================================================================================
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
VALUE CITY DEPARTMENT STORES, 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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
VALUE CITY DEPARTMENT STORES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
SEPTEMBER 10, 2003
AND
PROXY STATEMENT
IMPORTANT
Please complete, sign and date your proxy and promptly return it in the enclosed
envelope. No postage is necessary if mailed in the United States.
VALUE CITY DEPARTMENT STORES, INC.
3241 Westerville Road
Columbus, Ohio 43224
(614) 471-4722
August 8, 2003
Dear Shareholder:
You are cordially invited to attend the Value City Department Stores, Inc. 2003
Annual Meeting of Shareholders, which will be held at the Hilton Columbus, 3900
Chagrin Drive, Columbus, Ohio, 43219 on Wednesday, September 10, 2003, at 10:00
a.m., local time.
The following pages contain the formal Notice of the Annual Meeting and the
Proxy Statement. You will want to review this material for information
concerning the business to be conducted at the Annual Meeting.
Your vote is important. Whether you plan to attend the Annual Meeting or not,
you are urged to complete, date and sign the enclosed form of proxy and return
it in the enclosed envelope. If you attend the Annual Meeting, you may revoke
your proxy and vote in person if you wish, even if you have previously returned
your proxy.
On behalf of the Board of Directors, we would like to express our appreciation
for your continued interest in the affairs of the Company.
Jay L. Schottenstein John C. Rossler
Chairman President and Chief Executive Officer
VALUE CITY DEPARTMENT STORES, INC.
3241 Westerville Road
Columbus, Ohio 43224
614-471-4722
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 10, 2003
August 8, 2003
To the Shareholders of
Value City Department Stores, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the "Annual
Meeting") of Value City Department Stores, Inc., an Ohio corporation (the
"Company"), will be held at the Hilton Columbus, 3900 Chagrin Drive, Columbus,
Ohio 43219, on Wednesday, the 10th day of September, 2003, at 10:00 a.m., local
time, for the following purposes:
1. To elect seven directors, each for a term of one year and until
their successors are duly elected and qualified; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on July 28, 2003, are entitled
to notice of and to vote at the Annual Meeting and any postponements or
adjournments thereof.
By Order of the Board of Directors,
James A. McGrady
Executive Vice President, Chief Financial Officer,
Treasurer and Secretary
SHAREHOLDERS ARE URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED FORM OF PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED
IN THE UNITED STATES. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY REVOKE YOUR
PROXY AND VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR
PROXY.
VALUE CITY DEPARTMENT STORES, INC.
3241 Westerville Road
Columbus, Ohio 43224
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 10, 2003
INTRODUCTION
This proxy statement is furnished to the shareholders of Value City Department
Stores, Inc., an Ohio corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company (the "Board"),
for use at the Annual Meeting of Shareholders (the "Annual Meeting") to be held
on September 10, 2003, at 10:00 a.m., local time, at the Hilton Columbus, 3900
Chagrin Drive, Columbus, Ohio 43219. The Notice of the Annual Meeting, this
proxy statement and the accompanying proxy are being mailed to shareholders on
or about August 8, 2003. The Company's Annual Report on Form 10-K for the fiscal
year ended February 1, 2003 was previously mailed to shareholders.
Shareholders of record at the close of business on July 28, 2003 are entitled to
notice of and to vote at the Annual Meeting and any postponements or
adjournments thereof. At July 28, 2003, the Company had 33,649,269 outstanding
shares of Common Stock, net of treasury shares, without par value (the "Common
Stock"). Each outstanding share of Common Stock entitles the holder thereof to
one vote upon each matter to be voted upon by shareholders at the Annual
Meeting.
All shares represented by properly executed proxies received by the Company
prior to the meeting will be voted in accordance with the shareholder's
directions. In the absence of instructions to the contrary, proxies will be
voted FOR each of the proposals herein. A proxy may be revoked, without
affecting any vote previously taken, by:
o a written notice mailed to the Company (attention James A. McGrady,
Secretary);
o filing a duly executed later dated proxy; or
o delivery in person at the meeting and voting in person.
The presence, in person or by proxy, of a majority of the outstanding shares of
Common Stock is necessary to constitute a quorum for the transaction of business
at the Annual Meeting. Abstentions and broker non-votes are counted for purposes
of determining the presence or absence of a quorum. Broker non-votes occur when
brokers, who hold their customers' shares in street name, sign and submit
proxies for such shares and vote such shares on some matters, but not others.
This would occur when brokers have not received any instructions from their
customers, in which case the brokers, as the holders of record, are permitted to
vote on "routine" matters, which include the election of directors.
The election of each director nominee requires the favorable vote of a plurality
of all votes cast by the holders of Common Stock at a meeting at which a quorum
is present. Proxies that are marked "Withhold Authority" and broker non-votes
will not be counted toward such nominee's achievement of a plurality and thus
will have no effect.
-1-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OWNERSHIP OF COMMON STOCK
The following table sets forth, as of July 15, 2003, certain information
regarding the beneficial ownership of our Common Stock by each holder of 5% of
such shares, each director individually, each executive officer named in the
Summary Compensation Table, and all executive officers and directors as a group.
Name of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership (1) Outstanding Shares(2)
---------------- ------------------------ ---------------------
Henry L. Aaron 10,000 *
Raymond Blanton (10)
Ari Deshe (4)(5)(7) 24,972 *
Jon P. Diamond (4)(5) 11,700 *
Elizabeth M. Eveillard (1) 4,000 *
George Kolber (10)
Edwin J. Kozlowski (3) 198,000 *
James A. McGrady 137,000 *
Steven E. Miller 14,000 *
John C. Rossler (3) 296,000 *
Jay L. Schottenstein (4)(5)(6) 230,000 *
Harvey L. Sonnenberg (7) 24,000 *
James L. Weisman (7) 5,300 *
All directors and executive officers as a group
(12 persons) (3)(4)(5)(6)(7)(10)(11) 954,972 2.8%
Dimensional Fund Advisors Inc. (8) 2,037,800 6.0%
Schottenstein Stores Corporation (5) 27,668,851 63.4%
Cerberus Partner, L.P.(9) 9,722,085 22.3%
-------------
* Represents less than 1% of outstanding shares of Common Stock, net of
treasury shares.
(1) Except as otherwise noted, the persons named in this table have sole power
to vote and dispose of the shares listed and includes the following number
of shares of Common Stock as to which the named person has the right to
acquire beneficial ownership upon the exercise of stock options within 60
days of July 15, 2003: Mr. Aaron, 10,000; Mr. Deshe, 10,000; Mr. Diamond,
10,000; Ms. Eveillard, 4,000; Mr. Kozlowski, 118,000; Mr. McGrady,
131,000; Mr. Miller, 12,000; Mr. Rossler, 181,000; Mr. J. Schottenstein,
56,000; Mr. Sonnenberg, 4,000; Mr. Weisman, 4,000 and all directors and
executive officers as a group, 540,000.
(2) The percent is based upon the 39,913,056 shares of Common Stock
outstanding, net of treasury shares, plus the number of shares a person
has the right to acquire within 60 days of July 15, 2003.
(3) Includes 110,000 shares for Mr. Rossler, 80,000 shares for Mr. Kozlowski,
and 190,000 shares for all directors and executive officers as a group,
which are owned subject to a risk of forfeiture on termination of
employment with vesting over a period of years pursuant to the terms of
Restricted Stock Agreements.
(4) Does not include the 27,668,851 shares of Common Stock owned by SSC of
1800 Moler Road, Columbus, Ohio 43207. Jay L. Schottenstein is the
Chairman and Chief Executive Officer of SSC. Jay L. Schottenstein, Ari
Deshe and Jon P. Diamond are members of the Board of Directors of SSC. See
"Ownership of SSC," below.
(5) SSC is the holder of Senior Subordinated Convertible Loans in the
principal amount of 37,500,000 (the "Convertible Loan"). The Convertible
Loan is convertible at any time to the extent any portion of the loan
remains outstanding at the option of the holder thereof into shares of our
Common Stock. The conversion price of the Convertible Loan is $4.50 per
share, subject to conversion price adjustments. Further, SSC is the holder
of a warrant to purchase 1,388,752 Shares (subject to certain conversion
price adjustments) in connection with an additional loan made to us. Does
not include 123,372 shares owned by the Jay and Jean Schottenstein
Foundation, 67,944 shares held by the Ann and Ari Deshe
-2-
Foundation, 67,944 shares held by the Jon and Susan Diamond Family
Foundation and 40,740 shares held by the Lori Schottenstein Foundation,
all being private charitable foundations, and 1,312,500 Common Shares
owned by GB Stores, a Pennsylvania limited partnership. Combined, the
shares owned by the foundations and GB Stores represent approximately 5.0%
of our outstanding shares of Common Stock. SSC owns a 96% limited
partnership interest in GB Stores and its corporate general partner is an
affiliate of SSC. The foundations' trustees and officers consist of at
least one of the following persons: Geraldine Schottenstein, Jay
Schottenstein, Jon Diamond and/or Ari Deshe; in conjunction with other
Schottenstein family members.
(6) Includes 30,000 shares as to which Jay L. Schottenstein shares voting and
investment power as trustee of a trust which owns the shares.
(7) Includes 10,000 shares held by Mr. Deshe's minor children; 15,000 shares
held by Mr. Sonnenberg's spouse and 500 shares held by Mr. Weisman's
spouse.
(8) Dimensional Fund Advisors Inc. ("Dimensional"), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940,
furnishes investment advice to four investment companies registered under
the Investment Company Act of 1940, and serves as investment manager to
certain other commingled group trusts and separate accounts. These
investment companies, trusts and accounts are the "funds." In its role as
investment adviser or manager, Dimensional possesses voting and/or
investment power over our securities described in this schedule that are
owned by the funds and may be deemed to be the beneficial owner of the
shares of the issuer held by the Funds. Dimensional disclaims beneficial
ownership of such securities. The address for Dimensional is 1299 Ocean
Avenue, 11th Floor, Santa Monica, CA 90401. Based on information contained
in a Schedule 13G/A filed by Dimensional on February 10, 2003.
(9) Cerberus Partners, L.P., a Delaware limited partnership ("Cerberus"), is
the holder of Senior Subordinated Convertible Loans in the principal
amount of 37,500,000 (the "Convertible Loan"). The Convertible Loan is
convertible at any time to the extent any portion of the loan remains
outstanding at the option of the holder thereof into shares of our Common
Stock. The conversion price of the Convertible Loan is $4.50 per share,
subject to conversion price adjustments. Further, Cerberus is the holder
of a warrant to purchase 1,388,752 Shares (subject to certain conversion
price adjustments) in connection with an additional loan made to us.
Stephen Feinberg possesses sole power to vote and direct the disposition
of all of our securities held by Cerberus. The address for Cerberus is 450
Park Avenue, 28th Floor, New York, New York 10022. Based on information
contained in a Schedule 13D/A filed by Stephen Feinberg on October 9, 2002
and a Form 4 filed by Stephen Feinberg October 10, 2002.
(10) Mr. Kolber and Mr. Blanton are no longer affiliated with our Company. As a
consequence, we are unable to determine their beneficial ownership of
shares or the percentage of outstanding shares held.
(11) The percent is based upon the 33,913,056 shares of Common Stock
outstanding, net of treasury shares, and the exercise of 540,000 stock
options at July 15, 2003.
-3-
OWNERSHIP OF SSC
The following table indicates the shares of SSC Common Stock beneficially owned
by certain of our Directors and other Schottenstein family members, as of July
15, 2003:
Shares of SSC Percent
Common Stock of Class
------------ --------
Jay L. Schottenstein (1) 299.38139 78.4%
Geraldine Schottenstein (2) 27.41707 7.2%
Jon P. Diamond (3) 27.41707 7.2%
Ari Deshe (4) 27.41707 7.2%
Directors and officers as a group 381.63260 100.0%
-------------
(1) Represents sole voting and investment power over 299.38139 shares held in
irrevocable trusts for family members as to which Jay L. Schottenstein is
trustee and as to which shares Mr. Schottenstein may be deemed to be the
beneficial owner.
(2) Represents sole voting and investment power over 27.41707 shares held by
Geraldine Schottenstein as trustee of an irrevocable trust for family
members as to which shares Geraldine Schottenstein may be deemed to be
the beneficial owner.
(3) Represents sole voting and investment power over 27.41707 shares held by
irrevocable family trusts of which Jon Diamond or Susan Schottenstein
Diamond, Mr. Diamond's wife, are trustees, as to which shares Mr. Diamond
may be deemed to be the beneficial owner.
(4) Represents sole voting and investment power over 27.41707 shares held by
irrevocable family trusts of which Ari Deshe is the trustee, as to which
shares Mr. Deshe may be deemed to be the beneficial owner.
-4-
PROPOSAL ONE: ELECTION OF DIRECTORS
The members of the Board of the Company are elected at the Annual Meeting. The
number of members of the Board has been fixed at fourteen by action of the Board
pursuant to the Code of Regulations (By-laws) of the Company. The Nominating
Committee of the Board has nominated seven persons to serve as directors. If
each of the nominees is elected, seven vacancies will exist on the Board. Board
members serve until the annual meeting following their election or until their
successors are duly elected and qualified.
Set forth below is certain information relating to the nominees for election as
directors.
Name Age Principal Occupation
---- --- --------------------
Jay L. Schottenstein 49 Director of our Company since June 1991. Chairman of our Company,
American Eagle Outfitters, Inc. and SSC since March 1992 and Chief
Executive Officer from April 1991 to July 1997 and from July 1999
to December 2000. Mr. Schottenstein served as Vice Chairman of SSC
from 1986 until March 1992 and a director of SSC since 1982. He
served SSC as President of the Furniture Division from 1985
through June 1993 and in various other executive capacities since
1976. Mr. Schottenstein is also a director of American Eagle
Outfitters, Inc., which is a company with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act
of 1934. (1)
Henry L. Aaron 68 Director of our Company since January 2000. Mr. Aaron presently
serves as Senior Vice President of the Atlanta National League
Baseball Club, Inc. and as Vice President of Business Development
for the CNN Airport Network, along with a number of other private
business interests.
Ari Deshe 53 Director of our Company since October 1997. Chairman and Chief
Executive Officer since 1996 and President and Chief Executive
Officer from 1993 to 1996 of Safe Auto Insurance Company, a
property and casualty insurance company. Prior to that, Mr. Deshe
served as President of Safe Auto Insurance Agency from 1992 to
1993 and President of Employee Benefit Systems, Inc. from 1982 to
1992. Mr. Deshe is also a director of American Eagle Outfitters,
Inc., which is a company with a class of securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934. (1)
Jon P. Diamond 46 Director of our Company since June 1991. President and Chief
Operating Officer since 1996 and Executive Vice President and
Chief Operating Officer from 1993 to 1996 of Safe Auto Insurance
Company. Mr. Diamond served as Vice President of SSC from March
1987 to March 1993 and served SSC in various management positions
since 1983. Mr. Diamond is also a director of American Eagle
Outfitters, Inc., which is a company with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act
of 1934. (1)
-5-
Elizabeth M. Eveillard 56 Director of our Company since August 2001. Ms. Eveillard is an
independent consultant. From 2000-2003, she was a consultant and
Senior Managing Director, respectively, in the Retailing and
Apparel Group at Bear, Stearns & Co., Inc. Prior to that time, Ms.
Eveillard served as the Managing Director, Head of Retailing
Industry, Paine Webber Corporation from 1988 to 2000. From 1972 to
1988, Ms. Eveillard held various executive positions including
Managing Director in the Merchandising Group with Lehman Brothers.
Ms. Eveillard also serves on the board of directors of Too, Inc.
and Mayor's Jewelers, Inc. which are companies with a class of
securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934.
Harvey L. Sonnenberg 61 Director of our Company since August 2001. Partner in the CPA and
consulting firm, M.R. Weiser & Co., LLP, since November 1994. Mr.
Sonnenberg is active in a number of professional organizations
including the American Institute of CPA's and the New York State
Society of CPA's and has long been involved in rendering
professional services to the retail and apparel industry.
James L. Weisman 64 Director of our Company since August 2001. President and a member
of the Weisman Goldman Bowen & Gross, LLP, a Pittsburgh,
Pennsylvania law firm. He has been practicing law for 39 years and
has extensive experience in working with retail clients. His
primary areas of practice have been in banking transactions and
overseeing and directing litigation.
-------------
(1) SSC is a controlling shareholder of our Company. For information with
respect to the beneficial ownership of the voting stock of SSC by our
Board and beneficial ownership of our Common Stock by such persons and
officers, see "Security Ownership of Certain Beneficial Owners and
Management."
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE ELECTION
OF THE SLATE OF DIRECTORS LISTED ABOVE.
INFORMATION CONCERNING BOARD OF DIRECTORS
Our Board of Directors and four committees of the Board govern our Company.
During fiscal 2002, the Board met five times. Directors discharge their
responsibilities throughout the year at Board and at committee meetings and also
through considerable telephone contact and other communications with the
Chairman and other key executives, as well as with external advisors such as
legal counsel, outside auditors and investment bankers.
The average attendance at Board and committee meetings was approximately 95% in
fiscal 2002. No director attended fewer than 75% of the meetings of the Board
and of the committees to which the director was a member in fiscal 2002.
The following table identifies the current membership of Board committees and
states the number of committee meetings held during fiscal 2002. A summary of
each committee's functions follows the table.
-6-
Nominating and
Director Audit Compensation Governance Executive
-------- ----- ------------ ---------- ---------
Jay L. Schottenstein X *
Henry L. Aaron X
Ari Deshe X
Jon P. Diamond X
Elizabeth M. Eveillard X X *
Harvey L. Sonnenberg X * X
James L. Weisman X X
# of Meetings in 2002 9 2 0 0
* Committee Chair
Each of Messrs. Aaron, Sonnenberg and Weisman and Ms. Eveillard are paid an
annual retainer of $30,000 and, along with Messrs. Deshe and Diamond, receive a
quarterly Board meeting fee of $5,000 so long as they attend at least one Board
meeting during that quarter. Additionally, each of Messrs. Aaron, Sonnenberg and
Weisman and Ms. Eveillard receive $20,000 annually for each committee which they
serve and are automatically granted options each quarter to purchase 2,500
shares of our Common Stock under our 2000 Stock Incentive Plan.
AUDIT COMMITTEE
Assists the Board in monitoring:
o The integrity of our financial statements.
o Our system of internal control.
o The independence and performance of our independent public
accountants.
o The compliance by our Company with legal and regulatory
requirements.
The Committee also reviews and approves related party transactions.
All members of the Audit Committee are independent as defined in the applicable
New York Stock Exchange listing standards.
COMPENSATION COMMITTEE
o Establishes, reviews, and recommends an executive compensation
package for our Chief Executive Officer and other executive officers
of the Company.
o Recommends to our Board the number and terms of any stock options to
be granted under our stock option plan.
o Administers our Incentive Compensation Plan, the 1991 Stock Option
Plan and the 2000 Stock Incentive Plan.
NOMINATING AND GOVERNANCE COMMITTEE
o Evaluates the performance of our Board of Directors.
o Reviews our management organization and succession plans for the
Chairman and Chief Executive Officer.
-7-
o Makes recommendations to the Board concerning the composition of the
Board, the compensation of directors, the election of executive
officers, the appointment of the Chairman for each committee of the
Board and the procedures for shareholder voting.
o Reviews our corporate governance guidelines.
EXECUTIVE COMMITTEE
o Assists management with retail operations and other substantial
management issues.
REPORT OF THE AUDIT COMMITTEE
As described above, one of the Audit Committee's functions is to assist the
Board in monitoring the quality and integrity of the Company's accounting,
auditing and reporting practices. The Audit Committee currently consists of
three directors of the Board who are not employees of the Company. The Company's
Common Stock is listed on the New York Stock Exchange ("NYSE"). The members of
the Audit Committee have been reviewed by the Board and determined to be
independent as defined in Sections 303.01(B)(2)(a) and (3) of the NYSE's listing
standards.
On July 7, 2003, the Board amended the Company's Audit Committee Charter, a copy
of which is attached as Appendix A to this proxy statement.
In fulfilling its responsibilities, the Audit Committee has:
o Reviewed and discussed the Company's audited financial statements
with management and Deloitte & Touche LLP, the Company's independent
auditors. Management has the primary responsibility for the
financial statements and the reporting process;
o Reviewed and discussed, with management and Deloitte & Touche LLP,
the selection, application and disclosure of the Company's critical
accounting policies;
o Discussed with Deloitte & Touche LLP the matters required to be
discussed by Statements on Auditing Standard No. 61 (SAS 61)
(Codification of Statements of Auditing Standards, AU Section 380);
o Received the written disclosures and the letter from Deloitte &
Touche LLP required by Independence Standards Board Standard No. 1
and discussed with the independent auditors their independence; and
o Considered whether the independent auditors' provision of services
beyond the review of the Company's quarterly financial statements
and year-end audit of the Company's annual financial statements
(financial information systems design and implementation services,
if any, and other non-audit services to the Company) is compatible
with maintaining such auditors' independence.
-8-
The following table shows the fees that the Company paid or accrued for the
audit and others services provided by Deloitte & Touche LLP during fiscal 2002
and 2001:
2002 2001
---- ----
Audit Fees.......................................... $ 390,450 $357,380
Audit related fees (a).............................. $ 173,250 $167,895
Tax related fees.................................... $ 2,704 $ --
All other fees (b).................................. $ 72,082 $ 73,925
(a) Audit related fees include fees for audits of benefit plans, fees in
association with the July fiscal year end of SSC and work performed at
interim periods.
(b) All other fees are principally related to the refinancing in June 2002.
Based on its reviews and discussions, and subject to the limitations on the
Audit Committee's role and responsibilities as described in its charter, the
Audit Committee has recommended to the Board that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended February 1, 2003, for filing with the Securities and Exchange
Commission ("SEC").
The Audit Committee of the Board of Directors:
Harvey L. Sonnenberg (Chairman)
Elizabeth M. Eveillard
James L. Weisman
EXECUTIVE OFFICERS
The following persons are executive officers of the Company. Our officers are
elected annually by our Board and serve at the pleasure of the Board.
John C. Rossler, age 55, was elected our President in February 2002. In March
2002, Mr. Rossler became our President and Chief Executive Officer. Mr. Rossler
has served as President of Shonac Corporation and DSW Shoe Warehouse since
December 2000. Mr. Rossler has held various positions with DSW and Shonac since
1982, including Chief Operating Officer, Executive Vice President and Chief
Financial Officer. Prior to joining Shonac/DSW, Mr. Rossler was the managing
partner of the Columbus office of Alexander Grant/Grant Thornton International
where he was employed for 16 years.
Edwin J. Kozlowski, age 54, was elected our Executive Vice President and Chief
Operating Officer in February 2002. Mr. Kozlowski was elected Chief Financial
Officer of Shonac Corporation and DSW Shoe Warehouse in May 2001. Prior to that
time, Mr. Kozlowski served in various positions with General Nutrition
Companies, Inc. since 1978, including Chief Operating Officer of the retail
division of General Nutrition Centers, Executive Vice President and Chief
Financial Officer, Treasurer and Controller of GNCI and GNI.
James A. McGrady, age 52, became our Chief Financial Officer, Treasurer and
Secretary in July 2000. Prior to that time, Mr. McGrady served as Vice President
and Treasurer of Consolidated Stores Corporation beginning in 1986. From 1979
through 1986, Mr. McGrady was in the practice of public accounting with KPMG
Main Hurdman.
-9-
Julia A. Davis, age 42, became our Executive Vice President and General Counsel
in January 2003. Prior to that time, Ms. Davis was a partner in the Columbus
office of Vorys, Sater, Seymour and Pease LLP. Ms. Davis has 17 years of private
legal practice primarily representing and advising national and regional
retailers in a wide variety of employment matters.
Steven E. Miller, age 44, became our Vice President Controller in September
2000. Prior to that time, Mr. Miller served as Chief Financial Officer of
Spitzer Management, Inc. beginning in 1998. From 1993 through 1998, Mr. Miller
held various positions with Consolidated Stores Corporation including Director,
Assistant Treasurer and Assistant Controller.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires our executive
officers, directors and persons who are beneficial owners of more than ten
percent of our Common Stock ("reporting persons") to file reports of ownership
and changes in ownership with the Securities and Exchange Commission. Reporting
persons are required by Securities and Exchange Commission regulations to
furnish us with copies of all Section 16(a) forms filed by them. Based on its
review of the copies of Section 16(a) forms received by us, we believe that,
during fiscal year 2002, all filing requirements applicable to reporting persons
were complied with, except for one late Form 4 filing for Schottenstein Stores
Corporation and Mr. Schottenstein.
-10-
EXECUTIVE OFFICER COMPENSATION
The following table sets forth certain information regarding compensation paid
during each of our last three full fiscal years to our Chief Executive
Officer(s) and to each of our four most highly compensated executive officers
serving at the end of the current fiscal year.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
Restricted
Stock Options All Other
Name and Principal Fiscal Salary (1) Bonus Award (2) SARs Compensation (3)
Position Year ($) ($) ($) (#) ($)
-------- ---- --- --- --- --- ---
Jay L. Schottenstein 2002 $ 250,000 None None None None
Chairman 2001 $ 250,000 None None None None
2000 $ 250,000 None None None None
John C. Rossler 2002 $ 694,344 $ 985,000 None 2,430,000 $ 62,607
President and Chief 2001 $ 404,181 $ 497,058 $ 21,200 5,000 $ 31,927
Executive Officer 2000 $ 395,995 $ 621,323 None None $ 25,068
Edwin J. Kozlowski 2002 $ 496,154 $ 525,000 None 1,720,000 $ 96,784
Executive Vice President and Chief 2001 $ 223,846 $ 225,000 None None $ 84,724
Operating Officer 2000 None None None None None
James A. McGrady 2002 $ 397,436 $ 210,000 None 540,000 $ 35,057
Chief Financial Officer, Treasurer 2001 $ 325,000 $ 140,000 $ 21,200 5,000 $ 31,014
and Secretary 2000 $ 155,769 None None 30,000 $ 13,497
Steven E. Miller 2002 $ 202,019 $ 86,100 None 20,000 $ 11,487
Vice President Controller 2001 $ 176,250 $ 51,480 $ 8,480 2,000 $ 69,542
2000 $ 67,019 None None 10,000 $ 29,638
Raymond L. Blanton (4) 2002 $ 398,002 $ 323,723 None None $ 389,950
Former Senior Vice President and 2001 $ 294,895 $ 525,426 None None $ 45,963
General Merchandise Manager 2000 $ 288,922 $ 525,426 None 2,000 $ 18,864
George Kolber (5) 2002 $ 685,897 None None None $1,978,639
Former Vice Chairman and Chief 2001 $ 900,000 None None None $ 207,548
Executive Officer 2000 $ 112,500 None $3,450,000 500,000 $ 9,676
-------------
(1) Includes amounts deferred by the executive officer pursuant to the
Deferred Compensation Plan established in 1998.
(2) The value of the restricted stock is determined by multiplying the total
shares held by each named executive by the closing price on the NYSE on
January 31, 2003.
(3) See Table below for All Other Compensation.
(4) Mr. Blanton's employment ended on September 24, 2002.
(5) Mr. Kolber resigned from the Company effective April 6, 2002.
-11-
ALL OTHER COMPENSATION
Jay L. John C. Edwin J. James A. Steven E. Raymond L. George
Schottenstein Rossler Kozlowski McGrady Miller Blanton Kolber
401(k) Plan and Associate
Stock Purchase Plan Company
Contributions $ -- $ 8,458 $ -- $ 6,324 $ 5,220 $ 6,526 $ 4,176
Company paid relocation
expenses -- -- 5,884 -- -- -- --
Severance -- -- -- -- -- 219,231 1,950,000
Auto Reimbursement -- 36,597 11,076 25,937 3,448 78,731 4,421
Company paid Life, Medical
and Indemnity Insurance -- 4,687 440 952 140 1,256 --
Sec 79 Cafeteria Health Care
Plan -- 1,734 710 1,844 2,679 2,548 383
Personal Living Expenses -- -- -- -- -- -- 19,659
Loan Forgiveness -- -- 60,000 -- -- -- --
Gift Certificates -- 125 30 -- -- -- --
Country Club Dues and
Membership -- 11,006 18,644 -- -- 81,658 --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total All Other Compensation $ -- $ 62,607 $ 96,784 $ 35,057 $ 11,487 $ 389,950 $1,978,639
========== ========== ========== ========== ========== ========== ==========
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR TABLE
The following table provides certain information on option grants during fiscal
year 2002 by us to our Chief Executive Officer and each of our other executive
officers included in the above compensation table.
Potential Realized Value at
% of Total Assumed Annual Rates of Stock
Options Options/SARs Price Appreciation for
SARs Granted to Exercise or Option Term (2)
Granted Employees in Base Price Expiration ---------------
Name (#) Fiscal Year ($/Sh) Date (1) 5% 10%
---- --- ----------- ------ -------- -- ---
Jay L. Schottenstein None N/A N/A N/A N/A N/A
John C. Rossler 2,430,000 37% $ 4.50 2/3/2012 $ 6,876,963 $17,427,574
Edwin J. Kozlowski 1,720,000 26% $ 4.50 2/3/2012 $ 4,867,644 $12,335,567
James A. McGrady 540,000 8% $ 4.50 2/3/2012 $ 1,528,214 $ 3,872,794
Steven E. Miller 20,000 (3) $ 2.35 7/3/2012 $ 29,558 $ 74,906
Raymond L. Blanton(4) 570,000 9% $ 4.50 2/3/2012 $ 1,613,115 $ 4,087,949
George Kolber(5) None N/A N/A N/A N/A N/A
-12-
-------------
(1) Except as described below, all options are exercisable 20% per year,
beginning on the first anniversary of the original grant date, on a
cumulative basis and expire ten years from the original grant date.
1,590,000 options granted to Mr. Rossler and 1,130,000 options granted to
Mr. Kozlowski vest on (1) January 30, 2010 or, if earlier, (2) the later
of (A) January 31, 2004 if, (i) for each day of any 60-consecutive trading
day period that ends on or before January 31, 2004, the closing price of
the Common Stock is at least $12.00 per share or (ii) the Company has
achieved at least 95 percent of the EBIT goal the Board set for the
Company for each fiscal year ending after the effective date of Mr.
Rossler's or Mr. Kozlowki's respective employment agreement and on and
before January 31, 2004 or (B) the last day of (i) any 60-consecutive
trading day period that ends after January 31, 2004 and before January 30,
2010 and on each day of which the closing price of the Common Stock is at
least $12.00 per share or (ii) the Company has achieved at least 95
percent of the EBIT goal the Board set for the Company for each of any
three fiscal years ending after the effective date of Mr. Rossler's or Mr.
Kozlowski's respective employment agreement and on and before January 30,
2010.
(2) Represents the potential realizable value of each grant of options
assuming that the market price of the Common Stock appreciates in value
from the date of grant to the end of the option term at either a 5% or 10%
annualized rate, based on the difference between the assumed per share
value and the per share option exercise price, multiplied by the total
number of option shares.
(3) Represents less than 1% of total options granted during fiscal 2002.
(4) Mr. Blanton's employment ended on September 24, 2002.
(5) Mr. Kolber resigned from the Company effective April 6, 2002.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table provides certain information on the number and value of
stock options held by our executive officers named in the Summary Compensation
Table at February 1, 2003.
Potential Realized
Value at Assumed
Number of Unexercised Annual Rates of Stock
Shares Options at Fiscal Year End Price Appreciation for
Acquired on Value (#) Option Term ($) (1)
Exercise Realized --------------------------- ---------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- --- --- ----------- ------------- ----------- -------------
Jay L. Schottenstein -- -- 56,000 -- -- --
John C. Rossler -- -- 13,000 2,432,000 -- --
Edwin J. Kozlowski -- -- -- 1,720,000 -- --
James A. McGrady -- -- 17,000 558,000 -- --
Steven E. Miller -- -- 6,000 26,000 -- --
Raymond L. Blanton(2) -- -- -- -- -- --
George Kolber (3) -- -- -- -- -- --
-------------
(1) Represents the total gain which would be realized if all in-the-money
options held at year end were exercised, determined by multiplying the
number of shares underlying the options by the difference between the per
share option exercise price and the per share fair market value at year
end of $1.95. An option is in-the-money if the fair market value of the
underlying shares exceeds the exercise price of the option.
(2) Mr. Blanton's employment ended on September 24, 2002.
(3) Mr. Kolber resigned from the Company effective April 6, 2002. Pursuant to
an Addendum to the December 7, 2000 Executive Employment Agreement and
Restricted Stock Agreement, Mr. Kolber forfeited rights to 200,000 options
which were not vested on April 6, 2002.
-13-
EQUITY COMPENSATION PLAN TABLE
The following table sets forth additional information as of February 1, 2003,
about shares of our Common stock that may be issued upon the exercise of options
and other rights under our existing equity compensation plans and arrangements,
divided between plans approved by our shareholders and plans or arrangements not
submitted to our shareholders for approval. The information includes the number
of shares covered by, and the weighted average exercise price of, outstanding
options and other rights and the number of shares remaining available for future
grants excluding the shares to be issued upon exercise of outstanding options,
warrants, and other rights.
NUMBER OF SECURITIES
NUMBER OF REMAINING AVAILABLE
SECURITIES TO BE FOR ISSUANCE
ISSUED UPON WEIGHTED-AVERAGE UNDER EQUITY
EXERCISE OF EXERCISE PRICE COMPENSATION
OUTSTANDING OF OUTSTANDING PLANS (EXCLUDING
OPTIONS, WARRANTS OPTIONS, WARRANTS SECURITIES REFLECTED
AND RIGHTS AND RIGHTS IN COLUMN (A))
---------- ---------- --------------
Equity compensation plans approved by
security holders (1) 8,921,047 $8.98 4,091,683
Equity compensation plans not approved
by security holders N/A N/A N/A
--------- ----- ---------
Total 8,921,047 $8.98 4,091,683
========= ===== =========
-------------
(1) Equity compensation plans approved by shareholders include the 1991 Stock
Option Plan, as amended, and the 2000 Stock Incentive Plan.
AGREEMENTS WITH KEY EXECUTIVES
Mr. Rossler entered into an employment agreement with the Company effective May
1, 1998, with a term originally ending April 30, 2001. Effective May 1, 2002,
the agreement was renewed. The agreement provided for an annual salary of
$376,911 with annual increases of 2.5%. On July 24, 2002, Mr. Rossler entered
into a new employment agreement with the Company with an effective date of
February 3, 2002. The new employment agreement provides for an annual salary of
$700,000 with annual increases of 2.5%. In connection with the execution of the
new employment agreement, Mr. Rossler received a signing bonus of $250,000.
Beginning for the fiscal year ending February 1, 2003, and in accordance with
the Company's Incentive Compensation Plan, Mr. Rossler will receive an annual
cash incentive bonus based upon a predetermined formula of the Company's
earnings before interest and taxes. Mr. Rossler was granted 110,000 shares of
restricted stock which vest on February 4, 2006, subject to the terms
established by the Board. Mr. Rossler was also granted options to purchase up to
840,000 shares of Common Stock at an exercise price of $4.50. These options vest
ratably over five years. Subject to the terms of the Company's Stock Incentive
Plan and any applicable performance stock option agreement, the Company granted
to Mr. Rossler performance options to purchase 1,590,000 shares of Common Stock
that will vest on (1) January 30, 2010 or, if earlier, (2) the later of (A)
January 31, 2004 if, (i) for each day of any 60-consecutive trading day period
that ends on or before January 31, 2004, the closing price of the Common Stock
is at least $12.00 per share or (ii) the Company has achieved at least 95
percent of the EBIT goal
-14-
the Board set for the Company for each fiscal year ending after the effective
date of Mr. Rossler's employment agreement and on and before January 31, 2004 or
(B) the last day of (i) any 60-consecutive trading day period that ends after
January 31, 2004 and before January 30, 2010 and on each day of which the
closing price of the Common Stock is at least $12.00 per share or (ii) the
Company has achieved at least 95 percent of the EBIT goal the Board set for the
Company for each of any three fiscal years ending after the effective date of
Mr. Rossler's employment agreement and on and before January 30, 2010.
Mr. Kozlowski entered into an employment agreement with the Company, effective
May 1, 2001, for a term ending April 30, 2004. The agreement provides for an
annual salary of $300,000 with minimum annual increases of 2.5%. The contract
also provides for guaranteed bonuses and incentive compensation. Guaranteed
bonuses are $225,000 for fiscal year 2001-2002; $187,500 for fiscal year
2002-2003; $37,500 for fiscal year 2003-2004. Incentive compensation is intended
to provide for an annual maximum 200% of base salary (reduced by any amount
payable under the guaranteed bonus) based upon Board approved, predetermined,
performance measures. After fiscal year 2003-2004, the incentive compensation
will solely determine the bonus amount. The Company loaned Mr. Kozlowski funds
to close on his Columbus housing. The loan bears interest at the prime rate of
National City Bank, Columbus. This loan was repaid with interest in April 2003.
The Company also loaned Mr. Kozlowski the initiation fee for a country club
membership. This loan is being forgiven at a rate of 10 percent for each 12-
consecutive month period Mr. Kozlowski remains employed after the date the loan
was made, and will be fully forgiven if Mr. Kozlowski dies or becomes disabled
before the end of the ten-year period. If Mr. Kozlowski leaves employment with
the Company for any reason other than death or disability before the ten-year
period has elapsed, he is responsible for the balance of the payment.
On February 14, 2003, Mr. Kozlowski entered into a new employment agreement with
the Company with an effective date of February 3, 2002. The new employment
agreement provides for an annual salary of $500,000 with annual increases of
2.5%. Beginning for the fiscal year ending February 1, 2003, and in accordance
with the Company's Incentive Compensation Plan, Mr. Kozlowski will receive an
annual cash incentive bonus based upon a predetermined formula of the Company's
earnings before interest and taxes. Mr. Kozlowski was granted 80,000 shares of
restricted stock which vest on February 4, 2006, subject to the terms
established by the Board. Mr. Kozlowski was also granted options to purchase up
to 590,000 shares of Common Stock at an exercise price of $4.50. These options
vest ratably over five years. Subject to the terms of the Company's Stock
Incentive Plan and any applicable performance stock option agreement, the
Company granted to Mr. Kozlowski performance options to purchase 1,130,000
shares of Common Stock that will vest on (1) January 30, 2010 or, if earlier,
(2) the later of (A) January 31, 2004 if, (i) for each day of any 60-consecutive
trading day period that ends on or before January 31, 2004, the closing price of
the Common Stock is at least $12.00 per share or (ii) the Company has achieved
at least 95 percent of the EBIT goal the Board set for the Company for each
fiscal year ending after the effective date of Mr. Kozlowski's employment
agreement and on and before January 31, 2004 or (B) the last day of (i) any
60-consecutive trading day period that ends after January 31, 2004 and before
January 30, 2010 and on each day of which the closing price of the Common Stock
is at least $12.00 per share or (ii) the Company has achieved at least 95
percent of the EBIT goal the Board set for the Company for each of any three
fiscal years ending after the effective date of Mr. Kozlowski's employment
agreement and on and before January 30, 2010. The new employment agreement also
provides for the continuation of the loan for the initiation fee for a country
club membership as provided in Mr. Kozlowski's previous employment agreement.
This loan is being forgiven at a rate of 10 percent for each 12-consecutive
month period Mr. Kozlowski remains employed after the date the loan was made,
and will be fully forgiven if Mr. Kozlowski dies or becomes disabled before the
end of the ten-year period. If Mr. Kozlowski leaves employment with the Company
for any reason other than death or disability before the ten-year period has
-15-
elapsed, he is responsible for the balance of the payment. The largest amount of
the loan outstanding in fiscal 2002 was $79,995 and the amount of the loan
outstanding was $63,996 at July 28, 2003.
Mr. McGrady entered into an employment agreement with the Company effective June
21, 2000, for a term ending June 21, 2003. The agreement provides for an annual
salary of $300,000 and a bonus of at least 40% of his base salary based upon
Board approved, predetermined, performance measures set annually. On July 24,
2002, Mr. McGrady was granted options to purchase up to 540,000 shares of Common
Stock at an exercise price of $4.50. These options vest ratably over five years.
Mr. Miller entered into an employment agreement with the Company effective
November 26, 2001, for a term ending November 26, 2004. The agreement provides
for an annual salary of $195,000 and a bonus of at least 40% of his base salary
based upon Board approved, predetermined, performance measures set annually. On
July 3, 2002, Mr. Miller was granted options to purchase up to 20,000 shares of
Common Stock at an exercise price of $2.35. These options vest ratably over five
years.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our Compensation Committee is comprised of Elizabeth M. Eveillard (Chairperson),
Henry L. Aaron and Harvey L. Sonnenberg. The Compensation Committee establishes,
reviews, and recommends an executive compensation package for our Chief
Executive Officer and our other executive officers. Additionally, our
Compensation Committee administers and grants options under our 1991 Stock
Option Plan, as amended, and our 2000 Incentive Stock Plan and administers our
Incentive Compensation Plan. None of the members of the Compensation Committee
are present or former officers of our Company or are themselves or any of their
affiliates, if any, parties to agreements with us.
The following Compensation Report and Performance Graph and the Audit
Committee Report previously provided shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any of the Company's filings under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended,
except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under
such Acts.
COMPENSATION REPORT OF THE BOARD OF DIRECTORS
General. The Board has delegated to the Compensation Committee the authority to
establish the annual compensation of the executive officers of the Company,
other than the Chairman's compensation. The key components of the Company's
executive officer compensation include both short-term compensation consisting
of an annual base salary and annual bonuses under the Company's Incentive
Compensation Plan and long-term equity based compensation consisting of grants
of restricted stock and stock option awards. The entire Board has made the only
grants of restricted stock by the Company. The Compensation Committee also
grants options under the Company's 2000 Stock Incentive Plan.
In fiscal 2002, the Company engaged Hewitt Associates to perform an analysis and
make a recommendation to the Board regarding the appropriate compensation to be
paid to the Company's key executives. Hewitt reviewed the Company's compensation
goals and the compensation packages awarded to executives of other comparable
companies. The analysis covered both short-term and long-term incentives and
attempted to tie compensation to Company performance.
Hewitt Associates made a presentation to the Company's Compensation Committee
and Stock Option Committee in July 2002. Based upon the analysis, the Company
entered into a new employment
-16-
agreement with Mr. Rossler, effective February 3, 2002. For a description of
this new employment agreement, see "Agreements with Key Executives" in this
proxy statement.
Chairman's Compensation. The Chairman's annual base salary was fixed by action
of the Board at the time he was appointed Chairman during fiscal 1992. The
Chairman does not receive an annual bonus. The Board did not consider or take
any action to change the Chairman's annual base salary during fiscal 2002.
Chief Executive Officer. The compensation of the Chief Executive Officer, Mr.
Rossler, is fixed pursuant to the terms of his employment agreement, which was
negotiated by the Chairman, with input from a number of the Directors.
Executive Officers' Compensation. The remaining executive officers' base
salaries were based on negotiated employment agreements. Bonuses for fiscal 2002
were paid pursuant to the Company's Incentive Compensation Plan, which combines
individual and company-wide objectives and performance goals to provide a clear
vehicle linking the interests of the executive officers with the financial
performance of the Company.
Stock Awards. The Company's 1991 Stock Option Plan was adopted at the time the
Company went public in 1991 and the Board adopted the Company's 2000 Stock
Incentive Plan on December 4, 2000. Both plans were adopted for the purpose of
providing long-term incentives to key employees and motivating key employees to
improve performance of the Company's stock. Stock options granted under the
Company's 1991 Stock Option Plan and the Company's 2000 Stock Incentive Plan are
determined and administered by the Compensation Committee, none of the members
of which are officers or employees of the Company. In determining the size of a
stock option award, the Compensation Committee considers the total number of
shares subject to previously granted stock options held by the individual and,
based principally on the recommendation of senior executive officers, the
anticipated value of an individual's contribution to the Company's future
performance. The options granted during fiscal year 2002 were granted to
employees as a long-term incentive designed to encourage them to remain with the
Company.
The Budget Reconciliation Act of 1993 amended the Internal Revenue Code of 1986,
as amended (the "Code") to add Section 162(m) which bars a deduction to any
publicly held corporation for compensation paid to a "covered employee" in
excess of $1,000,000 per year. Generally, the Board intends that compensation
paid to covered employees shall be deductible to the fullest extent permitted by
law. The Company's 1991 Stock Option Plan, the 2000 Stock Incentive Plan and
Incentive Compensation Plan are intended to qualify under Section 162(m).
The following members of the Board respectively submit this report:
Jay L. Schottenstein Elizabeth M. Eveillard (Chairman)#
Henry L. Aaron# Harvey L Sonnenberg#
Ari Deshe James L. Weisman
Jon P. Diamond
# Members of the Compensation Committee.
-17-
PERFORMANCE GRAPH
The following graph compares the performance of the Company with that of the
Standard & Poor's General Merchandise Stores Index and the Russell 2000 Index,
both of which are published indexes. This comparison includes the period
beginning August 1, 1998 through February 1, 2003.
The Standard & Poor's General Merchandise Stores Index is published weekly in
the Standard & Poor's Statistical Service and the index value preceding each
fiscal year end has been selected for purposes of this comparison. The Russell
2000 Index is a capitalization-weighted index of domestic equity securities
traded on the New York and American Stock Exchanges and the NASDAQ that measures
the performance of the 2,000 smallest companies in the Russell 3000 Index. The
Common Stock is traded on the NYSE.
The comparison of the cumulative total returns for each investment assumes that
$100 was invested on August 1, 1998 and that all dividends were reinvested.
Cumulative Total Return
-------------------------------------------------------------------------------
8/2/97 8/1/98 1/30/99 1/29/00 2/7/01 2/2/02 2/1/03
VALUE CITY DEPARTMENT STORES, INC. 100.00 219.85 141.98 195.42 87.33 52.89 23.82
RUSSELL 2000 100.00 102.31 104.77 123.36 127.92 123.32 96.34
S & P GENERAL MERCHANDISE STORES 100.00 146.06 187.06 226.19 237.12 249.91 193.23
RELATIONSHIP WITH SSC AND ITS AFFILIATES
Prior to the completion of its initial public offering on June 18, 1991, the
Company was operated as the Department Store Division of SSC. On that date, SSC
transferred substantially all of the net assets of the Division to the Company
in exchange for 22,500,000 shares of our Common Stock.. At April 2, 2003, SSC
beneficially owned approximately 53% of the Company's outstanding Common Stock.
So long as SSC owns more than 50% of the Company's voting shares, it will
continue to have the power acting alone to approve any action requiring a vote
of the majority of the voting shares of the Company and to elect all of the
Company's directors. For information with respect to the beneficial ownership of
the voting stock of SSC by nominees for election to the Board of the Company and
beneficial ownership of Common
-18-
Stock by such persons and officers of the Company, see "Security Ownership of
Certain Beneficial Owners and Management".
The Company has also adopted a policy that requires its audit committee to
review and approve all affiliated party transactions.
REAL ESTATE LEASES AND SUBLEASES
The Company leases stores and warehouses under various arrangements with related
parties. Such leases expire prior to, or have renewal options, through 2040.
Generally, the Company is required to pay real estate taxes, maintenance,
insurance and contingent rentals based on sales in excess of specified levels.
The Company has several leasing agreements with SSC and affiliates. As of
February 1, 2003, under a Master Lease Agreement, as amended, the Company leases
five store locations owned by SSC. Additionally, the Company leases or subleases
from SSC or affiliates of SSC, 27 store locations, 6 warehouse facilities and a
parcel of land. The minimum rent for these leaseholds is set forth below with
additional contingent rents based on aggregate sales in excess of specified
sales trends for the store locations. Leases and subleases with related parties
are for initial periods generally ranging from five to twenty years, provide for
renewal options and require the Company to pay real estate taxes, maintenance
and insurance. As of July 5, 2003, the number of stores locations the Company
leases or subleases from SSC or affiliates of SSC is 34 including store
locations under the Master Lease Agreement.
Each lease entered into with SSC or its affiliates is on terms at least as
favorable to the Company as could be obtained in an arm's-length transaction
with an unaffiliated third party, and in certain instances, the Company is given
preferential terms. Future minimum lease payments required under the
aforementioned leases, exclusive of real estate taxes, insurance and maintenance
costs, at February 1, 2003 are as follows (in thousands):
Fiscal Year Minimum Payments
----------- ----------------
2003 $ 20,522
2004 20,597
2005 20,750
2006 20,333
2007 19,470
Future Years 110,075
-------
Total $211,747
=======
The composition of related party lease expense (in thousands):
Year Ended
--------------------------------
2/1/03 2/2/02 2/3/01
------ ------ ------
Minimum rentals:
Related parties $19,539 $15,363 $10,553
Contingent rentals:
Related parties 208 2,128 2,386
------- ------- -------
Total $19,747 $17,491 $12,939
======= ======= =======
-19-
SSC operates a chain of furniture stores, five of which operate in separate
space subleased from the Company at five of its store locations. Three of these
furniture store subleases (the "Furniture Subleases") are for a term concurrent
with the respective lease between the Company and a third party landlord. These
Furniture Subleases provide for the payment by SSC of base rent and other
charges in amounts at least equal to its pro rata share based on square footage
and its pro rata share of any percentage rent based on its gross sales. Two
additional furniture store subleases are for periods shorter than the Company's
lease. For fiscal 2002, SSC paid the Company an aggregate of $1.3 million
pursuant to these subleases.
LICENSE AGREEMENTS WITH AFFILIATES
In July 1997, the Company entered into agreements to form a 50/50 joint venture
with Mazel Stores, Inc. to create VCM, Ltd. to operate the health and beauty
care and toys and sporting goods departments in the Value City stores as
licensed departments. Beginning in fiscal 2000 VCM also operated the food
department. Pursuant to operating agreements between VCM and Value City, VCM
paid annual license fees to the Company based on 5% and 11% of net sales and
reimbursed us 2% and 4% of its sales for advertising and 2.9% and 1% of its
sales for administrative expenses for the health and beauty care and the toys
and sporting goods departments, respectively. The aggregate license fees paid by
VCM to the Company for fiscal 2001 were $9.7 million. Effective with the close
of business on February 2, 2002, the Company acquired Mazel's 50% interest in
VCM for $8.4 million and we now own 100% of VCM.
MERCHANDISE TRANSACTIONS WITH AFFILIATES
From time to time, the Company purchases merchandise from affiliates of SSC.
Some of such affiliates manufacture, import and wholesale apparel as their
principal business. The members of the Company's merchandising staff use these
sources and make their purchasing decisions in the same manner as with
unaffiliated sources. Any merchandise purchased from such sources is on terms at
least as favorable to the Company as could be obtained in an arm's-length
transaction with an unaffiliated third party, and in certain instances, the
Company is given terms preferential to those available to unaffiliated
customers. Total purchases by the Company from SSC and affiliates for fiscal
2002 were $13.2 million, representing 0.9% of our total purchases during the
fiscal year, while in fiscal 2001 purchases were $16.4 million, representing
1.3% of our total purchases during the fiscal year.
In May 2001, SSC and Value City entered into a deferred purchase arrangement for
the sale of Bugle Boy products that SSC purchased for approximately $11.9
million. As part of the agreement, Value City agreed to purchase at SSC's cost
plus a handling fee any unsold Bugle Boy merchandise owned by SSC on February 2,
2002. On February 6, 2002, the final payment was made to SSC.
In October 2001, SSC and Filene's Basement entered into a deferred purchase
arrangement for the sale of products that SSC purchased for approximately $2.9
million. As part of the agreement, Filene's Basement agreed to purchase goods at
SSC's cost plus a handling fee. On May 13, 2002, the final payment was made to
SSC.
SERVICES AGREEMENTS
The Company shares with SSC and its affiliates certain incidental support
personnel and services for the purpose of achieving economies of scale and cost
savings. These shared services include certain architectural, legal, advertising
and administrative services. The Company has entered into a Corporate Services
Agreement with SSC that sets forth the terms for payment of the costs of these
shared services. The Company believes that it is able to obtain such services at
a cost, which is equal to or below the cost of providing such services
internally or obtaining such services from unaffiliated third parties. For
fiscal
-20-
2002, the Company paid SSC or its affiliates $1.7 million for such services. The
Corporate Services Agreement also provides for participation by us in the
self-insurance program maintained by SSC. Under that program, the Company is
self-insured for purposes of personal injury and property damage, motor vehicle
and Ohio workers' compensation claims up to various specified amounts, and for
casualty losses up to $100,000. Claims and losses in excess of the specified
amounts are covered by stop-loss or excess liability policies maintained by SSC,
which include us as a named insured. SSC maintains reserves and pays claims for
self-insured amounts under the program and will continue to do so with respect
to the Company's participation in the program. SSC charges its affiliates,
divisions and the Company premiums based, among other factors, on loss
experience and its actual payroll and related costs for administering the
program. For fiscal 2002, the Company paid SSC $11.9 million for participation
in the program.
DEBT AGREEMENTS
On June 11, 2002, the Company entered into two separate credit facilities
equally held by Cerberus Partners, L.P. and SSC, and amended and restated its
$75.0 million senior convertible loan, initially entered into on March 15, 2000,
which is held equally by Cerberus Partners, L.P. and SSC.
$100 Million Term Loans
The Term Loans are comprised of a $50.0 million Term Loan B and a $50.0 million
Term Loan C. All obligations under the Term Loans are senior debt, ranking pari
passu with the Revolving Credit Facility and the Convertible Loan. The Company
and its principal subsidiaries are obligated on the Term Loans. The maturity
date is June 11, 2005.
The Term Loans stated rate of interest per annum during the initial two years of
the agreement is 14% if paid in cash and 15% if we elect a paid-in-kind ("PIK")
option. During the first two years of the Term Loans, the Company may elect to
pay all interest in PIK. During the final year of the Term Loans, the stated
rate of interest is 15.0% if paid in cash or 15.5% by PIK. The PIK option is
limited to 50% of the interest due.
The Company issued to the Term Loan C Lenders 2,954,792 Warrants with an initial
exercise price of $4.50 per share. The number of shares issuable upon the
exercise of the Warrants and the per share exercise price are subject to
adjustment upon the occurrence of specified events. The Warrants are exercisable
at any time prior to June 11, 2012. The Company granted the Term Loan C Lenders
registration rights with respect to the shares issuable upon exercise of the
Warrants.
$75 Million Senior Convertible Loan
The Company amended and restated its $75.0 million Convertible Loan. As amended,
borrowings under the Convertible Loan bear interest at 10% per annum. At the
Company's option, interest may be PIK for the first two years, and thereafter,
at the Company's option, up to 50% of the interest due may be PIK until
maturity. The Convertible Loan is guaranteed by all of the Company's principal
subsidiaries and is secured by a lien on assets junior to liens granted in favor
of the lenders on the Revolving Credit Facility and Term Loans. The Convertible
Loan is not subject to prepayment until June 11, 2007. The agent has the right
to designate two observers to the Company's Board for so long as the agent is
the beneficial owner of at least 50% of the advances initially made by it and
has the right to designate two individuals to our Board for so long as the agent
is the beneficial owner of at least 50% of the conversion shares issued upon
conversion of the advances initially made by it.
-21-
The Convertible Loan is convertible at the option of the holders into shares of
our Common Stock at an initial conversion price of $4.50. The maturity date is
June 10, 2009.
The Company recorded $9.5 million in interest expense and $3.9 million fees
related to its credit agreements in fiscal 2002 of which $15.5 million was paid.
Included in payments during 2002 was $3.7 million of PIK interest. The Company
also repaid an SSC loan in the amount of $20.0 million in conjunction with the
debt financing.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's Annual Report to Shareholders for the fiscal year ended February
1, 2003, contained financial statements for such year and the signed opinion of
Deloitte & Touche LLP, independent public accountants. It is anticipated that
representatives of Deloitte & Touche LLP will be present at the Annual Meeting
to respond to appropriate questions and to make a statement if such
representatives so desire. The Annual Report is not to be regarded as proxy
soliciting material and management does not intend to ask, suggest or solicit
any action from the shareholders with respect to such report.
COST OF SOLICITATION OF PROXIES
The Company will bear the cost of the solicitation of proxies, including the
charges and expenses of brokerage firms and others for forwarding solicitation
material to beneficial owners of stock. Representatives of the Company may
solicit proxies by mail, telegram, telephone, or personal interview.
SHAREHOLDER PROPOSALS
Each year the Board submits its nominations for election of directors at the
Annual Meeting of Shareholders. Other proposals may be submitted by the Board of
Directors or the shareholders for inclusion in the proxy statement for action at
the Annual Meeting. Any proposal submitted by a shareholder for inclusion in the
proxy statement for the Annual Meeting of Shareholders to be held in 2004 must
be received by the Company (addressed to the attention of the Secretary) on or
before April 10, 2004. To be submitted at the meeting, any such proposal must be
a proper subject for shareholder action under the laws of the State of Ohio, and
must otherwise conform to applicable requirements of the Proxy Rules of the SEC.
Any shareholder proposal submitted outside the processes of Rule 14a-8 under the
Securities Exchange Act of 1934 for presentation at our 2004 annual meeting will
be considered untimely for purposes of Rule 14a-4 and 14a-5, if notice thereof
is received by the Company after June 10, 2004. To be submitted at the meeting,
any such proposal must be a proper subject for shareholder action under the laws
of the State of Ohio.
OTHER MATTERS
The only business which management intends to present at the meeting consists of
the matters set forth in this statement. Management knows of no other matters to
be brought before the meeting by any other person or group. If any other matter
should properly come before the meeting, the proxy enclosed confers upon the
persons designated herein authority to vote thereon in their discretion.
THE COMPANY'S 2002 ANNUAL REPORT ON FORM 10-K, INCLUDING FINANCIAL STATEMENTS,
WAS FURNISHED TO SHAREHOLDERS PRIOR TO THE MAILING OF THIS PROXY STATEMENT.
EXTRA COPIES OF THE ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, ARE AVAILABLE UPON REQUEST, DIRECTED TO JAMES A. MCGRADY,
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER, TREASURER AND SECRETARY OF
THE COMPANY, AT 3241 WESTERVILLE ROAD, COLUMBUS, OHIO 43224.
-22-
APPENDIX A
VALUE CITY DEPARTMENT STORES, INC.
AMENDED AND RESTATED
AUDIT COMMITTEE CHARTER
AS ADOPTED JULY 7, 2003
I. AUDIT COMMITTEE PURPOSE
The purpose of the Audit Committee of the Board of Directors of Value City
Department Stores, Inc. (the "Company") is to assist the Board of Directors in
fulfilling its oversight responsibilities of:
- the integrity of the Company's financial statements;
- the Company's compliance with legal and regulatory requirements;
- the independent auditor's qualifications and independence; and
- the performance of the Company's internal audit function and
independent auditor.
The Audit Committee shall prepare the report required by the rules of the
Securities and Exchange Commission (the "Commission") to be included in the
Company's annual proxy statement. The Audit Committee shall also review and
approve all related party transactions.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
The Audit Committee shall be comprised of three or more directors as
determined by the Board. Audit Committee members shall meet the independence,
experience and other requirements of the New York Stock Exchange, Section
10A(m)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations of the Commission. All members of the Audit
Committee shall be financially literate and at least one member of the Audit
Committee shall be a financial expert as defined by the Commission. Audit
committee members shall not simultaneously serve on the audit committees of more
than three other public companies.
Audit Committee members shall be appointed by the Board on the
recommendation of the Nominating and Corporate Governance Committee and shall
serve until their successors are appointed and qualified. Audit Committee
members may be replaced by the Board. If an Audit Committee Chair is not
designated or present, the members of the Audit Committee may designate a Chair
by a majority vote of the Audit Committee membership.
The Audit Committee shall meet at least quarterly, or more frequently as
circumstances dictate. The Audit Committee shall meet periodically with
management, the internal auditors, and the independent auditor in separate
executive sessions. The Audit Committee Chair shall prepare and/or approve an
agenda in advance of each meeting. The Audit Committee may request any officer
or employee of the Company, its outside counsel or independent auditor to attend
a meeting of the Committee or to meet with any member of, or consultants to, the
Committee.
A-1
III. AUDIT COMMITTEE AUTHORITY, RESPONSIBILITIES AND DUTIES
The Audit Committee shall have the sole responsibility to appoint and
terminate the Company's independent auditor and any other registered public
accounting firm employed by the Company. The Audit Committee shall be directly
responsible for the compensation and oversight of the work of the independent
auditor and any other registered public accounting firm employed by the Company
(including resolution of disagreements between management and the independent
auditor regarding financial reporting) for the purpose of preparing or issuing
an audit report or related work. The independent auditor and any other such
registered public accounting firm employed by the Company shall report directly
to the Audit Committee.
The Audit Committee shall pre-approve all auditing services and permitted
non-audit services (including the fees and terms thereof) to be performed for
the Company by its independent auditor or other registered public accounting
firm, subject to the de minimis exceptions for non-audit services described in
Section 10A(i)(1)(B) of the Exchange Act that are approved by the Audit
Committee prior to the completion of the audit.
The Audit Committee shall establish guidelines for and have the sole
responsibility to review and approve all related party transactions.
The Audit Committee may form and delegate authority to subcommittees
consisting of one or more members of the Audit Committee, when appropriate,
including the authority to grant pre-approvals of audit and permitted non-audit
services, provided that decisions of such subcommittee to grant pre-approvals
shall be presented to the full Audit Committee at its next scheduled meeting.
The Audit Committee shall have the authority, to the extent it deems
necessary or appropriate to carry out its duties, to retain independent counsel
or other advisors. The Company shall provide for appropriate funding, as
determined by the Audit Committee, for payment of compensation to the
independent auditor for the purpose of rendering or issuing an audit report and
to any advisors employed by the Audit Committee.
The Audit Committee shall make regular reports to the Board. The Audit
Committee shall review and reassess the adequacy of this Charter annually and
recommend any proposed changes to the Board for approval. The Audit Committee
shall have the Charter published at least every three years in accordance with
the Commission's regulations. The Audit Committee shall annually review the
Audit Committee's own performance.
Consistent with the duties and obligations above, the Audit Committee,
shall also perform the following functions:
Financial Statement and Disclosure Matters
1. Review and discuss the Company's annual audited financial statements
with management and the independent auditor, including disclosures
made in Management's Discussion and Analysis of Financial Condition
and Results of Operations, and recommend to the Board whether the
audited financial statements should be included in the Company's
Annual Report on Form 10-K.
A-2
2. Review and discuss with management and the independent auditor the
Company's quarterly financial statements, including disclosures made
in Management's Discussion and Analysis of Financial Condition and
Results of Operations, prior to the filing of its Form 10-Q,
including the results of the independent auditor's review of the
quarterly financial statements.
3. Discuss with management and the independent auditor significant
financial reporting issues and judgments made in connection with the
preparation of the Company's financial statements, including any
significant changes in the Company's selection or application of
accounting principles, any major issues as to the adequacy of the
Company's internal controls over financial reporting, and any
special steps adopted in light of material control deficiencies or
weaknesses.
4. Review and discuss quarterly reports from the independent auditors
on:
(a) all critical accounting policies and practices to be used;
(b) all alternative treatments of financial information within
generally accepted accounting principles that have been
discussed with management officials of the issuer,
ramifications of the use of such alternative disclosures and
treatments, and the treatment preferred by the registered
public accounting firm; and
(c) other material written communications between the independent
auditor and management, such as any management letter or
schedule of unadjusted differences.
5. Discuss with management the Company's financial and accounting press
releases (on a pre-issuance basis), including the use of "pro forma"
or "adjusted" non-GAAP information, as well as financial information
and earnings guidance provided to analysts and rating agencies. Such
discussion may be done on an overall basis (consisting of discussing
the types of information to be disclosed and the types of
presentations to be made).
6. Discuss with management and the independent auditor the effect of
regulatory and accounting initiatives, as well as off-balance sheet
structures on the Company's financial statements.
7. Discuss with management the Company's major financial risk exposures
and the steps management has taken to monitor and control such
exposures, including the Company's risk assessment and risk
management policies and guidelines.
8. Discuss with the independent auditor the matters required to be
discussed by Statement on Accounting Standards No. 61 relating to
the conduct of the audit, including any problems or difficulties
encountered in the course of the audit work, any restrictions on the
scope of activities or access to requested information, and any
significant disagreements with management.
9. Review disclosures made to the Audit Committee by the Company's
Chief Executive Officer and Chief Financial Officer in connection
with the certifications made by such officers for the Form 10-K and
Form 10-Q concerning (a) any significant deficiencies or
A-3
material weaknesses in the design or operation of the Company's
internal control over financial reporting, which are reasonably
likely to adversely affect the Company's ability to record, process,
summarize, and report financial information, and (b) any fraud
involving management or other employees who have a significant role
in the Company's internal control.
Oversight of the Company's Relationship with the Independent Auditor
10. Obtain and review a report from the independent auditor, at least
annually, describing:
(a) the independent auditor's internal quality-control procedures;
(b) any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or by any
inquiry or investigation by governmental or professional
authorities within the preceding five years, respecting one or
more independent audits carried out by the firm, and any steps
taken to deal with any such issues; and
(c) all relationships between the independent auditor and the
Company.
After review, the Audit Committee shall evaluate the qualifications,
performance, and independence of the independent auditor, and shall
consider whether (1) the auditor's quality controls are adequate,
and (2) the provision of permitted non-audit services is compatible
with maintaining the auditor's independence, taking into account the
opinions of management and internal auditors. This evaluation shall
include a review and assessment of the lead or coordinating partner
of the independent auditor, and should ensure the rotation of such
lead or coordinating partner of the independent auditor as required
by law. The Audit Committee should further consider whether, in
order to assure continuing auditor independence, there should be
regular rotation of the audit firm itself. The Audit Committee shall
present its conclusions with respect to the independent auditor to
the Board.
11. Approve the Company's hiring of employees or former employees of the
independent auditor who participated in any capacity in the audit of
the Company.
12. Meet or discuss with the independent auditor the planning and
staffing of the audit.
Oversight of the Company's Internal Audit Function
13. Review the appointment, replacement, and performance of the senior
internal auditing executive or the entity performing the internal
audit function.
14. Review the significant reports to management prepared by the
internal auditing department (or the entity performing the internal
audit function) and management's responses.
15. Discuss with the independent auditor and management the internal
audit department (or the entity performing the internal audit
function) responsibilities, budget, and staffing and any recommended
changes in the planned scope of the internal audit.
A-4
Compliance Oversight Responsibilities
16. Obtain from the independent auditor assurance that Section 10A(b) of
the Exchange Act has not been implicated.
17. Obtain reports from management, the Company's senior internal
auditing executive (or the entity performing the internal audit
function), and the internal auditor that the Company and its
subsidiary/foreign affiliated entities are in conformity with
applicable legal requirements and the Company's Code of Business
Conduct. Review reports and disclosures of insider and related party
transactions. Advise the Board with respect to the Company's
policies and procedures regarding compliance with applicable laws
and regulations and with the Company's Code of Business Conduct.
18. Establish and review procedures for the receipt, retention, and
treatment of complaints received by the Company regarding
accounting, internal accounting controls, or auditing matters, and
the confidential, anonymous submission by employees of concerns
regarding questionable accounting , internal control, or auditing
matters to the Audit Committee.
19. Discuss with management and the independent auditor any
correspondence with regulators or governmental agencies and any
published reports which raise material issues regarding the
Company's financial statements or accounting policies.
Other Audit Committee Responsibilities
20. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
21. Perform any other activities consistent with this Charter, the
Company's code of regulations, and governing law, as the Committee
or the Board deems necessary or appropriate.
IV. LIMITATION OF AUDIT COMMITTEE'S ROLE
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements and disclosures
are complete and accurate and are in accordance with generally accepted
accounting principles and applicable rules and regulations. These are the
responsibilities of management and the independent auditor.
A-5
DETACH CARD
--------------------------------------------------------------------------------
VALUE CITY DEPARTMENT STORES, INC.
3241 Westerville Road, Columbus, Ohio 43224
------------------------------------------------------------------
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- SEPTEMBER 10, 2003
The undersigned shareholder of Value City Department Stores, Inc. (the
"Company") hereby appoints John C. Rossler, James A. McGrady and Julia A. Davis,
or any one of them, as attorneys and proxies with full power of substitution to
each, to vote all shares of common stock of the Company which the undersigned is
entitled to vote at the Annual Meeting of Shareholders of the Company to be held
at the Hilton Columbus, 3900 Chagrin Drive, Columbus, Ohio, on Wednesday,
September 10, 2003, at 10:00 a.m. local time, and at any adjournment or
adjournments thereof, with all of the powers such undersigned shareholder would
have if personally present, for the following purposes:
1. Election of the following Directors:
Henry L. Aaron
Ari Deshe
Jon P. Diamond
Elizabeth M. Eveillard
Jay L. Schottenstein
Harvey L. Sonnenberg
James L. Weisman
[ ] FOR [ ] WITHHOLD AUTHORITY FOR EACH NOMINEE
(Instruction: To Withhold Authority For A Specific Nominee, Write That Nominee's
Name Here: .)
2. To transact any other business which may properly come before the annual
meeting or any adjournment thereof.
(Continued and to be signed on the other side)
DETACH CARD
--------------------------------------------------------------------------------
(Continued from other side)
THIS PROXY, WHEN EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders, dated August 8, 2003, and the proxy statement of the Company
furnished therewith. Any proxy heretofore given to vote said shares is hereby
revoked.
PLEASE SIGN AND DATE THIS PROXY BELOW AND RETURN IN THE ENCLOSED ENVELOPE.
Dated: -------------------, 2003
---------------------------------
Signature
---------------------------------
Signature
Signature(s) shall agree with the
name(s) printed on this Proxy. If
shares are registered in two
names, both stockholders should
sign this Proxy. If signing as
attorney, executor,
administrator, trustee or
guardian, please give your full
title as such.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS