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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
(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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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CONSOLIDATED STORES CORP. LOGO
1105 North Market Street
Suite 1300
P.O. Box 8985
Wilmington, Delaware 19801
April 28, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders,
which will be held at the headquarters of the Company's principal operating
subsidiary at 300 Phillipi Road, Columbus, Ohio, on Tuesday, May 16, 2000, at
9:00 A.M., local time.
The following pages contain the formal Notice of Annual Meeting and the
Proxy Statement. You will want to review this material for information
concerning the business to be conducted at the meeting.
Your vote is important. Whether you plan to attend the meeting or not, you
are urged to complete, date and sign the enclosed Form of Proxy and return it in
the enclosed envelope. 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.
WILLIAM G. KELLEY,
Chairman,
Chief Executive Officer and President
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CONSOLIDATED STORES CORP. LOGO
1105 North Market Street
Suite 1300
P.O. Box 8985
Wilmington, Delaware 19801
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 2000
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 16, 2000, at 9:00 A.M., local time, for the following purposes:
1. To elect nine directors of the Company;
2. To consider a shareholder proposal seeking the termination of the
Company's Rights Agreement or stockholder action thereon; 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 24, 2000 are
entitled to notice of and to vote at said meeting or any adjournment thereof.
By order of the Board of Directors.
April 28, 2000
ALBERT J. BELL,
Executive Vice President, General
Counsel
and Secretary
---------------
YOUR VOTE IS IMPORTANT. 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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CONSOLIDATED STORES CORP. LOGO
1105 North Market Street
Suite 1300
P.O. Box 8985
Wilmington, Delaware 19801
---------------
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 16, 2000. 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, 2000, are first being mailed
to stockholders on or about April 28, 2000.
The close of business on March 24, 2000 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 110,995,171 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 proposal for it to be approved. In the case of any of the
proposals, Broker non-votes will be treated as votes not cast, and will not have
any effect. Abstentions will be treated as shares not voted with respect to
Proposal One, and will not be calculated in the tabulation. In the case of
Proposals Two and Three, abstentions will be treated as votes cast against the
proposal and if no instructions are given, the persons named as Proxies in the
accompanying proxy card intend to vote against Proposal Two and for Proposal
Three. 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 59 Chairman, Macaroons, Inc. (marketing services); 1994
Chairman, Xtreem Creative, Inc. (venture capital
services); former Chairman, President and founder,
Shelly Berman Communicators (retail marketing and
advertising)
W. Eric Carlborg 36 Chief Financial Officer, Ikano Communications, Inc. 1997
(branded internet service provider); former Chief
Strategy and Planning Officer, GO2Net Inc. (internet
network); former Chief Financial Officer, Authorize.Net
(internet payment processor); former Chief Financial
Officer, Einstein Noah Bagel Corp. (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 51 Chief Executive Officer and President, K-B Toys; former 1991
President, The Bombay Company (retail home furnishings)
William G. Kelley 54 Chairman, Chief Executive Officer and President of the 1990
Company
David T. Kollat 61 President and Founder, 22, Inc. (retail research and 1990
consulting)
Brenda J. Lauderback 49 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 51 Chief Executive Officer, BuildNet, Inc. (E-Commerce); 1990
Chairman, Handtech.com; Chairman, Starpower
Entertainment, Inc.; Principal, New Pegasus Ventures,
LLP; former Co-Chairman and Chief Executive Officer,
Computer City (retail stores); Senior Partner, Channel
Marketing Corporation
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PRINCIPAL OCCUPATION DIRECTOR
NAME AGE FOR THE PAST FIVE YEARS SINCE
---- --- ----------------------- --------
Dennis B. Tishkoff 57 President, Tishkoff and Associates, Inc. (retail 1991
Consultant); former President and Chief Executive
Officer, Shoe Corporation of America (retail footwear).
Shoe Corporation of America filed for bankruptcy on
June 14, 1999.
William A. Wickham 55 Chairman and Chief Executive Officer of SBC Advertising 1992
(advertising and corporate communications agency);
Principal, TFRB Leasing; Managing Partner, SBC
Partnership; Principal, Columbus Ad Service
Four meetings of the Board of Directors were held during the Company's
fiscal year ended January 29, 2000 (sometimes hereinafter "fiscal 1999"). Each
director attended all meetings of the Board, and the committees on which he or
she served during fiscal 1999.
The Board has an Audit Committee, a Compensation Committee, and a
Nominating Committee. Messrs. Carlborg, Berman 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 1999. 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 1999. Messrs. Kelley, Wickham 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 did not meet during fiscal 1999. The Nominating
Committee will not consider nominees recommended by stockholders.
RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Kelley is a director of Springs Industries, Inc. Mr. Glazer is a
director of Brookstone, Inc. and Berkshire Life Insurance Company. Mr. Kollat is
a director of The Limited, Inc., Cooker Restaurant Corp., SBC Advertising, AEI
Music Network, Cheryl & Co., Christy & Associates, Select Comfort, Inc.,
Wolverine Worldwide, Inc. and Core Mills Corporation. Mr. Berman is a director
of SBC Advertising. Ms. Lauderback is a director of Irwin Financial Corporation.
During fiscal 1999, the Company retained MC2 Cyberspace, a corporation
which is 50% owned by SBC Advertising. Additionally, 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 1999, the Company paid fees in the amount of $1,013,184, $32,067
and $969,065 to SBC Advertising, MC2 Cyberspace and AEI Music Network,
respectively.
DIRECTOR'S REMUNERATION. Pursuant to arrangements with the Company,
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 1999, 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 1999 (please see Director Stock Option
Plan).
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of January 29, 2000, 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 204,884 *
Common Stock Sheldon M. Berman (2) 42,188 *
Common Stock W. Eric Carlborg 4,000 *
Common Stock Michael L. Glazer 644,339 *
Common Stock William G. Kelley 3,571,276 3.2%
Common Stock David T. Kollat 118,847 *
Common Stock Brenda J. Lauderback 4,000 *
Common Stock Nathan P. Morton 35,252 *
Common Stock Michael J. Potter 235,507 *
Common Stock Dennis B. Tishkoff 30,048 *
Common Stock Salvatore Vasta 52,324 *
Common Stock William A. Wickham (3) 159,314 *
Common Stock Brinson Partners, Inc. (4) 6,256,000 5.7%
Common Stock Capital Research and Management
Company (5) 9,682,590 8.7%
Common Stock FMR Corp. (6) 15,703,446 14.2%
Common Stock All directors & executive officers as
a group (18 Persons) 5,624,044 5.1%
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* Represents less than 1% of the outstanding Common Stock.
(1) The persons named in the table, other than Brinson Partners, Inc. (see note
(4) below), Capital Research and Management Company (see note (5) below) and
FMR Corp. (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 29, 2000, unless otherwise stated. Of the shares
reported for Messrs. Bell, Berman, Carlborg, Glazer, Kelley, Kollat, Morton,
Potter, Tishkoff, Vasta, Wickham, Ms. Lauderback and for all directors and
executive officers as a group, 201,251, 27,439, 4,000, 590,127, 3,394,926,
58,691, 35,252, 194,063, 28,878, 51,250, 43,065, 4,000, and 5,058,349,
respectively, are shares which may be acquired within 60 days of the record
date pursuant to exercisable stock options.
(2) Includes 5,468 shares owned by Macaroons, Inc.
(3) Includes 54,687 shares which are owned by SBC Advertising, Inc. and 24,000
shares which are owned by SBC Ltd.
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(4) In its Schedule 13G dated February 4, 2000, Brinson Partners, Inc. stated
that it beneficially owned the number of shares reported in the table as of
December 31, 1999, and has sole voting power and shared dispositive power
over all listed shares.
(5) In its Schedule 13G dated February 10, 2000, and its accompanying materials,
Capital Research and Management Company stated that it beneficially owned
the shares reported in the table as of December 31, 1999, has sole
dispositive power over the shares, but no voting power over the shares.
(6) In its Schedule 13G dated February 14, 2000, and its accompanying materials,
FMR Corp. stated that it beneficially owned the number of shares reported in
the table as of December 31, 1999, which number includes 14,270,434 shares
(12.876% 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, including the Fidelity Value Fund, which holds 7,070,050 shares
(6.379% of the Common Stock at that date); and 1,418,312 shares (1.279% 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 288,512 shares, and sole dispositive power over
15,703,446 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: Brinson Partners,
Inc., 290 South LaSalle, Chicago, Ill 60604; Capital Research and Management
Company, 333 South Hope Street, Los Angeles, CA 90071; and FMR Corp., Fidelity
Management & Research Company and Fidelity Value Fund, 82 Devonshire Street,
Boston, MA 02109.
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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's responsibilities
include, among other things, establishing the policies and procedures applicable
to the compensation of the Company's executive officers and reporting on such to
the Board of Directors; recommending to the Board of Directors the salaries,
incentive compensation and other remuneration of executive officers; and
reviewing the salaries, compensation and other remuneration of all of the
Company's officers.
The Committee continues to believe 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 is established by his employment agreement dated May
19, 1998 which replaced 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,
business growth and the achievement of other previously established
non-financial criteria, 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 is determined in accordance with the
Company's Key Associate Annual Incentive Compensation Plan (the "Plan"). Under
the Plan, Mr. Kelley's bonus is based upon the Company's achievement of specific
annual earnings targets established by the Committee at the beginning of the
fiscal year. The Committee derives its targets from the planned earnings per
share for the fiscal year established by the Board at or prior to the beginning
of the fiscal year. In fiscal 1999, the Company successfully completed a joint
venture with BrainPlay.com, Inc. which resulted in the formation of KBkids.com
LLC ("KBkids.com"). Notwithstanding the successful formation of KBkids.com, the
venture negatively impacted the Company's earnings in fiscal 1999. As a result,
Mr. Kelley did not receive a bonus under the Plan.
Recognizing that Mr. Kelley would have received a bonus under the Plan
except for the negative impact upon the Company's earnings resulting from the
Company's investment in KBkids.com, and further
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recognizing Mr. Kelley's other contributions throughout fiscal 1999, the
Committee granted Mr. Kelley a discretionary bonus. In determining Mr. Kelley's
bonus, the Committee disregarded the impact on the Company's earnings resulting
from the formation of KBkids.com. Although the Committee's determination was
subjective in nature, the Committee believes Mr. Kelley's efforts in fiscal
1999, including the Company's investment in KBkids.com, 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, 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 fair 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. Typically, Mr. Kelley's stock purchase options are granted at
the beginning of each fiscal year.
NON-CEO SALARY
The salary component for executive officers other than the CEO is initially
based upon industry data for comparable positions at similarly sized companies,
as adjusted to reflect the experience and expertise of the individual. The
Company attempts to limit the comparison market to Columbus, Ohio wherever
possible. However, where the position is unique to companies included in the
Standard & Poor's Retail Stores Index, the company collects industry data
reflective of that group that are of similar size to the Company. Salaries are
reviewed annually and are adjusted to reflect growth in the individual's
performance, the individual's achievement of previously established goals, and
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 Plan. The bonus component for executive officers other
than the CEO consists of a percentage of salary earned as the Company, or the
executive's business group, as the case may be, 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 formation of KBkids.com negatively impacted the
Company's earnings in fiscal 1999. As a result, with the exception of the "Toys"
business group executive officers (whose bonus component is based upon their
business group's earnings rather than the Company's earnings), executive
officers did not receive a bonus under the Plan. Nevertheless, recognizing that
non-Toy group executive officers would have received a bonus under the Plan
except for the negative impact upon the Company's earnings resulting from the
Company's investment in KBkids.com, and further recognizing those officers'
other contributions throughout fiscal 1999, the Committee granted discretionary
bonuses to the non-Toy group executive officers.
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In determining the amount of the discretionary bonuses for the non-Toy
group executive officers, the Committee once again disregarded the negative
impact upon the Company's earnings resulting from the formation of KBkids.com.
Although the Committee's determination was subjective in nature and the non-Toy
group executive officers bonuses were granted notwithstanding the fact the
Company did not meet the relevant performance criteria under the Plan, the
Committee believes the executive officers' efforts in fiscal 1999 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, typically at the beginning of each
fiscal year and in an amount determined by position and performance. Stock
purchase options have an exercise price equal to the fair market value of the
Company's Common Stock at the date each option is granted. In addition, stock
purchase 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. Stock
purchase 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. Because the Committee made a grant of stock purchase options to the
non-CEO executive officers and other members of the Company's management late in
fiscal 1998, no options were granted to the executive officers in fiscal 1999.
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 (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 $1 million may
be deducted if it is "performance-based compensation" within the meaning of the
Code. Although the Company believes it has taken the necessary actions to
preserve the deductibility of payments made under the Company's compensation
plans, nonperformance-based compensation, such as the discretionary bonuses
described above, may not be fully deductible. As the Code or the regulations
promulgated thereunder change, further actions will be taken to the extent
necessary and possible to maintain the deductibility of payments under the
Company's compensation plans.
THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
David T. Kollat, Chairman
Nathan P. Morton
Dennis B. Tishkoff
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SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the individual
compensation paid to the Company's Chief Executive Officer and each of the four
other most highly compensated executive officers for services in all capacities
to the Company for fiscal years 1999, 1998, and 1997.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------------------- --------------------------------
AWARDS PAYOUTS
-------------------- ---------
RESTRICTED LONG-TERM
STOCK STOCK INCENTIVE ALL OTHER
FISCAL SALARY BONUS OTHER AWARDS OPTIONS PAYOUTS COMPENSATION
NAME AND POSITION YEAR ($) ($) ($) ($) (#) ($) ($)(F)(G)
----------------- ------ ---------- ---------- ------------ ---------- ------- --------- ------------
William G. Kelley, Chairman 1999 $982,000 $ 711,950 $103,200(a) -- 81,000(d) -- $21,719
of the Board and 250,000(e)
Chief Executive Officer 1998 935,000 -- 52,374(b) -- 475,000(d) -- 19,116
1997 850,000 1,700,000 --(c) -- -- -- 16,773
Michael L. Glazer, 1999 630,000 1,197,000 --(c) -- -- -- 6,400
Chief Executive Officer, 100,000(e)
K-B Toys 1998 630,000 -- --(c) -- 200,000(d) -- 6,400
1997 600,000 1,200,000 --(c) -- -- -- 6,400
Salvatore Vasta 1999 314,711 315,000 --(c) -- -- -- 6,400
Executive Vice 100,000(e)
President,
Merchandising and 1998 253,846 -- --(c) -- 75,000(d) -- 6,400
Operations, K-B Toys 1997 249,038 121,500 --(c) -- -- -- 6,400
Albert J. Bell, 1999 400,000 217,520 --(c) -- -- -- 10,412
Executive Vice 250,000(e)
President,
General Counsel and 1998 375,000 -- --(c) -- 150,000(d) -- 9,600
Secretary 1997 300,000 360,000 --(c) -- -- -- 8,938
Michael J. Potter, 1999 400,000 217,520 --(c) -- -- -- 9,497
Executive Vice President 250,000(e)
and Chief Financial 1998 375,000 -- --(c) -- 150,000(d) -- 8,832
Officer 1997 300,000 360,000 --(c) -- -- -- 8,289
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(a) Includes $73,905 for use of Company aircraft as approved by the Board of
Directors, $14,129 for use of Company vehicles and $12,814 for executive
medical benefits.
(b) Includes $21,463 for use of Company aircraft as approved by the Board of
Directors, $13,891 for use of Company vehicles and $14,135 for executive
medical benefits.
(c) 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.
(d) Non-qualified options granted pursuant to the 1996 Incentive Performance
Plan and The Executive Stock Option and Stock Appreciation Rights Plan.
(e) Non-qualified options granted pursuant to the KBkids.com LLC 1999 Unit
Option Plan.
(f) Company matching contribution to the Consolidated Stores Corporation Savings
Plan (401K) and/or Consolidated Stores Corporation Supplemental Savings Plan
(Top Hat). The matching contribution was $6,400 for all named individuals in
all years indicated.
(g) Accruals to the Consolidated Stores Corporation Supplemental Defined Benefit
Pension Plan for fiscal 1999 for Messrs. Kelley, Glazer, Vasta, Bell and
Potter were $15,319, $0, $0, $4,012, and $3,097, respectively. Accruals for
fiscal 1998 for Messrs. Kelley, Glazer, Vasta, Bell, and Potter were
$12,716, $0,
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$0, $3,200, and $2,432, respectively. Accruals for fiscal 1997 for Messrs.
Kelley, Glazer, Vasta, Bell, and Potter were $10,373, $0, $0, $2,538, and
$1,889, respectively.
EMPLOYMENT AGREEMENTS. Since 1989, 1995 and 1996, the Company has been a
party to employment agreements with Mr. Kelley, Mr. Glazer and Mr. Vasta,
respectively. In fiscal 1999, the Company entered into new employment agreements
with Messrs. Kelley and Glazer. The terms of all 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 for fiscal 1999
were not payable under the agreements unless the Company achieved a minimum
threshold of its target earnings per share, and in any event Mr. Kelley and Mr.
Glazer's bonuses were subject to a maximum of 200% of their base salary, and Mr.
Vasta's bonus was subject to a maximum of 100% of his base salary. 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 and Mr. Glazer's agreements provide that in the event either is
terminated without cause, such executive 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 such action occurs. Each of the
agreements further provides that in the event either Mr. Kelley or Mr. Glazer's
employment terminates for any reason within two years of a Change of Control,
they will become entitled to receive a lump sum cash payment, net of any
applicable withholding taxes, in an amount equal to two years salary and two
years annual stretch bonus and will be entitled to receive certain plan benefits
for one year. In addition, with respect to Mr. Glazer's agreement, if Mr.
Glazer's employment terminates for any reason within two years of a Change of
Control, all stock options granted pursuant to his 1995 agreement will vest and
become exercisable. Mr. Vasta'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. Vasta 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.
Vasta's stock options granted in connection with his employment agreement will
vest and become exercisable.
A Change of Control of the Company would also cause Messrs. Kelley, Glazer
and Vasta to receive a payment in the amount necessary to hold them 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 1999 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, 2000, for those named individuals.
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OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZED
INDIVIDUAL GRANTS VALUE AT
--------------------------------------------------------- ASSUMED ANNUAL
PCT. OF TOTAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(e)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION -----------------------
NAME GRANTED(#) FISCAL YEAR PER SHARE DATE 5% 10%
---- ---------- ------------- -------------- ---------- ---------- ----------
William G. Kelley 81,000(a) 22.7%(b) $21.875 23-Feb-09 $1,114,323 $2,823,912
250,000(c) 7.1%(d) 2.850 06-Jul-09 448,087 1,135,542
Michael L. Glazer --(a) -- -- -- -- --
100,000(c) 2.8%(d) 2.850 06-Jul-09 179,235 454,217
Salvatore Vasta --(a) -- -- -- -- --
100,000(c) 2.8%(d) 2.850 06-Jul-09 179,235 454,217
Albert J. Bell --(a) -- -- -- -- --
250,000(c) 7.1%(d) 2.850 06-Jul-09 448,087 1,135,542
Michael J. Potter --(a) -- -- -- -- --
250,000 7.1%(d) 2.850 06-Jul-09 448,087 1,135,542
- ---------------
(a) Options granted pursuant to the 1996 Incentive Performance Plan. Vesting is
one to five years based on attainment of certain performance goals for the
1999 fiscal year as established by the Compensation Committee. All options
attributable to the attainment of fiscal 1999 performance goals vest at the
end of the five year period.
(b) Based on 357,500 non-qualified options granted to all associates in fiscal
1999 pursuant to the 1996 Performance Incentive Plan.
(c) Options granted pursuant to the KBkids.com LLC 1999 Unit Option Plan. In
general vesting for Messrs. Kelley, Potter and Bell is monthly over a three
year period and Messrs. Glazer and Vasta is monthly over a four year period.
These options will be replaced with options to purchase common stock of
KBkids.com Inc. at the same exercise price concurrently with completion of a
public offering of common stock of KBkids.com Inc.
(d) Based on 3,512,207 non-qualified options granted to all associates in fiscal
1999 pursuant to the KBkids.com LLC Unit Option Plan.
(e) 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 securities at a future date.
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AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
UNEXERCISED OPTIONS AT JANUARY 29, 2000
---------------------------------------------------------
NUMBER OF VALUE OF IN-THE-MONEY
SHARES NUMBER OF OPTIONS OPTIONS(C)
OPTION ACQUIRED ON VALUE --------------------------- ---------------------------
NAME TYPE(A) EXERCISE REALIZED(B) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------- ----------- ----------- ----------- ------------- ----------- -------------
William G. Kelley CNS 664,061 $10,301,542 3,286,176 651,000 $20,326,664 $ 67,188
KBkids.com LLC -- -- 41,666 208,334 -- --
Michael L. Glazer CNS 70,500 1,148,222 454,502 381,875 611,582 230,078
KBkids.com LLC -- -- 12,500 87,500 -- --
Salvatore Vasta CNS -- -- 40,000 91,250 -- --
KBkids.com LLC -- -- 12,500 87,500 -- --
Albert J. Bell CNS -- -- 158,126 188,750 172,611 33,594
KBkids.com LLC -- -- 41,666 208,334 -- --
Michael J. Potter CNS 32,189 245,519 148,751 190,937 144,533 41,194
KBkids.com LLC -- -- 41,666 208,334 -- --
- ---------------
(a) Options to acquire common stock of Consolidated Stores Corporation are
designated as CNS and to acquire units of KBkids.com LLC are designated as
KBkids.com LLC.
(b) Difference of the sales price on the dates of exercise and the option
exercise price.
(c) The value of In-the-Money unexercised options is based on the fair market
value of Consolidated Stores Corporation Common Stock ($13.875) at January
29, 2000, minus the aggregate exercise prices. KBkids LLC is not publicly
traded. Accordingly, the value of In-the-Money unexercised options is based
on an estimated fair market value ($2.85) at January 29, 2000, minus the
aggregate exercise prices. The actual amount, if any, realized upon exercise
will depend upon the market price of the securities at the time of exercise.
There is no assurance that the value of unexercised In-the-Money options
will be as shown above.
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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 Composite Index.
COMPARISON OF FIVE YEAR TOTAL STOCKHOLDER RETURN (a)
CONSOLIDATED STORES
CORPORATION S&P RETAIL STORES S&P 500
------------------- ----------------- -------
1994 100.00 100.00 100.00
1995 108.11 107.83 138.67
1996 222.13 128.71 175.19
1997 347.34 190.86 222.33
1998 140.95 312.85 294.57
1999 117.19 361.51 333.82
(a) Assumes $100 invested on January 31, 1995 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.
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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 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, as 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
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of the Code. The Committee may grant stock appreciation rights to any eligible
employee on such terms as the Committee may determine.
The Committee may grant shares of restricted stock, stock equivalent units,
and performance units, subject to such conditions and restrictions as the 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.
1999 KBKIDS.COM LLC OPTION PLAN. The 1999 KBkids.com LLC Option Plan is
administered by the Board of Managers of KBkids.com LLC. The Board of Managers
determines the individuals to whom awards are made, the number of units, if any,
to be covered by each award, the term of the award, its vesting, exercise
period, and all other terms and conditions of the awards. The purpose of the
1999 KBkids.com LLC Option Plan is to provide a flexible, long-term vehicle to
attract, retain and motivate directors, officers and employees of KBkids.com
LLC.
The 1999 KBkids.com LLC Option Plan authorizes the grant of options to
acquire Class C Units of KBkids.com LLC. The number of units available for
delivery under the 1999 KBkids.com LLC Option Plan is 6,000,000. Awards under
the 1999 KBkids.com LLC Option Plan may be made to such participants as the
Board of Managers shall determine. Last year, options to acquire units were
granted to approximately 167 directors, officers, employees and consultants of
the company or its affiliates.
No award under the 1999 KBkids.com LLC Option 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 Board of Managers. In absence
of the first two exceptions, all rights may be exercised during the grantee's
lifetime only by the grantee.
The 1999 KBkids.com LLC Option Plan terminates on July 6, 2009, and awards
will not be granted after that date, although the terms of any award may be
amended in accordance with the 1999 KBkids.com LLC Option Plan at any date prior
to the end of the term of such award. Any awards outstanding at the time of
termination of the 1999 KBkids.com LLC Option Plan continue in full force and
effect according to the terms and conditions of the award and the 1999
KBkids.com LLC Option Plan.
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.
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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 benefits payable at age 65
to a person in the specified average compensation and years of service
classifications under the Pension Plan combined with 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
$156,000 and above $15,600 $23,400 $31,200 $39,000
The maximum annual benefit payable under the Pension Plan is restricted by
the Internal Revenue Code. At January 1, 2000, the maximum final five year
average compensation is $156,000. At January 1, 2000, Mr. Kelley had 9 years of
credited service, Messer. Glazer and Vasta had none, Mr. Bell had 12 years and
Mr. Potter had 8 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
$156,000 and above $15,600 $23,400 $31,200 $39,000
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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 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 $40,000
per participant. Amounts received by participants are treated as taxable income.
Amounts received exceeding the applicable threshold by the 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 103 persons). The agreements were updated and
reissued during fiscal 1999. 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
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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). Notwithstanding these provisions, the
agreements provide that a Change in Control shall not result from a transaction
in which the Company exchanges less than 50% of its then outstanding equity
securities for 51% or more of the outstanding equity securities of another
corporation. 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 and two times the employee's
then current stretch bonus; 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 and stretch bonus. Messrs. Kelley, Glazer
and Vasta are not a party to such an agreement, but each have substantially
similar provisions contained in his respective employment agreement. In
addition, the 1996 Performance Incentive Plan provides 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.
PROPOSAL TWO: SHAREHOLDER PROPOSAL ON THE COMPANY'S RIGHTS AGREEMENT
The Amalgamated Bank of New York LongView Collective Investment Fund
("LongView"), located at 11-15 Union Square, New York, New York 10003, has
notified the Company that it intends to present the resolution set forth below
to the Annual Meeting for action by the stockholders. LongView's statement in
support of such resolution, along with management's statement in opposition, is
also set forth below. LongView beneficially owns 34,119 shares of the Company's
Common Stock. Proxies solicited on behalf of the Board will be voted AGAINST
this proposal unless shareholders specify a contrary choice in their proxies.
SHAREHOLDER PROPOSAL
RESOLVED: That the shareholders of Consolidated Stores Corporation
("Consolidated Stores" or the "Company") request the Board of Directors to
redeem the shareholder rights previously issued unless such issuance is approved
by the affirmative vote of shareholders, to be held as soon as may be
practicable.
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SUPPORTING STATEMENT
In 1990 the board of directors issued certain shareholder rights pursuant
to a "rights agreement" of the type commonly known as a "poison pill." In taking
this action, the board acted unilaterally and without seeking or obtaining prior
approval from the shareholders.
We view this rights agreement as a type of anti-takeover device, which can
injure shareholders by reducing management accountability and adversely
affecting shareholder value. We believe that these rights are designed to
discourage or thwart an unwanted takeover of the Company and that they can
operate in that manner. Although management and the board of directors should
have appropriate tools to ensure that all shareholders benefit from any proposal
to acquire the Company, we do not believe that the future possibility of a
takeover justifies the unilateral imposition of such a poison pill. At a
minimum, we believe that shareholders should have the right to vote on the
necessity of such a powerful tool, which can operate to entrench existing
management.
The negative effects of poison pill rights plans on the trading value of
companies' stock have been extensively studied. Indeed, a 1992 study by
Professor John Pound of Harvard's Corporate Research Project and Lilli A. Gordon
of the Gordon Group found a correlation between high corporate performance and
the absence of poison pills.
We also believe that a shareholder vote on this topic is important in light
of the Company's poor performance in recent years. Consolidated Stores' stock
has lost over 60% of its value since it peaked in November 1997. Over the past
five years, the stock has also underperformed all but one of the six companies
in the S&P 500 peer group of general merchandise store retailers.
In recent years, various companies have been willing to redeem outstanding
rights or terminate the plans under which they were issued. We believe that
Consolidated Stores should follow suit or at least put to a vote of the
shareholders the question of whether a rights agreement should remain in force.
WE URGE YOU TO VOTE FOR THIS RESOLUTION!
RESPONSE OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING
REASONS:
On February 23, 1999, the Board granted one right to purchase one
one-thousandth of a share of Series B Junior Participating Preferred Stock for
each one outstanding share of the Company's common stock (a "Right"), as set
forth in the Rights Agreement dated as of April 6, 1999 (the "Rights
Agreement"). The Board determined it was in the best interests of the Company
and its stockholders to extend the benefits afforded by the 1989 Stockholder
Rights Plan which, pursuant to its terms, expired on April 18, 1999. The purpose
of the Rights Agreement is to provide the Board with the ability to take steps
to protect and maximize the value of stockholders' investment in the Company in
the event an unsolicited attempt is made to acquire the Company.
The adoption of the Rights Agreement by action of the Board is in accord
with the Board's responsibility under Delaware law to manage and direct the
management of the Company's business and affairs and, as a legal matter, does
not require stockholder approval. The Rights Agreement is designed to encourage
any potential acquiror of the Company to negotiate directly with the Board,
which the Company believes is in the best position to negotiate on behalf of all
stockholders. The Rights do not affect any takeover proposal which
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the Board may determine, in the exercise of its fiduciary duties, adequately
reflects the value of the Company and is in the best interests of the Company's
stockholders, because under the terms of the Rights Agreement, the Board has the
power to redeem the Rights to permit such an acquisition. In fact, the Board
believes that the only proper time to consider redemption of the Rights or
rescission of the Rights Agreement is when a specific offer is made to acquire
the Common Stock of the Company.
The Rights Agreement and Rights were put in place to enhance the
negotiating position of the Board to avoid abusive conduct and are designed to
protect stockholders against practices which do not treat all stockholders
fairly and equally. Examples of unsolicited takeover attempts include, among
others, a gradual accumulation of shares in the open market, a partial or
two-tier tender offer that does not treat all stockholders equally or a
squeeze-out merger that squeezes out certain stockholders. The Board believes
that the redemption of the Rights or rescission of the Rights Agreement at this
time would remove any incentive for a potential acquiror to negotiate with the
Board and eliminate a tool designed to ensure that all stockholders are treated
fairly and equally.
The benefits of a Rights Agreement have been validated in a November, 1997
study prepared by Georgeson & Company, Inc., a leading solicitation firm. In
relevant part, the Georgeson study (available on the Internet at
www.Georgeson.com) concluded:
- - Premiums paid to acquire companies with shareholders rights agreements were on
average 8% higher than companies without such agreements;
- - Shareholder rights agreements contributed an additional $13 billion in
shareholder value in the aggregate from 1992 to 1996, and shareholders of
acquired companies without shareholder rights agreements gave up $14.5 billion
in potential premiums;
- - The presence of a shareholder rights agreement did not increase the likelihood
of the withdrawal of a friendly bid nor the defeat of a hostile bid; and
- - Shareholder rights agreements did not reduce the likelihood of a company
becoming a takeover target.
Shareholder rights agreements have become very common for public companies.
Many companies with rights agreements have received unsolicited offers and have
redeemed their rights after their directors were satisfied that the offer, as
negotiated by the company's board of directors, adequately reflected the
underlying value of the company and was fair and equitable to all stockholders.
Your Board believes that the Rights Agreement serves the best interests of the
Company and its stockholders. For the reasons discussed above, the Board
strongly believes that the Company should retain this important tool for the
protection of all stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE AGAINST THE
PROPOSAL. PROXIES SOLICITED BY THE BOARD WILL BE SO VOTED UNLESS A STOCKHOLDER
SPECIFIES A CONTRARY CHOICE IN HIS OR HER PROXY.
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APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Deloitte & Touche LLP to be the
independent auditors of the Company and its subsidiaries for the fiscal year
ending February 3, 2001. Deloitte & Touche LLP acted as the Company's
independent auditors for fiscal years ended January 29, 2000, and January 30,
1999. 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
If a stockholder notifies the Company after March 14, 2001 of an intent to
present a proposal at the Company's 2000 Annual Meeting, the Company will have
the right to exercise its discretionary voting authority with respect to such
proposal, if presented at the meeting, without including information regarding
such proposal in its proxy materials. Any stockholder who intends to present a
proposal at the 2001 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 30, 2000.
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. To the Company's knowledge, all Section 16(a) filing requirements
applicable to its officers, directors and greater than 10 percent beneficial
owners during fiscal 1999 have been complied with.
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, against Proposal
Two, and to approve Proposal Three.
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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 28, 2000
Albert J. Bell,
Executive Vice President,
General Counsel and Secretary
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CONSOLIDATED STORES CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE MAY 16, 2000 ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints William G. Kelley, Albert J. Bell and
Michael J. Potter, 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 16, 2000, 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:
The Board of Directors recommends a vote FOR the nominees named below.
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.)
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(Continued, and to be dated and signed, on the other side)
(Continued from the other side)
The Board of Directors recommends a vote AGAINST the proposal.
FOR AGAINST ABSTAIN
2. Shareholder Proposal seeking the termination of the [ ] [ ] [ ]
Company's Rights Agreement or stockholder action thereon.
The Board of Directors recommends a vote FOR the proposal.
3. In their discretion, to vote upon such other business as [ ] [ ] [ ]
may properly come before the meeting.
Date: , 2000
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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.
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