<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 [ ]
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
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
CHARMING SHOPPES, INC.
450 WINKS LANE
BENSALEM, PENNSYLVANIA 19020
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JULY 1, 1999
------------------------
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 July 1, 1999 at 10:00 A.M. for the
following purposes:
1. To elect three Class C Directors of the Company; and
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 April 30, 1999 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
COLIN D. STERN
Secretary
May 26, 1999
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, PENNSYLVANIA 19020
------------------------
PROXY STATEMENT
------------------------
GENERAL
The enclosed Proxy Card is solicited by the Board of Directors of Charming
Shoppes, Inc. (the "Company") for use at the Annual Meeting of Shareholders to
be held on July 1, 1999 at 10:00 A.M. at the offices of the Company at 450 Winks
Lane, Bensalem, Pennsylvania 19020, and at any adjournments thereof (the
"Meeting"). This Proxy Statement, the accompanying Notice of Annual Meeting of
Shareholders and Proxy Card and the Company's 1999 Annual Report were mailed on
or about May 26, 1999 to all Shareholders entitled to vote at the Meeting.
RECORD DATE AND OUTSTANDING SHARES
Only Shareholders of record as of the close of business on April 30, 1999
are entitled to notice of and to vote at the Meeting. As of April 30, 1999 the
Company had 98,230,332 shares of Common Stock outstanding, the holders of which
are entitled to one vote per share.
VOTING
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, and as otherwise permitted
under the Rules of the Securities and Exchange Commission ("SEC"). At the time
of the mailing of this Proxy Statement, the Board of Directors had received no
notice which was timely in accordance with the Company's Bylaws regarding any
matter to come before the Meeting. The Proxy Committee consists of Dorrit J.
Bern, Chairman of the Board of Directors, President and Chief Executive Officer,
and Joseph L. Castle, II, a member of the Board of Directors.
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. Votes may be cast in favor or withheld; votes that are
withheld will be excluded entirely from the vote and will have no effect. Other
matters properly coming before the Meeting will be determined by a majority of
the votes cast. 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 non-vote will be excluded entirely from the vote and will
have no effect.
REVOCABILITY OF PROXIES
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.
<PAGE> 4
ELECTION OF DIRECTORS
GENERAL
The Company's Restated Articles of Incorporation provide for a classified
Board of Directors, consisting 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 C Directors, namely, Dorrit J. Bern, Alan Rosskamm and Kenneth S. Olshan,
are scheduled to expire as of the date of the Meeting. At the Meeting, Dorrit J.
Bern, Alan Rosskamm and Kenneth S. Olshan will be nominated to serve as Class C
Directors for additional three-year terms and until their successors shall have
been duly elected and qualified. Ms. Bern and Mr. Rosskamm were last elected as
Class C Directors to the Board at the Company's Annual Meeting held on June 27,
1996. Mr. Olshan was elected as a Class C Director on April 28, 1999 to fill the
vacancy created by the resignation of Michael Bozic on December 10, 1999.
Pamela S. Lewis was elected as a Class B Director on December 10, 1998 to
fill the vacancy created by the resignation of Laura A. Liswood. Both Michael
Solomon and Geoffrey W. Levy resigned as Directors of the Company with effect
from July 14, 1998.
Unless otherwise directed, the Proxy solicited hereby will be voted for the
election of Dorrit J. Bern, Alan Rosskamm and Kenneth S. Olshan as Class C
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 BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ALL THE
NOMINEES.
BIOGRAPHICAL INFORMATION
The following information is submitted as of May 13, 1999 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>
Dorrit J. Bern................ Chairman of the Board, 49 1995 2002
President and Chief Executive
Officer
Alan Rosskamm................. Director 49 1992 2002
Kenneth S. Olshan............. Director 66 1999 2002
</TABLE>
DIRECTORS WHOSE TERMS OF OFFICE CONTINUE
<TABLE>
<CAPTION>
POSITION HELD YEAR FIRST TERM
NAME WITH THE COMPANY AGE BECAME DIRECTOR TO EXPIRE
- ---- ---------------- --- --------------- ---------
<S> <C> <C> <C> <C>
Marvin L. Slomowitz........... Director 69 1990 2000
Marjorie Director 56 1997 2000
Margolies-Mezvinsky.........
Joseph L. Castle, II.......... Director 66 1990 2001
Pamela S. Lewis............... Director 42 1998 2001
</TABLE>
Dorrit J. Bern has been President and Chief Executive Officer since August
23, 1995 when she joined the Company. She also served as Vice Chairman of the
Board from August 23, 1995 until January 30, 1997 when she was elected Chairman
of the Board. Prior to her employment with the Company, Ms. Bern was employed by
Sears, Roebuck & Co. since 1987. As Divisional Vice President of Misses and
Junior Sportswear, Dresses, Outerwear, Petite and Large Size Sportswear and
Dresses, and Maternity, Ms. Bern was instrumental in the
2
<PAGE> 5
creation and execution of the women's apparel strategy at Sears. In December
1992, she was promoted to Category Vice President of Women's Apparel. In
December 1993, she was promoted to Group Vice President of Women's Apparel and
Home Fashions. Prior to joining Sears, Roebuck & Co., Ms. Bern held
merchandising positions at The Bon Marche and Joske's, divisions of Allied
Department Stores, Inc.
Alan Rosskamm has been Chairman of the Board of Directors of Jo-Ann Stores,
Inc. (formerly Fabri-Centers of America, Inc.) ("Jo-Ann") since July 1992 and
has been the Chief Executive Officer and a Director of Jo-Ann for more than five
years. Jo-Ann sells a wide variety of fashion and decorator fabrics, notions,
patterns, sewing accessories, crafts, floral and seasonal merchandise under the
Jo-Ann Fabrics and Crafts and Jo-Ann etc names. In February 1997, Jo-Ann reached
a settlement with the SEC, without admitting or denying the allegations,
concerning alleged violations of the securities laws primarily in connection
with certain inventory reserve estimates in Jo-Ann's 1992 financial statements
and their use in a 1992 securities offering. Concurrently, Mr. Rosskamm
consented to a separate SEC administrative cease and desist order against
violations of the federal securities laws, without admitting or denying the
SEC's allegations. The SEC contended that Mr. Rosskamm violated certain federal
securities laws in connection with the 1992 offering by not making adequate
inquiries of his financial staff before signing representation letters to
Jo-Ann's auditors and by signing a Form 10-Q which was filed following the
offering.
Kenneth S. Olshan currently serves as a member of the Board of Directors of
Footstar, Inc. and Saatchi & Saatchi PLC. He has provided strategic consulting
services to a variety of prominent companies. Mr. Olshan served as Chairman and
Chief Executive Officer of Wells Rich Greene BDDP from 1990 until 1995. He also
served as Chairman of Wells Rich Greene Advertising from 1982 to 1990 when the
agency was acquired by BDDP, a Paris-based global communications group.
Marvin L. Slomowitz has served as Chief Executive Officer and Chairman of
the Board of Directors of Mark Development Company, a shopping center developer,
for more than five years. He also served as Chairman of the Board and Chief
Executive Officer of Mark Centers Trust (the "Trust"), which is the general
partner of Mark Centers Limited Partnership (the "Partnership") from June 1993
until August 1998 when the Trust and Partnership combined their real estate
interests with the real estate interests of certain other entities and changed
their names to Acadia Realty Trust and Acadia Realty Limited Partnership,
respectively. Mr. Slomowitz has continued as a member of the Board of Trustees
of Acadia Realty Trust. Acadia Realty Trust is principally engaged in the
development of shopping centers.
Marjorie Margolies-Mezvinsky has served as President of the Women's
Campaign International since March 1998. She has also served as President of the
Women's Campaign Fund and the Women's Campaign Research Fund from March 1996 to
February 1998. In 1995 she served as Director of the United States Delegation to
the United Nations Fourth World Conference on Women. From 1992 to 1994, she
served as the United States representative from Pennsylvania's 13th
Congressional District in the 103rd Congressional Session. From 1971 to 1991,
Ms. Margolies-Mezvinsky was a television journalist with NBC and its owned and
operated stations in both New York and Washington, D.C.
Joseph L. Castle, II was Chairman of the Company's Board of Directors for
the period March 21, 1996 through January 30, 1997. 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 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 also a Director of Comcast
Corporation.
Pamela S. Lewis has been Professor of Management and Dean of the Bennett S.
LeBow College of Business at Drexel University since June 1997. From 1987 to
1997 Dr. Lewis served as Chairman of the Department of Management at the
University of Central Florida. Her professional specialization is in the field
of strategic planning with a particular emphasis on competitive and marketing
strategy. She has written and lectured on these topics extensively. Dr. Lewis is
a Director of C & D Technologies, Inc., Transitional Work, Inc. and the
Pennsylvania Economy League.
3
<PAGE> 6
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, a
Stock Option Committee, an Administration Committee and a Corporate Governance
Committee.
During the Company's 1999 fiscal year, Joseph L. Castle, II and Marvin L.
Slomowitz were members of the Audit Committee. Geoffrey W. Levy also served as a
member of the Audit Committee until his resignation on July 14, 1998. The Audit
Committee monitors the activities of the Company's independent auditors and the
Company's internal audit functions. The Audit Committee met six times during the
Company's 1999 fiscal year.
During the Company's 1999 fiscal year, Joseph L. Castle, II, Alan Rosskamm
and Marjorie Margolies-Mezvinsky were members of the Compensation Committee and
Stock Option Committee. Michael Solomon and Michael Bozic also served as members
of the Compensation Committee and the Stock Option Committee until their
resignations on July 14, 1998 and December 10, 1998, respectively. 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
four meetings (all of which were joint meetings with the Stock Option Committee)
during the Company's 1999 fiscal year. The Stock Option Committee has 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 Committee had four meetings (all of which were
joint meetings with the Compensation Committee) during the Company's 1999 fiscal
year. During the Company's 1998 fiscal year, the Board of Directors established
the Compensation/Stock Option Committee Subcommittee which also serves as a
committee which administers the Company's employee stock option and stock
incentive plans. Joseph L. Castle, II and Marjorie Margolies-Mezvinsky have been
members of this Subcommittee since its inception. This Subcommittee did not meet
during the Company's 1999 fiscal year.
During the Company's 1999 fiscal year, Dorrit J. Bern, Joseph L. Castle, II
and Alan Rosskamm were members of the Board of Directors' Administration
Committee (the "Administration Committee"). Geoffrey W. Levy also served as a
member of the Administration Committee until July 14, 1998 when he was replaced
by Alan Rosskamm. 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 one occasion.
During the Company's 1999 fiscal year, Marjorie Margolies-Mezvinsky and
Joseph L. Castle, II were members of the Corporate Governance Committee. Laura
A. Liswood also served as a member of the Corporate Governance Committee until
her resignation on July 14, 1998. The Corporate Governance Committee met once
during the Company's 1999 fiscal year. The Corporate Governance Committee will
oversee the Company's corporate governance and advise and report to the Board on
such matters from time to time.
The Company does not have a formal nominating committee, and nominations
for Director candidates are determined by the Board of Directors. The Company's
By-laws establish advance notice procedures with regard to the nomination, other
than by or at the direction of the Board of Directors or a committee thereof, of
candidates for election as Directors. These procedures generally provide that
the notice of proposed shareholder nominations for the election of Directors
must be given in writing to the Secretary of the Company not later than the date
on which a shareholder proposal would be required to be submitted to the Company
in order to be set forth in the Company's Proxy Statement, in accordance with
SEC Rules. See also "PROPOSALS FOR 2000 ANNUAL MEETING." Such notice generally
must (i) identify the name and
4
<PAGE> 7
address of the nominating shareholder and nominee, (ii) contain representations
concerning the nominating shareholder's ownership of Common Stock and intention
to appear at the Meeting and make the nomination, and (iii) include all relevant
information concerning the nominee and his or her relationship or transactions
with the Company that are required to be disclosed in the Proxy Statement
pursuant to SEC Rules.
Fifteen meetings of the Board of Directors were held during the Company's
fiscal year ended January 30, 1999. Each incumbent Director, except Michael
Solomon, Geoffrey W. Levy and Michael Bozic, attended at least 75% of the
meetings of the Board and Committees on which he or she served (held at a time
at which he or she was a Director). The Board of Directors acted by unanimous
consent on six occasions.
COMPENSATION OF DIRECTORS
Directors who are not also employees are compensated under the Non-Employee
Directors Program which was adopted by the Board of Directors on August 21,
1996. Under the Non-Employee Directors Program, each non-employee Director is
entitled to receive an award of shares with a fair market value equal to 60% of
the annual fee payable thereunder. The annual fee currently is $60,000. The
balance of the annual fee is payable in cash to each non-employee Director. A
Director who is also a Company employee is not separately compensated for his or
her service as a Director or Chairman of the Board.
Prior to April 1999, non-employee Directors participated in the Company's
1989 Non-Employee Director Stock Option Plan (the "1989 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. On
April 28, 1999 the Board of Directors suspended automatic option grants under
the 1989 Plan as the Board considers a possible restructuring of non-employee
director compensation.
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 30,
1999 ("1999 fiscal year"), January 31, 1998 ("1998 fiscal year") and February 1,
1997 ("1997 fiscal year")) to the Company's Chief Executive Officer and each of
the Company's four other most highly compensated Executive Officers who were
serving in such capacities at the end of the 1999 fiscal year based on salary
and bonus earned during the 1999 fiscal year.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------
ANNUAL COMPENSATION AWARDS
----------------------------------------- ------------------------
OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
NAME AND FISCAL COMPENSATION STOCK UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR(1) SALARY($)(2) BONUS($)(3) ($)(4) AWARD(S)($) OPTIONS(#) ($)(5)(6)
------------------ ------- ------------ ----------- ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dorrit J. Bern.......... 1999 $1,000,000 $508,563 $ 65,805 $ -- -- $101,943
Chairman of the Board 1998 1,000,000 492,000 65,837 -- -- 77,344
President and Chief 1997 1,000,000 570,000 67,978 1,900,000(7) -- 58,392
Executive Officer
Erna Zint............... 1999 400,000 159,299 151,972 -- 60,000 --
Executive Vice 1998 400,000 164,000 151,072 -- 40,000 --
President -- Sourcing 1997 400,000 190,000 150,568 -- -- --
Elizabeth Williams...... 1999 350,000 126,081 -- -- 90,000 23,374
Executive Vice 1998 350,000 121,975 -- -- 75,000 9,334
President -- Merchandising 1997 300,000 130,924 -- -- 200,000 70,843
Eric M. Specter......... 1999 315,000 113,473 -- -- 90,000 18,162
Executive Vice
President, 1998 295,000 82,246 -- -- 75,000 10,526
Chief Financial Officer 1997 240,000 85,455 -- -- 100,000 9,826
and Treasurer
Colin D. Stern.......... 1999 300,000 101,713 -- -- 60,000 27,564
Executive Vice 1998 300,000 98,400 -- -- 40,000 20,676
President, General 1997 300,000 136,806 -- -- 100,000 48,862
Counsel and Secretary
</TABLE>
- ---------------
(1) The Company has a 52-53 week fiscal year ending the Saturday nearest January
31.
(2) Includes all amounts deferred under qualified and non-qualified deferred
compensation plans.
(3) Includes all amounts deferred under qualified and non-qualified deferred
compensation plans. 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 depending on 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."
(4) The amount disclosed under the caption "Other Annual Compensation" for the
1999 fiscal year with respect to Dorrit J. Bern includes $13,820 paid on her
behalf for air travel commuting expenses between Ms. Bern's home in Illinois
and the Company's main office in Pennsylvania and $51,985 attributable to
her for the rent-free use of an apartment in Philadelphia, Pennsylvania. The
amount disclosed under the caption "Other Annual Compensation" for the 1999
fiscal year with respect to Erna Zint includes $144,000 paid on her behalf
as a housing allowance for living accommodations in Hong Kong. No amount has
been disclosed under the caption "Other Annual Compensation" with respect to
the other named Executive Officers in accordance with SEC Rules 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.
(notes continued on following page)
6
<PAGE> 9
(5) The Company has enabled Dorrit J. Bern, Elizabeth Williams, Eric M. Specter
and Colin D. Stern to obtain life insurance pursuant to "Split Dollar"
arrangements. The Company is the beneficiary under such policies to the
extent of the premiums paid by it. Accordingly, the economic value of this
benefit to each named Executive Officer included under the caption "All
Other Compensation" with respect to the 1999 fiscal year is as follows:
Dorrit J. Bern, $56,274; Elizabeth Williams, $9,594; Eric M. Specter,
$5,581; and Colin D. Stern, $9,401. 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.
(6) Included under the caption "All Other Compensation" are contributions in the
following amounts made or accrued by the Company under its qualified and
non-qualified deferred compensation plans on behalf of the named Executive
Officers during the 1999 fiscal year: Dorrit J. Bern, $45,669; Erna Zint,
$0; Elizabeth Williams, $13,780; Eric M. Specter, $12,581; and Colin D.
Stern, $12,163.
(7) Included under the caption "Restricted Stock Award(s)" is the value of a
stock award of 400,000 shares with a market value of $4.75 per share on
March 20, 1996, the date of the grant. Based on the closing price of $3.625
per share on January 29, 1999, the 180,000 shares still subject to risk of
forfeiture and restrictions on transferability had an aggregate value of
$652,500.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information relating to options granted to the
named Executive Officers during the 1999 fiscal year. The table indicates the
potential realizable value of options granted during the 1999 fiscal year
assuming the options are exercised immediately prior to their expiration date
and assuming the occurrence of the specified compounded rates of appreciation of
the Company's Common Stock over the term of such options. The potential
realizable value of such options is approximately equal to the amount a
purchaser of Common Stock would realize, exclusive of brokerage commissions,
assuming (i) the purchase of an equivalent number of shares of Common Stock at
the closing market price on the date of grant of the options depicted, (ii) the
sale of such shares immediately prior to the expiration date of such options at
the closing market price on such date, and (iii) the occurrence of the specified
compounded rates of appreciation of the Common Stock over such holding period.
This table is presented solely for purposes of complying with SEC Rules, and
there can be no assurance that the optionees or any purchaser of the Common
Stock under the circumstances described herein will actually realize the returns
assumed herein under the circumstances depicted or under any other
circumstances. The actual amounts, if any, realized by an optionee or the
purchaser of Common Stock will be dependent upon a number of factors, including
the future performance of the Company and overall stock market conditions.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED ANNUAL
SECURITIES % OF TOTAL RATES OF STOCK PRICE
UNDERLYING OPTIONS APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OPTION TERM(1)
GRANTED EMPLOYEES PRICE EXPIRATION ------------------------
NAME (#)(2) IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- -------------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Dorrit J. Bern.......... -- -- -- -- -- --
Erna Zint............... 60,000 3.9% $4.3125 2/18/08 $162,726 $412,381
Elizabeth Williams...... 90,000 5.9% 4.3125 2/18/08 244,090 618,571
Eric M. Specter......... 90,000 5.9% 4.3125 2/18/08 244,090 618,571
Colin D. Stern.......... 60,000 3.9% 4.3125 2/18/08 162,726 412,381
</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 non-transferability of
the options or the vesting requirements of the options.
(2) 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
(notes continued on following page)
7
<PAGE> 10
date of the grant. Such options become exercisable as to 20% of the shares
subject thereto on each succeeding anniversary of the date of grant until
the fifth anniversary at which time all options are fully vested. 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, Change
of Control and Severance Agreements." An Executive Officer can elect to have
the Company withhold shares upon exercise to satisfy tax withholding
obligations.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The table below provides the following information with respect to options
exercised by each of the named Executive Officers during the 1999 fiscal year:
(i) the number of shares of the Company's Common Stock acquired upon exercise of
options during the 1999 fiscal year, (ii) the aggregate dollar value realized
upon the exercise of such options, (iii) the total number of exercisable and
unexercisable stock options held at January 29, 1999 and (iv) the aggregate
dollar value of the in-the-money exercisable and unexercisable options at
January 29, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(1)
SHARE ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ---------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dorrit J. Bern........... -- -- 600,000 400,000 $ -- $ --
Erna Zint................ -- -- 158,000 192,000 112,500 75,000
Elizabeth Williams....... -- -- 195,000 270,000 71,250 47,500
Eric M. Specter.......... -- -- 315,740 299,360 46,875 --
Colin D. Stern........... -- -- 481,500 323,500 62,500 --
</TABLE>
- ---------------
(1) The closing price for the Company's Common Stock as reported by the Nasdaq
National Market on January 29, 1999 was $3.625. Value is calculated on the
basis of the aggregate of the difference between the option exercise price
of in-the-money options and $3.625 multiplied by the number of shares of
Common Stock underlying such options.
EMPLOYMENT, CHANGE OF CONTROL AND SEVERANCE AGREEMENTS
On August 22, 1995 Dorrit J. Bern entered into an Employment Agreement (the
"Bern Agreement") with the Company pursuant to which Ms. Bern is employed as the
Company's President and Chief Executive Officer at an annual salary of
$1,000,000 for an initial term of five years commencing August 23, 1995 (the
"Initial Term"). The Bern Agreement continues in full force and effect from year
to year after the expiration of the Initial Term unless either Ms. Bern or the
Company gives the other at least ninety days prior written notice before the
commencement of any such year of such party's intention to terminate the Bern
Agreement. Such annual salary may be increased or decreased at the discretion of
the Company's Board of Directors, but in no event may the annual salary be less
than $1,000,000. Ms. Bern received a cash bonus of $1,000,000 under the Bern
Agreement. Commencing with the fiscal year beginning February 4, 1996 Ms. Bern
is entitled to receive additional compensation ("Performance Payout") if the
Company achieves certain performance criteria established under the Company's
Annual Incentive Plan. The formula and standards for determining this
Performance Payout are determined by the Compensation Committee, but may not
exceed 120% of Ms. Bern's annual base salary for the applicable year. The Bern
Agreement provides that Ms. Bern will receive a Performance Payout of not less
than 30% of her annual salary for the fiscal year commencing February 4, 1996.
For the fiscal years beginning February 4, 1996, February 2, 1997 and February
1, 1998, respectively, the Compensation Committee determined that Ms. Bern's
Performance Payout could not exceed 90% of her annual base salary for any of
those years. Ms. Bern received Performance Payouts of $570,000, $492,000 and
8
<PAGE> 11
$508,563 for the fiscal years ended February 1, 1997, January 31, 1998 and
January 30, 1999, respectively. See "REPORT OF THE COMPENSATION AND STOCK OPTION
COMMITTEES OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION." The Company's
obligations under the Bern Agreement are secured by a Letter of Credit in the
face amount of $2,500,000.
Under the Bern Agreement, Ms. Bern was granted options to purchase up to
1,000,000 shares of the Company's Common Stock under the Company's 1993
Employees' Stock Incentive Plan. The options were granted at an exercise price
of $4.625 per share, the closing price per common share on the Nasdaq National
Market on the date of grant. Options covering 200,000 shares become exercisable
on the first anniversary of the date of grant and options covering an additional
200,000 shares vest on each succeeding anniversary of the date of grant until
the fifth anniversary at which time all options are fully vested. All options
become fully vested if Ms. Bern resigns for Good Reason or is discharged without
Cause. As defined in the Bern Agreement, "Good Reason" means: (i) a substantial
change in her duties and responsibilities, which change would materially reduce
her stature, importance and dignity within the Company; (ii) the appointment of
an executive officer superior in rank to her; (iii) the failure of the Board to
nominate her for re-election as a director, or the failure of the stockholders
to re-elect her; (iv) the failure of the Company to pay any amount due to her
hereunder which failure shall persist for ten (10) days after written notice of
such failure shall have been given to the Company; and/or (v) the assignment of
office space to her which is not commensurate with her position and title, the
failure of the Company to provide the ministerial, administrative and
secretarial support customarily associated with her title and position or the
withdrawal by the Company of any such ministerial, administrative and
secretarial support. As defined in the Bern Agreement, "Cause" includes but is
not limited to: her chronic neglect, refusal or failure to perform her
employment duties and responsibilities, other than for reasons of sickness,
accident or other similar causes beyond her control; or her commission of any
dishonest act or intentional wrongdoing committed against the Company, its
agents or employees or otherwise in connection with her employment by the
Company or a conviction of a felony, whether or not in connection with
employment. The Bern Agreement also provides for Ms. Bern's participation in the
Company's retirement, insurance and other benefit programs. In particular, the
Company has purchased a $4,000,000 split dollar life insurance policy on Ms.
Bern's life.
Ms. Bern's employment may be terminated (a) in the event of her disability
or incapacity, (b) on her death, (c) on her resignation for Good Reason, (d) on
her resignation without Good Reason, (e) on her resignation upon a Change of
Control which is defined in the Bern Agreement on substantially the same terms
as are set forth in the agreements evidencing options granted under the 1993
Employees' Stock Incentive Plan and the 1990 Employees' Stock Incentive Plan as
more fully described below, (f) for Cause, or (g) by the Company without Cause.
If Ms. Bern is discharged without Cause or resigns for Good Reason or the Bern
Agreement is not extended, she will continue to receive her base salary, paid in
monthly installments, for the greater of the remaining term of the Bern
Agreement or 18 months and her Performance Payout for such period provided that
the Company's obligation for base salary will be offset by 65% of any
compensation from other employment or self-employment during this period (the
"Mitigation Reduction"). If Ms. Bern resigns upon a Change of Control, she will
be entitled to post-termination compensation on these same terms for a period of
two years, subject to the Mitigation Reduction. If within 12 months following a
Change of Control, Ms. Bern's employment is terminated by her for Good Reason or
if her employment is terminated without Cause then, in lieu of any other
severance payments under the Bern Agreement, the Company will pay Ms. Bern on
termination a lump sum amount equal to 2.5 times her "base amount" within the
meaning of Section 280G(b)(3) of the Internal Revenue Code of 1986, as amended.
On death or on termination for disability or incapacity, Ms. Bern will be
entitled to her base salary for any days worked prior to the date of death or
termination, a Performance Payout and amounts payable under disability or
insurance plans or policies maintained by the Company for her benefit. If Ms.
Bern is discharged for Cause or she resigns without Good Reason, her entitlement
to further compensation generally will be limited to the receipt of base salary
for any days worked through the date of termination. During the term of the Bern
Agreement and for a period equal to the greater of two years following the
termination of employment for any reason or the period during which Ms. Bern is
entitled to payments upon termination under the Bern Agreement, she may not,
among other things, engage in or be financially interested in any business which
is in competition with the Company.
9
<PAGE> 12
On January 15, 1996 Erna Zint entered into an Employment Agreement (the
"Zint Agreement") with the Company pursuant to which Ms. Zint is employed as the
Company's Executive Vice President -- Sourcing at an annual salary of $400,000
for an initial term of five years commencing January 15, 1996 (the "Term"). Ms.
Zint is assigned to perform her duties under the Zint Agreement outside the
United States and initially in Hong Kong. Ms. Zint's salary will be reviewed at
least annually by the Company's Board of Directors to determine if an increase
is appropriate, which increase is in the sole discretion of the Company's Board
of Directors. Commencing with the fiscal year beginning February 4, 1996 Ms.
Zint is entitled to receive additional compensation ("Performance Compensation")
if the Company achieves certain performance objectives established under the
Company's Annual Incentive Plan. The formula and standards for determining this
Performance Compensation are determined by the Compensation Committee, but may
not exceed 100% of Ms. Zint's annual base salary for the applicable year.
Under the Zint Agreement, Ms. Zint was granted options to purchase up to
250,000 shares of the Company's Common Stock under the Company's 1993 Employees'
Stock Incentive Plan. The options were granted at an exercise price of $2.875
per share, the closing price per common share on the Nasdaq National Market on
the date of grant. Options covering 50,000 shares become exercisable on the
first anniversary of the date of grant and options covering an additional 50,000
shares vest on each succeeding anniversary of the date of grant until the fifth
anniversary at which time all options are fully vested. In addition, Ms. Zint is
entitled to certain other benefits including, among others, a housing allowance
of $12,000 per month during the Term of her employment, the payment of club
membership fees and a round-trip airline ticket per year to Europe or the United
States in connection with her annual leave which, when possible, will coincide
with a business trip. The Zint Agreement also provides for Ms. Zint's
participation in the Company's retirement, insurance and other benefit programs.
The Company may terminate Ms. Zint's employment (a) in the event of her
disability or death, or (b) for Cause. As defined in the Zint Agreement, "Cause"
means (i) a material breach by Ms. Zint of the provisions of the Zint Agreement;
(ii) the commission by Ms. Zint of fraud against the Company or the conviction
of Ms. Zint for aiding or abetting, or the commission of, a felony or of a fraud
or a crime involving moral turpitude or a business crime, or (iii) certain
events relating to drug or alcohol abuse which materially impair Ms. Zint's
ability to perform her duties under the Zint Agreement. The Company may also
terminate Ms. Zint's employment at any time during the Term upon written notice
to Ms. Zint for any reason that does not constitute "Cause" as defined above
provided that the Company pays to Ms. Zint the lesser of the amount to be paid
during the remainder of the Term or one year's base salary (severance) at the
rate in effect on the date of any such termination and continues to provide
those benefits due to Ms. Zint under the Zint Agreement for the period of time
covered by such severance. Ms. Zint has also agreed that, for a period of one
year after the termination of her employment, she will not solicit the
employment of any person who was employed by the Company or any of its
affiliates or subsidiaries on a full or part-time basis at the time of Ms.
Zint's termination unless such person was involuntarily discharged by the
Company or such affiliate or subsidiary, without the prior consent of the
Company.
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 (i) an
acquisition of shares giving a person or group, except an Excluded Party,
beneficial ownership of more than 20% of the voting power of the Company's
voting securities, (ii) 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 ("Continuing Directors"),
cease to constitute a majority of the Board, (iii) certain mergers,
recapitalizations, reorganizations, or similar transactions substantially
reducing the percentage of voting power held by shareholders of the Company
prior to such transactions (unless otherwise determined by the Board), and (iv)
liquidation or sale of all or substantially all of the assets of the Company,
except such transaction which would result in Excluded Parties owning or
acquiring more than 50% of the assets owned by the Company immediately prior to
the transaction. An "Excluded Party" includes subsidiaries of the Company,
employee benefit plans of the Company and 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. In the case of options
granted under the 1988 Key Employee Stock Option Plan and the 1986 Employees'
Stock
10
<PAGE> 13
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.
The Board of Directors has approved change-in-control agreements to be
entered into with the named Executive Officers (other than Ms. Bern whose
employment relationship with the Company is governed by the Bern Agreement
described above) and other members of senior management designated by the Board.
These agreements will provide for severance and other benefits if, within 24
months following the month in which a change in control of the Company occurs,
the Company terminates the executive's employment without cause or the executive
terminates employment for "good reason." "Good reason" means an adverse change
in employment status or duties, a reduction in compensation or benefits, a
failure to pay such compensation within thirty days after the due date, or a
required relocation of more than 50 miles. If a termination following a change
in control triggers benefits, the executive will receive:
- a lump-sum payment of a pro-rated portion of target annual incentive
compensation for the year in which the termination occurs.
- a lump-sum payment equal to the sum of the executive's highest base
salary and highest target annual incentive compensation, times a
multiplier of two for more senior executives or one for other
executives.
- life, disability and health benefits following termination for a
period of two years for more senior executives or one year for other
executives.
- payment of an allowance up to $30,000 for outplacement expenses.
- payment of reasonable legal expenses to enforce the agreement up to
$35,000.
- a lump-sum payment equal to the present value of that portion of the
excess cash surrender value of the executive's split-dollar life
insurance projected at the later of age 65 or the end of the
twentieth policy year which is forfeited by reason of the early
termination.
- if benefits are subject to the "golden parachute" excise tax, the
benefits shall be limited to the amount just necessary to avoid the
excise tax if such a limitation results in a greater net (of excise
tax) cash benefit to the executive than he or she would have
received had the benefits not been capped and an excise tax had been
levied.
The agreements obligate each executive not to disclose or use the Company's
confidential or proprietary information during and after employment and not to
attempt to induce any employee of the Company to terminate employment or
interfere in a similar manner with the Company's business during and for 24
months after termination of the executive's employment. For purposes of the
agreements, a "change in control" is defined in a manner similar to the
definition which applies to stock options, described above, except that changes
in board membership would constitute a change in control when Continuing
Directors cease to constitute two-thirds of the Board members.
11
<PAGE> 14
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEES OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The following report of the Compensation and Stock Option Committees of the
Board of Directors and the performance graph included elsewhere in this Proxy
Statement shall not be deemed soliciting material or otherwise deemed filed and
shall not be deemed to be incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any other filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent the Company specifically incorporates this Report or the performance
graph by reference therein.
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;
- provides competitive compensation opportunities relative to retail
industry organizations or other companies that may reasonably
reflect its market for high caliber executive talent;
- 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 retail
companies or in industry more generally; 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 attract and retain 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. Combinations of cash and stock compensation
have been critical factors in attracting and retaining key employees and are
intended to contribute to a high level of employee commitment to the Company's
business success.
The Company's target total compensation opportunities (base salary, 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 retail industry companies (the
"Compensation Peer Group"), its markets for executive talent, and the
expectation that the executive team should possess the necessary skills,
experience and motivations to attain ambitious goals for business
revitalization. Pay opportunities for specific individuals will vary based on
skills, experience and assessments with respect to individual performance.
Actual total compensation will vary above or below market standards based
primarily on the attainment of operating goals and the creation of shareholder
value.
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
12
<PAGE> 15
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 (corporate operating earnings), individual
performance relative to job requirements, the Company's ability to attract and
retain critical executives and relative job and industry experience criteria. No
specific weighting criteria are utilized among these factors. Over time,
Executive salaries generally are targeted at or near to the size adjusted 50th
percentile level of salaries of the Compensation Peer Group. The Committee may,
as business conditions and the need to attract and retain top talent warrants,
provide salaries to selected executives above the size adjusted 50th percentile
level of salaries of the Compensation Peer Group. See also "MANAGEMENT
COMPENSATION -- Employment, Change of Control and Severance Agreements."
Annual Incentive Plan
The fiscal 1999 annual incentive program established annual incentive
opportunities for Executives ranging from zero to a maximum 90% of salary at the
end of the 1999 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 corporate operating
earnings goals (reflecting corporate operating 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 40% 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 20% to 30% of
fiscal year-end salaries to a maximum incentive payment in a range from 60% to
90% of fiscal year-end salaries. These minimum and maximum payment levels were
prescribed by the Compensation Committee at the beginning of the 1999 fiscal
year. No awards may be paid out if corporate operating earnings performance
(reflecting corporate operating earnings growth) does not reach the established
minimum performance level.
The annual incentive payment opportunities for Dorrit J. Bern, the
Company's Chairman of the Board, President and Chief Executive Officer, were
based entirely on the quantitative corporate operating earnings goal (reflecting
corporate operating earnings growth). See "MANAGEMENT COMPENSATION --
Employment, Change of Control and Severance Agreements." The annual incentive
award opportunities for the other named Executive Officers were based 70% on the
quantitative corporate operating earnings goal (reflecting corporate operating
earnings growth) and 30% 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.
Long-Term Incentive Plans
The Company's long-term executive incentive program currently consists of
"market value" non-qualified 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) ("Standard Options"). Standard Options reward the Executives for
successful Company performance as reflected by appreciation in the market price
of the Company's Common Stock. The
13
<PAGE> 16
Company's long-term executive incentive program currently consists of the
following plans under which awards may be granted:
1. 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 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. The 1999 fiscal year
grants of these options to the named Executive Officers generally become
exercisable at the rate of 20% per year commencing with the first
anniversary of the date of grant and thereafter on each succeeding
anniversary of the date of grant. The 1993 Plan also authorizes grants of
restricted stock. See also "MANAGEMENT COMPENSATION -- Employment, Change
of Control and Severance Agreements."
2. The 1988 Key Employee Stock Option Plan ("KESOP") authorizes the
granting of "below market" options to key employees. In recent years,
grants under the KESOP generally have been used as an important retention
tool and as a 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.
In accordance with its business strategy and compensation philosophy, the
Company has granted Standard Options to the named Executive Officers 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.
Other
The Committee may, from time to time as warranted by business conditions
and the Company's need to attract, retain or recognize the contributions of key
executives, provide special incentive award opportunities to selected executives
to secure the employment of such executives, retain such executives or to reward
such executives for contributions made to the Company's success over extended or
extraordinary periods of service. See also "MANAGEMENT COMPENSATION --
Employment, Change of Control and Severance Agreements."
Compensation of the Chief Executive Officer for the 1999 Fiscal Year
On August 23, 1995 Dorrit J. Bern was appointed President, Chief Executive
Officer and Vice Chairman of the Board of the Company. In order to attract Ms.
Bern to the employ of the Company, the Committee provided her with a base salary
of $1,000,000. See "MANAGEMENT COMPENSATION -- Employment, Change of Control and
Severance Agreements." This salary recognized the value of Ms. Bern's experience
and skills in the industry and included a premium for moving to the Company
during a period of exceptional business challenge from a highly stable
employment situation. Ms. Bern's salary was not increased for the 1999 fiscal
year and remains at $1,000,000. Ms. Bern's salary is above the performance and
size adjusted 50th percentile level of base salary levels for the Compensation
Peer Group.
No stock options were granted to Ms. Bern during the 1999 fiscal year. On
the basis of the Committee's review and certification of the Company's 1999
fiscal year operating earnings in relation to Ms. Bern's goals under the Annual
Incentive Plan, an annual incentive payment of $508,563 was made to Ms. Bern
under the Annual Incentive Plan.
On an annualized basis, the combination of Ms. Bern's annual salary and
cash bonus awarded during the 1999 fiscal year placed her total cash
compensation above the performance and size adjusted 50th percentile level of
total compensation levels for the Compensation Peer Group.
14
<PAGE> 17
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code subjects public companies to
limits on the deductibility of certain executive compensation. It limits
deductible compensation for each Executive Officer named in the Summary
Compensation Table and serving as such at the end of the fiscal year to
$1,000,000 per year. See "MANAGEMENT COMPENSATION." Certain forms of
compensation are exempt from this deductibility limit, primarily
performance-based compensation under plans approved by shareholders.
The Committee recognizes that a portion of the cash compensation which was
paid to Ms. Bern in the 1999 fiscal year does not qualify for deduction under
Section 162(m). The Committee considered the deductibility of compensation under
Section 162(m) in designing compensatory arrangements and assessing the cost to
the Company of such compensatory arrangements and determined that the need to
attract and retain top industry executive talent considerably outweighed
deductibility considerations. The Committee therefore determined that it was
necessary and in the best interests of the Company to authorize compensation for
Ms. Bern that was, in part, in excess of the limitation on deductibility. As
circumstances change, the Committee will determine what actions are appropriate
in order to preserve tax deductibility of executive compensation paid by the
Company.
While the Annual Incentive Plan described above consists of
performance-based awards, cash payments thereunder will not comply with the
requirements for exemption from the deductibility limit under the Internal
Revenue Service regulations as shareholders have not been asked to approve the
stated performance goals.
Standard Options granted through the 1998 fiscal year appear to meet the
exemption requirements for performance-based compensation under Section 162(m).
Such awards granted in the 1999 fiscal year, and other awards such as restricted
stock, to the extent made, will not meet the exemption requirements for
performance-based compensation under Section 162(m).
Compensation Committee and Stock Option
Committee:
Alan Rosskamm
Joseph L. Castle, II
Marjorie Margolies-Mezvinsky
15
<PAGE> 18
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, the Dow Jones Retailers -- Specialty Apparel Index, and the Russell 2000
Composite Index. The Company is replacing the Standard & Poor's 500 Composite
Index with the Russell 2000 Composite Index as a comparative broad market index.
The Company is no longer included within the Standard and Poor's 500 Composite
Index and is included within the Russell 2000 Composite Index. In addition, the
average market capitalization of companies within the Russell 2000 Composite
Index is more comparable with the Company's market capitalization. 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.
[LINE GRAPH]
<TABLE>
<CAPTION>
DOW JONES RETAILERS -
CHARMING SHOPPES, S&P 500 COMPOSITE SPECIALTY APPAREL RUSSELL 2000
INC. INDEX INDEX COMPOSITE INDEX
----------------- ----------------- --------------------- ---------------
<S> <C> <C> <C> <C>
01/28/94 100 100 100 100
01/28/95 55 101 90 95
02/03/96 26 140 105 124
02/01/97 45 177 124 146
01/31/98 39 224 202 173
01/30/99 35 297 375 173
</TABLE>
The chart above assumes $100 invested on January 28, 1994 in Charming
Shoppes, Inc., the S&P 500 Composite Index, the Dow Jones Retailers -- Specialty
Apparel Index, and the Russell 2000 Composite Index, and was plotted using the
following data:
<TABLE>
<CAPTION>
01/28/94 01/28/95 02/03/96 02/01/97 01/31/98 01/30/99
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Charming Shoppes, Inc. .................. $100 $ 55 $ 26 $ 45 $ 39 $ 35
S&P 500 Composite Index.................. $100 $101 $140 $177 $224 $297
Dow Jones Retailers -- Specialty Apparel
Index.................................. $100 $ 90 $105 $124 $202 $375
Russell 2000 Composite Index............. $100 $ 95 $124 $146 $173 $173
</TABLE>
16
<PAGE> 19
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 a beneficial owner
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 1999 fiscal year, and (4) all current Directors, nominees and Executive
Officers of the Company as a group. Unless otherwise indicated, beneficial
ownership information is presented as of April 30, 1999.
<TABLE>
<CAPTION>
COMMON STOCK(1)
----------------------------
NUMBER OF PERCENT OF
NAME OF BENEFICIAL OWNER SHARES OWNED CLASS
- ------------------------ ------------ ----------
<S> <C> <C>
Dorrit J. Bern............................................. 1,000,000(2) 1.0%
Alan Rosskamm.............................................. 54,734(3) (13)
Marvin L. Slomowitz........................................ 54,250(3) (13)
Joseph L. Castle, II....................................... 50,275(3) (13)
Marjorie Margolies-Mezvinsky............................... 13,847(3) (13)
Pamela S. Lewis............................................ 4,397 (13)
Kenneth S. Olshan.......................................... 1,500 (13)
Colin D. Stern............................................. 579,700(4) (13)
Eric M. Specter............................................ 410,580(4) (13)
Elizabeth Williams......................................... 289,600(4) (13)
Erna Zint.................................................. 185,500(4) (13)
FMR Corp................................................... 15,913,170(5) 16.1%
Royce & Associates, Inc.................................... 7,875,132(6) 8.0%
Snyder Capital Management, Inc............................. 7,391,600(7) 7.5%
ICM Asset Management, Inc.................................. 7,268,510(8) 7.4%
Franklin Resources, Inc.................................... 6,600,000(9) 6.7%
National Rural Electric Cooperative Association............ 6,497,500(10) 6.6%
The Prudential Insurance Company of America................ 6,312,821(11) 6.3%
All current Directors, nominees and Executive Officers as a
Group (14 persons)....................................... 3,017,203(12) 3.1%
</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 180,000 shares of restricted stock subject to risk of forfeiture
and restrictions on transferability. These restrictions expire as to 60,000
shares of restricted stock on the fourth anniversary of March 20, 1996
which is the date of the stock award, and the restrictions on the remaining
120,000 shares of restricted stock expire on the fifth anniversary of the
date of the stock award. Also includes 600,000 shares as to which Ms. Bern
holds options exercisable within sixty days.
(3) Includes 30,000 shares for Mr. Rosskamm, 18,000 shares for Mr. Castle,
30,000 shares for Mr. Slomowitz, and 12,000 shares for Ms.
Margolies-Mezvinsky as to which such persons hold options exercisable
within sixty days. See "ELECTION OF DIRECTORS -- Compensation of
Directors."
(4) Includes 572,200 shares for Mr. Stern, 399,580 shares for Mr. Specter,
268,000 shares for Ms. Williams, and 178,000 shares for Ms. Zint as to
which such persons hold options exercisable within sixty days. Also
includes shares of restricted stock subject to risk of forfeiture and
restrictions on transferability in the following amounts: Mr. Stern, 7,500
shares; Mr. Specter, 11,000 shares; Ms. Williams, 11,000 shares; and Ms.
Zint, 7,500 shares. These restrictions expire as to 20% of the shares of
restricted stock on the first five anniversaries of February 10, 1999 which
is the date of the stock award.
(5) The source of this information is an Amendment to Schedule 13G dated
February 1, 1999 filed by FMR Corp. and certain other persons reporting
beneficial ownership as of December 31, 1998. FMR Corp.
(notes continued on following page)
17
<PAGE> 20
reported that it had sole power to vote or direct the vote of 257,814
shares and sole power to dispose or direct the disposition of 15,913,170
shares. This Schedule 13G reported that Edward C. Johnson, 3rd and certain
of his family members and trusts form a controlling group with respect to
FMR Corp. and that he and Abigail P. Johnson each also had beneficial
ownership of 15,913,170 shares (which shares are the same shares as those
beneficially owned by FMR Corp.), including sole voting power over 257,814
shares and sole dispositive power over 15,913,170 shares. The 15,913,170
shares include 825,863 shares which may be acquired by conversion of
$6,161,000 principal amount of the Company's 7.5% Convertible Subordinated
Notes due July 15, 2006 ("Convertible Debentures"). The Schedule 13G stated
that Fidelity Management & Research Company ("FMRC"), a wholly owned
subsidiary of FMR Corp. and a registered investment advisor, beneficially
owned 15,613,448 shares or 15.82% of the outstanding class of Common Stock
including 715,548 shares that may be acquired upon conversion of
Convertible Debentures in the principal amount of $5,338,000 (all of which
shares are included in the shares beneficially owned by FMR Corp.). The
Schedule 13G also stated that Fidelity Contrafund, a registered investment
company, was the beneficial owner of 10,620,500 shares or 10.76% of the
outstanding class of Common Stock (all of which shares are included in the
shares beneficially owned by FMR Corp.). The address of FMR Corp. and its
affiliates is 82 Devonshire Street, Boston, MA 02109.
(6) The source of this information is a Schedule 13G dated February 9, 1999
filed by Royce & Associates, Inc. ("Royce"), Royce Management Company
("RMC") and Charles M. Royce reporting beneficial ownership at December 31,
1998. The Schedule 13G reported that the filing persons constitute a group
and that Charles M. Royce may be deemed to be a controlling person of Royce
and RMC, and as such may be deemed to beneficially own 7,875,132 shares of
Common Stock which shares are the same shares as those beneficially owned
by Royce and RMC. The Schedule 13G also reported that Royce and RMC each
had the sole power to vote or direct the vote of 7,525,332 and 349,800
shares of Common Stock, respectively, and the sole power to dispose or
direct the disposition of 7,525,332 and 349,800 shares of Common Stock,
respectively. The address of Charles M. Royce, Royce & Associates, Inc. and
Royce Management Company is 1414 Avenue of the Americas, New York, NY
10019.
(7) The source of this information is a Schedule 13G dated February 4, 1999
filed by Snyder Capital Management, Inc. ("SCMI") and Snyder Capital
Management, L.P. ("SCMLP") reporting beneficial ownership at December 31,
1998. The Schedule 13G reported that SCMI and SCMLP each had sole power to
vote or direct the vote of 392,900 shares of Common Stock, sole power to
dispose or direct the disposition of 392,900 shares of Common Stock, shared
power to vote or direct the vote of 6,525,800 shares of Common Stock and
shared power to dispose or direct the disposition of 6,998,700 shares of
Common Stock. The address of SCMI and SCMLP is 350 California Street, Suite
1460, San Francisco, CA 94104.
(8) The source of this information is a Schedule 13G dated February 10, 1999
filed by ICM Asset Management, Inc. reporting beneficial ownership at
December 31, 1998. The Schedule 13G reported that it had sole power to vote
or direct the vote of 5,365,600 shares of Common Stock and sole power to
dispose or direct the disposition of 7,268,510 shares of Common Stock. The
address of ICM Asset Management, Inc. is 601 W. Main Avenue, Suite 600,
Spokane, WA 99201.
(9) The source of this information is a Schedule 13G dated January 22, 1999
filed by Franklin Resources, Inc. ("FRI") and certain other persons
reporting beneficial ownership as of December 31, 1998. FRI reported that
Franklin Advisory Services, Inc. ("FASI"), an investment advisor subsidiary
of FRI, had sole power to vote or direct the vote and sole power to dispose
or direct the disposition of 6,600,000 shares at that date. The Schedule
13G also reported that each of Charles B. Johnson and Rupert H. Johnson,
Jr. is a principal shareholder of FRI, and that FRI, FASI and the principal
shareholders each may be deemed to beneficially own the 6,600,000 shares.
These shares are held by one or more open or closed-end investment
companies or other managed accounts advised by direct or indirect
investment advisory subsidiaries of FRI. FRI, FASI and the principal
shareholders each disclaim any economic interest or beneficial ownership in
the shares. Any shares that may be held by a separate subsidiary of
(notes continued on following page)
18
<PAGE> 21
FRI which exercises voting and investment powers independently from FRI and
its other affiliates are excluded from the shares reported as beneficially
owned by FRI, FASI and the principal shareholders. The address of FRI and
the principal shareholders is 777 Mariners Island Boulevard, San Mateo, CA
94404 and the address of FASI is One Parker Street Plaza, Sixteenth Floor,
Fort Lee, NJ 07024.
(10) The source of this information is a Schedule 13G dated February 10, 1999
filed by National Rural Electric Cooperative Association, reporting that it
had sole power to vote or direct the vote of 6,497,500 shares of Common
Stock and shared power to dispose or direct the disposition of 6,497,500
shares of Common Stock at December 31, 1998. The address of National Rural
Electric Cooperative Association is 4301 Wilson Boulevard, Arlington, VA
22203.
(11) The source of this information is a Schedule 13G dated January 27, 1999
filed by The Prudential Insurance Company of America, reporting that it had
sole power to vote or direct the vote of 900 shares of Common Stock, sole
power to dispose or direct the disposition of 900 shares of Common Stock,
shared power to vote or direct the vote of 4,145,700 shares of Common Stock
and shared power to dispose or direct the disposition of 4,145,700 shares
of Common Stock, at December 31, 1998. Also included are 2,166,221 shares
of Common Stock which may be acquired upon conversion of Convertible
Debentures. The address of the Prudential Insurance Company of America is
751 Broad Street, Newark, NJ 07102-3777.
(12) Includes 2,459,100 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
Geoffrey W. Levy, a former Director who resigned from the Board on July 14,
1998, owns equity interests in shopping centers located in Gilford, New
Hampshire and Wakefield, Rhode Island in which the Company leases stores.
Members of Mr. Levy's immediate family also own equity interests in the shopping
center located in Wakefield, Rhode Island. The amounts (including rent, common
area maintenance charges, taxes, insurance and other charges payable under the
lease) paid by the Company for the 1999 fiscal year with respect to each store
in each shopping center are as follows: Gilford, New Hampshire: $108,731; and
Wakefield, Rhode Island: $106,166. Mr. Levy also owns a mortgage over the
shopping center located in Wakefield, Rhode Island.
Mr. Slomowitz, a Director, was Chairman of the Board of Trustees, Chief
Executive Officer and a shareholder of Mark Centers Trust (the "Trust"), which
is the general partner of Mark Centers Limited Partnership (the "Partnership"),
until August 12, 1998 when the Trust and the Partnership combined their real
estate interests with the real estate interests of certain other entities (the
"Transaction") and changed their names to Acadia Realty Trust and Acadia Realty
Limited Partnership, respectively. Mr. Slomowitz has continued as a member of
the Board of Trustees of Acadia Realty Trust. Mr. Slomowitz was also a principal
shareholder of the Partnership, which owns shopping centers in which the Company
leased eleven stores during the 1999 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 1999 fiscal year with respect to these eleven stores was $742,724, which is
less than two percent of the aggregate rental revenues of the Partnership both
prior to and after the Transaction. As part of the construction and expansion of
two of the stores owned by the Partnership during the 1999 fiscal year, the
Company received construction allowances in the aggregate amount of $126,084 to
fund the cost of certain leasehold improvements. Under the leases for these two
stores, a portion of the rent payable by the Company is used by the Partnership
to amortize the construction allowances paid to the Company. The rent payable by
the Company will be reduced by such portion after such construction allowances
have been amortized. As of January 30, 1999 construction allowances in the
amount of $49,022 were outstanding and owing to the Company. The Company also
leases a store in a shopping center located in Pittston, Pennsylvania. Mr.
Slomowitz owns a mortgage over this shopping center. The Lease Amount paid by
the Company for the 1999 fiscal year with respect to the Pittston store is
approximately $63,057.
19
<PAGE> 22
The foregoing leases involve less than two 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.
Eric M. Specter, the Company's Executive Vice President and Chief Financial
Officer, owns a 5.1% interest in a mortgage secured by a shopping center in
Logan, West Virginia in which the Company leases a store. The original principal
amount of this mortgage was $750,000 and as of January 30, 1999 the principal
balance outstanding on this mortgage was approximately $162,500. The scheduled
final payment date for this mortgage is during March 2000. The Lease Amount paid
by the Company to the third party which owns the shopping center during the 1999
fiscal year was $98,291.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the 1999 fiscal year Joseph L. Castle, II, Michael Solomon, Alan
Rosskamm, Marjorie Margolies-Mezvinsky and Michael Bozic served as members of
the Compensation Committee and Stock Option Committee.
Mr. Solomon served as a Director of the Company and a member of the
Compensation Committee and Stock Option Committee until his resignation as a
Director and as a member of those Committees with effect from July 14, 1998. Mr.
Solomon owns equity interests in two entities which own shopping centers located
in Massena, New York and Rita, West Virginia and in which the Company leases
stores. The Lease Amounts paid by the Company for the 1999 fiscal year with
respect to each store in each shopping center are as follows: Massena, New York:
$42,657; and Rita, West Virginia: $98,713.
Alan Rosskamm owns equity interests in an entity which owns a shopping
center located in Napoleon, Ohio and in which the Company leases a store. The
Lease Amounts paid by the Company for the 1999 fiscal year with respect to such
store was $28,589.
The foregoing 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 foregoing leases and transaction terms
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 (namely Dorrit J. Bern and Joseph L. Castle,
II) to vote in accordance with their best judgment.
RELATIONSHIP WITH AUDITORS
The firm of Ernst & Young LLP served as the Company's independent auditors
for the fiscal year ended January 30, 1999. Ernst & Young LLP 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 selected Ernst & Young LLP
as the Company's independent auditors for the current fiscal year.
PROPOSALS FOR 2000 ANNUAL MEETING
Any proposals of shareholders that are intended to be presented at the
Company's 2000 Annual Meeting of Shareholders, and included in the Company's
proxy materials for that Meeting, must be received at the
20
<PAGE> 23
Company's principal executive offices no later than January 27, 2000 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. In addition,
under the terms of the Company's By-Laws, a shareholder who intends to present
an item of business at the 2000 Annual Meeting of Shareholders, other than a
proposal submitted for inclusion in the Company's proxy materials, must provide
notice of such business to the Company after February 26, 2000 and on or before
March 27, 2000 and must comply with all applicable requirements of the Company's
By-Laws. See also "ELECTION OF DIRECTORS -- Committees of the Board."
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 30, 1999 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 Colin D. Stern, Secretary, 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
COLIN D. STERN
Secretary
Bensalem, Pennsylvania
May 26, 1999
21
<PAGE> 24
CHARMING SHOPPES, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Dorrit J. Bern and
Joseph L. Castle, II, 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 Thursday, July 1, 1999 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, ALL AS SET
FORTH IN THE PROXY STATEMENT.
(continued on reverse side)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 25
Please mark
your votes as [X]
indicated in
this example
<TABLE>
<S> <C>
1. ELECTION OF CLASS C DIRECTORS (INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE
FOR ANY INDIVIDUAL NOMINEE: WRITE THAT
NOMINEE'S NAME BELOW.)
Vote FOR Vote
all nominees WITHHELD Dorrit J. Bern Alan Rosskamm Kenneth S. Olshan
(except as marked
to the contrary) __________________________________________________________
________ _______
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:_____________________________________________, 1999
_________________________________________________________
Signature
_________________________________________________________
Signature
</TABLE>
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.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
ANNUAL MEETING OF SHAREHOLDERS
OF
CHARMING SHOPPES, INC.
THURSDAY, JULY 1, 1999
10:00 A.M.
CHARMING SHOPPES, INC.
450 WINKS LANE
BENSALEM, PA 19020
