<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Consolidated Stores
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
CONSOLIDATED STORES CORP. LOGO
1105 North Market Street
Suite 1300
P.O. Box 8985
Wilmington, Delaware 19801
April 9, 1999
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders,
which will be held at the headquarters of the Company's principal operating
subsidiary at 300 Phillipi Road, Columbus, Ohio, on Tuesday, May 18, 1999, at
9:00 A.M., local time.
The following pages contain the formal Notice of Annual Meeting and the
Proxy Statement. You will want to review this material for information
concerning the business to be conducted at the meeting.
Your vote is important. Whether you plan to attend the meeting or not, you
are urged to complete, date and sign the enclosed Form of Proxy and return it in
the enclosed envelope. If you attend the Annual Meeting, you may revoke your
proxy and vote in person if you wish, even if you have previously returned your
proxy.
WILLIAM G. KELLEY,
Chairman,
Chief Executive Officer and President
<PAGE> 3
CONSOLIDATED STORES CORP. LOGO
1105 North Market Street
Suite 1300
P.O. Box 8985
Wilmington, Delaware 19801
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 18, 1999
Notice is hereby given that the Annual Meeting of Stockholders of
Consolidated Stores Corporation will be held at the headquarters of the
Company's principal operating subsidiary at 300 Phillipi Road, Columbus, Ohio,
on Tuesday, May 18, 1999, at 9:00 A.M., local time, for the following purposes:
1. To elect nine directors of the Company; and
2. To transact such other business as may properly come before the meeting.
Only stockholders of record at the close of business on March 26, 1999 are
entitled to notice of and to vote at said meeting or any adjournment thereof.
By order of the Board of Directors.
April 9, 1999
ALBERT J. BELL,
Executive Vice President, General
Counsel
and Secretary
---------------
YOUR VOTE IS IMPORTANT. STOCKHOLDERS ARE URGED TO COMPLETE, DATE AND SIGN
THE ENCLOSED FORM OF PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE TO WHICH NO
POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE ANNUAL
MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU WISH, EVEN IF YOU
HAVE PREVIOUSLY RETURNED YOUR PROXY.
<PAGE> 4
CONSOLIDATED STORES CORP. LOGO
1105 North Market Street
Suite 1300
P.O. Box 8985
Wilmington, Delaware 19801
---------------
PROXY STATEMENT
This Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Consolidated Stores Corporation, a Delaware
corporation (the "Company"), for use at the Annual Meeting of Stockholders to be
held on May 18, 1999. 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 30, 1999, are first being mailed
to stockholders on or about April 9, 1999.
The close of business on March 26, 1999 has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting. At that date, the Company had outstanding 109,901,936 shares of
Common Stock, $.01 par value per share ("Common Stock"). Each of the outstanding
shares of Common Stock is entitled to one vote. The holders of Common Stock have
no cumulative voting rights in the election of directors.
All voting shall be governed by the Bylaws of the Company pursuant to the
General Corporation Law of the State of Delaware. For purposes of Proposal One,
the nine director nominees having the highest votes cast shall be elected. Votes
will be cast for only those nominees for whom authority is given. 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. A proxy may be revoked at any time before it is exercised by
filing with the secretary of the Company a notice of revocation or a duly
executed proxy bearing a later date. A proxy may also be revoked by attending
the meeting and giving notice of revocation to the secretary of the meeting,
either in writing or in open meeting. Tabulation shall be performed by National
City Bank, the Company's Transfer Agent, as inspected by duly appointed officers
of the Company.
1
<PAGE> 5
PROPOSAL ONE: ELECTION OF DIRECTORS
At the Annual Meeting, the shares of Common Stock represented by the
proxies will be voted, unless otherwise specified, for the election as directors
of the nine nominees named below. All nine nominees are currently directors of
the Company. Proxies cannot be voted at the Annual Meeting for more than nine
persons, although additional nominations can be made by stockholders at the
meeting.
Set forth below is certain information relating to the nominees for
election as directors.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME AGE FOR THE PAST FIVE YEARS SINCE
---- --- ----------------------- --------
<S> <C> <C> <C>
Sheldon M. Berman 58 Chairman, Macaroons, Inc. (consumer research and 1994
marketing services); Chairman, Xtreem, Inc. (financial
marketing services); former Chairman, President and
founder, Shelly Berman Communicators (retail marketing
and advertising)
W. Eric Carlborg 35 Chief Financial Officer, Einstein Noah Bagel Corp. 1997
(retail restaurants/bakeries); former Vice
President--Alignment and Planning, Boston Chicken, Inc.
(retail restaurants); former Vice President--Corporate
Finance, Merrill Lynch Investment Banking (investment
banking)
Michael L. Glazer 51 Chief Executive Officer and President, K-B Toys; former 1991
President, The Bombay Company (retail home furnishings)
William G. Kelley 53 Chairman, Chief Executive Officer and President of the 1990
Company
David T. Kollat 60 President and Founder, 22, Inc. (retail research and 1990
consulting)
Brenda J. Lauderback 48 former President--Wholesale Group, Nine West Group, 1997
Inc. (retail and wholesale footwear); former
President--Footwear Wholesale, U.S. Shoe Corporation
(retail and wholesale footwear); former Vice President,
General Merchandise Manager, Dayton Hudson Corporation
(retail stores)
Nathan P. Morton 50 Co-Chairman and Chief Executive Officer, Computer City 1990
(retail stores); Senior Partner, Channel Marketing
Corporation; former President and Chief Executive
Officer, Open Environment Corporation (software
development); former President and Chief Executive
Officer, Comp USA (retail stores)
Dennis B. Tishkoff 56 President and Chief Executive Officer, Shoe Corporation 1991
of America (retail footwear)
William A. Wickham 54 Chairman of the Board, SBC Advertising (advertising and 1992
corporate communications agency)
</TABLE>
2
<PAGE> 6
Four meetings of the Board of Directors were held during the Company's
fiscal year ended January 30, 1999 (sometimes hereinafter "fiscal 1998"). Each
director attended at least 75% of the meetings of the Board, and the committees
on which he or she served, during the period for which he or she served as a
director during fiscal 1998.
The Board has an Audit Committee, a Compensation Committee, and a
Nominating Committee. Messrs. Wickham, Carlborg and Ms. Lauderback are the
members of the Audit Committee, which monitors the activities of the Company's
independent auditors and its internal audit functions. The Audit Committee met
twice during fiscal 1998. Messrs. Kollat, Morton and Tishkoff are the members of
the Compensation Committee, which administers the Company's stock option plans
and advises the Board of Directors with respect to compensation matters. The
Compensation Committee conducted two meetings during fiscal 1998. Messrs.
Kelley, Berman and Glazer are the members of the Nominating Committee, which is
responsible for interviewing and nominating candidates for election as Directors
of the Company. The Nominating Committee did not meet during fiscal 1998. The
Nominating Committee will not consider nominees recommended by security holders.
RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Glazer is a director of Brookstone, Inc. Mr. Kollat is a director of
The Limited, Inc., Cooker Restaurant Corp., SBC Advertising, AEI Music Network,
Pipeliner Systems, Inc., Cheryl & Co., Christy & Associates, Select Comfort,
Inc., and Wolverine Worldwide, Inc. Ms. Lauderback is a director of Irwin
Financial Corporation.
During fiscal 1998, the Company retained MC2 Cyberspace, a corporation
which is 50% owned by SBC Advertising. Additionally, the Company customarily
retains SBC Advertising for communications and advertising services and AEI
Music Network for licensed music broadcasting in stores and other facilities.
During fiscal 1998, the Company paid fees in the amount of $1,037,103.74,
$29,487.65 and $1,978,953.58 to SBC Advertising, MC2 Cyberspace and AEI Music
Network, respectively.
DIRECTOR'S REMUNERATION. Pursuant to arrangements with the Company,
directors who are not officers and who are not involved in the daily affairs of
managing the Company receive an annual retainer of $18,000, plus $1,000 for each
Board meeting attended and $500 for each committee meeting attended. During
fiscal 1998, seven directors, Messrs. Berman, Carlborg, Kollat, Morton,
Tishkoff, Wickham and Ms. Lauderback, were parties to such arrangements. In
addition, such directors constitute outside directors and receive stock option
grants under the Director Stock Option Plan. Each of the aforenamed directors
received an option to acquire 5,000 shares of Common Stock pursuant to the
Director Stock Option Plan during fiscal 1998 (please see Director Stock Option
Plan).
3
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of January 30, 1999, certain information
with regard to the beneficial ownership of the Company's Common Stock by each
holder of 5% of such Stock, each director individually, each of the five
executive officers named in the Summary Compensation Table, and all officers and
directors of the Company as a group.
<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)
-------- ------------------------------------- -------------------- -----------
<S> <C> <C> <C>
Common Stock Albert J. Bell 138,553 *
Common Stock Sheldon M. Berman (2) 36,063 *
Common Stock W. Eric Carlborg 1,000 *
Common Stock Michael L. Glazer 488,320 *
Common Stock William G. Kelley 3,952,490 3.6%
Common Stock David T. Kollat 52,566 *
Common Stock Brenda J. Lauderback 1,300 *
Common Stock Donald Mierzwa 102,294 *
Common Stock Mark J. Miller 0 *
Common Stock Nathan P. Morton 29,127 *
Common Stock Michael J. Potter 159,582 *
Common Stock Dennis B. Tishkoff 23,923 *
Common Stock William A. Wickham (3) 155,127 *
Common Stock Ark Asset Management Company, Inc.
(4) 6,126,700 5.6%
Common Stock Brinson Partners, Inc. (5) 8,789,500 8.0%
Common Stock Capital Research and Management
Company (6) 10,156,190 9.3%
Common Stock FMR Corp. (7) 10,742,722 9.8%
Common Stock Putnam Investments, Inc. (8) 4,921,257 4.5%
Common Stock All directors & executive officers as
a group (18 Persons) 5,363,125 4.9%
</TABLE>
- ---------------
* Represents less than 1% of the outstanding Common Stock.
(1) The persons named in the table, other than Ark Asset Management Company,
Inc. (see note (4) below), Brinson Partners, Inc. (see note (5) below),
Capital Research and Management Company (see note (6) below), FMR Corp. (see
note (7) below), and Putnam Investments, Inc. (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 are adjusted to
account for the 5 for 4 stock splits which occurred in December, 1996 and
June, 1997, and include shares that may be acquired within 60 days of the
record date under stock options exercisable within that period. Percentage
ownership was based on shares of Common Stock outstanding at January 30,
1999, unless otherwise stated. Of the shares reported for Messrs. Bell,
Berman, Carlborg, Glazer, Kelley, Kollat, Mierzwa, Miller, Morton, Potter,
Tishkoff, Wickham, Ms. Lauderback and for all directors and executive
officers as a group, 135,314, 21,314, 1,000, 434,502, 3,902,425, 52,566,
97,501, 0, 29,127, 153,441, 22,753, 36,940, 1,000, and 5,111,695,
respectively, are shares which may be acquired within 60 days of the record
date pursuant to exercisable stock options.
(2) Includes 2,500 shares owned by Macaroons, Inc.
4
<PAGE> 8
(3) Includes 65,000 shares which are owned by SBC Advertising, Inc.
(4) In its Schedule 13G dated February 4, 1999, Ark Asset Management Company,
Inc. stated that it beneficially owned the number of shares reported in the
table as of December 31, 1998. Of the shares reported in the table above,
Ark Asset Management Company, Inc. has sole voting power over 4,491,800
shares, and sole dispositive power over 6,126,700 shares.
(5) In its Schedule 13G dated February 3, 1999, Brinson Partners, Inc. stated
that it beneficially owned the number of shares reported in the table as of
December 31, 1998, and has shared voting power and shared dispositive power
over all listed shares.
(6) In its Schedule 13G dated February 8, 1999, and its accompanying materials,
Capital Research and Management Company stated that it beneficially owned
the shares reported in the table as of December 31, 1998, has sole
dispositive power over the shares, but no voting power over the shares.
(7) In its Schedule 13G dated February 1, 1999, and its accompanying materials,
FMR Corp. stated that it beneficially owned the number of shares reported in
the table as of December 31, 1998, which number includes 9,878,752 shares
(9.022% 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 863,970 shares (0.789% of the Common Stock at that date)
beneficially owned by Fidelity Management Trust Company as a result of its
serving as investment manager for various institutional accounts. Of the
shares reported in the table above, FMR Corp. has sole voting power over
848,171 shares, and sole dispositive power over 10,742,722 shares.
(8) In its Schedule 13G dated February 17, 1999, and its accompanying materials,
Putnam Investments, Inc. stated that it beneficially owned the number of
shares reported in the table as of December 31, 1998, which number includes
4,905,957 shares (4.5% of the Common Stock at that date) beneficially owned
by Putnam Investment Management, Inc. in its capacity as investment advisor
to the Putnam family of mutual funds; and 15,300 shares (less than 1% of the
Common Stock at that date) beneficially owned by Putnam Advisory Company,
Inc., which is the investment advisor to Putnam's institutional clients. Of
the shares reported in the table above, Putnam Investments, Inc. reported no
voting power over the shares listed, and shared dispositive power over
4,905,957 shares.
The addresses of the persons shown in the table above as a beneficial owner
of more than 5% of the Company's Common Stock are as follows: Ark Asset
Management Company, Inc., 125 Broad Street, New York, NY 10004; Brinson
Partners, Inc., 290 South LaSalle, Chicago, Ill 60604; Capital Research and
Management Company, 333 South Hope Street, Los Angeles, CA 90071; FMR Corp., 82
Devonshire Street, Boston, MA 02109; and Putnam Investments, Inc., One Post
Office Square, Boston, MA 02109.
5
<PAGE> 9
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION REPORT OF THE COMPANY'S
COMPENSATION COMMITTEE
Compensation of the Company's executive officers is administered by the
Compensation Committee of the Board of Directors (the "Committee"). The
Committee consists of three independent, non-employee directors. Messrs. Kollat,
Morton, and Tishkoff comprise the Committee. The Committee's responsibilities
include, among other things, establishing the policies and procedures applicable
to the compensation of the Company's executive officers and reporting on such to
the Board of Directors; recommending to the Board of Directors the salaries,
incentive compensation and other remuneration of executive officers; and
reviewing the salaries, compensation and other remuneration of all of the
Company's officers.
The Committee believes that the key to the Company's success is the strong
performance of its executive officers. Consequently, the Committee applies
aggressive compensation incentives, both short term and long term, to maximize
stockholder value. The Committee feels that these incentives should be
implemented with a high degree of responsiveness to the performance of the
Company. To achieve this responsiveness, importance is placed upon executive
officer participation in the Company's performance through equity ownership, and
through bonuses based upon the Company's performance. The basic compensation
components for all executive officers, including the Company's Chief Executive
Officer ("CEO"), consist of salary, bonus, and stock options. Utilizing these
components, the Committee believes that it properly aligns the financial
interests and success of executive officers with those of the stockholders.
CEO SALARY
Mr. Kelley's salary is established by his employment agreement dated May
19, 1998 which replaced his employment agreement dated December 12, 1989. Mr.
Kelley's employment agreement does not provide for any automatic salary
increases. Instead, such increases (if any) are made in the sole discretion of
the Committee. The Committee has chosen not to adopt any specific schedule of
salary increases, and may adjust Mr. Kelley's salary without regard to
adjustments in the salaries of other executive officers of the Company.
Generally, the Committee looks to factors such as the Company's planned and
actual increase in pretax income, market performance of its Common Stock,
business growth and the achievement of other previously established
non-financial criteria, in determining the amount of Mr. Kelley's salary
increase. The Committee does not weigh such factors in advance or tie Mr.
Kelley's salary to specific performance criteria.
CEO BONUS
Mr. Kelley's bonus is determined in accordance with the Company's Key
Associate Annual Incentive Compensation Plan (the "Plan"). Bonuses under the
Plan are based upon the Company's achievement of specific annual earnings
targets established at the beginning of the fiscal year by the Committee. The
Committee derives its targets from the planned earnings per share for the fiscal
year established at or prior to
6
<PAGE> 10
the beginning of the fiscal year by the Board. For fiscal 1998, a bonus became
payable only when the Company achieved more than 92% of the target earnings per
share for the fiscal year, as confirmed by the audited financial statements of
the Company. As a result of the Company's fiscal 1998 earnings, Mr. Kelley did
not receive a bonus.
CEO EQUITY INCENTIVES
The Committee believes that the grant of significant annual equity awards
to Mr. Kelley further links Mr. Kelley's interests with the interests of the
stockholders. Consistent with these objectives, Mr. Kelley's equity interests in
the Company, through stock purchase options and restricted stock, comprise his
primary compensation, and align his personal rewards and motivation with Company
performance and stockholder value. Mr. Kelley's stock purchase options have an
exercise price equal to the market value of the Company's Common Stock at the
date each option is granted. Mr. Kelley's stock purchase options typically
become exercisable ("vest") over time during employment, usually in equal
amounts over a 5 year period. Typically, Mr. Kelley's stock purchase options are
granted at the beginning of each fiscal year. Recognizing Mr. Kelley's continued
contributions and leadership during fiscal 1998 and to provide additional
incentive to Mr. Kelley to navigate the Company through its transition phase,
the Committee made a second grant of stock purchase options later in the year in
lieu of any options which may have been granted to Mr. Kelley at the beginning
of fiscal 1999.
NON-CEO SALARY
The salary component for executive officers other than the CEO is initially
based upon industry data for comparable positions at similarly sized companies,
as adjusted to reflect the experience and expertise of the individual. The
Company attempts to limit the comparison market to Columbus, Ohio whenever
possible. However, where the position is unique to companies included in the
Standard & Poor's Retail Stores Index, the company collects industry data
reflective of that group that are of similar size to the Company. Salaries are
reviewed annually and are adjusted to reflect growth in the individual's
performance, the individual's achievement of previously established goals, and
the individual's relative contribution to the overall performance of the
Company. Salary adjustments are subjectively determined, and are not formally
tied to Company performance.
NON-CEO BONUS
The bonus component for non-CEO executive officers is typically determined
in accordance with the Company's Key Associate Annual Incentive Compensation
Plan. The bonus component for executive officers other than the CEO consists of
a percentage of salary earned as the Company achieves specific earnings targets
that are set by the Committee at the beginning of each fiscal year. The
percentage of salary is set by position level, and is subjectively determined.
The Committee believes that a significant portion of the total compensation of
the executive officers should be bonus and tied to the Company's performance. As
discussed above, as a result of the Company's fiscal 1998 earnings, non-CEO
executive officers did not receive bonuses.
7
<PAGE> 11
NON-CEO EQUITY INCENTIVES
The equity participation component for executive officers other than the
CEO consists primarily of stock purchase options. Stock purchase options are
granted at the discretion of the Committee, typically at the beginning of each
fiscal year and in an amount determined by position and performance. Stock
purchase options have an exercise price equal to the market value of the stock
at the time of grant. In addition, stock purchase options are sometimes granted
in connection with the promotion of an individual to a greater level of
responsibility. The number of shares per option grant is set in advance by
position, subject to adjustment, based upon the Committee's subjective
perception of the individual's performance. Stock purchase options typically
vest over a five year period, based upon time passage during employment and not
based upon performance criteria. The Committee's determination of the timing and
amount of each grant is subjective, based upon its assessment of the need and
appropriateness of each grant, in light of the performance of the respective
executive officer and the performance of the Company as a whole. The Committee
considers the recommendation of, and relies upon information provided by, the
CEO in making its assessment and reaching its decision. To create additional
incentive for the non-CEO executive officers to increase the Company's
performance and to further align the non-CEO executive officers' interest with
those of the stockholders, the Committee made a second grant of stock purchase
options to the non-CEO executive officers and other members of the Company's
management later in the year in lieu of any options which may have been granted
at the beginning of fiscal 1999. The Committee believes that its policy in
determining stock option grants best utilizes stock options as a specific
long-term performance incentive, by basing an important portion of the executive
officers compensation upon the future performance of the Company's Common Stock.
DEDUCTIBILITY OF ANNUAL COMPENSATION OVER $1 MILLION
Section 162(m) of the Internal Revenue Code (the "Code") generally limits
the tax deductibility for federal income tax purposes of compensation paid to
the Company's CEO and the four highest compensated executive officers (other
than the CEO) in excess of $1 million. Compensation in excess of $1 million may
be deducted if it is "performance-based compensation" within the meaning of the
Code. The Company believes it has taken the necessary actions to preserve the
deductibility of payments made under the Company's compensation plans. As the
Code or the regulations promulgated thereunder change, further actions will be
taken to the extent necessary and possible to maintain the deductibility of
payments under the Company's compensation plans.
THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
David T. Kollat, Chairman
Nathan P. Morton
Dennis B. Tishkoff
8
<PAGE> 12
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the individual
compensation paid to the Company's Chief Executive Officer and each of the five
other most highly compensated executive officers for services in all capacities
to the Company for fiscal years 1998, 1997, and 1996.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------------------- ---------------------------------
AWARDS PAYOUTS
-------------------- ----------
RESTRICTED LONG-TERM
STOCK STOCK INCENTIVE ALL OTHER
FISCAL SALARY BONUS OTHER AWARDS OPTIONS PAYOUTS COMPENSATION
NAME AND POSITION YEAR ($) ($) ($) ($) (#)(e) ($) ($)(f)(g)
----------------- ------ ---------- ---------- ------------ ---------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William G. Kelley, Chairman 1998 $935,000 $ -- $52,374(a) $ -- 475,000 $ -- $19,116
of the Board and 1997 850,000 1,700,000 --(b) -- -- -- 16,773
Chief Executive Officer 1996 651,000 878,850 55,995(c) -- 317,500 -- 15,037
Michael L. Glazer, 1998 630,000 -- --(b) -- 200,000 -- 6,400
Chief Executive Officer, 1997 600,000 1,200,000 --(b) -- -- -- 6,400
K-B Toys 1996 472,500 637,875 62,224(d) -- 285,000 -- 6,000
Albert J. Bell, 1998 375,000 -- --(b) -- 150,000 -- 9,600
Executive Vice 1997 300,000 360,000 --(b) -- -- -- 8,938
President,
General Counsel and 1996 225,000 182,250 --(b) -- 62,500 -- 8,170
Secretary
Michael J. Potter, 1998 375,000 -- --(b) -- 150,000 -- 8,832
Executive Vice President 1997 300,000 360,000 --(b) -- -- -- 8,289
and Chief Financial 1996 225,000 182,250 --(b) -- 62,500 -- 7,546
Officer
Donald A. Mierzwa, 1998 300,000 -- --(b) -- 75,000 -- 16,927
Executive Vice 1997 278,846 182,250 --(b) -- -- -- 13,152
President,
Store Operations -- 1996 221,635 68,000 --(b) -- 62,500 -- 14,529
Closeout
Mark J. Miller(h) 1998 539,423 -- --(b) -- 250,000 -- --
</TABLE>
- ---------------
(a) Includes $21,463 for use of Company aircraft as approved by the Board of
Directors, $13,891 for use of Company vehicles and $14,135 for executive
medical benefits.
(b) Exclusive of the value of perquisites or other personal benefits because
they do not exceed the lesser of $50,000 or 10% of total annual salary and
bonus for the named executive officer.
(c) Includes $29,719 of interest foregone by the Company in fiscal 1996 on a
$450,000 second mortgage loan to Mr. Kelley made in 1991. This loan was
repaid in full in fiscal 1996. The loan was in connection with relocation
assistance provided in Mr. Kelley's employment agreement, was payable on
demand, and secured by a second mortgage.
(d) Includes $32,433 in 1996 for relocation assistance provided to Mr. Glazer.
(e) Non-qualified options granted pursuant to the 1996 Incentive Performance
Plan and The Executive Stock Option and Stock Appreciation Rights Plan.
(f) Company matching contribution to the Consolidated Stores Corporation Savings
Plan (401K) and/or Consolidated Stores Corporation Supplemental Savings Plan
(Top Hat). For fiscal 1998 and 1997 the matching contribution was $6,400 for
all named individuals excluding Mr. Miller for which no matching
contribution was recorded. The matching contribution was attributable to
1996 was $6,000 for all named individuals in that year.
9
<PAGE> 13
(g) Accruals to the Consolidated Stores Corporation Supplemental Defined Benefit
Pension Plan for fiscal 1998 for Messrs. Kelley, Glazer, Bell, Potter, and
Mierzwa were $12,716, $0, $3,200, $2,432, and $10,527, respectively.
Accruals for fiscal 1997 for Messrs. Kelley, Glazer, Bell, Potter, and
Mierzwa were $10,373, $0, $2,538, $1,889, and $6,752, respectively and
accruals for fiscal 1996 for Messrs. Kelley, Glazer, Bell, Potter, and
Mierzwa were $9,037, $0, $2,170, $1,546, and $8,529, respectively.
(h) Former President of the Closeout Division. Mr. Miller was not employed by
the Company at January 31, 1999.
EMPLOYMENT AGREEMENTS. Since 1989 and 1995, respectively, the Company has
been a party to employment agreements with Mr. Kelley and Mr. Glazer. In fiscal
1998, the Company entered into new employment agreements with Messrs. Kelley and
Glazer. The terms of these agreements are substantially similar and they are
described collectively herein except where their terms materially differ. The
agreements provide for an annual base salary as increased by the Board of
Directors and an annual bonus based on the Company's level of achievement of
certain performance goals during the year as established by the Board of
Directors, provided that bonuses were not payable under the agreements unless
the Company achieved a minimum threshold of its target earnings per share, and
in any event were subject to a maximum of 200% of the base salary, for fiscal
1998. Each of the agreements requires that the individual employee devote his
full business time to the business of the Company and prohibits him from
competing with the Company during his employment and for a two-year period
thereafter (six months in the event of termination of employment following a
"Change of Control," as such term is defined in the agreements).
Each of the agreements provide that in the event either Mr. Kelley or Mr.
Glazer is terminated without cause, such executive will become entitled to
receive continued salary payments and benefits for one year and will receive a
pro-rata bonus for the fiscal year in which the such action occurs. Each of the
agreements further provides that in the event either Mr. Kelley or Mr. Glazer's
employment terminates for any reason within two years of a Change of Control,
they will become entitled to receive a lump sum cash payment, net of any
applicable withholding taxes, in an amount equal to two years salary and two
years annual stretch bonus and will be entitled to receive certain plan benefits
for one year. In addition, with respect to Mr. Glazer's agreement, if Mr.
Glazer's employment terminates for any reason within two years of a Change of
Control, all stock options granted pursuant to his 1995 agreement will vest and
become exercisable. A Change of Control of the Company would also cause Messrs.
Kelley and Glazer to receive a payment in the amount necessary to hold him
harmless from the effects of Section 280G and 4999, respectively, of the Code,
which Code sections could subject the payments due under these employment
agreements to excise tax liability (see also "Severance Agreements"). The
compensation payable on account of a Change of Control may be subject to the
deductibility limitations of Sections 162(m) and 280G of the Code.
The following tables reflect the (i) number and value of options granted in
fiscal 1998 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 30, 1999, for those named individuals.
10
<PAGE> 14
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants(a) POTENTIAL REALIZED
---------------------------------------------------------- VALUE AT
PCT. OF TOTAL ASSUMED ANNUAL
OPTIONS RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES IN Option Term(d)
OPTIONS FISCAL EXERCISE PRICE EXPIRATION ------------------------
NAME GRANTED YEAR(c) PER SHARE DATE 5% 10%
---- ---------- ------------- -------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
William G. Kelley(b) 275,000 7.6% 37.750 24-Feb-08 $6,528,712 $16,545,039
200,000 5.5% 16.375 13-Oct-08 2,059,630 5,219,507
Michael L. Glazer 100,000 2.8% 37.750 24-Feb-08 2,374,077 6,016,378
100,000 2.8% 16.375 13-Oct-08 1,029,815 2,609,753
Albert J. Bell 75,000 2.1% 37.750 24-Feb-08 1,780,558 4,512,283
75,000 2.1% 16.375 13-Oct-08 772,361 1,957,315
Michael J. Potter 75,000 2.1% 37.750 24-Feb-08 1,780,558 4,512,283
75,000 2.1% 16.375 13-Oct-08 772,361 1,957,315
Donald A. Mierzwa 25,000 0.7% 37.750 24-Feb-08 593,519 1,504,094
50,000 1.4% 16.375 13-Oct-08 514,907 1,304,877
Mark J. Miller(e) 150,000 4.2% 37.750 24-Feb-08 3,561,116 9,024,567
100,000 2.8% 16.375 13-Oct-08 1,029,815 2,609,753
</TABLE>
- ---------------
(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 transferability limitations.
(b) Option grant of 75,000 to Mr. Kelley may vest in one to five years based on
attainment of certain performance goals for the 1998 fiscal year as
established by the Compensation Committee. All options attributable to the
attainment of fiscal 1998 performance goals vest at the end of the five year
period.
(c) Based on 3,606,677 non-qualified options granted to all associates in fiscal
1998 pursuant to the 1996 Performance Incentive Plan.
(d) 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.
(e) Mr. Miller was not employed by the Company at January 31, 1999.
11
<PAGE> 15
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
UNEXERCISED OPTIONS AT JANUARY 30, 1999
---------------------------------------------------------
NUMBER OF VALUE OF IN-THE-MONEY
SHARES NUMBER OF OPTIONS Options(b)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(a) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William G. Kelley -- $ -- 3,715,550 804,687 $38,642,056 $ 854,763
Michael L. Glazer -- -- 369,377 537,500 1,388,297 1,003,125
Albert J. Bell -- -- 87,502 259,374 346,760 273,901
Michael J. Potter -- -- 106,567 265,310 481,574 323,344
Donald A. Mierzwa 31,250 $789,609 57,502 188,748 233,761 292,301
Mark J. Miller(c) 26,909 171,106 140,542 -- -- --
</TABLE>
- ---------------
(a) Difference of the sales price on the dates of exercise and the option
exercise price.
(b) Based on the fair market value ($16.75) of In-the-Money Consolidated Stores
Corporation Common Stock at January 30, 1999, minus the aggregate exercise
prices.
(c) Mr. Miller was not employed by the Company at January 31, 1999.
12
<PAGE> 16
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.
COMPARISON OF FIVE YEAR TOTAL STOCKHOLDER RETURN (a)
<TABLE>
<CAPTION>
CONSOLIDATED STORES
CORPORATION S&P RETAIL STORES S&P 500
------------------- ----------------- -------
<S> <C> <C> <C>
1993 100.00 100.00 100.00
1994 102.07 92.60 100.53
1995 110.34 99.85 139.40
1996 226.72 119.19 176.12
1997 354.53 176.73 223.51
1998 143.86 289.69 296.13
</TABLE>
(a) Assumes $100 invested on January 30, 1994 in Consolidated Stores Corporation
Common Stock compared to the same amount invested in the other funds shown
at the same time. Dividends, if any, are assumed to be reinvested.
COMPENSATION PLANS AND ARRANGEMENTS
DIRECTOR STOCK OPTION PLAN. The Director Stock Option Plan is administered
by the Compensation Committee pursuant to an established formula. Neither the
Board of Directors nor the Compensation Committee exercise any discretion in
administering the plan, and the administration performed by the Compensation
Committee is ministerial in nature. The formula which governs the grant of stock
options to eligible participants may be amended by the Board of Directors, but
not more frequently than once in any six month period. Under the current
formula, each of the outside directors who are not otherwise ineligible are
granted annually stock options for the purchase of 5,000 shares of the Company's
Common Stock, for an exercise price equal to 100% of the fair market value on
the date of grant. Each annual grant occurs on the last day of the quarterly
trading period next following the Annual Meeting of Stockholders.
13
<PAGE> 17
Options granted under the Director Stock Option Plan become exercisable
over three years beginning upon the first annual anniversary of the grant date,
whereby the option becomes exercisable for 20% of the shares on the first
anniversary, 60% on the second anniversary, and 100% on the third anniversary,
respectively. Options granted automatically terminate ten years and one month
following the date of grant. An optionee may exercise a stock option only during
specific quarterly trading periods, and only if at all times during the period
beginning on the date such option was granted and ending on the day three months
before the date of exercise, he or she was a director of the Company.
Options granted under the Director Stock Option Plan are not transferable
other than by will or the laws of descent and distribution.
1996 PERFORMANCE INCENTIVE PLAN. The 1996 Performance Incentive Plan is
administered by the Compensation Committee of the Board of Directors. The
Committee determines the individuals to whom Awards are to be made, the number
of shares, if any, to be covered by each Award, the term of the Award, its
vesting, exercise period or settlement, the type of consideration, if any, to be
paid to the Company upon exercise of an Award, and all other terms and
conditions of the Awards. The purpose of the 1996 Performance Incentive Plan is
to provide a flexible, long-term vehicle to attract, retain and motivate
officers and employees. The 1996 Performance Incentive Plan authorizes the grant
of incentive or nonqualified stock options, stock appreciation rights,
restricted stock, stock equivalent unit and performance unit awards
(collectively referred to as "Awards"), any of which may be granted on a stand
alone, combination or tandem basis.
The number of shares of Common Stock available for delivery under the 1996
Performance Incentive Plan consists of an initial allocation of 2,000,000 shares
(3,125,000 shares as adjusted to account for the 5 for 4 stock splits which
occurred in December, 1996 and June, 1997), which is increased, beginning with
the fiscal year in which the 1996 Performance Incentive Plan is in effect and
during each fiscal year following, by a number of shares equal to one percent
(1.0%) of the total number of issued shares of Common Stock as of the start of
each of the Company's fiscal years. Unused shares from previous fiscal years
remain available for delivery under the 1996 Performance Incentive Plan;
provided, that in any event, the total awards of stock options or restricted
stock outstanding and shares available for use under the 1996 Performance
Incentive Plan combined with any awards of stock options or restricted stock
outstanding from any other plan of the Company shall not exceed fifteen percent
(15%) of the total shares of issued and outstanding Common Stock as of any
measurement date.
The 1996 Performance Incentive Plan limits the number of shares of Common
Stock that can be represented by stock options, stock appreciation rights, or
restricted stock and awarded to any employee during any single fiscal year to no
more than 1,000,000 shares. As a further limitation, the maximum amount of
compensation with respect to performance units and stock equivalent units that
may be paid in any one fiscal year (within the meaning of Section 162(m) of the
Code) to anyone participant with respect to any one fiscal year is $2,000,000.
Awards under the 1996 Performance Incentive Plan may be made to any
employee of the Company or its affiliates designated by the Committee.
Historically, options have been granted to approximately 200 employees in any
given year.
14
<PAGE> 18
The 1996 Performance Incentive Plan provides for the Award of options which
may be either incentive stock options or non-qualified options. For both
incentive and non-qualified options, the exercise price may be not less than 100
percent of the fair market value of a share of Common Stock at the time the
option is granted. Any option intended to qualify as an incentive stock option
must meet all requirements of Section 422 of the Code. The Committee may grant
stock appreciation rights to any eligible employee on such terms as the
Committee may determine.
The Committee may grant shares of restricted stock, stock equivalent units,
and performance units, subject to such conditions and restrictions as the 1996
Performance Incentive Plan specifies and otherwise as the Committee may
determine. These grants may be made alone or in tandem with other Awards. Stock
equivalent units and performance units may be payable upon vesting in cash, or
may be convertible to common Stock or other form of value determined by the
Committee.
No Award under the 1996 Performance Incentive Plan may be assigned or
transferred by the grantee other than by will or the laws of descent and
distribution, pursuant to a qualified domestic relations order (as defined by
the Code) or as may otherwise be permitted by the Committee. In the absence of
the first two exceptions, all rights may be exercised during the grantee's
lifetime only by the grantee.
The Committee may from time to time, at its discretion, amend or terminate
the 1996 Performance Incentive Plan, except that no such amendment or
termination shall impair any rights under any Award made prior to the
amendment's effective date without the consent of the grantee, and provided that
no such amendment shall increase the number of shares available to the 1996
Performance Incentive Plan or change the price at which stock options or stock
appreciation rights may be granted unless approved by stockholders in accordance
with applicable laws and regulations. The 1996 Performance Incentive Plan shall
terminate on February 3, 2006, or such earlier date as the Board may determine.
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 of the Code, including bonuses, incentive compensation, severance
pay, disability payments and other forms of irregular payments. Effective
January 1, 1996, the benefits accrued for certain highly compensated
individuals, including all executive officers, was frozen at the then current
levels.
The table below illustrates the amount of annual benefits payable at age 65
to a person in the specified average compensation and years of service
classifications under the Pension Plan combined with the Supplemental Pension
Plan.
15
<PAGE> 19
<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
$154,000 and above $15,400 $23,100 $30,800 $38,500
</TABLE>
The maximum annual benefit payable under the Pension Plan is restricted by
the Internal Revenue Code. At January 1, 1999, the maximum final five year
average compensation is $154,000. At January 1, 1999, Mr. Kelley had 8 years of
credited service, Mr. Glazer had none, Mr. Bell had 11 years, Mr. Potter had 7
years, and Mr. Mierzwa had 9 years.
SUPPLEMENTAL PENSION PLAN. The Company maintains a non-qualified
supplemental employee retirement plan ("Supplemental Pension Plan") for those
executives whose benefits were frozen in the Pension Plan on or subsequent to
January 1, 1996. The Supplemental Pension Plan constitutes a contract to pay
benefits upon retirement as therein defined. The Supplemental Pension Plan is
designed to pay the same benefits in the same amount as if the participants
continued to accrue benefits under the Pension Plan. The Company has no
obligation to fund the Supplemental Pension Plan, and all assets and amounts
payable under the Supplemental Pension Plan are subject to the claims of general
creditors of the Company. The table below illustrates the amount of annual
benefit payable at age 65 to a person in the specified average compensation and
years of service classification under the Supplemental Pension Plan.
<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
$154,000 and above $15,400 $23,100 $30,800 $38,500
</TABLE>
SAVINGS PLAN. All of the executive officers referred to in the cash
compensation table, as well as substantially all other full-time employees of
the Company and its subsidiaries, are eligible to participate in the
Consolidated Stores Corporation Savings Plan (the "Savings Plan" or "401K"). In
order to participate in the Savings Plan, an eligible employee must satisfy
applicable age and service requirements and must make contributions to the
Savings Plan ("Participant Elective Contributions").
Participant Elective Contributions are made through authorized payroll
deductions to one or more of the several investment funds established under the
Savings Plan. One of the funds is a Company Stock Fund which is invested solely
in Common Stock of the Company. All Participant Elective Contributions are
matched by the Company ("Employer Matching Contributions") at a rate of 100% for
the first 2% of salary contributed, and 50% for the next 4% of salary
contributed; however, only Participant Elective Contributions of up to six
percent of the employee's compensation will be matched.
Each participant has a nonforfeitable right to all accrued benefits
pertaining to Participant Elective Contributions. Each participant also has a
nonforfeitable right to all accrued benefits pertaining to Employer Matching
Contributions in the event of retirement or other termination of employment (a)
on or after the participant's 65th birthday, (b) on account of disability, or
(c) by reason of death. A participant whose employment terminates under other
circumstances will have a nonforfeitable right to a portion of accrued
16
<PAGE> 20
benefits pertaining to Employer Matching Contributions determined under a
schedule based on years of service. All other unvested accrued benefits will be
forfeited.
SUPPLEMENTAL SAVINGS PLAN. The Company maintains a non-qualified salary
deferral plan (the "Supplemental Savings Plan" or "Top Hat") for those
executives participating in the Savings Plan who desire to contribute more than
the amount allowable under the Savings Plan. The Supplemental Savings Plan
constitutes a contract to pay deferred salary, and limits deferrals in
accordance with prevailing tax law. The Supplemental Savings Plan is designed to
pay the deferred compensation in the same amount as if the contributions had
been made to the Savings Plan. The Company has no obligation to fund the
Supplemental Savings Plan, and all assets and amounts payable under the
Supplemental Savings Plan are subject to the claims of general creditors of the
Company.
EXECUTIVE BENEFIT PLAN. Most of the executive officers are eligible to
participate in the Consolidated Stores Executive Benefit Plan (the "Benefit
Plan"). The Benefit Plan is a supplemental health benefits plan which reimburses
participants for medical costs incurred but not covered by the Consolidated
Stores Associate Benefits Plan, up to an annual maximum reimbursement of $10,000
per participant. Amounts received by participants are treated as taxable income.
Amounts received exceeding the applicable threshold by the individuals named in
the Summary Compensation Table are included in the amounts reflected in the
values of personal benefits received by such individuals.
EXECUTIVE CHANGE IN CONTROL SEVERANCE AGREEMENTS. Since April 18, 1989, the
Company has maintained Executive Severance Agreements with certain of its key
officers and employees (currently 104 persons). The agreements were updated and
reissued during fiscal 1998. 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). Notwithstanding these provisions, the
agreements provide that a Change in Control shall not result from a transaction
in which the Company exchanges less than 50% of its then outstanding equity
securities for 51% or more of the outstanding equity securities of another
corporation. The agreements provide for the following severance benefits: (i)
for certain officers (including Messrs. Bell, Potter and Mierzwa) and employees
having a position of vice president of the Company or above, a lump-sum payment
equal to 200% of the employee's then-current annual salary and two times the
employee's then current stretch bonus; or (ii) for other employees having a
position of director of a department of the Company, a lump-sum payment equal to
100% of the employee's then current annual salary and stretch bonus. Messrs.
Kelley and Glazer are not a party to such an agreement, but each have
substantially similar provisions contained in his respective employment
agreement. In addition, the 1996 Per-
17
<PAGE> 21
formance Incentive Plan provides for immediate vesting of all outstanding
options and shares, respectively, in the event of such a Change in Control
(please see the Fiscal Year End Option Values table above). The employee will
also become entitled to reimbursement of legal fees and expenses incurred by the
employee in seeking to enforce his rights under his agreement. In addition, to
the extent that payments to the employee pursuant to his agreement (together
with any other amounts received by the employee in connection with a Change in
Control) would result in triggering the provisions of Sections 280G and 4999 of
the Code, each agreement provides for the payment of an additional amount (the
"Tax Gross-Up Amount") such that the employee receives, net of excise taxes, the
amount he would have been entitled to receive in the absence of the excise tax
provided in Section 4999 of the Code. Under proposed income tax regulations,
compensation payable on change in control is subject to the income tax deduction
limitations.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Deloitte & Touche LLP to be the
independent auditors of the Company and its subsidiaries for the fiscal year
ending January 29, 2000. Deloitte & Touche LLP acted as the Company's
independent auditors for fiscal years ended January 30, 1999, and January 31,
1998. A representative of Deloitte & Touche LLP will be in attendance at the
Annual Meeting of Stockholders, will have the opportunity to make a statement if
he or she desires to do so, and will be available to respond to appropriate
questions from stockholders.
STOCKHOLDER PROPOSALS
If a stockholder notifies the Company after February 18, 2000 of an intent
to present a proposal at the Company's 2000 Annual Meeting, the Company will
have the right to exercise its discretionary voting authority with respect to
such proposal, if presented at the meeting, without including information
regarding such proposal in its proxy materials. Any stockholder who intends to
present a proposal at the 2000 Annual Meeting of Stockholders for inclusion in
the proxy statement and form of proxy relating to that meeting is advised that
the proposal must be submitted in accordance with Rule 14a-8 of the Securities
Exchange Act of 1934 and the Company's By-laws. To be eligible for inclusion,
stockholder proposals must be received by the Company at its principal executive
offices not later than December 10, 1999.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10 percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission and the New York Stock Exchange initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than 10 percent
shareholders are required by the regulations of the Securities and Exchange
Commission to furnish the Company with copies of all Section 16(a) forms they
file. To the Company's knowledge, all Section 16(a) filing requirements
applicable to its officers, directors and greater than 10 percent beneficial
owners during fiscal 1998 have been complied with.
18
<PAGE> 22
OTHER MATTERS
This solicitation of proxies is made by and on behalf of the Board of
Directors. In addition to mailing copies of this statement and the accompanying
notice and form of proxy to all stockholders of record on the record date, the
Company will request brokers, custodians, nominees and other fiduciaries to
forward copies of this material to persons for whom they hold shares of Common
Stock of the Company in order that such shares may be voted. Solicitation may
also be made by the Company's officers and regular employees personally or by
telephone or telegraph. The cost of the solicitation will be incurred by the
Company. The Company has also retained Georgeson & Company Inc. to aid in the
solicitation of proxies for a fee estimated to be $9,500, plus reasonable
out-of-pocket expenses.
If the accompanying form of proxy is executed and returned, the shares
represented thereby will be voted in accordance with any specifications made by
the stockholder. In the absence of any such specifications, they will be voted
to elect all nine nominees as set forth under Proposal One.
The presence of any stockholder at the Annual Meeting will not operate to
revoke his proxy. A proxy may be revoked at any time before it is exercised by
filing with the secretary of the Company a notice of revocation or a duly
executed proxy bearing a later date. A proxy may also be revoked by attending
the Annual Meeting and giving notice of revocation to the secretary of the
meeting, either in writing or in open meeting.
If any other matters shall properly come before the Annual Meeting, the
persons named in the proxy, or their substitutes, will vote thereon in
accordance with their judgment. The Board of Directors does not know of any
other matters which will be presented for action at the Annual Meeting.
By order of the Board of Directors.
April 9, 1999
Albert J. Bell,
Executive Vice President,
General Counsel and Secretary
19
<PAGE> 23
CONSOLIDATED STORES CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE MAY 18, 1999 ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints William G. Kelley, Albert J. Bell and
Michael J. Potter, and each of them, with full power of substitution, as
proxies for the undersigned to attend the Annual Meeting of Stockholders
of Consolidated Stores Corporation, to be held at 300 Phillipi Road,
Columbus, Ohio, at 9:00 A.M. (local time) on May 18, 1999, 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, W. Eric Carlborg, Michael L. Glazer, William G.
Kelley, David T. Kollat,
Brenda J. Lauderback, Nathan P. Morton, Dennis B. Tishkoff and William A.
Wickham.
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name on the space provided
below.)
-------------------------------------------------------------------------
(Continued, and to be dated and signed, on the other side)
(Continued from the other side)
<TABLE>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
2. In their discretion, to vote upon such other business as [ ] [ ] [ ]
may properly come before the meeting.
</TABLE>
Date: , 1999
----------------
-----------------------------
-----------------------------
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.
