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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:
/X/ Preliminary proxy statement
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
HANOVER DIRECT, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
HANOVER DIRECT, INC.
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(o)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $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:(1)
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - --------------------------------------------------------------------------------
/ / 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:
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(4) Date filed:
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- - ---------------
(1)Set forth the amount on which the filing fee is calculated and state how
it was determined.
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Preliminary Copy
HANOVER DIRECT, INC.
1500 HARBOR BOULEVARD
WEEHAWKEN, NEW JERSEY 07087
(201) 863-7300
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 22, 1994
To our Shareholders:
PLEASE TAKE NOTICE that the 1994 Annual Meeting of Shareholders (the
"Annual Meeting") of Hanover Direct, Inc., a Delaware corporation (the
"Company"), will be held at the St. Regis Hotel, Two East 55th Street at Fifth
Avenue, New York, New York 10022 on Wednesday, June 22, 1994 at 9:30 a.m., local
time, for the following purposes:
1. To consider and act upon a proposal to amend the Company's
Certificate of Incorporation to eliminate Article SIXTH and the present
classified Board of Directors as set forth in the attached Proxy Statement;
2. In the event of the approval of the foregoing amendment to the
Company's Certificate of Incorporation, to elect 11 members of the Board of
Directors for a term of one year and in each case until their respective
successors have been duly elected and qualified at the 1995 Annual Meeting
of Shareholders, or, in the event of the disapproval of such amendment, to
elect four Class II Directors for a term of three years and in each case
until their respective successors have been duly elected and qualified at
the 1997 Annual Meeting of Shareholders;
3. To ratify and approve the appointment by the Board of Directors of
Arthur Andersen & Co. as the Company's independent auditors for the fiscal
year ending December 31, 1994; and
4. To consider and act upon such other matters as may properly come
before the Annual Meeting or any adjournments or postponements thereof.
All shareholders are cordially invited to attend. Only shareholders of
record at the close of business on May 10, 1994 will be entitled to notice of
and to vote at the Annual Meeting or any adjournments or postponements thereof.
A copy of the Company's Proxy Statement and 1993 Annual Report to Shareholders
is enclosed.
By Order of the Board of Directors,
MICHAEL P. SHERMAN
Secretary
May 16, 1994
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE READ THE
ACCOMPANYING PROXY STATEMENT AND PROMPTLY COMPLETE, DATE AND SIGN THE ENCLOSED
PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED WITHIN THE UNITED STATES OF AMERICA. THE PROXY IS REVOCABLE BY YOU AT ANY
TIME PRIOR TO ITS USE AT THE ANNUAL MEETING. IF YOU RECEIVE MORE THAN ONE PROXY
CARD BECAUSE YOUR SHARES ARE REGISTERED IN DIFFERENT NAMES OR ADDRESSES, EACH
PROXY CARD SHOULD BE SIGNED AND RETURNED TO ASSURE THAT ALL YOUR SHARES WILL BE
VOTED AT THE ANNUAL MEETING.
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HANOVER DIRECT, INC.
1500 HARBOR BOULEVARD
WEEHAWKEN, NEW JERSEY 07087
(201) 863-7300
PROXY STATEMENT FOR THE 1994 ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON JUNE 22, 1994
INTRODUCTION
GENERAL
This Proxy Statement is being furnished to the holders (the "Shareholders")
of shares of common stock, par value $.66 2/3 per share (the "Common Stock"), of
Hanover Direct, Inc., a Delaware corporation (the "Company"), in connection with
the solicitation of proxies by the Board of Directors of the Company for use at
the 1994 Annual Meeting of Shareholders of the Company (the "Annual Meeting") to
be held at 9:30 a.m., local time, on Wednesday, June 22, 1994 at the St. Regis
Hotel, Two East 55th Street at Fifth Avenue, New York, New York 10022 and any
adjournments or postponements thereof. This Proxy Statement is first being sent
to Shareholders of the Company on or about May 16, 1994.
At the Annual Meeting, Shareholders will (i) consider and act upon a
proposal to amend the Company's Certificate of Incorporation to eliminate
Article SIXTH and the present classified Board of Directors, (ii) in the event
of the approval of such proposal, elect 11 members of the Board of Directors for
a one year term, or in the event of the disapproval of such proposal, elect four
(4) Class II Directors to serve until the 1997 Annual Meeting of Shareholders,
and (iii) ratify and approve the appointment of Arthur Andersen & Co. as the
Company's independent auditors for the fiscal year ending December 31, 1994.
Shareholders may also consider and act upon such other matters as may properly
come before the Annual Meeting or any adjournments or postponements thereof.
RECORD DATE; SHARES ENTITLED TO VOTE
The Board of Directors has fixed the close of business on May 10, 1994 as
the record date ("Record Date") for determining holders of Common Stock entitled
to notice of and to vote at the Annual Meeting and at any adjournments or
postponements thereof. Only holders of record of Common Stock at the close of
business on such date will be entitled to notice of and to vote at the Annual
Meeting or at any adjournments or postponements thereof. On that date, there
were 92,437,720 shares of Common Stock outstanding and entitled to vote. On such
date, 51,875,263 shares of Common Stock (and currently exercisable warrants or
options) were owned by subsidiaries of NAR Group Limited, a British Virgin
Islands corporation ("NAR"). Each outstanding share of Common Stock entitles the
holder thereof to one vote on all matters submitted for a vote at the Annual
Meeting.
VOTE REQUIRED
Pursuant to the Company's Certificate of Incorporation, the affirmative
vote of the holders of at least 75% of the Common Stock issued and outstanding
on the Record Date is required to amend the Company's Certificate of
Incorporation to eliminate Article SIXTH and the present classified Board of
Directors. The affirmative vote of the holders of a plurality of the Common
Stock is required to elect Directors. The affirmative vote of the holders of a
majority of the Common Stock present in person or by proxy at the Annual Meeting
and voting is required to ratify and approve the appointment of auditors.
Abstentions will have the same effect as a vote against the proposal to amend
the Company's Certificate of Incorporation to eliminate Article SIXTH and the
present classified Board of Directors and ratifying and approving the
appointment of auditors and, with respect to a nominee for Director, will have
the same effect as a withheld vote. Broker non-votes will have no effect on the
votes with respect to the proposal to amend the Company's Certificate of
Incorporation to eliminate Article SIXTH and the present classified Board of
Directors and ratifying and approving the adoption of the appointment of
auditors nor will they have any effect on the election of Directors.
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SOLICITATION OF PROXIES
Each Shareholder of the Company is requested to complete, sign, date and
return the enclosed proxy without delay in order to ensure that shares owned
thereby are voted at the Annual Meeting. All shares of Common Stock represented
at the Annual Meeting by properly executed proxies received prior to or at the
Annual Meeting will be voted at the Annual Meeting in accordance with the
instructions on the proxies. If no instructions are given or indicated, properly
executed proxies will be voted IN FAVOR OF the proposal to amend the Company's
Certificate of Incorporation to eliminate Article SIXTH and the present
classified Board of Directors and the ratification and approval of the
appointment of Arthur Andersen & Co. as the Company's independent auditors for
the fiscal year ending December 31, 1994 and FOR the election of the nominees
for Director described herein. In the event that any nominee at the time of
election shall be unable or unwilling to serve or is otherwise unavailable for
election (which contingency is not now contemplated or foreseen), and in
consequence other nominees shall be nominated, the persons named in the proxy
shall have the discretion and authority to vote or refrain from voting in
accordance with their judgment on such other nominations. The Company does not
know of any other matters to be presented at the Annual Meeting. If any
additional matters are properly presented to the Annual Meeting for action, the
persons named in the enclosed proxy and acting thereunder will have discretion
to vote on such matters in accordance with their own judgment.
REVOCATION OF PROXIES
Any Shareholder may revoke a proxy at any time before such proxy is voted.
Proxies may be revoked (i) by delivering to the Secretary of the Company a
written notice of revocation bearing a date later than the date of the proxy,
(ii) by duly executing a subsequent proxy relating to the same shares of Common
Stock and delivering it to the Secretary of the Company, or (iii) by attending
the Annual Meeting and stating to the Secretary of the Company an intention to
vote in person and so voting. Attendance at the Annual Meeting will not in and
of itself constitute revocation of a proxy. Any subsequent proxy or written
notice of revocation of a proxy should be delivered to Hanover Direct, Inc.,
1500 Harbor Boulevard, Weehawken, New Jersey 07087, Attention: Michael P.
Sherman, Secretary.
COST OF SOLICITATION
The Company will bear the cost of soliciting proxies in connection with the
Annual Meeting estimated at $10,000 in the aggregate. Proxies will be solicited
by telephone, telegram, mail or personal contact. The Company has retained
Morrow & Co., Inc., a professional proxy solicitation firm, to aid in the
solicitation of proxies in connection with the Annual Meeting at a fee estimated
at $3,000, plus out-of-pocket expenses. Directors, officers and employees of the
Company may solicit proxies by telephone, telegram, mail or personal contact.
Such persons will receive no additional compensation for such services, but the
Company may reimburse them for reasonable out-of-pocket expenses incurred in
connection therewith. Copies of solicitation material will be furnished to
fiduciaries, custodians, nominees and brokerage houses for forwarding to
beneficial owners of shares of Common Stock held in their names and the Company
will reimburse them for reasonable out-of-pocket expenses incurred in connection
therewith.
PROPOSAL TO AMEND THE COMPANY'S
CERTIFICATE OF INCORPORATION
Under the present Article SIXTH of the Company's Certificate of
Incorporation approved by Shareholders in 1983, the Board of Directors is
divided into three classes of Directors serving staggered three-year terms, with
one class of Directors consisting of four Directors to be elected at the Annual
Meeting, one class of Directors consisting of four Directors to be elected at
the 1995 Annual Meeting of Shareholders and one class of Directors consisting of
three Directors to be elected at the1996 Annual Meeting of Shareholders.
Provisions in the Company's Certificate of Incorporation consistent with
maintaining a classified board permit the size of the Board to be increased or
decreased and vacancies to be filled initially by the remaining Directors.
Directors of each class are elected for a term of three years and until their
respective successors have been duly elected
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and qualified so that the regular term of only one class of Directors expires
annually and any particular Director stands for election only once in each
three-year period. The Board of Directors is submitting for Shareholder approval
a proposal to amend the Company's Certificate of Incorporation to eliminate
Article SIXTH. A copy of Article SIXTH which is proposed to be eliminated is
annexed hereto as Attachment A and the foregoing description is qualified in its
entirety by reference thereto.
The division of directors into classes gives shareholders of a company the
right to elect approximately one-third of the company's directors annually. A
classified board was a popular device in the 1980's to impede a person or group
which obtained a substantial amount of a company's stock from assuming control
of the management of the company. Because the board of directors was classified,
a change in the majority of the board of directors in order to change management
policies would require two successive annual meetings. Classification of
directors was also considered desirable by some companies to permit their boards
of directors to plan for a reasonable period into the future in order to provide
for continuity in the policies of the company. Under classified board structures
similar to the Company's, approximately two-thirds of the directors at any one
time will have had prior experience on the board.
The Board of Directors recommends to the Shareholders that the present
classification of the Board of Directors into three classes be eliminated and
the entire Board of Directors be elected at the Annual Meeting as a single class
to serve for a one-year term. This result is accomplished by the proposed
amendment to the Company's Certificate of Incorporation to eliminate Article
SIXTH. In the event of the approval of the foregoing amendment to the Company's
Certificate of Incorporation, the Board of Directors will amend the By-laws to
the extent necessary to make them consistent with the Certificate of
Incorporation.
A declassified Board will give the Shareholders of the Company the right to
elect all of the Directors annually. As a result, a change in the majority of
the Board of Directors in order to change management policies could be effected
at any annual meeting of Shareholders. On the other hand, since all or a
majority of the Board of Directors could be reelected at successive annual
meetings, a declassified Board is not inherently inconsistent with either the
maintenance of continuity in management policies or the retention of Directors
who have had prior experience on the Board. A declassified Board may also
facilitate the assumption of the management of the Company by any person or
group which obtains a substantial amount of the Company's stock (if NAR ceases
to own in excess of 50% of the Common Stock outstanding).
Pursuant to the Company's Certificate of Incorporation, the affirmative
vote of the holders of at least 75% of the Common Stock issued and outstanding
on the Record Date is required to amend the Company's Certificate of
Incorporation to eliminate the provision providing for the classification of
directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSED
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION.
ELECTION OF DIRECTORS
GENERAL
The Company's Board of Directors is currently divided into three classes of
Directors serving three-year terms. One class of Directors is elected by the
Shareholders at each annual meeting to serve until the third annual meeting or
until their successors are elected and qualified. In the case of a vacancy,
Directors are appointed by the Directors then in office to serve the remainder
of the term. However, the Board of Directors is submitting for Shareholder
approval a proposal to amend the Company's Certificate of Incorporation to
eliminate Article SIXTH and the present classified Board of Directors. See
"PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION".
At the Annual Meeting, Shareholders will either elect 11 members of the
Board of Directors to serve until the Annual Meeting of Shareholders to be held
in 1995 in the event of the approval of the proposal to amend the Company's
Certificate of Incorporation to eliminate Article SIXTH or, in the event of the
disapproval of such proposal, elect four (4) Class II Directors to serve until
the Annual Meeting of Shareholders to be held in 1997 and until their respective
successors are elected and qualified or until their
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death, resignation, retirement, disqualification or removal as provided in the
Certificate of Incorporation and By-laws of the Company.
AGREEMENTS WITH RESPECT TO NOMINATION OF DIRECTORS
As a result of the commencement of a proxy contest in 1989 by Theodore H.
Kruttschnitt, J. David Hakman and Edmund R. Manwell, the Company entered into an
agreement on May 5, 1989 with Messrs. Kruttschnitt, Hakman and Manwell (the
"Nomination and Standstill Agreement"). Pursuant to the Nomination and
Standstill Agreement, the Board was expanded to 11 members and Mr. Kruttschnitt
was appointed as a Class III Director, Mr. Hakman as a Class I Director and Mr.
Manwell as a Class II Director. The Company also agreed to nominate each of
Messrs. Kruttschnitt, Hakman and Manwell for election upon the expiration of
their respective terms provided Mr. Kruttschnitt continues to own certain
specified levels of the Company's Common Stock. See "EXECUTIVE
COMPENSATION -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS".
Pursuant to the Stock Purchase Agreement, dated October 25, 1991, between
the Company and NAR (the "Stock Purchase Agreement"), the Company agreed to
recommend in its proxy statement for each annual or special meeting of
Shareholders at which Directors are to be elected during the five year period
from October 25, 1991, and at each such Shareholders' meeting, as part of the
management slate for election to the Board of Directors, such number of persons
designated by NAR as will result in the Board's including six persons designated
by NAR. In addition, NAR agreed that for a period of five years from October 25,
1991, so long as the Board of Directors of the Company consists of 11 persons of
whom six are designees of NAR, it will not nominate or propose for nomination or
elect persons to the Board if as a result more than six persons designated by it
would be on the Board at any one time except following an acquisition by a third
party of 20% or more of the voting stock or total assets of the Company. Messrs.
Destino, Laikind, Quasha and Wright and Ms. Long and Ms. Stutz were designated
pursuant to such agreement and were nominated and elected to serve as Directors
of the Company at the Company's 1991 Special Meeting of Shareholders. See
"EXECUTIVE COMPENSATION -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS".
NOMINEES FOR DIRECTOR
The nominees for Director, together with certain information furnished to
the Company by each nominee, are set forth below. In the event of the
disapproval of the proposal to amend the Company's Certificate of Incorporation
to eliminate Article SIXTH and the present classified Board of Directors, the
nominees for Class II Director are Messrs. Edmund R. Manwell, Alan G. Quasha and
Robert F. Wright and Ms. Geraldine Stutz.
Ralph Destino, 57, has been the Chairman of Cartier, Inc., a luxury goods
store, since 1985. Cartier, Inc. is a subsidiary of Richemont, an affiliate of
NAR. Mr. Destino also serves as a director of The Leslie Fay Companies, a
manufacturer of dresses, suits, coats and sportswear which filed for protection
under Chapter 11 of the U.S. Code in March 1993. Mr. Destino, a designee of NAR,
was elected a Director of the Company in October 1991. Mr. Destino is a Class
III Director whose term expires in 1995.
J. David Hakman, 52, has been the Chief Executive Officer of Hakman Capital
Corporation, Burlingame, California, an investment and merchant banking firm,
since 1980. Mr. Hakman also serves as a director of Concord Camera Corp., a firm
which manufactures and distributes cameras. Mr. Hakman is also the Chairman and
a director of AFD Acquisition Corp., a food distribution company, which filed
for protection under Chapter 11 of the U.S. Code in June 1991 and emerged from
Chapter 11 in September 1993. Mr. Hakman, a designee of Mr. Kruttschnitt, was
appointed a Director of the Company in May 1989 and was elected a Director of
the Company in October 1991. Mr. Hakman is a Class I Director whose term expires
in 1996.
S. Lee Kling, 65, is Chairman of the Board of Kling Rechter & Co., a
merchant banking company. He served as Chairman and a director of Landmark
Bancshares Corporation, a bank holding company in St. Louis, Missouri, from 1974
through 1991, when it merged with Magna Group Inc. He served as Landmark's Chief
Executive Officer from 1974 through 1990. Mr. Kling serves on the Boards of
Directors of
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E-Systems, Inc., a diversified electronics company, Falcon Products, Inc., a
manufacturer of commercial furniture, Bernard Chaus Inc., a sportswear
manufacturer and distributor, Top Air Manufacturing Co., a manufacturer of
agricultural equipment, Lewis Galoob Toys, Inc., a toy company, Magna Group,
Inc., a multi-bank holding company, National Beverage Corp., a specialized
beverage company, and NationsMart Corp., a dry cleaning, laundry and shoe repair
company, Mr. Kling was elected a Director of the Company in 1983. Mr. Kling is a
Class I Director whose term expires in 1996.
Theodore H. Kruttschnitt, 51, has been the owner and sole proprietor of
California Innkeepers, Burlingame, California, an owner/operator of hotels and
motor hotels, since May 1970. Mr. Kruttschnitt is also Chairman of the Board of
Burlingame Bancorp, a commercial bank holding company, and serves on the Board
of Directors of Cooper Development Company, a firm which invests in personal
care products businesses. Mr. Kruttschnitt was appointed a Director of the
Company in May 1989 and was elected a Director of the Company in October 1991.
Mr. Kruttschnitt is a Class III Director whose term expires in 1995.
Jeffrey Laikind, 58, has been a Managing Director of Prudential Securities
Investment Management (formerly Prudential Bache Securities Inc.), a money
management firm, since 1985. Mr. Laikind is also a director of NAR and a member
of the advisory board of Quadrant Management, Inc., an indirect wholly-owned
subsidiary of NAR which manages NAR's U.S. assets ("Quadrant"). Mr. Laikind, a
designee of NAR, was elected a Director of the Company in October 1991. Mr.
Laikind is a Class III Director whose term expires in 1995.
Elizabeth Valk Long, 43, has been the President of TIME Magazine since July
1991 and a Senior Vice President of Time Inc., periodical and book publishers,
since April 1989. She served as the publisher of TIME from July 1991 until
September 1993; the publisher of PEOPLE from November 1988 until July 1991; and
the publisher of LIFE Magazine from December 1986 until November 1988. Ms. Long,
a designee of NAR, was elected a Director of the Company in October 1991. Ms.
Long is a Class I Director whose term expires in 1996.
Edmund R. Manwell, 51, is senior partner at the law firm of Manwell &
Milton, San Francisco, California. Mr. Manwell has been associated with this
firm since 1982. Mr. Manwell also serves as a director of Dreyer's Grand Ice
Cream, Inc., an ice cream company. Mr. Manwell, a designee of Mr. Kruttschnitt,
was appointed a Director of the Company in May 1989 and was elected a Director
of the Company in October 1991. Mr. Manwell is a Class II Director whose term
expires in 1994.
Alan G. Quasha, 44, has been President of Quadrant since its formation in
early 1988. From 1980 to September 1991, he was a partner in the New York City
law firm of Quasha, Wessley & Schneider. In addition to his directorship at the
Company, Mr. Quasha serves as a director of Harken Energy Corporation, an oil
and gas exploration and production company, E-Z Serve Corporation, a convenience
store company, Tejas Power Corporation, a natural gas company, and NAR. Mr.
Quasha is also a director of Compagnie Financiere Richemont A.G. ("Richemont"),
a Swiss public company engaged in the tobacco, luxury goods and other businesses
and an affiliate of NAR. Mr. Quasha, a designee of NAR, was elected a Director
of the Company and Chairman of the Board in October 1991. Mr. Quasha is a Class
II Director whose term expires in 1994.
Jack E. Rosenfeld, 55, has served as President and Chief Executive Officer
of the Company since October 1990. Mr. Rosenfeld previously served as Executive
Vice President of the Company from May 1988 until October 1990. From 1987
through April 1988, Mr. Rosenfeld was President of Rosenfeld & Co., a consulting
firm that provided consulting services to the Company. Mr. Rosenfeld is also a
director of PSC, Inc., a manufacturer of bar code equipment, and Electric Fuel,
Ltd., a developer and manufacturer of electronic batteries and fueling systems
for motor vehicles. Mr. Rosenfeld was elected a Director of the Company in 1974.
Mr. Rosenfeld is a Class III Director whose term expires in 1995.
Geraldine Stutz, 65, has been the President and Publisher of Panache Press
at Random House Inc., a publishing company, since 1986. She was previously the
Chief Executive Officer and Managing Partner of Henri Bendel, a New York
specialty store. Ms. Stutz also serves as a director of Tiffany & Co., a retail
luxury
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jewelry store, and the Jones Apparel Group, a clothing manufacturer. Ms. Stutz,
a designee of NAR, was elected a Director of the Company in October 1991. Ms.
Stutz is a Class II Director whose term expires in 1994.
Robert F. Wright, 68, has been the President of Robert F. Wright
Associates, Inc., business consultants, since 1988. Prior thereto, he was a
senior partner of the accounting firm Arthur Andersen & Co. Mr. Wright is a
director of Reliance Standard Life Insurance Company, a life insurance company,
and affiliates, Williams Real Estate Co., Inc., a real estate company, and The
Navigator Group, Inc., a property insurance company. Mr. Wright also serves on
the advisory board of Quadrant. Mr. Wright, a designee of NAR, was elected a
Director of the Company in October 1991. Mr. Wright is a Class II Director whose
term expires in 1994.
OTHER INFORMATION
The Board of Directors has standing Executive, Audit, Stock Option and
Executive Compensation and Nominating Committees.
During 1993, Messrs. Quasha (Chairman), Rosenfeld and Wright were members
of the Executive Committee and currently serve as its members. Pursuant to the
Stock Purchase Agreement, at least one Director not designated by NAR shall
serve on the Executive Committee. The Executive Committee held eight meetings
(or took action by written consent) in 1993. The duties of the Executive
Committee include recommending actions to the Board of Directors and acting on
behalf of the Board on certain matters when the Board is not in session.
During 1993, Messrs. Wright (Chairman), Hakman and Manwell were members of
the Audit Committee and currently serve as its members. The Audit Committee held
four meetings (or took action by written consent) in 1993. The duties performed
by the Audit Committee include (1) review with the independent public
accountants of the scope of their audit, the audited consolidated financial
statements, and any internal control comments contained in the independent
public accountants' management letter, including corrective action taken by
management; (2) annual review and approval of the adequacy and scope of the
internal audit department's planned audit program and review of the internal
audit department's interim audit reports, including the evaluation of replies
and corrective action being taken; (3) review of the adequacy of the internal
accounting control systems of the Company and its subsidiaries; and (4) review
and approval of management's recommendation for the appointment of outside
independent public accountants prior to the submission of their nomination to
the Board of Directors for approval and to the Shareholders for ratification.
The Audit Committee is concerned with the accuracy and completeness of the
Company's consolidated financial statements and matters which relate to them.
However, the Audit Committee's role does not involve the professional evaluation
of the quality of the audit conducted by the independent public accountants.
While it is believed that the Audit Committee's activities are beneficial
because they provide ongoing oversight on behalf of the full Board, they do not
alter the traditional roles and responsibilities of the Company's management and
independent public accountants with respect to the accounting and control
functions and financial statement presentation.
During 1993, Messrs. Laikind (Chairman), Destino and Quasha and Ms. Long
and Ms. Stutz were members of the Stock Option and Executive Compensation
Committee (the "Compensation Committee") and currently serve as its members. The
Compensation Committee held two meetings (or took action by written consent) in
1993. The duties of the Compensation Committee are to review and make
recommendations for approval by the Board of Directors of remuneration
arrangements for Directors and members of management.
During 1993, Messrs. Rosenfeld (Chairman), Destino, Hakman, Kruttschnitt
and Laikind were members of the Nominating Committee and currently serve as its
members. The Nominating Committee did not hold any meetings in 1993. The duties
of the Nominating Committee include evaluating and recommending candidates for
election to the Board of Directors. The By-laws of the Company require advance
notice of nominations for election to the Board of Directors, other than those
made by the Board of Directors. Unless waived by the Board of Directors, a
notice of nomination must be received by the Company at least 75 days before
initiation of solicitation to the Shareholders for election in the event of an
election other than at an
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annual meeting of Shareholders, and at least 75 days before the date that
corresponds to the record date of the prior year's annual meeting of
Shareholders in the event of an election at an annual meeting of Shareholders,
and in all events must include certain required information. The Nominating
Committee will consider nominees recommended by Shareholders in accordance with
its By-laws.
During 1993, the Board of Directors held four meetings in person or by
conference telephone. Each incumbent Director attended at least 75% of the Board
meetings held during the period in which such Director was a member of the Board
and at least 75% of the meetings of the committees on which he or she served
during such period.
The Company indemnifies its executive officers and Directors to the extent
permitted by applicable law against liabilities incurred as a result of their
service to the Company. The Company has a directors and officers liability
insurance policy underwritten by National Union Fire Insurance Company of
Pittsburgh, Pennsylvania in the aggregate amount of $10,000,000. Such policy,
whose term is from March 5, 1993 to June 1, 1994, has a $350,000 corporate
deductible. The Company also has indemnification agreements with each Director.
In addition, the Shareholders' Agreement, dated October 25, 1991, between the
Company and NAR provides for indemnification, to the fullest extent permitted by
law, of NAR's designees to the Board of Directors against, among other things,
all liabilities and claims arising out of their service in any capacity for or
on behalf of the Company.
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
officers, Directors and beneficial owners of more than 10% of the Company's
Common Stock to file reports of ownership and changes in their ownership of the
equity securities of the Company with the Securities and Exchange Commission
("Commission") and the American Stock Exchange. Based solely on a review of the
reports and representations furnished to the Company during the last fiscal year
by such persons, the Company believes that each of these persons is in
compliance with all applicable filing requirements.
VOTE REQUIRED
The affirmative vote of the holders of a plurality of the Common Stock is
required to elect Directors. The enclosed proxy provides a means for
Shareholders to vote for the election of all of the nominees for Director listed
above in the event of the approval of the proposal to amend the Company's
Certificate of Incorporation to eliminate Articles SIXTH and the present
classified Board of Directors, or Edmund R. Manwell, Alan G. Quasha, Geraldine
Stutz and Robert F. Wright to serve as Class II Directors of the Company in the
event of the disapproval of such proposal, to withhold authority to vote for one
or more of such nominees, or to withhold authority to vote for all of such
nominees. Abstentions with respect to the election of a nominee for Director
will have the same effect as a withheld vote and broker non-votes will have no
effect on the election of Directors.
It is the intention of the persons named in the enclosed proxy to vote FOR
the election of all of the persons named above to serve as Directors of the
Company in the event of the approval of the proposal to amend the Company's
Certificate of Incorporation to eliminate Article SIXTH and the present
classified Board of Directors or Edmund R. Manwell, Alan G. Quasha, Geraldine
Stutz and Robert F. Wright to serve as Class II Directors of the Company in the
event of the disapproval of such proposal. The nominees, each of whom currently
serves as a Director, have consented to be named in this Proxy Statement and to
continue to serve as Directors if elected. Management does not contemplate or
foresee that any of the nominees will be unable or unwilling to serve or
otherwise unavailable for election, but if such a situation should arise and
other nominees are nominated, the persons named in the proxy will vote for the
election of the other nominees recommended by the Board of Directors. In all
cases, the Board of Directors has the authority to elect persons to fill
vacancies on the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE ELECTION
OF THE NOMINEES FOR DIRECTOR SET FORTH ABOVE.
7
<PAGE> 10
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE COMPENSATION OF THE COMPANY
The following table sets forth certain information with respect to
compensation awarded to, earned by or paid to the Company's Chief Executive
Officer and each of the four most highly compensated executive officers of the
Company other than the Chief Executive Officer whose total annual salary and
bonus exceeded $100,000 for each of the Company's last three fiscal years
(collectively, the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
(a) (b) (c) (d) (e) (f) (g) (h)
OTHER
ANNUAL
NAME AND COMPEN- RESTRICTED STOCK OPTIONS/ LTIP
PRINCIPAL FISCAL BONUS SATION AWARD(S) SARS PAYOUTS
POSITION YEAR SALARY ($) ($)(1) ($)(2) ($) (#) ($)
- - ------------------------- ------ ---------- -------- -------- ---------------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Jack E. Rosenfeld 1993 $500,000 -- -- -- 150,000(4) --
President and Chief 1992 $499,770 $150,469 -- -- 2,427,210(5) --
Executive Officer 1991 $519,326 -- -- -- 2,921,884(6) --
Michael P. Sherman 1993 $223,942 -- -- -- 80,000(4) --
Executive Vice President 1992 $215,019 $ 75,618 -- -- -- --
- - --Corporate Affairs, 1991 $207,827 -- -- -- -- --
General Counsel and
Secretary
Wayne P. Garten 1993 $225,144 -- -- -- 80,000(4) --
Executive Vice President 1992 $212,496 $ 72,016 -- -- -- --
and Chief Financial 1991 $189,538 -- -- -- -- --
Officer
Edward J. O'Brien 1993 $138,027 -- -- -- 40,000(4) --
Senior Vice President 1992 $126,998 $ 34,707 -- -- -- --
and Treasurer 1991 $120,082 $ 12,500 -- -- -- --
David E. Ullman 1993 $110,962 -- -- -- 10,000(4) --
Vice President- 1992 $ 84,135 $ 9,577 -- -- -- --
Controller 1991 $ 32,923(7) -- -- -- -- --
<CAPTION>
<S> <C>
(a) (i)
ALL
OTHER
NAME AND COMPEN-
PRINCIPAL SATION
POSITION ($)(3)
- - ------------------------- --------
<S> <C>
Jack E. Rosenfeld $ 35,523(8)
President and Chief $ 31,598(9)
Executive Officer --
Michael P. Sherman $ 19,314(10)
Executive Vice President $ 13,470(11)
- - --Corporate Affairs, --
General Counsel and
Secretary
Wayne P. Garten $ 10,160(12)
Executive Vice President $ 3,162(13)
and Chief Financial --
Officer
Edward J. O'Brien $ 11,849(14)
Senior Vice President $ 7,131(15)
and Treasurer --
David E. Ullman $ 647(16)
Vice President- --
Controller --
</TABLE>
- - ------------------
(1) In fiscal 1992, the Named Executives, except for Mr. Rosenfeld, deferred
25% of their bonuses and are entitled to receive such deferred amounts in
stock over a three year period pursuant to the Company's Incentive
Compensation Plan.
(2) The aggregate amount of all perquisites and other personal benefits paid to
any Named Executive is not greater than either $50,000 or 10% of the total
annual salary and bonus reported for such Named Executive.
(3) Commission rules do not require disclosure regarding items in this column
for fiscal 1991.
(4) Issued pursuant to the Company's 1993 Executive Equity Incentive Plan.
(5) Includes the right to purchase 1,213,605 shares of Common Stock granted to
Mr. Rosenfeld by NAR on May 28, 1993 pursuant to a letter agreement dated
September 23, 1992 at a price per share of $2.00 (subject to adjustment)
plus 10% per year (including fractions of a year) from October 25, 1991
through the exercise period and up to 1,213,605 shares of Common Stock at a
price per share of $1.50 (subject to adjustment) plus 10% per year
(including fractions of a year) from September 16, 1992 through the
exercise period.
(6) Includes the right to purchase, which was conditioned on the occurrence of
certain events, 1,213,605 shares of Common Stock granted to Mr. Rosenfeld
on October 25, 1991 at a price per share of $3.00 (subject to adjustment)
plus 10% per year (including fractions of a year) from October 25, 1991
through the exercise period and the right to purchase, pursuant to a rights
offering which was conditioned on the occurrence of certain events, a
maximum of 1,508,279 shares of Common Stock at a price per share to be
determined at a later date (but not less than $2.00). Mr. Rosenfeld was not
able to
8
<PAGE> 11
acquire any of these shares because the events upon which the exercise of
such rights were conditioned never occurred. The right to acquire these
shares expired on September 23, 1992.
(7) Mr. Ullman was hired by the Company in August 1991.
(8) Includes $2,998 of matching contributions made by the Company on behalf of
Mr. Rosenfeld under the Company's 401(k) Savings Plan, $26,216 of matching
contributions made by the Company on behalf of Mr. Rosenfeld under the
Company's Supplemental Retirement Plan, $1,388 of life insurance premiums
paid on term life insurance policies by the Company on behalf of Mr.
Rosenfeld, and the distribution of 2,316 shares of the Company's Common
Stock, resulting from the Company's termination of its Employee Stock
Ownership Plan, valued at $2.125 per share on the date of such plan's
termination.
(9) Includes $2,910 of matching contributions made by the Company on behalf of
Mr. Rosenfeld under the Company's 401(k) Savings Plan, $27,300 of matching
contributions made by the Company on behalf of Mr. Rosenfeld under the
Company's Supplemental Retirement Plan, and $1,388 of life insurance
premiums paid on term life insurance policies by the Company on behalf of
Mr. Rosenfeld.
(10) Includes $2,998 of matching contributions made by the Company on behalf of
Mr. Sherman under the Company's 401(k) Savings Plan, $11,492 of matching
contributions made by the Company on behalf of Mr. Sherman under the
Company's Supplemental Retirement Plan, $344 of life insurance premiums
paid on term life insurance policies by the Company on behalf of Mr.
Sherman, and the distribution of 2,108 shares of the Company's Common
Stock, resulting from the Company's termination of its Employee Stock
Ownership Plan, valued at $2.125 per share on the date of such plan's
termination.
(11) Includes $2,910 of matching contributions made by the Company on behalf of
Mr. Sherman under the Company's 401(k) Savings Plan, $10,215 of matching
contributions made by the Company on behalf of Mr. Sherman under the
Company's Supplemental Retirement Plan, and $344 of life insurance premiums
paid on term life insurance policies by the Company on behalf of Mr.
Sherman.
(12) Includes $2,998 of matching contributions made by the Company on behalf of
Mr. Garten under the Company's 401(k) Savings Plan, $2,724 of matching
contributions made by the Company on behalf of Mr. Garten under the
Company's Supplemental Retirement Plan, $252 of life insurance premiums
paid on term life insurance policies by the Company on behalf of Mr.
Garten, and the distribution of 1,970 shares of the Company's Common Stock,
resulting from the Company's termination of its Employee Stock Ownership
Plan, valued at $2.125 per share on the date of such plan's termination.
(13) Includes $2,910 of matching contributions made by the Company on behalf of
Mr. Garten under the Company's 401(k) Savings Plan, and $252 of life
insurance premiums paid on term life insurance policies by the Company on
behalf of Mr. Garten.
(14) Includes $2,998 of matching contributions made by the Company on behalf of
Mr. O'Brien under the Company's 401(k) Savings Plan, $5,864 of matching
contributions made by the Company on behalf of Mr. O'Brien under the
Company's Supplemental Retirement Plan, $300 of life insurance premiums
paid on term life insurance policies by the Company on behalf of Mr.
O'Brien, and the distribution of 1,265 shares of the Company's Common
Stock, resulting from the Company's termination of its Employee Stock
Ownership Plan, valued at $2.125 per share on the date of such plan's
termination.
(15) Includes $1,907 of matching contributions made by the Company on behalf of
Mr. O'Brien under the Company's 401(k) Savings Plan, $4,924 of matching
contributions made by the Company on behalf of Mr. O'Brien under the
Company's Supplemental Retirement Plan, and $300 of life insurance premiums
paid on term life insurance policies by the Company on behalf of Mr.
O'Brien.
(16) Includes $93 of matching contributions made by the Company on behalf of Mr.
Ullman under the Company's 401(k) Savings Plan, and $554 of matching
contributions made by the Company on behalf of Mr. Ullman under the
Company's Supplemental Retirement Plan.
STOCK OPTIONS
During fiscal 1993, no stock options were granted to, nor were any
exercised by, any of the Named Executives pursuant to the Stock Option Plan.
9
<PAGE> 12
The following table contains information concerning options granted to each
of the Named Executives during fiscal 1993 pursuant to the 1993 Executive Equity
Incentive Plan.
OPTION GRANTS IN FISCAL 1993
<TABLE>
<CAPTION>
PERCENT OF
TOTAL OPTIONS
OPTIONS GRANTED TO
GRANTED EMPLOYEES IN EXERCISE EXPIRATION GRANT DATE
NAME (#) FISCAL YEAR PRICE DATE(1) PRESENT VALUE(2)
(a) (b) (c) (d) (e) (h)
- - ------------------------------------- ---------- ------------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Jack E. Rosenfeld.................... 150,000 10.7% $ 2.50 3/2/99 $325,293
Michael P. Sherman................... 80,000 5.7% $ 2.50 3/2/99 $173,489
Wayne P. Garten...................... 80,000 5.7% $ 2.50 3/2/99 $173,489
Edward J. O'Brien.................... 40,000 2.8% $ 2.50 3/2/99 $ 86,745
David E. Ullman...................... 10,000 .7% $ 2.50 3/2/99 $ 21,686
</TABLE>
- - ------------------
(1) Options granted under the 1993 Executive Equity Incentive Plan become
exercisable three years after the date of grant and expire six years from
the date of grant.
(2) Grant date option values are determined using the Black-Scholes Model. The
Black-Scholes Model is a formula widely used to value exchange traded
options. However, stock options granted by the Company to its executives
differ from exchange traded options in three key respects: options granted
by the Company to its executives are long-term, non-transferable and subject
to vesting restrictions, while exchange traded options are short-term and
can be exercised or sold immediately in a liquid market. The Black-Scholes
Model relies on several key assumptions to estimate the present value of
options, including the volatility of the security underlying the option, the
risk-free rate of return on the date of grant and the term of the option. In
calculating the grant date option values set forth in the table, a factor of
61.96% has been assigned to the volatility of the Common Stock, based on
monthly stock market quotations for the three years preceding the date of
grant; the risk-free rate of return has been fixed at 7.54% based upon the
average of the Intermediate Term Government Bond Yields (Iobottson
Associates SBBI 1994 Yearbook Exhibit A-13) for the six years preceding the
date of grant; and the actual option term of six years has been used.
Consequently, the grant date option values set forth in the table are only
theoretical values and may not accurately determine present value. The
actual value, if any, an optionee will realize will depend on the excess of
the market value of the Common Stock over the exercise price on the date the
option is exercised.
EMPLOYMENT AGREEMENTS AND ARRANGEMENTS RELATING TO CHANGE IN CONTROL
In connection with the consummation of the transactions contemplated by the
Stock Purchase Agreement between the Company and NAR and as a condition thereto,
the Company entered into an Executive Employment Agreement, dated as of October
25, 1991, with Jack E. Rosenfeld, the President and Chief Executive Officer of
the Company (the "Employment Agreement"). The Employment Agreement provides for
a five-year term commencing on October 25, 1991, at a base salary of $500,000
per year; an annual bonus of between 25% and 100% of Mr. Rosenfeld's base
salary, depending on the attainment of various performance objectives and
payable only if the Company achieves at least 101% of the results forecast in
its approved budget; a payment to a trust on behalf of Mr. Rosenfeld of 916,667
shares of Common Stock in lieu of a cash payment of $1,564,000 to which he was
previously entitled in connection with a change in control of the Company,
666,667 of such shares being fully vested and the remaining 250,000 of such
shares to vest in equal annual installments over three years (such unvested
shares to be forfeitable if Mr. Rosenfeld's employment is terminated by the
Company with cause or by him without good reason), with the vested shares
distributable to Mr. Rosenfeld at the end of the employment term or the earlier
termination of his employment; and the grant of registration rights under the
Securities Act of 1933, as amended, ("Securities Act"), for shares of Common
Stock owned by Mr. Rosenfeld. On October 25, 1991, NAR entered into an agreement
with Mr. Rosenfeld pursuant to which he may purchase from NAR prior to October
25, 1996,
10
<PAGE> 13
1,213,605 shares of Common Stock at a price per share of $2.00 (subject to
adjustment) plus 10% of $2.00 per year through the date on which Mr. Rosenfeld
effects such purchase. This agreement was amended on September 23, 1992 to
provide that NAR would grant to Mr. Rosenfeld in March 1993 (which it did) the
right to purchase an additional 1,213,605 shares of Common Stock at a price
share of $1.50 (subject to adjustment) plus 10% per year from September 1992
through the exercise period.
In connection with the Stock Purchase Agreement, on October 14, 1991, the
Company entered into Executive Employment Agreements with each of Messrs.
Michael P. Sherman, Wayne P. Garten and Edward J. O'Brien. These Executive
Employment Agreements were essentially the same as such officers' existing
employment agreements except that they provide for cash payments on October 25,
1991 to Messrs. Sherman, Garten and O'Brien of $281,714, $221,621 and $90,000,
respectively, and contributions to a trust on behalf of such officers of 156,979
shares, 147,812 shares and 60,000 shares of the Company's Common Stock,
respectively, in connection with the change in control effected by NAR pursuant
to the Stock Purchase Agreement and in lieu of their right to receive a cash
change in control payment. Pursuant to the terms of the trust, such Common Stock
was distributed to each such officer during fiscal 1993. Messrs. Sherman, Garten
and O'Brien were also granted certain registration rights under the Securities
Act with respect to the shares of Common Stock granted to each of them. In 1993,
Messrs. Sherman and Garten's employment agreements were renewed for one year
renewable terms.
COMPENSATION OF DIRECTORS
During 1993, Directors who were not employees of the Company or its
subsidiaries were paid a retainer at an annual rate of $30,000, plus an
additional $1,000 for each Board meeting and $500 for each committee meeting
attended. Officers and employees of the Company or its subsidiaries receive no
remuneration for their services as Directors. During fiscal 1993, the Company
provided $50,000 of term life insurance for each Director of the Company. In
addition, the Company issues stock options for 20,000 shares to new Directors of
the Company pursuant to the 1993 Directors Option Plan, and indemnifies its
Directors to the extent permitted by applicable law. See "ELECTION OF
DIRECTORS -- Other Information".
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended January 1, 1994, the Compensation Committee of
the Board of Directors of the Company consisted of Jeffrey Laikind (Chairman),
Ralph Destino, Elizabeth Valk Long, Alan G. Quasha and Geraldine Stutz. None of
such persons was, during such fiscal year or formerly, an officer or employee of
the Company or any of its subsidiaries or had any relationship with the Company
other than serving as a Director of the Company. In addition, during the fiscal
year ended January 1, 1994, no executive officer of the Company served as a
director or a member of the compensation committee of another entity, one of
whose executive officers served as a Director or on the Compensation Committee
of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is empowered to make recommendations to the
Board of Directors with respect to remuneration arrangements for members of
management.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Stock Option and Executive Compensation Committee ("the Compensation
Committee") has the responsibility, under delegated authority from the Company's
Board of Directors, for developing, administering and monitoring the executive
compensation policies of the Company and making recommendations to the Board
with respect to these policies. The Compensation Committee is currently composed
of five outside directors. During 1991 and 1992, the Compensation Committee
conducted a complete reassessment of the executive compensation philosophy and
program. New compensation plans resulted from this review and were introduced in
1993. The Compensation Committee is pleased with the results of the new plans
and feels that they are having the desired effect on the Company.
11
<PAGE> 14
EXECUTIVE COMPENSATION PHILOSOPHY
The Compensation Committee's executive compensation philosophy supports the
Company's overall business strategy and has at its core a strong link between
pay and performance. The philosophy emphasizes recognition of achievement at
both the Company and individual level. A significant portion of income delivered
to executives to reflect such achievement is intended to be in the form of
long-term incentives. This long-term focus emphasizes sustained performance and
encourages retention of executive talent. In addition, executives are encouraged
to hold a significant ownership stake in the Company, so that their interests
are closely aligned with those of the shareholders in terms of both risk and
reward.
The specific executive compensation plans are designed to support the
executive compensation philosophy. Compensation of the Company's executives
consists of three components which are discussed below: salary, annual incentive
awards and long-term incentive awards. Base salary levels have been established
in order to attract and retain key executives commensurate with their level of
responsibility within the organization. Annual incentives closely link executive
pay with performance in areas that are critical to the Company's short-term
operating success. Long-term incentives motivate executives to make decisions
that are in the best interests of the Company's owners and reward for the
creation of shareholder value. It is the intent of both the Company and the
Compensation Committee that the components of the executive compensation program
will support the Company's compensation philosophy, reinforce the Company's
overall business strategy, and ultimately drive shareholder value creation.
BASE SALARIES
In accordance with the Compensation Committee's policy, the Company's
intention is to position executive salaries at median compensation levels for
comparable positions and responsibilities at the companies included in the
performance chart as of 1992, as well as medians reported in published
compensation surveys of the retail industry dating from 1992. Base salaries for
Messrs. Sherman, Garten, O'Brien and Ullman were $223,942, $225,144, $138,027
and $110,962, respectively and are generally competitive with salaries for
comparable individuals at the companies included in the performance chart.
Salaries for Messrs. Sherman and Garten were set pursuant to employment
agreements entered into by them with the Company in October 1991 and renewed in
June 1993. Individual salaries for other executives may be higher or lower than
the median based on several equally weighted factors: the qualifications and
experience of the executive, the executive's level of responsibility within the
organization, pay levels at companies who compete with the Company for executive
talent, individual performance, and the Company performance-related factors used
in determining annual incentive awards.
The base salaries of the Company's executives are subject to periodic
review and adjustment. Annual salary adjustments are made based on the factors
described above. Base salaries for the Named Executives have been adjusted for
each of the past three years.
Salaries are budgeted to be increased by 5% on average for Hanover
employees in 1994. This rate of increase is in line with competitive standards
in the retail sector over the past three years, and consistent with anticipated
salary increases in the industry for 1994.
ANNUAL INCENTIVE AWARDS
In addition to base salaries, each of the Company's executives and selected
key managers participate in the Company's Incentive Compensation Plan.
Currently, approximately 220 executives and key managers are eligible to
participate in the annual bonus plan. Under this plan, each participant is
assigned a target bonus, expressed as a percentage of his/her base salary, which
is paid if all performance targets are fully met. It is the policy of the
Compensation Committee to position target bonuses at competitive levels.
Individual target bonuses are based on the person's responsibility level in the
organization and the bonus award opportunity at the other organizations included
in the performance chart. Target bonus levels range from 5% to 30% of salary.
Target bonus awards as a percent of salary for Messrs. Sherman, Garten, O'Brien
and Ullman were 30%, 30%, 25% and 25%, respectively, in 1993.
12
<PAGE> 15
Participants are eligible to receive an annual bonus depending upon the
extent to which certain goals are achieved. Performance goals for 1993 were
based on Earnings Before Interest and Taxes (EBIT), Operating Profit, and other
customer satisfaction and performance-related goals including Inventory Fill,
Inventory Turns, Returns and Order Cancellations. Goals are set at both the
corporate and business unit levels depending on the participant's scope of
responsibility thus encouraging teamwork amongst the Company's employees. The
importance of each goal in determining a participant's bonus award also depends
on his/her scope of responsibility. In order for the Named Executives to receive
a bonus, the Company must achieve a threshold EBIT level. Once the threshold
EBIT level is achieved, bonus awards for the Named Executives depend 60% on
Company EBIT performance and 40% on the achievement of the customer satisfaction
and performance-related goals set forth above. Actual bonus levels vary
depending upon the degree of achievement in relationship to the performance
goals. Although the Compensation Committee reserves the right to pay
discretionary bonuses, they did not do so in 1993 and have announced their
intention not to do so in 1994.
Payouts of awards have been determined based on the Company's performance
during fiscal 1993. 75% of awards made under the bonus plan are paid in cash
while the remaining 25% is paid in stock which vests over three years. Since the
Company did not meet its aggressive EBIT goal, there were no bonus payouts based
on corporate performance. Award payouts for other participants ranged from 0% to
23% of salary depending on the performance of individuals' areas of
responsibility.
LONG-TERM INCENTIVE AWARDS
The Company has adopted the 1993 Executive Equity Incentive Plan to provide
executives and other key employees with incentives to maximize the long-term
creation of shareholder value. The long-term incentive plan encourages
executives to acquire and retain a significant ownership stake in the Company.
Under the plan, executives are given an opportunity to purchase shares of
Company Common Stock with up to 80% of the purchase price financed with a full
recourse Company loan. For each share of stock an employee purchases, he/she
receives an option to acquire two additional shares of Company Common Stock,
which vests after three years and expires after six years. By creating this
opportunity, the Company encourages executives to own Company Common Stock
thereby aligning executives' interests with those of the shareholders. The
number of shares offered for purchase to each executive and the corresponding
number of tandem options increases with the executive's level of responsibility
within the organization.
Approximately 41 executives are currently eligible to participate in the
1993 Executive Equity Incentive Plan. During 1993, the Compensation Committee
made awards under the plan based primarily on the executives' levels of
responsibility within the organization and desired levels of equity ownership
among executives in the Company. The Named Executives elected to purchase
180,000 shares of Common Stock during 1993 and, in accordance with the terms and
conditions of the plan, were awarded 360,000 tandem options to purchase shares
of Common Stock. All executives of the Company elected to purchase a total of
704,830 shares of Common Stock during 1993 and were awarded a total of 1,409,660
tandem options to purchase shares of Common Stock.
1993 ALL-EMPLOYEE EQUITY INVESTMENT PLAN
The Company considers every one of its employees critical to the long-term
success of the Company. Thus, the Company has adopted the 1993 All-Employee
Equity Investment Plan to provide all employees an opportunity to own stock and
share in the upside potential of the Company. The plan gives employees an
opportunity to purchase shares of Company Common Stock at a 40% discount to the
market price. Employees may finance their purchase through a short-term, full
recourse Company loan which is paid with payroll deductions over the course of a
year. By giving the opportunity to buy Company shares to all employees, the
Company believes that it is creating an atmosphere that promotes teamwork among
its employees who will identify with the interests of the shareholders.
Approximately 2,600 employees are eligible to participate in the 1993
All-Employee Equity Investment Plan, including all employees of the Company who
have been employed by the Company for at least one year and are not eligible to
participate in the 1993 Executive Equity Incentive Plan. Thus, the Named
Executives
13
<PAGE> 16
are not eligible to participate in the All-Employee Equity Investment Plan.
During 1993, 440 employees elected to purchase 211,883 shares of Common Stock in
accordance with the plan. The Compensation Committee has approved share purchase
opportunity guidelines for 1994 which are based primarily on employee's levels
of responsibility within the organization. It is the intent of the Compensation
Committee that new purchase opportunities will be made annually for the next two
years. At the end of two years, the Compensation Committee will determine the
appropriateness of continuing the plan.
CHIEF EXECUTIVE OFFICER COMPENSATION
The incentive elements of the compensation paid to Mr. Rosenfeld during
1993 were determined on the same basis as that discussed above for all Named
Executives. Mr. Rosenfeld's base salary was $500,000 pursuant to an employment
agreement entered into by him and the Company in October 1991. Mr. Rosenfeld
participated in the annual incentive plan in which his target bonus was 25% of
salary and had the ability to earn a bonus equal to 100% of salary. Since the
Company did not meet its aggressive EBIT goal in 1993, there were no bonus
payouts based on corporate performance. In addition, Mr. Rosenfeld elected to
purchase 75,000 shares of Common Stock under the Company's 1993 Executive Equity
Incentive Plan, which was Mr. Rosenfeld's maximum allowable purchase under the
plan. Under the terms and conditions of the plan, Mr. Rosenfeld received two
tandem options for each share purchased, for a total of 150,000 options.
In determining the terms of Mr. Rosenfeld's compensation, the Compensation
Committee noted the agreement between NAR and Mr. Rosenfeld which is discussed
under the caption Certain Agreements and Related Transactions elsewhere in this
proxy statement.
NONDEDUCTIBLE COMPENSATION
The Compensation Committee currently does not anticipate that
non-performance based compensation, as defined in Section 162(m) of the Omnibus
Budget Reconciliation Act of 1993, paid to the named executives in this proxy
statement will exceed $1 million in 1994, and consequently the Company expects
to enjoy full deductibility of its executive compensation program. However,
because the Omnibus Budget Reconciliation Act of 1993 is newly enacted and only
proposed regulations are available, no assurance can be given that the Company
will preserve the full deductibility of all executive compensation.
Respectfully Submitted,
The Stock Option and Executive
Compensation Committee
Mr. Jeffrey Laikind, Chairman
Mr. Ralph Destino
Ms. Elizabeth Valk Long
Mr. Alan Quasha
Ms. Geraldine Stutz
The Compensation Committee's recommendations for compensation for 1993 were
accepted by the Board of Directors.
14
<PAGE> 17
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the cumulative
total shareholder return on the Company's Common Stock for each of the Company's
last five fiscal years with the cumulative total return (assuming reinvestment
of dividends) of (i) the Standard & Poor's 500 Stock Index (which includes the
Company) and (ii) peer issuers from the Company's line of business selected by
the Company in good faith.
INDEXED TOTAL SHAREHOLDER RETURN
THE COMPANY, PEER GROUP AND S&P 500
DECEMBER 31, 1988 -- DECEMBER 31, 1993
<TABLE>
<CAPTION>
DIRECT
MEASUREMENT PERIOD HANOVER MARKETING
(FISCAL YEAR COVERED) DIRECT PEER GROUP S&P 500
--------------------- -------- ---------- -------
<S> <C> <C> <C>
1988 100 100 100
1989 85 148 132
1990 28 104 127
1991 52 154 166
1992 145 218 179
1993 328 375 197
</TABLE>
- Direct Marketing Peer Group consists of direct merchandising companies
that market their products through alternative distribution channels,
such as mail or television media; peer companies include Blair, Damark,
Fingerhut, Gander, Home Shopping Network, Land's End, Lillian Vernon, QVC
Network, Spiegel and Williams Sonoma.
NOTE: Assumes $100 on December 31, 1988 in the Company's Common Stock, S&P
500 Funds and the Direct Marketing Peer Group and that dividends of
each are reinvested quarterly; December 1993 figures assume September
1993 shares outstanding for the Direct Marketing Peer Group, given
data availablity.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the Nomination and Standstill Agreement, Messrs. Kruttschnitt,
Hakman and Manwell agreed that if at any time Mr. Kruttschnitt ceases to own at
least 2,262,000 shares of Common Stock (representing 83% of the shares owned by
Mr. Kruttschnitt on the date of the Nomination and Standstill Agreement), at
least one of them will resign as a Director; if at any time Mr. Kruttschnitt
ceases to own at least 1,907,710 shares of Common Stock (representing 70% of the
shares owned by Mr. Kruttschnitt on the
15
<PAGE> 18
date of the Nomination and Standstill Agreement), at least two of them will
resign as Directors; and if at any time Mr. Kruttschnitt owns less than 5% of
the outstanding shares of Common Stock, all of them will resign as Directors;
except no Director shall be obligated to resign if such resignation would
constitute a breach of the Director's fiduciary duties as a Director. See
"ELECTION OF FOUR DIRECTORS -- AGREEMENTS WITH RESPECT TO NOMINATION OF
DIRECTORS".
On October 25, 1991, the Company and NAR consummated the transactions
contemplated by the Stock Purchase Agreement and NAR acquired 49.8% of the
voting securities of the Company. Pursuant to the Stock Purchase Agreement, NAR
and its affiliates also agreed not to increase their beneficial ownership to
more than 50.1% of the voting stock outstanding of the Company for a period of
three years following October 25, 1991 without the approval of at least a
majority of the Directors of the Company unaffiliated and unassociated with and
not designated by NAR. However, NAR may exceed such percentage limitation under
certain circumstances, including as a result of acquisitions (i) in certain
circumstances, through the conversion or exercise of warrants or other
securities; (ii) directly from the Company or any subsidiary of the Company or
from any holder of at least five percent of the Common Stock; and (iii) after
certain Third Party Acquisitions (as defined in the Stock Purchase Agreement).
See "ELECTION OF FOUR DIRECTORS -- AGREEMENTS WITH RESPECT TO NOMINATION OF
DIRECTORS".
Since January 1993, pursuant to a consulting arrangement, Quadrant, an
affiliate of NAR, renders management consulting, business advisory and
investment banking services to the Company for an annual fee of $750,000 per
year.
Approximately $85,000 was paid by the Company during fiscal 1993 for the
rental of property pursuant to an operating lease to a partnership in which the
wife of the President and Chief Executive Officer of the Company, Jack E.
Rosenfeld, is a partner. Mr. Rosenfeld is also a Director of the Company.
In May 1993, the Company refinanced its revolving credit facility that had
been previously provided by a subsidiary of NAR with a new three-year $40
million facility with an independent financial institution. In October 1993, the
Company increased the maximum credit available to $52.5 million. A subsidiary of
NAR provided a secured limited guarantee of $10 million which allowed the
Company to borrow in excess of its availability based on a formula, up to the
facility's limit. This limited guarantee was reduced by approximately $5.1
million during the fourth quarter of 1993. The guarantee was eliminated in the
first quarter of 1994 based on the Company's 1993 operating results.
The foregoing relationships and transactions have been approved by the
Board or a committee of the Board or by the Shareholders and, to the extent that
such arrangements are available from non-affiliated parties, are on terms no
less favorable to the Company than those available from non-affiliated parties.
16
<PAGE> 19
PRINCIPAL HOLDERS OF VOTING SECURITIES OF THE COMPANY
The following table sets forth information concerning each person or group
of affiliated persons known by management to own beneficially more than five
percent (5%) of the Company's Common Stock as of April 25, 1994. The information
given is based on information furnished to the Company by such persons or groups
and statements filed with the Commission.
<TABLE>
<CAPTION>
SHARES OF
COMMON PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER STOCK CLASS(1)
- - ------------------------------------------------------------------ ---------- ----------
<S> <C> <C>
Alan G. Quasha(2)................................................. 51,895,263(3)(7) 53.2%
c/o Quadrant Management, Inc.
127 East 73rd Street
New York, NY 10021
NAR Group Limited(2).............................................. 51,875,263(3) 53.2%
c/o P.M.M. Services
(B.V.I.) Limited
P.O. Box 438
Road Town, Tortola,
British Virgin Islands
Theodore H. Kruttschnitt(4)....................................... 5,320,887(5) 5.8%
1350 Bayshore Boulevard
Suite 850
Burlingame, CA 94010
Jack E. Rosenfeld................................................. 3,849,598(6) 4.2%
c/o Hanover Direct, Inc.
1500 Harbor Boulevard
Weehawken, NJ 07087
</TABLE>
- - ------------------
(1) Includes in each case shares of Common Stock issuable upon exercise of
options exercisable within 60 days for the subject individual only.
Percentages computed on the basis of 92,437,720 shares of Common Stock
outstanding as of April 25, 1994.
(2) Information concerning the number of shares beneficially owned has been
taken from Amendment No. 15 to the Statement on Schedule 13D filed by NAR on
March 8, 1994 with the Commission. All of the shares beneficially owned by
NAR could also be deemed to be owned beneficially by certain other persons
including Alan G. Quasha, Intercontinental Mining & Resources Incorporated,
QCC and Richemont, each of which disclaims beneficial ownership of
securities of the Company owned of record by any of the others.
(3) Includes warrants to purchase 5,033,735 shares exercisable within 60 days
granted to NAR or its affiliates.
(4) Information concerning the number of shares beneficially owned has been
taken from Amendment No. 10 to the Statement on Schedule 13D filed by Mr.
Kruttschnitt on April 19, 1994 with the Commission. Such statement sets
forth the number of shares beneficially owned by Mr. Kruttschnitt and, of
such shares, the number as to which he holds sole voting power, shared
voting power, sole dispositive power or shared dispositive power. The
amended Schedule 13D also indicates that Mr. Kruttschnitt is a member of a
group which includes Mr. J. David Hakman, who beneficially owns 13,434
shares, and Mr. Edmund R. Manwell, who beneficially owns 13,628 shares. In
addition, Messrs. Hakman and Manwell have been granted options to purchase
15,000 and 20,000 shares, respectively, of Common Stock, which options are
exercisable within 60 days.
(5) Includes options to purchase 15,000 shares exercisable within 60 days.
(6) Includes options to purchase 2,627,210 shares exercisable within 60 days.
(7) Includes options to purchase 20,000 shares exercisable within 60 days by Mr.
Quasha.
17
<PAGE> 20
SECURITY OWNERSHIP OF MANAGEMENT OF THE COMPANY
The following table sets forth information concerning the beneficial
ownership of the Company's Common Stock by each Director, nominee for Director
and executive officer and by all executive officers and Directors as a group as
of April 25, 1994. The information given is based on information furnished to
the Company by such persons and statements filed with the Commission.
<TABLE>
<CAPTION>
SHARES OF
COMMON PERCENT OF
STOCK CLASS(1)
---------- ----------
<S> <C> <C>
Ralph Destino..................................................... 20,000(4) *
J. David Hakman(2)................................................ 28,434(5) *
S. Lee Kling...................................................... 18,511 *
Theodore H. Kruttschnitt(2)....................................... 5,320,887(5) 5.8%
Jeffrey Laikind................................................... 82,000(4) *
Elizabeth Valk Long............................................... 30,000(4) *
Edmund R. Manwell (2)............................................. 33,628(4) *
Alan G. Quasha (3)................................................ 51,895,263(4) 53.2%
Jack E. Rosenfeld................................................. 3,849,598(6) 4.2%
Geraldine Stutz................................................... 59,649(4) *
Robert F. Wright.................................................. 70,000(4) *
Michael P. Sherman................................................ 236,798(7) *
Wayne P. Garten................................................... 227,976(8) *
Edward J. O'Brien................................................. 84,060 *
David E. Ullman................................................... 5,253 *
Directors and executive officers as group (15 persons)............ 10,086,794(9) 11.4%
</TABLE>
- - ------------------
* Less than 1%
(1) Includes in each case shares of Common Stock issuable upon exercise of
options or warrants exercisable within 60 days for the subject individual
only. Percentages computed on the basis of 92,437,720 shares of Common Stock
outstanding as of April 25, 1994.
(2) See Note (4) under "PRINCIPAL HOLDERS OF VOTING SECURITIES OF THE COMPANY."
(3) See Note (2) under "PRINCIPAL HOLDERS OF VOTING SECURITIES OF THE COMPANY."
All of the shares beneficially owned by NAR could also be deemed to be
beneficially owned by Alan G. Quasha, due to his shared investment and
voting power with NAR.
(4) Includes options to purchase 20,000 shares exercisable within 60 days.
(5) Includes options to purchase 15,000 shares exercisable within 60 days.
(6) Includes options to purchase 2,627,210 shares exercisable within 60 days.
(7) Includes options to purchase 31,500 shares exercisable within 60 days.
(8) Includes options to purchase 32,150 shares exercisable within 60 days.
(9) Excludes 46,841,528 shares and warrants and options for 5,053,735 shares
beneficially owned by NAR which could also be deemed to be beneficially
owned by Alan G. Quasha. Includes options to purchase 20,000 shares
exercisable within 60 days by Alan G. Quasha.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed Arthur Andersen & Co. as independent public accountants of the Company
for the fiscal year ending December 31, 1994. Although the selection of auditors
does not require ratification, the Board has directed that the appointment of
Arthur Andersen & Co. be submitted to Shareholders for ratification because
management believes this matter is of such significance as to warrant
Shareholder participation. If Shareholders do not
18
<PAGE> 21
ratify the appointment, the Board of Directors, after review by the Audit
Committee, will consider the appointment of other certified public accountants.
Representatives of Arthur Andersen & Co. will be present at the Annual
Meeting and will be afforded the opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions.
The affirmative vote of the holders of a majority of the Common Stock
present in person or by proxy at the Annual Meeting and voting is required to
ratify and approve the selection of auditors.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" RATIFICATION
OF THE APPOINTMENT OF ARTHUR ANDERSEN & CO. AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1994.
SHAREHOLDER PROPOSALS FOR THE 1995 ANNUAL MEETING
Shareholder Proposals intended to be presented at the 1995 Annual Meeting
of Shareholders of the Company must be received by the Company no later than
March 31, 1995 for inclusion in the Company's proxy material for that meeting.
OTHER MATTERS
The Board of Directors does not know of any other matters to be presented
at the Annual Meeting. If any additional matters are properly presented to the
Annual Meeting for action, the persons named in the enclosed proxies and acting
thereunder will have discretion to vote on such matters in accordance with their
own judgment.
By Order of the Board of Directors
MICHAEL P. SHERMAN
Secretary
Dated: May 16, 1994
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN
THE ENCLOSED ENVELOPE.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED JANUARY 1, 1994, AS AMENDED FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION MAY BE OBTAINED WITHOUT CHARGE (EXCEPT FOR EXHIBITS TO SUCH ANNUAL
REPORT, WHICH WILL BE FURNISHED UPON PAYMENT OF THE COMPANY'S REASONABLE
EXPENSES IN FURNISHING SUCH EXHIBITS) BY ANY SUCH PERSON SOLICITED HEREUNDER BY
WRITING TO: MICHAEL P. SHERMAN, SECRETARY, HANOVER DIRECT, INC., 1500 HARBOR
BOULEVARD, WEEHAWKEN, NEW JERSEY 07087.
19
<PAGE> 22
ATTACHMENT A
ARTICLE SIXTH OF THE COMPANY'S
CERTIFICATE OF INCORPORATION
SIXTH: The business and affairs of the Corporation shall be managed by or
under the direction of a Board of Directors consisting of not less than three
nor more than twelve directors, the exact number of directors to be determined
from time to time by resolution adopted by affirmative vote of a majority of the
entire Board of Directors. The directors shall be divided into three classes,
designated Class I, Class II and Class III. Each class shall consist, as nearly
as may be possible, of one-third of the total number of directors constituting
the entire Board of Directors. From the date of incorporation, Class III
directors shall serve for a one-year term, Class II directors shall serve for a
two-year term and Class I directors for a three-year term. At each annual
meeting of stockholders beginning in 1994, successors to the class of directors
whose term expires at that annual meeting shall be elected for a three-year
term. If the number of directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain the number of directors in each
class as nearly equal as possible, and any additional director of any class
elected to fill a vacancy resulting from an increase in each class shall hold
office for a term that shall coincide with the remaining term of that class, but
in no case will a decrease in the number of directors shorten the term of any
incumbent director. A director shall hold office until the annual meeting for
the year in which his term expires and until his successor shall be elected and
shall qualify, subject, however, to prior death, registration, retirement,
disqualification or removal from office. Any vacancy on the Board of Directors
that results from an increase in the number of directors may be filled by a
majority of the Board of Directors then in office, and any other vacancy
occurring in the Board of Directors may be filled by a majority of the directors
then in office, although less than a quorum, or by a sole remaining director.
Any director elected to fill a vacancy not resulting from an increase in the
number of directors shall have the same remaining term as that of his
predecessors.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of preferred stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of this Certificate of Incorporation applicable thereto, and such
directors so elected shall not be divided into classes pursuant to this Article
Sixth unless expressly provided by such terms.
The election of directors of the Corporation need not be by ballot unless
the Bylaws so require. The Board of Directors and stockholders may hold their
meetings and have an office or offices outside the State of Delaware, if the
Bylaws so provide.
Notwithstanding any other provision of this Certificate of Incorporation,
no amendment of this Certificate of Incorporation shall amend, alter or repeal
any provision of this Article Sixth unless such amendment shall be approved by
the holders of shares of stock of the Corporation representing at least 75% of
the votes entitled to be cast thereon at a meeting of the stockholders duly
called for the consideration of such amendment.
A-1
<PAGE> 23
HANOVER DIRECT, INC.
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 22, 1994
The undersigned hereby appoints Jack E. Rosenfeld and S. Lee Kling proxies of
the undersigned, with full power of substitution, to vote all shares of Common
Stock of Hanover Direct, Inc., a Delaware corporation (the "Company"), the
undersigned is entitled to vote at the Annual Meeting of Shareholders of the
Company to be held at the St. Regis Hotel, Two East 55th Street at Fifth
Avenue, New York, New York on Wednesday, June 22, 1994 at 9:30 a.m. local time,
or any adjournments or postponements thereof, with all the powers the
undersigned would have if personally present on the following matters:
(Continued on reverse side)
<PAGE> 24
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. If no direction is indicated, this proxy will
be voted "FOR" the proposal to amend Article SIXTH of the Company's Certificate
of Incorporation, "FOR" the election of all nominees for directors, "FOR" the
appointment of Arthur Andersen & Co., and the proxies will use their discretion
with respect to any matters referred to in Item 4.
1. Proposal to amend Article SIXTH of the Company's Certificate of
Incorporation.
_____ FOR _____ AGAINST _____ ABSTAIN
2A. If proposal 1 above is approved: Election of the following nominees
as Directors to serve until the next Annual Meeting of Shareholders:
_____ FOR all nominees _____ AGAINST all nominees _____ ABSTAIN
NOMINEES: Ralph Destino, J. David Hakman, S. Lee Kling, Theodore H.
Kruttschnitt, Jeffrey Laikind, Elizabeth Valk Long, Edmund R.
Manwell, Alan G. Quasha, Jack E. Rosenfeld, Geraldine Stutz
and Robert F. Wright.
2B. If proposal 1 above is not approved: Election of the following
nominees as Directors to serve until the 1997 Annual Meeting of
Shareholders:
_____ FOR all nominees _____ AGAINST all nominees _____ ABSTAIN
NOMINEES: Edmund R. Manwell, Alan G. Quasha, Geraldine Stutz and
Robert F. Wright.
INSTRUCTIONS: To withhold authority to vote for any individual nominee
noted in 2A or 2B above, write that nominee's name in the
space provided.
________________________________________
3. Proposal to ratify and approve the appointment by the Board of Directors of
Arthur Andersen & Co. as the Company's independent auditors for the fiscal
year ending December 31, 1994.
_____ FOR _____ AGAINST _____ ABSTAIN
4. In their discretion, the above-named proxies are authorized to vote in
accordance with their own judgment upon such other matters as may properly
come before the Annual Meeting or adjournments or postponements thereof.
The undersigned hereby acknowledges receipt of the accompanying Notice of
Annual Meeting of Shareholders and Proxy Statement and hereby revokes any Proxy
or Proxies heretofore given.
You may strike out the persons named as Proxies and designate a person of your
choice, and may send this Proxy directly to such person.
SIGNATURE(S) __________________________________________ DATE __________
__________________________________________ DATE __________
NOTE: Please complete, date and sign exactly
as your name appears hereon. When signing
as attorney, administrator, executor,
guardian, trustee or corporate official,
please add your title. If shares are held
jointly, each holder should sign.
