<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
Filed by the registrant X
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):
X $125 per Exchange Act Rule 0-11(c)(l)(ii), 14a-6(i)(l), or 14a-6(i)(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 transactions applies:
- ----------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- ----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- ----------------------------------------------------------------------------
Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
- -----------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- -----------------------------------------------------------------------
(3) Filing party:
- -----------------------------------------------------------------------
(4) Date filed:
- -----------------------------------------------------------------------
<PAGE> Page 1
MCDONNELL DOUGLAS CORPORATION
----------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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 28,
1995, 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 four directors (page 2).
2. A proposal to approve the Senior Executive Performance Sharing
Plan (page 26).
3. A shareholder proposal regarding the composition of the
Nominating Committee (page 28).
4. Such other matters as may properly come before the meeting.
Shareholders of record at the close of business on March 3, 1995 will be
entitled to receive notice of and to vote at the meeting and any
adjournments thereof. The Annual Report to Shareholders for the year ended
December 31, 1994 is enclosed.
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, P.O. Box 516, St. Louis, MO 63166-
0516. 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, please mail your request so that MDC receives it
by April 21, 1995. An admittance card in your name will be mailed to you
promptly. Any shareholder who does not have a ticket may still register at
the door; however, those whose shares are held in street accounts must also
bring proof of stock ownership.
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,
STEVEN N. FRANK
Secretary
March 24, 1995
Page 2
MCDONNELL DOUGLAS CORPORATION
P.O. Box 516, St. Louis, Missouri 63166-0516
----------------------
Proxy Statement for
Annual Meeting of Shareholders
To be held Friday, April 28, 1995
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, as set forth in the accompanying Notice of Annual Meeting
of Shareholders, and at all adjournments thereof. The approximate mailing
date of the form of proxy and Proxy Statement is expected to be March 24,
1995. Each holder of record of MDC common stock (MDC Stock) at the close
of business on March 3, 1995 will be entitled to one vote for each share so
held. There were 115,722,101 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
and 2 and AGAINST proposal 3 described in this Proxy Statement and in
accordance with the best judgment of the persons named as proxies on any
other matters coming before the meeting. 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. If a broker or
other nominee indicates on the proxy that it does not have discretionary
authority as to certain shares to vote on a particular matter, such shares
will be treated as present and entitled to vote for purposes of determining
the presence of a quorum but as non-voted for purposes of determining the
approval of such matter.
1. ELECTION OF FOUR 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.
After the election, the Board will consist of thirteen members. 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.
Four directors are to be elected at the Annual Meeting. The
affirmative vote of a plurality of all the votes cast at a meeting at which
a quorum is present is required for the election of each nominee. The
nominees for directors are John H. Biggs and James S. McDonnell III, both
of whom were previously elected by MDC's shareholders; Harry C.
Stonecipher, who became a director on September 24, 1994 and P. Roy
Vagelos, who became a director on January 27, 1995. The Board recommends
that the nominees be elected for terms ending in 1998 and until their
respective successors have been elected and qualify. Proxies may not be
voted for a greater number of persons than the number of nominees named.
Page 3
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.
The principal occupations, directorships held and other information as
of January 31, 1995 with respect to the nominees and all directors whose
terms will continue after the Annual Meeting are shown in the following
table.
To Be Elected for Terms Ending in 1998
- --------------------------------------------------------------------------
[Photo Omitted]
John H. Biggs Director since 1989 Age 58
Chairman and Chief Executive Officer of Teachers Insurance & Annuity
Association of America and of College Retirement Equities Fund (TIAA/CREF)
(national teachers' pension fund) since January 1993; President and Chief
Operating Officer from January 1989 to January 1993. Trustee of
TIAA/CREF. Director of Ralston Purina Company.
- --------------------------------------------------------------------------
[Photo Omitted]
James S. McDonnell III (1) Director since 1975 Age 59
MDC Vice President for more than five years prior to his retirement in
January 1991. Director of Boatmen's Trust Company.
- --------------------------------------------------------------------------
[Photo Omitted]
Harry C. Stonecipher Director since 1994 Age 58
MDC President and Chief Executive Officer since September 1994. Chairman
and Chief Executive Officer of Sundstrand Corporation (manufacturer of
aerospace and electronic equipment) 1991-1994; President 1987-1991.
Director of Cincinnati Milacron, Inc. and Sentry Insurance.
- --------------------------------------------------------------------------
[Photo Omitted]
P. Roy Vagelos, M.D. Director since 1995 Age 65
Chairman of Merck & Co., Inc. (manufacturer of health products) from 1986
until his retirement in November 1994; Chief Executive Officer 1985-1994.
Chairman of the Board of Regeneron Pharmaceuticals, Inc. Director of
PepsiCo, Inc. and The Prudential Insurance Company of America.
Page 4
To Continue in Office Until 1997
- --------------------------------------------------------------------------
[Photo Omitted]
Beverly B. Byron Director since 1994 Age 62
Former Member of Congress, Maryland's Sixth District in the House of
Representatives, 1978-1992. Member of the 1993 Defense Base Closure and
Realignment Commission. Director of Baltimore Gas and Electric Company,
F&M Bancorp, and UNC Incorporated.
- --------------------------------------------------------------------------
[Photo Omitted]
William H. Danforth, M.D. Director since 1976 Age 68
Chancellor of Washington University, St. Louis, since 1971. Director of
Ralston Purina Company and Ralcorp Holdings, Inc.
- --------------------------------------------------------------------------
[Photo Omitted]
Kenneth M. Duberstein Director since 1989 Age 50
Chairman and Chief Executive Officer of The Duberstein Group, Inc.
(consulting firm) since July 1989. White House Chief of Staff 1988-1989.
Director of CINergy Corp.
- --------------------------------------------------------------------------
[Photo Omitted]
John F. McDonnell (1) Director since 1973 Age 56
MDC Chairman since 1988 and Chief Executive Officer 1988-1994. Director
of Ralston Purina Company. Deputy Chairman of the Board of The Federal
Reserve Bank of St. Louis.
- --------------------------------------------------------------------------
[Photo Omitted]
Ronald L. Thompson Director since 1994 Age 45
President and Chairman of The GR Group, Incorporated (manufacturer of
assemblies) since 1980. Chairman and Chief Executive Officer of Midwest
Stamping, Inc. (automotive parts supplier) since 1993. Director of
Illinova Corporation and Illinois Power Company.
Page 5
To Continue in Office Until 1996
- --------------------------------------------------------------------------
[Photo Omitted]
B. A. (Dolph) Bridgewater, Jr. Director since 1985 Age 60
Chairman and Chief Executive Officer of Brown Group, Inc. (footwear
and specialty retailing) since 1985; President 1979-1987 and since January
1990. Director of Boatmen's Bancshares, Inc., ENSERCH Corporation, Enserch
Exploration, Inc., and FMC Corporation.
- --------------------------------------------------------------------------
[Photo Omitted]
William E. Cornelius Director since 1986 Age 63
Chairman and Chief Executive Officer of Union Electric Company (electric
utility) for more than four years until his retirement in December 1993.
Director of Boatmen's Bancshares, Inc., General American Life Insurance
Company, and Union Electric Company.
- --------------------------------------------------------------------------
[Photo Omitted]
William S. Kanaga Director since 1987 Age 69
Chairman of the public accounting firm of Arthur Young & Company for more
than five years prior to his retirement in 1985. Director of Value Line,
Inc.
- --------------------------------------------------------------------------
[Photo Omitted]
George A. Schaefer Director since 1990 Age 66
Chairman and Chief Executive Officer of Caterpillar, Inc. (manufacturer of
machinery) for more than five years prior to his retirement in 1990.
Director of Aon Corporation, Caterpillar, Inc., Helmerich & Payne, Inc.,
and Morton International, Inc.
- -----------------------------
(1) J. S. McDonnell III and J. F. McDonnell are brothers.
Page 6
THE BOARD AND ITS COMMITTEES
The Board of Directors held six regularly scheduled meetings and two
telephonic meetings during 1994. Each incumbent director attended over 90%
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 Finance Committee, the Management Compensation and
Succession Committee, and the Nominating Committee.
Audit Committee
- ---------------
The Audit Committee consists of W. S. Kanaga (Chairman), J. H. Biggs,
B. B. Byron 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 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 1994.
Corporate Responsibility Committee
- ----------------------------------
The Corporate Responsibility Committee consists of K. M. Duberstein
(Chairman), B. B. Byron, J. S. McDonnell III and R. L. Thompson. 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 its Standards of Business Conduct, ethics
training programs and related documents, and monitors and provides
suggestions relative to human resources, environmental, worker health and
safety, and other public issues of significance in these areas. The
committee met two times in 1994.
Executive Committee
- -------------------
The Executive Committee consists of J. F. McDonnell (Chairman), B. A.
Bridgewater, Jr., W. E. Cornelius, W. H. Danforth and H. C. Stonecipher.
This committee has been delegated authority to exercise all powers of the
Board in the intervals between meetings of the Board of 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 one time in 1994.
Page 7
Finance Committee
- -----------------
The Finance Committee consists of J. H. Biggs (Chairman), B. A.
Bridgewater, Jr. and R. L. Thompson. This committee reviews with
management, and makes appropriate recommendations and reports to the Board
of Directors on the Company's financial condition and requirements. Such
reviews include: capitalization and debt levels; dividend policy;
investment performance of pension and employee savings plans; financial
resources for new product development and product derivatives in excess of
amounts delegated by the Board to management; policy limitations on
contingent liabilities and guarantees of commercial aircraft sales and
financings; the financing alternatives for acquisitions, dispositions and
mergers larger than delegated by the Board to management; and other matters
which may have significant financial impact on the financial condition or
operations of the Company. The committee was formed during the third
quarter and met one time in 1994.
Management Compensation and Succession Committee
- ------------------------------------------------
The Management Compensation and Succession Committee consists of B. A.
Bridgewater, Jr. (Chairman), W. S. Kanaga, G. A. Schaefer and P. R.
Vagelos. This committee monitors executive evaluation and development;
recommends the staffing of senior positions; recommends to the full Board
Chief Executive Officer 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 nine times in 1994.
Nominating Committee
- --------------------
The Nominating Committee consists of W. H. Danforth (Chairman), K. M.
Duberstein 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 committee met
three times in 1994.
MDC's Nominating Committee will consider director nominee
recommendations by shareholders who write to Steven N. Frank, Secretary,
providing the name and a detailed biography of each prospective nominee.
In January each year, the Nominating Committee generally proposes to the
Board nominees for directors to be elected at MDC's next Annual Meeting of
Shareholders. Therefore, in order to be considered for inclusion in MDC's
Proxy Statement, prospective nominee recommendations should be received by
the Secretary during the first week of January.
Compensation Paid to Board Members Page 8
- ----------------------------------
Compensation for 1994 Services
- ------------------------------
During 1994, directors who were not corporate officers of MDC were
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 was paid a quarterly retainer of
$750, other members of each of the committees were paid a quarterly
retainer of $250, and committee chairmen and committee members were paid
$800 plus expenses for each committee meeting attended. Corporate officers
received no remuneration for service as a director or as a member or
chairman of a committee.
Non-employee directors also participated in the MDC Deferred
Compensation Plan for Non-Employee Directors (the Non-Employee Director
Plan). Under the Non-Employee Director Plan, directors who are not
employed by the Company elected to receive, as an addition to their annual
retainer, 450 restricted shares of MDC Stock or an equivalent amount of
cash. Prior to the 1994 Annual Meeting of Shareholders, the annual award
under the Non-Employee Director Plan was 300 restricted shares or an
equivalent amount of cash. The stock and the cash are issued or paid
within 60 days after each Annual Meeting of Shareholders for services
performed during the twelve months preceding the Annual Meeting and are
subject to restrictions on transfer. Prior to the director compensation
changes discussed below, neither the stock nor the cash vested until the
director became disabled, resigned due to a conflict of interest, died or
retired from the Board in accordance with requirements established by the
Board. In conjunction with the director compensation changes discussed
below, the vesting provisions of the Non-Employee Director Plan were
amended to provide that the shares and cash will vest on the earlier of the
factors listed above or ten years from the end of the year in which the
services to which the retainer payment relates were performed.
Nonvested restricted shares and cash awarded under the Non-Employee
Director Plan are held by the Treasurer of the Company. Directors who
elected 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 elected to receive cash under the Non-
Employee Director Plan will not receive interest.
Amendments to Director Compensation
- -----------------------------------
In order to more closely align the interests of MDC's directors with
its shareholders, the Company has redesigned its director compensation
program effective April 1, 1995. For the first quarter of 1995, directors
will receive the cash retainers and meeting fees described above.
Effective April 1, 1995, the annual retainer will be payable in MDC stock
equivalents. The value of one stock equivalent will equal the fair market
value of one share of MDC Stock. The annual retainer will be equal to one
thousand MDC stock equivalents payable in quarterly installments of 250
stock equivalents in lieu of both the cash Board retainer and the
restricted stock payable for periods following the April 1995 Annual
Meeting under the Non-Employee Director Plan. In addition, directors will
annually elect whether to continue to receive committee retainers and
Page 9
Board and committee meeting fees in cash (in the same amounts discussed
above) or defer such amounts into MDC stock equivalents. In conjunction
with these director compensation changes, the 450 shares of restricted
stock that would have been payable for services rendered prior to the April
1995 Annual Meeting under the Non-Employee Director Plan will be paid
instead as MDC stock equivalents. The value of a director's stock
equivalents will be paid to him or her in cash after the director leaves
the Board for any reason. Directors may make an advance election to
receive this cash in a lump sum or in installments.
To attract and retain qualified directors, it is not uncommon for
publicly traded companies to augment director compensation with director
retirement plans that continue to compensate directors after their service
to the company has ended. MDC has chosen not to adopt such a plan. The
increase in the amount of the Board's annual retainer is intended, in part,
to be in lieu of adopting a director retirement plan.
Other Director Compensation
- ---------------------------
In 1992, MDC entered into a consulting agreement with K. M. Duberstein
to provide certain services in regard to an analysis of the disposition, by
settlement or through litigation, of a matter involving MDC. Under the
agreement, Mr. Duberstein is paid a quarterly retainer of $20,000 and is
reimbursed for expenses incurred on behalf of MDC. In 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. MDC required such additional services for six months
after March 1994.
Page 10
OWNERSHIP OF MDC STOCK
The following table shows the beneficial ownership of MDC Stock as of
January 31, 1995, unless otherwise indicated in the footnotes below, 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. An asterisk in the column
listing the percentage of shares beneficially owned indicates the person
owns less than one 1/100th of one percent of MDC Stock as of January 31,
1995.
Percent of
Number of Shares MDC Stock
Name Beneficially Owned Outstanding (1)
- ------------------------------------------------------------------------
John H. Biggs 8,100 (2) *
B. A. (Dolph) Bridgewater, Jr. 6,600 (3) *
Beverly B. Byron 1,084 (2) *
John P. Capellupo 15,215 (2) .01%
William E. Cornelius 8,100 (2) *
William H. Danforth, M.D. 5,910 (4) *
Kenneth M. Duberstein 2,100 (2) *
Robert H. Hood, Jr. 24,758 (2) .02%
Herbert J. Lanese 30,552 (2) .03%
William S. Kanaga 6,600 (3) *
James S. McDonnell III 3,826,830 (2)(5) 3.29%
John F. McDonnell 2,495,564 (2)(5) 2.15%
George A. Schaefer 3,600 (2) *
Harry C. Stonecipher 180,363 (2) .16%
Ronald L. Thompson 0 ---
P. Roy Vagelos, M.D. 1,392 (6) *
All directors, nominees and
executive officers as a
group (30 persons) 6,713,319 (5)(7) 5.78%
The Chase Manhattan Bank, N.A. 20,209,461 (8) 17.39%
Oppenheimer Group, Inc. 11,904,556 (9) 10.03%
- --------------------------
(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.
Page 11
(3) The director has sole voting and dispositive power for 600 shares.
The remaining shares are held as joint tenant for which there is
shared voting and/or dispositive power.
(4) The director has sole voting and dispositive power for 2,400 shares.
The remaining shares are held as joint tenant for which there is
shared voting and/or dispositive power.
(5) Excludes an additional 7,149,642 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 9.44%,
8.30%, and 11.93%, respectively, of the outstanding MDC Stock.
(6) The director has shared voting and/or dispositive power as the shares
are held as joint tenant.
(7) Includes shares as to which a director or executive officer has sole
or shared voting or dispositive power.
(8) 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 may direct
the Trustee how to vote his or her proportionate share of these
shares. Except for shares held in the PAYSOP, 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. Any
shares held under the PAYSOP for which the Trustee does not receive
voting instructions on any issue or proposal will not be voted with
regard to that issue or proposal.
(9) Based on Schedule 13G dated February 7, 1995, 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
certain of the Group's subsidiaries and/or certain investment advisory
clients or discretionary accounts of such subsidiaries and relating to
their collective beneficial ownership of shares of MDC's common stock.
Oppenheimer Group, Inc. has shared dispositive and voting power with
respect to all such shares.
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (Exchange Act)
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 Securities and Exchange Commission (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 Forms 5 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 1994.
Page 12
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
(collectively, 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
1994 management base salaries, incentive awards, and long-term incentives;
2. Discusses the 1994 compensation of the current and former Chief
Executive Officers; and
3. Outlines briefly proposed changes to the compensation program for
1995, that are described in detail elsewhere in this Proxy Statement.
Executive Compensation Program
- ------------------------------
The 1994 compensation program consists of two parts: annual target
cash compensation (which consists of base salary and annual incentives) and
long-term incentives. Annual incentive awards are made under MDC's
Incentive Award Plan (IA Plan), which was approved by MDC shareholders in
1986. Prior to 1994, long-term incentives were also made under the IA
Plan. Long-term incentive awards are currently made under MDC's 1994
Performance and Equity Incentive Plan (PEIP) which was approved by MDC
shareholders in 1994.
Internal Revenue Code Section 162(m) limits the deductibility of
certain compensation in excess of $1 million for MDC's Chief Executive
Officer and its four other highest paid executives. Certain performance
based compensation, however, is specifically exempt from the deduction
limit if paid under a shareholder approved plan. Although MDC's incentive
compensation programs historically have been designed to reward executives
for achievement of the Company's performance objectives, the IA Plan does
not meet certain technical requirements of Section 162(m). Therefore, on
the Committee's recommendation, the Company is submitting the MDC Senior
Executive Performance Sharing Plan to its shareholders for approval to make
possible the maximum allowable tax deductibility of annual incentive
compensation paid under this program in future years. For outstanding
awards, the Committee has deferred annual and long-term incentive payments
from the IA Plan to the extent such payments would be nondeductible under
Section 162(m). The Committee will continue to endeavor to maximize
deductibility of compensation to the extent practicable while maintaining
competitive compensation.
Page 13
Annual Compensation
- -------------------
In 1993, the Committee established the Performance Sharing Plan (PSP)
pursuant to the IA Plan, under which the annual incentive compensation of
its executive officers and approximately 900 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.
Base salaries are established based on (i) the value of the job
determined with reference to salaries paid to executives of the Comparative
Companies who perform similar duties and (ii) a subjective evaluation of
the executive's performance in the job determined with reference to the
executive's achievement of goals established as follows. 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
(RONA) 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 1994, the amount of incentive compensation actually earned by employees
was determined by the Committee after year-end and paid in March 1995. 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%); RONA (40%); and improvements in total quality management as
measured generally by the Malcolm Baldrige Award criteria, which relate
primarily to internal and external customer satisfaction and process
management (30%). Both cash flow and RONA are adjusted for unusual
accounting and operational items. 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 was capped at two times 30% of the target incentive compensation, but
earned incentive compensation related to RONA and total quality management
had no limit.
Target Compensation was established for 1994 when the Company was
emerging from a period of austerity. Surveys indicated that Target
Compensation for MDC's executive
Page 14
officers was generally lower than the median compensation paid to officers
of the Comparative Companies with comparable responsibilities. Target
Compensation for executive officers in 1994 increased an average of 19%
over 1993 to amounts that were still generally below the median
compensation of the Comparative Companies. A significant amount of this
increase was in the form of target incentive compensation. The average
base salary portion of Target Compensation of executive officers decreased
from 73% in 1993 to 66% in 1994, while the average target incentive award
portion of their Target Compensation increased from 27% in 1993 to 34% in
1994. The allocation of a larger percentage of Target Compensation to
target incentive compensation was intended by the Committee to increase the
portion of the executive officers' compensation that is tied to the
Company's performance. As was the case in 1993, the executive officers'
base salaries are generally below the median base salaries paid to
comparable officers of the Comparative Companies.
Because MDC's cash flow and RONA exceeded the 1994 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 256% of their 1994 target incentive award, compared to
201% for 1993, and base salary paid plus earned incentive compensation paid
to the executive officers increased by 43% over 1993 levels. This improved
performance was driven by MDC's cash flow being substantially in excess of
the Annual Operating Plan, which resulted in aerospace debt reduction of
$353 million and an increase in aerospace cash and cash equivalents of $393
million. RONA for 1994 was above the Annual Operating Plan target for each
business unit due to increased operating income and reduced assets. 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 $35.67 at the end of 1993 to $47.33 at the end of
1994, after adjusting prices to reflect a 3 for 1 stock split paid in
January 1995. All incentive compensation paid in 1995 to the executive
officers based on 1994 services was paid in cash.
Long-Term Incentive Compensation
- --------------------------------
The Committee granted Performance Accelerated Restricted Stock Awards
(PARS Awards) to key executives under the PEIP. PARS Awards are grants of
restricted stock, up to one-half of which, or in the case of the Chairman
of the Board all of which, will be subject to forfeiture if the Company
does not achieve substantial return on net asset targets during the 1994-
1999 fiscal years. PARS Awards were 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 is much smaller than the number of
participants in the PSP annual incentive compensation program.
Several of the Company's executive officers have outstanding Long-Term
Incentive Awards (LTI Awards) which were granted by the Committee prior to
1994 under the IA Plan. LTI Awards are earned only to the extent that
MDC Stock yields a total return superior to the average total
Page 15
return on the common stock of a group of competitive aerospace companies
designated by the Committee during a three year performance period. 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. The LTI Awards were also granted to a relatively small number
of management employees who were expected to have a substantial impact on
the Company's ability to achieve its goals and objectives.
The Committee compares the executive's Target Compensation and currently
outstanding long-term incentive awards to such total compensation paid to
officers performing similar services for the Comparative Companies when it
determines the size of long-term incentive grants. In March 1994 the Committee
granted PARS Awards to each of the officers named in the Summary Compensation
Table of this Proxy Statement other than Harry C. Stonecipher.
Compensation was paid under LTI Awards expiring in 1994 because the total
return on MDC Stock during the performance period for such awards was greater
than the average annual total return on the common stock of the peer companies.
Compensation of the Chief Executive Officer
- -------------------------------------------
On September 24, 1994, MDC entered into an employment agreement with
Harry C. Stonecipher to become President and Chief Executive Officer of the
Company. All aspects of Mr. Stonecipher's 1994 compensation were governed
by this employment agreement.
The Committee and the Board of Directors approved Mr. Stonecipher's
employment agreement after an extensive search had been conducted
by the Board with the assistance of an executive search firm. In
settling on the final compensation amounts, the Board focused on the
importance of hiring a President and Chief Executive Officer with an
outstanding business record who could provide the leadership necessary to
improve MDC's competitiveness and profitability. The Board also recognized
the need to consider Mr. Stonecipher's compensation at his former employer
as well as the value of benefits under various plans of that employer that
would be forfeited by Mr. Stonecipher upon his resignation.
The terms of Mr. Stonecipher's employment agreement are summarized in
the section entitled "Employment Agreement" on page 24. In order to reduce
the amount of Mr. Stonecipher's compensation that may be nondeductible
under Section 162(m), the Committee is considering amending the employment
agreement to convert a portion of Mr. Stonecipher's restricted stock to
stock equivalents which would remain subject to the terms and conditions of
the employment agreement and would not be payable until his employment
terminates.
Compensation of the Former Chief Executive Officer
- --------------------------------------------------
John F. McDonnell was Chairman of the Board and Chief Executive Officer
of the Company through September 23, 1994, and he continues to serve
as Chairman. As Chairman, Mr. McDonnell continues to serve as a full time
officer of the Company. Mr. McDonnell's Target Compensation, earned annual
incentive compensation and long-term incentive compensation were determined
in the same manner as described above for the Company's other executive
Page 16
officers. In setting Mr. McDonnell's compensation, the Committee
considered competitive Chief Executive Officer compensation practices of
the Comparative Companies and the relationship of his compensation to that
paid to MDC's other senior executives. Mr. McDonnell's Target Compensation
for 1994 was $1,031,000, which was a 26% increase from 1993. Mr. McDonnell's
base salary portion of Target Compensation increased approximately 9%
to $620,000 from 1993 to 1994, while the target incentive award
portion of his Target Compensation increased by approximately 64% to
$411,000. Mr. McDonnell's Target Compensation and base salary was below
the median base salaries paid to chief executive officers of the
Comparative Companies. As was the case with the other executive officers,
the allocation of a larger percentage of Mr. McDonnell's Target
Compensation to target incentive compensation was intended by the Committee
to link his opportunity to achieve higher Target Compensation to the
Company's performance. In March 1994, the Committee granted Mr. McDonnell
a PARS Award of 30,000 shares (adjusted for the Company's 3 for 1 stock
split), all of which are subject to forfeiture if the Company does not
achieve substantial RONA targets during the 1994-1999 fiscal years.
In establishing Mr. McDonnell's 1994 earned incentive compensation,
the Committee considered Mr. McDonnell's substantial attainment of
individual goals during 1994, and the Company's exceptional performance in
relation to the three Performance Factors. Mr. McDonnell's earned
incentive compensation for 1994 was $1,000,000, bringing the total of his
base salary and earned incentive compensation for the year to $1,620,000.
Mr. McDonnell's final 1994 incentive compensation was 243% of his target
incentive award. As discussed above, the Committee deferred payment of
Mr. McDonnell's earned incentive compensation to the extent it would have been
nondeductible under Section 162(m). Because Mr. McDonnell did not receive
an LTI Award in 1990 or 1991 maturing in 1994, he did not receive a
long-term incentive award payout in 1994. The Committee has reduced
Mr. McDonnell's Target Compensation in 1995 to recognize the fact that he no
longer serves as Chief Executive Officer and to reflect the value of his
continuing contributions.
MANAGEMENT COMPENSATION AND SUCCESSION COMMITTEE
B. A. Bridgewater, Jr., Chairman
W. S. Kanaga
G. A. Schaefer
P. R. Vagelos
Page 17
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.
(The Table below contains the data points used in the Performance
Graph which appears in the printed Proxy Statement.)
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
Company/Index 1989 1990 1991 1992 1993 1994
McDonnell Douglas $100 $68 $131 $89 $200 $269
S&P 500 Index 100 97 126 136 150 152
Aerospace/Defense 100 104 125 131 171 185
- --------------------
Source: S&P Compustat Services, Inc.
* Assumes that the value of the investment in MDC Stock and each index
was $100 on December 31, 1989 and that all dividends were reinvested.
Page 18
EXECUTIVE COMPENSATION
The table below provides information concerning the annual and long-
term compensation for services rendered to MDC of those persons who at
December 31, 1994 were (i) the Chief Executive Officer and (ii) the other
four most highly compensated executive officers of MDC based on salary and
bonuses for 1994 (the Named Officers).
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
----------------------------------------------------------------------------------------------
Awards Payout
------------------ ------
Other
Annual Restricted Securities All Other
Compen- Stock Underlying LTIP Compen-
Name and sation Awards Options Payout sation
Principal Position Year Salary Bonus(1) (2) ($)(3) (#)(4) ($)(5) (6)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
H. C. Stonecipher 1994 $206,250 (7) $750,000 $22,301 $4,656,750 (8) 450,000 --- $15,374 (9)
President and Chief 1993 --- --- --- --- --- --- ---
Executive Officer 1992 --- --- --- --- --- --- ---
J. F. McDonnell 1994 610,385 1,000,000 (10) --- --- --- --- 36,629
Chairman of 1993 559,477 495,100 --- --- --- --- 33,569
the Board 1992 501,166 184,400 --- --- --- --- 29,819
H. J. Lanese 1994 365,193 578,000 --- 285,313 (11) --- $667,836 21,906
Executive Vice 1993 339,150 277,300 --- --- --- --- 20,359
President and Chief 1992 298,108 125,000 --- --- --- --- 17,751
Financial Officer
J. P. Capellupo 1994 353,269 587,000 --- 285,313 (11) --- 691,688 4,155
President-McDonnell 1993 319,496 300,000 --- --- --- --- 17,670
Douglas Aerospace 1992 273,474 120,200 727 --- --- --- 16,279
R. H. Hood, Jr. 1994 366,471 (12) 415,200 7,883 228,250 (11) --- 834,796 20,225
President-Douglas 1993 352,942 (12) 261,600 2,523 --- --- --- 9,116
Aircraft Company 1992 326,857 (12) 85,800 1,274 --- --- --- 12,577
- ----------------------------
</TABLE>
(1) Mr. Stonecipher's bonus was a one-time bonus paid in accordance with
the Employment Agreement discussed on page 24. All other bonuses are
annual incentive compensation granted pursuant to MDC's Performance
Sharing Plan (for 1994 and 1993) and MDC's Incentive Compensation
Program (for 1992). Annual incentive compensation is paid during the
first three months of the year following the year to which such
compensation relates. For example, 1994 includes those earned
incentive compensation awards paid in March 1995 for services
rendered in 1994, all of which were paid in the form of cash.
(2) The Named Officers received certain perquisites, none of which
exceeded $50,000.
(3) At December 31, 1994, the number and value of the restricted stock
holdings of the following executive officers were: Mr. Stonecipher
126,000 shares ($5,964,000), Mr. McDonnell 30,000 shares
($1,420,000), Mr. Lanese 15,000 shares ($710,000), Mr. Capellupo
15,000 shares ($710,000), and Mr. Hood 12,000 shares ($568,000).
<PAGE>
Page 19
(4) Adjusted to reflect the 3 for 1 stock split paid on January 3, 1995 to
shareholders of record on December 2, 1994.
(5) LTIP payouts include long-term incentive awards originally scheduled
to end in 1994 and awards for which the performance period was to
have ended in 1995, but was shortened from four years to three years
to end in 1994 as part of the Company's adoption of a new long-term
incentive plan. The portions of LTIP payouts related to awards
originally scheduled to end in 1995 were as follows: Mr. Lanese
$596,283, Mr. Capellupo $596,283, and Mr. Hood $715,539.
Approximately one-half of the payout amount was made in cash and one-
half in shares of MDC Stock with the value of the stock based on the
closing price of MDC Stock on March 10, 1994, the date the form of
payout was determined.
(6) Includes amounts contributed by MDC on behalf of the Named Officers
under the Employee Savings Plan of MDC - Salaried Plan (Savings Plan)
and the MDC Supplemental Executive Savings Plan (SESP). The SESP
provides benefits which are not available to 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.
(7) Represents salary for employment from September 24, 1994 through
December 31, 1994.
(8) Of the 126,000 shares of restricted stock granted to Mr. Stonecipher
in 1994 pursuant to the Employment Agreement discussed on page 24,
42,000 shares will vest on March 31 in each of 1995, 1996 and 1997.
The restricted stock is valued as of September 24, 1994,
Mr. Stonecipher's employment date. Dividends are paid on these shares
of restricted stock.
(9) Includes $11,567 for reimbursement of Mr. Stonecipher's relocation
expenses.
(10) MDC's Management Compensation and Succession Committee has deferred
annual incentive payments to the extent such payments would be
nondeductible under Section 162(m). As a result, $560,000 of this
bonus has been deferred.
(11) The restricted stock is valued as of April 22, 1994, the date MDC's
shareholders approved the MDC 1994 Performance and Equity Incentive
Plan, and represents shares which are not subject to forfeiture
provided the executive officer remains employed by the Company for a
period of six years following grant of such shares; all or part of
the shares may vest approximately three years following grant if
certain RONA goals are achieved. Upon a change in control of MDC,
all restrictions and conditions applicable to these restricted shares
will be deemed to have been immediately satisfied. Dividends are
paid on these shares of restricted stock.
(12) Salary includes area and mortgage differentials of $29,901, $34,588 and
$44,845 for the years 1994, 1993 and 1992, respectively.
Page 20
Option Grants
- -------------
The following table provides information about stock options granted
during 1994.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants Grant Date Value
------------------------------- -----------------
Percent of
Number of Total
Securities Options
Underlying Granted to Exercise or Grant Date
Options Employees in Base Price Expiration Present Value
Name Granted (1) Fiscal Year ($/Share)(1) Date (2)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
H. C. Stonecipher 90,000 20% $36.958 9/24/2006 $1,577,618
90,000 20% 36.958 9/24/2007 1,554,905
90,000 20% 36.958 9/24/2008 1,526,918
90,000 20% 36.958 9/24/2009 1,494,698
90,000 20% 36.958 9/24/2010 1,459,122
J. F. McDonnell --- --- --- --- ---
H. J. Lanese --- --- --- --- ---
J. P. Capellupo --- --- --- --- ---
R. H. Hood, Jr. --- --- --- --- ---
- ---------------------
</TABLE>
(1) Options awarded to Mr. Stonecipher pursuant to the terms of the
Employment Agreement discussed on page 24 vest and become exercisable
in 20% increments on September 24 in each of 1996, 1997, 1998, 1999
and 2000. The per share exercise price is the fair market value on
the date Mr. Stonecipher's employment with MDC began. The number of
options and exercise price have been adjusted to reflect the 3 for 1
stock split paid on January 3, 1995 to shareholders of record on
December 2, 1994.
(2) These estimated values are based on the Black-Scholes option pricing
model using the following assumptions and inputs: options exercised
10 years after vesting, three-year prior stock price volatility of
0.37, three-year average dividend yield of 2.10% and interest rates
of 8.00%, 8.05%, 8.10%, 8.15% and 8.20% which were the 12 through 16
year Treasury bond returns at time of grant. The actual value, if
any, the executive officer may realize from these options will depend
solely on the gain in stock price over the exercise price when the
options are exercised, and may vary significantly from the
theoretical values estimated by the Black-Scholes model.
Page 21
Option Fiscal Year-End Value
- ----------------------------
None of the Named Officers exercised any stock options or stock
appreciation rights during 1994 and none of them hold any stock
appreciation rights. The following table provides information with respect
to the number and value of unexercised options held by the Named Officers
at December 31, 1994.
<TABLE>
<CAPTION>
FISCAL YEAR-END OPTION VALUES
Number of Securities Underlying Value of Unexercised
Unexercised In-the-Money
Options at Options at
December 31, 1994 December 31, 1994
------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
H. C. Stonecipher --- 450,000 --- $4,668,750(1)
J. F. McDonnell --- --- --- ---
H. J. Lanese --- --- --- ---
J. P. Capellupo --- --- --- ---
R. H. Hood, Jr. --- --- --- ---
- ---------------------
(1) Represents the difference between the December 31, 1994 closing price
of MDC Stock and the exercise price of the options.
Page 22
Long-Term Incentive Plan Awards
- -------------------------------
The following table provides information concerning awards made during
1994 to the Named Officers under the Performance Accelerated Restricted
Stock (PARS) Program implemented under the MDC 1994 Performance and Equity
Incentive Plan.
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
- ----------------------------------------------------------------------------------------------
Estimated Future Payouts Under
Non-Stock Price-Based Plans(1)(2)
------------------------------------------
Number of Performance Period Threshold Target
Shares Until Payout No. of Shares No. of Shares Maximum
Name (2) (1) (3) (4) No. of Shares
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
H. C. Stonecipher --- (5) --- --- --- ---
J. F. McDonnell 30,000 (6) 1994-2000 1 15,000 30,000
H. J. Lanese 7,500 (6) 1994-2000 1 3,750 7,500
J. P. Capellupo 7,500 (6) 1994-2000 1 3,750 7,500
R. H. Hood, Jr. 6,000 (6) 1994-2000 1 3,000 6,000
- -----------------------------
</TABLE>
(1) The shares of restricted stock disclosed in this table are subject to
forfeiture if certain RONA goals are not obtained for the six calendar
years following the grant of restricted shares (including the year of
grant). Participants are entitled to voting rights and dividends.
Vesting of all or part of the shares, however, may be accelerated to
1997 if MDC achieves specified average RONA goals during the 1994-1996
fiscal years. Upon a change in control of MDC, all restrictions and
conditions applicable to these restricted shares will be deemed to
have been immediately satisfied.
(2) Number of shares adjusted to reflect the 3 for 1 stock split paid on
January 3, 1995 to shareholders of record on December 2, 1994.
(3) Represents the number of shares upon which restrictions will lapse if
a specified minimum level of performance is obtained.
(4) While the real target under the PARS Program is the maximum payout,
this column discloses the number of shares upon which restrictions
will lapse if the level of performance obtained is at the midpoint
between the minimum at which shares may be earned and the level at
which all shares will be earned.
(5) Pursuant to the Employment Agreement discussed on page 24, MDC has
agreed to grant Mr. Stonecipher 120,000 performance based restricted
shares of MDC Stock, which will be granted in installments of 30,000
shares during the first quarters of 1995, 1996, 1997 and 1998.
(6) Represents PARS shares which are subject to forfeiture if certain RONA
goals are not achieved.
Page 23
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.
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 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 $13,608. 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
Five-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 $ 64,438 $ 85,918 $107,397 $128,876 $150,697 $173,197
450,000 98,188 130,198 163,647 196,376 229,447 263,197
600,000 131,938 175,918 219,897 263,876 308,197 353,197
750,000 165,688 220,918 276,147 331,376 386,947 443,197
900,000 199,438 265,918 332,397 398,876 465,696 533,196
1,050,000 233,188 310,917 388,647 466,376 544,447 623,197
1,200,000 266,938 355,918 444,897 533,876 623,197 713,197
</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 annual incentive awards made under the Performance Sharing Plan.
Page 24
Compensation reported in the table on page 18 includes compensation not
covered by the Retirement Plan. As of November 27, 1994 (end of Retirement
Plan year), compensation covered by the Retirement Plan and the SERIP for
1994 for the Named Officers, other than Mr. Stonecipher, 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 -
$1,101,642 ($799,614; 33 years); H. J. Lanese - $640,560 ($493,345; 5
years); J. P. Capellupo - $650,574 ($437,233; 33 years); and R. H. Hood,
Jr. - $597,544 ($429,888; 21 years). Mr. Stonecipher, who was employed by
MDC on September 24, 1994, has not yet completed a year of service.
Mr. Stonecipher's compensation and an arrangement concerning the calculation
of his service under MDC's retirement plans are discussed below in the summary
of the terms of his employment agreement.
EMPLOYMENT AGREEMENT
On September 24, 1994, the Company entered into an employment
agreement (the Agreement) with Mr. Stonecipher designed to assure the
Company of his continued employment as President and Chief Executive
Officer. The original "Employment Period" under the Agreement will expire
on September 23, 1997. However, unless written notice is given to the
contrary by the Company at least one year prior to the expiration date, the
Employment Period annually will be extended for an additional year, but
will not extend beyond May 16, 2001.
Under the Agreement, Mr. Stonecipher receives a base salary of not
less than $825,000 per year; target annual incentive compensation for 1995
of $575,000, with earned annual incentive compensation for 1995 and target
and earned annual incentive compensation thereafter to be determined
pursuant to the same terms and conditions as applied to the other members
of the Company's senior management. The Agreement also provides for
Mr. Stonecipher to receive: a one-time bonus of $750,000; 180,000 restricted
shares of MDC Stock (42,000 shares of which will vest on March 31 in each
of 1995, 1996 and 1997 and 54,000 shares of which will vest on March 31,
2002); 120,000 performance based restricted shares of MDC Stock, which will
be granted in installments of 30,000 shares each during the first quarters
of 1995, 1996, 1997 and 1998, with vesting, performance periods and other
criteria to be as set by the Management Compensation and Succession
Committee of the Company's Board of Directors for other members of senior
management; options to purchase 450,000 shares of MDC Stock at $36.958 per
share (the market price on the date of grant) which vest and become
exercisable in increments of 20% on September 24 in each of 1996, 1997,
1998, 1999 and 2000; reimbursement of moving and relocation expenses
incurred to move his residence to St. Louis, Missouri; and participation in
the Company's other employee benefit plans, policies, practices and
arrangements. As described in the Management Compensation and Succession
Committee Report on Executive Compensation, the Company and Mr. Stonecipher
are considering amending the employment agreement to convert a portion of
Mr. Stonecipher's restricted stock to stock equivalents which would remain
subject to the terms and conditions of the Agreement and would not be
payable until his employment terminates.
For the purposes of calculating Mr. Stonecipher's benefits under the
Company's retirement plans, he will receive credit for twice as many years
of service as he actually works for MDC. In addition, MDC has agreed to
provide a supplemental pension payment equal to the difference
Page 25
between (i) what Mr. Stonecipher would have received from his prior
employer had he stayed with that employer through the end of the Employment
Period and (ii) the pension payments he is actually entitled to receive
from the other company and MDC.
The Agreement provides that throughout the Employment Period, the
Company shall neither assign duties to Mr. Stonecipher which are not
appropriate for someone in the position of President and Chief Executive
Officer, nor substantially diminish his responsibilities. The Agreement
prohibits Mr. Stonecipher from competing with the Company and from
disclosing confidential information concerning the Company so long as any
restricted stock or stock options granted under the Agreement remain
unvested or unexercised. In the event the Company fails to perform any
material covenant or agreement set forth in the Agreement, Mr. Stonecipher
will be entitled to receive for the remainder of the Employment Period the
salary and benefits he would have received if his employment had continued
for such period. These benefits would not be payable, however, in the
event his employment is terminated by reason of a material breach of the
Agreement or for acts involving moral turpitude or a material breach of his
duty of loyalty to the Company. In the event of death or disability, the
Management Compensation and Succession Committee would determine the
reduction, if any, of the amount of incentive compensation that would be
payable or that would vest or remain exercisable. The Agreement also
provides for reimbursement of Mr. Stonecipher for legal expenses incurred
in connection with certain claims or legal proceedings brought under or
involving the Agreement.
Under the Agreement, the Company also is required to make an
additional "gross-up payment" to Mr. Stonecipher to offset fully the effect
of any excise tax imposed on change in control payments under Section 4999
of the Internal Revenue Code of 1986, as amended, on any such payment made
to him under the Agreement. Because the Agreement does not provide for an
acceleration of benefits in the event of a change in control of MDC, the
Company anticipates that the amount of such payment, if any, would not be
substantial.
The Company has no employment agreements with any of its other
executive officers.
CERTAIN TRANSACTIONS WITH MANAGEMENT
One executive officer of the Company was indebted to the Company
during 1994 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 payments are due on the loans until the earliest
of: (i) the date the 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 the ratio
of the loan amount to the purchase price of the residence.
Page 26
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 then incumbent
directors and certain of its officers. The complaint was purportedly
brought, in part, 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. During 1994, in accordance
with Maryland law, MDC's Charter and its Bylaws, MDC advanced approximately
$40,400 in expenses relating to the litigation on behalf of the directors
and officers named in the complaint. In March 1994, defendants moved to
dismiss all claims. Plaintiff did not respond to these motions and in
December 1994 plaintiff voluntarily dismissed the lawsuit without prejudice.
2. PROPOSAL TO APPROVE THE SENIOR EXECUTIVE PERFORMANCE SHARING PLAN
The purpose of this proposal is to seek shareholder approval of the
MDC Senior Executive Performance Sharing Plan (the Plan). The Plan is
being submitted to shareholders for approval in response to Internal
Revenue Code Section 162(m), which imposes limits on the Company's ability
to deduct for federal income tax purposes compensation paid to the Chief
Executive Officer and four other highest paid executives, unless certain
requirements are met. The Plan is similar to the MDC Performance Sharing
Plan (PSP), which has provided annual cash awards of performance based
compensation to key employees since 1993, with certain modifications to
meet the law's requirements that the material terms of performance based
compensation be disclosed to and approved by shareholders prior to payment
of the awards. The Company anticipates that only its executive officers
will participate in the Plan. Other employees who receive annual incentive
compensation but are not executive officers will continue to participate in
the PSP.
The Board of Directors unanimously recommends a vote for the proposal
to approve the Senior Executive Performance Sharing 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.
The Board of Directors has determined that approval of the Plan is in the
best interests of the Company and its shareholders because it will permit
the Company to deduct for tax purposes the full amount of the annual
incentive compensation payments made to its senior executives. If the Plan
is not approved by shareholders, it will not become effective.
The following discussion sets forth the material terms of the Plan.
The discussion is qualified in its entirety by reference to the complete
text of the Plan as set forth in Exhibit A.
General
- -------
The purpose of the Plan is to provide an annual incentive whereby a
significant portion of an executive's compensation is based on his or her
efforts in achieving specified performance objectives established for a
given fiscal year. The Plan is designed to attract, motivate and retain
Page 27
key executives on a competitive basis in which total cash compensation
levels are closely linked with accomplishment of the Company's financial
and strategic objectives.
Administration
- --------------
The Plan is administered by the Management Compensation and Succession
Committee of the Board of Directors (the Committee), which has broad
authority to administer and interpret the Plan, prescribe, amend and
rescind rules relating to the Plan, and determine the rights and
obligations of participants under the Plan.
Eligibility
- -----------
Participation in the Plan is limited to key employees of the Company
designated by the Committee. It is anticipated that approximately twenty
individuals, including the Company's Chief Executive Officer, will receive
awards under the Plan.
Maximum Target Incentive Awards and Performance Criteria
- --------------------------------------------------------
The Committee will establish maximum target awards which will be
payable to participants under the Plan only upon the achievement of
specific performance goals based on one or more of the following
performance criteria: return on assets, return on equity, return on
capital, return on revenues, cash flow, additions to firm backlog as set
forth each year in MDC's Annual Report to Shareholders, book value, MDC
stock price performance, earnings per share of MDC stock, price earnings
ratio, or total quality management score calculated generally in accordance
with criteria and scoring procedures specified by the Malcolm Baldrige
Foundation. Each of these performance criteria are to be specifically
defined by the Committee on a Company-specific basis, business-unit basis
or in comparison with peer group performance, and may include or exclude
specified items of an unusual or nonrecurring nature.
Payments
- --------
Before any payments are made under the Plan, the Committee must
certify in writing that the performance goals justifying such payment have
been met. Amounts earned under the Plan will be paid in cash by the end of
March of the year following the year to which the performance relates. In
general, to receive a payment under the Plan, the participant must be an
employee of the Company at the time such amount is paid.
Maximum Compensation
- --------------------
The maximum annual incentive award payable under the Plan to a
participant may not exceed $3 million for any given fiscal year.
Discretion
- ----------
No awards are to be paid to a participant if the minimum applicable
performance criteria are not achieved for a given fiscal year. If the
applicable performance criteria are achieved for a given fiscal year, the
Committee has full discretion to reduce or eliminate the annual incentive
award otherwise payable for that year. Under no circumstances may the
Committee use discretion to increase an annual incentive award payable to a
participant.
Page 28
Amendment and Termination
- -------------------------
The Committee may amend, suspend or terminate the Plan at any time,
except that no amendment is to be made without prior approval of the
Company's shareholders which would (i) increase the maximum award payable
under the Plan, (ii) change the specified performance objectives for
payment of awards, or (iii) modify the requirements as to eligibility for
participation. Under no circumstances may the Plan be amended to permit
the Committee to increase the amount of a previously set target award.
Plan Benefits
- -------------
The Company is not able to presently determine the benefits to be paid
under the Plan for 1995 performance. However, if the Plan had been in
effect in 1994, the annual incentives paid to the executive officers would
have been the same as was actually paid under the PSP as shown below (and,
for the Named Officers, other than Mr. Stonecipher, as reported in the
Bonus column of the Summary Compensation Table on page 18).
Amount of
Name Payment
------------------------------- ---------
H. C. Stonecipher N/A (1)
J. F. McDonnell $1,000,000
H. J. Lanese 578,000
J. P. Capellupo 587,000
R. H. Hood, Jr. 415,200
Executive Officer Group 5,446,000
Non-Executive Director Group 0
Non-Executive Officer
Employee Group 0
(1) Mr. Stonecipher, who joined MDC on September 24, 1994, did not receive
annual incentive compensation for 1994.
3. A SHAREHOLDER PROPOSAL REGARDING COMPOSITION OF THE
NOMINATING COMMITTEE
The New York City Employees' Retirement System, c/o Alan G. Hevesi,
Comptroller of the City of New York, 1 Centre Street, New York, New York
10007-2341, which owns 167,430 shares of MDC Stock, submitted the following
proposal.
Page 29
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. The Committee's
responsibilities shall include establishing procedures for the nominating
process and developing for board approval the criteria for nomination.
SUPPORTING STATEMENT
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.
Page 30
MANAGEMENT'S OPPOSING STATEMENT
For the following reasons, the Board recommends a vote AGAINST this
proposal.
This proposal is substantially the same as proposals submitted by the
same shareholder in 1993 and 1994, which the shareholders defeated. MDC's
Bylaws 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 three 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 three 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.
4. 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.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Company has appointed Ernst & Young as the independent certified
public accountants for 1995. Ernst & Young and predecessor firms have
served as the Company's independent certified public accountants since MDC
was formed in 1967. Representatives of Ernst & Young will be present at
the 1995 Annual Meeting of Shareholders to respond to appropriate questions
and to make a statement if they so desire.
Page 31
SHAREHOLDER PROPOSALS
Shareholders may recommend that the Nominating Committee consider
prospective director nominees for inclusion in MDC's Proxy Statement by
following the procedures set forth on page 7 in the section entitled
Nominating Committee. Only nominees recommended by the Nominating
Committee and approved by the Board of Directors will be included in MDC's
Proxy Statement. Otherwise, under the Company's Bylaws, in order for a
shareholder to nominate a candidate for director at a meeting of
shareholders, 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 Steven N.
Frank, Secretary, McDonnell Douglas Corporation, Mail Code 1001240,
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 27, 1995 for inclusion in its Proxy Statement and form of
Proxy for such meeting. Any such proposals should be sent to Steven N.
Frank at the address set forth in the preceding paragraph. Upon receipt of
any proposal, MDC will determine, in accordance with regulations governing
the solicitation of proxies, whether to include such proposal in the
Company's Proxy Statement.
Page 32
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. Brokerage houses, custodians,
nominees and fiduciaries have been 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 meeting to Steven N.
Frank, Secretary, McDonnell Douglas Corporation, Mail Code 1001240, 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
voting in person.
By order of the Board of Directors,
Steven N. Frank
Secretary
March 24, 1995
Page 33
Exhibit A
MCDONNELL DOUGLAS CORPORATION
SENIOR EXECUTIVE PERFORMANCE SHARING PLAN
I. Plan Purpose
The McDonnell Douglas Corporation Senior Executive Performance Sharing
Plan is intended to provide an annual incentive whereby a significant
portion of the selected executive's compensation is based on his or her
efforts in achieving specified performance objectives established for a
given Year. The Plan is designed to attract, motivate and retain key
executives on a competitive basis in which total cash compensation levels
are closely linked with accomplishment of the Company's financial and
strategic objectives.
II. Eligibility and Participation
Within the first 90 days of each Year, the Committee shall identify,
in writing, the key employees who will participate in the Plan for such
Year. Additions to the Plan during a Year shall be made only in the event
of an unusual circumstance, such as a new hire or promotion.
III. Individual Maximum Target Awards
Individual maximum target awards shall be established by the Committee
for eligible employees. Target awards will be paid only upon the
achievement of specific performance goals established by the Committee, in
writing, within the first 90 days of each Year (or, in the case of a new
hire or promoted individual added to the Plan during a Year, before 25% of
such individual's service for the Company for the performance period
established for the individual has elapsed). Such performance goals will
be based on one or more of the following performance-based criteria:
return on assets, return on equity, return on capital, return on revenues,
cash flow, additions to firm backlog as set forth each year in MDC's Annual
Report to Shareholders, book value, McDonnell Douglas Corporation stock
price performance, earnings per share of McDonnell Douglas Corporation
stock, price earnings ratio, or total quality management score calculated
generally in accordance with criteria and scoring procedures specified by
the Malcolm Baldrige Foundation. Each of these performance criteria are to
be specifically defined by the Committee on a Company-specific basis,
business-unit basis or in comparison with peer group performance, and may
include or exclude specified items of an unusual or nonrecurring nature.
Page 34
IV. Discretion to Decrease Award
The Committee, in its discretion, may cancel or decrease an earned
target award, but may not under any circumstances increase such award.
V. Maximum Award
Notwithstanding any other provision of this Plan, the maximum target
award a Participant may earn and receive in a Year is $3,000,000. The
Committee may, in its discretion, decrease this maximum, but may not, under
any circumstances, increase this maximum.
VI. Payments
Before any payments are made under the Plan, the Committee must
certify in writing that the performance goals justifying the payment of
Plan Compensation have been met. The distribution of Plan Compensation
shall be made in cash by the end of March following the Year.
VII. Entitlements
General Rule. To receive compensation from this Plan, the Participant
must be an employee of the Company at the time of payment of Plan
Compensation as determined by the Committee, in its sole discretion.
Exceptions to this rule shall be made in the cases of death, retirement,
layoff, and disability as described in this Section. The Committee may
also, in its sole discretion, permit other exceptions to this rule.
Death, Retirement, Layoff and Disability. If a Participant dies,
retires, is laid off, or becomes disabled during the Year, the amount
earned shall be prorated and payment made by the end of March following the
Year. If death, retirement, layoff or disability occurs after the close of
a Year, but before payment is made, such event shall not affect
calculations.
VIII. Administration
The Committee is authorized and empowered to administer the Plan;
interpret the Plan; prescribe, amend and rescind rules relating to the
Plan; and determine the rights and obligations of Participants under the
Plan. The Committee may delegate certain of these activities, and all
other matters as it solely determines. All decisions of the Committee
shall be final and binding upon all parties including the Company, its
shareholders, and its participants.
IX. Miscellaneous
No Contract or Guarantee of Continued Employment. Eligibility to
participate in the Plan is not a guarantee of continued employment. The
Plan does not constitute a contract of employment, and the Company
specifically reserves the right to
Page 35
terminate a Participant's employment at any time with or without cause
and with or without notice or assigning a reason.
No Guarantee of Plan Compensation. Eligibility to participate in this
Plan does not guarantee the payment of Plan Compensation. Participants who
have accrued rights to Plan Compensation shall be general creditors of the
Company and shall not have any interest in the income or assets of the
Company.
Assignments and Transfers. With the exception of transfer by
beneficiary designation, will or by the laws of descent and distribution,
rights under the Plan may not be transferred or assigned.
Withholding Tax. The Company will deduct from all cash payments due a
Participant taxes required by law to be withheld with respect to such
payments.
X. Definitions
Except as otherwise specified or as the context may otherwise require,
the following terms have the meanings indicated below for the purposes of
this Plan:
Board means the Board of Directors of McDonnell Douglas Corporation.
Code means the Internal Revenue Code of 1986, as amended.
Committee means the Management Compensation and Succession Committee
of the Board or any such other Committee to which the Board has delegated
the responsibility for administering the Plan. The Committee shall consist
of three or more members of the Board who are "outside directors" as
defined in Code Section 162(m) and the regulations thereunder.
Company means McDonnell Douglas Corporation (MDC) and its Subsidiaries
and Joint Ventures.
Year means the fiscal year of the Company.
Disability means disability according to the terms of the Salaried
Long-Term Disability Insurance MDC-East Plan, the Salaried Long-Term
Insurance MDC-West Plan or the Long Term Disability Insurance Plan for
Salaried Employees (MDHC), as may from time to time be applicable with
respect to the particular Participant.
Joint Venture means any partnership designated by the Committee where
the Company maintains 50% or more of the voting securities of the venture
or any such lesser percentage as the Committee may determine, in its sole
discretion.
Layoff means a termination which is not for cause but rather is due to
a permanent or indefinite reduction in the work force, including, but not
limited to, the elimination of a Participant's position as a result of a
facility closure, discontinuance or relocation of operations, acquisition,
reorganization or sale (including the sale
Page 36
by the Company of a business unit, division, product line or functionally
related group of assets).
Participant means an eligible Company employee selected for plan
participation in accordance with the procedures set forth in Section II.
Plan means the McDonnell Douglas Corporation Senior Executive
Performance Sharing Plan as set forth herein.
Plan Compensation means the amounts earned for the Year as a
consequence of the Plan.
Retirement means retirement according to the terms of the Employee
Retirement Income Plan of McDonnell Douglas Corporation -- Salaried Plan,
as may be modified from time to time.
Subsidiary means any corporation designated by the Committee in which
the Company owns an equity interest.
XI. Governing Law
The Plan shall be construed, administered and governed in all respects
under and by the applicable internal laws of the State of Missouri, without
giving effect to the principles of conflicts of law thereof.
XII. Plan Amendment and Termination
The Committee may, in its sole and absolute discretion, amend, suspend
or terminate the Plan at any time, with or without advance notice to
Participants. Notwithstanding the foregoing, no amendment to the Plan
shall be effective which would increase the maximum award payable under
Section V, which would change the specified performance objectives for
payment of awards under Section III, or which would modify the requirements
as to eligibility for participation under Section II unless the
stockholders of McDonnell Douglas Corporation shall have first approved
such change. Under no circumstances may the Plan be amended to permit the
Committee to increase the amount of the target award in contravention of
the requirements of Section IV.
XIII. Effective Date of the Plan
This Plan shall be effective on the date it is approved by the
shareholders of the Company which must occur within one year after approval
by the Board. Any grant of Plan Compensation prior to the approval by the
shareholders of the Company shall be void if such approval is not obtained.
<PAGE>
PROXY
MCDONNELL DOUGLAS CORPORATION
Proxy Solicited on Behalf of the Board of Directors of
the Company for the Annual Meeting on April 28, 1995
The undersigned hereby appoints John F. McDonnell, Harry C.
Stonecipher 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 3, 1995, at the Annual Meeting of Shareholders to be held on Friday,
April 28, 1995, and at any adjournments thereof. Said proxies are
authorized to vote in accordance with their best judgment as to any other
business which may properly come before the meeting.
Election of Directors.
Nominees to be elected for term ending in 1998: John H. Biggs
James S. McDonnell III
Harry C. Stonecipher
P. Roy Vagelos
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 and 2 and AGAINST proposal 3. The persons named
as proxies cannot vote your shares unless you sign and return this card.
SEE REVERSE
SIDE
<PAGE>
(REVERSE SIDE)
Please mark your votes
X as in this example 5139
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
and 2 and AGAINST proposal 3.
The Board of Directors recommends a vote FOR proposals 1 and 2.
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 Senior Executive
Performance Sharing Plan ------ ------- -------
The Board of Directors recommends a vote AGAINST proposal 3.
FOR AGAINST ABSTAIN
3. 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 adjournments thereof.
<PAGE>
CONFIDENTIAL VOTING INSTRUCTIONS
MCDONNELL DOUGLAS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS - APRIL 28, 1995
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 28, 1995, 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 3, 1995, 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 25,
1995, 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> (Reverse Side)
Please mark your votes
X as in this example
The Board of Directors recommends a vote "FOR" Proposals 1 and 2.
With- For All
For hold Except
1.) Election of Directors
Directors for terms ending ----- ------ -------
in 1998:
John H. Biggs, James S. McDonnell III,
Harry C. Stonecipher, P. Roy Vagelos
If you wish to withhold your vote from any individual nominee,
mark the "For All Except" box and strike a line through the
nominee's name in the list above.
For Against Abstain
2.) Proposal to approve the
Senior Executive
Performance Sharing Plan ----- -------- --------
The Board of Directors recommends a vote "AGAINST" Proposal 3
For Against Abstain
3.) Proposal regarding
composition of Nominating
Committee ------ -------- --------
Please be sure to sign and date this instruction.
- --------------------------- Date: ---------------------
Participant sign here
