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>
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 9, 1996, at 10:00 A.M., New York time, for the following purposes:
1. To elect eleven directors to hold office for the term expiring in
April, 1997;
2. To consider and vote upon the 1996 Directors Stock Plan;
3. To ratify the appointment of KPMG Peat Marwick LLP, as auditors; and
4. 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, 1996 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 7, 1996
<PAGE>
----------
PROXY STATEMENT
----------
This Proxy Statement, the attached Notice of Annual Meeting of
Shareholders, the enclosed Proxy, and the 1995 Annual Report are first being
mailed to the shareholders of the Corporation on or about March 7, 1996.
ITEM 1--ELECTION OF DIRECTORS
Eleven directors of the Corporation are to be elected at the Annual Meeting
of Shareholders in April, 1996, for terms expiring in April, 1997. 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.
Mr. Donald F. McCullough, after twenty-one years of distinguished service
on the Board, is retiring pursuant to Board policy and will not stand for
re-election. In view of his retirement, the size of the Board will be decreased
to eleven persons effective at the Annual Meeting of Shareholders on April 9,
1996.
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>
ALLAN J. BLOOSTEIN 66 1989 8,500 Common *
Consultant in both retail and consumer goods Shares (2)
marketing; Director of Taubman Centers Inc.;
Trustee or Director of various Smith Barney
investment portfolios
W. DON CORNWELL 48 1994 3,100 Common *
Chairman of the Board and Chief Executive Shares (2)
Officer of Granite Broadcasting Corporation, a group
broadcasting company
THOMAS P. GERRITY 54 1995 3,000 Common *
Dean of The Wharton School of the University Shares (2)
of Pennsylvania; Director of Digital Equipment
Corporation, the Federal National Mortgage
Association, Reliance Group Holdings, Inc. and
the Sun Company, Inc.
STANLEY P. GOLDSTEIN 61 1984 639,768 Common *
Chairman of the Board and Chief Executive Shares (2)(3)(4)(5)
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
</TABLE>
1
<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 59 1986 8,400 Common *
Chairman of the Board and Chief Executive Shares (2)
Officer 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; member of the
Executive Committee of the Corporation; Director of Aetna
Life & Casualty Company, Dell Computer Corporation, and
Rhone-Poulenc Rorer Inc.
WILLIAM H. JOYCE 60 1994 4,000 Common *
Chairman of the Board and Chief Executive Officer Shares (2)
of Union Carbide Corporation, a leading producer
of chemicals and polymers; from January, 1993 to January,
1996, President, Chief Operating Officer and Director of
Union Carbide Corporation; from December, 1991 to January,
1993, Executive Vice President of Union Carbide Corporation;
from October, 1990 to December, 1991, Vice President of
Union Carbide Corporation; Director of Reynolds Metals
Company
TERRY R. LAUTENBACH 57 1991 6,500 Common *
Retired Senior Vice President of IBM Shares (2)
Corporation, a multinational advanced information
technology company; member of the Executive
Committee of the Corporation; Director of Air
Products Corp., Varian Associates, Inc. and Trustee
of Loomis-Sayles Mutual Funds
HARVEY ROSENTHAL 53 1994 270,207 Common *
President and Chief Operating Officer of the Shares (2)(3)(4)
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>
<TABLE>
<CAPTION>
First Ownership of Percent
Became Corporation's of
Name Age Director Stock (1) Class
- ---- --- -------- --------- -----
<S> <C> <C> <C> <C>
IVAN G. SEIDENBERG 49 1993 4,000 Common *
Chairman of the Board and Chief Executive Officer Shares (2)
of NYNEX Corporation, a worldwide
communications company; from January, 1995 to
April, 1995, President, Chief Executive Officer and
Director of NYNEX Corporation; from February, 1994 to
January, 1995, President, Chief Operating Officer and
Vice Chairman of NYNEX Corporation; 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;
Director of AlliedSignal Inc. and Viacom Inc.
PATRICIA CARRY STEWART 67 1989 8,500 Common *
Retired Vice President of The Edna McConnell Shares (2)
Clark Foundation, a charitable foundation;
Director of Bankers Trust New York Corporation
M. CABELL WOODWARD, JR. 67 1982 12,000 Common *
Retired Vice Chairman, Chief Financial Officer Shares (2)
and Director of ITT Corporation, a diversified
multinational corporation; Chairman of the Executive
Committee of the Corporation; Director of Capital
Cities/ABC, Inc. and The Black & Decker Corporation
and Trustee of a management investment company
sponsored by Paine Webber
All directors and executive officers as a group
(31 persons) 2,086,553 Common 2%
Shares (2)(3)(4)(5)(6)
</TABLE>
- ----------
* Less than 1%.
(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, 1996.
(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, 1996 and were exercisable within 60 days
thereafter: Mr. Goldstein, 452,000; Mr. Rosenthal, 253,667 each of Messrs.
Bloostein, Jordan, Woodward and Ms. Stewart, 8,000; Mr. Lautenbach, 6,000;
Mr. Seidenberg, 4,000; Mr. Joyce, 3,000; Mr. Cornwell, 3,000; Mr. Gerrity,
2,000; directors and executive officers as a group 1,748,402 (31 persons).
(3) 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 are subject to certain restrictions as to continued
employment and transfer of such shares as provided in the plan: Mr.
Goldstein, 12,629; Mr. Rosenthal, 7,683; executive officers as a group (22
persons) 114,569.
(4) The Melville Corporation and Subsidiaries Employee Stock Ownership Plan
(the "ESOP") held as of March 1, 1996, 6,160,405 shares of the
Corporation's Series One ESOP Convertible Preference Stock. The Bank of New
3
<PAGE>
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, 1995 the last date on which an allocation was made, Messrs. Goldstein
and Rosenthal have each been allocated 671 shares; and all executive
officers as a group (22 persons) have been allocated 9,127 shares. These
amounts have not been included in the above table.
(5) 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.
(6) Included in the shares of Common Stock for the group are the shares owned,
subject to certain restrictions as to continued employment or subject to
options which were exercisable within 60 days of March 1, 1996, for the
following named executive officers: Gary L. Crittenden, 20,000 shares
subject to stock options; Jerald L. Maurer, 1,268 shares owned, 941 shares
subject to restrictions and 56,667 shares subject to stock options; and
Jerald S. Politzer, 12,119 shares owned, 5,298 shares subject to
restrictions and 175,666 shares subject to stock options.
The Corporation is not aware of any person who owned beneficially more than
5% of the outstanding voting securities of the Corporation as of March 1, 1996,
except as shown in the following table:
<TABLE>
<CAPTION>
No. of Percent
Title of Class Name and Address of Beneficial Owner Shares of Class*
-------------- ------------------------------------ ------ ---------
<S> <C> <C> <C>
Common Stock ....................... Invesco PLC 11,579,606 11%
1315 Peachtree St.,
N.E. Suite 500
Atlanta, GA 30309
Common Stock ....................... Putnam Investments, Inc. 6,802,100 6.5%
One Post Office Square
Boston, MA 02109
Series One ESOP
Convertible Preference
Stock ............................. Melville Corporation and Subsidiaries 6,160,405 100%
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, 1996, the percent of voting
securities owned by Invesco PLC, Putnam Investments, Inc., and the ESOP
Trust are 10.4%, 6.1% and 5.5%, respectively.
Invesco PLC ("Invesco") filed a statement with the Securities and Exchange
Commission (the "SEC") dated February 2, 1996 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 (11,579,606 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.
A Schedule 13G dated January 29, 1996 was filed with the SEC on behalf of
Putnam Investments, Inc. and its parent corporation, Marsh & McLennan Companies,
Inc. (collectively "Putnam") disclosing beneficial ownership of more than 5% of
the Corporation's Common Stock (6,802,100 shares). According to the statement,
Putnam has shared voting power over 40,950 shares and shared dispositive power
over 6,802,100 shares of the Corporation's Common Stock. These shares were
acquired for investment purposes and not to change or influence 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
4
<PAGE>
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
executive officers including those named in the Summary Compensation Table
participate, addressing the specific decisions made with respect to 1995
compensation.
Compensation Policies. The Compensation Committee has established several
important policies as a framework for the Corporation's executive compensation
program. The compensation program is designed to motivate key executives to
achieve business objectives, reward them for their achievements 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 1995, the Committee engaged a leading, national compensation consultant
to research market data and best practices for the Chief Executive Officer and
certain executive officers, including those named in the Summary Compensation
Table, to compare their salary and other compensation awards to retail industry
standards and to make appropriate recommendations reflective of the business
cycle the Corporation was in. This comparison included cash compensation levels
reported for senior executives of nine specific retailers with sales ranging
from approximately $7 billion to $20 billion. All companies in this survey group
are included in the S&P Retail Composite Index. The comparison also included a
review of compensation levels reported for positions with similar
responsibilities in two published surveys, which included 94 and 17 companies
respectively, in the retail industry. The Compensation Committee believes that
the best references for assessing executive compensation levels are similarly
sized retailers and, as such, reviewed those companies within a comparable sales
range. The study produced two key recommendations: tie senior management more
closely to shareholder value and increase the competitiveness of the long term
component of the Chief Executive Officer's and named executives' total
remuneration. The vehicle chosen to achieve these objectives was multi-year
stock option grants to these individuals; concurrently, the Committee eliminated
performance-based restricted stock grants for this group.
Compensation in 1995 for the Corporation's executive officers named in the
Summary Compensation Table, was comprised of base salary, cash bonuses under a
profit incentive plan and stock options. Total executive compensation levels,
including salaries, annual incentives, and long term incentives, were targeted
in 1995 at the median of compensation paid by comparable companies in the survey
group. Total compensation levels of executive officers may range below and above
median in any one year and over a period of years based on performance against
annual and long term business objectives and total return to shareholders.
Base Salary. The Committee reviews base salaries annually and considers
increases based on corporate profitability, competitive salaries, position
responsibility levels and individual qualifications and performance. The Chief
Executive Officer's base salary has not been increased since 1993. In 1994, the
Committee alternatively decided to increase the Chief Executive Officer's cash
bonus opportunity under the profit incentive plan to 60% of base salary, from
46% in 1993, placing a higher percentage of his compensation at risk based on
company performance. The same bonus opportunity continued for 1995.
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 executive officers,
including those named in the Summary Compensation Table, as well as awards to
other participants with corporate responsibilities, are based on achievement of
the annual budget for the Corporation, measured by consolidated earnings before
Federal income taxes. For executives and other employees with division
responsibilities, achievement of division profit budgets and individual
performance determine the awards earned.
5
<PAGE>
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 60% 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. This bonus 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 1995, no annual bonus was awarded to the Chief Executive Officer or
other executive officers with corporate responsibilities (including named
executives), because Corporate earnings were below the minimum threshold level
for the year, even though a major restructuring of the Corporation was approved
by the Board and announced to its shareholders.
Stock Options. As mentioned previously, in 1995, the Committee engaged a
leading, national compensation consultant to research market data and best
practices for the Chief Executive Officer and executives named in the Summary
Compensation Table to compare their salary and other compensation awards to
retail industry standards and to make appropriate recommendations reflective of
the business cycle the Corporation was in. Based on the findings of this study
and a previous study in 1994, normal 1994 stock option grants were deferred
until April 1995 to align these grants (made in October in previous years) with
the April review of the Chief Executive Officer's and named executives' total
remuneration.
As a result of the Committee's review of total remuneration market data and
best practices, in April 1995, a significant grant of stock options was made to
the Chief Executive Officer and other executive officers including those named
in the table. This option grant, which carried a staggered three-year rather
than the standard one-year vesting period, was intended to replace the standard
annual grants over the three-year period from 1995 to 1997. These grants provide
a significant incentive for achieving high shareholder returns over the long
term as well as provide for meaningful gains if substantial stock appreciation
is achieved thereby aligning the interests of executives with those of the
Corporation's shareholders. The exercise price of any stock option award may not
be less than 100% of the fair market value of a share of the Corporation's
Common Stock on the date the stock options are granted.
Performance-Based Restricted Stock. The purpose of the performance-based
restricted stock awards granted in recent years continues to be to further
motivate executives to achieve annual business objectives, encourage retention
and reward the creation of long term shareholder value. The number of shares of
performance-based restricted stock awarded (which is based on competitive pay
practices) is 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 is determined by one year
performance standards, which are based on the Corporation's annual return on net
assets as measured against a pre-approved budget. For Corporate participants, if
the Corporation's actual performance falls below a minimum threshold percentage
of budget, the right to receive the entire number of shares granted is
forfeited. If actual performance equals 100% of budget, 100% of shares awarded
are earned. For actual performance 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, performance for the division is measured against division
budgets.
Once earned, such shares 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
subject to forfeiture.
As mentioned previously, in 1995 the Committee did not grant
performance-based restricted stock to the Chief Executive Officer or to the
other executives named in the Summary Compensation Table. The only awards of
restricted stock in 1995, which were not performance-based, were in connection
with the hiring or retention of employees, but the rights to these awards are
subject to forfeiture if the recipient ceases to be employed by the Corporation
during the restriction period.
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 $1 million paid to the
Corporation's Chief Executive Officer and four other executive officers named in
the Summary Compensation Table. Qualifying performance-based compensation will
not be subject to the deduction limit if certain requirements are met. As was
the case in 1995, the Corporation's current intention is to structure the
6
<PAGE>
performance-based portion of the compensation of its executive officers (which
in 1995 consisted of annual profit incentive awards and stock option grants) in
a manner that complies with this law. However, while the Committee's policy is
to preserve corporate tax deductions, it also maintains the flexibility to
approve compensation arrangements which it deems to be in the best interests of
the Corporation and its stockholders but which may not always qualify for full
tax deductibility.
Compensation Committee Members
Donald F. McCullough, Chairman
Allan J. Bloostein
Ivan G. Seidenberg
M. Cabell Woodward, Jr.
SUMMARY COMPENSATION TABLE
The following table summarizes all compensation awarded to, earned by or
paid to the five named key policy-making officers for all services rendered to
the Corporation and its subsidiaries during each of the Corporation's last three
fiscal years.
<TABLE>
<CAPTION>
Long Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
-------------------- -------------------------- ---------
Restricted LTIP All Other
Stock Award Options/ Payouts Compensation
Name and Principal Position Year Salary($) Bonus ($) ($)(1) # of Shares (2) ($)(3) ($)(4)
- --------------------------- ---- --------- --------- ------ --------------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Stanley P. Goldstein 1995 1,050,000 0 0 450,000 0 3,750
Chairman of the Board, 1994 1,050,000 491,400 240,863 0 109,549 4,350
Chief Executive Officer 1993 1,050,000 285,000 192,893 30,000 228,028 6,338
Director of the Corporation
Harvey Rosenthal 1995 787,500 0 0 350,000 0 6,796
President, Chief Operating 1994 750,000 292,500 143,378 25,000 10,276 7,350
Officer and Director of the
Corporation
Jerald S. Politzer 1995 651,250 0 0 200,000 0 7,208
Executive Vice President 1994 625,000 204,750 92,150 0 50,864 7,350
of the Corporation 1993 600,000 148,700 93,007 16,000 65,121 10,835
Gary L. Crittenden 1995 442,500 0 0 100,000 0 0
Former Senior Vice President, 1994 9,810 0 313,125 20,000 0 0
Chief Financial Officer of the
Corporation
Jerald L. Maurer 1995 323,750 0 0 125,000 0 5,021
Senior Vice President 1994 275,000 68,640 28,524 15,000 0 0
of the Corporation
</TABLE>
- ----------
(1) All restricted stock disclosed in this table and currently outstanding with
the exception of shares granted to Mr. Crittenden, reflect awards of
performance-based restricted stock, which is contingent upon meeting one
year performance objectives and subject to a three year holding period from
the date of grant. Based on the number of shares of restricted stock earned
at the end of the one year performance period, dividends are paid at the
same rate as paid to all shareholders from the date of the contingent
award. On December 31, 1995, Mr. Goldstein had a right to receive, in the
aggregate, 12,629 restricted shares having a market value on December 31,
1995 of $384,395, Mr. Rosenthal had a right to receive, in the aggregate,
7,683 restricted shares having a market value on December 31, 1995 of
$233,851, Mr. Politzer had a right to receive, in the aggregate, 5,298
restricted shares having a market value on December 31, 1995 of $161,257
and Mr. Maurer had a right to receive, in the aggregate, 941 restricted
shares having a market value on December 31, 1995 of $28,642. Mr.
Crittenden had a right to receive, in the aggregate, 10,000 restricted
shares having a market value on December 31, 1995 of $308,750. Mr.
Crittenden's shares had a vesting date of December 22, 1997 and have been
forfeited as a result of his resignation.
(2) The 1995 option grants were multi-year grants that vest in one-third
increments over a three-year period.
7
<PAGE>
(3) Represents performance shares granted for the 1992-1994 performance cycle
based on the market value on December 31, 1994 of $30.31 and performance
shares granted for the 1991-1993 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.
(4) For 1995, includes $750, $3,796, $4,208, and $2,021 contributed under the
Corporation's 401K Profit Sharing Plan ("401K Plan") for Mr. Goldstein, Mr.
Rosenthal, Mr. Politzer, and Mr. Maurer, respectively, and 56.13. ESOP
shares based on an assumed market value of $53.45 per share (total value of
$3,000) contributed under the Corporation's ESOP for each of these named
executives. For 1994, includes $1,350, $4,350, and $4,350 contributed under
the Corporation's 401K Plan for Mr. Goldstein, Mr. Rosenthal and Mr.
Politzer, respectively, and 56.13 ESOP shares based on an assumed market
value of $53.45 per share (total value of $3,000) contributed under the
Corporation's ESOP for each of these named executives. For 1993, includes
$1,621 and $6,118 contributed under the 401K Plan for Mr. Goldstein 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 for each of
these named executives.
OPTION GRANTS IN FISCAL YEAR ENDING 12/31/95
The following table summarizes activity relating to stock options awarded to the
named executive officers in the last fiscal year.
<TABLE>
<CAPTION>
Present Value (3)
Individual Grants (1) On Grant Date
------------------------------------------------- ------------------
Percentage of
Total Options
Granted to
No. of Employees Exercise
Options in Fiscal Price Expiration
Name Granted Year ($/Sh) Date Value ($)
- ---- ------- ---- ------ ---- ---------
<S> <C> <C> <C> <C> <C>
Stanley P. Goldstein 450,000 14.8% $37.375 4/10/2005 $4,120,594
Harvey Rosenthal 350,000 11.5% $37.375 4/10/2005 $3,204,906
Jerald S. Politzer 200,000 6.6% $37.375 4/10/2005 $1,831,375
Gary L. Crittenden 100,000(2) 3.3% $37.375 4/10/2005 $ 915,688
Jerald L. Maurer 125,000 4.1% $37.375 4/10/2005 $1,144,609
</TABLE>
- ----------
(1) These options are multi-year grants that become exercisable in one-third
increments over a three-year period. They were awarded at fair market value
on the date of grant.
(2) In view of Mr. Crittenden's resignation effective February 16, 1996, none
of his options shown in this table will be exercisable.
(3) The hypothetical present values on grant date are calculated using the
Black-Scholes option pricing model which for 1995 grants was determined
based on the following six inputs: (1) the option exercise price is
$37.375; (2) the fair value of the stock under option at the time of grant
is also $37.375; (3) the dividend yield is 4.07% which equals the $1.52
dividend to be paid to shareholders during the year prior to the date of
grant of the option divided by the stock price of $37.375; (4) the option
term is 10 years; (5) the volatility of the stock is 19.27%, based on an
analysis of weekly closing stock prices and dividends paid during the
three-year period prior to the grant of the options; and (6) the assumed
risk-free rate of interest is 7.32%, equivalent to a 10 year treasury yield
at the time of grant of the options. No other discounts or any other
restrictions related to vesting or the likelihood of vesting were applied.
8
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR ENDING 12/31/95
AND YEAR-END OPTION VALUES
The following table summarizes stock option exercise activity for the named
executive officers during the last fiscal year and the fiscal year-end values of
unexercised options.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Year-End(#) Fiscal Year-End($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise(#) Realized($) Unexercisable Unexercisable
- ---- -------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Stanley P. Goldstein ................. -- -- 302,000/450,000 61,875/0
Harvey Rosenthal ..................... -- -- 137,000/350,000 28,875/0
Jerald S. Politzer ................... -- -- 109,000/200,000 0/0
Gary L. Crittenden ................... -- -- 20,000/100,000 0/0
Jerald L. Maurer ..................... -- -- 15,000/125,000 0/0
</TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL SHAREHOLDERS RETURN AMONG
MELVILLE CORPORATION, S&P INDEX AND S&P RETAIL COMPOSITE
GRAPHICAL REPRESENTATION OF CHART
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
Melville $100 $109 $134 $106 $ 84 $ 88
S&P 500 $100 $130 $140 $155 $157 $215
S&P Retail Composite $100 $158 $186 $178 $162 $182
9
<PAGE>
Income Continuation Policy. The Corporation has in effect an Income
Continuation Policy for Select Senior Executives of Melville Corporation (the
"Income Continuation Policy"), which provides by its terms together with the
employment agreements referred to below, 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, the Chief Executive
Officer and other named executive officers in the Summary Compensation Table
(other than Mr. Crittenden who is no longer with the Corporation) 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. The Corporation provides
Supplemental Executive Retirement Plans for Select Senior Management of Melville
Corporation (the "Supplemental Retirement Plans"). These Supplemental Retirement
Plans are designed to increase the retirement benefits of selected executive
employees with at least ten (10) years of credited service. The executive
officers named in the Summary Compensation Table with at least ten (10) 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) or as
provided in the employment agreements referred to below, no benefits are payable
to an eligible executive who terminates employment prior to age fifty-five (55)
or prior to completing ten (10) years of credited 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 these plans
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 ten (10) years of credited 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 5%
annual increases in existing compensation levels, the table below shows the
estimated annual benefit payable.
Age 55 Age 60
------ ------
Mr. Goldstein (1) ........................... $ N/A $805,000
Mr. Rosenthal ............................... $299,000 $746,000
Mr. Politzer ................................ $266,000 $650,000
Mr. Crittenden (2) .......................... $210,000 $515,000
Mr. Maurer (3) .............................. $ N/A $364,000
- ----------
(1) Mr. Goldstein is currently age 61.
(2) Mr. Crittenden resigned effective February 16, 1996 and therefore will not
be eligible for benefits under this plan.
(3) No benefit is payable to Mr. Maurer under this plan until age 61.
In 1995, the Corporation entered into employment agreements with Messrs.
Rosenthal, Politzer and Maurer. The agreements have terms of 5 years, except the
term is 3 years for Mr. Rosenthal, and are automatically renewed for year
10
<PAGE>
terms unless notice is given at least 180 days in advance. The agreements
provide for a base salary of $800,000, $660,000 and $390,000, respectively, and
target annual incentive awards of 50%, 42% and 40%, respectively, of base
salary. Generally, the executives are entitled to participate in the
Corporation's employee benefit and long term incentive programs as well as the
Income Continuation Policy and the Supplemental Retirement Plan. In addition,
Mr. Maurer is entitled to a retirement benefit at age 62 equal to $48,000 per
year, less what he is entitled to receive under the Supplemental Retirement
Plan. In the event of death during the term of the agreement the executive's
estate or beneficiary is entitled to receive pro rata annual incentive awards
for the year of death, to exercise vested stock options for a period of up to
one year after death, and to receive all restricted stock awards free of any
prior restrictions. If the executive is terminated without cause, as defined in
the agreements, or if the executive terminates his employment after the
occurrence of certain specified events including a change of control as defined
by the Income Continuation Policy, (a "constructive termination"), the executive
is entitled to receive his base salary amount for a period of 24, 24 and 36
months, respectively (the "severance period"); a pro rata annual incentive award
for the year in which such termination occurs; an amount equal to 2 times (3
times for Mr. Maurer) 50%, 42%, and 40%, respectively, of base salary, payable
monthly during the severance period; lapsing of restrictions on outstanding
restricted stock during the severance period in accordance with the normal terms
of such awards for Mr. Maurer and immediate lifting of all restrictions for
Messrs. Rosenthal and Politzer; generally to exercise options outstanding on the
date of termination of employment during the severance period and for 90 days
thereafter, except vesting of stock options shall occur in accordance with the
original schedule of the option, and continued participation during the
severance period in all applicable health and welfare benefits programs of the
Corporation.
In connection with Mr. Crittenden's employment by the Corporation, in 1995
he received a relocation loan in the principal amount of $500,000, bearing
interest at 6.38% per annum compounded annually. In view of Mr. Crittenden's
resignation, this loan will be repaid in full by June of 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Ivan Seidenberg, the Chairman and Chief Executive Officer of NYNEX, who
is one of the directors standing for re-election, serves on the Corporation's
Compensation Committee. Mr. Stanley Goldstein, the Chairman and Chief Executive
Officer of the Corporation, serves on the Board of Directors of NYNEX but does
not serve on NYNEX's Compensation Committee.
ITEM 2 --1996 DIRECTORS STOCK PLAN
In 1995, the Board of Directors authorized a complete study of the
Corporation's practices with respect to director compensation. After a full
review, the Board of Directors determined to cease further accruals under the
Directors Retirement Plan and to eliminate the existing annual stock option
grant and instead to make an annual grant of Common Stock, to mandate that
one-half of each directors' annual retainer fees be paid in Common Stock, to
permit directors to elect to receive such directors' other compensation in the
form of Common Stock, and to permit each director who is entitled to a prior
benefit under the Directors Retirement Plan to elect to receive the present
value of such benefit in the form of a grant of Common Stock. The Board of
Directors believes these changes will give each director a more direct interest
in the financial performance of the Corporation and will more effectively align
the directors' interest with that of the shareholders.
As part of the implementation of this new director compensation program,
the Board of Directors adopted on January 10, 1996, subject to the approval of
shareholders, a new stock plan designated as the "1996 Directors Stock Plan"
(and defined herein as the "1996 Plan"), permitting stock grants for an
aggregate of 150,000 shares of the Corporation's Common Stock to Directors who
are not employees of the Corporation. The Board believes that the adoption of
the 1996 Plan will continue to permit the Corporation to compete with other
organizations in attracting and retaining the services of directors of
exceptional talent who are able to make important contributions to the
Corporation. The Board of Directors believes that approval of the 1996 Plan is
in the best interests of the Corporation and its shareholders.
Below is a brief description of the principal features of the 1996 Plan.
The full text of the 1996 Plan is attached as Exhibit A, and reference is made
thereto for a complete statement of its terms.
Eligibility. The directors eligible (the "Eligible Directors") to receive
grants under the 1996 Plan consist of directors of the Corporation who at the
time of grant are not, and within the one year period immediately preceding
11
<PAGE>
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 participants therein to
acquire stock or stock options of the Corporation or its subsidiaries other than
under the Directors Stock Option Plan. The present directors and nominees for
election as directors who are Eligible Directors are Messrs. Bloostein,
Cornwell, Gerrity, Jordon, Joyce, Lautenbach, Seidenberg, Woodward and Ms.
Stewart. If elected, these directors will receive 300 shares of Common Stock
following the Annual Meeting of Shareholders and will receive one-half of their
annual retainer in shares, which based on the stock price on March 1, 1996 of
$32.38 per share, is 386 shares per director.
Shares Subject to the 1996 Plan. Not more than an aggregate of 150,000
shares of the Corporation's Common Stock may be issued under the 1996 Plan. All
Eligible Directors as of the end of the Annual Meeting of Shareholders of the
Corporation, commencing with the 1996 annual meeting, shall automatically
receive a grant of 300 shares of the Corporation's Common Stock. The shares to
be delivered under the plan may be made available from newly issued shares or
from shares reacquired by the Corporation, including such shares purchased in
the open market.
One-half of the annual retainer fees for each Eligible Director shall be
paid in shares of Common Stock. Eligible Directors may also elect to receive
remaining compensation, including additional fees to chair committees of the
Board but not including attendance fees, in shares of Common Stock. In addition,
each Eligible Director may elect to defer receipt of compensation payable in
Common Stock until termination of service as a director. In this case, such
directors will receive dividend equivalent credits on the deferred shares.
In connection with the termination of the Director Retirement Plan, each
Eligible Director may elect that in lieu of receiving the previously accrued
benefit in pension payments upon retirement the director will receive the value
of such payments in the form of an additional grant of Common Stock. The amount
of such grant will be calculated under actuarial assumptions determined by the
Corporation's benefit consultants.
All shares of Common Stock issued to an Eligible Director while a director
are nontransferable for six months to the extent necessary for such issuance to
be eligible for exemptive relief under Section 16 of the Securities Exchange Act
of 1934.
Administration. The 1996 Plan will be administered by the Board of
Directors. Subject to the provisions of the 1996 Plan, the Board shall be
authorized to interpret, establish, amend, and rescind any rules and regulations
relating thereto and to make all other determinations necessary or advisable for
the administration of such plan. However, the Board shall have no discretion
with regard to selection of directors to receive grants under the plan or the
number of shares of stock subject to any grants.
Certain Adjustments. In the event of any split-up, combination of shares,
stock dividend, merger, consolidation, or recapitalization, adjustments shall be
made in the number of shares subject to outstanding grants under the 1996 Plan
and in the number of shares for which grants may be made individually and in the
aggregate as may be determined to be appropriate by the Board.
Amendments, Suspension or Discontinuance. The Board of Directors may at any
time amend, suspend or discontinue the 1996 Plan, but may not, without the prior
approval of shareholders, make any amendment which extends the term of the Plan,
increases the total number of shares for which grants may be made individually
or in the aggregate, or changes the eligibility rule for grants.
Termination of the 1996 Plan. No grants may be made under the 1996 Plan
after April 8, 2006.
Federal Income Tax Consequences of the 1996 Plan. All Eligible Directors
under the 1996 Plan are currently subject to Section 16(b) of the Securities
Exchange Act of 1934 (the "Act"), and, therefore, when such director receives
shares under the 1996 Plan while a director, ordinary income is not recognized
at that time unless the election described below is made. Such directors will
instead recognize ordinary income equal to the fair market value of the shares
received on the first day the sale of such shares at a profit is no longer
subject to Section 16(b) of the Act and the Corporation will be entitled to a
deduction of a like amount for Federal income tax purpose at that time. Income
tax regulations state that such date is six months (less one day) after the
acquisition of such shares.
As an alternative to the above, within 30 days of the transfer of such
shares to the director, the director may elect to have the fair market value of
the stock on the date of issuance be treated as ordinary income to the director
in which case it will be allowed as a deduction for Federal income tax purposes
to the Corporation. If the director elects this alternative, when a director
disposes of the shares, any amount received in excess of the market value of the
shares on
12
<PAGE>
the date of issuance will be treated as long or short term capital gain,
depending upon the holding period of the shares. If the amount received is less
than the market value of the shares on the date of issuance, the loss will be
treated as long or short term capital loss, depending upon the holding period of
the shares.
If a director receives shares after ceasing to be subject to Section 16(b)
of the Act, such receipt will result in the fair market value of such shares
being immediately taxable as ordinary income and the Corporation will be allowed
a deduction for Federal income tax purposes at that time.
A majority of the votes cast at the meeting of the Common Stock and ESOP
Preference Stock of the Corporation, voting together as a single class, is
required for approval of the Directors Stock Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
APPROVAL OF THE DIRECTORS STOCK PLAN, AS DESCRIBED ABOVE.
ITEM 3 --APPOINTMENT OF INDEPENDENT AUDITORS
KPMG Peat Marwick LLP was the Corporation's independent auditor for the
year ended December 31, 1995 and has been appointed by the Board of Directors,
upon recommendation of the Audit Committee, to serve as such for the year ending
December 31, 1996. This appointment is being submitted to the shareholders for
ratification. A representative of KPMG Peat Marwick LLP is expected to attend
the Annual Meeting of Shareholders on April 9, 1996 and will be given the
opportunity to make a statement and/or to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
APPROVAL OF THE APPOINTMENT OF KPMG PEAT MARWICK AS THE CORPORATION'S
INDEPENDENT AUDITORS.
BOARD OF DIRECTORS
MEETINGS AND COMMITTEES
During the 1995 fiscal year, there were ten meetings of the Board of
Directors. The Corporation maintains standing Audit, Nominating and Compensation
Committees of the Board of Directors. Mr. Jordan attended six of the ten board
meetings.
The Audit Committee held four meetings during the 1995 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
W. Don Cornwell
Thomas P. Gerrity
William H. Joyce
Terry R. Lautenbach
The Nominating Committee held two meetings during the 1995 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:
Terry R. Lautenbach, Chairman
Allan J. Bloostein
M. Cabell Woodward, Jr.
The Compensation Committee held nine meetings during the 1995 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 $200,000 per annum, (ii) to
administer the Omnibus Stock Incentive Plan and any outstanding awards
13
<PAGE>
under the 1973 and 1987 Stock Option Plans 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*(1)
Allan J. Bloostein
Ivan G. Seidenberg
M. Cabell Woodward, Jr.
DIRECTORS COMPENSATION
Summarized below are each of the components of Directors Compensation in
effect for the fiscal year ended December 31, 1995. Contingent upon approval of
the 1996 Directors Stock Plan being submitted to shareholders for approval
pursuant to this proxy statement, these components will change in order to more
closely link the interests of directors and shareholders (see Item 2 above--1996
Directors Stock Plan).
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. Upon approval of the Directors Stock Plan, one-half
of the annual retainer will be paid in the Corporation's Common Stock. At a
Director's election, all retainers may be paid in the Corporation's Common
Stock.
1989 Directors Stock Option Plan and Directors Retirement Plan. Contingent
upon approval of the 1996 Directors Stock Plan, in the future these plans will
not be components of director compensation. Pursuant to the 1989 Directors Stock
Option Plan, on January 11 of each calendar year non-employee directors received
an option to purchase 1,000 shares of the Corporation's Common Stock except that
any director who became an eligible director after February 24, 1989 was granted
an initial option to purchase 2,000 shares of the Corporation's Common Stock, at
the fair market value on the date of grant. In view of the approval of the
Directors Stock Plan by the Board on January 10, 1996, contingent on shareholder
approval, no stock option awards were made to directors in 1996.
Pursuant to the Directors Retirement Plan, non-employee directors who
retired at age 65 or older with at least five years of service were eligible to
receive retirement benefits equal to the annual retainer paid by the Corporation
immediately prior to such directors retirement. For directors with more than
five but less than ten years of service, such benefit was payable for the lesser
of the total number of years of service or life. For directors with at least ten
years of service, such benefit was payable for the life of the director.
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; Royal Indemnity Company
of Charlotte, NC; Fidelity & Casualty Company of New York, NY; St. Paul Surplus
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, 1996. The aggregate premium for these
insurance policies is $786,500 for the directors and officers liability coverage
and $123,059 for the pension trust liability coverage. It is expected that the
above liability insurance coverage will be renewed or replaced upon expiration
of the above policies.
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. If any
other matters properly come before the meeting, however, 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
- ----------
(1)* Mr. McCullough will be retiring from the Board of Directors, pursuant to
board policy, as of April 9, 1996.
14
<PAGE>
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 1996
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, 1996 there were issued and outstanding and entitled to vote
105,218,990 shares of Common Stock and 6,160,405 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, FOR the 1996 Directors Stock Plan, and FOR
ratification of the appointment of KPMG Peat Marwick LLP, as independent
auditors.
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 1996
Directors Stock Plan and to ratify the appointment of the auditors requires a
majority of the votes cast 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 except that under
Federal regulations, for purposes of the proposal to adopt the 1996 Directors
Stock Plan abstentions are treated as voting on the matter and therefore will
have the effect of a negative vote. 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 9, 1996 AND ANY ADJOURNMENT OR ADJOURNMENTS
THEREOF. Only shareholders of record at the close of business on March 1, 1996
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 Secretary of 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 6, 1996.
If you do not plan to attend the Annual Meeting of Shareholders on April 9,
1996 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.
By order of the Board of Directors.
MELVILLE CORPORATION
ARTHUR V. RICHARDS
Vice President and Secretary
Dated: March 7, 1996
15
<PAGE>
EXHIBIT A
MELVILLE CORPORATION
1996 DIRECTORS STOCK PLAN
1. PURPOSE
The purpose of this Plan is to afford present and future directors of
Melville Corporation (the "Company") an opportunity to secure a stock ownership
in the Company, thereby encouraging them to acquire a direct and long term
interest in the growth and prosperity of the Company and to have the outlook and
consideration of an owner of the Company. This Plan also permits the Company to
compete with other organizations offering similar plans in attracting and
retaining the services of directors of exceptional talent who are able to make
important contributions to the Company's success.
2. ADMINISTRATION OF THE PLAN
This Plan shall be administered by the Company's Board of Directors (the
"Board"). Subject to the provisions of the Plan, the Board shall be authorized
to interpret the Plan, to establish, amend, and rescind any rules and
regulations relating to the Plan and to make all other determinations necessary
or advisable for the administration of the Plan, provided, however, that the
Board shall have no discretion with regard to the selection of individual
directors to receive stock grants under the Plan. The Board's interpretation of
the terms and provisions of this Plan shall be final and conclusive. The Board
may authorize an appropriate officer or officers of the Company to execute, on
behalf of the Company, such agreements and other instruments as may be necessary
to implement this Plan.
3. ELIGIBILITY
Participation will be limited to individuals who are Eligible Directors as
defined herein. Eligible Director shall mean a director of the Company who at
the relevant time is not, and within the one year period immediately preceding
such time has not been, an employee of the Company or its subsidiaries or
otherwise eligible for selection to participate in any plan of the Company or
its subsidiaries that entitles the participant therein to acquire stock, stock
options or stock appreciation rights of the Company or its subsidiaries, other
than this Plan and the Melville Corporation 1989 Directors Stock Option Plan.
4. SHARES SUBJECT TO THE PLAN
(a) Subject to the adjustments made pursuant to paragraph (c) of this
Section 4, the aggregate number of shares of Common Stock, $1.00 par value, of
the Company ("Stock") which may be issued under the Plan shall be 150,000.
(b) Any shares of Stock to be delivered under the Plan shall be made
available from newly issued shares of Stock or from shares of Stock reacquired
by the Company, including such shares purchased in the open market.
(c) In the event of any merger, reorganization, consolidation,
recapitalization, stock split, stock dividend, or other change in corporate
structure affecting the Stock, the aggregate number of shares of Stock which may
be issued under the Plan and the number of shares of Stock subject to the later
issuance by reason of previous deferral of payment shall be increased or
decreased proportionately, as the case may be.
5. ANNUAL STOCK GRANTS
Effective as of the end of each annual meeting of shareholders of the
Company, each person who is an Eligible Director shall be granted an award of
300 shares of Stock in respect of the preceding Award Year except that if the
Eligible Director was not a director of the Company for all of such Award Year,
the size of the award shall be pro rated based on the number of months in such
Award Year during which such Eligible Director was a director of the Company. If
an Eligible Director retires, resigns, dies or otherwise ceases to be a director
of the Company prior to the end of the annual meeting of shareholders of the
Company, there shall be granted, effective as of the first day of the month
after such person's termination of service as a director of the Company, an
award of 25 shares of Stock for each month during the Award Year such person was
a director. For purposes of this Section 5, a part of a month shall be treated
as a month and an Award Year shall mean the period from the first day of the
month after an annual meeting of shareholders of the Company to the beginning of
the next annual meeting of shareholders of the Company.
A-1
<PAGE>
6. DIRECTOR STOCK COMPENSATION
(a) The compensation of each Eligible Director shall be paid one-half in
Stock and, unless otherwise elected under paragraph (b) by an Eligible Director,
one-half in cash. Compensation for this purpose means annual retainer fees, but
does not include supplemental retainer fees for committee chair positions which
shall be paid in cash unless otherwise elected under paragraph (b) by an
Eligible Director.
(b) Each Eligible Director may elect in accordance with rules established
by the Board and uniformly applied, to receive in Stock any part of such
Eligible Director's compensation (including fees for chair positions but not
including meeting attendance fees) otherwise payable in cash. The number of
shares of Stock to be issued in lieu of such cash shall be determined by
dividing the average of the high and low sales price of the Company's Common
Stock on the date the cash is otherwise payable as reported on the Composite
Tape for such day into the cash amount elected to be received in Stock, rounded
down to the next whole number of shares.
(c)(i) Each Eligible Director may elect to defer the receipt of shares
otherwise currently payable to such Eligible Director under Sections 5, 6 or 7
of this Plan until such Eligible Director terminates service as a Director. In
that event, such Eligible Director shall be granted an immediate award of share
credits equal to the number of shares of Stock elected to be deferred.
(ii) As soon as practicable after an Eligible Director has ceased being a
director of the Company, all awards shall be paid to the Eligible Director or,
in the case of the death of the Eligible Director, the Eligible Director's
designated beneficiary or beneficiaries or in the absence of a designated
beneficiary, to the estate of the Eligible Director, in a single payment.
(iii)(A) In addition to the payment provided for in paragraph (c)(ii) of
this Section 6, each Eligible Director (or beneficiary) entitled to payment
under this Section 6(c) shall receive at the same time the dividend equivalent
amounts calculated under subparagraph (B) below.
(B) The dividend equivalent amount is the number of additional share
credits attributable to the number of share credits originally granted plus
additional share credits calculated hereunder. Such additional share credits
shall be determined and credited as of each dividend payment date occurring
prior to an Eligible Director ceasing to be an Eligible Director of the Company
by dividing the aggregate cash dividends which would have been paid had share
credits awarded or credited under this subparagraph (iii), as the case may be,
been actual shares of Stock on the record date for such dividend by the market
price per share of Stock on the dividend payment date. For this purpose, the
market price on any day shall be the average of the highest and lowest sales
price of Stock as reported on the Composite Tape for such day, unless the Board
determines that another procedure for determining market price would be more
appropriate.
(iv) Payments pursuant to paragraphs (ii) and (iii) above shall be made in
shares of Stock except that there shall be paid in cash the value of any
fractional share.
7. RETIREMENT BENEFITS CONVERSION
Each person who is an Eligible Director as of the end of the annual meeting
of shareholders of the Company at which the Plan is approved shall have the
right to elect within 30 days after such meeting on a form prescribed by the
Company for such purpose to waive any and all rights under the Directors
Retirement Plan and to receive in lieu of such rights a grant of shares of
Stock. Unless otherwise elected under paragraph 6(b) by an Eligible Director,
such shares shall be delivered to such Eligible Director as soon as possible
after the end of the 30 day election period. The number of shares of Stock to be
granted in lieu of an Eligible Director's benefit rights under the Directors
Retirement Plan shall be calculated by the Company's actuarial consultants using
assumptions that are reasonable and uniformly applied.
8. DELIVERY OF SHARES; TRANSFER OF SHARES
No shares of Stock shall be delivered under the Plan until the requirements
of such laws and regulations as may be deemed by the Board to be applicable
thereto are satisfied. No shares of Stock shall be transferable until at least
six months after receipt to the extent necessary to obtain exemptive relief
under Section 16 of the Securities Exchange Act of 1934.
A-2
<PAGE>
9. GENERAL PROVISIONS
(a) Designation of Beneficiary. Each Eligible Director may designate a
beneficiary or beneficiaries and may change such designation from time to time
by filing a written instrument of beneficiaries with the Board on a form to be
prescribed by it, provided that no such designation shall be effective unless so
filed prior to the death of such Eligible Director.
(b) Except as may be permitted by Section 9(a), no right to receive Stock
hereunder shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge and any such attempted
action shall be void and of no effect.
(c) No Segregation of Cash or Shares. The Company shall not be required to
segregate any cash or any shares of Stock which may at any time be represented
by Stock grants, share credits or dividend equivalents. No Eligible Director
shall have voting or other rights which respect to shares of Stock prior to the
delivery of such shares. The Company shall not, by any provisions of this Plan,
be deemed to be a trustee of any Stock or any other property, and the
liabilities of the Company to any Eligible Director pursuant to the Plan shall
be those of a debtor pursuant to such contract obligations as are created by the
Plan, and no such obligation of the Company shall be deemed to be secured by any
pledge or other encumbrance on any property of the Company.
(d) New York Law to Govern. All questions pertaining to the construction,
regulation, validity and effect of the provisions of the Plan shall be
determined in accordance with the laws of the State of New York.
(e) Withholding of Taxes. The Company shall be authorized to withhold from
any payment due under this Plan the amount of withholding taxes, if any, due in
respect of an award or payment hereunder, unless other provisions satisfactory
to the Company shall have been made for the payment of such taxes.
10. AMENDMENTS, SUSPENSION OR DISCONTINUANCE
The Board of Directors may amend, suspend, or discontinue the Plan, but
except as permitted by Rule 16b-3 promulgated under the Securities Exchange Act
of 1934 may not make any amendment which operates (a) to modify the class of
persons who constitute Eligible Directors as defined in the Plan, (b) to
increase the total number of shares of Stock available under the Plan, or (c) to
extend the period during which awards may be granted under the Plan. The
provisions of Sections 5, 6 and 7 may not be amended more often than once every
six months other than to comport with changes in the Internal Revenue Code, the
Employee Retirement Income Security Act of 1974, or the rules under either such
statute.
11. TERMINATION
The Plan shall be effective as of the annual meeting of shareholders of the
Company at which the shareholders approve the Plan. No grant shall be made under
the Plan after expiration of ten years from the date upon which the Plan is
approved by vote of the shareholders.
A-3
<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 9, 1996, 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, "FOR"
ITEM 2 AND "FOR" ITEM 3.
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 ITEMS 1, 2 AND 3.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
Please mark
your votes as
indicated in
this example [X}
THE BOARD RECOMMENDS A VOTE "FOR ALL NOMINEES" FOR DIRECTORS IN ITEM 1, "FOR"
ITEM 2 AND "FOR" ITEM 3. TO VOTE IN ACCORDANCE WITH THE BOARD'S RECOMMENDATIONS,
JUST SIGN BELOW; NO BOXES NEED TO BE CHECKED.
1. ELECTION OF DIRECTORS
Nominees:
A.J. Bloostein
W.D. Cornwell
T.P. Gerrity
S.P. Goldstein
M.H. Jordan
W.H. Joyce
T.R. Lautenbach
H. Rosenthal
I.G. Seidenberg
P.C. Stewart
M.C. Woodward, Jr.
FOR WITHHELD
FOR ALL
[ ] [ ]
WITHHELD FOR: (Write that nominee's name in the space provided below).
2. Approval of the 1996 Directors
Stock Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Approval of Auditors.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. 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 this meeting.
THIS PROXY WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER.
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.
Signature(s) ___________________________________________ Date __________________
NOTE: Please sign as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<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 9, 1996, 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, "FOR"
ITEM 2 AND "FOR" ITEM 3.
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 ITEMS 1, 2 AND 3.
* THE BANK OF NEW YORK, AS TRUSTEE HAS APPOINTED CHEMICAL MELLON AS AGENT TO
TALLY THE VOTES.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
Please mark
your votes as
indicated in
this example [X}
THE BOARD RECOMMENDS A VOTE "FOR ALL NOMINEES" FOR DIRECTORS IN ITEM 1, "FOR"
ITEM 2 AND "FOR" ITEM 3. TO VOTE IN ACCORDANCE WITH THE BOARD'S RECOMMENDATIONS,
JUST SIGN BELOW; NO BOXES NEED TO BE CHECKED.
1. ELECTION OF DIRECTORS
Nominees:
A.J. Bloostein
W.D. Cornwell
T.P. Gerrity
S.P. Goldstein
M.H. Jordan
W.H. Joyce
T.R. Lautenbach
H. Rosenthal
I.G. Seidenberg
P.C. Stewart
M.C. Woodward, Jr.
FOR WITHHELD
FOR ALL
[ ] [ ]
WITHHELD FOR: (Write that nominee's name in the space provided below).
2. Approval of the 1996 Directors
Stock Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Approval of Auditors.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. 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.
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.
Signature(s) ___________________________________________ Date __________________
NOTE: Please sign as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
