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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| 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 Rule 14a-11(c) or Rule 14a-12
COST-U-LESS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
CALCULATION OF FILING FEE
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Per unit price or other Proposed
underlying value of maximum
Title of each class of Aggregate number of transaction computed aggregate
securities to which securities to which pursuant to Exchange Act value of
transaction applies: transaction applies Rule 0-11: transaction Total Fee Paid
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|_| Fee paid previously with preliminary materials.
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|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and indentify 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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LOGO
April 12, 2002
Dear Cost-U-Less, Inc. Shareholders:
I am pleased to invite you to the Cost-U-Less Annual Meeting of
Shareholders. This year's annual meeting will be at 10:00 a.m. on Tuesday, May
14, 2002 at the Doubletree Hotel (Lake Hills Room), 300 112th Ave. S.E.,
Bellevue, Washington.
The accompanying Notice of Annual Meeting of Shareholders and the Proxy
Statement describe the formal business to be conducted at the meeting.
We hope you can join us on May 14th. Whether or not you can attend, please
read the attached Proxy Statement. When you have done so, please mark your
votes on the enclosed proxy card, sign and date the proxy card, and return it
to us in the enclosed envelope. Your vote is important, so please return your
proxy card promptly.
Sincerely,
LOGO
Martin P. Moore
Secretary
COST-U-LESS, INC.
8160-304th Avenue S.E., Building 3, Suite A
Preston, Washington 98050
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held Tuesday, May 14, 2002
Dear Cost-U-Less Shareholders:
On Tuesday, May 14, 2002, Cost-U-Less, Inc. will hold its Annual Meeting
of Shareholders at the Doubletree Hotel (Lake Hills Room), 300 112th Ave. S.E.,
Bellevue, Washington. The Annual Meeting will begin at 10:00 a.m. The record
date for the meeting has been set at March 29, 2002. At the Annual Meeting we
will ask you to:
(1) Elect three directors to hold office for the term as described in the
attached Proxy Statement or until their respective successors are
elected and qualified;
(2) Ratify the appointment of Deloitte & Touche, LLP as our independent
auditors for the fiscal year ending December 29, 2002; and
(3) Transact any other business properly presented at the meeting.
Only shareholders that owned stock at the close of business on March 29,
2002 will be entitled to notice of and to vote at this meeting or any
adjournments that may take place. For ten days prior to the meeting, a complete
list of shareholders entitled to vote at the meeting will be available for
examination by any shareholder, for any purpose related to the meeting, during
ordinary business hours at the Company's principal offices.
To assure your representation at the Annual Meeting, you are urged to
complete, sign, date, and return the enclosed proxy card as soon as possible in
the enclosed postage prepaid envelope. Your stock will be voted in accordance
with the instructions you give on your proxy card. You may, of course, attend
the Annual Meeting and vote in person even if you have previously returned your
proxy card.
By order of the Board of Directors,
LOGO
Martin P. Moore
Secretary
COST-U-LESS, INC.
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PROXY STATEMENT For Annual Meeting of Shareholders
to be held on May 14, 2002
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The Board of Directors of Cost-U-Less, Inc. ("Cost-U-Less" or the
"Company") is sending you this Proxy Statement in connection with its
solicitation of proxies for use at the Cost-U-Less 2002 Annual Meeting of
Shareholders or any adjournment or postponement thereof. The Annual Meeting
will be held at the Doubletree Hotel (Lake Hills Room), 300 112th Ave. S.E.,
Bellevue, Washington, on Tuesday, May 14, 2002 at 10:00 a.m. This Proxy
Statement and accompanying form of proxy are being first sent or given to the
shareholders of Cost-U-Less on or about April 12, 2002.
SOLICITATION AND VOTING OF PROXIES
Record Date and Outstanding Shares
Only those shareholders that owned shares of the Company's common stock at
the close of business on March 29, 2002, the record date for the Annual
Meeting, are entitled to vote at the annual meeting and any adjournment
thereof. On the record date, there were 3,606,376 shares of the Company's
common stock outstanding, all of which are entitled to vote with respect to all
matters to be acted upon at the annual meeting.
Quorum
The Company's Bylaws provide that a majority of all of the shares of the
stock entitled to vote, whether present in person or represented by proxy,
shall constitute a quorum for the purpose of transacting business. Votes for
and against, abstentions and "broker non-votes" will each be counted as present
for purposes of determining the presence of a quorum.
Revocability of Proxies
All valid proxies received before the meeting will be exercised. If you
give your proxy to Cost-U-Less, you have the power to revoke it at any time
before it is exercised. Your proxy may be revoked by:
o notifying the Secretary of Cost-U-Less in writing before the Annual
Meeting;
o delivering to the Secretary of Cost-U-Less before the Annual Meeting a
signed proxy with a later date; or
o attending the Annual Meeting and voting in person.
Voting
You are entitled to one vote for each share of common stock you hold. If a
quorum is present and voting, the three nominees for director receiving the
highest number of votes will be elected as directors. The proposal to ratify
the appointment of Deloitte & Touche, LLP as our independent auditors for
fiscal 2002 will be approved if the number of votes cast in favor of the
proposal by holders of common stock present, in person or by proxy, and
entitled to vote at the Annual Meeting, exceeds the number of votes cast
against it. Abstentions from voting will have no effect on these proposals
since they will not represent votes cast at the Annual Meeting for the purpose
of voting on such proposals.
If your shares are represented by proxy, they will be voted in accordance
with your directions. If your proxy is signed and returned without any
direction given, your shares will be voted (i) "FOR" the election of the three
nominees for the Board of Directors named on the following pages, and (ii)
"FOR" the ratification of the appointment of Deloitte & Touche, LLP as auditors
for Cost-U-Less for fiscal 2002. Cost-U-Less is not aware, as of the date of
this Proxy Statement, of any matters to be voted on at the Annual Meeting other
than as stated in the Proxy Statement and the accompanying Notice of Annual
Meeting of Shareholders. If any other matters are properly
1
brought before the Annual Meeting, the enclosed proxy gives discretionary
authority to the persons named in it to vote the shares in their best judgment.
Brokers who hold shares for the accounts of their clients who have not
been given specific voting instructions as to a matter by their clients may
vote their clients' proxies in their own discretion.
Solicitation of Proxies
Proxies will be solicited by certain of the directors, officers and
regular employees of Cost-U-Less, without payment of any additional
compensation to them. The Company may also request banks and brokers, and other
custodians, nominees and fiduciaries, to solicit their customers who have stock
of the Company registered in the names of such persons and will reimburse them
for their reasonable out-of-pocket costs. Proxies will be solicited by personal
interview, mail and telephone. Any costs relating to such solicitation of
proxies will be borne by Cost-U-Less. In addition, Cost-U-Less may reimburse
brokerage firms and other persons representing beneficial owners of shares of
common stock for their expenses in forwarding solicitation materials to such
beneficial owners.
PROPOSAL 1: ELECTION OF DIRECTORS
There are five directors who currently sit on the Cost-U-Less Board of
Directors. In accordance with the Bylaws of Cost-U-Less, the Board of Directors
consists of between two and seven directors as determined by the Board.
Directors generally are elected for three-year terms and the Board is divided
into three classes, with the classes to be as equal in number as may be
possible. Generally, one class of directors is elected to a three-year term at
each annual meeting of shareholders. At the Annual Meeting, one director will
be elected to hold office until the 2004 Annual Meeting of Shareholders and two
directors will be elected to hold office until the 2005 Annual Meeting of
Shareholders, or until their respective successors are elected and qualified.
The Board of Directors has proposed that the following nominees be elected
at the Annual Meeting: Arthur W. Buerk, David A. Enger and Gary W. Nettles. If
elected, Mr. Buerk will serve as director until the Company's Annual Meeting of
Shareholders in 2004 and until his successor is elected and qualified, and
Messrs. Enger and Nettles will serve as directors until the Company's Annual
Meeting of Shareholders in 2005 and until their successors are elected and
qualified. Unless otherwise instructed, persons named in the accompanying proxy
will vote FOR these nominees. Although Cost-U-Less anticipates that these
nominees will be available to serve as directors, should any of them not accept
the nomination, or otherwise be unable to serve, the proxies may be voted for
such substitute nominees as the Company may designate.
The Board of Directors recommends a vote "FOR" the nominees named above.
Directors
This section sets forth information concerning the ages and background of
the Company's current directors and the nominees to be elected at this meeting.
Name Position With the Company Age Since
- ---- ------------------------- --- -----
Class I director nominated for election at the 2002 Annual Meeting of Shareholders whose term will
expire at the 2004 Annual Meeting of Shareholders:
Arthur W. Buerk Director 66 2002
Class II directors nominated for election at the 2002 Annual Meeting of Shareholders whose term will
expire at the 2005 Annual Meeting of Shareholders:
David A. Enger Chairman of the Board 56 1993
Gary W. Nettles Director 50 1996
Class III directors whose terms expire at the 2003 Annual Meeting of Shareholders:
George C. Textor Director 57 1998
J. Jeffrey Meder Director, President and Chief
Executive Officer 50 1999
2
Nominees for the Board of Directors
Arthur W. Buerk has been a Director of Cost-U-Less since February 2002.
Mr. Buerk is a Founder and Managing Director at Buerk Craig Victor LLC, a
Seattle venture capital and investment banking firm that has successfully
invested in many Pacific Northwest companies from a variety of industry
sectors. Mr. Buerk served as President and board member for Shurgard Storage
Centers from 1977-1992. Mr. Buerk was also founder and director of Intermation,
a records storage management service that was sold to Iron Mountain in 1998.
Mr. Buerk serves as a director for several high-growth companies, including
Adinfonitum, Cybercamps, and Door to Door Storage. Mr. Buerk has a BA in
finance and banking from the University of Washington and an MBA from the
Harvard Business School.
David A. Enger has been a Director of Cost-U-Less since 1993 and has
served as Chairman of the Board since 2000. Mr. Enger has served since 1992 as
Executive Vice President of Keener's, one of the Northwest's largest
distributors of fresh foods. In 1990, Mr. Enger founded the Business & Banking
Institute, where he currently engages in business and banking consulting and
training. From 1980 to 1990, Mr. Enger served as a principal of Management
Advisory Services, Inc., a business and banking consulting firm which he
co-founded in 1980. From 1976 to 1980, Mr. Enger was a vice president of
Seafirst Bank. Mr. Enger serves as a director of Keener's, Colmac Industries,
Inc., a dry-cleaning equipment manufacturer, and Colmac Coil Manufacturing,
Inc., a heating and air-conditioning coils manufacturer.
Gary W. Nettles has been a Director of Cost-U-Less since 1996. Mr. Nettles
is a certified public accountant and President of Guchereau & Nettles, an
accounting firm located in Costa Mesa, California, where he has worked since
1987. Mr. Nettles serves as a director of Allen Tel Products, Inc., a
non-public supplier and manufacturer of data and telecommunication components,
located in Santa Ana, California.
Continuing Directors Until 2003
George C. Textor has been a Director of Cost-U-Less since 1998. Mr. Textor
is a general partner of Capstan Partners, a Seattle-based private equity
investment fund which he co-founded in 1988. From 1982 to 1988, Mr. Textor was
a founding general partner of Cable Howse & Ragen (now Ragen MacKenzie Group
Incorporated), an investment banking and brokerage firm located in the Pacific
Northwest.
J. Jeffrey Meder has been a Director and the President and CEO of
Cost-U-Less since 1999. Previously, he served as co-founder and President/Chief
Executive Officer of Drug Emporium, N.W. He had provided overall direction and
vision for that Company since 1981. During that time, he led the growth of the
Company to twenty stores with over $180 million in sales and employing
approximately 1,600 employees in the Pacific Northwest. Prior to co-founding
Drug Emporium, N.W., Mr. Meder was employed in the banking industry from
1975-1981. His last position in banking was Assistant Vice President in the
Commercial Division of Huntington National Bank in Columbus, Ohio, where his
responsibilities included business development and work-out loan situations.
Meetings of the Board of Directors
During the fiscal year ended December 30, 2001, the Board of Directors of
the Company held five meetings, the Audit Committee of the Board held four
meetings and the Compensation Committee of the Board held four meetings. The
Company has no standing nominating committee of the Board. No director attended
fewer than 75% of the total number of meetings of the Board and all of the
committees of the Board on which such director served held during that period.
The members of the Audit Committee during fiscal 2001 were Mr. Nettles
(Chairman), Mr. Enger and former director, Mr. Wayne W. Keener. Mr. Keener, who
left the Board of Directors in November 2001, was replaced by Mr. Textor. The
functions of the Audit Committee include, among others: recommending to the
Board the retention of independent public auditors; reviewing and approving the
planned scope, proposed fee arrangements and results of the Company's annual
audit; reviewing the adequacy of accounting and financial controls; and
reviewing the independence of the Company's auditors. For additional
information concerning the Audit Committee, see "Report of the Audit Committee"
and "Principal Accounting Firm Fees."
3
The members of the Compensation Committee during fiscal 2001 were Mr.
Textor (Chairman) and Mr. Enger. The Compensation Committee reviews and
determines the salary and bonus criteria of and stock option grants to all
executive officers. For additional information about the Compensation
Committee, see "Report of the Compensation Committee on Executive Compensation"
and "Executive Compensation and Other Matters" below.
Compensation of Directors
Non-employee directors of Cost-U-Less were paid $1,500 for each Board of
Directors meeting attended and $250 for each committee meeting attended,
including attendance at meetings of subcommittees of which they are not members
during fiscal 2001. Cost-U-Less also reimburses directors for travel expenses
in attending meetings. In December 2001, the Compensation Committee determined
that cash compensation for attendance at meetings of the Board of Directors in
fiscal 2002 will be suspended until the Board meeting in July 2002. Each
non-employee director will be granted options to purchase up to 2,000 shares of
Cost-U-Less common stock for each board meeting attended beginning with the
February 2002 meeting until such time as the cash compensation for attendance
at the meetings is no longer suspended. The options will have an exercise price
equal to the fair market value the day following each Board meeting. The
options will be vested immediately and exercisable within three years.
Cost-U-Less has also granted nonqualified stock options to its directors
pursuant to individual director stock option agreements. In December 1998, each
director was granted a 10-year, immediately exercisable option to purchase
10,331 shares of common stock at an exercise price equal to the fair market
value of the underlying shares on the date of grant, and a 10-year option to
purchase 2,951 shares of common stock at an exercise price equal to the fair
market value of the underlying shares on the date of grant, vesting ratably
over a five-year period. Each director received an automatic annual grant of
options to purchase 1,000 shares of common stock under the Company's 1998 Stock
Incentive Compensation Plan on the date of last year's Annual Shareholders'
Meeting. The Directors will again receive an automatic annual grant of options
to purchase 1,000 shares of common stock under the Company's 1998 Stock
Incentive Compensation Plan on the date of the 2002 Annual Shareholders'
Meeting.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of March 11, 2002, certain information
regarding the beneficial ownership of Cost-U-Less common stock by:
o each person known by Cost-U-Less to own beneficially 5% or more of our
common stock;
o each director and nominee for director of Cost-U-Less;
o each executive officer of Cost-U-Less for whom compensation
information is given in the Summary Compensation Table in this Proxy
Statement; and
o all directors and executive officers of Cost-U-Less as a group.
To the knowledge of Cost-U-Less, the beneficial owners listed below have
sole voting and investment power with respect to the shares shown as
beneficially owned.
Outstanding Shares
of Common Stock Percent of
Beneficial Owner(1) Beneficially Owned(2) Class
- ------------------- --------------------- -----
The Kula Fund (3) ........................................................ 357,000 9.6%
J. Jeffrey Meder (4) ..................................................... 175,000 4.7
Roy W. Sorensen (5) ...................................................... 100,000 2.7
Gary W. Nettles (6) ...................................................... 85,431 2.4
Martin P. Moore (7) ...................................................... 70,987 1.9
Joseph F. Bombara (8) .................................................... 30,000 *
Michael T. Scalzo (9) .................................................... 25,635 *
William W. Lofgren (10) .................................................. 22,530 *
David A. Enger (11) ...................................................... 22,282 *
George C. Textor (12) .................................................... 19,632 *
Arthur W. Buerk (13) ..................................................... 2,000 *
All directors and executive officers as a group (11 persons) (14) ........ 618,231 15.3%
4
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* Less than 1% of the outstanding shares of common stock.
(1) All beneficial owners can be reached c/o Cost-U-Less, Inc., 8160-304th
Ave., S.E., Bldg. 3, Ste. A, Preston, Washington 98050
(2) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission and includes shares over which the
indicated beneficial owner exercises voting and/or investment power.
Shares of common stock subject to options or warrants currently
exercisable or exercisable within 60 days of March 11, 2002 are deemed
outstanding for computing the percentage ownership of the person holding
the options but are not deemed outstanding for computing the percentage
ownership of any other person.
(3) Based on the Company's most recent information. Includes 117,000 shares
subject to a warrant exercisable within 60 days of March 11, 2002.
(4) Includes 155,000 shares subject to options exercisable within 60 days of
March 11, 2002
(5) Includes 95,000 shares subject to options exercisable within 60 days of
March 11, 2002
(6) Based on the Company's most recent information and publicly filed
information. Includes 11,807 shares held by the Alyce Christene Gangwish
Irrevocable Trust of 1995, 33,582 shares held by The Lenz Grandchildren's
Irrevocable Trust of 2000, 8,855 shares held by the Brittney Elizabeth
Lenz Irrevocable Trust of 1995, and 8,855 shares held by the Cody Allan
Lenz Irrevocable Trust of 1995 (for each of which Mr. Nettles acts as
Co-Trustee), 700 shares held by Guchereau & Nettles SEP and 21,632 shares
subject to options exercisable within 60 days of March 11, 2002.
(7) Includes 47,500 shares subject to options exercisable within 60 days of
March 11, 2002.
(8) Represents 30,000 shares subject to options exercisable within 60 days of
March 11, 2002
(9) Includes 19,620 shares subject to options exercisable within 60 days of
March 11, 2002
(10) Represents 22,530 shares subject to options exercisable within 60 days of
March 11, 2002
(11) Represents 22,282 shares subject to options exercisable within 60 days of
March 11, 2002
(12) Represents 19,632 shares subject to options exercisable within 60 days of
March 11, 2002
(13) Represents 2,000 shares subject to options exercisable within 60 days of
March 11, 2002
(14) Includes 446,556 shares subject to options exercisable within 60 days of
March 11, 2002.
5
Executive Officers
The following persons are executive officers of Cost-U-Less as of March
11, 2002, who will serve in the capacities noted until the election and
qualification of their successors. Each officer named below is expected to be
re-elected at the Board meeting to be held on May 14, 2002.
Name Age Positions and Offices With Cost-U-Less
- ---- --- --------------------------------------
J. Jeffrey Meder (1) ............ 50 President and Chief Executive Officer
Roy W. Sorensen (2) ............. 48 Vice President, Chief Operating Officer
Martin P. Moore (3) ............. 45 Vice President, Chief Financial Officer, Secretary
& Treasurer
Joseph F. Bombara (4) ........... 62 Vice President, Merchandising & Marketing
Michael T. Scalzo (5) ........... 37 Vice President, Business Development
William W. Lofgren (6) .......... 39 Vice President, Information Systems
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(1) For a biographical summary of J. Jeffrey Meder, see "Directors."
(2) Roy W. Sorensen joined the Company as Vice President, Chief Financial
Officer of Cost-U-Less in September 1999 before becoming Vice President,
Chief Operating Officer in August 2000. Previously, Mr. Sorensen served as
CFO and Treasurer of Drug Emporium NW. In this capacity, he played a key
role in successfully negotiating the sale of the company in July 1998 to
Longs Drugs, a $3.1 billion regional retailer. He also has held various
executive financial positions with other companies in the Pacific
Northwest, including Seattle Lighting Fixture Co., Egghead Software, and
Seafirst Corporation. Mr. Sorensen holds a CPA license, and received his
MBA from the University of Puget Sound.
(3) Martin P. Moore joined the Company in December 1998 as corporate controller
before becoming Vice President, Chief Financial Officer in August 2000.
Previously, Mr. Moore served as Manager of Corporate Planning & Reporting
at ATL Ultrasound, Inc., a $500 million medical equipment manufacturer
that was acquired by Philips Electronics in 1998. Mr. Moore received his
MBA from Seattle University in 1993.
(4) Joseph F. Bombara joined the Company in 2001 as Vice President,
Merchandising & Marketing. Previously, Mr. Bombara served as Chief
Operating Officer and Vice President of Global Merchandising & Marketing
for DirectSource Global Purchasing, Inc. a business to business e-commerce
company. Mr. Bombara also served as a senior executive with Wal-Mart
International, managing the Wal-Mart and Sam's operations on the island of
Puerto Rico and the Wal-Mart Supercenter operations in Indonesia, as well
as special projects for Wal-Mart in Mexico, Brazil and Argentina.
Additionally, Mr. Bombara has held senior executive and management
positions with Bargain Time, Riklis Holding (McCrory Stores) and various
other retail operations nationwide.
(5) Michael T. Scalzo assisted in creating Cost-U-Less' buying office and was
one of the original buyers for the Company in 1992. Mr. Scalzo became
general merchandise manager in 1995, was promoted to Vice President,
Merchandising in April 1999, and then to Vice President, Business
Development in March 2000.
(6) William W. Lofgren joined the Company in 1992 as information systems
manager before becoming operations manager in 1996 with overall
operational responsibility for Cost-U-Less' stores. He was promoted to
Vice President, Information Systems in April 1999. Previously, Mr. Lofgren
served as electronic maintenance manager of Costco from 1986 to 1991.
6
Executive Compensation
Summary Compensation Table
The following table sets forth certain compensation information as to the
Chief Executive Officer of Cost-U-Less and the other most highly compensated
executive officers of Cost-U-Less, Inc (the "Named Executive Officers") for
services rendered in all capacities for Cost-U-Less during the fiscal years
ended December 30, 2001, December 31, 2000 and December 26, 1999.
Long-Term
Compensation
Annual Compensation Awards
----------------------- ------- All Other
Bonus Shares Underlying Compensation
Name and Principal Position Year Salary ($) Options (#) ($)(1)
- --------------------------- ---- ------ --- ----------- ------
J. Jeffrey Meder (2) .................. 2001 $ 240,436 $10,000 100,000 $17,635
President, Chief Executive Officer 2000 229,387 11,498 50,000 15,859
1999 67,500 8,975 -- 2,500
Roy W. Sorensen (3) ................... 2001 $ 135,440 $ 7,000 60,000 $ 2,625
Vice President, Chief Operating 2000 127,347 6,387 30,000 1,297
Officer 1999 30,289 3,515 -- --
Martin P. Moore (4) ................... 2001 $ 110,652 $ 8,000 -- $ 2,625
Vice President, Chief Financial 2000 95,250 4,797 60,000 2,625
Officer, Secretary and Treasurer 1999 80,077 22,500 2,500 2,500
Joseph F. Bombara (5) ................. 2001 $ 134,241 $ 7,000 25,000 $ 3,120
Vice President, Merchandising & 2000 -- -- -- --
Marketing 1999 -- -- -- --
Michael T. Scalzo (6) ................. 2001 $ 144,635 $10,500 5,000 $ 2,625
Vice President, Business Development 2000 124,808 33,090 5,000 2,625
1999 120,000 13,104 10,000 2,500
William W. Lofgren (7) ................ 2001 $ 140,231 $ 8,000 -- $ 2,625
Vice President, Information Systems 2000 123,750 6,050 -- 2,625
1999 110,000 12,012 10,000 2,500
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(1) Consists of matching contributions to the Cost-U-Less 401(k) profit-sharing
plan, auto allowances and payments of disability insurance premiums, if
applicable.
(2) J. Jeffrey Meder joined the Company in September 1999.
(3) Roy W. Sorensen joined the Company in September 1999.
(4) Martin P. Moore joined the Company in December 1998 and was promoted to
Vice President, Chief Financial Officer, Secretary and Treasurer in August
2000.
(5) Joseph F. Bombara joined the Company in March 2001.
(6) Michael T. Scalzo was promoted to Vice President, Business Development in
March 2000.
(7) William W. Lofgren was promoted to Vice President, Information Systems in
April 1999.
7
Stock Option Grants in Fiscal 2001
The following table sets forth certain information regarding grants of
options to purchase the Company's common stock made during the fiscal year
ended December 30, 2001, to the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed
Individual Grants Annual Rates of
--------------------------------------------------------------------- Stock Price
Percent of Total Appreciation for
Number of Options Granted Exercise Option Term(3)
Securities Underlying to Employees Price Expiration -----------------------
Name Options Granted (#)(1) in Fiscal Year ($/Share)(2) Date 5% ($) 10% ($)
- ---- ---------------------- -------------- ------------ ---- ------ -------
J. Jeffrey Meder .......... 50,000 25.8% $ 1.880 5/08/11 $59,116 $149,812
J. Jeffrey Meder .......... 50,000 25.8% $ 1.500 7/30/11 47,167 119,531
Roy W. Sorensen ........... 30,000 15.5% $ 1.880 5/08/11 35,470 89,887
Roy W. Sorensen ........... 30,000 15.5% $ 1.500 7/30/11 28,300 71,718
Martin P. Moore ........... -- -- -- -- -- --
Joseph F. Bombara ......... 25,000 12.9% $ 1.880 5/08/11 29,558 74,906
Michael T. Scalzo (4) ..... 5,000 2.6% $ 1.500 4/24/11 4,717 11,953
William W. Lofgren ........ -- -- -- -- -- --
- ------------
(1) Except as described below, all options are granted under the Company's 1998
Stock Incentive Compensation Plan and are immediately exercisable. For
additional information regarding options, see "Employment Contracts and
Change-in-Control Arrangements" and "Report of the Compensation Committee
on Executive Compensation".
(2) The exercise price of all options is equal to the market value of the
common stock as of the day of grant.
(3) The future values of current year grants assume appreciation of 5% and 10%
per year over the 10-year option period, as required by applicable
regulations of the Securities and Exchange Commission and, therefore, are
not intended to forecast possible future appreciation, if any, of the
common stock price. The actual values realized depends on the future
performance of the common stock and overall market conditions, and may be
greater or less than the potential realizable values set forth in the
table.
(4) Represents an option granted under the Company's 1998 Stock Incentive
Compensation Plan, which vests ratably over five years from the date of
grant.
Stock Option Exercises in Fiscal 2001 and Year-End Values
The following table sets forth certain information concerning exercises of
options to purchase the Company's common stock in the fiscal year ended
December 30, 2001, and unexercised options held as of December 30, 2001, by the
Named Executive Officers.
8
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES(1)
Number of
Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
Fiscal Year-End (#) Fiscal Year-End ($)(2)
------------------------------- ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
J. Jeffrey Meder ........... 150,000 -- -- --
Roy W. Sorensen ............ 90,000 -- -- --
Martin P. Moore ............ 42,500 22,500 -- --
Joseph F. Bombara .......... 25,000 -- -- --
Michael T. Scalzo .......... 10,620 16,782 -- --
William W. Lofgren ......... 15,530 6,800 -- --
- ------------
(1) There were no exercises of options to purchase the Company's common stock
in the fiscal year ended December 30, 2001.
(2) Stock options are valued based upon the closing price of a share of common
stock as reported on the Nasdaq SmallCap Market on December 28, 2001
($1.26 per share).
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
In March 2000, the Company entered into an agreement with Michael T.
Scalzo, Vice President, Business Development of the Company. The agreement
provides for Mr. Scalzo to receive a salary subject to review by the Chief
Executive Officer. Pursuant to the agreement, Mr. Scalzo is entitled to receive
options under the Company's 1998 Stock Incentive Compensation Plan to purchase
10,000 shares of the Company's common stock. In 2000, Mr. Scalzo was granted an
option under the Company's 1998 Stock Incentive Compensation Plan to purchase
5,000 shares of the Company's common stock. In 2001, Mr. Scalzo was granted an
additional option under the Company's 1998 Stock Incentive Compensation Plan to
purchase 5,000 shares of the Company's common stock. See "Option Grants in Last
Fiscal Year" table. Mr. Scalzo will be awarded severance pay equal to one month
of his base salary at the time of termination by the Company for each year of
service. If the Company terminates the employment of Mr. Scalzo for cause (as
defined in the agreement), no severance will be paid.
In February 2001, the Company entered into an agreement with Joseph F.
Bombara, Vice President, Merchandising & Marketing of the Company. The
agreement provides for Mr. Bombara to receive a salary subject to review by the
Chief Executive Officer. Pursuant to the agreement, Mr. Bombara is entitled to
receive options under the Company's 1998 Stock Incentive Compensation Plan to
purchase 75,000 shares of the Company's common stock in three installments of
options to purchase 25,000 shares. The first installment to be granted at the
Company's Annual Shareholder's Meeting held on May 8, 2001, the second
installment on Mr. Bombara's first anniversary of employment with the Company
and the third installment on Mr. Bombara's second anniversary of employment
with the Company. In 2001, Mr. Bombara was granted an option under the
Company's 1998 Stock Incentive Compensation Plan to purchase 25,000 shares of
the Company's common stock. See "Option Grants in Last Fiscal Year" table. In
the event that Mr. Bombara's employment with the Company is terminated without
cause for any reason, he will be awarded severance pay equal to six months of
his base salary at the time of termination. If the Company terminates the
employment of Mr. Bombara for cause (as defined in the agreement), no severance
will be paid.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
Mr. Textor and Mr. Enger served on the Compensation Committee of the Board
of Directors for the past fiscal year. Mr. Textor has been the Chairman of the
Compensation Committee since 2000 and also serves as general partner of Capstan
Partners, a Seattle-based private equity investment fund. Mr. Enger also serves
as a director of Colmac Industries, Inc. and Colmac Coil Manufacturing, Inc.
Former director, Mr. Keener, also served on the Compensation Committee until
his resignation in November 2001. Mr. Keener also served as the president and
chief executive officer of Keener's since 1960 and also serves as a director of
both the National Meat Association and
9
the North American Meat Association. During the fiscal year ended December 30,
2001, the Company purchased approximately $108,000 of product from Keener's.
The Company believes that the terms of these purchases were no less favorable
to the Company than those available from third parties.
Certain Relationships and Related Transactions
Concurrent Reg. S Placement to Kula Fund. During 1997 and 1998,
Cost-U-Less discussed with Commonwealth Development Corporation a range of
potential business relationships. On July 23, 1998 these discussions concluded
with the sale of 160,000 shares of common stock to the Kula Fund in a private
placement at a price of $7.00 per share, concurrent with the Company's initial
public offering, and the sale, for nominal consideration, of a warrant to
purchase 117,000 shares of common stock at an exercise price of $8.40 per
share. This warrant contains standard net issuance provisions (permitting the
holder to exchange the warrant for a lesser number of shares based on the
then-current market value of the common stock) and is exercisable at any time
until July 23, 2002. These transactions were structured to meet the
requirements of the exclusion from registration provided by Regulation S under
the Securities Act of 1933, as amended.
Gevirtz Option. In January 1998, Donald L. Gevirtz, who was then a
director of Cost-U-Less, was granted a 10-year, immediately exercisable option
to purchase up to 88,554 shares of common stock at an exercise price of $7.62
per share in connection with his appointment to the Board of Directors. In
order to encourage Mr. Gevirtz to join the Board of Directors, the Board
granted him an option with a per share exercise price that was less than the
fair market value of the common stock on the date of grant. Cost-U-Less
therefore recognized a compensation expense of $75,000 in the first quarter of
fiscal 1998 in connection with this grant. In October 1998, Cost-U-Less offered
directors with options having exercise prices greater than $7.00 per share the
opportunity to surrender those options and receive new options with an exercise
price of $7.00 per share. With the exception of the exercise price, a six-month
blackout on exercise and a six-month delay in vesting, the terms of the new
options are identical to the terms of the old options. Although Mr. Gevirtz
resigned in 1999, the option may be exercised by the estate of Mr. Gervitz for
five years from his date of resignation.
Purchases of Product. Cost-U-Less has purchased product from Keener's, a
company that is 50% owned by Wayne V. Keener, a former director of Cost-U-Less.
David A. Enger, an Executive Vice President and director of Keener's, is also a
director of Cost-U-Less. Cost-U-Less purchased from Keener's approximately
$108,000 of product in fiscal 2001. Cost-U-Less believes that the terms of
these purchases were no less favorable to Cost-U-Less than those available from
independent third parties.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the officers, directors and persons who own more than 10% of a registered class
of equity securities of Cost-U-Less to file reports of ownership and changes in
ownership with the Commission. Officers, directors and greater-than-10%
shareholders are required by Commission regulation to furnish Cost-U-Less with
copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms it received and
written representations from certain reporting persons that no forms were
required for those persons, Cost-U-Less believes that all filing requirements
under Section 16(a) applicable to its officers, directors and greater-than-10%
beneficial owners were complied with by such persons.
10
PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on the
shares of common stock of Cost-U-Less for the period commencing on July 23,
1998, the date on which Cost-U-Less became a publicly held corporation, and
ending on December 30, 2001, with the cumulative total return of the Nasdaq
Stock Market Index (US) and the Nasdaq Retail Trade Stocks Index over the same
period (assuming an investment of $100 in the common stock, stocks comprising
The Nasdaq Stock Market Index (US), and the stocks comprising the Nasdaq Retail
Trade Stocks Index on July 23, 1998, and the reinvestment of all dividends).
Comparison of Five-Year Cumulative Total Returns
Performance Graph for
Cost U Less, Inc.
Produced on 02/20/2002 including data to 12/28/2001
[THE FOLLOWING INFORMATION WAS ALSO REPRESENTED AS A LINE CHART IN THE PRINTED
MATERIAL]
CRSP Total Returns Index for: 07/1998 12/1998 12/1999 12/2000 12/2001
Cost U Less, Inc. 100.0 75.0 58.9 14.7 18.0
Nasdaq Stock Market (US Companies) 100.0 113.2 208.0 128.3 103.7
Nasdaq Retail Trade Stocks 100.0 97.2 86.9 53.9 75.3
SIC 5200-5599, 5700-5799, 5900-5999 US & Foreign
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 07/23/1998.
11
REPORT BY THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is comprised of
non-employee members of the Company's Board of Directors. The Compensation
Committee is responsible for setting and administering the policies governing
annual compensation of the executive officers of the Company. The Compensation
Committee reviews the performance and compensation levels for executive
officers and sets salary levels.
The goals of the Company's executive officer compensation policies are to
attract, retain and reward executive officers who contribute to the Company's
success, to align executive officer compensation with the Company's performance
and to motivate executive officers to achieve the Company's business
objectives.
Base salaries of executive officers are reviewed annually by the
Compensation Committee and adjustments are made based on (i) individual
performance of executive officers for the previous fiscal year, and (ii)
financial results of the Company for the previous year.
The Company strongly believes that equity ownership by executive officers
provides incentives to build shareholder value and aligns the interests of
executive officers with those of the shareholders, and therefore makes periodic
grants of stock options under the Company's 1998 Stock Incentive Compensation
Plan. The size of an option grant to an executive officer has generally been
determined with reference to the responsibilities and expected future
contributions of the executive officer, previous grants to that officer, as
well as recruitment and retention considerations. In 2001, the Compensation
Committee approved stock option grants to certain of the executive officers
consistent with these criteria. See "Option Grants in Last Fiscal Year."
Mr. Meder's compensation as President and Chief Executive Officer includes
(i) base salary, (ii) annual incentive bonuses and (iii) stock option grants.
The determination of Mr. Meder's base salary is based upon assessments of
individual performance and achievement of predetermined operating goals that
are established annually by the Board of Directors. Assessments of individual
performance include objective standards and subjective evaluations of the value
of Mr. Meder's contributions. Mr. Meder's base salary for fiscal 2001 was set
at $240,000. Mr. Meder received an incentive bonus in the amount of $10,000 for
fiscal 2001. In fiscal 2001, the Compensation Committee granted Mr. Meder stock
options for 100,000 shares under the 1998 Stock Incentive Compensation Plan.
The Company has considered the provisions of Section 162(m) of the
Internal Revenue Code and related Treasury Department regulations which
restrict deductibility of executive compensation paid to the Company's chief
executive officer and each of the four other most highly compensated executive
officers holding office at the end of any year to the extent such compensation
exceeds $1,000,000 for any of such officers in any year and does not qualify
for an exception under the statute or regulations. Income from options granted
under the 1998 Stock Incentive Compensation Plan would generally qualify for an
exemption from these restrictions so long as the options are granted by a
committee whose members are non-employee directors The Company expects that the
Compensation Committee will generally be comprised of non-employee directors,
and that to the extent such Committee is not so constituted for any period of
time, the options granted during such period will not be likely to result in
compensation exceeding $1,000,000 in any year. To the extent that total
non-exempt compensation exceeds $1,000,000 in fiscal 2001 or any subsequent
year, it will not be deductible. The Committee does not believe that in general
other components of the Company's compensation will be likely to exceed
$1,000,000 for any executive officer in the foreseeable future and therefore
concluded that no further action with respect to qualifying such compensation
for deductibility was necessary at this time. In the future, the Committee will
continue to evaluate the advisability of qualifying its executive compensation
for deductibility of such compensation. The Committee's policy is to qualify
its executive compensation for deductibility under applicable tax laws as
practicable.
COMPENSATION COMMITTEE
George C. Textor
David A. Enger
12
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. The Board of Directors, in its business
judgment, has determined that all members of the committee are "independent,"
as required by the applicable listing standards of the Nasdaq SmallCap Market.
As set forth in the committee's Charter, management has the primary
responsibility for the financial statements and reporting process, including
the systems of internal controls and the selection, application and disclosure
of critical accounting policies. In fulfilling its oversight responsibilities,
the committee reviewed and discussed the Company's audited financial statements
in the Annual Report with management, including a discussion of the quality of
the accounting principles and policies, the reasonableness of significant
judgments, and the clarity of disclosures in the financial statements.
The Audit Committee has reviewed with the Company's independent
accountants, who are responsible for auditing the Company's financial
statements and expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgments as to the quality of the Company's accounting principles and such
other matters as are required to be discussed with the committee under
generally accepted auditing standards. The committee has discussed matters
required to be discussed by SAS 61 (Codification of Statements on Auditing
Standards) which includes, among other items, matters related to the conduct of
the audit of the Company's financial statements. The committee has also
received written disclosures and the letter from Deloitte & Touche, LLP
required by Independence Standards Board Standard No. 1 (which relates to the
auditors' independence from the Company and its related entities) and has
discussed with Deloitte & Touche, LLP their independence from management and
the Company and has considered the compatibility of nonaudit services with the
auditors' independence.
The members of the Audit Committee rely without independent verification
on the information provided to them and on the representations made by
management and the independent auditors. Accordingly, the Audit Committee's
oversight does not provide an independent basis to determine that management
has maintained appropriate accounting and financial reporting principles or
appropriate internal control and procedures designed to assure compliance with
accounting standards and applicable laws and regulations. Furthermore, the
Audit Committee's considerations and discussions referred to above do not
assure that the audit of the Company's financial statements has been carried
out in accordance with generally accepted auditing standards, that the
financial statements are presented in accordance with generally accepted
accounting principles or that the Company's auditors are in fact "independent".
Based on the reviews and discussions referred to above, and subject to the
limitations on the role and responsibilities of the committee referred to above
and in the Charter, the committee recommended to the Company's Board of
Directors that the Company's audited financial statements be included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 30,
2001. The committee and the Board of Directors have also recommended the
selection of the Company's independent auditors.
AUDIT COMMITTEE
Gary W. Nettles
David A. Enger
George C. Textor
13
CHANGE OF ACCOUNTANTS
On December 19, 2001, we dismissed Ernst & Young LLP as our independent
accountants. At that time, the reports of Ernst & Young LLP on our financial
statements for the two fiscal years preceding the dismissal had not contained
an adverse opinion or a disclaimer of opinion nor were they qualified or
modified as to uncertainty, audit scope or accounting principle. In the two
fiscal years preceding the dismissal, there were no disagreements with Ernst &
Young LLP on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure. Our audit committee made
the decision to dismiss Ernst & Young LLP. During the two fiscal years
preceding the dismissal, we did not have a disagreement or difference of
opinion with Ernst & Young LLP in which Ernst & Young LLP advised us of any
matter that would be a reportable event under Item 310(a)(1)(v) of Regulation
S-K.
We engaged Deloitte & Touche, LLP as our new independent accountants on
December 19, 2001. During the two fiscal years preceding December 19, 2001, we
had not consulted with Deloitte & Touche, LLP regarding either the application
of accounting principles to a specified completed or proposed transaction, the
type of audit opinion they might render on our financial statements, or any
disagreement with Ernst & Young LLP or reportable event.
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE, LLP
AS THE INDEPENDENT AUDITORS OF COST-U-LESS
Unless otherwise instructed, it is the intention of the persons named in
the accompanying form of proxy to vote shares represented by properly executed
proxies for the ratification of the appointment of Deloitte & Touche, LLP as
independent accountants for the Company for fiscal 2002. Deloitte & Touche, LLP
has audited the financial statements of the Company for fiscal 2001.
Representatives of Deloitte & Touche, LLP are expected to attend the Annual
Meeting and will have an opportunity to respond to appropriate questions from
shareholders. Representatives of Ernst & Young, LLP are not expected to attend
the Annual Meeting.
Shareholder ratification of the selection of Deloitte & Touche, LLP as the
Company's independent public accountants is not required by the Company's
Bylaws or otherwise. The Board of Directors is submitting the selection of
Deloitte & Touche, LLP to the shareholders for ratification as a matter of good
corporate practice. In the event the shareholders fail to ratify the selection,
the Board of Directors will reconsider whether or not to retain that firm. Even
if the selection is ratified, the Board of Directors in its discretion, may
direct the appointment of a different independent accounting firm at any time
during the year if the Board of Directors determines that such a change could
be in the best interests of the Company and its shareholders.
PRINCIPAL ACCOUNTING FIRM FEES
Fees Billed To The Company During Fiscal 2001
Audit Fees: The fees of Ernst & Young LLP billed for fiscal 2001 were:
$71,583.
The fees of Deloitte & Touche LLP billed for fiscal 2001
were: $142,832.
Financial Information Systems Design and Implementation Fees: There were no
fees billed by Ernst & Young LLP or Deloitte & Touche LLP during the fiscal year
ended December 30, 2001 for professional services related to financial
information systems design and implementation.
All Other Fees: The fees of Ernst & Young LLP billed for the year ended
December 30, 2001 for all services other than fees covered under the headings
"Audit Fees" and Financial Information Systems Design and Implementation Fees"
were $111,314, including tax and benefit plan related services.
There were no fees of Deloitte & Touche LLP billed for the year ended
December 30, 2001 for services other than fees covered under the heading "Audit
Fees".
The Board of Directors recommends a vote "FOR" the ratification of the
appointment of Deloitte & Touche, LLP as independent auditors for the
Company for fiscal 2002.
14
SHAREHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Under the Commission's proxy rules, shareholder proposals that meet
certain conditions may be included in the proxy statement and proxy card for a
particular annual meeting. Shareholders that intend to present a proposal at
the 2003 Annual Meeting of Cost-U-Less must give notice of the proposal to
Cost-U-Less no later than 120 calendar days in advance of the one year
anniversary of the date the Company's proxy statement was released to
shareholders in connection with the previous year's annual meeting of
shareholders to be considered for inclusion in the proxy statement and proxy
card relating to that meeting. Shareholders that intend to present a proposal
that will not be included in the proxy statement and proxy card must give
notice of the proposal to Cost-U-Less no fewer than 60 nor more than 90 days
prior to the date of the 2003 Annual Meeting pursuant to the Bylaws of
Cost-U-Less. Cost-U-Less reserves the right to reject, rule out of order, or
take other appropriate action with respect to any proposal that does not comply
with these and other applicable requirements.
OTHER MATTERS
As of the date of this Proxy Statement, the Board does not intend to
present, and has not been informed that any other person intends to present,
any matters for action at the Annual Meeting other than the matters
specifically referred to in this Proxy Statement. If other matters properly
come before the Annual Meeting, it is intended that the holders of the proxies
will act with respect thereto in accordance with their best judgment.
Copies of the Cost-U-Less 2001 Annual Report to Shareholders are being
mailed to shareholders, together with this Proxy Statement, form of Proxy and
Notice of Annual Meeting of Shareholders. Additional copies of the Annual
Report may be obtained from the Secretary of Cost-U-Less, 8160-304th Ave.,
S.E., Bldg. 3, Ste. A, Preston, Washington 98050.
The annual report of Cost-U-Less on Form 10-K for the fiscal year ended
December 30, 2001 was filed with the Securities and Exchange Commission on
April 1, 2002. Copies of the 10-K may be obtained from the Secretary of
Cost-U-Less, 8160-304th Ave., S.E., Bldg. 3, Ste. A, Preston, Washington 98050.
BY ORDER OF THE BOARD OF DIRECTORS,
LOGO
Martin P. Moore
Secretary
Preston, Washington
April 12, 2002
15
Please mark
your votes as |X|
indicated
FOR the WITHHOLD AUTHORITY
Nominees to vote for the Nominees
(1) ELECTION OF THREE DIRECTORS. |_| |_|
Nominees: 01 Arthur W. Buerk
02 David A. Enger
03 Gary W. Nettles
WITHHOLD for the following only: (write the name of the nominee in the space
below)
- --------------------------------------------------------------------------------
Unless otherwise directed, all votes will be apportioned equally among
those persons for who authority is given to vote
FOR AGAINST ABSTAIN
(2) RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE |_| |_| |_|
LLP AS THE INDEPENDENT AUDITORS OF COST-U-LESS
|_| I plan to attend the Annual Meeting
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
SHAREHOLDER IN THE SPACE PROVIDED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED "FOR" ITEM 1 AND "FOR" ITEM 2. The Board of Directors recommends a
vote "FOR" Item 1 and "FOR" Item 2.
Date
----------------------------------------------------------------
Signature(s)
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Date
----------------------------------------------------------------
Signature(s)
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Please sign exactly as name appears hereon. Attorneys, trustees,
executors and other fiduciaries acting in a representative capacity
should give their names and give their titles. An authorized person
should sign on behalf of corporations, partnerships, associates,
etc. and give his or her title. If your shares are held by two or
more persons, each person must sign. Receipt of the notice of
meeting and proxy statement is hereby acknowledged.
- --------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
COST-U-LESS, INC.
This Proxy is solicited by the Board of Directors for the
Annual Meeting of Shareholders-May 14, 2002
The undersigned hereby appoint(s) J. Jeffrey Meder and Martin P. Moore, and each
of them, as proxies, with full power of substitution, to represent and vote as
designated all shares of common stock of Cost-U-Less, Inc. held of record by the
undersigned on March 29, 2002, at the Annual Meeting of Shareholders of
Cost-U-Less, Inc. to be held at the Doubletree Hotel (Lake Hills Room), 300
112th Ave. S.E., Bellevue, Washington, at 10:00 a.m. on Tuesday, May 14, 2002,
with authority to vote upon the matters listed below and with discretionary
authority as to any other matters that may properly come before the meeting or
any adjournment or postponement thereof.
IMPORTANT-PLEASE DATE AND SIGN ON THE OTHER SIDE
- --------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
You can now access your Cost-U-Less account online.
Access your Cost-U-Less shareholder account online via Investor
ServiceDirect(SM) (ISD).
Mellon Investor Services LLC, agent for Cost-U-Less, now makes it easy and
convenient to get current information on your shareholder account. After a
simple, and secure process of establishing a Personal Identification Number
(PIN), you are ready to log in and access your account to:
o View account status
o Make address changes
o View certificate history
o Establish/change your PIN
Visit us on the web at http://www.melloninvestor.com
and follow the instructions shown on this page.
Step 1: FIRST TIME USERS - Establish a PIN
You must first establish a Personal Identification Number (PIN) online by
following the directions provided in the upper right portion of the web screen
as follows. You will also need your Social Security Number (SSN) available to
establish a PIN.
Investor ServiceDirect(SM) is currently only available for domestic individual
and joint accounts.
o SSN
o PIN
o Then click on the button
Please be sure to remember your PIN, or maintain it in a secure place for future
reference.
Step 2: Log in for Account Access
You are now ready to log in. To access your account please enter your:
o SSN
o PIN
o Then click on the button
If you have more than one account, you will now be asked to select the
appropriate account.
Step 3: Account Status Screen
You are now ready to access your account information. Click on the appropriate
button to view or initiate transactions.
o Certificate History
o Issue Certificate
o Payment History
o Address Change
o Duplicate 1099
For Technical Assistance Call 1-877-978-7778 between
9am-7pm Monday-Friday Eastern Time