<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 ss.240.14a-11(c) or ss.240.14a-12
DEB SHOPS, INC.
-----------------------------------------------
(Name of Registrant as Specified In Its Charter)
DEB SHOPS, INC.
-----------------------------------------------
(Name of Person(s) Filing Proxy Statement)
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:
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<PAGE>
DEB SHOPS INC.
9401 Blue Grass Road, Philadelphia, PA 19114
(215) 676-6000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held on
Wednesday, May 27, 1998
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 Wednesday, May 27,
1998 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 10, 1998 is the Record Date for the determination of
shareholders entitled to notice of and to vote at the Annual Meeting or any
adjournments or postponements 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 enclosed Proxy.
By Order of the Board of Directors of the Company
WARREN WEINER, Secretary MARVIN ROUNICK, President
Dated: April 30, 1998
<PAGE>
DEB SHOPS INC.
9401 Blue Grass Road, Philadelphia, PA 19114
--------------------
PROXY STATEMENT
--------------------
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
MAY 27, 1998
--------------------
This Proxy Statement is submitted with the attached Notice of Annual
Meeting of Shareholders of Deb Shops, Inc. (the "Company") to be held on
Wednesday, May 27, 1998 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, 1998.
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.
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The holders of record of the Common Stock of the Company at the close
of business on April 10, 1998 (the "Record Date") will be entitled to notice
of and to vote on all matters presented for vote at the Annual Meeting. At the
close of business on April 10, 1998, the total number of outstanding shares of
Common Stock was 12,944,770 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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of April 10,
1998 (except as to Dimensional Fund Advisors, Inc.), 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 of
Name and Address of Beneficial Percent
Beneficial Owner (1) Ownership Title of Class of Class
- -------------------- ----------- ---------------- --------
<S> <C> <C> <C>
Marvin Rounick (2) 3,849,656 (3) Common Stock 29.7%
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 19114
Warren Weiner 2,700,264 (5) Common Stock 20.9%
9401 Blue Grass Road 230 Non-Voting Series A 50.0%
Philadelphia, PA 19114 Preferred Stock
Penny Weiner 1,616,238 (6) Common Stock 12.5%
9401 Blue Grass Road
Philadelphia, PA 19114
Barry H. Frank 1,628,982 (7) Common Stock 12.6%
1735 Market Street
Philadelphia, PA 19103-7598
Robert Shein 1,629,882 (7)(8) Common Stock 12.6%
896 Roscommon Road
Bryn Mawr, PA 19010
</TABLE>
(2)
<PAGE>
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address of Beneficial Percent
Beneficial Owner (1) Ownership Title of Class of Class
- -------------------- ----------- ---------------- --------
<S> <C> <C> <C>
Jack A. Rounick (2) 1,318,158 (9) Common Stock 10.2%
3 Penn Court
325 Swede Street
Norristown, PA 19404
Stuart H. Savett 754,000 (10) Common Stock 5.8%
325 Chestnut Street
Suite 700
Philadelphia, PA 19106
Dimensional Fund Advisors Inc. 675,200 (11) Common Stock 5.2%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Paul S. Bachow -0- Common Stock -0-
Barry H. Feinberg -0- Common Stock -0-
Allan Laufgraben 75,040 (12) Common Stock Less than 1%
Barry Vesotsky 46,330 (12) Common Stock Less than 1%
Stanley A. Uhr 16,990 (12)(13) Common Stock Less than 1%
All Directors and 9,675,620 (14) Common Stock 74.8%
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.
(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 (24.5% 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.
[footnotes continued on following page]
(3)
<PAGE>
(5) Warren Weiner has sole voting and dispositive power with respect to
1,047,766 shares of Common Stock (8.1% of the class) and shared voting
and dispositive power with Penny Weiner, his wife, with respect to
1,616,238 shares of Common Stock (12.5% 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. 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, or 1,023,478
shares of Common Stock (7.9% 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 511,258 shares of
Common Stock (3.9% of the class). Of these shares he has sole dispositive
power with respect to 91,434 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 A. Rounick
shares voting and dispositive power as a co-trustee with Stuart Savett;
Mr. Rounick disclaims beneficial ownership of these shares.
(10) 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) The Company has been advised by Dimensional Fund Advisors, Inc.
("Dimensional"), that it is registered as an investment advisor under the
Investment Advisors Act of 1940, and is deemed to have beneficial
ownership of 675,200 shares of the Common Stock of the Company as of
December 31, 1997, all of which shares are held in portfolios of DFA
Investment Dimensions Group, Inc., a registered open-end investment
company, in series of the DFA Investment Trust Company, a Delaware
business trust, or in the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit plans. The
Company is further advised that Dimensional serves as investment manager
as to all of the foregoing entities. Dimensional disclaims beneficial
ownership of all such shares.
(12) 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 10, 1998 as follows:
Mr. Laufgraben--75,040 shares; Mr. Vesotsky--28,120 shares; Mr.
Uhr--16,750 shares; Officers as a Group (5 persons)--154,910 shares.
(13) Includes 120 shares held by children of Mr. Uhr as to which he disclaims
beneficial ownership.
(14) See prior footnotes.
(4)
<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 58 Director, President and Chief Executive Officer 1973
Warren Weiner 54 Director, Executive Vice President, Secretary 1973
and Treasurer
Jack A. Rounick 62 Director, Assistant Secretary 1973
Paul S. Bachow 47 Director 1989
Barry H. Feinberg 52 Director 1989
Barry H. Frank 59 Director 1989
Marvin Rounick and Jack A. Rounick are brothers.
</TABLE>
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
November, 1997, he has been counsel to the law firm of Wolf, Block, Schorr and
Solis-Cohen, Norristown, Pennsylvania. From October, 1995 to November, 1997,
he was engaged in the private practice of law in Norristown, Pennsylvania.
From 1984 to 1993, Mr. Rounick 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., Crusader Holding
Corporation, and Innova Corporation, each of which is a company with a class
of securities registered under the Securities Exchange Act of 1934, as
amended.
(5)
<PAGE>
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 Hippo Graphics, Inc., 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, LLP, 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, 1998 and acted by written consent nine times 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 the
Committees on which he served except Paul S. Bachow who attended fewer than
75% of such meetings.
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 one meeting 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 one meeting during the last fiscal year.
(6)
<PAGE>
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.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL
SHAREHOLDER RETURNS
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.
$300--------------------------------------------------------------------------
$250--------------------------------------------------------------------------
@
$200---------------------------------------------@----------------------------
$
@
$150--------------------------------------------------------------------------
@ @ $
$100#@$-------------------------------$---------------------------------------
$ $ #
#
# #
$ 50--------------------------------------------------------------------------
#
0---------------------------------------------------------------------------
1/93 1/94 1/95 1/96 1/97 1/98
# DEB SHOPS, INC.
@ NASDAQ STOCK MARKET (U.S)
$ DOW JONES RETAILERS - APPAREL
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Legend
------
Fiscal Year Ended
========== -----------------
Symbol Index Description 01/31/93 01/29/94 01/31/95 01/31/96 01/31/97 01/30/98
- ------ ----------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
DEB SHOPS, INC. 100 80 65 44 64 91
Nasdaq Stock Market (US Companies) 100 115 110 155 203 240
Dow Jones Retailers - Specialty Apparel Index 100 93 83 97 116 189
</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 01/31/93.
- -------------------------------------------------------------------------------
(7)
<PAGE>
EXECUTIVE COMPENSATION
The following information is furnished for the fiscal years ended
January 31, 1998, 1997 and 1996, 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.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
------------------------------------- ---------------------- -------------
Number of
Fiscal Other Shares
Year Annual Restricted Underlying All Other
Name and Ended Compensation Stock Options/ Compensation
Principal Position 1/31 Salary Bonus (1) Award(s) SARS LTIP Payouts (1)(2)
- ------------------ ------ ------ ----- --- ------- ---- ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Marvin Rounick 1998 $405,512 -- -- -- -- -- --
President and 1997 $407,705 -- -- -- -- -- --
Chief Executive 1996 $408,834 -- -- -- -- -- --
Officer
Warren Weiner 1998 $297,816 -- -- -- -- -- $4,000
Executive Vice 1997 $299,620 -- -- -- -- -- $3,750
President, 1996 $300,194 -- -- -- -- -- $3,636
Secretary, and
Treasurer
Allan Laufgraben 1998 $250,016 $300,000 -- -- -- -- $4,000
Senior Vice- 1997 $251,939 -- -- -- -- -- --
President, 1996 $ 42,311 -- -- -- 200,000 -- --
Merchandising
Barry Vesotsky 1998 $150,004 $150,000 -- -- 50,000 -- $3,556
Vice President, 1997 $162,235 -- -- -- -- -- $3,750
Merchandising 1996 $145,588 $ 17,000 -- -- 50,000 -- $3,300
Stanley A. Uhr 1998 $104,000 -- -- -- 30,000 -- --
Vice President, 1997 $104,800 -- -- -- -- -- --
Real Estate and 1996 $ 94,451 $ 10,000 -- -- 30,000 -- --
Corporate Counsel
</TABLE>
- --------------------
(1) 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.
(2) Consists of Company contributions to the ESP Plan for the account of the
named executive subject to vesting by lapse of time.
<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, 1998 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)
---------------------------------------------------------------------- --------------------------
Percentage of Total
Number of Shares Options Granted to
Underlying Options Employees in Exercise Price
Name Granted in 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 50,000 30.30% $6.00 1/8/2003 $82,800 $183,150
Stanley A. Uhr 30,000 18.18% $6.00 1/8/2003 $49,680 $109,890
</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.
(9)
<PAGE>
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, 1998, as well as the value of any
unexercised options:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
---------------------------------------------------------------------------------
Total Number of Shares Value of Unexercised
Underlying Unexercised Options at In-the-Money Options
Fiscal Year End 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 -- -- -- -- 100,000 100,000 $293,750 $293,750
Barry Vesotsky -- -- -- -- 50,000 50,000 $146,875 $9,375
Stanley A. Uhr -- -- -- -- 30,000 30,000 $88,125 $5,625
</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 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.
(10)
<PAGE>
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. 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. Also
pursuant to the agreement, Mr. Laufgraben was awarded the option to purchase
up to 200,000 shares of the Common Stock of the Company.
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.
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 1998 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 above. 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 except Messrs. Vesotsky and Laufgraben who
received bonuses pursuant to their employment contracts as described above.
(11)
<PAGE>
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
(12)
<PAGE>
TRANSACTIONS WITH MANAGEMENT
AND CERTAIN BUSINESS RELATIONSHIPS
The Company leases its warehouse and office facility (the "Facility")
totaling 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, 1998, 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, 1998, the outstanding principal amount of the PIDA
loan was approximately $86,500.
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.
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, 1998.
(13)
<PAGE>
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 its directors,
officers, and more than 10% shareholders filed when due all reports required
by Section 16(a) of the Exchange Act during the fiscal year ended January 31,
1998.
RELATIONSHIPS WITH INDEPENDENT AUDITORS
The firm of Arthur Andersen LLP was the Company's independent
auditors for the fiscal year ended January 31, 1998. 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.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Any proposal of a shareholder intended to be presented at the Annual
Meeting of Shareholders in 1999 must be received at the Company's principal
executive offices no later than December 31, 1998.
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.
(14)
