SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to
Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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 Registrant)
Payment of Filing Fee (check the appropriate box):
[ X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(2) 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 (Set forth the amount on which
the filing fee is calculated and state how it was determined): 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 27, 1998, at 11:00 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 LLP as independent auditors of the
Company; and
3. 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 10, 1998 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 24, 1998
William A. Carr,
Secretary
____________________________________
A proxy card and the annual report of the Company for the fiscal year ended
January 31, 1998 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.
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 27, 1998, 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 24, 1997.
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 MacKenzie Partners, Inc. 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 $.14-2/3 per share. There are authorized and issued
36,887,475 shares, of which 138,925 shares are held in the Company's treasury.
Only stockholders of record at the close of business on April 10, 1998, 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. 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 the approval of the independent
auditors, but will not be counted as a vote in favor of the matter.
Accordingly, an abstention from voting on the approval of the independent
auditors 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 the approval of the independent auditors.
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 III
Directors expires with this annual meeting. The terms of the Class I and
Class II 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.
<TABLE>
<CAPTION>
Business Experience and Principal Occupation or Year in which
Employment during past 5 years; Positions held with he first became
Name and Age Company; and other Directorships a director
<S> <C> <C>
Class III - Nominees to be elected for term expiring in 2001
JOHN A. HERDEG Attorney at Law; member of the Audit Committee; 1980
60 Chairman of the Board of Christiana Bank & Trust
Company.
THOMAS J. MALONE President, Chief Operating Officer and director of 1989
59 Milliken & Company, manufacturer of textile products;
member of the Audit Committee.
ROGER MILLIKEN Chairman and Chief Executive Officer of Milliken & Company, 1939
82 manufacturer of textile products; member of the Audit,
Compensation and Nominating Committees; director of Minot
Mercantile Corporation and Woodbank Mills, Inc.
(see note 11 to "Stock Ownership of Management").
FRANCIS G. RODGERS Author and lecturer; former Vice President-Marketing, 1987
71 International Business Machines Corporation; member of the
Compensation Committee; director of Milliken & Company,
manufacturer of textile products, and director of Bergen
Brunswig Corporation and Dialogic Corp.
Class I - Directors continuing in office until 1999
GERRISH H. MILLIKEN Director Emeritus of Milliken & Company, manufacturer of 1951
80 textile products; director of Minot Mercantile Corporation
and Woodbank Mills, Inc. (see note 11 to "Stock Ownership
of Management").
DAVID L. NICHOLS Chairman of the Board and Chief Executive Officer of the 1992
56 Company; director of The Andersons, Inc., a diversified
agribusiness and retailing company, and the Federal
Reserve Bank of Cleveland.
LAWRENCE R. PUGH Chairman of VF Corporation, apparel manufacturer and 1996
56 marketer; former Chief Executive Officer of VF
Corporation; member of the Compensation Committee;
director of Milliken & Company, manufacturer of textile
products and UNUM Corporation, an insurance company.
Class II -Directors continuing in office until 2000
H. KEITH H. BRODIE, M.D. President Emeritus of Duke University; member of the 1987
58 Audit, Compensation and Nominating Committees;
director of Milliken & Company, manufacturer of
textile products.
MINOT K. MILLIKEN Director Emeritus of Milliken & Company, 1943
82 manufacturer of textile products; member of the
Compensation Committee; director of Minot Mercantile
Corporation and Woodbank Mills, Inc. (see note 11 to
"Stock Ownership of Management").
ROGER K. SMITH Product Line Marketing Manager, Analog Devices, Inc., 1991
38 manufacturer of semiconductors; member of the
Nominating Committee; director of Milliken & Company,
manufacturer of textile products.
</TABLE>
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 28.53
1209 Orange Street Direct
Wilmington, Delaware 19801
Minot Mercantile Corporation 14,896,521(b) 40.54
and others joint disclosure(a) Direct and Indirect
c/o 1209 Orange Street
Wilmington, Delaware 19801
Scudder Kemper Investments, Inc. 3,241,980(c) 8.82
345 Park Avenue
New York, NY 10154
_________________________
(a) 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.
(b) These shares include the shares reported directly above by Minot
Mercantile Corporation and 27,413 shares (.07%) owned by Woodbank Mills,
Inc., owner of 49.6% of the common stock of Minot Mercantile Corporation.
(c) Based upon information as of December 31, 1997 set forth in a Schedule 13G
filing dated February 12, 1998. According to its filing, Scudder Kemper
Investments, Inc., a registered investment adviser, has sole and shared
voting power with respect to 755,255 and 2,284,830 of such shares,
respectively, and sole and shared dispositive power with respect to
3,233,850 and 8,130 of such shares, respectively, which are held of
record by its clients.
STOCK OWNERSHIP OF MANAGEMENT
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 378,037 (see notes 1 and 11) 1.30
(see note 1)
101,063
(life interest in trusts)
MINOT K. MILLIKEN 400,119 (see notes 2 and 11) 2.33
(see note 2)
454,536
(life interest in trusts)
ROGER MILLIKEN 4,220,254 (see notes 3 and 11) 11.81
(see note 3)
121,560
(life interest in trusts)
DAVID L. NICHOLS 7,812 4,658 *
(see note 4)
LAWRENCE R. PUGH 500 none *
FRANCIS G. RODGERS 2,750 none *
ROGER K. SMITH 75,939 none *
(see note 5)
RANDOLPH L. BURNETTE 2,250 5,287 *
(see note 6)
WILLIAM A. CARR 2,462 1,190 *
(see note 7)
JAMES M. McVICKER 5,657 1,690 *
(see note 8)
KATHRYN M. MULDOWNEY 1,000 1,115 *
(see note 9)
All Directors and
Executive 4,488,085 10,527,650 40.86
Officers (see note 10)
*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 each director's and executive
officer's 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. Gerrish H. Milliken is the beneficial owner of 378,037 shares
of the common stock of the Company as a trustee of certain trusts.
2. Minot K. Milliken is the beneficial owner of 400,119 shares of the
common stock of the Company as a trustee and an advisor of certain
trusts.
3. Roger Milliken is the beneficial owner of 4,220,254 shares of the
common stock of the Company as a trustee and an advisor of certain
trusts.
4. Includes 5,000 shares which are subject to options presently
exercisable or exercisable within 60 days.
5. Roger K. Smith is the beneficial owner of 65,803 shares of the
common stock of the Company as a trustee of certain trusts.
6. Reflects 2,250 shares which are subject to options presently
exercisable or exercisable within 60 days.
7. Includes 500 shares which are subject to options presently
exercisable or exercisable within 60 days.
8. Includes 2,250 shares which are subject to options presently
exercisable or exercisable within 60 days.
9. Reflects 1,000 shares which are subject to options presently
exercisable or exercisable within 60 days.
10. Includes 12,500 shares which are subject to options presently
exercisable or exercisable within 60 days.
11. Minot K. Milliken is the cousin of Roger Milliken and Gerrish H.
Milliken, who are brothers. 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 below in this
note eliminate the duplication of numbers and percentages of
shares. Each of Gerrish H. Milliken, Minot K. Milliken and Roger
Milliken may be deemed to be a controlling person of, 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 Minot Mercantile Corporation and Woodbank
Mills, Inc. Gerrish H. Milliken, Minot K. Milliken and Roger
Milliken together with Minot Mercantile Corporation and Woodbank
Mills, Inc. owned beneficially a maximum of 14,896,521 shares
(40.54%) of the common stock of the Company.
BOARD COMMITTEES
The Company's Board of Directors held eight regularly scheduled
meetings during the last fiscal year. Each director attended at least 75% of
all Board meetings and meetings of any committee of which he was a member. The
Company has standing Audit, Compensation and Nominating Committees of the
Board of Directors.
The members of the Audit Committee are H. Keith H. Brodie, M.D.,
John A. Herdeg, Thomas J. Malone and Roger Milliken. 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 members of the Compensation Committee are H. Keith H. Brodie, M.D.,
Minot K. Milliken, Roger Milliken, Lawrence R. Pugh and Francis G. Rodgers.
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 members of the Nominating Committee are 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, 1998, 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
In addition to the Chief Executive Officer, the Company's other
executive officers include: James M. McVicker, 51, 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; Randolph L. Burnette, 56,
who was elected Senior Vice President of Real Estate in April 1997 (Vice
President of Real Estate in January 1995 and Vice President of Planning in
March 1994) and prior to that time was Director of Merchandise Planning from
August 1992; William A. Carr, 59, who was elected Secretary in June 1996 and
Treasurer in March 1994 and prior to that time was Controller;
Kathryn M. Muldowney, 39, who was elected Vice President and Chief Information
Officer in December 1996 and prior to that time was Controller from March 1994
and previously was Director of Strategic Planning from March 1993;
Louis L. Ripley, 46, 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; and Donald L. Radcliff, 43, who was elected Controller in December
1996 and prior to that time was Director of Accounting Operations from March
1994 and previously was Manager of Accounting Operations.
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 31, 1998:
<TABLE>
Summary Compensation Table:
<CAPTION>
Number of
Fiscal Shares
Name and Principal Year Other Annual Underlying All Other
Position Ended Salary Bonus Compensation Options Compensation(a)
<S> <C> <C> <C> <C> <C> <C>
David L. Nichols 01/31/98 $839,846 $409,483 $0 20,000 $72,935
Chairman of the Board 02/01/97 $799,615 $520,749 $0 -0- $67,788
and Chief Executive
Officer 02/03/96 $725,385 $394,311 $0 -0- $58,925
James M. McVicker 01/31/98 $424,942 $188,947 $0 9,000 $24,500
Senior Vice President 02/01/97 $409,769 $242,622 $0 -0- $23,084
and Chief Financial
Officer 02/03/96 $361,038 $219,655(b) $0 -0- $19,833
Randolph L. Burnette 01/31/98 $313,269 $140,043 $0 9,000 $18,013
Senior Vice President 02/01/97 $296,538 $177,528 $0 -0- $16,571
of Real Estate 02/03/96 $274,231 $155,306 $0 -0- $13,672
William A. Carr 01/31/98 $255,000 $103,424 $0 2,000 $14,343
Treasurer and 02/01/97 $255,000 $135,809 $0 -0- $12,067
Secretary 02/03/96 $263,269 $ 74,025 $0 -0- $11,275
Kathryn M. Muldowney 01/31/98 $200,000 $ 81,117 $0 4,000 $10,956
Vice President and 02/01/97 $182,116 $ 98,528 $0 -0- $10,488
Chief Information
Officer 02/03/96 $140,769 $103,862 $0 -0- $ 6,925
</TABLE>
(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 $23,000, $24,000, and $21,000,
paid to Mr. Nichols for Board of Directors' meetings during the fiscal
years ended January 31, 1998, February 1, 1997, and February 3, 1996,
respectively.
(b) Includes a special bonus in the amount of $25,000 for additional services
recognized by the Board of Directors.
<TABLE>
Option Grants Table
<CAPTION>
The following table sets forth information regarding options granted
during the fiscal year ended January 31, 1998 by the Company to each of the
named executive officers:
Number of % of Total Potential Realizable Value at
Securities Options Assumed Annual Rates of Stock
Underlying Granted to Exercise or Price Appreciation for
Options Employees in Base Price Expiration Option Term(b)
Granted(a) Fiscal Year (Per Share) Date 5% 10%
<S> <C> <C> <C> <C> <C>
David L. Nichols 20,000 20.94% $48.06 4/18/2007 $ 604,494.00 $1,531,905.00
James M. McVicker 9,000 9.42% $48.06 4/18/2007 $ 272,022.00 $ 689,357.00
Randolph L. Burnette 9,000 9.42% $48.06 4/18/2007 $ 272,022.00 $ 689,357.00
William A. Carr 2,000 2.09% $48.06 4/18/2007 $ 60,449.00 $ 153,191.00
Kathryn M. Muldowney 4,000 4.19% $48.06 4/18/2007 $ 120,899.00 $ 306,381.00
</TABLE>
_______________
(a) One-fourth of these options will vest on April 20, 1998, and an additional
one-fourth will vest on April 20, 1999, April 18, 2000 and April 18, 2001.
(b) The potential realizable value of the options reported was calculated by
assuming 5% and 10% compounded annual rates of appreciation of the common
stock from the date of grant of the options until the expiration of the
options, based on the market price on the date of grant. These assumed
annual rates of appreciation were used in compliance with the rules of the
Securities and Exchange Commission and are not intended to forecast future
price appreciation of the common stock.
Fiscal Year End Option Value Table
The following table sets forth information regarding the aggregate
number and value of options held by the named executive officers as at
January 31, 1998. No options were exercised by any of the named executive
officers in 1997:
Number of Shares Value of Unexercised
Underlying Unexercised Options In-The-Money Options
at January 31, 1998 at January 31, 1998(1)
Name Exercisable Unexercisable Exercisable Unexercisable
David L. Nichols 0 20,000 $0 $ 228,800.00
James M. McVicker 0 9,000 $0 $ 102,960.00
Randolph L. Burnette 0 9,000 $0 $ 102,960.00
William A. Carr 0 2,000 $0 $ 22,880.00
Kathryn M. Muldowney 0 4,000 $0 $ 45,760.00
_______________
(1) The closing price for the Company's common stock on the New York Stock
Exchange on January 30, 1998 was $59.50 per share. Value is calculated on
the basis of the difference between the respective option exercise prices
and $59.50, multiplied by the number of shares of common stock underlying
the respective options.
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 H. Keith H. Brodie, M.D., Minot K. Milliken, Roger
Milliken, 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. With the adoption of the Company's 1996 Stock Option Plan, the
Company's compensation program now includes an equity incentive component.
The Committee recognizes that compensation in excess of $1 million paid to the
Company's Chief Executive Officer does not presently qualify for deduction by
the Company for federal income tax purposes under Section 162(m) of the
Internal Revenue Code, but believes that the non-deductible portion is not
material. Moreover, the Committee believes that it is important to maintain
the flexibility to compensate executive officers in a manner consistent with
the stated philosophy of performance-linked and competitive compensation
designed to maximize stockholder value, notwithstanding that some portion of
such compensation may not be deductible by 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 Company
performance. Under the program, bonuses are awarded based upon the
achievement of pre-defined Company and business unit performance measurements
as determined by the Board. For 1997, with respect to each executive officer
named in the Summary Compensation Table, bonuses were based on a weighted
average performance barometer which included pre-tax store profits, total
sales, inventory turnover and operating expense ratios. The bonuses reported
in the Summary Compensation Table reflect the fact that the weighted average
Company performance targets for 1997 were 91.20% achieved.
1996 Stock Option Plan. The 1996 Stock Option Plan (the "Stock Plan") is
intended to enhance the Company's ability to attract and retain employees with
valuable ability and experience and to furnish such personnel with incentives
to improve operations and increase profits of the Company. In addition,
options granted under the Stock Plan align the interests of executives with
those of the stockholders, and thus provide the executives with additional
incentive to maximize stockholder value. Options grants are made from time to
time to executives whose contributions have or are expected to have a
significant impact on the Company's long-term performance. The size of
previous grants and the number of options held are not determinative of future
grants. In 1997 options were granted to all seven of the Company's executive
officers. Options are granted at a price equal to the fair market value of the
Company's common stock on the date of grant, and, in general, vest in four
equal increments over the four year period following the date of grant.
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, who does not have an employment contract, received a salary
increase in 1997 of approximately 5.0% 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 1997 was based upon the performance of the Company. As
a participant in the Pay-for-Performance year-end bonus program, Mr. Nichols
received a bonus for 1997 of $409,000, based on the achievement of 91.20% of
the weighted average Company performance targets. In addition, Mr. Nichols
was awarded options to purchase 20,000 shares of the Company's common stock
under the Stock Plan.
H. Keith H. Brodie, M.D. Minot K. Milliken Roger Milliken
Lawrence R. Pugh Francis G. Rodgers
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 Five Year Cumulative Total Return*
February 1, 1993 Through January 31, 1998
Fiscal S&P Retail Department
Year Mercantile Stock Store Composite S&P 500 Composite Index
1992 $100.00 $100.00 $100.00
1993 $116.72 $109.96 $111.86
1994 $133.50 $101.07 $112.48
1995 $146.29 $120.31 $155.85
1996 $155.13 $128.02 $196.86
1997 $192.36 $165.56 $249.69
Pension Plans
The Company has maintained a noncontributory Pension Plan since 1945
which has been amended from time to time. The Plan is funded through
contributions by the Company to the Plan trustee or appreciation of existing
Plan assets. 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 February 3, 1996 was determined based on the addition of
.875% of each year's compensation up to the year's Taxable Wage Base
(as defined) and 1.375% of compensation above such base up to, since 1989, the
maximum annual limitation on compensation.
The Plan was amended effective February 4, 1996 to provide pension
benefits which are more commensurate with those prevalent in the competitive
retail industry. The amendment adjusted the calculation formula for benefits
earned after February 3, 1996. The new formula includes a 2-tier service
breakpoint for calculation purposes. Under the amended Plan, benefits for
associates with up to 20 years of enrollment (as defined) are based on
(i) .875% of annual compensation up to the year's Taxable Wage Base,
plus (ii) 1.875% of compensation above such base up to a compensation level
of twice the Taxable Wage Base, plus (iii) 3.0% of compensation above such
doubled Taxable Wage Base up to the maximum annual limitation on
compensation ($160,000 during 1997). For associates with more than 20 years
of enrollment, benefits are based on (i) 1.0% of annual compensation up to
the year's Taxable Wage Base, plus (ii) 2.5% of compensation above such base
up to a compensation level of twice the Taxable Wage Base, plus (iii) 4.0% of
compensation above such doubled Taxable Wage Base up to the maximum annual
limitation on compensation.
Benefits payable under the noncontributory Pension Plan are subject
to maximum limitations under the Internal Revenue Code of 1986, as amended
(the "Code"). Payments to each employee, upon retirement, are made from a
Trust Fund maintained by the trustee. The estimated annual benefits payable on
normal retirement (without regard to maximum limitations under the Code) to
the named executive officers are as follows: David L. Nichols, $673,509;
James M. McVicker, $470,206; Randolph L. Burnette, $236,635; William A. Carr,
$140,281; and Kathryn M. Muldowney, $352,258.
The Company also maintains a 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 31, 1998, there were charges against the earnings of the Company
with respect to such plan for the named executive officers in the aggregate
amount of $454,797.
Severance Protection Agreements
The Company has entered into severance protection agreements with each
of James M. McVicker, Randolph L. Burnette and Kathryn M. Muldowney (the
"Executives") and David L. Nichols (the "CEO"). The agreements are designed
to encourage the executives to carry out their 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 (as defined in the agreements) 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 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 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. In addition, each Executive and the
CEO is entitled to: (i) receive all employment benefits for the remainder of,
in the case of the Executives, the 24 month period, and in the case of the
CEO, the 36 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, in the case of the Executives, an additional two
years, and in the case of the CEO, an additional three years, of credited
service been completed; and (iii) legal fees and expenses reasonably incurred
in enforcing the agreements.
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 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.
Directors' Compensation
Directors who are not also officers of the Company receive $16,000 as
yearly compensation. 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 $3,000 as yearly compensation.
Section 16(a) Beneficial Ownership Reporting Compliance
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 1997 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 January 30, 1999,
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 27, 1998, 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 January 30, 1999
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.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Milliken & Company, of which Roger Milliken is Chairman and Chief
Executive Officer, Thomas J. Malone is President, Chief Operating Officer and
a director, Minot K. Milliken and Gerrish H. Milliken are directors emeriti,
and H. Keith H. Brodie, M.D., Lawrence R. Pugh, Francis G. Rodgers and
Roger K. Smith 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 are in the ordinary course of business at
competitive prices and amounted to approximately $420,000 in the case of
Milliken & Company and $61,955,000 in the case of VF Corporation during the
last fiscal year.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Stockholder proposals for inclusion in Proxy materials for the 1999
Annual Meeting should be addressed to the Company's Secretary, 1100 North
Market Street, Wilmington, Delaware 19801, and must be received before
December 31, 1998.
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 24, 1998.
By Order of the Board of Directors,
William A. Carr, Secretary
PROXY CARD
(Front)
MERCANITLE STORES COMPANY, INC.
(Company Logo) Proxy Solicited by the Board of Directors for Annual Meeting,
May 27, 1998.
The undersigned hereby appoints David L. Nichols, James M. McVicker and
Wiiliam A. Carr 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 27, 1998, and any
adjourment, the shares of stock which the undersigned would be entitled to vote
thereat upon all matters properly brought the meeting. This card also provides
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:__________________,1998
Signature of Stockholder
This Proxy Must be Signed Exactly
as Named Appears Hereon
Executors, administrators, trustees, 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)
Please mark vote in the oval in the following manner using dark ink only.
Board of Directors Recommends a Vote FOR Proposals 1 and 2
For Withheld For All Except Nominee(s)
All For All Written Below:
1. ELECTION OF DIRECTORS.
The nominees are:
John A. Herdeg; Thomas J.
Malone; Roger Milliken;
Francis G. Rodgers
2. Proposal to approve the
the appointment of Arthur
Andersen LLP as
independent auditors.
This proxy when properly executed will be voted in the 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.
The proxies are autiorized to vote in their discretion upon such other
matters as may properly come before the meeting.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
