MELVILLE CORP, DEF 14A, 1994-03-14

MELVILLE CORP
DEF 14A, 1994-03-14
APPAREL & ACCESSORY STORES

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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 / /
Check the appropriate box:

/ / Preliminary proxy statement

/x/ Definitive proxy statement

/ / Definitive additional materials

/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12

MELVILLE CORPORATION
- ------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

MELVILLE CORPORATION
- ------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)

Payment of filing fee (Check the appropriate box):

/x/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or Rule
14a-6(i)(2).

/ / $500 per each party per Exchange Act Rule 14a-6(i)(3), or Rule
14a-6(i)(2).

/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
<PAGE>
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MELVILLE CORPORATION
One Theall Road, Rye, N.Y. 10580

----------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

----------------

NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of
MELVILLE CORPORATION, a New York corporation (the "Corporation") will be held
at the offices of the Corporation, One Theall Road, Rye, New York 10580 on
Tuesday, April 12, 1994, at 10:00 A.M., New York time, for the following
purposes:

1. To elect fourteen directors to hold office for the term expiring in
April 1995;

2. To consider and vote upon the adoption of the Profit Incentive Plan of
Melville Corporation; and

3. To consider and transact such other business as may properly come
before the meeting, and any adjournment or adjournments thereof.

Only shareholders of record at the close of business on March 1, 1994
will be entitled to notice of and to vote at the meeting, and at any
adjournment or adjournments thereof.

By order of the Board of Directors.

MELVILLE CORPORATION

ARTHUR V. RICHARDS
Vice President and Secretary

Dated: March 14, 1994
<PAGE>
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--------------

PROXY STATEMENT

---------------

This Proxy Statement, the attached Notice of Annual Meeting of
Shareholders, the enclosed Proxy, and the 1993 Annual Report are first being
mailed to the shareholders of Melville Corporation on or about March 14, 1994.

Item 1--ELECTION OF DIRECTORS

Fourteen directors of the Corporation are to be elected at the annual
meeting of shareholders in 1994, for terms expiring in 1995. The persons named
as proxies in the enclosed Proxy have advised the Corporation that the shares
represented are to be voted at this annual meeting pursuant to the Proxy for
the nominees for election as directors. The persons named as proxies have also
advised the Corporation that it is their present intention, if any of said
nominees shall unexpectedly become unavailable, to vote for the election of
any person substituted by the management for any of said nominees.

The Board of Directors recommends that shareholders vote FOR all
nominees.

The names, ages, shareholdings and principal occupations for the past
five years of the nominees for election at this meeting, and the names of
public companies of which they are presently serving as directors, are set
forth below:

<TABLE>
<CAPTION>
First Ownership of Percent
Became Corporation's of
Name Age Director Stock (1) Class
---- ---- -------- ------------ -----
<S> <C> <C> <C> <C>
HYMAN L. BATTLE, JR. 69 1975 14,000 Common *
Of Counsel to, and prior to January 1, 1989, Shares (2)
a partner of, the law firm of Battle Fowler,
New York, NY

ALLAN J. BLOOSTEIN 64 1989 6,500 Common *
Consultant in both retail and consumer goods Shares (2)
marketing; Director of Crystal Brands, Inc.,
and Taubman Centers Inc.; Trustee or
Director of various Smith Barney Shearson
investment portfolios

JOHN J. CREEDON 69 1982 8,000 Common *
Retired President and Chief Executive Officer of Shares (2) (3)
Metropolitan Life Insurance Company, a personal
and group multiline insurance company, New
York, NY; member of the Executive
Committee of the Corporation; Director of
Metropolitan Life Insurance Company,
NYNEX Corporation, Rockwell Corporation,
Sonat Inc., Praxair Inc. and Union Carbide
Corporation

STANLEY P. GOLDSTEIN 59 1984 454,011 Common *
Chairman of the Board and Chief Executive Shares (2)(4)(5)(6)
Officer and a member of the Executive Committee
of the Corporation; prior to January 1, 1994,
also President of the Corporation; Director of
NYNEX Corporation

ROBERT D. HUTH 48 1988 148,479 Common *
Executive Vice President and Chief Shares (2) (4) (5)
Financial Officer of the Corporation

</TABLE>
1
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
First Ownership of Percent
Became Corporation's of
Name Age Director Stock (1) Class
---- ---- -------- -------------- -------
<S> <C> <C> <C> <C>

MICHAEL H. JORDAN 57 1986 6,400 Common *
Chairman of the Board and Chief Executive Officer Shares (2)
of Westinghouse Electric Corporation, a diversified
global technology based corporation; from August,
1992 to June, 1993, Principal of Clayton Dubilier
& Rice, Inc., a private investment firm; prior to
August, 1992, Chairman and Chief Executive
Officer of PepsiCo International Food and
Beverages, a worldwide food products and services
company, Dallas, TX; member of the Executive
Committee of the Corporation; Director of Aetna
Life & Casualty Company, Dell Computer,
Nukote, Inc. and Rhone-Poulenc Rorer Inc.

WILLIAM H. JOYCE 58 ** 1,000 Common *
President, Chief Operating Officer and Director of Shares
Union Carbide Corporation, a commodity
chemical company, Danbury, CT; from
December, 1991, to January, 1993, Executive
Vice President and since August, 1992,
Director of Union Carbide Corporation; from
October, 1990 to December, 1991, Vice President
of Union Carbide Corporation; from September,
1985 to October, 1990, President of the Polyolefins
Division of Union Carbide Corporation

Terry R. Lautenbach 55 1991 4,500 Common *
Retired Senior Vice President of IBM Corporation, Shares (2)
a multinational advanced information technology
company, Armonk, NY; Director of Air Products
Corp., Varian Associates, Inc. and Trustee of
Loomis-Sayles Mutual Funds

THEODORE LEVITT 69 1988 8,000 Common *
Edward W. Carter Shares (2)
Professor Emeritus of Business
Administration, Harvard University Graduate School
of Business Administration; Director of Consolidated
Natural Gas Co., Landmark Graphics Corp.,
The Stride Rite Corporation, Sanford C. Bernstein
Fund, Inc. and Saatchi & Saatchi Company PLC

DONALD F. MCCULLOUGH 68 1975 16,960 Common *
Chairman Emeritus of Collins & Aikman Shares (2)
Corporation, a producer of textiles and wall
coverings, Charlotte, N.C.; Director of Bankers
Trust New York Corporation and Massachusetts
Mutual Life Insurance Company

HARVEY ROSENTHAL 51 1994 109,463 Common *
President and Chief Operating Officer of the Shares (2)(4)(5)
Corporation; prior to January, 1994 Vice
President of the Corporation and President
and Chief Executive Officer of the CVS division
of the Corporation

</TABLE>
2
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
First Ownership of Percent
Became Corporation's of
Name Age Director Stock (1) Class
---- ---- -------- -------------- -------
<S> <C> <C> <C> <C>

IVAN G. SEIDENBERG 47 1993 2,000 Common *
President, Chief Operating Officer and Vice Shares (2)
Chairman of the Board of NYNEX Corporation,
a worldwide communications company, White
Plains, NY; from April, 1991 to February 1994,
Vice Chairman, Telecommunications Group,
NYNEX Corporation; from May, 1990 to
March, 1991, Executive Vice President, NYNEX
Corporation and President, NYNEX Worldwide
Information and Cellular Services Group; from
1988 to April, 1990, Senior Vice President,
NYNEX Corporation; Director of NYNEX
Corporation, NYNEX New York and NYNEX
New England

PATRICIA CARRY STEWART 65 1989 6,500 Common *
Retired Vice President of The Edna McConnell Shares (2)
Clark Foundation, a charitable foundation, New
York, NY; Director of Bankers Trust New York
Corporation, Borden, Inc. and Continental
Corporation

M. CABELL WOODWARD, JR. 65 1982 10,000 Common *
Retired Vice Chairman, Chief Financial Officer Shares (2)
and Director of ITT Corporation, a diversified
multinational corporation, New York, NY;
member of the Executive Committee of the
Corporation; Director of Capital Cities/ABC,
Inc. and The Black & Decker Corporation

All directors and executive officers as a group 1,545,275 Common 1.45%
(31 persons) Shares (2 through 6)
</TABLE>
- -------------
* Less than 1%.

** Standing for election as a director for the first time.

(1) Unless otherwise indicated, ownership means sole voting and investment
power. The number of shares and other information indicated in this table
and, unless otherwise indicated, throughout this Proxy Statement, are as
of March 1, 1994.

(2) The following shares of Common Stock included above for the indicated
persons and group are not presently owned, but were subject to options
which were outstanding on March 1, 1994 and were exercisable within 60
days thereafter: Mr. Goldstein, 280,000; Mr. Huth, 134,000; Mr.
Rosenthal, 98,000; each of Messrs. Battle, Bloostein, Creedon, Jordan,
Levitt, McCullough, Woodward and Ms. Stewart, 6,000; Mr. Lautenbach,
4,000; Mr. Seidenberg, 2,000; directors and executive officers as a
group, (31 persons) 1,219,650.

(3) Of the shares shown opposite Mr. Creedon's name 1,600 shares of Common
Stock are owned of record by The John J. Creedon Foundation, a non-profit
charitable foundation, of which he is President and a director and shares
voting and investment power. Mr.Creedon disclaims beneficial ownership of
all the shares of Common Stock owned by this foundation.

(4) The following shares of Common Stock included above for the indicated
persons and group were granted under the Corporation's Omnibus Stock
Incentive Plan and although no longer subject to performance standards
since the one year performance period for these awards has expired, are
subject to certain restrictions as to continued employment and transfer
of such shares as provided in the plan: Mr. Goldstein, 4,683; Mr. Huth,
2,328; Mr. Rosenthal, 2,953; executive officers as a group (20 persons)
22,040.

3
<PAGE>
<PAGE>

(5) The Melville Corporation and Subsidiaries Employee Stock Ownership Plan
(the "ESOP"), established in 1989, held as of March 1, 1994, 6,498,514
shares of the Corporation's Series One ESOP Convertible Preference Stock.
The Bank of New York, the trustee of the ESOP, will vote shares held by
the ESOP in proportion to instructions received from plan participants.
As of December 31, 1993, the last date on which an allocation was made,
Messrs. Goldstein, Huth and Rosenthal have each been allocated 482
shares; and all executive officers as a group (20 persons) have been
allocated 7,653 shares. These amounts have not been included in the above
table.

(6) Of the shares shown opposite Mr. Goldstein's name, 9,434 shares are owned
of record by a non-profit charitable foundation of which he is President
and shares voting and investment power and 20,000 shares are owned by Mr.
Goldstein's wife. Mr. Goldstein disclaims beneficial ownership of all
such shares.

The Corporation is not aware of any person who owned beneficially more
than 5% of the outstanding voting securities of the Corporation as of December
31, 1993, except as shown in the following table:

No. of Percent
Title of Class Name and Address of Beneficial Owner Shares of Class*
-------------- ------------------------------------ ------ ---------
<S> <C> <C> <C>
Common Stock. . . . . . . . . . Invesco Capital 8,636,109 8.20%
Management, Inc.
1315 Peachtree St.,
N.E. Suite 500
Altanta, GA 30309
Common Stock. . . . . . . . . . J.P. Morgan & Co., Inc. 8,148,014 7.73%
60 Wall Street
New York, NY 10260
Common Stock. . . . . . . . . . The Capital Group, Inc. 6,082,220 5.77%
333 South Hope Street
Los Angeles, CA 90071
Series One ESOP
Convertible Preference
Stock. . . . . . . . . . . . . Melville Corporation and Subsidiaries 6,498,514 100%
Employee Stock Ownership Plan Trust
c/o Bank of New York, as Trustee
48 Wall Street
New York, NY 10005

</TABLE>

* Based on all outstanding shares of Common Stock and Series One ESOP
Convertible Preference Stock as of March 1, 1994, the percent of voting
securities owned by Invesco Capital Management, Inc., J. P. Morgan & Co.
Inc., The Capital Group, Inc., and the ESOP Trust are 7.72%, 7.28%, 5.44%
and 5.81%, respectively.

Invesco Capital Management, Inc. ("Invesco") filed on February 10, 1994 a
statement with the Securities and Exchange Commission (the "SEC") on Schedule
13G under the Securities Exchange Act of 1934, as the parent holding company
in accordance with Rule 13d--1(b)(ii)(G) of such Act, disclosing beneficial
ownership of greater than 5% of the Corporation's Common Stock (8,636,109
shares). According to the statement, Invesco and/or subsidiaries have shared
voting power, and shared dispositive power over all shares, and Invesco has
certified that all of these shares were acquired in the ordinary course of
business, and not for the purpose of changing or influencing the control of
the Corporation.

On February 15, 1994, the Corporation received a copy of a Schedule 13G
that was filed with the SEC on behalf of J. P. Morgan & Co., Incorporated
("Morgan"). Such statement disclosed that as of December 31, 1993, Morgan
exercised sole and/or shared voting and dispositive power over various
accounts which held in the aggregate more than 5% of the Corporation's Common
Stock (8,148,014 shares). According to the statement, Morgan has sole voting
power over 4,419,025 shares of the Corporation's Common Stock, shared voting
power over 422,199 shares of the Corporation's Common Stock, sole dispositive
power over 7,659,105 shares of the Corporation's Common Stock and shared
dispositive power over 483,599 shares of the Corporation's Common Stock.
Morgan has certified that all shares were acquired in the ordinary course of
business and not for the purpose of or to effect a change or influence the
control of the Corporation.

4
<PAGE>
<PAGE>

A Schedule 13G dated February 11, 1994 was filed with the SEC on behalf
of certain operating subsidiaries of The Capital Group, Inc. ("Capital
Group"). Such statement disclosed that as of December 31, 1993, Capital Group
exercised investment discretion over various institutional accounts which held
in the aggregate greater than 5% of the Corporation's Common Stock (6,082,220
shares). Capital Guardian Trust Company, a bank, and one of such operating
subsidiaries, exercised investment discretion over 952,120 of said shares.
Capital Research and Management Company, a registered investment adviser, and
Capital International, S.A., an operating subsidiary, had investment
discretion with respect to 5,090,100 and 40,000 shares, respectively, of the
Corporation's Common Stock. Capital Group has certified that all of these
shares were acquired and are held solely for investment purposes in the
ordinary course of business and not for the purpose of changing or influencing
the control of the Corporation.

Each participant in the Melville Corporation and Subsidiaries Employee
Stock Ownership Plan ("ESOP") instructs the Trustee of the ESOP how to vote
his or her shares. As to unallocated shares and shares with respect to which
the Trustee receives no timely voting instructions, the Trustee, pursuant to
the ESOP Trust Agreement, votes these shares in the same proportion as it
votes all of the shares with respect to which it has received timely voting
instructions. As of the date hereof, each share of Series One ESOP Convertible
Preference Stock is entitled to one vote per share on all matters submitted to
a vote of the holders of Common Stock, voting together with the holders of
Common Stock as a single class.

EXECUTIVE COMPENSATION

Compensation Committee Report on Executive Compensation

The Corporation's executive compensation program is administered by the
Compensation Committee of the Board of Directors. This Committee is comprised
of four independent, non-employee Directors. The Compensation Committee has
prepared the following report on the executive compensation program, in which
executives named in the Summary Compensation Table participate, which
addresses the specific decisions made with respect to 1993 compensation.

Compensation Policies. The Compensation Committee has established several
important policies as a framework for the compensation program in which the
Corporation's executives participate. The compensation program is designed to
motivate key executives to achieve business objectives, reward them for their
achievement and align their interests with the long-term interests of
shareholders. The compensation program is also designed to provide
compensation opportunities which are comparable in the aggregate to those
offered by peer companies in the retail industry, allowing the Corporation to
compete for and retain talented executives who are critical to the
Corporation's success.

In 1993, the Committee compared the salary and other compensation awards
of the executives named in the Summary Compensation Table to retail industry
standards. This comparison included cash compensation levels reported for
senior executives of 12 specific retailers with sales ranging from
approximately $3 billion to $20 billion. The comparison also included a review
of compensation levels reported for positions with similar responsibilities in
published surveys which included approximately 50 companies in the retail
industry. The Compensation Committee believes that the best references for
assessing executive compensation levels are similarly sized retailers.
Therefore eleven of the companies included in the S&P Retail Composite in the
performance graph (and seven of the companies in the peer group) included in
this proxy statement were used in the compensation comparison. Twenty-five of
the companies in the S&P Retail Composite (and five of the companies in the
peer group) were not used because their revenues were substantially larger or
smaller than the revenues of the Corporation or the scope of their operations
were more limited. In 1993, executive compensation levels at the Corporation
corresponded to the median range of compensation paid by these comparable
companies.

Compensation in 1993 for the Corporation's executives, including those
named in the Summary Compensation Table, was comprised of base salary, cash
bonuses under a profit incentive plan, stock options and performance-based
restricted stock.

Base Salary. The Committee reviews base salaries annually. In 1993, the
Chief Executive Officer's base salary was increased by 4.3% to $1,050,000
which equaled the average salary increase approved for all executives of the
Corporation. Two corporate performance factors were considered by the
Compensation Committee when it approved this salary increase, although formal
weightings were not ascribed to these factors. First, 1992 net earnings,
excluding special one-time expenses relating to the restructuring of
operations in 1992, increased by approximately 10% over the prior year.
Secondly, 1992 consolidated net sales increased 5.5% to a record of $10.4
billion.

5
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Profit Incentive Plan. The profit incentive plan is a cash incentive or
bonus program that rewards employees based on performance relative to
predetermined objectives established for the year. Awards to executives named
in the Summary Compensation Table, as well as awards to other participants
with corporate responsibilities, depend solely on achievement of the annual
budget for the Corporation, measured by consolidated earnings before Federal
income taxes. For participants with division responsibilities, achievement of
division profit budgets and individual performance determine the awards
earned.

The award paid to each participant if earnings equal 100% of the annual
budget is known as the "Normal Award". Normal Awards range up to a maximum of
46% of base salary for the Chief Executive Officer (such percentage was
determined by taking into account total compensation packages at comparable
companies) and scale down depending on position responsibilities. The
incentive plan provides for larger awards, up to a maximum award of 200% of
the Normal Award, if earnings exceed budget and smaller or no awards if
earnings are below budget, according to a predetermined performance scale.

For 1993, the award made to Mr. Goldstein equaled 27% of salary, less
than his Normal Award of 46% of salary, because corporate earnings were below
100% of budget but above the minimum threshold level. Awards earned by other
corporate executives were similarly reduced.

Stock Options. Annual grants of stock options allow executives to
participate in creating shareholder value and to accumulate an equity interest
in the Corporation, thereby aligning the interests of executives with the
interests of shareholders. The exercise price of stock options equals 100% of
the fair market value of a share of the Corporation's Common Stock on the date
the stock options are granted. Options vest in one year and the term of each
option is ten years. Reflecting competitive pay practices, guidelines for
option grants are set by dividing fixed percentages of base salary, which vary
by position level, by the option exercise price. In determining the actual
number of options granted to executives, the Committee does not follow a fixed
formula. In general it takes into account corporate performance factors
including earnings before Federal income taxes (which indirectly takes into
account other corporate performance factors such as earnings per share and
return on beginning stockholders equity) and has the discretion to increase or
decrease these guidelines. Options to purchase 30,000 shares of the
Corporation's Common Stock at an exercise price of $45.00 were granted to Mr.
Goldstein in 1993. The number of shares granted was determined in October 1993
based on the guidelines for option grants which for the Chief Executive
Officer was 160% of base salary, and then adjusted downward for Mr. Goldstein
and the other executive officers named in the "Summary Compensation Table",
based on projected corporate performance for 1993 including earnings before
Federal income taxes.

Performance-Based Restricted Stock. In 1993, rather than grant
performance shares or restricted stock as was the practice in prior years, the
Committee approved grants of performance-based restricted stock. The purpose
of these awards was to further motivate executives to achieve business
objectives and align their interests with that of shareholders.

The number of shares of performance-based restricted stock awarded (which
are determined based on competitive pay practices) was determined by dividing
fixed percentages of salary, which vary by position, by the stock price on the
date of grant. The actual number of restricted shares that may be earned by
executives depends on the Corporation's return on net assets against budget.
Once the restricted shares are earned, they remain restricted until the third
anniversary from the date of grant. During the restriction period, executives
may not sell, assign, bequeath, transfer, pledge or otherwise dispose of the
shares. If an executive leaves the employ of the Corporation before the
restrictions lapse, except for termination due to death, disability or
retirement, the shares are forfeited.

For corporate participants, including executives named in the Summary
Compensation Table, if the Corporation's actual return on net assets falls
below a minimum threshold percentage of budget, the right to receive the
entire number of shares granted is forfeited. If actual return on net assets
equals 100% of budget, 100% of shares are earned. For actual return on net
assets which equals or exceeds the minimum threshold of budget, between 25% to
a maximum of 200% of the shares awarded may be earned depending on the
percentage of budget achieved. For participants with division
responsibilities, return on net assets for the division is measured against
division budgets.

An award of 6,964 shares of performance-based restricted stock was
approved by the Committee for Mr. Goldstein in 1993. Since the Corporation's
actual return on net assets was below 100% of budget in 1993 but above the
minimum level, the actual number of shares earned by Mr. Goldstein for 1993
was reduced by 2,281 shares to 4,683 shares. These shares are restricted until
the third anniversary from the date of grant which is in 1995. Awards earned
by other corporate participants were similarly reduced.

6
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Performance Shares. As stated above, no performance shares were awarded
in 1993. However, the performance period for shares awarded in 1991 ended on
December 31, 1993. In 1991 Mr. Goldstein was awarded 14,195 performance
shares, representing a contingent number of shares of Common Stock. Based on
results during the three year performance period with respect to earnings per
share growth and return on equity, Mr. Goldstein's actual award was 5,536
shares of Common Stock.

Compliance with Internal Revenue Code Section 162(m). Section 162(m) of
the Internal Revenue Code, which took effect January 1, 1994, generally
disallows a tax deduction to public companies for compensation over $1 million
paid to the Corporation's Chief Executive Officer and other executive officers
named below in the "Summary Compensation Table." Qualifying performance-based
compensation will not be subject to the deduction limit if certain
requirements are met. The Company currently intends to structure the
performance-based portion of the compensation of its executive officers (which
currently consists of stock option grants, performance-based restricted stock
awards and annual profit incentive awards) in a manner that complies with the
new rules.

Compensation Committee Members

Donald F. McCullough--Chairman
Allan J. Bloostein
Frank Melville
M. Cabell Woodward, Jr.

SUMMARY COMPENSATION TABLE

The following table summarizes all compensation awarded to, earned by or
paid to the four named key policy-making officers for all services rendered to
the Corporation and subsidiaries during 1993 or for each of the Corporation's
last three fiscal years.

Long Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
------------------------------ --------------------------- -------
Restricted LTIP All Other
Stock Awards Options/ Payouts Compensation
Name and Principal Position (1) Year Salary ($) Bonus ($) ($) (2) # of Shares ($)(3) ($) (4)
- ------------------------------- ---- ---------- --------- ------------ ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stanley P. Goldstein 1993 1,050,000 285,000 192,893 30,000 228,028 6,338
Chairman of the Board 1992 1,007,000 426,000 0 36,000 6,751
Chief Executive Officer and 1991 977,000 320,000 0 36,000
Director of the Corporation

Michael A. Friedheim 1993 640,000 158,600 99,309 14,000 65,121 10,835
Executive Vice President and 1992 640,000 247,000 0 21,000 11,115
Director of the Corporation 1991 620,000 183,800 0 21,000

Robert D. Huth 1993 620,000 153,600 95,890 18,000 65,121 10,835
Executive Vice President, 1992 590,000 228,000 0 23,000 11,115
Chief Financial Officer and 1991 560,000 166,000 0 21,000
Director of the Corporation

Jerald S. Politzer 1993 600,000 148,700 93,007 16,000 65,121 10,835
Executive Vice President and 1992 565,000 218,000 0 21,000 8,933
Director of the Corporation 1991 537,500 153,000 0 21,000
</TABLE>
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(1) During 1993 the Corporation had only four key policy-making executive
officers including the Chief Executive Officer.

(2) Beginning in 1993 grants of restricted stock were contingent upon meeting
one year performance objectives and to a three year holding period from
date of grant. All restricted stock disclosed in this table and currently
outstanding is as a result of the 1993 award of performance-based
restricted stock. Based on the number of restricted stock earned,
dividends are paid on this restricted stock at the same rate as paid to
all shareholders from the date of the contingent award. As of December
31, 1993, Mr. Goldstein had a right to receive, in the aggregate, 4,683
restricted shares having a market value on December 31, 1993 of $192,893,
Mr. Friedheim had a right to receive, in the aggregate, 2,411 restricted
shares having a market value on December 31, 1993 of $99,309, Mr. Huth
had a right to receive, in the aggregate, 2,328 restricted shares having
a market value on December 31, 1993 of $95,890 and Mr. Politzer had a
right to receive 2,258 restricted shares having a market value on
December 31, 1993 of $93,007.

(3) Represents performance shares granted for the 1991-93 performance cycle
based on the market value on December 31, 1993 of $41.19. These units
were earned at the end of the three year performance cycle based on
pre-established financial performance objectives with respect to earnings
per share growth and return on equity.

(footnotes continued on next page)

7
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(4) For 1993, includes $1,621, $6,118, $6,118, and $6,118 contributed under
the Corporation's 401K Profit Sharing Plan for Mr. Goldstein, Mr.
Friedheim, Mr. Huth and Mr. Politzer, respectively and 88.25 ESOP shares
based on an assumed market value of $53.45 per share (total value of
$4,717) contributed under the Corporation's ESOP for each of these named
executives. For 1992, includes $2,174, $6,538, $6,538 and $4,356
contributed under the Corporation's 401K Profit Sharing Plan for Mr.
Goldstein, Mr. Friedheim, Mr. Huth and Mr. Politzer, respectively, and
85.63 ESOP shares based on an assumed market value of $53.45 per share
(total value of $4,577) contributed for each of these named executives.

OPTION GRANTS IN FISCAL YEAR ENDING 12/31/93

The following table summarizes activity relating to stock options awarded
to the four named key policy-making executive officers in the last fiscal
year.

<TABLE>
<CAPTION>
Present Value(2)
Individual Grants On Grant Date
----------------------------------------------- ----------------
Percentage
of Total
Options
Granted to
No. of Employees Exercise
Options in Fiscal Price Expiration
Name Granted Year ($/Sh)(1) Date Value ($)
- ------------------------------------ -------- -------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Stanley P. Goldstein . . . . . . . 30,000 4.4% 45.00 10/13/03 308,400
Michael A. Friedheim . . . . . . . 14,000 2.1% 45.00 10/13/03 143,920
Robert D. Huth. . . . . . . . . . 18,000 2.6% 45.00 10/13/03 185,040
Jerald S. Politzer . . . . . . . . 16,000 2.3% 45.00 10/13/03 164,480
</TABLE>
- -----------------
(1) These options are exercisable on October 13, 1994, one year after the
date of grant and were awarded at fair market value on the date of grant.

(2) Calculated using the Black--Scholes option pricing model. The
Black--Scholes option value for 1993 grants is $10.28 per share and was
determined based on the following: The present value on grant date is
derived from applying the Black-Scholes option pricing model to the 1993
stock option grants made by the Corporation. The Black-Scholes model
requires six inputs: (1) the option exercise price is $45.00; (2) the
fair market value of the stock under option at the time of the grant is also
$45.00; (3) the dividend yield is 3.38%, which equals dividends in the
amount of $1.52 paid to shareholders during the year prior to the date of
grant of the option divided by the stock price of $45.00; (4) the option
term is 10 years; (5) the volatility of the stock is 17.9%, based on an
analysis of weekly closing stock prices and dividends paid during the
one-year period prior to the grant of the options; and (6) the assumed
risk-free rate of interest of 5.59%, equivalent to the 10 year treasury
yield at the time of grant of the options. No other discounts or any
other restrictions related to vesting or the likelihood of vesting were
applied.

AGGREGATED OPTION EXERCISES IN FISCAL YEAR ENDING 12/31/93
AND YEAR-END OPTION VALUES

The following table summarizes stock option exercise activity for the
four named key policy-making officers during the last fiscal year and the
fiscal year end values of unexercised options.

<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Year-End(#) Fiscal Year-End($)
------------------ ------------------
Shares
Acquired Exercisable/ Exercisable/
Name on Exercise(#) Value Realized($) Unexercisable Unexercisable
- ---------------------------- ------------- ---------------- -------------- -------------
<S> <C> <C> <C> <C>
Stanley P. Goldstein . . . -- -- 280,000/30,000 1,109,450/0
Michael A. Friedheim . . . -- -- 168,000/14,000 757,720/0
Robert D. Huth. . . . . . 21,000 187,973 134,000/18,000 179,940/0
Jerald S. Politzer . . . . -- -- 93,000/16,000 30,187/0
</TABLE>
8

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN AMONG
MELVILLE CORPORATION, S&P 500 INDEX, S&P RETAIL COMPOSITE,
AND OLD PEER GROUP (1)

(The below table was also depicted as a graph in the printed proxy)

- -------------------------------------------------------------------

1988 1989 1990 1991 1992 1993
---- ---- ---- ---- ---- ----
Melville $100 $124 $120 $131 $161 $128
S&P 500 $100 $132 $127 $166 $179 $195
S&P Retail Composite $100 $128 $128 $203 $238 $229
Old Peer Group $100 $131 $113 $156 $199 $222
- -------------------------------------------------------------------

- ------------------
(1) This peer group is comprised of the following companies: Dayton Hudson,
Edison Brothers, JC Penney, Longs Drug, Merry Go Round, Rite Aid, Sears,
TJX, Toys R Us, U.S. Shoe, Walgreen and Woolworth. The S&P Retail
Composite has been selected instead of this peer group because it
includes all the different categories of retailers with which the
Corporation believes it competes. Furthermore, unlike the peer group, the
S&P Retail Composite is not unduly weighted by the market capitalization
of only a few companies.

9
<PAGE>
<PAGE>

Income Continuation Policy. In January 1987, the Board of Directors
adopted, and in May 1988 amended, the Income Continuation Policy for Select
Senior Executives of Melville Corporation (the "Income Continuation Policy"),
which provides that in the event of a change in control, as defined in the
Income Continuation Policy, and subsequent termination of employment by the
Corporation other than for cause, or by the executive with good reason (as
defined in the Income Continuation Policy), within twenty-four (24) months of
a change in control, Messrs. Friedheim, Goldstein, Huth and Politzer will be
entitled to receive from the Corporation a single sum payment equal to three
(3) times annual base pay plus their full normal annual incentive compensation
award immediately prior to such termination of employment. In addition, upon
such a termination of employment, each covered executive will be entitled to
remain a participant in all employee welfare benefit plans maintained by the
Corporation at the time of such termination of employment for a period of
twenty-four (24) months after such termination of employment (or if such
participation is not possible under the terms of any such plan, each such
executive shall be provided with benefits which are comparable to the coverage
provided by such plan). The Income Continuation Policy also provides that in
the event of a change in control each covered executive shall be fully vested
in all shares previously awarded to the executive under the Corporation's
Omnibus Stock Incentive Plan and any successor plan thereto without regard to
any restrictions previously imposed under the terms of such plan and entitled
to exercise any stock options on the Corporation's Common Stock (whether or
not otherwise exercisable). In addition, upon termination of employment each
outstanding option shall remain exercisable until the earlier of six (6)
months after such termination, provided such exercise does not violate the
terms of the plan under which such option was granted, or the expiration of
the option period specified in such plan. The Income Continuation Policy also
provides that if payments under such policy or the Supplemental Executive
Retirement Plan described below, are subject to tax under Section 4999 of the
Internal Revenue Code (which deals with certain payments contingent on a
change in control), the Corporation will make an additional payment to the
covered executive in respect of such tax.

Supplemental Executive Retirement Plan. In 1981 the Board of Directors
adopted, and in May 1988 amended, the Supplemental Executive Retirement Plan
for Select Senior Management of Melville Corporation (the "Supplemental
Retirement Plan"). The Supplemental Retirement Plan is designed to increase
the retirement benefits of selected executive employees with at least fifteen
(15) years of credited service. Under the plan, eligible executives with at
least fifteen (15) years of credited service receive upon retirement at or
after age sixty (60) an annual benefit equal to 50% of final compensation less
any amounts provided by other retirement programs of the Corporation. In the
case of retirement on or after age fifty-five (55) but before age sixty (60),
a reduced benefit is provided. Except in the event of a change in control (as
defined in the plan), no benefits are payable to an eligible executive who
terminates employment prior to age fifty-five (55) or prior to completing
fifteen (15) years of service. Benefits are generally payable in annual
installments for the life of the executive, but other forms of payment of
equivalent actuarial value may be elected. In the event of a change in
control, eligible executives then covered by the plan whose employment is
terminated as described in the Corporation's Income Continuation Policy, are
entitled within the following twenty-four (24) month period to receive their
benefit in a lump sum payment, the amount of which is reduced if the executive
has less then fifteen (15) years of service and/or if the executive is less
than age sixty (60), payable at its present value. Assuming continued
employment of these individuals until age 55 or 60 and 6% annual increases in
existing compensation levels, the table below shows the estimated annual
benefit payable.

Age 55 Age 60
--------- ---------
Mr. Goldstein . . . . . . . . $547,000* $689,000
Mr. Friedheim . . . . . . . . $258,000 $729,000
Mr. Huth. . . . . . . . . . . $300,000 $816,000
Mr. Politzer. . . . . . . . . $355,000** $750,000

- --------------
* Reflects benefit payable to Mr. Goldstein at age 59, his current age.

** Reflects benefit payable to Mr. Politzer at age 56, upon completion of 15
years of credited service.
10
<PAGE>
<PAGE>
Item 2--PROPOSED PROFIT INCENTIVE PLAN

The Corporation has had in effect since 1967 a profit incentive program
under which certain employees whose performance can have a substantial impact
on divisional or corporate profits are provided with an opportunity to earn
compensation related to those profits in addition to their normal salaries.
Generally, under new tax rules taking effect in 1994, compensation in excess
of $1,000,000 paid to an executive officer appearing in the Summary
Compensation Table included in the Corporation's proxy statement will be tax
deductible by the Corporation only if it satisfies certain requirements. The
principal requirements are that the amount of the compensation be
performance-based, be determined by a committee of at least 2 outside
directors, and be approved by shareholders or paid pursuant to a plan approved
by shareholders. The Corporation's profit incentive program generally
satisfies the first two requirements but does not currently satisfy the
shareholder approval requirement. In order to enable future payments under the
program to the applicable executive officers to comply with the new tax rules,
the Board of Directors has adopted and recommends for shareholder approval the
Profit Incentive Plan of Melville Corporation (the "Profit Incentive Plan"),
pursuant to which profit incentive program payments to corporate executives
will be made. The existing profit incentive program in effect for divisional
employees will continue in effect and is not being submitted to shareholders
for a vote. The material terms of the Profit Incentive Plan are summarized
below but such summary is subject to, and qualified in its entirety by,
reference to the complete text of the Profit Incentive Plan attached as
Exhibit A.

The Profit Incentive Plan will be administered by the Compensation
Committee (the "Committee") of the Corporation's Board of Directors, which is
comprised solely of outside disinterested directors. Approximately 175
corporate employees are eligible to be selected by the Committee to receive an
award. Awards are expressed as a contingent percentage of base salary ("Normal
Awards") and depending on the level of performance attained during the
performance period, payment may range from zero to up to 200% of the Normal
Award. Awards are payable in cash, less applicable withholding taxes. The
performance criteria used to determine the level of payout of awards is a
schedule determined by the Committee based on earnings before Federal income
taxes of the Corporation and its subsidiaries. However, in no event will any
participant receive a payment under the 1994 Plan in respect of any fiscal
year in excess of $1,250,000. In limited circumstances, the Committee has the
authority to modify the performance standards established for a performance
period in light of significant changes in the capital structure of Melville or
certain other unusual or nonrecurring events. In addition, the Committee
retains the discretion to pay less than the amount otherwise scheduled to be
paid under the performance schedule.

While the benefits to be paid for 1994 and future years have not yet been
determined by the Committee, the following table shows the amounts paid to the
Corporation's employees for 1993 under the existing profit incentive program.
<TABLE>
<CAPTION>
Name and Position Amount Paid
----------------- -----------
<S> <C>
Stanley P. Goldstein, Chairman of the Board, Chief Executive Officer and President. . . $ 285,000
Michael A. Friedheim, Executive Vice President. . . . . . . . . . . . . . . . . . . . . $ 158,600
Robert D. Huth, Executive Vice President. . . . . . . . . . . . . . . . . . . . . . . . $ 153,600
Jerald S. Politzer, Executive Vice President. . . . . . . . . . . . . . . . . . . . . . $ 148,700
All executive officers as a group(including those named above). . . . . . . . . . . . . $1,788,940
All employees as a group (including the executive officers above) . . . . . . . . . . . $2,315,470
</TABLE>
The Board of Directors unanimously recommends that shareholders vote FOR
the Profit Incentive Plan.

<PAGE>
<PAGE>
RELATIONSHIP WITH INDEPENDENT AUDITORS

KPMG Peat Marwick were the Corporation's independent auditors for the
year ended December 31, 1993 and have been selected by the Board of Directors,
upon recommendation of the Audit Committee, to serve as such for the year
ending December 31, 1994. A representative of KPMG Peat Marwick is expected to
attend the annual meeting of shareholders on April 12, 1994 and will be given
the opportunity to make a statement and/or to respond to appropriate
questions.

BOARD OF DIRECTORS

Meetings and Committees

During the 1993 fiscal year, there were seven meetings of the Board of
Directors. The Corporation maintains standing Audit, Nominating and
Compensation Committees of the Board of Directors. Mr. Jordan attended four of
the seven board meetings.

The Audit Committee held five meetings during the 1993 fiscal year. The
duties of the Audit Committee are (i) to consider the adequacy of the
accounting and internal control systems, (ii) to oversee the audit function,
both independent and internal, (iii) to review annual consolidated financial
statements, (iv) to direct and supervise special investigations, (v) to
recommend to the Board of Directors the appointment of independent auditors,
(vi) to review non-audit services provided by the independent auditors, (vii)
to review conflict of interest policy and compliance procedures and (viii) to
report to the Board of Directors from time to time and make such
recommendations and observations as it sees fit.

The members of the Audit Committee are:

Patricia Carry Stewart, Chairman
Hyman L. Battle, Jr.
John J. Creedon
Terry R. Lautenbach
M. Cabell Woodward, Jr.

The Nominating Committee held three meetings during the 1993 fiscal year.
The duties of the Nominating Committee are to nominate, in concert with the
Chairman of the Board of Directors, any new director for election by the Board
of Directors. The Nominating Committee will consider nominees recommended by
the shareholders; the Committee, however, does not have any formal procedure
to be followed by shareholders in submitting such recommendations.

The members of the Nominating Committee are:

John J. Creedon, Chairman
Allan J. Bloostein
Theodore Levitt

The Compensation Committee held three meetings during the 1993 fiscal
year. The duties of the Compensation Committee are (i) to review and approve
the salaries, bonuses and other compensation of all officers and directors of
the Corporation and its subsidiaries and of each executive of the Corporation
and its subsidiaries whose base salary is greater than $150,000 per annum,
(ii) to administer the Omnibus Stock Incentive Plan and any outstanding awards
under the 1973 and 1987 Stock Option Plans of the Corporation subject to the
terms of such plans, and (iii) to administer any profit incentive plans for the
benefit of the Corporation and its divisions.

The members of the Compensation Committee are:

Donald F. McCullough, Chairman
Allan J. Bloostein
Frank Melville*
M. Cabell Woodward, Jr.

- ----------
* Mr. Melville will be retiring from the Board of Directors as of April 12,
1994.

12
<PAGE>
<PAGE>
DIRECTOR'S COMPENSATION

Annual Retainer. Each director who is not an employee of the Corporation
receives a retainer of $25,000 per year and a fee of $1,000 for each Board or
committee meeting that he or she attends. In addition, each director who is
not an employee of the Corporation receives an annual retainer of $2,500 for
each committee he or she Chairs.

1989 Directors Stock Option Plan. On January 11, 1989 the Board of
Directors adopted, and on April 11, 1989 the Shareholders approved, a stock
option plan designated as the "1989 Directors Stock Option Plan", pursuant to
which options for an aggregate of 150,000 shares of the Corporation's Common
Stock may be granted to directors who are not employees of the Corporation.

All directors of the Corporation who at the time of grant are not, and
within the one year period immediately preceding such time of grant have not
been, an employee of the Corporation or its subsidiaries or otherwise eligible
for selection to participate in any plan of the Corporation or its
subsidiaries that entitles the participant therein to acquire stock or stock
options of the Corporation or its subsidiaries, are eligible ("Eligible
Directors") to receive options under the Directors Stock Option Plan at the
market price on the date of grant. The nominees for director who are Eligible
Directors are Messrs. Battle, Bloostein, Creedon, Jordan, Joyce, Lautenbach,
Levitt, McCullough, Seidenberg, Ms. Stewart and Mr. Woodward.

On January 11 of each calendar year, all Eligible Directors receive an
option to purchase 1,000 shares of the Corporation's Common Stock.
Notwithstanding the foregoing, any director who became or becomes an Eligible
Director after February 24, 1989, was or shall be granted an initial option to
purchase 2,000 shares of the Corporation's Common Stock. Each Eligible
Director as of January 11, 1993 received an option to purchase 1,000 shares of
the Corporation's Common Stock at the then fair market value of such stock,
pursuant to the terms of the Directors Stock Option Plan. In July 1993, upon
becoming an Eligible Director, Mr. Seidenberg, received an option to purchase
2,000 shares of the Corporation's Common Stock at the then fair market value.
Since the adoption of the Directors Plan through March 1, 1994, options to
purchase an aggregate of 78,000 shares of Common Stock have been granted at
the average exercise price of $43.15 per share.

Directors Retirement Plan. As of January 1, 1992, the Corporation adopted
the Directors Retirement Plan for non-employee directors. Pursuant to this
plan non-employee directors who retire at age 65 or older with at least five
years of service are eligible to receive retirement benefits equal to the
annual retainer paid by the Corporation immediately prior to such directors
retirement. For directors with at least ten years of service, such benefit is
payable for the life of the director. For directors with more than five but
less than ten years of service, such benefit is payable for the lesser of the
total number of years of service or life.

The Directors Stock Option Plan and the Retirement Plan permit the
Corporation to compete with other organizations offering similar plans in
attracting and retaining the services of persons of exceptional talent who are
able to make important contributions to the Corporation by giving directors a
direct and long term interest in the Corporation's future success.

Directors and Officers Liability Insurance. The Corporation has purchased
directors and officers liability insurance with a limit of $100,000,000 and
pension trust liability insurance with a limit of $50,000,000. This insurance
was purchased in layers from National Union Fire Insurance Company of
Pittsburgh, PA; Federal Insurance Company of Warren, NJ; CIGNA Insurance
Company of Los Angeles, CA; Fidelity & Casualty Company of New York, NY;
Athena Assurance Company of St. Paul, MN; and Reliance Insurance Company of
Philadelphia, PA. The pension trust liability insurance covers actions of
directors and officers as well as other employees with fiduciary
responsibilities under ERISA. All of the insurance policies expire on June 1,
1994. The aggregate premium for these insurance policies is $816,635 for the
directors and officers liability coverage and $119,475 for the pension trust
liability coverage. It is expected that the above liability insurance
coverages will be renewed or replaced upon expiration of the above policies.

<PAGE>
<PAGE>
OTHER MATTERS

Management does not intend to present and has no knowledge that others
will present at the annual meeting matters other than those set forth herein.
However, if any other matters properly come before the meeting, it is the
intention of the persons named in the enclosed Proxy to vote the shares
represented in accordance with their judgment, pursuant to the discretionary
authority granted therein.

Voting, Solicitation of Proxies and Shareholder Proposals

The outstanding voting securities of the Corporation are its shares of
Common Stock and its ESOP Preference Stock. Under New York law and the
Corporation's Certificate of Incorporation, each share of Common Stock
outstanding on the record date is entitled to one vote at the Annual Meeting
of Shareholders. Each share of ESOP Preference Stock is entitled to the number
of votes equal to the number of shares of Common Stock into which such share
of ESOP Preference Stock could be converted on the record date, which for the
1994 annual meeting is one vote per share. The presence in person or by proxy
of the holders of shares entitled to cast a majority of the votes constitutes
a quorum. As of March 1, 1994 there were issued and outstanding and entitled
to vote 105,351,156 shares of Common Stock and 6,498,514 shares of ESOP
Preference Stock.

The Proxy, if returned properly executed and not subsequently revoked by
written notice delivered to the Secretary of the Corporation or in person at
the meeting, will be voted in accordance with the choice made by the
shareholder. If no instructions are indicated but the Proxy is executed, the
Proxy will be voted for the election of all Directors and in favor of Item 2
described in this Proxy Statement.

Votes are tabulated by the Corporation's transfer agent using the
transfer agent's automated system. Under New York law, directors are elected
by a plurality of the votes cast at the meeting. The proposal to approve the
Profit Incentive Plan requires the affirmative vote of a majority of the votes
cast by shareholders entitled to vote at the meeting.

Proxies for shares marked "abstain" on a matter will be considered to be
represented at the meeting, but not voted for such purposes. Broker non-votes,
that is, shares registered in the names of brokers or other "street name"
nominees for which proxies are voted on some but not all matters, will be
considered to be represented at the meeting but will be considered to be voted
only as to those matters actually voted on.

The enclosed Proxy is solicited by and on behalf of the Board of
Directors of the Corporation in connection with the Annual Meeting of
Shareholders of the Corporation to be held on April 12, 1994 and any
adjournment or adjournments thereof. Only shareholders of record at the close
of business on March 1, 1994 will be entitled to notice of, and to vote at,
the meeting and at any adjournment or adjournments thereof. Anyone giving a
Proxy may revoke it at any time before it is exercised by notifying the
Corporation in writing that the Proxy is revoked or by attending and voting in
person at the meeting.

The cost of the solicitation of Proxies will be borne by the Corporation.
The Corporation has retained Morrow & Co. to assist it in the solicitation of
Proxies for a fee of $6,000 plus out-of- pocket expenses. In addition,
solicitations may be made by mail, telephone, telegraph and personal
interview, by the directors, officers and regularly engaged employees of the
Corporation, without extra compensation.

Shareholder proposals intended for inclusion in next year's Proxy
Statement must be received by the Secretary of the Corporation at One Theall
Road, Rye, New York 10580, no later than November 15, 1994.

If you do not plan to attend the Annual Meeting of Shareholders on April
12, 1994 in person, the management urges that you show your interest in the
Corporation's affairs, whether your holdings are large or small, by promptly
signing and returning the enclosed Proxy so that your stock may be voted. A
postage paid return envelope is provided. The giving of such Proxy will not
affect your right to vote in person should you later decide to attend the
meeting.

MELVILLE CORPORATION

ARTHUR V. RICHARDS
Vice President and Secretary
Dated: March 14, 1994

14
<PAGE>
<PAGE>
EXHIBIT A
PROFIT INCENTIVE PLAN
of
MELVILLE CORPORATION

1. Purpose

The purpose of the Profit Incentive Plan of Melville Corporation
(the "Plan") is to provide an opportunity for employees of the Corporation
to earn additional compensation based on the financial success of the
Corporation.

2. Administration

The Compensation Committee of the Board of Directors (the "Committee")
shall administer the Plan. The Committee may review recommendations made by
the Chairman and Chief Executive Officer on participation, award
opportunities, performance measures and performance targets, but the Committee
shall have final authority to establish all terms and conditions which
participants must satisfy to earn awards. The Committee shall settle any
disputes about how to interpret the Plan, and such decisions will be final and
binding.

3. Participation

Corporate employees who are judged to have an impact on the Corporation's
performance will be considered for awards. The Chairman and Chief Executive
Officer may nominate participants subject to review and approval by the
Committee.

4. Performance Period

The performance period shall be the Corporation's fiscal year.

5. Normal Awards

Potential awards shall be expressed as a contingent percentage of base
salary, known as the "Normal Award", which is earned if corporate financial
objectives are achieved and individual performance meets expectations.

The actual size of the incentive pool earned will be determined at the
end of each performance period. If corporate financial performance exceeds the
objectives, the actual incentive pool earned can be as high as 200% of the
Normal Incentive Pool. (The sum of the Normal Awards of participants equals the
"Normal Incentive Pool.") If actual results fall below the objectives, the
actual incentive pool is reduced and may be as low as zero. In no event may any
participant receive an award for a year under which the maximum award value to
be paid exceeds $1,250,000.

6. Corporate Performance Measure

Incentive awards made to participants will be earned based on Melville
Corporation consolidated financial performance. The measure of corporate
performance used shall be earnings before Federal income taxes. The Committee
may in its discretion adjust the earnings before Federal income taxes results
for purposes of this Plan to eliminate the impact of financial performance
factors that the Committee determines should not be considered in calculating
incentive awards, provided, however, that the Committee shall have no
authority to make adjustments hereunder to the extent inconsistent with the
applicable requirements of Section 162(m) of the Internal Revenue Code (the
"Code") and the regulations thereunder.

7. Earnings at Varying Levels of Performance

The size of the actual incentive pool will increase or decrease according
to performance scales established by the Committee in its discretion that tie
the level of budget achievement to the level of the Normal Incentive Pool. At
the budgeted performance level, 100% of the Normal Incentive Pool will be
earned. The Committee reserves the right to vary scales or set unique targets
for special situations such as turnarounds. The Committee retains the right to
modify the performance objectives at the beginning of any year.

A-1
<PAGE>
<PAGE>
8. Calculation of Results

As soon as practical after the end of each fiscal year, the size of the
incentive pool earned will be calculated by comparing actual results, after any
adjustments, to budget and increasing or decreasing the incentive pool based
on the applicable performance scale.

9. Individual Performance

In the case of persons who are not covered employees within the meaning
of Section 162(m) of the Code, the Committee retains the right to increase or
decrease actual awards to individual participants to reflect individual
performance and contribution. Such adjustments may be based on achieving
formal individual objectives or may be made at the discretion of the
Committee, provided, however, that no individual's actual award exceeds the
maximum of 200% of the Normal Award. In no event can the total of all
participants' actual awards exceed the total incentive pool earned under
Section 8.

10. Payment of Awards

Once the incentive pool is calculated, awards will be paid in cash as
soon thereafter as practical.

11. Withholding

The Corporation retains the right to deduct any sums that Federal, state
or local tax laws require to be withheld with respect to any payment of
awards.

12. Termination of Employment

When a participant's employment ceases, the disposition of prior awards
depends on the circumstances of termination.

a. If termination is by reason of death, permanent disability or
retirement, then the participant shall receive a pro-rata award.
Pro-rata awards are based on the number of full months worked during
the year before termination of employment. If the last day worked
occurs on or after the 15th of any month, that month will be treated
as a full month for purposes of determining a pro-rata award. Awards
will be determined based upon the actual results at the end of the
performance period.

b. If termination is for any other reason, then no award(s) will be paid
when the last day worked occurs prior to the end of the fiscal year
in which the incentive is earned, unless otherwise determined by the
Committee.

13. Transfers and Changes in Responsibilities

If a participant transfers to a division and participation in the Plan
ceases, then any award such participant may be entitled to under the Plan will
be pro-rated to the date of such change or transfer and the award will be
based upon actual results at the end of the year. Pro-rata awards will be
based on the number of full months worked during the year before the date of
change or transfer. If the date of change or transfer occurs on or after the
15th of any month, that month will be treated as a full month for purposes of
determining the pro-rata award.

14. Employment Rights

The Plan does not give a participant any right to continue in the employ
of the Corporation or constitute any contract or agreement of employment or
interfere in any way with the right of the Corporation to terminate or change
the conditions of employment.

15. Amendment

This Plan may be amended by the Board of Directors of the Corporation at
any time in its sole discretion, provided that shareholder approval of such
amendment will be required if necessary to comply with any applicable tax or
regulatory rules.

A-2
<PAGE>
<PAGE>

MELVILLE CORPORATION
ONE THEALL ROAD
RYE, NEW YORK 10580 PROXY
- ------------------------------------------------------------------------------

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
MELVILLE CORPORATION (THE "CORPORATION")

The undersigned hereby instructs The Bank of New York, as trustee*, to vote
all the shares of Series One Convertible Preference Stock (the "ESOP Stock")
of the Corporation which the undersigned would be entitled to vote at the
Annual Meeting of Shareholders of the Corporation to be held at 10:00 o'clock
A.M., New York Time, on April 12, 1994, at the offices of the Corporation, One
Theall Road, Rye, New York 10580, and at any adjournment or adjournments
thereof.

The undersigned hereby ratifies and confirms all that said proxy may lawfully
do in the premises, and hereby revokes all proxies heretofore given by the
undersigned to vote at said meeting or any adjournment or adjournments
thereof. The undersigned acknowledges receipt of the notice of and proxy
statement for said meeting.

THE BOARD RECOMMENDS A VOTE "FOR ALL NOMINEES" FOR DIRECTORS IN ITEM 1, AND
"FOR" ITEM 2.

TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS, JUST SIGN
THE REVERSE SIDE; NO BOXES NEED TO BE CHECKED. IF THIS PROXY IS EXECUTED BUT
NO INSTRUCTIONS ARE GIVEN TO ANY ITEMS SET FORTH IN THIS PROXY, THIS PROXY
WILL BE VOTED FOR SUCH ITEMS.

* THE BANK OF NEW YORK, AS TRUSTEE HAS APPOINTED CHEMICAL BANK AS AGENT TO
TALLY THE VOTES.

<PAGE>
<PAGE>
<TABLE>
<CAPTION>
THE BOARD RECOMMENDS A VOTE "FOR ALL NOMINEES" FOR DIRECTORS IN ITEM 1, AND "FOR" ITEM 2. /X/ Please mark
TO VOTE IN ACCORDANCE WITH THE BOARD'S RECOMMENDATIONS, JUST SIGN BELOW; your votes
NO BOXES NEED TO BE CHECKED. as this

--------------
ESOP SHARES
<S> <C>
ITEM 1--ELECTION OF DIRECTORS H.L. Battle, Jr., A.J. Bloostein, J.J. Creedon, S.P. Goldstein, R.D.
Huth, M.H. Jordan, W.H. Joyce, T.R. Lautenbach, T. Levitt,
FOR All nominees / / WITHHOLD / / D.F. McCullough, H. Rosenthal, I.G. Seidenberg, P.C. Stewart and M.C.
listed on the right AUTHORITY Woodward, Jr.
(except as marked to vote for
to the contrary on all nomineess (Instruction: To withhold authority to vote for any individual nominee,
the right) listed on the print that nominee's name in the space provided below.)
right
<CAPTION> -----------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
ITEM 2--Approval FOR AGAINST ABSTAIN
of the Profit / / / / / /
Incentive Plan.
- -------------------------------------------------

ITEM 3--In its discretion, The Bank of New York,
as trustee, is authorized to vote in accordance
with its judgment upon such other business as
may properly come before the meeting.

THIS PROXY WHEN PROPERLY EXECUTED AND
RETURNED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED
SHAREHOLDER. PLEASE SIGN BELOW EXACTLY
AS NAME APPEARS ON THIS PROXY.

Dated: , 1994
---------------------------------------

Signature
---------------------------------------

This Proxy is solicited on behalf of the
Board of Directors. Please mark, sign,
date and return this proxy card using
the enclosed prepaid envelope. This
Proxy must be returned for your shares
to be voted at the meeting in accordance
with your instructions if you do not
plan to attend the meeting. Please
indicate any change in address.
</TABLE>
<PAGE>
<PAGE>

MELVILLE CORPORATION
ONE THEALL ROAD
RYE, NEW YORK 10580 PROXY
- ------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
MELVILLE CORPORATION (THE "CORPORATION")

The undersigned hereby appoints STANLEY P. GOLDSTEIN, DONALD F. McCULLOUGH AND
M. CABELL WOODWARD, JR., and each of them, the undersigned's true and lawful
proxies, agents and attorneys, each with full power to act without the others
and with full power of substitution and revocation, for and on behalf of the
undersigned, to vote all the shares of Common Stock of the Corporation which
the undersigned would be entitled to vote if present at the Annual Meeting of
Shareholders of the Corporation to be held at 10:00 o'clock A.M., New York
Time, on April 12, 1994, at the offices of the Corporation, One Theall Road,
Rye, New York 10580, and at any adjournment or adjournments thereof.

THE BOARD RECOMMENDS A VOTE "FOR ALL NOMINEES" FOR DIRECTORS IN ITEM 1, AND
"FOR" ITEM 2.

--------------
COMMON SHARES
<S> <C>
ITEM 1--ELECTION OF DIRECTORS H.L. Battle, Jr., A.J. Bloostein, J.J. Creedon, S.P. Goldstein, R.D.
Huth, M.H. Jordan, W.H. Joyce, T.R. Lautenbach, T. Levitt,
FOR All nominees / / WITHHOLD / / D.F. McCullough, H. Rosenthal, I.G. Seidenberg, P.C. Stewart and M.C.
listed on the right AUTHORITY Woodward, Jr.
(except as marked to vote for
to th econtrary on all nomineess (Instruction: To withhold authority to vote for any individual nominee,
the right) listed on the print that nominee's name in the space provided below.)
right
<CAPTION> -----------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
ITEM 2--Approval FOR AGAINST ABSTAIN
of the Profit / / / / / /
Incentive Plan.
<CAPTION>
- -------------------------------------------------

ITEM 3--In their discretion, the proxies and
each of them, are authorized to vote in
accordance with their judgment upon such other
business as may properly come before the
meeting.

THIS PROXY WHEN PROPERLY EXECUTED AND
RETURNED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED
SHAREHOLDER. PLEASE SIGN BELOW EXACTLY
AS NAME APPEARS ON THIS PROXY.

Dated: , 1994
---------------------------------------

Signature
---------------------------------------

This Proxy is solicited on behalf of the
Board of Directors. Please mark, sign,
date and return this proxy card using
the enclosed prepaid envelope. This
Proxy must be returned for your shares
to be voted at the meeting in accordance
with your instruction if you do not
plan to attend the meeting. Please
indicate any change in address.
</TABLE>