<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
X Filed by the registrant
__ Filed by a party other than the registrant
Preliminary proxy statement
X Definitive proxy statement
__ Definitive additional materials
__ Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
McDonnell Douglas Corporation
- -----------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Steven N. Frank
- -----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
__ $125 per Exchange Act Rule 0-11(c)(l)(ii), 14a-6(i)(l), or 14a-6(j)(2).
__ $500 per each party to 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:
- -----------------------------------------------------------------------
X 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:
$125.00
- -----------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
Preliminary 1994 Proxy Statement, PRE 14A
- -----------------------------------------------------------------------
(3) Filing party:
McDonnell Douglas Corporation, St. Louis, Missouri
- -----------------------------------------------------------------------
(4) Date filed:
March 4, 1994
- -----------------------------------------------------------------------
<PAGE> 1 HARD COPY PG. 1
MCDONNELL DOUGLAS
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held Friday, April 22, 1994
TO THE SHAREHOLDERS OF MCDONNELL DOUGLAS CORPORATION
The Annual Meeting of Shareholders of McDonnell Douglas Corporation
(MDC, Company) will be held at nine o'clock on the morning of Friday,
April 22, 1994, at MDC's Engineering Campus Auditorium (Bldg. 33) at
Lindbergh Blvd. and McDonnell Blvd., in St. Louis County, Missouri.
The purpose of the meeting is to consider and vote upon:
1. The election of five directors (page 2).
2. A proposal to approve the 1994 Performance and Equity Incentive
Plan (page 21).
3. A proposal to amend and restate MDC's Charter to increase the
number of authroized shares of common stock from 100,000,000 to
200,000,000 shares (page 28).
4. A proposal to reapprove the continuation of the MDC Salaried
Employees' Savings Plan (page 30).
5. Ratification of the appointment of Ernst & Young as independent
auditors for 1994 (page 33).
6. A shareholder proposal regarding conversion of assets to
commercial use (page 33).
7. A shareholder proposal regarding the composition of the Nominating
Committee (page 36).
8. Such other matters as may properly come before the meeting.
Shareholders of record at the close of business on March 4, 1994 will
be entitled to receive notice of and to vote at the meeting and any
adjournments thereof. The Annual Report for the year ended December 31,
1993 was mailed to such shareholders on March 18, 1994.
Shareholders are cordially invited to attend the meeting. If you are a
shareholder of record and plan to attend, please mark the appropriate
box on the enclosed proxy card. If you are a shareholder whose shares
are registered with a bank, brokerage firm, or other record holder and
you plan to attend the meeting, please request an Admission Card by
writing to MDC - Shareholder Services, Mail Code 1001240, at the address
noted below. Evidence of your stock ownership, which you can obtain from
your bank, stockbroker, or other record holder, must accompany your
letter. To assure timely processing of your request, please mail your
request for MDC's receipt by April 15, 1994. An admittance card in
your name will be mailed to you promptly. Shareholders who do not
have tickets may register at the door.
Whether or not you expect to attend the meeting, the Board of
Directors urges you to sign, date, and return the enclosed proxy in the
envelope provided at your earliest convenience.
By order of the Board of Directors
F. MARK KUHLMANN
Secretary
P.O. Box 516
St. Louis, Missouri 63166-0516
(314) 232-0232 TELEX 44-857
March 18, 1994
<PAGE> 2 HARD COPY PG. 2
MCDONNELL DOUGLAS
P.O. Box 516, St. Louis, Missouri 63166-0516
PROXY STATEMENT
Annual Meeting of Shareholders, Friday, April 22, 1994
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of MDC for use at the Annual
Meeting of Shareholders of MDC to be held on Friday, April 22, 1994 at
9:00 a.m., St. Louis time, at MDC's Engineering Campus Auditorium
(Bldg. 33) at Lindbergh Blvd. and McDonnell Blvd., in St. Louis County,
Missouri, and at all adjournments thereof, for the purposes set forth
in the accompanying Notice of Annual Meeting of Shareholders. The
approximate mailing date of the form of proxy and Proxy Statement is
expected to be March 18, 1994. Each holder of record of MDC common
stock (MDC Stock) at the close of business on March 4, 1994 will be
entitled to one vote for each share so held. There were 39,353,008
shares of MDC Stock outstanding on that date.
The presence at the meeting in person or by proxy of holders of a
majority of the outstanding shares is necessary to constitute a quorum
for the conduct of business. Shares represented by each duly signed
proxy will be voted as directed by the shareholder on the reverse side
of the proxy and, if no direction is given, such shares will be voted
FOR proposals 1 through 5 and AGAINST proposals 6 and 7 described in
this Proxy Statement. Unless otherwise indicated, proxies marked
"abstain" will be treated as present for purposes of determining a
quorum for the meeting, but will not be counted as voting in respect of
any matter as to which abstention is indicated. Proxies returned by
brokers as "non-votes" on behalf of shares held in street name because
beneficial owners' discretion has been withheld as to one or more
matters on the agenda for the meeting will not be treated as present
for purposes of determining a quorum for the meeting unless they are
voted by the broker on at least one matter on the agenda. Unless other-
wise indicated, such non-voted shares will not be counted for any purpose
as to the matters for which non-vote is indicated on the broker's proxy.
1. ELECTION OF FIVE DIRECTORS
The Company's Bylaws provide that the number of directors shall be
thirteen and may be increased or decreased upon an affirmative vote of
not less than 80% of the entire Board but shall never be less than
three. In accordance with the Bylaws, the number of directors of the
Company remains thirteen. One of the Company's directors, General
Roscoe Robinson, passed away in July 1993. Gerald A. Johnston, having
elected early retirement as an employee of the Company, will resign
from the Board on March 31, 1994. In accordance with director
retirement procedures, Julian B. Goodman and Sanford N. McDonnell, who
have reached age 71, will retire from the Board at the 1994 Annual
Meeting of Shareholders.
Five directors are to be elected at the Annual Meeting. The
affirmative vote of a plurality of all the votes cast at a
<PAGE> 3
meeting at which a quorum is present is required for the election
of each nominee. The nominees for directors are William H.
Danforth, M.D., Kenneth M. Duberstein, John F. McDonnell,
HARD COPY PG. 3
all of whom are incumbents; Beverly B. Byron, who became a
director on January 11, 1994; and Ronald L. Thompson, a new nominee.
The Board recommends that the nominees be elected for terms ending in
1997 and until their respective successors have been elected and
qualify. After the election, two Board seats in the class of
directors whose terms expire in 1995 will remain vacant. Pursuant to
the Company's Charter, a majority of the directors in office may fill
any vacancy that occurs for any cause other than an increase in the
number of directors. As of the date of mailing of this proxy
statement, the Board has not determined whom to propose as additional
directors, but is in the process of identifying candidates. Proxies
may not be voted for a greater number of persons than the number of
nominees named.
The Board of Directors does not contemplate that any of the nominees
will be unable to stand for election, but should any nominee become
unavailable for election, all proxies (except proxies marked to the
contrary) will be voted for the election of a substitute nominee
nominated by the Board of Directors.
MDC's Charter provides for division of the directors into three
classes, each of which must consist, as nearly as possible, of one-
third of the total number of directors. The principal occupations,
directorships held and other information as of January 31, 1994 with
respect to the nominees and all directors whose terms will continue
after the Annual Meeting are shown on the following table.
To Be Elected for Terms Ending in 1997
- ------------------------------------------------------------------------
Beverly B. Byron Director since 1994 Age 61
Photograph of Former Congressional Representative, Maryland's Sixth
B. B. Byron District in the House of Representatives from 1978
until 1992. From 1992 to mid 1993 appointed to the
eight-member Defense Base Closure and Realignment
Commission. Director of Baltimore Gas and Electric
Company and UNC Incorporated.
- --------------------------------------------------------------------------
William H. Danforth, M.D. Director since 1976 Age 67
Photograph of Chancellor of Washington University, St. Louis, since
W. H. Danforth 1971. Director of Ralston Purina Company.
<PAGE> 4
- -------------------------------------------------------------------------
Kenneth M. Duberstein Director since 1989 Age 49
Photogaph of Chairman and Chief Executive Officer of The Duberstein
K. M. Duberstein Group, Inc. (consulting firm) since July 1989. White
House Chief of Staff 1988-1989. Director of PSI
Resources, Inc.
- -------------------------------------------------------------------------
HARD COPY PG. 4
To Be Elected for Terms Ending in 1997 (cont.)
- --------------------------------------------------------------------------
John F. McDonnell (1) Director since 1973 Age 55
Photograph of MDC Chairman and Chief Executive Officer since March 1988.
J. F. McDonnell Director of Ralston Purina Company. Deputy Chairman of
the Board of The Federal Reserve Bank of St. Louis.
- --------------------------------------------------------------------------
Ronald L. Thompson New Nominee Age 44
Photograph of Chairman and Chief Executive Officer of GR Group,
R. L. Thompson Incorporated (manufacturer of assemblies) since 1980.
Chairman and Chief Executive Officer of Midwest
Stamping Company (automotive parts supplier) since
1993. Director of Illinois Power Company.
- ---------------------------------------------------------------------------
To Continue in Office Until 1996
- ---------------------------------------------------------------------------
B.A. (Dolph) Bridgewater, Jr. Director since 1985 Age 59
Photograph of Chairman and Chief Executive Officer of Brown Group, Inc.
B.A. Bridgewater (footwear and speciality retailing) since 1985, President
1979-1987 and since January 1990. Director of Boatmen's
Bancshares, Inc., ENSERCH Corporation and FMC Corporation.
- ---------------------------------------------------------------------------
William E. Cornelius Director since 1986 Age 62
Photograph of Chairman and Chief Executive Officer of Union Electric
W. E. Cornelius Company (electric utility) for more than four years
until his retirement in December 1993, President and Chief
Executive Officer 1984-1988. Director of Boatmen's
Bancshares, Inc., General American Life Insurance Company,
GenCare Health Services, Inc., and Union Electric Company.
- ----------------------------------------------------------------------------
William S. Kanaga Director since 1987 Age 68
Photograph of Chairman of the public accounting firm of Arthur Young &
W. S. Kanaga Company for more than five years prior to his retirement
in 1985. Director of Value Line, Inc.
<PAGE> 5 HARD COPY PG. 5
To Continue in Office Until 1996 (cont.)
- ----------------------------------------------------------------------------
George A. Schaefer Director since 1990 Age 65
Photograph of Chairman and Chief Executive Officer of Caterpillar, Inc.
G. A. Schaefer (manufactuer of machinery) for more than five years prior
to his retirement in 1990. Director of Helmerich & Payne,
Inc., Caterpillar, Inc., Aon Corporation and Morton
International, Inc.
- -----------------------------------------------------------------------------
To Continue in Office Until 1995
- -----------------------------------------------------------------------------
John H. Biggs Director since 1989 Age 57
Photograph of Chairman and Chief Executive Officer of Teachers Insurance
J. H. Biggs & Annuity Association of America and of College
Retirement Equities Fund (TIAA/CREF) (national teachers'
pension fund) since January 1993. President and Chief
Operating Officer of TIAA/CREF from January 1989 to
January 1993. Chairman and Chief Executive Officer
of Centerre Trust Co. of St. Louis 1988-1989, President
and Chief Executive Officer 1985-1988. Trustee of
TIAA/CREF. Director of Ralston Purina Company.
- ----------------------------------------------------------------------------
James S. McDonnell III(1) Director since 1975 Age 58
Photograph of MDC Vice President for more than five years prior to his
J.S. McDonnell retirement in January 1991. Director of Boatmen's Trust
Company.
- -----------------------------------------------------------------------------
(1) S. N. McDonnell is the cousin of J. S. McDonnell III and J. F.
McDonnell, who are brothers.
Julian B. Goodman was the Chairman and Chief Executive Officer of
National Broadcasting Company, Inc. (national television network) for
more than five years prior to his retirement in 1979. Sanford N.
McDonnell has served as MDC Chairman Emeritus since March 1988 and as
MDC Chairman and Chief Executive Officer from 1980 until his
retirement in March 1988.
THE BOARD AND ITS COMMITTEES HARD COPY PG. 6
The Board of Directors held six regularly scheduled meetings and two
telephonic meetings during 1993. Each incumbent director attended
87.5% or more of the aggregate of all Board meetings and meetings of
committees of the Board of which the director was a member. The
committees of the Board are the Audit Committee, the Corporate
Responsibility Committee, the Executive Committee, the Management
Compensation and Succession Committee, and the Nominating Committee.
<PAGE> 6
Audit Committee
The Audit Committee consists of W. S. Kanaga (Chairman), J. H. Biggs,
B. B. Byron (effective January 29, 1994) and W. E. Cornelius. In
accordance with MDC's Bylaws, each of these committee members is
independent of management and free from any relationships that, in the
opinion of the Board, would interfere with the exercise of independent
judgment. This committee oversees MDC's financial reporting on behalf
of the Board of Directors; recommends to the Board of Directors and the
shareholders the independent auditors to perform the annual audit;
reviews with the independent auditors the proposed scope of, fees for,
and the results of the annual audit; reviews with the independent
auditors, the internal auditors, and MDC management the financial
reporting process, the system of internal controls, and the scope and
results of independent and internal audits; considers the audit and non-
audit services provided by the independent auditors, the proposed fees
to be charged for each type of service, and the effect of non-audit
services on the independence of the independent auditors; meets
periodically with MDC's head of Internal Auditing and the independent
auditors, without management present, to facilitate private
communication on any subjects desired; and performs such other tasks as
may be assigned to it from time to time by the Board. The committee
met four times in 1993. Mr. Goodman and General Robinson served on
this committee during 1993.
Corporate Responsibility Committee
The Corporate Responsibility Committee consists of J. B. Goodman
(Chairman), B. B. Byron (effective January 29, 1994), K. M. Duberstein,
J. S. McDonnell III and S. N. McDonnell. This committee considers
MDC's position on issues of corporate responsibility. The committee
monitors and provides suggestions concerning MDC's programs for
defining and implementing Standards of Ethics and Conduct, ethics
training programs and related documents, and monitors and provides
suggestions relative to environmental, worker health and safety, and
other public issues of significance in these areas. The committee met
two times in 1993. During 1993, General Robinson was a member of this
committee. After J. B. Goodman and S. N. McDonnell retire from the
Board at the 1994 Annual Meeting of Shareholders, K. M. Duberstein will
become Chairman of this committee.
Executive Committee
The Executive Committee consists of S. N. McDonnell (Chairman),
B. A. Bridgewater, Jr., W. E. Cornelius, W. H. Danforth and J. F.
McDonnell. This committee has been delegated authority to exercise all
powers of the Board in the intervals between meetings of the Board of
<PAGE> 7 HARD COPY PG. 7
Directors, except those powers delegated to other Board committees, and
those which by statute, Charter, or Bylaws are reserved to the full
Board. The committee met four times in 1993. After S. N. McDonnell
retires from the Board at the 1994 Annual Meeting of Shareholders, J.
F. McDonnell will become Chairman of this committee.
Management Compensation and Succession Committee
The Management Compensation and Succession Committee consists of B. A.
Bridgewater, Jr. (Chairman), J. H. Biggs, W. S. Kanaga and G. A.
Schaefer. This committee monitors executive evaluation and
development; recommends the staffing of senior positions; recommends to
the full Board CEO succession; and has full power to administer the
Company's executive compensation plans. Members of the committee are
ineligible to participate in these plans. The committee is composed
exclusively of directors who are not employees or former employees of
the Company. The committee met six times in 1993.
Nominating Committee
The Nominating Committee consists of W. H. Danforth (Chairman), K. M.
Duberstein, J. B. Goodman and G. A. Schaefer. In accordance with MDC's
Bylaws, each of these committee members is independent of management
and free from any relationships that, in the opinion of the Board,
would interfere with the exercise of independent judgment. The
committee proposes to the Board nominees for directors of MDC and
members and chairmen of committees of the Board. It also makes
recommendations to the Board concerning the structure, size,
composition, and operation of the Board and its committees, and the
qualification, compensation, and retirement policy of directors. The
committee also recommends nominees to the boards of directors of MDC's
principal wholly-owned subsidiaries. The Nominating Committee will
consider recommendations for directors by shareholders who write to F.
Mark Kuhlmann, Secretary, providing the name and a detailed biography
of each prospective nominee. The committee met three times in 1993.
Compensation Paid to Board Members
Directors who are not corporate officers of MDC are each paid an annual
retainer of $20,000, an attendance fee of $2,000 plus expenses for each
regular and special meeting of the Board held during normal business
hours, and $500 plus expenses for each dinner meeting. In addition,
the chairman of each committee is paid a quarterly retainer of $750,
other members of each of the committees are paid a quarterly retainer
of $250, and committee chairmen and committee members are paid $800
plus expenses for each committee meeting attended. Corporate officers
receive no remuneration for service as a director or as a member or
chairman of a committee.
<PAGE> 8
Non-employee directors also participate in the Deferred Compensation
Plan for Non-Employee Directors (the "Non-Employee Director Plan").
The Non-Employee Director Plan allows members of the Board who are not
employed by the Company to elect to receive, as an addition to their
annual retainer, 100 shares of MDC Stock or an equivalent amount of
cash. Both the stock and the cash are subject to restrictions on
transfer and neither will vest until the director becomes disabled,
resigns due to a conflict of interest, dies or retires from the Board
in accordance with requirements established by the Board.
HARD COPY PG. 8
Nonvested restricted shares and cash awarded under the Non-Employee
Director Plan are held by the Treasurer of the Company. Directors who
elect to receive MDC Stock under the Non-Employee Director Plan will
receive dividends on and exercise voting rights with respect to the
restricted shares. Directors who elect to receive cash under the Non-
Employee Director Plan will not receive interest. Annual awards under
the Non-Employee Director Plan will be paid within 60 days after each
Annual Meeting of Shareholders.
In April 1992, MDC entered into a consulting agreement with Kenneth M.
Duberstein to provide certain services in regard to an analysis of the
disposition, by settlement or through litigation, of a matter involving
MDC. Mr. Duberstein is paid a quarterly retainer of $20,000 and is
reimbursed for expenses incurred on behalf of MDC. Effective June
1993, the consulting agreement was amended to expand the scope of Mr.
Duberstein's services to include an additional matter. The amendment
provides that his consulting fee for such additional services is
$10,000 per month for the period of June 1993 through March 1994 and,
thereafter, $10,000 for any month in which MDC notifies Mr. Duberstein
that it requires his consulting services during that month.
HARD COPY PG. 9
OWNERSHIP OF MDC STOCK
The following table shows the beneficial ownership of MDC Stock as of
January 31, 1994 by each director, each nominee, the Chief Executive
Officer, the four other most highly compensated executive officers, all
directors, nominees and executive officers of MDC as a group, and each
person MDC believes holds more than 5% of the outstanding MDC Stock.
<PAGE> 9
<TABLE>
<CAPTION>
Number of Shares Percent of
Name Beneficially MDC Common
Owned Stock Outstanding
(1)
- ------------------------------------------------------------------------
<S> <C> <C>
John H. Biggs 2,600 (2) (3)
B. A. (Dolph) Bridgewater, Jr. 2,100 (4) (3)
Beverly B. Byron 200 (2) (3)
John P. Capellupo 2,935 (2) (3)
William E. Cornelius 2,600 (2) (3)
William H. Danforth, M.D. 1,870 (2) (3)
Kenneth M. Duberstein 600 (2) (3)
Julian B. Goodman 1,100 (2) (3)
Robert H. Hood, Jr. 652 (2) (3)
Gerald A. Johnston 10,057 (5) .03%
Herbert J. Lanese 2,128 (2) (3)
William S. Kanaga 2,100 (4) (3)
James S. McDonnell III 1,282,340 (6)(7) 3.26%
John F. McDonnell 1,309,283 (2)(7) 3.33%
Sanford N. McDonnell 4,443 (2) .01%
George A. Schaefer 1,100 (2) (3)
Ronald L. Thompson 0 ---
All directors, nominees and
executive officers as a group
(27 persons) 2,646,223 (7)(8) 6.73%
The Chase Manhattan Bank, N.A. 7,690,281 (9) 19.55%
Oppenheimer Group, Inc. 1,977,163 (10) 5.03%
- ---------------------------------
<FN>
(1) Rounded to nearest 1/100th of one percent.
(2) Shares as to which the director or executive officer has sole voting
and dispositive power.
(3) Less than 1/100th of one percent.
HARD COPY PG. 10
(4) The director has sole voting and dispositive power for 100 shares.
The remaining shares are held as joint tenant for which there is shared
voting and/or dispositive power.
(5) G. A. Johnston has sole voting and dispositive power for 6,181
shares. The remaining shares are held as joint tenant for which there
is shared voting and/or dispositive power.
(6) J. S. McDonnell III has sole voting and dispositive power for
1,275,682 shares. The remaining shares are held as a Co-Trustee for
which there is shared voting and/or dispositive power.
<PAGE> 10
(7) Excludes an additional 2,508,214 shares held by the James S.
McDonnell Foundation and James S. McDonnell Charitable Trusts A and B,
over which J. S. McDonnell III, 7701 Forsyth Blvd., St. Louis,
Missouri 63105, and J. F. McDonnell, P. O. Box 516, St. Louis,
Missouri 63166-0516 have shared voting and dispositive power and each
is deemed to be the beneficial owner of such shares. Taking into
account these shares, J. S. McDonnell III, J. F. McDonnell, and all
directors, nominees and executive officers as a group beneficially own
9.64%, 9.71%, and 13.10%, respectively, of the MDC Stock outstanding.
(8) Includes shares as to which a director or executive officer has
sole or shared voting or dispositive power.
(9) Shares held of record by The Chase Manhattan Bank, N.A., Chase
Manhattan Center, Brooklyn, New York 11245, as Trustee under the
Employee Savings, Investment and Thrift Plans and the Employee Payroll
Stock Ownership Plan (PAYSOP) of MDC. The Trustee has dispositive
power for these shares to the extent necessary to follow valid
instructions from participants regarding withdrawals, transfers or
loans from such plans. Participants in each of these plans other than
the PAYSOP may direct the Trustee how to vote his or her proportionate
share of these shares. Shares for which the Trustee does not receive
voting instructions on any issue or proposal will be voted for, against
or in abstention in the same proportions as MDC Stock for which the
Trustee receives voting instructions.
(10) Based on Schedule 13G dated February 1, 1994, shares held of
record by Oppenheimer Group, Inc. ("Group"), Oppenheimer Tower, World
Financial Center, New York, New York 10281 as a parent holding company
on behalf of Oppenheimer LP and Group's subsidiary companies and/or
certain investment advisory clients or discretionary accounts of such
subsidiaries. Oppenheimer Group, Inc. has shared dispositive and
voting power with respect to all such Shares.
</TABLE>
EXECUTIVE COMPENSATION HARD COPY PG. 11
The tables below provide information concerning the annual and long-
term compensation for services rendered to MDC of those persons who at
December 31, 1993 were (i) the Chief Executive Officer, and (ii) the
other four most highly compensated executive officers of MDC based on
salary and bonuses for 1993 (the Named Officers).
<PAGE> 11
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
------------------------------------------------
(1) (2) (2)(3)
Name and Principal Other Annual Total Annual All Other
Position Year Salary Bonus Compensation Compensation Compensation
- -----------------------------------------------------------------------------------------------------
<S> <C> C> <C> <C> <C> <C>
J. F. McDonnell 1993 $559,477 $495,100 $ --- $1,054,577 $33,569
Chairman and Chief 1992 501,166 184,400 --- 685,566 29,819
Executive Office 1991 414,769 436,000 850,769
G. A. Johnston 1993 500,516 439,600 --- 940,116 30,042
President and Chief 1992 446,896 155,700 --- 602,596 26,593
Operating Officer 1991 365,119 364,000 729,119
J. P. Capellupo 1993 319,496 300,000 1,665 621,161 17,670
Executive Vice 1992 273,474 120,200 727 394,401 16,279
President 1991 229,323(4) 256,475(5) 485,798
R. H. Hood, Jr. 1993 352,942(4) 261,600 2,523 617,065 9,116
President - Douglas 1992 326,857(4) 85,800 1,274 413,931 12,577
Aircraft Company 1991 276,058(4) 190,000 466,058
H. J. Lanese 1993 339,150 277,300 --- 616,450 20,359
Executive Vice 1992 298,108 125,000 --- 423,108 17,751
President and Chief 1991 244,289 269,000 513,289
Financial Officer
- ------------------------------
<FN>
(1) Incentive compensation awards granted pursuant to MDC's Incentive
Compensation Program are paid during the first three months of the year
following the year to which such compensation relates. For example,
1993 includes those earned incentive compensation awards paid in 1994
for services rendered in 1993, all of which were paid in the form of cash.
(2) The Named Officers received certain perquisites, none of which
exceeded the lesser of $50,000 or 10% of such officer's salary and
bonus. In accordance with the transitional provisions of the revised
rules on executive officer and director compensation disclosure adopted
by the Securities and Exchange Commission (SEC), amounts of Other
Annual Compensation and All Other Compensation are excluded for 1991.
(3) Includes amounts contributed by MDC on behalf of the Named Officer
under the Employee Savings Plan of McDonnell Douglas Corporation -
Salaried Plan (Savings Plan) and the MDC Supplemental Executive Savings
Plan (SESP). The SESP provides benefits which are not available to the
HARD COPY PG. 12
employees under the Savings Plan because of Internal Revenue Code
limitations on annual compensation that may be considered for
determining contributions to the Savings Plan.
<PAGE> 12
(4) Salary includes area and mortgage differentials for the following
persons in the amounts indicated: J. P. Capellupo - 1991: $15,693; R.
H. Hood, Jr. - 1991: $46,289; 1992: $44,845; 1993: $34,588.
(5) Includes assignment pay (relating to Mr. Capellupo's relocation to
St. Louis) in the amount of $32,475 in 1991.
</TABLE>
Option Fiscal Year-End Values
- ------------------------------
None of the Named Officers were granted any stock options or stock
appreciation rights (SARs) during 1993 or exercised any stock options
during 1993 or held any stock options at December 31, 1993. The
following table provides information with respect to SARs exercised
during 1993 and unexercised SARs previously granted to the Named
Officers under the Incentive Compensation Program of the MDC Incentive
Award Plan which were outstanding on December 31, 1993.
<TABLE>
<CAPTION>
AGGREGATED SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END SAR VALUES
- ---------------------------------------------------------------------------------------------------
No. of Shares Number of Unexercised Value of Unexercised
of MDC Stock Cash SARs at In-the-Money Cash SARs at
Underlying December 31, 1993 December 31, 1993 (2)
Cash SARs Value ------------------------------------------------------
Name Exercised Realized(1) Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
J. F. McDonnell -- -- -- -- -- --
G. A. Johnston 33,004 $1,635,475 2,718 -- $46,886 --
J. P. Capellupo -- -- -- -- -- --
R. H. Hood, Jr. 4,464 $122,760 -- -- -- --
H. J. Lanese 11,892 $606,492 -- -- -- --
- ----------------------------------
<FN>
(1) Represents the difference between the closing price of MDC Stock
on the date of exercise and the exercise price of the SARs.
(2) Represents the difference between the closing price of MDC Stock
on December 31, 1993 and the exercise price of the cash SARs. Under
the Incentive Compensation Program, an employee who elects to receive
an incentive compensation award in SARs rather than cash has the right,
upon expiration of the SARs, to receive the same number of shares of
MDC Stock he or she would have received but for the election to receive
SARs.
</TABLE>
<PAGE> 13 HARD COPY PG. 13
Long-Term Incentive Plan Awards
- -------------------------------
The following table provides information concerning awards made during
1993 to the Named Officers under the Long-Term Incentive Program (LTIP)
of the MDC Incentive Award Plan.
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
- ------------------------------------------------------------------------------
Estimated Future Payouts
Under Non-Stock
Price-Based Plans (2)
-----------------------------
Number of Performance Period
Name Performance Shares(1) Until Payout(1) Threshold # Maximum #
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
J. F. McDonnell 12,000 1993-1996 600 12,000
G. A. Johnston 10,000 1993-1996 500 10,000
J. P. Capellupo 6,000 1993-1996 300 6,000
R. H. Hood, Jr. 6,000 1993-1996 300 6,000
H. J. Lanese 6,000 1993-1996 300 6,000
- -----------------------------
<FN>
(1) Performance Shares represent the right to receive a share of MDC
Stock or the cash value thereof determined based on the average of the
composite closing price for MDC Stock as reported in The Wall Street
Journal (the Closing Market Price) for each of the last 10 trading days
of the Performance Period. The Performance Period begins on February
26, 1993 and ends on February 28, 1996.
(2) There is no LTIP payout unless the total return on MDC Stock
during the Performance Period (change in market price plus cash
dividends which are assumed to be reinvested) (the MDC Stock Return)
exceeds the average of the total return on the common stock of a group
of peer companies during the Performance Period (calculated on the same
basis) (the Peer Group Stock Return). The amount of any LTIP payout
depends upon the extent to which the MDC Stock Return exceeds the Peer
Group Stock Return. If the MDC Stock Return exceeds the Peer Group
Stock Return, a participant in LTIP will receive a minimum of 5% (or
such other percentage as the Management Compensation and Succession
Committee determines) of the Performance Shares awarded; the maximum
payout is the number of Performance Shares granted.
</TABLE>
Retirement Income Plans
- ------------------------
Substantially all employees of MDC and its subsidiaries participate in
one of the various retirement plans maintained by MDC and its
subsidiaries. All executive officers participate in MDC's Retirement
Income Plan for Salaried Employees (Retirement Plan), which is a
qualified defined benefit pension plan.
<PAGE> 14
The following table shows the annual benefit payable under the
Retirement Plan for the life of the retiree and with no payments
thereafter to a survivor, upon retirement at age 65, for employees in
the salary classifications and with the years of service under the
HARD COPY PG. 14
Retirement Plan as specified. The present maximum annual Primary
Insurance Amount (PIA) Social Security benefit that was used in
computing the offset included in the benefits set forth in the table is
$13,512. The benefits set out in the table are payable from the
Retirement Plan to the limits permitted under the Internal Revenue Code
of 1986, as amended; thereafter, any additional benefit will be paid
under the Supplemental Employee Retirement Income Plan (SERIP).
<TABLE>
<CAPTION>
PENSION PLAN TABLE
Assumed Final
5-Year Average
Annual Compensation Estimated Annual Retirement Benefits for Years of Service Indicated
- --------------------------------------------------------------------------------------------------
15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$300,000 $ 64,460 $ 85,946 $107,433 $128,920 $150,744 $173,244
500,000 109,460 145,946 182,433 218,920 255,744 293,244
800,000 176,960 235,946 294,933 353,920 413,244 473,244
1,200,000 266,960 355,946 444,933 533,920 623,244 713,244
</TABLE>
Employer contributions to the Retirement Plan are on an aggregate basis
with no separate identity as to amounts paid or set aside with respect
to individuals. Generally, subject to certain exceptions and technical
definitions, the formula under the Retirement Plan for computing
monthly benefits payable at normal retirement (age 65) for the life of
the retiree and with no payments thereafter to a survivor is: 1.5% of
an employee's highest average monthly salary for five consecutive years
of the employee's last ten years of service multiplied by years of
employment while covered by the Retirement Plan, minus 1.5% of monthly
PIA Social Security benefits multiplied by up to a maximum of 33-1/3
years of employment while covered by the Retirement Plan. Salary covered
by the Retirement Plan generally includes regular base salary, certain
commissions, and awards made under the Incentive Compensation Program.
Compensation reported in the table on page 11 includes compensation
not covered by the Retirement Plan. As of November 28, 1993 (end of
Retirement Plan year), compensation covered by the Retirement Plan and
the SERIP for 1993 for each individual listed in the table on page 11 and,
parenthetically, the current five-year average annual compensation and
the current number of years of salaried employment under the
Retirement Plan for each such individual, was as follows: J. F.
McDonnell - $739,213 ($728,653; 32 years); G. A. Johnston - $652,014
($627,097; 37 years); H. J. Lanese - $461,570 ($448,695; 4 years); J.
P. Capellupo - $437,244 ($356,355; 33 years); R. H. Hood, Jr. -
$401,349 ($375,661; 20 years).
<PAGE> 15 HARD COPY PG. 15
MANAGEMENT COMPENSATION AND SUCCESSION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Philosophy
Under the direction of the Committee, MDC has developed and
implemented compensation policies, plans, and programs designed to
attract, motivate, reward and retain key management, technical and
professional employees who contribute to the success of MDC; and
closely link management compensation and equity ownership opportunity
to Company performance and enhancement of shareholder value.
In developing compensation plans and setting compensation levels, the
Committee has examined compensation and plans offered by other Fortune
100 companies, including companies in the S & P Aerospace Defense index
(the Comparative Companies), and has retained and considered the
recommendations of compensation consultants.
The balance of this report:
1. Describes the MDC Executive Compensation Program and the basis for
1993 management base salaries, incentive awards, and long-term
incentives;
2. Discusses the 1993 compensation of the Chief Executive Officer
(the CEO); and
3. Outlines briefly proposed changes to the compensation program for
1994 and thereafter, that are described in detail elsewhere in this
Proxy Statement.
Executive Compensation Program
The 1993 compensation program consists of two parts: annual target
cash compensation (which consists of base salary and annual incentives)
and long-term incentives. Annual and long-term incentive awards are
made under MDC's Incentive Award Plan which was approved by MDC
shareholders in 1986. The Committee is aware that in the future a
portion of the CEO's and other executive officers' compensation may be
non-deductible under Section 162(m) of the Internal Revenue Code. The
Committee is endeavoring, however, to maximize deductibility of
compensation to the extent practicable while maintaining competitive
compensation.
Annual Compensation
The Committee has established the Performance Sharing Plan (the PSP)
pursuant to MDC's Incentive Award Plan, under which the annual
incentive compensation of its executive officers and approximately
1,000 other employees is determined. During the first quarter of each
year, the Committee establishes base salary and the formula which is
applied to the base salary for determining the target incentive award;
Target Compensation is the sum of these two amounts.
<PAGE> 16 HARD COPY PG. 16
Base salaries are established based on the value of the job determined
with reference to salaries paid to executives of the Comparative
Companies who perform similar duties and a subjective evaluation of the
executive's performance in the job determined with reference to the
executive's achievement of goals established as described below. Management
in each business unit prepares strategic, financial and operational goals
together with timelines for accomplishment. Strategic goals focus on
such factors as new product development and business initiatives; financial
goals include criteria such as operating earnings, return on net assets and
cash flow. Operational goals include factors such as productivity and
quality management, workplace diversity, management development and
environmental management. These goals cascade within each
organizational component, culminating in the formation of individual
performance goals specific to salaried employees. Accomplishments
against individual goals are evaluated on an interim basis at mid-year
and, on a final basis, at year-end; these are documented and approved
in accordance with MDC's continuous performance improvement process.
While target incentive awards were determined during the first
quarter of 1993, the amount of incentive compensation actually earned
by employees was determined by the Committee after year-end and paid in
March 1994. The amount of earned incentive compensation was based
upon (i) the performance of each executive against his or her goals
during the year and (ii) the performance of MDC and the executive's
business unit in relation to the following three Performance Factors,
which were weighted as indicated: cash flow (30%); return on net assets
(RONA), adjusted for unusual accounting and operational items (40%);
and improvements in total quality management as measured by the Malcolm
Baldrige Award criteria, which relate primarily to internal and
external customer satisfaction and process management (30%). Each of
the Performance Factors was measured against an objective standard:
RONA and cash flow for MDC and the executive's business unit were
measured against the target amounts included in MDC's Annual Operating
Plan, which was approved by the Board of Directors; and improvements in
total quality management were measured by comparing target scores
established by the Committee early in the year with the results of a
total quality management assessment conducted by internal and external
examiners who followed criteria and scoring procedures generally in
accordance with those specified by the Malcolm Baldrige Foundation.
The amount of earned incentive compensation related to cash flow and
total quality management was capped at two times the target incentive
compensation, but earned incentive compensation related to RONA had no
limit.
As was the case in 1992, Target Compensation established for 1993 for
MDC's executive officers was generally lower than the median
compensation paid to officers of the Comparative Companies with
comparable responsibilities. The Committee believes this was
appropriate in view of the personnel reductions, compensation
restraint, asset sales, tight cash management and general climate of
austerity throughout MDC at the time the 1993 Target Compensation was
established. The Target Compensation for executive officers in 1993
increased an average of 5% over 1992. The base salary portion of
Target Compensation of executive officers increased an average of 13%
from 1992 to 1993, while the target incentive award portion of their
Target Compensation decreased from 32% in 1992 to 27% in 1993. The
<PAGE> 17 HARD COPY PG. 17
allocation of a larger percentage of Target Compensation to base salary
was intended by the Committee to bring the executive officers' base
salaries more in line with, but still generally below, the median base
salaries paid to comparable officers of the Comparative Companies while
not significantly increasing Target Compensation.
Because MDC's cash flow and RONA exceeded the 1993 Annual Operating
Plan targets and improvements in total quality management exceeded the
targets established by the Committee, the executive officers as a group
earned an average of 204% of their 1993 target incentive award,
compared to 85% for 1992, and salary plus earned incentive compensation
paid to the executive officers increased by 43% over 1992 levels.
This improved performance was driven by improvements in MDC's cash
flow; debt reduction of more than $1 billion; earnings per share in
excess of MDC's projections; and significant increases in MDC's total
quality management score. RONA for 1993 was above the Operating Plan
target for each business unit due to increased operating income and
reduced assets, and cash flows were above targeted levels primarily due
to improved results of operations. All MDC business units exceeded
their respective goals for improvement in total quality management.
Each of these factors contributed to an increase in MDC's stock price
from $48.25 at the end of 1992 to $107 at the end of 1993. All
incentive compensation paid in 1994 to the executive officers based on
1993 services was paid in cash.
Long-Term Incentive Compensation
Long-Term Incentive Awards (LTI Awards) are granted by the Committee
under the Long-Term Incentive Program (LTIP) established pursuant to
MDC's Incentive Award Plan. LTI Awards are earned only to the extent
that MDC stock yields a total return superior to the average total
return on the common stock of a group of competitive aerospace
companies designated by the Committee during a performance period
established by the Committee of from two to five years. There are
currently five aerospace companies in the group, each of which is
included in the Comparative Companies. The Committee believes that
comparing stock price performance to this peer group rather than the
Comparative Companies produces a more appropriate evaluation of
performance. LTIP awards have generally been granted only to those
management employees with greater levels of responsibility who are
expected to have a substantial impact on the Company's ability to
achieve its strategic, financial and operational goals and objectives.
As a result, the number of participants in this program has been much
smaller than the number of participants in the PSP annual incentive
compensation program. The Committee compares the LTIP participants'
Target Compensation and currently outstanding LTI Awards to the
compensation paid to officers performing similar services for the
Comparative Companies when it determines the size of LTI grants. The
Committee granted LTI Awards to each of the officers named in the
Summary Compensation Table of this Proxy Statement in March 1993 with
current performance periods of three years. No compensation was paid
under LTI Awards expiring in 1993 because the total return on MDC stock
during the performance period for such awards was less than the average
annual total return on the common stock of the peer companies.
<PAGE> 18 HARD COPY PG. 18
The Committee recommends that the LTIP be phased out, and replaced with
the plan referred to in the last two paragraphs of this report, and
discussed on pages 21 through 28 of this Proxy Statement. Accordingly,
the performance period of all outstanding LTI Awards, other than those
originally scheduled to end in 1994, was reduced in late 1993 by the
Committee from four years to three years to accommodate this
transition. Although the performance period for the LTI Awards was
shortened, the performance criterion (i.e., superior MDC Stock return)
was left unchanged.
Compensation of the Chief Executive Officer
The Chief Executive Officer's (CEO) Target Compensation and earned
annual incentive compensation are determined in the same manner as
described above. In setting CEO compensation, the Committee considers
competitive CEO compensation practices of the Comparative Companies and
the relationship of the CEO's compensation to that paid to MDC's other
senior executives. The CEO's Target Compensation for 1993 was
$820,000, which was a 2.5% increase from 1992. The CEO's base salary
portion of Target Compensation increased approximately 12% to $570,000
from 1992 to 1993, while his target incentive award portion of Target
Compensation decreased by approximately 14% to $250,000. The
allocation of a larger percentage of Target Compensation to base salary
was intended by the Committee to bring the CEO's base salary more in
line with, but still generally below, the median base salaries paid to
the CEO's of the Comparative Companies while not significantly
increasing the Target Compensation. This was considered appropriate in
view of the previously described need for austerity.
In establishing the CEO's 1993 final incentive compensation (which
was paid in March 1994), the Committee considered the CEO's
substantial attainment of individual goals during 1993, and the
Company's exceptional performance in relation to the three Performance
Factors. The CEO's earned incentive compensation for 1993 was $495,100,
bringing his total compensation for the year to $1,054,577, an
increase of 54% from total compensation paid for services performed in
1992. The CEO's final 1993 incentive compensation was 198% of his
target incentive award, compared to 63% for 1992. Because the CEO did
not receive an LTIP grant in 1989 maturing in 1993, he would not have
been eligible to receive a long-term incentive award payout in 1993 if
one had occurred.
Proposed Changes to Long-Term Incentive Compensation
Subject to obtaining shareholder approval, the Board of Directors has
approved the Committee's recommendation that MDC adopt the McDonnell
Douglas Corporation 1994 Performance and Equity Incentive Plan. As
discussed in more detail on pages 21 through 28 of this Proxy Statement,
in addition to the types of awards permitted by the current Incentive
Award Plan, including the issuance of options, stock appreciation
rights, performance shares and cash awards, the new plan will permit
the Committee to grant restricted stock and other types of
<PAGE> 19
cash and stock-based awards, providing the Committee with greater
flexibility to provide performance based long-term compensation. The
Committee initially intends to utilize the Plan in part to modify the
HARD COPY PG. 19
long-term incentive element of executive pay by awarding shares of
restricted stock to key executives, up to one-half of which, or in the
case of the CEO and the President all of which, will be subject to
forfeiture if the Company does not achieve substantial return on net
asset targets.
The Committee views this new Plan as an important mechanism to align
long-term management incentives closely with McDonnell Douglas
Corporation's long-term performance and shareholder value, and strongly
recommends its adoption by the shareholders.
MANAGEMENT COMPENSATION AND SUCCESSION COMMITTEE
B. A. Bridgewater, Chairman
J. H. Biggs
W. S. Kanaga
G. A. Schaefer
<PAGE> 20 HARD COPY PG. 20
PERFORMANCE GRAPH
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as
amended, or the Exchange Act, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following
Performance Graph and the Management Compensation and Succession
Committee Report on Executive Compensation set forth above shall not be
incorporated by reference into any such filings.
Set forth below is a line graph comparing the cumulative total
shareholder return on MDC Stock against the cumulative total return of
the Standard & Poor's Composite-500 Index and the Standard & Poor's
Aerospace/Defense Index. The graph is presented in accordance with SEC
requirements. Shareholders are cautioned against drawing any
conclusions from the data contained therein, as past results are not
necessarily indicative of future performance. The other indices are
included for comparative purposes only and do not necessarily reflect
management's opinion that such indices are an appropriate measure of
the relative performance of MDC Stock.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
(MDC, S & P 500, S & P Aerospace/Defense)
(The table below contains the data points used in the Performance Graph
which appears in the printed Proxy Statement.)
<TABLE>
<CAPTION>
FISCAL YEAR S&P AEROSPACE
ENDED & DEFENSE MCDONNELL DOUGLAS S&P 500
- --------------------------------------------------------------
<S> <C> <C> <C>
1988 $100.00 $100.00 $100.00
1989 $118.17 $ 84.54 $131.69
1990 $123.35 $ 57.13 $127.59
1991 $147.46 $110.45 $166.47
1992 $155.13 $ 75.03 $179.15
1993 $201.78 $169.47 $197.21
</TABLE>
Source: S & P Compustat Services, Inc.
Assumes that the value of the investment in MDC Stock and each index
was $100 on December 31, 1988 and that all dividends were reinvested.
<PAGE> 21 HARD COPY PG. 21
CERTAIN LITIGATION
On May 4, 1993, Pierre Haber filed an action in the U. S. District Court
for the District of Columbia against the Company, its directors and certain
of its officers. The defendants include all incumbent directors other
than Beverly B. Byron. The complaint is purportedly brought, in part,
as a class action seeking compensatory damages in an unspecified amount
and injunctive relief for alleged violations of the SEC's proxy rules.
The complaint alleges that proxy statements, annual reports to
shareholders, and periodic reports filed with the SEC contained false
and misleading statements and omitted adverse material facts relating
to the Company's contract for the development and production of the C-
17 Airlifter cargo aircraft for the U. S. Air Force. These allegations
are based principally on information contained in the Department of
Defense Inspector General's report, which is described in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1992.
The complaint is also purportedly brought as a derivative action on
behalf of the Company against its directors and certain officers,
seeking compensatory and punitive damages for claimed breaches of
fiduciary duty relating to that contract. The action has been
transferred on the defendants' motion to the U.S. District Court for
the Eastern District of Missouri. In accordance with Maryland law, MDC's
Charter and its Bylaws, certain expenses relating to the litigation have
been advanced on behalf of the directors and officers named in the
complaint. The Company believes that the outcome of this action will
not have a material adverse effect on its financial position.
2. PROPOSAL TO APPROVE PERFORMANCE AND EQUITY INCENTIVE PLAN
The Board of Directors has adopted, and submits for shareholder
approval, the McDonnell Douglas Corporation 1994 Performance and Equity
Incentive Plan (the PEIP). THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE PEIP. Proxies will
be so voted unless shareholders specify otherwise in their proxies. A
majority of shares represented in person or by proxy which are entitled
to be voted at the Annual Meeting is required for adoption of this
proposal. Proxies marked "abstain" will be treated as a vote against
the proposal only for the purpose of determining whether the PEIP has
been approved for Section 16 of the Securities Act of 1934 (Section 16)
purposes; for all other purposes, proxies marked "abstain" will not be
counted as voting in respect of the matter. A copy of the PEIP is attached
as Exhibit A to this Proxy Statement. The summary of the PEIP which
appears below is qualified by reference to the full text of the plan.
The Company has adopted the PEIP to seek to enhance the
profitability and value of the Company for the benefit of its
shareholders by providing equity ownership opportunities and
performance based incentives to better align the interests of officers
and key employees with those of shareholders. The PEIP is also
designed to enhance the profitability and value of the Company for the
benefit of its shareholders by providing stock and cash awards to
attract, retain and motivate officers and other key employees who make
important contributions to the success of the Company.
<PAGE> 22
In 1986, MDC's shareholders approved the McDonnell Douglas
Corporation Incentive Award Plan (IA Plan). As of March 10, 1994, of
the 2.5 million shares of MDC Stock authorized to be issued under the
HARD COPY PG. 22
IA Plan, MDC had issued approximately 262,000 shares and an additional
218,142 shares would have been issued if all outstanding options were
exercised and all outstanding long-term incentive awards were fully paid.
No awards which may cause the Company to issue additional shares of MDC
Stock have been made under the IA Plan since that date and, if PEIP is
approved by the shareholders, the Company will cease to issue new stock
awards under the IA Plan.
One of the primary purposes of the PEIP is to provide performance
based incentives. As discussed below, while some of the shares of MDC
Stock issued under the PEIP will not be performance based, it is anticipated
that a significant amount of such shares will be payable to participants
solely on account of the attainment of performance goals. Set forth
below is a description of the principal features of the PEIP and the
benefits that the Company has either granted under the PEIP, subject to
shareholder approval, or currently anticipates granting.
General Plan Provisions
The PEIP provides for the award of benefits (collectively,
Benefits) of various types, including stock options (Options), stock
appreciation rights (SARs), restricted shares of MDC Stock (Restricted
Stock), performance shares (Performance Shares), cash awards, and other
stock-based awards. The number of shares of MDC Stock which may be
issued in connection with Benefits will not exceed 1,900,000 shares.
No more than 250,000 of such shares may be granted to any one
individual. An individual's shares may be awarded in the form of
Options, SARs, Restricted Stock, Performance Shares or in any
combination thereof. On March 10, 1994, the closing price of MDC
Stock was $119.50.
The PEIP is administered by the Company's Management Compensation
and Succession Committee (the Committee) which consists of three or
more members of the Board of Directors who are "disinterested persons"
as defined in Rule 16b-3 (Rule 16b-3) under the Securities Exchange Act
of 1934 (Exchange Act) and "outside directors" as defined in Section
162(m) of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder (the Code). The Committee may amend the PEIP at
any time. However, the Committee may not amend the PEIP without
shareholder approval if such amendment would (i) cause options which
are intended to qualify as incentive stock options to fail to qualify
as such, (ii) cause the PEIP to fail to meet the requirements of Rule
16b-3, or (iii) violate applicable law. No Benefit may be granted
under the PEIP on or after the tenth anniversary date of the date the
PEIP is approved by the Company's shareholders, but Benefits granted
prior to such tenth anniversary may extend beyond that date.
<PAGE> 23
The Committee's discretion to grant Benefits includes the right to issue
up to 25,000 shares of MDC Stock per year which are not performance based.
Since one of the primary purposes of the PEIP is to provide performance
based incentives, not less than 40% of the shares of MDC Stock in excess of
this amount which may be issued or sold or for which Options, SARs or
Performance Shares may be granted under the PEIP in any fiscal year of
the Company shall be payable solely on account of the attainment of
performance goals established by the Committee at the time such Benefit
is granted. Such performance goals will be based on one or more of the
following performance based criteria: return on net assets, return on
assets, return on equity, return on capital, return on revenues, cash flow,
HARD COPY PG. 23
book value, MDC Stock price performance (including Options and SARs tied
solely to appreciation in the fair market value of the shares), earnings
per share of MDC Stock, price earnings ratio, or total quality management
score calculated generally in accordance with criteria and scoring
procedures in accordance with those specified by the Malcolm Baldrige
Foundation. The Committee will determine in advance whether these
performance goals will be measured on a Company-specific basis or
in comparison with peer group performance.
Under the PEIP, the Committee may grant Benefits at such times, in
such amounts, and to such recipients as the Committee may determine.
Benefits may be awarded, however, only to employees of the Company and
its affiliates. The amendment or termination of the PEIP will not
adversely affect any Benefit granted prior to such amendment or
termination. However, any Benefit may be modified or canceled by the
Committee if and to the extent permitted by the PEIP or applicable
agreement or with the consent of the participant to whom such Benefit
was granted.
Options may be either incentive stock options (ISOs) or non-
qualified stock options (NQSOs). For both ISOs and NQSOs, the option
price will be no less than the fair market value of the shares of MDC
Stock at the time the Option is granted. The other terms of Options
will be determined by the Committee, and, in the case of Options
intended to qualify as ISOs, will meet all requirements of Section 422
of the Code.
SARs are the right to receive an amount equal to the appreciation
in value of one share of MDC Stock from the time the SAR is awarded
until the time the grantee elects to receive payment. Participants who
elect to receive payment of an SAR will receive an amount in cash, MDC
Stock, or any combination of cash or MDC Stock, as determined by the
Committee.
Restricted Stock is subject to forfeiture until certain conditions
have been fulfilled and/or a period of time has elapsed. Grants of
Restricted Stock shall be made at such cost as the Committee shall
determine and may be issued for no monetary consideration, subject to
applicable state law. Such shares are non-transferable until all
<PAGE> 24
restrictions have been satisfied. At the discretion of the Committee,
the grantee may or may not be entitled to voting and dividend rights
with respect to the Restricted Stock from the date of grant.
Performance Shares are the right to receive MDC Stock or cash
equal to the fair market value of the MDC Stock at a future date.
Generally, such right will be based upon the attainment of one or more
targeted performance goals. The maximum cash award that may be granted
to an individual in any fiscal year of the Company may not exceed in
the aggregate the greater of $500,000 or 50% of his or her cash
compensation, e.g., base salary and annual incentive compensation,
(excluding the amount of any such cash award) paid in such year. The
Committee may also grant other awards which may be valued in whole or
in part by reference to, or otherwise based on, MDC Stock.
If an Option or SAR expires or is terminated, surrendered, or
canceled without having been fully exercised, if Restricted Stock or
Performance Shares are forfeited, or if any other conditions result in
any MDC Stock not being issued, the unused shares of MDC Stock covered
by any such Benefit shall again be available for grant under the PEIP
to any participant who is not subject to Section 16. If there is any
change in MDC Stock by reason of any stock split, stock dividend,
spin-off, split-up, spin-out, recapitalization, merger,
HARD COPY PG. 24
consolidation, reorganization, combination or exchange of shares, or
any other similar transaction, the number of shares of MDC Stock
available for grant under the PEIP or subject to, or granted pursuant
to, a Benefit and the price thereof, as applicable, will be
appropriately adjusted by the Committee.
Except as may be provided in an applicable agreement, any Benefit
may be converted, modified, forfeited, or canceled, or the restrictions
or conditions applicable to such Benefit waived or accelerated,
prospectively or retroactively, in whole or in part, by the Committee,
but (unless the participant has acted in a manner contrary to the best
interests of the Company or an affiliate of the Company) no such action
may impair the rights of a participant without his or her consent. The
occurrence of a Change of Control, as defined in Section 2.1(f) of the
PEIP, will not limit the Committee's authority to take any such action.
Awards may be granted by the Committee in tandem. However, no
Benefit except an SAR may be granted in tandem with an ISO. The
Committee will not permit the repricing of Options by any method,
including by cancellation and reissuance. Upon the exercise of an
Option or in the case of any other Benefit that requires a payment to
the Company, payment may be made either (i) in cash, or (ii) with the
consent of the Committee, (a) by the surrender of all or part of a
Benefit (including the Benefit being exercised), (b) by the tender to
the Company of MDC Stock owned by the participant having a fair market
value equal to the amount due to the Company, (c) in other property, or
(d) by any combination of the foregoing. At the time any Benefit
granted under the PEIP is distributed or exercised, the Company may
<PAGE> 25
withhold, in cash or in shares of MDC Stock, any amount necessary to
satisfy withholding requirements applicable to such distribution.
Unless otherwise determined by the Committee or specified in an
applicable agreement, Benefits will not be transferable other than by
beneficiary designation, will, pursuant to the laws of descent and
distribution, or pursuant to a qualified domestic relations order, and
will be exercisable during the participant's lifetime only by such
participant; except that, no ISO may be transferred or assigned
pursuant to a qualified domestic relations order or exercised, during a
participant's lifetime, by the participant's guardian or legal
representative.
Benefits Granted Under the Plan
Under the PEIP, all employees of the Company are eligible to
participate. The Committee has not yet determined how many employees
are likely to ultimately participate in the PEIP. The Company
initially intends to utilize the PEIP to grant Performance Accelerated
Restricted Stock (PARS Awards) to select senior officers and key
employees and One-Time Restricted Stock Awards (One-Time Awards) to a
broader group of employees who are not executive officers.
In January 1994, the Committee granted PARS Awards, subject to
shareholder approval of the PEIP. The PARS Awards have been granted as
long-term incentive compensation to approximately 110 key employees who
have had, and are expected to continue to have, a significant role in
improving the profitability and value of the Company for the benefit of
its shareholders. The PARS Awards are grants of Restricted Stock, one-
half of which are subject to forfeiture after six years if the Company
does not achieve specified average return on net asset (RONA) targets
during the 1994-1999 fiscal years. Vesting of the other half of the
HARD COPY PG. 25
Restricted Stock is contingent on the participant's continued service
to the Company or an affiliate of the Company for the six-year period.
Vesting of all or part of the shares, however, may be accelerated to
1997 if the Company achieves specified average RONA targets during the
1994-1996 fiscal years. Recipients of PARS Awards will be entitled to
voting rights and dividends, which may be held in escrow in certain
circumstances. When restrictions lapse on a PARS Award granted to an
officer of the Company who is subject to Section 16, the Company is
required to withhold shares in an amount equal to that officer's
estimated federal, state and local tax obligations, plus any
additional withholding requirements. The following table
shows PARS Awards which have been granted subject to shareholder
approval of the PEIP:
<PAGE> 26
<TABLE>
<CAPTION>
Number of
Dollar Shares of
Name Value (1) MDC Stock
- ---------------------------------------------------------
<S> <C> <C>
J. F. McDonnell $1,140,000 10,000
G. A. Johnston -- --
J. P. Capellupo 570,000 5,000
R. H. Hood, Jr. 456,000 4,000
H. J. Lanese 570,000 5,000
Executive Officer as a Group 4,389,000 38,500
Non-Executive Officer
Employee Group 7,216,200 63,300
- ------------------------------
(1) Based on $114.00 per share closing price of MDC Stock on date of
grant, January 28, 1994.
</TABLE>
While all employees of MDC and its affiliates are eligible to
participate in the PEIP, only certain key employees described above
will initially receive PARS Awards. From time to time, the Committee
intends to reward significant accomplishments by its employees who have
not received PARS Awards by granting One-Time Awards. The One-Time
Awards will be grants of Restricted Stock, the vesting of which is
contingent on the recipient's continued service to the Company or its
affiliates for a period specified at the time of the grant. The One-
Time Awards are intended to recognize and reward significant
accomplishments and encourage continued efforts by the Company's
employees. The Committee has awarded, subject to shareholder approval
of the PEIP, One-Time Awards to two employees who are not executive
officers for an aggregate of 3,000 shares of MDC Stock having a value
of $342,000.
Federal Income Tax Consequences
The following is a summary of certain federal income tax
consequences of the PEIP. Any time a distribution is made under the
PEIP, whether in cash or in shares of stock, the Company may withhold
from such payment any amount necessary to satisfy federal and state
HARD COPY PG. 26
income tax withholding requirements with respect to the distribution.
Such withholding may be in cash or in shares of stock.
Deductibility of Benefits. All Company deductions for PEIP Benefits
are limited by Section 162(m) of the Code which generally limits the
Company's deduction for non-performance based compensation to $1
million per year for the Company's CEO and its other four most highly
compensated officers. Section 162(m) was adopted in 1993 and the Internal
Revenue Service has recently issued proposed regulations for comment.
The Company believes that those shares of Restricted Stock subject to the
<PAGE> 27
PARS Agreement granted in January 1994 that are subject to forfeiture if
specified RONA targets are not met (i.e., all of the shares granted to the
Chairman and Chief Executive Officer and one-half of the shares granted to
other participants) should qualify as performance based compensation and not
be subject to the Section 162(m) deduction limit.
Incentive Stock Options. Although included in the calculation of the
Alternative Minimum Tax (AMT), discussed below, an optionee does not
recognize income on the grant of an ISO. If an optionee exercises an
ISO in accordance with the terms of the Option and does not dispose of
the shares acquired within two years from the date of the grant of the
Option nor within one year from the date of exercise, the optionee will
not realize any income by reason of the exercise, and the Company will
be allowed no deduction by reason of the grant or exercise. The
optionee's basis in the shares acquired upon exercise will be the
amount paid upon exercise. (See the discussion below for the tax
consequences of the exercise of an Option with stock already owned by
the optionee.) Provided the optionee holds the shares as a capital
asset at the time of sale or other disposition of the shares, his gain
or loss, if any, recognized on the sale or other disposition will be
capital gain or loss. The amount of his gain or loss will be the
difference between the amount realized on the disposition of the shares
and his basis in the shares.
If an optionee disposes of the shares within two years from the
date of grant of the Option or within one year from the date of
exercise (Early Disposition), the optionee will realize ordinary income
at the time of such Early Disposition which will equal the excess, if
any, of the lesser of (i) the amount realized on the Early Disposition,
or (ii) the fair market value of the shares on the date of exercise,
over the optionee's basis in the shares. The Company will be entitled
to a deduction in an amount equal to such income. The excess, if any,
of the amount realized on the Early Disposition of such shares over the
fair market value of the shares on the date of exercise will be long-
term or short-term capital gain, depending upon the holding period of
the shares. If an optionee disposes of such shares for less than the
optionee's basis in the shares, the difference between the amount
realized and the optionee's basis will be a long-term or short-term
capital loss, depending upon the holding period of the shares.
The excess of the fair market value of the shares at the time the
ISO is exercised over the exercise price for the shares is an item of
preference (Stock Option Preference) for AMT purposes. AMT is an
additional tax calculation (with 26/28% rates) using the normal tax
calculation and adjusted for preference items and exemption amounts.
Non-Qualified Stock Options. An optionee does not recognize income
at the time of the grant of the Option; the optionee recognizes
ordinary income upon the exercise of a NQSO in an amount equal to the
<PAGE> 28 HARD COPY PG. 27
difference between the fair market value of the stock on the date of
exercise of the Option and the amount of cash paid for the stock. As a
result of the optionee's exercise of an NQSO, the Company will be
entitled to deduct as compensation an amount equal to the amount
included in the optionee's gross income. The Company's deduction will
be taken in the Company's taxable year in which the Option is
exercised. The excess of the fair market value of the stock on the
date of exercise of an NQSO over the exercise price is not a Stock
Option Preference.
Use of Shares to Exercise Option. If the optionee exercises an
Option by surrendering stock already owned by such optionee (Old
Shares), the following rules apply:
1. To the extent the number of shares acquired (New Shares)
exceeds the number of Old Shares exchanged, the optionee will recognize
ordinary income on the receipt of such additional shares (provided the
Option is not an ISO) in an amount equal to the fair market value of
such additional shares less any cash paid for them and the Company will
be entitled to a deduction in an amount equal to such income. The
basis of such additional shares will be equal to the fair market value
of such shares (or, in the case of an ISO, the cash, if any, paid for
the additional shares) on the date of exercise and the holding period
for such additional shares will commence on the date the Option is
exercised.
2. Except as provided below, to the extent the number of New
Shares acquired does not exceed the number of Old Shares exchanged, no
gain or loss will be recognized on such exchange, the basis of the New
Shares received will be equal to the basis of the Old Shares
surrendered, and the holding period of the New Shares received will
include the holding period of the Old Shares surrendered. However,
under proposed regulations promulgated by the Internal Revenue Service,
if the optionee exercises an ISO by surrendering Old Shares, the
holding period for the New Shares will begin on the date the New Shares
are transferred to the optionee for purposes of determining whether
there is an Early Disposition of the New Shares and, if the optionee
makes an Early Disposition of the New Shares, such optionee will be
deemed to have disposed of the New Shares with the lowest basis first.
If the optionee exercises an ISO by surrendering Old Shares which were
acquired through the exercise of an ISO or an option granted under an
employee stock purchase plan, and if the surrender occurs prior to the
expiration of the holding period applicable to the type of option under
which the Old Shares were acquired, the surrender will be deemed to be
an Early Disposition of the Old Shares. The federal income tax
consequences of an Early Disposition are discussed above.
3. If the Old Shares surrendered were acquired by the optionee
by exercise of an ISO, then, except as provided in 2 above the exchange
will not constitute an Early Disposition of the Old Shares.
4. Based upon prior rulings of the Internal Revenue Service in
analogous areas, it is believed that if an optionee exercises an ISO
and surrendered Old Shares and if such optionee disposes of the New
Shares received upon exercise within two years from the date of the
<PAGE> 29 HARD COPY PG. 28
grant of the Option or within one year from the date of exercise, the
following tax consequences would result:
(i) To the extent the number of new Shares received upon
exercise does not exceed the number of Old Shares surrendered, the
disposition of the New Shares will not constitute an Early Disposition
(unless the disposition is a surrender of the New Shares in the
exercise of an ISO).
(ii) The disposition of the New Shares will constitute an
Early Disposition to the extent the number of New Shares received upon
exercise and disposed of exceeds the number of Old Shares surrendered.
Stock Appreciation Rights. Recipients of SARs do not recognize
income upon the grant of such rights. When a participant elects to
receive payment of an SAR, the participant recognizes ordinary income
in an amount equal to the cash and fair market value of shares of
Common Stock received, and the Company is entitled to a deduction equal
to such amount.
Restricted Stock and Performance Shares. Grantees of Restricted Stock
and Performance Shares do not recognize income at the time of the grant
of such stock. However, when shares of Restricted Stock are no longer
subject to a substantial risk of forfeiture or when Performance Shares
are paid, grantees recognize ordinary income in an amount equal to the
fair market value of the stock less, in the case of Restricted Stock,
the amount paid, if any, for the stock. Alternatively, the grantee of
Restricted Stock may elect to recognize income upon the grant of the
stock and not at the time the restrictions lapse. The Company is
entitled to deduct an amount equal to the fair market value of the
stock at the time the grantee recognizes income related to the grant.
Cash Awards, Dividends and Dividend Equivalents. Cash awards,
dividends and dividend equivalent payments are taxable as ordinary
income when paid. The Company is entitled to deduct the amount of a
cash award, dividends on Restricted Stock and dividend equivalent
payments when such amounts are taxable to the recipient.
Change of Control. If there is an acceleration of the vesting or
payment of Benefits and/or an acceleration of the exercisability of
Options upon a Change of Control, all or a portion of the accelerated
benefits may constitute "Excess Parachute Payments" under Section 280G
of the Code. The employee receiving an Excess Parachute Payment incurs
an excise tax of 2% of the amount of the payment in excess of the
employee's average annual compensation over the five calendar years
preceding the year of the Change of Control and the Company is not
entitled to a deduction for such excess amount.
The foregoing summary of the federal income tax consequences of
the PEIP is based on the Company's understanding of present federal tax
law and regulations. The summary does not purport to be complete or
applicable to every specific situation.
<PAGE> 30
3. PROPOSAL TO INCREASE AUTHORIZED COMMON STOCK
By resolution dated March 10, 1994, the Board of Directors adopted
a resolution declaring it advisable and in the best interests of MDC to
amend MDC's Charter to increase the number of shares of stock that MDC
has the authority to issue to an aggregate of 210 million shares, of
HARD COPY PG. 29
which 200 million shares would be common stock, $1.00 par value per
share, and directed that the amendment be submitted to a vote of the
shareholders at the Annual Meeting. The proposed revised first
sentence of Article SEVENTH of MDC's Charter is set forth as Exhibit B
to this Proxy Statement.
MDC's Charter currently authorizes the issuance of up to
110,000,000 shares, consisting of 100,000,000 shares of common stock,
$1.00 par value per share, and 10,000,000 shares of preferred stock,
$1.00 par value per share. As of March 10, 1994, the Company had
39,399,923 shares of common stock and no shares of preferred stock
outstanding. In addition, as of the same date approximately 8,355,000
shares of common stock were reserved for issuance as follows:
approximately 4,217,000 shares for issuance under the Company's
employee savings plans and other award plans; approximately 2,238,000
shares for issuance under the MDC Incentive Award Plan (the IA Plan);
and, subject to shareholder approval, 1,900,000 shares for issuance
under the MDC 1994 Performance and Equity Incentive Plan (the PEIP). If the
PEIP is approved by the shareholders at the Annual Meeting, the Company
will cease to issue new stock awards under the IA Plan and the reserve
for issuance under the IA Plan will be reduced to 218,142,
representing the number of shares that the Company would be required to
issue if all outstanding options and long-term incentive awards
previously granted under the IA Plan are exercised or are paid. If the
PEIP is not approved by the shareholders at the Annual Meeting, the
reserve for the PEIP will be eliminated.
The Board of Directors believes that it is in the best interests
of the Company and its shareholders to increase the number of
authorized shares of common stock in order to have additional shares
available for issuance to meet a variety of business needs as they may
arise and to enhance the Company's flexibility in connection with
possible future actions. These business needs and actions may include
stock dividends, stock splits, retirement of indebtedness, employee
benefit programs, corporate business combinations, acquisitions of property,
funding of product programs or businesses, or other corporate purposes.
Although the Board periodically considers transactions such as those
listed above, it currently does not have plans to issue any significant
amount of such common stock, except as described in the preceding
paragraph.
The authorized shares of common stock in excess of those presently
issued will be available for issuance at such times and for such
purposes as the Board of Directors may deem advisable without further
action by MDC's shareholders, except as may be required by applicable
<PAGE> 31
laws or regulations. The Board does not intend to issue any stock
except on terms or for reasons which the Board deems to be in the best
interests of the Company. Because the holders of MDC's common stock do
not have preemptive rights, the issuance of common stock otherwise than
on a pro-rata basis to all current shareholders would reduce the
current shareholders' proportionate interests. However, in any such
event, shareholders wishing to maintain their interests may be able to
do so through normal market purchases. Any future issuance of common
stock will be subject to the rights of holders of outstanding shares of
any preferred stock which MDC may issue in the future. While the
issuance of shares in certain instances may have the effect of
forestalling a hostile takeover, the Board does not intend or view the
increase in authorized common stock as an anti-takeover measure, nor is
the Company aware of any proposed or contemplated transaction of this
type.
HARD COPY PG. 30
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
PROPOSAL TO AMEND MDC'S CHARTER TO INCREASE THE NUMBER OF SHARES OF
COMMON STOCK THAT THE COMPANY IS AUTHORIZED TO ISSUE. Proxies will be
so voted unless shareholders specify otherwise in their proxies. The
affirmative vote of holders of two-thirds of the outstanding shares of
common stock is required for approval of this proposal. Consequently,
any shares not voted (whether by abstention or broker non-votes) will
have the same effect as votes against the proposed amendment to MDC's
Charter. If this proposal is approved by the shareholders, it will
become effective upon the filing of Articles of Amendment and
Restatement with the State Department of Assessments and Taxation of
Maryland, which will occur as soon as reasonably practicable after
approval.
4. REAPPROVAL OF SALARIED EMPLOYEES' SAVINGS PLAN
The Company has several savings plans under which eligible
employees may have a portion of their wages contributed and invested in
one or more investment or money market funds. One such plan is the
Employee Savings Plan of McDonnell Douglas Corporation - Salaried Plan
(the Savings Plan).
The Securities and Exchange Commission regulations adopted under
Section 16 of the Securities Exchange Act of 1934 (Section 16) provide
the Company's officers who are subject to Section 16 with additional
flexibility to engage in transactions permitted by the Savings Plan if
the plan has been approved by the Company's shareholders and has not
been materially amended since shareholder approval was obtained. The
Savings Plan was last approved by the shareholders in 1972. During the
last 22 years, the Savings Plan has been amended on numerous occasions
in accordance with its terms to reflect tax law changes and for other
reasons. While the Company does not believe that the Savings Plan has
been materially amended for Section 16 purposes by these modifications,
the Board of Directors believes it is prudent to resubmit the Savings
Plan for shareholder approval to remove any doubt. The Savings Plan
will continue in its current form notwithstanding the outcome of this
<PAGE> 32
proposal--reapproval is sought only to address potential uncertainties
regarding certain future Savings Plan transactions executed by officers
who are subject to Section 16.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
PROPOSAL TO REAPPROVE THE SAVINGS PLAN. Proxies will be so voted
unless shareholders specify otherwise in their proxies. A majority of
shares represented in person or by proxy which are entitled to be voted
at the Annual Meeting is required for adoption of this proposal.
Proxies marked "abstain" will be treated as a vote against the
proposal.
General Plan Provisions
Salaried employees of MDC and its subsidiaries (Employing
Companies) who are in covered employment are eligible to participate in
the Savings Plan after they have completed (i) 30 days of continuous
employment in the case of employees regularly scheduled to work at
least 20 hours per week, or (ii) one year of service in all other
cases. Participants may have 1% to 14% of their eligible compensation
contributed to the Savings Plan each week, either through deferral on a
HARD COPY PG. 31
pre-tax basis, payroll deduction on an after-tax basis, or a
combination of both. After six months of continuous employment, each
participant's Employing Company also contributes an amount equal to 75%
of the participant's contributions which do not exceed 8% of eligible
compensation. Employing Company contributions may be made either in
cash or MDC Stock.
Contributions to the Savings Plan are held in a trust fund by The
Chase Manhattan Bank, N.A., as trustee under the MDC Master Savings
Trust Agreement, and are credited to individual accounts for each
participant. A participant's pre-tax and after-tax contributions each
week are each invested as directed by the participant in one or two of
the following four funds: Fund A, which consists of bonds, mortgages,
real estate, preferred stocks, and other fixed income investments; Fund
B, which consists of common stocks indexed to approximate the Standard
& Poor's 500 Composite Stock Index; Fund C, which consists of short-
term money market securities; and Fund D, which consists of MDC Stock.
Participants may change their investment directions at any time. Once
every 13 weeks participants may transfer all or part of their vested
balances in Funds A, B, and C to any of the other three funds;
participants who are at least age 50 may also transfer amounts
attributable to their pre-tax and after-tax contributions in Fund D to
the other three funds once every 13 weeks. Employing Company
contributions are currently invested in Fund D, and may not be
transferred to the other funds. If contributions are made in the form
of cash, the trustee may acquire MDC Stock either from MDC or through
open market purchases.
Amounts attributable to participants' pre-tax and after-tax
contributions are vested (i.e., nonforfeitable) at all times.
Participants with at least five years of service, and participants who
<PAGE> 33
terminate employment under certain circumstances (e.g., after attaining
age 65 or as the result of layoff, divestiture, disability or death),
are vested in the value of their Employing Company contributions.
Forfeitures resulting from the termination of nonvested participants
are used to reduce future Employing Company contributions.
Contributions by or on behalf of each participant are subject to
various limits under the Internal Revenue Code. The amount which may
be allocated under the Savings Plan and all other qualified individual
account plans maintained by MDC and its subsidiaries for any
participant in any plan year may not exceed the lesser of $30,000 or
25% of compensation. The amount of annual compensation which may be
considered for determining contributions to the Savings Plan for any
participant is limited to $235,840 for the plan year which began on
November 29, 1993; the compensation limit will be reduced to $150,000
for the plan year beginning November 28, 1994, and will be adjusted for
cost-of-living increases thereafter. The amount which may be
contributed by or on behalf of highly compensated participants may be
limited by nondiscrimination tests. A participant's pre-tax
contributions for any calendar year may not exceed limits established
by the Internal Revenue Service ($9,240 for 1994).
While employed, participants may withdraw the value of their after-
tax contributions and vested Employing Company contributions at any
time. Amounts attributable to pre-tax contributions may be withdrawn
prior to termination only in the event of financial hardship or after
attainment of age 59-1/2. Employing Company contributions for
participants who make a withdrawal are generally suspended for 26
weeks. Subject to various conditions and limits, participants may also
HARD COPY PG. 32
borrow from amounts attributable to their pre-tax and after-tax
contributions and repay such amounts through payroll deduction.
Participants may request a distribution of their entire vested account
balance at any time after termination of employment; however, upon
attainment of age 65, or termination if later, that amount generally
must be distributed within 90 days. If the participant dies,
distribution will be made to the participant's beneficiary.
Withdrawals and distributions from Funds A, B and C will generally be
paid in cash. Amounts invested in Fund D will be paid in the form of
MDC Stock, unless that would be fewer than 100 shares; in that case,
the participant may elect to receive cash in lieu of MDC Stock.
Each participant may direct the trustee how to vote his or her
proportional share of the MDC Stock in Fund D. MDC Stock for which the
trustee does not receive voting instructions on any issue or proposal
will be voted for, against or in abstention in the same proportions as
MDC Stock for which the trustee receives voting instructions. In the
event of a tender offer for MDC Stock, each participant may elect to
have the trustee tender all or part of his or her proportional share of
the MDC Stock in Fund D.
<PAGE> 34
The Company may, at any time, amend the Savings Plan in any
manner, or terminate the Savings Plan, provided that any such amendment
or termination does not adversely affect participants' rights with
respect to prior benefits. Employing Company contributions become
vested in the event the Savings Plan is terminated.
Upon written or oral request, the Company will provide without
charge a copy of the Savings Plan to any shareholder. Requests should
be directed to Shareholder Services, McDonnell Douglas Corporation,
Mailcode 1001240, P.O. Box 516, St. Louis, Missouri 63166-0516,
telephone (314) 232-6282.
Benefits Granted Under the Plan
Of the approximately 38,000 salaried employees of MDC who were
eligible to participate in the Savings Plan, approximately 30,000 were
participating as of March 1, 1994. During 1993, the following
Savings Plan participants received the Employing Company contributions
listed below:
<TABLE>
<CAPTION>
Dollar
Name Value
- -------------------------------------------------
<S> <C>
J. F. McDonnell $ 13,138
G. A. Johnston 13,111
J. P. Capellupo 9,412
R. H. Hood, Jr. 3,915
H. J. Lanese 13,013
Executive Officers as a Group 115,310
Non-Executive Officer 71,699,800
Employee Group
</TABLE>
HARD COPY PG. 33
5. RATIFICATION OF APPOINTMENT OF ERNST & YOUNG AS INDEPENDENT
AUDITORS FOR 1994
The Board of Directors has appointed Ernst & Young as independent
auditors to audit the financial statements of MDC and its subsidiaries
for 1994, subject to ratification by the shareholders. THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
APPOINTMENT OF ERNST & YOUNG AS INDEPENDENT AUDITORS. Proxies will be
so voted unless shareholders specify otherwise in their proxies. A
majority of shares represented in person or by proxy which are entitled
to be voted at the Annual Meeting is required for adoption of this
proposal. If the shareholders do not approve the proposal, the
selection of independent auditors will be reconsidered by the Audit
Committee.
<PAGE> 35
Ernst & Young (or its predecessor firm, Ernst & Whinney) has audited
MDC's financial statements for many years. During 1993, Ernst & Young
performed the audit services involved in the examination of MDC's
consolidated financial statements. Audit services included reviews of
quarterly consolidated financial statements, reviews of financial and
related information included in filings with the Securities and
Exchange Commission and for employee benefit plans, and consultation on
matters pertaining to accounting and financial reporting. A
representative of Ernst & Young is expected to be present at the Annual
Meeting to answer appropriate questions and to make a statement if the
representative so desires.
6. A SHAREHOLDER PROPOSAL REGARDING CONVERSION OF ASSETS TO COMMERCIAL USE
The following organizations, which own a total of 8,740 shares of
record, submit the proposal set forth below: Adorers of the Blood of
Christ, 2 Pioneer Lane, Red Bud, Illinois 62278-9749; Brothers of
Christian Schools, 2101 Rue de la Salle, Glencoe, Missouri 63038;
Franciscan Sisters of Mary, 1100 Bellevue Avenue, St. Louis, Missouri
63117; Glenmary Home Missioners, P.O. Box 465618, Cincinnati, Ohio
45246; Missionary Oblates of Mary Immaculate, 159 Moore Street, Lowell,
Massachusetts 01852; Sisters of Loretto, 590 E. Lockwood, Webster
Groves, Missouri 63119; St. Mary's Institute, 204 North Main Street,
O'Fallon, Missouri 63366; School Sisters of Notre Dame, 320 East Ripa
Avenue, St. Louis, Missouri 63125-2897; Sisters of St. Joseph of
Carondelet, 6400 Minnesota Avenue, St. Louis, Missouri 63111-2899; and
Sisters of Mercy of the Americas, 2039 North Geyer Road, St. Louis,
Missouri 63131.
WHEREAS the end of the Cold War provides opportunities to:
1. convert to more stable commercial production;
2. convert high-tech military industry to environmental and other
socially beneficial technologies; and
3. choose sustainable development.
WHEREAS when the Cold War began, the Department of Defense funded basic
research and marketing for computers and electronic and information-
HARD COPY PG. 34
processing technologies. However, for the past twenty years, almost
80% of all federal research and development money has been directed to
narrowly applied military projects. Government-picked industrial
winners were arms manufacturers and federal loan guarantees supported
foreign military sales.
WHEREAS these practices have weakened our industrial base, our
international trade position and our capacity to compete.
<PAGE> 36
WHEREAS as course correction:
1. in 1993, the federal Technology Reinvestment Project (TRP)
invested $500,000,000 in development and deployment of military
technology into commercial fields;
2. since 1988, the National Technology Transfer Center (NTTC)
strengthens competitiveness of U.S. industry, assuring rapid and
productive access to marketable technologies and promoting
collaboration between companies and federal laboratories in
commercialization of technological products, processes and services;
3. the National Institute of Standards and Technology (NIST)
facilitates manufacturing excellence and transfer of military
technology into marketable commercial product designs.
WHEREAS McDonnell Douglas Corporation has developed and deployed narrow
military applications in such fields as laser research, computer
mapping and composite materials.
WHEREAS management commitment to convert these narrow military
applications is essential to a strong U.S. industrial base.
THEREFORE BE IT RESOLVED the shareholders request the Board of
Directors to report to all shareholders within one year of McDonnell
Douglas's 1994 annual meeting:
1. Steps taken toward technology transfer from military to commercial
deployment and development, including descriptions of conversion plans
and funding sources;
2. Strategies taken to identify community needs; employees' ideas and
finance and market opportunities and to utilize employee experience;
3. Brief descriptions of projects for which McDonnell Douglas has
applied for funding from NIST or TRP or participation in NTTC; number
of employees in the planning process;
4. Analysis of successes and failures; and
5. Membership in state and/or local government economic conversion
task forces.
This report should be prepared at reasonable cost and omit proprietary
information.
HARD COPY PG. 35
SUPPORTING STATEMENT
Infrastructure repair, mass transit, renewable energy and
environmental technologies represent new market opportunities for
McDonnell Douglas. These potential products build on the company's
<PAGE> 37
productive competence and meet community needs. Frankly, the
resolution proponents are appalled by military industry calls for a
$5,000,000,000 loan guarantee for foreign military sales to poor
nations because ultimately the U.S. will pay for foreign wars while
further degrading the U.S. military base.
The religious bodies who propose this resolution have confidence
in the capabilities of our employees to design and manufacture new
products to meet new demands. We do not intend to confront but to
invite company disclosure of current conversion efforts. We believe
conversion is the optimal approach for shareholder, community,
workforce and management. If you agree, please support this resolution
by voting YES.
MANAGEMENT'S OPPOSING STATEMENT
For the following reasons, the Board recommends a vote AGAINST
this proposal.
These proposals are simply variations on proposals made by some or
all of the same proponents over the last decade regarding the Company's
involvement in the manufacture and sale of military products. At each
meeting the shareholders have rejected such proposals by a large
majority of the shares voted.
The current proposal assumes that the defense business is
singularly unstable and that the interests of MDC's employees and
shareholders and of the nation would be best served by moving MDC out
of businesses in which it has long been a leader into other undefined
businesses in which it may have no experience. There are ample
opportunities for us within the aerospace industry. Although we have
demonstrated our commitment to appropriate forms of diversification,
including commercial aerospace and space systems, we believe it would
be inappropriate to reduce our participation in the defense industry.
MDC is proud to be in the forefront of corporations providing
products and technologies used in the defense of the U. S. and its
allies. We believe that our continued success in this field will,
better than any possible alternative course, provide substantial and
long-lasting benefits to our shareholders, our employees, the
communities in which we operate, and our nation. The Board believes
that MDC became the nation's largest defense contractor by becoming a
highly optimized organization. As a matter of fact, airframe companies
have made numerous highly publicized attempts to diversify in the past.
With almost no exceptions, the results (including MDC's attempts at
diversification) have not been successful. Furthermore, MDC expects to
win a growing share of the still large and critically important U.S.
defense market. In a shrinking market, we have the advantage of having
programs already in production and readily upgradable. In addition,
our sales of combat aircraft to allied nations, which have averaged $1
billion per year over the past three years, should be growing in the
next few years as a result of a string of recent successes in
international competitions. Consequently, the Board believes that MDC
is strongly positioned as one of the handful of clear winners in the
continuing shakeout within the defense industry and that a significant
transfer of our efforts from the defense industry would be a
fundamental and risk-laden change in the basic nature of the
corporation.
<PAGE> 38 HARD COPY PG. 36
FOR THE ABOVE REASONS, THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST THE PROPOSAL. Proxies will be so voted unless shareholders
specify otherwise in their proxies. A majority of shares represented
in person or by proxy which are entitled to be voted at the Annual
Meeting is required for adoption of this proposal.
7. A SHAREHOLDER PROPOSAL REGARDING COMPOSITION OF NOMINATING COMMITTEE
The New York City Employees' Retirement System, c/o Elizabeth Holtzman,
Comptroller of the City of New York, Municipal Building, New York, New
York 10007-2341, which owns 55,810 shares of MDC Stock, submitted the
following proposal.
WHEREAS, the board of directors is meant to be an independent body
elected by shareholders and charged by law and shareholders with the
duty, authority and responsibility to formulate and direct corporate
policies, and
WHEREAS, this company has provided that the board may designate from
among its members one or more committees, each of which, to the extent
allowed, shall have certain designated authority, and
WHEREAS, we believe that directors independent of management are best
qualified to act in the interest of shareholders and can take steps
necessary to seek, nominate and present new directors to shareholders,
and
WHEREAS, we believe the selection of new directors is an area in which
inside directors may have a conflict of interest with shareholders, and
WHEREAS, we believe that an increased role for the independent
directors would help our company improve its long-term financial
condition, stock performance and ability to compete, NOW THEREFORE BE
IT
RESOLVED, that the shareholders request the company establish a
Nominating Committee to recommend candidates to stand for election to
the board of directors. The Committee shall be composed solely of
independent directors. For these purposes, an independent director is
one who: (l) has not been employed by the Company or an affiliate, in
an executive capacity within the last five years; (2) is not, and has
not been, a member of a company that is one of this company's paid
advisors or consultants, (3) is not employed by a significant customer
or supplier; (4) does not, and did not, have a personal services
contract with the company; (5) is not employed by a tax-exempt
organization that receives significant contributions from the company;
(6) is not a relative of the management of the company; (7) has not had
any business relationship that would be required to be disclosed under
Regulation S-K. Also, to the extent possible within the standards
stated above, no individual shall serve on the Committee in the year
preceding the expiration of that individual's term as a director. The
Committee's responsibilities shall include establishing procedures for
the nominating process and developing for board approval the criteria
for nomination.
<PAGE> 39 SUPPORTING STATEMENT HARD COPY PG. 37
As long-term shareholders we are concerned about our company's
prospects for profitable growth. This proposal is intended to
strengthen the process by which nominees are selected. We believe that
this will strengthen the board of directors in its role of advising,
overseeing and evaluating management.
We urge you to vote FOR this proposal.
MANAGEMENT'S OPPOSING STATEMENT
For the following reasons, the Board recommends a vote AGAINST
this proposal.
This proposal is substantially the same as a proposal submitted by
the same shareholder in 1993, which the shareholders defeated. In July
1993, MDC amended its bylaws to require that members of its Nominating
Committee "be independent of management and free from any relationships
that, in the opinion of the Board, would interfere with the exercise of
independent judgment." MDC's Nominating Committee, therefore, is
comprised of four members all of whom are non-management directors.
Thus, this proposal is in large part moot.
The proponent, however, has used a broader, more restrictive
definition of Nominating Committee member independence than that which
is generally used by public companies. The Board believes that the
proposal could result in automatically eliminating qualified Board
members from serving on the Nominating Committee. The Board believes
that it is not in MDC's or the shareholders' best interests to tie the
hands of the Board unnecessarily by forcing them to use mechanical
determinations of committee composition rather than prudent business
judgment.
Finally, in considering the Board's position, it should be noted
that in addition to MDC's Nominating Committee which is comprised of
four non-management members, eleven of MDC's thirteen directors are
non-management directors; MDC's Audit Committee is comprised of four
members, all of whom are non-management directors; and MDC's Management
Compensation and Succession Committee is comprised of four members, all
of whom are non-management directors.
The Board believes that the composition of MDC's Nominating
Committee is independent of management.
FOR THE ABOVE REASONS, THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST THIS PROPOSAL. Proxies will be so voted unless shareholders
specify otherwise in their proxies. A majority of the shares
represented in person or by proxy which are entitled to be voted at the
Annual Meeting is required for the adoption of this proposal.
8. OTHER MATTERS
MDC management does not know of any other matters which may come before
the meeting. However, if any other matters do properly come before the
meeting, the persons named as proxies intend to vote upon them in
accordance with their best judgment.
<PAGE> 40 HARD COPY PG. 38
SHAREHOLDER PROPOSALS
Under the Company's Bylaws, in order for a shareholder to nominate a
candidate for director, timely notice must be received by the Company
in advance of the meeting. Ordinarily such notice must be received not
less than 60 nor more than 90 days before the first anniversary of the
preceding year's Annual Meeting. However, if the date of the Annual
Meeting is advanced by more than 30 days or delayed by more than 60
days from such anniversary date, notice must be received not earlier
than the 90th day prior to the Annual Meeting and not later than the
later of (i) the 60th day prior to the date set for the Annual Meeting
or (ii) the tenth day following the date on which the date set for the
Annual Meeting is first announced publicly. In certain cases, notice
may be delivered later if the number of directors to be elected to the
Board is increased. Any shareholder filing a notice of nomination must
include certain information about the nominee, as well as the name and
address of the shareholder and the number of shares of MDC Stock held
by the shareholder.
In order for a shareholder to bring other business before a shareholder
meeting, timely notice must be received by MDC within the time limits
described above. Such notice must include a description of the
proposed business, the reasons therefor, and any interest the
shareholder has in such business.
In each case the notice described above must be given to F. Mark
Kuhlmann, Secretary, McDonnell Douglas Corporation, P.O. Box 516,
St. Louis, Missouri 63166-0516. The fact that the Company may not
insist upon compliance with these requirements should not be construed
as a waiver by the Company of its right to do so at any time in the
future.
The foregoing requirements are separate from and in addition to the
SEC's requirements that a shareholder must meet to have a proposal
included in the Company's proxy statement. Proposals of shareholders
intended to be presented at the next Annual Meeting of Shareholders
must be received by MDC by November 19, 1994 for inclusion in its Proxy
Statement and form of Proxy for such meeting. Any such proposals
should be sent to F. Mark Kuhlmann at the address set forth in the
preceding paragraph. Upon receipt of any proposal, MDC will determine
whether to include such proposal in accordance with regulations
governing the solicitation of proxies.
CERTAIN TRANSACTIONS WITH MANAGEMENT
One executive officer of the Company was indebted to the Company during
1993 in an amount in excess of $60,000. The Company made a shared
appreciation loan to R. H. Hood, Jr. on April 29, 1989 in the principal
amount of $665,000. The loan was one of several made to assist key
employees who transferred to Douglas Aircraft Company in purchasing new
homes in California. Each such loan is secured by a Second Deed of
Trust on the employee's residence. No installments of principal or
interest are due on the loans until the earliest of: (i) the date the
<PAGE> 41
employee ceases to use the new home as his principal residence; (ii)
the date on which he transfers part or all of his interest in the
residence; (iii) the date his employment with MDC terminates other than
by death; (iv) one year after his death; (v) acceleration of the
maturity date; or (vi) thirty years after the loan was made. When the
loan becomes due, the employee is required to pay MDC its Proportionate
Share (as defined in the loan documents) of the fair market value of
the employee's residence. MDC's Proportionate Share is approximately
HARD COPY PG. 39
the ratio of the loan amount to the purchase price of the residence.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers, and persons who own more
than ten percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership on
Forms 3, 4 and 5 with the SEC and the New York Stock Exchange.
Directors, executive officers, and greater than ten percent shareowners
are required by SEC regulation to furnish the Company with copies of
all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received, or written representations from certain reporting persons
that no Form 5s were required for these persons, the Company believes
that all its directors, executive officers, and greater than ten
percent beneficial owners complied with all filing requirements
applicable to them with respect to transactions during 1993 except for
the following inadvertent omissions: (i) C. J. Dorrenbacher, who
retired from the Company on January 29, 1993, did not file a report with
respect to one post-retirement transaction on a timely basis and (ii)
R. H. Hood, Jr. did not file two reports with respect to two
transactions on a timely basis. When these inadvertent omissions were
discovered, both individuals promptly filed the appropriate reports.
SOLICITATION OF PROXIES
The solicitation of this proxy is made by the Board of Directors of the
Company. Proxies for the Annual Meeting of Shareholders will be
solicited by mail and may also be solicited by MDC directors, officers,
and employees, personally or by telephone or telegraph. Such persons
will not be specially compensated for such service. D. F. King & Co.,
Inc. has been retained for solicitation of proxies for a fee of $10,000
plus reasonable out-of-pocket expenses. Brokerage houses, custodians,
nominees and fiduciaries also will be requested to forward proxy
materials to the beneficial owners of shares held of record by such
persons and will be reimbursed for their expenses. The entire cost of
solicitations will be borne by MDC. Any shareholder giving a proxy may
revoke it by (i) communicating such revocation in writing prior to the
<PAGE> 42
meeting to F. Mark Kuhlmann, Secretary, McDonnell Douglas Corporation,
P.O. Box 516, St. Louis, Missouri 63166-0516, (ii) duly executing and
delivering a proxy bearing a later date, or (iii) attending the meeting
and casting a contrary vote.
By order of the Board of Directors
F. MARK KUHLMANN
Secretary
March 18, 1994
<PAGE> 43 HARD COPY PG. 40
EXHIBIT A
MCDONNELL DOUGLAS CORPORATION
1994 PERFORMANCE AND EQUITY INCENTIVE PLAN
ARTICLE I
NAME AND PURPOSE
1.1 Name. The name of this Plan is the "McDonnell Douglas
Corporation 1994 Performance and Equity Incentive Plan."
1.2 Purpose. The purpose of the Plan is to enhance the
profitability and value of the Company for the benefit of its
shareholders by providing equity ownership opportunities and
performance based incentives to better align the interests of officers
and key employees with those of shareholders. The Plan is also
designed to enhance the profitability and value of the Company for the
benefit of its shareholders by providing stock and cash awards to
attract, retain and motivate officers and other key employees who make
important contributions to the success of the Company.
ARTICLE II
DEFINITIONS OF TERMS AND RULES OF CONSTRUCTION
2.1 General Definitions. The following words and phrases, when
used in the Plan, unless otherwise specifically defined or unless the
context clearly otherwise requires, shall have the following respective
meanings:
(a) Affiliate. A Parent, or Subsidiary of the Company or
any other entity designated by the Committee in which the Company
owns at least a 50% interest (including, but not limited to,
partnerships and joint ventures).
(b) Agreement. The document which evidences the grant of
any Benefit under the Plan and which sets forth the Benefit and
the terms, conditions and provisions of, and restrictions relating
to, such Benefit.
(c) Benefit. Any benefit granted to a Participant under the
Plan.
(d) Board. The Board of Directors of the Company.
(e) Cash Award. A Benefit payable in the form of cash.
(f) Change of Control. (i) The acquisition at any time by
a "person" or "group" (as that term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) (excluding, for this purpose, the
Company or any Subsidiary or any employee benefit plan of the
Company or any Subsidiary) of beneficial ownership (as defined in
Rule 13d-3 under the Exchange Act) directly or indirectly, of
securities representing 20% or more of the combined voting power
in the election of directors of the then-outstanding securities of
<PAGE> 44 HARD COPY PG. 41
the Company or any successor of the Company; (ii) the termination
of service as directors, for any reason other than death,
disability or retirement from the Board in accordance with MDC Bd.
Res. 706, as it may be amended or superseded, during any period of
two consecutive years or less, of individuals who at the beginning
of such period constituted a majority of the Board of Directors,
unless the election of or nomination for election of each new
director during such period was approved by a vote of at least two-
thirds of the directors still in office who were directors at the
beginning of the period; (iii) approval by the shareholders of the
Company of any merger or consolidation or statutory share exchange
as a result of which the Common Stock shall be changed, converted or
exchanged (other than a merger or share exchange with a wholly-
owned Subsidiary of the Company) or liquidation of the Company or
any sale or disposition of 50% or more of the assets or earning
power of the Company; or (iv) approval by the shareholders of the
Company of any merger or consolidation or statutory share exchange
to which the Company is a party as a result of which the persons
who were shareholders of the Company immediately prior to the
effective date of the merger or consolidation or statutory share
exchange shall have beneficial ownership of less than 50% of the
combined voting power in the election of directors of the
surviving corporation following the effective date of such merger
or consolidation or statutory share exchange; provided, however,
that no Change in Control shall be deemed to have occurred if,
prior to such time as a Change in Control would otherwise be
deemed to have occurred, the Company's Board of Directors deems
otherwise. A "Change in Control" shall not include any reduction
in ownership of an Affiliate so long as the entity continues to
meet the definitions of those terms as contained in this Section.
(g) Code. The Internal Revenue Code of 1986, as amended.
Any reference to the Code includes the regulations promulgated
pursuant to the Code.
(h) Company. McDonnell Douglas Corporation.
(i) Committee. The Company's Management Compensation and
Succession Committee or its successor.
(j) Common Stock. The Company's $1.00 par value common
stock.
(k) Effective Date. The date that the Plan is approved by
the shareholders of the Company which must occur within one year
after approval by the Board. Any grants of Benefits prior to the
approval by the shareholders of the Company shall be void if such
approval is not obtained.
(l) Employee. Any person employed by the Employer.
(m) Employer. The Company and all Affiliates.
(n) Exchange Act. The Securities Exchange Act of 1934, as
amended.
<PAGE> 45 HARD COPY PG. 42
(o) Fair Market Value. The closing price of a Share on the
New York Stock Exchange on a given date, or, in the absence of
sales on a given date, the closing price on the New York Stock
Exchange on the last day on which a sale occurred prior to such
date.
(p) Fiscal Year. The taxable year of the Company which is the
calendar year.
(q) ISO. An Incentive Stock Option as defined in Section 422
of the Code.
(r) NQSO. A Non-Qualified Stock Option, which is an Option
that does not meet the statutory requirements of an ISO.
(s) Option. An option to purchase Shares granted under the
Plan.
(t) Other Stock Based Award. An award under ARTICLE XVIII
that is valued in whole or in part by reference to, or is otherwise
based on, Common Stock.
(u) Parent. Any corporation (other than the Company or a
Subsidiary) in an unbroken chain of corporations ending with the
Company, if, at the time of the grant of an Option or other Benefit,
each of the corporations (other than the Company or a Subsidiary)
owns stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.
(v) Participant. An Employee who is granted a Benefit under
the Plan. Benefits may be granted only to Employees.
(w) Performance Share. A Share awarded to a Participant under
ARTICLE XVI of the Plan.
(x) Plan. The McDonnell Douglas Corporation 1994 Performance
and Equity Incentive Plan and all amendments and supplements to it.
(y) Restricted Stock. Shares issued under ARTICLE XV of the Plan.
(z) Rule 16b-3. Rule 16b-3 promulgated by the SEC, as
amended, or any successor rule in effect from time to time.
(aa) SEC. The Securities and Exchange Commission.
(bb) Share. A share of Common Stock.
(cc) SAR. A Stock Appreciation Right, which is the right to
receive an amount equal to the appreciation, if any, in the Fair
Market Value of a Share from the date of the grant of the right to
the date of its payment.
(dd) Subsidiary. Any corporation, other than the Company, in
an unbroken chain of corporations beginning with the Company if, at
the time of grant of an Option or other Benefit, each of the
corporations, other than the last corporation in the unbroken chain,
<PAGE> 46 HARD COPY PG. 43
owns stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.
2.2 Other Definitions. In addition to the above definitions,
certain words and phrases used in the Plan and any Agreement may be
defined in other portions of the Plan or in such Agreement.
2.3 Conflicts in Plan. In the case of any conflict in the terms of
the Plan, or between the Plan and an Agreement, relating to a Benefit,
the provisions in the ARTICLE of the Plan which specifically grants such
Benefit shall control those in a different ARTICLE or in such Agreement.
ARTICLE III
COMMON STOCK
3.1 Number of Shares. The number of Shares which may be issued or
sold or for which Options, SARs or Performance Shares may be granted
under the Plan shall be 1,900,000, no more than 950,000 of which may be
awarded to Participants who are subject to Section 16 of the Exchange
Act. During the term of this Plan, no more than 250,000 of such Shares
may be granted to any one individual. Such Shares may be authorized but
unissued Shares, reacquired Shares, Shares acquired on the open market
specifically for distribution under this Plan, or any combination
thereof.
3.2 Reusage. If an Option or SAR expires or is terminated,
surrendered or canceled without having been fully exercised, if
Restricted Shares or Performance Shares are forfeited, or if any other
grant results in any Shares not being issued, the unused Shares covered
by any such Benefit shall again be available for grant under the Plan to
any Participant who is not subject to Section 16 of the Exchange Act.
3.3 Adjustments. If there is any change in the Common Stock of the
Company by reason of any stock split, stock dividend, spin-off, split-up,
spin-out, recapitalization, merger, consolidation, reorganization,
combination or exchange of shares, or any other similar transaction, the
number of shares available for grant under the Plan or subject to or
granted pursuant to a Benefit and the price thereof, as applicable, shall
be appropriately adjusted by the Committee.
ARTICLE IV
ELIGIBILITY
4.1 Determined By Committee. The Participants and the Benefits
they receive under the Plan shall be determined by the Committee in its
sole discretion. In making its determinations, the Committee shall
consider past, present and expected future contributions of Participants
and potential Participants to the Employer. Members of the Committee and
any other persons whose participation in the Plan would cause
disqualification of this or any other benefit plan intended to be
qualified under Rule 16b-3 are ineligible to participate in the Plan.
<PAGE> 47 HARD COPY PG. 44
ARTICLE V
ADMINISTRATION
5.1 Committee. The Plan shall be administered by the Company's
Management Compensation and Succession Committee or its successor. The
Committee shall consist of three or more members of the Board who are
"disinterested persons" as defined in Rule 16b-3 and are "outside
directors" as defined in Code Section 162(m) and the regulations
thereunder.
5.2 Authority. Subject to the terms of the Plan, the Committee
shall have sole discretionary authority to:
(a) determine the individuals to whom Benefits are granted,
the type and amounts of Benefits to be granted and the date of issuance
and duration of all such grants;
(b) determine the terms, conditions and provisions of, and
restrictions relating to, each Benefit granted;
(c) interpret and construe the Plan and all Agreements;
(d) prescribe, amend and rescind rules and regulations
relating to the Plan;
(e) determine the content and form of all Agreements;
(f) determine all questions relating to Benefits under the Plan;
(g) maintain accounts, records and ledgers relating to Benefits;
(h) maintain records concerning its decisions and proceedings;
(i) employ agents, attorneys, accountants or other persons for
such purposes as the Committee considers necessary or desirable; and
(j) do and perform all acts which it may deem necessary or
appropriate for the administration of the Plan and carry out the purposes
of the Plan.
5.3 Performance Based Benefits. The Committee's discretion to grant
Benefits includes the right to issue up to 25,000 Shares per Fiscal Year
which are not performance based. Since one of the primary purposes of
the Plan is to provide performance based incentives, not less than 40% of
the Shares in excess of this amount which may be issued or sold or for
which Options, SARs or Performance Shares may be granted under the Plan
in any Fiscal Year shall be payable solely on account of the attainment of
performance goals established at the sole discretion of the Committee at
the time such Benefit is granted. Such performance goals will be based
upon one or more of the following performance based criteria, either on
a Company-specific basis or in comparison with peer group performance:
return on net assets, return on assets, return on equity, return on capital,
return on revenues, cash flow, book value, Share price performance (including
Options and SARs tied solely to appreciation in the fair market value of
<PAGE> 48 HARD COPY PG. 45
the Shares), earnings per Share, price earnings ratio, or total quality
management score calculated generally in accordance with criteria and
scoring procedures specified by the Malcolm Baldridge Foundation.
5.4 Delegation. Except as required by Rule 16b-3 with respect to
grants of Options, SARs, Performance Shares, Other Stock Based Awards, or
other Benefits to individuals who are subject to Section 16 of the
Exchange Act or as otherwise required for compliance with Rule 16b-3 or
other applicable law, the Committee may delegate all or any part of its
authority under the Plan to any Employee, Employees or committee of
Employees.
5.5 Decisions of Committee and its Delegates. All decisions made
by the Committee, or (unless the Committee has specified an appeal
process to the contrary) any other person or persons to whom the
Committee has delegated authority, pursuant to the provisions hereof
shall be final and binding on all persons.
ARTICLE VI
AMENDMENT OF PLAN
6.1 Power of Committee. The Committee shall have the sole right
and power to amend the Plan at any time and from time to time; provided,
however, that the Committee may not amend the Plan, without approval of
the shareholders of the Company, in a manner which would:
(a) cause Options which are intended to qualify as ISOs to
fail to qualify;
(b) cause the Plan to fail to meet the requirements of Rule
16b-3; or
(c) violate applicable law.
ARTICLE VII
TERM AND TERMINATION OF PLAN
7.1 Term. The Plan shall commence as of the Effective Date. No
Benefit shall be granted pursuant to the Plan on or after the tenth
anniversary date of the Effective Date, but Benefits granted prior to
such tenth anniversary may extend beyond that date to the date(s)
specified in the Agreement(s) covering such Benefits.
7.2 Termination. Subject to ARTICLE VIII, the Plan may be
terminated at any time by the Committee.
ARTICLE VIII
MODIFICATION OR TERMINATION OF BENEFITS
8.1 General. Subject to the provisions of Section 8.2, the
amendment or termination of the Plan shall not adversely affect a
Participant's rights to or under any Benefit granted prior to such
amendment or termination.
<PAGE> 49 HARD COPY PG. 46
8.2 Committee's Right. Except as may be provided in an Agreement,
any Benefit granted may be converted, modified, forfeited or canceled,
prospectively or retroactively, in whole or in part, by the Committee in
its sole discretion, but, subject to Section 8.3, no such action may
impair the rights of any Participant without his or her consent. Except
as may be provided in an Agreement, the Committee may, in its sole
discretion, in whole or in part, waive any restrictions or conditions
applicable to, or accelerate the vesting of, any Benefit.
8.3 Termination of Benefits under Certain Conditions. The
Committee in its sole discretion may cancel any unexpired, unpaid, or
deferred Benefits at any time if the Participant is not in compliance
with all applicable provisions of this Plan or with any Agreement or if
the Participant, whether or not he or she is currently employed by an
Employer, acts in a manner contrary to the best interests of the Company
or any Affiliate.
8.4 Awards to Foreign Nationals and Employees Outside the United
States. To the extent the Committee deems it necessary, appropriate or
desirable to comply with foreign law or practice and to further the
purpose of this Plan, the Committee may, without amending this Plan, (i)
establish special rules applicable to Benefits granted to Participants
who are foreign nationals, are employed outside the United States, or
both, including rules that differ from those set forth in this Plan, and
(ii) grant Benefits to such Participants in accordance with those rules.
ARTICLE IX
CHANGE OF CONTROL
9.1 Right of Committee. The occurrence of a Change of Control
shall not limit the Committee's authority to take any action, in its sole
discretion, permitted by Section 8.2. The Committee, in its sole
discretion, may specify in any Agreement the effect a Change of Control
will have on such Agreement.
ARTICLE X
AGREEMENTS AND CERTAIN BENEFITS
10.1 Grant Evidenced by Agreement. The grant of any Benefit under
the Plan may be evidenced by an Agreement which shall describe the
specific Benefit granted and the terms and conditions of the Benefit.
The granting of any Benefit shall be subject to, and conditioned upon, the
recipient's execution of any Agreement required by the Committee. Except
as otherwise provided in an Agreement, all capitalized terms used in the
Agreement shall have the same meaning as in the Plan, and the Agreement
shall be subject to all of the terms of the Plan.
10.2 Provisions of Agreement. Each Agreement shall contain such
provisions as the Committee shall determine in its sole discretion to be
necessary, desirable and appropriate for the Benefit granted which may
<PAGE> 50 HARD COPY PG. 47
include, but not necessarily be limited to, the following: description
of the type of Benefit; the Benefit's duration; its transferability; if
an Option, the exercise price, the exercise period and the person or
persons who may exercise the Option; the effect upon such Benefit of the
Participant's death, disability, change of duties or termination of
employment; the Benefit's conditions; subject to the provisions of
Section 11.2, when, if, and how any Benefit may be forfeited, converted
into another Benefit, modified, exchanged for another Benefit, or
replaced; and the restrictions on any Shares purchased or granted under
the Plan.
10.3 Certain Benefits. Any Benefit granted to an individual who is
subject to Section 16 of the Exchange Act shall not be transferable other
than by will or the laws of descent and distribution and shall be
exercisable during the Participant's lifetime only by the Participant,
his or her guardian or legal representative. The designation of a
beneficiary by such individual shall not constitute a transfer.
ARTICLE XI
TANDEM AWARDS AND REISSUANCE OF OPTIONS
11.1 Tandem Awards. Benefits may be granted by the Committee in its
sole discretion individually or in tandem, provided, however, that no
Benefit except SARs may be granted in tandem with an ISO.
11.2 Cancellation and Reissuance of Options. The Committee will not
permit the repricing of Options by any method, including by cancellation
and reissuance.
ARTICLE XII
PAYMENT, DIVIDENDS, DEFERRAL AND WITHHOLDING
12.1 Payment. Upon the exercise of an Option or in the case of any
other Benefit that requires a payment by a Participant to the Company,
the amount due the Company is to be paid:
(a) in cash;
(b) by the surrender of all or part of a Benefit (including
the Benefit being exercised);
(c) by the tender to the Company of Shares owned by the
Participant and registered in his or her name having a Fair Market Value
equal to the amount due to the Company;
(d) in other property, rights and credits, deemed acceptable
by the Committee including the Participant's promissory note; or
(e) by any combination of the payment methods specified in (a)
through (d) above.
<PAGE> 51 HARD COPY PG. 48
Notwithstanding the foregoing, any method of payment other than in cash
may be used only with the consent of the Committee or if and to the
extent so provided in an Agreement. The proceeds of the sale of Shares
purchased pursuant to an Option and any payment to the Company for other
Benefits shall be added to the general funds of the Company or to the
reacquired Shares held by the Company, as the case may be, and used for
the corporate purposes of the Company as the Board shall determine.
12.2 Dividend Equivalents. Grants of Benefits in Shares or Share
equivalents may include dividend or dividend equivalent payments or
dividend credit rights.
12.3 Optional Deferral. The right to receive any Benefit under the
Plan may, at the request of the Participant, be deferred for such period
and upon such terms as the Committee shall determine, which may include
crediting of interest on deferrals of cash and crediting of dividends on
deferrals denominated in Shares.
12.4 Code Section 162(m). The Committee, in its sole discretion,
may require that one or more Agreements contain provisions which provide
that, in the event Section 162(m) of the Code, or any successor provision
relating to excessive employee remuneration, would operate to disallow a
deduction by the Company for all or part of any Benefit under the Plan, a
Participant's receipt of the portion of such Benefit that would not be
deductible by the Company shall be deferred until the next succeeding
year or years in which the Participant's remuneration does not exceed the
limit set forth in such provision of the Code.
12.5 Withholding. The Company may, at the time any distribution is
made under the Plan, whether in cash or in Shares, or at the time any
Option is exercised, withhold from such distribution or Shares issuable
upon the exercise of an Option, any amount necessary to satisfy federal,
state and local withholding requirements with respect to such
distribution or exercise of such Option. Such withholding may be
satisfied, at the Company's option, either by cash or the Company's
withholding of Shares. Agreements may contain withholding provisions
applicable only to Participants who are subject to Section 16 of the
Exchange Act.
ARTICLE XIII
OPTIONS
13.1 Types of Options. It is intended that both ISOs and NQSOs may
be granted by the Committee under the Plan.
13.2 Option Price. The purchase price for Shares under any ISO
shall be no less than the Fair Market Value of the Shares at the time the
Option is granted.
13.3 Other Requirements for ISOs. The terms of each Option which is
intended to qualify as an ISO shall meet all requirements of Section 422
of the Code or any successor statute in effect from time to time.
<PAGE> 52 HARD COPY PG. 49
13.4 NQSOs. The terms of each NQSO shall provide that such Option
will not be treated as an ISO. The purchase price for Shares under any
NQSO shall be no less than the Fair Market Value of the Shares at the
time the Option is granted.
13.5 Determination by Committee. Except as otherwise provided in
Section 13.2 through Section 13.4, the terms of all Options shall be
determined by the Committee.
ARTICLE XIV
SARS
14.1 Grant and Payment. The Committee may grant SARs. Upon
electing to receive payment of an SAR, a Participant shall receive
payment in cash, in Shares, or in any combination of cash and Shares, as
the Committee shall determine.
14.2 Grant of Tandem Award. If SARs are granted in tandem with an
Option, the exercise of the Option shall cause a proportional reduction
in SARs standing to a Participant's credit which were granted in tandem
with the Option; and the payment of SARs shall cause a proportional
reduction of the Shares under such Option. If SARs are granted in tandem
with an ISO, the SARs shall have such terms and conditions as shall be
required for the ISO to qualify as an ISO.
14.3 Payment of Award. SARs shall be paid by the Company to a
Participant, to the extent payment is elected by the Participant (and is
otherwise due and payable), as soon as practicable after the date on
which such election is made.
ARTICLE XV
RESTRICTED STOCK
15.1 Description. The Committee may grant Benefits in Shares as
Restricted Stock with such terms and conditions as may be determined in
the sole discretion of the Committee. Shares of Restricted Stock shall
be issued and delivered at the time of the grant or as otherwise
determined by the Committee, but shall be subject to forfeiture until
provided otherwise in the applicable Agreement or the Plan. Each
certificate representing Shares of Restricted Stock shall bear a legend
referring to the Plan and the risk of forfeiture of the Shares and
stating that such Shares are nontransferable until all restrictions have
been satisfied and the legend has been removed. At the discretion of the
Committee, the grantee may or may not be entitled to full voting and
dividend rights with respect to all shares of Restricted Stock from the
date of grant. The Committee may (but is not obligated to) require that
any dividends on such shares shall be automatically deferred and
reinvested in additional Restricted Stock subject to the same
restrictions as the underlying Benefit.
<PAGE> 53 HARD COPY PG. 50
15.2 Cost of Restricted Stock. Grants of Shares of Restricted Stock
shall be made at such cost as the Committee shall determine and may be
issued for no monetary consideration, subject to applicable state law.
15.3 Nontransferability. Shares of Restricted Stock shall not be
transferable until after the removal of the legend with respect to such
Shares.
ARTICLE XVI
PERFORMANCE SHARES
16.1 Description. Performance Shares represent the right of a
Participant to receive Shares or cash equal to the Fair Market Value of
such Shares at a future date in accordance with the terms and conditions
of a grant. The terms and conditions shall be determined by the
Committee, in its sole discretion, but generally are expected to be based
substantially upon the attainment of targeted financial performance
objectives.
16.2 Grant. The Committee may grant an award of Performance Shares
at such times, in such amounts and under such terms and conditions as it
deems appropriate.
ARTICLE XVII
CASH AWARDS
17.1 Grant. The Committee may grant Cash Awards at such times and
in such amounts as it deems appropriate.
17.2 Limitation. The amount of any Cash Award in any Fiscal Year to
any Participant shall not exceed the greater of $500,000 or 50% of his
cash compensation (excluding any Cash Award under this ARTICLE XVII) paid
in such Fiscal Year.
17.3 Restrictions. As determined by the Committee in its sole
discretion, Cash Awards may be subject or not subject to conditions,
restricted or nonrestricted, vested or subject to forfeiture, and may be
payable currently or in the future or both.
ARTICLE XVIII
OTHER STOCK BASED AWARDS AND OTHER BENEFITS
18.1 Other Stock Based Awards. The Committee shall have the right
to grant Other Stock Based Awards which may include, without limitation,
the grant of Shares based on certain conditions, the payment of cash
based on the market performance of the Common Stock, and the grant of
securities convertible into Shares.
18.2 Other Benefits. The Committee shall have the right to provide
other types of Benefits under the Plan in addition to those specifically
listed, if the Committee believes that such Benefits would further the
purposes for which the Plan has been established.
<PAGE> 54 HARD COPY PG. 51
ARTICLE XIX
MISCELLANEOUS PROVISIONS
19.1 Termination of Employment. If the employment of a Participant
by the Employer terminates for any reason, all unexercised, deferred, and
unpaid Benefits may be exercisable or paid only in accordance with rules
established by the Committee. These rules may provide, as the Committee
in its sole discretion may deem appropriate, for the expiration,
forfeiture, continuation, or acceleration of the vesting, except as may
be provided in an Agreement, of all or part of the Benefits.
19.2 Unfunded Status of the Plan. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation.
With respect to any payments or deliveries of Shares not yet made to a
Participant by the Company, nothing contained herein shall give any
rights that are greater than those of a general creditor of the
Company. The Committee may authorize the creation of trusts or other
arrangements to meet the obligations created under the Plan to deliver
Shares or payments hereunder consistent with the foregoing.
19.3 Designation of Beneficiary. A Participant may file with the
Committee a written designation of a beneficiary or beneficiaries
(subject to such limitations as to the classes and number of
beneficiaries and contingent beneficiaries as the Committee may from time
to time prescribe) to exercise, in the event of the death of the
Participant, an Option, or to receive, in such event, any Benefits. The
Committee reserves the right to review and approve beneficiary
designations. A Participant may from time to time revoke or change any
such designation of beneficiary and any designation of beneficiary under
the Plan shall be controlling over any other disposition, testamentary or
otherwise; provided, however, that if the Committee shall be in doubt as
to the right of any such beneficiary to exercise any Option or to receive
any Benefit, the Committee may determine to recognize only an exercise by
the legal representative of the recipient, in which case the Company, the
Committee and the members thereof shall not be under any further
liability to anyone.
19.4 Nontransferability. Unless otherwise determined by the
Committee or specified in an Agreement, (i) no Benefit granted under this
Plan may be transferred or assigned by the Participant to whom it is
granted other than by beneficiary designation, will, pursuant to the laws
of descent and distribution, or pursuant to a qualified domestic
relations order, and (ii) a Benefit granted under this Plan may be
exercised, during the Participant's lifetime, only by the Participant or
by the Participant's guardian or legal representative; except that, no
ISO may be transferred or assigned pursuant to a qualified domestic
relations order or exercised, during the Participant's lifetime, by the
Participant's guardian or legal representative.
<PAGE> 55 HARD COPY PG. 52
19.5 Rule 16b-3. With respect to Participants subject to Section 16
of the Exchange Act, transactions under this Plan are intended to comply
with all applicable provisions of Rule 16b-3 or its successors under the
Exchange Act. To the extent any provision of the Plan or action by the
Plan administrators fails to so comply, it shall be deemed null and void,
to the extent permitted by law and deemed advisable by the Committee.
19.6 Underscored References. The underscored references contained
in the Plan and in any Agreement are included only for convenience, and
they shall not be construed as a part of the Plan or Agreement or in any
respect affecting or modifying its provisions.
19.7 Number and Gender. The masculine, feminine and neuter, wherever
used in the Plan or in any Agreement, shall refer to either the masculine,
feminine or neuter; and, unless the context otherwise requires, the singular
shall include the plural and the plural the singular.
19.8 Governing Law. The place of administration of the Plan and
each Agreement shall be in the State of Missouri. The corporate law of
the Company's state of incorporation shall govern issues related to the
validity and issuance of Shares. Otherwise, this Plan and each Agreement
shall be construed and administered in accordance with the laws of the
State of Missouri, without giving effect to principles relating to
conflict of laws.
19.9 Purchase for Investment. The Committee may require each person
purchasing or receiving Shares pursuant to a Benefit to represent to and
agree with the Company in writing that such person is acquiring the
Shares for investment and without a view to distribution or resale. The
certificates for such Shares may include any legend which the Committee
deems appropriate to reflect any restrictions on transfer. All
certificates for Shares delivered under the Plan shall be subject to such
stock-transfer orders and other restrictions as the Committee may deem
advisable under all applicable laws, rules and regulations, and the
Committee may cause a legend or legends to be put on any such
certificates to make appropriate references to such restrictions.
19.10 No Employment Contract. Neither the adoption of the Plan
nor any Benefit granted hereunder shall confer upon any Employee any
right to continued employment nor shall the Plan or any Benefit interfere
in any way with the right of the Employer to terminate the employment of
any of its Employees at any time.
19.11 No Effect on Other Benefits. The receipt of Benefits
under the Plan shall have no effect on any benefits to which a
Participant may be entitled from the Employer, under another plan or
otherwise, or preclude a Participant from receiving any such benefits.
<PAGE> 56 HARD COPY PG. 53
Exhibit B
PROPOSED AMENDMENT TO FIRST SENTENCE
OF ARTICLE SEVENTH OF MDC'S CHARTER
The first sentence of Article SEVENTH of MDC's Charter is hereby
amended to read in its entirety as follows:
SEVENTH: The total number of shares of stock of all classes which
the Corporation has authority to issue is 210,000,000 shares of which
200,000,000 shares shall be Common Stock having a par value of $1.00
per share and 10,000,000 shares shall be Preferred Stock having a par
value of $1.00 per share, so that the aggregate par value of all
authorized shares of all classes of stock is $210,000,000.
<PAGE> 57 PROXY CARD
PROXY
MCDONNELL DOUGLAS CORPORATION
Proxy Solicited on Behalf of the Board of Directors of
the Company for the Annual Meeting on April 22, 1994
The undersigned hereby appoints John F. McDonnell and F. Mark
Kuhlmann, or their designees, each with power of substitution, as
lawful proxies to represent and vote as specified on this card all the
shares of common stock held of record by the undersigned on March 4,
1994, at the annual meeting of shareholders to be held on Friday, April
22, 1994, and at any adjournment thereof. Said proxies are authorized
to vote in their discretion as to any other business which may properly
come before the meeting.
Election of Directors.
Nominees to be elected for
term ending in 1997: Beverly B. Byron
William H. Danforth, M.D.
Kenneth M. Duberstein
John F. McDonnell
Ronald L. Thompson
You are encouraged to specify your choices by marking the appropriate
boxes on the reverse side. However if a vote is not specified, said
proxies will vote FOR proposals 1 through 5 and AGAINST proposals 6 and
7. The proxy committee cannot vote your shares unless you sign and
return this card.
SEE REVERSE
SIDE
<PAGE> 58 PROXY CARD..(REVERSE SIDE)
Please mark your votes 5139
X as in this example
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR
proposals 1 through 5 and AGAINST proposals 6 and 7.
The Board of Directors recommends a vote FOR proposals 1 through 5.
For Withheld
1. Election of
Directors
(see reverse) ------ --------
For, except vote withheld from the following nominee(s):
- -------------------------------------------------
For Against Abstain
2. Proposal to approve the
1994 Performance and
Equity Incentive Plan. ----- -------- --------
3. Proposal to increase
authorized common stock. ----- -------- --------
4. Proposal to reapprove the
continuation of the MDC
Salaried Employees'
Savings Plans. ----- -------- --------
5. Ratification of independent
accountants. ----- -------- --------
The Board of Directors recommends a vote AGAINST proposals 6 through 7.
For Against Abstain
6. Proposal regarding conversion
of assets to commercial use. ----- ------ -------
7. Proposal regarding composition
of Nominating Committee. ------ ------- -------
Address change/comments noted ------
Mark this box to obtain an admittance ticket ------
SIGNATURE(S) --------------------------------- DATE --------------
NOTE: Please sign exactly as name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
The signer hereby revokes all proxies heretofore given by the
signer to vote at said meeting or any adjournment thereof.
<PAGE> 59 VOTER INSTRUCTION CARD
CONFIDENTIAL VOTING INSTRUCTIONS
MCDONNELL DOUGLAS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS - APRIL 22, 1994
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
TO: THE CHASE MANHATTAN BANK, N.A., TRUSTEE UNDER THE EMPLOYEE
SAVINGS, INVESTMENT AND THRIFT PLANS OF MCDONNELL DOUGLAS CORPORATION
AND THE EMPLOYEE PAYROLL STOCK OWNERSHIP PLAN OF MCDONNELL DOUGLAS
CORPORATION
I HEREBY DIRECT THE TRUSTEE TO VOTE, IN PERSON OR BY PROXY, AT THE
ANNUAL MEETING OF SHAREHOLDERS OF MCDONNELL DOUGLAS CORPORATION (MDC)
TO BE HELD ON APRIL 22, 1994, AND ANY ADJOURNMENTS THEREOF, ALL FULL
AND FRACTIONAL SHARES OF COMMON STOCK OF MDC CREDITED TO MY ACCOUNTS AT
THE CLOSE OF BUSINESS ON MARCH 4, 1994, UNDER THE EMPLOYEE SAVINGS,
INVESTMENT AND THRIFT PLANS OF MDC, AND THE EMPLOYEE PAYROLL STOCK
OWNERSHIP PLAN OF MCDONNELL DOUGLAS CORPORATION IN ACCORDANCE WITH THE
INSTRUCTIONS ON THE REVERSE HEREOF.
SHARES IN EACH PLAN ARE VOTED BY THE TRUSTEE, AND PARTICIPANTS MAY NOT
VOTE SUCH SHARES AT THE ANNUAL MEETING. HOWEVER, IF THESE INSTRUCTIONS
ARE SIGNED AND RETURNED, THE SHARES CREDITED TO YOUR ACCOUNTS WILL BE
VOTED BY THE TRUSTEE IN ACCORDANCE WITH THE SPECIFICATIONS GIVEN. THIS
IS THE ONLY METHOD BY WHICH YOU MAY DIRECT THE VOTING OF SHARES
CREDITED TO YOUR ACCOUNTS. IF THESE INSTRUCTIONS ARE SIGNED AND
RETURNED WITHOUT DIRECTIONS, OR ARE RETURNED SO THAT THEY ARE RECEIVED
LATER THAN APRIL 19, 1994, OR ARE RETURNED WITHOUT SIGNATURE, OR ARE
NOT RETURNED, THE SHARES IN EACH PLAN WILL BE VOTED IN THE SAME
PROPORTION FOR, AGAINST OR IN ABSTENTION AS SHARES IN EACH RESPECTIVE
PLAN ARE VOTED FOR WHICH INSTRUCTIONS ARE RECEIVED; HOWEVER, SUCH
SHARES IN THE EMPLOYEE PAYROLL STOCK OWNERSHIP PLAN OF MCDONNELL
DOUGLAS CORPORATION WILL NOT BE VOTED.
(Continued on the other side)
<PAGE> 60 VOTER INSTRUCTION CARD (REVERSE SIDE)
The Board of Directors recommends a vote FOR proposals 1 through 5.
1. Election of Directors (TO WITHHOLD AUTHORITY TO
DIRECTORS FOR TERMS ENDING IN VOTE FOR ANY INDIVIDUAL
1997, BEVERLY B. BYRON, WILLIAM NOMINEE, WRITE THAT NOMINEE'S
H. DANFORTH, M.D., KENNETH M. NAME ON THE LINE PROVIDED BELOW.
DUBERSTEIN, JOHN F. MCDONNELL TO WITHHOLD AUTHORITY TO VOTE
AND RONALD L. THOMPSON FOR THE NOMINEES AS A GROUP,
MARK THE "WITHHELD" BOX TO
FOR WITHHELD THE LEFT HEREOF)
------ --------- -------------------------------
For Against Abstain
2. Proposal to approve the
1994 Performance and
Equity Incentive Plan. ----- -------- --------
3. Proposal to increase
authorized common stock. ----- -------- --------
4. Proposal to reapprove the
continuation of the MDC
Salaried Employees'
Savings Plans. ----- -------- --------
5. Ratification of independent
accountants. ----- -------- --------
The Board of Directors recommends a vote AGAINST proposals 6 through 7.
For Against Abstain
6. Proposal regarding conversion
of assets to commercial use. ----- ------ -------
7. Proposal regarding composition
of nominating committee. ------ ------- -------
Dated ---------------------, 1994
--------------------------------
Signature of Participant
"PLEASE MARK INSIDE BLUE BOXES SO THAT DATA
PROCESSING EQUIPMENT WILL RECORD YOUR VOTE"
