<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
CHICO'S FAS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[CHICO'S LOGO]
CHICO'S FAS, INC.
11215 Metro Parkway
Ft. Myers, Florida 33912
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 17, 1997
To the Stockholders of
Chico's FAS, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Chico's FAS, Inc., will be held on Tuesday, the 17th day of June, 1997, at 2:00
P.M., Local Time, at the Company's World Headquarters, 11215 Metro Parkway, Ft.
Myers, Florida for the following purposes:
1. To authorize and approve an increase in the number of members of the
Board of Directors from five members to six members through the
creation of one additional Class III director position;
2. To elect two Class I directors to each serve for a three-year term
and one Class III director to fill the newly created position and to
serve for an initial two year term;
3. To ratify the appointment of Arthur Andersen LLP as the Company's
independent certified public accountants for fiscal year 1998; and
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The close of business on April 20, 1997 has been fixed by the Board of
Directors as the record date for the determination of the stockholders entitled
to notice of and to vote at the meeting or any adjournments thereof.
Stockholders are requested to date, sign and mail the enclosed proxy promptly
in the enclosed addressed envelope. If you should be present at the meeting and
desire to vote in person, you may withdraw your proxy.
By Order of the Board of Directors,
/s/ Charles J. Kleman
---------------------------------
CHARLES J. KLEMAN, Secretary
April 28, 1997
<PAGE> 3
[CHICO'S LOGO]
CHICO'S FAS, INC.
11215 Metro Parkway
Ft. Myers, Florida 33912
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 17, 1997
To the Stockholders of April 28, 1997
Chico's FAS, Inc.:
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Chico's FAS, Inc. ("Chico's" or the
"Company"), from the holders of the Company's common stock for use at the
Annual Meeting of Stockholders and at any adjournments thereof. This meeting
will be held at 2:00 P.M., Local Time, on Tuesday, June 17, 1997 at the
Company's World Headquarters, 11215 Metro Parkway, Ft. Myers, Florida.
Any proxy given pursuant to this solicitation may be revoked by notice
in writing to the Secretary prior to the voting, by delivering a proxy bearing
a later date or by attending the Annual Meeting and voting the shares in
person. No such notice of revocation or later-dated proxy, however, will be
effective until received by the Company at or prior to the Annual Meeting.
Unless the proxy is revoked, the shares represented thereby will be voted at
the Annual Meeting or any adjournment thereof. The giving of the proxy does
not affect the right to vote in person should the stockholder attend the
meeting.
The entire cost of preparing and mailing the proxy material will be
borne by the Company. Solicitation of proxies will be made by mail, personally,
or by telephone or telegraph, by officers, directors and regular employees of
the Company. The Company will request brokerage houses and other custodians,
nominees and fiduciaries to forward soliciting material to the stockholders and
the Company will reimburse such institutions for their out-of-pocket expenses
incurred thereby.
It is important that proxies be returned promptly to avoid unnecessary
expense. Therefore, whether you plan to attend or not, you are urged,
regardless of the number of shares of stock owned, to date, sign and return the
enclosed proxy promptly.
The approximate date on which this proxy is to be mailed to
stockholders is April 28, 1997.
Shares of common stock, par value $.01 per share (the "Common Stock")
are the only outstanding voting securities of the Company.
1
<PAGE> 4
The Board of Directors in accordance with the By-Laws has fixed the
close of business on April 20, 1997, as the record date for determining the
stockholders entitled to notice of and to vote at the Annual Meeting of
Stockholders and adjournments thereof. At the close of business on such date,
the outstanding number of voting securities of the Company was 7,884,118 shares
of Common Stock, each of which is entitled to one vote. All votes will be
tabulated by employees of Chase Mellon Shareholder Services, the Company's
transfer agent for the Common Stock, whose representatives will serve as
inspectors of election. Abstentions and broker non-votes are each included in
the determination of the number of shares present but are not counted on any
matters brought before the meeting.
SECURITY OWNERSHIP
The following table sets forth, as of April 20, 1997, the number of shares of
the Company's Common Stock beneficially owned by 1)each person known to the
Company as having beneficial ownership of more than 5% of the Company's Common
Stock together with such person's address, each of its directors and nominees
to become a director, each named executive officer as defined under applicable
Securities and Exchange Commission rules and all directors and executive
officers as a group.
<TABLE>
<CAPTION>
Amount and Nature
Name of Beneficial Owner of Beneficial Percent
or Number in Group Ownership(1) of Class
------------------ ------------ --------
<S> <C> <C>
Marvin J. Gralnick . . . . . . . . . . . . 1,725,128(2) 21.8%
c/o Chico's FAS, Inc.
11215 Metro Parkway
Ft. Myers, Florida 33912
Helene B. Gralnick . . . . . . . . . . . . 1,725,128(2) 21.8%
c/o Chico's FAS, Inc.
11215 Metro Parkway
Ft. Myers, Florida 33912
Rodin, Ltd. . . . . . . . . . . . . . . . . 1,705,128(2) 21.7%
301 Congress, Suite 1900
Austin, Texas 78701
Quest Advisory Group . . . . . . . . . . . 484,000(3) 6.1%
1414 Avenue of the Americas
New York, New York 10019
Merrill Lynch & Co., Inc. . . . . . . . . . 709,133(4) 9.0%
World Financial Center, North Tower
250 Vesey Street
New York, New York 10281
The Kaufman Fund, Inc. . . . . . . . . . . 425,000(5) 5.38%
140 E. 45th Street, 43rd Floor
New York, New York 10017
Heartland Advisors, Inc. . . . . . . . . . 400,000(6) 5.1%
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
Brinson Partners, Inc. . . . . . . . . . . 489,800(7) 6.0%
209 South LaSalle
Chicago, Illinois 60604-1295
Charles J. Kleman . . . . . . . . . . . . . 344,960(8) 4.2%
Melissa J. Payner . . . . . . . . . . . . . 25,000(9) *
Scott A. Edmonds . . . . . . . . . . . . . 24,600(10) *
</TABLE>
2
<PAGE> 5
<TABLE>
<S> <C> <C>
Verna K. Gibson . . . . . . . . . . . . . . 38,000(11) *
W. Keith Schilit . . . . . . . . . . . . . 61,000(12) *
Ross E. Roeder . . . . . . . . . . . . . . _ _
John W. Burden . . . . . . . . . . . . . . _ _
All Directors and Executive Officers as a
Group (7 persons) . . . . . . . . . . . . . 2,218,688(13) 27.0%
</TABLE>
- ---------------------------------
* Less than one percent
(1) Beneficial ownership of shares, as determined in accordance with
applicable Securities and Exchange Commission rules, includes shares
as to which a person has or shares voting power and/or investment power.
Except as otherwise indicated, all shares are held of record with sole
voting and investment power.
(2) Marvin J. Gralnick and Helene B. Gralnick are husband and wife. The
number of shares shown for Marvin J. Gralnick and the number of shares
shown for Helene B. Gralnick each represent the aggregate of all shares
held by Rodin, Ltd., a Texas Limited Partnership. A limited liability
company established by Mr. Gralnick and Ms. Gralnick and of which Mr.
Gralnick and Ms. Gralnick are the sole members and managing members, is
the sole general partner of Rodin, Ltd., owning an aggregate of 1% of the
partnership interests. An irrevocable intervivos trust established by
Mr. Gralnick is one of two limited partners and owns 49.5% of the
partnership interests and a separate irrevocable intervivos trust
established by Ms. Gralnick is the other limited partner and owns the
remaining 49.5% of the partnership interests. Also includes 10,000
shares for each of Mr. Gralnick and Ms. Gralnick which are deemed to be
beneficially owned by each of them by virtue of certain stock options
that are currently exercisable or become exercisable within 60 days.
(3) This information is derived from a Schedule 13G dated February 3, 1997
filed jointly by Quest Advisory Corp. ("Quest") and Charles M. Royce.
Quest has sole voting power and sole dispositive power with respect to
all of the shares shown. Mr. Royce may be deemed to be a controlling
person of Quest and as such may be deemed to beneficially own the shares
shown. The address for Mr. Royce is 1414 Avenue of the Americas, New
York, New York 10019.
(4) This information is derived from a Schedule 13G dated February 14, 1997
filed jointly by Merrill Lynch & Co., Inc. ("Merrill Lynch"), Merrill
Lynch Group, Inc. ("ML Group"), Princeton Services, Inc. ("Princeton"),
Fund Asset Management, L.P. ("FAM"), and Merrill Lynch Special Value
Fund, Inc. ("MLSVF"). ML Group, may be deemed the beneficial owner of
704,400 (8.9%) of the shares shown. Princeton may be deemed the
beneficial owner of 706,400 (8.9%) of the shares shown. FAM may be
deemed the beneficial owner of 661,900 (8.4%) of the shares shown. MLSVF
may be deemed the beneficial owner of 661,900 (8.4%) of the shares
shown. Merrill Lynch, ML Group, Princeton, FAM and MLSVF have shared
voting and dispositive power with respect to the shares beneficially
owned by each of them. The address for ML Group is World Financial
Center, North Tower, 250 Vesey Street New York, New York 10281 and the
address for each of Princeton, FAM and MLSVF is 800 Scudders Mill Road,
Plainsboro, New Jersey 08536.
(5) This information is derived from a Schedule 13G dated December 31, 1996.
(6) This information is derived from a Schedule 13G dated February 12, 1997.
(7) This information is derived from a Schedule 13G dated February 12, 1997
filed jointly by Brinson Partners, Inc. ("BPI"), Brinson Trust Company
("BTC"), Brinson Holdings, Inc. ("BHI"), SBC Holding (USA), Inc.
("SBCUSA") and Swiss Bank Corporation ("SBC"). BTC may be deemed to be
the beneficial owner with respect to 137,695 (1.7%) of the shares
shown. BHI, SBCUSA and SBC may be deemed the beneficial owners with
respect to 489,800 (6.0%) of the shares shown. BPI, BTC, BHI, SBCUSA and
SBC have shared voting and dispositive power with respect to the shares
beneficially owned by each of them. The address of BTC and BHI is 209
South LaSalle, Chicago, Illinois 60604-1295. The address of SBC and
SBCUSA is Aeschenplatz 6 CH-4002, Basel, Switzerland.
3
<PAGE> 6
(8) Includes 1,900 shares owned by Mr. Kleman's son and 1,900 shares owned
by his daughter. In addition, includes 286,160 shares, 20,000 shares
and 15,000 shares deemed to be beneficially owned by Mr. Kleman by virtue
of stock options that are currently exercisable. Also includes 20,000
shares deemed to be beneficially owned by Mr. Kleman by virtue of
certain stock options that are currently exercisable or become
exercisable within 60 days.
(9) Ms. Payner was President and General Merchandise Manager of Chico's
until March 24, 1997 at which time she resigned from these positions in
accordance with the terms of a separation agreement. Of the shares shown
for Ms. Payner, 25,000 shares are deemed to be beneficially owned by Ms.
Payner by virtue of stock options that are currently exercisable. These
options expire on June 24, 1997 as a result of Ms. Payner's separation
arrangement.
(10) Includes 6,000 shares, 10,000 shares and 8,000 shares deemed to be
beneficially owned by Mr. Edmonds by virtue of certain stock options
that are currently exercisable or become exercisable within 60 days.
(11) Includes 8,000 shares, 3,000 shares, 10,000 shares and 10,000 shares
deemed to be beneficially owned by Ms. Gibson by virtue of certain stock
options that are currently exercisable.
(12) Includes 8,000 shares, 3,000 shares, 40,000 shares and 10,000 shares
deemed to be beneficially owned by Mr. Schilit by virtue of certain
stock options that are currently exercisable. These options expire
January 17, 1998 as a result of the expiration in June 1997 of Mr.
Schilit's term as a director.
(13) Pursuant to applicable Securities and Exchange Commission rules, the
1,725,128 shares of Common Stock deemed to be beneficially owned by
each of Marvin J. Gralnick and Helene B. Gralnick, are counted only once
for purposes of this calculation.
1. INCREASE IN THE SIZE OF THE BOARD OF DIRECTORS
The Company's Amended and Restated Articles of Incorporation provide that
the size of the Board of Directors shall consist of three to nine members, the
exact number of directors to be fixed from time to time as provided in the
Bylaws of the Company. The Bylaws of the Company provide that the number of
directors shall be fixed by the stockholders at any annual or special meeting.
The stockholders have previously fixed the number of directors at five, of
which two are Class I directors and, two are Class II directors and one is a
Class III director.
The Board of Directors believes it to be in the best interest of the
Company and the stockholders to increase the number of members of the Board of
Directors from five members to six members. In this respect, the Board of
Directors recommends that an additional Class III director seat be created
thereby increasing the size of the Board of Directors from five members to six
members (two Class I directors, two Class II directors and two Class III
directors). It is the intention of the persons named in the enclosed form of
proxy, unless otherwise directed, to vote such proxy in "FOR" the increase in
the number of members of the Board of Directors from five members to six
members.
2. ELECTION OF DIRECTORS
The current terms of the three classes of directors expire in 1997 (Class I
directors), 1998 (Class II directors) and 1999 (Class III directors).
Directors are generally elected for three-year terms.
4
<PAGE> 7
Three directors (two Class II directors and one Class III director) are
to be elected at the 1997 Annual Meeting. The Board of Directors has nominated
the following persons to stand for election at the 1997 Annual Meeting for the
three director seats:
Charles J. Kleman (Class I director - term expiring in 2000)
Ross E. Roeder (Class I director - term expiring in 2000)
John W. Burden (Class III director - term expiring in 1999)
It is the intention of the persons named in the enclosed form of proxy,
unless otherwise directed, to vote such proxy "FOR" the election of Charles J.
Kleman and Ross E. Roeder as the Class I directors of the Company and "FOR"
John W. Burden as a Class III director of the Company, each to serve for the
term described above. See "Management - Directors and Executive Officers" for
further information on such nominees. The nominees that receive a plurality of
the votes cast by the shares entitled to vote at the Annual Meeting shall be
elected as the directors.
The proposed nominees for election as directors are willing to be elected
as such. If, as a result of circumstances not now known or foreseen, the
nominees shall be unavailable or unwilling to serve as a director, proxies may
be voted for the election of such other persons as the Board of Directors may
select. The Board of Directors has no reason to believe that the nominees will
be unable or unwilling to serve.
MANAGEMENT
The following table sets forth certain information regarding the Company's
continuing executive officers, continuing directors, nominees for director and
certain other key employees.
<TABLE>
<CAPTION>
Has Served
as Director
Age Position Since
--- -------- ------------
<S> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------
Marvin J. Gralnick . . . . . . . . 62 Chief Executive Officer, President, Chairman
of the Board and Director (term expiring in 1983
1999)
Helene B. Gralnick . . . . . . . . 49 Senior Vice President - Design and Concept and
Director (term expiring in 1998) 1983
Charles J. Kleman . . . . . . . . . 46 Executive Vice President - Finance, Chief
Financial Officer, Secretary/Treasurer and
Director (term expiring in 1997) 1993
Scott A. Edmonds . . . . . . . . . 39 Senior Vice President - Operations and
Assistant Secretary
Verna K. Gibson . . . . . . . . . 52 Director (term expiring in 1998) 1993
Ross E. Roeder . . . . . . . . . . 59 Nominee for Director (term expiring in 2000)
John W. Burden . . . . . . . . . . 60 Nominee for Director (term expiring in 1999)
CERTAIN KEY EMPLOYEES
---------------------
Mori C. MacKenzie 47 Director of Stores
Richard Ransom 51 Controller
</TABLE>
5
<PAGE> 8
DIRECTORS AND EXECUTIVE OFFICERS
Marvin J. Gralnick, together with his wife, Helene B. Gralnick, founded
Chico's in December 1983. He served the Company as its Chief Executive Officer
until September 1, 1993, at which time Jeffrey J. Zwick succeeded Mr. Gralnick
in this position. In connection with the November 7, 1994 resignation of
Jeffrey J. Zwick as Chief Executive Officer, President and a director of the
Company, Mr. Gralnick and Ms. Gralnick returned to the Company on a full time
basis to head up merchandise design, marketing and image for the Company. In
February 1995, Mr. Gralnick reassumed the role of Chief Executive Officer and
in March 1997 reassumed the position of President following the departure of
Melissa Payner. In addition, Mr. Gralnick continues to serve as Chairman of
the Board and as a director. Mr. Gralnick served as President from the
Company's founding until 1990 when he became Chairman of the Board and was
given the official title of Chief Executive Officer. Mr. and Ms. Gralnick's
vision and creative talents led the development and evolution of the Company's
philosophy and the design and feel of Chico's merchandise and Chico's stores
through September 1, 1993 and since November 1994 again are leading the Company
in this regard. Mr. Gralnick also served as Chief Executive Officer and
director of Chico's International, Inc. from 1988 until it was merged into the
Company in 1992 and as Chief Executive Officer and director of Parrot Products,
Inc. from 1990 until it was dissolved in 1992.
Helene B. Gralnick was a co-founder of Chico's, together with her husband,
Marvin J. Gralnick, and has served the Company in various senior executive
capacities throughout its history. She was first elected Vice
President/Secretary in 1983. Ms. Gralnick was elected as Senior Vice
President-Merchandise Concept in 1992. In September 1993, Ms. Gralnick
stepped down from all officer positions with the Company. In connection with
the November 7, 1994 resignation of Jeffrey J. Zwick as Chief Executive
Officer, President and a director of the Company, Ms. Gralnick, together with
Mr. Gralnick, returned to the Company on a full time basis to head up
merchandise design, marketing and image for the Company. In February 1995, Ms.
Gralnick was elected as Senior Vice President - Design and Concept. In
addition, she continues to serve as a director of the Company. Ms. Gralnick
also served as a Vice President and director of Chico's International, Inc.
from 1988 until it was merged into the Company in 1992 and as Vice
President/Secretary and director of Parrot Products, Inc. from 1990 until it
was dissolved in 1992.
Charles J. Kleman has been employed by Chico's since January 1989, when he
was hired as the Company's Controller. In 1991, he was elected as Vice
President/Assistant Secretary. In 1992, Mr. Kleman was designated as the
Company's Chief Financial Officer. On September 1, 1993, he was elected to the
additional position of Secretary/Treasurer, served as Senior Vice President -
Finance from January 1, 1996 through November 1996 and effective December 3,
1996, was promoted to the position of Executive Vice President - Finance. Prior
to joining Chico's, Mr. Kleman was an independent accounting consultant in
1988, and from 1986 to 1988 Mr. Kleman was employed by Electronic Monitoring &
Controls, Inc., a manufacturer and distributor of energy management systems, as
its Vice President/Controller. Prior to 1986, Mr. Kleman was employed by
various independent certified public accounting firms, spending over four years
of that time with Arthur Andersen & Co. Mr. Kleman is responsible for
accounting, financial reporting, management information systems and personnel
administration and, on an interim basis, merchandise purchasing and planning.
Mr. Kleman also served as Vice President/Assistant Secretary of Chico's
International, Inc. from 1991 until it was merged into the Company in 1992 and
as Vice President/Assistant Secretary of Parrot Products, Inc. from 1991 until
it was dissolved in 1992.
Scott A. Edmonds has been employed by Chico's since September 1993, when he
was hired as Operations Manager. In February 1994, he was elected to the
position of Vice President - Operations and effective January 1, 1996 he was
promoted to the position of Senior Vice President - Operations. Mr. Edmonds is
responsible for store development, leasing and maintenance, franchise
operations, and management of the headquarters, woodshop, distribution center
and field operations. From March 1985 until September 1993, he was
President/General Manager of the Ft. Myers branch of Ferguson Enterprises, Inc.
and electric and plumbing wholesaler.
6
<PAGE> 9
Verna K. Gibson presently is, a consultant and a partner of Retail
Operations, Inc., a business advisory firm founded in June 1993. From
January 1991 through 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 voluntary
petition for bankruptcy protection under Chapter 11 of the Federal Bankruptcy
Code. She has over 30 years of experience in women's apparel retailing
including having served from 1985 to 1991 as President of Limited Stores, Inc.,
Cacique, Inc. and Limited Too, Inc., all of which were subsidiaries of The
Limited, Inc., a retail apparel specialty chain. Ms. Gibson also serves as a
director of The Caldor Corporation, Today's Man, Inc., Mothers Work, Inc. and
the National Retail Federation.
Ross E. Roeder is Chairman of the Board and Chief Executive Officer of MDR,
Inc., International Consulting Group. He is also currently Chairman of the
Board of Morgan-Kaufman Publishers, Inc., where he has been a director since
1986. He has also been Chairman of HTI Technologies, Inc. a manufacturer of
medical and remote sensing equipment since 1987. From 1986 until February
1993, Mr. Roeder was President and Chief Executive Officer of Federal
Construction Company. Mr. Roeder also serves as a director of Smart and Final,
Inc. Prior to 1986, he was President, Chief Executive Officer and Chief
Operating Officer of Fotomat Corp.
John W. Burden has been a consultant and partner in Retail Operations, Inc.
since November 1993. From December, 1990 to March 1993, Mr. Burden's principal
occupation was as an officer in Pelican Palms Realty Company, a real estate
sales company he owned. In 1990, he retired as the Chairman of both Federated
Department Stores, Inc., and Allied Department Stores, Inc., following a 19
year career in various merchandising positions in the Federated organization,
including as President of Burdines and Chairman of the Abraham and Strauss
Division. Prior to that time, he spent 12 years with Macy's. Mr. Burden is
also director of Danskin, Inc., Hills Stores Co. and Carson Pirie Scott, Inc..
Marvin J. Gralnick and Helene B. Gralnick are husband and wife. None of
the other executive officers or directors are related to one another.
Executive officers are elected by and serve at the discretion of the Board of
Directors.
CERTAIN KEY EMPLOYEES
Mori C. MacKenzie has been with the Company since October 1995, when she
was hired as the Director of Stores. Ms. MacKenzie is responsible for store
and field operations management, hiring and training. From January 1995 until
October 1995, Ms. MacKenzie was the Vice President of Store Operations for
Canadians Corporation. From August 1994 until December 1994, she was the Vice
President of Store Development for Goody's Family Clothing. From April 1992,
until August 1994, Ms. MacKenzie was the Vice President of Stores for United
Retail Group ("URG") and from August 1991 until April 1992 she was employed by
Conston Corp., a predecessor of URG. In addition, Ms. MacKenzie was Vice
President-Stores for Park Lane from November 1987 until July 1991, and was
Regional Director of Stores for the Limited, Inc. from June 1976 until October
1987. The current term of Ms. MacKenzie's Employment Agreement with the
Company expires in October, 1997.
Richard Ransom has been with the Company since March 1995, when he was
hired as the Controller. Mr. Ransom is responsible for accounting and payroll
administration. From July 1994 until November 1994, Mr. Ransom was Controller
for Lurias and from March 1992 until July 1994 was Assistant Controller for
Office Depot. From 1988 until 1992, he was Assistant Vice President, Store and
General Accounting for T.J. Maxx and from 1973 until 1988 he was Assistant Vice
President, Assistant Controller and in charge of Merchandise Accounting for
Zaire Corporation.
7
<PAGE> 10
MEETINGS OF THE BOARD OF DIRECTORS AND STANDING COMMITTEES
The Board of Directors held four meetings during fiscal 1997. In fiscal
1997, each incumbent Director attended at least 75% of the total number of
Board and Committee meetings.
The Board of Directors has a standing Audit Committee and Compensation and
Benefits Committee but does not have a Nominating Committee. The Board of
Directors functions as a Nominating Committee, and the Board will consider
written recommendations from stockholders for positions on the Board of
Directors in accordance with the procedures set forth in the Amended and
Restated Articles of Incorporation of the Company. See - "Stockholder
Proposals for Presentation at the 1998 Annual Meeting" for further information.
The current members of the Audit Committee are Ms. Gibson and Mr. Schilit.
It is anticipated that Ross E. Roeder and John W. Burden, if elected as a
Director will be appointed to the Audit Committee. The Audit Committee held
three meetings during fiscal 1997. The Audit Committee's principal
responsibilities are to recommend annually a firm of independent auditors to
the Board of Directors, to review the annual audit of the Company's financial
statements and to meet with the independent auditors of the Company from time
to time in order to review the Company's internal controls and financial
management practices.
The current members of the Compensation and Benefits Committee are Ms.
Gibson and Mr. Schilit. It is anticipated that Ross E. Roeder and John W.
Burden, if elected as directors, will be appointed to the Compensation and
Benefits Committee. The Compensation and Benefits Committee held three meetings
during fiscal 1997. The principal responsibilities of the Compensation and
Benefits Committee are to review and make recommendations to the Board of
Directors concerning the compensation of all officers of the Company; to review
and make recommendations with respect to the Company's existing and proposed
compensation plans, to serve as the committee responsible for administering the
Company's 1992 Stock Option Plan, the Company's 1993 Stock Option Plan and the
Company's 1993 Employee Stock Purchase Plan.
COMPENSATION OF DIRECTORS
Nonemployee directors receive $10,000 per year plus $500 for each Board
meeting attended and $500 for each committee meeting physically attended that
does not otherwise coincide with a Board meeting. All directors receive
reimbursement of reasonable out-of-pocket expenses incurred in connection with
meetings of the Board of Directors or committees thereof.
On April 5, 1993 and April 1, 1994, Ms. Gibson and Mr. Schilit were each
granted options to acquire 8,000 and 3,000 shares of Common Stock,
respectively, at $8.38 per share and $8.75 per share, respectively (the options
for 8,000 shares are adjusted to reflect the effect of the Company's two for
one stock split declared in December 1993). In addition, on May 1, 1995 and
May 1, 1996, Ms. Gibson was granted options to acquire 10,000 shares and
10,000 shares of Common Stock, respectively, at $5.50 and $7.00, respectively,
and Mr. Schilit was granted options to acquire 40,000 shares and 10,000 shares
of Common Stock, respectively, at $5.50 and $7.00, respectively. All of the
options are fully exercisable. The options for Mr. Schilit will expire on
January 17, 1998 as a result of the expiration in June 1997 of Mr. Schilit's
term as a director.
8
<PAGE> 11
COMPENSATION COMMITTEE REPORT
To: The Board of Directors
OVERVIEW AND PHILOSOPHY
The Compensation Committee of the Board of Directors (the "Compensation
Committee") is composed of two members, each of whom is an outside director of
the Company. The Compensation Committee provides overall guidance on the
Company's compensation and benefits philosophy. In addition, the Committee
approves and monitors the Company's
# executive compensation and benefits programs
# executive employment agreements
# stock option plan
# profit sharing plan
# stock purchase plan
The primary objectives of the Compensation Committee are to assure that the
Company's executive compensation and benefits program
# reflects the Company's unique, entrepreneurial, customer-focused,
orientation
# is competitive with other profitable, growing specialty retail
companies
# safeguards the interests of the company and its Stockholders
# is effective in driving performance to achieve financial goals and
create Stockholder value
# fosters teamwork on the part of management
# is cost-effective and fair to employees, management, and
stockholders
# is well communicated and understood by program participants
The Company's executive compensation policies are designated to attract,
motivate, and retain highly qualified executive officers who can enhance
Stockholder value, and to support a performance-oriented environment that
rewards achievement of the Company's planned financial goals. The Compensation
Committee meets periodically during each fiscal year to review the Company's
existing compensation and benefits programs and to consider modifications that
seek to provide a direct relationship between executive compensation and
sustained corporate performance.
The Company compensates its executive officers through three principal
types of compensation: annual base salary, annual incentive bonuses and
long-term incentive award through stock options. The Company, as a matter of
policy, places substantial emphasis on incentive bonuses and long-term stock
options since these two forms of compensation are viewed as very effective at
correlating executive officer compensation with corporate performance and
increases in stockholder value.
In addition to the three types of compensation just mentioned, certain
executive officers are eligible to participate in the Company's Employee Stock
Purchase Plan.
BASE SALARY
The annual base salary of each executive officer is based on the scope of
his or her responsibility and accountability within the Company, as well as on
performance and experience criteria. In addition, the Compensation Committee
considers salary and other compensation arrangements of other speciality
retailers of similar size and similar growth to determine appropriate levels
required to attract, motivate, and retain the most qualified management
personnel.
9
<PAGE> 12
The Compensation Committee believes that the Company's most direct
competitors for executive talent are not necessarily all of the companies that
would be included in a peer group established to compare Stockholder returns.
Thus, the compensation Peer Group is not the same as the peer group index in
the "Comparison of Cumulative Total Return for Initial Period" graph included
in this proxy statement.
The Compensation Committee, upon the recommendation by the Chief Executive
Officer, determines and makes final decisions regarding base salary of
executives on an annual basis. The Compensation Committee recognizes that, to
some degree, the determination of an executive officer's base salary involves
subjective considerations.
INCENTIVE BONUSES
A significant component of an executive officer's total cash compensation
consists of an incentive bonus, which is intended to make the executive
compensation dependent on the Company's performance and to provide executive
officers with incentives to achieve Company goals, increase Stockholder value,
and work as a team. The bonuses are based on the Company's achievement of its
targeted pre-tax income goal, which is part of the Company's overall plan. The
pre-tax income goal, as well as the overall plan, is reviewed and approved by
the Compensation Committee prior to the start of each bi-annual period. To
encourage high levels of performance, the targeted pre-tax income goal is
established at a level which builds in, among other things, a conservatively
aggressive growth in sales and comparable store sales.
Bonuses are awarded to the executive team based on the Company's attainment
of specific pre-determined pre-tax income levels relative to the targeted
pre-tax income goal established in the Company's overall plan. If the Company
does not match its minimum pre-tax income goal level, then no bonuses are
awarded. Through the end of 1995, bonuses were awarded on a quarterly basis.
Beginning in 1996, bonuses have been awarded on a bi-annual basis. The
executive team received a total of approximately $274,000 in fiscal 1997 ended
February 1, 1997.
LONG TERM STOCK OPTION COMPENSATION
The Compensation Committee believes that providing key employees, including
executive officers, with the opportunity to acquire stock ownership over time
is the most desirable way to align their interests with those of the Company's
Stockholders. Stock options, awarded under the Company's 1992 and 1993 Stock
Option Plans and in some limited cases outside of the plans pursuant to
separate individual stock option agreements, provide an incentive that focuses
the attention of executive officers on managing the Company from the
perspective of an owner with an equity interest in the business. In addition,
stock options are a key part of the Company's program for motivating and
rewarding managers over the long term. Stock options granted to key employees
are tied to future performance of the Company's stock and will provide value
only when the price of the Company's stock exceeds the option grant price.
The Compensation Committee, upon the recommendation by the Chief Executive
Officer, determines and makes final decisions regarding stock option awards
made under the Company's plan. Such factors as performance and
responsibilities of individual managers and the management team as a whole as
well as general industry practices play an integral role in the determination
of the number of options awarded to a particular senior executive. In
determining the size of the individual award of options, the Compensation
Committee also considers the amounts of options outstanding and previously
granted, the amount of options remaining available for grant under the Stock
Option Plans, the aggregate amount of current awards, and the amount necessary
to retain qualified manager.
In accordance with its business strategy and compensation philosophy, the
Company has granted stock options to a significant number of employees in
managerial positions to afford them an opportunity to
10
<PAGE> 13
participate in the Company's future growth and to focus them on the
contributions which are necessary for the financial success and business growth
of the Company and, thereby, the creation of value for its Stockholders. In
fiscal 1997 ended February 1, 1997, a total of 329,300 options were granted,
including 221,000 options which were awarded to senior executives.
Stock options are typically awarded each year based on an assessment of
each recipient's ongoing contribution to overall corporate performance. As a
means to encourage a stock option recipient to remain in service with the
company, stock option awards vest over time, in equal amounts over a period of
three years from the date of grant. All stock options have exercise prices at
least equal to the market value of the Company's stock on the date of grant.
PROFIT SHARING PLAN AND STOCK PURCHASE PLAN FOR EMPLOYEES
In 1992, the Company adopted a profit sharing plan to provide a means for
all eligible employees at all levels of the Company to share in the Company's
profits and accumulate retirement savings. The Company's contribution to the
profit sharing plan for each year is determined by the discretion of the
Company's Board of Directors. Contributions to the profit sharing plan are
made out of the Company's profits to reward employees for their collective
efforts in producing profits, based on the amount it deemed appropriate in
light of the results of the Company's operations for the year. In fiscal 1997,
the Company accrued a contribution of $175,000 to its profit sharing plan,
which amounted to 5.4% of its pre-tax profits for fiscal 1997.
In 1993, the Company adopted a stock purchase plan to provide all eligible
employees at all levels an opportunity to become Stockholders of the Company.
This plan is viewed as an effective way to help align the interest of all
employees with those of the Company's Stockholders. As an inducement, eligible
employees may purchase shares of stock in the Company at a 15% discount to the
value of the stock established during the exercise period.
FISCAL 1997 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
The general policies described above for the compensation of the executive
officers also apply to the compensation approved by the Compensation Committee
with respect to the fiscal 1997 compensation for Mr. Gralnick, the Company's
Chairman of the Board and Chief Executive Officer, who re-joined the Company in
an active capacity in November, 1994, following the resignation of Jeffrey J.
Zwick, the former President and Chief Executive Officer. Mr. Gralnick, a co-
founder of the Company, had been the Chief Executive Officer of the Company
until September 1, 1993, at which time he resigned his position as Chief
Executive Officer, but continued to serve as Chairman of the Board. He assumed
the position of Chief Executive Officer again on April 1, 1995, while
continuing on as Chairman of the board.
Mr. Gralnick's base salary was $200,000 in fiscal 1997, which was the same
as his base salary has been since April 1995. In fiscal, 1997, Mr. Gralnick
also received a bonus of $56,000 in fiscal 1997, as a result of the Company
having reached certain targeted performance incentive goals. Although the
other members of the senior management team were awarded stock options in
fiscal 1997, due to Mr. Gralnick's substantial ownership position in the
Company, it was agreed that it was not necessary to award him any additional
options to purchase shares of stock in the Company.
Mr. Gralnick's compensation was based on industry comparisons as well as on
the Company's performance over the most recent years, as reflected in the
Company's Annual Report to Stockholders which accompanies this proxy statement.
In addition, the Company engaged the services of an independent executive
compensation firm to assess the compensation package of Mr. Gralnick and of the
other members of the senior management team. The compensation firm considered
the nature and scope of each manager's responsibilities relative to comparable
companies in analyzing management compensation.
11
<PAGE> 14
Under the leadership of Mr. Gralnick and the rest of the management team,
total revenues for Chico's increased from approximately $16 million in 1990 to
approximately $64 million in fiscal 1997. Between 1990 and fiscal 1997,
pre-tax income grew from a loss of approximately $289,000 to a profit of $3.2
million, and net income grew from a loss of $186,000 to a profit of $1.9
million, or $.24 per share. Although over the long term, the Company's growth
in revenues and net income has been strong, Chico's like several other
retailers, has had periodic setbacks in its performance, which have
necessitated that the Company take steps aimed at restoring a stronger
performance. Recently, the Company has experienced such a setback and has,
consequently, developed an appropriate plan to realign management
responsibilities and to reorient the Company. The Board of Directors monitors
the implementation of these plans and attempts to incorporate such information
into compensation packages awarded to senior management.
This report has been provided by the Compensation Committee.
COMPENSATION AND BENEFITS COMMITTEE:
Verna K. Gibson
W. Keith Schilit
12
<PAGE> 15
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Company's
Common Stock with the cumulative total return of the companies in the Standard
& Poor's 500 Index and the S&P 500 Retail Stores-Specialty-Apparel Industry
Index. Cumulative total return for each of the periods shown in the
Performance Graph is measured assuming an initial investment of $100 on March
24, 1993, the date of the Company's initial public offering, and the
reinvestment of dividends. The performance graph reflects the change in the
Company's year end from the Sunday closest to December 31 to the Saturday
closest to January 31.
COMPARISON OF CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
March 24, January 29, January 28, February 3, February 1,
1993 1994 1995 1996 1997
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CHICO'S 100.00 226.79 100.00 58.93 57.14
S&P 500 INDEX 100.00 109.35 110.45 152.54 192.33
RETAIL SPECIALTY APPAREL 100.00 97.70 80.25 95.36 119.01
</TABLE>
13
<PAGE> 16
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides information concerning the annual compensation
of each of the named executive officers of the Company, as defined under
applicable Securities and Exchange Commission Rule, for services rendered to
the Company in each of the Company's last three fiscal years.
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation(1) Awards
---------------------- ------
Securities
Name and Fiscal Year Underlying All Other Com-
Principal Position Ended (2) Salary($ Bonus(3)($) Options/#) pensation($)(4)
- ------------------ --------- -------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Marvin J. Gralnick, February 1, 1997 203,846 56,000 (5) 2,794
Chairman of the Board, December 31, 1995 200,000 -0- 15,000 1,306
Chief Executive Officer January 1, 1995 109,239 -0- (5) 2,379
Melissa J. Payner February 1, 1997 265,575 102,500 125,000 3,396
President/General Merchandise December 31, 1995 95,192 -0- 75,000 -0-
Manager(6) January 1, 1995
Helene B. Gralnick, February 1, 1997 44,231 13,020 (5) 602
Senior Vice President - December 31, 1995 100,000 -0- 15,000 653
Design and Concept January 1, 1995 11,538 63,750 (5) -0-
Charles J. Kleman, February 1, 1997 191,106 39,375 30,000 3,396
Executive Vice President - December 31, 1995 150,000 -0- 15,000 1,958
Finance and Chief Financial January 1, 1995 149,037 25,000 15,000 3,199
Officer
Scott A. Edmonds, February 1, 1997 152,885 31,500 24,000 3,396
Senior Vice President - December 31, 1995 114,904 -0- 15,000 1,500
Operations January 1, 1995 107,423 -0- 6,000 2,419
</TABLE>
- ---------------------------
(1) Other Annual Compensation, other than salary and bonuses, does not exceed
the minimum amounts required to be reported pursuant to Securities and
Exchange Commission Rules.
(2) For the year ended February 1, 1997, reflects the change in the Company's
fiscal year from the Sunday closest to December 31 to the Saturday closest
to January 31. Compensation paid for the interim period January 1, 1996 to
January 28, 1996, which was created as a result of the change in fiscal
year, is not shown in the table. Such compensation was primarily salary and
was paid on a basis consistent with compensation paid for prior fiscal
years.
(3) Amounts in this column consist of certain bonuses including bonuses earned
under the annual management incentive plan which is keyed to the Company's
performance and a one time special bonus awarded in June, 1996. Amounts
earned with respect to a particular fiscal year are accrued as expenses in
such fiscal year.
(4) This category includes the Company's matching contributions to the Profit
Sharing Plan.
(5) Not applicable. No compensation of this type received.
(6) Ms. Payner was employed by the Company beginning in July 1995. On March
24, 1997, Ms. Payner resigned as President/General Merchandise Manager. In
connection with Ms. Payner's resignation, Mr. Gralnick has reassumed the
role of President.
14
<PAGE> 17
OPTION/SAR GRANTS TABLE
The following table shows information concerning stock options granted
during fiscal 1997 for the individuals shown in the Summary Compensation Table.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
---------------------------------
Individual Grants Potential Realizable Value at
----------------- Assumed Annual Rates of Stock
Price Appreciation for Option Term
----------------------------------
Number of % of Total
Securities Options Exercise
Underlying Granted to or Base
Options Employees in Price Expiration
Name Granted(#)(1) Fiscal Year ($/sh) Date 5%($) 10%($)
---- ------------ ------------- ------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Marvin J. Gralnick -- -- -- -- -- --
Melissa J. Payner 125,000 38.0% 7.00 5/1/2006 550,283 1,394,525
Helene B. Gralnick -- -- -- -- -- --
Charles J. Kleman 30,000 9.1% 7.00 5/1/2006 132,068 334,686
Scott A. Edmonds 24,000 7.3% 7.00 5/1/2006 105,654 267,749
</TABLE>
- ----------------------
(1) The grants of options above were made in May 1996. All of the options vest
annually at a rate of 33-1/3% on each anniversary date of the grant
beginning on the first anniversary.
OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
No stock options were exercised by any of the Company's executive officers
during fiscal 1997. The following table shows information concerning stock
option values as of the end of fiscal 1997.
<TABLE>
<CAPTION>
Aggregated Fiscal Year-End Option Values
----------------------------------------
Number of Securities Underlying Value of Unexercised
Unexercised In-the-Money Options
Options at Fiscal Year-End(#) at Fiscal Year-End ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable(1)
---- ------------------------- -------------------------
<S> <C> <C>
Marvin J. Gralnick 5,000/10,000 -0-/-0-
Melissa Payner (2) 25,000/175,000 -0-/-0-
Helene B. Gralnick 5,000/10,000 -0-/-0-
Charles J. Kleman 326,160/40,000 -0-/-0-
Scott A. Edmonds 2,000/19,000 -0-/-0-
</TABLE>
- --------------------------
(1) This represents the excess of the fair market value of the Company's Common
Stock of $4.00 per share as of February 1, 1997, above the exercise price
of the options.
(2) Under the terms of Ms. Payner's Separation Agreement with the Company
entered into as of March 24, 1997, the 175,000 unexercisable options will
not vest and the 25,000 exercisable options will expire on June 24, 1997 if
not exercised before that date.
15
<PAGE> 18
EMPLOYMENT AGREEMENTS
Effective February 15, 1995, the Company entered into new employment
agreements with Mr. Gralnick and Ms. Gralnick which each provide for an annual
base salary and certain other benefits. Pursuant to the employment agreements,
the 1995 annualized base salaries of Mr. Gralnick and Ms. Gralnick were
$200,000 and $100,000, respectively, subject in each case to annual increases
as agreed upon between the executive and the Board of Directors (currently
$200,000 and $100,000, respectively). Under the terms of the employment
agreements, the Company contracted to employ Mr. Gralnick and Ms. Gralnick for
a period which currently extends through December 31, 1997, and which period,
by the terms of the agreement is automatically extended for additional one year
periods until the respective employment agreement is terminated by the Company
or the executive.
Effective April 1, 1993, the Company entered into an employment agreement
with Mr. Kleman which provides for an annual base salary and certain other
benefits. Pursuant to the employment agreement and certain further actions of
the Board of Directors, the 1996 base salary of Mr. Kleman was $150,000 subject
to annual increases thereafter as agreed upon between Mr. Kleman and the Board
of Directors (currently $187,500). Under the terms of the employment
agreement, the Company contracted to employ Mr. Kleman for a period which
currently extends through December 31, 1997, and which period, by the terms of
the agreement is automatically extended for additional one year periods until
the employment agreement is terminated by the Company or Mr. Kleman.
Effective, June 28, 1995, the Company entered into an employment agreement
with Mr. Edmonds which provides for an annual base salary and certain other
benefits. Pursuant to the employment agreement, the initial base salary of Mr.
Edmonds was $125,000 subject to annual increases thereafter as agreed upon
between Mr. Edmonds and the Board of Directors (currently $150,000). Under the
terms of Mr. Edmonds employment agreement, the Company contracted to employ Mr.
Edmonds for a period which currently extends through December 31, 1997, and
which period, by the terms of the agreement, is automatically extended for
additional one year periods until the employment agreement is terminated by the
Company or Mr. Edmonds.
The employment agreements provide that Messrs. Gralnick, Kleman and Edmonds
and Mrs. Gralnick are entitled to certain severance benefits in the event that
their employment is terminated by the Company "without cause" or by such
executive following a "change of control" (both as defined in the employment
agreements). In such cases, the executive would receive his or her salary for
the remainder of the then effective employment term (or, if longer, for 6
months, if the termination is without cause, and for 12 months, if the
termination follows a change in control). Each employment agreement is also
subject to termination in the event of disability, death or voluntary
retirement by the individual or his or her termination for cause. Each
employment agreement provides for a covenant not to compete which is to
continue for two years following any termination.
On March 24, 1997, Melissa Payner resigned as President and General
Merchandise Manager. In connection with her resignation, Ms. Payner entered
into a Separation Agreement with the Company. Under the terms of the
Separation Agreement, Ms. Payner, as severance pay and in consideration of
consulting services to be provided to the Company through June 24, 1997,
received approximately $239,000. In addition, Ms. Payner's Separation
Agreement provided for the Company to pay the premium cost for COBRA coverage
with respect to health and dental insurance coverage through the earlier of the
date Ms. Payner becomes employed by another business or December 31, 1997. The
Separation Agreement also provides that all unvested options are forfeited and
with respect to those options currently exercisable, the period for exercise
shall expire on June 24, 1997. The Separation Agreement also relieved Ms.
Payner of the noncompetition restrictions contained in her Employment Agreement
but retains for a two year nonsolicitation with respect to the employees of the
Company.
16
<PAGE> 19
The Company has entered into substantially identical indemnification
agreements with each of the Company's executive officers and directors in which
the Company has agreed to indemnify each executive officer and director (the
"Indemnified Party") against all losses, costs and expenses that an Indemnified
Party may incur as a result of or arising out of service as an officer or
director of the Company. Among its provisions, each indemnity agreement affords
the Indemnified Party the right to counsel of his or her choosing and obligates
the Company to advance the reasonable fees and expenses of such counsel on
behalf of the Indemnified Party. The indemnification agreements provide there
is to be no indemnification and require the repayment to the Company of any
advanced funds in situations where indemnification is not permitted by
applicable law.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Company's Compensation and Benefits Committee
which was created in June 1993, are Verna K. Gibson and W. Keith Schilit.
Neither Ms. Gibson nor Mr. Schilit has at any time been an officer or employee
of the Company. It is anticipated that Ross E. Roeder and John W. Burden, if
elected as directors, will be appointed to the Company's Compensation and
Benefits Committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
S CORPORATION MATTERS
On February 10, 1993, the Company and Marvin J. Gralnick, Barry E.
Szumlanski, Lynn D. Mann, Jeffrey J. Zwick and Helene B. Gralnick (the "S
Corporation Stockholders") entered into an S Corporation Tax Allocation and
Indemnification Agreement (the "Tax Agreement") relating to their respective
income tax liabilities. Because the Company became fully subject to corporate
income taxation after the consummation of the Company's initial public
offering, any reallocation of income and deductions between the period during
which the Company was treated as an S Corporation and the period during which
the Company is subject to corporate income taxation may increase the taxable
income of one party while decreasing that of another party. Accordingly, the
Tax Agreement is intended to assure that taxes are borne by the Company and the
S Corporation Stockholders to the extent that such parties were required to
report the related income for tax purposes. Subject to certain limitations,
the Tax Agreement generally provides that the S Corporation Stockholders will
be indemnified by the Company with respect to federal and state income taxes
(plus interest and penalties) shifted from a Company taxable year subsequent to
the consummation of the Company's initial public offering to a taxable year in
which the Company was an S Corporation, and the Company will be indemnified by
the S Corporation Stockholders with respect to federal and state income taxes
shifted from an S Corporation taxable year to a Company taxable year subsequent
to the consummation of the Company's initial public offering. Any payment made
by the Company to the S Corporation Stockholders pursuant to the Tax Agreement
may be considered by the Internal Revenue Service or the state taxing
authorities to be nondeductible by the Company for income tax purposes. No
payments were made under the Tax Agreement during fiscal 1997.
LEASES OF DISTRIBUTION CENTER AND STORAGE FACILITIES
Prior to the completion and opening of the Company's World Headquarters in
September 1994, the Company utilized certain leased property and facilities as
its distribution center and for storage purposes. The property and facilities
that the Company utilized as its prior distribution center (the "Distribution
Facilities") were leased until August, 1996, from a Florida general partnership
(GS&M #1) in which Marvin J. Gralnick and Barry E. Szumlanski are each equal
partners with Lynn D. Mann. An existing facility that the Company used for
storage is currently leased from a separate Florida general partnership (GS&M
#2) in which Marvin J. Gralnick, Helene B. Gralnick and Barry E. Szumlanski are
equal partners with Lynn D. Mann.
17
<PAGE> 20
In June 1996, GS&M#1 entered into a separate lease agreement with an
unrelated third party (the "New Lease") to lease the Distribution Facilities
and as a result released the Company from its existing lease with
GS&M#1 pursuant to the terms of a Lease Termination and Settlement Agreement.
The terms of the Lease Termination and Settlement Agreement provide that the
Company will pay to GS&M#1, (a) until the date January 31, 1998, (the date on
which the lease with the Company was scheduled to expire) the difference
between the lease payments due under the GS&M#1 lease and the New Lease, (b)
the real estate broker commissions payable by GS&M#1 as a result of entering
into the New Lease, (c) all real estate taxes imposed against the Distribution
Facilities until January 31, 1998 and (d) the cost of certain inspections and
repairs required under the New Lease. In addition, under the Lease and
Termination Agreement, the Company has agreed until January 31, 1998 to
unconditionally guarantee the payments due by the unrelated third party tenant
under the New Lease. Because of expense accruals previously reflected, no
additional expense is anticipated to be recognized by the Company.
Under the GS&M#1 lease the Company was obligated until August, 1996, and
under the GS&M#2 lease the Company continues to be obligated, to pay all of the
rent and costs associated with owning and operating the respective facility,
including utilities, taxes and insurance. The Company continues to pay these
same costs with respect to GS&M#2 even though the facility is no longer being
actively utilized by the Company. Although believed to be at fair market
rental at the time the leases were entered into, the rent paid under these
leases in fiscal 1997, and currently being paid under the GS&M#2 lease, is at a
rate which is significantly above market rates for similar property. In fiscal
1997, the Company paid as rent under the GS&M #1 lease (exclusive of the
passed-through costs) and under the terms of the Lease Termination and
Settlement Agreement an aggregate of approximately $117,000 and paid as rent to
GS&M#2 (exclusive of the passed-through costs) approximately $55,000. The
GS&M#2 lease has a ten year term which commenced December 1, 1988. As a
result of the completion and operation of its new World Headquarters (which
provides combined corporate headquarters, distribution center and woodshop
facilities), the Company no longer has a need for the facility leased under
GS&M#2. The Company has continued to explore alternative courses of action with
respect to the GS&M#2 lease, focusing on subleasing the property to an
unrelated third party. Although attempts have been made to negotiate a
sublease for the GS&M#2 lease with several potential subtenants, such
negotiations have not led to any a final lease agreement.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
To the Company's knowledge, based solely on a review of the forms, reports
and certificates filed with the Company by the Company's directors and officers
and the holders of more than 10% of the Company's Common Stock, all Section
16(a) filing requirements were complied with by such persons in fiscal 1996
except that a report on Form 3 was filed late by each of Klee & Company,
L.L.C., Camus & Company, L.L.C., and Rodin, Ltd., and reports on Form 4 were
filed late by each of Marvin J. Gralnick, Helene B. Gralnick, Klee & Company,
L.L.C., Camus & Company, L.L.C., Captiva, Ltd., and Sartre Partners, Ltd.
3. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS.
The firm of Arthur Andersen LLP has been the Company's independent
certified public accountants since September 1991. Arthur Andersen LLP has
been recommended by the Audit Committee and approved by the Board of Directors
as the Company's independent certified public accountants for the year ending
January 31, 1998, subject to ratification of such appointment by the
stockholders. Representatives of Arthur Andersen LLP are expected to be
present at the Annual Meeting of Stockholders with the opportunity to make a
statement if they desire to do so and such representatives are expected to be
available to respond to appropriate questions by stockholders. Ratification of
the Company's independent certified public accountants is not required by the
Company's By-Laws or otherwise, but the Board of Directors has decided to seek
such ratification as a matter of good corporate practice.
The Board recommends that you vote "FOR" ratification of the appointment of
Arthur Andersen LLP as independent certified public accountants for the period
specified. If the stockholders do not ratify this appointment, other certified
public accountants will be considered by the directors upon recommendations of
the Audit Committee.
18
<PAGE> 21
OTHER BUSINESS
It is not expected that any other matters are likely to be brought before
the meeting. However, if any other matters are presented, it is the intention
of the persons named in the proxy to vote the proxy in accordance with their
best judgment.
STOCKHOLDER PROPOSALS FOR PRESENTATIONS AT THE 1998 ANNUAL MEETING
Pursuant to the General Rules under the Securities Exchange Act of 1934,
proposals of stockholders intended to be presented at the 1998 Annual Meeting
of Stockholders must be received by management of the Company at its executive
offices on or before December 28, 1997.
The Company's Amended and Restated Articles of Incorporation also require
certain advance notice to the Company of any stockholder proposal and of any
nominations by stockholders of persons to stand for election as directors at a
stockholders' meeting. Notice of stockholder proposals and of director
nominations must be timely given in writing to the Secretary of the Company
prior to the meeting at which the directors are to be elected. To be timely,
notice must be received at the principal executive offices of the Company not
less than 60 days prior to the meeting of stockholders; provided, however, that
in the event that less than 70 days' notice prior to public disclosure of the
date of the meeting is given or made to the stockholders, notice by the
stockholder, in order to be timely, must be so delivered or received not later
than the close of business on the tenth day following the day on which such
notice of the date of the annual meeting was mailed or public disclosure of the
date of the annual meeting was made, whichever first occurs.
A stockholder's notice with respect to a proposal to be brought before the
annual meeting must set forth in addition to the mattes required to be set
forth by the General Rules under the Securities Exchange Act of 1934; (a) a
brief description of the proposal and the reasons for conducting such business
at the annual meeting, (b) the name and address, as they appear on the
Company's books, of the stockholder proposing such business and any other
stockholders known by such stockholder to be supporting such proposal, (c) the
class and number of shares of the Company which are beneficially owned by such
stockholder on the date of such stockholder notice and by any other
stockholders known by such stockholder to be supporting such proposal on the
date of such stockholder notice, and (d) any financial interest of the
stockholder in such proposal.
A stockholder's notice with respect to a director nomination must set 1) the
name, age, business address and residence address of the person, 2) the
principal occupation or employment of the person, 3) the class and number of
shares of the Company which are beneficially owned by such person, 4) all
information that would be required to be included in a proxy statement
soliciting proxies for the election of the nominee director (including such
person's written consent to serve as a director if so elected) and (b) as to
the stockholder providing such notice (i) the name and address, as they appear
on the Company's books, of the stockholder and (ii) the class and number of
shares of the Company which are beneficially owned by such stockholder on the
date of such stockholder notice.
The complete Amended and Restated Articles of Incorporation provisions
governing these requirements are available to any stockholder without charge
upon request from the Secretary of the Company.
By Order of the Board of Directors,
/s/ Charles J. Kleman
---------------------------------
CHARLES J. KLEMAN, Secretary
Dated: April 28, 1997
19
<PAGE> 22
APPENDIX
CHICO'S FAS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 17, 1997
The undersigned, a stockholder of CHICO'S FAS, INC. (the "Company"),
does hereby appoint Marvin J. Gralnick, Charles J. Kleman and Verna K. Gibson
and each of them acting individually, as the attorneys and proxies of the
undersigned, with power of substitution, for and on behalf of the undersigned,
to attend the Annual Meeting of Stockholders of the Company to be held at the
Company's World Headquarters, 11215 Metro Parkway, Ft. Myers, Florida at 2:00
P.M., local time, on June 17, 1997 and any adjournment or adjournments thereof
(the "Annual Meeting"), to represent the undersigned at the Annual Meeting, and
there to vote all the shares of Common Stock of the Company which the
undersigned is entitled to vote at the Annual Meeting, in any manner and with
the same effect as if the undersigned were personally present at the Annual
Meeting, all as described in the Company's Proxy Statement dated April 28, 1997
relating to the Annual Meeting, and the undersigned hereby authorizes and
instructs the above named proxies to vote as specified on the reverse side:
The shares represented by this Proxy will be voted only if this Proxy
is properly executed and timely returned. In that event, such shares will be
voted in the manner directed herein. IF NO DIRECTION IS MADE, THE SHARES WILL
BE VOTED FOR THE INCREASE IN THE NUMBER OF MEMBERS OF THE BOARD OF DIRECTORS,
FOR THE NOMINEES FOR DIRECTOR LISTED BELOW, FOR THE PROPOSAL TO RATIFY THE
APPOINTMENT OF THE INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS AND IN THE
DISCRETION OF THE PROXIES FOR OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE
ANNUAL MEETING.
(Continued and to be signed on reverse side)
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<PAGE> 23
The Board of Directors recommends voting FOR the following proposals:
<TABLE>
<S> <C> <C> <C>
1. TO AUTHORIZE AND APPROVE AN INCREASE IN THE NUMBER OF 2. ELECTION OF DIRECTORS. Nominees for Class I
MEMBERS OF THE BOARD OF DIRECTORS FROM FIVE MEMBERS TO Directors:
SIX MEMBERS THROUGH THE CREATION OF ONE ADDITIONAL Ross E. Roeder and
CLASS III DIRECTOR POSITION. Charles J. Kleman
Nominee for Class III
Director:
John W. Burden
FOR AGAINST ABSTAIN FOR the nominees WITHHOLD
listed above (except as AUTHORITY
marked to the contrary) To vote for all
the nominees
listed above
[ ] [ ] [ ] [ ] [ ]
3. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN 4. OTHER MATTERS. Unless a line is stricken through
LLP AS THE COMPANY'S INDEPENDENT CERTIFIED PUBLIC this sentence, the proxies herein named may in
ACCOUNTANTS FOR FISCAL YEAR 1998. their discretion vote the shares represented by
this Proxy upon such other matters as may
properly come before the Annual Meeting.
FOR AGAINST ABSTAIN
The undersigned acknowledges
[ ] [ ] [ ] receipt of (1) the Company's 1997
Annual Report to Stockholders and
(2) the Company's Notice of Annual
Meeting and Proxy Statement dated
April 28, 1997 relating to the
Annual Meeting. The undersigned
does hereby revoke any proxy
previously given with respect to
the shares represented by this
Proxy.
Date ________________ , 1997
------------------------------------
Signature
------------------------------------
Signature if held jointly
NOTE: Your signature should appear
as your name appears hereon. As to
shares held in joint names, each
joint owner should sign. If the
signer is a corporation, please
sign full corporate name by a duly
authorized officer. If a
partnership, please sign in
partnership name by an authorized
person. If signing as attorney,
executor, administrator, trustee,
guardian, or in other
representative capacity, please
give full title as such.
Please mark, sign and date this
proxy card and promptly return it
using the enclosed envelope.
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