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:
(X) Preliminary Proxy Statement
( ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Lowe's Companies, Inc.
(Name of Registrant as Specified in its Charter)
Lowe's Companies, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
(X) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
( ) $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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:
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 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:
(Hunton & Williams suggested draft--March 28, 1994)
(Chairman and President's Letter for Lowe's)
Dear Lowe's Shareholder:
As stated in the attached Proxy Statement, Lowe's 1994
Annual Meeting will be held on Friday, May 27 at 10:00 a.m. at
our corporate headquarters in North Wilkesboro, North Carolina.
The business of this year's meeting is to elect four Class II
Directors for a term of three years, to approve an increase in
authorized Common Stock to (750) million shares, to approve
amendments to our 1985 Stock Option Plan which, among other
things, increases the number of shares covered by the plan by
1,000,000 shares, to approve a new Directors' Stock Incentive
Plan and the issuance of up to 25,000 shares under such plan, and
to approve the appointment of Deloitte & Touche as our
independent auditors for 1994. As in the past, the meeting will
include a report on Lowe's activities for the year ended January
31, 1994 and there will be an opportunity for comments and
questions from the shareholders.
Whether or not you plan to attend the meeting, it is
important that you be represented and that your shares be voted.
Accordingly, after reviewing the enclosed proxy material, we ask
you to complete, sign and date the proxy card and return it as
soon as possible in the postage-paid envelope provided. Early
return of your proxy will permit us to avoid the expense of
soliciting the votes of shareholders who are late sending in
their proxy cards.
Fiscal 1993 was a record year for Lowe's Companies, Inc.,
and we hope shareholders are as pleased with that performance as
are Lowe's Directors, management and associates. We do not plan
to rest on this performance but instead build on it for exciting
developments in the future.
Sincerely,
Robert L. Strickland Leonard G. Herring
Chairman of the Board President and CEO
LOWE'S COMPANIES, INC. Revised 3/31/94
P. O. Box 1111
North Wilkesboro, NC 28656
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 27, 1994
The Annual Meeting of Shareholders of Lowe's Companies, Inc. (the
"Company") will be held at the Company's corporate headquarters, Highway
268 East, North Wilkesboro, North Carolina, on Friday, May 27, 1994, at
10:00 a.m. to consider and act upon the following proposals:
1. To elect four Class II Directors for a term of three years;
2. To approve an amendment to the Company's Restated and Amended
Charter to increase authorized Common Stock to 750 million
shares;
3. To approve amendments to the Company's 1985 Stock Option Plan to
increase the shares available for issuance under the Plan by
1,000,000 shares, to authorize stock appreciation rights, stock
awards and incentive awards, and to extend the term of the Plan
to January 30, 2004.
4. To approve the Directors' Stock Incentive Plan and to authorize
the issuance of up to 25,000 shares of Common Stock under the
Directors' Stock Incentive Plan;
5. To approve the appointment of Deloitte & Touche as independent
certified public accountants for the fiscal year ending January
31, 1995; and
6. To transact such other business as may be properly brought before
the Annual Meeting.
Shareholders of record at the close of business on April 8, 1994, are
entitled to notice of and to vote at the meeting. All properly executed
proxies delivered pursuant to this solicitation will be voted at the
meeting in accordance with instructions, if any. If two or more proxies
are submitted by the same shareholder, the proxy bearing the later date
will revoke the prior proxy. Any proxy delivered before the meeting may be
revoked by attending the meeting and voting in person.
You are cordially invited to attend and we look forward to seeing you
at the meeting.
Sincerely,
Robert L. Strickland Leonard G. Herring
Chairman of the Board President & CEO
North Wilkesboro, North Carolina
April --, 1994
IF YOU DO NOT PLAN TO ATTEND THE MEETING, PLEASE DATE AND SIGN THE PROXY
AND MAIL AT ONCE IN THE ENCLOSED ENVELOPE.
LOWE'S COMPANIES, INC.
P. O. Box 1111
North Wilkesboro, North Carolina 28656
910/651-4000
Proxy Statement
for
Annual Meeting of Shareholders
May 27, 1994
This Proxy Statement is being furnished in connection with the
solicitation by the Board of Directors of Lowe's Companies, Inc. (the
"Company") of proxies to be voted at the Annual Meeting of Shareholders to
be held at the Company's corporate headquarters, Highway 268 East, North
Wilkesboro, North Carolina, on Friday, May 27, 1994, at 10:00 a.m. It is
anticipated that this Proxy Statement and the enclosed form of proxy will
be sent to shareholders on April --, 1994.
Only shareholders of record at the close of business on April 8, 1994,
are entitled to notice of and to vote at the meeting or any adjournment
thereof. On April 8, 1994, there were ------------ shares of Common Stock
of the Company outstanding and entitled to vote. Shareholders are entitled
to one vote for each share held on all matters to come before the meeting.
The shares represented by a proxy will be voted as directed unless the
proxy is revoked. Any proxy may be revoked before it is exercised by
filing with the Secretary of the Company an instrument revoking the proxy
or a proxy bearing a later date. A proxy is revoked if the person who
executed the proxy is present at the meeting and elects to vote in person.
Important Note: On March 16, 1994, the Company's Common Stock was
split two for one. All per share information in this Proxy Statement has
been adjusted to reflect the two for one stock split effective March 16,
1994.
ELECTION OF CLASS II DIRECTORS
There are currently nine members of the Board of Directors, which is
divided into three classes, with one class to be elected each year for a
three-year term. The term of Class II Directors is expiring at the 1994
Annual Meeting. Because a new nominee is being presented to shareholders
for election, the Board of Directors is being expanded to ten members and
Class II is being expanded to four members. The four nominees listed below
have been nominated by the Board of Directors, as recommended by the
Executive Committee, to a three-year term as Class II Directors. If
elected, each Class II nominee will serve three consecutive years with
his/her term expiring in 1997 or until a successor is elected and
qualifies. Unless authority to vote in the election of Directors is
withheld, it is the intention of the persons named as Proxies to vote FOR
the four nominees named below, all of whom, except Carol A. Farmer,
currently serve as Directors. If at the time of the meeting any of these
nominees shall become unavailable for election as a Director for any
reason, which is not expected to occur, the persons named as Proxies will
vote for such substitute nominee or nominees, if any, as shall be
designated by the Board of Directors.
-2-
INFORMATION CONCERNING CLASS II NOMINEES
Nominees for Election for Three-Year Term (Class II Directors to serve
until the 1997 Annual Meeting)
<TABLE>
Director Business Experience, Directorships, and
Name and Age Since Positions within the Last Five Years
<S> <C> <C>
Carol A. Farmer, 49 . . N/A President of Carol Farmer Associates, Inc. (Trend
Forecasting and Consulting), Boca Raton, Fla., since
1985.
Leonard G. Herring, 66 1956 President and Chief Executive Officer since 1978,
Chairman of Non-Employee Directors' Stock Option
Committee, Member of Executive Committee and
Government/Legal Affairs Committee of the Company.
Other directorships: First Union Corporation,
Charlotte, N. C., since 1986.
Robert G. Schwartz, 66 1973 Chairman of Compensation/Employee Stock Option
Committee, Member of Audit Committee and Committee
of Outside Directors of the Company. Director of
Metropolitan Life Insurance Company, New York, N. Y.,
since 1980, having served as Chairman of the Board
(1983-1993), President and Chief Executive Officer
(1989-1993) of that company. (Mr. Schwartz retired
in March, 1993.) Other directorships: Potlatch
Corporation, San Francisco, Calif., since 1973;
Comsat Corporation, Washington, D. C., since 1986;
Mobil Corporation, New York, N. Y., since 1987; The
Reader's Digest Association, Inc., Pleasantville, N.
Y., since 1989; Consolidated Edison Company of New
York, New York, N. Y., since 1989; CS First Boston,
Inc., New York, N. Y., since 1989; Lone Star
Industries, Inc., Stanford, Conn., since 1994.
Jack C. Shewmaker, 56 . 1985 Member of Compensation/Employee Stock Option
Committee, Executive Committee and Committee of
Outside Directors of the Company. Director of Wal-
Mart Stores, Inc. (Discount Retail Chain),
Bentonville, Ark., since 1977, having previously
served as Vice Chairman of the Board (1984-1988),
President and Chief Operating Officer (1978-1984) of
that company. (Mr. Shewmaker retired in February,
1988.) Other directorships: Vons Companies, Inc.,
El Monte, Calif., since 1988.
</TABLE>
-3-
INFORMATION CONCERNING CONTINUING DIRECTORS
The Directors whose terms expire after 1994 are:
Class III Directors, term expiring in 1995
<TABLE>
Director Business Experience, Directorships, and
Name and Age Since Positions within the Last Five Years
<C> <C> <C>
Gordon E. Cadwgan, 80 . 1961 Chairman of Audit Committee, Member of
Compensation/Employee Stock Option Committee,
Executive Committee and Committee of Outside
Directors of the Company. Trustee and Financial
Consultant, affiliated with Tucker Anthony, Inc.,
Boston, Mass., since 1979. Other directorships:
Third Century Fund, Inc., Providence, R. I., since
1981.
Petro Kulynych, 72 . . 1952 Member of Audit Committee, Executive Committee, and
Government/Legal Affairs Committee of the Company,
having previously served as Managing Director (1978-
1983). (Mr. Kulynych retired in December, 1983.)
Other directorships: Local Board, Wachovia Bank of
North Carolina, N. A., North Wilkesboro, N. C., since
1988; Carolina Motor Club, Inc.
Russell B. Long, 75 . . 1987 Chairman of Government/Legal Affairs Committee,
Member of Compensation/Employee Stock Option
Committee and Committee of Outside Directors of the
Company. Partner, Long Law Firm (Attorneys-at-Law),
Washington, D. C., since 1988. Other directorships:
Catalyst Vidalia Corp., Vidalia, La., since 1989; The
New York Stock Exchange, Inc., New York, N. Y., since
1987. Other: United States Senator 1948-1987;
Member, Senate Finance Committee 1952-1987 (Chairman
1965-1981).
</TABLE>
-4-
Class I Directors, term expiring in 1996
<TABLE>
Director Business Experience, Directorships, and
Name and Age Since Positions within the Last Five Years
<S> <C> <C>
William A. Andres, 67 1986 Chairman of Committee of Outside Directors, Member of
Audit Committee and Compensation/Employee Stock
Option Committee of the Company. Previously Chairman
of the Board (1976-1983), Chairman of Executive
Committee (1983-1985) of Dayton Hudson Corporation
(Retail Chain), Minneapolis, Minn. (Mr. Andres
retired in September, 1985.) Other directorships:
Jostens, Inc., Minneapolis, Minn., since 1985; Scott
Paper Company, Philadelphia, Penn., since 1983;
Multifoods, Inc., Minneapolis, Minn., since 1978;
Hannaford Bros., Scarborough, Me., since 1986.
John M. Belk, 74 . . . 1986 Member of Audit Committee, Compensation/Employee
Stock Option Committee and Committee of Outside
Directors of the Company. Chairman of the Board,
Belk Stores Services, Inc. (Retail Department
Stores), Charlotte, N. C., since 1980. Other
directorships: Coca-Cola Bottling Company
Consolidated, Charlotte, N. C., since 1972; Chaparral
Steel, Midlothian, Tex., since 1987.
Robert L. Strickland, 63 1961 Chairman of the Board since 1978, Chairman of
Executive Committee, Member of
Government/Legal Affairs Committee and Non-
Employee Directors' Stock Option Committee of
the Company. Other directorships: Summit
Communications, Atlanta, Ga., since 1987; T.
Rowe Price Associates, Inc., Baltimore, Md.,
since 1991.
</TABLE>
-5-
INFORMATION ABOUT THE BOARD OF DIRECTORS AND
COMMITTEES OF THE BOARD
Compensation of Directors--Standard Arrangements. Employee Directors
receive no Director or Committee compensation. Directors (other than
Founding Directors) who were not otherwise employed by the Company were
paid, during Fiscal 1993, an annual retainer of $20,000. Non-employee
Founding Directors were paid a retainer of $40,000 each (Gordon E. Cadwgan
and Petro Kulynych are non-employee Founding Directors.) Committee
members were paid an additional $5,000 for serving as a member of a
permanent committee with Committee Chairmen having been paid an additional
$10,000. The maximum amount paid during Fiscal 1993 to any one Director
(pursuant to the terms of the Company's Director Compensation Plan) was
$45,000 except for Mr. Cadwgan who received an additional $1,400 (plus
expenses) for serving as a Director on the Board of one of the Company's
wholly owned subsidiaries.
Compensation of Directors--Other Arrangements. The Director
compensation arrangement also provides that once a Founding Director elects
to retire, such Director will be compensated for life at an annual rate
equal to 50% of the most recent basic annual Director fee paid to any
Founding Director.
In 1989, the Company's shareholders approved the Lowe's Companies,
Inc. 1989 Non-Employee Directors' Stock Option Plan. Under this Plan, each
outside Director was granted annually an immediately exercisable stock
option to purchase 4,000 shares of Common Stock at the first Directors'
Meeting following the Annual Meeting in 1989, 1990, 1991, 1992 and 1993.
The option price is determined under a formula that takes into account the
Directors' federal tax liability attributable to exercising the option and
the shares' value on the date of exercise and the date of grant. Two
hundred thousand shares of Common Stock (as adjusted for the 2-for-1 stock
splits in 1992 and 1994) were reserved under the Plan for the granting of
options, of which options covering 140,000 shares have been granted.
During 1993, options covering 28,000 shares were granted at a price of
$9.6875 per share and exercisable for 10 years covering 4,000 shares each
for non-employee Directors Andres, Belk, Cadwgan, Kulynych, Long, Schwartz
and Shewmaker. No additional options may be granted under this Plan.
During Fiscal 1993, Mr. Cadwgan exercised options for 8,000 shares and
realized a net gain on the shares of $118,624 (representing the difference
between the market value at the date of exercise and the option exercise
price. Mr. Shewmaker exercised options for 20,000 shares and realized a
net gain on the shares of $309,500 (representing the difference between the
market value at the date of exercise and the option exercise price. In
accordance with the provisions of the option agreements between Messrs.
Cadwgan and Shewmaker and the Company, the Company applied part of the
proceeds of the option exercise price to make federal income tax deposits
on behalf of Messrs. Cadwgan and Shewmaker.
Board of Directors--During Fiscal 1993, the Board of Directors held
five meetings. The Board has five standing committees which met the number
of times set forth in parentheses: Executive (3), Audit (4),
Compensation/Employee Stock Option (3), Government/Legal Affairs (0) and
Outside Directors (0). All Directors attended at least 75% of the meetings
-6-
of the Board and committees on which they served with the exception of
Senator Long who attended 63% of such meetings.
Audit Committee--The Company's Audit Committee consists of five non-
employee Directors: Gordon E. Cadwgan (Chairman), William A. Andres, John
M. Belk, Petro Kulynych and Robert G. Schwartz. The Audit Committee meets
independently with the internal auditing staff, with representatives of the
Company's independent accountants and with representatives of senior
management. The Committee reviews the general scope of the Company's
annual audit and the fee charged by the independent accountants, determines
the duties and responsibilities of the internal auditors, reviews audit
results and other matters relating to internal control. In addition, the
Audit Committee recommends annually the engagement of the Company's
independent accountants.
Compensation/Employee Stock Option Committee--The Company's
Compensation/Employee Stock Option Committee consists of six non-employee
Directors: Robert G. Schwartz (Chairman), William A. Andres, John M. Belk,
Gordon E. Cadwgan, Russell B. Long and Jack C. Shewmaker. This Committee
reviews and sets, at least annually, the compensation of Directors who are
employees of the Company; reviews the compensation of all other employees
whose annual salary and bonus opportunities exceed a certain level; reviews
and approves all annual bonus plans; reviews and approves all forms of
compensation which exceed one year in duration, including employee stock
option and deferred compensation awards; administers and interprets all
provisions of any compensation, employee stock option or stock appreciation
rights plans approved by the Board; and grants options pursuant to the
terms of any employee stock option or stock appreciation rights plan.
Executive Committee--The Company's Executive Committee consists of
five Directors: Robert L. Strickland (Chairman), Gordon E. Cadwgan,
Leonard G. Herring, Petro Kulynych and Jack C. Shewmaker. The Executive
Committee exercises all of the powers of the Board of Directors between
Board meetings, except as otherwise limited by law. In addition, this
Committee functions as a nominating committee by recommending nominees for
election as Directors of the Company. This Committee considers nominees
recommended by shareholders. Any such recommendation should be submitted
in writing to the Secretary of the Company no later than 120 days prior to
the date of mailing the proxy materials for each annual meeting (generally,
not later than the end of November preceding the annual meeting). Such
recommendation should include information that will enable the Committee to
evaluate the qualifications of the proposed nominee.
Government/Legal Affairs Committee--The Government/Legal Affairs
Committee of the Company consists of four members: Russell B. Long
(Chairman), Leonard G. Herring, Petro Kulynych and Robert L. Strickland.
This Committee assists the Board of Directors with the Company's
relationships with federal, state and local governments. The Committee
also assists the Board and management in responding to and initiating
legislative proposals at all three governmental levels.
Committee of Outside Directors--The Company also has a Committee of
Outside Directors which consists of six non-employee Directors: William A.
Andres (Chairman), John M. Belk, Gordon E. Cadwgan, Russell B. Long, Robert
G. Schwartz and Jack C. Shewmaker. This Committee, performs, at the
-7-
direction of the Board of Directors, special projects appropriately
assigned to outside directors.
-8-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table shows the beneficial ownership as of April 8,
1994, except as noted, of Common Stock of each incumbent Director of the
Company, each nominee for election as a Director of the Company, each
shareholder known to the Company to be the beneficial owner of more than 5%
of the Company's Common Stock, and Directors and Executive Officers as a
group:
<TABLE>
Percent
Name or Number of Persons Number of (1) of Class
in Group Shares
<S> <C> <C>
William A. Andres 34,000 *
John M. Belk 32,000 *
Gordon E. Cadwgan 105,476 *
Carol A. Farmer -0- *
Leonard G. Herring 1,859,610 (2) -
Petro Kulynych 2,234,060 (3) -
Russell B. Long 76,400 *
R. Michael Rouleau 30,000 *
Robert G. Schwartz 40,000 (4) *
Jack C. Shewmaker 21,600 *
Robert L. Strickland 1,374,410 (5) *
Robert L. Tillman 93,078 *
Harry B. Underwood II 76,060 *
Incumbent Directors, Director Nominees
and Executive Officers as a Group (20 in total) 6,090,324 (6)
----
Lowe's Companies Employee Stock
Ownership Trust
P. O. Box 1111
North Wilkesboro, NC 28656 - (6) -
FMR Corp.
82 Devonshire Street
Boston, MA 02109 19,824,472 (7) -
Loomis, Sayles & Company,
Incorporated
One Financial Center
Boston, MA 02111 7,728,448 (7) -
------------------------------
* Less than 1%.
(1) Includes shares that may be acquired within 60 days under the
Company's Stock Option Plans as follows: Mr. Andres 20,000 shares;
Mr. Belk 20,000 shares; Mr. Cadwgan 8,000 shares; Mr. Herring 10,000
shares; Mr. Kulynych 20,000 shares; Mr. Schwartz 20,000 shares; Mr.
Strickland 20,000 shares; Mr. Tillman 16,000 shares; Mr. Underwood
-9-
16,000 shares; with aggregate shares for all Executive Officers and
Directors as a group (19) being 150,000.
(2) Includes 81,300 shares of shared voting and investment power.
(3) Includes 82,000 shares of shared voting and investment power. Also
includes 1,420,000 shares in a self-directed individual retirement
account.
(4) Does not include 33,400 shares beneficially owned by Metropolitan Life
Insurance Company of which Mr. Schwartz currently serves on the Board
of Directors. (Mr. Schwartz retired as Chairman of the Board,
President and Chief Executive Officer of Metropolitan Life Insurance
Company in March, 1993.)
(5) Includes 164,000 shares of shared voting and investment power.
(6) Shares allocated to participants' ESOP accounts are voted by the
participants, via proxy solicitations from Wachovia Bank of North
Carolina, N.A. (the "Trustee"). The ESOP's Management Committee
directs the Trustee in the manner in which shares not allocated to
participants' accounts are to be voted. The Management Committee has
18 members, including Messrs. Herring, Strickland, Rouleau, Tillman
and Underwood. At April 8, 1994, there were ---------- unallocated
shares.
(7) Shares held at December 31, 1993.
</TABLE>
Based solely on its review of the forms required to be filed by
Section 16(a) of the Securities Exchange Act of 1934 that have been
received by the Company and written representations from certain reporting
persons that no annual statements on Form 5 were required, the Company
believes that all filing requirements under Section 16(a) applicable to its
Officers, Directors and beneficial owners of more than 10% of its Common
Stock have been complied with.
COMPENSATION OF EXECUTIVE OFFICERS
The following table discloses compensation received by the Company's
Chief Executive Officer and the four remaining most highly paid Executive
Officers for the three fiscal years ended January 31, 1994:
-10-
<TABLE>
SUMMARY COMPENSATION TABLE
for Fiscal Year Ended January 31, 1994(1)
Long-Term
Annual Compensation Compensati
on
(a) (b) (c) (d) (e) (f) (g)
Fiscal Year Other Stock All Other
Name & Principal Ending Jan. Salary Bonus Annual Options Compensation
Position 31 Compensati (in (3)
on(2) shares)
<S> <C> <C> <C> <C> <C> <C>
Leonard G. Herring 1994 $535,000 $373,750 $173,523 0 $19,500
President & CEO
1993 $495,000 $253,500 $146,397 0 $30,000
1992 $430,000 $0 $79,269 0 $28,889
Robert L. Strickland 1994 $497,500 $341,250 $157,961 0 $19,500
Chairman of the Board
1993 $470,000 $240,500 $137,950 0 $30,000
1992 $410,000 $0 $74,652 0 $28,889
Robert L. Tillman 1994 $321,000 $180,000 $82,910 0 $19,500
Executive Vice
President - 1993 $281,381 $147,010 $65,235 0 $30,000
Merchandising
1992 $245,000 $0 $25,278 0 $28,889
R. Michael Rouleau 1994 $321,000 $180,000 $0 0 $16,298
Executive Vice
President - 1993 $149,998 $75,210 $0 30,000 $0
Store Operations 1992(4) NA NA NA NA NA
Harry B. Underwood II 1994 $203,846 $118,500 $43,160 0 $19,500
Senior Vice President
& Treasurer (Chief
Financial Officer) 1993 $195,537 $114,000 $38,812 0 $30,000
1992 $190,000 $0 $14,220 0 $25,275
Footnotes:
(1) Does not include awards made on January 31, 1994 for the fiscal year ending January 31, 1995
described in the New Plan Benefit Table included in this Proxy Statement.
(2) All amounts shown in column (e) are payments from the Company's Benefits Restoration Plan
(3) Amounts shown are 1993 contributions made by the Company to the Employee Stock Ownership Plan
(4) Mr. Rouleau was employed 8/1/92; consequently, no compensation was paid during the fiscal year
ended 1/31/92
</TABLE>
-11-
-12-
OPTION GRANTS IN LAST FISCAL YEAR
No options were granted to the named Executive Officers during Fiscal
1994.
-13-
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises in Fiscal
1993 by the named Executive Officers and the value of such Officers'
unexercised options at January 31, 1994. All outstanding options were
exercisable at that date.
<TABLE>
(a) (b) (c) (c1)(optional) (d1) (d2) (e1) (e2) (e3)
Value of Unexercised In-the-Money
Shares Annualized Number of Unexercised Options at FY-End ($)($30.50 on 1/31/94(1)
Acquired on Value Value Options at FY-End (#) Exercisable Unexercisable
Name Exercise (#) Realized ($) Realized($) Exercisable Unexercisable Aggregate Annualized
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Leonard G. 24,000 $441,875 $89,123 10,000 0 $241,250 $51,882 $0
Herring (1)
Robert L. 0 $0 $0 20,000 0 $482,500 $103,763 $0
Strickland
Robert L. 8,000 $124,000 $22,262 16,000 0 $386,000 $83,011 $0
Tillman (2)
R. Michael 0 $0 $0 30,000 0 $609,375 $491,431 $0
Rouleau
Harry B. 12,000 $285,750 $47,310 16,000 0 $386,000 $83,011 $0
Underwood II
(3)
(1) Mr. Herring exercised two grants during Fiscal 1993. One grant of
14,000 shares was held for 5.45 years with an option price of $4.0625
and a market price of $18.4375 at date of exercise. The second grant
of 10,000 shares was held for 4.61 years and had an option price of
$6.375 and a market price of $30.4375 at date of exercise. In
accordance with a formula set forth in the agreement evidencing the
second grant, the Company made a federal tax deposit of $58,610 on
behalf of Mr. Herring. The annualized value realized indicates the
value accrued for each year the option grants were held. The
annualized value was determined by dividing the Value Realized for
each option by the number of years each option was held.
(2) The grant exercised by Mr. Tillman was held for 5.57 years; the option
price was $4.0625 and the market price at exercise was $19.5625. The
annualized value realized indicates the value accrued for each year
-14-
the option grant was held. The annualized value was determined by
dividing the Value Realized by the 5.57 years the option was held.
(3) The grant exercised by Mr. Underwood was held for 6.04 years; the
option price was $4.0625 and the market price at exercise was $27.875.
The annualized value realized indicates the value accrued for each
year the option was held. The annualized value was determined by
dividing the Value Realized by the 6.04 years the option was held.
(4) This column shows the annualized value of the unexercised in-the-money
options which had not been exercised at fiscal year end.
</TABLE>
-15-
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
There were no awards under the Company's Long-Term Incentive Plan for
the fiscal year ended January 31, 1994.
-16-
REPORT OF THE COMPENSATION/EMPLOYEE
STOCK OPTION COMMITTEE
This report by the Executive Compensation Committee is required by
rules of the Securities and Exchange Commission. It is not to be deemed
incorporated by reference by any general statement which incorporates by
reference this Proxy Statement into any filing under the Securities Act of
1933 or the Securities Exchange Act of 1934, and it is not to be otherwise
deemed filed under either such Act.
The Compensation/Employee Stock Option Committee (the "Committee") of
the Board of Directors is comprised of six of the Company's non-employee
Directors and is responsible for administering the Company's Executive
Compensation Program for all executives at a compensation level set by the
Company's Bylaws. In carrying out its responsibilities, the Committee:
. Articulates the Company's executive compensation philosophies and
policies to executive management, participates in compensation
program development, and has final authority for approval of plans
and programs except where shareholder approval is required;
. Monitors and approves on-going base salary and incentive
compensation programs for executive management, including
participation, performance goals and criteria interpretation of
provisions and determination of award payouts;
. Reviews and approves base salary increase recommendations for
Executive Officers of the Company; and
. Initiates all compensation actions for the President and Chief
Executive Officer and the Chairman of the Board, subject to final
Board approval.
The Committee has retained a national consulting firm to be a source
of on-going advice to both the Committee and management, but to report to
the Committee.
Executive Compensation Principles
The Company's Executive Compensation Program has been designed to
establish a strong linkage between the creation of shareholder value and
the compensation earned by its senior executives. It is the intention of
the Committee that all compensation paid under the Executive Compensation
Program of the Company will be tax deductible to the Company in the year
paid to the executive. The fundamental objectives of the Program are to:
. Align executive compensation with the Company's mission, values and
business strategies;
. Attract, motivate, retain and reward the executives whose
leadership and performance are critical to the Company's success in
enhancing shareholder value; and
-17-
. Provide compensation which is commensurate with the Company's
performance and the contributions made by executives toward this
performance.
The Program is intended to provide compensation which is competitive
with comparable companies in the retailing industry (with particular
emphasis on specialty hardgoods retailers and major U.S. retailers) when
the Company is meeting its targeted financial goals. At the same time, the
Program seeks to provide above average compensation when the Company's
targeted goals are exceeded, and below average compensation when targeted
performance goals are not achieved.
The Program provides for larger portions of total compensation to vary
on the basis of Company performance for higher levels of executives (i.e.,
the most senior Executive Officers have more of their total compensation at
risk on the basis of Company performance than do lower levels of
executives). All Executive Officers participate in the same direct
compensation programs as the other executives of the Company, with the only
differences being the degree of compensation risk and the overall magnitude
of the potential awards.
The Committee believes that Executive Officers of the Company should
be encouraged to own significant holdings of the Company's Common Stock to
align their interests with those of the Company's shareholders. Through
the operation of the Company's Employee Stock Ownership Plan, the Employee
Savings and Investment Plan and the proposed 1994 Incentive Plan, vehicles
are provided to enable executives to acquire Company Stock.
Elements in the Executive Compensation Program
The Company's Executive Compensation Program is comprised of the
following elements:
Base Salary
Salaries for Executive Officers are established on the basis of the
qualifications and experience of the executive, the nature of the job
responsibilities and salaries for competitive positions in the retailing
industry.
Executive Officers' base salaries are reviewed annually and are
approved by the Committee. Salaries of Executive Officers are compared
with those of comparable executive positions in the retailing industry
throughout the United States. The Committee uses the median level of base
salary as a guideline, in conjunction with the executive's performance and
qualifications, for establishing salary levels.
Management Bonus Program
All Executive Officers participate in the Company's Management Bonus
Program. This Plan provides award opportunities which can be earned upon
achievement by the Company of pre-set annual financial goals. Based on the
annual business plan developed by management, the Committee establishes
financial goals for each fiscal year as well as the award opportunities
-18-
provided to each participant and the relationship between the performance
goals and the award opportunities.
Under the Plan, no bonuses are paid if performance is below the
threshold level of corporate profitability set by the Committee at the
beginning of the year. If the threshold level is achieved, a minimum bonus
payment is earned, typically 25% of the stated bonus opportunity for the
executive. Additional bonus amounts are earned on a proportionate scale
up to 100% of the stated bonus opportunity if pre-set financial goals are
met. Designated senior managers and executives can earn a bonus premium
ranging from 27% to 43% of stated bonus opportunity if financial goals are
exceeded. The maximum bonus, including bonus premium, which can be earned
by any executive of the Company for 1994 is 70% of base annual salary.
No bonuses were paid under the Plan for performance in the fiscal year
ended January 31, 1992 because the Company's financial results did not meet
the Plan's minimum requirements.
Maximum bonuses were paid under the Plan for the fiscal years ended
January 31, 1993 and January 31, 1994 because the Company's financial
results exceeded the performance goals which the Committee had established
for the year.
Stock Appreciation Incentive Plan
The Stock Appreciation Incentive Plan is a "phantom stock" incentive
plan which provides participating executives with the opportunity to earn
cash incentive awards based on the basis of the Company's stock price
appreciation during a defined performance cycle. Each participant is
granted a specified number of units (reflecting the nature and magnitude of
the executive's position and competitive marketplace long-term incentive
compensation opportunities). The amount of award earned by the participant
for the performance cycle is equal to the difference between the price of
the Company's Common Stock at the beginning of the cycle and the two-month
average stock price as measured at the end of the period, multiplied by the
number of units granted to the participant. The amount of incentive
compensation which can be paid to any participant for a performance cycle
is limited to $6,250 per 1,000 units.
At the end of the performance cycle that began February 1, 1991 and
ended January 31, 1994, a total of 671,112 Plan units had been granted and
remained outstanding to 82 executives, including Messrs. Tillman and
Underwood (32,000 and 24,000 units, respectively). The Company's stock
price at the beginning of the performance cycle was $6.28 per share and
$29.875 per share during the Final Valuation period at the end of the
cycle, resulting in maximum payments under terms of the Plan. Messrs.
Herring, Rouleau and Strickland have not been granted units under the Plan.
No grants were made under the Plan during the year ended January 31, 1994.
The term of the Stock Appreciation Incentive Plan has expired and no
further awards may be made under the Plan.
-19-
1985 Stock Option Plan
The 1985 Stock Option Plan allows the Committee to make grants of
non-qualified stock options and/or incentive stock options. The Committee
is empowered to set the option price on any grant (with the requirement
that the option price on any incentive stock options cannot be less than
the market price of the Company's Common Stock on the date on which the
incentive stock option is granted). Non-qualified stock options may be
granted at market price, below market price or above market price, as of
the date the options are granted. All stock options which have been
granted under the Plan measure performance and create compensation solely
on the basis of the appreciation in the price of the Company's Common Stock
above the fair market value on the date of the grant.
All options under the Plan must be granted prior to March 25, 1995,
and no option may have a term exceeding ten years. Four million shares of
the Company's Common Stock were originally authorized for grants under the
Plan. Of that amount, options covering 2,814,000 shares had been granted
by January 31, 1994 and 154,220 shares continued to be outstanding and
unexercised on that date.
1994 Incentive Plan
On January 31, 1994, the Board of Directors voted to amend and restate
the 1985 Stock Option Plan as the 1994 Incentive Plan. The 1994 Incentive
Plan is submitted for shareholder approval in this Proxy and described
herein.
The purpose of the 1994 Incentive Plan is to enable the Company to
attract, motivate, retain and reward the executives whose leadership and
performance are critical to the Company's success in enhancing shareholder
value, to place further emphasis on executive ownership of Company Stock,
to continue previously established incentive compensation practices under a
single plan and to assure deductibility of executive compensation.
Benefit Restoration Plan
The Benefit Restoration Plan was adopted by the Company in May 1990,
to provide qualifying executives with benefits equivalent to those received
by all other employees under the Company's basic qualified employee benefit
plans. Qualifying executives are those executives whose annual additions
and other benefits, as normally provided to all participants under those
qualified plans, would be curtailed by the effect of Internal Revenue Code
restrictions, and who are selected by the Committee to participate in the
Plan. The Benefit Restoration Plan benefits are determined annually.
Participating executives may elect annually to defer benefits or to receive
a current cash payment.
Other Compensation
The Company's Executive Officers participate in the various qualified
and non-qualified employee benefit plans sponsored by the Company. The
Company makes only nominal use of perquisites in compensating its executive
officers.
-20-
The CEO's Compensation in the Fiscal Year Ended January 31, 1994
Effective August 1, 1993, the Committee increased Mr. Herring's
annual base salary from $495,000 to $575,000. This increase of 16% was the
first salary increase received by Mr. Herring since February 1, 1992. The
Committee based its determination on the combination of the progress made
by the Company in establishing and implementing its new retailing
strategies, the operating performance of the Company, Mr. Herring's
leadership and the assessment that his prior base salary was below market
in comparison to those of other Chief Executive Officers of similarly
situated companies.
The Committee authorized payment to Mr. Herring of an annual bonus of
$373,750 under the 1993 Management Bonus Program. The Committee determined
Mr. Herring's bonus solely on the basis of the Company's earnings
performance versus the goals for such performance which the Committee
established at the beginning of the year. Inasmuch as the Company's
performance for the year exceeded the pre-set goals, Mr. Herring earned his
maximum award opportunity.
Mr. Herring did not receive any grants under either the 1985 Stock
Option Plan or under the Stock Appreciation Incentive Plan during the
fiscal year ended January 31, 1994. Furthermore, Mr. Herring was not a
participant in the 1991-1994 performance cycle of the Stock Appreciation
Incentive Plan. Subject to shareholder approval of the 1994 Incentive
Plan, the Committee granted Mr. Herring three STAR Awards of 5,000 Units
each with terms of one year, two years and three years, with a Beginning
Valuation of $30.50 per unit. The maximum appreciation has been set at
$2.50 per Unit for the one-year award, $5.00 per Unit for the two-year
award, and $7.50 per Unit for the three-year award. The Committee also
approved, subject to shareholder approval of the 1994 Incentive Plan, the
grant to Mr. Herring of 10,000 Performance Accelerated Restricted Stock
(PARS) shares as of January 31, 1994 which will vest after seven years, but
provide for accelerated vesting if certain performance measures are met
after three years and/or five years.
Mr. Herring received a Benefit Restoration Plan payment of $173,523
and a Company contribution under the Employee Stock Ownership Plan of
$19,500 (such amount was equal to 13% of $150,000, the maximum salary which
can be taken into account for benefit plan contributions) for the fiscal
year ended January 31, 1994. The Committee believes that the payments
described herein were necessary to maintain the competitiveness of Mr.
Herring's compensation package in comparison to those of other Chief
Executive Officers of similarly situated companies.
* * *
-21-
The Committee believes that the Company's Executive Compensation
Program has been strongly linked to the Company's performance and the
enhancement of shareholder value. The Committee intends to continually
evaluate the Company's compensation philosophies and plans to ensure that
they are appropriately configured to align the interests of executives and
shareholders, and to ensure that the Company can attract, motivate and
retain talented management personnel.
Robert G. Schwartz, Chairman
William A. Andres
John M. Belk
Gordon E. Cadwgan
Russell B. Long
Jack C. Shewmaker
-22-
PERFORMANCE GRAPH
The following graph compares the total returns (assuming reinvestment
of dividends) of the Company's Common Stock, the S&P 500 Index and the S&P
Retail Index. The graph assumes $100 invested on January 31, 1989, in the
Company's Common Stock and each of the indices.
Comparison of 5 Year Cumulative Total Return of Lowe's, the S&P 500, and
the S&P Retail Index
(GRAPH AS DEFINED BY THE FOLLOWING DATA POINTS)
Jan- Jan- Jan- Jan- Jan- Jan-
89 90 91 92 93 94
Lowe's 100 121.29 115.78 189.31 258.50 575.26
S&P 500 100 114.37 123.75 151.40 166.88 187.68
S&P Retail 100 116.49 133.84 180.72 237.54 232.13
Index
-23-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Banking and Financial Transactions. During Fiscal 1993, the Company
paid all outstanding indebtedness ($676,825) to Metropolitan Life Insurance
Company. Robert G. Schwartz, a Director of the Company, serves on the
Board of Directors of Metropolitan Life Insurance Company. (Mr. Schwartz
retired as Chairman of the Board, President and Chief Executive Officer of
Metropolitan Life Insurance Company in March, 1993.)
At January 31, 1994, the Company and certain subsidiaries of the
Company were indebted to First Union National Bank, a subsidiary of First
Union Corporation, in the amount of $17,108,411 at annual interest rates
varying from 7% to the Bank's prime rate as in effect from time to time
plus 1% with maturities in 1994. Also at January 31, 1994, the Company
and certain subsidiaries of the Company were indebted to various Industrial
Development Boards for which First Union National Bank acts as a collecting
agent. The amount at January 31, 1994, was $2,395,834 at annual interest
rates varying from 70.0% to 75.8% of First Union's prime rate as in effect
from time to time with maturities ranging from 1994 through 2000. The
Company has a line of credit agreement with First Union National Bank which
provides for short-term unsecured borrowings of up to $30 million. At
January 31, 1994, there were no amounts outstanding under this credit
arrangement. The applicable interest rate for this credit arrangement is
the lesser of the Bank's certificate of deposit rate plus 50 basis points,
the Bank's prime rate, the LIBOR rate plus 37.5 basis points, or a rate
negotiated with the Bank. Under this arrangement, the Company pays an
annual fee of 12.5 basis points on the $30 million line of credit. The
amount of fees paid during Fiscal 1993 was $37,500. The Company also has
an arrangement with First Union National Bank for a $45 million line of
credit for the purpose of issuing letters of credit and bankers
acceptances. Other than a commission fee on letters of credit issued under
this arrangement, there are no fees charged for maintaining this line of
credit. In addition, First Union National Bank extends a $15 million line
of credit to a nonaffiliated entity that purchases, on an on-going basis,
an undivided interest in Company accounts receivable which are generated in
the normal course of business. Leonard G. Herring, President and a
Director of the Company, is a member of the Board of Directors of First
Union Corporation.
Except as discussed above and under "Compensation of Directors--
Standard Arrangements", to the knowledge of management, no Director,
Officer, or associate of any Director or Officer had any material interest,
direct or indirect, in any material transaction during the year ended
January 31, 1994, nor in any proposed transaction in which the Company was
or will be a party. The Company believes the terms of the transactions
described above are comparable to terms available for similar transactions
with entities unaffiliated with its Directors and Officers.
APPROVAL OF CHARTER AMENDMENT TO
INCREASE AUTHORIZED COMMON STOCK
The Board of Directors has recommended an amendment of the Company's
Restated and Amended Charter, in the form below, to increase authorized
Common Stock, $.50 par value, to (750,000,000) shares. As of April 8,
1994, the Company has approximately ( ) shares of Common Stock
-24-
outstanding. The amendment would effect no change in the currently
authorized 5,000,000 shares of Preferred Stock, $5 par value.
The amendment will permit future dividends and splits of the Common
Stock. While the Board of Directors has no present plans to declare a
stock split (since the Common Stock was only recently split two-for-one on
March 16, 1994) the Board, nonetheless, believes it advisable to have the
ability to declare a stock split when circumstances warrant. Currently,
there are insufficient authorized but unissued shares to declare a two-for-
one stock split in the form of a dividend.
Adoption of this proposal to increase authorized Common Stock to
(750,000,000) shares requires the affirmative vote of an absolute majority
of outstanding shares of Common Stock.
If authorized, additional Common Stock will be available for possible
future financings of, or acquisitions by, the Company and for general
corporate purposes without any legal requirement that further shareholder
authorization for the issuance be obtained. The Company has no present
plans for the issuance of any Common Stock other than the issuance of
shares in the Company's 1985 Stock Option Plan, the Non-Employee Directors
Plan and Employee Stock Ownership Plan and the proposed Directors Stock
Incentive Plan and 1994 Incentive Plan, all as described in this Proxy
Statement. The Board of Directors has approved funding the Fiscal 1993
contribution to the Employee Stock Ownership Plan with previously unissued
Common Stock during 1994.
Shareholders should be aware that the issuance of any additional
shares of Common Stock could cause a dilution of voting rights and net
income and net book value per share of Common Stock; prior to issuance, of
course, they have no such effect. The Company, however, would receive
consideration for any additional shares of Common Stock issued, thereby
reducing or eliminating the economic effect to each stockholder of such
dilution.
The proposed amendment to the Company's Restated and Amended Charter
consists of revising the first paragraph of Article 4 to read as follows
(change underlined):
4. Authorized Stock. The Corporation
shall have the authority to issue 5,000,000
shares of Preferred Stock of a par value of
$5 per share and (750,000,000) shares of Common
Stock of a par value of $.50 per share.
The Board of Directors recommends a vote FOR approval of the amendment
to the Company's Articles of Incorporation to increase authorized Common
Stock to (750,000,000) shares.
-25-
APPROVAL OF AMENDMENTS TO
THE 1985 STOCK OPTION PLAN
The Board proposes that shareholders approve several amendments to the
1985 Stock Option Plan (the "1985 Plan"). The amendments were adopted by
the Board, subject to the approval of shareholders, on January 31, 1994 and
further amended, subject to shareholder approval, on March 7, 1994. The
amendments (i) increase the number of shares available for issuance under
the 1985 Plan, (ii) authorize the grant of stock appreciation rights, Stock
Awards and Incentive Awards and (iii) extend the term of the 1985 Plan. To
reflect these proposed amendments, the name of the 1985 Stock Option Plan
will be changed to the "1994 Incentive Plan" (the "1994 Plan").
The approval of the amendments requires the affirmative vote of the
holders of a majority of the shares of Common Stock present or represented
by properly executed and delivered proxies at the meeting. Abstentions and
Broker Shares voted as to any matter at the meeting will be included in
determining the number of votes present or represented at the meeting with
respect to determining the vote on the amendments. Broker Shares that are
not voted on any matter at the meeting will not be included in determining
the number of shares present or represented at the meeting with respect to
determining the vote on the amendments.
For many years the Company has provided stock-based compensation
opportunities for executives and directors. The 1985 Plan was adopted by
the Board on March 25, 1985 and approved by shareholders on May 31, 1985.
The Board believes that the 1985 Plan has served its purpose of promoting a
greater identity of interest between participants and shareholders and that
stock-based compensation and incentive opportunities should be continued
under the 1985 Plan, as amended to become the 1994 Plan.
The following paragraphs summarize the principal features of the 1994
Plan. This summary is subject, in all respects, to the terms of the 1994
Plan. The Company will provide promptly, upon request and without charge,
a copy of the full text of the 1994 Plan to each person to whom a copy of
this Proxy Statement is delivered. Requests should be directed to:
William C. Warden, Jr., Senior Vice President, General Counsel and
Secretary, Lowe's Companies, Inc., P. O. Box 1111, North Wilkesboro, North
Carolina 28656-0001 (Telephone 910-651-4497).
Summary of the 1994 Plan
Purpose. The Board believes that the 1994 Plan will benefit the
Company by (i) assisting it in recruiting and retaining employees with
ability and initiative, (ii) providing greater incentive for employees of
the Company and its affiliates, and (iii) associating the interests of
employees with those of the Company, its affiliates and its shareholders
through opportunities for increased stock ownership and performance-based
compensation. A maximum of 5,000,000 shares of Common Stock (after taking
into account shares previously issued under the 1985 Plan) may be issued
under the 1994 Plan. No more than 1,000,000 shares may be issued as Stock
Awards (as described below). After giving effect to the two-for-one stock
split, this represents an increase of 1,000,000 shares over the number
previously authorized under the 1985 Plan. If the 1994 Plan is approved by
-26-
shareholders, a total of 2,332,640 shares will remain available for awards
thereunder.
Administration. The Compensation/Employee Stock Option Committee of
the Board (the "Compensation Committee") will administer the 1994 Plan.
The Compensation Committee may delegate its authority to administer the
1994 Plan to one or more officers of the Company. The Compensation
Committee, however, may not delegate its authority with respect to
individuals who are subject to Section 16 of the Securities Exchange Act of
1934. As used in this summary, the term "Administrator" means the
Compensation Committee and any delegate, as appropriate.
Eligibility. Each employee of the Company and its affiliates is
eligible to participate in the 1994 Plan if the Administrator, in its sole
discretion, determines that such person has contributed significantly or
can be expected to contribute significantly to the profits or growth of the
Company or an affiliate ("Participants"). No person may participate in the
1994 Plan while he is a member of the Compensation Committee. The
Administrator may, from time to time, grant stock options, stock
appreciation rights ("STARs"), Stock Awards and Incentive Awards to
Participants.
Options. Options granted under the 1994 Plan may be incentive stock
options ("ISOs") or non-qualified stock options. A stock option entitles
the Participant to purchase shares of Common Stock from the Company at the
option price. The Administrator will specify the number of shares subject
to each option; provided, however, that no Participant may be granted
options in any calendar year covering more than 40,000 shares of Common
Stock. The option price will be determined by the Administrator at the
time the option is granted, but in the case of an ISO the price cannot be
less than the shares' fair market value on the date of grant. The maximum
term of each option will be determined by the Administrator at the time the
option is granted but cannot exceed ten years in the case of an ISO. The
option price may be paid in cash or a cash equivalent, by surrendering
shares of Common Stock, or with a combination of cash, cash equivalent and
Common Stock. The 1994 Plan will allow the grant of options that qualify
as "performance based compensation" under the Internal Revenue Code's
limitation on the deductibility of executive compensation.
STARs. STAR awards are denominated in Units, which are comparable to
a share of Common Stock for purposes of determining the amount payable
under a STAR award. The number of Units subject to each STAR award will be
determined by the Administrator on the date of grant; provided, however,
that no Participant may be granted STARs in any calendar year covering more
than 30,000 Units. STARs entitle the Participant to receive the excess of
the Final Value of each STAR Unit over the fair market value of a share of
Common Stock on the date of grant; provided, however, that the
Administrator may establish a limit on the amount payable with respect to
each STAR Unit. The Final Value is the average closing price of a share of
Common Stock during the last month of the STAR performance period. The
STAR performance period is prescribed by the Administrator on the date of
grant and will be either one, two or three years. The amount payable under
a STAR award will be paid in cash within ninety days of the end of the STAR
performance period.
-27-
The STAR award provisions of the 1994 Plan continue the incentive
compensation opportunity previously provided under the Stock Appreciation
Incentive Plan (described elsewhere in this Proxy Statement) which has
expired. STAR awards are included under the 1994 Plan to ensure that
benefits qualify as "performance based compensation" under the Internal
Revenue Code's limitation on the deductibility of executive compensation.
Stock Awards. Participants also may be awarded shares of Common Stock
pursuant to a Stock Award. The number of shares subject to each Stock
Award will be determined by the Administrator on the date of grant;
provided, however, that no Participant may receive Stock Awards in any
calendar year covering more than 30,000 shares of Common Stock. The
Administrator, in its discretion, may prescribe that a Participant's rights
in a Stock Award will be nontransferable or forfeitable or both unless
certain conditions are satisfied. The 1994 Plan provides that performance
objectives may be stated as goals based on the Company's earnings per
share, return on assets, the fair market value of the Common Stock, or the
Company's average annual FIFO pre-tax earnings relative to beginning non-
cash assets. For this purpose, "beginning non-cash assets" means the
Company's total assets at the beginning of the fiscal year, exclusive of
cash and short-term investments.
Incentive Awards. Participants also may receive Incentive Awards
under the 1994 Plan. An Incentive Award entitles a Participant to receive
a cash payment based on goals stated with reference to the Company's
average annual FIFO pre-tax earnings. The Administrator will determine
each Participant's Incentive Award opportunity; provided, however, that no
Participant may receive Incentive Award payments in any calendar year that
exceed 75% percent of the Participant's base salary (prior to any salary
reduction or deferral election) as of February 1 of the performance year.
The Incentive Award provisions of the 1994 Plan continue the incentive
compensation opportunity heretofore provided under the Management Bonus
Program (described in the Compensation Committee Report included in this
Proxy Statement). Incentive Awards are included under the 1994 Plan to
ensure that benefits qualify as "performance based compensation" under the
Internal Revenue Code's limitation on the deductibility of executive
compensation.
Change in Control. The 1994 Plan provides that outstanding STARs will
be payable and outstanding Stock Awards will be transferable and vested in
the event of a Change in Control. The 1994 Plan defines the term "Change
in Control" with reference to the Company's Rights Agreement with Wachovia
Bank and Trust Company. The 1994 Plan limits such payments, when taken
into account with all other benefits, to the amount allowed under the
Internal Revenue Code's "golden parachute" rules. Amounts will be payable
under Incentive Awards following a Change in Control only to the extent
that the performance objectives are achieved. Outstanding options will
terminate in the event of a reorganization, merger or consolidation of the
Company with another corporation if the Company is not the surviving
corporation.
Duration of 1994 Plan. No option, STAR, Stock Award, Performance
Share, or Incentive Award may be granted under the Plan after January 30,
2004. The Board may sooner terminate the 1994 Plan without further action
-28-
by the shareholders. The Board also may amend the 1994 Plan except that no
amendment that increases the number of shares of Common Stock that may be
issued under the 1994 Plan or changes the class of individuals eligible to
participate in the 1994 Plan will become effective until the amendment is
approved by shareholders.
The following table illustrates the benefits available under the 1994
Plan with respect to awards approved by the Directors on January 31, 1994,
subject to shareholder approval of the 1994 Plan.
-29-
<TABLE>
NEW PLAN BENEFITS
1994 Incentive Plan1
STAR Awards2 Stock Awards3 Incentive Awards4
NBT FIFO NBT FIFO NBT FIFO
Maximum Number Dollar Number Earnings Earnings Earnings
Name and Position Dollars/Unit of Units Value5 of Shares Minimum Plan Base Plan Maximum Plan
<S> <C> <C> <C> <C> <C> <C> <C>
Leonard G. Herring $2.50 5,000 (1-year period) $300,500 10,000 $79,063 $316,250 $402,500
President and CEO $5.00 5,000 (2-year period)
$7.50 5,000 (3-year period)
Robert L. Strickland $2.50 5,000 (1-year period) $300,500 10,000 $72,188 288,750 $367,500
Chairman of the Board $5.00 5,000 (2-year period)
$7.50 5,000 (3-year period)
Robert L. Tillman $2.50 4,000 (1-year period) $183,000 6,000 $36,563 $146,250 $195,000
Executive Vice
President - $5.00 4,000 (2-year period)
Merchandising $7.50 4,000 (3-year period)
R. Michael Rouleau $2.50 4,000 (1-year period) $183,000 6,000 $36,563 $146,250 $195,000
Executive Vice
President - $5.00 4,000 (2-year period)
Store Operations $7.50 4,000 (3-year period)
Harry B. Underwood $2.50 3,000 (1-year period) $152,500 5,000 $24,750 $99,000 $132,000
Senior Vice
President - $5.00 3,000 (2-year period)
and Treasurer $7.50 3,000 (3-year period)
Executive Group
(12 people) $2.50 36,000 (1-year period) $1,738,500 57,000 $326,050 $1,338,200 $1,811,130
$5.00 36,000 (2-year period)
$7.50 36,000 (3-year period)
Non-Executive
Director Group 0 $ 0 0 $ 0 $ 0 $ 0
Non-Executive Officer
Employee Group
( people) $2.50 253,300 (1-year period) $1,037,000 34,000 $1,275,890 $5,103,550 $5,899,210
$5.00 253,300 (2-year period)
$7.50 253,300 (3-year period)
1The New Plan Benefits table illustrates the STAR Awards, Stock Awards and Incentive Awards under the
1994 Plan that were made on January 31, 1994, subject to shareholder approval.
2The STAR Awards have one, two and three-year performance periods and will pay the difference between
the Final Value and the Beginning Value. The Beginning Value is $30.50, the fair market value of the Common
Stock on January 31, 1994. The amount payable with respect to each STAR Unit is capped as shown in the
table. Except in the case of the participant's death or disability, STAR Units will be forfeited if the
participant's employment is terminated for any reason or the participant is demoted before the end of the
STAR performance period.
3The Stock Awards are nontransferable and subject to forfeiture for seven years. However, 50% of the
shares may become transferable and vested as of the third anniversary of the grant and all of the shares may
become transferable and vested as of the fifth anniversary of the grant if the Company's average annual FIFO
pre-tax earnings relative to Beginning Non-Cash Assets for the three or five-year period attains levels
prescribed by the Compensation Committee. "Beginning Non-Cash Assets" means the Company's total assets at
the beginning of each fiscal year, exclusive of cash and short-term investments. Except in the case of death
or disability, shares that have not previously vested will be forfeited upon the participant's termination of
employment for any reason.
4The Incentive Awards provide an opportunity to earn a cash benefit based on the Company's FIFO pre-tax
earnings for the fiscal year ending January 31, 1995. The earnings targets for payment of Incentive Awards
in Fiscal 1994 were set by the Compensation Committee on March 7, 1994.
5Shares of Common Stock will not be issued under the Stock Awards before the 1994 Plan is approved by
shareholders. The value of the Stock Awards shown in the table is the fair market value of the Common Stock
($30.50) on January 31, 1994.
</TABLE>
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Except as shown in the table with respect to the January 31, 1994, STAR,
Stock Award and Incentive Award grants, neither the number of individuals
who will be selected to participate in the 1994 Plan nor the type or size
of awards that will be approved by the Administrator can be determined.
The Corporation is also unable to determine the number of individuals who
would have participated in the 1994 Plan or the type or size of awards that
would have been made in 1993 had the plan amendments been in effect in
1993.
Federal Income Tax Consequences
No income is recognized by a Participant at the time an option is
granted. If the option is an ISO, no income will be recognized upon the
Participant's exercise of the option (although the exercise can affect the
Participant's alternative minimum tax liability). Income is recognized by
a Participant when he disposes of shares acquired under an ISO. The
exercise of a non-qualified stock option generally is a taxable event that
requires the Participant to recognize, as ordinary income, the difference
between the shares' fair market value and the option price.
The Participant will recognize income on account of a Stock Award on
the first day that the shares are either transferable or not subject to a
substantial risk of forfeiture. The amount of income recognized by the
Participant is equal to the fair market value of the Common Stock received
on that date.
The employer (either the Company or an affiliate) will be entitled to
claim a federal income tax deduction on account of the exercise of a non-
qualified stock option, the settlement of a STAR or Incentive Award, or the
vesting of a Stock Award. The amount of the deduction is equal to the
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ordinary income recognized by the Participant. The employer will not be
entitled to a federal income tax deduction on account of the grant or
exercise of an ISO. The employer may claim a federal income tax deduction
on account of certain dispositions of Common Stock acquired upon the
exercise of an ISO.
The Board recommends that shareholders vote FOR the amendments to the
1985 Plan.
APPROVAL OF THE DIRECTORS' STOCK INCENTIVE PLAN
The Board proposes that shareholders approve the Directors' Stock
Incentive Plan (the "Directors' Stock Plan"). The Directors' Stock Plan
was adopted by the Board of Directors, subject to approval by the
shareholders. The approval of the Directors' Stock Plan requires the
affirmative vote of the holders of a majority of the shares of Common Stock
present or represented by properly executed and delivered proxies at the
meeting. Abstentions and Broker Shares voted as to any matter at the
meeting will be included in determining the number of votes present or
represented at the meeting with respect to determining the vote on the
Directors' Stock Plan. Broker Shares that are not voted on any matter at
the meeting will not be included in determining the number of shares
present or represented at the meeting with respect to determining the vote
on the Directors' Stock Plan.
The following paragraphs summarize the principal features of the
Directors' Stock Plan. This summary is subject, in all respects, to the
terms of the Directors' Stock Plan. The Company will provide promptly upon
request and without charge, a copy of the full text of the Directors' Stock
Plan to each person to whom a copy of this Proxy Statement is delivered.
Requests should be directed to: William C. Warden, Jr., Senior Vice
President, General Counsel and Secretary, Lowe's Companies, Inc., P. O. Box
1111, North Wilkesboro, North Carolina 28656-0001 (Telephone 910-651-4497).
Summary of Directors' Stock Plan
The Board believes that the Directors' Stock Plan will assist in the
recruitment and retention of Directors and benefit the Company by promoting
a greater identity of interest between the eligible Directors and
shareholders by enabling eligible Directors to participate in the Company's
success through ownership of Common Stock.
The Directors' Stock Plan provides for each eligible Director to
receive an annual award of 500 shares of Common Stock. The Directors'
Stock Plan does not increase the retainer or committee fees otherwise
payable to Directors.
No Director who is an employee of the Company or an affiliate is
eligible to participate in the Directors' Stock Plan. The Company's Board
currently consists of seven Directors who will be eligible to participate
in the Directors' Stock Plan. Eight Directors will be eligible to
participate in the Directors' Stock Plan if the Director nominees are
elected to the Board.
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The Directors' Stock Plan provides that at the first Board meeting
following each annual meeting of shareholders, the Company shall issue each
eligible Director 500 shares of Common Stock. Up to 25,000 shares of
Common Stock may be issued under the Directors' Stock Plan.
The first issuance of Common Stock pursuant to the Directors' Stock
Plan will occur at the first Board meeting following the 1994 Annual
Meeting, if requisite shareholder approval is obtained. The last issuance
of Common Stock pursuant to the Directors' Stock Plan will occur at the
first Board meeting following the 1998 Annual Meeting.
The shares of Common Stock awarded under the Directors' Stock Plan are
nonforfeitable and the participating Directors will be immediately and
fully vested in Common Stock issued under the Directors' Stock Plan.
Subject only to such limitations on transfer as may be specified by
applicable securities laws, Directors may sell shares issued under the
Directors' Stock Plan at any time. The number of shares of Common Stock
issuable to each eligible Director and the maximum aggregate number of
shares that may be issued under the Directors' Stock Plan will be adjusted
to reflect stock dividends, stock splits, consolidations or other changes
in the Company's capitalization.
The Directors' Stock Plan provides that the Board may amend or
terminate the Plan, but the Plan may not be amended more than once within a
six-month period other than to conform to changes in the Internal Revenue
Code or the Employee Retirement Income Security Act. An amendment will not
become effective without shareholder approval if the amendment changes the
eligibility requirements or increases the benefits that may be provided
under the Directors' Stock Plan.
If the Directors' Stock Plan had been in effect during 1993, 3,500
shares would have been issued to Directors eligible to participate in the
Directors' Stock Plan. Each eligible Director would have received Common
Stock with a fair market value of $18.875 per share, based on the fair
market value of Common Stock on May 28, 1993. No shares would have been
awarded to the executive officers named in the compensation table, to the
executive group, or to the non-executive officer employee group.
The Board recommends that shareholders vote FOR the Directors' Stock
Incentive Plan.
RATIFICATION OF APPOINTMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee of the Board, the Board
of Directors has appointed, subject to ratification by shareholders,
Deloitte & Touche as the firm of independent certified public accountants
to audit the financial statements of the Company and its subsidiaries for
the fiscal year ending January 31, 1995. Deloitte & Touche has served as
independent auditors for the Company since 1982.
While the Board of Directors is not required to seek shareholder
ratification of the Board's appointment of the Company's independent
certified public accountants, it has been Board policy for many years to do
so.
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Representatives of Deloitte & Touche have been invited to and are
expected to attend the Annual Meeting with the opportunity to make
statements if they so desire and to be available to respond to appropriate
questions from shareholders.
The Board of Directors recommends a vote FOR approval of the
appointment of Deloitte & Touche as independent certified public
accountants of the Company.
GENERAL
The cost of solicitations of proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited personally, by
telephone, by telegraph or by certain employees of the Company. The
Company may reimburse brokers or other persons holding stock in their names
or in the names of nominees for their expense in sending proxy material to
principals and obtaining their proxies. Also the Company has engaged the
proxy soliciting firm of D. F. King & Co., Inc. at an anticipated cost of
$7,000 (plus handling fees).
The shares represented by a proxy will be voted as directed unless the
proxy is revoked. Any proxy may be revoked before it is exercised by
filing with the Secretary of the Company an instrument revoking the proxy
or a proxy bearing a later date. A proxy is revoked if the person who
executed the proxy is present at the meeting and elects to vote in person.
Where a choice is specified with respect to any matter to come before
the meeting, the shares represented by the proxy will be voted in
accordance with such specifications.
Where a choice is not so specified, the shares represented by the
proxy will be voted FOR the proposals set forth in the Notice of Annual
Meeting, Proxy Statement and Proxy Card.
Management is not aware that any matters other than those specified
herein will be presented for action at the meeting, but if any other
matters do properly come before the meeting, the persons named as Proxies
will vote upon such matters in accordance with their best judgment.
In the election of Directors, a specification to withhold authority to
vote for the slate of management nominees will not constitute an
authorization to vote for any other nominee.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 1995 Annual
Meeting must be received by the Board of Directors for consideration for
inclusion in the Proxy Statement and form of proxy relating to that meeting
on or before December --, 1994.
ANNUAL REPORT
The Annual Report to shareholders accompanies this Proxy Statement.
The Company's report to the Securities and Exchange Commission on Form 10-K
for the fiscal year ended January 31, 1994, is available from the Company
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at its home office address furnished in the Notice of Annual Meeting of
Shareholders.
North Wilkesboro, North Carolina
April --, 1994
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LOWE'S COMPANIES, INC.P. O. Box 1111, North Wilkesboro, NC 28656
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Robert E. Black, Jr. and Dwight E. Pardue,
Sr. as Proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated below, all the
shares of Common Stock of Lowe's Companies, Inc. held of record by the
undersigned on April 8, 1994, at the Annual Meeting of Shareholders to
be held on May 27, 1994, or any adjournment thereof. Management
recommends a vote FOR Proposals 1, 2, 3, 4 and 5.
1. ELECTION OF CLASS II DIRECTORS Note: Make marks in one section
ONLY -- Voting in Section A will
take precedence over any votes in
Section B.
SECTION A -- to vote for all Class II Director Nominees as a group, mark in
this section
FOR all nominees listed below WITHHOLD AUTHORITY for all
nominees listed below
SECTION B -- to vote for Class II Director Nominees individually, mark in
this section
FOR WITHHOLD AUTHORITY Carol A. Farmer
FOR WITHHOLD AUTHORITY Robert G. Schwartz
FOR WITHHOLD AUTHORITY Leonard G. Herring
FOR WITHHOLD AUTHORITY Jack C. Shewmaker
2. PROPOSAL TO APPROVE an amendment to the Company's Restated and Amended
Charter to increase authorized Common Stock to 750 million shares.
FOR AGAINST ABSTAIN
3. PROPOSAL TO APPROVE amendments to the Company's 1985 Stock Option Plan to
increase the shares available for issuance under the Plan by 1,000,000
shares, to authorize stock appreciation rights, stock awards and incentive
awards, and to extend the term of the Plan to January 30, 2004.
FOR AGAINST ABSTAIN
4. PROPOSAL TO APPROVE the Directors' Stock Incentive Plan and to authorize the
issuance of up to 25,000 shares of Common Stock under the Directors' Stock
Incentive Plan.
FOR AGAINST ABSTAIN
(continued and to be signed on reverse side)
5. PROPOSAL TO APPROVE THE APPOINTMENT OF DELOITTE & TOUCHE as the independent
certified publicaccountants of the Company for the fiscal year ending
January 31, 1995 FOR AGAINST ABSTAIN
6. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this proxy will be
voted FOR Proposals 1, 2, 3, 4 and 5.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
DATED --------------------------------------, 1994
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Signature
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Signature if held jointly
Please mark, sign, date and return the
proxy card promptly using the enclosed
envelope.
