<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
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
JO-ANN STORES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
JO-ANN STORES, INC.
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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<PAGE> 2
[JO-ANN STORES LOGO]
5555 Darrow Road
Hudson, Ohio 44236
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 8, 2000
To our Shareholders:
The Annual Meeting of Shareholders of Jo-Ann Stores, Inc. will be held at
our corporate offices located at 5555 Darrow Road, Hudson, Ohio, on Thursday,
June 8, 2000, at 9:00 a.m., local time, for the following purposes:
1. To elect three Directors to the class whose three-year term of office
will expire in 2003.
2. 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 14, 2000 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 FOLLOW THE INSTRUCTIONS ON THE
ENCLOSED PROXY CARD TO VOTE YOUR PROXY EITHER BY MAIL, TELEPHONE OR THROUGH THE
INTERNET, 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.
Whether or not you plan to attend, you can be sure your shares are
represented at the meeting by promptly voting and submitting your proxy.
The Proxy Statement accompanies this Notice.
BETTY ROSSKAMM, Secretary
May 8, 2000
By Order of the
Board of Directors
<PAGE> 3
PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THE MEETING........................................... 1
When is the Proxy Statement being mailed?................. 1
What is the purpose of the annual meeting?................ 1
Who may attend the annual meeting?........................ 1
Who is entitled to vote?.................................. 1
What constitutes a quorum?................................ 1
What am I voting on?...................................... 1
Is electronic access available?........................... 1
How do I vote?............................................ 2
Can I change my vote after I return my proxy card?........ 2
How do I vote my 401(k) shares?........................... 2
What does it mean if I receive more than one proxy
card?.................................................. 3
Who will count the vote?.................................. 3
What is the Board's recommendation?....................... 3
What is the required vote for approval of the proposal?... 3
Are there other matters to be acted upon at the annual
meeting?............................................... 3
PRINCIPAL SHAREHOLDERS...................................... 4
ELECTION OF DIRECTORS....................................... 7
Nominees to the Board of Directors........................ 7
Compensation of Directors................................. 9
EXECUTIVE COMPENSATION...................................... 10
Summary Compensation Table................................ 10
Option Grants in Fiscal Year 2000......................... 11
Aggregate Option Exercises In Last Fiscal Year and Fiscal
Year-end Option Values................................. 12
Change of Control and Employment Agreements............... 12
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION.............................................. 13
STOCK PERFORMANCE GRAPH..................................... 16
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS... 17
INDEPENDENT AUDITORS........................................ 17
PROXY SOLICITATION COSTS.................................... 17
SHAREHOLDERS' PROPOSALS..................................... 17
ANNUAL REPORT............................................... 17
</TABLE>
<PAGE> 4
[JO-ANN STORES LOGO]
5555 Darrow Road
Hudson, Ohio 44236
PROXY STATEMENT
This Proxy Statement contains information related to the annual meeting of
shareholders of Jo-Ann Stores, Inc. to be held on Thursday, June 8, 2000,
beginning at 9:00 a.m., local time, at 5555 Darrow Road, Hudson, Ohio, and at
any postponements or adjournments thereof.
ABOUT THE MEETING
WHEN IS THE PROXY STATEMENT BEING MAILED?
This Proxy Statement is first being mailed on or about May 8, 2000 to our
shareholders by our Board of Directors to solicit proxies for use at the Annual
Meeting of Shareholders.
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At our annual meeting, shareholders will act upon the election of
directors. In addition, our management will report on our performance during
fiscal 2000 and respond to questions from shareholders.
WHO MAY ATTEND THE ANNUAL MEETING?
All shareholders, both Class A and Class B, as of the close of business on
April 14, 2000, the record date, may attend the annual meeting.
WHO IS ENTITLED TO VOTE?
Class A shareholders as of the record date are entitled to vote at the
annual meeting. Each outstanding share of Class A common stock entitles its
holder to cast one vote on each matter to be voted upon.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of Class A common stock outstanding on the record date
will constitute a quorum, permitting the meeting to conduct its business. As of
the record date, 9,155,656 Class A common shares were outstanding. Proxies
received but marked as abstentions and broker non-votes will be included in the
calculation of the number of shares considered to be present at the meeting.
WHAT AM I VOTING ON?
You will be voting on:
- electing three Directors to the class whose three-year term of office
will expire in 2003;
- transacting such other business as may properly come before the meeting.
IS ELECTRONIC ACCESS AVAILABLE?
Two new opportunities for electronic access are being offered to our
shareholders this year.
1
<PAGE> 5
- For the first time, our shareholders have the flexibility of voting their
Class A shares by telephone or over the Internet, in addition to the
traditional mail-in method. Telephone and Internet voting give you the
convenience of voting 24 hours a day, seven days a week. Simply follow
the instructions on your proxy card.
- We are also offering you the opportunity during this year's voting
process to elect to view future proxy material on the Internet, rather
than receive paper copies in the mail. You will have other opportunities
throughout the year to make the election. This service will help Jo-Ann
Stores reduce printing and postage costs and is more environmentally
friendly. Additional information is provided below.
HOW DO I VOTE?
You may vote by proxy or in person at the meeting. To vote by proxy, you
may select one of the following options:
Vote By Telephone:
You can vote your shares by telephone by calling the toll-free telephone
number shown on your proxy card. Telephone voting is available 24 hours a day,
seven days a week. Easy-to-follow voice prompts allow you to vote your shares
and confirm that your instructions have been properly recorded. Our telephone
voting procedures are designed to authenticate the shareholder by using
individual control numbers. You can also consent to view future proxy statements
and annual reports on the Internet instead of receiving them in the mail. If you
vote by telephone, you do NOT need to return your proxy card.
Vote By Internet:
You can select to vote on the Internet. The website for Internet voting is
shown on your proxy card. Internet voting is available 24 hours a day, seven
days a week. You will be given the opportunity to confirm that your instructions
have been properly recorded, and you can consent to view future proxy statements
and annual reports on the Internet instead of receiving them in the mail. If you
vote on the Internet, you do NOT need to return your proxy card.
The deadline for voting by telephone or on the Internet is 12:00 noon
eastern standard time on June 7, 2000.
Vote By Mail:
If you choose to vote by mail, simply mark your proxy card, date and sign
it, and return it in the postage-paid envelope provided. If you wish to view
future proxy statements and annual reports on the Internet, check the box
provided on the card.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised by filing a notice of revocation, or a
duly executed proxy bearing a later date, with the Corporate Secretary. The
powers of the proxy holders will be suspended if you attend the meeting in
person and so request, although attendance at the meeting will not by itself
revoke a previously granted proxy.
HOW DO I VOTE MY 401(K) SHARES?
If you participate in the Jo-Ann Stores, Inc. Savings Plan (401k), the
number of Class A common shares that you may vote is equivalent to the interest
in Class A common shares credited to your account as of the record date. You may
vote by instructing Institutional Trust Company (a division of Invesco
Retirement and Benefit Services), the trustee of the plan, pursuant to the proxy
card being mailed with this proxy statement to plan participants. The trustee
will vote your shares in accordance with your duly executed instructions. If you
do not send instructions on how to vote your shares, the
2
<PAGE> 6
share equivalents credited to your account will be voted by the trustee in the
same proportion that the trustee votes share equivalents for which it did
receive instructions.
WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
If you receive more than one proxy card, it is because your shares are in
more than one account. You will need to vote all proxy cards to insure that all
your shares will be counted.
WHO WILL COUNT THE VOTE?
A representative of Automatic Data Processing Incorporated will be
tabulating the votes. A representative of our Company will be acting as
inspector of election.
WHAT IS THE BOARD'S RECOMMENDATION?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the recommendation
of the Board of Directors. The Board's recommendation is set forth with the
description of the proposal in "Election of Directors." In summary, the Board
recommends a vote for the nominated slate of directors (see page 7).
WHAT IS THE REQUIRED VOTE FOR APPROVAL OF THE PROPOSAL?
The affirmative vote of a plurality of the votes cast at the meeting is
required for the election of directors. A properly executed proxy card marked
"WITHHOLD AUTHORITY" with respect to the election of one or more directors will
not be voted with respect to the director or directors indicated, although it
will be counted for purposes of determining whether there is a quorum.
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.
ARE THERE OTHER MATTERS TO BE ACTED UPON AT THE ANNUAL MEETING?
We do not know of any other matters to be presented or acted upon at the
annual meeting. If any other matter is presented at the annual meeting on which
a vote may properly be taken, the shares represented by proxies will be voted in
accordance with the judgment of the proxy holders.
3
<PAGE> 7
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of April 14, 2000, the amount of our
common stock beneficially owned by (1) each person or group known to us to be
beneficial owners of more than 5% of our Class A or Class B common shares, (2)
each of our directors and nominees for directors, (3) each of the executive
officers named in the Summary Compensation Table herein not listed as a
director, and (4) all our executive officers and directors as a group. The
information provided in connection with this table has been obtained from our
records and a review of statements filed with the Securities and Exchange
Commission. Unless otherwise indicated, each of the persons listed in the
following table has sole voting and investment power with respect to the common
shares set forth opposite his or her name. As of April 14, 2000, 9,155,656 Class
A common shares were outstanding and 8,843,748 Class B common shares were
outstanding. Class A common shares each have one vote per share and Class B
common shares do not have voting rights.
<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>
Alan Rosskamm(1)(2)........... 1,413,655 15.26% 921,166 10.16%
5555 Darrow Road
Hudson, OH 44236
First Pacific Advisors,
Inc.(3)..................... 895,700 9.78% n/a n/a
11400 West Olympic Boulevard
Suite 1200
Los Angeles, CA 90064
Betty Rosskamm(1)(4)(5)....... 878,810 9.60% 581,217 6.57%
5555 Darrow Road
Hudson, OH 44236
The Capital Group Companies,
Inc.(3)(6).................. 525,000 5.73% n/a n/a
333 South Hope Street
Los Angeles, CA 90071
Mr. Justin and Mrs. Alma
Zimmerman(1)(5)(7).......... 471,300 5.15% 371,917 4.21%
5555 Darrow Road
Hudson, OH 44236
Jane Aggers(1)(8)............. 169,528 1.84% 203,968 2.27%
Brian Carney(1)(9)............ 56,904 * 33,301 *
Dave Bolen(1)(10)............. 40,476 * 68,844 *
Scott Cowen(11)............... 33,550 * 14,550 *
Frank Newman(12).............. 30,250 * 17,250 *
Rosalind Thompson(1)(13)...... 21,281 * 39,791 *
Ira Gumberg(14)............... 21,250 * 2,250 *
Gregg Searle(15).............. 15,875 * 7,875 *
Debra Walker(16).............. 7,250 * 2,250 *
All Executive Officers and
Directors as a group (12
persons)(1)(17)............. 2,409,884 25.54% 2,024,936 21.55%
</TABLE>
- ---------------
* Less than 1%
4
<PAGE> 8
(1) With respect to common stock beneficially owned by such persons under our
Employees' Savings and Profit Sharing Plan, the shares of common stock
included are as of March 31, 2000, the latest date for which statements are
available.
(2) Mr. Rosskamm's beneficial ownership includes 110,000 Class A common shares
and 218,750 Class B common shares subject to stock options granted that are
exercisable on or prior to June 13, 2000, 20,000 Class A common shares held
as restricted stock under our Executive Incentive Plan, and an aggregate of
181,251 Class A common shares and 366,715 Class B common shares held by his
children, spouse, or by Mr. Rosskamm as trustee for the benefit of family
members and charities. His beneficial ownership also includes 750,245 Class
A common shares and 45,547 Class B common shares held by Rosskamm Family
Partners, L.P. with regard to which he has shared voting and dispositive
power, 193,896 Class B common shares held by Rosskamm Family Partners, L.P.
II, with regard to which he also has shared voting and dispositive power
and 98,950 Class A common shares and 9,303 Class B common shares held by
Caneel Bay Partners, L.P., with regard to which he has sole 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, 1999.
(4) Mrs. Rosskamm's beneficial ownership includes 22,803 Class A common shares
and 28,241 Class B common shares held as custodian for the benefit of her
grandchildren. Her beneficial ownership also includes 25,000 Class A common
shares and 25,000 Class B common shares held by The Rosskamm Family
Partnership, with regard to which she has sole voting and dispositive
power, 750,245 Class A common shares and 45,547 Class B common shares held
by Rosskamm Family Partners, L.P., with regard to which she has shared
voting and dispositive power and 193,896 Class B common shares held by
Rosskamm Family Partners, L.P. II, with regard to which she also has shared
voting and dispositive power.
(5) Betty Rosskamm, Alma and Justin Zimmerman and the company have entered into
an agreement, dated September 26, 1997, relating to their shares of Class A
and Class B common stock. Under this agreement, Betty Rosskamm and her
lineal descendants and permitted holders, and Alma and Justin Zimmerman and
their lineal descendants and permitted holders, may each sell up to 200,000
shares of their Class A common stock in any calendar year and may not sell
more than 100,000 of those shares in any 180-day period. Mrs. Rosskamm, and
Mr. and Mrs. Zimmerman collectively, may each sell up to 100,000 of their
shares of Class B common stock in any 60-day period. If either Mrs.
Rosskamm or Mr. and Mrs. Zimmerman sell a number of shares of their Class A
common stock in excess of the number permitted under the agreement, they
must first offer to sell those shares to the other family party to the
agreement, and then with the other family's permission, to the company. If
either Mrs. Rosskamm or Mr. and Mrs. Zimmerman sell a number of shares of
their Class B common stock in excess of the number permitted under the
agreement, each family must first offer to sell those shares to the
company.
(6) Capital Research and Management Company, a registered investment adviser
and an operating subsidiary of The Capital Group Companies, Inc., exercised
as of December 31, 1999 investment discretion with respect to 525,000 Class
A common shares or 5.73% 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.
(7) Of the 471,300 Class A common shares beneficially owned by the Zimmermans,
Mr. Zimmerman disclaims beneficial ownership of 129,867 Class A common
shares beneficially owned by his wife and Mrs. Zimmerman disclaims
beneficial ownership of 341,433 Class A common shares beneficially owned by
her husband. Of the 371,917 Class B common shares beneficially owned by the
Zimmermans, Mr. Zimmerman disclaims beneficial ownership of 120,790 Class B
common shares beneficially owned by his wife and Mrs. Zimmerman disclaims
beneficial ownership of 251,127 Class B common shares beneficially owned by
her husband.
(8) Ms. Agger's beneficial ownership includes 76,500 Class A common shares and
157,750 Class B common shares subject to stock options granted that are
exercisable on or prior to June 13, 2000 and 20,000 Class A common shares
held as restricted stock under our Executive Incentive Plan.
5
<PAGE> 9
(9) Mr. Carney's beneficial ownership includes 25,000 Class A common shares and
33,250 Class B common shares subject to stock options granted that are
exercisable on or prior to June 13, 2000 and 20,000 Class A common shares
held as restricted stock under our Executive Incentive Plan.
(10) Mr. Bolen's beneficial ownership includes 62,000 Class B common shares
subject to stock options granted that are exercisable on or prior to June
13, 2000 and 26,000 Class A common shares held as restricted stock under
our Executive Incentive Plan and 1998 Incentive Compensation Plan.
(11) Mr. Cowen's beneficial ownership includes 16,250 Class A common shares and
12,250 Class B common shares subject to stock options granted under our
Stock Option Plan for Non-Employee Directors that are exercisable on or
prior to June 13, 2000 and 5,000 Class A common shares held as restricted
stock under our 1998 Incentive Compensation Plan.
(12) Mr. Newman's beneficial ownership includes 25,250 Class A common shares and
17,250 Class B common shares subject to stock options granted under our
Stock Option Plan for Non-Employee Directors that are exercisable on or
prior to June 13, 2000 and 5,000 Class A common shares held as restricted
stock under our 1998 Incentive Compensation Plan.
(13) Ms. Thompson's beneficial ownership includes 7,250 Class A common shares
and 39,125 Class B common shares subject to stock options granted that are
exercisable on or prior to June 13, 2000 and 11,000 Class A common shares
held as restricted stock under our Executive Incentive Plan and 1998
Incentive Compensation Plan.
(14) Mr. Gumberg's beneficial ownership includes 10,250 Class A common shares
and 2,250 Class B common shares subject to stock options granted under our
Stock Option Plan for Non-Employee Directors that are exercisable on or
prior to June 13, 2000 and 5,000 Class A common shares held as restricted
stock under our 1998 Incentive Compensation Plan.
(15) Mr. Searle's beneficial ownership includes 7,875 Class A common shares and
7,875 Class B common shares subject to stock options granted under our
Stock Option Plan for Non-Employee Directors that are exercisable on or
prior to June 13, 2000 and 5,000 Class A common shares held as restricted
stock under our 1998 Incentive Compensation Plan.
(16) Ms. Walker's beneficial ownership includes 2,250 Class A common shares and
2,250 Class B common shares subject to stock options granted under our
Stock Option Plan for Non-Employee Directors that are exercisable on or
prior to June 13, 2000 and 5,000 Class A common shares held as restricted
stock under our 1998 Incentive Compensation Plan. Ms. Walker was elected to
the Board of Directors on August 28, 1998.
(17) Beneficial ownership for all executive officers and directors as a group
includes 280,625 Class A common shares and 552,750 Class B common shares
subject to stock options granted under our Stock Option Plans that are
exercisable on or prior to June 13, 2000 and 122,000 Class A common shares
held as restricted stock under our Executive Incentive Plan and 1998
Incentive Compensation Plan. Total excludes 750,245 Class A common shares
and 239,443 Class B common shares held by Mr. Rosskamm and Mrs. Rosskamm in
certain family partnerships with which they share voting and dispositive
powers.
6
<PAGE> 10
ELECTION OF DIRECTORS
Our Board of Directors is presently comprised of eight members. The Board
is divided into three classes, two of which consist of three members and one
that currently consists of two members. The proxies solicited hereby will not be
voted for a greater number of persons than the number of nominees named herein.
Each of the directors in the class whose term of office expires in 2000,
Alan Rosskamm, Scott Cowen and Gregg Searle, has been nominated by the Board for
reelection at the annual meeting as a director to serve for a three-year term
expiring at our annual meeting of shareholders in 2003 or until his or her
successor is elected and qualified.
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 BOARD OF DIRECTORS
The following table sets forth certain information regarding the nominees
for election as members of 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 14, 2000.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION PAST FIVE YEARS, DIRECTOR
NAME OTHER DIRECTORSHIP AND AGE SINCE
---- ------------------------------------- --------
<S> <C> <C>
NOMINEES FOR THE TERM TO EXPIRE IN 2003
Alan Rosskamm(1)(4) Chairman of the Board, President and Chief Executive 1985
Officer of our company for more than five years. He is a
member of one of the two founding families of our company
and has been employed by us since 1978. Mr. Rosskamm is
also a Director of Charming Shoppes Inc., a women's
apparel retailer; age 50.
Scott Cowen(1)(2)(3) President of Tulane University since July 1998. 1987
Previously, he was Dean of the Weatherhead School of
Management and A.J. Weatherhead III Professor of
Management, Case Western Reserve University, for more
than five years. Mr. Cowen is also a Director of American
Greetings Corporation, Forest City Enterprises, Inc. and
Newell Rubbermaid Inc.; age 53.
Gregg Searle(1)(2)(3) President and Chief Executive Officer of StoneGate 1996
Holdings, Ltd., a private investment company, since
October 1999. He was President and Chief Operating
Officer from November 1996 to September 1998 and
Executive Vice President from August 1993 to February
1996 of Diebold, Incorporated; age 51.
DIRECTORS WHOSE TERM EXPIRES IN 2001
Alma Zimmerman Senior Vice President of our company for more than five 1967
years; age 87.
Ira Gumberg(1)(2)(5) Chief Executive Officer and President of J.J. Gumberg 1992
Co., a real estate investment and development company,
for more than five years. He is also Director of Mellon
Bank, N.A.; age 46.
</TABLE>
7
<PAGE> 11
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION PAST FIVE YEARS, DIRECTOR
NAME OTHER DIRECTORSHIP AND AGE SINCE
---- ------------------------------------- --------
<S> <C> <C>
DIRECTORS WHOSE TERM EXPIRES IN 2002
Frank Newman(1)(2)(3) Chief Executive Officer since April 2000, of more.com, an 1991
on-line health, beauty and wellness retailer. He was
previously Chairman of the Board from February 1997 to
March 2000, President and Chief Executive Officer from
February 1996 to March 2000 and President from July 1993
to March 2000, of Eckerd Corporation, a pharmacy
retailer. He is also a Director of AmSouth Bancorporation
and Jabil Circuit, Inc.; age 51.
Betty Rosskamm Senior Vice President and Secretary of our company for 1967
more than five years. Betty Rosskamm is the mother of
Alan Rosskamm; age 72.
Debra Walker(1)(2)(3) Executive Vice President and Chief Marketing Officer and 1998
co-founder of iCARumba, Inc., an on-line auto services
site. She was previously Vice President and Chief
Information Officer of The Goodyear Tire and Rubber
Company from March 1997 to July 1999 and Vice
President -- Retail of The Goodyear Tire and Rubber
Company responsible for the operation of all of its
retail stores from February 1995 to March 1997; age 43.
</TABLE>
- ---------------
(1) Member of the Corporate Governance Committee, which did not meet during the
fiscal year ended January 29, 2000. 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 our 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.
(2) Member of the Audit Committee, which met twice during the fiscal year ended
January 29, 2000. This Committee is responsible for reviewing with the
independent auditors of our company the scope and thoroughness of the
auditors' examination, reviewing the adequacy of our 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.
(3) Member of the Compensation Committee, which met four times during the fiscal
year ended January 29, 2000. This Committee has the authority to set the
compensation for executive officers of our 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.
(4) Concurrently with our 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 our company's auditors in
connection with the 1992 offering of 6 1/4% Convertible Subordinated
Debentures, and as a result of signing our company's Form 10-Q for the
quarter ended May 2, 1992.
(5) Ira Gumberg, one of our directors, is President and Chief Executive Officer
and a principal shareholder of J.J. Gumberg Co., which manages numerous
shopping centers. Twelve of these shopping centers contain stores of our
company. Three of the leases were entered into after Mr. Gumberg became a
director of our company, and we believe such leases are on terms no less
favorable to us
8
<PAGE> 12
than could have been obtained from an unrelated party. The aggregate rent
and related occupancy charges paid during fiscal 2000, fiscal 1999 and
fiscal 1998 on these stores amounted to $1.3 million, $1.2 million and $1.2
million, respectively.
During the fiscal year ended January 29, 2000, there were four meetings of
our 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
during the period for which he or she was a director.
COMPENSATION OF DIRECTORS
Our company's compensation program for each non-employee director consists
of cash compensation and grants of stock options and restricted stock.
CASH COMPENSATION. Each non-employee director is compensated at a rate of
$5,000 per quarter and $1,000 for each day of Board and committee meetings
attended. Additionally, committee chairpersons receive an additional $500 for
each day of Board and committee meetings attended.
DEFERRED STOCK. In September 1999, the Board of Directors approved the
adoption of a deferred stock feature for non-employee directors that allows
non-employee directors to elect to convert the retainer and meeting fee portion
of their cash compensation into deferred stock units. This program became
effective for the March 2000 Board meeting. Under this feature, non-employee
directors will make an irrevocable election prior to our Company's annual
meeting of shareholders whereby they can elect to convert a percentage (0% to
100% in 25% increments) of their cash compensation to deferred stock units.
One-half of the cash compensation deferred is converted into Class A stock units
and one-half into Class B stock units. The conversion of cash compensation to
deferred stock units is based on the closing market price of Class A and Class B
common shares on the date the cash compensation would have been payable if it
were paid in cash. These deferred stock units will be credited to an account of
each non-employee director, although no stock will be issued until the earlier
of an elected distribution date as selected by the non-employee director or
retirement.
STOCK OPTIONS. Non-employee directors are granted stock option awards under
the 1996 Stock Option Plan for Non-Employee Directors. Under this plan, our
company automatically grants stock 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 to the Board. We also grant stock 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 as a director. A year of service
generally ends on the date of the Annual Meeting of Shareholders. A total of
64,000 Class A common shares and 64,000 Class B common shares are currently
available for option grants under the 1996 Stock Option Plan for Non-Employee
Directors. Each grant of stock options will terminate ten years following the
date of grant. 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 stock option (outstanding for a period of more than twelve months)
becomes exercisable. Upon termination of a director from the Board for any
reason, he or she would continue to have the right to exercise an outstanding
stock option during the three-month period immediately following the date of
termination of such service.
RESTRICTED STOCK. Non-employee directors are granted restricted stock
awards as permitted under the 1998 Incentive Compensation Plan. This feature of
the 1998 Incentive Compensation Plan was adopted by the Board of Directors in
November 1999 and provided for a one-time grant of 5,000 Class A Common shares
to each then current non-employee director. Additionally, each new non-employee
director will be eligible for a one-time grant of 5,000 Class A or Class B
Common shares upon joining the Board of Directors. Each non-employee director
will then be eligible for an additional grant of 5,000 Class A or Class B Common
shares every ten years following their initial grant, provided the director
continuously serves as a director for the entire ten-year period. Restricted
stock represents awards granted without payment to the Company but which are
subject to restrictions on their transfer or sale. The restrictions on
non-employee restricted stock lapse with respect to 50 percent of the award
three years from the date of the grant and six years from the date of the grant
with respect to the other fifty percent, provided the non-employee director
still serves in such capacity at the time of each lapse.
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<PAGE> 13
EXECUTIVE COMPENSATION
The following table sets forth information relating to the annual and
long-term compensation for the fiscal years ended January 29, 2000, January 30,
1999 and January 31, 1998, for the Chief Executive Officer and the other named
executive officers of our company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION ------------------------------
------------------------------- SECURITIES
OTHER UNDERLYING ALL
ANNUAL OPTION/SARS(7) OTHER
COMPEN- RESTRICTED (COMMON SHARES) COMPEN-
NAME AND FISCAL SATION STOCK ----------------- SATION
PRINCIPAL POSITION YEAR SALARY(3) BONUS(4) (5) AWARDS(6) CLASS A CLASS B (8)
------------------ ------ --------- -------- -------- ---------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Alan Rosskamm 2000 $450,053 $225,027 -- -- -- 60,000 $79,042
Chairman of the Board, 1999 $448,107 -- -- -- -- 60,000 $95,932
President and Chief 1998 $432,685 $279,956 -- $415,000 -- 35,000 $88,018
Executive Officer
Jane Aggers 2000 $345,008 $86,252 -- -- -- 40,000 $19,709
Executive Vice President, 1999 $344,946 -- -- -- -- 40,000 $18,524
Merchandising, Marketing 1998 $328,794 $211,884 -- $376,250 -- 25,000 $17,937
and Inventory Management
Dave Bolen (1) 2000 $300,035 $75,009 -- -- -- 33,000 $20,758
Executive Vice President, 1999 $268,047 -- -- $ 81,875 -- 33,000 $19,738
Stores and Business 1998 $218,341 $129,282 $165,849 $473,750 -- 92,500 $10,884
Development
Brian Carney (1) 2000 $296,022 $74,006 -- -- -- 33,000 $14,439
Executive Vice President, 1999 $295,052 -- -- -- -- 33,000 $11,831
Chief Financial Officer 1998 $ 71,482 $75,000 -- $420,000 50,000 50,000 --
Rosalind Thompson(2) 2000 $202,446 $50,612 -- $ 57,813 -- 33,000 $ 2,351
Executive Vice President, 1999 $193,830 -- -- -- -- 10,000 $ 2,417
Human Resources 1998 $176,306 $85,498 -- $124,500 -- 5,000 $ 2,400
</TABLE>
- ---------------
(1) Mr. Bolen's employment began on March 10, 1997 and Mr. Carney's employment
began on October 26, 1997.
(2) Ms. Thompson was promoted to Executive Vice President, Human Resources
effective December 27, 1999.
(3) Includes amounts earned but deferred under Section 401(k) of the Internal
Revenue Code.
(4) Incentive Bonus Compensation is based on the achievement of pre-established
corporate and individual 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. Carney, the 1998 bonus represents a minimum
guaranteed award paid in fiscal 1999. For Mr. Bolen, such compensation
includes a $50,000 discretionary award paid during fiscal year 1998.
(5) Other compensation and benefits are included in this column only if in the
aggregate they are greater than $50,000 or 10 percent of the total salary
and bonus reported for the named executive officer. For Mr. Bolen, such
compensation includes a $150,000 relocation allowance paid during fiscal
1998.
(6) Restricted stock awards have been granted to named executive officers under
our 1998 Incentive Compensation Plan and 1994 Executive Incentive Plan.
Restricted stock represents stock awards granted without payment to the
company but which are subject to restrictions on their transfer or sale. The
restrictions generally lapse five years from the date of the award. In the
event that the named executive officer terminates employment prior to the
lapse of restrictions, the award is forfeited. The amounts reported in the
table represent the market value at the award date. For the fiscal years
2000, 1999 and 1998, the named executive officers listed in the compensation
table received the following restricted stock awards, respectively: Alan
Rosskamm-0, 0, 20,000 Class A common shares; Jane Aggers-0, 0, 20,000 Class
A common shares; Brian Carney-0, 0, 20,000 Class A common shares; Dave
Bolen-0, 5,000, 21,000 Class A common shares; Rosalind Thompson-5,000, 0,
6,000 Class A common shares. At January 29, 2000, the aggregate number and
value of restricted stock holdings for each
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<PAGE> 14
named executive officer were as follows: Mr. Rosskamm 20,000 Class A common
shares at $216,250; Ms. Aggers 20,000 Class A common shares at $216,250; Mr.
Carney 20,000 Class A common shares at $216,250; Mr. Bolen 26,000 Class A
common shares at $281,125 and Ms. Thompson 11,000 Class A common shares at
$118,938. The shares of restricted stock would participate the same as other
shares of our common stock regarding voting rights and dividend payments.
(7) Our 1998 Incentive Compensation Plan and 1990 Employees Stock Option and
Stock Appreciation Rights Plan, as amended, provide 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. Our 1990 Employees Stock
Option and Stock Appreciation Rights Plan, as amended, also provides for
stock appreciation rights to our key employees.
(8) Unless otherwise noted, this reflects matching contributions we have made
under our Employees' Savings and Profit Sharing Plan, compensation earned
for insurance premiums paid on behalf of the named executive officers for
insurance policies for which family members of the named executive officers
are the beneficiaries and amounts we have expensed for potential benefits
earned under our 1979 Supplemental Retirement Benefit Plan. For fiscal year
2000, compensation earned for insurance premiums paid on behalf of the named
executive officers amounted to the following: Alan Rosskamm -- $1,306; Jane
Aggers -- $1,799; Dave Bolen -- $2,032; Brian Carney -- $550; Rosalind
Thompson -- $0. With respect to Mr. Rosskamm's insurance policy, it is
structured such that upon payment of benefits or cancellation, all premium
payments will be returned to our Company. Our 1979 Supplemental Retirement
Benefit Plan provides benefits, subject to forfeiture, to such employees
upon normal retirement, early retirement, death or total disability. In
fiscal years 2000, 1999 and 1998, we expensed, under this plan, for the
named executive officers, the following amounts, respectively: Alan
Rosskamm -- $0, $0, $0; Jane Aggers -- $15,510, $15,510, $15,510; Brian
Carney -- $11,489, $11,489, $0; Dave Bolen -- $16,326, $16,326, $10,884;
Rosalind Thompson -- $0, $0, $0. Mr. Rosskamm's participation under this
plan was terminated in 1995 and replaced with a split-dollar life insurance
arrangement with a trust established by Mr. Rosskamm for the benefit of Mr.
Rosskamm's children. Our company and the trust 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 and his wife, Barbara Rosskamm
(whichever occurs later). The split-dollar insurance arrangement is
structured such that upon the payment of benefits or cancellation, all
premium payments will be returned to our company. The present value of the
insurance arrangement included herein for fiscal year 2000 is $75,336.
OPTION GRANTS IN FISCAL YEAR 2000
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 our company.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL
- -------------------------------------------------------------------------------------------- RATES OF STOCK PRICE
NUMBER OF PERCENT OF TOTAL APPRECIATION FOR
SECURITIES UNDERLYING OPTIONS GRANTED EXERCISE OR OPTION TERM (4)
OPTIONS GRANTED TO EMPLOYEES BASE PRICE PER EXPIRATION ---------------------
NAME (COMMON SHARES)(1) IN FISCAL YEAR COMMON SHARE DATE(3) 5% 10%
---- --------------------- ---------------- -------------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Alan Rosskamm Class B 60,000(2) 12.0% $10.94 12/06/2009 $412,731 $1,045,941
Jane Aggers Class B 40,000(2) 8.0% $10.94 12/06/2009 $275,154 $ 697,294
Brian Carney Class B 33,000(2) 6.6% $10.94 12/06/2009 $227,002 $ 575,268
Dave Bolen Class B 33,000(2) 6.6% $10.94 12/06/2009 $227,002 $ 575,268
Rosalind Thompson Class B 33,000(2) 6.6% $10.94 12/06/2009 $227,002 $ 575,268
</TABLE>
- ---------------
(1) The option holder has the right to pay the exercise price by delivering
previously acquired shares of our 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 our 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.
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<PAGE> 15
(4) Based upon the exercise price, which was equal to the fair market on the
date of grant, and annual appreciation at the rate stated on such price
through the expiration date of the options. Amounts represent hypothetical
gains that could be achieved for the options if exercised at the end of the
term. The assumed 5% and 10% rates of stock price appreciation are provided
in accordance with the rules of the Securities and Exchange Commission and
do not represent our estimate or projection of the future stock price.
Actual gains, if any, are contingent upon the continued employment of the
named executive officer through the expiration date, as well as being
dependent upon general performance of our common stock. The potential
realizable values have not taken into account amounts required to be paid by
the named executive officer for federal income taxes.
AGGREGATE 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 our company.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
COMMON SHARES AT JANUARY 29, 2000 AT JANUARY 29, 2000
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ---------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alan Rosskamm Class A 22,500 $210,004 110,000 -- $363,753 --
Class B 22,500 $165,004 218,750 131,250 $284,128 --
Jane Aggers Class A 4,500 $ 27,938 76,500 -- $211,295 --
Class B 4,500 $ 23,438 157,750 88,750 $161,326 --
Brian Carney Class A -- -- 25,000 25,000 -- --
Class B -- -- 33,250 82,750 -- --
Dave Bolen Class A -- -- -- -- -- --
Class B -- -- 54,500 104,000 -- --
Rosalind Thompson Class A -- -- 7,250 -- $ 6,016 --
Class B -- -- 39,125 49,875 $ 13,875 --
</TABLE>
CHANGE OF CONTROL AND EMPLOYMENT AGREEMENTS
Our company has employment agreements with Alan Rosskamm, Jane Aggers, Dave
Bolen, Brian Carney and Rosalind Thompson. These employment agreements are
designed to retain the executive officers and provide for continuity of
management in the event of any actual or threatened change in the control of our
company. Each agreement becomes operative only upon a "Change in Control" of our
company (as defined in the employment agreements) and only if the executive
officer is then in the employ of our company. After a Change in Control, each
employment 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 officer is
terminated by our company without "cause" as defined in his or her employment
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 officer has an
obligation to seek comparable employment elsewhere so as to minimize payments
made and benefits provided under the employment agreement. Any compensation and
benefits received from another employer serve to reduce payments and benefits
provided by our company. In each employee agreement, the executive officer
agrees that he or she will forfeit the foregoing payments and benefits if he or
she engages in competition with our company during the period that any payments
are made or benefits provided under his or her employment agreement.
12
<PAGE> 16
REPORT OF THE COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee"), each member of which is a non-employee director, is responsible for
approving executive management compensation and for administering the incentive
and equity participation plans which make up the variable compensation paid to
the following:
- Chief Executive Officer
- Executive Officers
- Other Operating Officers
The Compensation Committee is accountable to the Board of Directors on all
compensation matters regarding our company's officers.
WHAT IS OUR COMPANY'S PHILOSOPHY ON EXECUTIVE COMPENSATION?
The Compensation Committee's strategy is to design a compensation program
that will enable our company to attract, motivate and retain officers and to
establish and maintain a performance and achievement-oriented environment. The
Compensation Committee and the Board believe that the executive management
compensation program should support the goals of our company. Accordingly, the
compensation program:
- Establishes compensation performance objectives that are aligned with
corporate goals;
- Provides a high degree of correlation between compensation and
performance; and
- Creates long-term incentives directly linked to shareholder returns.
HOW ARE THE CHIEF EXECUTIVE OFFICER AND OTHER EXECUTIVE OFFICERS COMPENSATED?
Our company's compensation program for executive management consists of
three elements:
- A base salary;
- A performance-based annual bonus; and
- Periodic grants of stock options and restricted stock awards.
BASE SALARY. Base salaries are generally set above the average of the
salaries of comparable officers at companies that are considered to be peers of
our company. Salary information about peer companies is determined by direct
reference to published public information about companies in the specialty
retail industry as well as companies in the fabric and craft industries. In
determining compensation, consideration is given to the relative size of such
companies. In addition, the Compensation Committee from time to time obtains
input on 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 determined
by job responsibility, with the Chief Executive Officer and the executive vice
presidents occupying the top tier. During fiscal year 2000, the Compensation
Committee did not increase the base salaries of this top tier during its annual
performance reviews.
ANNUAL BONUS. Our company awards bonuses to executive officers, operating
officers and certain other management employees through the Key Management
Incentive Plan. The Plan is administered in such a way as to focus the efforts
of participants on meeting the expectations of customers and shareholders
through teamwork. To ensure that the interests of all Plan participants are
aligned with those of our company's shareholders, the company's profits are
utilized as a factor in determining bonuses under the Plan. The level of bonus
awarded under this Plan is based on a combination of the profit target for the
fiscal year and individual performance goals. Bonuses are not payable under this
13
<PAGE> 17
Plan unless the minimum profit goal is achieved. For fiscal year 2000, our
company's profit exceeded the minimum target.
The profit target that is established by the Board of Directors is
typically set at a level that exceeds our company's profit from the prior fiscal
year. The profit target is comprised of a minimum, midpoint and maximum target.
The Chief Executive Officer can earn a bonus ranging from 50 percent to 100
percent of his base salary. Executive officers can earn a bonus ranging from 25
percent to 75 percent of their base salary. Bonuses for operating officers and
other management employees participating in the plan are designed to amount to a
smaller percentage of their salary.
Individual performance goals are determined annually in advance by the
Compensation Committee for the Chief Executive Officer, and for all other
participants by the Chief Executive Officer or supervising Executive Officer.
Specific bonuses awarded, if any, to executive officers and other participants
are adjusted based on how well they met their pre-determined individual
performance goals suitable for their particular position.
STOCK OPTIONS AND RESTRICTED STOCK. Stock option and restricted stock
awards are granted to executive officers and other key employees through the
1998 Incentive Compensation Plan. The Compensation Committee administers the
plan, selects the recipients and determines the level of awards of stock options
and restricted stock. Stock option awards are generally granted to executive
officers upon hire, promotion or the assumption of increased responsibility.
Additionally, an award is usually granted to executive officers, other operating
officers and certain other management employees during November or December of
each year. By including many levels of management, 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 our company, the best interests of the shareholders and
management will be closely aligned. Stock option grants to the Chief Executive
Officer during the fiscal year 2000 represented 12 percent of all stock options
granted during the year. Grants to the Chief Executive Officer and all other
executive officers of the Company during fiscal year 2000 represented 40 percent
of all stock options granted during the year. Stock option awards are not fully
exercisable until four years following the date of grant and expire in ten
years. This vesting period helps to reinforce a long-term perspective and retain
executives.
The Compensation Committee also grants restricted stock awards as a
performance-based compensation vehicle and to attract and retain executive and
operating officers. Generally, awards are made upon hire, promotion, the
assumption of increased responsibility and to recognize superior performance.
All restrictions on restricted stock awards granted to executive officers during
the last three fiscal years lapse five years from the date of the award.
Recipients forfeit their right to the restricted shares if they leave our
company before the date of lapse. Because of this, 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 executive officers.
Restricted stock awards are also considered a useful compensation vehicle
because, even after the restrictions on the awards lapse, they tend to reinforce
the recipient's commitment to continued growth of our company and appreciation
in the market price of our common stock over the long-term.
HOW WAS THE CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER COMPENSATED FOR
FISCAL YEAR 2000?
During fiscal year 2000, Mr. Rosskamm did not receive an increase to his
base salary of $450,000. The Compensation Committee had recommended an increase
in Mr. Rosskamm's salary during fiscal year 2000, as Mr. Rosskamm's base salary
is below market based on independent analyses of comparable Chief Executive
Officers' base salary levels. However, Mr. Rosskamm declined to accept the
increase. The Compensation Committee will continue to review Mr. Rosskamm's
salary in light of market conditions in the future. Additionally, the other
executive officers of the Company received no increase to their base salaries
during fiscal year 2000. The average salary increase for all other operating
officers was four percent. Mr. Rosskamm was awarded a bonus for fiscal 2000
under the Key Management Incentive Plan in the amount of $225,027 representing
50 percent of his base salary. This bonus
14
<PAGE> 18
was based on the Company's operating profit of $67.6 million exceeding the
minimum goal for fiscal year 2000 as set by the Compensation Committee at the
beginning of fiscal 2000. Mr. Rosskamm was granted a stock option award for
60,000 Class B common shares in December 1999.
As part of his overall compensation package, Mr. Rosskamm is provided a
split dollar life insurance arrangement for which the beneficiary is a trust
established for the benefit of Mr. Rosskamm's children. This arrangement
replaced the Supplemental Retirement Plan provided by the company to Mr.
Rosskamm prior to fiscal 1995. See note (8) under "Executive Compensation."
HOW HAS THE COMPANY RESPONDED TO THE IRS LIMITS ON DEDUCTIBILITY OF
COMPENSATION?
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public corporations for compensation over $1,000,000 paid for any
fiscal year to the corporation's chief executive officer and four other most
highly compensated executive officers. During fiscal 1999, shareholders approved
the 1998 Incentive Compensation Plan, which provides for performance-based
awards. Stock option and restricted stock awards made under this Plan are
intended to meet the performance-based compensation exception to the IRS
deduction disallowance.
The names of the Directors who serve on the Compensation Committee are set
forth below.
COMPENSATION COMMITTEE
FRANK NEWMAN (Chairman)
SCOTT COWEN
GREGG SEARLE
DEBRA WALKER
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<PAGE> 19
STOCK PERFORMANCE GRAPH
The following graph compares the yearly changes in total shareholder return
on our Class A and Class B common shares with the total return of the S&P
Composite--500 Stock Index and the S&P Retail (Specialty)-Small Index for the
last five years. In each case, we assumed an initial investment of $100 on
January 31, 1995. Each subsequent date on the chart represents the last day of
the indicated fiscal year. No dividends were paid by us during such five-year
period.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
JO-ANN A JO-ANN B S&P 500 S&P RETAIL
-------- -------- ------- ----------
<S> <C> <C> <C> <C>
1995 100 100 100 100
1996 179 158 135 64
1997 196 181 167 73
1998 313 277 208 99
1999 197 163 272 100
2000 132 120 296 78
</TABLE>
16
<PAGE> 20
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3, 4 and 5 and amendments thereto
furnished to us with respect to our most recent fiscal year, we believe that,
during the fiscal year ended January 29, 2000, all filing requirements under
Section 16(a) of the Securities Exchange Act of 1934 applicable to our executive
officers, directors and greater than 10% beneficial owners were met.
INDEPENDENT AUDITORS
Arthur Andersen, LLP has been appointed as our company's independent
auditors for the fiscal year ending January 27, 2001. A representative of Arthur
Andersen, LLP will be present at the annual meeting and will have an opportunity
to make a statement if he desires to do so. Additionally, this representative
will be available to answer appropriate questions that you may have with respect
to his firm's examination of our financial statements and records for the fiscal
year ended January 29, 2000.
PROXY SOLICITATION COSTS
The proxies being solicited hereby are being solicited by our company. We
will bear the expense of preparing, printing, mailing and otherwise distributing
this Proxy Statement. Further solicitation, if required, may be made by mail,
telephone and personal interview, by the directors, officers and regularly
engaged employees of our company, without extra compensation. We will, upon
request, reimburse brokerage firms and others for their reasonable expenses in
forwarding solicitation materials to the beneficial owners of our common shares.
SHAREHOLDERS' PROPOSALS
The deadline for shareholders to submit proposals to be considered for
inclusion in the Proxy Statement for the 2001 annual meeting of shareholders is
January 9, 2001. Proxies for the 2001 annual meeting of shareholders will confer
discretionary authority to vote on any matter that a shareholder does not give
written notice of by March 24, 2001.
ANNUAL REPORT
Our Annual Report for the fiscal year ended January 29, 2000, 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 8, 2000
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<PAGE> 21
JO-ANN STORES, INC(R)
PROXY SERVICES
P.O. BOX 9079
FARMINGDALE, NY 11735
VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your
voting instructions anytime before 12:00 noon eastern standard time on June 7,
2000. Have your proxy card in hand when you call. You will be prompted to enter
your 12-digit Control Number which is located below and then follow the simple
instructions the Vote Voice provides you.
VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting
instructions anytime before 12:00 noon eastern standard time on June 7, 2000.
Have your proxy card in hand when you access the web site. You will be prompted
to enter your 12-digit Control Number which is located below to obtain your
records and create an electronic voting instruction form.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we have provided or return to Jo-Ann Stores, Inc., c/o ADP, 51 Mercedes Way,
Edgewood, NY 11717.
Also, please check the box provided below if you plan to view future materials
on the Internet.
<TABLE>
<CAPTION>
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK: JOANN1 KEEP THIS PORTION FOR YOUR RECORDS
- -----------------------------------------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
JO-ANN STORES, INC.
Election of Directors
<S> <C> <C> <C> <C>
1. To elect the following three directors of the class For Withhold For All To withhold authority to vote,
whose three-year terms of office will expire in 2003: All All Except mark "For All Except" and write
01) Alan Rosskamm [ ] [ ] [ ] the nominee's number on the
02) Scott Cowen line below.
03) Gregg Searle _______________________________
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.
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Signature (PLEASE SIGN WITHIN BOX) Date Signature (JOINT OWNERS) Date
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JOANN2
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JO-ANN STORES, INC.
BOARD OF DIRECTORS PROXY
ANNUAL MEETING, JUNE 8, 2000
At the Annual Meeting of Shareholders of our Company to be held on June 8, 2000,
and at any adjournment. Frank Newman, Betty Rosskamm, and Debra Walker or any
one of them, is hereby authorized to represent me and thereat to vote my shares
on the following:
1. To elect the following three directors of the class whose three-year terms
of office will expire in 2003: Alan Rosskamm, Scott Cowen, and Gregg Searle.
SEE REVERSE
SIDE
