SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
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 ss.240.14a-11(c) or ss.240.14a-12
The Great Train Store Company
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title to each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
THE GREAT TRAIN STORE COMPANY
14180 DALLAS PARKWAY, SUITE 618
DALLAS, TEXAS 75240
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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To the Stockholders of May 3, 1999
The Great Train Store Company: Dallas, Texas
The Annual Meeting of the Stockholders of The Great Train Store Company will be
held on Tuesday, June 15, 1999, at 9:00 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 serve a three-year term and until the
director's successor has been elected and qualified;
2. 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 3, 1999, 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 1998 Annual Report 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
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PROXY STATEMENT
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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, June 15, 1999, at 9:00 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 May
21, 1999. 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 3, 1999, 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 James L. Llewellyn, 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 S. Schultz named
herein as nominees for director of the Company to hold office for a
term of three years expiring in 2002 and until the director's successor
has been duly elected and qualified;
(2) 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.
<PAGE>
Voting Securities, Principal Holders Thereof
and Cumulative Voting Rights
On April 26, 1999, there were 4,417,193 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 April 26, 1999, 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.
Beneficial Ownership
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Number of Shares Percent
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James H. Levi (a) 1,164,261 25.9%
85 Larchmont Avenue
Larchmont, New York 10538
Joel S. Pollack (b) 135,838 3.1%
1150 Benedict Canyon Drive
Beverly Hills, California 90210
John J. Schultz 23,500 *
P.O. Box 1106 - Horseshoe Farm
Ridgefield, CT 06877
Charles M. Tureen (c) 29,512 *
101 South Hanley Road, Suite 1600
St. Louis, Missouri 63105
Robert M. Warner - *
1015 Nautilus Lane
Mamaroneck, New York 10543
Matthew A. Katzer & Barbara M. Dawson 402,650 9.1%
2373 Northwest 185th Avenue, Suite 416
Hillsboro, Oregon 97124
Edmund H. Shea, Jr. (d) 238,000 5.3%
655 Brea Canyon Road
Walnut, California 91789
All directors and officers as a group
(7 persons) 1,355,540 30.2%
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* Less than 1%
(a) Includes 10,000 shares of common stock owned by Mr. Levi's spouse. Mr.
Levi disclaims beneficial ownership of these shares. Also includes
75,000 shares of Common Stock issuable upon the exercise of the warrants
received by Mr. Levi pursuant to the private placement of debt in 1994,
which are beneficially owned by Mr. Levi.
(b) Includes 135,838 shares held of record by The Pollack Family Trust dated
May 13, 1986, of which Mr. Pollack and his spouse are co-trustees.
(c) Includes 29,512 shares owned by "The Mary W. Tureen Revocable Trust" of
which Mary W Tureen (spouse of Mr. Tureen) and Mr. Tureen are
co-trustees.
(d) Includes 50,000 shares of common stock issuable upon the exercise of the
warrants received by Mr. Shea pursuant to the private placement of debt
in 1994, which are beneficially owned by Mr. Shea. All other shares are
held of record by E & M RP Trust, of which Mr. Shea is trustee.
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 III and Class I directors
expire in 2000 and 2001, respectively. The Board of Directors has nominated Joel
S. Pollack and John J. Schultz, who are currently Class II directors, for
re-election to serve a three-year term expiring at the annual meeting of
stockholders in 2002. The following table sets forth certain information
concerning Joel S. Pollack and John J. Schultz and those directors who are
continuing in office.
NOMINEES FOR DIRECTOR - CLASS II
(to be elected to serve a three-year term)
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Name Age Position Director Since
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Joel S. Pollack 60 Director 1994
John J. Schultz 62 Director 1994
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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.
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
is presently a consultant specializing in the retail area and serves as a
director of Big Smith Brands, Inc. and A.R. Accessories, 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.
Your Board of Directors recommends you vote for the election of these nominees.
DIRECTORS CONTINUING IN OFFICE - CLASS III
(terms expiring in 2000)
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Name Age Position Director Since
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James H. Levi 59 Director, Chairman of the Board, 1994
President and Chief Executive Officer
Robert M. Warner 78 Director 1994
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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 retailers, large and small. 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 2001)
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Name Age Position Director Since
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Charles M. Tureen 68 Director 1994
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Charles M. Tureen has been a Director of the Company since April, 1994. Mr.
Tureen was a member in the St. Louis, Missouri law firm of Gallop, Johnson &
Neuman, L.C., from July, 1990 through December, 1996, when he became of counsel
to the firm. 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.
The Board of Directors of the Company has established an Audit Committee
(presently consisting of Mr. Pollack, Mr. Warner and Mr. Schultz) to be
comprised of at least two non-employee directors which has the responsibility of
reviewing the scope of the audit and services provided by the Company's
independent auditors. The Audit Committee meets 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. Pollack and Mr. Warner) also to be comprised of at least two
non-employee directors 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. 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 1998 the Board of Directors held
three meetings, the Audit Committee held three meetings, the Compensation
Committee held three meetings, and the Executive Committee held five meetings.
During such period each director 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.
Director Compensation
The Company pays each non-employee director of the Company $1,250 in cash for
each Board meeting attended 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 1996, 1997, and 1998 were made in
cash. In addition, pursuant to its 1994 Director's Stock Option Plan, the
Company granted to each non-employee director, on the date of his initial
selection, 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 1996, 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.
During 1997, the annual award was increased to 5,000 options to be granted on
the date of each subsequent annual meeting of the stockholders. Such options
will be at a price equal to the fair market value of the Common Stock on the
date of award.
Executive Officers
Each of the executive officers, other than Mr. Levi, is a full time employee of
the Company. In accordance with his employment agreement, Mr. Levi 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 50% of the customary
work week to the Company's business for the foreseeable future. The non-employee
directors of the Company devote such time and attention to the affairs of the
Company as is reasonable and necessary. Set forth below are descriptions of the
backgrounds of the executive officers, other than Mr. Levi, of the Company.
James L. Llewellyn joined the Company in March 1994 as its Vice President -
Sales. From 1985 until joining the Company, Mr. Llewellyn served as Senior
District Manager of Club International Menswear, a chain of retail men's stores.
Mr. Llewellyn graduated in June, 1982 from the University of New Brunswick, New
Brunswick, Canada. Mr. Llewellyn supervises store sales operations, buying,
advertising, promotion and merchandising.
Cheryl A. Taylor currently serves the Company as its Vice President - Finance
and Administration. Ms. Taylor joined the Company in May 1994 as its Controller.
From 1989 until joining the Company, Ms. Taylor served as a certified public
accountant with Coopers & Lybrand LLP, an international accounting and auditing
firm. She received her Bachelor's of Business Administration degree in
accounting from Texas A & M University.
Compliance with Section 16(a) of the Exchange Act
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.
Certain Relationships and Related Transactions
During the most recent two fiscal years there have been no transactions between
the Company and any of its directors, executive officers, principal stockholders
or affiliates, and no such transactions are currently proposed. All future such
transactions 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.
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 January 2, 1999.
Summary Compensation Table
Annual Compensation
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Name and Principal Position Year Salary Bonus Other
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James H. Levi 1998 $155,280 $ - $ -
Chairman of the Board, President 1997 145,237 - -
and Chief Executive Officer 1996 129,789 - -
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Option / SAR Grants in Last Fiscal Year
Individual Grants
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Number of % of Total
Securities Options/SARs Exercise
Underlying granted to or Base
Name and Principal Options/SARs Employees in Price Expiration
Position Granted (#) Fiscal Year ($/sh) Date
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James H. Levi - Chairman
of the Board, President and 5,000 (a) 7.2% $ 3.50 3/2008
Chief Executive Officer
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(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
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Value of
Number Of Unexercised Unexercised
Shares Securities In-The-Money
Acquired Underlying Options/SARs Options/SARs At
On Value At FY-End (#) FY-End ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
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James H. Levi - - 17,000 / 71,000 - / -
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<PAGE>
<TABLE>
<CAPTION>
Ten-Year Option/SAR Repricings
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Number of Length of
Options Market Price Exercise Original
/SARs of Stock Price At Option Term
Repriced at Time of Time of New Remaining
or Repricing or Repricing or Exercise at Date of
Amended Amendment Amendment Price Repricing or
Name Date (#) ($) ($) ($) Amendment
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
James H. Levi, 3/11/98 5,000 $ 3.50 $ 5.63 $ 3.50 7 Years
President 3/11/98 10,000 $ 3.50 $ 5.63 $ 3.50 8 Years
3/11/98 15,000 $ 3.50 $ 5.63 $ 3.50 8 Years
3/11/98 10,000 $ 3.50 $ 8.50 $ 3.50 9 Years
3/11/98 26,000 $ 3.50 $ 7.88 $ 3.50 9 Years
James L. Llewellyn, 3/11/98 5,000 $ 3.50 $ 5.63 $ 3.50 7 Years
Vice President- 3/11/98 10,000 $ 3.50 $ 5.63 $ 3.50 8 Years
Sales 3/11/98 15,000 $ 3.50 $ 5.63 $ 3.50 8 Years
3/11/98 10,000 $ 3.50 $ 8.50 $ 3.50 9 Years
3/11/98 20,000 $ 3.50 $ 7.88 $ 3.50 9 Years
* Michael D. Glazer, 3/11/98 5,000 $ 3.50 $ 5.63 $ 3.50 7 Years
Vice President- 3/11/98 10,000 $ 3.50 $ 5.63 $ 3.50 8 Years
Real Estate 3/11/98 15,000 $ 3.50 $ 5.63 $ 3.50 8 Years
3/11/98 10,000 $ 3.50 $ 8.50 $ 3.50 9 Years
3/11/98 20,000 $ 3.50 $ 7.88 $ 3.50 9 Years
Cheryl A. Taylor, 3/11/98 7,500 $ 3.50 $ 5.63 $ 3.50 7 Years
Vice President- 3/11/98 12,000 $ 3.50 $ 5.63 $ 3.50 8 Years
Finance & 3/11/98 20,000 $ 3.50 $ 5.63 $ 3.50 8 Years
Administration 3/11/98 13,000 $ 3.50 $ 8.50 $ 3.50 9 Years
3/11/98 22,000 $ 3.50 $ 7.88 $ 3.50 9 Years
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<FN>
* As of March 31, 1999, Mr. Glazer is no longer employed with The Great Train
Store Company.
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</FN>
</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
$150,000, subject to annual adjustment by the Compensation Committee of the
Board of Directors. 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 50% of the customary work- week to the Company's
business for the foreseeable future.
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.
Compensation Committee Report
General Policy. The Compensation Committee is committed to providing a
comprehensive compensation package designed to attract and retain quality
executive officers, instill a long-term commitment to the Company and insure
that the interests of management and the Company's stockholders are aligned.
With this in mind, the Compensation Committee's principal objective is to link
executive compensation to corporate performance.
Each year, the Compensation Committee reviews the Company's overall executive
compensation program in comparison to the Company's results of operations and
progress on strategic and other qualitative goals. The key components of the
Company's compensation package are base salary and stock options. The Company
does not currently have an executive bonus plan.
Base Salaries. Base salaries for executive officers are initially determined by
evaluating the responsibilities of the position held and the experience of the
individual, and by referring to the relevant competitive marketplace for
executive management. When determining base salary, the Compensation Committee
also takes into account other aspects of the entire compensation package
afforded by the Company to the individual officer.
Annual salary adjustments are determined by evaluating the performance of the
Company and of each executive officer and also taking into account new
responsibilities. The Compensation Committee exercises judgment and discretion
in the information it reviews and the analysis it considers, and where
appropriate, also considers non-financial performance measures. In reviewing the
individual performance of the Company's executive's (other than James H. Levi),
the Committee also takes into account the views of the Mr. Levi. Mr. Levi's
views are typically subjective, such as his perception of the individual's
performance, the importance of his role and functional responsibilities to the
overall well-being of the Company and any planned changes in functional
responsibilities.
In determining Mr. Levi's base salary for fiscal 1999, the Compensation
Committee took into account the Company's financial results in fiscal 1998 and
the assessment of the Committee of Mr. Levi's leadership and response to the
challenges encountered by the Company in fiscal 1998. The Committee also took
into account the time devoted by Mr. Levi to the Company's affairs in excess of
that required by his employment agreement. As a result, the Committee set Mr.
Levi's base salary for fiscal 1999 at $150,000, which is the same amount paid to
Mr. Levi in fiscal 1998. 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. To date, Mr. Levi has not requested nor received
any such bonuses.
Stock Options. The granting of stock options is a key part of the Company's
overall compensation program and is designed to provide its executive officers
and other key employees with incentives to maximize the Company's long-term
financial performance and align their interests with those of the Company's
shareholders. In determining whether and how many options should be granted, the
Committee may consider the seniority of each of the executive officers as well
as the financial performance of the Company and other such factors as it deems
appropriate. However, the Compensation committee has not established target
awards governing the receipt, timing or size of option grants under the Stock
Option Plans. Thus, determinations by the Compensation Committee with respect to
the granting of stock options are subjective in nature.
In March 1998, the Committee recognized that the then outstanding options had
ceased to advance the purpose for which the option program had been designed.
The exercise price of outstanding options generally exceeded the market price
for the underlying stock by a substantial amount. After examining the reasons
for such disparity, the Committee concluded that the erosion of the market value
of the Company's stock was the result of numerous factors, many of which were
outside the control of the Company's executives, and that the long term
objectives of the company's compensation program would be best served by
adjusting the exercise price of outstanding options to equal to then prevailing
market price of the underlying stock.
Respectfully submitted,
Compensation Committee of the
Board of Directors of
The Great Train Store Company
Charles M. Tureen
Joel S. Pollack
Robert M. Warner
Stock Performance
Set forth below is a line graph comparing the cumulative total shareholder
return since January4, 1995 through December 31, 1998 on the Company's common
stock against the cumulative total return of the Russell 2000 and the Company's
peer group of other specialty retailers, selected by the Company. The peer group
includes Funco, Natural Wonders and Noodle Kidoodle.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG GTRN, PEER COMPANIES AND RUSSELL 2000 INDEX
[EDGAR representation of data points used in printed graphic]
04-Jan 29-Dec- 31-Dec- 31-Dec- 31-Dec-
1995 1995 1996 1997 1998
- --------------------------------------------------------------------------------
Peer Group $100.00 $117.89 $109.77 $149.12 $188.41
GTRN 100.00 114.13 143.48 103.26 17.39
Russell 2000 100.00 127.59 146.42 176.47 170.39
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<PAGE>
PROPOSAL 2 - 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 2000 Annual Meeting
Proposals of the stockholders intended to be presented at the 2000 Annual
Meeting of Stockholders must be received by the Company at its principal office
in Dallas, Texas not later than February 3, 2000 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 from 1996 through 1998. The Company's independent public accountant
for 1999 will be selected by the Board at a regular Board meeting to be held in
1999. 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.
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.
<PAGE>
THE GREAT TRAIN STORE COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS, JUNE 15, 1999 AT 9:00 A.M.
The undersigned stockholder of The Great Train Store Company (the "Company")
hereby appoints Cheryl A. Taylor and James L. Llewellyn and each of them as
attorneys and proxies, each with power of substitution and revocation, to
represent the undersigned at the Annual Meeting of Stockholders of the Company
to be held in the offices of the Company at 14180 Dallas Parkway, Suite 618,
Dallas, Texas on June 15, 1999 at 9:00 A.M. Central Daylight Savings Time, and
at any adjournment or postponement thereof, with authority to vote all shares
held or owned by the undersigned in accordance with the directions indicated
herein.
Receipt of the Notice of Annual Meeting of Stockholders dated May 3, 1999, the
Proxy Statement furnished herewith, and a copy of the Annual Report to
Stockholders for the year ended January 2, 1999 is hereby acknowledged.
Item 1. Election of Joel S. Pollack and John J. Schultz as Class II Directors
for a term of three years expiring in 2002 and until the director's
successor has been duly elected and qualified.
Joel S. Pollack
_____ FOR _____ WITHHOLD
John J. Schultz
_____ FOR _____ WITHHOLD
Item 2. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting or any
adjournment thereof.
<PAGE>
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
ITEM 1 AND PURSUANT TO ITEM 2.
THIS BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 1.
Dated: , 1999
---------------------------
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(Signature)
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(Signature if held jointly)
The signature should agree with the name on
your stock certificate. If acting as
attorney, executor, administrator, trustee,
guardian, etc., you should so indicate when
signing. If the signer is a corporation,
please sign the full corporate name by duly
authorized officer. If shares are held
jointly, each shareholder should sign.
