<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] 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
</TABLE>
GOODY'S FAMILY CLOTHING, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
----------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
(Goody's Family Clothing Logo)
Dear Fellow Shareholder:
On behalf of the Board of Directors and management, I cordially invite you
to attend the annual meeting of shareholders to be held at 10:00 a.m. on
Wednesday, June 16, 1999 at the Company's corporate headquarters located at 400
Goody's Lane, Knoxville, Tennessee.
The notice of the meeting and Proxy Statement accompanying this letter
describe the specific business to be acted upon. A copy of the Company's 1998
Annual Report is also enclosed for your review.
In addition to the specific matters to be acted upon at the meeting as
described in detail in the accompanying Proxy Statement, during the meeting
there will be a review of fiscal 1998, a report on the progress of the Company
and an opportunity for shareholders to ask management questions of general
interest.
It is important that your shares be represented and voted at the meeting.
Whether or not you plan to attend the meeting in person, you are requested to
complete, sign, date and promptly return the enclosed proxy card in the envelope
provided. If you choose to attend the meeting, you may revoke your proxy and
personally cast your vote.
I look forward to seeing you at the meeting.
Sincerely yours,
/s/ Robert M. Goodfriend
Robert M. Goodfriend
Chairman of the Board and
Chief Executive Officer
Knoxville, Tennessee
May 14, 1999
<PAGE> 3
GOODY'S FAMILY CLOTHING, INC.
400 GOODY'S LANE
KNOXVILLE, TENNESSEE 37922
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Goody's Family Clothing, Inc.:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of Goody's
Family Clothing, Inc. (the "Company") will be held at 10:00 a.m. on Wednesday,
June 16, 1999 at the Company's corporate headquarters located at 400 Goody's
Lane, Knoxville, Tennessee for the following purposes:
1. To elect two directors to serve for terms of three years; and
2. To transact such other business as may properly come before the
meeting or any adjournment(s) or postponement(s) thereof.
Only shareholders of record, as shown by the transfer books of the Company,
at the close of business on April 26, 1999 are entitled to notice of and to vote
at the meeting.
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, WE
URGE YOU TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE AS PROMPTLY AS POSSIBLE. IF YOU CHOOSE TO ATTEND THE MEETING,
YOU MAY REVOKE YOUR PROXY AND PERSONALLY CAST YOUR VOTE.
By Order of the Board of Directors,
/s/ EDWARD R. CARLIN
Edward R. Carlin
Secretary
Knoxville, Tennessee
May 14, 1999
<PAGE> 4
GOODY'S FAMILY CLOTHING, INC.
400 GOODY'S LANE
KNOXVILLE, TENNESSEE 37922
PROXY STATEMENT
This Proxy Statement is furnished by and on behalf of the Board of
Directors (the "Board") of Goody's Family Clothing, Inc. (the "Company") in
connection with the solicitation of proxies for use at the annual meeting of
shareholders of the Company to be held on Wednesday, June 16, 1999 and at any
and all adjournment(s) or postponement(s) thereof (the "Annual Meeting"). A copy
of the notice of the Annual Meeting accompanies this Proxy Statement. This Proxy
Statement and the enclosed proxy card will be first mailed on or about May 14,
1999 to the shareholders of record of the Company (individually, a "Shareholder"
and collectively, the "Shareholders") at the close of business on April 26, 1999
(the "Record Date").
Proxies will be voted as specified by Shareholders. Unless contrary
instructions are specified, if the enclosed proxy card is executed and returned
(and not revoked) prior to the Annual Meeting, the shares of common stock, no
par value per share, of the Company (the "Common Stock") represented thereby
will be voted FOR the election as directors of the Company of the two nominees
listed in this Proxy Statement. A signed proxy submitted by a Shareholder will
not affect his or her right to attend, and to vote in person at, the Annual
Meeting. Shareholders who execute a proxy may revoke it at any time before it is
voted by filing a written revocation with the Secretary of the Company, by
executing a proxy bearing a later date or by attending and voting in person at
the Annual Meeting.
There are 33,333,480 shares of Common Stock entitled to notice of and to
vote at the Annual Meeting, and each such share entitles its holder to one vote.
Pursuant to the provisions of the Tennessee Business Corporation Act, April 26,
1999 has been fixed as the Record Date for the determination of the Shareholders
entitled to notice of and to vote at the Annual Meeting and, accordingly, only
holders of Common Stock of record at the close of business on that day will be
entitled to notice of and to vote at the Annual Meeting. The holders of a
majority of all the shares of Common Stock entitled to vote must be present in
person, or represented by proxy, at the Annual Meeting to constitute a quorum
and to act upon the proposed business. Shares as to which authority to vote is
withheld, abstentions and broker non-votes are counted in determining whether a
quorum exists.
Under Tennessee law, directors are elected by the affirmative vote, in
person or by proxy, of a plurality of the shares entitled to vote in any
election at a meeting at which a quorum is present. Only votes actually cast
will be counted for the purpose of determining whether a particular nominee
received more votes than another person or persons, if any, nominated for the
same seat on the Board. Accordingly, votes withheld from director nominees,
abstentions and broker non-votes will not be included in vote totals and will
not be considered in determining the outcome of the vote.
The terms "fiscal 1996," "fiscal 1997," "fiscal 1998," "fiscal 1999" and
"fiscal 2000" as used herein refer to the Company's fiscal years ended February
1, 1997, January 31, 1998 and January 30, 1999 and the Company's fiscal years
ending January 29, 2000 and February 3, 2001, respectively.
YOUR BOARD OF DIRECTORS URGES YOU TO COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
<PAGE> 5
VOTING RIGHTS AND PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of the outstanding shares of Common Stock as of the Record Date for
(i) each person known by the Company to beneficially own more than 5% of the
outstanding shares of Common Stock, (ii) each of the executive officers of the
Company named in the "Table I -- Summary Compensation Table," (iii) each
director and director nominee of the Company and (iv) all directors and
executive officers of the Company as a group. According to rules adopted by the
Securities and Exchange Commission (the "Commission"), a person is a "beneficial
owner" of securities if that person has or shares the power to vote them or to
direct their investment, or has the right to acquire beneficial ownership of
such securities within 60 days from the Record Date through the exercise of an
option, warrant or right, conversion of a security or otherwise. As of the date
of this Proxy Statement, the Company only has shares of Common Stock
outstanding. An asterisk indicates beneficial ownership of less than 1% of the
outstanding shares of Common Stock.
<TABLE>
<CAPTION>
Number of Shares and Nature of Beneficial
Ownership at April 26, 1999
-------------------------------------------------
Number of
Shares in
Voting or Investment Second Column
Power Percent Which May Be
-------------------- of Acquired within
Name Sole Shared Class 60 Days(1)
- ---- ---------- ------ ------- ---------------
<S> <C> <C> <C> <C>
Robert M. Goodfriend(2).......................... 13,881,710(3) 22,500(4) 40.9% 652,000
Harry M. Call.................................... 66,209 -- * 58,000
Edward R. Carlin................................. 64,305 -- * 64,000
Thomas R. Kelly, Jr.............................. 135,000 -- * 119,000
David R. Mullins................................. 104,000 -- * 93,500
Samuel J. Furrow................................. 10,306 -- * 10,306
Robert F. Koppel................................. 10,544 -- * 10,544
Irwin L. Lowenstein.............................. 22,858 -- * 22,858
Cheryl L. Turnbull............................... 48,460 -- * 48,460
All Directors and Executive Officers as a Group
(16 Persons)................................... 14,530,290(3) 23,900(5) 42.1% 1,250,468
</TABLE>
- ---------------
(1) This column lists the number of shares of Common Stock which the respective
director and/or executive officer has the right to acquire within 60 days
from the Record Date through the exercise of stock options awarded under the
Company's stock option plans.
(2) The business address of Mr. Goodfriend is 400 Goody's Lane, Knoxville,
Tennessee 37922.
(3) These shares do not include 834,540 shares (2.5% of the outstanding shares
of Common Stock) held in trust for Mr. Goodfriend's children, as to which
Mr. Goodfriend disclaims beneficial ownership. Mr. Goodfriend has no voting
or investment power with respect to these shares.
(4) These shares are owned by Mr. Goodfriend's wife, with whom Mr. Goodfriend
shares voting and investment power with respect to such shares.
(5) Voting and investment power with respect to these shares are shared with
certain family members of the respective director and/or executive officer.
See footnote 4 above.
2
<PAGE> 6
PROPOSAL 1 -- ELECTION OF DIRECTORS
NOMINEES
The Board is divided into three classes of directors with each class
holding office for a staggered three-year term. The term of the Class I
Directors, Irwin L. Lowenstein and Cheryl L. Turnbull, will expire at the Annual
Meeting. Irwin L. Lowenstein and Cheryl L. Turnbull are nominees for election at
the Annual Meeting as Class I Directors to serve until the 2002 annual meeting
of shareholders (or until the earlier election and qualification of their
successors). The Company's Bylaws (the "Bylaws") provide that any vacancy in the
Board created by the death, resignation or removal of a director shall be filled
by the affirmative vote of a majority of the remaining directors then in office,
though less than a quorum, for a term of office until the next annual meeting of
shareholders.
The Bylaws further provide that the Company shall have at least five and no
more than ten directors, with the Board to determine the exact number from time
to time, and that at least 51% of the Board shall be Independent Directors. For
purposes of the Bylaws, a person shall be deemed to be an "Independent Director"
if he or she (i) is not an executive officer or an employee of the Company or
any subsidiary or affiliate of the Company, (ii) has not served as an executive
officer of the Company at any time during the two years preceding his or her
election as a director of the Company and has not served in such capacity for a
period exceeding ten years, (iii) is not a family member (i.e., parent, sibling,
grandparent, mother-in-law, father-in-law, spouse, former spouse, child,
stepchild, grandchild or any other blood or legal relative) of any executive
officer or any other employee described in clause (i) or (ii) above, (iv) is not
a person, or is not a family member or Affiliate or Associate (as defined in
Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), of any person, who beneficially owns 25% or more of the securities of
the Company then entitled to vote in the election of directors of the Company
and (v) is free from any relationship that, in the good faith opinion of the
other Independent Directors, would interfere with the exercise of independent
judgment in carrying out the responsibilities of an Independent Director. The
Board is currently comprised of six members and all of the directors, other than
Messrs. Goodfriend and Call, meet the requirements for being an Independent
Director.
Since the Board has only nominated two persons for election as Class I
Directors and has fixed the number of Class I Directors at two directors,
proxies granted by the Shareholders cannot be voted for a greater number of
persons than the number of nominees named herein. The election of the Class I
Directors requires the presence, in person or by proxy, of the holders of a
majority of all the shares of Common Stock entitled to notice of and to vote at
the Annual Meeting, and the Class I Directors are elected by the affirmative
vote, in person or by proxy, of a plurality of the shares entitled to vote at
the Annual Meeting. The Company's principal shareholder, Mr. Robert M.
Goodfriend, owns approximately 40% of the outstanding shares of Common Stock and
has indicated his intention to vote his shares in favor of the election as Class
I Directors of the Company of the two nominees listed below.
In the event any of the nominees listed below refuses or is unable to serve
as a director (which is not now anticipated), the persons named as proxies in
the enclosed proxy card reserve full discretion to vote for such other person or
persons as may be nominated.
3
<PAGE> 7
DIRECTOR, DIRECTOR NOMINEE AND EXECUTIVE OFFICER INFORMATION
The following table sets forth biographical data for the last five years
for each director, for each nominee for director and for each executive officer
of the Company (based upon information supplied by him or her to the Company)
and such person's length of service as a director and/or executive officer of
the Company.
CLASS I DIRECTORS -- NOMINEES FOR ELECTION AT THE ANNUAL MEETING FOR
TERM EXPIRING AT THE 2002 ANNUAL MEETING
<TABLE>
<CAPTION>
Executive
Position(s) With the Company, Principal Director Officer
Name Age Occupation and Business Experience Since Since
---- --- --------------------------------------- -------- ---------
<S> <C> <C> <C> <C>
Irwin L. Lowenstein 63 Director. Executive Vice President of 1996 --
Rhodes/Heilig-Meyers Company (a
publicly-held specialty furniture
retailer) since February 1997.
Previously served as Chief Executive
Officer of Rhodes, Inc. (a
publicly-held specialty furniture
retailer) from May 1989 to January
1997, Chairman from July 1994 to
February 1997, Director from March 1977
to February 1997, President from March
1977 to July 1994 and Chief Operating
Officer from March 1977 to May 1989.
Director of L.A. T Sportswear, Inc. (a
publicly-held sportswear manufacturer
and distributor) since July 1994 and
The Powell Company, Inc. (a
privately-held furniture manufacturer)
since February 1999.
Cheryl L. Turnbull 38 Director. Director of Banc One Capital 1995 --
Markets, Inc., formerly Banc One
Capital Corporation (a merchant bank)
("Banc One") since January 1998.
Previously served as Vice President of
Banc One from July 1996 to December
1997. A private investor from July 1995
to July 1996. Previously served as
Managing Director of Aston Limited
Partners, L.P. (a bank re-engineering
firm) from August 1992 to June 1995.
</TABLE>
YOUR BOARD RECOMMENDS A VOTE FOR THE ELECTION
OF THE ABOVE NOMINEES AS CLASS I DIRECTORS.
4
<PAGE> 8
CLASS II DIRECTORS -- TERM EXPIRING AT THE 2000 ANNUAL MEETING
<TABLE>
<CAPTION>
Executive
Position(s) With the Company, Principal Director Officer
Name Age Occupation and Business Experience Since Since
---- --- --------------------------------------- -------- ---------
<S> <C> <C> <C> <C>
Harry M. Call 54 Director, President and Chief Operating 1995 1995
Officer of the Company since January
1995. Director of TREBOR of TN, Inc., a
wholly-owned subsidiary of the Company,
since October 1996 and Manager of
GFCFS, LLC, a wholly-owned subsidiary
of SYDOOG, Inc., (which itself is a
wholly-owned subsidiary of the Company)
since November 1998. Director of Cush
Industries (a medical supply company)
since August 1994. Previously served as
the Director of Operations of Processed
Foods Corporation (a food processing
company) from October 1993 to January
1995.
Samuel J. Furrow 57 Director. Chairman of Furrow Auction 1995 --
Company (a real estate and equipment
sales company) since April 1968.
Chairman of Furrow-Justice Machinery
Corporation (a six-branch industrial
and construction equipment dealer)
since September 1983. Owner of
Knoxville Motor Company -- Mercedes
Benz since December 1980 and Land Rover
of Knoxville since July 1997. Director
of Southeastern Advertising Inc. (an
advertising agency) since April 1968.
Director of First American National
Bank since September 1993. Director of
Innovo Group, Inc. (a publicly-held
manufacturer and supplier of sports
bags and apparel) since April 1998.
</TABLE>
CLASS III DIRECTORS -- TERM EXPIRING AT THE 2001 ANNUAL MEETING
<TABLE>
<CAPTION>
Executive
Position(s) With the Company, Principal Director Officer
Name Age Occupation and Business Experience Since Since
---- --- --------------------------------------- -------- ---------
<S> <C> <C> <C> <C>
Robert M. Goodfriend 49 Chairman of the Board of Directors and 1973 1977
Chief Executive Officer of the Company.
Robert F. Koppel 52 Director. President of East Tennessee 1995 --
Children's Hospital since August 1976.
</TABLE>
5
<PAGE> 9
EXECUTIVE OFFICERS (IN ADDITION TO MESSRS. GOODFRIEND AND CALL):
<TABLE>
<CAPTION>
Executive
Position(s) With the Company, Principal Officer
Name Age Occupation and Business Experience Since
---- --- ------------------------------------------------ ---------
<S> <C> <C> <C>
Edward R. Carlin 58 Executive Vice President, Chief Financial 1994
Officer of the Company since July 1994 and
Secretary of the Company since February 1995.
Director of SYDOOG, Inc., TREBOR of TN, Inc. and
GOFAMCLO, Inc., all of which are wholly-owned
subsidiaries of the Company, since October 1996
and Manager of GFCFS, LLC, a wholly-owned
subsidiary of SYDOOG, Inc., since November 1998.
Previously served as Director, Executive Vice
President, Chief Financial Officer and Secretary
of Oshman's Sporting Goods, Inc. (a
publicly-held retail sporting goods chain) and
in various other capacities from August 1982 to
July 1994.
Thomas R. Kelly, Jr. 54 Executive Vice President, General Merchandise 1995
Manager of the Company since January 1995.
Previously served as Senior Vice President and
General Merchandise Manager of Solo Serve
Corporation (an off-price retailer) from
November 1993 to June 1994.
David R. Mullins 47 Executive Vice President, Stores of the Company 1980
since December 1996. Previously served as Senior
Vice President, Store Operations from July 1994
to December 1996 and Vice President, Store
Operations from August 1980 to July 1994.
Bruce E. Halverson 44 Senior Vice President, Planning and Allocation 1998
of the Company since January 1998. Previously
served as Vice President, Planning and
Allocation of the Company from November 1993 to
January 1998.
Stanley B. Latacha 48 Senior Vice President, Marketing and Advertising 1997
of the Company since July 1997. Previously
served as Senior Vice President, Marketing and
Advertising of OfficeMax, Inc. (a publicly-held
office products superstore) from June 1996 to
July 1997 and Vice President, Marketing and
Sales Promotion of Richman Gordman 1/2 Price
Stores, Inc. (a regional off-price department
store) from October 1990 to June 1996.
John J. Okvath III 54 Senior Vice President, Product Development of 1998
the Company since January 1998. Previously
served as Vice President, Product Development of
the Company from August 1995 to January 1998, as
a consultant to the Company from June 1995 to
July 1995 and as Country Manager in various
capacities of Swire & Maclaine Ltd. Hong Kong (a
privately-held import/export buying agency) from
April 1988 to May 1995.
</TABLE>
6
<PAGE> 10
<TABLE>
<CAPTION>
Executive
Position(s) With the Company, Principal Officer
Name Age Occupation and Business Experience Since
---- --- ------------------------------------------------ ---------
<S> <C> <C> <C>
Keith J. Reichelderfer 38 Senior Vice President, General Merchandise 1999
Manager, Women's since January 1999. Previously
served as Vice President, General Merchandise
Manager of Women's Sportswear of the Company
from August 1997 to January 1999 and Divisional
Merchandise Manager, Juniors of the Company from
February 1995 to August 1997. National Sales
Manager and Merchandisor of Trends Clothing Co.
(an apparel manufacturer) from July 1993 to
January 1995.
Jay D. Scussel 55 Senior Vice President, Management Information 1998
Systems of the Company since January 1998.
Previously served as Vice President, Management
Information Systems of the Company from January
1996 to January 1998, an independent consultant
from February 1995 to January 1996 and Vice
President of Systems Development of Kmart
Corporation (a publicly-held mass market
retailer) from January 1989 to February 1995.
Marcus H. Smith, Jr. 42 Senior Vice President, Real Estate of the 1995
Company since April 1995. Previously served as
Vice President of Development of Valparaiso
Realty Company (a real estate development
company) from May 1992 to April 1995.
Bobby Whaley 54 Senior Vice President, Distribution, 1998
Transportation and Logistics of the Company
since January 1998. Previously served as Vice
President, Distribution, Transportation and
Logistics of the Company from February 1983 to
January 1998.
</TABLE>
MEETINGS AND COMMITTEES OF THE BOARD
During fiscal 1998, the Board met four times and each director attended 75%
or more of the aggregate number of meetings held by the Board and its committees
on which he or she served. The Bylaws provide that the Board shall have and
maintain Audit and Compensation Committees. The Bylaws further provide that each
of such committees shall consist of not less than three directors and all
members of such committees shall be Independent Directors.
The Audit Committee, which consists of Messrs. Furrow and Koppel (Chair)
and Ms. Turnbull, is responsible for making recommendations to the Board for the
selection and remuneration of independent auditors to audit the Company's annual
financial statements. The Audit Committee also reviews (i) the results and
findings of audits performed by the independent auditors and the Company's
internal audit department and their recommendations therewith, (ii) the
Company's systems of internal accounting controls and significant accounting
policies and (iii) the nature of non-audit services performed by the independent
auditors. During fiscal 1998, the Audit Committee met four times.
The Compensation Committee, which consists of Messrs. Koppel and Lowenstein
and Ms. Turnbull (Chair), is responsible for reviewing the compensation,
including fringe benefits, of the Chief Executive Officer, other officers and
key management of the Company and making recommendations thereof to the Board.
It is also responsible for the review and administration of the Company's stock
option plans, 401(k) retirement plan, employee payroll investment plan and
short-term incentive compensation plan. In carrying out such responsibilities,
the Compensation Committee reviews the salaries, benefits, performance and other
7
<PAGE> 11
incentive bonuses of key employees as well as the general terms and conditions
of the other benefit plans. During fiscal 1998, the Compensation Committee met
four times.
The Board also has a Nominating Committee, consisting of Messrs. Furrow
(Chair), Goodfriend and Lowenstein, which is responsible for recommending to the
Board suitable persons for election as directors of the Company. The Nominating
Committee will consider nominees recommended by shareholders provided that the
names of such persons are submitted no later than the date established for the
submission of shareholder proposals for action at the Company's next annual
meeting of shareholders. The Nominating Committee met twice during fiscal 1998.
DIRECTORS' COMPENSATION
No compensation is paid to executive officers of the Company for services
rendered in their capacities as directors of the Company.
Each non-employee director is entitled to receive a monthly retainer of
$1,000 and a fee of $1,500 for attendance at each meeting of the Board or any of
its committees (provided, however, committee meetings that are held on the same
days as Board meetings are not counted as separate meetings and provided further
that directors are not compensated for their participation in brief informative
telephonic meetings). The Board has also instituted a policy which provides that
eight hours of committee work outside of formal committee meetings by a
non-employee director is equivalent to attendance at one committee meeting,
thereby entitling such director to a fee of $1,500. In addition to receiving
directors' fees, all non-employee directors are reimbursed for expenses incurred
in connection with their attendance at meetings of the Board or any of its
committees.
Non-employee directors are also entitled to receive, upon first becoming a
director of the Company, formula grants of stock options to acquire 15,000
shares of Common Stock. At each subsequent annual meeting of shareholders,
formula grants of stock options to acquire 3,000 shares of Common Stock are also
awarded to each non-employee director. These stock options are granted at an
exercise price equal to the fair market value of a share of Common Stock on the
date of grant and vest in 20% annual increments following the date of grant.
Directors are also eligible to receive additional grants of stock options
under the Company's 1991 Stock Incentive Plan, 1993 Stock Option Plan and 1997
Stock Option Plan at the discretion of the Compensation Committee. The exercise
price, term and vesting of any such stock options would be determined by the
Compensation Committee at its discretion. There are 954,210 shares of Common
Stock available for future issuance under these plans as of May 1, 1999.
Non-employee directors are permitted to irrevocably elect and receive (in
lieu of cash for directors' fees otherwise earned by them) non-qualified stock
options exercisable to purchase shares of Common Stock at an exercise price
equal to 50% of the fair market value of a share of Common Stock on the date of
grant. This alternative allows the Company to eliminate the cash cost of annual
directors' fees otherwise payable to non-employee directors and to more closely
align the interests of non-employee directors with those of the shareholders.
These stock options are granted at the Board meeting following the annual
meeting of shareholders based on the number of anticipated meetings of the Board
and its committees to be held during the twelve-month period, as well as the
monthly retainer, beginning on the first day of the third quarter of the then
current fiscal year of the Company and ending on the last day of the second
quarter of the following fiscal year of the Company (the "Plan Year"). These
stock options vest on the twelve-month anniversary of the date of grant and are
subject to adjustment at the end of the Plan Year (which corresponds with the
end of the Company's second fiscal quarter) to reflect each director's actual
attendance at or participation in the meetings. At each of the Board meetings
following the respective annual meetings of shareholders on June 18, 1997 and
June 17, 1998, all non-employee directors elected to receive 100% of their
directors' fees for the 1997 Plan Year and the 1998 Plan Year, respectively, in
the form of discounted stock options. The non-employee directors will be
permitted to make such election for the 1999 Plan Year at the Board meeting
planned for June 16, 1999 following the Annual Meeting.
8
<PAGE> 12
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who beneficially own more than 10% of a
registered class of the Company's equity securities ("Reporting Persons") to
file reports of ownership and changes in ownership with the Commission on a
timely basis. Reporting Persons are required to furnish the Company with copies
of all such forms they file. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company and certain
written representations that no other reports were required, the Company
believes that all filing requirements applicable to Reporting Persons during and
with respect to fiscal 1998 were complied with on a timely basis, except that
each of Messrs. Kelly and Smith inadvertently failed to file one report on a
timely basis with respect to one transaction, which transaction was reported
late on a Form 4 by Mr. Kelly and on a Form 5 by Mr. Smith.
OTHER MATTERS
On September 29, 1995, the Commission entered an Order Instituting Public
Proceedings Pursuant to Section 21C of the Exchange Act, Making Findings and
Imposing Relief, and Cease-and-Desist Order against the Company and Robert M.
Goodfriend, the Chairman and Chief Executive Officer of the Company, Release No.
36308, File No. 3-8852 (the "Order"). In anticipation of the Order, the Company
and Mr. Goodfriend each submitted an Offer of Settlement without admitting or
denying the findings set forth therein, and consented to the entry of the Order
by the Commission. Pursuant to the Order, the Commission found that during 1992
and 1993: (i) the Company violated Sections 13(a) and 13(b)(2)(A) and (B) of the
Exchange Act and Rules 12b-20, 13a-1, 13a-13 and 13b2-1 promulgated thereunder
and (ii) Mr. Goodfriend violated Rule 13b2-1 promulgated under the Exchange Act
and caused the Company's violation of the above-referenced Sections. In
addition, the Commission entered an order that each of the Company and Mr.
Goodfriend cease and desist from committing or causing any violation, and from
committing or causing any future violation, of Sections 13(a) and 13(b)(2)(A)
and (B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-13 and 13b2-1
promulgated thereunder.
9
<PAGE> 13
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE COMPENSATION TABLES
The following tables set forth certain information relating to various
forms of compensation awarded to, earned by and paid to the Company's chief
executive officer and its next four most highly compensated executive officers
who were serving as the Company's executive officers at the end of fiscal 1998.
All of such executive officers are hereinafter referred to as the "named
executive officers."
TABLE I -- SUMMARY COMPENSATION TABLE
The following table presents the total compensation awarded to, earned by
and paid to the named executive officers during the last three fiscal years.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
---------------------------------- ------------
Other Securities All
Annual Underlying Other
Fiscal Salary Bonus Compensation Options Compensation
Name and Position Year ($) ($) ($)(1) (#) ($)
- ------------------------------- ------ ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Robert M. Goodfriend........... 1998 600,000(2) 100,000 174,544(3) 60,000 54,648(4)
Chairman of the Board and 1997 600,000(2) 900,000 82,838(3) -- 35,581(4)
Chief Executive Officer 1996 550,000 825,000 82,550(3) 640,000 32,816(4)
Harry M. Call.................. 1998 325,000 100,000 -- 30,000 15,630(5)
President and 1997 300,000 225,000 -- 230,000 12,178(5)
Chief Operating Officer 1996 275,000 206,250 -- -- 10,876(5)
Thomas R. Kelly, Jr............ 1998 325,000 100,000 -- 15,000 6,517(6)
Executive Vice President, 1997 300,000 225,000 -- 300,000 3,158(6)
General Merchandise Manager 1996 215,000 129,000 -- 20,000 2,216(6)
David R. Mullins............... 1998 250,000 15,000 -- 15,000 8,547(7)
Executive Vice President, 1997 235,000 141,000 -- 15,000 5,068(7)
Stores 1996 215,000 129,000 -- 15,000 3,969(7)
Edward R. Carlin............... 1998 250,000 15,000 -- 15,000 14,835(8)
Executive Vice President, 1997 225,000 135,000 -- 15,000 11,254(8)
Chief Financial Officer and 1996 215,000 129,000 -- 15,000 5,775(8)
Secretary
</TABLE>
- ---------------
(1) The amounts in this column include the aggregate value of certain personal
benefits to a named executive officer only where such value is greater than
the lesser of either $50,000 or 10% of such executive's salary and bonus for
the fiscal year.
(2) Fiscal 1997 salary includes $417,227 of salary earned by Mr. Goodfriend but
deferred and payable in fiscal 1998 and 1999 pursuant to the terms of a
Deferred Compensation Agreement dated June 15, 1997 between Mr. Goodfriend
and the Company. Fiscal 1998 salary excludes $243,977 paid to Mr. Goodfriend
pursuant to such agreement.
(3) Consists of (i) $63,179, $66,267 and $67,399 in fiscal 1998, 1997 and 1996,
respectively, attributable to personal use of the Company's aircraft by Mr.
Goodfriend and his family, calculated using the applicable industry standard
fare level formula established by the Internal Revenue Service, (ii)
$15,479, $14,982 and $13,562 in fiscal 1998, 1997 and 1996, respectively,
for Mr. Goodfriend's personal use of the Company's automobile, (iii) $1,589
in each of fiscal 1998, 1997 and 1996 for the imputed value of group life
insurance benefits as to which Mr. Goodfriend's family is the beneficiary in
excess of specified amounts as determined by the Internal Revenue Service
and (iv) $94,297 in fiscal 1998 for personal financial consulting and estate
planning services paid by the Company.
(4) Consists of (i) non-cash benefits of $35,030, $32,700 and $30,600 in fiscal
1998, 1997 and 1996, respectively, calculated using the applicable Internal
Revenue Service formula, deemed to have been paid to Mr. Goodfriend as a
result of the Company's payment of premiums on certain split-dollar life
insurance policies, (ii) $2,794, $2,881 and $2,216 in fiscal 1998, 1997 and
1996, respectively, attributable to the Company's contributions and
allocations on Mr. Goodfriend's behalf to the Company's Profit Sharing Plan,
(iii) $4,000 attributable to the Company's contributions on Mr. Goodfriend's
behalf to the Company's 401(k) Retirement Plan in fiscal 1998 and (iv)
$12,824 for interest paid in fiscal 1998 to Mr. Goodfriend on fiscal 1997
deferred salary. This does not include interest payable amounting to $17,129
for fiscal 1998 on Mr. Goodfriend's fiscal 1997 salary deferred and payable
to him in fiscal 1999 (see footnote 2 above). The Company maintains and pays
the premiums on split-dollar life insurance policies on the life of Mr.
Goodfriend. During fiscal 1998, the Company paid premiums of $54,000 for one
of such policies. The beneficiary under these policies is a trust
established by Mr. Goodfriend for the benefit of his children and is
controlled by him. Upon the death of Mr. Goodfriend, the $35 million in
benefits payable under these policies will be split between the Company and
the trust, so that the Company is first reimbursed for all premium payments
previously made by it and the remaining proceeds are paid to the trust.
10
<PAGE> 14
(5) Consists of (i) $3,308 for each of fiscal 1998, 1997 and 1996, respectively,
attributable to the Company's payment of term life insurance premiums as to
which Mr. Call's family is the beneficiary, (ii) $5,528, $5,435 and $5,352
for disability insurance premiums paid by the Company in fiscal 1998, 1997
and 1996, respectively, (iii) $2,794, $2,881 and $2,216 attributable to the
Company's contributions and allocations on Mr. Call's behalf to the
Company's Profit Sharing Plan in fiscal 1998, 1997 and 1996, respectively,
and (iv) $4,000 and $554 attributable to the Company's contributions on Mr.
Call's behalf to the Company's 401(k) Retirement Plan in fiscal 1998 and
1997, respectively.
(6) Consists of (i) $2,794, $2,881 and $2,216 attributable to the Company's
contributions and allocations on Mr. Kelly's behalf to the Company's Profit
Sharing Plan in fiscal 1998, 1997 and 1996, respectively, and (ii) $3,723
and $277 attributable to the Company's contributions on Mr. Kelly's behalf
to the Company's 401(k) Retirement Plan in fiscal 1998 and 1997,
respectively.
(7) Consists of (i) $2,794, $2,881 and $2,216 in fiscal 1998, 1997 and 1996,
respectively, attributable to the Company's contributions and allocations on
Mr. Mullins' behalf to the Company's Profit Sharing Plan, (ii) $812 for each
of fiscal 1998, 1997 and 1996 attributable to the Company's payment of
annuity premiums, (iii) $941 for each of fiscal 1998, 1997 and 1996,
respectively, for disability insurance premiums paid by the Company and (iv)
$4,000 and $434 attributable to the Company's contributions on Mr. Mullins'
behalf to the Company's 401(k) Retirement Plan in fiscal 1998 and 1997,
respectively.
(8) Consists of (i) $939 for each of fiscal 1998, 1997 and 1996, respectively,
attributable to the Company's payment of term life insurance premiums as to
which Mr. Carlin's family is the beneficiary, (ii) $6,502, $6,419 and $2,620
for disability insurance premiums paid by the Company in fiscal 1998, 1997
and 1996, respectively, (iii) $2,794, $2,881 and $2,216 attributable to the
Company's contributions and allocations on Mr. Carlin's behalf to the
Company's Profit Sharing Plan in fiscal 1998, 1997 and 1996, respectively,
(iv) $4,000 and $415 attributable to the Company's contributions on Mr.
Carlin's behalf to the Company's 401(k) Retirement Plan in fiscal 1998 and
1997, respectively, and (v) $600 received for each of fiscal 1998 and 1997
as a director's fee from two of the Company's wholly-owned subsidiaries.
TABLE II -- OPTION GRANTS IN FISCAL 1998
The following table presents information regarding stock options to
purchase shares of Common Stock granted in fiscal 1998 to the named executive
officers. No Stock Appreciation Rights ("SARs") were granted in fiscal 1998.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants(1) for Option Term(2)
-------------------------------------------------------------- ---------------------
% of Total Exercise
Number of Securities Options or
Underlying Granted Base
Options Granted to Employees in Price Expiration 5% 10%
Name (#) Fiscal Year(3) ($/Sh) Date ($) ($)
---- -------------------- --------------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert M. Goodfriend(4)....... 60,000 9.85% 21.46 3/17/08 809,491 2,051,271
Harry M. Call(4).............. 30,000 4.92% 21.46 3/17/08 404,746 1,025,635
Thomas R. Kelly, Jr.(4)....... 15,000 2.46% 21.46 3/17/08 202,373 512,818
David R. Mullins(4)........... 15,000 2.46% 21.46 3/17/08 202,373 512,818
Edward R. Carlin(4)........... 15,000 2.46% 21.46 3/17/08 202,373 512,818
</TABLE>
- ---------------
(1) All stock options granted to the named executive officers as shown in the
above table have exercise prices equal to the fair market value of the
Common Stock on the date of grant and may be exercised until the earlier of
(i) the tenth anniversary of the date of grant, (ii) thirty days after the
optionee ceases to be an employee of the Company for any reason other than
death or disability and (iii) the first anniversary of the optionee's death
or disability. These stock options may be transferred pursuant to a will and
the laws of lineal descent as well as (i) to the spouse or any lineal
ancestor or descendant of the grantee, (ii) to any trust, the sole
beneficiaries of which are any one or all of the grantee, the grantee's
spouse or any lineal descendants of the grantee and (iii) to such other
persons and/or entities as the Compensation Committee may approve.
(2) The dollar amounts in these columns are the result of calculations at the 5%
and 10% rates set by the Commission and therefore are not intended to
forecast possible future appreciation, if any, of the Common Stock price.
(3) The percentage of stock options granted to each named executive officer is
based on a total number of stock options granted amounting to 609,192 during
fiscal 1998.
(4) These stock options were granted on March 18, 1998 and vest in equal annual
increments over five years from the date of grant.
11
<PAGE> 15
TABLE III -- AGGREGATED OPTION EXERCISES IN FISCAL 1998 AND
FISCAL YEAR-END OPTION VALUES
The following table presents information regarding the value realized by
named executive officers upon exercise of stock options during fiscal 1998 and
the value of unexercised stock options held by them at January 30, 1999. There
were no SARs exercised in fiscal 1998 and there are no SARs outstanding.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at FY-End at FY-End
Acquired on Value (#) ($)(1)
Exercise Realized(2) --------------------------- ---------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert M. Goodfriend............. -- -- 640,000 60,000 1,319,840 0
Harry M. Call.................... 160,000 3,531,438 46,000 254,000 265,926 18,744
Thomas R. Kelly, Jr.............. -- -- 76,000 339,000 364,340 293,080
David R. Mullins................. 50,000 1,053,250 81,500 42,000 473,302 93,612
Edward R. Carlin................. 34,000 670,310 41,000 64,000 201,051 205,614
</TABLE>
- ---------------
(1) Represents the value of unexercised, in-the-money stock options at January
29, 1999 (the last trading day of fiscal 1998), using the $10.78 closing
price of the Common Stock on that date.
(2) Based on the fair market value of the Common Stock on the date of exercise,
less the option exercise price.
EMPLOYMENT AND TERMINATION ARRANGEMENTS WITH NAMED EXECUTIVE OFFICERS
Robert M. Goodfriend. The Company does not have an employment agreement
with Mr. Goodfriend. However, the Compensation Committee and Mr. Goodfriend have
agreed to the material terms of an employment agreement, and the Compensation
Committee has retained counsel to draft the employment agreement and related
documentation. Such employment agreement and related documentation are expected
to be finalized during fiscal 1999. See "Compensation Committee Report."
Other Executive Employment Arrangements. On May 20, 1998, the Company
entered into new employment agreements with Mr. Call, its President and Chief
Operating Officer, and with each of Messrs. Carlin, Kelly and Mullins, its
executive vice presidents, replacing any current employment agreements or other
arrangements with such employees. Pursuant to such employment agreements, the
executive is considered an at-will employee, and his employment may be
terminated at any time subject to the obligations set forth in the agreement.
Under the agreements, each executive is paid an annual base salary ($325,000 in
the case of Messrs. Call and Kelly, which was increased to $350,000 effective
January 31, 1999 in accordance with the employment agreements; and $250,000 in
the case of Messrs. Carlin and Mullins, which was increased to $260,000
effective January 31, 1999), which amount may be increased by the Company in its
discretion. In addition, each executive participates in the Company's short-term
incentive compensation plan whereby he is eligible to receive an annual
incentive target bonus of a certain percentage, as set forth in his agreement
(50% in the case of Messrs. Call and Kelly, which was increased to 75% effective
January 31, 1999, and 40% in the case of Messrs. Carlin and Mullins, which was
increased to 60% effective January 31, 1999), of his base salary for each fiscal
year he is employed if the Company achieves certain performance goals for such
fiscal year. Each of Messrs. Call's and Kelly's agreement also provides for a
guaranteed annual bonus of $100,000 which reduces any incentive bonus payable as
described above. The employment agreements also provide for a disability
insurance policy and an annuity contract or life insurance policy and contain
confidentiality and non-solicitation provisions.
Under the terms of the employment agreements, if the executive's employment
is terminated by reason of his death, Disability (as defined in the agreements)
or retirement on or after the attainment of age 65 or is terminated for Cause
(as defined in the agreements) or voluntarily terminated by the executive (other
than on account of Constructive Termination, as defined in the agreements), the
Company will be obligated to pay such executive a lump sum payment equal to (i)
his base salary through the date of such termination and (ii) any compensation
previously deferred by him, earned but unpaid vacation pay for the then current
year and amounts or benefits he or his beneficiaries are owed under any employee
benefit plans or policies or for reimbursement of expenses (collectively, the
"Accrued Obligations"). If the executive's employment is
12
<PAGE> 16
terminated by reason of his death or Disability, the Company will have the
additional obligation, subject to the terms of the short-term incentive
compensation plan and further provided that the executive has been employed by
the Company for the first six months of the then applicable fiscal year, to pay
an amount equal to a pro-rated portion of the performance bonus for such fiscal
year. Furthermore, if the executive's employment is terminated by reason of his
retirement on or after the attainment of age 65 or Disability, the Company will
pay the premiums (to the same extent paid prior to termination) for the
continued participation of the executive for a period of 12 months after
termination in any individual life insurance policy on the same terms as the
executive and the Company were participating prior to termination. Moreover, if
the executive's employment is terminated by reason of his death, retirement on
or after the attainment of age 65 or Disability, the Company will, for a period
of 12 months after termination, pay the entire COBRA premium under any Company
medical and dental program that the executive (and his spouse and eligible
dependents) was participating in prior to termination.
The employment agreements further provide that if the Company terminates
the executive's employment other than for Cause or his Disability or death, or
the executive terminates his employment for Constructive Termination, the
Company will pay the executive a lump sum payment equal to (i) all Accrued
Obligations, (ii) 12 months of the executive's base salary at the rate in effect
as of the date when the Notice of Termination (as defined in the agreements) was
given and (iii) subject to the terms of the short-term incentive compensation
plan and further provided that the executive has been employed by the Company
for the first six months of the then applicable fiscal year, a pro-rated portion
of the performance bonus for such fiscal year. Further, in the case of a
Constructive Termination or termination by reason of death or Disability, all
unvested stock options held by the executive will become fully vested, effective
on the Date of Termination (as defined in the agreements), and will be
thereafter exercisable in accordance with the provisions of the applicable plan
and award agreement.
In addition, the employment agreements provide that upon the occurrence of
a Change of Control of the Company (as defined in the agreements), as
consideration for assisting the Company in bringing about a successful
transaction, the executive is entitled to receive a lump sum payment equal to 18
months of the executive's base salary at the rate in effect as of the Change of
Control Date (as defined in the agreements).
In May 1998, the Board amended each of the Company's 1991 Stock Incentive
Plan, 1993 Stock Option Plan and 1997 Stock Option Plan to provide that, upon
the occurrence of a Change of Control (as defined in such plans), all stock
options granted under such plan that are outstanding and not yet vested will
become immediately 100% vested effective on a Change of Control Date (as defined
in such plans) and shall be thereafter exercisable in accordance with the terms
of such plan and any applicable award agreement, subject to certain exceptions.
Goody's Family Clothing, Inc. Benefit Protection Trust Agreement. The
Company entered into such trust agreement on November 15, 1994. First Tennessee
Bank served as trustee (the "Trustee") under this trust agreement. Pursuant to
this trust agreement, the Company established an irrevocable grantor trust to,
among other things, assist it in meeting its obligation to pay certain severance
payments to certain executives of the Company upon a Change of Control (as
defined in the trust agreement) in accordance with employment contracts between
the Company and each such executive. Upon establishment of the trust in November
1994, the Company made an initial contribution to the trust of $10,000 and
provided an irrevocable letter of credit in the amount of $500,000. As a result
of the Change of Control that occurred on January 5, 1995, the Company
contributed an additional $1,272,800 in investment securities to the trust. The
trust terminated on April 6, 1998 in accordance with its terms, and the trust's
assets aggregating approximately $1.6 million were distributed to the Company.
13
<PAGE> 17
COMPENSATION COMMITTEE REPORT
Background. The Company currently has twelve executive officers and six
directors. Three of the non-employee directors, Messrs. Koppel and Lowenstein
and Ms. Turnbull (Chair), comprise the Compensation Committee.
Objective and Philosophy. The Compensation Committee works closely with
management to design an executive compensation program to assist the Company in
attracting and retaining outstanding executives and senior management personnel
in the retail industry who, the Company believes, will be (or who are) valuable
employees. The design and implementation of such program continually evolves as
the Company grows but is primarily based on providing compensation opportunities
that are competitive with retail companies of similar size and linking
executives' compensation with the Company's annual and long-term financial
performance by rewarding the achievement of short-term and long-term objectives
of the Company.
Compensation Program Components. Currently, the three principal components
of the Company's executive compensation program are annual base salary,
short-term incentive compensation in the form of performance bonuses payable in
cash each year and long-term incentive compensation in the form of stock
options. These programs are structured in accordance with the Compensation
Committee's objectives and philosophy.
Base Salary. Base salary levels for the Company's executives are designed
to be reflective of competitive conditions in the marketplace for executives of
comparable talent and experience and are based upon responsibility and
performance. Base salaries are generally recommended by management for the
review and approval of the Compensation Committee and the Board (subject to
applicable employment agreements). The employment agreements for certain of the
executives are described above under "Employment and Termination Arrangements
with Named Executive Officers." Mr. Goodfriend, the Company's principal
shareholder and Chief Executive Officer, does not currently have an employment
agreement with the Company and his compensation is discussed in greater detail
below.
Short-Term Incentive Compensation. The short-term incentive compensation
component consists of target performance bonuses for eligible executives which
are calculated as a percent of their base salaries (ranging between 60% and
150%). Each year, the target earnings (which are based upon prebonus and pretax
earnings) of the Company are established by the Compensation Committee with the
assistance of management and approved by the Board. Each participating executive
is eligible to receive between 0% and 150% of their respective target
performance bonus depending upon the Company's performance. Upon management's
recommendation, the Compensation Committee, with the approval of the Board, has
the discretion to award additional bonuses outside of this plan if warranted by
an executive officer's exceptional service to the Company. With respect to
fiscal 1998, because the target level of earnings was not achieved, no bonuses
were awarded to executive officers except for (i) a guaranteed bonus of $100,000
paid to Mr. Goodfriend which is discussed below, (ii) a guaranteed bonus of
$100,000 to each of Messrs. Call and Kelly payable under their employment
agreements with the Company and (iii) certain discretionary bonuses amounting to
$105,030 to nine executive officers based on their exceptional services to the
Company.
Long-Term Incentive Compensation. The long-term incentive compensation
component currently consists of stock option plans under which executives may be
granted stock options exercisable to purchase shares of Common Stock. The
exercise price of stock options represents the fair market value of the Common
Stock on the date of grant, and, generally, the stock options become exercisable
in 20% increments over five years and expire ten years from the date of grant.
The deferred vesting provisions of the stock options are designed to reward
long-term contributions and create an incentive for executives to remain with
the Company. The Compensation Committee believes that granting stock options
promotes greater interest on the part of executives in the welfare of the
Company by allowing them to share in the Company's success as measured by an
appreciation in the value of the Common Stock and is beneficial in aligning the
interests of the executives with the Company's shareholders. Stock options are
granted by the Compensation Committee (and approved by the Board) to key
employees based on management's recommendation, and levels of
14
<PAGE> 18
participation in the plan generally vary based on the employee's position with
the Company. Stock options granted on the date of hire reflect the result of
negotiations between the Company and the recipient.
CEO Compensation. Mr. Goodfriend does not have an employment agreement
with the Company. His compensation is determined annually by the Compensation
Committee and approved by the full Board of Directors (other than Mr.
Goodfriend) based on his compensation in prior years and the compensation of
CEO's of similarly-sized companies in the retail industry.
From August 1996 until January 1999, Mr. Goodfriend's annual base salary
was $600,000, which was increased to $650,000 effective January 31, 1999. In
addition, he also received guaranteed annual bonuses of $100,000 for each of
fiscal 1995 through fiscal 1998. Since fiscal 1995, Mr. Goodfriend has been
participating in the short-term incentive compensation plan discussed above and
was eligible to receive a performance bonus of up to 150% of his base salary for
fiscal 1998 if the Company met the predetermined target levels of its earnings,
as discussed above, for such fiscal year. Because certain performance objectives
for fiscal 1998 were not achieved, Mr. Goodfriend did not receive any
performance bonus.
Prior to fiscal 1996, Mr. Goodfriend did not participate in any of the
Company's stock option plans; as a result, in December 1996, in connection with
the review of his employment arrangement discussed below, he was granted options
immediately exercisable to purchase 640,000 shares of Common Stock at a cash
exercise price of $8.72 per share (the closing sales price of the Common Stock
on The Nasdaq Stock Market for the day preceding the date of grant) which expire
five years from the date of grant. In March 1998 and 1999 in connection with the
annual review of option awards for executives, Mr. Goodfriend was granted
options exercisable to purchase 60,000 and 15,000 shares of Common Stock,
respectively, at a cash exercise price of $21.46 and $9.97 per share (the
closing sales price of the Common Stock on The Nasdaq Stock Market for the day
preceding the date of grant), respectively, which expire ten years from the date
of grant and vest in equal annual increments over five years from the date of
grant.
In order to provide fair and reasonable employment and compensation
arrangements for Mr. Goodfriend reflecting an increased emphasis on the
relationship between compensation and the Company's performance, the
Compensation Committee decided that the Company should formalize its employment
arrangements with Mr. Goodfriend and has engaged independent compensation
consultants to advise the committee on such arrangements. Based on the
consultants' findings, the Compensation Committee has approved the material
terms of an employment agreement with Mr. Goodfriend, which codify the salary,
short-term incentive compensation and option grants described above and
authorized the drafting of an employment agreement and related documents
reflecting such terms. These material terms include, among other things, a
three-year "evergreen" employment term; a minimum annual base salary of
$650,000; an annual guaranteed bonus of $100,000; and continued participation in
the short-term incentive compensation plan described above. In addition, in
connection with the negotiation of this employment agreement, the Compensation
Committee is contemplating a new split-dollar life insurance arrangement with
Mr. Goodfriend. The Compensation Committee expects that the employment agreement
and related documentation and arrangements will be finalized during fiscal 1999.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally disallows a tax deduction for compensation over $1 million
paid to the Company's chief executive officer and certain other highly
compensated executive officers. Qualifying performance-based compensation is not
subject to the deduction limit if certain requirements are met. The short-term
incentive compensation plan adopted by the Company and approved by the
shareholders in June 1997 complies with the requirements under Code Section
162(m) regarding qualifying performance-based compensation to provide for the
deductibility of compensation payable thereunder. The Company and Mr. Goodfriend
entered into a deferred compensation agreement in June 1997 whereby a portion of
his salary for fiscal 1997 was deferred and paid to him in fiscal 1998 and 1999
thereby enabling the Company to deduct a majority of the compensation paid to
Mr. Goodfriend in fiscal 1997 and 1998. The remaining balance of $173,250 under
the deferred compensation agreement was paid to Mr. Goodfriend in fiscal 1999.
It is expected that Mr. Goodfriend's compensation to be paid in fiscal 1999 will
15
<PAGE> 19
not exceed $1 million (assuming no change to his current split-dollar life
insurance arrangement). It is not currently expected that any other executive of
the Company will receive compensation in excess of $1 million for fiscal 1999.
COMPENSATION COMMITTEE
CHERYL L. TURNBULL (CHAIR)
ROBERT F. KOPPEL
IRWIN L. LOWENSTEIN
The foregoing report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
the Proxy Statement into any filing under the Securities Act of 1933, as
amended, or the Exchange Act, and shall not otherwise be deemed filed under such
Acts.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Decisions on executive compensation in fiscal 1998 were made by the
Compensation Committee (and approved by the Board) upon the recommendation of
the Company's Chairman of the Board and Chief Executive Officer and its
President and Chief Operating Officer (other than, in each case, with respect to
such executive's own compensation). The Compensation Committee currently
consists of Messrs. Koppel and Lowenstein and Ms. Turnbull (Chair), none of whom
is or was an officer or other employee of the Company or had any other
relationship with the Company required to be disclosed as a Compensation
Committee interlock, except that Mr. Koppel is the President of the East
Tennessee Children's Hospital (the "Hospital") and Mr. Goodfriend is a director
of the Hospital and as such participates in deliberations regarding incentive
payments to officers of the Hospital, including, without limitation, Mr. Koppel.
See "Certain Transactions."
16
<PAGE> 20
PERFORMANCE GRAPH
The following is a line graph comparing the Company's total shareholder
returns to those of the Standard & Poors 500 Index and a Comparable Company
Index for fiscal 1994 through fiscal 1998. The Comparable Company Index for
fiscal 1998 is based on information from Burlington Coat Factory Warehouse,
Catherines Stores Corporation, Cato Corporation, Consolidated Stores
Corporation, Deb Shops, Inc., Designs, Inc., Dollar General Corp., Dress Barn
Inc., Edison Brothers Stores, Family Dollar Stores, Filene's Basement
Corporation, Fred's Inc., Gantos, Inc., Gottschalks, Inc., Jacobson Stores,
Kohls Corporation, Ross Stores, Inc., Stein Mart, Inc. and Value City Department
Stores, Inc. Total return values were calculated based on cumulative total
return, assuming the value of the investment in shares of Common Stock and in
each index was $100 on January 29, 1994 and, in the case of the Comparable
Company Index, that all dividends paid by any of those companies were
reinvested. The Comparable Company Index for fiscal 1998 does not include
information relating to the following four companies which had been included in
the fiscal 1997 Comparable Company Index because each of Clothestime Inc.,
Jamesway Corp. and Merry-Go-Round Enterprises, Inc. went into bankruptcy
proceedings in December 1998, March 1997 and March 1997, respectively, and
MacFrugals Bargains was acquired by Consolidated Stores Corporation in February
1998.
GOODY'S FAMILY CLOTHING, INC.
COMPARISON OF CUMULATIVE TOTAL RETURN
TO S&P 500 AND PEER GROUP INDICES
<TABLE>
<CAPTION>
GOODY'S
MEASUREMENT PERIOD FAMILY S&P 500
(FISCAL YEAR COVERED) CLOTHING, INC. INDEX PEER GROUP
<S> <C> <C> <C>
1993 100 100 100
1994 61.82 100.53 81.62
1995 56.43 139.40 83.15
1996 149.27 176.12 132.40
1997 249.39 223.51 228.65
1998 157.00 296.13 261.39
</TABLE>
17
<PAGE> 21
CERTAIN TRANSACTIONS
On January 26, 1991, the Company redeemed all 2,651 shares of its then
outstanding preferred stock, all of which were owned by the Company's founder,
Mr. M. D. Goodfriend, and his wife, for their stated redemption value of
$2,651,000. Of such amount, $500,000 was paid in cash at closing and the balance
was funded by a promissory note from the Company which bears interest at 10% per
annum and is amortized over the ten-year term of the note. During fiscal 1998,
the Company paid $350,000 of principal and interest on this note. As of April
26, 1999, the principal balance due on this note was $607,000. Mr. M. D.
Goodfriend was the retiring Chairman of the Board at the time of this
transaction and is the father of Mr. Robert M. Goodfriend, the Company's current
Chairman of the Board and Chief Executive Officer.
In January 1995, the Company sold its distribution center located in
Athens, Tennessee, to Citizens National Bank of Athens, Tennessee, a local bank
of which Mr. Robert M. Goodfriend is a director and less than 5% shareholder,
for $520,000, its fair market value as determined based upon an appraisal of the
property by an arms-length third party, and realized a gain of $20,000. The
Company subsequently entered into a lease with the bank in connection with this
property which currently expires on December 31, 1999 and provides for annual
rental payments of $40,000. During fiscal 1998, the Company leased additional
space from the bank for annual rental payments of $16,800. The aggregate rental
payments to the bank for these spaces in fiscal 1998 were $42,800. The Company
primarily uses this space for storage.
Since 1987 the Company has leased a store in Athens, Tennessee, from an
irrevocable trust established for the benefit of the children of Mr. Robert M.
Goodfriend. During July 1998, the Company renegotiated a new ten-year lease for
this location with such trust for annual rental payments of $289,500 plus its
pro-rata share of real property taxes. The aggregate rental payments to the
trust, including real property taxes, for this space in fiscal 1998 were
$373,665.
As previously noted, Mr. Koppel, a director of the Company, is the
President of the East Tennessee Children's Hospital of which Mr. Goodfriend is
also a director. The Company facilitates contributions by its employees to the
Hospital through a payroll deduction plan and matches employee contributions to
the Hospital on a 100% basis. The Company also makes additional contributions
(in cash or in kind) to the Hospital. The total amount of contributions by the
Company (including employee contributions) to the Hospital in fiscal 1998 was
$402,698. Such contributions represented less than 1% of the Hospital's total
revenues for its last fiscal year ended June 30, 1998.
In connection with the sale of an aggregate 2,327,000 shares of Common
Stock by Messrs. Goodfriend, Call and Carlin pursuant to a public offering in
September 1997, the Company entered into agreements with each of such persons
whereby the Company agreed to indemnify each of them for certain liabilities in
connection with such offering, including liabilities under the Securities Act of
1933.
AUDITORS
Deloitte & Touche LLP serves as the principal accounting firm designated to
audit the Company's financial statements. The engagement of Deloitte & Touche
LLP is not being presented for approval by the Shareholders at the Annual
Meeting; however, a representative from Deloitte & Touche LLP is expected to be
available to answer questions, if any, addressed to him or her at the Annual
Meeting and will be given the opportunity to make a statement if such
representative desires to do so.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
In order to present a proposal at the Company's annual meeting of
shareholders to be held in 2000, a shareholder must provide advance written
notice of the proposal to the Company at its principal executive offices no
later than the close of business on March 30, 2000. If such proposal relates to
amending the Bylaws, then advance notice must be provided to the Company at its
principal executive offices no later than the close of business on January 15,
2000 and otherwise comply with the Bylaws. A copy of the Bylaws is available
upon written request to the Secretary of the Company. If a shareholder gives
notice of a proposal after the applicable deadline, the Company's proxy holders
will have discretionary authority to vote on this proposal
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<PAGE> 22
when and if raised at the 2000 annual meeting. In addition, all stockholder
proposals intended to be included in the Company's proxy materials for the 2000
annual meeting must be received by the Company at its principal executive
offices no later than the close of business on January 15, 2000 and must
otherwise comply with the rules of the Commission for inclusion in the proxy
materials.
GENERAL
Management does not know of any other matters to be presented at the Annual
Meeting for action by the Shareholders. However, if any other matter requiring a
vote of the Shareholders is properly presented at the Annual Meeting or any
adjournment(s) or postponement(s) thereof, it is intended that votes will be
cast pursuant to the proxies with respect to such matters in accordance with the
best judgment of the persons acting under the proxies.
The Company will pay the cost of the Annual Meeting and the cost of
soliciting proxies in the accompanying form (including the cost of mailing the
proxy material). The Company has engaged Corporate Communications, Inc. and
Bowne of Atlanta, Inc. to distribute and solicit proxies for the Annual Meeting
at an estimated cost of $30,000 (which amount includes mailing and shipping
costs), plus reasonable expenses. The Company has requested that brokerage
houses and other custodians, nominees and fiduciaries forward proxy and other
soliciting materials to their principals, the beneficial owners of Common Stock,
and will reimburse them for their reasonable out-of-pocket expenses.
A list of the Shareholders will be available at the Company's corporate
offices located at 400 Goody's Lane, Knoxville, Tennessee, for inspection by
Shareholders during regular business hours from April 26, 1999 to the date of
the Annual Meeting. The list will also be available during the Annual Meeting
for inspection by Shareholders who are present.
ANNUAL REPORT
A copy of the Company's 1998 Annual Report to Shareholders is enclosed
herewith. The Annual Report is not part of the proxy solicitation material.
/s/ EDWARD R. CARLIN
Edward R. Carlin
Secretary
May 14, 1999
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(GOODY'S FAMILY CLOTHING LOGO)
<PAGE> 24
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
GOODY'S FAMILY CLOTHING, INC.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders and Proxy Statement, each dated May 14, 1999, and does hereby
appoint Robert M. Goodfriend and Harry M. Call, or either of them, with full
power of substitution, as proxy or proxies of the undersigned to represent the
undersigned and to vote all shares of Common Stock of Goody's Family Clothing,
Inc. (the "Company") which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Shareholders of the Company to be
held at 10:00 a.m. (EDT) on Wednesday, June 16, 1999, at the Company's
corporate headquarters located at 400 Goody's Lane, Knoxville, Tennessee, and
at any adjournments(s) or postponement(s) thereof, hereby revoking all proxies
heretofore given with respect to such stock.
This Proxy, when properly executed, will be voted in accordance with the
directions given by the undersigned shareholder. IF NO DIRECTION IS MADE, IT
WILL BE VOTED IN FAVOR OF THE ELECTION OF THE NOMINEES FOR DIRECTOR NAMED
HEREIN.
TO BE SIGNED ON OTHER SIDE
- -------------------------------------------------------------------------------
<PAGE> 25
GOODYS FAMILY CLOTHING, INC.
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
<TABLE>
<S> <C> <C> <C>
FOR all nominees WITHHOLD AUTHORITY
listed below (except as marked to vote for all nominees
1. ELECTION OF DIRECTORS to the contrary below) listed below
[ ] [ ]
NOMINEES: IRWIN L. LOWENSTEIN 2. IN THEIR DISCRETION, THE PROXIES ARE
and CHERYL L. TURNBULL as Class I AUTHORIZED TO VOTE ON SUCH OTHER BUSINESS
Directors (for a term expiring at the 2002 Annual Meeting of AS MAY PROPERLY COME BEFORE THE MEETING
Shareholders) OR ANY ADJOURNMENT(S) OR POSTPONEMENT(S)
THEREOF.
</TABLE>
(Instruction: to withhold authority to vote for any individual
nominee, write that nominee's name in the space provided.)
______________________________________________________________
RECORD DATE SHARES:
<TABLE>
<S> <C>
--------------------
Please be sure to sign and date this Proxy. Dated: Please sign exactly as name(s) appears hereon, and when
- ----------------------------------------------------------------------- signing as attorney, executor, administrator, trustee or
guardian, give your full title as such. If the signatory
is a corporation, sign the full corporate name by a duly
authorized officer. When shares are held by joint tenants,
both should sign.
- ----Shareholder sign here---------------------Co-owner sign here------- PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
