<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or ss.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.
9401 Blue Grass Road, Philadelphia, PA 19114
(215) 676-6000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on
Wednesday, May 19, 1999
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 (the "Company"), will be held on
Wednesday, May 19, 1999 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 directors to serve until the next Annual Meeting of
Shareholders and until the election and qualification of their
respective successors;
2. Amend the Company's Articles of Incorporation to increase the
number of shares of authorized Common Stock from 25,000,000 to
50,000,000 shares.
3. 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.
March 31, 1999 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 28, 1999
<PAGE>
DEB SHOPS, INC.
9401 Blue Grass Road, Philadelphia, PA 19114
___________________________
PROXY STATEMENT
___________________________
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
MAY 19, 1999
___________________________
This Proxy Statement is submitted with the attached Notice (the
"Notice") of Annual Meeting of Shareholders of Deb Shops, Inc. (the "Company")
to be held on Wednesday, May 19, 1999 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 28, 1998.
The Board of Directors of the Company does not intend to bring any
matter before the Annual Meeting except as specifically indicated in the
attached Notice and does not know of anyone else who intends to do so. If any
other matters properly come before the Annual Meeting, however, the persons
named in the enclosed Proxy, or their duly constituted substitutes, will be
authorized to vote or otherwise act thereon in accordance with their judgment on
such matters.
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 the Company's common stock,
$0.01 par value per share ("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 March 31, 1999 (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 March 31, 1999, the total number of outstanding shares of Common
Stock was 13,198,880 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. Abstentions and broker non-votes are
counted for purposes of determining whether a quorum is present at the Annual
Meeting.
(2)
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of March 3l,
1999 (February 11, 1999 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 29.2%
9401 Blue Grass Road 230 Non-Voting Series A 50.0%
Philadelphia, PA 19114 Preferred Stock
Judy Rounick 683,736 (4) Common Stock 5.2%
9401 Blue Grass Road
Philadelphia, PA 19114
Warren Weiner 2,700,264 (5) Common Stock 20.5%
9401 Blue Grass Road 230 Non-Voting Series A 50.0%
Philadelphia, PA 19114 Preferred Stock
Penny Weiner 1,616,238 (6) Common Stock 12.3%
9401 Blue Grass Road
Philadelphia, PA 19114
Barry H. Frank 1,628,982 (7) Common Stock 12.3%
1735 Market Street
Philadelphia, PA 19103-7598
Robert Shein 1,629,882 (7)(8) Common Stock 12.4%
896 Roscommon Road
Bryn Mawr, PA 19010
Jack A. Rounick (2) 1,318,158 (9) Common Stock 10.0%
3 Penn Court
325 Swede Street
Norristown, PA 19404
Stuart H. Savett 754,000 (10) Common Stock 5.7%
325 Chestnut Street
Suite 700
Philadelphia, PA 19106
Dimensional Fund Advisors Inc. 690,900 (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 75,000 (12) Common Stock Less than 1%
Barry Vesotsky 45,000 Common Stock Less than 1%
Stanley A. Uhr 15,180 (13) Common Stock Less than 1%
All Directors and Executive 9,722,840 (12)(14) Common Stock 73.4%
Officers as a Group 460 Non-Voting Series A 100.0%
(12 persons) Preferred Stock
</TABLE>
(3)
<PAGE>
- -------------
(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 (the "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 (24.0% 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 (5.2% of the class).
See note (4) below. The foregoing table does not include 750,000 shares
of Common Stock (5.7% 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 (7.9% of the class) and shared voting
and dispositive power with Penny Weiner, his wife, with respect to
1,616,238 shares of Common Stock (12.3% 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 (4.6%
of the class) held by a trust of which Mr. Weiner is the sole
beneficiary, or 1,023,478 shares of Common Stock (7.8% 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 (5.7% 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) Includes 750,000 shares of Common Stock (5.7% 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) Based solely on the Schedule 13G, dated February 11, 1999, filed with
the Commission by Dimensional Fund Advisors, Inc. ("Dimensional"). The
Schedule 13G reports that Dimensional, an investment advisor registered
under Section 203 of the Investment Advisors Act of 1940, furnishes
investment advice to four investment companies registered under the
Investment Company Act of 1940, and serves as investment manager to
certain other investment vehicles, including commingled group trusts.
These investment companies and investment vehicles are referred to
collectively hereinafter as the "Portfolios." In its role as investment
advisor and investment manager, Dimensional possesses both voting and
investment power over these securities, all of which are owned by the
Portfolios. Dimensional disclaims beneficial ownership of such
securities.
(4)
<PAGE>
(12) Beneficial ownership has been determined pursuant to Rule 13d-3 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), 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 March
31, 1999 as follows: Mr. Laufgraben -- 25,000; All Directors and
Executive Officers as a Group (12 persons) -- 42,000 shares.
(13) Includes 60 shares held by children of Mr. Uhr as to which he disclaims
beneficial ownership.
(14) See prior footnotes.
(5)
<PAGE>
ELECTION OF DIRECTORS
Six directors will be elected to hold office subject to the provisions
of the Company's ByLaws 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 59 Director, President and Chief Executive Officer 1973
55 Director, Executive Vice President, Secretary and
Warren Weiner Treasurer 1973
Jack A. Rounick 63 Director, Assistant Secretary 1973
Paul S. Bachow 48 Director 1989
Barry H. Feinberg 53 Director 1989
Barry H. Frank 60 Director 1989
</TABLE>
Marvin Rounick and Jack A. Rounick are brothers.
A plurality of the votes cast by all shareholders entitled to vote with
respect to the election of directors at the Annual Meeting is required for the
election of directors. Shareholders may vote "FOR" or "AUTHORITY WITHHELD" with
respect to the election of the entire slate of directors by marking the proper
box on the enclosed form of Proxy, or may vote "AUTHORITY WITHHELD" with respect
to any one or more nominees by marking the proper box and writing out the names
of such nominees on the Proxy, as instructed therein. Abstentions and broker
non-votes will have the same effect as votes of "AUTHORITY WITHHELD" in the case
of the election of directors. Upon the execution and return of the enclosed form
of Proxy, the shares represented thereby will be voted in accordance with the
terms of the Proxy, unless the Proxy is revoked. If no directions are indicated
in such Proxy, the shares represented thereby will be voted "FOR" the above
nominees in the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR"
THE ABOVE NOMINEES FOR DIRECTOR.
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
LLP, Philadelphia, Pennsylvania, which provides legal services to the Company.
From October, 1995 to November, 1997, he was
(6)
<PAGE>
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 or investing in manufacturing, software, communications and service
companies. Mr. Bachow is also a director of Anadigics, Inc., Crusader Holding
Corporation and Digital Microwave Corporation, each of which is a company with a
class of securities registered under the Exchange Act.
Barry H. Feinberg has been, since January, 1992, President of The
Feinberg Group or its predecessor firms, 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 Exchange Act.
Barry H. Frank has been, since May, 1987, a partner in the law firm of
Mesirov Gelman Jaffe Cramer & Jamieson, LLP, Philadelphia, Pennsylvania, which
provides legal services to the Company.
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 one meeting during the fiscal year ended
January 31, 1999 and acted by written consent 12 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.
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 and acted by written consent one time during
the last fiscal year.
(7)
<PAGE>
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, 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.
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.
Compensation Committee Interlocks and Insider Participation
Barry H. Frank, a member of the Compensation Committee of the Company,
was during the last fiscal year, and continues to be, a partner in the law firm
of Mesirov Gelman Jaffe Cramer & Jamieson, LLP, Philadelphia, Pennsylvania,
which provided during the last fiscal year, and continues to provide, legal
services to the Company.
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 (U.S. Companies) and (ii) the Dow
Jones Retailers -- Specialty Apparel Index.
<TABLE>
<CAPTION>
[PERFORMANCE GRAPH APPEARS HERE]
Legend
------
Fiscal Year Ended
---------------------------------------------------------------
Symbol Index Description 01/31/94 01/31/95 01/31/96 01/31/97 01/31/98 01/30/99
- ------ ----------------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
DEB SHOPS, INC. 100 81 56 80 114 215
Nasdaq Stock Market (US Companies) 100 95 135 177 209 326
Dow Jones Retailers -- Specialty Apparel Index 100 90 105 124 204 378
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 01/31/94.
</TABLE>
(8)
<PAGE>
EXECUTIVE COMPENSATION
The following information is furnished for the fiscal years ended
January 31, 1999, 1998 and 1997, 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/ LTIP Compensation
Principal Position 1/31 Salary Bonus (1) Award(s) SARS Payouts (2)
------------------- ------ -------- ------- ------------ ---------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Marvin Rounick
President and 1999 $405,012 -- -- -- -- -- $397,286(3)
Chief Executive 1998 $405,012 -- -- -- -- -- --
Officer 1997 $407,705 -- -- -- -- -- --
Warren Weiner
Executive Vice
President, 1999 $297,600 -- -- -- -- -- $151,423(3)
Secretary, and 1998 $297,816 -- -- -- -- -- $4,000
Treasurer 1997 $299,620 -- -- -- -- -- $3,750
Allan Laufgraben
Senior Vice- 1999 $250,016 $300,000 -- -- 150,000 -- $4,000
President, 1998 $250,016 $300,000 -- -- -- -- $4,000
Merchandising 1997 $251,939 -- -- -- -- -- --
Barry Vesotsky 1999 $160,004 $150,000 -- -- 50,000 -- $4,000
Vice President, 1998 $150,004 $150,000 -- -- 50,000 -- $3,556
Merchandising 1997 $162,235 -- -- -- -- -- $3,750
Stanley A. Uhr 1999 $108,500 -- -- -- 30,000 -- --
Vice President, 1998 $104,800 -- -- -- 30,000 -- --
Real Estate and 1997 $104,800 $10,000 -- -- -- -- --
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.
(3) Includes payments of $397,286 and $147,423 made in connection with
split dollar increasing whole life insurance policies providing
coverage for Marvin Rounick and Warren Weiner, respectively. The
payments were made to eliminate indebtedness incurred on the policies
to pay past premiums and included interest incurred on such
indebtedness through February 1, 1996. It is expected that there will
be no further premium payments made by, or on behalf of, the Company
with respect to either of these insurance policies. See "Executive
Compensation - Insurance."
(9)
<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, 1999 to each of
the named executive officers pursuant to the Company's 1995 Incentive Stock
Option Plan:
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Individual Grants Value
------------------------------- At Assumed Annual
Number of Percentage of Rates of Stock Price
Shares Options Appreciation For
underlying Granted to Exercise Option Term (1)
Options Employees in Price Expiration -------------------------
Name Granted Fiscal Year Per Share Date 5% 10%
-------- ---------- ------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Marvin Rounick N/A(2) -- -- -- -- --
Warren Weiner N/A(2) -- -- -- -- --
Allan Laufgraben 150,000 49.18% $7.00 1/31/2004 $290,096 $641,036
Barry Vesotsky 50,000 16.39% $7.00 1/31/2004 $ 96,699 $213,679
Stanley A. Uhr 30,000 9.84% $7.00 1/31/2004 $ 58,019 $128,207
</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 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.
(10)
<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, 1999, 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 Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at Fiscal Year End at Fiscal Year End (1)
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 125,000 $575,340 25,000 200,000 $200,000 $1,037,500
Barry Vesotsky 75,000 $447,420 -- 75,000 -- $ 343,750
Stanley A. Uhr 45,000 $257,650 -- 45,000 -- $ 206,250
</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.
In 1998, the owner of each of the policies agreed to a reduction in the face
value of the policy from $20,000,000 to $15,000,000 and the Company, in
consideration for the insurer eliminating any indebtedness on the policies of
insurance and reducing the premium obligation to maintain the policy in force,
agreed to pay a one-time, lump-sum premium on each of the policies in the amount
of $397,286 and $147,423, respectively, which included interest through February
1, 1996. 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 later to die of the
executive and his spouse. The premiums referred to above were paid by the
Company 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
lesser 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.
(11)
<PAGE>
Employment Contracts
Allan Laufgraben has a written agreement with the Company which
provides that Mr. Laufgraben will serve as the Company's Senior Vice
President-Merchandising, will be paid a base salary of $325,000 per year, and
will be entitled to receive a bonus not to exceed $300,000 with respect to
fiscal years 2000, 2001 and 2002 equal to four percent of the increase in
earnings before interest and taxes on a consolidated basis of the Company's
apparel business (excluding Tops 'N Bottoms) for such fiscal year over the
corresponding amount for the preceding fiscal year. Mr. Laufgraben was also
awarded the option to purchase up to 150,000 shares of the Common Stock of the
Company pursuant to the agreement.
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 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 1999 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 receives
bonuses or participates 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 in fiscal year 1999 based on the increase in earnings before interest
and taxes on a consolidated basis of the Company's apparel business over the
corresponding amount for the preceding fiscal year. These bonuses were paid
pursuant to employment contracts in effect in fiscal year 1999.
The foregoing report is submitted by the Board of Directors: Paul
Bachow, Barry Feinberg, Barry Frank, Jack Rounick, Marvin Rounick and Warren
Weiner.
(12)
<PAGE>
PROPOSAL TO AMEND THE RESTATED ARTICLES OF INCORPORATION
Introduction
The Company's Restated Articles of Incorporation, as currently in
effect (the "Articles"), provide that the Company's authorized capital stock
shall consist of 25,000,000 shares of Common Stock and 5,000,000 shares of
Preferred Stock, $1.00 par value per share. On February 26, 1999, the Company's
Board of Directors approved an amendment of the Articles (the "Amendment") in
order to increase the number of shares of Common Stock authorized for issuance
under the Articles by 25,000,000 shares to a total of 50,000,000 shares. The
text of the Amendment is set forth below. If the Amendment is adopted, it will
become effective upon the filing of the Amendment with the Secretary of State of
the Commonwealth of Pennsylvania (which the Company expects to do as soon as is
practicable after adoption).
Current Use of Shares
As of the Record Date, the Company had 13,198,880 shares of Common
Stock outstanding and 1,851,800 shares reserved for issuance under the Company's
1995 Incentive Stock Option and Restricted Stock Incentive Plans (collectively,
the "Employee Stock Plans"), of which 495,800 were covered by outstanding
options and 1,356,000 were available for grant. Therefore, the Company's total
share requirement as of the Record Date was 15,050,680 shares. In the event
shareholder approval of this proposal is obtained, following the effectiveness
of the Amendment, the Company would have a total of 34,949,320 authorized and
unissued shares remaining available pursuant to its Articles.
Purpose of the Proposed Amendment
The Board of Directors believes that the availability of additional
authorized but unissued shares of Common Stock will provide the Company with the
flexibility to issue Common Stock for appropriate corporate purposes which may
be identified in the future. Such future purposes may include, without
limitation, raising equity capital, issuing shares pursuant to the conversion or
exercise of convertible preferred stock, convertible debt, warrants or other
securities that may be issued in the future, adopting additional employee stock
option, purchase or similar plans or reserving additional shares for issuance
under its existing Employee Stock Plans, making acquisitions through the use of
Common Stock and effecting stock splits and/or declaring stock dividends. Other
than as permitted or required under the Company's existing Employee Stock Plans
and outstanding options, the Board of Directors has no immediate plans,
understandings, agreements or commitments to issue additional shares of Common
Stock for any purpose.
The Board of Directors believes that the proposed increase in the
authorized Common Stock will make a sufficient number of shares available should
the Company decide to use its shares for one or more of such previously
mentioned purposes or otherwise. The Company may seek further increases in
authorized shares from time to time in the future as considered appropriate by
the Board of Directors.
(13)
<PAGE>
Possible Effects of the Proposed Amendment
If the shareholders approve the proposed Amendment, the Board of
Directors may cause the issuance of additional shares of Common Stock without
further vote of the shareholders of the Company, except as provided under
Pennsylvania corporate law or under the rules of any national securities
exchange on which shares of Common Stock are then listed. Under the Articles,
the Company's shareholders do not have preemptive rights to subscribe to
additional securities which may be issued by the Company, which means that
current shareholders do not have a prior right to purchase any new issue of
capital stock of the Company in order to maintain their proportionate ownership
of Common Stock. In addition, if the Board of Directors elects to issue
additional shares of Common Stock, such issuance could have a dilutive effect on
the earnings per share, voting power and shareholdings of current shareholders.
In addition to the corporate purposes discussed above, the proposed
Amendment could, under certain circumstances, have an anti-takeover effect,
although this is not the intent of the Board of Directors. For example, it may
be possible for the Board of Directors to delay or impede a takeover or transfer
of control of the Company by causing such additional authorized shares to be
issued to holders who might side with the Board in opposing a takeover bid that
the Board of Directors determines is not in the best interests of the Company
and its shareholders. The Amendment therefore may have the effect of
discouraging unsolicited takeover attempts. By potentially discouraging
initiation of any such unsolicited takeover attempt, the proposed Amendment may
limit the opportunity for the Company's shareholders to dispose of their shares
at the higher price generally available in takeover attempts or that may be
available pursuant to a merger proposal. The proposed Amendment may have the
effect of permitting the Company's current management, including the current
Board of Directors, to retain its position, and place it in a better position to
resist changes that shareholders may wish to make if they are dissatisfied with
the conduct of the Company's business. However, The Board of Directors has not
presented this proposal with the intent that it be utilized as a type of
anti-takeover device.
Required Vote; Recommendation of Board of Directors
Affirmative votes constituting a majority of the votes cast by all
shareholders entitled to vote with respect to the Amendment at the Annual
Meeting will be required to approve the Amendment. Shareholders may vote "FOR,"
"AGAINST" or to "ABSTAIN" with respect to approval of the Amendment by marking
the proper box on the enclosed form of Proxy. For voting purposes, only shares
voted either "FOR" or "AGAINST" approval of the Amendment, and neither
abstentions nor broker non-votes, will be counted as votes in determining
whether or not the Amendment is approved. As a consequence, abstentions and
broker non-votes will have no effect on the vote on the Amendment. Upon the
execution and return of the enclosed form of Proxy, the shares represented
thereby will be voted in accordance with the terms of the Proxy, unless the
Proxy is revoked. If no directions are indicated in such Proxy, the shares
represented thereby will be voted "FOR" the approval of the proposed Amendment.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR"
APPROVAL OF THE AMENDMENT
TO THE RESTATED ARTICLES OF INCORPORATION.
(14)
<PAGE>
The following is the text of Article 5 of the Articles as it would
read, and marked to show the changes that would result, in the event the
Amendment is approved:
"5. The aggregate number of shares which the corporation
shall have authority to issue is:
[Twenty-five]* Fifty million [(25,000,000)]* (50,000,000) shares
of Common Stock with a par value of one cent ($.01) per share and
five million (5,000,000) shares of Preferred Stock, issuable in
series, with a par value of one dollar ($1.00) per share.
Each share of Common Stock shall entitle the holder thereof to
one (1) vote. No holder of Common Stock shall be entitled to
cumulative voting rights.
The shares of Preferred Stock may be divided into and issued in
series, from time to time, as herein provided, each of such
series to be distinctly designated. The shares of the Preferred
Stock of different series, subject to any applicable provision of
law, may vary and the designations, preferences, voting powers,
qualifications, limitations, restrictions, privileges, options,
conversion rights, relative rights, liquidation rights, dividend
rights, or other special rights of any series of Preferred Stock
that is desired but which has not been fixed herein shall be
fixed in the case of each such series at any time prior to the
issuance of the shares thereof by resolution or resolutions
adopted by the Board of Directors. No holder of any series of
Preferred Stock, however designated, shall be entitled to
cumulative voting rights."
*Bracketed material has been deleted.
(15)
<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, Director,
President and Chief Executive Officer of the Company, Warren Weiner, Director,
Executive Vice President, Secretary and Treasurer of the Company, Jack A.
Rounick, Director and Assistant Secretary of the Company, 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. On January 3, 1999, the Lease was amended to extend the term for an
additional five years. During the fiscal year ended January 31, 1999, 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, 1999, the outstanding principal amount of the PIDA
loan was approximately $42,400.
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, 1999.
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 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 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, 1999;
except that Stephen Smith, Vice President, Information Systems of the Company,
did not include in his Form 3 filed on June 2, 1998 beneficial ownership of 200
shares of Common Stock and corrected such deficiency by way of an amendment to
such Form 3 filed on March 3, 1999, and Joan M. Nolan, Controller of the
Company, did not file a Form 3 within 10 days of becoming a reporting person and
corrected such deficiency by filing a Form 5 on March 3, 1999.
RELATIONSHIPS WITH INDEPENDENT AUDITORS
The firm of Ernst & Young LLP was the Company's independent auditors
for the fiscal year ended January 31, 1999. Representatives of Ernst & Young 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.
(16)
<PAGE>
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.
Effective June 1, 1998, the Company dismissed its prior independent
accountants, Arthur Andersen LLP, and retained for fiscal year 1999 new
independent accountants, Ernst & Young LLP. Arthur Andersen LLP's reports on the
Company's financial statements for the two most recent fiscal years (i.e., the
fiscal years ended January 31, 1998 and January 31, 1997) contained no adverse
opinion or a disclaimer of opinion, and were not qualified or modified as to
uncertainty, audit scope or accounting principles. The decision to change the
Company's accountants was approved by the Company's Board of Directors.
During the Company's last two fiscal years and the subsequent interim
period to the date of dismissal, there were no disagreements between the Company
and Arthur Andersen LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Arthur Andersen LLP, would
have caused it to make a reference to the subject matter of the disagreements in
connection with its reports.
None of the "reportable events" described in Item 304(a)(1)(v) of
Regulation S-K occurred with respect to the Company within the last two fiscal
years and the subsequent interim period to the date of dismissal.
Effective June 1, 1998, the Company engaged Ernst & Young LLP as its
independent accountants for fiscal year 1999. During the last two fiscal years
and the subsequent interim period to the date of engagement, the Company did not
consult Ernst & Young LLP regarding any of the matters or events set forth in
Item 304(a)(2) of Regulation S-K.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Any proposal of a shareholder intended to be presented at the Annual
Meeting of Shareholders in 2000 must be received at the Company's principal
executive offices no later than December 31, 1999 in order to be considered for
inclusion in the Company's proxy statement and form of proxy relating to that
meeting.
A shareholder of the Company may wish to have a proposal presented at
the 2000 Annual Meeting, but not to have such proposal included in the Company's
proxy statement and form of proxy relating to that meeting. If notice of any
such proposal is not received by the Company at the address appearing on the
first page of this proxy statement by March 15, 2000, then such proposal shall
be deemed "untimely" for purposes of Rule 14a-4(c) promulgated under the
Exchange Act and, therefore, the Company will have the right to exercise
discretionary voting authority with respect to such proposal.
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.
(17)
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
DEB SHOPS, INC.
May 19, 1999
Please Detach and Mail in the Envelope Provided
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
A / X / Please mark your
votes as in this example
<S> <C> <C> <C>
FOR AUTHORITY
WITHHELD FOR AGAINST ABSTAIN
1. Election of Nominees: Paul S. Bachow 2. Amend the Company's Articles of / / / / / /
Directors: / / / / Barry H. Feinberg Incorporation to increase the number
Barry H. Frank of shares of authorized Common
To withhold authority for any Marvin Rounick Stock from 25,000,000 to 50,000,000
individual nominee(s), check the Jack A. Rounick shares.
box, and insert the nominee(s) Warren Weiner
name(s) on the line below: 3. In their discretion, on such other business as may
properly come before the Annual Meeting or any adjournment
FOR ALL EXCEPT or postponement thereof.
/ /_________________________________________________________ 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 and FOR approval of the
amendment of the Company's Articles of Incorporation as
described in Item 2.
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 name by President or other
authorized officer. If a partnership, sign in partnership name by authorized persons.
</TABLE>
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
DEB SHOPS, INC.
9401 Blue Grass Road, Philadelphia, 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
19, 1999, 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)
