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
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
THE COSMETIC CENTER, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
( ) $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) 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>
THE COSMETIC CENTER, INC.
8839 GREENWOOD PLACE
SAVAGE, MARYLAND 20763
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 8, 1996
The Annual Meeting of Stockholders of The Cosmetic Center, Inc., a Delaware
corporation (the "Company"), will be held on Friday, March 8, 1996, at 3:30 p.m.
at the Holiday Inn, 4095 Powder Mill Road, Beltsville, Maryland for the
following purposes:
1. To elect two Class I directors as set forth in the accompanying Proxy
Statement.
2. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Only Class B stockholders of record at the close of business on January 23,
1996 are entitled to notice of and to vote at the meeting. The list of Class B
stockholders entitled to vote at the meeting will be open to the examination of
any stockholder during the ten days prior to the meeting at the Company's
offices, 8839 Greenwood Place, Savage, Maryland, during normal business hours.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN,
DATE AND MAIL YOUR PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED WITHIN THE UNITED STATES. IF YOU ARE PRESENT AT THE MEETING, YOU MAY, IF
YOU WISH, WITHDRAW YOUR PROXY AND VOTE YOUR SHARES PERSONALLY.
By Order of the Board of Directors
ANITA J. WEINSTEIN
SECRETARY
February 2, 1996
NOTICE TO CLASS A COMMON STOCKHOLDERS.
THIS PROXY STATEMENT IS PROVIDED TO CLASS A STOCKHOLDERS FOR INFORMATIONAL
PURPOSES ONLY. CLASS A STOCKHOLDERS DO NOT HAVE ANY VOTING RIGHTS WITH RESPECT
TO THE ABOVE ISSUES.
<PAGE>
THE COSMETIC CENTER, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
FRIDAY, MARCH 8, 1996
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board of Directors") of The Cosmetic
Center, Inc., a Delaware corporation (the "Company"), for use at the 1996 annual
meeting of stockholders to be held on Friday, March 8, 1996 at 3:30 p.m., at the
Holiday Inn, 4095 Powder Mill Road, Beltsville, Maryland, and at any
adjournments thereof (the "Meeting").
Record holders of the Company's Class B Common Stock, par value $.01 per
share, at the close of business on January 23, 1996 are entitled to notice of,
and to vote at, the Meeting. Each stockholder will be entitled to one vote for
each share of Class B Common Stock held at the close of business on January 23,
1996. On January 10, 1996, there were outstanding 1,582,780 shares of Class B
Common Stock.
Shares of Class B Common Stock represented by valid proxies received by the
Company in time for the Meeting will be voted as specified in such proxies. Any
stockholder giving a proxy has the right to revoke it at any time before it is
exercised by attending the Meeting and voting in person or by filing with the
Secretary of the Company an instrument of revocation or a duly executed proxy
bearing a later date.
The Company has been advised that Anita Weinstein, Mark Weinstein and Susan
Magenheim, who, in the aggregate, beneficially own or have the power to vote in
excess of 50% of the shares of Class B Common Stock entitled to vote at the
Meeting, intend to vote in favor of each of the proposals to be considered and
acted upon at the Meeting. Accordingly, each of the proposals can be approved
without the vote of any other stockholder.
Votes cast by proxy or in person at the Meeting will be tabulated by the
judge of elections appointed for the Meeting. The judge of elections will treat
abstentions as Class B Common Stock that is present and entitled to vote for
purposes of determining the presence of a quorum but as not voted for purposes
of determining the approval of any matter submitted to stockholders for a vote.
If a broker indicates on a proxy that such broker does not have discretionary
authority as to certain Class B Common Stock to vote on a particular matter,
such shares will not be considered as present and entitled to vote with respect
to that matter.
The Proxy Statement, the accompanying notice of the Meeting and proxy form
and the Company's Annual Report were first sent or given to stockholders on or
about February 2, 1996.
The mailing address of the Company's principal executive offices is 8839
Greenwood Place, Savage, Maryland 20763.
ELECTION OF DIRECTORS
The Company has a classified Board of Directors consisting of two Class I
directors, two Class II directors and two Class III directors. The current terms
of the directors continue until the annual meeting of stockholders to be held in
1996, 1997 and 1998, respectively, and until their respective successors are
elected and qualified. At each annual meeting, directors are elected for a full
term of three years to succeed those directors whose terms expire at the annual
meeting date.
The persons named in the proxy will vote, unless the proxy is marked
otherwise, to elect as Class I directors, Mr. Ronald M. Hirschel and Mrs. Susan
K. Magenheim. Mr. Ronald M. Hirschel and Mrs. Susan K. Magenheim currently serve
as Class I directors. The proxy may not be voted for more than two directors. If
a nominee will be unable to serve, the person acting under the proxy may vote
the proxy for the election of a substitute. It is not presently contemplated
that any nominee will be unable to serve. The term of the Class I directors
elected at the Meeting will expire in 1999.
<PAGE>
The following information is furnished with respect to the nominees listed
above and to the other directors of the Company whose terms of office will
extend beyond the Meeting. All references to the Company in this section include
the Company's predecessors.
NOMINEES
CLASS I
Ronald M. Hirschel, age 45, has been a member of the law firm of Hirschel,
Savitz, Parker & Hollman, P.A. (formerly Savitz, Kronthal & Hirschel, P.A.)
since its inception in 1991. From 1988 to 1991, Mr. Hirschel was a consultant
and lawyer in private practice. He has served as a Director of the Company since
December 1994.
Susan K. Magenheim, age 38, has served as a Director of the Company since
April 1989 and as Vice President and Assistant Secretary of the Company since
April 1986. Ms. Magenheim also served as a Director of the Company from
September 1982 to July 1987.
OTHER DIRECTORS
CLASS II
Mark S. Weinstein, age 43 has been Chairman of the Board of Directors since
July 1995, Vice Chairman of the Board of Directors and Chief Executive Officer
of the Company from April 1989 to July 1995 and a Director of the Company since
September 1982. From June 1985 to April 1989, he served as the Company's
President.
Donald R. Rogers, age 49, has served as a Director of the Company since
February 1983. For more than the past five years, he has been a member of the
law firm of Shulman, Rogers, Gandal, Pordy & Ecker, P.A. in Rockville, Maryland.
Mr. Rogers is a director of Allegiance Bank, N.A.
CLASS III
Ben S. Kovalsky, age 57, has served as Chief Executive Officer since July
1995 and as a Director, President and Chief Operating Officer of the Company
since April 1989.
Anita J. Weinstein, age 66, has served as Vice Chairwoman of the Board of
Directors since July 1995, as a Director and Secretary of the Company since
September 1982, and as a Vice President since April 1989.
Mark Weinstein and Susan Magenheim are the son and daughter of Anita
Weinstein.
PAST DIRECTOR
Louis R. Weinstein, who co-founded the Company in 1957 with his wife, Anita
J. Weinstein, served as a Director and principal officer of the Company until
his death in July 1995.
2
<PAGE>
The following table summarizes the ownership of Class A Common Stock and
Class B Common Stock by each director or nominee and certain executive officers,
individually, and by all directors and executive officers as a group as of
January 10, 1996:
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
AMOUNT AND PERCENT OF AMOUNT AND PERCENT OF
NAME NATURE CLASS(1) NATURE CLASS(2)
<S> <C> <C> <C> <C>
Anita J. Weinstein............................... 538,496(3) 19.0 644,811(4) 40.2
Mark S. Weinstein................................ 168,714(5) 6.2 107,176(6) 6.7
Susan K. Magenheim............................... 91,428(7) 3.3 64,496(8) 4.1
Ben S. Kovalsky.................................. 46,000(9) 1.7 32,500(10) 2.0
Donald R. Rogers................................. 6,500(11) * 3,500(12) *
Ronald M. Hirschel............................... 1,810(13) * 605(14) *
Michael J. Lewis................................. 6,700(15) * -0- *
All directors and officers as a group
(12 persons)................................... 886,598(16) 30.0 862,338(17) 52.2
</TABLE>
* Less than 1% of the outstanding shares.
(1) Based on 2,713,354 shares of Class A Common Stock outstanding plus
currently exercisable options for the individual officers.
(2) Based on 1,582,780 shares of Class B Common Stock outstanding plus
currently exercisable options for the individual officers.
(3) Includes 121,528 shares of Class A Common Stock issuable upon exercise of
currently exercisable options and excluding 18,472 shares of Class A Common
Stock issuable pursuant to options currently not exercisable.
(4) Includes 20,000 shares of Class B Common Stock issuable upon exercise of
currently exercisable options.
(5) Includes 24,091 shares of Class A Common Stock issuable upon exercise of
currently exercisable options and 2,036 shares of Class A Common Stock
owned by his wife and excludes 26,260 shares of Class A Common Stock held
by him in trust for his nephews and niece, over which shares he disclaims
any beneficial interest.
(6) Includes 9,090 shares of Class B Common Stock issuable upon exercise of
currently exercisable options and 4,536 shares of Class B Common Stock
owned by his wife and excludes 10,666 shares of Class B Common Stock held
by him in trust for his nephews and niece, over which shares he disclaims
any beneficial interest.
(7) Includes 15,491 shares of Class A Common Stock issuable upon exercise of
currently exercisable options and excludes 37,453 shares of Class A Common
Stock held by her in trust for her nephew and niece, over which shares she
disclaims any beneficial interest.
(8) Includes 9,090 shares of Class B Common Stock issuable upon exercise of
currently exercisable options and excludes 24,381 shares of Class B Common
Stock held by her in trust for her nephew and niece, over which shares she
disclaims any beneficial interest.
(9) Includes 41,000 shares of Class A Common Stock issuable upon exercise of
currently exercisable options.
(10) Includes 27,500 shares of Class B Common Stock issuable upon exercise of
currently exercisable options.
(11) Includes 4,000 shares of Class A Common Stock issuable upon exercise of
currently exercisable options and 2,000 shares of Class A Common Stock
owned by his wife over which shares he disclaims any beneficial interest.
(12) Includes 1,000 shares of Class B Common Stock issuable upon exercise of
currently exercisable options and 2,000 shares of Class B Common Stock
owned by his wife, over which shares he disclaims any beneficial interest.
(13) Includes 80 shares of Class A Common Stock owned by his wife and excludes
1,170 shares of Class A Common Stock held by him in trust for his children,
over which shares he disclaims any beneficial interest.
(14) Includes 55 shares of Class B Common Stock owned by his wife.
(15) Includes 6,700 shares of Class A Common Stock issuable upon exercise of
currently exercisable options.
(16) Includes 238,760 shares of Class A Common Stock issuable upon exercise of
currently exercisable options and excludes 18,472 shares of Class A Common
Stock issuable pursuant to options currently not exercisable and other
shares of Class A Common Stock as described above. See Notes 5, 7, and 13.
(17) Includes 70,430 shares of Class B Common Stock issuable upon exercise of
currently exercisable options and excludes other shares of Class B Common
Stock as described above. See Notes 6, 8, and 14.
Except as otherwise indicated, each person named in the table has sole voting
and investment power over his or her shares of Class A Common Stock and Class B
Common Stock.
3
<PAGE>
The Board of Directors held five meetings during the fiscal year ended
September 29, 1995. The Company does not have a nominating committee. During
1995, each director attended at least 75% of the aggregate of the total number
of meetings of the Board (held during the period for which he or she was a
director) and the total number of meetings held by all Board committees on which
he or she served (during the periods that he or she served as a member).
The Audit Committee, which during 1995 consisted of Messrs. Hirschel and
Rogers, is responsible for reviewing, with the independent certified public
accountants, the general scope of their audit services and the annual results of
their audit and making recommendations to the Board of Directors regarding the
selection and fees of the independent auditors. The Audit Committee met twice
during the fiscal year. The Audit Committee also met in November 1995 to discuss
the results of the year end audit.
Based upon its review of Forms 3, 4 and 5 and any amendments thereto
furnished to the Company pursuant to Section 16 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), all of such forms were filed on a
timely basis by reporting persons during 1995.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth certain information known to the Company
concerning the ownership of 5% or more of the shares of Class B Common Stock as
of January 10, 1996. The voting and investment powers of the shares of Class B
Common Stock are held solely by the reported owner unless otherwise indicated.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NAME AND ADDRESS NATURE CLASS
<S> <C> <C>
Anita J. Weinstein
8839 Greenwood Place
Savage, Maryland 20763..................................................... 644,811(1) 40.2
Mark S. Weinstein
8839 Greenwood Place
Savage, Maryland 20763..................................................... 107,176(2) 6.7
</TABLE>
(1) Includes 20,000 shares of Class B Common Stock issuable upon exercise of
currently exercisable options.
(2) Includes 9,090 shares of Class B Common Stock issuable upon exercise of
currently exercisable options and 4,536 shares of Class B Common Stock owned
by his wife and excludes 10,666 shares of Class B Common Stock held by him
in trust for his nephews and niece, which shares he disclaims any beneficial
interest.
4
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth for the fiscal years ended September 29,
1995, September 30, 1994 and September 24, 1993, the annual and long-term
compensation for services in all capacities of the Company and its subsidiaries
for the Company's Chief Executive Officer and the four most highly compensated
executive officers at September 29, 1995 whose cash compensation from the
Company exceeded $100,000:
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
SALARY AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR $ BONUS $ OPTIONS # COMPENSATION
<S> <C> <C> <C> <C> <C>
Ben S. Kovalsky 1995 306,680 -- 13,500(6) --
President, Chief Executive 1994 299,943 32,500 4,500 --
Officer and Chief Operating 1993 286,965 50,000 4,500 3,880(5)
Officer
Mark S. Weinstein 1995 232,045 -- 15,000(6) 8,800(1)
Chairman of the Board 1994 225,961 32,500 5,000 6,976(1)
of Directors 1993 213,331 50,000 5,000 10,255(1)(3)
Louis R. Weinstein 1995 274,363 -- 20,000 190,272(2)(4)
Chairman of the Board 1994 374,151 32,500 20,000 116,514(2)
of Directors (past) 1993 347,511 50,000 20,000 120,572(2)(3)
Allen D. Nehman 1995 147,242 -- 7,700(6) --
Senior Vice President -- 1994 147,497 -- 2,500 --
Merchandising 1993 138,549 2,500 2,500 2,469(5)
Michael J. Lewis 1995 157,488 -- 6,700(6) --
Vice President -- Retail 1994 154,519 -- 2,500 --
Operations 1993 146,104 2,500 2,500 2,436(5)
</TABLE>
(1) Includes insurance premiums paid in the amount of $8,800, $6,976 and $6,500
in 1995, 1994 and 1993, respectively, by the Company with respect to
split-dollar life insurance polices for the benefit of Mr. Mark S.
Weinstein.
(2) Includes insurance premiums paid in the amount of $116,514 for 1995 and 1994
and $117,017 for 1993 by the Company with respect to split-dollar life
insurance policies for the benefit of Mr. Louis R. Weinstein.
(3) Includes Company contributions to the Employees Retirement Plan for the
benefit of the named executive officer as follows:
Mark S. Weinstein -- $3,755 in 1993
Louis R. Weinstein - $3,555 in 1993
(4) Includes $73,758 of continuing salary benefits paid to his estate under his
employment contract described in the section titled, "Employment Contracts
and Termination of Employment and Change-In-Control Arrangements".
(5) Represents the named executive officer's allocation of the contributions to
the Company's Employees Retirement Plan.
(6) In February 1995, the named executive officer received stock option grants
at the then fair market value of the Class A Common Stock upon surrendering
a like number of stock options.
5
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grant of options
under the 1991 Stock Option Plan, to each of the executive officers named in the
Summary Compensation Table, during the fiscal year ended September 29, 1995. All
options issued under this plan are for shares of Class A Common Stock.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE FOR
OPTIONS TO EMPLOYEES PRICE EXPIRATION OPTION TERM(4)
NAME GRANTED #(1) IN FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Ben S. Kovalsky 13,500(2) 11.9% $7.00 2/07/2005 $59,431 $150,609
Mark S. Weinstein 15,000(2) 13.3 7.70 2/07/2000 31,911 70,514
Louis R. Weinstein 20,000(2)(3) 17.7 9.62 2/16/2000 53,157 117,462
Allen D. Nehman 7,700(2) 6.8 7.00 2/07/2005 33,897 85,903
Michael J. Lewis 6,700(2) 5.9 7.00 2/07/2005 29,495 74,747
</TABLE>
(1) All options issued during the current fiscal year to officers were granted
as incentive stock options ("ISOs") under Section 422 of the Internal
Revenue Code of 1986, except for Louis R. Weinstein and Anita J. Weinstein's
options which were granted as non-incentive stock options. The option price
with respect to ISOs may not be less than 100% of the fair market value of
the common shares on the date of grant of the option. However, in the case
of an ISO granted to a person owning over 10% of the total combined voting
power of all classes of stock of the Company (a "Ten Percent Stockholder"),
the option price may not be less than 110% of such fair market value. Louis
R. Weinstein, Anita J. Weinstein and Mark S. Weinstein are Ten Percent
Stockholders. The aggregate fair market value (determined as of the date or
dates of grant) of the common shares subject to ISOs granted to any one
person which first become exercisable in any calendar year may not exceed
$100,000. ISOs are exercisable over a specified period not to exceed ten
years from the date of grant; provided, however, that in the case of an ISO
granted to a Ten Percent Stockholder, the exercise period may not exceed
five years from the date of grant. Louis R. Weinstein and Anita J.
Weinstein's non-incentive stock options were also granted at 110% of the
fair market value at date of grant and are currently exercisable for a
period of five years from the date of grant. Options will terminate no later
than thirty days after the termination of service as an employee or
director, except that options will terminate no later than nine months after
the termination of service due to death or disability.
(2) Options are currently exercisable except for the following executive officer
whose options first become exercisable in the calendar year as follows:
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Mark S. Weinstein 12,987 2,013
</TABLE>
(3) The 1991 Stock Option Plan is administered by a committee of which Louis R.
Weinstein was a member. As a member of the committee he received a
non-discretionary grant for 20,000 shares of Class A Common Stock on January
15th of each year, provided shares are available.
(4) The potential realizable value represents the estimated future gain in the
value of the options over their exercise price. The calculation assumes a 5%
and 10% appreciation rate, as dictated by the Securities and Exchange
Commission, in the per share price of the Class A Common Stock starting on
the date of grant and further assumes that the options will be exercised on
the expiration date. These return values are not intended to be a forecast
of the Class A Common Stock price and are not necessarily indicative of the
actual values which may be realized by the named executive officer.
6
<PAGE>
TEN-YEAR OPTION REPRICINGS
The following table contains information concerning the repricing of
options to each of the executives named in the Summary Compensation Table,
during the fiscal year ended September 29, 1995. All repriced options are for
shares of Class A Common Stock.
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF MARKET ORIGINAL
SECURITIES PRICE OF EXERCISE OPTION TERM
UNDERLYING STOCK AT PRICE AT REMAINING AT
OPTIONS TIME OF TIME OF NEW DATE OF
REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME AND PRINCIPAL POSITION DATE AMENDED (#) AMENDMENT ($) AMENDMENT ($) PRICE ($) AMENDMENT
<S> <C> <C> <C> <C> <C> <C>
Ben S. Kovalsky 2/07/95 4,500 $7.00 $ 11.37 $7.00 89 months
President, Chief Executive 2/07/95 4,500 7.00 14.50 7.00 103 months
Officer and Chief Operating 2/07/95 4,500 7.00 15.75 7.00 114 months
Officer
Mark S. Weinstein 2/07/95 5,000 7.00 12.51 7.70 29 months
Chairman of the Board 2/07/95 5,000 7.00 15.95 7.70 43 months
of Directors 2/07/95 5,000 7.00 17.32 7.70 54 months
Allen D. Nehman 2/07/95 2,700 7.00 11.37 7.00 89 months
Senior Vice President -- 2/07/95 2,500 7.00 14.50 7.00 103 months
Merchandising 2/07/95 2,500 7.00 15.75 7.00 114 months
Michael J. Lewis 2/07/95 1,700 7.00 11.37 7.00 89 months
Vice President -- Retail 2/07/95 2,500 7.00 14.50 7.00 103 months
Operations 2/07/95 2,500 7.00 15.75 7.00 114 months
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table sets forth information for each of the executive
officers named in the Summary Compensation Table with respect to the options
exercised during the fiscal year and the value of outstanding and unexercised
options held as of September 29, 1995.
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF OPTIONS
CLASS NUMBER OF UNEXERCISED OPTIONS AT FISCAL
OF SHARES ACQUIRED VALUE AT FISCAL YEAR END YEAR END(1)
NAME STOCK ON EXERCISE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Mark S. Weinstein A 27,590 $182,094 22,078 2,013 $ 8,753
B 27,591 182,101 9,090 -- 5,454
Louis R. Weinstein A -- -- 64,151 15,849 25,100
B -- -- 20,000 -- 23,900
Ben S. Kovalsky A -- -- 41,000 -- 99,420
B -- -- 27,500 -- 84,375
Allen D. Nehman A -- -- 7,900 -- 6,973
B -- -- 250 -- 313
Michael J. Lewis A -- -- 6,700 -- 5,829
B -- -- -- -- --
<CAPTION>
NAME UNEXERCISABLE
<S> <C>
Mark S. Weinstein $ 342
--
Louis R. Weinstein --
--
Ben S. Kovalsky --
--
Allen D. Nehman --
--
Michael J. Lewis --
--
</TABLE>
(1) At September 29, 1995 the closing market price of the Class A Common Stock
was $7.87 and the closing market price of the Class B Common Stock was
$7.75.
7
<PAGE>
COMPENSATION OF DIRECTORS
The Company pays each director who is not an officer or employee of the
Company $2,000 as director fees for each quarterly Board of Directors meeting
and $1,000 for each Audit Committee meeting attended. Directors who are officers
or employees of the Company receive no additional cash compensation for service
as directors. For the fiscal year ended September 29, 1995 the Company paid
directors fees of $8,000 to both Mr. Donald Rogers and Mr. Ronald Hirschel and
audit committee fees of $2,000 to both Mr. Donald Rogers and Mr. Ronald
Hirschel.
Mrs. Anita Weinstein and Mr. Donald Rogers are members of the stock option
committee. In that capacity they receive, annually on January 15th,
non-discretionary grants for 20,000 and 1,000 shares of Class A Common Stock,
respectively. They are non-qualified options. Mrs. Weinstein's options are
issued at 110% of fair market value at the date of grant and terminate five
years thereafter. Mr. Rogers' options are issued at fair market value at the
date of grant and terminate ten years thereafter.
Mr. Louis R. Weinstein also served as a member of the stock option
committee until his death in July 1995 and, as a member of the stock option
committee, received on January 16, 1995, a non-discretionary grant for 20,000
shares of Class A Common Stock a 110% of fair market value. See Employment
Contract section with regards to termination of options.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has employment contracts (the "Contracts") with Mark Weinstein
and Mr. Kovalsky that call for minimum annual salaries of $190,500 and $250,000,
respectively, subject to annual increases. The Contracts require that the
Company provide to the respective employee a vehicle or vehicle allowance, as
well as the right to participate in certain of the Company's benefit programs.
Each of the Contracts has a four-year term, commencing March 1, 1991, and
is automatically extended for successive additional 12-month periods unless a
notice to terminate such contract is given by the Company at least 24 months
prior to the expiration of the term of such Contract (including any extension
thereof). The Contracts provide that if the respective employee is terminated by
the Company other than for "good cause" (as defined therein), or if there is a
change in control of the Company, the Company is obligated to pay the employee
the balance of the salary due over the remaining term of the Contract.
Additionally, upon death, expiration of term, change in control of the Company,
or termination other than for "good cause," the Company is obligated to buy back
all of the employees' options (vested or unvested), which totalled 101,681
options at January 10, 1996. Payments would be based upon the difference between
the market value of the Class A Common Stock or Class B Common Stock, as the
case may be, on the termination date and the exercise prices of the options.
Each Contract provides that, during the term of the Contract and for two
years thereafter, the employee will not, directly or indirectly, own, control,
manage, or operate stores similar to those operated by the Company in Maryland,
Virginia, Illinois, or the District of Columbia or within a fifty mile radius of
any other city where the Company is operating retail stores.
The Contract with Mark Weinstein requires that the Company continue in
effect a life insurance policy in the face amount of $1,000,000. The Company
pays the annual premium of $8,800 on the policy. The Company is the beneficiary
of the policy to the extent of the premiums paid by it and the balance of the
benefits are payable to beneficiaries designated by Mark Weinstein. The Contract
with Mr. Kovalsky requires that the Company reimburse him, up to a maximum
amount of $4,000, for the annual premium cost of various personal insurance
policies owned by him.
The Company has an employment contract with Michael Lewis that calls for a
minimum annual salary of $150,380, subject to annual increases. The contract has
a one-year term, commencing August 1, 1995, and is automatically extended for
successive additional 12-month periods unless a notice to terminate the contract
is given by the Company at least 90 days prior to the expiration of the term of
the contract(including any extension thereof). The contract provides that if M.
Lewis is terminated by the Company without cause or after the expiration of the
term, the Company is obligated to pay M. Lewis an amount equal to one year's
salary. Upon the death of M. Lewis the contract is terminated and the Company's
only obligation is the payment of the unpaid portion of accrued compensation up
to the date of death.
8
<PAGE>
Louis Weinstein had a contract similar in terms to Messrs. M. Weinstein and
Kovalsky. As a result of his death in July 1995, the Company is obligated to
make continuing salary benefit payments to his estate until the end of his
contract, February 28, 1998, based on an annual salary of $348,675. The Contract
also obligated the Company to buy back all of L. Weinstein's options (vested or
unvested), which totalled 100,000 at July 8, 1995, based upon the difference
between the market value of the respective classes of stock and the exercise
price of the options. His beneficiary, Anita Weinstein, did not exercise this
buy-back option which expired on August 8, 1995, however Mrs. Weinstein can
exercise, in whole or in part, any of L. Weinstein's options until April 8,
1996. On December 20, 1995, Mrs. Weinstein exercised 10,000 of the foregoing
options in each of the Class A Common Stock and Class B Common Stock.
The Contract with Louis Weinstein requires that the Company continue in
effect a joint life insurance policy in the face amount of $4,000,000 covering
the lives of Louis and Anita Weinstein. The Company pays the annual premium of
$60,143. The Company is the beneficiary of the policy to the extent of the
premiums paid by it and the balance of the benefits are payable to a trust
designated by L. Weinstein. The Contract also required that the Company maintain
a life insurance policy in the face amount of $1,600,000 covering the life of L.
Weinstein. During the fiscal year 1995 the Company paid the annual premium of
$56,371 and received as death benefits the accumulative premiums paid by the
Company of $225,480 since the inception of the policy.
BOARD REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation policies are formulated, administered
and reviewed by the Board of Directors. The Board of Directors' general goal
with respect to executive officer compensation is to design a compensation
package which enables the Company to attract, motivate and retain key qualified
executives and to establish and maintain incentives for performance. The
executive officer compensation program consists of: (a) salary, (b) bonus and
(c) long-term stock based incentives.
The base salaries of the executive officers are intended to be set at
competitive levels consistent with the executive officers' position and
experience. The Board of Directors does not employ pay scales, formulas, target
levels or other quantitative techniques in setting executive officers' salaries
but instead makes an individual judgment in its discretion with respect to each
executive officer, based upon the directors' general knowledge with respect to
compensation practices in other companies, including companies the directors
believe are engaged in similar businesses, and the directors' judgment with
respect to an appropriate salary based upon the individual officer's position,
experience and personal performance. The base salaries for Messrs. L. Weinstein,
M. Weinstein, Kovalsky, and Lewis were fixed in connection with entering into
the employment agreements described above under "Employment Contracts and
Termination of Employment and Change-In-Control Arrangements." The agreements
provide for annual increases equal to the greater of the Consumer Price Index
for all Urban Consumers or the budgeted percentage compensation increase for all
officers, exclusive of the Chairman, Vice Chairman and President.
The Board of Directors similarly does not employ scales, formulas, target
levels or other quantitative techniques in setting executive officers bonuses
but instead makes an individual judgement based upon the overall performance of
the Company on a year to year basis and an evaluation, in its discretion, of the
personal performance of each executive officer.
Long-term incentive compensation, in the form of stock options, may be
awarded to any of the executive officers under the Company's 1991 Stock Option
Plan. Awards under the plan are made by the Stock Option Committee (composed of
Mrs. Weinstein and Mr. Rogers). The Stock Option Committee does not employ
formulas or other quantitative techniques in setting the amount of option
grants, but exercises its discretion in determining grants based upon its
evaluation of the executive officer's position, experience and personal
performance. The number of shares granted to Mr. L. Weinstein were set by the
terms of the plan. The exercise price of options granted under the plan are
fixed by the plan at fair market value of the shares subject to the grant on the
date of the grant (or 110% of the fair market value in the case of grants to 10%
stockholders). Compensation under the plan therefore will be realized only to
the extent that the stock price appreciates, thereby aligning the financial
interest of the Company's executive officers with those of the Company's
shareholders.
In February 1995, the Stock Option Committee amended certain outstanding
stock options to reset their exercise prices at the then current fair market
value of the Class A Common Stock, or in the case of 10% stockholders, at 110%
of the then current fair market value. This action effected all outstanding
stock options (other
9
<PAGE>
than non-discretionary options) with an exercise price greater than 110% of the
then current fair market value and was taken to help restore the incentive value
of these options to the holders. It did not result in a net increase in the
outstanding options.
Mr. Mark Weinstein, who has served as the Company's chief executive officer
from April 1989 to July 1995, and Mr. Ben Kovalsky, who has served as the
Company's chief executive officer since July 1995, are compensated pursuant to
their employment agreements entered into as of March 1, 1991. The terms of the
agreements are described above under "Employment Contracts and Termination of
Employment and Change-In-Control Arrangements." Mr. Weinstein's and Mr.
Kovalsky's base salaries are set in the agreements and annual increases are
determined by calculating the greater of the Consumer Price Index for all Urban
Consumers or the budgeted percentage compensation increase for all officers,
exclusive of the Chairman, Vice Chairman and President. Mr. Weinstein's base
salary was increased by $6,500 from 1994 to 1995 and Mr. Kovalsky's base salary
was increased by $8,520 from 1994 to 1995. No bonuses were awarded in 1995. In
February 1995 the Stock Option Committee repriced 15,000 options of Mr.
Weinstein and 13,500 options of Mr. Kovalsky at the fair market value. No
additional options were granted. The 3% salary increase was determined by the
Board, and the option grants were determined by the Stock Option Committee,
based upon their individual evaluations of Mr. Weinstein's and Mr. Kovalsky's
personal performances and cost of living increases.
The Board of Directors believes that Mr. M. Weinstein's and Mr. Kovalsky's
compensation for the fiscal year ended September 29, 1995 were determined in a
manner consistent with the policies described above. Mr. M. Weinstein did not
participate in the Board's deliberations with respect to the determination of
his compensation. Mr. B. Kovalsky did not participate in the Board's
deliberations with respect to the determination of his compensation.
<TABLE>
<CAPTION>
Board of Directors Stock Option Committee
<S> <C>
Mark S. Weinstein Anita J. Weinstein
Anita J. Weinstein Donald R. Rogers
Ben S. Kovalsky
Susan K. Magenheim
Donald R. Rogers
Ronald M. Hirschel
</TABLE>
10
<PAGE>
PERFORMANCE GRAPH
The following graph illustrates from September 30, 1990 through September
30, 1995 the cumulative total shareholder return, including the reinvestment of
any dividends, of $100 invested in the Company Class B Common Stock, the Total
Return Index for the NASDAQ Stock Market (US companies) and the Total Return
Industry Index for NASDAQ Retail Stocks.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG THE COSMETIC CENTER, INC., THE NASDAQ SOTCK MARKET-US INDEX
AND THE NASDAQ RETAIL INDEX
[INSERT GRAPH HERE]
9/95 9/94 9/93 9/92 9/91 9/90
THE COSMETIC CENTER, INC. 143 336 273 234 186 100
NASDAQ STOCK MARKET-US 321 233 231 176 157 100
NASDAQ RETAIL 223 203 206 182 181 100
* $100 INVESTED ON 9/30/90 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING SEPTEMBER 30.
11
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen & Co., independent public accountants, were the Company's
auditors for the fiscal year ended September 29, 1995 and have been employed in
that capacity since May 1987. The Board of Directors has not made a
determination as to the Company's auditors for the year ending September 28,
1996, which determination is expected to be made at the July 1996 Audit
Committee meeting.
A representative of Arthur Andersen & Co. is expected to attend the
Meeting. At that time, the representative will have the opportunity to make a
statement if he or she desires, and will be available to respond to appropriate
questions regarding the most recent audit of the Company's financial statements.
SOLICITATION OF PROXIES, STOCKHOLDER PROPOSALS
AND OTHER MATTERS
Proxies for the Meeting will be solicited by mail and may be solicited by
telephone and other means of communication. Solicitation may be made by
directors, officers and other regular employees of the Company. The entire cost
of soliciting proxies will be borne by the Company. The Company does not expect
to pay any compensation for solicitation of proxies, but will reimburse brokers,
nominees and fiduciaries for reasonable expenses incurred by them in sending
proxy material to the beneficial owners of Class B Common Stock held by such
persons.
Proposals of stockholders intended to be presented at the Company's next
annual meeting of stockholders must be received at the Company's principal
executive offices not later than September 15, 1996.
The Board of Directors does not intend to present, and has not been
informed that any other person intends to present, any matters for action at the
Meeting other than those specifically referred to herein. If, however, any other
matters should properly come before the Meeting, it is the intention of the
persons named in the enclosed proxy to vote the Class B Common Stock represented
thereby in accordance with their best judgment on such matters.
By Order of the Board of Directors
Anita J. Weinstein
SECRETARY
February 2, 1996
12
<PAGE>
PROXY
THE COSMETIC CENTER, INC.
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MARCH 8, 1996
The undersigned, a stockholder of The Cosmetic Center, Inc., a Delaware
corporation (the"Company"), hereby appoints Arlene H. Wright and Bruce E. Strohl
or either of them, attorneys and proxies of the undersigned, with full power of
substitution to vote and act for the undersigned at the Company's Annual Meeting
of Stockholders to be held at the Holiday Inn, 4095 Powder Mill Road,
Beltsville, Maryland on Friday, March 8, 1996 at 3:30 p.m., and at any
adjournments thereof, in respect of all shares of the Class B Common Stock
registered in the name of the undersigned as fully as the undersigned could vote
and act if personally present, on the following matters:
<TABLE>
<S> <C>
1. [ ] VOTE FOR all nominees listed below (except as [ ] WITHHOLD AUTHORITY TO VOTE FOR all nominees listed below.
indicated to the contrary below).
</TABLE>
CLASS I DIRECTORS: RONALD M. HIRSCHEL AND SUSAN K. MAGENHEIM
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, PRINT
THE NOMINEE'S NAME ON THIS LINE
2. In their discretion, on any other matters which may properly come before the
meeting or any adjournments thereof.
(CONTINUED ON OTHER SIDE)
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED. HOWEVER, IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR
PROPOSAL 1.
Please date this proxy and sign your name exactly as your name appears
herein. If the shares are held jointly, all owners must sign. When signing as
attorney, executor, administrator, trustee, guardian or other representative
capacity, please give full title.
Date , 1996
Signature of Stockholder
Signature of Stockholder
PLEASE COMPLETE, SIGN, DATE AND
PROMPTLY RETURN THIS PROXY IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES
