-----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, HWo18rJ6pOru9L+zYtwWkzmsWmIoQkg8zLYIN1oHA0cvKs6nUAaDVbEI92OvhdB/ fBSJPqW6CI6ZSV8GItWYig== 0000950144-99-010737.txt : 19990830 0000950144-99-010737.hdr.sgml : 19990830 ACCESSION NUMBER: 0000950144-99-010737 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991014 FILED AS OF DATE: 19990827 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CROWN GROUP INC /TX/ CENTRAL INDEX KEY: 0000799850 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 630851141 STATE OF INCORPORATION: TX FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 000-14939 FILM NUMBER: 99701072 BUSINESS ADDRESS: STREET 1: 4040 N. MACARTHUR BLVD. STREET 2: SUITE 100 CITY: IRVING STATE: TX ZIP: 75038 BUSINESS PHONE: 9727173423 MAIL ADDRESS: STREET 1: 4040 N. MACARTHUR BLVD. STREET 2: SUITE 100 CITY: IRVING STATE: TX ZIP: 75038 FORMER COMPANY: FORMER CONFORMED NAME: CROWN CASINO CORP DATE OF NAME CHANGE: 19931104 FORMER COMPANY: FORMER CONFORMED NAME: SKYLINK AMERICA INC DATE OF NAME CHANGE: 19920703 DEF 14A 1 CROWN GRUOP, INC. 1 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 [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12 CROWN GROUP, INC. (Name of Registrant as Specified in Its Charter) CROWN GROUP, INC. (Name of Person(s) Filing Proxy Statement) Payment of Filing Fee (Check the appropriate box): [ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2). [ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. 1) Title of each class of securities to which transaction applies: 2) Aggregate number of securities to which transaction applies: 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11:1 4) Proposed maximum aggregate value of transaction: [ ] 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: - -------- (1) Set forth the amount on which the filing fee is calculated and state how it was determined. 2 CROWN GROUP, INC. 4040 NORTH MACARTHUR BOULEVARD, SUITE 100 IRVING, TEXAS 75038 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS OCTOBER 14, 1999 To the Holders of Common Stock of Crown Group, Inc. Notice is hereby given that the Annual Meeting of Stockholders of Crown Group, Inc., a Texas corporation (the "Company"), will be held in accordance with its Bylaws at the Four Seasons Hotel and Resort, 4150 North MacArthur Boulevard, Irving, Texas 75038, on Thursday, October 14, 1999, at 10:00 a.m., local time, for the following purposes: (1) To elect seven directors to serve for a term of one year and until their successors have been elected and qualified; and (2) To conduct such other business as may properly come before the meeting or any adjournment thereof. Only stockholders of record as of the close of business on August 27, 1999, will be entitled to notice of and to vote at said meeting or any adjournment thereof. By Order of the Board of Directors. Edward R. McMurphy Chairman of the Board, President and Chief Executive Officer September 2, 1999 IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER OF SHARES YOU HOLD. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO COMPLETE, SIGN, DATE AND MAIL THE ENCLOSED PROXY IN THE ACCOMPANYING RETURN ENVELOPE TO WHICH NO POSTAGE NEED BE AFFIXED BY THE SENDER IF MAILED WITHIN THE UNITED STATES. 3 CROWN GROUP, INC. 4040 NORTH MACARTHUR BOULEVARD, SUITE 100 IRVING, TEXAS 75038 ANNUAL MEETING OF STOCKHOLDERS OCTOBER 14, 1999 PROXY STATEMENT SOLICITATION OF PROXIES This Proxy Statement, which is first being mailed to stockholders on or about September 2, 1999, is furnished in connection with the solicitation of proxies by and on behalf of the Board of Directors of Crown Group, Inc. (the "Company"), for use at the Annual Meeting of Stockholders of the Company (the "Annual Meeting") to be held at the Four Seasons Hotel and Resort, 4150 North MacArthur Boulevard, Irving, Texas 75038, on Thursday, October 14, 1999, at 10:00 a.m., local time, and at any or all adjournments thereof. The address of the principal executive offices of the Company is 4040 North MacArthur Boulevard, Suite 100, Irving, Texas 75038 and the Company's telephone number at such address is (972) 717-3423. The total cost of this solicitation will be borne by the Company. In addition to the U.S. mail, proxies may be solicited by officers and regular employees of the Company, without remuneration, by personal interviews, telephone and facsimile. It is anticipated that banks, brokerage houses and other custodians, nominees and fiduciaries will forward soliciting material to beneficial owners of stock entitled to vote at the Annual Meeting. Any person giving a proxy pursuant to this Proxy Statement may revoke it at any time before it is exercised at the Annual Meeting by notifying in writing the Secretary of the Company, Mark D. Slusser, at the offices of the Company, 4040 North MacArthur Boulevard, Suite 100, Irving, Texas 75038, prior to the Annual Meeting date. In addition, if the person executing the proxy is present at the Annual Meeting, he may, but need not, revoke the proxy, by notice of such revocation to the Secretary of the Annual Meeting, and vote his shares in person. Proxies in the form enclosed, if duly signed and received in time for voting, and not so revoked, will be voted at the Annual Meeting in accordance with the instructions specified therein. Where no choice is specified, proxies will be voted FOR the election of the nominees for director named herein and, on any other matters presented for a vote, in accordance with the judgment of the persons acting under the proxies. Abstentions and broker non-votes will not be counted as votes either in favor of or against the matter with respect to which the abstention or broker non-vote relates; however, with respect to any proposal other than the election of directors, abstentions and broker non-votes would have the effect of a vote against the proposal. Only stockholders of record at the close of business on August 27, 1999 will be entitled to notice of and to vote at the Annual Meeting and any adjournments thereof. Each share of Common Stock issued and outstanding on such record date is entitled to one vote. As of August 23, 1999, the Company had outstanding 9,741,796 shares of Common Stock. 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information as of August 23, 1999, with respect to ownership of the outstanding Common Stock by (i) all persons known to the Company to own beneficially more than five percent (5%) of the outstanding Common Stock of the Company (whose address is shown), (ii) each director and nominee for director of the Company, (iii) each of the executive officers of the Company named in the Summary Compensation Table on page 5, and (iv) all directors and executive officers as a group. Unless otherwise indicated, each person possesses sole voting and investment power with respect to the shares owned by him.
Number of Shares Percent Name Beneficially Owned of Class Robert J. Kehl 969,167(1) 9.9% Third St., Ice Harbor Dubuque, Iowa 52004 Edward R. McMurphy 974,540(2) 9.4% 4040 N. MacArthur Blvd Suite 100 Irving, Texas 75038 Gerald L. Adams 565,000(3) 5.8% 1225 East 9th St Lockport, Illinois 60441 Tilman J. Falgout, III 659,000(4) 6.6% 4040 N. MacArthur Blvd Irving, Texas 75038 Gerard M. Jacobs 428,280(5) 4.4% John David Simmons 49,650(6) * David J. Douglas 64,300(7) * Mark D. Slusser 102,500(8) 1.0% All Directors and Executive 3,812,437(9) 35.3% Officers as a Group (8 persons)
- ------------------- * Less than 1%. (1) Includes 956,667 shares issued in the name of Kehl River Boats, Inc., of which Mr. Kehl is president and a principal shareholder. Also includes 12,500 shares subject to stock options. (2) Includes 600,000 shares subject to presently exercisable stock options. (3) Includes 15,000 shares subject to presently exercisable stock options. (4) Includes 242,500 shares subject to presently exercisable stock options and 400,000 shares held in a corporation controlled by Mr. Falgout. (5) Includes 2,300 shares held by a corporation controlled by Mr. Jacobs, 120,000 shares owned by Mr. Jacobs' spouse, 12,000 shares held by a partnership of which Mr. Jacobs is a general partner, and 12,500 shares subject to presently exercisable stock options. (6) Includes 47,500 shares subject to presently exercisable stock options. 2 5 (7) Includes 42,500 shares subject to presently exercisable stock options. (8) Includes 100,000 shares subject to presently exercisable stock options. (9) Includes an aggregate of 1,072,500 shares subject to presently exercisable stock options, 402,300 shares held in corporations controlled by certain directors, 956,667 shares issued in the name of Kehl River Boats, Inc. of which a director is president and a principal shareholder, 12,000 shares held in a partnership of which a director is a general partner, and 120,000 shares owned by a spouse of a director. AGENDA ITEM ONE ELECTION OF DIRECTORS Pursuant to the Bylaws of the Company, the Board of Directors has set the number of directors for the ensuing year at seven, all of whom are proposed to be elected at the Annual Meeting. In the event any nominee is unable or declines to serve as a director at the time of the meeting, the persons named as proxies therein will have discretionary authority to vote the proxies for the election of such person or persons as may be nominated in substitution by the present Board of Directors. Management knows of no current circumstances which would render any nominee named herein unable to accept nomination or election. Directors shall be elected by a plurality of the votes cast by the holders of shares entitled to vote in the election of directors at a meeting of shareholders at which a quorum is present. Members of the Board of Directors are elected annually to serve until the next annual meeting of stockholders and until their successors are elected and qualified. The following persons have been nominated for election to the Board of Directors. EDWARD R. MCMURPHY, age 48, has served as the Company's Chief Executive Officer since July 1984. He has been a director of the Company since its inception in April 1983. From 1979 to June 1986, Mr. McMurphy served as President of Marion Properties, Inc., a real estate development company and former parent of the Company from July 1984 to June 1986. TILMAN J. FALGOUT, III, age 50, has served as Executive Vice President and General Counsel of the Company since March 1995 and as a director of the Company since September 1992. From 1978 until June 1995, Mr. Falgout was a partner in the law firm of Stumpf & Falgout, Houston, Texas. JOHN DAVID SIMMONS, age 63, has served as a director of the Company since August 1986. Since 1970, he has been President of Simmons & Associates, Inc., a real estate development company, and Management Resources Company, a management consulting firm. DAVID J. DOUGLAS, age 35, has served as managing director of Tuesday Afternoon, Inc. (investment company) since January 1998. From February 1993 through December 1997, Mr. Douglas served as managing director of Triple S Capital Corporation (investment banking firm). From July 1989 through January 1993, Mr. Douglas served as Vice President of Hatchett Capital Group, Inc. (investment banking firm). From 1986 through 1988, Mr. Douglas was employed in the investment banking division of Paine Webber Incorporated. Mr. Douglas has served as a director of the Company since September 1992. GERALD L. ADAMS, age 64, has been an entrepreneur for the past 30 years, starting, developing and operating a number of businesses primarily related to the shipping, trucking, and real estate industries. Mr. Adams currently owns and operates several companies, including TriRiver Dock, Inc. (stevedoring), Clover Ridge Estates, Inc. (residential construction), Barge Terminal Trucking, Inc. (trucking) and Adams Enterprises, Inc. (trucking and crane services). Mr. Adams has served as a director of the Company since October 1993. GERARD M. JACOBS, age 44, has been President of Huntington AluTech, Inc., a holding company engaged in the consolidation of the aluminum forging industry, since March 1999. From April 1996 to February 1999, Mr. Jacobs was Chief Executive Officer and a director of Metal Management, Inc., a company specializing in scrap metal. From 1983 through 1995, Mr. Jacobs developed resource recovery, landfill and hydroelectric projects for his own 3 6 account and for the investment banking firm of Russell, Rea & Zappala, Inc., Pittsburgh, Pennsylvania. From 1978 to 1983, Mr. Jacobs practiced securities, corporate and banking law with the law firms of Reed, Smith, Shaw & McClay and Manion, Alder & Cohen, P.C., Pittsburgh, Pennsylvania. Mr. Jacobs has been a director of the Company since September 1994. ROBERT J. KEHL, age 64, has been an entrepreneur for the past 35 years, starting, developing and operating businesses primarily in the riverboat construction, gaming, riverboat touring and restaurant industries. Since 1993, Mr. Kehl has served as president of Kehl River Boats, Inc., a riverboat construction firm in Las Vegas, Nevada. Mr. Kehl currently has interests in companies involved in gaming and riverboat construction or operation. Mr. Kehl has been a director of the Company since September 1994. COMMITTEES OF THE BOARD AND ATTENDANCE The Board of Directors of the Company presently has the following standing committees: (A) the Audit Committee, currently comprised of Messrs. Douglas, Kehl and Jacobs. The Audit Committee, which held two meetings during the Company's last fiscal year, is authorized to nominate the Company's independent auditors and to review with the independent auditors the scope and results of the audit engagement. (B) the Compensation and Stock Option Committee, currently comprised of Messrs. Adams, Douglas, McMurphy and Simmons. This Committee, which held three meetings during the Company's last fiscal year, recommends compensation levels for executive officers of the Company, and is authorized to consider and make grants of options pursuant to the Company's 1997 Stock Option Plan and to administer its stock option plans. During the Company's last fiscal year, the Board of Directors held three meetings and took action 13 times by unanimous written consent. Each incumbent director attended at least 75% of the aggregate number of meetings held by the Board and by the Committees of the Board on which he served. The Company does not have a Directors Nominating Committee, such function being reserved to the entire Board of Directors. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors, certain officers, and persons who own more than 10% of the outstanding Common Stock of the Company, to file with the Securities and Exchange Commission reports of changes in ownership of the Common Stock of the Company held by such persons. Officers, directors and greater than 10% stockholders are also required to furnish the Company with copies of all forms they file under this regulation. To the Company's knowledge, based solely on a review of the copies of such reports furnished to the Company, during the fiscal year ended April 30, 1999, all Section 16(a) filing requirements applicable to its officers, directors and greater than 10% stockholders were complied with, except as follows: Edward R. McMurphy, Tilman J. Falgout, III and Mark D. Slusser, officers of the Company, each filed one report on Form 5 late reporting certain option grants made to them during the fiscal year. 4 7 EXECUTIVE COMPENSATION The following table sets forth the compensation paid or accrued by the Company to or on behalf of the Company's Chief Executive Officer and any other executive officer whose salary and bonus, if any, exceeded $100,000 in fiscal 1999 (the "Named Executive Officers"), for the years ended April 30, 1999, 1998 and 1997: SUMMARY COMPENSATION TABLE
Annual Compensation ------------------- Long-Term Fiscal Other Annual Compensation All Other Name and Principal Position Year Salary Bonus Compensation Stock Options Compensation(1) - --------------------------- --------- ------------ -------------- ------------ ------------- ------------ Edward R. McMurphy 1999 $312,500 $800,000 -- 400,000 $16,900 Chairman of the Board, 1998 300,000 150,000 -- 25,000 -- President and Chief 1997 312,500 200,000 -- 25,000 -- Executive Officer Tilman J. Falgout, III 1999 $237,500 $425,000 -- 145,000 $12,728 Executive Vice President 1998 225,000 75,000 -- 20,000 -- and General Counsel 1997 231,250 125,000 -- 20,000 -- Mark D. Slusser 1999 $156,250 $250,000 -- 115,000 $ 7,732 Chief Financial Officer, 1998 150,000 50,000 -- 15,000 -- Vice President Finance 1997 156,250 87,500 -- 15,000 -- and Secretary
- -------------------- (1) These amounts include contributions to the Company's 401(k) Plan and certain insurance premiums as follows:
Disability 401(k) Insurance Plan Edward R. McMurphy 1999 $8,525 $8,375 1998 -- -- 1997 -- -- Tilman J. Falgout, III 1999 5,811 6,917 1998 -- -- 1997 -- -- Mark D. Slusser 1999 2,207 5,525 1998 -- -- 1997 -- --
SEVERANCE AGREEMENTS In July 1996, the Board of Directors authorized the Company to enter into severance agreements with each of Mr. McMurphy, Mr. Falgout and Mr. Slusser, which agreements provide that in the event of a sale, merger, consolidation, change in control, or liquidation of the Company, or similar extraordinary corporate transaction causing a change in control, each such officer shall be entitled to 2.99 times the annual compensation paid to the executive as well as accelerated vesting of options under the Company's stock option plans. 5 8 STOCK OPTION PLAN In July 1997, the Board of Directors adopted the Company's 1997 Stock Option Plan which was subsequently approved by the stockholders at the 1997 Annual Meeting (the "1997 Plan"). During the fiscal year ended April 30, 1999, the following options were granted under the 1997 Plan:
OPTION GRANTS IN LAST FISCAL YEAR Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation Individual Grants for Option Term(1) - ----------------------------------------------------------------------------------------------------------------------- % Total Number of Options Securities Granted to Underlying Employees Exercise Options in Price Expiration Name Granted(2) Fiscal year Per Share Date 5% 10% - ---- ---------- ----------- ---------- ---------- ---------- --------- Edward R 25,000 $ 3.5625 7-01-08 $ 56,011 $ 141,943 McMurphy 250,000 3.125 10-16-08 491,324 1,245,111 125,000(3) 57.6% 5.50 12-30-08 432,365 1,095,698 Tilman J. Falgout, 20,000 3.5625 7-01-08 44,809 113,554 III 125,000(3) 20.9% 5.50 12-30-08 432,365 1,095,698 Mark D. Slusser 15,000 3.5625 7-01-08 33,607 85,166 100,000(3) 16.5% 5.50 12-30-08 345,892 876,558
- ----------------------- (1) The dollar amounts under these columns represent the potential realizable value of each option assuming that the market price of the Common Stock appreciates in value from the date of grant at the 5% and 10% annual rates prescribed by regulation and therefore are not intended to forecast possible future appreciation, if any, of the price of the Common Stock. (2) Unless otherwise indicated, the options shown are immediately exercisable. (3) These options vest in equal 20% increments over five years, beginning at the date of grant of the option. 6 9 The following table provides certain information concerning each exercise of stock options under the Company's stock option plans during the fiscal year ended April 30, 1999, by the Named Executive Officers and the fiscal year-end value of unexercised options held by such persons under the Company's stock option plans: AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
Number of Unexercised Value of Shares Options at Fiscal Unexercised Options Acquired Year-End at Fiscal Year-End On Value Exercisable/ Exercisable/ Name Exercise Realized Unexercisable Unexercisable(1) - --------------------------- ----------------------- ---------------------- ----------------- -------------------- Edward R. McMurphy 25,000 $77,736 600,000/100,000 $1,482,813/$25,000 Tilman J. Falgout, III -- -- 242,500/100,000 535,625/25,000 Mark D. Slusser -- -- 100,000/80,000 216,875/20,000
- -------------------- (1) The market value of the Company's Common Stock on April 30, 1999 was $5.75 per share, and options to purchase 1,220,000 shares held by the above officers were in-the-money. The actual value, if any, an executive may realize will depend upon the amount by which the market price of the Company's Common Stock exceeds the exercise price when the options are exercised. DIRECTOR COMPENSATION Effective August 1, 1998, non-employee directors of the Company receive a $24,000 annual retainer, $2,000 per Board meeting attended in person, and $500 per Committee meeting attended in person. Directors who are also employees of the Company do not receive separate compensation for their services as a director. Pursuant to the Company's 1997 Stock Option Plan (the "Plan"), on the first business day of July in each year, each then serving non-employee director of the Company is automatically granted an option to purchase 2,500 shares of Common Stock, at an exercise price equal to the fair market value of such stock on the date of grant. Options granted under the Plan are exercisable for a period of up to ten years. In the event that a director ceases to be a director of the Company for any reason, options granted to the director will generally expire upon the earlier to occur of (1) the tenth anniversary of the date of grant of the option, or (2) ninety days following the date on which such director ceased to be a director. Notwithstanding anything to the contrary set forth in any of the Company's previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate future filings, including this Proxy Statement, in whole or in part, the following Report of the Compensation and Stock Option Committee on Executive Compensation and the Stockholder Return Performance Graph shall not be incorporated by reference into any such filings. REPORT OF COMPENSATION AND STOCK OPTION COMMITTEE ON EXECUTIVE COMPENSATION The Board of Directors of the Company has a Compensation and Stock Option Committee ("Compensation Committee") which recommends compensation levels for the executive officers of the Company, including the Chief Executive Officer, and is authorized to consider and make grants of options pursuant to the Company's 1997 Stock Option Plan and to administer its option plans. The Compensation Committee held three meetings during fiscal 1999. During fiscal 1999 the Company had three executive officers, including Edward R. McMurphy, President and Chief Executive Officer; Tilman J. Falgout, III, Executive Vice President and General Counsel; and Mark D. Slusser, Chief Financial Officer, Vice President Finance and Secretary. 7 10 The Compensation Committee (then comprised of Messrs. Douglas, Simmons and Adams) met in January 1999 to discuss executive compensation. Upon recommendation from the Compensation Committee, the Board of Directors adopted a compensation package for the Company's executive officers that will remain in effect for a five-year period (unless modified by the Board of Directors or the Committee). As a result of such meeting, effective February 1, 1999, Mr. McMurphy's annual salary was set at $350,000 by the Compensation Committee. In determining such salary, the Compensation Committee considered Mr. McMurphy's recent performance in identifying and completing various acquisitions by the Company and his contribution to the overall performance of the Company in the last fiscal year, as well as his contribution to the Company's growth. The Compensation Committee considers from time to time the payment of bonuses to the executive officers in light of the performance of the Company and the effort made by the executive officers to promote the Company's businesses. Also in January 1999, the Board of Directors, upon recommendation of the Compensation Committee, approved and adopted a bonus program whereby in each fiscal year beginning with the fiscal year commencing May 1, 1998, a bonus equal to five percent of the Company's consolidated pre-tax income (before the bonus computation) would be earned collectively by the Company's executive officers. For purposes of the calculation, pre-tax income shall (i) exclude earnings or losses attributable to subsidiary minority shareholders, (ii) convert equity in earnings or loss of unconsolidated subsidiaries/investments to a pre-tax amount, (iii) to the extent there is a pre-tax loss in a particular fiscal year, such loss shall be carried forward to offset pre-tax income in subsequent fiscal years, and (iv) be otherwise calculated in accordance with generally accepted accounting principles. This bonus program is intended to remain in effect for five fiscal years. Pursuant to this bonus program, for the fiscal year ended April 30, 1999, the executive officers were paid the following bonuses: Mr. McMurphy - $800,000, Mr. Falgout - $425,000 and Mr. Slusser - $250,000. In July 1996, the Board of Directors also authorized the Company to enter into severance agreements with each of Mr. McMurphy, Mr. Falgout and Mr. Slusser, which agreements provide that in the event of a sale, merger, consolidation, change in control, or liquidation of the Company, or similar extraordinary corporate transaction causing a change in control, each such officer shall be entitled to 2.99 times the annual compensation paid to the executive as well as accelerated vesting of options under the Company's stock option plans. The Compensation Committee believes that the foregoing agreements and actions are reasonable and provide competitive compensation packages necessary in order for the Company to retain the management expertise it needs. The Compensation Committee takes action from time to time, based upon guidelines and recommendations provided by the Board of Directors, to provide additional incentive compensation to the executive officers and other employees through the award of stock options under the Company's existing stock option plans. During fiscal 1999, awards of stock options to purchase shares of the Company's Common Stock were made to the executive officers, as follows: Edward R. McMurphy (400,000 shares), Tilman J. Falgout, III (145,000 shares), and Mark D. Slusser (115,000 shares). The Company's future compensation policies will be developed in light of the Company's financial position and results of operations and with the goal of rewarding members of management for their contributions to the Company's success. DAVID J. DOUGLAS JOHN DAVID SIMMONS GERALD L. ADAMS EDWARD R. MCMURPHY 8 11 STOCKHOLDER RETURN PERFORMANCE GRAPH Set forth below is a line graph comparing the fiscal year end percentage change in the cumulative total stockholder return on the Company's Common Stock against (i) the cumulative total return of the NASDAQ Market Index (U.S. Companies), and (ii) the MG Group Index 744 - Auto Dealerships ("Automobile Index"), for the period of five fiscal years commencing on May 1, 1994 and ending on April 30, 1999. As the largest portion of the Company's revenues during the fiscal year ended April 30, 1999 were generated from automobile operations, the Company has determined that the Automobile Index is presently the most appropriate "peer group" index. The Company believes the Automobile Index is an accurate reflection of the Company's peer group as the Automobile Index is comprised of companies involved in the sale of automobiles and other vehicles through dealerships. The graph assumes that the value of the investment in the Company's Common Stock and each index was $100 on May 1, 1994. COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS PERFORMANCE GRAPH FOR CROWN GROUP, INC.
4/30/94 4/30/95 4/30/96 4/30/97 4/30/98 4/30/99 ------- ------- ------- ------- ------- ------- Crown Group, Inc. 100.0 64.46 25.62 28.10 56.20 76.03 Nasdaq Market Index (U.S. Companies) 100.0 116.25 165.73 175.42 262.30 356.45 Automobile Index 100.0 87.29 114.82 81.15 75.11 71.65
The dollar value at April 30, 1999 of $100 invested in the Company's Common Stock on May 1, 1994 was $76.03, compared to $71.65 for the Automobile Index described above and $356.45 for the Nasdaq Market Index (U.S. Companies). 9 12 INDEPENDENT PUBLIC ACCOUNTANTS PricewaterhouseCoopers LLP served as the Company's independent auditors for the fiscal year ended April 30, 1999. The Company has not as yet executed an engagement letter with respect to the audit of the Company's financial statements for the fiscal year ending April 30, 2000, but expects to do so in due course. A representative of PricewaterhouseCoopers LLP is expected to be present at the Annual Meeting, will have an opportunity to make a statement, and will be available to respond to appropriate questions which stockholders might have. The Company knows of no direct or indirect material financial interest or relationship that members of this firm have with the Company. REPORT ON FORM 10-K The Company's Annual Report on Form 10-K for the fiscal year ended April 30, 1999, as filed with the Securities and Exchange Commission, is available to stockholders who make written request therefor to the Secretary of the Company, Mark D. Slusser, at the offices of the Company, 4040 North MacArthur Boulevard, Suite 100, Irving, Texas 75038. Copies of exhibits filed with that report or referenced therein will be furnished to stockholders of record upon request and payment of the Company's expenses in furnishing such documents. STOCKHOLDER PROPOSALS Any proposal to be presented at next year's Annual Meeting must be received at the principal executive offices of the Company not later than April 29, 2000, directed to the attention of the Secretary, for consideration for inclusion in the Company's proxy statement and form of proxy relating to that meeting. In connection with the Company's Annual Meeting of Stockholders to be held in 2000, if the Company does not receive notice of a matter or proposal to be considered by July 13, 2000, then the persons appointed by the Board of Directors to act as the proxies for such Annual Meeting (named in the form of proxy) will be allowed to use their discretionary voting authority with respect to any such matter or proposal at the Annual Meeting, if such matter or proposal is raised at that Annual Meeting. Any such proposals must comply in all respects with the rules and regulations of the Securities and Exchange Commission. OTHER MATTERS Management does not know of any matter to be brought before the meeting other than those referred to above. If any other matter properly comes before the meeting, the persons designated as proxies will vote on each such matter in accordance with their best judgment. By Order of the Board of Directors. Edward R. McMurphy Chairman of the Board, President and Chief Executive Officer September 2, 1999 10 13 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CROWN GROUP, INC. The undersigned stockholder(s) of Crown Group, Inc., a Texas corporation, hereby appoints Edward R. McMurphy and Mark D. Slusser, and each of them, proxies and attorneys-in-fact, with full power to each of substitution, on behalf and in the name of the undersigned, to represent the undersigned at the 1999 Annual Meeting of Stockholders of Crown Group, Inc. to be held on Thursday, October 14, 1999 at 10:00 a.m. local time at the Four Seasons Hotel and Resort, 4150 North MacArthur Boulevard, Irving, Texas 75038, to vote the shares of Common Stock which the undersigned would be entitled to vote if then and there personally present, on the matters set forth below: (1) To elect seven directors for a term of one year and until their successors are elected and qualified: [ ] FOR all nominees listed below (except as indicated to the contrary below) [ ] AGAINST AUTHORITY to vote for all nominees Edward R. McMurphy Tilman J. Falgout, III John David Simmons Gerald L. Adams David J. Douglas Gerard M. Jacobs Robert J. Kehl If you wish to withhold authority to vote for any individual nominee(s), write the name(s) on the line below: ---------------------------------------------------------------------- (2) In their discretion, upon such other matter or matters which may properly come before the meeting or any adjournment or adjournments thereof. PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY. This proxy, when properly executed, will be voted in accordance with directions given by the undersigned stockholder. IF NO DIRECTION IS MADE, IT WILL BE VOTED FOR PROPOSAL 1 AND AS THE PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING. Dated , 1999 --------------------------------------- ----------------------------------------------------- Signature ------------------------------------------------------ Signature (This Proxy should be marked, dated, and signed by the stockholder(s) exactly as his or her name appears hereon, and returned promptly in the enclosed envelope. Persons signing in a fiduciary capacity should so indicate. If shares are held by joint tenants or as community property, both should sign.) -----END PRIVACY-ENHANCED MESSAGE-----