<PAGE>
================================================================================
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 Section 240.14a-11(c) or Section 240.14a-12
FREDERICK'S OF HOLLYWOOD
- --------------------------------------------------------------------------------
(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.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF FREDERICK'S OF HOLLYWOOD]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JANUARY 30, 1997
The Annual Meeting of Shareholders of Frederick's of Hollywood, Inc., will
be held at the Holiday Inn, 1755 North Highland Avenue, Los Angeles,
California 90028 on Thursday, January 30, 1997 at 10:00 A.M. for the following
purposes:
1. To elect a Board of Directors, seven in number to serve until the next
Annual Meeting of Shareholders and until their respective successors shall
be elected and qualified;
2. To consider and ratify the selection of KPMG Peat Marwick as
independent certified public accountants for fiscal year 1997; and
3. To consider and to transact such other business as may properly be
brought before the meeting or any adjournment or adjournments thereof.
The foregoing proposals are more fully described in the accompanying Proxy
Statement to which your attention is invited.
Only shareholders of record at the close of business on December 6, 1996
will be entitled to Notice of the Meeting and to vote at it or any
adjournments thereof.
Shareholders who do not expect to attend the Annual Meeting and who wish
their stock to be voted, are urged to fill in and execute the enclosed Proxy
and mail it promptly in the enclosed envelope.
/s/ John B. Hatfield
JOHN B. HATFIELD
Secretary
Los Angeles, California
December 6, 1996
Requests for additional copies of the Proxy Material should be addressed to:
John B. Hatfield
Executive Vice President, Secretary, Chief Financial and
Administrative Officer
Frederick's of Hollywood, Inc.
6608 Hollywood Boulevard
Los Angeles, California 90028
<PAGE>
[LOGO OF FREDERICK'S OF HOLLYWOOD]
----------------
PROXY STATEMENT
----------------
The following information is provided in connection with the solicitation of
the enclosed proxy, by and on behalf of the Board of Directors of Frederick's
of Hollywood, Inc. (hereinafter referred to as the "Company") for use at the
Annual Meeting of Shareholders of the Company to be held at the Holiday Inn,
1755 North Highland Avenue, Los Angeles, California on January 30, 1997, and
at any adjournment or adjournments thereof. The Company's principal executive
offices are located at 6608 Hollywood Boulevard, Los Angeles, California
90028.
Shares represented by duly executed proxies in the accompanying form
received by the Board of Directors prior to the meeting will be voted at the
meeting. A shareholder executing and delivering the enclosed proxy may revoke
such proxy at any time prior to exercise of the authority thereby given. If a
shareholder specifies a choice with respect to any matter to be voted upon by
means of the ballot provided in the accompanying form of proxy, the shares
will be voted in accordance with the specification so made.
The expense of this solicitation of proxies will be borne by the Company.
The principal solicitation of proxies is being made by mail, however,
additional solicitation may be made by telephone, telegraph or personal visits
by directors, officers and regular employees of the Company and its
subsidiaries. This proxy statement and the accompanying form of proxy are
being mailed to shareholders commencing on or about December 24, 1996.
VOTING SECURITIES
The holders of record of the Company's Class A Capital Stock at the close of
business on December 6, 1996 are entitled to vote on matters to come before
the meeting. On that date, 2,955,309 shares of Class A Capital Stock ("Class A
Stock") were issued and outstanding. In addition, at December 6, 1996, there
were approximately 5,903,118 shares of Class B Capital Stock ("Class B Stock")
outstanding, none of which will have voting rights at the meeting. Each Class
A Stock shareholder of record is entitled to one vote. Every Class A Stock
shareholder entitled to vote has the right in voting, to elect directors, to
cumulate his votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which
his shares are entitled, or to distribute his votes on the same principle
among as many candidates as he shall see fit. Assuming a quorum is present,
with respect to the election of directors, the seven nominees receiving the
greatest number of votes cast by the holders of the Class A Stock will be
elected directors.
As a condition to exercising the right to cumulative voting, the Class A
Stock shareholder must give prior notice at the meeting of his intent to
cumulate his votes and the candidate for whom he proposes to cast his vote
must have been placed in nomination prior to the vote.
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table contains information with respect to each person known
to the Company to be the beneficial owner of more than five percent of the
Company's outstanding shares of Capital Stock and the total number of shares
beneficially owned by all directors and officers as a group as of December 6,
1996.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OUTSTANDING*
NAME AND ADDRESS OF ---------------------------- ---------------------------
BENEFICIAL OWNER CLASS A STOCK CLASS B STOCK CLASS A STOCK CLASS B STOCK
------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Harriett R. Mellinger
Trust(1)............... 463,066 1,579,718 14.8 25.3
14724 Ventura Boulevard
Suite 803
Sherman Oaks, CA 91409
Frederick N. Mellinger
Trust(1)............... 820,193 1,579,386 26.1 25.3
14724 Ventura Boulevard
Suite 803
Sherman Oaks, CA 91409
Mr. Hugh V. Hunter(1)... 1,315,591 3,223,768 41.9 51.6
14724 Ventura Boulevard
Suite 803
Sherman Oaks, CA 91409
Company ESOP(2)......... 348,662 -0- 11.1 -0-
All Directors and
Officers as a Group
(11 persons)(1)........ 1,583,770(3) 3,744,303(4) 50.5 59.9
</TABLE>
- --------
* The percentage calculation is based on the number of shares outstanding
plus shares represented by options exercisable within 60 days.
(1) Hugh V. Hunter, a director of the Company, is the Co-Trustee of the
Harriett R. Mellinger Trust and the Frederick N. Mellinger Trust
("Mellinger Family Trusts"), and has the power to direct the voting of the
Company's Capital Stock held by the Trusts. Wells Fargo Bank is the Co-
Trustee of the Mellinger Family Trusts.
(2) Each ESOP participant is entitled to vote (1) shares of stock allocated to
participants account and, (2) a portion of the unallocated stock equal to
the percentage of allocated stock participant is entitled to vote.
(3) Includes 116,961 shares, of which 102,086 are attributable to George W.
Townson, which officer having the right to acquire under immediately
exercisable options.
(4) Includes 208,914 shares, of which 179,164 are attributable to George W.
Townson, which officer having the right to acquire under immediately
exercisable options.
2
<PAGE>
ELECTION OF DIRECTORS
Shares of Class A Stock represented by the enclosed proxy are intended to be
voted, unless authority is withheld, for the election of seven nominees named
below as directors of the Company to serve until the next annual meeting of
shareholders and until their respective successors shall be elected and
qualified. The following table is furnished with respect to each person
nominated for election as a director and includes for each nominee, the
beneficial ownership of the Company's Capital Stock as of December 6, 1996.
<TABLE>
<CAPTION>
SHARES OF CAPITAL STOCK PERCENT
BENEFICIALLY OWNED(3) OUTSTANDING**
-------------------------- ---------------
DIRECTOR CLASS A CLASS B CLASS A CLASS B
NAME PRINCIPAL OCCUPATION(1) AGE SINCE STOCK STOCK STOCK STOCK
---- ------------------------ --- -------- ----------- ----------- ------- -------
<C> <S> <C> <C> <C> <C> <C> <C>
George W. Townson...... Chairman of the Board, 55 1985 116,961(4) 208,914(5) 3.7 3.3
President and Chief
Executive Officer of the
Company
Richard O. Starbird(2). University Professor, 72 1977 54,369 108,738 1.7 1.7
Western Washington
University
Hugh V. Hunter(2)...... Certified Public 78 1972 1,315,591(6) 3,223,768(6) 41.9 51.6
Accountant; President,
Hugh V. Hunter
Accountancy Company
William J. Barrett(2).. Senior Vice President, 57 1983 7,256 16,217 * *
Janney Montgomery Scott
Inc., Investment Bankers
Morton R. Field(2)..... Counsel to the law firm 73 1969 546 1,092 * *
of Loeb and Loeb
Sylvan Lefcoe.......... Consultant, National 91 1984 168 336 * *
Aerosol Products Co.
Merle A. Johnston...... Sales and Marketing 64 1994 -- -- * *
Consultant, Conky
Johnston Inc.
</TABLE>
- --------
* Less than one percent.
** The percentage calculation is based on the number of shares outstanding
plus shares represented by options exercisable within 60 days.
(1) The principal occupation of each of the directors for the past five years
is stated in the foregoing table.
(2) Hugh V. Hunter is a director of K2 Inc. William J. Barrett is a director
of Supreme Industries, Inc., Contempre Homes, Inc., The Western Transmedia
Company, Inc., Shelter Components, Inc. and TGC Industries, Inc. The firm
of Janney Montgomery Scott Inc., of which Mr. Barrett is an officer, was
retained during the fiscal year for investment banking services and has
also been retained in 1997. Richard O. Starbird is a director of The
Western Transmedia Company, Inc. Morton R. Field is counsel to the law
firm of Loeb and Loeb, LLP, which has been retained to perform legal
services for the Company in 1997.
(3) All directors have sole voting and investment power as to all of the
shares of Capital Stock beneficially owned by them.
(4) George W. Townson has the right to acquire 102,086 shares of Class A Stock
under immediately exercisable options.
3
<PAGE>
(5) George W. Townson has the right to acquire 179,164 shares of Class B Stock
under immediately exercisable options.
(6) Hugh V. Hunter is a Co-Trustee of the Harriett R. Mellinger Trust and the
Frederick N. Mellinger Trust ("Mellinger Family Trusts"). The Mellinger
Family Trusts own 1,283,259 shares of Class A Stock and 3,159,104 shares
of Class B Stock. Mr. Hunter has the power to vote the Class A Stock held
by the Mellinger Family Trusts and to dispose of the Class A Stock and
Class B Stock. The shares held by the Mellinger Family Trusts are included
in the table above.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors is responsible for the overall affairs of the
Company. To assist it in carrying out its duties, the Board has delegated
certain authority to several committees. The Board of Directors held six
meetings during the year ended August 31, 1996.
AUDIT COMMITTEE
The Audit Committee consists of Hugh V. Hunter, William J. Barrett and
Morton R. Field and they met three times in fiscal year 1996. Each year, the
Committee recommends the appointment of a firm of independent accountants to
examine the accounting records of the Company and its subsidiaries for the
coming year. In making this recommendation, the Committee reviews the nature
of services rendered or to be rendered to the Company and its subsidiaries by
the independent public accountants and also reviews the nature of non audit-
related services rendered to the Company and its subsidiaries. The Committee
reviews with representatives of the independent accountants the auditing
arrangements and scope of the independent accountants' examination of the
accounting records, results of those audits, their fees, and any problems
identified by the independent public accountants regarding internal accounting
controls, together with their recommendations. The Committee also meets with
the Company's Chief Financial Officer to review reports on the functioning of
the Company's programs for compliance with its policies and procedures
regarding business ethics and those regarding financial controls and internal
auditing. This includes an assessment of internal controls within the Company
and its subsidiaries based upon the activities of the Company's internal
auditing staff as well as evaluation of the performance of the staff. The
Committee is also prepared to meet at any time upon request of the independent
public accountants or the Chief Financial Officer to review any special
situation arising in relation to any of the foregoing subjects.
NOMINATING AND COMPENSATION COMMITTEE
The Nominating and Compensation Committee consists of Hugh V. Hunter,
Richard O. Starbird and Morton R. Field and they met three times in fiscal
year 1996. The Committee makes recommendations to the Board as to the salary
of the Chief Executive Officer and sets the salaries of the other elected
officers. It grants bonuses and stock options to elected officers and other
executives and reviews guidelines for the administration of the Company's
employee benefit plans. The Committee reviews the qualifications of, and
recommends to the Board, candidates to fill Board vacancies as they may occur
during the year. The Committee also reviews proposed changes in the
compensation of non-employee directors.
4
<PAGE>
INFORMATION CONCERNING EXECUTIVE OFFICERS
Executive Officers of the Company are elected annually by the Board of
Directors and serve at the pleasure of the Board. Certain information
concerning such executive officers is set forth below:
<TABLE>
<CAPTION>
SHARES OF
CAPITAL STOCK
BENEFICIALLY PERCENT
OWNED OUTSTANDING
------------------ --------------- PRESENT POSITION
NAME AGE CLASS A CLASS B CLASS A CLASS B WITH THE COMPANY
---- --- ------- ------- ------- ------- ------------------------------
<C> <C> <C> <C> <C> <C> <S> <C>
George W. Townson........... 55 116,961(1) 208,914(1) 3.7 3.3 Chairman, President, and
Chief Executive Officer
since 1985
John B. Hatfield............ 53 40,836(2) 69,164(2) * * Executive Vice
President, Chief
Financial and
Administrative Officer,
Secretary and Treasurer
since 1990
Nitin G. Parikh............. 46 20,480(3) 50,957(3) * * Vice President, Control
and Planning since 1989
Robert R. Genest............ 58 17,500(4) 35,000(4) * * President--Retail
Division since 1994;
Executive Vice
President, General
Manager--Retail Division
1990-1994
Geric B. Johnson............ 45 10,063(5) 30,122(5) * * Executive Vice
President--Mail Order
Division since 1994;
Vice President--Mail
Order Operations 1989-
1994
</TABLE>
- --------
* Less than one percent
(1) Includes 102,086 Class A shares and 179,164 Class B Shares which George W.
Townson has the right to acquire beneficial ownership.
(2) Includes 40,836 Class A Shares and 69,164 Class B Shares which John B.
Hatfield has the right to acquire beneficial ownership.
(3) Includes 15,418 Class A Shares and 40,832 Class B Shares which Nitin G.
Parikh has the right to acquire beneficial ownership.
(4) Includes 17,500 Class A Shares and 35,000 Class B Shares which Robert R.
Genest has the right to acquire beneficial ownership.
(5) Includes 7,918 Class A Shares and 25,832 Class B Shares which Geric B.
Johnson has the right to acquire beneficial ownership.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information for each of the fiscal years
ended August 31, 1996, September 2, 1995, and September 3, 1994 concerning the
compensation of the Company's Chief Executive Officer and of each of the
Company's most highly compensated executive officers whose total annual salary
and bonus exceeded $100,000. All bonus awards are shown for the fiscal year
when paid but represent performance for the previous calendar year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION OPTION(S)
------------------------------- ---------------
OTHER ANNUAL ALL OTHER
NAME AND FISCAL COMPENSATION COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1)(2) CLASS A CLASS B ($)(3)
------------------ ------ --------- -------- ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
George W. Townson 1996 250,000 -0- 30,202 -0- -0- 40,130
Chairman, President and 1995 250,000 -0- 28,845 -0- -0- 45,830
Chief Executive Officer 1994 250,000 -0- 28,169 25,000 25,000 48,682
John B. Hatfield 1996 170,667 -0- -0- -0- -0- 28,385
Executive Vice 1995 160,000 -0- -0- -0- -0- 28,163
President, Chief 1994 147,333 25,000 -0- 12,500 12,500 24,819
Financial and
Administrative Officer,
Secretary
Nitin G. Parikh 1996 103,333 -0- -0- -0- -0- 5,167
Vice President, 1995 98,334 -0- -0- -0- -0- 4,917
Control and Planning 1994 93,333 8,000 -0- -0- 10,000 4,666
Robert R. Genest 1996 185,000 -0- -0- -0- -0- 51,448
President, 1995 175,500 -0- -0- -0- -0- 52,950
Retail Division 1994 155,500 -0- -0- -0- -0- 44,945
Geric B. Johnson 1996 124,000 25,800 -0- -0- -0- 9,871
Executive Vice 1995 113,333 -0- -0- -0- -0- 9,416
President, General 1994 91,167 15,000 -0- -0- 10,000 5,753
Manager--Mail Order
Division
</TABLE>
- --------
(1) Under the caption "Other Annual Compensation", the only reportable amount
is Mr. Townson's Company car.
(2) If no amount has been disclosed under the caption "Other Annual
Compensation" the value of the perquisites or other personal benefits
received do not equal the lesser of $50,000 or 10% of the total annual
salary and bonus reported for each named executive officer.
(3) Under the Caption "All Other Compensation", the only reportable amounts
are the contributions made or accrued by the Company under its defined
contributions plan on behalf of the named executive officers.
OPTION GRANTS IN LAST FISCAL YEAR
There were no grants of stock options to the executive officers of the
Company named in the Summary Compensation Table during the fiscal year ended
August 31, 1996.
6
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996 AND YEAR-END OPTION VALUE
TABLE
No options were exercised by any option holder during fiscal year ended
August 31, 1996. The following table sets forth information as to the
outstanding options at fiscal year ended August 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR END FISCAL YEAR END(2)
------------------------- -------------------------
NUMBER OF
SHARES ACQUIRED VALUE
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
George W. Townson
Class A Stock -0- -0- 93,752 shs 8,334 shs -0- -0-
Class B Stock -0- -0- 170,830 shs 8,334 shs -0- -0-
John B. Hatfield
Class A Stock -0- -0- 36,669 shs 4,167 shs -0- -0-
Class B Stock -0- -0- 64,996 shs 4,168 shs -0- -0-
Nitin G. Parikh
Class A Stock -0- -0- 15,418 shs -0- -0- -0-
Class B Stock -0- -0- 37,498 shs 3,334 shs -0- -0-
Robert R. Genest
Class A Stock -0- -0- 17,500 shs -0- -0- -0-
Class B Stock -0- -0- 35,000 shs -0- -0- -0-
Geric B. Johnson
Class A Stock -0- -0- 7,918 shs -0- -0- -0-
Class B Stock -0- -0- 22,498 shs 3,334 shs -0- -0-
</TABLE>
- --------
(1) Value realized (if any) is calculated based on the aggregate difference
between the option exercise price and the closing market price of the
stock on the date of exercise multiplied by the number of shares to which
such exercise relates.
(2) The closing price for the Company's Capital Stock as reported by the New
York Stock Exchange ("NYSE") on August 30, 1996 (last trading day prior to
fiscal year end) was $4.00 for Class A Stock and $3.75 for Class B Stock.
Value (if any) is calculated on the basis of the aggregate of the
differences between the option exercise price of the in-the-money options
and the NYSE closing price multiplied by the number of shares underlying
such options.
REMUNERATION OF DIRECTORS
Directors who are employees of the Company do not receive additional
compensation for serving on the Board or any committee thereof. Directors who
are not employees of the Company receive $5,000 per annum and $4,000 per annum
for each Committee on which they serve plus $750 for attendance at each
meeting of the Board of Directors. The Chairman of the Audit Committee and the
Chairman of the Compensation Committee each receive $7,000 per annum.
NOMINATION AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Nomination and Compensation Committee are Hugh V. Hunter,
Richard O. Starbird and Morton R. Field. Morton R. Field is counsel to the law
firm of Loeb and Loeb, which is expected to perform legal services for the
Company from time to time. Hugh V. Hunter is co-trustee of the Frederick N.
Mellinger Trust and the Harriett Mellinger Trust and has the power to vote
approximately 42% of the outstanding Class A Capital Stock. In addition to
receiving compensation as a director and member of various board committees,
7
<PAGE>
Mr. Hunter receives compensation as Chairman of the Nomination and
Compensation Committee, Chairman of the Audit Committee and Chairman of the
Executive Committee.
EMPLOYMENT AND CHANGE IN CONTROL AGREEMENT
The Company has an employment agreement with George W. Townson which
provides for his employment as Chairman of the Board, President and Chief
Executive Officer for a five (5) year term which presently goes through fiscal
year end 2001. Unless the Board takes action not to renew the agreement at
least six (6) months prior to the end of any fiscal year, the agreement is
deemed renewed for an additional five (5) year term commencing on the first
day of the Company's next fiscal year.
Mr. Townson's Employment Agreement provides (a) an annual salary of
$250,000, subject to increases at the discretion of the Company's Board of
Directors, (b) an annual bonus calculated as a percent of the Company's pre-
tax earning, no bonus is due unless pre-tax earnings are at least 5.5% of
sales, (c) a Company car, and (d) fringe benefits the Company provides to its
Vice Presidents.
The Employment Agreement also provides for the following payment upon a
change in control: (a) one (1) year base salary plus an amount equal to the
most recently received bonus, both of which are multiplied by the number of
complete and partial years remaining in the term of the Agreement plus one
(1), (b) for all unexercised stock options, the difference between the
exercise price and the per share fair market value, and (c) the continuation
of certain employment benefits.
The Company has an Employment Agreement with John B. Hatfield providing for
one year's compensation plus the continuation of certain employment benefits
upon a change in control.
The Company also has change in control agreements with 14 employees
providing for a total payment of $500,000.
REPORT OF THE NOMINATION AND COMPENSATION COMMITTEE
The Nomination and Compensation Committee of the Board of Directors (the
"Committee") is made up of independent, non-employee directors. The Committee
regularly reviews and approves the compensation paid to all executive officers
except for the Chairman of the Board who performs under an employment
agreement approved by the Board of Directors.
Compensation for executive officers consists of three components: Salary,
Bonus and Stock Options.
Salary
Consistent with the Company's objectives, salaries for executive officers
are generally maintained near the average of salaries being paid by
competitive companies. The competitive companies by which the Committee
compares salary structures are companies engaged in the mail order business
and/or retail women specialty stores. In the past, the salary structure was
adjusted based on the individual's performance and contribution to the Company
as well as to maintain a competitive position.
The salary for the Chief Executive Officer is fixed by his employment
agreement with the Company which was executed in 1992 and is summarized under
"Employment and Change in Control Agreement."
8
<PAGE>
Bonus
The annual bonus for the Chief Executive Officer is fixed by his employment
agreement as a percent of the Company's pre-tax profit. Therefore, the bonus
arrangement is directly tied into the Company's profitability and ultimately
to shareholder value.
At the start of each fiscal year, management established target levels of
operating income for each operating unit and for the Company as a whole. These
targets were based upon expected levels of sales as well as containment of
costs. Bonuses paid to executives other than the Chief Executive Officer were
based on two performance criteria: 1) corporate and/or subsidiary performance;
and 2) an overall assessment of an executive's performance.
These potential bonus amounts were reviewed and approved by the Committee.
Executive Savings and Retirement Plans
The Company has non-qualified executive savings and retirement plans which
provide benefits for certain executive officers. The plans allow for the
executive officers' contribution and matching Company contribution as well as
an additional Company contribution in an amount which is intended to provide
up to 60% of the final five year average of his or her base salary less social
security benefits. The Company contributed a total of $177,000 to the above
plans for fiscal year 1996.
Stock Options
The Company's Stock Option Plan is intended to provide an incentive for
employees who have the most impact on the management, growth and success of
the business. Approximately 50 employees participate in the Stock Option Plan,
including all executive officers. The Company makes stock option grants at no
less than 100% of the market price on the date of grant. The options are
exercisable after one year at the rate of 1/3 of the option per year
thereafter. Grants are only made to employees who have demonstrated a capacity
for contributing in a substantial way to the success of the Company. Stock
options encourage these executive officers and employees to become owners of
the Company, which helps to further align their interests with the
shareholders. Options have no significant value unless the price of the
Company's stock increases since they are exercisable only by the employee and
cannot be transferred except in the case of death.
In 1993 Congress adopted legislation that prohibited publicly held companies
from deducting certain compensation paid to Executive Officers that exceeds
$1,000,000 during the tax year. If in accordance with regulations issued by
the Internal Revenue Service, a portion of the compensation is based upon the
attainment of performance goals set by the Board pursuant to the plans
approved by the shareholders, then the corresponding deduction will not be
limited by the legislation. The Committee intends to modify its 1990 Stock
Option Plan where practical to comply with the legislation and retain the
deductibility of executive compensation.
This report is submitted by members of the Committee: Hugh V. Hunter,
Chairman, Richard O. Starbird and Morton R. Field.
The report of the Compensation Committee to the Board of Directors shall not
be deemed to be incorporated by reference into any filing by the Company under
either the Securities Act of 1934 ("Exchange Act"), including, without
limitation, that of outstanding shelf registration statements, periodic
reports on forms 10-Q, 10-K, etc., that incorporate future Securities Act or
Exchange Act filings by reference.
9
<PAGE>
STOCK PERFORMANCE CHART
The following chart shows a five-year comparison of cumulative total returns
(assumes reinvestment of dividends) on the Capital Stock of the Company, the
Wilshire Retail Index (all establishments engaged in re-sale of merchandise to
the general public for personal or household consumption) and the Wilshire 5000
index (all New York Stock Exchange and American Stock Exchange companies plus
the most active stock on the over the counter market). The Company's fiscal
year ends on the Saturday nearest August 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 RETURNS
FREDERICK'S OF HOLLYWOOD CLASS A CAPITAL STOCK,
WILSHIRE 5000 AND WILSHIRE RETAIL
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
08/30/91 08/28/92 08/27/93 09/02/94 09/01/95 08/30/96
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Frederick's of Hollywood, Inc......... $100 $ 60 $ 52 $ 44 $ 49 $ 37
Wilshire Retail....................... $100 $104 $115 $117 $121 $143
Wilshire 5000......................... $100 $108 $127 $133 $164 $191
</TABLE>
10
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE RETURNS
FREDERICK'S OF HOLLYWOOD CLASS B CAPITAL STOCK,
WILSHIRE 5000 AND WILSHIRE RETAIL
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
08/30/91 08/28/92 08/27/93 09/02/94 09/01/95 08/30/96
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Frederick's of Hollywood, Inc......... $100 $ 60 $ 52 $ 43 $ 48 $ 36
Wilshire Retail....................... $100 $104 $115 $117 $121 $143
Wilshire 5000......................... $100 $108 $127 $133 $164 $191
</TABLE>
The charts assume $100 invested on August 30, 1991 in Frederick's of
Hollywood, Inc., the Wilshire Retail Index and the Wilshire 5000 Index. The
charts were plotted using the data shown in the tables following each of the
above graphs:
The historical stock performance shown on the charts above is not
necessarily indicative of future price performance.
11
<PAGE>
EMPLOYMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed the firm of KPMG Peat Marwick ("KPMG")
Certified Public Accountants, who examined the corporation's consolidated
financial statements for fiscal year 1996, as independent accountants to
examine the consolidated financial statements of the Company for fiscal 1997.
The selection is being presented to the shareholders for ratification or
disapproval at this meeting. If the shareholders do not ratify the employment
of KPMG, the selection of independent accountants will be reconsidered by the
Board of Directors. Representatives from the firm of KPMG will be present at
the Annual Meeting. They will be provided the opportunity to make a statement
if they desire to do so, and will be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16 of the Securities Exchange Act of 1934 ("Section 16") requires
that reports of beneficial ownership of the Company's Capital Stock and change
in such ownership be filed with the Securities and Exchange Commission ("SEC")
by the Company's directors and executive officers. The Company is required to
conduct a review and to identify in its proxy statement each director or
executive officer who failed to file any required reports under Section 16 on
a timely basis. Based upon that review, and in the best knowledge of the
Company, all Section 16 reporting requirements applicable to its directors and
executive officers were filed on a timely basis.
OTHER MATTERS
Management knows of no other business to be presented at the Meeting. If
other matters do properly come before the meeting, persons acting pursuant to
the proxy will vote on them in their discretion.
Proposals to be submitted for the 1997 Annual Meeting of Shareholders must
be received by the Company no later than August 12, 1997.
A copy of the Company's Annual Report, including financial statements for
the year ended August 31, 1996 has been mailed to shareholders.
/s/ John B. Hatfield
JOHN B. HATFIELD
Secretary
Los Angeles, California
December 6, 1996
12
<PAGE>
FREDERICK'S OF HOLLYWOOD, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
GEORGE W. TOWNSON and HUGH V. HUNTER, and each of them, with full power of
substitution, are hereby authorized to represent and to vote the stock of the
undersigned FREDERICK'S OF HOLLYWOOD, INC. at the Annual Meeting of
Shareholders, to be held on January 30, 1997 and at any adjournments thereof.
(CONTINUED AND TO BE VOTED, SIGNED AND DATED ON REVERSE SIDE)
<PAGE>
Please mark your
A [X] votes as in this
example.
1. ELECTION OF DIRECTORS
[_] FOR all nominees listed to the right (except as marked to the contrary)
[_] WITHHOLD AUTHORITY to vote for all nominees listed to the right
NOMINEES: George W. Townson
Richard O. Starbird
Hugh V. Hunter
Morton R. Field
William J. Barrett
Sylvan Lefcoe
Merle A. Johnston
Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided.
------------------------------------------
2. The proposal to ratify employment of KPMG Peat Marwick as independent
certified accountants for the Corporation for Fiscal Year 1997.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. Upon or in connection with the transaction of such other business as may
properly come before the meeting or any adjournments thereof.
UNLESS OTHERWISE DIRECTED THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
---
Dated: , 1996
- ------------------------- -------------------------- ----------
SIGNATURE SIGNATURE, IF HELD JOINTLY
NOTE: Please sign as name(s) appears hereon. If joint account, EACH joint owner
should sign.
