<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the Com-
mission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or
Rule 14a-12
FRETTER, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
FRETTER, INC.
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
FRETTER, INC.
12501 GRAND RIVER
BRIGHTON, MICHIGAN 48116
May 31, 1995
Dear Common Shareholder:
We are pleased to enclose our Annual Report, Notice of Annual Meeting
to be held on June 21, 1995, Proxy Statement and Form of Proxy.
You are cordially invited to attend the Annual Meeting, but whether or
not you expect to attend, your vote is highly important regardless of the
number of shares you own. We strongly urge you to sign and promptly return to
us your Proxy.
If you have questions about the Company, please do not hesitate to
direct them to us or to other officers of the Company at the Annual Meeting or
at any other time.
Sincerely,
ERNEST L. GROVE, JR. JOHN B. HURLEY
Chairman of the Board President
<PAGE> 3
FRETTER, INC.
_____________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 21, 1995
_____________
The Annual Meeting of Shareholders of Fretter, Inc., a Michigan
corporation (the "Company"), will be held at the Company's headquarters offices
at 12501 Grand River, Brighton, Michigan, on Wednesday, June 21, 1995 at 11:00
a.m., Eastern Daylight Savings Time (the "Annual Meeting"), for the following
purposes:
1. To elect seven directors (four by the holders of the
Company's Common Stock, two by the holder of its Convertible Preferred
Stock, Series A, and one by the holders of its Preferred Stock, Series
B) to serve until the next Annual Meeting of Shareholders or until
their successors have been duly elected and qualified.
2. To transact such other business as may properly come
before the Annual Meeting or any adjournment or adjournments thereof.
The Board of Directors of the Company has fixed the close of business
on May 10, 1995 as the record date for the determination of shareholders
entitled to notice of and to vote at the Annual Meeting. Accordingly, only
shareholders of record on that date will be entitled to vote at the Annual
Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE
COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED STAMPED,
SELF-ADDRESSED ENVELOPE PROMPTLY IN ORDER THAT YOU MAY BE REPRESENTED AT THE
MEETING.
By Order of the Board of Directors
STUART G. GARSON
Secretary
Brighton, Michigan
Date: May 31, 1995
<PAGE> 4
FRETTER, INC.
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 21, 1995
This Proxy Statement is furnished to holders of the Common Stock (the
"Common Stock") of Fretter, Inc., a Michigan corporation (the "Company") in
connection with the solicitation by the Board of Directors of the Company, of
Proxies to be voted at the Annual Meeting of Shareholders of the Company to be
held at the principal executive offices of the Company at 12501 Grand River,
Brighton, Michigan 48116 on Wednesday, June 21, 1995 at 11:00 a.m., Eastern
Daylight Savings Time, and any adjournment or adjournments thereof (the
"Meeting").
A Notice of Annual Meeting and Form of Proxy accompanies this Proxy
Statement. The Proxy Statement is being first mailed to shareholders on May
31, 1995.
VOTING SHARES REPRESENTED BY PROXIES
The Board of Directors knows of no business which will be presented at
the Meeting other than the matters referred to in the accompanying notice of
Annual Meeting. However, if any other matters are properly presented at the
Meeting, it is intended that the persons named in the Proxy will vote upon the
same and act in accordance with their judgment. Shares represented by properly
executed Proxies will be voted at the Meeting in the manner specified therein.
If no instructions are specified in the Proxy, the shares represented thereby
will be voted for the election as directors of the nominees to be elected by
the holders of Common Stock referred to below. Any proxy may be revoked by the
person giving it any time prior to being voted by giving written notice of
revocation to the Secretary of the Company, by giving a later dated proxy, or
by attending the Meeting, revoking the Proxy and voting in person.
SHAREHOLDERS ENTITLED TO VOTE AND PRINCIPAL SHAREHOLDERS
The Board of Directors of the Company has fixed the close of business
on May 10, 1995 as the record date for the determination of shareholders
entitled to notice of and to vote at the Meeting. Accordingly, only
shareholders of record at the close of business on that date are entitled to
vote at the Meeting. At the close of business on May 10, 1995 there were
10,577,392 shares of Common Stock, 3,000,000 shares of Convertible Preferred
Stock, Series A ("Series A Preferred Stock"), and 1,500,000 shares of Preferred
Stock, Series B ("Series B Preferred Stock") entitled to vote. Each share of
Series A Preferred Stock is entitled to one vote on the election of two
directors, each share of Series B Preferred Stock is entitled to one vote on
the election of one director, and each share of Common Stock is entitled to one
vote on the election of four directors and upon any other matter to be
presented at the Meeting.
So far as is known to the Company, no person owned beneficially as of
May 1, 1995 more than 5% of the issued and outstanding shares of voting
stock of the Company, other than the persons shown in the following table.
Except as otherwise indicated, each person has the sole investment and voting
power with respect to the shares shown.
<PAGE> 5
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
-------------------------- ------------------------
AMOUNT OF AMOUNT OF
NAME AND ADDRESS OF BENEFICIAL PERCENT BENEFICIAL PERCENT
BENEFICIAL OWNER(1) OWNERSHIP OF CLASS OWNERSHIP OF CLASS
------------------- --------- -------- --------- --------
<S> <C> <C> <C> <C>
Oliver L. Fretter
28833 Telegraph Road
Southfield, Michigan 48034 3,468,991(2) 32.8%(2) -0- -0-
Howard O. Fretter(3)
28833 Telegraph Road
Southfield, Michigan 48034 1,570,296(4) 14.8%(4) -0- -0-
John B. Hurley
12501 Grand River
Brighton, Michigan 48116 5,932,669(5) 54.8%(5) -0- -0-
Dixons Overseas 3,000,000 100%
Investments Limited(6) (Series A)
29 Farm Street 1,500,000 100%
London, W1X 7RO 7,444,454(7) 50.1%(7) (Series B)
England
</TABLE>
- ---------------
(1) Except as otherwise noted, each of Messrs. Fretter and Hurley holds
his shares of Common Stock in a revocable living trust under which,
during his lifetime, he is the sole trustee and beneficiary.
(2) Includes 3,452,671 shares owned by Oliver L. Fretter and 16,320 shares
held in irrevocable trusts for the benefit of his daughter and
grandchildren.
(3) Howard O. Fretter is the son of Oliver L. Fretter.
(4) Includes 1,558,056 shares owned by Howard O. Fretter and 12,240 shares
held in an irrevocable trust for the benefit of his children. Does
not include 100,000 shares held in other irrevocable trusts for the
benefit of his children.
(5) Includes 5,135,207 shares owned by Oliver L. Fretter, Howard O.
Fretter and certain trusts for the benefit of the children of Howard
O. Fretter, over which John B. Hurley has voting power pursuant to a
Shareholders Agreement dated November 30, 1993. Under that agreement,
Mr. Hurley has also agreed to cast such votes, as long as the Fretter
family holds in the aggregate at least 10% of the outstanding Common
Stock, in all elections of directors, in such a way as to elect Oliver
L. Fretter (or, if Oliver L. Fretter so chooses or is unable to serve,
Howard O. Fretter) to the Board of Directors. Also under that
agreement, Messrs. Fretter have agreed not to sell any Common Stock if
as a result of that sale Mr. Hurley would then control the votes of
less than 55% of the Common Stock outstanding (disregarding any shares
held by Dixons America Holdings, Inc. or its affiliate). Included in
the 5,135,207 shares are 880,600 shares which Mr. Hurley also may
acquire pursuant to various options. The total number of shares held
by Mr. Hurley (5,932,669) also includes 255,000 shares which Mr.
Hurley may acquire from the Company upon the exercise of options
pursuant to his employment agreement which are presently vested or
will vest within
2
<PAGE> 6
sixty days after the date hereof, and 6,120 shares held by Mr. Hurley
as custodian for the benefit of his children. Mr. Hurley's indicated
holdings do not include any shares held by Dixons Overseas Investments
Limited as to which certain voting arrangements exist. Percentage is
based on 10,577,392 shares of Common Stock presently outstanding, plus
255,000 shares issuable upon the exercise of certain presently vested
options. See footnote (7), below.
(6) Dixons Overseas Investments Limited ("Dixons Overseas") is a
wholly-owned indirect subsidiary of Dixons Group plc, a United Kingdom
based electronics retailer whose shares are traded on the London Stock
Exchange.
(7) Consists of 3,164,804 shares of Common Stock presently held, together
with the 4,279,650 shares of Common Stock into which the 3,000,000
shares of Series A Preferred Stock are presently convertible.
Percentage is based on 10,577,392 shares of Common Stock presently
outstanding, plus the 4,279,650 shares which would be outstanding if
Dixons Overseas were to convert the 3,000,000 shares of Series A
Preferred Stock it now holds. John B. Hurley has agreed that if
Dixons Overseas converts any shares of Series A Preferred Stock to
Common Stock, he will (to the extent he may do so without triggering
liability under Section 16(b) of the Securities Exchange Act of 1934)
exercise his options from the Company granted under his employment
agreement in an amount sufficient to keep Dixons Overseas' voting
control below 50%. Pursuant to a Voting Agreement dated December 3,
1993 (as amended) between John B. Hurley and Dixons America Holdings,
Inc. ("DAH"), the 3,164,804 shares of Common Stock held by Dixons
Overseas (as long as it is beneficially owned by DAH or its
affiliates) shall be voted in all elections of directors in direct
proportion to the vote of all other holders of shares of Common Stock,
until the earlier of December 3, 1996, or the conversion of more than
50% of the Series A Preferred Stock into Common Stock or the sale or
disposition of more than 50% of the Series A Preferred Stock to a
party other than an affiliate of DAH. Further, at the sole option of
DAH and its affiliates and upon the conversion of more than 50% of the
Series A Preferred Stock into Common Stock, (a) the Common Stock then
owned by DAH and its affiliates shall be voted for the election of
directors nominated by Mr. Hurley up to (i) the total number of
directors, less (ii) one-half of the total number of directors,
rounded up to the nearest whole number, minus one; and (b) the Common
Stock owned by Mr. Hurley (or for which he has voting power) shall be
voted for the election of directors nominated by DAH or its
affiliates, up to one-half of the total number of directors, rounded
up to the nearest whole number, minus one (inclusive of any directors
to be elected by the holders of Series A Preferred Stock and Series B
Preferred Stock). The voting agreements described in (a) and (b)
above are revocable by DAH or its affiliates at any time, and by Mr.
Hurley during such time as he does not have the power to elect a
majority of the Board of Directors after giving effect to the
foregoing agreements.
ELECTION OF DIRECTORS
Seven directors are proposed to be elected to hold office until the
next annual meeting of the shareholders and until their respective successors
have been elected and qualified. Assuming the presence of a quorum, four
directors will be elected at the Annual Meeting, from among those duly
nominated for such positions, by a plurality of the votes cast by holders of
Common Stock, two directors will be elected by a plurality of the votes cast by
holders of Series A Preferred Stock, and one director will be elected by a
plurality of the votes cast by holders of Series B Preferred Stock, in each
case present in person, or represented by proxy, and entitled to vote at the
meeting. Assuming a quorum is present, abstentions, withholdings of authority
or broker non-votes will not affect the election of such nominees. Except to
the extent authority is withheld, votes will be cast pursuant to the Proxies
solicited hereby for the nominees for election by holders of Common Stock named
below. If any nominee is unable to serve, which is not anticipated, the
Proxies will be voted for such other person as may be nominated by the Board of
Directors.
The following table sets forth information as to each of the nominees
and information as to beneficial ownership of Common Stock by each of the
persons named in the Summary Compensation Table below and by all directors and
executive officers of the Company as a group, in each case, based on data
furnished by him or them. Except as indicated in the footnotes, each person
has sole investment and voting power with respect to the shares shown.
3
<PAGE> 7
<TABLE>
<CAPTION>
SERVED
AS A SHARES OF
DIRECTOR COMMON STOCK
PRINCIPAL OCCUPATION OF THE BENEFICIALLY
NAME OF INDIVIDUAL OR AND EMPLOYMENT FOR COMPANY OWNED AS OF PERCENT
IDENTITY OF GROUP AGE LAST FIVE YEARS SINCE MAY 1, 1995 OF CLASS
--------------------- --- -------------------- ------- ----------- --------
<S> <C> <C> <C> <C> <C>
NOMINEES
Ernest L. Grove, Jr.(1) 70 Chairman of the Board of the 1987 1,000 *
Company since December 1993.
Retired Vice Chairman of the
Board, Chief Financial
Officer and Director of The
Detroit Edison Company.
Also a Director of Standard
Federal Bank and a Trustee
of Cranbrook Funds, an
investment company.
Oliver L. Fretter(1) 72 Chairman of the Board of the 1967 3,468,991(3) 32.8%
Company from 1985 to
December 1993. Prior
thereto he was President of
the Company.
John B. Hurley(1) 55 President of the Company 1978 5,932,669(3) 54.8%
since 1985. Prior thereto
he was Executive Vice
President.
Dale R. Campbell(1) 38 Executive Vice President of 1993 2,550(4) *
the Company since June 1989.
Prior thereto he was General
Counsel of the Company.
Peter A. Dow(2) 61 Retired Vice Chairman, 1986 510 *
President and Chief
Operating Officer of Lintas:
Campbell-Ewald, an
advertising agency.
Brian K. Friedman(2) 38 General Counsel of Silo, 1994 -- *
Inc. from 1989 to 1993.
Robert N. Shrager(2) 46 Corporate Finance Director 1994 -- *
of Dixons Group plc since
1988.
NON DIRECTOR EXECUTIVE OFFICERS
Daniel Hourigan 47 Senior Vice President - -- -- *
Store Operations since
February 1994. From 1991 to
1994, he held the same
position at Silo, Inc.
Prior to then, he was
employed in various
capacities with Dixons Store
Group Limited in England.
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
SERVED
AS A SHARES OF
DIRECTOR COMMON STOCK
PRINCIPAL OCCUPATION OF THE BENEFICIALLY
NAME OF INDIVIDUAL OR AND EMPLOYMENT FOR COMPANY OWNED AS OF PERCENT
IDENTITY OF GROUP AGE LAST FIVE YEARS SINCE MAY 1, 1995 OF CLASS
--------------------- --- -------------------- ------- ----------- --------
<S> <C> <C> <C> <C> <C>
Julian L. Potts 47 Senior Vice President- -- 4,080(4) *
Advertising, Merchandising
and Marketing since December
1993. Previously, he was
Senior Vice President-Sales,
Operations, Marketing and
Market Development since
1991. Previous thereto he
was Senior Vice President-
Eastern Region since 1990.
He has been employed by the
Company since 1979.
Stuart G. Garson 39 Vice President and Secretary -- -- *
since December 1993.
General Counsel since
November 1989.
All Executive Officers and Directors as a Group (ten persons) 5,944,094 54.8%
</TABLE>
- ---------------
* less than 1%
(1) Director position to be voted on by Common Stockholders.
(2) Director position to be voted on by Preferred Stockholders.
(3) See "Shareholders Entitled to Vote and Principal Shareholders" above.
(4) Represents shares of Common Stock which Messrs. Campbell and Potts
have the right to acquire through the exercise of stock options within
60 days of May 1, 1995.
CERTAIN INFORMATION AS TO COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
From February 1, 1994 to March 23, 1994, the Audit Committee consisted
of John B. Hurley, Ernest L. Grove, Jr., Chairman, Peter A. Dow and Bruce D.
Birgbauer. On March 23, 1994, Mr. Birgbauer resigned, and Robert N. Shrager
now serves on the Audit Committee. The Audit Committee met two times during
the fiscal year. The Committee annually recommends for appointment by the
Board of Directors the independent public accountants for the Company, receives
and reviews audit reports submitted by the Company's independent public
accountants and internal audit staff, reviews internal audit procedures and
performs related functions.
From February 1, 1994 to June 15, 1994, the Compensation Committee
consisted of Oliver L. Fretter, Peter A. Dow, Chairman, and Ernest L. Grove,
Jr. On June 15, 1994, Mr. Fretter resigned, and Robert N. Shrager now serves
on the Compensation Committee. The Compensation Committee met one time during
the fiscal year. The Committee reviews and recommends to the Board of
Directors matters regarding compensation plans and arrangements with officers
and directors of the Company. The Committee also functions as the option
committee under the Company's 1986 Employee Stock Option Plan and the bonus
committee under the Company's Bonus Plan described under the Compensation
Committee Report on Executive Compensation below. In addition, a subcommittee
of the Compensation Committee, Ernest L. Grove, Jr. and Peter A. Dow, functions
as the Administrator of the Company's 1993 Long Term Incentive Plan.
5
<PAGE> 9
From February 1, 1994 to March 23, 1994, the Executive Committee
consisted of John B. Hurley, Ernest L. Grove, Jr., Dale R. Campbell and Bruce
D. Birgbauer. Bruce D. Birgbauer resigned on March 23, 1994. The Executive
Committee now consists of Ernest L. Grove, Jr., John B. Hurley, and Dale R.
Campbell. The Executive Committee met four times during the fiscal year. The
Executive Committee has the same power and authority as the Board in the
management of the business and affairs of the Company, subject to certain
limitations.
The Company has no standing nominating committee. The Board of
Directors held seven meetings and took action by written consent two times
during the fiscal year. Each director attended at least 75 percent of all of
the meetings of the Board and of the committees upon which he served.
EXECUTIVE COMPENSATION
The following table sets forth compensation awarded to earned by or
paid to the Company's Chief Executive Officer and the other four executive
officers who were serving as such at the end of fiscal year 1994, for services
rendered to the Company and its subsidiaries by such officers during fiscal
year 1995. Also included is salary, bonus and option information for these
people for fiscal years 1994 and 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
====================================================================================================
ANNUAL COMPENSATION LONG TERM
COMPENSATION
NAME AND -------------------------- ------------
PRINCIPAL POSITION AWARDS ALL OTHER
------------ COMPENSA-
YEAR SALARY ($) BONUS ($) OPTIONS (#) TION ($)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
John B. Hurley 1995 $325,000 $ 475,000 -- $ 500
President and Chief 1994 350,000 1,100,000 1,785,000 500
Executive Officer 1993 325,000 75,000 -- 1,000
- ----------------------------------------------------------------------------------------------------
Dale R. Campbell 1995 198,125 75,000 125,000 500
Executive Vice President 1994 155,000 -- -- 500
1993 142,500 30,000 -- 1,000
- ----------------------------------------------------------------------------------------------------
Daniel C. Hourigan 1995 254,952 -- 125,000 --
Senior Vice President - 1994 23,996 50,000 -- --
Store Operations 1993 -- -- -- --
- ----------------------------------------------------------------------------------------------------
Julian L. Potts 1995 198,125 50,000 125,000 500
Senior Vice President - 1994 155,000 -- -- 500
Advertising, 1993 145,090 30,000 -- 1,000
Merchandising and
Marketing
- ----------------------------------------------------------------------------------------------------
Stuart G. Garson 1995 143,750 65,000 75,000 500
Vice President, 1994 115,000 -- -- 500
Secretary and General 1993 115,000 29,000 -- 1,000
Counsel
====================================================================================================
</TABLE>
On October 1, 1991, John B. Hurley and the Company entered into an
employment agreement providing for, among other things, an annual salary of
$325,000, subject to annual upward adjustment in the discretion of the Board,
and various fringe benefits. In connection with the Silo acquisition in
December 1993, this employment agreement was amended.
6
<PAGE> 10
Under this employment agreement, the Company granted Mr. Hurley
options to acquire 800,000 shares of Common Stock. Of these 800,000 options,
200,000 were exercised during fiscal year 1993 at an exercise price of $.50 per
share. The remaining 600,000 options were amended in connection with the Silo
acquisition to become 306,000 options which are exercisable through October 1,
2001 for $.97 per share. Subject to certain other provisions of the employment
agreement discussed below, of these 306,000 options, 255,000 are exercisable as
of the date of this Proxy Statement and the remaining 51,000 will become
exercisable on February 1, 1996.
If an "Acceleration Event" occurs during the term of Mr. Hurley's
employment agreement and the Company (or its successor) thereafter terminates
Mr. Hurley's employment other than for "Cause" (as defined in the agreement),
all then outstanding options granted him under the agreement would become
immediately exercisable. The term "Acceleration Event" is defined in the
agreement to include, among other things, (a) a merger in which the Company is
not the survivor, (b) the sale of a majority of the Common Stock the result of
which is to consolidate ownership of such stock in a single person or a group
of persons acting in concert, (c) the sale of all of the Common Stock held by
Unaffiliated Shareholders (as therein defined) the result of which is to
consolidate the ownership of such stock in a single person or group, and (d)
the conveyance of all or substantially all of the assets of the Company to
another entity the ownership of which is not substantially similar to that of
the Company prior to such conveyance.
In addition, Mr. Hurley's employment agreement may be terminated by
the Company at any time, with or without Cause. If termination is for Cause,
or if Mr. Hurley voluntarily terminates (other than under certain specified
circumstances following an Acceleration Event), all then outstanding options
granted to Mr. Hurley under the agreement would become void and no other
obligations would be owed to him under the agreement. If termination is due to
death or disability (as defined in the agreement), the Company would not be
required to continue any salary or other benefits pursuant to the agreement,
but all options then outstanding and exercisable would continue to be
exercisable through January 31 of the next calendar year. Termination by the
Company other than for Cause or voluntarily by Mr. Hurley under specified
circumstances following an Acceleration Event would have no effect on the
status of his then outstanding options. In addition, in either such case,
salary payments would be required to continue until the earlier of (a) October
1, 2001 or (b) five years after the termination date.
Further, Mr. Hurley may terminate his employment agreement if prior to
December 3, 1996 either (a) Dixons American Holdings, Inc. ("DAH") (or its
transferee) designates a majority of the members of the Company's Board of
Directors or (b) an aggregate of 5% of the Common Stock or Series A Preferred
Stock issued in the Silo Acquisition are transferred by DAH or an affiliate, to
a party not an affiliate of DAH. If Mr. Hurley terminates the agreement in
such event, he will be paid the lesser of (x) $1.625 million, or (y) the
aggregate of all amounts which would be paid to him through the end of the term
of the agreement. In addition, the stock options granted under his employment
agreement, under the Company's 1993 Long Term Incentive Plan, and from Oliver
L. Fretter and Howard O. Fretter (see below), will accelerate and fully vest.
Pursuant to option agreements amended in connection with the Silo
acquisition, Mr. Hurley also holds options to purchase 408,000 shares of Common
Stock from Oliver L. Fretter and options to purchase 204,000 shares of Common
Stock from Howard O. Fretter, in each case at an exercise price of $.97 per
share. Of these 612,000 options, 285,600 are presently vested and the balance
will become vested in two equal tranches on each of December 3, 1995 and 1996,
subject to acceleration as described above. The options expire on December 3,
1999.
7
<PAGE> 11
OPTIONS GRANTED
The following table sets forth information with respect to the
individuals named in the Summary Compensation Table concerning option grants
during the last fiscal year. No stock appreciation rights ("SARs") were
granted during the last fiscal year.
OPTIONS/SARS GRANTS
IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
=======================================================================================================================
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term
=======================================================================================================================
% of Total
Options/SARs
Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted Fiscal Year Per Share Date 5% 10%
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
John B. Hurley -- -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------------
Dale R. Campbell 125,000 12.4% $3.50 8/1/2004 $275,000 $697,500
-----------------------------------------------------------------------------------------------------------------------
Daniel Hourigan 125,000 12.4 3.50 8/1/2004 275,000 697,500
-----------------------------------------------------------------------------------------------------------------------
Julian L. Potts 125,000 12.4 3.50 8/1/2004 275,000 697,500
-----------------------------------------------------------------------------------------------------------------------
Stuart G. Garson 75,000 7.5 3.50 8/1/2004 165,000 418,500
=======================================================================================================================
</TABLE>
8
<PAGE> 12
OPTION EXERCISE AND FISCAL YEAR-END VALUES
The following table sets forth information with respect to the
individuals named in the Summary Compensation Table concerning the number and
value of options outstanding at the end of the last fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES(1)
<TABLE>
<CAPTION>
=======================================================================================================================
Number of Unexercised Value of Unexercised
Options/SARs at In-The-Money
Fiscal Year End (#)(1) Options/SARs at
Fiscal Year End ($)(2)
---------------------------------------------------------------
Shares
Acquired
on Value Not Not
Name Exercise Received Exercisable Exercisable Exercisable Exercisable
(#) ($)
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
John B. Hurley -- -- 1,084,600 1,618,400 $1,930,588 $2,880,752
-----------------------------------------------------------------------------------------------------------------------
Dale R. Campbell -- -- 2,550 125,000 -- --
-----------------------------------------------------------------------------------------------------------------------
Daniel Hourigan -- -- -- 125,000 -- --
-----------------------------------------------------------------------------------------------------------------------
Julian L. Potts -- -- 4,080 125,000 -- --
-----------------------------------------------------------------------------------------------------------------------
Stuart G. Garson -- -- -- 75,000 -- --
=======================================================================================================================
</TABLE>
NOTES
(1) No SARs are outstanding.
(2) Calculated on the basis of the fair market value of the underlying
securities at the fiscal year end minus the exercise price.
DIRECTORS' COMPENSATION
Board members receive an annual fee of $18,000; the Chairman of the
Board receives an annual fee of $40,000. The Board's committee chairmen each
receive an additional annual fee of $2,400. In addition, each Director is paid
$1,000 for each meeting attended, $1,000 for each committee meeting attended on
a day other than the day of a Board meeting, and $500 for each committee
meeting attended on the day of a Board meeting; plus, with respect to each
meeting, reimbursement for reasonable out-of-pocket expenses. Robert N.
Shrager has waived his right to receive any of the foregoing fees. Directors
who are employees of the Company are not separately compensated for their
services as directors.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors was established
by the Board of Directors pursuant to the Company's By-Laws on June 18, 1986.
Until June 15, 1994, the Committee consisted of Peter A. Dow and Ernest L.
Grove, Jr., both outside Directors of the Company, and Oliver L. Fretter, a
member (and, until December 3, 1993, Chairman) of the Board of Directors of the
Company. On June 15, 1994, Mr. Fretter resigned and was replaced by Robert N.
Shrager, a member of the Board of Directors of the Company. The Compensation
Committee is empowered to review and make recommendations to the Board of
Directors of the Company with regard to compensation plans and arrangements
with officers and directors of the Company (including, but not limited to,
9
<PAGE> 13
compensation, fringe benefits, stock incentive programs and contributions to
the Company's profit sharing plans); to serve as the Option Committee under the
1986 Fretter, Inc. Employee Stock Option Plan; and to serve as the Bonus
Committee under the 1988 Fretter, Inc. Bonus Plan. In addition, Messrs. Grove
and Dow also serve as the Administrator of the Company's 1993 Long Term
Incentive Plan.
The overall objectives of the Company's executive compensation program
are to (a) encourage the Company's executives to achieve performance of long
term and fiscal year goals, (b) provide compensation that will attract and
retain superior talent and reward initiative, innovation and industry, and (c)
reward achievement of goals and recognize extraordinary efforts or
undertakings. Accordingly, the Company's executive compensation is based on
three components: base salary, annual incentive bonuses and long term
incentives through stock options.
During the fiscal year, the Compensation Committee did not recommend
any raises in base salary for any executives, because the Compensation
Committee, in its subjective discretion, did not deem such raises advisable.
The salary of the Chief Executive Officer was set by contract entered into in a
prior year, and therefore was not subject to review by the Compensation
Committee during fiscal year 1995.
Annual incentive bonuses are generally paid pursuant to the Company's
1988 Fretter, Inc. Bonus Plan. The Bonus Plan is administered by the
Compensation Committee acting as the bonus committee under the Bonus Plan
("Bonus Committee"). The Bonus Plan provides for the establishment of an
additional compensation fund available for bonuses for any taxable year
(defined to correspond to the Company's fiscal year) of 15 percent of net
income of the Company in excess of $4 million, up to a maximum fund of $1.5
million. As defined in the Bonus Plan, net income means the net income of the
Company for the taxable year before the payment of or provision for bonus
awards and any federal income taxes (but not other taxes) on the net income of
the Company for such taxable year, and excluding gains or losses from the sale
or other disposition of capital assets during such taxable year and any net
operating loss carryforward. There is no requirement that any part of the
additional compensation fund be awarded as bonuses for any taxable year and no
part of the fund not awarded in one taxable year is carried forward to
succeeding years. To the extent funds are available for payment under the
Plan, the Committee allocates all or a portion thereof among the Company's
executives and other Company employees whom the Committee believes were
responsible for the level of Company earnings achieved. For Fiscal 1995, the
Committee awarded bonuses under the Plan. Bonuses paid to the executive
officers are depicted in the Summary Compensation Table found elsewhere in this
Proxy Statement.
Long term incentives for executives are created through utilization of
the Company's 1993 Long Term Incentive Plan and 1986 Fretter, Inc. Employee
Stock Option Plan (the "Option Plans"), approved by the shareholders of the
Company in December 1993 and March 1986, respectively. An aggregate of
3,514,000 shares of the Company's Common Stock are authorized to be issued
pursuant to the Option Plans.
The Option Plans are administered by the Compensation Committee or, as
to the 1993 Plan, by a subcommittee thereof. No member of the administering
committee is eligible to receive options under either Option Plan (or stock
options or stock appreciation rights under any other plan which may be adopted
in the future by the Company) while a member of the administering committee,
nor may any member of the administering committee have been eligible for any of
the foregoing at any time within one year prior to such member's appointment to
the administering committee.
By providing an exercise price equal to or exceeding the fair market
price of the Company's Common Stock at the time of grant, executives are
encouraged to achieve Company goals which create long term shareholder value
and thus an increase in the price of the Company's Common Stock. The Committee
awards incentive options among the Company's executives and other Company
employees whom the Committee believes have in the past year or are expected to
favorably address such long term objectives of the Company. In fiscal year
1995, a total of 1,006,550 options were granted to employees.
Peter A. Dow
Ernest L. Grove, Jr.
Robert N. Shrager
10
<PAGE> 14
COMPANY PERFORMANCE
The following graph depicts a five year comparison of cumulative total
returns, assuming $100 was invested on January 31, 1990 and reinvestment of any
dividends or distributions in (a) the Company's Common Stock, (b) the entire
NASDAQ Stock Market (as a broad equity market index) and (c) the NASDAQ Retail
Trade Stock Index (as a peer group index utilizing a published industry index).
Company Performance Chart
Comparison of five year cumulative return among NASDAQ Stock Market,
NASDAQ Retail Trade Stocks and Fretter, Inc.
<TABLE>
<CAPTION>
1/31/90 1/31/91 1/31/92 1/31/93 1/31/94 1/31/95
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Fretter 100.00 116.15 116.15 67.75 121.94 99.18
NASDAQ Stock Market 100.00 103.00 158.00 179.00 204.00 196.00
NASDAQ Retail Trade Stocks 100.00 120.00 210.00 190.00 204.00 180.00
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Until June 15, 1995, the Compensation Committee of the Company's Board
of Directors consisted of Peter A. Dow, Ernest L. Grove, Jr., both outside
Directors of the Company, and Oliver L. Fretter, a member (and until December
1993, Chairman) of the Board of Directors of the Company. On June 15, 1995,
Mr. Fretter resigned and was replaced by Robert N. Shrager.
Three Company properties (Mt. Clemens, Detroit (office) and
Southfield) are owned by Oliver L. and Elma M. Fretter, wife of Oliver L.
Fretter, and were leased to the Company pursuant to leases having 12-year
terms. The aggregate rental payments to Oliver L. and Elma M. Fretter under
these leases in fiscal year 1995 were $281,370. The lease for the Detroit
office was terminated on March 1, 1994, and the Company continues to operate
the Mt. Clemens and Southfield store locations on a month-to-month basis.
The Company's store in Flint, Michigan is owned and was leased to the
Company by LEHO Co., a partnership in which Laura Fretter (50%) and Howard O.
Fretter (50%) are partners, each being adult children of Oliver L. Fretter.
Until December 1993, Howard O. Fretter was a Director and Secretary of the
Company. This lease was terminated as of January 31, 1994, but continues on a
month-to-month basis on the same economic terms. Rental payments under this
lease in fiscal year 1995 were $84,000.
Pursuant to a Capital Contribution/Sale Agreement among the Company,
John B. Hurley and Oliver L. Fretter dated November 30, 1993, Mr. Fretter has
agreed to contribute to the capital of the Company shares of Common Stock he
owns, share for share to meet any exercises by Mr. Hurley of his option from
the Company to acquire up to 1,785,000 shares of Common Stock. Mr. Hurley has
agreed to pay Mr. Fretter $.97 for each share contributed to the Company by Mr.
Fretter.
11
<PAGE> 15
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANT
Price Waterhouse is the independent public accountant for the Company
and has reported on the Company's financial statements for the years ended
January 31, 1995, 1994 and 1993 included in the Annual Report which accompanies
this Proxy Statement. The Company's independent public accountants are
appointed by the Board of Directors. The Board of Directors has selected Price
Waterhouse to be the independent public accountants for the current fiscal
year. Representatives of Price Waterhouse are expected to be present at the
meeting with the opportunity to make a statement if they desire to do so and to
be available to respond to appropriate questions.
ANNUAL REPORT AND OTHER MATTERS
The Annual Report of the Company for the fiscal year ended January 31,
1995, including the financial statements, is being mailed to the shareholders
with this Proxy Statement. A complete list of the shareholders of record
entitled to vote at the Meeting will be available for examination by any
shareholder during the Meeting and at the place of the Meeting.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Certain parties are required to file under Section 16 of the
Securities Exchange Act of 1934 reports of ownership and changes of ownership
with the Securities and Exchange Commission, and to provide copies of such
reports to the Company.
Based solely on information provided to the Company by individual
directors and executive officers, the Company believes that during the
preceding year all such filing requirements have been complied with, except
that: (a) Dale Campbell, Daniel Hourigan, Julian Potts, Stuart Garson, Mark
Malta and Paul Mattei (all officers of the Company) filed late Form 5s
reporting the grant of options to them under the Company's 1993 Long Term
Incentive Plan; (b) Paul Mattei and Daniel Hourigan filed late Form 3s
reporting their ownership of Company securities as of the date they became
officers of the Company; and (c) Howard Fretter, a significant shareholder,
filed a late Form 5 reporting a gift of Company Common Stock to trusts for the
benefit of his children.
PROPOSALS FOR 1996 ANNUAL MEETING
A shareholder desiring that a proposal, otherwise proper for
presentation, be presented at an annual meeting of shareholders to be held in
1996 must send such proposal to the Secretary of the Company for inclusion in
the materials relating to that meeting so that it is received by February 1,
1996.
COST OF SOLICITING PROXIES
The cost of soliciting Proxies will be paid by the Company. The
Company has retained Georgeson & Co. Inc. ("Georgeson") to assist the Company
in the solicitation of Proxies. Proxies may be solicited by directors,
officers and/or regular employees of the Company and Georgeson on behalf of the
Company by telephone, telegram and personal solicitation in addition to the use
of the mails. Georgeson will receive a fee of approximately $1,500, plus
reimbursement of expenses, for its assistance in the solicitation of Proxies,
depending on the actual services rendered. The Company may reimburse banks,
brokers and fiduciaries holding shares in their names or in the names of their
nominees for their expenses in sending soliciting materials to the beneficial
owners of such shares and of obtaining their Proxies.
By Order of the Board of Directors
STUART G. GARSON
Secretary
Dated: May 31, 1995
12
<PAGE> 16
<TABLE>
<S> <C>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF THE NOMINEES INDICATED BELOW.
1. Election of Directors Duly Nominated: Ernest L. Grove Jr., Oliver L. Fretter, John B. Hurley and Dale R. Campbell
FOR all nominees WITHHOLD
listed (except as AUTHORITY (Instruction: To withhold authority to vote for any individual nominee,
marked to the to vote for all strike a line through the name of said nominee listed above.)
contrary). nominees listed.
/ / / / ___________________________________________________________________________
2. In the discretion of the proxies upon
such other business as may properly
come before the meeting.
The undersigned acknowledges receipt of the Notice of Annual
Meeting and the Proxy Statement and hereby revokes all proxies
heretofore given to vote at said meeting or at any adjournment
or adjournments thereof.
Please sign exactly as name appears. When signing as attorney,
executor, administrator, trustee, or guardian, please give full
title. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
Dated:___________________________________________________, 1995
_______________________________________________________________
(Signature)
_______________________________________________________________
(Signature if held jointly)
"PLEASE MARK INSIDE BLUE BOXES SO THAT DATA PLEASE MARK, SIGN AND RETURN PROXY CARD PROMPTLY USING THE
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES" ENCLOSED ENVELOPE.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PROXY FRETTER, INC. PROXY
ANNUAL MEETING OF SHAREHOLDERS OF FRETTER, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Ernest L. Grove Jr., and John B. Hurley as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote as designated on the reverse side, all shares of
Common Stock, $.01 par value, of Fretter, Inc. a Michigan corporation, which the
undersigned has the power to vote, at the Annual Meeting of Shareholders to be
held June 21, 1995 and any adjournment or adjournments thereof.
(Continued on reverse side)
