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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/X/ Preliminary proxy statement
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CONSOLIDATED STORES
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CONSOLIDATED STORES
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
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1105 North Market Street
Suite 1300
P.O. Box 8985
Wilmington, Delaware 19899
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 7, 1994
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, June 7,
1994, at 3:00 P.M., local time, for the following purposes:
1. To elect nine directors of the Company.
2. To approve the amendment of the Consolidated Stores Corporation Bylaws
establishing three classes of directors.
3. To approve the adoption of the Consolidated Stores Corporation 1994 Key
Executive Incentive Compensation Plan.
4. To transact such other business as may properly come before the meeting.
Only stockholders of record at the close of business on April 26, 1994 are
entitled to notice of and to vote at said meeting or any adjournment thereof.
IN ADDITION, THE STOCKHOLDERS ARE INVITED TO ATTEND THE RIBBON-CUTTING
CEREMONY FOR THE OPENING OF THE EXPANSION OF THE COMPANY'S DISTRIBUTION CENTER
LOCATED AT THE SAME ADDRESS, WHICH IS SCHEDULED TO BEGIN PROMPTLY AT 2:30 P.M.
Instructions concerning the ribbon-cutting ceremony will be provided to
stockholders upon their arrival on the day of the event.
By order of the Board of Directors.
May 9, 1994
Albert J. Bell,
Senior Vice President and Secretary
STOCKHOLDERS ARE URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED FORM OF PROXY
AND RETURN IT IN THE ENCLOSED ENVELOPE TO WHICH NO POSTAGE NEED BE AFFIXED IF
MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING, YOU MAY REVOKE YOUR
PROXY AND VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR
PROXY.
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1105 North Market Street
LOGO Suite 1300
P.O. Box 8985
Wilmington, Delaware 19899
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PROXY STATEMENT
This Statement is furnished in connection with the solicitation of proxies
for use at the Annual Meeting of Stockholders of Consolidated Stores
Corporation, a Delaware corporation (the "Company"), to be held on June 7, 1994.
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 29, 1994, are first being mailed to stockholders on or about May
9, 1994.
The close of business on April 26, 1994 has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
meeting. At that date, the Company had outstanding XXXXXXXXXXXXX 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. Stockholders may revoke their proxies if they
wish by attending the meeting, revoking the proxy in writing and voting in
person. Tabulation shall be performed by National City Bank, the Company's
Transfer Agent, as inspected by duly appointed officers of the Company.
PROPOSAL ONE: ELECTION OF DIRECTORS
At the meeting, the shares of Common Stock represented by the proxies will
be voted, unless otherwise specified, for the election as directors of the nine
nominees named below. Eight of the nine nominees are currently directors of the
Company. Proxies cannot be voted at the annual meeting for more than nine
persons, although additional nominations can be made by stockholders at the
meeting.
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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
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Brady J. Churches 35 President of the Company; former Executive Vice 1993
President -- Merchandising, Senior Vice
President -- Merchandising, and former Vice
President -- Merchandising of the Company.
Michael L. Glazer 46 President, The Bombay Company (retail home 1991
furnishings); former Executive Vice President, The
Bombay Company; former Chairman and Chief Executive
Officer, Galaxy Network Corporation (consumer
electronics extended service plan marketing); former
Chairman and Chief Executive Officer, Platt Music
Corporation (operated leased consumer electronics de-
partments in department stores)
William G. Kelley 48 Chairman of the Board and Chief Executive Officer of 1990
the Company; former President and Chief Operating
Officer of C.V.N. Companies (television retail
shopping); former Executive Vice President and Board
Member, The Home Depot, Inc. (retail stores)
David T. Kollat 55 President and Founder, 22, Inc. (retail research and 1990
consulting)
Nathan P. Morton 45 President and Chief Executive officer, Open Environment 1990
Corporation (software development); former President
and Chief Executive Officer, Comp USA (retail stores);
former Senior Vice President, The Home Depot, Inc.
(retail stores)
John L. Sisk 66 Retired, President and Chief Executive Officer, 1990
Herman's World of Sporting Goods (retail stores)
Dennis B. Tishkoff 51 President and Chief Executive Officer, Shoe Corporation 1991
of America, a division of J. Baker Shoe (retail
footwear); former Chairman, Tishkoff Enterprises, Inc.
(retail footwear)
William A. Wickham 49 President, Chief Executive Officer and owner, SBC 1992
Advertising (advertising and corporate communications
agency)
Sheldon M. Berman 53 Chairman, Macaroons, Inc. (consumer research and New
marketing services); former Chairman, President and Nominee
founder, Shelly Berman Communicators (retail marketing
and advertising)
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Five meetings of the Board of Directors were held during the Company's
fiscal year ended January 29, 1994. Each director attended all of the meetings
of the Board, and the committees on which he served, during the period for which
he served as a director during the year.
The Board has an Audit Committee, a Compensation Committee, and a
Nominating Committee. Messrs. Glazer, Sisk, and Wickham 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 two times
during the fiscal year ended January 29, 1994. Messrs. Glazer, Kollat, Sisk 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 five times during the
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fiscal year ended January 29, 1994. Messrs. Kelley, Kollat, Morton and Tishkoff
are the members of the Nominating Committee, which is responsible for
interviewing and nominating candidates for election as Directors of the Company.
The Nominating Committee did not meet during the fiscal year ended January 29,
1994. The Nominating Committee will not consider nominees recommended by
security holders.
RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Kelley is also a director of National City Bank, Columbus, and Max &
Erma's Restaurants, Inc. Mr. Kollat is also a director of The Limited, Inc.,
Cooker Restaurant Corp., Chalkline, Inc., Cost Plus, Inc., and Wolverine
Worldwide, Inc.
The Company customarily retains SBC Advertising for communications and
advertising services. During fiscal year ended January 29, 1994, the Company
paid fees in the amount of $2,738,057 to SBC Advertising.
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 the fiscal year ended January 29, 1994, six directors (Messrs.
Glazer, Kollat, Morton, Sisk, Tishkoff, and Wickham) were parties to such
arrangements. In addition, such directors constitute Outside Directors and
therefore receive stock option grants under the Director Stock Option Plan. Each
of the six aforenamed directors received a grant of 5,000 stock options each
pursuant to the said Director Stock Option Plan during fiscal 1993. (Please see
Director Stock Option Plan.)
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of January 30, 1994, certain information
with regard to the beneficial ownership of the Company's Common Stock by each
holder of 5% of such stock, each director and nominee for director individually,
each of the five executive officers named in the Summary Compensation Table, and
all officers, directors and nominees for director of the Company as a group.
AMOUNT AND PERCENT OF
TITLE OF NAME OF BENEFICIAL OWNER NATURE OF BENEFICIAL OUTSTANDING
CLASS OR IDENTITY OF GROUP OWNERSHIP (1) SHARES (1)
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Common Stock Sheldon M. Berman (2) 3,700 *
Common Stock M. Steven Bromet 84,418 *
Common Stock Brady J. Churches 194,308 *
Common Stock Michael L. Glazer 10,000 *
Common Stock William G. Kelley 1,237,985 2.7%
Common Stock David T. Kollat 49,500 *
Common Stock Nathan P. Morton 13,500 *
Common Stock John L. Sisk 11,500 *
Common Stock William B. Snow (3) 176,400 *
Common Stock Jerry D. Sommers 73,775 *
Common Stock Dennis B. Tishkoff 6,745 *
Common Stock William A. Wickham (4) 53,000 *
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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)
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Common Stock The Capital Group (5) 3,309,000 7.1%
Common Stock Dietche & Field Advisors (6) 2,387,000 5.1%
Common Stock FMR Corp. (7) 6,041,000 13.0%
Common Stock First Interstate Bank (8) 2,395,000 5.1%
All directors, nominees and officers as a
Common Stock group (17 Persons) 2,017,960 4.3%
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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 (see note (4)
below), Dietche & Field Advisors, Inc. (see note (5) below), FMR Corp. (see
note (6) below) and First Interstate Bank (see note (7) 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 include shares
that may be acquired within 60 days under stock options exercisable within
that period. Percentage ownership was based on 46,485,428 shares of Common
Stock outstanding at January 30, 1994. Of the shares reported for Mr.
Kelley, 1,224,301 are shares which may be acquired within 60 days pursuant
to exercisable stock options. Of the shares reported for Messrs. Kollat,
Morton, and Sisk, respectively, 11,000 are shares which may be acquired
within 60 days pursuant to exercisable stock options. Of the shares reported
for Messrs. Glazer and Tishkoff, respectively, 6,000 are shares which may be
acquired within 60 days pursuant to exercisable stock options. Of the shares
reported for Mr. Wickham, 1,000 are shares which may be acquired within 60
days pursuant to exercisable stock options. Of the shares reported for
Messrs. Churches, Sommers and Bromet, 98,000 shares, 59,000 shares, and
81,000 shares, respectively, are shares which may be acquired within 60 days
of this Proxy statement pursuant to exercisable stock options. Of the shares
reported for all directors, nominees for director, and officers as a group,
1,740,301 are shares which may be acquired within 60 days pursuant to
exercisable stock options.
(2) Includes 2,000 shares owned by Macaroons, Inc., and 300 shares owned by
Judith Berman.
(3) Includes shares owned pursuant to the Company's 1987 Restricted Stock Plan,
as described below.
(4) Includes 52,000 shares which are owned by SBC Advertising, Inc.
(5) In a letter to the Company accompanying its Schedule 13G dated February 11,
1994, The Capital Group, Inc., stated that Capital Guardian Trust Company
and Capital Research and Management Company, operating subsidiaries of The
Capital Group, Inc., exercised as of December 31, 1993, investment
discretion with respect to 544,000 and 2,765,000 shares, respectively, or a
combined total of 7.12% of outstanding stock which was owned by various
institutional investors. In its Schedule 13G, The Capital Group reported
sole voting power over 378,000 shares.
(6) In its Schedule 13G dated March 15, 1994, Dietche & Field Investment
Advisors, Inc., reported that it held sole voting power only concerning the
shares described in the table above.
(7) In a letter to the Company dated March 28, 1994, FMR Corp. stated that it
beneficially owned the number of shares reported in the table as of January
31, 1994, which number includes 6,006,600 shares (12.92% 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
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8 of the Investment Company Act; and 34,400 shares (0.07% of the Common
Stock at that date) beneficially owned by Fidelity Management Trust Company
in its capacity as trustee or managing agent for various private investment
accounts, primarily employee benefit plans. Of the shares reported in the
table above, FMR Corp. stated that it has the sole power to vote 5,600
shares, and the sole power to dispose of 6,041,000 shares.
(8) Denver Investment Advisors, Inc., is an SEC registered investment advisor,
and a wholly owned subsidiary of First Interstate Bank of Denver, which is
in turn a wholly owned subsidiary of First Interstate Bancorp. In a letter
to the Company dated March 31, 1994, Denver Investment Advisors, Inc.,
stated that it has sole voting power over 1,516,400 shares and sole
dispositive power over all of the shares reported in the table above.
The address of the person shown in the table above as the beneficial owner
of more than 5% of the Company's Common Stock is as follows: The Capital Group,
Inc., 333 South Hope Street, Los Angeles, CA 90071; Dietche & Field Advisors,
Inc., 437 Madison Avenue, New York, NY 10022; FMR Corp, 82 Devonshire Street,
Boston, MA 02109; and First Interstate Bancorp, 633 West 5th Street, Los
Angeles, CA 90071.
PROPOSAL TWO:
APPROVAL OF THE AMENDMENT OF THE CONSOLIDATED STORES CORPORATION
BYLAWS CREATING CLASSES OF DIRECTORS
On June 8, 1993, the Board of Directors amended the Bylaws of the Company,
subject to stockholder approval, creating three classes of directors of the
Company, with each class having a three year term. The nominees in Proposal One
are classified below in the manner proposed by the Board of Directors.
CLASS ONE CLASS TWO CLASS THREE
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Sheldon M. Berman Brady J. Churches Michael L. Glazer
John L. Sisk Nathan P. Morton William G. Kelley
Dennis B. Tishkoff William A. Wickham David T. Kollat
For purposes of this election, nominees in Class One will serve for a one
year term, and will be considered at the 1995 Annual Meeting of the Stockholders
of the Company, and at three year intervals thereafter, for election to a three
year term. Nominees in Class Two will serve for a two year term, and will be
considered at the 1996 Annual Meeting of the Stockholders of the Company, and at
three year intervals thereafter, for election to a three year term. Nominees in
Class Three will serve for a three year term, and will be considered at the 1997
Annual Meeting of the Stockholders of the Company, and at three year intervals
thereafter, for election to a three year term. In the event that a vacancy shall
occur, the Board may appoint a successor, who shall finish the unfulfilled term
of the vacancy within the corresponding class of directors.
Under Delaware corporation law and the Bylaws of the Company, the
affirmative vote of the holders of a majority of the shares of Common Stock
present and voting on the measure is required to approve the By-law Amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL
TO APPROVE THE BYLAW AMENDMENT.
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PROPOSAL THREE:
APPROVAL OF THE CONSOLIDATED STORES CORPORATION
KEY EXECUTIVE INCENTIVE COMPENSATION PLAN
As part of his employment agreement dated December 12, 1989, the Company
established a bonus formula for the Chief Executive Officer ("CEO") of the
Company, William G. Kelley, which provides a cash bonus award based directly on
the earnings improvement of the Company at the end of each fiscal year (the
"Existing Plan"). Until 1994, all cash payments made pursuant to the Existing
Plan have been deductible by the Company for federal income tax purposes.
However, as a result of recent changes in federal tax laws (specifically, the
Omnibus Reconciliation Act of 1993 (the "Act")), some payments, if made under
the Existing Plan to the Company's CEO in 1994 or subsequent years, would not be
deductible by the Company and the Company would lose the tax benefits of such
payments.
In order that the Company might continue to provide incentive compensation
to its CEO and retain the tax benefits associated therewith, on January 25,
1994, the Committee established, subject to stockholder approval, the 1994 Key
Executive Incentive Compensation Plan (the "1994 Plan"), effective as of January
30, 1994. If the 1994 Plan is approved by stockholders and otherwise complies
with the Act, this substitution of the 1994 Plan for the Existing Plan for the
CEO will allow the Company to continue to avail itself of federal tax deductions
with respect to certain payments made pursuant to the 1994 Plan which would not
be available as deductions if paid under the Existing Plan.
The Act added a new Section 162 (m) to the Internal Revenue Code of 1986,
as amended, (the "Code") which no longer permits publicly held corporations,
such as the Company to deduct as compensation "applicable employee remuneration"
paid to "covered employees" to the extent that the remuneration paid to a
"covered employee" exceeds $1 million for a taxable year. "Covered employees" is
defined in the Code by reference to Securities and Exchange Commission rules
governing disclosure of compensation paid to certain executive officers. As a
result, "covered employees" for purposes of the Code is effectively defined to
include a public company's chief executive officer and four most highly
compensated officers (other than the chief executive officer) at the end of the
corporation's fiscal year.
In order that the Company may continue to deduct certain components of
amounts paid to its CEO (the only employee impacted by the limitation impacting
"covered employees" with total compensation exceeding $1 million), pursuant to
new Section 162(m), such compensation (i) must be payable on account of the
obtainment of one or more pre-established performance goals; (ii) the
performance goals must be established by a compensation committee of the Board
of Directors comprised solely of two or more outside directors, (iii) the
material terms of the compensation and the performance goals must be disclosed
to and approved by the stockholders before payments are made; and (iv) the
compensation committee must certify that the performance goals have been
satisfied before payment is actually made.
The performance objectives or goals for the CEO pursuant to the 1994 Plan
have been approved and adopted for the Company by the Committee, which is
comprised solely of outside directors of the Company. These objectives or
performance goals include specific targets for earnings growth and provide for
awards based upon achieving these goals as set forth in a matrix established by
the Committee. The 1994 Plan specifies that the award for the CEO be determined
by multiplying the salary base by a fraction, the denominator of which is the
planned increase in pre-tax income of the Company, which planned increase is
established annually in advance by the Board of Directors, and the numerator of
which is the amount of the actual increase in pre-tax income of the Company for
the fiscal year in question, as determined from the Company's audited financial
statements; provided, however, that if the resultant fraction is less than .50
no
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bonus is paid, and if the resultant fraction is more than 1.35 the maximum bonus
is capped at 135% of the base salary. This award formula is the same as
established under the Existing Plan in effect during 1993.
If the 1994 Plan is approved by the Stockholders and the other conditions
as set forth above are satisfied, payments made to the Company's CEO under the
1994 Plan will be ordinary income to the individual and will be deductible by
the Company as compensation expense. Payments will be made in cash in the
calendar year following performance.
The Committee may amend the 1994 Plan or the performance criterion at any
time; however, in doing so, the requirements of Section 162(m) must be met in
order that payments made to the CEO thereunder remain eligible as deductible
compensation expenses to the Company for federal tax purposes.
The Committee continues to believe that incentive compensation is an
important component of total compensation for its CEO. It views such
compensation as the best method to promote the achievement of specified earnings
growth. The Company has realized strong earnings growth in recent years, and
sustaining such results year after year is an important goal to both the Company
and its stockholders. This sustained growth is integrally linked to the
Company's favorable market value to book value, which the Board of Directors
believes to be important to all Company stockholders.
Substitution of the 1994 Plan for the Existing Plan with respect to the
Company's CEO will allow the Company to continue to deduct such payments under
the new tax law, yet will not result in any additional benefit to Mr. Kelley
than is already provided under the Existing Plan. Had the 1994 Plan been in
place for fiscal year 1993, Mr. Kelley would have earned and received an award
of $426,635, the same amount that he earned and received under the Existing
Plan.
Approval of the 1994 Plan requires the affirmative vote of the holders of
the majority of outstanding shares of CONSOLIDATED STORES CORPORATION Common
Stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL
TO APPROVE THE CONSOLIDATED STORES CORPORATION KEY EXECUTIVE INCENTIVE
COMPENSATION PLAN.
EXECUTIVE COMPENSATION
COMBINED REPORT OF THE COMPANY'S COMPENSATION COMMITTEE
AND THE CHIEF EXECUTIVE OFFICER
Compensation of the Company's executive officers is administered by the
Compensation Committee of the Board of Directors (the "Committee"). The
Committee consists of four independent, non-employee directors. Messrs. Glazer,
Kollat, Sisk and Tishkoff, respectively, comprised the Committee at the last
fiscal year end, and continue to serve in that capacity.
The Company believes that the key to its success in a very competitive
business climate is the strong performance of its executive officers,
particularly that of its Chief Executive Officer ("CEO"). Consequently, it
believes that aggressive compensation incentives, both short term and long term,
are essential to maximize stockholder value. The Company 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 the executive officer participating in the Company's performance through
equity ownership, and through bonuses based upon the Company's pre-tax earnings.
The basic compensation components for all executive officers, including the CEO,
consist of salary, bonus, and stock options. In addition, all executive
officers,
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including the CEO, are eligible to participate in the Company's 401(k) Savings
Plan, Supplemental Savings Plan, Executive Medical Plan and Defined Benefit
Pension Plan.
CEO COMPENSATION
As a means of evaluating the compensation package for its CEO, William G.
Kelley, the Company analyzed the 1992 data reflected in proxy statements of
fifteen retailers, namely, Circuit City, The Gap, 50 Off, Value City, Home
Depot, Staples, Dayton Hudson, Walmart, Toys "R" Us, Caldor, MacFrugal's,
Tuesday Morning, Pier 1 Imports, TJX Companies, and Office Depot (the
"Comparison Group"). The Committee believes these fifteen retailers represent a
fair sampling of competitors for purposes of comparing CEO compensation
packages. By comparison, during the same period Mr. Kelley received a lower
salary and higher bonus than the average for CEOs in the Comparison Group. He
received no restricted stock (in contrast to a substantial average award among
five of the companies in the group that made such awards), yet he was awarded
substantially more shares in the form of stock purchase options (granted during
the most recent three fiscal years) than the average for CEOs in the Comparison
Group. However, the comparison of stock option awards must be considered in
light of the Committee's desire to create, in a short time period, a 5% equity
incentive for Mr. Kelley. Please see "CEO Equity Incentives", below. Overall,
Mr. Kelley's compensation is consistent with the Committee's view that executive
officer salary compensation should be at or somewhat below market levels, with
emphasis placed upon incentive compensation tied to Company performance. The
Committee believes that the incentive created by this compensation package is
important to the Company's short term and long term growth, especially as the
Company continues to seek new ways in which to expand its market niche. The
individual components of Mr. Kelley's compensation are discussed below.
CEO SALARY
Mr. Kelley's salary was originally set by his employment agreement dated
December 12, 1989. The employment agreement does not provide for automatic
salary or equity increases, leaving such decisions to the discretion of the
Committee. Typically, Mr. Kelley has been limited to a 5% salary increase each
year, consistent with salary increases of other executive officers. However, the
Committee has chosen not to adopt any specific schedule of salary increase, and
for fiscal year 1993 awarded Mr. Kelley a 20% salary increase. Generally, the
Committee looks to factors such as the Company's planned and actual increase in
pre-tax income, market performance of its Common Stock, and business growth, in
determining the amount of salary increase or stock options, if any, to be
awarded in any fiscal year. However, the Committee does not specifically weight
such factors in advance. Such decisions are subjectively made, and are not
formally tied to objective performance criteria.
CEO BONUS
Mr. Kelley's bonus is determined strictly in accordance with the formula
and criteria stated in his employment agreement. Specifically, the bonus is
determined by multiplying the salary base by a fraction, the denominator of
which is the planned increase in pre-tax income of the Company, which planned
increase is established annually in advance by the Board of Directors, and the
numerator of which is the amount of the actual increase in pre-tax income of the
Company for the fiscal year in question, as determined from the Company's
audited financial statements; provided, however, that if the resultant fraction
is less than .50 no bonus is paid, and if the resultant fraction is more than
1.35 the maximum bonus is capped at 135% of the base salary. This formula has
not changed since December, 1989. The amount of compensation changes based
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upon the percentage of planned increase in earnings achieved, and based upon Mr.
Kelley's then current salary level.
CEO EQUITY INCENTIVES
The Committee makes it a priority for the Chief Executive Officer to have
an equity interest in the Company equal to approximately 5% of the Company's
outstanding Common Stock, in addition to any personal holdings he may have in
the Company as the result of market purchases and retirement plan participation.
In February 1994, Mr. Kelley was granted stock purchase options for 250,000
shares, raising Mr. Kelley's equity interest to the desired 5% level.
Consequently, Mr. Kelley's stock option grants during the most recent three
fiscal years have artificially outpaced those received by CEOs in the Comparison
Group. 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.
Initially the Committee granted options that would become exercisable ("vest")
over 3 years. Subsequent grants have had increasingly longer vesting periods,
with the most recent grants being 5 years. The 5% level was achieved in
increments through annual awards. The amount of 5%, and the amount of each
increment, were subjectively determined by the Committee. The Committee believes
this approach promotes commonality of interest between the CEO and the Company's
stockholders, and adds a long term performance perspective to his total
compensation package. This is particularly important while the Company seeks
high levels of growth.
COMPENSATION OF OTHER EXECUTIVE OFFICERS
To evaluate the compensation package for its executive officers other than
the CEO, the Company also looked to the results of its analysis of the
Comparison Group proxy statements. Please see "CEO Compensation", above. By
comparison, the Company's President, Brady J. Churches, has a lower salary,
somewhat higher bonus, and more shares subject to stock purchase options, than
the group average. The Company's Executive Vice President -- Merchandising,
Jerry D. Sommers, has a higher salary, lower bonus, and more shares subject to
stock purchase options, than the group average. The Company's Chief Financial
Officer, William B. Snow, has the same salary, lower bonus, and fewer shares
subject to stock purchase options, than the group average. No comparison could
be made concerning the Company's Senior Vice President -- Human Resources and
Information Services, M. Steven Bromet, due to the unique characteristics of his
position. The calculation of average shares subject to stock purchase options
for the group in the foregoing comparison includes only those companies within
the group that awarded stock options to the comparable position within the three
year period. As with the CEO compensation, the overall compensation is
consistent with the Committee's view that executive officer salary compensation
should be at or somewhat below market levels, and that the package should
contain significant incentive compensation tied to Company performance. The
individual components of compensation for executive officers other than the CEO
are discussed below.
NON-CEO SALARY
The salary component for executive officers other than the CEO is initially
based upon industry data for comparable positions, as adjusted to reflect the
relative level of experience and expertise of the individual. The industry data
used to gauge the initial salary is gathered informally as needed from industry
publications and, where necessary, from telephone surveys conducted by the
Company. Where the position is unique to companies included in the Standard &
Poor's Retail Stores Index, the Company collects industry data reflective of
companies within that industry group that are of similar size to the Company.
However, where the
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position being filled is common to many industry groups, the Company collects
industry data that more comprehensively reflects salaries of such executive
officers in similarly sized companies in or around Columbus, Ohio, where the
Company's principal operating subsidiary is located. Typically, salary for these
executive officers starts at or below the average market salary for comparable
positions. Once the initial salary is established based upon industry data, the
salary is not adjusted relative to comparable positions outside the Company
unless it otherwise suspects that the salary for a particular position is
becoming significantly below market. Based upon the Company's analysis of the
1993 Retail Management Compensation Study performed by Management Compensation
Services ("MCS"), salaries for those executive officer positions of the Company
covered by the survey, other than those named in the Summary Compensation Table,
are generally at or near the average for similar positions of the companies
surveyed. The analysis of the study by MCS consisted of 1992 salaries paid for
similar positions at 52 surveyed retailers. The salary is adjusted annually only
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. However, it is the Committee's view that executive officer salary
compensation should be at or below market levels, where possible, so as to allow
for incentive compensation tied to Company performance.
NON-CEO BONUS
The bonus component for these executive officers is a maximum (or "target")
percentage of salary that is set by position level at the beginning of each
fiscal year. The amount of the basic percentage is subjectively determined. The
Committee believes that a significant portion of the total compensation of the
executive officers should be bonus tied to Company earnings, and has minimized
salary increases for this purpose. Bonus is earned and paid only to the extent
that the Company has met its planned earnings per share for the fiscal year as
set at the beginning of that fiscal year by the Board of Directors. If the
Company earns less than 80% of the earnings per share planned for that fiscal
year, then no bonus is earned or paid. If the Company earns 80% or more (but
less than 100%) of the planned earnings per share, a prorated bonus is earned
and paid. No amount greater than the target bonus can be earned by or paid to
executive officers other than the CEO, even if the Company's earnings exceed
that planned for the fiscal year.
NON-CEO EQUITY INCENTIVES
The equity participation component for these executive officers consists of
stock purchase options. The Committee has not established a goal for an amount
of equity held by its executive officers other than the CEO. Stock purchase
options are granted at the discretion of the Committee, usually only once per
year, in an amount determined by position and performance. As a general rule, a
number of shares per option grant is set in advance by position. Actual grants
are determined subjectively, based upon perception of the individual's
performance. When granted, stock purchase options are issued with an exercise
price equal to the current market value of the Company's Common Stock as of the
date the option is granted. 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.
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RESTRICTED STOCK PLAN
In addition to the above, the Committee has the discretion to grant shares
of Company Common Stock to executive officers pursuant to its Restricted Stock
Plan (please see "Restricted Stock Plan" below). Since September, 1988, the
Committee has maintained a policy of making no grants under the Restricted Stock
Plan. The Committee intends to continue with this policy until such time as it
identifies a purpose for granting such shares. If such a purpose is identified,
the Committee desires that specific objective criteria be established as a basis
for such grants. However, it is within the Committee's power to grant shares
under the Restricted Stock Plan at any time in a purely subjective manner.
DEDUCTIBILITY OF COMPENSATION OVER $1 MILLION
During 1993, the Omnibus Budget Reconciliation Act of 1993 (the "Act") was
enacted. The Act includes potential limitations on the deductibility of
compensation in excess of $1 million paid to the Company's five highest paid
officers beginning in 1994. Based on the preliminary regulations issued by the
Internal Revenue Service to implement the Act, the Company has taken the
necessary actions to ensure the deductibility of payments under the bonus plan,
including submitting the bonus plan for stockholder approval pursuant to
Proposal Three, above. Upon issuance of final regulations, further actions will
be taken to the extent necessary and possible to maintain the deductibility of
payments under the plan.
THE COMPENSATION COMMITTEE William G. Kelley
OF THE BOARD OF DIRECTORS Chairman and CEO
Michael L. Glazer, Chairman (Not A Member Of The
David T. Kollat Compensation Committee)
John L. Sisk
Dennis B. Tishkoff
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SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the individual
compensation paid to the Company's Chief Executive Officer and each of the four
other most highly compensated executive officers for services in all capacities
to the Company for fiscal years 1993, 1992, and 1991.
LONG-TERM COMPENSATION
----------------------------------
AWARDS LONG-
---------------------- TERM
ANNUAL COMPENSATION RESTRICTED STOCK INCENTIVE
-------------------------------------- STOCK OPTIONS PAYOUTS
NAME AND POSITION YEAR SALARY ($) BONUS ($) OTHER ($) AWARDS ($) (#)(D) ($)
- - ------------------------------- ---- ---------- --------- --------- ---------- ------- -------
William G. Kelley, Chairman 1993 562,275 426,635 223,354(a) -- 250,000 --
of the Board and 1992 468,563 632,559 173,096(b) -- -- --
Chief Executive Officer 1991 446,250 602,437 233,576(c) -- 935,752 --
Brady J. Churches, President 1993 309,615 249,375 15,299 -- 120,000 --
1992 250,000 125,000 12,152 -- 50,000 --
1991 198,998 75,000 12,036 -- -- --
William B. Snow, Executive 1993 240,731 57,174 17,917 -- -- --
Vice President and Chief 1992 229,268 34,390 20,972 -- -- --
Financial Officer 1991 218,350 32,753 25,483 -- -- --
Jerry D. Sommers, Executive 1993 208,462 109,250 7,481 -- 70,000 --
Vice President, 1992 159,367 27,889 6,600 -- 10,000 --
Merchandising 1991 151,778 30,356 8,769 -- -- --
M. Steven Bromet, Sr. Vice 1993 173,250 41,147 10,162 -- 10,000 --
President, Inform. Services 1992 157,500 23,625 12,076 -- 15,000 --
and Human Resources 1991 149,319 22,500 15,389 -- -- --
ALL OTHER
COMPENSATION
NAME AND POSITION ($)
- - ------------------------------- ------------
William G. Kelley, Chairman 6,266(e)
of the Board and 4,364(e)
Chief Executive Officer 4,208(e)
Brady J. Churches, President 6,266(e)
4,364(e)
1,050(e)
William B. Snow, Executive 475,323(f)
Vice President and Chief 70,000(f)
Financial Officer 45,000(f)
Jerry D. Sommers, Executive 5,999(e)
Vice President, 4,364(e)
Merchandising 1,245(e)
M. Steven Bromet, Sr. Vice 5,783(e)
President, Inform. Services 4,364(e)
and Human Resources 4,238(e)
(a) Includes $171,124 of income tax adjustments, as authorized by the Board of
Directors, associated with Mr. Kelley's relocation and $29,348 of interest
foregone by the Company on a $450,000 second mortgage loan to Mr. Kelley in
1991 concerning his residence. The mortgage loan was made in
connection with relocation assistance provided in Mr. Kelley's employment
agreement, is payable on demand, and is secured by a second mortgage.
(b) Includes a $113,051 expenditure for personal security measures added to Mr.
Kelley's residence as authorized by the Board of Directors and $27,997 of
interest foregone by the Company associated with the second mortgage loan
more fully described in (1) above.
(c) Includes $191,591 for expenses related to relocation and $19,361 of interest
foregone by the Company associated with the second mortgage loan more fully
described in (1) above.
(d) Non-qualified options granted pursuant to The Executive Stock Option and
Stock Appreciation Rights Plan.
(e) Company matching contribution to the Consolidated Stores Corporation Savings
Plan (401K) and/or Consolidated Stores Corporation Supplemental Savings
Plan.
(f) Reflects $92,500, $70,000, and $45,000 in fiscal 1993, 1992, and 1991,
respectively, for earnings on a restricted stock grant made in fiscal 1988.
Additionally, 1993 includes a distribution of $382,823 in connection with
the termination of Mr. Snow's supplemental pension agreement.
In December, 1989, the Company entered into an employment agreement with
William G. Kelley for an indefinite term. The agreement provides for an annual
base salary, as increased by the Board of Directors for fiscal year ending
January 28, 1995, of $590,389, and an annual bonus of up to a maximum of
$797,025 based upon a percentage of progress of the Company toward certain
planned goals during the year as established by the Board of Directors. The
agreement also provides that if there occurs an effective change of control of
the Company (as defined in the agreement), Mr. Kelley shall be entitled to
terminate his employment within one year, and upon such termination shall become
entitled to receive a sum in the amount of up to $590,389, plus a bonus, if any,
for the fiscal year in which the termination occurs, as well as an additional
amount necessary to hold Mr. Kelley harmless from the effects of Sections 280G
and 4999, respectively, of the Internal Revenue
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Code of 1986, as amended (please see "Executive Severance Agreements"), which
Sections could subject the payments to excise tax liability, and shall be
reimbursed by the Company for any excise tax liability incurred by receiving
such amount. Mr. Kelley's employment agreement requires that he devote his full
business time to the business of the Company and prohibits him from competing
with the Company's business during his employment and for a two-year period
after termination of his employment.
In February, 1994, the Company entered into an employment agreement with
each of Brady J. Churches and Jerry D. Sommers, respectively, for an indefinite
term. The agreements respectively provide, for fiscal year ending January 28,
1995, an annual base salary of $400,000 for Mr. Churches, and of $300,000 for
Mr. Sommers. The agreements also provide for an annual bonus of up to a maximum
of $300,000 for Mr. Churches, and of $150,000 for Mr. Sommers, based upon a
percentage of progress of the Company toward certain planned goals during the
year as established by the Board of Directors. The agreements provide that if
there occurs an effective change of control of the Company (as defined in the
agreement), Messrs. Churches and Sommers, respectively, shall be entitled to
terminate their respective employment within one year, and upon such termination
shall become entitled to receive a sum in the amount of up to $800,000 for Mr.
Churches, and up to $600,000 for Mr. Sommers, plus a prorated bonus, if any was
earned, for the fiscal year in which the termination occurs, as well as an
additional amount necessary to hold each of them harmless from the effects of
Sections 280G and 4999, respectively, of the Internal Revenue Code of 1986, as
amended (please see "Executive Severance Agreements"), which Sections could
subject the payments to excise tax liability, and shall be reimbursed by the
Company for any excise tax liability incurred by receiving such amount. The
agreements require Messrs. Churches and Sommers to respectively devote their
full business time to the business of the Company and prohibits them from
competing with the Company's business during their employment and for a two-year
period after termination of their employment.
Pursuant to The Executive Stock Option and Stock Appreciation Rights Plan,
nonqualified stock options were granted by the Compensation Committee on shares
of Company Common Stock to the individuals named in the Summary Compensation
Table, to Executive Officers of the Company, and to other associates of the
Company. The following tables reflect the (i) number and value of options
granted in fiscal 1993 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 29, 1993 for those named individuals.
Pursuant to The Executive Stock Option and Stock Appreciation Rights Plan
Nonqualified Stock Options were granted by the Compensation Committee on shares
of Company Common Stock to the individuals' names in the Summary Compensation
Table. to Executive Officers of the Company, and to other associates of the
Company. The following tables reflect the (i) number and value of options
granted in fiscal 1993 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 29, 1994 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
OPTIONS PRICE APPRECIATION FOR
GRANTED TO OPTION TERM (C)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION -------------------------
NAME GRANTED FISCAL YEAR (B) PER SHARE DATE 5% 10%
- - ----------------------- ------- --------------- -------------- --------------- ---------- ----------
William B. Kelley 250,000 36.8% $ 18.500 Feb. 2003 $2,908,638 $7,371,059
Brady J. Churches 20,000 2.9% $ 16.125 April 2003 $ 202,819 $ 513,982
Brady J. Churches 100,000 14.7% $ 17.250 Aug. 2003 $1,084,843 $2,749,206
William B. Snow -- -- -- -- -- --
Jerry D. Sommers 20,000 3.1% $ 16.125 April 2003 $ 202,819 $ 513,982
Jerry D. Sommers 50,000 7.4% $ 17.250 Aug. 2003 $ 542,422 $1,374,603
M. Steven Bromet 10,000 1.6% $ 16.125 Feb. 2003 $ 101,409 $ 256,991
- - ---------------
(a) Material terms of the options granted include 5 year vesting at 20% per year
on each succeeding anniversary of the grant date, continuous employment with
the Company through at least the 90th day prior to any exercise, employment
with the Company as a condition of vesting, and non-transferability of the
stock options.
(b) Based on 678,000 non-qualified options granted to all associates in fiscal
1993 pursuant to the Executive Stock Option and Stock Appreciation Rights
Plan.
(c) Assumes a respective 5% or 10% annualized appreciation in the underlying
Common Stock price from the date of grant to the expiration date less the
aggregate exercise price. The ultimate amount realized will depend on the
market value of the Company's Common Stock at a future date.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
UNEXERCISED OPTIONS AT JANUARY 28, 1994
---------------------------------------------------------------
NUMBER OF VALUE OF IN-THE-MONEY OPTIONS
SHARES NUMBER OF OPTIONS (B)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE REALIZED (A) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ------------------ ----------- ------------ ----------- ------------- ----------- -------------
William G. Kelley -- -- 1,074,301 1,011,451 $14,799,784 $ 8,280,921
Brady J. Churches -- -- 76,000 194,000 $ 1,121,000 $ 937,500
William B. Snow 120,000 $1,770,713 134,000 6,000 $ 2,221,750 $ 90,750
Jerry D. Sommers -- -- 53,000 90,000 $ 946,625 $ 352,000
M. Steven Bromet -- -- 63,000 62,000 $ 983,625 $ 710,750
(a) Difference of the sales price on the dates of exercise and the option
exercise price.
(b) Based on the fair market value ($18.75) of Consolidated Stores Corporation
Common Stock at January 29, 1994 minus the aggregate exercise prices.
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.
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COMPARISON OF FIVE YEAR TOTAL STOCKHOLDER RETURN (A)
CONSOLIDATED
MEASUREMENT PERIOD STORES COR- S&P RETAIL
(FISCAL YEAR COVERED) PORATION S&P 500 STORES
1989 100.00 100.00 100.00
1990 28.81 114.84 114.46
1991 49.15 134.75 124.07
1992 176.27 188.28 152.22
1993 232.20 224.74 168.33
1994 245.76 216.61 190.00
(a) Assumes $100 invested on January 31, 1989 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
STOCK OPTION PLANS. The Company maintains two stock option plans. The
Executive Stock Option and Stock Appreciation Rights Plan (the "Executive Stock
Option Plan") is a grant/award plan that covers fulltime employees of the
Company. The Director Stock Option Plan is a formula plan that covers only non-
employee Directors of the Company.
EXECUTIVE STOCK OPTION PLAN. All of the executive officers of the Company
are eligible to participate in the Executive Stock Option Plan. The purposes of
the Executive Stock Option Plan are to promote the growth and profitability of
the Company by increasing the personal participation of fulltime employees in
the continued growth and financial success of the Company, to enable the Company
to attract, retain and motivate fulltime employees of outstanding competence and
to provide such employees with an equity opportunity in the Company. Some of the
options granted under the Executive Stock Option Plan may be intended to qualify
as "incentive stock options" within the meaning of Section 422A of the Code, and
Treasury Regulations promulgated thereunder. If an option does not qualify as an
incentive stock option, it is treated as a "nonqualified stock option". The
total number of shares of stock delivered pursuant to the Executive Stock Option
Plan may not exceed 6,800,000 in the aggregate, subject to adjustment for stock
dividends, stock splits and certain other changes in the Company's
capitalization.
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The Executive Stock Option Plan is administered by the Compensation
Committee, a committee of at least three disinterested Board members appointed
by the Board. No current member of the Compensation Committee is an employee of
the Company. Any fulltime employee of the Company or any of its subsidiary
corporations, except for members of the Compensation Committee, is eligible to
participate in the Executive Stock Option Plan. The approximate number of
persons qualified to participate in the Executive Stock Option Plan is 5,300.
The Committee designates employees to whom incentive or nonqualified stock
options are to be granted and specifies the number of shares subject to each
grant. The price per share of stock purchased by the exercise of any incentive
or nonqualified stock option granted under the Executive Stock Option Plan (the
"option price") is, in the discretion of the Committee, equal to or greater than
the fair market value per share of such stock at the time such option is
granted. Though the Executive Stock Option Plan allows Incentive Stock Options
to be granted, all currently outstanding options are nonqualified options, and
the Committee expects to continue to grant only nonqualified options absent
further changes in the tax laws.
The Committee has the discretion to grant stock appreciation rights
("SARs") in connection with options to purchase shares of Common Stock on such
terms and conditions as it deems appropriate in accordance with the Executive
Stock Option Plan. An SAR allows a participant to surrender an option or portion
thereof and to receive payment from the Company in an amount equal to the excess
of the aggregate fair market value of the shares of Common Stock with respect to
which the option is surrendered over the aggregate option price of such shares.
The Committee has not granted any SAR as of the date hereof.
The Board may alter, amend or terminate the Executive Stock Option Plan
from time to time. No stock option granted to an optionee under the Executive
Stock Option Plan is transferable by him or otherwise than by will or the laws
of descent and distribution, and any such option shall be exercisable during his
lifetime only by him. No amendment which alters the terms or provisions of any
incentive or nonqualified option granted before such amendment may be made
without the consent of the person to whom it is granted or the holder currently
entitled to exercise it. The Executive Stock Option Plan terminates on April 29,
1995. Any stock option outstanding at the termination date will remain
outstanding until it has either expired or been exercised.
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 shall be
granted annually stock options for the purchase of 5,000 shares of the Company's
Common Stock, for an exercise price equal to 100% of the fair market value on
the date of grant. Each annual grant occurs on the last day of the quarterly
trading period next following the Annual Meeting of Stockholders.
Options granted under the Director Stock Option Plan subsequent to such
date will become exercisable over three years beginning upon the first annual
anniversary of the grant date, whereby the option will become exercisable for up
to 20% of the shares on the first anniversary, 60% on the second anniversary,
and 100% on the third anniversary, respectively. Options granted will
automatically terminate ten years and one month following the date of grant. An
optionee may exercise a stock option only during specific quarterly trading
periods, and only if at all times during the period beginning on the date such
option was granted and ending on the day three months before the date of
exercise he was a director of the Company.
Options granted under the Director Stock Option Plan are not transferable
other than by will or the laws of descent and distribution.
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RESTRICTED STOCK PLAN. All of the executive officers and directors and
other key employees of the Company are eligible to participate in the Company's
1987 Restricted Stock Plan (the "Restricted Stock Plan"). At the date hereof,
approximately 50 persons are eligible to receive awards, and no awards are
outstanding as of the date hereof.
The Restricted Stock Plan provides generally that an employee or director
to whom an award of shares of Common Stock has been made under the Restricted
Stock Plan shall not receive or be immediately vested in the shares of Common
Stock awarded, but shall receive and become vested in such shares of Common
Stock at such time or times as specified by the Board of Directors and set forth
in the written agreement evidencing the award. Shares awarded that are not
vested may not be sold, transferred, assigned, pledged, hypothecated,
anticipated, alienated, encumbered or charged, whether voluntarily,
involuntarily or by operation of law, and shares awarded must be forfeited to
the Company in the event the recipient ceases to be an employee.
Vesting of any shares awarded under the Restricted Stock Plan becomes
accelerated automatically upon consummation of any event that results in a
Change in Effective Control of the Company. As used in the Restricted Stock
Plan, "Change in Effective Control" means any one or more of the following: (i)
any person or group (as defined for purposes of Section 13(d) of the Securities
Exchange Act of 1934) becomes the beneficial owner of, or has the right to
acquire (by contract, option, warrant, conversion of convertible securities or
otherwise), 20% or more of the outstanding equity securities of the Company
entitled to vote for the election of directors; (ii) a majority of the Board of
Directors is replaced within any period of two years or less by directors not
nominated and approved by a majority of the directors in office at the beginning
of such period (or their successors so nominated and approved), or a majority of
the Board of Directors at any date consists of persons not so nominated and
approved; or (iii) the stockholders of the Company approve an agreement to merge
or consolidate with another corporation or an agreement to sell or otherwise
dispose of all or substantially all of the Company's assets (including without
limitation, a plan of liquidation).
The Restricted Stock Plan is administered by the Board of Directors of the
Company, which selects the employees and directors to whom awards will be
granted, the number of shares to be awarded to each, and the vesting schedule
and other terms of each award. The number of shares of Common Stock awarded
pursuant to the Restricted Stock Plan may not exceed 500,000 in the aggregate,
subject to adjustment as described above. The Board of Directors may adjust the
number and kind of shares of Common Stock available for distribution and subject
to vesting, in order to prevent dilution or enlargement of rights in the event
of a change in the number or kind of outstanding shares of the Company by reason
of recapitalization, merger, consolidation, reorganization, separation,
liquidation, stock split, stock dividend, combination of shares, or any other
change in the corporate structure or shares of stock of the Company.
PENSION PLAN AND TRUST. The Company maintains a noncontributory defined
benefit pension plan (the "Pension Plan") for all employees whose hire date
precedes April 1, 1994, who have reached the age of 21 and who have worked for
the Company for more than one year. The amount of the Company's annual
contribution to the Pension Plan is actuarially determined to accumulate
sufficient funds to maintain projected benefits. Effective January 1, 1993, the
computation of annual retirement benefits payable upon retirement under the
Pension Plan is 1% of final average annual compensation multiplied by the years
of service up to a maximum of 25. This benefit is payable when a participant
reaches the normal retirement age of 65. However, the Pension Plan does provide
an early retirement option, and employment beyond the normal retirement age is
permitted by agreement with the Company. For purposes of calculating benefits
under the Pension Plan, compensation is defined to include a two month
equivalent of the total cash remuneration (including overtime) paid for services
rendered during a Plan year prior to salary reductions pursuant to Sections
401(k)
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or 125, respectively, of the Internal Revenue Code of 1986, as amended,
including bonuses, incentive compensation, stock options, severance pay,
disability payments and other forms of irregular payments.
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
$175,000 $17,500 $26,250 $35,000 $43,750
$200,000 $20,000 $30,000 $40,000 $50,000
$225,000 $21,922 $32,884 $43,845 $54,806
The maximum annual benefit payable under the Pension Plan is restricted by
the Internal Revenue Code. At January 1, 1994, the maximum final five year
average compensation is $219,224. At January 1, 1994 Mr. Kelley had 3 years of
credited service, Mr. Churches had 15 years, Mr. Sommers had 9 years, Mr. Snow
had 8 years, and Mr. Bromet had 5 years.
SAVINGS PLAN. All of the executive officers referred to in the cash
compensation table, as well as substantially all other full-time employees of
the Company and its subsidiaries, are eligible to participate in the
Consolidated Stores Corporation Savings Plan (the "Savings Plan"). In order to
participate in the Savings Plan, an eligible employee must satisfy applicable
age and service requirements and must make contributions to the Savings Plan
("Participant Elective Contributions").
Participant Elective Contributions are made through authorized payroll
deductions to one or more of the several investment funds established under the
Savings Plan. One of the funds is a Company Stock Fund which is invested solely
in Common Stock of the Company. All Participant Elective Contributions are
matched by the Company ("Employer Matching Contributions") at a rate of 100% for
the first 1% of salary contributed, 75% for the second 1% of salary contributed,
and 50% for the next 4% of salary contributed; however, only Participant
Elective Contributions of up to six percent of the employee's compensation will
be matched. Employee Matching Contributions will always be made in the form of
Common Stock of the Company.
Each participant has a nonforfeitable right to all accrued benefits
pertaining to Participant Elective Contributions. Each participant also has a
nonforfeitable right to all accrued benefits pertaining to Employer Matching
Contributions in the event of retirement or other termination of employment (a)
on or after his 65th birthday, (b) on account of disability, or (c) by reason of
death. A participant whose employment terminates under other circumstances will
have a nonforfeitable right to a portion of accrued benefits pertaining to
Employer Matching Contributions determined under a schedule based on years of
service. All other unvested accrued benefits will be forfeited.
SUPPLEMENTAL SAVINGS PLAN. The Company maintains a non-qualified salary
deferral plan ("Supplemental Savings Plan") for those executives participating
in the Savings Plan who desire to contribute more than the amount allowable
under the Savings Plan. The Supplemental Savings Plan constitutes a contract to
pay deferred salary, and limits deferrals in accordance with prevailing tax law.
The Supplemental Savings Plan is
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designed to pay the deferred compensation in the same amount as if the
contributions had been made to the Savings Plan. The Company has no obligation
to fund the Supplemental Savings Plan, and all assets and amounts payable under
the Supplemental Savings Plan are subject to the claims of general creditors of
the Company.
EXECUTIVE BENEFIT PLAN. Most of the executive officers are eligible to
participate in the Consolidated Stores Executive Benefit Plan (the "Benefit
Plan"). The Benefit Plan is a supplemental health benefits plan which reimburses
participants for medical costs incurred but not covered by the Consolidated
Stores Associate Benefits Plan, up to an annual maximum reimbursement of $10,000
per participant. Amounts received by participants are treated as taxable income.
Amounts received by the five individuals named in the cash compensation table,
and by all participating executive officers as a group, respectively, are
included in the amounts reflected in the values of personal benefits received by
such individuals and executive officers as a group.
EXECUTIVE SEVERANCE AGREEMENTS. On April 18, 1989, the Board of Directors
of the Company authorized the Company to enter into Executive Severance
Agreements with certain of its key officers and employees (currently 22
persons). The agreements expire on the anniversary of their execution and are
automatically extended on an annual basis unless the Company provides at least
90 days' notice that any particular agreement will not be extended. The
agreements provide for severance benefits if, within 24 months after a Change in
Control (as defined in the agreements), the employee's employment is terminated
by the Company (other than for Cause, as defined in the agreements), or the
employee resigns because of a material change in the circumstances of his
employment. The agreements provide for the following severance benefits: (i) for
certain officers (including Messrs. Bromet, Churches, Sommers and Snow) and key
employees of the Company, a lump-sum payment equal to 200% of the employee's
then-current annual salary; or (ii) for other officers and key employees of the
Company, a lump-sum payment equal to 100% of the employee's then-current annual
salary. Mr. Kelley is not a party to such an agreement, but has similar
provisions contained in his employment agreement permitting a severance benefit
of 100% of his then current annual salary. In addition, the Executive Stock
Option Plan and the Restricted Stock Plan each provide for immediate vesting of
all outstanding options and shares, respectively, in the event of such a Change
in Control (please see "Stock Option Plans" table, and "Restricted Stock Plan",
above). The employee will also become entitled to reimbursement of legal fees
and expenses incurred by the employee in seeking to enforce his rights under his
agreement. In addition, to the extent that payments to the employee pursuant to
this agreement (together with any other amounts received by the employee in
connection with a Change in Control) would result in the triggering of the
provisions of Sections 280G and 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), each agreement provides for the payment of an additional
amount (the "Tax Gross-Up Amount") such that the employee receives, net of
excise taxes, the amount he would have been entitled to receive in the absence
of the excise tax provided in Section 4999 of the Code. Based on compensation
levels as of January 29, 1994, the aggregate cash benefit (including the
estimated Tax Gross-Up Amount based on severance payment and accelerated vesting
of stock options, but not including legal fees) under the agreements would be as
follows: Mr. Kelley, $5,730,200; Mr. Churches, $1,856,614; Mr. Sommers,
$970,827; Mr. Snow, $481,462; Mr. Bromet, $1,212,164; all executive officers as
a group $11,309,022; and all persons who are parties to an Agreement as a group,
$12,841,797. In addition to the cash benefit, each of the foregoing would
receive immediate vesting of all unvested stock options and restricted stock,
which at January 29, 1994, would have been valued at $8,280,921; $937,750;
$710,750; $90,750; $352,000; $11,174,182 and $12,447,939, respectively.
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APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Deloitte & Touche to be the
independent auditors of the Company and its subsidiaries for the fiscal year
ending January 28, 1995. Deloitte & Touche acted as the Company's independent
auditors for fiscal years ended January 29, 1994, and January 30, 1993. A
representative of Deloitte & Touche 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 1995 Annual
Meeting of Stockholders for inclusion in the proxy statement and form of proxy
relating to that meeting is advised that the proposal must be received by the
Company at its principal executive offices not later than January 9, 1995. The
Company will not be required to include in its proxy statement or form of proxy
a stockholder proposal which is received after that date or which otherwise
fails to meet requirements for stockholder proposals established by regulations
of the Securities and Exchange Commission.
OTHER MATTERS
This solicitation of proxies is made by and on behalf of the Board of
Directors. In addition to mailing copies of this statement and the accompanying
notice and form of proxy to all stockholders of record on the record date, the
Company will request brokers, custodians, nominees and other fiduciaries to
forward copies of this material to persons for whom they hold shares of Common
Stock of the Company in order that such shares may be voted. Solicitation may
also be made by the Company's officers and regular employees personally or by
telephone or telegraph. The cost of the solicitation will be incurred by the
Company. The Company has also retained Georgeson & Company Inc. to aid in the
solicitation of proxies for a fee estimated at $8,000 plus reasonable
out-of-pocket expenses.
If the accompanying form of proxy is executed and returned, the shares
represented thereby will be voted in accordance with any specifications made by
the stockholder. In the absence of any such specifications, they will be voted
to elect all nine nominees as set forth under Proposal One, and to vote in favor
of Proposals Two and Three, respectively.
The presence of any stockholder at the meeting will not operate to revoke
his proxy. A proxy may be revoked at any time before it is exercised, by a later
appointment received by the secretary of the meeting or by giving notice of a
revocation to the secretary of the meeting in writing or in open meeting.
If any other matters shall properly come before the meeting, the persons
named in the proxy, or their substitutes, will vote thereon in accordance with
their judgment. The Board of Directors does not know of any other matters which
will be presented for action at the meeting.
By order of the Board of Directors.
May 9, 1994
Albert J. Bell,
Senior Vice President,
General Counsel and Secretary
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CONSOLIDATED STORES CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE JUNE 7, 1994 ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints William G. Kelley, William B. Snow
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 3:00 P.M. (local time) on June 7, 1994, 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 / /
Michael L. Glazer, William G. Kelley, David T. Kollat, Nathan P. Morton,
John L. Sisk, Brady J. Churches, Dennis B. Tishkoff, William A. Wickham
and Sheldon M. Berman.
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name on the space provided
below.)
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2. PROPOSAL TO APPROVE THE AMENDMENT TO THE CONSOLIDATED STORES
CORPORATION BYLAWS CREATING THREE CLASSES OF DIRECTORS WITH STAGGERED
THREE YEAR TERMS.
FOR / / AGAINST / / ABSTAIN / /
(Continued, and to be dated and signed, on the other side)
(Continued from the other side)
3. PROPOSAL TO APPROVE THE CONSOLIDATED STORES CORPORATION KEY EXECUTIVE
INCENTIVE PLAN.
FOR / / AGAINST / / ABSTAIN / /
4. In their discretion, to vote upon such other business as may properly
come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED BY THE
STOCKHOLDER. IF NO SPECIFICATIONS ARE MADE, THE PROXY WILL BE VOTED TO
ELECT ALL NOMINEES AS DESCRIBED IN ITEM 1 ABOVE AND FOR PROPOSALS 2 AND
3, RESPECTIVELY.
Date:_________________, 1994
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Signature(s) of
Stockholder(s)
PLEASE SIGN AS YOUR NAME OR
NAMES APPEAR HEREON. WHEN
SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE
GIVE YOUR FULL TITLE. IF A
CORPORATION, PLEASE SIGN IN
FULL CORPORATE NAME BY
PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP,
PLEASE SIGN IN PARTNERSHIP
NAME BY AN AUTHORIZED PERSON.
Proxy Card
