<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
HECHINGER COMPANY
(Name of Registrant as Specified in Its Charter)
HECHINGER COMPANY
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 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:
Hechinger Class A common, Hechinger Class B common
(2) Aggregate number of securities to which transactions applies:
Shares outstanding 4/28/94: HECHA 29,801,398 HECHB 12,427,587
(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:
- - --------------------------------------------------------------------------------
/ / 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 registrations 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:
- - --------------------------------------------------------------------------------
- - ---------------
1Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
<TABLE>
<S> <C>
HECHINGER COMPANY
3500 PENNSY DRIVE
LANDOVER, MARYLAND 20785
- - ------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 14, 1994 (LOGO)
</TABLE>
May 12, 1994
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
HECHINGER COMPANY, which will be held at Stouffer Mayflower Hotel, 1127
Connecticut Avenue, N.W., Washington, D.C., on Tuesday, June 14, 1994, at 10:00
a.m., for the following purposes:
(1) to elect eight directors to hold office until the next Annual Meeting
and until their successors are elected and qualified;
(2) to ratify the appointment of independent public accountants for the
current fiscal year; and
(3) to transact such other business as may properly come before the meeting
or any adjournments or postponements thereof.
Only stockholders of record at the close of business on April 28, 1994 are
entitled to notice of, and to vote at, this meeting and any adjournments or
postponements thereof. Such stockholders may vote in person or by proxy.
Representation of at least a majority of all the outstanding shares of
common stock of the Company is required to constitute a quorum. Whether or not
you plan to attend the meeting, it is important that you promptly complete,
sign, date and return the accompanying proxy in the enclosed envelope at your
earliest convenience.
By Order of the Board of Directors,
Mark R. Adams
Secretary
<PAGE> 3
HECHINGER COMPANY
LANDOVER, MARYLAND 20785
------------------------
PROXY STATEMENT
MAY 12, 1994
------------------------
The enclosed proxy is being solicited by the Board of Directors of
Hechinger Company (the "Company") in connection with the Company's Annual
Meeting of Stockholders (the "Annual Meeting") to be held on June 14, 1994, and
at any adjournments or postponements thereof. To assure adequate representation
at the Annual Meeting, stockholders are requested to sign, date and return
promptly the enclosed proxy. Only stockholders of record at the close of
business on April 28, 1994 (the "Record Date") will be entitled to vote at the
meeting. These proxy materials are first being mailed to stockholders of the
Company on or about May 12, 1994.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of the Company, at or before the taking of the vote at the
Annual Meeting, a written notice of revocation bearing a later date than the
proxy, (ii) duly executing a later dated proxy relating to the same shares and
delivering it to the Secretary of the Company before the taking of the vote at
the Annual Meeting or (iii) attending the Annual Meeting and voting in person
(although attendance at the Annual Meeting will not in and of itself constitute
a revocation of a proxy). Any written notice of revocation or subsequent proxy
should be sent so as to be delivered to Hechinger Company, 3500 Pennsy Drive,
Landover, Maryland 20785, Attention: Secretary, or hand delivered to the
Secretary of the Company at or before the taking of the vote at the Annual
Meeting.
If a proxy is signed with a preference indicated thereon, the corresponding
shares will be voted accordingly, but if no choice has been specified, the
shares will be voted FOR the election of the directors nominated herein and FOR
the ratification of the appointment of the independent public accountants set
forth herein. Stockholders votes cast at the meeting in person or by proxy will
be tallied by the Company's transfer agent. Shares held by stockholders present
at the meeting in person who do not vote and proxies or ballots marked "abstain"
or "withheld" will be counted as present at the meeting for quorum purposes but
will not be considered to be voted at the meeting. "Broker non-votes" (i.e.,
shares represented by proxies, received from a broker or nominee, indicating
that the broker or nominee has not voted the shares on a matter with respect to
which the broker or nominee does not have discretionary voting power) will be
treated as abstentions, i.e., present at the meeting but not voted.
ELECTION OF DIRECTORS
Eight directors are to be elected at the Annual Meeting, each to hold
office until the next Annual Meeting and until his or her successor is elected
and qualified. It is the intention of the persons named in the enclosed proxy to
vote such proxy for the selection of the nominees listed below, unless authority
to do so is withheld. All nominees are now directors of the Company and have
served continuously since their first election. In the event that any nominee
should be unable to accept the position of director, which is not anticipated,
it is intended that the persons named in the
<PAGE> 4
proxy will vote such proxy for the election of such other person in the place of
such nominee for the position of director as the Board may recommend.
<TABLE>
<CAPTION>
YEAR
FIRST
ELECTED
NAME AGE DIRECTOR
- - --------------------------- --- --------
<S> <C> <C> <C>
John W. Hechinger 74 1959 Mr. Hechinger joined Hechinger Company in 1946. He became
President of the Company in 1958. He served as Co-Chairman
and Co-Chief Executive from 1986 until 1990. He currently
serves as Chairman of the Board.
Herbert J. Broner 66 1988 Mr. Broner joined Mohasco Corporation in 1968 as Director of
Marketing and Merchandising and held several executive
positions with Mohasco prior to being elected a director and
then President and Chief Operating Officer in 1980. He served
as Chief Executive Officer of Mohasco from April 1983 and
Chairman from August 1985 until his retirement in 1988.
John W. Hechinger, Jr. 44 1984 Mr. Hechinger, Jr., joined Hechinger Company in 1972. He
served in various positions with the Company before becoming
Vice President -- Corporate Development in 1982. In 1986 he
was named President and Chief Operating Officer. In March,
1990, Mr. Hechinger, Jr. was elected Chief Executive Officer.
S. Ross Hechinger 42 1984 Mr. Hechinger joined Hechinger Company in 1974. He served in
various positions with the Company before becoming Vice
President -- Distribution in 1982. In 1986 he was promoted to
Senior Vice President. He served as Senior Vice President --
Information Systems and Logistics for the Hechinger Stores
subsidiary until January 1994, when he became Senior Vice
President -- Corporate Administration for the Company.
Ann D. Jordan 59 1990 Ms. Jordan is a former Associate Fieldwork Professor, SSA,
University of Chicago, and former Director of Social
Services, University of Chicago Medical Center. She also
serves on the board of directors of Automatic Data
Processing, Inc., Capital Cities -- ABC, Inc., Johnson &
Johnson Corporation, National Health Laboratories, Inc.,
Salant Corporation and The Travelers, Inc.
David O. Maxwell 63 1988 Mr. Maxwell joined the Federal National Mortgage Association
as President in February 1981 and was elected Chairman in May
1981. He served as Chairman and Chief Executive Officer until
his retirement in January 1991. Mr. Maxwell also serves on
the board of directors of Corporate Partners, L.P., Kaufman
and Broad Home Corporation, Potomac Electric Power Company
and SunAmerica, Inc.
W. Clark McClelland 55 1979 Mr. McClelland joined Hechinger Company in 1975. He served as
Vice President, Treasurer and Secretary from 1983 until being
named Senior Vice President in 1986. Mr. McClelland was named
Executive Vice President in March 1993. He currently serves
as Executive Vice President and Chief Financial Officer.
Alan J. Zakon 58 1990 Mr. Zakon joined Bankers Trust Company in 1989 as Managing
Director. Prior to joining Bankers Trust he served in several
executive positions with the Boston Consulting Group prior to
being elected Chief Executive in 1980. He also serves on the
board of directors of Arkansas-Best Corporation, Augat, Inc.,
Autotote Corporation and Laurentian Capital Corporation.
</TABLE>
COMMITTEES OF THE BOARD AND MEETINGS
The Audit Committee of the Board reviews and acts upon or reports to the
Board with respect to the Company's accounting principles and accounting
procedures, financial reporting standards and practices and its internal control
and recordkeeping practices. The Audit Committee, which presently consists of
Mr. Herbert J. Broner, Chairman, Mr. Alan J. Zakon and Ms. Ann D. Jordan, held
three meetings during the Company's last fiscal year.
2
<PAGE> 5
The Compensation Committee of the Board reviews, approves or makes
recommendations to the Board regarding compensation policies and programs of the
Company including the salaries, annual incentive and long-term incentive awards
for executive officers of the Company. The Committee administers the Company's
1991 Stock Incentive and Performance Share Plans. The Compensation Committee,
which presently consists of Messrs. David O. Maxwell, Chairman, Herbert J.
Broner and Alan J. Zakon, held three meetings during the Company's last fiscal
year.
The Board does not currently have a nominating committee.
The Board met five times during the Company's last fiscal year. During the
Company's last fiscal year, no member of the Board attended fewer than 75% of
the aggregate of (i) the total number of meetings of the Board (held during the
period for which he has been a director) and (ii) the total number of meetings
held by all committees of the Board on which he served (during the periods that
he served).
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company ("Non-Employee Director")
receive an annual fee of $20,000 and an attendance fee of $1,000 for each Board
meeting attended. They also receive $1,000 for each Committee meeting attended.
Committee Chairmen receive an additional attendance fee of $250 for each
Committee meeting attended. Pursuant to the terms of the Company's 1991 Stock
Incentive Plan, Non-Employee Directors receive a one-time award of a non-
qualified stock option covering 8,000 shares of Class A common stock upon the
date they are first elected to the Board, and also automatically receive each
year a non-qualified stock option covering 2,000 shares of Class A common stock
at the time of each annual meeting of the Company's stockholders. All options
fully vest two years after the date of grant and are exercisable at the fair
market value of the underlying stock on the date of grant. Non-Employee
Directors are also reimbursed for reasonable expenses of each Board or Committee
meeting attended. Directors who are also employees of the Company receive no
additional compensation for their service as directors or as members of
Committees of the Board.
EXECUTIVE COMPENSATION
The Summary Compensation Table sets forth individual compensation
information paid by the Company and its subsidiaries to the Chief Executive
Officer and the four other most highly paid executive officers (the "Named
Executive Officers"), for services rendered in all capacities during the fiscal
years ended January 29, 1994 ("1993"), January 30, 1993 ("1992") and February 1,
1992 ("1991").
3
<PAGE> 6
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------------
AWARDS
ANNUAL COMPENSATION ---------------------------- PAYOUTS
-------------------------------------- SECURITIES -----------
OTHER ANNUAL RESTRICTED UNDERLYING PERFORMANCE
NAME AND SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS SHARES
PRINCIPAL POSITION YEAR ($) ($) ($) ($)(1) (#) ($)(2)
- - ------------------------------ ---- -------- -------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
John W. Hechinger 1993 425,000 0 0 0 0 0
Chairman of the 1992 422,500 0 0 0 0 0
Board 1991 391,667 110,000 0 0 0 0
John W. Hechinger, Jr. 1993 450,000 230,000 0 0 200,000 0
President & Chief 1992 446,667 175,000 0 0 34,769 0
Executive Officer 1991 425,000 175,000 0 0 329,710 0
Kenneth J. Cort(4) 1993 400,000 220,000 341,172 0 37,333 0
President 1992 33,333 150,000 0 903,125 0 0
Hechinger Stores 1991 0 0 0 0 0 0
Company
Frank C. Doczi(5) 1993 391,666 160,000 0 0 19,787 323,072
President 1992 350,000 225,000 0 962,500 12,654 0
Home Quarters 1991 320,000 180,000 0 0 13,913 0
Warehouse
W. Clark McClelland 1993 294,167 140,000 0 180,000 24,000 0
Executive Vice 1992 263,333 135,000 0 0 13,269 0
President & Chief 1991 249,167 110,000 0 980,000 9,420 0
Financial Officer
<CAPTION>
ALL OTHER
NAME AND COMPENSATION
PRINCIPAL POSITION ($)(3)
- - ------------------------------ ---------------
<S> <C>
John W. Hechinger 11,374
Chairman of the 778
Board 12,100
John W. Hechinger, Jr. 11,374
President & Chief 778
Executive Officer 12,100
Kenneth J. Cort(4) 1,680
President 0
Hechinger Stores 0
Company
Frank C. Doczi(5) 11,374
President 10,340
Home Quarters 9,418
Warehouse
W. Clark McClelland 11,374
Executive Vice 778
President & Chief 12,100
Financial Officer
</TABLE>
- - ---------------
(1) Represents 85,000 shares of Restricted Stock awarded to Kenneth J. Cort;
110,000 shares of Restricted Stock awarded to Frank C. Doczi; and 20,000 and
80,000 shares of Restricted Stock awarded to W. Clark McClelland. Each award
on this table is valued based upon the fair market value of the stock on the
date awarded. For each of the Named Executive Officers, the number and value
of the aggregate Restricted Stock holdings at the end of the past fiscal
year was as follows: John W. Hechinger 0/$0; John W. Hechinger, Jr., 0/$0;
Kenneth J. Cort 76,500/ $870,188; Frank C. Doczi 88,000/$1,001,000; and W.
Clark McClelland 64,000/$728,000. The unvested portion of Restricted Stock
awards set forth on this table vest as follows: Kenneth J. Cort, 17,000
shares on January 11, 1995, 17,000 shares on January 11, 1996, 17,000 shares
on January 11, 1997 and 25,500 shares on January 11, 1998; Frank C. Doczi,
22,000 shares on October 5, 1994, 22,000 shares on October 5, 1995 and
44,000 shares on October 5, 1996; and W. Clark McClelland, 20,000 shares on
January 1, 1995, 36,000 shares on January 1, 1996 and 8,000 shares on
January 1, 1997. Kenneth J. Cort, Frank C. Doczi, and W. Clark McClelland
had 8,500, 22,000 and 20,000 shares, respectively, become unrestricted in
1993. Dividends will be paid on the Restricted Stock reported on this table.
The Restricted Stock Award Agreements pursuant to which Restricted Stock was
granted to Messrs. Kenneth J. Cort, Frank C. Doczi, and W. Clark McClelland,
and the Stock Option Agreements pursuant to which options to purchase
200,000 shares and 308,000 shares of Class A common stock were granted to
John W. Hechinger, Jr. in 1993 and 1991, respectively, provide that in the
event of termination of the executive's employment in certain circumstances
after a change in control, the restrictions on such shares or options
granted shall lapse and the executive shall receive such shares or options
free of restrictions. In addition, if such shares or options become subject
to certain excise taxes in connection with the lapse of restrictions, the
Company shall make an additional payment to the executive to compensate for
such taxes. "Change in control" is defined generally to mean an acquisition
of beneficial ownership of 20% or more of the Company's voting power by any
person (other than the Hechinger and England families) at a time when the
Hechinger and England families beneficially own securities representing less
voting power than such person, as well as certain changes in the Board of
Directors not approved by two-thirds of the then existing directors.
(2) Represents fair market value at date of determination of Performance Shares
earned. See Long-Term Incentive Plan Table on page 6 for Performance Shares
granted in the past fiscal year.
4
<PAGE> 7
(3) Represents contribution to the Company's Profit Sharing Plan. Company
contributions to the Profit Sharing Plan are in such amounts as may be
determined by the Board up to the maximum amount allowable under the
Internal Revenue Code of 1986, as amended (the "Code"). Company
contributions become 100% vested after a participant completes five years of
Plan Service, subject to special rules under which a participant may become
partially vested upon completion of four years of Plan Service. Company
contributions also become 100% vested if the participant is an employee of
the Company at the time he attains age 65 or in the event of the
participant's death or disability while an employee.
(4) Kenneth J. Cort was hired as President and Chief Executive Officer of the
Company's Hechinger Stores subsidiary in December 1992. In employing Mr.
Cort, the Company agreed to provide him with a salary of $400,000,
reviewable annually. The Company also provided a signing bonus to Mr. Cort
of $150,000, and a performance bonus opportunity which on the achievement of
specified goals could range from 25% to 75% of his 1993 salary. The Company
also granted to Mr. Cort 85,000 shares of Restricted Stock vesting over 5
years; and agreed that Mr. Cort would be entitled to salary continuation for
a period of 12 months in the event of his involuntary termination other than
for cause. The Company provided relocation benefits (which included,
reimbursement of loss and costs associated with the sale of his principal
residence, costs associated with relocating to the Washington, D.C. area and
temporary living expenses) and an auto allowance which totalled $341,172 in
1993.
(5) In connection with the Company's acquisition of Home Quarters Warehouse in
1988, the Company entered into a four year employment agreement with Frank
C. Doczi. The employment agreement expired February 5, 1993.
All stock options granted to the Named Executive Officers for the three
previous fiscal years are disclosed in the Summary Compensation Table. The table
below restates the options granted to the Named Executive Officers in the last
fiscal year, and provides other information regarding such grants, including an
estimate of the grant date present value. Stock Options are granted pursuant to
the 1991 Stock Incentive Plan. The Company has not granted any stock
appreciation rights.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------
PERCENT OF GRANT DATE VALUE
NUMBER OF TOTAL OPTIONS EXERCISE OR ----------------
SECURITIES UNDERLYING GRANTED TO BASE PRICE GRANT DATE
OPTIONS GRANTED EMPLOYEES IN PER SHARE EXPIRATION PRESENT VALUE
NAME (#)(1) FISCAL YEAR ($/SH.) DATE ($) (2)
- - ----------------------- ---------------------- --------------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
John W. Hechinger 0 -- -- -- --
John W. Hechinger, Jr. 200,000 21.3% $9.00 3/16/03 $874,000
Kenneth J. Cort 37,333 4.0% $9.00 3/16/03 $163,145
Frank C. Doczi 19,787 2.1% $9.00 3/16/03 $ 86,469
W. Clark McClelland 24,000 2.6% $9.00 3/16/03 $104,880
</TABLE>
- - ---------------
(1) With regard to Messrs. Cort, Doczi and McClelland, all options granted in
the past fiscal year fully vest on March 16, 1995, which is two years after
the date of grant. With regard to Mr. Hechinger, Jr., all options granted in
the past fiscal year fully vest over a four year period ending March 16,
1997. See also Note (1) under the Summary Compensation Table for further
discussion of the option granted to Mr. Hechinger, Jr.
(2) The estimated grant date present value reflected in the above table is
determined by using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the value
of the options reflected in the above table include the following: (a) an
exercise price on the options of $9.00, which is equal to the fair market
value of the underlying stock on the date of grant; (b) option terms of ten
years; (c) an interest rate (5.98%) representing the interest rate on a U.S.
Treasury security with a maturity date corresponding to that of the option
term as of the date of grant; (d) volatility of 39.77%,
5
<PAGE> 8
calculated using daily stock prices for the one-year period prior to the
date of grant; and (e) dividends at the rate of $0.16 per share representing
the annualized dividends paid with respect to a share of Class A common
stock at the date of grant. The ultimate value of the options will depend on
the future market price of the Company's Class A common stock, which cannot
be forecasted with reasonable accuracy. The actual value, if any, an
executive will realize upon exercise of an option will depend on the excess
of the market value of the Company's Class A common stock over the exercise
price on the date the option is exercised.
The following table sets forth certain information on options exercised
during the last fiscal year and unrealized value for both exercisable and
unexercisable options at fiscal year end.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR,
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END(1)
ACQUIRED VALUE --------------------------- ---------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- - ------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John W. Hechinger 0 -- 0 0 0 0
John W. Hechinger, Jr. 0 -- 129,560 481,169 113,602 690,600
Kenneth J. Cort 0 -- 0 37,333 0 88,666
Frank C. Doczi 0 -- 24,413 32,441 38,261 46,994
W. Clark McClelland 0 -- 53,670 37,269 31,999 57,000
</TABLE>
- - ---------------
(1) Market value of stock at fiscal year end less exercise price, before payment
of applicable income taxes.
The following table sets forth certain information as to awards under the
Company's Performance Share Plan. The Performance Share Plan provides for the
award of "Performance Grants" to officers and key employees of the Company and
its subsidiaries. "Performance Grants" are rights to earn shares of the Class A
common stock ("Performance Shares"), if certain performance goals are met during
a specified time period. The Performance Share Plan is administered by the
Compensation Committee. No grantee has any voting or dividend rights, or other
rights of a stockholder in respect of any Performance Shares until his name is
recorded in the Company's stockholder ledger as a record holder of shares of
Class A common stock representing such Performance Shares.
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUT
NUMBER OF OF PERFORMANCE SHARES
PERFORMANCE PERFORMANCE ------------------------------
SHARES GRANTED PERIOD UNTIL THRESHOLD TARGET MAXIMUM
NAME (#) PAYOUT (#) (#) (#)
- - ----------------------- -------------- ------------------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
John W. Hechinger 0 -- -- -- --
John W. Hechinger, Jr. 0 -- -- -- --
Kenneth J. Cort 0 -- -- -- --
Frank C. Doczi (1) 6,596 Three-Year Period Ended 0 5,277 9,234
February 3, 1996
W. Clark McClelland 0 -- -- -- --
</TABLE>
- - ---------------
(1) Pursuant to the terms of the Company's Performance Share Plan, Mr. Doczi was
granted the right to earn between 0 and 9,234 shares of Class A common stock
upon Home Quarters Warehouse achieving a certain specified range of average
operating income targets over the three-year performance period.
6
<PAGE> 9
PENSION AND RETIREMENT PLANS
The Company maintains a tax-qualified defined benefit pension plan (the
"Pension Plan") pursuant to which employees of the Company or its participating
subsidiaries who have completed one year of Benefit Service, as that term is
defined in the Pension Plan, are eligible to participate. Under the terms of the
Pension Plan, which was instituted in 1981, a participant is entitled upon
normal retirement at age 65 (or, if later, the 5th anniversary of participation
in the plan) to an annual retirement benefit payable monthly for life.
For years prior to January 1, 1992, a participant's annual retirement
benefit payable at normal retirement is equal to 1% of the participant's "Final
Average Earnings" (defined as the average of the participant's highest annual
Earnings during any five calendar years of his last 10 years of employment)
multiplied by the participant's Years of Benefit Service (not in excess of 30
years). As a result of an amendment to the Pension Plan, effective January 1,
1992, the annual retirement benefit payable at a participant's normal retirement
is the sum of (i) 1% of the participant's Final Average Earnings calculated as
of December 31, 1991, multiplied by the participant's Years of Benefit Service
as of December 31, 1991 (the "Final Average Earnings Formula"); plus (ii) 1.25%
of the participant's "Career Average Earnings" beginning January 1, 1992 through
termination of employment, multiplied by the participant's Years of Benefit
Service beginning on and after January 1, 1992 (the "Career Average Earnings
Formula"). The total Years of Benefit Service taken into account in computing a
participant's normal retirement benefit will not exceed 30 years. For purposes
of this Formula, a participant's Career Average Earnings is the sum of the
participant's Earnings for each Year of Benefit Service beginning January 1,
1992 until termination of employment, divided by the number of such years. The
term "Earnings" as used in the Pension Plan means a participant's total
compensation (effective January 1, 1989, not in excess of $200,000, and
effective January 1, 1994 not in excess of $150,000, in each case subject to
adjustment for cost-of-living) for a plan year, excluding the value of group
term life insurance, income from stock options, awards under the Hechinger
Performance Share Plan and other extraordinary items. Participants earn a full
Year of Benefit Service for each year during which they complete at least 1,500
hours of service. Participants become fully vested in their benefits under the
Pension Plan upon the completion of five years of service (10 years in the case
of a participant who is not credited with at least one hour of service on or
after February 1, 1989). Participants are eligible for an actuarially reduced
early retirement benefit upon attaining age 55 and completion of 10 years of
service.
The Company has also entered into Supplemental Executive Retirement
Agreements with certain officers including the Named Executive Officers, with
the exception of John W. Hechinger. These agreements provide for retirement
benefits equal to 65% of the participant's average annual compensation as
defined by the agreements (and excluding certain non-cash compensation such as
income from the exercise of stock options and other extraordinary items) for the
five highest-paid years of the last ten years of his or her employment,
multiplied by a fraction, the numerator of which is the executive's months of
employment by the Company not in excess of 360 and the denominator of which is
360. Such benefits are reduced by the amount of an executive's Social Security
benefits and payments under the Pension and Profit Sharing Plans of the Company.
Benefits vest and are payable at age 65 unless an executive obtains approval
from the Board for early retirement. If the participant dies prior to
retirement, the participant's named beneficiary will receive an amount equal to
50% of his or her prior year's compensation, payable in equal monthly
installments, until the later of the month following the month when the
participant would have become 65 or the 120th monthly payment. The agreements
also provide for limited cost of living adjustments to an executive's retirement
benefits.
The estimated total annual retirement benefits accrued as of December 31,
1993 and payable at normal retirement under the Pension Plan and the
Supplemental Executive Retirement Agreements for the Named Executive officers
(excluding John W. Hechinger) are as follows: John W. Hechinger, Jr., $28,080;
Kenneth J. Cort, $0; Frank C. Doczi, $73,718; and W. Clark McClelland, $28,500.
The Pension Plan portion of these benefit amounts is based on 13 Years of
Benefit Service for
7
<PAGE> 10
Mr. Hechinger, Jr. and Mr. McClelland, and 0 Years of Benefit Service for Mr.
Cort. Mr. Doczi is ineligible for the Pension Plan. The portion of the benefit
payable under the Supplemental Executive Retirement Agreements is based on the
following years of service credit: John W. Hechinger, Jr., 22; Kenneth J. Cort,
1; Frank C. Doczi, 9; and W. Clark McClelland, 18.
John W. Hechinger has not entered into a Supplemental Executive Retirement
Agreement but has a separate agreement with the Company with respect to
retirement benefits. The agreement provides for retirement benefits equal to
one-half of the average of Mr. Hechinger's highest five years earnings. The
benefit is payable for his lifetime (or that of his spouse in the event he
predeceases her). The benefits payable under the agreement will be adjusted for
changes in the Consumer Price Index. The total annual retirement benefit accrued
as of December 31, 1993 and payable under the Pension Plan and this agreement as
of December 31, 1993 is $321,218. Mr. Hechinger is credited with 13 Years of
Benefit Service under the Pension Plan.
COMPENSATION COMMITTEE REPORT
Since its inception in 1911, the Company has recognized the importance of
attracting, retaining and motivating executives of outstanding abilities. The
Company firmly believes that quality people are essential to future success.
As described in the Section entitled Committees of the Board and Meetings
on page three, the Compensation Committee is responsible for administering the
compensation program for executive officers of the Company. The Committee's
Report discusses the Company's overall compensation philosophy applicable to its
executive officers and provides specific information regarding the components of
compensation and bases for compensation of the Chief Executive Officer. The
Compensation Committee is comprised of three Non-Employee Directors.
On August 10, 1993, the Omnibus Budget Reconciliation Act of 1993 was
signed into law (the "Revenue Act"). The Revenue Act limits the deductibility of
certain compensation in excess of $1 million per year paid by a publicly traded
corporation to an employee of such corporation for years following 1993. Under
the Revenue Act, compensation which is payable under a written contract that was
in effect before February 17, 1993, or which qualifies as "performance-based"
compensation is exempt from the $1 million deductibility limitation. The
Committee is aware of the applicable provisions of the Revenue Act and intends
to review their application to the Company's executive compensation program as
it, from time to time, considers compensation issues.
OVERALL COMPENSATION PHILOSOPHY
The Hechinger Company's executive compensation program is designed to
provide forms and levels of compensation that:
- Enable the Company to compete effectively in the labor market, by
attracting and retaining executive talent of a calibre sufficient to
meet its business goals;
- Reward executives for the accomplishment of pre-defined business
goals and objectives, thereby maintaining a "pay-for-performance"
environment; and
- Motivate executives toward gains in stockholder wealth so that
executives will be financially advantaged when stockholders are
similarly advantaged.
In implementing this philosophy, the Company targets its compensation plans
at the competitive norm for the retail industry. The competitive norm is
considered to be the median level of compensation as adjusted for company size,
in available compensation surveys of the retail industry. In 1993, the Company
primarily used survey information prepared by Management Compensation Services,
a division of Hewitt Associates LLC. Because of its broader base, this survey
information does not include precisely the same companies included in the S&P
Retail-Specialty Index. In addition, individual compensation may vary from the
competitive norm based on factors specific to each of the three main components
of compensation described below.
8
<PAGE> 11
COMPONENTS OF COMPENSATION AND PERFORMANCE
BASE SALARY
Executive officer salaries are assessed annually. In determining the
appropriateness of a salary change, the Committee has generally considered four
factors:
- The relationship between current salary and the competitive norm;
- The average size of salary increases being granted by the retail
industry;
- Whether the responsibilities of the position have been changed
during the preceding year; and
- The general performance of the executive officer.
As can be seen from the Summary Compensation Table, the base salary of the
Chief Executive Officer, John W. Hechinger, Jr., increased by less than 1% in
1993 over 1992. The Committee took this action given: (i) the significant charge
taken by the Company in 1992 to reposition the Hechinger Stores subsidiary, and
(ii) the Committee's desire to further motivate the Chief Executive Officer in a
manner consistent with increasing stockholder wealth, as discussed under
Long-Term Incentives below. Both the 1993 increase and Mr. Hechinger, Jr.'s
salary level are below the norm for similarly sized retail companies.
Excluding Mr. Cort, who only joined the Company in December 1992, the
aggregate salary increase for the remaining Named Executive Officers was 7.2%.
The evaluation of each Officer's increase was based on the factors described
above.
ANNUAL INCENTIVES
Annual incentives (or bonuses) are based on performance and are intended to
focus management's attention on key financial and strategic results. It is
possible that no annual awards may be paid if corporate and subsidiary
performance objectives are not achieved.
The annual performance measures adopted for the fiscal year ended January
29, 1994 ("1993") provided for awards based primarily on the profitability of
the consolidated Company and its two subsidiaries versus pre-established
financial targets. In addition, the 1993 incentive plan recognized the
achievement of other key strategic objectives. The strategic objectives varied
by position, as did the weight assigned these objectives, but included
measurable goals related to store productivity and cost reduction, among others.
The Chief Executive Officer's bonus for 1993 was $230,000, which slightly
exceeded Mr. Hechinger, Jr.'s target payout of $225,000, or 50% of year end
salary. Mr. Hechinger, Jr.'s bonus was determined based upon an evaluation of
performance versus pre-established consolidated financial goals and
pre-established strategic goals. These goals were weighted such that 75% of his
targeted payout related to consolidated financial performance, and 25% related
to the accomplishment of enumerated strategic goals. In arriving at the 1993
bonus payment, the Committee considered each goal individually, and measured
performance against the goals. In Mr. Hechinger, Jr.'s case, each goal was
achieved or exceeded. Other Executive Officers were similarly evaluated. Of the
remaining Named Executive Officers who received a bonus, each had a target
payout of 45% of year end salary, and each had a bonus evaluation which was
weighted either 75% or 80% to the achievement of financial performance goals
(i.e., consolidated or business unit profitability, as appropriate), and either
25% or 20% to the achievement of strategic goals.
LONG-TERM INCENTIVES
The Hechinger Company's compensation philosophy is that long-term
incentives should motivate and retain executive officers. In addition, the
Committee believes that compensation, particularly at the senior executive
level, should be linked to changes in stockholder value. Toward this objective,
the Company has awarded executive officers Stock Options, Restricted Stock, and
Performance Shares. The size of Stock Option and Performance Share Awards are
targeted to meet
9
<PAGE> 12
competitive norms in the retail industry and are primarily influenced by cash
compensation and job position. Restricted Stock Awards and any "Special" Stock
Option Grants are more greatly influenced by specific circumstances, including
individual performance and anticipated responsibility. "Special" grants differ
from other option grants primarily in terms of being larger in size, providing
longer vesting restrictions, and including change in control provisions. The
Committee believes that these "Special" grants and Restricted Stock, because of
their limited use and unique objective, must be sufficient in size to provide a
strong incentive for the Executive Officer to achieve the Company's long-term
business goals. Restricted Stock and "Special" Stock Option Grants are intended
to be utilized in very limited circumstances.
All stock options have value for executive officers only if the price of
the Company's stock appreciates in value from the date the stock options are
granted. The Company has not repriced or amended the terms of the outstanding
options; therefore, executive officers do not benefit from stock price
appreciation unless stockholders also benefit.
As described under Base Salary on page nine, the Committee wanted to
further motivate the Chief Executive Officer in a manner consistent with
increasing stockholder wealth. Consequently, on March 16, 1993, Mr. Hechinger,
Jr. was awarded a "Special" Stock Option Grant to purchase 200,000 shares of
Class A common stock. The option is exercisable at the fair market value of the
common stock on the grant date ($9.00 per share) and vests over a four
year-period. In awarding the grant, the Committee considered each of the factors
outlined above along with the advice of its outside compensation and benefit
consultant. Like all options, value will only accrue to Mr. Hechinger, Jr. if
the price of the Company's stock exceeds the option's exercise price. Options
granted to other Named Executive Officers were essentially based on formulas
which are targeted to meet competitive norms in the retail industry.
Concurrent with his promotion to Executive Vice President, 20,000 shares of
Restricted Stock were granted to W. Clark McClelland in 1993. The Committee
believes that this grant, like grants in prior years, aligns the executive's
interest with stockholders, and provides strong retentive characteristics due to
multi-year vesting schedules.
The Performance Share Plan was adopted to provide incentive compensation
based on the Company's and any subsidiary's longer term financial performance.
Under the plan, Performance Shares may be granted annually as determined by the
Committee. The granting of Performance Shares to an executive has generally
resulted in a reduction in the number of stock options which the executive would
have been awarded. For participating executives, value is created under the
Performance Share Plan only if the Executive's business unit achieves at least
80% of its three-year operating income target. Only Mr. Doczi of the Named
Executive Officers was awarded Performance Shares in 1993.
SUMMARY
In summary, the Committee believes that the Company's compensation programs
effectively implement the Overall Compensation Philosophy described on page
eight. Nevertheless, as the Company evolves, so likely will its compensation
programs. Notwithstanding that evolution, the Committee intends to continue the
policy of linking executive compensation to corporate performance, with the
appropriate balancing of both short-term and long-term objectives.
COMPENSATION COMMITTEE,
David O. Maxwell, Chairman
Herbert J. Broner
Alan J. Zakon
10
<PAGE> 13
STOCK PERFORMANCE GRAPH
The following graph compares the Company's Class A common stock performance
for each of the last five fiscal years with the performance of the Standard &
Poor's 500 Stock Index ("S&P 500") and the Standard & Poor's Retail -- Specialty
Index ("S&P Retail -- Specialty"). The cumulative total return assumes $100
invested on January 30, 1989 and assumes reinvestment of dividends on a
quarterly basis.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
HECHINGER COMPANY, S&P 500, AND S&P RETAIL -- SPECIALTY
<TABLE>
<CAPTION>
MEASUREMENT PERIOD HECHINGER S&P RETAIL-
(FISCAL YEAR COVERED) COMPANY S&P 500 SPECIALTY
<S> <C> <C> <C>
1989 100.00 100.00 100.00
1990 62.52 114.36 116.84
1991 38.59 123.92 134.22
1992 78.89 151.94 181.15
1993 57.11 167.90 238.14
1994 64.40 189.40 232.82
</TABLE>
* TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS ON A QUARTERLY BASIS.
CERTAIN TRANSACTIONS
During the last fiscal year, thirteen of the Company's store sites were
leased from Hechinger Enterprises ("Enterprises"), a partnership consisting of
members of the Hechinger and England families. The rentals paid by the Company
to Enterprises under these leases in the Company's last fiscal year were
$4,553,614. Only twelve of these store sites were leased at the end of the
fiscal year. In addition, the Company leased certain warehouse space from
Enterprises for which it paid $73,333 during the year. In the opinion of
management, the terms of these leases were at least as favorable to the Company
as those of leases which the Company has with unaffiliated lessors for
comparable premises. Certain administrative services were provided to
Enterprises by certain employees of the Company. During the last fiscal year,
the Company charged Enterprises approximately $285,615 for such services, and
the Company believes that such amount is approximately equal to the amount which
unrelated third parties would charge for such services. In 1994, these
administrative services are being provided to Enterprises by third party
vendors.
11
<PAGE> 14
EQUITY SECURITIES AND PRINCIPAL HOLDERS THEREOF
As of the Record Date, there were outstanding 29,801,398 shares of Class A
common stock and 12,427,587 shares of Class B common stock. Each share of Class
A common stock is entitled to one vote and each share of Class B common stock is
entitled to ten votes on the matters to be voted upon at the Annual Meeting.
As of April 28, 1994, to the knowledge of the management of the Company,
J.P. Morgan & Co., Incorporated, 60 Wall Street, New York, New York, owned
6,025,985 shares or 20.7% of the Class A common stock outstanding, as indicated
in a Schedule 13G filed with the Securities and Exchange Commission on December
31, 1993, and, as of May 5, 1994, FMR Corp., 82 Devonshire Street, Boston,
Massachusetts, owned 2,643,100 shares or 8.9% of the Class A common stock
outstanding, based on information furnished to the Company by FMR Corp. Members
of the Hechinger and England families beneficially own a total of 1,252,957
shares (4.21%) of the outstanding Class A common stock. Pursuant to a voting
agreement with members of the Hechinger and England families, and entities
controlled by them (the "Voting Agreement"), John W. Hechinger, John W.
Hechinger, Jr., and S. Ross Hechinger together hold a proxy to vote these
1,252,957 shares of Class A common stock held by certain members of the
Hechinger and England families and certain entities controlled by them.
The following table provides information as to the only stockholders of
record known to management of the Company to own more than 5% of the outstanding
shares of Class B common stock. The share totals and percentages set forth below
reflect duplicative counting of shares in certain instances where the beneficial
ownership is attributable to more than one stockholder in accordance with the
definition of "beneficial ownership" set forth in the rules and regulations
applicable to proxy statement disclosure. For example, John W. Hechinger, John
W. Hechinger, Jr., and S. Ross Hechinger are deemed to each have beneficial
ownership of 10,972,791 shares of Class B common stock for which they together
hold a proxy to vote pursuant to the Voting Agreement, as described below. The
address for each individual and entity listed in the following table is 3500
Pennsy Drive, Landover, Maryland 20785.
<TABLE>
<CAPTION>
CLASS B SHARES
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OWNED CLASS B
- - ------------------------------------------ -------------- ----------
<S> <C> <C>
Joan England Akman 678,132(2) 5.46%
Catherine S. England 852,366(3) 6.86%
Lois H. England 1,607,114(4) 12.94%
Richard England 1,607,114(5) 12.94%
Richard England, Jr. 1,048,983(6) 8.44%
John W. Hechinger 10,972,791(7)(1) 88.30%
John W. Hechinger, Jr. 10,972,791(8)(1) 88.30%
June R. Hechinger 2,666,369(9) 21.46%
S. Ross Hechinger 10,972,791(10)(1) 88.30%
Nancy Hechinger Lowe 1,027,043(11) 8.27%
Sally Hechinger Rudoy 1,027,042(12) 8.27%
June Limited Partnership(13) 2,601,229 20.94%
Lois Associates Limited Partnership(14) 1,786,455 14.38%
</TABLE>
- - ---------------
(1) Members of the Hechinger and England families beneficially own a total of
10,972,791 shares (88.30%) of the outstanding Class B common stock.
Pursuant to the Voting Agreement with members of the Hechinger and England
families and entities controlled by them, John W. Hechinger, John W.
Hechinger, Jr., and S. Ross Hechinger together hold a proxy to vote these
10,972,791 shares of Class B common stock held by certain members of the
Hechinger and England families and entities controlled by them.
12
<PAGE> 15
(2) Represents 667,262 shares held indirectly by Ms. Akman by virtue of her
holdings in family partnerships and 10,870 shares held indirectly by Ms.
Akman as custodian for her minor children.
(3) Represents 170,524 shares held directly by Ms. England, 667,262 shares held
indirectly by Ms. England by virtue of her holdings in family partnerships,
6,715 shares held directly by Ms. England's former spouse and 7,865 shares
held indirectly by Ms. England as custodian for her minor children.
(4) Represents 701,765 shares held directly by Mrs. England, 203,585 shares
held indirectly by Mrs. England by virtue of her holdings in a family trust
and 701,764 shares held directly by Mrs. England's spouse.
(5) Represents 701,764 shares held directly by Mr. England, 701,765 shares held
directly by Mr. England's spouse and 203,585 shares held indirectly by Mr.
England's spouse by virtue of her ownership interests in a family trust.
(6) Represents 381,722 held directly by Mr. England, Jr. and 667,261 shares
held indirectly by Mr. England, Jr. by virtue of his holdings in family
partnerships.
(7) Includes 1,172,836 shares held directly by Mr. Hechinger, 669,824 shares
held indirectly by Mr. Hechinger by virtue of his holdings in a family
partnership and a family trust, 489,917 shares held directly by Mr.
Hechinger's spouse and 333,792 shares held indirectly by Mr. Hechinger's
spouse by virtue of her ownership interest in a family partnership.
(8) Includes 466,566 shares held directly by Mr. Hechinger, Jr., 538,383 shares
held indirectly by Mr. Hechinger, Jr. by virtue of his holdings in family
partnerships, 5,827 shares held directly by Mr. Hechinger, Jr.'s spouse,
4,614 shares held indirectly by Mr. Hechinger, Jr.'s spouse as custodian
for her minor children and 17,481 shares held indirectly by Mr. Hechinger,
Jr. as custodian for his minor children.
(9) Represents 489,917 shares held directly by Mrs. Hechinger, 333,792 shares
held indirectly by Mrs. Hechinger by virtue of her holdings in a family
partnership, 1,172,836 shares held directly by Mrs. Hechinger's spouse and
669,824 shares held indirectly by Mrs. Hechinger's spouse by virtue of his
ownership interest in a family partnership and a family trust.
(10) Includes 471,180 shares held directly by Mr. Hechinger, 538,383 shares held
indirectly by Mr. Hechinger by virtue of his holdings in family
partnerships, 5,827 shares held directly by Mr. Hechinger's spouse and
17,481 shares held indirectly by Mr. Hechinger as custodian for his minor
children.
(11) Represents 471,180 shares held directly by Mrs. Lowe through a revocable
trust, 538,382 shares held indirectly by Mrs. Lowe by virtue of her
holdings in family partnerships, 5,827 shares held directly by Mrs. Lowe's
spouse and 11,654 shares held indirectly by Mrs. Lowe as custodian for her
minor children.
(12) Represents 471,180 shares held directly by Mrs. Rudoy, 538,381 shares held
indirectly by Mrs. Rudoy by virtue of her holdings in family partnerships,
5,827 shares held directly by Mrs. Rudoy's spouse and 11,654 shares held
indirectly by Mrs. Rudoy as custodian for her minor children.
(13) June Limited Partnership is a partnership consisting of members of the
family of John W. Hechinger.
(14) Lois Associates Limited Partnership is a partnership consisting of members
of the family of Richard England.
13
<PAGE> 16
The following table sets forth the beneficial ownership of the Company's
common stock by each of the directors and nominees, each Named Executive
Officer, and all of the Company's directors and executive officers as a group as
of April 28, 1994.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
BENEFICIALLY BENEFICIALLY
OWNED % OF OWNED % OF
NAME APRIL 28, 1994 CLASS APRIL 28, 1994 CLASS
- - ---------------------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
John W. Hechinger (1) (1) (1) (1)
Kenneth J. Cort 85,000(3) less than 1% -- less than 1%
Herbert J. Broner 9,000(3) less than 1% -- --
Frank C. Doczi 154,681(3) less than 1% -- --
John W. Hechinger, Jr (2)(3) (2) (2) (2)
S. Ross Hechinger (2)(3) (2) (2) (2)
Ann D. Jordan 8,300(3) less than 1% -- --
David O. Maxwell 9,000(3) less than 1% -- --
W. Clark McClelland 144,216(3) less than 1% 1,592 less than 1%
Alan J. Zakon 8,000(3) less than 1% 2,000 less than 1%
All Directors and Executive 1,152,215 3.87% 4,735,703 38.11%
Officers as a group
(11 persons)
</TABLE>
- - ---------------
(1) By virtue of their direct holdings of the Company's shares and their
ownership interests in a family partnership and a family trust, Mr. and Mrs.
John W. Hechinger own 168,666 shares (.57%) and 90,252 shares (.31%),
respectively, of Class A common stock and 1,842,660 shares (14.83%) and
823,709 shares (6.63%), respectively, of Class B common stock. Pursuant to
the Voting Agreement with members of the Hechinger and England families and
entities controlled by them, John W. Hechinger, together with John W.
Hechinger, Jr. and S. Ross Hechinger, holds a proxy to vote a total of
1,252,957 shares (4.21%) of Class A common stock and 10,972,791 shares
(88.30%) of Class B common stock held by certain members of the Hechinger
and England families and certain family partnerships.
(2) John W. Hechinger, Jr. and S. Ross Hechinger are the adult sons of John W.
Hechinger. By virtue of their direct holdings of the Company's shares, their
spouses' holdings, their holdings as custodians for their minor children and
their interests in family partnerships,and stock option grants which are
currently exercisable into Class A common stock, John W. Hechinger, Jr. owns
319,159 shares (1.07%) of Class A common stock and 1,032,871 shares (8.32%)
of Class B common stock and S. Ross Hechinger owns 151,367 shares (.51%) of
Class A common stock and 1,032,871 shares (8.32%) of Class B common stock.
Pursuant to the Voting Agreement with members of the Hechinger and England
families and entities controlled by them, John W. Hechinger, Jr., and S.
Ross Hechinger, together with John W. Hechinger, hold proxies to vote a
total of 1,252,957 shares (4.21%) of Class A common stock and 10,972,791
shares (88.30%) of Class B common stock held by certain members of the
Hechinger and England families and entities controlled by them.
(3) The number and percentage of Class A shares represented in the table as
beneficially owned by Kenneth J. Cort, Herbert J. Broner, Frank C. Doczi,
John W. Hechinger, Jr., S. Ross Hechinger, Ann D. Jordan, David O. Maxwell,
W. Clark McClelland and Alan J. Zakon include 0; 8,000; 37,067; 204,329;
36,537; 8,000; 8,000; 60,689 and 8,000, respectively, of stock option grants
which are currently exercisable into Class A common stock.
Richard England, Catherine S. England and Joan England Akman filed a Form 4
report of their stock holdings covering two, one and two transactions,
respectively, after the required filing date.
14
<PAGE> 17
RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Ernst & Young, 1225 Connecticut Avenue, N.W., Washington, D.C.
20036, served as independent public accountants for the Company with respect to
the fiscal year ended January 29, 1994. The Board desires that firm to continue
in that capacity with respect to the current fiscal year. Accordingly, a
resolution will be presented to the meeting to ratify the appointment by the
Board of Ernst & Young as independent public accountants to audit the accounts
and records of the Company for the current fiscal year and to perform other
appropriate services. Representatives of Ernst & Young will be present at the
Annual Meeting. They will have an opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions from
stockholders. No determination has been made as to what action the Board would
take if stockholders do not ratify the selection.
SOLICITATION OF PROXIES
The cost of the solicitation of proxies will be borne by the Company. To
assist in the proxy solicitation, the Company has engaged W. F. Doring & Co.,
Inc. for a fee of $2,500 plus out-of-pocket expenses. In addition to the use of
the mails, proxies may be solicited personally or by telephone, by a few regular
employees of the Company. The Company will reimburse brokers and other persons
holding stock in their names, or in the names of nominees, for their expenses
for sending proxy materials to principals and obtaining their proxies.
This Proxy Statement is accompanied by the Annual Report, or has been
preceded by the Annual Report of the Company, which includes financial
statements for the year ended January 29, 1994. The Annual Report is not to be
regarded as part of the proxy solicitation materials.
SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1995 Annual
Meeting must be received by the Secretary of the Company, 3500 Pennsy Drive,
Landover, Maryland 20785, no later than January 19, 1995, in order to be
considered for inclusion in the 1995 Proxy Statement.
OTHER MATTERS
So far as management knows, there are no matters to come before the Annual
Meeting, other than those set forth in this Proxy Statement. If any further
business is properly presented to the meeting, the persons named in the enclosed
form of proxy and acting thereunder will have discretion to vote on such matters
in accordance with their best judgment.
By Order of the Board of Directors
Mark R. Adams
Secretary
15
<PAGE> 18
(LOGO)
<PAGE> 19
HECHINGER COMPANY
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 14, 1994
The undersigned, having received notice of meeting and management's Proxy
Statement, hereby appoint(s) W. CLARK McCLELLAND and MARK R. ADAMS, or either
one of them, attorneys, agents or proxies (with full power of substitution in
them and each of them) for and in the name(s) of the undersigned to attend the
annual meeting of the stockholders of HECHINGER COMPANY to be held on June 14,
1994, at 10:00 a.m. and any and all adjournments thereof, and there in their
discretion to vote and act in regard to all matters which may properly come
before said meeting (except those matters as to which authority is hereinafter
withheld) upon and in respect of all shares of Class A common stock and Class B
common stock of said Company which the undersigned would possess, if personally
present, and especially (but without limiting the general authorization and
power hereby given) to vote and act as follows:
1. ELECTION OF DIRECTORS
FOR / / all nominees listed below (except as marked to the contrary below):
WITHHOLDING AUTHORITY / / to vote for all nominees listed below:
JOHN W. HECHINGER, HERBERT J. BRONER, JOHN W. HECHINGER, JR., S. ROSS HECHINGER,
ANN D. JORDAN, DAVID O. MAXWELL, W. CLARK McCLELLAND, ALAN J. ZAKON
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
- - --------------------------------------------------------------------------------
2. FOR / / AGAINST / / ABSTAIN / / ratification of the appointment of Ernst &
Young as independent auditors of the Company; and,
3. On such other matters as may properly come before the meeting or at any
adjournments thereof.
(Continued on reverse side)
<PAGE> 20
The shares represented by this proxy will be voted as directed by the
stockholder. If no instructions are indicated, the undersigned's vote will be
cast FOR the election of the eight director nominees listed in the Proxy
Statement and FOR the ratification of the appointment of Ernst & Young.
Dated: -----------------, 1994
-------------------------------
-------------------------------
Signature(s)
Please sign exactly as your
name appears hereon. For stock
held jointly, each joint owner
should personally sign. For
stock held by corporation,
please affix corporate seal.
Persons signing in a fiduciary
capacity, please give full
title.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
