SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / 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
MOTHERS WORK, 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:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[ MOTHERS WORK, INC. LOGO ]
456 NORTH FIFTH STREET
PHILADELPHIA, PENNSYLVANIA 19123
---------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JANUARY 16, 1997
---------------------------
To the Stockholders of Mothers Work, Inc.:
The Annual Meeting of Stockholders of Mothers Work, Inc., a Delaware
corporation (the 'Company') will be held at 9:00 a.m., local time, on January
16, 1997 at the Company's corporate headquarters, 456 North Fifth Street,
Philadelphia, Pennsylvania, for the following purposes:
1. To elect two directors of the Company;
2. To ratify the appointment of Arthur Andersen LLP as independent
auditors for the Company for the fiscal year ending September 30, 1997; and
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only holders of the Common Stock at the close of business on December 13,
1996 are entitled to notice of, and to vote at, the Annual Meeting and any
adjournments or postponements thereof. Such stockholders may vote in person or
by proxy. The stock transfer books of the Company will not be closed. The
accompanying form of proxy is solicited by the Board of Directors of the
Company.
By Order of the Board of Directors
/s/ Dan W. Matthias
Dan W. Matthias
Chairman of the Board and
Chief Executive Officer
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. YOU ARE
CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU EXPECT TO
ATTEND IN PERSON, YOU ARE URGED TO COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY
CARD IN THE SELF-ADDRESSED ENVELOPE, ENCLOSED FOR YOUR CONVENIENCE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU DECIDE TO ATTEND THE
MEETING AND WISH TO VOTE IN PERSON, YOU MAY REVOKE YOUR PROXY BY WRITTEN NOTICE
AT THAT TIME.
December 19, 1996
<PAGE>
[MOTHERS WORK, INC. LOGO]
456 NORTH FIFTH STREET
PHILADELPHIA, PENNSYLVANIA 19123
---------------------------
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
JANUARY 16, 1997
---------------------------
This Proxy Statement, which is first being mailed to stockholders on
approximately December 19, 1996, is furnished in connection with the
solicitation by the Board of Directors of Mothers Work, Inc. (the 'Company') of
proxies to be used at the Annual Meeting of Stockholders of the Company (the
'Annual Meeting'), to be held at 9:00 a.m. on January 16, 1997 at the Company's
corporate headquarters, 456 North Fifth Street, Philadelphia, Pennsylvania, and
at any adjournments or postponements thereof. If proxies in the accompanying
form are properly executed and returned prior to voting at the meeting, the
shares of the Company's Common Stock (the 'Common Stock') represented thereby
will be voted as instructed on the proxy. If no instructions are given on a
properly executed and returned proxy, the shares of the Common Stock represented
thereby will be voted for the election of the nominees for director named below,
for the ratification of the appointment of Arthur Andersen LLP as independent
auditors, and in support of management on such other business as may properly
come before the Annual Meeting or any adjournments thereof. Any proxy may be
revoked by a stockholder prior to its exercise upon written notice to the
Secretary of the Company, by delivering a duly executed proxy bearing a later
date, or by the vote of a stockholder cast in person at the Annual Meeting.
VOTING
Holders of record of the Common Stock on December 13, 1996 will be entitled
to vote at the Annual Meeting or any adjournments or postponements thereof. As
of that date, there were 3,559,317 shares of Common Stock outstanding and
entitled to vote. The presence, in person or by proxy, of holders of Common
Stock entitled to cast at least a majority of the votes which all holders of the
Common Stock are entitled to cast will constitute a quorum for purposes of the
transaction of business. Each share of Common Stock entitles the holder thereof
to one vote on the election of the nominee for director and on any other matter
that may properly come before the Annual Meeting. Stockholders are not entitled
to cumulative voting in the election of directors. Directors are elected by the
affirmative vote of a plurality of the votes of the shares entitled to vote,
present in person or represented by proxy, and votes may be cast in favor of or
withheld from each director nominee. Votes that are withheld from a director
nominee will be excluded entirely from the vote for such nominee and will have
no effect thereon. Abstentions and broker non-votes (described below) are
counted in determining whether a quorum is present. Abstentions with respect to
any proposal other than the election of directors will have the same effect as
votes against the proposal, because approval requires a vote in favor of the
proposal by a majority of the shares entitled to vote, present in person or
represented by proxy. Broker non-votes, which occur when a broker or other
nominee holding shares for a beneficial owner does not vote on a proposal
because the beneficial owner has not checked one of the boxes on the proxy card,
are not considered to be shares 'entitled to vote' (other than for quorum
purposes), and will therefore have no effect on the outcome of any of the
matters to be voted upon at the Annual Meeting.
The cost of solicitation of proxies by the Board of Directors will be borne
by the Company. Proxies may be solicited by mail, personal interview, telephone
or telegraph and, in addition, directors,
<PAGE>
officers and regular employees of the Company may solicit proxies by such
methods without additional remuneration. Banks, brokerage houses and other
institutions, nominees or fiduciaries will be requested to forward the proxy
materials to beneficial owners in order to solicit authorizations for the
execution of proxies. The Company will, upon request, reimburse such banks,
brokerage houses and other institutions, nominees and fiduciaries for their
expenses in forwarding such proxy materials to the beneficial owners of the
Common Stock.
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Company's Board of Directors is divided into three classes, with
staggered three-year terms. Currently, the Board has eight members. Unless
otherwise specified in the accompanying proxy, the shares voted pursuant thereto
will be cast for Marvin S. Traub and Walter F. Loeb, for terms expiring at the
Annual Meeting of Stockholders to be held following fiscal 1999 (the '2000
Annual Meeting'). If, for any reason, at the time of election, any of the
nominees named should decline or be unable to accept his or her nomination or
election, it is intended that such proxy will be voted for the election, in the
nominee's place, of a substituted nominee, who would be recommended by the Board
of Directors. The Board of Directors, however, has no reason to believe that any
of the nominees will be unable to serve as a director.
The following biographical information is furnished as to each nominee for
election as a director and each of the current directors:
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR A THREE YEAR TERM EXPIRING AT 2000 ANNUAL MEETING
Marvin S. Traub, 71, has been President of Marvin Traub Associates, Inc., a
New York based retail consultancy company, since its founding in February 1992.
He has also been a Senior Advisor for Financo, Inc., an investment banking firm,
since November 1994. Prior to establishing Marvin Traub Associates, Inc.,
Mr. Traub was Chairman and Chief Executive Officer of Bloomingdales from
1978-1992 and was Vice Chairman of Federated Department Stores from 1988-1992.
From December 1992 to January 1994, Mr. Traub served as a director and Chairman
of the Executive Committee of The Conran Stores, Inc., which filed for a
petition for protection under U.S. bankruptcy laws on January 10, 1994. He is
currently a director of Prime Retail, Inc. See 'Certain Transactions.'
Walter F. Loeb, 71, became a director of the Company on June 5, 1995.
Mr. Loeb is President of Loeb Associates Inc., a New York based retail
consultancy company that has served a variety of domestic and international
companies since its founding in February 1990. Mr. Loeb is also the publisher of
'Loeb Retail Letter,' a monthly analysis of the retail industry. From 1974 until
the founding of his company, Mr. Loeb had been a senior retail analyst at Morgan
Stanley & Co. Incorporated, and in 1984 became a principal of the same company.
He also has held various positions with the May Company, Allied Stores and
Macy's. He currently is a director of Gymboree Corporation, Wet Seal, Federal
Realty Investment Trust and InterTAN, Inc.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING AT 1998 ANNUAL MEETING
Dan W. Matthias, 53, joined the Company on a full-time basis in 1982 and
has served as Chairman of the Board since its inception. From 1983 to 1993 he
served as the Company's Executive Vice President, and since January 1993,
Mr. Matthias has been the Company's Chief Executive Officer. He had previously
been involved in the computer and electronics industry, serving as a director of
Zilog, Inc. and serving as the President of a division of a subsidiary of Exxon
Corporation.
William L. Rulon-Miller, 48, became a director of the Company in 1992.
Mr. Rulon-Miller is currently Senior Vice President - Co-Director - Investment
Banking of Janney Montgomery Scott Inc.,
2
<PAGE>
an investment banking firm with which he has held several positions since 1979.
Mr. Rulon-Miller is also a director of Intelligent Electronics, Inc. and Penn
Janney Fund, Inc.
Elam M. Hitchner, III, 50, became a director of the Company in January
1994. Mr. Hitchner has been engaged in the private practice of law since 1971.
Since May 1992, Mr. Hitchner has been a partner of the law firm of Pepper,
Hamilton & Scheetz, Philadelphia, Pennsylvania, which provides legal services to
the Company. From April 1987 to May 1992, Mr. Hitchner was a partner of the law
firm of Braemer Abelson & Hitchner, which also provided legal services to the
Company. See 'Certain Transactions.'
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING AT 1999 ANNUAL MEETING
Rebecca C. Matthias, 43, founded the Company in 1982 and has served as a
director of the Company and its President since its inception. Since January
1993, Ms. Matthias has served as the Company's Chief Operating Officer. Prior to
1982, she was a construction engineer for the Gilbane Building Company. In 1992,
she was chosen as 'Regional Entrepreneur of the Year' by Inc. Magazine and
Merrill Lynch. Ms. Matthias also serves as a director of the Greater
Philadelphia Chamber of Commerce.
Verna K. Gibson, 54, became a director of the Company in May 1992. From
1985 to 1991, Ms. Gibson was President and Chief Executive Officer of the
Limited Stores Division of Limited, Inc. From January 1991-1995 she was
President of Outlook Consulting Int., Inc. From December 1994 to July 1996,
Ms. Gibson was the Chairman of the Board of Petrie Retail, Inc. On October 12,
1995, Petrie Retail, Inc. filed a petition under Chapter 11 of the Bankruptcy
Code. Ms. Gibson is currently a partner of Retail Options, Inc., a New York
based retail consulting firm, which was formed in 1993. Ms. Gibson is a past
director of the Cleveland Federal Reserve Board and serves on the Boards of
Directors of Today's Man, Inc., Chicos Fas, Inc., The Caldor Corporation and the
National Retail Federation.
Joseph A. Goldblum, 47, has been a director of the Company since 1989.
Mr. Goldblum has been Of Counsel with the law firm of Goldblum & Hess and
President of G-II Equity Investors, Inc., a general partner of G-II Family
Partnership L.P. since May 1989. From May 1985 to April 1989, Mr. Goldblum was
Senior Vice President - Operations for McKesson Drug Corporation.
Other than the husband and wife relationship between Dan and Rebecca
Matthias, there are no family relationships among any of the other directors of
the Company.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended September 30, 1996, the Board of Directors
held five meetings. With the exception of Verna Gibson, each director attended
at least 75% of the aggregate of the total number of meetings of the Board of
Directors and committees of the Board of Directors on which he or she served.
During the fiscal year ended September 30, 1996 the Audit Committee, which
currently consists of Ms. Perelman, Mr. Loeb and Mr. Rulon-Miller held four
meetings. The function of the Audit Committee is to recommend to the Board of
Directors the accounting firm to be retained to audit the Company's financial
statements and to consult with, and review recommendations made by, such
accounting firm with respect to financial statements, financial records and
controls, and to make such other recommendations to the Board of Directors as it
deems appropriate from time to time.
During the fiscal year ended September 30, 1996, the Compensation
Committee, which consists of Mr. Matthias. Ms. Gibson and Mr. Goldblum, held
four meetings. The Compensation Committee considers recommendations of the
Company's management regarding compensation, bonuses and fringe benefits of the
executive officers of the Company, and determines whether the recommendations of
management are consistent with general policies, practices, and compensation
scales established by
3
<PAGE>
the Board of Directors. The Compensation Committee also considers management's
proposals regarding stock option grants and their consistency with policies
established by the Board of Directors, and, in general, administers the
Company's 1987 Stock Option Plan ('1987 Option Plan').
During the fiscal year ended September 30, 1996, the Nominating Committee,
which consists of Ms. Matthias, Mr. Goldblum, Mr. Hitchner and Ms. Perelman, did
not hold any meetings. The Nominating Committee functions include establishing
the criteria for selecting candidates for nomination to the Board of Directors;
actively seeking candidates who meet those criteria; and making recommendations
to the Board of Directors of nominees to fill vacancies on, or as additions to,
the Board of Directors. The Nominating Committee will consider nominees for
election to the Board of Directors that are recommended by stockholders provided
that a complete description of the nominees' qualifications, experience and
background, together with a statement signed by each nominee in which he or she
consents to act as such, accompany the recommendations. Such recommendations
should be submitted, in writing to the attention of the Chairman of the Board of
Directors, and should not include self-nominations.
COMPENSATION OF DIRECTORS
The Company pays each director $250 for each Board meeting and each
Committee meeting attended by such director in person. In addition, upon
conclusion of each Annual Meeting of Stockholders, the Company grants each
director options to purchase 2,000 shares of the Common Stock pursuant to the
Company's 1994 Director Stock Option Plan. In fiscal 1996, although they were
entitled to receive option grants under this plan, Dan and Rebecca Matthias
voluntarily decided to forego receipt of these options.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities (collectively, 'Reporting
Persons'), to file with the Securities and Exchange Commission initial reports
of ownership and reports of changes in ownership of the Common Stock and other
equity securities of the Company. Reporting Persons are additionally required to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations of Reporting
Persons that no other reports were required with respect to fiscal 1996, all
Section 16(a) filing requirements applicable to the Reporting Persons were
complied with, except that Mr. Goldblum inadvertently filed one report, relating
to one transaction, one day late.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation:
GENERAL
The Compensation Committee of the Board of Directors consists of Dan W.
Matthias(1), Joseph A. Goldblum and Verna Gibson. Under the supervision of the
Compensation Committee, the Company has developed and implemented compensation
policies, plans and programs which seek to enhance the profitability of the
Company, and thus stockholder value, by aligning the financial interests of the
- ------------------
(1) Dan Matthias, Chairman of the Board and Chief Executive Officer, abstains
from voting on issues pertaining to his personal compensation and Rebecca
Matthias' compensation.
4
<PAGE>
Company's senior management with those of its stockholders. Annual base salary
and longer term incentive compensation provide an important incentive in
attracting and retaining corporate officers and other key employees and
motivating them to perform to the full extent of their abilities in the best
long-term interests of the stockholders.
The Company's executive compensation program consists of two key elements:
(1) an annual component, i.e., base salary and annual bonus and (2) a long-term
component, i.e., stock options. Executive compensation levels are determined in
connection with a review of compensation levels at comparable publicly held
companies. As a result of such review, the Compensation Committee developed an
executive compensation package with an annual component set somewhat below the
salary levels paid to senior management of similar sized companies with
comparable responsibilities. The Compensation Committee has determined that a
compensation package that contains long-term stock based incentives is more
appropriate for the Company's goals of sustainable growth and enhanced
shareholder value.
Based on this philosophy, a meaningful portion of the senior executives'
annual bonus and stock options is placed at-risk and linked to the increase of
the Company's earnings per share ('EPS') over the prior fiscal year. This will
lead to the creation of value for the Company's stockholders in both the short
and long term. Under this pay-for-performance orientation:
o executives are motivated to improve the overall performance and
profitability of the Company;
o accountability is further encouraged through the adjustment of salaries
and incentive awards on the basis of each executive's individual performance,
potential and contribution;
o most incentive awards are denominated and/or paid in shares of Company
Common Stock to further reinforce the linkage of executives' interest with those
of stockholders.
The policies with respect to each element of the compensation package, as
well as the basis for determining the compensation of the Chief Executive
Officer and President, Dan and Rebecca Matthias, respectively, are described
below.
1. Annual Component: Base Salary and Annual Bonus
Base Salary: Base salary represents compensation for discharging job
responsibilities and reflects the executive officer's performance over time.
Peer salaries for comparable positions are used as reference points in setting
salary opportunities for executive officers. The Company's overall goal is to
approximate the median salaries paid by the peer group assuming comparability of
such factors as position, responsibilities and tenure.
Individual salary adjustments take into account the Company's salary
increase guidelines for the year and individual performance contributions for
the year, as well as sustained performance contributions over a number of years
and significant changes in responsibilities, if any. The assessment of
individual performance contributions is subjective and does not reflect the
Company's performance.
Annual Bonus: The annual bonus for the Chief Executive Officer and
President is computed on a sliding scale based on EPS. The maximum cash bonus
can be attained by increasing EPS by 35% over the prior fiscal year.
Notwithstanding the foregoing, the Compensation Committee has the discretion to
increase the annual bonus in any given year to take into account what it deems
to be extraordinary events.
2. Long Term Component: Stock Options
To align stockholder and executive officer interests, the long-term
component of the Company's executive compensation program uses grants whose
value is related to the value of the Common Stock. Stock options are granted to
reinforce the importance of improving stockholder value over the long-term, and
to encourage and facilitate the executive's stock ownership. Under the 1987
Option Plan, options to purchase Common Stock are available for grant to
directors, officers and other key employees of the Company. Stock options are
granted at 100% of the fair market value of the Common
5
<PAGE>
Stock on the date of the grant to ensure that the executives can only be
rewarded for appreciation in the price of the Common Stock when the Company's
stockholders are similarly benefitted. Stock options are exercisable up to ten
years from the date granted. The stock options generally vest over a five year
period, although some stock options vest immediately. While all executives are
eligible to receive stock options, participation in each annual grant, as well
as the size of the grant each participating executive receives, is contingent on
the increase in the EPS over the prior fiscal year. Notwithstanding the
foregoing, the Compensation Committee has the discretion to increase the annual
grant of options in any given year to take into account what it deems to be
extraordinary events.
During fiscal 1996, the Compensation Committee approved the exchange and
repricing of outstanding stock options held by Donald W. Ochs, the Company's
Senior Vice President - Operations. The Compensation Committee concluded that
the decline in the market value of the Common Stock had frustrated the purpose
of his options (i.e.; to attract and retain his services and to provide
incentives to him to exert maximum efforts for the Company's success). The
Compensation Committee felt that it was important to reduce the exercise price
on these options so as to put the 'incentive' back into his compensation scheme.
In connection with the exchange of options, the executive officer agreed to a
new five year vesting period commencing upon the date of the repricing. No other
executive officer option repricings occurred during fiscal 1996. The terms of
the repricing are set forth below in the Ten-Year Option Repricing table.
CHIEF EXECUTIVE OFFICER AND PRESIDENT COMPENSATION
In fiscal 1996, the annual base salary for Dan W. Matthias, Chairman of the
Board and Chief Executive Officer, and Rebecca C. Matthias, President and Chief
Operating Officer, increased from $165,000 to $220,000. The fiscal 1996 base
salary for each of the Matthiases is comparable with the salaries of senior
management of publicly-held companies in the retail clothing industry.
Based upon the Company not meeting its EPS-based bonus standard during
fiscal 1996, the Chief Executive Officer and the President did not receive
either an annual incentive bonus or stock options.
THE COMPENSATION COMMITTEE
Dan W. Matthias
Joseph A. Goldblum
Verna Gibson
6
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth, for the fiscal years ended September 30,
1994, 1995 and 1996 certain compensation information with respect to the
Company's Chief Executive Officer and the other Company officers named therein.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
--------------------
ANNUAL COMPENSATION SECURITIES
---------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#)
- --------------------------- --------- ---------- ---------- --------------------
<S> <C> <C> <C> <C>
Dan W. Matthias 1996 $ 220,350 $ - -
Chairman and Chief Executive Officer 1995 161,907 100,000 30,000
1994 150,798 41,519 40,905
Rebecca C. Matthias 1996 $ 217,885 $ - -
President and Chief Operating Officer 1995 159,808 100,000 30,000
1994 149,233 41,519 40,905
Lynne M. Wieder 1996 $ 188,085 $ - -
Senior Vice President - Stores 1995 150,201 55,000 5,000
1994 118,304 20,000 6,996
Thomas Frank 1996 $ 158,646 $ - -
Vice President - Finance and Chief Financial 1995 132,747 45,000 5,000
Officer 1994 111,925 10,000 4,056
Donald W. Ochs 1996 $ 256,799 $ - 20,000(2)
Senior Vice President - Operations 1995(1) 67,432 27,000 20,000(2)
</TABLE>
- ------------------
(1) Mr. Ochs' employment with the Company commenced in June 1995.
(2) The 20,000 options shown for fiscal 1995 were originally granted in June
1995, and were canceled in connection with a replacement grant of the 20,000
options shown for fiscal 1996.
STOCK OPTIONS GRANTED TO CERTAIN EXECUTIVE OFFICERS DURING LAST FISCAL YEAR
Under the 1987 Option Plan, options to purchase Common Stock are available
for grant to directors, officers and other key employees of the Company. Options
are also available for grant to directors under the Company's 1994 Director
Stock Option Plan. The following table sets forth certain information regarding
options for the purchase of Common Stock that were awarded to the Company's
Chief Executive Officer and the other named Company officers during fiscal 1996.
OPTION GRANTS IN FISCAL YEAR ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
GAIN AT ASSUMED ANNUAL
PERCENT OF RATES OF STOCK PRICE
NUMBER OF TOTAL OPTIONS APPRECIATION FOR OPTION
SECURITIES GRANTED TO EXERCISE TERMS COMPOUNDED
UNDERLYING EMPLOYEES OR BASE ANNUALLY
OPTIONS IN LAST PRICE EXPIRATION ------------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% 10%
---- ------------- --------------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Dan W. Matthias............. 30,000(1) 14.3% $ 13.50 11/20/2005 $ 254,702 $ 645,466
Rebecca C. Matthias......... 30,000(1) 14.3% $ 13.50 11/20/2005 $ 254,702 $ 645,466
Lynne M. Wieder............. 5,000(2) 2.4% $ 13.50 11/20/2005 $ 42,450 $ 107,578
Thomas Frank................ 5,000(2) 2.4% $ 13.50 11/20/2005 $ 42,450 $ 107,578
Donald W. Ochs.............. 20,000(2)(3) 9.5% $ 13.50 11/20/2005 $ 169,802 $ 430,310
</TABLE>
------------------
(1) These options were fully vested on the date of grant, November 20, 1995.
These options were granted under the 1987 Option Plan and have a term of 10
years, subject to earlier termination in certain circumstances related to
termination of employment.
(Footnotes continued on next page)
7
<PAGE>
(Footnotes continued from previous page)
(2) These options became exercisable as to 20% of the shares on November 20,
1996 and will become exercisable as to an additional 20% of such shares on
November 20 of each successive year, with full vesting occurring on November
20, 2000. These options were granted under the 1987 Option Plan and have a
term of 10 years, subject to earlier termination in certain circumstances
related to termination of employment.
(3) Granted in connection with the cancellation of options originally granted on
June 19, 1995 at a price of $14.25 per share.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR
ENDED SEPTEMBER 30, 1996 AND FY 1996-END OPTION VALUES
The following table sets forth certain information regarding options for
the purchase of the Common Stock that were exercised and/or held by the
Company's Chief Executive Officer and the other named Company officers therein:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT FY-END AT FY-END
SHARES --------------- ---------------------
ACQUIRED ON VALUE # EXERCISABLE/ $ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
----------------- --------------- --------------- ---------------------
<S> <C> <C> <C> <C>
Dan W. Matthias.................................. - - 78,905/ 9,000 $95,036/$4,500
Rebecca C. Matthias.............................. - - 78,905/ 9,000 $95,036/$4,500
Lynne M. Wieder.................................. - - 12,184/17,816 $78,521/$51,514
Thomas Frank..................................... - - 12,600/10,400 $128,921/$22,044
Donald W. Ochs................................... - - 0/20,000 $0/$0
</TABLE>
TEN-YEAR OPTION REPRICINGS
The following table sets forth all option repricings undertaken by the
Company within the last ten fiscal years with respect to options held by any
current or former executive officer of the Company.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES MARKET PRICE
UNDERLYING OF STOCK AT EXERCISE PRICE LENGTH OF ORIGINAL
OPTIONS TIME OF AT TIME OF NEW OPTION TERM REMAINING
REPRICED REPRICING OR REPRICING OR EXERCISE AT DATE OF REPRICING OR
NAME DATE OR AMENDED AMENDMENT AMENDMENT PRICE AMENDMENT
----- ---------- ---------- -------------- -------------- --------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Donald W. Ochs 11/20/95 20,000 $13.50 $14.25 $13.50 9 years
Senior Vice President -
Operations...................
Robert E. Pollock 1/6/95 12,000 $10.25 $17.75 $10.25 9 years
Vice President - Real
Estate.......................
Vana Longwell 1/6/95 18,000 $10.25 $12.875 $10.25 9 years
Vice President -
Manufacturing................
</TABLE>
8
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The graph below compares the Company's cumulative total stockholder return
on the Common Stock for the period (March 15, 1993 to September 30, 1996) from
the date the Company's Common Stock commenced trading on the Nasdaq National
Market to September 30, 1996, with the cumulative total return of the Standard &
Poor's 500 Stock Index and the Standard and Poor's Retail Stores Composite
Index. The comparison assumes $100 was invested on March 15, 1993 in the
Company's Common Stock and in each of the foregoing indices and assumes
reinvestment of dividends.
[PERFORMANCE GRAPH]
In the printed document, there is a line chart representing the
following:
Total Shareholder Returns
<TABLE>
<CAPTION>
Mothers Work, Inc. S&P 500 Index Retail Composite
<S> <C> <C> <C>
March 15, 1993 $100.00 $100.00 $100.00
September 30, 1993 $ 96.15 $103.14 $ 92.27
September 30, 1994 $101.92 $106.94 $ 91.59
September 30, 1995 $130.76 $138.75 $ 99.06
September 30, 1996 $103.84 $166.96 $117.80
</TABLE>
9
<PAGE>
EMPLOYMENT AGREEMENTS
The Company is a party to written employment agreements (the 'Employment
Agreements') with both Dan and Rebecca Matthias which expire on September 30,
1999, unless earlier terminated pursuant to the terms of the Employment
Agreements. The term of each Employment Agreement automatically extends for
successive one year periods extending the expiration date into the third year
after the extension, unless either the Company or the executive gives written
notice to the other party that the term will not so extend. Under the Employment
Agreements, the Company has agreed to nominate the Matthiases as directors and
to use its best efforts to cause them to be elected as directors. The base
salary of each executive for fiscal 1997 is $275,000 per year, and the base
salary will increase each year during the term in an amount determined by the
Compensation Committee of the Board of Directors, but in any event no less than
the rate of inflation. Following each year of the term, the executive will
receive a bonus of between $0 and $150,000 and up to 45,000 immediately vested
stock options with a fair market value exercise price, based upon a formula
relating to the percentage increase, if any, of the EPS before extraordinary
items for the fiscal year just ended, compared to the highest level of EPS
before extraordinary items ever attained by the Company in any previous fiscal
year. The Compensation Committee retains the discretion to increase the
executives' bonuses if such Committee deems it to be appropriate.
The Employment Agreements provide that for one year following the
termination of employment of either executive (other than for 'good reason' or
upon a 'change of control' of the Company, as such terms are defined in the
Employment Agreements) the executive shall not compete with the Company or
solicit the Company's suppliers or employees. If the employment of either
executive is terminated by the Company without cause or by the executive for
good reason or following a change of control, (i) the executive is entitled to
receive a lump sum severance payment equal to three years of base salary and the
maximum amount of cash and option bonus compensation and fringe benefits which
would have been paid or made available to the executive during the three years
following such termination, (ii) all stock options held by the terminated
executive will become immediately vested, and the executive may require the
Company to repurchase all such stock options at a price equal to the excess of
the closing price of the Common Stock over the exercise price of the options,
and (iii) the executive is entitled to cause the Company to register all shares
owned by the executive under the Securities Act of 1933, as amended, to the
extent they are not then registered, and the executive may additionally include
his or her shares in future registrations filed by the Company. In the event of
a termination by the Company for cause or by the executive without good reason,
the executive will not be entitled to any further base salary or bonus
compensation, and all unvested options then held by the executive will be
automatically canceled. In the event of a termination by the Company because of
a disability, the executive shall continue to receive base salary and cash bonus
and option compensation and fringe benefits during the three years following
such termination, at 50% of the levels the executive would have received if the
executive's employment had been terminated by the Company without cause, as
described above, less any payments received by the executive under any long term
disability or life insurance provided by the Company.
The Company is also a party to a written employment agreement with Donald
Ochs (the 'Ochs Agreement') which expires on June 19, 1997, unless earlier
terminated pursuant to the terms of the Ochs Agreement. According to the Ochs
Agreement, Mr. Ochs will serve as the Company's Senior Vice President of
Operations and will be compensated for his services at the annual base rate of
$250,000, subject to upward adjustment by the Board of Directors, plus an annual
bonus of up to 50% of Mr. Ochs' base salary for a given fiscal year based upon a
formula set forth in the Ochs Agreement. If Mr. Ochs is terminated for any
reason other than 'Disability' or 'cause', as defined therein, or the death of
Mr. Ochs, the Company must pay Mr. Ochs his salary accrued through the date of
termination and for six months thereafter, if during the first year of the term,
or for three months thereafter, if during the second year of the term. The Ochs
Agreement provides that Mr. Ochs is subject to a covenant not to compete with
the Company during the term of his employment and for a two-year period after
his employment with the Company terminates.
10
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of November 15, 1996, except
as otherwise noted, with respect to the beneficial ownership of shares of the
Common Stock by each person who is known to the Company to be the beneficial
owner of more than five percent of the outstanding Common Stock, by each
director or nominee for director, by each of the officers named on the Summary
Compensation Table, and by all directors and executive officers as a group.
Unless otherwise indicated, each person has sole voting power and sole
investment power.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER (A) BENEFICIAL OWNERSHIP OF CLASS
---------------------------------------- -------------------- -----------
<S> <C> <C>
Dan W. and Rebecca C. Matthias.................................................... 668,675(b) 18.0%
Meridian Venture Partners......................................................... 344,645 9.7%
259 Radnor-Chester Rd.
Radnor, PA 19087
Verna K. Gibson................................................................... 47,890(c) 1.3%
Joseph A. Goldblum................................................................ 111,399(d) 3.1%
Elam M. Hitchner, III............................................................. 16,000(e) *
Walter F. Loeb.................................................................... 4,000(f) *
Donald W. Ochs.................................................................... 11,000(g) *
Marsha R. Perelman................................................................ 25,472(h) *
William L. Rulon-Miller........................................................... 160,324(i) 4.5%
Marvin S. Traub................................................................... 16,667(j) *
Thomas Frank...................................................................... 15,527(f) *
Lynne M. Wieder................................................................... 18,184(f) *
Massachusetts Financial Services Company.......................................... 285,500(k) 8.0%
500 Boylston Street
Boston, MA 02116
Episode USA Inc................................................................... 217,365 6.1%
1040 Avenue of Americas
New York, NY 10018
Crown-Glynn Associates Limited Partnership........................................ 53,300(l) 1.5%
67 East Park Place
Morristown, NJ 07960
Crown Associates III, Limited Partnership......................................... 111,700(l) 3.1%
67 East Park Place
Morristown, NJ 07960
The Crown Trust................................................................... 87,500(l) 2.5%
67 East Park Place
Morristown, NJ 07960
All directors and officers as a group (11 persons)................................ 1,078,471(m) 28.3%
</TABLE>
- ------------------
<TABLE>
<S> <C>
* Less than 1% of the outstanding Common Stock.
(a) Except as otherwise indicated, the address of each person named in the table is: c/o Mothers Work, Inc., 456
North Fifth Street, Philadelphia, Pennsylvania 19123.
</TABLE>
(Footnotes continued on next page)
11
<PAGE>
Footnotes continued from previous page)
<TABLE>
<S> <C>
(b) Includes 81,905 shares purchasable upon exercise of stock options by each of Dan and Rebecca Matthias (or a
total of 163,810 shares). Except for the shares purchasable upon exercise of stock options, Dan and Rebecca
Matthias are husband and wife and beneficially own the shares indicated jointly.
(c) Includes 17,945 shares purchasable upon exercise of stock options.
(d) Includes 53,010 shares owned by G-2 Family Partnership L.P. Mr. Goldblum is general partner of G-2 Family
Partnership L.P. and may be deemed to be a beneficial owner of such shares. Also includes 6,000 shares
purchasable upon exercise of stock options; 26,100 shares held as custodian or in trust for members of Mr.
Goldblum's family; and 10,425 shares held by Mr. Goldblum as custodian for the benefit of three of the
Matthiases' children.
(e) Includes 6,000 shares purchasable upon exercise of stock options.
(f) Consists of shares purchasable upon exercise of stock options.
(g) Includes 4,000 shares purchasable upon exercise of stock options.
(h) Includes 6,000 shares purchasable upon exercise of stock options.
(i) Includes 154,324 shares beneficially owned by Penn Janney Fund, Inc. Mr. Rulon-Miller is director of Penn
Janney Fund, Inc. and may be deemed to be a beneficial owner of such shares. Also includes 6,000 shares
purchasable upon exercise of stock options.
(j) Consists of shares purchasable upon exercise of stock options owned by Marvin Traub Associates. Mr. Traub is
the President of Marvin Traub Associates and may be deemed to be a beneficial owner of such options.
(k) The beneficial ownership of shares of the Company's Common Stock is as of September 30, 1996. These shares
are held for investment purposes by MFS Emerging Growth Fund (a series of MFS Series Trust II) and other
accounts for which Massachusetts Financial Services Company ('MFS') serves as investment adviser. MFS has
sole voting power with respect to 272,300 of the shares, and no voting power with respect to 13,200 of the
shares.
(l) Represents shares owned by a group of three entities and seven persons, none of which individually directly
owns 5% of the Company's outstanding Common Stock, but who have shared voting power and dispositive power
with respect to 252,500 shares.
(m) Includes the following number of shares owned by affiliates of the following directors, which may be deemed
to be beneficially owned by the directors: Joseph A. Goldblum - 53,010 and William L. Rulon-Miller - 154,324
shares. Also includes the following number of shares purchasable upon the exercise of stock options owned by
the following persons: Verna K. Gibson - 17,945, Joseph A. Goldblum - 6,000, Elam M. Hitchner, III - 6,000,
Walter F. Loeb - 4,000, Dan W. Matthias - 81,905, Rebecca C. Matthias - 81,905, Marsha R. Perelman - 6,000,
William L. Rulon-Miller - 6,000, Thomas Frank - 15,527, Donald W. Ochs - 4,000 and Lynne M. Wieder - 18,184.
</TABLE>
VOTING AGREEMENT
Prior to September 28, 1995, a voting agreement (the 'Voting Agreement')
was in effect among the following stockholders of the Company: Dan and Rebecca
Matthias, Penn Janney Fund, Inc. ('Penn Janney'), Apex Investment Fund, L.P.
('Apex'), G-2 Family Partnership L.P., Meridian Venture Partners ('MVP'),
Keystone Venture II, L.P. ('Keystone') and Elam M. Hitchner, III. Pursuant to
the Voting Agreement, all of the signatories were obliged to vote all shares of
the Common Stock held by them so that the Company's Board of Directors would be
composed of nine directors designated as follows: Dan and Rebecca Matthias
jointly had the right to designate five directors (which may include the
Matthiases); one director could be designated by Apex; one director could be
designated by Penn Janney; one director could be designated by MVP after
consultation with the other parties to the Voting Agreement excluding the
Matthiases; and one director could be designated by the majority vote of the
parties to the Voting Agreement not including the Matthiases or Keystone. Two of
the directors to be designated by the Matthiases were required to be
unaffiliated with the Company and the Matthiases and were expected to have
substantial experience in the retailing industry. The director
12
<PAGE>
to be designated by MVP was required to have substantial experience in the
retailing industry and be unaffiliated with the Company, the Matthiases and the
other parties to the Voting Agreement.
The following members of the Company's Board of Directors were elected at a
time when the Voting Agreement was in effect: Marsha R. Perelman, Walter F.
Loeb, Dan W. Matthias, William L. Rulon-Miller and Elam M. Hitchner. The Voting
Agreement terminated by mutual agreement of the parties effective September 28,
1995.
CERTAIN TRANSACTIONS
The Company is a party to a written consulting agreement (the 'Consulting
Agreement') with Marvin Traub Associates, Inc. ('MTA') which has an initial one
year term ending on September 30, 1997, during which the Company shall pay to
MTA $200,000 plus options to acquire 16,667 shares of Company Common Stock. Mr.
Traub, a director nominee, is the Chairman and President of MTA. Pursuant to the
Consulting Agreement, the Company retained MTA to perform consulting and
advisory services for the Company in connection with the growth and strategic
development of the Company's businesses. The services to be performed by MTA
will be performed by Mr. Traub.
Elam M. Hitchner, III is a partner of the law firm of Pepper, Hamilton &
Scheetz, Philadelphia, Pennsylvania, which provides legal services to the
Company.
RATIFICATION OF
APPOINTMENT OF AUDITORS
(PROPOSAL 2)
The Board of Directors has selected Arthur Andersen LLP ('Arthur
Andersen'), independent public accountants, to audit the consolidated financial
statements of the Company for the fiscal year ending September 30, 1997 and
recommends that the stockholders ratify such selection. This appointment will be
submitted to the stockholders for ratification at the Annual Meeting.
The submission of the appointment of Arthur Andersen is not required by law
or by the By-laws of the Company. The Board of Directors is nevertheless
submitting it to the stockholders to ascertain their views. If the stockholders
do not ratify the appointment, the selection of other independent public
accountants will be considered by the Board of Directors. If Arthur Andersen
shall decline to accept or become incapable of accepting its appointment, or if
its appointment is otherwise discontinued, the Board of Directors will appoint
other independent public accountants.
A representative of Arthur Andersen is expected to be present at the Annual
Meeting, will have the opportunity to make a statement, and will be available to
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2 TO RATIFY THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS FOR THE YEAR ENDING
SEPTEMBER 30, 1997.
OTHER BUSINESS
Management knows of no other matters that will be presented at the Annual
Meeting. However, if any other matter properly comes before the meeting, or any
adjournment or postponement thereof, it is intended that proxies in the
accompanying form will be voted in accordance with the judgment of the persons
named therein.
13
<PAGE>
ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended September 30, 1996 accompanies this Proxy Statement.
STOCKHOLDER PROPOSALS
To be eligible for inclusion in the Company's proxy materials for the 1998
Annual Meeting of Stockholders, a proposal intended to be presented by a
stockholder for action at that meeting must, in addition to meeting the
stockholder eligibility and other requirements of the Securities and Exchange
Commission's rules governing such proposals, be received not later than August
18, 1997 by the Vice President - Finance and Chief Financial Officer of the
Company at the Company's principal executive offices, 456 North Fifth Street,
Philadelphia, Pennsylvania 19123.
------------------------------
THE COMPANY WILL PROVIDE TO EACH PERSON SOLICITED, WITHOUT CHARGE EXCEPT
FOR EXHIBITS, UPON REQUEST IN WRITING, A COPY OF ITS ANNUAL REPORT ON FORM 10-K,
INCLUDING THE FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES, AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FISCAL YEAR ENDED SEPTEMBER
30, 1996. REQUESTS SHOULD BE DIRECTED TO THOMAS FRANK, VICE PRESIDENT - FINANCE
AND CHIEF FINANCIAL OFFICER, MOTHERS WORK, INC., 456 NORTH FIFTH STREET,
PHILADELPHIA, PENNSYLVANIA 19123.
By Order of the Board of Directors
/s/ Dan W. Matthias
Dan W. Matthias
Chairman of the Board and
Chief Executive Officer
Date: December 19, 1996
Philadelphia, Pennsylvania
14
<PAGE>
<PAGE>
MOTHERS WORK, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all previous proxies, hereby appoints Dan W.
Matthias and Rebecca C. Matthias, and each of them acting individually, as the
attorney and proxy of the undersigned, with full power of substitution, to vote,
as indicated below and in their discretion upon such other matters as may
properly come before the meeting, all shares which the undersigned would be
entitled to vote at the Annual Meeting of the Stockholders of the Company to be
held on January 16, 1997, and at any adjournment or postponement thereof.
1. Election of Directors:
/ / FOR the nominees listed below / / WITHHOLD AUTHORITY
to vote for the nominees listed below
Nominees: For a three-year term expiring at the 2000 Annual Meeting: Marvin S.
Traub and Walter F. Loeb
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S), WRITE THE
NAME(S) OF SUCH NOMINEE(S) ON THE LINE BELOW.)
- --------------------------------------------------------------------------------
2. Ratification of appointment of Arthur Andersen LLP as independent
auditors for the Company for the fiscal year ending September 30, 1997:
/ / FOR / / AGAINST / / ABSTAIN
PLEASE DATE AND SIGN YOUR PROXY ON THE REVERSE SIDE AND RETURN IT PROMPTLY.
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. UNLESS
OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED 'FOR' THE ELECTION OF THE NOMINEES
FOR DIRECTOR LISTED ON THE REVERSE SIDE HEREOF AND 'FOR' RATIFICATION OF
APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING SEPTEMBER 30, 1997. THIS PROXY ALSO DELEGATES DISCRETIONARY
AUTHORITY WITH RESPECT TO ANY OTHER BUSINESS WHICH MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT.
________________________________
Signature of Stockholder
________________________________
Signature of Stockholder
Dated:
________________________ , 1996
NOTE: PLEASE SIGN THIS PROXY
EXACTLY AS NAME(S) APPEAR ON
YOUR STOCK CERTIFICATE. WHEN
SIGNING AS ATTORNEY-IN-FACT,
EXECUTOR, ADMINISTRATOR, TRUSTEE
OR GUARDIAN, PLEASE ADD YOUR
TITLE AS SUCH, AND IF SIGNER IS
A CORPORATION, PLEASE SIGN WITH
FULL CORPORATE NAME BY A DULY
AUTHORIZED OFFICER OR OFFICERS
AND AFFIX THE CORPORATE SEAL.
WHERE STOCK IS ISSUED IN THE
NAME OF TWO (2) OR MORE PERSONS,
ALL SUCH PERSONS SHOULD SIGN.
