SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
CATHERINES STORES CORPORATION
----------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the filing
fee is calculated and state how it was determined.)
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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<PAGE>
[ ] Fee paid previously with preliminary materials.
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE>
CATHERINES STORES CORPORATION
3742 Lamar Avenue
Memphis, Tennessee 38118
(901) 363-3900
NOTICE OF MEETING OF STOCKHOLDERS TO BE HELD ON
June 3, 1998
TO THE STOCKHOLDERS OF
CATHERINES STORES CORPORATION
Notice is hereby given that the Annual Meeting of Stockholders of
Catherines Stores Corporation will be held at the executive offices of the
Company, 3742 Lamar Avenue, Memphis, Tennessee, on Wednesday, June 3, 1998 at
10:00 A.M. local time, for the following purposes:
1. To elect two members of the Board of Directors to serve a
term of three years;
2. To authorize an additional 300,000 shares under the 1994 Omnibus
Incentive Plan;
3. To ratify the appointment of independent public accountants for the
fiscal year ending January 30, 1999; and
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The accompanying Proxy Statement contains further information with
respect to these matters.
Stockholders of record at the close of business on April 9, 1998 are
entitled to notice of and to vote at the Annual Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED
TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED FOR MAILING IN THE
UNITED STATES.
By Order of the Board of Directors
Stanley H. Grossman
Secretary
April 24, 1998
<PAGE>
CATHERINES STORES CORPORATION
3742 Lamar Avenue
Memphis, Tennessee 38118
(901) 363-3900
PROXY STATEMENT
For Annual Meeting of Stockholders, June 3, 1998
The enclosed proxy is solicited by the Board of Directors (the "Board"
or "Board of Directors") of Catherines Stores Corporation (the "Company"), 3742
Lamar Avenue, Memphis, Tennessee 38118, to be voted at the Annual Meeting of
Stockholders to be held on June 3, 1998, at 10:00 A.M. local time at the
executive offices of the Company, 3742 Lamar Avenue, Memphis, Tennessee, or any
adjournments thereof (the "Annual Meeting"). At the Annual Meeting, the presence
in person or by proxy of the holders of a majority of the total number of shares
of outstanding Common Stock will be necessary to constitute a quorum.
Each nominee for Director shall be elected by a majority of the votes
cast by the holders of Common Stock, all such stockholders being present in
person or by proxy and being entitled to vote in the election.
All shares represented by properly executed proxies will be voted in
accordance with the instructions indicated thereon unless such proxies
previously have been revoked. If any proxies of holders of Common Stock do not
contain voting instructions, the shares represented by such proxies will be
voted FOR Proposals 1, 2 and 3. The Board of Directors does not know of any
business to be brought before the Annual Meeting other than as indicated in the
notice, but it is intended that, as to any other such business, votes may be
cast pursuant to the proxies in accordance with the judgment of the persons
acting thereunder.
Any stockholder who executes and delivers a proxy may revoke it at any
time prior to its use upon (a) receipt by the Secretary of the Company of
written notice of such revocation, (b) receipt by the Secretary of the Company
of a duly executed proxy bearing a later date, or (c) appearance by the
stockholder at the meeting and his request for the return of his proxy.
Only stockholders of record at the close of business on April 9, 1998
are entitled to notice of and to vote at the Annual Meeting. As of March 31,
1998, there were 7,231,070 shares of Common Stock outstanding, each of which is
entitled to one vote. This Proxy Statement and the attached form of proxy card
are first being sent or given to stockholders on or about April 24, 1998.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Certain employees, officers and directors of the Company may be
<PAGE>
granted stock options pursuant to the 1994 Omnibus Incentive Plan, as amended
(the "Incentive Plan"). The approval of the amendment to the Incentive Plan is
being presented as Proposal 2.
OWNERSHIP OF COMMON STOCK
BY DIRECTORS,
OFFICERS AND CERTAIN BENEFICIAL OWNERS
To the best knowledge of the Company based on information filed with
the Securities and Exchange Commission as of December 31, 1997 and the Company's
stock records, the following table sets forth the beneficial ownership (1) of
the Company's Common Stock as of March 30, 1998, by (i) beneficial owners of
more than five percent of the Company's Common Stock, (ii) each director, (iii)
each nominee for director and (iv) all directors and officers of the Company as
a group.
Beneficial Owner Shares Percent
- -------------------------------------------------------------------------
Heartland Advisors, Inc.(2) 912,500 12.6
Royce & Associates (3) 841,700 11.6
John Weil (4) 760,000 10.5
The TCW Group, Inc. (5) 607,600 8.4
Pioneering Management Corporation (6) 590,000 8.2
Dimensional Fund Advisors Inc. (7) 520,700 7.2
James H. Lindy (8) 9,875 *
Allen B. Morgan, Jr. (8) 44,875 *
Wellford L. Sanders, Jr. (8) 6,875 *
Elliot J. Stone (8) 8,875 *
Bernard J. Wein (9) 284,768 3.8
Stanley H. Grossman (9) 185,000 2.5
David C. Forell (9)(10) 98,173 1.3
All directors and officers
as a group (8 persons)(11) 683,691 8.8
- -------------------------------
* Less than one percent of the number of outstanding shares.
(1) As used in this table, beneficial ownership means the sole or shared power
to vote, or direct the voting of, a security, or the sole or shared power to
dispose, or direct the disposition of a security. Except as otherwise indicated,
all persons listed above have (i) sole voting power and investment power with
respect to their shares of Common Stock, except to the extent that authority is
shared by spouses under applicable law and (ii) record and beneficial ownership
with respect to their shares of Common Stock.
(2) The address of this shareholder is 790 North Milwaukee Street, Milwaukee WI
53202
(3) The address of this shareholder is 1414 Avenue of the Americas, New York, NY
10019
(4) The address of this shareholder is 200 North Broadway, St. Louis, MO 63102
<PAGE>
(5) The address of this shareholder is 865 South Figueroa Street, Los Angeles,
CA 90017
(6) The address of this shareholder is 60 State Street, Boston, MA
02109
(7) The address of this shareholder is 1299 Ocean Avenue, 11th Floor, Santa
Monica, CA 90401. Dimensional Fund Advisors Inc. ("Dimensional"), a registered
investment advisor, is deemed to have beneficial ownership of 520,700 shares of
Catherines Stores Corporation stock as of December 31, 1997, all of which shares
are held in portfolios of DFS Investment Dimensions Group Inc., a registered
open-end investment company, or in series of the DFA Investment Trust Company, a
Delaware business trust, or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit plans, all of which
Dimensional Fund Advisors Inc. serves as investment manager. Dimensional
disclaims beneficial ownership of all such shares.
(8) Includes 6,875 shares of Common Stock issuable upon exercise of options
granted under the 1992 Nonqualified Stock Option Plan and the 1994 Omnibus
Incentive Plan.
(9) Includes 222,350, 168,100 and 84,500 shares of Common Stock issuable upon
exercise of Management Performance Units and options granted under the 1990
Performance Units Plan, the 1992 Nonqualified Stock Option Plan and the 1994
Omnibus Incentive Plan for Messrs. Wein, Grossman and Forell, respectively, all
of which are currently exercisable. See "Proposal 1-Election of Directors."
(10) Includes 1,000 shares owned by Mr. Forell's children.
(11) Includes 517,700 shares of Common Stock issuable upon exercise of
Management Performance Units and options granted under the 1992 Nonqualified
Stock Option Plan and the 1994 Omnibus Incentive Plan, all of which are
currently exercisable.
PROPOSAL 1. ELECTION OF DIRECTORS
The Board currently consists of seven directors, classified in three
classes. The terms of Stanley H. Grossman and Wellford L. Sanders, Jr. expire at
this Annual Meeting, and they are standing for re-election. The two directors to
be elected at the Annual Meeting will serve until the 2001 Annual Meeting of
Stockholders and until their successors are elected. The names of, and certain
information furnished to the Company by the nominees with respect to, the
nominees for election as directors, are set forth below. If, for any reason, any
of the nominees shall become unavailable for election, the individuals named in
the enclosed proxy may exercise their discretion to vote for any substitutes
chosen by the Board of Directors, unless the Board of Directors should decide to
reduce the number of directors to be elected at the Annual Meeting. The Company
has no reason to believe that any nominee will be unable to serve as a director.
<PAGE>
For information concerning the number of shares of the Company's
Common Stock owned by each director, each nominee for director, and all
directors and officers as a group as of April 9, 1998, see "Ownership of Common
Stock by Directors, Officers and Certain Beneficial Owners."
Director
Name Age Since Position with Company
- ---- --- ------- ---------------------
Bernard J. Wein 57 1987 Chairman of the Board,
President, Chief Executive
Officer and Director
Stanley H. Grossman* 65 1992 Executive Vice President,
Secretary and Director
David C. Forell 50 1992 Executive Vice President,
Chief Financial Officer and
Director
James H. Lindy 60 1992 Director
Allen B. Morgan, Jr. 55 1992 Director
Wellford L. Sanders, Jr.* 52 1991 Director
Elliot J. Stone 77 1991 Director
- ------------------------------
* Nominee for Director.
Bernard J. Wein was named Chairman of the Board, President and Chief
Executive Officer of the Company in December 1987.
Stanley H. Grossman has been Executive Vice President and Secretary of
the Company since December 1987.
David C. Forell has been Executive Vice President and Chief Financial
Officer of the Company since January 1988.
James H. Lindy is Principal of Lindy & Associates, an architectural and
planning firm in Memphis, Tennessee. Mr. Lindy and his firm have provided
extensive retail architectural design services for numerous major corporations.
His firm has performed architectural services for the Company for over five
years and has accumulated significant knowledge concerning the location, design
and operation of the Company's stores.
Allen B. Morgan, Jr. is the Chairman of the Board and Chief Executive
Officer of Morgan Keegan, Inc., the holding company for Morgan Keegan & Company,
Inc., its stock brokerage and underwriting subsidiary, positions he has held
since 1983. He has also been Chairman of the Board, Chief Executive Officer,
employee and director of the subsidiary since 1969.
Wellford L. Sanders, Jr. is a Managing Director of Wheat First
Union, a securities firm. Mr. Sanders was a member of the law firm of
McGuire, Woods, Battle & Boothe LLP from 1986 to 1997.
Elliot J. Stone served as the President and Chief Executive
Officer of Jordan Marsh from 1979 to 1986, and as Chairman and Chief
<PAGE>
Executive Officer of Jordan Marsh from 1986 until his retirement in
1989. Mr. Stone is a management consultant.
The Board of Directors of the Company is divided into three classes
serving staggered three-year terms. Pursuant to this Proposal 1, you are being
asked to vote for the election of Messrs. Grossman and Sanders for three year
terms expiring at the Annual Meeting of the Shareholders of the Company in 2001
or upon the later election of their successors. The terms of Messrs. Forell,
Morgan and Stone expire in 1999. The terms of Messrs. Lindy and Wein expire in
2000.
Directors of the Company who are not employees of the Company or of any
of its wholly owned subsidiaries are paid an annual retainer of $15,000 plus
$2,000 for each Board of Directors meeting attended, whether in person or by
teleconference. In addition, the Company's 1994 Omnibus Incentive Plan
automatically grants each nonemployee Director options to purchase 2,500 shares
of Common Stock annually, at fair market value on the date of grant, exercisable
twenty-five percent (25%) per year. No separate compensation is payable for
participation in committee meetings, although Directors are entitled to
reimbursement for expenses incurred in attending Board and committee meetings,
including expenses for travel, food and lodging. The Board of Directors met five
times during the fiscal year ended January 31, 1998. During that fiscal year,
each director attended all of the meetings of the Company's Board of Directors.
Audit Committee
The Audit Committee is responsible for recommending the independent
public accountants for the Company and reviewing the scope of the audit. It also
reviews the report of the Company's independent public accountants. The Audit
Committee held two meetings during the fiscal year ended January 31, 1998. Its
members for that fiscal year were Messrs. Sanders, Lindy, Morgan and Stone.
Compensation Committee
The Compensation Committee reviews and approves the salaries of
officers and (except for Mr. Lindy as to stock incentive plans) approves the
grant of stock options and other rights under the Company's stock option and
other executive compensation plans, subject to approval by the Board. The
Compensation Committee held one meeting during the fiscal year ended January 31,
1998. Its members for that fiscal year were Messrs. Morgan, Lindy, Sanders and
Stone.
The Board of Directors has no standing nominating committee.
Executive Compensation
Cash Compensation
The following table sets forth the cash compensation paid, as well as
certain other compensation paid or accrued, to the Company's chief
<PAGE>
executive officer and to each other executive officer whose aggregate cash
compensation exceeded $100,000 during the indicated fiscal years (the "Named
Officers").
1997 Summary Compensation Table
<TABLE>
<CAPTION>
Stock All Other
Year Salary($) Bonus($) Options (#) Compensation($)(1)
---- --------- -------- ----------- ------------------
<S> <C> <C> <C> <C> <C>
Bernard J. Wein
Chairman of the Board and
Chief Executive Officer
1997 500,000 150,000 45,000 183,052
1996 500,000 - 50,000 187,123
1995 480,000 82,510 50,000 94,782
Stanley H. Grossman
Executive Vice President -
Merchandising
1997 325,000 78,000 18,000 120,417
1996 325,000 - 20,000 125,460
1995 315,000 43,318 20,000 116,831
David C. Forell
Executive Vice President -
Chief Financial Officer
1997 290,000 69,600 18,000 43,188
1996 290,000 - 20,000 47,702
1995 280,000 38,505 20,000 40,856
E. Glenn Irelan
Executive Vice President -
Stores/Marketing/Real Estate
1997 190,000 45,600 9,000 95,065
1996 190,000 - 10,000 57,162
1995 165,000 22,690 8,000 33,007
B. Allen Weinstein (2)
Senior Vice President -
Merchandising
1997 136,886 - 9,000 33,363
1996 240,000 30,000 10,000 32,440
1995 120,000 30,000 10,000 500
</TABLE>
- ------------------
(1) The amounts shown for each individual include amounts contributed by
the Company under the Company's Retirement Savings and Profit Sharing Plan,
supplemental retirement benefits in the form of executive annuities or life
insurance and automobile allowances. For Messrs. Irelan and Weinstein, the
amounts include relocation expenses.
<PAGE>
(2) Mr. Weinstein joined the Company in July 1995 and left the Company in August
1997.
Employment Agreements
- ---------------------
The Company has Executive Employment Agreements with each of Messrs.
Wein, Grossman and Forell, (the "Executive Employment Agreements"). Each
Executive Employment Agreement prescribes a minimum base salary, has an initial
term of three years and is automatically extended for additional one-year
periods unless either party gives notice of termination at least one year prior
to the then expiration date. During 1997, Mr. Grossman's agreement was amended
to expire on January 31, 1999. No notice was given June 1, 1997 to Messrs. Wein
and Forell, therefore, their contracts were extended through June 1, 1999. In
the event that the Company gives an executive notice of its election to
discontinue the Executive Employment Agreement, then the executive is entitled
to a lump-sum severance payment equal to 200% of base salary in the case of Mr.
Wein and 150% of base salary in the case of Messrs. Grossman and Forell. In the
event that the Company terminates the employment of an executive, including if
there is a change in control, other than for cause or if the executive
terminates his employment as a result of a material breach by the Company of any
of its obligations under the Executive Employment Agreement, then the executive
shall be entitled to receive a lump sum payment equal to (x) the sum of (a)
one-twelfth of his annual base salary in effect immediately before such
termination plus (b) one-twelfth of 100% of his target bonus opportunity for the
fiscal year in which such termination occurs, multiplied by (y) the greater of
(a) the number of calendar months remaining in the term of the executive's
employment under the Executive Employment Agreement or (b) 24 (in the case of
Mr. Wein) or 18 (in the case of Messrs. Grossman and Forell). In the event that
an executive is entitled to severance payments as described in the preceding two
sentences, he is also entitled to the continuation of health and insurance
benefits and certain additional retirement benefits pursuant to executive
annuity and life insurance agreements for the time period on which the severance
payment is based following the termination of employment.
Stock Options
- -------------
The following table sets forth information on stock option grants
pursuant to the 1994 Omnibus Incentive Plan during the last fiscal year for each
of the Named Officers:
<PAGE>
Stock Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential
Realizable
Value at Assumed
Annual Rates
Number of % of Total of
Securities Options Stock
Underlying Granted to Appreciation
Options Employees Exercise or for Option
Granted in Base Price Exp. Terms(3)
(#)(1) Fiscal Year ($/Share)(2) Date 5%($) 10%($)
- ------ ----------- ------------ ----- ----- ------
<S> <C> <C> <C> <C> <C>
Bernard J. Wein
45,000 31.3 4.875 3/19/07 137,964 349,627
Stanley H. Grossman
18,000 12.5 4.875 3/19/97 55,186 139,851
David C. Forell
18,000 12.5 4.875 3/19/07 55,186 139,851
E. Glenn Irelan
9,000 6.3 4.875 3/19/07 27,593 69,925
B. Allen Weinstein
9,000 6.3 4.875 3/19/07 (4) (4)
</TABLE>
(1) The options are exercisable in cumulative 25% installments commencing one
year from date of grant. Vesting may be accelerated in certain events including
retirement, disability, death and a change of the Company's ownership.
(2) Options were granted at market value at the date of grant as determined by
the Company's last quoted price on NASDAQ. The exercise price and tax
withholding obligations related to exercise may be paid by delivery of already
owned shares or by offset of the underlying shares, subject to certain
conditions.
(3) Gains are reported net of the option exercise price, but before taxes
associated with exercise. These amounts represent certain assumed rates of
appreciation only. Actual gains, if any, on stock option exercises are dependent
on the future performance of the Common Stock, overall stock market conditions,
as well as the optionholder's continued employment through the vesting period.
The amounts reflected in this table may not necessarily be achieved.
(4) Mr. Weinsteins's options were forfeited when he left the Company.
The following table sets forth information concerning the exercise of
stock options during the last fiscal year and unexercised options held as of
January 31, 1998 for each of the Named Officers:
<PAGE>
Aggregate Stock Option Exercises and Fiscal Year End Option Values
<TABLE>
<CAPTION>
Number of
Shares Number of Value of Unexercised In-
Acquired Unexercised Options Held the-Money Options at
on Value At Fiscal Year End Year End ($)(1)
Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
-------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Bernard J. Wein:
- - 179,850/113,750 269,738/73,125
Stanley H. Grossman:
- - 148,600/48,000 269,738/29,250
David C. Forell:
- - 65,000/48,000 --/29,250
E. Glenn Irelan:
- - 6,500/20,500 --/14,625
B. Allen Weinstein:
- - --/-- --/--
</TABLE>
- ------------------
(1) Represents the difference between the price of the Company's Common Stock at
January 31, 1998 less the exercise price of the options.
Report of Compensation Committee
The Compensation Committee of the Board reviews and approves officers'
salaries, stock option grants, and other executive and Company employee benefit
plans and establishes policies relating to employee compensation. Decisions made
by the Compensation Committee concerning executive officers' compensation are
reviewed by the full Board. Members of the Compensation Committee are Messrs.
Morgan, Lindy, Sanders and Stone (except for Mr. Lindy as to stock incentive
plans).
The objectives of the Company's executive compensation policy are to align
the interests of the stockholders and management while motivating and retaining
key employees. In order to achieve its overall objective, the Company's
executive compensation policies combine annual base compensation, incentive
bonuses based on operating performance and long term equity-based incentives.
Taken together, the Company believes its programs will attract and retain
qualified executives who have a significant stake in the long-term success of
the Company. When appropriate, the Committee intends to take the necessary steps
to conform its compensation to the compensation deduction cap created by
Internal Revenue Code Section 162(m), which disallows a public company's
deduction for top executives' compensation in excess of $1 million, in order to
preserve full deductibility of executive compensation, consistent with its
responsibility to provide motivating and competitive compensation which is
performance-based.
<PAGE>
The Compensation Committee attempts to set total compensation at no
less than the median level of comparable companies. Base salaries for the Chief
Executive Officer and the Company's other senior management are determined
annually by the Committee and may be increased based on a) the contribution of
the individual to the Company, b) increases in the scope and complexity of the
individual's primary responsibilities, c) increases in the cost of living and d)
increases in competitive salaries, which factors are subjectively weighted by
the Compensation Committee. Based on the Company's 1996 fiscal year results, the
Committee concluded that Messrs. Wein, Grossman, Forell, Irelan and Weinstein
should not receive salary increases in fiscal 1997.
The Committee believes that a significant portion of the key
executives' total compensation should be performance-based. The Committee has
focused on earnings before interest, taxes, depreciation and amortization
("EBITDA") as the performance measurement upon which incentive compensation
should be based. The Committee believes growth in this measurement is ultimately
the key determinant of shareholder value and allows management to make
investment decisions that will provide long-term benefits to the stockholders.
Target levels for EBITDA are set each year by the Committee based on the prior
year's performance. Incentive compensation earned can be up to 75% of base
salary for the Chief Executive Officer and 60% for the other senior executives.
In fiscal 1997, EBITDA increased approximately 17% from the prior year which
earned bonuses of 30% and 24% of salary for the Chief Executive Officer and the
other senior executives, respectively. The Committee reserves the right to make
discretionary bonuses in unusual circumstances. No discretionary bonuses were
made in 1997. Incentive compensation earned in 1997 is set forth in the 1997
Summary Compensation Table on page 5, under the "Bonus" column.
Long-term incentives are provided by the grant of stock options and the
ability to purchase stock in the Employee Stock Purchase Plan. The purposes of
these equity-based incentives are to retain these employees and to align the
long-term interests of management and the stockholders. Stock options are
granted at market prices. Options vest over a period of time, as determined by
the Compensation Committee, which is currently four years. Factors determining
stock option grants are similar to the factors determining increases in base
pay, and the overall stock option plan provisions were determined by comparison
to other specialty retail companies.
The Company's stock incentive plans permit the grant of options without
restrictions on the transferability of the options from optionees to their
immediate family members, to trusts for the benefit of family members and to
charitable organizations.
The Company has provided all employees with the opportunity to purchase
Common Stock through the Employee Stock Purchase Plan. Employees may contribute
1% to 10% of their gross salary to the Plan. Quarterly, accumulated funds are
<PAGE>
used to purchase stock from the Company at the lesser of 85% of the closing
market price of the Company's Common Stock at the first or last day of the
calendar quarters. Messrs. Wein, Grossman and Forell participate in the Plan.
The Committee believes that the Company's overall compensation policies
are appropriate to align the interests of management and the stockholders and to
motivate and retain key executives.
Allen B. Morgan, Jr. Wellford L. Sanders, Jr.
James H. Lindy Elliot J. Stone
Company Performance
The following graph compares the cumulative total returns for the
Company, the NASDAQ Stock Market (US) Index and an index of six (6) peer
companies.
The peer group includes The Cato Corporation, United Retail Group,
Inc., Charming Shoppes, Inc., Deb Shops, Inc., The Dress Barn, Inc. and Stein
Mart. This peer group index is subject to occasional changes as the Company or
its competitors change their focus, merge or are acquired, undergo significant
changes, or as new competitors emerge. Clothestime has been eliminated from the
peer group as a result of their bankruptcy and their subsequent delisting from
NASDAQ.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Cumulative Total Return
----------------------------------
1/93 1/94 1/95 1/96 1/97 1/98
Catherines Stores Corp CATH 100 76 43 31 27 32
PEER GROUP PPEERI 100 69 44 28 44 59
NASDAQ STOCK MARKET-US INAS 100 115 110 155 203 240
Comparison of Cumulative Total Return
The total cumulative return on investment assumes that $100 was
invested in the Company, the NASDAQ Stock Market (U.S.) Index and the peer group
index on January 31, 1993 and that all dividends were reinvested.
Compensation Committee Interlocks and Insider Participation
Lindy & Associates, of which Mr. Lindy is the sole proprietor, in the
twelve-month period ended January 31, 1998 was paid approximately $66,000 in
architectural fees for services provided to the Company. Management of the
Company believes that amounts paid for the services rendered were fair in
relation to the cost of similar services available from others.
Certain Transactions
The Board of Directors of the Company approved a loan of $200,000 to
Mr. Forell for margin calls related to indebtedness incurred in connection with
the exercise of options to acquire stock of the Company.
<PAGE>
The loan is pursuant to a promissory note and is secured by a lien upon the
supplemental retirement benefits which Mr. Forell's beneficiaries are entitled
to receive upon his demise, by a right of offset against any severance payments
to which Mr. Forell might otherwise be entitled upon any termination of his
employment with the Company and a lien on stock in the Company owned by him
and/or his wife subordinated to the margin indebtedness. The promissory note
bears interest at the Company's incremental borrowing rate, and the principal
amount and interest is due and payable not later than the earlier of Mr.
Forell's termination of employment with the Company for any reason or ten years
from the date of such borrowing. As of March 30, 1998, Mr. Forell owed the
Company approximately $153,000 in principal and accrued interest on this loan.
Mr. Wein's wife is the sole proprietor of a company which was paid
approximately $21,000 for video production services provided to the Company in
the twelve month period ended January 31, 1998. Management of the Company
believes that amounts paid for the services rendered were fair in relation to
the cost of similar services available from others.
See "Proposal 1. Election of Directors - Compensation Committee
Interlocks and Insider Participation" with regard to architectural fees paid to
Lindy & Associates.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely on review of the copies of reporting forms furnished to
the Company, or written representations that no forms are required, the Company
believes that during 1997, all filing requirements of its officers, directors
and 10% shareholders for reporting to the Securities and Exchange Commission
their ownership and changes in ownership of shares (as required pursuant to
Section 16(a) of the Securities and Exchange Act of 1934) were fulfilled.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE SLATE OF DIRECTORS AS SET FORTH IN
THIS PROPOSAL 1.
PROPOSAL 2. AUTHORIZATION OF AN ADDITIONAL 300,000 SHARES UNDER
THE 1994 OMNIBUS INCENTIVE PLAN AND APPROVAL OF GRANTS THEREUNDER
The Company has heretofore maintained the 1994 Omnibus Incentive Plan
(the "Incentive Plan") pursuant to which stock options have been awarded to key
employees (approximately 35 persons, including four current executive officers )
and directors (four persons). Of the 650,000 shares of Common Stock originally
authorized under the Incentive Plan, only 69,750 remain available for grant.
The Company granted options in 1996 for 166,500 shares and in 1997 for
153,750 shares and proposes to grant options in 1998 (subject to stockholder
approval of this Proposal 2) for 152,750 shares, representing 2.2%, 2.1% and
2.3% of the Company's outstanding shares.
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The Compensation Committee's current expectation is for annual grants of stock
options at substantially the same levels. The Compensation Committee also
reviewed the percentage derived by dividing the number of shares authorized
under the Plan by the Company's total shares outstanding, relative to a similar
measure for other retailing companies and determined that the percentage for the
Company would be within an acceptable range after the adoption of this Proposal
2.
On March 18, 1998, the Board of Directors approved an increase of
300,000 in the number of authorized shares available under the Incentive Plan.
The Board of Directors, based on the recommendation of the Compensation
Committee, thereafter recommends increasing the authorized number of shares
under the Incentive Plan from 650,000 to 950,000.
The table below indicates grants of stock options under the Incentive
Plan, all of which options are exercisable at the fair market value of a share
of Common Stock on the date of grant.
Incentive Plan Benefits Granted To Date
Name Position Value ($)(2) Shares (#)
- --------------------------------------------------------------------------------
Bernard J. Wein Chairman of
the Board and
Chief Executive
Officer,
Director 154,375 170,000
Stanley H. Grossman Executive Vice
President-
Merchandising,
Director 61,750 78,000
David C. Forell Executive Vice
President and
Chief Financial
Officer,
Director 61,750 78,000
E. Glenn Irelan Executive Vice
President-
Stores, Real
Estate,
Marketing 29,875 27,000
All Current Executives as a Group (4 persons) 307,750 353,000
Non-Executive Directors as a Group (4 persons) 35,000 40,000
Non-Executive Officer Employees as a Group (27 147,688 187,250 (1)
persons)
- ------------------
(1) All employees as a group were granted 540,250 options.
(2) Represents the difference between the price of the Company's Common
Stock at March 30, 1998 less the exercise price of the options.
The table below indicates grants of nonqualified stock options under
the Incentive Plan which the Compensation Committee proposes to approve on the
date of the Annual Meeting of Stockholders if the
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stockholders approve the increase in number of authorized shares under the
Incentive Plan, all of which options would be exercisable over a four-year
period at the fair market value of a share of Common Stock on the date of
stockholder approval.
New Incentive Plan Benefits
---------------------------
Name Position Shares (#)
Bernard J. Wein Chairman of the Board and
Chief Executive Officer,
Director 50,000
Stanley H. Grossman Executive Vice President-
Merchandising, Director 20,000
David C. Forell Executive Vice President
and Chief Financial Officer,
Director 20,000
E. Glenn Irelan Executive Vice President-
Stores, Real Estate,
Marketing 10,000
All Current Executives as a Group (4 persons) 100,000
Non-Executive Officer Employees as a Group (31 persons) 52,750(1)(2)
- --------------------
(1) All employees as a group will be granted 152,750 options.
(2) The dollar value of such options is indeterminate because the
exercise price will not be determined unless and until the stockholders ratify
the increase in the number of shares available under the Incentive Plan. The
market value of the Company's Common Stock as of March 30,1998 was $7.75 per
share.
(3) Non-Executive Directors as a group will receive an automatic grant of
10,000 options on the date of the Annual meeting of Stockholders.
The following summary of the Incentive Plan is qualified in its
entirety by the full text of the Incentive Plan, a copy of which may be obtained
by shareholders of the Company upon request directed to the Secretary of the
Company at 3742 Lamar Avenue, Memphis, Tennessee 38118.
The Incentive Plan is administered by the Compensation Committee (other
than Mr. Lindy) (the "Committee"). Key employees and directors of the Company
who are in positions in which their decisions, actions and counsel can make
substantial contributions to the Company's profitability and success are
eligible to participate in the Incentive Plan.
Stock options may be granted under the Incentive Plan at the discretion of
the Committee. No cash consideration will be received by the Company for the
granting of any option. Stock options may be options which are intended to
qualify as incentive stock options ("Incentive Stock Options") within the
meaning of Section 422(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), or options which are not intended to so qualify ("Nonqualified Stock
Options"). The Committee has the discretion to fix the exercise price of the
options, however, the exercise price for Incentive Stock Options cannot be less
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than 100% of the fair market value as of the date of grant. The option exercise
price may be satisfied in cash or by exchanging shares of Common Stock owned by
the optionee, or a combination of cash and shares. The Company may facilitate
the cashless exercise of options through customary brokerage arrangements. If
the exercise price is paid by tendering shares, the Committee in its discretion
may grant the optionee a new stock option for the number of shares used to pay
the exercise price. The Committee has broad discretion as to the terms and
conditions upon which options granted shall be exercised. Options have a maximum
term of ten years from date of grant. Options granted to date have a ten-year
term and become exercisable on a cumulative basis in annual installments over a
four year period.
Stock appreciation rights ("SARs" ) are rights to receive cash or
shares, or a combination thereof, as the Committee may determine, in an amount
equal to the excess of (i) the fair market value of the shares with respect to
which the SAR is exercised, over (ii) a specified price which must not be less
than 100% of the fair market value of the shares at the time the SAR is granted,
or, if the SAR is granted in connection with a previously issued stock option,
not less than 100% of the fair market value of shares at the time such option is
granted. SARs may be granted in connection with a previously or
contemporaneously granted stock option or independently. No cash consideration
will be received by the Company for the granting of any SAR. If a SAR is granted
in relation to a stock option, (i) the SAR will be exercisable only at such
times and by such persons as the related option is exercisable, and (ii) the
grantee's right to exercise either the related option or the SAR will be
canceled to the extent that the other is exercised. No SAR may be exercised
earlier than six months or later than ten years after the date of grant. The
Committee may provide in the SAR agreement circumstances under which SARs will
be come immediately exercisable and may, notwithstanding the foregoing
restriction on time of exercise, accelerate the exercisability of any SAR at any
time.
Awards of restricted shares under the Incentive Plan may be made at the
discretion of the Committee and consist of shares of stock granted to a
participant and subject to a stock restriction agreement. At the time of an
award, a participant has the benefits of ownership in respect of such shares,
including the right to vote such shares and receive dividends thereon and other
distributions subject to the restrictions set forth in the Incentive Plan and in
the stock restriction agreement. The shares are legended and may not be sold,
transferred or disposed of until such restrictions have elapsed. Upon the
expiration, lapse or removal of restrictions, shares free of restrictive legend
will be issued to the grantee. The Committee has broad discretion as to the
specific terms and conditions of each award, including applicable rights upon
certain terminations of employment.
Performance unit awards entitle grantees to future payments based upon
the achievement of pre-established long-term performance objectives. A
performance unit agreement will establish with respect to each unit award (i) a
performance period of not fewer than two years, (ii) a value for each unit which
will not thereafter change, or which may vary thereafter pursuant to criteria
<PAGE>
specified by the Committee and (iii) maximum and minimum performance targets to
be achieved during the applicable performance period. Under each agreement, the
grantee will be entitled to full value of a unit award for achievement of
maximum targets and a portion of a unit award for performance exceeding minimum
targets but less than maximum targets. The Committee has discretion to determine
the participants to whom performance unit awards are to be made, the times in
which such awards are to be made, the size of such awards and all other
conditions and awards, including any restrictions, deferral periods or
performance requirements.
The Committee has the discretion to provide financing to a participant
in a principal amount sufficient for the purchase of shares pursuant to an
award. The participant, prior to the issuance or transfer of Shares under the
Incentive Plan, shall satisfy any tax withholding obligations, in whole or in
part, and may elect to have the Company withhold shares for the value equal to
the amount of taxes required by law to be withheld.
If a Change in Control of the Company, as defined in the Incentive
Plan, occurs, any SAR outstanding for at least six months and any stock options
awarded and not previously exercisable and vested will become fully exercisable
and vested and all restrictions applicable to any restricted stock, performance
units or other stock-based awards will lapse.
In the event of any change in the outstanding common stock of the
Company by reason of a stock dividend or distribution, recapitalization, merger,
consolidation, reorganization, split-up, combination, exchange of shares or the
like, the Board of Directors, in its discretion, may adjust proportionately the
number of shares which may be issued under the Incentive Plan, the number of
shares subject to outstanding awards, and the option exercise price of each
outstanding option. The Board of Directors may also make other such changes in
outstanding options, SARs, performance units and restricted stock awards as it
deems equitable in its absolute discretion to prevent dilution or enlargement of
the rights of grantees, provided that any fractional shares resulting from such
adjustments will be eliminated.
The Board of Directors may terminate, amend, modify or suspend the
Incentive Plan at any time, except that the Board of Directors may not, without
the authorization of the holders of a majority of the Company's outstanding
shares, increase the maximum number of shares which may be issued under the
Incentive Plan (other than adjustments pursuant to the Incentive Plan), extend
the last date on which awards may be granted under the Incentive Plan, extend
the date on which the Incentive Plan expires, change the class of persons
eligible to receive awards, or change the minimum option price.
The Incentive Plan provides that each non-employee director will
receive a Nonqualified Stock Option for 2,500 shares after each annual
shareholders' meeting, which option becomes exercisable twenty-five percent
(25%) per year beginning one year after the date of grant.
<PAGE>
Federal Income Tax Consequences
(1) Options: No income will be realized by an optionee upon the
optionee's purchase of shares pursuant to the exercise of an Incentive Stock
Option. In order to avail himself of this tax benefit, the optionee must not
dispose of the shares before he has held such shares for at least one year after
the date of exercise and at least two years after the date of grant. Assuming
compliance with this and other applicable tax provisions, an optionee will
recognize long-term capital gain or loss when the optionee disposes of the
shares, measured by the difference between the option price and the amount
realized for the shares at the time of disposition. If the optionee disposes of
shares purchased upon the exercise of the option before the expiration of the
above-noted periods, any amount realized from such disqualifying disposition
will be taxable as ordinary income in the year of disposition to the extent of
the lesser of the amount realized by the optionee in excess of the option price,
or the spread between the option price and the fair market value of the shares
at the time the option is exercised. Any amount realized in excess of the fair
market value of the shares on the date of exercise will be treated as long- or
short-term capital gain, depending upon the holding period of the shares. No
deduction will be allowed to the Company for federal income tax purposes at the
time of the grant or exercise of an Incentive Stock Option. At the time of a
disqualifying disposition by an optionee, the Company will be entitled to a
deduction for the amount taxable to the optionee as ordinary income.
The exercise of a Nonqualified Stock Option will result in the
recognition of ordinary income by the optionee for federal income tax purposes
in an amount equal to the difference between the option price and the fair
market value of the shares acquired upon the exercise of the option. The Company
will be entitled to a deduction equal to the amount of income recognized by the
optionee. Upon the later sale of any shares acquired upon the exercise of a
Nonqualified Stock Option, any amount realized by the optionee in excess of the
amount recognized by the optionee as ordinary income will be treated as long- or
short-term capital gain to the optionee, depending upon the holding period of
the shares.
(2) SARs: A grantee of a SAR will realize ordinary income upon the
exercise of a SAR equaling the amount of cash received or the current fair
market value of stock acquired, and the Company will receive a corresponding
deduction. Upon subsequent disposition of any shares received, any gain or loss
will be a long- or short-term capital gain or loss depending upon the applicable
holding period.
(3) Restricted Stock: The federal income tax consequences of restricted
stock awards will depend on the facts and circumstances of each restricted stock
award, and in particular, the nature of the restrictions imposed with respect to
the stock which is the subject of the award. In general, if the stock is subject
to a "substantial risk of forfeiture", i.e., if rights to full enjoyment of the
benefit of ownership of the stock are conditioned upon the future performance of
substantial services by the grantee, a taxable event occurs only when the risk
<PAGE>
of forfeiture ceases. At such time, the grantee will realize ordinary income to
the extent of the excess of the fair market value of the stock on the date the
risk ceases over the grantee's cost for such stock, and the Company will be
entitled to a deduction in the same amount. Under certain circumstances, the
grantee can accelerate the taxable event with respect to the stock, in which
event, the ordinary income amount and the Company's deduction will be measured
as of the date the stock is deemed to have been transferred to the grantee. If
the restrictions with respect to stock which is the subject of a restricted
stock award do not subject the grantee to a "substantial risk of forfeiture" of
the stock, then the grantee will realize ordinary income with respect to the
stock to the extent of the difference at the time of the transfer of the stock
to the grantee between the fair market value of the stock and the grantee's cost
therefor, and the Company will be entitled to a deduction in the same amount.
Subsequent to the determination and satisfaction of the ordinary income tax
consequences, any further gain or loss realized on the subsequent disposition of
such stock will be a long- or short-term capital gain depending upon the
applicable holding period.
(4) Performance Unit Awards: A grantee of a performance unit award will
realize ordinary income upon receipt equaling the amount of cash or the current
market value of the stock received, and the Company will receive a corresponding
deduction. Upon subsequent disposition of any shares received, any gain or loss
will be a long- or short-term gain or loss depending upon the applicable holding
period.
The foregoing description of tax consequences is based on present
federal income tax laws and is subject to change as the law changes. The summary
does not cover any State or local tax consequences of participation in the
Incentive Plan.
The affirmative vote of a majority of the votes cast by the holders of
the Company's Common Stock is required for adoption of Proposal 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2 TO INCREASE THE
NUMBER OF AUTHORIZED SHARES UNDER THE INCENTIVE PLAN AND TO RATIFY ALL GRANTS OF
OPTIONS UNDER THIS PLAN TO DATE.
PROPOSAL 3. RATIFICATION OF APPOINTMENT
OF INDEPENDENT PUBLIC ACCOUNTANTS
Subject to ratification by the stockholders at the Annual Meeting, the
Board of Directors has appointed Arthur Andersen LLP to serve as the independent
public accountants for the Company for its current fiscal year ending January
30, 1999. Representatives of Arthur Andersen LLP are expected to be present at
the Annual Meeting, will have the opportunity to make a statement, if they
desire to do so, and will be available to respond to appropriate questions.
<PAGE>
The affirmative vote of a majority of the votes cast by the holders of the
Company's Common Stock on this proposal shall constitute ratification of the
appointment of Arthur Andersen LLP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF
THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS
FOR THE CURRENT FISCAL YEAR.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of
no matters which will be presented for consideration at the Annual Meeting other
than the proposals set forth in this Proxy Statement. If any other matters
properly come before the Annual Meeting, it is intended that the persons named
in the proxy will act in respect thereof in accordance with their best judgment.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company no later than December
28, 1998 and the proposals must meet certain eligibility requirements of the
Securities and Exchange Commission. Proposals may be mailed to Catherines Stores
Corporation, the attention of the Secretary, 3742 Lamar Avenue, Memphis,
Tennessee 38118.
SOLICITATION OF PROXIES AND COST THEREOF
The cost of solicitation of the proxies will be borne by the Company.
In addition to solicitation of the proxies by use of the mails, employees of the
Company, without extra remuneration, may solicit proxies personally or by
telephone or other written or electronic media. The Company will reimburse
brokerage firms, nominees, custodians and fiduciaries for their out-of-pocket
expenses for forwarding proxy materials to beneficial owners and seeking
instruction with respect thereto.
STOCKHOLDERS MAY OBTAIN A COPY OF THE COMPANY'S FORM 10-K AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION WITHOUT CHARGE (EXCEPT FOR EXHIBITS) BY
WRITING TO: SECRETARY, CATHERINES STORES CORPORATION, 3742 LAMAR AVENUE,
MEMPHIS, TENNESSEE 38118.
FINANCIAL STATEMENTS MEETING THE REQUIREMENTS OF REGULATION S-X ARE
INCORPORATED BY REFERENCE AND CAN BE FOUND IN THE ANNUAL REPORT ACCOMPANYING
THIS PROXY STATEMENT AND IN THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND
EXCHANGE COMMISSION ON FORM 10-K.
By Order of the Board of Directors
Stanley H. Grossman
Secretary
April 24, 1998
<PAGE>
CATHERINES STORES CORPORATION
3472 Lamar Avenue
Memphis, Tennessee 38118
This proxy is solicited on behalf of the Board of Directors. The undersigned
hereby appoints David C. Forell and E. Glenn Irelan as Proxies, each with the
power to appoint his substitute, and hereby authorizes them to represent and
vote as designated on the reverse side, all the shares of Common Stock of
Catherines Stores Corporation held of record by the undersigned on April 9, 1998
at the annual meeting of the shareholders to be held on June 3, 1998 or any
adjournment thereof.
(continued from other side)
<PAGE>
This proxy, when properly executed will be voted in the manner directed herein
by the undersigned stockholder. IF NO ELECTION IS MADE, THE PROXY WILL BE VOTED
FOR PROPOSALS 1,2 and 3.
1. ELECTION OF DIRECTORS for the terms set forth in the Proxy Statement.
FOR all nominees listed below WITHHOLD ALL AUTHORITY
(except as marked to to vote for all
the contrary below) nominees listed below
[ ] [ ]
(INSTRUCTION: To withhold authority to vote for any
individual nominee, strike through the nominee's name below).
Stanley H. Grossman Wellford L. Sanders, Jr.
2. PROPOSAL TO INCREASE THE NUMBER OF SHARES UNDER THE 1994 OMNIBUS INCENTIVE
PLAN AND TO RATIFY THE GRANT OF OPTIONS THEREUNDER.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP as the independent
public accountants of the corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please indicate by checkmark if you will attend the meeting in
person. [ ]
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
DATED: _______________, 1997 __________________________________
Signature
PLEASE MARK, SIGN, DATE AND
RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED
ENVELOPE. __________________________________
Signature if held jointly
<PAGE>
