<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240. 14a-11(c) or Section 240.
14a-12
Harcourt General, Inc.
(Name of Registrant as Specified In Its Charter)
Eric P. Geller, Esq.
(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(i)(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 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
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:
4) Date Filed:
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<PAGE> 2
[LOGO]
Harcourt General, Inc.
27 Boylston Street/Box 1000
Chestnut Hill, MA 02167
(617) 232-8200
February 2, 1996
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 8, 1996
The Annual Meeting of Stockholders of Harcourt General, Inc. will be held
at 10:00 a.m., Eastern Standard Time, on Friday, March 8, 1996, at The First
National Bank of Boston, 100 Federal Street, Boston, Massachusetts, for the
following purposes:
1. To elect five Class C directors and one Class A director in
accordance with the By-Laws of the Company.
2. To consider and act on a proposal to ratify the appointment by the
Board of Directors of Deloitte & Touche LLP as the Company's independent
auditors for the current fiscal year.
3. To transact such other business as may properly come before the
meeting and any adjournments of the meeting.
Holders of the Company's Common Stock and Class B Stock will be asked to
consider and act upon each of the foregoing items. All stockholders are
cordially invited to attend the meeting.
By Order of the Board of Directors
ERIC P. GELLER
Secretary
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE> 3
[LOGO] Harcourt General, Inc.
27 Boylston Street/Box 1000
Chestnut Hill, MA 02167
(617) 232-8200
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
MARCH 8, 1996
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Harcourt General, Inc. (the "Company") for
use at the Annual Meeting of Stockholders to be held at 10:00 a.m. on Friday,
March 8, 1996, at The First National Bank of Boston, 100 Federal Street, Boston,
Massachusetts, and at any adjournments thereof. All shares will be voted in
accordance with the instructions contained in the proxy, but if the proxies
which are signed and returned do not specify a vote on any proposal, the proxies
will be voted FOR the election of the nominees for director named herein and FOR
the ratification of the appointment by the Board of Directors of Deloitte &
Touche LLP as the Company's independent auditors for the current fiscal year.
Any proxy may be revoked by a stockholder at any time before it is exercised by
providing written notice of revocation to the Secretary of the Company (at the
address set forth above), by executing a proxy bearing a later date, or by
voting in person at the Annual Meeting. The mailing of this proxy statement and
accompanying form of proxy is expected to commence on or about February 2, 1996.
In addition to solicitations of proxies by mail, the Company's officers,
directors or employees may solicit proxies by telephone or personal
communication. All costs of soliciting proxies, including reimbursement of fees
of certain brokers, fiduciaries and nominees in obtaining voting instructions
from beneficial owners, will be borne by the Company.
Although stock transfer books will remain open, the Board of Directors has
fixed the close of business on January 11, 1996 as the record date for
determining the stockholders having the right to vote at the Annual Meeting. At
the meeting, each share of Common Stock and Class B Stock is entitled to one
vote. At the close of business on January 11, 1996, there were 52,050,717 shares
of Common Stock and 20,802,108 shares of Class B Stock of the Company
outstanding and entitled to vote at the meeting.
Shares of Common Stock and Class B Stock represented in person or by proxy
at the Annual Meeting (including abstentions and broker non-votes) will be
tabulated by the inspectors of election appointed for the meeting and will be
counted in determining that a quorum is present. Votes are counted using written
ballots.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of January 19, 1996 (except
as indicated in Note 5 below) with respect to the beneficial ownership of the
Company's equity securities by (i) each person known to the Company to own
beneficially more than 5% of the outstanding shares of the Company's Common
Stock
<PAGE> 4
or Class B Stock, (ii) each executive officer named in the Summary Compensation
Table, (iii) each director and nominee for director of the Company, and (iv) all
current executive officers and directors as a group.
<TABLE>
<CAPTION>
SHARES AND PERCENT OF CLASS OR
SERIES OF STOCK OWNED BENEFICIALLY(1)
--------------------------------------------------------
NAME COMMON % SERIES A % CLASS B %
---- -------- --- -------- --- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Smith Family Group(2)(3)................. 203,267 * -- -- 20,766,398 99.8
c/o Richard A. Smith
Harcourt General, Inc.
27 Boylston Street
Chestnut Hill, MA 02167
Richard A. Smith(2)(3)................... 78,727 * -- -- 14,364,154 69.1
c/o Harcourt General, Inc.
27 Boylston Street
Chestnut Hill, MA 02167
Nancy L. Marks(2)(3)..................... 78,424 * -- -- 10,229,182 49.2
c/o Harcourt General, Inc.
27 Boylston Street
Chestnut Hill, MA 02167
Mark D. Balk, Esq.(2)(4)................. 78,424 * -- -- 2,894,429 13.9
Goulston & Storrs, P.C.
400 Atlantic Avenue
Boston, MA 02110
Neuberger & Berman L.P.(5)............... 4,039,027 7.8 -- -- -- --
605 Third Avenue
New York, NY 10158
Robert J. Tarr, Jr.(6)................... 482,432 * 55,414 4.6 -- --
John R. Cook(7).......................... 16,709 * -- -- -- --
Brian J. Knez(8)......................... 89,507 * -- -- 775,373 3.7
Eric P. Geller(9)........................ 54,217 * 6,000 * -- --
William F. Connell....................... 1,500 * -- -- -- --
Gary L. Countryman....................... -- -- -- -- -- --
Jack M. Greenberg........................ 500 * -- -- -- --
Herbert W. Jarvis........................ 4,500 * -- -- -- --
Jeffrey R. Lurie(10)..................... 89,077 * -- -- -- --
Lynn Morley Martin....................... 500 * -- -- -- --
Maurice Segall........................... 2,000 * -- -- -- --
Robert A. Smith(11)...................... 100,611 * -- -- 774,273 3.7
Paula Stern.............................. 100 * -- -- -- --
Sidney Stoneman(12)...................... 1,000,000 1.9 -- -- -- --
Hugo Uyterhoeven......................... 1,200 * 1,200 * -- --
Clifton R. Wharton, Jr. ................. 1,500 * -- -- -- --
All current executive officers and
directors as a group (21
persons)(13)........................... 1,763,913 3.4 63,622 5.3 15,913,800 76.5
<FN>
- ---------------
* Less than 1%.
</TABLE>
2
<PAGE> 5
(1) Each share of Class B Stock is convertible at any time into one share of
Common Stock. Each share of the Company's Series A Cumulative Convertible
Stock ("Series A Stock"), which is not a voting security of the Company, is
convertible at any time into 1.1 shares of Common Stock. The Company knows
of no person owning Series A Stock who, after conversion of such stock,
would own more than 5% of the Company's outstanding Common Stock. Unless
otherwise indicated in the following footnotes, each stockholder referred
to above has sole voting and investment power with respect to the shares
listed.
(2) Certain of the shares included in the table have been counted more than
once because of certain rules and regulations of the Securities and
Exchange Commission. The total number of shares owned by, or for the
benefit of, Richard A. Smith, Nancy L. Marks and members of their families
is as shown for the "Smith Family Group." See Note 3. Mr. Smith and Mrs.
Marks are "control" persons of the Company within the meaning of the rules
and regulations of the Securities and Exchange Commission.
(3) The Smith Family Group includes Richard A. Smith, Chairman of the Board of
the Company; Nancy L. Marks, Mr. Smith's sister; Robert A. Smith, Group
Vice President and a director of the Company, who is the son of Richard A.
Smith; Brian J. Knez, President of Harcourt Brace & Company and a director
of the Company, who is the son-in-law of Richard A. Smith; Jeffrey R.
Lurie, a nominee for director of the Company and the son of Nancy L. Marks;
other members of their families and various family corporations, trusts and
charitable foundations. Certain members of the Smith Family Group have
filed a Schedule 13D, as amended, with the Securities and Exchange
Commission. The Schedule 13D discloses that the members of the Smith Family
Group have executed the Smith-Lurie/Marks Stockholders' Agreement dated
December 29, 1986, as supplemented (the "Stockholders' Agreement"). The
Stockholders' Agreement imposes certain restrictions on the ability of the
parties thereto to convert their Class B Stock into Common Stock without
permitting the other parties to acquire the shares proposed to be so
converted.
Not all shares of Class B Stock and none of the shares of Common Stock
owned beneficially by the members of the Smith Family Group are subject to
the Stockholders' Agreement. Thus, while 19,734,912 shares of Class B Stock
are subject to the terms of the Stockholders' Agreement, the total number
of shares held by or for the benefit of the Smith Family Group and as to
which the Smith Family Group is deemed to be the beneficial owner is
20,766,398 shares of Class B Stock and 203,267 shares of Common Stock,
which includes 31,807 shares of Common Stock subject to outstanding options
exercisable within 60 days of January 19, 1996. The 20,766,398 shares of
Class B Stock constitute 99.8% of the outstanding Class B Stock and,
together with the 203,267 shares of Common Stock owned by the Smith Family
Group, constitute 28.2% of the aggregate of the shares of the Class B
Stock, Common Stock and Series A Stock outstanding as of January 19, 1996,
assuming conversion of all Series A Stock into Common Stock. Members of the
Smith Family Group possess sole or shared voting power over all of the
shares shown in the table.
Each share of Common Stock entitles the holder thereof to one vote on all
matters submitted to the stockholders, and each share of Class B Stock
entitles the holder thereof to one vote on all such matters, except that
each share of Class B Stock entitles the holder thereof to ten votes on the
election of directors at any stockholders' meeting under certain
circumstances which are not present as of the date of this Proxy Statement.
As to any elections in which the Class B Stock carries one vote per share
(as is the case on the date of this Proxy Statement), the Smith Family
Group had, as of January 19, 1996, 28.7% of the combined voting power of
the Common Stock and Class B Stock. As to any elections in which the Class
B Stock would carry ten votes per share, the Smith Family Group had, as of
January 19, 1996, 79.9% of the combined voting power of the Common Stock
and Class B Stock. The effect of this significant voting power is to permit
the Smith Family Group to exert decisive control over the results of
3
<PAGE> 6
elections for the Board of Directors in the event of a substantial
accumulation of Common Stock by persons unrelated to the Smith Family
Group.
The holders of Common Stock and the holders of Class B Stock are each
entitled to vote separately as a class on a number of significant matters.
For example, the holders of Common Stock and Class B Stock will each vote
separately as a class on any (i) merger or consolidation of the Company
with or into any other corporation, any sale, lease, exchange or other
disposition of all or substantially all of the Company's assets to or with
any other person, or any dissolution of the Company, (ii) additional
issuances of Class B Stock other than in connection with stock splits and
stock dividends, and (iii) amendments to the Company's Restated Certificate
of Incorporation.
(4) Mr. Balk, who is an officer and director of the law firm of Goulston &
Storrs, P.C., and is included in the Smith Family Group because he serves
as a trustee and/or director of several Smith family trusts and/or
corporations, shares voting and investment power with respect to all shares
of Class B Stock and Common Stock shown next to his name with various
members of the Smith Family Group. Mr. Balk disclaims beneficial ownership
of such shares, all of which are included in the number of shares owned
beneficially by or for the benefit of the Smith Family Group. See Note 3.
(5) The information reported was provided to the Company by Neuberger & Berman
in December 1995. Neuberger & Berman has shared voting power with respect
to 2,093,400 shares and shared investment power with respect to all of the
shares reported in the table. Neuberger & Berman disclaims any economic
interest with respect to the shares reported in the table.
(6) Includes 125,954 shares of Common Stock which are subject to outstanding
options exercisable within 60 days of January 19, 1996. Also includes
15,000 shares of Common Stock and 15,000 shares of Series A Stock owned by
Mr. Tarr's wife; 12,248 shares of Common Stock owned by a charitable trust
of which Mr. Tarr is a trustee; 30,000 shares of Common Stock held by three
trusts, of which Mr. Tarr's wife is a trustee, for the benefit of their
children and 15,000 shares of Series A Stock owned by Mr. Tarr's wife as
custodian for their three children. Mr. Tarr disclaims beneficial ownership
of the shares described in the preceding sentence.
(7) Represents options exercisable within 60 days of January 19, 1996.
(8) Includes 10,628 shares of Common Stock which are subject to outstanding
options exercisable within 60 days of January 19, 1996. Also includes
279,965 shares of Class B Stock held by Mr. Knez's wife, 483,528 shares of
Class B Stock held in trust for the benefit of Mr. Knez's wife, 11,880
shares of Class B Stock held by two trusts, of which Mr. Knez is a trustee,
for the benefit of his children, and 78,000 shares of Common Stock held by
a private foundation of which Mr. Knez is one of seven trustees and shares
voting and investment power. Mr. Knez disclaims beneficial ownership of the
shares held by the private foundation. All of the shares reported for Mr.
Knez are included in the shares owned by the Smith Family Group. See Note
3.
(9) Includes 37,500 shares of Common Stock which are subject to outstanding
options exercisable within 60 days of January 19, 1996.
(10) Includes 10,640 shares of Common Stock held by the Philadelphia Eagles,
Inc., of which Mr. Lurie is owner and Chief Executive Officer, and 78,424
shares of Common Stock held by a charitable foundation of which Mr. Lurie
is one of five trustees and shares voting and investment power. Mr. Lurie
disclaims beneficial ownership of the shares held by the charitable
foundation. All of the shares reported for Mr. Lurie are included in the
shares owned by the Smith Family Group. See Note 3.
4
<PAGE> 7
(11) Includes 21,179 shares of Common Stock which are subject to outstanding
options exercisable within 60 days of January 19, 1996, 160,000 shares of
Class B Stock held by a trust of which Mr. Smith is a trustee and
beneficiary and 78,000 shares of Common Stock held by a private foundation
of which Mr. Smith is one of seven trustees and shares voting and
investment power. Mr. Smith disclaims beneficial ownership of the shares
held by the private foundation. All of the shares reported for Mr. Smith
are included in the shares owned by the Smith Family Group. See Note 3.
(12) Includes 494,336 shares of Common Stock over which Mr. Stoneman has sole
voting and investment power and 505,664 shares of Common Stock owned by Mr.
Stoneman's wife, as to which shares Mr. Stoneman disclaims beneficial
ownership.
(13) Includes 275,285 shares of Common Stock which are subject to outstanding
options exercisable within 60 days of January 19, 1996.
1. ELECTION OF DIRECTORS
The Company has a classified Board of Directors consisting of three
classes. At each Annual Meeting, a class of directors is elected for a full term
of three years to succeed those whose terms are expiring.
At the 1996 Annual Meeting, five Class C directors are to be elected for
three year terms and one Class A director is to be elected for a one year term
to coincide with the terms of the other Class A directors. The persons named in
the accompanying proxy will vote each proxy for the election of the nominees
listed below, unless directed otherwise. Each of the Class C nominees (other
than Jeffrey R. Lurie) is currently a member of the Board of Directors. The
Company has no reason to believe that the listed nominees will become
unavailable for election, but if for any reason that should be the case, the
proxies may be voted for substitute nominees. In electing directors, holders of
the Common Stock and Class B Stock vote together as a single class. A plurality
of the votes cast at the Annual Meeting is required to elect each director.
Proxies withholding authority to vote for a nominee will be treated as votes
cast against the election of such nominee. Broker non-votes will not be treated
as votes cast and, therefore, will not be counted in calculating a plurality.
Sidney Stoneman, a current Class C director, is not standing for election
at the 1996 Annual Meeting, but has been elected Director Emeritus by the Board
of Directors of the Company effective at the Annual Meeting. Mr. Stoneman, who
is 84 years old, has been a director of the Company since 1950. He has served as
Vice Chairman of the Board of Directors since December 1991 and was Chairman of
the Executive Committee of the Board of Directors prior thereto.
The Company's By-Laws provide for the independence of a majority of the
members of the Board of Directors and the Audit, Nominating and Compensation
Committees. Those persons who are considered "independent" within the meaning of
the Company's By-Laws are indicated by an asterisk (*) below.
All of the nominees for director and the directors who will continue to
serve after the 1996 Annual Meeting are listed below with their principal
occupations for the last five years.
NOMINEES FOR TERMS EXPIRING IN 1999 (CLASS C DIRECTORS)
BRIAN J. KNEZ, age 38, Director since 1995
President and Chief Executive Officer of Harcourt Brace & Company since May
1995; President of the Scientific, Technical, Medical and Professional Group of
Harcourt Brace from 1993 to May 1995; Group Vice President of the Scientific
Technical and Medical Group of Harcourt Brace from 1991 to 1993; Vice President
of the Company since November 1991; Assistant to the President of the Company
prior thereto. Mr. Knez is
5
<PAGE> 8
the son-in-law of Richard A. Smith, Chairman of the Board of the Company, and
the brother-in-law of Robert A. Smith, Group Vice President and a director of
the Company.
JEFFREY R. LURIE, age 44, Nominee for the First Time
Owner and Chief Executive Officer, Philadelphia Eagles, Inc., a National
Football League franchise, since May 1994; President and Chief Executive Officer
of Chestnut Hill Productions, a motion picture production company, since 1985.
Mr. Lurie is the nephew of Richard A. Smith, Chairman of the Board of the
Company, and the cousin of Robert A. Smith, Group Vice President and a director
of the Company.
LYNN MORLEY MARTIN*, age 56, Director since 1993
Davee Chair, J. L. Kellogg School of Management, Northwestern University,
since September 1993; Advisor, Deloitte & Touche LLP, since June 1993; former
Fellow at the Kennedy School of Government, Harvard University; United States
Secretary of Labor from February 1991 to January 1993; Member of the United
States House of Representatives (Illinois 16th Congressional District) from 1981
to February 1991; Director of Ameritech Corporation, Ryder Systems, Inc.,
Procter & Gamble Co., TRW Inc. and various Dreyfus mutual funds.
PAULA STERN*, age 50, Director since 1993
President of The Stern Group, Inc., an economic analysis and trade advisory
firm; Senior Fellow, Progressive Policy Institute, since October 1993; Former
Chairwoman of the U.S. International Trade Commission; Director of Westinghouse
Electric Corporation, Duracell International Inc. and Wal-Mart Stores, Inc.
CLIFTON R. WHARTON, JR.*, age 69, Director since 1994
Retired Chairman and Chief Executive Officer of Teachers Insurance and
Annuity Association-College Retirement Equities Fund (TIAA-CREF); Deputy
Secretary of State, U.S. Department of State, from January 1993 to November
1993; former Chancellor, State University of New York System; Director of Ford
Motor Company, Tenneco, Inc., New York Stock Exchange, Inc. and TIAA-CREF Board
of Overseers.
NOMINEE FOR TERM EXPIRING IN 1997 (CLASS A DIRECTOR)
GARY L. COUNTRYMAN*, age 56, Nominee for the First Time
Chairman (since April 1991) and Chief Executive Officer of Liberty Mutual
Insurance Company and Liberty Mutual Fire Insurance Company; President of those
companies through March 1992; Chairman of Liberty Financial Companies, Inc.;
Director of Liberty Mutual Insurance Company, Liberty Mutual Fire Insurance
Company, Liberty Financial Companies, Inc., Boston Edison Company, and Bank of
Boston Corporation and its principal subsidiary, The First National Bank of
Boston. Mr. Countryman served as a director of The Neiman Marcus Group, Inc., a
majority-owned subsidiary of the Company, from its creation in 1987 until
January 19, 1996.
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<PAGE> 9
DIRECTORS WHOSE TERMS EXPIRE IN 1997 (CLASS A DIRECTORS)
JACK M. GREENBERG*, age 53, Director since 1993
Vice Chairman and Chief Financial Officer of McDonald's Corporation since
January 1992; Senior Executive Vice President and Chief Financial Officer of
McDonald's Corporation prior thereto; Director of McDonald's Corporation, Stone
Container Corporation and Arthur J. Gallagher & Company.
HERBERT W. JARVIS*, age 70, Director since 1981
Retired President and Chief Executive Officer of Sybron Corporation;
Adjunct Professor of Management at the Rochester Institute of Technology from
1987 to 1991; Director of Berkshire Life Insurance Company and various other
corporations and organizations.
RICHARD A. SMITH, age 71, Director since 1950
Chairman of the Board of the Company and of The Neiman Marcus Group, Inc.;
Chief Executive Officer of the Company and of The Neiman Marcus Group, Inc.
until December 1991; Chairman of the Board, President (until November 1, 1995)
and Chief Executive Officer of GC Companies, Inc. since December, 1993; Director
of The Neiman Marcus Group, Inc., GC Companies, Inc., Liberty Mutual Insurance
Company, Liberty Mutual Fire Insurance Company, Liberty Financial Companies,
Inc., and Bank of Boston Corporation and its principal subsidiary, The First
National Bank of Boston. Mr. Smith is the father of Robert A. Smith, who is
Group Vice President and a director of the Company, the father-in-law of Brian
J. Knez, who is President and Chief Executive Officer of Harcourt Brace &
Company and a director of the Company, and the uncle of Jeffrey R. Lurie, a
nominee as a Class C director.
ROBERT J. TARR, JR., age 52, Director since 1982
President, Chief Executive Officer (since December 1991) and Chief
Operating Officer of the Company and of The Neiman Marcus Group, Inc.; Director
of The Neiman Marcus Group, Inc.
DIRECTORS WHOSE TERMS EXPIRE IN 1998 (CLASS B DIRECTORS)
WILLIAM F. CONNELL*, age 57, Director since 1992
Chairman and Chief Executive Officer of Connell Limited Partnership;
Director of Boston Edison Company, Bank of Boston Corporation and its principal
subsidiary, The First National Bank of Boston, and North American Mortgage
Company.
MAURICE SEGALL*, age 66, Director since 1986
Senior Lecturer, Massachusetts Institute of Technology; Former Chairman and
Chief Executive Officer of Zayre Corp.; Director of AMR Corporation.
ROBERT A. SMITH, age 36, Director since 1989
Group Vice President of the Company since December 1991; Group Vice
President of The Neiman Marcus Group, Inc. since January 1992; Vice President --
Corporate Development of the Company prior to December 1991; Vice President --
Corporate Development of The Neiman Marcus Group, Inc. prior to January 1992;
President and Chief Operating Officer of GC Companies, Inc. since November 1995.
Mr. Smith is the son of Richard A. Smith, Chairman of the Board of the Company,
the brother-in-law of Brian J.
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<PAGE> 10
Knez, President and Chief Executive Officer of Harcourt Brace & Company and a
director of the Company, and the cousin of Jeffrey R. Lurie, a nominee as a
Class C director.
HUGO UYTERHOEVEN*, age 64, Director since 1980
Timken Professor of Business Administration, Graduate School of Business
Administration, Harvard University; Director of Bombardier, Inc., Brown Boveri &
Cie, Ciba-Geigy AG, The Stanley Works and Ecolab, Inc.
- ---------------
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended October 31, 1995, the Board of Directors held
five meetings and acted twice by unanimous written consent. During fiscal 1995,
each director of the Company attended at least 75% of the aggregate number of
Board meetings and meetings held by committees of which he or she is a member.
The Board of Directors has designated four principal standing committees. Set
forth below are descriptions of the functions of such committees and the names
of their current members.
Audit Committee. The members of the Audit Committee, which met four times
during fiscal 1995, are Messrs. Jarvis (Chairman), Greenberg, Uyterhoeven and
Wharton and Dr. Stern. The functions of the Audit Committee include the review
of the scope of the services of the Company's independent auditors and the
responsibilities of the Company's internal audit department and a continuing
review of the Company's internal procedures and controls. The Audit Committee
annually reviews the Company's audited financial statements, considers the
qualifications and fees of the independent auditors of the Company and makes
recommendations to the Board of Directors as to the selection of the auditors
and the scope of their audit services.
Compensation Committee. The members of the Compensation Committee, which
met once and acted on one occasion by unanimous written consent during fiscal
1995, are Messrs. Segall (Chairman), Connell, Greenberg and Uyterhoeven and Ms.
Martin. The functions of the Compensation Committee are to review or determine
salaries, benefits and other compensation for officers and key employees of the
Company and its subsidiaries and to administer the Company's stock incentive
plans.
Nominating Committee. The members of the Nominating Committee, which met
once during fiscal 1995, are Messrs. Uyterhoeven (Chairman), Connell, Jarvis,
Stoneman, Richard A. Smith and Ms. Martin. The functions of the Nominating
Committee, in addition to nominating directors and making recommendations
concerning the structure and membership of the various committees of the Board
of Directors, include consulting with the Chief Executive Officer on questions
of management, organization and succession and providing the Board of Directors
with such guidance on these matters as the Board of Directors may seek from time
to time. The Company's By-Laws provide that the Nominating Committee must
carefully consider all suggestions timely received from any stockholder of
nominees for director of the Company when the nominee confirms in writing to the
Nominating Committee his or her desire to serve as a director of the Company and
where the credentials of the nominee meet the standards generally applied by the
Nominating Committee. Written suggestions for candidates, accompanied by the
consent of the proposed candidate to serve as a director if nominated and
elected, and a detailed description of his or her qualifications and background,
should be sent to the Company, c/o Secretary, P.O. Box 1000, Chestnut Hill,
Massachusetts 02167 (see "Deadline for Submission of 1997 Stockholder Proposals
and Nominations").
Executive Committee. The members of the Executive Committee, which did not
act during fiscal 1995, are Messrs. Richard A. Smith (Chairman), Robert J. Tarr,
Jr. and Robert A. Smith. The By-Laws confer upon the Executive Committee the
authority to manage the affairs of the Company in the intervals between meetings
of the Board of Directors, except that the Committee may not effect certain
fundamental corporate actions such as (a) declaring a dividend, (b) amending the
Restated Certificate of Incorporation or the By-
8
<PAGE> 11
Laws, (c) adopting an agreement of merger or consolidation or (d) imposing a
lien on substantially all the assets of the Company. In practice, the Executive
Committee meets infrequently and does not act except on matters which must be
dealt with prior to the next scheduled Board of Directors meeting and which are
not sufficiently important to require action by the full Board of Directors.
DIRECTORS' COMPENSATION
Those directors who are not employees of the Company receive an annual
retainer of $22,500 each and a fee of $1,750 per meeting attended, plus travel
and incidental expenses (an aggregate of $15,703 in fiscal 1995) incurred in
attending meetings and carrying out their duties as directors. They also receive
a fee of $750 (the Chairmen receive $1,250, with the exception of the Chairmen
of the Audit and Compensation Committees, who receive $1,750) for each committee
meeting attended. If a director is unable to attend a meeting in person but
participates by telephone, he or she receives one-half of the fee that would
otherwise be payable. Through fiscal 1995, Mr. Stoneman, who is not standing for
re-election to the Board, received an annual retainer of $25,000 as Vice
Chairman of the Board of Directors.
All directors of the Company are invited to attend meetings of the Board of
Directors of The Neiman Marcus Group, Inc. ("NMG"), a publicly-held company in
which the Company has a controlling interest. Directors of the Company who are
not employees of the Company and who participate in NMG Board meetings receive
$1,500 for each meeting attended in person and $750 for participating by
telephone. The total amount paid to directors of the Company for attendance at
NMG Board meetings in fiscal 1995 was $11,250.
The Company offers non-employee directors the alternative of receiving
directors' fees on a deferred basis. Those directors may elect to defer receipt
of all or a specified portion of their fees (i) in the form of cash with
interest at a rate equal to the average of the top rates paid by major New York
banks on primary new issues of three month negotiable certificates of deposit,
or (ii) in the form of units, the value of each unit initially being equal to
the fair market value of one share of Common Stock of the Company on the date
the fees would otherwise be payable. To date, Messrs. Greenberg, Jarvis and
Uyterhoeven and Dr. Stern have elected to receive their fees on a deferred basis
using the stock based method, and Mr. Stoneman has elected to defer his fees
using the cash based method.
The Company also maintains a retirement plan for its non-employee
directors. Directors who have served on the Board for at least ten years are
entitled to receive an annual retirement benefit equal to the annual retainer in
effect during the year in which they retire. This benefit continues for a period
of time equal to the director's length of service on the Board. Retirement
benefits are not payable after death or in the event a director joins the board
of directors or becomes an executive officer of a competitor of the Company
within three years of his or her retirement as a director of the Company.
SECTION 16 REPORTS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and persons who own more than 10%
of the Company's Common Stock to file initial reports of ownership and reports
of changes in ownership with the Securities and Exchange Commission and the New
York Stock Exchange. The Company believes that all filing requirements
applicable to its insiders were complied with during fiscal 1995.
9
<PAGE> 12
EXECUTIVE COMPENSATION
<TABLE>
SUMMARY COMPENSATION TABLE
The following table provides information on the compensation provided by
the Company during fiscal 1995, 1994 and 1993 to the Company's Chief Executive
Officer and the four most highly paid executive officers of the Company during
fiscal 1995.
<CAPTION>
LONG-TERM
COMPENSATION(1)
---------------
AWARDS
---------------
ANNUAL COMPENSATION SECURITIES
--------------------------------------------- UNDERLYING ALL OTHER
NAME AND FISCAL SALARY BONUS OTHER ANNUAL OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(2) COMPENSATION($)(3) (#)(4)(5) ($)(6)
- ---------------------------------- ------ ---------- ---------- ------------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Tarr, Jr..................... 1995 $1,500,000 $1,125,000 $ 89,862 -- $ 92,994
President and Chief Executive 1994 $1,400,000 $1,050,000 $ 69,431 -- $ 95,042
Officer 1993 $1,250,000 $ 937,500 $145,618 -- $ 89,521
Richard A. Smith(7).................... 1995 $ 750,000 $ 525,000 -- -- $334,805(8)
Chairman of the Board 1994 $ 750,000 $ 525,000 -- -- $273,404(8)
1993 $ 750,000 $ 525,000 -- -- $253,483(8)
John R. Cook........................... 1995 $ 337,500 $ 168,750 -- 4,000 $ 16,596
Senior Vice President and 1994 $ 330,000 $ 165,000 -- 15,000 $ 17,800
Chief Financial Officer 1993 $ 315,000 $ 157,500 -- 16,515 $ 15,331
Brian J. Knez(9)....................... 1995 $ 301,923 $ 152,383 -- 3,000 $ 14,159
President and Chief Executive Officer 1994 $ 220,000 $ 66,000 -- 2,500 $ 8,601
Harcourt Brace & Company 1993 $ 200,000 $ 77,760 -- 2,753 $ 9,492
Eric P. Geller.......................... 1995 $ 292,500 $ 146,250 $ 77,307 4,000 $ 14,456
Senior Vice President, 1994 $ 280,000 $ 140,000 -- 10,000 $ 15,118
General Counsel and Secretary 1993 $ 262,500 $ 165,000 $118,380 -- (10) $ 15,251
<FN>
- ---------------
(1) The Company does not have a long-term compensation program that includes
long-term incentive payouts.
(2) Bonus payments are reported with respect to the year in which the related
services were performed.
(3) No disclosure regarding items included in this column is required unless
the amount in any year exceeds the lesser of $50,000 or 10% of the total
annual salary and bonus for any named officer. Includes the cost to the
Company of medical and dental expenses, financial counseling and estate
planning fees, auto expenses with respect to Messrs. Smith and Tarr, tax
offset bonuses in connection with the exercise of stock options in the
amount of $62,530 to Mr. Geller in fiscal 1995 and to Messrs. Tarr and
Geller in the respective amounts of $77,331 and $109,148 in fiscal 1993,
and bargain interest on Company loans, including bargain interest of
$64,801, $45,181 and $38,858 for Mr. Tarr in fiscal 1995, 1994 and 1993,
respectively.
(4) At the end of fiscal 1995, the only named executive officers who held
restricted shares of Common Stock were Mr. Knez, who had 150 shares with a
fair market value (based on the New York Stock Exchange closing price of
the Company's Common Stock of $39.625 at fiscal year end) of $5,944, and
Mr. Geller, who had 250 shares with a fair market value of $9,906. Those
shares became fully vested in January 1996.
(5) In connection with the spinoff of the Company's motion picture exhibition
business to the Company's stockholders in December 1993, the number and
exercise price of all options shown in the table for fiscal 1993 were
adjusted in accordance with the 1988 Stock Incentive Plan.
</TABLE>
10
<PAGE> 13
(6) The items accounted for in this column include the value of allocated ESOP
shares, the cost to the Company of matching contributions under the Key
Employee Deferred Compensation Plan and group life insurance premiums. For
fiscal 1995, such amounts for each of the named executive officers were,
respectively, as follows: Mr. Tarr -- $500, $78,462 and $14,032; Mr. Smith
-- $500, $0 and $2,160; Mr. Cook -- $500, $15,144 and $952; Mr. Knez --
$500, $13,023 and $952; and Mr. Geller -- $500, $13,126 and $830. Also
included in this column for fiscal 1995 is $332,145 for Mr. Smith, which
represents a calculation of the benefit to Mr. Smith of the premium
advanced by the Company in fiscal 1995 on the life insurance policy
referred to in paragraph B under "Transactions Involving Management." The
benefit is determined for the period, projected on an actuarial basis,
between the date the premium is paid by the Company and the date the
Company will be entitled to reimbursement of the premium.
(7) Pursuant to a Deferred Compensation Agreement between the Company and Mr.
Smith dated as of December 15, 1994, Mr. Smith has agreed to defer that
portion of his compensation for fiscal 1995 and succeeding fiscal years
which is not deductible as compensation by the Company under the provisions
of the Internal Revenue Code which disallow a tax deduction to the Company
for compensation to an executive officer named in the Summary Compensation
Table in excess of $1 million in any fiscal year.
(8) For information regarding advances made to Mr. Smith of a portion of the
premiums payable on a split dollar life insurance policy, see paragraph B
under "Transactions Involving Management."
(9) Mr. Knez became President and Chief Executive Officer of Harcourt Brace &
Company in May, 1995.
(10) In lieu of receiving any stock option grants in fiscal 1993, Mr. Geller
received an option grant of 11,010 shares (as adjusted for the spinoff of
the Company's motion picture exhibition business) in June 1992 after he
became Senior Vice President and General Counsel.
11
<PAGE> 14
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
The following table provides information regarding options granted under
the Company's 1988 Stock Incentive Plan during the fiscal year ended October 31,
1995 to the executive officers named in the Summary Compensation Table.
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF % OF ANNUAL RATES OF
SECURITIES TOTAL STOCK PRICE
UNDERLYING OPTIONS APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OR OPTION TERM(2)
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME (#) FISCAL YEAR ($/SH) DATE 5% 10%
---- ----------- --------------- ----------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Mr. Tarr(3).......... -- -- -- -- -- --
Mr. Smith(4)......... -- -- -- -- -- --
Mr. Cook............. 4,000 4.99% $33.25 12/16/04 $83,643 $211,968
Mr. Knez............. 3,000 3.74% $33.25 12/16/04 $62,732 $158,976
Mr. Geller........... 4,000 4.99% $33.25 12/16/04 $83,643 $211,968
<FN>
- ---------------
(1) No stock appreciation rights were granted to any named executive officer
during fiscal 1995. All option grants are non-qualified stock options
having a term of 10 years and one day. They become exercisable at the rate
of 20% on each of the first five anniversary dates of the grant. All
options were granted at fair market value determined by the closing price
of the Common Stock on the New York Stock Exchange on the date of grant.
(2) These potential realizable values are based on assumed rates of appreciation
required by applicable regulations of the Securities and Exchange
Commission.
(3) Pursuant to Mr. Tarr's Employment Agreement, following the grants of options
and restricted stock to Mr. Tarr in fiscal 1992, he is not eligible to
receive any additional restricted stock or stock options through October
1996. For a description of Mr. Tarr's Employment Agreement, see paragraph A
under "Transactions Involving Management."
(4) Mr. Smith does not participate in the Company's stock incentive plans.
</TABLE>
12
<PAGE> 15
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
The following table provides information regarding the stock options
exercised during fiscal 1995 and the number and value of stock options held at
October 31, 1995 by the executive officers named in the Summary Compensation
Table.
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED OCT. 31, 1995(#) OCT. 31, 1995($)
ON VALUE ------------------ ------------------
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($)(2) UNEXERCISABLE(3) UNEXERCISABLE(3)(4)
- -------------------------------- --------- ---------- ------------------ ------------------
<S> <C> <C> <C> <C>
Mr. Tarr(5)..................... 206,102 $5,291,103 121,110/ $2,399,484/
48,885 $1,156,758
Mr. Smith(6).................... -- -- -- --
Mr. Cook........................ -- -- 9,606/ $ 92,638/
25,909 $ 216,019
Mr. Knez........................ -- -- 7,765/ $ 147,676/
8,746 $ 100,737
Mr. Geller...................... 5,505 $ 115,109 37,672/ $ 716,609/
18,717 $ 206,922
<FN>
- ---------------
(1) No stock appreciation rights were held, other than those discussed in Note 5
below, by any of the named executive officers during fiscal 1995.
(2) Represents the difference between the closing price of the Company's Common
Stock on the New York Stock Exchange on the date of exercise and the option
exercise price.
(3) In connection with the spinoff of the Company's motion picture exhibition
business to the Company's stockholders in December 1993, the number and
exercise price of all options granted to all employees of the Company,
including the named executive officers, prior to the spinoff were adjusted
in accordance with the Company's stock incentive plans.
(4) The value of unexercised in-the-money options is calculated by multiplying
the number of underlying shares by the difference between the closing price
of the Company's Common Stock on the New York Stock Exchange at fiscal year
end ($39.625) less the option exercise price for those shares. These values
have not been realized. The closing price of the Company's Common Stock on
the New York Stock Exchange was $39 on January 19, 1996.
(5) The number of shares listed in the first column for Mr. Tarr includes the
surrender of vested options to purchase 132,120 shares of Common Stock at
an exercise price of $15.89. The Company paid Mr. Tarr $3,250,865 in
connection with that surrender. The amount of that payment, which was
calculated based on the difference between the closing price of the Common
Stock on the New York Stock Exchange on the date Mr. Tarr surrendered the
options and the option exercise price, is included in the second column in
this table. In November 1991, Mr. Tarr was granted stock appreciation
rights in tandem with 220,200 non-qualified stock options (as adjusted, see
Note 3 above). The value of these stock appreciation rights is not
separately listed in this table since an equal number of options must be
surrendered if the stock appreciation rights are exercised.
(6) Mr. Smith does not participate in the Company's stock incentive plans.
</TABLE>
13
<PAGE> 16
PENSION PLANS
The Company maintains a funded, qualified pension plan known as the
Harcourt General Retirement Plan (the "Retirement Plan"). Non-union employees of
the Company who have reached the age of 21 and completed one year of service
with 1,000 or more hours participate in the Retirement Plan, which pays benefits
upon retirement or termination of employment by reason of disability. Benefits
under the Retirement Plan become fully vested after five years of service with
the Company.
The Company also maintains a Supplemental Executive Retirement Plan (the
"SERP"). The SERP is an unfunded, non-qualified plan under which benefits are
paid from the Company's general assets to supplement Retirement Plan and Social
Security benefits. Executive, administrative and professional employees with an
annual base salary at least equal to a self-adjusting minimum ($100,000 as of
December 31, 1995) are eligible to participate in the SERP. At normal retirement
age (generally age 65), a participant with 25 or more years of service is
entitled to payments under the SERP sufficient to bring his or her combined
annual benefit from the Retirement Plan and the SERP, computed as a straight
life annuity, up to 50% of the participant's highest consecutive 60 month
average of annual pensionable earnings, less 60% of his or her estimated annual
primary Social Security benefit. If the participant has fewer than 25 years of
service, the combined benefit is proportionately reduced. In computing the
combined benefit, "pensionable earnings" means base salary, including any salary
which may have been deferred. Benefits under the SERP become fully vested after
five years of service with the Company.
<TABLE>
The following table shows the estimated annual pension benefits payable to
employees in various compensation and years of service categories. The estimated
benefits apply to an employee retiring at age 65 in 1995 who elects to receive
his or her benefit in the form of a straight life annuity. These benefits
include amounts attributable to both the Retirement Plan and the SERP and are in
addition to any retirement benefits that might be received from Social Security.
ESTIMATED ANNUAL RETIREMENT BENEFITS
UNDER RETIREMENT PLAN AND SERP(1)
<CAPTION>
TOTAL CREDITED YEARS OF SERVICE
AVERAGE ------------------------------------------------------------
PENSIONABLE 25
EARNINGS 5 10 15 20 OR MORE
- --------- - -- -- -- -------
<S> <C> <C> <C> <C> <C>
$ 300,000 ........................... $ 30,000 $ 60,000 $ 90,000 $120,000 $150,000
600,000 ........................... 60,000 120,000 180,000 240,000 300,000
900,000 ........................... 90,000 180,000 270,000 360,000 450,000
1,200,000 ........................... 120,000 240,000 360,000 480,000 600,000
1,500,000 ........................... 150,000 300,000 450,000 600,000 750,000
<FN>
- ---------------
(1) The amounts actually payable will be lower than the amounts shown above,
since the above amounts will be reduced by 60% of the participant's
estimated primary Social Security benefit. Richard A. Smith will have a
smaller Social Security reduction due to certain guaranty provisions
contained in a prior pension plan in which he participated. In 1990, Mr.
Smith received a distribution of the present value of excess retirement
benefits then accrued under an agreement between Mr. Smith and the Company;
his future retirement benefits will thus be reduced accordingly.
</TABLE>
14
<PAGE> 17
<TABLE>
The following table shows the pensionable earnings and credited years of
service for the executive officers named in the Summary Compensation Table as of
October 31, 1995 and years of service creditable at age 65. Credited service may
not exceed 25 years for the purpose of calculating retirement benefits under any
of the Company's retirement plans.
<CAPTION>
YEARS OF SERVICE
----------------------
PENSIONABLE EARNINGS AT
FOR YEAR ENDED OCTOBER 31, AT
NAME OCTOBER 31, 1995 1995 AGE 65
---- -------------------- ----------- ------
<S> <C> <C> <C>
Mr. Tarr(1).................................... $1,500,000 19 25
Mr. Smith...................................... 750,000 25 25
Mr. Cook....................................... 337,500 3 14
Mr. Knez....................................... 301,923 8 25
Mr. Geller..................................... 292,500 16 25
<FN>
- ---------------
(1) See paragraph A under "Transactions Involving Management" for a description
of Mr. Tarr's retirement benefits under his Employment Agreement.
</TABLE>
TRANSACTIONS INVOLVING MANAGEMENT
A. The Company and Mr. Tarr have entered into an Employment Agreement
effective as of November 25, 1991 (the "Employment Agreement"), as modified by a
Supplemental Agreement effective as of December 17, 1992 (the "Supplemental
Agreement"). The initial term of the Employment Agreement continues until
October 31, 1996. As provided therein, the Board of Directors of the Company
unanimously voted in June 1995 to extend the Employment Agreement for two
additional 12-month periods (each such period is referred to as an "Extension"),
so that the Employment Agreement now runs through October 31, 1998. The initial
term, as so extended, is referred to herein as the "Term."
Under the Employment Agreement, Mr. Tarr shall be the President, Chief
Executive Officer and Chief Operating Officer of the Company. The Employment
Agreement provides that Mr. Tarr's base salary will be $1,500,000 for fiscal
1995 and $1,600,000 for each of fiscal 1996, 1997 and 1998.
Mr. Tarr is eligible to receive an annual cash bonus for each fiscal year
during the Term. Each annual bonus is based on the achievement of performance
objectives to be agreed on by the Compensation Committee and Mr. Tarr. For
fiscal years 1995 and 1996, Mr. Tarr is entitled to a maximum annual bonus equal
to 75% of his base salary if the performance objectives are achieved. During
fiscal 1997 and 1998, the 75% figure will be increased to 100%. All annual
bonuses will be reduced to the extent that performance objectives are not
achieved, except that in no event shall the bonus paid for fiscal 1996 be less
than $800,000. Mr. Tarr's bonus for fiscal 1995 is included in the Summary
Compensation Table.
Mr. Tarr is entitled to participate in all benefit plans maintained by the
Company for its senior executives. Pursuant to his Employment Agreement, in June
1992 Mr. Tarr received a loan from the Company in the amount of $1,000,000,
which carried interest at an annual rate of 5%. Mr. Tarr discharged this loan in
December 1994. In addition, the Company pays all premiums on a $450,000 life
insurance policy in Mr. Tarr's name until the policy is fully paid-up.
At the end of the Term, Mr. Tarr will receive an annual retirement benefit
during his lifetime of 50% of his final average compensation, which is defined
as 1/5 of the total of his base salary plus annual bonuses received for the five
consecutive 12-month periods during the Term for which such total is the
highest. If Mr. Tarr is survived by his spouse, then she will receive a
retirement benefit during her lifetime in an annual amount equal to 50% of the
benefit being paid to Mr. Tarr at the time of his death.
15
<PAGE> 18
If Mr. Tarr dies during the Term, the Company will provide to Mr. Tarr's
surviving spouse a benefit for her lifetime in an annual amount equal to 50% of
the benefit which Mr. Tarr would have received under the preceding paragraph if
he had remained employed by the Company until October 31, 1996 (or if such death
occurs after October 31, 1996, then until the expiration of the Extension during
which such death occurs) and had received his full base salary and 50% of his
maximum bonus (or in the case of fiscal 1996, the full guaranteed bonus
described above).
In the event the Company terminates Mr. Tarr's employment without Cause, as
defined below, or in the event Mr. Tarr terminates his employment for Good
Reason, as defined below, then the Company will (a) pay to Mr. Tarr his base
salary and the maximum annual bonuses as though he had remained employed until
October 31, 1996 (or, if such termination occurs after October 31, 1996, then
until the expiration of the Extension during which such termination occurs), (b)
pay to Mr. Tarr from and after October 31, 1996 (or the expiration of the
Extension, as the case may be) the consulting fees that would have been payable
to him, as described below, and (c) pay retirement and survivor benefits as
though he had remained employed until October 31, 1996 or until the expiration
of the Extension during which such termination occurs.
If a Change of Control of the Company occurs, as defined below, and, within
two years following such Change of Control, the Company terminates Mr. Tarr's
employment without Cause, or Mr. Tarr terminates his employment for Good Reason,
the Company will pay to Mr. Tarr a lump sum equal to the greater of (a) the
total amount he would have received had he remained in the employ of the Company
until October 31, 1996 (or the expiration of the Extension in which the
termination occurred) and received his full base salary and 50% of the maximum
annual bonuses (or, in the case of fiscal 1996, the full guaranteed bonus) or
(b) three times the sum of his base salary and maximum annual bonus for the year
in which termination occurs. Mr. Tarr is also entitled to receive the actuarial
equivalent of the retirement and survivor benefits to which he and his surviving
spouse would have been entitled had he not been terminated. A Change of Control
exists if (a) more than 20% of the voting power of the Company is beneficially
owned by a person or group and the Smith Family Group has at such time less than
50.1% of the voting power of all classes of stock of the Company entitled to
vote in an election of directors; (b) the Smith Family Group does not have
sufficient voting power to prevent the Company from consummating a merger,
consolidation, sale of its assets or dissolution; or (c) the members of the
Board of Directors at the time the Employment Agreement was executed (the
"Incumbent Directors") cease to constitute a majority of the Board, provided
that any person who became a director subsequent to the execution of the
Employment Agreement and whose nomination was approved by at least a majority of
the Board is considered an Incumbent Director for purposes of the Employment
Agreement.
Mr. Tarr's employment may be terminated by the Company for Cause only in
the event of his willful and continuing failure to perform his duties under the
Employment Agreement or his conviction for or plea of nolo contendere to a
felony or any other crime which involves fraud, dishonesty, or moral turpitude.
Mr. Tarr may terminate his employment for Good Reason only if (a) he is assigned
duties which are inconsistent with his position as President and Chief Executive
Officer of the Company, (b) the Company fails to comply with its obligations
under the Employment Agreement, (c) the Company requires Mr. Tarr to relocate
beyond a 15 mile radius from Chestnut Hill, Massachusetts, (d) the Board of
Directors of the Company fails to appoint Mr. Tarr as Chairman of the Board and
assign to him the powers and duties of that position when Richard A. Smith
ceases to serve in that position, (e) the Company fails to obtain a satisfactory
agreement from any successor to substantially all of the business of the Company
to assume the Company's obligations under the Employment Agreement, or (f) the
Company purports to terminate Mr. Tarr's employment other than as expressly
permitted by the Employment Agreement.
During the 12-month period following the expiration of the Term, Mr. Tarr
will be bound by certain non-competition provisions and will provide consulting
services to the Company for a consulting fee equal to 50%
16
<PAGE> 19
of his base salary for the last 12 months of his employment and $4,000 per day
for each day he renders services in excess of 10 days per month.
Pursuant to the Employment Agreement, on November 25, 1991, Mr. Tarr
received a grant of 100,000 shares of restricted Common Stock under the
Company's 1988 Stock Incentive Plan and a non-qualified stock option (together
with stock appreciation rights) under that Plan to purchase 220,200 shares of
the Company's Common Stock at a price of $15.90 per share (as adjusted in
connection with the spinoff of the Company's motion picture exhibition business
in December 1993 as described in Note 5 to the Summary Compensation Table). Mr.
Tarr is not entitled to receive any additional restricted stock or stock option
grants through October 31, 1996. As of January 19, 1996, 80% of the stock
options (and related stock appreciation rights) had become exercisable. The
balance of the stock options and related stock appreciation rights become
exercisable on May 1, 1996.
Effective December 17, 1992, pursuant to the recommendation of the
Compensation Committee, Mr. Tarr and the Company entered into a Supplemental
Agreement providing for the vesting of all of the shares of restricted Common
Stock previously granted to Mr. Tarr. As a result of the foregoing, Mr. Tarr
recognized taxable income, and the Company recognized a corresponding deduction,
in the amount of $2,830,500. The Company took this action in part to preserve
tax benefits which might have been lost in the event tax laws were enacted which
would have limited the Company's right to deduct compensation amounts over
certain levels.
As a result of the accelerated vesting of the restricted shares, Mr. Tarr
paid $1,018,980 in federal and state income taxes for 1992, and the Company
subsequently loaned this amount (the "Reimbursement Loan") to Mr. Tarr, without
interest. The Supplemental Agreement provides that Mr. Tarr will repay the
Reimbursement Loan in 16 equal consecutive quarterly installments of principal
beginning June 15, 1993, subject to acceleration of the full amount in the event
Mr. Tarr's employment with the Company should terminate for any reason. At
January 19, 1996, $318,432 remained outstanding under this loan. In addition,
should Mr. Tarr's employment with the Company terminate because of a breach by
him of the Employment Agreement, he will pay to the Company an amount, in cash
or Company stock (the "Restricted Stock Obligation"), equal to the value of the
restricted shares which would have not yet vested under the terms of Mr. Tarr's
Employment Agreement and a previous restricted stock grant before they were
modified by the Supplemental Agreement. This is intended to put the Company in
the same position it would have been had the Supplemental Agreement not been
executed. Both the Reimbursement Loan and the Restricted Stock Obligation are
secured by the Company's right to set off any amounts payable by the Company to
Mr. Tarr.
B. In August 1990, a trust established by Mr. and Mrs. Richard A. Smith
entered into an agreement with the Company whereby the Company, with the
approval of the Compensation Committee, agreed to make advances of the portion
of the premiums not related to term insurance payable on a split dollar life
insurance policy purchased by the trust on the joint lives of Mr. and Mrs.
Smith. The Company will make such advances for not more than nine years, after
which time the premiums may be paid through policy loans. The Company is
entitled to reimbursement of the amounts advanced, without interest, upon the
first to occur of (a) the death of the survivor of Mr. and Mrs. Smith or (b) the
surrender of the policy. These advances are secured by a collateral assignment
of the policy to the Company. During fiscal 1995, 1994, and 1993, the Company
advanced $419,075, $422,898, and $426,216, respectively, toward the payment of
such premiums.
C. The principal purpose of the Company's 1983 Key Executive Stock
Purchase Loan Plan (the "Loan Plan"), which provides loans to key employees to
finance the purchase of shares of the Company's stock, is to encourage the
acquisition and retention of Company stock by such employees so that the
continuing proprietary interest of such employees in the Company may serve as an
additional incentive to them.
17
<PAGE> 20
Each loan made to date under the Loan Plan is evidenced by a secured
promissory note bearing interest at a rate determined by the Compensation
Committee. The unpaid principal amount of any loan becomes due and payable seven
months after the loan participant's employment with the Company or any of its
subsidiaries has terminated. The Compensation Committee, in its discretion, may
extend any loan which becomes due and payable by reason of such termination for
an additional term not exceeding five months. The unpaid principal amount of a
loan of a participant who ceases to be a Company employee by reason of
retirement, disability, involuntary discharge or death, or who resigns more than
four years after the date of the loan, shall be repayable at the option of the
participant (or his legal representative, as the case may be) either in cash or
in the number of Company shares obtained with the proceeds of the loan.
The aggregate unpaid principal amount of all stock purchase loans
outstanding under the Loan Plan may not exceed $5,000,000 at any time, subject,
however, to the right of the Board of Directors upon the recommendation of the
Compensation Committee to increase the aggregate outstanding loan limitation to
not more than 3/4 of 1% of the Company's total assets as most recently made
public by the Company at the time of such action, excluding for this purpose the
assets of The Neiman Marcus Group, Inc. The aggregate amount of outstanding
indebtedness to the Company on January 19, 1996 under the Loan Plan was
$550,993.
<TABLE>
The following table describes (a) the largest amount of indebtedness
outstanding under the Loan Plan during fiscal 1995, (b) the amount of
indebtedness outstanding on January 19, 1996, and (c) the weighted average rate
of interest on indebtedness outstanding on January 19, 1996 for the executive
officers of the Company who had loans in excess of $60,000 during fiscal 1995 or
subsequent thereto.
<CAPTION>
LARGEST INDEBTEDNESS WEIGHTED
INDEBTEDNESS OUTSTANDING AT AVERAGE
OUTSTANDING JANUARY 19, INTEREST RATE
IN FISCAL 1995 1996 PER ANNUM
--------------- --------------- --------------
<S> <C> <C> <C>
Mr. Tarr (1)................................. $985,928 $250,000 2.55%
Mr. Cook..................................... 334,752 0 --
Mr. Geller................................... 244,856 186,443 5.65%
Mr. Farwell(2)............................... 150,141 0 --
Mr. Sawin(3)................................. 100,175 100,175 4.74%
Mr. Gibbons(4)............................... 85,313 14,375 6.00%
<FN>
- ---------------
(1) The Company has also made loans to Mr. Tarr pursuant to his Employment
Agreement and Supplemental Agreement. Mr. Tarr has repaid the loan made to
him under the Employment Agreement. At January 19, 1996, the principal
amount outstanding under the loan made under the Supplemental Agreement was
$318,431. For further information, see paragraph A under "Transactions
Involving Management."
(2) Mr. Farwell is the Vice President -- Corporate Relations of the Company.
(3) Mr. Sawin is the Vice President -- Planning and Analysis of the Company.
(4) Mr. Gibbons is the Vice President and Treasurer of the Company.
</TABLE>
-----------------------------
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934, each as amended, that might incorporate future filings, including this
proxy statement, in whole or in part, the following Compensation Committee
Report on Executive Compensation and Stock Performance Graph shall not be deemed
to be incorporated by reference into any such filings, nor shall such sections
of this proxy statement be deemed to be incorporated into any future filings
made by the Company under the Securities Act of 1933 or the Securities Exchange
Act of 1934.
18
<PAGE> 21
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is composed of Maurice Segall (Chairman),
William F. Connell, Jack M. Greenberg, Lynn Morley Martin and Hugo Uyterhoeven.
The members of the Compensation Committee are all independent directors.
Compensation Policies
The principal objectives of the Company's executive compensation program
are to reward competitively its executive officers in order to attract and
retain excellent management and to provide incentives to executive officers that
will most sharply focus their attention on the goal of building profitability
and shareholder value.
Early in each fiscal year, the Committee considers the recommendations of
the Chief Executive Officer, which are supported by data generated by the
Company's Human Resources Department, for each component of compensation for the
Company's executive officers. The Committee reviews those recommendations and
then approves them or makes such modifications as it deems appropriate.
The principal components of the Company's compensation program are:
Base Salary:
Base salary is determined with reference both to salary survey
information from recognized compensation consulting firms and to each
executive officer's level of responsibility, experience and performance.
The salary survey data is used to establish benchmark amounts for both base
salary and total cash compensation for each executive position. Comparisons
are made to a broad range of companies or, depending on an executive's
level of responsibility, to groups of profit centers or divisions within
such companies, with the principal selection criteria for comparisons being
similar revenues to the Company or to the group or division within the
Company. While there are no hard and fast rules which bind the Committee,
the Company generally sets its salary and total cash compensation
benchmarks (assuming that maximum bonuses are achieved) for executive
officers at the 75th percentile of the comparison group of companies in
order to both reflect the Company's size (in terms of revenues) and
complexity (in terms of diversity of operating business) and to compete for
and retain the best management talent available. Because the Company is
involved in a variety of businesses and competes for executives with a
broad range of major companies, the Committee believes that comparison
information from the broadest group of companies is the most appropriate
reference for setting cash compensation amounts. The Committee accordingly
does not limit its comparison information for compensation purposes to the
companies included in the peer groups in the Stock Performance Graph.
The Committee reviews in detail the base salary levels for each of the
executive officers of the Company. While the Committee uses the benchmarks
as a reference point, a particular individual's base salary may vary from
the benchmark depending upon his salary history, experience, individual
performance, contractual obligations of the Company, guidelines determined
by the Chief Executive Officer with respect to salary increases for the
entire Company and the subjective judgment of the Committee.
Executive Incentive Bonus Plan:
Bonuses are awarded under this plan based on the achievement of
performance objectives by the Company and individual executive officers.
The bonus program puts significant amounts of total cash compensation at
risk for executive officers, with the intent of focusing their attention on
achieving both the Company's performance goals and their individual goals,
thereby contributing to profitability and building shareholder value.
Shortly after the beginning of each fiscal year, the Compensation
Committee considers the recommendations of the Chief Executive Officer for
the Company's performance goals for the current year, the executive
officers who should participate in the plan for that year, and the maximum
bonus
19
<PAGE> 22
values attainable by them. The Committee reviews those recommendations and
then approves them or makes such modifications as it deems appropriate. The
plan allows for maximum bonuses ranging from 30% to 75% of base salary.
The principal performance measure which determines the payment of
bonuses for executive officers is the Company's earnings goal established
by the Committee shortly after the beginning of the fiscal year. The
earnings goal established for fiscal 1995 was an amount of net income that
was exceeded by the Company's actual net income for fiscal 1995 as it
appears on the line "Net earnings" in the Company's Consolidated Statements
of Earnings. For executives with responsibilities at the group or division
level, a performance target relating to the financial results of that group
or division is established.
In addition, each of the Company's senior executive officers prepares
and agrees with the Chief Executive Officer on individual performance goals
which must be achieved in addition to the Company's performance target in
order for an executive to get his full bonus. Individual performance goals
typically include achievement of specific tasks.
Absent extraordinary circumstances, if the corporate performance
target is exceeded, bonus awards are not increased over the maximum bonus
values established by the Committee. If the performance target is not met,
bonus awards will, in all probability, be reduced at the discretion of the
Committee. If the Company falls sufficiently short of its performance
target, there is a presumption that bonuses would not be paid absent
special circumstances. Depending on the individual executive officer,
factors such as the performance of a business unit or units for which the
executive officer is responsible and achievement of individual performance
goals are considered in the decision to award a bonus. If corporate and/or
business unit performance targets are met, but an individual falls short of
his performance goals, the individual's bonus could be reduced or
eliminated in the discretion of the Committee.
The bonuses awarded to the named executive officers in fiscal 1995
were determined by an assessment of all of the factors described above.
While the Company exceeded its earnings goal in fiscal 1995, the bonuses
awarded to the named executive officers in each case equaled their maximum
bonus values.
Stock Incentives:
The Committee's purpose in awarding equity based incentives,
principally in the form of stock options which vest over a period of five
years and terminate ten years from the date of grant, is to achieve as much
as possible an identity of interest between the executive officers and the
long term interest of the stockholders. The Company's senior executive
officers have always had a very significant equity ownership in the
Company, and the Committee is of the view that this has been and continues
to be a key factor in focusing the efforts of management in building
shareholder value. The principal factors considered in determining which
executive officers (including the named executive officers) were awarded
stock options in fiscal 1995, and in determining the amounts of such
awards, were salary levels, special circumstances such as promotions and
contractual commitments, as well as the performance, experience and level
of responsibility of each executive officer.
Compensation of the Chief Executive Officer
Mr. Tarr's compensation for fiscal 1995 was determined by his Employment
Agreement with the Company which was entered into after approval by the
Compensation Committee in November 1991. Mr. Tarr's Employment Agreement is
described earlier in this proxy statement.
When the Committee approved Mr. Tarr's agreement, it considered all of the
factors described above under the Compensation Policies caption as well as
detailed information for chief executive officer positions at other large and
complex companies which was developed by the Company's Human Resources
Department acting under the ultimate supervision of Richard A. Smith, the
Company's then Chairman and Chief
20
<PAGE> 23
Executive Officer. This information included special reviews of chief executive
officer compensation conducted at the request of the Company by William M.
Mercer Incorporated and Hewitt Associates, two nationally recognized executive
compensation consulting firms. Other factors which the Committee considered in
approving Mr. Tarr's contract were his experience and performance with the
Company, competition for chief executive officers of similar experience and
ability, and planning for management succession.
Mr. Tarr's Employment Agreement became effective after the Company
completed the acquisition of Harcourt Brace & Company in November, 1991. In
approving Mr. Tarr's agreement, the Committee considered the Company's need for
continuity of strong and experienced senior management to focus on the
integration of Harcourt Brace & Company into the Company's operations.
Specifically, the Committee was of the view that a long term agreement with Mr.
Tarr met the Company's need for stability during the period following the
acquisition of Harcourt Brace & Company.
Mr. Tarr was paid his full target bonus of 75% of base salary for fiscal
1995 because the Company exceeded the earnings goal established by the Committee
for the 1995 fiscal year.
In November 1991, Mr. Tarr received 100,000 shares of restricted stock and
an option grant for 220,200 shares (adjusted to reflect the December 1993
spinoff of the Company's motion picture exhibition business) of stock pursuant
to his Employment Agreement. The purpose of these grants was to put a
substantial portion of Mr. Tarr's total compensation at risk and to sharply
focus his attention on building shareholder value over the long term. Under the
terms of his Employment Agreement Mr. Tarr is not entitled to receive any
further grants of restricted stock or stock options during the initial term of
his contract, which runs through October 31, 1996.
Compliance with the Internal Revenue Code
The Internal Revenue Code (the "Code") generally disallows a tax deduction
to public companies for compensation in excess of $1 million per year paid to
each of the executive officers named in the Summary Compensation Table. Because
Mr. Tarr's compensation is paid pursuant to his Employment Agreement, which
became effective prior to February 17, 1993, his compensation for fiscal 1995
and 1996 is not subject to the $1 million limit on deductibility. Mr. Smith,
whose compensation also exceeded $1 million in fiscal 1995, has deferred all of
his fiscal 1995 compensation that would not have been deductible as a result of
this provision of the Code, and has agreed to continue to defer income in future
fiscal years so long as such compensation is not deductible by the Company under
the Code. Under transition provisions of the Code, compensation resulting from
awards under the Company's stock incentive plans is not subject to the
deductibility limit at this time. The Committee will continue to monitor the
requirements of the Code to determine what actions should be taken by the
Company in order to preserve the tax deduction for executive compensation to the
maximum extent, consistent with the Company's continuing goals of providing the
executive officers of the Company with appropriate incentives and rewards for
their performance.
COMPENSATION COMMITTEE
Maurice Segall, Chairman
William F. Connell
Jack M. Greenberg
Lynn Morley Martin
Hugo Uyterhoeven
21
<PAGE> 24
STOCK PERFORMANCE GRAPH
<TABLE>
The following graph compares the total cumulative return over five years on
the Company's Common Stock to the total cumulative return over the same period
of the common stocks of companies in the Standard & Poor's 500 Stock Index and
two Peer Indexes. The graph assumes that the value of the investment in the
Company's Common Stock and each index was $100 at October 31, 1990 and that all
dividends were reinvested.
<CAPTION>
Measurement Period Harcourt S&P 500 Peer Index Peer Index
(Fiscal Year Covered) General, Inc. Index (NEW) (OLD)
<S> <C> <C> <C> <C>
31-Oct-90 100.00 100.00 100.00 100.00
31-Oct-91 110.48 133.41 153.88 150.47
31-Oct-92 164.53 146.69 156.93 163.42
31-Oct-93 249.17 168.56 183.26 194.42
31-Oct-94 233.72 175.06 221.48 214.87
31-Oct-95 254.47 221.29 216.47 225.39
</TABLE>
Both Peer Indexes include companies in the publishing and specialty
retailing industries. As a result of the sale of the insurance business at the
end of fiscal 1994 and Contempo Casuals during fiscal 1995, the New Peer Index
excludes the insurance peer group and The Limited, Inc.
The common stocks of the companies in each group have been weighted
annually at the beginning of each fiscal year to reflect relative stock market
capitalization. The groups in the New Peer Index have been weighted 55%
publishing and 45% specialty retailing based on the approximate contribution to
the Company's fiscal 1995 operating earnings of each of those sectors. The
companies which comprise the New Peer Index are:
<TABLE>
<CAPTION>
SPECIALTY
PUBLISHING RETAILING
---------- ---------
<S> <C>
Houghton Mifflin Company Tiffany & Co.
John Wiley & Sons Nordstrom, Inc.
McGraw-Hill, Inc.
Times Mirror Co.
</TABLE>
The groups in the Old Peer Index have been weighted 55% publishing, 30%
specialty retailing and 15% insurance. The companies which comprise the Old Peer
Index are the companies listed above as well as The
22
<PAGE> 25
Limited, Inc. and several insurance companies, namely Jefferson-Pilot Corp.,
Lincoln National Corp., Providian Corp., Torchmark Corp., Unum Corp. and USLIFE
Corp.
The comparisons provided in this graph are not intended to be indicative of
possible future performance of the Company's stock. In addition, it should be
noted that (i) the Company had no publishing or insurance operations prior to
the acquisition of Harcourt Brace & Company in November 1991, (ii) the Company
sold its insurance business on October 31, 1994, and (iii) the Company's
subsidiary, The Neiman Marcus Group, Inc., sold its Contempo Casuals business on
June 30, 1995.
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Although Delaware law does not require that the selection by the Board of
Directors of the Company's auditors be approved each year by the stockholders,
the Board of Directors believes it is appropriate to submit its selection to the
stockholders for their approval and to abide by the result of the stockholders'
vote. The Board of Directors recommends that the stockholders ratify the
appointment of Deloitte & Touche LLP as independent auditors to audit the
financial statements of the Company for the fiscal year ending October 31, 1996.
Representatives of Deloitte & Touche LLP will be present at the Annual
Meeting, will have an opportunity to make a statement if they wish, and will be
available to respond to appropriate questions from stockholders. The Company
paid or accrued approximately $1.3 million on account of audit, tax and
consulting services rendered by Deloitte & Touche LLP for the fiscal year ended
October 31, 1995. Deloitte & Touche LLP also serves as the independent auditors
for The Neiman Marcus Group, Inc.
Approval of the proposal to ratify the selection of Deloitte & Touche LLP
as the Company's independent auditors for the current fiscal year requires a
favorable vote of a majority of the issued and outstanding Common Stock and
Class B Stock, voting together as a single class, represented and entitled to
vote at the meeting. Abstentions will be treated as votes cast. Broker non-votes
will be treated as present but not voting. On this proposal, abstentions and
broker non-votes will have the same effect as votes against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL
TO RATIFY THE SELECTION OF DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING OCTOBER 31, 1996.
3. OTHER MATTERS
The Board of Directors knows of no other matters which are likely to be
brought before the meeting. If any other matters should be properly brought
before the meeting, it is the intention of the persons named in the enclosed
proxy to vote, or otherwise act, in accordance with their judgment on such
matters.
23
<PAGE> 26
DEADLINE FOR SUBMISSION OF
1997 STOCKHOLDER PROPOSALS AND NOMINATIONS
In order for stockholder proposals to be considered by the Company for
inclusion in the proxy material for the Annual Meeting of Stockholders to be
held in 1997, they must be received by the Company at its principal executive
offices by November 1, 1996. Any nominations for the Board of Directors must
also be received no later than November 1, 1996. See "Meetings and Committees of
the Board of Directors -- Nominating Committee."
By Order of the Board of Directors
ERIC P. GELLER
Secretary
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, IF YOU ARE A HOLDER OF
COMMON STOCK OR CLASS B STOCK, PLEASE COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE. STOCKHOLDERS WHO
ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY EVEN THOUGH THEY HAVE SENT IN
THEIR PROXIES.
24
<PAGE> 27
PROXY
HARCOURT GENERAL, INC.
COMMON STOCK AND COMMON STOCK AND
CLASS B STOCK CLASS B STOCK
PROXY PROXY
ANNUAL MEETING OF STOCKHOLDERS -- MARCH 8, 1996
Richard A. Smith, Robert J. Tarr, Jr. and Eric P. Geller, and each of
them (a majority of those present and acting to have all the powers hereunder),
with several powers of substitution, are hereby authorized to represent and
vote all shares of Common Stock and/or Class B Stock of the undersigned at the
Annual Meeting of Stockholders of Harcourt General, Inc. to be held at The
First National Bank of Boston, 100 Federal Street, Boston, Massachusetts, on
Friday, March 8, 1996 at 10:00 a.m. and at any adjournments thereof. The
undersigned hereby revokes any Proxy previously given and acknowledges receipt
of the Notice of Annual Meeting and Proxy Statement dated February 2, 1996 and
a copy of the Annual Report for the year ended October 31, 1995.
The shares represented by this Proxy will be voted as directed by the
undersigned. The Board of Directors of Harcourt General,Inc. recommends a vote
FOR the nominees set forth below and FOR proposal 2. IF THIS PROXY IS SIGNED
AND RETURNED AND DOES NOT SPECIFY A VOTE ON ANY PROPOSAL, THE PROXY WILL BE SO
VOTED.
ELECTION OF CLASS C DIRECTORS ELECTION OF CLASS A DIRECTOR
NOMINEES: Brian J. Knez NOMINEE: Gary L. Countryman
Jeffrey R. Lurie
Lynn Morley Martin
Paula Stern
Clifton R. Wharton, Jr.
(SEE REVERSE SIDE TO CAST VOTE.)
CONTINUED, AND TO BE SIGNED, ON REVERSE SIDE
<PAGE> 28
/X/ Please mark
votes as in
this example.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Proposals 1 and 2.
- --------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of / / / / 2. Approval of the / / / / / /
Directors (See appointment of
reverse). Deloitte & Touche
LLP as independent
auditors of the Company
for the current fiscal year.
/ /
- --------------------------------------
For all nominees except as noted above
- --------------------------------------------------------------------------------
MARK HERE MARK HERE
FOR ADDRESS / / IF YOU PLAN / /
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
For joint accounts, each owner should sign.
Executors, Administrators, Trustees, etc., should give
full title.
Signature: Date
--------------------- ----------------
Signature: Date
--------------------- ----------------
<PAGE> 29
CONFIDENTIAL VOTING INSTRUCTIONS
TO: WACHOVIA BANK OF NORTH CAROLINA, N.A.
AS TRUSTEE UNDER THE
HARCOURT GENERAL, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
WITH RESPECT TO THE ANNUAL MEETING OF STOCKHOLDERS OF
HARCOURT GENERAL, INC. - MARCH 8, 1996
I hereby instruct the Trustee to vote (in person or by proxy) all shares of
Common Stock of Harcourt General, Inc. which are credited to my account under
the above-referenced Plan at the Annual Meeting of Stockholders of Harcourt
General Inc. to be held at The First National Bank of Boston, 100 Federal
Street, Boston, Massachusetts on Friday, March 8, 1996 at 10:00 a.m. and at any
adjournments thereof. The undersigned hereby revokes any voting instruction
previously given and acknowledges receipt of the Notice of Annual Meeting and
Proxy Statement dated February 2, 1996 and a copy of the Annual Report for the
year ended October 31, 1995.
The shares represented by this Instruction Card will be voted by the
Trustee as directed by the undersigned. The Board of Directors of Harcourt
General, Inc. recommends a vote FOR the nominees set forth below and FOR
proposal 2. IF THIS INSTRUCTION CARD IS SIGNED AND RETURNED AND DOES NOT
SPECIFY A VOTE ON ANY PROPOSAL, THIS INSTRUCTION CARD WILL BE SO VOTED.
ELECTION OF CLASS C DIRECTORS ELECTION OF CLASS A DIRECTOR
NOMINEES: Brian J. Knez NOMINEE: Gary L. Countryman
Jeffrey R. Lurie
Lynn Morley Martin
Paula Stern
Clifton R. Wharton, Jr.
(SEE REVERSE SIDE TO CAST VOTE.)
CONTINUED, AND TO BE SIGNED, ON REVERSE SIDE
<PAGE> 30
/X/ Please mark
votes as in
this example.
This Instruction Card is solicited by the Plan Trustee
- -------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Proposals 1 and 2.
- -------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of / / / / 2. Approval of the / / / / / /
Directors (See appointment of
reverse). Deloitte & Touche
LLP as independent
auditors of the Company
for the current fiscal year.
/ /
----------------------------------
For all nominees except as noted above
- --------------------------------------------------------------------------------
MARK HERE MARK HERE
FOR ADDRESS / / IF YOU PLAN / /
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
For joint accounts, each owner should sign.
Executors, Administrators, Trustees etc., should give
full title.
Signature: Date
--------------------- ----------------
Signature: Date
--------------------- ----------------
<PAGE> 31
WACHOVIA
Wachovia Corporate Services, Inc.
Trust Services Division
301 North Main Street
Winston-Salem, North Carolina 27150-3099
February 5, 1996
TO: Participants in the Harcourt General, Inc.
Employees' Stock Ownership Plan
FROM: Wachovia Bank of North Carolina, N.A.
Trustee of the Employees' Stock Ownership Plan
As a participant in Harcourt General, Inc. Employees' Stock Ownership
Plan, which owns shares of Harcourt General Common Stock, you are entitled to
instruct the Trustee on how to vote the shares of Common Stock in your account
on matters scheduled to come before the Annual Meeting of Stockholders of
Harcourt General, Inc. to be held on Friday, March 8, 1996.
A proxy statement, confidential voting instruction card and return
envelope are enclosed. Please complete, date and sign the voting instruction
card and mail it promptly in the return envelope to exercise your right to
direct the Trustee with respect to shares of Harcourt General, Inc. allocated
to your account.
If you own shares of Harcourt General, Inc. outside of the Employees'
Stock Ownership Plan, you will receive similar materials for those shares in a
separate mailing. Please return both cards in their separate return envelopes
if you wish to fully participate in the matters being submitted to the
stockholders of Harcourt General, Inc.
Enclosures
