<PAGE>
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 240.14a-11(c) or 240.14a-12
Mercantile Stores Company, Inc.
(Name of Registrant as Specified in its Charter)
Dennis F. Murphy
Secretary
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-
6(j)(2).
$500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
N/A
2) Aggregate number of securities to which transaction applies:
N/A
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: N/A
4) Proposed maximum aggregate value of transaction: N/A
Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid: N/A
2) Form, Schedule or Registration Statement No.: N/A
3) Filing Party: N/A
4) Date Filed: N/A
<PAGE>
Mercantile Stores Company, Inc. 1100 North Market Street
Wilmington, Delaware 19801
NOTICE OF ANNUAL STOCKHOLDERS' MEETING
To the Stockholders:
NOTICE is hereby given that the annual stockholder's meeting of
Mercantile Stores Company, Inc., a Delaware corporation, will be held at
1100 North Market Street, Wilmington Trust Center, Wilmington, Delaware
19801, on Wednesday, May 25, 1994, at 11:30 A.M., for the following
purposes, as described in the accompanying proxy statement:
1. To elect four directors of the Company to serve for a term of
three years;
2. To approve Arthur Andersen & Co. as independent auditors of the
Company;
3. To act upon a stockholder proposal to declassify the Board of
Directors; and
4. To transact such other business as may properly come before the
meeting.
In lieu of closing the transfer books the Board of Directors has fixed
April 15, 1994 as the record date for the determination of the stockholders
entitled to notice of and to vote at said meeting or at any adjournment or
adjournments thereof.
Dated: April 25, 1994 Dennis F. Murphy, Secretary
____________________________________
A proxy card and the annual report of the Company for the fiscal year ended
January 29, 1994 are enclosed.
YOUR VOTE IS IMPORTANT
Each stockholder who does not expect to be present at the meeting is urged
to execute the enclosed proxy and mail it promptly in the enclosed envelope
which requires no postage.
<PAGE>
PROXY STATEMENT
General
This statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Mercantile Stores Company, Inc.
(hereinafter called the Company), to be used at the Annual Meeting of the
Stockholders of the Company to be held at 1100 North Market Street,
Wilmington Trust Center, Wilmington, Delaware 19801, on Wednesday, May 25,
1994, at 11:30 A.M., for the purposes set forth in the Notice of Meeting.
The approximate mailing date of this Proxy Statement and the accompanying
proxy is April 25, 1994.
The accompanying proxy, which is revocable, is solicited by and on
behalf of the Board of Directors of the Company. The Company will pay all
expenses in connection with preparing, assembling and mailing the proxies
and it will reimburse agents or nominees of stockholders for reasonable
out-of-pocket and clerical expenses incurred in seeking proxies or
authorizations to execute proxies from their principals. In addition to
solicitation by mail, the Company has retained Georgeson & Company to
assist in the solicitation of proxies from beneficial owners of shares held
of record by brokerage houses, banks and other custodians, nominees or
fiduciaries, at a cost not to exceed $6,000 plus reasonable out-of-pocket
expenses.
The enclosed proxy card also serves as a voting instruction to the
trustee of the Company's Savings, Profit Sharing and Supplemental
Retirement Plan with respect to shares held by the trustee for Plan
participants. Participants in the Plan who are also holders of additional
shares of common stock will receive one proxy card for all holdings
registered in a similar manner. Participants in the Plan will receive a
separate proxy card for their individual and Plan holdings if their
accounts are not registered in a similar manner. Unvoted shares of the
Plan will be voted by the trustee in its discretion.
Voting Rights and Votes Required
The outstanding voting securities of the Company consist of common
shares with a par value of $.142/3 per share. There are authorized and
issued 36,887,475 shares, of which 43,425 shares are held in the Company's
treasury. Only stockholders of record at the close of business on April
15, 1994, are entitled to vote at the meeting and each share of stock is
entitled to one vote on all matters. Under the Company's By-laws, a quorum
will be present if a majority of the Company's outstanding shares is
represented in person or by proxy. Shares of common stock present in
person or represented by proxy (including shares which abstain or do not
vote with respect to one or more of the matters presented for stockholder
approval) will be counted for purposes of determining whether a quorum
exists at the meeting.
Directors will be elected by a plurality of the votes cast. Only
votes cast for a nominee will be counted, except that the accompanying
proxy will be voted for the four nominees in the absence of instructions to
the contrary. Abstentions, broker non-votes, and instructions on the
accompanying proxy card to withhold authority to vote for one or more of
the nominees will result in the respective nominees receiving fewer votes.
The affirmative vote of the holders of a majority of the shares of common
stock present or represented at the meeting and entitled to vote is
required for the approval of the independent auditors and for the approval
of the stockholder proposal. Abstentions will be treated as shares that
are present and entitled to vote for purposes of determining the number of
shares present and entitled to vote with respect to any particular matter,
but will not be counted as a vote in favor of such matter. Accordingly, an
abstention from voting on any of such matters will have the same legal
effect as a vote against the matter. Broker non-votes will not be
considered as present and entitled to vote with respect to such matter.
<PAGE>
ELECTION OF DIRECTORS
The Restated Certificate of Incorporation of the Company divides the
Board of Directors into three Classes with the terms of office of the
Directors of each Class ending in different years. The term of the Class
II Directors expires with this annual meeting. The terms of the Class I
and Class III Directors will expire at subsequent annual meetings. The
number of directors of the Company to be elected at the Annual Meeting is
four. The shares represented by the proxy will be voted by the persons
named in the proxy for the election as directors of the nominees named
herein to serve until their successors are elected and qualified. In the
event that any of the nominees named below should become unavailable, for
any reason, it is intended that the persons named in the proxy will vote
for a substitute, who will be designated by the Board of Directors. The
Board of Directors has no reason to believe that it will be necessary to
designate a substitute nominee.
<PAGE>
Year in
Business Experience and Principal Occupation which
or Employment during past 5 years; he first
Name Positions held with company; became a
and Age and other Dirctorships director
Class II - Nominees to be elected for term expiring in 1997
H. KEITH H. BRODIE, M.D. President Emeritus of Duke University; 1987
54 member of the Audit Committee and
director of the Company; director
of Milliken & Company, manufacturer
of textile products.
RENE C. McPHERSON Corporate director; former Chairman 1984
69 and Chief Executive Officer of
Dana Corporation; former Dean of the
Stanford University Graduate School of
Business; consultant, member of the
Compensation Committee and director of the
Company; director of Milliken & Company,
manufacturer of textile products; director
of Dow Jones & Company, Westinghouse Electric
Corporation, Banc One Corp. and the Andersons.
MINOT K. MILLIKEN Vice-President and director of 1943
78 Milliken & Company, manufacturer of
textile products; member of the
Compensation Committee and director
of the Company.
ROGER K. SMITH Manager of TQM Diffusion, Analog 1991
34 Devices, Inc. manufacturer of
integrated circuits, director of
the Company.
Class III - Directors continuing in office until 1995
JOHN A. HERDEG Attorney at Law; member of the 1980
56 Audit Committee and director of
the Company; Chairman of the Board
of Christiana Bank & Trust Company.
THOMAS J. MALONE President, Chief Operating Officer 1989
55 and director of Milliken & Company,
manufacturer of textile products;
member of the Audit Committee and
director of the Company.
ROGER MILLIKEN Chairman, Chief Executive Officer 1939
78 and director of Milliken & Company,
manufacturer of textile products;
member of the Audit and Compensation
Committees and director of the Company;
director of W.R. Grace & Company.
FRANCIS G. RODGERS Author and lecturer; former Vice- 1987
67 President, International Business
Machines Corp.; member of the
Compensation committee and director
of the Company; director of Milliken &
Company, manufacturer of textile products;
director of Bergen Brunswig Corporation
and Dialogic Corp.
Class I - Directors continuing in office until 1996
GERRISH H. MILLIKEN Director of the Company; director 1951
76 of Milliken & Company, manufacturer
of textile products.
GEORGE S. MOORE International financial consultant; 1957
89 member of the Audit and Compensation
Committees and director of the Company;
honorary director of W.R. Grace & Company.
DAVID L. NICHOLS Chairman of the Board and director 1992
52 of the Company; former Executive
Vice President, Treasurer and Chief
Financial Officer of the Company
(1989-1992); former President of the
Lion Dry Goods Division (a division
of the Company).
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information, as of March 31, 1994,
concerning the beneficial ownership of Company common stock by the
Company's directors, the executive officers named in the Summary
Compensation Table below, and by all directors and executive officers as a
group:
Amount of Common Stock
Beneficially Owned
Name Directly Indirectly Percent of
Class
H. KEITH H. BRODIE, M.D. none none *
JOHN A. HERDEG 1,625 none *
RENE C. McPHERSON 5,200 none *
THOMAS J. MALONE none none *
GERRISH H. MILLIKEN 377,507 (see notes 1, 2 and 6) 1.31
(see note 2)
107,624
(life interest in trusts)
MINOT K. MILLIKEN 406,680 (see notes 1, 3 and 6) 2.37
(see note 3)
469,592
(life interest in trusts)
ROGER MILLIKEN 4,246,473 (see notes 1, 4 and 6) 11.84
(see note 4)
121,560
(life interest in trusts)
GEORGE S. MOORE 4,250 none *
DAVID L. NICHOLS 1,252 3,892 *
FRANCIS G. RODGERS 1,250 none *
ROGER K. SMITH 57,226 none *
(see note 5)
JAMES D. CAIN 25 10,508 *
WILLIAM A. CARR 62 799 *
JAMES M. McVICKER 1,407 1,227 *
MICHAEL G. SHANNON none 1,127 *
All Directors and
Executive Officers 4,482,761 10,530,483 40.70
_________________
*Less than one percent.
There is included in the above figures, with respect to each director
and executive officer listed (and all directors and executive officers as
a group) the number of shares, if any, credited to his account in the
Savings, Profit Sharing and Supplemental Retirement Plan and those held in
the name of his spouse and their minor children. Each director and
executive officer, however, disclaims any admission of beneficial ownership
of any securities included herein held in the name of his spouse or their
minor children.
Notes:
1. Minot K. Milliken is the cousin of Roger Milliken and Gerrish H.
Milliken, who are brothers. Minot Mercantile Corporation owned
10,484,875 shares (28.42%) of the common stock of the Company;
Woodbank Mills, Inc. owned 27,413 shares (0.07%) of such stock.
Woodbank Mills, Inc. also owned 49.6% of the common stock of Minot
Mercantile Corporation (representing 49.6% of the latter's voting
securities).
2. Gerrish H. Milliken is the beneficial owner of 377,507 shares of the
common stock of the Company as a trustee of certain trusts. Gerrish
H. Milliken may be deemed to be a controlling person of each of Minot
Mercantile Corporation and Woodbank Mills, Inc., and therefore may
be deemed to be the beneficial owner of, and to share the power to
direct the voting and/or the disposition of, common stock of the
Company held by such corporations.
3. Minot K. Milliken is the beneficial owner of 406,680 shares of the
common stock of the Company as a trustee and an advisor of certain
trusts. Minot K. Milliken may be deemed to be a controlling person
of each of Minot Mercantile Corporation and Woodbank Mills, Inc., and
therefore may be deemed to be the beneficial owner of, and to share
the power to direct the voting and/or the disposition of, common
stock of the Company held by such corporations.
4. Roger Milliken is the beneficial owner of 4,246,473 shares of the
common stock of the Company as a trustee and an advisor of certain
trusts. Roger Milliken may be deemed to be a controlling person of
each of Minot Mercantile Corporation and Woodbank Mills, Inc., and
therefore may be deemed to be the beneficial owner of, and to share
the power to direct the voting and/or the disposition of, common
stock of the Company held by such corporations.
5. Roger K. Smith is the beneficial owner of 57,226 shares of the common
stock of the Company as a trustee of certain trusts.
6. Gerrish H. Milliken, Minot K. Milliken and Roger Milliken and their
respective associates, as that term is defined by the rules of the
Securities and Exchange Commission, owned beneficially a maximum of
14,922,740 shares (40.45%) of the common stock of the Company. The
shares listed as beneficially owned by each of Gerrish H. Milliken,
Minot K. Milliken and Roger Milliken include shares listed as
beneficially owned by one or both of the other two. The overall
figures for all officers and directors as a group and the figures
included in this note eliminate the duplication of numbers and
percentages of shares.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information concerning beneficial owners
of more than 5% of the Company's common stock, as reported by such
beneficial owners:
Name and Address of Amount of Common Stock and
Beneficial Owner Nature of Beneficial Ownership Percent of Class
Minot Mercantile Corporation 10,484,875 28.42
1209 Orange Street Direct
Wilmington, Delaware 19801
Minot Mercantile Corporation 14,922,740** 40.45
and others joint disclosure* Direct and Indirect
c/o 1209 Orange Street
Wilmington, Delaware 19801
_________________
*Please see the notes following the Stock Ownership of Management Table
for an explanation of this stock ownership. By definition of the
Securities and Exchange Commission, the persons involved in this joint
disclosure may be deemed to be "beneficial owners" of substantial
quantities of this stock. Except as otherwise set forth in this proxy
statement, such persons disclaim admission of beneficial ownership of these
securities.
**These shares include the shares reported directly above by Minot
Mercantile Corporation.
<PAGE>
BOARD COMMITTEES
The Company has a standing Audit Committee of the Board of Directors the
members of which are Messrs. H. Keith H. Brodie, John A. Herdeg, Thomas J.
Malone, Roger Milliken and George S. Moore. The members of the Audit
Committee met twice during the last fiscal year. The Audit Committee is
responsible for engaging and discharging auditors; reviewing with the
auditors and management the Company's policies and procedures with respect
to internal auditing, accounting and financial controls; reviewing with the
independent auditors, upon completion of their audit, their report or
opinion and any recommendations they may have for improving internal
accounting controls, choice of accounting principles or management systems;
and meeting with the Company's financial staff at least two times a year to
discuss internal accounting and auditing procedures. The Company also has
a standing Compensation Committee of the Board of Directors the members of
which are Messrs. Rene C. McPherson, Minot K. Milliken, Roger Milliken,
Francis G. Rodgers and George S. Moore. The Compensation Committee, which
met three times during the last fiscal year, is responsible for reviewing
the compensation of the Company's executive officers and recommending
changes in such compensation. The Company's Board of Directors has
established certain other committees to perform designated functions. The
Company does not have a standing Nominating Committee of the Board of
Directors. The Company's Board of Directors held six regularly scheduled
meetings and 17 special meetings during the last fiscal year.
OTHER EXECUTIVE OFFICERS
The Company's other executive officers include: James D. Cain, 58, who was
elected Vice President of Administration in April 1994 and prior to that
time was Vice President of Merchandising from June 1992 and previously was
Director of Merchandising (from October 1991) and president of The McAlpin
Company subsidiary; James M. McVicker, 47, who was elected Vice President
and Chief Financial Officer in May 1993 and prior to that time was
Treasurer or Assistant Treasurer from January 1990 (and Director of
Strategic Planning from October 1990) and previously was Director of Credit
and Cash Management for the Company; Randolph L. Burnette, 52, who was
elected Vice President of Planning in March 1994 and prior to that time was
Director of Merchandise Planning from August 1992 and previously was
president of J.B. White & Company subsidiaries; Paul E. McLynch, 52, who
was elected Vice President of Merchandising in April 1994 and prior to that
time was president of the Gayfers/J.B. White division from March 1993 and
previously was president of the Jones Store Co. subsidiary (from March
1992) and president of the McAlpin's/Lexington division; William A. Carr,
55, who was elected Treasurer in March 1994 and prior to that time was
Controller; Dennis F. Murphy, 57, who has been Secretary since 1974; and
Kathryn M. Muldowney, 35, who was elected Controller in March 1994 and
prior to that time was Director of Strategic Planning from March 1993 and
previously was Director of Systems Development (from February 1990) and a
Company analyst.
MANAGEMENT REMUNERATION
The Summary Compensation Table below shows compensation earned by or
paid to the named executive officers (the Chief Executive Officer and the
other four most highly compensated executive officers) for the three years
ended January 29, 1994:Summary Compensation Table:
<TABLE>
<CAPTION>
Annual Compensation
Fiscal
Name and Principal Year Other Annual All Other
Position Ended Salary Bonus(a) Compensation Compensation(b)
<S> <C> <C> <C> <C> <C>
David L. Nichols(c) 1/29/94 $512,462 $165,529 $0 $56,898
Chairman of
the Board 1/31/93 $480,000 $160,000 $0 $28,397
1/31/92 - - - -
James D. Cain(d) 1/29/94 $270,846 $ 96,234 $0 $9,101
Vice President of 1/31/93 $248,000 $ 90,000 $0 $6,548
Merchandising 1/31/92 - - - -
Michael G. Shannon(e) 1/29/94 $202,692 $ 70,823 $0 $6,625
Vice President of 1/31/93 $187,116 $ 85,000 $0 $5,271
Administration 1/31/92 $162,692 $ 60,000 $0 -
James M. McVicker(f) 1/29/94 $216,539 $ 53,882 $0 $6,470
Vice President and 1/31/93 $167,115 $ 65,000 $0 $4,496
Chief Financial Officer1/31/92 $142,385 $ 40,000 $0 -
William A. Carr 1/29/94 $243,154 $ 20,000 $0 $6,132
Controller 1/31/93 $231,846 $ 25,000 $0 $6,057
1/31/92 $160,000 $ 63,000 $0 -
________________________
<FN>
(a)Includes a special bonus for the year ended January 29, 1994 for additional
services recognized by the Board of Directors, in the amount of $30,000 for Mr.
Nichols and $20,000 for each of Messrs. Cain, Shannon, McVicker and Carr. Also
includes a special bonus for the year ended January 31, 1993 in connection with
the acquisition of Maison Blanche, in the amount of $25,000 for each of Messrs.
Shannon, McVicker and Carr.
(b)All Other Compensation is comprised of the Company's matching contributions
under the Company's Savings, Profit Sharing and Supplemental Retirement Plan and
the Company's Non-Qualified Savings, Profit Sharing and Supplemental Retirement
Plan. Also includes $40,000 and $16,000 paid to Mr. Nichols for Board of
Directors' meetings during the fiscal years ended January 29, 1994 and January
31, 1993, respectively. Information is not provided for the fiscal year ended
prior to January 31, 1993.
(c)Mr. Nichols was elected Chairman of the Board on February 5, 1992.
Therefore,information is not provided for the fiscal year ended prior thereto.
(d)Mr. Cain was elected Vice President of Merchandising on June 3, 1992 and
previously was not an executive officer. Therefore, information is not provided
for the fiscal year ended prior thereto.
(e)Mr. Shannon was elected president of the Gayfers/J.B. White division on April
4, 1994.
(f)Mr. McVicker was elected Vice President and Chief Financial Officer on May
14, 1993.
</TABLE>
<PAGE>
Report of the Compensation Committee
General. The Compensation Committee of the Board of Directors (the
"Committee") is composed of five outside directors. The current members of the
Committee are Rene C. McPherson, Minot K. Milliken, Roger Milliken, George S.
Moore and Francis G. Rodgers. As part of its duties, the Committee reviews and
recommends to the Board of Directors compensation levels for the Company's
executive officers.
The Company's compensation program reflects the philosophy that executive
compensation levels should be linked to Company performance and also be
competitive within the retail industry. Historically, the Company has
structured compensation principally through base annual salary and year-end
bonuses.
For tax years beginning on or after January 1, 1994, the Internal Revenue Code
(the "Code") will limit the ability of a publicly held corporation to deduct
compensation in excess of $1 million paid to certain executives. The Company
has not established a policy with regard to Section 162(m) of the Code, since
the Company has not and does not currently anticipate paying cash compensation
in excess of $1 million per annum to any executive.
Base Salaries. Base salaries for the Company's executives are determined by
evaluating the responsibilities of the position and the experience of the
individual, and by reference to the competitive marketplace. The Company seeks
to target base salaries within the median salary level for comparable executive
positions.
Annual Bonuses. During 1993, the Company established a more specific
Pay-for-Performance year-end bonus program designed to reward management and
other key executives for Company and individual performance. Under the program,
bonuses are awarded based upon Company performance (pre-tax store profits) and
upon the individual's achievement of certain business unit and Company goals,
as determined by the Board. The program gives equal weighting to Company and
individual performance criteria. For 1993, each executive named in the Summary
Compensation Table (other than Mr. Carr who does not participate in the program)
received a bonus which reflected full achievement of his individual performance
goals, but at the same time took into account that the Company's performance
targets were not met. Also for 1993, the Chief Executive Officer received
$30,000, and each of the other named executives received $20,000, for additional
services recognized by the Board of Directors.
Compensation of the Chief Executive Officer. The compensation of David L.
Nichols, Chairman of the Board and Chief Executive Officer of the Company, is
determined in accordance with the criteria set forth above. Mr. Nichols
received a salary increase in 1993 of approximately 7% to keep his salary
within the median marketplace salary level for comparable executive positions
and based on an evaluation of the other criteria set forth above under
"Base Salaries."
Mr. Nichols' bonus for 1993 was based upon the performance of the Company
and Mr. Nichols' achievement of specified strategic goals. Although pre-tax
store profits fell short of target levels, Mr. Nichols continued the successful
implementation of various strategic goals, including the implementation of a
balanced inventory program, the consolidation of certain division operations,
improved expense ratios, and other cost saving measures. Based upon these
factors, the Committee recommended and the Board approved a bonus of $135,529
for Mr. Nichols, which was approximately 15% less than the bonus awarded for
fiscal 1992.
Rene C. McPherson Minot K. Milliken Roger Milliken
George S. Moore Francis G. Rodgers
Compensation Committee Interlocks and Insider Participation
Mr. Rene C. McPherson, a member of the Compensation Committee, was paid
$203,500 in consideration of consulting services rendered to the Company during
the last fiscal year. Mr. McPherson will continue to provide ongoing consulting
services relating to strategic planning and management development during the
current year.
<PAGE>
Performance Graph
Set forth below is a tabular representation of the line graph (included
in the Company's paper filing) comparing, over the last five fiscal years,
the Company's cumulative total return to shareholders with (i) the Standard &
Poor's 500 Composite Stock Price Index and (ii) the Standard & Poor's Retail
Department Stores Composite Index:
<TABLE>
<CAPTION>
MERCANTILE STORES COMPANY, INC.
Comparison of 5 Year Cumulative Total Return*
February 1, 1989 through January 29, 1994
S&P Retail Department
S&P 500 Composite Mercantile Stock Stores Composite Index
<S> <C> <C> <C>
1988 $100.00 $100.00 $100.00
1989 $114.40 $ 82.89 $123.35
1990 $123.97 $ 81.89 $132.78
1991 $152.05 $ 89.82 $162.61
1992 $168.11 $ 88.07 $180.13
1993 $188.51 $101.46 $198.08
<FN>
*Total Return assumes re-investment of dividends.
<FN>
Assumes $100 invested on February 1, 1989 in Mercantile common stock,
S&P 500 Index and S&P Retail Department Stores Composite Index.
</TABLE>
Pension Plans
The Company has maintained a Noncontributory Pension Plan since 1945 which
has been amended from time to time. The Plan is funded by means of
contributions by the Company to the Plan trustee. All employees, including
officers employed by the Company, with one year of employment during which at
least 1,000 hours were worked and who meet certain age requirements, are
participants. Normal retirement eligibility occurs at age 65 for participants
in the Plan; however, early retirement at a reduced monthly benefit is available
to employees who have reached the age of 60 and have at least 10 years of
service (as defined). The retirement benefit is in the form of a level monthly
payment for life. The benefit for service from February 1, 1976 to January 31,
1989 was determined based on the addition of 7/8% of each year's compensation
up to the year's Taxable Wage Base (as defined) and 13/8% of compensation above
such base. The Plan was amended effective February 1, 1989 to comply with the
Social Security integration and compensation limit requirements of The Tax
Reform Act of 1986. The amendment provides for benefits based on 7/8% of annual
compensation up to the year's Taxable Wage Base and 13/8% of compensation above
such base up to $235,840 ($228,860 in 1992). Benefits payable are subject to
maximum limitations under the Internal Revenue Code. Payments to each employee
upon retirement are made from a trust fund maintained by the trustee with
Company contributions. The estimated annual benefits payable on normal
retirement (without regard to maximum limitations under the Internal Revenue
Code) to the named executive officers are as follows: David L. Nichols,
$182,722; James D. Cain, $71,544; Michael G. Shannon, $121,118; James M.
McVicker, $94,701; and William A. Carr, $69,630.
<PAGE>
The Company also maintains the Mercantile Stores Nonqualified Salaried
Pension Plan to provide benefits to employees in an amount equal to the amount
by which an employee's benefits under the Pension Plan were reduced because of
limitations imposed on tax exempt plans by the Internal Revenue Code. For the
fiscal year ended January 29, 1994, there were charges against the earnings of
the Company with respect to such plan in the amount of $116,992.
Directors' Compensation
Directors who are not also officers of the Company receive as yearly
compensation $16,000. All directors receive a standard fee of $2,000 for each
board meeting attended and $1,000 for each committee meeting attended plus the
payment of expenses incurred in connection therewith. In addition, all members
of each committee receive as yearly compensation $3,000. Rene C. McPherson was
paid $203,500 in consideration of consulting services rendered to the Company
during the last fiscal year. Mr. McPherson will continue to provide ongoing
consulting services relating to strategic planning and management development
during the current year.
APPROVAL OF AUDITORS
The auditors selected by the Board of Directors and being recommended to the
stockholders for approval for the fiscal year ending January 28, 1995, are
Arthur Andersen & Co. who were likewise selected and approved for the previous
fiscal year. Representatives of Arthur Andersen & Co. are expected to be
present at the stockholder's meeting on May 25, 1994, with the opportunity to
make a statement if they desire to do so and to respond to appropriate
questions. The following resolution concerning the appointment of independent
auditors will be offered at the meeting:
"RESOLVED, that the appointment by the Board of Directors of Arthur
Andersen & Co. to audit the accounts of the Company and its
subsidiaries for the fiscal year ending January 28, 1995 is approved."
Arthur Andersen & Co. have been auditing the accounts of the Company and its
subsidiaries for many years and are certified public accountants of the highest
standing. That firm has no financial interest, direct or indirect, in the
Company or any subsidiary and has had no connection with the Company or any
subsidiary during the past three years, except the usual professional
relationship between auditor and client.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Milliken & Company, of which Roger Milliken is Chairman, Chief Executive
Officer and a director, Thomas J. Malone is President, Chief Operating Officer
and a director, Minot K. Milliken is Vice-President and a director and H. Keith
H. Brodie, M.D., Gerrish H. Milliken, Rene C. McPherson and Francis G. Rodgers
are directors, is one of the Company's suppliers of some types of merchandise.
Such purchases for resale and use by the Company and its subsidiaries were in
the ordinary course of business at competitive prices and amounted to
approximately $1,325,300 during the past fiscal year.
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STOCKHOLDER PROPOSAL
The Company has been notified by Amalgamated Bank of New York LongView
Collective Investment Fund (the "Fund"), 11-15 Union Square, New York, New York
10003, the beneficial owner of 1,800 shares of Company common stock, that it
intends to propose the following resolution at the Annual Meeting:
"RESOLVED: That the stockholders of Mercantile Stores Company, Inc. (the
"Company" or "Mercantile") request that the Board of Directors take the
necessary steps, in accordance with Delaware state law, to declassify the
Board of Directors so that all directors are elected annually, such
declassification to be effected in a manner that does not affect the
unexpired terms of directors previously elected."
The following is the statement submitted in support of this proposal:
"The election of directors is the primary avenue for stockholders to
influence corporate governance policies and to hold management accountable
for its implementation of those policies. We believe that the classification
of the Board of Directors, which results in only a portion of the Board being
elected annually, is not in the best interests of the Company and its
stockholders.
The Board of Directors of Mercantile is divided into three classes serving
staggered three-year terms. We believe that the Company's classified Board of
Directors maintains the incumbency of the current Board and therefore of
current management, which in turn limits management's accountability to
stockholders.
The elimination of Mercantile's classified Board would require each new
director to stand for election annually and allow stockholders an opportunity
to register their views on the performance of the Board collectively and each
director individually. We believe this is one of the best methods available to
stockholders to insure that the Company will be managed in a manner that is in
the best interests of stockholders.
We believe that concerns expressed by companies with classified boards that
the annual election of all directors could leave companies without experienced
directors in the event that all incumbents are voted out by stockholders, are
unfounded. In our view, in the unlikely event that stockholders vote to replace
all directors, this decision would express stockholder dissatisfaction with the
incumbent directors and reflect the need for change.
We believe that the Company's performance is unsatisfactory. According to
the Company's proxy statement for its 1993 Annual Meeting of Stockholders,
Mercantile has been increasingly and significantly underperforming its
designated industry peer group since 1989 based on a comparison of five year
cumulative total returns. In addition, out of 1,000 companies studied by the
United Shareholders of America in 1993 (evaluating companies on the basis of
long and short-term returns to stockholders, stockholder rights policies and
linkage of executive compensation to stock performance), Mercantile was rated
near the bottom at number 927. WE URGE YOU TO VOTE FOR THIS RESOLUTION!
The Board of Directors recommends a vote AGAINST the foregoing proposal for
the following reasons:
In 1983, the Company's stockholders considered an amendment to the Company's
Certificate of Incorporation to provide for the classification of the Board of
Directors into three equal or nearly equal classes, each to serve for a term of
three years, with one class being elected each year. This amendment was
approved by the holders of 77.9% of the total outstanding shares of the Company.
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The Board of Directors believes that the classification gives the Board of
Directors a greater continuity of experience since a majority of directors at
any given time will have experience with the business affairs and operations of
the Company. This permits more effective long-term strategic planning in use
of Company resources. Continuity and quality of leadership that results from
the classified Board creates long-term value for the stockholders.
A classified Board reduces the possibility of a sudden and surprise change
in majority control of the Board. It also has the effect of impeding disruptive
and inequitable tactics that have become relatively common corporate take-over
practices. In the event of a hostile take-over attempt, the fact that
approximately two-thirds of the Board members have tenure for more than a year
would encourage a person seeking to gain control of the Company to initiate
arms-length discussions with the management and the Board, who are in a position
to negotiate a transaction that is most favorable to the Company and the
stockholders.
For these reasons, more than half of the Fortune 500 companies provide for
the staggered election of directors. Statistics compiled by the Investor
Responsibility Research Center, Inc. show that stockholders of public companies
have overwhelmingly supported the use of classified boards, as indicated by the
fact that in responding to stockholder proposals to eliminate classified boards
in 1993, an average of only 32% of all shares were voted for elimination.
Finally, the information in the 1993 proxy statement concerning the
cumulative total return to stockholders over a five-year period relates to the
market price of the Company's stock, which is not related to the classification
of the Board of Directors. The Board of Directors is well aware of the
Company's performance compared to its industry peer group and is taking measures
to enhance stockholder value.
If approved, this proposal would serve as a recommendation to the Board of
Directors to take the necessary steps to eliminate the classified Board. Such
steps would include the repeal of the classified Board provision in the
Company's Certificate of Incorporation which, in accordance with the terms
approved by the Company's stockholders in 1983, requires the favorable vote at
a stockholder's meeting of the holders of at least 75% of the then outstanding
shares of voting stock of the Company. Gerrish H. Milliken, Minot K. Milliken
and Roger Milliken and their respective associates own beneficially
approximately 40% of the outstanding shares of the Company, and therefore would
have the ability to block such action.
The Board of Directors recommends a vote AGAINST this proposal. If not
otherwise specified, properly executed proxies will be voted against the
proposal.
STOCKHOLDER PROPOSALS FOR 1995 ANNUAL MEETING
Stockholder proposals for inclusion in Proxy materials for the 1995 Annual
Meeting should be addressed to the Company's Secretary, 1100 North Market
Street, Wilmington, Delaware 19801 and must be received before December 31,
1994.
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The Board of Directors knows of no matters other than the foregoing to come
before the annual meeting. If any other matters or motions properly come before
the meeting, it is the intention of the persons named in the accompanying form
of proxy to vote the proxy in accordance with their judgment on such matters or
motions, including any matters dealing with the conduct of the meeting.
Dated: Wilmington, Delaware, April 25, 1994.
By Order of the Board of Directors,
Dennis F. Murphy, Secretary.
