<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Friedman's 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:
-------------------------------------------------------------------------
[_] 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.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
[FRIEDMAN'S LOGO]
4 West State Street
Savannah, Georgia 31401
January 28, 2000
Dear Stockholder:
On behalf of the Board of Directors and management of Friedman's Inc.,
I cordially invite you to attend the 2000 Annual Meeting of Stockholders to be
held at the Hyatt Regency Savannah, 2 West Bay Street, Savannah, Georgia, on
Thursday, March 2, 2000, at 10:00 a.m. local time.
We look forward to your attendance at the Annual Meeting so that you
can learn more about your Company and become better acquainted with members of
the Board of Directors and the management team. The sole item of business that
is being presented for a vote by the holders of Class A Common Stock at the
Annual Meeting is the election of three directors of the Company, as explained
in the accompanying Proxy Statement.
It is important that your stock be represented at the meeting
regardless of the number of shares you hold. You are encouraged to specify your
voting preferences by so marking the enclosed proxy card. Please then sign and
date the proxy card and return it in the enclosed envelope whether or not you
plan to attend the meeting. If you do attend and wish to vote in person, you
may revoke your proxy at the meeting.
If you have any questions about the Proxy Statement or the accompanying
1999 Annual Report, please contact Mr. Victor M. Suglia at (912) 233-9333.
Sincerely,
/s/ Bradley J. Stinn
--------------------
Bradley J. Stinn
President and Chief Executive Officer
<PAGE>
FRIEDMAN'S INC.
4 West State Street
Savannah, Georgia 31401
NOTICE TO THE HOLDERS OF CLASS A COMMON STOCK
OF THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 2, 2000
Notice is hereby given to the holders of the Class A common stock, $.01 par
value per share (the "Class A Common Stock"), of Friedman's Inc. (the "Company")
that the 2000 Annual Meeting of Stockholders of the Company (the "Annual
Meeting") will be held at the Hyatt Regency Savannah, 2 West Bay Street,
Savannah, Georgia, on Thursday, March 2, 2000, at 10:00 a.m., local time, for
the following purposes:
(i) To elect three directors to serve until the 2001 Annual Meeting of
Stockholders; and
(ii) To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
Information relating to the Annual Meeting and the election of directors is
set forth in the attached Proxy Statement.
Only those stockholders of record at the close of business on January 7,
2000, are entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof; however, the transfer books will not be closed. A
complete list of stockholders entitled to vote at the Annual Meeting will be
available for examination by any stockholder at the Annual Meeting and for a
period of ten days prior thereto at the executive offices of the Company in
Savannah, Georgia.
By Order of the Board of Directors.
/s/ Victor M. Suglia
--------------------
Victor M. Suglia
January 28, 2000 Secretary
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE VOTE, SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY IN THE ENCLOSED PREPAID
ENVELOPE. YOU CAN SPARE YOUR COMPANY THE EXPENSE OF FURTHER PROXY SOLICITATIONS
BY RETURNING YOUR PROXY CARD PROMPTLY. IF YOU ATTEND THE ANNUAL MEETING, YOU
MAY WITHDRAW YOUR PROXY APPOINTMENT AND VOTE IN PERSON.
<PAGE>
FRIEDMAN'S INC.
-----------------
PROXY STATEMENT
For Holders of Class A Common Stock
For Annual Meeting of Stockholders
to be Held on March 2, 2000
-----------------
This Proxy Statement is furnished to holders of the Class A common stock,
$.01 par value per share ("Class A Common Stock"), of Friedman's Inc., a
Delaware corporation (the "Company"), in connection with the solicitation of
proxies by the Company's Board of Directors from holders of the outstanding
shares of Class A Common Stock for use at the 2000 Annual Meeting of
Stockholders to be held at 10:00 a.m. local time, at the Hyatt Regency Savannah,
2 West Bay Street, Savannah, Georgia, on Thursday, March 2, 2000, and at any
adjournments thereof (the "Annual Meeting").
With respect to the holders of Class A Common Stock, the Annual Meeting will
be held for the following purposes: (i) to elect three directors to serve until
the 2001 Annual Meeting of Stockholders and (ii) to transact such other business
as may properly come before the Annual Meeting or any adjournments thereof.
The approximate date on which this Proxy Statement and the accompanying
Proxy are first being sent or given to stockholders of the Company is January
28, 2000.
Stockholders Entitled to Vote
Only stockholders of record of the Company at the close of business on
January 7, 2000 (the "Record Date") will be entitled to notice of, and to vote
at, the Annual Meeting. On the Record Date, there were 13,236,322 shares of the
Class A Common Stock issued and outstanding held by approximately 79
stockholders of record. In addition, there were 1,196,283 shares of the
Company's Class B common stock, $.01 par value per share ("Class B Common
Stock"), issued and outstanding held by two stockholders of record.
Notwithstanding the Record Date specified above, the Company's stock transfer
books will not be closed and shares may be transferred subsequent to the Record
Date. However, all votes must be cast in the names of stockholders of record on
the Record Date.
The Certificate of Incorporation of the Company (the "Certificate") provides
that holders of Class A Common Stock have voting rights with regard to the
election of a minimum of 25% of the members of the Company's Board of Directors
(rounding the number of such directors to be elected up if 25% of the members of
the Board of Directors is not equal to a whole number of directors), with the
precise number of directors to be elected by the Class A Common Stockholders in
excess of such 25% (if any) to be determined by the Board of Directors. The
Company's current Board of Directors has been set at six members, and pursuant
to the Certificate the holders of Class A Common Stock are entitled to elect at
least two directors. The Board of Directors has determined that holders of
Class A Common Stock will elect three directors at the 2000 Annual Meeting.
Holders of Class A Common Stock are entitled to one vote for each share held in
the election of directors.
Quorum and Voting Requirements
In accordance with Delaware law (under which the Company is organized) and
the Company's Bylaws, the presence of a majority of the issued and outstanding
shares of Class A Common Stock entitled to vote at the Annual Meeting, present
in person or by proxy, are required to establish a quorum. For the purpose of
determining the presence of a quorum, abstentions and votes withheld from any
nominee will
<PAGE>
be considered to be "votes entitled to be cast" and therefore will be counted as
present for purposes of determining the presence or absence of a quorum. Broker
non-votes will not be considered to be "votes entitled to be cast" and will not
be counted as present for quorum purposes. Broker non-votes are votes that
brokers holding shares of record for their customers are not permitted to cast
under applicable stock exchange rules because the brokers have not received
specific instructions from their customers as to certain proposals and as to
which the brokers advised the Company that they lack voting authority.
The election of three directors by the holders of Class A Common Stock will
require the affirmative vote of a majority of the shares of Class A Common Stock
represented and entitled to vote in the election at the Annual Meeting, provided
a quorum is present. With respect to the election of directors, stockholders
may (1) vote "for" each of the nominees, (2) "withhold" authority to vote for
each of such nominees, or (3) withhold authority to vote for one or more
nominees but vote for the other nominees. Because the directors are elected by
the holders of a majority of the shares represented and entitled to vote,
withholding authority to vote with respect to one or all nominees or an
abstention from voting will have the effect of a vote "against" such nominee or
nominees. Broker non-votes will not be considered "votes entitled to be cast"
and will have no effect on the outcome of the election of directors.
Proxies
The accompanying proxy card is for use at the Annual Meeting if a
stockholder is unable to attend in person or is able to attend but does not wish
to vote in person. Stockholders should specify their choices with regard to
each proposal on the enclosed proxy card. All properly executed and dated proxy
cards delivered by stockholders to the Company in time to be voted at the Annual
Meeting and not revoked will be voted at the Annual Meeting in accordance with
the instructions given. If no specific instructions are given, the shares
represented by a signed and dated proxy card will be voted "FOR" the election of
the three director nominees named herein. If any other matters properly come
before the Annual Meeting, the persons named as proxies will vote upon such
matters according to their judgment.
The Board of Directors is not aware of any other business to be presented to
a vote of the stockholders at the Annual Meeting. As permitted by Rule 14a-4(c)
of the of the Securities and Exchange Commission (the "SEC"), the persons named
as proxies on the proxy cards will have discretionary authority to vote in their
judgment on any proposals presented by stockholders for consideration at the
Annual Meeting that were submitted to the Company after December 13, 1999. Such
proxies also will have discretionary authority to vote in their judgment upon
the election of any person as a director if a director nominee is unable to
serve for good cause and will not serve, and on matters incident to the conduct
of the Annual Meeting.
The giving of a proxy does not affect the right to vote in person should the
stockholder attend the Annual Meeting. Any stockholder who has given a proxy
has the power to revoke it at any time before it is voted by giving written
notice of revocation to Victor M. Suglia, the Secretary of the Company, at 4
West State Street, Savannah, Georgia 31401, by executing and delivering to Mr.
Suglia a proxy card bearing a later date, or by voting in person at the Annual
Meeting. If a stockholder is not attending the Annual Meeting, any proxy or
notice should be returned in time for receipt no later than the close of
business on the day preceding the Annual Meeting.
-2-
<PAGE>
ELECTION OF DIRECTORS
The Bylaws of the Company provide that the Board of Directors shall consist
of not less than three individuals with the exact number of directors determined
by resolution of the Board of Directors; provided, that as long as any Class B
Common Stock of the Company remains outstanding, the minimum number of directors
must be sufficient to enable the holders of the Class B Common Stock to elect a
majority of the directors.
Pursuant to Article III of the Company's Bylaws, the Board of Directors has
set the number of directors of the Company at six and has nominated the
following individuals for election by the holders of Class A Common Stock and
Class B Common Stock as directors of the Company, respectively:
Class A Common Stock Nominees Director Since
----------------------------- --------------
John E. Cay III 1997
Robert W. Cruickshank 1993
David B. Parshall 1993
Class B Common Stock Nominees
-----------------------------
Bradley J. Stinn 1993
Sterling B. Brinkley 1993
Mark C. Pickup 1993
Each of the directors will be elected to hold office until the 2001 Annual
Meeting of Stockholders or until his earlier death, resignation or removal.
Holders of Class A Common Stock are entitled to vote only on the Class A
Common Stock nominees, and holders of Class B Common Stock are entitled to vote
only on the Class B Common Stock nominees. The persons designated as proxies on
the enclosed Proxy intend to vote the shares represented thereby in favor of the
election to the Board of Directors of the Class A Common Stock nominees whose
names appear above, unless either authority to vote for one or all of the
nominees is withheld or such Proxy has previously been revoked. It is believed
that the nominees will be available and able to serve as directors. In the
event that a nominee is unable to serve, the Board of Directors, in its
discretion, may designate a substitute nominee or nominees (in which case it is
anticipated that the persons designated as proxies will vote for the election of
such substitute nominee or nominees), allow the vacancy or vacancies to remain
open until the Board locates a suitable candidate or candidates, or reduce the
authorized number of directors. It is anticipated that management stockholders
of the Company will vote for the election of the nominees.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF
---
THE CLASS A COMMON STOCK NOMINEES AS DIRECTORS FOR A ONE-YEAR TERM EXPIRING AT
THE 2001 ANNUAL MEETING OF STOCKHOLDERS.
-3-
<PAGE>
Certain Information Concerning Nominees
The following table sets forth certain information regarding the nominees
for directors to be elected by the holders of the Class A Common Stock and Class
B Common Stock. For additional information concerning the nominees, see
"Meetings of the Board of Directors and Committees," "Stock Ownership" and
"Certain Transactions" below.
Class A Common Stock Nominees
-----------------------------
Name and Age Business Experience
- ------------ -------------------
John E. Cay III Mr. Cay was elected a director of the Company in
(54) February 1997. Mr. Cay has been Chairman and Chief
Executive Officer of Palmer & Cay, Inc., a regional
insurance brokerage and employee benefit consulting
company, since 1998. He served as President of
Palmer & Cay from 1971 to 1997. Mr. Cay also serves
as a director and on the compensation committee of
the Board of Directors of EZCORP, Inc. ("EZCORP"), a
pawn shop chain and an affiliate of the Company. Mr.
Cay also serves as a director for First Union
National Bank of Georgia and First Union National
Bank of Savannah.
Robert W. Cruickshank Mr. Cruickshank was elected a director of the
(54) Company in August 1993. Since 1981, Mr. Cruickshank
has been President of R.W. Cruickshank Co., a
financial management company. Mr. Cruickshank is
currently a director and chairman of the
compensation committee of Calgon Carbon Corp. and a
director of the New Canaan Bank & Trust, New Canaan,
Connecticut.
David B. Parshall Mr. Parshall was elected a director of the Company
(52) in December 1993. Since October 1992, Mr. Parshall
has been Managing Director of Dolphin Management
Inc., an investment management firm. Mr. Parshall
has also been a Managing Director of Private Equity
Investors, Inc., a company that purchases portfolios
of private equities, since April 1992. From 1988 to
1990, Mr. Parshall was a Managing Director of
Shearson Lehman Brothers Inc., and from August 1990
to March 1992, Mr. Parshall served as a Managing
Director of the Blackstone Group, L.P, both
investment banks.
-4-
<PAGE>
Class B Common Stock Nominees
-----------------------------
Name and Age Business Experience
- ------------ -------------------
Bradley J. Stinn Since September 1998, Mr. Stinn has served as
(40) President and Chief Executive Officer of the Company
and has served as Chairman of the Executive
Committee of the Board of Directors since July 1998.
He served as Chief Executive Officer of the Company
from February 1996 until December 1997, and as
Chairman of the Board of Directors from February
1996 until June 1998. Mr. Stinn served as President,
Chief Executive Officer and a director of the
Company from August 1993 until January 1996. Since
June 1995, he has served as the Chairman of the
Board of Directors and Chief Executive Officer of
Crescent Jewelers Inc. ("Crescent Jewelers"), a
retail jewelry chain that is an affiliate of the
Company. Mr. Stinn served as President and Chief
Executive Officer of MS Jewelers Corporation ("MS
Jewelers"), the general partner of MS Jewelers
Limited Partnership (the "Partnership") which owns
100% of the outstanding shares of Class B Common
Stock, from September 1992 until August 1993, and he
has served since May 1990 as a director of MS
Jewelers.
Sterling B. Brinkley Mr. Brinkley has served as Chairman of the Board of
(47) Directors of the Company since July 1998. From
February 1996 until June 1998, he served as Chairman
of the Executive Committee of the Board of Directors
of the Company. Prior to that time, Mr. Brinkley
served as the Chairman of the Board of Directors
from August 1993 until January 1996. Mr. Brinkley
also serves in the uncompensated position of
Chairman of the Board of Directors of MS Jewelers.
He also serves as a consultant to Morgan Schiff &
Co., Inc. ("Morgan Schiff"), an affiliate of the
Company. Mr. Brinkley serves as a director of
Crescent Jewelers and as Chairman of the Board of
EZCORP. Mr. Brinkley also serves as the chairman of
other private companies that are affiliates of
Morgan Schiff.
Mark C. Pickup Mr. Pickup was elected a director of the Company in
(49) August 1993. Mr. Pickup served as Vice Chairman of
Crescent Jewelers from December 1994 until February
1995 and served as President and Chief Executive
Officer of Crescent Jewelers from August 1993 to
December 1994. From October 1992 until August 1993,
Mr. Pickup served as the Senior Vice President and
Chief Financial Officer for Crescent Jewelers. Mr.
Pickup is also a director of EZCORP. Previously, for
more than five years, Mr. Pickup held various
positions with Ernst & Young LLP, leaving as a
Partner in its San Francisco, California office in
October 1992.
-5-
<PAGE>
Meetings of the Board of Directors and Committees
Board of Directors. Under the Delaware General Corporation Law and the
Bylaws of the Company, the property, affairs and business of the Company are
under the general management of its Board of Directors. The Board of Directors
conducts its business through meetings of the full Board and through committees
of the Board, and the Board of Directors has appointed standing Audit,
Compensation, Compliance and Executive Committees of the Board of Directors.
Audit Committee. The members of the Audit Committee are Mark C. Pickup
(Chairman), Robert W. Cruickshank and David B. Parshall. The Audit Committee
recommends to the Board of Directors who the Board should appoint as the
independent auditors to audit the financial statements of the Company, which
includes an inspection of the books and accounts of the Company. The Audit
Committee also reviews with the accountants selected the scope of their audit
and their audit report, including any questions and recommendations that may
arise in the audit and report or concerning the Company's internal accounting
procedures. The Audit Committee held five meetings during the 1999 fiscal year.
Compensation Committee. The members of the Compensation Committee are
Robert W. Cruickshank (Chairman), Mark C. Pickup and David B. Parshall. The
Compensation Committee reviews and approves the compensation of executive
officers and establishes targets and incentive awards under the Company's
incentive compensation plans. The Compensation Committee held two meetings
during the 1999 fiscal year.
Compliance Committee. The members of the Compliance Committee are David B.
Parshall (Chairman), John E. Cay III and Sterling B. Brinkley. The Compliance
Committee oversees the policies and procedures of the Company to ensure that the
Company is in compliance with all applicable governmental regulations and
regulatory procedures. The Committee's work includes overseeing the training and
review of employees. The Compliance Committee held one meeting during the 1999
fiscal year.
Executive Committee. The members of the Executive Committee are Bradley J.
Stinn (Chairman), Sterling B. Brinkley and Mark C. Pickup. The Executive
Committee exercises the authority of the Board of Directors to manage the
Company between meetings of the Board of Directors, to the extent permitted by
law. The Executive Committee held four meetings during the 1999 fiscal year.
The Board of Directors acting as a whole nominates those persons whom the
Board recommends that the stockholders elect as directors of the Company. The
Board of Directors also considers Class A Common Stock nominees submitted by
holders of Class A Common Stock and will do so for the 2001 Annual Meeting if
nominees are submitted to the Company on or before September 29, 2000. See
"Stockholder Proposals for 2001 Annual Meeting of Stockholders."
The Board of Directors held four meetings during the 1999 fiscal year. Each
director, during the period he was a director, attended at least 75% of the
meetings of the Board of Directors, and each member of a committee, during the
period he was a committee member, attended at least 75% of the meetings of each
committee on which he served.
Compensation of Directors
In fiscal 1999, directors who were not current employees of the Company
received an annual director's fee of $15,000 per year, and Committee Chairmen
who were not current employees of the Company received an additional $5,000 per
year. In addition, during fiscal 1999 the Board of Directors established a
special committee of the Board of Directors to consider certain matters relating
to Crescent Jewelers. Mr. Parshall, as Chairman of the special committee was
paid $7,500 for his services, and Messrs. Cay and Cruickshank were each paid
$3,750 for their services as members of the special committee. In
-6-
<PAGE>
addition, pursuant to Friedman's 1999 Long-term Incentive Plan, directors are
able to receive up to 100% of their annual director's fees in shares of Class A
Common Stock. See "Executive Compensation - Long-Term Incentive Plan." The
Company also reimburses directors for travel and other out-of-pocket expenses
incurred in connection with their services as directors. Directors who are
employees are not paid extra compensation for their service on the Board of
Directors or any committee.
In addition, under the Friedman's Inc. Stock Option Plan for Outside
Directors (the "Director Plan"), each director who is not an employee of the
Company receives a grant of options to purchase 5,000 shares of Class A Common
Stock upon his initial election to the Board of Directors, and each such
director receives subsequent annual grants of options to purchase 1,000 shares
of Class A Common Stock. The annual grants are made on the day following each
annual meeting of stockholders. The option price for each option granted under
the Director Plan is the "Fair Market Value," as defined in the Director Plan,
of the shares of Class A Common Stock subject to the option on the date the
option is granted. An option is exercisable six months after it is granted and
remains exercisable for five years from the date of grant. The Company has
reserved 50,000 shares of Class A Common Stock for issuance under the Director
Plan and as of September 30, 1999 there were 14,000 options outstanding to
purchase shares under the Director Plan.
Executive Officers of the Company
The following table sets forth certain information regarding the executive
officers of the Company, other than Messrs. Stinn and Brinkley, who are
discussed above. For information concerning executive officers' ownership of
capital stock, see "Stock Ownership."
Name and Age Business Experience
- ------------ -------------------
Victor M. Suglia Victor M. Suglia, has served as Senior Vice President
(44) and Chief Financial Officer of the Company since June
1997, and Treasurer and Secretary of the Company since
November 1997. Since September 1999, Mr. Suglia has also
served as the Chief Financial Officer of Crescent
Jewelers. Prior to joining the Company, Mr. Suglia was
Vice President and Corporate Controller for Saks
Holdings, Inc., the holding company of Saks Fifth
Avenue, for six years.
Paul G. Leonard Paul G. Leonard joined the Company in May 1999 as
(44) Executive Vice President and Chief Merchandising
Officer. Prior to joining the Company, Mr. Leonard was
President of Corporate Merchandise at Zale Corporation
for four and one half years. Mr. Leonard was Senior Vice
President for Ames Department stores for three years
prior to joining Zale Corporation.
-7-
<PAGE>
Executive Compensation
Summary Compensation Information. The following table presents certain
summary information concerning compensation for the fiscal years ended September
30, 1999, 1998 and 1997 earned by (i) the Chief Executive Officer of the
Company; and (ii) each of the other most highly compensated executive officers
of the Company whose total salary and bonus for the fiscal year ended September
30, 1999, exceeded $100,000 (collectively, the "Named Executive Officers").
Summary Compensation Table
--------------------------
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards
----------------------------------------------------------- ----------------------
Name and Other Annual Securities
Principal Position Year Salary Bonus Compensation Underlying Options
- --------------------- ---- ------ -------- ------------ ----------------------
<S> <C> <C> <C> <C> <C>
Bradley J. Stinn 1999 $400,000 $250,000 $137,890 (1) --
President, Chief Executive 1998 400,000 -- 143,313 (1) 50,000
Officer and Chairman of 1997 300,000 -- 154,907 (1) --
the Executive Committee
of the Board of Directors
Sterling B. Brinkley 1999 $300,000 $125,000 $ 76,468 (2) --
Chairman of the 1998 300,000 -- 73,361 (2) --
Board of Directors 1997 225,000 50,000 96,022 (2) --
Victor M. Suglia (3) 1999 $190,000 $ 40,000 -- --
Senior Vice President, 1998 178,750 25,000 -- --
Chief Financial Officer, 1997 58,333 10,000 $ 97,598 (4) 25,000
Secretary and Treasurer
Donald J. Wright, Jr. (5) 1999 $125,000 $ 10,000 -- --
Vice President 1998 124,167 -- -- --
Merchandising 1997 115,000 10,000 -- 4,000
Paul G. Leonard (6) 1999 $105,769 $125,000 $130,305 (7) 90,000
Executive Vice President 1998 -- -- -- --
and Chief Merchandising 1997 -- -- -- --
Officer
</TABLE>
- ------------------
(1) Composed of: (i) a housing allowance of $42,000 in each of fiscal 1999,
1998 and 1997, respectively; (ii) an automobile allowance of $17,400,
$20,334 and $14,666 in fiscal 1999, 1998 and 1997, respectively; (iii)
annual interest forgiveness on an incentive loan of $40,875, $42,225 and
$52,650 in fiscal 1999, 1998 and 1997, respectively; and (iv) an annual
reimbursement for the payment of taxes on the interest forgiveness of
$37,515, $38,754 and $45,591 in fiscal 1999, 1998 and 1997, respectively.
See "-- Employment Arrangements."
(2) Composed of: (i) annual interest forgiveness on an incentive loan of
$40,875, $42,225 and $52,650 in fiscal 1999, 1998 and 1997, respectively,
and (ii) an annual reimbursement for the payment of taxes on the interest
forgiveness of $35,593, $31,136 and $43,372, in fiscal 1999, 1998 and 1997,
respectively. See "-- Employment Arrangements."
(3) Mr. Suglia's employment with the Company began in June 1997.
-8-
<PAGE>
(4) Composed of (i) reimbursement for moving expenses of $51,455 and (ii)
reimbursement of income taxes related to the moving expense of $46,143.
(5) Mr. Wright's employment with the Company was terminated in April 1999.
(6) Mr. Leonard's employment with the Company began in May 1999.
(7) Composed of (i) reimbursement of moving expenses of $67,446 and (ii)
reimbursement of income taxes related to the moving expense of $62,859.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Individual Grant
----------------------------------------------------------------- Potential Realizable Value at
Number of Percent of Assumed Annual Rates of Stock
Securities Total Options Price Appreciation
Underlying Granted to For Option Term
Options Employees in Exercise or Expiration -----------------------------
Name Granted Fiscal Year Base Price Date 5% 10%
- ---- ---------- ------------- ---------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Paul G. Leonard 90,000 66.4% $12.99 5/11/09 $735,241 $1,863,244
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year-End Option Values
Number of Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options
At Fiscal Year-End(1) at Fiscal Year-End(2)
---------------------------------- ---------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Bradley J. Stinn(3) 320,000 30,000 -- --
Sterling B. Brinkley 130,000 -- -- --
Victor M. Suglia 17,500 7,500 -- --
Donald J. Wright, Jr. -- 5,000 -- --
Paul G. Leonard -- 90,000 -- --
</TABLE>
- --------------
(1) No stock options were exercised by any of the Named Executive Officers
during fiscal 1999.
(2) All of the options shown had exercise prices in excess of the fair market
value of a share of Class A Common Stock as of September 30, 1999 of $8.81,
and as a result none of the options were in-the-money as of September 30,
1999.
(3) All of the unexercisable options to purchase shares of Class A Common Stock
held by Mr. Stinn become immediately exercisable in the event that the
employment of Mr. Stinn is terminated by the Company for any reason.
Employment Arrangements.
As further incentive to enhance the value of the Company for the benefit of
its stockholders, in October 1994 when the Class A Common Stock Price was
$16.38, the Company adopted an incentive plan that provided each of Mr. Brinkley
and Mr. Stinn a loan in the amount of $1.5 million, the repayment of which is
forgiven upon the attainment of specific targets for the market price of the
Company's Class A Common Stock ranging from $22.50 to $32.50. The plan was
structured such that if the Company is able to achieve nearly 100% appreciation
in its stock price within a designated period, the entire amount of all advances
will be forgiven and related tax consequences will be paid by the Company. The
loans are due and payable in ten years and carry an interest rate equal to the
minimum rate allowable under the Internal Revenue Code of 1986, as amended (the
"Code"). The incentive features of the loans provide that: (i) as
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<PAGE>
long as Mr. Brinkley or Mr. Stinn are employed by the Company on the date when
interest is due on the loans, the interest will be forgiven; (ii) a percentage
of the outstanding principal of the loans will be forgiven upon the attainment
of certain targets for the price of the Company's Class A Common Stock; and
(iii) the Company will pay any taxes due as the result of the forgiveness of
interest and principal. In addition, in the event of the death or disability of
Mr. Brinkley or Mr. Stinn or a Change in Control of the Company (as defined in
the loan agreements), the remaining principal amount and any unpaid and
unforgiven interest accrued on the loans will be forgiven. The first stock price
target ($22.50 per share) was attained in July 1995, the second stock price
target ($25.00 per share) was attained in April 1996 and the third stock price
target ($27.50 per share) was attained in May 1996. To date, 50% of the
principal amount of the loans has been forgiven. The remaining principal amount
will be forgiven through 2003 if the stock price reaches targets ranging from
$32.50 to $60.00. The Company incurred a charge of $2.1 million in the quarter
ended June 30, 1996 related to the attainment of the $25.00 and $27.50 price
targets.
In January 1999, the Company entered into an Indemnification Agreement with
Mr. Stinn pursuant to which the Company agreed to assume and pay certain
indemnification obligations of Crescent Jewelers to Mr. Stinn should Crescent
Jewelers fail to promptly pay such obligations. The only indemnification
obligations the Company agreed to assume under the agreement are those which (i)
constitute indemnifiable claims under Crescent Jewelers' Articles of
Incorporation or Bylaws, and (ii) arise out of or relate to a transaction
between the Company and Crescent Jewelers.
Long-Term Incentive Plan.
The Company currently maintains the Friedman's Inc. 1999 Long-Term
Incentive Plan (the "LTIP"), which was approved by the holders of Class B Common
Stock at the 1999 Annual Meeting. The Company had 373,500 options available to
be granted pursuant to the LTIP as of September 30, 1999. The Company has
reserved 500,000 shares of the authorized but unissued shares of Class A Common
Stock for issuance upon the grant or exercise of awards pursuant to the LTIP.
Report on Executive Compensation of the Compensation
Committee of the Board of Directors
Introduction
The Compensation Committee of the Board of Directors is responsible for
developing the Company's executive compensation policies and advising the Board
of Directors with respect to such policies. The members of the Compensation
Committee are Robert W. Cruickshank, who serves as Chairman of the Compensation
Committee, David B. Parshall and Mark C. Pickup.
Compensation Policies
The objectives of the Company's executive compensation program are to:
- Encourage the achievement of Company goals by providing compensation
that directly relates to the performance of the individual and the achievement
of strategic objectives.
- Establish compensation policies and guidelines that will attract and
retain qualified personnel through an overall level of compensation opportunity
that is competitive within the Company's industry.
- Promote a direct relationship between compensation and Company
performance by facilitating executive officer stock ownership through long-term
incentive compensation, specifically stock option awards.
Compensation Practices
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<PAGE>
The Company's executive officer compensation program is comprised of base
salary, annual cash incentive bonus compensation, and long-term incentive
compensation in the form of stock options, incentive loans, and various other
benefits, which are generally available to all employees of the Company.
Base Salary.
The base salaries for the Company's executive officers vary depending on
the responsibilities of the officers. An executive officer's base salary may
not necessarily be competitive with other companies in the Company's industry;
however, the Company believes that its emphasis on incentive bonus compensation
described below better serves the interests of the Company, and such incentive
bonus compensation may enable the executive officer's overall annual
compensation to exceed the total compensation paid by companies comparable to
the Company.
Annual Cash Incentive Compensation.
In order to maximize the interests of the Company's stockholders and its
management, the Company makes extensive use of cash bonuses that are awarded
based on the Company's operating performance and the individual executive
officer's contribution thereto. The Company's budgeted financial performance
goals are set at the beginning of each fiscal year. Cash bonuses are then
recommended in the judgment of the Compensation Committee based on the
achievement of budgeted targets and the individual performance of the executive
officer. The Compensation Committee believes that this program provides a
direct financial incentive to the Company's executive officers which motivates
them to achieve the Company's performance goals and to work for the overall
success of the business.
In fiscal 1999, the performance measure for incentive compensation payments
were based on the quarterly earnings performance of the Company, and the maximum
possible bonus payout was 100% of the budgeted target. The Company's
performance in fiscal 1999 met certain performance goals, and certain executive
officer bonuses were paid quarterly. For fiscal 2000, the Compensation
Committee determined that the performance measures for incentive compensation
payments would be based on specific criteria associated with the executive
officers' area of responsibility and the achievement of certain financial
performance targets, specifically return on equity, and that the maximum
possible bonus payment would be 100% of the budgeted target.
Long-Term Incentive Compensation
Long-term incentives are designed to link management compensation with the
long-term interests of the Company's stockholders. Although the Friedman's Inc.
1999 Long-Term Incentive Plan provides for several types of long-term incentive
based compensation, the Company currently grants stock options as long-term
incentives. Stock options generally have a vesting period of three years.
Individual stock option awards are based on level of responsibility, the
Company's stock ownership objectives for management and the Company's
performance versus certain financial performance objectives. The Company's
long-term performance ultimately determines the level of compensation resulting
from stock options, since stock option value is entirely dependent on the long-
term growth of the price of the Class A Common Stock.
Compensation of Chief Executive Officer
The base salary of the current Chief Executive Officer of the Company,
Bradley J. Stinn, was $400,000 for fiscal 1999. Based on the Company's
performance during its first and fourth quarters, Mr. Stinn was paid bonuses
amounting in the aggregate to $250,000 for fiscal 1999.
Policy with Respect to Deductibility of Compensation Expense
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<PAGE>
It is the responsibility of the Compensation Committee to address the
issues raised by changes in the tax laws which made certain non-performance-
based compensation in excess of $1,000,000 to executives of public companies
non-deductible to these companies beginning in 1994. The Compensation Committee
has reviewed the issues applicable to the Company and has taken action,
including the amendment of the incentive loan agreements with Messrs. Brinkley
and Stinn, to ensure that the Company receives the maximum tax benefit from its
compensation expenses. In addition, the Friedman's Inc. 1999 Long-Term Incentive
Plan is designed to comply with the Internal Revenue Service requirements for
deductibility of performance-based compensation.
Conclusion
The Company's compensation program described above is designed to closely
link pay with performance and the creation of stockholder value. The
Compensation Committee believes that the program has been and will continue to
be successful in supporting the Company's financial, growth and other business
objectives.
COMPENSATION COMMITTEE
Robert W. Cruickshank
David B. Parshall
Mark C. Pickup
CERTAIN TRANSACTIONS
Background of the Company
In May 1990, MS Jewelers Limited Partnership (the "Partnership") was formed
by an investor group led by the investment banking firm Morgan Schiff and its
principals to purchase from Friedman's Jewelers, Inc. ("FJI") certain jewelry
retailing assets, including 45 stores (the "FJI Acquisition"). The Company then
was incorporated under the laws of the State of Delaware on July 15, 1993, and,
prior to the closing of its initial public offering of Class A Common Stock in
October 1993, the Company issued 5,606,700 shares of Class B Common Stock to the
Partnership in exchange for substantially all of the assets held by the
Partnership and the Company's assumption of all of the Partnership's
liabilities. Each share of Class B Common Stock is convertible into one share
of Class A Common Stock.
Effective March 31, 1996, the Partnership issued a notice to the limited
partners of the Partnership granting the limited partners the option to withdraw
from the Partnership by exchanging their units of interest in the Partnership
for shares of Class A Common Stock of the Company. The shares of Class A Common
Stock that were distributed to these limited partners (the "Withdrawing Limited
Partners") constituted shares of Class B Common Stock held by the Partnership
that had been converted into Class A Common Stock by the Partnership to effect
the distribution. As of December 31, 1999, an aggregate of 4,410,417 shares of
Class A Common Stock had been distributed to Withdrawing Limited Partners.
The Company is controlled by Mr. Phillip Ean Cohen, through his sole
ownership of MS Jewelers, the general partner of the Partnership, which owns
100% of the Company's Class B Common Stock. As a result of his control of those
entities, Mr. Cohen controls all decisions with respect to major corporate
transactions affecting the Company. Mr. Cohen also controls Morgan Schiff, for
which Mr. Brinkley serves as a consultant, and Crescent Jewelers, of which Mr.
Brinkley serves as a director, Mr. Stinn serves as Chairman and Chief Executive
Officer, and Mr. Suglia serves as Chief Financial Officer.
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<PAGE>
Other Transactions
MS Jewelers. Mr. Brinkley has served in the uncompensated position of
Chairman of the Board of MS Jewelers, the general partner of the Partnership,
since May 1990. Mr. Stinn served as President and Chief Executive Officer of MS
Jewelers from September 1992 until August 1993.
Effective August 9, 1993, the Partnership established the MS Jewelers
Limited Partnership 1993 Incentive Plan (the "Partnership Incentive Plan"). The
Partnership Incentive Plan provided for the granting of options to purchase up
to six units of limited partnership interest (a "Unit") at option prices
determined by the Board of Directors of MS Jewelers. Each Unit represents a
partnership capital percentage equal to approximately .84%, which represents an
indirect interest in 41,955 shares of Class B Common Stock on a fully diluted
basis assuming exercise of all outstanding options. Effective August 9, 1993,
Bradley J. Stinn was granted an option to purchase five Units under the
Partnership Incentive Plan. The exercise price of these options was $100,000
per Unit, which equates to $2.38 per share of Class B Common Stock. See "Stock
Ownership."
Stock Purchase Loans to Directors and Executive Officers. On November 5,
1998, the Board of Directors of the Company authorized the Company to make
incentive stock purchase loans to the directors and certain executive officers
of the Company. Pursuant to the terms of the loan agreements, the directors and
executive officers were required to use the proceeds from the loans to purchase
shares of the Company's Class A Common Stock, thereby more closely linking the
personal interests of the directors and executive officers to those of the
Company's stockholders. The principal balance of all such loans will be due on
November 23, 2003, and interest, which accrues at 5.0% annual simple interest,
is payable annually. On November 23, 1998, loans in the following amounts were
made to the following directors and executive officers: Sterling B. Brinkley
($250,000); John E. Cay ($50,000); Robert W. Cruickshank ($50,000); David B.
Parshall ($50,000); Mark C. Pickup ($50,000); Bradley J. Stinn ($250,000);
Victor M. Suglia ($150,000); and Donald J. Wright ($25,000). Mr. Wright repaid
his loan in full when the Company terminated his employment in April 1999. On
May 14, 1999 and August 3, 1999, loans in the amounts of $50,000 and $25,000,
respectively, were made to Paul G. Leonard.
Morgan Schiff. In December 1994, the Company entered into a Financial
Advisory Services Agreement with Morgan Schiff under which Morgan Schiff agreed
to provide the Company with certain financial advisory services with respect to
capital structure, business strategy and operations, budgeting and financial
controls, and mergers, acquisitions and other similar transactions. The
Financial Advisory Services Agreement has a term of one year with an automatic
renewal unless either party terminates by written notice 30 days prior to the
end of the term. The Company paid Morgan Schiff $400,000 plus expenses for its
services under the Financial Advisory Services Agreement in fiscal 1999, and
also agreed to indemnify Morgan Schiff against any losses associated with the
Financial Advisory Services Agreement. In connection with the transaction, the
Company accrued estimated costs of $1 million for services provided by Morgan
Schiff, an affiliate, associated with the refinancing, the purchase warrant and
guarantee of Crescent's debt. See - "Certain Transactions - Other Transactions
- - Crescent".
Crescent. Crescent operates 150 stores in seven western states,
principally California and Arizona. The Company and Crescent are affiliated
through common controlling ownership and executive management. The Company is
controlled by Mr. Phillip Ean Cohen, through his sole ownership of MS Jewelers,
the general partner of the Partnership which owns 100% of the Company's Class B
Common Stock. As a result of his control of those entities, Mr. Cohen controls
all decisions with respect to major corporate transactions affecting the
Company. Crescent is also controlled by Mr. Cohen through his sole ownership of
CJ Morgan Corp., the general partner of CJ Limited Partnership which owns all of
the capital stock of Crescent. In addition, Bradley J. Stinn and Victor M.
Suglia serve respectively as President and Chief Executive Officer and Chief
Financial Officer of the Company and Crescent.
On September 15, 1999, Crescent entered into a $112.5 million, three-year
senior, secured revolving syndicated bank facility, led by Bank of America, N.A.
to fund its restructuring and provide for
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<PAGE>
its working capital needs. Crescent used a portion of the proceeds from the
facility to repay the Company's $25 million investment originally made in
Crescent. As part of Crescent's new three-year bank facility, the Company agreed
to provide certain credit enhancements and to guaranty the obligations of
Crescent under the syndicated credit facility. In consideration for this
guaranty, Crescent agreed to make quarterly payments to the Company in an amount
equal to 2% per annum of the outstanding obligations of Crescent under its
credit facility during the preceding quarter. The Company estimates that
approximately $2 million annually will be paid to it by Crescent pursuant to
this agreement. In further consideration of this guaranty, Crescent issued a
warrant to the Company to purchase 7,942,904 shares of Crescent non-voting Class
A Common Stock, or approximately 50% of the capital stock of Crescent on a fully
diluted basis, for an exercise price of $500,000.
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<PAGE>
Stock Ownership
Based solely upon information furnished to the Company, the following table
sets forth certain information with respect to the beneficial ownership of Class
A and Class B Common Stock as of December 31, 1999 by (i) each person who is
known by the Company to beneficially own more than five percent of either the
Class A Common Stock or the Class B Common Stock, (ii) each nominee for director
of the Company, (iii) each of the Named Executive Officers (as defined under
"Election of Directors -- Executive Compensation" above), and (iv) all officers
and directors as a group.
<TABLE>
<CAPTION>
Shares of Class A Shares of Class B
Common Stock Common Stock Percentage of
Name and Address ------------------------- ------------------------- Class A and Class B
of Beneficial Owner Number Percentage (1) Number Percentage (1) Common Stock (1)
- ------------------- --------- -------------- --------- -------------- --------------------
<S> <C> <C> <C> <C> <C>
MS Jewelers Limited Partnership (2) -- -- 1,196,283 100% 8.3%
MS Jewelers Corporation
Phillip Ean Cohen
350 Park Avenue
New York, New York 10022
FJI (3) 1,085,338 8.2% -- -- 7.5%
Friedman's Jewelers, Inc.
Friedman's Jewelers, Inc., Anniston
Friedman's Jewelers, Inc., Greenville
Friedman's Jewelers, Inc., Marietta
Friedman's Jewelers, Inc., Oglethorpe
Stanley Jewelers, Inc.
P.O. Box 9925
Savannah, Georgia 31412
Gilder, Gagnon, Howe & Co. (4) 1,080,655 8.2% -- -- 7.5%
1775 Broadway
New York, New York 10019
Merrill Lynch & Co., Inc. (5) 682,600 5.1% -- -- 4.7%
on behalf of Merrill Lynch Asset
Management Group
World Financial Center, North Tower
250 Vesey Street
New York, NY 10381
Goldman, Sachs Asset Management(6) 784,000 5.1% -- -- 5.4%
Goldman Sachs trust on behalf of
Goldman Sachs Small Cap Fund
1 New York Plaza
New York, New York 10004
FMR Corp. (7) 1,343,700 10.2% -- -- 9.3%
Edward C. Johnson III
82 Devonshire Street
Boston, Massachusetts 02109
Becker Capital Management, Inc. (8) 1,184,000 8.8% -- -- 8.2%
1211 SW Fifth Avenue, Suite 2185
Portland, Oregon 97204
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
Shares of Class A Shares of Class B
Common Stock Common Stock Percentage of
Name and Address ------------------------- ------------------------- Class A and Class B
of Beneficial Owner Number Percentage (1) Number Percentage (1) Common Stock (1)
- ------------------- --------- -------------- --------- -------------- --------------------
<S> <C> <C> <C> <C> <C>
Bradley J. Stinn (9)(10) 507,600 3.7% 209,774 17.5% 4.9%
Sterling B. Brinkley (11) 432,494 3.2% -- -- 3.0%
Robert W. Cruickshank (12) 13,283 * -- -- *
David B. Parshall (13) 10,595 * -- -- *
Mark C. Pickup (14) 11,989 * -- -- *
John E. Cay III (15) 37,287 * -- -- *
Donald J. Wright, Jr. -- * -- -- *
Victor M. Suglia (16) 37,950 * -- -- *
Paul G. Leonard 17,747 * -- -- *
All executive officers and directors 1,068,945 7.8% 209,774 17.5% 8.6%
as a group (8 persons) (17)
</TABLE>
- -----------------
* Less than 1%.
(1) Except as indicated in the footnotes set forth below, the persons named in
the table have sole voting and dispositive power with respect to all shares
shown as beneficially owned by them. The numbers of shares shown include
shares that are not currently outstanding but which certain stockholders
are entitled to acquire or will be entitled to acquire within 60 days from
December 31, 1999, upon the exercise of stock options. Such shares are
deemed to be outstanding for the purpose of computing the percentage of
Common Stock owned by the particular stockholder and by the group but are
not deemed to be outstanding for the purpose of computing the percentage
ownership of any other person.
(2) MS Jewelers is the general partner of the Partnership and has the sole
right to vote the shares of Class B Common Stock and to direct their
disposition. Mr. Cohen is the sole stockholder of MS Jewelers. See "Certain
Transactions."
(3) Based on a Schedule 13G filed with the SEC on February 12, 1999.
(4) Based on a Schedule 13G filed with the SEC on February 15, 1995. Gilder,
Gagnon, Howe & Co. disclaims beneficial ownership of these shares which are
held in: (i) customer accounts over which its partners or employees may
have discretion to purchase or dispose of securities but over which Gilder,
Gagnon, Howe & Co. does not have discretion (1,066,805 shares as of
December 31, 1994); (ii) accounts owned by its partners and by its
partners' families in accounts controlled by partners (10,200 shares as of
December 31, 1994); or (iii) the account of its firm profit sharing plan,
which is controlled by certain of its partners (3,600 shares as of
December 31, 1994).
(5) Based on a Schedule 13G filed with the SEC on February 4, 1999.
(6) Based on a Schedule 13G filed with the SEC on November 10, 1999.
(7) Based on a Schedule 13G filed with the SEC on December 10, 1998. Of the
shares reported, Fidelity Management & Research Company ("Fidelity"), a
wholly-owned subsidiary of FMR Corp., is the beneficial owner of 1,343,700
shares. Edward C. Johnson III and FMR Corp., through its control of
Fidelity, each have sole power to dispose of the 1,343,700 shares. Neither
has the sole power to vote or direct the voting of the shares. Fidelity
Management Trust Company, a wholly-owned subsidiary of FMR Corp., is the
beneficial owner of 30,000 shares. Mr. Johnson and FMR Corp., through its
control of Fidelity, each have sole voting and dispositive power over the
30,000 shares.
(8) Based on a Schedule 13G filed with the SEC on February 10, 1999.
(9) Shares of Class B Common Stock owned by Mr. Stinn are owned indirectly
through his ownership of options to purchase limited partnership interests
in the Partnership. He has no right to vote or to direct the disposition of
these shares. See "Certain Transactions."
(10) Includes 5,100 shares of Class A Common Stock held by or on behalf of Mr.
Stinn's children, 765 shares of Class A Common Stock held by Mr. Stinn's
wife and options to purchase 335,000 shares of Class A Common Stock that
are immediately exercisable.
(11) Includes options to purchase 130,000 shares of Class A Common Stock that
are immediately exercisable.
(12) Includes options to purchase 5,000 shares of Class A Common Stock granted
under the Director Plan that are immediately exercisable.
(13) Includes 300 shares of Class A Common Stock held in trust for Mr.
Parshall's children and options to purchase 5,000 shares of Class A Common
Stock granted under the Director Plan that are immediately exercisable.
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<PAGE>
(14) Includes options to purchase 5,000 shares of Class A Common Stock granted
under the Director Plan that are immediately exercisable.
(15) Includes options to purchase 7,000 shares of Class A Common Stock granted
under the Director Plan that are immediately exercisable and 11,500 shares
of Class A Common Stock held by Palmer & Cay, Inc.
(16) Includes options to purchase 17,500 shares of Class A Common Stock that are
immediately exercisable.
(17) Includes 209,774 shares of Class B Common Stock held by Mr. Stinn
indirectly through ownership of options to purchase limited partnership
interests in the Partnership, and options to purchase 504,500 shares of
Class A Common Stock.
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<PAGE>
STOCKHOLDER RETURN COMPARISON
The Company's Class A Common Stock began trading on the Nasdaq National
Market on October 14, 1993 in connection with the Company's initial public
offering. The price information reflected for the Class A Common Stock in the
following performance graph represents the closing sale price of the Class A
Common Stock for the period from September 30, 1994 through September 30, 1999.
The performance graph compares the cumulative stockholder returns on the Class A
Common Stock with the Nasdaq Stock Market Index (U.S. Companies) and a Peer
Index (as described below) over the same period (assuming the investment of $100
in the Company's Class A Common Stock, the Nasdaq Stock Market (U.S. Companies)
and the Peer Index on September 30, 1994, and reinvestment of all dividends).
Comparison of Cumulative Total Returns - Friedman's Inc.
[GRAPH OF COMPARISON OF CUMULATIVE TOTAL RETURNS - FRIEDMAN'S INC.]
Year-End Cumulative Returns
September 30,
-------------
1994 1995 1996 1997 1998 1999
----- ----- ----- ----- ----- -----
Friedman's Inc. 100.0 142.6 123.0 110.7 42.6 58.0
The Nasdaq Stock Market 100.0 138.1 163.8 225.0 228.8 371.5
Peer Index 100.0 110.3 132.1 151.2 129.5 157.8
Total return calculations for the Nasdaq Stock Market Index (U.S. Companies)
and the Peer Index were prepared by the Center for Research in Security Prices,
The University of Chicago. The Peer Index is composed of the stocks of those
companies included in the Nasdaq Retail Trade Stock Index. Specific information
regarding the companies comprising the Peer Index will be provided to any
stockholder upon request to Victor M. Suglia, the Secretary of the Company.
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<PAGE>
STOCKHOLDER PROPOSALS
FOR 2001 ANNUAL MEETING OF STOCKHOLDERS
Nominations by stockholders for director elections and other proposals of
stockholders, intended to be presented at the annual meeting of stockholders to
be held in 2001, together with certain related information specified in Rule
14a-8 of the Securities and Exchange Commission, should be submitted by
certified mail, return receipt requested, and must be received by the Company at
its executive offices in Savannah, Georgia on or before September 29, 2000 to be
eligible for inclusion in the Company's Proxy Statement and Proxy relating to
that meeting. Any stockholder proposal must be in writing and must set forth
(i) a description of the business desired to be brought before the meeting and
the reasons for conducting the business at the meeting, (ii) the name and
address, as they appear on the Company's books, of the stockholder submitting
the proposal, (iii) the class and number of shares that are beneficially owned
by such stockholder, (iv) a statement in support of the proposal and (v) any
other information required by the rules and regulations of the Securities and
Exchange Commission. Nominations and other proposals of stockholders that are
submitted to the Company after September 29, 2000 may be excluded from the
Company's proxy materials for the 2001 Annual Meeting of Stockholders and will
otherwise be subject to Rule 14a-8 of the Securities and Exchange Commission.
OTHER MATTERS
Filings Under Section 16(a)
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and any persons who beneficially own more than ten
percent of the Company's Class A Common Stock to file reports of ownership and
changes in ownership of such securities with the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc. Officers,
directors and beneficial owners of more than ten percent of the Class A Common
Stock are required by applicable regulations to furnish the Company with copies
of all Section 16(a) forms they file. Based solely upon a review of the copies
of the Forms 3, 4 and 5 furnished to the Company, or written representations
from certain reporting persons that no Forms 5 were required, the Company
believes that during fiscal 1999, all persons subject to the reporting
requirements with regard to the Class A Common Stock complied with all
applicable filing requirements except in two instances.
Auditors
The Company's Board of Directors has selected Ernst & Young LLP to conduct
the annual audit of the financial statements of the Company for the fiscal year
ending September 30, 2000. Ernst & Young LLP has no financial interest, direct
or indirect, in the Company and does not have any connection with the Company
except in its professional capacity as an independent auditor. The Board of
Directors has submitted the selection of Ernst & Young LLP as independent
auditors to the holders of Class B Common Stock for ratification.
Representatives of Ernst & Young LLP will be present at the Annual Meeting and
will have an opportunity to make a statement if they so desire and respond to
appropriate questions. If this selection is not ratified at the Annual Meeting,
the Board of Directors intends to reconsider its selection of independent
auditors for the fiscal year ending September 30, 2000. Even if the selection
is ratified, the Board of Directors in its sole discretion may direct the
appointment of a different independent accounting firm at any time during the
fiscal year if the Board determines that such a change would be in the best
interest of the Company and its stockholders.
Miscellaneous
The Board of Directors of the Company knows of no matters other than those
referred to in the accompanying Notice of Annual Meeting of Stockholders that
may properly come before the Annual Meeting. However, if any other matter
should be properly presented for consideration and voting at the
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<PAGE>
Annual Meeting or any adjournment thereof, it is the intention of the persons
named as proxies on the enclosed form of proxy card to vote the shares
represented by all valid proxy cards in accordance with their judgment of what
is in the best interest of the Company.
Availability of Annual Report
Accompanying this Proxy Statement is a copy of the Company's Annual Report
for the year ended September 30, 1999, which includes audited financial
statements of the Company. Stockholders who would like additional copies of the
Annual Report should direct their requests in writing to: Friedman's Inc., 4
West State Street, Savannah, Georgia 31401, Attention: Victor M. Suglia,
Secretary. Such materials will not form any part of the materials for the
solicitation of proxies.
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<PAGE>
PROXY
FRIEDMAN'S INC.
Savannah, Georgia
2000 Annual Meeting of Stockholders
The undersigned stockholder of Friedman's Inc. (the "Company"), Savannah,
Georgia, hereby constitutes and appoints Bradley J. Stinn and Victor M. Suglia,
or either one of them, each with full power of substitution, to vote the number
of shares of Class A Common Stock which the undersigned would be entitled to
vote if personally present at the 2000 Annual Meeting of Stockholders to be held
at the Hyatt Regency Savannah, 2 West Bay Street, Savannah, Georgia 31401 on
Thursday, March 2, 2000, at 10:00 A.M., local time, or at any adjournments
thereof (the "Annual Meeting"), upon the proposal (the "Proposal") described in
the Notice to the Holders of Class A Common Stock of the Annual Meeting of
Stockholders and Proxy Statement, both dated January 28, 2000, the receipt of
which is acknowledged, in the manner specified below. The proxies, in their
discretion, are further authorized to vote for the election of a person to the
Board of Directors if any nominee named herein becomes unable to serve or will
not serve and are further authorized to vote on other matters which may properly
come before the Annual Meeting and any adjournments thereof. The Board of
Directors recommends a vote FOR the Proposal.
Election of Directors. On the Proposal to elect the following directors to
serve until the 2000 Annual Meeting of Stockholders of the Company and
until their successors are elected and qualified:
John E. Cay III
Robert W. Cruickshank
David B. Parshall
For [_] Withhold Authority [_]
To withhold authority for any individual nominee(s), write the name of the
nominee(s) in the space provided:
----------------------------------------
This Proxy, when properly executed, will be voted in the manner directed by
the undersigned stockholder. If no direction is made, this Proxy will be voted
FOR the Proposal and with discretionary authority on all other matters that may
properly come before the Annual Meeting or any adjournments thereof.
Please sign exactly as your name appears on your stock certificate and
date. Where shares are held jointly, each stockholder should sign. When signing
as executor, administrator, trustee, or guardian, please give full title as
such. If a corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in full partnership name by
authorized person.
Shares Held:
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Signature of Stockholder
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Signature of Stockholder (If held Jointly)
Dated: , 2000
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Month Day
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FRIEDMAN'S INC.
AND MAY BE REVOKED BY THE STOCKHOLDER PRIOR TO ITS EXERCISE.
