SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. ____)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(c)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
The Great Train Store Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Names of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
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[ ] Fee paid previously with preliminary material.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
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<PAGE>
THE GREAT TRAIN STORE COMPANY
14180 DALLAS PARKWAY, SUITE 618
DALLAS, TEXAS 75240
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of May 31, 1996
The Great Train Store Company: Dallas, Texas
The Annual Meeting of the Stockholders of The Great Train Store Company will be
held on Tuesday, July 16, 1996, at 10:00 a.m. Central Daylight Savings Time in
the offices of the Company at 14180 Dallas Parkway, Suite 618, Dallas, Texas
75240, for the following purposes:
1. To elect two class II directors to each serve a three-year term and
until each director's successor has been elected and qualified;
2. To consider and vote upon a proposal to approve the amendment of the
Company's 1994 Incentive Compensation Plan to increase the number of
shares available for issuance from 310,000 to 460,000;
3. To consider and vote upon a proposal to approve the amendment of the
Company's 1994 Director Stock Option Plan to increase the number of
shares available for issuance from 20,000 to 50,000 and to provide
each non-employee director with an automatic annual award of 2,500
options;
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on May 30, 1996, will be
entitled to vote at the meeting. A list of all stockholders entitled to vote at
the annual meeting, arranged in alphabetical order and showing the address of
and number of shares held by each stockholder, will be open at the principal
office of The Great Train Store Company, 14180 Dallas Parkway, Suite 618,
Dallas, Texas 75240, during usual business hours, to the examination of any
stockholder for any purpose germane to the annual meeting for 10 days prior to
the date thereof. The list of shareholders will also be available at the meeting
for examination at any time during the meeting.
A copy of the Company's Annual Report for fiscal year 1995 accompanies this
notice.
By Order of the Board of Directors
James H. Levi
Chairman, President, and
Chief Executive Officer
Whether or not you intend to be present at the meeting, please mark, sign,
date, and return the accompanying proxy promptly. A return addressed
envelope is enclosed for your convenience.
<PAGE>
The Great Train Store Company
14180 Dallas Parkway, Suite 618
Dallas, Texas 75240
PROXY STATEMENT
SOLICITATION OF PROXIES
The enclosed proxy is solicited by the Board of Directors of The Great Train
Store Company (the "Company"), for use at the Annual Meeting of Stockholders to
be held in the offices of the Company at 14180 Dallas Parkway, Suite 618,
Dallas, Texas 75240, July 16, 1996, at 10:00 a.m. CDST and at any adjournments
thereof. Whether or not you expect to attend the meeting in person, please
return your executed proxy in the enclosed envelope and the shares represented
thereby will be voted in accordance with your wishes. This proxy statement and
the accompanying proxy card will be first mailed to stockholders on or about
June12, 1996. All costs of solicitation of proxies will be borne by the Company.
In addition to solicitations by mail, the Company's directors, officers and
regular employees, without additional remuneration, may solicit proxies by
telephone, telegraph, telecopy and personal interviews. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the owners
of stock held in their names and the Company will reimburse them for their
out-of-pocket expenses incurred in connection with the distribution of proxy
materials.
REVOCABILITY OF PROXY
If, after sending in your proxy, you decide to vote in person or desire to
revoke your proxy for any other reason, you may do so by notifying the Secretary
of the Company, or the presiding officer at the meeting, in writing of such
revocation at any time prior to the voting of the proxy, or by attending the
meeting and voting in person, or by submitting a new proxy bearing a later date.
RECORD DATE
Stockholders of record at the close of business on May 30, 1996, will be
entitled to vote at the meeting.
ACTION TO BE TAKEN UNDER PROXY
All properly executed proxies received by the Board of Directors pursuant to
this solicitation will be voted by Cheryl A. Taylor and Stanley R. Herndon, or
the one of them who acts, in accordance with the directions specified in the
proxy. If no such directions have been specified by marking the appropriate
squares in the accompanying proxy card, the shares will be voted as follows:
(1) FOR the election of Joel S. Pollack and John J. Schultz named herein
as nominees for directors of the Company to hold office for a term of
three years expiring in 1999 and until each director's successor has
been duly elected and qualified;
(2) FOR approval of the amendment of the Company's 1994 Incentive
Compensation Plan, which amendment would increase the number of shares
of Common Stock available for issuance under the plan to officers and
other key employees of the Company from 310,000 to 460,000;
(3) FOR approval of the amendment of the Company's 1994 Director Stock
Option Plan to increase the number of shares available for issuance
from 20,000 to 50,000 and to provide each non-employee director with
an automatic annual award of 2,500 options;
(4) According to their judgment, on the transaction of such other business
as may properly come before the meeting or any adjournments thereof.
Should the nominee named herein for election as a director become unavailable
for any reason, it is intended that the persons named in the proxy will vote for
the election of such other person in his stead as may be designated by the Board
of Directors. The Board of Directors is not aware of any reason that might cause
the nominee to be unavailable.
2
<PAGE>
VOTING SECURITIES, PRINCIPAL HOLDERS THEREOF AND
CUMULATIVE VOTING RIGHTS
On May 30, 1996, there were 3,145,000 shares of Common Stock, par value $.01 per
share ("Common Stock"), outstanding, which constitute all of the outstanding
capital stock of the Company. Each stockholder is entitled to cast one vote for
each share of record on all matters to be voted on by the stockholders,
including the election of directors.
A majority of the outstanding shares present or represented by proxy will
constitute a quorum at the meeting. Votes that are withheld in the election of
directors, abstentions on all other matters properly brought before the meeting
and the proxies relating to "street name" shares which are not voted by brokers
on one or more, but less than all, matters (so-called "broker non-votes") will
be considered as shares present for purposes of determining a quorum. Under
applicable state law and the Company's Certificate of Incorporation (i) an
affirmative vote of a plurality of the shares present in person or represented
by proxy at the meeting is required for the election of directors, and, (ii) an
affirmative vote by a majority of the shares present in person or represented by
proxy at the meeting is required to approve all other matters submitted to a
vote of the stockholders. With regard to the election of directors, votes that
are withheld will be excluded entirely from the vote and will have no effect.
With regard to other matters, abstentions (including proxies which deny
discretionary authority on any other matters properly brought before the
meeting) will be counted as shares present and entitled to vote and will have
the same effect as a vote against any such matters. Broker non-votes will not be
treated as shares represented at the meeting as to such matter(s) not voted on
and therefore will have no effect.
The following table sets forth as of May 30, 1996 the beneficial ownership of
each current director (including the nominee for election as a director), each
of the executive officers named in the Summary Compensation Table set forth
herein, the executive officers and directors as a group, and each other
stockholder known to the Company to own beneficially more than 5% of the
outstanding Common Stock. Unless otherwise indicated, the Company believes that
the beneficial owners set forth in the table have sole voting and investment
power.
<TABLE>
<CAPTION>
Beneficial Ownership
--------------------
Number of
Shares Percent
------ -------
<S> <C> <C>
James H. Levi (a) 1,183,511 36.7%
The Great Train Store Company
85 Larchmont Avenue
Larchmont, New York 10538
Joel S. Pollack (b) 85,338 2.7%
1150 Benedict Canyon Drive
Beverly Hills, California 90210
John J. Schultz (c) 9,000 *
P.O. Box 1106 - Horseshoe Farm
Ridgefield, CT 06877
Charles M. Tureen (d) 34,512 1.1%
Gallop, Johnson & Neuman, L.C.
101 South Hanley Road, Suite 1600
St. Louis, Missouri 63105
Robert M. Warner (e) 5,000 *
1015 Nautilus Lane
Mamaroneck, New York 10543
Edmond H. Shea, Jr. for E&M RP Trust (f) 229,450 7.2%
655 Brea Canyon Road
Walnut, CA 91789
All directors and officers as a group (9 persons) 1,491,886 45.6%
</TABLE>
* Less than 1%
3
<PAGE>
(a) Includes 5,000 shares of Common Stock and 5,000 shares of Common Stock
issuable upon exercise of warrants owned by Mr. Levi's spouse. Mr. Levi
disclaims beneficial ownership of these shares and warrants. Also includes
75,000 shares of Common Stock issuable upon the exercise of the warrants
received by Mr. Levi in conjunction with the private placement of debt in
1994. Includes 4,250 shares of Common Stock issuable upon the exercise of
certain employee stock options which first became exercisable in May 1996.
Excludes 17,750 shares of Common Stock issuable upon the exercise of
certain employee stock options none of which become exercisable before May
1997.
(b) Includes 80,338 shares held of record by The Pollack Family Trust dated May
13, 1986, of which Mr. Pollack and his spouse are co-trustees. Also
includes 5,000 shares of Common Stock issuable upon the exercise of options
granted upon Mr. Pollack's election as a director. Excludes 2,500 shares of
Common Stock issuable upon the exercise of certain director stock options
which first become exercisable in September 1996.
(c) Includes 2,000 shares of Common Stock issued upon exercise of warrants
which are currently exercisable and 5,000 shares of Common Stock issuable
upon the exercise of options granted upon Mr. Schultz's election as a
director. Excludes 2,500 shares of Common Stock issuable upon the exercise
of certain director stock options which first become exercisable in
September 1996.
(d) Includes 29,512 shares held in "The Mary W. Tureen Revocable Trust" of
which Mary W. Tureen (spouse of Mr. Tureen) and Mr. Tureen are Co-Trustees.
Mr. Tureen disclaims beneficial ownership of these shares. Also includes
5,000 shares of Common Stock issuable upon the exercise of options granted
upon Mr. Tureen's election as a director. Excludes 2,500 shares of Common
Stock issuable upon the exercise of certain director stock options which
first become exercisable in September 1996.
(e) Includes 5,000 shares of Common Stock issuable upon the exercise of options
granted upon Mr. Warner's election as a director. Excludes 2,500 shares of
Common Stock issuable upon the exercise of certain director stock options
which first become exercisable in September 1996.
(f) The foregoing information is based on a Schedule 13D furnished to the
Company by Mr. Shea on behalf of E&M RP Trust. Includes 50,000 shares of
Common Stock issuable upon the exercise of the warrants received by Mr.
Shea in conjunction with the private placement of debt in 1994.
PROPOSAL 1 - ELECTION OF TWO CLASS II DIRECTORS
INFORMATION ABOUT THE NOMINEES AND DIRECTORS CONTINUING IN OFFICE
The Company's Certificate of Incorporation and Bylaws currently provide for
three classes of directors, each class serving for a three-year term expiring
one year after the term of the preceding class, so that the term of one class
will expire each year. The terms of the current Class I and Class III directors
expire in 1998 and 1997, respectively. The Board of Directors has nominated Joel
S. Pollack and Jack J. Schultz, who are currently Class II directors, for
re-election to each serve a three-year term expiring at the annual meeting of
stockholders in 1999. The following table sets forth certain information
concerning Mr. Pollack and Mr. Schultz and those directors who are continuing in
office.
NOMINEE FOR DIRECTOR - CLASS II
(to be elected to serve a three-year term)
Director
Name Age Position Since
---- --- -------- -----
Joel S. Pollack 56 Private Investor 1994
John J. Schultz 59 Consultant to Retail Industry 1994
Joel S. Pollack has been a Director of the Company since August, 1994. For more
than the last five years, Mr. Pollack has been a private investor in Beverly
Hills, California. From 1977 to 1987, he was Executive Vice President and
Co-Head of Retail Sales at Oppenheimer & Co., Inc., and was employed in various
capacities at Hayden Stone and predecessor companies. Mr. Pollack graduated from
The Wharton School of the University of Pennsylvania in 1961.
4
<PAGE>
John J. Schultz has been a Director of the Company since August, 1994. Mr.
Schultz has more than thirty-five years of experience in the retail industry and
since 1993 has been engaged as a consultant specializing in the retail area. He
is presently a director of Big Smith Brands, Inc. Previously, Mr. Schultz served
as Executive Vice President and General Merchandise Manager for Bloomingdale's
Department Stores and Sanger Harris Department Stores, President and Chief
Executive Officer of B. Altman & Co., and President of the Retail Services
Division and Executive Director of the National Retail Federation. Mr. Schultz
is a graduate of Fairleigh Dickenson University in Madison, New Jersey,
Dartmouth Institute and the Federated Senior Management Institute.
DIRECTORS CONTINUING IN OFFICE - CLASS III
(terms expiring in 1997)
Director
Name Age Position Since
---- --- -------- -----
James H. Levi 56 Director, Chairman of the Board, 1994
President, and Chief Executive
Officer of the Company
Robert M. Warner 75 Consultant to Retail Industry 1994
James H. Levi has been the Chairman of the Board of Directors, President and
Chief Executive Officer and a Director of the Company since its organization in
1985. Since 1992, Mr. Levi has also been President of Levi Company, a real
estate and venture investing company, and is involved in a number of investment
and other activities. In 1987, he co-founded and, until 1992, served as
President of Value Properties, Inc., a real estate investment firm. For more
than fifteen years prior thereto, Mr. Levi was President of Oppenheimer
Properties, Inc. and a number of related entities and was Executive Vice
President and a member of the Executive Committee of Oppenheimer & Co., Inc.,
investment bankers. He has been responsible for the creation of a large number
of enterprises among which was the adaptive reuse of St. Louis Union Station,
the location of the original The Great Train Store. Mr. Levi developed The Great
Train Store concept and has been the principal owner of the Company and all of
its predecessors since inception. He is a graduate of Harvard College and
received his M.B.A. degree from Harvard Business School.
Robert M. Warner has been a Director of the Company since August, 1994. For more
than ten years, Mr. Warner has been a retail store management consultant whose
present clients include many retailers, large and small. He is presently a
director of Cherry & Webb, a 50 store women's specialty chain. Previously, Mr.
Warner served as President and Chief Executive Officer of Steinbach, Inc., a
$200 million department store chain; President and Chief Executive Officer of
K-G Retail, Inc., a $100 million men's clothing chain; Senior Vice President of
Macy's, Inc., where, among other positions, he served as the General Manager of
Macy's-Herald Square store, the largest store in the world. Mr. Warner has also
worked for a number of other retail companies as either chief executive officer,
director or consultant. Mr. Warner is a graduate of the University of Michigan
and received an M.B.A. from the Harvard Business School.
DIRECTOR CONTINUING IN OFFICE - CLASS I
(terms expiring in 1998)
Director
Name Age Position Since
---- --- -------- -----
Charles M. Tureen 65 Attorney-at-law and member 1994
of the firm of Gallop, Johnson
and Neuman, L.C.
Charles M. Tureen has been a Director of the Company since April, 1994. Mr.
Tureen has been a member in the St. Louis, Missouri law firm of Gallop, Johnson
& Neuman, L.C., since July, 1990. Until June, 1990 and for a number of years
prior thereto, he was a principal in the St. Louis, Missouri law firm of
Blumenfeld, Sandweiss, Marx, Tureen, Ponfil, and Kaskowitz P.C.
5
<PAGE>
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to
the Company during its most recent fiscal year and Form 5 and amendments
thereto, or written representations that no Form 5 is required, furnished to the
Company, the Company believes that each person required to file reports under
Section 16(a) relative to the Company's equity securities has done so on a
timely basis.
The Board of Directors of the Company has established an Audit Committee
(presently consisting of Mr. Pollack, Mr. Schultz, and Mr. Warner) which has the
responsibility of reviewing the scope of the audit and services provided by the
Company's independent accountants. The Audit Committee will also meet with the
financial staff of the Company to review accounting procedures and policies. The
Board of Directors also has established a Compensation Committee (presently
consisting of Mr. Tureen, Mr. Warner and Mr. Pollack) which has been given the
responsibility of setting and administering the policies which govern the annual
compensation of the Company's directors and executive officers, as well as the
Company's stock option and other benefit plans. Each of these committees began
operating in August 1994. The Board of Directors has also established an
Executive Committee (presently consisting of Mr. Levi and Mr. Tureen) with the
power to act, if necessary, on a broad range of matters during the interim
periods between Board of Directors meetings.
During 1995, the Board of Directors held three meetings, the Audit Committee
held two meetings, the Compensation Committee held three meetings, and the
Executive Committee held three meetings. During such period each director, other
than Joel S. Pollack, attended 100% of the aggregate of (i) the total number of
meetings of the Board of Directors held during the period and (ii) the meetings
held during the period by the Committees of the Board of Directors on which he
served. Mr. Pollack was absent on one occasion.
Director Compensation
The Company pays each non-employee director of the Company $750 in cash for each
Board meeting and reimburses all directors for out-of-pocket expenses incurred
in connection with their attendance at Board meetings. The Company has the
option to pay these directors in that number of shares of Common Stock
determined by reference to the fair market value of the Common Stock on the
meeting date. However, all payments during 1994 and 1995 were made in cash. In
addition, pursuant to its 1994 Director Stock Option Plan, the Company granted
to each non-employee director, on the date of his initial election, options to
purchase 5,000 shares of Common Stock at an exercise price equal to the fair
market value of the Common Stock on the date of the selection. Such options
first became exercisable on the first anniversary of the recipient's election as
a director.
During 1995, the 1994 Director's Stock Option Plan was amended to award an
additional 2,500 options to each non-employee Director and establish an annual
award of 2,500 options on the date of each subsequent Annual Meeting of the
Stockholders of the Company at which each remains a Director of the Company.
Such stock options will be at a price equal to the fair market value of the
Common Stock on the date of award. The effectiveness of all stock options
awarded as a result of this amendment are expressly conditioned upon the
approval of such amendment by the Company's Stockholders, and if such approval
is not received on or prior to December 31, 1996, the amendment and all options
granted thereunder shall be rescinded and the 1994 Director Stock Option Plan
shall continue as if the amendment had never been adopted by the Company's Board
of Directors.
Certain Relationships and Related Transactions
From time to time, the Company has engaged in various transactions with its
directors, executive officers and other affiliated parties. The following
paragraphs summarize certain information concerning certain transactions and
relationships which have occurred during the last two years or which are
presently proposed.
6
<PAGE>
From time to time in the past, Messrs. Levi, Herndon and Glazer have loaned
money to the Company by advancing cash and/or deferring salary. At December 30,
1995, the amount of indebtedness, including accrued interest, owed to Messrs.
Levi, Herndon and Glazer was $542,171, $364,850 and $18,263, respectively. Until
April 12, 1994, such indebtedness accrued interest at a rate of 15% per annum
and was payable upon demand. Effective April 12, 1994, Messrs. Levi, Herndon and
Glazer agreed to restructure the indebtedness owed to them by the Company. The
indebtedness is currently represented by promissory notes (the "Management
Notes") which provide for the payment of principal and interest at a rate of 8%
per annum, in quarterly installments. The Management Notes may be prepaid by the
Company, in whole or in part, at any time without the payment of any premium or
penalty. As had been agreed, upon exercise of the Underwriter's over-allotment
option the Management Notes were prepaid in 1994 to the extent of one-half of
the proceeds ($112,500) received by the Company pursuant thereto. It is further
anticipated that the Company will prepay the Management Notes upon exercise of
the warrants, the Bridge Warrants, the Underwriter's Option and any options
granted under the Company's 1994 Incentive Compensation Plan or 1994 Director
Stock Option Plan. On May 25, 1994, Mr. Herndon elected to defer $25,000 per
annum of his annual salary. The rate of interest payable on the deferred
compensation is variable, approximating 6%, and all accrued amounts are due May
25, 1997. At December 30, 1995, the amount of indebtedness, including accrued
interest owed to Mr. Herndon under the deferred compensation arrangement was
$45,115.
Under the Agreement of Limited Partnership of The Great Train Store Partners,
L.P. (The "Partnership") dated September 1, 1990, as amended, James H. Levi was
engaged as a consultant to the Partnership and its general partner, a position
he had previously held with The Great Train Store Corporation and The Great
Train Store of St. Louis, Inc. In consideration for his consulting services, Mr.
Levi was entitled to receive a fee of $25,000 per annum; however, the fees due
to Mr. Levi were accrued and not paid. The aggregate consulting fees in the
amount of $223,732 were paid out of the net proceeds of the Company's initial
public offering (the "Offering"). Upon completion of the Offering and the
commencement of compensation under his employment agreement, Mr. Levi's
consulting arrangement with the Partnership ceased.
On May 25, 1994, James H. Levi purchased $300,000 of a $750,000 bridge financing
which was privately placed in reliance on Section 4(2) of the Securities Act of
1933, as amended. Mr. Levi received 75,000 warrants in connection with the
private placement. The net proceeds of such offering were used by the Company to
fund part of the costs of constructing and opening new stores and working
capital requirements and for other general corporate purposes. The entire
principal amount of the bridge financing and accrued interest thereon were
repaid out of the net proceeds of the Offering.
In connection with the Reorganization, Mr. Herndon and Mr. Glazer each received
94,050 shares of restricted stock, which vest at August 4, 1996, and will be
forfeited to the Company in the event the owner thereof resigns his employment
with the Company prior to such vesting date. Such shares were issued as
consideration for the agreement of Messrs. Herndon and Glazer for the
termination of certain incentive compensation agreements entered into with The
Great Train Store Partners, L.P. in 1990. The Company has agreed to register
such shares under the Act in the event they may not be sold in compliance with
Rule 144 under the Act upon the vesting date. On April 16, 1996 the Board of
Directors approved immediate vesting of Michael Glazer's restricted stock and
extended the restricted period with respect to the shares previously issued to
Stanley Herndon.
Charles M. Tureen, a Director of the Company, is a member of the law firm of
Gallop, Johnson & Neuman, L.C. which has been engaged by the Company to render
legal services on a variety of matters including the Company's initial public
offering. During the fiscal years ended December 30, 1995 and December 31, 1994,
the Company incurred legal fees of approximately $43,000 and $149,000,
respectively, in connection with legal services rendered by Gallop, Johnson &
Neuman, L.C.
The terms and conditions of the foregoing transactions were not negotiated on an
arm's-length basis. All future transactions between the Company and its
officers, directors, principal stockholders and affiliates are required to be
approved by a majority of the independent and disinterested outside directors
and must be on terms no less favorable to the Company than could be obtained
from unaffiliated third parties under similar circumstances.
7
<PAGE>
Executive Compensation
The following table summarizes information concerning cash and non-cash
compensation paid to or accrued for the benefit of the Company's Chief Executive
Officer for all services rendered in all capacities to the Company. No other
officer of the Company earned compensation of more than $100,000 during any of
the three fiscal years ended December 30, 1995.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Name and Principal Position Year Salary Bonus Other
--------------------------- ---- ------ ----- -----
<S> <C> <C> <C> <C>
James H. Levi 1995 $125,000 $ - $ -
Chairman of the Board, President, and Chief 1994 $ 61,561 (a) $ - $ -
Executive Officer 1993 $ 25,000 (a) $ - $ -
</TABLE>
(a) Includes amounts paid under a consulting arrangement with The Great Train
Store Partners, L.P.
Option/SAR Grants in Last Fiscal Year
Individual Grants
<TABLE>
<CAPTION>
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name and Principal Position Granted (#) Fiscal Year ($/sh) Date
--------------------------- ----------- ----------- ------ ----
<S> <C> <C> <C> <C>
James H. Levi
Chairman of the Board, President and Chief
Executive Officer 5,000(a) 9.9% $6.20 6/2000
</TABLE>
(a) 25% become exercisable annually commencing with the second anniversary of
the grant date
Aggregated Option/SAR Exercises in Last Fiscal Year and
FY-End Options/SAR Values
<TABLE>
<CAPTION>
Number Of
Unexercised Value Of Unexercised
Securities In-The-Money
Shares Underlying Options/SARs At
Acquired Options/SARs FY-End ($)
On Value At FY-End (#) Exercisable/
Exercise Realized Exercisable/ Unexercisable
Name and Principal Position (#) ($) Unexercisable
--------------------------- ---- ---- ------------- -------------
<S> <C> <C> <C> <C>
James H. Levi
Chairman of the Board, President, and
Chief Executive Officer - - - / 22,000 - / $62,375
</TABLE>
Employment Arrangements with Executive Officers
The Company entered into an employment agreement effective April 12, 1994 with
James H. Levi. Under this agreement, which expires August 12, 1999, Mr. Levi has
agreed to continue to serve as Chairman of the Board, President and Chief
Executive Officer of the Company in exchange for annual base compensation of
$125,000, subject to annual adjustment by the Compensation Committee of the
Board of Directors. Prior to this arrangement Mr. Levi was entitled to
compensation of $25,000 per annum pursuant to his consulting arrangement. Mr.
Levi has agreed to devote such time to the business and affairs of the Company
as is reasonable and necessary. It is Mr. Levi's intention to devote at least
8
<PAGE>
50% of the customary work week to the Company's business for the foreseeable
future. In addition, Mr. Levi is entitled to receive an annual bonus in such
amount as the Compensation Committee may determine in its sole discretion to be
appropriate. No such bonuses have been paid to date.
In the event Mr. Levi's employment with the Company is terminated for reasons
other than for cause, permanent disability or death or there occurs a
significant reduction in the position, duties or responsibilities of Mr. Levi (a
"Termination") within two years following a "Change of Control" (as defined in
the agreement), Mr. Levi will be entitled to an additional bonus of 175% of the
Base Compensation payable in the fiscal year in which such termination occurs.
Mr. Levi has also agreed to refrain from disclosing information confidential to
the Company or engaging directly or indirectly, in the sale or distribution of
merchandise competitive with that sold by the Company during the term of his
employment agreement and for two years thereafter without the prior written
consent of the Company.
PROPOSAL 2 - AMENDMENT OF THE GREAT TRAIN STORE COMPANY
1994 INCENTIVE COMPENSATION PLAN
GENERAL
On August 25, 1994, the Board of Directors adopted The Great Train Store Company
1994 Incentive Compensation Plan (the "1994 Plan"). In 1995, the Plan was
amended in order to increase the number of shares of Common Stock available for
issuance from 150,000 to 310,000. On February 14, 1996, the Board of Directors
resolved to amend, upon approval by the Company's stockholders, the amended 1994
plan in order to increase the number of shares of Common Stock available for
issuance from 310,000 to 460,000 (the "Amendment") and directed that the
Amendment be submitted to the stockholders of the Company for their approval.
The Amendment will become effective only if the holders of at least a majority
of the issued and outstanding shares of Common Stock present at the annual
meeting in person or by proxy vote for the approval of the Amendment.
The 1994 Plan is administered by the Compensation Committee of the Board of
Directors of the Company. The 1994 Plan authorizes the Compensation Committee to
grant, incentive stock options, nonqualified stock options and to award
restricted stock to key employees, including officers, as selected by such
Committee. The 1994 Plan will expire on, and no awards may be granted thereunder
after the tenth anniversary of the plan, subject to the right of the Board of
Directors to terminate such 1994 Plan at any time prior thereto. The Board of
Directors may amend the 1994 Plan at any time, except no such amendment may
impair the rights of recipients of previous grants without such grantee's
consent.
An option enables the optionee to purchase shares of Common Stock at the option
exercise price. The per share exercise price of any options granted under the
plan may not be less than the fair market value of the Common Stock at the time
the option is granted, provided that, with respect to an incentive stock option
granted to an optionee who is or would be the beneficial owner of more than 10%
of the combined voting power of all classes of the Company's stock, the exercise
price may not be less than 110% of the fair market value of the Common Stock on
the date of grant. In order to obtain the shares, a participant must pay the
full exercise price to the Company at the time of exercise of the option. The
exercise price may be paid in cash or, with the consent of the Compensation
Committee, stock of the Company, including stock acquired under the same option.
Incentive stock options are intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended.
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Incentive stock options and non-qualified stock options may be granted with
terms of no more than ten years from the date of grant, provided that in the
event the grant of an incentive stock option to an optionee who is or would be
the beneficial owner of more than 10% of the total combined voting power of all
classes of the Company's stock, the term of such option may not exceed five
years. Options will survive for a limited period of time after the optionee s
death, disability or normal retirement from the Company. Any shares as to which
an option expires, lapses unexercised or is terminated or canceled may be
subject to a new option.
PROPOSAL 3 - AMENDMENT OF THE GREAT TRAIN STORE COMPANY
1994 DIRECTOR STOCK OPTION PLAN
GENERAL
On May 10, 1994, the Board of Directors adopted The Great Train Store Company
1994 Director Stock Option Plan (the "1994 Plan"). On September 8, 1995, the
Board of Directors resolved to amend, upon approval by the Company's
stockholders, the 1994 plan in order to increase the number of shares of Common
Stock available for issuance from 20,000 to 50,000 and to provide each
non-employee director with an automatic annual award of 2,500 options. The first
such award being effective September 8, 1995 (the "Amendment") and directed that
the Amendment be submitted to the stockholders of the Company for their
approval. The Amendment will become effective only if the holders of at least a
majority of the issued and outstanding shares of Common Stock present at the
annual meeting in person or by proxy vote for the approval of the Amendment.
The 1994 Plan is administered by the Chairman of the Board of Directors of the
Company. The 1994 Plan authorizes the Chairman to grant nonqualified stock
options to directors of the Company who are not otherwise officers or employees
of the Company or of any subsidiary thereof. Currently, the four non-employee
members of the Board of Directors are eligible for this plan. Authority to grant
options under the Plan will terminate, if not terminated earlier by the Board,
on the tenth anniversary of the plan. The Board of Directors may amend the Plan
at any time, except no such amendment may impair the rights of recipients of
previous grants without such grantee's consent.
An option enables the optionee to purchase shares of Common Stock at the option
exercise price. The per share exercise price of any options granted under the
plan may not be less than the fair market value of the Common Stock at the time
the option is granted. In order to obtain the shares, a participant must pay the
full exercise price to the Company at the time of exercise of the option. The
exercise price may be paid in cash or, with the consent of the Compensation
Committee, stock of the Company, including stock acquired under the same option.
An option may be granted with terms of no more than ten years from the date of
grant. Director's options first become exercisable on the first anniversary of
the date of grant.
NEW PLAN BENEFITS
1994 Director Stock Option Plan
<TABLE>
<CAPTION>
Name and Principal Position Dollar Value ($) Number of Units
--------------------------- ---------------- ---------------
<S> <C> <C>
James H. Levi
Chairman of the Board, President, and Chief
Executive Officer $ - -
Executive Group - -
Non-Executive Directors Group 5,625 10,000
Non-Executive Officer Employee Group - -
</TABLE>
(a) Dollar Value is calculated in accordance with Item 402(d) of Regulation SB
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<PAGE>
PROPOSAL 4 - OTHER BUSINESS
Management does not know of any other matters which may come before the Meeting.
However, if any other matters are properly presented to the Meeting, it is the
intention of the persons named in the accompanying proxy to vote, or otherwise
act, in accordance with their judgment on such matters.
Proposals for the 1997 Annual Meeting
Proposals of the stockholders intended to be presented at the 1997 Annual
Meeting of Stockholders must be received by the Company at its principal office
in Dallas, Texas not later than February 3, 1997 for inclusion in the proxy
statement for that meeting.
Relationship with the Independent Accountants
KPMG Peat Marwick, LLP ("KPMG") served as the independent public accountant for
the Company in 1995. The Company's independent public accountant for 1996 will
be selected by the Board at a regular Board meeting to be held in 1996.
Representatives of KPMG will be present at the annual meeting with the
opportunity to make a statement if they desire to do so and are expected to be
available to respond to appropriate questions.
On December 28, 1994, the Company engaged KPMG to serve as the Company's
principal independent accountant and to audit the Company's financial statements
for the fiscal year ended December 31, 1994. Concurrent with the engagement of
KPMG, the Company dismissed Arthur Andersen LLP ("Andersen") as the Company's
principal independent accountant and auditor.
This change in certifying accountant was recommended by the Audit committee of
the Company's Board of Directors and approved by the Board of Directors. The
report of Andersen on the financial statements of the Company for the fiscal
years ended December 31, 1992 and December 31, 1993, did not contain an adverse
opinion or a disclaimer of opinion, nor were such reports qualified or modified
as to uncertainty, audit scope or accounting principles. There were no
disagreements between Andersen and the Company on any matter of accounting
principle or practice, financial statement disclosure or audit scope or
procedure, which if not resolved to its satisfaction would have caused Andersen
to make reference to the subject matter of any such disagreement in connection
with this report.
By Order of the Board of Directors
James H. Levi
Chairman, President, and
Chief Executive Officer
THE BOARD OF DIRECTORS HOPES THAT YOU WILL ATTEND THE MEETING. WHETHER OR NOT
YOU PLAN TO ATTEND, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN
THE ACCOMPANYING ENVELOPE PROMPTLY. IF YOU ATTEND THE MEETING, YOU MAY VOTE YOUR
STOCK PERSONALLY BY DELIVERING A WRITTEN REVOCATION OF YOUR PROXY TO THE
SECRETARY OF THE COMPANY.
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