<PAGE> 1
===============================================================================
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
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 Rule 14a-11(c) or Rule 14a-12
D.I.Y. HOME WAREHOUSE, 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)(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:________________________________________
[ ] 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
D.I.Y. HOME WAREHOUSE, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 21, 1997
--------------------------
To the Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders of
D.I.Y. Home Warehouse, Inc. (the "Company") will be held at the Sheraton Airport
Hotel, 5300 Riverside Drive, Cleveland, Ohio 44135, (216) 267-1500, on
Wednesday, May 21, 1997, at 10:00 a.m., local time, for the following purposes:
(1) To elect a Board of eight Directors to serve until the
next Annual Meeting of Shareholders or until their
successors shall have been duly elected and qualified;
and
(2) To transact such other business as may properly come
before the meeting.
A Proxy Statement containing information relevant to the Annual
Meeting appears on the following pages.
Only holders of Common Stock of record at the close of business on
March 28, 1997, are entitled to notice of and to vote at the meeting or any
adjournments.
If you wish to vote in accordance with the Board of Director's
recommendations, it is not necessary to specify your choices; merely sign, date,
and return the enclosed Proxy Card. If you attend the meeting, you may withdraw
your Proxy and vote your own shares.
By Order of the Board of Directors
JOHN M. ERB
Secretary
Dated: April 15, 1997
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN
PERSON. HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE
ENCOURAGED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE
IN THE POSTAGE-PAID ENVELOPE ENCLOSED FOR THAT PURPOSE.
<PAGE> 3
D.I.Y. HOME WAREHOUSE, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 21, 1997
--------------------------
PROXIES AND SOLICITATIONS
This Proxy Statement is furnished to shareholders in connection with
the solicitation of proxies by the Board of Directors (the "Board") of D.I.Y.
Home Warehouse, Inc. (the "Company") to be used at the Annual Meeting of
Shareholders (the "Annual Meeting") and at any adjournments. If received in time
for the Annual Meeting, the shares represented by a valid proxy will be voted in
accordance with the specifications, if any, contained in such executed proxy. If
no instructions are given, proxies will be voted for all nominees for the Board.
A proxy executed in the enclosed form may be revoked by the person signing it at
any time before it is exercised. Proxies may be revoked by filing with the
Secretary of the Company, any time prior to the time set for commencement of the
Annual Meeting, a written notice of revocation bearing a later date than the
proxy, or by attending the Annual Meeting and voting in person (although
attendance at the Annual Meeting will not in and of itself constitute revocation
of a proxy).
In addition to the use of mails, proxies may be solicited by
personal interview, telephone and telegram, by directors, officers and employees
of the Company. The Company has engaged Corporate Investor Communications, Inc.
to assist in various matters relating to this Proxy Statement, the solicitation
of shareholder proxies and the Annual Meeting. Arrangements may also be made
with brokerage houses or other custodians, nominees and fiduciaries to forward
solicitation material to the beneficial owners of Common Stock held of record by
such persons, and the Company may reimburse such persons for reasonable
out-of-pocket expenses incurred in forwarding material. The Company anticipates
that fees and expenses for the foregoing parties will not exceed $1,000. The
costs of all proxy solicitation will be borne by the Company.
The executive offices of the Company are located at 5811 Canal Road,
Valley View, Ohio 44125. The approximate date of mailing of this Proxy Statement
and the enclosed Proxy materials to the Company's shareholders is April 15,
1997.
TIME AND PLACE OF MEETING
The Annual Meeting will be held at the Sheraton Airport Hotel, 5300
Riverside Drive, Cleveland, Ohio 44135, (216) 267-1500, on Wednesday, May 21,
1997, at 10:00 a.m., local time.
VOTING RIGHTS AND
PRINCIPAL HOLDERS OF VOTING SECURITIES
Only shareholders of record at the close of business on March 28,
1997 are entitled to notice of and to vote at the Annual Meeting or at any
adjournments. As of that date, the Company had 7,633,859 shares of Common Stock
issued, outstanding and entitled to vote held by approximately 226 holders of
record. Based on information provided to the Company by certain holders of
record, the Company estimates that there are in excess of 2,000 beneficial
shareholders. Each outstanding share entitles the record holder to one vote.
Shares cannot be voted at the Annual Meeting unless the holder is present in
person or represented by proxy. The presence, in person or by proxy, of
shareholders entitled to vote a majority of the voting shares that are
outstanding and entitled to vote will constitute a quorum.
Information concerning principal holders of the Common Stock is
discussed under "Security Ownership of Certain Beneficial Owners and
Management."
MATTERS TO COME BEFORE THE ANNUAL MEETING
ELECTION OF DIRECTORS
The first matter expected to be considered at the Annual Meeting
will be the election of eight directors. It is proposed that these positions be
filled by persons nominated to the Board by management. Each director shall be
elected by a plurality of the votes cast at the Annual Meeting. Therefore, if a
quorum is present, abstentions and broker non-votes will have no effect on the
election of directors. Proxies will be tabulated by the Company's transfer
agent. The Inspector of Elections appointed at the Annual Meeting will then
combine the proxy votes with the votes cast at the Annual Meeting. Each director
elected at the Annual Meeting will serve for a term
<PAGE> 4
commencing on the date of the Annual Meeting and continuing until the next
Annual Meeting of Shareholders or until his successor is duly elected and
qualified. In the absence of directions to the contrary, proxies will be voted
in favor of the election of the eight nominees listed below.
If any of the nominees named below are unavailable to serve for any
reason, then a valid proxy may be voted for the election of such other persons
as the person or persons voting the proxy may deem advisable in accordance with
their best judgment. Management has no present knowledge that any of the persons
named will be unavailable to serve. In any event, the enclosed proxy can be
voted for only the eight nominees named in this Proxy Statement or their
substitutes.
The following list identifies each nominee for election to the Board
at the Annual Meeting and describes each candidate's principal occupation for
the past five years. Each of the directors has served continuously from the date
of his election to the present time.
FRED A. ERB, age 74, is the Chairman of the Board of the Company. He
has been a Director of the Company since its inception. Mr. Erb is the Chief
Executive Officer and a Director of Edgemere Enterprises, Inc. He also serves as
an executive officer and director of Erb-D.I.Y. Center, Inc. and TQ10
Corporation. Edgemere Enterprises, Inc., Erb-D.I.Y. Center, Inc. and TQ10
Corporation are affiliates of the Company. Mr. Erb leases, and is a partner of
certain entities which lease, property to the Company. See "Compensation
Committee Interlocks and Insider Participation." Fred A. Erb is the father of
John M. Erb.
CLIFFORD L. REYNOLDS, age 50, has been a Director since February
1993. He is the President and Chief Executive Officer of the Company and has
served in such capacity since October 1989. Mr. Reynolds has 26 years of
experience in the home improvement retailing business. From October 1984 until
October 1989, Mr. Reynolds served as the Senior Vice President and General
Manager of the Company, except for a brief period in 1988 when Mr. Reynolds was
employed by Handy Andy Home Improvement Centers. Prior to his involvement with
the Company, Mr. Reynolds held various senior management positions at other
retail home improvement companies.
R. SCOTT EYNON, age 47, has been a Director since February 1993. He
is the Vice President-Operations of the Company and has served in that capacity
since January 1993. Between February 1988 and December 1992, Mr. Eynon served as
the Regional Manager for the Company. From January 1985 until February 1988, Mr.
Eynon held various management positions with the Company. Since 1977, Mr. Eynon
has served in a variety of management positions in the home center industry.
DENNIS C. HOFF, age 53, has been a Director since February 1993. He
is the Vice President-General Merchandising Manager of the Company and has
served in such capacity since January 1993. From July 1988 until December 1992,
Mr. Hoff served as the General Merchandising Manager of the Company. Since 1970,
Mr. Hoff has been involved with purchasing, sales and marketing for several
other companies in the retail industry. He has been involved in the home
improvement industry since 1984.
JOHN M. ERB, age 42, has been a Director since February 1993. He is
the Secretary of the Company and has served in such capacity since February
1993. From February 1991 to February 1993, Mr. Erb was Assistant Secretary. Mr.
Erb also serves as an executive officer of Edgemere Enterprises, Inc., Erb
Lumber, Inc. and TQ10 Corporation. TQ10 Corporation and Edgemere Enterprises,
Inc. are affiliates of the Company. John M. Erb is the son of Fred A. Erb.
GREGORY K. JONES, age 36, has been a Director since August 1993. Mr.
Jones is Senior Vice President of APAC Corporation. From April 1993 to October
1995, Mr. Jones served as President of Office 1 Superstore. Prior to that, he
was President and Chief Operating Officer of Reliable Corporation, an office
products and supplies retailer.
JOHN A. SHIELDS, age 53, has been a Director since August 1993. Mr.
Shields is the Chairman and Chief Executive Officer of Delray Farms Fresh
Markets. From 1983 to 1993, he was President and Chief Executive Officer of
First National Super Markets, Inc., a retail grocery store chain. He is also a
Director of Homeland Stores, Inc., a publicly reporting retail supermarket.
MARK A. TIMMERMAN, age 36, has been a Director since August 1993. He
is a principal at William Blair & Company, an investment banking firm, where he
has been employed since July 1986.
COMMITTEES OF THE BOARD AND MEETINGS
The Board met eight times and took action by unanimous written
consent on two occasions during the fiscal year ended December 28, 1996.
Several important functions of the Board may be performed by
committees that are comprised of members of the Board. The Company's Bylaws
authorize the formation of these committees and grant the Board the authority to
prescribe the functions of each committee and the standards for membership of
each committee.
2
<PAGE> 5
In addition, the Board appoints the members of each committee. The Board has
four standing committees: an Audit Committee, a Compensation Committee, a Long
Term Incentive Plan Committee, and an Executive Committee.
The Audit Committee was established to (i) annually recommend a firm
of independent public accountants to the Board to act as auditors of the
Company; (ii) review the scope of the annual audit with the auditors in advance
of the audit; (iii) generally review the results of the audit and the adequacy
of the Company's accounting, financial and operating controls; (iv) review the
Company's accounting and reporting principles, policies and practices; and (v)
perform such other duties as may be delegated to it by the Board. The current
members of the Audit Committee are Messrs. Fred A. Erb, Mark A. Timmerman and
Gregory K. Jones. The Audit Committee took action informally without meeting on
one occasion, and it held one formal meeting during the fiscal year ended
December 28, 1996.
The Compensation Committee was established to (i) set, review and
modify the compensation (including salaries, bonuses and stock options) of the
Company's officers; and (ii) perform such other duties as may be delegated to it
by the Board. The members of the Compensation Committee during the fiscal year
ended December 28, 1996 were Messrs. Fred A. Erb, John M. Erb and John A.
Shields. The Compensation Committee held one formal meeting during the fiscal
year ended December 28, 1996. See "Compensation Committee's Report to
Shareholders". The Long Term Incentive Plan Committee (the "LTIP Committee")
(composed of Messrs. Fred A. Erb and John M. Erb) was established to administer
the Company's 1993 Long Term Incentive Plan (the "Plan"). The LTIP Committee
took action by unanimous consent on two occasions during the fiscal year ended
December 28, 1996.
The Executive Committee was established to generally manage the
day-to-day business and affairs of the Company between regular Board meetings.
In no event may the Executive Committee, without the prior approval of the Board
acting as a whole, (i) recommend to the shareholders an amendment to the
Company's Articles of Incorporation, (ii) amend the Company's Code of
Regulations, (iii) adopt an agreement of merger or consolidation, (iv) recommend
to the shareholders the sale, lease or exchange of all or substantially all of
the Company's property and assets, (v) recommend to the shareholders a
dissolution of the Company or a revocation of a dissolution, (vi) fill vacancies
on the Board, (vii) fix compensation of the directors for serving on the Board
or on a committee of the Board, (viii) declare dividends or authorize the
issuance of the Company's stock, (ix) approve or take any action with respect to
any related party transaction involving the Company, or (x) take any other
action which is forbidden by the Company's Code of Regulations. All actions
taken by the Executive Committee must be promptly reported to the Board as a
whole and are subject to ratification, revision and alteration by the Board,
except that no rights of third persons created in reliance on authorized acts of
the Executive Committee can be affected by any such revision or alteration. The
current members of the Executive Committee are Messrs. Fred A. Erb, Clifford L.
Reynolds and John M. Erb. The Executive Committee did not hold any formal
meetings during the fiscal year ended December 28, 1996.
The Board does not have a standing committee responsible for
nominating individuals to become directors.
OUTSIDE DIRECTOR COMPENSATION
Fred A. Erb, John M. Erb and directors who are employees of the
Company do not receive compensation for serving on the Board or on the Board's
committees. Directors who are not employees of the Company are entitled to an
annual retainer fee of $5,000, a $1,000 fee for each regular or special meeting
of the Board and a $500 fee for each committee meeting attended on a day other
than a regular or special Board meeting date. For services during the fiscal
year ended December 28, 1996, Mark A. Timmerman, John A. Shields and Gregory K.
Jones received directors' fees of $11,000, $11,500 and $11,000, respectively, of
which $1,006, $2,006 and $1,006, respectively, was paid in cash and $9,994,
$9,494 and $9,994, respectively, was paid by the issuance of 5,685 shares of
Common Stock pursuant to the Company's 1996 Retainer Stock Plan for Non-Employee
Directors.
3
<PAGE> 6
MANAGEMENT AND COMPENSATION
EXECUTIVE OFFICERS
The persons listed below are the current executive officers of the
Company. Each is annually appointed by, and serves at the pleasure of, the
Board.
<TABLE>
<CAPTION>
APPROXIMATE
DATE
NAME AGE OFFICE SERVICE BEGAN
---- --- ------ -------------
<S> <C> <C> <C>
Fred A Erb(1)......................................... 74 Chairman of the Board October 1984
Clifford L. Reynolds.................................. 50 President and Chief Executive Officer October 1984
R. Scott Eynon........................................ 47 Vice President-Operations January 1985
Dennis C. Hoff........................................ 53 Vice President-General Merchandising May 1988
Manager
John M. Erb(1)........................................ 42 Secretary February 1991
Marilyn A. Eisele..................................... 39 Vice President-Administration and September 1994
Finance, and Chief Financial Officer
Eric I. Glassman...................................... 38 Treasurer and Controller January 1997
<FN>
------------------------------------
(1) Fred A. Erb is the father of John M. Erb.
</TABLE>
Each of the executive officers other than Marilyn A. Eisele and Eric I. Glassman
has been continuously employed by the Company for more than five (5) years,
serving in the capacities and since the date reflected above.
MARILYN A. EISELE has been Vice President-Administration and
Finance, and Chief Financial Officer since September 1994. For the fifteen years
prior to joining the Company, Ms. Eisele was employed by Coopers & Lybrand LLP,
the Company's auditors, most recently as Business Assurance Manager.
ERIC I. GLASSMAN has been Treasurer and Controller since January
1997. Prior to joining the Company, Mr. Glassman was employed by BE-MAC
Transport Company, Inc. as Vice President, Treasurer and Controller from 1991 to
February 1993 and was employed by Photoco, Inc. as Chief Financial Officer from
February 1993 until joining the Company in January 1997.
4
<PAGE> 7
EXECUTIVE COMPENSATION
The following table sets forth all cash compensation paid to the
Chief Executive Officer and each executive officer whose remuneration from the
Company exceeded $100,000 during the fiscal year ended December 28, 1996.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
NAME AND PRINCIPAL POSITION
--------------------------- LONG TERM
COMPENSATION ALL OTHER
YEAR SALARY($)(1) BONUS($) OPTIONS(#) COMPENSATION($)(2)
---- ------------ -------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Clifford L. Reynolds,
President and Chief Executive
Officer......................................... 1996 $246,635 $250,000 30,000 $3,420
1995 234,135 121,875 30,000 3,208
1994 225,000 78,125 75,000 3,000
R. Scott Eynon,
Vice President - Operations...................... 1996 $137,981 $112,000 20,000 $3,052
1995 130,481 60,938 15,000 3,123
1994 125,000 39,062 37,500 3,000
Dennis C. Hoff,
Vice President - General
Merchandising Manager............................ 1996 $137,981 $112,000 20,000 $3,052
1995 130,481 60,938 15,000 3,123
1994 125,000 39,062 37,500 3,000
Marilyn A. Eisele,
Vice President - Administration
and Finance..................................... 1996 $125,481 $ 89,250 20,000 $2,775
1995 118,653 -0- 7,500 2,047
1994(3) 35,385 -0- 30,000 -0-
<FN>
------------------------------------
(1) Includes amounts which were deferred at the election of the officer to
the Company's 401(k) plan.
(2) Consists of contributions paid by the Company on behalf of the officer
to the Company's 401(k) plan and Company paid premium on life
insurance.
(3) Consists of amounts from September 1994 (date of hire) to year end.
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has entered into amended and restated employment
contracts with Messrs. Reynolds, Eynon and Hoff dated as of January 1, 1995,
which amend and restate employment agreements originally dated as of March 24,
1993. The Company has also entered into an employment agreement with Ms. Eisele
dated as of April 1, 1995. These agreements expire five years from their date,
unless sooner terminated as provided therein. The agreements provide for payment
of a base salary, as well as a bonus to be determined in the discretion of the
Compensation Committee, together with certain fringe benefits. The agreements
contain typical confidentiality provisions, and Messrs. Reynolds', Eynon's and
Hoff's agreements preclude them from competing with the Company during the term
of the agreement and for certain periods of time after termination under certain
circumstances. In addition, the agreements provide for severance compensation,
at the executive's base salary rate plus continued medical and insurance
benefits, for termination of employment following a "change of control" (as
defined in the agreements) for certain periods of time (18 months for Mr.
Reynolds, and 12 months for Messrs. Eynon and Hoff and Ms. Eisele) or following
various other circumstances.
5
<PAGE> 8
<TABLE>
<CAPTION>
OPTIONS/SARS GRANTS
IN LAST FISCAL YEAR
=================================================================================================================================
Individual Grants Grant Date Value
=================================================================================================================================
% of Total Options/SARs
Granted to Employees in
Fiscal Year Exercise or Base Grant Date
Options/SARs Granted Price Expiration Date Present
Name Per Share Value (1)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Clifford L. Reynolds 30,000 19% $4.69 9/6/2001 $58,236
---------------------------------------------------------------------------------------------------------------------------------
R. Scott Eynon 20,000 13% $4.69 9/6/2001 $38,824
---------------------------------------------------------------------------------------------------------------------------------
Dennis C. Hoff 20,000 13% $4.69 9/6/2001 $38,824
---------------------------------------------------------------------------------------------------------------------------------
Marilyn A. Eisele 20,000 13% $4.69 9/6/2001 $38,824
=================================================================================================================================
<FN>
(1) In 1996, the Company changed its method of valuing options from the
appreciation method to the Black-Scholes option pricing model to be consistent
with the requirements of Statement of Financial Accounting Standards No. 123
"Accounting for Stock - Based Compensation" used in the Company's 1996 Annual
Report. The present value at the date of grant during fiscal year 1996 has been
calculated using the Black-Scholes option pricing model, based upon the
following assumptions: risk-free interest rate of 5.7%, no dividend yield,
expected lives of five years and volatility of 36%. The values which are
calculated are not intended to predict future prices of the Company's Common
Stock. The values shown are theoretical and do not necessarily reflect the
actual values the recipients may realize. Any actual value to the recipients
will depend on the extent to which the market value of the Company's Common
Stock at a future date exceeds the exercise price.
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES AND
FISCAL YEAR-END OPTION/SAR VALUES TABLE
===================================================================================================================================
No. of Unexercised Options/SARs at Value of Unexercised
Fiscal Year-End In-The-Money Options/SARs at
Fiscal Year-End
------------------------------------- ----------------------------------
Shares Acquired
on Exercise Value
Name in 1996 Received Exercisable Not Exercisable Exercisable Not Exercisable
===================== =============== =============== ================ ================== =============== ================
<S> <C> <C> <C> <C> <C> <C>
Clifford L. Reynolds 0 n/a 72,000 123,000 $0 $0
- --------------------- --------------- --------------- ---------------- ------------------ --------------- ================
R. Scott Eynon 0 n/a 39,000 68,500 0 0
- --------------------- --------------- --------------- ---------------- ------------------ --------------- ================
Dennis Hoff 0 n/a 39,000 68,500 0 0
- --------------------- --------------- --------------- ---------------- ------------------ --------------- ================
Marilyn A. Eisele 0 n/a 13,500 44,000 0 0
===================== =============== =============== ================ ================== =============== ================
</TABLE>
COMPENSATION COMMITTEE'S REPORT TO SHAREHOLDERS
The executive compensation program is administered by the
Compensation Committee of the Board (the "Committee") which was comprised of
non-employee directors Messrs. Fred A. Erb, John M. Erb and John A. Shields
during the fiscal year ended December 28, 1996. The Committee reviews the
compensation (including salaries, bonuses and stock options) of the Company's
officers and performs such other duties as may be delegated to it by the Board.
The Committee held one formal meeting during the fiscal year ended December 28,
1996.
In reviewing the compensation to be paid to the Company's executive
officers during the fiscal year ended December 28, 1996, the Committee sought to
ensure that executive officers were rewarded for long-term strategic management,
for increasing the Company's value for its shareholders, and for achieving
internal goals established by the Board.
6
<PAGE> 9
The key components of executive officer compensation are salary,
bonuses and stock awards. Salary is generally based on factors such as an
individual officer's level of responsibility, prior years' compensation,
comparison to compensation of other officers in the Company, and compensation
provided at competitive companies and companies of similar size. Bonuses and
stock awards are intended to reward exceptional performances. In March, 1996,
the Committee approved increases in the base salaries of the four principal
executive officers (Messrs. Reynolds, Eynon and Hoff and Ms. Eisele) effective
March 31, 1996. The aggregate base salaries for all four principal executive
officers was increased by 5.6%. Stock awards are also intended to increase an
officer's interest in the Company's long-term success as measured by the market
and book value of its stock. Stock awards may be granted to officers and
directors of the Company and to certain employees who have managerial or
supervisory responsibilities under the Company's Plan. Stock awards may be stock
options, stock appreciation rights or restricted share rights. Forty employees
received stock options under the Stock Plan during the fiscal year ended
December 28, 1996. No stock options were granted to non-employee directors under
the Stock Plan during the fiscal year ended December 28, 1996.
The Committee reviewed the individual performances of the principal
executive officers and recognized the progress the Company has made toward
attaining its long-term goals. Based on its subjective evaluation of the
performance by the four principal officers (Messrs. Reynolds, Eynon and Hoff and
Ms. Eisele) and their perceived levels of contribution to attainment of the
Company's long-term goals, the Committee approved the salary increases described
above and the Long Term Incentive Plan Committee awarded stock options under the
Plan in March, 1996 to Mr. Reynolds (30,000 shares), Messrs. Hoff and Eynon and
Ms. Eisele (20,000 shares each).
In May 1996, the Committee recommended to the Board (and the Board
adopted) an employee bonus percentage based compensation plan for the fiscal
year ended December 28, 1996. Under the bonus plan, bonuses were to be awarded
based on the extent to which earnings per share for the fiscal year exceeded
$0.40 up to a maximum of $0.50, as reported in the Company's audited financial
statements for the year. The bonus would be a pre-set percentage (which varied
according to the actual earnings per share reported) multiplied by the
employee's base compensation. Eligible employees were the executive officers.
The Company's earnings per share for the fiscal year ended December 28, 1996
were $0.50 per share. Accordingly, bonuses paid to Messrs. Reynolds, Eynon and
Hoff and Ms. Eisele under the employee bonus percentage based compensation plan
for the fiscal year ended December 28, 1996 were $250,000, $112,000, $112,000
and $89,250, respectively. Bonuses paid to Messrs. Reynolds, Eynon and Hoff in
1994 and 1995 were awarded for their contribution to both the growth of the
Company and the completion of the Company's initial public offering in 1993.
Such bonuses were payable from October 1994 through December 1995 and were
contingent upon the continuing employment of such individuals during the pay-out
period.
In addition, the Committee seeks to point out that the Committee
believes that there are many relevant factors that should generally be
considered in determining a bonus plan including, but not limited to, return on
equity, earnings as a percentage of sales, margins, expenses, and other
designated targets and projects. The Committee further believes that earnings
per share in many instances should only be one component of a bonus plan or
possibly, under certain circumstances, not a component at all.
Fred A. Erb John M. Erb John A. Shields
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Fred A. Erb and John M. Erb constituted the Compensation
Committee from August 9, 1993 to February 23, 1994. On February 23, 1994, Mr.
John A. Shields joined the Compensation Committee. Prior to August 9, 1993, Mr.
Fred A. Erb was solely responsible for determining executive officer
compensation. Mr. Fred A. Erb has served as a director and executive officer of
other entities which are, or have been, related to the Company. See "Directors
and Officers." Mr. Fred A. Erb also leases, and is a partner of certain entities
which lease, property to the Company.
The Company leases the Cleveland, Boardman, North Randall and
Eastlake store locations from either Fred A. Erb (the Company's Chairman and
controlling stockholder) or entities affiliated with him. Each of the leases are
"net" leases, whereby DIY and its sublessors are responsible for all costs
associated with the premises. The Company believes that the rents payable under
these leases are at rates that are no less favorable to the Company than those
that could be obtained from unaffiliated third parties.
The Company leases its Cleveland location from D.I.Y. Ohio Real
Estate Associates Limited Partnership ("DIY Ohio"), a limited partnership
controlled by Mr. Fred A. Erb and in which he and members of this immediate
family are partners. Pursuant to the terms of the lease, the Company pays an
annual "Basic Rent" of $353,340. Beginning January 31, 1997, the Company must
pay an additional amount equal to the Basic Rent multiplied by one-half of the
percentage increase in the Consumer Price Index from August 1992 to the month in
question ("CPI Rent"). Each year, the Company must also pay "Percentage Rent"
equal to 1.5% of the amount by which the Company's gross sales for the year
exceeds the sum of the Basic Rent and the CPI Rent, if any, which sum is divided
by 1.5%. The Company paid $388,340 in rent in 1996 and $353,340 in rent in each
of 1995 and 1994 to
7
<PAGE> 10
DIY Ohio. The term of the lease ends on December 30, 2007, and the Company does
not have any renewal options.
The Company also leases its Boardman, Ohio location from DIY Ohio.
The Company pays an annual "Basic Rent" of $519,600. Each year, the Company must
also pay "Percentage Rent" equal to 1.5% of the amount by which the Company's
gross sales for the year exceeds the sum of the Basic Rent and the "CPI Rent"
(defined below), if any, which sum is divided by 1.5%. The amount of rent paid
to DIY Ohio in each of 1996 and 1995 was $519,600 and was $558,415 in 1994. The
term of the lease ends on September 30, 2008, and the Company has three
five-year renewal options, with rent equal to the Basic Rent plus an additional
amount equal to one-half of the percentage increase of the Consumer Price Index
from October 1, 1993 to the date of the beginning of the renewal term,
multiplied by the Basic Rent (the "CPI Rent").
The Company's North Randall location is leased from D.I.Y. Center
Associates, a general partnership in which Mr. Fred A. Erb is a partner. The
lease runs through October 31, 2002, and provides for annual rent of $511,000.
The Company has three ten-year renewal options, with annual rent for the first,
second and third renewal periods of $536,000, $561,000 and $586,000,
respectively. The amount of rent paid in each of 1996, 1995 and 1994 was
$511,000.
The Company leases its Eastlake store from a partnership controlled
by Mr. Fred A. Erb. The lease term ends on February 28, 2002, and DIY does not
have any renewal options. In August, 1996, Basic Rent increased from $411,000 to
$456,600 per year. Each year, the Company must also pay Percentage Rent equal to
1.5% of the amount, if any, by which the Company's gross sales for the year
exceeds the Company's Basic Rent for that year divided by 1.5%. On August 1 of
1999, the Company's Basic Rent will be increased by a percentage equal to
one-half of the percentage increase in the Consumer Price Index over the
preceding three year period. The Company paid rent of $430,000 in 1996 and
$411,000 in rent in each of 1995 and 1994.
In 1985, Edgemere Enterprises, Inc. (formerly Erb Lumber Co.), a
company controlled by Mr. Fred A. Erb, advanced $3.0 million to the Company. The
present balance outstanding is $900,000. The loan bears interest at the rate of
3/4% over the prime rate per year, and is due on demand.
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The following graph depicts a comparison of cumulative total
returns, assuming $100 was invested on May 18, 1993 (the date of the Company's
initial public offering) and reinvestment of dividends in (a) the Company, (b)
the entire Nasdaq stock market, and (c) a group of issuers which the Company
believes are the Company's peers in its line of business. This "peer group"
consists of BMC West, Eagle Hardware & Garden, Grossman's Inc., Hechinger, Home
Depot, Inc., Lowe's, Orchard Supply & Hardware, Payless Cashways and Wolohan
Lumber Co.
<TABLE>
<CAPTION>
D.I.Y. HOME PEER GROUP NASDAQ
WAREHOUSE INDEX MARKET INDEX
----------- ---------- ------------
05/18/93 <S> <C> <C>
12/31/93
12/31/94
12/31/95
12/31/96
-----------------------------------------------------
+ D.I.Y. HOME WAREHOUSE, INC. - PEER GROUP INDEX
+ NASDAQ MARKET INDEX
-----------------------------------------------------
ASSUMES $100 INVESTED ON MAY 18, 1993
ASSUMES $100 INVESTED ON MAY 18, 1993
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1996
</TABLE>
8
<PAGE> 11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 28, 1997, the
shareholdings of (a) each person known to the Company to be the beneficial owner
of more than five (5%) percent of the Common Stock, (b) each director of the
Company, (c) each executive officer listed in the Summary Compensation Table,
and (d) all executive officers and directors of the Company as a group, based
upon information available to the Company.
<TABLE>
<CAPTION>
====================================================================================================================
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING SHARES (1)
- ------------------------------------ -------------------- -----------------
<S> <C> <C>
Fred A. Erb 4,550,000(2) 59.6%
Chairman of the Board of Directors
44 East Long Lake Road
Bloomfield Hills, Michigan 48304
Clifford L. Reynolds 238,000(3) 3.1%
Director and President and Chief Executive Officer
5811 Canal Road
Valley View, Ohio 44125
R. Scott Eynon 98,350(4) 1.3%
Director and Vice President - Operations
5811 Canal Road
Valley View, Ohio 44125
Dennis C. Hoff 98,100(5) 1.3%
Director and Vice President - General
Merchandising Manager
5811 Canal Road
Valley View, Ohio 44125
Marilyn A. Eisele 20,500(6) *
Vice President-Administration and Finance
and Chief Financial Officer
5811 Canal Road
Valley View, Ohio 44125
John M. Erb 70,000(2) .9%
Director and Secretary
44 East Long Lake Road
Bloomfield Hills, Michigan 48304
Gregory K. Jones, Director 13,084(7) *
One Parkway North Center
Deerfield, Illinois 60015
John A. Shields, Director 57,891(8) .8%
2749 Landon Road
Shaker Heights, Ohio 44122
Mark A. Timmerman, Director 16,984(9) *
222 West Adams Street
Chicago, Illinois 60606
All current executive officers and directors as a group 5,163,909(2)(10) 67.6%
(10 persons)
============================================================================================================================
<FN>
* Less than one-half percent.
(1) Percentage calculations based on 7,633,859 shares of Common Stock issued and outstanding
as of March 28, 1997. Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission, which provide that shares of Common Stock
subject to options exercisable within 60 days are deemed outstanding for computing the
percentage of the person or group holding the particular option, but are not outstanding
for computing the percentage of any other person.
(2) Does not include 300,000 shares held by The Erb Foundation, the trustees of which are
Fred A. Erb, John M. Erb and Ira J. Jaffe.
(3) Consists of 150,000 shares now owned by Mr. Reynolds and 88,000 shares which he may
acquire within 60 days pursuant to his options under the Plan.
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
<S> <C>
(4) Consists of 50,350 shares now owned by Mr. Eynon and 48,000 shares
which he may acquire within 60 days pursuant to his options under the
Plan.
(5) Consists of 50,100 shares now owned by Mr. Hoff and 48,000 shares
which he may acquire within 60 days pursuant to his options under the
Plan.
(6) Consists of 1,500 shares now owned by Ms. Eisele and 19,000 shares
which she may acquire within 60 days pursuant to her options under the
plan.
(7) Consists of 3,084 shares now owned by Mr. Jones and 10,000 shares
which he may acquire within 60 days pursuant to his options under the
Plan.
(8) Consists of 47,891 shares now owned by Mr. Shields and 10,000 shares
which he may acquire within 60 days pursuant to his options under the
Plan.
(9) Consists of 8,984 shares now owned by Mr. Timmerman and 8,000 shares
which Mr. Timmerman may acquire within 60 days pursuant to his options
under the Plan.
(10) Includes 231,000 shares which executive officers and directors have
the right to acquire within 60 days pursuant to stock options issued
under the Plan.
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company is required to identify each person who was an officer,
director or beneficial owner of more than 10% of the Company's registered equity
securities during the Company's most recent fiscal year and who did not file on
a timely basis reports required by Section 16(a) of the Securities and Exchange
Act of 1934. Based solely upon its review of copies of such reports received by
it during or with respect to the fiscal year ended December 28, 1996, the
Company believes that all officers, directors and beneficial owners of more than
10% of the Company's registered equity securities timely filed all required
reports.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STORE LEASES
The Company leases the Cleveland, Boardman, North Randall and
Eastlake store locations from either Fred A. Erb (the Company's Chairman and
controlling stockholder) or entities affiliated with him. See "Management -
Compensation Committee Interlocks and Insider Participation."
TRANSACTIONS WITH EDGEMERE ENTERPRISES, INC.
In 1985, Edgemere Enterprises, Inc. (formerly Erb Lumber Co.), a
company controlled by Mr. Fred A. Erb, advanced $3.0 million to the Company. The
present balance outstanding is $900,000. The loan bears interest at the rate of
3/4% over the prime rate per year, and is due on demand. See "Management -
Compensation Committee Interlocks and Insider Participation."
TAX INDEMNIFICATION AGREEMENT
The Company and Fred A. Erb, John M. Erb, Clifford L. Reynolds, R.
Scott Eynon and Dennis C. Hoff entered into a mutual indemnification agreement
relating to federal and certain state and local income tax liabilities of the
Company and the shareholders for tax years during which the Company had elected
to be treated as an S Corporation. This agreement generally provides that the
Company will indemnify the shareholders, and the shareholders will indemnify the
Company, against any increase in the indemnified party's income tax liabilities
(including interest and penalties and all expenses, attorneys' fees and
accountants' fees incurred in connection therewith) for those jurisdictions in
which an S Corporation election was made or deemed to have been made.
GENERAL INFORMATION
INDEPENDENT PUBLIC ACCOUNTANTS
The Board selected Coopers & Lybrand as the Company's independent
public accountants for the fiscal year ended December 28, 1996. Representatives
of Coopers & Lybrand are expected to be present at the Annual Meeting, and will
have the opportunity to make a statement if they desire to do so and to respond
to appropriate questions. It is expected that Coopers & Lybrand will also serve
the Company in the same capacity during the fiscal year ending January 3, 1998.
10
<PAGE> 13
SHAREHOLDERS' PROPOSALS
Any and all shareholder proposals for inclusion in the proxy
materials for the Company's next Annual Meeting of Shareholders must comply with
the rules and regulations promulgated under the Securities Exchange Act of 1934,
as amended, and must be received by the Company, at its offices at 5811 Canal
Road, Valley View, Ohio 44125, not later than December 16, 1997. Such proposals
should be addressed to the Company's Secretary.
The Company's Code of Regulations (the "Regulations") also contain
certain provisions which affect shareholder proposals. The Regulations require
that notice in writing of proposed shareholder nominations for the election of
directors be timely given to the Secretary of the Company prior to the meeting.
Such notice must contain certain information about the non-incumbent nominee,
including name, age, business and residence addresses, principal occupation, the
class and number of shares of the Company beneficially owned by the nominee and
such other information as would be required to be included in a proxy statement
soliciting proxies for election of the nominee, as well as certain information
about the nominating shareholder. The Company may require any nominee to furnish
other information reasonably required by the Company to determine the nominees
eligibility to serve as a director. If the presiding officer of any shareholders
meeting determines that a person was not nominated in accordance with the
foregoing procedures, such person shall not be eligible for election as a
director.
In addition, the Regulations require that notice in writing from any
shareholder who proposes to bring business before any meeting of shareholders
must be timely given to the Secretary of the Company prior to the meeting. Such
notice must contain certain information, including a brief description of the
business proposed to be brought before the meeting, the reasons for conducting
such business at the meeting, the class and number of shares of the Company
beneficially owned by such shareholder and any supporting shareholders and any
material interest of the proposing shareholder in the business so proposed. If
the presiding officer of any shareholders' meeting determines that any such
business was not properly brought before the meeting in accordance with the
foregoing procedures, such business will not be conducted at the meeting.
Nothing in the Code of Regulations will preclude discussion by any shareholder
of any business properly brought before the meeting in accordance with the
above-mentioned procedures.
To be timely, shareholder notice of a nomination for election of a
director or to bring business before any shareholders meeting must be received
by the Company not less than thirty days nor more than sixty days prior to the
meeting (or, if fewer than forty days' notice or prior public disclosure of the
meeting date is given or made to shareholders, not later than the tenth day
following the day of mailing notice of the meeting or public disclosure
thereof).
OTHER MATTERS
The Company's Annual Report for the year ended December 28, 1996 has
been mailed with this Proxy Statement or previously delivered to shareholders.
Management knows of no matters which will be presented for
consideration at the Annual Meeting other than those stated in the Notice of
Meeting. However, if any other matters do properly come before the Annual
Meeting, the person or persons named in the accompanying proxy form will vote
the proxy in accordance with their best judgment regarding such matters,
including the election of a director or directors other than those named in this
Proxy Statement should an emergency or unexpected occurrence make the use of
such discretionary authority necessary, and also regarding matters incident to
the conduct of the meeting.
Shareholders are requested to date, sign and return the enclosed
proxy in the enclosed postage-paid envelope. So that the presence, in person or
by proxy, of the holders of a majority of the shares entitled to vote at the
meeting may be assured, prompt execution and return of the proxy is requested.
By Order of the Board of Directors
JOHN M. ERB
Secretary
Dated: April 15, 1997
11
<PAGE> 14
[LOGO - DIY (DO IT YOURSELF) HOME WAREHOUSE]
--------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
D.I.Y. HOME WAREHOUSE INC.
ANNUAL MEETING OF SHAREHOLDERS -- WEDNESDAY, MAY 21, 1997, AT 10:00 A.M.
The undersigned hereby appoints Fred A. Erb, John M. Erb and Clifford L.
Reynolds, or any one of them, as attorneys and proxies of the undersigned
shareholder, with full power of substitution, to vote on behalf of the
undersigned and in his or her name and stead, all shares of the common stock of
D.I.Y. Home Warehouse, Inc., which the undersigned would be entitled to vote if
personally present at the Company's Annual Meeting of Shareholders to be held
at the Sheraton Airport Hotel, 5300 Riverside Drive, Cleveland, Ohio 44135, on
Wednesday, May 21, 1997, and at any adjournments thereof.
1. ELECTION OF DIRECTORS
[ ] FOR all the nominees listed below:
Fred A. Erb Clifford L. Reynolds Dennis C. Hoff R. Scott Eynon
John M. Erb John A. Shields Gregory K. Jones Mark A. Timmerman
[ ] FOR all the nominees listed above except those nominees with a line
drawn through their name.
[ ] AUTHORITY IS WITHHELD for all the nominees listed above.
2. OTHER BUSINESS
The above-appointed proxies are authorized to vote upon all matters
incidental to the conduct of the Annual Meeting and such other business as
may properly come before the Annual Meeting in accordance with their best
judgment.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
<PAGE> 15
Proxy No. (continued from reverse side) Shares
The undersigned shareholder acknowledges receipt of the Notice of Annual
Meeting and Proxy Statement dated April 15, 1997.
The giving of this Proxy does not affect the right of the undersigned
shareholder to vote in person should the undersigned shareholder attend the
annual Meeting. This Proxy may be revoked at any time it is voted.
THE PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF ALL NOMINEES LISTED ABOVE.
Please sign exactly as your name appears on this
card. When shares are held by joint tenants, both
should sign. When signing as attorney, executor,
personal representative, trustee or in some other
representative capacity, please sign name and give
full title. If a corporation, please sign in full
corporate name by President or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
DATED: , 1997
--------------------------
Signature:
---------------------------------------
-------------------------------------------------
Signature if held jointly
------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
------------------------------------------------
