<PAGE> 1
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 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)
Dan Zuckerman
- --------------------------------------------------------------------------------
(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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4) Date Filed:
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<PAGE> 2
[LOGO]
May 17, 1996
Dear Stockholder:
You are cordially invited to attend our 1996 Annual Meeting of Stockholders
to be held at 9:00 a.m. on Wednesday, June 19, 1996 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. The Company's 1995 Annual
Report to Stockholders is also enclosed. 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 19, 1996
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 19, 1996,
beginning at 9:00 a.m., local time. The Annual Meeting will be held for the
following purposes:
1. To elect seven (7) 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 April 29, 1996 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/ Philip L. Carter
------------------------------------
PHILIP L. CARTER
President and Chief Executive Officer
Dominguez, California
May 17, 1996
<PAGE> 4
[LOGO]
2430 EAST DEL AMO BOULEVARD
DOMINGUEZ, CALIFORNIA 90220-6306
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 19, 1996
------------------------
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 19, 1996, 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 17,
1996.
RECORD DATE AND VOTING
April 29, 1996 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 April 29,
1996, there were 25,229,347 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
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
Common Stock present in person or represented by proxy and entitled to vote on
the election of directors. Abstentions will be treated as the equivalent of a
negative vote for the purpose of determining whether a proposal has been adopted
and 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.
Pursuant to Delaware law, a broker non-vote will not be treated as present or
voting in person or by proxy on the proposal. 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 nine. The Board of Directors is proposing for election seven of
the nine persons now serving on the Board for election to the Board at the
Annual Meeting. Each of the 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 58 Chairman of the Board of the Company since 1990
October 1990; Chairman of the Board and Chief
Executive Officer since 1989, Willmott
Services, Inc. (retail); Director,
Browning-Ferris Industries, Federal Express
Corporation, International Multifoods
Corporation, Maytag Corporation, Morgan Keegan
& Co., Inc., and Zenith Electronics
Corporation.
Philip L. Carter 47 President and Chief Executive Officer of the 1995
Company since March 1995; Executive Vice
President, Chief Financial Officer since August
1993; Senior Vice President, Chief Financial
Officer since October 1991; Vice President
Finance and Distribution since 1991.
Mark J. Miller 44 Executive Vice President of Merchandise and 1995
Stores of the Company since March 1995;
Executive Vice President, General Merchandise
Manager since September 1992; Vice President of
Merchandising/ General Merchandise Manager
1991-1992, The Disney Store, Inc.; Vice
President, Merchandise Manager, Hardlines
1988-1991, Pic 'N' Save Corporation.
David H. Batchelder 46 President, Secretary and Director since 1988, 1990
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);
Director, Santa Fe Pacific Gold Corporation,
and Washington Construction Group, Inc.
Anthony Luiso 52 Chairman, President and Chief Executive Officer 1992
since 1989, International Multifoods (food
service distributor and food processor);
Director, The Black & Decker Corporation.
Ronald P. Spogli 48 General Partner since 1983, Freeman Spogli & 1989
Co. (merchant banking); Director, Brylane,
Inc., Buttrey Food and Drug Stores Company,
Calmar Inc., Envirosource, Inc., Orchard Supply
Hardware Stores, Inc. and The Pantry, Inc.
</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>
</TABLE>
firm).
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 eight times during the fiscal year ended January 28, 1996
("fiscal 1995"). All directors attended 75% or more of the meetings of the Board
of Directors and the committees of which they were a member.
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 1995. 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 "1990 Plan"). The Compensation Committee
met three times in fiscal 1995.
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 once
in fiscal 1995.
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 Non-Employee Directors Plan discussed below. Other than
Mr. Thomas, each of the current non-employee directors of the Company elected to
receive such an option, in lieu of the Retainer Fee, in fiscal 1995.
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 $25,000
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 Non-Employee Directors Plan. The purpose of the Non-Employee
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 Non-Employee
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 Non-Employee Directors
Plan. The Non-Employee Directors Plan is administered by the Board of Directors,
although, as discussed below, the grant of options is automatic. The expenses of
administering the Non-Employee Directors Plan are borne by the Company.
The Non-Employee 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 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. Pursuant to the Non-Employee Directors Plan
as originally adopted, the number of shares covered by this option was 2,500.
However, on March 15, 1995, the Board of Directors approved an amendment to the
Non-Employee Directors Plan that reduced the number of shares covered by these
options to 2,250. These options are not exercisable until the annual meeting of
stockholders following the date of grant.
The second feature of the Non-Employee 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 Non-Employee 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
Non-Employee Directors Plan originally authorized the issuance of up to 200,000
shares of Common Stock, subject to adjustment to prevent dilution. In 1995, the
Company's stockholders approved an amendment to the Non-Employee Directors Plan
which increased the number of shares reserved for issuance thereunder by 200,000
shares to an aggregate of 400,000 shares, subject to adjustment to prevent
dilution.
The Non-Employee 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 Non-Employee Directors Plan after
March 18, 2002. Although any option that was duly granted on or prior to such
date may
4
<PAGE> 8
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 Agreements -- In each of fiscal 1990 and fiscal 1995,
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 Agreements provide that the options will
terminate upon the earlier of the tenth anniversary of the date 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
current and former Chief Executive Officers of the Company and the other
executive officers of the Company (collectively, the "Named Executive
Officers"), for the fiscal years ended January 28, 1996, January 29, 1995 and
January 30, 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION(4) COMPENSATION
------------------------------------------------ AWARDS
OTHER ANNUAL ------------ ALL OTHER
NAME AND PRINCIPAL FISCAL BONUS COMPENSATION OPTIONS/SARS COMPENSATION
POSITION(1) YEAR SALARY($) ($)(5) ($)(6) (#)(7) ($)(8)
- -------------------------- ------ --------- -------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Leonard S. Williams(2) 1995 $ 197,308 $ -- $ -- -- $343,939
Former President and 1994 536,539 242,573 4,050 16,853 5,926
Chief Executive Officer 1993 520,000 -- -- 70,000 9,689
Philip L. Carter(2) 1995 411,416 -- 1,254 320,000 5,472
Current President and 1994 274,000 106,586 780 8,426 5,223
Chief Executive Officer 1993 254,000 -- -- 75,000 11,280
Mark J. Miller 1995 360,750 -- 633 50,000 5,341
Executive Vice President 1994 308,270 119,942 530 8,426 5,318
of Merchandise and Stores 1993 300,000 -- -- 35,000 9,082
Earl C. Bonnecaze(3) 1995 70,769 -- 175 65,000 64,275
Senior Vice President 1994 -- -- -- -- --
of Stores 1993 -- -- -- -- --
Patricia J. Wehner(3) 1995 176,058 -- 494 -- 19,711
Senior Vice President 1994 186,000 57,195 277 6,019 4,991
Real Estate & Construction 1993 171,000 -- -- 33,000 6,431
</TABLE>
- ---------------
(1) The Company maintains written employment agreements with each of its
executive officers. See "Employment Agreements" below.
(2) Mr. Williams resigned as President and Chief Executive Officer of the
Company in March 1995. Prior to March 15, 1995, Mr. Carter was Executive
Vice President and Chief Financial Officer of the Company.
(3) Mr. Bonnecaze joined the Company in July 1995. Ms. Wehner resigned from the
Company in January 1996.
(4) 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.
(5) 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
<PAGE> 9
(6) Represents reimbursement for taxes incurred in connection with the group
term life insurance paid for by the Company.
(7) Represents options granted pursuant to the 1990 Plan. See "1990 Employee
Stock Incentive Plan" below.
(8) Includes fiscal 1995 contributions of $4,500 to the Company's defined
contribution profit sharing plan (the "Profit Sharing Plan") for each of Mr.
Carter, Mr. Miller, and Ms. Wehner and $2,096 for Mr. Bonnecaze; fiscal 1994
contributions of $4,500 for each of Mr. Williams, Mr. Carter, Mr. Miller and
Ms. Wehner; fiscal 1993 contributions of $8,254, $8,254, $8,254, and $5,918
to the Profit Sharing Plan for Mr. Williams, Mr. Carter, Mr. Miller and Ms.
Wehner, respectively; and fiscal 1995 moving expenses of $61,977 for Mr.
Bonnecaze and fiscal 1993 moving expenses of $2,270 for Mr. Carter. Also
includes fiscal 1995 severance compensation of $342,692 for Mr. Williams
(See "Employment Agreements -- Mr. Williams' Separation Agreement" below)
and $14,769 for Ms. Wehner (See "Employment Agreements -- Termination of
Employment; Change of Control" below). The balance of the amounts shown
represents premiums for the group term life insurance paid for by the
Company on behalf of the Named Executive Officers.
The following table shows information with respect to stock options granted
under the 1990 Plan to the Named Executive Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE
NUMBER OF OPTIONS/ VALUE AT ASSUMED ANNUAL
SHARES SARS RATES OF STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR OPTION
OPTIONS/ EMPLOYEES EXERCISE TERM
SARS IN FISCAL PRICE -----------------------
NAME GRANTED YEAR ($/SH)(4) EXPIRATION DATE 5% 10%
- ------------------------ ---------- ---------- ---------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Leonard S. Williams..... -- --% -- -- -- --
Philip L. Carter........ 250,000(2) 26.58 $ 14.750 May 2, 2005 $2,319,049 $5,876,925
70,000(3) 7.43 11.625 Nov. 2, 2005 511,763 1,296,908
Mark J. Miller.......... 50,000(3) 5.31 11.625 Nov. 2, 2005 365,545 926,363
Earl C. Bonnecaze....... 40,000(3) 4.25 17.500 July 17, 2005 440,206 1,115,620
25,000(3) 2.05 11.625 Nov. 2, 2005 182,773 469,181
Patricia J. Wehner...... -- -- -- -- -- --
</TABLE>
- ---------------
(1) Does not reflect stock options granted in March 1995 taking into account
fiscal 1994 performance. Other than as set forth above, no options have been
or will be granted with respect to fiscal 1995 performance.
(2) Becomes exercisable in five installments vesting as follows: 100,000 shares
immediately on the date of grant; 35,000 shares on the six-month anniversary
of the date of grant; 35,000 shares on the twelve-month anniversary of the
date of grant; 35,000 shares on the 24-month anniversary of the date of
grant; and 45,000 shares on the 36-month anniversary of the date of grant.
(3) Becomes exercisable in three equal annual installments beginning on the
first anniversary of the date of grant.
(4) All options were granted with an exercise price equal to the fair market
value per share of the Common Stock on the date of grant.
6
<PAGE> 10
The following table shows information with respect to fiscal 1995 option
exercises and year-end option values for each of the Named Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/ OPTIONS/
SARS AT FISCAL SARS AT FISCAL
YEAR-END(#) YEAR-END($)
---------------- ------------------
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) VALUE REALIZED($) UNEXERCISABLE(1) UNEXERCISABLE(2)
- ------------------------ ---------------- ----------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Leonard S. Williams..... 22,937 $ 178,465 390,563/0 $1,421,597/$--
Philip L. Carter........ -- -- 205,250/241,926 0/131,250
Mark J. Miller.......... -- -- 27,000/119,426 45,000/183,750
Earl C. Bonnecaze....... 0/65,000 0/46,875
Patricia J. Wehner...... -- -- 20,700/25,819 13,125/0
</TABLE>
- ---------------
(1) The amounts in this column are options to purchase shares of Common Stock
granted under the 1990 Plan and do not include stock options granted on
March 15, 1995 taking into account performance during fiscal 1994.
(2) The amounts in this column are based upon the closing price of the Common
Stock on January 26, 1996 of $13.50 per share.
EMPLOYMENT AGREEMENTS
Each of the Company's Named Executive Officers served during fiscal 1995
pursuant to a written employment agreement. The Company entered into a new
agreement with Mr. Carter as of March 15, 1995 pursuant to which Mr. Carter is
employed as the Company's President and Chief Executive Officer at an initial
annual base salary of $450,000. The Company entered into a new agreement with
Mr. Miller as of March 15, 1995 pursuant to which Mr. Miller is employed as the
Company's Executive Vice President of Merchandise and Stores at an initial
annual base salary of $375,000. The Company also entered into an employment
agreement with Mr. Bonnecaze as of July 17, 1995 at an initial base salary of
$160,000. None of the agreements provide for any fixed term of employment and
are subject to termination 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 March 11, 1996, Mr. Carter's annual base salary was increased to
$550,000, Mr. Miller's annual base salary was increased to $420,000 and Mr.
Bonnecaze's annual base salary was increased to $170,000.
Performance Stock Options -- Pursuant to their employment agreements, the
Company's Named Executive Officers are entitled to participate in any
performance stock option program approved annually by the Compensation Committee
of the Board of Directors. The performance stock option program approved by the
Compensation Committee for fiscal 1995 provided that options would be granted in
fiscal 1996 based upon fiscal 1995 performance. On November 2, 1995, the
Compensation Committee approved the grant of 70,000 options to Mr. Carter,
50,000 to Mr. Miller and 25,000 to Mr. Bonnecaze in connection with the
Company's new strategic direction described in the Company's 1995 Annual Report
to Stockholders and in recognition of fiscal 1995 performance.
Performance Bonus -- Pursuant to their employment agreements, the Company's
Named Executive Officers are entitled to participate in any performance bonus
plan approved annually by the Compensation Committee of the Board of Directors.
The performance bonus plan approved by the Compensation Committee for fiscal
1995 provided that bonuses would be granted in fiscal 1996 based upon a
combination of the fiscal 1995 financial performance of the Company and the
individual executive's performance during fiscal 1995.
7
<PAGE> 11
The plan further provided that the maximum bonus that could be paid would 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 President and
70% in the case of Mr. Carter. As a result of the Company's fiscal 1995
performance, no performance bonus was paid to any of the Named Executive
Officers.
Termination of Employment; Change of Control -- Each of the employment
agreements provides that, in the event the Named Executive Officer's employment
is terminated, the Company will continue to make the base salary payments at the
rate then being paid for eighteen months after termination of the agreement in
the case of Messrs. Carter and Miller, twelve months in the case of Ms. Wehner,
and, in the case of Mr. Bonnecaze, six months prior to the second anniversary of
the date of his employment agreement, nine months prior to the third such
anniversary and twelve months subsequent to the third such anniversary. Mr.
Carter's agreement further provides, however, that in the event his employment
is terminated at any time subsequent to March 15, 1998, the Company will
continue to pay his base salary at the rate then being paid for twenty-four
months after such termination. The employment agreements also provide that if,
within two months after a Change of Control (as defined in the agreements), the
Named Executive Officer terminates his or her employment, then the Company will
pay him or her a lump sum severance payment equal to 2 (2.9 in the case of Mr.
Carter) multiplied by the sum of his or her annual base salary in effect during
the year immediately preceding termination and 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, whichever is greater. In addition,
the Named Executive Officer 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 Named Executive
Officer, multiplied by the number of shares covered by each such option. As used
in the employment agreements, a Change in Control is defined to mean the
acquisition by any person of beneficial ownership of more than 35% of the
combined voting power of the Company's outstanding securities, as a result of
purchases of such securities which are not expressly approved by the Board of
Directors.
Mr. Carter's employment agreement additionally provides that the Company
will pay him the lump sum severance payment described above in the event his
employment is terminated without cause within eighteen months following an
Approved Change in Control. An Approved Change in Control is defined in Mr.
Carter's agreement to mean the acquisition by any person of beneficial ownership
of more than 80% of the combined voting power of the Company's outstanding
securities, as a result of a transaction which is expressly approved by the
Board of Directors. Mr. Carter's agreement further provides that any unvested
portion of that certain stock option to purchase 250,000 shares of the Common
Stock granted to Mr. Carter on May 2, 1995 shall immediately vest and become
exercisable in the event of a Change in Control or an Approved Change in
Control.
Promissory Notes with Mr. Miller -- Concurrently with entering into his
previous employment agreement with the Company on September 25, 1992, Mr. Miller
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 a portion of 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. On April 1, 1995, Mr. Miller paid the remaining principal
balance under the $30,000 note together with accrued interest to date. See
"Certain Transactions" below.
Mr. Williams' Separation Agreement. -- In connection with his resignation
from the Company, the Company entered into a separation agreement with Mr.
Williams pursuant to which the Company agreed to pay Mr. Williams at the rate of
$45,000 per month through September, 1996. The agreement also provides
8
<PAGE> 12
that all options to purchase shares of Common Stock held by Mr. Williams which
were vested and exercisable as of March 15, 1995 are exercisable by Mr. Williams
through December 15, 1996.
1990 EMPLOYEE STOCK INCENTIVE PLAN
In 1990, the Company adopted 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 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 79 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 from the date of grant. Grants and awards are
made in consideration of services rendered or to be rendered by the recipients
thereof.
Options to purchase shares of Common Stock were granted to the Named
Executive Officers of the Company during fiscal 1995 as described above in the
table entitled "Option/SAR Grants in Last Fiscal Year." Except as otherwise
noted in such table, all such options (a) become exercisable in three equal
annual installments beginning on the first anniversary of the date of grant, and
(b) have an exercise price equal to the fair market value of the Common Stock on
the date of grant. Payment of the exercise price of options granted under the
1990 Plan must be made in full in cash or cash equivalent concurrently with the
exercise of such option, or as follows subject to approval of the Compensation
Committee:
(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 from 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
Concurrently with entering into his previous employment agreement with the
Company on September 25, 1992, Mr. Miller 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 a portion
of 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
9
<PAGE> 13
to date. On April 1, 1995, Mr. Miller paid the remaining principal balance under
the $30,000 note together with accrued interest to date.
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 (the "Executive Officers") set forth in
the Summary Compensation Table, based upon the responsibilities of the
individual Executive Officers and the Company's financial performance. The
Company enters into employment agreements with its Executive Officers that set
forth the elements of compensation that have been approved by the Committee. In
recent years, the form of these agreements has been structured to allow the
Committee to tie a significant portion of each Executive Officer's overall
compensation to criteria based on the Company's financial performance.
EXECUTIVE COMPENSATION PROGRAM
Compensation which may be earned by an Executive Officer in any fiscal year
typically consists of base salary, cash bonus and stock options. In addition,
special bonus and stock option awards may be made at the time an executive is
first hired by the Company or is promoted. While the Committee generally
followed this approach in fiscal 1995, as discussed below, the Committee
modified the annual stock option arrangements for the Executive Officers.
- -- BASE SALARY
The Committee establishes base salaries at levels determined through
the Company's overall salary structure and the Company's own experience in
attracting qualified executives. Adjustments are made to reflect an
individual's contributions to the Company and the specific job
responsibilities. The amount thereby arrived at is set forth in the
Executive Officer's employment agreement. The Committee does not peg salary
levels to the amounts paid by other companies; nevertheless, the Committee
compares salary levels at the Company to those reported by other companies
that participate in retail industry compensation surveys to ensure that
salaries at the Company are within the range paid by comparably sized
retail companies. Because participation in these surveys is on an anonymous
basis, the Committee is unable to determine the extent to which the
companies that participate in the salary survey are the same as the retail
companies included in the Stockholder Return Performance Presentation on
page 12 of this Proxy Statement. Base salaries are reviewed annually and
any changes in base salary are made at the discretion of the Committee,
subject to ratification by the Board of Directors. Actual salary increases
are based upon evaluations of a particular officer's individual performance
and contribution to the Company.
- -- ANNUAL CASH BONUS
Executive Officers are eligible for an annual cash bonus only if
certain pre-tax earnings objectives for the fiscal year are met. At the
discretion of the Committee, a certain part of the bonus may be based on
the Committee's subjective evaluation of the Executive Officer's individual
performance during the fiscal year, but only if the amount of pre-tax
operating income exceeds a certain threshold. A maximum bonus level is set
for each Executive Officer, expressed as a percentage of base salary, in
the event that pre-tax operating income exceeds targeted levels.
- -- STOCK OPTIONS
Commencing with fiscal 1994, the Committee adopted a policy of making
annual stock option grants after the end of the fiscal year, based on
performance goals (and subject to a maximum award level) established by the
Committee at the beginning of the year. This policy replaced the
Committee's previous practice of granting options at the beginning of the
year which vested only if certain performance goals
10
<PAGE> 14
were satisfied. Because stock option grants are awarded as an annual
incentive, the Committee does not generally consider the size of the
previous years' grants in determining the number of options that may be
granted in the current year.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER AND OTHER
EXECUTIVE OFFICERS IN FISCAL 1995
The Committee followed the policies outlined above in establishing salaries
for fiscal 1995. The salary payable to Messrs. Carter, Miller and Bonnecaze and
to Ms. Wehner is set forth in an employment agreement between the Company and
each of the Executive Officers. In connection with Mr. Carter's promotion to
Chief Executive Officer, the Committed granted him stock options exercisable for
up to 250,000 shares.
Also consistent with these policies, at the beginning of fiscal 1995 the
Committee established operating income performance goals for purposes of
determining annual cash bonuses and stock option grants. As described in the
Company's 1995 Annual Report to Stockholders, the Company announced a new
strategic direction in November 1995. Concurrently with this announcement, stock
options were granted to the Executive Officers including Mr. Carter who received
an option covering 70,000 shares. The Committee believes that this November 1995
option grant serves the dual purpose of recognizing performance for fiscal 1995
and encouraging the Executive Officers to successfully implement the new
strategic direction. No cash bonuses were paid and no additional stock options
were granted in connection with fiscal 1995 performance.
- -- OTHER
Legislation adopted by Congress in 1993 places a $1 million limitation
on the deduction available to public companies for compensation paid to
certain executives, unless the compensation is treated as "performance
based" (as defined under the Internal Revenue Code of 1986, as amended) or
satisfies another exception. In December 1995 the Internal Revenue Service
("IRS") adopted final regulations to implement this legislation. The
Committee has not developed specific policies to address this new tax
provision. However, the Committee believes that amounts recognized on
exercise of outstanding stock options will qualify as performance-based
compensation under the proposed IRS regulations. The Committee, along with
the Company, will evaluate the Company's compensation programs on an
ongoing basis in view of the limiting provisions of Section 162(m) of the
Internal Revenue Code of 1986, as amended.
Submitted by the Compensation and Organization Committees.
Anthony Luiso (Chairman)
David H. Batchelder
Bruce E. Karatz
Ronald P. Spogli
Peter S. Willmott
11
<PAGE> 15
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 1995 or is a former officer of the Company.
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 February 3, 1991 and ending January 28, 1996. 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.
<TABLE>
<CAPTION>
Retailers-
Measurement Period Dow Jones Other Spe-
(Fiscal Year Covered) Mac Frugal's Equity cialty
<S> <C> <C> <C>
1990 100.00 100.00 100.00
1991 185.54 127.72 142.13
1992 155.42 141.96 186.56
1993 143.37 158.86 174.70
1994 163.86 159.87 181.69
1995 130.12 217.83 163.01
</TABLE>
12
<PAGE> 16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following security ownership information is set forth, as of April 29,
1996, 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 Named Executive
Officers, 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)........................... 79,486 *
Bruce E. Karatz.................................. 25,541 *
Anthony Luiso.................................... 33,595 *
Ronald P. Spogli................................. 29,595 *
Bill M. Thomas(4)................................ 1,090,962 4.32%
Leonard S. Williams.............................. 488,500 1.91%
Peter S. Willmott................................ 155,370 *
James J. Zehentbauer............................. 28,595 *
Philip L. Carter................................. 263,685 1.03%
Mark J. Miller................................... 35,785 *
Earl C. Bonnecaze................................ 200 *
Patricia J. Wehner............................... 300 *
All Directors and Executive Officers
as a Group (12 persons)........................ 2,231,614 8.54%
</TABLE>
- ---------------
(*) Denotes less than 1% of the sum of the 25,299,347 shares of Common Stock
outstanding at April 29, 1996 plus shares that are subject to options that
are presently exercisable or will become exercisable within 60 days after
April 29, 1996 by that person or group, as the case may be.
(1) Includes shares which may be acquired pursuant to options exercisable on or
within 60 days after April 29, 1996, as follows: Mr. Batchelder (28,595);
Mr. Karatz (24,541); Mr. Luiso (28,595); Mr. Spogli (28,595); Mr. Thomas
(9,750); Mr. Williams (390,563); Mr. Willmott (78,595); Mr. Zehentbauer
(28,595); Mr. Carter (253,685); Mr. Miller (35,685); and all directors and
executive officers as a group (907,199). Unless otherwise indicated, each
person has sole investment and voting power as to the shares indicated.
(2) The percentages are based upon 25,299,347 shares of Common Stock outstanding
at April 29, 1996 plus shares that are subject to options that are
exercisable or will become exercisable within 60 days after April 29, 1996
by that person or group, as the case may be.
(3) Includes 48,810 shares of Common Stock owned directly by Mr. Batchelder
(including 28,595 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>
FMR Corp.(2)...................................... 3,096,325 12.27%
82 Devonshire Street
Boston, Massachusetts 02109
NewSouth Capital Management, Inc.(3).............. 2,566,096 10.17%
1000 Ridgeway Loop Road, Suite 233
Memphis, Tennessee 38120
First Pacific Advisors, Inc.(4)................... 2,154,400 8.54%
11400 West Olympic Boulevard, Suite 1200
Los Angeles, California 90064
Westport Asset Management, Inc.(5)................ 1,440,400 5.71%
253 Riverside Avenue
Westport, Connecticut 06880-4816
</TABLE>
- ---------------
(1) The percentages are based upon 25,229,347 shares of Common Stock outstanding
at April 29, 1996.
(2) The Company received from FMR Corp. an amended Schedule 13G dated February
14, 1996 reporting that it beneficially owned an aggregate of 3,096,325
shares of Common Stock, of which it has sole dispositive power over
3,096,325 shares and sole voting power over 9,425 shares. In the Schedule
13G, FMR Corp. 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 received an amended Schedule 13G dated February 13, 1996 from
NewSouth Capital Management, Inc. ("NewSouth") reporting that it has sole
dispositive power over 2,566,096 shares of Common Stock and sole voting
power over 2,456,096 of such shares. In the 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.
(4) The Company received a Schedule 13G dated February 13, 1996 from First
Pacific Advisors, Inc. ("First Pacific") reporting beneficial ownership of
2,154,400 shares of Common Stock. This Schedule 13G also reported that First
Pacific has shared dispositive power over all such shares and shared voting
power over 617,000 shares. In its Schedule 13G, First Pacific reported 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.
(5) The Company received a Schedule 13G dated February 14, 1996 from Westport
Asset Management, inc. ("Westport") reporting beneficial ownership of
1,440,400 shares of Common Stock, of which Westport has shared dispositive
and voting power over 1,372,300 shares, and sole dispositive and voting
power over 68,100 shares. In the Schedule 13G, Westport reported 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.
14
<PAGE> 18
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 fiscal 1995 all
Section 16(a) filing requirements applicable to its Insiders were complied with.
INDEPENDENT PUBLIC ACCOUNTANTS
For fiscal 1995, 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.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Any proposal relating to a proper subject which an eligible stockholder may
intend to present for action at the Company's 1997 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 February 16, 1997. 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.
15
<PAGE> 19
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/ Philip L. Carter
------------------------------------
PHILIP L. CARTER
President and Chief Executive Officer
Dominguez, California
May 17, 1996
16
<PAGE> 20
________________________________________________________________________________
MAC FRUGAL'S BARGAINS - CLOSE-OUTS INC.
ANNUAL MEETING OF STOCKHOLDERS -- JUNE 19, 1996
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,
Philip L. Carter, 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 19, 1996 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 OF ANY POSTPONEMENTS OR ADJOURNMENTS THEREOF.
(Continued, and to be dated and signed on the reverse side)
MAC FRUGAL'S BARGAINS - CLOSE-OUTS INC.
P.O. BOX 11343
NEW YORK, N.Y. 10203-0343
________________________________________________________________________________
________________________________________________________________________________
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 / / WITHHOLD AUTHORITY to vote / / *EXCEPTIONS / /
listed below for all nominees listed below
NOMINEES: Peter S. Willmott, Philip L. Carter, Mark J. Miller, David H.
Batchelder, Anthony Luiso, Ronald P. Spogli and James J. Zehentbauer.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark the "Exceptions" box and write that nominee's name in the space
provided below.)
*Exceptions_______________________________________________________________
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
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 _________________________________, 1996
_____________________________________________
(Signature)
_____________________________________________
(Signature, if held jointly)
VOTES MUST BE INDICATED / /
(X) IN BLACK OR BLUE INK
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
_______________________________________________________________________________
