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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CONSOLIDATED STORES
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CONSOLIDATED STORES
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
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CONSOLIDATED (LOGO) 1105 North Market Street
Suite 1300
P.O. Box 8985
Wilmington, Delaware 19899
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 6, 1995
Notice is hereby given that the Annual Meeting of Stockholders of
Consolidated Stores Corporation will be held at the headquarters of the
Company's principal operating subsidiary at 300 Phillipi Road, Columbus, Ohio,
on Tuesday, June 6, 1995, at 10:00 A.M., local time, for the following purposes:
1. To elect eight directors of the Company.
2. To transact such other business as may properly come before the meeting.
Only stockholders of record at the close of business on April 17, 1995 are
entitled to notice of and to vote at said meeting or any adjournment thereof.
By order of the Board of Directors.
May 8, 1995
ALBERT J. BELL,
Senior Vice President, General
Counsel
and Secretary
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STOCKHOLDERS ARE URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED FORM OF
PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE TO WHICH NO POSTAGE NEED BE AFFIXED
IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING, YOU MAY REVOKE YOUR
PROXY AND VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR
PROXY.
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CONSOLIDATED (LOGO) 1105 NORTH MARKET STREET
SUITE 1300
P.O. BOX 8985
WILMINGTON, DELAWARE 19899
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PROXY STATEMENT
This Statement is furnished in connection with the solicitation of proxies
for use at the Annual Meeting of Stockholders of Consolidated Stores
Corporation, a Delaware corporation (the "Company"), to be held on June 6, 1995.
The Notice of Annual Meeting, this statement and the accompanying form of proxy,
together with the Company's Annual Report to stockholders for the fiscal year
ended January 28, 1995, are first being mailed to stockholders on or about May
8, 1995.
The close of business on April 17, 1995 has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
meeting. At that date, the Company had outstanding 47,270,568 shares of Common
Stock, $.01 par value per share ("Common Stock"). Each of the outstanding shares
of Common Stock is entitled to one vote. The holders of Common Stock have no
cumulative voting rights in the election of directors.
All voting shall be governed by the Bylaws of the Company pursuant to the
General Corporation Law of the State of Delaware. For purposes of Proposal One,
the eight director nominees having the highest votes cast shall be elected.
Votes will be cast for only those nominees for whom authority is given. Broker
non-votes will be treated as votes not cast, and will not have any effect.
Abstentions will be treated as shares not voted, and will not be calculated in
the tabulation. Stockholders may revoke their proxies if they wish by attending
the meeting, revoking the proxy in writing and voting in person. Tabulation
shall be performed by National City Bank, the Company's Transfer Agent, as
inspected by duly appointed officers of the Company.
PROPOSAL ONE: ELECTION OF DIRECTORS
At the meeting, the shares of Common Stock represented by the proxies will
be voted, unless otherwise specified, for the election as directors of the eight
nominees named below. Each of the eight nominees are currently directors of the
Company. One vacancy will remain in the Board. Proxies cannot be voted at the
annual meeting for more than eight persons, although additional nominations can
be made by stockholders at the meeting.
The reason for fixing the number of directors at a higher number than those
to be elected is that the Company believes it desirable to have the vacancy
available to be filled by the directors without the time and expense involved in
holding a special meeting of the stockholders, should a person who could make a
valuable contribution as a director become available during the year. The
Company intends to add one director to the
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Board of Directors when a suitable person is identified, but no candidate has
been considered and approved by the Board.
<TABLE>
Set forth below is certain information relating to the nominees for
election as directors.
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME AGE FOR THE PAST FIVE YEARS SINCE
- - ------------------- --- ------------------------------------------------------- --------
<S> <C> <C> <C>
Michael L. Glazer 47 President of the Company; Former President, The Bombay 1991
Company (retail home furnishings); former Executive
Vice President, The Bombay Company
William G. Kelley 49 Chairman of the Board and Chief Executive Officer of 1990
the Company
David T. Kollat 56 President and Founder, 22, Inc. (retail research and 1990
consulting)
Nathan P. Morton 46 President and Chief Executive officer, Open Environment 1990
Corporation (software development)
John L. Sisk 67 Retired, Chairman and Chief Executive Officer, Herman's 1990
World of Sporting Goods (retail stores)
Dennis B. Tishkoff 52 President and Chief Executive Officer, Shoe Corporation 1991
of America (retail footwear)
William A. Wickham 50 President, Chief Executive Officer, SBC Advertising 1992
(advertising and corporate communications agency)
Sheldon M. Berman 54 Chairman, Macaroons, Inc. (consumer research and 1994
marketing services); former Chairman, President and
founder, Shelly Berman Communicators (retail marketing
and advertising)
</TABLE>
Five meetings of the Board of Directors were held during the Company's
fiscal year ended January 28, 1995. Each director attended at least 90% of the
meetings of the Board, and the committees on which he served, during the period
for which he served as a director during the year.
The Board has an Audit Committee, a Compensation Committee, and a
Nominating Committee. Messrs. Glazer, Sisk, and Wickham are the members of the
Audit Committee, which monitors the activities of the Company's independent
auditors and its internal audit functions. The Audit Committee met two times
during the fiscal year ended January 28, 1995. Messrs. Kollat, Sisk and Tishkoff
are the members of the Compensation Committee, which administers the Company's
stock option plans and advises the Board of Directors with respect to
compensation matters. The Compensation Committee met five times during the
fiscal year ended January 28, 1995. Messrs. Berman, Kelley, Kollat and Morton
are the members of the Nominating Committee, which is responsible for
interviewing and nominating candidates for election as Directors of the Company.
The Nominating Committee met one time during the fiscal year ended January 28,
1995. The Nominating Committee will not consider nominees recommended by
security holders.
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RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Kelley is also a director of National City Bank, Columbus, and Open
Environment Corporation. Mr. Kollat is also a director of The Limited, Inc.,
Cooker Restaurant Corp., e Shop, Inc., SBC Advertising, AEI Music Network,
Pipeliner Systems, Inc. P.J. Phillips, Cheryl & Co., Christy & Associates,
NuVision, Select Comfort, Inc., Bron-Shoe Co., and Wolverine Worldwide, Inc.
The Company customarily retains SBC Advertising for communications and
advertising services and AEI Music Network for licensed music broadcasting in
stores and other facilities. During fiscal year ended January 28, 1995, the
Company paid fees in the amount of $5,819,617, and $168,000 to SBC Advertising
and AEI Music Network, respectively.
DIRECTOR'S REMUNERATION. Pursuant to arrangements with the Company,
certain directors who are not officers and who are not involved in the daily
affairs of managing the Company receive an annual retainer of $18,000, plus
$1,000 for each Board meeting attended and $500 for each committee meeting
attended. During the fiscal year ended January 28, 1995, seven directors
(Messrs. Berman, Glazer, Kollat, Morton, Sisk, Tishkoff, and Wickham) were
parties to such arrangements. In addition, such directors constitute Outside
Directors and therefore receive stock option grants under the Director Stock
Option Plan. Each of the seven aforenamed directors received a grant of 5,000
stock options each pursuant to the said Director Stock Option Plan during fiscal
1994. (Please see Director Stock Option Plan.)
<TABLE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of January 28, 1995, certain information
with regard to the beneficial ownership of the Company's Common Stock by each
holder of 5% of such stock, each director and nominee for director individually,
each of the five executive officers named in the Summary Compensation Table, and
all officers, directors and nominees for director of the Company as a group.
<CAPTION>
AMOUNT AND PERCENT OF
TITLE OF NAME OF BENEFICIAL OWNER NATURE OF BENEFICIAL OUTSTANDING
CLASS OR IDENTITY OF GROUP OWNERSHIP (1) SHARES (1)
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<S> <C> <C> <C>
Common Stock Sheldon M. Berman (2) 7,200 *
Common Stock M. Steven Bromet 106,964 *
Common Stock Albert J. Bell 58,997 *
Common Stock Brady J. Churches 154,598 *
Common Stock Michael L. Glazer 18,000 *
Common Stock William G. Kelley 1,635,971 3.49%
Common Stock David T. Kollat 52,500 *
Common Stock Nathan P. Morton 16,500 *
Common Stock John L. Sisk 14,500 *
Common Stock Jerry D. Sommers (3) 103,023 *
Common Stock Dennis B. Tishkoff 9,745 *
Common Stock William A. Wickham (4) 56,000 *
Common Stock The Capital Group (5) 4,927,240 10.53%
</TABLE>
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<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
TITLE OF NAME OF BENEFICIAL OWNER NATURE OF BENEFICIAL OUTSTANDING
CLASS OR IDENTITY OF GROUP OWNERSHIP (1) SHARES (1)
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<S> <C> <C> <C>
Common Stock Dietche & Field Advisors (6) 2,624,100 5.60%
Common Stock FMR Corp. (7) 2,910,000 6.21%
Common Stock First Interstate Bank (8) 2,568,450 5.48%
Common Stock All directors, nominees and officers as a
group (16 Persons) 2,290,362 4.89%
- - ---------------
<FN>
* Represents less than 1% of the outstanding Common Stock.
(1) The persons named in the table, other than The Capital Group (see note (5)
below), Dietche & Field Advisors, Inc. (see note (6) below), FMR Corp. (see
note (7) below) and First Interstate Bank (see note (8) below),
respectively, have sole voting power and investment power with respect to
all shares of Common Stock subject to the information contained in the
footnotes to this table. The amounts described in the table include shares
that may be acquired within 60 days under stock options exercisable within
that period. Percentage ownership was based on 46,866,303 shares of Common
Stock outstanding at January 28, 1995. Of the shares reported for Messrs.
Bell, Bromet, Churches, Glazer, Kelley, Kollat, Morton, Sisk, Sommers,
Tishkoff, Wickham, and for all directors, nominees for director, and
officers as a group, 57,000, 103,000, 154,000, 9,000, 1,611,451, 14,000,
14,000, 14,000, 88,000, 9,000, 4,000, and 2,290,362, respectively, are
shares which may be acquired within 60 days pursuant to exercisable stock
options.
(2) Includes 2,000 shares owned by Macaroons, Inc., and 300 shares owned by
Judith Berman.
(3) Includes 200 shares each held in the name of Leslie Sommers and Jessica
Sommers.
(4) Includes 52,000 shares which are owned by SBC Advertising, Inc.
(5) In its Schedule 13G dated February 8, 1995, and its accompanying materials,
The Capital Group, Inc., stated that Capital Guardian Trust Company and
Capital Research and Management Company, operating subsidiaries of The
Capital Group, Inc., exercised as of December 31, 1994, investment
discretion with respect to 1,353,740 and 3,573,500 shares, respectively, or
a combined total of 10.53% of outstanding stock which was owned by various
institutional investors. In its Schedule 13G, The Capital Group reported
sole voting power over 922,670 shares, and sole dispositive power over
4,927,240 shares.
(6) In its Schedule 13G dated March 15, 1994, Dietche & Field Investment
Advisors, Inc., reported that it held sole voting power only concerning the
shares described in the table above.
(7) In its Schedule 13G dated February 13, 1995, FMR Corp. stated that it
beneficially owned the number of shares reported in the table as of December
31, 1994, which number includes 2,637,200 shares (5.63% of the Common Stock
at that date) beneficially owned by Fidelity Management & Research Company
in its capacity as investment advisor to various investment companies
registered under Section 8 of the Investment Company Act; and 272,800 shares
(0.58% of the Common Stock at that date) beneficially owned by Fidelity
Management Trust Company as a result its serving as investment manager for
various institutional accounts. Of the shares reported in the table above,
neither FMR Corp. nor Edward C. Johnson 3d, its Chairman, have the sole
power to vote or direct the voting of any of the 2,637,200 shares owned
directly by the Fidelity Funds. However, the Schedule 13G states that
through control of Fidelity Management Trust Company, both FMR Corp and its
Chairman have sole dispositive power over 272,800 shares, no power to vote
or direct the voting of 138,700 shares, and the sole power to vote or direct
the voting of 134,100 shares.
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(8) In its Schedule 13G dated February 10, 1995, First Interstate Bank and First
Interstate Bancorp, represented having beneficial ownership of the number of
shares reported in the table, with sole dispository power over 2,292,950
shares, shared dispository power over 275,500 shares, sole voting power over
1,450,150 shares, and shared voting power over 221,900.
</TABLE>
The address of the person shown in the table above as the beneficial owner
of more than 5% of the Company's Common Stock is as follows: The Capital Group,
Inc., 333 South Hope Street, Los Angeles, CA 90071; Dietche & Field Advisors,
Inc., 437 Madison Avenue, New York, NY 10022; FMR Corp, 82 Devonshire Street,
Boston, MA 02109; and First Interstate Bancorp, 633 West 5th Street, Los
Angeles, CA 90071.
EXECUTIVE COMPENSATION
COMBINED EXECUTIVE COMPENSATION REPORT OF THE COMPANY'S COMPENSATION
COMMITTEE AND THE CHIEF EXECUTIVE OFFICER
Compensation of the Company's executive officers is administered by the
Compensation Committee of the Board of Directors (the "Committee"). The
Committee consists of three independent, non-employee directors. Messrs. Glazer,
Kollat, Sisk and Tishkoff, respectively, comprised the Committee at the last
fiscal year end, and Messrs. Kollat, Sisk and Tishkoff continue to serve in that
capacity.
The Company believes that the key to its success in a very competitive
business climate is the strong performance of its executive officers,
particularly that of its Chief Executive Officer ("CEO"). Consequently, it
believes that aggressive compensation incentives, both short term and long term,
are essential to maximize stockholder value. The Company feels that these
incentives should be implemented with a high degree of responsiveness to the
performance of the Company. To achieve this responsiveness, importance is placed
upon the executive officer participating in the Company's performance through
equity ownership, and through bonuses based upon the Company's earnings. The
basic compensation components for all executive officers, including the CEO,
consist of salary, bonus, and stock options. The Company maintains a Restricted
Stock Plan, but did not have any grants outstanding at January 28, 1995. In
addition, all executive officers, including the CEO, are eligible to participate
in the Company's 401(k) Savings Plan, Supplemental Savings Plan, Executive
Medical Plan and Defined Benefit Pension Plan. Amounts described under Other
Annual Compensation in the Summary Compensation Table include personal benefits
derived from use of company automobiles, as well as executive medical and group
life insurance benefits. Amounts described under All Other Compensation in the
Summary Compensation Table include Company contributions to the 401(k) savings
plan and supplemental savings plan for the respective individuals.
CEO COMPENSATION
As a means of evaluating the compensation package for its CEO, William G.
Kelley, in 1993 the Company analyzed the 1992 data reflected in proxy statements
of fifteen retailers, namely, Circuit City, The Gap, 50 Off, Value City, Home
Depot, Staples, Dayton Hudson, Walmart, Toys "R" Us, Caldor, MacFrugal's,
Tuesday Morning, Pier 1 Imports, TJX Companies, and Office Depot (the
"Comparison Group"). The Committee believes these fifteen retailers represented
a fair sampling of competitors for purposes of comparing CEO compensation
packages. The identity of entities comprising the Comparison Group were
arbitrarily determined, and the number of companies so included was limited to
fifteen for ease and cost of comparison.
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By comparison, during the same period Mr. Kelley received a lower salary
and higher bonus than the average for CEOs in the Comparison Group. He received
no restricted stock (in contrast to a substantial average award among five of
the companies in the group that made such awards), yet he was awarded
substantially more shares in the form of stock purchase options (granted during
the most recent three fiscal years) than the average for CEOs in the Comparison
Group. However, the comparison of stock option awards must be considered in
light of the Committee's desire to create, in a short time period, a 5% equity
incentive for Mr. Kelley. Please see "CEO Equity Incentives", below. Overall,
Mr. Kelley's compensation was consistent with the Committee's view that
executive officer salary compensation should be at or somewhat below market
levels, with emphasis placed upon incentive compensation tied to Company
performance. The Committee believed then, and continues to believe that the
incentive created by this compensation package is important to the Company's
short term and long term growth, especially as the Company continues to seek new
ways in which to expand its market niche. However, the Committee has not
collected or analyzed, and has no current plans to collect or analyze, any new
information concerning the Comparison Group, or any other group of companies.
The individual components of Mr. Kelley's compensation are discussed below.
CEO SALARY
Mr. Kelley's salary was originally set by his employment agreement dated
December 12, 1989. The employment agreement does not provide for automatic
salary or equity increases, leaving such decisions to the discretion of the
Committee. All such increases are made by the Compensation Committee,
exclusively. Typically, Mr. Kelley has been limited to a 5% salary increase each
year, consistent with salary increases of other executive officers. However, the
Committee has chosen not to adopt any specific schedule of salary increase.
Generally, the Committee looks to factors such as the Company's planned and
actual increase in pre-tax income, market performance of its Common Stock, and
business growth, in determining the amount of salary increase or stock options,
if any, to be awarded in any fiscal year. However, the Committee does not
specifically weight such factors in advance. Such decisions are subjectively
made, and are not formally tied to objective performance criteria.
CEO BONUS
Mr. Kelley's bonus is determined strictly in accordance with the formula
and criteria stated in his employment agreement. For the fiscal year ended
January 28, 1995, and prior years, the bonus was determined by multiplying the
salary base by a fraction, the denominator of which was the planned increase in
pre-tax income of the Company, which planned increase was established annually
in advance by the Board of Directors, and the numerator of which was the amount
of the actual increase in pre-tax income of the Company for the fiscal year in
question, as determined from the Company's audited financial statements;
provided, however, that if the resultant fraction was less than .50 no bonus was
paid, and if the resultant fraction was more than 1.35 the maximum bonus was
capped at 135% of the base salary (salary x actual pre-tax increase/planned
pre-tax increase). Application of this formula resulted in a bonus of $593,936
for the most recent fiscal year ended. The formula for fiscal year ending
February 3, 1996, and subsequent years, substitutes as the denominator the
planned earnings per share determined at the beginning of the fiscal year by the
Board, and substitutes as the numerator the actual earnings per share for that
fiscal year as determined by the audited financial statements of the Company.
The substitution is designed to ease the ability of stockholders and investment
advisors to monitor progress under the bonus plan. The formula for fiscal year
ending February 3, 1996 does not increase or decrease the maximum amount of
benefit available to be paid to Mr. Kelley. The amount of compensation changes
based upon the percentage of planned earnings achieved, and based upon Mr.
Kelley's then current salary level.
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CEO EQUITY INCENTIVES
The Committee makes it a priority for the Chief Executive Officer to have
an equity interest in the Company equal to approximately 5% of the Company's
outstanding Common Stock, in addition to any personal holdings he may have in
the Company as the result of market purchases and retirement plan participation.
In February 1994, Mr. Kelley was granted stock purchase options for 250,000
shares, raising Mr. Kelley's equity interest to the desired 5% level.
Consequently, Mr. Kelley's stock option grants during the most recent three
fiscal years artificially outpaced those received by CEOs in the Comparison
Group during the comparison period. Mr. Kelley's stock purchase options have an
exercise price equal to the market value of the Company's Common Stock at the
date each option is granted. Initially the Committee granted options that would
become exercisable ("vest") over 3 years. Subsequent grants have had
increasingly longer vesting periods, with the most recent grants being 5 years.
Options vest by passage of time during employment and not by accomplishment of
performance criteria. The 5% level was achieved in increments through annual
awards. The amount of 5%, and the amount of each increment, were subjectively
determined by the Committee. The Committee believes this approach promotes
commonality of interest between the CEO and the Company's stockholders, and adds
a long term performance perspective to his total compensation package by basing
a significant portion of his compensation upon the future performance of the
Company's Common Stock. This is particularly important while the Company seeks
high levels of growth.
COMPENSATION OF OTHER EXECUTIVE OFFICERS
To evaluate the compensation package for its executive officers other than
the CEO, in 1993 the Company also looked to the results of its analysis of the
Comparison Group proxy statements. Please see "CEO Compensation", above. By
comparison, the Company's President, Brady J. Churches, had a lower salary,
somewhat higher bonus, and more shares subject to stock purchase options, than
the group average. The Company's Executive Vice President -- Merchandising,
Jerry D. Sommers, had a higher salary, lower bonus, and more shares subject to
stock purchase options, than the group average. No comparison could be made
concerning the Company's then Senior Vice President -- Human Resources and
Information Services, M. Steven Bromet, and its Senior Vice President -- Legal
and Real Estate, Albert J. Bell, respectively, due to the unique characteristics
of their positions. The calculation of average shares subject to stock purchase
options for the group in the foregoing comparison included only those companies
within the group that awarded stock options to the comparable position within
the three year period. As with the CEO compensation, the overall compensation
was, and the Committee believes continues to be, consistent with the Committee's
view that executive officer salary compensation should be at or somewhat below
market levels, where possible, and that the package should contain significant
incentive compensation tied to Company performance. The Company has not
collected or analyzed any additional or subsequent information for purposes of
similar comparison, and has no present plans to do so. The individual components
of compensation for executive officers other than the CEO are discussed below.
NON-CEO SALARY
The salary component for executive officers other than the CEO is initially
based upon industry data for comparable positions, as adjusted to reflect the
relative level of experience and expertise of the individual. The industry data
used to gauge the initial salary is gathered informally as needed from industry
publications and, where necessary, from telephone surveys conducted by the
Company. Where the position is unique to companies included in the Standard &
Poor's Retail Stores Index, the Company collects industry data reflective of
companies within that industry group that are of similar size to the Company.
However, where the
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position being filled is common to many industry groups, the Company collects
industry data that more comprehensively reflects salaries of such executive
officers in similarly sized companies in or around Columbus, Ohio, where the
Company's principal operating subsidiary is located. Typically, salary for these
executive officers starts at or below the average market salary for comparable
positions. Once the initial salary is established based upon industry data, the
salary is not adjusted relative to comparable positions outside the Company
unless it otherwise suspects that the salary for a particular position is
becoming significantly below market. Based upon the Company's analysis of the
1993 Retail Management Compensation Study performed by Management Compensation
Services ("MCS"), salaries for those executive officer positions of the Company
covered by the survey, other than those named in the Summary Compensation Table,
are generally at or near the average for similar positions of the companies
surveyed. The analysis of the study by MCS consisted of 1992 salaries paid for
similar positions at 52 surveyed retailers. The salary is adjusted annually only
to reflect growth in the individual's performance, as well as the individual's
relative contribution to the overall performance of the Company. Salary
adjustments are subjectively determined, and are not formally tied to Company
performance. However, it is the Committee's view that executive officer salary
compensation should be at or slightly below market levels, where possible, so as
to allow for incentive compensation tied to Company performance.
NON-CEO BONUS
The bonus component for these executive officers is a maximum (or "target")
percentage of salary that is set by position level at the beginning of each
fiscal year. The amount of the basic percentage is subjectively determined. The
Committee believes that a significant portion of the total compensation of the
executive officers should be bonus tied to Company earnings, and has minimized
salary increases for this purpose. Bonus is earned and paid only to the extent
that the Company has met its planned earnings per share for the fiscal year as
set at the beginning of that fiscal year by the Board of Directors. If the
Company earns less than 90% of the earnings per share planned for that fiscal
year, then no bonus is earned or paid. If the Company earns 90% or more (but
less than 100%) of the planned earnings per share, a prorated bonus is earned
and paid. The CEO, President, Executive Vice President, and all Senior Vice
Presidents may earn up to 135% of their respective target bonus if the Company's
earnings exceed that planned for the fiscal year.
NON-CEO EQUITY INCENTIVES
The equity participation component for these executive officers consists of
stock purchase options. The Committee has not established a goal for an amount
of equity held by its executive officers other than the CEO. Stock purchase
options are granted at the discretion of the Committee, usually only once per
year, in an amount determined by position and performance. As an exception,
stock options are sometimes granted more than once in a given year where it
involves the promotion of an individual to a greater level of responsibility. As
a general rule, a number of shares per option grant is set in advance by
position. Actual grants are determined subjectively, based upon perception of
the individual's performance. When granted, stock purchase options are issued
with an exercise price equal to the current market value of the Company's Common
Stock as of the date the option is granted. Options typically vest over a five
year period, based upon time passage during employment and not based upon
performance criteria. The Committee's determination of the timing and amount of
each grant is subjective, based upon its assessment of the need and
appropriateness of each grant, in light of the performance of the respective
executive officer and the performance of the Company as a whole. The Committee
considers the recommendation of, and relies upon information provided by, the
CEO in making its assessment and reaching its decision. The Committee believes
that its policy in determining stock option grants best utilizes stock options
as a specific long-term performance incentive, by
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basing an important portion of executive officer compensation upon the future
performance of the Company's Common Stock.
RESTRICTED STOCK PLAN
In addition to the above, the Committee has the discretion to grant shares
of Company Common Stock to executive officers pursuant to its Restricted Stock
Plan (please see "Restricted Stock Plan" below). Since September, 1988, the
Committee has maintained a policy of making no grants under the Restricted Stock
Plan. It views the Plan as a means of creating exceptional incentive for
exceptional performance. The Committee intends that specific and objective
performance vesting criteria be used in connection with such grants. However, it
is within the Committee's power to grant shares under the Restricted Stock Plan
at any time in a purely subjective manner.
DEDUCTIBILITY OF ANNUAL COMPENSATION OVER $1 MILLION
During 1993, the Omnibus Budget Reconciliation Act of 1993 (the "Act") was
enacted. Beginning in 1994, the Act includes potential limitations on the
deductibility of compensation in excess of $1 million paid to the Company's
chief executive officer (CEO) and the four highest compensated executive
officers (other than the CEO) employed on the last day of the taxable year.
Remuneration which is qualified "performance-based compensation" is not subject
to the deduction limitation. Based on the preliminary regulations issued by the
Internal Revenue Service to implement the Act, the Company has taken the
necessary actions to preserve the deductibility of payments under the bonus
plan. Upon issuance of final regulations, further actions will be taken to the
extent necessary and possible to maintain the deductibility of payments under
the plan.
THE COMPENSATION COMMITTEE William G. Kelley
OF THE BOARD OF DIRECTORS Chairman and CEO
David T. Kollat, Chairman (Not A Member Of The
John L. Sisk Compensation Committee)
Dennis B. Tishkoff
9
<PAGE> 12
<TABLE>
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the individual
compensation paid to the Company's Chief Executive Officer and each of the four
other most highly compensated executive officers for services in all capacities
to the Company for fiscal years 1994, 1993, and 1992.
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------
AWARDS
ANNUAL COMPENSATION ------------------------- LONG-
----------------------------------------- SECURITIES TERM
OTHER ANNUAL RESTRICTED UNDERLYING INCENTIVE
COMPENSATION STOCK OPTIONS PAYOUTS
NAME AND POSITION YEAR SALARY ($) BONUS ($) ($) AWARDS ($) (#)(D) ($)
- - ------------------------------- ---- ---------- --------- ------------ ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
William G. Kelley, Chairman 1994 590,389 593,936 65,708(a) -- 250,000 --
of the Board and 1993 562,275 426,635 223,354(b) -- 250,000 --
Chief Executive Officer 1992 468,563 632,559 173,096(c) -- -- --
Brady J. Churches, President 1994 400,000 300,000 14,184 -- 50,000 --
1993 309,615 249,375 15,299 -- 120,000 --
1992 250,000 125,000 12,152 -- 50,000 --
Jerry D. Sommers, Executive 1994 300,000 150,000 11,397 -- 10,000 --
Vice President, 1993 208,462 109,250 7,481 -- 70,000 --
Merchandising 1992 159,367 27,889 6,600 -- 10,000 --
M. Steven Bromet, Sr. Vice 1994 181,913 45,478 11,190 -- 10,000 --
President and Chief 1993 173,250 41,147 10,162 -- 10,000 --
Information Officer 1992 157,500 23,625 12,076 -- 15,000 --
Albert J. Bell, Sr. Vice 1994 150,000 37,500 3,486 -- 15,000 --
President
Legal and Real Estate, 1993 115,000 27,313 3,050 -- 10,000 --
General Counsel 1992 100,000 25,000 4,803 -- 15,000 --
and Secretary
<CAPTION>
ALL OTHER
COMPENSATION
NAME AND POSITION ($)(E)
- - ------------------------------- ------------
<S> <C>
William G. Kelley, Chairman 5,625
of the Board and 6,266
Chief Executive Officer 4,364
Brady J. Churches, President 1,419
6,266
4,364
Jerry D. Sommers, Executive 1,419
Vice President, 5,999
Merchandising 4,364
M. Steven Bromet, Sr. Vice 5,625
President and Chief 5,783
Information Officer 4,364
Albert J. Bell, Sr. Vice 5,473
President
Legal and Real Estate, 4,248
General Counsel 2,923
and Secretary
- - ---------------
<FN>
(a) Includes $40,500 of interest foregone by the Company on a $450,000 second
mortgage loan to Mr. Kelley made in 1991 concerning his residence. The
second mortgage loan is in connection with relocation assistance provided in
Mr. Kelley's employment agreement, is payable on demand, and is secured by a
second mortgage.
(b) Includes $171,124 of income tax adjustments, as authorized by the Board of
Directors, associated with Mr. Kelley's relocation and $29,348 of interest
foregone by the Company on a second mortgage loan more fully described in
(a) above.
(c) Includes a $113,051 expenditure for personal security measures added to Mr.
Kelley's residence as authorized by the Board of Directors and $27,997 of
interest foregone by the Company associated with the second mortgage loan
more fully described in (a) above.
(d) Non-qualified options granted pursuant to The Executive Stock Option and
Stock Appreciation Rights Plan.
(e) Company matching contribution to the Consolidated Stores Corporation Savings
Plan (401K) and/or Consolidated Stores Corporation Supplemental Savings Plan
(Top Hat).
</TABLE>
In December, 1989, the Company entered into an employment agreement with
William G. Kelley for an indefinite term. The agreement provides for an annual
base salary, as increased by the Board of Directors for fiscal year ending
February 3, 1996, of $620,000, and an annual bonus of up to a maximum of
$837,000 based upon a percentage of progress of the Company toward certain
planned goals during the year as established by the Board of Directors. The
agreement also provides that if there occurs an effective change of control of
the Company (as defined in the agreement), Mr. Kelley shall be entitled to
terminate his employment within one year, and upon such termination shall become
entitled to receive a sum in the amount of up to $620,000, plus a bonus, if any,
for the fiscal year in which the termination occurs, as well as an additional
amount necessary to hold Mr. Kelley harmless from the effects of Sections 280G
and 4999, respectively, of the Internal Revenue Code of 1986, as amended (please
see "Executive Severance Agreements"), which Sections could subject the payments
to excise tax liability, and shall be reimbursed by the Company for any excise
tax liability incurred
10
<PAGE> 13
by receiving such amount. Mr. Kelley's employment agreement requires that he
devote his full business time to the business of the Company and prohibits him
from competing with the Company's business during his employment and for a
two-year period after termination of his employment. Under proposed income tax
regulations, compensation payable solely on change of control would subject such
compensation to the deduction limits described above (see "Deductibility of
Annual Compensation Over $1 Million").
Employment agreements with each of Brady J. Churches and Jerry D. Sommers,
respectively, were entered in February, 1994, and have terminated since January
28, 1995.
Pursuant to The Executive Stock Option and Stock Appreciation Rights Plan,
nonqualified stock options were granted by the Compensation Committee on shares
of Company Common Stock to the individuals named in the Summary Compensation
Table to Executive Officers of the Company, and to other associates of the
Company. The following tables reflect the (i) number and value of options
granted in fiscal 1994 to the individuals named in the Summary Compensation
Table; and (ii) the aggregate exercises and number and value of exercisable and
unexercisable options at January 28, 1995, for those named individuals.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
POTENTIAL REALIZED
INDIVIDUAL GRANTS (A) VALUE AT
--------------------------------------------------------------------- ASSUMED ANNUAL
PCT. OF TOTAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM (C)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION -------------------------
NAME GRANTED FISCAL YEAR (B) PER SHARE DATE 5% 10%
- - ----------------------- ---------- --------------- -------------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
William G. Kelley 250,000 39.5% $18.75 Feb. 2004 $2,947,944 $7,470,668
Brady J. Churches 50,000 7.9% $18.75 Feb. 2004 $ 589,589 $1,494,134
Jerry D. Sommers 10,000 1.6% $18.75 Feb. 2004 $ 117,918 $ 298,827
M. Steven Bromet 10,000 1.6% $18.75 Feb. 2004 $ 117,918 $ 298,827
Albert J. Bell 15,000 2.4% $18.75 Feb. 2004 $ 176,877 $ 448,240
- - ---------------
<FN>
(a) Material terms of the options granted include 5 year vesting at 20% per year
on each succeeding anniversary of the grant date, continuous employment with
the Company through at least the 90th day prior to any exercise, employment
with the Company as a condition of vesting, and non-transferability of the
stock options.
(b) Based on 663,500 non-qualified options granted to all associates in fiscal
1994 pursuant to the Executive Stock Option and Stock Appreciation Rights
Plan.
(c) Assumes a respective 5% or 10% annualized appreciation in the underlying
Common Stock price from the date of grant to the expiration date less the
aggregate exercise price. The ultimate amount realized will depend on the
market value of the Company's Common Stock at a future date.
</TABLE>
11
<PAGE> 14
<TABLE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<CAPTION>
UNEXERCISED OPTIONS AT JANUARY 28, 1995
---------------------------------------------------------------
NUMBER OF VALUE OF IN-THE-MONEY OPTIONS
SHARES NUMBER OF OPTIONS (B)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE REALIZED (A) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ------------------ ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William G. Kelley -- -- 1,411,451 924,301 $17,703,059 $ 4,856,209
Brady J. Churches -- -- 122,000 198,000 $ 1,369,251 $ 622,000
Jerry D. Sommers -- -- 73,000 80,000 $ 925,125 $ 237,750
M. Steven Bromet -- -- 83,000 52,000 $ 1,218,625 $ 444,500
Albert J. Bell -- -- 47,000 38,000 $ 665,125 $ 157,375
- - ---------------
<FN>
(a) Difference of the sales price on the dates of exercise and the option
exercise price.
(b) Based on the fair market value ($18.50) of Consolidated Stores Corporation
Common Stock at January 28, 1995 minus the aggregate exercise prices.
</TABLE>
COMPARISON OF FIVE YEAR TOTAL STOCKHOLDER RETURN
The following graph demonstrates a five year comparison of cumulative total
return for Consolidated Stores Corporation, the Standard & Poor's 500 Index and
the Standard & Poor's Retail Stores Index.
<TABLE>
COMPARISON OF FIVE YEAR TOTAL STOCKHOLDER RETURN (A)
<CAPTION>
CONSOLIDATED
MEASUREMENT PERIOD STORES COR- S&P RETAIL
(FISCAL YEAR COVERED) PORATION STORES S&P 500
<S> <C> <C> <C>
1990 100.00 100.00 100.00
1991 170.59 117.33 108.39
1992 611.76 163.95 132.99
1993 805.88 195.69 147.06
1994 852.94 188.61 166.00
1995 870.59 174.65 166.88
12
<PAGE> 15
<FN>
(a) Assumes $100 invested on January 31, 1990 in Consolidated Stores Corporation
Common Stock compared to the same amount invested in the other funds shown
at the same time. Dividends, if any, are assumed to be reinvested.
</TABLE>
COMPENSATION PLANS AND ARRANGEMENTS
STOCK OPTION PLANS. The Company maintains two stock option plans. The
Executive Stock Option and Stock Appreciation Rights Plan (the "Executive Stock
Option Plan") is a grant/award plan that covers fulltime employees of the
Company. The Director Stock Option Plan is a formula plan that covers only non-
employee Directors of the Company.
EXECUTIVE STOCK OPTION PLAN. The Executive Stock Option Plan expired April
29, 1995. Stock options outstanding at the termination date will remain
outstanding until it has either expired or been exercised. All of the executive
officers of the Company were eligible to participate in the Executive Stock
Option Plan.
DIRECTOR STOCK OPTION PLAN. The Director Stock Option Plan is administered
by the Compensation Committee pursuant to an established formula. Neither the
Board of Directors, nor the Compensation Committee exercise any discretion in
administering the plan, and the administration performed by the Compensation
Committee is ministerial in nature. The formula which governs the grant of stock
options to eligible participants may be amended by the Board of Directors, but
not more frequently than once in any six month period. Under the current
formula, each of the Outside Directors who are not otherwise ineligible shall be
granted annually stock options for the purchase of 5,000 shares of the Company's
Common Stock, for an exercise price equal to 100% of the fair market value on
the date of grant. Each annual grant occurs on the last day of the quarterly
trading period next following the Annual Meeting of Stockholders.
Options granted under the Director Stock Option Plan subsequent to such
date will become exercisable over three years beginning upon the first annual
anniversary of the grant date, whereby the option will become exercisable for up
to 20% of the shares on the first anniversary, 60% on the second anniversary,
and 100% on the third anniversary, respectively. Options granted will
automatically terminate ten years and one month following the date of grant. An
optionee may exercise a stock option only during specific quarterly trading
periods, and only if at all times during the period beginning on the date such
option was granted and ending on the day three months before the date of
exercise he was a director of the Company.
Options granted under the Director Stock Option Plan are not transferable
other than by will or the laws of descent and distribution.
RESTRICTED STOCK PLAN. All of the executive officers and directors and
other key employees of the Company are eligible to participate in the Company's
1987 Restricted Stock Plan (the "Restricted Stock Plan"). Approximately 50
persons were eligible to receive awards, and no awards were outstanding as of
January 28, 1995.
The Restricted Stock Plan provides generally that an employee or director
to whom an award of shares of Common Stock has been made under the Restricted
Stock Plan shall not receive or be immediately vested in the shares of Common
Stock awarded, but shall receive and become vested in such shares of Common
Stock at such time or times as specified by the Board of Directors and set forth
in the written agreement evidencing the award. Shares awarded that are not
vested may not be sold, transferred, assigned, pledged, hypothecated,
anticipated, alienated, encumbered or charged, whether voluntarily,
involuntarily or by operation of law, and shares awarded must be forfeited to
the Company in the event the recipient ceases to be an employee.
13
<PAGE> 16
Vesting of any shares awarded under the Restricted Stock Plan becomes
accelerated automatically upon consummation of any event that results in a
Change in Effective Control of the Company. As used in the Restricted Stock
Plan, "Change in Effective Control" means any one or more of the following: (i)
any person or group (as defined for purposes of Section 13(d) of the Securities
Exchange Act of 1934) becomes the beneficial owner of, or has the right to
acquire (by contract, option, warrant, conversion of convertible securities or
otherwise), 20% or more of the outstanding equity securities of the Company
entitled to vote for the election of directors; (ii) a majority of the Board of
Directors is replaced within any period of two years or less by directors not
nominated and approved by a majority of the directors in office at the beginning
of such period (or their successors so nominated and approved), or a majority of
the Board of Directors at any date consists of persons not so nominated and
approved; or (iii) the stockholders of the Company approve an agreement to merge
or consolidate with another corporation or an agreement to sell or otherwise
dispose of all or substantially all of the Company's assets (including without
limitation, a plan of liquidation). Vesting solely on change of control subjects
such compensation to the income tax deduction limits described above (see
"Deductibility of Annual Compensation Over $1 Million).
The Restricted Stock Plan is administered by the Compensation Committee of
the Board of Directors of the Company, which selects the employees and directors
to whom awards will be granted, the number of shares to be awarded to each, and
the vesting schedule and other terms of each award. No current member of the
Compensation Committee is eligible to receive an award under the Plan. The
number of shares of Common Stock awarded pursuant to the Restricted Stock Plan
may not exceed 500,000 in the aggregate, subject to adjustment as described
above. The Board of Directors may adjust the number and kind of shares of Common
Stock available for distribution and subject to vesting, in order to prevent
dilution or enlargement of rights in the event of a change in the number or kind
of outstanding shares of the Company by reason of recapitalization, merger,
consolidation, reorganization, separation, liquidation, stock split, stock
dividend, combination of shares, or any other change in the corporate structure
or shares of stock of the Company.
PENSION PLAN AND TRUST. The Company maintains a noncontributory defined
benefit pension plan (the "Pension Plan") for all employees whose hire date
precedes April 1, 1994, who have reached the age of 21 and who have worked for
the Company for more than one year. The amount of the Company's annual
contribution to the Pension Plan is actuarially determined to accumulate
sufficient funds to maintain projected benefits. Effective January 1, 1993, the
computation of annual retirement benefits payable upon retirement under the
Pension Plan is 1% of final average annual compensation multiplied by the years
of service up to a maximum of 25. This benefit is payable when a participant
reaches the normal retirement age of 65. However, the Pension Plan does provide
an early retirement option, and employment beyond the normal retirement age is
permitted by agreement with the Company. For purposes of calculating benefits
under the Pension Plan, compensation is defined to include a two month
equivalent of the total cash remuneration (including overtime) paid for services
rendered during a Plan year prior to salary reductions pursuant to Sections
401(k) or 125, respectively, of the Internal Revenue Code of 1986, as amended,
including bonuses, incentive compensation, severance pay, disability payments
and other forms of irregular payments.
The table below illustrates the amount of annual benefit payable at age 65
to a person in the specified average compensation and years of service
classifications under the Pension Plan.
14
<PAGE> 17
<TABLE>
<CAPTION>
FINAL YEARS OF SERVICE
AVERAGE -------------------------------------------
COMPENSATION 10 15 20 25
- - ------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
$100,000 $10,000 $15,000 $20,000 $25,000
$125,000 $12,500 $18,750 $25,000 $31,250
$150,000 $15,000 $22,500 $30,000 $37,500
$175,000 $15,000 $22,500 $30,000 $37,500
$200,000 $15,000 $22,500 $30,000 $37,500
$225,000 $15,000 $22,500 $30,000 $37,500
</TABLE>
The maximum annual benefit payable under the Pension Plan is restricted by
the Internal Revenue Code. At January 1, 1995, the maximum final five year
average compensation is $150,000. At January 1, 1995, Mr. Kelley had 4 years of
credited service, Mr. Churches had 16 years, Mr. Sommers had 10 years, Mr.
Bromet had 6 years, and Mr. Bell had 7 years.
The compensation covered by the Plan includes all compensation described as
Annual Compensation in the Summary Compensation Table. The benefits are computed
based upon straight life annuity amounts, and are subject to a deduction for
benefits payable under other plans not sponsored by the Company, other than
Social Security benefits.
SAVINGS PLAN. All of the executive officers referred to in the cash
compensation table, as well as substantially all other full-time employees of
the Company and its subsidiaries, are eligible to participate in the
Consolidated Stores Corporation Savings Plan (the "Savings Plan"). In order to
participate in the Savings Plan, an eligible employee must satisfy applicable
age and service requirements and must make contributions to the Savings Plan
("Participant Elective Contributions").
Participant Elective Contributions are made through authorized payroll
deductions to one or more of the several investment funds established under the
Savings Plan. One of the funds is a Company Stock Fund which is invested solely
in Common Stock of the Company. All Participant Elective Contributions are
matched by the Company ("Employer Matching Contributions") at a rate of 100% for
the first 1% of salary contributed, 75% for the second 1% of salary contributed,
and 50% for the next 4% of salary contributed; however, only Participant
Elective Contributions of up to six percent of the employee's compensation will
be matched. Employee Matching Contributions will always be made in the form of
Common Stock of the Company.
Each participant has a nonforfeitable right to all accrued benefits
pertaining to Participant Elective Contributions. Each participant also has a
nonforfeitable right to all accrued benefits pertaining to Employer Matching
Contributions in the event of retirement or other termination of employment (a)
on or after his 65th birthday, (b) on account of disability, or (c) by reason of
death. A participant whose employment terminates under other circumstances will
have a nonforfeitable right to a portion of accrued benefits pertaining to
Employer Matching Contributions determined under a schedule based on years of
service. All other unvested accrued benefits will be forfeited.
SUPPLEMENTAL SAVINGS PLAN. The Company maintains a non-qualified salary
deferral plan ("Supplemental Savings Plan") for those executives participating
in the Savings Plan who desire to contribute more than the amount allowable
under the Savings Plan. The Supplemental Savings Plan constitutes a contract to
pay deferred salary, and limits deferrals in accordance with prevailing tax law.
The Supplemental Savings Plan is designed to pay the deferred compensation in
the same amount as if the contributions had been made to the
15
<PAGE> 18
Savings Plan. The Company has no obligation to fund the Supplemental Savings
Plan, and all assets and amounts payable under the Supplemental Savings Plan are
subject to the claims of general creditors of the Company.
Executive Benefit Plan. Most of the executive officers are eligible to
participate in the Consolidated Stores Executive Benefit Plan (the "Benefit
Plan"). The Benefit Plan is a supplemental health benefits plan which reimburses
participants for medical costs incurred but not covered by the Consolidated
Stores Associate Benefits Plan, up to an annual maximum reimbursement of $10,000
per participant. Amounts received by participants are treated as taxable income.
Amounts received by the five individuals named in the cash compensation table,
and by all participating executive officers as a group, respectively, are
included in the amounts reflected in the values of personal benefits received by
such individuals and executive officers as a group.
Executive Change In Control Severance Agreements. On April 18, 1989, the
Board of Directors of the Company authorized the Company to enter into Executive
Severance Agreements with certain of its key officers and employees (currently
22 persons). The agreements expire on the anniversary of their execution and are
automatically extended on an annual basis unless the Company provides at least
90 days' notice that any particular agreement will not be extended. The
agreements provide for severance benefits if, within 24 months after a Change in
Control (as defined in the agreements), the employee's employment is terminated
by the Company (other than for Cause, as defined in the agreements), or the
employee resigns because of a material change in the circumstances of his
employment. For purposes of the agreements, "Change in Control" means any one or
more of the following: (i) any person or group (as defined for purposes of
Section 13(d) of the Securities Exchange Act of 1934) becomes the beneficial
owner of, or has the right to acquire (by contract, option, warrant, conversion
of convertible securities or otherwise), 20% or more of the outstanding equity
securities of the Company entitled to vote for the election of directors; (ii) a
majority of the Board of Directors is replaced within any period of two years or
less by directors not nominated and approved by a majority of the directors in
office at the beginning of such period (or their successors so nominated and
approved), or a majority of the Board of Directors at any date consists of
persons not so nominated and approved; or (iii) the stockholders of the Company
approve an agreement to merge or consolidate with another corporation or an
agreement to sell or otherwise dispose of all or substantially all of the
Company's assets (including without limitation, a plan of liquidation). The
agreements provide for the following severance benefits: (i) for certain
officers (including Messrs. Bromet, Churches and Sommers) and key employees of
the Company, a lump-sum payment equal to 200% of the employee's then-current
annual salary; or (ii) for other officers and key employees of the Company, a
lump-sum payment equal to 100% of the employee's then-current annual salary. Mr.
Kelley is not a party to such an agreement, but has similar provisions contained
in his employment agreement permitting a severance benefit of 100% of his then
current annual salary. In addition, the Executive Stock Option Plan and the
Restricted Stock Plan each provide for immediate vesting of all outstanding
options and shares, respectively, in the event of such a Change in Control
(please see "Stock Option Plans" table, and "Restricted Stock Plan", above). The
employee will also become entitled to reimbursement of legal fees and expenses
incurred by the employee in seeking to enforce his rights under his agreement.
In addition, to the extent that payments to the employee pursuant to this
agreement (together with any other amounts received by the employee in
connection with a Change in Control) would result in the triggering of the
provisions of Sections 280G and 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), each agreement provides for the payment of an additional
amount (the "Tax Gross-Up Amount") such that the employee receives, net of
excise taxes, the amount he would have been entitled to receive in the absence
of the excise tax provided in Section 4999 of the Code. Under proposed income
tax
16
<PAGE> 19
regulations, compensation payable on change in control is subject to the income
tax deduction limitations described above (see "Deductibility of Annual
Compensation Over $1 Million).
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Deloitte & Touche to be the
independent auditors of the Company and its subsidiaries for the fiscal year
ending February 3, 1996. Deloitte & Touche acted as the Company's independent
auditors for fiscal years ended January 28, 1995, and January 29, 1994. A
representative of Deloitte & Touche will be in attendance at the Annual Meeting
of Stockholders, will have the opportunity to make a statement if he or she
desires to do so, and will be available to respond to appropriate questions from
stockholders.
STOCKHOLDER PROPOSALS
Any stockholder who intends to present a proposal at the 1995 Annual
Meeting of Stockholders for inclusion in the proxy statement and form of proxy
relating to that meeting is advised that the proposal must be received by the
Company at its principal executive offices not later than January 9, 1996. The
Company will not be required to include in its proxy statement or form of proxy
a stockholder proposal which is received after that date or which otherwise
fails to meet requirements for stockholder proposals established by regulations
of the Securities and Exchange Commission.
OTHER MATTERS
This solicitation of proxies is made by and on behalf of the Board of
Directors. In addition to mailing copies of this statement and the accompanying
notice and form of proxy to all stockholders of record on the record date, the
Company will request brokers, custodians, nominees and other fiduciaries to
forward copies of this material to persons for whom they hold shares of Common
Stock of the Company in order that such shares may be voted. Solicitation may
also be made by the Company's officers and regular employees personally or by
telephone or telegraph. The cost of the solicitation will be incurred by the
Company. The Company has also retained Georgeson & Company Inc. to aid in the
solicitation of proxies for a fee estimated at $8,000 plus reasonable
out-of-pocket expenses.
If the accompanying form of proxy is executed and returned, the shares
represented thereby will be voted in accordance with any specifications made by
the stockholder. In the absence of any such specifications, they will be voted
to elect all eight nominees as set forth under Proposal One.
The presence of any stockholder at the meeting will not operate to revoke
his proxy. A proxy may be revoked at any time before it is exercised, by a later
appointment received by the secretary of the meeting or by giving notice of a
revocation to the secretary of the meeting in writing or in open meeting.
If any other matters shall properly come before the meeting, the persons
named in the proxy, or their substitutes, will vote thereon in accordance with
their judgment. The Board of Directors does not know of any other matters which
will be presented for action at the meeting.
By order of the Board of Directors.
May 8, 1995
Albert J. Bell,
Senior Vice President,
General Counsel and Secretary
17
<PAGE> 20
CONSOLIDATED STORES CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE JUNE 6, 1995 ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints William G. Kelley, Michael L. Glazer,
and Albert J. Bell, and each of them, with full power of substitution, as
proxies for the undersigned to attend the Annual Meeting of Stockholders
of Consolidated Stores Corporation, to be held at 300 Phillipi Road,
Columbus, Ohio, at 10:00 A.M. (local time) on June 6, 1995, and thereat,
and at any adjournment thereof, to vote and act with respect to all
shares of Common Stock of the Company which the undersigned would be
entitled to vote, with all the power the undersigned would possess if
present in person, as follows:
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C>
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary below) / / to vote for all nominees listed below / /
</TABLE>
Sheldon M. Berman, Michael L. Glazer, William G. Kelley, David T. Kollat,
Nathan P. Morton, John L. Sisk, Dennis B. Tishkoff and William A.
Wickham.
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name on the space provided
below.)
-------------------------------------------------------------------------
(Continued, and to be dated and signed, on the other side)
(Continued from the other side)
2. In their discretion, to vote upon such other business as may properly
come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED BY THE
STOCKHOLDER. IF NO SPECIFICATIONS ARE MADE, THE PROXY WILL BE VOTED TO
ELECT ALL NOMINEES AS DESCRIBED IN ITEM 1 ABOVE.
Date: , 1995
-----------------------------
-----------------------------
Signature(s) of
Stockholder(s)
PLEASE SIGN AS YOUR NAME OR
NAMES APPEAR HEREON. WHEN
SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE
GIVE YOUR FULL TITLE. IF A
CORPORATION, PLEASE SIGN IN
FULL CORPORATE NAME BY
PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP,
PLEASE SIGN IN PARTNERSHIP
NAME BY AN AUTHORIZED PERSON.
Proxy Card
