<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
</TABLE>
Crown Group, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(5) Total fee paid:
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[ ] 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:
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<PAGE> 2
CROWN GROUP, INC.
4040 NORTH MACARTHUR BOULEVARD, SUITE 100
IRVING, TEXAS 75038
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 19, 2000
To the Holders of Common Stock of
Crown Group, Inc.
Notice is hereby given that the Annual Meeting of Stockholders of Crown
Group, Inc., a Texas corporation (the "Company"), will be held in accordance
with its Bylaws at the Four Seasons Hotel and Resort, 4150 North MacArthur
Boulevard, Irving, Texas 75038, on Thursday, October 19, 2000, at 10:00 a.m.,
local time, for the following purposes:
(1) To elect seven directors to serve for a term of one year and
until their successors have been elected and qualified; and
(2) To conduct such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record as of the close of business on August 25,
2000, will be entitled to notice of and to vote at said meeting or any
adjournment thereof.
By Order of the Board of Directors.
Edward R. McMurphy
Chairman of the Board,
President and Chief Executive Officer
September 1, 2000
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER OF
SHARES YOU HOLD. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU
ARE URGED TO COMPLETE, SIGN, DATE AND MAIL THE ENCLOSED PROXY IN THE
ACCOMPANYING RETURN ENVELOPE TO WHICH NO POSTAGE NEED BE AFFIXED BY THE SENDER
IF MAILED WITHIN THE UNITED STATES.
<PAGE> 3
CROWN GROUP, INC.
4040 NORTH MACARTHUR BOULEVARD, SUITE 100
IRVING, TEXAS 75038
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 19, 2000
------------------------
PROXY STATEMENT
------------------------
SOLICITATION OF PROXIES
This Proxy Statement, which is first being mailed to stockholders on or
about September 1, 2000, is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Directors of Crown Group, Inc. (the
"Company"), for use at the Annual Meeting of Stockholders of the Company (the
"Annual Meeting") to be held at the Four Seasons Hotel and Resort, 4150 North
MacArthur Boulevard, Irving, Texas 75038, on Thursday, October 19, 2000, at
10:00 a.m., local time, and at any or all adjournments thereof. The address of
the principal executive offices of the Company is 4040 North MacArthur
Boulevard, Suite 100, Irving, Texas 75038 and the Company's telephone number at
such address is (972) 717-3423.
The total cost of this solicitation will be borne by the Company. In
addition to the U.S. mail, proxies may be solicited by officers and regular
employees of the Company, without remuneration, by personal interviews,
telephone and facsimile. It is anticipated that banks, brokerage houses and
other custodians, nominees and fiduciaries will forward soliciting material to
beneficial owners of stock entitled to vote at the Annual Meeting.
Any person giving a proxy pursuant to this Proxy Statement may revoke
it at any time before it is exercised at the Annual Meeting by notifying in
writing the Secretary of the Company, Mark D. Slusser, at the offices of the
Company, 4040 North MacArthur Boulevard, Suite 100, Irving, Texas 75038, prior
to the Annual Meeting date. In addition, if the person executing the proxy is
present at the Annual Meeting, he may, but need not, revoke the proxy, by notice
of such revocation to the Secretary of the Annual Meeting, and vote his shares
in person. Proxies in the form enclosed, if duly signed and received in time for
voting, and not so revoked, will be voted at the Annual Meeting in accordance
with the instructions specified therein. Where no choice is specified, proxies
will be voted FOR the election of the nominees for director named herein and, on
any other matters presented for a vote, in accordance with the judgment of the
persons acting under the proxies. Abstentions and broker non-votes will not be
counted as votes either in favor of or against the matter with respect to which
the abstention or broker non-vote relates; however, with respect to any proposal
other than the election of directors, abstentions and broker non-votes would
have the effect of a vote against the proposal.
Only stockholders of record at the close of business on August 25, 2000
will be entitled to notice of and to vote at the Annual Meeting and any
adjournments thereof. Each share of Common Stock issued and outstanding on such
record date is entitled to one vote. As of August 18, 2000, the Company had
outstanding 8,024,462 shares of Common Stock.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of August 18,
2000, with respect to ownership of the outstanding Common Stock by (i) all
persons known to the Company to own beneficially more than five percent (5%) of
the outstanding Common Stock of the Company (whose address is shown), (ii) each
director and nominee for director of the Company, (iii) each of the executive
officers of the Company named in the Summary Compensation Table on page 5, and
(iv) all directors and executive officers as a group. Unless otherwise
indicated, each person possesses sole voting and investment power with respect
to the shares owned by him.
<TABLE>
<CAPTION>
Number of Shares Percent
Name Beneficially Owned of Class
---- ------------------ --------
<S> <C> <C>
Edward R. McMurphy 1,014,540(1) 11.7%
4040 N. MacArthur Blvd., Suite 100
Irving, Texas 75038
Robert J. Kehl 971,667(2) 12.1%
Third St., Ice Harbor
Dubuque, Iowa 52004
Tilman J. Falgout, III 694,000(3) 8.4%
4040 N. MacArthur Blvd., Suite 100
Irving, Texas 75038
Gerald L. Adams 447,500(4) 5.6%
1225 East 9th St.
Lockport, Illinois 60441
Gerard M. Jacobs 336,780(5) 4.2%
David J. Douglas 66,800(6) *
John David Simmons 52,150(7) *
Mark D. Slusser 124,500(8) 1.5%
All Directors and Executive 3,707,937(9) 40.4%
Officers as a Group (8 persons)
</TABLE>
-------------------------
* Less than 1%.
(1) Includes 625,000 shares subject to presently exercisable stock options.
(2) Includes 956,667 shares issued in the name of Kehl River Boats, Inc., of
which Mr. Kehl is president and a principal shareholder. Also includes
15,000 shares subject to presently exercisable stock options.
(3) Includes 267,500 shares subject to presently exercisable stock options and
400,000 shares held in a corporation controlled by Mr. Falgout.
(4) Includes 17,500 shares subject to presently exercisable stock options.
(5) Includes 2,300 shares held by a corporation controlled by Mr. Jacobs,
38,000 shares owned by Mr. Jacobs' spouse, and 15,000 shares subject to
presently exercisable stock options.
(6) Includes 45,000 shares subject to presently exercisable stock options.
(7) Includes 50,000 shares subject to presently exercisable stock options.
2
<PAGE> 5
(8) Includes 120,000 shares subject to presently exercisable stock options.
(9) Includes an aggregate of 1,155,000 shares subject to presently exercisable
stock options, 402,300 shares held in corporations controlled by certain
directors, 956,667 shares issued in the name of Kehl River Boats, Inc. of
which a director is president and a principal shareholder, and 38,000
shares owned by a spouse of a director.
AGENDA ITEM ONE
ELECTION OF DIRECTORS
Pursuant to the Bylaws of the Company, the Board of Directors has set
the number of directors for the ensuing year at seven, all of whom are proposed
to be elected at the Annual Meeting. In the event any nominee is unable or
declines to serve as a director at the time of the meeting, the persons named as
proxies therein will have discretionary authority to vote the proxies for the
election of such person or persons as may be nominated in substitution by the
present Board of Directors. Management knows of no current circumstances which
would render any nominee named herein unable to accept nomination or election.
Directors shall be elected by a plurality of the votes cast by the holders of
shares entitled to vote in the election of directors at a meeting of
shareholders at which a quorum is present.
Members of the Board of Directors are elected annually to serve until
the next annual meeting of stockholders and until their successors are elected
and qualified.
The following persons have been nominated for election to the Board of
Directors.
EDWARD R. MCMURPHY, age 49, has served as the Company's Chief Executive
Officer since July 1984. He has been a director of the Company since its
inception in April 1983. From 1979 to June 1986, Mr. McMurphy served as
President of Marion Properties, Inc., a real estate development company and
former parent of the Company from July 1984 to June 1986.
TILMAN J. FALGOUT, III, age 51, has served as Executive Vice President
and General Counsel of the Company since March 1995 and as a director of the
Company since September 1992. From 1978 until June 1995, Mr. Falgout was a
partner in the law firm of Stumpf & Falgout, Houston, Texas.
JOHN DAVID SIMMONS, age 64, has served as a director of the Company
since August 1986. Since 1970, he has been President of Simmons & Associates,
LLC, a real estate development company, and Management Resources LLC, a
management consulting firm.
DAVID J. DOUGLAS, age 36, has served as managing director of Tuesday
Afternoon, Inc. (investment company) since January 1998. From February 1993
through December 1997, Mr. Douglas served as managing director of Triple S
Capital Corporation (investment banking firm). From July 1989 through January
1993, Mr. Douglas served as Vice President of Hatchett Capital Group, Inc.
(investment banking firm). From 1986 through 1988, Mr. Douglas was employed in
the investment banking division of Paine Webber Incorporated. Mr. Douglas has
served as a director of the Company since September 1992.
GERALD L. ADAMS, age 65, has been an entrepreneur for the past 35
years, starting, developing and operating a number of businesses primarily
related to the shipping, trucking, and real estate industries. Mr. Adams
currently owns and operates several companies, including (i) Adams
Transportation, Inc. (trucking) where he has been President since 1963, (ii)
TriRiver Dock, Inc.(stevedoring), where he has been President since 1970, (iii)
Adams Ringside, Inc. (restaurant) and Clover Ridge, Inc. (shopping center
operator), where he has been President since 1990, and (iv) Clover Ridge
Estates, Inc. (residential real estate development), where he has been President
since 1998. Mr. Adams has served as a director of the Company since October
1993.
GERARD M. JACOBS, age 45, has been Chief Executive Officer and
President of Huntington AluTech, Inc., a holding company engaged in the
consolidation of the aluminum forging industry, since March 1999. From April
1996 to February 1999, Mr. Jacobs was Chief Executive Officer and a director of
Metal Management, Inc., a company specializing in scrap metal. From 1983 through
1995, Mr. Jacobs developed resource recovery, landfill and hydroelectric
projects for his own account and for the investment banking firm of Russell, Rea
& Zappala, Inc.,
3
<PAGE> 6
Pittsburgh, Pennsylvania. From 1978 to 1983, Mr. Jacobs practiced securities,
corporate and banking law with the law firms of Reed, Smith, Shaw & McClay and
Manion, Alder & Cohen, P.C., Pittsburgh, Pennsylvania. Mr. Jacobs has been a
director of the Company since September 1994.
ROBERT J. KEHL, age 65, has been an entrepreneur for the past 35 years,
starting, developing and operating businesses primarily in the riverboat
construction, gaming, riverboat touring and restaurant industries. Since 1993,
Mr. Kehl has served as President of Kehl River Boats, Inc., a riverboat
construction firm in Las Vegas, Nevada. Mr. Kehl has been a director of the
Company since September 1994.
COMMITTEES OF THE BOARD AND ATTENDANCE
The Board of Directors of the Company presently has the following
standing committees:
(A) the Audit Committee is currently comprised of Messrs. Simmons,
Kehl and Jacobs, each of whom is an "independent director" as
such term is defined by the NASD's listing standards. The Audit
Committee, which held two meetings during the Company's last
fiscal year, is authorized to nominate the Company's independent
auditors and to review with the independent auditors the scope
and results of the audit engagement. A copy of the Audit
Committee Charter is attached hereto as Appendix A.
(B) the Compensation and Stock Option Committee is currently
comprised of Messrs. Adams, Douglas, McMurphy and Simmons. This
Committee, which held three meetings during the Company's last
fiscal year, recommends compensation levels for executive
officers of the Company, and is authorized to consider and make
grants of options pursuant to the Company's 1997 Stock Option
Plan and to administer its stock option plans.
During the Company's last fiscal year, the Board of Directors held
three meetings and took action three times by unanimous written consent. Each
incumbent director attended at least 75% of the aggregate number of meetings
held by the Board and by the Committees of the Board on which he served.
The Company does not have a Directors Nominating Committee, such
function being reserved to the entire Board of Directors.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, certain officers, and persons who own more than 10% of the
outstanding Common Stock of the Company, to file with the Securities and
Exchange Commission reports of changes in ownership of the Common Stock of the
Company held by such persons. Officers, directors and greater than 10%
stockholders are also required to furnish the Company with copies of all forms
they file under this regulation. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company, during the fiscal
year ended April 30, 2000, all Section 16(a) filing requirements applicable to
its officers, directors and greater than 10% stockholders were complied with,
except as follows: Gerald L. Adams, a director of the Company, filed one report
on Form 4 late reporting certain sales of common stock.
4
<PAGE> 7
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company to or on behalf of the Company's Chief Executive Officer and any other
executive officer whose salary and bonus, if any, exceeded $100,000 in fiscal
2000 (the "Named Executive Officers"), for the years ended April 30, 2000, 1999
and 1998:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term All Other
Annual Compensation Compensation Compensation (1)
----------------------------------------- ------------ ----------------
Name and Fiscal Other Annual Stock
Principal Position Year Salary Bonus Compensation Options
------------------ ------ ------ ----- ------------ ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Edward R. McMurphy 2000 $ 350,000 $ 650,000 - - $12,967
Chairman of the Board, 1999 312,500 800,000 - 400,000 16,900
President and Chief 1998 300,000 150,000 - 25,000 -
Executive Officer
Tilman J. Falgout, III 2000 $ 275,000 $ 375,000 - - $ 8,862
Executive Vice President 1999 237,500 425,000 - 145,000 12,728
and General Counsel 1998 225,000 75,000 - 20,000 -
Mark D. Slusser 2000 $ 175,000 $ 275,000 - - $ 7,234
Chief Financial Officer, 1999 156,250 250,000 - 115,000 7,732
Vice President Finance 1998 150,000 50,000 - 15,000 -
and Secretary
</TABLE>
----------
(1) These amounts include contributions to the Company's 401(k) Plan and
certain insurance premiums as follows:
<TABLE>
<CAPTION>
Disability 401(k)
Insurance Plan
---------- ------
<S> <C> <C> <C>
Edward R. McMurphy 2000 $ 8,717 $ 4,250
1999 8,525 8,375
1998 -- --
Tilman J. Falgout, III 2000 $ 4,841 $ 4,021
1999 5,811 6,917
1998 -- --
Mark D. Slusser 2000 $ 2,206 $ 5,028
1999 2,207 5,525
1998 -- --
</TABLE>
SEVERANCE AGREEMENTS
In July 1996, the Board of Directors authorized the Company to enter
into severance agreements with each of Mr. McMurphy, Mr. Falgout and Mr.
Slusser, which agreements provide that in the event of a sale, merger,
consolidation, change in control, or liquidation of the Company, or similar
extraordinary corporate transaction causing a change in control, each such
officer shall be entitled to 2.99 times the annual compensation paid to the
executive as well as accelerated vesting of options under the Company's stock
option plans.
5
<PAGE> 8
STOCK OPTION PLAN
In July 1997, the Board of Directors adopted the Company's 1997 Stock
Option Plan which was subsequently approved by the stockholders at the 1997
Annual Meeting (the "1997 Plan"). During the fiscal year ended April 30, 2000,
no options were granted under the 1997 Plan to any Named Executive Officer.
The following table provides certain information concerning each
exercise of stock options under the Company's stock option plans during the
fiscal year ended April 30, 2000, by the Named Executive Officers and the fiscal
year-end value of unexercised options held by such persons under the Company's
stock option plans:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Value of Unexercised
Shares Unexercised Options Options at Fiscal
Acquired at Fiscal Year-End Year-End
On Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable(1)
---- -------- -------- ------------------ ----------------
<S> <C> <C> <C> <C>
Edward R. McMurphy -- -- 625,000/75,000 $1,189,063/$ -
Tilman J. Falgout, III -- -- 267,500/75,000 421,875/ -
Mark D. Slusser -- -- 120,000/60,000 171,875/ -
</TABLE>
--------------------
(1) The market value of the Company's Common Stock on April 28, 2000 was $5.25
per share, and options to purchase 870,000 shares held by the above officers
were in-the-money. The actual value, if any, an executive may realize will
depend upon the amount by which the market price of the Company's Common
Stock exceeds the exercise price when the options are exercised.
DIRECTOR COMPENSATION
Effective August 1, 1998, non-employee directors of the Company receive
a $24,000 annual retainer, $2,000 per Board meeting attended in person, and $500
per Committee meeting attended in person. Directors who are also employees of
the Company do not receive separate compensation for their services as a
director. Pursuant to the Company's 1997 Stock Option Plan (the "Plan"), on the
first business day of July in each year, each then serving non-employee director
of the Company is automatically granted an option to purchase 2,500 shares of
Common Stock, at an exercise price equal to the fair market value of such stock
on the date of grant. Options granted under the Plan are exercisable for a
period of up to ten years. In the event that a director ceases to be a director
of the Company for any reason, options granted to the director will generally
expire upon the earlier to occur of (1) the tenth anniversary of the date of
grant of the option, or (2) ninety days following the date on which such
director ceased to be a director.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended April 30, 2000, Edward R. McMurphy,
Chairman of the Board, President and Chief Executive Officer of the Company,
served as a member of the Compensation and Stock Option Committee of the Board
of Directors. Mr. McMurphy also served as a Director of Huntington AluTech,
Inc., a firm where Gerard M. Jacobs, a Director of the Company, serves as Chief
Executive Officer.
6
<PAGE> 9
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following Report of the
Compensation and Stock Option Committee on Executive Compensation and the
Stockholder Return Performance Graph shall not be incorporated by reference into
any such filings.
REPORT OF COMPENSATION AND STOCK OPTION COMMITTEE
ON EXECUTIVE COMPENSATION
The Board of Directors of the Company has a Compensation and Stock
Option Committee ("Compensation Committee") which recommends compensation levels
for the executive officers of the Company, including the Chief Executive
Officer, and is authorized to consider and make grants of options pursuant to
the Company's 1997 Stock Option Plan and to administer its option plans. The
Compensation Committee held three meetings during fiscal 2000. During fiscal
2000 the Company had three executive officers, including Edward R. McMurphy,
Chairman of the Board, President and Chief Executive Officer; Tilman J. Falgout,
III, Executive Vice President and General Counsel; and Mark D. Slusser, Chief
Financial Officer, Vice President Finance and Secretary.
The Compensation Committee (then comprised of Messrs. Douglas, Simmons
and Adams) met in January 1999 to discuss executive compensation. Upon
recommendation from the Compensation Committee, the Board of Directors adopted a
compensation package for the Company's executive officers that will remain in
effect for a five-year period (unless modified by the Board of Directors or the
Committee). As a result of such meeting, effective February 1, 1999, Mr.
McMurphy's annual salary was set at $350,000 by the Compensation Committee. In
determining such salary, the Compensation Committee considered Mr. McMurphy's
recent performance in identifying and completing various acquisitions by the
Company and his contribution to the overall performance of the Company in the
last fiscal year, as well as his contribution to the Company's growth.
The Compensation Committee considers from time to time the payment of
bonuses to the executive officers in light of the performance of the Company and
the effort made by the executive officers to promote the Company's businesses.
Also in January 1999, the Board of Directors, upon recommendation of the
Compensation Committee, approved and adopted a bonus program whereby in each
fiscal year beginning with the fiscal year commencing May 1, 1998, a bonus equal
to five percent of the Company's consolidated pre-tax income (before the bonus
computation) would be earned collectively by the Company's executive officers.
For purposes of the calculation, pre-tax income shall (i) exclude earnings or
losses attributable to subsidiary minority shareholders, (ii) convert equity in
earnings or loss of unconsolidated subsidiaries/investments to a pre-tax amount,
(iii) to the extent there is a pre-tax loss in a particular fiscal year, such
loss shall be carried forward to offset pre-tax income in subsequent fiscal
years, and (iv) be otherwise calculated in accordance with generally accepted
accounting principles. This bonus program is intended to remain in effect for
five fiscal years. Pursuant to this bonus program, for the fiscal year ended
April 30, 2000, the executive officers were paid the following bonuses: Mr.
McMurphy - $650,000, Mr. Falgout - $375,000 and Mr. Slusser - $275,000.
In July 1996, the Board of Directors also authorized the Company to
enter into severance agreements with each of Mr. McMurphy, Mr. Falgout and Mr.
Slusser, which agreements provide that in the event of a sale, merger,
consolidation, change in control, or liquidation of the Company, or similar
extraordinary corporate transaction causing a change in control, each such
officer shall be entitled to 2.99 times the annual compensation paid to the
executive as well as accelerated vesting of options under the Company's stock
option plans.
The Compensation Committee believes that the foregoing agreements and
actions are reasonable and provide competitive compensation packages necessary
in order for the Company to retain the management expertise it needs.
The Compensation Committee takes action from time to time, based upon
guidelines and recommendations provided by the Board of Directors, to provide
additional incentive compensation to the executive officers and other employees
through the award of stock options under the Company's existing stock option
plan. During fiscal 2000, no stock options were granted to any of the executive
officers.
7
<PAGE> 10
The Company's future compensation policies will be developed in light
of the Company's financial position and results of operations and with the goal
of rewarding members of management for their contributions to the Company's
success.
<TABLE>
<CAPTION>
DAVID J. DOUGLAS JOHN DAVID SIMMONS GERALD L. ADAMS EDWARD R. MCMURPHY
<S> <C> <C> <C>
</TABLE>
8
<PAGE> 11
STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the fiscal year end
percentage change in the cumulative total stockholder return on the Company's
Common Stock against (i) the cumulative total return of the NASDAQ Market Index
(U.S. companies), and (ii) the MG Group Index 744 - Auto Dealerships
("Automobile Index"), for the period of five fiscal years commencing on May 1,
1995 and ending on April 30, 2000.
As the largest portion of the Company's revenues during the fiscal year
ended April 30, 2000 were generated from automobile operations, the Company has
determined that the Automobile Index is presently the most appropriate "peer
group" index. The Company believes the Automobile Index is an accurate
reflection of the Company's peer group as the Automobile Index is comprised of
companies involved in the sale of automobiles and other vehicles through
dealerships. The graph assumes that the value of the investment in the Company's
Common Stock and each index was $100 on May 1, 1995.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR CROWN GROUP, INC.
<TABLE>
<CAPTION>
4/28/95 4/30/96 4/30/97 4/30/98 4/30/99 4/28/00
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Crown Group, Inc. 100.0 39.7 43.6 87.2 118.0 107.7
Nasdaq Market Index (U.S. Companies) 100.0 142.6 150.9 225.6 309.4 469.0
Automobile Index 100.0 125.1 88.1 82.0 80.8 44.8
</TABLE>
The dollar value at April 28, 2000 of $100 invested in the Company's Common
Stock on May 1, 1995 was $107.69, compared to $44.76 for the Automobile Index
described above and $469.03 for the Nasdaq Market Index (U.S. Companies).
9
<PAGE> 12
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
On October 20, 1999, the Company's Audit Committee unanimously approved
the dismissal of PricewaterhouseCoopers LLP ("PwC") as the Company's independent
accountants, and engaged Grant Thornton LLP as the Company's new independent
accountants. The Company's Audit Committee cited cost considerations as a
principal reason for the change.
PwC's report on the financial statements of the Company for the two
fiscal years preceding their dismissal did not contain an adverse opinion or a
disclaimer of opinion, and was not qualified or modified as to uncertainty,
audit scope or accounting principles.
During the two most recent fiscal years and the subsequent interim
period preceding the dismissal of PwC, there were no disagreements with PwC on
any matter of accounting principles or practices, financial statement
disclosure, or audit scope or procedure, which disagreements, if not resolved to
the satisfaction of PwC, would have caused it to make reference to the subject
matter of the disagreements in connection with its report.
No event listed in Paragraphs (A) through (D) of Item 304 a(1)(v) of
Regulation S-K occurred within the Company's two most recent fiscal years and
the subsequent interim period preceding the dismissal of PwC except as follows:
During the course of its fiscal 1999 year end closing process, the
Company discovered certain accounting errors and irregularities at its
Paaco Automotive Group, Inc. and Premium Auto Acceptance Corporation
subsidiaries (collectively "Paaco"). As a result of such discovery PwC
(i) expanded their fiscal 1999 audit procedures at Paaco and (ii)
advised the Company that a material weakness existed in Paaco's
financial reporting and accounting processes. The Company has
restructured Paaco's management organization and has taken certain
steps to ensure the integrity of Paaco's accounting and reporting
procedures. Daniel Chu, former President of Paaco, resigned in July
1999.
The Audit Committee of the Board of Directors of the Company met with
PwC and discussed the subject matter of the audit procedures and advice
of PwC with respect to Paaco, and the Company authorized PwC to respond
fully to the inquiries of the Company's successor accountant concerning
the subject matter of PwC's audit procedures and advice regarding
Paaco.
During the two most recent fiscal years and subsequent interim period
preceding the engagement of Grant Thornton LLP, the Company did not consult with
Grant Thornton LLP on (i) the application of accounting principles to a
specified transaction, (ii) the type of audit opinion that might be rendered on
the Company's financial statements, or (iii) any matter that was either the
subject of a disagreement or a reportable event.
PwC provided the Company with a letter indicating its agreement with
the foregoing statements.
INDEPENDENT PUBLIC ACCOUNTANTS
Grant Thornton LLP served as the Company's independent auditors for the
fiscal year ended April 30, 2000. The Company has not as yet executed an
engagement letter with respect to the audit of the Company's financial
statements for the fiscal year ending April 30, 2001, but expects to do so in
due course.
A representative of Grant Thornton LLP is expected to be present at the
Annual Meeting, will have an opportunity to make a statement, and will be
available to respond to appropriate questions which stockholders might have. The
Company knows of no direct or indirect material financial interest or
relationship that members of this firm have with the Company.
10
<PAGE> 13
REPORT ON FORM 10-K
The Company's Annual Report on Form 10-K for the fiscal year ended
April 30, 2000, as filed with the Securities and Exchange Commission, is
available to stockholders who make written request therefor to the Secretary of
the Company, Mark D. Slusser, at the offices of the Company, 4040 North
MacArthur Boulevard, Suite 100, Irving, Texas 75038. Copies of exhibits filed
with that report or referenced therein will be furnished to stockholders of
record upon request and payment of the Company's expenses in furnishing such
documents.
STOCKHOLDER PROPOSALS
Any proposal to be presented at next year's Annual Meeting must be
received at the principal executive offices of the Company not later than May
30, 2001, directed to the attention of the Secretary, for consideration for
inclusion in the Company's proxy statement and form of proxy relating to that
meeting. In connection with the Company's Annual Meeting of Stockholders to be
held in 2001, if the Company does not receive notice of a matter or proposal to
be considered by August 13, 2001, then the persons appointed by the Board of
Directors to act as the proxies for such Annual Meeting (named in the form of
proxy) will be allowed to use their discretionary voting authority with respect
to any such matter or proposal at the Annual Meeting, if such matter or proposal
is raised at that Annual Meeting. Any such proposals must comply in all respects
with the rules and regulations of the Securities and Exchange Commission.
OTHER MATTERS
Management does not know of any matter to be brought before the meeting
other than those referred to above. If any other matter properly comes before
the meeting, the persons designated as proxies will vote on each such matter in
accordance with their best judgment.
By Order of the Board of Directors.
Edward R. McMurphy
Chairman of the Board,
President and Chief Executive Officer
September 1, 2000
<PAGE> 14
APPENDIX A
CROWN GROUP, INC.
AUDIT COMMITTEE CHARTER
ORGANIZATION
The Audit Committee of Crown Group, Inc. (the "Company") shall be
composed of at least three members of the Board of Directors of the Company (the
"Board"), each of whom is outside of the management of the Company and is free
of any relationship that, in the opinion of the Board, would interfere with his
or her exercise of independent judgment as an Audit Committee member. In
accordance with the requirements of the National Association of Securities
Dealers, Inc. (the "NASD"), each member of the Audit Committee must have a
minimum level of financial literacy, and one member must have accounting or
financial management experience resulting in the individual's financial
sophistication. The Audit Committee shall annually elect from among its members
a Chairman, who shall preside over meetings of the Audit Committee.
STATEMENT OF POLICY
The Audit Committee shall provide assistance to the Board in fulfilling
its responsibility to the shareholders, potential shareholders, and investment
community relating to the Company's accounting and financial reporting
practices, and the quality and integrity of the Company's financial statements.
RESPONSIBILITIES
In furtherance of the policy of the Audit Committee, it will be the
responsibility of the Audit Committee to:
o maintain free and open means of communication among Board members, the
outside auditors, the internal auditors and the financial management
of the Company.
o select and appoint the outside auditors, which firm is ultimately
accountable to the Audit Committee and the Board.
o evaluate the performance of the outside auditors and, if the Audit
Committee deems it to be in the best interests of the Company, replace
the outside auditors.
o confirm and assure the independence of the outside auditors, and in
connection therewith, review the fees paid to the outside auditors for
both audit and non-audit services.
o obtain, annually, a formal written statement from the outside auditors
consistent with Independence Standards Board Standard No. 1,
delineating relationships between the outside auditors and the
Company, and actively engage in dialogue with the outside auditors
regarding matters that might reasonably be expected to affect their
independence.
o discuss telephonically and/or meet with the outside auditors and
financial management of the Company during the fourth quarter of the
fiscal year to review the scope of the proposed annual audit and the
audit procedures to be utilized. This discussion/meeting will include
the Chairman of the Committee only.
o discuss with the outside auditors the matters required to be discussed
by Statement on Auditing Standards No. 61 relating to the conduct of
the audit.
o review, with the outside auditors and the Company's financial and
accounting personnel, the adequacy and effectiveness of the accounting
and financial controls of the Company, and elicit any recommendations
for the improvement of such internal control procedures or particular
areas where new or more detailed controls or procedures are desirable.
Particular emphasis should be given to the adequacy of such internal
controls to expose any payments, transactions, or procedures that
might be deemed illegal or otherwise improper.
A-1
<PAGE> 15
o review with management and, as appropriate, the outside auditors:
o the Corporation's annual financial statements and related
footnotes, prior to filing by the Corporation of the Form 10-K
with the Securities and Exchange Commission;
o any problems or difficulties the outside auditors may have
encountered and any management letter provided by the outside
auditors and the Corporation's response to any such letter;
o any significant changes to the Corporation's auditing and
accounting principles and practices suggested by the
Corporation's outside auditors or by management; and
o at periodic meetings with management, the Corporation's major
financial risk exposures and the steps management has taken to
monitor and control such exposures.
o provide sufficient opportunity for the outside auditors to meet with
the members of the Audit Committee without members of management
present. Among the items to be discussed in these meetings are the
outside auditors' evaluation of the Corporation's financial,
accounting, and auditing personnel, and the cooperation that the
outside auditors received during the course of the audit.
o investigate any matter brought to its attention within the scope of
its duties, with the power to retain outside counsel for this purpose
if, in its judgment, that is appropriate.
o ensure that the outside auditors conduct a review in accordance with
Statement on Auditing Standards No. 71 prior to each filing of the
Corporation's Form 10-Q with the Securities and Exchange Commission.
o prepare the report of the Audit Committee required pursuant to the
rules promulgated by the Securities and Exchange Commission to be
included in the Corporation's annual proxy statement.
o submit the minutes of all meetings of the Audit Committee to, or
discuss the matters discussed at each Audit Committee meeting with,
the Board, and make such recommendations to the Board as the Audit
Committee may deem appropriate.
o review and reassess the adequacy of this Audit Committee Charter on an
annual basis and recommend any proposed changes to the Board for
adoption.
In addition, the Audit Committee will perform such other functions as
assigned by law, NASD rules, the Corporation's charter or bylaws, or the Board.
While the Audit Committee has the responsibilities and powers set forth
in this charter, it is not the duty of the Committee to specifically plan or
conduct audits or to determine that the Corporation's financial statements are
complete and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the outside auditors.
Nor is it the duty of the Committee to conduct investigations, to resolve
disagreements, if any, between management and the outside auditors, or to assure
compliance with laws and regulations or rules of the NASD.
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<PAGE> 16
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF
CROWN GROUP, INC.
The undersigned stockholder(s) of Crown Group, Inc., a Texas corporation,
hereby appoints Edward R. McMurphy and Mark D. Slusser, and each of them,
proxies and attorneys-in-fact, with full power to each of substitution, on
behalf and in the name of the undersigned, to represent the undersigned at the
2000 Annual Meeting of Stockholders of Crown Group, Inc. to be held on Thursday,
October 19, 2000 at 10:00 a.m. local time at the Four Seasons Hotel and Resort,
4150 North MacArthur Boulevard, Irving, Texas 75038, to vote the shares of
Common Stock which the undersigned would be entitled to vote if then and there
personally present, on the matters set forth below:
(1) To elect seven directors for a term of one year and until their
successors are elected and qualified:
[ ] FOR all nominees listed below (except as indicated to the
contrary below)
[ ] AGAINST AUTHORITY to vote for all nominees
Edward R. McMurphy Tilman J. Falgout, III
John David Simmons Gerald L. Adams
David J. Douglas Gerard M. Jacobs
Robert J. Kehl
If you wish to withhold authority to vote for any individual nominee(s), write
the name(s) on the line below:
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(2) In their discretion, upon such other matter or matters which may
properly come before the meeting or any adjournment or adjournments
thereof.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY. This proxy,
when properly executed, will be voted in accordance with directions given by the
undersigned stockholder. If no direction is made, it will be voted FOR Proposal
1 and as the proxies deem advisable on such other matters as may come before the
meeting.
Dated , 2000
---------------------------------
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Signature
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Signature
(This Proxy should be marked, dated, and
signed by the stockholder(s) exactly as his or
her name appears hereon, and returned promptly in
the enclosed envelope. Persons signing in a
fiduciary capacity should so indicate. If shares
are held by joint tenants or as community
property, both should sign.)
