<PAGE>
J. MICHAELS, INC.
182 SMITH STREET, BROOKLYN, N.Y. 11201
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
(Meeting Date - September 15, 1995)
TO THE SHAREHOLDERS OF J. MICHAELS, INC.:
The Annual Meeting of the Shareholders of J. MICHAELS,
INC. (THE "Company") will be held at the principal executive
office of the Company, on the First Floor, 182 Smith Street,
Brooklyn, N.Y., on Friday, September 15, 1995 at 10:00
o'clock A.M. to consider and act upon:
1. The election of a Board of Directors of the Company.
2. Approval of a warrant to purchase common stock issued to
Mr. James Michaels.
3. The transaction of such other business as may properly
come before the meeting.
Only holders of Common Shares of the Company of
record at the close of business on August 24, 1995, will be
entitled to vote at this meeting.
By Order of the Board of Directors,
August 28, 1995 MARTIN KASMAN,
Secretary
PROXY STATEMENT
This proxy statement is furnished in connection
with the solicitation on behalf of the Board of Directors of
the Company of proxies for use at the Annual Meeting of
Shareholders to be held on September 15, 1995, or any
adjournment thereof. Holders of Common Shares of record at
the close of business on August 24, 1995, are entitled to
vote at the meeting and each shareholder shall have one vote
for each Common Share registered in his name. On that date
there were issued and outstanding 851,282 Common Shares.
The enclosed proxy may be revoked at any time before it is
voted. The expenses of solicitation will be paid by the
Company.
The principal executive offices of the Company are
located at 182 Smith Street, Brooklyn, New York 11201. This
proxy statement and accompanying form of proxy were first
mailed to shareholders on or about August 28, 1995.
Any shareholder executing the enclosed form of
proxy may revoke it any time before it is exercised. The
proxy may be revoked by delivering to the Company a written
revocation or a duly executed proxy bearing a later date, or
by attending the Annual Meeting and voting in person.
Proxies marked as abstaining will be treated as
present for purposes of determining a quorum for the Annual
Meeting, but will not be counted as voting in respect of any
matter as to which abstinence is indicated. Proxies
returned by brokers as "non-votes" on behalf of shares held
in street name because beneficial owners' discretion has
been withheld as to one or more matters on the agenda for
the Annual Meeting will not be treated as present for
purposes of determining a quorum for the Annual Meeting
unless they are voted by the broker on at least one matter
on the agenda; such shares will not be counted for any
purpose as to the matters for which a non-vote is indicated
on the broker's proxy.
Item 1. ELECTION OF DIRECTORS
The following information is furnished with respect to
(i) each person to be nominated by management for election
as director to serve until the next annual meeting or until
his successor is elected and qualifies and (ii) each other
executive officer of the Company. Each nominee for director
has been in the active employ of the Company for more than
five years and each nominee for director (except Mr. Pagano)
was elected at the last annual meeting of shareholders of
the Company. Mr. Pagano has been employed as Merchandise
Manager since 1990. In 1994 he assumed the administrative
duties previously performed by Mr. Sullivan. Previous to
1990, Mr. Pagano owned and operated a retail furniture
store. Ms. Steinhart was employed as sales representative
from 1987 to 1990 for Aarrow Furniture Rental Division, and
is the General Manager of Aarrow. Since 1993, she has also
served as General Manager of A. Victor & Co.
Mr. James H. Michaels is the registered and
beneficial owner of 34,862 shares. Mr. Michaels is also the
sole trustee of a trust for the benefit of Richard H.
Michaels, his cousin, which trust contains 101,532 shares of
the Company and a co-trustee of a trust under the will of
Jules Michaels, which trust contains 139,449 shares.
Subject to shareholder approval at the 1995 Annual Meeting
of Shareholders, Mr. Michaels has been granted a warrant to
acquire 40,000 shares of Common Stock, which shares are not
included in the number of shares set forth herein. Mr.
Michaels is also a member and director of Michaels
Philanthropic Foundation, which is the record and beneficial
owner of 17,550 shares. Mr. Kasman and Mr. Michaels' wife
are the other directors of the foundation.
By virtue of the foregoing, Mr. James Michaels may
be deemed to be a person in control of the Company. There
are no arrangements or understanding with respect to the
election of directors of any other matters. The securities
listed are Common Shares of the Company beneficially owned,
directly or indirectly, as of August 24, 1995.
<PAGE>
<TABLE>
<CAPTION>
Name and age of Year Service As
Directors/Officers Principal Occupation Director Began Securities(2)
<S> <C> <C> <C>
James H. Michaels(43)(1) President 1979 313,393(3)(4)
Edward P. Sullivan(73)(1) Consultant 1971 5,000(4)
Martin Kasman(68)(1) Secretary/Treasurer 1987 -0-
Lance Davis(55)(1) Advertising Director 1991 -0-
John Pagano(33)(1) Vice President - -0-
Helene Steinhart(58) Vice President - -0-
(1) Nominee as Director.
(2) Mr. Michaels owns 36.8% of the outstanding shares of
Common Stock. No officer or director other than Mr. James
Michaels owns more than 1% of the issued and outstanding
shares.
(3) See "Outstanding Voting Securities and Principal
Holders" and the notes thereto. Mr. James Michaels may be
deemed a person in control of the Company.
(4) Includes for Messrs. Michaels and Sullivan 20,000 and
5,000 shares of Common Stock, respectively, that are subject
to purchase under currently exercisable options granted
under the Incentive Stock Option Plan. Does not include a
warrant to purchase 40,000 shares of Common Stock issuable
to Mr. Michaels subject to shareholder approval at the 1995
Annual Meeting of Shareholders.
The Company has no audit, nominating or
compensation committees or committees performing similar
functions except for the option committee appointed to
administer the Company's Incentive Stock Option Plan and
1987 Stock Option Plan. See "Executive Compensation".
During its last fiscal year, the Company's Board of
Directors held six meetings. All director/nominees were
present at 75 percent or more of such meeting. Directors
are paid no fees for serving as such.
Item 2. APPROVAL OF WARRANT TO PURCHASE COMMON STOCK ISSUED
TO MR. JAMES MICHAELS.
On April 15, 1995, the Board of Directors of the
Company, subject to approval by the shareholders of the
Company at the 1995 Annual Meeting of Shareholders,
authorized the issuance to Mr. James Michaels of a warrant
to purchase 40,000 shares of Common Stock of the Company at
an exercise price of $10.50 per share (the market price of
the Company's Common Stock on April 15, 1995). The warrant
may be exercised at any time starting May 1, 1995 (subject
to shareholder approval), but not later than April 15, 2005.
The exercise price under the warrant may be paid in cash, by
delivery of shares of Common Stock of the Company having a
fair market value at least equal to the exercise price, by
delivery of a note for such part of the exercise price as
the Board of Directors of the Company may deem acceptable,
or by such combination of the foregoing as may be approved
by the Board of Directors. Mr. Michaels has the right to
have the Company register the shares of common stock
issuable under the warrant, or to include such shares in any
registration statement filed by the Company, subject to
certain exclusions. The warrant was issued to Mr. Michaels
in connection with the execution and delivery by the Company
and Mr. Michaels of an extension of his employment agreement
with the Company.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR
APPROVAL OF THE GRANT OF THE WARRANT TO MR. JAMES MICHAELS.
REPORT OF THE BOARD OF DIRECTORS CONCERNING
COMPENSATION
Compensation of executive officers of the Company
(including Mr. James Michaels, its President) is set by the
Board of Directors of the Company. It should be noted that
all of the directors of the Company are also executive
officers or employees of, or consultants to, the Company,
whose compensation is determined by the Board of Directors
of the Company. See Executive Interlocks and Insider
Participation below.
The compensation policy of the Company is, in
general, that executive officers of the Company should be
compensated in the amount that is appropriate given the
responsibilities of such executive officer, in light of the
compensation levels of executive officers of other companies
having similar responsibilities, and the desire to retain
the services of talented and experienced executives. The
Board believes that the stability shown in the executive
ranks of the Company is, in part, attributable to this
philosophy.
The Board of Directors of the Company further
believes that it is appropriate for compensation of
executives to contain an incentive component, so that the
effect of the executive's performance on the Company's
performance is reflected, in part, in the compensation of
the executive.
Pursuant to Mr. Michael's employment agreement,
Mr. Michaels receives a base salary, and incentive
compensation based on Company profits.
In addition, the Company has a stock option plan,
which it has previously used to grant key executives the
ability to acquire common stock of the Company at then
market prices (or, in the case of Mr. Michaels, above market
prices), in order to provide a benefit to these executives
if their performance results in increased value of the
Company's common stock.
The board reviews executive compensation levels
periodically to determine whether they are appropriate.
<PAGE>
The Board of Directors
James Michaels Edward P. Sullivan Martin Kasman Lance Davis
EXECUTIVE INTERLOCKS AND INSIDER PARTICIPATION
All of the members of the Board of Directors (Mr.
Michaels, Mr. Kasman, Mr. Sullivan and Mr. Davis) are
employees of the Company or are consultants rendering
services to the Company. As such, their compensation is
determined by the Board of Directors or by Mr. Michaels.
EXECUTIVE COMPENSATION
The following table contains specific compensation
information for the Chief Executive Officer as of March 31,
1995. No other executive officer of the Company receives in
excess of $100,000 in total annual compensation.
</TABLE>
<TABLE>
<CAPTION>
Name and Principal Fiscal Annual Compensation
Position Year Salary Bonus All Other(1)
<S> <C> <C> <C> <C>
James H. Michaels, 1995 $358,352 $43,004 $5,149
President 1994 $350,638 $44,560 $4,981
1993 $350,638 $44,003 $5,130
(1) Includes value to Mr. James of the use of a car
provided by the Company to him for combined business and
personal use.
(2) Does not include options to purchase 20,000 shares
granted to Mr. Michaels nor the Corporation's contributions
for Mr. Michaels to the J. Michaels Furniture Inc. Savings
and Security Plan (401 K Plan).
Mr. Michaels did not receive any long term compensation in
any of the fiscal years ended March 31, 1995, 1994 and 1993.
The J. Michaels Furniture, Inc. Savings and
Security Plan, which became effective April 1, 1986, is
designed to enable participants to accumulate savings. The
Plan provides that non-union employees with at least six
months of continuous service with the Company may elect to
contribute each year between 1% and 15% of his or her
eligible earnings to the Plan. The Company in its
discretion may make a matching contribution for any plan
year which would either be based on a formula adopted by the
Company for that plan year or would equal a total dollar
amount determined by the Company for that plan year.
Participants' contributions are on a "pre-tax" basis as
permitted under Section 401(k) of the Internal Revenue Code
of 1986. Participant's contributions are invested by
trustees chosen by the Company's Board of Directors. At
present, except for funds in previous years invested in a
mutual fund for the account of specific participants or used
to pay premiums on life insurance purchased by some
participants in previous years, all funds are invested in
fixed income investments. The trustees may invest in any
investment in their discretion. Participants have a full
and immediate vested interest in amounts contributed by them
and earnings thereon. Participants have a vested interest
in the Company's contributions previously made and to be
made in the future which s determined by their years of
vesting service and after six years of such service have a
100% vested interest in all Company contributions made and
to be made in the future on their behalf to the Plan.
Withdrawals and distributions made from the Plan as now in
effect are subject to restrictions imposed by the Internal
Revenue Code of 1986, and by the terms of the Plan.
For the plan year ended December 31, 1994, the
Company's contribution under the Plan for all employees as a
group was $30,000, for all executives as a group was $8,998,
and for Mr. James Michaels was $2,332.
Effective April 1, 1993, the Company entered into
an employment contract with Mr. Michaels. This employment
contract covered the period through March 31, 1995 and
provided for an annual base salary of $350,638 per year
increasing by the percentage increase in the consumer price
index, incentive compensation equal to 4% of the Company's
consolidated income before any income taxes for such year,
after elimination of any non-recurring gain or loss arising
from the sale of any store or any substantial part of the
Company's business less expenses allocable thereto, and for
certain payments in the event of his disability. In the
event of Mr. Michael's death, the Company will pay to his
wife or estate within 90 days of his death, an amount equal
to his base salary at the time of his death, together with
the average incentive compensation paid or payable to him in
respect of the most recent two full fiscal years preceding
his death. In addition, the employment contract provides
that upon a change of control of the Company (as defined
therein), Mr. Michaels will be paid in a lump sum an amount
equal to three times the base compensation payable to him
under the contract at the time of the change of control plus
an amount equal to three times the average annual incentive
compensation paid or payable to Mr. Michaels in respect of
the most recent two fiscal years prior to the change of
control, together with additional payments to the extent
necessary to compensate Mr. Michaels for excise taxes
payable on such lump sum payments. The contract provides
that upon his termination, Mr. Michaels is not required to
mitigate any damages suffered by him and provides for the
Company to indemnify Mr. Michaels to the fullest extent
permitted by law. Subsequent to fiscal year end, the
Company entered into a new employment agreement with Mr.
Michaels.
<PAGE>
J. Michaels Inc. has an Incentive Stock Option
Plan (the "ISOP"), pursuant to which options to purchase up
to 225,000 shares of common stock may be granted, and a 1987
Stock Option Plan (the "1987 Plan") pursuant to which
options to purchase up to 50,000 shares of common stock may
be granted. All employees of the Company or any majority-
owned subsidiary of the Company are eligible to participate
in the plans. Options granted under the ISOP must be at the
market price of shares of common stock on the date of grant
of such option, but options under the 1987 Plan may be
granted at a price to be determined by the Option Committee,
but not less than $5.50 per share. The term of any option
may not be more than ten years from the date of grant.
The ISOP and the 1987 Plan are administered by an
Option Committee appointed by the Board of Directors.
Subject to the provisions of the plans and to approval by
the Board of Directors of each grant by the Option Committee
of options under either plan, the Option Committee has the
authority, in its discretion, to determine to whom and the
time or times options will be granted, the exercise price
and the duration of each option, among other things. The
names and addresses of the members of the option committee
are as follows:
<PAGE>
Mark Goldsmith Irving Sitnick Cliff Zucker
10-09 43rd Street c/o Moses & Singer 250 West 39th St.
LIC, New York 11101 1301 Avenue of Americas New York, NY 10018
There were no options granted under the ISOP or
the 1987 Plan in the fiscal years ended March 31, 1995, 1994
and 1993. As of August 24, 1995 options to purchase 25,000
shares were outstanding under the ISOP, 5,000 of which
options were granted at an exercise price of $11.375 per
share to Mr. Edward Sullivan, and 20,000 of which options
were granted to Mr. James Michaels at an exercise price of
$12.513 per share.
Set forth below is information as to the aggregate
option exercises and fiscal year-end option value of the Mr.
Michaels:
Name Shares Acquired Value Number of Unexercised Value of
on Exercises Realized Options at Fiscal Year Unexercised
End Exercisable In-The-Money
Unexercisable Options At FY-
End Exercisable
Unexercisable
J. Michaels(1) N/A N/A 20,000 N/A
(1) Does not include warrant to purchase 40,000 shares at an exercise price
of $10.50 per share issued to Mr. Michaels subsequent to fiscal year end.
<PAGE>
Stock Comparison Table
</TABLE>
<TABLE>
<CAPTION>
Company Market Market Peer Peer
Date Index Index Count Index Count
<S> <C> <C> <C> <C> <C>
03/30/90, 100.000, 100.000, 4129, 100.000, 152
04/30/90, 100.000, 96.723, 4121, 101.241, 149
05/31/90, 100.809, 105.838, 4111, 112.029, 147
06/29/90, 100.809, 106.619, 4087, 113.460, 143
07/31/90, 100.809, 101.266, 4083, 114.799, 141
08/31/90, 81.071, 88.492, 4076, 99.337, 141
09/28/90, 77.646, 80.108, 4049, 89.138, 140
10/31/90, 69.653, 76.958, 4023, 87.948, 142
11/30/90, 65.907, 84.290, 3992, 98.824, 142
12/31/90, 71.689, 87.928, 3975, 99.132, 142
01/31/91, 72.521, 97.659, 3943, 110.357, 141
02/28/91, 71.352, 107.057, 3928, 121.277, 139
03/28/91, 73.691, 114.205, 3915, 137.696, 142
04/30/91, 78.042, 114.944, 3877, 139.898, 139
05/31/91, 81.590, 120.207, 3877, 148.136, 144
06/28/91, 81.590, 112.897, 3900, 142.271, 141
07/31/91, 81.590, 119.566, 3899, 153.010, 142
08/31/91, 95.448, 125.498, 3913, 156.494, 145
09/30/91, 95.448, 125.957, 3917, 160.919, 146
10/31/91, 95.448, 130.135, 3930, 161.360, 145
11/29/91, 96.307, 125.776, 3942, 161.627, 142
12/31/91, 96.307, 141.106, 3950, 188.308, 144
01/31/92 94.766, 149.392, 3960, 192.690, 147
02/28/92, 94.766, 152.780, 3964, 196.176, 144
03/31/92, 94.766, 145.577, 3976, 186.883, 148
04/30/92, 95.641, 139.356, 3975, 169.454, 153
05/29/92, 95.641, 141.187, 3963, 166.647, 156
06/30/92, 98.093, 135.674, 3941, 155.875, 156
07/31/92, 98.976, 140.472, 3905, 160.940, 156
08/31/92, 98.976, 136.171, 3885, 151.268, 157
09/30/92, 98.976, 141.220, 3883, 162.617, 158
10/30/92, 103.925, 146.773, 3895, 167.031, 159
11/30/92, 114.798, 158.446, 3911, 174.886, 161
12/31/92, 104.816, 164.303, 3935, 177.219, 164
01/29/93, 95.646, 168.983, 3923, 173.835, 167
02/26/93, 100.680, 162.655, 3954, 164.640, 167
03/31/93, 100.680, 167.388, 3977, 167.806, 169
04/30/93, 101.586, 160.240, 4011, 157.858, 172
05/28/93, 101.586, 169.780, 4039, 166.087, 179
06/30/93, 101.586, 170.577, 4076, 165.865, 182
07/30/93, 99.047, 170.804, 4108, 168.938, 182
08/31/93, 105.087, 179.604, 4143, 178.525, 186
09/30/93, 102.524, 184.959, 4179, 183.928, 186
10/29/93, 103.447, 189.144, 4227, 191.280, 190
11/30/93, 98.274, 183.495, 4310, 183.973, 191
12/31/93, 116.378, 188.610, 4382, 187.296, 201
01/31/94, 117.309, 194.329, 4406, 186.929, 200
02/28/94, 117.309, 192.564, 4444, 183.134, 201
03/31/94, 117.309, 180.714, 4497, 172.310, 205
04/29/94, 118.247, 178.379, 4526, 172.669, 204
05/31/94, 118.247, 178.824, 4565, 168.672, 205
06/30/94, 110.364, 172.309, 4578, 165.296, 205
07/29/94, 111.310, 175.845, 4595, 165.515, 207
08/31/94, 108.660, 187.042, 4613, 177.932, 206
09/30/94, 111.310, 186.568, 4614, 180.674, 208
10/31/94, 122,956, 190.178, 4635, 182.869, 209
11/30/94, 106.918, 183.856, 4651, 175.953, 209
12/30/94, 109.591, 184.416, 4655, 170.899, 206
01/31/95, 118.572, 185.449, 4643, 164.988, 206
02/28/95, 118.572, 195.207, 4646, 168.540, 204
03/31/95, 121.267, 200.905, 4641, 169.115, 208
OUTSTANDING VOTING SECURITIES AND PRINCIPAL HOLDERS
The number of voting securities of the Company outstanding on
August 24, 1995, the record date for determining shareholders entitled to
vote at the annual meeting, was 851,282 Common Shares, all of one class and
each entitled to one vote. On August 24, 1995, the following persons owned
of record, or were believed by the Company to own beneficially, more than
5% of the Common Shares of the Company.
</TABLE>
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Ownership of Class
<S> <C> <C>
Phyllis Michaels 168,396 19.8%
182 Smith Street
Brooklyn, NY 11201
James H. Michaels 313,393(1)(3) 36.8%
182 Smith Street
Brooklyn, NY 11201
Doris Rosenson 149,658(2) 17.6%
1822 Lathrup
Saginaw, Mich. 48603
Tweedy Browne, Inc. 55,323 6.3%
TBK Partners
52 Vanderbilt Avenue
New York, NY 10017
All Directors and Officers 318,393(3) 37.4%
as a group (6 persons)
(1) Includes (i) 34,862 shares of which Mr. Michaels is the
record and beneficial owner, (ii) 101,532 shares owned by a trust for the
benefit of Richard H. Michaels of which James H. Michaels is sole trustee:
(iii) 139,449 shares held as a fiduciary under the will of Jules Michaels,
and (iv) 17,550 shares owned by Michaels Philanthropic Foundation of which
Mr. Michaels, his wife and Mr. Kasman are directors.
(2) Includes (i) 10,209 shares of which Mrs. Rosenson is the
record and beneficial owner, and (ii) 139,449 shares held by her as a co-
trustee (together with Mr. James Michaels) under the will of Jules
Michaels.
(3) Except in the case of the 17,550 shares owned by the
Michaels Philanthropic Foundation where the power to vote and dispose of
the shares is shared by the directors land in the case of the 139,449
shares owned by the trust under the will of Jules Michaels where the power
to vote and dispose of the shares is shared by the trustees, all other
beneficial owners listed in the table have the sole power to vote and
dispose of the shares shown as beneficially owned by them. Includes 20,000
and 25,000 shares of Common Stock, respectively, for Mr. James H. Michaels
and all directors and officers as a group, which shares may be acquired
pursuant to immediately exercisable options granted under the Company's
Incentive Stock Option Plan. Does not include 40,000 shares of Common
Stock issuable to Mr. Michaels under a Warrant subject to shareholder
approval at the 1995 Annual Meeting of Shareholders.
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Company for its fiscal
year ended March 31, 1995, were Richard A. Eisner & Co. LLP and it is
contemplated that such accountants will continue to serve as such for the
Company's present fiscal year. In accordance with prior practice, the
designation of the Company's independent public accountants is made by its
Board of Directors and not by its shareholders. Such determination has
customarily been made by the Company's Board of Directors at its first
meeting following the shareholders meeting, and will be based on the
information available to the Board of Directors at that time. It is not
presently contemplated that any representative of Richard A. Eisner & Co.
LLP will be present at the annual meeting of shareholders.
VOTING OF PROXIES
Proxies in the enclosed form, which are received by management,
will be voted by the persons therein named. It is intended that, unless
otherwise directed by the shareholders giving the proxies (in which case
they will be voted in accordance with such direction), such vote will be
cast as follows:
1. FOR the election as directors of the nominees named herein.
The management knows of no reason why any of the nominees so named will be
unavailable for election. If any such nominee should be unavailable for
election by reason of death or otherwise, the proxies will be voted either
for the election of such other person as may be recommended by the Board of
Directors in his place or for fixing the number of directors at the lesser
number of nominees who are then able to serve.
2. FOR approval of a warrant to purchase common shares issued to
Mr. James Michaels.
3. With respect to other matters which may properly come before
the meeting, in accordance with the judgment of the persons named in the
proxies.
OTHER BUSINESS
The management is not aware of any business or matter to be
presented at the meeting other than as stated above. The annual report of
the Company for the year ended March 31, 1995, is being mailed to
shareholders with this Proxy Statement.
PROPOSALS OF SECURITY HOLDERS
Proposals of holders of Common Shares intended to be presented at
the next annual meeting must be received in the Company's principal
executive office, 182 Smith Street, Brooklyn, NY 11201, no later than May
1, 1996.
Your officers hope that it will be convenient for you to attend
the meeting. If you do not expect to be present, please sign and mail the
enclosed proxy regardless of whether your holdings are large or small. The
enclosed return envelope requires no postage if mailed in the United
States.
</TABLE>
