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 (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
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2)
[ ] Soliciting Material Under
Rule 14a-12
99(CENT) ONLY STORES
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(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 transactions 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:
- --------------------------------------------------------------------------------
(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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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Page 1
99(CENT) ONLY STORES
-----------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
-----------------------------------------------------
TIME........................ 10:00 a.m. on Thursday, May 11, 2000
PLACE....................... 4000 Union Pacific Avenue
City of Commerce, California 90023
ITEMS OF BUSINESS........... (1) To elect a Board of eight Directors to
hold office until the next Annual
Meeting of Shareholders and until his
or her successor is elected.
(2) To approve an amendment to the Company's
Amended and Restated Articles of
Incorporation ("Articles of Incorporation")
to increase the authorized number of shares
of Common Stock from 40,000,000 shares to
100,000,000 shares.
(3) To consider and act upon a shareholder
proposal.
(4) To transact such other business as may
properly come before the Annual Meeting and
any adjournments or postponements thereof.
RECORD DATE................. You can vote if at the close of business on
March 27, 2000 you were a shareholder of record.
PROXY VOTING................ ALL SHAREHOLDERS ARE CORDIALLY INVITED TO
ATTEND THE ANNUAL MEETING IN PERSON. HOWEVER,
TO ENSURE YOUR REPRESENTATION AT THE ANNUAL
MEETING, YOU ARE URGED TO COMPLETE AND RETURN
THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE.
IF YOU RECEIVE MORE THAN ONE PROXY CARD BECAUSE
YOU OWN SHARES REGISTERED IN DIFFERENT NAMES OR
AT DIFFERENT ADDRESSES, EACH CARD SHOULD BE
COMPLETED AND RETURNED.
/S/ ERICK SCHIFFER
April 12, 2000 Eric Schiffer
ASSISTANT CORPORATE SECRETARY
Page 2
99(CENT) ONLY STORES
4000 UNION PACIFIC AVENUE
CITY OF COMMERCE, CALIFORNIA 90023
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of 99(cent) Only Stores, a California corporation
("99(cent) Only Stores," the "Company," "we," or "us"), of proxies to be voted
at our 2000 annual meeting of shareholders and at any adjournments or
postponements thereof.
You are invited to attend our annual meeting of shareholders on Thursday,
May 11, 2000, beginning at 10:00 a.m. Pacific Standard Time (the "Annual
Meeting"). The meeting will be held at the Company's offices at 4000 Union
Pacific Avenue, City of Commerce, California 90023.
SHAREHOLDERS ENTITLED TO VOTE. The close of business on March 27, 2000, has been
fixed as the record date for the determination of shareholders entitled to
notice of and to vote at the Annual Meeting and any postponements or
adjournments thereof. At the record date, 33,469,586 shares of the Company's
common stock, no par value (the "Common Stock"), were outstanding. The Common
Stock is the only outstanding class of securities entitled to vote at the Annual
Meeting. At the record date, the Company had approximately 10,924 shareholders,
which includes 489 shareholders of record.
PROXIES. Your vote is important. If your shares are registered in your name, you
are a share owner of record. If your shares are in the name of your broker or
bank, your shares are held in street name. We encourage you to vote by proxy so
that your shares will be represented and voted at the meeting even if you cannot
attend. All share owners can vote by written proxy card. Your submitting the
enclosed Proxy will not limit your right to vote at the annual meeting if you
later decide to attend in person. If your shares are held in street name, you
must obtain a Proxy, executed in your favor, from the holder of record to be
able to vote at the meeting. If you are a record holder, you may revoke your
Proxy at any time before the meeting either by filing with the Secretary of the
Company, at its principal executive offices, a written notice of revocation or a
duly executed Proxy bearing a later date, or by attending the annual meeting and
expressing a desire to vote your shares in person. If no instruction is
specified on the enclosed Proxy with respect to a matter to be acted upon, the
shares represented by the Proxy will be voted (i) in favor of the election of
the nominees for director set forth herein, (ii) in favor of the amendment to
the Company's Articles of Incorporation, (iii) against the shareholder proposal,
and (iv) if any other business is properly presented at the Annual Meeting, in
accordance with the recommendations of the Board of Directors. It is anticipated
that this Proxy Statement and the accompanying Proxy will be mailed to
shareholders on or about April 12, 2000.
QUORUM. The presence, in person or by proxy, of a majority of the votes entitled
to be cast by the shareholders entitled to vote at the annual meeting is
necessary to constitute a quorum. Abstentions and broker non-votes will be
included in the number of shares present at the Annual Meeting for determining
the presence of a quorum.
VOTING. A shareholder is entitled to cast one vote for each share held of record
on the record date on all matters to be considered at the Annual Meeting.
Abstentions will be counted toward the tabulation of votes cast on proposals
submitted to shareholders and will have the same effect as negative votes, while
broker non-votes will not be counted as votes cast for or against such matters.
ELECTION OF DIRECTORS. The election of the directors will require the
affirmative vote of a plurality of the shares of Common Stock present and voting
at the Annual Meeting.
INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK. The approval of the
amendment to the Company's Articles of Incorporation will require the
affirmative vote of 66 2/3% of the issued and outstanding shares of Common
Stock.
SHAREHOLDER PROPOSAL. Approval of the shareholder proposal will require the
affirmative vote of a majority of the shares of Common Stock present and voting
at the Annual Meeting.
OTHER MATTERS. All other matters that may properly come before the meeting
require for approval the favorable vote of a majority of shares voting at the
meeting in person or by proxy. At the date this proxy statement went to press,
we do not know of any other matter to be raised at the annual meeting.
Page 2
ITEM 1: ELECTION OF DIRECTORS
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In accordance with the Bylaws of the Company, 99(cent) Only Stores'
directors are elected at each Annual Meeting and hold office until the next
Annual Meeting and until their successors are elected and qualified. The Bylaws
of the Company provide that the Board of Directors shall consist of no less than
seven and no more than eleven directors as determined from time to time by the
Board of Directors. The Board of Directors currently consists of eight
directors.
Unless otherwise instructed, the Proxy holders will vote the Proxies
received by them for the nominees named below. If any nominee is unable or
unwilling to serve as a director at the time of the Annual Meeting or any
adjournments thereof, the Proxies will be voted for such other nominee(s) as
shall be designated by the current Board of Directors to fill any vacancy. The
Company has no reason to believe that any nominee will be unable or unwilling to
serve if elected as a director.
The Board of Directors proposes the election of the following nominees as
directors:
William Christy
Lawrence Glascott
David Gold
Howard Gold
Jeff Gold
Marvin Holen
Eric Schiffer
Ben Schwartz
If elected, each nominee is expected to serve until the 2001 Annual Meeting
of Shareholders and thereafter until his or her successor is duly elected and
qualified. The eight nominees for election as directors at the Annual Meeting
who receive the highest number of affirmative votes will be elected.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
THE ELECTION OF THE NOMINEES LISTED ABOVE.
Page 3
INFORMATION WITH RESPECT TO NOMINEES AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
nominees and executive officers of the Company as of March 31, 2000:
YEAR FIRST
AGE AT ELECTED OR
MARCH 31, APPOINTED
NAME: 2000 DIRECTOR PRINCIPAL OCCUPATION
---- ---- -------- --------------------
NOMINEES:
David Gold 67 1965 DAVID GOLD has been Chairman of the Board and Chief Executive
Officer of the Company since the founding of the Company in 1965.
Mr. Gold has over 45 years of retail experience.
Howard Gold 40 1991 HOWARD GOLD has been a director of the Company since 1991.
He joined the Company in 1982 and has served in various
managerial capacities. He currently serves as Senior Vice
President of Distribution. Mr. Gold received his B.S. degree
from the University of California at Los Angeles in 1984.
Eric Schiffer 39 1991 ERIC SCHIFFER has been a director of the Company since
1991. He joined the Company in 1992 and served in
various managerial capacities, most recently as Senior
Vice President. In March, 2000, he was promoted to
President. Prior to joining the Company, from 1987 to
1992, he was employed by Oxford Partners, a venture
capital firm. Mr. Schiffer received his B.S.E. degree
from Duke University in 1983 and his M.B.A. from
Harvard Business School in 1987.
Jeff Gold 32 1991 JEFF GOLD has been a director of the Company since
1991. He joined the Company in 1984 and has served in
various managerial capacities. He currently serves as
Senior Vice President of Real Estate and Information
Systems. Mr. Gold received his B.A. degree from the
University of California at Berkeley in 1989.
William O. Christy 68 1992 WILLIAM O. CHRISTY has been a director of the Company
since 1992. He was President and Chief Executive
Officer of Certified Grocers of California from 1977
until his retirement in 1990. He has served on numerous
trade association boards including the executive
committee of the National Grocers Association Board and
Chairman of the Merchant and Manufacturer Association
Board.
Marvin Holen 70 1991 MARVIN HOLEN has been a director of the Company since
1991. He is an attorney and in 1960 founded the law
firm of Van Petten & Holen. He served on the Board of
the Southern California Rapid Transit District from
1976 to 1993 (six of those years as the Board's
President). He served on the Board of Trustees of
California Blue Shield from 1972 to 1978, on the Board
of United California Savings Bank from 1992 to 1994 and
on several other corporate, financial institution and
philanthropic boards of directors.
Page 4
Ben Schwartz 82 1993 BEN SCHWARTZ has been a director of the Company since
1993. He was Chairman of Foods Company Markets, a
supermarket chain, from 1980 until it was acquired in
1987 by Boys Markets. Prior thereto, he served for many
years as its president. He served on the Board of
Directors of Certified Grocers of California including
four years as Chairman. Additionally, Mr. Schwartz sits
on a number of industry trade boards, including the
Food Marketing Institute.
Lawrence Glascott 65 1996 LAWRENCE GLASCOTT has been a director of the Company
since October 1996. From 1991 to 1996 he was the Vice
President - Finance of Waste Management International,
an environmental services company. Prior thereto, Mr.
Glascott was a partner at Arthur Andersen LLP and was
the Arthur Andersen LLP partner in charge of the
99(cent) Only Stores account for six years.
Additionally, Mr. Glascott was in charge of the Los
Angeles based Arthur Andersen LLP Enterprise Group
practice for over 15 years.
OTHER EXECUTIVE OFFICERS:
Helen Pipkin 57 HELEN PIPKIN joined the Company in 1991 and serves as
Senior Vice President of Wholesale Operations. Prior to
joining the Company, from 1985 through 1991, Ms. Pipkin
served as Controller and Manager of Wholesale and
Import Operations of Cobra Associated International, a
wholesaler of variety merchandise. Prior to 1985, for
many years, Ms. Pipkin was an owner, Vice President and
Controller of Markell Imports, a general merchandise
wholesaler.
Andy Farina 53 Andy Farina joined the Company in September 1996 and
serves as Chief Financial Officer. Prior to joining the
Company, from April 1993 through August 1996, Mr.
Farina was Vice President of Finance of Crown BBK,
Inc., a food brokerage business. Mr. Farina was
employed by a division of Sara Lee from 1976 through
1988, ultimately in the capacity of President. Mr.
Farina began his career with Arthur Andersen LLP.
Jose Gomez 40 JOSE GOMEZ joined the Company in 1980 and has served in
many different managerial capacities, most recently as
Vice President of Retail Operations. He has over 20
years of retail experience.
David Gold is the father of Howard Gold and Jeff Gold and the
father-in-law of Eric Schiffer.
Page 5
FURTHER INFORMATION CONCERNING THE BOARD OF DIRECTORS
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BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of 16 meetings, including committee
meetings, during the fiscal year ended December 31, 1999. The Board of Directors
has an Audit Committee and a Compensation Committee. During the fiscal year
ended December 31, 1999, each director during the term of his tenure, attended
all meetings of the Board of Directors held. Each director also attended all
meetings of the committees of the Board of Directors on which he served.
The Audit Committee met three times and the Compensation Committee met
three times during the fiscal year ended December 31, 1999. The Audit
Committee's functions include recommending to the Board of Directors the
engagement of the Company's independent accountants, discussing the scope and
results of the audit with the accountants, discussing the Company's financial
accounting and reporting principles and the adequacy of the internal audits with
management and reviewing and evaluating the Company's accounting policies and
internal accounting controls. The Compensation Committee reviews and approves
the compensation of officers and key employees, including the granting of awards
under the Company's stock option plan. The members of the Audit Committee are
Messrs. Christy, Schwartz and Glascott and the members of the Compensation
Committee are Messrs. Christy, Holen and Glascott. The Company does not have a
standing nominating committee.
COMPENSATION OF DIRECTORS
Each director who is not an officer of or otherwise employed by the Company
(an "Outside Director") receives an automatic annual grant on May 1 of a
non-qualified option to purchase 4,000 shares of Common Stock with a per share
exercise price equal to the fair market value of a share of the Company's Common
Stock on the date of grant. In addition, each Outside Director receives $1,500
per month, plus $500 for each board meeting attended plus $150 for each
committee meeting attended on a day when no board meeting is held, or $250 for
each committee meeting attended as committee chairperson.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company has no interlocking relationships involving any of the members
of its Compensation Committee which would be required by the Securities and
Exchange Commission (the "Commission") to be reported in this Proxy Statement,
and no officer or employee of the Company serves on its Compensation Committee.
ITEM 2: PROPOSAL TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
- -------------------------------------------------------------------------------
The Board of Directors has adopted, subject to shareholder approval, an
amendment to the first paragraph of Article III of the Company's Amended and
Restated Articles of Incorporation (the "Amendment") to increase the Company's
authorized number of shares of Common Stock from 40,000,000 shares to
100,000,000 shares. The text of the first paragraph of Article III of the
Articles of Incorporation, as it is proposed to be amended, is as follows:
"This Corporation is authorized to issue two classes of shares,
designated "Common Stock," and "Preferred Stock." The total number of
shares which this Corporation is authorized to issue is 101,000,000.
The number of shares of Preferred Stock which this Corporation is
authorized to issue is 1,000,000. The number of shares of Common Stock
which this Corporation is authorized to issue is 100,000,000."
Please see Appendix A for a copy of the Certificate of Amendment of Amended
and Restated Articles of Incorporation as it has been proposed.
PRINCIPAL EFFECTS OF THE AMENDMENT
The additional Common Stock to be authorized by adoption of the Amendment
would have rights identical to the currently outstanding Common Stock of the
Page 6
Company. Adoption of the proposed Amendment and issuance of the Common Stock
would not affect the rights of the holders of currently outstanding Common Stock
of the Company, except for effects incidental to increasing the number of shares
of the Company's Common Stock outstanding, such as dilution of the earnings per
share and voting rights of current holders of Common Stock. If the Amendment is
adopted, it will become effective upon filing of a Certificate of Amendment of
the Company's Articles of Incorporation with the Secretary of State of
California.
As of March 27, 2000, of the 40,000,000 shares of Common Stock presently
authorized: 33,469,586 shares were issued and outstanding. After taking into
account shares reserved for issuance pursuant to the Company's 1996 Stock Option
Plan, 1,442,809 shares were available for issuance.
REASONS FOR THE AMENDMENT
The Company declared a stock dividend on January 19, 2000, whereby
8,376,765 shares of Common Stock were issued to shareholders. The stock dividend
reduced the number of unissued and unreserved shares to 2,442,809 shares. The
Company needs to increase the number of authorized shares of Common Stock to
provide flexibility for business and financial purposes in the future. The
additional shares may be used, without further shareholder approval, for various
purposes including, without limitation, expanding the Company's business through
the acquisition of other businesses, future stock dividends, raising capital,
issuing stock options to officers, directors or employees and establishing
strategic relationships with other companies. The size of the proposed increase
will give the Company's Board of Directors the broad latitude to authorize the
issuance of additional capital stock without further shareholder approval.
The additional shares of Common Stock that would become available for
issuance if the proposal were adopted could also be used by the Company to
oppose a hostile takeover attempt or delay or prevent changes in control or
management of the Company. Although this proposal to increase the authorized
Common Stock has been prompted by business and financial considerations and not
by the threat of any hostile takeover attempt (nor is the Board of Directors
currently aware of any such attempts directed at the Company), nevertheless,
shareholders should be aware that approval of the proposal could facilitate
future efforts by the Company to deter or prevent changes in control of the
Company, including transactions in which the shareholders might otherwise
receive a premium for their shares over then current market prices.
The Company does not contemplate seeking shareholder approval for any
future issuance of capital stock unless required to do so by an obligation
imposed by applicable law, a regulatory authority or a third party. Under the
Company's currently effective Amended and Restated Articles of Incorporation, no
shareholder is entitled to preemptive rights with respect to any future
issuances of capital stock. The Board of Directors believe the proposed increase
in the authorized Common Stock will make a sufficient number of shares available
should the Company decide to use its shares for one or more of the previously
mentioned purposes or otherwise. The Company reserves the right to seek a
further increase in authorized shares from time to time in the future as
considered appropriate by the Board of Directors.
REQUIRED VOTE
The approval of the Amendment requires the affirmative vote of 662/3% of
the outstanding shares of Common Stock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
THE APPROVAL OF THE AMENDMENT TO THE ARTICLES OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
ITEM 3: SHAREHOLDER PROPOSAL
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Aaron Merle Epstein, 13455 Ventura Boulevard #209, Sherman Oaks, California
91423-6122, owning 113 shares of Common Stock of the Company, has notified the
Company of his intent to introduce the following proposal at the annual meeting.
"Whereas: Consumers and shareholders continue to be seriously concerned about
whether low wages and abusive working conditions exist in facilities where the
products they buy are produced or assembled. U.S. based companies are importing
more goods from countries where working conditions fall far below basic
standards of fair and humane treatment. Our company purchases goods produced in
countries like China where human rights abuses and unfair labor practices have
been well documented. (U.S. State Department's "China Country Report on Human
Rights Practices--1998" ). A growing number of students have called on their
Page 7
universities to adopt codes of conduct to make sure clothing sold in university
stores is made under humane conditions. Students have pressed for a living wage,
upholding the rights of women in the workplace, public disclosure of conditions
in factories and transparency in reporting, and verification of compliance by
organizations that are independent of companies. ("Sweatshop Reform", Business
Week, 5/3/99). Our company should take effective action to ensure it does not
and will not do business with suppliers who manufacture items for sale using
forced labor, convict labor, or illegal child labor, or who fail to satisfy all
applicable standards and laws protecting their employees' wages, benefits,
working conditions, freedom of association and other rights. We believe our
company needs to support the rights of workers to organize and bargain
collectively any place they operate. Our company should demonstrate enforcement
of its code by developing independent monitoring programs with local, respected
religious, human rights and labor rights groups to ensure compliance with its
vendor standards and assure consumers that products are not made under abusive
labor conditions. Reports that overseas suppliers are exploiting workers may
damage our company's reputation and generate a consumer backlash. In an effort
to improve the quality of life of workers who make its products, our company
should implement ongoing wage adjustments, ensuring that workers have adequate
purchasing power and a sustainable living wage. Wage adjustments would add
little to overall production costs while contributing to productivity. In
addition, our company, rather than terminating contracts, needs to establish
incentives to encourage its suppliers and vendors to raise labor standards.
Resolved: Shareholders request the Board of Directors to prepare a report at
reasonable expense on its Vendor Standards and compliance mechanisms for its
vendors, subcontractors and buying agents in the countries where it sources. A
summary of the results should be reported to shareholders by October, 2000.
Supporting statement to be effective, enforcement of company codes must be
carefully monitored. The Gap, Inc. has participated in an independent monitoring
process in El Salvador with respected religious and human rights and labor
institutions for past four years. Other companies have begun to develop
independent monitoring programs in conjunction with local non-governmental
organizations. Through the use of independent monitoring, consumers and
investors can have greater confidence that the company's code of vendor conduct
is enforced, protecting the company from negative publicity associated with the
discovery of sweatshop practices."
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE AGAINST THIS
PROPOSAL FOR THE FOLLOWING REASONS:
The Company recognizes its responsibility to engage in business with
ethical and responsible vendors and will continue to do so. The Company also
believes that greater progress will be made in the improvement of international
human rights through a combination of cooperative efforts to improve living
standards, awareness, education and monitoring. In this respect, the Company
believes its activities are substantially consistent with the objectives of good
business practice and that the Company has performed responsibly. The Board of
Directors believes that the proposed report is not warranted.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THIS
PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED AGAINST THIS
PROPOSAL UNLESS OTHERWISE SPECIFIED BY THE SHAREHOLDER IN THE PROXY.
Page 8
EXECUTIVE COMPENSATION
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SUMMARY COMPENSATION TABLE
The following table sets forth, as to the Chief Executive Officer and as to
each of the other four most highly compensated officers whose compensation
exceeded $100,000 during the last fiscal year (the "Named Executive Officers"),
information concerning all compensation paid for services to the Company in all
capacities during the last three fiscal years or accrued within the current
fiscal year.
LONG-TERM
COMPENSATION
NUMBER OF
FISCAL YEAR ANNUAL COMPENSATION SECURITIES
ENDED ------------------- UNDERLYING
NAME AND PRINCIPAL POSITION DECEMBER 31, SALARY BONUS OPTIONS
- --------------------------- ------------ ------ ----- -------
David Gold...................... 1999 $175,000 - -
Chairman of the Board and 1998 175,000 - -
Chief Executive Officer 1997 175,000 - -
Andrew Farina .................. 1999 $128,000 $15,000 20,000
Chief Financial Officer 1998 120,000 12,000 25,000
1997 109,000 4,000 18,751
Jose Gomez...................... 1999 $159,600 $25,000 20,000
Vice President of 1998 131,000 25,000 25,000
Retail Operations 1997 131,000 25,000 31,251
Helen Pipkin.................... 1999 $145,800 $20,000 20,000
Senior Vice President of 1998 135,200 25,000 25,000
Wholesale Operations 1997 135,200 25,000 31,251
Eric Schiffer .................. 1999 $120,000 - -
President 1998 120,000 -
1997 120,000 - 18,751
Page 9
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding the grant of
stock options made during the fiscal year ended December 31, 1999 to the Named
Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL
REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL
SECURITIES TOTAL OPTIONS RATES OF STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR
OPTION EMPLOYEES IN EXERCISE OR EXPIRATION OPTION TERM(A)
NAME GRANTED(B) FISCAL YEAR(C) BASE PRICE DATE 5% 10%
---- ---------- -------------- ---------- ---- -- ---
David Gold.................. - - - - - -
Jose Gomez.................. 20,000 0.2% $ 35.25 5/09/09 $ 443,371 $1,123,588
Helen Pipkin................ 20,000 0.2% 35.25 5/09/09 443,371 1,123,588
Andrew Farina............... 20,000 0.2% 35.25 5/09/09 443,371 1,123,588
Eric Schiffer............... - - - - - -
- ------------------------
<FN>
(a) The potential realizable value is based on the assumption that the Common
Stock appreciates at the annual rate shown (compounded annually) from the
date of grant until the expiration of the option term. These amounts are
calculated pursuant to applicable requirements of the Commission and do not
represent a forecast of the future appreciation of the Common Stock.
(b) The option grants set forth on this chart vest in three equal annual
installments beginning on May 9, 2000.
(c) Options covering an aggregate of 985,444 shares were granted to eligible
persons during the fiscal year ended December 31, 1999.
</FN>
STOCK OPTIONS HELD AT FISCAL YEAR END
The following table sets forth, for each of the Named Executive Officers,
certain information regarding the number of shares of Common Stock underlying
stock options held at fiscal year end and the value of options held at fiscal
year end based upon the last reported sales price of the Common Stock on the New
York Stock Exchange on December 31, 1999 ($28.69 per share).
AGGREGATED OPTIONS EXERCISED IN THE LAST FISCAL YEAR AND YEAR-END VALUES
NUMBER OF SECURITIES NUMBER OF SECURITIES
UNDERLYING EXERCISED UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1999 DECEMBER 31, 1999 AT DECEMBER 31, 1999(A)
------------------------ --------------------------- -----------------------------
NAME SHARES VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------ -------------- ----------- ------------- ----------- -------------
David Gold......... - - - - - -
Jose Gomez......... - - 60,419 47,083 $1,158,576 $288,981
Helen Pipkin....... 13,800 $226,347 15,368 47,083 333,351 288,981
Andrew Farina...... - - 30,210 42,916 482,908 213,517
Eric Schiffer...... - - 31,252 6,250 655,063 113,188
- -------------------
<FN>
(a) Based on the last reported sale price of the Common Stock on the New York
Stock Exchange on December 31, 1999 ($28.69) less the option exercise
price.
</FN>
Page 10
REPORT OF THE COMPENSATION COMMITTEE
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The Compensation Committee of the Board of Directors is responsible for the
review and administration of the Company's various compensation plans, including
determining base salaries for officers and administering the Company's stock
option plan and annual bonus plan.
COMPENSATION PHILOSOPHY. The Company's executive compensation program is
designed to (1) provide levels of compensation that integrate pay and incentive
plans with the Company's strategic goals, so as to align the interests of
executive management with the long-term interests of the Company's shareholders,
(2) attract, motivate and retain executives of outstanding abilities and
experience capable of achieving the strategic business goals of the Company, (3)
recognize outstanding individual contributions, and (4) provide compensation
opportunities which are competitive to those offered by other retail companies
of similar size and performance. To achieve these goals, the Company's executive
compensation program consists of three main elements: (i) base salary, (ii)
annual cash bonus and (iii) long-term incentives. Each element of compensation
has an integral role in the total executive compensation program. Given the
current share ownership of Messrs. David Gold, Howard Gold, Jeff Gold and Eric
Schiffer, these members of management have chosen not to receive bonuses or
stock option awards.
BASE SALARY. Base salaries are negotiated at the commencement of an
executive's employment with the Company and are reviewed annually. Base salaries
are designed to reflect the position, duties and responsibilities of each
executive officer, the cost of living in the area in which the officer is
located, the market for base salaries of similarly situated executives at other
companies engaged in businesses similar to that of the Company and the Company's
performance against its financial and strategic goals. Base salaries are
generally designed to be at the mid-range of salaries of comparable companies.
During the year ended December 31, 1999, David Gold served as the Company's
Chief Executive Officer. Mr. Gold's base salary of $175,000 was determined based
upon his service to the Company, the financial performance of the Company in the
year ended December 31, 1999, and the salaries received by similarly situated
executives at other companies. See "Executive Compensation -- Summary
Compensation Table."
ANNUAL CASH BONUSES. Executive officers and key members of management are
eligible to receive annual incentive bonuses from an executive bonus pool in
amounts determined at the discretion of the Board of Directors. The executive
bonus pool is calculated based on the Company's annual performance against a
business plan developed each year by senior management and reviewed and approved
by the Board of Directors. The executive bonus pool is capped at 3% of the
Company's operating profit. Funding of the bonus pool is determined based on a
performance matrix consisting of two variables: (i) the increase in store sales
during the subject year over stores sales during the immediately preceding year;
(ii) operating income goals; and (iii) the individual performance of the
executives. Individual bonus targets for executives range from 0% to 20% of the
executive's base salary depending on the level of responsibility and attainment
of individual performance goals. Messrs. David Gold, Howard Gold, Jeff Gold and
Eric Schiffer were not eligible to receive an annual incentive bonus for 1999.
LONG-TERM INCENTIVES. The Company provides its executive officers with
long-term incentive compensation through grants of awards under the Company's
1996 Stock Option Plan. Under the 1996 Stock Option Plan, the Board of Directors
is authorized to grant any type of award which might involve the issuance of
shares of Common Stock, an option, warrant, convertible security, stock
appreciation right or similar right or any other security or benefit with a
value derived from the value of the Common Stock. The Compensation Committee of
the Board of Directors is currently responsible for selecting the individuals to
whom grants of awards will be made, the timing of grants, the determination of
the per share exercise price and the number of shares subject to each award. All
awards granted by the Compensation Committee pursuant to the 1996 Stock Option
Plan have been in the form of stock options. The Compensation Committee believes
that stock options provide the Company's executive officers with the opportunity
to purchase and maintain an equity interest in the Company and to share in the
appreciation of the value of the Common Stock. The Compensation Committee
believes that stock options directly motivate an executive to maximize long-term
shareholder value. The options incorporate vesting periods in order to encourage
key employees to continue in the employ of the Company. All options granted in
1999 were granted at the fair market value of the Company's Common Stock on the
date of grant. The Compensation Committee considers the grant of each option
subjectively, considering factors such as the individual performance of
executive officers and competitive compensation packages in the industry.
Messrs. David Gold, Howard Gold, Jeff Gold and Eric Schiffer were not eligible
to receive stock options for 1999.
Page 11
OMNIBUS BUDGET RECONCILIATION ACT IMPLICATIONS FOR EXECUTIVE COMPENSATION.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
places a limit of $1,000,000 on the amount of compensation that may be deducted
by the Company in any year with respect to each of the Company's five most
highly paid executive officers. Certain "performance-based" compensation that
has been approved by the Company's shareholders is not subject to the deduction
limit. The Company's 1996 Stock Option Plan is qualified so that awards under
the plan constitute performance-based compensation not subject to Section 162(m)
of the Code. All compensation paid to the Company's employees in fiscal 1999
will be fully deductible.
SUMMARY. The Compensation Committee believes that its executive
compensation philosophy of paying the Company's executive officers by means of
base salaries, annual cash bonuses and long-term incentives (other than Messrs.
David Gold, Howard Gold, Jeff Gold and Eric Schiffer), as described in this
report, serves the interests of the Company and its shareholders.
COMPENSATION COMMITTEE
William Christy
Marvin Holen
Lawrence Glascott
Page 12
PERFORMANCE GRAPH
- -------------------------------------------------------------------------------
The following graph sets forth the percentage change in cumulative total
shareholder return of the Company's Common Stock during the period from May 23,
1996 (the date of commencement of the Company's initial public offering) to
December 31, 1999, compared with the cumulative returns of the S&P Small Cap 600
Index and the Russell 2000 Index. The comparison assumes $100 was invested on
May 23, 1996 in the Common Stock and in each of the foregoing indices. The stock
price performance on the following graph is not necessarily indicative of future
stock price performance.
[GRAPH OMITTED]
Cumulative Total Return
----------------------------------------------------------
5/23/1996 12/96 12/97 12/98 12/99
99 CENTS ONLY STORES 100.00 103.15 232.28 483.51 376.48
S & P SMALLCAP 600 100.00 108.53 136.29 140.01 157.38
RUSSELL 2000 100.00 113.18 149.15 139.52 137.45
Page 13
CERTAIN TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
As of March 31, 2000, the Company leased 12 of its 86 store locations and a
parking lot associated with one of these stores from certain members of the Gold
family and their affiliates (the "Shareholders"). Annual rental expense for the
facilities owned by the Shareholders or their affiliates was approximately $2.0
million, $2.2 million and $1.9 million in 1997, 1998 and 1999, respectively. The
Company believes that such leases and contracts are no less favorable to the
Company than those an unrelated party would have provided after arm's-length
negotiations. It is the Company's current policy not to enter into real estate
transactions with the Shareholders or their affiliates, except with respect to
the renewal or modification of existing leases and occasions where such
transactions are determined to be in the best interests of the Company.
Moreover, all real estate transactions between 99(cent) Only Stores and the
Shareholders will require the unanimous approval of the independent directors on
the Company's Board of Directors and a determination by such independent
directors that such transactions are the equivalent of a negotiated arm's-length
transaction with a third party. There can be no guarantee that the Company and
the Shareholders or their affiliates will be able to agree on renewal terms for
the properties currently leased by the Company from the Shareholders, or, if
such terms are agreed to, that the independent directors on the Board of
Directors will approve such terms.
Page 14
PRINCIPAL SHAREHOLDERS
- --------------------------------------------------------------------------------
The following table sets forth as of March 31, 2000, certain information
relating to the ownership of the Common Stock by (i) each person known by the
Company to be the beneficial owner of more than five percent of the outstanding
shares of the Company's Common Stock, (ii) each of the Company's directors,
(iii) each of the Named Executive Officers, and (iv) all of the Company's
executive officers and directors as a group. Except as may be indicated in the
footnotes to the table and subject to applicable community property laws, each
such person has the sole voting and investment power with respect to the shares
owned. The address of each person listed is in care of the Company, 4000 Union
Pacific Avenue, City of Commerce, California 90023.
NUMBER OF PERCENT
NAMES AND ADDRESSES SHARES(a) OF CLASS(a)
- ------------------- --------- -----------
David Gold (b)(e).................. 11,520,468 34.4%
Sherry Gold (c)(e)................. 11,520,468 34.4%
Howard gold (d)(e)................. 7,444,938 22.2%
Jeff Gold (d)(e)................... 7,444,938 22.2%
Eric and Karen Schiffer (e)(f)..... 7,482,442 22.4%
Au Zone Investments #3
LLC (e)............................ 6,255,476 18.7%
William O. Christy (g)............. 24,459 *
Marvin Holen (h) .................. 35,919 *
Ben Schwartz (i)................... 43,753 *
Lawrence Glascott (j).............. 15,084 *
Helen Pipkin (k)................... 42,868 *
Jose Gomez (l)..................... 85,836 *
Andrew Farina (m).................. 51,460 *
All of the Company's
executive officers and
directors as a group (11
persons)(n)........................ 15,425,737 46.1%
- ------------------------------------
<FN>
* Less than 1%
(a) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission that deem shares to be beneficially
owned by any person who has or shares voting or investment power with
respect to such shares. In computing the number of shares beneficially
owned by a person and the percentage ownership of that person, shares of
common stock subject to options held by that person that currently are
exercisable or exercisable within 60 days of March 31, 2000 are deemed
outstanding. Unless otherwise indicated, the persons named in this table
have sole voting and sole investment power for all shares shown as
beneficially owned, subject to community property laws where applicable.
(b) Includes 2,632,496 shares owned by Sherry Gold, David Gold's spouse, and
6,255,476 shares controlled through Au Zone Investments #3, LLC, a
California limited liability company ("Au Zone").
(c) Includes 2,632,496 shares owned by David Gold, Sherry Gold's spouse, and
6,255,476 shares controlled through Au Zone.
(d) Includes 6,255,476 shares controlled through Au Zone and 37,502 shares
reserved for issuance upon exercise of stock options which are or will
become exercisable on or before May 30, 2000.
(e) Au Zone is the general partner of Au Zone Investments #2, L.P., a
California limited partnership (the "Partnership"). The Partnership is
the registered owner of shares of Common Stock. The limited partners of
the Partnership are David Gold, Sherry Gold, Howard Gold, Jeff Gold and
Karen Schiffer. Each of the limited partners of the Partnership owns a
20% interest in Au Zone.
(f) Includes 6,255,476 shares controlled through Au Zone and 37,502 shares
reserved for issuance upon exercise of stock options which are or will
become exercisable on or before May 30, 2000.
(g) Includes 23,418 shares of Common Stock reserved for issuance upon
exercise of stock options which are or will become exercisable on or
before May 30, 2000.
(h) Includes 29,669 shares of Common Stock reserved for issuance upon
exercise of stock options which are or will become exercisable on or
before May 30, 2000.
(i) Includes 17,169 shares of Common Stock reserved for issuance upon
exercise of stock options which are or will become exercisable on or
before May 30, 2000.
(j) Includes 14,043 shares of Common Stock reserved for issuance upon
exercise of stock options which are or will become exercisable on or
before May 30, 2000.
(k) Includes 40,785 shares of Common Stock reserved for issuance upon
exercise of stock options which are or will become exercisable on or
before May 30, 2000.
(l) Includes 85,836 shares of Common Stock reserved for issuance upon
exercise of stock options which are or will become exercisable on or
before May 30, 2000.
(m) Includes 51,460 shares of Common Stock reserved for issuance upon
exercise of stock options which are or will become exercisable on or
before May 30, 2000.
(n) Includes (i) shares owned by Sherry Gold, the spouse of David Gold, (ii)
shares controlled through Au Zone and (iii) shares of Common Stock
reserved for issuance upon exercise of stock options which are or will
become exercisable on or before May 30, 2000.
</FN>
Page 15
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- --------------------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors, and persons who own more than ten percent of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership with the Commission. Executive officers, directors and
greater-than-ten percent shareholders are required by the Commission's
regulations to furnish the Company with all Section 16(a) forms they file. Based
solely on its review of the copies of the forms received by it and written
representations from certain reporting persons that they have complied with the
relevant filing requirements, the Company believes that, during the year ended
December 31, 1999, all the Company's executive officers, directors and
greater-than-ten percent shareholders complied with all Section 16(a) filing
requirements, except that Jose Gomez did not file a Form 3 upon his becoming an
executive officer of the Company and Helen Pipkin did not file a Form 4 to
report the sale of 13,799 shares of Common Stock on May 27, 1999.
SHAREHOLDER PROPOSALS
Any shareholder who intends to present a proposal at the next Annual
Meeting for inclusion in the Company's Proxy Statement and Proxy form relating
to such Annual Meeting must submit such proposal to the Company at its principal
executive offices by December 15, 2000.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, independent public accountants, were selected by
the Board of Directors to serve as independent public accountants of the Company
for the year ended December 31, 1999 and have been selected by the Board of
Directors to serve as independent public accountants for the fiscal year ending
December 31, 2000. Representatives of Arthur Andersen LLP are expected to be
present at the Annual Meeting, and will be afforded the opportunity to make a
statement if they desire to do so, and to be available to respond to appropriate
questions from shareholders.
SOLICITATION OF PROXIES
The expenses of preparing, assembling, printing and mailing this Proxy
Statement and the materials used in the solicitation of Proxies will be borne by
the Company. It is contemplated that the Proxies will be solicited through the
mails, but officers, directors and regular employees of the Company may solicit
Proxies personally. Although there is no formal agreement to do so, the Company
may reimburse banks, brokerage houses and other custodians, nominees and
fiduciaries for their reasonable expenses in forwarding the Proxy materials to
shareholders whose stock in the Company is held of record by such entities. In
addition, the Company may use the services of individuals or companies it does
not regularly employ in connection with the solicitation of Proxies if
management determines it advisable.
ANNUAL REPORT ON FORM 10-K
THE COMPANY'S ANNUAL REPORT ON FORM 10-K, WHICH HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED DECEMBER 31, 1999, WILL BE
MADE AVAILABLE TO SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO 99(cent)
ONLY STORES, 4000 UNION PACIFIC AVENUE, CITY OF COMMERCE, CALIFORNIA 90023,
ATTENTION: CHIEF FINANCIAL OFFICER.
ON BEHALF OF THE BOARD OF DIRECTORS
/S/ ERIC SCHIFFER
Eric Schiffer
President
400 Union Pacific Avenue
City of Commerce, California 90023
April 12, 2000
Page 16
99 CENTS ONLY STORES
4000 UNION PACIFIC AVENUE
CITY OF COMMERCE, CALIFORNIA 90023
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
99 CENTS ONLY STORES
The undersigned, a shareholder of 99 CENTS ONLY STORES, a California
corporation (the "Company"), hereby appoints David Gold and Eric Schiffer, and
each of them, the proxy of the undersigned, with full power of substitution, to
attend, vote and act for the undersigned at Company's Annual Meeting of
Shareholders (the "Annual Meeting"), to be held on May 11, 2000, and at any of
its postponements or adjournments, to vote and represent all of the shares of
the Company which the undersigned would be entitled to vote, as follows:
(Please sign and date on the reverse side)
X Please mark your THE BOARD OF DIRECTORS RECOMMENDS A WITH VOTE ON
Votes as in this PROPOSAL 1, A FOR VOTE ON PROPOSAL 2, AND AN
example using dark AGAINST VOTE ON PROPOSAL 3.
ink only.
WITH
Authority to
Vote for the
WITH nominees FOR AGAINST ABSTAIN
listed
1. ELECTION OF DIRECTORS, X X 2. To approve an amendment to the X X X
As provided in the Company's Amended and
Company's Proxy Re-stated Articles of
Statement: Incorporation ("Articles of
Incorporation")
to increase the
authorized
number of shares
of Common Stock
from 40,000,000
shares to
100,000,000
shares.
(Instructions: To withhold authority for a 3. SHAREHOLDER PROPOSAL
nominee, line through or otherwise strike out
the name of the nominee below)
William O. Christy
Lawrence Glascott
David Gold
Howard Gold
Jeff Gold
Marvin Holen
Eric Schiffer
Ben Schwartz
FOR AGAINST ABSTAIN
The Board of Directors recommends a X X X
vote AGAINST the adoption of this
proposal. Proxies solicited by the
Board of Directors will be voted
against this proposal unless
otherwise specified by the
shareholder in the proxy.
The undersigned hereby revokes any other proxy to vote at the Annual Meeting,
and hereby ratifies and confirms all that the proxy holder may lawfully do by
virtue hereof. As to any business that may properly come before the Annual
Meeting and any of is postponement or adjournments, the proxy holder is
authorized to vote in accordance with its best judgment.
This Proxy will be voted in accordance with the instructions set forth above.
This Proxy will be treated as a GRANT OF AUTHORITY TO VOTE WITH the election of
the directors named above, FOR the increase in the authorized number of shares,
AGAINST the shareholder proposal and as the proxy holder shall deem advisable on
such other business as may come before the Annual Meeting, unless otherwise
directed.
The undersigned acknowledges receipt of a copy of the Notice of Annual Meeting
and accompanying Proxy Statement dated April __, 2000 relating to the Annual
Meeting.
___________________________________ Date:_________________,2000
Signature(s) of Shareholder(s)
See Instructions Below)
The signature(s) hereon should correspond exactly with the name(s) of the
shareholder(s) appearing on the Stock Certificate. If stock is jointly held, all
joint owners should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If signer is a corporation,
please sign the full corporation name and give title of signing officer.
Page 17
APPENDIX A
CERTIFICATE OF AMENDMENT OF THE
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
99(CENT) ONLY STORES
Eric Schiffer and Andrew Farina do hereby certify that:
They are the President and Chief Financial Officer, respectively, of 99(cent)
Only Stores (hereinafter called the "CORPORATION"), a corporation organized and
existing under and by virtue of the provisions of the laws of the State of
California.
1. The Corporation filed Amended and Restated Articles of Incorporation on
April 3, 1996.
2. The Corporation filed a Certificate of Amendment of Articles of
Incorporation on May 14, 1996.
3. The Corporation filed a Certificate of Amendment of Articles of
Incorporation on June 7, 1996.
4. The first paragraph of Article III of the Amended and Restated Articles of
Incorporation, as amended, is amended to read in its entirety as follows:
ARTICLE III
THIS CORPORATION IS AUTHORIZED TO ISSUE TWO CLASSES OF SHARES, DESIGNATED
"COMMON STOCK," AND "PREFERRED STOCK." THE TOTAL NUMBER OF SHARES WHICH
THIS CORPORATION IS AUTHORIZED TO ISSUE IS 101,000,000. THE NUMBER OF
SHARES OF PREFERRED STOCK WHICH THIS CORPORATION IS AUTHORIZED TO ISSUE IS
1,000,000. THE NUMBER OF SHARES OF COMMON STOCK WHICH THIS CORPORATION IS
AUTHORIZED TO ISSUE IS 100,000,000.
5. The Board of Directors of the Corporation has duly approved the foregoing
amendment to the Amended and Restated Articles of Incorporation.
6. The foregoing amendment to the Amended and Restated Articles of
Incorporation have been duly approved by the required vote of shareholders
in accordance with Section 903 of the General Corporation Law of the State
of California. The total number of outstanding shares of Common Stock is
__________. The number of shares of Common Stock voting in favor of the
amendment equaled or exceeded the vote required. The percentage vote
required was more than fifty percent (50%) of the outstanding Common Stock.
We further declare under penalty of perjury under the laws
of the State of California that the matters set forth in
this Certificate are true and correct of our own knowledge.
Page 18
Executed in the City of Los Angeles, State of California, on this ____ day
of May, 2000.
----------------------------------------
Eric Schiffer, President
--------------------------------------------
Andrew Farina, Chief Financial Officer
Page 19