by the Company during the
1995 fiscal year with respect to the lease of that store is $101,858. 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
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<PAGE> 19
Company believes that the terms thereof are no less favorable to the Company
than the Company could have negotiated with an unaffiliated third party.
Bernard Brodsky, an Executive Officer of the Company, and his wife (the
"Brodskys"), are personally indebted to the Company for a loan made to them in
the aggregate amount of $150,000 (the "Loan"). The Loan bears interest, payable
monthly, at an annual rate of 6.5%, and is payable in full on January 31, 1997.
The Loan is secured by a first mortgage on a residence owned by the Brodskys.
The principal amount outstanding as of April 30, 1995 was $125,000 which was
also the largest aggregate amount of indebtedness outstanding at any time during
the 1995 fiscal year.
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 (3)".
The Company also provides additional life insurance coverage for Philip
Wachs. Under the split dollar arrangement, the Company will pay annual premiums
of $83,317, provided, however, that the proceeds of such policies shall be first
used to repay all premiums paid by the Company. 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. The balance of such policy proceeds will be paid to certain designated
beneficiaries. See also, "MANAGEMENT COMPENSATION -- Summary Compensation Table:
Footnote (3)".
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".
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the 1995 fiscal year the members of the Compensation Committee and
Stock Option Committees were: Joseph L. Castle, II, Michael Solomon and Marvin
L. Slomowitz. Marvin L. Slomowitz 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
1995 fiscal year. The aggregate amounts (including rent, common area maintenance
charges, taxes, insurance and other charges payable under the leases (the "Lease
Amounts")) paid by the Company for the 1995 fiscal year with respect to these
eleven stores was $649,000 which is less than two percent of the aggregate
rental 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 1995 fiscal year with respect to the Honesdale and Pittston
stores are approximately $69,000 and $49,000, 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
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intention of the persons named in the enclosed Proxy Card (namely Philip Wachs
and Samuel Sidewater) 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 28, 1995. 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 1996 ANNUAL MEETING
Any proposals of Shareholders that are intended to be presented at the
Company's 1996 Annual Meeting of Shareholders must be received at the Company's
principal executive offices no later than January 26, 1996 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 28, 1995, 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.
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 25, 1995
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<PAGE> 21
PROXY
CHARMING SHOPPES, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Philip Wachs and Samuel
Sidewater, and each of them, Proxies of the undersigned, with full power of
substitution, to vote and act as designated below 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 Thursday, June 29, 1995 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 AS SET FORTH
IN THE PROXY STATEMENT.
(CONTINUED ON REVERSE SIDE)
<PAGE> 22
1. ELECTION OF CLASS B DIRECTORS
<TABLE>
<S> <C> <C>
Vote FOR
all nominees
(except as marked Vote (INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE: WRITE
to the contrary) WITHHELD THAT NOMINEE'S NAME BELOW.)
/ / / / Joseph L. Castle, II Michael Solomon Philip Wachs
---------------------------------------------------------------------------------------
</TABLE>
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: _______________________, 1995
-------------------------------------
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 PROCESSING EQUIPMENT WILL
RECORD YOUR VOTES"
FOLD AND DETACH HERE
ANNUAL MEETING OF SHAREHOLDERS
OF
CHARMING SHOPPES, INC.
THURSDAY, JUNE 29, 1995
10:00 A.M.
CHARMING SHOPPES, INC.
450 WINKS LANE
BENSALEM, PA 19020
