<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14A
PROXY STATEMENT
(PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934)
------------------------
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CARTER HAWLEY HALE STORES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARC E. BERCOON, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
CARTER HAWLEY HALE STORES, INC.
3880 NORTH MISSION ROAD
LOS ANGELES, CALIFORNIA 90031
WITH COPIES TO:
ERIC H. SCHUNK, ESQ.
MILBANK, TWEED, HADLEY & MCCLOY
601 SOUTH FIGUEROA STREET
LOS ANGELES, CALIFORNIA 90017
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
/ / 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:
/X/ Filing fee paid with preliminary materials.
<PAGE>
CARTER HAWLEY HALE STORES, INC.
3880 NORTH MISSION ROAD
LOS ANGELES, CALIFORNIA 90031
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AT HOTEL INTERCONTINENTAL
251 SOUTH OLIVE STREET
LOS ANGELES, CALIFORNIA 90012
To the Stockholders:
NOTICE is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of Carter Hawley Hale Stores, Inc. (the "Company") will be held in the
Watercourt Ballroom of Hotel InterContinental on Friday, June 17, 1994 at 1:00
p.m. local time, for the following purposes:
1. To elect eleven directors to serve for a term of one year until the
next Annual Meeting of Stockholders and until their respective
successors have been duly elected and qualified;
2. To approve a proposed amendment to the Company's Amended and Restated
Certificate of Incorporation to change the Company's name to Broadway
Stores, Inc.;
3. To approve the restatement of the Company's 1992 Stock Incentive
Plan, as amended, to eliminate the automatic four percent annual
increase in the exercise price of certain options issued thereunder;
4. To ratify the appointment of Price Waterhouse as the Company's
independent accountants for the Company's 1994 fiscal year; and
5. To consider and transact such other business as may properly come
before the Annual Meeting or any adjournment thereof.
Holders of the Company's common stock, par value $.01 per share, and series
A exchangeable preferred stock, par value $.01 per share, at the close of
business on April 25, 1994, the record date fixed by the Board of Directors, are
entitled to notice of and to vote at the Annual Meeting. The Company's Board of
Directors urges that all stockholders of record exercise their right to vote at
the meeting personally or by proxy. Accordingly, we are sending you the
following Proxy Statement and the enclosed proxy card.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SPECIFY YOUR
VOTE ON THE ACCOMPANYING PROXY AND SIGN, DATE AND RETURN IT AS PROMPTLY AS
POSSIBLE IN THE ENCLOSED SELF-ADDRESSED, POSTAGE-PAID ENVELOPE.
Your prompt response will be appreciated.
By Order of the Board of Directors
/s/ Marc E. Bercoon
Marc E. Bercoon
Secretary
Los Angeles, California
May 5, 1994
<PAGE>
CARTER HAWLEY HALE STORES, INC.
3880 NORTH MISSION ROAD
LOS ANGELES, CALIFORNIA 90031
PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors (the "Board")
of Carter Hawley Hale Stores, Inc. (the "Company") to be used at the Annual
Meeting of Stockholders on Friday, June 17, 1994 (the "Annual Meeting") to be
held at 1:00 p.m. local time in the Watercourt Ballroom of the Hotel
InterContinental, Los Angeles. This Proxy Statement, the enclosed form of proxy
and the Annual Report to Stockholders are being sent to stockholders on or about
May 5, 1994.
At the Annual Meeting, stockholders will be asked to consider and vote upon
the following items:
ITEM I: The election of eleven directors to serve until the 1995 Annual
Meeting of Stockholders;
ITEM II: A proposed amendment to the Company's Amended and Restated
Certificate of Incorporation to change the Company's name to
Broadway Stores, Inc.
ITEM III: A proposal to approve the restatement of the Company's 1992 Stock
Incentive Plan, as amended, to eliminate the automatic four
percent annual increase in the exercise price of certain options
issued thereunder;
ITEM IV: A proposal to ratify the appointment of Price Waterhouse as the
Company's independent public accountants for its 1994 fiscal year.
Any stockholder giving a proxy may revoke it at any time prior to its
exercise at the Annual Meeting by giving notice of such revocation either
personally or in writing to the Secretary of the Company at the Company's
executive offices, by subsequently executing and delivering another proxy or by
voting in person at the Annual Meeting.
The Annual Report to Stockholders that accompanies this Proxy Statement is
not to be regarded as proxy soliciting material.
The Board of the Company believes that election of its director nominees and
approval of Items II, III and IV are in the best interests of the Company and
its stockholders and recommends to the stockholders the approval of each of the
nominees and of Items II, III and IV.
VOTING
Shares represented by duly executed and unrevoked proxies in the enclosed
form received by the Board will be voted at the Annual Meeting in accordance
with the specifications made therein by the stockholders, unless authority to do
so is withheld. If no specification is made, shares represented by duly executed
and unrevoked proxies in the enclosed form will be voted FOR the election as
directors of the nominees listed herein, FOR Items II, III and IV and, with
respect to any other matter that may properly come before the meeting, in the
discretion of the persons voting the respective proxies.
The cost of preparing, assembling and mailing the proxy materials will be
borne by the Company. The Company has retained Chemical Bank to solicit proxies
at an estimated cost of $9000.
Only holders of record at the close of business on April 25, 1994 (the
"Record Date") of the Company's common stock, $.01 par value (the "Common
Stock"), which is listed on the New York Stock Exchange (the "NYSE") under the
symbol "CHH," and the Company's series A exchangeable preferred stock, $.01 par
value (the "Preferred Stock"), which has not been admitted or listed for trading
on any national securities exchange or on any national automated dealer
quotation system, will be entitled to vote at the Annual Meeting, voting
together as a single class. On the Record Date, there were 45,619,792 shares of
Common Stock and 849,560 shares of Preferred Stock outstanding. Each share of
Common Stock and each share of Preferred Stock is entitled to one vote on all
matters presented at the Annual Meeting.
<PAGE>
VOTE REQUIRED
The election of the director nominees requires a plurality of the votes cast
in person or by proxy at the Annual Meeting. Under Delaware law, the Company's
Amended and Restated Certificate of Incorporation and the Company's By-laws,
shares as to which a stockholder abstains or withholds from voting on the
election of directors and shares as to which a broker indicates that it does not
have discretionary authority to vote ("Broker Non-Votes") on the election of
directors will not be counted as voting thereon and therefore will not affect
the election of the nominees receiving a plurality of the votes cast.
Approval of the proposal to approve the restatement of the Company's 1992
Stock Incentive Plan, as amended, to eliminate the four percent annual increase
in the exercise price of certain options issued thereunder and the proposal to
amend the Company's Amended and Restated Certificate of Incorporation to change
the Company's name to Broadway Stores, Inc. each require the affirmative vote of
a majority of the shares present in person or represented by proxy at the Annual
Meeting and entitled to vote thereat. Under Delaware law, the Company's Amended
and Restated Certificate of Incorporation and the Company's By-laws, abstentions
and Broker Non-Votes on these proposals have the same legal effect as a vote
against such proposal.
The stockholders of the Company have no dissenters' or appraisal rights in
connection with any of Items I, II, III or IV.
The Company has been informed that a holder of more than 50% of the shares
entitled to vote, Zell/ Chilmark Fund, L.P., a Delaware limited partnership
("Zell/Chilmark"), intends to vote FOR the election of the directors nominated
by the Board and FOR Items II, III and IV. If Zell/Chilmark does in fact so vote
its shares, the election of such directors and the approval of each of Items II,
III and IV is assured, irrespective of the votes of other stockholders. See
"Principal Stockholders and Management Ownership--Principal Stockholders."
2
<PAGE>
PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as to those persons known
to the Company to be beneficial owners (as determined in accordance with Rule
13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of more than 5% of the outstanding Common Stock and Preferred
Stock as of the Record Date. The percentage ownership figures set forth in the
table are calculated on the basis of the number of shares of Common Stock and
Preferred Stock outstanding as of the Record Date.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE
OF
TITLE NAME AND ADDRESS BENEFICIAL PERCENT
OF CLASS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- - -------------- ---------------------------------- --------------- ----------------
<S> <C> <C> <C>
Common Stock Zell/Chilmark Fund, L.P. 24,800,866(1) 54.4%
Two North Riverside Plaza, Suite
1500
Chicago, IL 60606
Common Stock Mellon Bank, N.A., as 2,500,000(2) 5.5%
Trustee for
First Plaza Group Trust
One Mellon Center
Pittsburgh, PA 15258
Common Stock FMR Corp. 3,253,069(3) 7.1%
82 Devonshire Street
Boston, MA 02109-3614
Common Stock Trimark Investment Management Inc. 3,068,000(4) 6.7%
One First Canadian Place
Suite 5600, P.O. Box 487
Toronto, Ontario M5X 1E5
Canada
Preferred Bankers Trust Company 543,127(5) 63.9%
Stock One Bankers Trust Plaza
New York, NY 10006
<FN>
- - ------------------------
(1) The sole general partner of Zell/Chilmark is ZC Limited Partnership, an
Illinois limited partnership ("ZC Limited"). The sole general partner of
ZC Limited is ZC Partnership, a Delaware general partnership ("ZC"). The
general partners of ZC are ZC, Inc., an Illinois corporation ("ZCI"), and
CZ, Inc., a Delaware corporation ("CZI"). The Samuel Zell Revocable Trust
dated January 17, 1990 (the "SZ Trust") is the sole stockholder of ZCI.
Mr. Samuel Zell is trustee and the beneficiary of the SZ Trust. Mr. David
M. Schulte is the sole stockholder of CZI. One of the limited partners of
ZC Limited is COP General Partnership, an Illinois general partnership
("COP"). One of the general partners of COP is COP Seniors General
Partnership, an Illinois general partnership ("COP Seniors"). One of the
general partners of COP Seniors is Mr. Shkolnik. Messrs. Zell, Schulte and
Shkolnik may each be deemed to share beneficial ownership of the shares
referenced, but each disclaims beneficial ownership of such shares.
(2) Mellon Bank, N.A., acts as the trustee (the "Trustee") of First Plaza
Group Trust ("First Plaza"), a trust under and for the benefit of certain
employee benefit plans of General Motors Corporation ("GM") and its
subsidiaries. First Plaza may be deemed to beneficially own the shares
referenced. Additionally, General Motors Investment Management Corporation
("GMIMCo"), a Delaware corporation and a wholly-owned subsidiary of GM,
may be deemed to beneficially own these shares because it serves as
investment manager for First Plaza with respect to such shares and has the
power to direct the Trustee as to voting and disposition of such shares.
The Pension Investment Committee of GM may also be deemed to beneficially
own such shares by virtue of its authority to select the investment
manager of such shares. First Plaza is also a limited partner of Zell/
Chilmark, but disclaims beneficial ownership of shares of common stock
owned by Zell/Chilmark.
(3) Fidelity Management & Research Company ("Fidelity"), a wholly-owned
subsidiary of FMR Corp. ("FMR"), is the beneficial owner of 3,123,000
shares or 6.85% of the Company's outstanding Common Stock in its capacity
as investment adviser to several investment companies. Fidelity Management
Trust Company ("FMTC"), a wholly-owned subsidiary of FMR, is the
</TABLE>
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
3
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
<TABLE>
<S> <C>
beneficial owner of 130,069 shares or 0.29% of the Company's outstanding
Common Stock in its capacity as investment manager of certain
institutional accounts. Edward C. Johnson 3d, the Chairman of FMR, owns
34% of the outstanding voting common stock of FMR. Certain of Mr.
Johnson's family members and related trusts also own shares of FMR voting
common stock (together with Mr. Johnson, the "Johnson Family"). The
Johnson Family, FMR Corp., Fidelity and FMTC may thus be deemed to have
beneficial ownership of all or a portion of the shares referenced.
(4) Trimark Investment Management Inc. ("TIMI") is the investment manager for,
and sole trustee of, three mutual funds, Trimark Fund, Trimark Select
Growth Fund and Trimark Select Canadian Growth Fund (collectively, the
"Trimark Funds"), each of which is the record owner of a portion of the
referenced shares. As investment manager and sole trustee for the Trimark
Funds, TIMI has sole voting and dispositive power in respect of such
shares and may thus be deemed to be have beneficial ownership of such
shares.
(5) Bankers Trust Company holds these shares in its capacity as the trustee of
the Company's 401(k) Savings and Investment Plan (the "401(k) Plan").
Bankers Trust Company disclaims beneficial ownership of such shares.
</TABLE>
MANAGEMENT OWNERSHIP
The following table indicates the total number of equity securities of the
Company beneficially owned by each of the Company's directors, the Named
Executive Officers, as defined below, director nominees and all directors and
executive officers as a group as of the Record Date. Beneficial ownership has
been calculated in accordance with Rule 13d-3 promulgated under the Exchange
Act. Unless otherwise indicated, all shares are owned directly and the owner has
sole voting and investment power with respect thereto.
<TABLE>
<CAPTION>
TITLE NAME OF AMOUNT AND NATURE OF
OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- - -------------- ----------------------- -------------------- -------------------
<S> <C> <C> <C>
DIRECTORS:
Common Stock Walter T. Dec 2,500,000(1) 5.5%(1)
Common Stock David L. Dworkin 666,666(2) *
Common Stock Leobardo F. Estrada 10,000(3) *
Common Stock Sidney R. Petersen 10,825(3)(4) *
Common Stock Terry Savage 11,000(3)(5) *
Common Stock David M. Schulte 24,800,866(6) 54.4%(5)
Common Stock Sanford Shkolnik 24,920,866(7) 54.6%(6)
Common Stock Robert M. Solow 10,000(3) *
Common Stock Dennis C. Stanfill 12,710(3)(8) *
Common Stock James D. Woods 13,000(3) *
Common Stock Samuel Zell 24,800,866(9) 54.4%(8)
NAMED EXECUTIVE OFFICERS:
Common Stock Philip M. Hawley 480,000(10) 1.1%
Common Stock William J. Podany 36,666(11) *
Common Stock Gerald J. Mathews 0 *
Common Stock Patricia A. Warren 0 *
Common Stock Brian L. Fleming 16,185(12) *
Common Stock Edwin J. Holman 17,590(13) *
Common Stock Larry G. Petersen 3,722(14) *
All Directors and
Executive Officers as a
Group (19 persons)
28,229,705(1)(6) 61.9%
(7)(9)(15)
<FN>
- - ------------------------
* Less than 1 percent.
(1) The shares listed for Mr. Dec are held of record by Mellon Bank, N.A., as
trustee for First Plaza, a trust under and for the benefit of certain
employee benefit plans of GM and its subsidiaries. By virtue of his
position as head of private market investment activities for GMIMCo, First
Plaza's investment manager, Mr. Dec may be deemed to share, with others,
voting and dispositive power with respect to the shares owned by First
Plaza. Mr. Dec disclaims beneficial ownership of all of such shares. See
footnote 2 to the table under the heading "Principal Stockholders and
Management Ownership--Principal Stockholders."
</TABLE>
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
4
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
<TABLE>
<S> <C>
(2) In connection with Mr. Dworkin's election to the positions of President and
Chief Executive Officer, on February 18, 1993 the Stock Option Committee of
the Board granted Mr. Dworkin options for 1,000,000 shares of Common Stock.
Under the terms of such grant, options to purchase 333,333 shares of Common
Stock became vested on each of March 24, 1993 and March 24, 1994. The
666,666 options are currently exercisable. For a description of the
agreement in principle between Mr. Dworkin and the Company regarding Mr.
Dworkin's employment with the Company, see "Employment and
Change-in-Control Arrangements-- Employment Agreement with Mr. Dworkin."
(3) Includes currently exercisable options to purchase 10,000 shares of Common
Stock.
(4) Includes 405 shares of Common Stock and Warrants to purchase 420 shares of
Common Stock, all of which are held by Mr. Petersen and his wife as
trustees for the Petersen Family Trust.
(5) Includes 1,000 shares of Common Stock held by Ms. Savage as trustee for
Terry Savage Productions Limited, Retirement Plan and Trust dated June 1,
1982.
(6) The shares listed for Mr. Schulte are held of record by Zell/Chilmark. Mr.
Schulte may be deemed to share, with others, voting and dispositive power
with respect to the shares owned by Zell/Chilmark. Mr. Schulte disclaims
beneficial ownership of all of such shares. See footnote 1 to the table
under the heading "Principal Stockholders and Management
Ownership--Principal Stockholders."
(7) Includes currently exercisable options to purchase 110,000 shares of Common
Stock plus 10,000 shares of Common Stock owned directly. 24,800,866 of the
shares listed for Mr. Shkolnik are held of record by Zell/Chilmark. The
sole general partner of Zell/ Chilmark is ZC Limited. One of the limited
partners of ZC Limited is COP. One of the general partners of COP is COP
Seniors. One of the general partners of COP Seniors is Mr. Shkolnik. Mr.
Shkolnik may be deemed to share, with others, voting and dispositive power
with respect to the shares owned by Zell/Chilmark. Mr. Shkolnik disclaims
beneficial ownership of all shares held by Zell/Chilmark. See footnote 1 to
the table under the heading "Principal Stockholders and Management
Ownership--Principal Stockholders."
(8) Includes Warrants to purchase 210 shares of Common Stock.
(9) The shares listed for Mr. Zell are held of record by Zell/Chilmark. Mr.
Zell may be deemed to share, with others, voting and dispositive power with
respect to the shares owned by Zell/Chilmark. Mr. Zell disclaims beneficial
ownership of all of such shares. See footnote 1 to the table under the
heading "Principal Stockholders and Management Ownership--Principal
Stockholders."
(10) Includes currently exercisable options to purchase 480,000 shares of Common
Stock. Mr. Hawley resigned as Chief Executive Officer effective February
1993 and resigned as director in June 1993.
(11) Includes currently exercisable options to purchase 36,666 shares of Common
Stock.
(12) Includes currently exercisable options to purchase 14,666 shares of Common
Stock and warrants to purchase 361 shares of Common Stock. Mr. Fleming left
the employ of the Company on April 1, 1994.
(13) Includes currently exercisable options to purchase 11,667 shares of Common
Stock, warrants to purchase 840 shares of Common Stock and 1,855 shares of
Preferred Stock, which shares of Preferred Stock are currently exchangeable
for warrants to purchase 1,855 shares of Common Stock. The 1,855 shares of
Preferred Stock owned by Mr. Holman constitute less than one percent of the
shares of Preferred Stock outstanding. Mr. Holman left the employ of the
Company in October 1993.
(14) Includes Warrants to purchase 840 shares of Common Stock and includes 1,055
shares of Preferred Stock, which shares of Preferred Stock are currently
exchangeable for Warrants to purchase 1,055 shares of Common Stock. Mr.
Petersen left the employ of the Company in October 1993. The 1,055 shares
of Preferred Stock owned by Mr. Petersen constitute less than one percent
of the shares of Preferred Stock outstanding.
(15) Includes currently exercisable options to purchase 907,997 shares of Common
Stock, Warrants to purchase 630 shares of Common Stock and 859 shares of
Preferred Stock, which shares of Preferred Stock are currently exchangeable
for Warrants to purchase 859 shares of Common Stock.
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A partnership affiliated with Samuel Zell, the Company's Chairman of the
Board, owns Southland Mall, located in Hayward, California. The Company operates
an Emporium store at Southland Mall pursuant to a long-term lease with the owner
of the mall. The Company's monthly payments under such lease amount to $50,000.
Additionally, the Company must pay the owner of the mall certain fees to cover
common area maintenance expenses and real estate taxes.
See "Employment and Change-in-Control Arrangements--Employment Agreement
with Mr. Dworkin" for a discussion of the legal fees to be paid to Mr. Dworkin's
brother-in-law in connection with his providing Mr. Dworkin legal advice in
connection with the negotiation of Mr. Dworkin's employment arrangements with
the Company.
5
<PAGE>
NOMINEES FOR ELECTION AS DIRECTORS
The Company's Amended and Restated Certificate of Incorporation and By-laws
require that the number of directors on the Board be not less than three nor
more than twenty-five. The Board currently consists of the following ten
persons: David L. Dworkin, Leobardo F. Estrada, Sidney R. Petersen, Dennis C.
Stanfill, Terry Savage, David M. Schulte, Sanford Shkolnik, Robert M. Solow,
James D. Woods and Samuel Zell. At each annual meeting of stockholders, the term
of each director expires and director nominees are elected to the Board for
terms of one year.
At the Annual Meeting eleven directors are to be elected to serve until the
1995 Annual Meeting of Stockholders and until their successors are elected and
qualified. Unless authority to vote for directors is withheld in the proxy card,
it is the intention of the persons named in the enclosed form of proxy to vote
FOR the election of Walter T. Dec as a director and the re-election of David L.
Dworkin, Leobardo F. Estrada, Sidney R. Petersen, Dennis C. Stanfill, Terry
Savage, David M. Schulte, Sanford Shkolnik, Robert M. Solow, James D. Woods and
Samuel Zell as directors. The persons designated as proxies will have discretion
to cast votes for other persons in the event any nominee for director is unable
to serve. At present, it is not anticipated that any nominee will be unable to
serve.
DIRECTOR NOMINEES
WALTER T. DEC, 51
For more than the past five years, Mr. Dec has been head of private market
investment activities for GMIMCo, First Plaza's investment manager. He is also a
member of the board of directors of GMIMCo and its Asset Allocation Committee.
In addition, he is a member of the board of directors of Taubman Centers, Inc.,
a real estate investment trust, and is a member of the advisory boards of a
number of private investment partnerships.
DAVID L. DWORKIN, 50
Mr. Dworkin has been a director since March 24, 1993. He has been President
and Chief Executive Officer of the Company since March 1993. Mr. Dworkin served
as Chairman and Chief Executive Officer of British Home Stores, a division of
Storehouse PLC, a London, England based retailer, from November 1989 until July
1992, and as Group Chief Executive of the Storehouse PLC from July 1992 until
joining the Company in March of 1993. Mr. Dworkin has in excess of 25 years
experience in the retail industry, including service as President & Chief
Executive Officer of Bonwit Teller from 1988 through 1989, President & Chief
Operating Officer of Neiman Marcus from 1984 through 1988, and Executive Vice
President of Marshall Fields, a division of Dayton-Hudson Corp.
DR. LEOBARDO F. ESTRADA, 48
Dr. Estrada has been a director since 1992. He has been an Associate
Professor at the Graduate School of Architecture and Urban Planning at the
University of California at Los Angeles for more than the past five years.
SIDNEY R. PETERSEN, 63
Mr. Petersen has been a director since 1989. For more than the past five
years, he has been a private investor and consultant. He is the retired Chairman
of the Board and Chief Executive Officer for Getty Oil Company, positions which
he held from 1980 to 1984. He is also a director of Avery Dennison Corporation,
NICOR, Inc., Global Natural Resources, Inc. and Union Bank.
TERRY SAVAGE, 49
Ms. Savage has been a director since 1992. She is a financial analyst and
author. For the past five years, she has been a syndicated columnist for the
Chicago Sun-Times. Additionally, Ms. Savage was a financial and business
reporter for the CBS-owned television station in Chicago, WBBM-TV, from 1982
through 1991. She is also a director of McDonald's Corporation.
DAVID M. SCHULTE, 47
Mr. Schulte has been a director since 1992. He is the sole shareholder of
one of the two partners of the sole general partner of ZC Limited, the sole
general partner of Zell/Chilmark, which owns 54.4% of the Company's outstanding
Common Stock. Since 1984, Mr. Schulte has been managing general partner of
6
<PAGE>
Chilmark Partners, L.P., a merchant banking firm, which currently devotes all of
its time to the affairs of Zell/ Chilmark. Mr. Schulte is a director of Revco
D.S., Inc., Jacor Communications, Inc., Santa Fe Energy Resources, Inc. and
Sealy Corporation.
SANFORD SHKOLNIK, 54
Mr. Shkolnik has been a director since 1992. He served as Vice Chairman of
the Company from October 1992 through March 1993. For more than the past five
years he has been Executive Vice President of Equity Financial and Management
Company, a company chaired by Mr. Zell. He is also Chairman of the Board of
Equity Properties and Development Company, an affiliate of Mr. Zell. Mr.
Shkolnik is an indirect limited partner of ZC Limited, the sole general partner
of Zell/Chilmark.
DR. ROBERT M. SOLOW, 69
Dr. Solow has been a director since 1992. He is Institute Professor at the
Massachusetts Institute of Technology. He is the 1987 recipient of the Nobel
Memorial Prize in Economic Science. In addition to his professorship at M.I.T.,
Dr. Solow serves on the board of directors of Yamaichi Global Funds and is a
member of the Corporate Technology Committee of the Norton Co. He also serves as
a member of the advisory committee of Zell/Chilmark. He is former Chairman of
the Federal Reserve Bank of Boston and a former member and Chairman of General
Motors Science Advisory Committee.
DENNIS C. STANFILL, 67
Mr. Stanfill has been a director since 1987. He is currently a senior
advisor to Credit Lyonnais. He was Co-Chairman, Co-Chief Executive Officer and a
director of Metro-Goldwyn-Mayer Inc. from January 1992 until May 1993. From
August 1990 to December 1991, he served as Chairman of the Board and Chief
Executive Officer of AME, Inc., a video post-production company. AME, Inc. is
currently the subject of a reorganization petition under chapter 11 of title 11
of the United States Code filed in the United States Bankruptcy Court Central
District of California on July 22, 1992. Prior to August 1990, Mr. Stanfill was
President of Stanfill, Bowen & Co., Inc., a private investment and venture
capital firm. He is also a director of The Dial Corporation.
JAMES D. WOODS, 62
Mr. Woods has been a director since 1992. He has served as the Chairman of
the Board of Baker Hughes Incorporated since January 1989 and as President and
Chief Executive Officer of Baker Hughes Incorporated since April 1987. Mr. Woods
is also a Director of Varco International, Inc. and Wynn's International, Inc.
Mr. Woods was the former chairman of the Petroleum Equipment Suppliers
Association and the National Ocean Industries Association, as well as a member
of the National Petroleum Council.
SAMUEL ZELL, 52
Mr. Zell has been a director since 1992 and Chairman of the Board since
March 4, 1993. He is Chairman of the Board of Equity Financial and Management
Company and Equity Group Investments, Inc., two privately-owned affiliated
investment and management companies. Mr. Zell is the trustee and beneficiary of
a trust that is the sole shareholder of one of the two partners of the sole
general partner of ZC Limited, the sole general partner of Zell/Chilmark, which
holds 54.4% of the Company's outstanding Common Stock; Chairman of the Board of
Itel Corporation, the Delta Queen Steamboat Co. and Great American Management
and Investment, Inc.; Chairman of the Board of Trustees of Equity Residential
Properties Trust; Chairman of the Board and Chief Executive Officer of Capsure
Holdings Corp.; and Co-Chairman of Manufactured Home Communities, Inc. Mr. Zell
is also a director of Jacor Communications, Inc., Sealy Corporation and The
Vigoro Corporation, and is Co-Chairman of the Board of Revco D.S., Inc. Prior to
October 4, 1991, Mr. Zell was President of Madison Management Group, Inc., which
company filed for protection under chapter 11 of title 11 of the United States
Code on November 8, 1991. The case has subsequently been converted to a
proceeding under chapter 7 of such code.
7
<PAGE>
INFORMATION REGARDING THE BOARD OF DIRECTORS
AND ITS COMMITTEES
The Board met 9 times during fiscal 1993. With the exception of James D.
Woods and Robert M. Solow, each current director attended at least 75% of the
total number of meetings of the Board and each of the committees of the Board on
which such director served held during the period for which he or she has been a
director. The Board has standing Executive, Audit, Compensation, Stock Option
and Nominating Committees. The current members of each of the Board's committees
are listed below.
THE EXECUTIVE COMMITTEE
The current members of the Executive Committee are David L. Dworkin, David
M. Schulte, Sanford Shkolnik and Samuel Zell. The Executive Committee did not
meet during fiscal 1993.
The Executive Committee has all of the authority of the Board except the
authority to amend by-laws, fix director compensation, authorize special
distributions to stockholders, fill Board vacancies and act with respect to
certain other limited matters.
THE AUDIT COMMITTEE
The current members of the Audit Committee are David M. Schulte, Sidney R.
Petersen and James D. Woods. During the 1993 fiscal year, the Audit Committee
met 4 times.
The Audit Committee, composed solely of outside directors, meets
periodically with the Company's independent accountants, management and internal
auditors to discuss accounting principles, financial and accounting controls,
the scope of the annual audit, internal control and other matters; advises the
Board on matters related to accounting and auditing; and reviews management's
selection of independent accountants. The independent accountants and the
internal auditors have complete access to the committee without management
present, to discuss results of their audit and their opinions on adequacy of
internal controls, quality of financial reporting, and other accounting and
auditing matters.
THE COMPENSATION COMMITTEE
The current members of the Compensation Committee are Terry Savage, David M.
Schulte, Dr. Robert M. Solow and Dennis C. Stanfill. The Compensation Committee
met 8 times during fiscal 1993.
The Compensation Committee, composed solely of outside directors, reviews
and takes action regarding terms of compensation, employment contracts and
pension matters that concern officers and key employees of the Company.
THE STOCK OPTION COMMITTEE
The current members of the Stock Option Committee are David M. Schulte and
Samuel Zell. The Stock Option Committee met 10 times during the 1993 fiscal
year.
The Stock Option Committee administers the Company's 1992 Stock Incentive
Plan, as amended (the "Plan"), which task includes, among other things, granting
and setting the terms of stock options and stock appreciation rights.
THE NOMINATING COMMITTEE
The current members of the Nominating Committee are Dr. Leobardo F. Estrada
and Samuel Zell. The Nominating Committee did not meet in fiscal 1993.
The Nominating Committee recommends to the Board nominees for Board
membership and makes recommendations as to Board policies concerning the
selection, tenure and qualification of directors.
The Nominating Committee reviews the qualifications of, among others, those
persons recommended for nomination to the Board by stockholders. A stockholder
suggesting a nominee to the Board should send the nominee's name, biographical
material, beneficial ownership of the Company's stock and other relevant
information in writing to the Secretary of the Company in a timely manner as set
forth in the Company's By-laws, accompanied by a consent of such nominee to
serve as a director if elected. Nominees must be willing to devote the time
required to serve effectively as a director and as a member of one or more Board
committees. In order to submit a nomination, a stockholder must be a holder of
record on the date of such submission and on the record date for determining
stockholders entitled to vote at the meeting at which the election will take
place.
8
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
SUMMARY OF COMPENSATION
Table I sets forth information concerning the annual and long-term
compensation for services in all capacities to the Company for the fiscal years
1993, 1992 and 1991, of those persons who at any time during fiscal 1993 served
as the chief executive officer, at the end of Fiscal 1993 were the four most
highly compensated executive officers of the Company, and two other
highly-compensated executive officers who were not serving as such at the close
of fiscal 1993 (collectively, the "Named Executive Officers").
TABLE I
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-----------------------------------------------------------
OTHER
NAME AND ANNUAL ALL OTHER
PRINCIPAL SALARY BONUS COMPENSATION OPTIONS COMPENSATION
POSITION YEAR ($) ($) ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C>
D.L. Dworkin 1993 856,409 0 0 1,000,000 1,477,664(1)
President & CEO 1992 0 0 0 0 0
1991 0 0 0 0 0
W.J. Podany 1993 325,000 0 0 40,000 26,651(2)
EVP, Merchandising 1992 305,208 0 0 110,000 156,836
1991 0 0 0 0 0
G.J. Mathews 1993 243,748 0 0 150,000 157,280(3)
EVP, Stores 1992 0 0 0 0 0
1991 0 0 0 0 0
P.A. Warren 1993 224,166 0 0 150,000 186,373(4)
EVP, Merchandising 1992 0 0 0 0 0
1991 0 0 0 0 0
B.L. Fleming 1993 275,000 0 0 0 4,594(5)
SVP, Accounting & 1992 272,356 0 0 44,000 11,337
Taxes 1991 250,000 0 0 0 4,350
FORMER EXECUTIVE OFFICERS
P.M. Hawley 1993 0 0 126,438(6) 0 0
Former Chairman & 1992 787,500(7) 0 0 480,000 1,750,960(8)
Chief 1991 750,000 0 0 0 7,429
Executive Officer
E.J. Holman 1993 466,667 7,088(9) 0 170,000 6,960(10)
Former Vice Chairman 1992 393,750 0 0 130,000 6,682
& COO 1991 350,000 0 0 0 6,139
L.G. Petersen 1993 350,000 5,982(11) 241(12) 0 5,846(13)
Former EVP-CFO 1992 337,500 0 568 110,000 5,846
1993 250,000 0 76 0 4,475
<FN>
- - ------------------------
(1) Includes a $1,000,000 sign-on bonus, a $375,000 bonus to compensate Mr.
Dworkin for the loss of his bonus from his prior employment, $97,444 as
compensation for relocation costs and $5,220 as the imputed value of life
insurance benefits.
</TABLE>
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
9
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
<TABLE>
<S> <C>
(2) The amount shown for 1993 includes $21,222 as compensation for relocation
costs and $5,428 as the imputed value of life insurance benefits. The
amount shown for 1992 includes a $75,000 sign-on bonus, $76,860 as
compensation for relocation costs and $4,976 as imputed value of life
insurance benefits.
(3) Includes a $38,301 sign-on bonus, $115,963 as compensation for relocation
costs and $3,016 as the imputed value of life insurance benefits.
(4) Includes a $104,044 sign-on bonus, $79,313 as compensation for relocation
costs and $3,016 as the imputed value of life insurance benefits.
(5) The amounts shown for 1993 and 1991 include $4,594 and $4,350,
respectively, as the imputed value of life insurance benefits. The amount
shown for 1992 includes $6,743 as the value of new stock and warrants from
1987 restricted stock grant and $4,594 as the imputed value of life
insurance benefits. Mr. Fleming left the employ of the Company on April 1,
1994.
(6) In connection with an agreement entered into in October 1992 regarding his
cessation of activities as Chief Executive Officer, Mr. Hawley agreed to
retire as Chief Executive Officer as of December 31, 1992 and the Company
agreed to pay him $2 million in full satisfaction of, among other things,
the remaining term of his employment agreement. Pursuant to such
agreement, the Company also agreed (i) to provide Mr. Hawley with office
space and secretarial and ancillary office services in the Los Angeles
area until December 31, 1994, and (ii) to reimburse Mr. Hawley for certain
business expenses incurred by him. Mr. Hawley and the Company entered into
an agreement dated as of December 31, 1992 under which Mr. Hawley agreed
to continue to serve as Chairman of the Board for an undetermined period
of time after his cessation of activities as Chief Executive Officer and
agreed to provide certain consulting services to the Company. This
agreement obligated the Company to make six quarterly payments of
consulting fees to Mr. Hawley in the amount of $41,666 each. The amount
shown for 1993 reflects the payment of $83,332 in consulting fees and
$37,690 in expenses related to the provision to Mr. Hawley of office space
and secretarial and ancillary office services.
(7) The $2 million payment to Mr. Hawley referred to in note 6 above has been
allocated in this table between the Salary column and All Other
Compensation column. The amount shown in the Salary column reflects the
aggregate salary Mr. Hawley earned at the rate provided under his
employment agreement from the beginning of the 1992 fiscal year through
October 15, 1992, plus that portion of the $2 million payment attributable
to Mr. Hawley's agreeing to continue to serve as Chief Executive Officer
from October 15, 1992 through his retirement date. Subsequent to entering
into the October agreement referred to above, Mr. Hawley agreed to
continue to perform the functions of Chief Executive Officer through the
end of the Company's fiscal year.
(8) Of the figure shown for 1992, $1,744,000 reflects the portion of the
$2,000,000 payment received by Mr. Hawley in connection with his
retirement that was not allocated to salary for fiscal 1992 as described
in footnote 7. Of the figures shown for all three years, $6,960 reflects
payments made by the Company on behalf of Mr. Hawley for life insurance
benefits. $469 and $2,047 of the amounts shown for 1991 and 1990,
respectively, reflect registrant contributions to the 401(k) Plan.
(9) 1992 Annual Incentive Plan Award paid in April 1993.
(10) Includes $6,960 and $6,682 as the imputed value of life insurance benefits
for 1993 and 1992, respectively.
(11) 1992 Annual Incentive Plan Award paid in April 1993.
(12) Preferential earnings on deferred compensation based at rate of 10.16%
(20% above Basic Rate of 7.16%).
(13) Includes $5,846 and as the imputed value of life insurance benefits for
1993 and 1992. The amount shown for 1991 includes $4,475 as the imputed
value of life insurance benefits and a $313 contribution to Mr. Petersen's
account under the 401(k) Plan.
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
Table II presents information regarding stock option grants made during
fiscal 1993 to each of the Named Executive Officers pursuant to the Plan. No
Stock Appreciation Rights ("SARs") were granted to any Named Executive Officer
in fiscal 1993.
10
<PAGE>
TABLE II
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED ANNUAL
-------------------------------------------------------- RATE OF STOCK PRICE
PERCENT OF TOTAL APPRECIATION FOR
OPTIONS/ OPTIONS/SARS EXERCISE OPTION TERM
SARS GRANTED TO OR BASE -----------------------
GRANTED EMPLOYEES IN PRICE EXPIRATION 5% 10%
NAME (#) FISCAL YEAR (%) ($/SHARE) DATE ($) ($)
<S> <C> <C> <C> <C> <C> <C>
D.L. Dworkin 1,000,000 32.289 10.220 02/18/03 6,427,000 16,288,000
G.J. Matthews 110,000 3.552 12.875 05/04/03 890,672 2,257,138
G.J. Matthews 40,000 1.292 13.750 11/09/03 345,892 892,558
W.J. Podany 40,000 1.292 13.375 11/09/03 336,440 852,640
P.A. Warren 110,000 3.552 13.750 07/01/03 951,170 2,410,540
P.A. Warren 40,000 1.292 13.375 11/09/03 336,440 852,640
FORMER EXECUTIVE OFFICERS
E.J. Holman(1) 170,000 5.489% $ 11.500 04/01/03 1,229,490 3,115,767
<FN>
- - ------------------------
(1) Mr. Holman left the employ of the Company on October 22, 1993. At that
time, he had 43,333 options that were exercisable until October 21, 1994;
all of his unexercisable options were cancelled. As of fiscal year-end, he
had 11,667 options that were exercisable.
</TABLE>
OPTION EXERCISES AND YEAR-END VALUES
Table III sets forth information regarding unexercised stock options held by
each of the Named Executive Officers. The only Named Executive Officers to have
exercised any stock options during fiscal 1993 were Messrs. Holman and Petersen,
as set forth below.
11
<PAGE>
TABLE III
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF IN-THE-MONEY
UNEXERCISED OPTIONS
OPTIONS AT FY-END
SHARES ACQUIRED VALUE AT FY-END ----------------------------
ON EXERCISE REALIZED ----------------------------- EXERCISABLE UNEXERCISABLE
NAME (#) ($) EXERCISABLE UNEXERCISABLE ($) ($)
<S> <C> <C> <C> <C> <C> <C>
D.L. Dworkin 0 0 333,333 666,667 0 0
W.J. Podany 0 0 36,667 113,333 0 0
G.J. Mathews 0 0 0 150,000 0 0
P.A. Warren 0 0 0 150,000 0 0
B.L. Fleming 0 0 14,667 29,333 0 0
FORMER EXECUTIVE OFFICERS
P.M. Hawley 0 0 480,000 4,800 0 0
E.J. Holman 31,666 $127,822.23 11,667(1) 0 0 0
L.G. Petersen 36,667 $138,959.76 0 0 0 0
<FN>
- - ------------------------
(1) These options will expire on October 21, 1994.
</TABLE>
PENSION AND SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS
All employees, other than employees covered by pension plans of applicable
labor unions, are eligible to participate in the Company's pension plan (the
"Pension Plan"). As of the Record Date, approximately 16,500 employees were
eligible to participate. The Company makes contributions to the Pension Plan
based upon the funding requirements of the Employee Retirement Income Security
Act of 1974, as amended. Such contributions are held by Bankers Trust Company,
which acts as trustee of the Pension Plan.
Benefits under the Pension Plan are based on a percentage of each
participant's yearly total of salary and bonus (collectively, "earnings"). In
general, every year, each participant earns a "Benefit" that equals 1% of such
participant's total earnings plus an additional 1/2% of such participant's
earnings that exceed the social security wage base. Benefits are added yearly
and become fully vested after five years of service. In general, upon a
participant's retirement at or after age 65, such participant shall be entitled
to receive monthly payments under the Pension Plan. Such monthly payments are
calculated on a straight life annuity basis and shall equal 1/12th of the
aggregate of all Benefits earned during employment. Participants who retire
after attaining age 55 but before attaining age 65 and after having accumulated
15 years of service with the Company shall be entitled to reduced payments under
the Pension Plan if they elect to receive such payments before age 65.
Table IV sets forth total benefits payable to executive employees, including
the Named Executive Officers, who participate in the Company's Supplemental
Executive Retirement Plan (the "SERP"). Amounts shown represent the aggregate
amounts to which such employees are entitled under both the Pension Plan and the
SERP, but do not reflect the deduction of 50% of social security benefits that
such employees will receive on retirement. Benefits are reduced if payments
begin prior to age 62.
12
<PAGE>
TABLE IV
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE YEARS OF SERVICE
ANNUAL COMPENSATION* 15 20 25 30
<S> <C> <C> <C> <C>
$ 100,000............................ $ 22,500 $ 30,000 $ 37,500 $ 45,000
$ 200,000............................ $ 45,000 $ 60,000 $ 75,000 $ 90,000
$ 300,000............................
$ 67,500 $ 90,000 $ 112,500 $ 135,000
$ 400,000............................ $ 90,000 $ 120,000 $ 150,000 $ 180,000
$ 500,000............................ $ 112,500 $ 150,000 $ 187,500 $ 225,000
$ 600,000............................ $ 135,000 $ 180,000 $ 225,000 $ 270,000
$ 700,000............................ $ 157,500 $ 210,000 $ 262,500 $ 315,000
$ 800,000............................ $ 180,000 $ 240,000 $ 300,000 $ 360,000
$ 900,000............................ $ 202,500 $ 270,000 $ 337,500 $ 405,000
$1,000,000........................... $ 225,000 $ 300,000 $ 375,000 $ 450,000
$1,100,000........................... $ 247,500 $ 330,000 $ 412,500 $ 495,000
$1,200,000........................... $ 270,000 $ 360,000 $ 450,000 $ 540,000
<FN>
- - ------------------------------
* Annual compensation consists of all amounts received under the categories
salary and bonus as shown in Table I.
</TABLE>
Employees whose annual base salary is $100,000 or more, or certain employees
who had achieved SERP eligibility prior to the Company's reorganization, may
also participate in the SERP. The threshold annual base salary rate is indexed
and adjusted annually to the rate of increase in the social security wage base.
The SERP presently covers approximately 150 executive employees. SERP benefits
are based on a percentage of average earnings for the five highest of the final
ten years' employment, less 50% of age 65 social security benefits and less
Benefits paid under the Pension Plan and certain supplemental amounts which may
be payable under certain individual employment contracts. Benefits generally are
computed on a straight life annuity basis. However, certain executives have
individual employment contracts that provide for supplemental payments, the
benefits of which are computed on a life annuity basis with a two-thirds benefit
to a surviving spouse. Except in the case of certain executives with special
provisions in their employment agreements, participants are entitled to receive
SERP benefits only upon (i) attaining age 55 and having accumulated 15 years of
service with the Company or (ii) attaining age 65 and having accumulated five
years of service with the Company.
Messrs. Dworkin, Podany, Mathews and Fleming and Ms. Warren, respectively,
have 1, 2.1, 0.9, 20 and 0.8 years of credited service under the Pension Plan
and the SERP.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive an annual retainer of
$22,000 plus $750 for each Board or committee meeting attended. Directors are
also eligible to receive stock option grants under the Plan.
Non-employee directors who do not have any vested interest in the SERP or
the Pension Plan may receive benefits under the Company's Retirement Plan for
Non-Employee Directors. Under such plan, upon retirement, each eligible director
shall receive monthly payments equal to 1/12 of the annual retainer in effect at
the time of retirement. Such payments shall continue for a period of months
equal to the number of months the director receiving the payments served, but
shall cease upon such director's death. To be eligible for benefits under this
plan, a director must have served for a minimum of 36 months. Notwithstanding
the foregoing, if a director retires on or after attainment of age 72, such
director shall receive retirement payments for a minimum period of 60 months or
until death. No director who is terminated for cause shall be entitled to any
benefits under this plan.
EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS AND CERTAIN TRANSACTIONS
EMPLOYMENT AGREEMENT WITH MR. DWORKIN. As of March 24, 1993, the Company
entered into an agreement with David L. Dworkin whereby Mr. Dworkin has agreed
to serve as the Company's President and Chief Executive Officer for a term of
three years. He received a $1,000,000 bonus upon commencing his duties as Chief
Executive Officer on March 24, 1993. Under such agreement Mr. Dworkin receives
an annual
13
<PAGE>
base salary of $1,000,000 and a guaranteed bonus of at least $400,000 payable in
April 1994 and at least $300,000 payable in April 1995. Upon commencing his
duties as Chief Executive Officer. Mr. Dworkin also received $375,000 as
compensation for the loss of his bonus from his prior employer plus relocation
and interim housing expenses associated with his moving from London to Southern
California, which expenses were paid for in such a manner that Mr. Dworkin was
not attributed any taxable income or paid as taxable income to Mr. Dworkin in a
sufficient gross amount such that after payment of applicable taxes Mr. Dworkin
will have been reimbursed for all appropriate expenses associated with
relocation. Mr. Dworkin was also afforded an opportunity to invest $250,000 in
Zell/Chilmark on the same terms as its general partners at any time on or before
August 15, 1993. He did not make such an investment.
Additionally, the Company paid the legal fees incurred by Mr. Dworkin in
connection with Mr. Dworkin's severance of his employment arrangement with his
prior employer, British Home Stores, and with the negotiations regarding his
employment arrangement with the Company. Mr. Dworkin's brother-in-law acted as
Mr. Dworkin's attorney with respect to these transactions. The legal fees of Mr.
Dworkin's brother-in-law for serving as such were $150,000.
Such agreement also provided for the granting to Mr. Dworkin of options to
purchase 1,000,000 shares of Common Stock under the Plan. On February 18, 1993,
the Stock Option Committee granted Mr. Dworkin nonqualified stock options to
purchase 1,000,000 shares of Common Stock. Options with respect to 333,333
shares of Common Stock became vested on each of March 24, 1993 and March 24,
1994, respectively. The remaining 333,334 options will vest on March 24, 1995.
The exercise price of all options granted is $10.22 per share. In addition to
the terms provided in the Plan, in the event that Mr. Dworkin is involuntarily
terminated or there occurs a "change-in-control," as defined below, all of Mr.
Dworkin's options will become immediately exercisable. For purposes of the
immediately preceding sentence, a "change-in-control" occurs if (i) the nominees
or designees of Zell/Chilmark cease to compose a majority of the Board, (ii)
certain changes in the Company's senior management occur, (iii) Zell/Chilmark
ceases to own 36% of the outstanding shares of the Company's voting stock, or
(iv) the Company ceases to own all of the outstanding shares of CHH Receivables,
Inc., a Delaware corporation and a wholly-owned subsidiary of the Company. Mr.
Dworkin will have 90 days to exercise the options that vest as a result of his
involuntary termination or any of the events described in clauses (i) through
(iv) above.
Because Mr. Dworkin has served as President and Chief Executive Officer of
the Company for at least one year, pursuant to his contract, upon retirement he
will be guaranteed benefits under the SERP, as defined below. The amount to
which he will be entitled will be determined based on the number of years that
he serves. If he is involuntarily terminated or if there occurs a
change-in-control as defined in the preceding paragraph, he will receive two
years' salary as a termination benefit. The Company's obligations under Mr.
Dworkin's agreement are guaranteed by Zell/Chilmark.
EMPLOYMENT AND TERMINATION AGREEMENTS WITH NAMED EXECUTIVE OFFICERS. Each
of the Named Executive Officers has entered into employment agreements with the
Company.
William J. Podany and Brian L. Fleming are parties to agreements with the
Company providing for three-year terms of employment that commenced July 21,
1992. Their annual base salaries are $325,000 and $275,000, respectively. Gerald
J. Mathews and Patricia A. Warren are parties to agreements with the Company
providing for three-year terms of employment that commenced on May 3, 1993 and
May 24, 1993, respectively. Their annual base salaries are $325,000. Mr.
Mathews' contract provided for a net after tax signing bonus of $25,000.
Prior to his retirement as Chairman of the Board and Chief Executive
Officer, Philip M. Hawley was party to an Assumption & Amendment to Employment
Agreement (the "Assumption Agreement") under which he was to serve as Chief
Executive Officer until July 20, 1995. Under the Assumption Agreement, Mr.
Hawley's annual base salary was $750,000. The Assumption Agreement was
terminated by this agreement upon Mr. Hawley's retirement on December 31, 1992.
See footnotes 6, 7 and 8 to Table I.
Edwin J. Holman, the Company's former Vice Chairman and Chief Operating
Officer, was party to an agreement with the Company providing for a three-year
term of employment that commenced July 21, 1992.
14
<PAGE>
As of April 1, 1993, his annual base salary was increased from $400,000 to
$480,000. Mr. Holman's employment agreement guaranteed him receipt of SERP
retirement benefits if he was terminated without cause. Larry G. Petersen, the
Company's former Executive Vice President and Chief Financial Officer, was party
to an employment agreement with the Company that provided for a three-year term
of employment that commenced July 21, 1992. Under this agreement, Mr. Petersen's
base salary was $350,000. Messrs. Holman and Petersen left the Company in
October 1993. Pursuant to the terms of their employment agreements, the Company
will continue to pay base salaries to Messrs. Holman and Petersen through the
term of such agreements to the extent they do not receive compensation for
services from other sources.
CHANGE-IN-CONTROL ARRANGEMENTS. The Plan enables the Company to grant stock
options and SARs to certain key employees, officers, directors and consultants.
Under the Plan, upon the occurrence of a "Change of Control," as defined
therein, all outstanding options shall become immediately exercisable except as
otherwise provided in any option holder's "Award Agreement," as defined in the
Plan, with respect to such holder's options. See "Employment Agreement with Mr.
Dworkin" for a discussion of change-in-control arrangements between Mr. Dworkin
and the Company.
CERTAIN TRANSACTIONS. In January 1994, the Company extended a three-year
loan in the principal amount of $100,000 to Robert J. Lambert, Executive Vice
President, Human Resources, to assist Mr. Lambert in the purchase of a home in
the Southern California area. So long as Mr. Lambert remains employed by the
Company, the loan does not bear interest (on a net tax free basis to Mr.
Lambert) and the principal amount of the loan is forgiven based on daily
amortization over its three-year term. In the event Mr. Lambert voluntarily
leaves the Company or is terminated with cause, the remaining principal balance
of the loan will begin to accrue interest at the prime rate as published in the
Wall Street Journal and such remaining principal will become due and payable in
30 days. In the event Mr. Lambert is terminated without cause, the remaining
principal balance of the loan on the date of such termination will be forgiven.
REPORT ON REPRICING OF OPTIONS/SARS
On July 1, 1993, the Stock Option Committee cancelled options that had
previously been granted to certain associates and executive officers with
exercise prices of ranging from $15.625 to $16.125 per share (representing the
market price of the Common Stock on the date such options were initially
granted), and granted an identical number of new options with identical terms
and vesting periods (the "New Options") to these persons with an exercise price
of $13.75, the offering price per share of Common Stock offered to the public in
the Company's equity offering that was completed in July 1993 (the "Equity
Offering"). On July 1, 1993, the last reported sale price per share of the
Common Stock, as reported on the NYSE, was $13.75.
The Stock Option Committee took this action so that these key associates and
executive officers would have options at a price that was in line with that paid
by purchasers in the Equity Offering. The original option grants to these
individuals occurred in the period from late May through June, 1993, during
which time the price of the Company's Common Stock temporarily surged near its
52-week high. Because stock options are priced at or above the prevailing
trading price of the Common Stock on the grant date, the exercise prices of the
options granted to these individuals were relatively high. Because the Stock
Option Committee believed that the relatively high-priced options would not
provide the intended incentives to these individuals, the committee decided to
replace those options with options that had an exercise price equal to the price
per share in the Equity Offering.
On December 2, 1993, the Board formally approved the Stock Option
Committee's previous recommendation to restate the Company's 1992 Stock
Incentive Plan, as amended, to eliminate the automatic four percent annual
increase in the exercise price of certain options issued thereunder. As of
October 8, 1993, the exercise price of certain options (the "Effective Date
Options") granted to certain employees effective as of October 8, 1992, the date
the Company emerged from bankruptcy (the "Effective Date"), would have
automatically increased by four percent from $10.22 to $10.63 under the existing
language of the Plan. Because the provisions in the Plan providing for this
automatic increase in the exercise price of the Effective Date Options were not
consistent with the original intent of the Board and the Stock Option Committee
that the Plan not provide for variable options, the Board and the Stock Option
Committee adopted a restatement
15
<PAGE>
of the Plan to eliminate the automatic increase feature. See "Approval of the
Restatement of the 1992 Stock Incentive Plan." In addition, on December 2, 1993,
the Stock Option Committee formally approved amendments to the option agreements
of certain other executive officers pertaining to certain stock options other
than Effective Date Options eliminating automatic exercise price escalation
provisions similar to those prescribed in the existing language of the Plan for
Effective Date Options.
The following table summarizes all repricings of options or SARs held by any
executive officer of the Company during the last ten fiscal years. Although it
is not clear that the restatement of the Plan and the amendment of the other
stock option agreements to reflect the original intent of the Board and the
Stock Option Committee constitute a repricing within the meaning of the
applicable rules of the Securities and Exchange Commission ("SEC"), the Company
has prepared the following table as if the restatement of the Plan and the
amendment of such stock option agreements constituted such a repricing.
TABLE V
TEN-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF LENGTH OF
SECURITIES MARKET PRICE EXERCISE ORIGINAL
UNDERLYING OF STOCK AT PRICE AT OPTION TERM
OPTIONS/ SARS TIME OF TIME OF NEW REMAINING AT
REPRICED REPRICING OR REPRICING OR EXERCISE DATE OF
OR AMENDED AMENDMENT AMENDMENT PRICE REPRICING OR
NAME DATE (#) ($) ($) ($) AMENDMENT
<S> <C> <C> <C> <C> <C> <C>
E. Garofolo July 1, 1993 110,000 13.75 15.625 13.75 9.8 years
EVP, Marketing & Sales
Promotion
P. Warren July 1, 1993 110,000 13.75 15.625 13.75 9.8 years
EVP, Merchandising,
Women's Apparel
W.J. Podany December 2, 1993 110,000 11.75 10.63 10.22 8.8 years
EVP, Merchandising, Home,
Men's and Cosmetics
R.M. Menar December 2, 1993 40,000 11.75 10.63 10.22 8.8 years
EVP, Logistics and
Information Services
B.L. Fleming(1) December 2, 1993 44,000 11.75 10.63 10.22 8.8 years
SVP, Accounting & Taxes
P.M. Hawley December 2, 1993 480,000 11.75 10.63 10.22 8.8 years
Former Chairman & CEO
E.J. Holman December 2, 1993 43,333 11.75 10.63 10.22 8.8 years
Former Vice Chairman &
COO
L.G. Petersen December 2, 1993 36,666 11.75 10.63 10.22 8.8 years
Former EVP-CFO
D.L. Dworkin December 2, 1993 1,000,000 11.75 10.22 10.22 9.3 years
President & CEO
G.J. Mathews December 2, 1993 110,000 11.75 12.75 12.75 9.4 years
EVP, Stores
M.E. Bercoon December 2, 1993 20,000 11.75 11.00 11.00 9.1 years
SVP, General Counsel &
Secretary
<FN>
- - ------------------------------
(1) Mr. Fleming left the employ of the Company on April 1, 1994.
</TABLE>
<TABLE>
<CAPTION>
STOCK OPTION COMMITTEE
OF THE BOARD OF DIRECTORS
- - ----------------------------------------------
<S> <C>
Samuel Zell (Chairman)
David M. Schulte
</TABLE>
16
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
AND THE STOCK OPTION COMMITTEE
The Compensation Committee is responsible for setting the terms of and
reviewing the compensation of the Company's officers and key employees. The
Stock Option Committee is responsible for administering the Amended Plan, which
plays an important role in the compensation of the Company's key employees. The
Compensation Committee and the Stock Option Committee are collectively referred
to herein as the "Committees."
COMPENSATION OF MR. DWORKIN
In March of 1993, Mr. Dworkin assumed the position of Chief Executive
Officer of the Company pursuant to an agreement under which Mr. Dworkin received
a $1,000,000 signing bonus, $375,000 as compensation for the loss of his bonus
from his prior employer, an annual base salary of $1,000,000 for a term of three
years, guaranteed bonuses of at least $400,000 payable in April 1994 and
$300,000 payable in April 1995 and other benefits. In addition, Mr. Dworkin was
granted options to purchase 1,000,000 shares of Common Stock. See "Employment
and Change-in-Control Arrangements Employment Agreement with Mr. Dworkin." The
Compensation Committee believes that this compensation package was necessary (i)
to provide Mr. Dworkin with a sufficiently attractive compensation package
compared to those available to him including that available to him at his
previous position at Storehouse PLC, and (ii) to provide him with significant
incentives to improve the Company's performance. The three-year term, salary
level and other benefits are commensurate with the Compensation Committee's
belief that Mr. Dworkin, who has a proven record with retail firms undergoing
reorganization, will be a strong leader.
CURRENT COMPENSATION PHILOSOPHY
The attraction and retention of highly competent and motivated executives is
an important objective of the Company's compensation practices. The Committees
believe they can achieve this goal by providing top employees with competitive
salaries, offering bonuses to reward the achievement of Company goals, such as
specified earnings levels, and providing long-term incentives through stock
options, which give executives an opportunity to share in the Company's success
as reflected by increases in its stock price.
BASE SALARY AND BONUS. The Compensation Committee plays a significant role
with respect to officers' compensation by setting the bonuses of the Company's
officers. In the upcoming year, the Compensation Committee will award such
bonuses based on the Company's success. One measure of the Company's success
will be management's ability to achieve specified earnings levels. The
Compensation Committee has commissioned Management to make recommendations to
refine a new annual incentive plan. Management has retained an independent
consultant to assist the Company in this process. Throughout the coming year the
Compensation Committee will additionally focus on setting the terms of
compensation for new top level employees. In determining competitive salaries
for such individuals, the Compensation Committee will compare the salaries
offered by the Company to those provided by other entities competing for
similarly-skilled executives. In the past when setting executive compensation,
the Company has looked to the Hay Retail Industry Senior Executive Total
Remuneration Survey, a report that compares various compensation components for
participating retail companies. The Hay survey or an equivalent survey is
expected to be a continued reference for the Compensation Committee.
In light of the fact that the Company emerged from its Bankruptcy proceeding
in October 1992, the Committee has found it necessary to deviate from some of
its philosophy on compensation in order to attract the key executives Mr.
Dworkin feels are necessary to lead the Company back to profitability.
Accordingly, in certain cases, signing bonuses were granted to attract
executives who would be foregoing a bonus at their previous job or, in some
cases, to compensate the executive for the relatively high cost of housing in
the Los Angeles area. Management has advised the Committee that all of these
positions have now been filled.
INCENTIVE COMPENSATION. The Plan provides an incentive for key employees,
directors and consultants of the Company to increase stockholder value by
aligning their own interests with those of the Company's stockholders. Because
the exercise price of stock options granted under the Plan may not be set at
less than market value, participants will not realize value on such options
unless the Company's stock price increases.
17
<PAGE>
Under the Plan, the Stock Option Committee determines who shall be granted
options and sets the terms of option grants. The Stock Option Committee intends
to make future grants to those employees who make or who because of their
positions are expected to make material contributions to the Company's success
and demonstrate effective management skills. Accordingly, future grants to key
employees are expected to be in similar ranges for new hires of similar status.
PHILOSOPHY ON THE DEDUCTIBILITY OF COMPENSATION
The Compensation Committee designs its compensation arrangements to provide
competitive levels of compensation that align compensation with the Company's
annual and long-term performance goals, reward strong performance, recognize
individual achievement and assist the Company in attracting and retaining
qualified executives, and in this way, achieve the best returns for the
Company's stockholders.
Under tax legislation enacted during 1993, beginning in 1994, the amount of
compensation paid to or accrued for the Chief Executive Officer and the four
other most highly compensated Executive Officers which may be deductible by the
Company for federal income tax purposes is limited to $1,000,000 per person per
year, except that compensation which is performance-based will be excluded for
purposes of calculating the amount of deductible compensation. The Internal
Revenue Service has proposed regulations to implement this legislation, but they
have not been finalized.
As stated above, the Compensation Committee designs its compensation
arrangements to achieve various objectives and, to the extent these objectives
can be achieved in a manner which maximizes the deductibility of compensation
paid by the Company, it will seek to do so.
The Compensation Committee will continue to strive to achieve its
compensation objectives in a manner which causes the incentive compensation paid
to the Company's executive officers to be fully deductible and will consider
possible changes to the Company's compensation policies when final regulations
are issued.
<TABLE>
<CAPTION>
COMPENSATION COMMITTEE STOCK OPTION COMMITTEE
OF THE BOARD OF DIRECTORS OF THE BOARD OF DIRECTORS
- - ------------------------------ ------------------------------
<S> <C>
David M. Schulte (Chairman) Samuel Zell (Chairman)
Terry Savage David M. Schulte
Robert M. Solow
Dennis C Stanfill
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Stock Option Committee administers the Plan. The members of the Stock
Option Committee are David Schulte and Samuel Zell.
Mr. Schulte is the sole shareholder of one of two partners of the sole
general partner of ZC Limited, the sole general partner of Zell/Chilmark, which
currently owns 24,800,866 shares of Common Stock, or 54.4% of the shares of
Common Stock outstanding.
Mr. Zell is the trustee and beneficiary of a trust that is the sole
shareholder of one of two partners of the sole general partner of ZC Limited,
the sole general partner of Zell/Chilmark, which currently owns 24,800,866
shares of Common Stock, or 54.4% of the shares of Common Stock outstanding.
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return of the
Company, based on share price (the Company did not grant any dividends during
the period shown), with the cumulative total return of the Standard & Poor's 500
Stock Index and the cumulative total return of the Standard & Poor's Retail
Stores Composite Index. Except as set forth in the next sentence, the graph
assumes $100 invested on July 31, 1988 in the Company's Old Common Stock (as
defined below) and each of the other indices. Because of the change in the
Company's capital structure upon emergence from bankruptcy on October 8,
18
<PAGE>
1992 (the "Effective Date"), for periods subsequent to the Effective Date the
graph assumes $100 invested on the Effective Date in the Company's Common Stock
and each of the other indices. Effective as of the Effective Date and pursuant
to the Reorganization Plan, holders of the Company's common stock, par value
$.01 per share, outstanding prior to the effectiveness of the Reorganization
Plan (the "Old Common Stock") received .081 shares of Common Stock in exchange
for each share of Old Common Stock. Additionally, certain unsecured creditors of
the Company received .046 shares of Common Stock for each $1.00 of allowed
claims against the Company.
COMPARISON OF CUMULATIVE TOTAL RETURN
CARTER HAWLEY HALE STORES, INC., S&P 500 INDEX, AND S&P RETAIL STORES COMPOSITE
INDEXED / CUMULATIVE RETURNS
<TABLE>
<CAPTION>
BASE
PERIOD RETURN RETURN RETURN RETURN RETURN
COMPANY / INDEX NAME JULY 1988 JULY 1989 JULY 1990 JAN. 1991 JAN. 1992 SEP. 1992
- - ----------------------------------------------- ------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CARTER HAWLEY HALE STORES 100 140.74 51.85 29.63 17.28 12.35
RETAIL STORES-COMPOSITE 100 139.25 153.95 153.70 214.76 230.61
S&P 500 INDEX 100 131.93 140.51 138.25 169.63 177.10
</TABLE>
<TABLE>
<CAPTION>
BASE
PERIOD RETURN RETURN
COMPANY / INDEX NAME OCT. 9, 1992 JAN. 1993 JAN. 1994
- - -------------------------------------------- --------------- ----------- -----------
<S> <C> <C> <C>
CARTER HAWLEY HALE STORES 100 151.92 150.00
RETAIL STORES-COMPOSITE 100 114.15 110.02
S&P 500 INDEX 100 109.73 123.86
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors, officers
and persons who own more than 10% of the Common Stock to file reports of
ownership and changes in ownership of such equity securities with the SEC and
NYSE. Directors, officers and greater than 10% stockholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file. The following information is based solely upon a review of copies of such
Forms 3, 4 and 5 that have been furnished to the Company, or, in the case of
Forms 5, written representations that no Forms 5 were required.
The Company believes that the following current officers of the Company
failed to file a Form 3 in connection with their becoming executive officers of
the Company within the meaning of Section 16 of the Exchange Act within the time
period required: (i) Mr. Gerald J. Mathews, Executive Vice President, Stores,
filed a Form 3 on January 31, 1994, although such form was due on May 13, 1993,
(ii) Ms. Elayne M. Garofolo, Executive Vice President, Marketing and Sales
Promotion, filed a Form 3 on January 31, 1994, although such form was due on
June 4, 1993, (iii) Ms. Patricia A. Warren, Executive Vice President,
Merchandising, Women's Apparel, filed a Form 3 on January 31, 1994, although
such form was due on June 4, 1993, (iv) Mr. William J. Podany, Executive Vice
President, Merchandising, Home, Men's and Cosmetics, filed a Form 3 on January
31, 1994, although such form was due on April 10, 1993, (v) Mr. Robert J.
Lambert, Executive Vice President, Human Resources, filed a Form 3 on February
1, 1994, although such form was due on January 13, 1993, and (vi) Mr. Robert M.
Menar, Executive Vice President, Logistics and Information Services, filed a
Form 3 on January 31, 1994, although such form was due on November 11, 1993. The
Company believes that the following officers of the Company failed to file a
Form 5 with respect to grants of options to purchase Common Stock: (i) Mr. Brian
L. Fleming, Senior Vice President, Accounting and Taxes, failed to file a Form 5
with respect to a grant made on October 8, 1992 of options to purchase 44,000
shares of Common Stock, and (ii) Mr. Marc E. Bercoon, Senior Vice President,
General Counsel and Secretary, failed to file a Form 5 with respect to
19
<PAGE>
grants of options to purchase 30,000 shares of Common Stock. The Company
believes that Mr. Estrada, Mr. Solow and Mr. Petersen, each of whom is a current
director of the Company, each failed to file a Form 5 with respect to a grant
of options to purchase 10,000 shares of Common Stock made on November 9, 1992.
Mr. Petersen filed his Form 5 on April 25, 1994, Messrs. Estrada and Bercoon
filed their Forms 5 on April 27, 1994, and Messrs. Solow and Fleming have
advised the Company that they plan to make their respective filings prior to the
Annual Meeting.
APPROVAL OF THE PROPOSED AMENDMENT TO THE COMPANY'S
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION IN ORDER
TO CHANGE THE NAME OF THE COMPANY TO BROADWAY STORES, INC.
The Board recommends to the shareholders that the Company's Amended and
Restated Certificate of Incorporation be amended to change the name of the
Company to "Broadway Stores, Inc."
The Board believes that the name "Broadway Stores, Inc." more accurately
identifies its operating business, as 52 of its 83 stores presently operate
under the "Broadway" name, and will be more recognizable by the Company's
customers and the general public. No stores are operated under the Company's
current name. There will be relatively little cost associated with the change.
Virtually no advertising will be required.
If the amendment to the Amended and Restated Certificate of Incorporation is
approved, the Company will use the name "Broadway Stores, Inc." in its business
operations and the Common Stock of the Company will trade on the NYSE under the
symbol "BWY."
APPROVAL OF THE RESTATEMENT OF THE 1992 STOCK INCENTIVE PLAN
The Plan was initially adopted in connection the approval by the Company's
creditors and stockholders of the Company's plan of reorganization upon
emergence from bankruptcy. As initially adopted, the Plan provided that the
exercise price of the Effective Date Options would automatically increase by
four percent on each anniversary of the Effective Date. The provisions in the
Plan providing for this automatic increase in the exercise price of the
Effective Date Options, however, were not consistent with the original intent of
the Board and the Stock Option Committee that the Plan not provide for variable
options. Consequently, the Board and the Stock Option Committee have adopted a
restatement of the Plan to eliminate the automatic increase feature.
Shares represented by duly executed and unrevoked proxies in the enclosed
form received by the Board will be voted FOR the approval of the restatement of
the Plan in the absence of contrary specifications.
The table below reflects the number of affected Effective Date Options and
the dollar value of the change in exercise price as a result of the restatement
of the Plan as described above for each of the Named Executive Officers, all of
its current executive officers as a group, all current directors that are not
currently executive officers and all other current employees other than current
executive officers.
20
<PAGE>
IMPACT OF PLAN RESTATEMENT
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING
DOLLAR VALUE OF EFFECTIVE DATE
NAME AND POSITION RESTATEMENT($)(1) OPTIONS
- - ------------------------------------------------------------------- ---------------- -----------------
<S> <C> <C>
D.L. Dworkin
President & CEO 0 0
W.J. Podany
EVP, Merchandising 45,100 110,000
G.J. Mathews
EVP, Stores 0 0
P.A. Warren
EVP, Merchandising 0 0
P.M. Hawley
Former Chairman & CEO 196,800 480,000
E.J. Holman
Former Vice Chairman & COO 4,783 11,666
L.G. Petersen
Former EVP-CFO 15,033 36,666
B.L. Fleming(2)
SVP, Accounting & Taxes 6,013 14,666
All Current Executive Officers as a Group (9 persons) 61,910 151,000
All Current Non-Employee Directors as a Group (9 persons) 0 0
All Employees, including current Officers who are not Executive
Officers, as a Group (94 persons) 344,400 840,000
<FN>
- - ------------------------
(1) Dollar value determined based on the difference between the exercise price
of the Effective Date Options after giving effect to the restatement of the
Plan to eliminate the exercise price escalation feature and the exercise
price as adjusted in accordance with the exercise price escalation
provisions as of the first anniversary of the Effective Date.
(2) Mr. Fleming left the employ of the Company on April 1, 1994.
</TABLE>
DESCRIPTION OF THE PLAN
The following summary of the Plan is qualified in its entirety by the full
text of the Plan as restated, a copy of which has been filed with the SEC as an
exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended
January 29, 1994.
The Plan provides for the issuance to key employees, directors and
consultants of stock options ("Options") to purchase shares of Common Stock and
SARs entitling the holder thereof, upon exercise, to receive some or all of the
increase in value of the shares of Common Stock subject thereto. (Awards of
either Options or SARs or both shall be referred to hereinafter as "Awards" and
the agreements pursuant to which they are granted shall be referred to as "Award
Agreements").
Recipients of Awards must enter into Award Agreements with the Company in
such forms as the Stock Option Committee determines, setting forth, among other
things, the exercise price, the term of the Award and provisions regarding the
exercisability of the Award.
Options granted under the Plan shall constitute either "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code") ("ISOs") or "nonqualified stock options" ("NQSOs"). All
Options granted to non-employee directors and consultants will constitute NQSOs.
The Board believes that the Plan provides the Company with the necessary
flexibility to attract,
21
<PAGE>
retain and motivate key employees, officers, directors and consultants of the
Company by providing such key employees, officers, directors and consultants
with incentives which are linked directly to increases in stockholder value.
The Plan is administered by the Stock Option Committee of the Board, which
must consist of no fewer than two directors, none of whom may be employees of
the Company and each of whom serves at the discretion of the Board. The Stock
Option Committee has full power to administer and to make all determinations it
deems necessary or advisable for the proper administration of the Plan,
including, without limitation, the power to select the key employees, officers,
consultants and directors to whom Awards will be granted and the number of
Awards to be granted to such key employees, officers, consultants and directors.
The Stock Option Committee is also authorized to interpret the Plan and may at
any time adopt such rules and regulations it deems advisable.
Options awarded pursuant to the Plan may vest at such times and may be
exercised at such exercise prices (which must be equal to at least the fair
market value of the shares subject to such Options on the date of grant)
specified by the Stock Option Committee, in its discretion, at the time of
grant. Upon the retirement of an employee participant at or after age 62,
Disability of a participant (as defined in the Plan) or death of a participant,
any Options held by such participants shall become immediately and fully
exercisable (unless such participant's Award Agreement provides otherwise).
The exercise price of an Option may be paid in full in cash, by certified or
cashier's check, or in shares of Common Stock previously owned or issuable upon
exercise of such Option or in a combination of cash and Common Stock.
In the event of voluntary termination on or after an employee participant's
Early Retirement Age (as defined in the Plan), the participant shall be entitled
to exercise Options which are exercisable on the date of such termination for a
maximum period of one year from such termination. Participants who are
terminated due to job elimination or for any reason other than for cause shall
be entitled to exercise Options which are exercisable on the date of such
termination for a maximum period of one year from such termination. Participants
who become Disabled (as defined in the Plan) or the estates of participants who
die while in possession of Options shall be entitled to exercise all Options for
a maximum period of three years from such Disability or death. Employee
participants who retire at or after age 62 may exercise all Options therefore
granted in accordance with the terms of their Award Agreements. Participants who
are involuntarily terminated for Cause (as defined in the Plan) shall forfeit
all outstanding Options. In the event of a participant's termination under any
other circumstances, Options shall remain exercisable for a maximum period of 90
days from such termination. Notwithstanding the foregoing, the Stock Option
Committee is authorized to accelerate the exercisability of any Options at any
time.
The Effective Date Options constitute NQSOs and vest in equal one-third
increments on the first, second and third anniversaries of the Effective Date
and cease to be exercisable 10 years from the Effective Date of grant or earlier
in certain circumstances. Under the original terms of the Plan, the exercise
price for Effective Date Options was equal to $10.22 per share, increased and
compounded annually by 4% for each full year elapsed between the Effective Date
and the date of exercise of an Effective Date Option. Under the terms of the
Plan as restated, the exercise price of the Effective Date Options will remain
fixed at $10.22 per share.
Under the Plan, the Stock Option Committee is authorized to grant SARs
either alone ("Unrelated SARs") or in tandem with the grant of an Option
("Related SARs") with respect to some or all of the shares covered by such
Option (a "Tandem Option"). Upon the exercise of a Related SAR, the Tandem
Option shall cease to be exercisable to the extent of the shares with respect to
which the Related SAR is exercised. Upon the exercise of a Tandem Option, the
Related SAR shall cease to be exercisable to the extent of the shares with
respect to which the Tandem Option was exercised. Related SARs shall be
exercisable at the same times and exercise price as the Tandem Options. The
exercise price per share of an Unrelated SAR shall be determined by the Stock
Option Committee, in its discretion, but shall be equal to at least the fair
market value of the Common Stock underlying the Unrelated SAR on the date of
grant. Upon the exercise of an SAR, a participant shall be entitled, at his
election, to shares of Common Stock, cash or a combination
22
<PAGE>
thereof, equal in value to the excess of the fair market value of the shares of
Common Stock with respect to which the SAR is exercised over the aggregate
exercise price with respect to such shares under the SAR, provided that the
Stock Option Committee shall have sole discretion to consent to or disapprove of
an election to receive cash in whole or in part by an individual subject to the
reporting requirements under Section 16(a) of the Exchange Act.
The Board may terminate, suspend, amend or modify the Plan at any time, but
without the consent of any adversely affected participant, such termination,
suspension or modification shall not affect any Awards outstanding under the
Plan. The Board may amend the Plan, but may not, without the approval of the
holders of Common Stock, make any amendment which would, in accordance with the
principles of Rule 16b-3 promulgated under the Exchange Act, require the
approval of the holders of Common Stock issued and outstanding.
Upon the occurrence of certain events, including a reclassification,
recapitalization, reorganization, spin-off, stock dividend, sale of assets,
merger, or other similar transactions, the Stock Option Committee may, in its
discretion, provide that (i) all outstanding Awards shall become immediately
exercisable, (ii) the number of shares of Common Stock available for Awards or,
covered by outstanding Awards, and the exercise price per share thereof, shall
be proportionately adjusted, (iii) each Award shall be converted into an Award
entitling the holder thereof upon exercise to receive the shares of stock, other
securities, property, or cash receivable by a holder of the number of shares of
Common Stock which would be receivable by such holder upon the exercise of such
Award immediately prior to the transaction, (iv) in certain cases, each
outstanding Award shall be cancelled in exchange for a cash payment, or (v) in
certain cases, outstanding Awards shall become immediately exercisable and
terminate as of a specified date.
For purposes of the Plan, a "Change in Control" of the Company shall be
deemed to have occurred, generally, if (i) any person other than the Company,
certain of its affiliates or Zell/Chilmark acquires beneficial ownership of more
than 30% of the combined voting power of the Company and more than the
percentage of combined voting power owned by Zell/Chilmark, (ii) during any
period of two consecutive years, individuals who at the beginning of such period
constitute the Board and any new director whose nomination was approved by such
Board members cease for any reason to constitute a majority of the Board,
provided that if Zell/Chilmark beneficially owns at least 30% of the combined
voting power of the Company during such entire period, a change in Control will
not be deemed to have occurred, (iii) the stockholders of the Company approve
certain mergers or consolidations of the Company with any other corporation, or
(iv) the stockholders of the Company approve a plan of complete liquidation or a
sale of all or substantially all of the assets of the Company. Upon the
occurrence of a Change in Control, all outstanding Options shall become
immediately exercisable except as otherwise provided in any participant's Award
Agreement with respect to such participant's Options.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal United States federal
income tax consequences to participants and the Company relating to Awards under
the Plan. This summary discusses only federal income tax consequences and does
not address any other federal tax consequences and does not describe state or
local tax consequences. Participants are advised to consult their own tax
advisors as to the particular tax consequences to them of the receipt of any
Awards under the Plan.
(I) NQSOS. A participant will not recognize any taxable income, and the
Company will not be entitled to a tax deduction upon the grant of an NQSO.
Except as noted below, upon the exercise of an NQSO the participant will
recognize ordinary income in an amount equal to the excess of the fair market
value of the Common Stock acquired (determined at the time of exercise) over the
exercise price (the "Excess Amount"). The Company will be entitled to deduct the
Excess Amount in its tax year in which or with which ends the taxable year of
the participant in which the participant exercises the NQSO (the "Exercise
Date"). A participant's aggregate basis for Common Stock acquired upon an
"in-the-money" exercise of an NQSO will equal the fair market value of the
shares on the Exercise Date and the holding period for that Common Stock will
begin on the Exercise Date and, accordingly, will not include the period during
which the NQSO was held.
23
<PAGE>
If a participant elects to tender shares of Common Stock already owned in
partial or full payment of the exercise price for shares to be acquired upon the
exercise of an NQSO, the participant will not recognize any gain or loss on such
tendered shares. The number of shares of Common Stock received by the
participant upon any such exercise that are equal in number to the number of
tendered shares would retain the tax basis and the holding period of the
tendered shares for capital gain purposes. The participant will recognize
compensation taxable as ordinary income, and the Company will be entitled to a
deduction, in an amount equal to the fair market value of the number of shares
received by the participant upon such exercise that is in excess of the number
of tendered shares, less any cash paid by the participant. The fair market value
of such excess number of shares would then become the tax basis for those shares
and the holding period of such shares for capital gain purposes will begin
immediately after the exercise date.
Upon disposition of shares of Common Stock received upon exercise of an
NQSO, the amount realized upon any such disposition over the tax basis of the
disposed shares will generally result in a capital gain or loss, assuming the
participant holds the Common Stock as a capital asset. The capital gain or loss
will be a long-term capital gain or loss if the participant held the Common
Stock for more than one year after the Exercise Date.
In cases where a participant exercises an NQSO within six months of its
grant and the participant is subject to Section 16 of the Exchange Act (a
"Section 16 Individual"), the participant will include the Excess Amount in
income and the Company can claim a deduction on the first day after the lapse of
six months after the option grant date (the "Lapse Date"), and the Common Stock
value will be determined at the Lapse Date rather than the Exercise Date for
purposes of determining the Excess Amount and the holding period.
(II) ISOS. A participant will not recognize any income, and the Company
will not be entitled to a deduction, upon the grant of an ISO. A participant
will not recognize any income and the Company will not be entitled to a
deduction upon the timely exercise of an ISO. The timely exercise of an ISO may,
however, affect the computation of a participant's alternative minimum tax.
Exercise by a participant of an ISO will be timely if made while the participant
is employed by the Company or within three months after the cessation of such
employment (one year if the participant is disabled with the meaning of section
22(e)(3) of the Code). If the exercise of an ISO is not timely, exercise of the
ISO will be taxed according to the rules described above for the exercise of an
NQSO. A participant's aggregate basis for shares acquired upon exercise of an
ISO will be equal to the exercise price paid for such shares, and the holding
period for the shares will begin on the Exercise Date and, accordingly, will not
include the period during which the ISO was held.
Except as discussed in the following paragraph, if a participant elects to
tender shares of Common Stock already owned in partial or full payment of the
exercise price for shares to be acquired upon the exercise of an ISO, the
participant will not recognize any gain or loss on such tendered shares. No
income will be realized by the participant in respect of the shares received by
the participant upon the exercise of the ISO if, as previously stated, the
requirements of the Plan and the Code are met. The Internal Revenue Service has
not yet issued final regulations with respect to the determination of the basis
and the holding period of the shares acquired upon such an exercise. Regulations
proposed by the Internal Revenue Service provide that for all shares of Common
Stock acquired upon such an exercise the requisite two year and one year holding
periods for stock acquired upon exercise of an incentive stock option must be
satisfied, regardless of the holding period applicable to the tendered shares.
However, the tax basis (and holding period for all other federal income tax
purposes) of the tendered shares will carry over to the same number of shares
acquired upon the exercise. The number of shares acquired which is in excess of
the number of tendered shares will have a tax basis of zero and a holding period
for all purposes beginning on the Exercise Date. Any subsequent disqualifying
disposition will be deemed first to have been a disposition of the shares with a
tax basis of zero, and then to have been a disposition of the shares with a
carry-over basis. For purposes of determining the amount of compensation taxable
to the participant upon a subsequent disqualifying disposition, the exercise
price of the shares with a tax basis of zero will be deemed to be zero, and the
exercise prise of the shares with a carry-over basis will be deemed to be the
fair market value of the shares on the Exercise Date.
24
<PAGE>
If a participant elects to tender shares of Common Stock that were
previously acquired upon the exercise of an ISO in partial or full payment of
the exercise price for shares to be acquired upon the exercise of another ISO,
and such exercise occurs within two years of the date of grant of such ISO, or
within one year after such tendered shares were transferred to the participant,
the tender of such shares will be a taxable, disqualifying disposition with the
tax consequences described below regarding the disposition within two years of
the date of grant of an ISO, or within one year after shares were acquired upon
the exercise of an ISO.
If a participant disposes of shares acquired pursuant to an ISO, and those
shares were held for more than two years from the date of the granting of the
ISO and one year from the transfer of those shares to the participant, then any
gain or loss realized upon disposition will be treated as a long-term capital
gain or loss. Under such circumstances, the Company will not be entitled to any
deduction in respect of the exercise of the ISO. If, however, the participant
makes a taxable disposition of shares acquired pursuant to an ISO within either
two years from the date of the granting of the ISO or one year from the transfer
of those shares to the participant (a "Disqualifying Disposition"), then any
gain realized generally will be taxable to the participant as follows: (i) as
ordinary income in an amount equal to any excess of (a) the lesser of the fair
market value of the shares on the date the ISO is exercised (the value and
timing of recognition on the Lapse Date will govern in the case of a Section 16
Individual whose sale of the shares occurs within six months of the date of
grant of the ISO, as discussed above for NQSOs) or the amount realized on the
Disqualifying Disposition, over (b) the exercise price, and (ii) as capital gain
to the extent of any excess of the amount realized on the Disqualifying
Disposition over the fair market value of the shares on the Exercise Date or the
Lapse Date. In such cases, the Company will be entitled to a deduction at the
time of the Disqualifying Disposition for the amount taxable to the participant
as ordinary income. Any loss realized upon a Disqualifying Disposition (that is,
where the exercise price of the ISO exceeds the amount realized upon such
Disqualifying Disposition) will generally be a capital loss, and will be a
long-term capital loss if the holding period for the disposed shares is more
than one year.
If the Disqualifying Disposition is a non-taxable disposition (for example,
a gift or a sale to a related person), the excess, if any, of the fair market
value of the Common Stock on the exercise date over the exercise price will be
compensation taxable as ordinary income, and the Company, subject to proper
withholding, will be entitled to a deduction equal to the amount of ordinary
income recognized by the participant.
(III)SARS. A participant will not recognize income, and the Company will
not be entitled to a deduction, upon the grant of an SAR. On the exercise of an
SAR for cash, the participant will be taxed at ordinary income rates on the
amount of cash received. On the exercise of an SAR for shares, unless the next
sentence applies, the participant will be taxed at that time on the fair market
value of the shares received and will have an aggregate tax basis in those
shares equal to their fair market value. If the shares received by the
participant are subject to a substantial risk of forfeiture under Section
83(c)(3) of the Code because the participant is a Section 16 Individual, then,
unless that participant makes an election under section 83(b) of the Code within
30 days after the exercise to be taxed under the rule of the preceding sentence,
(i) the participant will recognize taxable ordinary income at the Lapse Date,
(ii) the amount of such ordinary income will be equal to the fair market value
of the shares at that time, (iii) the participant's tax basis in such shares
will equal such fair market value, (iv) the participant's holding period for the
shares will begin on the Lapse Date and (v) any dividends the participant
receives on the shares before the Lapse Date will be taxable to the participant
as compensation income. In all such cases, the Company will be entitled to a
deduction at the same time and in the same amount as the participant has taxable
ordinary income, (including the deduction for any dividends paid to the
participant in the absence of the election under section 83(b) of the Code).
If the provisions of the Plan relating to a Change in Control become
applicable, certain compensation payments or other benefits received by
"disqualified individuals" (as defined in Section 280G(c) of the Code)
25
<PAGE>
under the Plan or otherwise may cause or result in "excess parachute payments"
(as defined in Section 280G(b)(1) of the Code). Section 4999 of the Code
generally imposes a 20% excise tax on the amount of any such "excess parachute
payment" received by such a "disqualified individual" and any such "excess
parachute payments" will not be deductible by the Company.
Under Section 162(m) of the Code, the amount of compensation paid to the
chief executive officer and the four other most highly paid executive officers
of the Company in the year for which a deduction is claimed by the Company is
limited to $1,000,000 per such person, except that compensation which is
performance-based will be excluded for purposes of calculating the amount of
compensation subject to this $1,000,000 limitation. The ability of the Company
to claim a deduction for compensation paid to any other executive officer or
employee of the Company is not affected by this provision.
The Company is required to withhold tax on the amount of ordinary income
recognized in connection with the NQSOs, ISOs or SARs acquired by the
participant.
SELECTION OF INDEPENDENT ACCOUNTANTS
The Board has selected Price Waterhouse to serve as the Company's
independent accountants to audit the financial statements of the Company for the
1994 fiscal year. A representative of Price Waterhouse will attend the Annual
Meeting, will be given an opportunity to make a statement and will be available
to answer appropriate questions. The Board recommends, on the advice of its
Audit Committee, that the stockholders vote FOR ratification of the appointment
of Price Waterhouse as the Company's independent auditors for fiscal 1994.
OTHER MATTERS
The Board is not aware of any other matters to be presented at the meeting.
If any other matters should properly come before the meeting, the persons named
in the proxy will vote the proxies according to their best judgment.
STOCKHOLDER PROPOSALS
Stockholder proposals, if any, which may be considered for inclusion in the
Company's proxy materials for the 1995 Annual Meeting must be received by the
Company at its offices at 3880 North Mission Road, Los Angeles, California 90031
not later than December 30, 1994.
ANNUAL REPORT
The Annual Report to Stockholders for fiscal 1993 was mailed to stockholders
on or about May 5, 1994. The Company files an annual report on Form 10-K with
the SEC. Stockholders may obtain a copies of these reports without charge by
writing to the Secretary of the Company.
26
<PAGE>
[Logo] CARTER HAWLEY HALE
THE BROADWAY--EMPORIUM--WEINSTOCKS
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING--JUNE 17, 1994
CARTER HAWLEY HALE STORES, INC.
3880 NORTH MISSION ROAD
LOS ANGELES, CALIFORNIA 90031
The undersigned hereby appoints DAVID L. DWORKIN, JOHN C. HAECKEL and MARC E.
BERCOON, and each of them, proxies, each with full power of substitution, to
vote all stock of the undersigned at the annual meeting of stockholders of
Carter Hawley Hale Stores, Inc. (the "Company") to be held June 17, 1994 at 1:00
p.m. in the Watercourt Ballroom of the Hotel InterContinental, Los Angeles,
California, and/or at any adjournment of the annual meeting in the manner
indicated on the reverse side, all in accordance with and as more fully
described in the Notice of Annual Meeting and accompanying Proxy Statement for
the meeting, receipt of which is hereby acknowledged.
(CONTINUED ON REVERSE SIDE)
- - -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
THE SHARES REPRESENTED BY THIS PROXY SHALL BE VOTED AS INDICATED BELOW:
/x/ PLEASE MARK YOUR CHOICES LIKE THIS
------------------ -------------------
COMMON PREFERRED
1. To elect Walter T. Dec, David L. Dworkin, Dr. Leobardo F. Estrada,
Sidney R. Petersen, Terry Savage, David M. Schulte, Sanford Shkolnik,
Dr. Robert M. Solow, Dennis C. Stanfill, James D. Woods and Samuel Zell as
directors to serve for a term of one year until the next Annual Meeting of
Stockholders and until their respective successors have been duly elected and
qualified.
WITHHOLD AUTHORITY WITHHOLD AUTHORITY
to vote for ALL to vote for the
FOR / / nominees / / following nominee(s): / /
-----------------------------------
IF YOU DO NOT SPECIFY A CHOICE WITH RESPECT TO ITEMS 2, 3 AND 4, THE SHARES
REPRESENTED BY YOUR PROXY WILL BE VOTED FOR ITEMS 2, 3 AND 4.
2. To approve a proposed amendment to the Company's Amended and Restated
Certificate of Incorporation to change the Company's name to Broadway Stores,
Inc.
FOR / / AGAINST / / ABSTAIN / /
3. To approve the restatement of the Carter Hawley Hale Stores, Inc. 1992 Stock
Incentive Plan, as amended, to eliminate the automatic four percent annual
increase in the exercise price of certain options issued thereunder;
FOR / / AGAINST / / ABSTAIN / /
4. To ratify the appointment of Price Waterhouse as the Company's Independent
Accountants for the Company's 1994 Fiscal Year.
FOR / / AGAINST / / ABSTAIN / /
5. To vote in their discretion on such other business as may properly come
before the annual meeting or any adjournment thereof.
IF ANY OTHER BUSINESS IS PRESENTED, THIS PROXY SHALL BE VOTED IN ACCORDANCE WITH
THE RECOMMENDATIONS OF MANAGEMENT.
Please mark, date and sign as your name appears to the left and return in the
enclosed envelope. If acting as executor, administrator, trustee or guardian,
state your full title and authority when signing. If the signer is a
corporation, please sign the full corporate name, by a duly authorized officer.
If shares are held jointly, each stockholder named should sign.
Date_________________________
Signature(s)_________________
Signature(s)_________________
PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE
- - -------------------------------------------------------------------------------
FOLD AND DETACH HERE
[Logo] CARTER HAWLEY HALE
THE BROADWAY--EMPORIUM--WEINSTOCKS
YOUR VOTE IS IMPORTANT TO THE COMPANY
PLEASE SIGN AND RETURN YOUR PROXY BY
TEARING OFF THE TOP PORTION OF THIS SHEET
AND RETURNING IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE
<PAGE>
[ALTERNATE PROXY CARD TO BE SENT TO PARTICIPANTS
IN THE COMPANY'S 401(k) PLAN]
[Logo] CARTER HAWLEY HALE
THE BROADWAY--EMPORIUM--WEINSTOCKS
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING--JUNE 17, 1994
CARTER HAWLEY HALE STORES, INC.
3880 NORTH MISSION ROAD
LOS ANGELES, CALIFORNIA 90031
The undersigned hereby appoints DAVID L. DWORKIN, JOHN C. HAECKEL and
MARC E. BERCOON, and each of them, proxies, each with full power of
substitution, to vote all stock of the undersigned at the annual meeting of
stockholders of Carter Hawley Hale Stores, Inc. (the "Company") to be held
June 17, 1994 at 1:00 p.m. in the Watercourt Ballroom of the Hotel
InterContinental, Los Angeles, California, and/or at any adjournment of
the annual meeting in the manner indicated on the reverse side, all in
accordance with and as more fully described in the Notice of Annual Meeting and
accompanying Proxy Statement for the meeting, receipt of which is hereby
acknowledged.
(CONTINUED ON REVERSE SIDE)
- - -------------------------------------------------------------------------------
FOLD AND DETACH HERE
This is your VOTING INSTRUCTION CARD. Please vote, sign, and return in the
enclosed envelope.
It is important that this card be returned promptly. Participants in the Carter
Hawley Hale Stores, Inc. 401(k) Savings and Investment Plan (the "Plan") who
wish to exercise their right to vote should complete, sign, date and return the
accompanying card in the return envelope to Chemical Trust Company of California
for tabulation. An executed proxy card will be deemed instructions to Bankers
Trust Company of California for tabulation. An executed proxy card will be
deemed to be instructions to Bankers Trust Company, N.A., the Plan trustee (the
"Trustee"), to vote the shares of Company stock held by the Trustee and
allocated to your Plan account as indicated on each proxy card.
If you hold shares of Company stock other than through the plan, you will
receive a separate PROXY CARD to vote such shares.
<PAGE>
THE SHARES REPRESENTED BY THIS PROXY SHALL BE VOTED AS INDICATED BELOW:
/x/ PLEASE MARK YOUR CHOICES LIKE THIS
------------------- ------------------
COMMON PREFERRED
1. To elect Walter T. Dec, David L. Dworkin, Dr. Leobardo F. Estrada, Sidney R.
Petersen, Terry Savage, David M. Schulte, Sanford Shkolnik, Dr. Robert M. Solow,
Dennis C. Stanfill, James D. Woods and Samuel Zell as directors to serve for a
term of one year until the next Annual Meeting of Stockholders and until their
respective successors have been duly elected and qualified.
WITHHOLD AUTHORITY WITHHOLD AUTHORITY
to vote for ALL to vote for the
FOR / / nominees / / following nominee(s): / /
-----------------------------------
IF YOU DO NOT SPECIFY A CHOICE WITH RESPECT TO ITEMS 2, 3 AND 4, THE SHARES
REPRESENTED BY YOUR PROXY WILL BE VOTED FOR ITEMS 2, 3 AND 4.
2. To approve a proposed amendment to the Company's Amended and Restated
Certificate of Incorporation to change the Company's name to Broadway Stores,
Inc.
FOR / / AGAINST / / ABSTAIN / /
3. To approve the restatement of the Carter Hawley Hale Stores, Inc. 1992 Stock
Incentive Plan, as amended, to eliminate the automatic four percent annual
increase in the exercise price of certain options issued thereunder;
FOR / / AGAINST / / ABSTAIN / /
4. To ratify the appointment of Price Waterhouse as the Company's Independent
Accountants for the Company's 1994 Fiscal Year.
FOR / / AGAINST / / ABSTAIN / /
5. To vote in their discretion on such other business as may properly come
before the annual meeting or any adjournment thereof.
IF ANY OTHER BUSINESS IS PRESENTED, THIS PROXY SHALL BE VOTED IN ACCORDANCE WITH
THE RECOMMENDATIONS OF MANAGEMENT.
Please mark, date and sign as your name appears to the left and return in the
enclosed envelope. If acting as executor, administrator, trustee or guardian,
state your full title and authority when signing. If the signer is a
corporation, please sign the full corporate name, by a duly authorized officer.
If shares are held jointly, each stockholder named should sign.
Date_______________________________
Signature(s)_______________________
Signature(s)_______________________
PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE
- - -------------------------------------------------------------------------------
FOLD AND DETACH HERE
[Logo] CARTER HAWLEY HALE
THE BROADWAY--EMPORIUM--WEINSTOCKS
YOUR VOTE IS IMPORTANT TO THE COMPANY
PLEASE SIGN AND RETURN YOUR PROXY BY
TEARING OFF THE TOP PORTION OF THIS SHEET
AND RETURNING IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE
