SCHEDULE 14A
SCHEDULE 14 INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ X ]
Check the appropriate box:
[X ] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Name of Registrant as Specified in Its Charter:
Price/Costco, Inc.
Name of Person(s) Filing Proxy Statement:
Price/Costco Shareholders Committee
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:
____________________________________________________________
2) Aggregate number of securities to which transaction
applies:
_____________________________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: (1)
_____________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________
(1) 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:
____________________________
2) Form, Schedule or Registration Statement No:
______________________________
3) Filing Party: _________________________
Date Filed: _______________________________
<PAGE>
Price/Costco Shareholders Committee
c/o Teamsters Local 542
4666 Mission Gorge Place
San Diego CA 92120
Tel. (619) 582-0542
Fax (619) 582-0059
PRELIMINARY PROXY STATEMENT
INDEPENDENT SHAREHOLDER SOLICITATION
AGAINST BOARD NOMINEE GALANTI AND FOR SHAREHOLDER PROPOSAL ON
INSIDER TRADING
at
ANNUAL STOCKHOLDERS MEETING of
PRICE/COSTCO, INC.
January 29, 1996
Double Tree Resort, 5401 N. Scottsdale Rd.
Scottsdale AZ 7:30pm
Date sent to shareholders:
January 28, 1996
Dear Price/Costco Shareholder:
In the board of directors election, we urge you NOT to vote
for nominee Richard Galanti. In 1995 Galanti entered into a
consent decree in an SEC insider stock trading lawsuit against
him.
We urge you to vote FOR the shareholder proposal that the
board not nominate anyone in the future found guilty of insider
trading or bound by a consent decree concerning insider trading.
1. SHAREHOLDER PROPOSAL FOR ZERO TOLERANCE FOR INSIDER TRADING
Please vote FOR the following recommendation concerning
future elections:
RESOLVED, that shareholders recommend the Board adopt a policy
for future board elections of "zero tolerance" for insider
trading, under which the board will not nominate anyone for
election as director who has been convicted of insider trading
or entered into a consent decree with respect to insider
trading.
For good reasons, it is illegal for a public company
director or executive who possesses material nonpublic
information about his company to use that
information buy or sell the company's stock. In the
view of many, , insider trading activity violates a
fundamental principle of a free market: that everyone in the
market have equal access to information. Insider trading allows
a person with special access to information to fleece other
investors, by selling stock in advance of a public disclosure
likely to depress the price, or buying it before other investors
have information which will tend to increase the price.
A person who would act this way cannot be given a position
of trust. It does not matter whether the insider trading
occurred in the stock of this company or another, any more than
Price/Costco should hire someone who embezzled from a previous
employer.
In 1995, Price/Costco Chief Financial Officer Galanti
consented to entry of a final judgment against him in an action
brought by the SEC alleging that he engaged in illegal insider
trading in the stock of Office Club, Inc. He was permanently
enjoined from violating federal laws against insider trading. He
agreed to disgorge $26,875 in insider profits, to pay a civil
penalty of $26,875, and to pay interest of $10,658.
The SEC complaint alleged that in 1990, while in possession
of material non-public information about an impending merger
transaction involving Office Club and Office Depot, Galanti
purchased 5,000 shares of Office Club stock. Office Depot is no
stranger to Costco. Carrefour was the dominant stockholder in
both Office Depot and Costco until this year, when it divested
its Price Costco stock. Carrefour described Office Depot and
Costco as its two United States allied companies. <FN1>
At the time the trading occurred, Galanti was the chief financial
officer of Costco.
Management is silent about whether it has
taken any actions to alter his access to inside information or to
discipline him. Shareholders need to forcefully advise management
this is unacceptable.
Management's argument against this proposal is that a
consent decree should not be treated the same way as a
conviction, and seems to imply Galanti was innocent but entered
into the decree to avoid legal expenses.
In our view the SEC generally conducts a thorough
investigation before it files an insider trading lawsuit. We
feel shareholders can trust the SEC more than they can trust this
board of directors to punish one of its own.
<FN1> We make no claim that Carrefour or its officials were
involved in the alleged insider trading.<PAGE>
<PAGE>
Management offers you no reason to believe that consent
decrees result from the SEC filing frivolous cases and coercing
innocent people into consent decrees merely because they cannot
afford to litigate. Could a man in Mr. Galanti's position not
afford to fight a false accusation?
The board should not expect unfettered discretion on how to
deal with inside trading simply because there is a consent decree
rather than a trial. The Board's nominating committee has
discretion under the bylaws as to whom it will nominate for
future vacancies.
This shareholder proposal simply asks the Board to find
someone to nominate new to nominate for Mr. Galanti's slot 3
years from now.
Passage of this proposal will send a strong message to all
insiders at Price/Costco (and elsewhere) that shareholders will
not stand for insiders taking unfair advantage.
2. DO NOT VOTE FOR GALANTI'S REELECTION TO THE BOARD:
There are three board nominees up for reelection this year,
all current executives: Galanti, President Jim Senegal, and
Chairman Jeffrey Brotman.
Price/Costco bought $200,528 worth of apparel in FY 1996
from a company which Galanti's sister owns and runs.
We feel additional independence is needed on the
Price/Costco board. Four of the board's nine members are current
Price/Costco executives. The 5th is a retired Costco executive
now employed by the company as a consultant ($174,996 in fees in
1996). The 6th owns a business which consults on the Company's
employee insurance matters, receiving $990,974 in 1996. The 7th
is a senior executive of the managing underwriter of the latest
public offering of Company stock. That leaves only two board
members with no ties to incumbent management. We believe this is
too few on a 9-member board.
We urge you to vote against Galanti. If you wish to use
management's proxy card to express this view, write his name on
the line next to "WITHHOLD AUTHORITY".
VOTING RIGHTS AND PROCEDURES:
If you have already sent in the proxy card you received from
the company, you can still change your vote. A proxy can be
revoked at any time prior to being counted at the meeting simply
by filling out a later proxy card (or by appearing at the meeting
to vote, or delivering the Company secretary written notice of
revocation prior to the meeting.)
Employees owning stock through their 401K Plan have the
right to instruct the plan trustee confidentially on how to vote
their stock, without any fear of management finding out and
retaliating. The Committee will keep all proxy cards and surveys
we receive confidential (except that proxy cards from non-401K
shareholders must be presented to the company's inspector of
election at the meeting for counting).
The enclosed proxy card grants no discretionary authority:
if matters come before the meeting which are not set forth in the
Company's proxy statement or this proxy statement (which we do
not anticipate), we will not vote your shares on those matters.
All holders of common stock as of 12/6/96 record date are
entitled to vote. If you sign the enclosed card but do not direct
us how to vote, we will vote FOR the shareholder proposal,
vote for Brotman and Senegal, withhold authority as to
Galanti, and abstain on all other voting matters. We
incorporate herein by reference the discussion in the Company's
12/96 proxy statement of the election of directors, voting
requirements and outstanding securities at pp. ____ .
OTHER ITEMS SET FOR A VOTE
Management proposes to: (1) change the company name to
Costco Companies, Inc.; (2) increase the number of shares
available for issuance under the management stock option plan
from 10 million to 20 million, and (3) ratify the independent
auditors. We take no position on these issues. We incorporate
herein by reference the discussion of these issues in
management's proxy statement at pp. _____.
PARTICIPANTS IN THIS PROXY SOLICITATION
The Committee consists currently of shareholder Joni Kahn
(P.O. Box ____, San Diego, CA) and Teamsters Local 542.
Ms. Kahn began acquiring Price/Costco stock in 1993 and now
beneficially owns 313 shares. She is currently retired
(she was on Local 542 staff until 1990). Local 542
does not own stock in its own name, but it represents about 1800
Price/Costco employees in the San Diego area , and
many of them have advised the Local that they have invested
in the Company's stock through its 401K retirement plan (the
dates and amounts of these purchases are not known to Local
542). Other Teamster locals represent approximately 5200
Price employees who also participate in this plan. The
Company claims that less than 10% of its California employees
have chosen to invest in Company stock. Proxies will be
sought by mail, fax, telephone and personal interview. The cost
of proxy solicitation, estimated at $2500, will be borne by Local
542. For proxy solicitation Local 542 will use regular staff, not
specially-engaged solicitors, and may be assisted by other
West Coast locals' staff. These locals have collective
bargaining agreements with various company stores and
have
worked to organize others, which management resisted.
Local 542 has no organizing campaign, strike, boycott or
picketing currently underway. Some Eastern locals are in
negotiations with the Company.
No participant is (or has been)
a party to any contract arrangement or understanding with respect
to any securities of the company, nor with respect to any future
employment by the company, nor with respect to any further
transactions to which the company may be a party.
PROPOSALS FOR FUTURE MEETINGS
SEC Rule 14a-8 gives shareholders who have owned more than
$1000 worth of the company's stock for more than one year the
right to have the company's proxy statement include a shareholder
proposal and supporting statement. The deadline for submitting
such proposals for inclusion in the proxy statement for the 1997
annual meeting will be 9/1/97. Feel free to contact us if you
would like more information about shareholder proposals.
EXECUTIVE COMPENSATION/SECURITY OWNERSHIP OF DIRECTORS AND
EXECUTIVE OFFICERS
In 1996, CEO Senegal and Chairman Brotman each received
$450,000 in cash compensation, up from $305,769 each in 1995
(they received stock options in 1995, none in 1996). CFO Galanti
received $355,000 in cash compensation (up from $277,000) and
80,000 stock options (up from 20,000). We incorporate herein by
reference the more complete information on these matters in the
company proxy statement at pp. ____ .
THANK YOU FOR VOTING FOR THE SHAREHOLDER PROPOSAL AGAINST INSIDER
TRADING
PLEASE RETURN THE ENCLOSED SURVEY AND PROXY CARD TO
Price/Costco Shareholders Committee
c/o Teamsters Local 542
4666 Mission Gorge Place
San Diego CA 92120
Fax (619) 582-0059<PAGE>
<PAGE>
<PAGE>
PROXY
SOLICITED BY PRICE/COSTCO SHAREHOLDERS COMMITTEE
for
ANNUAL SHAREHOLDERS MEETING OF
PRICE/COSTCO, INC.
January 29, 1996
The undersigned shareholder hereby appoints Joni Kahn, Norma
DeSaulnier and proxies with full power of substitution to vote
for the undersigned at the Company's annual meeting, and at any
adjournments thereof, on the matters set forth in the Proxy
Statement. The undersigned hereby directs these proxies be voted
in accordance with the instructions herein. Unless marked
otherwise, this proxy will be voted FOR the shareholder proposal
and not voted on any other matter.
(1) Shareholder Proposal for Zero Tolerance on Insider Trading
FOR [ ] AGAINST [ ] ABSTAIN [ ]
We recommend a vote FOR this proposal.
(2) Company Proposal to Change Name to Costco Companies, Inc.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(3) Company Proposal to Double Amount of Stock Available for
Stock Option Plan
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(4) Company Proposal to Ratify Auditors
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(5) ELECTION OF DIRECTORS:
Nominees:
FOR WITHHOLD AUTHORITY
Jim Senegal [ ] [ ]
Jeffrey Brotman [ ] [ ]
Richard Galanti [ ] [ ]
FOR all nominees: [ ]
WITHHOLD AUTHORITY for all nominees [ ]
We recommend you withhold authority as to Galanti.
PLEASE DATE, SIGN AND PROMPTLY MAIL.
[ADDED TO CARDS SENT TO INSTITUTIONS:] IF YOU OWN STOCK THROUGH A
STOCKBROKER OR OTHER NOMINEE, DO NOT SEND THIS CARD TO THE
COMMITTEE: INSTEAD, CONTACT YOUR BROKER OR OTHER NOMINEE (STOCK
CAN ONLY BE VOTED BY THE BROKER OR OTHER HOLDER OF RECORD ON THE
PRICE/COSTCO SHAREHOLDERS LIST).
SIGNATURE ________________________________ DATE ___________
PERSONS SIGNING IN REPRESENTATIVE CAPACITY SHOULD INDICATE
AS SUCH. IF SHARES ARE HELD JOINTLY, BOTH OWNERS SHOULD SIGN.
PRINT NAME ________________________________
ADDRESS _____________________________________________________
___________________ ___________ __________________
ACCOUNT NO./SSN # OF SHARES TEL. NO./FAX NO.
<PAGE>
SURVEY OF PRICE/COSTCO SHAREHOLDERS
THIS IS NOT A PROXY: PLEASE RETURN IT EVEN IF YOU DO NOT
FILL OUT A PROXY
1. Do you support the proposal asking that future board nominees
not include anyone who has entered into a SEC insider trading
consent decree?
Yes _____ No ____ Undecided ________
If you wish to vote on this proposal, you need to return a proxy
card or vote at the meeting.
2. Do you support Mr. Galanti's candidacy for the Board of
Directors?
Yes _____ No ____ Undecided ________
If you wish to vote on his candidacy, you need to return a proxy
card or vote at the meeting.
3. List anything you would like management to change about
Price/Costco:
_________________________________
4. List any additional info you would like from the Committee:
_________________________________
THE FOLLOWING INFORMATION WILL BE KEPT CONFIDENTIAL:
Name __________________________________Title, if any __________
Address _______________________________________________________
Phone/Fax ________ # Shares owned ________
Return to: Price/Costco Shareholders Committee, c/o Teamsters
Local 542, 4666 Mission Gorge Pl., San Diego CA 92120. Fax (619)
582-0059.
