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
[ ] Solicitng Material Under Rule 14a-12
MOTHERS WORK, INC.
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(Name of Registrant as Specified In Its Charter)
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(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
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computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
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paid previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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<PAGE>
MOTHERS WORK(R)
456 NORTH FIFTH STREET
PHILADELPHIA, PENNSYLVANIA 19123
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JANUARY 18, 2001
------------------
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
18, 2001 at the Company's corporate headquarters, 456 North Fifth Street,
Philadelphia, Pennsylvania 19123, 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,
2001;
3. To approve the amendment to the Company's 1987 Stock Option Plan, as
amended and restated (the "Restated Stock Option Plan"), which would
authorize the Company to grant options to purchase up to an additional
250,000 shares, or a total of 1,475,000 shares of Common Stock; and
4. 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 12,
2000 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 15, 2000
<PAGE>
MOTHERS WORK(R)
456 NORTH FIFTH STREET
PHILADELPHIA, PENNSYLVANIA 19123
--------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
JANUARY 18, 2001
--------------------
This Proxy Statement, which is first being mailed to stockholders on
approximately December 15, 2000, 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 18, 2001 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 12, 2000 will be
entitled to vote at the Annual Meeting or any adjournments or postponements
thereof. As of that date, there were 3,453,750 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 a plurality of the votes cast 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.
<PAGE>
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, 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 seven members. Unless
otherwise specified in the accompanying proxy, the shares voted pursuant thereto
will be cast for Messrs. Dan W. Matthias and Elam M. Hitchner, III, for terms
expiring at the Annual Meeting of Stockholders to be held following fiscal 2003
(the "2004 Annual Meeting"). If, for any reason, at the time of election, any of
the nominees named should decline or be unable to accept his 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 2004 ANNUAL MEETING
Dan W. Matthias, 57, joined the Company on a full-time basis in 1982 and
has served as Chairman of the Board since its inception. 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.
Elam M. Hitchner, III, 54, became a director of the Company in January
1994. Mr. Hitchner is a general partner of Meridian Venture Partners and
Meridian Venture Partners II, venture capital firms located in Radnor,
Pennsylvania until December 31, 2000. From May 1992 until June 1999, Mr.
Hitchner was a partner at the law firm of Pepper Hamilton LLP, Philadelphia,
Pennsylvania, which provides legal services to the Company. Effective January 1,
2001, Mr. Hitchner will return to Pepper Hamilton LLP as a partner. See "Certain
Transactions."
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING AT 2003 ANNUAL MEETING
Stanley C. Tuttleman, 81, became a director on January 20, 2000. He has
been the President and Chief Executive Officer of Tuttson Capital Corp., a
financial services corporation, since 1983. Mr. Tuttleman also serves as Chief
Executive Officer and Chairman of Telepartners, Inc., a wireless program
company.
William A. Schwartz, Jr., 61, became a director of the Company on August
28, 1998. Mr. Schwartz is President and Chief Executive Officer of U.S. Vision,
a retailer of optical products and services, a position which he has held since
1995. Mr. Schwartz currently is a director of U.S. Vision and Commerce Bankcorp.
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<PAGE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING AT 2002 ANNUAL MEETING
Rebecca C. Matthias, 47, 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. Ms.
Matthias also serves as a member of the Board of Trustees of Drexel University.
Verna K. Gibson, 58, became a director of the Company in May 1992. Ms.
Gibson is currently the 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 also 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., and
Dekor, Inc.
Joseph A. Goldblum, 51, has been a director of the Company since 1989. Mr.
Goldblum has been President of G-II Equity Investors, Inc. a general partner of
G-II Family Partnership L.P. since May 1989. He was also Of Counsel with the law
firm of Goldblum & Hess from May 1989 to December 1996.
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, 2000, the Board of Directors
held five meetings. 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, 2000, the Audit Committee, which
consists of Mr. Hitchner, Chairman, Mr. Schwartz and Mr. Tuttleman, held four
meetings. Each member of the Audit Committee is considered an "independent
director" under NASD's rules. The function of the Audit Committee is to assist
the Board of Directors in preserving the integrity of the financial information
published by the Company through the review of financial and accounting control
and policies, financial reporting requirements, alternative accounting
principles that could be applied and the quality and effectiveness of the
independent accountants. On June 14, 2000, the Board and the Audit Committee
unanimously adopted the Audit Committee Charter outlining the responsibilities
and duties of the Audit Committee. A copy of the Audit Committee Charter is
included as Appendix A to this Proxy Statement.
During the fiscal year ended September 30, 2000, the Compensation
Committee, which consists of Mr. Goldblum, Chairman, Mr. Matthias and Ms.
Gibson, held three 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 the Board of Directors. A
subcommittee (Ms. Gibson and Mr. Goldblum) of the Compensation Committee
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 Restated Stock Option Plan.
During the fiscal year ended September 30, 2000, the Nominating Committee,
which consists of Mr. Matthias, Chairman, Mr. Goldblum and Mr. Hitchner, held
one meeting. 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
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<PAGE>
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, other than the Matthiases, a retainer of
$3,000 per quarter. In addition, each director is paid $1,500 for each Board
meeting, and $500 for each Committee meeting, attended by such director in
person. Upon conclusion of each Annual Meeting of Stockholders, the Company
grants each director other than the Matthiases options to purchase 2,000 shares
of the Common Stock pursuant to the Company's 1994 Director Stock Option Plan.
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.
Michael F. Devine, III, the Company's Chief Financial Officer and Vice
President - Finance, filed two Forms 4 late and each of Donald W. Ochs, the
Company's Senior Vice President - Operations and director Stanley C. Tuttleman
filed a Form 4 late. Other than as specified above, 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 2000, all Section 16(a) filing requirements
applicable to the Reporting Persons were complied with.
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<PAGE>
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors has:
- Reviewed and discussed the audited financial statements with
management;
- Discussed with Arthur Andersen LLP, the Company's independent
auditor, the matters required to be discussed by Statement on
Auditing Standards No. 61;
- Received the written disclosures and the letter from Arthur
Andersen LLP required by Independence Standards Board Standard
No. 1, and has discussed with Arthur Andersen LLP its
independence.
In reliance on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the year ended
September 30, 2000.
THE AUDIT COMMITTEE
Elam M. Hitchner, III, Chairman
William A. Schwartz, Jr.
Stanley C. Tuttleman
The foregoing Audit Committee Report shall not be deemed to be incorporated by
reference into any filing made by the Company under the Securities Act of 1933
or the Securities Exchange Act of 1934, notwithstanding any general statement
contained in any such filing incorporating this proxy statement by reference,
except to the extent the Company incorporates such report by specific reference.
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<PAGE>
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 Joseph A.
Goldblum, Chairman, Dan W. Matthias(1), 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 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. The Compensation Committee has determined that a compensation package
that contains long-term stock based incentives is 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 designed to be 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; and
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.
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
--------------------
(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.
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<PAGE>
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: Annual bonuses are generally based on the Company's
performance and management's performance against specified goals established by
senior management and the Compensation Committee. The annual bonuses for the
Chief Executive Officer and President are based on performance against their
goals and the Company's EPS. 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 Restated
Stock 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 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
benefited. 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.
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<PAGE>
CHIEF EXECUTIVE OFFICER AND PRESIDENT COMPENSATION
In fiscal 2000, 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 $350,000 to $377,493 and $376,265,
respectively. The fiscal 2000 base salary is comparable with the salaries of
senior management of publicly-held companies of comparable size in the retail
clothing industry.
The Matthiases' compensation package as set forth in their respective
employment agreements consists of two elements: (1) an annual component
consisting of base salary and cash bonus and (2) a long-term component
consisting of stock options. It is the practice of the Committee to meet with
senior management at the beginning of each fiscal year and agree upon priority
goals for that year. Management's performance can then be measured against
attainment of such goals. The goals for fiscal 2000 contained criteria such as
meeting certain financial goals and further development of the senior management
team. Based on the financial performance of the Company, each of the Matthiases
was entitled to a significant bonus which was paid in fiscal 2001. The Board
ratified the Committee's recommendations regarding the fiscal 2000 compensation
of each of the Matthiases at its meeting in November 16, 2000.
THE COMPENSATION COMMITTEE
Joseph A. Goldblum, Chairman
Dan W. Matthias
Verna K. Gibson
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<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth, for the fiscal years ended September 30,
1998, 1999 and 2000 certain compensation information with respect to the
Company's Chief Executive Officer and the other Company officers named therein.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
------------------------------------ ---------------------------------------------------
SECURITIES
UNDER-
OTHER RESTRICTED LYING ALL OTHER
FISCAL ANNUAL STOCK OPTIONS/ LTIP COMPEN-
NAME AND YEAR SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS SATION
PRINCIPAL POSITION(a) (b) ($)(c) ($)(d) ($)(e) ($)(f) (#)(g) ($)(h) ($)(i)
------------------------ ------ ------- ------- ------------ ---------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dan W. Matthias........ 2000 377,493 210,000 -- -- -- -- --
Chairman and 1999 350,000 -- -- -- 25,000 -- --
Chief Executive 1998 325,000 85,000 -- -- 25,000 -- --
Officer
Rebecca C. Matthias.... 2000 376,265 210,000 -- -- -- -- --
President and Chief 1999 350,000 -- -- -- 25,000 -- --
Operating Officer 1998 325,000 85,000 -- -- 25,000 -- --
Michael F. Devine III.. 2000 160,583 130,460 -- -- 30,000 -- --
Vice President-- 1999* -- -- -- -- -- --
Finance and Chief 1998* -- -- -- -- -- -- --
Financial Officer
--
Donald W. Ochs......... 2000 340,806 212,338 -- -- -- -- --
Senior Vice 1999 323,333 -- -- -- 5,000 -- --
President--Operations 1998 302,500 40,000 -- -- 5,000 -- --
Vana Longwell.......... 2000 308,974 210,050 -- -- -- -- --
Senior Vice 1999 266,666 -- -- -- 5,000 -- --
President-- 1998 217,750 40,000 -- -- 7,000 -- --
Merchandising
</TABLE>
-------------------
*/ Mr. Devine joined the Company in February 2000.
-
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<PAGE>
STOCK OPTIONS GRANTED TO CERTAIN EXECUTIVE OFFICERS DURING LAST FISCAL YEAR
Under the Restated Stock 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 2000.
OPTION GRANTS IN FISCAL YEAR ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE GAIN
NUMBER OF AT ASSUMED ANNUAL RATES OF
SECURITIES PERCENT OF TOTAL STOCK APPRECIATION FOR
UNDERLYING OPTIONS GRANTED OPTION TERMS COMPOUNDED
OPTIONS TO EMPLOYEES IN EXERCISE OR BASE ANNUALLY
NAME GRANTED (#) FISCAL YEAR PRICE ($/Sh) EXPIRATION DATE 5% 10%
------------------ ----------- ---------------- ---------------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Dan W. Matthias -- -- $-- -- $-- $--
Rebecca C. Matthias -- -- $-- -- $-- $--
Michael F. Devine, III 30,000(1) 18.9% $12.06 1/21/2010 $108,453 $387,053
Donald W. Ochs -- -- $-- -- $-- $--
Vana Longwell -- -- $-- -- $-- $--
</TABLE>
-----------------
(1) These options become exercisable as to 20% of the shares granted on January
21, 2001 and will become exercisable as to an additional 20% of such shares
on January 21 of each successive year, with full vesting occurring on
January 21, 2005. These options were granted under the Restated Stock
Option Plan and have a term of 10 years, subject to earlier termination in
certain circumstances related to termination of employment.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR
ENDED SEPTEMBER 30, 2000 AND FISCAL YEAR 2000-END OPTION VALUES
The following table sets forth certain information regarding options for
the purchase of the Common Stock that were exercised and/or held by the
Company's Chief Executive Officer and the other named Company officers therein:
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY OPTIONS
SHARES ACQUIRED VALUE UNEXERCISED OPTIONS AT FY-END AT FY-END ($)
NAME ON EXERCISE (#) REALIZED ($) (#) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- ------------ ------------------------------- --------------------------
<S> <C> <C> <C> <C>
Dan W. Matthias -- -- 135,905/-- 28,375/--
Rebecca C. Matthias -- -- 135,905/-- 28,375/--
Michael F. Devine, III -- -- --/30,000 -- / --
Donald W. Ochs -- -- 26,200/15,800 3,765/7,223
Vana Longwell -- -- 30,800/12,200 5,019/9,104
</TABLE>
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<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The graph below compares the Company's cumulative total stockholder
return on the Common Stock for the period September 30, 1995 to September 30,
2000, 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 September 30, 1995 in the Company's Common Stock
and in each of the foregoing indices and assumes reinvestment of dividends.
Total Shareholder Returns
[Graph]
<TABLE>
<CAPTION>
Mothers Work, Inc. S&P 500 Index Retail Composite
<S> <C> <C> <C>
September 30, 1995 $100.00 $100.00 $100.00
September 30, 1996 $ 83.08 $117.61 $117.37
September 30, 1997 $ 81.54 $162.09 $152.94
September 30, 1998 $ 66.15 $174.02 $187.10
September 30, 1999 $ 48.46 $219.49 $251.00
September 30, 2000 $ 59.23 $245.81 $246.91
</TABLE>
EMPLOYMENT AGREEMENTS
The Company is a party to written employment agreements with both Dan and
Rebecca Matthias (the "Employment Agreements") which expire on September 30,
2003, 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 Matthias' as directors and to
use its best efforts to cause them to be elected as directors. The base salary
of each executive for fiscal 2001 is $400,000 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. For each year commencing with fiscal 2001, each executive will be
entitled to a cash bonus of up to 100% of base salary based on a formula
relating to the percentage increase of EPS before extraordinary items for the
year over the highest EPS before extraordinary items for any prior year, with
the maximum bonus payable at a 50% percentage increase. In addition, following
each fiscal year, each executive will be granted up to 60,000 immediately-vested
stock options based on a similar formula, with the maximum number of options to
be granted at a 35% percentage increase. The Compensation Committee retains the
discretion to increase the executives' bonuses and to grant additional options
if such Committee deems it to be appropriate.
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<PAGE>
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.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of December 8, 2000, 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.
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER (a) BENEFICIAL OWNERSHIP OF CLASS
----------------------- -------------------- --------
Dan W. and Rebecca C. Matthias 883,730 (b) 25.6%
Michael F. Devine, III 6,100 (c) *
Verna K. Gibson 55,945 (d) 1.6%
Joseph A. Goldblum 164,924 (e) 4.8%
Elam M. Hitchner, III 56,500 (f) 1.6%
Vana Longwell 35,800 (g) 1.0%
Donald W. Ochs 47,600 (h) 1.4%
William A. Schwartz, Jr. 6,000 (i) *
Stanley C. Tuttleman 29,000 (j) *
Dimensional Fund Advisors, Inc. 284,400 (k) 8.2%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
FMR Corp. 294,100 (l) 8.5%
82 Devonshire Street
Boston, MA 02109
Foremark Investments, Ltd. 217,365 (m) 6.3%
c/o Madeline Wong
21 South End Avenue,
Penthouse 1C
New York, NY 10280
Massachusetts Financial 192,000 (n) 5.6%
Services Company
500 Boylston Street
Boston, MA 02116
MVP Distribution Partners 374,645 (o) 10.9%
259 Radnor-Chester Rd.
Radnor, PA 19087
Oakmont Capital, Inc. 259,000 (p) 7.5%
112 St. Clair Avenue West
Suite 504
Ontario, Canada M4V 2Y3
All directors and 1,285,599 (q) 37.2%
officers as a group
(10 persons)
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<PAGE>
-----------------------------
* 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.
(b) Includes 195,905 shares and 195,905 shares, respectively, purchasable upon
exercise of stock options by Dan and Rebecca Matthias (or a total of
391,810 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 6,000 shares purchasable upon the exercise of stock options.
(d) Includes 16,000 shares purchasable upon exercise of stock options
(including 2,000 shares expected to be granted under the Company's 1994
Director Stock Option Plan upon completion of the 2001 Annual Meeting).
(e) Includes 53,010 shares owned by G-II Family Partnership L.P. Mr. Goldblum
is general partner of G-II Family Partnership L.P. and may be deemed to be
a beneficial owner of such shares. Also includes 16,000 shares purchasable
upon exercise of stock options (including 2,000 shares expected to be
granted under the Company's 1994 Director Stock Option Plan upon completion
of the 2001 Annual Meeting); 26,700 shares held as custodian or in trust
for members of Mr. Goldblum's family; and 23,370 shares held by Mr.
Goldblum as custodian for the benefit of three of the Matthias' children.
(f) Includes 16,000 shares purchasable upon exercise of stock options
(including 2,000 shares expected to be granted under the Company's 1994
Director Stock Option Plan upon completion of the 2001 Annual Meeting,
subject to Mr. Hitchner's re-election as a director).
(g) Includes 35,600 shares purchasable upon exercise of stock options.
(h) Includes 34,600 shares purchasable upon exercise of stock options.
(i) All shares purchasable upon exercise of stock options (includes 2,000
shares expected to be granted under the Company's 1994 Director Stock
Option Plan upon completion of the 2001 Annual Meeting).
(j) Includes 4,000 shares purchasable upon exercise of stock options (including
2,000 shares expected to be granted under the Company's 1994 Director Stock
Option Plan upon completion of the 2001 Annual Meeting).
(k) Based on information provided by Dimensional Fund Advisors, Inc.
("Dimensional") as of September 30, 1999, Dimensional is an investment
advisor registered under Section 203 of the Investment Advisors Act of
1940, furnishes investment advice to four investment companies registered
under the Investment Company Act of 1940, and serves as investment manager
to certain other investment vehicles, including commingled group trusts.
(These investment companies and investment vehicles are the "Portfolios").
In its role as investment advisor and investment manager, Dimensional
possesses both voting and investment power over 284,400 shares of the
Company's Common Stock as of September 30, 2000. The Portfolios own all
securities reported in this statement, and Dimensional disclaims beneficial
ownership of such securities.
(l) Based on information provided by FMR Corp. ("FMR"), as of November 21,
2000, FMR owns 294,100 shares or 8.64% of the issued and outstanding shares
of Common Stock of Mothers Work. FMR Corp., on behalf of its direct
subsidiary Fidelity Management & Research Company ("Fidelity") is the
beneficial owner of 294,100 common shares. Fidelity carries out the voting
of shares under written guidelines by the fund's Board of Trustees.
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<PAGE>
(m) Information is based on the Schedule 13G filed with the Securities and
Exchange Commission on December 2, 1998. Foremark Investments Ltd.
("Foremark") is the record owner of all of the shares; Madeline Wong is the
owner of all of the voting and equity securities of Foremark. Such shares
do not include 42,000 shares owned by John Charlton, the husband of
Madeline Wong.
(n) Information is based on the Schedule 13G/A filed with the Securities and
Exchange Commission on February 10, 2000. These shares are held for
investment purposes by MFS Emerging Growth Fund (a series of MFS Series
Trust II) and other accounts for which MFS serves as investment adviser.
(o) Information is based on the Schedule 13G filed with the Securities and
Exchange Commission on May 3, 1999.
(p) Based on the Schedule 13D/A filed with the Securities and Exchange
Commission on November 19, 1998, all of such shares may be deemed to be
beneficially owned by Oakmont Capital, Inc. ("Oakmont"). Oakmont is a part
of a group (the "Group") which also includes E.J.K. Real Estate Services
Limited, Inc. ("EJK") and 1272562 Ontario, Inc. ("1272562"), Gregory P.
Hannon and Terence M. Kavanagh. Oakmont has sole voting power and sole
dispositive power with respect to 173,800 of such shares. EJK and 127652
each own 50 percent of the voting stock of Oakmont and have shared voting
power and shared dispositive power with respect to the shares owned by
Oakmont. Mr. Kavanagh owns all of the capital stock in EJK, and Mr. Hannon
owns all of the capital stock of 1272562. EJK, 1272562, Mr. Kavanagh, and
Mr. Hannon also have sole voting power and sole dispositive power as to
shares not directly owned by Oakmont.
(q) 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. Also includes the following number
of shares purchasable upon the exercise of stock options owned (or which
may be deemed to be owned) by the following persons: Verna K. Gibson -
16,000, Joseph A. Goldblum - 16,000, Elam M. Hitchner, III - 16,000, Dan W.
Matthias - 195,905, Rebecca C. Matthias - 195,905, Michael F. Devine, III -
6,000, William A. Schwartz, Jr. - 6,000, Stanley C. Tuttleman - 4,000,
Donald W. Ochs - 34,600 and Vana Longwell - 35,600.
CERTAIN TRANSACTIONS
Elam M. Hitchner, III has been re-elected to partnership at Pepper Hamilton
LLP, provides legal services to the Company effective January 1, 2001. In
addition, Verna K. Gibson receives $10,000 a month from the Company in
consulting fees.
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<PAGE>
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, 2001 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. The representative 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, 2001.
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<PAGE>
APPROVAL OF AMENDMENT OF THE COMPANY'S
RESTATED STOCK OPTION PLAN
(PROPOSAL 3)
At the 2001 Annual Meeting, the stockholders will be asked to approve an
amendment (the "Option Plan Amendment") to the Mothers Work, Inc. Stock Option
Plan, as Amended and Restated (the "Restated Option Plan" or the "Plan"). Such
approval will require the affirmative vote of a majority of the voting power of
all outstanding shares of the Company's Common Stock present or represented and
entitled to vote at the 2001 Annual Meeting. On or before January 18, 2001, the
Board expects to adopt the Option Plan Amendment, subject to stockholder
approval as described herein. If approved, the Option Plan Amendment will
increase the number of shares of Common Stock available for issuance upon the
exercise of options granted under the Restated Option Plan from 1,225,000 to
1,475,000. The terms of the Restated Option Plan and information regarding
options granted thereunder are summarized below.
Adoption of the Option Plan Amendment will only amend the Restated Option
Plan by increasing the number of shares of Common Stock available for option
grants by 250,000. At September 30, 2000, options to purchase 901,832 shares of
Common Stock were granted and outstanding under the Restated Option Plan,
leaving a balance of 323,168 additional shares of Common Stock which could be
subject to options granted under such Plan. The Board believes that increasing
the number of stock options available for grant under such Plan to 1,475,000
(leaving options to purchase 573,168 shares of Common Stock available for future
grants) is advisable because such awards reinforce the importance of improving
stockholder value over the long-term, encourage and facilitate executives stock
ownership, thereby promoting interest in the welfare of the Company by allowing
them to share in the success of the Company and encouraging them to remain in
the service of the Company.
SUMMARY OF THE RESTATED OPTION PLAN
The Restated Option Plan provides for the grant to selected employees and
consultants of the Company and its Subsidiary who contribute to the development
and success of the Company and its Subsidiary of both "incentive stock options"
within the meaning of Section 422 of the Code ("ISOs") and options that are
non-qualified for federal income tax purposes ("NQSOs"); provided, however, that
consultants are eligible for the grant of NQSOs only. The total number of shares
of Common Stock for which options may be granted pursuant to the Restated Option
Plan after giving effect to the Option Plan Amendment will be 1,475,000, of
which 573,168 will be available for future grants, subject to certain
adjustments reflecting changes in the Company's capitalization. As of December
8, 2000, the Company had approximately 2,300 employees eligible to receive
options.
The Restated Option Plan is administered by a subcommittee of the
Compensation Committee of the Board (the "Committee"), which is comprised of
directors who are not also employees of the Company (Ms. Gibson and Mr.
Goldblum). The Committee determines, among other things, which employees will
receive options under the Plan; the time when options will be granted; the type
of option (ISO or NQSO, or both) to be granted, the number of shares subject to
each option, the time or times when the options will become exercisable and
expire, and, subject to certain conditions discussed below, the option price and
duration of the option. The exercise price of the options granted under the
Restated Option Plan is determined by the Board of Directors, but may not be
less than the fair market value per share of the Common Stock on the date the
option is granted. The Compensation Committee also determines the method of
payment for the exercise of options under the Plan, which may consist entirely
of cash, check, promissory notes or Common Stock having a fair market value on
the date of surrender equal to the aggregate exercise price. The market value of
the shares of Common Stock underlying the outstanding options as of September
30, 2000 was $7,778,301.
There are no federal income tax consequences to the Company on the grant or
exercise of an ISO. However, if an employee disposes of stock acquired through
the exercise of an ISO within one year after the date such stock is acquired or
within two years after the grant of the ISO (a "Disqualifying Disposition"), the
Company will be entitled to a deduction in an amount equal to the difference
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<PAGE>
between the fair market value of such stock on the date it is acquired and the
exercise price of the ISO. There will be no tax consequences to the Company if
an ISO lapses before exercise or is forfeited. The grant of a NQSO will have no
immediate tax consequences to the Company. Upon the exercise of a NQSO by an
employee or consultant, the Company will be entitled to a deduction in an amount
equal to the difference between the fair market value of the share acquired
through exercise of the NQSO and the exercise price of the NQSO. There will be
no tax consequences to the Company if a NQSO lapses before exercise or is
forfeited.
An employee who receives an ISO will not be subject to federal income tax
on the grant or exercise of the ISO; however, the difference between the option
price and the fair market value of the Common Stock received on the exercise of
the ISO ("ISO Stock") will be an adjustment for purposes of the alternative
minimum tax. Upon the exercise of an ISO, an employee will have a basis in the
ISO Stock received equal to the amount paid. Generally, an employee will be
subject to capital gain or loss upon the sale of ISO Stock equal to the
difference between the amount received for the stock and the employee's basis in
such. The gain or loss will be long- or short-term, depending on the length of
time the ISO Stock was held prior to disposition. There will be no tax
consequences to an employee if an ISO lapses before exercise or is forfeited.
In the event of a Disqualifying Disposition, an employee will be required
to recognize (1) taxable ordinary income in an amount equal to the difference
between the fair market value of the ISO Stock on the date of exercise of the
ISO and the exercise price; and (2) capital gain or loss (long- or short-term,
as the case may be) in an amount equal to the difference between (a) the amount
realized by the employee upon the Disqualifying Disposition and (b) the exercise
price paid by the employee for the stock, increased by the amount of ordinary
income recognized by the employee, if any. If the disposition generates an
allowable loss (e.g., a sale to an unrelated party not within 30 days of
purchase of Common Stock), then the amount required to be recognized by the
employee as ordinary income will be limited to the excess, if any, of the amount
realized on the sale over the basis of the stock.
The grant of a NQSO will have no immediate tax consequences to an employee.
The exercise of a NQSO will require an employee or consultant to include in
gross income the amount by which the fair market value of the acquired shares
exceeds the exercise price on the exercise date. The Company will be required to
withhold income and employment taxes from an employee's wages on account of this
income. The employee's or consultant's basis in the acquired shares will be
their fair market value on the date of exercise. Upon a subsequent sale of such
shares, the employee or consultant will recognize capital gain or loss equal to
the difference between the sales price and the basis in the stock. The capital
gain or loss will be long- or short-term, depending on whether the employee has
held the shares for more than one year. There will be no tax consequences to an
employee or consultant if a NQSO lapses before exercise or is forfeited.
The Restated Option Plan allows an employee to pay an exercise price in
cash or shares of the Company's Common Stock. If the employee pays with shares
of the Company's Common Stock that are already owned, the basis of the newly
acquired ISO Stock will depend on the tax character and number of shares of the
previously owned stock used as payment. If an employee pays with shares acquired
upon other than the exercise of an ISO ("non-ISO Stock"), the transaction will
be tax-free to the extent that the number of shares received does not exceed the
number of shares of non-ISO Stock paid. The basis of the number of shares of
newly acquired ISO Stock which does not exceed the number of shares of non-ISO
Stock paid will be equal to the basis of the shares paid. The employee's holding
period with respect to such shares will include the holding period of the shares
of non-ISO Stock paid. To the extent that the employee receives more new shares
than shares surrendered, the "excess" shares of ISO Stock will take a zero
basis. If an employee exercises an ISO by using stock that is previously
acquired ISO Stock, however, certain special rules apply. If the employee has
not held the previously acquired ISO Stock for at least two years from the date
of grant of the related ISO and one year from the date the employee acquired the
previously acquired ISO Stock, the use of such ISO Stock to pay the exercise
price will constitute a Disqualifying Disposition and subject the employee to
income tax with respect to the ISO Stock as described above. In such
circumstances, the basis of the newly acquired ISO Stock will be equal to the
fair market value of the previously acquired ISO Stock used as payment.
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<PAGE>
If an employee or consultant uses previously owned Common Stock as payment
for the exercise price of a NQSO, to the extent the employee or consultant
surrenders the same number of shares received, the exchange will be tax-free and
the new shares will have a basis equal to that of the shares surrendered. The
holding period for the new shares will include the period the employee or
consultant held the surrendered shares. To the extent the employee or consultant
receives more new shares than shares surrendered, the excess shares will be
treated as having been acquired for no consideration and the fair market value
of such excess shares will be includible in the employee's income as
compensation. The basis of the excess shares is their fair market value at the
time of receipt. If the previously owned shares consist of ISO Stock for which
the holding requirements were not met such that their use as payment of the
exercise price constituted a Disqualifying Disposition, the employee will have
the income tax consequences described above.
The Board of Directors has authority to suspend, terminate or discontinue
the Restated Option Plan or revise or amend it in any manner with respect to
options granted after the date of revision. No such revision, however, will be
permitted to change the aggregate number of shares subject to the Plan, change
the designation of employees eligible thereunder, or decrease the price at which
options may be granted without the approval of the Company's stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 3 TO APPROVE THE AMENDMENT
TO THE RESTATED OPTION PLAN.
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.
ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended September 30, 2000 accompanies this Proxy Statement.
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<PAGE>
STOCKHOLDER PROPOSALS
In order for a shareholder proposal to be considered for inclusion in the
Company's proxy statement and form of proxy relating to the Annual Meeting of
Stockholders to be held in 2002, the proposal must be received by the Company at
its principal executive offices not later than August 17, 2001. In addition, in
the event that the Company receives notice of a stockholder proposal not
intended for inclusion in the Company's proxy statement at the Company's
principal executive offices not later than October 31, 2001, then so long as the
Company includes in its proxy statement for that Meeting the advice on the
nature of the proposal and how the named proxyholders intend to vote the shares
for which they have received discretionary authority, such proxyholders may
exercise discretionary authority with respect to such proposal, except to the
extent limited by the SEC's rules governing shareholder proposals.
----------------
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, 2000. REQUESTS SHOULD BE DIRECTED TO 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 15, 2000
Philadelphia, Pennsylvania
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<PAGE>
APPENDIX A
CHARTER OF THE
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
OF
MOTHERS WORK, INC.
ARTICLE I
PURPOSE
The primary purpose of the Audit Committee (the "Committee") is to assist
the Board of Directors (the "Board") of Mothers Work, Inc. (the "Company") in
undertaking and fulfilling its oversight responsibilities in connection with:
(a) reviewing the financial reports and other financial information prepared by
the Company for submission to any governmental or regulatory body or the public
and monitoring the integrity of such financial reports; (b) reviewing the
Company's systems of internal controls established by management for finance,
accounting, legal compliance and ethics that management and the Board have
established; (c) reviewing the Company's, accounting and financial reporting
processes generally; (d) monitoring compliance with legal regulatory
requirements; (e) monitoring the independence and performance of the Company's
independent public accountants; and (f) providing effective communication
between the Board and the Company's independent public accountants.
In discharging its oversight role, the Committee is empowered to
investigate any matter brought to its attention with full power to retain
special legal, accounting or other consultants to advise the Committee.
<PAGE>
ARTICLE II
MEMBERSHIP AND TERM
(a) MEMBERSHIP. The Committee shall be comprised of at least three members
of the Board, and the Committee's composition shall meet the following listing
requirements of The Nasdaq Stock Market's National Market.
1. Each member of the Committee must not have any relationship with
the Company that may interfere with the exercise of the member's
independence;
2. Each member of the Committee must be financially literate(1) or
become financially literate within a reasonable period of time
after appointment to the Committee; and
3. At least one member of the Committee shall have expertise in
accounting or financial reporting.(2)
(b) TERM; REMOVAL. The members of the Committee shall be appointed for a
one year term by the Board at its annual meeting. Unless a chairman of the
Committee is designated by the Board, the members of the Committee will elect a
chairman by formal vote of the Committee's full membership. A member of the
Committee may be removed from the Committee at any time at the discretion of the
Board.
-----------------------------
(1)The term "financial literacy" means that a member of the audit committee must
have the ability to read and understand fundamental financial statements,
including a balance sheet, income statement and statement of cash flows or
will become able to do so within a reasonable period of time after being
appointed to an audit committee. The term "financial literacy" does not mean
that a member must have a chief financial officer's or accounting
practitioner's understanding of generally accepted accounting principles,
consistently applied, as adopted in the United States of America by the
Financial Accounting Standards Board ("GAAP").
(2)The term "expertise in accounting or financial reporting" means that at least
one member of the audit committee must have had some past employment
experience in finance or accounting, a professional certification in
accounting, or any other comparable experience or background which results in
the individual's financial sophistication, including being or having been a
chief executive officer, chief financial officer or other senior officer with
financial oversight responsibilities.
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<PAGE>
ARTICLE III
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The Company's independent public accountants shall be accountable to the
Board and the Committee, and the Board and Committee shall have ultimate
authority to select, evaluate and replace the Company's independent public
accountants.
ARTICLE IV
MEETINGS
The Committee shall meet at such times and from time to time as it deems to
be appropriate, but not less than four times a year. The Committee shall report
to the Board at the first board meeting following each such Committee meeting.
The Committee may request any officer or employee of the Company or the
Company's outside counsel or independent public accountants to attend a meeting
of the Committee or to meet with any members of, or consultants to, the
Committee.
ARTICLE V
RESPONSIBILITIES
The following functions are the common recurring activities of the
Committee in carrying out its oversight function. These functions are set forth
as a guide with the understanding that the Committee may diverge from this
function as appropriate given the circumstances.
1. Review and reassess (using assessment tools available through
third parties or developed internally) the adequacy of this
Committee and its Charter not less than annually and recommend
any proposed changes to the Board for approval.
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<PAGE>
2. In accordance with Article III, hold such regular meetings as may
be necessary and such special meetings as may be called by the
Chairman of the Audit Committee or at the request of the
independent public accountants or management.
3. Review with management and the independent public accountants the
audited financial statement to be included in the Company's
Annual Report on Form 10-K (or the Annual Report to Shareholders
if distributed prior to the filing of Form 10-K), including major
issues regarding accounting and auditing principles and practices
and any related party transactions as well as the adequacy of
internal controls that could significantly affect the Company's
financial statements, and review and consider with the
independent public accountants the matters required to be
discussed by Statement on Auditing Standards ("SAS") 61.
4. Review of significant financial reporting issues and judgments
made by management and independent public accountants in
connection with the preparation of the Company's financial
statements.
5. Review with the independent public accountants the Company's
interim financial results to be included in the Company's
quarterly reports to be filed with Securities and Exchange
Commission and the matters required to be discussed by SAS 61
prior to such filing.
6. Meet periodically with management to review the Company's major
financial risk exposures and the steps management has taken to
monitor and control such exposures.
7. Review major changes to the Company's auditing and accounting
principles and practices as proposed by management and reviewed
by the independent public accountants.
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<PAGE>
8. Obtain from the independent public accountants their
recommendation regarding internal controls and other matters
relating to the accounting procedures and the books and records
of the Company and its subsidiaries and reviewing the correction
of controls deemed to be deficient. After the completion of the
audit, the Committee shall review with the independent public
accountants any problems or difficulties the auditors may have
encountered.
9. Receive periodic reports from the independent public accountants
regarding the independent public accountants' relationships
between the independent public accountants and the Company
consistent with Independence Standards Board Standard Number 1.
The Committee shall also discuss with the independent public
accountants any such disclosed relationships and their impact on
the auditor's independence. The Committee shall recommend that
the Board take appropriate action to ensure the continuing
objectivity and independence of the independent public
accountants.
10. Review the performance of the independent public accountants and
recommend to the Board the appointment or termination of the
independent public accountants and the selection of new
independent public accountants. The Committee shall also review
the fees to be paid to the independent public accountants.
11. Recommend to the Board the proposed scope of services for the
independent public accountants for each fiscal year, including a
review of the independent public accountant's risk assessment
process in establishing the scope of the examination, proposed
fees, and the reports to be rendered.
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<PAGE>
12. Review with the Company's general counsel legal matters that may
have a material impact on the financial statements, the Company's
compliance policies and any material reports or inquiries
received from regulators or governmental agencies.
13. Review the procedures established by the Company that monitor the
compliance by the Company with its loan and indenture covenants
and restrictions.
14. Prepare the report required by the rules of the Securities and
Exchange Commission, regarding the Committee, to be included in
the Company's annual proxy statement.
15. Report through its Chairman to the Board following the meetings
of the Committee.
16. Maintain minutes or other records of meetings and activities of
the Committee.
17. Conduct or authorize investigation into any matters within the
Committee's scope of responsibilities.
18. Consider such other matters in relation to the financial affairs
of the Company and its accounts, and in relation to the audit of
the Company as the Committee may, in its discretion, determine to
be advisable.
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the Company's financial statements are complete and accurate and
are in accordance with the generally accepted accounting principles. This is the
responsibility of management and the independent public accountants.
The Committee recognizes that the Company's management is responsible for
preparing the Company's financial statements, and the independent public
accountants are responsible for auditing or reviewing those financial statements
in compliance with applicable law. The Committee also recognizes that management
of the Company and the independent public accountants have more time, knowledge
-6-
<PAGE>
and more detailed information on the Company than do Committee members.
Consequently, in carrying out its oversight responsibility, the Committee will
not provide any special assurances as to the Company's financial statements or
any professional certification as to the independent public accountants' work.
In addition, it is not the duty of the Committee to conduct investigations, to
resolve disagreements, if any, between management and the independent public
accountants, or to assure compliance with laws and regulations.
-7-
<PAGE>
APPENDIX 1
AMENDMENT 2001-1
TO THE
MOTHERS WORK, INC.
AMENDED AND RESTATED STOCK OPTION PLAN
The Board of Directors of Mothers Work, Inc. (the "Company") has caused
the Mothers Work, Inc. Amended and Restated Stock Option Plan (the "Plan") to be
amended as follows, subject to the following condition, effective as of the 1st
day of January, 2001:
1. AMENDMENT. Section 5 of the Plan is deleted in its entirety and
replaced with the following:
"Section 5. STOCK SUBJECT TO THE PLAN.
Subject to this Section 5 and to the provisions of Section 8 of the
Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is One Million Four Hundred Seventy Five Thousand (1,475,000),
which amount consists of the 725,000 Shares available for grant under the Plan
prior to its 1997 amendment and restatement, an additional 500,000 Shares
authorized for grant under the amended and restated Plan effective December 9,
1997, and an additional 250,000 Shares authorized for grant under the amendment
effective as of January 1, 2001. Options may be either incentive stock options
or non-qualified stock options, as determined by the Board. If an Option expires
or becomes unexercisable for any reason without having been exercised in full,
the Shares subject to such Option shall, unless the Plan shall have been
terminated, return to the Plan and become available for future grant under the
Plan. Notwithstanding the foregoing, no individual shall receive, over the term
of the Plan, Options for more than an aggregate of Six Hundred Thousand
(600,000) Shares."
2. CONDITION. The amendment to the Plan set forth in paragraph 1 above
will only be effective upon the requisite approval of the Company's stockholders
at the Company's Annual Meeting of Stockholders on January 18, 2001.
The Plan, as amended by the foregoing change in paragraph 1 above, and
subject to the stockholder approval described in paragraph 2 above, is hereby
ratified and confirmed in all respects.
<PAGE>
APPENDIX 2
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 18, 2001, and at any adjournment or
postponement thereof.
1. Election of Directors:
[ ] F0R the nominees below [ ] WITHOLD AUTHORITY to vote for
the nominees listed below
Nominees: For a three-year term expiring at the 2004 Annual Meeting:
Dan W. Matthias and Elam M. Hitchner, III.
(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, 2001:
[ ] For [ ] Against [ ] Abstain
3. Approval of amendment to the Company's Amended and Restated Stock
Option Plan:
[ ] 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, "FOR" RATIFICATION OF
APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING SEPTEMBER 30, 2001 AND "FOR" APPROVAL OF THE AMENDMENT TO THE
RESTATED STOCK OPTION PLAN. 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
Date:
------------------------------
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.
