<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:
/ / 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
CROWLEY, MILNER AND COMPANY
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
CROWLEY, MILNER AND COMPANY
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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
[LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 17, 1995
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Crowley,
Milner and Company, a Michigan corporation (the "Company"), will be held at the
principal offices of the Company, 2301 West Lafayette Boulevard, Detroit,
Michigan 48216 on Wednesday, May 17, 1995 at 2:00 p.m., Eastern Daylight Savings
Time, for the following purposes:
1. To elect three directors to hold office until the Annual Meeting of
Shareholders in 1998;
2. To appoint the firm of Ernst & Young LLP to audit the financial
records of the Company for the fiscal year ending February 3, 1996;
3. To approve an amendment to the Crowley, Milner and Company 1992
Incentive Stock Plan (the "1992 Incentive Stock Plan") to increase the
number of shares of Common Stock authorized for issuance under the
1992 Incentive Stock Plan from 100,000 shares to 200,000 shares;
4. To approve the Crowley, Milner and Company 1995 Director Stock Option
Plan; and
5. To consider and act upon any other matters which may properly come
before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 5, 1995 as
the record date for the determination of shareholders entitled to vote at the
Annual Meeting and any adjournment thereof.
You are cordially invited to attend the meeting in person. If you do not
expect to be present, please sign, date and mark the enclosed proxy and return
it immediately. The proxy is revocable and will not affect your right to vote in
person if you attend the meeting.
By order of the Board of Directors,
[sig]
MARK A. VANDENBERG, Secretary
Detroit, Michigan
April 25, 1995
<PAGE> 3
[LOGO]
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 17, 1995
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Crowley, Milner and Company, a Michigan corporation
(the "Company"), of proxies to be used at the Annual Meeting of Shareholders
which will be held on May 17, 1995 or at any adjournment of the meeting. The
mailing address of the principal executive offices of the Company is 2301 West
Lafayette Boulevard, Detroit, Michigan 48216. This Proxy Statement and the
enclosed Proxy were first sent or given to shareholders on April 25, 1995.
The cost of soliciting proxies, whether by mail, telephone, telegraph, in
person or otherwise, will be borne by the Company. In addition to solicitation
by mail, the Company will reimburse brokerage houses and other nominees for
their expenses incurred in sending proxies and proxy material to the beneficial
owners of shares held by them.
Holders of Common Stock of record at the close of business on April 5, 1995
will be entitled to vote at the meeting. On that date, 1,048,300 shares of
Common Stock were issued and outstanding. Each shareholder is entitled to one
vote for each share of Common Stock held by him. Cumulative voting for the
election of directors is not available under the Company's Articles of
Incorporation. Shares cannot be voted at the meeting unless the holder is
present in person or represented by proxy. Any shareholder giving a proxy may
revoke it at any time prior to its use. Unless revoked, the shares represented
by the proxy will be voted in accordance with the specifications made. If no
specifications are made, such shares will be voted (i) for the election of the
Company's nominees as directors, (ii) for the appointment of Ernst & Young LLP
as auditors, (iii) for the approval of an amendment to the Crowley, Milner and
Company 1992 Incentive Stock Plan (the "1992 Incentive Stock Plan") to increase
the number of shares of Common Stock authorized for issuance under the 1992
Incentive Stock Plan from 100,000 shares to 200,000 shares, (iv) and for the
approval of the 1995 Director Stock Option Plan (the "1995 Director Stock
Plan"). The Board of Directors does not intend to present any other matters at
the Annual Meeting. However, should any other matters properly come before the
Annual Meeting, the proxy holders will have discretionary authority to vote upon
such matters and, in such event, it is the intention of such proxy holders to
vote the proxy in accordance with their best judgment.
For purposes of determining the number of votes cast with respect to any
voting matter, except as otherwise expressly described herein, (a) only those
cast "for" or "against" are included, (b) abstentions are counted only for
purposes of determining whether a quorum is present at the Annual Meeting, and
(c) broker non-votes are not counted for any purpose. A majority of the
outstanding shares of the Company, represented in person or by proxy, will
constitute a quorum at the meeting.
MATTERS TO COME BEFORE THE MEETING
1. ELECTION OF DIRECTORS.
General; Plurality and Voting.
The Bylaws of the Company provide that the Board of Directors shall consist
of not less than nine members nor more than twelve members as shall be fixed
from time to time by the Board and that the Board of Directors shall be divided
into three classes as nearly equal in number as possible. The term of office of
each class of directors is three years, and the terms of office of the three
classes overlap.
1
<PAGE> 4
Although the Board of Directors is presently comprised of eleven directors
one of the directors whose term expires at the 1995 Annual Meeting, Mr. Robert
E. Winkel, has elected to retire from the Board, and the Board has fixed its
size at ten directors, effective immediately after the 1995 Annual Meeting.
Three directors will be elected at this year's Annual Meeting to hold office
until the Annual Meeting in 1998. The nominees named below have been selected by
the Board of Directors. If, due to circumstances not now foreseen, any of the
nominees named below will not be available for election, the proxies will be
voted for such other person or persons as the Board of Directors may select.
Provided that a quorum is present, the three nominees receiving the highest
number of votes cast at the Annual Meeting will be elected as directors of the
Company.
If no instructions are indicated in any properly executed proxy, such proxy
will be voted FOR the election of the three individuals nominated by the Board
of Directors.
The following table sets forth the name, age, principal occupation for the
past five years, other directorships with publicly owned companies and with
public institutions, term of service as a director of the Company, and
beneficial shareholdings with respect to the three individuals who will be
nominated for election and the seven directors who were previously elected and
who will continue for the terms indicated, as provided to the Company by each
such person.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED AS OF
HAS APRIL 5, 1995(1)
SERVED -------------------
NOMINEES FOR ELECTION AS A PERCENT
AS DIRECTOR UNTIL THE PRINCIPAL OCCUPATION DIRECTOR OF
1998 ANNUAL MEETING AND OTHER DIRECTORSHIPS AGE SINCE NUMBER CLASS
- - --------------------------- ------------------------------- --- ---- ------- -----
<S> <C> <C> <C> <C> <C>
Dennis P. Callahan......... President and Chief Executive
Officer of the Company since
November 1992; previously
employed as Senior Vice
President -- Merchandising
of Hess's Department Stores,
Allentown, Pennsylvania,
from May 1990 to November
1992........................ 51 1992 64,212(1)(2) 6.0%
JoAnn S. Cousino........... Private investor; former buyer
for the Company................ 55 1983 131,526(1) 12.5%
Alfred M. Entenman, Jr..... Executive Consultant to BEI
Associates, Inc.
(architectural and
engineering services) since
January 1988................ 74 1973 100 *
<CAPTION>
DIRECTORS WHOSE TERM
WILL CONTINUE UNTIL THE
1997 ANNUAL MEETING
- - ---------------------------
Carroll E. Ebert........... Retired Chairman, Carson Pirie
Scott & Co.................. 71 1991 1,500 *
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED AS OF
HAS APRIL 5, 1995(1)
DIRECTORS WHOSE TERM SERVED -------------------
WILL CONTINUE UNTIL THE AS A PERCENT
1997 ANNUAL MEETING PRINCIPAL OCCUPATION DIRECTOR OF
(CONT'D) AND OTHER DIRECTORSHIPS AGE SINCE NUMBER CLASS
- - --------------------------- ------------------------------- --- ---- ------- -----
<S> <C> <C> <C> <C> <C>
Julius L. Pallone.......... Management consultant since
June 1993; President and
Chief Executive Officer of
Royal Financial Services,
Inc. from January 1989 to
June 1993; Chairman of the
Board and President of its
wholly-owned subsidiary,
Royal Maccabees Life
Insurance Co. from 1968 to
June 1993. Also serves as a
trustee of the Woodward
Funds....................... 64 1988 4,000 *
Andrew J. Soffel........... Chairman of the Board of
Directors of the Company since
March 1991 and consultant to
the Company since January
31, 1993; President and
Chief Executive Officer of
the Company from March 1988
to November 1992............ 64 1988 12,000(2) 1.1%
<CAPTION>
DIRECTORS WHOSE TERMS
WILL CONTINUE UNTIL THE
1996 ANNUAL MEETING
- - ---------------------------
Joseph C. Keys............. Buyer for the Company.......... 54 1983 152,891(1) 14.6%
Richard S. Keys............ Buyer for the Company.......... 56 1981 153,281(1) 14.6%
Paul R. Rentenbach......... Member in the firm of Dykema
Gossett PLLC, Detroit,
Michigan (attorneys)........ 49 1991 1,000 *
James L. Schaye, Jr........ Vice-President, Schottenstein
Professional Asset Management
Corporation (formerly
Jubilee Co., Inc.) since
1990; formerly President,
Eleven Group, Inc. (apparel
manufacturer) from 1988 to
1989........................ 46 1993 -- (1) --
</TABLE>
- - -------------------------
* Less than 1%.
(1) See "Principal Shareholders".
(2) For purposes of computing the applicable percentages of the named persons,
shares which can be acquired upon the exercise of any option within the
60-day period beginning April 5, 1995 were added to the shares owned
beneficially by such persons and to the total shares outstanding on that
date, provided that such shares were not deemed to be outstanding for
purposes of computing the percentages of any other person.
Except as otherwise described, the individuals named above have been
principally engaged in the occupations described above for the past five years.
Richard and Joseph Keys are brothers and JoAnn S. Cousino is their cousin.
None of the above individuals is a party to any contract, arrangement, or
understanding with any person with respect to any securities of the Company
except for the Shareholder Agreement (see "Principal Shareholders").
3
<PAGE> 6
The law firm of Dykema Gossett PLLC, of which Mr. Rentenbach is a member,
has performed legal services for the Company during its last fiscal year and is
expected to perform such services during the current year. The amounts paid to
Dykema Gossett during the fiscal year ended January 28, 1995 by the Company for
legal services did not exceed five percent of that firm's gross revenues for its
last fiscal year.
Meetings and Committees of the Board.
The Board of Directors has established an Executive Committee, a
Compensation Committee, an Audit Committee, and a Nominating Committee. During
the fiscal year ended January 28, 1995, the Board of Directors met seven times,
the Executive Committee and Nominating Committee did not meet, the Compensation
Committee met three times, and the Audit Committee met once.
Directors other than officers are currently paid a retainer of $9,000 per
year and $300 per meeting for attending meetings of the Board and any committees
on which they serve. In the case of Mr. Rentenbach, amounts paid to him as
director's fees are credited against fees for legal services charged by the law
firm of which he is a member.
The present members of the Executive Committee are Messrs. Winkel
(Chairman), Callahan, Entenman, Joseph C. Keys, and Soffel, and Ms. Cousino. The
function of the Executive Committee is to exercise the authority of the Board of
Directors in the management of the business of the Company between meetings of
the Board of Directors.
The present members of the Compensation Committee are Messrs. Pallone
(Chairman), Ebert, Entenman, Richard S. Keys, and Schaye. The Compensation
Committee establishes from time to time the salaries of the Company's executive
officers, recommends to the Board of Directors the schedule of discretionary
annual bonuses to be paid under the Company's discretionary bonus program, and
administers the 1992 Incentive Stock Plan.
The present members of the Audit Committee are Messrs. Entenman (Chairman),
Ebert, Joseph C. Keys, Richard S. Keys, Pallone, and Winkel, and Ms. Cousino.
The Audit Committee nominates the independent auditors, reviews with the
independent auditors the scope and results of the auditing engagement and any
non-audit services to be performed by the independent auditors and evaluates the
independence of the independent auditors and their fees for audit and non-audit
services.
The present members of the Nominating Committee are Messrs. Richard S. Keys
(Chairman), Ebert, Entenman, Pallone and Rentenbach. The Nominating Committee is
responsible for identifying and recommending to the Board qualified candidates
for election as directors of the Company. In carrying out its responsibilities,
the Nominating Committee will consider candidates suggested by other directors,
employees and shareholders. Suggestions for candidates, accompanied by
biographical material for evaluation, may be sent to the Secretary of the
Company at the Company's principal executive offices.
2. APPOINTMENT OF AUDITORS.
The Board of Directors, upon recommendation of its Audit Committee, will
propose at the meeting that the shareholders appoint the firm of Ernst & Young
LLP to audit the financial records of the Company for the fiscal year ending
February 3, 1996. Ernst & Young LLP audited the Company's financial records for
the prior fiscal year.
A representative of Ernst & Young LLP is expected to be present at the
meeting and will have the opportunity to make a statement, if he so desires, and
will be available to answer appropriate questions by shareholders.
The affirmative vote of a majority of the shares of Common Stock present at
the meeting is required to appoint Ernst & Young LLP as the Company's auditors.
If the necessary approval by shareholders is not received the Board of Directors
will select and appoint another independent public accounting firm for such
purpose without further shareholder action.
If no instructions are indicated in any properly executed proxy, such proxy
will be voted FOR the appointment of Ernst & Young LLP as auditors.
4
<PAGE> 7
3. APPROVAL OF AMENDMENT TO 1992 INCENTIVE STOCK PLAN.
The Board of Directors approved the amendment to the 1992 Incentive Stock
Plan described below on March 22, 1995 and directed that the amendment be
submitted to the shareholders for approval at the Annual Meeting.
Proposed Amendment to Increase the Number of Shares Authorized for Issuance.
The Company proposes to amend the 1992 Incentive Stock Plan to increase the
number of shares of Common Stock authorized for issuance under the 1992
Incentive Stock Plan from 100,000 shares to 200,000 shares.
As of April 5, 1995, (i) incentive stock options for 56,000 shares had been
granted and were outstanding and options for 166 shares had been exercised, and
(ii) awards for 30,000 shares had been granted to Mr. Callahan (subject to
certain vesting and forfeiture provisions) and were outstanding. See "Executive
Compensation -- Long Term Incentive Plan -- Award of Restricted Stock in Last
Fiscal Year". As a result, there are currently 14,000 shares of Common Stock
available for issuance under the 1992 Incentive Stock Plan and, if the amendment
is approved, there will be 114,000 shares of Common Stock available for issuance
under the 1992 Incentive Stock Plan. In addition, as of the date of this Proxy
Statement, incentive stock options for an additional 40,000 shares were granted
on March 22, 1995, subject, however, to the approval by the shareholders of the
amendment to the 1992 Incentive Stock Plan described herein.
Since the adoption of the 1992 Incentive Stock Plan, the Company has
utilized the grant of stock options and the award of restricted stock as part of
its compensation program for executives and key employees. In this way, the
Company has linked compensation at various levels within the organization to
performance and believes that it is appropriate to continue such practice in the
future through the use of stock options and restricted stock awards. In
addition, the Company believes that the grant of stock options and the award of
restricted stock to executives and key employees helps to provide an incentive
for their continued employment and otherwise more closely aligns their interests
with those of the Company's shareholders.
As a result, the Board of Directors believes that 100,000 additional shares
of Common Stock should be made available under the 1992 Incentive Stock Plan in
order to facilitate the continued use of stock options and restricted stock
awards or part of the Company's incentive compensation program.
Summary of 1992 Incentive Stock Plan.
General. The 1992 Incentive Stock Plan was adopted by the Board of
Directors on March 25, 1992 and was approved by the shareholders at the Annual
Meeting held on May 20, 1992. The purpose of the 1992 Incentive Stock Plan is to
promote the best interests of the Company and its shareholders by encouraging
employees of the Company to acquire a proprietary interest in the Company
through the grant of options and restricted stock awards, thus identifying their
interests with those of shareholders and encouraging employees to make greater
efforts on behalf of the Company to achieve its long-term business plans and
objectives. The following is a summary of the material features of the 1992
Incentive Stock Plan.
The 1992 Incentive Stock Plan authorizes the granting of incentive stock
options and nonqualified stock options and the awarding of restricted stock for
up to an aggregate of 100,000 shares of Common Stock to certain eligible
officers and employees of the Company and for such share amounts as the
Compensation Committee of the Board of Directors (the "Committee") may select
from time to time. The officers and employees eligible to participate in the
1992 Incentive Stock Plan consist of the executive officers of the Company and
the directors of the Company's principal departments (9 in total as of the date
of this Proxy Statement). The closing price of the Company's Common Stock as
quoted on the American Stock Exchange Composite Transaction listing on April 5,
1995, was $4.25 per share.
Incentive Stock Options and Nonqualified Stock Options. Options granted
under the 1992 Incentive Stock Plan may be either "incentive stock options"
(options, pursuant to Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), which afford tax benefits to recipients upon compliance
with certain conditions and which do not result in tax deductions to the
Company) or "nonqualified stock options" (options which do not afford income tax
benefits to recipients, but which may provide tax deductions to the
5
<PAGE> 8
Company). Incentive stock options and nonqualified stock options are sometimes
collectively referred to as "options".
Incentive stock options granted under the 1992 Incentive Stock Plan may be
exercised for such prices and at such times as the Committee determines,
provided that no incentive stock options shall be granted with an exercise price
below 100% of the fair market value of the Common Stock on the date of grant or
with an exercise term that extends beyond 10 years from the date of grant; in
the case of an employee owning more than 10% of the Common Stock, the exercise
price must be at least 110% of the fair market value of the Common Stock on the
date the incentive stock option is granted. Nonqualified stock options granted
under the 1992 Incentive Stock Plan may be exercised for such prices (including
an exercise price below 100% of the fair market value of the Common Stock on the
date of grant) and at such times as the Committee determines, provided that no
nonqualified stock options shall be granted with an exercise term that extends
beyond 10 years from the date of grant. The purchase price for the Common Stock
issuable upon exercise of an incentive stock option and a nonqualified stock
option must be paid in full in cash or by check, bank draft or money order at
the time of exercise; in lieu of such form of payment, an employee may pay the
purchase price by tendering shares of Common Stock.
Options granted under the 1992 Incentive Stock Plan become exercisable on a
cumulative basis in equal installments at a rate of 33 1/3% per year, commencing
one year from the date of grant; provided, however, that the termination of an
employee's employment and/or the occurrence of a "change in control" (as
described below) may affect an employee's right to exercise an option. The
shares comprising each installment may be purchased in whole or in part at any
time after such installment becomes exercisable. In the case of incentive stock
options, the aggregate fair market value of the underlying Common Stock which
may be first exercised by an employee in any one calendar year cannot exceed
$100,000, with such value being determined at the time the options are granted
as provided by the terms of Section 422 of the Code. To the extent that an
option intended to constitute an incentive stock option shall violate the
foregoing $100,000 limitation (including change of control situations), the
portion of the option that exceeds the $100,000 limitation shall be deemed to
constitute a nonqualified stock option. The Committee, in its sole discretion,
may accelerate the time at which any option may be exercised in whole or in
part.
If an employee's employment is terminated for any reason (other than a
change in control) prior to the date an option first becomes exercisable, the
employee's right to exercise the option terminates. If an employee's employment
is terminated for any reason other than death or disability after the date an
option first becomes exercisable, the employee's right to exercise the option
terminates within the earlier of the expiration of the option or the expiration
of three months after termination of employment, and if an employee's employment
is terminated due to death or disability after the date an option first becomes
exercisable, the employee's right to exercise the option terminates within the
earlier of the expiration of the option or the expiration of one year after
termination of employment. The Committee, at the time of an employee's
termination of employment, may, in its sole discretion, accelerate the term of
an option or extend the exercise period of an option.
In the case of an incentive stock option, a grantee will not be deemed to
have received taxable income upon the grant or exercise of any incentive stock
option, provided that such shares are not disposed of by the grantee for at
least one year after the date of exercise and two years after the date of grant.
No compensation deduction will be taken by the Company as a result of the grant
or exercise of incentive stock options. In the case of a nonqualified stock
option, a grantee will be deemed to receive ordinary income upon exercise of the
nonqualified stock option in an amount equal to the amount by which the exercise
price is exceeded by the fair market value of the Common Stock purchased on the
date of exercise. The amount of any ordinary income deemed to be received by a
grantee due to a disposition of Common Stock acquired upon the exercise of an
incentive stock option prior to the expiration of two years from the date of
such option was granted and/or prior to the expiration of one year from the date
the Common Stock was acquired and the amount of any ordinary income deemed to be
received by a grantee upon exercise of a nonqualified stock option will be a
deductible expense for tax purposes for the Company.
6
<PAGE> 9
A grantee of an option will have no rights as a shareholder with respect to
any shares covered by an option until the issuance of a stock certificate for
such shares.
Restricted Stock Awards. The Committee may award shares of restricted stock
to such employees and in such amounts as it shall determine. Shares of
restricted stock awarded under the 1992 Incentive Stock Plan may not be sold or
otherwise transferred until the termination of the applicable restriction period
established by the Committee; however, the Committee shall have the discretion
to accelerate the lapse of restrictions in the applicable restriction period
with respect to all or any number of the shares of a restricted stock award. All
rights with respect to the restricted stock awarded to an employee shall be
exercisable during an employee's lifetime only by the employee. The Committee
may impose such other restrictions on any shares of restricted stock awarded
under the 1992 Incentive Stock Plan as it may deem advisable, including, without
limitation, restrictions under applicable federal or state securities laws.
Except as otherwise provided with respect to an employee's termination of
employment and/or the "change in control" provisions (described below), and
subject to applicable federal and state securities laws, shares of restricted
stock awarded under the 1992 Incentive Stock Plan shall become freely
transferable by the employee after the last day of the restriction period.
During the applicable period, an awardee holding shares of restricted stock
may exercise full voting rights with respect to the restricted stock and shall
be entitled to receive all dividends and other distributions paid with respect
to such restricted stock.
Restricted stock awarded under the 1992 Incentive Stock Plan is generally
restricted from sale or other transfer for a period of five years, except that
such restrictions shall lapse and such shares shall become freely transferable
on a cumulative basis in equal installments at a rate of 20% per year,
commencing one year from the date of the award; provided, however, that the
termination of an employee's employment and/or the occurrence of a "change in
control" (described below) may affect an employee's right to receive freely
transferable stock.
If an employee's employment is terminated by reason of death, disability,
or retirement during the restriction period, any remaining restrictions (except
those required by federal or state securities laws) applicable to a restricted
stock award automatically shall terminate, and the shares shall thereby be fully
transferable. If an employee terminates employment for reasons other than death,
disability or retirement, the employee's restricted stock still subject to the
restriction period automatically shall be forfeited to the Company; provided,
however, that the Committee, in its sole discretion, may waive the restrictions
remaining on any or all shares of restricted stock and add such new restrictions
to such shares of restricted stock as it deems appropriate.
An awardee of restricted stock will be deemed to receive ordinary income
upon the lapse of applicable restrictions on transfer in an amount equal to the
fair market value of the Common Stock on the date of lapse. The amount of any
ordinary income deemed to be received by an awardee upon lapse of applicable
restrictions on transfer will be a deductible expense for tax purposes for the
Company.
Change in Control. Upon a "change in control", any options granted under
the 1992 Incentive Stock Plan become immediately exercisable and the remaining
restriction period on any restricted stock awarded under the 1992 Incentive
Stock Plan immediately lapses; provided, however, that to the extent that the
acceleration of a grant is deemed to constitute a "parachute payment" under
Section 280G of the Code and such payment, when aggregated with other parachute
payments to the employee results in an "excess parachute payment" under Section
280G of the Code, any accelerated payment shall be reduced to the highest
permissible amount that shall not subject the employee to the excess parachute
excise tax under Section 4999 of the Code and shall entitle the Company to
retain its full compensation tax deduction for the payment.
The term "change in control" is defined in the 1992 Incentive Stock Plan
generally to mean the occurrence of any of the following events: (i) if any
"person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), or group of persons
acting in concert, other than the Company, a subsidiary or an employee benefit
plan or employee benefit plan
7
<PAGE> 10
trust maintained by the Company or a subsidiary, becomes the "beneficial owner"
(as such term is defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the combined voting power of the Company's then outstanding securities
ordinarily having the right to vote in the election of directors; or (ii) a
liquidation or dissolution of the Company, sale of substantially all of the
assets of the Company, or a merger, consolidation or combination in which the
Company is not the survivor; or (iii) the addition of new members to the Board
within any consecutive twenty-four (24) month period, which members constitute a
majority of the Board, unless a majority of the Board consists of incumbent
members of the Board in office prior to the commencement of such twenty-four
(24) month period, plus new members who were recommended or appointed by a
majority of the incumbent directors in office immediately prior to the addition
of such new members to the Board.
Termination and Amendment. The Board of Directors may terminate the 1992
Incentive Stock Plan, or the granting of options or awarding of restricted stock
under the 1992 Incentive Stock Plan, at any time. No option shall be granted
under this 1992 Incentive Stock Plan after the tenth anniversary of the date of
adoption of this 1992 Incentive Stock Plan by the Board (being March 25, 1992).
The Board may amend or modify the 1992 Incentive Stock Plan at any time and from
time to time, but no amendment or modification, without the approval of the
shareholders of the Company, shall (a) materially increase the benefits accruing
to participating employees under the 1992 Incentive Stock Plan, (b) increase the
amount of Common Stock for which grants and awards may be made under the 1992
Incentive Stock Plan, except as permitted with respect to stock splits, stock
dividends, and the like, or (c) change the provisions relating to the
eligibility of individuals to whom grants and awards may be made under the 1992
Incentive Stock Plan. No amendment, modification, or termination of the 1992
Incentive Stock Plan will in any manner affect any option granted or restricted
stock awarded under the 1992 Incentive Stock Plan without the consent of the
employee holding the option or restricted stock.
Miscellaneous. Options granted and restricted stock awarded under the 1992
Incentive Stock Plan are not transferable by the grantee or awardee, as the case
may be, except by will or the laws of descent and distribution. During the
lifetime of a participating employee, an option shall be exercised only by the
employee and the rights with respect to restricted stock shall be exercised only
by the employee.
Neither the adoption of the 1992 Incentive Stock Plan nor the granting of
any option or awarding of any restricted stock pursuant to the 1992 Incentive
Stock Plan will be deemed to confer on any person any right to continue in the
employ of the Company or its affiliates or to continue to perform services for
the Company or its affiliates or interferes in any way with the right of the
Company or its affiliates to terminate such person's service as an officer or
other employee at any time.
8
<PAGE> 11
Options Granted and Restricted Stock Awarded.
The following table provides information as to the number of options
granted and shares of restricted stock awarded under the 1992 Incentive Stock
Plan from its inception through the date of this Proxy Statement to each person
or group listed in the table.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMMON STOCK
SUBJECT TO OPTIONS PREVIOUSLY GRANTED(1)
--------------------------------------------
NOT SUBJECT TO SUBJECT TO APPROVAL
APPROVAL OF AMENDMENT OF AMENDMENT NUMBER OF SHARES OF
TO 1992 INCENTIVE TO 1992 INCENTIVE COMMON STOCK SUBJECT TO
NAME AND POSITION STOCK PLAN STOCK PLAN RESTRICTED STOCK PREVIOUSLY GRANTED
- - ----------------------------- --------------------- ------------------- -----------------------------------
<S> <C> <C> <C>
Dennis P. Callahan
President and Chief
Executive Officer.......... 30,000 30,000 30,000(2)
All current executive
officers as a group (5
persons)................... 37,000 38,000 30,000(2)
All other employees as a
group (10 persons)......... 56,000 40,000 30,000(2)
</TABLE>
- - -------------------------
(1) As of the date of this Proxy Statement, there have been no grants of
nonqualified stock options under the 1992 Incentive Stock Plan. The
exercise price of all incentive stock options granted under the 1992
Incentive Stock Plan, ranging from $10.375 to $4.125, were at least equal
to the fair market value of the Common Stock as of the respective grant
dates. All such options are exercisable on a cumulative basis in equal
installments at a rate of 33 1/3% per year, commencing one year from the
grant date and expire 5 years after the date of grant.
(2) See "Executive Compensation -- Long Term Incentive Plan -- Award of
Restricted Stock in Last Fiscal Year".
Required Vote.
The affirmative vote of holders of a majority of the shares of Common Stock
present at the Annual Meeting is required to approve the amendment to the 1992
Incentive Stock Plan. Abstentions will have the effect of a vote against
approval of the amendment to the 1992 Incentive Stock Plan and broker non-votes
will have no effect.
If no instructions are indicated in any properly executed proxy, such proxy
will be voted FOR the approval of the amendments to the 1992 Incentive Stock
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT
TO THE 1992 INCENTIVE STOCK PLAN.
4. APPROVAL OF 1995 DIRECTOR STOCK OPTION PLAN
On March 22, 1995, the Board of Directors approved, subject to shareholder
approval at the Annual Meeting, the adoption of the 1995 Director Stock Plan.
The 1995 Director Stock Plan was adopted to promote the best interests of the
Company and its shareholders by attracting and motivating highly qualified
individuals to serve as directors and to encourage such directors to acquire an
ownership interest in the Company, thus identifying their interests with those
of shareholders.
The 1995 Director Stock Plan will be administered by the Compensation
Committee of the Board of Directors (the "Committee"). The Committee is
authorized to construe the provisions of the 1995 Director Stock Plan, but shall
have no discretion with respect to the terms of grants made automatically under
the 1995 Director Stock Plan, except to the extent such discretion would not
result in the 1995 Director Stock Plan failing to qualify for the exemption
provided under Rule 16b-3 ("Rule 16b-3") promulgated by the Securities
9
<PAGE> 12
and Exchange Commission pursuant to the Securities Exchange Act of 1934, as
amended (the "Securities Exchange Act").
Eligible Participants.
All directors of the Company shall automatically participate under the 1995
Director Stock Plan, provided that a director shall not be eligible to
participant under the 1995 Director Stock Plan unless he shall have served on
the Board for at least 1 year prior to the grant of any options, and provided
further that a director shall not be eligible to participate under the 1995
Director Stock Plan during such period as he is participating in the 1992
Incentive Stock Plan. As of the date hereof, all of the directors, except for
Mr. Callahan, the President and Chief Executive Officer, are eligible to
participate in the 1995 Director Stock Plan and, moreover, none of the executive
officers or other employees of the Company, except for Mr. Soffel, Chairman of
the Board, are eligible to participate in the 1995 Director Stock Plan.
Terms of the 1995 Director Stock Plan.
The 1995 Director Stock Plan provides for the issuance of options to
purchase up to 100,000 shares (subject to adjustment by the Committee to prevent
dilution or enlargement of benefits resulting from a stock dividend on Common
Stock, a subdivision or combination of shares of Common Stock, a stock split, or
a reclassification) of the Company's Common Stock to eligible directors of the
Company. Shares of Common Stock subject to any unexercised portion of a
terminated, forfeited, cancelled or expired option under the 1995 Director Stock
Plan may be used again for subsequent grants under the 1995 Director Stock Plan.
Under the 1995 Director Stock Plan, on the business day immediately prior
to each Annual Meeting of Shareholders, eligible directors then serving on the
Board shall be granted a nonqualified stock option (i.e., an option to purchase
stock that is not intended to meet the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code")) to purchase 2,000 shares
of the Company's Common Stock. The grant shall be automatic and
non-discretionary. No grants or awards have been made under the 1995 Director
Stock Plan as of the date hereof, but an annual grant will be made on May 16,
1995, being the business day prior to the Annual Meeting, to each of the
directors, except for Mr. Callahan, for an aggregate of 20,000 shares of Common
Stock, which grant shall be conditioned upon receipt of shareholder approval of
the 1995 Director Stock Plan. In the event that shareholder approval of the 1995
Director Stock Plan is not received prior to March 21, 1996, the 1995 Director
Stock Plan shall be rescinded and any options granted under the 1995 Director
Stock Plan shall be void retroactive to the grant date.
The exercise price for options granted under the 1995 Director Stock Plan
shall be the fair market value of the Common Stock on the date the option is
granted. For purposes of the 1995 Director Stock Plan, fair market value shall
mean the closing price of the Common Stock on the American Stock Exchange or any
national securities exchange on which the Common Stock is listed or the average
of the closing bid and asked prices of the Common Stock on The Nasdaq Stock
Market (as the case may be). On April 5, 1995, the closing price of the Common
Stock as reported on the American Stock Exchange was $4.25. The option exercise
price is payable in cash, by certified check, bank draft or money order, by
delivery to the Company of previously acquired shares of Common Stock having a
fair market value equal to the option exercise price, through a cashless
exercise procedure whereby the optionee instructs his or her broker to deliver
to the Company sufficient cash to pay the exercise price and applicable income
and employment withholding taxes, or by any combination of the foregoing.
Each option granted under the 1995 Director Stock Plan becomes exercisable
in full on the date which is three months after the date of grant. Once
exercisable, such options may be exercised at any time and from time to time
until the expiration date of such options, unless earlier terminated pursuant to
the 1995 Director Stock Plan, provided that, if options are not exercised by a
participant in the sequential order granted, those options granted to such a
participant prior to the option so exercised shall terminate. All options
granted under the 1995 Director Stock Plan are exercisable for a period of five
years from the date of grant, unless earlier terminated pursuant to the 1995
Director Stock Plan. If a participant's services as a director terminates for
any reason, (i) the expiration date of each option granted pursuant to the 1995
Director Stock Plan during the
10
<PAGE> 13
calendar year ending December 31, 1995 shall be the third anniversary of its
grant date, and (ii) the expiration date of each option granted pursuant to the
1995 Director Stock Plan after December 31, 1995 shall be the first anniversary
of the effective date of the participant's termination as a director.
Options granted under the 1995 Director Stock Plan are not transferable
except by will or by the laws of descent and distribution, and may be exercised
during a participant's lifetime only by such participant.
Change in Control.
Upon a Change in Control, any outstanding option granted under the 1995
Director Stock Plan become immediately exercisable in full. The term "change in
control" is defined in the 1995 Director Stock Plan and has the same meaning
given to such term in the 1992 Incentive Stock Plan. For a summary of such term,
see "3. Approval of Amendment to 1992 Incentive Stock Plan -- Change in
Control", which is hereby incorporated herein by reference.
Termination and Amendment.
The Board may terminate the 1995 Director Stock Plan, or the granting of
options under the 1995 Director Stock Plan, at any time. No new grants shall be
made under the 1995 Director Stock Plan after March 21, 2000.
The Board may amend or modify the 1995 Director Stock Plan at any time and
from time to time, but, unless otherwise permitted under Rule 16b-3 without
shareholder approval, no amendment or modification, without the approval of the
shareholders of the Corporation, shall (i) materially increase the benefits
accruing to participants under the 1995 Director Stock Plan, (ii) increase the
amount of Common Stock for which grants may be made under the 1995 Director
Stock Plan, or (iii) change the provisions relating to the eligibility of
individuals to whom grants may be made under the 1995 Director Stock Plan. The
1995 Director Stock Plan generally may not be amended more than once in any six
month period, other than to comply with changes in the Code or the Exchange Act.
Federal Income Tax Consequences.
The following summary generally describes the principal federal income tax
consequences, based on the Code as currently in effect, of options granted under
the 1995 Director Stock Plan. This summary is not intended to, and does not,
cover all tax consequences that may apply to a particular Plan participant. Each
holder of an option under the 1995 Director Stock Plan should consult the
holder's own accountant, legal counsel or other financial advisor regarding the
tax consequences of participation in the 1995 Director Stock Plan.
Upon the exercise of an option granted under the 1995 Director Stock Plan,
a participant will recognize ordinary income equal to the difference between the
option price and the fair market value of the Common Stock at the time of
exercise and the Company will receive a corresponding deduction. (However,
payment of the option price for shares of Common Stock by surrender of
previously owned shares of Common Stock owned by the participant will not give
rise to a recognized gain on the shares surrendered.) When the participant
disposes of shares acquired by the exercise of an option, the amount received in
excess of the fair market value on the date of exercise will be treated as long-
or short-term capital gain, depending on the holding period of the shares.
Required Vote.
The affirmative vote of holders of a majority of the shares of Common Stock
present at the Annual Meeting is required to approve the 1995 Director Stock
Plan. Abstentions will have the effect of a vote against approval of the
Directors Plan and broker non-votes will have no effect.
If no instructions are indicated in any properly executed proxy, such proxy
will be voted FOR the approval of the 1995 Director Stock Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1995
DIRECTOR STOCK PLAN.
11
<PAGE> 14
FURTHER INFORMATION
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information concerning those persons
who were, on April 5, 1995, believed by the Company to be beneficial owners of
more than 5% of the Company's outstanding Common Stock, as reported to the
Securities and Exchange Commission ("the SEC") and/or to the Company by such
persons, sets forth information about ownership of shares by the Named Executive
Officer (as defined below in "Executive Compensation"), and sets forth
information about ownership of shares of Common Stock by all directors and
officers (including the Named Executive Officer) of the Company as a group.
<TABLE>
<CAPTION>
NUMBER
NAME AND ADDRESS OF PERCENT
OF BENEFICIAL OWNER SHARES OF CLASS
--------------------------------------------------------------- ------- --------
<S> <C> <C>
JoAnn S. Cousino(1)............................................ 131,526 12.5%
500 St. Clair
Grosse Pointe, Michigan 48230
Joseph C. Keys(1).............................................. 107,335 10.2%
701 N. Oxford Road
Grosse Pointe Woods, Michigan 48236
Richard S. Keys(1)............................................. 107,575 10.3%
414 Notre Dame Ave.
Grosse Pointe, Michigan 48230
Joseph C. Keys and Richard S. Keys,
Co-Trustees of John G. Keys Trust(1)......................... 45,556 4.3%
c/o 414 Notre Dame Ave.
Grosse Pointe, Michigan 48230
Schottenstein Professional
Asset Management Corporation ("SPAMC")
(formerly, Jubilee Co. Inc.)................................. 130,136 12.4%(2)
1800 Moler Road
Columbus, Ohio 43207
Schottenstein Stores Corporation ("SSC")....................... 198,000 15.9%(2)
1800 Moler Road
Columbus, Ohio 43207
Dennis P. Callahan(3).......................................... 64,212 6.0%
------ ---
All directors and executive officers (including the Named 480,954 45.0%(2)(4)
Executive Officer) of the Company as a group (14 in ======= ====
number)......................................................
</TABLE>
12
<PAGE> 15
- - -------------------------
(1) Pursuant to a Shareholder Agreement dated August 18, 1992, as amended, JoAnn
Cousino, Joseph Keys (individually and as a co-trustee), and Richard Keys
(individually and as co-trustee) have agreed to restrict the disposition of,
and regulate the voting of, 390,062 shares (approximately 37.2%) of the
Company's outstanding Common Stock. This Shareholder Agreement continues in
force through August 18, 1996, unless sooner terminated as provided therein.
(2) SPAMC and SSC are affiliated corporations. Mr. Schaye, a director of the
Company, is a director of SSC and a vice president of SPAMC. Pursuant to an
Option Agreement, dated May 20, 1993, between the Company and SSC (the "SSC
Option Agreement"), the Company granted to SSC an irrevocable option
(exercisable in whole or in part, at any time or from time to time, from May
20, 1994 through May 18, 1997) to purchase up to 198,000 shares of the
Company's Common Stock at a purchase price of $0.50 per share (the "SSC
Option"). The SSC Option Agreement provides that, under certain
circumstances, SSC has the right to receive the spread between the exercise
price and the then fair market value of the shares, provided that, by a
letter agreement, dated September 14, 1994, the Company and SSC amended the
SSC Option Agreement, such that the spread is capped at $6.36 per share.
SPAMC has sole voting and investment powers with respect to 130,136 shares
and SSC has the right to acquire 198,000 shares under the SSC Option. Upon
exercise of the SSC Option in full for 198,000 shares, and assuming
1,048,300 shares of Common Stock were issued and outstanding immediately
prior to such exercise, the beneficial ownership of all directors and
officers (including the Named Executive Officer) as a group would be diluted
to 38.6%, the beneficial ownership of SPAMC would be diluted to 10.4% and
the beneficial ownership of SSC would remain at 15.9% of the outstanding
shares of Common Stock.
(3) Includes shares held indirectly by members of Mr. Callahan's immediate
family and 13,334 shares as to
which Mr. Callahan has the right to acquire pursuant to outstanding stock
options within 60 days from April 5, 1995.
(4) Includes shares which can be acquired within the 60-day period beginning
April 5, 1995. Does not include shares beneficially owned by SSC or SPAMC.
EXECUTIVE OFFICERS
Set forth below is certain information concerning the Company's present
executive officers, including name, age, principal occupation and business
experience during the past five years and length of service as an officer of the
Company.
<TABLE>
<CAPTION>
NAME AND AGE OFFICE(S) AND LENGTH OF SERVICE
- - ------------------------------- -----------------------------------------------------------
<S> <C>
Dennis P. Callahan, 51......... President and Chief Executive since November 1992;
previously employed as Senior Vice President --
Merchandising of Hess's Department Stores, Allentown,
Pennsylvania, from May 1990 to November 1992, and as
President of Bon Ton Stores, York, Pennsylvania, from
July 1985 to January 1989.
Mark A. VandenBerg, 38......... Vice President -- Finance and Chief Financial Officer since
July 1991; Secretary since February 1987; and Treasurer
since February 1986.
Michael G. Toloff, 40.......... Vice President -- Stores since March 1995; Vice President
-- Stores and Operations from July 1991 to March 1995;
Director of Control from February 1988 to July 1991.
June A. Ley, 43................ Vice President -- General Merchandise Manager since March
1995; General Merchandise Manager from April 1994 to March
1995; Divisional Merchandise Manager from June 1993 to
April 1994; previously self-employed as Retail
Consultant, Pittsburg, Pennsylvania, from February 1992
to June 1993, and as Divisional Merchandise Manager of
Streets of Oklahoma City, Oklahoma City, Oklahoma, from
February 1990 to November 1991.
James A. Smith, 39............. Vice President -- Operations since March 1995; Director of
Distribution & Traffic from 1990 to March 1995.
</TABLE>
13
<PAGE> 16
EXECUTIVE COMPENSATION
The following information about the Company's method of compensating its
executive officers is intended to both comply with recently amended disclosure
rules of the Securities and Exchange Commission ("SEC") and provide shareholders
with a better understanding of the Company's objectives, policies and
arrangements for executive compensation.
Summary Compensation Table
The following table sets forth, for the fiscal years ended January 28, 1995
("fiscal year 1994"), January 29, 1994 ("fiscal year 1993"), and January 30,
1993 ("fiscal year 1992"), information with respect to the cash and other
compensation paid to, or accrued for, the Chief Executive Officer, the only
executive officer whose total annual salary and bonuses exceeded $100,000 (the
"Named Executive Officer").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------
AWARDS PAYOUTS
---------- -------
SECURITIES
ANNUAL COMPENSATION UNDERLYING LTIP
NAME AND PRINCIPAL -------------------- OPTIONS PAYOUTS ALL OTHER
POSITION FISCAL YEAR SALARY BONUS (#) ($) COMPENSATION($)
- - --------------------------- ------------ -------- ------- ---------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Dennis P. Callahan(1)...... 1994 $286,273 $75,000 20,000 $41,250(2) $ 4,901(3)
President and Chief 1993 250,042 75,000 -- -- 24,349(4)
Executive Officer 1992(5) 59,636 -- 10,000 -- 64,323(6)
</TABLE>
- - -------------------------
(1) Mr. Callahan became President and Chief Executive Officer of the Company
effective November 2, 1992. Pursuant to the terms of an employment
agreement, he is entitled to, among other things, a base salary of $250,000
per year.
(2) As of January 28, 1995, 10,000 shares of Common Stock subject to an award of
restricted stock vested subject to certain restrictions on transfer. For a
description of such award, see "Executive Compensation -- Long Term
Incentive Plan -- Award of Restricted Stock in Last Fiscal Year" which is
hereby incorporated herein by reference. The dollar value reflected in the
table was calculated by multiplying such 10,000 shares by the closing price
of the Common Stock reported on the American Stock Exchange on January 27,
1995 (the last reported trade prior to January 28, 1995), or $4.125 per
share. With respect to the payout reported in the table, the performance
objective related to the vesting of such 10,000 shares was reduced by the
Company and by Mr. Callahan.
(3) Includes $4,200 (or $350 per month) for a car allowance, $501 of premiums
paid by the Company on a term life insurance policy maintained for the
benefit of Mr. Callahan, for the fiscal year 1994, and $200 contributed by
the Company on Mr. Callahan's behalf to the Company's profit-sharing plan,
for the fiscal year 1994.
(4) Includes $19,000 for moving expenses, $4,200 (or $350 per month) for a car
allowance, $1,049 of premiums paid by the Company on a term life insurance
policy maintained for the benefit of Mr. Callahan, and $100 contributed by
the Company on Mr. Callahan's behalf to the Company's profit-sharing plan,
for the fiscal year 1993.
(5) The compensation listed includes all compensation paid to, or accrued for,
Mr. Callahan for the period of November 7, 1992 through January 30, 1993.
(6) Includes $25,572 for moving expenses, $22,000 for a relocation allowance,
$15,048 for housing purchase costs and expenses, and $1,400 (or $350 per
month) for a car allowance, as well as $303 of premiums paid by the Company
on a term life insurance policy maintained for the benefit of Mr. Callahan,
for the fiscal year 1992.
14
<PAGE> 17
Unexercised Options and Holdings
The following table sets forth information with respect to the Named
Executive Officer concerning the exercise of options previously granted under
the 1992 Incentive Stock Plan during the fiscal year ended January 28, 1995 and
unexercised options held as of that date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND 1994 FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES VALUE FISCAL YEAR-END FISCAL YEAR-END
ACQUIRED ON REALIZED (#) EXERCISABLE/ ($) EXERCISABLE/
NAME EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE(1)
- - ------------------------------------------- ------------ -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Dennis P. Callahan......................... 0 $0 6,667/23,333 $0 /$0
</TABLE>
- - -------------------------
(1) The estimated value of the unexercised option shares (i.e., the difference
between the fair market value of the securities underlying the options and
the exercise price of the option at fiscal year-end) was based on the
closing price of the Common Stock reported on the American Stock Exchange
on January 27, 1995 (the last reported trade date prior to January 28,
1995), or $4.125 per share. The dollar values in this table (and all others
contained in this report) are calculated on a pre-tax basis.
Long-Term Incentive Plan -- Award of Restricted Stock in Last Fiscal Year.
The following table sets forth information concerning the award of
restricted stock to the Named Executive Officer under the 1992 Incentive Stock
Plan during the fiscal year ended January 28, 1995.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE
NUMBER OF SHARES, OR OTHER PERIOD
UNITS OR OTHER RIGHTS UNTIL MATURATION
NAME (#) OR PAYOUT
-------------------------------------- --------------------- --------------------
<S> <C> <C>
Dennis P. Callahan.................... 30,000 shares of
Common Stock(1) January 30, 1999(1)
</TABLE>
- - -------------------------
(1) The award of restricted stock was made as of August 24, 1994 pursuant to the
terms of the 1992 Incentive Stock Plan and the Restrictive Stock Agreement,
dated August 24, 1994, between the Company and Mr. Callahan (the "Restricted
Stock Agreement"). Such terms contain the following general provisions
relative to vesting and transfer restrictions: (i) effective as of the
fiscal year ended January 28, 1995 and the fiscal years ending February 3,
1996 and February 1, 1997, as the case may be, one-third of the 30,000
shares in the award shall be automatically forfeited to the Company unless
certain performance objectives are satisfied; in the event the performance
objectives are satisfied, such one-third portion not so forfeited shall be
deemed vested; and (ii) the 30,000 shares in the award (including any vested
shares) generally are restricted from transfer for a period of five years
from January 30, 1994, except that such transfer restrictions shall lapse at
such time, if any, as the Company's Board of Directors shall, in their sole
discretion, determine from time to time, and, in certain cases, upon
termination of employment. During the five-year restriction period, Callahan
retains full voting rights and is entitled to receive all dividends and
distributions with respect to the shares in the award. With respect to the
fiscal year ended January 28, 1995, the performance objectives were
satisfied. For a description of the 10,000 shares of such award which became
vested effective January 28, 1995, see "Executive Compensation -- Summary
Compensation Table" which is hereby incorporated herein by reference.
15
<PAGE> 18
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE-IN-CONTROL
ARRANGEMENT
Executive officers of the Company (including the Named Executive Officer)
are appointed annually by the Board of Directors and, subject to the employment
agreement with Mr. Callahan described below, serve at the pleasure of the Board.
The Company has entered into a written employment agreement with Mr.
Callahan employing him as the President and Chief Executive Officer of the
Company. This agreement provides for a two year term of employment (initially,
from November 1, 1992 to October 31, 1994, subject to certain automatic renewal
provisions) unless he is terminated due to permanent disability (as defined in
the agreement), he is terminated without cause (as defined in the agreement), he
voluntarily terminates his employment or he is terminated for good reason or for
cause (as defined in the agreement, including the willful engagement in
dishonest or fraudulent actions or omissions). Termination for good reason
includes (a) a change in control (generally, (i) the acquisition by a person or
group of more than 50% of the fair market value or total voting power of the
Company, (ii) the acquisition within a twelve-month period by a person or group
of more than one-third in fair market value of the Company's assets, or (iii)
the replacement of a majority of the directors within a twelve-month period)
followed by a diminution or adverse change in the employee's duties and
responsibilities, in the employee's rights or benefits under certain bonus,
stock, and other employee benefit plans or by a requirement that the employee
relocate his principal place of employment beyond a 100 mile radius of Detroit,
Michigan, (b) a material breach of the employment agreement, and (c) the failure
by the Company to obtain a satisfactory agreement from any successor to perform
the employment agreement. If the employee is terminated without cause or for
good reason, the employee would be entitled to receive a single cash payment,
within ten business days following the date of termination, equal to the present
value of two years' base salary (initially, the base salary is $250,000 per
year) and, further, the employee would be entitled to exercise any previously
granted outstanding stock options. The agreement restricts employee disclosure
of material or secret information and employee competition within a fifteen-mile
radius of any of the Company's stores for a period of one year after employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended January 28, 1995, the Compensation Committee
consisted of Messrs. Pallone (Chairman), Ebert, Entenman, Richard S. Keys and
Schaye. Mr. Keys was employed by the Company as a Buyer during the year ended
January 28, 1995.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
General
The compensation of the Company's executive officers (including the Named
Executive Officer) is determined annually by the Compensation Committee of the
Board of Directors. The Compensation Committee consists of five directors, four
of whom are not employed by the Company and are not eligible to participate in
any of the Company's benefit plans except for the 1995 Director Stock Plan. The
Board of Directors, with the guidance and supervision of the Compensation
Committee, has developed and implemented compensation policies that seek to
provide fair and competitive compensation, encourage the retention of qualified
individuals and enhance stockholder value by encouraging executive officers to
focus their effort on achieving profitability for the Company. The Company's
compensation policies are intended to align the financial interest of the
Company's officers (including its executive officers) with those of the
shareholders as well as to create an atmosphere which recognizes the individual
contribution and/or performance of each executive officer.
In addition to merit-based promotions, the essential components of the
compensation policy for the Company's executive officers are base compensation,
short-term cash performance bonus awards and long-term stock incentive awards in
the form of stock options and/or restricted stock.
16
<PAGE> 19
Base Compensation
The base compensation for the executive officers of the Company, including
the Chief Executive Officer, is reviewed in March of each year by the
Compensation Committee. Each year, the Compensation Committee reviews with the
Chief Executive Officer and approves, with any modifications it deems
appropriate, annual salaries for the Company's executive officers (excluding the
Chief Executive Officer) for the following year. Annual salaries are developed
after a review of several factors, including the overall salary increase for
Company personnel, comparative competitive industry data and assessments of the
executive's individual performance. The general salary increase for Company
employees as a whole is primarily dependent upon the Company's earnings
performance, the inflation rate for southeastern Michigan and any reported
trends reflecting general increases in compensation among retailers of
comparable size. The peer group of retailers used for compensation analysis is
not generally the same as the Peer Group Index discussed below in the Stock
Performance Graph. The Compensation Committee believes that the Company's most
direct competitors for executive talent are not necessarily comprised of all of
the companies included in a peer group established for comparing shareholder
returns. The Compensation Committee, where appropriate, also considers certain
other non-financial measures, such as increases in market share, improvements in
service quality, and improvements in relations with customers, suppliers and
employees.
The base compensation of the Chief Executive Officer under his employment
agreement is determined by reference to the same factors applicable to the
executive officers but such determination is made by the Compensation Committee
without the involvement by the Chief Executive Officer. Each year the
Committee's determination on base compensation is presented to and approved by
the Company's Board of Directors, without participation by any affected employee
directors.
Performance Bonus Awards
For several years, the Company has maintained a program to provide
incentives to selected officers and employees who have principal responsibility
for profitability and growth in the form of contingent awards payable in cash.
This program consists primarily of cash awards under a short-term performance
plan and an annual cash bonus plan and is administered by the Compensation
Committee, which administration includes the establishment of performance
objectives and awards and the selection of participants. The establishment of
performance objectives and awards is accomplished by taking into consideration
general market and economic considerations and management's financial plan in
the form presented to the Board of Directors at the beginning of each fiscal
year.
Under the short-term performance plan, the Compensation Committee
establishes annual performance objectives, stated in terms of net profits after
taxes, and performance awards based on the satisfaction of such objectives.
Awards to participants are made based on the pro rata base compensation of each
participant. As has been the case for the past several years, no awards were
made under the plan for the fiscal year ended January 28, 1995.
Under the annual cash bonus plan, ten percent (10%) of pre-tax earnings in
excess of an "earnings base" is paid to eligible participants on the basis of
their contributions to the Company as determined by the Compensation Committee.
For the fiscal year ended January 28, 1995, this earnings base was $471,542 and,
as has been the case for the past several years, no awards were made under the
plan. The earnings base will be five percent (5%) of invested capital at January
28, 1995, or $529,213, for the fiscal year ending February 3, 1996.
For the fiscal year ending February 3, 1996, the eligible participants
under the short-term performance plan and the annual cash bonus plan consist of
officers (including the Chief Executive Officer) and key employees of the
Company totalling eight in number.
The Company also has from time to time paid discretionary bonuses to
certain officers and key employees of the Company selected by the Compensation
Committee, based upon their performance during the prior fiscal year. For the
fiscal year ended January 28, 1995, the Compensation Committee approved a
discretionary bonus to the Chief Executive Officer of $75,000 and discretionary
bonuses to six other officers and key
17
<PAGE> 20
employees totalling $28,000, all of which were made primarily as a result of the
contributions to the Company's significant improvement in profitability.
Stock Incentive Awards
The Company's incentive program includes the 1992 Incentive Stock Plan, as
adopted by the Board in 1992 and approved by the shareholders and as amended by
the Board on March 22, 1995 subject to shareholder approval, which is intended
to retain qualified executive officers and to motivate such officers to improve
the operating results of the Company and, thereby, improve the long term stock
performance of the Company through the grant of stock options and/or the award
of restricted stock. Under this Plan, which is administered by the Compensation
Committee, grants of incentive stock options and awards of restricted stock have
been made to eligible participants as follows: (i) during the fiscal year ended
January 30, 1993, options were granted to acquire 30,000 shares (pursuant to
which options to acquire 166 shares have been exercised and certain options have
terminated such that 3,834 shares have been returned to the Plan);(ii) no grants
or awards were made during the fiscal year ended January 29, 1994; (iii) during
the fiscal year ended January 28, 1995, options were granted to acquire 40,000
shares (of which, options to acquire 20,000 shares were granted to the Chief
Executive Officer) and a restricted stock award was made to the Chief Executive
Officer for 30,000 shares of Common Stock subject to certain performance
objectives and vesting requirements; and (iv) to date, during the fiscal year
ending February 3, 1996, options were granted to acquire 40,000 shares (of
which, options to acquire 30,000 shares were made to the Chief Executive
Officer), provided that such grants were made subject to the approval by the
shareholders of the amendment to the 1992 Incentive Stock Plan.
As is the case with respect to cash compensation, the amount of any grants
of stock options and/or awards of restricted stock to the Chief Executive
Officer will be established separately by the Compensation Committee without the
participation of the Chief Executive Officer. Any such award will be based,
among other things, upon factors applicable to executive officer awards as well
as information regarding option grants to chief executive officers of retailers
of similar size or performance, the Chief Executive Officer's base compensation
and his anticipated future contribution to the Company.
Conclusion
Through the compensation programs described above, a significant portion of
the executive compensation is based on individual and corporate performance and
on stock performance. In the case of the Chief Executive Officer, approximately
twenty percent (20%) of his executive compensation (excluding long-term
compensation awards and payouts) for the fiscal year ended January 28, 1995
consisted of a performance based element. The Compensation Committee intends to
continue the policy of linking the executive compensation to corporate
performance and shareholder returns.
Members of the Compensation Committee:
Jules L. Pallone, Chairman
Carroll E. Ebert
Alfred M. Entenman, Jr.
Richard S. Keys
James L. Schaye, Jr.
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<PAGE> 21
STOCK PERFORMANCE GRAPH
The following graph compares the percentage change in the cumulative total
shareholder return on the Company's Common Stock during the Company's last five
fiscal years with the cumulative total return on the American Stock Exchange
(the "AMEX Index") and the Media General Retail Trade -- Department Stores Index
(the "Peer Group Index"). The comparison assumes the investment of $100 in the
Company's Common Stock and in each index on January 27, 1990 and the
reinvestment of all dividends, if any, through January 28, 1995.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
CROWLEY, MILNER AND COMPANY, THE AMERICAN STOCK EXCHANGE INDEX,
AND MEDIA GENERAL RETAIL TRADE -- DEPARTMENT STORES INDEX
(PERFORMANCE RESULTS FROM JANUARY 27, 1990
THROUGH JANUARY 28, 1995)
<TABLE>
<CAPTION>
CROWLEY,
MEASUREMENT PERIOD MILNER & PEER GROUP
(FISCAL YEAR COVERED) COMPANY INDEX AMEX INDEX
<S> <C> <C> <C>
1990 100.00 100.00 100.00
1991 62.43 88.93 93.63
1992 42.32 113.55 115.43
1993 61.37 131.42 113.37
1994 78.30 168.85 135.37
1995 34.92 143.00 118.14
</TABLE>
19
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CERTAIN REPORTING REQUIREMENTS
Under the federal securities laws, the Company's directors and executive
officers and any persons holding more than 10% of the Company's Common Stock
(collectively, the "Reporting Persons") are required to file reports with the
Securities and Exchange Commission and with the American Stock Exchange relative
to their ownership of the Common Stock. Specific due dates for filing these
reports have been established and the Company is required to disclose in this
Proxy Statement any failure to timely file these reports.
Based on the written representations of its Reporting Persons and on copies
of the reports filed with the Securities and Exchange Commission, the Company
believes that all of these requirements were satisfied by the Company's
Reporting Persons, except that one report relative to a change in beneficial
ownership was filed late by each of Mr. Callahan (which involved the acquisition
of 200 shares by Mr. Callahan's wife) and Mr. Ebert (which involved the
acquisition of 500 shares by Mr. Ebert).
OTHER MATTERS AND SHAREHOLDER PROPOSALS
At the date of this Proxy Statement, management is not aware of any matters
to be presented for action at the meeting other than those described above,
except for routine matters. If other business does properly come before the
meeting, however, the persons named in the accompanying proxy intend to vote the
proxy in accordance with their best judgment on such matters.
Any proposals of shareholders to be presented at the Annual Meeting to be
held in 1996 which are eligible for inclusion in the Company's proxy statement
for that meeting under applicable rules of the Securities and Exchange
Commission must be received by the Company no later than 120 days prior to April
25, 1996 and should be sent to the Secretary of the Company at its principal
executive offices by certified mail, return-receipt requested.
Detroit, Michigan
April 25, 1995
20
<PAGE> 23
/x/ PLEASE MARK VOTES AS
IN THIS EXAMPLE
With- For All
For hold Except
1. Election of directors to hold office until the / / / / / /
Annual Meeting of Shareholders in 1998.
Nominee:
DENNIS P. CALLAHAN JOANN S. COUSINO ALFRED M. ENTENMAN
If you do not wish your shares voted "FOR" a particular nominee, mark the
"For All Except" box and strike a line through the nominee(s) name. Your
shares will be voted for the remaining nominee(s).
For Against Abstain
2. Appointment of Ernst & Young LLP as independent / / / / / /
auditors for the fiscal year ending February
3, 1996.
For Against Abstain
3. To approve an amendment to the Crowley, Milner / / / / / /
and Company 1992 Incentive Stock Plan to
increase the number of shares of Common Stock
authorized for issuance thereunder from
100,000 shares to 200,000 shares.
For Against Abstain
4. To approve the Crowley, Milner and Company / / / / / /
1995 Director Stock Option Plan.
Mark box at right if comments or address change
have been noted on the reverse side of this card. / /
Please be sure to sign and date this Proxy. Date
____________________________________________________________________________
Shareholder sign here __________________ Co-owner sign here ____________
PROXY PROXY
CROWLEY, MILNER AND COMPANY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF CROWLEY, MILNER AND COMPANY
The undersigned shareholder hereby appoints DENNIS P. CALLAHAN and MARK
A. VANDENBERG, or either one of them, the attorney and proxies of the
undersigned, with power of substitution, to vote all the shares of common stock
of Crowley, Milner and Company standing in the name of the undersigned at the
close of business on April 5, 1995 at the Annual Meeting of Shareholders of the
Company to be held on Wednesday, May 17, 1995 at 2:00 p.m. Eastern Daylight
Savings Time, and at any and all adjournments thereof, with all the powers the
undersigned would possess if then and there present.
The shareholder instructs the proxies to vote as specified on this proxy
on the matters described in the Proxy Statement dated April 25, 1995. Proxies
will be voted as instructed.
IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
THE COMPANY'S NOMINEES AS DIRECTORS, FOR THE APPOINTMENT OF ERNST & YOUNG LLP AS
AUDITORS, FOR THE APPROVAL OF AN AMENDMENT TO THE 1992 INCENTIVE STOCK PLAN TO
INCREASE THE NUMBER OF SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE THEREUNDER
FROM 100,000 SHARES TO 200,000 SHARES AND FOR THE APPROVAL OF THE 1995 DIRECTOR
STOCK PLAN.
BY EXECUTION OF THIS PROXY, THE UNDERSIGNED SHAREHOLDER CONFERS UPON THE
ABOVE-APPOINTED PROXIES THE DISCRETIONARY AUTHORITY TO VOTE UPON ANY OTHER
MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
The undersigned acknowledges receipt of the Proxy Statement and Notice
of said meeting, both dated April 25, 1995.
Brokers executing proxies should indicate in the space below the number
of shares with respect to which authority is conferred by this Proxy if less
than all shares held as nominees are to be voted.
Please sign exactly as your name appears. If acting as attorney,
executor, trustee or in other representative capacity, sign name and title.
PLEASE EXECUTE AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE PROMPTLY.
Comments/Address Change:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
