<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
</TABLE>
MAZEL STORES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(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
April 22, 1999
Dear Fellow Shareholder:
It is a pleasure to extend to you a cordial invitation to attend
the 1999 Annual Meeting of Shareholders of Mazel Stores, Inc. This year's annual
meeting will be held at The Cleveland Marriott East, 3663 Park East Drive,
Beachwood, Ohio 44122 on Tuesday, May 25, 1999 at 10:00 a.m.
Shareholders will be asked to approve the election of Directors
and to ratify the appointment of auditors. In addition, we will present a report
on the operations and activities of the Company. Following the meeting,
management will be pleased to answer your questions regarding the Company.
Please carefully review the enclosed Proxy Statement.
I hope you will be able to attend this meeting in person. Whether
or not you expect to attend, I urge you to sign, date and return the enclosed
proxy card so that your shares will be represented.
I look forward to seeing you on May 25th.
Sincerely,
Reuven D. Dessler
Chairman of the Board
<PAGE> 3
MAZEL STORES, INC.
31000 Aurora Road
Solon, Ohio 44139
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 25, 1999
The Annual Meeting of Shareholders of Mazel Stores, Inc., an Ohio
corporation (the "Company"), will be held at The Cleveland Marriott East, 3663
Park East Drive, Beachwood, Ohio 44122 on Tuesday, May 25, 1999 at 10:00 a.m.
The purpose of the meeting will be to:
1. Elect two Directors for a term expiring in 2002.
2. Ratify the appointment of KPMG LLP as auditors of the Company for
the fiscal year ending January 29, 2000.
3. Transact such other business as is properly brought before the
meeting.
Only holders of shares of Common Stock of record at the close of business
on April 9, 1999 will be entitled to notice of and to vote at the meeting. A
list of such shareholders will be open for examination by any shareholder at the
meeting.
ALL SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. TO ENSURE
YOUR REPRESENTATION AT THE MEETING, HOWEVER, PLEASE MARK, SIGN AND DATE YOUR
PROXY CARD AND RETURN IT WITHOUT DELAY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
Any shareholder present at the meeting may withdraw his or her proxy and vote
personally on each matter brought before the meeting.
By Order of the Board of Directors
Marc H. Morgenstern
Secretary
Cleveland, Ohio
April 22, 1999
<PAGE> 4
MAZEL STORES, INC.
31000 AURORA ROAD
SOLON, OHIO 44139
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
SOLICITATION AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Mazel Stores, Inc. (the "Company") for use
at the Annual Meeting of Shareholders to be held at the time and place, and for
the purposes, set forth in the accompanying Notice of Annual Meeting of
Shareholders (the "Annual Meeting"). It is anticipated that the Proxy Statement
together with the proxy card and the fiscal 1998 Annual Report to Shareholders
will be mailed to the Company's shareholders commencing on April 27, 1999.
Pursuant to the Ohio General Corporation Law, a person has the power to
revoke its proxy at any time before it is exercised by (1) attending the Annual
Meeting and voting in person, (2) executing and delivering a proxy bearing a
later date, or (3) delivering written notice of revocation to the Secretary of
the Company prior to the Annual Meeting.
The Company will bear the cost of this solicitation of proxies, including
the charges and expenses of brokerage firms and others for forwarding
solicitation materials to beneficial owners of the Company's shares of Common
Stock (the "Common Shares"). In addition, proxies may be solicited by mail,
personal interview, or telephone by Directors, officers or employees of the
Company and its subsidiaries without additional compensation therefor.
PURPOSES OF ANNUAL MEETING
The Annual Meeting has been called for the purposes of (1) electing two
(2) Directors of the class whose three-year term of office will expire in 2002;
(2) ratifying the appointment of KPMG LLP as auditors of the Company for fiscal
1999; and (3) transacting such other business as may properly come before the
meeting.
The two persons named in the enclosed proxy have been selected by the
Board of Directors and will vote Common Shares represented by valid Board of
Directors' proxies. They have indicated that, unless otherwise indicated in the
enclosed Proxy, they intend to vote for the election of the Director nominees
named herein and in favor of the proposal listed in Item 2 above.
VOTING SECURITIES
The close of business on April 9, 1999 has been fixed as the record date
for the determination of holders of record of the Common Shares of the Company
entitled to notice of and to vote at the Annual Meeting. On the record date,
9,141,798 Common Shares were outstanding and eligible to be voted at the Annual
Meeting. A quorum for the transaction of business at the Annual Meeting is a
majority of the outstanding Common Shares. Votes cast by proxy or in person at
the Annual Meeting will be tabulated by the election inspector appointed for the
Annual Meeting. The election of Directors and the proposal to ratify the
appointment of auditors require approval only by a plurality of the votes cast.
As a consequence, abstentions and broker non-votes will not be counted in
determining the outcome of the vote with respect to election of Directors or
appointment of the auditors.
<PAGE> 5
INFORMATION REGARDING THE BOARD OF DIRECTORS
GENERAL
The business of the Company is managed under the direction of the
Company's Board of Directors. The number of Directors is currently fixed at
nine. The Company's Amended and Restated Code of Regulations ("Code of
Regulations") divides the Board of Directors into three classes of three
Directors each. The Directors serve staggered terms of three years, with the
members of one class being elected each year, as follows: (i) Reuven D. Dessler
and Ned L. Sherwood serve until the 1999 Annual Meeting; (ii) Jacob Koval, Jerry
Sommers and Phillip Cohen serve until the 2000 Annual Meeting; and (iii) Brady
Churches, Robert Horne and Charles Bilezikian serve until the 2001 Annual
Meeting; , and in each case until their respective successors are elected and
qualified. A vacancy exists in the class of Directors whose term expires in
1999.
The Board of Directors has established two standing committees: an Audit
Committee and Compensation Committee.
The Audit Committee has general responsibility for supervision of
financial controls as well as accounting and audit activities of the Company.
The Audit Committee annually reviews the qualifications of the Company's
independent certified public accountants, makes recommendations to the Board of
Directors concerning the selection of the accountants, reviews and approves the
services performed by the accountants and reviews their fees. The Audit
Committee consists of Messrs. Bilezikian, Horne and Sherwood.
The Compensation Committee has the authority to: (i) administer the
Company's stock option plan and restricted stock plan; (ii) review and monitor
key employee compensation and benefits policies and (iii) administer the
Company's management compensation plans. The Compensation Committee consists of
Messrs. Sherwood, Bilezikian and Cohen.
The Board of Directors of the Company held seven meetings in fiscal 1998;
whereas the Audit and Compensation Committees each held one meeting during the
year. All of the current Directors attended at least 75% of the Board and
applicable committee meetings held during fiscal 1998. In addition to holding
regular Board and committee meetings, the Board members also reviewed and
considered matters and documents and communicated with each other wholly apart
from the meetings. Several actions were taken by unanimous written consent.
COMPENSATION OF DIRECTORS
The Company pays each outside Director a fee of $15,000 for attendance at
four meetings per year, together with reimbursement of out-of-pocket expenses
incurred in connection with the Directors' attendance at such meetings. In
addition, each outside Director receives $1,500 per meeting for each meeting
attended in excess of four per year. No additional compensation is to be paid
for committee meetings held on the same day as a Board of Directors' meeting.
Officers of the Company who are also Directors will receive no additional
compensation for serving as Directors.
Each current outside Director of the Company upon their initial election
as a Director in fiscal 1996 received a stock option to purchase 15,000 Common
Shares at $16.00 per share. Such options vest ratably over a period of five
years and expire ten years from date of grant.
2
<PAGE> 6
PROPOSAL ONE
ELECTION OF DIRECTORS
The Board of Directors has nominated Reuven Dessler and Ned Sherwood, the
Directors whose terms of office expire this year, to stand for reelection as
Directors. The three-year term will end upon the election of Directors at the
2002 Annual Meeting of Shareholders. Since a suitable nominee has yet to be
found for the vacancy in the class whose term expires at this Annual Meeting of
Shareholders, a vacancy will continue in the class of Directors whose term will
expire in 2002.
At the Annual Meeting, the Common Shares represented by valid proxies,
unless otherwise specified, will be voted to reelect the Directors. Each
individual nominated for election as a Director of the Company has agreed to
serve if elected. However, if any nominee becomes unable or unwilling to serve
if elected, the proxies will be voted for the election of such other person as
may be recommended by the Board of Directors. The Board of Directors has no
reason to believe that the persons listed as nominees will be unable or
unwilling to serve.
The Board of Directors recommends that each shareholder vote "FOR" the
Board of Directors' nominees.
3
<PAGE> 7
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION PAST FIVE YEARS, DIRECTOR
NAME OF DIRECTOR AGE OTHER DIRECTORSHIPS SINCE
- ------------------ ----- ------------------------------------- -----
NOMINEES FOR TERM TO EXPIRE IN 2002
<S> <C> <C> <C>
Reuven D. Dessler 51 Chairman of the Board and Chief Executive Officer of 1996
the Company since November 1996. Mr. Dessler co-
founded the Company in 1975 and served as its
President until November 1996.
Ned L. Sherwood 49 Principal of ZS Fund L.P., a private investment firm, for 1996
over five years. Mr. Sherwood is currently a member of
the Boards of Directors of Kaye Group, Inc. and Market
Facts, Inc.
DIRECTORS WHOSE TERM EXPIRES IN 2000
PHILLIP COHEN 80 Retired; former Vice President of P-C Sales, Inc., a 1997
wholesaler of closeout merchandise for over five years.
From 1947 to his retirement in 1989, Mr. Cohen was
Chairman and CEO of Wisconsin Toy and Novelty, Inc., a
Midwest distributor of closeout toy and novelty items.
Jacob Koval 51 Executive Vice President - Wholesale of the Company 1996
for over five years. Mr. Koval co-founded the Company
in 1975.
Jerry Sommers 48 Executive Vice President - Retail of the Company since 1996
November 1995. From 1984 through April 1995, Mr.
Sommers held various positions with Consolidated
Stores Corporation, including Executive Vice President
- Merchandise from August 1993 until April 1995.
DIRECTORS WHOSE TERM EXPIRES IN 2001
Charles Bilezikian 62 President of Christmas Tree Shops, Inc., a New 1997
England-based specialty retailer of housewares and
gourmet foods since 1971.
Brady Churches 40 President of the Company since November 1996 having 1996
served as President - Retail from August 1995 until such
date. From 1978 until April 1995, Mr. Churches held
various senior management positions with Consolidated
Stores Corporation, including President from August
1993 until April 1995.
Robert Horne 40 Principal of ZS Fund L.P., A private investment firm, for 1996
over five years.
</TABLE>
4
<PAGE> 8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information as of April 9,
1999 with respect to the beneficial ownership of the Common Shares. Unless
otherwise indicated below, the persons named below have the sole voting and
investment power with respect to the number of shares set forth opposite their
names. All information with respect to beneficial ownership has been furnished
by the respective Director, officer or 5% or greater shareholder, as the case
may be.
<TABLE>
<CAPTION>
Names and, where necessary, Number of Shares
Addresses of Beneficial Owners Beneficially Owned Percentage
- ------------------------------ ------------------ ----------
<S> <C> <C>
ZS Fund L.P. (1)................................. 2,750,383 29.5%
54 Morris Lane
Scarsdale, NY 10583
Ned Sherwood .................................... 2,756,383 (2) 29.6
54 Morris Lane
Scarsdale, NY 10583
Robert Horne .................................... 2,756,383 (2) 29.6
54 Morris Lane
Scarsdale, NY 10583
Mazel/D&K, Inc. (3).............................. 2,058,105 22.1
31000 Aurora Road
Solon, Ohio 44139
Reuven D. Dessler................................ 1,590,755 (4) 17.1
31000 Aurora Road
Solon, Ohio 44139
Jacob Koval...................................... 814,917 (5) 8.7
31000 Aurora Road
Solon, Ohio 44139
William Shenk.................................... 676,769 7.3
1728 Ocean Front
Del Mar, CA 92014
Massachusetts Financial Services Company ........ 485,355 5.2
500 Boylston Street
Boston, MA 20116
Wellington Management Company, LLP............... 481,000 5.2
75 State Street
Boston, MA 02109
Brady Churches .................................. 334,004 (6) 3.6
Jerry Sommers.................................... 335,276 (6) 3.6
Susan Atkinson................................... 53,510 (7) *
Charles Bilezikian............................... 21,000 (8) *
Phillip Cohen ................................... 19,800 (9) *
All Current Directors and 5,931,645 (10) 63.7
Executive Officers of the Company (9 Persons)
<FN>
- -------------
* Less than one percent.
</TABLE>
5
<PAGE> 9
(1) The shares beneficially owned by ZS Fund L.P. include 1,992,001
shares held by ZS Mazel L.P., 453,767 shares held by ZS Mazel II
L.P., and 304,615 shares held by ZS Mazel, Inc.
Messrs. Horne and Sherwood are officers of ZS Fund L.P.
(2) Includes the shares beneficially owned by ZS Fund L.P. as officers
and/or equity owners of the entities holding such shares, Messrs.
Sherwood and Horne have voting power with respect to such shares.
Except to the extent of their equity interests in the entities
holding such shares, Messrs. Sherwood and Horne disclaim beneficial
ownership in such shares. Also includes 6,000 shares each subject to
options currently exercisable or exercisable within 60 days hereof.
(3) Mazel/D& K, Inc. is a corporation owned by Messrs. Dessler and Koval
and members of their families. Messrs. Dessler and Koval are the
Directors and officers of Mazel/D&K, Inc.
(4) Includes 1,372,304 shares owned by Mazel/D&K, Inc. for the benefit of
Mr. Dessler and family members and 30,000 shares subject to options
currently exercisable or exercisable within 60 days hereof.
(5) Includes 685,801 shares owned by Mazel/D&K, Inc. for the benefit of
Mr. Koval and family members and 12,000 shares subject to options
currently exercisable or exercisable within 60 days hereof.
(6) Messrs. Churches and Sommers each own 17,538 Common Shares that are
unvested and held under the Company's Restricted Stock Plan and
40,000 and 43,000 shares, respectively, subject to options currently
exercisable or exercisable within 60 days hereof. These shares are
included in the individuals respective totals.
(7) Includes 14,000 shares subject to options currently exercisable or
exercisable within 60 days hereof.
(8) Includes 6,000 shares subject to options currently exercisable or
exercisable within 60 days hereof.
(9) Includes 16,000 shares subject to options currently exercisable or
exercisable within 60 days hereof.
(10) Includes 173,000 shares subject to options currently exercisable or
exercisable within 60 days hereof.
EXECUTIVE OFFICERS' COMPENSATION
The following table sets forth certain information with respect to
the compensation earned during the fiscal years ended January 30, 1999, January
31, 1998 and January 25, 1997, respectively, by the Chief Executive Officer and
certain other named executive officers of the Company:
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Long Term
Compensation Compensation
Fiscal Option All Other
Name and Principal Position Year Salary Bonus Awards(#) Compensation
- --------------------------- ---- ------ ----- --------- ------------
(1)
<S> <C> <C> <C> <C> <C>
Reuven D. Dessler 1998 $ 458,945 - - $1,231
Chief Executive Officer 1997 457,363 $62,500 - -
1996 1,273,883 125,000 75,000 1,274,285
Brady Churches 1998 394,531 - - 2,677
President 1997 390,055 62,500 - 112,500
1996 420,913 125,000 100,000 881,479
Jacob Koval 1998 246,088 - - 890
Executive Vice President - 1997 243,477 79,376 - -
Wholesale 1996 414,719 75,000 30,000 461,528
Jerry Sommers 1998 290,952 - 15,000 1,999
Executive Vice President - Retail 1997 288,709 62,500 - 53,750
1996 367,044 125,000 100,000 488,733
Susan Atkinson 1998 150,337 - 10,000 1,128
Senior Vice President - 1997 129,069 30,377 - -
Chief Financial Officer and 1996 138,629 56,918 30,000 123,134
Treasurer
<FN>
(1) Payments in fiscal years 1996 and 1997 were made under the executive officers' employment agreements discussed below.
</TABLE>
6
<PAGE> 10
STOCK OPTION GRANTS IN FISCAL 1998
The following table summarizes stock option grants by the Company to
executive officers during the fiscal year ended January 30, 1999
<TABLE>
<CAPTION>
(a)
Number of % of Total (b)
Securities Options Potential Realizable Value at
Underlying Granted to Exercise or Assumed Annual Rates of Stock
Options Employees Base Price Expiration Price Appreciation for Option Term
Name Granted (#) In Fiscal 1998 ($/Sh) Date 5% ($) 10% ($)
---- ----------- -------------- ---------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Reuven Dessler 0 - - - - -
Brady Churches 0 - - - - -
Jacob Koval 0 - - - - -
Jerry Sommers 15,000 6.4 17.25 03-16-08 162,726 412,381
Susan Atkinson 10,000 4.3 17.25 03-16-08 108,484 274,921
<FN>
(a) Options are exercisable upon vesting 20% each year, commencing in March,
1999.
(b) The potential realizable value that might be recognized upon the exercise of
the options immediately prior to the expiration of their term, assuming the
specified compounded rates of appreciation over the term of the option.
Shareholders of the Company, as a group, would realize $10,291,094 and
$26,079,653 at assumed annual rates of appreciation of 5% and 10%, respectively,
over the ten-year life of the options. There can be no assurance that the
amounts reflected in this table will be achieved.
</TABLE>
AGGREGATED OPTION EXERCISES IN FISCAL 1998 AND FISCAL YEAR-END OPTION VALUES
The following table summarizes the fiscal year-end value of
unexercised options for each of the executive officers identified in the Summary
Compensation Table. No options were exercised by any executive officer in fiscal
1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS AT JANUARY 30, VALUE OF UNEXERCISED IN-THE-MONEY
1999 (#) OPTIONS AT JANUARY 30, 1999 ($) (1)
------------------------------------ -----------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Reuven Dessler 30,000 45,000 $ 0 $ 0
Brady Churches 40,000 60,000 0 0
Jacob Koval 12,000 18,000 0 0
Jerry Sommers 40,000 75,000 0 0
Susan Atkinson 12,000 28,000 0 0
<FN>
(1) The closing price of Mazel Stores, Inc. Common Shares on January 29,
1999, the last trading day prior to the fiscal year end, was $15.250.
</TABLE>
7
<PAGE> 11
EMPLOYMENT ARRANGEMENTS
Mr. Dessler has an employment agreement terminating October 31, 2000.
Under the terms of the agreement, Mr. Dessler's current annual salary is
$462,020 (subject to annual cost-of-living adjustments). Mr. Dessler is entitled
to received an annual bonus of up to 88.2% of his base salary subject to the
Company achieving pre-determined annual performance targets. Under the
agreement, Mr. Dessler is entitled to a severance payment equal to one-year's
salary and bonus in the event of termination of his employment by the Company
without cause, except that, if the termination occurs after or in contemplation
of a "change in control" (as defined in the agreement) that Mr. Dessler voted
against, the severance payment is two-years' salary and bonus.
Mr. Koval has an employment agreement terminating on October 31,
2000. Under the terms of the agreement, Mr. Koval's current annual salary is
$245,036 (subject to annual cost-of-living adjustments). Mr. Koval is entitled
to receive an annual bonus of up to 66.7% of his base salary subject to the
Company achieving pre-determined annual performance targets. Under the
agreement, Mr. Koval is entitled to a severance payment equal to one-year's
salary and bonus in the event of termination of his employment by the Company
without cause, except that, if the termination occurs after or in contemplation
of a change in control that Mr. Koval voted against, the severance payment is
two-years' salary and bonus.
Mr. Churches has an employment agreement terminating on October 31,
2000 providing him a current annual base salary of $389,432 (subject to annual
cost-of-living adjustments). Mr. Churches is entitled to receive an annual bonus
up to 58.3% of his annual base salary, subject to the Company achieving
pre-determined annual performance targets. Under his agreement, Mr. Churches is
entitled to two-years' salary and bonus in the event of termination of his
employment without cause or in the event he elects to terminate employment
following a change in control.
Mr. Sommers has an employment agreement terminating on October 31,
2000 providing him a current annual base salary of $287,074 (subject to annual
cost-of-living adjustments). Mr. Sommers is entitled to receive an annual bonus
of up to 59.4% of his annual base salary, subject to the Company achieving
pre-determined annual performance targets. Mr. Sommers is entitled to receive
two-years' salary and bonus in the event of termination of his employment
without cause or in the event he elects to terminate employment following a
change in control.
Ms. Atkinson has an employment agreement terminating January 31, 2000
providing her a current annual base salary of $200,000. Ms. Atkinson is entitled
to an annual bonus of up to 48.4% of her annual base salary, subject to the
Company achieving pre-determined annual performance targets. Under her
agreement, Ms. Atkinson is entitled to receive one-year's salary in the event of
termination of her employment other than for cause.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Act of 1934 requires the Company's
Directors, executive officers and persons who own 10% or more of the Company's
Common Shares to file reports of ownership and changes of ownership with the
Securities and Exchange Commission and the Company. Based upon a review of these
filings and written representations from such individuals, the Company
understands that all such filers have adhered to all applicable filing
requirements.
8
<PAGE> 12
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is generally
responsible for determining the nature and amount of compensation for executive
officers. All decisions by the Compensation Committee are reviewed and approved
by the full Board of Directors. The Compensation Committee met once in fiscal
1998.
The Company's compensation philosophy ties a significant portion of
executive compensation to the Company's success in meeting specified profit
growth and performance goals and to appreciation in the Company's stock price.
The Company's compensation objectives include attracting and retaining the best
possible executive talent, motivating executive officers to achieve the
Company's performance objectives, rewarding individual performance and
contributions, and linking executive and shareholder interests through
equity-based plans.
The Company's executive compensation consists of three key
components: base salary, annual bonus and stock options and restricted stock
awards, each of which is intended to complement the others and, taken together,
to satisfy the Company's compensation objectives.
BASE SALARY. At the time of the Company's initial public offering
("IPO") in November 1996, the Company entered into or amended existing
employment agreements with each of the Company's executive officers. The
agreements generally expire on October 31, 2000. These agreements set forth
annual salaries for the executives that were established through negotiations
with the officers, giving consideration to the salaries of executives of other
growth retailers of similar size. In fiscal 1998, the Compensation Committee
reviewed the agreements to determine if the annual salaries were still
appropriate or needed modifications in order to continue to meet the Company's
compensation objectives. The Committee determined that no modification in the
salaries of the executives was necessary.
ANNUAL BONUS. The Company has established a management incentive
bonus plan that bases an executive's annual bonus on specified profit growth and
performance goals and to appreciation in the Company's stock price established
by the Compensation Committee at the beginning of the fiscal year. The annual
bonus percentages for the named officers range from 48% to 88% of base salary,
with the annual bonus of the Chief Executive Officer being at the 88% threshold.
The plan provided for graduated bonus payments dependent on the percentage of
the targeted goal achieved. The employment contracts capped the maximum bonus
payable to senior executive officers. In as much as the minimum targeted goals
for fiscal 1998 were not achieved, no bonuses were paid under the plan.
STOCK-RELATED COMPENSATION. In November 1996, at the time of the
Company's IPO, the Company made stock option awards and restricted stock awards
to its officers and key personnel, including the named executive officers. The
Compensation Committee believes that equity-based compensation ensures that the
Company's executives have a continuing stake in the long-term success of the
Company. Both stock option and restricted stock awards contain vesting
provisions that ensures the executives have a financial incentive to remain with
the Company during the vesting period and beyond. Option awards to the
executives were made at the IPO's offering price of the Company's Common Shares
and, accordingly, will have value only if the Company's stock price increases.
In determining the size of option awards, the Committee looks at several
measurements, including the value of options awarded to individuals in
comparable position in peer group companies, individual and Company performance
against plan, the number of shares and options currently held by the officer and
the relative proportion of long-term incentives within the total compensation
mix. Stock option awards in fiscal 1998 were made to Mr. Sommers and Ms.
Atkinson in the amounts of 15,000 and 10,000, respectively. No
9
<PAGE> 13
other stock option awards were made to executive officers in fiscal 1998. The
Company expects to review the grant of awards to executive officers in fiscal
1999.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. The Committee uses the same
procedures described above for the other executive officers in setting the
annual salary, bonus, and stock- incentive awards for the Chief Executive
Officer. Mr. Dessler's employment agreement is described in the section titled
"Employment Arrangements."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. Phillip
Cohen was an officer of a company that was involved, in fiscal 1998 and prior
years, in a joint venture with the Company with respect to the identification,
purchase and sale of close-out merchandise. See "Certain Transactions" below.
COMPENSATION COMMITTEE:
Charles Bilezikian, Chairman
Phillip Cohen
Ned Sherwood
10
<PAGE> 14
CERTAIN TRANSACTIONS
Messrs. Dessler and Koval are partners in Aurora Road Realty
Development Company, a partnership which leases the office and warehouse
facility located in Solon, Ohio, to the Company. Messrs. Dessler and Koval own
40.0% and 6.0% interests, respectively, in such partnership. The Company made
rent payments totaling $1,930,000 pursuant to the lease for fiscal 1998. Messrs.
Dessler and Koval are also minority shareholders in entities that operate public
warehouses in which the Company periodically leases space. The Company believes
the payments under the leases are on terms no less favorable to the Company than
could be obtained from unrelated parties.
The Company's warehouse in South Plainfield, New Jersey is leased
from a limited liability company in which Messrs. Dessler and Koval own
approximately 34% and 10% membership interest, respectively. Neither Mr. Dessler
or Mr. Koval are involved in the management of the lessor and the terms are no
less favorable to the Company than could be obtained from unrelated parties.
The Company made loans to executives and other individuals in
December 1996 to provide for payment of tax obligations arising from the
issuance of Common Shares to such individuals at the time of the Company's IPO.
The balances as of January 30, 1999 were $953,400, $672,100 and $62,700 to Mr.
Dessler, Mr. Koval and Ms. Atkinson, respectively. Such loans are to be repaid
on the earlier of five years from the effective date of the loan or the date of
the individual's first sale of Common Shares, but only to the extent of net sale
proceeds. The loans bear interest at the applicable federal rate.
P-C Sales, a corporation owned by the son of Mr. Cohen and of which
Mr. Cohen was an officer, had a joint venture agreement with the Company wherein
the two companies split the profits derived from the sale of closeout
merchandise located by P-C Sales and sold by the Company. In fiscal 1998, P-C
Sales income from the joint venture totaled $345,400. The Company purchased the
assets of P-C Sales in fiscal 1998. Additionally, for services rendered for and
on behalf of P-C Sales and the Company, on March 16, 1998, Mr. Cohen received
10,000 ten-year, fully-vested stock options to purchase Common Shares at $17.25
per share.
Christmas Tree Shops, Inc., a New England-based retailer of which Mr.
Bilezikian is President and founder, is a customer of the Company's wholesale
division. The dollar amount of purchases by the Christmas Tree Shops is not
"material" (as defined in SEC Regulation S-K, Item 404(b)) to either the Company
or Christmas Tree Shops.
11
<PAGE> 15
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the cumulative total
shareholder return on the Company's Common Shares against the cumulative total
return of the Nasdaq U.S. Composite Index and the Nasdaq Retail Trade Stock
Index from the date of the Company's IPO in November 1996 through January 1999.
The stock price performance graph below shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into and filing under the Securities Act of 1933 or under
the Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference and shall not otherwise
be deemed filed under such Acts.
<TABLE>
<CAPTION>
[GRAPH]
COMPARISON OF CUMULATIVE TOTAL RETURNS
Mazel Stores, Inc., Nasdaq Retail Trade Stock Index and Nasdaq U.S. Composite Index
From November 29, 1996 through January 31, 1999
11/29/96 1/31/97 1/31/98 1/31/99
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Mazel Stores, Inc. $100.00 $164.06 $ 86.72 $ 95.31
Nasdaq Retail Trade Stock Index $100.00 $ 97.67 $114.21 $139.25
Nasdaq U.S. Composite Index $100.00 $107.01 $126.56 $197.55
</TABLE>
12
<PAGE> 16
PROPOSAL TWO
INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of the Audit
Committee, has selected KPMG LLP as auditors for the fiscal year ending January
29, 2000. The Board of Directors requests the ratification of the appointment of
KPMG LLP by the shareholders at the Annual Meeting. The Board of Directors
recommends that each shareholder vote "FOR" ratification of KPMG LLP as auditors
for fiscal 1999.
KPMG LLP has audited the Company's financial statements for each
fiscal year since the fiscal year ended December 31, 1987. Representatives of
KPMG LLP are expected to be present at the meeting with the opportunity to make
a statement if they desire to do so, and are expected to be available to respond
to appropriate questions.
OTHER MATTERS
The Board of Directors of the Company is not aware that any matters
other than those listed in the Notice of Annual Meeting of Shareholders is to be
presented for action at the meeting. If any of the Board's nominees is
unavailable for election as a Director or any other matter should properly come
before the meeting, it is intended that votes will be cast pursuant to the proxy
in respect thereto in accordance with the best judgment of the person or persons
acting as proxies.
SHAREHOLDERS' PROPOSALS
The deadline for shareholders to submit proposals to be considered
for inclusion in the Proxy Statement for the 2000 Annual Meeting of Shareholders
is expected to be December 17, 1999.
OTHER INFORMATION
The Company's fiscal 1998 Annual Report is being mailed to
shareholders with this Notice of the Annual Meeting of Shareholders and Proxy
Statement.
MARC H. MORGENSTERN
Secretary
By Order of the Board of Directors
April 22, 1999
13
<PAGE> 17
PROXY
Mazel Stores, Inc.
Annual Meeting of Shareholders
May 25, 1999
The undersigned shareholder of MAZEL STORES, INC.. (the "Company")
hereby appoints Reuven D. Dessler and Brady Churches, or either one of them,
each with full power of substitution and revocation as Proxies to represent and
vote all the Common Shares of the Company held of record by the undersigned at
the above-stated Annual Meeting and at any adjournment(s) thereof with all of
the powers the undersigned would possess if present, as specified on the reverse
side.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL
BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE ON THE REVERSE SIDE HEREOF.
UNMARKED PROXIES WILL BE VOTED IN FAVOR OF EACH OF THE MATTERS LISTED ON THE
REVERSE SIDE UNLESS SPECIFIED TO THE CONTRARY. THE PROXIES WILL USE THEIR
DISCRETION WITH RESPECT TO ANY MATTER REFERRED TO IN ITEM (3). THIS PROXY IS
REVOCABLE AT ANY TIME BEFORE IT IS EXERCISED.
The undersigned hereby acknowledges receipt of the Notice of Meeting
and Proxy Statement dated April 27, 1999 for the Annual Meeting of Shareholders.
(CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE)
14
<PAGE> 18
Please sign, date and mail your
proxy card back as soon as possible!
ANNUAL MEETING OF SHAREHOLDERS
MAZEL STORES, INC.
MAY 25, 1999
Please Detach and Mail in the Envelope Provided
[ X ] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE
For Withhold Nominees: Reuven Dessler
Item 1. Ned Sherwood
Election of directors [ ] [ ]
WITHHELD FOR: (Write that nominee's name in the space provided below)
- ---------------------------------
For Withhold Abstain
Item 2. Approval of the appointment of KPMG LLP [ ] [ ] [ ]
as auditors for the fiscal year ending
January 29, 2000
Item 3. Upon such other business as may be properly come
before said meeting or any adjournment thereof.
The Board of Directors recommends a vote FOR the nominees and FOR proposal 2.
SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
CHANGE OF ADDRESS
COMMENTS AT LEFT [ ]
I PLAN TO ATTEND
THE MEETING [ ]
I DO NOT PLAN TO
ATTEND THE MEETING [ ]
SIGNATURE(S)___________________________________________ DATE__________, 1999
NOTE: Please sign EXACTLY as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
15
