UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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REX Stores Corporation
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[REX STORES LOGO]
REX STORES CORPORATION
2875 NEEDMORE ROAD
DAYTON, OHIO 45414
-------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 26, 2005
The Annual Meeting of Shareholders of REX Stores Corporation will be held at
the Dayton Racquet Club, Kettering Tower, Dayton, Ohio on Thursday, May 26,
2005, at 2:00 p.m., for the following purposes:
1. Election of seven members to the Board of Directors to serve until
the next Annual Meeting of Shareholders and until their respective
successors are elected and qualified.
2. Transaction of such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Only shareholders of record at the close of business on April 21, 2005 will
be entitled to notice of and to vote at the Annual Meeting.
All shareholders are cordially invited to attend the Annual Meeting in
person.
By Order of the Board of Directors
EDWARD M. KRESS
EDWARD M. KRESS
Secretary
Dayton, Ohio
April 28, 2005
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WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, DATE,
SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE
PROVIDED.
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REX STORES CORPORATION
2875 NEEDMORE ROAD
DAYTON, OHIO 45414
--------------------------
PROXY STATEMENT
--------------------------
MAILING DATE
APRIL 28, 2005
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of REX Stores Corporation, a Delaware
corporation (the 'Company'), for use for the purposes set forth herein at its
Annual Meeting of Shareholders to be held on May 26, 2005 and any adjournments
thereof. All properly executed proxies will be voted as directed by the
shareholder on the proxy card. If no direction is given, proxies will be voted
in accordance with the Board of Directors' recommendations and, in the
discretion of the proxy holders, in the transaction of such other business as
may properly come before the Annual Meeting and any adjournments thereof. Any
proxy may be revoked by a shareholder by delivering written notice of revocation
to the Company or in person at the Annual Meeting at any time prior to the
voting thereof.
The Company has one class of stock outstanding, namely Common Stock, $.01
par value, of which there were 11,122,522 shares outstanding as of April 21,
2005. Only holders of Common Stock whose names appeared of record on the books
of the Company at the close of business on April 21, 2005 are entitled to notice
of and to vote at the Annual Meeting. Each shareholder is entitled to one vote
per share.
A majority of the outstanding shares of Common Stock will constitute a
quorum at the Annual Meeting. Abstentions and broker non-votes are counted for
purposes of determining the presence or absence of a quorum. Directors are
elected by a plurality of the votes cast by the holders of Common Stock at a
meeting at which a quorum is present. Abstentions and broker non-votes will not
be counted toward a nominee's achievement of a plurality and thus will have no
effect. A broker non-vote occurs when a broker submits a proxy with respect to
shares held in a fiduciary capacity (or 'street name') that indicates the broker
does not have discretionary authority to vote the shares on a particular matter.
Brokers normally have discretion to vote shares held in street name on 'routine'
matters, such as election of directors, but not on non-routine matters such as
approval of stock plans.
FISCAL YEAR
All references in this Proxy Statement to a particular fiscal year are to
the Company's fiscal year ended January 31. For example, 'fiscal 2004' means the
period February 1, 2004 to January 31, 2005.
ELECTION OF DIRECTORS
Seven directors are to be elected at the Annual Meeting to hold office until
the next Annual Meeting of Shareholders and until their successors are elected
and qualified. Unless otherwise directed, it is the intention of the persons
named in the accompanying proxy to vote each proxy for the election of the
nominees listed below. All nominees are presently directors of the Company.
If at the time of the Annual Meeting any nominee is unable or declines to
serve, the proxy holders will vote for the election of such substitute nominee
as the Board of Directors may recommend. The Company and the Board of Directors
have no reason to believe that any substitute nominee will be required.
Set forth below is certain information with respect to the nominees for
director.
STUART A. ROSE, 50, has been the Chairman of the Board and Chief Executive
Officer of the Company since its incorporation in 1984 as a holding company to
succeed to the ownership of Rex Radio and Television, Inc., Kelly & Cohen
Appliances, Inc. and Stereo Town, Inc. Upon the retirement of Mr. Tomchin in
2004, Mr. Rose was also elected President. Prior to 1984, Mr. Rose was Chairman
of the Board and Chief Executive Officer of Rex Radio and Television, Inc.,
which he founded in 1980 to acquire the stock of a corporation which operated
four retail stores.
LAWRENCE TOMCHIN, 77, retired as the President and Chief Operating Officer
of the Company effective January 31, 2004, a position he held since 1990.
Mr. Tomchin remains a part-time employee of, and consultant to, the Company.
From 1984 to 1990, he was the Executive Vice President and Chief Operating
Officer of the Company. Mr. Tomchin has been a director since 1984. Mr. Tomchin
was Vice President and General Manager of the corporation which was acquired by
Rex Radio and Television, Inc. in 1980 and served as Executive Vice President of
Rex Radio and Television, Inc. after the acquisition.
ROBERT DAVIDOFF, 78, has been a director since 1984. Mr. Davidoff has been
employed by Carl Marks & Co., Inc., an investment banking firm, since 1950 and
currently is Vice President in charge of corporate finance. Mr. Davidoff is also
a director of Hubco Exploration, Inc., Marisa Christina, Inc. and Access
Integrated Technologies, Inc.
EDWARD M. KRESS, 55, has been the Secretary of the Company since 1984 and a
director since 1985. Mr. Kress has been a partner of the law firm of Chernesky,
Heyman & Kress P.L.L., counsel for the Company, since 1988. Mr. Kress has
practiced law in Dayton, Ohio since 1974.
LEE FISHER, 53, has been a director since 1996. Mr. Fisher is the President
and Chief Executive Officer of the Center for Families and Children, a private
nonprofit human services organization. Mr. Fisher was a partner of the law firm
of Hahn Loeser & Parks LLP from 1995 to 1999. Mr. Fisher served as Ohio Attorney
General from 1991 to 1995, State Senator, Ohio General Assembly, from 1983 to
1991, and State Representative, Ohio General Assembly, from 1981 to 1983. Mr.
Fisher practiced law with Hahn Loeser & Parks from 1978 to 1991.
CHARLES A. ELCAN, 41, has been a director since 2003. Mr. Elcan became
Executive Vice President -- Medical Office Properties of Health Care Property
Investors, Inc. (HCP), a real estate investment trust specializing in health
care related real estate, in October 2003. Prior to that date, he served as the
Chief Executive Officer and President of MedCap Properties, LLC, a real estate
company located in Nashville, Tennessee that owns, operates and develops real
estate in the healthcare field, which HCP acquired in October 2003. From 1992 to
1997, Mr. Elcan was a founder and investor in
2
Behavioral Healthcare Corporation (now Ardent Health Services LLC), a healthcare
company that owns and operates psychiatric and acute care hospitals.
DAVID S. HARRIS, 45, has been a director since 2004. Mr. Harris serves as a
Managing Director of Tri-Artisan Partners, LLC, a private merchant banking firm
engaged in investment banking and principal investment activities. From
May 2001 to December 2001, Mr. Harris served as a Managing Director in the
investment banking division of ABN Amro Securities LLC (ABN). From 1997 to
May 2001, Mr. Harris served as a Managing Director and Sector Head of the
Retail, Consumer and Leisure Group of ING Barings LLC (ING). The investment
banking operations of ING were acquired by ABN in May 2001. From 1986 to 1997
Mr. Harris served in various capacities as a member of the investment banking
group of Furman Selz LLC. Furman Selz was acquired by ING in 1997. Mr. Harris is
also a director of Steiner Leisure Limited.
BOARD OF DIRECTORS
The Board of Directors consists of seven directors. The Board has determined
that four of the seven directors, Robert Davidoff, Lee Fisher, Charles A. Elcan
and David S. Harris, are independent within the meaning of Section 303A.02 of
the New York Stock Exchange ('NYSE') Listed Company Manual.
To be considered independent, the Board must determine that the director has
no material relationship with the Company, either directly or as a partner,
shareholder or officer of an organization that has a relationship with the
Company, including commercial, industrial, banking, consulting, legal,
accounting, charitable and family relationships, among others. The Board has
established the following guidelines, consistent with Section 303A.02 of the
NYSE listing standards, to assist it in determining independence of directors.
A director who is an employee, or whose immediate family member is an
executive officer, of the Company is not independent until three years
after the end of such employment relationship.
A director who receives, or whose immediate family member receives, more
than $100,000 during any 12-month period in direct compensation from the
Company, other than director and committee fees and pension or other forms
of deferred compensation for prior service (provided such compensation is
not contingent in any way on continued service), is not independent until
three years after he or she ceases to receive more than $100,000 during
any 12-month period in such compensation. (Compensation received by an
immediate family member for service as a non-executive employee need not
be considered in determining independence under this test.)
A director who is a partner or employee, or whose immediate family member
is a partner, or an employee participating in the audit, assurance or tax
compliance (but not tax planning) practice, of the Company's internal or
external auditor, or a director or immediate family member who was within
the last three years a partner or employee of such a firm and personally
worked on the Company's audit, is not independent.
A director who is employed, or whose immediate family member is employed,
as an executive officer of another company where any of the Company's
present executives serve on that company's compensation committee is not
'independent' until three years after the end of such service or the
employment relationship.
A director who is an employee, or whose immediate family member is an
executive officer, of a company that makes payments to, or receives
payments from, the Company for property or
3
services in an amount which, in any single fiscal year, exceeds the
greater of $1 million, or 2% of such other company's consolidated gross
revenues, is not 'independent' until three years after falling below such
threshold.
Mr. Elcan's brother provides real estate brokerage services to the Company
and has acted as a finder in connection with the Company's investments in
synthetic fuel limited partnerships and facilities. The Board has determined
that this is not a material relationship affecting Mr. Elcan's independence.
The Board of Directors held one meeting and took action by unanimous written
consent three times during the fiscal year ended January 31, 2005. The average
attendance by incumbent directors at Board and Board Committee meetings was 98%.
Directors are invited and encouraged to attend the Company's annual meeting
of shareholders. All directors attended the 2004 Annual Meeting.
The non-management directors meet at regularly scheduled executive sessions
without management. The presiding director for each such executive session is
rotated among the chairs of the independent Board committees.
BOARD COMMITTEES
The Board of Directors has four standing committees: the Audit Committee,
the Compensation Committee, the Nominating/Corporate Governance Committee and
the Executive Committee.
Audit Committee. The Audit Committee assists Board oversight of the
integrity of the financial statements of the Company, the Company's compliance
with legal and regulatory requirements, the independent accountants'
qualifications and independence, and the performance of the Company's internal
audit function and independent accountants. The Audit Committee is directly
responsible for the appointment, retention and oversight of the work of the
Company's independent accountants. The Audit Committee acts pursuant to a
written charter. The members of the Audit Committee are Messrs. Harris
(Chairman), Davidoff, Fisher and Elcan. All members of the Audit Committee are
independent within the meaning of applicable NYSE listing standards and rules of
the Securities and Exchange Commission ('SEC'). The Board has determined that
Mr. Harris and Mr. Davidoff are each an audit committee financial expert as
defined by applicable SEC rules. The Audit Committee met eight times during
fiscal 2004.
Compensation Committee. The Compensation Committee has direct responsibility
to review and approve CEO compensation, makes recommendations to the Board with
respect to non-CEO compensation and compensation plans, and administers the
Company's stock option plans. The Compensation Committee acts pursuant to a
written charter. The members of the Compensation Committee are Messrs. Davidoff
(Chairman), Fisher, Elcan and Harris. All members of the Compensation Committee
are independent within the meaning of applicable NYSE listing standards. The
Compensation Committee met two times and took action by unanimous written
consent two times during fiscal 2004.
Nominating/Corporate Governance Committee. The Nominating/Corporate
Governance Committee identifies individuals qualified to become Board members
consistent with criteria approved by the Board, recommends for the Board's
selection a slate of director nominees for election to the Board at the annual
meeting of shareholders, develops and recommends to the Board the Corporate
Governance Guidelines applicable to the Company, and oversees the evaluation of
the Board and management. The Nominating/Corporate Governance Committee acts
pursuant to a written charter. The members of the
4
Nominating/Corporate Governance Committee are Messrs. Fisher (Chairman),
Davidoff, Elcan and Harris. All members of the Nominating/Corporate Governance
Committee are independent within the meaning of applicable NYSE listing
standards. The Nominating/Corporate Governance Committee was established in
March 2004 and did not meet formally in fiscal 2004.
The Board seeks director candidates who possess the background, skills and
expertise to make a significant contribution to the Board, the Company and
shareholders. In identifying and evaluating director candidates, the
Nominating/Corporate Governance Committee may consider a number of attributes,
including experience, skills, judgment, accountability and integrity, financial
literacy, time, industry knowledge, networking/contacts, leadership,
independence from management and other factors it deems relevant. The
Nominating/Corporate Governance Committee reviews the desired experience, mix of
skills and other qualities to assure appropriate Board composition, taking into
account the current directors and specific needs of the Company and the Board.
The Nominating/Corporate Governance Committee may solicit advice from the CEO
and other members of the Board.
The Nominating/Corporate Governance Committee will consider director
candidates recommended by the Company's shareholders. Shareholders must submit
the name of a proposed shareholder candidate to the Nominating/Corporate
Governance Committee at the Company's corporate offices by the date specified
under 'Shareholder Proposals.'
Executive Committee. The Executive Committee is empowered to exercise all of
the powers and authority of the Board of Directors between meetings of the
Board, other than the power to fill vacancies on the Board or on any Board
committee and the power to declare dividends. The members of the Executive
Committee are Messrs. Rose and Tomchin. The Executive Committee met informally
throughout the year and took formal action by unanimous written consent three
times during fiscal 2004.
CODE OF ETHICS, CORPORATE GOVERNANCE GUIDELINES AND COMMITTEE CHARTERS
The Company has adopted a Code of Business Conduct and Ethics applicable to
its employees, officers and directors. A copy of the Code of Business Conduct
and Ethics has been filed as an exhibit to the Company's Annual Report on Form
10-K for the year ended January 31, 2004 and is posted on the Company's website
www.rextv.com.
The Company has adopted a set of Corporate Governance Guidelines addressing
director qualification standards, director responsibilities, director access to
management and independent advisors, director compensation and other matters. A
copy of the Corporate Governance Guidelines is posted on the Company's website
www.rextv.com.
The charters of the Audit Committee, Compensation Committee and
Nominating/Corporate Governance Committee are posted on the Company's website
www.rextv.com.
Copies of the Code of Business Conduct and Ethics, Corporate Governance
Guidelines and the charters of Audit Committee, Compensation Committee and
Nominating/Corporate Governance Committee are available in print to shareholders
by contacting Douglas L. Bruggeman, Vice President -- Finance, REX Stores
Corporation at (937) 276-3931.
PROCEDURES FOR CONTACTING DIRECTORS
Shareholders may communicate with the Board, the non-management directors as
a group, or a specific director by writing to REX Stores Corporation, 2875
Needmore Road, Dayton, Ohio 45414,
5
Attention: Board of Directors, Non-Management Directors or [Name of Specific
Director]. All communications will be forwarded as soon as practicable to the
specific director, or if addressed to the Non-Management Directors to the
Chairman of the Audit Committee, or, if addressed to the Board, to the Chairman
of the Board or other director designated by the Board to receive such
communications.
DIRECTOR COMPENSATION
Directors who are not officers or employees of the Company are paid an
annual retainer of $20,000 per year (plus reasonable travel expenses) and a
$5,000 per year retainer if they serve on one or more Board committees. The
Chairman of the Audit Committee is paid an additional $5,000 per year retainer.
Nonemployee directors are eligible to receive grants of stock options under
the Company's 1995 and 1999 Omnibus Stock Incentive Plans. Under the Plans, on
the date of each annual meeting of the Company's shareholders, each nonemployee
director is awarded a nonqualified stock option to purchase a number of shares
of Common Stock such that the exercise price of the option multiplied by the
number of shares subject to the option is as near as possible to $100,000, but
in no event more than 10,000 shares. The exercise price of each nonqualified
option is the fair market value of the Common Stock on the date of grant. The
options are exercisable in five equal annual installments commencing on the
first anniversary of the date of grant and expire ten years from the date of
grant. For fiscal 2004, each nonemployee director was granted an option to
purchase 8,210 shares at an exercise price of $12.18 per share.
AUDIT COMMITTEE REPORT
The Audit Committee assists Board oversight of the integrity of the
financial statements of the Company. The Audit Committee is comprised of
nonemployee directors who meet the independence and financial experience
requirements of applicable NYSE listing standards and SEC rules. The Audit
Committee operates under a written charter.
Management has the primary responsibility for the financial statements and
the reporting process, including the Company's systems of internal controls. In
fulfilling its oversight responsibilities, the Committee reviewed the audited
financial statements in the Annual Report on Form 10-K with management,
including a discussion of the quality and the acceptability of the Company's
financial reporting and controls.
The Committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles, their judgments as to
the quality and the acceptability of the Company's financial reporting and such
other matters as are required to be discussed with the Committee under generally
accepted auditing standards. In addition, the Committee has discussed with the
independent auditors the auditors' independence from management and the Company,
including the matters in the auditors' written disclosures required by the
Independence Standards Board.
The Committee also discussed with the Company's independent auditors the
overall scope and plans for their respective audits. The Committee meets
periodically with the independent auditors, with and without management present,
to discuss the results of their examinations, their evaluations of the Company's
internal controls, and the overall quality of the Company's financial reporting.
6
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 2005 for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
DAVID S. HARRIS, Chairman
ROBERT DAVIDOFF
LEE FISHER
CHARLES A. ELCAN
7
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation awarded to, earned by or
paid to the Chief Executive Officer, and to each of the other executive officers
of the Company whose total annual salary and bonus exceeded $100,000, for
services rendered in all capacities to the Company and its subsidiaries for each
of the last three fiscal years.
LONG-TERM
COMPENSATION
------------
AWARDS
ANNUAL COMPENSATION ------------
-------------------------------------------- SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($)(1) OPTIONS (#) COMPENSATION ($)(2)
------------------ ---- ---------- --------- ------------------- ----------- -------------------
Stuart A. Rose .............. 2004 154,500 821,689 8,750 -- --
Chairman of the Board, 2003 154,500 984,225 8,750 -- --
President and Chief 2002 154,500 882,800 8,750 -- --
Executive Officer
Douglas L. Bruggeman ........ 2004 167,367 43,817 -- 35,000 200
Vice President -- Finance, 2003 148,800 51,500 -- 35,000 200
Chief Financial Officer and 2002 137,500 46,200 -- 35,000 200
Treasurer
---------
(1) Amounts represent the value of use of a company automobile.
(2) Amounts represent employer matching contributions on behalf of the named
executive under the Company's Profit Sharing Plan.
EMPLOYMENT AGREEMENTS
Stuart A. Rose has an employment agreement with Rex Radio and Television,
Inc. that provides for an annual salary of $154,500, a cash bonus at the
discretion of the Board of Directors, participation in all employee benefit
plans and reimbursement for business expenses. The agreement is for a term of
three years commencing January 1, 2003 and is automatically renewed for
additional one-year terms until Mr. Rose's resignation, death, total disability
or termination of employment for cause, unless earlier terminated by either
party upon 180 days written notice.
Lawrence Tomchin has an employment agreement with Rex Radio and Television,
Inc. that provides for an annual salary of $77,250, a cash bonus at the
discretion of the Board of Directors, participation in all employee benefit
plans and reimbursement for business expenses. The agreement is for a term of
one year commencing February 1, 2004 and is automatically renewed for additional
one-year terms until Mr. Tomchin's resignation, death, total disability or
termination of employment for cause, or unless earlier terminated by either
party upon 90 days written notice. In fiscal 2004, Mr. Tomchin was paid a salary
of $77,250, awarded a cash bonus of $192,070 and provided use of a company
automobile valued at $10,750.
8
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning individual grants of
stock options made to the named executive officers during the fiscal year ended
January 31, 2005.
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
------------------------------------------------------- ---------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
---- ----------- ----------- ------ ---- ------ -------
Stuart A. Rose................. -- -- -- -- -- --
Douglas L. Bruggeman........... 35,000(1) 10.7 12.45 6/7/14 274,041 694,473
---------
(1) Nonqualified options granted pursuant to the Company's 1999 Omnibus Stock
Incentive Plan. These options become exercisable in five cumulative
installments of 20% on each anniversary of the date of grant. The date of
grant was June 7, 2004.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning each exercise of stock
options during fiscal 2004 by each of the named executive officers and the
fiscal year-end value of unexercised options.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
ACQUIRED YEAR-END (#) FISCAL YEAR-END ($)(1)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
Stuart A. Rose................ 461,275 4,165,078 2,464,250 387,000 21,359,823 2,525,625
Douglas L. Bruggeman.......... 14,500 188,730 199,500 111,000 1,536,260 284,515
---------
(1) Unexercised options were in-the-money if the fair market value of the
underlying shares exceeded the exercise price of the option at January 31,
2005.
EQUITY COMPENSATION PLAN INFORMATION
NUMBER OF SECURITIES
REMAINING AVAILABLE
FOR FUTURE ISSUANCE
NUMBER OF SECURITIES UNDER EQUITY
TO BE ISSUED UPON WEIGHTED-AVERAGE COMPENSATION PLANS
EXERCISE OF EXERCISE PRICE OF (EXCLUDING SECURITIES
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, REFLECTED IN
WARRANTS AND RIGHTS WARRANTS AND RIGHTS COLUMN(A))
PLAN CATEGORY (a) (b) (c)
------------- --------------------- -------------------- ---------------------
Equity compensation plans approved by
security holders(1)................. 815,360 $5.13 108,011
Equity compensation plans not approved
by security holders(2).............. 4,935,948 $8.12 1,962,803
--------- ----- ---------
Total............................. 5,751,308 $7.70 2,070,814
--------- ----- ---------
--------- ----- ---------
(footnotes on next page)
9
(footnotes from previous page)
(1) Includes the Company's 1995 Omnibus Stock Incentive Plan.
(2) Includes the Company's 1999 Omnibus Stock Incentive Plan, the 1998
Nonqualified Executive Stock Options and the 2001 Nonqualified Executive
Stock Options.
Under the 1999 Omnibus Plan, the Company may grant to officers and key
employees awards in the form of nonqualified stock options, stock
appreciation rights, restricted stock, other stock-based awards and cash
incentive awards. The 1999 Omnibus Plan also provides for yearly grants of
nonqualified stock options to directors who are not employees of the
Company. The exercise price of each option must be at least 100% of the fair
market value of the Common Stock on the date of grant. A maximum of
4,500,000 shares are authorized for issuance under the 1999 Omnibus Plan, of
which 1,962,803 shares remain available for issuance.
The 1998 Nonqualified Executive Stock Options and the 2001 Nonqualified
Executive Stock Options are individual compensation arrangements. On
October 14, 1998, nonqualified stock options for 1,462,500 shares were
granted to Messrs. Rose and Tomchin at an exercise price of $4.42 per share,
which represented the market price on the date of grant, in connection with
their entering into three year employment agreements. These options are
fully exercisable and outstanding. On April 17, 2001, nonqualified stock
options for 1,462,500 shares were granted to Messrs. Rose and Tomchin at an
exercise price of $8.01 per share, which represented the market price on the
date of grant, in connection with their entering into new three year
employment agreements. These options become exercisable in one-third
increments on December 31, 2003, 2004 and 2005.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee reviews and approves Chief Executive Officer
(CEO) compensation, makes recommendations to the Board with respect to non-CEO
compensation and compensatory plans, and administers the Company's 1995 and 1999
Omnibus Stock Incentive Plans.
EXECUTIVE COMPENSATION POLICIES
The goal of the Company's executive compensation policy is to ensure that an
appropriate relationship exists between executive pay and the creation of
shareholder value, while at the same time motivating and retaining key
employees. To achieve this goal, the Company's executive compensation policies
integrate base salary with annual bonuses based upon corporate and individual
performance, historically supplemented with long-term equity-based incentive
awards.
Base salary is intended to be set at a level below or competitive with the
base salaries paid to executives of similarly-sized companies within the
industry and the peer group. Salaries for executive officers are reviewed by the
Committee on an annual basis, subject to the terms of any existing employment
agreements.
Annual bonuses are intended to comprise a substantial portion of each senior
executive officer's annual cash compensation and are based upon corporate
financial performance. For fiscal 2004, to reflect tax savings realized from the
Company's investments generating income tax credits, the Committee established
the amount of the Company's after-tax earnings as a percentage of net sales (the
'After-Tax Earnings Percentage') as the performance measure for determining
senior executives' bonuses. In calculating after-tax earnings for this purpose,
the Company's effective federal income tax
10
rate cannot go below 0%. Annual bonuses for the executive officers other than
senior executives are established by the Chief Executive Officer based on his
assessment of the individual's performance.
Long-term incentive awards are made in the form of annual grants of
incentive stock options and nonqualified stock options pursuant to the Omnibus
Plans. Stock appreciation rights, restricted stock and other stock-based awards
may also be granted under the Plans. The Committee feels that stock options and
other stock-based awards are an effective long-term incentive for executive
officers to create value for shareholders, since their value bears a direct
relationship to the Company's stock price. Stock options are granted at the fair
market value of the underlying shares at the date of grant (unless otherwise
required by applicable law), and generally vest in installments over multiple
years. During fiscal 2004, nonqualified stock options were granted under the
1999 Omnibus Plan to 69 employees, including one executive officer, based
primarily on the individual's contribution to the Company's growth and
profitability. The Committee does not intend to grant stock options to employees
during fiscal 2005.
CEO COMPENSATION
Stuart A. Rose, the Chairman, President and Chief Executive Officer of the
Company, received a base salary of $154,500 in fiscal 2004 pursuant to the terms
of his employment agreement.
Mr. Rose earned a cash bonus of $821,689 for fiscal 2004, compared to his
fiscal 2003 cash bonus of $984,225. This decrease was based on the fiscal 2004
After-Tax Earnings Percentage of 4.978% (compared to the fiscal 2003 After-Tax
Earnings Percentage of 5.965%). In determining Mr. Rose's cash bonus, the
Committee utilized a measure of a $165,000 cash bonus for each After-Tax
Earnings Percentage point.
INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code generally disallows a federal
income tax deduction to a public company for compensation paid in excess of
$1 million in any taxable year to the corporation's chief executive officer or
any of its other named executive officers in the proxy statement. Depending upon
the number of options exercised by an executive officer in a particular year and
the value of the underlying shares at that time, exercise of the 1998 or 2001
nonqualified executive stock options or the nonqualified options granted under
the 1999 Omnibus Plan could result in the individual's annual compensation
exceeding the $1 million deduction limitation. For fiscal 2004, a portion of Mr.
Rose's compensation exceeded the $1 million deduction limitation.
COMPENSATION COMMITTEE
ROBERT DAVIDOFF, Chairman
LEE FISHER
CHARLES A. ELCAN
DAVID S. HARRIS
11
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock against
the cumulative total return of the S&P 500 Stock Index and two peer groups (new
and old) comprised of selected publicly traded consumer electronics retailers
(*) for the period commencing January 31, 2000 and ended January 31, 2005. The
graph assumes an investment of $100 in the Company's Common Stock and each index
on January 31, 2000 and reinvestment of all dividends.
[PERFORMANCE GRAPH]
1/31/00 1/31/01 1/31/02 1/31/03 1/31/04 1/31/05
REX Stores Corporation 100 129.69 287.3 148.36 189.48 213.02
New Peer Group 100 79.63 120.35 54.89 105.31 115.89
S&P 500 100 99.11 83.1 63.97 86.09 91.44
Old Peer Group 100 102.05 121 25.96 37.45 28.41
---------
* The new peer group is comprised of Best Buy Co., Inc., Tweeter Home
Entertainment Group, Inc., Circuit City Stores, Inc. and Conn's, Inc. The old
peer group is comprised of Tweeter Home Entertainment Group, Inc., Ultimate
Electronics, Inc. and Conn's, Inc. Ultimate Electronics filed for Chapter 11
bankruptcy protection in January 2005 and was dropped from the new peer
group. Best Buy and Circuit City were added since their business operations
are similar to the Company's.
12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of April 21, 2005 (the record date for
the Annual Meeting), certain information with respect to the beneficial
ownership of the Company's Common Stock by each director and nominee for
director of the Company, each executive officer of the Company, all directors
and executive officers of the Company as a group and those persons or groups
known by the Company to own more than 5% of the Company's Common Stock.
For purposes of this table, a person is considered to 'beneficially own' any
shares if such person, directly or indirectly, through any contract,
arrangement, understanding, relationship, or otherwise, has (or has the right to
acquire within 60 days after April 21, 2005) sole or shared power (i) to vote or
to direct the voting of such shares or (ii) to dispose or to direct the
disposition of such shares. Unless otherwise indicated, voting power and
investment power are exercised solely by the named person or shared with members
of his household.
COMMON STOCK
BENEFICIALLY OWNED
----------------------
NAME AND ADDRESS NUMBER PERCENT(1)
---------------- ------ ----------
Stuart A. Rose(2)........................................... 3,167,905 24.2%
2875 Needmore Road
Dayton, Ohio 45414
Lawrence Tomchin(3) ........................................ 775,919 6.5%
2875 Needmore Road
Dayton, Ohio 45414
Robert Davidoff(4) ......................................... 288,516 2.6%
900 Third Avenue, 33rd Floor
New York, New York 10022
Edward M. Kress(5) ......................................... 176,805 1.6%
1100 Courthouse Plaza S.W.
Dayton, Ohio 45402
Lee Fisher(6) .............................................. 50,113 *
Western Reserve Building
4500 Euclid Avenue
Cleveland, Ohio 44103
Charles A. Elcan(7) ........................................ 4,964 *
3100 West End Avenue, Suite 800
Nashville, Tennessee 37203
David S. Harris(8) ......................................... 1,642 *
24 Avon Road
Bronxville, New York 10708
Douglas L. Bruggeman(9) .................................... 233,000 2.1%
2875 Needmore Road
Dayton, Ohio 45414
All directors and executive officers as a group
(8 persons)(10)........................................... 4,698,864 32.7%
FMR Corp.(11) ............................................. 1,400,000 12.6%
82 Devonshire Street
Boston, Massachusetts 02109
(table continued on next page)
13
(table continued from previous page)
COMMON STOCK
BENEFICIALLY OWNED
----------------------
NAME AND ADDRESS NUMBER PERCENT(1)
---------------- ------ ----------
Dimensional Fund Advisors Inc.(12) ......................... 932,492 8.4%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Royce & Associates, LLC(13)................................. 764,000 6.9%
1414 Avenue of the Americas
New York, New York 10019
Investment Counselors of Maryland, LLC(14).................. 613,900 5.5%
803 Cathedral Street
Baltimore, Maryland 21201-5297
---------
* One percent or less.
(1) Percentages are calculated on the basis of the number of shares outstanding
on April 21, 2005 plus the number of shares issuable upon the exercise of
options held by the person or group which are exercisable within 60 days
after April 21, 2005.
(2) Includes (i) 511,219 shares held by the Stuart Rose Family Foundation, an
Ohio nonprofit corporation of which Mr. Rose is the sole member, chief
executive officer and one of three members of the board of trustees, the
other two being members of his immediate family and (ii) 1,991,350 shares
issuable upon the exercise of options.
(3) Includes 5,622 shares held by Mr. Tomchin's wife and 770,206 shares
issuable upon the exercise of options.
(4) Includes 105,744 shares issuable upon the exercise of options.
(5) Includes 20,160 shares held by Mr. Kress as co-trustee of two trusts with
respect to which Mr. Kress has shared voting and investment power, 4,775
shares held by Mr. Kress as trustee of two trusts for the benefit of his
children and 105,744 shares issuable upon the exercise of options.
(6) Includes 50,113 shares issuable upon the exercise of options.
(7) Includes 4,964 shares issuable upon the exercise of options.
(8) Includes 1,642 shares issuable upon the exercise of options.
(9) Includes 229,250 shares issuable upon the exercise of options.
(10) Includes 3,259,013 shares issuable upon the exercise of options.
(11) Based on a Schedule 13G filing dated February 14, 2003. Fidelity Management
& Research Company, a wholly-owned subsidiary of FMR Corp. and a registered
investment adviser, is the beneficial owner of 1,400,000 shares of Common
Stock of the Company as a result of acting as investment adviser to various
registered investment companies. One investment company, Fidelity Low
Priced Stock Fund, owns 1,400,000 shares. Edward C. Johnson 3d (Chairman of
FMR Corp.), FMR Corp., through its control of Fidelity Management &
Research Company, and the funds each has sole power to dispose of the
1,400,000 shares owned by the funds, while the sole power to vote
(footnotes continued on next page)
14
(footnotes continued from previous page)
or direct the voting of the shares owned directly by the Fidelity funds
resides with the funds' boards of trustees.
(12) Based on a Schedule 13G filing dated February 9, 2005. Dimensional Fund
Advisors Inc., a registered investment adviser, furnishes investment advice
to four registered investment companies and serves as investment manager to
certain other commingled group trusts and separate accounts. In its role as
investment adviser or manager, Dimensional Fund Advisors Inc. has sole
power to vote and dispose of 932,492 shares owned by these funds.
Dimensional Fund Advisors Inc. disclaims beneficial ownership of all such
shares.
(13) Based on a Schedule 13G filing dated February 2, 2005. Royce & Associates,
LLC, a registered investment adviser, has sole power to vote or direct the
voting and sole power to dispose or direct the disposition of 764,000
shares.
(14) Based on a Schedule 13G filing dated February 4, 2005. All shares of Common
Stock are owned by various investment advisory clients of Investment
Counselors of Maryland, Inc., which is deemed to be a beneficial owner of
those shares due to its discretionary power to make investment decisions
over such shares for its clients and its ability to vote such shares.
Investment Counselors of Maryland, Inc. has sole power to vote 479,900
shares, shared power to vote 134,000 shares and sole power to dispose of
613,900 shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers to file reports of ownership and changes of
ownership of the Company's Common Stock with the Securities and Exchange
Commission. The Company believes that during fiscal 2004 all filing requirements
applicable to its directors and executive officers were met.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Rex Radio and Television, Inc. leases 10,000 square feet for a store in a
strip shopping center in Beavercreek, Ohio, from Stuart Rose/Beavercreek, Inc.
under a net lease dated December 12, 1994. The shareholders of Stuart
Rose/Beavercreek, Inc. are Stuart A. Rose and Lawrence Tomchin. The lease was
renewed for a five year term effective January 31, 2005 pursuant to the terms of
the lease. Base rent is $92,500 per year for the renewal term. Rex Radio and
Television, Inc. also paid Stuart Rose/Beavercreek, Inc. $31,311 under the lease
in fiscal 2004 for its pro rata portion of common area maintenance, real estate
taxes and utilities.
During fiscal 2004, the Company paid the law firm of Chernesky, Heyman &
Kress P.L.L., of which Edward M. Kress is a partner, a total of $438,494 for
legal services.
15
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP served as the Company's independent public accountants
for the fiscal year ended January 31, 2005, and has served in that capacity
since 2002. It is anticipated that representatives of Deloitte & Touche LLP will
be present at the Annual Meeting to respond to appropriate questions from
shareholders and to make a statement if they desire to do so.
The Board of Directors of the Company annually appoints the independent
public accountants for the Company after receiving the recommendations of its
Audit Committee. No recommendation of the Audit Committee has been made
concerning the appointment of independent public accountants for the fiscal year
ending January 31, 2006.
AUDIT AND NON-AUDIT FEES
The following table sets forth the aggregate fees billed to the Company for
the fiscal years ended January 31, 2005 and 2004 by Deloitte & Touche LLP:
FISCAL FISCAL
2004 2003
---- ----
Audit Fees(1)............................................... $487,103 $175,950
Audit-Related Fees(2)....................................... 48,170 20,500
Tax Fees(3)................................................. 159,490 76,975
All Other Fees(4)........................................... -- --
-------- --------
Total................................................... $694,763 $273,425
-------- --------
-------- --------
---------
(1) Audit Fees consist of fees billed for professional services rendered for the
audit of the Company's annual financial statements and review of the interim
financial statements included in the Company's quarterly reports and
services that are normally provided by Deloitte & Touche LLP in connection
with statutory and regulatory filings or engagements. This category included
fees related to the audit of the Company's internal control over financial
reporting required by Section 404 of the Sarbanes-Oxley Act.
(2) Audit-Related Fees consist of fees billed for assurance and related services
that are reasonably related to the performance of the audit or review of the
Company's financial statements and are not reported under 'Audit Fees.' This
category included fees related to the audit of the financial statements of
the Company's employee benefit plan and Sarbanes-Oxley readiness and
advisory services.
(3) Tax Fees consist of fees billed for professional services rendered for tax
compliance, tax advice and tax planning.
(4) All Other Fees consist of fees for products and services other than services
reported above.
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES
The Audit Committee's policy is to pre-approve all audit and non-audit
services provided by the independent public accountants. The Audit Committee
will generally pre-approve a list of specific services and categories of
services, including audit, audit-related, tax and other services, for the
upcoming or current fiscal year, subject to a specified dollar limit. Any
material service not included in the approved list of services, and all services
in excess of the pre-approved dollar limit, must be separately pre-approved by
the Audit Committee. The independent public accountants and
manage-
16
ment are required to periodically report to the Audit Committee all services
performed and fees charged to date by the independent public accountants
pursuant to the pre-approval policy. None of the fees billed by the independent
public accountants for Audit-Related, Tax and Other Services described above
were approved by the Audit Committee after the services were rendered pursuant
to the de minimus exception under SEC rules.
OTHER BUSINESS
SOLICITATION OF PROXIES
The Company will bear the entire expense of this proxy solicitation.
Arrangements will be made with brokers and other custodians, nominees and
fiduciaries to send proxy solicitation materials to their principals and the
Company will, upon request, reimburse them for their reasonable expenses in so
doing. Officers and other regular employees of the Company may solicit proxies
by mail, in person or by telephone.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
Annual Meeting other than those mentioned above. However, if other matters
should properly come before the Annual Meeting or any adjournments thereof, the
proxy holders will vote the proxies thereon in their discretion.
SHAREHOLDER PROPOSALS
Proposals by shareholders intended to be presented at the Company's 2006
Annual Meeting of Shareholders must, in accordance with applicable regulations
of the Securities and Exchange Commission, be received by the Secretary of the
Company at 2875 Needmore Road, Dayton, Ohio 45414 on or before December 29, 2005
in order to be considered for inclusion in the Company's proxy materials for
that meeting. Shareholder proposals intended to be submitted at the 2006 Annual
Meeting outside the processes of Rule 14a-8 will be considered untimely under
Rule 14a-4(c)(1) if not received by the Company at its corporate offices on or
before March 14, 2006. If the Company does not receive timely notice of such
proposal, the proxy holders will vote on the proposal, if presented at the
meeting, in their discretion.
Shareholder recommendations for director candidates must be received by the
Nominating/Corporate Governance Committee at the Company's corporate offices on
or before December 29, 2005 to be considered for nomination in connection with
the 2006 Annual Meeting. Names submitted after this deadline will not be
considered.
By Order of the Board of Directors
EDWARD M. KRESS
EDWARD M. KRESS
Secretary
April 28, 2005
Dayton, Ohio
17
Appendix 1
PROXY
REX STORES CORPORATION
Proxy for Annual Meeting of Shareholders
May 26, 2005
The undersigned hereby appoints Stuart A. Rose and Lawrence Tomchin and
each of them proxies for the undersigned, with full power of substitution, to
vote all the shares of Common Stock of REX STORES CORPORATION, a Delaware
corporation (the "Company"), which the undersigned is entitled to vote at the
Annual Meeting of Shareholders of the Company to be held on Thursday, May 26,
2005, at 2:00 p.m. and any adjournments thereof.
(Continued, and to be signed, on the other side)
ANNUAL MEETING OF SHAREHOLDERS OF
REX STORES CORPORATION
May 26, 2005
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
___ Please detach along perforated line and mail in the envelope provided. ___
------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK
INK AS SHOWN HERE [X]
------------------------------------------------------------------------------------------------------
1. ELECTION OF DIRECTORS: 2. IN THEIR DISCRETION the proxies are
authorized to vote upon such other business
NOMINEES: as may properly come before the Meeting.
[ ] FOR ALL NOMINEES [ ] Stuart A. Rose
[ ] Lawrence Tomchin This proxy is solicited on behalf of the Board of
[ ] WITHHOLD AUTHORITY [ ] Robert Davidoff Directors and will be voted as directed herein. If
FOR ALL NOMINEES [ ] Edward M. Kress no direction is given, this proxy shall be voted
[ ] Lee Fisher FOR Proposal 1.
[ ] FOR ALL EXCEPT [ ] Charles A. Elcan
(See Instructions below) [ ] David S. Harris
INSTRUCTION: To withhold authority to vote for
any individual nominee(s), mark "FOR ALL EXCEPT"
and fill in the circle next to each nominee you
wish to withhold, as shown here: [ ]
--------------------------------------------------
--------------------------------------------------
To change the address on your account, please
check the box at right and indicate your new
address in the address space above. Please [ ]
note that changes to the registered name(s)
on the account may not be submitted via this
method.
--------------------------------------------------
Signature of Shareholder Date: Signature of Shareholder Date:
------------------- --------- ------------------- ---------
Note: Please sign exactly as your name or names appear on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor, administrator, attorney,
trustee or guardian, please give full title as such. If the signer is a corporation,
please sign full corporate name by duly authorized officer, giving full title as such. If
signer is a partnership, please sign in partnership name by authorized person.