<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. 1)
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 sec.240.14a-11(c) or sec.240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Grossman's Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/ / $125 per Exchange Act Rules 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:
/X/ 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
[GROSSMAN'S LOGO]
GROSSMAN'S INC.
45 DAN ROAD
CANTON, MASSACHUSETTS 02021-2817
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 25, 1996
PLEASE TAKE NOTICE that the Annual Meeting of Stockholders of Grossman's
Inc. (the "Company") will be held on Tuesday, June 25, 1996, at 10:30 a.m.,
local time, at the Sheraton Tara Hotel, 37 Forbes Road, Braintree,
Massachusetts, for the following purposes:
1. To elect seven (7) directors of the Company.
2. To vote upon the approval of Ernst & Young LLP as independent
auditors for the Company for 1996.
3. To vote upon the ratification of the issuance of Notes of the
Company convertible into shares of the Company's Common Stock.
4. To vote upon a stockholder proposal to amend the Company's
By-laws.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof. Management does not know of any other
business to be presented to the Annual Meeting.
Holders of record of the Company's Common Stock at the close of business on
May 3, 1996 are entitled to notice of and to vote at the meeting or any
adjournment thereof. A list of stockholders entitled to vote at the meeting will
be open to examination by stockholders at the meeting and during normal business
hours from June 13, 1996 to the date of the meeting at the offices of Donald
Carvin, 44 Adams Street, Braintree, Massachusetts 02185.
By Order of the Board of Directors
RICHARD E. KENT
Secretary
May 14, 1996
Whether or not you expect to attend the meeting, please complete, date,
sign and return the enclosed proxy, WHICH IS SOLICITED BY MANAGEMENT, in the
enclosed envelope, which does not require postage if mailed in the United
States.
<PAGE> 3
GROSSMAN'S INC.
45 DAN ROAD
CANTON, MASSACHUSETTS 02021-2817
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the management of Grossman's Inc. (the "Company") for use at the
Annual Meeting of Stockholders of the Company (the "Annual Meeting") to be held
at the Sheraton Tara Hotel, 37 Forbes Road, Braintree, Massachusetts, on
Tuesday, June 25, 1996, at 10:30 a.m., local time, and any adjournment thereof.
The Company's Annual Report, including financial statements for the year ended
December 31, 1995, was sent to the Company's stockholders on April 17, 1996.
This Proxy Statement and the related proxy card, are being sent to the Company's
stockholders on or about May 14, 1996.
Please complete, sign, date and return the enclosed proxy. The proxy
solicited hereby may be revoked at any time by executing and delivering a proxy
of a later date, by delivering written notice of revocation to the Secretary of
the Company or by attending the meeting and giving notice of the intention to
vote in person.
Subject to certain restrictions on voting described under the heading
"Restrictions on Accumulation of Common Stock," properly executed, delivered and
unrevoked proxies in the form enclosed will be voted at the Annual Meeting or
any adjournment thereof in accordance with the directions thereon. In the
absence of such directions, the proxy will be voted for the election as
directors of the seven nominees nominated by the Board of Directors, for the
approval Ernst & Young LLP as the Company's auditors for 1996, for the approval
of the issuance of convertible Notes and against the stockholder proposal
relating to the qualifications for members of the Company's Board of Directors
and otherwise in accordance with the recommendations of management.
Management does not know of any matters other than those set forth herein
which may come before the Annual Meeting. If any other matters are properly
presented to the meeting for action, it is intended that the persons named in
the enclosed form of proxy and acting thereunder will vote in accordance with
their best judgment on such matters.
VOTING SECURITIES
The only class of voting securities of the Company is its Common Stock, par
value $.01 per share ("Common Stock"). The holders of record of the outstanding
shares of Common Stock at the close of business on May 3, 1996 are entitled to
notice of, and to vote at, the Annual Meeting. Holders of Common Stock are
entitled to one vote for each share held on matters properly presented to the
Annual Meeting, except as described below under "Restrictions on Accumulation of
Common Stock."
As of May 3, 1996, there were [ ] shares of Common Stock issued
and outstanding, exclusive of [ ] shares held as treasury shares.
The holders of a majority of the issued and outstanding shares of Common
Stock, present in person or represented by proxy and entitled to vote, will
constitute a quorum for the transaction of business at the Annual Meeting.
Directors shall be elected by a plurality of the votes cast at the meeting. The
favorable vote of the holders of a majority of the shares of Common Stock
present in person or represented by proxy and entitled to vote thereon is
required for the approval of proposals 2, 3 and 4. Under Delaware law and the
Company's By-Laws, an abstention from voting has no effect on the election of
directors and has the effect of a vote against proposals 2, 3 and 4. When a
proxy is returned and properly signed, the shares represented will
<PAGE> 4
be voted in accordance with your directions. Where choices or abstention are not
indicated, proxies will be voted FOR proposals 2 and 3 and AGAINST proposal 4.
On May 3, 1996, Sydney L. Katz, as trustee under the Company's Savings Plan
for its participating employees, held [ ] shares of Common Stock,
representing less than 1% of the outstanding Common Stock of the Company. Shares
held by the trustee for the account of employees will be voted in accordance
with written instructions from such employees, and where no instructions are
received, will not be voted.
PROPOSAL 1:
ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS' NOMINATIONS FOR DIRECTORS
The Board of Directors has nominated the seven incumbent directors named
below for election as directors at the Annual Meeting, each to serve until the
next Annual Meeting and until a successor is elected and qualified. Unless
otherwise directed, the proxies named in the accompanying form of proxy intend
to vote for such nominees. If any of the nominees should not be available for
election, the persons named as proxies may vote in their discretion for another
nominee designated by the Board of Directors in such person's place. Management
has no reason to believe that any nominee named below will be unavailable for
election.
Harold Tanner retired from the Board of Directors in December 1995. The
vacancy on the Board created by Mr. Tanner's retirement was not filled. Leo Kahn
has notified management that he is not standing for election in 1996.
Accordingly, the size of the Board has been fixed at seven. The Board of
Directors accepted the retirements of Messrs. Tanner and Kahn with an expression
of appreciation for their dedicated counsel over many years of service to the
Company.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES NAMED
BELOW FOR ELECTION AS DIRECTORS.
Except as indicated below, each of the nominees has had the same principal
occupation for the past five years.
RUSSELL COX has been President of Resort Management Inc., a property
management and real estate consulting firm located in Waterville Valley, New
Hampshire, since 1977 and has been a general partner of Real Estate Venture Fund
since 1985. He is a graduate of MIT and Harvard Business School. Mr. Cox has
been a director since 1987 and is age 69.
JOHN R. GREY retired as President of Chevron Corporation in 1985. He is a
director of Academy Studio of Novato, California; he retired as a director of
BankAmericorp and Bank of America NT & SA in 1993. Mr. Grey is a graduate of
Stanford University with a B.S. degree in Chemical Engineering. Mr. Grey has
been a director since 1987 and is age 73.
MAURICE GROSSMAN retired as an employee of the Company in 1994 and served
as Chairman of the Board and Chief Executive Officer of the Company from 1986 to
1990. Mr. Grossman is a graduate of Pennsylvania State University and of Boston
University with an MBA degree. Mr. Grossman has been a director since 1987 and
is age 74.
SYDNEY L. KATZ has been President and Chief Executive Officer of the
Company since December 1, 1994; prior to his election as President he had been
Executive Vice President, Chief Financial Officer and Treasurer of the Company
for more than five years. He has been a director since February 1, 1994. Mr.
Katz is a graduate of the University of Connecticut with a B.S. degree, is a
certified public accountant and is age 54.
2
<PAGE> 5
W. WALLACE MCDOWELL, JR. is a private investor and was Managing Director of
MLGAL Partners, a leveraged acquisition firm from 1991 to 1994. From 1983 to
1990, Mr. McDowell was Chairman and Chief Executive Officer of Prospect Group,
Inc., a diversified holding company. Mr. McDowell is a director of Jack Morton
Productions, Inc., Children's Discovery Centers, Inc., Excelsior Funds and U.S.
HomeCare, Inc. and serves as Chairman of the Board of ITI Technologies, Inc. He
is a graduate of Princeton University and received his MBA from the University
of Virginia. Mr. McDowell has been a director of the Company since 1993 and is
age 59.
STEPHEN B. ORESMAN has been the owner and President of Saltash Ltd., a
management consulting firm, since 1991. He was a partner and Vice President of
The Canaan Group Ltd., another management consulting firm, from 1988 to 1991.
Prior to that time he was with the consulting firm of Booz, Allen & Hamilton for
19 years. He is a member of the Board of Directors of Cleveland-Cliffs Inc.,
Technology Solutions Company and TriNet Corporate Realty Trust, Inc. Mr. Oresman
is a graduate of Amherst College and Harvard Business School. Mr. Oresman has
been a director since 1991 and is age 63.
ROBERT K. SWANSON has been non-executive Chairman of the Board of the
Company since November 23, 1994 and also serves as Chairman of the Board of RKS,
Inc., an investment and marketing consulting firm in Phoenix, Arizona, and U.S.
Games, Inc., a manufacturing company in Atlanta Georgia. He also serves as a
director of American Southwest Concepts, Inc., Arizona Desert Saguaro, Inc. and
The Thursley Group. He was Chairman and Chief Executive Officer of Del Webb
Corporation, a diversified company located in Phoenix, Arizona, engaged in the
management and development of real estate and leisure operations, from 1981 to
1987, when he retired from that position. He graduated from the University of
South Dakota and studied at the University of Melbourne as a Fulbright Scholar.
Mr. Swanson has been a director since 1987 and is age 63.
BOARD MEETINGS; COMMITTEES
The Board of Directors met six times in 1995. In 1995 each of the current
directors attended at least 75% of the aggregate number of meetings of the Board
of Directors and committees of the Board of Directors on which he served, except
that Mr. Cox attended eight of eleven such meetings.
The Company's Board of Directors has four standing committees. The
committee memberships are indicated below.
COMMITTEES OF THE BOARD OF DIRECTORS
Executive Committee
The Executive Committee may exercise all the powers and authority of the
Board of Directors in the management of the property, affairs and business of
the Company during the intervals between the meetings of the Board of Directors,
to the extent permitted by the By-Laws of the Company and applicable law. The
Executive Committee currently consists of Messrs. Cox, Grey, Katz, McDowell and
Swanson. The Executive Committee met two times in 1995.
Audit and Finance Committee
The Audit and Finance Committee recommends to the Board of Directors the
engagement of independent auditors for the year, subject to approval by the
stockholders of the Company, reviews with the auditors the plan and scope of the
audit engagement, reviews the annual financial statements of the Company and the
management letter, monitors the Company's system of internal control and its
accounting and reporting practices, reviews compliance with the conflict of
interest policy and other policies of the Company, reviews the capital structure
of the Company and advises the Board of Directors with respect to capital
3
<PAGE> 6
expenditure programs, dividend policies, equity and debt securities, financial
planning and capital and operating budgets for the Company. The Audit and
Finance Committee currently consists of Messrs. Cox, Swanson and McDowell. The
Audit and Finance Committee met three times in 1995.
Compensation Committee
The Compensation Committee reviews and recommends to the Board of Directors
compensation for senior management of the Company and the adoption, amendment
and implementation of incentive compensation plans, stock option plans,
retirement programs and other employee benefit plans and programs for the
Company. The Compensation Committee currently consists of Messrs. Cox, Grey and
Oresman. The Compensation Committee met two times in 1995.
Nominating Committee
The Nominating Committee reviews the composition and organization of the
Board of Directors of the Company and recommends to the Board of Directors
individuals to fill Board vacancies. The Nominating Committee currently consists
of Messrs. Grossman, Oresman and Swanson. The Nominating Committee met two times
in 1995. Recommendations from stockholders will be considered by the Nominating
Committee and should be sent to the Secretary of the Company.
COMPENSATION OF DIRECTORS
Pursuant to the 1995 Directors Stock and Option Plan, each director who is
not an employee of the Company receives, as an annual fee, Common Stock of the
Company having an equivalent market value on the date of issuance of $15,000. In
addition, each new Director receives a nonqualified stock option to purchase
25,000 shares of the Company's Common Stock at an exercise price equal to the
fair market value of such stock on the date the option is granted. Each option
is immediately exercisable as to 5,000 shares and will become exercisable to the
extent of an additional 5,000 shares on each of the four succeeding
anniversaries of the date the option is granted. The options expire ten years
from the date of the grant.
In addition, each director who is not an employee of the Company receives
an attendance fee of $500 for each meeting at which he is present in person. The
Chairman of each committee of the Board of Directors receives an annual fee of
$2,000. Each member of a committee (other than an employee of the Company)
receives an attendance fee of $500 for each meeting at which he is present in
person. Directors are reimbursed for expenses incurred in performing their
duties.
Mr. Swanson was elected non-executive Chairman of the Board of Directors on
November 23, 1994. In connection with such election, Mr. Swanson entered into a
consulting agreement with the Company. Pursuant to this agreement, in 1995 Mr.
Swanson received a one-time grant of an option covering 50,000 shares of the
Common Stock of the Company and a one-time issuance of shares of Common Stock of
the Company having a fair market value equal to $20,000 for consulting services
performed in 1994. In addition, commencing with the first quarter of 1995 and
continuing thereafter, Mr Swanson received and will receive for each day that he
worked during the previous quarter on the affairs of the Company, up to a
maximum of 90 days per calendar year, shares of Common Stock of the Company
having a fair market value on the last day of each calendar quarter equal to
$1,000 and $1,000 in cash. He received $88,000 and 49,591 shares of Common Stock
of the Company for services in 1995.
In May through October 1990, Jay H. Shidler and Robert W. Holman, Jr. (the
"Shidler/Holman Group") unsuccessfully solicited written consents of
stockholders of the Company seeking to remove the directors then in office and
to elect their designees. In order to avoid the diversion of management time and
resources and the expense of a proxy contest, on March 13, 1991, the Company
entered into a Standstill
4
<PAGE> 7
Agreement (the "Standstill Agreement") with Messrs. Shidler and Holman and Mr.
Stephen B. Oresman, pursuant to which the Board of Directors agreed to nominate
as directors a representative of the Shidler/Holman Group and a second person
not financially affiliated with the Shidler/Holman Group. On March 13, 1991, the
Board of Directors increased its size by two members and elected Messrs. Shidler
and Oresman as directors. In 1993, Mr. Shidler resigned as director, and Mr.
McDowell was elected to fill the vacancy. In February 1995, Mr. Shidler
relinquished his right to designate one affiliated and one independent director.
The Standstill Agreement expires on the day following the Company's 1996 Annual
Meeting of Stockholders.
OWNERSHIP OF EQUITY SECURITIES
The following table sets forth the beneficial ownership, reported to the
Company as of March 30, 1996, of Common Stock of the Company, including shares
as to which the right to acquire ownership exists by the exercise of stock
options, within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934 (the "Exchange Act"), of each director and nominee, the chief executive
officer, the other current and former executive officers of the Company who are
"Named Executive Officers" as defined below under "Compensation of Executive
Officers," and all directors and executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF PERCENT
COMMON OF
NAME STOCK(1)(3) CLASS(2)
---- ----------- --------
<S> <C> <C>
Russell Cox...................................................... 20,866 *
Robert L. Flowers(5)............................................. 106,000 *
John R. Grey..................................................... 32,886 *
Maurice Grossman................................................. 219,886 *
Leo Kahn......................................................... 17,886 *
Sydney L. Katz................................................... 426,805 1.5%
Richard E. Kent.................................................. 95,000 *
David T. Krawczyk................................................ 136,875 *
W. Wallace McDowell, Jr.......................................... 21,886 *
Stephen B. Oresman............................................... 17,886 *
Arthur Ryan...................................................... 59,600 *
Robert K. Swanson................................................ 125,662 *
All of the directors and executive officers as a group (13
persons)(4).................................................... 1,232,638 4.3%
<FN>
- ---------------
Information with respect to stock ownership has been furnished by the persons
named.
(1) The persons named have sole voting and investment power with respect to
shares listed, except as described under "Standstill Agreement."
(2) Asterisks indicate beneficial ownership of less than 1% of the outstanding
Common Stock.
(3) Stock beneficially owned includes shares which may be acquired upon the
exercise of presently exercisable options as follows: Mr. Flowers -- 101,000
shares; Mr. Grossman -- 200,000 shares; Mr. Katz -- 349,583 shares; Mr. Kent
-- 88,000 shares; Mr. Krawczyk -- 155,625 shares; Mr. Ryan -- 48,000 shares;
Messrs. Cox, Grey, Kahn, McDowell, and Oresman -- 10,000 shares each; Mr.
Swanson -- 30,000 shares; and the group -- 1,022,208 shares. Not included
are shares which may be acquired upon the exercise of options which are not
presently exercisable as follows: Mr. Katz -- 150,417 shares; Mr. Kent --
10,000 shares; Mr Krawczyk -- 44,375 shares; Messrs. Cox, Grey, Kahn,
McDowell, and Oresman -- 15,000 shares each; Mr. Swanson -- 45,000 shares
and the group -- 444,792 shares.
(4) The percentage of outstanding Common Stock held by all directors and
executive officers as a group has been calculated on the basis of 26,088,219
shares of Common Stock outstanding on February 1, 1995, plus 2,756,575
shares of Common Stock subject to currently exercisable stock options held
by such group.
(5) Mr. Flowers retired as Executive Vice President -- Real Estate of the
Company on March 1, 1996.
</TABLE>
5
<PAGE> 8
SECTION 16(A) REPORTING
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and beneficial owners of more than 10% of its
Common Stock to file initial reports of ownership and reports of changes in
ownership of the Company's securities with the Securities and Exchange
Commission and to furnish the Company with copies of the reports they file.
Michael Shea was engaged as an Executive Vice President and Chief Financial
Officer of the Company in September of 1995 when he was awarded a grant of
10,000 shares of Common Stock of the Company pursuant to the Company's
Restricted Stock Plan and a stock option for 80,000 shares of Common Stock of
the Company pursuant to the Company's 1986 Stock Option Plan. Mr. Shea held
1,000 shares of Common Stock of the Company when he was employed. Mr. Shea did
not report such holdings or awards until February of 1996 when he filed his
Annual Statement on Form 5.
COMPENSATION OF EXECUTIVE OFFICERS
COMPENSATION OF EXECUTIVE OFFICERS
The following tables sets forth information with respect to compensation
for services to the Company in 1995 paid to or accrued on behalf of (i) the
chief executive officer as of December 31, 1995 and (ii) each of the four most
highly compensated executive officers of the Company, other than the chief
executive officer, as of December 31, 1995 (collectively, the "Named Executive
Officers"):
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------
NAME AND -------------------- OPTION ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(#) COMPENSATION(1)
- --------------------------------------- ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sydney L. Katz......................... 1995 $400,000 $ --0-- $ --0-- $520
President and CEO 1994 304,125 --0-- 235,000 520
1993 274,400 75,000 --0-- 520
David T. Krawczyk...................... 1995 243,875 --0-- --0-- --0--
Executive Vice President 1994 215,250 63,100 35,000 --0--
President of Contractors' 1993 173,301 71,750 90,000 --0--
Warehouse Division
Richard E. Kent........................ 1995 167,700 --0-- --0-- 520
Vice President, Secretary 1994 164,450 --0-- 8,000 520
and General Counsel 1993 157,976 7,000 --0-- 520
Robert L. Flowers(1)................... 1995 197,400 166,859 --0-- 520
Executive Vice President -- 1994 191,800 --0-- 8,000 520
Real Estate 1993 182,476 --0-- --0-- 520
(Retired March 1, 1996)
Arthur S. Ryan......................... 1995 142,500 --0-- --0-- 520
Vice President and Treasurer 1994 133,812 --0-- 8,000 520
1993 126,333 7,500 --0-- 520
<FN>
- ---------------
(1) Mr. Flowers retired as of March 1, 1996. In 1994 the Board of Directors
approved an award for Mr. Flowers payable upon the closing of the sale of
the Company's former headquarters site to Kmart Corporation and in 1995 he
received a bonus of $166,859 in consideration for services in connection
with such sale.
</TABLE>
6
<PAGE> 9
The options listed below are reflected in the Summary Compensation Table
above. No stock options or stock appreciation rights were granted by the Company
to the Named Executive Officers in 1995.
The table below sets forth information with respect to the number and value
of unexercised options held by the Named Executive Officers of the Company on
December 31, 1995. No stock options or stock appreciation rights were exercised
by such persons in 1995, and there are no outstanding stock appreciation rights.
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
SHARES AT DECEMBER 31, 1995 AT DECEMBER 31, 1995
ACQUIRED ON VALUE ------------------------------ ------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- ----------- -------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Sydney L Katz......... --0-- -- 288,750 111,250 --0-- --0--
David T. Krawczyk..... --0-- -- 110,000 90,000 --0-- --0--
Richard E. Kent....... --0-- -- 79,500 18,500 --0-- --0--
Robert L. Flowers..... --0-- -- 81,750 19,250 --0-- --0--
Arthur S. Ryan........ --0-- -- 42,000 11,000 --0-- --0--
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has an employment agreement dated December 1, 1994 with Mr.
Katz, providing for his employment as President of the Company for a three-year
rolling term. His annual base salary under the agreement is $400,000, effective
December 1, 1994. In the event of termination of Mr. Katz's employment without
cause, he would be entitled to a lump sum severance payment (the "Severance
Payment") equal to 300% of his base salary in effect at the time of such
termination plus his target bonus for the current year (50% of base salary for
1996), except that if such termination is following a "change of control," as
defined in the agreement, the Severance Payment would be equal to 300% of the
sum of his base salary in effect at the time of such termination plus the
highest cash bonus earned by him during any of the last three full calendar
years. In the event that any portion of the Severance Payment would constitute
an "excess parachute payment" within the meaning of Section 280G of the Internal
Revenue Code, Mr. Katz will receive a "gross-up payment" from the Company in an
amount sufficient to make Mr. Katz whole for all taxes imposed with respect to
the excess parachute payment (including the gross-up payment) and any associated
interest and penalties. Following a change of control, Mr. Katz may terminate
his employment and receive the Severance Payment. The employment agreement also
provides that his benefit under the Company's ERISA Excess Plan and its
Supplemental ERISA Excess Plan is to be computed on a final pay formula rather
than a career average formula. Accordingly, his straight life pension benefit
accrued as of December 31, 1995 was $74,715, and at age 65, assuming annual
compensation to age 65 at his current base salary, would be $151,097 per year.
The Company also has employment agreements with the two other executive
officers of the Company. The agreements provide for employment for a two-year
rolling term. Any increase in annual salary during the employment term increases
the minimum annual salary under the agreements. The current minimum annual
salaries under the agreements for Messrs. Krawczyk and Kent are $250,000 and
$167,700, respectively. In addition, the agreements provide for severance pay
upon involuntary termination without cause in an amount equal to one year's
annual salary plus any bonus received within the preceding 12-month period. Upon
an involuntary termination without cause or a constructive termination, as
defined in each agreement, within one year following a change in control, the
officer so terminated under the agreements is entitled to severance pay equal to
200% of the greater of (i) of the sum of his base annual salary plus any bonus
received within the preceding 12 months and (ii) the average of the sum of
annual base salary plus bonuses paid during the three twelve-month periods
preceding the termination date.
7
<PAGE> 10
RETIREMENT PLANS
The Company has a non-contributory defined benefit pension plan (the
"Pension Plan"), which covers substantially all of its employees and an ERISA
Excess Plan (the "EEP"), to preserve certain benefits for employees whose
retirement benefits under the Pension Plan are affected by limitations imposed
by the Internal Revenue Code.
The following table shows the estimated annual benefits payable upon
retirement at age 65 under the Pension Plan as supplemented by the EEP for
services performed and compensation earned through December 31, 1995 on a 100%
straight-life annuity basis to persons in specified remuneration and years-of-
service classifications. The straight-life annuity benefit is approximately 110%
of the 10-year certain benefit. Such benefits reflect a reduction for annual
earnings below $20,900 in 1996 to recognize in part the Company's cost of Social
Security benefits related to credited service under the Pension Plan.
<TABLE>
<CAPTION>
YEARS OF SERVICE
ANNUAL -------------------------------------------------------------------------
COMPENSATION 10 YRS. 15 YRS. 20 YRS. 25 YRS. 30 YRS. 35 YRS.
- ---------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 50,000 $ 6,238 $ 9,008 $ 11,778 $ 14,549 $ 17,319 $ 20,089
$ 100,000 $ 13,053 $ 18,857 $ 24,662 $ 30,466 $ 36,270 $ 42,075
$ 150,000 $ 19,868 $ 28,706 $ 37,545 $ 46,383 $ 55,222 $ 64,060
$ 200,000 $ 26,683 $ 38,555 $ 50,428 $ 62,300 $ 74,173 $ 86,046
$ 250,000 $ 33,498 $ 48,404 $ 63,311 $ 78,218 $ 93,124 $108,031
$ 300,000 $ 40,313 $ 58,253 $ 76,194 $ 94,135 $112,075 $130,016
$ 350,000 $ 47,128 $ 68,102 $ 89,077 $110,052 $131,027 $152,002
$ 400,000 $ 53,943 $ 77,951 $101,960 $125,969 $149,978 $173,987
$ 500,000 $ 67,573 $ 97,650 $127,727 $157,804 $187,881 $217,958
$ 600,000 $ 81,203 $117,348 $153,493 $189,638 $225,783 $261,928
$ 700,000 $ 94,833 $137,046 $179,259 $221,473 $263,686 $305,899
$ 800,000 $108,463 $156,744 $205,025 $253,307 $301,588 $349,870
$ 900,000 $122,093 $176,442 $230,792 $285,141 $339,491 $393,840
$1,000,000 $135,723 $196,140 $256,558 $316,976 $377,393 $437,811
</TABLE>
Reference earnings ("Reference Earnings") covered by the Pension Plan and
EEP include all direct compensation payments, including overtime, bonuses,
commissions and similar payments. Reference Earnings for any year are determined
by reference to payments made during the year, whereas compensation set forth in
the Summary Compensation Table on page [ ] hereof is determined by reference to
payments, whether made during the year or thereafter, for services during the
year. In 1995, Reference Earnings for the Named Executive Officers were
substantially (within a 10% variance) the same as the annual compensation
(salary and bonus) reported in the Summary Compensation Table.
Benefits are based upon the average of the highest five of the last ten
years for service prior to 1991 and upon annual reference earnings for each year
thereafter. The Summary Compensation Table on page [ ] hereof does not include
the value of retirement benefits earned in 1995.
As of December 31, 1995 the years of credited service for the individuals
named in the Cash Compensation Table above were: Sydney L. Katz, 12 years, David
T. Krawczyk, 20 years, Robert L. Flowers, 26 years, Richard E. Kent, 25 years
and Arthur S. Ryan 8 years. For purposes of the portion of the Pension Plan
formula determined on a final average pay basis for service prior to 1991,
supplemented by the EEP, the covered compensation for service prior to 1991 of
Messrs. Krawczyk, Flowers, Kent and Ryan are $89,054, $169,558, $184,823 and
$105,791, respectively. Messrs. Flowers and Kent received lump sum benefits
under the Pension Plan at age 65 in 1991 and 1994, respectively. Mr. Katz is
entitled to a retirement benefit computed on a final average pay basis for his
entire credited service.
8
<PAGE> 11
Mr. Grossman does not participate in the EEP or SEEP and is presently
receiving an annual retirement benefit of $124,147. Mr. Kent accrues benefits
under the Pension Plan during employment reflecting the increase in his lump sum
benefits, if any, attributable to such service.
REPORT OF COMPENSATION COMMITTEE ON ANNUAL COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
composed entirely of independent outside directors of the Company. The Committee
is responsible for determining executive compensation including salaries, bonus
awards and stock options.
The Company's executive compensation programs are designed to correlate
with performance and stockholder value creation. In this connection, the Company
has developed a compensation strategy and specific executive variable
compensation plans that allocate a significant portion of an executive's total
compensation upon achievement of specified goals as set forth in the financial
plans for the operation of the Company. The objectives of the compensation
strategy are to attract and retain the highest level of executive talent, to
motivate the executives to achieve the goals defined by the Company's business
strategies, to link executive and stockholder interests through equity based
plans and to provide a compensation package that recognizes competitive practice
and individual contributions as well as the financial results of operations.
Each year the Committee conducts a thorough review of the Company's
executive compensation programs. In this capacity, the Committee avails itself
periodically of a report from independent compensation consultants assessing the
effectiveness of the Company's compensation programs and comparing the Company's
executive compensation, corporate performance and stock price appreciation to a
peer group of public retail corporations with annual revenues ranging from $300
million to $6 billion that represent the Company's competition for executive
positions. The companies included in the retail peer group are not necessarily
companies included in the market indices set forth on the Comparative Stock
Performance Chart on page [ ] of this Proxy Statement. This is reflective of
the fact that the market indices contain organizations which are considerably
larger, and in some cases, in very different sectors of the retail market than
is the Company. The Committee targets a competitive level of the executive
market as reported by the compensation consultants, but allows deviations from
that target to reflect the acquisition cost of new hires and/or exceptional
contributions to initiatives by the Company to increase stockholder value.
The Committee sets policies for and determines the compensation of all of
the corporate officers, including the Named Executive Officers. The Committee
and Mr. Katz jointly review the individual performance of each of the executives
other than Mr. Katz.
The key elements of the Company's executive compensation package are base
salary, annual bonus and stock options. The Committee's policies with respect to
each of these elements, including the bases for the compensation awarded to Mr.
Katz, are discussed below. In addition, the Committee considers the full
compensation package offered by the Company to the executive group, including
pension benefits, supplemental retirement benefits, severance plans, employment
agreements, insurance and other benefits.
The Company does not anticipate that compensation to any executive officer
for 1996 will exceed $1 million for purposes of Section 162(m) of the Internal
Revenue Code, which limits the deductibility of compensation in excess of $1
million annually that is not performance based. However, the Committee will be
evaluating its policy in regards to qualifying its annual and long-term
incentive program in terms of the deductibility cap in future years.
9
<PAGE> 12
BASE SALARIES
Base salaries for new executive officers are determined by evaluating the
responsibilities of the position and the experience of the individual, with
reference to the marketplace for executive talent, including a comparison to
base salaries for comparable positions with other corporations. Annual salary
adjustments are determined by evaluating the performance of the Company and of
each executive officer with consideration to any new responsibilities of such
officer. In the case of corporate officers with responsibility for operating
divisions, the financial results of the division are considered in the context
of economic and competitive factors. The Committee also grants appropriate
consideration to such non-financial performance measures as the quality of work,
business relationships and operational efficiency.
During 1995, Michael Shea was employed as Executive Vice President and
Chief Financial Officer and Charles Hofeller was employed as Vice President-Real
Estate of the Company. The annual salary of $175,000 for Mr. Shea was determined
by reference to his experience and the responsibilities of the office. The
Company also entered into a Severance Agreement with Mr. Shea that provides that
he will be entitled to severance of six months salary in the event of
termination without cause within one year of employment and of one year's salary
in the event of termination without cause thereafter. Mr. Hofeller's annual
salary of $120,000 was determined after consideration of his experience and an
evaluation of his ability to sell properties on terms advantageous to the
Company.
ANNUAL BONUS
The Company's executive officers are eligible for an annual cash bonus
awarded by reference to an operating income plan for the Company and, where
appropriate, for a division of the Company. Pursuant to his employment
agreement, Mr. Katz's bonus will be determined based upon the attainment of
objectives (including non-financial objectives) to be established in writing by
the Committee prior to the end of the first quarter of each calendar year. Each
executive officer is assigned a target bonus expressed as a percentage of base
salary. Target bonus levels for all executives, including the President, are
periodically evaluated by the Committee to ensure that they represent
competitive pay opportunities for comparable executives in the retail industry.
In 1995, such target percentage rates ranged from 25% to 50% for executive
officers of the Company, with Mr. Katz assigned a 50% opportunity. Bonuses for
executive officers are awarded as a percentage of the target bonus, ranging from
0% to 150% of the target bonus upon achievement of scaled percentages of the
applicable operating income plan.
In 1995, the Company did not achieve its corporate operating income plan,
and accordingly, no incentive bonuses were paid for services in 1995 under the
Plan to any executive officer of the Company, including the President.
No special bonus award was approved in 1995. Special bonus awards are
considered by the Company to be non-recurring and outside the criteria typically
utilized in considering pay competitiveness.
STOCK OPTIONS
Under the Company's 1986 Nonqualified Stock Option Plan, as amended, stock
options are granted from time to time to key employees, including executive
officers, of the Company. The Committee sets guidelines for the size of stock
option awards based upon competitive practice, base salary and other factors,
including contributions to initiatives adopted by the Company to increase
stockholder value, similar to the factors considered in setting base salary.
Stock options are designed to align the interests of executives with those
of the stockholders, as part of the compensation objectives of the Company.
Stock options are granted with an exercise price equal to the market price of
the Company's common stock on the date of grant. The options generally vest over
four years.
10
<PAGE> 13
Accordingly, the full benefit of the options is realized only when stock price
appreciation occurs over an extended period.
The Committee has endeavored to motivate executives by granting options
that present executives an opportunity for significant gains commensurate with
gains in stockholder values.
In 1995, the Company also adopted the 1995 Restricted Stock Plan whereby
awards of Common Stock will be issued to officers and key employees as an
incentive to increase the profitability of the Company. In 1995, the Board of
Directors approved awards under the Plan for an aggregate of 162,000 shares of
Common Stock to 16 officers and key employees in lieu of annual salary increases
for 1995 and 1996.
No stock options were granted to Named Executive Officers in 1995.
CONCLUSION
The programs described above correlate a significant portion of the
Company's executive compensation to individual and corporate performance and
stock price appreciation. The Committee intends to continue the policy of
linking executives' compensation to corporate performance and improvement in
stockholder values, recognizing that economic factors beyond management's
control may result in imbalances for particular periods but that consistent
improvement in corporate performance over the long term will inure to the mutual
benefit of the Company's executives and its stockholders.
The Compensation Committee
John R. Grey, Chairman
Russell Cox
Stephen B. Oresman
11
<PAGE> 14
COMPARATIVE STOCK PERFORMANCE
Set forth below is a line graph comparing the performance of the Company's
Common Stock against the S&P Composite -- 500 Stock Index and the S&P Specialty
Retail Composite Index for the five-year period commencing January 1, 1991 and
ending December 31, 1995.
COMPARISON OF CUMULATIVE TOTAL RETURN
FISCAL YEAR ENDING DECEMBER 31
<TABLE>
<CAPTION>
MEASUREMENT PERIOD GROSSMANS S&P RETAIL STORES-
(FISCAL YEAR COVERED) INC. S&P 500 SPECIALITY INDEX
<S> <C> <C> <C>
DEC-90 100 100 100
DEC-91 124 130 152
DEC-92 206 140 203
DEC-93 141 155 203
DEC-94 118 157 191
DEC-95 53 215 186
</TABLE>
PROPOSAL 2:
APPROVAL OF INDEPENDENT AUDITORS
The Board of Directors has appointed Ernst & Young LLP as independent
auditors for the Company to examine its consolidated financial statements for
the 1996 fiscal year and requests stockholders to approve such appointment.
Representatives of Ernst & Young LLP will be present at the Annual Meeting and
will have an opportunity to make a statement if they so desire and to respond to
appropriate questions from stockholders.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF ERNST & YOUNG LLP
AS INDEPENDENT AUDITORS.
12
<PAGE> 15
PROPOSAL 3:
RATIFICATION OF THE ISSUANCE OF CONVERTIBLE NOTES OF THE COMPANY
The Board of Directors has approved the issuance of an aggregate of $7
million principal amount in convertible Notes of the Company. These Notes were
issued in conjunction with the restructuring and refinancing plan announced by
the Company in March 1996, as explained in the Company's 1995 Annual Report.
In December 1995, the Company announced that it was negotiating with the
holders of its 14% Debentures for a settlement of the $16.201 million in
principal plus accrued interest due in January 1996, and in March 1996 the
Company arrived at an agreement with the Debenture holders. One holder with
$15.101 million in principal amount of the Debentures received $11 million in
cash and the balance then due in three year Notes, including a $3 million Note
with an annual interest rate of 10% convertible into Common Stock of the Company
at $1.30 per share. Interest on the Notes may be deferred at the Company's
option. The holder of the balance of the Debentures was paid $1.1 million in
cash.
In March 1996 the Company closed the 60 stores in its Grossman's Division
and in April 1996 transferred its owned real estate to GRS Realty Company, Inc.,
a wholly-owned subsidiary ("GRS"). GRS entered into a series of agreements
pursuant to which it received a loan of up to $32.5 million from a third party,
secured by a mortgage on all of the properties owned by GRS. The Notes issued by
GRS in conjunction with such transaction include a non-interest bearing Note for
the payment of fees and a non-interest bearing two-year $4 million Note
convertible at maturity into Common Stock of the Company at $0.75 per share. The
remaining mortgage Notes bear interest at 15% per annum and, in the event of
default, $2 million in principal is convertible into Common Stock of the Company
at $1.50 per share. Proceeds from the sale of real properties have been and will
be applied to the payment of the Notes.
The convertible Notes include anti-dilution provisions and initially are
convertible into an aggregate of 8,974,358 shares of Common Stock of the Company
or approximately 34% of the Company's presently outstanding shares.
The restructuring, including the issuance of the shares upon conversion of
the convertible Notes, was deemed necessary and in the best interests of the
Company and its stockholders by the Board of Directors of the Company to avoid a
court-supervised liquidation and to create liquidity in order to finance the
operations and growth of the Company's Contractors' Warehouse Division and its
Mr. 2nd's Bargain Outlet stores.
Your Board of Directors seeks ratification of the issuance of shares upon
conversion of the convertible Notes pursuant to the National Association of
Securities Dealers rule requiring shareholder approval in the case of an issuer
issuing securities convertible into common stock at a price less than the
greater of book or market value which together with sales by officers, directors
or substantial shareholders of the company equals 20% or more of common stock or
20% or more of the voting power outstanding before the issuance. Failure to
comply with the foregoing rule may result in termination of the Company's
designation as a NASDAQ national market issuer.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE ISSUANCE
OF THE CONVERTIBLE NOTES OF THE COMPANY.
13
<PAGE> 16
PROPOSAL 4:
STOCKHOLDER PROPOSAL
- --------------------------------------------------------------------------------
The Company has been informed that the following stockholder proposal may
be presented at the 1996 Annual Meeting. YOUR BOARD OF DIRECTORS RECOMMENDS A
VOTE AGAINST THE STOCKHOLDER PROPOSAL; its reasons follow the stockholder
proposal and supporting statement.
- --------------------------------------------------------------------------------
The following proposal was submitted by Kelford Partners, L.P., 1315 Wilson
Drive, Lake Forest, Illinois 60045 (the "Stockholder"), which is the holder of
record of 400,000 shares of the Company's Common Stock. The Stockholder proposes
that the By-laws of the Company be amended to insert the following language at
the end of Section 3.2 of Article III of such By-laws:
"Notwithstanding any other provisions in these By-laws, it shall at
all times be a qualification for office that two directors of the
Corporation shall be "Investor Directors" (as defined in the next
sentence). As used herein, an "Investor Director" is a director who has, or
who has been designated to serve by an entity other than the Corporation or
an affiliate of the Corporation which has, certified to the Corporation in
a sworn statement that such person or entity (i) has invested a sufficient
amount of capital in the acquisition of Common Stock of the Corporation in
open market purchases to purchase one-quarter of one percent (.25%) or more
of the outstanding Common Stock of the Corporation, (ii) has maintained an
investment at that level, and (iii) has not obtained any shares of the
Corporation's Common Stock directly, or indirectly, as a result or upon the
acceptance or exercise of a grant of Common Stock or purchase rights or
options provided as compensation to such person for services rendered as an
employee (not as a director); except that, if at any time there exist fewer
than five holders of record of the Common Stock who or which would qualify
to be or designate an Investor Director, then the ten holders of record
holding the greatest number of shares of Common Stock of the Corporation
purchased in open market transactions shall be eligible to be or designate
Investor Directors. If the foregoing certification shall become inaccurate,
such person shall cease to be an Investor Director. To effectuate the
purposes of this Section 3.2, the Board of Directors of the Corporation
shall establish and maintain a Board of Directors with at least two
Investor Director members. At a minimum, the Board of Directors shall not
nominate or endorse for election a slate of nominees for Director that does
not include at least two nominees who, if elected, would be Investor
Directors. Notwithstanding any other provision in these By-laws, this
Section 3.2 may not be amended except with the approval of the holders of a
majority of the voting power of the Common Stock entitled to vote generally
for the election of directors. The Directors shall not adopt a new By-law
or amend these By-laws in a manner inconsistent with, or in derogation of,
the provisions of this Section 3.2."
Stockholder's Statement in Support of the Proposal
The Stockholder believes that the adoption of the By-law amendment to
require that two Investor Directors be members of the Company's Board of
Directors would be in the best interest of the Company's stockholders and
promote decisions by the Board most likely to enhance the long-term value of the
Company's stock because such members would be the most likely members to present
to the other directors and management at each meeting of the Board and with
respect to each matter considered the views of those who have invested
significant amounts of capital in the Company's stock. Many other corporations
have adopted this view as is indicated by the growing number of companies that
require management to purchase significant (in the tens or hundreds of thousands
of dollars) holdings of their stock. Such a requirement is one of many
approaches which companies have taken to improve the accountability of
management to the board of directors and of the board of directors to the
stockholders. These measures include the adoption of by-laws
14
<PAGE> 17
requiring that the chairman be an independent director, that all board members
have access to senior management and that board members meet regularly with the
stockholders.
To the best of the Stockholder's knowledge, the present Board of the
Company does not have a single member who is, or who was designated or nominated
by, a party who remains a significant stockholder of the Company who or which
purchased stock in the open market sufficient to give such party an ownership in
the Company's shares in excess of one quarter of one percent of the Company's
outstanding Common Stock. Accordingly, the voices of the most significant group
of the owners of the Company are not being heard. The adoption of the proposed
By-law amendment would correct this deficiency in the Company's governance
structure.
Board of Directors' Statement Opposing Stockholder Resolution
The Company believes that the Stockholder Proposal is inadvisable as
Directors should not represent any particular constituency or institution but
should monitor the conduct of the Company's business with impartial oversight on
behalf of all of those with an investment in the Company. In addition, the
Company believes that such a By-law amendment would be unusual in comparison to
provisions of other companies in similar industries and of comparable size to
the Company.
Among other issues, a Director representing an institutional investor will
have access to confidential information not yet available to other stockholders,
thereby possibly creating a serious conflict of interest. Institutional
investors may be obliged to trade for an immediate profit to fulfill its duty to
beneficiaries of a fund. In such a case, a Director representing the institution
would have a conflict in the Director's duties to the institution and the
Director's loyalty to the Company.
The Company firmly believes that selection of the most qualified nominees
for the Board of Directors is a better rule than designating certain Directors
to represent a special interest. The Company looks for experience, ability and
judgment in selecting candidates to recommend to shareholders for election to
the Board of Directors. In the selection of the most qualified nominees, the
Company firmly believes that significant ownership in the Company, by itself,
fails to constitute an effective measure of a person's ability to serve as a
director of the Company. To impose a rule designating certain Directors to
represent a special interest could limit the Company's ability to obtain the
services of the best qualified persons as directors and accordingly, could limit
the Company's ability to recommend to the shareholders persons most apt to serve
their interests, as a whole, as directors of the Company.
The Board of Directors recommends a vote AGAINST the Stockholder Proposal.
15
<PAGE> 18
PRINCIPAL STOCKHOLDERS
The following table sets forth the name and address of the only persons
known to the Company to beneficially own more than 5% of the Common Stock as of
February 1, 1996, the number of shares beneficially owned and the percentage so
owned:
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED SHARES
------------------------------------ ------------ -------------
<S> <C> <C>
Richard L. Wendt.................................................. 2,691,700 10.3%
3250 Lakeport Blvd.
Klamath Falls, OR 97601
Pioneer Funds..................................................... 2,255,500 8.7%
60 State Street
Boston, MA 02109
Dimensional Funds................................................. 1,448,700 5.6%
1299 Ocean Ave.
Santa Monica, CA 90401
Continental Assurance Company..................................... 1,538,462(1) 5.9%
and Continental Casualty Company
333 S. Wabash - 41 South
Chicago, IL 60685
<FN>
- ---------------
(1) 1,153,846 of these shares are shares which may be acquired upon conversion
of the convertible Notes for 1,500,000 in principal convertible into Common
Stock of the Company at $1.30 per share.
</TABLE>
RESTRICTIONS ON ACCUMULATION OF COMMON STOCK
In order to assist in protecting certain tax benefits, Article Ninth of the
Company's Restated Certificate of Incorporation contains provisions restricting
the acquisition of shares of Common Stock by any person (including any
partnership, corporation or other entity), and provides that shares accumulated
in excess of the prescribed number shall not have voting rights.
In general, Article Ninth, as modified and extended by the Board of
Directors, provides that no person may, voluntarily or involuntarily, acquire
any shares of Common Stock on or prior to December 31, 1996 (or such later date
as may be determined by the Board of Directors), if the number of shares
actually and constructively owned by such person (except for shares issued in
1986 to creditors of Evans pursuant to Evan's reorganization plan under Chapter
11 of the Federal Bankruptcy Code) would be more than 5% of the outstanding
Common Stock on any date (any such excess shares being herein called "Excess
Shares"). For the purposes of this provision, shares are deemed to be
constructively owned by a person if they are considered to be owned by such
person under the constructive ownership rules of Section 318 of the Internal
Revenue Code, except that subsections (a)(2)(C) and (a)(3)(C) of such Section
318 shall be applied by substituting "5 percent" for "50 percent." Under this
provision, shares may be deemed to be constructively owned by a person if such
person holds an option to acquire such shares, if such shares are owned by
certain family members or by a partnership in which such person is a partner, by
a trust or estate of which such person is a beneficiary or by a corporation in
which such person owns 5% or more of the stock, and, in case such person is
itself a partnership, trust, estate or corporation, shares may be deemed to be
constructively owned by such person if they are owned (including shares
constructively owned) by any partner, beneficiary or 5% or greater stockholder,
as the case may be.
16
<PAGE> 19
In case any person attempts to acquire Excess Shares, voluntarily or
involuntarily, such Excess Shares shall be deemed transferred to the Company or
a third party designated by the Company, in either case as trustee (the
"Trustee"), and the purported owner shall have no right to vote such Excess
Shares or to receive dividends thereon or any other rights with respect thereto,
except the right to receive from the net proceeds realized by the Trustee from
the sale of such Excess Shares and certain other funds that may be available to
the Trustee (or to retain from the proceeds of any disposition thereof by the
purported owner, as agent for the Trustee), an amount not in excess of the
amount paid by such purported owner for such Excess Shares, plus broker's
commissions.
Pursuant to such Article Ninth, any holder of shares of Common Stock is
obligated to notify the Company immediately of any purported acquisition of
Excess Shares and to furnish to the Company all information reasonably requested
by it with respect to all shares of Common Stock actually or constructively
owned by such holder.
Under such Article Ninth, the Board of Directors of the Company is
authorized to extend the period of effectiveness of the above-described
restrictions beyond December 31, 1996, increase the 5% percentage referred to
above, or modify the definition of constructive ownership of shares, if
necessary or desirable to preserve the federal income tax net operating loss or
investment tax credit carryforwards of the Company. Any such determination by
the Board of Directors will be filed with the Secretary of the Company, and
copies will be mailed to the stockholders of the Company.
The foregoing restrictions on acquisition of shares of Common Stock may be
waived by the Board of Directors of the Company and are not applicable to an
acquisition of more than 50% of the outstanding shares of Common Stock for cash
consideration pursuant to any tender offer for all of the outstanding shares of
Common Stock, merger or other business combination in which all holders of such
outstanding shares are given the opportunity to participate. The Board of
Directors has waived such restrictions with respect to (a) shares of Common
Stock acquired and held by the Shidler/Holman Group or Mr. Oresman in compliance
with the Standstill Agreement described above and (b) shares of Common Stock
acquired by Mr. Richard Wendt.
STOCKHOLDER PROPOSALS
It is anticipated that the 1996 Annual Meeting of Stockholders will be held
on April 23, 1997. In accordance with regulations issued by the Securities and
Exchange Commission, stockholder proposals intended for presentation at that
meeting must be received by the Secretary of the Company no later than November
13, 1996, if such proposals are to be considered for inclusion in the Company's
Proxy Statement.
17
<PAGE> 20
PROXY SOLICITATION
The expense of preparing, printing and mailing this Proxy Statement, and
the proxy solicited hereby, will be borne by the Company. In addition to the use
of the mails, proxies may be solicited by officers, directors and regular
employees of the Company, without additional remuneration, by personal
interviews, telephone or otherwise. The Company will also request brokerage
firms, nominees, custodians and fiduciaries to forward proxy materials to the
beneficial owners of shares held of record and will provide reimbursement for
the cost of forwarding such materials in accordance with customary charges. The
Company has retained Georgeson & Co., Inc. to aid in the solicitation of
proxies, including soliciting proxies from brokerage firms, banks, nominees,
custodians and fiduciaries. The fees of such firm are estimated at $8,000 plus
out-of-pocket costs and expenses.
By Order of the Board of Directors
RICHARD E. KENT
Secretary
May 14, 1996
18
<PAGE> 21
GROSSMAN'S INC.
PROXY
ANNUAL MEETING OF STOCKHOLDERS, JUNE 25, 1996
PROXY SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF GROSSMAN'S INC.
The undersigned hereby appoints Sydney L. Katz, Robert K. Swanson and Richard
E. Kent, and each of them, proxies of the undersigned, with power of
substitution to each, to vote all shares of Common Stock of Grossman's Inc.
(the "Company") that the undersigned is entitled to vote at the Annual
Meeting of Stockholders of the Company to be held at the Sheraton Tara Hotel,
37 Forbes Road, Braintree, Massachusetts, on June 25, 1996, at 10:30 A.M., and
at any adjournment thereof, on all matters coming before the meeting, as
indicated on the reverse side hereof.
Election of Directors: Nominees:
Russell Cox, John R. Grey, Maurice Grossman, Sydney L. Katz, W. Wallace
McDowell, Jr., Stephen B. Oresman and Robert K. Swanson
PLEASE SIGN AND DATE THIS PROXY ON THE REVERSE SIDE AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE.
-----------
SEE REVERSE
SIDE
-----------
Please mark
/X/ votes as in
this example.
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. The Board of Directors favors a vote FOR
election of the nominees listed on the reverse side hereof and FOR Proposals 2
and 3 and AGAINST Proposal 4. If no contrary instructions are indicated, this
Proxy will be voted FOR Proposals one, two and three and AGAINST Proposal four.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Proposals 1, 2 and 3.
- --------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1. ELECTION OF / / / / 2. APPROVAL OF ERNST & / / / / / /
DIRECTORS (See YOUNG LLP AS
reverse) INDEPENDENT AUDITORS
/ / For all nominees 3. RATIFICATION OF THE / / / / / /
except as noted above ISSUANCE OF NOTES OF
THE COMPANY CONVERTIBLE
INTO SHARES OF THE
COMPANY'S COMMON STOCK.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote AGAINST Proposal 4.
- --------------------------------------------------------------------------------
AGAINST FOR ABSTAIN
4. THE STOCKHOLDER / / / / / /
PROPOSAL TO AMEND
THE COMPANY'S BY-LAWS.
- --------------------------------------------------------------------------------
MARK HERE / / 5. OTHER MATTERS. In their discretion, the
FOR ADDRESS proxies are authorized to vote upon such
CHANGE AND other matters as may properly come before
NOTE BELOW the meeting.
Please sign name(s) exactly as printed herein.
Joint owners should each sign. When signing
as attorney, executor, administrator, parent
or guardian, give full title as such. If
a corporation, sign on corporate name by
President or other authorized officer. If a
partnership, sign on partnership name by
authorized person.
PLEASE MARK, SIGN AND DATE THIS PROXY AND SIGNATURE: DATE
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. -------------- -----
SIGNATURE: DATE
-------------- -----
