<PAGE>
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 (S)240.14a-11(c) or (S)240.14a-12
J. C. Penney 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:
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
JCPENNEY William R. Howell
Chairman of the Board
April 10, 1996
Dear Stockholders:
On behalf of your Board of Directors and your management, I cordially invite
you to attend the Annual Meeting of Stockholders of your Company. It will be
held on Friday, May 17, 1996, at 10:00 A.M., local time, at the Company's Home
Office located at 6501 Legacy Drive, Plano, Texas 75024-3698.
You will find information regarding the matters to be voted on at the
meeting in the formal Notice of Meeting and Proxy Statement which are included
on the following pages of this booklet.
The vote of each and every stockholder is most important to us. We are
gratified that so many of you have in the past exercised your right to vote
your shares.
WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE SIGN AND RETURN THE ENCLOSED PROXY
IN THE ACCOMPANYING ENVELOPE AS SOON AS POSSIBLE SO THAT YOUR SHARES WILL BE
VOTED AT THE MEETING.
Please note that your completed proxy will not prevent you from attending
the meeting and voting in person should you so choose. We look forward to
seeing you at this meeting. If you plan to attend, please so indicate in the
appropriate box on your proxy. As in the past, there will be a report on
operations, an opportunity to meet your Company's directors and officers, as
well as time for questions.
Thank you for your cooperation and continued support and interest in
JCPenney.
Warmest Regards,
/s/ William R. Howell
ANY STOCKHOLDER HAVING A DISABILITY REQUIRING SPECIAL ASSISTANCE WHO WOULD
LIKE TO ATTEND THE ANNUAL MEETING SHOULD CALL THE SECRETARY OF THE COMPANY AT
(214) 431-1201 AND REASONABLE EFFORTS WILL BE MADE TO ACCOMMODATE SUCH NEEDS.
------------------------------------------
Customer Service is Our Number One Priority
------------------------------------------
J. C. Penney Company, Inc. . P.O. Box 10001 . Dallas, TX 75301-0001
Home Office . 6501 Legacy Drive . Plano, TX 75024-3698
<PAGE>
J. C. PENNEY COMPANY, INC.
6501 Legacy Drive, Plano, Texas
75024-3698
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 17, 1996
The Annual Meeting of Stockholders of J. C. Penney Company, Inc. will be held
at the Company's Home Office at 6501 Legacy Drive, Plano, Texas 75024-3698 on
Friday, May 17, 1996, at 10:00 A.M., local time, for the following purposes:
1. to elect four directors for a three-year term as described in the accom-
panying proxy materials;
2. to approve the employment of KPMG Peat Marwick LLP as auditors to audit
the accounts of the Company for the fiscal year ending January 25, 1997;
3. to act upon a resolution which the Company has been informed will be
proposed by a stockholder of the Company regarding doing business with
foreign suppliers;
4. to act upon a resolution which the Company has been informed will be
proposed by a stockholder of the Company regarding classification of the
Board;
5. to act upon a resolution which the Company has been informed will be
proposed by a stockholder of the Company regarding submission of the
Company's stockholder rights plan to a stockholder vote; and
6. to transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on March 18, 1996, are
entitled to vote at the meeting. A complete list of those stockholders will be
open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours at the Company's Home Office located
at 6501 Legacy Drive, Plano, Texas 75024-3698, for a period of 10 days prior
to the meeting.
Plano, Texas /s/ C. R. Lotter
April 10, 1996 C. R. Lotter, Secretary
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE, & RETURN YOUR PROXY CARD
<PAGE>
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation by the
Board of Directors of proxies in the accompanying form.
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING. WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY
AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE IN ORDER TO BE SURE THAT
YOUR SHARES WILL BE VOTED AT THE MEETING.
You may revoke your proxy at any time before it is exercised at the meeting
by submitting a written revocation, a subsequently dated proxy, or by personal
vote at the meeting.
The enclosed proxy also serves as the voting instruction card for Chemical
Bank as agent ("Agent") holding shares of Common Stock of 50c par value of the
Company ("Common Stock") of record for participants under the Company's
Dividend Reinvestment Plan ("DRIP"). Such voting instructions are intended to
cover Common Stock allocated to accounts of DRIP participants from whom an
executed voting instruction card is received by the Agent by May 14, 1996
("Voted Stock") and Common Stock allocated to the accounts of DRIP
participants from whom an executed voting instruction card is not received by
the Agent by May 14, 1996 ("Undirected Stock"). The Agent will vote as
follows: (a) for Voted Stock, in accordance with the instructions given, and
(b) for Undirected Stock, in the same proportion as the vote for the Voted
Stock. Separate voting instruction cards are also being furnished to
participants who beneficially own Voting Stock (as defined below) in the
trusts under the Company's Savings and Profit-Sharing Retirement Plan
("Savings Plan"), and the Company's Savings, Profit-Sharing and Stock
Ownership Plan ("LESOP").
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, certain directors, officers, and employees of the
Company may solicit proxies in person, by telephone, telegraph, or mail. The
Company has also retained, on behalf of the Board of Directors, Morrow & Co.,
Inc. to aid solicitation by mail, telephone, telegraph, and personal
interview, for a fee of approximately $22,500, plus reasonable expenses, which
will be paid by the Company. The Company may also reimburse brokers and other
persons holding shares in their names, or in the names of nominees, for their
expenses in sending proxy material to principals and obtaining their proxies.
The complete mailing address of the Company's principal executive offices is
J. C. Penney Company, Inc., P. O. Box 10001, Dallas, Texas 75301-0001. The
approximate date on which this proxy statement and the form of proxy were
first sent or given to stockholders was April 10, 1996.
VOTING RIGHTS
Stockholders of record at the close of business on March 18, 1996, the record
date for the Annual Meeting, are entitled to vote at the meeting. At the close
of business on such date, 224,628,036 shares of Common Stock, and 988,237
shares of Series B ESOP Convertible Preferred Stock ("ESOP Preferred Stock")
having a Common Stock voting equivalent of 20 votes per share for a combined
total voting equivalent of 244,392,776 shares ("Voting Stock"), were
outstanding and entitled to vote.
On that date, a trust maintained under the Company's Savings Plan held
26,178,573 shares of Common Stock representing approximately 10.71% of the
Voting Stock, and a trust maintained under the LESOP held 988,237 shares of
ESOP Preferred Stock and 7,716,979 shares of Common Stock, representing
approximately 11.24% of the Voting Stock. The holdings of both Plans represent
approximately 21.95% of the Voting Stock. These trusts have disclaimed
beneficial ownership of these shares of Voting Stock.
1
<PAGE>
The Company's Bylaws require an affirmative vote of the holders of a
majority of the shares of the Voting Stock outstanding and entitled to vote as
of the record date for approval of each proposal presented in this proxy
statement. Abstentions and broker nonvotes are counted only for purposes of
determining whether a quorum is present at the meeting.
GOVERNANCE OF THE COMPANY
BOARD OF DIRECTORS. The Board of Directors is responsible for establishing
broad corporate policies and for overseeing the general performance of the
Company. In keeping with its long-standing practice, the Company's Board
continues to be an independent board. The Company's Board structure is
designed to assure that there is independent review and oversight as well as
approval of significant strategic and management decisions affecting the
Company. The Board has seven meetings scheduled for fiscal 1996.
COMMITTEES OF BOARD OF DIRECTORS. The Board of Directors carries out many of
its functions through six principal standing committees, which are described
on pages 3 and 4. One of these committees, the Committee on Directors, which
is composed entirely of directors who are not employees of the Company,
selects and recommends to the Board nominees for director on the basis of
their recognized experience and achievements, both in commerce and society,
and for their ability to bring a wide diversity of skills and experience to
the deliberations of the Board. Stockholders also may make recommendations of
nominees for director, as explained in greater detail on page 26.
CONFIDENTIAL VOTING. In casting their votes, stockholders are also assured
that their votes are accorded confidential voting treatment as provided in the
Company's confidential voting policy described on pages 26 and 27.
EXECUTIVE COMPENSATION. The Personnel and Compensation Committee of the Board
of Directors, which is composed entirely of non-employee directors, approves,
among other things, the annual salaries of executive officers and recommends
to the full Board for its approval the respective annual salaries of the three
employee directors. Please see the Report of Personnel and Compensation
Committee on Executive Compensation, which begins on page 10.
CLASSES OF BOARD OF DIRECTORS. The Company's Restated Certificate of
Incorporation and its Bylaws provide for a Board of not less than three
directors as fixed, from time to time, by the Board, and further provide for
three classes of directors to be as nearly equal in number as possible, with
each class serving a three-year term and with one class being elected each
year. Currently, the Board consists of twelve members, with three classes each
having four directors. Of the twelve current directors, three are currently
Company employees and nine have principal occupations or employment which are
and have been outside the Company.
Each director is required to be a stockholder of the Company.
BOARD MEETINGS. During fiscal 1995, nine meetings of the Board were held.
Attendance at such meetings for current directors averaged approximately 96%.
In addition to membership on the Board, directors also serve on one or more of
the principal standing committees of the Board. During fiscal 1995, these
committees held a total of 20 meetings; no current director attended fewer
than 75% of the aggregate total of meetings of the Board and committees on
which he or she served.
2
<PAGE>
COMMITTEES
The following describes the principal standing committees of the Board of
Directors:
AUDIT COMMITTEE. The Audit Committee's responsibilities include recommending
to the Board of Directors for stockholder approval the independent auditors
for the annual audit of the Company's consolidated financial statements. The
Committee reviews the audit strategy and plan, scope, fees, and audit results
of the auditors, reports on the adequacy of internal accounting controls, non-
audit services and related fees, the Company's ethics program, status of
significant legal matters, the scope of the internal auditors' plans and
budget and results of their audits, and the effectiveness of the Company's
program for correcting audit findings.
During fiscal 1995, this Committee met three times. Its members are M. A.
Burns, A. W. Richards, C. S. Sanford, Jr., R. G. Turner, and J. D. Williams,
who serves as its Chair.
BENEFIT PLANS REVIEW COMMITTEE. This Committee's responsibilities include
reviewing and administering the Company's retirement and welfare plans and
reviewing annually the financial condition and investment performance results
of the Company's retirement plans, annual actuarial valuation reports for the
Company's Pension Plan, and the financial condition, investment performance
results, and actuarial valuation aspects of the Company's welfare plans.
During fiscal 1995, this Committee met two times. Its members are M. A.
Burns, R. G. Turner, J. D. Williams, and J. C. Pfeiffer, who serves as its
Chair.
COMMITTEE ON DIRECTORS. The Committee on Directors' responsibilities include
making recommendations to the Board with respect to the size, composition, and
functions of the Board of Directors, the qualifications of directors,
candidates for election as directors, and the compensation of directors.
During fiscal 1995, this Committee met four times. Its members are C. H.
Chandler, George Nigh, J. C. Pfeiffer, C. S. Sanford, Jr., and V. E. Jordan,
Jr., who serves as its Chair.
Stockholders may propose nominations for directors in accordance with the
procedures described on page 26.
PERSONNEL AND COMPENSATION COMMITTEE. This Committee's responsibilities
include reviewing and administering the Company's annual and long-term
incentive compensation plans, making recommendations in areas concerning
personnel relations, and taking action or making recommendations with respect
to the compensation of executive officers, including those who are directors.
During fiscal 1995, this Committee met six times. Its members are V. E.
Jordan, Jr., George Nigh, J. C. Pfeiffer, and C. H. Chandler, who serves as
its Chair.
PUBLIC AFFAIRS COMMITTEE. The responsibilities of the Public Affairs Committee
include identifying, analyzing, and bringing to the attention of the Board
social and environmental trends, community affairs, and public policy issues
which may have a potential impact on the business performance and investment
character of the Company, and assuring that Company policy and performance
reflect a sensitivity toward the social and physical environments in which the
Company does business and that such policy and performance are in accord with
the public interest.
During fiscal 1995, this Committee met two times. Its members are M. A.
Burns, V. E. Jordan, Jr., A. W. Richards, J. D. Williams, and George Nigh, who
serves as its Chair.
3
<PAGE>
SPECIAL FINANCE COMMITTEE. The Special Finance Committee takes action and
makes recommendations with respect to the issuance and sale of debt securities
and similar instruments in transactions by the Company or its subsidiaries in
the U. S. market and the international capital markets.
During fiscal 1995, this Committee met three times. Its members are W. R.
Howell, J. E. Oesterreicher, and C. S. Sanford, Jr., who serves as its Chair.
The mailing address for all of these committees is c/o C. R. Lotter,
Secretary, J. C. Penney Company, Inc., P. O. Box 10001, Dallas, Texas 75301-
1109.
ELECTION OF DIRECTORS (PROPOSAL 1)
As indicated on page 2, under "Classes of Board of Directors", the Board of
Directors has been divided into three classes each having four directors. At
the meeting, four directors will be elected to hold office for a three-year
term expiring at the 1999 Annual Meeting of Stockholders. Other directors will
continue in office, in accordance with their previous election, until the
expirations of the terms of their classes at the 1997 or 1998 Annual Meeting
of Stockholders, as the case may be.
Brief statements setting forth certain information as of March 18, 1996, as
to the Board of Directors' nominees for directors for the three-year term
expiring at the 1999 Annual Meeting of Stockholders and as to each current
director in the classes continuing in office are shown on pages 5 to 7. Each
of the nominees is currently a director of the Company.
If properly executed and timely returned, the accompanying proxy will be
voted for all four nominees for a term expiring at the 1999 Annual Meeting of
Stockholders, except where authority so to vote is withheld. If any nominee
should become unavailable for election for any presently unforeseen reason,
the persons designated as proxies will have full discretion to cast votes for
another person designated by the Board, unless the Board reduces the number of
directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES FOR
DIRECTOR.
4
<PAGE>
NOMINEES FOR DIRECTORS FOR THREE-YEAR TERM EXPIRING 1999
[PHOTO OF WILLIAM R. HOWELL, 60
WILLIAM R. Chairman of the Board of the Company since 1983 and Chief
HOWELL Executive Officer of the Company from 1983 to January 1995;
APPEARS Associated with the Company since 1958; Director of Bankers
HERE] Trust Company, Bankers Trust New York Corporation, Exxon
Corporation, Halliburton Company, Warner-Lambert Company, Beta
Gamma Sigma, and National Retail Federation; Trustee of the
National Urban League; Director of the Company since 1981.
[PHOTO OF GEORGE NIGH, 68
GEORGE President of the University of Central Oklahoma since 1992;
NIGH Formerly Governor of Oklahoma, during 1963 and from 1979 to
APPEARS 1987; Lieutenant Governor from 1958 to 1963 and from 1967 to
HERE] 1979; Member of the Oklahoma House of Representatives from 1950
to 1958; Director of Boatmen's First National Bank of Oklahoma;
Director of the Company since 1987.
[PHOTO OF ANN W. RICHARDS, 62
ANN W. Senior Advisor, law firm of Verner, Liipfert, Bernhard,
RICHARDS McPherson & Hand since 1995; Formerly Governor of Texas, from
APPEARS 1991 to 1995; State Treasurer, State of Texas, from 1983 to
HERE] 1991; Chair, Democratic National Convention, 1992; Director of
TIG Holdings, Inc.; Director of the Company since 1995.
[PHOTO OF JOSEPH D. WILLIAMS, 69
JOSEPH D. Retired Chairman and Chief Executive Officer of Warner-Lambert
WILLIAMS Company (pharmaceuticals, health care, and consumer products)
APPEARS from 1985 to 1991, with which and with a related company he
HERE] served in positions of increasing importance since 1950,
including its President and Chief Operating Officer from 1979 to
1985; Director of AT&T Corp., Exxon Corporation, Rockefeller &
Co., Therapeutic Antibodies Inc, Thrift Drug, Inc., and Warner-
Lambert Company; Trustee of Columbia University, Project Hope,
Liberty Science Center, and the United Negro College Fund;
Director of the Company since 1985.
5
<PAGE>
MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING 1997
[PHOTO OF VERNON E. JORDAN, JR., 60
VERNON E. Senior Partner, law firm of Akin, Gump, Strauss, Hauer & Feld
JORDAN, JR. since 1992; Partner since 1982; President from 1977 to 1981 and
APPEARS Executive Director from 1972 to 1977 of the National Urban
HERE] League; Director of American Express Company, Bankers Trust
Company, Bankers Trust New York Corporation, Corning
Incorporated, Dow Jones & Company, Inc., Revlon Group
Incorporated, Ryder System, Inc., Sara Lee Corporation, Union
Carbide Corporation, and Xerox Corporation; Trustee of The Ford
Foundation, Howard University, and the Joint Center for
Political and Economic Studies; Director of the Company since
1973.
[PHOTO OF JANE C. PFEIFFER, 63
JANE C. Independent management consultant; Chairman of the Board of
PFEIFFER National Broadcasting Company, Inc. from 1978 to 1980;
APPEARS Independent management consultant from 1976 to 1978; Vice
HERE] President of Communications and Government Relations of
International Business Machines Corporation from 1972 to 1976;
Director of Ashland Oil, Inc., International Paper Company, The
Mutual Life Insurance Company of New York, and Overseas
Development Council; Trustee of The Conference Board and of the
University of Notre Dame; Director of the Company since 1977.
[PHOTO OF R. GERALD TURNER, 50
R. GERALD President of Southern Methodist University since 1995; Formerly
TURNER Chancellor of the University of Mississippi, from 1984 to 1995;
APPEARS Chairman, Commission on Education for the Teaching Profession,
HERE] from 1990 to 1991; Member, President's Commission, the National
Collegiate Athletic Association, from 1989 to 1992; Director of
First Mississippi Corporation and River Oaks Furniture
Corporation; Director of the Company since 1995.
[PHOTO OF W. BARGER TYGART, 60
W. BARGER President and Chief Operating Officer of the Company since
TYGART January 1995; Senior Executive Vice President from 1992 to 1995;
APPEARS Executive Vice President from 1987 to 1992; Associated with the
HERE] Company since 1960; Chairman of Council of the Past Presidents
and Executive Committee, The Fashion Association; Director and
Executive Committee Member, North Texas Public Broadcasting;
Director of the Education Foundation for the Fashion
Industries--Fashion Institute of Technology, and the Corporate
Advisory Board, National Council of LaRaza; Member of the
Advisory Board, Harvey and Bernice Jones Eye Institute; Advisory
director of American Studies at Harding University; Member of
the College of Business Advisory Board at the University of
Arkansas; Director of the Company since 1995.
6
<PAGE>
MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING 1998
[PHOTO OF M. ANTHONY BURNS, 53
M. ANTHONY Chairman, President and Chief Executive Officer of Ryder System,
BURNS Inc. (a provider of transportation and logistics services) since
APPEARS 1985, with which he has served in positions of increasing
HERE] importance since 1974, including its President since 1979, Chief
Executive Officer since 1983, and a director since 1979;
Director of The Chase Manhattan Bank, N. A., The Chase Manhattan
Corporation, Pfizer, Inc., and Boy Scouts of America; Trustee of
the University of Miami; Member of the Policy Committee of The
Business Roundtable, Chairman of The Business Roundtable's
Health, Welfare, and Retirement Income Task Force, and a member
of The Business Council; Director of the Company since 1988.
[PHOTO OF COLBY H. CHANDLER, 70
COLBY H. Formerly Chairman and Chief Executive Officer of Eastman Kodak
CHANDLER Company from 1983 to 1990 and its President from 1977 to 1983;
APPEARS Associated with Eastman Kodak Company since 1950 and a director
HERE] from 1974 to 1993; Director of Citicorp, Digital Equipment
Corporation, Ford Motor Company, and M.I.T. Corporation; Trustee
of the International Museum of Photography at George Eastman
House, Rochester Institute of Technology, and the University of
Rochester; Director of the Company since 1983.
[PHOTO OF JAMES E. OESTERREICHER, 54
JAMES E. Vice Chairman of the Board and Chief Executive Officer of the
OESTERREICHER Company since January 1995; President, JCPenney Stores and
APPEARS Catalog, from 1992 to 1995; Executive Vice President from 1988
HERE] to 1992; Associated with the Company since 1964; Director of
Brinker International, Inc., Texas Utilities Company, Circle Ten
Council--Boy Scouts of America, March of Dimes Birth Defects
Foundation, National 4-H Council, National Organization on
Disability, Presbyterian Healthcare Systems, and Presbyterian
Hospital of Plano; Advisory board member of The Center for
Retailing Education and Research, University of Florida;
Director of the Company since 1995.
[PHOTO OF CHARLES S. SANFORD, JR., 59
CHARLES S. Chairman of the Board and Chief Executive Officer of Bankers
SANFORD, JR. Trust New York Corporation and its principal subsidiary, Bankers
APPEARS Trust Company, since 1987, with which he has served in positions
HERE] of increasing importance since 1961, including its Deputy
Chairman from 1986 to 1987 and President from 1983 to 1986;
Director of Mobil Corporation; Member of The Business Roundtable
and The Business Council; Overseer of The Wharton School,
University of Pennsylvania; Member of the Foundation Board of
Trustees of the University of Georgia and the Council on Foreign
Relations; Director of the Company since 1992.
7
<PAGE>
MANAGEMENT OWNERSHIP OF COMMON STOCK AND ESOP PREFERRED STOCK
The following table shows, as of March 18, 1996, the beneficial ownership of
shares of Voting Stock by each present director and by the six most highly
compensated executive officers serving as of the last fiscal year (the "Named
Executive Officers"), and by all present directors and all executive officers
of the Company as a group. The information includes shares held under certain
restrictions and, in the case of executive officers, also includes the number
of shares of Voting Stock credited to their accounts under the Company's
Savings Plan and LESOP. As shown in the last two columns, substantial portions
of the shares indicated as beneficially owned are actually unissued shares
attributable to unexercised and unexpired options for Common Stock. The
combined beneficial ownership of shares of Common Stock and Common Stock
voting equivalents of each director and Named Executive Officer and of all
directors and executive officers as a group (not including shares attributable
to unexercised and unexpired options) constitutes less than 1% of the total
Voting Stock as of March 18, 1996.
<TABLE>
<CAPTION>
Number
attributable Number
to unexercised attributable
Number and unexpired to options
of shares options for exercisable within
beneficially Common 60 days of
Name or Group owned Stock March 18, 1996
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Directors:
M. A. Burns 10,000 8,000 8,000
C. H. Chandler 22,000 8,000 8,000
W. R. Howell 344,337 243,595 183,595
V. E. Jordan, Jr. 12,054 11,200 11,200
George Nigh 8,745 8,000 8,000
J. E. Oesterreicher 245,731 183,000 123,000
J. C. Pfeiffer 11,021 10,000 10,000
A. W. Richards 1,715 1,600 1,600
C. S. Sanford, Jr. 8,000* 4,000 4,000
R. G. Turner 1,810 800 800
W. B. Tygart 220,331 141,726 118,726
J. D. Williams 26,000 8,000 8,000
Named Executive Officers:**
J. T. Cody, Jr. 165,939 102,936 83,936
T. D. Hutchens 145,362 103,706 84,706
R. E. Northam 181,111 102,798 102,798
All present directors and
executive officers as a
group*** 1,875,294 1,245,275 986,025
- ---------------------------------------------------------------------------
</TABLE>
* Excludes 4,148,388 shares held in accounts of Bankers Trust Company, of
which Mr. Sanford is the Chairman of the Board and Chief Executive Officer,
but as to which he disclaims beneficial ownership.
** In addition to Messrs. Howell, Oesterreicher, and Tygart who also serve as
directors.
*** Excludes shares beneficially owned by Mr. Northam who retired from the
Company on January 31, 1996.
8
<PAGE>
DIRECTORS' FEES
Company employees are not paid additional amounts for serving as directors.
Directors who are not Company employees ("Non-Associate Directors") are paid
an annual retainer of $26,400, plus $1,200 for attendance at each meeting of
the Board and $1,000 for attendance at each meeting of any committee of the
Board. The chair of the Audit Committee and the Personnel and Compensation
Committee of the Board are each paid an additional annual fee of $4,500; the
chair of the Benefit Plans Review Committee, the Committee on Directors, the
Public Affairs Committee, and the Special Finance Committee of the Board are
each paid an additional annual fee of $4,000. Directors are also reimbursed
for expenses incurred for attending any meeting which they attend in their
official capacities as directors. One Non-Associate Director sits on the Board
of Directors of Thrift Drug, Inc., a subsidiary of the Company ("Thrift").
This Non-Associate Director receives $2,000 for attendance at each meeting of
Thrift's Board, $2,000 for attendance at each meeting of a committee of the
Thrift Board on which he sits, and is reimbursed for expenses incurred for
meeting attendance. He does not receive an annual retainer for serving on the
Thrift Board. Directors who are Representatives under an Indemnification Trust
Agreement between the Company and Chemical Bank, as trustee, (currently
Directors Jordan, Pfeiffer, and Williams), are paid an annual retainer of
$5,000, plus $600 for each meeting of the Representatives and are reimbursed
for expenses of meeting attendance. During fiscal 1995, no such meetings were
held. Non-Associate Directors are also paid $800 for each full day of service
to the Company in addition to those services which they perform in connection
with Board and committee responsibilities, and are reimbursed for expenses in
connection with their performance of such services. During fiscal 1995, Non-
Associate Directors Burns, Chandler, Pfeiffer, Richards, Turner, and Williams
were each paid $800 for such services, and Non-Associate Directors Jordan,
Nigh, and Sanford were each paid $400 for such services. A director may elect
to defer payment of all or part of any of the above fees under the terms of a
deferred compensation plan for directors. During fiscal 1995, three directors
elected to so defer.
Pursuant to a retirement plan for Non-Associate Directors, any director who
is not entitled to receive benefits under the Company's Pension Plan will be
paid a retirement benefit after serving as a member of the Board for a period
of not less than five years. For a director retiring on his or her normal
retirement date, as defined in the retirement plan, annualized benefits will
equal the annual retainer for directors from time to time then in effect.
Pursuant to the Company's Bylaws, no person may continue to serve as a
director after the Company's annual meeting of stockholders in the calendar
year in which such person attains age 72.
During fiscal 1995, each Non-Associate Director was also automatically given
a tandem restricted stock award/stock option grant under the Company's 1993
Non-Associate Directors' Equity Plan. Each such award/grant consisted of 200
shares of restricted Common Stock and an option to purchase 800 shares of
Common Stock. All such options became exercisable six months from the date of
grant, but shares which may be acquired upon any such exercise may not be sold
by a director until that director's termination. If on the date of a
"Qualifying Termination" the "option value" of any unexpired option is greater
than the fair market value of the Common Stock covered by the tandem stock
award, such stock award will be forfeited and the stock option will remain
exercisable for two years, but if the option value is less than the fair
market value of the Common Stock covered by the tandem stock award, the stock
option will automatically expire and the tandem stock award will automatically
vest. For any "Non-qualifying Termination", unless otherwise determined by the
plan committee, all outstanding stock awards and unexercised options will be
forfeited or canceled, as the case may be. Generally, termination by reason of
misconduct will be considered a Non-qualifying Termination and all other
terminations will be considered Qualifying Terminations. The shares under
option grant are included in the table on page 8.
Directors are eligible to participate in the Company's Directors' Charitable
Award Program ("Charitable Award Program"). The Charitable Award Program is
designed to acknowledge the service
9
<PAGE>
of directors and to benefit and recognize the mutual interest of directors and
the Company in supporting worthy charitable and educational institutions. In
addition, it enhances the Company's ability to attract and retain directors of
the highest caliber and experience. Pursuant to the Charitable Award Program,
the Company has purchased joint life insurance policies on groups of
directors. Each group generally consists of two directors with the Company
named as the beneficiary of each joint life policy. With respect to each
group, the Company will receive a $1,000,000 death benefit upon the death of
the second director of the group. The Company in turn has informally agreed to
donate a total of $1,000,000; $500,000 upon the earlier of (i) five years
after the date of death of the first director of the group to die or (ii) the
death of the second director of the group, and an additional $500,000 upon the
death of the second director of the group, to one or more charitable
organizations as recommended by the individual directors. Because all
charitable deductions accrue solely to the Company, the individual directors
derive no financial benefits from this Program. The Board may, at any time,
without the consent of any participating director, amend, suspend, or
terminate this Program. Eleven of the current directors have elected to
participate in the Charitable Award Program.
REPORT OF PERSONNEL AND COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Personnel and Compensation Committee of the Board of Directors
("Committee"), which is composed entirely of non-employee directors, is
responsible for establishing and implementing the compensation policies for
the Company. Based upon its evaluation of the performance of both the Company
and the executive officers, the Committee determines and approves the annual
salaries of these officers and recommends to the full Board for its approval
the respective annual salaries of the Company's Chairman of the Board, its
Vice Chairman of the Board and Chief Executive Officer ("CEO"), and its
President and Chief Operating Officer, who also serves as a Company director.
The Committee also determines and approves the amounts of annual and long-term
incentive compensation payments to be made to executive officers as well as
the awards which may be made to them under the Company's 1993 Equity
Compensation Plan ("Equity Plan") and predecessor plans. In carrying out these
responsibilities, the Committee is advised by outside consultants with respect
to the competitiveness of the Company's executive compensation policies and
programs and, as needed, meets with these consultants without any Company
representative being present.
COMPENSATION PHILOSOPHY. Since the Company's founding in 1902 by James Cash
Penney and as set forth in the Penney Idea adopted in 1913, the JCPenney
compensation philosophy has been based on the following: To reward the men and
women in our organization through participation in what the business produces.
Implementation of this philosophy is based on tying compensation directly to
the achievement of the Company's annual and long-term performance goals.
Through the consistent and fair application of this philosophy the Company
believes it can attract and retain executives who are most able to contribute
to the long-term success of the Company and the enhancement of stockholder
value. This is accomplished through a compensation package consisting of: (1)
base salary, (2) annual profit incentive compensation, and (3) long-term
incentive compensation of both cash and stock. (See "Summary Compensation
Table" on pages 15 and 16.) As an executive officer's Position Responsibility
Level ("PRL") increases, a greater portion of his or her compensation is based
upon Company performance, and this is reflected in the annual and long-term
incentive components of such officer's compensation.
BASE SALARY AND INCENTIVE COMPENSATION PAYMENTS. Total annual cash
compensation consists of base salary and annual awards under the Company's
short and long-term incentive compensation plans. Base salary is set by the
Committee from a range determined by the officer's PRL. At the executive
officer level, the midpoint of such base salary range has typically been set
25-30% below median competitive base pay rates for comparable executives
because emphasis is placed upon incentive compensation tied to Company
performance as a means to provide competitive pay
10
<PAGE>
levels. In determining base salary, consideration is given to the following
factors: job responsibilities and tasks; knowledge, skills, and experience
required for successful job performance; and competitive positioning, both
within and outside the Company. No specific weighting is given to any of these
factors. In determining competitive position, consideration is given to the
companies constituting the S&P 500 Retail Index for department stores as well
as other major retailers in the United States and selected Fortune 200
companies. It is believed that these are the companies with which the Company
competes for executive talent. In setting base salaries the Committee
considers the competitiveness of the Company's cash compensation package as
compared with the cash compensation packages of these selected companies. The
Company targets its total cash compensation package for its executive
officers, as a group, and its CEO at or near the 50th percentile of
competitive pay for comparable executives when Company performance goals are
"met" and at or near the 75th percentile when Company performance "exceeds"
pre-established targets. The Committee reviews base salary levels at least
annually and, based on the factors described above and a review of competitive
data, approves salary increases for executive officers. The length of time
between increases generally ranges from 12 to 14 months.
Under the Company's 1989 Management Incentive Compensation Program
("Incentive Program"), annual profit incentive compensation can be earned and
added to base salary. The amount of annual incentive compensation, which is a
cash payment, is based on the number of profit incentive units credited to a
particular PRL and the value assigned to each unit. The number of profit
incentive units credited is a given percentage, based on PRL level, of base
salary. The value of each unit is determined by the Committee. A unit value is
determined for the total Company based on the Company's performance against
two factors: total revenues as measured against the Company's goal for the
year (weighted at approximately 30%), and primary earnings per share for the
current year as measured against primary earnings per share for the preceding
year (weighted at approximately 70%). Unit values are also determined for each
of the Company's major operating divisions, based on performance against its
sales and profit goals for the year (typically the sales and profit factors
are given equal weight). For executive officers with broad Company
responsibility, including Messrs. Howell, Oesterreicher, Tygart, and Northam,
1995 unit values were based 50% on total Company revenue and earnings per
share ("EPS") results and 50% on a blended unit value called "Company
Management". The Company Management unit value is based 30%, 30%, and 20%,
respectively, on the sales and profit results of the Company's Region,
Merchandising, and Catalog operating units, and 20% on total Company revenue
and EPS results. For other executive officers with operating responsibilities,
50% of their annual incentive pay is tied to total Company performance, using
the same factors described above, and 50% to the operating division which they
direct.
The cash payment of long-term incentive compensation is set by the Committee
under the Company's 1984 Performance Unit Plan ("PUP"). Similar to the
Incentive Program, the annual amount paid under the PUP is based on the number
of performance units credited to a particular PRL and the value assigned to
each unit. The number of performance units is calculated by multiplying the
sum of base salary and profit incentive compensation opportunity valued at
$1.00 per unit by a given percentage, based on PRL. The value of each
performance unit is determined by the Committee and is based on the Company's
return on equity ("ROE") measured over a three-year period and EPS, as
determined by the Committee, measured over this same period and the five
consecutive fiscal years immediately preceding this three-year period, as well
as the Company's financial performance (i.e., ROE and EPS), relative to a
selected group of retail competitors. The calculation is based upon a matrix
award schedule having various performance unit value ranges at specified
ROE/EPS performance combinations. While there is no specific weighting of
these factors, ROE generally has a greater impact on the value than does EPS.
The selected group of competitors includes those making up the S&P 500 Retail
Index for department stores and other major retailers which, based upon size
and target customer, have a reasonable basis for comparison to the Company.
The Committee may, in its discretion, assign a performance unit value outside
of the matrix award schedule if it determines
11
<PAGE>
that such unit value is warranted by the Company's ROE and EPS performance
results for the measurement period. (See "Long-Term Incentive Plans--Awards in
Last Fiscal Year" on page 19.)
For fiscal 1995, the combined payments from these two incentive programs
accounted for from 63% to 70% of the Named Executive Officers' total cash
compensation, depending on the Company's sales and earnings performance and
the executive's PRL.
EQUITY AWARDS. The stock or equity portion of the Company's compensation
package is designed to align the interests of its executives with its
stockholders. Generally, an executive's participation in the Equity Plan and
the size of awards made are a function of the executive's PRL. The Committee
does not consider the amounts and terms of prior grants of stock options when
determining equity awards. To date, stock options, stock awards, and
shareholder value awards have been granted under the Equity Plan.
As of February 26, 1996, options covering approximately 1,250,000 shares of
Common Stock under the Equity Plan (to approximately 1,675 management
employees of the Company and its subsidiaries) were granted at an option price
of $47.6875 per share. Additionally, shareholder value award units were
granted on February 1, 1993, February 1, 1994, and February 1, 1995, which
vested on January 26, 1996 (see "Shareholder Value Award Program" below).
The Company has never reduced the exercise prices of outstanding stock
options under the present or any prior option plan.
SHAREHOLDER VALUE AWARD PROGRAM. Effective January 31, 1993, the Committee
approved the J. C. Penney Company, Inc. Shareholder Value Award ("SVA")
Program as an additional equity incentive element of the Equity Plan. This
program was intended to encourage and reward the creation of sustainable
stockholder value by providing equity awards which cause participants to
manage the business from the perspective of an owner, with a personal stake in
the Company's long-term growth and profitability.
Awards granted under the SVA Program vested on January 26, 1996.
Participants earned shares of restricted Common Stock in an amount based upon
the Company's cumulative Total Shareholder Return ("TSR") over a three-year
measurement period relative to the TSR for the S&P 500 Retail Index for
department stores and the S&P 500 Index, which resulted in a payment under the
SVA Program's measurement formula of 1.23 shares of Common Stock for each SVA
unit granted. These earned shares of Common Stock are subject to a three-year
non-transferability period. Since vesting of the SVA units was dependent upon
TSR for a three-year measurement period, there was no guarantee that any
Common Stock would be earned until the TSR measurement period ended on January
26. During this measurement period, the stock price of Common Stock grew from
$35.8125 to $46.375 a share. Including dividends, TSR was 43.9% for the SVA
program measurement period.
1995 COMPENSATION. In 1995, the annual profit incentive compensation unit
value for the measurement comprising total Company performance under the
Incentive Program was $1.23 as compared to $2.15 in 1994 and $2.12 in 1993. As
noted previously, no employee's 1995 incentive compensation was comprised
solely of the total Company performance measurement. For executive officers
with broad Company responsibility, 50% of the unit value is based upon the
blended Company Management unit value. For certain other officers, 50% of the
unit value is based upon the sales and profit results of the particular
operating division(s) for which they are responsible. The 1995 Incentive
Program unit values for each of Messrs. Howell, Oesterreicher, Tygart,
Northam, Cody, and Hutchens was $1.23.
Correspondingly, the performance unit value under the PUP for the three-year
measurement period ending in 1995 was $1.85 as compared to $2.20 in 1994 and
$1.80 in 1993. Average return on
12
<PAGE>
equity was 18.2%, 19.5%, and 17.0% for the measurement periods ending in 1995,
1994, and 1993, respectively. Average EPS percentage growth, as determined by
the Committee, for each of these same three years was 14.9% (1995), 16.9%
(1994), and 8.3% (1993). Due to its long-term nature, the PUP awards are less
sensitive to year-to-year changes in Company performance than are Incentive
Program awards.
CEO COMPENSATION. As shown in the Summary Compensation Table, the CEO's base
salary for 1995 was $395,017. For 1995, over 66% of the total cash
compensation for the CEO position was comprised of annual and long-term cash
incentive awards. (The comparable percentages for fiscal 1994 and 1993 were
69% and 68%, respectively.) This level of compensation was based on the same
performance factors applicable to all executive officers, as discussed in the
preceding paragraphs. No unique evaluation factors are utilized with respect
to determining the CEO's compensation.
As discussed above, the Company's executive compensation philosophy
emphasizes incentive compensation tied to Company performance. In 1993,
Section 162(m) of the Internal Revenue Code was introduced, which, in certain
circumstances, limits the deductibility of executive compensation. Final
regulations under Section 162(m) were adopted in December 1995. The Committee
believes that the Company's compensation programs provide the necessary
incentives and flexibility to promote the Company's performance-based
compensation philosophy while being consistent with Company culture and
objectives. Accordingly, while the Committee continues to study the Company's
compensation programs in light of new Section 162(m), it has determined not to
amend the Company's existing plans at this time. The limitations of Section
162(m) apply to compensation paid to one Company executive.
PERSONNEL AND COMPENSATION COMMITTEE
<TABLE>
<S> <C>
C. H. Chandler, Chair George Nigh
V. E. Jordan, Jr. J. C. Pfeiffer
</TABLE>
13
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Personnel and Compensation Committee is composed entirely of persons who
are neither employees nor former or current officers of the Company. C. H.
Chandler, V. E. Jordan, Jr., George Nigh, and J. C. Pfeiffer are the members
of the Committee. Mr. Jordan is a senior partner of Akin, Gump, Strauss, Hauer
& Feld, which is one of a number of firms which have provided or will provide
legal services to the Company and its subsidiaries.
Mr. Sanford is Chairman of the Board and Chief Executive Officer of Bankers
Trust New York Corporation. W. R. Howell, the Company's Chairman of the Board,
serves on the Board of Directors and Human Resources Committee of Bankers
Trust New York Corporation.
FIVE-YEAR TOTAL STOCKHOLDER RETURN COMPARISON
The following is a line-graph presentation comparing cumulative five-year
stockholder returns on an indexed basis with the S&P 500 Stock Index and the
S&P 500 Retail Index for department stores. A list of these companies follows
the graph below:
[LINE GRAPH APPEARS HERE]
-----------------------------------------------
S&P DEPARTMENT STORES:
JCPenney, Dillard, May, Mercantile, Nordstrom
-----------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
JCPenney 100 121 163 244 201 235
S&P 500 100 130 140 152 150 197
S&P Dept. Stores 100 129 145 165 149 165
- --------------------------------------------------------------------------
</TABLE>
The stockholder returns shown are neither determinative nor indicative of
future performance.
14
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
------------------------
Annual Compensation Awards(1) Payouts
------------------------------ ----------- -----------
Securities
Other Underlying
Annual Options/ LTIP All Other
Name and Salary Bonus Compensation SARs Payouts Compensation
Principal Position Year ($) ($) ($) (#)(2) ($)(3) ($)(4)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Howell, W. R. 1995 735,160 859,034 232,463(5) 60,000 1,784,056 103,285
(Chairman of the 1994 721,256 1,080,388 -- 20,000 544,260 99,363
Board) 1993 691,967 1,048,884 -- -- 427,221 105,771
Oesterreicher, J. E. 1995 395,017 412,990 -- 27,000 974,554 42,109
(Vice Chairman of 1994 294,077 378,200 -- 11,500 193,752 33,266
the Board and 1993 255,154 314,790 18,671(6) -- 136,796 32,523
Chief Executive
Officer)
Tygart, W. B. 1995 367,010 361,137 48,727(6) 23,000 817,661 37,881
(President and 1994 272,924 329,421 -- 9,500 171,183 30,385
Chief Operating 1993 244,853 282,989 -- -- 124,949 30,745
Officer)
Northam, R. E. 1995 327,658 302,265 -- 19,000 706,621 38,690
(Executive Vice 1994 308,486 371,610 -- 9,500 192,403 36,605
President) 1993 290,118 353,654 368,272(6) -- 148,047 38,112
Cody, J. T., Jr. 1995 281,544 259,724 -- 19,000 636,348 28,064
(President of 1994 208,075 237,669 -- 8,000 124,085 22,410
JCPenney Stores) 1993 185,881 204,265 -- -- 90,171 21,867
Hutchens, T. D. 1995 269,532 248,644 -- 19,000 627,404 27,317
(President of 1994 206,121 233,699 -- 8,000 122,896 22,253
Merchandising 1993 185,881 201,756 -- -- 90,171 22,215
Worldwide)
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Each of the Named Executive Officers owns shares of restricted Common
Stock granted and vested under the Motivational Stock Award Program
("MSAP"). Pursuant to the terms of the MSAP, ability to issue additional
motivational stock awards ended on September 30, 1992. Dividends are paid
on all shares from the date of grant. The restricted stock award shares
with continuing retention periods and their aggregate value as of January
26, 1996, respectively, are as follows: Mr. Howell, 4,000 shares,
$185,500; Mr. Oesterreicher, 6,458 shares, $299,490; Mr. Tygart, 6,250
shares, $289,844; Mr. Northam, 6,750 shares, $313,013; Mr. Cody, 4,416
shares, $204,792; and Mr. Hutchens, 4,666 shares, $216,386. Due to
retention period requirements, future value realized on these shares of
restricted stock may differ from the value on January 26, 1996. The
retention period requirement on the shares held by Mr. Northam ended on
January 31, 1996, the date on which he retired from the Company. The
number of shares of restricted stock awarded on January 26, 1996 under the
Shareholder Value Award ("SVA") Program, and the value of such shares on
the last trading day of the fiscal year, are set forth in footnote (3)
below.
(2) No SARs have been granted since 1987.
(3) This amount reflects long-term incentive plan payments made pursuant to
the Company's Performance Unit Plan ("PUP") and, for 1995, both payments
made under PUP and the value, as of January 26, 1996, of shares of
restricted stock awarded under the SVA Program. These shares of restricted
stock were earned on January 26, 1996 based upon Company performance as
measured by the Company's cumulative Total Shareholder Return ("TSR") over
a three-year measurement period relative to the TSR for the S&P 500 Retail
Index for department stores and the S&P 500 Index. The number of shares of
restricted stock awarded, and the value of such shares on January 26,
1996, were, respectively, as follows: Mr. Howell, 20,798 shares, $961,908;
Mr. Oesterreicher, 13,179 shares, $609,529; Mr. Tygart, 11,073 shares,
$512,126; Mr. Northam, 10,003 shares, $462,639; Mr. Cody, 9,226 shares,
$426,703; and Mr. Hutchens, 9,226 shares, $426,703. Due to retention
period requirements, future value realized on these stock award shares may
differ from the value on the date they were earned. The retention period
requirement on the shares held by Mr. Northam ended on January 31, 1996,
the date on which he retired from the Company. For a description of PUP
and the SVA Program, see "Report of Personnel and Compensation Committee
on Executive Compensation" on pages 10 to 13.
(4) Represents Company contributions or allocations on behalf of these
executive officers under the LESOP and the Benefit Restoration Plan,
which, for the last fiscal year, were, respectively, as follows: Mr.
Howell, $6,565 and $96,720;
15
<PAGE>
Mr. Oesterreicher, $6,565 and $35,544; Mr. Tygart, $6,565 and $31,316; Mr.
Northam, $6,565 and $32,125; Mr. Cody, $6,565 and $21,499; and Mr. Hutchens,
$6,565 and $20,752. The allocations presently made under the Benefit
Restoration Plan were, prior to 1995, made under the Supplemental Retirement
Program for Management Profit-Sharing Associates. For a description of the
Benefit Restoration Plan and the Supplemental Retirement Program, see
"Retirement Income" on pages 20 and 21.
(5) This amount includes (i) income of $76,836 imputed to Mr. Howell for use
of a Company airplane, and (ii) tax benefit rights paid on exercise of
certain stock options. No tax benefit rights have been granted on options
since 1987, and cannot be granted under the Equity Plan.
(6) Tax benefit rights paid on exercise of certain stock options. No tax
benefit rights have been granted on options since 1987, and cannot be
granted under the Equity Plan.
16
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information regarding stock options granted to
the Named Executive Officers during fiscal 1995. The values assigned to each
reported option are shown using arbitrarily assumed annualized rates of stock
appreciation of 5% and 10% over the full 10-year term of the options, which
would result in a stock price of $70.04 and $111.53, respectively. In
assessing these values it should be kept in mind that regardless of the
theoretical value that is placed on a stock option on the date of grant, its
ultimate value will be dependent on the market value of the Company's Common
Stock at a future date, and as a result of the efforts of such executives to
contribute to the creation of sustainable stockholder wealth.
<TABLE>
<CAPTION>
Individual Grants
- ------------------------------------------------------------------------------
Number of Potential Realizable
Securities % of Total Value at
Underlying Options/SARs Exercise Assumed Annual
Options/SARs Granted to or Base Rates of Stock
Granted Employees in Price Expiration Price Appreciation
Name (#)(1) Fiscal Year ($/Sh) Date for Option Term(2)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
5% 10%
Howell, W. R.
(Chairman of the Board) 60,000 4.9 43.00 2/26/05 $1,622,400 $4,111,800
Oesterreicher, J. E.
(Vice Chairman of the Board and
Chief Executive Officer) 27,000 2.2 43.00 2/26/05 $ 730,080 $1,850,310
Tygart, W. B.
(President and Chief Operating
Officer) 23,000 1.9 43.00 2/26/05 $ 621,920 $1,576,190
Northam, R. E.
(Executive Vice President) 19,000 1.5 43.00 2/26/05 $ 513,760 $1,302,070
Cody, J. T., Jr.
(President of JCPenney Stores) 19,000 1.5 43.00 2/26/05 $ 513,760 $1,302,070
Hutchens, T. D.
(President of Merchandising
Worldwide) 19,000 1.5 43.00 2/26/05 $ 513,760 $1,302,070
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) No SARs were granted in the last fiscal year.
(2) The dollar amounts under these columns are the result of calculations at
the 5% and 10% rates set by the Securities and Exchange Commission and,
therefore, are not intended to forecast possible future appreciation, if
any, of the Company's stock price.
17
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
The following table shows stock option exercises by Named Executive Officers
during fiscal 1995, including the aggregate value of gains on the date of
exercise. In addition, this table includes the number of shares covered by
both exercisable and non-exercisable stock options at fiscal year-end. Also
reported are the values for "in-the-money" options which represent the
positive spread between the exercise price of any such existing stock options
and the fiscal 1995 year-end price of the Company's Common Stock.
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized ($)(1) Unexercisable Unexercisable(2)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Howell, W. R. 14,490 440,453 134,357(E) 2,430,044
(Chairman of the Board) 60,000(U) 202,500
Oesterreicher, J. E. 4,434 102,223 96,000(E) 1,450,748
(Vice Chairman of the 27,000(U) 91,125
Board
and Chief Executive
Officer)
Tygart, W. B. 4,500 139,219 99,718(E) 1,662,447
(President and Chief 23,000(U) 77,625
Operating Officer)
Northam, R. E. 6,284 98,958 83,798(E) 1,362,771
(Executive Vice 19,000(U) 64,125
President)
Cody, J. T., Jr. -- -- 64,936(E) 976,496
(President of JCPenney 19,000(U) 64,125
Stores)
Hutchens, T. D. -- -- 65,706(E) 994,026
(President of 19,000(U) 64,125
Merchandising Worldwide)
- ------------------------------------------------------------------------------------------
</TABLE>
(1) Since most shares reported here continue to be held by participants, and
considering certain shares have holding period requirements, the future
value realized on such shares upon actual disposition may differ from the
value reported here on the exercise date.
(2) Value is based on the closing price on the last trading day of the fiscal
year, which, as of January 26, 1996, was $46.375.
18
<PAGE>
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
The following table represents 1995 payouts under the 1984 Performance Unit
Plan ("PUP") and units granted under the Shareholder Value Award ("SVA")
Program. The percent of the PUP award earned is based on the Company's
performance against the following indices: (1) average return on equity; (2)
average annual percent increase in earnings per share, as determined by the
Committee; and (3) the performance of a selected group of competitors. The
value of each performance unit, as determined by the Committee, times the
number of performance units yields the annual payout under PUP. (See "Report
of Personnel and Compensation Committee on Executive Compensation--Base Salary
and Incentive Compensation Payments", which begins on page 10.)
Average ROE and EPS performance will yield the percent of PUP awards earned,
which can range from 0 to 230%. The range of percent of awards earned
increases with improved average ROE and EPS performance. The average ROE and
EPS performance in 1993-95 are 18.2% and 14.9%, respectively, resulting in an
award range of $1.65 to $2.00 per unit. The Committee may, in its discretion,
grant PUP awards outside of this range if it determines that such grant is
warranted by the Company's ROE and EPS performance results for the measurement
period.
Awards granted under the SVA Program vested on January 26, 1996. As noted
previously, participants earned shares of restricted stock in an amount based
upon the Company's cumulative Total Shareholder Return ("TSR") over a three-
year measurement period relative to the TSR for the S&P 500 Retail Index for
department stores and the S&P 500 Index. The shares of Common Stock paid to
participants upon vesting of the SVAs are subject to a three-year non-
transferability period. (See "Report of Personnel and Compensation Committee
on Executive Compensation--Shareholder Value Award Program" on page 12.)
<TABLE>
<CAPTION>
Estimated Future Payouts
Performance or Under Non-Stock Price-
Number of Other Period Based Plans (1)
Shares, Until ---------------------------
Units or Other Maturation or Threshold Target Maximum
Name Rights (#) Payout ($) ($) ($)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Howell, W. R. 444,404 (2) 1993-1995 733,267 811,037 888,808
(Chairman of the Board) 12,747 (3) 1993-1995 147,786 591,142 1,182,284
Oesterreicher, J. E. 197,311 (2) 1993-1995 325,563 360,093 394,622
(Vice Chairman of the 5,928 (3) 1993-1995 68,728 274,911 549,822
Board and Chief
Executive Officer)
Tygart, W. B. 165,154 (2) 1993-1995 272,504 301,406 330,308
(President and Chief 5,049 (3) 1993-1995 58,537 234,147 468,295
Operating Officer)
Northam, R. E. 131,882 (2) 1993-1995 217,605 240,685 263,764
(Executive Vice 4,179 (3) 1993-1995 48,450 193,801 387,602
President)
Cody, J. T., Jr. 113,321 (2) 1993-1995 186,980 206,811 226,642
(President of JCPenney 4,171 (3) 1993-1995 48,358 193,430 386,860
Stores)
Hutchens, T. D. 108,487 (2) 1993-1995 179,003 197,988 216,974
(President of 4,171 (3) 1993-1995 48,358 193,430 386,860
Merchandising Worldwide)
- -----------------------------------------------------------------------------------
</TABLE>
(1) The amounts shown represent fiscal 1995 award payout ranges for PUP and
ranges for the 1995 SVA unit awards (which vested on January 26, 1996)
assuming the closing price on the last trading day of the fiscal year,
which, as of January 26, 1996, was $46.375.
(2) This number represents the number of PUP performance units granted in
fiscal 1995 and is a function of base salary plus profit incentive
compensation valued at one dollar per unit and the individual's PRL.
(3) This number represents the number of SVA units granted in fiscal 1995 and
is based on the individual's PRL.
19
<PAGE>
ASSOCIATE STOCK OWNERSHIP GUIDELINES. The Company has adopted a Stock
Ownership Guidelines Program for certain of its management employees and store
managers. The Guidelines were enacted to further encourage and support a
"stakeholder" mentality among these employees in order to align their
interests with other Company stockholders. Pursuant to the Guidelines, all
participants in the Company's Equity Plan, including store managers, are
required to own a minimum amount of Common Stock based upon a multiple (the
"Ownership Multiple") of their annual base salary. Under the Guidelines, the
Ownership Multiples range from seven times base salary for the CEO to one-half
times base salary for non-officers and store managers. The compliance period
for these Guidelines is five years from the implementation of the Guidelines,
or election as officer or change in status, if later.
DEFERRED COMPENSATION PLAN. Participant contributions to qualified savings
plans are limited by a $150,000 compensation limit imposed by the Internal
Revenue Service. Effective July 1, 1995, the Board of Directors of the Company
approved the J. C. Penney Company, Inc. 1995 Deferred Compensation Plan as a
vehicle for associates earning more than the compensation limit to defer a
portion of their base salary and incentive compensation payments exceeding the
$150,000 limit as a means of saving for retirement. Participants in the
Deferred Compensation Plan elect to defer a percentage of their compensation
each year. Deferred amounts are generally payable upon a participant's
retirement, death, or other separation from the Company.
RETIREMENT INCOME. The following table shows various estimated maximum
aggregate annual retirement incomes payable to management employees who
receive profit incentive compensation and retire at age 60 (the age at which
most management personnel currently voluntarily retire).
ESTIMATED RETIREMENT INCOME TABLE
<TABLE>
<CAPTION>
Years of Service
-----------------------------------------------------------
Average
Final
Compensation 15 20 25 30 35 40
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 250,000 $ 87,500 $100,000 $112,500 $ 125,000 $ 131,250 $ 137,500
500,000 175,000 200,000 225,000 250,000 262,500 275,000
750,000 262,500 300,000 337,500 375,000 393,750 412,500
1,000,000 350,000 400,000 450,000 500,000 525,000 550,000
1,250,000 437,500 500,000 562,500 625,000 656,250 687,500
1,500,000 525,000 600,000 675,000 750,000 787,500 825,000
1,750,000 612,500 700,000 787,500 875,000 918,750 962,500
2,000,000 700,000 800,000 900,000 1,000,000 1,050,000 1,100,000
Each additional
$ 50,000 17,500 20,000 22,500 25,000 26,250 27,500
- ----------------------------------------------------------------------------
</TABLE>
Average Final Compensation for pension formula purposes includes "Salary",
"Bonus", and PUP payments included in "LTIP Payouts" as reported under these
columns of the Summary Compensation Table on page 15.
The present annual pension benefit payable after normal retirement (age 65
or later) to participants in the Company's Pension Plan ("Pension Plan") with
service after December 31, 1988, generally is equal to the sum of .75% times
the "average final compensation" up to the "Average Social Security Wage Base"
plus 1.25% times the "average final compensation" in excess of the "Average
Social Security Wage Base" multiplied by the number of years of "credited
service". "Average final compensation" is the average of the highest five
consecutive full calendar years of compensation out of the employee's last ten
years in the Plan. "Average Social Security Wage Base" is the average of the
35 consecutive years of wages subject to the Social Security Tax, ending with
20
<PAGE>
the year an employee qualifies for unreduced Social Security retirement
benefits. The Pension Plan contains provisions for early retirement and
optional forms of benefit payments.
A Supplemental Retirement Program for Management Profit-Sharing Associates
("Supplemental Retirement Program") provides certain supplemental retirement
benefits, including Social Security substitute payments until age 62, to
certain management employees, including executive officers, who voluntarily
retire prior to age 65 in accordance with the Supplemental Retirement Program
and whose aggregate retirement and estimated Social Security benefits would
otherwise be below specified minimum retirement income levels. Participation
in the Supplemental Retirement Program was frozen effective December 31, 1995,
and no additional associates will become eligible for participation after that
date.
The Internal Revenue Code ("Code") imposes certain limitations on the
maximum benefits that may be earned under "qualified" retirement plans, such
as the Pension Plan and the LESOP. Effective August 1, 1995, the Company
adopted the J. C. Penney Company, Inc. Benefit Restoration Plan ("Benefit
Restoration Plan"), which provides to impacted management associates certain
benefits which, under the Code, cannot be earned under the Pension Plan and
LESOP. Prior to August 1, 1995, the benefits provided under the Benefit
Restoration Plan were provided under the Supplemental Retirement Program.
Estimated annual retirement incomes reflected in the table are assumed for
this purpose to comprise the total of (i) the benefit under the Pension Plan,
(ii) the value at retirement of the aggregate of Company contributions made to
the Company's LESOP and predecessor plans, and earnings thereon, (iii) the
benefit under the Benefit Restoration Plan, and (iv) the benefit under the
Supplemental Retirement Program, assuming the payment of all such benefits in
the form of a straight life annuity. With the exception of Mr. Northam who,
upon his retirement as a full-time employee on January 31, 1996, became
entitled to an annual retirement income of $335,395, the individuals named in
the table on pages 15 and 16 currently have, respectively, the following years
of "credited service" and approximate assumed "average final compensation"
recognized for calculation of benefits under the Benefit Restoration Plan and
the Supplemental Retirement Program: Mr. Howell, 37 years, $2,307,947; Mr.
Oesterreicher, 31 years, $908,942; Mr. Tygart, 35 years, $815,078; Mr. Cody,
32 years, $596,364; and Mr. Hutchens, 34 years, $582,838.
APPROVAL OF AUDITORS (PROPOSAL 2)
KPMG Peat Marwick LLP, independent certified public accountants, and members
of the Securities and Exchange Commission Practice Section of the American
Institute of Certified Public Accountants' Division of Certified Public
Accounting firms, have been auditors of the Company's consolidated financial
statements since 1916. Their employment for the purpose of auditing the
Company's financial statements for the fiscal year ending January 25, 1997,
has been authorized by the Board, upon the recommendation of the Audit
Committee. Stockholder approval of such employment is requested.
It is anticipated that a representative of KPMG Peat Marwick LLP will attend
the meeting, will be available to respond to appropriate questions, and will
have an opportunity to make a statement should he or she so desire.
The total amount paid to KPMG Peat Marwick LLP for all services related to
the fiscal 1995 audit of the Company's consolidated financial statements was
approximately $2,150,000.
THE BOARD RECOMMENDS A VOTE FOR THIS PROPOSAL.
STOCKHOLDER RESOLUTIONS
The Company has been informed that the Amalgamated Bank of New York LongView
Collective Investment Fund, 11-15 Union Square, New York, New York 10003, a
beneficial owner of 49,000 shares of Common Stock, intends to submit a
resolution for adoption at the Annual Meeting, as follows:
21
<PAGE>
STOCKHOLDER RESOLUTION NUMBER ONE (PROPOSAL 3)
RESOLUTION AND REASONS STATED BY SUBMITTING STOCKHOLDER
SHAREHOLDER PROPOSAL
RESOLVED: That the shareholders of J. C. Penney Company, Inc. request the
Board of Directors to prepare a report at reasonable expense which describes
the Company's actions to ensure that it does not and will not do business with
foreign suppliers who manufacture items for sale in the United States using
forced labor, convict labor, or illegal child labor, or who fail to satisfy
all applicable laws and standards protecting their employees' wages, benefits,
working conditions, freedom of association, and other rights.
SUPPORTING STATEMENT
As U.S. companies increasingly import goods from overseas, there is growing
concern about working conditions in many nations which fall far below the most
basic standards of fair and humane treatment. Several years ago, a controversy
arose after reports that goods manufactured by convicts in Chinese prisons
were being imported into the United States for sale to consumers. The Tariff
Act of 1930 makes it illegal to import any goods made by forced labor,
including convict labor. China's use of prison labor and its record on human
rights generally were also issues in the recent debate about whether China
should enjoy "most favored nation" trading status with the United States.
Public concern has also been voiced in the wake of reports about the
manufacture of retail items using illegal child labor, unsafe or unhealthy
working conditions, and violations of other labor laws.
When questions about such practices first arose, many retailers and
manufacturers denied any knowing involvement with suppliers who engage in
them. Some companies went a step further and adopted "sourcing" standards
which declare that the company will not do business with foreign suppliers who
exploit their workers manufacture items for import and sale in the United
States. More recently, the White House has issued a set of sourcing principles
which it is urging American businesses to adopt in dealing with overseas
suppliers.
J. C. Penney imports many goods into this country, and we believe that the
shareholders have a strong interest in learning what steps the Company is
taking to monitor and control the conditions under which the goods it sells
are produced. We believe that it makes good business sense to have strict
sourcing standards and to enforce them vigorously, as reports that a company's
overseas suppliers are exploiting workers may damage the company's reputation
and generate a consumer backlash.
In our view, it is not enough for a company merely to have standards which
may look good on paper; effective enforcement is also required. There are
subterfuges which suppliers can use to import into the United States goods
made by forced labor. Also, when the federal government enforces applicable
laws in this area, it may hold companies liable for their supplier's actions.
We therefore ask the Board to prepare a report which would give investors
data about J. C. Penney's efforts to assure that it is not doing business with
overseas suppliers who exploit workers and information to indicate that the
Company is vigorously monitoring supplier performance.
WE URGE YOU TO VOTE FOR THIS RESOLUTION!
THE BOARD OF DIRECTORS SUPPORTS THIS PROPOSAL FOR THE FOLLOWING REASONS:
The stated goals of this proposal are consistent with the long-standing policy
of the Company. The Company has always been committed to the highest ethical
conduct and strict compliance with the law in all its business dealings,
including its important relationships with its many suppliers. The Company
22
<PAGE>
is deeply concerned about this issue and, as a result, over the years has
developed a comprehensive program to address the matters set forth in the
proposal. The Company's commitment to the goals expressed in the stockholder
proposal has been and remains a fundamental part of our business policy. The
Company's Board of Directors has therefore asked management to prepare for its
review a report describing the Company's actions in this important area, which
will be made available to stockholders at the Annual Meeting.
ACCORDINGLY, THE BOARD RECOMMENDS A VOTE FOR THIS PROPOSAL.
The Company has also been informed that Evelyn Y. Davis, Watergate Office
Building, 2600 Virginia Avenue, N.W., Suite 215, Washington, D.C. 20037, a
recordholder of 100 shares of Common Stock, intends to submit a resolution for
adoption at the Annual Meeting, as follows:
STOCKHOLDER RESOLUTION NUMBER TWO (PROPOSAL 4)
RESOLUTION AND REASONS STATED BY SUBMITTING STOCKHOLDER
RESOLVED: "That the shareholders of J. C. Penney recommend that the Board of
Directors take the necessary steps to reinstate the election of directors
ANNUALLY, instead of the stagger system which was recently adopted."
REASONS: "Until recently, directors of J. C. Penney were elected annually by
all shareholders."
"The great majority of New York Stock Exchange listed corporations elect all
their directors each year."
"This insures that ALL directors will be more accountable to ALL shareholders
each year and to a certain extent prevents the self-perpetuation of the
Board."
"Last year the owners of 97,046,645 shares, representing approximately 46.% of
shares voting, voted FOR this proposal."
"If you AGREE, please mark your proxy FOR this resolution."
THE BOARD OF DIRECTORS OPPOSES THIS PROPOSAL.
Prior to the 1985 Annual Meeting of Stockholders, directors were elected
annually for a one-year term. At the 1985 meeting, stockholders by a
substantial majority approved amendments to the Company's Restated Certificate
of Incorporation, as amended, and to its Bylaws providing, among other things,
that the Board be divided into three classes of directors serving staggered
three-year terms with each class being as nearly equal as possible
("Classified Board Amendments").
In the proxy statement for that meeting, which contained a detailed
discussion of the reasons for the Board's recommendation, the Board stated
that the overall purpose of the Classified Board Amendments was to assure
continuity and stability in the Company's operations. With a classified Board,
it is more likely that a majority of the directors at any time will have had
prior experience as directors of the Company, thereby facilitating continuity
and planning for the Company's business. For these reasons, the Board believes
that a classified Board will protect the interests of stockholders.
The Board continues to hold the view that the reasons set forth in the 1985
proxy statement are valid and that the election of directors by classes should
be maintained.
It should be noted that adoption of this proposal would not in itself
"reinstate" the annual election of directors but would simply amount to a
request that the Board consider taking the "necessary steps" to accomplish
such reinstatement. If the Board were to consider such a request desirable, it
would then have to present a formal amendment repealing the classified Board
provision to the Company's stockholders for their approval at an annual
meeting.
23
<PAGE>
A stockholder proposal virtually identical to this proposal was defeated by
the votes of Company stockholders at the 1995, 1994, 1993, 1992, 1991, 1990,
1989, and 1988 Annual Meetings of Stockholders.
ACCORDINGLY, THE BOARD CONTINUES TO RECOMMEND A VOTE AGAINST THIS PROPOSAL.
The Company has also been informed that the Union of Needletrades, Industrial
and Textile Employees, AFL-CIO, CLC, 2100 L Street, N.W., Suite 210,
Washington, D.C. 20037, a recordholder of 50 shares of Common Stock, intends
to submit a resolution for adoption at the Annual Meeting, as follows:
STOCKHOLDER RESOLUTION NUMBER THREE (PROPOSAL 5)
RESOLUTION AND REASONS STATED BY SUBMITTING STOCKHOLDER
Resolved: The shareholders of J. C. Penney Company, Inc. ("Company") hereby
request the Board of Directors to redeem the Preferred Stock Purchase Rights
issued February 14, 1990, unless said issuance is approved by the affirmative
vote of a majority of outstanding shares at a meeting of shareholders as soon
as practical.
This resolution received 47.6% of votes cast last year.
In February of 1990, the Company's Board of Directors authorized the
distribution of preferred stock purchase rights ("right" or "rights"). These
rights are a type of corporate anti-takeover device commonly known as a poison
pill.
Under its terms, one right was declared for each common share outstanding.
Each right entitles shareholders to purchase, under certain conditions, one
two-hundredth of a share of the Company's Series A Preferred Stock at a
purchase price of $280. The rights will be exercisable only if a person or
group acquires beneficial ownership of 15% or more of the common shares or has
commenced or intends to commence a tender offer upon consummation of which
such person or group would own 30% or more of the common shares. The Company
may redeem the rights for $.01 per right subject to adjustment.
We believe the terms of the rights are designed to discourage or thwart an
unwanted takeover of our Company. While management and the Board of Directors
should have appropriate tools to ensure that all shareholders benefit from any
proposal to buy the Company, we do not believe that the future possibility of
a takeover justifies the unilateral implementation of such a poison pill-type
device.
Rights plans like ours have become increasingly unpopular in recent years.
In 1995, a majority of shareholders at Ryder Systems, Super Valu Stores and
Central Maine Power voted in favor of proposals asking management to repeal or
redeem poison pills.
The effects of poison pill rights plans on the trading value of companies'
stock have been the subject of extensive research. A 1986 study by the Office
of the Chief Economist of the U. S. Securities and Exchange Commission on the
economics of the rights plans states that "The stock-returns evidence suggest
that the effect of poison pills to deter prospective hostile takeover bids
outweighs the beneficial effects that might come from increased bargaining
leverage of the target management." Another, more recent, study by Professor
Michael Ryngaert singled out rights plans such as the one authorized by our
Company for their negative effect on shareholder value. A 1992 study by
Professor John Pound of Harvard University's Corporate Research Project and
Lilli A. Gordon of the Gordon Group found a correlation between high corporate
performance and the absence of poison pills.
In light at what can best be described as the debatable economic benefit of
our preferred share rights and the undeniably undemocratic way in which they
were assigned to shareholders, we believe these rights should be either
redeemed or voted on.
WE URGE SHAREHOLDERS TO VOTE FOR THIS RESOLUTION.
---
24
<PAGE>
THE BOARD OF DIRECTORS OPPOSES THIS PROPOSAL.
In February 1990, the Board of Directors unanimously adopted a Rights
Agreement ("Rights Plan") and declared a dividend distribution of one
Preferred Stock Purchase Right (collectively, "Rights") on each outstanding
share of the Company's Common Stock. The Rights Plan was established in
connection with the Company's redemption of the rights issued pursuant to its
original rights plan adopted in 1986. The Rights Plan is designed to encourage
potential acquirors to negotiate directly with the Board of Directors, which
the Company believes is in the best position to negotiate on behalf of all
stockholders, evaluate the adequacy of any potential offer, and protect
stockholders against potential abuses during the takeover process, such as
partial and two-tiered tender offers and creeping stock accumulation programs,
which do not treat all stockholders fairly and equally.
The Rights Plan will allow the Board adequate time and flexibility to
negotiate on behalf of the stockholders and enhance the Board's ability to
negotiate the highest possible bid from a potential acquiror, develop
alternatives which may better maximize stockholder values, preserve the long-
term value of the Company for the stockholders, and ensure that all
stockholders are treated fairly and equally. The Rights Plan is not intended
to prevent a takeover on terms that are fair and equitable to all
stockholders, nor is it intended as a deterrent to a stockholder's initiation
of a proxy contest. The Board of Directors may, pursuant to the terms of the
Rights Plan, redeem the Rights to permit an acquisition that it determines, in
the exercise of its fiduciary duties, adequately reflects the value of the
Company and to be in the best interests of all stockholders. Moreover, a
number of other companies with existing rights plans have received unsolicited
offers and have redeemed their rights after their directors were satisfied
that the offer, as negotiated by the target company's board of directors,
adequately reflected the underlying value of the company and was fair and
equitable to all stockholders. Thus, experience indicates that rights plans
neither prevent unsolicited offers from occurring, nor prevent companies from
being acquired at prices that are fair and adequate to stockholders. The Board
believes that rather than deterring good-faith negotiations between a
potential acquiror and the Board, the Rights Plan will assist the Board in
maximizing the price paid to stockholders in the event the Company is
acquired.
The proponent references three studies regarding the effect of rights plans
on the trading value of the adopting companies' stock. However, March and
October 1988 studies by Georgeson & Company, a nationally recognized proxy
solicitation and investor relations firm, found that companies adopting rights
plans do not lessen the value of their stock, and, more importantly, that
companies with rights plans received higher takeover premiums than those
companies without rights plans. The March 1988 Georgeson study concluded that
companies with rights plans received takeover premiums averaging 69% higher
than those received by companies not protected by such plans. Similarly, a
March 1993 study by Robert Comment and G. William Schwert of the Bradley
Policy Research Center, University of Rochester, determined that rights plans
do not deter takeovers. Additionally, Comment and Schwert found that rights
plans are associated with higher takeover premiums for selling stockholders.
The Board specifically examined its fiduciary responsibilities under
Delaware law when it adopted the original rights plan in 1986 and the current
Rights Plan. It is important to note that the Company's Board of Directors is
an independent board, and that this preponderance of independent outside
directors has consistently been the case for over sixteen years, thus
providing further assurance that the Rights Plan will not be used for
entrenchment purposes. The Board adopted the Rights Plan with the aim of
protecting the interests of all stockholders and maximizing the value of their
investments in the Company. Based on the Board's collective business
experience and knowledge of the Company, it believes that the adoption of the
Rights Plan was a valid exercise of its fiduciary obligations to all
stockholders, and is in accord with the Board's responsibility under Delaware
law to manage and direct the management of the Company's business and affairs.
The Board does not believe that the Rights
25
<PAGE>
Plan will deter an acquisition offer that adequately reflects the underlying
value of the Company and that is fair to all stockholders, nor will it deter
the initiation of a proxy contest.
At the 1995, 1994, 1993, and 1992 Annual Meetings of Stockholders
stockholder proposals virtually identical to this proposal were defeated by
the Company's stockholders. Also, substantially similar proposals relating to
the original 1986 rights plan were defeated at the 1987 and 1988 Annual
Meetings of Stockholders.
ACCORDINGLY, THE BOARD RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
REQUIREMENTS, INCLUDING DEADLINES, FOR SUBMISSION OF PROXY PROPOSALS,
NOMINATION OF DIRECTORS, AND OTHER BUSINESS BY STOCKHOLDERS
Under the rules of the Securities and Exchange Commission, the date by which
proposals of stockholders intended to be presented at the 1997 Annual Meeting
of Stockholders must be received by the Company for inclusion in its proxy
statement and form of proxy relating to that meeting is December 11, 1996.
Under the Company's Bylaws, certain procedures are provided which a
stockholder must follow to nominate persons for election as directors or to
introduce an item of business at an annual meeting of stockholders. These
procedures provide, generally, that stockholders desiring to make nominations
for directors, and/or bring a proper subject of business before the meeting,
must do so by a written notice timely received (not later than 90 days in
advance of such meeting) by the Secretary of the Company containing the name
and address of the stockholder, and a representation that the stockholder is a
holder of record and intends to appear in person or by proxy at the meeting.
If the notice relates to a nomination for director, it must also set forth the
name and address of any nominee(s), all arrangements or understandings between
the stockholder and each nominee and any other person(s) (naming such
person(s)) pursuant to which the nomination(s) are to be made, such other
information regarding each nominee as would have been required to be included
in a proxy statement filed pursuant to the proxy rules of the Securities and
Exchange Commission had each nominee been nominated by the Board, and the
consent of each nominee to serve. Notice of an item of business shall include
a brief description of the proposed business and any material interest of the
stockholder in such business.
The chairman of the meeting may refuse to allow the transaction of any
business not presented, or to acknowledge the nomination of any person not
made, in compliance with the foregoing procedures.
Stockholders were advised by a notice to stockholders dated February 1, 1996
that any nomination for director and notice of any such business to be
properly brought before the 1996 Annual Meeting had to be made by stockholders
no later than February 17, 1996. It is currently expected that the 1997 Annual
Meeting of Stockholders will be held on or about May 16, 1997, in which event
any advance notice of nominations for directors and items of business (other
than proposals intended to be included in the proxy statement and form of
proxy, which as noted above must be received by December 11, 1996) must be
given by stockholders by February 15, 1997. The Company does, however, retain
the right to change this date as it, in its sole discretion, may determine.
Notice of any change will be furnished to stockholders prior to the expiration
of the 90-day advance notice period referred to above. Copies of the Company's
Bylaws are available from the Secretary of the Company.
CONFIDENTIAL VOTING
The Company, considering it to be in the best interest of stockholders, has a
policy to the effect that all proxy (voting instruction) cards, ballots, and
vote tabulations which identify the particular vote of a stockholder are to be
kept secret from the Company, its directors, officers, and employees.
26
<PAGE>
Accordingly, proxy cards are returned in envelopes addressed to the tabulator,
which receives and tabulates the proxies. The final tabulation is inspected by
inspectors of election who are independent of the Company, its directors,
officers, and employees. The identity and vote of any stockholder shall not be
disclosed to the Company, its directors, officers, or employees, nor to any
third party except (i) to allow the independent election inspectors to certify
the results of the vote to the Company, its directors, officers, and
employees; (ii) as necessary to meet applicable legal requirements and to
assert or defend claims for or against the Company; (iii) in the event of a
proxy solicitation based on an opposition proxy statement filed, or required
to be filed, with the Securities and Exchange Commission; or (iv) in the event
a stockholder has made a written comment on such material.
OTHER MATTERS
The Board of Directors does not intend to present any other business at the
meeting and knows of no other matters which will be properly presented.
However, if any other matter calling for a vote of stockholders is properly
presented at the meeting, it is the intention of the persons named in the
accompanying proxy to vote in accordance with their judgment on such matters.
/s/ C. R. Lotter
C. R. Lotter, Secretary
27
<PAGE>
- --------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE Please mark
MANNER DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS your votes as /X/
PROXY WILL BE VOTED FOR ELECTION OF ALL DIRECTORS AND indicated in
FOR PROPOSALS 2 AND 3 AND AGAINST PROPOSALS 4 AND 5. this example
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS AS
DESCRIBED IN THE PROXY STATEMENT:
- --------------------------------------------------------------------------------
1. Election of Directors (see reverse). 2. Approval of Auditors.
FOR all nominees AUTHORITY WITHHELD FOR AGAINST ABSTAIN
except as noted as to all nominees / / / / / /
/ / / / 3. Stockholder resolution regarding
________________________________________ doing business with foreign
suppliers.
FOR AGAINST ABSTAIN
/ / / / / /
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOLLOWING PROPOSALS AS
DESCRIBED IN THE PROXY STATEMENT:
- --------------------------------------------------------------------------------
4. Stockholder resolution regarding 5. Stockholder resolution regarding
classification of Board. rights dividend.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
/ / / / / / / / / / / /
- --------------------------------------------------------------------------------
I/we plan to attend the meeting / /
_____ PLEASE SIGN AND DATE
| Please sign your name or names exactly
| as stenciled hereon. For a joint
account, each joint owner should sign.
Persons signing in a representative
capacity should indicate their
capacity.
______________________________________
SIGNATURE DATE
______________________________________
SIGNATURE DATE
- --------------------------------------------------------------------------------
J. C. PENNEY COMPANY, INC.
PROXY/VOTING INSTRUCTION CARD
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
By properly executing this card on the reverse, you are authorizing V.E. Jordan,
Jr., J.E. Oesterreicher, W.B. Tygart, or any one of them, with power of
substitution in each, to represent and vote the stock owned of record which you
are entitled to vote at the Annual Meeting of Company Stockholders, to be held
at the Company's Home Office at 6501 Legacy Drive, Plano, Texas 75024-3698 on
Friday, May 17, 1996, at 10:00 A.M., local time, and at any adjournment or
postponement thereof ("Meeting"), upon such business as may come before the
Meeting, including the items set forth on the reverse ("Business").
AS DESCRIBED IN THE PROXY STATEMENT, THIS CARD ALSO PROVIDES VOTING INSTRUCTIONS
AT SUCH MEETING FOR CHEMICAL BANK ("AGENT") FOR SUCH BUSINESS FOR PARTICIPANTS
IN THE COMPANY'S DIVIDEND REINVESTMENT PLAN ("DRIP") BOTH FOR COMMON STOCK (IF
ANY) ALLOCATED TO YOUR ACCOUNTS AND FOR COMMON STOCK ALLOCATED TO OTHER DRIP
PARTICIPANTS' ACCOUNTS FOR WHICH VOTING INSTRUCTIONS ARE NOT RECEIVED BY MAY 14,
1996 ("UNDIRECTED STOCK"). IF THIS VOTING INSTRUCTION CARD IS EXECUTED AND
RECEIVED BY MAY 14, 1996, THE AGENT WILL VOTE AS FOLLOWS: (A) FOR COMMON STOCK
ALLOCATED TO THE UNDERSIGNED'S ACCOUNTS, IN ACCORDANCE WITH THE INSTRUCTIONS
HEREIN AND (B) FOR UNDIRECTED STOCK, IN THE SAME PROPORTION AS ALL COMMON STOCK
ALLOCATED TO ACCOUNTS FOR WHICH INSTRUCTION CARDS RECEIVED BY MAY 14, 1996 HAS
BEEN VOTED.
Nominees for Election of Directors for the term set forth in the Proxy Statement
are W.R. Howell, George Nigh, A.W. Richards, and J.D. Williams. TO WITHHOLD
AUTHORITY TO VOTE FOR ANY NOMINEE, WRITE THAT NOMINEE'S NAME IN THE SPACE
PROVIDED ON THE REVERSE.
Your vote is important and cannot be recorded by the proxies or Agent unless
this card is properly executed by you and returned. Therefore, please sign,
date, and return this card promptly in the envelope provided. No postage is
required if this envelope is mailed in the United States.
(Continued on reverse side)
- --------------------------------------------------------------------------------
<PAGE>
J. C. PENNEY COMPANY, INC.
PROXY/VOTING INSTRUCTION CARD
ALLOCATED STOCK
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
TO PARTICIPANTS IN THE COMPANY'S SAVINGS AND PROFIT-SHARING RETIREMENT PLAN AND
THE COMPANY'S SAVINGS, PROFIT-SHARING AND STOCK OWNERSHIP PLAN (TOGETHER,
"PLANS"):
BY PROPERLY EXECUTING THIS CARD ON THE REVERSE, YOU ARE INSTRUCTING STATE STREET
BANK AND TRUST COMPANY ("TRUSTEE") TO VOTE ON YOUR BEHALF, IN ACCORDANCE WITH
YOUR INSTRUCTIONS, IN PERSON OR BY PROXY, SHARES OF VOTING STOCK HELD FOR YOU IN
ACCOUNTS UNDER THE PLANS ("ALLOCATED STOCK"), AT THE ANNUAL MEETING OF COMPANY
STOCKHOLDERS, TO BE HELD AT THE COMPANY'S HOME OFFICE AT 6501 LEGACY DRIVE,
PLANO, TEXAS 75024-3698 ON FRIDAY, MAY 17, 1996, AT 10:00 A.M., LOCAL TIME, AND
AT ANY ADJOURNMENT OR POSTPONEMENT THEREOF, UPON SUCH BUSINESS AS MAY COME
BEFORE THE MEETING, INCLUDING THE ITEMS SET FORTH ON THE REVERSE. IF THIS
PROXY/VOTING INSTRUCTION CARD IS NOT RECEIVED BY THE TRUSTEE BY MAY 14, 1996,
YOUR ALLOCATED STOCK WILL BE VOTED IN THE SAME PROPORTION AS INSTRUCTIONS
RECEIVED BY THE TRUSTEE BY THAT DATE FROM THE PLANS' PARTICIPANTS WHO HAVE
RETURNED THEIR UNALLOCATED/UNDIRECTED PROXY/VOTING INSTRUCTION CARDS IN A TIMELY
MANNER.
For your information, a copy of the Board of Directors' Proxy Statement for the
meeting is enclosed herewith.
Nominees for Election of Directors for the term set forth in the Proxy Statement
are W.R. Howell, George Nigh, A.W. Richards, and J.D. Williams. TO WITHHOLD
AUTHORITY TO VOTE FOR ANY NOMINEE, WRITE THAT NOMINEE'S NAME IN THE SPACE
PROVIDED ON THE REVERSE.
Your instructions as to your Allocated Stock are important and cannot be
followed by the Trustee unless this card is properly executed by you and
received by the Trustee by MAY 14, 1996. Therefore, please sign, date, and
return this card promptly in the envelope provided. No postage is required if
this envelope is mailed in the United States.
(Continued on reverse side)
- -------------------------------------------------------------------------------
TO DIRECT THE TRUSTEE TO VOTE, PLEASE SIGN, AND RETURN IN THE ENCLOSED ENVELOPE,
BOTH CARDS, ONE FOR YOUR ALLOCATED STOCK AND THE OTHER FOR UNDIRECTED AND
UNALLOCATED STOCK. PLEASE TEAR OFF AND DISCARD THIS STUB. THANK YOU.
- -------------------------------------------------------------------------------
J. C. PENNEY COMPANY, INC.
PROXY/VOTING INSTRUCTION CARD
UNALLOCATED AND UNDIRECTED STOCK
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
TO PARTICIPANTS IN THE COMPANY'S SAVINGS AND PROFIT-SHARING RETIREMENT PLAN AND
THE COMPANY'S SAVINGS, PROFIT-SHARING AND STOCK OWNERSHIP PLAN (TOGETHER,
"PLANS"):
BY PROPERLY EXECUTING THIS CARD ON THE REVERSE, YOU ARE INSTRUCTING STATE STREET
BANK AND TRUST COMPANY ("TRUSTEE") TO VOTE, IN PERSON OR BY PROXY, SHARES OF
VOTING STOCK HELD UNDER THE PLANS (I) NOT YET ALLOCATED TO THE ACCOUNTS OF
PLANS' PARTICIPANTS ("UNALLOCATED STOCK") AND (II) ALLOCATED TO THE ACCOUNTS OF
PLANS' PARTICIPANTS FROM WHOM AN EXECUTED PROXY/VOTING INSTRUCTION CARD IS NOT
RECEIVED BY THE TRUSTEE BY MAY 14, 1996 ("UNDIRECTED STOCK"), AT THE ANNUAL
MEETING OF COMPANY STOCKHOLDERS, TO BE HELD AT THE COMPANY'S HOME OFFICE AT 6501
LEGACY DRIVE, PLANO, TEXAS 75024-3698 ON FRIDAY, MAY 17, 1996, AT 10:00 A.M.,
LOCAL TIME, AND AT ANY ADJOURNMENT OR POSTPONEMENT THEREOF, UPON SUCH BUSINESS
AS MAY COME BEFORE THE MEETING, INCLUDING THE ITEMS SET FORTH ON THE REVERSE.
UNDIRECTED STOCK AND UNALLOCATED STOCK WILL BE VOTED IN THE SAME PROPORTION AS
INSTRUCTIONS RECEIVED BY THE TRUSTEE BY MAY 14, 1996 FROM THE PLANS'
PARTICIPANTS WHO HAVE RETURNED THIS PROXY/VOTING INSTRUCTION CARD IN A TIMELY
MANNER.
For your information, a copy of the Board of Directors' Proxy Statement for the
meeting is enclosed herewith.
Nominees for Election of Directors for the term set forth in the Proxy Statement
are W.R. Howell, George Nigh, A.W. Richards, and J.D. Williams. TO WITHHOLD
AUTHORITY TO VOTE FOR ANY NOMINEE, WRITE THAT NOMINEE'S NAME IN THE SPACE
PROVIDED ON THE REVERSE.
Your instructions as to Unallocated Stock and Undirected Stock are important and
cannot be followed by the Trustee unless this card is properly executed by you
and received by the Trustee by MAY 14, 1996. Therefore, please sign, date, and
return this card promptly in the envelope provided. No postage is required if
this envelope is mailed in the United States.
(Continued on reverse side)
- -------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE Please mark
MANNER DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS your votes as /X/
PROXY WILL BE VOTED FOR ELECTION OF ALL DIRECTORS AND indicated in
FOR PROPOSALS 2 AND 3 AND AGAINST PROPOSALS 4 AND 5. this example
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS AS
DESCRIBED IN THE PROXY STATEMENT:
- --------------------------------------------------------------------------------
1. Election of Directors (see reverse). 2. Approval of Auditors.
FOR all nominees AUTHORITY WITHHELD FOR AGAINST ABSTAIN
except as noted as to all nominees / / / / / /
/ / / / 3. Stockholder resolution regarding
________________________________________ doing business with foreign
suppliers.
FOR AGAINST ABSTAIN
/ / / / / /
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOLLOWING PROPOSALS AS
DESCRIBED IN THE PROXY STATEMENT:
- --------------------------------------------------------------------------------
4. Stockholder resolution regarding 5. Stockholder resolution regarding
classification of Board. rights dividend.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
/ / / / / / / / / / / /
- --------------------------------------------------------------------------------
_____
|
|
PLEASE SIGN AND DATE
Please sign your name exactly as
stenciled hereon.
______________________________________
SIGNATURE DATE
- --------------------------------------------------------------------------------
TO DIRECT THE TRUSTEE TO VOTE, PLEASE SIGN, AND RETURN IN THE ENCLOSED ENVELOPE,
BOTH CARDS, ONE FOR YOUR ALLOCATED STOCK AND THE OTHER FOR UNDIRECTED AND
UNALLOCATED STOCK. PLEASE TEAR OFF AND DISCARD THIS STUB. THANK YOU.
- --------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE Please mark
MANNER DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS your votes as /X/
PROXY WILL BE VOTED FOR ELECTION OF ALL DIRECTORS AND indicated in
FOR PROPOSALS 2 AND 3 AND AGAINST PROPOSALS 4 AND 5. this example
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS AS
DESCRIBED IN THE PROXY STATEMENT:
- --------------------------------------------------------------------------------
1. Election of Directors (see reverse). 2. Approval of Auditors.
FOR all nominees AUTHORITY WITHHELD FOR AGAINST ABSTAIN
except as noted as to all nominees / / / / / /
/ / / / 3. Stockholder resolution regarding
________________________________________ doing business with foreign
suppliers.
FOR AGAINST ABSTAIN
/ / / / / /
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOLLOWING PROPOSALS AS
DESCRIBED IN THE PROXY STATEMENT:
- --------------------------------------------------------------------------------
4. Stockholder resolution regarding 5. Stockholder resolution regarding
classification of Board. rights dividend.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
/ / / / / / / / / / / /
- --------------------------------------------------------------------------------
_____
|
|
PLEASE SIGN AND DATE
Please sign your name exactly as
stenciled hereon.
______________________________________
SIGNATURE DATE
- --------------------------------------------------------------------------------
