-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DXsTearzSk0d1Jo+Iaq43Th7mgrjtA4NbOoaGEBEHDt4SyrYAAwBoqkrjtWlzD6P H76S+NQB+EnvMJgmwClQvA== 0000950152-02-003808.txt : 20020506 0000950152-02-003808.hdr.sgml : 20020506 ACCESSION NUMBER: 0000950152-02-003808 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020606 FILED AS OF DATE: 20020506 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JO-ANN STORES INC CENTRAL INDEX KEY: 0000034151 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS SHOPPING GOODS STORES [5940] IRS NUMBER: 340720629 STATE OF INCORPORATION: OH FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-06695 FILM NUMBER: 02634483 BUSINESS ADDRESS: STREET 1: 5555 DARROW RD CITY: HUDSON STATE: OH ZIP: 44236 BUSINESS PHONE: 2166562600 MAIL ADDRESS: STREET 1: 5555 DARROW ROAD CITY: HUDSON STATE: OH ZIP: 44236 FORMER COMPANY: FORMER CONFORMED NAME: CLEVELAND FABRIC SHOPS INC DATE OF NAME CHANGE: 19681216 FORMER COMPANY: FORMER CONFORMED NAME: FABRI CENTERS OF AMERICA INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: CLEVELAND FABRIC SHOPS INC NUMBER THREE DATE OF NAME CHANGE: 19681216 DEF 14A 1 l91910adef14a.txt JO-ANN STORES, INC. DEFINITIVE PROXY 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 Section 240.14a-11c or Section 240.14a-12
Jo-Ann Stores, Inc. - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement) 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: ---------------------------------------------------------------------- [JO-ANN STORES LOGO] 5555 Darrow Road Hudson, Ohio 44236 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 6, 2002 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 6, 2002 at 9:00 a.m., eastern standard time, for the following purposes: 1. To elect three directors to the class whose three-year term of office will expire in 2005. 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 12, 2002 will be entitled to vote at the meeting. IF YOU ARE A HOLDER OF CLASS A COMMON SHARES, YOU WILL FIND A PROXY CARD ENCLOSED. YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE FOLLOW THE INSTRUCTIONS ON THE ENCLOSED PROXY CARD TO VOTE YOUR PROXY EITHER BY MAIL OR TELEPHONE OR VIA THE INTERNET. 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 By order of the Board of Directors May 6, 2002 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 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?.................................................. 2 Who will count the vote?.................................. 2 What is the Board's recommendation?....................... 3 What is the required vote for approval of the proposal?... 3 Is electronic access available to view future proxy materials?............................................. 3 PRINCIPAL SHAREHOLDERS...................................... 4 ELECTION OF DIRECTORS....................................... 7 Nominees to and Current Members of the Board of Directors.............................................. 7 Board of Directors and Its Committees, Meetings and Functions.............................................. 8 Compensation of Directors................................. 9 EXECUTIVE COMPENSATION...................................... 10 Summary Compensation Table................................ 10 Option Grants in Fiscal Year 2002......................... 11 Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values................................. 12 Executive 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 APPENDIX A.................................................. A-1
[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 6, 2002 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 being mailed on or about May 8, 2002 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 2002 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 12, 2002, 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, 10,001,176 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 the election of three directors to the class whose three-year term of office will expire in 2005. If any other matter is presented at the meeting, your proxy holder will vote in accordance with his or her best judgment. At the time this proxy statement went to press, we knew of no other matters to be acted on at the meeting. 1 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 via the Internet: You can vote your shares via 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. If you vote via the Internet, you do NOT need to return your proxy card. THE DEADLINE FOR VOTING VIA THE INTERNET IS 12:00 NOON, EASTERN STANDARD TIME, ON JUNE 5, 2002. 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 IS 12:00 NOON, EASTERN STANDARD TIME, ON JUNE 5, 2002. 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. If you attend the meeting in person, you may request that the powers of the proxy holders to vote your shares be suspended 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 these shares 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. 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. 2 WHAT IS THE BOARD'S RECOMMENDATION? The Board recommends a vote for the nominated slate of directors (see page 7). The Board's recommendation is set forth in the description of the proposal for the "Election of Directors." 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. 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 (see page 7), 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. IS ELECTRONIC ACCESS AVAILABLE TO VIEW FUTURE PROXY MATERIALS? We offer you the opportunity during the voting process to consent to view future proxy statements and annual reports via 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 us reduce printing and postage costs and is more environmentally friendly. 3 PRINCIPAL SHAREHOLDERS The following table sets forth, as of April 12, 2002 (except as otherwise noted), the amount of Class A common shares beneficially owned by each person or group known to us to be beneficial owners of more than 5% of Class A common shares and the amount of 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 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 12, 2002, 10,001,176 Class A common shares were outstanding and 8,813,511 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) 740,700 7.41% n/a n/a 11400 West Olympic Boulevard Suite 1200 Los Angeles, CA 90064 DIRECTORS AND NOMINEES FOR DIRECTORS Alan Rosskamm(2)(3) 1,384,566 13.73% 777,206 8.55% 5555 Darrow Road Hudson, OH 44236 Betty Rosskamm(2)(4)(5) 879,122 8.79% 582,537 6.61% 5555 Darrow Road Hudson, OH 44236 Mr. Justin and Mrs. Alma Zimmerman(2)(5)(6) 679,836 6.80% 410,156 4.65% 5555 Darrow Road Hudson, OH 44236 Scott Cowen(7) 39,056 * 20,592 * Gregg Searle(8) 22,245 * 14,323 * Ira Gumberg(9) 21,188 * 8,966 * Frank Newman(10) 20,510 * 8,172 * Beryl Raff(11) 5,000 * -- * EXECUTIVE OFFICERS Brian Carney(2)(12) 88,119 * 112,801 1.27% Dave Bolen(2)(13) 47,034 * 183,548 2.05% Rosalind Thompson (2)(14) 20,434 * 70,135 * Mike Edwards (2)(15) 10,000 * 46,385 * ALL EXECUTIVE OFFICERS AND DIRECTORS AS A GROUP (12 PERSONS)(2)(16) 2,466,865 24.18% 2,034,791 21.51%
- --------------- * Less than 1% (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, 2001. (2) 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, 2002, the latest date for which statements are available. 4 (3) Mr. Rosskamm's beneficial ownership includes 80,000 Class A common shares and 275,000 Class B common shares subject to stock options that are exercisable on or prior to June 11, 2002, 20,000 Class A common shares held as restricted stock, 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, 154,483 Class B common shares held by Rosskamm Family Partners, L.P. II with regard to which he has shared 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. (4) 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 154,483 Class B common shares held by Rosskamm Family Partners, L.P. II with regard to which she also has shared dispositive power. (5) 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 plan to 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 plan to 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. (6) Of the 679,836 Class A common shares beneficially owned by the Zimmermans, Mr. Zimmerman disclaims beneficial ownership of 339,230 Class A common shares beneficially owned by his wife and Mrs. Zimmerman disclaims beneficial ownership of 340,606 Class A common shares beneficially owned by her husband. Of the 410,156 Class B common shares beneficially owned by the Zimmermans, Mr. Zimmerman disclaims beneficial ownership of 198,522 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. (7) Mr. Cowen's beneficial ownership includes 20,000 Class A common shares and 16,000 Class B common shares subject to stock options that are exercisable on or prior to June 11, 2002, 1,756 Class A common shares and 2,292 Class B common shares subject to a deferred compensation arrangement and 5,000 Class A common shares held as restricted stock. (8) Mr. Searle's beneficial ownership includes 13,500 Class A common shares and 13,500 Class B common shares subject to stock options that are exercisable on or prior to June 11, 2002, 745 Class A common shares and 823 Class B common shares subject to a deferred compensation arrangement and 5,000 Class A common shares held as restricted stock. (9) Mr. Gumberg's beneficial ownership includes 13,375 Class A common shares and 5,375 Class B common shares subject to stock options that are exercisable on or prior to June 11, 2002, 2,813 Class A common shares and 3,591 Class B common shares subject to a deferred compensation arrangement and 5,000 Class A common shares held as restricted stock. (10) Mr. Newman's beneficial ownership includes 14,000 Class A common shares and 6,000 Class B common shares subject to stock options that are exercisable on or prior to June 11, 2002, 1,510 Class A common 5 shares and 2,172 Class B common shares subject to a deferred compensation arrangement and 5,000 Class A common shares held as restricted stock. (11) Ms. Raff's beneficial ownership includes 5,000 Class A common shares held as restricted stock. (12) Mr. Carney's beneficial ownership includes 50,000 Class A common shares and 91,250 Class B common shares subject to stock options that are exercisable on or prior to June 11, 2002 and 20,000 Class A common shares held as restricted stock. (13) Mr. Bolen's beneficial ownership includes 133,750 Class B common shares subject to stock options that are exercisable on or prior to June 11, 2002 and 20,000 Class A common shares held as restricted stock. (14) Ms. Thompson's beneficial ownership includes 2,250 Class A common shares and 65,000 Class B common shares subject to stock options that are exercisable on or prior to June 11, 2002 and 11,000 Class A common shares held as restricted stock. (15) Mr. Edwards's beneficial ownership includes 31,250 Class B common shares subject to stock options that are exercisable on or prior to June 11, 2002 and 10,000 Class A common shares held as restricted stock. (16) Beneficial ownership for all executive officers and directors as a group includes 193,125 Class A common shares and 637,125 Class B common shares subject to stock options granted under our stock option plans that are exercisable on or prior to June 11, 2002, 6,824 Class A common shares and 8,878 Class B common shares subject to a deferred compensation arrangement and 106,000 Class A common shares held as restricted stock. 6 ELECTION OF DIRECTORS Our Board of Directors is presently comprised of eight members. The Board is divided into three classes, two of which consist of three members and one that consists 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. Frank Newman, Betty Rosskamm and Beryl Raff are directors in the class whose term of office expires in 2002. Each of these individuals have been nominated by the Board for reelection at the Annual Meeting to serve for a three-year term expiring at our Annual Meeting of Shareholders in 2005 and until his or her successor is elected and qualified, subject to the director's earlier retirement, resignation or death. If any 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 12, 2002.
PRINCIPAL OCCUPATION PAST FIVE YEARS, DIRECTOR NAME OTHER DIRECTORSHIP AND AGE SINCE ---- ------------------------------------- -------- NOMINEES FOR THE TERM TO EXPIRE IN 2005 Frank Newman(1)(2)(3) 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 53. Betty Rosskamm Senior Vice President and Secretary of our company for more 1967 than five years. Betty Rosskamm is the mother of Alan Rosskamm; age 73. Beryl Raff(1)(2)(3) Senior Vice President-General Merchandising Manager for the 2001 Retail Jewelry Division of J.C. Penney Company, Inc., a department store retailer, since May 2001. Previously, she spent three years with Zale Corporation, a specialty retailer of fine jewelry, advancing to Chairman and Chief Executive Officer and spent 19 years with R.H. Macy & Company, a department store retailer, advancing to Senior Vice President/General Merchandising Manager; age 51.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES IDENTIFIED ABOVE 7
PRINCIPAL OCCUPATION PAST FIVE YEARS, DIRECTOR NAME OTHER DIRECTORSHIP AND AGE SINCE ---- ------------------------------------- -------- DIRECTORS WHOSE TERM EXPIRES IN 2003 Alan Rosskamm(1) Chairman of the Board, President and Chief Executive Officer 1985 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 52. Scott Cowen(1)(2)(3) 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 55. Gregg Searle(1)(2)(3) President and Chief Executive Officer of Compel Holdings, 1996 LLC, a network infrastructure services company, since November 2001 and President and Chief Executive Officer of StoneGate Holdings, Ltd., a private investment company, since October 1999. Previously, 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 53. DIRECTORS WHOSE TERM EXPIRES IN 2004 Alma Zimmerman Senior Vice President of our company for more than five 1967 years; age 89. Ira Gumberg(1)(4) President and Chief Executive Officer of J.J. Gumberg Co., a 1992 real estate investment company, for more than five years. He is also a Director of Mellon Bank, N.A.; age 48.
- --------------- (1) Member of the Corporate Governance Committee. (2) Member of the Audit Committee. (3) Member of the Compensation Committee. (4) J.J. Gumberg Co. manages numerous shopping centers, twelve of which contain stores of our company. Two 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 our company than could have been obtained from an unrelated party. The aggregate rent and related occupancy charges paid during fiscal 2002, 2001 and 2000 on these stores amounted to $1.3 million, $1.4 million, and $1.3 million, respectively. BOARD OF DIRECTORS AND ITS COMMITTEES, MEETINGS AND FUNCTIONS During the fiscal year ended February 2, 2002, 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 four times during the fiscal year ended February 2, 2002, is responsible for advising and making recommendations to the Board of Directors on issues of corporate governance, including matters relating to our code of conduct, authority and approval levels, and insider trading and media and analyst communication policies, among others. The Corporate Governance Committee 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 properly 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. 8 The Compensation Committee, which met three times during the fiscal year ended February 2, 2002, sets 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 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 2, 2002, is responsible for reviewing, the independent auditors of our company, 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. On March 7, 2002, the Board of Directors amended the charter expressly to give the Audit Committee authority to retain and consult with its own professional advisors, including accounting experts and legal counsel. In compliance with its charter, the Audit Committee has satisfied its responsibilities during the fiscal year ended February 2, 2002. 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 2, 2002 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, deferred stock 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 make an irrevocable election at the Board meeting held at the time of 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 for the next 12 month period. 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 1998 Incentive Compensation Plan. 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 ends on the date of the Annual Meeting of Shareholders. Each grant of stock options expire 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. A total of 563,962 common shares are currently available for stock awards under the 1998 Incentive Compensation Plan. The 1998 Incentive Compensation Plan is the same plan used to grant stock options and restricted stock awards to executive officers and other key employees of the company. 9 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 September 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 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 2, 2002, February 3, 2001 and January 29, 2000, 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 OTHER OPTIONS/SARS ALL ANNUAL RESTRICTED COMMON SHARES OTHER NAME AND FISCAL COMPEN- STOCK --------------------- COMPEN- PRINCIPAL POSITION YEAR(1) SALARY(2) BONUS(3) SATION AWARDS(4) CLASS A CLASS B SATION(5) ------------------ ------- --------- -------- -------- ---------- --------- --------- ---------- Alan Rosskamm 2002 $465,000 -- -- -- -- -- $78,104 Chairman of the Board, 2001 $480,965 -- -- -- -- 250,000 $78,710 President and 2000 $450,053 $225,027 -- -- -- 60,000 $79,042 Chief Executive Officer Dave Bolen(6) 2002 $342,597 -- -- -- -- 50,000 $19,314 Executive Vice President, 2001 $329,716 -- -- -- -- 125,000 $20,363 Merchandising and 2000 $300,035 $ 75,009 -- -- -- 33,000 $20,758 Marketing Brian Carney 2002 $306,500 -- -- -- -- 50,000 $14,273 Executive Vice President, 2001 $316,871 -- -- -- -- 125,000 $14,724 Chief Financial Officer 2000 $296,022 $ 84,006 -- -- -- 33,000 $14,439 Mike Edwards (7) 2002 $238,484 $100,000 $153,831 $44,500 -- 125,000 $ -- Executive Vice President, 2001 $ -- -- -- -- -- -- $ -- Operations 2000 $ -- -- -- -- -- -- $ -- Rosalind Thompson 2002 $250,000 -- -- -- -- 50,000 $23,769 Executive Vice President, 2001 $259,233 -- -- -- -- 125,000 $ 2,058 Human Resources 2000 $202,446 $ 50,612 -- $57,813 -- 33,000 $ 2,351
- --------------- (1) Fiscal year 2001 was a 53 week year. (2) Includes amounts earned but deferred under Section 401(k) of the Internal Revenue Code. (3) Represents bonuses paid under the Key Management Incentive Plan ("KMIP"). These amounts represent bonuses earned in the fiscal year indicated but paid in the subsequent fiscal year. Mike Edwards was given a $100,000 KMIP guaranteed bonus -- 50% payable April 2001, 50% payable March 2002. (4) The number of restricted stock holdings granted to each named executive officer were as follows: Mr. Edwards 10,000 Class A common shares; and Ms. Thompson 5,000 Class A common shares. (5) 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 and amounts we have expensed for potential benefits earned under our Supplemental Retirement Benefit Plan. For fiscal 10 year 2002, matching contributions made under our Jo-Ann Stores, Inc. Savings Plan 401(k) to executive officers amounted to the following: Mr. Rosskamm -- $2,550; Mr. Bolen -- $2,550; Mr. Carney -- $2,550; and Ms. Thompson -- $2,550. For fiscal year 2002, 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 -- $1,551; Mr. Bolen -- $438; Mr. Carney -- $234; and Ms. Thompson -- $540. Our 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 2002 as follows: Mr. Bolen -- $16,326; Mr. Carney -- $11,489; and Ms. Thompson -- $20,679. There is a split-dollar life insurance arrangement with a trust established by Mr. Rosskamm and his wife, Barbara Rosskamm, for the benefit of their 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 (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 2002 is $74,003. (6) Mr. Bolen assumed the position of Executive Vice President, Merchandising and Marketing effective March 27, 2001. Prior to such date, he served as Executive Vice President, Stores and Business Development from December 1998 to March 2001. (7) Mr. Edwards assumed the position of Executive Vice President, Operations effective April 15, 2001. Other annual compensation includes a $153,831 relocation allowance paid during fiscal 2002. OPTION GRANTS IN FISCAL YEAR 2002 The following table provides information relating to stock option grants during the last fiscal year to the named executive officers of our company noted below. No stock option grant was awarded to the chief executive officer.
INDIVIDUAL GRANTS POTENTIAL REALIZABLE - --------------------------------------------------------------------------------------------- VALUE AT ASSUMED PERCENT OF ANNUAL RATES OF STOCK NUMBER OF TOTAL OPTIONS PRICE APPRECIATION FOR SECURITIES UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(3) OPTIONS GRANTED EMPLOYEES IN BASE PRICE PER EXPIRATION ----------------------- NAME (COMMON SHARES) FISCAL YEAR COMMON SHARE DATE 5% 10% ---- --------------------- ---------------- -------------- ---------- ---------- ---------- Dave Bolen Class B 50,000(1) 12.4% $2.40 07/26/2008 $ 75,467 $191,249 Brian Carney Class B 50,000(1) 12.4% $2.40 07/26/2008 $ 75,467 $191,249 Mike Edwards Class B 125,000(2) 31.0% $3.00 05/04/2011 $235,835 $597,653 Rosalind Thompson Class B 50,000(1) 12.4% $2.40 07/26/2008 $ 75,467 $191,249
- --------------- (1) The options granted become exercisable with respect to one hundred percent four years after the date of grant, but are subject to accelerated vesting when the company achieves certain levels of financial performance. (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 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. 11 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 VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS COMMON SHARES OPTIONS AT FEBRUARY 2, 2002 AT FEBRUARY 2, 2002 ACQUIRED ON VALUE --------------------------- --------------------------- NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- ------------- -------- ----------- ------------- ----------- ------------- Alan Rosskamm Class A -- -- 80,000 -- $334,625 -- Class B -- -- 275,000 295,000 $190,625 $387,500 Dave Bolen Class A -- -- -- -- -- -- Class B -- -- 133,750 199,750 -- $538,750 Brian Carney Class A -- -- 50,000 -- -- -- Class B -- -- 91,250 199,750 -- $538,750 Mike Edwards Class A -- -- -- -- -- -- Class B -- -- -- 125,000 -- $787,500 Rosalind Thompson Class A -- -- 7,250 -- $ 6,663 -- Class B -- -- 70,000 194,000 $ 7,925 $538,750
EXECUTIVE EMPLOYMENT AGREEMENTS Our company has agreements with Alan Rosskamm, Chief Executive Officer, and the other named executive officers that 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 will become operative only if the executive's employment is terminated by the company "without cause" or by the executive for "good reason" (in each case, as defined in the agreement). If an agreement becomes operative, the executive will be entitled to certain severance payments and continuing health and life insurance coverage. The amount of these payments and the length of time that insurance coverage will be continued vary depending upon whether the termination occurs before or after a "Change in Control" of our company (as defined in the agreements). The payments and continuing coverage that may be provided under these agreements for Mr. Rosskamm and the other executive officers are explained below. If Mr. Rosskamm becomes entitled to benefits under the agreement before a Change in Control, he will be entitled to receive continued payments of base salary and continued health and life insurance coverage through the third anniversary of the termination date. If Mr. Rosskamm becomes entitled to benefits under the agreement after a Change in Control, he will be entitled to prompt payment of (a) a lump sum equal to three times the sum of his base salary plus bonus, (b) any unpaid bonus for any prior year, and (c) a pro rata bonus for that part of the current year that ends on the termination date. In addition, health and life insurance coverage will be continued through the third anniversary of the termination date. Whether the termination is before or after a Change in Control, continuing health and certain life insurance coverage would stop if Mr. Rosskamm becomes eligible for similar benefits with another employer. The agreements for the other executive officers provide for similar benefits except that (a) if the termination is before a Change in Control, salary and health and life insurance coverage would continue for one and one-half years, rather than three years, after the termination date and (b) if the termination is after a Change in Control, the lump sum payment would be two times, rather than three times, salary and bonus and health and life insurance coverage would be continued through the second, rather than the third, anniversary of the termination date. In addition, the other executive officers would be entitled to a lump sum payment in lieu of any retirement benefits provided under the company's Supplemental Retirement Benefit Plan. 12 REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION The Compensation Committee of the Board of Directors (the "Compensation Committee") 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 chief executive officer and other executive officers and operating officers. Each member of the Compensation Committee is a non-employee director. 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 and revenues 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 2002, executive officers did not receive salary increases, except for Dave Bolen, who received a salary increase of approximately 8% as a result of his promotion to the position of Executive Vice President, Merchandising and Marketing. ANNUAL BONUS. Our company awards bonuses to executive officers, operating officers and certain other management employees through the Key Management Incentive Plan ("KMIP"). The KMIP 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 KMIP participants are aligned with those of our company's shareholders, the company's profits are utilized as the primary 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. 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 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. 13 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. Restricted stock awards may also be granted under the 1994 Executive Incentive 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, other operating officers and certain other management employees upon hire, promotion or the assumption of increased responsibility. 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. Historically, an annual award is granted to the entire management group, although no such award was made in fiscal year 2002. Generally, stock option awards are fully exercisable after four years following the date of grant and expire in ten years. As part of a management retention plan approved by the Compensation Committee, a specific retention option grant was awarded in the first quarter of fiscal year 2001 to executive officers, other operating officers and certain other management employees. These options, which were larger in size than a normal annual option grant vested 50% after 3 years and 50% at the end of the fourth year and expire in ten years. During fiscal year 2002, an additional retention option grant was awarded. These option awards were made to executive officers of the company, other than the chief executive officer, that were shorter in duration, with a seven year expiration. These stock option awards vest in four years but are subject to accelerated vesting when the company achieves certain levels of financial performance. By establishing option awards with shorter periods of duration and accelerated vesting provisions, the Compensation Committee believes that the value of such awards are more closely aligned to the near-term financial performance and success of the company, which is appropriate given the turnaround initiatives established for the company. 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 restriction, 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 2002? During fiscal year 2002, Mr. Rosskamm did not receive an increase to his base salary of $465,000. The Compensation Committee will continue to review Mr. Rosskamm's salary in light of market conditions in the future. Mr. Rosskamm was not awarded a bonus for fiscal 2002 under the Key Management Incentive Plan. Also, no stock option award was granted to Mr. Rosskamm during fiscal year 2002. As part of his overall compensation package, Mr. Rosskamm is provided a split dollar life insurance program for which the beneficiary is his wife upon his death and a trust established for the benefit of Mr. Rosskamm's children, upon the second to die of both Mr. Rosskamm and his wife. See note (5) to the Summary Compensation Table under "Executive Compensation." 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 or one of the four other most highly compensated executive officers, unless such compensation is performance-based. 14 Qualifying performance-based compensation will not be subject to the deduction limit if certain requirements are met. During fiscal 1999, the shareholders approved the 1998 Incentive Compensation Plan, a plan that provides for performance-based awards. The stock options and restricted stock awards made under the 1998 Incentive Compensation Plan are intended to qualify as performance-based compensation under Section 162(m). The names of the directors who serve on the Compensation Committee are set forth below. COMPENSATION COMMITTEE FRANK NEWMAN (Chairman) SCOTT COWEN BERYL RAFF GREGG SEARLE 15 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 the company. 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 of 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 2, 2002, 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 2, 2002, for filing with the Securities and Exchange Commission. Historically, the Audit Committee recommends the appointment of the independent auditors to the full Board of Directors at its November Board Meeting after it has had the opportunity to review the scope of work to be performed and the fees proposed. Arthur Andersen LLP has been the independent auditor of the company, and the company presently intends to utilize Arthur Andersen LLP in the review of its first quarter results during the fiscal year ending February 1, 2003. The Audit Committee wishes to acknowledge the quality of the services that the company has received from Arthur Andersen LLP, and the integrity and professionalism of their personnel assigned to the company's audit. However, in light of the current environment, the Audit Committee has met with senior management of Arthur Andersen LLP, and is closely monitoring the evolving events. The Audit Committee has taken appropriate contingency planning steps to interview and evaluate other independent auditors in the event that the Audit Committee exercises its right to change independent auditors during the February 1, 2003 fiscal year. AUDIT COMMITTEE SCOTT COWEN (Chairman) FRANK NEWMAN BERYL RAFF GREGG SEARLE 16 PRINCIPAL ACCOUNTING FIRM FEES The following table sets forth the aggregate fees billed to our company for the fiscal year ended February 2, 2002 by the company's principal accounting firm, Arthur Andersen LLP (in thousands): Audit fees $265 Financial information systems design and implementation fees -- All other fees 103(a)(b) ---- $368 ====
- --------------- (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 Specialty Stores Index for the last five years. In each case, we assumed an initial investment of $100 on January 31, 1997. 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 LOGO 1997 1998 1999 2000 2001 2002 Jo-Ann Stores, Inc. Class A Common Shares 100 160 101 67 37 76 Jo-Ann Stores, Inc. Class B Common Shares 100 152 90 66 32 61 S&P 500 Index 100 125 163 173 172 144 S&P Specialty Stores Index 100 134 136 114 140 203
17 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 2, 2002, 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 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 2, 2002. PROXY SOLICITATION COSTS The proxies being solicited by this proxy statement 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 2003 Annual Meeting of Shareholders is January 8, 2003. Proxies for the 2003 Annual Meeting of Shareholders will confer discretionary authority to vote on any matter that a shareholder does not give written notice of by March 24, 2003. ANNUAL REPORT Our Annual Report for the fiscal year ended February 2, 2002 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 6, 2002 18 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 Audit 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 payments, transactions, or procedures that A-1 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 its own accounting advisors, legal counsel or other assistance for this purpose, if, in its judgement, that is appropriate. A-2 [JO-ANN STORES INC LOGO] VOTE BY PHONE - 1-800-690-6903 C/O PROXY SERVICES USE ANY TOUCH-TONE TELEPHONE TO TRANSMIT YOUR VOTING P.O. BOX 9150 INSTRUCTIONS ANYTIME BEFORE 12:00 NOON EASTERN FARMINGDALE, NY 11735 STANDARD TIME, ON JUNE 5, 2002. 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 5, 2002. 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 ELECTRONIC 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: JOANN1 KEEP THIS PORTION FOR YOUR RECORDS - ------------------------------------------------------------------------------------------------------------------------------------ DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. - ------------------------------------------------------------------------------------------------------------------------------------ JO-ANN STORES, INC. ELECTION OF DIRECTORS 1. To elect the following three directors of the class whose FOR WITHHOLD FOR ALL To withhold authority to vote, mark three-year terms of office will expire in 2005: ALL ALL EXCEPT "For All Except" and write the nominee's number on the line below. 01) Frank Newman [ ] [ ] [ ] 02) Betty Rosskamm -------------------------------------- 03) Beryl Raff SHARES REPRESENTED BY PROPERLY EXECUTED PROXIES WILL BE VOTED AS SPECIFIED. UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION 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 - ------------------------------------------------------------------------------------------------------------------------------------
DIRECTIONS TO THE HILTON GARDEN INN 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. [MAP] 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. JOANN2 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JO-ANN STORES, INC. BOARD OF DIRECTORS PROXY ANNUAL MEETING, JUNE 6, 2002 At the Annual Meeting of Shareholders of our Company to be held on June 6, 2002, and at any adjournment, Ira Gumberg and Alma Zimmerman 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 three directors of the class whose three-year terms of office will expire in 2005: Frank Newman, Betty Rosskamm and Beryl Raff. ---------------- SEE REVERSE SIDE ---------------- - -------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----