PRELIMINARY
COPY SUBJECT TO COMPLETION
KARPREILLY
CAPITAL PARTNERS, L.P.
March __,
2009
Dear
Fellow Stockholder:
KarpReilly
Capital Partners, L.P. (“KarpReilly LP”) and the other participants in this
solicitation (collectively, the “KarpReilly Group” or “we”) are the beneficial
owners of an aggregate of 1,868,203 shares of common stock of Charlotte Russe
Holding, Inc. (“Charlotte Russe” or the “Company”), representing approximately
8.9% of the outstanding shares of common stock of the Company. For
the reasons set forth in the attached Proxy Statement, the KarpReilly Group
believes that the Board of Directors of the Company is not acting in the best
interests of its stockholders. The KarpReilly Group is therefore
seeking your support at the annual meeting of stockholders (the “Annual
Meeting”) scheduled to be held on April 28, 2009 at 9:00 a.m. local time at the
Hyatt Regency La Jolla at Aventine located at 3777 La Jolla Village Drive, San
Diego, California 92122,
for the
following:
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1.
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To
elect the KarpReilly Group’s slate of three (3) director nominees to the
Company’s Board of Directors in opposition to the Company’s incumbent
directors;
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2.
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To
approve the Charlotte Russe Holding, Inc. 2009 Equity Incentive Plan;
and
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3.
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To
ratify the selection of Ernst & Young LLP as the Company’s independent
auditors for the fiscal year ending September 26,
2009.
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We are
not seeking control of the Board of Directors. Through the attached
Proxy Statement, we are soliciting proxies to elect not only our three (3)
director nominees, but also the candidates who have been nominated by Charlotte
Russe other than Emilia Fabricant, Leonard H. Mogil and Jennifer C.
Salopek. This gives stockholders the ability to vote for the total
number of directors (seven (7)) up for election at the Annual
Meeting. The names, backgrounds and qualifications of Charlotte
Russe’s nominees, and other information about them, can be found in the
Company’s proxy statement. There is no assurance that any of
Charlotte Russe’s nominees will serve as directors if our nominees are
elected.
The
KarpReilly Group urges you to carefully consider the information contained in
the attached Proxy Statement and then support its efforts by signing, dating and
returning the enclosed
GOLD
proxy card
today.
If you
have already voted a proxy card furnished by the Company’s management, you have
every right to change your vote by signing, dating and returning a later dated
proxy.
If you
have any questions or require any assistance with your vote, please contact
Okapi Partners, which is assisting us, at its address and toll-free number
listed on the following page.
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Thank
you for your support.
|
|
|
|
Allan
W. Karp
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|
KarpReilly
Capital Partners,
L.P.
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If
you have any questions, require assistance in voting your
GOLD
proxy
card,
or
need additional copies of KarpReilly L.P.’s proxy
materials,
please
call Okapi Partners at the phone numbers listed below.
Okapi
Partners
780
Third Avenue, 30
th
Floor
New
York, NY 10017
Stockholders
Call Toll-Free at: (877) 259-6290
Banks
and Brokers Call Collect at: (212) 297-0720
info@okapipartners.com
|
2009
ANNUAL MEETING OF STOCKHOLDERS
OF
CHARLOTTE
RUSSE HOLDING, INC.
_________________________
PROXY
STATEMENT
OF
KARPREILLY
CAPITAL PARTNERS, L.P.
_________________________
PLEASE
SIGN, DATE AND MAIL THE ENCLOSED GOLD PROXY CARD TODAY
KarpReilly
Capital Partners, L.P., a Delaware limited partnership (“KarpReilly LP”),
KarpReilly GP I, LLC, a Delaware limited liability company (“KarpReilly GP”),
Allan W. Karp (“Mr. Karp”), Christopher K. Reilly (“Mr. Reilly”), William P.
Logan (“Mr. Logan”), Hezy Shaked (“Mr. Shaked”) and Gabriel Bitton (“Mr.
Bitton”) (collectively, the “KarpReilly Group”) are significant stockholders of
Charlotte Russe Holding, Inc., a Delaware corporation (“Charlotte Russe” or the
“Company”). The members of the KarpReilly Group are participants in
this solicitation. The KarpReilly Group believes that the Board of
Directors of the Company (the “Board”) is not acting in the best interests of
its stockholders. The KarpReilly Group is therefore seeking your
support at the annual meeting of stockholders scheduled to be held on April 28,
2009 at 9:00 a.m. local time at the Hyatt Regency La Jolla at Aventine located
at 3777 La Jolla Village Drive, San Diego, California 92122,
including any adjournments
or postponements thereof and any meeting which may be called in lieu thereof
(the “Annual Meeting”), for the following:
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1.
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To
elect the KarpReilly Group’s director nominees, Allan W. Karp, Hezy Shaked
and Gabriel Bitton (the “KarpReilly Nominees”), to serve as directors
until the 2010 annual meeting of stockholders and until their respective
successors shall have been elected and qualified, in opposition to the
Company’s incumbent directors whose terms expire at the Annual
Meeting;
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|
2.
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To
approve the Charlotte Russe Holding, Inc. 2009 Equity Incentive Plan;
and
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|
3.
|
To
ratify the selection of Ernst & Young LLP as the Company’s independent
auditors for the fiscal year ending September 26,
2009.
|
This
Proxy Statement is soliciting proxies to elect not only the three (3) KarpReilly
Nominees, but also the candidates who have been nominated by the Company other
than Emilia Fabricant, Leonard H. Mogil and Jennifer C. Salopek. This
gives stockholders who wish to vote for the KarpReilly Nominees the ability to
vote for seven (7) nominees in total.
As of
the date of this Proxy Statement, the members of the KarpReilly Group were the
beneficial owners of an aggregate of 1,868,203 shares of common stock of the
Company, par value $0.01 per share (the “Shares”), which currently represent
approximately 8.9% of the issued and outstanding Shares. The
KarpReilly Group is entitled to vote 1,548,174 Shares at the Annual Meeting, as
320,029 Shares were acquired after the Record Date (as defined
below).
Charlotte
Russe has set the record date for determining stockholders entitled to notice of
and to vote at the Annual Meeting as February 27, 2009 (the “Record
Date”). The mailing address of the principal executive offices of
Charlotte Russe is 4645 Morena Boulevard, San Diego, California 92117.
Stockholders of record at the close of business on the Record Date will be
entitled to vote at the Annual Meeting. According to Charlotte Russe,
as of the Record Date, there were 20,999,870 Shares outstanding and entitled to
vote at the Annual Meeting. The participants in this solicitation
intend to vote all of their Shares which they are entitled to vote (i) FOR the
election of the KarpReilly Nominees and the candidates who have been nominated
by the Company other than Emilia Fabricant, Leonard H. Mogil and Jennifer C.
Salopek, (ii) FOR the approval of the Charlotte Russe Holding, Inc. 2009 Equity
Incentive Plan, and (iii) FOR the ratification of the appointment of Ernst &
Young LLP as described herein.
This
proxy statement (this “Proxy Statement”) and the enclosed
GOLD
proxy card are first
being furnished to stockholders on or about March [___], 2009.
THIS
SOLICITATION IS BEING MADE BY THE KARPREILLY GROUP AND NOT ON BEHALF OF THE
BOARD OF DIRECTORS OR MANAGEMENT OF THE COMPANY. THE KARPREILLY GROUP
IS NOT AWARE OF ANY OTHER MATTERS TO BE BROUGHT BEFORE THE ANNUAL
MEETING. SHOULD OTHER MATTERS, WHICH THE KARPREILLY GROUP IS NOT
AWARE OF A REASONABLE TIME BEFORE THIS SOLICITATION, BE BROUGHT BEFORE THE
ANNUAL MEETING, THE PERSONS NAMED AS PROXIES IN THE ENCLOSED GOLD PROXY CARD
WILL VOTE ON SUCH MATTERS IN THEIR DISCRETION.
THE
KARPREILLY GROUP URGES YOU TO SIGN, DATE AND RETURN THE GOLD PROXY CARD IN FAVOR
OF THE ELECTION OF THE KARPREILLY NOMINEES.
IF YOU
HAVE ALREADY SENT A PROXY CARD FURNISHED BY CHARLOTTE RUSSE MANAGEMENT TO THE
COMPANY, YOU MAY REVOKE THAT PROXY AND VOTE FOR THE ELECTION OF THE KARPREILLY
NOMINEES AND THE CANDIDATES WHO HAVE BEEN NOMINATED BY THE COMPANY OTHER THAN
EMILIA FABRICANT, LEONARD H. MOGIL AND JENNIFER C. SALOPEK BY SIGNING, DATING
AND RETURNING THE ENCLOSED GOLD PROXY CARD. THE LATEST DATED PROXY IS
THE ONLY ONE THAT COUNTS. ANY PROXY MAY BE REVOKED AT ANY TIME PRIOR
TO THE ANNUAL MEETING BY DELIVERING A WRITTEN NOTICE OF REVOCATION OR A LATER
DATED PROXY FOR THE ANNUAL MEETING TO THE KARPREILLY GROUP, C/O OKAPI PARTNERS,
WHICH IS ASSISTING IN THIS SOLICITATION, OR TO THE SECRETARY OF CHARLOTTE RUSSE,
OR BY VOTING IN PERSON AT THE ANNUAL MEETING.
IMPORTANT
NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS
FOR
THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 28, 2009
The
proxy materials are available at
http://www.myproxyonline.com/okapimaterials.
IMPORTANT
Your vote
is important, no matter how few Shares you own. The KarpReilly Group
urges you to sign, date and return the enclosed GOLD proxy card today to vote
FOR the election of the KarpReilly Nominees.
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·
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If
your Shares are registered in your own name, please sign and date the
enclosed GOLD proxy card and return it to the KarpReilly Group, c/o Okapi
Partners, in the enclosed envelope
today.
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·
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If
your Shares are held in a brokerage account or bank, you are considered
the beneficial owner of the Shares, and these proxy materials, together
with a GOLD voting form, are being forwarded to you by your broker or
bank. As a beneficial owner, you must instruct your broker,
trustee or other representative how to vote. Your broker cannot
vote your Shares on your behalf without your
instructions.
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|
·
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Depending
upon your broker or custodian, you may be able to vote either by toll-free
telephone or by the Internet. Please refer to the enclosed
voting form for instructions on how to vote electronically. You
may also vote by signing, dating and returning the enclosed voting
form.
|
Since
only your latest dated proxy card will count, we urge you not to return any
proxy card you receive from the Company. Even if you return the
Company’s proxy card marked “withhold” as a protest against the incumbent
directors, it will revoke any proxy card you may have previously sent to the
KarpReilly Group. Remember, you can vote for our three nominees only
on our
GOLD
proxy
card. So please make certain that the latest dated proxy card you
return is the
GOLD
proxy
card.
If you
have any questions regarding your proxy,
or need
assistance in voting your Shares, please call:
Okapi
Partners
780
Third Avenue, 30th Floor
New
York, NY 10017
Stockholders
Call Toll-Free at: (877) 259-6290
Banks
and Brokers Call Collect at: (212) 297-0720
info@okapipartners.com
BACKGROUND
OF THE SOLICITATION
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·
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In
September 1996, Saunders Karp & Megrue Partners, LLC (“SKM”), a
private equity investment firm co-founded by Mr. Karp, acquired a 95%
interest in the Company, then a privately-owned 35-store chain operating
primarily in Southern California. Mr. Karp was the partner from
SKM responsible for the Charlotte Russe investment since its
inception.
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·
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From the time of
SKM’s acquisition of the Company until 2007 when SKM exited its
investment, the Company grew from 35 stores to over 400 stores and saw
annual revenues increase from $71 million in fiscal 1996 to $741 million
in fiscal 2007, or approximately 24% compounded annual
growth. The equity valuation of the Company grew from
approximately $18 million at the time of the acquisition to $600 million
at the time of SKM’s final
exit
.
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·
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In
October 1999, the Company completed its initial public offering of common
stock (the “IPO”). SKM remained invested as one of the
Company’s largest stockholders from 1999 to 2007, with Mr. Karp serving as
its representative on the Board during this
time.
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·
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In
February 2007, SKM sold its remaining shares in Charlotte Russe, and on
July 2, 2007, Mr. Karp resigned as a director of Charlotte Russe after
almost 11 years. The stock closed at $26.10 per Share on July
2, 2007.
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|
·
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On
November 20, 2007, representatives of KarpReilly, LLC, an affiliate of
KarpReilly LP, requested a brief, confidential due diligence period for
the purpose of making a proposal to acquire the Company. This
request was denied by the Board.
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·
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On
July 20, 2008, at the request of the Board, Mark A. Hoffman retired as
President, Chief Executive Officer and a director of the
Company. Soon after, on July 30, 2008, two other top
executives, Patricia K. Johnson, Executive Vice President and Chief
Financial Officer, and Patricia A. Shields, Executive Vice President,
General Merchandise Manager, resigned from the
Company.
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|
·
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On
July 20, 2008, Leonard H. Mogil, a member of the Board, was appointed
interim Chief Executive Officer by the Board. Mr. Mogil retired
in August 2001 from an executive position at Phillips-Van Heusen
Corporation and has no experience as a chief executive officer of a public
company or of a company similar to the Company’s
business. Effective August 14, 2008, Mr. Mogil was also named
interim Chief Financial Officer by the
Board.
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·
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On
August 13, 2008, the Board adopted a stockholder rights plan or “poison
pill.”
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·
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Between
August 4, 2008 and November 12, 2008, KarpReilly LP accumulated an
aggregate of 1,172,162 Shares.
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·
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On
November 12, 2008, KarpReilly LP submitted a non-binding, fully financed,
all cash proposal to the Board to acquire all of the outstanding Shares at
a valuation range of between $9.00 and $9.50 per Share (the “KarpReilly
Acquisition Proposal”). KarpReilly LP requested a 21-day due
diligence period to enable it to finalize its proposal. The
offer represented a premium of 31-38% over the closing price of the Shares
on November 11, 2008, the trading day prior to KarpReilly LP’s
announcement.
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|
·
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On
November 19, 2008, the Board sent a letter to KarpReilly LP denying its
request for access to due diligence materials. The Board made
no attempt to contact KarpReilly or discuss its interest in acquiring the
Company.
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·
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On
November 24, 2008, as a result of the Board’s response, KarpReilly LP
filed an amendment to its Schedule 13D announcing the withdrawal of the
KarpReilly Acquisition Proposal.
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·
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On
December 4, 2008, the Board amended the Company’s bylaws to establish
procedures that stockholders must comply with in order to be able to
nominate directors, or make other proposals, at annual and special
meetings of stockholders of the
Company.
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·
|
On
January 21, 2009, the Company announced its financial results for the
first quarter of fiscal 2009, reporting a 9.1% decrease in comparable
store sales and a net loss of $2.9 million, as compared to the $14.0
million of net income reported by the Company in the first quarter of
fiscal 2008. The Company also announced that comparable store
sales are expected to be in the negative mid- to high-single digits, and
net loss per diluted share is expected to be in the range of $0.10 to
$0.20, for its second quarter of fiscal 2009. In conjunction
with this announcement, the Company announced that the Board was engaged
in a process to evaluate strategic alternatives, including a possible sale
of the Company.
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|
·
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Immediately
prior to these announcements on January 21, 2009, the Company’s common
stock closed at $4.93 per Share, as compared to $6.89 per Share
immediately prior to the KarpReilly Acquisition
Proposal.
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·
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On
March 5, 2009, in accordance with the Company’s bylaws, Mr. Karp delivered
to the Company his notice of intention to nominate the KarpReilly Nominees
for election to the Board at the Annual
Meeting.
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|
·
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On
March 12, 2009, the Company announced that it was initiating a sale
process.
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REASONS
FOR THE SOLICITATION
The
KarpReilly Group is seeking your support for the election of the KarpReilly
Nominees. We believe the election of the KarpReilly Nominees
represents the best means for stockholders to maximize the value of their
Shares. The KarpReilly Nominees have extensive experience relevant to
the Company and to the ability to fully pursue efforts to increase stockholder
value, as further discussed in their biographical extracts below. If
elected to the Board, the KarpReilly Nominees will endeavor to use their
experience to work with the rest of the Board, oversee the Company with a goal
of implementing the strategic and operational changes espoused by the KarpReilly
Group, as well as exploring any other viable alternatives to maximize
stockholder value. There can be no assurance that these goals will be
achieved if the KarpReilly Nominees are elected.
We believe that the current
Board is not acting in the best interests of stockholders
We
believe that the Board has made a number of decisions which have resulted in a
precipitous decline in stockholder value. Most importantly, we
believe that, without a change in the Board, the current Board and executive
management will continue to erode, not create, stockholder
value.
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·
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We
believe the Board mishandled the “requested” retirement of the former
CEO.
In July 2008, the
Board requested Mark Hoffman, then the Company’s President and CEO, to
retire, without, in our view, a viable back-up plan. Ten days
later, the Company’s Chief Financial Officer and General Merchandise
Manager quit on their own accord, and issued a joint statement that they
resigned “because we do not feel comfortable with the level of
collaboration with the board of directors.” The Board named one
of its own, Leonard H. Mogil, as interim CEO and CFO, and subsequently
paid this retired apparel executive total compensation of $678,000 in
cash, stock and perquisites for what proved to be an assignment of less
than four months. This upheaval occurred right before the
critical back-to-school and holiday seasons, during which the Company
reported negative same store sales of 3.8% and 9.1% in its fourth and
first quarters, respectively. Compare these results to those of
the Company’s peer group, which averaged negative same store sales of 0.3%
and 4.9% during the comparable quarters
.
1
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·
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In response to this serious
management void, the Board hired a new team with little to no junior
fast-fashion experience
.
To replace the talented and experienced operators who left the
Company, the Board hired two executives (not including the CFO) with
minimal junior fast-fashion experience whose former companies (Mervyn’s
and babystyle) have filed for bankruptcy protection. We believe
that the combined base salary of $1.5 million that the Board agreed to pay
these two executives is in excess of the base salaries paid by the
Company’s peers. We also believe that the almost $500,000 in
signing bonuses and over 500,000 Shares in the form of stock awards given
to these two executives by the Board is inappropriate both in light of
their relevant experience and for a company of Charlotte Russe’s size and
market
value.
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1
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We have used the same peer
group selected by the Company in its latest proxy statement to measure its
compensation practices against the market: Aéropostale Inc. (NYSE: ARO),
Bebe Stores, Inc. (Nasdaq: BEBE), Buckle, Inc. (NYSE: BKE), Guess?, Inc.
(NYSE: GES), Hot Topic, Inc. (Nasdaq: HOTT), J. Crew Group, Inc. (NYSE:
JCG), Pacific Sunwear of California, Inc. (Nasdaq: PSUN), Skechers USA,
Inc. (NYSE: SKX), Tween Brands, Inc. (NYSE: TWB), Urban Outfitters, Inc.
(Nasdaq: URBN), Wet Seal, Inc. (Nasdaq: WTSLA). These results
do not include WTSLA, which has not yet reported its most recent quarterly
results.
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|
·
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We believe
the Board has wasted time and money on outside consultants to review
strategic initiatives
. The Board began its ‘strategic
review’ of the Company’s operations in January 2008 in which it retained
outside consultants to evaluate Charlotte Russe’s market position – for
almost an entire year. The Board has not disclosed who the
consulting firm was or how much
was
invested in this project, but so far the only tangible results we’ve seen
are additional marketing expenses (a brand ambassador and celebrity
stylist) and a $65 million supply agreement with a premium denim brand to
offer $88-$98 jeans alongside the Company’s otherwise value-priced
items. We believe this is a huge departure from Charlotte
Russe’s value proposition to its customers and is exactly the kind of
strategic misstep that occurs when a Board relies on consultants.
2
|
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·
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We believe
the Board has acted to entrench itself at the expense of
stockholders.
Consider the following: In
November 2007, representatives of KarpReilly, LLC requested a brief,
confidential due diligence period for the purpose of making a proposal to
acquire the Company, a request that was summarily denied by the
Board. A few months later, the Board adopted a poison
pill. On November 12, 2008, KarpReilly LP submitted a
non-binding, fully financed, all cash proposal to the Board to acquire all
of the outstanding Shares at a valuation range of between $9.00 and $9.50
per Share, and requested a 21-day due diligence period to enable it to
finalize its proposal. Without engaging in any dialogue with
KarpReilly LP, the Board rejected this request. Two weeks
later, the Board amended the Company’s bylaws to institute complex
procedures that stockholders must comply with in order to be able to
nominate directors, or make other proposals, at annual and special
meetings of stockholders of the
Company.
|
Perhaps
these entrenchment actions should come as no surprise, given the Board members’
increase of their own compensation and their minimal stock
ownership. In fiscal 2008, the Board amended its own director
compensation policy, resulting in the non-employee directors receiving between
$166,000 and $307,000 in cash and stock awards, despite the Company’s declining
performance. In addition, the seven current directors own only 35,750
Shares (as well as 127,267 currently exercisable options) between
them. Based upon the foregoing, we have serious concerns as to
whether the Board’s interests are truly aligned with those of the Company’s
stockholders.
We
believe Charlotte Russe’s financial performance and stock price lag behind its
peers
Looking
at the performance of Charlotte Russe stock over the last five years, there is a
significant discrepancy between the performance while Mr. Karp was a director
and the performance since then, both on an absolute basis and relative to its
peer group. From December 2003 through June 2007, at a time when Mr.
Karp was an active participant on the Board, the Company’s stock price
meaningfully out-performed the S&P Apparel Retail Index and compared
favorably to its peer group.
2
|
We believe that investors in
the Company would certainly find both the identity of the consultants the
Board entrusted to develop a new strategic plan for the Company over the
course of almost one year, and the amount of fees paid to outside
consultants for this substantial project, to be important information,
although the Company may not be required to disclose this information
under SEC rules.
|
By
contrast, after Mr. Karp resigned from the Board until the end of 2008, although
all companies reflected in the chart below have faced difficult economic
conditions that likely played a part in these declines, the Company’s stock
price
underperformed
the S&P
Apparel Retail Index and its peer group by 29% and 16%,
respectively.
We
believe that the Company’s stock performance during this time reflects the
market’s lost confidence in the Board’s decision-making, particularly after Mr.
Hoffman’s “requested” retirement in July 2008 and KarpReilly’s rebuffed
acquisition proposal in November 2008.
Charlotte
Russe’s financial performance has also suffered under the current Board, as the
Company has underperformed its peer group significantly since June 2007, despite
having faced the same economic conditions as its competitors (dollars in
thousands).
We
believe the KarpReilly Group has the experience, knowledge, relationships and
judgment to improve the Company’s operational and financial
performance
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·
|
We believe
our nominees will immediately bring an “ownership” mentality to
Board-level decision-making.
All three
KarpReilly
Nominees have spent the
last 20 years
investing their
own
capital to
grow retail and apparel businesses – Mr. Karp as a consumer-focused
private equity investor and Mr. Shaked and Mr. Bitton as
owners
and
operators
of successful retail / apparel brands. Further, the three
KarpReilly Nominees collectively beneficially own 8.9% of the Company,
with KarpReilly LP directly owning 1,612,203 Shares, Mr. Karp directly
owning 201,274 Shares, Mr. Bitton directly owning 50,000 Shares and Mr.
Shaked directly owning no Shares. The existing Board owns less
than 0.2% of the Company’s outstanding Shares – of which at most 2,500
Shares were purchased on the open market. As Board members,
every aspect of our decision-making – from setting Board compensation, to
structuring compensation and option plans for senior management, to
critical budgeting and capital expenditure decisions – will be done with
an ownership mentality. In our view, this discipline has been
lacking on the Charlotte Russe Board since Mr. Karp left the
Board.
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|
·
|
We will
work to restore financial discipline to the
Company.
Since Mr. Karp left the Board in July 2007,
Charlotte Russe has seen a dramatic increase in SG&A expenses, Board
compensation, senior management compensation and consulting
expenses. At the same time, same store sales have fallen
significantly, the growth of new stores has been curtailed and gross
margin has eroded in excess of 500 basis points. This has led
to a significant reduction in profitability – with the Company even losing
money in its 2009 fiscal first quarter (including the holiday season) for
the first time since it went public, a turnaround of $24.5 million in lost
EBITDA alone as compared to the first fiscal quarter of
2008. The current Board’s response appears to be a $3 million
reduction in overhead. We will advocate right-sizing the
Company’s overhead structure to be consistent with its current levels of
store performance, growth and profitability. We believe these
are actions every responsible owner-operator of a business should be
taking in this difficult
environment.
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|
·
|
We believe
that a critical evaluation of the current senior management team is
essential to improve the Company’s performance.
There
has been a wholesale realignment of management personnel precipitated by
the Board’s requested retirement of Mark Hoffman. While we have
not worked with most of the senior executives, we are concerned by their
lack of junior fast-fashion experience. The fast-moving,
competitive junior fashion retailing business places unique demands on
management, and we are uncomfortable with the concept of a senior
management team attempting to learn the intricacies of this complex
business, in a dismal retail environment, while in positions of such
responsibility. If elected, the KarpReilly Nominees will assess
management’s capabilities and, if necessary, seek to have the Board
address the shortcomings.
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|
·
|
We believe
our slate of director nominees brings directly relevant and
current
retailing,
apparel and brand management experience to the Board
.
Our slate
includes a CEO who owns and runs a growing retailer of branded apparel
(Mr. Shaked), a President who owns and runs a wholesaler and multi-unit
retailer of branded apparel (Mr. Bitton), and a private equity investor
who is a senior partner in private equity funds that currently own
interests in seven companies that are multi-unit retail and restaurant
operators. The current slate of outside Board directors includes three
consultants (Ms. Salopek, Mr. Kleinberger and Mr. Blitzer, two of whom
(Ms. Salopek and Mr. Kleinberger) are with the same firm) and one retiree
(Mr. Mogil, who formerly worked at Phillips Van Heusen with Mr.
Blitzer).
|
We are skeptical of the
Board’s current process to pursue a sale of the Company
In
November 2007, after announcement of Charlotte Russe’s fourth quarter results,
the stock traded down significantly. Mr. Karp, who had resigned from
the Board four months earlier, remained personally a significant stockholder of
the Company and was concerned about the ability of the Board to effectively
manage the Company. His firm, KarpReilly LLC, made a private proposal
to acquire 100% of the Company that, subject to a brief due diligence period,
would represent “a very substantial premium to the recent trading range for the
Company’s stock”. On the date of this proposal, the Company’s stock
closed at $14.41 per Share. The Board rejected this
proposal.
Again, in
November 2008, now owning a larger stake in the Company and seriously concerned
about the Board’s actions and the significant management turnover, KarpReilly
made a proposal to the Board to acquire 100% of the Company for cash at a
significant premium to the stock price of $6.89 per Share. The Board
again rejected this proposal without engaging in any discussions with
KarpReilly.
Finally,
on March 12, 2009, seven days after KarpReilly nominated a slate of directors,
the Company announced the initiation of a sale process. As a
significant stockholder, we do not understand the Board’s
decision-making. After rejecting a proposal in November 2007 with the
stock at $14.41 per Share and the Company performing well, and again rejecting a
proposal at a significant premium to the stock price of $6.89 per Share in
November 2008, the Board now elects to begin a sale process in one of the worst
economic environments since the Great Depression, coming off the worst first
fiscal quarter in the Company’s recent history and projecting continued losses
in the second quarter.
In view
of the Company’s financial condition and projected performance, the operational
improvements we believe are needed, the difficulties in obtaining financing for
acquisition opportunities and the current Share price, we have serious doubts
that an offer to acquire the Company will emerge from this process at a level
that would be attractive to stockholders. As a major stockholder, we
certainly are not supportive of a sale of the Company at distressed
levels.
For these
reasons, we question the Board’s decision to conduct a sale process and will not
be a participant as a potential buyer in the process
.
We
believe that a failed sale process could have significant adverse consequences
for the Company, in view of the Company’s recent financial
results. Therefore, we believe it is critical that stockholders elect
Board members who have substantial retail experience. The KarpReilly
Nominees, if elected, will work to maximize value for all stockholders and to
effect the changes that we believe are necessary to improve the Company’s
operational and financial performance in the event a sale is not
consummated.
The
KarpReilly Nominees, if elected, will represent a minority of the
Board. If elected, the KarpReilly Nominees will, subject to their
fiduciary duties as directors, work with the other members of the Board to take
those steps that they deem are necessary to maximize stockholder
value. Although the KarpReilly Nominees will not be able to adopt any
measures without the support of at least some members of the current Board, we
believe that the election of the KarpReilly Nominees will send a strong message
to the Board regarding the meaningful change desired by Charlotte Russe
stockholders. There can be no assurance that the goals of the
KarpReilly Group will be achieved if the KarpReilly Nominees are
elected.
PROPOSAL
NO. 1
ELECTION
OF DIRECTORS
The
KarpReilly Group is seeking your support at the Annual Meeting to elect the
KarpReilly Nominees. The Board is currently composed of seven (7)
directors. The KarpReilly Group believes that seven (7) directors are
up for election at the Annual Meeting to serve one-year terms expiring at the
2010 annual meeting of stockholders and until their successors have been
selected and qualified. For the reasons stated above, we are seeking
your support at the Annual Meeting to elect the KarpReilly Nominees in
opposition to three (3) of the Company’s seven (7) director
nominees. Your vote to elect the KarpReilly Nominees will have the
legal effect of replacing three (3) incumbent directors of the Company with the
KarpReilly Nominees. If elected, the KarpReilly Nominees will
represent a minority of the members of the Board.
THE
KARPREILLY NOMINEES
The
KarpReilly Group has nominated three (3) highly qualified nominees, each of
whom, if elected, will exercise his independent judgment in accordance with his
fiduciary duties as a director in all matters that come before the
Board. The KarpReilly Nominees are independent of the Company in
accordance with the SEC and Nasdaq Stock Market rules on board
independence. If elected, and subject to their fiduciary duties as
directors, the KarpReilly Nominees would work with the other members of the
Board to take those steps that they deem are necessary or advisable to maximize
value for all stockholders.
Set forth
below are the name, age, citizenship, business address, present principal
occupation and employment and material occupations, positions, offices or
employments for the past five years of each of the KarpReilly
Nominees. This information has been furnished to the KarpReilly Group
by the KarpReilly Nominees. The KarpReilly Nominees have been
nominated by Mr. Karp in accordance with the Company’s advance notice bylaw
provision.
Hezy
Shaked (Age 54)
serves
as the Chairman and Chief Executive Officer of Tilly’s. Mr. Shaked
co-founded the business in 1982 in Los Alamitos, California. Tilly’s
is a California-based retailer of west-coast lifestyle clothing, shoes and
accessories in a wide assortment of brands such as Volcom, Quiksilver, Billabong
and Hurley. Currently, Tilly’s operates 99 locations across seven
states. The principal business address of Mr. Shaked is c/o Tilly’s,
10 Whatney, Irvine, California 92618. Mr. Shaked is a U.S.
citizen.
Gabriel Bitton (Age 52)
serves
as President of Buffalo David Bitton (“Buffalo”), a retailer and wholesaler of
premium jeans and other men’s and womenswear selling through better department
stores and approximately 40 retail locations in Canada. Mr. Bitton
co-founded Buffalo in 1985. Mr. Bitton has over 32 years of
experience in the apparel industry with expertise in sourcing, brand
development, design and vendor management. The principal business
address of Mr. Shaked is c/o Buffalo David Bitton, 400 Sauvé West, Suite 100,
Montréal, QC H3L 1Z8, Canada. Mr. Bitton is a Canadian
citizen.
Allan W. Karp (Age 54)
co-founded KarpReilly, LLC, an investment management firm, in 2006, and
serves as a manager of KarpReilly GP, the general partner of KarpReilly LP,
which makes and oversees equity and equity-related investments with the
principal objective of appreciation of capital invested. Mr. Karp was
co-CEO of Apax Partners, L.P., a private equity firm, from April 2005 to
November 2006. Mr. Karp co-founded Saunders Karp & Megrue Partners, LLC, a
private equity investment firm engaged in the acquisition and ownership of
growth businesses, in 1990 and was a partner in the firm from 1990 to
2005. Previously, he was a Principal in the Merchant Banking
Department of Morgan Stanley & Co., Inc. He is a current member of the board
of directors of Trina Turk, Z'Tejas, Habit Burger Grill, S.B. Restaurant Co.,
Inc. (Elephant Bar), Miller’s Ale House Inc., Café Rio, Inc. and Comark, Inc. He
is a former board member of, among others, Spyder Active Sports, Inc., UpToDate,
Inc., Accessory Network Group, Inc., Mimi’s Café, Marie Callender’s, Dollar Tree
Stores, and Charlotte Russe. The principal business address of Mr.
Karp is c/o KarpReilly Capital Partners, L.P., 104 Field Point Road, Greenwich,
Connecticut 06830. Mr. Karp is a U.S. citizen.
Each of
the KarpReilly Nominees, if elected, intends to act in accordance with his
fiduciary duty and recuse himself from voting should any conflict of interest
arise in the future.
The
KarpReilly Nominees will not receive any compensation from any member of the
KarpReilly Group for their services as directors of the Company. Other than as
stated herein, there are no arrangements or understandings between members of
the KarpReilly Group and any of the KarpReilly Nominees or any other person or
persons pursuant to which the nomination of the KarpReilly Nominees described
herein is to be made, other than the consent by each of the KarpReilly Nominees
to be named in this Proxy Statement and to serve as a director of Charlotte
Russe if elected as such at the Annual Meeting. None of the
KarpReilly Nominees is a party adverse to Charlotte Russe or any of its
subsidiaries or has a material interest adverse to Charlotte Russe or any of its
subsidiaries in any material pending legal proceedings.
The
KarpReilly Group does not expect that the KarpReilly Nominees will be unable to
stand for election, but, in the event that such persons are unable to serve or,
for good cause, will not serve, the Shares represented by the enclosed
GOLD
proxy card will be voted
for substitute nominees, to the extent this is not prohibited under the
Company’s Amended and Restated Bylaws or applicable law. In addition,
Mr. Karp reserves the right to nominate substitute persons if Charlotte Russe
makes or announces any changes to its Amended and Restated Bylaws or takes or
announces any other action that has, or if consummated would have, the effect of
disqualifying the KarpReilly Nominees. In any such case, Shares
represented by the enclosed
GOLD
proxy card will be voted
for such substitute nominees, to the extent this is not prohibited under the
Company’s Amended and Restated Bylaws or applicable law. Mr. Karp
reserves the right to nominate additional persons if Charlotte Russe increases
the size of the Board above its existing size. Additional nominations
made pursuant to the preceding sentence are without prejudice to the position of
Mr. Karp that any attempt to increase the size of the current Board or to
classify the Board constitutes an unlawful manipulation of the Company’s
corporate machinery.
YOU
ARE URGED TO VOTE FOR THE ELECTION OF THE KARPREILLY NOMINEES ON THE ENCLOSED
GOLD PROXY CARD.
PROPOSAL
NO. 2
COMPANY
PROPOSAL TO APPROVE THE CHARLOTTE RUSSE HOLDING, INC.
2009
EQUITY INCENTIVE PLAN
As
discussed in further detail in the Company’s proxy statement, the Board is
seeking an increase in the number of Shares that may be issued under the
Charlotte Russe Holding, Inc. 2009 Equity Incentive Plan (the “2009 Plan”),
beyond those reserved for issuance under the Charlotte Russe Holding, Inc. 1999
Equity Incentive Plan (the Company’s predecessor plan), by 2,575,000
Shares. The Company is submitting the 2009 Plan to stockholders for
their consideration at the Annual Meeting.
Although
the KarpReilly Group does not agree with the number of Shares that will be made
available for grant under the 2009 Plan if this proposal is approved, the
KarpReilly Group supports this proposal because it believes that the Company
needs to have additional Shares available for future grant to its
employees. The KarpReilly Nominees, if elected to the Board and
subject to their fiduciary duties as directors, will work to ensure that the
Board takes a disciplined approach to all future grants to senior executives of
the Company.
THE KARPREILLY GROUP RECOMMENDS A
VOTE “FOR” THE PROPOSAL TO APPROVE THE
CHARLOTTE RUSSE HOLDING, INC. 2009
EQUITY INCENTIVE PLAN
.
PROPOSAL
NO. 3
COMPANY
PROPOSAL TO RATIFY SELECTION OF
INDEPENDENT
AUDITORS
As
discussed in further detail in the Company’s proxy statement, the Audit
Committee of the Board has engaged Ernst & Young LLP as the Company’s
independent auditors for the fiscal year ending September 26,
2009. The Audit Committee has submitted this proposal to stockholders
for ratification as a corporate governance practice.
We do not
object to the ratification of the appointment of Ernst & Young LLP as the
Company’s independent auditors for the fiscal year ending September 26,
2009.
VOTING
AND PROXY PROCEDURES
Only
stockholders of record on the Record Date will be entitled to notice of and to
vote at the Annual Meeting. Each Share is entitled to one
vote. Stockholders who sell Shares before the Record Date (or acquire
them without voting rights after the Record Date) may not vote such
Shares. Stockholders of record on the Record Date will retain their
voting rights in connection with the Annual Meeting even if they sell such
Shares after the Record Date. Based on publicly available
information, the KarpReilly Group believes that the only outstanding class of
securities of Charlotte Russe entitled to vote at the Annual Meeting is the
Shares.
Shares
represented by properly executed
GOLD
proxy cards will be voted
at the Annual Meeting as marked and, in the absence of specific instructions,
will be voted FOR the election of the KarpReilly Nominees to the Board, FOR the
election of the candidates who have been nominated by the Company other than
Emilia Fabricant, Leonard H. Mogil and Jennifer C. Salopek, FOR the approval of
the 2009 Plan, FOR the ratification of the appointment of Ernst & Young LLP
as the Company’s independent auditors for the fiscal year ending September 26,
2009, and in the discretion of the persons named as proxies on all other matters
as may properly come before the Annual Meeting.
According
to the Company’s proxy statement for the Annual Meeting, the Board intends to
nominate seven (7) candidates for election as directors at the Annual
Meeting. This Proxy Statement is soliciting proxies to elect not only
the KarpReilly Nominees, but also the candidates who have been nominated by the
Company other than Emilia Fabricant, Leonard H. Mogil and Jennifer C. Salopek.
This gives stockholders who wish to vote for the KarpReilly Nominees and such
other persons the ability to do so. Under applicable proxy rules, we
are required either to solicit proxies only for the KarpReilly Nominees, which
could result in limiting the ability of stockholders to fully exercise their
voting rights with respect to the Company’s nominees, or to solicit for the
KarpReilly Nominees and for fewer than all of the Company’s nominees, which
enables a stockholder who desires to vote for the KarpReilly Nominees to also
vote for those of the Company’s nominees for whom we are soliciting
proxies. The names, backgrounds and qualifications of the Company’s
nominees, and other information about them, can be found in the Company’s proxy
statement. There is no assurance that any of the Company’s nominees
will serve as directors if the KarpReilly Nominees are elected.
QUORUM
In order
to conduct any business at the Annual Meeting, a quorum must be present in
person or represented by valid proxies. The presence in person or by
proxy of the holders of a majority of the outstanding Shares entitled to vote at
the Annual Meeting is necessary to constitute a quorum. Abstentions are counted
as present for purposes of determining whether a quorum is present at the
meeting.
VOTES
REQUIRED FOR APPROVAL
Vote required for the election of
directors
. Directors are elected by a plurality of the votes
present at the Annual Meeting or by proxy and entitled to vote at the Annual
Meeting. Votes cast for a nominee will be counted in favor of
election. Abstentions will not count either in favor of, or against,
election of a nominee.
Vote required for the approval of
the 2009 Plan
. According to the Company’s proxy statement, the
affirmative vote of the holders of a majority of the Shares present in person or
represented by proxy and entitled to vote at the Annual Meeting will be required
to approve the adoption of the 2009 Plan. According to the Company’s
proxy statement, (i) abstentions will be counted toward the tabulation of votes
cast on this proposal and will have the same effect as negative votes and (ii)
broker non-votes will be counted toward a quorum, but will not be counted for
any purpose in determining whether this matter has been approved.
Vote required for the ratification
of the appointment of Ernst & Young LLP.
According to the
Company’s proxy statement, to be approved, the ratification of the selection of
Ernst & Young LLP as the Company’s independent auditors must receive “For”
votes from the majority of Shares present and entitled to vote either in person
or by proxy. According to the Company’s proxy statement, (i)
abstentions will be counted toward the tabulation of votes cast on this proposal
and will have the same effect as negative votes and (ii) broker non-votes will
be counted toward a quorum, but will not be counted for any purpose in
determining whether this matter has been approved.
DISCRETIONARY
VOTING
Shares
held in “street name” and held of record by banks, brokers or nominees may not
be voted by such banks, brokers or nominees unless the beneficial owners of such
Shares provide them with instructions on how to vote.
REVOCATION
OF PROXIES
Stockholders
of Charlotte Russe may revoke their proxies at any time prior to exercise by
attending the Annual Meeting and voting in person (although attendance at the
Annual Meeting will not in and of itself constitute revocation of a proxy) or by
delivering a written notice of revocation. The delivery of a
subsequently dated proxy which is properly completed will constitute a
revocation of any earlier proxy. The revocation may be delivered
either to the KarpReilly Group in care of Okapi Partners at the address set
forth on the back cover of this Proxy Statement or to Charlotte Russe at 4645
Morena Boulevard, San Diego, California 92117, or any other address provided by
Charlotte Russe. Although a revocation is effective if delivered to
Charlotte Russe, the KarpReilly Group requests that either the original or
photostatic copies of all revocations be mailed to the KarpReilly Group in care
of Okapi Partners at the address set forth on the back cover of this Proxy
Statement so that the KarpReilly Group will be aware of all revocations and can
more accurately determine if and when proxies have been received from the
holders of record on the Record Date and the number of outstanding Shares
represented thereby. Additionally, Okapi Partners may use this
information to contact stockholders who have revoked their proxies in order to
solicit later dated proxies for the election of the KarpReilly
Nominees.
IF
YOU WISH TO VOTE FOR THE ELECTION OF THE KARPREILLY NOMINEES TO THE BOARD, FOR
THE APPROVAL OF THE 2009 PLAN OR
FOR THE RATIFICATION OF
THE APPOINTMENT OF
ERNST & YOUNG LLP, PLEASE SIGN, DATE AND RETURN
PROMPTLY THE ENCLOSED GOLD PROXY CARD IN THE POSTAGE-PAID ENVELOPE
PROVIDED.
SOLICITATION
OF PROXIES
The
solicitation of proxies pursuant to this Proxy Statement is being made by the
KarpReilly Group. Proxies may be solicited by mail, facsimile,
telephone, telegraph, Internet, in person and by advertisements.
KarpReilly
LP has entered into an agreement with Okapi Partners for solicitation and
advisory services in connection with this solicitation, for which Okapi Partners
will receive a fee not to exceed $75,000, together with reimbursement for its
reasonable out-of-pocket expenses, and will be indemnified against certain
liabilities and expenses, including certain liabilities under the federal
securities laws. Okapi Partners will solicit proxies from
individuals, brokers, banks, bank nominees and other institutional
holders. KarpReilly LP has requested banks, brokerage houses and
other custodians, nominees and fiduciaries to forward all solicitation materials
to the beneficial owners of the Shares they hold of
record. KarpReilly LP will reimburse these record holders for their
reasonable out-of-pocket expenses in so doing. It is anticipated that
Okapi Partners will employ approximately 20 persons to solicit Charlotte Russe’s
stockholders for the Annual Meeting.
The
entire expense of soliciting proxies is being borne by KarpReilly LP pursuant to
the terms of the Joint Filing and Solicitation Agreement (as described
below). Costs of this solicitation of proxies are currently estimated
to be approximately $[__________]. KarpReilly LP estimates that
through the date hereof, its expenses in connection with this solicitation are
approximately $[___________]. KarpReilly LP intends to seek
reimbursement from Charlotte Russe of all expenses it incurs in connection with
the solicitation of proxies for the election of the KarpReilly Nominees to the
Board at the Annual Meeting. KarpReilly LP does not intend to submit
the question of such reimbursement to a vote of security holders of the
Company.
ADDITIONAL
PARTICIPANT INFORMATION
The
KarpReilly Nominees and the other members of the KarpReilly Group are
participants in this solicitation. The principal business of
KarpReilly LP is making and overseeing equity and equity-related investments
with the principal objective of appreciation of capital invested. The principal
business of KarpReilly GP is serving as the general partner of KarpReilly
LP. Messrs. Karp and Reilly serve on the board of managers of
KarpReilly, LLC, an affiliate of KarpReilly LP, which provides investment advice
to KarpReilly LP and whose primary mission is to invest in consumer growth
companies and help them achieve their long-term vision. Messrs. Karp
and Reilly are also the managers of KarpReilly GP. Mr. Logan’s
principal occupation is serving as a partner of KarpReilly, LLC.
The
address of the principal office of each of KarpReilly LP, KarpReilly GP and
Messrs. Karp, Reilly and Logan is 104 Field Point Road, Greenwich, Connecticut
06830.
As of the
date hereof, KarpReilly LP beneficially owns 1,612,203 Shares. Each
of KarpReilly GP, as the general partner of KarpReilly LP, and Messrs. Karp and
Reilly, as the managers of KarpReilly GP, is deemed to beneficially own the
1,612,203 Shares beneficially owned by KarpReilly LP. In addition,
Mr. Karp directly owns 201,274 Shares (including 1,500 Shares held in trust for
the benefit of certain family members), Mr. Reilly directly owns 3,641 Shares,
Mr. Logan directly owns 1,085 Shares, Mr. Bitton directly owns 50,000 Shares and
Mr. Shaked does not directly own any Shares.
Each
member of the KarpReilly Group, as a member of a “group” with the other
KarpReilly Group members for the purposes of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended, is accordingly the beneficial owner of the
Shares beneficially owned in the aggregate by the other members of the
KarpReilly Group reported herein. Each member of the KarpReilly Group
disclaims beneficial ownership of such Shares, except that KarpReilly GP and
Messrs. Karp and Reilly do not disclaim beneficial ownership of the Shares owned
by KarpReilly LP.
For
information regarding purchases and sales of securities of Charlotte Russe
during the past two years by the members of the KarpReilly Group, including the
KarpReilly Nominees, see Schedule I.
On March
5, 2009, the members of the KarpReilly Group entered into a Joint Filing and
Solicitation Agreement in which, among other things, (a) the KarpReilly Group
agreed to the joint filing on behalf of each of them of statements on Schedule
13D with respect to the securities of the Company, (b) the KarpReilly Group
agreed to solicit proxies or written consents for the election of the KarpReilly
Nominees, or any other person(s) nominated by Mr. Karp, to the Board at the
Annual Meeting (the “Solicitation”), and (c) KarpReilly LP agreed to bear all
expenses incurred in connection with the KarpReilly Group’s activities, subject
to certain limitations. KarpReilly LP has agreed to indemnify each of
Messrs. Shaked and Britton against claims arising from the Solicitation and any
related transactions.
Except as
set forth in this Proxy Statement (including the Schedules hereto), (i) during
the past 10 years, no participant in this solicitation has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors); (ii)
no participant in this solicitation directly or indirectly beneficially owns any
securities of Charlotte Russe; (iii) no participant in this solicitation owns
any securities of Charlotte Russe which are owned of record but not
beneficially; (iv) no participant in this solicitation has purchased or sold any
securities of Charlotte Russe during the past two years; (v) no part of the
purchase price or market value of the securities of Charlotte Russe owned by any
participant in this solicitation is represented by funds borrowed or otherwise
obtained for the purpose of acquiring or holding such securities; (vi) no
participant in this solicitation is, or within the past year was, a party to any
contract, arrangements or understandings with any person with respect to any
securities of Charlotte Russe, including, but not limited to, joint ventures,
loan or option arrangements, puts or calls, guarantees against loss or
guarantees of profit, division of losses or profits, or the giving or
withholding of proxies; (vii) no associate of any participant in this
solicitation owns beneficially, directly or indirectly, any securities of
Charlotte Russe; (viii) no participant in this solicitation owns beneficially,
directly or indirectly, any securities of any parent or subsidiary of Charlotte
Russe; (ix) no participant in this solicitation or any of his/its associates was
a party to any transaction, or series of similar transactions, since the
beginning of Charlotte Russe’s last fiscal year, or is a party to any currently
proposed transaction, or series of similar transactions, to which Charlotte
Russe or any of its subsidiaries was or is to be a party, in which the amount
involved exceeds $120,000; (x) no participant in this solicitation or any of
his/its associates has any arrangement or understanding with any person with
respect to any future employment by Charlotte Russe or its affiliates, or with
respect to any future transactions to which Charlotte Russe or any of its
affiliates will or may be a party; and (xi) no person, including the
participants in this solicitation, who is a party to an arrangement or
understanding pursuant to which the KarpReilly Nominees are proposed to be
elected has a substantial interest, direct or indirect, by security holdings or
otherwise in any matter to be acted on at the Annual Meeting.
OTHER
MATTERS AND ADDITIONAL INFORMATION
Other
than as discussed above, the KarpReilly Group is unaware of any other matters to
be considered at the Annual Meeting. However, should other matters,
which the KarpReilly Group is not aware of a reasonable time before this
solicitation, be brought before the Annual Meeting, the persons named as proxies
on the enclosed
GOLD
proxy card will vote on such matters in their discretion.
STOCKHOLDER
PROPOSALS
Any
stockholder who intends to present a proposal at the Company’s annual meeting in
the year 2010 must deliver the proposal to the Corporate Secretary at Charlotte
Russe:
|
v
|
Not
later than November 19, 2009, if the proposal is submitted for inclusion
in the Company’s proxy materials for that meeting pursuant to Rule 14a-8
under the Securities Exchange Act of 1934, as amended;
or
|
|
v
|
Not
earlier than December 29, 2009 and not later than January 28, 2010,
pursuant to the Company’s bylaws, if a stockholder wishes to submit a
proposal that is not to be included in the Company’s proxy materials for
that meeting or nominate a
director.
|
The
information set forth above regarding the procedures for submitting stockholder
proposals for consideration at Charlotte Russe’s 2010 annual meeting of
stockholders is based on information contained in the Company’s proxy
statement. The incorporation of this information in this Proxy
Statement should not be construed as an admission by the KarpReilly Group that
such procedures are legal, valid or binding.
INCORPORATION
BY REFERENCE
THE
KARPREILLY GROUP HAS OMITTED FROM THIS PROXY STATEMENT CERTAIN DISCLOSURE
REQUIRED BY APPLICABLE LAW THAT IS EXPECTED TO BE INCLUDED IN CHARLOTTE RUSSE’S
PROXY STATEMENT RELATING TO THE ANNUAL MEETING. THIS DISCLOSURE IS
EXPECTED TO INCLUDE, AMONG OTHER THINGS, CURRENT BIOGRAPHICAL INFORMATION ON
CHARLOTTE RUSSE’S CURRENT DIRECTORS, INFORMATION CONCERNING EXECUTIVE
COMPENSATION, AND OTHER IMPORTANT INFORMATION. THE KARPREILLY GROUP
WAS NOT INVOLVED IN THE PREPARATION OF CHARLOTTE RUSSE’S PROXY
STATEMENT. SEE SCHEDULE II FOR INFORMATION REGARDING PERSONS WHO
BENEFICIALLY OWN MORE THAN 5% OF THE SHARES AND THE OWNERSHIP OF THE SHARES BY
THE DIRECTORS AND MANAGEMENT OF CHARLOTTE RUSSE.
The
information concerning Charlotte Russe contained in this Proxy Statement and the
Schedules attached hereto has been taken from, or is based upon, publicly
available information.
THE
KARPREILLY GROUP
March
__, 2009
SCHEDULE
I
TRANSACTIONS
IN SECURITIES OF CHARLOTTE RUSSE
DURING
THE PAST TWO YEARS
Except
as otherwise specified, all purchases and sales were made in the open
market.
Shares
of Common Stock
Purchased / (Sold)
|
Price
Per
Share($)
|
Date
of
Purchase /
Sale
|
KARPREILLY CAPITAL PARTNERS,
L.P.
332,626
|
|
10.0416
|
08/04/2008
|
50,000
|
|
10.9582
|
09/18/2008
|
50,000
|
|
10.9940
|
09/18/2008
|
60,000
|
|
10.5623
|
09/29/2008
|
33,737
|
|
9.9282
|
10/02/2008
|
50,000
|
|
10.1969
|
10/02/2008
|
46,900
|
|
9.8788
|
10/03/2008
|
3,100
|
|
9.8300
|
10/03/2008
|
50,000
|
|
9.5405
|
10/06/2008
|
50,000
|
|
9.4501
|
10/06/2008
|
41,394
|
|
9.5100
|
10/08/2008
|
45,000
|
|
8.8172
|
10/10/2008
|
10,000
|
|
6.6263
|
10/28/2008
|
12,332
|
|
6.4476
|
11/10/2008
|
71,943
|
|
6.3870
|
11/10/2008
|
3,600
|
|
6.4889
|
11/11/2008
|
2,223
|
|
6.4276
|
11/11/2008
|
79,107
|
|
8.1499
|
11/12/2008
|
100,000
|
|
8.0987
|
11/12/2008
|
32,943
|
|
6.6430
|
11/12/2008
|
47,257
|
|
6.5579
|
11/12/2008
|
38,800
|
|
4.4058
|
01/15/2009
|
65,000
|
|
4.6300
|
01/22/2009
|
25,000
|
|
4.5862
|
01/22/2009
|
3,400
|
|
4.4501
|
01/23/2009
|
23,169
|
|
4.4935
|
01/27/2009
|
14,643
|
|
4.9700
|
02/23/2009
|
39,000
|
|
5.1957
|
03/02/2009
|
21,802
|
|
4.9428
|
03/04/2009
|
147,201
|
|
5.0189
|
03/05/2009
|
52,943
|
|
5.0488
|
03/06/2009
|
ALLAN W.
KARP
10,000
|
|
12.9664
|
07/21/2008
|
WILLIAM P.
LOGAN
1,000
|
|
12.8700
|
7/24/2008
|
(115)
*
|
|
17.8400
|
6/20/2008
|
GABRIEL
BITTON
KARPREILLY GP I,
LLC
None
CHRISTOPHER K.
REILLY
None
HEZY
SHAKED
None
*
Shares
donated to a non-profit organization.
SCHEDULE
II
The
following table is reprinted from Charlotte Russe’s proxy statement filed with
the
Securities
and Exchange Commission on March 20, 2009
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table provides information regarding the beneficial ownership of the
Company’s common stock as of February 20, 2009 by: (i) each of the
Company’s directors, (ii) each of the Company’s named executive officers,
(iii) all of the Company’s directors and executive officers as a group and
(iv) each person, or group of affiliated persons, known by the Company to
beneficially own more than five percent of the Company’s common stock. The table
is based upon information supplied by the Company’s officers, directors and
principal stockholders and a review of Schedules 13D, 13G or, to the extent more
recent, 13F, if any, filed with the SEC. Unless otherwise indicated in the
footnotes to the table and subject to community property laws where applicable,
the Company believes that each of the stockholders named in the table has sole
voting and investment power with respect to the shares indicated as beneficially
owned.
Applicable
percentages are based on 20,999,870 shares outstanding on February 20,
2009, adjusted as required by rules promulgated by the SEC. These rules
generally attribute beneficial ownership of securities to persons who possess
sole or shared voting power or investment power with respect to those
securities. In addition, the rules include shares of common stock issuable
pursuant to the exercise of stock options, restricted stock units or warrants
that are either immediately exercisable or exercisable on April 21, 2009,
which is 60 days after February 20, 2009. These shares are deemed to be
outstanding and beneficially owned by the person holding those options,
restricted stock units or warrants for the purpose of computing the percentage
ownership of that person, but they are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.
Name
and Address of Beneficial Owner (1)
|
|
Number
of Shares
Beneficially
Owned
|
|
Percentage
of
Shares
Beneficially
Owned
|
|
|
|
|
|
|
|
KarpReilly
Capital Partners, L.P. and affiliates (2)
|
|
|
1,859,120
|
|
|
|
8.9
|
%
|
Barclays
Global Investors, NA. (3)
|
|
|
1,675,532
|
|
|
|
8.0
|
%
|
Wells
Fargo & Company (4)
|
|
|
1,472,761
|
|
|
|
7.0
|
%
|
Paradigm
Capital Management, Inc. (5)
|
|
|
1,276,700
|
|
|
|
6.1
|
%
|
Renaissance
Technologies LLC (6)
|
|
|
1,217,230
|
|
|
|
5.8
|
%
|
FMR
LLC (7)
|
|
|
1,099,094
|
|
|
|
5.2
|
%
|
Mark
A. Hoffman (8)
|
|
|
173,667
|
|
|
|
*
|
|
Edward
Wong (9)
|
|
|
93,061
|
|
|
|
*
|
|
Leonard
H. Mogil (10)
|
|
|
90,200
|
|
|
|
*
|
|
Paul
R. Del Rossi (11)
|
|
|
23,800
|
|
|
|
*
|
|
Jennifer
C. Salopek (12)
|
|
|
22,100
|
|
|
|
*
|
|
Sandra
Tillett (13)
|
|
|
20,000
|
|
|
|
*
|
|
Michael
J. Blitzer (14)
|
|
|
13,875
|
|
|
|
*
|
|
Herbert
J. Kleinberger (15)
|
|
|
13,042
|
|
|
|
*
|
|
Patricia
K. Johnson (16)
|
|
|
5,000
|
|
|
|
*
|
|
Patricia
A. Shields (17)
|
|
|
1,000
|
|
|
|
*
|
|
John
D. Goodman (18)
|
|
|
—
|
|
|
|
*
|
|
Emilia
Fabricant (19)
|
|
|
—
|
|
|
|
*
|
|
Bernard
Zeichner (20)
|
|
|
—
|
|
|
|
*
|
|
All
directors and executive officers as a group (11 persons)
(21)
|
|
|
455,745
|
|
|
|
2.1
|
%
|
(1)
|
Except
as otherwise noted above, the address for each person or entity listed in
the table is c/o Charlotte Russe Holding, Inc., 4645 Morena Boulevard, San
Diego, California 92117.
|
(2)
|
The
address for KarpReilly Capital Partners, L.P. is 104 Field Point Road,
Greenwich, CT 06830. Includes 1,603,120 shares owned by KarpReilly Capital
Partners, L.P. and KarpReilly GP I, LLC, 201,247 shares owned by Allan W.
Karp, 3,641 shares owned by Christopher K. Reilly, 1,085 shares owned by
William P. Logan and 50,000 shares owned by Gabriel
Bitton.
|
(3)
|
The
address for Barclays Global Investors, NA. is 45 Fremont Street, San
Francisco, CA 94105.
|
(4)
|
The
address for Wells Fargo & Company is 420 Montgomery Street, San
Francisco, CA 94163.
|
(5)
|
The
address for Paradigm Capital Management, Inc. is 9 Elk Street, Albany, NY
12207.
|
(6)
|
The
address for Renaissance Technologies LLC is 800 Third Avenue, New York, NY
10022.
|
(7)
|
The
address for FMR LLC is 82 Devonshire Street, Boston, MA
02109.
|
(8)
|
Mr. Hoffman
retired in July 2008. Includes 137,667 shares of common stock subject to
options exercisable within 60 days of February 20,
2009.
|
(9)
|
Includes
41,000 shares of common stock subject to options exercisable within 60
days of February 20, 2009 and 46,834 shares of unvested restricted
common stock.
|
(10)
|
Includes
67,950 shares of common stock subject to options exercisable within 60
days of February 20, 2009.
|
(11)
|
Includes
19,300 shares of common stock subject to options exercisable within 60
days of February 20, 2009.
|
(12)
|
Includes
19,100 shares of common stock subject to options exercisable within 60
days of February 20, 2009.
|
(13)
|
Ms. Tillett
joined the Company in May 2008. Includes 20,000 shares of unvested
restricted common stock.
|
(14)
|
Includes
10,875 shares of common stock subject to options exercisable within 60
days of February 20, 2009.
|
(15)
|
Includes
10,042 shares of common stock subject to options exercisable within 60
days of February 20, 2009.
|
(16)
|
Ms. Johnson
resigned in August 2008.
|
(17)
|
Ms. Shields
resigned in August 2008.
|
(18)
|
Mr. Goodman
joined the Company in November
2008.
|
(19)
|
Ms. Fabricant
joined the Company in November
2008.
|
(20)
|
Mr. Zeichner
retired in June 2008.
|
(21)
|
Includes
305,934 shares of common stock subject to options exercisable within 60
days of February 20, 2009 and 66,834 shares of unvested restricted
common stock.
|
IMPORTANT
Tell your
Board what you think! Your vote is important. No matter how many
Shares you own, please give the KarpReilly Group your proxy FOR the election of
the KarpReilly Nominees by taking three steps:
|
●
|
SIGNING
the enclosed
GOLD
proxy card,
|
|
|
|
|
●
|
DATING
the enclosed
GOLD
proxy card, and
|
|
|
|
|
●
|
MAILING
the enclosed
GOLD
proxy card TODAY in the envelope provided (no postage is required if
mailed in the United States).
|
If any of
your Shares are held in the name of a brokerage firm, bank, bank nominee or
other institution, only it can vote such Shares and only upon receipt of your
specific instructions. Accordingly, please contact the person
responsible for your account and instruct that person to execute the
GOLD
proxy card representing
your Shares. The KarpReilly Group urges you to confirm in writing
your instructions to the KarpReilly Group in care of Okapi Partners at the
address provided below so that the KarpReilly Group will be aware of all
instructions given and can attempt to ensure that such instructions are
followed.
If you
have any questions or require any additional information concerning this Proxy
Statement, please contact Okapi Partners at the address set forth
below.
Okapi
Partners
780
Third Avenue, 30th Floor
New
York, NY 10017
Stockholders
Call Toll-Free at: (877) 259-6290
Banks
and Brokers Call Collect at: (212) 297-0720
info@okapipartners.com
PRELIMINARY
COPY SUBJECT TO COMPLETION
GOLD
PROXY CARD
CHARLOTTE
RUSSE HOLDING, INC.
2009
ANNUAL MEETING OF STOCKHOLDERS
THIS
PROXY IS SOLICITED ON BEHALF OF THE KARPREILLY GROUP
THE
BOARD OF DIRECTORS OF CHARLOTTE RUSSE HOLDING, INC.
IS
NOT SOLICITING THIS PROXY
P R O X Y
The
undersigned appoints Allan W. Karp and William P. Logan, and each of them,
attorneys and agents with full power of substitution to vote all shares of
common stock of Charlotte Russe Holding, Inc. (“Charlotte Russe” or the
“Company”) which the undersigned would be entitled to vote if personally present
at the 2009 Annual Meeting of Stockholders of the Company scheduled to be held
on April 28, 2009 at 9:00 a.m. local time at the Hyatt Regency La Jolla at
Aventine located at 3777 La Jolla Village Drive, San Diego, California 92122,
and including at any adjournments or postponements thereof and at any meeting
called in lieu thereof (the “Annual Meeting”).
The
undersigned hereby revokes any other proxy or proxies heretofore given to vote
or act with respect to the shares of common stock of the Company held by the
undersigned, and hereby ratifies and confirms all action the herein named
attorneys and proxies, their substitutes, or any of them may lawfully take by
virtue hereof. If properly executed, this Proxy will be voted as
directed on the reverse and in the discretion of the herein named attorneys and
proxies or their substitutes with respect to any other matters as may properly
come before the Annual Meeting that are unknown to the KarpReilly Group a
reasonable time before this solicitation.
IF
NO DIRECTION IS INDICATED WITH RESPECT TO THE PROPOSALS ON THE REVERSE, THIS
PROXY WILL BE VOTED “FOR” PROPOSALS 1, 2 AND 3.
This
Proxy will be valid until the sooner of one year from the date indicated on the
reverse side and the completion of the Annual Meeting.
IMPORTANT: PLEASE
SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY!
CONTINUED
AND TO BE SIGNED ON REVERSE SIDE
[X]
Please mark vote as in this
example
THE
KARPREILLY GROUP STRONGLY RECOMMENDS THAT STOCKHOLDERS VOTE
“FOR”
THE NOMINEES LISTED BELOW IN PROPOSAL NO. 1
Proposal No.
1 – The KarpReilly Group’s Proposal to Elect Allan W. Karp, Hezy Shaked and
Gabriel Bitton as Directors of the Company.
|
FOR
ALL
NOMINEES
|
WITHHOLD
AUTHORITY
TO
VOTE
FOR ALL
NOMINEES
|
FOR
ALL
NOMINEES
EXCEPT
|
|
|
|
|
Nominees: Allan
W. Karp
Hezy
Shaked
Gabriel
Bitton
|
[ ]
|
[ ]
|
[ ]
|
THE
KARPREILLY GROUP INTENDS TO USE THIS PROXY TO VOTE (I) “FOR” MESSRS. KARP,
SHAKED AND BITTON AND (II) “FOR” THE CANDIDATES WHO HAVE BEEN NOMINATED BY THE
COMPANY TO SERVE AS DIRECTORS OTHER THAN EMILIA FABRICANT, LEONARD H. MOGIL AND
JENNIFER C. SALOPEK, FOR WHOM THE KARPREILLY GROUP IS NOT SEEKING AUTHORITY TO
VOTE FOR AND WILL NOT EXERCISE ANY SUCH AUTHORITY. THE NAMES,
BACKGROUNDS AND QUALIFICATIONS OF THE CANDIDATES WHO HAVE BEEN NOMINATED BY THE
COMPANY, AND OTHER INFORMATION ABOUT THEM, CAN BE FOUND IN THE COMPANY’S PROXY
STATEMENT.
THERE IS
NO ASSURANCE THAT ANY OF THE CANDIDATES WHO HAVE BEEN NOMINATED BY THE COMPANY
WILL SERVE AS DIRECTORS IF THE KARPREILLY GROUP’S NOMINEES ARE
ELECTED.
NOTE: IF
YOU DO NOT WISH FOR YOUR SHARES TO BE VOTED “FOR” A PARTICULAR KARPREILLY
NOMINEE, MARK THE “FOR ALL NOMINEES EXCEPT” BOX AND WRITE THE NAME(S) OF THE
NOMINEE(S) YOU DO NOT SUPPORT ON THE LINE BELOW. YOUR SHARES WILL BE
VOTED FOR THE REMAINING KARPREILLY NOMINEE(S). YOU MAY ALSO WITHHOLD
AUTHORITY TO VOTE FOR ONE OR MORE ADDITIONAL CANDIDATES WHO HAVE BEEN NOMINATED
BY THE COMPANY BY WRITING THE NAME OF THE NOMINEE(S) BELOW.
_______________________________________________________________
THE
KARPREILLY GROUP RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” PROPOSAL NO.
2
Proposal
No. 2 – The Company’s proposal to approve the Charlotte Russe
Holding, Inc. 2009 Equity Incentive Plan.
|
o
FOR
|
|
o
AGAINST
|
|
o
ABSTAIN
|
THE
KARPREILLY GROUP DOES NOT OBJECT TO PROPOSAL NO. 3
Proposal
No. 3 – The Company’s proposal to ratify the selection of Ernst &
Young LLP as the Company’s independent auditors for the fiscal year ending
September 26, 2009.
|
o
FOR
|
|
o
AGAINST
|
|
o
ABSTAIN
|
DATED: ____________________________
____________________________________
(Signature)
____________________________________
(Signature,
if held jointly)
____________________________________
(Title)
WHEN
SHARES ARE HELD JOINTLY, JOINT OWNERS SHOULD EACH SIGN. EXECUTORS,
ADMINISTRATORS, TRUSTEES, ETC., SHOULD INDICATE THE CAPACITY IN WHICH
SIGNING. PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS
PROXY.