<PAGE>
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 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
99 CENTS ONLY STORES
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee Required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
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 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
-----------------------------------------------------------------------
(3) Filing party:
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(4) Date filed:
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<PAGE>
99 CENTS ONLY STORES
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 12, 1998
------------------------
To the Shareholders:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders (the
"Annual Meeting") of 99 CENTS Only Stores (the "Company") will be held at the
Company's offices located at 4000 Union Pacific Avenue, City of Commerce,
California at 10:00 a.m. (Los Angeles time) on Tuesday, May 12, 1998 for the
following purposes:
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. The
persons nominated by the Board of Directors of the Company (Messrs. D.
Gold, H. Gold, E. Schiffer, J. Gold, W. Christy, M. Holen, B. Schwartz
and L. Glascott) are described in the accompanying Proxy Statement;
2. To approve an amendment to the Company's 1996 Stock Option Plan to
increase the maximum number of shares of Common Stock that may be issued
pursuant to awards granted under the plan from 1,250,000 shares to
2,500,000 shares; and
3. To transact such other business as may properly come before the Annual
Meeting or any of its adjournments or postponements.
Only shareholders of record of the Company at the close of business on March
31, 1998 are entitled to notice of and to vote at the Annual Meeting and
adjournments or postponements thereof.
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 mark, sign and return the enclosed Proxy as promptly as possible in the
postage pre-paid envelope enclosed for that purpose. Any shareholder attending
the Annual Meeting may vote in person, even though he or she has returned a
Proxy.
By Order of the Board of Directors,
/s/ ERIC SCHIFFER
---------------------------
Eric Schiffer
Assistant Corporate Secretary
City of Commerce, California
April 14, 1998
TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN IT
IN THE ENCLOSED ENVELOPE. 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.
<PAGE>
99 CENTS ONLY STORES
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, MAY 12, 1998
---------------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors of 99 CENTS Only Stores, a California
corporation (the "Company" or "99 CENTS Only Stores"), for use at the 1998
Annual Meeting of Shareholders (the "Annual Meeting") to be held at the
Company's offices at 4000 Union Pacific Avenue, City of Commerce, California, on
Tuesday, May 12, 1998, commencing at 10:00 a.m. (with pre-meeting activities at
8:00 a.m.), and at all postponements and adjournments thereof.
At the Annual Meeting, the shareholders of the Company will vote upon (i)
the election of eight directors to hold office until the next Annual Meeting of
Shareholders and until their respective successors are duly elected and
qualified, (ii) a proposal to amend the Company's 1996 Stock Option Plan to
increase the maximum number of shares of Common Stock that may be issued
pursuant to awards under the plan, and (iii) such other matters as may properly
come before the Annual Meeting or any of its adjournments or postponements.
A Proxy for use at the Annual Meeting is enclosed. Any shareholder who
executes and delivers such Proxy has the right to revoke it at any time before
it is exercised by delivering to the Secretary of the Company an instrument
revoking it or a duly executed proxy bearing a later date, or by attending the
Annual Meeting and voting in person. Subject to such revocation, all shares
represented by a properly executed Proxy received in time for the Annual Meeting
will be voted by the Proxy holders in accordance with the instructions on the
Proxy. If no instruction is specified 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 1996 Stock Option Plan, and (ii) 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 14, 1998.
VOTING PROCEDURES
The close of business on March 31, 1998 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, 18,586,111 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 3,900 shareholders of record.
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. The
election of directors requires the affirmative vote of a plurality of the shares
of Common Stock present and voting at the Annual Meeting. The amendment of the
1996 Stock Option Plan to increase by 1,250,000 the number of shares of Common
Stock that may be issued pursuant to awards under the 1996 Stock Option Plan
will require the affirmative vote of a majority of the shares of Common Stock
present or represented and voting on this matter at the Annual Meeting
1
<PAGE>
(which shares voting affirmatively also constitute at least a majority of the
required quorum). Abstentions and broker non-votes will be included in the
number of shares present at the Annual Meeting for the purpose of determining
the presence of a quorum. 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 either as votes
cast for or against such matters.
ELECTION OF DIRECTORS
In accordance with the Bylaws of the Company, 99 CENTS Only Stores'
directors are elected at each Annual Meeting of Shareholders and hold office
until the next Annual Meeting of Shareholders 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:
David Gold
Howard Gold
Eric Schiffer
Jeff Gold
William O. Christy
Marvin Holen
Ben Schwartz
Lawrence Glascott
If elected, each nominee is expected to serve until the 1999 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 A VOTE "FOR" THE ELECTION OF THE
NOMINEES LISTED ABOVE.
2
<PAGE>
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, 1998:
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED OR
AGE AT MARCH APPOINTED
NAME: 31, 1998 DIRECTOR PRINCIPAL OCCUPATION
- ------------------------------- --------------- ----------- ---------------------------------------------------------
<S> <C> <C> <C>
NOMINEES:
David Gold..................... 65 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 40 years of retail
experience and 20 years of wholesale experience.
Howard Gold.................... 38 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.................. 37 1991 ERIC SCHIFFER has been a director of the Company since
1991. He joined the Company in 1992 and served in various
managerial capacities. He currently serves as Senior Vice
President of Finance and Operations and Treasurer. 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...................... 30 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 since 1989. 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............. 66 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 to 1990
where he spent the majority of his career. 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.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED OR
AGE AT MARCH APPOINTED
NAME: 31, 1998 DIRECTOR PRINCIPAL OCCUPATION
- ------------------------------- --------------- ----------- ---------------------------------------------------------
<S> <C> <C> <C>
Marvin Holen................... 68 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 Californian Rapid Transit District from 1976 to
1993 (six of those years as the Board's President). He
also 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.
Ben Schwartz................... 80 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 has also 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 (FMI).
Lawrence Glascott.............. 63 1996 LAWRENCE GLASCOTT has been a director of the Company
since October 1996. He was the former Vice
President--Finance of Waste Management International.
Prior thereto, Mr. Glascott was a partner at Arthur
Andersen LLP and was the Arthur Andersen LLP partner in
charge of the 99 CENTS 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................... 55 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.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED OR
AGE AT MARCH APPOINTED
NAME: 31, 1998 DIRECTOR PRINCIPAL OCCUPATION
- ------------------------------- --------------- ----------- ---------------------------------------------------------
<S> <C> <C> <C>
Andy Farina.................... 51 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.
CERTAIN KEY EMPLOYEES:
Larry Borenstein............... 46 LARRY BORENSTEIN joined the Company in 1984 and currently
serves as Vice President of Construction and Advertising.
Mr. Borenstein has also served in various other
managerial capacities within the Company.
Carolyn Brock.................. 47 CAROLYN J. BROCK joined the Company in 1994 and currently
serves as Vice President of Human Resources. During 1993
and 1994, Ms. Brock was employed by Dodge, Warren &
Peters Consultants, Inc., a consulting firm, where she
served as Executive Vice President. From 1992 to 1993,
she was an owner and the Vice President of Comp
Solutions, a worker's compensation consulting firm. From
1990 to 1992, she was the President of Employers
Management Services, a human resources consulting firm.
Jose Gomez..................... 38 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.
Kenneth R. Phipps.............. 47 KENNETH R. PHIPPS joined the Company in 1993 and serves
as Vice President of Distribution. From 1991 until 1993,
Mr. Phipps served as Director of Operations for SE Rykoff
Inc., a large food wholesaler. From 1970 to 1991, Mr.
Phipps was employed by Lucky Stores, Inc., a large
grocery chain, where his responsibilities included, at
various times, serving as the distribution center manager
at three Lucky's facilities.
</TABLE>
David Gold is the father of Howard Gold and Jeff Gold and the father-in-law
of Eric Schiffer.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of eleven meetings during the fiscal
year ended December 31, 1997. The Board of Directors has an Audit Committee and
a Compensation Committee. During the fiscal
5
<PAGE>
year ended December 31, 1997, 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 and the Compensation Committee each met one time during
the fiscal year ended December 31, 1997. 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 3,000 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 day preceding the date of grant. In addition, each Outside Director
is entitled to receive $1,000 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.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
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 deep-discount
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, it is currently the Company's policy not to award
stock options to David Gold and not to provide annual incentive bonuses to any
of Messrs. David Gold, Howard Gold, Jeff Gold and Eric Schiffer.
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
6
<PAGE>
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 fiscal 1997, 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 fiscal year ended
December 31, 1996, and the salaries received by similarly situated executives at
other companies. David Gold's salary also included $325,000 representing the
payment of life insurance premiums on policies insuring the lives of Mr. Gold
and his wife, Sherry Gold. 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;
and (ii) operating income goals. Individual bonus targets for executives range
from 0% to 25% of the executive's base salary depending on the level of
responsibility and obtainment of individual performance goals. Messrs. David
Gold, Howard Gold, Jeff Gold and Eric Schiffer were not eligible to receive an
annual incentive bonus for 1997.
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
1997 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. Mr.
Gold was not eligible to receive stock options during 1997.
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 1997 will be fully deductible.
7
<PAGE>
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 (other than Messrs. David Gold, Howard Gold,
Jeff Gold and Eric Schiffer) and long-term incentives (other than David Gold),
as described in this report, serves the interests of the Company and its
shareholders.
COMPENSATION COMMITTEE
William O. Christy
Marvin Holen
Lawrence Glascott
8
<PAGE>
EXECUTIVE COMPENSATION
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.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------
NUMBER OF
FISCAL YEAR ANNUAL COMPENSATION SECURITIES
ENDED DECEMBER --------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION 31, SALARY BONUS OPTIONS(A) COMPENSATION(B)
- ------------------------------------------ --------------- ---------- --------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
David Gold................................ 1997 $ 175,000 -- -- $ 325,000
Chairman of the Board and Chief Executive 1996 175,000 -- -- 324,000
Officer 1995 65,000 -- -- 317,000
Helen Pipkin.............................. 1997 $ 135,200 $ 25,000 18,750 --
Senior Vice President of Wholesale 1996 125,000 25,000 18,750 --
Operations 1995 104,000 20,000 -- --
Jeff Gold................................. 1997 $ 120,000 -- 11,250 --
Senior Vice President of Real Estate and 1996 120,000 -- 11,250 --
Information Systems 1995 52,000 -- -- --
Howard Gold............................... 1997 $ 120,000 -- 11,250 --
1996 120,000 -- 11,250 --
Senior Vice President of Distribution 1995 52,000 -- -- --
Eric Schiffer............................. 1997 $ 120,000 -- 11,250
Senior Vice President of Finance and 1996 120,000 -- 11,250 --
Operations, Treasurer 1995 52,000 -- -- --
</TABLE>
- ------------------------
(a) Reflects an adjustment, pursuant to the anti-dilution provisions of the
Company's 1996 Stock Option Plan and the executive's respective stock option
agreement, in the number of shares of Common Stock underlying stock options
granted in 1996 and 1997 as a result of the Company's distribution in
December 1997 of a dividend of 0.25 shares of Common Stock for each share of
Common Stock then outstanding.
(b) Represents life insurance premiums on policies (one of which is "split
dollar") insuring the lives of David Gold and his wife, Sherry Gold. Under
the "split dollar" life insurance policy, upon the deaths of David and
Sherry Gold, the Company will be reimbursed for all premiums paid. Also
includes $2,000 of automobile insurance premiums paid in 1995 on policies
insuring David Gold's automobile.
9
<PAGE>
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, 1997 to the Named
Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED RATE
NUMBER OF OF STOCK PRICE
SECURITIES PERCENT OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED OPTION TERM(A)
OPTION TO EMPLOYEES IN EXERCISE OR EXPIRATION ----------------------
NAME GRANTED(B) FISCAL YEAR(C) BASE PRICE(D) DATE 5% 10%
- ----------------------- ----------- ----------------- ------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
David Gold............. -- -- -- -- -- --
Helen Pipkin........... 18,750 2.7% $ 17.60 5/1/07 $ 207,535 $ 525,935
Jeff Gold.............. 11,250 1.6% $ 17.60 5/1/02 $ 54,704 $ 120,881
Howard Gold............ 11,250 1.6% $ 17.60 5/1/02 $ 54,704 $ 120,881
Eric Schiffer.......... 11,250 1.6% $ 17.60 5/1/02 $ 54,704 $ 120,881
</TABLE>
- ------------------------
(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 1, 1998.
(c) Options covering an aggregate of 695,464 shares were granted to eligible
persons during the fiscal year ended December 31, 1997.
(d) The exercise price and tax withholding obligations related to exercise may
be paid by delivery of already owned shares, subject to certain conditions.
Reflects an adjustment, pursuant to the anti-dilution provisions of the
Company's 1996 Stock Option Plan and the executive's respective stock option
agreement, in the per share exercise price of the stock options from $22.00
(the market price of a share of Common Stock on the New York Stock Exchange
on the date of grant) to $17.60 as a result of the Company's distribution in
December 1997 of a dividend of .25 shares of Common Stock for each share of
Common Stock then outstanding.
10
<PAGE>
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, 1997 ($29.50 per share). No stock options
were exercised by any Named Executive Officer during fiscal 1997.
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997(A)
---------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
David Gold................. 0 0 $ 0 $ 0
Helen Pipkin............... 6,250 31,250 129,438 482,000
Jeff Gold.................. 3,750 18,750 77,663 289,200
Howard Gold................ 3,750 18,750 77,663 289,200
Eric Schiffer.............. 3,750 18,750 77,663 289,200
</TABLE>
- ------------------------
(a) Based on the last reported sale price of the Common Stock on the New York
Stock Exchange on December 31, 1997 ($29.50) less the option exercise price.
11
<PAGE>
CERTAIN TRANSACTIONS WITH
DIRECTORS AND EXECUTIVE OFFICERS
As of March 31, 1998, the Company leased 13 of its 54 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 $1.6
million, $1.8 million and $1.8 million in 1995, 1996 and 1997, 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 CENTS 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.
The Company pays the premium on a "split-dollar" life insurance agreement
with David Gold and Sherry Gold. See "Executive Compensation." Under a
collateral assignment agreement, the premiums paid by the Company will be
reimbursed to the Company out of death benefit proceeds at the death of both
shareholders. The Company has recorded a receivable of $230,000 from an
affiliated entity in its balance sheets as of December 31, 1997 for the present
value, not to exceed the cash surrender value of the policy, based on mortality
table, of the premiums paid through December 31, 1997.
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, 1997, all of the Company's executive officers, directors and
greater-than-ten percent shareholders complied with all Section 16(a) filing
requirements, except that each of Howard Gold and Helen Pipkin did not file a
Form 5 with respect to options acquired during 1997.
12
<PAGE>
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 the Company's initial public offering) to December 31, 1997,
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.
COMPARISON OF CUMULATIVE RETURN AMONG
99 CENTS ONLY STORES, THE S&P SMALL CAP 600 INDEX
AND THE RUSSELL 2000 INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
QUARTER ENDING 99 CENT ONLY STORES RUSSELL 2000 INDEX S&P SMALLCAP 600 INDEX
<S> <C> <C> <C>
May-23-96 $100 $100 $100
Jun-96 88 92 96
Sep-96 88 96 99
Dec-96 103 101 104
Mar-97 123 95 94
Jun-97 173 110 112
Sep-97 182 125 128
Dec-97 194 125 121
</TABLE>
PROPOSAL TO AMEND THE 1996 STOCK OPTION PLAN
GENERAL
The Board of Directors has approved an amendment (the "Amendment") to the
1996 Stock Option Plan (the "Stock Plan") to increase the number of shares of
Common Stock available for issuance under the Stock Plan from 1,250,000 shares
to 2,500,000 shares. The Amendment is being submitted to the Shareholders for
approval.
The Board of Directors approved the Amendment to ensure that a sufficient
number of shares are available for issuance under the Stock Plan. At March 31,
1998, 13,200 shares remained available for grants of awards under the Stock
Plan. The Board of Directors believes that the ability to grant stock-based
awards is important to the future success of the Company. The grant of stock
options and other stock-based awards can motivate high levels of performance and
provide an effective means of recognizing employee contributions to the success
of the Company. In addition, stock-based compensation can be valuable in
recruiting and retaining key personnel who are in great demand as well as
rewarding and providing incentives to its current employees. The increase in the
number of shares available for awards under the Stock Plan will enable the
Company to continue to realize the benefits of granting stock-based
13
<PAGE>
compensation. Further, it is the Company's current policy to give to all
employees (except David Gold, Chief Executive Officer of the Company, and Sherry
Gold, Bargain Wholesale's cash and carry operations manager), full-time or
part-time, with tenure of more than six months with the Company, an annual grant
of stock options.
On December 1, 1997, upon the Company's distribution of a dividend of 0.25
shares of Common Stock for each share of Common Stock then outstanding, the
number of shares of Common Stock available for issuance under the Stock Plan was
automatically increased pursuant to the terms of the Stock Plan from 1,000,000
shares to 1,250,000 shares. In addition, as a result of the stock dividend,
proportionate adjustments were made to the number of shares of Common Stock
underlying awards then outstanding under the Stock Plan and to the maximum
number of shares with respect to which awards may be granted to any participant
in the Stock Plan in any fiscal year.
As of March 31, 1998, the last reported sales price of the Common Stock on
the New York Stock Exchange was $34 15/16 per share.
SUMMARY OF THE STOCK PLAN
PURPOSE. The purpose of the Stock Plan is to advance the interests of the
Company and its shareholders by strengthening the Company's ability to obtain
and retain the services of the types of employees, consultants, officers and
directors who will contribute to the Company's long term success and to provide
incentives which are linked directly to increases in stock value which will
inure to the benefit of all shareholders of the Company.
ADMINISTRATION. The Stock Plan must be administered by a committee of the
Board of Directors of the Company (the "Committee") consisting of two or more
directors, each of whom shall be a "disinterested person," as that term is
defined in Rule 16b-3(c) of the Rules and Regulations (the "Rules") of the
Commission under the Securities Exchange Act of 1934, as amended, an "outside
director" for purposes of Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code") and the regulations of the Internal Revenue Service
adopted thereunder, as such Rules and such Section and regulations may from time
to time be amended or interpreted, and a director who is not also an employee of
the Company. Members of the Committee serve at the pleasure of the Company's
Board of Directors. The Stock Plan is currently administered by the Compensation
Committee of the Board of Directors.
Subject to the provisions of the Stock Plan, the Committee has full and
final authority (i) to select from among eligible directors, officers, employees
and consultants, those persons to be granted awards under the Stock Plan, (ii)
to determine the type, size and terms of individual awards to be made to each
person selected, (iii) to determine the time when awards will be granted and to
establish objectives and conditions (including, without limitation, vesting and
performance conditions), if any, for earning awards, (iv) to amend the terms or
conditions of any outstanding award, subject to applicable legal restrictions
and to the consent of the other party to such award, (v) to authorize any person
to execute, on behalf of the Company, any instrument required to carry out the
purposes of the Stock Plan, and (vii) to make any and all other determinations
which the Committee determines to be necessary or advisable in the
administration of the Stock Plan. The Committee has full power and authority to
administer and interpret the Stock Plan and to adopt, amend and revoke such
rules, regulations, agreements, guidelines and instruments for the
administration of the Stock Plan and for the conduct of its business as the
Committee deems necessary or advisable.
ELIGIBILITY. Any person who is an officer, employee or consultant of the
Company, or any of its subsidiaries (a "Participant"), is eligible to be
considered for the grant of awards under the Stock Plan. Directors of the
Company who are not employees ("non-employee directors") are only entitled to
receive automatic grants of awards under the Stock Plan as discussed below. No
Participant may receive in any fiscal year awards representing more than 125,000
shares of Common Stock, subject to adjustment as provided in the Stock Plan. It
is the Company's policy to give to all employees (except David Gold, Chief
14
<PAGE>
Executive Officer of the Company, and Sherry Gold, Bargain Wholesale's cash and
carry operations manager), full-time or part-time, with tenure of more than six
months with the Company, an annual grant of stock options.
MANDATORY GRANTS TO NON-EMPLOYEE DIRECTORS. Each non-employee director of
the Company who is serving on the Board of Directors as of the date of each
annual meeting of shareholders (or any special meeting in lieu of the annual
meeting) is entitled to receive a ten year non-statutory stock option to
purchase 3,000 shares of Common Stock, with a per share exercise price equal to
the fair market value (as determined pursuant to the Stock Plan) of a share of
Common Stock on the day preceding the date of grant.
TYPES OF AWARDS. Awards authorized under the Stock Plan may consist of any
type of arrangement with a Participant that, by its terms, involves or might
involve or be made with reference to the issuance of shares of the Company's
Common Stock, or a derivative security with an exercise or conversion price
related to the Common Stock or with a value derived from the value of the Common
Stock. Awards are not restricted to any specified form or structure and may
include sales, bonuses and other transfers of stock, restricted stock, stock
options, reload stock options, stock purchase warrants, other rights to acquire
stock or securities convertible into or redeemable for stock, stock appreciation
rights, phantom stock, dividend equivalents, performance units or performance
shares, or any other type of award which the Committee shall determine is
consistent with the objectives and limitations of the Stock Plan. An award may
consist of one such security or benefit, or two or more of them in tandem or in
the alternative.
CONSIDERATION. The Common Stock or other property underlying an award may
be issued for any lawful consideration as determined by the Committee,
including, without limitation, a cash payment, services rendered, or the
cancellation of indebtedness. An award may provide for a purchase price of the
Common Stock or other property at a value less than the fair market value of the
Common Stock or other property on the date of grant. In addition, an award may
permit the recipient to pay the purchase price of the Common Stock or other
property or to pay such recipient's tax withholding obligation with respect to
such issuance, in whole or in part, by delivering previously owned shares of
capital stock of the Company or other property, or by reducing the number of
shares of Common Stock or the amount of other property otherwise issuable
pursuant to such award.
TERMINATION OF AWARDS. All awards granted under the Stock Plan expire ten
years from the date of grant, or such shorter period as is determined by the
Committee. No option is exercisable by any person after such expiration. If an
award expires, terminates or is canceled, the shares of Common Stock not
purchased thereunder shall again be available for issuance under the Stock Plan.
AMENDMENT AND TERMINATION OF THE STOCK PLAN. The Committee may amend the
Stock Plan at any time, may suspend it from time to time or may terminate it
without approval of the shareholders; provided, however, that shareholder
approval is required for any amendment which materially increases the number of
shares for which awards may be granted, materially modifies the requirements of
eligibility, or materially increases the benefits which may accrue to recipients
of awards under the Stock Plan. However, no such action by the Board of
Directors or shareholders may unilaterally alter or impair any award previously
granted under the Stock Plan without the consent of the recipient of the award.
In any event, the Stock Plan shall terminate on March 19, 2006 (ten years
following the date it was approved by the Company's shareholders) unless sooner
terminated by action of the Board of Directors.
FEDERAL INCOME TAX CONSEQUENCES FOR STOCK OPTIONS
As of March 31, 1998, the only type of award granted by the Company under
the Stock Plan has been stock options. The following is a general discussion of
the principal tax considerations for both "incentive stock options" within the
meaning of Section 422 of the Code ("Incentive Stock Options") and non-statutory
stock options ("Non-statutory Stock Options"), and is based upon the tax laws
and regulations of
15
<PAGE>
the United States existing as of the date hereof, all of which are subject to
modification at any time. The Stock Plan does not constitute a qualified
retirement plan under Section 401(a) of the Code (which generally covers trusts
forming part of a stock bonus, pension or profit-sharing plan funded by the
employer and/or employee contributions which are designed to provide retirement
benefits to participants under certain circumstances) and is not subject to the
Employee Retirement Income Security Act of 1974 (the pension reform law which
regulates most types of privately funded pension, profit sharing and other
employee benefit plans).
CONSEQUENCES TO EMPLOYEES: INCENTIVE STOCK OPTIONS. No income is recognized
for federal income tax purposes by an optionee at the time an Incentive Stock
Option is granted, and, except as discussed below, no income is recognized by an
optionee upon his or her exercise of an Incentive Stock Option. If the optionee
makes no disposition of the Common Stock received upon exercise within two years
from the date such option was granted or one year from the date such option is
exercised, the optionee will recognize mid-term or long-term capital gain or
loss when he or she disposes of his or her Common Stock depending on the length
of the holding period. Such gain or loss generally will be measured by the
difference between the exercise price of the option and the amount received for
the Common Stock at the time of disposition.
If the optionee disposes of the Common Stock acquired upon exercise of an
Incentive Stock Option within two years after being granted the option or within
one year after acquiring the Common Stock, any amount realized from such
disqualifying disposition will be taxable as ordinary income in the year of
disposition to the extent that (i) the lesser of (a) the fair market value of
the shares on the date the Incentive Stock Option was exercised or (b) the fair
market value at the time of such disposition exceeds (ii) the Incentive Stock
Option exercise price. Any amount realized upon disposition in excess of the
fair market value of the shares on the date of exercise will be treated as
long-term, mid-term or short-term capital gain, depending upon the length of
time the shares have been held.
The use of stock acquired through exercise of an Incentive Stock Option to
exercise an Incentive Stock Option will constitute a disqualifying disposition
if the applicable holding period requirement has not been satisfied.
For alternative minimum tax purposes, the excess of the fair market value of
the stock as of the date of exercise over the exercise price of the Incentive
Stock Option is included in computing that year's alternative minimum taxable
income. However, if the shares are disposed of in the same year, the maximum
alternative minimum taxable income with respect to those shares is the gain on
disposition. There is no alternative minimum taxable income from a disqualifying
disposition in subsequent years.
CONSEQUENCES TO EMPLOYEES: NON-STATUTORY STOCK OPTIONS. No income is
recognized by a holder of Non-statutory Stock Options at the time Non-statutory
Stock Options are granted under the Stock Plan. In general, at the time shares
of Common Stock are issued to a holder pursuant to the exercise of Non-statutory
Stock Options, the holder will recognize ordinary income equal to the excess of
the fair market value of the shares on the date of exercise over the exercise
price.
A holder will recognize gain or loss on the subsequent sale of Common Stock
acquired upon exercise of Non-statutory Stock Options in an amount equal to the
difference between the selling price and the tax basis of the Common Stock,
which will include the price paid plus the amount included in the holder's
income by reason of the exercise of the Non-statutory Stock Options. Provided
the shares of Common Stock are held as a capital asset, any gain or loss
resulting from a subsequent sale will be short-term, mid-term or long-term
capital gain or loss depending upon the length of time the shares have been
held.
CONSEQUENCES TO THE COMPANY: INCENTIVE STOCK OPTIONS. The Company will not
be allowed a deduction for federal income tax purposes at the time of the grant
or exercise of an Incentive Stock Option. There are also no federal income tax
consequences to the Company as a result of the disposition of Common Stock
acquired upon exercise of an Incentive Stock Option if the disposition is not a
disqualifying
16
<PAGE>
disposition. At the time of a disqualifying disposition by an optionee, the
Company will be entitled to a deduction for the amount received by the optionee
to the extent that such amount is taxable to the optionee as ordinary income.
CONSEQUENCES TO THE COMPANY: NON-STATUTORY STOCK OPTIONS. Generally, the
Company will be entitled to a deduction for federal income tax purposes in the
year and in the same amount as the optionee is considered to have realized
ordinary income in connection with the exercise of Non-statutory Stock Options.
REQUIRED VOTE
The approval of the Amendment requires the affirmative vote of a majority of
the shares of Common Stock present or represented and voting on this matter at
the Annual Meeting (which shares voting affirmatively also constitute at least a
majority of the required quorum). Thus, abstentions and broker non-votes can
have the effect of preventing approval of the Amendment where the number of
affirmative votes, though a majority of the votes cast, does not constitute a
majority of the quorum.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" THE APPROVAL OF THE AMENDMENT TO THE 1996 STOCK OPTION PLAN.
17
<PAGE>
OTHER INFORMATION
PRINCIPAL SHAREHOLDERS
The following table sets forth as of March 31, 1998 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.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAMES AND ADDRESSES SHARES(A)(B) CLASS
- ---------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
David Gold (c)(f)..................................................... 8,112,944 43.7%
Sherry Gold (d)(f).................................................... 8,112,944 43.7%
Howard Gold (e)(f).................................................... 5,005,490 26.9%
Jeff Gold (e)(f)...................................................... 5,005,490 26.9%
Eric and Karen Schiffer (f)(g)........................................ 5,016,740 27.0%
Au Zone Investments #3, LLC(f)........................................ 3,753,098 20.2%
William O. Christy (h)................................................ 6,875 *
Marvin Holen (i)...................................................... 12,500 *
Ben Schwartz (j)...................................................... 22,500 *
Lawrence Glascott (k)................................................. 2,500 *
Helen Pipkin (l)...................................................... 20,000 *
All of the Company's executive officers and directors as a group (10
persons)(m)......................................................... 11,951,246 64.0%
</TABLE>
- ------------------------
* 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. 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) On March 31, 1998, the Company filed a Registration Statement with the
Securities and Exchange Commission covering a public offering of an
aggregate of 3,500,000 shares of Common Stock. Of the shares to be offered,
the Company is offering to sell 750,000 newly issued shares and each of
David Gold, Sherry Gold, Howard Gold, Jeff Gold and Eric and Karen Schiffer
is selling 550,000 shares of Common Stock.
(c) Includes 2,179,861 shares owned by Sherry Gold, David Gold's spouse, and
3,753,098 shares controlled through Au Zone Investments #3, LLC, a
California limited liability company ("Au Zone").
(d) Includes 2,179,985 shares owned by David Gold, Sherry Gold's spouse, and
3,753,098 shares controlled through Au Zone.
(e) Includes 3,753,098 shares controlled through Au Zone and 11,250 shares
reserved for issuance upon exercise of stock options which are or will
become exercisable on or before May 30, 1998.
(f) 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 3,753,098 shares of Common Stock. The
18
<PAGE>
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.
(g) Includes 3,753,098 shares controlled through Au Zone and 22,500 shares
reserved for issuance upon exercise of stock options which are or will
become exercisable on or before May 30, 1998.
(h) Includes 6,250 shares of Common Stock reserved for issuance upon exercise of
stock options which are or will become exercisable on or before May 30,
1998.
(i) Includes 8,750 shares of Common Stock reserved for issuance upon exercise of
stock options which are or will become exercisable on or before May 30,
1998.
(j) Includes 3,750 shares of Common Stock reserved for issuance upon exercise of
stock options which are or will become exercisable on or before May 30,
1998.
(k) Includes 1,875 shares of Common Stock reserved for issuance upon exercise of
stock options which are or will become exercisable on or before May 30,
1998.
(l) Includes 18,750 shares of Common Stock reserved for issuance upon exercise
of stock options which are or will become exercisable on or before May 30,
1998.
(m) Includes (i) 2,179,861 shares owned by Sherry Gold, the spouse of David
Gold, (ii) 3,753,098 shares controlled through Au Zone and (iii) 90,000
shares of Common Stock reserved for issuance upon exercise of stock options
which are or will become exercisable on or before May 30, 1998.
SHAREHOLDER PROPOSALS
Any shareholder who intends to present a proposal at the next Annual Meeting
of Shareholders for inclusion in the Company's Proxy Statement relating to such
Annual Meeting must submit such proposal to the Company at its principal
executive offices by December 16, 1998.
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 fiscal year ended December 31, 1997 and have been selected by the Board of
Directors to serve as independent public accountants for the fiscal year ending
December 31, 1998. 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.
19
<PAGE>
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, 1997, WILL BE
MADE AVAILABLE TO SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO 99 CENTS
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
ASSISTANT CORPORATE SECRETARY
City of Commerce, California 90023
April 14, 1998
20
<PAGE>
99 CENTS ONLY STORES-Registered Trademark-
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
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 the Company's
Annual Meeting of Shareholders (the "Annual Meeting"), to be held on May 12,
1998, 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:
The Board of Directors recommends a WITH vote on Proposal 1 and a FOR vote
on Proposal 2.
1. ELECTION OF DIRECTORS, as provided in the Company's Proxy Statement:
/ / WITH / / WITHOUT Authority to vote for the nominees listed below.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY FOR A NOMINEE, LINE THROUGH OR
OTHERWISE STRIKE OUT THE NAME OF THE NOMINEE BELOW)
David Gold
Howard Gold
Eric Schiffer
Jeff Gold
William O. Christy
Marvin Holen
Ben Schwartz
Lawrence Glascott
2. The approval of the amendment to the 99 CENTS Only Stores 1996 Stock
Option Plan (the "Stock Plan") to increase the number of shares of the
Company's Common Stock reserved for issuance under the Stock Plan from
1,250,000 to 2,500,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
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 OTHER BUSINESS THAT MAY PROPERLY COME
BEFORE THE ANNUAL MEETING AND ANY OF ITS POSTPONEMENTS 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 FOR THE
ELECTION OF THE DIRECTORS NAMED AND THE AMENDMENT TO THE 1996 STOCK PLAN, AND
AS THE PROXY HOLDER SHALL DEEM ADVISABLE ON SUCH OTHER BUSINESS AS MAY COME
BEFORE THE ANNUAL MEETING, UNLESS OTHERWISE DIRECTED.
<PAGE>
The undersigned acknowledges receipt of a copy of the Notice of Annual
Meeting and accompanying Proxy Statement dated April 14, 1998 relating to the
Annual Meeting.
Date:________________, 1998
___________________________
___________________________
Signature(s) of Shareholders(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.
THIS PROXY IS SOLICITED BY
THE BOARD OF DIRECTORS OF 99 CENTS ONLY STORES
