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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)
(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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1105 North Market Street
[LOGO] Suite 1300
P.O. Box 8985
Wilmington, Delaware 19801
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 1998
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 19, 1998, at 9:00 A.M., local time, for the following purposes:
1. To elect nine directors of the Company;
2. To approve the 1998 Consolidated Stores Corporation Key Associate Annual
Incentive Compensation Plan; and
3. To transact such other business as may properly come before the meeting.
Only stockholders of record at the close of business on March 27, 1998 are
entitled to notice of and to vote at said meeting or any adjournment thereof.
By order of the Board of Directors.
April 15, 1998
ALBERT J. BELL,
Executive 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 ANNUAL MEETING, YOU MAY REVOKE
YOUR PROXY AND VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED
YOUR PROXY.
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1105 NORTH MARKET STREET
[LOGO] SUITE 1300
P.O. BOX 8985
WILMINGTON, DELAWARE 19801
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PROXY STATEMENT
This Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Consolidated Stores Corporation, a Delaware
corporation (the "Company"), for use at the Annual Meeting of Stockholders to be
held on May 19, 1998. 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 January 31, 1998, are first being mailed
to stockholders on or about April 15, 1998.
The close of business on March 27, 1998 has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting. At that date, the Company had outstanding 107,378,774 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 Proposals Two and Three, 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 any of
the three 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 Proposals Two and Three, abstentions will be treated as votes cast
against the respective proposal. A proxy may be revoked at any time before it is
exercised by filing with the secretary of the Company a notice of revocation or
a duly executed proxy bearing a later date. A proxy may also be revoked by
attending the meeting and giving notice of revocation to the secretary of the
meeting, either in writing or in open meeting. Tabulation shall be performed by
National City Bank, the Company's Transfer Agent, as inspected by duly appointed
officers of the Company.
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PROPOSAL ONE: ELECTION OF DIRECTORS
At the Annual 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. All 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 57 Chairman, Macaroons, Inc. (consumer research and 1994
marketing services); former Chairman, President and
founder, Shelly Berman Communicators (retail marketing
and advertising)
W. Eric Carlborg 34 Chief Financial Officer, Einstein Noah Bagel Corp. 1997
(retail restaurants/bakeries); former Vice
President--Alignment and Planning, Boston Chicken, Inc.
(retail restaurants); former Vice President--Corporate
Finance, Merrill Lynch Investment Banking (investment
banking)
Michael L. Glazer 50 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 52 Chairman of the Board and Chief Executive Officer of 1990
the Company
David T. Kollat 59 President and Founder, 22, Inc. (retail research and 1990
consulting)
Brenda J. Lauderback 47 former President--Wholesale Group, Nine West Group, 1997
Inc. (retail and wholesale footwear); former
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 49 Co-Chairman and Chief Executive Officer, Computer City 1990
(retail stores); Senior Partner, Channel Marketing
Corporation; former President and Chief Executive
Officer, Open Environment Corporation (software
development); former President and Chief Executive
Officer, Comp USA (retail stores)
Dennis B. Tishkoff 55 President and Chief Executive Officer, Shoe Corporation 1991
of America (retail footwear)
William A. Wickham 53 Chairman of the Board, SBC Advertising (advertising and 1992
corporate communications agency)
Five meetings of the Board of Directors were held during the Company's
fiscal year ended January 31, 1998 (sometimes hereinafter "fiscal 1997"). Each
director attended at least 75% of the meetings of the Board, and the committees
on which he or she served, during the period for which he or she served as a
director during fiscal 1997.
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The Board has an Audit Committee, a Compensation Committee, and a
Nominating Committee. Messrs. Wickham, Carlborg and Ms. Lauderback are the
members of the Audit Committee, which monitors the activities of the Company's
independent auditors and its internal audit functions. The Audit Committee met
twice during fiscal 1997. Messrs. Kollat, Morton and Tishkoff 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 once during fiscal 1997. Messrs. Kelley, Berman and
Glazer 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 met once during fiscal 1997. The Nominating Committee
will not consider nominees recommended by security holders.
RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Kelley is a director of National City Bank. Mr. Glazer is a director of
Brookstone, Inc. Mr. Kollat is a director of The Limited, Inc., Cooker
Restaurant Corp., SBC Advertising, AEI Music Network, Pipeliner Systems, Inc.,
Cheryl & Co., Christy & Associates, Select Comfort, Inc., and Wolverine
Worldwide, Inc. Ms. Lauderback is 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 1997, the Company paid fees in the
amount of $777,181.12, and $1,003,721.00 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 1997, seven directors, Messrs. Berman, Carlborg, Kollat, Morton,
Tishkoff, Wickham and Ms. Lauderback, were parties to such arrangements. In
addition, such directors constitute outside directors and receive stock option
grants under the Director Stock Option Plan. Each of the aforenamed directors
received an option to acquire 5,000 shares of Common Stock pursuant to the
Director Stock Option Plan during fiscal 1997. (Please see Director Stock Option
Plan.)
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of January 31, 1998, certain information
with regard to the beneficial ownership of the Company's Common Stock by each
holder of 5% of such stock, each director individually, each of the five
executive officers named in the Summary Compensation Table, and all officers and
directors 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 Albert J. Bell 81,671 *
Common Stock Sheldon M. Berman (2) 27,813 *
Common Stock W. Eric Carlborg 0 *
Common Stock Charles C. Freidenberg 187,544 *
Common Stock Michael L. Glazer 422,527 *
Common Stock William G. Kelley 3,752,086 3.49%
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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 105,472 *
Common Stock Brenda J. Lauderback 0 *
Common Stock Nathan P. Morton 45,316 *
Common Stock Michael J. Potter 95,745 *
Common Stock Dennis B. Tishkoff 38,673 *
Common Stock William A. Wickham (3) 140,624 *
Common Stock The Capital Group Companies, Inc (4) 4,635,420 5.50%
Common Stock FMR Corp. (5) 12,351,273 14.64%
Common Stock Putnam Investments, Inc. (6) 7,149,068 8.00%
Common Stock All directors & executive 4,989,865 4.65%
officers as a group (18 Persons)
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* Represents less than 1% of the outstanding Common Stock.
(1) The persons named in the table, other than The Capital Group Companies, Inc.
(see note (4) below), FMR Corp. (see note (5) below), and Putnam
Investments, Inc. (see note (6) 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 5 for 4 stock splits
which occurred in December, 1996 and June, 1997, and include shares that may
be acquired within 60 days of the record date under stock options
exercisable within that period. Percentage ownership was based on shares of
Common Stock outstanding at January 31, 1998, unless otherwise stated. Of
the shares reported for Messrs. Bell, Berman, Carlborg, Freidenberg, Glazer,
Kelley, Kollat, Morton, Potter, Tishkoff, Wickham, Ms. Lauderback and for
all directors and executive officers as a group, 79,690, 14,064, 0, 182,816,
369,337, 3,707,738, 45,316, 21,877, 94,068, 37,503, 29,690, 0, and
4,664,295, respectively, are shares which may be acquired within 60 days of
the record date 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 10, 1998, 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, 1997, of which 4,375,940 shares (5.2% 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 227,040 shares, and sole dispositive power over
4,635,420 shares.
(5) In its Schedule 13G dated February 14, 1998, and its accompanying materials,
FMR Corp. stated that it beneficially owned the number of shares reported in
the table as of December 31, 1997, which number includes 11,234,772 shares
(13.31% 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 1,115,376 shares (1.32% 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 sole voting power over
693,159 shares, and sole dispositive power over 12,351,273 shares.
(6) In its Schedule 13G dated January 16, 1998, and its accompanying materials,
Putnam Investments, Inc. stated that it beneficially owned the number of
shares reported in the table as of December 31, 1997, which number includes
4,798,248 shares (6.0% of the Common Stock at that date) beneficially owned
by Putnam Investment Management, Inc. in its capacity as investment advisor
to the Putnam family of
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mutual funds; and 2,350,820 shares (2.0% of the Common Stock at that date)
beneficially owned by Putnam Advisory Company, Inc., which is the investment
advisor to Putnam's institutional clients. Of the shares reported in the
table above, Putnam Investments, Inc. has the shared voting power over
1,599,452 shares, and shared dispositive power over 7,149,068 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; FMR Corp., 82
Devonshire Street, Boston, MA 02109; and Putnam Investments, Inc., One Post
Office Square, Boston, MA 02109.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION REPORT OF THE COMPANY'S
COMPENSATION COMMITTEE
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,
Morton and Tishkoff comprise the Committee.
The Committee believes that the key to the Company's success is the strong
performance of its executive officers. Consequently, the Committee applies
aggressive compensation incentives, both short term and long term, to maximize
stockholder value. The Committee feels that these incentives should be
implemented with a high degree of responsiveness to the performance of the
Company. To achieve this responsiveness, importance is placed upon executive
officer participation in the Company's performance through equity ownership, and
through bonuses based upon the Company's performance. The basic compensation
components for all executive officers, including the Company's Chief Executive
Officer ("CEO"), consist of salary, bonus, and stock options. Utilizing these
components, the Committee believes that it properly aligns the financial
interests and success of executive officers with those of the stockholders.
CEO SALARY
Mr. Kelley's salary was originally set by his employment agreement dated
December 12, 1989. Mr. Kelley's employment agreement does not provide for any
automatic salary increases. Instead, such increases (if any) are made in the
sole discretion of the Committee. The Committee has chosen not to adopt any
specific schedule of salary increases, and may adjust Mr. Kelley's salary
without regard to adjustments in the salaries of other executive officers of the
Company. Generally, the Committee looks to factors such as the Company's planned
and actual increase in pretax income, market performance of its Common Stock,
and business growth, in determining the amount of Mr. Kelley's salary increase.
The Committee does not weight such factors in advance or tie Mr. Kelley's salary
to specific performance criteria.
CEO BONUS
Typically, Mr. Kelley's bonus would be determined in accordance with the
Company's Key Associate Annual Incentive Compensation Plan. Bonuses under the
Company's Key Associate Annual Incentive Compensation Plan are based upon the
Company's achievement of specific annual earnings targets established at the
beginning of the fiscal year by the Committee. The Committee derives its targets
from the planned earnings per share for the fiscal year established at the
beginning of the fiscal year by the Board of Directors. In fiscal 1997, the
Company's successful acquisition of Mac Frugal's Bargains Close-out Inc. ("Mac
Frugal's") resulted in certain unusual or infrequent charges which negatively
impacted the Company's
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earnings. As a result, Mr. Kelley did not receive a bonus under the Company's
Key Associate Annual Incentive Compensation Plan.
Recognizing that the unusual or infrequent charges associated with the Mac
Frugal's acquisition and the corresponding impact upon the Company's earnings
related for the most part to integration costs, transaction related costs, and
nonrecurring costs, and further recognizing Mr. Kelley's other contributions
throughout fiscal 1997, the Committee granted Mr. Kelley a discretionary bonus.
In determining the amount of Mr. Kelley's bonus, the Committee, without
attempting to weigh such factors, looked to indicators such as the Company's
planned and actual increase in pretax income, market performance of its Common
Stock, business growth and the successful completion of the Mac Frugal's
acquisition. Although the Committee's determination was subjective in nature and
Mr. Kelley's bonus was granted notwithstanding the Company's failure to meet the
relevant performance criteria under the Company's Key Associate Annual Incentive
Compensation Plan, the Committee believes Mr. Kelley's efforts in fiscal 1997
will enhance the profitability of the Company and continue to create value for
stockholders.
CEO EQUITY INCENTIVES
The Committee believes that the grant of significant annual equity awards
to Mr. Kelley further links Mr. Kelley's interests with the interests of the
stockholders. Consistent with these 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. Mr. Kelley's stock purchase options typically
become exercisable ("vest") over time during employment, usually in equal
amounts over a 5 year period.
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 component for non-CEO executive officers is typically 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 the Company's performance.
As discussed above, the Company's successful acquisition of Mac Frugal's
resulted in certain unusual or infrequent charges which negatively impacted the
Company's earnings. As a result, no executive officer received a bonus under the
Company's Key Associate Annual Incentive Compensation Plan. Once again
recognizing the nature of these charges, and further recognizing the other
contributions made by the executive officers throughout fiscal 1997, the
Committee granted discretionary bonuses, in varying amounts, to the
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executive officers. In determining the amount of each executive officer's bonus,
the Committee, without attempting to weigh such factors, looked to indicators
such as the Company's planned and actual increase in pretax income, divisional
business growth, the successful completion of the Mac Frugal's acquisition, and
personal performance. Although the Committee's determination was subjective in
nature and all of the non-CEO executive officers' bonuses were granted
notwithstanding the Company's failure to meet the relevant performance criteria
under the Company's Key Associate Annual Incentive Compensation Plan, the
Committee believes the executive officers' efforts in fiscal 1997 will enhance
the profitability of the Company and continue to create value for stockholders.
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 Committee's
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
considers the recommendation of, and relies upon information provided by, the
CEO in making its assessment and reaching its decision. 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
the executive officers compensation upon the future performance of the Company's
Common Stock.
DEDUCTIBILITY OF ANNUAL COMPENSATION OVER $1 MILLION
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") generally limits the tax deductibility for federal income tax purposes
of compensation paid to the Company's CEO and the four highest compensated
executive officers (other than the CEO) in excess of $1 million. Compensation in
excess of $1 million may be deducted if it is "performance-based compensation"
within the meaning of the Code. Although the Company has taken the necessary
actions to preserve the deductibility of payments made under the Company's
compensation plans, nonperformance-based compensation, such as the discretionary
bonuses described above, may not be fully deductible.
THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
David T. Kollat, Chairman
Nathan P. Morton
Dennis B. Tishkoff
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SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the individual
compensation paid to the Company's Chief Executive Officer and each of the four
other most highly compensated executive officers for services in all capacities
to the Company for fiscal years 1997, 1996, and 1995.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------------------- --------------------------------
AWARDS PAYOUTS
-------------------- ---------
RESTRICTED LONG-TERM
STOCK STOCK INCENTIVE ALL OTHER
FISCAL SALARY BONUS OTHER AWARDS OPTIONS PAYOUTS COMPENSATION
NAME AND POSITION YEAR ($) ($) ($) ($)(d) (#)(e) ($) ($)
----------------- ------ ---------- ---------- ------------ ---------- ------- --------- ------------
William G. Kelley, Chairman 1997 $850,000 $1,700,000 $ --(a) $ -- -- -- $16,773(f)(g)
of the Board and 1996 651,000 878,850 55,995(b) -- 317,500 -- 15,037(f)(g)
Chief Executive Officer 1995 620,000 527,000 75,442(b) 2,062,500 195,313 -- 5,625(f)
Michael L. Glazer, President 1997 600,000 1,200,000 --(a) -- -- -- 6,400(f)(g)
1996 472,500 637,875 62,224(c) -- 285,000 -- 6,000(f)(g)
1995 328,846 382,500 64,119(c) 1,662,500 390,625 -- --
Albert J. Bell, 1997 300,000 360,000 --(a) -- -- -- 8,938(f)(g)
Executive Vice 1996 225,000 182,250 --(a) -- 62,500 -- 8,170(f)(g)
President,
General Counsel and 1995 200,000 68,000 --(a) -- 117,188 -- 5,625(f)
Secretary
Michael J. Potter, 1997 300,000 360,000 --(a) -- -- -- 8,289(f)(g)
Executive Vice President 1996 225,000 182,250 --(a) -- 62,500 -- 7,546(f)(g)
and Chief Financial 1995 200,000 68,000 --(a) -- 128,126 -- 4,038(f)
Officer
Charles C. Freidenberg 1997 300,000 153,000 --(a) -- -- -- 19,686(f)(g)
Sr. Vice President, 1996 275,000 222,750 --(a) -- 62,500 -- 18,583(f)(g)
Merchandising 1995 228,750 106,250 --(a) -- 195,313 -- 5,625(f)
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(a) Exclusive of the value of perquisites or other personal benefits because
they do not exceed the lesser of $50,000 or 10% of total annual salary and
bonus for the named executive officer.
(b) Includes $29,719 and $31,500 of interest foregone by the Company in fiscal
1996 and 1995, respectively, on a $450,000 second mortgage loan made to Mr.
Kelley by the Company 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.
(c) Includes $32,433 and $53,712 in 1996 and 1995, respectively, for relocation
assistance provided to Mr. Glazer.
(d) 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 are no restricted shares held by named
executive officers as of January 31, 1998, 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,
1996, and September 19, 1996, 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.
(e) Non-qualified options granted pursuant to the 1996 Incentive Performance
Plan and The Executive Stock Option and Stock Appreciation Rights Plan, as
adjusted to account for the 5 for 4 stock splits which occurred in December,
1996 and June, 1997.
(f) Company matching contribution to the Consolidated Stores Corporation Savings
Plan (401K) and/or Consolidated Stores Corporation Supplemental Savings Plan
(Top Hat). For fiscal 1997 and 1996 the matching contribution was $6,400 and
$6,000, respectively, for all named individuals.
(g) Accruals to the Consolidated Stores Corporation Supplemental Defined Benefit
Pension Plan for fiscal 1997 for Messrs. Kelley, Glazer, Bell, Potter, and
Freidenberg were $10,373, 0, $2,538, $1,889, and $13,286, respectively.
Accruals for fiscal 1996 for Messrs. Kelley, Glazer, Bell, Potter, and
Freidenberg were $9,037, 0, $2,170, $1,546, and $12,583, respectively.
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EMPLOYMENT AGREEMENTS. In 1989, the Company entered into an employment
agreement with Mr. Kelley, and in 1995, the Company entered into employment
agreements with Messrs. Glazer and Freidenberg, 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 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 under the agreements unless the Company achieved a
minimum threshold of its target earnings per share, and in any event were
subject to a maximum of 200% of the base salary, for fiscal 1997. Each of the
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 of Control," as such term
is defined in the agreements).
Mr. Kelley's agreement provides that in the event he is terminated without
cause, or if his employment terminates for any reason within one year of a
Change of Control, Mr. Kelley 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 the termination occurs. In addition, with respect to the
stock options granted pursuant to his employment agreement, Mr. Kelley's stock
options will continue to vest in a pro-rata manner during the fiscal year in
which he is terminated in the event he is terminated without cause, and will
become fully vested following a Change of Control. Mr. Glazer's agreement
provides that in the event that he is terminated without 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 his employment agreement will become vested and exercisable. Mr.
Freidenberg's agreement provides that if he is terminated without cause or his
employment terminates for any reason within one year of a Change of Control, he
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,
Mr. Freidenberg will continue to receive his salary and benefits for a period of
365 days, unless he is re-employed prior to the expiration of the payment
period. Also in the event of a Change of Control, Mr. Freidenberg's stock
options granted in connection with his employment agreement will become vested
and exercisable. Messrs. Bell and Potter do not have employment agreements.
In addition, a Change of Control of the Company would cause Messrs. Kelley,
Glazer and Freidenberg 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 be subject to the
deductibility limitations of Sections 162(m) and 280G of the Code.
The following tables reflect the (i) number and value of options granted in
fiscal 1997 to the individuals named in the Summary Compensation Table and (ii)
the aggregate exercises and number and value of exercisable and unexercisable
options at January 31, 1998, 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
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ----------------------
NAME GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
---- ---------- ------------- -------------- ---------- -- ---
William G. Kelley -- -- -- -- -- --
Michael L. Glazer -- -- -- -- -- --
Albert J. Bell -- -- -- -- -- --
Michael J. Potter -- -- -- -- -- --
Charles C. Freidenberg -- -- -- -- -- --
- ---------------
(a) As noted, no stock options were granted to any of the named individuals in
the Summary Compensation Table in fiscal 1997.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
UNEXERCISED OPTIONS AT JANUARY 31, 1998
----------------------------------------------------------
NUMBER OF VALUE OF IN-THE-MONEY
SHARES NUMBER OF OPTIONS(b) OPTIONS(c)
ACQUIRED ON VALUE --------------------------- ----------------------------
NAME EXERCISE REALIZED(a) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
William G. Kelley -- $ -- 3,383,988 661,249 $120,333,719 $14,563,377
Michael L. Glazer -- -- 187,502 519,375 5,661,002 11,115,797
Albert J. Bell 31,250 623,000 59,378 137,498 1,713,384 3,062,379
Michael J. Potter 31,250 734,000 75,475 146,402 2,210,030 3,359,390
Charles C. Freidenberg -- -- 150,004 190,623 4,550,123 4,701,145
- ---------------
(a) Difference of the sales price on the dates of exercise and the option
exercise price.
(b) Adjusted to account for the 5 for 4 stock splits which occurred in December,
1996 and June, 1997.
(c) Based on the fair market value ($41.125) of Consolidated Stores Corporation
Common Stock at January 31, 1998 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 S&P RETAIL
(FISCAL YEAR COVERED) CORPORATION STORES S&P 500
1993 $100.00 $100.00 $100.00
1994 105.84 96.38 112.88
1995 108.03 89.25 113.48
1996 116.79 96.23 157.35
1997 239.96 114.87 196.80
1998 375.23 170.34 252.30
(a) Assumes $100 invested on January 31, 1993 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 become exercisable over
three years beginning upon the first annual anniversary of the grant date,
whereby the option becomes exercisable for 20% of the shares on
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the first anniversary, 60% on the second anniversary, and 100% on the third
anniversary, respectively. Options granted 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 or she 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 1996 Performance Incentive 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 1996 Performance Incentive Plan is
to provide a flexible, long-term vehicle to attract, retain and motivate
officers and employees. The 1996 Performance Incentive 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.
The number of shares of Common Stock available for delivery under the 1996
Performance Incentive Plan consists of an initial allocation of 2,000,000 shares
(3,125,000 shares as adjusted to account for the 5 for 4 stock splits which
occurred in December, 1996 and June, 1997), which is increased, beginning with
the fiscal year in which the 1996 Performance Incentive 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 as of the start of
each of the Company's fiscal years. Unused shares from previous fiscal years
remain available for delivery under the 1996 Performance Incentive Plan;
provided, that in any event, the total awards of stock options or restricted
stock outstanding and shares available for use under the 1996 Performance
Incentive 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 1996 Performance Incentive 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
Code) to anyone participant with respect to any one fiscal year is $2,000,000.
Awards under the 1996 Performance Incentive Plan may be made to any employee of
the Company or its affiliates designated by the Committee. Historically, options
have been granted to approximately 200 employees in any given year.
The 1996 Performance Incentive 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.
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The Committee may grant shares of restricted stock, stock equivalent units, and
performance units, subject to such conditions and restrictions as the 1996
Performance Incentive 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.
No Award under the 1996 Performance Incentive 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
1996 Performance Incentive 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 1996 Performance Incentive
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 1996 Performance Incentive Plan shall terminate on February
3, 2006, or such earlier date as the Board may determine.
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 of the
Code, 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
$152,000 and above $15,200 $22,800 $30,400 $38,000
The maximum annual benefit payable under the Pension Plan is restricted by
the Internal Revenue Code. At January 1, 1998, the maximum final five year
average compensation is $152,000. At January 1, 1998,
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Mr. Kelley had 7 years of credited service, Mr. Glazer had none, Mr. Bell had 10
years, Mr. Potter had 6 years, and Mr. Freidenberg had 14 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 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
$152,000 and above $15,200 $22,800 $30,400 $38,000
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" or "401K"). 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.
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 the participant's 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 (the "Supplemental Savings Plan" or "Top Hat") 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
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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 exceeding the applicable threshold by the five individuals
named in the Summary Compensation Table are included in the amounts reflected in
the values of personal benefits received by such individuals.
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 77 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 Messrs. Bell and 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, and Freidenberg 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 Executive Stock Option 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 the Fiscal Year End Option Values table
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 triggering the provisions
of Sections 280G and 4999 of 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.
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PROPOSAL TWO: APPROVAL OF THE 1998 CONSOLIDATED STORES CORPORATION
KEY ASSOCIATE ANNUAL INCENTIVE COMPENSATION PLAN
The 1998 Consolidated Stores Corporation Key Associate Annual Incentive
Compensation Plan (the "Plan") was adopted, subject to stockholder approval, by
the Board of Directors on February 24, 1998. The Plan was adopted to replace the
Company's existing Key Associate Annual Incentive Compensation Plan. The Plan
reflects changes brought about by Statement of Financial Accounting Standards
No. 128 ("FAS 128"). Specifically, FAS 128 changed the presentation of earnings
per share data on the Company's income statement and notes to the financial
statements. The relevant performance goals/targets of the Plan conform to the
changes brought about by FAS 128. Additionally, the Plan provides increased
flexibility under section 162(m) of the Code when unusual or infrequent items
occur that are not representative of the Company's ongoing operations.
The Plan is designed to (i) assist Consolidated Stores Corporation in
attracting, retaining and motivating employees, (ii) align Participants'
interests with those of the Company's stockholders and (iii) qualify
compensation paid to Participants who are "Covered Employees" as "other
performance-based compensation" within the meaning of section 162(m) of the
Code, or any similar successor provision. The following is a summary of the
proposed features of the Plan, which is qualified in its entirety by reference
to the Plan, a copy of which is attached as Appendix A to this Proxy Statement.
Each key associate of the Company who is approved for participation in the
Plan by the Committee (or under the authority conveyed by the Committee) shall
be a Participant as of the date designated. Approximately 360 individuals would
have participated in the Plan in fiscal 1997 had the Plan been in effect.
Written notice of approval for participation shall be given to each key
associate so approved as soon as practicable following the date of approval. The
Committee may withdraw its approval for participation for a Participant at any
time. In the event of such withdrawal, the key associate concerned shall cease
to be an active Participant as of the date selected by the Committee and the key
associate shall be notified of such withdrawal as soon as practicable following
such action. In general, it is expected that key associates who are to be
Participants for a Performance Period shall be notified of that fact before the
beginning of the Performance Period. However, the Plan reserves the right to
include associates without prior notification.
Each Award to a Covered Associate must contain one or more performance
goals, the material terms of which must be disclosed to, and subsequently
approved in a separate vote by, the stockholders before the payout is executed,
unless they conform to one or any combination of the goals enumerated in the
Plan. For each Award to a Covered Associate, the Committee must establish
written performance goals prior to the completion of 25% of the period of time
for which the goal applies, or such earlier date as required under Section
162(m) of the Code. For the fiscal year beginning February 1, 1998, the Award
payable to Messrs. Kelley, Glazer, Bell, Potter and Freidenberg is determined
under a payout table based on earnings per share criteria established by the
Committee. The payout table is based upon objective and specific criteria
reflected in the Company's financial statements as reported in the Company's
Annual Report. In the event the Company's earnings per share exceeds the minimum
threshold established in the payout table, the achieved earnings per share is
applied to the payout table resulting in a bonus percentage which, in turn, is
multiplied by a Participant's base salary to compute the bonus amount.
Application of this formula would have resulted in the bonuses described in the
table below for the last completed fiscal year had the Plan been in effect.
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1998 CONSOLIDATED STORES CORPORATION KEY ASSOCIATE
ANNUAL INCENTIVE COMPENSATION PLAN BENEFITS
NAME AND POSITION DOLLAR VALUE
----------------- ------------
William G. Kelley........................................... $1,445,000
Chairman of the Board and Chief Executive Officer
Michael L. Glazer........................................... 930,000
President
Albert J. Bell.............................................. 306,000
Executive Vice President, General Counsel and Secretary
Michael J. Potter........................................... 306,000
Executive Vice President and Chief Financial Officer
Charles C. Friedenberg...................................... 153,000
Sr. Vice President, Merchandising
All executive officers as a group........................... 3,820,650
All non-executive directors as a group...................... 0
All non-executive officer employees as a group.............. 2,658,070
In lieu of Awards based on a percentage of Base Salary, Awards may be based
on a percentage or share of an Award pool. In such event, the Committee (or its
designee) must determine the total dollar amount available for Awards (or a
formula to calculate the total dollar amount available) known as an Award pool.
The Committee, in it sole discretion, may establish two or more separate Award
pools and assign the Participants to a particular Award pool. The Committee (or
its designee) must also establish a written performance payout table or formula
detailing the Award pool and the payout (or payout formula) based upon the
relative level of attainment of performance goals. Each payout table or formula
shall (a) be based on a comparison of actual performance to the performance
goals, (b) provide the amount of a Participant's Award or total pool dollars
available (or a formula to calculate pool dollars available), if the performance
goals for the Performance Period are achieved, and (c) provide for an actual
Award (which may be based on a formula to calculate the percentage of the pool
to be awarded to a particular Participant) based on the extent to which the
performance goals were achieved. The payout table or formula may include a
"floor" which is the level of achievement of the performance goals in which
payout begins. In the case of Awards which are stated in terms of a percentage
of an Award pool, the sum of the individual percentages for all Participants in
the pool cannot exceed 100 percent. In no case shall a reduction in an Award of
one Participant result in an increase in another Participant's Award.
After the end of each Performance Period or such earlier date if the
respective performance goals are achieved, the Committee shall certify to that
effect in writing, prior to the unconditional payment of any Award. The
Committee (or its designee) shall then determine the actual Award for each
Participant relative to the level of achievement of the respective performance
goals. The Committee, in its discretion, may cancel or decrease an Award, but
may not under any circumstances increase such Award with respect to any
participant who is a "Covered Employee". Any other provision of the Plan
notwithstanding, the maximum aggregate Award a Participant may earn for a
particular Fiscal Year is $3,000,000.
The Committee may authorize a Conditional Payment of a Participant's Award
based upon the Committee's good faith determination. Conditional Payments to
"Covered Employees" shall only be made in
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circumstances where the Covered Associate's compensation deduction will not be
jeopardized under IRC 162(m). In the event that a performance goal is not
achieved, the Participant is required under the plan to return an amount of the
Conditional Payment to the Company equal to the Conditional Payment less the
Award payment that has vested, if any.
The Plan allows Participants to defer payment of Awards, provided that the
election to defer is made prior to the beginning of the period to which the
Award applies, and provided that any other requirements established by the
Committee are satisfied. Elections to defer payment are treated as irrevocable
by the Plan.
The Committee may modify or amend, in whole or in part, any or all of the
provisions of the Plan, except as to those terms or provisions that are required
by Section 162(m) of the Code to be approved by the Company's stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE APPROVAL
OF THE 1998 CONSOLIDATED STORES CORPORATION KEY ASSOCIATE ANNUAL INCENTIVE
COMPENSATION PLAN.
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 30, 1999. Deloitte & Touche LLP acted as the Company's
independent auditors for fiscal years ended January 31, 1998, and February 1,
1997. 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 1999 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 submitted in
accordance with Rule 14a-8 of the Securities Exchange Act of 1934 and the
Company's By-laws. To be eligible for inclusion, stockholder proposals must be
received by the Company at its principal executive offices not later than
December 14, 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10 percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission and the New York Stock Exchange initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than 10 percent
shareholders are required by the regulations of the Securities and Exchange
Commission to furnish the Company with copies of all Section 16(a) forms they
file.
On February 1, 1997, the last day of the Company's fiscal 1996, options to
acquire the Company's Common Stock were granted, in varying amounts, to the
Company's executive officers. Although all stock options granted in fiscal 1996
were disclosed in the Company's 1997 Proxy, the Company's executive officers
inadvertently reported the receipt of stock options granted in fiscal 1996 in an
untimely manner. Specifically, Mr. Bell, Mr. Freidenberg, Mr. Glazer, C. Matthew
Hunnell (former Sr. Vice President), Mr. Kelley, James McGrady, Vice President
and Treasurer of the Company, Mr. Potter and Mark D. Shapiro, Vice President and
Controller of the Company, each unintentionally reported the receipt of the
options in a late report.
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Also, inadvertently, Mr. Bell, Mr. Potter and Salvatore Vasta, Sr. Vice
President of a subsidiary of the Company, failed to timely report a transaction
involving the exercise of options. Similarly, Alan Chaikin, Executive Vice
President of a subsidiary of the Company, and Mr. Shapiro failed to timely
report two transactions involving the exercise of options. Finally, Messrs.
McGrady and Potter failed to timely report the receipt of stock options granted
in fiscal 1995, and the Company's outside directors, with the exception of Mr.
Berman, failed to timely report options granted in both fiscal 1995 and 1996.
To the Company's knowledge, all other Section 16(a) filing requirements
applicable to its officers, directors and greater than 10 percent beneficial
owners during fiscal 1997 have been complied with. Recognizing the importance of
compliance with Section 16(a), the Company implemented new procedures and
replaced personnel responsible for Section 16 compliance to assure timely
reporting in the future.
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 to be $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
Proposals Two and Three.
The presence of any stockholder at the Annual Meeting will not operate to
revoke his proxy. A proxy may be revoked at any time before it is exercised by
filing with the secretary of the Company a notice of revocation or a duly
executed proxy bearing a later date. A proxy may also be revoked by attending
the Annual Meeting and giving notice of revocation to the secretary of the
meeting, either in writing or in open meeting.
If any other matters shall properly come before the Annual 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 Annual Meeting.
By order of the Board of Directors.
April 15, 1998
Albert J. Bell,
Executive Vice President,
General Counsel and Secretary
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23
APPENDIX A
THE 1998 CONSOLIDATED STORES CORPORATION KEY ASSOCIATE
ANNUAL INCENTIVE COMPENSATION PLAN
1. NAME
The 1998 Consolidated Stores Corporation Key Associate Annual Incentive
Compensation Plan (the "Plan").
2. PURPOSE
The Plan is designed to (i) assist Consolidated Stores Corporation in
attracting, retaining and motivating employees, (ii) align Participants'
interests with those of the Corporation's stockholders and (iii) qualify
compensation paid to Participants who are "Covered Employees" as "other
performance-based compensation" within the meaning of section 162(m) of the IRC
or a successor provision.
3. DEFINITIONS
"Award" means a payment subject to the provisions of this plan.
"Base Salary" means as to a Performance Period, a Participant's actual
gross salary rate in effect on the Determination Date. Such salary shall be
before (1) deductions for taxes and benefits, and (2) deferrals of salary
pursuant to Company-sponsored plans.
"Beneficiary" means the person or persons entitled to receive the interest
of a Participant in the event of the Participant's death.
"Board" means the Board of Directors of Consolidated Stores Corporation, a
Delaware Corporation.
"Change of Control" means a change of control as defined in the
Consolidated Stores Corporation Stockholder Rights Plan dated April 18, 1989, as
from time-to-time amended or any successor thereto.
"Committee" means the Compensation Committee of the Board, which shall
consist of not less than two (2) members of the Board each of whom is a
"disinterested person" as defined in Securities and Exchange Commission Rule
16b-3(c)(2)(i), or as such term may be defined in any successor regulation under
Section 16 of the Securities Exchange Act of 1934, as amended. In addition, each
member of the Committee shall be an outside director within the meaning of
Section 162(m) of the IRC.
"Common Stock" means the common stock of Consolidated Stores Corporation, a
Delaware Corporation, its successors and assigns.
"Company" means Consolidated Stores Corporation, a Delaware Corporation,
its successors and assigns and any corporation which shall acquire substantially
all its assets. In addition, Company shall include any corporation or other
entity, whether domestic or foreign, in which the Corporation has or obtains,
directly or indirectly, a proprietary interest of more than 50% by reason of
stock ownership or otherwise.
"Conditional Payment" means prepaying an Award before the date of current
payment in section 6.2 and subjects the prepayment (or a portion thereof) to
possible return to the Company.
"Covered Associate(s)" means the chief executive officer (or an individual
acting in such capacity) as of the end of the Fiscal Year and any other employee
whose total compensation for the Fiscal Year is required to be reported to
stockholders under the Securities Exchange Act of 1934 by reason of such
employee being
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among the four highest compensated officers (other than the chief executive
officer or other individual acting in such capacity) for the Fiscal Year.
"Determination Date" means as to a Performance Period: (1) the first day of
the Performance Period, or (2) such other date set by the Committee provided
such date will not jeopardize the Plan's Award as performance-based compensation
under IRC 162(m).
"Eligible Position" means an employment position with the Company which
provides the employee in the position the opportunity to participate in the
Plan. The Committee or its designee determines Eligible Positions.
"Fiscal Year" means a fiscal year of the Company (currently comprised of a
52/53 week fiscal year which ends on the Saturday nearest to January 31).
"IRC" means the Internal Revenue Code of 1986, as amended.
"Participant" means a key associate of the Company who has been approved
for participation in the Plan by the Committee (or its designee) or a key
associate of a partnership designated by the Committee which the Company
maintains 50% or more profit sharing, loss sharing and ownership of capital
interests or a key associate of a limited liability company (LLC) in which the
Company maintains a 50% or more ownership interest.
"Performance Period" means the Fiscal Year except in the following cases:
(1) The associate's service period within a Fiscal Year in the case of
a new hire or promoted associate; or
(2) A period of service determined at the discretion of the Committee
(or its designee in the case of associates who are not Covered
Associates).
4. ELIGIBILITY AND PARTICIPATION
4.1 Approval
Each key associate of the Company who is approved for participation in the
Plan by the Committee (or under the authority conveyed by the Committee) shall
be a Participant as of the date designated. Written notice of such approval
shall be given to each key associate so approved as soon as practicable
following date of approval.
4.2 Termination of Approval
The Committee may withdraw its approval for participation for a Participant
at any time. In the event of such withdrawal, the key associate concerned shall
cease to be an active Participant as of the date selected by the Committee and
the key associate shall be notified of such withdrawal as soon as practicable
following such action.
4.3 Notification
In general, it is expected that key associates who are to be Participants
for a Performance Period shall be notified of that fact before the beginning of
the Performance Period. However, the Plan reserves the right to include
associates without prior notification.
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4.4 Transfers In, Out of and Between Eligible Positions
(1) A key associate may be approved for participation during a portion
of a Fiscal Year.
(a) With respect to associates that are not Covered Associates, an
associate newly hired or transferred into an Eligible Position shall
have his/her participation prorated during the first Fiscal Year
provided employment or transfer occurs at least two months prior to
the end of the Fiscal Year.
(b) An associate (other than a Covered Associate) transferred out of
an Eligible Position may receive a prorated Award at the discretion
of the Committee provided he/she served in the Eligible Position for
at least two full months during the Fiscal Year.
(c) With respect to Covered Associates approved for participation
during a portion of a Fiscal Year, see Section 5.3 as it would relate
to Performance Periods that are not equivalent to a Fiscal Year.
(2) Participants (which are not Covered Associates) transferring
between Eligible Positions having different Award formulas will receive
Awards prorated to months served in each Eligible Position. For Covered
Associates transferring between Eligible Positions, Section 5.3 shall apply
to each respective Performance Period applicable to the particular
position.
4.5 Termination of Employment
Unless otherwise determined by the Committee (or its designee in the case
of Participants who are not Covered Associates), or in the case of amounts
accumulated in the various accounts under Section 6.4 of this Plan or as
required by applicable law, no payment pursuant to this Plan shall be made to a
Participant unless the Participant is employed by the Company on the day on
which payments determined under section 6.2 are in fact made (or would have been
made if a deferred payment election under section 6.4--(1) had not been
executed).
The Committee shall have the discretion not to make or to reduce an Award
for a Plan Year for a Participant whose employment with the Company terminated
during the Plan Year due to retirement, disability, or death.
5. DETERMINATION OF AWARDS
5.1 In addition to Section 4.5, Awards will vest solely on account of: (1)
the attainment of one or more pre-established performance goals/targets and (2)
the certification described in Section 5.6.
5.2 With respect to Awards for Covered Associates, the material terms of
the performance goal(s) must be disclosed to, and subsequently approved by, the
stockholders before the payout is executed, unless they conform to one or any
combination of the following goals/targets:
(a) Income (loss) per common share from continuing operations as
disclosed in the Company's annual report to stockholders for a particular
Fiscal Year; or
(b) Income (loss) per common share from income as disclosed in the
Company's annual report to stockholders for a particular Fiscal Year; or
(c) Income (loss) per common share or income (loss) per common share
from continuing operations excluding (i) extraordinary charge(s); and/or
(ii) any accruals for restructuring programs,
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merger integration costs, or merger transaction costs; and/or (iii) other
unusual or infrequent items (whether gains or losses) as defined by
generally accepted accounting principles (GAAP) which are disclosed as a
separate component of income or loss on the face of the income statement or
as may be disclosed in the notes to the financial statements (hereinafter
"EPS"); or
(d) Ratio of (i) operating profit, or other objective and specific
income (loss) category results to (ii) average common shares outstanding.
Adjustments to (i) in this paragraph may be made at the time of the
goal/target establishment by the Committee in its discretion; or
(e) Any of items (a), (b), (c) or (d) on a diluted basis as described
in Statement of Financial Accounting Standards No. 128 including official
interpretations or amendments thereof which may be issued from time to time
as long as such interpretations or amendments are utilized on the face of
the income statement or in the notes to the financial statements disclosed
in the Company's annual report to stockholders; or
(f) Common Stock price; or
(g) Total stockholder return expressed on a dollar or percentage basis
as is customarily disclosed in the proxy statement accompanying the notice
of annual meetings of stockholders; or
(h) Income (loss) (i) from continuing operations before extraordinary
charge(s), or (ii) before extraordinary charge(s), or (iii) net, as the
case may be, adjusted to remove the effect of any accruals for
restructuring programs or other unusual or infrequent items as defined by
generally accepted accounting principles (GAAP) disclosed as a separate
component of income on the face of the income statement or in the notes to
the financial statements; or
(i) Net income; or
(j) Percentage increase in comparable store sales as disclosed in the
Company's annual report; or
(k) Any of items (a) through (j) above with respect to any subsidiary,
affiliate, business unit or business group of the Company whether or not
such information is included in the Company's annual report to
stockholders, proxy statement or notice of annual meeting of stockholders;
or
(l) Any of items (a) through (j) above with respect to a Performance
Period whether or not such information is included in the Company's annual
report to stockholders, proxy statement or notice of annual meetings of
stockholders; or
(m) Total Stockholder Return Ranking Position meaning the relative
placement of the Company's Total Stockholder Return compared to those
publicly held companies in the company's peer group as established by the
Committee prior to the beginning of a vesting period or such later date as
permitted under the IRC. The peer group shall be comprised of not less than
six (6) companies, including the Company.
With respect to items (a), (b), (c) and (d) above, other terminology may be used
for "income (loss) per common share" (such as "Basic EPS", "earnings per common
share", "diluted EPS", or "earnings per common share-assuming dilution") as
contemplated by Statement of Financial Accounting Standards No. 128.
5.3 Prior to the completion of 25% of the Performance Period or such
earlier date as required under IRC Section 162(m), the Committee shall in its
sole discretion, for each such Performance Period determine and establish in
writing a performance goal or performance goals (in accordance with Section 5.2)
applicable to
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the Performance Period to any Covered Associate. Within the same period of time,
the Committee (or its designee) for each such Performance Period shall determine
and establish in writing the performance goal(s) applicable to the Performance
Period for Participants who are not Covered Associates. Such preestablished
performance goal(s) must state, in terms of an objective formula or standard,
the method for computing the amount of the Award payable to the Participant if
the goal(s) is (are) obtained. A formula or standard is objective if a third
party having knowledge of the relevant performance results could calculate the
amount to be paid to the Participant. The Committee may establish any number of
Performance Periods, goals and Awards for any associate running concurrently, in
whole or in part, provided, that in so doing the Committee does not jeopardize
the Company's deduction for such Awards under IRC Section 162(m).
5.4 On or prior to the date specified in Section 5.3, the Committee, in its
sole discretion, shall either (i) assign each Participant a target Award
expressed as a percentage of Base Salary or a whole dollar amount (for Covered
Associates, Base Salary must be fixed prior to the establishment of performance
goals applicable to a particular Performance Period) or (ii) establish a payout
table or formula for purposes of determining the Award (if any) payable to each
Participant. The Committee may authorize a designee to establish a payout table
or formula for those Participants who are not Covered Associates.
Each payout table or formula:
(a) shall be in writing;
(b) shall be based on a comparison of actual performance to the
performance goals;
(c) may include a "floor" which is the level of achievement of the
performance goal in which payout begins; and
(d) shall provide for an actual Award equal to or less than the
Participant's target Award, depending on the extent to which
actual performance approached or reached the performance goal(s).
5.5 In lieu of Awards based on a percentage of Base Salary (Section 5.4),
Awards may be based on a percentage or share of an Award pool. The Committee (or
its designee) shall determine (by the date specified in Section 5.3) the total
dollar amount available for Awards (or a formula to calculate the total dollar
amount available) known as an Award pool. The Committee, in it sole discretion,
may establish two or more separate Award pools and assign the Participants to a
particular Award pool. The Committee (or its designee in the case of
Participants who are not Covered Associates) shall establish in writing a
performance payout table or formula detailing the Award pool and the payout (or
payout formula) based upon the relative level of attainment of performance
goals. Each payout table or formula shall (a) be based on a comparison of actual
performance to the performance goals, (b) provide the amount of a Participant's
Award or total pool dollars available (or a formula to calculate pool dollars
available), if the performance goals for the Performance Period are achieved,
and (c) provide for an actual Award (which may be based on a formula to
calculate the percentage of the pool to be awarded to a particular Participant)
based on the extent to which the performance goals were achieved. The payout
table or formula may include a "floor" which is the level of achievement of the
performance goals in which payout begins. In the case of Awards which are stated
in terms of a percentage of an Award pool, the sum of the individual percentages
for all Participants in the pool cannot exceed 100 percent. In no case shall a
reduction in an Award of one Participant result in an increase in another
Participant's Award.
5.6 After the end of each Performance Period or such earlier date if the
performance goal(s)/target(s) are achieved, the Committee shall certify in
writing, prior to the unconditional payment of any Award, that the
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performance goal(s)/target(s) for the Performance Period were satisfied and to
what extent they were satisfied. The Committee (or its designee) shall determine
the actual Award for each Participant based on the payout table/formula
established in section 5.4 or 5.5, as the case may be.
5.7 The Committee, in its discretion, may cancel or decrease an Award, but
with respect to Covered Associates, may not under any circumstances increase
such Award.
5.8 Any other provision of the Plan notwithstanding, the maximum aggregate
Award a Participant may earn for a particular Fiscal Year is $3,000,000.
6. PAYMENT OF INCENTIVE AWARDS
6.1 In General
Once an Award has vested and the amount thereof determined, payment of the
Award (or the portion thereof not deferred under section 6.4) shall be made
pursuant to section 6.2 or, if properly and timely elected, shall be deferred in
accordance with section 6.4.
6.2 Current Payment
A Participant's Award for a Performance Period, which is not deferred in
accordance with the provisions of Section 6.4 hereof, and a Participant's Award,
whether or not he/she elected deferred-payment thereof, for the Fiscal Year in
which his/her employment terminates, shall be paid in cash to the Participant,
or his/her Beneficiary in the event of his/her death, between the date on which
certification by the Committee was made in accordance with section 5.6 and the
75th day (inclusive) following the end of the Performance Period. Should the
Committee elect to postpone the payments for any reason, the Committee may, in
its discretion, also elect to pay interest at a reasonable rate (consistent with
IRC Section 162(m)) for period between the 75th day following the end of the
Performance Period and the day on which the payments are in fact made.
6.3 Conditional Payment
The Committee may authorize a Conditional Payment of a Participant's Award
based upon the Committee's good faith determination. The Conditional Payment, at
the discretion of the Committee (or, except for Covered Associates, under
authority granted to its designee) may be discounted to reasonably reflect the
time value of money for the prepayment. Conditional Payments to Covered
Associates shall only be made in circumstances where the Covered Associate's
compensation deduction will not be jeopardized under IRC Section 162(m). The
amount of the Conditional Payment that will be returned to the Company is equal
to the Conditional Payment less the Award payment that has vested, if any. For
example, if the floor (see Section 5.4) was not attained for the performance
goal or target for the Performance Period, all of the Conditional Payment made
for that Performance Period to the Participant must be returned to the Company.
Return of all or a portion of the Conditional Payment shall be made reasonably
soon after it is determined the extent to which the performance goal or target
was not achieved.
6.4 Deferred Payment
6.4--(1) Election
Before the first day of each Performance Period (or such other date as
permissible to properly defer the Award for income tax purposes), a Participant
may irrevocably elect in writing to have a part or all of an Award for the year
under the Plan (but not less than $1,000) deferred. Such deferred payment shall
be
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credited to a bookkeeping reserve account which shall be established for the
Participant and set up on the books of the Company and known as his/her
"Interest Account".
6.4--(2) Credits To Interest Account
When a Participant has elected to have a part or all of his/her Award
credited to an "Interest Account", the unpaid balance in such account shall be
credited with a simple annual interest equivalent, as follows: As of the May 1
next following the Fiscal Year for which the deferred Award was made, such Award
shall become part of the unpaid balance of such Interest Account. Such Interest
Account shall be credited on April 30 of each year with an amount equal to
interest on the unpaid balance of such account from time to time outstanding
during the year ending on such April 30 at the rate determined by adding
together the Three-month Treasury Bill rate on the last banking day prior to the
beginning of such year and the Three-month Treasury Bill rate in effect on the
last banking days of each of the calendar months of May through March of such
year and dividing such total by 12. In the event that the interest Account shall
be terminated for any reason prior to April 30 of any year, such account shall
upon such termination date be credited with an amount equal to interest at the
average Three-month Treasury Bill rate determined as aforesaid on the unpaid
balance from time to time outstanding during that portion of such year prior to
the date of termination.
6.4--(3) Alternate Deferral Plans
The Committee, at its discretion, may provide alternate deferral plans of
which Awards under this Plan may be included.
6.4--(4) Trust Deposits
The Committee, at its discretion, may establish an irrevocable trust in
which the assets of the trust are subject to the general creditors of the
Company. Such trust may upon the occurrence of certain events, as determined by
the Committee, receive assets equal to the value of all participants Interest
Accounts on the date of the event.
6.4--(5) Distribution Upon Termination of Employment
Upon termination of a Participant's employment with the Company for any
reason, the Participant, or his/her Beneficiary in the event of his/her death,
shall be entitled to payment of the entire Interest Account in ten annual
installment payments. The amount accumulated in such Participant's Interest
Account shall be distributed as hereinafter provided.
a. The Interest Account shall be paid in cash as follows:
i. The first annual payment shall be made no earlier than the
thirtieth day following the date of termination of employment, and
shall be in an amount equal to the value of one-tenth ( 1/10th) of
the total amount credited to the Participant's Interest Account as
of the end of the month immediately preceding the date of
termination.
ii. A second annual payment shall be made no earlier than the first
day of the Fiscal Year following the year during which the first
anniversary of the date of termination of employment occurs, and
shall be in an amount equal to the value of 1/9th of the amount
credited (which includes accumulated interest) to the
Participant's Interest Account as of January 1 next following the
first anniversary of the termination of employment.
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iii. Each succeeding installment payment shall be determined in a
similar manner, i.e., the fraction of Participant's Interest
Account balance to be paid out shall increase each year to 1/8,
1/7, etc., until the tenth installment which shall equal the then
remaining balance of the account.
The annual installment payments are intended to qualify the deferred
compensation portion of this Plan under Chapter 4 of Title 4, United States
Code, Section 114(b)(1)(I).
6.4--(6) Distribution In Event Of Financial Emergency
If requested by a Participant while in the employ of the Company and if the
Committee (or in the case of Participants who are not Covered Associates, its
designee) determines that a financial emergency has occurred in the financial
affairs of the Participant, the Interest Account of the Participant on the date
the Participant makes the request may be paid out at the sole discretion of the
Committee (or its designee) in the same manner it would have been paid out had
the Participant terminated his employment with the Company on the date of such
request. In the event of a payout due to a financial emergency, a second
Interest Account shall be established for the Participant and any Awards made to
the Participant thereafter shall be credited to this second Interest Account.
The Participant's rights to the second Interest Account shall be the same as
his/her rights to the initial Interest Account.
6.4--(7) Acceleration Of Payment
Notwithstanding the provisions in Item 6.4--(5) and 6.4--(6), if the amount
remaining in a Participant's Interest Account at any time is less than $50,000,
or in the event of a financial emergency (including death or disability)
occurring in the personal affairs of the Participant, or his/her Beneficiary in
case of his/her death, during the payout period, the Committee may elect to
accelerate the payout thereafter of the Participant's Interest Account.
6.4--(8) Beneficiary Designation
A Participant may designate a Beneficiary who is to receive, upon his/her
death or disability, the distributions that otherwise would have been paid to
him/her. All designations shall be in writing and shall be effective only if and
when delivered to the Secretary of the Company during the lifetime of the
Participant. If a Participant designates a Beneficiary without providing in the
designation that the Beneficiary must be living at the time of each
distribution, the designation shall vest in the Beneficiary all of the
distribution whether payable before or after the Beneficiary's death, and any
distributions remaining upon the Beneficiary's death shall be made to the
Beneficiary's estate.
A Participant may from time to time during his lifetime change his
Beneficiary by a written instrument delivered to the Secretary of the Company.
In the event a Participant shall not designate a Beneficiary as aforesaid, or if
for any reasons such designation shall be ineffective, in whole or in part, the
distribution that otherwise would have been paid to such Participant shall be
paid to his estate and in such event the term "Beneficiary" shall include his
estate.
6.4--(9) Corporate Changes
i. Dissolution or Liquidation of Company
The Company shall cause the dollar balance of an Interest Account
(adjusted to the end of the month immediately preceding the date of
dissolution or liquidation) to be paid out in cash in a lump
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sum to the Participants, or their Beneficiaries as the case may be,
within 60 days following the date of dissolution or liquidation of the
Company.
ii. Merger, Consolidation or Sale of Assets
Notwithstanding anything herein to the contrary, in the event that the
Company desires to consolidate with, merge into, sell or otherwise
transfer all or substantially all of its assets to another corporation
(hereinafter referred to as "Successor Corporation"), such Successor
Corporation may assume the obligation under this Plan, provided those
appropriate amendments are made to the Plan. In the event the Plan is
not continued within a reasonable period of time by the Successor
Corporation, then as of the date preceding the date of such
consolidation, merger, or transfer, the account of each Participant
shall be converted into dollars and distributed as provided in section
6.
7. RIGHTS OF PARTICIPANTS
No Participant or Beneficiary shall have any interest in any fund or in any
specific asset or assets of the Company by reason of any account under the Plan.
It is intended that the Company has merely a contractual obligation to make
payments when due hereunder and it is not intended that the Company hold any
funds in reserve or trust to secure payments hereunder. No Participant may
assign, pledge, or encumber his/her interest under the Plan, or any part
thereof, except that a Participant may designate a Beneficiary as provided
herein.
Nothing contained in this Plan shall be construed to:
A. Give any associate or Participant any right to receive any Award
other than in the sole discretion of the Committee;
B. Give a Participant any rights whatsoever with respect to share(s)
of Common Stock of the Company;
8. NO EMPLOYEE RIGHTS
Nothing in the Plan or participation in the Plan shall confer upon any
Participant the right to be employed by the Company or to continue in the employ
of the Company, nor shall anything in the Plan, or participation in the Plan
amend, alter or otherwise affect any rights or terms of employment or other
benefits arising from that employment.
9. ADMINISTRATION
The Plan shall be administered by the Committee. The Committee may, from
time to time, establish rules for the administration of the Plan that are not
inconsistent with the provisions of the Plan.
10. AMENDMENT OR TERMINATION
The Committee may modify or amend, in whole or in part, any or all of the
provisions of the Plan, except as to those terms or provisions that are required
by IRC Section 162(m) to be approved by the stockholders, or suspend or
terminate it entirely; provided, however, that no such modifications, amendment,
or suspension or termination may, without the consent of the Participant, or his
Beneficiary in the case of his/her death, reduce the right of a Participant, or
his/her Beneficiary, as the case may be, to any Payment due under the Plan.
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11. TAX WITHHOLDING
The Company shall have the right to deduct from all cash payments any
federal, state, or local taxes or other withholding amounts required by law or
valid court order to be withheld with respect to such cash payments.
12. EFFECTIVE DATE
The Plan shall be effective as of February 2, 1998, subject to approval and
modification by the Company's stockholders no later than September 1, 1998.
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CONSOLIDATED STORES CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE MAY 19, 1998 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 19, 1998, 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. Lauderback, 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 1998 Consolidated Stores Corporation Key [ ] [ ] [ ]
Associate Annual Incentive Compensation Plan.
3. In their discretion, to vote upon such other business as [ ] [ ] [ ]
may properly come before the meeting.
Date: , 1998
-----------------------------
-----------------------------
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.
