<PAGE> 1
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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
FABRI-CENTERS OF AMERICA INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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<PAGE> 2
FABRI-CENTERS OF AMERICA, INC.
5555 Darrow Road
Hudson, Ohio 44236
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 4, 1998
The Annual Meeting of Shareholders of Fabri-Centers of America, Inc.
(the "Company") will be held at Fabri-Centers' Corporate Office, 5555 Darrow
Road, Hudson, Ohio, on Thursday, June 4, 1998, at 1:00 p.m., local time, for the
following purposes:
1. To elect two Directors of the class whose three-year terms of
office will expire in 2001.
2. To consider and act upon a proposal to approve the adoption of
the Fabri-Centers of America, Inc. 1998 Incentive Compensation
Plan.
3. To consider and act upon a proposal to adopt a
resolution changing the name of the Company to "Jo-
Ann Stores, Inc."
4. To transact such other business as may properly come before
the meeting.
All shareholders are cordially invited to attend the meeting, although
only those holders of Class A Common Shares of record at the close of business
on April 9, 1998 will be entitled to vote at the meeting.
IF YOU ARE A HOLDER OF CLASS A COMMON SHARES, YOU WILL ALSO FIND
ENCLOSED A PROXY CARD. YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY IN THE RETURN ENVELOPE PROVIDED FOR THAT PURPOSE,
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING. IF YOU ATTEND THE
MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR CLASS A COMMON SHARES IN
PERSON.
The Proxy Statement accompanies this Notice.
BETTY ROSSKAMM, Secretary
May 4, 1998
By Order of the
Board of Directors
<PAGE> 3
FABRI-CENTERS OF AMERICA, INC.
5555 Darrow Road
Hudson, Ohio 44236
1998 ANNUAL MEETING OF SHAREHOLDERS
JUNE 4, 1998
THE PROXY AND This Proxy Statement is being mailed on or about
SOLICITATION May 4, 1998, to the shareholders of Fabri-Centers
of America, Inc. (the "Company") in connection with
the solicitation by the Board of Directors of the enclosed form of Proxy for the
1998 Annual Meeting of Shareholders to be held on June 4, 1998 (the "Annual
Meeting"). If you are a holder of the Company's Class A Common Stock without par
value ("Class A Common Shares"), as of April 9, 1998 (the "Record Date"), you
will also find enclosed a proxy card and an envelope in which to return it.
Pursuant to the Ohio General Corporation Law, any holder of Class A Common
Shares signing and returning the enclosed Proxy has the power to revoke it by
giving notice of such revocation to the Company in writing or in the open
meeting before any vote with respect to the matters set forth therein is taken.
The representation in person or by proxy of at least a majority of the
outstanding Class A Common Shares entitled to vote is necessary to provide a
quorum at the Annual Meeting. The nominees for Directors receiving the greatest
number of votes will be elected. As a result, any Class A Common Shares present
in person or by proxy at the Annual Meeting but not voted for any reason have no
impact in the election of Directors, except to the extent that the failure to
vote for an individual may result in another individual receiving a larger
number of votes. Abstentions and broker non-votes are tabulated in determining
the votes present at a meeting. Consequently, an abstention or a broker non-vote
has the same effect as a vote against a proposal or a director nominee, as each
abstention or broker non-vote would be one less vote in favor of a proposal or
for a director nominee.
PURPOSES OF The Annual Meeting has been called for the purposes
ANNUAL MEETING of (1) electing two Directors of the class whose
three-year terms of office will expire in 2001; 2)
considering and acting upon a proposal to approve the adoption of the
Fabri-Centers of America, Inc. 1998 Incentive Compensation Plan; (3) considering
and acting upon a proposal to adopt a resolution changing the name of the
Company to "Jo-Ann Stores, Inc."; and (4) transacting such other business as may
properly come before the meeting.
The three persons named in the enclosed Proxy have been selected by the
Board of Directors and will vote Class A Common Shares represented by valid
Board of Directors' Proxies. They have indicated that, unless otherwise
indicated in the enclosed Proxy, they intend to vote for the election of the
nominees listed below.
<PAGE> 4
The Company has no knowledge of any other matters to be presented at
the Annual Meeting, except the reports of officers on which no action is
proposed to be taken. In the event that other matters do properly come before
the Annual Meeting, the persons named in the Proxy will vote in accordance with
their judgment on such matters.
VOTING The Board of Directors has fixed the close of
SECURITIES business on April 9, 1998, as the Record Date for
determining shareholders entitled to notice of, and
to vote at, the Annual Meeting. On the Record Date, the Company had outstanding
and entitled to vote at the Annual Meeting 9,498,488 Class A Common Shares. Each
Class A Common Share entitles the holder to one vote on all matters properly
brought before the meeting. Pursuant to the Amended Articles of Incorporation of
the Company, shares of the Company's Class B Common Stock, without par value
("Class B Common Shares"), do not entitle the holders thereof to vote on any
matter submitted to the shareholders, except in certain circumstances set forth
in the Ohio General Corporation Law, none of which are applicable to the Annual
Meeting (Class A Common Shares and Class B Common Shares are hereafter sometimes
collectively referred to as "Common Stock"). Under the Ohio General Corporation
Law, all of the Class A Common Shares may be voted cumulatively in the election
of Directors if any shareholder gives written notice to the President, a Vice
President or the Secretary of the Company, not less than 48 hours before the
time set for the Annual Meeting, and an announcement of the notice is made at
the beginning of the Annual Meeting by the Chairman or the Secretary or by or on
behalf of the shareholder giving such notice. Cumulative voting permits a
shareholder to (1) cast a number of votes equal to the number of Class A Common
Shares owned by the shareholder multiplied by the number of Directors to be
elected and (2) cast those votes for only one nominee or distribute them among
the nominees. In the event that voting at the election is cumulative, the
persons named in the enclosed Proxy will vote the Class A Common Shares
represented by valid Proxies on a cumulative basis for the election of the
nominees listed below, allocating the votes of such Class A Common Shares in
accordance with their judgment. Shareholders of the Company will not be entitled
to dissenters' rights with respect to any matter to be considered at the Annual
Meeting.
2
<PAGE> 5
SECURITY The following table sets forth, as of April 9, 1998, the
OWNERSHIP OF amount of the Company's Common Stock beneficially owned by
MANAGEMENT each of its Directors and nominees for Directors, the
Chief Executive Officer, the four other most highly
compensated executive officers, and all executive officers and Directors of the
Company as a group. Unless otherwise indicated, each of the persons listed in
the following table has sole voting and investment power with respect to the
Common Stock set forth opposite his or her name.
<TABLE>
<CAPTION>
CLASS A COMMON SHARES CLASS B COMMON SHARES
------------------------------ -------------------------------
NUMBER OF PERCENT OF NUMBER OF PERCENT OF
NAME OF COMMON SHARES CLASS IF 1% COMMON SHARES CLASS IF 1%
BENEFICIAL OWNER BENEFICIALLY OWNED OR MORE BENEFICIALLY OWNED OR MORE
---------------- -------------------------------- -------------------------------
<S> <C> <C> <C> <C>
BETTY ROSSKAMM(1)(2) 878,603 9.25% 719,226 7.73%
ALAN ROSSKAMM(1)(3) 684,110 7.10% 536,301 5.64%
ALMA ZIMMERMAN(1) 550,487 5.80% 503,287 5.41%
JANE AGGERS (1)(4) 152,101 1.59% 175,924 1.87%
JOHN HERMSEN (1)(5) 75,000 -- 6,250 --
DAVID E. BOLEN (1)(6) 23,500 -- 10,000 --
IRA GUMBERG(8) 23,375 -- 21,375 --
BRIAN P. CARNEY (1)(7) 22,500 -- 0 --
SCOTT COWEN(9) 21,175 -- 20,175 --
FRANK NEWMAN(10) 17,375 -- 15,375 --
GREGG SEARLE(11) 3,250 -- 2,250 --
SAMUEL R. GASTON(12) 0 -- 0 --
ALL EXECUTIVE OFFICERS
AND DIRECTORS 2,451,476(1)(13) 25.02%(13) 1,920,163(1)(13) 19.82%(13)
AS A GROUP
(12 PERSONS)
</TABLE>
(1) With respect to Common Stock beneficially owned by such persons under
the Company's Employees' Savings and Profit Sharing Plan, the shares of
Common Stock included are as of December 31, 1997, the latest date for
which statements are available.
(2) Includes 22,803 Class A Common Shares and 28,241 Class B Common Shares
held by Mrs. Rosskamm as custodian for the benefit of her
grandchildren, 25,000 Class A Common Shares and 25,000 Class B Common
Shares held by The Rosskamm Family Partnership, with regard to which
Mrs. Rosskamm has sole voting and dispositive power, and 25,500 Class A
Common Shares and 25,500 Class B Common Shares held by Rosskamm Family
Partners, L.P., with regard to which Mrs. Rosskamm has shared voting
and dispositive power.
(3) Includes 136,250 Class A Common Shares and 170,000 Class B Common
Shares subject to stock options granted to Mr. Rosskamm exercisable on
or prior to June 8, 1998, 32,500 Class A Common Shares and 12,500 Class
B Common Shares held by Mr. Rosskamm
3
<PAGE> 6
as restricted stock under the Company's Executive Incentive Plan, an
aggregate of 181,751 Class A Common Shares and 210,629 Class B Common
Shares held by his children, spouse, or by Mr. Rosskamm as trustee for
the benefit of family members and charities and 25,500 Class A Common
Shares and 25,500 Class B Common Shares held by Rosskamm Family
Partners, L.P., with regard to which Mr. Rosskamm has shared voting and
dispositive power.
(4) Includes 81,000 Class A Common Shares and 107,250 Class B Common Shares
subject to stock options granted to Ms. Aggers exercisable on or prior
to June 8, 1998 and 35,000 Class A Common Shares and 15,000 Class B
Common Shares held by Ms. Aggers as restricted stock under the
Company's Executive Incentive Plan.
(5) Includes 25,000 Class A Common Shares and 6,250 Class B Common Shares
subject to stock options granted to Mr. Hermsen exercisable on or prior
to June 8, 1998 and 50,000 Class A Common Shares held by Mr. Hermsen as
restricted stock under the Company's Executive Incentive Plan.
(6) Includes 7,500 Class B Common Shares subject to stock options granted
to Mr. Bolen exercisable on or prior to June 8, 1998 and 21,000 Class A
Common Shares held by Mr. Bolen as restricted stock under the Company's
Executive Incentive Plan.
(7) Includes 20,000 Class A Common Shares held by Mr. Carney as restricted
stock under the Company's Executive Incentive Plan.
(8) Includes 17,375 Class A Common Shares and 15,375 Class B Common Shares
subject to stock options granted to Mr. Gumberg under the Stock Option
Plan for Non-Employee Directors exercisable on or prior to June 8,
1998.
(9) Includes 18,875 Class A Common Shares and 17,875 Class B Common Shares
subject to stock options granted to Mr. Cowen under the Stock Option
Plan for Non-Employee Directors exercisable on or prior to June 8,
1998.
(10) Includes 17,375 Class A Common Shares and 15,375 Class B Common Shares
subject to stock options granted to Mr. Newman under the Stock Option
Plan for Non-Employee Directors exercisable on or prior to June 8,
1998.
(11) Includes 2,250 Class A Common Shares and 2,250 Class B Common Shares
subject to stock options granted to Mr. Searle under the Stock Option
Plan for Non-Employee Directors exercisable on or prior to June 8,
1998.
(12) Mr. Gaston resigned his position as Executive Vice President, Chief
Financial Officer effective October 7, 1997.
(13) Includes 298,125 Class A Common Shares and 341,875 Class B Common
Shares subject to stock options granted under the Company's Stock
Option Plans and exercisable on or prior to
4
<PAGE> 7
June 8, 1998 and 158,500 Class A Common Shares and 27,500 Class B
Common Shares of restricted stock awarded under the Company's Executive
Incentive Plan.
SECURITY Unless otherwise indicated, the following table and notes
OWNERSHIP OF thereto set forth information as to the only persons
CERTAIN or groups known to the Company, as of April 9, 1998, to be
BENEFICIAL beneficial owners (as defined in rules promulgated
OWNERS by the Securities and Exchange Commission) of more than
five percent of the outstanding Class A Common Shares of the Company. The
information provided in connection with this table has been obtained from the
Company's records and a review of statements filed with the Securities and
Exchange Commission. Unless otherwise indicated, each of the owners listed in
the following table has sole voting and investment power with respect to the
Class A Common Shares set forth opposite their names.
<TABLE>
<CAPTION>
CLASS A COMMON SHARES
--------------------------------------------
NUMBER OF
COMMON SHARES
NAME AND ADDRESS BENEFICIALLY PERCENT
OF BENEFICIAL OWNERS OWNED OF CLASS
- - -------------------- ------------- --------
<S> <C> <C>
Mrs. Betty Rosskamm(1)(2) 878,603 9.25%
5555 Darrow Road
Hudson, OH 44236
First Pacific Advisors, Inc. (3) 795,300 8.37%
11400 West Olympic Boulevard
Suite 1200
Los Angeles, CA 90064
FMR Corp.(3)(4) 764,850 8.05%
Edward C. Johnson 3d
82 Devonshire Street
Boston, MA 02109
Mr. Justin and Mrs. Alma Zimmerman(1)(5) 692,042 7.29%
5555 Darrow Road
Hudson, OH 44236
Mr. Alan Rosskamm (1)(6) 684,110 7.10%
5555 Darrow Road
Hudson, OH 44236
The State Teachers Retirement 553,900 5.83%
Board of Ohio(STRS)(7)
275 East Broad Street
Columbus, OH 43215
The Capital Group Companies, Inc.(3)(8) 525,000 5.53%
333 South Hope Street
Los Angeles, CA 90071
</TABLE>
5
<PAGE> 8
(1) With respect to Class A Common Shares beneficially owned by such
persons under the Company's Employees' Savings and Profit Sharing Plan,
the Class A Common Shares included are as of December 31, 1997, the
latest date for which statements are available.
(2) Includes 22,803 Class A Common Shares held by Mrs. Rosskamm as
custodian for the benefit of her grandchildren, 25,000 Class
A Common Shares held by The Rosskamm Family Partnership, with
regard to which Mrs. Rosskamm has sole voting and dispositive
power, and 25,500 Class A Common Shares held by Rosskamm
Family Partners, L.P., with regard to which Mrs. Rosskamm has
shared voting and dispositive power.
(3) The Class A Common Shares listed are reported on a Schedule 13G filed
with the Securities and Exchange Commission with respect to holdings as
of December 31, 1997.
(4) Fidelity Management & Research Company, a wholly owned subsidiary of
FMR Corp. ("Fidelity"), reported beneficial ownership of 575,750 Class
A Common Shares as a result of acting as investment advisor to several
investment funds that hold such Class A Common Shares (the "Funds").
The voting of these 575,750 Class A Common Shares is directed by each
of the Funds' Boards of Trustees. In addition, Fidelity Management
Trust Company, a wholly owned subsidiary of FMR Corp. ("FMTC"),
reported beneficial ownership of 189,100 Class A Common Shares. FMR has
sole voting and dispositive power with regard to these 189,100 shares.
(5) Of the 692,042 Class A Common Shares, Mr. Zimmerman disclaims
beneficial ownership of 550,487 Class A Common Shares beneficially
owned by his wife and Mrs. Zimmerman disclaims beneficial ownership of
141,555 Class A Common Shares beneficially owned by her husband.
(6) Includes 136,250 Class A Common Shares subject to stock options granted
to Mr. Rosskamm exercisable on or prior to June 8, 1998, 32,500 Class A
Common Shares held by Mr. Rosskamm as restricted stock under the
Company's Executive Incentive Plan, an aggregate of 181,751 Class A
Common Shares held by his children, spouse, or by Mr. Rosskamm as
trustee for the benefit of family members and charities and 25,500
Class A Common Shares held by Rosskamm Family Partners, L.P., with
regard to which Mr. Rosskamm has shared voting and dispositive power.
(7) The Class A Common Shares listed are reported on a Schedule 13G filed
with the Securities and Exchange Commission with respect to holdings as
of December 31, 1993. No subsequent
6
<PAGE> 9
amendment to the Schedule 13G has been filed of record with the
Securities and Exchange Commission.
(8) Capital Research and Management Company, a registered
investment adviser and an operating subsidiary of The Capital
Group Companies, Inc., exercised as of December 31, 1997
investment discretion with respect to 525,000 Class A Common
Shares or 5.53% of outstanding shares of the class, which were
owned by various institutional investors. Such subsidiary has
no power to direct the vote of the above shares.
ELECTION OF The Board of Directors of the Company consists of
DIRECTORS nine members divided into three classes, each
consisting of three members. Since suitable
replacement nominees have yet to be found following the resignations of Robert
Norton in 1996 and Samuel Krasney in 1997, vacancies will remain in the classes
whose terms will expire as of this annual meeting of shareholders in addition to
the class of 1999, respectively. The proxies solicited hereby will not be voted
for a greater number of persons than the number of nominees named herein.
In the event of the death of or inability to serve of any of the
nominees, the Proxies will be voted for the election as a Director of such other
person as the Board of Directors may recommend. The Board of Directors has no
reason, however, to anticipate that this will occur.
NOMINEES TO The following table sets forth certain information
THE BOARD regarding the nominees for election as members of
OF DIRECTORS the Board of Directors and Directors whose terms
of office will continue after the Annual Meeting,
based upon information furnished to the Company by such persons, except as
otherwise noted, as of April 9, 1998.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION PAST FIVE YEARS, DIRECTOR
NAME OTHER DIRECTORSHIPS AND AGE SINCE
------------------------------------- --------
NOMINEES FOR THE TERM TO EXPIRE IN 2001
<S> <C> <C>
Alma Zimmerman Senior Vice President of the Company
1967 for more than five years; age 85.
Ira Gumberg Chief Executive Officer and President of 1992
(1)(3)(4) J.J. Gumberg Co. (real estate management and
development company) for more than five years;
Director of Mellon Bank, N.A.; age 44.
</TABLE>
7
<PAGE> 10
<TABLE>
DIRECTORS WHOSE TERMS EXPIRE IN 1999
<S> <C> <C>
Frank Newman Chairman of the Board since February 1997, 1991
(1)(2)(3) President and Chief Executive Officer since
February 1996, President since July 1993, Chief
Operating Officer from July 1993 to February 1996,
Director since July 1993 of Eckerd
Corporation(retail pharmacy stores); President and
Chief Executive Officer, F & M Distributors prior
to July 1993 for more than five years; age 49.
Betty Rosskamm Senior Vice President and Secretary of the 1967
Company for more than five years; age 69.
Betty Rosskamm is the mother of Alan Rosskamm.
DIRECTORS WHOSE TERMS EXPIRE IN 2000
Alan Rosskamm Chief Executive Officer of the Company for more 1985
(5) than five years, since April 1993, President,
and since July 1992, Chairman of the Board; prior
to July 1992, President of the Company for more
than five years; Director of Charming Shoppes Inc.
(women's apparel retailer); age 48. Alan Rosskamm
is the son of Betty Rosskamm.
Scott Cowen Dean of the Weatherhead School of Management 1987
(1)(2)(3) and A.J. Weatherhead III Professor of Management,
Case Western Reserve University, for more than
five years; Director of American Greetings
Corporation, Forest City Enterprises, Inc.,
Rubbermaid Inc. and Weatherhead Industries;
age 51.
Gregg Searle President and Chief Operating Officer since 1996
(1)(2)(3) November, 1996, Executive Vice President from
August 1993 to February 1996 of Diebold,
Incorporated; Vice President of Diebold,
Incorporated and General Manager of InterBold from
January 1992 to August 1993; Director of Diebold,
Incorporated since November 1996; age 49.
</TABLE>
(1) Member of the Audit Committee, which met three times during the fiscal
year ended January 31, 1998. This Committee is responsible for
reviewing with the independent auditors of the Company the scope and
thoroughness of the auditors' examination, reviewing the adequacy of
the Company's systems of internal accounting controls with the
independent auditors and recommending to the Board of Directors the
appointment of independent auditors for the fiscal year.
(2) Member of the Compensation Committee, which met four times during the
fiscal year ended January 31, 1998. This Committee has the authority to
8
<PAGE> 11
set the compensation for executive officers of the Company. The
Committee also makes recommendations to the Board of Directors with
respect to the adoption and amendment of incentive compensation plans
and administers those plans approved by the Board of Directors.
(3) Member of the Corporate Governance Committee (formerly Nominating
Committee), which met four times during the fiscal year ended January
31, 1998. This Committee is responsible for advising and making
recommendations to the full Board of Directors on issues of corporate
governance and has the authority to interview and recommend to the
Board of Directors for nomination on behalf of the Board suitable
persons for election as directors when a vacancy exists on the Board.
The Committee and the Board of Directors will also consider individuals
recommended by shareholders of the Company. Such recommendations
should be submitted in writing to the Chairman of the Board, who will
submit them to the Committee and the entire Board for their
consideration. The recommendations must be accompanied by the consent
of the individual nominated to be elected and to serve.
(4) Ira Gumberg, a Director of the Company, is President and Chief
Executive Officer, and a principal shareholder of J.J. Gumberg Co.
J.J. Gumberg Co. manages numerous shopping centers, 11 of which
contain stores of the Company. Three of the leases were entered into
after Mr. Gumberg became a Director of the Company, and the Company
believes such leases are on terms no less favorable to the Company than
could have been obtained from an unrelated party. The aggregate rent
and related occupancy charges paid during fiscal year 1998 on those 11
stores amounted to $1,159,000.
(5) Concurrently with the Company's settlement of allegations by the
Securities and Exchange Commission in February 1997, Mr. Rosskamm
consented to a separate SEC administrative cease and desist order
settling certain allegations by the SEC, without admitting or denying
the allegations. The SEC contended that Mr. Rosskamm violated certain
federal securities laws as a result of his not making adequate inquiry
of his financial staff before signing management representation letters
given to the Company's auditors in connection with the 1992 offering of
6 1/4% Convertible Subordinated Debentures, and as result of signing
the Company's Form 10-Q for the quarter ended May 2, 1992.
During the fiscal year ended January 31, 1998, there were five meetings
of the Company's Board of Directors. Each incumbent Director attended at least
75% of the Board meetings and meetings held by the committees on which he or she
served.
SECTION 16(a) Based solely upon a review of Forms 3 and 4 and
BENEFICIAL amendments thereto furnished to the Company
OWNERSHIP with respect to its most recent fiscal year,
REPORTING and written representations from reporting
COMPLIANCE persons that no Form 5 was required, the Company
believes that, during the fiscal year ended
January 31, 1998, all
9
<PAGE> 12
filing requirements under Section 16(a) of the Securities Exchange Act of 1934
applicable to its executive officers and Directors were met.
DIRECTORS' The Company compensates Directors, other than officers of the
COMPENSATION Company who are Directors, for their services on the basis of
a $16,000 annual retainer and $1,000 for each day of Board
and committee meetings attended. The Company also maintains the 1996 Stock
Option Plan for Non-Employee Directors (the "Directors Plan"), which provides
automatic one-time grants of options for 7,500 Class A Common Shares and 7,500
Class B Common Shares to new Non-Employee Directors as of the date of their
initial election and automatic grants of options for 1,500 Class A Common
Shares and 1,500 Class B Common Shares to each Non-Employee Director upon
completion of each year of service (commencing in 1997) as a Director. For
purposes of granting shares for the completion of each year of service, a year
of service generally ends on the date of the Annual Shareholders Meeting. A
total of 85,000 Class A Common Shares and 85,000 Class B Common Shares are
currently available for issuance upon the exercise of options granted or which
may be granted under the Directors Plan. Each option will terminate on the date
that is ten years following the date of grant; provided, that, in the event of
the retirement of a Director after more than ten years of continuous service,
the Compensation Committee may accelerate the date on which any option
(outstanding for a period of more than twelve months) becomes exercisable. When
an optionee ceases to be a Director of the Company for any reason, that
optionee shall continue to have the right to exercise an outstanding option
during the three-month period immediately following the date of termination
of such service.
EXECUTIVE The following table sets forth information relating
COMPENSATION to the annual and long-term compensation for the
fiscal years ended January 31, 1998, February 1, 1997 and
January 27, 1996, for the Chief Executive Officer and the other named executive
officers of the Company (as defined in rules promulgated by the Securities and
Exchange Commission).
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------------- ------------------------------------------------------
OTHER SECURITIES ALL
ANNUAL UNDERLYING OTHER
COMPEN- RESTRICTED OPTIONS COMPEN-
NAME AND FISCAL SATION STOCK (E) SATION
PRINCIPAL POSITION YEAR SALARY (A) BONUS (B) (C) AWARD(S)(D) (COMMON SHARES) (F)
- - ------------------ ---- --------- -------- ------ ----------- ----------------- --------
CLASS A CLASS B
-------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
ALAN ROSSKAMM 1998 $432,675 $279,956 - $415,000 0 35,000 $ 88,018
CHAIRMAN OF THE BOARD, 1997 $409,751 $310,846 - $0 0 35,000 $ 84,634
PRESIDENT AND CHIEF 1996 $396,109 $259,994 - $0 0 50,000 $ 64,991
EXECUTIVE OFFICER
JANE AGGERS 1998 $328,794 $211,884 - $376,250 0 25,000 $ 17,937
EXECUTIVE VICE 1997 $301,110 $229,385 - $0 0 25,000 $ 17,760
</TABLE>
10
<PAGE> 13
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
PRESIDENT, 1996 $294,096 $192,518 - $0 0 40,000 $ 17,760
MERCHANDISING AND
MARKETING
JOHN HERMSEN (1) 1998 $310,523 $198,961 - $207,500 0 25,000 $ 21,799
EXECUTIVE VICE 1997 $296,625 $224,639 - $0 0 25,000 $ 13,963
PRESIDENT-STORES 1996 $136,154 $ 30,270 $ 60,000 $486,252 50,000 50,000 $ 19,520
SAMUEL R. GASTON (2) 1998 $249,048 $0 - $0 0 0 $0
1997 $134,495 $101,841 $200,000 $285,000 50,000 65,000 $ 23,330
DAVID E. BOLEN (1) 1998 $218,341 $129,282 $165,849 $473,750 0 92,500 $ 10,884
EXECUTIVE VICE
PRESIDENT,
BUSINESS DEVELOPMENT
BRIAN P. CARNEY (1) 1998 $ 71,482 $ 75,000 - $420,000 50,000 50,000 $0
EXECUTIVE VICE
PRESIDENT, CHIEF
FINANCIAL OFFICER
</TABLE>
----------
(1) Mr. Hermsen's employment commenced August 11, 1995, Mr.
Gaston's employment commenced August 19, 1996, Mr. Bolen's
employment commenced March 10, 1997 and Mr. Carney's
employment commenced October 26, 1997.
(2) Mr. Gaston resigned his position as Executive Vice President,
Chief Financial Officer effective October 7, 1997.
(A) Includes amounts earned but deferred pursuant to Section
401(k) of the Internal Revenue Code.
(B) Incentive Bonus Compensation is based on the achievement of
pre-established individual and corporate performance goals and
is calculated as a percentage of an individual's base salary.
The Compensation Committee is responsible for establishing the
corporate performance goals and the percentage range for each
level of management eligible for incentive bonus compensation.
The level of incentive bonus compensation is scaled up to a
specified maximum for superior performance. Unless otherwise
noted, amounts represent bonuses earned in the current fiscal
year for which payment is not made until the subsequent fiscal
year. For Mr. Bolen, such compensation includes a $50,000
discretionary bonus paid during the current fiscal year. For
Mr. Carney, such compensation represents a minimum guaranteed
bonus.
(C) Excludes perquisites and other benefits, unless the aggregate
amount of such compensation is greater than the lesser of
$50,000 or 10 percent of the total of annual salary and bonus
reported for the named executive officer. Such compensation
includes a $150,000 relocation allowance given to Mr. Bolen
during fiscal 1998, a $200,000 relocation allowance given to
11
<PAGE> 14
Mr. Gaston during fiscal 1997 and a $60,000 relocation
allowance given to Mr. Hermsen during fiscal 1996.
(D) Restricted stock consists of Common Stock issued and delivered
to the recipient at the time the award is made without payment
to the Company, but which are subject to restrictions on
transfer for, and forfeiture in the event of termination of
employment prior to the expiration of, a specified period of
time (currently at the end of a period of five years). The
amounts reported in the table represent the market value at
the award date. For the fiscal years 1998, 1997 and 1996, the
executive officers listed in the compensation table received
the following numbers of restricted shares, respectively: Alan
Rosskamm - 20,000, 0, 0 Class A Common Shares and 0, 0, 0
Class B Common Shares; Jane Aggers - 20,000, 0, 0 Class A
Common Shares and 0, 0, 0 Class B Common Shares; John Hermsen
- 10,000, 0, 40,000 Class A Common Shares and 0, 0, 0 Class B
Common Shares; Samuel R. Gaston - 0, 20,000, 0 Class A Common
Shares and 0, 0, 0 Class B Common Shares; David E. Bolen -
21,000, 0, 0 Class A Common Shares and 0, 0, 0 Class B Common
Shares; Brian P. Carney - 20,000, 0, 0 Class A Common Shares
and 0, 0, 0 Class B Common Shares. The aggregate number and
value without giving effect to the diminution of value
attributable to the restrictions on such shares of the
restricted stock holdings at January 31, 1998 were: Mr.
Rosskamm 32,500 Class A Common Shares at $792,188 and 12,500
Class B Common Shares at $273,438; Ms. Aggers 45,000 Class A
Common Shares at $1,096,875 and 25,000 Class B Common Shares
at $546,875; Mr. Hermsen 50,000 Class A Common Shares at
$1,218,750; Mr. Bolen 21,000 Class A Common Shares at
$511,875; and Mr. Carney 20,000 Class A Common Shares at
$487,500. The shares of restricted stock would participate the
same as other shares of Common Stock of the Company regarding
dividend payment.
(E) The Company's 1990 Employees Stock Option and Stock
Appreciation Rights Plan, as amended, provides for the award
of incentive and non-qualified stock options which may be
Class A Common Shares or Class B Common Shares or a
combination thereof and stock appreciation rights to key
employees of the Company.
(F) Reflects matching contributions, equal to 50% of a
participant's first 4% under the Company's Employees' Savings
and Profit Sharing Plan and amounts accrued by the Company for
potential benefits earned under the Company's 1979
Supplemental Retirement Benefit Plan (the "1979 Plan"). The
1979 Plan provides benefits, subject to forfeiture, to such
employees upon normal retirement, early retirement, death or
total disability. In fiscal years 1998, 1997 and 1996, the
Company had accrued, under the 1979 Plan, for the
12
<PAGE> 15
executive officers listed in the compensation table, the
following amounts, respectively: Alan Rosskamm - $0, $0, $0;
Jane Aggers - $15,510, $15,510, $15,510; John Hermsen -
$19,387 $12,925, $0; Samuel R. Gaston - $0, $14,100, $0; David
E. Bolen - $10,884, $0, $0; Brian P. Carney - $0, $0, $0. Mr.
Rosskamm's participation under the 1979 Plan has been
terminated and replaced with a Split Dollar Life Insurance
arrangement with a trust established by Mr. Rosskamm, pursuant
to which the Company and the trust will share in the premium
costs of whole life insurance policies that pay death benefits
of not less than $10 million upon the death of Mr. Rosskamm or
his wife, Barbara Rosskamm (whichever occurs later). The
split-dollar insurance arrangement is structured such that all
premium payments will be returned to the Company. The present
value of Mr. Rosskamm's insurance arrangement for fiscal year
1998 is $85,598.
13
<PAGE> 16
OPTION GRANTS TABLE
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information relating to stock option
grants during the last fiscal year to the Chief Executive Officer and the other
named executive officers of the Company.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES
OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(4)
- - ---------------------------------------------------------------------- --------------------
NUMBER OF
SECURITIES PERCENT
UNDERLYING OF TOTAL EXERCISE
OPTIONS OPTIONS OR BASE
GRANTED GRANTED TO PRICE PER
(COMMON EMPLOYEES IN COMMON EXPIRATION
NAME SHARES)(1) FISCAL YEAR SHARE DATE (3) 5% 10%
---- ----------------- ------------- -------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Alan Rosskamm Class B 35,000(2) 6.6% $20.00 11/19/2007 $440,226 $1,115,620
Jane Aggers Class B 25,000(2) 4.7% $20.00 11/19/2007 $314,447 $ 796,871
John Hermsen Class B 25,000(2) 4.7% $20.00 11/19/2007 $314,447 $ 796,871
Samuel R. Gaston - - - - - - -
David E. Bolen Class B 30,000(2) 5.7% $18.19 04/03/2007 $343,150 $ 869,610
Class B 50,000(2) 9.4% $22.44 07/31/2007 $705,557 $1,788,020
Class B 12,500(2) 2.4% $20.00 11/19/2007 $157,224 $ 398,436
Brian P. Carney Class A 50,000(2) 9.4% $21.19 11/06/2007 $666,251 $1,688,411
Class B 50,000(2) 9.4% $20.31 11/06/2007 $638,737 $1,618,685
</TABLE>
----------
(1) The option holder has the right to pay the exercise price by
delivering previously acquired shares of the Company's Common
Stock and to have shares withheld to satisfy tax withholding
requirements in connection with the exercise of options. Such
options become immediately exercisable upon a Change in
Control of the Company, as defined in the option plan. Options
are nontransferable other than by will or the laws of descent
and distribution.
(2) The options granted become exercisable in four equal annual
installments commencing one year after the date of grant.
(3) Options were granted for a term of ten years, subject to
earlier termination in certain events related to termination
of employment.
(4) The amounts under the columns labeled "5%" and "10%" are
included by the Company pursuant to certain rules promulgated
by the Securities and Exchange Commission and are not intended
14
<PAGE> 17
to forecast future appreciation, if any, in the price of Class
A or Class B Common Shares. Such amounts are based on the
assumption that the named persons hold the options granted for
their full ten year term and that the market value of the
shares appreciate in value from the market value on the date
of grant at the 5% and 10% annualized rates.
OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
The following table provides information relating to aggregate
option exercises during the last fiscal year and fiscal year-end option
values for the Chief Executive Officer and the other named executive
officers of the Company.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE MONEY
COMMON OPTIONS AT OPTIONS AT
SHARES ACQUIRED VALUE JANUARY 31, 1998 JANUARY 31, 1998
ON EXERCISE REALIZED ------------------------- ---------------------
NAME --------------- -------- EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C> <C>
ALAN ROSSKAMM CLASS A 36,000 $742,446 136,250 3,750 $2,292,713 $ 62,344
CLASS B 36,000 $679,446 170,000 90,000 $2,271,619 $ 558,438
JANE AGGERS CLASS A 9,750 $178,777 81,000 3,000 $1,228,622 $ 49,875
CLASS B 9,750 $163,777 107,250 66,750 $1,276,591 $ 425,656
JOHN HERMSEN CLASS A 0 $ 0 25,000 25,000 $ 264,050 $ 264,050
CLASS B 25,000 $212,500 6,250 68,750 $ 42,969 $ 377,331
SAMUEL R. GASTON CLASS A 12,500 $132,038 0 0 $ 0 $ 0
CLASS B 12,500 $ 92,188 0 0 $ 0 $ 0
DAVID E. BOLEN CLASS A 0 $ 0 0 0 $ 0 $ 0
CLASS B 0 $ 0 0 92,500 $ 0 $ 134,048
BRIAN P. CARNEY CLASS A 0 $ 0 0 50,000 $ 0 $ 159,350
CLASS B 0 $ 0 0 50,000 $ 0 $ 78,100
</TABLE>
CHANGE OF CONTROL AND EMPLOYMENT AGREEMENTS
The Company has entered into separate agreements
(collectively, the "Agreements") with Alan Rosskamm, Jane Aggers, David
E. Bolen, Brian P. Carney and John Hermsen. The Agreements are designed
to retain the executives and provide for continuity of management in
the event of any actual or threatened change in the control of the
Company. Each agreement only becomes operative upon a "Change in
Control" of the Company (as defined in the Agreements) and only if the
executive is then in the employ of the Company. After a Change in
Control, each Agreement becomes, in effect, a two-year employment
agreement, providing a salary, bonus and other employee benefits at not
less than the levels existing prior to the Change in Control. If the
executive is terminated by the Company
15
<PAGE> 18
without "cause" as defined in the Agreement or terminates his or her
employment following a significant change in his or her duties, the
employee will be entitled to receive compensation and benefits for the
balance of the two-year period. The executive is obligated to endeavor
to mitigate damages by seeking comparable employment elsewhere and, to
the extent the employee receives compensation and benefits from another
employer, the foregoing payments and benefits provided by the Company
will be reduced accordingly. In each Agreement, the executive agrees
that the employee will forfeit the foregoing payments and benefits if
the employee engages in competition with the Company during the period
that any payments are made or benefits provided under the Agreement.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the
"Compensation Committee") establishes levels of compensation for the
Chief Executive Officer and the other named executive officers, as well
as the Company's other officers. The Compensation Committee also makes
recommendations to the Board of Directors with respect to the adoption
and amendment of incentive compensation plans and administers those
plans approved by the Board of Directors. The Compensation Committee is
composed of three non-employee Directors and is accountable to the
Board of Directors on all compensation matters regarding executive
officers.
The overall strategy of the Compensation Committee is to
design and implement compensation programs that will lead to increases
in the Company's return on shareholders' equity over the long-term. The
Compensation Committee's strategy is to design a compensation program
that will enable the Company to attract, motivate, and retain key
executives and to establish and maintain a performance and
achievement-oriented environment. The principal elements of this
strategy, in addition to competitive salaries, includes an annual bonus
program that is based on pretax profit and long-term equity incentives
whose value is dependent on the market price of the Company's Common
Stock. These elements are designed to operate on an integrated basis
that enhances the Company's long-term business objectives. They are
described separately in more detail below.
SALARY
The Compensation Committee strives to provide a competitive
total compensation package that helps to attract and retain the best
people in the industry. Salaries are generally set above the average of
the salaries of comparable officers at companies that are considered
comparable. Salary information about comparable companies is determined
by direct reference to public disclosures made by selected,
publicly-held companies in the specialty retail
16
<PAGE> 19
industry as well as companies in the fabric and craft industries, with
consideration given to the relative sales volume of such companies.
These companies include many of the companies in the S&P Retail
(Specialty-Apparel) Index reflected in the performance graph set forth
below. In addition, the Compensation Committee from time to time
obtains additional information about industry salary levels from a
nationally recognized employment consultant who has significant
experience in the retail industry.
In general, base salary and other components of compensation
are tiered by job responsibility, with the Chief Executive Officer and
the Executive Vice Presidents occupying the top tier. During the 1998
fiscal year, the Compensation Committee increased the average base
salaries during the annual performance reviews of the top tier by 5
percent.
BONUS
The Compensation Committee places strong emphasis on annual
incentive compensation as a means for building shareholder value over
the long term through consistent annual progress toward improvement in
pretax profit. The Company's Key Management Incentive Plan provides a
vehicle for the payment of significant cash bonuses if predetermined
levels of pretax profits are achieved during the year. This pretax
profit goal is established at a level which exceeds the Company's
pretax profit from the prior year. Bonuses are not payable under this
Plan to the individuals in the top tier unless the minimum pretax
profit target is achieved. During the fiscal year ended January 31,
1998, the Company's pretax profit exceeded the minimum goal. The amount
payable under this Plan is scaled up to a specified maximum for
superior profit performance. In addition to the corporate pretax profit
goal, the specific award payable to an executive officer is adjusted
based on the degree by which he or she also meets individual
performance goals suitable for the particular position, which are also
determined annually in advance by the Compensation Committee in the
case of the Chief Executive Officer, and in all other cases by the
Chief Executive Officer or the supervising executive officer.
The Key Management Incentive Plan is administered in such a
way as to focus the efforts of participants on meeting the expectations
of customers and shareholders through teamwork. The Plan's foundation
on overall pretax profits is intended to provide a common objective
that all participants share, thereby linking their interests with those
of the Company's shareholders.
The amounts available for award under this Plan are determined
annually. In general, the award potential for the Chief Executive
Officer and the next four most highly compensated executive officers is
designed to provide a minimum bonus, if any bonus is payable for the
year, of 25 percent of the individual's base salary
17
<PAGE> 20
and a maximum bonus of 75 percent. Bonuses for other officers are
designed to amount to a smaller percentage of salary.
STOCK OPTIONS AND RESTRICTED STOCK
The Compensation Committee selects the recipients and
determines the level of awards of stock options. The option program
includes approximately 700 participants, including not only officers
but all levels of the Company's management through the level of store
managers. This broad participation in the stock option program reflects
the Compensation Committee's strong belief that by providing additional
incentives to key employees who have substantial responsibility for the
management and growth of the Company, the best interests of the
shareholders and management will be closely aligned. The number of
shares of Common Stock covered by each award is scaled by the
Compensation Committee in its discretion according to compensation
level and job classification. In exercising this discretion, the
Compensation Committee takes into consideration the overall number of
shares of Common Stock available for grant, the number of options
outstanding, the number of shares exercisable, and the option price in
comparison to the market price for the underlying stock. Options
granted to the Chief Executive Officer during the 1998 fiscal year
represented 7 percent of all option grants during the year, and grants
to the other named executive officers of the Company amounted to
approximately 46 percent in the aggregate.
Options granted during the 1998 fiscal year vest at the rate
of 25 percent per year and expire ten years after the date of the
grant. The vesting schedule and expiration term reflect the
Compensation Committee's determination that options are designed to
have a long-term retention effect and that benefits are realizable over
a period of up to ten years.
The Compensation Committee also awards restricted stock as a
compensation vehicle and to attract and retain key executive managers.
Generally, awards are made upon hire or promotion or to recognize
superior performance. Currently, eighteen participants hold restricted
stock awards.
All awards of restricted stock made during the last three
fiscal years have provided for vesting at the end of a period of five
years from the date of the award. Since the recipient of such an award
would forfeit all of the shares of Common Stock if he or she were to
leave the Company before the end of the vesting period, the
Compensation Committee believes that these awards are a significant
factor in the retention of key management personnel and induce a
long-term view among key executive officers. Restricted stock is also
considered a useful compensation vehicle because, even after the
restrictions lapse, it tends to reinforce the recipient's commitment to
continued growth of the Company and
18
<PAGE> 21
appreciation in the market price of its Common Stock over the long-
term.
Effective January 1, 1994, the Omnibus Budget Reconciliation
Act of 1993 added Section 162(m) to the Internal Revenue Code of 1986,
as amended (the "Code"). Section 162(m) of the Code generally provides
that certain compensation in excess of $1,000,000 per year paid to a
company's chief executive officer and any of its four other highest
paid executive officers is no longer deductible to a company beginning
in the 1994 tax year unless the compensation qualifies for an
exception. The Compensation Committee recognizes that a portion of the
value of stock options and restricted stock awarded to its executive
officers in prior years may exceed $1,000,000 and therefore, will not
be deductible, however the Compensation Committee believes that the
benefits of securing the services of these executive officers outweigh
the Company's inability to obtain a tax deduction for any such
compensation. The approval of the Company's 1998 Incentive Compensation
Plan will eliminate any deductibility problem in future years.
DISCUSSION OF FISCAL 1998 COMPENSATION FOR THE CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
In considering the compensation for the Chairman and Chief
Executive Officer for fiscal 1998, the Compensation Committee reviewed
his existing compensation arrangements and both the Company's and
individual's performance during fiscal 1997. The Compensation
Committee's decisions took into consideration the fact that financial
performance for the year ended February 1, 1997 (fiscal 1997)
significantly improved. The Compensation Committee accordingly made the
following determinations regarding Mr. Rosskamm's compensation for the
year ended January 31, 1998 (fiscal 1998):
- Effective March 2, 1997, Mr. Rosskamm's base salary
was increased by 4 percent from $416,000 to $433,000
based on the Compensation Committee's positive
assessment of his performance and contributions
during fiscal 1997 as Chairman of the Board,
President and Chief Executive Officer. The average
salary increase for all individuals in the senior
management group was 8 percent.
- Based on the financial performance of the Company for
fiscal 1998, the Compensation Committee approved an
annual incentive compensation award of $279,956. This
represents 65 percent of Mr. Rosskamm's salary, which
represents the upper half of the range of potential
payments under the Key Management Incentive Plan. The
Company's pretax profit, as defined by the Key
Management
19
<PAGE> 22
Incentive Plan, of approximately $51.2 million
exceeded the midpoint goal for fiscal year 1998 under
the plan, which was established prior to the start of
fiscal 1998.
- The Compensation Committee awarded Mr. Rosskamm stock
options for 35,000 Class B Common Shares. This
represented approximately 7 percent of the total
number of shares awarded to all employees during
fiscal 1998.
- The Compensation Committee awarded Mr. Rosskamm
20,000 shares of Class A Restricted Stock during
fiscal 1998.
- As part of his overall compensation package, Mr.
Rosskamm is provided a split dollar life insurance
arrangement for Mr. Rosskamm and his wife, which
replaced the Supplemental Retirement Plan provided by
the Company to Mr. Rosskamm in fiscal 1995.
The foregoing report on fiscal year 1998 executive
compensation was submitted by the Compensation Committee and shall not
be deemed to be "soliciting material" or to be "filed" with the
Securities and Exchange Commission or subject to Regulation 14A
promulgated by the Securities and Exchange Commission or Section 18 of
the Exchange Act. The names of the Directors who serve on the
Compensation Committee are set forth below.
COMPENSATION COMMITTEE
Frank Newman (Chairman)
Scott Cowen
Gregg Searle
20
<PAGE> 23
PERFORMANCE Set forth below is a line graph comparing the yearly
GRAPH percentage change in the cumulative shareholder
return, which includes the reinvestment of cash
dividends (if applicable), of the Company's Class A Common Shares and Class B
Common Shares with the cumulative total return of the S&P Composite - 500 Stock
Index and the S&P Retail (Specialty-Apparel) Index for the Company as of January
31, 1998 (the date nearest the end of the Company's fiscal year for which index
data is readily available) for each of the Company's last five years.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
Fiscal Years
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
FCA Class A Common 100 107 100 166 195 298
Shares
FCA Class B Common 100 107 100 150 183 267
Shares
S&P Composite - 500 100 113 113 157 199 252
Index
S&P Retail (Specialty- 100 85 68 81 103 187
Apparel) Index
</TABLE>
* Assumes $100 invested on January 31, 1993 in each of the Company's
Class A Common Shares and Class B Common Shares, S&P Composite - 500
Stock Index and S&P Retail (Specialty-Apparel) Index and that all
dividends (if applicable) were reinvested.
21
<PAGE> 24
APPROVAL OF On March 3, 1998, the Board of Directors approved,
THE 1998 subject to shareholder approval, the Fabri-
INCENTIVE Centers of America, Inc., 1998 Incentive
COMPENSATION Compensation Plan (the "1998 Incentive Plan").
PLAN The primary purposes of the 1998 Incentive Plan
are to enable the Company to attract and retain qualified employees and outside
Directors and to provide incentives for, and to reward, performance. To achieve
these purposes, the 1998 Incentive Plan provides the authority to grant awards
payable in shares, in cash, or in a combination of shares and cash.
Section 162(m) of the Code precludes a deduction, for federal income tax
purposes, for compensation paid to a "covered employee" to the extent that the
compensation exceeds $1,000,000 in any taxable year. "Covered employees" consist
of the Chief Executive Officer and the other four highest compensated employees
of the Company. This deduction limitation does not, however, apply to certain
performance-based compensation, including stock options granted under a plan
approved by shareholders. A secondary purpose of the 1998 Incentive Plan is,
therefore, to enable the Company to grant stock options and provide other
performance-based compensation that is not subject to the $1,000,000 deduction
limitation. In addition to stock options, the Company's Key Management Incentive
Plan can be incorporated into the 1998 Incentive Plan, thereby eliminating the
risk that the incentive bonuses paid to senior management may be subject to the
$1,000,000 deduction limitation.
All of the Class B Common Shares available for issuance under
the Fabri-Centers of America, Inc. 1990 Employees Stock Option and Stock
Appreciation Rights Plan (the "1990 Plan") have been issued or are subject to
outstanding stock options, and, therefore, no further stock options to acquire
Class B Common
Shares may be granted under the 1990 Plan.
The complete text of the 1998 Incentive Plan is attached as
Appendix A to the Proxy Statement. The following summary of the 1998 Incentive
Plan does not purport to be complete and is qualified in its entirety by
reference to Appendix A.
Eligible Persons. All outside Directors and employees of
the Company or any of its subsidiaries will be eligible to receive awards.
Administration. The 1998 Incentive Plan will be administered
by the Compensation Committee of the Board of Directors, unless the Board of
Directors designates another committee to administer the 1998 Incentive Plan
(the "Compensation Committee"). The Compensation Committee will have the
authority to: (1) select the eligible Directors and employees who will receive
awards, (2) determine the number and types of awards to be
22
<PAGE> 25
granted, (3) determine the terms, conditions, vesting periods, and restrictions
applicable to the awards, (4) establish performance goals for performance-based
awards, (5) grant the awards, and (6) adopt, alter, and repeal rules governing
the 1998 Incentive Plan. If any member of the Compensation Committee does not
qualify as a "non-employee director" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), that member
will not be deemed to be a member of the Compensation Committee for purposes of
granting an award if the inclusion of that member on the Compensation Committee
would subject the recipient of the award to the risk of short-swing profit
recovery under Section 16(b) of the Exchange Act. Similarly, if any member of
the Compensation Committee does not qualify as an "outside" director within the
meaning of Section 162(m) of the Code, that member will not be deemed to be a
member of the Compensation Committee for purposes of performance-based awards to
covered employees.
Number and Types of Shares Available under the 1998 Incentive
Plan. The shares to be issued under the 1998 Incentive Plan may be Class A
Common Shares or Class B Common Shares, as determined by the Committee. The
total number of shares (whether Class A Common Shares, Class B Common Shares, or
both) subject to awards (other than Stock Purchase Rights meeting the
requirements of Section 423 of the Code) granted in any fiscal year of the
Company may not exceed the sum of (1) four percent (4%) of the number of shares
(including both Class A Common Shares and Class B Common Shares) outstanding at
the beginning of the fiscal year and (2) for each of the two prior fiscal years,
the excess of four percent (4%) of the number of shares outstanding at the
beginning of each such fiscal year over the number of shares subject to awards
actually granted in each such fiscal year. With respect to Stock Purchase Rights
meeting the requirements of Section 423 of the Code granted during any fiscal
year, the total number of shares subject to Stock Purchase Rights granted in any
fiscal year may not exceed 1,000,000. The maximum number of shares that may be
issued or delivered upon exercise of incentive stock options granted under the
1998 Incentive Plan is 1,000,000. Shares issued or delivered under the 1998
Incentive Plan may consist of authorized and unissued shares, treasury shares,
or shares to be purchased by the Company, as determined by the Committee.
The number of shares subject to awards granted to any eligible
person, and the amount of any incentive compensation award payable in cash to
any eligible person, are subject to the following limitations:
23
<PAGE> 26
(1) With respect to stock options (other than incentive stock
options), the number of shares subject to stock options granted to the
eligible person in any fiscal year of the Company may not exceed
500,000. If the exercise price of any stock option granted to the
eligible person in that fiscal year is less than the fair market value
of the shares subject to the stock option at the date of grant, then,
with respect to all stock options granted to the eligible person in
that fiscal year, the aggregate amount of the excess of (a) the fair
market value of the shares subject to the stock options at the dates of
grant over (b) the respective exercise prices may not exceed
$1,000,000.
(2) With respect to stock appreciation rights, the number of
shares subject to stock appreciation rights granted to the eligible
person in any fiscal year of the Company may not exceed 100,000.
(3) With respect to incentive stock options, the aggregate
fair market value (determined as of the time the incentive stock option
is granted) of the shares with respect to which incentive stock options
may be exercisable for the first time by any eligible person in any
calendar year may not exceed $100,000 or such other maximum amount as
may be permitted by the Code.
(4) With respect to restricted stock, the number of shares
granted to the eligible person may not exceed 100,000 on the date of
hire and 50,000 otherwise in any fiscal year of the Company.
(5) With respect to stock awards other than stock options and
restricted stock, the number of shares granted to the eligible person
in any fiscal year of the Company may not exceed 100,000.
(6) With respect to incentive compensation awards payable in
cash, the amount payable to the eligible person in any fiscal year may
not exceed the lesser of $1,000,000 or 150% of annual base salary.
These amounts are maximum limitations prescribed by the terms of the 1998
Incentive Plan and do not necessarily reflect the anticipated number or value of
the awards to be granted under the 1998 Incentive Plan.
Shares subject to an award that is forfeited, terminated,
canceled, or surrendered without having been exercised (other than shares
subject to a stock option that is canceled upon the exercise of a related stock
appreciation right, shares subject to an award
24
<PAGE> 27
that is surrendered in payment of the exercise price of a stock option, and
shares subject to an award that is surrendered in payment of taxes associated
with an award) will again be available for grant under the 1998 Incentive Plan,
without reducing the number of shares that may be subject to awards or that are
available for the grant of awards in any fiscal year. The assumption of awards
granted by an organization acquired by the Company, or the grant of awards under
the 1998 Incentive Plan in substitution for any such awards, will not reduce the
number of shares available for the grant of awards under the 1998 Incentive
Plan. Stock equivalent units that represent deferred compensation, and shares
issued in payment of deferred compensation, will not reduce the number of shares
that may be subject to awards or that are available for the grant of awards
under the 1998 Incentive Plan or to any eligible person in any fiscal year,
except to the extent of matching or other grants by the Company or any discount
in the price used to convert the deferred compensation into stock equivalent
units or shares.
In the event of any change in the shares by reason of a
merger, consolidation, reorganization, recapitalization, or similar transaction,
or in the event of a stock dividend, stock split, distribution to shareholders
(other than normal cash dividends), or rights offering or similar sale of shares
for less than their fair market value at the time of sale, the Compensation
Committee will adjust the number and class of shares that may be issued under
the 1998 Incentive Plan, the number and class of shares that may be issued to
any eligible person in any fiscal year, the number and class of shares subject
to outstanding awards, the exercise price applicable to outstanding awards, and
any value determinations applicable to outstanding awards.
Types of Awards. The 1998 Incentive Plan provides for
the grant of different types of awards, including the following:
(1) Stock Appreciation Rights - A right to receive a payment,
in cash or shares, equal to the excess of (a) the fair market value of
a specified number of shares on the date the right is exercised over
(b) the fair market value of the shares on the date the right is
granted, all as determined by the Compensation Committee. The right may
be conditioned upon the occurrence of certain events, such as a change
in control of the Company, or may be unconditional, as determined by
the Compensation Committee.
(2) Stock Award - An award that is made in shares, restricted
stock, or stock equivalent units. Restricted stock consists of shares
that are subject to restrictions or risk of forfeiture. Stock
equivalent units are awards
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that are valued by reference to the fair market value of
shares.
(3) Stock Option - A right to purchase a specified number of
shares, during a specified period, and at a specified exercise price,
all as determined by the Compensation Committee. A stock option may be
an incentive stock option designed to meet the requirements of Section
422 of the Code or a non-qualified stock option, as determined by the
Compensation Committee.
(4) Incentive Compensation Award - An award that, in the
discretion of the Compensation Committee, is payable in shares, in
cash, or in a combination of shares and cash and is contingent upon the
achievement of performance goals established by the Compensation
Committee.
(5) Stock Purchase Right - A right to participate in a stock
purchase program, including but not limited to a stock purchase program
that meets the requirements of Section 423 of the Code. Section 423
provides for the grant to employees of rights to purchase shares for a
exercise price that may not be less than the lesser of (1) 85% of the
fair market value of the shares at the time the rights are granted and
(2) 85% of the fair market value of the shares at the time the rights
are exercised. Section 423 also provides that no employee may be
granted rights to purchase shares with a fair market value of more than
$25,000 (determined at the time of grant) in any calendar year.
More than one award may be granted to the same eligible
person. Awards may be granted singly or in combination or tandem with other
awards. The Company may assume awards granted by an organization acquired by the
Company or may grant Awards in replacement of, or in substitution for, any such
awards.
Performance-Based Awards under Section 162(m) of the Code. The
Compensation Committee will determine the period of time during which any award
that is performance-based for purposes of Section 162(m) of the Code may be
earned. The Compensation Committee will also establish, not later than 90 days
after the commencement of the award period (or such earlier or later date as may
be the applicable deadline for the award to be performance-based for purposes of
Section 162(m) of the Code), one or more performance objectives ("Performance
Goals") to be met by the Company, or by one or more of its subsidiaries or other
business units, as a condition to the payment of the award. The Performance
Goals may, in the discretion of the Compensation Committee, include a range of
performance objectives (such as minimum, middle, and
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maximum objectives) the achievement of which will entitle eligible persons to
receive different amounts of compensation.
The Performance Goals will be based on one or more of the
following criteria ("Performance Criteria"): sales and sales productivity
measures, earnings, earnings per share, return on equity, return on assets or
other asset productivity ratios, completion of acquisitions or other projects,
and market price per share. These Performance Criteria may be measured before or
after taxes, interest, depreciation, amortization, discontinued operations,
effect of accounting changes, acquisition expenses, restructuring expenses,
non-operating items, or usual charges, as determined by the Compensation
Committee at the time the Performance Goals are established.
Deferral of Payment. The Compensation Committee may, in its
discretion, permit eligible persons to defer the payment of some or all of the
shares or cash subject to awards, as well as other compensation or fees, in
accordance with procedures established by the Compensation Committee to assure
that the recognition of taxable income is deferred in accordance with the Code.
Deferred amounts may, to the extent permitted by the Compensation Committee, be
credited as cash or stock equivalent units and paid in cash or in shares. The
Compensation Committee may also, in its discretion, establish rules and
procedures for the crediting of interest on deferred cash and dividend
equivalents on stock equivalent units. The Compensation Committee may also, in
its discretion, provide for matching or other grants in connection with such
deferrals.
Change in Control. In the event of a change in control of the
Company, unless otherwise determined by the Compensation Committee, (1) all
stock appreciation rights, stock options, and stock purchase rights then
outstanding will become fully exercisable as of the date of the change in
control, (2) all restrictions and conditions applicable to restricted stock and
other stock awards will be deemed to have lapsed or been satisfied as of the
date of the change in control, and (3) all incentive compensation awards will be
deemed to have been fully earned as of the date of the change in control.
Amendment or Suspension of the 1998 Incentive Plan. The Board
of Directors may amend or suspend the 1998 Incentive Plan at any time.
Shareholder approval for any such amendment will be required only to the extent
necessary to preserve the deductibility of compensation associated with any
award for federal income tax purposes under Section 162(m) of the Code.
Effective Date; Termination. The 1998 Incentive Plan
will become effective on the date it is approved by the holders of
a majority of the shares then outstanding. The 1998 Incentive Plan
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will continue in effect until it is terminated by the Board of Directors.
Certain Federal Income Tax Consequences. The 1998 Incentive
Plan provides for many types of awards. A brief description of the tax
consequences of certain common types of awards follows. This description is
based on federal income tax laws currently in effect and does not purport to be
complete.
Restricted Stock. An eligible person who has been awarded
restricted stock and does not make an election under Section 83(b) of
the Code will not recognize taxable income at the time of the award.
When any transfer or forfeiture restrictions applicable to the
restricted stock lapse, the eligible person will recognize ordinary
income, and the Company will be entitled to a corresponding deduction,
equal to the excess of the fair market value of the shares when the
restrictions lapse over any amount paid by the eligible person for the
restricted stock. Any dividends paid to the eligible person on the
restricted stock at or before the lapse of the restrictions will be
ordinary compensation income to the eligible person and deductible as
such by the Company.
An eligible person who has been awarded restricted stock and
makes an election under Section 83(b) of the Code will recognize
ordinary income at the time of the award, and the Company will be
entitled to a corresponding deduction, equal to the fair market value
of the shares at the time of grant over any amount paid by the eligible
person for the restricted stock. Any dividends subsequently paid to the
eligible person on the restricted stock will be dividend income to the
eligible person and not deductible by the Company. There are no federal
income tax consequences either to the eligible person or to the Company
at the time any transfer or forfeiture restrictions applicable to the
restricted stock lapse.
Stock Options. There are no federal income tax consequences
either to the recipient of the stock option or to the Company upon the
grant of an incentive stock option or a non-qualified stock option. On
the exercise of an incentive stock option during employment or within
three months thereafter, the eligible person will not recognize any
income, and the Company will not be entitled to a deduction, although
the excess of the fair market value of the shares on the date of
exercise over the exercise price must be included in the eligible
person's alternative minimum taxable income, which may
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give rise to alternative minimum tax liability to the eligible person.
Generally, if the eligible person disposes of shares acquired upon
exercise of an incentive stock option within two years of the date of
grant or one year of the date of exercise, the eligible person will
recognize ordinary income, and the Company will be entitled to a
deduction, equal to the excess of the fair market value of the shares
on the date of exercise over the exercise price (but not in excess of
the gain on the sale). The balance of any gain or loss will be treated
as a capital gain or loss to the eligible person. If the shares are
disposed of after the two-year and one-year periods mentioned above,
the Company will not be entitled to any deduction, and the entire gain
or loss for the eligible person will be treated as a capital gain or
loss.
On the exercise of a non-qualified stock option, the excess of
the fair market value of the shares on the date of exercise over the
exercise price will generally be taxable to the eligible person as
ordinary income and deductible by the Company, provided the Company
properly files IRS Form W-2 or Form 1099 in respect of the exercise.
This disposition of shares acquired upon the exercise of a
non-qualified stock option will generally result in a capital gain or
loss for the eligible person, but will have no tax consequences for the
Company.
Stock Appreciation Rights. There are no federal income tax
consequences either to the eligible person or to the Company upon the
grant of stock appreciation rights. The amount of any cash (or the fair
market value of any shares) received by the eligible person upon the
exercise of the stock appreciation rights will be subject to ordinary
income tax in the year of receipt, and the Company will be entitled to
a deduction for that amount.
Vote Required. Approval of the 1998 Incentive Plan will
require the affirmative vote of the holders of a majority of the Class A Common
Shares represented in person or by proxy at the meeting. The Board of Directors
recommends a vote FOR approval of the 1998 Incentive Plan.
APPROVAL OF On March 3, 1998, the Board of Directors approved,
CHANGE IN NAME subject to shareholder approval, an amendment to
TO "JO-ANN the Company's Articles of Incorporation to change
STORES, INC." the name of the Company to "Jo-Ann Stores, Inc."
The Company now operates stores under a variety of names:
"Jo-Ann Fabrics and Crafts," "Jo-Ann etc," "Cloth World," "New York
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Fabrics," "House of Fabrics," "So-Fro Fabrics," "Fabricland," and "Fabric King."
Of these names, "Jo-Ann" was developed by the Company and has been in use since
1963. At present, the Company operates approximately 650 stores under the name
"Jo-Ann," including 11 "Jo-Ann etc" stores. The other names identify stores that
are part of chains developed by other retailers and subsequently acquired by the
Company. Most recently, for example, the Company acquired House of Fabrics,
Inc., which uses the names "House of Fabrics," "So-Fro Fabrics," "Fabricland,"
and "Fabric King." At present, the Company operates approximately 500 stores
under names other than "Jo-Ann."
In order to develop national recognition and brand
identification, the Company plans to change the name of all of its stores to
either "Jo-Ann Fabrics and Crafts" or "Jo-Ann etc." The name will be changed on
store buildings throughout the year, with a grand opening marketing plan set for
the third quarter.
The proposed change in the Company's name to "Jo-Ann Stores,
Inc." is intended to align the corporate identity with that of the stores. As
the name "Jo-Ann" gains national recognition, the Company expects that potential
investors will be able to more readily identify the Company and its business.
Changing the Company's name requires an amendment to the
Company's Articles of Incorporation. Accordingly, the following resolution is
submitted to shareholders for approval:
RESOLVED, that Article FIRST of the Company's Articles of
Incorporation be amended to read as follows:
FIRST. The name of the Corporation is "Jo-Ann Stores, Inc."
Vote Required. Approval of the resolution changing the
Company's name will require the affirmative vote of the holders of a majority of
the outstanding Class A Common Shares. The Board of Directors recommends a vote
FOR approval of the change.
INDEPENDENT Arthur Andersen LLP has been appointed as the
AUDITORS Company's independent auditors for the fiscal year
ending January 30, 1999. A representative of Arthur
Andersen LLP is expected to be present at the Annual Meeting with an opportunity
to make a statement if he desires to do so and to answer appropriate questions
with respect to that firm's examination of the Company's financial statements
and records for the fiscal year ended January 31, 1998.
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PROXY The Company will bear the expense of preparing,
SOLICITATION printing and mailing this Proxy Statement. In
addition to solicitation by mail, the Company will
request brokers and other custodians, nominees and fiduciaries to send the proxy
materials to beneficial owners; and the Company will, upon request, reimburse
such brokerage houses and custodians for their reasonable expenses in so doing.
The Company has retained Corporate Investor Communications, Inc. ("CIC") to aid
in the solicitation of proxies and to verify certain records related to the
solicitations. CIC will receive fees estimated to be $4,000, and expense
reimbursement, for such services. In addition, solicitations may be made by
mail, telephone and personal interview, by the directors, officers and
regularly engaged employees of the Company, without extra compensation.
SHAREHOLDERS' The deadline for shareholders to submit proposals to
PROPOSALS be considered for inclusion in the Proxy Statement
for the 1999 Annual Meeting of Shareholders is
January 4, 1999.
ANNUAL The Company's Annual Report for the fiscal year
REPORT ended January 31, 1998, including financial
statements of the Company and the report thereon of
Arthur Andersen LLP, is being mailed to holders of both Class A and Class B
Common Shares with this Notice of Annual Meeting and Proxy Statement.
BETTY ROSSKAMM,
Secretary
By order of the Board of Directors
May 4, 1998
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APPENDIX A
FABRI-CENTERS OF AMERICA, INC.
1998 INCENTIVE COMPENSATION PLAN
1. PURPOSE
The purpose of this Plan is enable the Company to attract and
retain qualified employees and outside Directors, to provide incentives, and to
reward performance. To achieve this purpose, this Plan provides the authority to
grant of Awards payable in Shares, in cash, or in a combination of Shares and
cash.
2. DEFINITIONS
(a) "AFFILIATE AND ASSOCIATE" - These terms have the meanings
given to them in Rule 12b-2 under the Exchange Act.
(b) "AWARD" - A grant of Stock Appreciation Rights, Stock
Awards, Stock Options, Stock Purchase Rights, Incentive Compensation
Awards, or other incentives under this Plan.
(c) "BOARD OF DIRECTORS" - The Board of Directors of the
Company.
(d) "CHANGE IN CONTROL" - A "Change of Control" will be deemed
to occur if at any time after the date of the adoption of this Plan:
(i) Any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan or employee share ownership plan of
the Company or any Subsidiary of the Company, or any Person organized,
appointed, or established by the Company or any Subsidiary of the
Company for or pursuant to the terms of any such plan), alone or
together with any of its Affiliates or Associates, becomes the
Beneficial Owner of securities of the Company having 20% or more of the
voting power of the Company. For purposes of this Section 2(d)(i), the
terms "Beneficial Owner" and "Person" have the meanings given to them
in the Rights Agreement, dated October 22, 1990, between the Company
and Harris Bank and Trust, as Rights Agent, as amended or restated from
time to time (the "Rights Agreement"), or in any rights agreement or
similar agreement that replaces or supersedes the Rights Agreement.
(ii) At any time during a period of 24 consecutive months,
individuals who were Directors at the beginning of the period no longer
constitute a majority of the members of the Board of Directors unless
the election, or
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the nomination for election by the Company's shareholders, of each
Director who was not a Director at the beginning of the period is
approved by at least a majority of the Directors who are in office at
the time of the election or nomination and were Directors at the
beginning of the period.
(iii) The Company is merged, consolidated, or reorganized into
or with another Person and, as a result of the merger, consolidation,
or reorganization, securities having less than a majority of the voting
power of such Person in the election of Directors outstanding
immediately after the merger, consolidation, or reorganization are held
by the holders of securities of the Company entitled to vote generally
in the election of directors outstanding immediately prior to the
merger, consolidation, or reorganization.
(e) "CLASS A SHARES" - Class A Common Shares, without par
value, of the Company or any equity security or securities of the Company that
are issued in substitution or exchange therefor in a recapitalization of the
Company.
(f) "CLASS B SHARES" - Class B Common Shares, without par
value, of the Company or any equity security or securities of the Company that
are issued in substitution or exchange therefor in a recapitalization of the
Company.
(g) "CODE" - The Internal Revenue Code of 1986, or any law
that supersedes or replaces it, as amended from time to time.
(h) "COMMITTEE" - The Compensation Committee of the Board of
Directors, or any other committee of the Board of Directors that the Board of
Directors authorizes to administer this Plan.
(i) "COMPANY" - Fabri-Centers of America, Inc., an Ohio
corporation.
(j) "COVERED EMPLOYEES" - An officer of the Company whose
compensation is subject to the $1,000,000 limit on deductibility under Section
162(m) of the Code, or any provision that supersedes or replaces Section 162(m)
of the Code, as amended from time to time.
(k) "DIRECTOR" - A director of the Company.
(l) "EXCHANGE ACT" - Securities Exchange Act of 1934, and any
law that supersedes or replaces it, as amended from time to time.
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(m) "FAIR MARKET VALUE" of Shares - The value of Shares
determined by the Committee, or pursuant to rules established by the Committee,
on a basis consistent with regulations under the Code.
(n) "INCENTIVE COMPENSATION AWARD" - This term has the meaning
given to it in Section 6(a)(iv).
(o) "INCENTIVE STOCK OPTION" - A Stock Option that meets the
requirements of Section 422 of the Code, or any provision that supersedes or
replaces Section 422 of the Code, as amended from time to time.
(p) "PARTICIPANT" - Any person to whom an Award has been
granted under this Plan.
(q) "PERFORMANCE CRITERIA" - This term has the meaning given
to it in Section 7(b).
(r) "PERFORMANCE GOAL" - This term has the meaning given to it
in Section 7(a).
(s) "RESTRICTED STOCK" - An Award of Shares that are subject
to restrictions or risk of forfeiture.
(t) "RULE 16B-3" - Rule 16b-3 under the Exchange Act, or any
rule that supersedes or replaces it, as amended from time to time.
(u) "SHARES" - Class A Shares or Class B Shares, as the
case may be.
(v) "STOCK APPRECIATION RIGHT" - This term has the meaning
given to it in Section 6(a)(i).
(w) "STOCK AWARD" - This term has the meaning given to it in
Section 6(a)(ii).
(x) "STOCK EQUIVALENT UNIT" - An Award that is valued by
reference to the Fair Market Value of Shares.
(y) "STOCK OPTION" - This term has the meaning given to it in
Section 6(a)(iii).
(z) "STOCK PURCHASE RIGHT" - A right to participate in a stock
purchase program, including but not limited to a stock purchase program that
meets the requirements of Section 423 of the Code.
(aa) "SUBSIDIARY" - A corporation, limited liability company,
business trust, partnership, joint venture, or other orga-
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nization of which securities having a majority of the voting power are owned,
directly or indirectly, by the Company.
3. ELIGIBILITY
All outside Directors and employees of the Company or any of
its Subsidiaries will be eligible to receive Awards.
4. ADMINISTRATION
(a) COMMITTEE. Subject to Sections 4(b) and 4(c), this Plan
will be administered by the Committee. The Committee will, subject to the terms
of this Plan, have the authority to: (i) select the eligible Directors and
employees who will receive Awards, (ii) determine the number and types of Awards
to be granted, (iii) determine the terms, conditions, vesting periods, and
restrictions applicable to the Awards, (iv) establish Performance Goals for
performance-based Awards, (v) prescribe the forms of any notices, agreements, or
other instruments relating to the Awards, (vi) grant the Awards, (vii) adopt,
alter, and repeal rules governing this Plan, (viii) interpret the terms and
provisions of this Plan and any Awards granted under this Plan, and (ix)
otherwise supervise the administration of this Plan. All decisions by the
Committee will be made with the approval of not less than a majority of its
members.
(b) AWARDS SUBJECT TO SECTION 16(B) OF THE EXCHANGE ACT.
Notwithstanding the provisions of Section 4(a), if any member of the Committee
does not qualify as a "Non-Employee Director" within the meaning of Rule 16b-3,
the "Committee" will, for purposes of making any Award that (i) constitutes a
"purchase" of securities within the meaning of Section 16(b) of the Exchange Act
by an individual who is subject to potential liability under Section 16(b) of
the Exchange Act and (ii) does not otherwise qualify for an exemption under Rule
16b-3, be deemed to consist only of those members of the Committee who qualify
as such Non-Employee Directors.
(c) AWARDS SUBJECT TO SECTION 162(M) OF THE CODE.
Notwithstanding the provisions of Section 4(b), if any member of the Committee
does not qualify as an "outside director" within the meaning of Section 162(m)
of the Code, the "Committee" will, for purposes of making and performance-based
Awards to Covered Employees, be deemed to consist only of those members who
qualify as such outside directors.
(d) DELEGATION. The Committee may delegate any of its
authority to any other Person or Persons that it deems appropriate, provided the
delegation does not (i) cause this Plan, or any Awards granted under this Plan,
to fail to qualify for the exemption
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provided by Rule 16b-3 or (ii) result in a reduction in the amount of
compensation associated with any Award that is deductible for federal income tax
purposes under Section 162(m) of the Code.
(e) DECISIONS FINAL. All decisions by the Committee, and by
any other person or persons to whom the Committee has delegated authority, will
be final and binding on all persons.
5. SHARES AVAILABLE UNDER PLAN; LIMITATIONS ON INCENTIVE
(a) MAXIMUM AGGREGATE NUMBER OF SHARES. Subject to Sections
4(c) and 4(d), the total number of Shares (whether Class A Shares, Class B
Shares, or a combination of Class A Shares and Class B Shares) subject to Awards
(other than Stock Purchase Rights meeting the requirements of Section 423 of the
Code) granted in any fiscal year of the Company may not exceed the sum of (i)
four percent (4%) of the number of Shares (including both Class A Shares and
Class B Shares) outstanding at the beginning of the fiscal year and (ii) for
each of the two prior fiscal years, the excess of four percent (4%) of the
number of Shares outstanding at the beginning of each such fiscal year over the
number of Shares subject to Awards actually granted in each such fiscal year.
With respect to Stock Purchase Rights meeting the requirements of Section 423 of
the Code granted during any fiscal year, the total number of shares subject to
Stock Purchase Rights granted in any fiscal year may not exceed 1,000,000. The
maximum number of Shares that may be issued or delivered upon exercise of
Incentive Stock Options granted under this Plan is 1,000,000. Shares issued or
delivered under this Plan may consist of authorized and unissued shares,
treasury shares, or shares to be purchased by the Company, as determined by the
Committee.
(b) MAXIMUM NUMBER OF SHARES AND AMOUNT OF INCENTIVE
COMPENSATION AWARD FOR EACH PARTICIPANT. Subject to Sections 4(c) and 4(d), the
number of Shares subject to Awards granted to any Participant, and the amount of
any Incentive Compensation Award payable in cash to any Participant, may not
exceed:
(i) With respect to Stock Options (other than Incentive Stock
Options), 500,000 Shares in any fiscal year of the Company. If the
exercise price of any Stock Option granted to the Participant in that
fiscal year is less than the Fair Market Value of the Shares subject to
the Stock Option at the date of grant, then, with respect to all Stock
Options granted to the Participant in that fiscal year, the aggregate
amount of the excess of (A) the Fair Market Value of the Shares subject
to the Stock
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Options at the dates of grant over (B) the respective exercise prices
may not exceed $1,000,000.
(ii) With respect to Stock Appreciation Rights, 100,000 Shares
in any fiscal year of the Company.
(iii) With respect to Incentive Stock Options, the aggregate
Fair Market Value (determined as of the time the Incentive Stock Option
is granted) of the Shares with respect to which Incentive Stock Options
may be exercisable for the first time by any Participant in any
calendar year may not exceed $100,000 or such other maximum amount as
may be permitted by the Code.
(iv) With respect to Restricted Stock, in any fiscal year of
the Company, the number of Shares granted may not exceed 100,000 on the
date of hire and 50,000 otherwise in any fiscal year of the Company.
(v) With respect to Stock Awards other than Stock Options and
Restricted Stock, 100,000 Shares in any fiscal year of the Company.
(vi) With respect to Incentive Compensation Awards payable in
cash, the lesser of $1,000,000 or 150% of annual base salary in respect
to any fiscal year of the Company.
(c) CHARGING OF SHARES. Shares subject to an Award that is
forfeited, terminated, canceled, or surrendered without having been exercised
(other than (i) Shares subject to a Stock Option that is canceled upon the
exercise of a related Stock Appreciation Right and (ii) Shares subject to an
Award that is surrendered in payment of the exercise price of a Stock Option or
a Stock Purchase Right or in payment of taxes associated with an Award) will
again be available for grant under this Plan, without reducing the number of
Shares that may be subject to Awards or that are available for the grant of
Awards in any fiscal year. The assumption of awards granted by an organization
acquired by the Company, or the grant of Awards under this Plan in substitution
for any such awards, will not reduce the number of Shares available for the
grant of Awards under this Plan. Stock Equivalent Units that represent deferred
compensation, and Shares issued in payment of deferred compensation, will not
reduce the number of Shares that may be subject to Awards or that are available
for the grant of Awards under the Plan or to any Participant in any fiscal year,
except to the extent of matching or other related grants by the Company or any
discount in the price used to convert the deferred compensation into Stock
Equivalent Units or Shares.
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(d) ADJUSTMENT. In the event of any change in the Shares by
reason of a merger, consolidation, reorganization, recapitalization, or similar
transaction, or in the event of a stock dividend, stock split, distribution to
shareholders (other than normal cash dividends), or rights offering or similar
sale of Shares for less than their Fair Market Value at the time of sale, the
Committee will adjust the number and class of shares that may be issued under
this Plan, the number and class of shares that may be issued to any Participant
in any fiscal year, the number and class of shares subject to outstanding
Awards, the exercise price applicable to outstanding Awards, and any value
determinations applicable to outstanding Awards.
6. AWARDS
(a) TYPES OF AWARDS. Awards may include, but are not
limited to, the following:
(i) STOCK APPRECIATION RIGHT - A right to receive a payment,
in cash or Shares, equal to the excess of (A) the Fair Market Value of
a specified number of Shares on the date the right is exercised over
(B) the Fair Market Value of the Shares on the date the right is
granted, all as determined by the Committee. The right may be
conditioned upon the occurrence of certain events, such as a Change in
Control of the Company, or may be unconditional, as determined by the
Committee.
(ii) STOCK AWARD - An Award that is made in Shares, Restricted
Stock, or Stock Equivalent Units.
(iii) STOCK OPTION - A right to purchase a specified number of
Shares, during a specified period, and at a specified exercise price,
all as determined by the Committee. A Stock Option may be an Incentive
Stock Option or a Stock Option that does not qualify as an Incentive
Stock Option. In addition to the terms, conditions, vesting periods,
and restrictions established by the Committee, Incentive Stock Options
must comply with the requirements of Section 422 of the Code. The
exercise price of Incentive Stock Options granted to any Participants,
and the exercise price of any Stock Options granted to Covered
Employees, may not be less than the Fair Market Value of the Shares
subject to the Stock Option on the date of grant.
(iv) INCENTIVE COMPENSATION AWARD - An Award that, in the
discretion of the Committee, is payable either in Shares or in cash and
is contingent upon the achievement of Performance Goals established by
the Committee.
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(v) STOCK PURCHASE RIGHT - A right to participate in a stock
purchase program, including but not limited to a stock purchase program
that meets the requirements of Section 423 of the Code.
Among other requirements, Section 423 currently provides that
(A) only employees of the Company, or of any direct or indirect
subsidiary of the Company designated by the Committee, may receive
Stock Purchase Rights that qualify under Section 423 ("Section 423
Rights"), (B) Section 423 Rights may not be granted to any Participant
who, immediately after the Section 423 Rights are granted, owns stock
possessing five percent (5%) or more of the total combined voting power
or value of all classes of shares of the Company, (C) Section 423
Rights must be granted to all employees of the Company, and of any
direct or indirect subsidiary of the Company designated by the
Compensation Committee, except that there may be excluded (1) employees
who have been employed less than two years, (2) employees whose
customary employment is 20 hours or less per week, (3) employees whose
customary employment is for not more than five months in any calendar
year, and (4) highly compensated employees (within the meaning of
Section 414(q) of the Code), (D) all employees granted Section 423
Rights must have the same rights and privileges, except that the number
of Shares that may be purchased by any employee upon exercise of
Section 423 Rights may bear a uniform relationship to the total
compensation, or the basic or regular rate of compensation, of the
employee, (E) the exercise price of Section 423 Rights may not be less
than the lesser of (1) eighty five percent (85%) of the Fair Market
Value of the Shares at the time Section 423 Rights are granted, or (2)
eighty five percent (85%) of the Fair Market Value of the Shares at the
time the Section 423 Rights are exercised; (F) Section 423 Rights
cannot be exercised after the expiration of 27 months from the date the
Section 423 Rights are granted, and (G) no employee may be granted
Section 423 Rights, under this Plan and any other plans of the Company
and its subsidiaries, that permit the purchase of Shares with a Fair
Market Value of more than $25,000 (determined at the time the Section
423 Rights are granted) in any calendar year.
(b) GRANT OF AWARDS. More than one Award may be granted to the
same Participant. Awards may be granted singly or in combination or tandem with
other Awards. The Company may assume awards granted by an organization acquired
by the Company or may grant Awards in replacement of, or in substitution for,
any such awards.
7. PERFORMANCE-BASED AWARDS UNDER SECTION 162(m) OF THE CODE
A-8
<PAGE> 42
(a) SELECTION OF PARTICIPANTS AND ESTABLISHMENT OF PERFORMANCE
GOALS. The Committee will determine the period of time during which any Award
that is performance-based for purposes of Section 162(m) of the Code may be
earned. The Committee will also establish, not later than 90 days after the
commencement of the award period (or such earlier or later date as may be the
applicable deadline for the Award to be performance-based for purposes of
Section 162(m) of the Code), one or more performance objectives ("Performance
Goals") to be met by the Company, or by one or more of its Subsidiaries or other
business units, as a condition to the payment of the Award. The Performance
Goals may, in the discretion of the Committee, include a range of performance
objectives (such as minimum, middle, and maximum objectives) the achievement of
which will entitle Participants to receive different amounts of compensation.
(b) PERFORMANCE CRITERIA. The Performance Goals will be based
on one or more of the following criteria ("Performance Criteria"): sales,
earnings, earnings per Share, return on equity, completion of acquisitions or
other projects, and market price per Share. These Performance Criteria may be
measured before or after taxes, interest, depreciation, amortization,
discontinued operations, affect of accounting changes, acquisition expenses,
restructuring expenses, non-operating items, or usual charges, as determined by
the Committee at the time the Performance Goals are established.
8. DEFERRAL OF PAYMENT
The Committee may, in its discretion, permit Participants to
defer the payment of some or all of the Shares or cash subject to their Awards,
as well as other compensation or fees, in accordance with procedures established
by the Committee to assure that the recognition of taxable income is deferred
under the Code. Deferred amounts may, to the extent permitted by the Committee,
be credited as cash or Stock Equivalent Units and paid in cash or in Shares. The
Committee may also, in its discretion, establish rules and procedures for the
crediting of interest on deferred cash and dividend equivalents on Stock
Equivalent Units. The Committee may also, in its discretion, provide for
matching or other grants in connection with such deferrals.
9. PAYMENT OF EXERCISE PRICE
(a) MANNER OF PAYMENT. The exercise price of a Stock Option
(other than an Incentive Stock Option), a Stock Purchase Right, and any other
Stock Award for which the Committee has established an exercise price may be
paid in cash, by the transfer of Shares, by the surrender of all or part of an
Award (including
A-9
<PAGE> 43
the Award being exercised), or by a combination of these methods, as and to the
extent permitted by the Committee. The exercise price of an Incentive Stock
Option may be paid in cash, by the transfer of Shares, or by a combination of
these methods, as and to the extent permitted by the Committee at the time of
grant, but may not be paid by the surrender of all or part of an Award. The
Committee may prescribe any other method of paying the exercise price that it
determines to be consistent with applicable law and the purpose of this Plan,
including loans by the Company.
(b) USE OF RESTRICTED STOCK. In the event shares of Restricted
Stock are used to pay the exercise price of a Stock Option or a Stock Purchase
Right, a number of the Shares issued upon the exercise of the Stock Option or
Stock Purchase Right equal to the number of shares of Restricted Stock used to
pay the exercise price will be subject to the same restrictions as the
Restricted Stock.
10. TAXES ASSOCIATED WITH AWARD
Prior to the payment of an Award, the Company may withhold, or
require a Participant to remit to the Company, an amount sufficient to pay any
federal, state, and local taxes associated with the Award. The Committee may, in
its discretion and subject to such rules as the Committee may adopt, permit a
Participant to pay any or all taxes associated with the Award (other than an
Incentive Stock Option) in cash, by the transfer of Shares, by the surrender of
all or part of an Award (including the Award being exercised), or by a
combination of these methods. The Committee may permit a Participant to pay any
or all taxes associated with an Incentive Stock Option in cash, by the transfer
of Shares, or by a combination of these methods, but not by the surrender of all
or part of an Award.
11. TERMINATION OF EMPLOYMENT
If the employment of a Participant terminates for any reason,
all unexercised, deferred, and unpaid Awards may be exercisable or paid only in
accordance with rules established by the Committee.
12. TERMINATION OF AWARDS UNDER CERTAIN CONDITIONS
The Committee may cancel any unexpired, unpaid, or deferred
Award at any time if the Participant is not in compliance with all applicable
provisions of this Plan or with the terms or conditions of the Award or if the
Participant, without the prior
A-10
<PAGE> 44
written consent of the Company, engages in any of the following
activities:
(i) Renders services to an organization, or engages in a
business, that is, in the judgment of the Committee, in competition
with the Company.
(ii) Discloses to anyone outside of the Company, or uses for
any purpose other than the Company's business, any confidential
information or material relating to the Company, whether acquired by
the Participant during or after employment with the Company.
The Committee may, in its discretion and as a condition to the
exercise of an Award, require a Participant to acknowledge in writing that he or
she is in compliance with all applicable provisions of this Plan and with the
terms and conditions of the Award and has not engaged in any activities referred
to in clauses (i) and (ii) above.
13. CHANGE IN CONTROL; ACQUISITION OF THE COMPANY
(a) CHANGE IN CONTROL. In the event of a Change in Control of
the Company, unless otherwise determined by the Committee, (i) all Stock
Appreciation Rights, Stock Options, and Stock Purchase Rights then outstanding
will become fully exercisable as of the date of the Change in Control, (ii) all
restrictions and conditions applicable to Restricted Stock and other Stock
Awards will be deemed to have been satisfied as of the date of the Change in
Control, and (iii) all Incentive Compensation Awards will be deemed to have been
fully earned as of the date of the Change in Control.
(b) ACQUISITION OF THE COMPANY. With respect to Stock Options
and any other Awards that entitled Participants to receive Shares, in the event
of an acquisition of the Company in which the holders of Shares receive other
securities or cash in exchange for their Shares, the Committee may, in its
discretion, arrange for (1) the grant by the acquiror of substitute Stock
Options or Awards that entitle Participants to receive, in lieu of the Shares
they otherwise would be entitled to receive, of the securities or cash for which
the Shares would have been exchanged in the acquisition or (2) the cancellation
of the Stock Options and other Awards in consideration of the securities or cash
for which the Shares would have been exchanged in the acquisition, net of any
exercise price.
A-11
<PAGE> 45
14. AMENDMENT OR SUSPENSION OF THIS PLAN; AMENDMENT OF OUTSTANDING
AWARDS
(a) AMENDMENT OR SUSPENSION OF THIS PLAN. The Board of
Directors may amend or suspend this Plan at any time. Shareholder approval for
any such amendment will be required only to the extent necessary to preserve the
deductibility of compensation associated with any Award for federal income tax
purposes under Section 162(m) of the Code.
(b) AMENDMENT OF OUTSTANDING AWARDS. The Committee may, in its
discretion, amend the terms of any Award, prospectively or retroactively, but no
such amendment may, except as provided in Section 13(b), impair the rights of
any Participant without his or her consent. The Committee may, in whole or in
part, waive any restrictions or conditions applicable to, or accelerate the
vesting of, any Award.
15. NONASSIGNABILITY
Unless otherwise determined by the Committee, (i) no Award
granted under this Plan may be transferred or assigned by the Participant to
whom it is granted other than by will, pursuant to the laws of descent and
distribution, or (except in the case of an Incentive Stock Option) pursuant to a
qualified domestic relations order and (ii) an Award granted under this Plan may
be exercised, during the Participant's lifetime, only by the Participant or by
the Participant's guardian or legal representative.
16. GOVERNING LAW
The interpretation, validity, and enforcement of this Plan
will, to the extent not otherwise governed by the Code or the securities laws of
the United States, be governed by the law of the State of Ohio.
17. RIGHTS OF EMPLOYEES
Nothing in this Plan will confer upon any Participant the
right to continued employment by the Company or limit in any way the Company's
right to terminate any Participant's employment at will.
18. EFFECTIVE AND TERMINATION DATES
(a) EFFECTIVE DATE. This Plan will become effective on
the date it is approved by the holders of a majority of the Shares
then outstanding.
A-12
<PAGE> 46
(b) TERMINATION DATE. This Plan will continue in effect until
it is terminated by the Board of Directors. No Incentive Stock Options may be
granted under this Plan after June 3, 2008.
A-13
<PAGE> 47
FABRI-CENTERS OF AMERICA, INC.
BOARD OF DIRECTORS PROXY
ANNUAL MEETING, JUNE 4, 1998
At the Annual Meeting of Shareholders of the Company to be held on
June 4, 1998, and at any adjournment, Alan Rosskamm, Scott Cowen
and Gregg Searle or any one of them, is hereby authorized to
represent me and thereat to vote my shares on the following:
<TABLE>
<S> <C> <C>
1. To elect the following two Directors of the class (change of address)
P whose three-year terms of office will expire in 2001: ------------------------------------
Ira Gumberg and Alma Zimmerman ------------------------------------
R ------------------------------------
2. To consider and act upon a proposal to approve the (If you have written in the above
O adoption of the Fabri-Centers of America, Inc. 1998 space, please mark the corresponding
Incentive Compensation Plan. box on the reverse side of this
X card.)
3. To consider and act upon a proposal to adopt a
Y resolution changing the name of the Company to
"Jo-Ann Stores, Inc."
</TABLE>
PLEASE DATE AND SIGN EXACTLY AS THE NAME APPEARS ON THE FACE OF THE
PROXY AND RETURN BY MAIL PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE.
SHARES REPRESENTED BY PROPERLY EXECUTED PROXIES WILL BE VOTED AS
SPECIFIED. UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED
FOR THE ELECTION AS DIRECTORS OF THE NOMINEES LISTED ABOVE.
SEE REVERSE
SIDE
................................................................................
DETACH CARD
<PAGE> 48
FABRI-CENTERS OF AMERICA, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
<TABLE>
<CAPTION>
FOR WITHHELD FOR ALL
ALL ALL EXCEPT: FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C>
1. Election of Directors -- [ ] [ ] [ ] 3. Change in name to "Jo-Ann Stores, Inc." [ ] [ ] [ ]
(See reverse)
--------------------------
Nominee exception
FOR AGAINST ABSTAIN
2. 1998 Incentive [ ] [ ] [ ] Attend Meeting [ ]
Compensation Plan
Address Change Requested [ ]
Date: ------------------------- , 1998
---------------------------------------
Signature(s)
---------------------------------------
Signature(s)
Please give title when signing as
executor, administrator, trustee,
attorney or other representative. If
shares are registered in the names of
joint tenants or trustees, each joint
tenant or trustee should sign.
...................................................................................................................................
FOLD AND DETACH HERE
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY FORM PROMPTLY USING THE ENCLOSED
ENVELOPE.
</TABLE>
<PAGE> 49
CONFIDENTIAL VOTING INSTRUCTIONS
TO: KEYCORP, TRUSTEE UNDER THE FABRI-CENTERS OF AMERICA, INC.
EMPLOYEES' SAVINGS AND PROFIT-SHARING PLAN
Pursuant to the provisions of the Fabri-Centers of America, Inc. Employees'
Savings and Profit-Sharing Plan, the undersigned, as a participant in or
beneficiary of the Plan, having received the Notice and accompanying Proxy
Statement for the Annual Meeting of Shareholders of the Company to be held on
June 4, 1998, hereby directs the Trustee to vote (in person or by proxy) shares
of Common Stock of the Company credited to the undersigned's account under the
Plan on the record date for the Meeting, and at any adjournment thereof, on the
following:
<TABLE>
<S> <C>
1. To elect the following two Directors of the class
D F whose three-year terms of office will expire in 2001:
Ira Gumberg and Alma Zimmerman
I O
2. To consider and act upon a proposal to approve the
R R adoption of the Fabri-Centers of America, Inc. 1998
Incentive Compensation Plan.
E M
3. To consider and act upon a proposal to adopt a
C resolution changing the name of the Company to
"Jo-Ann Stores, Inc."
T
I
O
N
</TABLE>
PLEASE DATE AND SIGN EXACTLY AS THE NAME APPEARS ON THE FACE OF THIS FORM AND
RETURN BY MAIL PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE.
SHARES REPRESENTED BY PROPERLY EXECUTED DIRECTION FORMS WILL BE VOTED AS
DIRECTED. UNLESS OTHERWISE DIRECTED, THIS FORM WILL BE VOTED FOR THE ELECTION
AS DIRECTORS OF THE NOMINEES LISTED ABOVE.
SEE REVERSE
SIDE
...............................................................................
DETACH FORM
<PAGE> 50
FABRI-CENTERS OF AMERICA, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
<TABLE>
<CAPTION>
FOR WITHHELD FOR ALL
ALL ALL EXCEPT: FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C> <C>
1. Election of Directors -- [ ] [ ] [ ] Change in name to "Jo-Ann Stores, Inc." [ ] [ ] [ ]
(See reverse)
---------------------------
Nominee exception
FOR AGAINST ABSTAIN
2. 1998 Incentive [ ] [ ] [ ] Attend Meeting [ ]
Compensation Plan
Date:------------------------- , 1998
----------------------------------
Signature(s)
----------------------------------
Signature(s)
Please give title when signing as executor,
administrator, trustee, attorney or other
representative. If shares are registered in
the names of joint tenants or trustees, each
joint tenant or trustee should sign.
THESE CONFIDENTIAL VOTING INSTRUCTIONS WILL BE SEEN ONLY BY AUTHORIZED PERSONNEL
OF THE TRUSTEE.
....................................................................................................................................
FOLD AND DETACH HERE
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS DIRECTION FORM PROMPTLY USING THE
ENCLOSED ENVELOPE.
</TABLE>
