<PAGE> 1
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-11(c) or Rule 14a-12
</TABLE>
Rhodes, 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/ $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> 2
[RHODES, INC. LOGO]
June 17, 1996
Dear Shareholder:
You are cordially invited to attend the 1996 Annual Meeting of Shareholders
of Rhodes, Inc. to be held on July 16, 1996 at 4370 Peachtree Road, Atlanta,
Georgia, 30319. The meeting will begin promptly at 2:00 p.m., local time, and we
hope that it will be possible for you to attend.
The items of business are listed in the Notice of Annual Meeting and are
more fully addressed in the Proxy Statement provided herewith.
Please date, sign and return your proxy card in the enclosed envelope at
your convenience to assure that your shares will be represented and voted at the
Annual Meeting even if you cannot attend.
On behalf of your Board of Directors, thank you for your continued support
and interest in Rhodes, Inc.
Sincerely,
/s/ Irwin L. Lowenstein
Irwin L. Lowenstein
Chairman of the Board of Directors
and Chief Executive Officer
<PAGE> 3
RHODES, INC.
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 16, 1996
---------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Rhodes,
Inc. (the "Company") will be held at 4370 Peachtree Road, Atlanta, Georgia,
30319, on Tuesday, July 16, 1996, at 2:00 p.m., local time, for the following
purposes:
(i) To elect five directors to serve until the 1997 Annual Meeting of
Shareholders;
(ii) To ratify the appointment of Arthur Andersen LLP as the Company's
independent certified public accountants for the fiscal year ending
February 28, 1997; and
(iii) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only the holders of record of Common Stock of the Company at the close of
business on June 7, 1996 are entitled to notice of and to vote at the Annual
Meeting of Shareholders and any adjournment thereof. A list of shareholders as
of the close of business on June 7, 1996 will be available at the Annual Meeting
of Shareholders for examination by any shareholder, such shareholder's agent or
such shareholder's attorney.
Your attention is directed to the Proxy Statement provided with this
Notice.
By Order of the Board of Directors,
/s/ Joel H. Dugan
Joel H. Dugan
Senior Vice President
and Secretary
Atlanta, Georgia
June 17, 1996
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE, WHICH DOES NOT REQUIRE ANY POSTAGE IF MAILED IN THE UNITED STATES. IF
YOU ATTEND THE MEETING, YOU MAY REVOKE THE PROXY AND VOTE YOUR SHARES IN PERSON.
<PAGE> 4
RHODES, INC.
4370 PEACHTREE ROAD
ATLANTA, GEORGIA 30319
---------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 16, 1996
The 1996 Annual Meeting of Shareholders (the "Annual Meeting") of Rhodes,
Inc. (the "Company") will be held on July 16, 1996 at 2:00 p.m. at 4370
Peachtree Road, Atlanta, Georgia, for the purposes set forth in the Notice of
Annual Meeting of Shareholders attached hereto. The enclosed form of proxy is
solicited by the Board of Directors of the Company (the "Board" or "Board of
Directors") and the cost of the solicitation will be borne by the Company. When
the proxy is properly executed and returned, the shares it represents will be
voted as directed at the Annual Meeting or any adjournment thereof, or, if no
direction is indicated, such shares will be voted in favor of the proposals set
forth in the Notice of Annual Meeting of Shareholders attached hereto. Any
shareholder giving a proxy has the power to revoke it at any time before it is
voted. All proxies delivered pursuant to this solicitation are revocable at any
time at the option of the persons executing them by giving written notice to the
Secretary of the Company, by delivering a later-dated proxy or by voting in
person at the Annual Meeting.
VOTING
Only holders of record of shares of the Company's common stock, without par
value (the "Common Stock"), as of the close of business on June 7, 1996 will be
entitled to vote at the Annual Meeting. As of that date, the Company had
outstanding 9,149,964 shares of Common Stock. Shareholders of record as of the
close of business on June 7, 1996 are entitled to one vote for each share of
Common Stock held. No cumulative voting rights are authorized and dissenters'
rights for shareholders are not applicable to the matters being proposed. It is
anticipated that this Proxy Statement and the accompanying proxy will first be
mailed to shareholders on or about June 17, 1996.
The presence in person or by proxy of holders of a majority of the
outstanding shares of Common Stock will constitute a quorum for the transaction
of business at the Annual Meeting. The affirmative vote of a plurality of the
shares present in person or by proxy and entitled to vote is required to elect
directors. With respect to any other matter that may properly come before the
Annual Meeting, the approval of any such matter would require a greater number
of votes cast favoring the matter than the number of votes cast opposing such
matter. Shares held by nominees for beneficial owners will be counted for
purposes of determining whether a quorum is present if the nominee has the
discretion to vote on at least one of the matters presented even if the nominee
may not exercise discretionary voting power with respect to other matters and
voting instructions have not been received from the beneficial owner (a "broker
non-vote"). Broker non-votes will not be counted as votes for or against matters
presented for shareholder consideration, including the election of directors.
Abstentions with respect to a proposal are counted for purposes of establishing
a quorum. If a quorum is present, abstentions have no effect on the outcome of
any vote, including the election of directors.
COMMON STOCK OWNERSHIP BY MANAGEMENT
AND PRINCIPAL SHAREHOLDERS
The following table sets forth the beneficial ownership of shares of Common
Stock as of June 7, 1996 for (i) the Chief Executive Officer and each of the
four other most highly compensated executive officers of the Company
(collectively, the "Named Executive Officers"), (ii) each director of the
Company owning shares of Common Stock, (iii) the directors and executive
officers of the Company as a group and (iv) each person who is known to the
Company to be a beneficial owner of more than 5% of the outstanding shares of
Common
<PAGE> 5
Stock. Unless otherwise indicated in the footnotes, all of such interests are
owned directly, and the indicated person or entity has sole voting and
investment power.
<TABLE>
<CAPTION>
NUMBER
OF SHARES
NAME AND ADDRESS BENEFICIALLY
OF BENEFICIAL OWNER(1) OWNED PERCENT OF CLASS
- ---------------------------------------------------------------- ------------ ----------------
<S> <C> <C>
Irwin L. Lowenstein(2).......................................... 111,378 1.2%
Joel T. Lanham(3)............................................... 61,680 *
Joel H. Dugan(4)................................................ 55,575 *
James A. Welch(5)............................................... 17,177 *
Don M. Parker(6)................................................ 27,787 *
Don L. Chapman(7)............................................... 7,000 *
Tug Manufacturing Corporation
2652 South Main Street
Kennesaw, Georgia 30144-3520
James V. Napier(8).............................................. 6,500 *
3343 Peachtree Rd., NE
Suite 1420-East Tower
Atlanta, Georgia 30326
Holcombe T. Green, Jr.(9)....................................... 2,920,879 31.9%
WPS Investors, L.P.............................................. 2,912,679 31.8%
3343 Peachtree Rd., NE
Suite 1420-East Tower
Atlanta, Georgia 30326
FMR Corp.(10)................................................... 630,800 6.9%
82 Devonshire Street
Boston, Massachusetts 02109
Swiss Bank Corporation(11)...................................... 743,000 8.1%
Aeschenplatz 6 CH-4002
Basel, Switzerland
Southeastern Asset Management, Inc.(12)......................... 1,006,900 11.0%
6075 Poplar Avenue, Suite 900
Memphis, TN 38119
Longleaf Partners Small-Cap Fund(12)(13)........................ 574,600 6.3%
6075 Poplar Avenue, Suite 900
Memphis, TN 38119
All executive officers and directors as a group (11
persons)(14).................................................. 3,226,289 34.5%
</TABLE>
- ---------------
* Less than 1%.
(1) Unless otherwise indicated, the business address of each beneficial owner
is the principal executive office of the Company at 4370 Peachtree Road,
Atlanta, Georgia 30319.
(2) Includes 70,000 shares of Common Stock which Mr. Lowenstein has the right
to acquire pursuant to options exercisable within 60 days. Excludes 400
shares of Common Stock owned by Mr. Lowenstein's daughters, as to which Mr.
Lowenstein disclaims beneficial ownership.
(3) Includes 46,000 shares of Common Stock which Mr. Lanham has the right to
acquire pursuant to options exercisable within 60 days.
(4) Includes 30,000 shares of Common Stock which Mr. Dugan has the right to
acquire pursuant to options exercisable within 60 days.
(5) Includes 15,000 shares of Common Stock which Mr. Welch has the right to
acquire pursuant to options exercisable within 60 days.
2
<PAGE> 6
(6) Includes 19,000 shares of Common Stock which Mr. Parker has the right to
acquire pursuant to options exercisable within 60 days.
(7) Includes 4,500 shares of Common Stock which Mr. Chapman has the right to
acquire pursuant to options exercisable within 60 days.
(8) Includes 4,500 shares of Common Stock which Mr. Napier has the right to
acquire pursuant to options exercisable within 60 days.
(9) Includes 2,912,679 and 5,700 shares of Common Stock held by WPS Investors,
L.P. ("WPS") and RW Holdings ("RW"), respectively. WPS and RW are
partnerships controlled by Mr. Green. Also includes 2,500 shares owned by
Mr. Green in his capacity as trustee of the HTG Corp. Profit Sharing Plan.
(10) The information regarding FMR Corp. is given in reliance upon a Schedule
13G, which is dated February 14, 1996 and was filed with the Securities and
Exchange Commission. Fidelity Management & Research Company, a wholly owned
subsidiary of FMR Corp., is the beneficial owner of all of the 630,800
shares.
(11) The information regarding Swiss Bank Corporation ("SBC") is given in
reliance upon a Schedule 13G, which is dated February 9, 1996 and was filed
with the Securities and Exchange Commission. Brinson Partners, Inc. ("BPI")
filed the Schedule 13G on behalf of itself, Brinson Trust Company ("BTC"),
Brinson Holdings, Inc. ("BHI"), SBC Holding (USA), Inc. ("SBCUSA") and SBC.
BTC is a wholly owned subsidiary of BPI. BPI is a wholly owned subsidiary
of BHI. BHI is a wholly owned subsidiary of SBCUSA. SBCUSA is a wholly
owned subsidiary of SBC. By virtue of these corporate relationships, each
of SBC, SBCUSA, BHI and BPI may be deemed to beneficially own and have the
power to dispose and vote or direct the disposition or voting of all of the
743,000 shares. BTC shares dispositive and voting power with respect to
199,316 of the shares.
(12) The information regarding Southeastern Asset Management, Inc. is given in
reliance upon a Schedule 13G, which is dated February 5, 1996 and was filed
with the Securities and Exchange Commission. Southeastern Asset Management,
Inc. has sole power of disposition over 432,300 shares and shared power of
disposition with Longleaf Partners Small-Cap Fund over 574,600 shares.
Southeastern Asset Management, Inc. has sole voting power with respect to
410,300 shares and shared voting power with respect to 574,600 shares (with
no voting power with respect to the remaining shares).
(13) The information regarding Longleaf Partners Small-Cap Fund is given in
reliance upon a Schedule 13G, which is dated February 5, 1996 and was filed
with the Securities and Exchange Commission. Longleaf Partners Small-Cap
Fund shares dispositive power with Southeastern Asset Management, Inc. over
all such shares and shares voting power with Southeastern Asset Management,
Inc. with respect to all such shares.
(14) Includes an aggregate of 202,000 shares of Common Stock which may be
acquired pursuant to options exercisable within 60 days and excludes 400
shares of Common Stock owned by Mr. Lowenstein's daughters, as to which Mr.
Lowenstein disclaims beneficial ownership, and 300 shares of Common Stock
owned by Barbara Snow's children, as to which Ms. Snow disclaims beneficial
ownership.
ELECTION OF DIRECTORS
Under the Bylaws of the Company and the resolutions of the Board of
Directors, the number of directors constituting the Board is fixed at five. The
Board of Directors has proposed that the shareholders elect as directors the
five persons set forth below to serve until the annual meeting of shareholders
in 1997 or until their successors are duly elected and qualified. Each nominee
is presently a director of the Company and has consented to serve as a director
if elected. The Board has no reason to believe that any of the nominees for the
office of director will be unavailable for election as a director. However, if
at the time of the Annual Meeting any of the nominees should be unable to serve
or, for good cause, will not serve, the persons named in the proxy will vote as
recommended by the Board to elect substitute nominees recommended by the Board.
In no event, however, can a proxy be voted to elect more than five directors.
The following list contains, as to each nominee, certain biographical
information, a brief description of principal occupation and business experience
during the past five years, directorships of companies (other than
3
<PAGE> 7
the Company) presently held, and certain other information, which information
has been furnished by the respective individuals.
NOMINEES FOR ELECTION
IRWIN L. LOWENSTEIN joined the Company in 1972 and has served as President,
Chief Operating Officer and Director of the Company since 1979. In 1989, Mr.
Lowenstein was elected Chief Executive Officer of the Company, and in 1994, Mr.
Lowenstein was elected Chairman of the Board of Directors. Mr. Lowenstein is a
director of L.A.T. Sportswear, Inc., a sportswear manufacturer and distributor.
He is 60 years old.
HOLCOMBE T. GREEN, JR. has been a director of the Company since 1988,
served as Chairman of the Board of the Company from 1988 until July 26, 1994 and
currently serves as Chairman of the Executive Committee of the Board of
Directors. Mr. Green has been the principal of Green Capital Investors, L.P.
("Green Capital"), a holding company and general partner of RW, since its
organization in January 1988. Mr. Green currently is Chairman of the Board of
HBO & Company, a provider of hospital information systems, Chairman of the Board
and Chief Executive Officer of WestPoint Stevens Inc., a textile manufacturer,
and a director of American Buildings Company, a manufacturer of pre-engineered
metal building systems, and Georgia Gulf Corporation, a chemical manufacturer.
He is 56 years old.
DON L. CHAPMAN has been a Director of the Company since December 1992. Mr.
Chapman has been Chief Executive Officer of Opti-World, Inc., an optical
products retailer, from January 1983 until April 1995. Mr. Chapman is Principal
and Chief Executive Officer of Tug Manufacturing Corp., an airline ground
support equipment manufacturer, a position he has held since 1977. Mr. Chapman
is a director of ValuJet Airlines, Inc., a regional air transportation company,
Omni Insurance Company, a specialty insurance company, and Longhorn Steaks,
Inc., a restaurant chain. He is 57 years old.
JAMES R. KUSE has been a Director of the Company since 1988. Mr. Kuse has
been Chairman of Georgia Gulf Corporation since January 1985. Georgia Gulf
Corporation was formed to acquire the chemicals division of Georgia-Pacific
Corporation in 1984. Mr. Kuse beneficially owns a limited partnership interest
of 12.50% in Green Capital. He is 65 years old.
JAMES V. NAPIER has been a Director of the Company since 1992. Mr. Napier
has been Chairman of the Board of Directors of Scientific-Atlanta, Inc., an
electronic products company, since December 1992. Mr. Napier served as Chairman
and President of Commercial Telephone Group, Inc., a designer of telephone
products, from July 1988 to December 1992 and was a private investor and
consultant from April 1986 to July 1988. Mr. Napier is a director of Engelhard
Corporation, a manufacturer of specialty chemical and metallurgical products,
HBO & Company, Intelligent Systems, Inc., a manufacturer of computer
accessories, and Vulcan Materials Company, a producer of chemicals and
construction materials from scrap metal. He is 59 years old.
MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended February 29, 1996, the Board of Directors held
four meetings. Each director attended at least 75% of all Board meetings and
meetings of the applicable committees on which they served.
CERTAIN COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established standing Audit and Compensation
Committees, but does not maintain a Nominating Committee.
AUDIT COMMITTEE. The Audit Committee which is currently composed of
Messrs. Kuse and Napier, is responsible for (i) recommending independent
auditors, (ii) reviewing with the independent auditors the scope and results of
the audit engagement, (iii) monitoring the Company's financial policies,
activities of the Company's internal audit department and control procedures and
(iv) reviewing and monitoring the provision of non-audit services by the
Company's auditors. During the fiscal year 1996, the Audit Committee held one
meeting.
4
<PAGE> 8
COMPENSATION COMMITTEE. The Compensation Committee is currently composed
of Messrs. Green, Chapman and Kuse. Mr. Kuse is chairman of the Committee. The
Compensation Committee is responsible for establishing all compensation for the
Company's executive officers and administering the 1991 Stock Option Plan.
During the fiscal year 1996, the Compensation Committee held one meeting.
COMPENSATION OF DIRECTORS
With the exception of Mr. Lowenstein, each director receives compensation
of $1,000 per month, $1,000 for attendance at each meeting of the Board of
Directors and $500 for attendance at each committee meeting.
THE ELECTION OF A DIRECTOR REQUIRES OF A PLURALITY OF THE VOTES CAST AT THE
ANNUAL MEETING.
THE BOARD RECOMMENDS A VOTE FOR IRWIN L. LOWENSTEIN, DON L. CHAPMAN,
HOLCOMBE T. GREEN, JR., JAMES R. KUSE AND JAMES V. NAPIER TO HOLD OFFICE UNTIL
THE ANNUAL MEETING OF SHAREHOLDERS IN 1997 OR UNTIL THEIR SUCCESSORS ARE DULY
ELECTED AND QUALIFIED, WHICHEVER IS LATER.
5
<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth certain information concerning the
compensation paid to the Named Executive Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
--------------------------------------- SECURITIES ALL OTHER
NAME AND FISCAL OTHER ANNUAL UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) ($)(1)
- ---------------------------------- ------ --------- -------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Irwin L. Lowenstein............... 1996 360,000 132,168 8,371(2) -- 30,244
Chairman of the Board and Chief 1995 360,000 361,390 -- 125,000 32,319
Executive Officer 1994 335,000 337,371 -- 32,219
Joel T. Lanham.................... 1996 275,000 110,503 428(2) -- 5,200
President and Chief Operating 1995 205,000 276,062 -- 85,000 4,797
Officer 1994 185,000 186,309 -- 4,777
Joel H. Dugan..................... 1996 150,000 77,868 550(2) -- 4,648
Senior Vice President, Finance 1995 137,500 138,031 -- 55,000 4,399
and Administration 1994 125,000 125,885 -- 4,854
Don M. Parker..................... 1996 145,000 70,000 275(2) 35,000 4,116
Senior Vice President, 1995 132,500 133,012 14,377(3) 4,225
Merchandising 1994 119,417 104,904 4,878
James A. Welch.................... 1996 145,000 70,000 44(2) 17,500 3,172
Senior Vice President, Store 1995 128,159 133,012 27,728(4) 17,500 2,883
Operations 1994 93,538 76,931 -- 2,799
</TABLE>
- ---------------
(1) All Other Compensation paid during the fiscal year 1996 includes the
following: (i) Company contributions to the Savings Plan: Mr.
Lowenstein -- $1,200; Mr. Lanham -- $3,241; Mr. Dugan -- $3,053; Mr.
Parker -- $2,447; Mr. Welch -- $2,669; (ii) premiums paid for disability
insurance: Mr. Lowenstein -- $5,032; Mr. Lanham -- $1,959; Mr.
Dugan -- $1,595; Mr. Parker -- $1,669; Mr. Welch -- $503; (iii) premiums
paid by the Company for life insurance policies for Mr. Lowenstein in the
amount of $24,012.
All Other Compensation paid during the fiscal year 1995 includes the
following: (i) Company contributions to the Savings Plan: Mr.
Lowenstein -- $4,883; Mr. Lanham -- $4,797; Mr. Dugan-- $4,399; Mr.
Parker -- $4,225; and Mr. Welch -- $2,883; (ii) premiums paid for permanent
disability insurance for Mr. Lowenstein in the amount of $3,424 and (iii)
premiums paid by the Company for a life insurance policy for Mr. Lowenstein
in the amount of $24,012.
All Other Compensation paid during the fiscal year 1994 includes the
following: (i) Company contributions to the Savings Plan: Mr.
Lowenstein -- $4,783; Mr. Lanham -- $4,777; Mr. Dugan -- $4,854; Mr.
Parker -- $4,878; and Mr. Welch -- $2,799; (ii) premiums paid for permanent
disability insurance for Mr. Lowenstein in the amount of $3,424 and (iii)
premiums paid by the Company for a life insurance policy for Mr. Lowenstein
in the amount of $24,012.
(2) Other Annual Compensation for the fiscal year 1996 represents in each case
Company payment of FICA-HI Tax payments on Supplemental Employees' Pension
Plan benefits accrued.
(3) Represents amount reimbursed during fiscal year 1994 for the payment of
taxes relating to the exercise of stock options.
(4) Includes an automobile allowance of $6,450, reimbursed relocation expenses
of $14,784 and $6,494 paid to Mr. Welch for the reimbursement of taxes.
6
<PAGE> 10
OPTION GRANTS
No stock options were granted to the Named Executive Officers during the
fiscal year 1996.
AGGREGATED OPTION EXERCISES
The following table sets forth certain information with respect to the
number of shares of Common Stock underlying unexercised options held by the
Named Executive Officers as of February 29, 1996. No stock options were
exercised by Named Executive Officers during the fiscal year 1996, and no
options held by Named Executive Officers were in-the-money options at the end of
the fiscal year 1996.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS AT
FISCAL YEAR END (#)
---------------------------------
NAME EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Irwin L. Lowenstein............................................. 70,000 55,000
Joel T. Lanham.................................................. 46,000 39,000
Joel H. Dugan................................................... 30,000 25,000
Don M. Parker................................................... 19,000 16,000
James A. Welch.................................................. 15,000 20,000
</TABLE>
PENSION AND SUPPLEMENTAL PLANS
The following table sets forth the range of estimated combined annual
benefits payable under the Rhodes, Inc. Employees Pension Plan (the "Pension
Plan") and the Rhodes, Inc. Supplemental Employees' Pension Plan (the
"Supplemental Plan") to participants in specified compensation and years of
service classifications, upon retirement of such participants at age 65. The
amounts set forth below are unreduced for Social Security and compensation
limits set by the Internal Revenue Code of 1986, as amended (the "Code").
PENSION AND SUPPLEMENTAL PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------
REMUNERATION 15 20 25 30 35
- -------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
125,000..................................... $ 23,437 $ 31,250 $ 39,062 $ 46,875 $ 54,688
150,000..................................... $ 28,125 $ 37,500 $ 46,875 $ 56,250 $ 65,625
175,000..................................... $ 32,813 $ 43,750 $ 54,688 $ 65,625 $ 76,562
200,000..................................... $ 37,500 $ 50,000 $ 62,500 $ 75,000 $ 87,500
225,000..................................... $ 42,189 $ 56,250 $ 70,312 $ 84,375 $ 98,437
250,000..................................... $ 46,875 $ 62,500 $ 78,125 $ 93,750 $109,375
300,000..................................... $ 56,250 $ 75,000 $ 93,750 $112,500 $131,250
400,000..................................... $ 75,000 $100,000 $125,000 $150,000 $175,000
450,000..................................... $ 84,375 $112,500 $140,625 $168,750 $196,875
500,000..................................... $ 93,750 $125,000 $156,250 $187,500 $218,750
550,000..................................... $103,125 $137,500 $171,875 $206,250 $240,625
600,000..................................... $112,500 $150,000 $187,500 $225,000 $262,500
650,000..................................... $121,875 $162,500 $203,125 $243,750 $284,375
700,000..................................... $131,250 $175,000 $218,750 $262,500 $306,250
750,000..................................... $140,625 $187,500 $234,375 $281,250 $328,125
800,000..................................... $150,000 $200,000 $250,000 $300,000 $350,000
850,000..................................... $159,375 $212,500 $265,625 $318,750 $371,875
</TABLE>
The Pension Plan has been in effect since February 1, 1968 and covers all
employees (including officers and directors who are employees) meeting certain
standards as to age and length of service with the Company. Amounts payable
under the Pension Plan are based upon amounts received by a participant for
personal
7
<PAGE> 11
service to the Company during his or her last five years of employment. The
compensation upon which these amounts are based includes all pay reported by the
Company on Form W-2 as taxable income and pre-tax employee contributions to the
Savings Plan and other Company plans. All salary and bonus amounts shown in the
Summary Compensation Table constitute covered compensation under the Pension
Plan. Participants become fully vested in their accrued benefits under the
Pension Plan upon completion of five years of vesting service with the Company,
as defined in the Pension Plan.
The Company has also established a Supplemental Plan, effective March 1,
1995, to pay benefits to certain Pension Plan participants which exceed the
benefits payable to such participants under the Pension Plan as a result of
federal tax restrictions. The Supplemental Plan provides these benefits to
certain officers of the Company who earn annual compensation in excess of the
compensation limits imposed by the Code. Under the Supplemental Plan,
participants eligible for a retirement benefit under the Pension Plan are
entitled to receive a monthly retirement benefit equal to the difference between
(i) the monthly benefit that would be payable under the Pension Plan without
regard to the Code compensation limits or maximum benefit limit applicable to
the Pension Plan and (ii) the monthly retirement benefit payable under the
Pension Plan. Supplemental Plan benefits will be paid at the same time and in
the same form as benefits are paid under the Pension Plan, and amounts payable
under the Supplemental Plan are based on the same compensation on which amounts
payable under the Pension Plan are based. Participants in the Supplemental Plan
become fully vested in their accrued benefits under the Supplemental Plan at the
same time as they become fully vested in accrued benefits under the Pension
Plan. Benefits under the Pension Plan and the Supplemental Plan are computed on
a straight-life annuity basis and are subject to deduction for Social Security
benefits payable to the participant.
As of February 29, 1996, Messrs. Lowenstein, Lanham, Dugan, Parker and
Welch had twenty-three, nineteen, eleven, nine and nine credited years of
service, respectively, under the Pension and Supplemental Plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The directors serving on the Compensation Committee of the Board of
Directors during the fiscal year 1996 were Messrs. Green, Kuse and Chapman. With
the exception of Mr. Green, none of these individuals are or have ever been
officers or employees of the Company. During the fiscal year 1996, no executive
officer of the Company served as a director of any corporation for which any of
these individuals served as an executive officer, and there were no other
compensation committee overlocks with the companies with which these individuals
or the Company's other directors are affiliated.
COMPENSATION AGREEMENTS
On July 1994, Mr. Lowenstein and Mr. Green entered into a letter of
understanding, which provided that, notwithstanding the occurrence of certain
events, including the death or disability of Mr. Green or a change in control of
the Company, the Company would continue to pay Mr. Lowenstein (i) an annual
minimum base salary of $360,000, (ii) an annual minimum guaranteed bonus equal
to the annual minimum guaranteed bonus paid to Mr. Lowenstein for the fiscal
year 1994 and (iii) health insurance, life insurance, disability insurance, club
dues and other benefits comparable to the level of benefits provided to him
during the fiscal year 1994 through and including the fiscal year ending
February 28, 1999.
In May, 1996, the Company entered into Compensation Agreements with Messrs.
Lanham and Dugan which provide (i) that if the Company effectively terminates
such Executive's employment in his present position without good cause before
the first anniversary of a change in control of the Company, the Company shall
pay to such Executive, in a lump sum payment immediately after the effective
date of such termination, an amount equal to the sum of (a) a pro rata portion
of his annual compensation for the portion of the one year period that started
on the date of the change in control and that remains as of the effective date
of the Executive's termination of employment plus (b) an additional one year's
compensation, and (ii) if the Company effectively terminates such Executive's
employment in his present position without good cause on or after the first
anniversary of a change in control of the Company, the Company shall pay to such
Executive, in a lump sum payment immediately after the effective date of such
termination, an amount equal to one year's
8
<PAGE> 12
compensation for such Executive. In addition, each such Executive is entitled to
six (6) month's notice of any such termination.
STOCK PRICE PERFORMANCE GRAPH
The following stock price performance graph compares the Company's
performance to the S&P 500 Index and to a self-constructed group of the
Company's peers (the "Peer Group")(1). The stock price performance graph assumes
an investment of $100 in each of the Company, the companies listed in the S&P
500 Index, the companies that are included in the Peer Group on June 18, 1993(2)
and further assumes the reinvestment of all dividends.
COMPARISON OF 32 MONTH CUMULATIVE TOTAL RETURN*
AMONG RHODES, INC., THE S&P 500 INDEX AND A PEER GROUP
[GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) RHODES, INC. PEER GROUP S & P 500
<S> <C> <C> <C>
6/18/93 100 100 100
2/28/94 160 136 107
2/28/95 99 87 115
2/29/96 78 55 155
</TABLE>
- ---------------
* $100 invested on 06/18/93 in stock or index -- including reinvestment of
dividends. Fiscal years ending February 28/29.
(1) The Peer Group includes the following companies: Haverty Furniture Company,
Inc., Heilig Meyers Company and Levitz Furniture, Inc. Levitz Furniture,
Inc. completed an initial public offering of its common stock on July 2,
1993. Information with respect to the Peer Group assumes that the
appropriate number of Levitz shares were available to be purchased at the
initial public offering price on June 18, 1993.
(2) The Company priced the initial public offering of its Common Stock on June
18, 1993.
THE STOCK PRICE PERFORMANCE GRAPH SHALL NOT BE DEEMED INCORPORATED BY
REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY
STATEMENT INTO ANY FILING UNDER THE SECURITIES ACT OF 1933 OR
9
<PAGE> 13
UNDER THE SECURITIES EXCHANGE ACT OF 1934, EXCEPT TO THE EXTENT THAT THE COMPANY
SPECIFICALLY INCORPORATES THIS INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE
BE DEEMED FILED UNDER SUCH ACTS.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is composed entirely
of non-employee directors and is responsible for (i) establishing salaries,
bonuses and other compensation for the Company's executive officers and (ii)
awarding stock options under the 1991 Stock Option Plan. Set forth below is a
discussion of the compensation policies established by the Compensation
Committee which are applicable to the Company's executive officers, the
executive officers' compensation program for the last fiscal year, and the Chief
Executive Officer's compensation for the last fiscal year.
EXECUTIVE COMPENSATION POLICY
The Executive Compensation Policy of the Company is designed to accomplish
the following goals:
- To provide compensation levels that are consistent with the Company's
business plan, financial objectives and operating performance;
- To reward performance that facilitates the achievement of business plan
goals;
- To motivate executives to achieve strategic operating objectives; and
- To align the interest of executives with those of stockholders and the
long-term interest of the Company by providing long-term incentive
compensation in the form of stock options.
The Executive Compensation Policy reflects the Company's desire to provide
levels of compensation that integrate compensation with the Company's annual and
long-term performance goals, reward above average corporate performance and
allow the Company to attract and retain qualified executives. In light of these
objectives, the principal components of the Company's executive compensation
program for the fiscal year 1996 were base salaries and annual bonuses.
ELEMENTS OF EXECUTIVE OFFICER 1996 COMPENSATION
BASE SALARY. Each executive officer's base salary (including the Chief
Executive Officer's base salary) is based upon a subjective analysis of a number
of factors, including anticipated contribution to the operation of the Company
and the responsibilities, expertise and length of service of the executive
officer. Each executive officer's base salary is reviewed annually and generally
adjusted to account for inflation, any change in the executive officer's
responsibilities and the executive officer's overall performance.
ANNUAL BONUSES. Each executive officer, including the Chief Executive
Officer, is eligible to receive an annual cash bonus. Annual bonuses generally
are paid pursuant to a bonus program established at the beginning of a fiscal
year in connection with the preparation of the Company's annual operating budget
for such year. Under this bonus program, an executive officer (including the
Chief Executive Officer) is eligible to receive a bonus equal to a specified
percentage of an amount determined annually by the Compensation Committee (the
"Bonus Pool"), subject to a minimum guaranteed amount. The amount included in
the Bonus Pool varies depending on whether the Company meets or exceeds certain
targets with respect to its planned income before interest expense and taxes for
the fiscal year. If the Company meets or exceeds a specified income target, each
executive officer receives a percentage of the Bonus Pool equal to that
executive officer's base salary divided by the aggregate amount of base salaries
paid to all executive officers. Accordingly, in connection with determining the
specific percentage for any particular executive officer, the executive
officer's performance during the preceding fiscal year is deemed relevant in
calculating that officer's bonus. Bonuses paid to the Company's executive
officers, including the Chief Executive Officer, with respect to the 1996 fiscal
year generally reflected amounts slightly in excess of the minimum guaranteed
bonus amount with the exception of one executive officer who received an amount
commensurate with that received by other senior executive officers.
10
<PAGE> 14
STOCK OPTIONS. Under the Rhodes, Inc. 1991 Stock Option Plan, all
executive officers, including the Chief Executive Officer, are eligible to
receive discretionary stock options. Stock option grants serve to align the
interest of executives with those of stockholders and the long-term interest of
the Company. Stock options were granted to Steve Hurwitz and the grant of these
stock options was based upon an evaluation by the Compensation Committee, acting
upon recommendations of the Chairman of the Board, of Mr. Hurwitz's performance
as well as the Company's overall financial performance to date and the
desirability of long-term service from Mr. Hurwitz.
CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation of Mr. Lowenstein, the Company's Chief Executive Officer,
is consistent with the compensation policy of the Company and is based upon a
subjective analysis of Mr. Lowenstein's performance with strong consideration
given to the Company's performance, taking into account the letter of
understanding with Mr. Lowenstein described above under "Executive Compensation
Agreement." As a result, the compensation for Mr. Lowenstein for the fiscal year
1996 was $530,783 and included a base salary of $360,000, an annual bonus of
$132,168 and other forms of compensation, including (i) the payment of
disability and life insurance premiums, (ii) contributions made by the Company
on Mr. Lowenstein's behalf through the Company's Savings Plan and (iii) payment
of FICA-HI tax payments on Supplemental Plan accrued benefits. Mr. Lowenstein's
base salary for the fiscal year 1997 will be $360,000. The amount of the bonus
was based upon the bonus program described above.
DEDUCTIBILITY LIMITATION
The Company does not anticipate that any executive officer's compensation
will be subject to the $1 million deductibility limitation of Section 162(m) of
the Internal Revenue Code. In the event that the Compensation Committee
considers awarding compensation in the future which could not be deductible
under Section 162(m), the Committee will consider what actions, if any, should
be taken to seek to make such compensation deductible.
Compensation Committee
James R. Kuse, Chairman
Holcombe T. Green, Jr.
Don L. Chapman
THE FOREGOING REPORT SHOULD NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY
GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY
FILING UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES EXCHANGE ACT OF
1934, EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES THIS
INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH
ACTS.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Arthur Andersen LLP, subject to
ratification by the shareholders at the Annual Meeting, as auditors of the
Company for the fiscal year 1997. Arthur Andersen LLP and its predecessor,
Arthur Andersen & Co., has audited the Company's financial statements since
1979. Should this firm be unable to perform the requested services for any
reason or not be ratified by the shareholders, the Directors will appoint other
independent auditors to serve for the remainder of the year. Representatives of
Arthur Andersen & Co. will be present at the annual meeting of shareholders,
will have the opportunity to make a statement if they so desire, and will be
available to respond to appropriate questions.
RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT AUDITORS REQUIRES THE APPROVAL OF A MAJORITY OF THE VOTES CAST AT
THE ANNUAL MEETING.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
RATIFICATION OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
11
<PAGE> 15
OTHER MATTERS
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act"),
requires the Company's officers, directors and persons who own more than 10% of
the Company's Common Stock to file certain reports with respect to each such
person's beneficial ownership of the Company's Common Stock. In addition, Item
405 of Regulation S-K requires the Company to identify in its Proxy Statement
each reporting person that failed to file on a timely basis reports required by
Section 16(a) of the Exchange Act during the most recent fiscal year or prior
fiscal year.
EXECUTION OF PROXY
If the Common Stock owned by a shareholder is registered in the name of
more than one person, each such person should sign the enclosed proxy. If the
proxy is signed by an attorney, executor, administrator, trustee, guardian or by
any other person in a representative capacity, the full title of the person
signing the proxy should be given and a certificate should be furnished showing
evidence of appointment.
ANNUAL REPORT TO SHAREHOLDERS
The Annual Report of the Company for the fiscal year 1996, including
audited financial statements, is being mailed to shareholders herewith. The
Annual Report does not form any part of the material for the solicitation of
proxies.
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL PROVIDE WITHOUT CHARGE, AT THE WRITTEN REQUEST OF ANY
SHAREHOLDER OF RECORD AS OF THE CLOSE OF BUSINESS ON JUNE 7, 1996, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, EXCEPT EXHIBITS THERETO. The Company will provide copies of the
exhibits, should they be requested by eligible shareholders, and the Company may
impose a reasonable fee for providing such exhibits. Request for copies of the
Company's Annual Report on Form 10-K should be mailed to:
Rhodes, Inc.
4370 Peachtree Road
Atlanta, Georgia 30319
Attention: Joel H. Dugan
Senior Vice President,
Finance and Administration
SHAREHOLDER PROPOSALS
Any shareholder proposals intended to be presented at the Company's 1997
Annual Meeting of Shareholders must be received by the Company on or before
February 12, 1997 to be eligible for inclusion in the Proxy Statement and form
of proxy to be distributed by the Board of Directors in connection with such
meeting.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the
meeting. However, if any other matters should come before the meeting, the
persons named in the proxy will vote such proxy in accordance with their
judgment.
12
<PAGE> 16
EXPENSES OF SOLICITATION
The cost of solicitation of proxies will be borne by the Company. In an
effort to have as large a representation at the meeting as possible, special
solicitation of proxies may, in certain instances, be made personally or by
telephone, telegraph or mail by one or more employees of the Company. The
Company also may reimburse brokers, banks, nominees and other fiduciaries for
postage and reasonable clerical expenses of forwarding the proxy material to
their principals who are beneficial owners of the Company's stock. The Company
has not retained any third party to assist in the solicitation of proxies with
respect to shares of the Company's stock held of record by brokers, nominees and
institutions or other holders.
Joel H. Dugan
Senior Vice President and
Secretary
Atlanta, Georgia
June 17, 1996
13
<PAGE> 17
APPENDIX A
RHODES, INC.
PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS ON JULY 16, 1996
The undersigned hereby appoints Irwin L. Lowenstein, Joel T. Lanham and Joel
H. Dugan and each of them, proxies, with full power of substitution and
resubstitution, for and in the name of the undersigned, to vote all shares of
common stock of Rhodes, Inc. which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Shareholders to be held on Monday,
July 16, 1996, at 2:00 p.m., local time, at 4370 Peachtree Road, Atlanta,
Georgia, 30319, or at any adjournment thereof, upon the matters described in the
accompanying Notice of Annual Meeting of Shareholders and Proxy Statement,
receipt of which is hereby acknowledged, and upon any other business that may
properly come before the Annual Meeting of Shareholders or any adjournment
thereof. Said proxies are directed to vote on the matters described in the
Notice of Annual Meeting of Shareholders and Proxy Statement as follows, and
otherwise in their discretion upon such other business as may properly come
before the Annual Meeting of Shareholders or any adjournment thereof.
1. To elect five (5) directors to serve until the 1997 Annual Meeting of
Shareholders:
<TABLE>
<S> <C> <C> <C>
/ / FOR all nominees listed (except as marked below to the contrary)
Irwin L. Lowenstein Holcombe T. Green, Jr. James V. Napier
Don L. Chapman James R. Kuse
</TABLE>
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.)
<TABLE>
<S> <C> <C> <C>
/ / WITHHOLD AUTHORITY to vote for all nominees listed
Irwin L. Lowenstein Holcombe T. Green, Jr. James V. Napier
Don L. Chapman James R. Kuse
</TABLE>
2. To ratify the appointment of Arthur Andersen LLP as the Company's
independent auditors for the fiscal year ending February 28, 1997.
<TABLE>
<S> <C> <C> <C>
FOR / / AGAINST / / ABSTAIN / /
</TABLE>
(Continued and to be signed on the other side)
(Continued from the other side)
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO DIRECTION IS INDICATED, THE
PROXY WILL BE VOTED FOR THE ABOVE-STATED PROPOSALS.
Date: ,1996
---------------------------
-------------------------------------
-------------------------------------
Please sign exactly as your name or
names appear hereon. For more than
one owner as shown above, each should
sign. When signing in a fiduciary or
representative capacity, please give
full title. If this proxy is
submitted by a corporation, it should
be executed in the full corporate
name by a duly authorized officer, if
a partnership, please sign in
partnership name by authorized
person.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING ON JULY 16, 1996.
IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY.
