<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
The May Department Stores Company
----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
The May Department Stores Company
----------------------------------------------------
(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:
---------------------------------------------------------------------
_/ Set forth the amount on which the filing fee is calculated and state how
it was determined.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
1) Amount Previously Paid:
---------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------
3) Filing Party:
---------------------------------------------------------------------
4) Date Filed:
---------------------------------------------------------------------
<PAGE> 2
MAY
The May Department Stores Company
611 Olive Street
St. Louis, Missouri 63101-1799
April 18, 1994
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
The annual meeting of the shareowners of The May Department Stores
Company, a New York corporation, will be held at the Cervantes
Convention Center, Washington Avenue at Eighth Street, St. Louis,
Missouri, on Friday, May 20, 1994, at 10:00 a.m. Central Daylight Time.
Directions to the Cervantes Convention Center can be found on the last
page of the accompanying proxy statement. The meeting will be to
consider and act upon the following matters:
1. The election of five directors;
2. The ratification of the appointment of independent auditors;
3. Proposals to approve incentive plans; and
4. Proposals by certain shareowners.
These matters are described in the accompanying proxy statement. All
common shareowners and owners of ESOP preference shares of record at
the close of business on March 31, 1994 (the "Record Date") are
entitled to vote at the meeting.
It is important that your shares be represented at this meeting. Even
if you plan to attend, we encourage you to promptly sign, date and
return your proxy in the enclosed postage-paid envelope.
PLEASE NOTE: Directions to the Cervantes Convention Center in downtown
St. Louis can be found on the last page of the accompanying proxy
statement.
<PAGE> 3
PROXY STATEMENT
This proxy statement is furnished to common shareowners of The May
Department Stores Company (the "Company") and to owners of ESOP
(Employee Stock Ownership Plan) preference shares of the Company ("ESOP
stock") in connection with the solicitation by the board of directors
of proxies for use at the annual meeting of shareowners, and at all
adjournments thereof. This proxy statement and the enclosed form of
proxy are being mailed to shareowners on or about April 18, 1994.
Management knows of no matters to be presented at the meeting other
than as mentioned below. However, if any matter not specifically set
forth in the foregoing notice properly comes before the meeting, it is
intended that the holders of the proxies will vote thereon in their
discretion. Any shareowner has the power to revoke his or her proxy at
any time during or prior to the annual meeting.
Owners of common stock are entitled to cast one vote for each share
owned. The outstanding voting securities of the Company as of the
Record Date, which carry 263,775,100 votes, consisted of (i)
248,443,231 shares of common stock (excluding 65,193,765 shares of
treasury stock), and (ii) 748,250 shares of ESOP stock which carry
15,331,869 votes. The owners of the outstanding common stock and of the
ESOP stock are entitled to vote together as a single class.
As of the Record Date, the Company's Profit Sharing Plan beneficially
owned 11,526,487 shares of common stock (4.63% of the outstanding
shares of common stock) and 100% of the outstanding shares of ESOP
stock which carry 15,331,869 votes. Members direct the voting of all
shares held by the Profit Sharing Plan. Together, the ESOP stock and
the common stock owned by the Profit Sharing Plan represent 10.18% of
the votes which can be cast at the meeting. Except for the Profit
Sharing Plan, the Company knows of no person who beneficially owns more
than 5% of the Company's voting securities.
1995 SHAREOWNER PROPOSALS. Shareowner proposals for the 1995 annual
meeting of shareowners must be received at the Company's principal
executive offices, 611 Olive Street, St. Louis, Missouri 63101-1799,
prior to December 19, 1994, for inclusion in the Company's proxy
statement and the form of proxy for such meeting.
THE ELECTION OF DIRECTORS
Proposal (a) on the accompanying proxy card.
NOMINEES. The board of directors proposes the election of five
directors. These five directors, together with the eight directors
whose terms continue beyond this year's annual meeting, will comprise
the board of directors.
The shares represented by the accompanying proxy card will be voted
(unless voting authority is withheld) in favor of electing the persons
named below as directors. Such proxies will be voted to elect Thomas A.
Hays, Jerome T. Loeb, Russell E. Palmer, Michael R. Quinlan and William
P. Stiritz to serve as directors for a term expiring at the 1997 annual
meeting of shareowners and until their respective successors have been
elected and qualified. Messrs. Farrell, Meyer and Weidenbaum and Mrs.
Kaplan were previously elected to serve as directors for terms expiring
at the 1995 annual meeting of shareowners, and Messrs. Battram,
Pearson, Storey and Whitacre were previously elected to serve as
directors for terms expiring at the 1996 annual meeting of shareowners
and, accordingly, these directors do not stand for election at the 1994
annual meeting.
If any nominee should subsequently become unavailable for election,
the holders of proxies may, in their discretion, vote for a substitute
or the board of directors may reduce the number of directors to be
elected.
The ages shown on the following pages are as of May 20, 1994, and the
shares shown are the shares of common stock of the Company over which
the director had sole or shared voting and investment power as of March
21, 1994. No director reported beneficial ownership of any shares of
preferred stock of the Company. The shares reported reflect interests
in shares owned by the Company's Profit Sharing Plan.
- - - - - ------------------------------------------------------------------------
[PHOTO] DAVID C. FARRELL, Director Since 1974, Age 60
Mr. Farrell, Chairman of the Board and Chief Executive
Officer of the Company, joined the Company in 1956. He
became Chief Executive Officer in 1979 and Chairman of the
Board in 1985. He is also a director of Emerson Electric
Co. and Ralston Purina Company. Mr. Farrell beneficially
owns 826,640 shares and has the right to acquire an
additional 260,970 shares on or before May 20, 1994.
1
<PAGE> 4
- - - - - ------------------------------------------------------------------------
[PHOTO] RICHARD L. BATTRAM, Director Since 1984, Age 59
Mr. Battram, Vice Chairman of the Company, joined the
Company in 1972. He became Vice Chairman of the Company in
1984. Mr. Battram is also a director of Boatmen's
Bancshares, Inc., and Pet Incorporated. Mr. Battram
beneficially owns 200,881 shares and has the right to
acquire an additional 50,644 shares on or before May 20,
1994.
- - - - - ------------------------------------------------------------------------
[PHOTO] THOMAS A. HAYS, Director Since 1983, Age 61
(Standing for election at this meeting)
Mr. Hays, Deputy Chairman of the Company, joined the
Company in 1969. He served as President of the Company
from 1985 to 1993, when he became Deputy Chairman. Mr.
Hays is also a director of Mercantile Bancorporation Inc.
and Union Electric Company. Mr. Hays beneficially owns
266,209 shares and has the right to acquire an additional
33,565 shares on or before May 20, 1994.
- - - - - ------------------------------------------------------------------------
[PHOTO] HELENE L. KAPLAN, Director Since 1985, Age 60
Mrs. Kaplan is Of Counsel to the law firm of Skadden,
Arps, Slate, Meagher & Flom. She was a partner in the law
firm of Webster & Sheffield from 1978 to 1985 and served
as Counsel to Webster & Sheffield from 1986 to 1990. She
is a director of Chemical Banking Corporation, Chemical
Bank, Metropolitan Life Insurance Company, Mobil
Corporation and NYNEX Corporation. Mrs. Kaplan also serves
as a trustee or director of many non-profit cultural,
educational and scientific organizations. Mrs. Kaplan
beneficially owns 7,100 shares.
- - - - - ------------------------------------------------------------------------
[PHOTO] JEROME T. LOEB, Director Since 1984, Age 53
(Standing for election at this meeting)
Mr. Loeb, President of the Company, joined the Company in
1964. He served as Vice Chairman from 1986 to 1993, when
he became President. Mr. Loeb also serves as the Company's
chief financial officer. Mr. Loeb beneficially owns
233,221 shares (and disclaims beneficial interest in 4,384
of those shares) and has the right to acquire an
additional 45,314 shares on or before May 20, 1994.
- - - - - ------------------------------------------------------------------------
[PHOTO] EDWARD H. MEYER, Director Since 1979, Age 67
Mr. Meyer is Chairman of the Board of Directors, President
and Chief Executive Officer of Grey Advertising Inc. Mr.
Meyer joined Grey Advertising Inc. in 1956 and became
President in 1968, Chief Executive Officer in 1970 and
Chairman of the Board in 1972. Mr. Meyer is also a
director of Bowne & Co., Inc., Ethan Allen Interiors, Inc.
and Harman International Industries, Incorporated, and he
is a director/trustee of 31 mutual funds advised by
Merrill Lynch Asset Management, Inc. Mr. Meyer
beneficially owns 13,340 shares.
- - - - - ------------------------------------------------------------------------
[PHOTO] RUSSELL E. PALMER, Director Since 1984, Age 59
(Standing for election at this meeting)
Mr. Palmer is the Chairman and Chief Executive Officer of
The Palmer Group, a corporate investment firm. He is the
retired managing director and Chief Executive Officer of
Touche Ross International and the retired Dean of The
Wharton School and Reliance Professor of Management and
Private Enterprise at the University of Pennsylvania. Mr.
Palmer is also a director of Allied-Signal Inc., Bankers
Trust New York Corporation, Contel Cellular, Inc., Federal
Home Loan Mortgage Corporation, The Goodyear Tire & Rubber
Company, GTE Corporation, Imasco Limited and Safeguard
Scientifics, Inc. Mr. Palmer beneficially owns 3,700
shares.
2
<PAGE> 5
- - - - - ------------------------------------------------------------------------
[PHOTO] ANDRALL E. PEARSON, Director Since 1982, Age 68
Mr. Pearson is the retired President and Chief Operating
Officer of PepsiCo, Inc. He also served as the Class of
1958 Professor of Business Administration, Harvard
University Graduate School of Business Administration. Mr.
Pearson is also a director of PepsiCo, Inc., Kendall
Company, Lexmark International and Primerica Corporation.
Mr. Pearson beneficially owns 3,700 shares.
- - - - - ------------------------------------------------------------------------
[PHOTO] MICHAEL R. QUINLAN, Became a Director in 1993, Age 48
(Standing for election at this meeting)
Mr. Quinlan is Chairman and Chief Executive Officer of
McDonald's Corporation. He joined McDonald's in 1963 and
served as Chief Operating Officer from 1982 to 1987 and as
President from 1982 to 1989. He became Chief Executive
Officer in 1987 and Chairman in 1990. Mr. Quinlan is also
a director of Dun & Bradstreet and a member of the board
of trustees of Ronald McDonald Children's Charities and
Loyola University of Chicago. Mr. Quinlan beneficially
owns 2,000 shares.
- - - - - ------------------------------------------------------------------------
[PHOTO] WILLIAM P. STIRITZ, Director Since 1983, Age 59
(Standing for election at this meeting)
Mr. Stiritz is Chairman of the Board of Directors and
Chief Executive Officer of Ralston Purina Company. Mr.
Stiritz is also a director of Angelica Corporation, Ball
Corporation, Boatmen's Bancshares, Inc., General American
Life Insurance Company, Reinsurance Group of America, Inc.
and S.C. Johnson & Son, Inc. Mr. Stiritz beneficially owns
3,700 shares.
- - - - - ------------------------------------------------------------------------
[PHOTO] ROBERT D. STOREY, Director Since 1989, Age 58
Mr. Storey is a partner in the law firm of Thompson, Hine
and Flory in Cleveland, Ohio. Prior to joining his present
law firm in 1993, Mr. Storey was a partner for 19 years in
the law firm of Burke, Haber & Berick, also in Cleveland.
Mr. Storey is also a director of Bank One, Cleveland, GTE
Corporation and The Procter & Gamble Company and a trustee
of the Kresge Foundation. Mr. Storey beneficially owns
3,805 shares.
- - - - - ------------------------------------------------------------------------
[PHOTO] MURRAY L. WEIDENBAUM, Director 1978-1981 and Since 1982,
Age 67
Dr. Weidenbaum is Director of the Center for the Study of
American Business and is the Mallinckrodt Distinguished
University Professor at Washington University. He joined
the faculty of Washington University in 1964, and from
time to time served in certain governmental positions,
including Chairman of the Council of Economic Advisers in
1981 and 1982. Dr. Weidenbaum is also a director of
Harbour Group, Ltd., Medicine Shoppe International, Inc.,
and Tesoro Petroleum. Dr. Weidenbaum beneficially owns
3,700 shares.
- - - - - ------------------------------------------------------------------------
[PHOTO] EDWARD E. WHITACRE, JR., Director Since 1989, Age 52
Mr. Whitacre is Chairman and Chief Executive Officer of
Southwestern Bell Corporation. He joined Southwestern Bell
in 1963 and served as Vice Chairman and Chief Financial
Officer from 1986 to 1988 and as President and Chief
Operating Officer from 1988 to 1989 when he became
Chairman and Chief Executive Officer. Mr. Whitacre is also
a director of Anheuser-Busch Companies, Inc., Burlington
Northern, and Emerson Electric Co. Mr. Whitacre
beneficially owns 3,700 shares.
3
<PAGE> 6
- - - - - ------------------------------------------------------------------------
The executive officers and directors, as a group, (i) have, as of March
21, 1994, sole voting and investment power over 1,621,147 shares of
common stock (less than 1% of common shares outstanding) and disclaim
beneficial ownership as to 4,384 of such shares and (ii) have the right
to acquire sole or shared voting and investment power over 425,509
shares on or before May 20, 1994, and disclaim beneficial ownership as
to all of such shares. Included among this group is Mr. Anthony J.
Torcasio, who is listed in the Summary Compensation Table below, who
beneficially owns 49,451 shares of common stock and has the right to
acquire an additional 35,016 shares on or before May 20, 1994. The
figures in this paragraph include the shares reported above with
respect to each of the nominees.
<TABLE>
- - - - - ---------------------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual
Compensation(2) Long-Term Compensation
--------------------------------------------------------------------------
Awards Payouts
------------------------------------------
Restricted Long-Term All Other
Name and Stock Stock Incentive Compen-
Principal Position Year Salary(1)(3) Bonus(1)(4) Awards(5) Options(6) Payouts(1)(7) sation(8)
- - - - - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
David C. Farrell 1993 $1,100,000 $660,000 $0 40,000 $896,076 $10,729
Chairman of the Board and 1992 $1,100,000 $408,112 $0 40,000 $312,088 $9,814
Chief Executive Officer 1991 $1,100,000 $371,267 $297,344 40,000 $108,733 $5,503
Thomas A. Hays 1993 $910,000 $276,000 $0 26,680 $362,504 $10,729
Deputy Chairman 1992 $880,000 $256,960 $0 26,680 $196,500 $9,814
1991 $880,000 $215,111 $0 26,680 $63,000 $5,503
Jerome T. Loeb 1993 $739,952 $232,500 $749,376 26,680 $275,187 $10,729
President 1992 $660,000 $195,640 $0 20,000 $140,906 $9,814
1991 $627,500 $158,889 $0 20,000 $43,750 $5,503
Richard L. Battram 1993 $672,500 $204,000 $0 20,000 $262,035 $10,729
Vice Chairman 1992 $640,000 $189,800 $0 20,000 $138,656 $9,814
1991 $617,500 $154,000 $881,250 20,000 $43,656 $5,503
Anthony J.Torcasio(9) 1993 $503,205 $150,000 $0 20,000 $168,354 $10,729
Chief Executive Officer
May Merchandising Co.
- - - - - ---------------------------------------------------------------------------------------------------------------------------------
<FN>
1. Total Cash Compensation. As supplemental information, the following
table shows the total cash compensation (Salary, Bonus and Long-Term
Incentive Payouts) paid to the named executive officers for the
fiscal year.
YEAR MR. FARRELL MR. HAYS MR. LOEB MR. BATTRAM MR. TORCASIO
1993 $2,656,076 $1,548,504 $1,247,639 $1,138,535 $821,559
1992 $1,820,200 $1,333,460 $996,546 $968,456
1991 $1,580,000 $1,158,111 $830,139 $815,156
2. The Summary Compensation Table does not reflect certain non-cash
compensation made available to the named executive officers for the
last three fiscal years because the aggregate amounts of such
compensation are below the required disclosure threshholds.
3. The table reflects salary paid or deferred during the respective
fiscal years shown. Annual salary changes for each of the named
executives and for all salaried associates normally occur on May 1
of each year, but occurred on August 1 in each of 1991 and 1992.
4. "Bonus" reflects the annual portion of the bonus payable under the
Company's Executive Incentive Compensation Plan for Corporate
Executives. See "Performance Based Bonus Plans" on page 5. The
bonuses were paid or were deferred under the Company's Deferred
Compensation Plan, which provides that all deferrals will be
distributed to participants in lump sum cash payments immediately
following a change in control of the Company (as defined in the
plan).
5. Restricted Stock is valued at the average price of the common stock
on the date of grant. The aggregate value of the restricted stock
owned by each of the named executive officers as of the end of the
last fiscal year (at $39.75 per share) was $6,340,443 for Mr.
Farrell (159,508 shares), $4,521,483 for Mr. Hays (113,748 shares),
$3,339,000 for Mr. Loeb (84,000 shares), $2,782,500 for Mr. Battram
(70,000 shares), and $1,192,500 for Mr. Torcasio (30,000 shares).
Dividends are paid on these shares quarterly. Mr. Farrell's 1991
grant of 10,000 shares vested one year after the date of the grant.
Mr. Battram's 1991 grant of 30,000 shares vests on April 30, 1994.
Shares of restricted stock are included in the common stock
ownership numbers on pages 1, 2 and 3. Under some circumstances,
restricted shares continue to be forfeitable for up to 10 years from
the date of grant. The restricted stock plan provides that, upon a
change in control of the Company (as defined in the plan),
restricted stock grants will be fully vested and all restrictions
will be waived. All share numbers reflect the June 1, 1993, 2-for-1
stock split.
6. "Stock Options" represent non-qualified 10-year options under the
Company's 1976 and 1987 stock option plans (adjusted to reflect the
June 1, 1993, 2-for-1 stock split). Options may no longer be granted
under the 1976 plan. Generally, one-fourth of the options become
exercisable on each of the first through fourth anniversaries of the
grant date. Both plans provide that all outstanding options become
fully exercisable upon the occurrence of a change in control of the
Company (as defined in the plans).
7. "Long-Term Incentive Payouts" represents the long-term portion of
the bonus payable under the Executive Incentive Compensation Plan
for Corporate Executives. Such amounts were paid or were deferred
under the Company's Deferred Compensation Plan. See "Performance
Based Bonus Plans" on page 5 and note 4 above.
8. "All Other Compensation" represents the Company's effective matching
allocation to the named individuals' accounts in the Company's
Profit Sharing Plan. See "Profit Sharing Plan" on page 6.
9. Mr. Torcasio became an executive officer for reporting purposes for
the first time in 1993 and, therefore, no information is provided
for earlier years.
</TABLE>
4
<PAGE> 7
EXECUTIVE COMPENSATION. The Summary Compensation Table on the previous
page shows the compensation in each of the last three fiscal years of
the executive officers whose compensation is required to be disclosed
pursuant to current proxy rules.
PERFORMANCE BASED BONUS PLANS. The Company has three performance based
bonus plans that cover approximately 2,100 associates. Each plan links
a major portion of the associates' potential total pay to the
associates' performance and to the Company's performance.
Executive Incentive Compensation Plan for Corporate Executives. The
Executive Incentive Compensation Plan for Corporate Executives applies
to nine individuals, including the five individuals named in the
Summary Compensation Table. Participants may receive annual cash awards
(for individual fiscal years) and long-term cash awards (for three-year
long-term performance periods). These awards are based upon attaining
earnings per share and return on net assets (RONA) performance
standards relating to the Company as a whole and are also based on the
performance of the Company's stock price over the long-term performance
periods. In addition, awards are subject to an automatic upward or
downward adjustment to reflect the Company's performance as compared to
the performance of the group of competitors included in the Company's
performance graph on page 8. The plan is administered by the executive
compensation and development committee of the board of directors (the
"Committee"), which is comprised of non-management directors. The
performance standards are set by the Committee at the beginning of the
measurement periods and are measured by the Committee after the close
of the measurement periods. In general, the maximum annual award
payable under the plan's formula is 30% (60% for the Chief Executive
Officer) of the executive's base salary, and the maximum long-term
award payable under the plan's formula is 45% (90% for the Chief
Executive Officer) of the executive's average base salary over the
three-year period. In 1993 and earlier years, the Committee could
adjust any of the awards upward or downward, in its sole and absolute
discretion; beginning in 1994, the Committee may adjust the awards for
the named executive officers downward only. (See the Long-Term
Incentive Plans table below.) This plan is described in detail in
connection with the proposal to approve this plan, beginning on
page 13.
Executive Incentive Compensation Plan for Company Principals. The
Executive Incentive Compensation Plan for Company Principals applies to
the 18 presidents and chairmen of the Company's operating divisions.
Participants may receive annual cash awards (for individual fiscal
years) and long-term cash awards (for three-year long-term performance
periods). These awards are based upon attaining earnings growth and
RONA performance standards relating to the participants' respective
divisions and are also based on the performance of the Company's stock
price over the long-term performance periods. The plan is administered
by the executive compensation and development committee of the board,
which may (and has) delegated certain decisions regarding the
implementation of the plan to a management committee comprised of the
Chief Executive Officer, the Deputy Chairman and certain other
management executives, none of whom can be participants in the plan
(the "Management Committee"). The performance standards are set by the
Management Committee at the beginning of the measurement periods and
are measured by the Management Committee after the close of the
measurement periods. The maximum annual award payable under the plan's
formula is 30% of the participants' base salary, and the maximum long-
term award payable under the plan's formula is 45% of the participants'
average base salary over the three-year period. The Management
Committee may adjust any of the awards upward or downward, in its sole
and absolute discretion. Awards are reviewed annually by the executive
compensation and development committee.
Performance Incentive Plan. The Performance Incentive Plan applies to
over 2,000 associates of the Company and its subsidiaries. Participants
may receive annual cash awards based upon attaining certain measures of
performance tailored to the participant's job. Performance standards
are set at the beginning of the fiscal year and measured after the
close of the fiscal year. The maximum annual award payable under the
plan's formula ranges from 15% to 50% of the associate's base salary.
Approximately $27.1 million was awarded to all participants in the
three plans for the performance periods ending in the last fiscal year.
Amounts awarded under these plans are reflected in the Summary
Compensation Table.
During the last fiscal year, each of the five executive officers
named in the Summary Compensation Table became eligible to receive a
potential long-term cash award for the three fiscal years 1993 to 1995.
The table below shows the maximum long-term cash awards payable to each
of them for that long-term period.
<TABLE>
- - - - - ---------------------------------------------------------------------------------------------------------------------------------
LONG-TERM INCENTIVE PLAN
AWARDS IN LAST FISCAL YEAR
<CAPTION>
Estimated Future
Performance Payouts Under
or Other Non-Stock
Period Until Price Based Plan
Maturation ----------------
Name or Payout Maximum(1)
- - - - - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
David C. Farrell Earned over $990,000
Thomas A. Hays three fiscal $412,500
Jerome T. Loeb years (1993-1995) $355,969
Richard L. Battram ending 1/27/96 $316,125
Anthony J. Torcasio $233,813
- - - - - ---------------------------------------------------------------------------------------------------------------------------------
<FN>
1. Payouts may range from $0 to the "maximum" award value. The estimate
above assumes that the individual remains eligible to participate
throughout the three-year period, the maximum performance goals have
been met and that the stock price has increased sufficiently to
result in the maximum stock price adjustment.
</TABLE>
5
<PAGE> 8
PROFIT SHARING PLAN. During 1993, over 44,900 associates invested $56.7
million in the Profit Sharing Plan, $35.1 million of which was invested
in the Company's common stock. In addition, $34.5 million of the
Company's common stock and ESOP stock was added to associates' accounts
as a result of the matching formula. As of the Record Date, the plan
beneficially owned 4.63% (11,526,487 shares) of the outstanding common
stock and 100% (equivalent to 15,331,869 shares of common stock) of the
outstanding ESOP stock, which together represent 10.18% of the voting
power of the Company.
The plan links its benefits to the Company's performance each year
and to the value of the Company's common stock. Generally, the Company
matches up to the first 5% of pay that an associate invests in the
plan. In 1993, our associates made $37.9 million of "matchable"
contributions to the plan. The matching rate for any year is variable
and discretionary. The matching rate is based on the Company's earnings
per share (EPS) performance. If the EPS increases by 6% from one year
to the next, the matching rate is 50% (i.e., 50c for every matchable
dollar invested). The matching rate increases by 1.25 percentage points
over 50% for every one percentage point by which the EPS increase
exceeds 6%; the matching rate also decreases based on the same formula,
if the EPS change is less than a 6% increase. In addition, if the price
of the Company's common stock exceeds $24.74 per share, the effective
matching rate will be higher as a result of the operation of the ESOP
feature of the plan (added in April 1989). The effective matching rate
for 1993 was 91.0% and has averaged 67.9% over the last five years.
Associates with one year of service (with at least 1,000 hours of
paid employment) and who are at least 21 years old may participate. The
plan offers associates four professionally managed investment funds for
associate contributions: a money market fund, a fixed income index
fund, a common stock index fund and a Company common stock fund.
RETIREMENT PLANS. The Company has a noncontributory retirement plan
covering substantially all associates who are paid for 1,000 or more
hours per year.
In addition, the Company has a supplementary retirement plan (the
"Supplementary Plan") covering, generally, associates who, at one time,
had compensation in a calendar year equal to at least twice the amount
of "wages" then subject to the payment of old age, survivor and
disability insurance Social Security taxes. Under the Supplementary
Plan, covered associates become entitled to a single life annuity
retirement benefit equal to (i) 2% of the average of the highest three
years out of the last five years of final annual salary and bonuses
(reported as salary, bonus and long-term incentive payouts in the
Summary Compensation Table) multiplied by their years of service, up to
a maximum of 25 years (ii) reduced by primary Social Security benefits,
Company-provided benefits payable under the Company's retirement,
profit sharing and disability plans and, if appropriate, by amounts to
reflect early retirement. The minimum benefit under the Supplementary
Plan is the amount of Company-provided benefits which would have been
payable under the Company's retirement and profit sharing plans,
determined without regard to any statutory limits, less the amount of
Company-provided benefits actually payable under those plans.
The Supplementary Plan provides that, in the event of a change in
control (as defined in the plan), vesting would be accelerated in
limited circumstances and benefits would not be forfeitable. The
Company established a trust which would be funded upon a potential
change in control to provide accrued benefits under the Supplementary
Plan and which would, upon an actual change in control, become
irrevocable.
<TABLE>
The following table shows the estimated aggregate annual benefits
payable upon retirement (assuming a retirement in 1993) for persons in
specified compensation and years of service classifications covered by
the Company's retirement plan and, if eligible, the Supplementary Plan.
(The individuals named in the Summary Compensation Table had, as of
December 31, 1993, the following years of service, respectively: David
C. Farrell, 38 years; Thomas A. Hays, 25 years; Jerome T. Loeb, 30
years; Richard L. Battram, 21 years; and Anthony J. Torcasio, 24
years.)
- - - - - ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Average
Annual Years of Service
Earnings ------------------------------------------------------------------------------------------------------------
(000's) 20 25 30 35 40
<S> <C> <C> <C> <C> <C>
$ 800 164,737 196,398 230,428 264,457 298,487
$ 1,000 207,981 247,429 290,134 332,839 375,544
$ 1,200 251,226 298,461 349,841 401,221 452,601
$ 1,400 294,470 349,491 409,547 469,602 529,657
$ 1,600 337,715 400,523 469,253 537,984 606,714
$ 1,800 380,959 451,554 528,959 606,364 683,770
$ 2,000 424,203 502,585 588,666 674,746 760,827
$ 2,200 467,447 553,617 648,372 743,128 837,884
$ 2,400 510,692 604,647 708,078 811,509 914,940
- - - - - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
With respect to the last fiscal year, the expense to the Company of the
Company's retirement plans for asso-
ciates aggregated $24.3 million.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS. During 1986 through 1988, the Company entered into
severance agreements with the five executive officers named in the
Summary Compensation Table. The agreements provide that the executive
is entitled to benefits if (i) a change in control of the Company (as
defined in the agreement) occurs and (ii) during the 180 days following
such change in control, the executive determines in good faith that as
a result of the change in control he is unable to execute his duties
effectively. Following such 180-day period, employment must be actually
or constructively terminated other than for cause or disability during
the term of the agreement for benefits to be payable. Under the
severance agreements, a change in control would include any of the
following events: (i) any "person," as defined in the Securities
Exchange Act of 1934, as amended, acquires 50
6
<PAGE> 9
percent or more of the Company's voting securities; (ii) a majority of
the Company's directors are replaced during a two-year period; or (iii)
shareowners approve certain mergers, or a liquidation, or sale of all
or substantially all of the Company's assets.
The severance agreements provide a lump sum payment equal to three
times the sum of (i) base salary at termination or, if greater, base
salary immediately prior to the change in control plus (ii) target
bonus with maximum share price adjustment for the year in which the
change in control occurs. Each agreement also provides 36 months of
continued medical and life insurance benefits and, if the terminated
executive is within five years of his or her eligibility date,
eligibility in the Company's post-retirement life and medical insurance
benefits. The agreements with officers who are subject to Section 16(b)
of the Securities Exchange Act of 1934 provide for a cash payment in
cancellation of stock options. The agreement with the Chairman of the
Board and Chief Executive Officer provides a "tax gross-up" payment to
ensure that the above-mentioned payments are not subject to net
reduction due to imposition of excise taxes which are payable under
Section 4999 of the Internal Revenue Code. The agreement with the
Deputy Chairman provides for 50% of such payment. The Company
established a trust which would be funded upon a potential change in
control to provide the benefits under the severance agreements and
which would, upon an actual change in control, become irrevocable.
Messrs. Farrell, Loeb, Battram and Torcasio have individual contracts
of employment with the Company which expire at various dates subsequent
to the end of the current fiscal year, but on or before April 30, 1996
and which provide for annual base salaries at rates not less than the
amounts reported in the Summary Compensation Table.
<TABLE>
- - - - - ---------------------------------------------------------------------------------------------------------------------------------
STOCK OPTION GRANTS IN FISCAL 1993
<CAPTION>
Percent of
Options Total Options Exercise or Expiration Grant Date
Name Granted(1) Granted Base Price(2) Date Present Value(3)
- - - - - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
David C. Farrell 40,000 3.26% $37.0625 05/12/2003 $498,800
Thomas A. Hays 26,680 2.17% $37.0625 05/12/2003 $332,700
Jerome T. Loeb 26,680 2.17% $37.0625 05/12/2003 $332,700
Richard L. Battram 20,000 1.63% $37.0625 05/12/2003 $249,400
Anthony J. Torcasio 20,000 1.63% $37.0625 05/12/2003 $249,400
- - - - - ---------------------------------------------------------------------------------------------------------------------------------
<FN>
1. One fourth of the options become exercisable on May 12, 1994, the
first anniversary of the date of the grant, and on each of the
second through fourth anniversaries thereafter. The information has
been adjusted to reflect the 2-for-1 stock split on June 1, 1993.
2. The exercise price is the market price on the date the options were
granted (adjusted to reflect the 2-for-1 stock split on June 1,
1993).
3. Grant date present values were determined using the Black-Scholes
option pricing model. The estimated values under the model are based
on assumptions as to variables such as option term, interest rates,
stock price volatility and dividend yield. The actual value, if any,
the option holder may realize will depend on the excess of the
actual market price of the stock over the exercise price on the date
the option is exercised. The Grant Date Present Value calculation is
presented in accordance with SEC proxy disclosure requirements, and
the Company has no way to determine whether the Black-Scholes model
can properly determine the value of an option. There is no assurance
that the value that may be realized by the option holder will be at
or near the value estimated by the Black-Scholes model. The model
assumes: (a) an option term of 10 years, which represents the length
of time between grant date of options under the Company's plans and
their exercise date for the named executive officers; (b) an
interest rate that represents the interest rate on a U.S. Treasury
Bond with a maturity date corresponding to that of the option's
term; (c) volatility calculated using daily stock prices for the 250
trading days prior to the grant date; and (d) dividends at the rate
of $0.92 per share, the annual dividend rate with respect to a share
of stock at the time of grant.
</TABLE>
<TABLE>
- - - - - ---------------------------------------------------------------------------------------------------------------------------------
AGGREGATED STOCK OPTION EXERCISES IN FISCAL 1993
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
Total Number of Value of Unexercised
Shares Total Unexercised Options Held In-the-Money Options(2)
Acquired Gain ----------------------------- -----------------------------
Name on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
- - - - - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
David C. Farrell 0 $0 120,647 400,323 $2,130,367 $6,595,014
Thomas A. Hays 20,441 $330,203 13,340 66,915 $167,166 $584,462
Jerome T. Loeb 5,210 $116,721 30,483 56,841 $403,753 $456,078
Richard L. Battram 0 $0 41,903 50,161 $637,472 $438,125
Anthony J. Torcasio 26,322 $540,116 22,201 37,315 $346,943 $256,821
- - - - - ---------------------------------------------------------------------------------------------------------------------------------
<FN>
1. The amounts "realized" reflect the appreciation on the date of
exercise (based on the excess of the fair market value of the shares
on the date of exercise over the exercise price). However, because
the executive officers may keep the shares they acquired upon the
exercise of the option (or sell them at different prices), these
amounts do not reflect cash realized upon sale of those shares. The
number of shares acquired on exercise and the number of options held
have been adjusted to reflect the June 1, 1993, 2-for-1 stock split.
2. "In-the-Money options" are options outstanding at the end of the
last fiscal year for which the fair market value of the Company's
common stock at the end of the last fiscal year ($39.75 per share)
exceeded the exercise price of the options.
</TABLE>
7
<PAGE> 10
Comparison of 5-Year Cumulative Return
May, S&P 500 Index and
Competitor Group Index
[GRAPH]
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
- - - - - -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
May $100.0 $123.9 $134.4 $164.2 $216.3 $248.4
S&P 500 $100.0 $114.5 $124.1 $152.2 $168.3 $190.0
Competitor Group $100.0 $123.9 $121.4 $139.2 $166.5 $170.6
- - - - - -----------------------------------------------------------------------------------------
</TABLE>
The graph assumes $100 invested on January 31, 1988 (the beginning of
fiscal 1988) in Company common stock, in the S&P 500 Index and in an
index of the competitors (which is comprised of Dayton Hudson,
Dillard's, J.C. Penney, Melville, Mercantile and Nordstrom) used in
determining bonuses under the Company's performance based bonus plans.
Assumes dividends are reinvested annually.
STOCK PRICE PERFORMANCE. The graph above compares the Company's
cumulative total shareowner return against the returns of the S&P's 500
stock index and of an index of the competitors used in determining
bonuses under the Company's performance based bonus plans.
<TABLE>
EXECUTIVE STOCK OWNERSHIP. The Company encourages all of its associates
to make a personal investment in Company stock, further aligning their
interests with those of shareowners. In 1994, the Company adopted the
following minimum stock ownership guidelines for the Company's top
management group:
- - - - - ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ownership
Guideline
(Multiple of
Executive Level Base Salary)
- - - - - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Chief Executive Officer 5.0 times
Corporate Senior Management Committee(a) 3.5 times
Presidents and Chairmen of Operating Divisions 2.5 times
Corporate Executive Vice Presidents and Senior Vice Presidents and the
Senior Management Committees of Operating Divisions 1.5 times
- - - - - ---------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) Currently, Messrs. Farrell (whose guideline is the CEO guideline
above), Hays, Loeb, Battram and Torcasio.
</TABLE>
These minimum guidelines are expected to be satisfied over the next
five years and may be satisfied through direct ownership of shares,
share equivalents under the Company's Profit Sharing Plan or phantom
stock under the Deferred Compensation Plan.
EXECUTIVE COMPENSATION AND DEVELOPMENT COMMITTEE REPORT. The executive
compensation and development committee (the "Committee") reviews and
approves, among other things, the compensation payable to each of the
executive officers named in the Summary Compensation Table. Each member
of the Committee is an independent, non-management director.
Compensation Philosophy. The Company's basic compensation philosophy
is that the compensation program should:
* attract, retain and motivate highly qualified executives;
* be competitive;
* align the executive's compensation with the Company's objectives; and
* be meaningfully related to the value created for shareowners.
Compensation for senior executives is comprised of a base salary, bonus
opportunities (a significant portion of total compensation) and long-
term stock related incentives. The Committee reviews compensation based
on the foregoing philosophy, on the performance of the Company and on
competitive practices. As part of its review of competitive pay levels,
the Committee looks at the base salary levels, annual bonus levels and
long-term related incentives at a broad group of companies, including
the companies which are included in the Company's performance graph on
this page, other retail companies and companies in other industries of
similar size and complexity to the Company. The Committee did not
target a specific percentage level of compensation within the group,
but, as discussed under the "Additional Information" heading below,
determined, based on that review, that the Company's current overall
compensation program is appropriate for the Company.
Base Salary. Base salaries are reviewed by the Committee on an annual
basis and may be increased at that time based on (i) the individual's
contribution to the Company, (ii) competitive pay levels and (iii)
management's recommendations. As a result of its overall review, the
annual rate of the base salaries for the named executives increased in
May 1993 by an average of 5.4%. The annual rate of base salary for Mr.
Loeb increased again in June, 1993 by 10.7% when he was elected
president of the Company. Based on the Committee's review of all
elements of his compensation, the base salary for Mr. Farrell was
unchanged in 1993.
Bonus Opportunities. The Company has three performance based bonus
plans that cover approximately 2,100 associates. Each plan links a
major portion of the associates' potential total pay to the associates'
performance and to the Company's performance. The three plans are
described on page 5. The bonus
8
<PAGE> 11
opportunities for the most senior executives and executive officers
include both annual and long-term opportunities. Each named executive
participates in the Executive Incentive Compensation Plan for Corporate
Executives, which provides an opportunity for both an annual bonus and
a long-term bonus. A proposal that shareowners approve that plan is
described beginning on page 13.
For 1993, the annual bonus opportunity was for up to 30% (60% for Mr.
Farrell) of base salary, and was determined based on whether the
Company achieved certain performance levels (threshold, target or
maximum) determined in advance by the Committee for (i) earnings per
share ("EPS") and (ii) return on net assets ("RONA") over the year. The
annual bonus may be adjusted based on the Company's performance
relative to the EPS and RONA performance of the predetermined group of
competitors included in the Company's performance graph on page 8.
While return on equity is the Company's principal measure in evaluating
its performance for shareowners and its ability to profitably invest
shareowners' funds, the bonus plans use RONA in evaluating this element
of bonus opportunity in order to facilitate industry comparisons
without having to make adjustments for different levels of leverage
among the competitor group. The Company's rank relative to the
competitor group is determined based on data provided to the Committee
by the Company's independent public accountants. For 1993, the annual
bonus also could be adjusted upward or downward on a discretionary
basis by the Committee. For 1993, the Company exceeded the maximum
performance level set by the Committee for EPS and exceeded the maximum
performance level for RONA (as described on page 14, no adjustment was
made based on the Company's relative rank in the competitor group).
Based on these results, the annual bonus represented approximately 60%
of base salary for Mr. Farrell and 30% of base salary for each of the
other named executive officers.
For the three-fiscal-year period ended in 1993, the long-term bonus
opportunity was for up to 45% (90% for Mr. Farrell) of average base
salary, and was determined based on whether the Company achieved
certain performance levels (threshold, target or maximum) determined in
advance by the Committee for (i) compound growth rate for EPS and (ii)
average RONA over the three-fiscal-year period. The long-term bonus is
subject to an automatic upward or downward adjustment (i) based on
predetermined levels of changes in the common stock price over the
period and (ii) based on the Company's performance as compared to the
EPS and RONA performance of the predetermined group of competitors
included in the Company's performance graph on page 8. The Company's
rank relative to the competitor group is determined based on data
provided to the Committee by the Company's independent public
accountants. For the three-year period ending in 1993, the long-term
bonus also could be adjusted upward or downward on a discretionary
basis by the Committee. For that three-year period, the Company
exceeded the maximum performance level set by the Committee for
compound growth rate for EPS and exceeded the target performance level
for average RONA (as described on page 15, no adjustment was made based
on the Company's relative rank in the competitor group), and the common
stock price increased by 63.6%, resulting in a 50% increase in the
long-term bonuses. Based on these results, the long-term bonuses
awarded for the three-fiscal-year period which ended in 1993,
represented approximately 81.5% of average base salary for Mr. Farrell
and 40.7% of average base salary for each of the other named executive
officers.
Long-Term Stock Related Incentives. The Company provides long-term
stock related incentives with stock options and restricted stock, which
are designed to attract, retain and motivate management associates and
relate their compensation directly to the performance of the Company's
stock. Stock options are granted at fair market value on the date of
the grant and will only have value to the executives if the Company's
stock price increases. The Committee establishes guidelines for the
grant of options for all executives other than the executive officers
and specifically approves any grants to executive officers. The
Committee has established option guidelines for annual grants based on
competitive practices and position levels. The 1993 grants to the named
executive officers (including Mr. Farrell) were consistent with the
normal annual grant levels previously established for those executive
officers.
Restricted stock grants are approved by the Committee in special
circumstances. During 1993, when Mr. Loeb was elected president of the
Company, the Committee approved a grant to him of 20,000 shares, an
amount the Committee deemed appropriate. No other grants were made to
the named executive officers in 1993.
Additional Information. During 1993, the Company selected and
retained independent, professional compensation experts to study the
compensation of the executive group in the Company's operating
divisions and of the senior management committee in the corporate
office. The experts reported to the Committee on the Company's base
salary levels, annual bonus levels and long-term incentives as compared
with the compensation packages of a broad group of companies, including
the companies which are included in the Company's performance graph on
page 8, other retail companies and companies in other industries of
similar size and complexity to the Company. Based on the experts'
reports, the Committee has determined that the Company's current
compensation program, taking into account base compensation, bonus
opportunities and long-term incentive opportunities, is appropriate for
the Company. The Committee recommended, and the Company adopted,
minimum stock ownership guidelines for the Company's top management
group in the operating divisions and in the corporate office. The
guidelines are described on page 8.
Also during 1993, the Committee reviewed the new tax law and proposed
IRS regulations limiting the tax deductibility of executive
compensation in excess of $1 million. The committee also reviewed the
exceptions that permit tax deductions on such compensation, including
exceptions for performance based compensation. Final
9
<PAGE> 12
regulations are expected in the future. However, on a preliminary
basis, the Committee's policy is that the Company should attempt,
wherever reasonably possible, to qualify future compensation to be tax
deductible. The proposals to approve the 1994 Stock Incentive Plan and
to approve the Executive Incentive Compensation Plan for Corporate
Executives are being submitted to the shareowners to permit the Company
to deduct future compensation under those plans.
Executive Compensation and Development Committee:
Edward H. Meyer, Chairman
Helene L. Kaplan Andrall E. Pearson
Russell E. Palmer Edward E. Whitacre, Jr.
MISCELLANEOUS. On December 11, 1993, the Company paid approximately
$798,500 in premiums to purchase policies of directors' and officers'
liability insurance from Federal Insurance Company, National Union Fire
Insurance Company and Great American Insurance Company providing
coverage for a one-year period. Such policies cover all directors and
officers of the Company and its subsidiaries. As of March 31, 1994, no
claims have been made nor have any sums been paid under policies of
directors' and officers' liability insurance purchased by the Company.
Executive officers and directors are required to report to the
Securities and Exchange Commission, pursuant to Section 16(a) of the
Securities Exchange Act of 1934, ownership of and transactions in
Company common stock. With the exception of one report covering one
transaction (filed late by Mr. L. J. Jay, a senior vice president),
based solely on a review of copies of reports provided to it by such
individuals, the Company believes that all reporting requirements were
satisfied.
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The board of directors held seven meetings during the last fiscal year.
Each incumbent director attended at least 81% of the aggregate of (i)
the total number of board meetings held during the period for which
such director held such office and (ii) the total number of meetings
held by all board committees on which such director served during the
periods that such director served. Overall, the average percentage for
all directors' attendance was 95%.
COMPENSATION OF DIRECTORS. Non-management directors receive an annual
fee of $30,000 and, in addition, $2,500 for attending each board
meeting and $2,000 for attending each committee meeting. A non-
management chairperson of a committee receives an additional annual fee
of $5,000. Non-management directors may defer all or any portion of
their cash fees under a deferred compensation plan that is
substantially similar to the Deferred Compensation Plan for management
associates. Each non-management director who first became a director
prior to 1989 will be entitled to a retirement pension upon retirement
from the board. Other non-management directors will become eligible for
benefits upon retirement after age 60 with five years of board service.
The pension will be equal to the base annual fee then in effect and
will be payable for the life of the director or, if shorter, for the
number of years (up to 15) of the director's board service. The Company
has a restricted stock plan for non-management directors, under which
shares of stock may be issued which are subject to restrictions on
transferability and to forfeiture. Each non-management director
receives 2,000 shares upon joining the board and 500 shares per year of
continued board service. Management board members receive no
compensation or fees for attending board or committee meetings.
The board of directors has an audit committee, an executive
committee, an executive compensation and development committee, a
finance committee and a nominating committee, each of which is
described below.
AUDIT COMMITTEE. The audit committee is comprised of Messrs. Meyer,
Palmer (chairman), Quinlan, Stiritz, Storey and Weidenbaum. The
committee met four times during the last fiscal year. The audit
committee makes recommendations to the board of directors as to the
selection of and proposed arrangements with the firm of independent
public accountants and auditors that examine the books and accounts of
the Company for each fiscal year, reviews the results of audits, and
the coordination between the independent public accountants and
auditors and the Company's internal auditing staff and oversees the
Company's policies concerning sensitive payments and conflict of
interest.
EXECUTIVE COMMITTEE. The executive committee is comprised of Messrs.
Farrell (chairman), Hays, Meyer, Palmer, Pearson and Stiritz. The
committee did not meet during the last fiscal year. The executive
committee exercises, on a "standby" or "emergency" basis, and subject
to the direction of the full board of directors, all of the powers of
the board of directors (with certain specified exceptions required by
law) during intervals between meetings.
EXECUTIVE COMPENSATION AND DEVELOPMENT COMMITTEE. The executive
compensation and development committee is comprised of Messrs. Meyer
(chairman), Palmer, Pearson and Whitacre and Mrs. Kaplan. The committee
met five times during the last fiscal year and acted by unanimous
written consent on several other occasions. The committee considers and
recommends to the board the Company's overall compensation programs,
reviews and approves the compensation payable to all senior management
personnel, reviews the compensation payable to store company
principals, reviews and approves new compensation programs that involve
Company stock or affect compensation to senior
10
<PAGE> 13
management personnel and store company principals, advises management
on all other executive compensation matters as requested, and reviews
and monitors management development efforts to assure development of a
group of executives that would provide for adequate and orderly
management succession. The committee also administers (directly, or in
some circumstances by delegation or the establishment of operating
guidelines) the Company's stock option plans, the Executive Incentive
Compensation Plan for Corporate Executives, the Executive Incentive
Compensation Plan for Company Principals, the Deferred Compensation
Plan and the restricted stock plan for management employees.
FINANCE COMMITTEE. The finance committee is comprised of Messrs. Hays,
Loeb, Quinlan, Pearson (chairman), Stiritz, Weidenbaum and Whitacre and
Mrs. Kaplan. The committee met two times during the last fiscal year.
The finance committee reviews the financial policies, plans and
structure of the Company and reviews and recommends to the board the
Company's long-range financial plans, the Company's capital expenditure
program, specific debt and equity placement activities, financial
public relations and communications programs, financial aspects of
proposed acquisitions or divestitures, and the administration and
evaluation of the retirement and profit sharing plans' investments.
NOMINATING COMMITTEE. The nominating committee is comprised of Messrs.
Stiritz (chairman), Storey and Whitacre and Mrs. Kaplan. The committee
met two times during the last fiscal year. In addition, frequent
telephone conversations occurred among the committee members. The
nominating committee recommends to the board nominees for directors,
nominees for the successor to the chief executive officer when a
vacancy in that office occurs, and nominees for chairpersons and
members of all committees of the board. The committee considers
suggestions as to nominees for directors from any source, including any
shareowner. Nominations by shareowners should be submitted in writing
to the Company's Secretary, 611 Olive Street, St. Louis, Missouri
63101-1799 and, to be effective, must comply with the notice procedures
set forth in the Company's by-laws. A copy of the notice procedures is
available upon request to the Company's Secretary.
THE RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
Proposal (b) on the accompanying proxy card.
Upon recommendation of the audit committee, the board of directors
appointed Arthur Andersen & Co., independent public accountants, as
auditors of the Company and its subsidiaries for the fiscal year ending
January 28, 1995, subject to ratification by the shareowners at the
annual meeting. It is intended that, unless otherwise directed by
shareowners, proxies will be voted for the ratification of this
appointment. A member of the firm of Arthur Andersen & Co. will be
present at the meeting to make such statements as that firm may desire
and to answer any questions by shareowners. The aggregate amount of
fees paid in fiscal 1993 by the Company to Arthur Andersen & Co. was
$4.0 million. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
PROPOSAL (b), AND YOUR PROXY WILL BE SO VOTED UNLESS YOU
SPECIFY OTHERWISE.
PROPOSAL TO APPROVE THE 1994 STOCK INCENTIVE PLAN.
Proposal (c) on the accompanying proxy card.
The board of directors has adopted the 1994 Stock Incentive Plan (the
"1994 Plan"), subject to shareowner approval, which provides for grants
of stock options and other stock-based awards. The 1994 Plan is
intended to provide an opportunity for certain management employees of
the Company to acquire an ownership interest in the Company, thereby
aligning their interests with those of the Company's shareowners.
Adoption of the 1994 Plan will also enhance and maintain the Company's
ability to attract, retain and motivate key management employees whose
efforts will be important to the Company's future success and
prosperity.
The Company presently has two other stock option plans and a
restricted stock plan (the "Prior Plans"). Upon shareowner approval of
the 1994 Plan, the Prior Plans will be terminated, so that no further
stock options or restricted stock will be granted under the Prior Plans
(previous grants will be unaffected). As of March 18, 1994, there were
4,606,338 stock options and 831,200 shares of restricted stock
outstanding under the Prior Plans.
The text of the 1994 Plan is in Appendix A. The following summary
does not purport to be complete and is qualified by reference to the
1994 Plan.
GENERAL. The 1994 Plan permits the Company to grant (i) stock options
(both non-qualified stock options and incentive stock options ("ISOs")
within the meaning of Section 422 of the Internal Revenue Code), (ii)
restricted stock (including "performance restricted stock") and (iii)
stock appreciation rights ("SARs") (both tandem and non-tandem). The
1994 Plan became effective March 18, 1994; if the 1994 Plan is not
approved by shareowners prior to March 18, 1995, the 1994 Plan and all
awards granted thereunder prior to such date will be void.
ADMINISTRATION. The 1994 Plan is administered by the executive
compensation and development committee of the board of directors, whose
members are "outside
11
<PAGE> 14
directors" under Section 162(m) of the Internal Revenue Code and are
"disinterested persons" under Section 16 of the Securities Exchange Act
of 1934, as amended (the "Committee"). The Committee determines which
management employees (either individually or by position) of the
Company and its subsidiaries are eligible to participate in the 1994
Plan and the amounts, times, forms, terms and conditions of grants
under the 1994 Plan. With respect to executive officers, the Committee
intends to specifically approve any grant of stock options, restricted
stock or stock appreciation rights. With respect to others, the
Committee intends to administer the 1994 Plan (i) by establishing
guidelines for the grant of stock options for those who are not
executive officers, so that the Company can grant options to those
employees consistent with those guidelines, (ii) by specifically
approving any grants of stock options which are outside of the
guidelines and (iii) by specifically approving any grants of restricted
stock. As of March 18, 1994, approximately 1,540 management employees
were eligible to participate in the 1994 Plan.
NUMBER OF SHARES. Subject to adjustment in the event of any change in
the capital structure of the Company, the maximum number of shares that
may be issued in the aggregate under the 1994 Plan is 15,000,000
shares, of which no more than 1,750,000 shares may be released from
restriction under restricted stock grants. Over the life of the 1994
Plan, the maximum number of stock options and SARs that may be granted
to an individual participant is 750,000; provided, however, that if a
SAR is issued in substitution for an existing stock option or in tandem
with a stock option, then the grant of such a SAR shall not count
against the limit. Non-tandem SARs may be granted in substitution for
options outstanding under the 1994 Plan or other stock option plans of
the Company. No more than 50,000 shares of Performance Restricted Stock
may be issued to an individual participant in any one year. For any
participant, the aggregate fair market value of stock subject to ISOs
that are first exercisable in any calendar year may not exceed the
limits established therefore from time to time under Section 422 of the
Internal Revenue Code. If any unexercised stock options or SARs expire,
terminate or are surrendered, or if restricted stock is forfeited for
any reason, the shares available for distribution with respect to such
options, SARs or grants of restricted stock will be available again for
distribution under the 1994 Plan.
The benefits that will be received by individual persons are not
currently determinable. However, if the 1994 Plan had been in effect
during 1993, the grants under the 1994 Plan would have been the same as
1993 grants under the Prior Plans. The Stock Option Grants table on
page 7 sets forth the number and the grant date present value of the
non-qualified options awarded in 1993 to the executive officers named
in the Summary Compensation Table. The Summary Compensation Table on
page 4 sets forth the value of the 20,000 shares of restricted stock
awarded to Mr. Loeb during 1993. No other named executive officer
received restricted stock in 1993. In 1993, the Company's executive
officer group (12 individuals, including the five named executive
officers) received $917,986 of restricted stock (24,500 shares) and
168,960 stock options with a grant date present value (see footnote 3
to the Stock Option Grants table on page 7) of $2,106,931 and employees
other than the executive officer group received $487,095 of restricted
stock (13,000 shares) and 1,058,100 stock options with a grant date
present value of $13,194,507. The closing price of the Company's common
stock on March 18, 1994 was $45.00.
STOCK OPTIONS AND SARS. Options granted under the 1994 Plan may be non-
qualified stock options, ISOs or any combination thereof. SARs may be
granted in tandem with stock options ("Tandem SARs") or independently
of any stock option ("Non-tandem SARs"). The Committee may grant awards
of Tandem SARs with, or Non-tandem SARs in substitution for, stock
options currently outstanding, in which case the exercise price of
those SARs shall be the same as that of the outstanding stock options.
Options and SARs may be exercised at any time during the term of the
option or SAR as determined by the Committee; however, no option shall
be exercisable more than 10 years after the date the option is granted.
Certificates for the shares purchased on the exercise of an option will
be issued only upon payment in full of the option price.
The exercise price of an option or Non-tandem SAR shall not be less
than 100% of the fair market value of a share of the Company's common
stock on the grant date. The exercise price of a Tandem SAR shall be
the exercise price of the related stock option.
A Tandem SAR will be exercisable only to the extent and at the same
time as the related stock option is exercisable. When a Tandem SAR is
exercised, the number of shares issuable under the related option will
be reduced by the number of shares covered by the SAR. The exercise of
an option will result in an equivalent reduction in the number of
shares covered by the related SAR. A Non-tandem SAR may be exercised at
the time or times specified in the agreement evidencing the grant. Upon
exercise of a SAR, the participant is entitled to receive a payment in
cash, stock or a combination thereof equal to the excess of the market
value of the common stock on the exercise date over the exercise price
of the SAR.
Repricing. No option will be granted in exchange for the cancellation
of a higher-priced option previously granted to a participant.
RESTRICTED STOCK. The Committee determines when restricted stock will
be granted, the times within which restricted stock shall be subject to
forfeiture and all of the other terms and conditions of a grant. If the
other terms
12
<PAGE> 15
and conditions include the performance based restrictions described
below, then the restricted stock is referred to as "Performance
Restricted Stock." Subject to certain restrictions, when a restricted
stock grant is made, the participant has all of the benefits of
ownership with respect to such shares including the rights to vote the
shares and to receive dividends. So long as the restrictions are in
effect, (a) the shares may not be sold or otherwise disposed of, and
(b) if the participant's employment terminates for any reason other
than death or disability, the participant will forfeit and return to
the Company any shares subject to restriction as of the termination
date.
Performance Restricted Stock. Restrictions on the shares of
Performance Restricted Stock which would otherwise be released on a
given date will only be released if the Company meets the "target"
level of the earnings per share performance standard (after adjustment
for relative performance rank) under the Executive Incentive
Compensation Plan for Corporate Executives for the appropriate long-
term performance period. If the Company meets the "threshold" level of
that performance standard (after adjustment for relative performance
rank), then restrictions will be released on 50% of the shares. For
Company performance that falls between the "threshold" and "target"
levels, the percentage of shares on which restrictions will be released
will be prorated. If the Company does not meet the "threshold" level,
then the shares are forfeited. No restrictions will be released until
the Committee certifies that the applicable performance levels have
been satisfied. The Company currently intends that any restricted stock
granted to executive officers named in the Summary Compensation Table
will be in the form of Performance Restricted Stock.
CHANGE IN CONTROL. The 1994 Plan provides that in the event of a change
in control of the Company, all stock options and SARs granted shall
become fully exercisable and vested and the restrictions applicable to
any grants of restricted stock shall lapse and such shares shall be
fully vested.
AMENDMENT OR TERMINATION. The 1994 Plan will automatically terminate on
March 18, 2004. The board of directors may terminate the 1994 Plan at
any time prior to that date and may make such changes in the 1994 Plan
as it deems advisable; except that shareowner approval shall be sought
for changes which would require shareowner approval under the New York
Business Corporation Law, Rule 16b-3 of the Securities Exchange Act of
1934, as amended, or Section 162(m) of the Internal Revenue Code of
1986, as amended.
FEDERAL TAX CONSEQUENCES. The Company has been advised by counsel that
under present law the following are the federal tax consequences
generally arising with respect to awards of stock options and SARs
granted under the 1994 Plan.
The grant of a stock option or SAR creates no income tax consequences
to the participant or the Company. Upon the exercise of a non-qualified
stock option, the participant generally will recognize ordinary income
equal to the excess of the fair market value of the shares purchased
(as of the exercise date) over the option price. The Company will be
entitled to a deduction in the same amount and at the same time.
Upon exercising an ISO, a participant has no taxable income (except
that the alternative minimum tax may apply), and the Company receives
no deduction, provided that the employment requirements specified in
Section 422 of the Internal Revenue Code are satisfied. If the
participant holds the stock acquired upon exercise for the statutory
holding period, then any gain or loss upon subsequent sale of the
common stock will be a long-term capital gain or loss equal to the
difference between the option price and any amount realized on the
disposition. The Company is allowed no deduction. The statutory holding
period is the later of two years from the grant date or one year from
the date the common stock is transferred to the participant pursuant to
the exercise of the option. If a participant disposes of shares
acquired by the exercise of an ISO before expiration of the holding
period (a "disqualifying disposition"), then the amount of ordinary
income taxable to the participant is the lesser of (i) the fair market
value of the common stock on the exercise date less the option price,
and (ii) the amount realized on disposition less the option price. The
Company will be entitled to a deduction in the same amount and at the
same time.
Upon exercise of a SAR, the participant will recognize ordinary
income equal to the amount of any cash and the market value of any
common stock received. The Company will be entitled to a deduction in
the same amount and at the same time.
The affirmative vote of the holders of a majority of all outstanding
shares entitled to vote thereon is required to approve the adoption of
the 1994 Plan. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
PROPOSAL (c), AND YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY
OTHERWISE.
PROPOSAL TO APPROVE THE EXECUTIVE INCENTIVE COMPENSATION PLAN FOR
CORPORATE EXECUTIVES
Proposal (d) on the accompanying proxy card.
The May Department Stores Company Executive Incentive Compensation
Plan for Corporate Executives (the "Plan") is a performance based bonus
plan for designated corporate executives. It provides opportunities for
designated executives to earn substantial rewards for superior
performance.
13
<PAGE> 16
The board of directors initially adopted the Plan in 1982 and is
submitting the Plan in its revised form for shareowner approval. Under
new tax rules (Section 162(m) of the Internal Revenue Code), certain
future bonus payments under the Plan may not be tax deductible unless
certain requirements are satisfied, including shareowner approval of
the Plan. The board is seeking shareowner approval of the Plan in order
for the Company to take a tax deduction for those bonuses paid under
the Plan.
The text of the Plan is in Appendix B. The following summary of the
future operation of the Plan does not purport to be complete and is
qualified by reference to the Plan.
OVERVIEW. The Plan provides for annual performance and long-term
(three-year) awards based on (i) actual results as compared to pre-
established financial performance targets, (ii) the Company's
performance relative to certain competitors and (iii) for long-term
awards only, changes in the Company's stock price. The Plan is
administered by the executive compensation and development committee of
the board of directors, whose members are "outside directors" under
Section 162(m) of the Internal Revenue Code (the "Committee").
The benefits that will be received by individual persons are not
currently determinable. However, the Summary Compensation Table on page
4 sets forth the compensation paid in 1993 pursuant to the Plan for the
named executive officers under the columns labeled "Bonus" and "Long-
Term Incentive Payouts." In 1993, Plan participants (nine individuals,
including the five named executive officers) received $1,994,944 in
annual bonuses and $2,373,308 in long-term bonuses. There are no other
participants in the Plan.
ELIGIBILITY. Management employees of the Company are eligible to
participate in the Plan. For 1994 and for long-term performance periods
which include 1994, the only participants in the Plan are the executive
officers named in the Summary Compensation Table and two other
executives. The Committee designates participants for a particular
annual and/or long-term performance period. Performance periods are
measured on a fiscal year basis.
ANNUAL AWARDS. Annual awards are calculated as a percentage of the
participant's base salary on November 1 of the fiscal year. The Plan
requires the Committee to establish a maximum percentage that a
participant may earn under the Plan as an annual award for any annual
performance period. This maximum percentage may not be greater than 45%
(90% for the Chief Executive Officer). That maximum level set by the
Committee for 1994 is 30% (60% for the Chief Executive Officer), which
is the same level that has applied under the Plan for the past several
years.
Performance Measures. The financial performance measures for annual
awards are annual earnings per share growth ("EPS Growth") and return
on net assets ("RONA") as disclosed in the Company's annual report and
as RONA may be adjusted by the Company's independent certified public
accountants to exclude non-recurring or extraordinary items that the
Committee determines are not representative of the Company's ongoing
operations.
The Committee establishes threshold, target and maximum performance
objectives with respect to EPS Growth and RONA for each participant for
each annual performance period. For example, for 1994, for each of EPS
Growth and RONA, the percentages of base salary which a participant may
earn are 5% for performance equal to the threshold objective; 10% for
performance equal to the target objective; and 15% for performance
equal to or exceeding the maximum objective (these percentages are
doubled for the Chief Executive Officer). For actual performance that
falls between the threshold and maximum annual objectives, the
percentage of base salary earned will be prorated.
Adjustment for Relative Rank. Annual awards are subject to an
automatic upward or downward adjustment to reflect the Company's
performance as compared to competitors. Each financial measure is
ranked with the comparable financial measure of a group of competitors
designated in advance by the Committee. The Company's relative rank is
determined based on data provided by the Company's independent public
accountants. The relative rank adjustment varies depending on the
number of competitors designated by the Committee. For example, if the
Committee designated six other competitors, then, if the Company were
to rank first or second, the award for that measure would not be less
than target level; if the Company were to rank third or fourth, the
award for that measure would not be less than threshold level; and if
the Company were to rank sixth or seventh, the award for that measure
would not be more than threshold level.
LONG-TERM AWARDS. Each long-term performance period consists of three
consecutive fiscal years. Long-term performance periods operate
concurrently (that is, a new performance period commences annually).
For example, fiscal years 1994, 1995 and 1996 constitute one
performance period; 1995, 1996 and 1997 a second performance period;
and 1996, 1997, and 1998 a third performance period.
Long-term awards are calculated as a percentage of the participant's
average base salary over the three-year period. The maximum percentage
that a participant may earn under the Plan as a long-term award for any
long-term performance period (before any share price adjustment) is 30%
(60% for the Chief Executive Officer); the maximum is then subject to
the share price adjustment described below.
14
<PAGE> 17
Performance Measures. The financial performance measures for long-
term awards are EPS Growth and RONA. EPS Growth is measured by the
compound annual growth rate over the three-year performance period.
RONA is measured by averaging the returns for each of the three fiscal
years of the performance period. The adjustments for relative rank as
compared to competitors with respect to annual awards also apply to
each long-term award.
As with the annual award portion of the Plan, the Committee
establishes threshold, target and maximum performance objectives with
respect to EPS Growth and RONA for each participant for each long-term
performance period.
Adjustments for Relative Rank and Change in Market Price. As with the
annual award portion of the Plan, long-term awards are subject to
adjustment based on the Company's relative ranking compared to a group
of competitors designated by the Committee.
Long-term awards are also adjusted to reflect changes in the market
value of the Company's common stock over the three-year performance
period. The award earned is increased or decreased in direct proportion
to the percentage increase or decrease in the market price, subject to
a maximum increase of 50% of such award and a maximum decrease of 25%
of such award.
DISCRETIONARY ADJUSTMENTS OF AWARDS AND PERCENTAGES. The Committee may
adjust the annual and long-term awards of any participant upward or
downward in its sole and absolute discretion. The Committee may not,
however, make upward adjustments in awards of a participant whose
compensation for the particular year is subject to the limits on tax
deductibility in Section 162(m) of the Internal Revenue Code. No awards
will be paid to such a participant until the Committee certifies in
writing that the terms of the Plan have been satisfied.
The affirmative vote of the holders of a majority of the votes cast
on the proposal is required to approve the Plan. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL (d), AND YOUR PROXY WILL BE
SO VOTED UNLESS YOU SPECIFY OTHERWISE.
PROPOSAL BY A CERTAIN SHAREOWNER CONCERNING A CLASSIFIED BOARD
Proposal (e) on the accompanying proxy card.
Evelyn Y. Davis, Watergate Office Building, Suite 215, 2600 Virginia
Ave., N.W., Washington, D.C., who is the owner of 200 shares of common
stock of the Company, has advised the Company that she plans to
introduce the following resolution at the annual meeting:
Resolved, that the shareholders of The May Department Stores Company
recommend that the Board of Directors take the necessary steps to
reinstate the election of directors annually, instead of the stagger
system which was recently adopted.
This shareowner has submitted the following statement in support of the
resolution:
Until recently, directors of May were elected annually by all
shareholders.
The great majority of New York Stock Exchange listed corporations
elect all their directors each year.
This insures that all directors will be more accountable to all
shareholders each year and to a certain extent prevents the self-
perpetuation of the Board.
Last year, the owners of 34,021,264 shares, representing 36.1% of
shares voting, voted FOR this proposal.
If you agree, please mark your proxy FOR this resolution.
THE BOARD OF DIRECTORS OPPOSES THE FOREGOING RESOLUTION.
The Company's shareowners decided in 1985 to install a classified
system of electing directors, with three classes of directors serving
staggered three-year terms. This shareowner decision has been
challenged with this same resolution at every annual meeting since
1988. On each of these occasions, the shareowners confirmed that they
wanted to retain the classified system of electing directors by voting
against the proposal for annual elections. The board of directors
agrees with the results of previous shareowner voting on this issue and
continues to believe that the classified system is advantageous to the
Company and its shareowners because, by providing that the directors
will serve three-year terms rather than one-year terms, it enhances the
likelihood of continuity and stability in the composition of the
Company's board of directors and in the policies formulated by the
board. This, in turn, permits the board to represent more effectively
the interests of all shareowners, including responding to circumstances
created by demands or actions by a single shareowner or a small group
of shareowners. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
AGAINST PROPOSAL (e), AND YOUR PROXY WILL BE SO VOTED UNLESS YOU
SPECIFY OTHERWISE.
PROPOSAL BY CERTAIN SHAREOWNERS CONCERNING CUMULATIVE VOTING
Proposal (f) on the accompanying proxy card.
John J. Gilbert and the estate of Lewis D. Gilbert, 1165 Park Avenue,
New York, New York, each of whom is the owner of 240 shares of common
stock of the Company and representing family interests of 1,248 shares,
have advised the Company that they plan to introduce the following
resolution at the annual meeting:
15
<PAGE> 18
RESOLVED: That the stockholders of The May Department Stores Company,
assembled in annual meeting in person and by proxy, hereby request the
Board of Directors to take the steps necessary to provide for
cumulative voting in the election of directors, which means each
stockholder shall be entitled to as many votes as shall equal the
number of shares he or she owns multiplied by the number of directors
to be elected, and he or she may cast all of such votes for a single
candidate, or any two or more of them as he or she may see fit.
These shareowners have submitted the following statement in support of
the resolution:
Continued very strong support along the lines we suggest were shown at
the last annual meeting when 24%, an increase over the previous year,
owners of 22,633,436 shares, were cast in favor of this proposal. The
vote against included 2,095 unmarked proxies.
A law enacted in California provides that all state pension holding,
as well as state college funds, invested in shares must be voted in
favor of cumulative voting proposals, showing increasing recognition
of the importance of this democratic means of electing directors.
Also, the National Bank Act has provided for cumulative voting.
Unfortunately, in so many cases companies get around it by forming
holding companies without cumulative voting. Thus, with so many
banking failures the result is that tax payers have to make up the
losses. Banking authorities have the right to question the capability
of directors to be on banking boards. Unfortunately, in so many cases
authorities come in after and say the director or directors were not
qualified. So there is no reason why this could not be done for
corporations under the SEC and banking authorities.
It has increasingly been recognized that fair and equitable
distribution of voting power is best secured when all the stockholders
have the right of cumulative voting. This is the purpose of cumulative
voting, in our opinion, it protects everyone.
Because of the normal need to find new directors and the need for
directors on the compensation committee, we think cumulative voting is
the answer. In addition, some recommendations have been made to carry
out the Valdez 10 points. In our opinion, the 11th should be to have
cumulative voting and to end stagger systems of electing directors.
Alaska took away cumulative voting, over our objections, when it
became a state. Perhaps, if the citizens had insisted on proper
representation the disastrous Valdez oil spill might have been
prevented if environmental directors were elected through cumulative
voting.
Many successful corporations have cumulative voting. For example,
Pennzoil having cumulative voting defeated Texaco in that famous case.
Another example, in spite of still having a stagger system of electing
directors, Ingersoll-Rand, which has cumulative voting, won two
awards. In FORTUNE magazine it was ranked second as "America's Most
Admired Corporations" and the WALL STREET TRANSCRIPT noted "on almost
any criteria used to evaluate management, Ingersoll-Rand excels." We
believe May Department Stores should follow their example. If you
agree, please mark your proxy for this resolution; otherwise it is
automatically cast against it, unless you have marked to abstain.
THE BOARD OF DIRECTORS OPPOSES THE FOREGOING RESOLUTION.
The directors of the Company bring to the Company broad experience and
proven competence in retailing and other important fields, and each is
elected to represent the shareowners as a whole. Management believes
that a director elected by less than a majority of shareowners through
a cumulative voting procedure would be the choice of, and might regard
himself or herself as representing only the special interests of, the
particular group of shareowners responsible for such director's
election. Such a result would be contrary to the interests of the
Company and its shareowners as a whole. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE AGAINST PROPOSAL (f), AND YOUR PROXY
WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
PROPOSAL BY A CERTAIN SHAREOWNER CONCERNING RETIREMENT PLANS FOR
DIRECTORS
Proposal (g) on the accompanying proxy card.
Howard W. Witsma, 665 S. Skinker Blvd., St. Louis, Mo., who is the
owner of over $1,000 of common stock, has advised the Company that he
plans to introduce the following resolution at the annual meeting:
RESOLVED: We the stockholders assembled in person and by proxy, do
request that the Board of Directors take all necessary steps to
abolish the pension system established for "outside" directors, and
request that no further pensions be made without the direct and
specific approval of the shareholders assembled in Annual Meeting.
This shareowner has submitted the following statement in support of the
resolution:
REASONS: Although it has become commonplace for "outside" directors to
be pensioned, these people are the employees of the stockholders and
not the Company. These ladies and gentlemen are currently
16
<PAGE> 19
being handsomely remunerated for their services in the form of
retainers, per diems, and expenses for their work for the Company.
Further, these same ladies and gentlemen are otherwise employed, or
are retired with pensions, and are being paid for their services at
their place of primary employment. Such "double dipping" is not in the
interests of we, the stockholders and owners of the Corporation, nor
fair to us. While we certainly require top talent as our directors,
there are many corporations today, despite what management may say to
the contrary, where this practice is not permitted.
Your vote in favor is requested. If you fail to mark your proxy,
management will vote against this motion.
THE BOARD OF DIRECTORS OPPOSES THE FOREGOING RESOLUTION. The board
believes that it is in the best interests of the Company and its
shareowners to attract and retain exceptional individuals who are
recognized for their leadership, knowledge, experience and ability to
serve as outside directors. To do this, the Company must provide a
compensation package that is fair and competitive with that offered by
other major companies. Compensation may take many forms and one normal
type of compensation that the Company has elected to provide is
retirement benefits. The Company believes that retirement benefits are
a preferred form of compensation because the right to receive them is
not automatic. A director must earn the right to receive retirement
benefits by providing service to the Company for at least five years.
This encourages directors to remain with the Company and promotes
greater continuity and stability within the board. In addition, the
Company's pension plan for non-management directors provides a pension
that is proportionate to the length of the director's service. It
limits the maximum number of years that an annuity may be paid to the
number of years (up to 15 years) that a director has served on the
board. The Company believes that the directors' retirement plan is
consistent with industry standards and is fair and appropriate. THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST PROPOSAL (g),
AND YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
GENERAL
VOTE REQUIRED. The election of directors requires a plurality of votes
cast. The affirmative vote of the owners of a majority of the votes
cast at the meeting is required to approve the ratification of
auditors, the Executive Incentive Compensation Plan and the shareowner
proposals. The affirmative vote of owners of a majority of all
outstanding shares entitled to vote at the meeting is required to
approve the 1994 Stock Incentive Plan. The shares represented by
abstentions and broker non-votes will be considered present at the
meeting for quorum purposes. Abstentions and broker non-votes (i) will
not be counted as either FOR or AGAINST a nominee or a matter,
(ii) will have no effect upon the election of directors, the
ratification of auditors, the proposal to approve the Executive
Incentive Compensation Plan and the shareowner proposals, and
(iii) will have the effect of a vote AGAINST the proposal to approve
the 1994 Stock Incentive Plan.
SOLICITATION OF PROXIES. Your signature on the accompanying proxy card
is solicited by the Company's board of directors. The expenses of
solicitation of proxies hereunder will be paid by the Company. Proxies
may be solicited by directors, officers and regular employees of the
Company personally, by mail, telegraph and telephone from and through
registered holders, nominees and others acting as principals and as
intermediaries. The Company may reimburse persons holding shares in
their names or those of their nominees for their expenses in sending
proxies and proxy material to principals. In addition, the Company has
retained D. F. King & Co., Inc., to assist in the solicitation of
proxies for a fee of $18,000, plus out-of-pocket expenses.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. YOUR COOPERATION IN
GIVING THIS MATTER YOUR IMMEDIATE ATTENTION WILL BE APPRECIATED.
By order of the board of directors.
17
<PAGE> 20
APPENDIX "A"
1994 STOCK INCENTIVE PLAN
I. GENERAL
1. PURPOSE. The purpose of the Plan is to aid the Company and its
Subsidiaries in attracting, retaining, and motivating management
employees.
2. DEFINITIONS. Whenever used herein, the following terms shall have
the meanings set forth below:
a. "Board" means the Board of Directors of the Company.
b. "Code" means the Internal Revenue Code of 1986, as amended.
c. "Committee" means a committee designated by the Board, which shall
consist of not less than three members of the Board who shall be
appointed by and serve at the pleasure of the Board and who shall be
"disinterested" within the meaning of Rule 16b-3 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended,
and who shall be "outside" directors within the meaning of Section
162(m) of the Code.
d. "Company" means The May Department Stores Company.
e. "Disability" means a permanent and total disability which enables
the Participant to be eligible for and receive a disability benefit
under the Federal Social Security Act.
f. "Fair Market Value" means the average of the high and low prices
of the Stock on the New York Stock Exchange on the date in question,
or, if no sale or sales of the Stock occurred on such Exchange on that
day, the average of the high and low prices of the Stock on the last
preceding day when the Stock was sold on the New York Stock Exchange;
with respect to a Stock Appreciation Right, the term means the average
of the high and low prices of the Stock on the New York Stock Exchange
on such date or dates as may be provided in the Stock Appreciation
Right Agreement.
g. "Incentive Stock Option" means an Option granted under the Plan
which constitutes and shall be treated as an "incentive stock option"
as defined in Section 422 of the Code.
h. "Non-Qualified Stock Option" means an Option granted under the
Plan which shall not constitute or be treated as an Incentive Stock
Option.
i. "Non-Tandem Stock Appreciation Right" means a Right described in
Part III, Section 3.
j. "Option" means a right or rights to purchase shares of Stock
described in Part II.
k. "Option Agreement" means the agreement between the Company and a
Participant evidencing the grant of an Option and containing the terms
and conditions, not inconsistent with the Plan, that are applicable to
such Option.
l. "Participant" means an individual to whom an Option or Right is
granted or Restricted Stock Grant is made.
m. "Performance Restricted Stock" means Restricted Stock whose
provisions include the restrictions described in Part IV, Section 3(b).
n. "Plan" means the 1994 Stock Incentive Plan of the Company, as
amended from time to time.
o. "Related Option" means the Option in relation to which a Tandem
Stock Appreciation Right is granted.
p. "Restricted Stock Grant" means a grant described in Part IV.
q. "Retirement" means retirement as that word is defined in any
retirement plan sponsored by the Company or a Subsidiary which is
applicable to the Participant.
r. "Stock" means the Common Stock of the Company.
s. "Stock Appreciation Right" or "Right" means a right described in
Part III which provides for the payment of an amount in cash or Stock
in accordance with such terms and conditions as are provided in the
Stock Appreciation Right Agreement applicable to such Right; provided
however, that in Part III, Section 2, "Right" shall refer only to a
"Tandem Stock Appreciation Right" and that in Part III, Section 3,
"Right" shall refer only to a "Non-Tandem Stock Appreciation Right".
t. "Stock Appreciation Right Agreement" means the agreement between
the Company and a Participant evidencing the grant of a Stock
Appreciation Right and containing the terms and conditions, not
inconsistent with the Plan, that are applicable to such Right.
u. "Subsidiary" means a subsidiary of the Company or an
unincorporated organization controlled, directly or indirectly, by the
Company.
v. "Tandem Stock Appreciation Right" means a Right described in Part
III, Section 2.
3. ADMINISTRATION. The Plan shall be administered by the Committee.
Subject to all applicable provisions of the Plan, the Committee is
authorized to approve grants of Options or Rights or the making of
Restricted Stock Grants in accordance with the Plan, to construe and
interpret the Plan, to prescribe, amend, and rescind rules and
regulations relating to the Plan and to make all determinations and
take all actions necessary or advisable for the Plan's administration.
The Committee shall act by vote or written consent of a majority of its
members. Whenever the Plan authorizes or requires the Committee to take
any action, make any determination or decision or form any opinion,
then any such action, determination, decision or opinion by or of the
Committee shall be in the absolute discretion of the Committee.
4. SHARES SUBJECT TO THE PLAN.
(a) Maximum Number of Shares. Stock issued under the Plan shall be
treasury shares subject to the following limitations:
(i) Plan Maximum. The maximum number of shares of Stock which may be
issued under the Plan is 15,000,000, of which no more than 1,750,000
may be issued pursuant to Restricted Stock Grants.
18
<PAGE> 21
(ii) Participant Maximum. The maximum number of Options and Stock
Appreciation Rights that may be granted to any Participant is 750,000;
provided, however, that if a Stock Appreciation Right is issued in
substitution for an existing stock option or in tandem with a stock
option, then the grant of such a Stock Appreciation Right shall not
count against the limit. The maximum number of shares of Stock which
may be issued to each Participant free from restrictions pursuant to a
grant of Performance Restricted Stock is 50,000 per year.
(b) Expired Options or Rights. If an Option or Right expires,
terminates, ceases to be exercisable or is surrendered without having
been exercised in full, then the shares relating to the Option or Right
shall, unless the Plan has been terminated, again become available
under the Plan.
(c) Lapse of Restrictions on Restricted Stock. If any shares of Stock
shall be returned to the Company pursuant to the provisions of Sections
2 or 3 of Part IV or in the instruments evidencing the making of
Restricted Stock Grants, then such shares shall, unless the Plan has
been terminated, again become available under the Plan.
5. PARTICIPANTS. Participants in the Plan shall be determined as
follows:
(a) Eligibility. The individuals who are eligible to receive Options,
Rights or Restricted Stock Grants hereunder shall be limited to
management employees of the Company and its Subsidiaries (including
employees who are directors and/or officers).
(b) Determination. From time to time the Committee shall, in its sole
discretion, but subject to all of the provisions of the Plan, determine
which of those eligible employees shall receive Option(s), Stock
Appreciation Right(s) or Restricted Stock Grant(s) under the Plan and
the size, terms, conditions and/or restrictions of the Option(s),
Right(s) or Restricted Stock Grant(s).
(c) Differing Terms; Effect of Grant. The Committee may approve the
grant of Option(s) or Right(s) or the making of Restricted Stock
Grant(s) subject to differing terms, conditions and/or restrictions to
any eligible employee in any year. The Committee's decision to approve
the grant of an Option or Right or the making of a Restricted Stock
Grant to an eligible employee in any year shall not require the
Committee to approve the grant of an Option or Right or the making of a
Restricted Stock Grant to that employee in any other year or to any
other employee in any year; nor shall the Committee's decision with
respect to the size, terms, conditions and/or restrictions of any
Option or Right to be granted to an employee or any Restricted Stock
Grant to be made to an employee in any year require the Committee to
approve the grant of an Option or Right or the making of a Restricted
Stock Grant of the same size or with the same terms, conditions and/or
restrictions to that employee in any other year or to any other
employee in any year. The Committee shall not be precluded from
approving the grant of an Option or Right or the making of a Restricted
Stock Grant to any eligible employee solely because such employee may
previously have been granted an Option or Right or may previously have
received a Restricted Stock Grant.
6. RIGHTS WITH RESPECT TO SHARES OF STOCK. A Participant who has
exercised an Option or Right (payable all or in part in Stock) or to
whom a Restricted Stock Grant has been made shall have, after a
certificate or certificates for the number of shares of Stock granted
have been issued in his name, absolute ownership of such shares
including the right to vote the same and receive dividends thereon;
provided, however that rights with respect to shares issued in
connection with a Restricted Stock Grant shall be subject to the terms,
conditions and restrictions described in the Plan and in the instrument
evidencing the making of the Restricted Stock Grant to such
Participant.
7. EMPLOYMENT. In the absence of any specific agreement to the
contrary, no grant of an Option or Right or making of a Restricted
Stock Grant to a Participant under the Plan shall affect any right of
the Company or its Subsidiaries to terminate the Participant's
employment at any time.
II. OPTIONS
1. GENERAL. Each employee chosen to receive an Option(s) may be granted
an Incentive Stock Option, a Non-Qualified Stock Option or both,
subject to the following terms, conditions and restrictions. Each
Option granted under the Plan shall be evidenced by an Option Agreement
which shall contain such terms and conditions consistent with the Plan
as the Committee shall determine; provided, however, that each Option
shall satisfy the following requirements and each Incentive Stock
Option shall satisfy the requirement of Part II, Section 2:
(a) Option Price. The option price for each share purchased under any
Option shall be specified in the Option Agreement and, subject to the
provisions of Part V, Section 3, shall not be less than Fair Market
Value on the date the Option is granted; provided, however, that in no
event shall the option price per share be less than the par value
thereof.
(b) Option Period.
(i) General. The period in which an Option may be exercised shall
not exceed ten years from the date the Option is granted; provided,
however, that the Option may be sooner terminated in accordance with
the provisions of this paragraph (b). Subject to the foregoing, the
Committee may provide that any Option may be exercised, in whole or in
part, at such time or times as the Committee may in its discretion
determine.
(ii) Termination of Employment. If the Participant ceases to be an
employee of the Company or a Subsidiary for any reason other than
Retirement,
19
<PAGE> 22
Disability, or death, all of such Participant's outstanding Options
shall immediately terminate.
(iii) Retirement or Disability. If a Participant's employment is
terminated by Retirement or Disability, the term of any then
outstanding Option held by the Participant shall extend for a period
specified by the Committee in the agreement pertaining to such Option,
and the number of shares in respect of which the Option may be
exercised after the Participant's Retirement or Disability shall be
determined by the agreement pertaining to such Option; provided,
however, that such agreement shall provide that the Committee may
cancel the Participant's Option during such period if the
Participant's Retirement was without the consent of the Company, or if
the Participant engages during such period of Retirement or Disability
in employment or activities contrary, in the opinion of the Committee,
to the best interests of the Company.
2. INCENTIVE STOCK OPTIONS. Each Option Agreement evidencing an
Incentive Stock Option shall satisfy the requirement that to the extent
that the aggregate Fair Market Value of Stock with respect to which
Incentive Stock Options are exercisable for the first time by any
Participant during any calendar year (under the Plan and all stock
option plans of the Company and its Subsidiaries) exceeds $100,000,
such Options shall be treated as Non-Qualified Stock Options. For
purposes of this Section 2, aggregate Fair Market Value of Stock shall
be determined as of the time the Option with respect to such Stock is
granted.
3. DEATH. If a Participant's employment is terminated by death at a
time when he or she has not fully exercised any then outstanding
Option, or if a Participant dies after Retirement or Disability without
having fully exercised any then outstanding Option, the beneficiary
designated by the Participant (or, in the absence of such designation,
the executors or administrators or legatees or distributees of the
Participant's estate) shall have the right to exercise such Option in
whole or in part during such period following the Participant's death
as is set forth in the Option Agreement. The Company shall prescribe
the procedures and requirements for beneficiary designations not
inconsistent with this provision and has the right to review and
approve such designations.
4. NONASSIGNABILITY. Each Option shall not be transferable (other than,
upon the death of the Participant, by beneficiary designation, by last
will and testament or by the laws of descent and distribution) and
shall be exercisable during the Participant's lifetime only by the
Participant.
5. PAYMENT FOR STOCK. Full payment in cash or, if the Committee
approves, in Stock, for shares purchased shall be made at the time of
exercising the Option in whole or in part. No certificates for shares
so purchased shall be issued until full payment therefor has been made,
and a Participant shall have none of the rights of a shareowner until
such certificates are issued to him or her.
6. USE OF PROCEEDS. The proceeds received by the Company from the sale
of Stock pursuant to the exercise of an Option may be used for general
corporate purposes.
7. RESTRICTIONS UPON EXERCISE OF OPTION. The exercise of each Option
shall be subject to the condition that if at any time the Company shall
determine in its discretion that the satisfaction of withholding tax or
other withholding liabilities under any state or Federal law, or that
the listing, registration or qualification of any shares otherwise
deliverable upon such exercise upon any securities exchange or under
any state or Federal law, or that the consent or approval of any
regulatory body, is necessary or desirable as a condition of, or in
connection with, such exercise or the delivery or purchase of shares
thereunder, then in any such event such exercise shall not be effective
unless such withholding, listing, registration, qualification, consent
or approval shall have been effected or obtained free of any conditions
not acceptable to the Company.
8. REPRICING PROHIBITED. There shall be no grant of an Option(s) to a
Participant in exchange for a Participant's agreement to cancellation
of a higher-priced Option(s) that was previously granted to such
Participant.
III. STOCK APPRECIATION RIGHTS
1. GENERAL. Each employee chosen to receive a Stock Appreciation
Right(s) may be granted a Tandem Stock Appreciation Right, a Non-Tandem
Stock Appreciation Right or both, subject to the following terms,
conditions and restrictions and subject to such additional terms,
conditions and restrictions as may be determined by the Committee from
time to time hereafter; provided however, that no Right shall be
subject to additional terms, conditions or restrictions which are more
favorable to a Participant than the terms, conditions and restrictions
set forth in the Plan.
2. TANDEM STOCK APPRECIATION RIGHTS. Each Tandem Stock Appreciation
Right may be granted only with respect to a share(s) of Stock for which
an Option(s) has been granted under the Plan, and may be awarded
concurrently with the grant of such Option or at any time thereafter
while the Option is outstanding. If the Committee so determines, a
Tandem Stock Appreciation Right may also be granted with respect to a
share(s) of Stock for which an option has been granted and is
outstanding under any other plan of the Company. A Stock Appreciation
Right shall be evidenced by a Stock Appreciation Right Agreement which
shall contain such terms and conditions (which may include limitations
as to the time when such Stock Appreciation Right becomes exercisable
and when it ceases to be exercisable that are more restrictive than the
limitations applicable to the
20
<PAGE> 23
Related Option(s)) not inconsistent with the Plan as the Committee
shall determine; provided, however, that each Tandem Stock Appreciation
Right shall satisfy the following requirements:
(a) Termination of a Right. If the Related Option is exercised, in
whole or in part, then the Right with respect to the shares of Stock
purchased pursuant to such exercise (but not with respect to any
unpurchased shares of Stock) shall terminate as of the date of the
exercise. If an unexercised Right is otherwise exercisable on the date
that the Related Option expires, and if the Fair Market Value of the
shares of Stock with respect to which such Right was granted,
determined as of the date of such expiration, exceeds the Option price
of such shares, then, notwithstanding Section 2(b), the Right shall
automatically be deemed to have been exercised as of the date of such
expiration; otherwise, on the date that the Related Option expires, any
outstanding Right related thereto shall be terminated as of the date of
such expiration.
(b) Exercise. Tandem Stock Appreciation Rights may be exercised (i)
only at such time or times as, and to the extent that, the Related
Options shall be exercisable, (ii) only upon surrender of the Related
Options with respect to the shares for which the Rights are then being
exercised, and (iii) subject to the terms and conditions set forth in
the Stock Appreciation Right Agreement; provided that no Tandem Stock
Appreciation Right may be exercised prior to the expiration of six (6)
months from the date of the grant and can only be exercised during the
ten-day period beginning on the third business day following the
release of the Company's quarterly or annual statement of sales and
earnings.
3. NON-TANDEM STOCK APPRECIATION RIGHTS. Each Non-Tandem Stock
Appreciation Right may be granted with respect to a share(s) of Stock
or, if the Committee so determines, in exchange for an outstanding
Option or an outstanding stock option granted under any other plan of
the Company. A Non-Tandem Stock Appreciation Right shall be evidenced
by a Stock Appreciation Right Agreement which shall contain such terms
and conditions not inconsistent with the Plan as the Committee shall
determine; provided, however, that each Non-Tandem Stock Appreciation
Right shall satisfy the following requirements:
(a) Termination of a Right. A Non-Tandem Stock Appreciation Right
shall terminate as of the earlier of (i) the date of exercise of such
Right, to the extent that it is exercised; or (ii) the termination date
specified in the Stock Appreciation Right Agreement. If an unexercised
Right is otherwise exercisable on the date that it expires, and if the
Fair Market Value of the shares of Stock with respect to which such
Right was granted, determined as of the date of such expiration,
exceeds the exercise price of such Right (set forth in the Stock
Appreciation Right Agreement), then the Right shall automatically be
deemed to have been exercised as of the date of such expiration.
(b) Exercise. Non-Tandem Stock Appreciation Rights may be exercised
in accordance with the terms and conditions set forth in the Stock
Appreciation Right Agreement; provided that (i) no Non-Tandem Stock
Appreciation Right that is payable all or in part in Stock may be
exercised prior to the expiration of six (6) months from the date of
the grant; (ii) the exercise price of any Non-Tandem Stock Appreciation
Right granted in exchange for an outstanding Option or for an
outstanding stock option granted under any other plan of the Company
shall be the same exercise price as that outstanding Option or option
and (iii) the exercise price of any Non-Tandem Stock Appreciation Right
not granted in exchange for an outstanding Option or for an outstanding
stock option granted under any other plan of the Company shall be the
Fair Market Value of the Stock on the date of the grant of the
Right(s).
4. PAYMENT.
(a) Amount. Upon the exercise of a Stock Appreciation Right, a
Participant shall be entitled to receive the excess of the aggregate
Fair Market Value of the shares of Stock with respect to which the
Right is being exercised (determined as of the date of such exercise)
over (i) the aggregate option price of such shares in the case of
Tandem Stock Appreciation Rights; or (ii) the aggregate exercise price
(set forth in the Stock Appreciation Right Agreement) in the case of
Non-Tandem Stock Appreciation Rights.
(b) Form. Any amount which becomes payable upon exercise of a Stock
Appreciation Right under the Plan shall be paid entirely in cash,
entirely in Stock or partly in cash and partly in Stock in accordance
with such terms and conditions as are provided in the applicable Stock
Appreciation Right Agreement; provided, however, that notwithstanding
any provision in any Stock Appreciation Right Agreement, the Committee
may determine in its sole and absolute judgment that any amount which
may become payable upon exercise of a Right shall be paid entirely in
cash.
5. TERMINATION OF EMPLOYMENT.
(a) General. If a Participant ceases to be an employee of the Company
or of a Subsidiary for any reason other than Retirement, Disability or
death, all of such Participant's outstanding Rights shall immediately
terminate.
(b) Retirement or Disability. If a Participant's employment is
terminated by Retirement or Disability, the Participant's right to
exercise all or any portion of any Right after the date of such
Retirement or Disability shall be determined by the provisions of the
Stock Appreciation Right Agreement; provided, however, that such
Agreement shall provide that the Committee may terminate the
Participant's Right prior to the date on which the Right is exercised
if the Participant's Retirement was without the consent of the Company,
or if the Participant engages during such period of Retirement or
Disability in employment or activities contrary, in the opinion of the
Committee, to the best interests of the Company.
(c) Death. If a Participant's employment is terminated by death at a
time when the Participant has not fully exercised any then outstanding
Rights, or if a Participant dies after Retirement or Disability without
having fully
21
<PAGE> 24
exercised any then outstanding Rights, the beneficiary designated by
the Participant (or, in the absence of such designation, the executors
or administrators or legatees or distributees of the Participant's
estate) shall have the right to exercise such Right in whole or in part
during such period following the Participant's death as set forth in
the Stock Appreciation Right Agreement. The Company shall prescribe the
procedures and requirements for beneficiary designations not
inconsistent with this provision and has the right to review and
approve such designations.
6. EXPIRATION. If the period in which a Stock Appreciation Right is
exercisable expires and the Right has not been exercised, then such
Right shall terminate as of the last day on which it was exercisable.
7. NONASSIGNABILITY. Each Right shall not be transferable (other than,
upon the death of the Participant, by beneficiary designation, by last
will and testament or by the laws of descent and distribution) and
shall be exercisable during the Participant's lifetime only by the
Participant.
8. RESTRICTIONS UPON EXERCISE OF RIGHTS. The exercise of each Right
shall be subject to the condition that if at any time the Company shall
determine in its discretion that the satisfaction of withholding tax or
other withholding liabilities under any state or Federal law, or that
the consent or approval of any regulatory body, is necessary or
desirable as a condition of, or in connection with, such exercise,
then, in any such event, such exercise shall not be effective unless
such withholding, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company.
IV. RESTRICTED STOCK GRANTS
1. GENERAL. A Restricted Stock Grant made under the Plan shall contain
the following terms, conditions and restrictions and such additional
terms, conditions and restrictions as may be determined by the
Committee from time to time hereafter; provided, however, that no
Restricted Stock Grant shall be subject to additional terms, conditions
or restrictions which are more favorable to a Participant than the
terms, conditions and restrictions set forth in the Plan.
2. RESTRICTIONS. Subject to the provisions of Part IV, Section 3,
shares of Stock granted to a Participant pursuant to a Restricted Stock
Grant:
(i) shall not be sold, assigned, conveyed, transferred, pledged,
hypothecated, or otherwise disposed of, and
(ii) shall be returned to the Company forthwith, and all the rights
of the Participant to such shares shall immediately terminate without
any payment or consideration by the Company, if the Participant's
continuous employment with the Company or any Subsidiary shall
terminate for any reason, except as provided in Part IV, Section 4.
Such return of such Stock shall be accomplished by the Participant's
delivering or causing to be delivered to the Secretary or any Assistant
Secretary of the Company the certificate(s) for such shares of Stock,
accompanied by such endorsement(s) and/or instrument(s) of transfer as
may be required by the Secretary or any Assistant Secretary of the
Company.
3. LAPSE OF RESTRICTIONS.
(a) General. Subject to the provisions of Part IV, Sections 3(b) and
4 and of Part V, Section 4, the restrictions set forth in Part IV,
Section 2 shall lapse on such date or dates on or after the first
anniversary and on or before the tenth anniversary of the date as of
which the Restricted Stock Grant is made, as the Committee shall
determine at the time of the Restricted Stock Grant.
(b) Performance Restricted Stock. If the Committee has designated the
Stock covered by a Restricted Stock Grant as Performance Restricted
Stock, then the lapse of restrictions set forth in Part IV, Section 2
that would otherwise occur on a specified date shall also be subject to
the following:
(i) if the Company meets or exceeds the Target Long-Term EPS Growth
Objective (after adjustment for Relative Performance Rank) for the
most recently ended Long-Term Performance Period, then the
restrictions that would otherwise lapse on such date shall lapse as to
100% of the shares of such Performance Restricted Stock; and
(ii) if the Company meets or exceeds the Threshold Long-Term EPS
Growth Objective (after adjustment for Relative Performance Rank) but
does not meet or exceed the Target Long-Term Growth Objective (after
adjustment for Relative Performance Rank) for the most recently ended
Long-Term Performance Period, then the restrictions on the shares of
Performance Restricted Stock that would otherwise lapse on such date
shall lapse as to (i) 50% of such shares plus (ii) 50% of such shares
multiplied by a fraction (not less than zero and not greater than
one), the numerator of which is the Company's actual Long-Term EPS
Growth for the most recently ended Long-Term Performance Period less
the Threshold Long-Term EPS Growth Objective for such period and the
denominator of which is the Target Long-Term EPS Growth Objective for
such period less the Threshold Long-Term EPS Growth Objective for such
period, and the remaining shares of Performance Restricted Stock shall
immediately forfeit to the Company; and
(iii) if the Company does not meet or exceed the Threshold Long-Term
EPS Objective (after adjustment for Relative Performance Rank) for the
most recently ended Long-Term Performance Period, then 100% of the
shares of such Performance Restricted Stock shall immediately forfeit
to the Company.
For purposes of this Section 3(b), the terms Long-Term Performance
Period, Relative Performance Rank, Target Long-Term EPS Objective and
Threshold Long-Term EPS Objective shall have the same meanings as in
the Company's Executive Incentive Compensation Plan
22
<PAGE> 25
for Corporate Executives. No restrictions shall lapse on any
Performance Restricted Stock until the Committee certifies, in writing,
that the requirements set forth in this Section 3(b) have been
satisfied.
(c) Forfeiture. All shares of Stock forfeited under this Section 3
shall be returned to the Company forthwith, and all the rights of the
Participant to such shares shall immediately terminate without any
payment or consideration by the Company.
4. TERMINATION OF EMPLOYMENT BY REASON OF DEATH OR DISABILITY. If a
Participant who has been in the continuous employment of the Company or
of a Subsidiary since the date as of which a Restricted Stock Grant was
made to such Participant shall, while in such employment, die or become
Disabled and such Participant's death or Disability shall occur more
than one year after the date as of which the Restricted Stock Grant was
made to such Participant, then the restrictions set forth in Part IV,
Section 2 shall lapse as to all shares of Restricted Stock granted to
such Participant pursuant to such Restricted Stock Grant on the date of
such event. A Participant may file a written designation of beneficiary
to receive, in the event of the Participant's death, any shares for
which restrictions lapse on the date of death. The Company shall
prescribe procedures and requirements for beneficiary designations not
inconsistent with this provision and has the right to review and
approve such designations.
5. AGREEMENT BY EMPLOYEE REGARDING WITHHOLDING TAXES. Each Participant
shall agree that, subject to the provisions of Part IV, Section 6,
(i) no later than the date as of which the restrictions mentioned in
Part IV, Section 2 and in the instrument evidencing the making of the
Restricted Stock Grant shall lapse, such Participant will pay to the
Company in cash, or, if the Committee approves, in Stock, or make other
arrangements satisfactory to the Committee regarding payment of, any
Federal, state or local taxes of any kind required by law to be
withheld with respect to the shares of Stock subject to such Restricted
Stock Grant, and
(ii) the Company and its Subsidiaries shall, to the extent permitted
by law, have the right to deduct from any payment of any kind otherwise
due to the Participant any Federal, state or local taxes of any kind
required by law to be withheld with respect to the shares of Stock
subject to such Restricted Stock Grant.
6. ELECTION TO RECOGNIZE GROSS INCOME IN THE YEAR OF GRANT. If any
Participant properly elects, within thirty (30) days of the date of
grant, to include in gross income for Federal income tax purposes an
amount equal to the fair market value of the shares of Stock granted on
the date of grant, such Participant shall pay to the Company, or make
arrangements satisfactory to the Committee to pay to the Company in the
year of such grant, any Federal, state or local taxes required to be
withheld with respect to such shares. If such Participant shall fail to
make such payments, the Company and its Subsidiaries shall, to the
extent permitted by law, have the right to deduct from any payment of
any kind otherwise due to the employee any Federal, state or local
taxes of any kind required by law to be withheld with respect to such
shares.
7. RESTRICTIVE LEGEND; CERTIFICATES MAY BE HELD IN CUSTODY. Each
certificate evidencing shares of Stock granted pursuant to a Restricted
Stock Grant shall, (i) if issued to any person other than the Company
for safekeeping while the restrictions apply, bear an appropriate
legend referring to the terms, conditions and restrictions applicable
to such Restricted Stock Grant and (ii) if issued to the Company for
safekeeping while the restrictions apply, be noted as restricted on the
records of the transfer agent. Any attempt to dispose of such shares of
Stock in contravention of such terms, conditions and restrictions shall
be ineffective. The Committee may adopt rules which provide that the
certificates evidencing such shares may be held in custody by a bank or
other institution, or that the Company may itself hold such shares in
custody, until the restrictions thereon shall have lapsed.
8. RESTRICTIONS UPON MAKING OF RESTRICTED STOCK GRANTS. The listing
upon the New York Stock Exchange or the registration or qualification
under any Federal or state law of any shares of Stock to be granted
pursuant to Restricted Stock Grants (whether to permit the making of
Restricted Stock Grants or the resale or other disposition of any such
shares of Stock by or on behalf of the employees receiving such shares)
may be necessary or desirable as a condition of or in connection with
such Restricted Stock Grants and if, in any such event, the Board in
its sole discretion so determines, delivery of the certificates for
such shares of Stock shall not be made until such listing, registration
or qualification shall have been completed. In such connection, the
Company agrees that it will use its best effort to effect any such
listing, registration or qualification; provided, however, the Company
shall not be required to use its best efforts to effect such
registration under the Securities Act of 1933 other than on Form S-8,
as presently in effect, or such other forms as may be in effect from
time to time calling for information comparable to that presently
required to be furnished under Form S-8.
9. RESTRICTIONS UPON RESALE OF STOCK. If the shares of Stock that have
been granted to a Participant pursuant to the terms of the Plan are not
registered under the Securities Act of 1933, as amended, pursuant to an
effective registration statement, such Participant, if the Committee
shall deem it advisable, may be required to represent and agree in
writing that (i) any shares of Stock acquired by such employee pursuant
to the Plan will not be sold except pursuant to an effective
registration statement under the Securities Act of 1933, as amended, or
pursuant to an exemption from registration under said Act and (ii) such
Participant is acquiring such shares of Stock for the Participant's own
account and not with a view to the distribution thereof.
23
<PAGE> 26
V. MISCELLANEOUS
1. EFFECTIVE DATE. The Plan became effective on March 18, 1994, subject
to approval by shareowners before March 18, 1995.
2. DURATION OF PLAN. Unless sooner terminated, the Plan shall remain in
effect until March 18, 2004. Termination of the Plan shall not affect
any Options or Rights previously granted, which Options or Rights shall
remain in effect until exercised, surrendered, or cancelled, or until
they have expired, all in accordance with their terms. Termination of
the Plan shall not affect any Restricted Stock Grants previously made,
or Stock previously granted pursuant to a Restricted Stock Grant; the
terms, conditions and restrictions applicable to shares issued pursuant
to a Restricted Stock Grant shall remain in effect until such terms,
conditions and restrictions shall have lapsed all in accordance with
their terms.
3. CHANGES IN CAPITAL STRUCTURE. In the event that there is any change
in the capital structure of the Company through merger, consolidation,
reorganization, recapitalization, spin-off or otherwise, or if there
shall be any dividend on the Company's Stock, payable in such Stock, or
if there shall be a Stock split or a combination of shares, then:
(i) the number of shares reserved for Options (both in the aggregate
and with respect to each Participant) and the number of shares subject
to outstanding Options and the price per share of each such Option;
(ii) the number of shares with respect to which Rights may be
exercised (both in the aggregate and with respect to each Participant);
and
(iii) the number of shares of Stock reserved for Restricted Stock
Grants under the Plan
shall be proportionately adjusted by the Board as it deems equitable,
in its absolute discretion, to prevent dilution or enlargement of the
rights of a Participant and any shares issued pursuant to such change
in capital structure shall be subject to the same terms, conditions and
restrictions as the shares of Stock with respect to which newly issued
shares are issued. The issuance of Stock for consideration and the
issuance of Stock rights shall not be considered a change in the
Company's capital structure. No adjustment provided for in this Section
3 shall require the issuance of any fractional share.
4. CHANGE IN CONTROL. If while unexercised Options, Rights, or
Restricted Stock Grants remain outstanding under the Plan:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any
company owned, directly or indirectly, by the shareowners of the
Company in substantially the same proportions as their ownership of
stock of the Company), is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the combined
voting power of the Company's then outstanding securities;
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in clause
(i), (iii) or (iv) of this Section) whose election by the Board or
nomination for election by the Company's shareowners was approved by a
vote of at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease
for any reason to constitute at least a majority thereof;
(iii) the shareowners of the Company approve a merger or
consolidation of the Company with any other Company, other than (1) a
merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 50% of the
combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation or (2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no
"person" (as hereinabove defined) acquires more than 50% of the
combined voting power of the Company's then outstanding securities; or
(iv) the shareowners of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets,
then (a) from and after the date of the first of the foregoing events
to occur, all Options and Rights held by active employees on such date
shall be exercisable in full, whether or not otherwise exercisable; and
(b) on the date of the first of the foregoing events to occur, the
restrictions set forth in Part IV, Section 2 on all outstanding
Restricted Stock Grants, including Performance Restricted Stock Grants,
shall lapse.
5. AMENDMENT OR TERMINATION. The Board may, by resolution, amend or
terminate the Plan at any time; provided, however, that
(i) shareowner approval shall be required for any changes to the Plan
which would require shareowner approval under the New York Business
Corporation Law, Rule 16b-3 of the Securities Exchange Act of 1934, as
amended, or Section 162(m) of the Code; and
(ii) the Board may not, without the written consent of the
Participant, alter, impair or adversely affect any right
24
<PAGE> 27
of such Participant with respect to any Option or Right previously
granted or Restricted Stock Grant previously made to such Participant
under the Plan except as authorized herein.
Notwithstanding the foregoing, the Board may, by resolution, amend the
Plan in any way that it deems necessary or appropriate in order to make
income with respect to the Plan deductible for Federal income tax
purposes under Section 162(m) of the Code without regard to the
foregoing provisos (i) and (ii), and any such amendment shall be
effective as of such date as is necessary to make such income under the
Plan so deductible.
6. UNFUNDED PLAN. The Plan shall be unfunded. Neither the Company nor
the Committee shall be required to segregate any assets that may at any
time be represented by Options or Rights under the Plan. Neither the
Company nor the Committee shall be deemed to be a trustee of any
amounts to be paid under the Plan. Any liability of the Company to any
Participant with respect to a right shall be based solely upon any
contractual obligations created by the Plan or a Stock Appreciation
Right Agreement or Option Agreement; no such obligation shall be deemed
to be secured by any pledge or any encumbrance on any property of the
Company.
25
<PAGE> 28
APPENDIX "B"
EXECUTIVE INCENTIVE COMPENSATION PLAN FOR CORPORATE EXECUTIVES
This document constitutes and sets forth the terms of The May
Department Stores Company Executive Incentive Compensation Plan for
Corporate Executives.
Section 1. PURPOSES OF THE PLAN. The purposes of the Plan are (i) to
provide a means to attract, retain and motivate talented personnel and
(ii) to provide to participating management employees added incentive
for high levels of performance and for additional effort to improve the
Company's financial performance. Payments of awards under this Plan are
intended to qualify for tax deductibility under the provisions of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). Notwithstanding any other provisions of this Plan, if any
decision must be made before a specified date in order for payments to
qualify for such tax deductibility under the tax rules in effect from
time to time, then such decision is to be made before such date.
Section 2. DEFINITIONS. Whenever used herein, the following terms shall
have the following meanings:
(a) "Annual Award" means, for a Participant for a Fiscal Year, the
product of the Participant's Minimum Annual Compensation for such
Fiscal Year multiplied by the aggregate of:
(i) the Participant's Annual EPS Factor for such Fiscal Year, plus
(ii) the Participant's Annual RONA Factor for such Fiscal Year.
(b) "Annual EPS Factor" means, for a Participant for a Fiscal Year
(i) five percent (ten percent for the Chief Executive Officer), if
actual EPS Growth for such Fiscal Year equals or exceeds the
Participant's Threshold Annual EPS Growth Objective for such Fiscal
Year, plus (ii) ten percent (twenty percent for the Chief Executive
Officer) multiplied by a fraction (not less than zero and not greater
than one), the numerator of which is the actual EPS Growth for such
Fiscal Year less the Participant's Threshold Annual EPS Growth
Objective for such Fiscal Year and the denominator of which is the
Participant's Maximum Annual EPS Growth Objective for such Fiscal Year
less the Participant's Threshold Annual EPS Growth Objective for such
Fiscal Year; provided, however,
(1) that the Annual EPS Factor shall be subject to adjustment as
provided in Section 6(b); and
(2) that the percentages referred to in this definition may be
adjusted by the Committee as provided in Section 4(b).
(c) "Annual RONA Factor" means, for a Participant for a Fiscal Year
(i) five percent (ten percent for the Chief Executive Officer) if
actual RONA for such Fiscal Year equals or exceeds the Participant's
Threshold Annual RONA Objective for such Fiscal Year, plus (ii) ten
percent (twenty percent for the Chief Executive Officer) multiplied by
a fraction (not less than zero and not greater than one), the numerator
of which is the actual RONA for such Fiscal Year less the Participant's
Threshold Annual RONA Objective for such Fiscal Year and the
denominator of which is the Participant's Maximum Annual RONA Objective
for such Fiscal Year less the Participant's Threshold Annual RONA
Objective for such Fiscal Year; provided, however,
(1) that the Annual RONA Factor shall be subject to adjustment as
provided in Section 6(b); and
(2) that the percentages referred to in this definition may be
adjusted by the Committee as provided in Section 4(b).
(d) "Average Annual Compensation" means, for a Long-Term Performance
Period, the Participant's average annual salary rate during such
period, determined on a monthly basis, or such lesser amount as the
Participant and the Company shall agree to, in writing.
(e) "Board" means the Board of Directors of the Company.
(f) "Committee" means a committee designated by the Board, which
shall consist of not less than three members of the Board who shall be
appointed by and serve at the pleasure of the Board and who shall be
"outside" directors within the meaning of Section 162(m) of the Code.
(g) "Company" means The May Department Stores Company.
(h) "Disability" means the inability of a Participant to perform the
normal duties of the Participant's regular occupation.
(i) "EPS Growth" means (i) for a Fiscal Year, the annual growth rate
in EPS measured from the immediately preceding Fiscal Year; and (ii)
for a Long-Term Performance Period, the compound annual growth rate in
EPS measured from the Fiscal Year immediately preceding the Long-Term
Performance Period to the last Fiscal Year in the Long-Term Performance
Period. For purposes of this definition, "EPS" for a Fiscal Year means
the Company's EPS for such Fiscal Year as reported in the Company's
annual report to its shareholders for the year of determination (or, in
the event that such item is not included in such annual report, such
comparable figure as may be determined by the Committee) adjusted by
the Company's independent certified public accountants to exclude such
non-recurring or extraordinary items as the Committee shall determine
are not representative of the on-going operations of the Company.
(j) "Fiscal Year" means the fiscal year of the Company.
(k) "Long-Term Award" means, for a Participant for a Long-Term
Performance Period, the product of the
26
<PAGE> 29
Participant's Average Annual Compensation for such period multiplied by
the aggregate of:
(i) the Participant's Long-Term EPS Factor for such period, plus
(ii) the Participant's Long-Term RONA Factor for such period
as such product is adjusted in accordance with Section 5(b) of the
Plan.
(l) "Long -Term EPS Factor" means, for a Participant for a Long-Term
Performance Period, (i) five percent (ten percent for the Chief
Executive Officer) if actual EPS Growth for such period equals or
exceeds the Participant's Threshold Long-Term EPS Growth Objective for
such period, plus (ii) ten percent (twenty percent for the Chief
Executive Officer) multiplied by a fraction (not less than zero and not
greater than one) the numerator of which is the actual EPS Growth for
such period less the Participant's Threshold Long-Term EPS Growth
Objective for such period and the denominator of which is the
Participant's Maximum Long-Term EPS Growth Objective for such period
less the Participant's Threshold Long-Term EPS Growth Objective for
such period; provided, however, that the Long-Term EPS Factor shall be
subject to adjustment as provided in Section 6(b).
(m) "Long-Term Performance Period" means three consecutive Fiscal
Years.
(n) "Long-Term RONA Factor" means, for a Participant for a Long-Term
Performance Period (i) five percent (ten percent for the Chief
Executive Officer) if actual RONA for such period equals or exceeds the
Participant's Threshold Long-Term RONA Objective for such period plus
(ii) ten percent (twenty percent for the Chief Executive Officer)
multiplied by a fraction (not less than zero and not greater than one),
the numerator of which is the actual RONA for such period less the
Participant's Threshold Long-Term RONA Objective for such period and
the denominator of which is the Participant's Maximum Long-Term RONA
Objective for such period less the Participant's Threshold Long- Term
RONA Objective for such period; provided, however, that the Long-Term
RONA Factor shall be subject to adjustment as provided in Section 6(b).
(o) "Market Value" means the average closing price of the Stock on
the New York Stock Exchange, Inc. during the month of February of the
year specified.
(p) "Minimum Annual Compensation" means, for a Fiscal Year, the
Participant's rate of minimum annual salary on the first day of the
fiscal month of November in the Fiscal Year.
(q) "Participant" means an individual who has been designated to
participate in the Plan in accordance with Section 3 of the Plan.
(r) "Plan" mean The May Department Stores Company Executive Incentive
Compensation Plan for Corporate Executives.
(s) "Relative Performance Rank" means, for a Fiscal Year or for a
Long-Term Performance Period, the relative rank of the Company (as
among the Company and a group of competitors designated by the
Committee) based on the EPS Growth and RONA, respectively, of all such
corporations for such corporations' comparable fiscal periods, as
determined by the Committee. Relative Performance Rank shall be
determined based on data provided by the Company's independent
certified public accountants from publicly available information about
all such corporations, and adjusted by such independent certified
public accountants for comparability (adjustments for LIFO, major non-
recurring transactions, etc.) subject to the direction and approval of
the Committee. The competitors designated by the Committee for the 1994
Fiscal Year and the Long-Term Performance Period commencing in 1994 are
Dayton-Hudson Company, Dillard Department Stores, J.C. Penney, Melville
Stores, Mercantile Stores and Nordstrom. The Committee may change the
number of competitors or corporations included in the group when, as a
result of extraordinary or unforeseen events, it is no longer
appropriate for a particular corporation to be included in the
competitor group (such as when one of the group ceases operations,
merges with another corporation, files for bankruptcy protection or
significantly changes the nature of its business).
(t) "Retirement" means, as to a Participant, retirement as that word
is defined in any retirement plan sponsored by the Company or any
Subsidiary which is applicable to such Participant.
(u) "RONA" means (i) for a Fiscal Year, the Company's return on
beginning net assets for such Fiscal Year as reported in the Company's
annual report to its shareowners for the year of determination (or, in
the event that such item is not included in such annual report, such
comparable figure as may be determined by the Committee) adjusted by
the Company's independent certified public accountants to exclude such
non-recurring or extraordinary items as the Committee shall determine
are not representative of the ongoing operations of the Company; and
(ii) for a Long-Term Performance Period, the sum of the RONA for each
Fiscal Year in the Long-Term Performance Period divided by three.
(v) "Stock" means the common stock of the Company.
(w) "Subsidiary" means a subsidiary corporation of the Company within
the meaning of Section 425(f) of Code.
(x) The terms "Maximum Annual EPS Growth Objective," "Maximum Long-
Term EPS Growth Objective," "Target Annual EPS Growth Objective,"
"Target Long-Term EPS Growth Objective," "Threshold Annual EPS Growth
Objective," "Threshold Long-Term EPS Growth Objective," "Maximum Annual
RONA Objective," "Maximum Long-Term RONA Objective," "Target Annual
RONA Objective," "Target Long-Term RONA Objective," "Threshold Annual
RONA Objective" and "Threshold Long-Term RONA Objective" shall mean the
respective objectives determined by the Committee for each Participant
pursuant to Section 7 of the Plan.
Section 3. ELIGIBILITY. Management employees of the Company and its
Subsidiaries shall be eligible to
27
<PAGE> 30
participate in the Plan. The Committee may, in its sole discretion,
designate any such individual as a Participant for a particular Fiscal
Year and/or for a particular Long-Term Performance Period before the
end of such Fiscal Year and Long-Term Performance Period, respectively.
Designation of an individual as a Participant for any period shall not
require designation of such individual as a Participant in any other
period, and designation of one individual as a Participant shall not
require designation of any other individual as a Participant in such
period or in any other period.
Section 4. ANNUAL AWARD. (a) Subject to the other provisions of the
Plan, a Participant for a Fiscal Year who is designated as such for an
entire Fiscal Year shall be entitled to an Annual Award for such Fiscal
Year. Subject to the other provisions of the Plan, a Participant for a
Fiscal Year who is designated as such for less than an entire Fiscal
Year shall be entitled to a reduced Annual Award for such Fiscal Year
equal to the Annual Award for such Fiscal Year multiplied by a
fraction, the numerator of which shall be the number of complete fiscal
months between (i) the first day of the fiscal month in which occurs
the date as of which the Participant was so designated and (ii) the end
of such Fiscal Year and the denominator of which shall be twelve.
(b) The Committee may change the percentages referred to in the
definitions of "Annual EPS Factor" and "Annual RONA Factor" for any
Fiscal Year, provided that the maximum Annual Award which may be paid
under such different percentages may not be greater than 45% (90% for
the Chief Executive Officer) of the Participant's Minimum Annual
Compensation for such Fiscal Year.
Section 5. LONG-TERM AWARD. (a) Subject to the other provisions of the
Plan, a Participant for a Long-Term Performance Period who is
designated as such for an entire Long-Term Performance Period shall be
entitled to a Long-Term Award for such period. Subject to the other
provisions of the Plan, a Participant for a Long-Term Performance
Period who is designated as such for less than an entire Long-Term
Performance Period shall be entitled to a reduced Long-Term Award for
such period equal to the Long-Term Award for such period multiplied by
a fraction, the numerator of which shall be the number of complete
fiscal months between (i) the first day of the fiscal month in which
occurs the date as of which the Participant was so designated and (ii)
the end of such Long-Term Performance Period and the denominator of
which shall be thirty-six.
(b) The Long-Term Award otherwise payable pursuant to Section 5(a) of
the Plan for a Long-Term Performance Period shall be adjusted by
multiplying such Long-Term Award by a percentage equal to a fraction,
the numerator of which shall be the Market Value of the Stock in
February of the calendar year in which such Long-Term Performance
Period ends and the denominator of which shall be the Market Value of
the Stock in February of the calendar year in which such Long-Term
Performance Period begins; provided, however, that such percentage
shall in no event be greater than one hundred fifty percent nor less
than seventy-five percent.
Section 6. ADJUSTMENTS. (a) DISCRETIONARY ADJUSTMENT OF AWARDS. In the
event that the Committee determines, in its absolute discretion, that
an Annual Award or a Long-Term Award payable to a Participant in
accordance with the other terms of the Plan should be adjusted, upwards
or downwards, based on all the facts and circumstances known to the
Committee at the time, then, the Committee may, in its sole and
absolute discretion, increase or decrease any such Annual Award or
Long-Term Award to such amount as it determines; provided, however,
that the Committee may not adjust upwards any Annual Award or Long-Term
Award of any Participant who is a "covered employee" (as defined in
Section 162 (m) of the Code and the regulations thereunder) with
respect to the particular performance period for which the Annual Award
or Long-Term Award is being granted.
<TABLE>
(b) ADJUSTMENT FOR RELATIVE RANK. A Participant's Annual EPS Factor,
Annual RONA Factor, Long-Term EPS Factor and Long-Term RONA Factor
shall be adjusted in the following manner based upon the number of
competitors in the group of competitors used to determine the Company's
Relative Performance Rank and the Company's Relative Performance Rank
therein:
- - - - - ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Number of Competitor Companies (not including the Company)
10 9 8 7 6 5 4
- - - - - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Factor will be no less than
"Target" if the Company's rank is: 1st - 1st - 1st - 1st - 1st - 1st - 1st -
3rd 3rd 3rd 2nd 2nd 2nd 2nd
Factor will be no less than
"Threshold" if the Company's rank is: 4th - 4th - 4th - 3rd - 3rd - 3rd - 3rd-
6th 6th 6th 4th 4th 4th 4th
Factor will be no higher than
"Threshold" if the Company's rank is: 9th - 8th - 7th - 7th - 6th - 5th - 5th
11th 10th 9th 8th 7th 6th
- - - - - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Section 7. ANNUAL AND LONG-TERM TARGETS. Threshold, target and maximum
annual and long-term objectives with respect to EPS Growth and with
respect to RONA shall be determined by the Committee as soon as
practicable prior to the commencement of each Fiscal Year and each
Long-Term Performance Period for each Participant or within
28
<PAGE> 31
the period permitted by applicable law. The Committee shall cause the
respective objectives for each Participant to be provided to such
Participant as soon thereafter as practicable. Such objectives shall
remain in effect for the entire Fiscal Year or Long-Term Performance
Period, as appropriate.
Section 8. PAYMENT OF AWARDS. (a) Annual Awards for a Fiscal Year shall
be payable in cash within three months after the close of such Fiscal
Year or as soon thereafter as practicable.
(b) Long-Term Awards for a Long-Term Performance Period shall be
payable in cash within three months after the close of such Long-Term
Performance Period or as soon thereafter as practicable.
(c) A Participant may elect to defer all or a portion of an award by
making such election under the Deferred Compensation Plan with respect
to such award. Such election must be made not later than December 31 of
the calendar year preceding the commencement of the Fiscal Year or
Long-Term Performance Period, as appropriate.
(d) The Company shall have the right to deduct any sums that federal,
state or local tax laws require to be withheld with respect to any
payment of awards.
(e) Before any award is paid to a Participant who is a "covered
employee" (as defined in Section 162(m) of the Code and the regulations
thereunder), the Committee shall certify in writing that the material
terms of the Plan have been satisfied.
Section 9. TERMINATION OF EMPLOYMENT.
(a) Death or Disability. In the event of either the death or
Disability of the Participant while employed (a "Section 9(a) Event"),
the Participant shall be entitled to the following:
(i) An Annual Award with respect to the Fiscal Year in which the
Section 9(a) Event occurs equal to the Annual Award otherwise payable
(if any) for that Fiscal Year, prorated to the end of the fiscal month
in which such Section 9(a) Event occurs; and
(ii) A Long-Term Award with respect to each Long-Term Performance
Period which includes the Fiscal Year of the Section 9(a) Event;
provided, however, that for purposes of this Section 9(a)(ii) the
Long-Term Award for any Long-Term Performance Period (1) shall be
determined at the end of the Fiscal Year in which the Section 9(a)
Event occurs, (2) shall be determined (and averages used in that
determination shall be calculated) based only on the Fiscal Year and
any preceding Fiscal Years otherwise included in the Long-Term
Performance Period and (3) shall be prorated to the end of the fiscal
month in which the Section 9(a) Event occurs.
(b) Retirement.
(i) In the event of the Retirement of the Participant with the
written consent of the Company, such event shall be deemed to be a
Section 9(a) Event, and the Participant shall be entitled to an Annual
Award and to a Long-Term Award as provided in Section 9(a).
(ii) In the event of the Retirement of the Participant without the
consent of the Company (a "Section 9(b)(ii) Event"), the Participant
shall be entitled to the following:
(1) An Annual Award with respect to the Fiscal Year in which the
Section 9(b)(ii) Event occurs equal to the Annual Award otherwise
payable (if any) for that Fiscal Year, prorated to the end of the
fiscal month in which the Section 9(b)(ii) Event occurs; and
(2) No Long-Term Award following the Section 9(b)(ii) Event. The
Participant shall forfeit any right or entitlement to any award with
respect to any Long-Term Performance Period which has not been
completed on the date of the Section 9(b)(ii) Event. Any Long-Term
Award for a period which ended prior to the Section 9(b)(ii) Event
shall remain unaffected.
(c) Termination of Employment.
(i) In the event of the termination of employment of the Participant
not covered by Sections 9(a) or 9(b) above which occurs at the end of
the term of the Participant's then-current written employment
agreement (if any) with the Company or Subsidiary, or in the event of
such a termination of a Participant who has no current written
employment agreement with the Company or Subsidiary, such event shall
be deemed to be a Section 9(b)(ii) Event, and the Participant shall be
entitled to an Annual Award (but not to a Long-Term Award) as provided
in Section 9(b)(ii).
(ii) In the event of the termination of employment of the Participant
not covered by Sections 9(a) or 9(b) above before the end of the term
of the Participant's then-current written employment agreement (if
any) with the Company or Subsidiary, with the written consent of the
Company (a "Section 9(c)(ii) Event"), the Participant shall be
entitled to the following:
(1) An Annual Award with respect to the Fiscal Year in which the
Section 9(c)(ii) Event occurs equal to the actual award otherwise
payable for the Fiscal Year (if any); provided, however, that in the
event that the term of the Participant's then-current employment
agreement is due to expire during that Fiscal Year, then the Annual
Award shall be prorated to the end of the fiscal month in which such
term is due to expire; and
(2) A Long-Term Award with respect to each Long-Term Performance
Period which includes the Fiscal Year of the 9(c)(ii) Event equal to
the Long-Term Award otherwise payable with respect to each Long-Term
Performance Period; provided, however, that in the event that the
term of the Participant's then-current employment agreement (if any)
with the Company is otherwise due to expire during any such period,
then the Long-Term Award with respect to such period shall be
prorated to the end of the calendar month in which such term is due
to expire.
29
<PAGE> 32
(iii) In the event of the termination of employment of the
Participant not otherwise covered by this Section 9 before the end of
the term of the then-current written employment agreement (if any)
with the Company or Subsidiary, without the written consent of the
Company, the Participant shall not be entitled to any Annual Award or
to any Long-Term Award with respect to any Fiscal Year or Long-Term
Performance Period which has not been completed as of the date of such
termination of employment. The Participant shall forfeit any right or
interest in any award for any such Fiscal Year or Long-Term
Performance Period. Annual Awards and Long-Term Awards with respect to
Fiscal Years and Long-Term Performance Periods which ended prior to
the date of such termination of employment shall remain unaffected.
(d) For purposes of this Section 9, the term "written consent of the
Company" shall refer to an express written consent of the Company, duly
executed by the Company, which, by its own terms, expressly refers to
this Section 9 of the Plan.
Section 10. TRANSFERS AND CHANGES IN RESPONSIBILITIES. In the event
that (i) the duties of a Participant change and the Participant becomes
eligible to participate in another bonus plan of the Company, or (ii)
the duties of an employee who is a participant in another bonus plan of
the Company change and the employee is newly designated by the
Committee as a Participant in this Plan, then the maximum amount that
such Participant would be entitled to receive under the Plan shall be
(1) the Annual Award determined in accordance with the provisions of
the Plan with respect to the entire Fiscal Year in which such event
occurred; and
(2) a Long-Term Award with respect to each Long-Term Performance
Period which has commenced at the time of the event, determined in
accordance with the provisions of the Plan,
subject, in all events, to the Committee's right to adjust such awards
in accordance with and subject to the restrictions set forth in Section
6(a), in its absolute discretion, which may be exercised in such a way
that the Committee deems fair and equitable based on the performance of
Participant while participating in the other bonus plan of the Company.
Section 11. RIGHTS OF PARTICIPANTS AND BENEFICIARIES. (a) Nothing
contained in the Plan shall confer upon any Participant any right to
continue in the employ of the Company or constitute any contract or
agreement of employment or interfere in any way with the right of the
Company to terminate or change the conditions of employment.
(b) The Company shall pay all amounts payable hereunder only to the
Participant or his or her personal representatives. In the event of the
death of a Participant, payments of all amounts otherwise due to the
Participant under the Plan shall be made to the Participant's
beneficiary at the time of death under the Company Paid Life Plan of
The May Department Stores Company or to such other beneficiary as the
Participant shall have designated, in writing, for purposes of this
Plan on a form provided by the Company.
(c) Subject to the provisions of Section 11(d), rights to payments
under the Plan shall not be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, levy or
charge, and any attempt to do so shall be void; nor shall any such
amounts be in any manner liable for or subject to the debts, contracts,
liabilities, engagements or torts of the Participant or his or her
beneficiaries.
(d) Nothing in this Section 11 shall prohibit the personal
representatives of a Participant from designating that any amount that
would otherwise be distributed to the Participant's estate should be
distributed in accordance with the terms of the Participant's last will
and testament or pursuant to the laws of descent and distribution.
Section 12. UNFUNDED CHARACTER OF THE PLAN. The right of a Participant
to receive any Annual Award or Long-Term Award hereunder shall be an
unsecured claim against the general assets of the Company. Nothing in
the Plan shall require the Company to invest any amounts in Stock or in
any other medium.
Section 13. CHANGES IN CAPITAL STRUCTURE. In the event that there is
any change in the Stock through merger, consolidation, reorganization,
recapitalization, spin-off or otherwise, or if there shall be any
dividend on the Stock, payable in such Stock, or if there shall be a
stock split or combination of shares, then the fraction provided for in
Section 5(b) of the Plan shall be adjusted by the Committee as it deems
desirable, in its absolute discretion, to prevent dilution or
enlargement of the rights of Participants. The issuance of Stock for
consideration and the issuance of Stock rights shall not be considered
a change in the Company's capital structure.
Section 14. AMENDMENT OR TERMINATION. The Committee may, by resolution,
amend or terminate the Plan at any time. Any amendment necessary to
bring the Plan into compliance with Section 162(m) of the Code and any
regulations thereunder shall not require shareowner approval and the
effectiveness of such amendment shall be as of the effective date of
the provision in Section 162(m) of the Code or regulations thereunder
giving rise to the amendment. However, (i) shareowner approval shall be
sought for any changes to the Plan which would require shareowner
approval under Section 162(m) of the Code and (ii) except as provided
in the preceding sentence, the Committee may not, without the consent
of the Participant, amend or terminate the Plan in such a manner as to
affect adversely any Annual Award or Long-Term Award which would have
been payable, based on the terms of the Plan immediately prior to any
such amendment or termination, for any Fiscal Year or Long-Term
Performance Period which has already commenced as of the effective date
of the amendment or termination.
30
<PAGE> 33
DIRECTIONS TO CERVANTES CONVENTION CENTER
Washington at Eighth Street
St. Louis, Missouri
The Cervantes Convention Center is located on Washington Avenue at 8th Street,
2 blocks north of Famous-Barr. Please enter the convention center through the
Convention Plaza entrance on the east side of the building.
Parking has been reserved for you in the parking garage adjacent to the
convention center. From the garage, you may enter the convention center two
ways. You may take the stairs which connect the second level of the parking
garage with the second level of the convention center, and take the escalator
down to the first floor. Or, you may take a garage elevator to the street
level and walk outside to the Convention Plaza entrance next to the garage.
The meeting room is on the first level, immediately to your left as you enter
the convention center.
[MAP]
<PAGE> 34
MAY
The May Department Stores Company
611 Olive Street
St. Louis, MO 63101-1799
April 18, 1994
To Our Shareowners:
The annual meeting of May shareowners will be held at the Cervantes Convention
Center, Washington at Eighth Street, St. Louis, Missouri, on Friday, May 20,
1994, at 10:00 a.m. Central Daylight Time. Directions to the Cervantes
Convention Center can be found on the last page of the enclosed proxy
statement and on the reverse side of this letter.
We are pleased to have accomplished our 19th consecutive year of record
sales, earnings per share and dividends per share. We appreciate the
support of our shareowners, and we continue our efforts to enhance the
value of your investment.
The enclosed proxy statement provides you with information regarding the
meeting, the nominees for election to the Board of Directors and
proposals to be voted upon. The Company's first quarter report to
shareowners will include a report on the meeting.
It is important that your shares be represented at this meeting. Even if
you plan to attend, we encourage you to promptly sign, date and return your
proxy in the enclosed postage-paid envelope.
Very truly yours,
/s/ DAVID C. FARRELL
David C. Farrell
Chairman of the Board and
Chief Executive Officer
ADMISSION TICKET
(Please detach the proxy card below and return it in the enclosed envelope.
If you are planning to attend the annual meeting, please save this letter
and bring it to the meeting. It is your admission ticket.)
DETACH PROXY CARD HERE
- - - - - -------------------------------------------------------------------------------
<PAGE> 35
/ /
To vote your shares for all listed nominees, please mark the FOR box in item
(a). To withhold voting for all nominees, please mark the WITHHOLD box. If
you do not wish your shares voted FOR a particular nominee, please mark the
EXCEPTION box and enter the name of the exception(s) in the space provided.
- - - - - --------------------------------------------------------------------------
MANAGEMENT RECOMMENDS A VOTE FOR ITEMS (a), (b), (c) AND (d).
- - - - - --------------------------------------------------------------------------
For Withhold Exception
(a) Election of Directors
Exception(s)________________
____________________________ For Against Abstain
(b) Ratification of appointment of
independent auditors
(c) Proposal to approve the 1994
Stock Incentive Plan
(d) Proposal to approve the Exec-
utive Incentive Compensation
Plan for Corporate Executives
- - - - - --------------------------------------------------------------------------
- - - - - --------------------------------------------------------------------------
MANAGEMENT RECOMMENDS A VOTE AGAINST ITEMS (e), (f), AND (g).
- - - - - --------------------------------------------------------------------------
For Against Abstain
(e) Proposal by a shareowner concerning
a classified board
(f) Proposal by shareowners concerning
cumulative voting
(g) Proposal by a shareowner concerning
retirement plans for directors
- - - - - --------------------------------------------------------------------------
If you plan to attend the annual
meeting, please mark here.
Address change and/or comments,
please mark here.
Please sign name(s) exactly as shown on this card. If
signing in a representative capacity, please indicate.
Date:_________________________________________, 1994
____________________________________________________
____________________________________________________
Signature(s)
Please mark boxes in blue
or black ink as in the example. X
Please sign, date and return the proxy card promptly using the enclosed
envelope.
<PAGE> 36
DIRECTIONS TO CERVANTES CONVENTION CENTER
Washington at Eighth Street
St. Louis, Missouri
The Cervantes Convention Center is located on Washington Avenue at 8th Street,
2 blocks north of Famous-Barr. Please enter the convention center through the
Convention Plaza entrance on the east side of the building.
Parking has been reserved for you in the parking garage adjacent to the
convention center. From the garage, you may enter the convention center two
ways. You may take the stairs which connect the second level of the parking
garage with the second level of the convention center, and take the escalator
down to the first floor. Or, you may take a garage elevator to the street
level and walk outside to the Convention Plaza entrance next to the garage.
The meeting room is on the first level, immediately to your left as you enter
the convention center.
[MAP]
- - - - - -------------------------------------------------------------------------------
<PAGE> 37
MAY PROXY
THE MAY DEPARTMENT STORES COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING ON MAY 20, 1994.
The undersigned hereby appoints each of David C. Farrell, Louis J. Garr, Jr.,
and Richard A. Brickson, as proxy, with full power of substitution, to vote
all common shares of the undersigned in The May Department Stores Company at
the annual meeting of shareowners to be held on May 20, 1994, and at any
adjournment thereof, upon all subjects that may properly come before the
meeting, including the matters described in the proxy statement furnished
herewith, subject to the directions indicated on the reverse side of this
card. IF NO DIRECTIONS ARE GIVEN, AND THE SIGNED CARD IS RETURNED, THE
PROXIES WILL VOTE FOR THE ELECTION OF ALL LISTED DIRECTOR NOMINEES, FOR
PROPOSALS (b), (c) AND (d) AND AGAINST PROPOSALS (e), (f) AND (g), AND
IN THE PROXIES' DISCRETION ON ANY OTHER MATTER THAT MAY PROPERLY COME
BEFORE THE MEETING.
The nominees for the board of directors are Thomas A. Hays, Jerome T. Loeb,
Russell E. Palmer, Michael R. Quinlan and William P. Stiritz.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF ALL LISTED DIRECTOR
NOMINEES, FOR PROPOSALS (b), (c) AND (d) AND AGAINST PROPOSALS (e), (f) AND
(g) LISTED ON THE REVERSE SIDE OF THIS CARD.
This card also constitutes your voting instructions for any and all shares
held of record by The Bank of New York for your account in the Company's
Dividend Reinvestment Plan.
Please sign on the reverse side of this card and return it promptly in the
enclosed return envelope to The Bank of New York, Proxy Department, New York,
NY 10203-0002.
<PAGE> 38
MAY
The May Department Stores Company
611 Olive Street
St. Louis, MO 63101-1799
April 18, 1994
Dear Fellow Member of the Profit Sharing Plan:
Enclosed please find the Company's 1993 Annual Report to Shareowners which
summarizes a year of strong performance for May. We are pleased to have
accomplished our 19th consecutive year of record sales, earnings per share
and dividends per share. I appreciate your superb effort throughout the year
which contributed to these accomplishments.
In this year's annual report, we salute our associates and their commitment to
treating the customer right, featuring (on pages 10 and 11) several associates
who represent the thousands of May associates whose performance has changed
the way our customers feel about our stores.
Also enclosed are the proxy statement for the 1994 Annual Meeting, a
confidential voting instruction card and a return envelope. It is important
that you vote. Management's recommendations on each issue and the reasons
for the recommendations are described in the proxy statement. I encourage
you to read it carefully.
Please complete, sign and return the confidential voting instruction card.
When the Profit Sharing Plan trustee (The Bank of New York) votes the shares
of May common stock owned by the Plan, it will follow your instructions.
Your voting instructions are confidential; the trustee cannot disclose your
instructions.
Again, I appreciate the tremendous effort made by each of you.
Very truly yours,
/s/ DAVID C. FARRELL
David C. Farrell
Chairman of the Board and
Chief Executive Officer
DETACH VOTING INSTRUCTION CARD HERE
- - - - - -------------------------------------------------------------------------------
<PAGE> 39
/ /
To vote your shares for all listed nominees, please mark the FOR box in item
(a). To withhold voting for all nominees, please mark the WITHHOLD box. If you
do not wish your shares voted FOR a particular nominee, please mark the
EXCEPTION box and enter the name of the exception(s) in the space provided.
- - - - - --------------------------------------------------------------------------
MANAGEMENT RECOMMENDS A VOTE FOR ITEMS (a), (b), (c) AND (d).
- - - - - --------------------------------------------------------------------------
For Withhold Exception
(a) Election of Directors
Exception(s)____________________
________________________________ For Against Abstain
(b) Ratification of appointment of
independent auditors
(c) Proposal to approve the 1994
Stock Incentive Plan
(d) Proposal to approve the Exec-
utive Incentive Compensation
Plan for Corporate Executives
- - - - - --------------------------------------------------------------------------
- - - - - --------------------------------------------------------------------------
MANAGEMENT RECOMMENDS A VOTE AGAINST ITEMS (e), (f) AND (g).
- - - - - --------------------------------------------------------------------------
For Against Abstain
(e) Proposal by a shareowner concerning
a classified board
(f) Proposal by shareowners concerning
cumulative voting
(g) Proposal by a shareowner concerning
retirement plans for directors
- - - - - --------------------------------------------------------------------------
Please sign name(s) exactly as shown on this card.
Date:_____________________________________, 1994
________________________________________________
________________________________________________
Signature(s)
Please mark boxes in blue
or black ink as in the example. X
PLEASE SIGN, DATE AND RETURN THE VOTING INSTRUCTION CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
<PAGE> 40
CONFIDENTIAL VOTING INSTRUCTIONS TO
THE BANK OF NEW YORK AS TRUSTEE UNDER
MAY THE MAY DEPARTMENT STORES COMPANY PROFIT SHARING PLAN
I hereby instruct the Trustee to vote all shares of common stock of
The May Department Stores Company represented by units credited to my account
in the May Common Stock Fund of the Profit Sharing Plan and all shares of ESOP
Preference Shares of the Company credited to my account in the ESOP Preference
Fund in the Profit Sharing Plan, all as of January 31, 1994 (the latest
practicable Valuation Date), at the annual meeting of shareowners to be held
on May 20, 1994, and at any adjournment thereof, upon all subjects that may
properly come before the meeting, including the matters described in the proxy
statement furnished herewith, subject to the directions indicated on the
reverse side of this card. IF NO DIRECTIONS ARE GIVEN, AND THE SIGNED CARD IS
RETURNED, THE TRUSTEE WILL VOTE FOR THE ELECTION OF ALL LISTED DIRECTOR
NOMINEES, FOR PROPOSALS (b), (c) AND (d) AND AGAINST PROPOSALS (e), (f) AND
(g), AND IN ITS DISCRETION ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE
THE MEETING. IF THIS CARD IS NOT RECEIVED BY THE TRUSTEE ON OR BEFORE MAY 13,
1994, THE TRUSTEE WILL VOTE SUCH SHARES IN THE SAME PROPORTION AS THE OTHER
SHARES HELD BY THE TRUSTEE ARE VOTED PURSUANT TO INSTRUCTIONS RECEIVED FROM
OTHER PARTICIPANTS IN THE PROFIT SHARING PLAN.
The nominees for the board of directors are Thomas A. Hays, Jerome T. Loeb,
Russell E. Palmer, Michael R. Quinlan and William P. Stiritz.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF ALL LISTED DIRECTOR
NOMINEES, FOR PROPOSALS (b), (c) AND (d) AND AGAINST PROPOSALS (e), (f) AND
(g) LISTED ON THE REVERSE SIDE OF THIS CARD.
Please sign on the reverse side of this card and return it promptly in the
enclosed return envelope to The Bank of New York, Proxy Department, New York,
NY 10203-0002.
(Continued, and please sign on reverse side.)
<PAGE> 41
APPENDIX
1. On pages 1 through 3 of the proxy statement, the space to
the left of each director's biography contains a
photograph of the respective director.
2. Page eight of the proxy statement contains a Comparison of
5-Year Cumulative Return Graph. The information in that
graph is depicted in the table that immediately follows the
graph.
3. The back cover of the proxy statement and the letter to
shareowners contains a map with directions to Cervantes Convention.
