<PAGE> 1
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
Mac Frugal's Bargains Close-outs Inc.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Ted Finamore
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 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:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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4) Proposed maximum aggregate value of transaction:
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Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 2
[LOGO]
May 19, 1994
Dear Stockholder:
We cordially invite you to attend our 1994 Annual Meeting of Stockholders
to be held at 9:00 a.m. on Wednesday, June 22, 1994 at the Long Beach Airport
Marriott Hotel, 4700 Airport Plaza Drive, Long Beach, California 90815. Enclosed
are the Notice of Annual Meeting, Proxy Statement and Proxy Card relating to the
Annual Meeting which we urge you to read carefully. Also enclosed is the
Company's 1993 Annual Report to Stockholders. Whether or not you expect to
attend the Annual Meeting, please sign and date the enclosed Proxy Card and
return it as promptly as possible to ensure that your shares will be voted.
Because mail delays occur frequently, it is important that the enclosed Proxy
Card be returned well in advance of the meeting.
ON BEHALF OF YOUR BOARD OF DIRECTORS
/s/ PETER S. WILLMOTT
----------------------------
PETER S. WILLMOTT
Chairman of the Board
<PAGE> 3
[LOGO]
NOTICE OF ANNUAL MEETING
TO BE HELD JUNE 22, 1994
TO THE STOCKHOLDERS OF
MAC FRUGAL' S BARGAINS - CLOSE-OUTS INC.:
Notice is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of Mac Frugal's Bargains - Close-outs Inc., a Delaware corporation
(the "Company"), will be held at the Long Beach Airport Marriott Hotel, 4700
Airport Plaza Drive, Long Beach, California 90815, on Wednesday, June 22, 1994,
beginning at 9:00 a.m., local time. The Annual Meeting will be held for the
following purposes:
1. To elect eight (8) directors of the Company to serve during the ensuing
year or until their successors have been duly elected and qualified.
2. To transact such other business as may properly come before the meeting
or any postponements or adjournments thereof.
The Board of Directors has fixed May 6, 1994 as the record date for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting and any adjournments thereof, and only stockholders of record at the
close of business on that date are entitled to such notice and to vote at the
Annual Meeting. A list of stockholders entitled to vote at the meeting will be
available at the offices of the Company for 10 days prior to the meeting.
We hope that you will use this opportunity to take an active part in the
affairs of the Company by voting on the business to come before the meeting
either by executing and returning the enclosed Proxy Card or by casting your
vote in person at the meeting.
STOCKHOLDERS UNABLE TO ATTEND THE MEETING IN PERSON ARE REQUESTED TO DATE
AND SIGN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. A STAMPED ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE. IF A STOCKHOLDER RECEIVES MORE THAN ONE PROXY
CARD BECAUSE HE OR SHE OWNS SHARES REGISTERED IN DIFFERENT NAMES OR ADDRESSES,
EACH PROXY CARD SHOULD BE COMPLETED AND RETURNED.
By Order of the Board of Directors
/s/ LEONARD S. WILLIAMS
-------------------------------------
LEONARD S. WILLIAMS
President and Chief Executive Officer
Dominguez, California
May 19, 1994
<PAGE> 4
[LOGO]
MAC FRUGAL' S BARGAINS - CLOSE-OUTS INC.
2430 EAST DEL AMO BOULEVARD
DOMINGUEZ, CALIFORNIA 90220-6306
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 22, 1994
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Mac Frugal's Bargains - Close-outs Inc.
(the "Company") for use at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held at 9:00 a.m., local time, on June 22, 1994, at the Long
Beach Airport Marriott Hotel, 4700 Airport Plaza Drive, Long Beach, California
90815, and any postponements or adjournments thereof for the purposes set forth
in the accompanying Notice of Annual Meeting. This Proxy Statement and the
accompanying Form of Proxy were first mailed to stockholders on or about May 23,
1994.
RECORD DATE AND VOTING
May 6, 1994 has been fixed as the record date (the "Record Date") for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting, and any postponements or adjournments thereof. As of May 6, 1994, there
were 29,306,375 shares of the Company's Common Stock, par value $.02778 per
share (the "Common Stock"), issued and outstanding. No shares of the Company's
preferred stock, par value $1.00 per share, were outstanding as of that date. A
majority of the shares entitled to vote, present in person or represented by
proxy, will constitute a quorum at the meeting.
Each share of Common Stock issued and outstanding on the Record Date is
entitled to one vote on any matter presented for consideration and action by the
stockholders at the Annual Meeting. With respect to all matters other than the
election of directors, the affirmative vote of a majority of shares of the
Company's Common Stock present in person or represented by proxy at the meeting
and entitled to vote on the subject matter will be the act of the stockholders.
Directors will be elected by a plurality of the votes of the shares of the
Company's Common Stock present in person or represented by proxy and entitled to
vote on the election of directors. Abstentions will have no effect for the
purpose of determining whether a director has been elected. Unless otherwise
instructed, proxies solicited by the Company will be voted "FOR" the nominees
named herein for election as directors.
New York Stock Exchange rules generally require that when shares are
registered in street or nominee name, its member brokers must receive specific
instructions from the beneficial owners in order to vote on certain proposals. A
broker non-vote will have no effect for the purpose of determining whether a
director has been elected.
A stockholder giving a proxy has the power to revoke it at any time before
it is exercised by giving written notice of revocation to the Secretary of the
Company, by executing a subsequent proxy, or by attending the Annual Meeting and
voting in person. Subject to any such revocation, all shares represented by
properly executed proxies will be voted in accordance with the specifications on
the enclosed proxy card.
<PAGE> 5
ELECTION OF DIRECTORS
The Company's by-laws state that the Board of Directors shall consist of
not less than five nor more than nine members. The specific number of Board
members within this range is established by the Board of Directors and is
currently set at eight. The Board of Directors is proposing for election each of
the eight persons now serving on the Board for election to the Board at the
Annual Meeting. Each of the eight directors elected at the Annual Meeting will
serve until the next annual meeting of stockholders or until his successor is
duly elected and qualified. Should any nominee become unavailable to serve as a
director or should any vacancy occur before the election (which events are not
anticipated), the proxies may be voted for a substitute nominee selected by the
Board of Directors or the authorized number of directors may be reduced. If for
any reason the authorized number of directors is reduced, the proxies will be
voted, in the absence of instructions to the contrary, for the election of the
remaining nominees named in this Proxy Statement. To the Company's knowledge,
all nominees are and will be available to serve. The nominees are listed below
and have supplied the following background information to the Company:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
DURING THE LAST 5 YEARS, OTHER DIRECTOR
NAME AGE BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE
---- --- ----------------------------------------------- --------
<S> <C> <C> <C>
Peter S. Willmott 56 Chairman of the Board of the Company since 1990
October 1990; Chairman of the Board since 1989,
Willmott Services, Inc. (retail); Chairman of
the Board, President and Chief Executive
Officer 1983 to 1989, Carson Pirie Scott &
Company (retail and food services); Director,
Browning-Ferris Industries, Federal Express
Corporation, International Multifoods
Corporation, Maytag Corporation, Morgan Keegan
& Co., Inc., and Zenith Electronics
Corporation.
Leonard S. Williams 56 President and Chief Executive Officer of the 1990
Company since November 1990; Consultant 1989 to
1990; Chief Executive Officer 1987 to 1989,
Lion-Nathan Ltd. (retail).
David H. Batchelder 44 President, Secretary and sole Director since 1990
1988, Batchelder & Partners, Inc. (financial
advisory and consulting firm); President,
Secretary and sole Director since 1988,
Batchelder Co. (general partner of DHB
Partners, L.P., investor in acquisition
partnerships).
Bruce E. Karatz 48 Director since April 1989, Chairman since 1989
August 1993, President, Chief Executive Officer
and Director since 1986, Kaufman and Broad Home
Corporation (residential and commercial real
estate development); Director, Honeywell Inc.,
National Golf Properties, Inc.
Anthony Luiso 50 Chairman, President and Chief Executive Officer 1992
since 1989, Director, President and Chief
Operating Officer 1988 to 1989, International
Multifoods (food service distributor and food
processor); Director, The Black & Decker
Corporation.
Ronald P. Spogli 46 General Partner since 1983, Freeman Spogli & 1989
Co. (merchant banking); Director, Buttrey Food
and Drug Stores Company, Envirosource, Inc.,
Orchard Supply Hardware Stores, Inc.
Bill M. Thomas 59 Private Investor since 1989; Consultant 1987 to 1990
1989; and Chief Financial Officer of the
Company 1980 to 1987.
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
DURING THE LAST 5 YEARS, OTHER DIRECTOR
NAME AGE BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE
---- --- ----------------------------------------------- --------
<S> <C> <C> <C>
James J. Zehentbauer 32 Investment Banking Partner since 1990 and 1990
Principal Accountant 1989 to 1990, Batchelder &
Partners, Inc. (financial advisory and
consulting firm); Certified Public Accountant
1984 to 1989, Arthur Andersen & Co. (accounting
firm).
</TABLE>
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE ELECTION OF
ALL OF THE ABOVE NOMINEES.
For information concerning beneficial ownership of Common Stock by
directors, see "Security Ownership of Certain Beneficial Owners and
Management -- Security Ownership of Management" below. The Board of Directors
met a total of six times during fiscal 1993. All directors attended 75% or more
of the meetings of the Board of Directors and the committees of which they were
a member, other than Mr. Karatz who attended 70% of all such meetings.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND
COMMITTEES OF THE BOARD OF DIRECTORS
COMMITTEES OF THE BOARD
Audit Committee -- The Board has a standing Audit Committee which reviews
the audit and control functions of the Company, the Company's accounting
principles, policies and practices and financial reporting, the scope of the
audit conducted by the Company's auditors, the fees and all non-audit services
of the independent auditors and the independent auditors' opinion and letter of
comment to management and management's response thereto. The Audit Committee
also recommends to the Board the selection of the Company's independent
auditors. The Audit Committee met four times in fiscal 1993. At the date of this
Proxy Statement the Audit Committee was comprised of Messrs. Zehentbauer
(Chairman), Batchelder, Luiso and Spogli.
Compensation and Organization Committee -- The Board has a Compensation and
Organization Committee (the "Compensation Committee") whose members at the date
of this Proxy Statement were Messrs. Luiso (Chairman), Batchelder, Karatz,
Spogli and Willmott. The Compensation Committee is authorized to review and
recommend to the Board the salaries, bonuses and perquisites of the Company's
executive officers. The Compensation Committee also reviews and recommends to
the Board any new compensation or retirement plans and administers the Company's
1990 Employee Stock Incentive Plan. The Compensation Committee met two times in
fiscal 1993.
Nominating Committee -- The Board of Directors also has a standing
Nominating Committee whose members at the date of this proxy statement were
Messrs. Willmott (Chairman), Batchelder, Karatz and Thomas. The Nominating
Committee is authorized to review matters regarding the structure of the
Company's Board of Directors and the qualifications of proposed nominees to
serve on the Board. The Nominating Committee will consider nominees for director
whose names are timely submitted in writing by holders of the Company's Common
Stock addressed to the Chairperson of the Nominating Committee accompanied by
such information regarding the nominee as would be required under the rules of
the Securities and Exchange Commission were the stockholders soliciting proxies
with regard to the election of such nominee. The Nominating Committee met two
times in fiscal 1993.
On August 9, 1990, the Company entered into a Settlement Agreement with
Girard Partners, Mr. Batchelder and certain other related parties in connection
with a consent solicitation of other stockholders by Girard Partners (then a 6%
stockholder of the Company) to reconstitute the Board of Directors of the
Company. The Settlement Agreement provides that so long as Mr. Batchelder serves
on the Board of Directors of the Company, he will be a member of each of the
Board's committees.
3
<PAGE> 7
DIRECTOR COMPENSATION
Standard Compensation -- Directors who are not employees of the Company or
its subsidiaries receive $15,000 per year (the "Retainer Fee") or, in lieu
thereof, a director may elect to receive an option to purchase shares of Common
Stock pursuant to the Stock Option Plan for Non-Employee Directors discussed
below. Other than Mr. Karatz and Mr. Thomas, each of the current directors of
the Company elected to receive such an option, in lieu of the Retainer Fee, in
fiscal 1993. Additionally, non-employee directors receive $1,000 for each
meeting of the Board or committee meeting which they attend plus reimbursement
of any expenses they may incur with respect to such meeting, and up to $1,000
per diem for time expended on matters on the Company's behalf. Chairmen of the
Audit, Compensation and Nominating Committees receive additional annual retainer
fees of $10,000, $8,000 and $5,000, respectively; the Chairman of the Board
receives a $15,000 additional annual retainer fee. Directors who are employees
of the Company or its subsidiaries serve as directors without compensation.
Stock Option Plan for Non-Employee Directors -- In 1992, the Company
adopted the Stock Option Plan for Non-Employee Directors (the "Directors'
Plan"). The purpose of the Directors' Plan is to provide present and prospective
directors who are not employed by the Company with the opportunity to obtain
equity ownership interests in the Company through the exercise of stock options.
The Directors' Plan is designed to link the non-employee directors' compensation
more closely with the Company's performance.
Only directors of the Company who are not employees of the Company or one
of its subsidiaries are eligible to participate in the Directors' Plan. The
Directors' Plan is administered by the Board of Directors, although, as
discussed below, the grant of options is automatic. The expenses of
administering the Directors' Plan are borne by the Company.
The Directors' Plan provides for options to be awarded under two different
circumstances. First, each non-employee director is automatically granted on the
date of the annual meeting at which the director is elected (including at each
annual stockholder meeting at which the director is re-elected), an option to
purchase 2,500 shares of Common Stock at an exercise price equal to the fair
market value of the Common Stock at the close of business on the day before such
annual meeting. These options are not exercisable until the annual meeting of
stockholders following the date of grant.
The second feature of the Directors' Plan permits each non-employee
director to elect, on the date of each annual meeting at which he is elected or
re-elected, to receive an option to purchase shares of Common Stock in lieu of
being paid the Retainer Fee. If the non-employee director makes such an
election, on the six-month anniversary of the date of the election (the "Date of
Grant") such director will be granted an option exercisable for a number of
shares of Common Stock equal to the amount of the director's Retainer Fee
divided by 20% of the fair market value of the shares of Common Stock at the
close of business on the Date of Grant. The exercise price for any such option
will be 80% of the fair market value of the Common Stock on the Date of Grant.
These options will become exercisable on the date of the first annual meeting of
stockholders following the Date of Grant.
Upon exercise of the options granted under the Directors' Plan, the
exercise price must be paid to the Company in cash or by check. The options
expire on the earlier of the tenth anniversary of the date of grant or six
months after the recipient of the option ceases to be a director. The maximum
number of shares of Common Stock that may be issued pursuant to awards granted
under the Directors' Plan is 200,000 (subject to adjustments to prevent
dilution). The Directors' Plan became effective, with stockholder approval, upon
its adoption by the Company's Board of Directors on March 18, 1992. Awards may
not be granted under the Directors' Plan after March 18, 2002. Although any
option that was duly granted on or prior to such date may thereafter be
exercised in accordance with its terms, no shares of Common Stock may be issued
pursuant to any award after March 18, 2012.
Mr. Willmott's Option Agreement -- In fiscal 1990, the Chairman of the
Board, Mr. Willmott, was granted an option to purchase 25,000 shares of Common
Stock exercisable on the date of grant at the fair market value on such date, as
additional compensation for his services to the Company. Mr. Willmott's Stock
Option Agreement provides that the option will terminate upon the earlier of the
tenth anniversary of the date
4
<PAGE> 8
of grant or 90 days after termination of Mr. Willmott's relationship with the
Company, except that if termination is caused by total disability or death, the
option terminates upon the earlier of the tenth anniversary of the date of grant
or the first anniversary of the date of termination of Mr. Willmott's position.
COMPENSATION OF EXECUTIVE OFFICERS
The table below sets forth the compensation paid to or accrued for the
Company's Chief Executive Officer and the four other executive officers of the
Company for the fiscal years ended January 30, 1994, January 31, 1993 and
February 2, 1992:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION(3) AWARDS
---------------------------- ------------ ALL OTHER
FISCAL BONUS OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION(1)(2) YEAR SALARY($) ($)(4) (#)(5) ($)(6)
------------------------------------ ------ --------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Leonard S. Williams 1993 520,000 0 70,000 9,689
President and Chief Executive
Officer 1992 520,000 0 17,500 12,823
1991 461,000 356,602 175,000 0
Philip L. Carter 1993 254,000 0 75,000 11,280
Executive Vice President and Chief 1992 232,442 0 8,750 19,455
Financial Officer 1991 89,038 46,875 35,000 114,771(7)
Mark J. Miller 1993 300,000 0 35,000 9,082
Executive Vice President and 1992 103,846 100,000 100,000 276
General Merchandise Manager
Richard N. Lodwick 1993 260,000 0 35,000 8,972
Senior Vice 1992 258,269 0 8,750 7,533
President--Stores 1991 240,385 125,000 50,000 0
Patricia J. Wehner 1993 171,000 0 33,000 6,431
Senior Vice President 1992 154,962 0 8,000 4,531
Real Estate & Construction 1991 90,000 26,250 7,500 0
</TABLE>
- - ---------------
(1) The Company maintains written employment agreements with each of its five
executive officers. See "Employment Agreements" below.
(2) Mr. Williams joined the Company in November 1990; Mr. Carter joined the
Company in September 1991; Mr. Miller joined the Company in September 1992;
Mr. Lodwick joined the Company in February 1991; and Ms. Wehner joined the
Company in June 1991.
(3) In addition to the annual salary and bonus compensation shown in the table,
the executive officers of the Company received other annual compensation in
the form of other personal benefits. The amount of such other annual
compensation paid to each executive officer did not exceed the lesser of
$50,000 or ten percent of the total of annual salary and bonus reported for
such executive officer for each respective fiscal year.
(4) Represents bonuses paid pursuant to employment agreements. Bonuses shown for
any fiscal year were accrued during the fiscal year shown and paid in the
following fiscal year.
(5) Represents options granted pursuant to the Company's 1990 Employee Stock
Incentive Plan (the "1990 Plan"). See "1990 Employee Stock Incentive Plan"
below.
(6) Includes fiscal 1993 contributions of $8,254, $8,254, $8,254, $8,254 and
$5,918 to the Company's Amended and Restated Qualified Profit Sharing Plan
(see "Qualified Profit Sharing Plan" below) for Mr. Williams, Mr. Carter,
Mr. Miller, Mr. Lodwick and Ms. Wehner, respectively. Includes fiscal 1992
contributions of $11,443, $6,815 and $4,066 to the Company's Amended and
Restated Qualified Profit Sharing Plan for Mr. Williams, Mr. Lodwick and Ms.
Wehner, respectively, and fiscal 1993 moving expenses of $2,270 and fiscal
1992 moving expenses of $18,809 for Mr. Carter. The balance of the
5
<PAGE> 9
amounts shown represents premiums for term life insurance paid by the
Company on behalf of the named executive officers.
(7) Represents payments made to Mr. Carter for services as a consultant during
the period February 4, 1991 through September 1, 1991.
The following table shows, as to each of the five executive officers of the
Company, information with respect to stock options granted under the 1990 Plan
during the fiscal year ended January 30, 1994.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES
OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
----------------------------------------------------------- ---------------------
% OF TOTAL
OPTIONS/
SARS
GRANTED
TO
OPTIONS/ EMPLOYEES EXERCISE
SARS IN FISCAL PRICE
NAME GRANTED(1)(2) YEAR ($/SH) EXPIRATION DATE 5% 10%
- - ----------------------- ------------- ----------- -------- ------------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Leonard S. Williams.... 70,000 11.50% $16.00 February 1, 2003 $704,362 $1,784,992
Philip L. Carter....... 35,000 5.75% $16.00 February 1, 2003 $352,181 $ 892,496
15,000 2.47% $17.13 March 17, 2003 $159,094 $ 401,781
25,000 4.11% $14.25 August 4, 2003 $224,044 $ 567,771
Mark J. Miller......... 35,000 5.75% $16.00 February 1, 2003 $352,181 $ 892,496
Richard N. Lodwick..... 35,000 5.75% $16.00 February 1, 2003 $352,181 $ 892,496
Patricia J. Wehner..... 8,000 1.31% $16.00 February 1, 2003 $ 80,499 $ 203,999
25,000 4.11% $14.25 August 4, 2003 $224,044 $ 567,771
</TABLE>
- - ---------------
(1) Amounts in this column are options to purchase shares of Common Stock
granted under the 1990 Plan which become exercisable at the rate of 20% per
year beginning in the year following the year in which the grant was made.
(2) All options shown were granted on February 1, 1993 except for the grant to
Mr. Carter on March 17, 1993 of an option to purchase 15,000 shares and
except for the grant to each of Mr. Carter and Ms. Wehner on August 4, 1993
of an option to purchase 25,000 shares.
The following table shows, as to each of the five executive officers of the
Company, information with respect to fiscal 1993 year-end option values.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS/ OPTIONS/
SARS AT FISCAL SARS AT FISCAL
YEAR-END(#) YEAR-END($)
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) VALUE REALIZED($) UNEXERCISABLE(1) UNEXERCISABLE(2)
- - --------------------------- ---------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Leonard S. Williams........ 0 $ 0 378,500/84,000 $2,012,500/$0
Philip L. Carter........... 0 $ 0 25,083/93,667 $0/$15,625
Mark J. Miller............. 20,000 $ 150,000 0/115,000 $0/$290,000
Richard N. Lodwick......... 0 $ 0 51,750/42,000 $162,500/$0
Patricia J. Wehner......... 0 $ 0 5,000/35,500 $15,625/$23,438
</TABLE>
6
<PAGE> 10
- - ---------------
(1) The amounts in this column are options to purchase shares of Common Stock
granted under the 1990 Plan.
(2) The amounts in this column are based upon the closing price of the Common
Stock on January 28, 1994 of $14.875 per share.
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Leonard S. Williams,
the President and Chief Executive Officer, on November 12, 1990; with Philip L.
Carter, Executive Vice President and Chief Financial Officer, as of October 28,
1991; with Mark J. Miller, Executive Vice President, General Merchandise
Manager, as of September 25, 1992; with Richard N. Lodwick, Senior Vice
President, Stores, on February 18, 1991, and with Patricia J. Wehner, Senior
Vice President, Real Estate and Construction as of August 4, 1993. Mr. Williams'
employment agreement expires in January 1996 and Mr. Miller's agreement expires
in September 1995. Mr. Williams' agreement was amended in February 1992 and
Messrs. Williams and Miller's agreements were amended as of January 31, 1994,
the first day of fiscal 1994. Messrs. Carter and Lodwick's agreements expired on
the last day of fiscal 1993 and the Company entered into new agreements with
Messrs. Carter and Lodwick as of the first day of fiscal 1994 (the "1994 Carter
and Lodwick Agreements"). The 1994 Carter and Lodwick Agreements and the
agreement with Ms. Wehner do not provide for any fixed term of employment and
are subject to cancellation by the Board of Directors upon 30 days notice.
Base Salaries -- The base salaries payable under these agreements are
subject to increase annually at the discretion of the Board of Directors.
Effective April 1, 1994 Messrs. Williams' and Miller's annual salaries were
increased to $540,000 and $310,000 respectively.
Stock Options -- Concurrently with the execution of their respective
employment agreements, the executives were granted stock options under the 1990
Plan to purchase 200,000 shares of Common Stock in the case of Mr. Williams,
100,000 shares in the case of Mr. Miller, and 25,000 shares in the case of each
of Mr. Carter and Ms. Wehner, at the market price of the Common Stock on the
date of grant. Mr. Lodwick was granted an immediately exercisable option under
the 1990 Plan to purchase 50,000 shares of Common Stock in conjunction with the
execution of his employment agent which expired in fiscal 1993. No options were
granted to Mr. Lodwick in conjunction with the execution of his new employment
agreement. The stock options granted to Messrs. Williams and Lodwick were
immediately exercisable; the stock options granted to Messrs. Carter and Miller
and to Ms. Wehner vest in equal annual installments over a period of five years.
Pursuant to the terms of Mr. Williams' employment agreement, on May 1, 1991,
July 1, 1991 and January 15, 1992, he received stock options to purchase an
additional 100,000, 50,000 and 25,000 shares, respectively, of Common Stock,
each of which was immediately exercisable. In connection with the amendment to
this agreement in February 1992, Mr. Williams relinquished his right, as
provided by his employment agreement, to receive two option grants exercisable
in the aggregate for an additional 50,000 shares prior to expiration of his
employment agreement. In consideration of such relinquishment, Mr. Williams'
base salary was increased from $461,000 to $520,000. Pursuant to the January
1994 amendments to Messrs. Williams' and Miller's agreements and pursuant to the
1994 Carter and Lodwick Agreements and pursuant to the agreement with Ms.
Wehner, commencing with fiscal 1994 the Company's executive officers are
entitled to participate in any performance stock option program approved
annually for other executive officers of the Company by the Compensation
Committee of the Board of Directors. The performance stock option program
approved by the Compensation Committee for fiscal 1994 provides that options
will be granted in fiscal 1995 based upon the individual executive's performance
during fiscal 1994. The program further provides that the maximum number of
stock options that may be granted will be 17,500 in the case of Mr. Williams,
8,750 in the case of Messrs. Carter and Miller, and 6,250 in the case of each of
Mr. Lodwick and Ms. Wehner.
Performance Bonus -- For fiscal 1993, each of the employment agreements
(with the exception of Ms. Wehner) entitled the executive to a bonus equal to
1.5% (in the case of Mr. Williams) or 0.75% (in the case of each of Messrs.
Carter, Miller and Lodwick) of the increase in the Company's consolidated
pre-tax income from operations in such fiscal year over the Company's
consolidated pre-tax income from operations
7
<PAGE> 11
for the prior fiscal year. No performance bonus was payable, however, unless
such increase was more than $5,000,000 and any bonus payable with respect to
fiscal 1993 could not exceed 50% of the executive officer's base salary for such
year. Mr. Williams' performance bonus was not subject to the foregoing 50%
limitation. For fiscal 1993, none of the executive officers were awarded
performance bonuses. Pursuant to the January 1994 amendments to Messrs.
Williams' and Miller's agreements and pursuant to the 1994 Carter and Lodwick
Agreements and pursuant to the agreement with Ms. Wehner, commencing with fiscal
1994 the Company's executive officers are entitled to participate in a
performance bonus plan each fiscal year which is approved annually by the
Compensation Committee of the Board of Directors. The performance bonus plan
approved by the Compensation Committee for fiscal 1994 provides that 85% of any
bonus will be based upon the fiscal 1994 financial performance of the Company
and 15% will be based upon the individual executive's performance during fiscal
1994. The plan further provides that the maximum bonus that may be paid will not
exceed 50% of the executive officer's base salary for fiscal 1994 in the case of
the Senior Vice Presidents, 60% in the case of the Executive Vice Presidents and
70% in the case of Mr. Williams.
Termination of Employment; Change of Control -- Each of the employment
agreements provides that, in the event the executive's employment is terminated,
the Company will continue to make the base salary payments at the rate then
being paid for periods from six months to eighteen months after early
termination or expiration of the agreement (if the Company elects not to renew).
The employment agreements further provide that if, within two months after a
Change of Control (as defined in the agreements), the executive terminates his
or her employment, then the Company will pay him or her the following benefits:
(i) a lump sum severance payment equal to 2 (2.9 in the case of Mr. Williams)
multiplied by the sum of his or her annual base salary in effect during the year
immediately preceding termination and (ii) the greater of the amount of any
incentive, bonus or other cash compensation that was paid to him or her during
either the 12 months immediately preceding the date of termination or the 12
months immediately preceding the Change of Control. In addition, the executive
would be entitled to receive a cash payment equal to the amount by which the
greater of (i) the closing price of the Common Stock on the day before
termination or (ii) the highest price per share actually paid in connection with
the Change of Control exceeds the per share exercise price of each then vested
and exercisable stock option held by such executive on the day before the date
of his or her employment termination, multiplied by the number of shares covered
by each such option, in exchange for which payment the executive is required to
surrender all options to the Company without exercising them.
Promissory Notes with Mr. Miller -- Concurrently with entering into his
employment agreement with the Company on September 25, 1992, Mr. Miller,
Executive Vice President and General Merchandise Manager of the Company,
executed two promissory notes in favor of the Company in the amounts of $100,000
and $30,000, respectively. Each of the notes provided for interest to accrue at
the rate of 7% per annum. The principal amount of the $100,000 note was
originally due and payable in three equal annual installments on April 1, 1993,
April 1, 1994 and April 1, 1995. On May 13, 1993, the Company paid Mr. Miller
100% of his fiscal 1992 bonus and offset the $100,000 note with the net proceeds
($69,712) after first deducting interest accrued to that date. The remaining
$30,288 principal due under the $100,000 note was paid in full by Mr. Miller on
April 1, 1994 together with interest accrued to that date. The principal amount
of the $30,000 note was due and payable in two equal installments on April 1,
1994 and April 1, 1995. On April 1, 1994, Mr. Miller paid the first installment
due under the $30,000 note together with accrued interest to date. At the
Company's option, the Company may apply amounts payable to Mr. Miller in
connection with any performance bonus (described above in "Compensation of
Executive Officers") to offset the remaining amount due and payable to the
Company under the $30,000 promissory note described above. See "Certain
Transactions" below.
1990 EMPLOYEE STOCK INCENTIVE PLAN
In 1990, the Company adopted its 1990 Employee Stock Incentive Plan (the
"1990 Plan"). The 1990 Plan originally authorized the issuance of up to
1,750,000 shares of Common Stock including "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code ("Incentive Stock Options"),
stock options that do not qualify as incentive stock options, stock appreciation
rights and restricted shares of Common Stock. In 1993, the stockholders approved
an amendment to the 1990 Plan which increased the
8
<PAGE> 12
number of shares reserved for issuance thereunder by 1,450,000 shares to an
aggregate of 3,200,000 shares. Officers and other salaried employees of the
Company are eligible to participate in the 1990 Plan. As of the date of this
Proxy Statement, approximately 93 persons were eligible.
The 1990 Plan is administered by the Compensation Committee. The
Compensation Committee selects from the eligible participants under the 1990
Plan and determines the terms and conditions of all grants and awards to such
participants including the terms and conditions under which each option may be
exercisable and the expiration date of each option, except that each option must
expire no later than ten years form the date of grant. Grants and awards are
made in consideration of services rendered or to be rendered by the recipients
thereof.
In fiscal 1993, Incentive Stock Options to purchase shares of Common Stock
were granted to each of the five executive officers of the Company as described
above in the table entitled "Option/SAR Grants in Last Fiscal Year". All such
options (a) become exercisable at the rate of 20% per year beginning in the year
following the year in which the grant was made, and (b) have an exercisable
price equal to the fair market value of the Common Stock on the date of grant.
Payment of the exercise price of such options must be made in full in cash or
cash equivalent concurrently with the exercise of such option, or as follows:
(i) by delivery by the optionee of a full-recourse promissory note in
a form and amount satisfactory to the Committee; provided that the
principal amount of such promissory note shall not exceed the excess of the
exercise price of such option over and above the aggregate par value of the
option shares;
(ii) in whole or in part, with shares of Common Stock delivered
concurrently with such exercise (such shares to be valued on the basis of
the fair market value of such shares on the business day immediately
preceding the date of such exercise), provided that the Company is not then
prohibited form purchasing or acquiring such shares; and/or
(iii) in whole or in part, by reducing the number of option shares to
be delivered to the optionee upon exercise of such option (such reduction
to be valued on the basis of the aggregate fair market value of the
additional shares of Common Stock that would otherwise have been delivered
to such optionee upon exercise of such option, such fair market value to be
determined as of the business day immediately preceding the date of such
exercise), provided that the Company is not then prohibited from purchasing
or acquiring such shares.
CERTAIN TRANSACTIONS
On August 9, 1990, the Company entered into a Settlement Agreement with
Girard Partners, Mr. Batchelder and certain other related parties in connection
with a consent solicitation of other stockholders by Girard Partners (then a 6%
stockholder of the Company) to reconstitute the Board of Directors of the
Company. The Settlement Agreement provides that so long as Mr. Batchelder serves
on the Board of Directors of the Company, he will be a member of each of the
Board's committees.
Concurrently with entering into his employment agreement with the Company
on September 25, 1992, Mr. Miller, Executive Vice President and General
Merchandise Manager of the Company, executed two promissory notes in favor of
the Company in the amounts of $100,000 and $30,000, respectively. Each of the
notes provided for interest to accrue at the rate of 7% per annum. The principal
amount of the $100,000 note was originally due and payable in three equal annual
installments on April 1, 1993, April 1, 1994 and April 1, 1995. On May 13, 1993,
the Company paid Mr. Miller 100% of his fiscal 1992 bonus and offset the
$100,000 note with the net proceeds ($69,712) after first deducting interest
accrued to that date. The remaining $30,288 principal due under the $100,000
note was paid in full by Mr. Miller on April 1, 1994 together with interest
accrued to that date. The principal amount of the $30,000 note was due and
payable in two equal installments on April 1, 1994 and April 1, 1995. On April
1, 1994, Mr. Miller paid the first installment due under the $30,000 note
together with accrued interest to date. At the Company's option, the Company may
apply amounts payable to Mr. Miller in connection with his fiscal 1992 bonus or
any performance bonus (described above in "Compensation of Executive Officers")
to offset the remaining amount due and payable to the Company under the $30,000
promissory note described above.
9
<PAGE> 13
REPORT OF THE COMPENSATION AND ORGANIZATION COMMITTEE
ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY
The Company's Compensation and Organization Committee (the "Committee") has
established policies for the compensation of the Company's Chief Executive
Officer and the other executive officers set forth in the Summary Compensation
Table (the "Executive Officers") that are based upon the responsibility of the
individual Executive Officers and the Company's financial performance.
Compensation which may be earned by an Executive Officer in any fiscal year
consists of base salary, cash bonus and stock options. The Committee intends
that a significant portion of each Executive Officer's overall compensation be
directly linked to the Company's financial performance. However, special bonus
and option awards may be made at the time an executive is first hired by the
Company or is promoted. The Company enters into employment agreements with its
Executive Officers that set forth the elements of compensation that have been
approved by the Committee.
COMPENSATION POLICIES FOR EXECUTIVE OFFICERS
Salary -- The Committee establishes base salaries within the Company's
overall salary structure and to the levels of salary historically paid by the
Company. Adjustments are made to reflect an individual's contributions to the
Company and specific job responsibilities. The Committee does not directly tie
salary levels to amounts paid by other companies; nevertheless, the level of
salaries paid by the Company are based upon published retail industry
compensation surveys and the Company's own experience in attracting qualified
executives. Base salaries are subject to annual increases at the discretion of
the Committee, subject to ratification by the Board of Directors. Actual salary
increases are generally based upon evaluations of a particular officer's
individual performance and contribution to the Company.
Incentive Compensation -- Incentive compensation consists of a cash bonus
and a stock option grant. Incentive compensation generally is designed to
reflect the Company's performance in achieving increases in consolidated pre-tax
income over the prior fiscal year and in enhancing shareholder value. As a
result, total compensation levels for the Executive Officers may vary from year
to year, depending on the financial performance of the Company.
Annual Cash Bonuses -- For 1993, each of the Executive Officers was
eligible for a bonus equal to 1.5% (in the case of Mr. Williams) or 0.75% (in
the case of the other Executive Officers) of the increase in the Company's
fiscal year consolidated pre-tax income from operations over the previous fiscal
year's consolidated pre-tax income. However, no bonuses were payable unless the
amount of the pre-tax income increase exceeded $5,000,000. The maximum bonus
payable to any eligible executive was limited to 50% of an executive's base
salary for the year.
Stock Options -- In recent years, the Committee has maintained an option
award program under which it awarded options to purchase shares of the Company's
Common Stock at the beginning of the year, with the number of shares for which
the options were exercisable being subject to reduction at the end of the year
based upon the extent to which fiscal pre-tax profits for the year had increased
from fiscal pre-tax profits for the previous year. In order for the Executive
Officers to retain any of the options awarded, fiscal pre-tax income would have
to increase over the previous year's results by at least $1 million, and the
maximum option award would be earned only if fiscal pre-tax income had increased
at least $15 million. In this manner, compensation from options is dependent
upon increases in shareholder value through stock price appreciation (as is
always the case with the Company's employee stock options) and also upon an
additional performance factor. The target number of options awarded under the
program is determined annually at the discretion of the Committee. However,
because the option award program is designed as an annual incentive compensation
arrangement, the Committee has not traditionally considered the size of previous
years' grants in determining the size of maximum option grants.
In 1993, after target option grants had been awarded, the Committee
determined to alter its option award program as a result of the current
accounting treatment of performance-based option awards and other
10
<PAGE> 14
considerations. In the future, the Committee intends to issue options only after
the end of the fiscal year, subject to a maximum award level established by the
Committee at the beginning of the year. The actual number of options granted
will be based upon performance evaluations made by the Committee at the time
options are actually issued. Accordingly, the Committee does not anticipate
again granting stock options to any Executive Officers (other than in connection
with any promotions) until April 1995, based upon 1994 performance. In light of
these changes in the option award program, the Committee in 1993 waived the
right to reduce the number of shares covered by 1993 option awards. As a result,
each Executive Officer received the maximum option award irrespective of the
Company's 1993 pre-tax income growth. The Committee intends to consider the
number of options awarded as a result of this one-time waiver when determining
the target number of options to be granted for 1994 performance.
Other -- Legislation adopted by Congress in 1993 places a $1 million
limitation on the deduction available to public companies for compensation paid
in 1994 or thereafter to certain executives, unless the compensation is treated
as "performance based" (as defined under the Tax Code) or satisfies another
exception. The Committee has not developed specific policies to address this new
provision pending further guidance or regulations from the IRS. However, the
Committee believes that amounts recognized upon exercise of outstanding stock
options will qualify as performance-based compensation under this provision.
RELATIONSHIP OF PERFORMANCE TO 1993 COMPENSATION
Executive Officers -- Based upon the Company's performance in fiscal 1992,
the Committee recommended, and the Board of Directors approved, no increase in
base salary for the Executive Officers for fiscal 1993. However, Mr. Carter and
Ms. Wehner received salary increases and option grants as a result of
promotions. The Company's fiscal 1993 pre-tax income was such that no cash
bonuses were earned by the Executive Officers for fiscal 1993. For the reasons
noted above, 1993 option awards were not reduced according to corporate
performance.
Chief Executive Officer Compensation -- For fiscal 1993 Mr. Williams
received cash payments of $520,000, comprising salary only. The bonus formula
contained in Mr. Williams' employment agreement, as discussed above, resulted in
no bonus being paid to him for fiscal 1992. In February 1993, Mr. Williams
received an option grant for 70,000 shares pursuant to the option award program.
The target number of options awarded Mr. Williams under the program was
determined at the discretion of the Committee. As a result of the changes to the
option award program discussed above, this grant was not subsequently reduced
according to corporate performance. The Committee considers Mr. Williams' fiscal
1993 remuneration appropriate given his responsibilities and the performance of
the Company during fiscal 1993.
Submitted by the Compensation and Organization Committee:
Anthony Luiso (Chairman)
David H. Batchelder
Bruce E. Karatz
Ronald P. Spogli
Peter S. Willmott
The Report of the Compensation and Organization Committee on Executive
Compensation shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933 or under the Securities Exchange Act of 1934, except
to the extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such acts.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of the date of this Proxy Statement, the members of the Compensation
Committee of the Board of Directors were Messrs. Luiso (Chairman), Batchelder,
Karatz, Spogli and Willmott, none of whom was an officer or employee of the
Company during fiscal year 1993 or is a former officer of the Company.
11
<PAGE> 15
On August 9, 1990, the Company entered into a Settlement Agreement with
Girard Partners, Mr. Batchelder and certain other related parties in connection
with a consent solicitation of other stockholders by Girard Partners (then a 6%
stockholder of the Company) to reconstitute the Board of Directors of the
Company. The Settlement Agreement provides that so long as Mr. Batchelder serves
on the Board of Directors of the Company, he will be a member of each of the
Board's committees.
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's Common Stock against
the cumulative total return of the Dow Jones Equity Composite Stock Index and
the Dow Jones Retailers-Other Specialty Composite Stock Index for the five
fiscal years commencing January 1, 1989 and ending January 30, 1994. The stock
performance graph shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933 or under the Securities Exchange Act of 1934, except
to the extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such acts.
(A paper copy of the performance graph has been submitted to the
Securities and Exchange Commission under cover of Form SE)
12
<PAGE> 16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following security ownership information is set forth, as of May 6,
1994, with respect to certain persons or groups known to the Company to be
beneficial owners of more than 5% of the Company's outstanding Common Stock and
with respect to each director of the Company, each of the executive officers
named in the Summary Compensation Table, and all current directors, nominees and
executive officers as a group (12 persons). Other than as set forth below, the
Company is not aware of any other person who may be deemed to be a beneficial
owner of more than 5% of the Company's Common Stock.
SECURITY OWNERSHIP OF MANAGEMENT
<TABLE>
<CAPTION>
AMOUNT
AND NATURE
OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1) CLASS(2)
------------------------------------------------- ------------- ----------
<S> <C> <C>
David H. Batchelder(3)........................... 65,605 *
Bruce E. Karatz.................................. 11,660 *
Anthony Luiso.................................... 19,714 *
Ronald P. Spogli................................. 15,714 *
Bill M. Thomas(4)................................ 1,086,212 3.71%
Leonard S. Williams.............................. 471,000 1.59%
Peter S. Willmott................................ 116,489 *
James J. Zehentbauer............................. 14,714 *
Philip L. Carter................................. 46,833 *
Mark J. Miller................................... 7,100 *
Richard N. Lodwick............................... 63,760 *
Patricia J. Wehner............................... 9,400
All Directors and Executive Officers
as a Group (12 persons)........................ 1,928,201 6.44%
</TABLE>
- - ---------------
(*) Denotes less than 1% of the sum of the 29,306,375 shares of Common Stock
outstanding at May 6, 1994 plus shares that are subject to options that are
presently exercisable or will become exercisable within 60 days of May 6,
1994 by that person or group, as the case may be.
(1) Includes shares which may be acquired pursuant to options exercisable within
60 days of May 6, 1994, as follows: Mr. Batchelder (14,714); Mr. Karatz
(10,660); Mr. Luiso (14,714); Mr. Spogli (14,714); Mr. Thomas (5,000); Mr.
Williams (396,000); Mr. Willmott (39,714); Mr. Zehentbauer (14,714); Mr.
Carter (36,833); Mr. Miller (7,000); Mr. Lodwick (60,500); Ms. Wehner
(9,100); and all directors and executive officers as a group (623,663).
Unless otherwise indicated, each person has sole investment and voting power
as to the shares indicated.
(2) The percentages are based upon 29,306,375 shares of Common Stock outstanding
at May 6, 1994 plus shares that are subject to options that are presently
exercisable or will become exercisable within 60 days of May 6, 1994 by that
person or group, as the case may be.
(3) Includes 30,875 shares of Common Stock owned directly by Mr. Batchelder
(including 14,714 shares which may be acquired pursuant to certain options)
and 30,676 shares owned by DHB Partners, L.P. (the "Partnership") which are
attributable to him through his ownership of the sole general partner of the
Partnership (which is a corporation owned by him) and all of the limited
partnership interests in the Partnership. Mr. Batchelder disclaims
beneficial ownership of the shares of Common Stock held by the Partnership.
(4) Mr. Thomas also holds an additional 10,800 shares of Common Stock for the
benefit of his children, as to which shares Mr. Thomas disclaims beneficial
ownership. Of such shares, 5,400 are held for the benefit of Mr. Thomas'
son, who resides with Mr. Thomas.
13
<PAGE> 17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
<TABLE>
<CAPTION>
AMOUNT
AND NATURE
OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP CLASS(1)
-------------------------------------------------- -------------- -----------
<S> <C> <C>
Southeastern Asset Management Inc.(2)............. 5,655,523 19.30%
860 Ridgelake Boulevard, Suite 301
Memphis, Tennessee 38120
NewSouth Capital Management, Inc.(3).............. 1,742,494 5.95%
755 Crossover Lane, Suite 233
Memphis, Tennessee 38117
</TABLE>
- - ---------------
(1) The percentages are based upon 29,306,375 shares of Common Stock outstanding
at May 6, 1994.
(2) On February 17, 1994, the Company received from Southeastern Asset
Management, Inc. ("Southeastern") a second Amendment to its Schedule 13G
filed the Securities and Exchange Commission reporting that it beneficially
owns an aggregate of 5,655,523 shares of Common Stock, of which it has sole
dispositive power over 4,796,023 shares and sole voting power over 4,556,023
shares. In this Amendment, Southeastern stated that all such shares were
acquired in the ordinary course of business and not with the purpose of
influencing the control of the Company. The Company is unaware of any change
in the foregoing information.
(3) The Company has received a Schedule 13G dated January 7, 1993 from NewSouth
Capital Management, Inc. ("NewSouth") reporting that it has sole dispositive
power over 1,742,494 shares of Common Stock and sole voting power over
1,657,494 of such shares. In this Schedule 13G, NewSouth stated that all
shares were acquired in the ordinary course of business and not for the
purpose of influencing control of the Company. The Company is unaware of any
change in the foregoing information.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors, executive officers and persons who own more
than 10% of the Common Stock (collectively "Insiders") to file initial reports
of ownership (Forms 3) and reports of changes in ownership of Common Stock
(Forms 4 and Forms 5) with the Securities and Exchange Commission as well as the
Company and the New York Stock Exchange.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations from each Insider
known to the Company that no other reports were required, during the fiscal year
ended January 30, 1994 all Section 16(a) filing requirements applicable to its
Insiders were complied with except that Mr. Carter filed late one Form 5.
INDEPENDENT PUBLIC ACCOUNTANTS
For fiscal 1993, Deloitte & Touche provided audit services which included
examination of the Company's annual consolidated financial statements, timely
review of unaudited quarterly financial information, assistance and consultation
in connection with the Company's annual report on Form 10-K filed with the
Commission, and the audit of the Company's profit sharing plan. Audit services
were provided with the approval of the Board of Directors which, among other
things, considered the independence of the public accountants. Arrangements for
non-audit services, if any, are made by management with the knowledge of the
Board of Directors. A meeting of the Audit Committee will be held in the near
future, at which time a recommendation will be made as to the selection of the
Company's auditors for the current fiscal year. A representative of Deloitte &
Touche is expected to attend the Annual Meeting to make any statements he or she
may desire and to respond to any stockholder questions.
14
<PAGE> 18
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR 1995 ANNUAL MEETING
Any proposal relating to a proper subject which an eligible stockholder may
intend to present for action at the Company's 1994 Annual Meeting of
Stockholders and which such stockholder may wish to have included in the proxy
materials for such meeting in accordance with the provisions of Rule 14a-8
promulgated under the Exchange Act must be received as far in advance of the
meeting as possible in proper form by the Secretary of the Company at 2430 East
Del Amo Boulevard, Dominguez, California 90220-6306, and in any event not later
than January 27, 1995. It is suggested that any such proposal be submitted by
certified mail, return receipt requested.
OTHER BUSINESS OF THE ANNUAL MEETING
Management is not aware of any matters to come before the Annual Meeting or
any postponement or adjournment thereof other than the election of directors.
However, inasmuch as matters of which management is not now aware may come
before the meeting or any postponement or adjournment thereof, the proxies
confer discretionary authority with respect to acting thereon, and the persons
named in such proxies intend to vote, act and consent in accordance with their
best judgment with respect thereto, provided that, to the extent the Company
becomes aware a reasonable time before the Annual Meeting of any matter to come
before such meeting, the Company will provide an opportunity to vote by proxy
directly on such matter. Upon receipt of such proxies in time for voting, the
shares represented thereby will be voted as indicated thereon and as described
in this Proxy Statement.
MISCELLANEOUS
The solicitation of proxies is made on behalf of the Company and all the
expenses of soliciting proxies from stockholders will be borne by the Company.
In addition to the solicitation of proxies by use of the mails, officers and
regular employees may communicate with stockholders personally or by mail,
telephone, telegram or otherwise for the purpose of soliciting such proxies, but
in such event no additional compensation will be paid to any such persons for
such solicitation. The Company will reimburse banks, brokers and other nominees
for their reasonable out-of-pocket expenses in forwarding soliciting material to
beneficial owners of shares held of record by such persons.
By Order of the Board of Directors
/s/ LEONARD S. WILLIAMS
-------------------------------------
LEONARD S. WILLIAMS
President and Chief Executive Officer
Dominguez, California
May 19, 1994
15
<PAGE> 19
<TABLE>
<S> <C>
MAC FRUGAL'S BARGAINS - CLOSE-OUTS INC.
ANNUAL MEETING OF STOCKHOLDERS -- JUNE 22, 1994
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Mac Frugal's Bargains - Close-outs Inc., a Delaware corporation, hereby acknowledges
receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement and appoints Peter S. Willmott, Leonard S.
Williams, or either of them, proxies with full power of substitution, on behalf and in the name of the undersigned, to
represent the undersigned at the Annual Meeting of Stockholders of Mac Frugal's Bargains - Close-outs Inc.
to be held Wednesday, June 22, 1994 at 9:00 A.M. at the Long Beach Airport Marriott Hotel, 4700 Airport Plaza Drive,
Long Beach, California 90815, and at any postponements or adjournments thereof, and to vote all shares of Common Stock
which the undersigned would be entitled to vote if personally present, on the matters set forth on the reverse side.
This proxy will be voted as directed or, if no contrary direction is indicated, will be voted for the election
of the nominees as directors, and as such proxy holders deem advisable on such other matters as may come before the
Annual Meeting or any postponements or adjournments thereof.
(Continued, and to be dated and signed on the reverse side.)
/ /
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF EACH OF THE MATTERS SET FORTH BELOW.
1. Election of Directors FOR all nominees listed below / / WITHHOLD AUTHORITY to vote / / EXCEPTIONS / /
(except as marked to the contrary) for all nominees listed below
Nominees: Peter S. Willmott, Leonard S. Williams, David H. Batchelder, Bruce E. Karatz, Anthony Luiso, Ronald P. Spogli,
Bill M. Thomas and James J. Zehentbauer.
INSTRUCTION: If you wish to withhold authority to vote for any individual nominee mark the Exceptions box and strike a line
through that nominee's name above.
2. In their discretion, upon any other matters which may properly come before the Annual Meeting or any postponements or
adjournments thereof.
Address Change and/or / /
Comments Mark Here
PROXY DEPARTMENT
NEW YORK, N.Y. 10203-0343
NOTE: Please sign exactly as shown at the left. If stock is
jointly held each owner should sign. Executors, administrators,
trustees, guardians, attorneys and corporate officers should
indicate their fiduciary capacity or full title when signing.
Dated: _______________________________________________, 1994
____________________________________________________________
(Signature)
____________________________________________________________
(Signature, if held jointly)
Votes must be indicated / /
Please sign, Date and Return the Proxy Card (x) in Black or Blue ink.
Promptly Using the Enclosed Envelope.
</TABLE>
