<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (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 240.14a-11(c) or 240.14a-12
Deb Shops, Inc.
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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>
DEB SHOPS INC.
LOGO
9401 BLUE GRASS ROAD, PHILADELPHIA, PA 19114
(215)676-6000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
FRIDAY, MAY 30, 1997
AT 10:00 A.M.
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Deb
Shops, Inc., a Pennsylvania corporation, will be held on Friday, May 30, 1997
at 10:00 a.m. at the offices of the Company, 9401 Blue Grass Road,
Philadelphia, Pennsylvania. The purposes of the meeting are to:
1. Elect six (6) directors to serve until the next Annual Meeting of
Shareholders and until the election and qualification of their
respective successors; and
2. Transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
Information concerning such matters is set forth in the following Proxy
Statement.
April 11, 1997 is the Record Date for the determination of shareholders
entitled to notice of, and to vote at, the Annual Meeting or any adjournments
thereof.
The accompanying form of Proxy is solicited by the Board of Directors of
the Company. Even if you are planning to attend the Annual Meeting in person,
please complete, date, sign and return the Proxy.
By Order of the Board of Directors of the Company
WARREN WEINER, Secretary MARVIN ROUNICK, President
Dated: April 30, 1997
<PAGE>
DEB SHOPS INC.
LOGO
9401 BLUE GRASS ROAD, PHILADELPHIA, PA 19114
------
PROXY STATEMENT
------
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
MAY 30, 1997
------
This Proxy Statement is submitted with the attached Notice of Annual
Meeting of Shareholders of Deb Shops, Inc. (the "Company") to be held on
Friday, May 30, 1997 at 10:00 a.m., at the offices of the Company, 9401 Blue
Grass Road, Philadelphia, Pennsylvania. The form of Proxy is enclosed. This
Proxy Statement is first being sent or given to shareholders of the Company
on or about April 30, 1997.
REVOCABILITY OF PROXY
A Proxy executed in the form enclosed may be revoked at any time prior to
its exercise by notifying the Secretary of the Company in writing, by
delivering a duly executed proxy bearing a later date, or by attending the
Annual Meeting and voting in person.
PERSONS MAKING THE SOLICITATION
The accompanying Proxy is being solicited on behalf of the Board of
Directors of the Company. In addition to mailing the proxy materials,
solicitation may be made in person or by telephone or telegraph by directors,
officers or regular employees of the Company or of its subsidiaries, none of
whom will receive additional compensation in connection with such
solicitation. The expense of the solicitation of Proxies for the Annual
Meeting will be borne by the Company. The Company will request banks, brokers
and other nominees to forward proxy materials to beneficial owners of common
stock held by them, and will reimburse such banks, brokers and other nominees
for their reasonable out-of-pocket expenses in doing so.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The holders of record of the Common Stock of the Company at the close of
business on April 11, 1997 (the "Record Date") will be entitled to vote on
all matters presented for vote at the Annual Meeting. At the close of
business on April 11, 1997, the total number of outstanding shares of Common
Stock was 12,844,680 shares. Each share of Common Stock will be entitled to
one vote on all business to come before the Annual Meeting on which a vote is
taken. The presence, in person or by proxy, of shareholders entitled to cast
a majority of the votes which all shareholders are entitled to cast is
necessary for a quorum to be present at the Annual Meeting. The vote of at
least a majority of the shareholders present, in person or by proxy, is
required to elect each director.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of April 11, 1997,
regarding the shares of each class of equity securities of the Company owned
by (i) each person who is known to the Company to be the beneficial owner of
more than 5% of any class of the Company's voting securities, (ii) each
director, (iii) the chief executive officer and each of the four other most
highly compensated executive officers, and (iv) all directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
Amount and
Nature
Name and Address of of Beneficial Title of Percent
Beneficial Owner (1) Ownership Class of Class
- -------------------- -------------- -------- --------
<S> <C> <C> <C>
Marvin Rounick(2) 3,849,656(3) Common Stock 30.0%
9401 Blue Grass Road 230 Non-Voting Series A 50.0%
Philadelphia, PA 19114 Preferred Stock
Judy Rounick 683,736(4) Common Stock 5.3%
9401 Blue Grass Road
Philadelphia, PA 19444
Warren Weiner 2,710,264(5) Common Stock 21.0%
9401 Blue Grass Road 230 Non-Voting Series A 50.0%
Philadelphia, PA 19114 Preferred Stock
Penny Weiner 1,616,238(6) Common Stock 12.6%
9401 Blue Grass Road
Philadelphia, PA 19114
Barry H. Frank 1,628,982(7) Common Stock 12.7%
1735 Market Street
Philadelphia, PA 19103-7598
Robert Shein 1,629,882(7)(8) Common Stock 12.7%
896 Roscommon Road
Bryn Mawr, PA 19010
Jack A. Rounick(2) 1,363,875(9) Common Stock 10.6%
516 Swede Street
Norristown, PA 19401
Stuart H. Savett 751,000(10) Common Stock 5.8%
320 Walnut Street
Suite 508
Philadelphia, PA 19106
Paul S. Bachow -0- Common Stock -0-
Barry H. Feinberg -0- Common Stock -0-
Allan Laufgraben 50,000(11) Common Stock Less than 1%
Barry Vesotsky 45,528(11) Common Stock Less than 1%
Stanley A. Uhr 15,240(11)(12) Common Stock Less than 1%
All Directors and 9,686,245(13) Common Stock 75.4%
Officers as a Group 460 Non-Voting Series A 100.0%
(11 persons) Preferred Stock
</TABLE>
- ------
(1) Addresses are included for beneficial owners of more than 5% of the
Common Stock of the Company. Information as to certain of such
shareholders has been derived from filings made with the Securities and
Exchange Commission.
[footnotes continued on following page]
2
<PAGE>
[footnotes continued from preceding page]
(2) Marvin Rounick and Jack A. Rounick are brothers.
(3) Marvin Rounick has sole voting and dispositive power with respect to
3,165,920 shares of Common Stock (24.7% of the class), and shared voting
and dispositive power with Judy Rounick, his wife, with respect to the
remaining 683,736 shares of Common Stock (5.3% of the class). See note
(4) below. The foregoing table does not include 750,000 shares of Common
Stock (5.8% of the class) held by a trust of which Mr. Rounick is the
sole beneficiary, but as to which neither Mr. nor Mrs. Rounick has
voting or dispositive power. See notes (9) and (10) below.
(4) Judy Rounick has shared voting and dispositive power with Marvin
Rounick, her husband, with respect to these shares. See note (3) above.
(5) Warren Weiner has sole voting and dispositive power with respect to
1,047,766 shares of Common Stock (8.2% of the class) and shared voting
and dispositive power with Penny Weiner, his wife, with respect to
1,616,238 shares of Common Stock (12.6% of the class). See note (6)
below. The table also includes 25,000 shares of Common Stock held by
trusts for the benefit of Mr. Weiner's nephew and nieces, as to which
Mr. Weiner has sole voting and dispositive power as trustee and 10,000
shares held by one of Mr. Weiner's daughters; Mr. Weiner disclaims
beneficial ownership of such shares. The foregoing table does not
include 605,504 shares of Common Stock (4.7% of the class) held by a
trust of which Mr. Weiner is the sole beneficiary, and 1,023,478 shares
of Common Stock (8.0% of the class) held by a trust of which Mrs. Weiner
is the sole beneficiary, but as to which neither Mr. nor Mrs. Weiner has
voting or dispositive power. See note (7) below. The table includes
11,260 shares of Common Stock to which Mr. Weiner may become entitled
under the Company's Employee Savings and Protection Plan.
(6) Penny Weiner has shared voting and dispositive power with Warren Weiner,
her husband, with respect to these shares. See note (5) above.
(7) Includes 1,628,982 shares held by trusts for the benefit of Mr. or Mrs.
Warren Weiner, of which Messrs. Frank and Shein share voting and
dispositive power, as co-trustees. Messrs. Frank and Shein disclaim
beneficial ownership of these shares.
(8) Includes 900 shares held by a child of Mr. Shein as to which he
disclaims beneficial ownership.
(9) Jack A. Rounick has sole voting power with respect to 556,975 shares of
Common Stock (4.3% of the class). Of these shares he has sole
dispositive power with respect to 137,151 shares and shared dispositive
power with Noreen Rounick, his wife, with respect to the remaining
419,824 shares. Mr. Rounick also has shared voting and dispositive
power, with his wife, with respect to 56,900 shares of Common Stock
included in the table. The table also includes 750,000 shares of Common
Stock (5.8% of the class) held by a trust for the benefit of Marvin
Rounick, in which Jack Rounick shares voting and dispositive power as a
co-trustee with Stuart Savett; Mr. Rounick disclaims beneficial
ownership of these shares.
(10) The table includes 750,000 shares of Common Stock (5.8% of the class)
held by a trust for the benefit of Marvin Rounick, in which Mr. Savett
shares voting and dispositive power as a co-trustee with Jack A.
Rounick; Mr. Savett disclaims beneficial ownership of such shares.
(11) Beneficial ownership has been determined pursuant to Rule 13d-3 of the
Securities Exchange Act of 1934, as amended, and therefore, includes
shares of common stock covered by options granted to officers pursuant
to the Company's 1995 Incentive Stock Option Plan which are currently
exercisable or exercisable within 60 days of April 11, 1996 as follows:
Mr. Laufgraben--50,000 shares; Mr. Vesotsky--25,000 shares; Mr.
Uhr--15,000 shares; Officers as a Group (5 persons)--107,500 shares.
(12) Includes 120 shares held by children of Mr. Uhr as to which he disclaims
beneficial ownership.
(13) See prior footnotes.
3
<PAGE>
ELECTION OF DIRECTORS
Six (6) directors will be elected to hold office subject to the provisions
of the Company's By-Laws until the next Annual Meeting of Shareholders and
until their respective successors are duly elected and qualified.
The following table sets forth the name, age, position with the Company
and respective service dates of each person who has been nominated to be a
director of the Company.
<TABLE>
<CAPTION>
Director
Name Age Position with the Company Since
-------------------------- ----- ----------------------------------- ----------
<S> <C> <C> <C>
Marvin Rounick ........... 57 Director, President and Chief 1973
Executive Officer
Warren Weiner ............ 53 Director, Executive Vice President, 1973
Secretary and Treasurer
Jack A. Rounick .......... 61 Director, Assistant Secretary 1973
Paul S. Bachow ........... 46 Director 1989
Barry H. Feinberg ........ 51 Director 1989
Barry H. Frank ........... 58 Director 1989
</TABLE>
Marvin Rounick and Jack A. Rounick are brothers.
PRINCIPAL OCCUPATIONS OF THE NOMINEES TO BE DIRECTORS
Marvin Rounick has been employed by the Company since 1961. Since 1979, he
has served as the President and Chief Executive Officer.
Warren Weiner was employed by the Company from 1965 until 1975. He
rejoined the Company in January, 1982 as Executive Vice President, Secretary
and Treasurer.
Jack A. Rounick is Assistant Secretary of the Company. Since October,
1995, he has been engaged in the private practice of law in Norristown,
Pennsylvania. In addition, since 1984 Mr. Rounick has been a director, and
from 1984 to 1993 was Vice President and General Counsel, of Martin Lawrence
Limited Editions, Inc., a public company engaged in the business of
publishing and selling lithographs, paintings and other works of art on a
wholesale basis and through company-owned art galleries. Mr. Rounick was
also, from May 1992 to December 1995, President of THINK BIG!, Inc.,
Conshohocken, Pennsylvania, which sold oversized gift products.
Paul S. Bachow has been, since December, 1985, President of Bachow and
Associates, Inc. or its predecessor firms, Philadelphia, Pennsylvania, and
affiliated companies, private companies engaged in the business of buying and
operating manufacturing, distributing, communication and service companies.
Mr. Bachow is also a director of Anadigics, Inc., a company with a class of
securities registered under the Securities Exchange Act of 1934, as amended.
Barry H. Feinberg has been, since January, 1992, President of Kaiser,
Feinberg & Associates, Inc., Philadelphia, Pennsylvania, a marketing company.
From July 1992 to October 1993, Mr. Feinberg was President of Nationwide
Automotive, Inc., a retailer of automotive parts. Since 1991 Mr. Feinberg
also has been an Adjunct Professor of Marketing at the Wharton School,
University of Pennsylvania. Mr. Feinberg is also a director of Hibbett
Sporting Goods, Inc., Souper Salad, Inc., The Children's Place, Inc., and
Hippo Graphics, Inc., each of which is a company with a class of securities
registered under the Securities Exchange Act of 1934, as amended.
Barry H. Frank has been a partner in the law firm of Mesirov Gelman Jaffe
Cramer & Jamieson, Philadelphia, Pennsylvania, general counsel to the
Company, since May, 1987.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors holds formal meetings and also discusses matters on
an informal basis. The Board held two meetings during the fiscal year ended
January 31, 1997 and acted by written consent fourteen times
4
<PAGE>
during the year. The Company has no nominating committee. However, the Board
has established an Audit Committee, a Stock Option Committee, a Compensation
Committee and an Employee Savings and Protection Plan Committee ("ESP Plan
Committee"). Each director attended all meetings of the Board and of
Committees on which he served.
The Audit Committee consists of Paul S. Bachow, Barry H. Feinberg and
Barry H. Frank. The function of the Audit Committee is to recommend to the
Board the employment of the Company's independent auditors and to review with
management and the independent auditors the Company's financial statements,
basic accounting and financial policies and practices, audit scope, and the
competency of internal audit personnel. The Audit Committee held one meeting
during the last fiscal year.
The Stock Option Committee, consisting of Marvin Rounick, Warren Weiner
and Jack A. Rounick, administers the Company's 1995 Incentive Stock Option
Plan and determines the employees eligible to be granted stock options and
the number of options to be granted. The Stock Option Committee also
administers the Company's Restricted Stock Incentive Plan and determines the
employees eligible to be granted common stock and the number of shares to be
granted. The Stock Option Committee held no meetings but acted by written
consent once during the last fiscal year.
The Compensation Committee consists of Paul S. Bachow, Barry H. Feinberg
and Barry H. Frank. The function of the Compensation Committee is to consider
and make recommendations to the Board of Directors, at its request, with
respect to appropriate levels of compensation for the President, Executive
Vice President, and other officers and employees of the Company. The
Compensation Committee held no meetings during the last fiscal year.
The ESP Plan Committee, consisting of Marvin Rounick, Warren Weiner and
Stanley A. Uhr, Esq., administers the Company's Employee Savings and
Protection Plan ("ESP Plan"), a 401(k) plan under the Internal Revenue Code.
The ESP Plan Committee held no meetings during the last fiscal year.
Directors of the Company, other than Directors who are also employees of
the Company, receive $500 for each meeting of the Board of Directors and
Committees of the Board attended, plus expenses.
5
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL
SHAREHOLDER RETURN
The following graph compares the cumulative total shareholder return for
the last five fiscal years for the Company's Common Stock to the cumulative
total returns of (i) the NASDAQ Stock Market (US Companies) and (ii) the Dow
Jones Retailers -- Specialty-Apparel Index.
250|------------------------------------------------------------------|
| |
| |
| |
| |
| & |
200|------------------------------------------------------------------|
| |
| & |
| |
D | |
O | |
L 150|------------------------------------------------------------------|
L | |
A | |
R | & & |
S | |
| & o |
100|*&o---------------------------------------------------------------|
| *o o |
| o |
| o |
| |
| * |
50|------------------------------------*--------------------------*--|
| |
| |
| * |
| |
| |
0|-|-----------|-----------|----------|-------------|-------------|-|
1/92 1/93 1/94 1/95 1/96 1/97
===============================================================================
LEGEND
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------------
Symbol Index Description 01/31/92 01/29/93 01/31/94 01/31/95 01/31/96 01/31/97
------ ----------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
* DEB SHOPS, INC. 100 96 60 49 34 49
& Nasdaq Stock Market (US Companies) 100 113 130 124 175 215
o Dow Jones Retailers -- Specialty Apparel Index 100 95 88 79 92 113
</TABLE>
NOTES
A. The lines represent annual index levels, assuming reinvestment of all
dividends paid during the measurement period.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the annual interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to 100.0 on 01/31/92.
===============================================================================
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following information is furnished for the fiscal years ended January
31, 1997, 1996 and 1995, with respect to the Company's Chief Executive
Officer and each of the four other most highly compensated executive officers
of the Company during the last fiscal year whose salary and bonus exceeded
$100,000. The Summary Compensation Table includes amounts deferred at the
officer's election.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
--------------------------------------
Annual Compensation Awards Payouts
---------------------------------- ------------------------ ------------
Number of
Fiscal Other Restricted Shares
Year Annual Stock Underlying All Other
Ended Bonus Compensation Award(s) Options/ Compensation
Name and Principal Position 1/31 Salary (1) (2) (3) SARs LTIP Payouts (2)(4)
--------------------------- ------ -------- -------- ------------ ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Marvin Rounick 1997 $407,705 -- -- -- -- -- --
President and Chief 1996 $408,834 -- -- -- -- -- --
Executive Officer 1995 $407,942 -- -- -- -- -- --
Warren Weiner 1997 $299,620 -- -- -- -- -- $3,750
Executive Vice 1996 $300,194 -- -- -- -- -- $3,636
President, Secretary and 1995 $300,194 -- -- -- -- -- $3,232
Treasurer
Allan Laufgraben 1997 $251,939 -- -- -- -- -- --
Senior Vice-President, 1996 $ 42,311 -- -- -- 200,000 -- --
Merchandising 1995 -- -- -- -- -- -- --
Barry Vesotsky 1997 $162,235 -- -- -- -- -- $3,750
Vice President, 1996 $145,588 $17,000 -- -- 50,000 -- $3,300
Merchandising 1995 $137,538 $40,000 -- -- -- -- $3,125
Stanley A. Uhr 1997 $104,800 -- -- -- -- -- --
Vice President, 1996 $ 94,451 $10,000 -- -- 30,000 -- --
Real Estate and 1995 $ 94,451 $20,000 -- -- -- -- $ 765
Corporate Counsel
</TABLE>
- ------
(1) For the fiscal year ended January 31, 1995 consists of market value, at
date of vesting, of restricted common stock issued under the Company's
Restricted Stock Incentive Plan, which vests solely by lapse of time in
approximately six months from date of grant, subject to earlier
forfeiture upon termination of employment. Pending vesting, the grantee
is entitled to vote the stock and to receive any cash dividends. See
"Employment Contracts."
(2) The named executive officers received various personal benefits, the
total value of which did not exceed for any fiscal year as to any such
person the lesser of $50,000 or 10% of his annual salary and bonus.
(3) Awards of restricted stock are shown in Bonus column.
(4) Consists of Company contributions to the ESP Plan for the account of the
named executive subject to vesting by lapse of time.
7
<PAGE>
GRANT OF STOCK OPTIONS
The following table sets forth information regarding grants of stock
options made during the Company's fiscal year ended January 31, 1997 to each
of the named executive officers pursuant to the Company's 1995 Incentive
Stock Option Plan:
<TABLE>
<CAPTION>
Potential Realizable Value
At Assumed Annual
Rates of Stock Price
Appreciation For
Individual Grants Option Term (1)
----------------------------------------------------------------------------- --------------------------
Number of Shares Percentage of Total
Underlying Options Granted to
Options Employees in Exercise Price
Name Granted Fiscal Year per Share Expiration Date 5% 10%
- ----------------- ------------------ -------------------- ---------------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Marvin Rounick N/A(2) -- -- -- -- --
Warren Weiner N/A(2) -- -- -- -- --
Allan Laufgraben 0 -- -- -- -- --
Barry Vesotsky 0 -- -- -- -- --
Stanley A. Uhr 0 -- -- -- -- --
</TABLE>
- ------
(1) Potential realizable value is based on the assumption that the stock
price of the Common Stock appreciates at the annual rate shown
(compounded annually) from the date of grant until the end of the option
term. These numbers are calculated based on the requirements promulgated
by the Securities and Exchange Commission and do not reflect the
Company's estimate of future stock price performance.
(2) Mr. Rounick and Mr. Weiner do not participate in the Company's 1995
Incentive Stock Option Plan.
EXERCISE OF STOCK OPTIONS
The following table sets forth information regarding the exercise of stock
options by each of the named executive officers of the Company during the
fiscal year ended January 31, 1997, as well as the value of any unexercised
options:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Total Number of Shares
Underlying Unexercised Options Value of Unexercised In-the-Money
at Fiscal Year End Options at Fiscal Year End (1)
-------------------------------- -----------------------------------
Shares Acquired Value
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---------------- --------------- ---------- ------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Marvin Rounick N/A(2) -- -- -- -- --
Warren Weiner N/A(2) -- -- -- -- --
Allan Laufgraben -- -- 50,000 150,000 $65,750 $197,250
Barry Vesotsky -- -- 25,000 25,000 $32,875 $ 32,875
Stanley A. Uhr -- -- 15,000 15,000 $19,725 $ 19,725
</TABLE>
- ------
(1) Options are In-the-Money at the fiscal year end if the fair market value
of the underlying securities on such date exceeds the exercise or base
price of the option.
(2) Mr. Rounick and Mr. Weiner do not participate in the Company's 1995
Incentive Stock Option Plan.
INSURANCE
In 1983, the Company purchased split dollar increasing whole life
insurance policies providing $5,000,000 coverage for each of Marvin Rounick
and Warren Weiner. In 1987, at the request of the insureds, the Company
surrendered these policies, which had cash surrender values of $519,925 and
$489,691, respectively, for two new
8
<PAGE>
whole life policies each in the amount of $20,000,000. One policy insures the
joint lives of Marvin Rounick and his wife, and the other policy insures the
joint lives of Warren Weiner and his wife. The cash surrender values of the
prior policies were applied as prepaid premiums for the new policies. The
policies are payable upon the death of the last to die of the executive and
his spouse. No premiums were paid on these policies in the last fiscal year.
Upon the death of an insured, or at such earlier date as the Company's
interest in the policy may be terminated at the election of the Company or
the owner of the policy, the Company will be entitled to receive from the
death benefits or the cash surrender value, as the case may be, an amount
equal to the greater of (i) all premiums paid by it directly or through loans
on the policy, plus any remaining dividend credits, less any indebtedness to
the insurance company incurred by the Company to pay premiums, or (ii) the
amount of the cash surrender value of the policy. The balance of any death
benefits will be paid to a certain Rounick family insurance trust or a
certain Weiner family insurance trust, as the case may be, which are the
owners and beneficiaries of the respective policies.
EMPLOYMENT CONTRACTS
Messrs. Barry Vesotsky and Allan Laufgraben have written agreements with
the Company which govern all or part of their compensation. The agreement
with Mr. Vesotsky provides that he is entitled to receive, in addition to his
annual salary, a bonus with respect to fiscal years 1997, 1998, and 1999
equal to two percent (2%) of the increase in earnings before interest and
taxes on a consolidated basis, of the Company's apparel business for each
such fiscal year over the corresponding amount for the preceding fiscal year.
Such bonus shall not exceed $150,000.
The agreement with Mr. Laufgraben provides that Mr. Laufgraben will serve
as the Company's Senior Vice President-Merchandising, will be paid a base
salary of $250,000 per year, and will be entitled to receive a bonus with
respect to fiscal years 1997, 1998, and 1999 equal to four percent (4%) of
the increase in earnings before interest and taxes on a consolidated basis,
of the Company's apparel business for such fiscal year over the corresponding
amount for the preceding fiscal year. Such bonus shall not exceed $300,000.
Mr. Laufgraben, pursuant to the agreement, was awarded the option to purchase
up to 200,000 shares of the Common Stock of the Company.
REPORT ON EXECUTIVE COMPENSATION
The compensation of the President and Executive Vice President is set by
the Board of Directors. The cash compensation of the other executive officers
is set by the President, as authorized by the Board of Directors. The Stock
Option Committee is authorized to make awards of incentive stock options
under the Company's 1995 Incentive Stock Option Plan and of restricted stock
under the Company's Restricted Stock Incentive Plan.
In fiscal year 1997 the Board of Directors continued its previous practice
of compensating the President/Chief Executive Officer and the Executive Vice
President on the basis of fixed salaries, supplemented by various perquisites
which are included as "salary" in the Summary Compensation Table. Such
compensation is considered by the Board to be appropriate for those
positions, irrespective of the Company's performance. The compensation of
those officers has not, therefore, increased materially in years of
above-average Company performance and has not decreased materially in years
of below-average performance. The President/Chief Executive Officer and the
Executive Vice President, alone or together with spouses and various trusts
and partnerships for family members, are principal shareholders of the
Company and, in the Board's view, derive sufficient incentive to maximize
Company performance through their status as shareholders without receiving
incentive compensation in addition to, or as part of, their regular
compensation. Accordingly, neither the President/Chief Executive Officer nor
the Executive Vice President receive bonuses or participate in either of the
Company's two plans referred to above.
The other executive officers of the Company are principally compensated
through fixed salaries.
The foregoing report is submitted by the Board of Directors: Paul Bachow,
Barry Feinberg, Barry Frank, Jack Rounick*, Marvin Rounick*, and Warren
Weiner*.
- ------
*Members of Stock Option Committee
9
<PAGE>
TRANSACTIONS WITH MANAGEMENT AND CERTAIN BUSINESS RELATIONSHIPS
The Company leases its warehouse and office facility (the "Facility")
totalling approximately 280,000 square feet pursuant to a twenty year lease
dated and effective June 15, 1982, as amended ("the Lease") from the Blue
Grass Partnership ("Lessor"). The partners of the Lessor are Marvin Rounick,
Warren Weiner, and Jack A. Rounick, and their respective spouses. Under the
terms of the Lease, the Company must pay all maintenance, repairs, insurance,
utilities, taxes, improvements and modifications to the Facility. During the
fiscal year ended January 31, 1997, the Company accrued and paid a rental
expense of $550,000 under the Lease.
A loan in the amount of $500,000 from the Pennsylvania Industrial
Development Authority ("PIDA") was made to the Lessor in December, 1984 to
finance the Facility. The PIDA loan is payable over a 15 year term at an
interest rate of 5% per annum. The Company has guaranteed the repayment of
the PIDA loan. At January 31, 1997, the outstanding principal amount of the
PIDA loan was approximately $131,900.
In the last fiscal year, the Company paid legal fees and expects to pay
legal fees during the fiscal year ending January 31, 1998 to the law firm of
Jack A. Rounick, P.C. (the principal of which is Jack A. Rounick, a director
of the Company).
In the last fiscal year, the Company paid legal fees approximating $99,000
to the law firm of Mesirov Gelman Jaffe Cramer & Jamieson, its general
counsel, and expects to pay legal fees to such firm during the fiscal year
ending January 31, 1998. Barry H. Frank, a director of the Company, is a
partner in that law firm.
The Company believes that the terms of these transactions, including the
Lease, are fair, reasonable and consistent with the terms that would have
been available to the Company if made with unaffiliated parties.
On November 22, 1996, the Company loaned $8.33 million to St. Regis
Investors, an affiliate of Warren Weiner, in connection with the refinancing
by the borrower of an apartment complex located in Philadelphia,
Pennsylvania. The loan was written on a demand basis, was secured by a first
mortgage on the apartment complex, and bore interest at an annual rate of
8.5%. The loan was repaid in full by the borrower on December 5, 1996.
In December 1994 the Company made a $95,000 loan to Lewis Lyons, its Vice
President, Finance and Chief Financial Officer. The loan, which is unsecured
and does not bear interest, had an unpaid balance of $23,500 as of January
31, 1997.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of copies of Forms 3, 4, and 5 furnished to the
Company under Section 16(a) of the Securities Exchange Act of 1934 ("Exchange
Act") or written representations from persons required to furnish to the
Company copies of such Forms 3, 4, and 5 if filed with the Securities and
Exchange Commission, the Company has determined that Stanley A. Uhr and Lewis
Lyons each filed late one report (each relating to a single transaction --
the grant of stock options) required by Section 16(a) of the Exchange Act
during the fiscal year ended January 31, 1996.
RELATIONSHIPS WITH INDEPENDENT AUDITORS
The firm of Arthur Andersen LLP was the Company's independent auditors for
the fiscal year ended January 31, 1997. Representatives of Arthur Andersen
LLP are expected to be present at the Annual Meeting, with the opportunity to
make a statement if they desire to do so, and will be available to respond to
appropriate questions of shareholders.
The Board of Directors selects, upon recommendation by the Audit
Committee, the independent auditors for the Company. The Board has not yet
selected the independent auditors for the current fiscal year.
10
<PAGE>
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Any proposal of a shareholder intended to be presented at the Annual
Meeting of Shareholders in 1998 must be received at the Company's principal
executive offices no later than December 31, 1997.
FORM 10-K
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON SOLICITED BY THIS
PROXY STATEMENT, ON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K INCLUDING FINANCIAL STATEMENTS AND THE
SCHEDULES THERETO. SUCH WRITTEN REQUESTS SHOULD BE DIRECTED TO THE COMPANY AT
9401 BLUE GRASS ROAD, PHILADELPHIA, PENNSYLVANIA 19114, ATTENTION: CORPORATE
COUNSEL.
11
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
DEB SHOPS, INC.
9401 Blue Grass Road, Phildelphia, PA 19114
The undersigned hereby appoints Marvin Rounick and Warren Weiner, and each of
them, proxies with full power of substitution to vote all the shares of Common
Stock of Deb Shops, Inc., which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Shareholders to be held on May 30,
1997, at 10 A.M., local time, and at any adjournment or postponement thereof,
upon the following matters set forth in the notice of such meeting.
(To Be Signed on Reverse Side.)
[X] Please mark your
votes as in this example
AUTHORITY
FOR WITHHELD Nominees: Paul S. Bachow
1. Election of Directors: [ ] [ ] Barry H. Feinberg
Barry H. Frank
Marvin Rounick
Jack A. Rounick
Warren Weiner
To withhold authority for any individual nominee(s), check
the box, and insert the nominee(s) name(s) on the line below:
FOR ALL
EXCEPT:
[ ]
-------------------------------------------------------
2. In their discretion, on such other business as may properly come
before the Annual Meeting or any adjournment or postponement therof.
This Proxy when properly executed will be voted as specified
above. If not otherwise specified, this Proxy will be voted
FOR the election of the nominees of the Board of
Directors named in Item 1.
PLAESE MARK, SIGN, DATE AND RETURN IMMEDIATELY
SIGNATURE DATE SIGNATURE DATE
---------------------- ----- ---------------------- -----
Note: Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as an attorney, executor,
administrator, trustee or guardian, give the full title. If a corporation,
sign in full corporate name by President or other authorized officer. If a
partnership, sign in partnership name by authorized persons.
