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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
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 sec. 240.14a-11(c) or sec. 240.14a-12
JO-ANN STORES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
JO-ANN STORES, INC.
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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2
[JO-ANN STORES LOGO]
5555 Darrow Road
Hudson, Ohio 44236
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 7, 2001
To our Shareholders:
The Annual Meeting of Shareholders of Jo-Ann Stores, Inc. will be held at
the Hilton Garden Inn located at 8971 Wilcox Drive in Twinsburg, Ohio
(directions enclosed), on Thursday, June 7, 2001 at 9:00 a.m., eastern standard
time, for the following purposes:
1. To elect two Directors to the class whose three-year term of office will
expire in 2004.
2. To transact such other business as may properly come before the meeting.
All shareholders are cordially invited to attend the meeting, although only
those holders of Class A common shares of record at the close of business on
April 13, 2001 will be entitled to vote at the meeting.
IF YOU ARE A HOLDER OF CLASS A COMMON SHARES, YOU WILL FIND ENCLOSED A
PROXY CARD. YOUR VOTE IS IMPORTANT. PLEASE FOLLOW THE INSTRUCTIONS ON THE
ENCLOSED PROXY CARD TO VOTE YOUR PROXY EITHER BY MAIL OR TELEPHONE OR THROUGH
THE INTERNET, WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING. IF YOU
ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR CLASS A COMMON
SHARES IN PERSON.
Whether or not you plan to attend, you can be sure your shares are
represented at the meeting by promptly voting and submitting your proxy.
The Proxy Statement accompanies this Notice.
BETTY ROSSKAMM, Secretary
May 7, 2001
By Order of the
Board of Directors
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PROXY STATEMENT
TABLE OF CONTENTS
PAGE
----
ABOUT THE MEETING........................................... 1
When is the Proxy Statement being mailed?................. 1
What is the purpose of the Annual Meeting?................ 1
Who may attend the Annual Meeting?........................ 1
Who is entitled to vote?.................................. 1
What constitutes a quorum?................................ 1
What am I voting on?...................................... 1
Is electronic access available to vote or view future
proxy materials?....................................... 2
How do I vote?............................................ 2
Can I change my vote or revoke my proxy after I return my
proxy card?............................................ 2
How do I vote my 401(k) shares?........................... 2
What does it mean if I receive more than one proxy
card?.................................................. 3
Who will count the vote?.................................. 3
What is the Board's recommendation?....................... 3
What is the required vote for approval of the proposal?... 3
Are there other matters to be acted upon at the Annual
Meeting?............................................... 3
PRINCIPAL SHAREHOLDERS...................................... 4
ELECTION OF DIRECTORS....................................... 7
Nominees to and Current Members of the Board of
Directors.............................................. 7
Board of Directors, Its Committees, Meetings and
Functions.............................................. 8
Compensation of Directors................................. 9
EXECUTIVE COMPENSATION...................................... 10
Summary Compensation Table................................ 10
Option Grants in Fiscal Year 2001......................... 11
Aggregate Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values................................. 12
Change of Control and Employment Agreements............... 12
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION.............................................. 13
REPORT OF THE AUDIT COMMITTEE............................... 16
PRINCIPAL ACCOUNTING FIRM FEES.............................. 17
STOCK PERFORMANCE GRAPH..................................... 17
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..... 18
INDEPENDENT AUDITORS........................................ 18
PROXY SOLICITATION COSTS.................................... 18
SHAREHOLDERS' PROPOSALS..................................... 18
ANNUAL REPORT............................................... 18
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[JO-ANN STORES LOGO]
5555 Darrow Road
Hudson, Ohio 44236
PROXY STATEMENT
This Proxy Statement contains information related to the Annual Meeting of
Shareholders of Jo-Ann Stores, Inc. to be held on Thursday, June 7, 2001
beginning at 9:00 a.m., eastern standard time, at the Hilton Garden Inn in
Twinsburg, Ohio, and at any postponements or adjournments of that meeting.
ABOUT THE MEETING
WHEN IS THE PROXY STATEMENT BEING MAILED?
This Proxy Statement is first being mailed on or about May 7, 2001 to our
shareholders by our Board of Directors to solicit proxies for use at the Annual
Meeting of Shareholders.
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At our Annual Meeting, shareholders will act upon the election of
directors. In addition, our management will report on our performance during
fiscal 2001 and respond to questions from shareholders.
WHO MAY ATTEND THE ANNUAL MEETING?
All shareholders, both Class A and Class B, as of the close of business on
April 13, 2001, the record date, may attend the Annual Meeting.
WHO IS ENTITLED TO VOTE?
Class A shareholders as of the record date are entitled to vote at the
Annual Meeting. Each outstanding Class A common share entitles its holder to
cast one vote on each matter to be voted upon.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the Class A common shares outstanding on the record date will
constitute a quorum, permitting the meeting to conduct its business. As of the
record date, 9,512,449 Class A common shares were outstanding. Proxies received
but marked as abstentions and broker non-votes will be included in the
calculation of the number of shares considered to be present at the meeting.
Consequently, an abstention or broker non-vote has the same effect as a vote
against a director nominee as each abstention or broker non-vote would be one
less vote in favor of a director nominee.
WHAT AM I VOTING ON?
You will be voting on:
- electing two Directors to the class whose three-year term of office will
expire in 2004; and
- transacting such other business as may properly come before the meeting.
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IS ELECTRONIC ACCESS AVAILABLE TO VOTE OR VIEW FUTURE PROXY MATERIALS?
Two opportunities for electronic access are offered to our shareholders.
- You may vote your Class A common shares over the Internet, in addition to
the traditional mail-in and telephone methods. Internet voting gives you
the convenience of voting 24 hours a day, seven days a week. Simply
follow the instructions on your proxy card.
- We also offer you the opportunity during the voting process to consent to
view future proxy statements and annual reports on the Internet, rather
than receive paper copies in the mail. You will have other opportunities
throughout the year to give your consent. This service helps Jo-Ann
Stores reduce printing and postage costs and is more environmentally
friendly. Additional information is provided below.
HOW DO I VOTE?
You may vote by proxy or in person at the meeting. To vote by proxy, you
may use one of the following methods:
Vote through the Internet:
You can vote your shares through the Internet. The website for Internet
voting is shown on your proxy card. Internet voting is available 24 hours a day,
seven days a week. You will be given the opportunity to confirm that your
instructions have been properly recorded, and you can consent to view future
proxy statements and annual reports on the Internet instead of receiving them in
the mail. If you vote on the Internet, you do NOT need to return your proxy
card.
Vote by Telephone:
You can vote your shares by telephone by calling the toll-free telephone
number shown on your proxy card. Telephone voting is available 24 hours a day,
seven days a week. Easy-to-follow voice prompts allow you to vote your shares
and confirm that your instructions have been properly recorded. Our telephone
voting procedures are designed to authenticate the shareholder by using
individual control numbers. If you vote by telephone, you do NOT need to return
your proxy card.
The deadline for voting by telephone or through the Internet is 12:00 noon
eastern standard time on June 6, 2001.
Vote by Mail:
If you choose to vote by mail, simply mark your proxy card, date and sign
it, and return it in the postage-paid envelope provided.
CAN I CHANGE MY VOTE OR REVOKE MY PROXY AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy, you may change your vote or
revoke your proxy at any time before the proxy is exercised by filing a duly
executed proxy bearing a later date, or a notice of revocation, with the
Corporate Secretary. The powers of the proxy holders will be suspended if you
attend the meeting in person and so request, although attendance at the meeting
will not by itself revoke a previously granted proxy.
HOW DO I VOTE MY 401(k) SHARES?
If you participate in the Jo-Ann Stores, Inc. Savings Plan 401(k), the
number of Class A common shares that you may vote is equivalent to the interest
in Class A common shares credited to your account as of the record date. You may
vote by instructing Institutional Trust Company (a division of Invesco
Retirement and Benefit Services), the trustee of the plan, pursuant to the proxy
card being mailed with this proxy statement to plan participants. The trustee
will vote your shares in accordance with your duly executed instructions. If you
do not send instructions on how to vote your shares, the share equivalents
credited to your account will be voted by the trustee in the same proportion
that the trustee votes share equivalents for which it did receive instructions.
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WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
If you receive more than one proxy card, it is because you hold shares in
more than one account. You will need to vote all proxy cards to insure that all
your shares are counted.
WHO WILL COUNT THE VOTE?
A representative of Automatic Data Processing Incorporated will tabulate
the votes. A representative of our company will be acting as inspector of
election.
WHAT IS THE BOARD'S RECOMMENDATION?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the recommendation
of the Board of Directors. The Board's recommendation is set forth in the
description of the proposal for the "Election of Directors." In summary, the
Board recommends a vote for the nominated slate of directors (see page 7).
WHAT IS THE REQUIRED VOTE FOR APPROVAL OF THE PROPOSAL?
The affirmative vote of a plurality of the votes cast at the meeting is
required for the election of directors. A properly executed proxy card marked
"WITHHOLD AUTHORITY" with respect to the election of one or more directors will
not be voted with respect to the director or directors indicated, although it
will be counted for purposes of determining whether there is a quorum.
Under the Ohio General Corporation Law, all of the Class A common shares
may be voted cumulatively in the election of Directors if any shareholder gives
written notice to the President, a Vice President or the Secretary of the
company, not less than 48 hours before the time set for the Annual Meeting, and
an announcement of the notice is made at the beginning of the Annual Meeting by
the Chairman or the Secretary or by or on behalf of the shareholder giving such
notice. Cumulative voting permits a shareholder to (1) cast a number of votes
equal to the number of Class A common shares owned by the shareholder multiplied
by the number of Directors to be elected and (2) cast those votes for only one
nominee or distribute them among the nominees. In the event that voting at the
election is cumulative, the persons named in the enclosed proxy will vote the
Class A common shares represented by valid proxies on a cumulative basis for the
election of the nominees listed below, allocating the votes of such Class A
common shares in accordance with their judgment. Shareholders of the company
will not be entitled to dissenters' rights with respect to any matter to be
considered at the Annual Meeting.
ARE THERE OTHER MATTERS TO BE ACTED UPON AT THE ANNUAL MEETING?
We do not know of any other matters to be presented or acted upon at the
Annual Meeting. If any other matter is presented at the Annual Meeting on which
a vote may properly be taken, the shares represented by proxies will be voted in
accordance with the judgment of the proxy holders.
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PRINCIPAL SHAREHOLDERS
The following table sets forth, as of April 13, 2001 (except as otherwise
noted), the amount of our Class A common shares beneficially owned by each
person or group known to us to be beneficial owners of more than 5% of our Class
A common shares and the amount of our Class A and Class B common shares
beneficially owned by (1) each of our directors and nominees for directors, (2)
each of the executive officers named in the Summary Compensation Table herein
not listed as a director, and (3) all our executive officers and directors as a
group. The information provided in connection with this table has been obtained
from our records and a review of statements filed with the Securities and
Exchange Commission. Unless otherwise indicated, each of the persons listed in
the following table has sole voting and investment power with respect to the
common shares set forth opposite his or her name. As of April 13, 2001,
9,512,449 Class A common shares were outstanding and 8,806,211 Class B common
shares were outstanding. Class A common shares each have one vote per share and
Class B common shares do not have voting rights.
CLASS A COMMON SHARES CLASS B COMMON SHARES
-------------------------------- --------------------------------
NUMBER OF PERCENT OF NUMBER OF PERCENT OF
NAME OF COMMON SHARES CLASS IF 1% COMMON SHARES CLASS IF 1%
BENEFICIAL OWNER BENEFICIALLY OWNED OR MORE BENEFICIALLY OWNED OR MORE
---------------- ------------------ ----------- ------------------ -----------
5% OWNERS
First Pacific Advisors, Inc.(1)........ 895,700 9.42% n/a n/a
11400 West Olympic Boulevard Suite
1200
Los Angeles, CA 90064
Banc One Corporation(1)................ 647,577 6.81% n/a n/a
1111 Polaris Parkway
PO Box 710185
Columbus, OH 43271-0185
The Capital Group Companies,
Inc.(1)(2)........................... 525,000 5.52% n/a n/a
333 South Hope Street
Los Angeles, CA 90071
DIRECTORS AND NOMINEES FOR DIRECTORS
Alan Rosskamm(3)(4).................... 1,395,997 14.54% 770,267 8.51%
5555 Darrow Road
Hudson, OH 44236
Betty Rosskamm(3)(5)(6)................ 878,817 9.24% 597,372 6.78%
5555 Darrow Road
Hudson, OH 44236
Mr. Justin and Mrs. Alma............... 680,835 7.16% 459,918 5.22%
Zimmerman(3)(6)(7)
5555 Darrow Road
Hudson, OH 44236
Scott Cowen(8)......................... 35,300 * 16,300 *
Frank Newman(9)........................ 32,000 * 19,000 *
Ira Gumberg(10)........................ 23,000 * 4,000 *
Gregg Searle(11)....................... 19,500 * 11,500 *
EXECUTIVE OFFICERS
Brian Carney(3)(12).................... 71,159 * 62,301 *
Dave Bolen(3)(13)...................... 42,340 * 108,606 1.22%
Rosalind Thompson(3)(14)............... 22,527 * 56,039 *
Debra Walker(15)....................... 15,000 * -- *
ALL EXECUTIVE OFFICERS AND DIRECTORS AS
A GROUP (11 PERSONS)(3)(16).......... 2,466,230 25.38% 1,890,312 20.28%
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* Less than 1%
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(1) The Class A common shares listed are reported on a Schedule 13G filed
with the Securities and Exchange Commission with respect to holdings as
of December 31, 2000.
(2) Capital Research and Management Company, a registered investment adviser
and an operating subsidiary of The Capital Group Companies, Inc.,
exercised as of December 31, 2000 investment discretion with respect to
525,000 Class A common shares or 5.52% of outstanding shares of the
class, which shares were owned by various institutional investors.
Capital Research and Management Company has no power to direct the vote
of the above shares.
(3) The number of common shares beneficially owned by such persons under our
Jo-Ann Stores, Inc. Savings Plan 401(k) is included as of March 31,
2001, the latest date for which statements are available.
(4) Mr. Rosskamm's beneficial ownership includes 92,000 Class A common
shares and 248,250 Class B common shares subject to stock options that
are exercisable on or prior to June 12, 2001, 20,000 Class A common
shares held as restricted stock under our Executive Incentive Plan, and
an aggregate of 181,251 Class A common shares and 210,523 Class B common
shares held by his children, spouse, or Mr. Rosskamm as trustee for the
benefit of family members and charities. His beneficial ownership also
includes 750,245 Class A common shares and 45,547 Class B common shares
held by Rosskamm Family Partners, L.P. with regard to which he has
shared voting and dispositive power, 169,444 Class B common shares held
by Rosskamm Family Partners, L.P. II with regard to which he has
dispositive power, and 98,950 Class A common shares and 9,303 Class B
common shares held by Caneel Bay Partners, L.P. with regard to which he
has sole voting and dispositive power.
(5) Mrs. Rosskamm's beneficial ownership includes 22,803 Class A common
shares and 28,241 Class B common shares held as custodian for the
benefit of her grandchildren. Her beneficial ownership also includes
25,000 Class A common shares and 25,000 Class B common shares held by
The Rosskamm Family Partnership with regard to which she has sole voting
and dispositive power, 750,245 Class A common shares and 45,547 Class B
common shares held by Rosskamm Family Partners, L.P. with regard to
which she has shared voting and dispositive power, and 169,444 Class B
common shares held by Rosskamm Family Partners, L.P. II with regard to
which she also has dispositive power.
(6) Mrs. Rosskamm, Mr. and Mrs. Zimmerman and the company have entered into
an agreement, dated September 26, 1997, relating to their Class A and
Class B common shares. Under this agreement, Mrs. Rosskamm and her
lineal descendants and permitted holders, and Mr. and Mrs. Zimmerman and
their lineal descendants and permitted holders, may each sell up to
200,000 Class A common shares in any calendar year and may not sell more
than 100,000 of those shares in any 180-day period. Mrs. Rosskamm, and
Mr. and Mrs. Zimmerman collectively, may each sell up to 100,000 Class B
common shares in any 60-day period. If either Mrs. Rosskamm or Mr. and
Mrs. Zimmerman sell a number of their Class A common shares in excess of
the number permitted under the agreement, they must first offer to sell
those shares to the other family party to the agreement, and then with
the other family's permission, to the company. If either Mrs. Rosskamm
or Mr. and Mrs. Zimmerman sell a number of their Class B common shares
in excess of the number permitted under the agreement, each family must
first offer to sell those shares to the company.
(7) Of the 680,835 Class A common shares beneficially owned by the
Zimmermans, Mr. Zimmerman disclaims beneficial ownership of 276,697
Class A common shares beneficially owned by his wife and Mrs. Zimmerman
disclaims beneficial ownership of 341,199 Class A common shares
beneficially owned by her husband. Of the 459,918 Class B common shares
beneficially owned by the Zimmermans, Mr. Zimmerman disclaims beneficial
ownership of 211,378 Class B common shares beneficially owned by his
wife and Mrs. Zimmerman disclaims beneficial ownership of 211,634 Class
B common shares beneficially owned by her husband. Mrs. Zimmerman's
beneficial ownership includes 62,939 Class A common shares and 36,906
Class B common shares held by the Burton Zucker and Bob Forchheimer
Trust, with regard to which she has an annuity interest.
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(8) Mr. Cowen's beneficial ownership includes 18,000 Class A common shares
and 14,000 Class B common shares subject to stock options granted under
our Stock Option Plan for Non-Employee Directors that are exercisable on
or prior to June 12, 2001 and 5,000 Class A common shares held as
restricted stock under our 1998 Incentive Compensation Plan.
(9) Mr. Newman's beneficial ownership includes 27,000 Class A common shares
and 19,000 Class B common shares subject to stock options granted under
our Stock Option Plan for Non-Employee Directors that are exercisable on
or prior to June 12, 2001 and 5,000 Class A common shares held as
restricted stock under our 1998 Incentive Compensation Plan.
(10) Mr. Gumberg's beneficial ownership includes 12,000 Class A common shares
and 4,000 Class B common shares subject to stock options granted under
our Stock Option Plan for Non-Employee Directors that are exercisable on
or prior to June 12, 2001 and 5,000 Class A common shares held as
restricted stock under our 1998 Incentive Compensation Plan.
(11) Mr. Searle's beneficial ownership includes 11,500 Class A common shares
and 11,500 Class B common shares subject to stock options granted under
our Stock Option Plan for Non-Employee Directors that are exercisable on
or prior to June 12, 2001 and 5,000 Class A common shares held as
restricted stock under our 1998 Incentive Compensation Plan.
(12) Mr. Carney's beneficial ownership includes 37,500 Class A common shares
and 62,250 Class B common shares subject to stock options that are
exercisable on or prior to June 12, 2001 and 20,000 Class A common
shares held as restricted stock under our Executive Incentive Plan.
(13) Mr. Bolen's beneficial ownership includes 101,625 Class B common shares
subject to stock options that are exercisable on or prior to June 12,
2001 and 26,000 Class A common shares held as restricted stock under our
Executive Incentive Plan and 1998 Incentive Compensation Plan.
(14) Ms. Thompson's beneficial ownership includes 7,250 Class A common shares
and 55,500 Class B common shares subject to stock options that are
exercisable on or prior to June 12, 2001 and 11,000 Class A common
shares held as restricted stock under our Executive Incentive Plan and
1998 Incentive Compensation Plan.
(15) Ms. Walker's beneficial ownership includes 15,000 Class A common shares
held as restricted stock under our 1998 Incentive Compensation Plan. Ms.
Walker resigned from our Board of Directors and became an executive
officer of our company on June 5, 2000.
(16) Beneficial ownership for all executive officers and directors as a group
includes 205,250 Class A common shares and 516,125 Class B common shares
subject to stock options granted under our stock option plans that are
exercisable on or prior to June 12, 2001 and 112,000 Class A common
shares held as restricted stock under our Executive Incentive Plan and
1998 Incentive Compensation Plan. The total excludes 750,245 Class A
common shares and 214,991 Class B common shares held by Mr. Rosskamm and
Mrs. Rosskamm in certain family partnerships with which they share
voting and dispositive powers.
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ELECTION OF DIRECTORS
Our Board of Directors is presently comprised of seven members. The Board
is divided into three classes, one of which consists of three members and two
that consist of two members. The proxies solicited by this Proxy Statement will
not be voted for a greater number of persons than the number of nominees named
in this Proxy Statement.
Each of the directors in the class whose term of office expires in 2001,
Alma Zimmerman and Ira Gumberg, has been nominated by the Board for reelection
at the Annual Meeting as a director to serve for a three-year term expiring at
our Annual Meeting of Shareholders in 2004 and until his or her successor is
elected and qualified subject to the director's earlier retirement, resignation
or death.
If either of the nominees becomes unable to serve as a director, the
proxies will be voted for the election as a director of such other person as the
Board of Directors may recommend. The Board of Directors has no reason, however,
to anticipate that this will occur.
NOMINEES TO AND CURRENT MEMBERS OF THE BOARD OF DIRECTORS
The following table sets forth certain information regarding the nominees
for election as members of the Board of Directors and Directors whose terms of
office will continue after the Annual Meeting. This information is based upon
information furnished to the company by such persons as of April 13, 2001
(except as otherwise noted).
PRINCIPAL OCCUPATION PAST FIVE YEARS, DIRECTOR
NAME OTHER DIRECTORSHIP AND AGE SINCE
---- ------------------------------------- --------
NOMINEES FOR THE TERM TO EXPIRE IN 2004
Alma Zimmerman Senior Vice President of our company for more than five 1967
years; age 88.
Ira Gumberg(1)(2) Chief Executive Officer and President of J.J. Gumberg 1992
Co., a real estate investment company, for more than five
years. He is also a Director of Mellon Bank, N.A.; age
47.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES IDENTIFIED ABOVE
DIRECTORS WHOSE TERM EXPIRES IN 2002
Frank Newman(1)(3)(4) Private investor since January 2001. Previously, he was 1991
Chief Executive Officer from April 2000 to January 2001
of more.com, an on-line health, beauty and wellness
retailer, and Chairman of the Board from February 1997 to
March 2000, President and Chief Executive Officer from
February 1996 to March 2000 and President from July 1993
to March 2000 of Eckerd Corporation, a pharmacy retailer.
He is also a Director of Jabil Circuit, Inc.; age 52.
Betty Rosskamm Senior Vice President and Secretary of our company for 1967
more than five years. Betty Rosskamm is the mother of
Alan Rosskamm; age 72.
DIRECTORS WHOSE TERM EXPIRES IN 2003
Alan Rosskamm(1)(5) Chairman of the Board, President and Chief Executive 1985
Officer of our company for more than five years. He is a
member of one of the two founding families of our company
and has been employed by us since 1978. Mr. Rosskamm is
also a Director of Charming Shoppes Inc., a women's
apparel retailer; age 51.
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PRINCIPAL OCCUPATION PAST FIVE YEARS, DIRECTOR
NAME OTHER DIRECTORSHIP AND AGE SINCE
---- ------------------------------------- --------
Scott Cowen(1)(3)(4) President of Tulane University and the Seymour S. Goodman 1987
Professor of Management since July 1998. Previously, he
was Dean of the Weatherhead School of Management and A.J.
Weatherhead III Professor of Management, Case Western
Reserve University, for more than five years. Mr. Cowen
is also a Director of American Greetings Corporation,
Forest City Enterprises, Inc. and Newell Rubbermaid Inc.;
age 54.
Gregg Searle(1)(3)(4) President and Chief Executive Officer of StoneGate 1996
Holdings, Ltd., a private investment company, since
October 1999. He was President and Chief Operating
Officer from November 1996 to September 1998 and
Executive Vice President from August 1993 to November
1996 of Diebold, Incorporated; age 52.
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(1) Member of the Corporate Governance Committee.
(2) J.J. Gumberg Co. manages numerous shopping centers, thirteen of which
contain stores of our company. Three of the leases were entered into after
Mr. Gumberg became a director of our company, and we believe such leases are
on terms no less favorable to us than could have been obtained from an
unrelated party. The aggregate rent and related occupancy charges paid
during fiscal 2001, 2000 and 1999 on these stores amounted to $1.5 million,
$1.3 million and $1.2 million, respectively.
(3) Member of the Audit Committee.
(4) Member of the Compensation Committee.
(5) Concurrently with our company's settlement of allegations by the Securities
and Exchange Commission in February 1997, Mr. Rosskamm consented to a
separate SEC administrative cease and desist order settling certain
allegations by the SEC, without admitting or denying the allegations. The
SEC contended that Mr. Rosskamm violated certain federal securities laws as
a result of his not making adequate inquiry of his financial staff before
signing management representation letters given to our company's auditors in
connection with the 1992 offering of 6 1/4% Convertible Subordinated
Debentures and as a result of signing our company's Form 10-Q for the
quarter ended May 2, 1992.
BOARD OF DIRECTORS, ITS COMMITTEES, MEETINGS AND FUNCTIONS
During the fiscal year ended February 3, 2001, there were five meetings of
our Board of Directors. Each incumbent director attended at least 75% of the
Board meetings and meetings held by the committees on which he or she served
during the period for which he or she was a director.
The Corporate Governance Committee, which met three times during the fiscal
year ended February 3, 2001, is responsible for advising and making
recommendations to the Board of Directors on issues of corporate governance and
has the authority to interview and recommend to the Board of Directors for
nomination on behalf of the Board suitable persons for election as directors
when a vacancy exists on the Board. The Corporate Governance Committee and the
Board of Directors will also consider individuals recommended by shareholders of
our company. Such recommendations should be submitted in writing to the Chairman
of the Board, who will submit them to the Committee and the entire Board for
their consideration. The recommendations must be accompanied by the consent of
the individual nominated to be elected and to serve.
The company has a Compensation Committee, which met twice during the fiscal
year ended February 3, 2001. The Compensation Committee has the authority to set
the compensation for executive officers of our company. The Committee also makes
recommendations to the Board of Directors with respect to the adoption and
amendment of incentive compensation plans and administers those plans
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approved by the Board of Directors. The formal report of the Compensation
Committee on executive compensation begins on page 13 of this Proxy Statement.
The Audit Committee, which met twice during the fiscal year ended February
3, 2001, is responsible for reviewing with the independent auditors of our
company the scope and thoroughness of the auditors' examination, reviewing the
independence of the independent auditors, reviewing the adequacy of our
company's systems of internal accounting controls with the independent auditors
and recommending to the Board of Directors the appointment of independent
auditors for the fiscal year. The Board of Directors has adopted a written
charter for the Audit Committee which is attached hereto as Appendix A. The
Audit Committee has satisfied its responsibilities during the fiscal year ended
February 3, 2001 in compliance with its charter. All members of the Audit
Committee meet the independence standards of Section 303.01 of the New York
Stock Exchange Listed Company Manual. The formal report of the Audit Committee
with respect to the fiscal year ended February 3, 2001 begins on page 16 of this
Proxy Statement.
COMPENSATION OF DIRECTORS
Our company's compensation program for each non-employee director consists
of cash compensation and grants of stock options and restricted stock.
CASH COMPENSATION. Each non-employee director is compensated at a rate of
$5,000 per quarter and $1,000 for each day of Board and committee meetings
attended. Additionally, committee chairpersons receive an additional $500 per
quarter per committee chaired.
DEFERRED STOCK. In September 1999, the Board of Directors approved the
adoption of a deferred stock feature for non-employee directors that allows
non-employee directors to elect to convert the retainer and meeting fee portion
of their cash compensation into deferred stock units. This program became
effective for the March 2000 Board meeting. Under this feature, non-employee
directors will make an irrevocable election prior to our company's Annual
Meeting of Shareholders whereby they can elect to convert a percentage (0% to
100% in 25% increments) of their cash compensation to deferred stock units.
One-half of the cash compensation deferred is converted into Class A stock units
and one-half into Class B stock units. The conversion of cash compensation to
deferred stock units is based on the closing market price of Class A and Class B
common shares on the date the cash compensation would have been payable if it
were paid in cash. These deferred stock units are credited to an account of each
non-employee director, although no stock is issued until the earlier of an
elected distribution date as selected by the non-employee director or
retirement.
STOCK OPTIONS. Non-employee directors are granted stock option awards under
the 1996 Stock Option Plan for Non-Employee Directors. We grant stock options
for 2,500 Class A common shares and 2,500 Class B common shares to each
non-employee director upon completion of each year of service as a director. A
year of service generally ends on the date of the Annual Meeting of
Shareholders. A total of 63,000 Class A common shares and 63,000 Class B common
shares are currently available for option grants under the 1996 Stock Option
Plan for Non-Employee Directors. Each grant of stock options will terminate ten
years following the date of grant. In the event of the retirement of a director
after more than ten years of continuous service, the Compensation Committee may
accelerate the date on which any stock option (outstanding for a period of more
than twelve months) becomes exercisable. Upon termination of a director from the
Board for any reason, he or she would continue to have the right to exercise an
outstanding stock option during the three-month period immediately following the
date of termination of such service.
RESTRICTED STOCK. Non-employee directors are granted restricted stock
awards as permitted under the 1998 Incentive Compensation Plan. This feature of
the 1998 Incentive Compensation Plan was adopted by the Board of Directors in
November 1999 and provided for a one-time grant of 5,000 Class A common shares
to each then current non-employee director. Additionally, each new non-employee
director will be eligible for a one-time grant of 5,000 Class A or Class B
common shares upon joining the Board of Directors. Each non-employee director
will then be eligible for an additional grant of 5,000
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Class A or Class B common shares every ten years following their initial grant,
provided the director continuously serves as a director for the entire ten-year
period. Restricted stock represents awards granted without payment to the
company but which are subject to restrictions on their transfer or sale. The
restrictions on non-employee director restricted stock lapse with respect to
fifty percent of the award three years from the date of the grant and with
respect to the remaining fifty percent six years from the date of the grant,
provided the non-employee director still serves in such capacity at the time of
each lapse.
EXECUTIVE COMPENSATION
The following table sets forth information relating to the annual and
long-term compensation for the fiscal years ended February 3, 2001, January 29,
2000, and January 30, 1999, for the Chief Executive Officer and the other named
executive officers of our company.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION ------------------------------
------------------------------- SECURITIES
UNDERLYING ALL
OTHER OPTION/SARS OTHER
ANNUAL RESTRICTED COMMON SHARES COMPEN-
NAME AND FISCAL COMPEN- STOCK ----------------- SATION
PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) SATION AWARDS(3) CLASS A CLASS B (4)
------------------ ------ --------- -------- -------- ---------- ------- ------- -------
Alan Rosskamm 2001 $480,965 -- -- -- -- 250,000 $78,710
Chairman of the Board, 2000 $450,053 $225,027 -- -- -- 60,000 $79,042
President and Chief 1999 $448,107 -- -- -- -- 60,000 $95,932
Executive Officer
Dave Bolen(5) 2001 $329,716 -- -- -- -- 125,000 $20,363
Executive Vice President, 2000 $300,035 $75,009 -- -- -- 33,000 $20,758
Merchandising 1999 $268,047 -- -- $ 81,875 -- 33,000 $19,738
Brian Carney 2001 $316,871 -- -- -- -- 125,000 $14,724
Executive Vice President, 2000 $296,022 $84,006 -- -- -- 33,000 $14,439
Chief Financial Officer 1999 $295,052 -- -- -- -- 33,000 $11,831
Rosalind Thompson 2001 $259,233 -- -- -- -- 125,000 $ 2,058
Executive Vice President, 2000 $202,446 $50,612 -- $ 57,813 -- 33,000 $ 2,351
Human Resources 1999 $193,830 -- -- -- -- 10,000 $ 2,417
Debra Walker(6) 2001 $210,108 $103,134 $158,015 $ 71,250 -- 125,000 --
Executive Vice President,
Marketing and E-Commerce
- ---------------
(1) Includes amounts earned but deferred under Section 401(k) of the Internal
Revenue Code. Fiscal year 2001 is a 53-week year and includes an additional
bi-weekly payroll.
(2) Represents bonuses paid under the Key Management Incentive Plan. These
amounts represent bonuses earned in the fiscal year indicated but paid in
the subsequent fiscal year.
(3) At February 3, 2001, the aggregate number and value of restricted stock
holdings for each named executive officer were as follows: Mr. Rosskamm
20,000 Class A common shares at $114,800; Mr. Bolen 26,000 Class A common
shares at $149,240; Mr. Carney 20,000 Class A common shares at $114,800; Ms.
Thompson 11,000 Class A common shares at $63,140 and Ms. Walker 15,000 Class
A common shares at $86,100. Ms. Walker's restricted stock holdings at
February 3, 2001, include restricted stock granted as compensation during
her past membership on our Board of Directors. Shares of restricted stock
participate the same as our common shares regarding voting rights and
dividend payments.
(4) Reflects matching contributions we have made under our Jo-Ann Stores, Inc.
Savings Plan 401(k), compensation earned for insurance premiums paid on
behalf of the named executive officers for insurance policies for which
family members of the named executive officers are the beneficiaries
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and amounts we have expensed for potential benefits earned under our 1979
Supplemental Retirement Benefit Plan. For fiscal year 2001, compensation
earned for insurance premiums paid or imputed income on insurance premiums
paid on behalf of the named executive officers amounted to the following:
Mr. Rosskamm--$2,082; Mr. Bolen--$2,427; Mr. Carney--$685; and Ms.
Thompson--$123. Our 1979 Supplemental Retirement Benefit Plan provides
benefits, subject to forfeiture, to such employees upon normal retirement,
early retirement, death or total disability. Under this plan, we expensed
the following amounts for fiscal 2001, 2000, and 1999, respectively: Mr.
Bolen--$16,326, $16,326, $16,326; Mr. Carney--$11,489, $11,489, $11,489; and
Ms. Thompson--$0, $0, $0. There is a split-dollar life insurance arrangement
with a trust established by Mr. Rosskamm for the benefit of Mr. Rosskamm's
children. Our company and the trust share in the premium costs of whole life
insurance policies that pay death benefits of not less than $10 million upon
the death of Mr. Rosskamm and his wife, Barbara Rosskamm (whichever occurs
later). The split-dollar insurance arrangement is structured such that upon
the payment of benefits or cancellation, all premium payments will be
returned to our company. The present value of the insurance arrangement
included herein for fiscal year 2001 is $74,078.
(5) Mr. Bolen assumed the position of Executive Vice President, Merchandising
effective March 27, 2001. Prior to such date, he served as Executive Vice
President, Stores and Business Development from December 1998 to March 2001.
(6) Ms. Walker's employment began on June 5, 2000. All compensation reflected in
the Summary Compensation Table is compensation Ms. Walker received as an
officer of the company. From August 1998 to June 2000, Ms. Walker received
compensation as a member of our Board of Directors. Bonus represents a
minimum guaranteed fiscal 2001 bonus award paid in fiscal 2002. Other annual
compensation includes a $150,000 relocation allowance paid during fiscal
2001.
OPTION GRANTS IN FISCAL YEAR 2001
The following table provides information relating to stock option grants
during the last fiscal year to the Chief Executive Officer and the other named
executive officers of our company.
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
- ------------------------------------------------------------------------------------------ ANNUAL
NUMBER OF RATES OF STOCK PRICE
SECURITIES PERCENT OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OR OPTION TERM (3)
OPTIONS GRANTED TO EMPLOYEES BASE PRICE PER EXPIRATION -----------------------
NAME (COMMON SHARES) IN FISCAL YEAR COMMON SHARE DATE 5% 10%
---- ------------------- ---------------- -------------- ---------- ---------- ----------
Alan Rosskamm Class B 250,000(1) 13.1% $ 7.75 03/09/2010 $1,218,483 $3,087,876
Dave Bolen Class B 125,000(1) 6.5% $ 7.75 03/09/2010 $ 609,242 $1,543,938
Brian Carney Class B 125,000(1) 6.5% $ 7.75 03/09/2010 $ 609,242 $1,543,938
Rosalind Thompson Class B 125,000(1) 6.5% $ 7.75 03/09/2010 $ 609,242 $1,543,938
Debra Walker Class B 125,000(2) 6.5% $ 7.56 07/07/2010 $ 594,502 $1,506,585
- ---------------
(1) The options granted become exercisable with respect to fifty percent three
years after the date of grant and with respect to the remaining fifty
percent four years after the date of grant.
(2) The options granted become exercisable in four equal annual installments
commencing one year after the date of grant.
(3) Based upon the exercise price, which was equal to the fair market on the
date of grant, and annual appreciation at the rate stated on such price
through the expiration date of the options. Amounts represent hypothetical
gains that could be achieved for the options if exercised at the end of the
term. The assumed 5% and 10% rates of stock price appreciation are provided
in accordance with the rules of the Securities and Exchange Commission and
do not represent our estimate or projection of the future stock price.
Actual gains, if any, are contingent upon the continued employment of the
named executive officer through the expiration date, as well as being
dependent upon general
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performance of our common stock. The potential realizable values have not
taken into account amounts required to be paid by the named executive
officer for federal income taxes.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table provides information relating to aggregate option
exercises during the last fiscal year and fiscal year-end option values for the
Chief Executive Officer and the other named executive officers of our company.
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
COMMON SHARES AT FEBRUARY 3, 2001 AT FEBRUARY 3, 2001
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ---------------- -------- ----------- ------------- ----------- -------------
Alan Rosskamm Class A -- -- 92,000 -- -- --
Class B -- -- 248,250 333,750 -- --
Dave Bolen Class A -- -- -- -- -- --
Class B -- -- 94,125 189,375 -- --
Brian Carney Class A -- -- 37,500 12,500 -- --
Class B -- -- 62,250 178,750 -- --
Rosalind Thompson Class A -- -- 7,250 -- -- --
Class B -- -- 55,500 158,500 -- --
Debra Walker Class A -- -- -- -- -- --
Class B -- -- -- 125,000 -- --
CHANGE OF CONTROL AND EMPLOYMENT AGREEMENTS
Our company has employment agreements with Alan Rosskamm, Dave Bolen, Brian
Carney, Rosalind Thompson and Debra Walker. These employment agreements are
designed to retain the executive officers and provide for continuity of
management in the event of any actual or threatened change in the control of our
company. Each agreement becomes operative only upon a "Change in Control" of our
company (as defined in the employment agreements) and only if the executive
officer is then in the employ of our company. After a Change in Control, each
employment agreement becomes, in effect, a two-year employment agreement,
providing a salary, bonus and other employee benefits at not less than the
levels existing prior to the Change in Control. If the executive officer is
terminated by our company without "cause" as defined in his or her employment
agreement or terminates his or her employment following a significant change in
his or her duties, the employee will be entitled to receive compensation and
benefits for the balance of the two-year period. The executive officer has an
obligation to seek comparable employment elsewhere so as to minimize payments
made and benefits provided under the employment agreement. Any compensation and
benefits received from another employer serve to reduce payments and benefits
provided by our company. In each employment agreement, the executive officer
agrees that he or she will forfeit the forgoing payments and benefits if he or
she engages in competition with our company during the period that any payments
are made or benefits provided under his or her employment agreement.
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REPORT OF THE COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee"), each member of which is a non-employee director, is responsible for
approving executive management compensation and for administering the incentive
and equity participation plans which make up the variable compensation paid to
the following:
- Chief Executive Officer
- Executive Officers
- Other Operating Officers
The Compensation Committee is accountable to the Board of Directors on all
compensation matters regarding our company's officers.
WHAT IS OUR COMPANY'S PHILOSOPHY ON EXECUTIVE COMPENSATION?
The Compensation Committee's strategy is to design a compensation program
that will enable our company to attract, motivate and retain officers and to
establish and maintain a performance and achievement-oriented environment. The
Compensation Committee and the Board believe that the executive management
compensation program should support the goals of our company. Accordingly, the
compensation program:
- Establishes compensation performance objectives that are aligned with
corporate goals;
- Provides a high degree of correlation between compensation and
performance; and
- Creates long-term incentives directly linked to shareholder returns.
HOW ARE THE CHIEF EXECUTIVE OFFICER AND OTHER EXECUTIVE OFFICERS COMPENSATED?
Our company's compensation program for executive management consists of
three elements:
- A base salary;
- A performance-based annual bonus; and
- Periodic grants of stock options and restricted stock awards.
BASE SALARY. Base salaries are generally set above the average of the
salaries of comparable officers at companies that are considered to be peers of
our company. Salary information about peer companies is determined by direct
reference to published public information about companies in the specialty
retail industry as well as companies in the fabric and craft industries. In
determining compensation, consideration is given to the relative size of such
companies. In addition, the Compensation Committee from time to time obtains
input on industry salary levels from a nationally recognized employment
consultant who has significant experience in the retail industry. During fiscal
year 2001, the average salary increase for all executive officers was three
percent.
ANNUAL BONUS. Our company awards bonuses to executive officers, operating
officers and certain other management employees through the Key Management
Incentive Plan. The Plan is administered in such a way as to focus the efforts
of participants on meeting the expectations of customers and shareholders
through teamwork. To ensure that the interests of all Plan participants are
aligned with those of our company's shareholders, the company's profits are
utilized as a factor in determining bonuses under the Plan. The level of bonus
awarded under this Plan is based on a combination of the profit target for the
fiscal year and individual performance goals. Bonuses are not payable under this
Plan unless the minimum profit target is achieved. For fiscal year 2001, our
company's profit target did not meet the minimum target and therefore no bonuses
were awarded.
The profit target that is established by the Board of Directors is
typically set at a level that exceeds our company's profit from the prior fiscal
year. The profit target is comprised of a minimum, midpoint
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and maximum target. The Chief Executive Officer can earn a bonus ranging from 50
to 100 percent of his base salary. Executive officers can earn a bonus ranging
from 25 to 75 percent of their base salary. Bonuses for operating officers and
other management employees participating in the plan are designed to amount to a
smaller percentage of their salary.
Individual performance goals are determined annually in advance by the
Compensation Committee for the Chief Executive Officer, and for all other
participants by the Chief Executive Officer or supervising executive officer.
Specific bonuses awarded, if any, to executive officers and other participants
are adjusted based on how well they met their pre-determined individual
performance goals suitable for their particular position.
STOCK OPTIONS AND RESTRICTED STOCK. Stock option and restricted stock
awards are granted to executive officers and other key employees through, or
subject to, the 1998 Incentive Compensation Plan. The Compensation Committee
administers the plan, selects the recipients and determines the level of awards
of stock options and restricted stock. Stock option awards are generally granted
to executive officers upon hire, promotion or the assumption of increased
responsibility. Additionally, an award is usually granted to executive officers,
other operating officers and certain other management employees during November
or December of each year. As part of a management retention plan approved by the
Compensation Committee, a specific retention option grant was awarded in March
2000. By including many levels of management, the stock option program reflects
the Compensation Committee's strong belief that by providing additional
incentives to key employees who have substantial responsibility for the
management and growth of our company, the best interests of the shareholders and
management will be closely aligned. Stock option awards are not fully
exercisable until four years following the date of grant and expire in ten
years. This vesting period helps to reinforce a long-term perspective and retain
executives.
The Compensation Committee also grants restricted stock awards as a
performance-based compensation vehicle and to attract and retain executive and
operating officers. Generally, awards are made upon hire, promotion and the
assumption of increased responsibility and to recognize superior performance.
All restrictions on restricted stock awards granted to executive officers during
the last three fiscal years lapse five years from the date of the award.
Recipients forfeit their right to the restricted shares if they leave our
company before the date of lapse. Because of this, the Compensation Committee
believes that these awards are a significant factor in the retention of key
management personnel and induce a long-term view among executive officers.
Restricted stock awards are also considered a useful compensation vehicle
because, even after the restrictions on the awards lapse, they tend to reinforce
the recipient's commitment to continued growth of our company and appreciation
in the market price of our common stock over the long-term.
HOW WAS THE CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER COMPENSATED FOR
FISCAL YEAR 2001?
During fiscal year 2001, Mr. Rosskamm's base salary was increased
approximately three percent from $450,000 to $465,000 based on the Compensation
Committee's positive assessment of his performance and contributions during
fiscal year 2000 as Chairman of the Board, President and Chief Executive
Officer. Mr. Rosskamm was not awarded a bonus for fiscal 2001 under the Key
Management Incentive Plan. Mr. Rosskamm was granted a stock option award for
250,000 Class B common shares in March 2000.
As part of his overall compensation package, Mr. Rosskamm is provided a
split dollar life insurance arrangement for which the beneficiary is a trust
established for the benefit of Mr. Rosskamm's children. See note (4) to the
Summary Compensation Table under "Executive Compensation."
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HOW HAS THE COMPANY RESPONDED TO THE IRS LIMITS ON DEDUCTIBILITY OF
COMPENSATION?
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public corporations for compensation over $1,000,000 paid for any
fiscal year to the corporation's chief executive officer and four other most
highly compensated executive officers. During fiscal 1999, shareholders approved
the 1998 Incentive Compensation Plan, which provides performance-based awards.
Stock option and restricted stock awards made under this Plan are intended to
meet the performance-based compensation exception to the IRS deduction
disallowance.
The names of the Directors who serve on the Compensation Committee are set
forth below.
COMPENSATION COMMITTEE
FRANK NEWMAN (Chairman)
SCOTT COWEN
GREGG SEARLE
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REPORT OF THE AUDIT COMMITTEE
In accordance with its written charter adopted by the Board of Directors,
the Audit Committee of the Board of Directors (the "Audit Committee") assists
the Board in fulfilling its responsibility for oversight of the quality and
integrity of the accounting, auditing and financial reporting practices of Jo-
Ann Stores, Inc. During the current year, the Audit Committee met twice, and the
Audit Committee chair, as representative of the Audit Committee, discussed the
interim financial information contained in each quarterly earnings announcement
with the Chief Executive Officer, Chief Financial Officer, Vice President and
Controller and independent auditors prior to public release.
In discharging its oversight responsibility as to the audit process, the
Audit Committee obtained from the independent auditors a formal written
statement describing all relationships between the auditors and the company that
might bear on the auditors' independence consistent with Independence Standards
Board Standard No. 1, "Independence Discussions with Audit Committees," and
discussed with the auditors any relationships that may impact their objectivity
and independence. The Audit Committee also discussed with management, the
internal auditors and the independent auditors the quality and adequacy of the
company's internal controls and the internal audit function's organization,
responsibilities, budget and staffing. The Audit Committee reviewed both with
the independent and internal auditors their audit plans, audit scope and
identification of audit risks.
The Audit Committee discussed and reviewed with the independent auditors
all communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees," and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements. The Audit Committee also discussed the results of the
internal audit examinations.
The Audit Committee reviewed the audited financial statements of the
company as of and for the fiscal year ended February 3, 2001, with management
and the independent auditors. Management has the responsibility for the
preparation of the company's financial statements and the independent auditors
have the responsibility for the examination of those statements.
Based on the above-mentioned review and discussions with management and the
independent auditors, the Audit Committee recommended to the Board that the
company's audited financial statements be included in its Annual Report on Form
10-K for the fiscal year ended February 3, 2001, for filing with the Securities
and Exchange Commission. The Audit Committee also recommended the reappointment
of the independent auditors and the Board concurred in such recommendation.
AUDIT COMMITTEE
SCOTT COWEN (Chairman)
FRANK NEWMAN
GREGG SEARLE
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PRINCIPAL ACCOUNTING FIRM FEES
The following table sets forth the aggregate fees billed to our company for
the fiscal year ended February 3, 2001 by the company's principal accounting
firm, Arthur Andersen LLP (in millions):
Audit fees............................................ $0.3
Financial information systems design and
implementation fees................................. --
All other fees........................................ 1.0(a)(b)
----
$1.3
====
- ---------------
(a) Includes fees for non-audit accounting, consulting and tax fees.
(b) The Audit Committee has considered whether the provision of these services
is compatible with maintaining the principal accountant's independence.
STOCK PERFORMANCE GRAPH
The following graph compares the yearly changes in total shareholder return
on our Class A and Class B common shares with the total return of the S&P
Composite--500 Stock Index and the S&P Retail (Specialty)-Small Index for the
last five years. In each case, we assumed an initial investment of $100 on
January 31, 1996. Each subsequent date on the chart represents the last day of
the indicated fiscal year. No dividends were paid by us during such five-year
period.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
[LINE GRAPH]
S&P RETAIL
JO ANN STORES A JO ANN STORES B S&P 500 INDEX (SPECIALTY)-SMALL
--------------- --------------- ------------- -----------------
1996 100 100 100 100
1997 109 115 126 115
1998 175 175 158 155
1999 110 103 206 157
2000 74 76 219 122
2001 41 37 217 159
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3, 4 and 5 and amendments thereto
furnished to us with respect to our most recent fiscal year, we believe that,
during the fiscal year ended February 3, 2001, all filing requirements under
Section 16(a) of the Securities Exchange Act of 1934 applicable to our executive
officers, directors and greater than 10% beneficial owners were met.
INDEPENDENT AUDITORS
Arthur Andersen LLP has been appointed as our company's independent
auditors for the fiscal year ending February 2, 2002. A representative of Arthur
Andersen LLP will be present at the Annual Meeting and will have an opportunity
to make a statement if he desires to do so. Additionally, this representative
will be available to answer appropriate questions that you may have with respect
to his firm's examination of our financial statements and records for the fiscal
year ended February 3, 2001.
PROXY SOLICITATION COSTS
The proxies being solicited hereby are being solicited by our company. We
will bear the expense of preparing, printing, mailing and otherwise distributing
this Proxy Statement. Further solicitation, if required, may be made by mail,
telephone and personal interview, by the directors, officers and regularly
engaged employees of our company, without extra compensation. Upon request, we
will reimburse brokerage firms and others for their reasonable expenses in
forwarding solicitation materials to the beneficial owners of our common shares.
SHAREHOLDERS' PROPOSALS
The deadline for shareholders to submit proposals to be considered for
inclusion in the Proxy Statement for the 2002 Annual Meeting of Shareholders is
January 8, 2002. Proxies for the 2002 Annual Meeting of Shareholders will confer
discretionary authority to vote on any matter that a shareholder does not give
written notice of by March 23, 2002.
ANNUAL REPORT
Our Annual Report for the fiscal year ended February 3, 2001 is being
mailed to holders of both Class A and Class B common shares with this Notice of
Annual Meeting and Proxy Statement.
BETTY ROSSKAMM,
Secretary
By order of the Board of Directors
May 7, 2001
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APPENDIX A
JO-ANN STORES INC.
AUDIT COMMITTEE CHARTER
ORGANIZATION
There shall be a committee of the Board of Directors to be known as the
Audit Committee. The Audit Committee shall be composed of at least three
financially literate directors who are independent of the management of the
Company and are free of any relationship that, in the opinion of the Board of
Directors, would interfere with their exercise of independent judgement as a
committee member. At least one of the members shall have accounting or related
financial management expertise.
STATEMENT OF POLICY
The Audit Committee shall provide assistance to the directors in fulfilling
their responsibility to the shareholders of Jo-Ann Stores, Inc. and the
investment community relating to the Company's accounting and reporting
practices and the quality and integrity of the financial reports of the Company.
In so doing, it is the responsibility of the Audit Committee to maintain free
and open means of communication between the directors, the independent auditors,
the internal auditors, and the financial management of the Company. The
independent auditors shall be ultimately responsible to the Audit Committee and
the Board of Directors, who shall have final authority and responsibility to
select, evaluate, and, where appropriate, replace the independent auditors.
RESPONSIBILITIES
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is the
responsibility of the management of the Company and its independent auditors.
Nor is it the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with the laws and regulations and the Company's business
conduct guidelines.
In carrying out its responsibilities, the Audit Committee believes its
policies and procedures should remain flexible in order to best react to
changing conditions and to ensure to the directors that the accounting and
reporting practices of the Company are in accordance with all requirements and
are of the highest quality.
In carrying out these responsibilities, the Audit Committee will:
- Review and recommend to the directors the independent auditors to be
selected to audit the consolidated financial statements of the Company.
- Review and evaluate the independence of the outside auditors by obtaining
a formal written statement detailing all relationships between the
auditors and the Company, or any other relationships which might
adversely affect the independence or objectivity of the auditors, and
take appropriate action to satisfy itself of the outside auditors'
independence.
- Meet with the independent auditors and financial management of the
Company to review the scope of the proposed audit for the current year
and the audit procedures to be utilized, and at the conclusion thereof
review such audit, including any comments or recommendations of the
independent auditors.
- Review with the independent auditors, the Company's internal auditors,
and financial and accounting personnel the adequacy and effectiveness of
the accounting and financial controls of the Company and elicit any
recommendations for the improvement of such internal control procedures
or particular areas where new or more detailed controls or procedures are
desirable. Particular emphasis should be given to the adequacy of such
internal controls to expose any
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payments, transactions, or procedures that might be deemed illegal or
otherwise improper. Further, the committee should periodically review
company adherence to its written code of conduct.
- Review annually the internal audit function of the Company, including the
independence and authority of its reporting obligations, a summary of
findings from completed internal audits, the proposed audit plans for the
coming year, and the coordination of such plans with the independent
auditors.
- Review the annual audited financial statements contained in the Company's
annual report, quarterly earnings releases, and the quarterly financial
reports with management and the independent auditors to determine that
the independent auditors are satisfied with the quality of the accounting
principles used and the disclosure and content of the financial
statements to be presented to the public and filed with the Securities
and Exchange Commission. Any changes in accounting principles or material
estimates should be reviewed.
- Provide sufficient opportunity for the internal and independent auditors
to meet with the members of the Audit Committee without members of
management present. Among the items to be discussed in these meetings are
the independent auditors' evaluation of the Company's financial ,
accounting and auditing personnel, and the cooperation that the
independent auditors receive during the course of the audit.
- Review accounting and financial human resources and succession planning
within the Company.
- Submit the minutes of all meetings of the Audit Committee to, or discuss
the matters discussed at each committee meeting with, the Board of
Directors.
- Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel or other assistance for
this purpose, if, in its judgement, that is appropriate.
A-2
24
[JO-ANN STORES INC. LOGO]
C/O PROXY SERVICES
P.O. BOX 9141
FARMINGDALE, NY 11735
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions anytime before
12:00 noon eastern standard time, on June 6, 2001. Have your proxy card in hand
when you call. You will be prompted to enter your 12-digit Control Number which
is located below and then follow the simple instructions the Vote Voice provides
you.
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions anytime before 12:00 noon
eastern standard time, on June 6, 2001. Have your proxy card in hand when you
access the web site. You will be prompted to enter your 12-digit Control Number
which is located below to obtain your records and create an electric voting
instruction form.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we have provided or return to Jo-Ann Stores, Inc., c/o ADP, 51 Mercedes Way,
Edgewood, NY 11717.
Also, please check the box provided below if you would like to view future
materials (i.e., annual report, proxy, press releases) on the Internet.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK: JOANNZ KEEP THIS PORTION FOR YOUR RECORDS
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY
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JO-ANN STORES, INC.
ELECTION OF DIRECTORS
1. To elect the following two directors of the class whose three-year For Withhold For All To withhold authority to vote
terms of office will expire in 2004. All All Except mark "For All Except" and write
(01) Alma Zimmerman [ ] [ ] [ ] the nominees number on the
(02) Ira Gumberg line below.
_____________________________
SHARES REPRESENTED BY PROPERLY EXECUTED PROXIES WILL BE VOTED AS SPECIFIED. UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL
BE VOTED FOR THE SELECTION AS DIRECTORS OF THE NOMINEES LISTED ABOVE.
Please check if you would like to view future materials on the Internet [ ]
_______________________________________________ ___________________________________________________
Signature (PLEASE SIGN WITHIN BOX) Date Signature (Joint Owners) Date
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25
DIRECTIONS TO THE
HILTON GARDEN INN
[MAP]
From Downtown Cleveland
Take I-77 South to I-480 East. Exit
Twinsburg SR 82. Turn Right onto
SR 82 (Aurora Road). Turn Right
on Wilcox Drive.
From Cleveland Hopkins Airport
Take I-480 East. Exit at Twinsburg
SR 82. Turn Right onto SR 82
(Aurora Road). Turn Right on
Wilcox Drive.
From Akron (East Side) Downtown
Take Route 8 North. Then turn Right on SR 82 into Twinsburg.
Turn Left on Wilcox Drive.
From Akron (West Side) Copley-Barberton
Take I-77 North to I-271 North. Exit at Route 8 (Macedonia). Turn Left on
SR 8. Then turn Right on SR 82. Follow 82 into Twinsburg. Turn Left onto
Wilcox Drive.
JOANNZ
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JO-ANN STORES, INC.
BOARD OF DIRECTORS PROXY
ANNUAL MEETING, JUNE 7, 2001
At the Annual Meeting of Shareholders of our Company to be held on June 7, 2001,
and any adjournment, Alan Rosskamm, Scott Cowen, and Gregg Searle and each of
them, with full power of substitution, is hereby authorized to represent me and
thereat to vote my shares on the following:
1. To elect the following two directors of the class whose three-year terms of
office will expire in 2004:
Alma Zimmerman and Ira Gumberg.
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SEE REVERSE
SIDE
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