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
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[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)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $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
5) Total fee paid: N/A
[ ] Fee paid previously with preliminary materials.
[ ] 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 stockholders' 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 22, 1996, at 11:00 A.M., for the following
purposes, as described in the accompanying proxy statement:
1. To elect three directors of the Company to serve for a term of
three years;
2. To approve Arthur Andersen LLP 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 12, 1996 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 19, 1996 Dennis F. Murphy,
Secretary
A proxy card and the annual report of the Company for the fiscal year
ended February 3, 1996 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
22, 1996, at 11:00 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 19, 1996.
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 12, 1996, 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 three 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 these matters, but will not be counted
as a vote in favor of the matter. Accordingly, an abstention from
voting on any of these 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 these matters.
<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 I Directors expires with this annual meeting. The terms of the
Class II and Class III Directors will expire at subsequent annual
meetings. Mr. Rene C. McPherson, a director of the Company since 1984
and a Class II director, died on February 26, 1996. Mr. George S.
Moore, a director of the Company since 1957 and a Class I director, will
retire from the Board and will not stand for re-election at the annual
meeting. Mr. Lawrence R. Pugh was elected to the Board of Directors on
January 2, 1996 and is a Class I director. The number of directors of
the Company to be elected at the Annual Meeting is three. 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.
<TABLE>
<CAPTION>
Business Experience and Principal Occupation or Year in which
Employment during past 5 years; he first became
Name and Age Positions held with Company; and other Directorships a director
<S> <C> <C>
Class I - Nominees to be elected for term expiring in 1999
GERRISH H. MILLIKEN Director of Milliken & Company, manufacturer of 1951
78 textile products; director of Minot Mercantile
Corporation and Woodbank Mills, Inc. (see note 1 to
"Stock Ownership of Management").
DAVID L. NICHOLS Chairman of the Board and Chief Executive Officer of 1992
54 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); director of The Andersons, Inc.,
a diversified agribusiness and retailing company.
LAWRENCE R. PUGH Chairman of VF Corporation, apparel manufacturer and 1996
63 marketer; former Chief Executive Officer of VF
Corporation; member of the Compensation Committee;
director of The Black & Decker Corporation, Meridian
Bancorp, Inc. and UNUM Corporation.
Class II - Directors continuing in office until 1997
H. KEITH H. BRODIE, M.D. President Emeritus of Duke University; member of the 1987
56 Audit, Compensation and Nominating Committees; director
of Milliken & Company, manufacturer of textile products.
MINOT K. MILLIKEN Vice President and director of Milliken & Company, 1943
80 manufacturer of textile products; member of the
Compensation Committee; director of Minot Mercantile
Corporation and Woodbank Mills, Inc. (see note 1 to
"Stock Ownership of Management").
ROGER K. SMITH Strategic Marketing Manager, Analog Devices, Inc., 1991
36 manufacturer of semiconductors; member of the
Nominating Committee.
Class III - Directors continuing in office until 1998
JOHN A. HERDEG Attorney at Law; member of the Audit Committee; 1980
58 Chairman of the Board of Christiana Bank & Trust
Company.
THOMAS J. MALONE President, Chief Operating Officer and director of 1989
57 Milliken & Company, manufacturer of textile products;
member of the Audit Committee.
ROGER MILLIKEN Chairman, Chief Executive Officer and director of 1939
80 Milliken & Company, manufacturer of textile products;
member of the Audit, Compensation and Nominating
Committees; director of Minot Mercantile Corporation
and Woodbank Mills, Inc. (see note 1 to "Stock
Ownership of Management").
FRANCIS G. RODGERS Author and lecturer; former Vice President- 1987
69 Marketing, International Business Machines
Corporation; member of the Compensation Committee;
director of Milliken & Company, manufacturer of
textile products; director of Bergen Brunswig
Corporation and Dialogic Corp.
</TABLE>
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information, as of March 31, 1996,
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. 1,000 none *
JOHN A. HERDEG 2,125 none *
THOMAS J. MALONE 600 none *
GERRISH H. MILLIKEN 378,353 (see notes 1, 2 and 6) 1.32
(see note 2)
107,624
(life interest in trusts)
MINOT K. MILLIKEN 406,680 (see notes 1, 3 and 6) 2.34
(see note 3)
454,536
(life interest in trusts)
ROGER MILLIKEN 4,228,525 (see notes 1, 4 and 6) 11.81
(see note 4)
121,560
(life interest in trusts)
GEORGE S. MOORE 100 none *
DAVID L. NICHOLS 1,452 4,240 *
LAWRENCE R. PUGH 500 none *
FRANCIS G. RODGERS 2,750 none *
ROGER K. SMITH 72,363 none *
(see note 5)
RANDOLPH L. BURNETTE none 4,837 *
JAMES D. CAIN 25 11,275 *
PAUL E. McLYNCH 807 6,373 *
JAMES M. McVICKER 2,407 1,393 *
All Directors and
Executive Officers 4,479,009 10,543,577 40.77
_________________
*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 or
her account in the Savings, Profit Sharing and Supplemental Retirement
Plan and those held in the name of his or her 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 or her 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 (28.46%) 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 378,353
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 4,228,525
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 62,686 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 14,904,792 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.
<PAGE>
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:
<TABLE>
<CAPTION>
Name and Address of Amount of Common Stock and
Beneficial Owner Nature of Beneficial Ownership Percent of Class
<S> <C> <C>
Minot Mercantile Corporation 10,484,875 28.46
1209 Orange Street Direct
Wilmington, Delaware 19801
Minot Mercantile Corporation 14,904,792** 40.45
and others joint disclosure* Direct and Indirect
c/o 1209 Orange Street
Wilmington, Delaware 19801
_________________
<FN>
*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.
</TABLE>
<PAGE>
BOARD COMMITTEES
The Company's Board of Directors held six regularly scheduled
meetings during the last fiscal year. The Company has standing Audit,
Compensation and Nominating Committees of the Board of Directors.
The members of the Audit Committee are Messrs. H. Keith H. Brodie,
M.D., John A. Herdeg, Thomas J. Malone, Roger Milliken and George S.
Moore. The members of the Audit Committee met three times 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 members of the Compensation Committee are Messrs. H. Keith H.
Brodie, M.D., Minot K. Milliken, Roger Milliken, George S. Moore,
Lawrence R. Pugh and Francis G. Rodgers. The Compensation Committee,
which met four 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 Board has established a standing Nominating Committee of the
Board of Directors, the members of which are Messrs. H. Keith H. Brodie,
M.D., Roger Milliken, and Roger K. Smith. The Nominating Committee met
once during the last fiscal year. The Nominating Committee establishes
procedures for identifying potential candidates for appointment or
election as directors, reviews and makes recommendations regarding the
criteria for Board membership, and proposes nominees for election at the
annual meeting and candidates to fill Board vacancies. The Nominating
Committee will consider recommendations from any stockholder who is
entitled to vote for the election of directors. Stockholders should
send recommendations of candidates for nomination, in writing, no later
than December 31, 1996 to the Company's Secretary, 1100 North Market
Street, Wilmington, Delaware 19801. Recommendations must be accompanied
by the consent of the individual being recommended to be nominated, to
be elected and to serve. The submission also should include a statement
of the candidate's business experience and other business affiliations.
OTHER EXECUTIVE OFFICERS
The Company's other executive officers include: James M. McVicker,
49, who was elected Senior Vice President and Chief Financial Officer in
December 1994 (Vice President and Chief Financial Officer in May 1993)
and prior to that time was Treasurer or Assistant Treasurer from January
1990; James D. Cain, 60, 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; Randolph L. Burnette, 54, who was elected Vice President
of Real Estate in January 1995 (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; Louis L. Ripley, 44, who was elected Vice President of
Human Resources in February 1996 and prior to that time was Director of
Human Resources and Management Development from February 1994 and
previously was Director of Human Resources; William A. Carr, 57, who was
elected Treasurer in March 1994 and prior to that time was Controller;
Dennis F. Murphy, 59, who has been Secretary since 1974; and Kathryn M.
Muldowney, 37, 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.
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 February 3, 1996:
Summary Compensation Table:
<TABLE>
<CAPTION>
Annual Compensation
Fiscal
Name and Principal Year Other Annual All Other
Position Ended Salary Bonus Compensation Compensation(a)
<S> <C> <C> <C> <C> <C>
David L. Nichols 2/03/96 $725,385 $394,311 $0 $58,925
Chairman of the Board 1/28/95 $646,500 $352,525 $0 $50,234
and Chief Executive Officer 1/29/94 $512,462 $165,529 $0 $56,898
James M. McVicker 2/03/96 $361,038 $219,655 $0 $19,833
Senior Vice President 1/28/95 $278,519 $202,668 $0 $ 9,511
and Chief Financial Officer 1/29/94 $216,539 $ 53,882 $0 $ 6,470
James D. Cain 2/03/96 $307,692 $127,562 $0 $16,450
Vice President of 1/28/95 $275,000 $159,858 $0 $10,622
Administration 1/29/94 $270,846 $ 96,234 $0 $ 9,101
Randolph L. Burnette(c) 2/03/96 $274,231 $155,306 $0 $13,672
Vice President of 1/28/95 $231,131 $114,353 $0 $ 7,752
Real Estate 1/29/94 -- -- - --
Paul E. McLynch(d) 2/03/96 $337,500 $ 78,609 $0 $18,148
Vice President of 1/28/95 $297,856 $178,307 $0 $ 9,706
Merchandising 1/29/94 -- -- - --
________________________
<FN>
(a)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 $21,000,
$27,000, and $40,000 paid to Mr. Nichols for Board of Directors'
meetings during the fiscal years ended February 3, 1996, January 28,
1995, and January 29, 1994, respectively.
(b)Includes a special bonus for the years ended February 3, 1996 and
January 28, 1995 in the amount of $25,000 for each year for Mr. McVicker
for additional services recognized by the Board of Directors. 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. McVicker and Cain.
(c)Mr. Burnette was elected Vice President of Planning in March 1994 and
previously was not an executive officer. Therefore, information is not
provided for the fiscal year ended prior thereto.
(d)Mr. McLynch was elected Vice President of Merchandising in April 1994
and previously was not an executive officer. Therefore, information is
not provided for the fiscal year ended prior thereto. As of March 8,
1996, Mr. McLynch is no longer an officer of the Company.
</TABLE>
<PAGE>
Report of the Compensation Committee
General. The Compensation Committee of the Board of Directors (the
"Committee") is composed of six outside directors. The current members
of the Committee are H. Keith H. Brodie, M.D., Minot K. Milliken, Roger
Milliken, George S. Moore, Lawrence R. Pugh 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. Generally, it is the Committee's view that
executive compensation should be designed so that it qualifies for
deductibility for federal income tax purposes under Section 162(m) of
the Internal Revenue Code. The Committee recognizes that the portion of
Mr. Nichols' compensation which exceeds $1 million will not be
deductible. The Committee intends to review the regulations pursuant to
which executive compensation is tax deductible to the Company.
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. The Company has a Pay-for-Performance year-end
bonus program designed to reward management and other key executives for
the Company's performance. Under the program, bonuses are awarded based
upon Company and business unit performance (pre-tax store profits) as
determined by the Board. For 1995, each executive named in the Summary
Compensation Table received a bonus which reflected that the Company's
performance targets were approximately 99% achieved. In addition, a
discretionary bonus was paid to the following executives based on an
evaluation of personal and operational performance including a 19.2%
increase in net income over the prior year, a net interest expense
decrease of 34% and a successful transformation of the credit operation
to an in-house environment: David L. Nichols - $225,000, James M.
McVicker - $110,000, James D. Cain - $55,000, and Randolph L. Burnette -
$90,000.
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 1995 of approximately
7.7% 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 1995 was based upon the performance of the
Company. Pre-tax store profits were approximately 99% of target levels,
and Mr. Nichols continued the successful implementation of various
strategic goals, including the consolidation of certain division
operations, improved merchandising profit, and implementation of other
cost saving measures. Based upon these factors, the Committee
recommended and the Board approved a bonus of $169,311 for Mr. Nichols,
which was approximately 4.8% less than the bonus awarded for fiscal
1994.
H. Keith H. Brodie, M.D. Minot K. Milliken Roger Milliken
George S. Moore Lawrence R. Pugh Francis G. Rodgers
<PAGE>
Compensation Committee Interlocks and Insider Participation
Mr. Rene C. McPherson, who previously served as a member of the
Compensation Committee, was paid $92,000 in consideration of consulting
services rendered to the Company during the last fiscal year.
Performance Graph
Set forth below is a line graph 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:
Mercantile Stores Company, Inc.
Comparison of 5 Year Cumulative Total Return*
February 1, 1991 through February 2, 1996
S&P Retail Department
S&P Composite Mercantile Stock Stores Composite Index
1991 $100.00 $100.00 $100.00
1992 $122.65 $109.40 $122.47
1993 $135.61 $107.28 $135.66
1994 $152.06 $123.55 $149.18
1995 $153.82 $143.54 $137.11
1996 $213.09 $159.33 $163.21
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) 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 5 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 the maximum annual
limitation on compensation ($150,000 during 1995). 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, $287,648; James M. McVicker,
$190,719; James D. Cain, $83,787; Randolph L. Burnette, $118,889; and
Paul E. McLynch, $84,206.
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 February 3, 1996,
there were charges against the earnings of the Company with respect to
such plan for the named executive officers in the aggregate amount of
$97,750.
Severance Protection Agreements
The Company has entered into severance protection agreements with
each of James M. McVicker, Randolph L. Burnette, James D. Cain and Paul
E. McLynch (the "Executives") and David L. Nichols (the "CEO"). The
agreements are designed to encourage each such executive to carry out
his duties with the Company in the event of a potential change in
control of the Company.
The agreements for the Executives provide that if within 24 months
following a change in control of the Company, the Executive's employment
is terminated either (i) by the Company for other than cause or
disability, or (ii) by the Executive, for good reason, then such
Executive will receive, in addition to base salary and bonus accrued
through the date of termination, the greater of: (a) 2.99 times his
annual salary and bonus at the highest rate in effect during the one
year period prior to the change in control less the cash compensation
paid the Executive for services rendered from the date of change in
control to the termination date, or (b) two weeks' compensation for
every year of service with the Company at a level equal to salary and
bonus at the highest rate in effect during the one year period prior to
the change in control. The severance payments provided for in (a) above
shall be paid in accordance with the Company's normal payroll procedures
for the balance of the period from the date the Executive is terminated
or resigns until the date that is 24 months following the change in
control. The severance payments provided for in (b) above shall be paid
in a single lump sum cash payment within five days after the Executive's
termination. In addition, the Executive is entitled to: (i) receive all
employment benefits for the remainder of the 24 month period following
the change in control, (ii) a lump sum payment equal to the present
value of the amount by which retirement benefits would have been larger
had the Executive accumulated an additional two complete years of
credited service, and (iii) legal fees and expenses reasonably incurred
in enforcing the agreements. A "change in control" of the Company is
generally defined as the acquisition by any person of beneficial
ownership of 20% or more of the voting stock of the Company, certain
business combinations involving the Company, an agreement for the sale
or other disposition of all or substantially all of the assets of the
Company, or a change of a least two-thirds of the members of the Board
of Directors as of January 1, 1995, except for new members whose
election or nomination for election is approved by two-thirds of the
members of the Board of Directors as of January 1, 1995. "Good reason"
is generally defined as a reduction in the executive's compensation,
benefits, title, position or responsibilities or a change in the
executive's job location.
The Internal Revenue Code of 1986, as amended (the "Code"), imposes
certain excise taxes on, and limits the deductibility of, certain
compensatory payments made by a corporation to or for the benefit of
certain individuals if such payments are contingent upon certain changes
in the ownership or effective control of the corporation or the
ownership of a substantial portion of the assets of the corporation
provided that such payments to the individual have an aggregate present
value in excess of three times the individual's annualized includible
compensation for the base period, as defined in the Code. The
agreements for the Executives provide that such severance payments shall
be reduced to the extent necessary so that no such payments are subject
to the excise tax.
The agreement with the CEO provides that if within 24 months
following a change in control of the Company, the CEO's employment is
terminated either (i) by the Company for other than cause or disability,
or (ii) by the CEO for any reason whatsoever, then the CEO will receive
in addition to base salary and bonus accrued through the date of
termination, the greater of: (a) $2,997,075, or (b) 2.99 times his
annual salary and bonus at the highest rate in effect during the one
year period prior to the change in control. Such severance payment
shall be paid in a single lump sum cash payment within five days after
the CEO's termination. In addition, the CEO is entitled to: (i)
receive all employment benefits for a 36 month period following his
termination of employment, (ii) a lump sum payment equal to the present
value of the amount by which retirement benefits would have been larger
had the CEO accumulated an additional three complete years of credited
service and (iii) legal fees and expenses reasonably incurred in
enforcing the CEO agreement. As noted above, the Code imposes certain
excise taxes on and limits the deductibility of certain compensatory
payments which are contingent upon certain changes in the ownership or
effective control of the corporation. The CEO's agreement entitles him
to receive an amount sufficient to offset any excise tax payable by the
CEO pursuant to the provisions of the Code. Other than as set forth in
this paragraph, the provisions of the CEO agreement are substantially
similar to the provisions of the Executives' agreements.
The agreements continue in effect until April 30, 1997 and are
automatically renewed on May 1 of each year (commencing May 1, 1996) for
additional one year periods unless, not later than ninety days prior to
such date each year, one of the parties notifies the other that it does
not wish to extend the agreement. If a change in control occurs, the
agreements will remain in effect for a period of 24 months following
such change in control.
<PAGE>
Directors' Compensation
Directors who are not also officers of the Company receive as
yearly compensation $16,000. All directors receive a standard fee of
$3,000 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 $92,000 in
consideration of consulting services rendered to the Company during the
last fiscal year.
Litigation
On September 28, 1994, an action was filed against the Company in
the Chancery Court of Delaware captioned Francis Bodkin and Irene Bodkin
v. Mercantile Stores Company, Inc., et. al. (the "Complaint"). The
action was purportedly brought individually, on plaintiffs' own behalf,
and as a class action, on behalf of all the holders of shares of common
stock. The Complaint alleged that the Company and/or its directors
breached their fiduciary duties in allegedly rejecting an offer by The
May Department Stores Company to acquire the Company during August and
September, 1994. As part of their demand for relief, plaintiffs seek
unspecified compensatory damages. Plaintiffs subsequently amended their
Complaint, purporting to bring the action "derivatively" on behalf of
the Company, in or around December 1994. The defendants moved to
dismiss plaintiffs' amended complaint on August 24, 1995. The motion is
being briefed and will be argued in due course. The Company believes
that the Complaint is without merit and intends to vigorously defend the
action.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons
owning more than ten percent of a registered class of the Company's
equity securities, to file with the Securities and Exchange Commission
reports of ownership and changes in ownership of equity securities of
the Company. Such persons are also required to furnish the Company with
copies of all such forms.
Based solely upon a review of the copies of such forms furnished to
the Company and, in certain cases, written representations that no Form
5 (Annual Statement of Changes in Beneficial Ownership) filings were
required, the Company believes that, with respect to the 1995 fiscal
year, all required Section 16(a) filings were timely made.
APPROVAL OF AUDITORS
The auditors selected by the Board of Directors and being
recommended to the stockholders for approval for the fiscal year ending
February 1, 1997, are Arthur Andersen LLP who were likewise selected and
approved for the previous fiscal year.
Representatives of Arthur Andersen LLP are expected to be present
at the stockholders' meeting on May 22, 1996, 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 LLP to audit the accounts of the Company and its
subsidiaries for the fiscal year ending February 1, 1997 is approved."
Arthur Andersen LLP 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.
<PAGE>
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 and
Francis G. Rodgers are directors, is one of the Company's suppliers of
some types of merchandise. VF Corporation, of which Lawrence R. Pugh is
Chairman of the Board and was formerly the Chief Executive Officer, also
supplies the Company with 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
$1,679,000 in the case of Milliken & Company and $37,542,000 in the case
of VF Corporation during the past fiscal year.
STOCKHOLDER PROPOSAL
The Company has been notified by Amalgamated Bank of New York
LongView Collective Investment Fund, 11-15 Union Square West, New York,
New York 10003, the beneficial owner of 8,000 shares of Company common
stock, that it intends to propose the following resolution at the Annual
Meeting:
"RESOLVED: The stockholders of Mercantile Stores Company, Inc.
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 our Company and its stockholders.
The Mercantile Board of Directors is divided into three classes
serving staggered, three-year terms. We believe that the Company's
classified Board maintains the incumbency of the current Board, and
therefore of current management, which in turn limits the Board's
accountability to stockholders.
The elimination of Mercantile's classified Board would require each
director to stand for election annually and give 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 ensure that the company
will be managed in a manner that is in the best interest 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.
At the 1995 annual stockholders' meeting, a similar resolution was
approved by over 26% of the voting shares. We therefore resubmit this
resolution based on our belief that the classification of Mercantile's
Board of Directors is not in the best interest of stockholders. WE URGE
YOU TO VOTE FOR THIS RESOLUTION!"
<PAGE>
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.
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, the Board continues to believe that the
Company's classified Board promotes the best interests of the
stockholders.
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 stockholders' 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 1997 ANNUAL MEETING
Stockholder proposals for inclusion in Proxy materials for the 1997
Annual Meeting should be addressed to the Company's Secretary, 1100
North Market Street, Wilmington, Delaware 19801, and must be received
before December 31, 1996.
___________________________________
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 19, 1996.
By Order of the Board of Directors,
Dennis F. Murphy, Secretary
<PAGE>
MERCANTILE STORES COMPANY, INC.
Proxy Solicited by the Board of Directors for Annual Meeting, May 22, 1996
The undersigned hereby appoints David L. Nichols, James M. McVicker and
James D. Cain the proxies (each with power to act alone and with power of
substitution) of the undersigned to vote at the Annual Meeting of Stockholders
of Mercantile Stores Company, Inc. to be held on May 22, 1996, and any
adjourment, the shares of stock which the undersigned would be entitled to
vote thereat upon all matters properly brought before the meeting. This card
also provides voting instructions 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
Dated________________,1996
_________________________
_________________________
_________________________
Signature of Stockholder
This Proxy Must be Signed Exactly
as Name Appears Hereon
Executors, administrators, trustee,
etc., should give full title as such.
For joint accounts, each owner should
sign. If the signer is a corporation,
please sign full corporate name by
duly authorized officer
(over)
The Board of Directors Recommends a Vote FOR Proposals 1 and 2
For Withheld For All Except
All For All Nominee(s)
Written Below
1. Election of Directors.
The nominees are: Gerrish H. Milliken;
David L. Nichols; Lawrence R Pugh
2. Proposal to approve the appointment
of Arthur Andersen as independent
auditors.
The Board of Directors Recommends a Vote AGAINST Proposal 3
For Against Abstain
3. Stockholder Proposal to declassify
Board of Directors
The proxies are authorized to vote in their discretion upon such other matters
as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed herein
by the stockholder. If no direction is made, this proxy will be voted FOR
Proposals 1 and 2 and AGAINST Proposal 3.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
