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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
CONSOLIDATED STORES CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CONSOLIDATED STORES CORPORATION
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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CONSOLIDATED STORES CORP. LOGO
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1997
Notice is hereby given that the Annual Meeting of Stockholders of
Consolidated Stores Corporation will be held at the headquarters of the
Company's principal operating subsidiary at 300 Phillipi Road, Columbus, Ohio,
on Tuesday, May 20, 1997, at 9:00 A.M., local time, for the following purposes:
1. To elect nine directors of the Company.
2. To approve the Amendment to the Fourth Article of the Certificate of
Incorporation of the Company increasing the authorized shares of Common
Stock of the Company;
3. To transact such other business as may properly come before the meeting.
Only stockholders of record at the close of business on April 3, 1997 are
entitled to notice of and to vote at said meeting or any adjournment thereof.
By order of the Board of Directors.
April 25, 1997
ALBERT J. BELL,
Senior Vice President, General
Counsel
and Secretary
---------------
STOCKHOLDERS ARE URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED FORM OF
PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE TO WHICH NO POSTAGE NEED BE AFFIXED
IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING, YOU MAY REVOKE YOUR
PROXY AND VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR
PROXY.
1105 North Market Street
Suite 1300
P.O. Box 8985
Wilmington, Delaware 19899
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CONSOLIDATED STORES CORP. LOGO
---------------
PROXY STATEMENT
This Statement is furnished in connection with the solicitation of proxies
for use at the Annual Meeting of Stockholders of Consolidated Stores
Corporation, a Delaware corporation (the "Company"), to be held on May 20, 1997.
The Notice of Annual Meeting, this statement and the accompanying form of proxy,
together with the Company's Annual Report to stockholders for the fiscal year
ended February 1, 1997, are first being mailed to stockholders on or about April
25, 1997.
The close of business on April 3, 1997 has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
meeting. At that date, the Company had outstanding 67,339,903 shares of Common
Stock, $.01 par value per share ("Common Stock"). Each of the outstanding shares
of Common Stock is entitled to one vote. The holders of Common Stock have no
cumulative voting rights in the election of directors.
All voting shall be governed by the Bylaws of the Company pursuant to the
General Corporation Law of the State of Delaware. For purposes of Proposal One,
the nine director nominees having the highest votes cast shall be elected. Votes
will be cast for only those nominees for whom authority is given. For purposes
of Proposal Two, a majority of shares present and voting must be cast in favor
of the respective proposal for it to be approved. In the case of either of the
proposals, Broker non-votes will be treated as votes not cast, and will not have
any effect. Abstentions will be treated as shares not voted with respect to
Proposal One, and will not be calculated in the tabulation. In the case of
Proposal Two, abstentions will be treated as votes cast against the proposal.
Stockholders may revoke their proxies if they wish by attending the meeting,
revoking the proxy in writing and voting in person. Tabulation shall be
performed by National City Bank, the Company's Transfer Agent, as inspected by
duly appointed officers of the Company.
1105 NORTH MARKET STREET
SUITE 1300
P.O. BOX 8985
WILMINGTON, DELAWARE 19899
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PROPOSAL ONE: ELECTION OF DIRECTORS
At the meeting, the shares of Common Stock represented by the proxies will
be voted, unless otherwise specified, for the election as directors of the nine
nominees named below. Seven of the nine nominees are currently directors of the
Company. Proxies cannot be voted at the annual meeting for more than nine
persons, although additional nominations can be made by stockholders at the
meeting.
Set forth below is certain information relating to the nominees for
election as directors.
PRINCIPAL OCCUPATION DIRECTOR
NAME AGE FOR THE PAST FIVE YEARS SINCE
- - --------------------- --- ------------------------------------------------------- --------
Sheldon M. Berman 56 Chairman, Macaroons, Inc. (consumer research and 1994
marketing services); former Chairman, President and
founder, Shelly Berman Communicators (retail marketing
and advertising)
W. Eric Carlborg 33 Senior Vice President--Finance, Einstein Noah Bagel New
Corp.(retail restaurants/bakeries); former Vice Nominee
President-- Alignment and Planning, Boston Chicken,
Inc. (retail restaurants); former Vice
President--Corporate Finance, Merrill Lynch Investment
Banking (investment banking)
Michael L. Glazer 49 President of the Company and President and Chief 1991
Executive Officer of K.B. Consolidated, Inc. and
subsidiaries; Former President, The Bombay Company
(retail home furnishings)
William G. Kelley 51 Chairman of the Board and Chief Executive Officer of 1990
the Company
David T. Kollat 58 President and Founder, 22, Inc. (retail research and 1990
consulting)
Brenda J. Lauderback 46 President--Wholesale Group, Nine West Group, Inc. New
(retail and wholesale footwear); former Nominee
President--Footwear Wholesale, U.S. Shoe Corporation
(retail and wholesale footwear); former Vice President,
General Merchandise Manager, Dayton Hudson Corporation
(retail stores)
Nathan P. Morton 48 Senior Partner, Channel Marketing Corporation; former 1990
President and Chief Executive Officer, Open Environment
Corporation (software development); former President
and Chief Executive Officer, Comp USA (retail stores)
Dennis B. Tishkoff 54 President and Chief Executive Officer, Shoe Corporation 1991
of America (retail footwear)
William A. Wickham 52 Chairman of the Board, SBC Advertising (advertising and 1992
corporate communications agency)
Seven meetings of the Board of Directors were held during the Company's
fiscal year ended February 1, 1997 (sometimes hereinafter "fiscal 1996"). Each
director attended at least 75% of the meetings of the Board, and the committees
on which he served, during the period for which he served as a director during
the year.
The Board has an Audit Committee, a Compensation Committee, and a
Nominating Committee. Messrs. Tishkoff, Wickham, and John Sisk (retired) are the
members of the Audit Committee, which monitors the activities of the Company's
independent auditors and its internal audit functions. The Audit
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Committee met one time during fiscal 1996. Messrs. Kollat, Tishkoff and Sisk
(retired) are the members of the Compensation Committee, which administers the
Company's stock option plans and advises the Board of Directors with respect to
compensation matters. The Compensation Committee met one time during fiscal
1996, and acted two times without a meeting. Messrs. Berman, Kelley, Kollat and
Morton are the members of the Nominating Committee, which is responsible for
interviewing and nominating candidates for election as Directors of the Company.
The Nominating Committee did not meet during fiscal 1996. The Nominating
Committee will not consider nominees recommended by security holders.
RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Kelley is also a director of National City Bank, Columbus. Mr. Glazer
is also a director of Brookstone, Inc. Mr. Kollat is also a director of The
Limited, Inc., Cooker Restaurant Corp., e Shop, Inc., SBC Advertising, AEI Music
Network, Pipeliner Systems, Inc., P.J. Phillips, Cheryl & Co., Christy &
Associates, NuVision, Select Comfort, Inc., Bron-Shoe Co., and Wolverine
Worldwide, Inc. Ms Lauderback is also a director of Irwin Financial Corporation.
The Company customarily retains SBC Advertising for communications and
advertising services and AEI Music Network for licensed music broadcasting in
stores and other facilities. During fiscal year ended February 1, 1997, the
Company paid fees in the amount of $614,667, and $689,102 to SBC Advertising and
AEI Music Network, respectively.
DIRECTOR'S REMUNERATION. Pursuant to arrangements with the Company, certain
directors who are not officers and who are not involved in the daily affairs of
managing the Company receive an annual retainer of $18,000, plus $1,000 for each
Board meeting attended and $500 for each committee meeting attended. During
fiscal 1996, six directors, Messrs. Berman, Kollat, Morton, Tishkoff, Wickham,
and John Sisk (retired), were parties to such arrangements. In addition, such
directors constitute Outside Directors, and therefore receive stock option
grants under the Director Stock Option Plan. Each of the aforenamed directors
received a grant of 5,000 stock options pursuant to the said Director Stock
Option Plan during fiscal 1996. (Please see Director Stock Option Plan.)
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of February 1, 1997, certain information
with regard to the beneficial ownership of the Company's Common Stock by each
holder of 5% of such stock, each director and nominee for director individually,
each of the five executive officers named in the Summary Compensation Table, and
all officers, directors and nominees for director of the Company as a group.
AMOUNT AND PERCENT OF
TITLE OF NAME OF BENEFICIAL OWNER NATURE OF BENEFICIAL OUTSTANDING
CLASS OR IDENTITY OF GROUP OWNERSHIP (1) SHARES (1)
- - --------------------- ------------------------------------ -------------------- -----------
Common Stock Sheldon M. Berman (2) 14,000 *
Common Stock W. Eric Carlborg 0 *
Common Stock Charles Freidenberg 87,120 *
Common Stock Michael L. Glazer 127,500 *
Common Stock C. Matthew Hunnell 52,722 *
Common Stock William G. Kelley 2,711,284 4.05%
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AMOUNT AND PERCENT OF
TITLE OF NAME OF BENEFICIAL OWNER NATURE OF BENEFICIAL OUTSTANDING
CLASS OR IDENTITY OF GROUP OWNERSHIP (1) SHARES (1)
- - --------------------- ------------------------------------ -------------------- -----------
Common Stock David T. Kollat 78,125 *
Common Stock Brenda J. Lauderback 300 *
Common Stock Nathan P. Morton 33,125 *
Common Stock Michael J. Potter 62,820 *
Common Stock Dennis B. Tishkoff 24,681 *
Common Stock William A. Wickham (3) 82,500 *
Common Stock The Capital Group (4) 3,928,000 5.90%
Common Stock FMR Corp. (5) 8,949,200 13.38%
Common Stock All directors, nominees & executive
officers as a group (15 Persons) 3,372,419 5.04%
- - ---------------
* Represents less than 1% of the outstanding Common Stock.
(1) The persons named in the table, other than The Capital Group (see note (4)
below), and FMR Corp. (see note (5) below), respectively, have sole voting
power and investment power with respect to all shares of Common Stock
subject to the information contained in the footnotes to this table. The
amounts described in the table are adjusted to account for the stock split
which occurred in December, 1996, and include shares that may be acquired
within 60 days under stock options exercisable within that period.
Percentage ownership was based on 66,958,846 shares of Common Stock
outstanding at February 1, 1996, unless otherwise stated. Of the shares
reported for Messrs. Berman, Freidenberg, Glazer, Hunnell, Kelley, Kollat,
Morton, Potter, Tishkoff, Wickham, and for all directors, nominees for
director, and officers as a group, 5,000, 81,250, 85,000, 46,750, 2,675,940,
30,000, 30,000, 61,125, 23,750, 17,500, and 3,150,790, respectively, are
shares which may be acquired within 60 days pursuant to exercisable stock
options.
(2) Includes 2,500 shares owned by Macaroons, Inc.
(3) Includes 65,000 shares which are owned by SBC Advertising, Inc.
(4) In its Schedule 13G dated February 12, 1997, and its accompanying materials,
The Capital Group Companies, Inc., stated that through its operating
subsidiaries it beneficially owned the shares reported in the table as of
December 31, 1996, of which 3,352,800 shares (5.0% of the Common Stock at
that date) are beneficially owned by Capital Research and Management
Company. In its Schedule 13G, The Capital Group Companies, Inc., reported
sole voting power over 549,700 shares, and sole dispositive power over
3,928,000 shares.
(5) In its Schedule 13G dated February 14, 1997, FMR Corp. stated that it
beneficially owned the number of shares reported in the table as of December
31, 1996, which number includes 8,367,700 shares (12.51% of the Common Stock
at that date) beneficially owned by Fidelity Management & Research Company
in its capacity as investment advisor to various investment companies
registered under Section 8 of the Investment Company Act; and 581,500 shares
(0.87% of the Common Stock at that date) beneficially owned by Fidelity
Management Trust Company as a result of its serving as investment manager
for various institutional accounts. Of the shares reported in the table
above, FMR Corp. has the sole power to voting power over 202,500 shares, and
sole dispositive power over 8,949,200 shares.
The addresses of the persons shown in the table above as a beneficial owner
of more than 5% of the Company's Common Stock are as follows: The Capital Group
Companies, Inc., 333 South Hope Street, Los Angeles, CA 90071; and FMR Corp, 82
Devonshire Street, Boston, MA 02109.
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EXECUTIVE COMPENSATION
COMBINED EXECUTIVE COMPENSATION REPORT OF THE COMPANY'S COMPENSATION
COMMITTEE AND THE CHIEF EXECUTIVE OFFICER
Compensation of the Company's executive officers is administered by the
Compensation Committee of the Board of Directors (the "Committee"). The
Committee consists of three independent, non-employee directors. Messrs. Kollat,
Tishkoff, and John Sisk (retired) comprised the Committee during the most recent
fiscal year ended. Mr. Sisk is not standing for reelection.
The Committee applies aggressive compensation incentives, both short term
and long term, that are highly responsive to Company earnings and stock value.
Two of the three components, bonus and equity (primarily stock purchase
options), are entirely tied to Company performance. By doing so, the Committee
believes that it properly aligns the financial interests and success of the
executive officer with that of stockholders.
CEO SALARY
Mr. Kelley's salary is the least emphasized component of his compensation
package. It was originally set by his employment agreement dated December 12,
1989, and is increased by the Compensation Committee annually, in its
discretion, typically at a level consistent with the salary increases of other
executive officers of the Company. The Committee has chosen not to adopt any
specific schedule of salary increase, and may adjust Mr. Kelley's salary without
regard to adjustments for other executive officers of the Company. The
employment agreement does not provide for any automatic salary increases.
Generally, the Committee looks to factors such as the Company's planned and
actual increase in earnings, market performance of its Common Stock, and
business growth, in determining the amount of salary increase, if any. The
Committee does not weight such factors in advance or tie salary to specific
performance criteria.
CEO BONUS
Mr. Kelley's bonus is determined in accordance with the Company's Key
Associate Annual Incentive Compensation Plan. For fiscal 1996, the bonus was
determined based upon the Company's achievement of specific annual earnings
targets established at the beginning of the fiscal year by the Committee, which
are derived from the planned earnings per share for the fiscal year as
established at or prior to the beginning of the fiscal year by the Board. For
fiscal 1996, bonus became payable only when the Company achieved more than 92%
of the target earnings per share for the fiscal year, as confirmed by the
audited financial statements of the Company, and in any event was capped at 135%
of the base salary.
CEO EQUITY INCENTIVES
Consistent with the Committees objectives, Mr. Kelley's equity interests in
the Company, through stock purchase options and restricted stock, comprise his
primary compensation, and align his personal rewards and motivation with Company
performance and stockholder value. Mr. Kelley's stock purchase options have an
exercise price equal to the market value of the Company's Common Stock at the
date each option is granted. His stock purchase options typically become
exercisable ("vest") over time during employment, usually in equal amounts over
a 5 year period.
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NON-CEO SALARY
The salary component for executive officers other than the CEO is initially
based upon informally gathered information about comparable positions at
similarly sized companies, as adjusted to reflect the experience and expertise
of the individual. The Company limits the comparison market to Columbus, Ohio
wherever possible. Salaries are reviewed annually, and are adjusted to reflect
growth in the individual's performance, as well as the individual's relative
contribution to the overall performance of the Company. Salary adjustments are
subjectively determined, and are not formally tied to Company performance.
NON-CEO BONUS
The bonus for non-CEO executive officers is determined in accordance with
the Company's Key Associate Annual Incentive Compensation Plan. The bonus
component for executive officers other than the CEO consists of a percentage of
salary earned as the Company achieves specific earnings targets that are set by
the Committee at the beginning of each fiscal year. The percentage of salary is
set by position level, and is subjectively determined. The Committee believes
that a significant portion of the total compensation of the executive officers
should be bonus, and tied to Company earnings. For fiscal 1996, bonus became
payable only when the Company achieved more than 92% of the target earnings per
share for the fiscal year, as confirmed by the audited financial statements of
the Company, and in any event was capped at 135% of the base salary.
NON-CEO EQUITY INCENTIVES
The equity participation component for executive officers other than the
CEO consists primarily of stock purchase options. Stock purchase options are
granted at the discretion of the Committee, usually only once per year, in an
amount determined by position and performance, and with an exercise price equal
to the market value of the stock at the time of grant. In addition, stock
options are sometimes granted in connection with the promotion of an individual
to a greater level of responsibility. The number of shares per option grant is
set in advance by position, subject to adjustment, based upon the Committees
subjective perception of the individual's performance. Options typically vest
over a five year period, based upon time passage during employment and not based
upon performance criteria. The Committee's determination of the timing and
amount of each grant is subjective, based upon its assessment of the need and
appropriateness of each grant, in light of the performance of the respective
executive officer and the performance of the Company as a whole. The Committee
believes that its policy in determining stock option grants best utilizes stock
options as a specific long-term performance incentive, by basing an important
portion of executive officer compensation upon the future performance of the
Company's Common Stock.
In addition to the above, the Committee has the discretion to grant shares
of Company Common Stock to executive officers pursuant to its Restricted Stock
Plan (please see "Restricted Stock Plan" below). No grants were made in fiscal
1996. The Committee views the Plan as a means of creating exceptional incentive
for exceptional performance. The Committee intends that specific and objective
performance vesting criteria be used in connection with such grants. However, it
is within the Committee's power to grant shares under the Restricted Stock Plan
at any time in a purely subjective manner.
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DEDUCTIBILITY OF ANNUAL COMPENSATION OVER $1 MILLION
The Omnibus Budget Reconciliation Act of 1993, as amended (the "Act") imposes
potential limitations on the deductibility of compensation in excess of $1
million paid to the Company's chief executive officer (CEO) and the four highest
compensated executive officers (other than the CEO) employed on the last day of
the taxable year. Remuneration which is qualified "performance-based
compensation" is not subject to the deduction limitation. Based on the
regulations issued by the Internal Revenue Service to implement the Act, the
Company has taken the necessary actions to preserve the deductibility of
payments under the Company's compensation plans. As the Act or the regulations
thereunder promulgate change, further actions will be taken to the extent
necessary and possible to maintain the deductibility of payments under the
compensation plans.
THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
David T. Kollat, Chairman
Dennis B. Tishkoff
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SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the individual
compensation paid to the Company's Chief Executive Officer and each of the four
other most highly compensated executive officers for services in all capacities
to the Company for fiscal years 1996, 1995, and 1994.
LONG-TERM COMPENSATION
------------------------------------
AWARDS PAYOUTS
---------------------- ---------
ANNUAL COMPENSATION RESTRICTED LONG-TERM
-------------------------------------------------- STOCK STOCK INCENTIVE
FISCAL SALARY BONUS OTHER AWARDS OPTIONS PAYOUTS
NAME AND POSITION YEAR ($) ($) ($) ($)(C) (#)(D) ($)
- - ---------------------------- ---- ---------- --------- ------------ ---------- ------- ---------
William G. Kelley, Chairman 1996 $651,000 $878,850 $ 55,995(a) -- 254,000 --
of the Board and 1995 620,000 527,000 75,442(a) 2,062,500 156,250 --
Chief Executive Officer 1994 590,389 593,936 65,708(a) -- 312,500 --
Michael L. Glazer, 1996 472,500 637,675 62,224(b) -- 228,000 --
President 1995 328,846 382,500 64,119(b) 1,662,500 312,500 --
1994 -- -- -- -- --(e) --
C. Matthew Hunnell, 1996 275,000 222,750 12,914 -- 50,000 --
Sr. Vice President, 1995 228,750 106,250 10,834 -- 150,000 --
Merchandising 1994 133,654 53,333 12,518 -- 18,750 --
Charles Freidenberg, 1996 275,000 222,750 13,688 -- 50,000 --
Sr. Vice President, 1995 228,750 106,250 9,925 -- 156,250 --
Merchandising 1994 133,654 53,333 8,866 -- 18,750 --
Michael J. Potter, 1996 225,000 182,250 12,266 -- 50,000 --
Sr. Vice President and 1995 200,000 68,000 17,551 -- 102,500 --
Chief Financial Officer 1994 144,237 37,500 9,630 -- 25,000 --
ALL OTHER
COMPENSATION
NAME AND POSITION ($)
- - ---------------------------- ------------
William G. Kelley, Chairman $ 15,037(f)(g)
of the Board and 5,625(f)
Chief Executive Officer 5,625(f)
Michael L. Glazer, 6,000(f)
President --
--
C. Matthew Hunnell, 7,666(f)(g)
Sr. Vice President, 5,625(f)
Merchandising 4,839(f)
Charles Freidenberg, 18,583(f)(g)
Sr. Vice President, 5,625(f)
Merchandising 4,839(f)
Michael J. Potter, 7,546(f)(g)
Sr. Vice President and 4,038(f)
Chief Financial Officer 3,186(f)
- - ---------------
(a) Includes $29,719, $31,500 and $40,500 of interest foregone by the Company in
fiscal 1996, 1995, and 1994, respectively, on a $450,000 second mortgage
loan to Mr. Kelley made in 1991. This loan was repaid in full in fiscal
1996. The loan was in connection with relocation assistance provided in Mr.
Kelley's employment agreement, was payable on demand, and secured by a
second mortgage.
(b) Includes $32,433 and $53,712 in 1996 and 1995, respectively for relocation
assistance provided to Mr. Glazer.
(c) The amount shown represents the dollar value of restricted stock made during
the indicated year, calculated by multiplying the closing price of
unrestricted shares of the Company's Common Stock on the date of grant by
the number of shares awarded. There were no restricted shares held by named
executive officers as of February 1, 1997, as to which restrictions pursuant
to the award had not lapsed.
Pursuant to terms of the restricted stock award on March 26, 1996, April 1,
1995, and September 19, 1995, an aggregate 100,000 shares vested with
Messrs. Kelley and Glazer, each, when the Company's Common Stock closed on
the New York Stock Exchange at a price equal to or above $30, $35, and $40
per share, respectively.
(d) Non-qualified options granted pursuant to the 1996 Incentive Performance
Plan and The Executive Stock Option and Stock Appreciation Rights Plan.
(e) Excludes 6,250 options granted pursuant to the Director Stock Option Plan,
prior to Mr. Glazer becoming an executive officer.
(f) Company matching contribution to the Consolidated Stores Corporation Savings
Plan (401K) and for Consolidated Stores Corporation Supplemental Savings
Plan (Top Hat). For fiscal 1996 the matching contribution was $6,000 for all
named individuals.
(g) Accruals to the Consolidated Stores Corporation Supplemental Defined Benefit
Pension Plan for fiscal 1996 for Messrs. Kelley, Glazer, Hunnell,
Freidenberg, and Potter were $9,037, 0, $1,668, $12,583, and $1,546,
respectively.
EMPLOYMENT AGREEMENTS. In 1989, the Company entered into an employment
agreement with William G. Kelley and in 1995, the Company entered into
employment agreements with Michael L. Glazer, C. Matthew Hunnell, and Charles
Freidenberg, respectively, each for an indefinite term. The terms of these
agreements are substantially similar and they are described collectively herein
except where their terms materially differ. The agreements provide for an annual
base salary as increased by the Board of Directors and
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an annual bonus based on the Company's level of achievement of certain
performance goals during the year as established by the Board of Directors,
provided that bonuses were not payable unless the Company achieved more than 92%
of its target earnings, and in any event were subject to a maximum of 135% of
the base salary, for fiscal 1996. Each of the employment agreements requires
that the individual employee devote his full business time to the business of
the Company and prohibits him from competing with the Company during his
employment and for a two-year period thereafter (six months in the event of
termination of employment following a "Change in Control," as such term is
defined in the agreements).
Pursuant to this agreement, if Mr. Kelley is terminated without cause or if
his employment terminated for any reason within one year of a Change of Control,
he will become entitled to receive continued salary payments and benefits for
one year and will receive a pro-rata bonus for the fiscal year in which
termination occurs. In addition, with respect to the stock options that were
granted pursuant to his employment agreement, he will continue to vest in a
pro-rata portion of his stock options for the year of his termination in the
event he is terminated without cause and will receive a total acceleration of
the vesting of his stock options on a termination following a Change of Control.
Mr. Glazer's agreement provides that in the event that he is terminated with
cause, he suffers a diminution in duties, title or authority, or if his
employment is terminated for any reason within one year of a Change of Control,
he will receive continued salary payments and benefits for one year plus a
pro-rata bonus for the fiscal year in which the termination occurs, and all of
his stock options granted in connection with the employment agreement will
become vested and exercisable. Mr. Freidenberg's and Mr. Hunnell's agreements
provide that if they are terminated without cause or their employment terminates
for any reason within one year of a Change of Control, they will continue to
receive salary payments for the two year non-compete period if the Company
elects to enforce the restrictive covenant, plus continued benefits for that
period. If the company elects not to enforce the non-compete provision, Messrs.
Freidenberg and Hunnell will respectively continue to receive their salary and
benefits for a period of 365 days, unless they are re-employed prior to the
expiration of the payment period. Also in the event of a Change of Control,
Messrs. Freidenberg's and Hunnell's stock options granted in connection with
their employment agreements will become vested and exercisable.
In addition, a Change of Control of the Company would cause each of the
before named individuals to receive a payment in the amount necessary to hold
him harmless from the effects of Section 280G and 4999, respectively, of the
Code, which Code sections could subject the payments due under these employment
agreements to excise tax liability (see also "Severance Agreements"). The
compensation payable on account of a Change of Control may also be subject to
the deductibility limitations of Section 162(m) of the Code.
Pursuant to the 1996 Performance Incentive Plan, nonqualified stock options
were granted by the Compensation Committee on shares of Company Common Stock to
the individuals named in the Summary Compensation Table, to Executive Officers
of the Company, and to other associates of the Company. The following tables
reflect the (i) number and value of options granted in fiscal 1996 to the
individuals named in the Summary Compensation Table; and (ii) the aggregate
exercises and number and value of exercisable and unexercisable options at
February 1, 1997, for those named individuals.
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OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZED
INDIVIDUAL GRANTS (a) VALUE AT
--------------------------------------------------------------------- ASSUMED ANNUAL
PCT. OF TOTAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM (c)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION --------------------------
NAME GRANTED FISCAL YEAR (b) PER SHARE DATE 5% 10%
- - ----------------------- ---------- --------------- -------------- --------------- ---------- -----------
William G. Kelley 254,000 14.0% $33.25 Feb. 2007 $5,311,330 $13,459,952
Michael L. Glazer 228,000 12.6% 33.25 Feb. 2007 4,767,650 12,082,162
C. Matthew Hunnell 50,000 2.8% 33.25 Feb. 2007 1,045,537 2,649,597
Charles Freidenberg 50,000 2.8% 33.25 Feb. 2007 1,045,537 2,649,597
Michael J. Potter 50,000 2.8% 33.25 Feb. 2007 1,045,537 2,649,597
- - ---------------
(a) Material terms of the options granted include 5 year vesting at 20% per year
on each succeeding anniversary of the grant date, continuous employment with
the Company through at least the 90th day prior to any exercise, employment
with the Company as a condition of vesting, and non-transferability of the
stock options.
Option grants of 104,000 and 78,000 to Messrs. Kelley and Glazer,
respectively, may vest in one to five years based on attainment of certain
performance goals for the 1997 fiscal year as established by the
Compensation Committee. All options not vesting as a result of performance
goal attainment will vest at the end of the five year period.
(b) Based on 1,815,200 non-qualified options granted to all associates in fiscal
1996 pursuant to the 1996 Performance Incentive Plan.
(c) Assumes a respective 5% or 10% annualized appreciation in the underlying
Common Stock price from the date of grant to the expiration date less the
aggregate exercise price. The ultimate amount realized will depend on the
market value of the Company's Common Stock at a future date.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
UNEXERCISED OPTIONS AT FEBRUARY 1, 1997
---------------------------------------------------------------
NUMBER OF VALUE OF IN-THE-MONEY OPTIONS
SHARES NUMBER OF OPTIONS (B)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE REALIZED (A) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---------------------- ----------- ------------ ----------- ------------- ----------- -------------
William G. Kelley -- -- 2,550,940 685,250 $68,340,986 $ 7,799,063
Michael L. Glazer -- -- 85,000 480,500 1,696,500 4,812,875
C. Matthew Hunnell 15,000 $274,400 42,250 192,000 796,063 2,685,975
Charles Freidenberg -- -- 76,750 195,750 1,548,463 2,755,163
Michael J. Potter -- -- 57,375 145,125 1,195,406 1,757,094
- - ---------------
(a) Difference of the sales price on the dates of exercise and the option
exercise price.
(b) Based on the fair market value ($33.25) of Consolidated Stores Corporation
Common Stock at February 1, 1997, minus the aggregate exercise prices.
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COMPARISON OF FIVE YEAR TOTAL STOCKHOLDER RETURN
The following graph demonstrates a five year comparison of cumulative total
return for Consolidated Stores Corporation, the Standard & Poor's 500 Index and
the Standard & Poor's Retail Stores Index.
COMPARISON OF FIVE YEAR TOTAL STOCKHOLDER RETURN (a)
Consolidated
Measurement Period Stores
(Fiscal Year Covered) Corporation S&P Retail Stores S&P 500
1992 100.00 100.00 100.00
1993 131.73 119.36 110.58
1994 139.42 115.04 124.82
1995 142.31 106.53 125.48
1996 153.85 114.87 174.00
1997 316.11 137.12 219.83
(a) Assumes $100 invested on January 31, 1992 in Consolidated Stores Corporation
Common Stock compared to the same amount invested in the other funds shown
at the same time. Dividends, if any, are assumed to be reinvested.
COMPENSATION PLANS AND ARRANGEMENTS
DIRECTOR STOCK OPTION PLAN. The Director Stock Option Plan is administered by
the Compensation Committee pursuant to an established formula. Neither the Board
of Directors, nor the Compensation Committee exercise any discretion in
administering the plan, and the administration performed by the Compensation
Committee is ministerial in nature. The formula which governs the grant of stock
options to eligible participants may be amended by the Board of Directors, but
not more frequently than once in any six month period. Under the current
formula, each of the Outside Directors who are not otherwise ineligible are
granted annually stock options for the purchase of 5,000 shares of the Company's
Common Stock, for an exercise price equal to 100% of the fair market value on
the date of grant. Each annual grant occurs on the last day of the quarterly
trading period next following the Annual Meeting of Stockholders.
Options granted under the Director Stock Option Plan subsequent to such date
will become exercisable over three years beginning upon the first annual
anniversary of the grant date, whereby the option will become
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exercisable for up to 20% of the shares on the first anniversary, 60% on the
second anniversary, and 100% on the third anniversary, respectively. Options
granted will automatically terminate ten years and one month following the date
of grant. An optionee may exercise a stock option only during specific quarterly
trading periods, and only if at all times during the period beginning on the
date such option was granted and ending on the day three months before the date
of exercise he was a director of the Company.
Options granted under the Director Stock Option Plan are not transferable other
than by will or the laws of descent and distribution.
1996 PERFORMANCE INCENTIVE PLAN. The Plan is administered by the Compensation
Committee of the Board of Directors. The Committee determines the individuals to
whom Awards are to be made, the number of shares, if any, to be covered by each
Award, the term of the Award, its vesting, exercise period or settlement, the
type of consideration, if any, to be paid to the Company upon exercise of an
Award, and all other terms and conditions of the Awards. The purpose of the Plan
is to provide a flexible, long-term vehicle to attract, retain and motivate
officers and employees. The Plan authorizes the grant of incentive or
nonqualified stock options, stock appreciation rights, restricted stock, stock
equivalent unit and performance unit awards (collectively referred to as
"Awards") any of which may be granted on a stand alone, combination or tandem
basis, subject to certain Plan limitations.
The number of shares of common stock available for delivery under the Plan (the
"Common Stock") consists of an initial allocation of 2,500,000 shares, which is
increased, beginning with the fiscal year in which the Plan is in effect and
during each fiscal year following, by a number of shares equal to one percent
(1.0%) of the total number of issued shares of Common Stock at the end of the
prior fiscal year. Unused shares from previous fiscal years remain available for
delivery under the Plan; provided, that in any event, the total awards of stock
options or restricted stock outstanding and shares available for use under the
Plan combined with any awards of stock options or restricted stock outstanding
from any other plan of the Company shall not exceed fifteen percent (15%) of the
total shares of issued and outstanding Common Stock as of any measurement date.
The Plan limits the number of shares of Common Stock that can be represented by
Stock Options, Stock Appreciation Rights, or Restricted Stock and awarded to any
employee during any single fiscal year to no more than 1,000,000 shares. As a
further limitation, the maximum amount of compensation with respect to
Performance Units and Stock Equivalent Units that may be paid in any one fiscal
year (within the meaning of Section 162(m) of the Internal Revenue Code, as
amended), to anyone participant with respect to any one fiscal year is be
$2,000,000.
Awards under the Plan may be made to any employee of the Company or its
affiliates designated by the Committee. Historically, options have been granted
to approximately 500 employees in any given year.
The Plan provides for the Award of options which may be either incentive stock
options or non-qualified options. For both incentive and non-qualified options,
the exercise price may be not less than 100 percent of the fair market value of
a share of Common Stock at the time the option is granted. Any option intended
to qualify as an incentive stock option must meet all requirements of Section
422 of the Code. The Committee may grant stock appreciation rights to any
eligible employee on such terms as the Committee may determine.
The Committee may grant shares of restricted stock, stock equivalent units, and
performance units, subject to such conditions and restrictions as the Plan
specifies and otherwise as the Committee may determine. These grants may be made
alone or in tandem with other Awards. Stock equivalent units and performance
units may be payable upon vesting in cash, or may be convertible to common Stock
or other form of value determined by the Committee.
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No Award under the Plan may be assigned or transferred by the grantee other than
by will or the laws of descent and distribution, pursuant to a qualified
domestic relations order (as defined by the Code) or as may otherwise be
permitted by the Committee. In the absence of the first two exceptions, all
rights may be exercised during the grantee's lifetime only by the grantee.
The Committee may from time to time, at its discretion, amend or terminate the
Plan, except that no such amendment or termination shall impair any rights under
any Award made prior to the amendment's effective date without the consent of
the grantee, and provided that no such amendment shall increase the number of
shares available to the Plan or change the price at which stock options or stock
appreciation rights may be granted unless approved by stockholders in accordance
with applicable laws and regulations. The Plan shall terminate on February 3,
2006 or such earlier date as the Board may determine.
RESTRICTED STOCK PLAN. All of the executive officers and directors and other key
employees of the Company are eligible to participate in the Company's 1987
Restricted Stock Plan (the "Restricted Stock Plan"). Approximately 50 persons
were eligible to receive awards. No awards were outstanding as of the most
recent fiscal year end. The Restricted Stock Plan expires in August, 1997.
The Restricted Stock Plan provides generally that an employee or director to
whom an award of shares of Common Stock has been made under the Restricted Stock
Plan shall not receive or be immediately vested in the shares of Common Stock
awarded, but shall receive and become vested in such shares of Common Stock at
such time or times as specified by the Board of Directors and set forth in the
written agreement evidencing the award. Shares awarded that are not vested may
not be sold, transferred, assigned, pledged, hypothecated, anticipated,
alienated, encumbered or charged, whether voluntarily, involuntarily or by
operation of law, and shares awarded must be forfeited to the Company in the
event the recipient ceases to be an employee.
Vesting of any shares awarded under the Restricted Stock Plan becomes
accelerated automatically upon consummation of any event that results in a
Change in Effective Control of the Company. As used in the Restricted Stock
Plan, "Change in Effective Control" means any one or more of the following: (i)
any person or group (as defined for purposes of Section 13(d) of the Securities
Exchange Act of 1934) becomes the beneficial owner of, or has the right to
acquire (by contract, option, warrant, conversion of convertible securities or
otherwise), 20% or more of the outstanding equity securities of the Company
entitled to vote for the election of directors; (ii) a majority of the Board of
Directors is replaced within any period of two years or less by directors not
nominated and approved by a majority of the directors in office at the beginning
of such period (or their successors so nominated and approved), or a majority of
the Board of Directors at any date consists of persons not so nominated and
approved; or (iii) the stockholders of the Company approve an agreement to merge
or consolidate with another corporation or an agreement to sell or otherwise
dispose of all or substantially all of the Company's assets (including without
limitation, a plan of liquidation). Vesting solely on change of control subjects
such compensation to the income tax deduction limits described above (see
"Deductibility of Annual Compensation Over $1 Million).
The Restricted Stock Plan is administered by the Compensation Committee of the
Board of Directors of the Company, which selects the employees and directors to
whom awards will be granted, the number of shares to be awarded to each, and the
vesting schedule and other terms of each award. No current member of the
Compensation Committee is eligible to receive an award under the Plan. The
number of shares of Common Stock awarded pursuant to the Restricted Stock Plan
may not exceed 625,000 in the aggregate, subject to adjustment as described
above. The Board of Directors may adjust the number and kind of shares of Common
Stock available for distribution and subject to vesting, in order to prevent
dilution or enlargement of rights in the event of a change in the number or kind
of outstanding shares of the Company by reason of
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recapitalization, merger, consolidation, reorganization, separation,
liquidation, stock split, stock dividend, combination of shares, or any other
change in the corporate structure or shares of stock of the Company.
PENSION PLAN AND TRUST. The Company maintains a noncontributory defined benefit
pension plan (the "Pension Plan") for all employees whose hire date precedes
April 1, 1994, who have reached the age of 21 and who have worked for the
Company for more than one year. The amount of the Company's annual contribution
to the Pension Plan is actuarially determined to accumulate sufficient funds to
maintain projected benefits. Effective January 1, 1993, the computation of
annual retirement benefits payable upon retirement under the Pension Plan is 1%
of final average annual compensation multiplied by the years of service up to a
maximum of 25. This benefit is payable when a participant reaches the normal
retirement age of 65. However, the Pension Plan does provide an early retirement
option, and employment beyond the normal retirement age is permitted by
agreement with the Company. For purposes of calculating benefits under the
Pension Plan, compensation is defined to include a two month equivalent of the
total cash remuneration (including overtime) paid for services rendered during a
Plan year prior to salary reductions pursuant to Sections 401(k) or 125,
respectively, of the Internal Revenue Code of 1986, as amended, including
bonuses, incentive compensation, severance pay, disability payments and other
forms of irregular payments. Effective January 1, 1996, the benefits accrued for
certain highly compensated individuals, including all executive officers, was
frozen at the then current levels.
The table below illustrates the amount of annual benefit payable at age 65 to a
person in the specified average compensation and years of service
classifications under the Pension Plan.
FINAL YEARS OF SERVICE
AVERAGE -------------------------------------------
COMPENSATION 10 15 20 25
- - ------------ ------- ------- ------- -------
$ 100,000 $10,000 $15,000 $20,000 $25,000
$ 125,000 $12,500 $18,750 $25,000 $31,250
$ 150,000 $15,000 $22,500 $30,000 $37,500
and above
The maximum annual benefit payable under the Pension Plan is restricted by
the Internal Revenue Code. At January 1, 1997, the maximum final five year
average compensation is $150,000. At January 1, 1997, Mr. Kelley had 6 years of
credited service, Mr. Glazer had none, Mr. Hunnell had 12 years, Mr. Freidenberg
had 13 years, and Mr. Potter had 5 years.
SUPPLEMENTAL PENSION PLAN. The Company maintains a non-qualified
supplemental employee retirement plan ("Supplemental Pension Plan") for those
executives whose benefits were frozen in the Pension Plan on or subsequent to
January 1, 1996. The Supplemental Pension Plan constitutes a contract to pay
benefits upon retirement as therein defined. The Supplemental Pension Plan is
designed to pay the same benefits in the same amount as if the participants
continued to accrue benefits under the Pension Plan. The Company has no
obligation to fund the Supplemental Pension Plan, and all assets and amounts
payable under the Supplemental Pension Plan are subject to the claims of general
creditors of the Company. The table below illustrates the
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amount of annual benefit payable at age 65 to a person in the specified average
compensation and years of service classification under the Supplemental Pension
Plan.
FINAL YEARS OF SERVICE
AVERAGE -------------------------------------------
COMPENSATION 10 15 20 25
- - ------------ ------- ------- ------- -------
$ 100,000 $10,000 $15,000 $20,000 $25,000
$ 125,000 $12,500 $18,750 $25,000 $31,250
$ 150,000 $15,000 $22,500 $30,000 $37,500
and above
SAVINGS PLAN. All of the executive officers referred to in the cash
compensation table, as well as substantially all other full-time employees of
the Company and its subsidiaries, are eligible to participate in the
Consolidated Stores Corporation Savings Plan (the "Savings Plan"). In order to
participate in the Savings Plan, an eligible employee must satisfy applicable
age and service requirements and must make contributions to the Savings Plan
("Participant Elective Contributions").
Participant Elective Contributions are made through authorized payroll
deductions to one or more of the several investment funds established under the
Savings Plan. One of the funds is a Company Stock Fund which is invested solely
in Common Stock of the Company. All Participant Elective Contributions are
matched by the Company ("Employer Matching Contributions") at a rate of 100% for
the first 2% of salary contributed, and 50% for the next 4% of salary
contributed; however, only Participant Elective Contributions of up to six
percent of the employee's compensation will be matched. Employee Matching
Contributions will always be made in the form of Common Stock of the Company.
Each participant has a nonforfeitable right to all accrued benefits
pertaining to Participant Elective Contributions. Each participant also has a
nonforfeitable right to all accrued benefits pertaining to Employer Matching
Contributions in the event of retirement or other termination of employment (a)
on or after his 65th birthday, (b) on account of disability, or (c) by reason of
death. A participant whose employment terminates under other circumstances will
have a nonforfeitable right to a portion of accrued benefits pertaining to
Employer Matching Contributions determined under a schedule based on years of
service. All other unvested accrued benefits will be forfeited.
SUPPLEMENTAL SAVINGS PLAN. The Company maintains a non-qualified salary
deferral plan ("Supplemental Savings Plan") for those executives participating
in the Savings Plan who desire to contribute more than the amount allowable
under the Savings Plan. The Supplemental Savings Plan constitutes a contract to
pay deferred salary, and limits deferrals in accordance with prevailing tax law.
The Supplemental Savings Plan is designed to pay the deferred compensation in
the same amount as if the contributions had been made to the Savings Plan. The
Company has no obligation to fund the Supplemental Savings Plan, and all assets
and amounts payable under the Supplemental Savings Plan are subject to the
claims of general creditors of the Company.
EXECUTIVE BENEFIT PLAN. Most of the executive officers are eligible to
participate in the Consolidated Stores Executive Benefit Plan (the "Benefit
Plan"). The Benefit Plan is a supplemental health benefits plan which reimburses
participants for medical costs incurred but not covered by the Consolidated
Stores Associate Benefits Plan, up to an annual maximum reimbursement of $10,000
per participant. Amounts received by participants are treated as taxable income.
Amounts received by the five individuals named in the cash
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compensation table, are included in the amounts reflected in the values of
personal benefits received by such individuals and executive officers as a
group.
EXECUTIVE CHANGE IN CONTROL SEVERANCE AGREEMENTS. Since April 18, 1989, the
Company has maintained Executive Severance Agreements with certain of its key
officers and employees (currently 22 persons). The agreements expire on the
anniversary of their execution and are automatically extended on an annual basis
unless the Company provides at least 90 days notice that any particular
agreement will not be extended. The agreements provide for severance benefits
if, within 24 months after a Change in Control (as defined in the agreements),
the employee's employment is terminated by the Company (other than for Cause, as
defined in the agreements), or the employee resigns because of a material change
in the circumstances of his employment. For purposes of the agreements, "Change
in Control" means any one or more of the following: (i) any person or group (as
defined for purposes of Section 13(d) of the Securities Exchange Act of 1934)
becomes the beneficial owner of, or has the right to acquire (by contract,
option, warrant, conversion of convertible securities or otherwise), 20% or more
of the outstanding equity securities of the Company entitled to vote for the
election of directors; (ii) a majority of the Board of Directors is replaced
within any period of two years or less by directors not nominated and approved
by a majority of the directors in office at the beginning of such period (or
their successors so nominated and approved), or a majority of the Board of
Directors at any date consists of persons not so nominated and approved; or
(iii) the stockholders of the Company approve an agreement to merge or
consolidate with another corporation or an agreement to sell or otherwise
dispose of all or substantially all of the Company's assets (including without
limitation, a plan of liquidation). The agreements provide for the following
severance benefits: (i) for certain officers (including Mr. Potter) and
employees having a position of vice president of the Company or above, a
lump-sum payment equal to 200% of the employee's then-current annual salary; or
(ii) for other employees having a position of director of a department of the
Company, a lump-sum payment equal to 100% of the employee's then-current annual
salary. Messrs. Kelley, Glazer, Freidenberg, and Hunnell are not a party to such
an agreement, but each have substantially similar provisions contained in his
respective employment agreement permitting a severance benefit of up to 100% of
his then current annual salary. In addition, the stock option plans, the
Restricted Stock Plan, and each of the above described employment agreements,
each provide for immediate vesting of all outstanding options and shares,
respectively, in the event of such a Change in Control (please see "Stock Option
Plans" table, and "Restricted Stock Plan", above). The employee will also become
entitled to reimbursement of legal fees and expenses incurred by the employee in
seeking to enforce his rights under his agreement. In addition, to the extent
that payments to the employee pursuant to his agreement (together with any other
amounts received by the employee in connection with a Change in Control) would
result in the triggering of the provisions of Sections 280G and 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), each agreement provides
for the payment of an additional amount (the "Tax Gross-Up Amount") such that
the employee receives, net of excise taxes, the amount he would have been
entitled to receive in the absence of the excise tax provided in Section 4999 of
the Code. Under proposed income tax regulations, compensation payable on change
in control is subject to the income tax deduction limitations described above
(see "Deductibility of Annual Compensation Over $1 Million").
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PROPOSAL TWO: APPROVAL OF THE AMENDMENT TO THE FOURTH
ARTICLE OF THE CERTIFICATE OF INCORPORATION OF THE COMPANY
INCREASING THE AUTHORIZED OF COMMON STOCK OF THE COMPANY
Article Fourth of the Company's Restated Certificate of Incorporation
presently provides for an authorized capitalization of the Company of 90,000,000
shares of Common Stock, $0.01 par value per share, 8,000,000 shares of
Non-Voting Common Stock, $0.01 par value per share, and 2,000,000 shares of
Preferred Stock, for a total authorized capitalization of 100,000,000 shares. As
of April 3, 1997, none of the authorized shares of Preferred Stock were issued
and outstanding, and 67,339,903 shares of Common Stock were issued and
outstanding with a total of 9,893,188 additional shares of Common Stock reserved
for issuance upon exercise of stock options granted and available for grant
under the Company's stock option and restricted stock plans.
On February 18, 1997, the Board of Directors of the Company proposed to
amend the Fourth Article of the Company's Certificate of Incorporation, subject
to stockholder approval, to increase from 90,000,000 to 290,000,000 the number
of authorized shares of Common Stock. A copy of the restated Article Fourth
reflecting the proposed amendment is set forth in Exhibit A.
If the proposal is approved by the stockholders of the Company, the
additional 200,000,000 shares of Common Stock so authorized will be available
for issuance by the Board of Directors of the Company for stock splits or stock
dividends, acquisitions, raising additional capital, stock options, or other
corporate purposes. The Company does not anticipate that it would seek
authorization from the stockholders for issuance of any other additional shares
in the future unless required by applicable law or regulation. Any additional
shares, when issued, would have the same rights and preferences as the shares of
Common stock presently outstanding. One of the effects of the amendment, if
adopted, may be to enable the Board to discourage an attempt to obtain control
of the Company. In addition, since the Company's stockholders have no preemptive
rights to purchase additional shares of Common Stock issued, the issuance of
such shares in certain contexts could dilute the interests of current
stockholders of the Company. However, the Company maintains other measures which
could discourage undesirable changes in control, and which restrict the pricing
and amount of derivative securities available under the various stock option and
restricted stock plans.
The approval of this proposal to amend the Company's Restated Certificate
of Incorporation to increase the number of authorized shares of Common Stock
requires the affirmative vote of a majority of those outstanding shares of
Common Stock present and voting at the meeting wherein a quorum is declared
present.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE APPROVAL
OF PROPOSAL TWO.
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APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Deloitte & Touche LLP to be the
independent auditors of the Company and its subsidiaries for the fiscal year
ending January 31, 1998. Deloitte & Touche LLP acted as the Company's
independent auditors for fiscal years ended February 1, 1997, and February 3,
1996. A representative of Deloitte & Touche LLP will be in attendance at the
Annual Meeting of Stockholders, will have the opportunity to make a statement if
he or she desires to do so, and will be available to respond to appropriate
questions from stockholders.
STOCKHOLDER PROPOSALS
Any stockholder who intends to present a proposal at the 1997 Annual
Meeting of Stockholders for inclusion in the proxy statement and form of proxy
relating to that meeting is advised that the proposal must be received by the
Company at its principal executive offices not later than January 19, 1998. The
Company will not be required to include in its proxy statement or form of proxy
a stockholder proposal which is received after that date or which otherwise
fails to meet requirements for stockholder proposals established by regulations
of the Securities and Exchange Commission.
OTHER MATTERS
This solicitation of proxies is made by and on behalf of the Board of
Directors. In addition to mailing copies of this statement and the accompanying
notice and form of proxy to all stockholders of record on the record date, the
Company will request brokers, custodians, nominees and other fiduciaries to
forward copies of this material to persons for whom they hold shares of Common
Stock of the Company in order that such shares may be voted. Solicitation may
also be made by the Company's officers and regular employees personally or by
telephone or telegraph. The cost of the solicitation will be incurred by the
Company. The Company has also retained Georgeson & Company Inc. to aid in the
solicitation of proxies for a fee estimated at $8,000 plus reasonable
out-of-pocket expenses.
If the accompanying form of proxy is executed and returned, the shares
represented thereby will be voted in accordance with any specifications made by
the stockholder. In the absence of any such specifications, they will be voted
to elect all nine nominees as set forth under Proposal One, and to approve
Proposal Two.
The presence of any stockholder at the meeting will not operate to revoke
his proxy. A proxy may be revoked at any time before it is exercised, by a later
appointment received by the secretary of the meeting or by giving notice of a
revocation to the secretary of the meeting in writing or in open meeting.
If any other matters shall properly come before the meeting, the persons
named in the proxy, or their substitutes, will vote thereon in accordance with
their judgment. The Board of Directors does not know of any other matters which
will be presented for action at the meeting.
STOCKHOLDERS MAY OBTAIN FROM THE COMPANY, WITHOUT CHARGE, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE COMPANY'S MOST RECENT FISCAL YEAR, BY WRITING ALBERT J. BELL,
SECRETARY, AT 300 PHILLIPI ROAD, COLUMBUS, OHIO 43228.
By order of the Board of Directors.
April 25, 1997
Albert J. Bell,
Senior Vice President,
General Counsel and Secretary
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APPENDIX A
CONSOLIDATED STORES CORPORATION
BOARD OF DIRECTORS
INCREASE IN AUTHORIZED SHARES
RESOLVED, that the Certificate of Incorporation be, and it is hereby, amended by
deleting the first paragraph of Article Fourth in its entirety, and substituting
therefore the following (the "Amendment"):
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is three hundred million
(300,000,000), of which two million (2,000,000) shares shall be designated
as Preferred Stock, $.01 par value per share (the "Preferred Stock"), two
hundred ninety million (290,000,000) shares shall be designated as Common
Stock, $.01 par value per share (the "Common Stock"), and eight million
(8,000,000) shares shall be designated as Non-Voting Common Stock, $.01 par
value per share (the "Non-Voting Common Stock"). The shares of such classes
of stock shall have the following express terms:
RESOLVED FURTHER, that the Amendment be, and is hereby, made subject to the
approval of the stockholders of the Corporation at the next Annual Meeting of
the Stockholders duly called and held.
RESOLVED FURTHER, that, conditioned upon the approval of the Amendment by the
stockholder of the Corporation, the officers of the Corporation be, and they
hereby are, acting jointly or severally, authorized and directed to prepare and
file an Amended and Restated Certificate of Incorporation, and such other
notices, designations, and documents, and to take any other action, as they
shall deem necessary or appropriate, to effect the intent of the preceding
Resolution.
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CONSOLIDATED STORES CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE MAY 20, 1997 ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints William G. Kelley, Michael L. Glazer,
and Albert J. Bell, and each of them, with full power of substitution, as
proxies for the undersigned to attend the Annual Meeting of Stockholders
of Consolidated Stores Corporation, to be held at 300 Phillipi Road,
Columbus, Ohio, at 9:00 A.M. (local time) on May 20, 1997, and thereat,
and at any adjournment thereof, to vote and act with respect to all
shares of Common Stock of the Company which the undersigned would be
entitled to vote, with all the power the undersigned would possess if
present in person, as follows:
1. ELECTION OF DIRECTORS
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary below) [ ] to vote for all nominees listed below [ ]
Sheldon M. Berman, W. Eric Carlborg, Michael L. Glazer, William G. Kelley, David T. Kollat,
Brenda J. Landerback, Nathan P. Morton, Dennis B. Tishkoff and William A. Wickham.
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name on the space provided
below.)
-----------------------------------------------------------------------------------------------------
(Continued, and to be dated and signed, on the other side)
(Continued from the other side)
FOR AGAINST ABSTAIN
2. To approve the Amendment to the Fourth Article of the Certificate of [ ] [ ] [ ]
Incorporation of the Company increasing the authorized shares of common
stock of the Company.
3. In their discretion, to vote upon such other business as may properly come [ ] [ ] [ ]
before the meeting.
Date: -----------------, 1997
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Signature(s) of Stockholder(s)
PLEASE SIGN AS YOUR NAME OR
NAMES APPEAR HEREON. WHEN
SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE
GIVE YOUR FULL TITLE. IF A
CORPORATION, PLEASE SIGN IN
FULL CORPORATE NAME.
Proxy Card
