LOWE'S COMPANIES, INC.
P. O. Box 1111
North Wilkesboro, NC 28656
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 30, 1997
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 30, 1997, at 10:00 a.m.
to consider and act upon the following proposals:
1. To elect one Class I Director to a term of two years, three Class II
Directors to a term of three years, and two Class III Directors to a
term of one year;
2. To approve an amendment to the Amended and Restated Articles of
Incorporation to change from a variable range Board of Directors to a
fixed-size Board of Directors not to exceed 15 members and to consent
to the Board of Directors' adoption of a conforming change to the
Bylaws;
3. To approve the Lowe's Companies, Inc. 1997 Incentive Plan; and
4. To transact such other business as may be properly brought before the
Annual Meeting.
Shareholders of record at the close of business on April 4, 1997, 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 Robert L. Tillman
Chairman of the Board President & CEO
North Wilkesboro, North Carolina
April 18, 1997
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
910/658-4000
Proxy Statement
for
Annual Meeting of Shareholders
May 30, 1997
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 30, 1997, 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 18, 1997.
Only shareholders of record at the close of business on April 4, 1997, are
entitled to notice of and to vote at the meeting or any adjournment thereof.
On April 4, 1997, 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.
Abstentions and shares held of record by a broker or its nominee ("broker
shares") that are voted on any matter are included in determining the number of
votes present or represented at the meeting. Broker shares that are not voted
on any matter at the meeting are not included in determining whether a quorum
is present. The vote required on matters to be considered is disclosed under
the caption for such matters. Votes that are withheld and broker shares that
are not voted (commonly referred to as "broker non-votes") are not included in
determining the number of votes cast in the election of Directors or on other
matters.
ELECTION OF DIRECTORS
There are currently 12 members of the Board of Directors, divided into
three classes of four members each, with one class being elected each year for
a three-year term. As recommended by the Governance Committee (acting as a
nominating committee), the Board of Directors has reduced the size of the Board
to 10 effective at the 1997 Annual Meeting to reflect the retirement of Petro
Kulynych and Russell B. Long as Class III Directors. Due to (i) the nomination
of Class II Director Paul Fulton as a Class III Director, (ii) the realignment
of Leonard G. Herring from Class II to Class I and Robert L. Strickland from
Class I to Class II to make the expiration of their Board terms coincident with
their planned tenure as Directors, (iii) the nomination of James F. Halpin as a
Class III Director, and (iv) the nomination of three Class II Directors whose
terms expire at the 1997 Annual Meeting, six nominees are standing for election
at the Annual Meeting. The six nominees, all of whom are currently Directors,
and their terms are: Leonard G. Herring, Class I expiring in 1999; Carol A.
Farmer, Robert G. Schwartz and Robert L. Strickland, Class II expiring in 2000;
and Paul Fulton and James F. Halpin, Class III expiring in 1998. Messrs.
Fulton and Halpin were elected by the Board since the 1996 Annual Meeting --
Mr.Fulton as a Class II Director and Mr. Halpin as a Class III Director. Mr.
Fulton is being realigned to Class III to make the three Board classes as
nearlyequal in size as possible -- four in Class I and three in each of
Classes II and III.
If elected, each nominee will serve the number of years indicated above or
until a successor is elected and qualifies. The election of each nominee
requires the affirmative vote of the holders of the plurality of the shares of
Common Stock cast in the election of Directors. 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 six nominees. If at the time of the meeting any of
these nominees is 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.
INFORMATION CONCERNING CLASS I NOMINEE
The nominee for election for a two-year term as a Class I Director to
serve until the 1999 Annual Meeting is Leonard G. Herring
Director Business Experience, Directorships, and
Name and Age Since Positions within the Last Five Years
Leonard G. Herring, 69 . . 1956 President and Chief Executive Officer 1978-
July 1996, (Mr. Herring resigned as
President and CEO effective August 1, 1996
and retired as an employee of the Company
January 31, 1997), Member of Executive
Committee and Government/ Legal Affairs
Committee of the Company. Other
directorships: First Union Corporation,
Charlotte, N.C., since 1986.
INFORMATION CONCERNING CLASS II NOMINEES
The nominees for election to three-year terms as Class II Directors to serve
until the 2000 Annual Meeting are Carol A. Farmer, Robert G. Schwartz and
Robert L. Strickland
Director Business Experience, Directorships, and
Name and Age Since Positions within the Last Five Years
Carol A. Farmer, 52 . .1994 Member of Audit Committee, Governance
Committee and Government/Legal Affairs
Committee of the Company. President,
Carol Farmer Associates, Inc. (Trend
Forecasting and Consulting), Boca Raton,
Fla., since 1985. Other directorships:
The Sports Authority, Inc., Ft. Lauderdale,
Fla., since 1995.
Robert G. Schwartz, 69 . .1973 Chairman of Compensation Committee, Member
of Audit Committee and Governance Committee
of the Company. Director of Metropolitan
Life Insurance Company, New York, N.Y.,
since 1980, having previously 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;
Lone Star Industries, Inc., Stamford,
Conn., since 1994; Ascent Entertainment
Group, Inc.,Denver, Colo., since 1995.
Robert L. Strickland, 66 . 1961 Chairman of the Board since 1978, Chairman
of Executive Committee and Member of
Government/Legal Affairs Committee of the
Company. Other directorships: Deputy
Chairman, Federal Reserve Bank, Richmond,
Va., since 1996; T. Rowe Price Associates,
Inc., Baltimore, Md., since 1991; Hannaford
Bros., Scarborough, Me., since 1994.
INFORMATION CONCERNING CLASS III NOMINEES
The nominees for election to one-year terms as Class III Directors to
serve until the 1998 Annual Meeting are Paul Fulton and James F. Halpin
Director Business Experience, Directorships, and
Name and Age Since Positions within the Last Five Years
Paul Fulton, 62 . . . . 1996 Member of Audit Committee and Governance
Committee of the Company. Dean,
Kenan-Flagler Business School, University
of North Carolina, Chapel Hill, N.C.,
since 1994. President, Sara Lee
Corporation (Manufacturer and Marketer of
Consumer Products), Chicago, Ill., 1988-
1993. Other directorships: Sonoco
Products Company, Hartsville, S.C., since
1989; NationsBank Corporation, Charlotte,
N.C., since 1993; Bassett Furniture
Industries, Inc., Bassett, Va., since 1993;
The Cato Corporation, Charlotte, N.C.,
since 1994; Winston Hotels, Inc., Raleigh,
N.C., since 1994.
James F. Halpin, 46 . . .1996 Member of Compensation Committee and
Governance Committee of the Company.
President and Chief Executive Officer,
CompUSA Inc. (Computer Superstores),
Dallas, Tex. since 1993; President,
HomeBase, Irvine, Cal., (Home
Improvement Retail Chain), 1990-1993.
Other directorships: Interphase
Corporation, Dallas, Tex., since 1995;
Invincible Technologies Corp., Boston,
Mass., since 1995; ToyBiz, Inc.,
New York, N.Y., since 1995; Prime Source
Building Products, Dallas, Tex., 1995-
Feb. 1997.
INFORMATION CONCERNING CONTINUING DIRECTORS
The remaining Directors whose terms expire after 1997 are:
Class III Director, term expiring in 1998
Director Business Experience, Directorships, and
Name and Age Since Positions within the Last Five Years
Robert L. Tillman, 53 . .1994 President and Chief Executive Officer since
August 1996, having previously served as
Senior Executive Vice President and Chief
Operating Officer (1994-July 1996) and
Executive Vice President - Merchandising
(1991-1994), Member of Executive Committee
and Government/Legal Affairs Committee of
the Company. Other directorships:
Wachovia Bank of North Carolina, N.A.,
Winston-Salem, N.C., since 1995;
International Mass Retail Association,
Arlington, Va., since 1996.
Class I Directors, term expiring in 1999
Director Business Experience, Directorships, and
Name and Age Since Positions within the Last Five Years
William A. Andres, 70 . .1986 Chairman of Governance Committee, Member of
Compensation Committee and Executive
Committee of the Company. Previously
Chairman of the Board and Chief Executive
Officer (1976-1983), Chairman of Executive
Committee (1983-1985) of Dayton Hudson
Corporation (Retail Chain), Minneapolis,
Minn. (Mr. Andres retired in September
1985.) Other directorships: Hannaford
Bros., Scarborough, Me., since 1986.
John M. Belk, 77 . . . .1986 Chairman of Audit Committee, Member of
Compensation Committee and Governance
Committee 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.
Claudine B. Malone, 60 . .1995 Member of Audit Committee, Governance
Committee and Government/Legal Affairs
Committee of the Company. President and
Chief Executive Officer, Financial &
Management Consulting, Inc., McLean, Va.,
since 1984. Other directorships:
Chairman, Federal Reserve Bank, Richmond,
Va., since 1996 (Member since 1994); Dell
Computer Corporation, Austin, Tex., since
1993; Hannaford Bros., Scarborough, Me.,
since 1991; Hasbro, Inc., Pawtucket, R.I.,
since 1992; Houghton Mifflin, Boston,
Mass., since 1982; LaFarge Corporation,
Reston, Va., since 1994; The Limited,
Inc., Columbus, Oh., since 1982;
Mallinckrodt Group Inc., St. Louis, Mo.,
since 1994; SAIC-Science Applications
International Corporation, San Diego,
Calif., since 1993; Union Pacific
Resources Corporation, Fort Worth, Tex.,
since 1995.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND
COMMITTEES OF THE BOARD
Classification of Directors. Each Lowe's Director is classified as an
"Independent Director" or a "Management Director". A "Management Director" is
a present or former employee who serves as a Director. An "Independent
Director" is a Director within the scope of Securities and Exchange Commission
rules defining "non-employee directors". Certain Directors are also "Founding
Directors", defined in the Bylaws as a person who was a Director when Lowe's
became a public company in 1961 and who has served continuously as a Director
since 1961. Ms. Farmer and Ms. Malone and Messrs. Andres, Belk, Fulton,
Halpin, Long and Schwartz are Independent Directors. Messrs. Herring,
Kulynych, Strickland and Tillman are Management Directors. Messrs. Herring,
Kulynych and Strickland are Founding Directors.
Compensation of Directors - Standard Arrangements. Messrs. Herring,
Strickland and Tillman receive no Director or Committee compensation with the
exception of fees paid to Mr. Herring by one of the Company's wholly owned
subsidiaries. Directors (other than Founding Directors) who are not employed
by the Company are paid an annual retainer of $30,000 plus $5,000 annually for
serving as a Committee Chairman and $1,000 per Board meeting or Committee
meeting attended (with the maximum annual amount payable to any one Director
being $60,000). Founding Directors who are not employed by the Company are
paid an annual retainer of $60,000 each, with no additional fees for attending
meetings or for Committee Chairmanships. In 1996, Mr. Herring was paid $5,000
for serving as a Director of one of the Company's wholly owned subsidiaries.
Compensation of Directors - Other Arrangements. Once a Founding Director
retires from the Board, he may be designated a Director Emeritus and, if so
designated, is compensated for life at an annual rate equal to 50% of the
basic annual Founding Director retainer in effect at the time he was named a
Director Emeritus. Upon his retirement as a Director on June 30, 1996, Gordon
E. Cadwgan was designated a Director Emeritus, entitling him to annual
lifetime compensation of $30,000.
In 1989, shareholders approved the Lowe's Companies, Inc. 1989 Non-
Employee Directors' Stock Option Plan. Under this Plan, eligible Directors
were 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 was the
shares' fair market value on the date of grant. In accordance with a formula
set forth in the option agreement, the Company makes a federal income tax
deposit on behalf of Directors who exercise options. Two hundred thousand
shares of Common Stock were reserved under the Plan for the granting of
options and options covering 140,000 shares were granted. No options were
granted under this Plan during Fiscal 1996 and no options will be granted
under this Plan in the future. No options were exercised under this Plan
during Fiscal 1996.
In 1994, the Board adopted the Lowe's Companies, Inc. Directors' Deferred
Compensation Plan. This Plan allows each non-employee Director to defer
receipt of all, but not less than all, of the annual retainer and meeting fees
otherwise payable to the Director. Deferrals are credited to a bookkeeping
account and account values are adjusted based on the investment measure
selected by the Director. One investment measure adjusts the account based on
the Wachovia Bank and Trust Company prime rate plus 1%. The other investment
measure assumes that the deferrals are invested in the Company's Common Stock.
A Director may allocate deferrals between the two investment measures in 25%
multiples. Account balances are paid in cash following the termination of a
Director's service.
In 1995, shareholders approved the Lowe's Companies, Inc. Directors'
Stock Incentive Plan. This Plan provides for each eligible Director to be
awarded 500 shares of Company Common Stock at the first Directors' Meeting
following the Annual Meeting in 1994, 1995, 1996, 1997 and 1998. Up to 25,000
shares may be issued under this Plan. During Fiscal 1996, 4,000 shares
(having a fair market value of $34.25 per share on May 31, 1996) were awarded
to eight eligible Directors (500 shares each to Directors Andres, Belk,
Cadwgan, Farmer, Kulynych, Long, Malone and Schwartz).
Board of Directors - During Fiscal 1996, the Board of Directors held six
meetings. The Board has five standing committees which met the number of
times set forth in parentheses: Executive (1), Audit (4), Compensation (4),
Governance (4) and Government/Legal Affairs (0). All Directors attended at
least 75% of the meetings of the Board and committees on which they served
with the exception of Messrs. Andres and Belk who attended 73.3% and 66.7% of
such meetings respectively.
Audit Committee - The Audit Committee has six members: John M. Belk
(Chairman), Carol A. Farmer, Paul Fulton, Petro Kulynych, Claudine B. Malone
and Robert G. Schwartz. The Audit Committee meets with the internal auditing
staff and representatives of the Company's independent accounting firm without
senior management present, 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 financial statements and
the accounting principles being applied and reviews audit results and other
matters relating to internal control and compliance with the Company's code of
ethics. In addition, the Audit Committee recommends annually the engagement
of the Company's independent accountants.
Compensation Committee - The Compensation Committee has five members:
Robert G. Schwartz (Chairman), William A. Andres, John M. Belk, James F.
Halpin and Russell B. Long. This Committee reviews and sets the compensation
of Directors who are employees of the Company; reviews the compensation of all
other employees whose annual salary and bonus opportunities exceed $125,000;
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 all compensation, employee stock option, stock appreciation
rights and other incentive plans; and approves awards pursuant to the terms of
any employee stock option or stock appreciation rights plan.
Executive Committee - The Executive Committee has five members: Robert
L. Strickland (Chairman), William A. Andres, Leonard G. Herring, Petro
Kulynych and Robert L. Tillman. The Executive Committee exercises all of the
powers of the Board of Directors between meetings, except as otherwise limited
by law.
Governance Committee - The Governance Committee has eight members:
William A. Andres (Chairman), John M. Belk, Carol A. Farmer, Paul Fulton,
James F. Halpin, Russell B. Long, Claudine B. Malone and Robert G. Schwartz.
This Committee's responsibilities include screening suggestions for new Board
members and making recommendations to the full Board; conducting an annual
performance evaluation of the Chief Executive Officer; and conducting an
annual review of the performance of the full Board and structure of Board
Committees. This Committee functions as a nominating committee by
recommending nominees for election as Directors of the Company. The 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). The 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 has seven members: Russell B. Long (Chairman), Carol A. Farmer,
Leonard G. Herring, Petro Kulynych, Claudine B. Malone, Robert L. Strickland
and Robert L. Tillman. 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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows the beneficial ownership as of April 4, 1997,
except as noted, of Common Stock of each incumbent Director of the Company,
each nominee for election as a Director of the Company, the Officers named in
the Summary Compensation Table, 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:
Name or Number Percent
of Persons in Group Number of Shares (1) (2) of Class
William A. Andres 40,500 *
John M. Belk 40,525 *
Carol A. Farmer 2,100 *
Paul Fulton 2,000 *
James F. Halpin -0- *
Leonard G. Herring 1,796,362(3) _____
Petro Kulynych 1,817,752(4) _____
Russell B. Long 77,900 *
Claudine B. Malone 1,500 *
Dale C. Pond 20,400 *
Robert G. Schwartz 41,500 *
Robert L. Strickland 1,419,107(5) *
Larry D. Stone 74,567 *
Robert L. Tillman 162,566 *
William C. Warden, Jr. 33,304 *
Incumbent Directors, Director Nominees
and Executive Officers as a Group
(23 in total)6,041,105(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 24,923,722(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. Kulynych 20,000 shares; Mr. Schwartz 20,000 shares; Mr. Tillman
10,000 shares; with aggregate shares for all Executive Officers and Directors
as a group (23) being 90,000. Also includes Stock Awards (Performance Stock
and Performance Accelerated Restricted Stock) that have been granted but not
vested as follows: Mr. Herring 27,500 shares; Mr. Pond 17,500 shares; Mr.
Stone 21,500 shares; Mr. Strickland 45,000 shares; Mr. Tillman 54,000 shares;
Mr. Warden 24,500 shares; with aggregate shares for all Executive Officers and
Directors as a group (23) being 320,500.
2) Does not include phantom shares credited to the accounts of Directors
under the Company's Deferred Compensation Plan as follows: Mr. Andres ______
shares; Mr. Belk _______ shares; Ms. Farmer ______ shares; and Mr. Long
_____ shares.
3) Includes 76,750 shares of shared voting and investment power.
4) Includes 71,622 shares of shared voting and investment power and 1,185,000
shares in a self-directed individual retirement account.
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 19 members, including Messrs. Pond,
Stone, Strickland, Tillman and Warden. At April 4, 1997, there were no
unallocated shares.
7) Shares held at December 31, 1996, according to Schedule 13G filed with
the Securities and Exchange Commission.
Each Director or Executive Officer that participates in the Employee
Stock Ownership Plan, is granted Stock Awards or Stock Options under the 1994
Incentive Plan or who participates in the Directors' Incentive Plan or
Directors' Deferred Compensation Plan is required to file an annual statement
on Form 5. With those exceptions, 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 have been complied
with.
COMPENSATION OF EXECUTIVE OFFICERS
The following table discloses compensation received by the Company's
current Chief Executive Officer, as well as the Chief Executive Officer for
the first half of Fiscal 1996, and the four remaining most highly paid
Executive Officers for the three fiscal years ended January 31, 1997:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long-term Compensation
Fiscal Awards Payouts
Name & Year Other Restricted Stock
Principal Ended Annual Stock Options LTIP All Other
Position Jan. 31 Salary Bonus Compensation Awards (1) # shares(2) Payouts Compensation(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert L. Tillman 1997 $548,269 $412,500 $153,531(4) 30,000 shares 120,000 $0 $21,000
President & CEO
1996 400,000 46,204 83,430 12,500 shares 0 0 21,000
1995 350,385 195,000 185,019 8,500 shares 10,000 0 19,500
Leonard G. Herring 1997 697,116 525,000 221,539(5) 0 shares 0 0 21,000
President & CEO (Retired)
1996 625,000 96,259 156,424 15,000 shares 0 0 21,000
1995 575,000 402,500 246,056 12,500 shares 0 0 19,500
Robert L. Strickland 1997 623,077 468,750 212,538(6) 12,500 shares 50,000 0 21,000
Chairman of the Board
1996 575,000 88,558 162,040 15,000 shares 0 0 21,000
1995 525,000 367,500 285,916 12,500 shares 0 0 19,500
William C. Warden,Jr. 1997 267,445 137,500 61,281(7) 12,500 shares 40,000 0 21,000
Executive Vice President,
Chief Administrative 1996 214,616 19,508 40,068 6,000 shares 0 0 21,000
Officer, General Counsel,
and Secretary 1995 187,693 87,500 381 4,000 shares 0 0 14,225
Larry D. Stone 1997 266,385 125,000 46,548(8) 12,500 shares 40,000 0 21,000
Executive Vice President -
Store Operations 1996 167,885 12,802 18,240 6,000 shares 0 0 21,000
1995 140,884 66,000 97,447 2,000 shares 0 0 19,500
Dale C. Pond 1997 249,888 137,500 46,117(9) 10,000 shares 30,000 0 21,000
Senior Vice President -
Marketing 1996 239,231 23,615 40,074 3,000 shares 0 0 21,000
1995 226,154 123,750 0 3,000 shares 0 0 18,388
Footnotes:
(1) Restricted stock awards made as of January 31, 1997, are Performance Stock Award shares granted under the 1994
Incentive Plan. These awards fully vest at the end of the three-year performance period if the average annual return
on non-cash beginning assets for the performance period is at least 13%. None of the Performance Stock Award shares
vest if the average annual return for the performance period is less than 11%. If the Average Annual Return for the
Performance Period is at least 11% but less than 13%, the executive's interest in the Performance Stock Award shares
shall become vested according to a formula which provides that one-half of the Performance Stock Award shares shall
become vested if the average annual return for the performance period equals 11% and an additional number of whole
shares that most nearly equals, but does not exceed, 2 1/2% of the Performance Stock Award shares for each one-tenth
of a Percent that the average annual return for the performance Period exceeds 11%.
Restricted stock awards made as of January 31, 1996, and Janaury 31, 1995, were Performance Accelerated Restricted
Stock (PARS) awards Dividends are paid to executives on both Performance Stock Award shares and PARS shares.
Aggregate restricted stock awards subject to future vesting are 27,500 for Mr. Herring, 45,000 for Mr. Strickland,
54,000 for Mr. Tillman, 21,500 for Mr. Stone, 24,500 for Mr. Warden and, 17,500 for Mr. Pond.
(2) Options granted as of December 6, 1996, at the $39.125 fair market value of Lowe's shares on that date. All options
were granted under the 1994 Incentive Plan except 10,000 shares granted to Mr. Strickland and 80,000 shares granted to
Mr. Tillman under the 1997 Incentive Plan, subject to shareholder approval.
(3) Amounts shown are employer contributions to the Employee Stock Ownership Plan.
(4) Amount shown is the total of a payment under the Company's Benefit Restoration Plan ($146,200), dividends on
restricted stock shares awarded in grants effective January 31, 1994, 1995, and 1996 ($4,775), taxable value of group
term life insurance in excess of $50,000 ($2,130), and taxable value of personal use of corporate aircraft ($426).
(5) Amount shown is the total of a payment under the Company's Benefit Restoration Plan ($192,990), dividends on
restricted stock shares awarded in grants effective January 31 1994, 1995, and 1996 ($6,750), taxable value of group
term life insurance in excess of $50,000 ($4,780), director fees paid by LF Corporation, a subsidiary of Lowe's
Companies, Inc.($5,000), and taxable value of personal use of corporate aircraft ($12,019).
(6) Amount shown is the total of a payment under the Company's Benefit Restoration Plan ($169,660), dividends on
restricted stock shares awarded in grants effective January 31, 1994, 1995, and 1996 ($6,750), taxable value of group
term life insurance in excess of $50,000 ($8,577), and taxable value of personal use of corporate aircraft ($27,551)
(7) Amount shown is the total of a payment under the Company's Benefit Restoration Plan ($53,600), dividends on
restricted stock shares awarded in grants effective January 31, 1994, 1995, and 1996 ($2,500), director fees paid by
LF Corporation, a subsidiary of Lowe's Companies, Inc.($5,000), and taxable value of group term life insurance in
excess of $50,000 ($181).
(8) Amount shown is the total of a payment under the Company's Benefit Restoration Plan ($44,280), dividends on
restricted stock shares awarded in grants effective January 31, 1994, 1995, and 1996 ($1,700), and taxable value of
group term life insurance in excess of $50,000 ($568)
(9) Amount shown is the total of a payment under the Company's Benefit Restoration Plan ($43,570), dividends on
restricted stock shares awarded in grants effective January 31 1994, 1995, and 1996 ($1,650), and taxable value of
group term life insurance in excess of $50,000 ($897).
</TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information with respect to stock options
and SARs granted to the named Executive Officers during Fiscal 1996:
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
Individual Grants Potential Realizable Value
% of Total at Assumed Annual Rates
Options/SARs of Stock Price
Granted to Exercise or Appreciation for
Options / SARs Employees in Base Price Expiration Option/SAR Term
Name Granted Fiscal Year $/Sh Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Robert L. Tillman (1) 120,000 / 0 9.8 / 0 39.125 12/5/01 1,297,200 2,866,320
Leonard G. Herring 0 / 0 0 / 0
Robert L. Strickland (2) 50,000 / 0 4.1 / 0 39.125 12/5/01 540,500 1,194,300
William C. Warden, Jr. (3) 40,000 / 0 3.3 / 0 39.125 12/5/01 432,400 955,440
Larry D. Stone (3) 40,000 / 0 3.3 / 0 39.125 12/5/01 432,400 955,440
Dale C. Pond (3) 30,000 / 0 2.5 / 0 39.125 12/5/01 324,300 716,580
(1) Options granted to Mr. Tillman include 40,000 shares awarded under the 1994 Incentive Plan and 80,000
shares awarded under the 1997 Incentive Plan, subject to shareholder approval.
(2) Options granted to Mr. Strickland include 40,000 shares awarded under the 1994 Incentive Plan and 10,000
shares awarded under the 1997 Incentive Plan, subject to shareholder approval.
(3) Options granted to Messrs. Stone, Warden, and Pond were awarded under the 1994 Incentive Plan.
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table provides information on option/SAR exercises in
Fiscal 1996 by the named Executive Officers and the value of such Officers'
unexercised options/SARs at January 31, 1997:
<TABLE>
Aggregated Option/SAR Exercises and Fiscal Year-End
Option/SAR Value Table (PART I)
<CAPTION>
Shares Annualized
Acquired on Value Value
Name Exercise (1) Realized ($) (2) Realized ($)
<S> <C> <C> <C>
Robert L. Tillman 0 Shares
4,000 Units 14,280 4,760
Leonard G. Herring 0 Shares
5,000 Units 17,850 5,950
Robert L. Strickland 0 Shares
5,000 Units 17,850 5,950
William C. Warden, Jr. 0 Shares
3,000 Units 10,710 3,570
Larry D. Stone 0 Shares
2,000 Units 7,140 2,380
Dale C. Pond 0 Shares
2,500 Units 8,925 2,975
(1) Awards denominated in Shares represent stock options; Awards denominated in Units
represent stock appreciation rights (STARs).
(2) Stock appreciation rights (STARs) incentive payments as of January 31, 1997
($3.57 per share appreciation for each STAR unit).
</TABLE>
<TABLE>
Aggregated Option/SAR Exercises and Fiscal Year-End
Option/SAR Value Table (PART II)
<CAPTION>
Value of Unexercised In-the-Money
Number of Unexercised Options/SARs at FY-End ($) ($33.125 on 1/31/97)
Options/SARs at FY-End Exercisable
Name Exercisable Unexercisable Aggregate Annualized Unexercisable (3)
<S> <C> <C> <C> <C> <C>
Robert L. Tillman 10,000 Shares 120,000 Shares 0 0 0
0 Units 9,000 Units 0 0 10,000
Leonard G. Herring 0 Shares 0 Shares 0 0 0
0 Units 0 Units 0 0 0
Robert L. Strickland 0 Shares 50,000 Shares 0 0 0
0 Units 10,000 Units 0 0 10,000
William C. Warden, Jr. 0 Shares 40,000 Shares 0 0 0
0 Units 7,000 Units 0 0 8,000
Larry D. Stone 0 Shares 40,000 Shares 0 0 0
0 Units 4,500 Units 0 0 5,000
Dale C. Pond 0 Shares 30,000 Shares 0 0 0
0 Units 5,000 Units 0 0 5,000
(3) Value of the unexercised in-the-money options and SARs which had not been exercised at fiscal
year end.
</TABLE>
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
No awards were made under any long-term incentive plans for the Company
during 1996.
REPORT OF THE COMPENSATION 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 Committee (the "Committee") of the Board of Directors
comprises five Independent 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 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 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 link 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
- - 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 the most senior Executive Officers to have more
of their total compensation at risk on the basis of Company performance than
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 better
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, the 1994 Incentive Plan, and the 1997 Incentive Plan,
vehicles are provided to enable executives to acquire Company Stock, subject
to regulatory limitations. The Committee has established informal ownership
guidelines for Executive Officers and will take into account each executive's
progress toward attaining those goals when considering future stock options or
restricted stock awards.
Elements in the Executive Compensation Program
The Company's Executive Compensation Program comprises 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.
1994 Incentive Plan
The 1994 Incentive Plan was adopted 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 and to assure deductibility of executive
compensation for federal and state income tax purposes.
The 1994 Incentive Plan authorizes the grant of stock options. The
option price cannot be less than the market price of the Company's Common
Stock on the date on which the option is granted. Consequently, stock options
granted under the 1994 Incentive Plan measure performance and create
compensation solely on the basis of the appreciation in the price of the
Company's Common Stock.
Stock appreciation rights (STARs) also may be granted under the 1994
Incentive Plan. STARs entitle the recipient to receive a cash payment based
on the appreciation in the Company's Common Stock following the date of the
award and, accordingly, measure performance and create compensation only if
the price of the Company's Common Stock appreciates.
Company Common Stock also may be issued under stock awards pursuant to
the 1994 Incentive Plan. All stock awards made through January 31, 1996, were
performance accelerated restricted stock (PARS) awards which provide that the
shares are subject to forfeiture and are nontransferable for seven years
following the award. Accelerated vesting is permitted if the Company achieves
certain financial objectives during the three- and five-year periods following
the award.
Stock awards made as of January 31, 1997, include both PARS and
Performance Stock Awards. The President/Chief Executive Officer, the
Chairman, and members of the President's staff were granted Performance Stock
shares. Other eligible senior and middle managers were granted PARS awards.
The Performance Share awards are subject to forfeiture and are nontransferable
unless the Company achieves specific performance objectives at the end of a
three-year period. The PARS awards are subject to forfeiture and are
nontransferable for five years following the award. Accelerated vesting is
permitted if the Company achieves certain financial objectives during the
three- and four-year periods following the award.
The Management Bonus Program is the final component of the 1994 Incentive
Plan. The Management Bonus Program provides bonus opportunities which can be
earned upon achievement by the Company of preset annual financial goals. No
bonuses are paid if performance is below the threshold level of corporate
profitability. Additional bonus amounts are earned on a proportionate scale
up to 100% of the stated bonus opportunity if the preset financial goals are
met. Maximum bonuses were paid for the fiscal year ended 1995, because the
Company's financial results exceeded the preset performance goals. A partial
bonus equal to 25.669% of the basic bonus opportunity was paid for the year
ended January 31, 1996, because financial results exceeded the minimum
performance threshold but were below the goals established for full bonus
payment. Maximum bonuses were again paid for the year ended January 31, 1997,
because the Company's financial performance exceeded the preset performance
goals.
Proposed 1997 Incentive Plan
The 1997 Incentive Plan was approved by the Compensation Committee and
the Company's Board of Directors on December 6, 1996, and is submitted for
shareholder approval. The purpose of the 1997 Incentive Plan is to provide
authorized shares to continue the objectives of the 1994 Incentive Plan: 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, and
to assure deductibility of executive compensation for federal and state
income tax purposes.
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 retirement
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 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.
The CEO's Compensation in the Fiscal Year Ended January 31, 1997
On August 1, 1996, Robert L. Tillman was named President and Chief
Executive Officer of the Company.
Effective February 1, 1997, the Committee increased Mr. Tillman's annual
base salary from $550,000 to $675,000. The Committee based its decision 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. Tillman's leadership during a critical management transition, and
the Committee's assessment that his prior base salary was below market when
compared to other chief executive officers of similarly situated companies.
The Committee authorized payment to Mr. Tillman of an annual bonus of
$240,000 under the 1996 Management Bonus Program based upon his position as
Senior Executive Vice President and Chief Operating Officer on February 1,
1996. The Committee approved a supplemental year-end bonus payment of
$172,500 in recognition of his assumption of the role of President and Chief
Executive Officer at mid-year. The Committee determined Mr. Tillman'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.
Mr. Tillman was granted options for 120,000 shares of Company Stock on
December 6, 1996, at $39.125, the fair market value of the Stock on the date
of the grant. The options become exercisable in three equal installments
after one, two, and three years from the date of the grant. The options
expire after five years. The Committee also approved an award of 30,000
restricted Performance Stock shares which will become vested and transferable
after three years if certain predetermined performance objectives are met.
Mr. Tillman earned a Benefit Restoration Plan payment of $146,200 for the
fiscal year ended January 31, 1997.
The Committee believes that the payments and stock incentives described
herein were necessary to maintain the competitiveness of Mr. Tillman's
compensation package in comparison to those of other chief executive officers
of similarly situated companies.
* * *
Section 162(m) of the Internal Revenue Code imposes a $1 million limit on
the amount that a company may deduct for compensation paid to each of its five
most highly compensated officers. Compensation that is "performance based
compensation" under Section 162(m) is deductible without regard to the limit.
The Committee continues to study the Company's compensation programs to ensure
deductibility of compensation under Section 162(m) to the extent that any
required changes continue to serve the Company's ability to achieve its goals
and maintain its compensation philosophy. The 1997 Incentive Plan, if
approved by shareholders, will allow the Committee to provide for performance
based awards that are deductible under Section 162(m).
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
James F. Halpin
Russell B. Long
April 18, 1997
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, 1992, in the Company's
Common Stock and each of the indices.
Comparison of Five Year Cumulative Return of
Lowe's Companies, Inc., the S & P 500 and S & P Retail Index
Jan. '92 Jan. '93 Jan. '94 Jan. '95 Jan. '96 Jan. `97
LOWE'S 100 136.55 303.87 367.88 313.52 335.66
S&P 500 100 110.57 124.76 125.41 173.85 219.61
S&P RETAIL INDEX 100 131.48 128.53 127.68 118.94 142.09
(As of January 31)
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Banking and Financial Transactions. The Company has a $300 million
revolving credit facility with a syndicate of 13 banks, two of which are
First Union National Bank, a subsidiary of First Union Corporation, and
Wachovia Bank of North Carolina, N.A. The facility has a $200 million
portion expiring November 27, 2001 and another $100 million expiring November
26, 1997. It is used to support the Company's commercial paper program and
for short-term borrowings. First Union's and Wachovia's portions of this
facility are $22.5 and $30 million, respectively. The current applicable
interest rates for this credit facility are the Bank's reference rate or the
LIBOR rate plus 15 or 16.5 basis points. At January 31, 1997, there were no
borrowings outstanding under this credit facility. In Fiscal 1996, the
Company incurred $22 and $34 thousand in fees on First Union's and Wachovia's
portions of the unused lines of credit, respectively.
The Company also has commitments from First Union for a $35 million line
of credit and from Wachovia for a $60 million line of credit for purposes of
issuing documentary and standby letters of credit. At January 31, 1997, there
was $7.3 million outstanding with First Union and $8.9 million outstanding
with Wachovia under these lines. Other than a commission fee for letters of
credit issued under these arrangements, no fees are charged for maintaining
these lines of credit. Robert L. Tillman, President and a Director of the
Company, is a member of the Board of Directors of Wachovia Bank of North
Carolina, N.A.; Leonard G. Herring, former President and a current Director of
the Company, is a member of the Board of First Union Corporation.
Other Transactions. The Company extended a $180,000 "bridge" loan to J.
Gregory Dodge, former Senior Vice President - Real Estate/Engineering and
Construction, to assist Mr. Dodge in acquiring his principal residence in
Wilkes County, N. C. The terms of the loan were negotiated at the time Mr.
Dodge was hired as an Executive Officer. The loan, due in 1997 and bearing a
5% annual interest rate, was paid in full during Fiscal 1996.
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, 1997,
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.
AMENDMENT OF ARTICLES OF INCORPORATION
TO CHANGE TO A FIXED-SIZE BOARD
The Board of Directors recommends that shareholders approve amendment of
the Restated and Amended Articles of Incorporation to change from a variable
range Board of Directors of from 6 to 12 members to a fixed-sized Board not
to exceed 15 members. Shareholder approval of the amendment to the Articles
of Incorporation also will constitute approval of the Board of Directors
action amending the Bylaws to make them consistent with the proposed
amendment to the Articles of Incorporation. Approval of the proposed
amendment to the Articles of Incorporation requires the affirmative vote of a
majority of outstanding Common Stock. The text of proposed amended Sections
9(a) and 9(b) of the Articles of Incorporation is attached as Exhibit A.
For many years, the Articles of Incorporation have provided that the
number of Directors shall be as set forth in the Bylaws, and, in the absence
of a Bylaw, fixed the number of Directors at 9, with a limitation on any
increase in the number in any 12-month period to not more than 2 except by the
affirmative vote of holders of at least 70% of the outstanding Voting Shares.
Also for many years, the Bylaws have provided for a variable-range Board of
Directors of not less than 6 or more than 12 members with the number of
Directors being fixed annually by appropriate resolution of the Board of
Directors. North Carolina law provides that, once shares have been issued, a
North Carolina corporation may not change from a variable range board to a
fixed-size board without the approval of shareholders.
The number of Directors in recent years has fluctuated from 10 to 12, the
last number being the maximum number of Directors permitted by the Bylaws.
Due to the retirement of 2 Directors at the 1997 Annual Meeting, following the
Annual Meeting the Board will comprise 10 members. The Board of Directors
believes it should have the flexibility to add additional Directors if
outstanding candidates become available, although at the current time the
Board of Directors has not identified any specific candidates for addition to
the Board.
In keeping with the practice of most corporations, the Board believes a
Board of Directors of a maximum fixed-size, with the actual number of
Directors to be prescribed by the Board of Directors by amendment of the
Bylaws, is in the Company's and the shareholders' best interest. After mature
consideration, the Board has determined to request shareholder approval of an
amendment to the Articles of Incorporation to provide that the Board at any
time shall not exceed 15 members, and that the number of Directors may not be
increased or decreased by more than 30% during any 12-month period except by
the affirmative vote of the holders of at least 70% of outstanding Voting
Stock. The provisions respecting increases and decreases in the number of
Directors accords with North Carolina law, which permits increases and
decreases by up to 30% during a 12-month period.
The amendment to the Articles of Incorporation will not affect in any way
the classification of the Board into classes, and if the Board of Directors
should be increased to the maximum size permitted by the proposed amendment,
the Board would comprise of 3 classes of 5 members each.
The Board of Directors unanimously recommends that shareholders APPROVE
ADOPTION of Amended Articles 9(a) and 9(b) to the Amended and Restated
Articles of Incorporation and consent to the conforming Bylaw change.
APPROVAL OF THE LOWE'S COMPANIES, INC. 1997 INCENTIVE PLAN
The Board of Directors proposes that shareholders approve the Lowe's
Companies, Inc. 1997 Incentive Plan (the "1997 Plan"), adopted by the Board on
December 6, 1996, subject to the approval of the Company's shareholders. The
1997 Plan permits the grant of options to purchase shares of Common Stock from
the Company, stock appreciation rights ("SARs"), Stock Awards, Performance
Shares and Incentive Awards.
The shareholders approved the 1994 Incentive Plan at the 1994 Annual
Meeting. As of the date of this proxy statement, _____ shares of Common Stock
remain available for awards under the 1994 Incentive Plan. The Board believes
it needs additional shares available for officer and employee incentive
programs. Approval of the 1997 Plan will not affect the Company's ability to
make additional awards under the 1994 Incentive Plan, subject to its share
authorization.
The Board believes that the 1997 Plan will benefit the Company by (i)
assisting it in recruiting and retaining the services of employees with
ability and initiative, (ii) providing greater incentive for employees who
provide valuable services to the Company and (iii) associating the interests of
such persons with those of the Company through opportunities for increased
stock ownership and performance-based incentive compensation. The more
significant features of the 1997 Plan are described below.
The 1997 Plan must be approved by holders of a majority of the shares of
Common Stock represented at the Annual Meeting.
Administration
The Compensation Committee of the Board (the "Compensation Committee")
will administer the 1997 Plan. The Compensation Committee will have the
authority to select the individuals who will participate in the 1997 Plan
("Participants") and to grant Options and SARs and to make Stock Awards, awards
of Performance Shares and Incentive Awards upon such terms (not inconsistent
with the terms of the 1997 Plan), as the Compensation Committee considers
appropriate. In addition, the Compensation Committee will have complete
authority to interpret all provisions of the 1997 Plan, to prescribe the form
of agreements evidencing awards under the 1997 Plan, to adopt, amend and
rescind rules and regulations pertaining to the administration of the 1997 Plan
and to make all other determinations necessary or advisable for the
administration of the 1997 Plan.
The Compensation Committee may delegate its authority to administer the
1997 Plan to an officer 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 ("Section 16"). As used in
this summary, the term "Administrator" means the Compensation Committee and any
delegate, as appropriate.
Eligibility
Any employee of the Company or any subsidiary is eligible to participate
in the 1997 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 a subsidiary.
Directors who are employees of the Company or a subsidiary may be selected to
participate in the 1997 Plan.
Awards
Options. Options granted under the 1997 Plan may be incentive stock
options ("ISOs") or nonqualified stock options. A stock option entitles the
Participant to purchase shares of Common Stock from the Company at the option
price. The option price will be fixed by the Administrator at the time the
option is granted, but the price cannot be less than the shares' fair market
value on the date of grant. The option price may be paid in cash or, with the
Administrator's consent, with shares of Common Stock, or a combination of cash
and Common Stock. Options may be exercised at such times and subject to such
conditions as may be prescribed by the Administrator. The maximum period in
which an option may be exercised will be fixed by the Administrator at the
time the option is granted but cannot exceed ten years in the case of an ISO.
No employee may be granted ISOs (under the 1997 Plan or any other plan of
the Company) that are first exercisable in a calendar year for Common Stock
having an aggregate fair market value (determined as of the date the option
is granted) exceeding $100,000. In addition, no Participant may be granted
options in any calendar year for more than 300,000 shares of Common Stock.
SARs. SARs generally entitle the Participant to receive the excess of
the fair market value of a share of Common Stock on the date of exercise over
the initial value of the SAR. The initial value of the SAR is the fair market
value of a share of Common Stock on the date of grant. The 1997 Plan provides
that the Administrator may prescribe that the Participant will realize
appreciation on a different basis than described in the preceding sentences.
For example, the Administrator may limit the amount of appreciation that may
be realized upon the exercise of an SAR.
SARs may be granted in relation to option grants ("Corresponding SARs")
or independently of option grants. The difference between these two types of
SARs is that to exercise a Corresponding SAR, the Participant must surrender
unexercised that portion of the stock option to which the Corresponding SAR
relates and vice versa.
SARs may be exercised at such times and subject to such conditions as
may be prescribed by the Administrator. The maximum period in which an SAR
may be exercised will be fixed by the Administrator at the time the SAR is
granted but cannot exceed ten years in the case of an SAR that is granted in
relation to an ISO.
No Participant may be granted SARs in any calendar year for more than
300,000 shares of Common Stock. For purposes of this limitation (and the
limitation on individual option grants), an option and a Corresponding SAR are
treated as a single award.
Stock Awards. The 1997 Plan also permits the grant of Stock Awards,
i.e., shares of Common Stock. A Stock Award shall be forfeitable or otherwise
restricted until certain conditions are satisfied. These conditions may
include, for example, a requirement that the Participant complete a specified
period of service or that certain objectives be achieved. The objectives may
be based on performance criteria, including those described below. A Stock
Award will be restricted for a period of at least three years; provided,
however, that the period shall be at least one year in the case of a Stock
Award that is subject to objectives based on one or more performance criteria.
No participant may be granted Stock Awards in any calendar year for more than
100,000 shares.
Performance Shares. The 1997 Plan also permits the award of Performance
Shares, i.e., an award stated with reference to a number of shares of Common
Stock that entitles the holder to receive a payment equal to the fair market
value of the Common Stock if the performance objectives are achieved. The
performance objectives may be stated with respect to the criteria described
below. The performance measurement period shall be at least one year. To
the extent that a Performance Share award is earned, it may be settled in
cash, with Common Stock, or a combination of cash and Common Stock. No
Participant may receive an award of Performance Shares in any calendar year
for more than 100,000 shares.
Incentive Awards. Incentive Awards also may be granted under the 1997
Plan. An Incentive Award is an opportunity to earn a bonus, payable in cash,
upon the attainment of stated performance objectives. The performance
objectives will be stated with reference to one or more of the performance
measures described below. No Participant may receive an Incentive Award
payment in any calendar year that exceeds the lesser of (i) 200 percent of
the Participant's base salary (prior to any salary reduction or deferral
election) as of the date of grant of the Incentive Award or (ii) $2,000,000.
Performance Measures
As noted above, a Participant's rights under a Stock Award, Performance
Shares or an Incentive Award may be subject to the satisfaction of performance
objectives. Those performance objectives may be stated with reference to the
Company's FIFO pre-tax earnings in relation to non-cash beginning assets, the
fair market value of the Common Stock or the Company's, a subsidiary's or an
operating unit's return on equity, earnings per share, total earnings,
earnings growth, return on capital, return on assets or such other measures as
may be
selected by the Administrator.
Transferability
Options, SARs, Stock Awards, Performance Shares and Incentive Awards
generally will be nontransferable except by will or the laws of descent and
distribution. The Administrator may prescribe that options, SARs, Performance
Shares and Incentive Awards may be transferred to members of the Participant's
immediate family, a family trust or a family partnership on such terms and
conditions as may be permitted under Securities and Exchange Commission Rule
16b-3, as in effect from time to time.
Share Authorization
Under the 1997 Plan, a maximum of 5,000,000 shares of Common Stock may
be issued upon the exercise of options and SARs and the grant of Stock Awards
and the settlement of Performance Shares. No more than 1,650,000 shares of
Common Stock may be issued as Stock Awards and in settlement of Performance
Shares. These limitations will be adjusted, as the Administrator determines
is appropriate, in the event of a change in the number of outstanding shares
of Common Stock by reason of a stock dividend, stock split, combination,
reclassification, recapitalization, or other similar events. The terms of
outstanding awards and the limitations on individual grants also may be
adjusted by the Administrator to reflect such changes.
Amendment and Termination
No options, SARs, Stock Awards or Performance Shares may be granted
under the 1997 Plan after January 31, 2007. The Board may, without further
action by shareholders, terminate or suspend the 1997 Plan in whole or in
part. The Board also may amend the 1997 Plan except that no amendment that
increases the number of shares of Common Stock that may be issued under the
1997 Plan, changes the class of individuals who may be selected to participate
in the 1997 Plan, materially increases the benefits that may be provided
under the 1997 Plan or that affects the terms of an outstanding award in a
manner that, to a material extent, makes it more likely that a benefit will be
earned, will become effective until it is approved by shareholders.
Change in Control
Each outstanding option and SAR shall be exercisable on the date that the
Board approves a transaction, or the Company enters into an agreement with
respect to a transaction, that would result in a change in control (as defined
in the 1997 Plan). In addition, each outstanding Stock Award shall be vested
and transferable and each Performance Share and Incentive Award shall be earned
in its entirety upon a change in control. If a payment or benefit under the
1997 Plan is characterized as a "parachute payment" under the Internal Revenue
Code, the Company shall pay the Participant an amount sufficient to hold the
Participant harmless from the parachute payment provisions of the Internal
Revenue Code.
Initial Awards
On December 6, 1996, the Committee granted nonqualified stock options to
Messrs. Strickland and Tillman, subject to the shareholders' approval of the
1997 Plan. The options generally become exercisable in three equal
installments on the first, second and third anniversaries of the grant. The
options have a five-year term and cannot be exercised more than three months
after termination of employment, although a longer period for exercise is
permitted if employment ends on account of death, disability or retirement.
The option price is $39.125 per share, the fair market value on the date of
grant, and may be paid in cash, by surrendering Common Stock or a combination
of cash and Common Stock. Messrs. Strickland and Tillman were required to
enter into Confidentiality and Non-Competition Agreements as a condition of
receipt of the options.
Except as described above, the Company is not able to estimate the number
of individuals that the Administrator will select to participate in the 1997
Plan or the type or size of awards that the Administrator will approve.
Federal Income Tax Consequences
The Company has been advised by counsel regarding the federal income
tax consequences of the 1997 Plan. 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. Income is recognized
by a Participant when he disposes of shares acquired under an ISO. The
exercise of a nonqualified 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.
No income is recognized upon the grant of an SAR. The exercise of an SAR
generally is a taxable event. The Participant must recognize income equal to
any cash that is paid and the fair market value of Common Stock that is
received
in settlement of an SAR.
Income is recognized on account of the grant of a Stock Award when the
shares first become transferable or are no longer subject to a substantial
risk of forfeiture. At that time the Participant recognizes income equal to
the
fair market value of the Common Stock.
No income is recognized on account of the award of Performance Shares.
The Participant must recognize income equal to any cash that is paid and the
fair market value of Common Stock that is received in settlement of a
Performance Share award.
No income is recognized upon the grant of an Incentive Award. Income
will be recognized on the date that payment is made under the Incentive Award.
The employer (either the Company or a subsidiary) will be entitled to
claim a federal income tax deduction on account of the exercise of a
nonqualified stock option or SAR or the vesting of a Stock Award or the
settlement of Performance Shares or an Incentive Award. The amount of the
deduction is equal to the ordinary income recognized by the Participant. The
employer will not be entitled to a federal income tax deduction on account
of the grant or the exercise of an ISO. The employer may claim a federal
income tax deduction on account of certain dispositions of ISO stock.
The Board of Directors unanimously recommends that the shareholders vote "FOR"
the 1997 Incentive Plan.
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 materials to principals
and obtaining their proxies. The Company has engaged the proxy soliciting
firm of D. F. King & Co., Inc. to solicit proxies for the Annual Meeting 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 Proposals 1, 2 and 3 as set forth in the Notice of Annual
Meeting 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 1998 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 19, 1997.
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, 1997, is available upon written request
addressed to Lowe's Companies, Inc., Investor Relations Department, P. O. Box
1111, North Wilkesboro, NC 28656.
North Wilkesboro, North Carolina
April 18, 1997
EXHIBIT A
PROPOSED AMENDMENT TO AMENDED AND
RESTATED ARTICLES OF INCORPORATION
9. Board of Directors. (a) Number, Election & Term of Directors. The
number of Directors shall be set forth in the Bylaws, but shall not exceed at
any time 15 members. The number of Directors may not be increased or
decreased by more than 30% during any 12-month period except by the
affirmative vote of the holders of at least 70% of the outstanding Voting
Shares, as defined in this Article 9. The Board of Directors shall be divided
into three classes, Class I, Class II and Class III, as nearly equal in number
as possible, and with each class' term expiring at the third annual
shareholders meeting after its election. At each Annual Meeting of
Shareholders, the successors to the class of Directors whose term shall then
expire shall be identified as being of the same class as the Directors they
succeed and elected to hold office for a term expiring at the third succeeding
Annual Meeting of Shareholders. When the number of Directors is changed, any
newly-created directorships or any decrease in directorships shall be so
apportioned to one of the classes as to make all classes as nearly equal in
number as possible.
(b) Newly-Created Directorships and Vacancies. Subject to the
rights of the holders of Preferred Stock then outstanding, any vacancy
occurring in the Board of Directors, including a vacancy resulting from an
increase by not more than 30% in the number of Directors in any 12-month
period, may be filled by the affirmative vote of the majority of the remaining
Directors, though less than a quorum of the Board of Directors, and the
Directors so chosen shall hold office for a term expiring at the Annual
Meeting of Shareholders at which the term of the class to which they have been
elected expires, subject to any requirement that they be elected by the
shareholders at the annual meeting next following their election by the Board
of Directors. No decrease in the number of Directors constituting the Board
of Directors shall shorten the term of any incumbent Director.
<TABLE>
<CAPTION>
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 A. Gragg and David H. Sain as Proxies, each with the power to appoint
his/her substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side,
all the shares of Common Stock of Lowe's Companies, Inc. held of record by the undersigned on April 4
1997, at the Annual Meeting of Shareholders to be held on May 30, 1997, or any adjournment thereof. The
Board of Directors recommends a vote FOR Proposals 1, 2 and 3.
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 and 3.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY USING THE ENCLOSED ENVELOPE.
Please sign exactly as your name(s) appear(s) on the books of the Company. Joint owners should each sign
personally. Trustees, custodians and other fiduciaries should indicate the capacity in which they sign/ and
where more than one name appears, a majority must sign. If the shareholder is a corporation, the
signature should be that of an authorized officer who should indicate his or her title.
HAS YOUR ADDRESS CHANGED?
________________________________
________________________________
________________________________
________________________________
<S> <S>
X PLEASE MARK VOTES
- --- AS IN THIS EXAMPLE
1. Election of Directors
LOWE'S Nominees:
COMPANIES, INC.
CLASS I DIRECTOR (Two-year Term 1997-1999)
Leonard G. Herring
CLASS II DIRECTORS (Three-year Term 1997-2000)
Carol A. Farmer, Robert G. Schwartz,
Robert L. Strickland
RECORD DATE SHARES: CLASS III DIRECTORS (One-year Term 1997-1998)
Paul Fulton, James F. Halpin
Note: If you do not wish your shares voted "FOR" a
particular nominee, mark the "FOR ALL EXCEPT"
box and strike a line through that nominee's name Your
shares will be voted for the remaining nominees
For All With- For All
Nominees hold Except
--- --- ---
2. PROPOSAL TO APPROVE AN AMENDMENT TO THE AMENDED
AND RESTATED ARTICLES OF INCORPORATION to change from a variable
range Board of Directors to a fixed-size Board of Directors and
consent to a conforming Bylaw change
For Against Abstain
--- --- ---
Please be sure to sign
and date this Proxy. Date 3. PROPOSAL TO APPROVE THE LOWE'S COMPANIES INC 1997
INCENTIVE PLAN
For Against Abstain
--- --- ---
4. In their discretion, the Proxies are authorized to
vote upon such other business as may properly come
Shareholder sign here before the meeting
Co-owner sign here Mark box at right if an address change has been
noted on the reverse side of this card.
---
14
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