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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 Section 240.14a-11(c) or Section 240.14a-12
J. C. PENNEY COMPANY, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
notice of
annual
meeting
of stockholders
and
proxy
statement
1998
J.C. Penney Company, Inc.
<PAGE>
JCPENNEY James E. Oesterreicher
Chairman of the Board
and Chief Executive Officer
April 9, 1998
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 15, 1998, 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, OR VOTE VIA TELEPHONE AS SET FORTH IN THE PROXY,
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.
Regards,
/s/ J.E. Oesterreicher
ANY STOCKHOLDER HAVING A DISABILITY REQUIRING SPECIAL ASSISTANCE WHO WOULD
LIKE TO ATTEND THE ANNUAL MEETING SHOULD CALL THE SECRETARY OF THE COMPANY AT
(972) 431-1201 AND REASONABLE ACCOMMODATIONS WILL BE MADE TO MEET 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 15, 1998
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 15, 1998, 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 30, 1999;
3. 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;
4. 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
5. to transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on March 16, 1998, 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
April 9, 1998 /s/ C. R. Lotter
C. R. Lotter, Secretary
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE, & RETURN YOUR PROXY CARD OR VOTE BY TELEPHONE
<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 (OR FOLLOW THE
INSTRUCTIONS SET FORTH ON THE ENCLOSED PROXY CARD TO VOTE YOUR PROXY BY
TELEPHONE) 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 (either by
telephone or by mail), or by personal vote at the meeting.
The enclosed proxy also serves as the voting instruction card for The Chase
Manhattan 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 12,
1998 ("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 12, 1998 ("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 9, 1998.
VOTING RIGHTS
Stockholders of record at the close of business on March 16, 1998, the record
date for the Annual Meeting, are entitled to vote at the meeting. At the close
of business on such date, 252,176,384 shares of Common Stock, and 859,238
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 269,361,144 shares ("Voting Stock"), were
outstanding and entitled to vote.
On that date, a trust maintained under the Company's Savings Plan held
20,361,245 shares of Common Stock representing approximately 7.56% of the
Voting Stock, and a trust maintained under the LESOP held 859,238 shares of
ESOP Preferred Stock and 7,359,042 shares of Common Stock, representing
approximately 9.11% of the Voting Stock. The holdings of both Plans represent
1
<PAGE>
approximately 16.67% of the Voting Stock. These trusts have disclaimed
beneficial ownership of these shares of Voting Stock.
The Company has been advised that as of December 31, 1997, Capital Research
and Management Company (mutual funds manager) and Capital Guardian Trust
Company ("Capital Guardian"), operating subsidiaries of The Capital Group
Companies, Inc., located at 333 South Hope Street, Los Angeles, California
90071, exercised investment discretion with respect to 22,798,300 shares of
Common Stock. Such shares, owned by various institutional investors, amounted
to approximately 9.1% of the then outstanding shares of Common Stock (8.5% of
the Voting Stock as of such date). Capital Guardian has sole voting power with
respect to 900 of such shares, and neither it nor Capital Research and
Management Company has voting power, sole or shared, with respect to the
remaining 22,797,400 shares.
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 currently has seven meetings scheduled for fiscal 1998.
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 pages 27 and 28.
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 page 28.
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 annual salaries of 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 eleven members, with two classes
consisting of four directors each and one class consisting of three directors.
Of the eleven current directors, two 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.
2
<PAGE>
BOARD MEETINGS. During fiscal 1997, nine meetings of the Board were held.
Attendance at such meetings for current directors averaged approximately 97%.
In addition to membership on the Board, directors also serve on one or more of
the principal standing committees of the Board. During fiscal 1997, these
committees held a total of 27 meetings; no current director attended fewer
than 85% of the aggregate total of meetings of the Board and committees on
which he or she served.
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 independent auditors' audit strategy and plan, scope,
fees, audit results, and non-audit services and related fees, internal audit
reports on the adequacy of internal controls, 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 1997, this Committee met four times. Its members are M. A.
Burns, V. E. Jordan, Jr., A. W. Richards, Francisco Sanchez-Loaeza, C. S.
Sanford, Jr., 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 1997, this Committee met three times. Its members are J. C.
Pfeiffer, A. W. Richards, R. G. Turner, and M. A. Burns, 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 1997, this Committee met six times. Its members are George
Nigh, J. C. Pfeiffer, C. S. Sanford, Jr., J. D. Williams, and V. E. Jordan,
Jr., who serves as its Chair.
Stockholders may propose nominations for directors in accordance with the
procedures described on pages 27 and 28.
FINANCE COMMITTEE. The Finance Committee is responsible for reviewing the
Company's financial policies, strategies, and capital structure.
During fiscal 1997, this Committee met four times. Its members are M. A.
Burns, J. E. Oesterreicher, Francisco Sanchez-Loaeza, W. B. Tygart, and C. S.
Sanford, Jr., who serves as its Chair.
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.
3
<PAGE>
During fiscal 1997, this Committee met eight times. Its members are George
Nigh, R. G. Turner, J. D. Williams, and J. C. Pfeiffer, 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 1997, this Committee met two times. Its members are V. E.
Jordan, Jr., A. W. Richards, J. D. Williams, and George Nigh, 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-
0005.
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 with two classes consisting of
four directors each and one class consisting of three directors. At the
meeting, four directors will be elected to hold office for a three-year term
expiring at the 2001 Annual Meeting of Stockholders. Except for Messrs. Tygart
and Williams, who will retire from the Board on April 30, 1998 and May 15,
1998, respectively, the other directors will continue in office, in accordance
with their previous election, until the expirations of the terms of their
classes at the 1999 or year 2000 Annual Meeting of Stockholders, as the case
may be.
Brief statements setting forth certain information as of March 16, 1998, as
to the Board of Directors' nominees for directors for the three-year term
expiring at the 2001 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 (or properly voted by telephone),
the accompanying proxy will be voted for all four nominees for a term expiring
at the 2001 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.
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<PAGE>
NOMINEES FOR DIRECTORS FOR THREE-YEAR TERM EXPIRING 2001
[PHOTO OF M. ANTHONY BURNS, 55
M. ANTHONY Chairman, President and Chief Executive Officer of Ryder System,
BURNS APPEARS Inc. (a provider of transportation and logistics services) since
HERE] 1985, with which he has served in positions of increasing
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 and Retirement Task Force, and a member of The Business
Council; Director of the Company since 1988.
[PHOTO OF JAMES E. OESTERREICHER, 56
JAMES E. Chairman of the Board of the Company since January 1997 and
OESTERREICHER Chief Executive Officer of the Company since January 1995; Vice
APPEARS HERE] Chairman of the Board of the Company from 1995 to 1997;
President, JCPenney Stores and Catalog, from 1992 to 1995;
Executive Vice President from 1988 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
Organization on Disability, National Retail Federation, and
Presbyterian Healthcare Systems; Member of the Policy Committee
of the Business Roundtable; Director of the Company since 1995.
[PHOTO OF FRANCISCO SANCHEZ-LOAEZA, 52
FRANCISCO Chairman of the Board since 1994, and President, Chief Executive
SANCHEZ- Officer, and a director since 1992, of Panamerican Beverages
LOAEZA Inc. (soft drink bottling operations), with which he has served
APPEARS HERE] in positions of increasing importance since 1980; Member of The
Conference Board; Director of the Company since February 1998.
[PHOTO OF CHARLES S. SANFORD, JR., 61
CHARLES S. Retired Chairman of the Board and Chief Executive Officer of
SANFORD, JR. Bankers Trust New York Corporation and its principal subsidiary,
APPEARS HERE] Bankers Trust Company, from 1987 to 1996, with which he served
in positions 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
Council and the Foundation Board of Trustees of the University
of Georgia; Overseer of The Wharton School, University of
Pennsylvania; Director of the Company since 1992.
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MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING 1999
[PHOTO OF GEORGE NIGH, 70
GEORGE NIGH President of the University of Central Oklahoma from 1992 to
APPEARS HERE] 1997; Governor of Oklahoma from 1979 to 1987; Lieutenant
Governor from 1959 to 1963 and from 1967 to 1979; Member of the
Oklahoma House of Representatives from 1950 to 1958; Director of
Local Federal Bank of Oklahoma; Chair, President's Oklahoma City
Scholarship Fund Advisory Board; Director of the Company since
1987.
[PHOTO OF ANN W. RICHARDS, 64
ANN W. Senior Advisor, law firm of Verner, Liipfert, Bernhard,
RICHARDS McPherson & Hand since 1995; Formerly Governor of Texas, from
APPEARS HERE] 1991 to 1995; State Treasurer, State of Texas, from 1983 to
1991; Chair, Democratic National Convention, 1992; Director of
TIG Holdings, Inc.; Director of the Company since 1995.
[PHOTO OF JOSEPH D. WILLIAMS, 71
JOSEPH D. Retired Chairman and Chief Executive Officer of Warner-Lambert
WILLIAMS Company (pharmaceuticals, health care, and consumer products)
APPEARS HERE] from 1985 to 1991, with which and with a related company he
served in positions of increasing importance since 1950,
including its President and Chief Operating Officer from 1979 to
1985; Director of Eckerd Corporation, Rockefeller & Co., and
Therapeutic Antibodies Inc.; Trustee of Columbia University,
Project Hope, Liberty Science Center, and the United Negro
College Fund; Director of the Company since 1985.
6
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MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING 2000
[PHOTO OF VERNON E. JORDAN, JR., 62
VERNON E. Senior Partner, law firm of Akin, Gump, Strauss, Hauer & Feld,
JORDAN, JR. L.L.P. since 1992; Partner since 1982; President from 1977 to
APPEARS HERE] 1981 and Executive Director from 1972 to 1977 of the National
Urban League; Director of American Express Company, Bankers
Trust Company, Bankers Trust New York Corporation, Callaway Golf
Company, Chancellor Media Corporation, Dow Jones & Company,
Inc., Revlon Group Incorporated, Revlon, Inc., Ryder System,
Inc., Sara Lee Corporation, Union Carbide Corporation, and Xerox
Corporation; Trustee of The Ford Foundation and Howard
University; Director of the Company since 1973.
[PHOTO OF JANE C. PFEIFFER, 65
JANE C. Independent management consultant; Chairman of the Board of
PFEIFFER National Broadcasting Company, Inc. from 1978 to 1980;
APPEARS HERE] Independent management consultant from 1976 to 1978; Vice
President of Communications and Government Relations of
International Business Machines Corporation from 1972 to 1976;
Director of Ashland Oil, Inc., International Paper Company, and
The Mutual Life Insurance Company of New York; Trustee of The
Conference Board and of the University of Notre Dame; Director
of the Company since 1977.
[PHOTO OF R. GERALD TURNER, 52
R. GERALD President of Southern Methodist University since 1995; Formerly
TURNER Chancellor of the University of Mississippi, from 1984 to 1995;
APPEARS HERE] Chairman, Commission on Education for the Teaching Profession,
from 1990 to 1991; Member, President's Commission, the National
Collegiate Athletic Association, from 1989 to 1992; Director of
Capstar Broadcasting Corp., ChemFirst Corporation, and Mobil
Telecommunications Corporation; Director of the Company since
1995.
[PHOTO OF W. BARGER TYGART, 62
W. BARGER Vice Chairman of the Board of the Company since November 1997;
TYGART President and Chief Operating Officer from January 1995 to
APPEARS HERE] November 1997; Senior Executive Vice President from 1992 to
1995; Executive Vice President from 1987 to 1992; Associated
with the 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.
7
<PAGE>
MANAGEMENT OWNERSHIP OF COMMON STOCK AND ESOP PREFERRED STOCK
The following table shows, as of March 16, 1998, the beneficial ownership of
shares of Voting Stock by each present director and by the five 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 16, 1998.
<TABLE>
<CAPTION>
Number Number
attributable attributable
Number to unexercised to options
of shares and unexpired exercisable within
beneficially options for 60 days of
Name or Group owned Common Stock March 16, 1998
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Directors:
M. A. Burns 13,500 8,800 8,800
V. E. Jordan, Jr. 16,647 12,000 12,000
George Nigh 12,160 8,800 8,800
J. E. Oesterreicher 422,960 347,940 227,940
J. C. Pfeiffer 15,120 10,800 10,800
A. W. Richards 3,685 2,400 2,400
F. Sanchez-Loaeza 500 0 0
C. S. Sanford, Jr. 10,500 4,800 4,800
R. G. Turner 3,638 1,600 1,600
W. B. Tygart 269,468 180,800 157,800
J. D. Williams 29,200 8,800 8,800
Named Executive Officers:*
J. T. Cody, Jr. 206,571 130,410 107,410
T. D. Hutchens 107,424 77,972 58,972
F. A. Newman 143,616 139,192 120,192
All present directors and
executive officers as a group 1,922,918 1,357,708 1,072,408
- ------------------------------------------------------------------------------
</TABLE>
* In addition to Messrs. Oesterreicher and Tygart who also serve as
directors.
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 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. which is 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
8
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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 The Chase Manhattan 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 1997, 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 1997, Non-Associate Directors Pfeiffer and Williams were each paid
$400, and Non-Associate Director Sanford was paid $800, 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
1997, three directors elected such deferral.
Pursuant to a retirement plan for Non-Associate Directors, a director
serving as of February 12, 1997, and any person who served as a Company
director prior to such date, 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, unless such Non-
Associate Director elected to discontinue participation in the retirement
plan. For such 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. During fiscal 1997,
each eligible Non-Associate Director who elected to remain in the retirement
plan was granted a stock award of 200 shares of restricted Common Stock under
the Company's 1997 Equity Compensation Plan ("Equity Plan"). Each Non-
Associate Director who was not eligible for the retirement plan or who elected
not to participate in the retirement plan was granted a stock award of 500
shares of restricted Common Stock under the Equity Plan. Non-Associate
Directors elected or appointed to the Company's Board after February 12, 1997
are not eligible to receive retirement benefits. 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.
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 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. Nine of
the current directors have elected to participate in the Charitable Award
Program.
9
<PAGE>
REPORT OF PERSONNEL AND COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Company's compensation policies are established and implemented by the
Personnel and Compensation Committee of the Board of Directors ("Committee"),
which is composed entirely of non-employee directors. In addition to
determining and approving annual salaries of officers who are not directors
and making recommendations to the full Board regarding the annual salaries of
associate directors, the Committee determines and approves payments under the
Company's annual and long-term incentive compensation programs and makes
awards under the Company's 1997 Equity Compensation Plan ("Equity Plan"). 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.
Compensation is tied directly to the achievement of the Company's annual and
long-term performance goals. In this manner, 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. In general,
an executive's compensation package consists 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 page 15.) As an
executive's Position Responsibility Level ("PRL") increases, a greater portion
of his or her compensation is linked to Company performance.
BASE SALARY AND INCENTIVE COMPENSATION PAYMENTS. Total annual cash
compensation consists of base salary and short and long-term incentive
compensation. Base salary is set by the Committee from a range determined by
the officer's PRL. For executive officers, the midpoint of such range
typically has been set below median base pay rates for comparable executives
because of the Company's emphasis on incentive compensation tied to Company
performance as a means to provide competitive pay 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. The Company believes
it competes with 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 for executive talent. In setting base salaries,
the Committee compares the Company's cash compensation package 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
Chairman of the Board and Chief Executive Officer ("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 regularly reviews
base salary levels to determine if salary increases are merited. The length of
time between increases generally ranges from 12 to 14 months.
Annual profit incentive compensation can be earned by eligible management
associates of the Company (other than Eckerd Corporation ("Eckerd")
associates) under the Company's 1989 Management Incentive Compensation Program
("Incentive Program"). The amount of this cash award is based on the number of
profit incentive units credited to a particular PRL and the value, as
determined by the Committee, assigned to each unit. The number of profit
incentive units credited is a given percentage, based on PRL, of base salary.
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 basic
earnings per share for the
10
<PAGE>
current year as measured against basic 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, other than drugstores, 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, 1997 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 executive officers with specific 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 or divisions which they direct.
Eligible Eckerd associates, including Mr. Newman, participate in the Eckerd
Corporation Key Management Bonus Plan ("KMBP"), a compensation plan in place
at Eckerd prior to the Company's acquisition of Eckerd. The KMBP is also a
performance based annual incentive compensation program, which pays a cash
bonus to participants generally based on the extent to which identified Eckerd
financial objectives for the fiscal year, including earnings before interest
and taxes, return on investment, and sales, have been achieved. There are six
levels of KMBP participation and the participation level of each eligible
Eckerd associate is determined by his or her title. At each participation
level, "threshold", "target", and "goal" payout percentages have been set
based on Eckerd's actual performance relative to its plan for the fiscal year.
The various financial objectives for each participant are weighted and the
participant's actual payout percentage, which is a percentage of eligible base
salary, represents the sum of the weighted payout percentages for each
financial objective. The Company has the discretion, however, to determine a
different payout percentage if it believes that such payout percentage is
warranted in light of the circumstances surrounding Eckerd's results for the
year.
For fiscal 1997, long-term incentive compensation for eligible management
associates of the Company and its subsidiaries, including Eckerd, was 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 (or, in the case of Eckerd, at target) by
a given percentage, based on PRL (or, in the case of Eckerd, grade level). 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 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 1997, the combined payments from the Incentive Program and PUP
accounted for 61% to 68% of the total cash compensation of the Named Executive
Officers (other than Mr. Newman), depending on the Company's sales and
earnings performance and the executive's PRL. The combined payments from the
KMBP and PUP accounted for 43% of Mr. Newman's total cash compensation for
fiscal 1997.
11
<PAGE>
Effective February 1, 1998, the Board of Directors approved and adopted the
J. C. Penney Company, Inc. 1998 EVA(R) Performance Plan ("EVA Performance
Plan"), which replaces the PUP. As with the PUP, the number of performance
units granted to each participant is calculated by multiplying the sum of base
salary and profit incentive compensation valued at $1.00 per unit (or, in the
case of Eckerd, at target) by a given percentage, based on PRL. The value of
each performance unit for a given fiscal year is determined by the Committee
and is based on the change in the Company's "economic value added" or "EVA"
from the previous fiscal year, measured against predetermined EVA growth
targets. EVA is a Company's after-tax net operating profit minus a charge for
the capital employed (both debt and equity) for a given fiscal year. The
aggregate value of each participant's performance units for the fiscal year,
which may be positive or negative based on the Company's performance, is added
to a "bonus reserve account" established for such participant. Annual payments
to participants under the EVA Performance Plan will be made from each
participant's bonus reserve account in amounts equal to up to 100% of the
participant's target award for such fiscal year (i.e., the number of
performance units granted for the fiscal year at $1.00 per unit), to the
extent that the bonus reserve account balance is positive, plus 50% of any
remaining positive balance. Since a participant's bonus reserve account
balance may be negative it is possible that a participant would not receive a
cash award under the EVA Performance Plan in a given fiscal year.
EQUITY AWARDS. The Company makes equity awards to eligible associates to align
their interests with stockholders. Generally, an executive's participation in
the Equity Plan and the size of the award 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 and stock
awards have been granted under the Equity Plan.
As of March 2, 1998, options covering approximately 1,600,000 shares of
Common Stock under the Equity Plan (to approximately 2,000 management
employees of the Company and its subsidiaries) were granted at an option price
of $71.2812 per share. Generally, the retention period for the underlying
shares is two years from the date of exercise of the option. Also, all
participants in the Equity Plan are subject to certain minimum Company stock
ownership guidelines. (See "Associate Stock Ownership Guidelines" on page 20).
The Company has never reduced the exercise prices of outstanding stock
options under the present or any prior option plan.
1997 COMPENSATION. In 1997, the total Company unit value under the Incentive
Program was $1.49 as compared to $1.35 in 1996 and $1.23 in 1995. As noted
previously, no associate's 1997 incentive compensation was based solely on the
total Company performance measurement. The 1997 Incentive Program unit values
for Messrs. Oesterreicher, Tygart, Cody, and Hutchens were $1.488, $1.488,
$1.485, and $1.475, respectively. Mr. Newman's 1997 payout percentage under
the KMBP was 35% of his eligible base salary.
The PUP unit value for the three-year measurement period ending in 1997 was
$1.20 as compared to $1.40 in 1996 and $1.85 in 1995. Average ROE was 13.7%,
16.0%, and 18.2% for the measurement periods ending in 1997, 1996, and 1995,
respectively. Average EPS percentage growth, as determined by the Committee,
for each of these same three years was 3.1% (1997), 8.8% (1996), and 14.9%
(1995).
CEO COMPENSATION. As shown in the Summary Compensation Table, the CEO's base
salary for 1997 was $560,826. For 1997, over 68% of the CEO's total cash
compensation consisted of annual and long-term cash incentive awards (compared
to 68% and 66% for fiscal 1996 and 1995, respectively). The CEO's 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.
- --------
EVA(R) is a registered trademark of Stern Stewart & Co.
12
<PAGE>
As discussed above, the Company's executive compensation philosophy
emphasizes incentive compensation tied to Company performance. The
deductibility of executive compensation is limited in certain circumstances by
Section 162(m) of the Internal Revenue Code. The Company's Equity Plan
satisfies the requirements of Section 162(m) regarding stock option grants.
With respect to the Company's other compensation programs, the Committee
believes that these programs provide the necessary incentives and flexibility
to promote the Company's performance-based compensation philosophy while being
consistent with Company culture and objectives and, accordingly, has
determined not to amend these plans at this time. For fiscal 1997, the
limitations of Section 162(m) applied to compensation paid to three Company
executives.
PERSONNEL AND COMPENSATION COMMITTEE
J. C. Pfeiffer, Chair R. G. Turner
George Nigh J. D. Williams
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. George
Nigh, J. C. Pfeiffer, R. G. Turner, and J. D. Williams served as members of
the Committee during the Company's 1997 fiscal year.
Mr. Jordan is a senior partner of Akin, Gump, Strauss, Hauer & Feld, L.L.P.,
which is one of a number of firms which have provided or will provide legal
services to the Company and its subsidiaries.
In connection with its acquisition of Eckerd Corporation ("Eckerd"), the
Company requested that Mr. Newman, Eckerd's Chairman, President and Chief
Executive Officer, enter into an amendment to his existing employment
agreement to guarantee his continued employment with Eckerd for at least three
years after the acquisition. As amended, the agreement, which provides for an
initial base salary of $575,000, has a three-year term beginning February 27,
1997, after which it is automatically renewed annually until terminated by the
Company or Mr. Newman. Upon involuntary termination of his employment, other
than for cause, Mr. Newman is entitled to a severance payment of two times his
then current annual base salary, payable in monthly installments over a two
year period. In addition, upon termination by the Company within two years, or
termination by Mr. Newman for Good Reason (as defined therein) at least one
year but less than two years, after a Change of Control (as defined therein),
he will receive a lump sum severance payment of 2.9 times base salary and all
previously granted incentive awards will vest immediately. Unless terminated
for cause, Mr. Newman will also receive a pro rata portion of his applicable
bonus compensation and, subject to certain limitations, the Company will
continue certain insurance and medical benefits for two years.
13
<PAGE>
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:
[PERFORMANCE GRAPH APPEARS HERE]
---------------------------------------------------------
S & P DEPARTMENT STORES:
JCPenney, Dillard, Federated, May, Mercantile, Nordstrom
---------------------------------------------------------
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
JCPenney 100 151 124 152 153 226
- --------------------------------------------------------------------------------
S&P 500 100 113 113 157 199 252
- --------------------------------------------------------------------------------
S&P Dept. Stores 100 115 102 121 130 172
- --------------------------------------------------------------------------------
</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 Payouts
---------------------------------- --------------------- -------
Securities
Other Restricted Underlying
Annual Stock Options/ LTIP All Other
Name and Salary Bonus Compensation Award(s) SARs Payouts Compensation
Principal Position Year ($) ($) ($) ($)(1) (#)(2) ($)(3) ($)(4)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Oesterreicher, J. E. 1997 560,826 792,784 -- -- 60,000 406,823 79,773
(Chairman of the 1996 458,008 587,613 -- -- 60,000 387,612 56,100
Board and Chief 1995 395,017 412,990 -- -- 27,000 974,554 42,109
Executive Officer)
Tygart, W. B. 1997 405,064 482,188 26,150(5) -- 23,000 218,734 55,632
(Vice Chairman 1996 390,423 421,813 42,831(5) -- 23,000 245,966 48,345
of the Board) 1995 367,010 361,137 48,727(5) -- 23,000 817,661 37,881
Cody, J. T., Jr. 1997 337,215 382,274 -- -- 19,000 167,949 42,280
(President and 1996 304,598 309,548 -- -- 19,000 171,641 35,396
Chief Operating 1995 281,544 259,724 -- -- 19,000 636,348 28,064
Officer, JCPenney
Stores, Merchandising,
Marketing, and Catalog)
Hutchens, T. D. 1997 304,968 337,261 -- -- 19,000 147,300 40,210
(President and 1996 291,603 306,183 -- -- 19,000 164,318 33,886
Chief Operating 1995 269,532 248,644 -- -- 19,000 627,404 27,317
Officer, International)
Newman, F. A. 1997 595,079(6) 207,200(7) -- -- -- 245,088 --
(Chairman, President 1996 578,079 237,542(7) -- -- -- 313,733(8) 23,977
and Chief Executive 1995 533,449 419,805(7) -- -- -- 184,894(8) 20,567
Officer, Eckerd
Corporation)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Each of the Named Executive Officers received a grant of performance units
in 1997 under the JCPenney Making Profit Grow ("MPG") Program. Based on
the Company's results for fiscal 1997, no MPG awards vested. In addition,
Mr. Newman received a grant of performance units under the JCPenney Drug
Store Partner Incentive Award ("PIA") Program. Based on Eckerd's results
for fiscal 1997, no shares were credited pursuant to this award. For a
description of the MPG Program and the PIA Program, see page 20. Each of
the Named Executive Officers other than Mr. Newman holds shares of
restricted stock which were earned on January 26, 1996 under the Company's
Shareholder Value Award ("SVA") Program 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. Dividends are paid on
all shares from the date of award. The number of such shares of restricted
stock with continuing retention periods held by such Named Executive
Officers, and their aggregate value as of January 30, 1998, are,
respectively, as follows: Mr. Oesterreicher, 7,938 shares, $534,823; Mr.
Tygart, 6,669 shares, $449,324; Mr. Cody, 5,536 shares, $372,988; and Mr.
Hutchens, 1,560 shares, $105,105. Due to retention period requirements,
future value realized on these stock award shares may differ from the
value on the date they were earned.
(2) No SARs have been granted since 1987. Pursuant to the terms of the
Company's acquisition of Eckerd, each share of Eckerd common stock was
converted into .6604 of a share of the Company's Common Stock, and each
option to purchase shares of Eckerd common stock was converted into an
option to purchase shares of Company Common Stock at the same ratio. As a
result, Mr. Newman's holdings of Eckerd common stock and stock options
were converted into 4,424 shares of Common Stock and 120,192 options to
purchase shares of the Company's Common Stock, respectively. Mr. Newman
received grants of 90,000 and 30,000 Eckerd stock options in fiscal 1996
and fiscal 1995, respectively, but did not receive any grant of stock
options under the Company's or Eckerd's equity plans in 1997.
(3) This amount reflects long-term incentive plan payments made pursuant to
the Company's Performance Unit Plan ("PUP"). For a description of PUP, see
"Report of Personnel and Compensation Committee on Executive Compensation"
on pages 10 to 13. For 1995 only, the amounts shown for the Named
Executive Officers other than Mr. Newman include both payments made under
PUP and the value, as of January 26, 1996, of shares of restricted stock
awarded under the SVA Program.
(4) Represents Company contributions or allocations on behalf of the following
executive officers under the LESOP and the Benefit Restoration Plan,
which, for the last fiscal year, were, respectively: Mr. Oesterreicher,
$8,309 and $71,464; Mr. Tygart, $8,309 and $47,323; Mr. Cody, $8,309 and
$33,971; and Mr. Hutchens, $8,309 and $31,901. The allocations
15
<PAGE>
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 21 to 23.
In the case of Mr. Newman, the amounts shown represent allocations made by
Eckerd pursuant to the Eckerd Profit-Sharing Plan and the Eckerd Executive
Excess Plan. As of the date of this Proxy Statement, such amounts were not
calculable with respect to 1997.
(5) 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) In connection with its acquisition of Eckerd, the Company requested that
Mr. Newman enter into an amendment to his existing employment agreement.
For a description of the terms of Mr. Newman's employment agreement, as
amended, see page 13.
(7) This amount reflects payments made to Mr. Newman pursuant to Eckerd
Corporation's Key Management Bonus Plan ("KMBP"). Mr. Newman does not
participate in the Company's 1989 Management Incentive Compensation
Program. For a description of the KMBP, see "Report of Personnel and
Compensation Committee on Executive Compensation" on pages 10 to13.
(8) Represents amounts paid to Mr. Newman under the Eckerd Corporation
Executive Three Year Bonus Plan, which was terminated in connection with
the Company's acquisition of Eckerd.
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 1997. Such options are exercisable
after one year from the date of the grant. The values assigned to each
reported option are shown using arbitrarily assumed annualized rates of stock
price appreciation of 5% and 10% over the full 10-year term of the options,
which would result in a stock price of $79.00 and $125.80, respectively. In
assessing these values it should be kept in mind that regardless of the
theoretical value that is placed on a stock option on the date of grant, its
ultimate value will be dependent on the market value of the Company's Common
Stock at a future date, and as a result of the efforts of such executives to
contribute to the creation of sustainable stockholder wealth.
<TABLE>
<CAPTION>
Individual Grants
- -----------------------------------------------------------------------
Number of Potential Realizable
Securities % of Total Value at
Underlying Options/SARs Exercise Assumed Annual
Options/SARs Granted to or Base Rates of Stock
Granted Employees in Price Expiration Price Appreciation
Name (#)(1) Fiscal Year ($/Sh) Date for Option Term(2)
- ---------------------------------------------------------------------------------------------
5% 10%
<S> <C> <C> <C> <C> <C> <C>
Oesterreicher, J. E.
(Chairman of the Board
and Chief Executive
Officer) 60,000 4.8 48.50 2/23/07 $1,830,000 $4,638,000
Tygart, W. B.
(Vice Chairman of the
Board) 23,000 1.8 48.50 2/23/07 $ 701,500 $1,777,900
Cody, J. T., Jr.
(President and Chief
Operating Officer,
JCPenney Stores,
Merchandising,
Marketing, and Catalog) 19,000 1.5 48.50 2/23/07 $ 579,500 $1,468,700
Hutchens, T. D.
(President and Chief
Operating Officer,
International) 19,000 1.5 48.50 2/23/07 $ 579,500 $1,468,700
Newman, F. A.
(Chairman, President and
Chief Executive Officer,
Eckerd -- -- -- -- -- --
Corporation)(3)
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) No SARs were granted in the last fiscal year.
(2) The dollar amounts under these columns are the result of calculations at
the 5% and 10% rates set by the Securities and Exchange Commission and,
therefore, are not intended to forecast possible future appreciation, if
any, of the Company's stock price.
(3) Mr. Newman is the holder of 120,192 options to purchase shares of the
Company's Common Stock, which he received in exchange for his options to
purchase shares of Eckerd common stock in connection with the Company's
acquisition of Eckerd, which was completed on February 27, 1997. Mr.
Newman did not receive any grant of stock options under the Company's or
Eckerd's equity plans in the last fiscal year.
17
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
The following table shows stock option exercises by Named Executive Officers
during fiscal 1997, including the aggregate value of gains on the date of
exercise. In addition, this table includes the number of shares covered by
both exercisable and non-exercisable stock options at fiscal year-end. Also
reported are the values for "in-the-money" options which represent the
positive spread between the exercise price of any such existing stock options
and the fiscal 1997 year-end price of the Company's Common Stock.
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End(#) FY-End($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized($)(1) Unexercisable Unexercisable(2)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Oesterreicher, J. E. 11,292 370,050 167,940(E) 4,593,367
(Chairman of the Board 60,000(U) -0-
and Chief Executive
Officer)
Tygart, W. B. 2,932 74,715 138,794(E) 4,352,001
(Vice Chairman of the Board) 23,000(U) -0-
Cody, J. T., Jr. 3,112 79,745 88,410(E) 2,521,371
(President and Chief Operating 19,000(U) -0-
Officer, JCPenney
Stores, Merchandising,
Marketing, and Catalog)
Hutchens, T. D. 1,364 50,212 49,473(E) 1,465,755
(President and Chief Operating 9,499(U) -0-
Officer, International)
Newman, F. A. -- -- 120,192(E) 6,492,977
(Chairman, President and Chief -0-(U) -0-
Executive Officer,
Eckerd Corporation)(3)
- -----------------------------------------------------------------------------------------
</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 30, 1998, was $67.375.
(3) Mr. Newman is the holder of 120,192 options to purchase shares of the
Company's Common Stock, which he received in exchange for his options to
purchase shares of Eckerd common stock in connection with the Company's
acquisition of Eckerd, which was completed on February 27, 1997. All of
such options are immediately exercisable. Mr. Newman did not exercise any
of such options in the last fiscal year.
18
<PAGE>
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
The following table represents 1997 payouts under the 1984 Performance Unit
Plan ("PUP"). 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 1995-97 are 13.7% and 3.1%, respectively, resulting in an
award range of $.95 to $1.45 per unit. The Committee may, in its discretion,
grant PUP awards outside of this range if it determines that such grant is
warranted by the Company's ROE and EPS performance results for the measurement
period.
<TABLE>
<CAPTION>
Estimated Future Payouts
Performance or Under Non-Stock Price-
Number of Other Period Based Plans(2)
Shares, Until -------------------------
Units or Other Maturation or Threshold Target Maximum
Name Rights(#)(1) Payout ($) ($) ($)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Oesterreicher, J. E. 339,019 1995-1997 322,068 406,823 491,578
(Chairman of the Board
and Chief Executive
Officer)
Tygart, W. B. 182,279 1995-1997 173,165 218,734 264,304
(Vice Chairman of the
Board)
Cody, J. T., Jr. 139,957 1995-1997 132,959 167,949 202,938
(President and Chief
Operating Officer,
JCPenney Stores,
Merchandising,
Marketing, and Catalog)
Hutchens, T. D. 122,750 1995-1997 116,612 147,300 177,987
(President and Chief
Operating Officer,
International)
Newman, F. A. 204,240 1995-1997 194,028 245,088 296,148
(Chairman, President and
Chief Executive Officer,
Eckerd Corporation)
- ---------------------------------------------------------------------------------
</TABLE>
(1) This number represents the number of PUP performance units granted in
fiscal 1997 and is a function of base salary plus profit incentive
compensation valued at $1.00 per unit (or, in the case of Eckerd, at
target) and the individual's PRL (or, in the case of Eckerd, grade level).
(2) The amounts shown represent fiscal 1997 award payout ranges for PUP.
19
<PAGE>
MAKING PROFIT GROW PROGRAM. Effective March 12, 1997, the Personnel and
Compensation Committee of the Board of Directors ("Committee") approved the
JCPenney Making Profit Grow Program as an additional equity incentive element
of the Equity Plan. This Program is intended to closely align management
performance with stockholder interests by rewarding performance which exceeds
the Company's 1997 and 1998 profit plans as approved by the Board of
Directors.
Participants receive Making Profit Grow awards ("MPGs") which will be paid
in restricted stock, if and when they vest, based on results against the
Company's planned income from operations for 1997 and 1998. Vesting of a
participant's MPGs is based upon two factors: (i) the participant's business
segment must achieve at least 102% of its plan for income from operations, and
(ii) the Company as a whole must achieve at least 102% of its plan for income
from operations. In addition, bonus MPG awards will be paid if both the
participant's business segment and the Company achieve at least 102% of their
respective cumulative targets for income from operations for 1997 and 1998.
Each MPG award is equivalent to one share of Common Stock for valuation
purposes, and, if they vest, will be paid in shares of Common Stock having a
two year retention period. Except to determine whether bonus MPGs will be
awarded, results for 1997 and 1998 are calculated separately; consequently, an
award may vest in one or both years. For fiscal 1997, no MPG awards vested.
JCPENNEY DRUG STORE PARTNER INCENTIVE AWARD PROGRAM. Effective March 12, 1997,
the Committee also approved the JCPenney Drug Store Partner Incentive Award
Program to motivate and reward key Eckerd associates for the achievement of
aggressive profit plans for 1997-1999. Under this program, Partner Incentive
Awards ("PIAs") are granted to participants in each of the three years in the
measurement period but are only credited after the close of each fiscal year,
if at all, based on Eckerd's actual operating income results for such fiscal
year compared to planned operating income for the period. At the conclusion of
the program, the number of credited PIAs which vest, if any, will be based
upon Eckerd's cumulative sales and operating income results for the three-year
period against plan. Each PIA award is equivalent to one share of Common Stock
for valuation purposes, and, if they vest, will be paid in shares of Common
Stock having a two year retention period. For fiscal 1997, no PIAs were
credited.
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 are required to own a minimum amount
of Common Stock based upon a multiple (the "Ownership Multiple") of the
midpoint of the base salary range for such participant's PRL (or the
equivalent PRL for associates of the Company's subsidiaries). Under the
Guidelines, the Ownership Multiples range from seven times the base salary
range midpoint for the CEO to one-half times the base salary range midpoint
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 were limited in 1997 by a $160,000 compensation limit imposed by the
Internal Revenue Service. 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
compensation 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.
OTHER AGREEMENTS. In recognition of the competitive retail environment and W.
R. Howell's extensive knowledge of the industry, the Company entered into a
Personal Services Agreement with Mr. Howell which commenced on March 1, 1997
and ends on the earlier of Mr. Howell's death or March 1, 2002. During the
agreement's term, Mr. Howell will provide services to the Company as requested
from time
20
<PAGE>
to time by the Chairman of the Board, and he further agreed that he will not
make any investment in or provide services to any competitor of the Company.
In return, the Company will pay Mr. Howell, who retired from the Company on
February 28, 1997 at age 61, an annual retainer of $300,000 as well as a one-
time Common Stock award having a market value of $5 million with a related tax
gross up payment sufficient so that the full value of the award is realized.
Mr. Howell will also have use of the Company's corporate aircraft and car and
driver when performing requested services, will be reimbursed for reasonable
business expenses, including spouse's travel expenses if appropriate, and will
be provided with an office and secretarial services during the agreement's
term.
RETIREMENT INCOME. The following table shows various estimated maximum
aggregate annual retirement incomes payable to the Company's 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 generally 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" up to a maximum of 35 such years. In addition to this annual pension
benefit, a participant may receive an annual retirement benefit generally
equal to 0.25% of his or her average final compensation times his or her years
of credited service that exceed 25 years of credited service, but do not
exceed 35 such years. "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 Pension Plan. "Average Social Security Wage
Base" is the average of the 35 consecutive years of wages subject to the
Social Security Tax, ending with 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
21
<PAGE>
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 is limited to
associates eligible for participation on or prior to December 31, 1995.
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. In 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. The Named Executive Officers (other than
Mr. Newman) 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. Oesterreicher, 33 years, $1,450,824; Mr.
Tygart, 37 years, $1,064,705; Mr. Cody, 34 years, $805,917; and Mr. Hutchens,
36 years, $755,763.
Mr. Newman does not participate in the Pension Plan but he does participate
in the Eckerd Corporation Pension Plan ("Eckerd Pension Plan"), a pension plan
in place prior to the Company's acquisition of Eckerd. The table below shows
the various estimated minimum annual retirement benefits payable to
participants under the Eckerd Pension Plan.
ECKERD PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of Service
--------------------------------------------------------------------
Final
Average
Compensation 15 20 25 30 35
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 250,000 $ 59,250 $ 79,000 $ 98,750 $ 98,750 $ 98,750
350,000 82,950 110,600 138,250 138,250 138,250
450,000 106,640 142,200 177,750 177,750 177,750
550,000 130,350 173,800 217,250 217,250 217,250
650,000 154,050 205,400 256,750 256,750 256,750
750,000 177,750 237,000 296,250 296,250 296,250
850,000 201,450 268,600 335,750 335,750 335,750
950,000 225,150 300,200 375,250 375,250 375,250
1,050,000 248,850 331,800 414,750 414,750 414,750
1,150,000 272,550 363,400 454,250 454,250 454,250
1,250,000 296,250 395,000 493,750 493,750 493,750
1,350,000 319,950 426,600 533,250 533,250 533,250
1,450,000 343,650 458,200 572,750 572,750 572,750
- -------------------------------------------------------------------------------------
</TABLE>
The Eckerd Pension Plan is qualified under the Code and is non-contributory.
Eckerd employees who retire or terminate as vested participants are entitled
to receive retirement benefits under a final average compensation formula. The
Eckerd Pension Plan provides for a minimum annual retirement benefit at age 65
after 25 years of service equal to 24% of final average compensation plus
15.5% of
22
<PAGE>
final average compensation in excess of an employee's average Social Security
maximum taxable wage base for the 35 years ending with the employee's Social
Security normal retirement age. The minimum annual retirement benefit includes
the income which could be provided by a monthly annuity for life purchased
with the Eckerd Profit-Sharing Plan vested account balance. For purposes of
the Eckerd Pension Plan, final average compensation is the average
compensation (including base salary, KMBP payments, and PUP payments, as
reported in the "Salary", "Bonus", and "Long Term Incentive Plan Payouts"
columns of the Summary Compensation Table) for the highest consecutive five of
the final ten years of employment. It also includes certain perquisites. The
minimum annual retirement benefits shown above are age 65 single life annuity
amounts and are not subject to any deduction for Social Security or other
offset amounts. To the extent benefits cannot be provided under the Eckerd
Pension Plan due to the limitations imposed by Sections 415 and 401(a)(17) of
the Code, such benefits will be provided under The Eckerd Corporation
Executive Excess Plan (the "Excess Plan"), which is not qualified under the
Code. Mr. Newman's years of service and current level of compensation
recognized for retirement purposes (which would be used to calculate average
annual compensation) are four years and $1,179,792. Since Mr. Newman has not
completed five years of service with Eckerd and therefore does not yet have a
vested benefit, there is no relevant final average compensation calculation
for him.
Mr. Newman also participates in the Eckerd Corporation First Executive
Supplemental Benefit Plan ("ESBP"), which was in place prior to the time the
Company acquired Eckerd and is a non-qualified, non-contributory plan that
provides for supplemental retirement and death benefits for the executive
officers and other key management employees of Eckerd.
The following table sets out the estimated annual benefits payable under the
ESBP at age 65 for the noted levels of midpoint salaries:
<TABLE>
<CAPTION>
Annual
Covered Benefit
Salary Payable
------------
<S> <C>
$100,000 $ 25,000
200,000 50,000
300,000 75,000
400,000 100,000
500,000 125,000
600,000 150,000
700,000 175,000
------------
</TABLE>
Under the ESBP, Eckerd is obligated to pay a participant an annual amount
equal to 25% of the participant's covered salary in equal monthly installments
for fifteen years commencing at age 65. The annual benefit shown assumes that
the sum of the participant's age and the number of years of service (which
cannot be less than five) is at least 70. If it is less than 70, then the
annual benefit is prorated pursuant to a prescribed formula. The covered
salary is the midpoint of a salary range for a particular executive position
as calculated by Eckerd. Mr. Newman's 1997 covered salary recognized for
retirement purposes was $646,700 and his years of service recognized for
purposes of the ESBP were four years. The ESBP also provides that, in the
event of the death of a participant prior to retirement, the participant's
beneficiary is entitled to receive either (a) a lump sum payment equal to four
times the participant's covered salary, or (b) an amount equal to 90% of the
participant's covered salary for the first year after death plus 45% of the
covered salary annually for the next nine years.
APPROVAL OF AUDITORS (PROPOSAL 2)
KPMG Peat Marwick LLP, independent certified public accountants, and members
of the SEC Practice Section of the AICPA Division for CPA firms, have been
auditors of the Company's consolidated financial statements since 1916. Their
employment for the purpose of auditing the Company's financial
23
<PAGE>
statements for the fiscal year ending January 30, 1999, 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 1997 audit of the Company's consolidated financial statements was
approximately $2,600,000.
THE BOARD RECOMMENDS A VOTE FOR THIS PROPOSAL.
STOCKHOLDER RESOLUTIONS
The Company has 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 ONE (PROPOSAL 3)
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 92,109,655 shares, representing approximately 42.3%
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 in number 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. The directors do not believe that the
classified status of the Board results in the directors being less
24
<PAGE>
accountable to stockholders or results in the self-perpetuation of the Board.
For these reasons, the Board believes that a classified Board protects 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 a meeting of
stockholders.
A stockholder proposal virtually identical to this proposal was defeated by
the votes of Company stockholders at the 1997, 1996, 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 Southern Regional Joint Board of
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 56
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: The shareholders of J. C. Penney Company, Inc. ("Company") 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.
Support for this resolution has grown steadily since it was first
introduced. Last year it received approximately 51% of shares present and
voting at the annual meeting, up from 41% of votes cast two years ago.
In February 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, 1/400
of a share of the Company's Series A Junior Participating Preferred Stock at a
purchase price of $140. 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.
25
<PAGE>
Rights plans like ours have become increasingly unpopular in recent years.
In 1997, a majority of shareholders at Bausch & Lomb, Wellman, Columbia/HCA
Healthcare and Fleming Companies, among others, voted in favor of proposals
asking management to redeem or repeal poison pills.
The effects of poison pill rights plans on the trading value of companies'
stock have been researched extensively. A 1986 study by the U. S. Securities
and Exchange Commission's Office of the Chief Economist on the economics of
the rights plans stated, "the stock-returns evidence suggests 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 and Lilli A. Gordon of The Gordon Group found a correlation
between high corporate performance and the absence of poison pills.
In light of the debatable economic benefit of our rights plan 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.
THE BOARD OF DIRECTORS OPPOSES THIS PROPOSAL.
Your Board of Directors believes that the Rights Agreement ("Rights Plan") is
an appropriate and effective tool to maximize the value of the Company's stock
in the context of a potential takeover of the Company.
Companies continue to adopt new rights plans, and renew existing ones, in
large numbers (over 300 new plans were adopted by U.S. companies in 1997),
consistent with the increasing number of studies demonstrating the economic
benefits that rights plans provide for stockholders. Studies in March and
October of 1988 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, but do increase the takeover premium. This was
reconfirmed by a subsequent study by Comment and Schwert in 1995. A February
1996 study by Johan Molin of The Economic Research Institute, Stockholm School
of Economics, also concludes that rights plans are in the interest of the
stockholders of the adopting company. A 1997 JPMorgan study also found that
consistently higher premiums were paid for companies with rights plans in
place. Finally, a November 1997 study by Georgeson & Company reported that
rights plans contributed an additional $13 billion in stockholder value during
the past five years, and that stockholders of acquired companies without such
protection gave up $14.5 billion in potential premiums. Georgeson & Company
also reported that the presence of a rights plan at a target company did not
increase the likelihood of the withdrawal of a friendly takeover bid nor the
defeat of a hostile one.
In February 1990, the Board of Directors unanimously adopted the Rights
Plan, which provided for a dividend distribution of one Preferred Stock
Purchase Right (collectively, "Rights") for each outstanding share of the
Company's Common Stock. This action was taken in connection with the Company's
redemption of the rights issued pursuant to its original rights plan adopted
by the Board in
26
<PAGE>
1986 (together, the "Plans"). Based on the Board's collective business
experience and knowledge of the Company, it determined that the adoption of
the Plans was in accord with the Board's responsibility under Delaware law to
manage and direct the management of the Company's business and affairs for the
benefit of the Company's stockholders. It should be noted that the Company has
had an independent outside Board of Directors for over 18 years. In adopting
the Rights Plan, the directors received the advice of outside legal counsel as
to their fiduciary obligations to stockholders. The Rights Plan was not
adopted nor will it be used for entrenchment purposes. The Board does not
believe that the Rights 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.
The Rights Plan encourages potential acquirors to negotiate directly with
the Board, which is in the best position to negotiate on behalf of all
stockholders, to evaluate the adequacy of any potential offer, and to protect
stockholders against potential abuses during the takeover process, such as
partial and two-tiered tender offers and creeping stock accumulation programs,
which unfairly discriminate among stockholders. The Rights Plan is designed to
provide the Board with adequate time and flexibility to negotiate on behalf of
all the Company's stockholders and enhances the Board's ability to negotiate
the highest possible offer 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. Again, the Rights Plan would not prevent a takeover on terms
determined by the Board of Directors to be fair and equitable to all
stockholders, nor is it intended as a deterrent to a stockholder's initiation
of a proxy contest.
Indeed, at such time as the Board of Directors determines that an offer
adequately reflects the value of the Company and is in the best interests of
all stockholders, it may redeem the Rights. Merger and acquisition activity
over the last ten years shows that rights plans neither prevent unsolicited
offers from occurring, nor prevent companies from being acquired at prices
that are fair and adequate to stockholders. Therefore, rather than deterring
good-faith negotiations between a potential acquiror and the Board, the Rights
Plan encourages a would-be acquiror to meet and negotiate in good faith with
the target's board of directors. It thereby enhances the Board's ability to
obtain a better price for all stockholders in the event the Company is to be
acquired.
At the 1997, 1996, 1995, 1994, 1993, and 1992 Annual Meetings of
Stockholders stockholder proposals virtually identical to this proposal were
defeated. 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 1999 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 10, 1998.
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
27
<PAGE>
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 January 15, 1998
that any nomination for director and notice of any such business to be
properly brought before the 1998 Annual Meeting had to be made by stockholders
no later than February 14, 1998. It is currently expected that the 1999 Annual
Meeting of Stockholders will be held on or about May 21, 1999, 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 10, 1998) must be
given by stockholders by February 20, 1999. 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, including telephone voting, which identify the particular
vote of a stockholder are to be kept secret from the Company, its directors,
officers, and employees. 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
28
<PAGE>
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, or by voting via telephone, you
are authorizing George Nigh, J.C. Pfeiffer and A.W. Richards, 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 15, 1998, 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 THE CHASE MANHATTAN 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 12, 1998 ("UNDIRECTED STOCK"). IF THIS VOTING INSTRUCTION CARD
IS EXECUTED AND RECEIVED BY MAY 12, 1998, OR IF YOU HAVE VOTED BY TELEPHONE BY
SUCH DATE, 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 OR TELEPHONE VOTES RECEIVED BY MAY 12, 1998
HAS BEEN VOTED.
Nominees for Election of Directors for the term set forth in the Proxy Statement
are (01) M.A. Burns, (02) J.E. Oesterreicher, (03) Francisco Sanchez-Loaeza, and
(04) C.S. Sanford, Jr. TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED ON THE REVERSE, OR FOLLOW THE TELEPHONE
VOTING INSTRUCTIONS.
Your vote is important and cannot be recorded by the proxies or Agent unless
this card is properly executed by you and returned, or unless you vote by
telephone. Therefore, please sign, date, and return this card promptly in the
envelope provided, or vote by telephone. No postage is required if this envelope
is mailed in the United States.
(Continued on reverse side)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF TWO WAYS:
1. Call TOLL FREE 1-800-840-1208 on a Touch Tone Telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this call.
OR
--
2. Mark, sign and date your proxy card and return it promptly in the enclosed
envelope.
<PAGE>
- -------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ELECTION OF ALL DIRECTORS
AND FOR PROPOSAL 2 AND AGAINST PROPOSALS 3 AND 4.
Please mark your votes as indicated in this example [X]
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS AS
DESCRIBED IN THE PROXY STATEMENT:
1. Election of Directors: 2. Approval of Auditors.
Nominees for Election of Directors for the term set
forth in the Proxy Statement are: 01 M.A. Burns, FOR AGAINST ABSTAIN
02 J.E. Oesterreicher, 03 Francisco Sanchez-Loaeza [ ] [ ] [ ]
04 C.S. Sanford, Jr.
FOR all nominees AUTHORITY WITHHELD
except as noted as to all nominees
[ ] [ ]
------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOLLOWING PROPOSALS AS
DESCRIBED IN THE PROXY STATEMENT:
3. Stockholder resolution regarding FOR AGAINST ABSTAIN
classification of Board. [ ] [ ] [ ]
4. Stockholder resolution regarding FOR AGAINST ABSTAIN
rights dividend. [ ] [ ] [ ]
- --------------------------------------------------------------------------------
I/we plan to attend the meeting [ ]
- --------------------------------------------------------------------------------
***IF YOU WISH TO VOTE BY TELEPHONE, PLEASE READ THE INSTRUCTIONS BELOW***
- --------------------------------------------------------------------------------
SIGNATURE____________________________SIGNATURE______________________DATE________
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.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
[PICTURE OF TELEPHONE VOTE BY TELEPHONE [PICTURE OF TELEPHONE
APPEARS HERE] APPEARS HERE]
QUICK *** EASY *** IMMEDIATE
Your telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.
. After dialing the toll-free number listed below, you will be asked to enter
the Control Number which is located in the box in the lower right hand corner of
the proxy instruction card.
- --------------------------------------------------------------------------------
OPTION #1: To vote as the Board of Directors recommends on ALL proposals:
Press 1.
- --------------------------------------------------------------------------------
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
- --------------------------------------------------------------------------------
OPTION #2: If you choose to vote on each proposal separately, press 0.
You will hear these instructions:
- --------------------------------------------------------------------------------
Proposal 1: To VOTE FOR ALL nominees, press 1; to WITHHOLD FOR ALL nominees,
press 9.
To WITHHOLD FOR AN INDIVIDUAL nominee, press 0 and listen to the
instructions.
Proposal 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
The Instructions are the same for all remaining proposals.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
- --------------------------------------------------------------------------------
PLEASE DO NOT RETURN THE ABOVE PROXY CARD IF YOU VOTED BY PHONE.
THANK YOU FOR VOTING.
CALL TOLL FREE ON A TOUCH TONE TELEPHONE
1-800-840-1208 - ANYTIME
There is NO CHARGE to you for this call.
<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, OR BY VOTING BY TELEPHONE, 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 15, 1998, 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, OR IF YOU HAVE NOT VOTED BY TELEPHONE, BY MAY 12, 1998, 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 OR VOTED BY TELEPHONE 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 (01) M.A. Burns, (02) J.E. Oesterreicher, (03) Francisco Sanchez-Loaeza, and
(04) C.S. Sanford, Jr. TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED ON THE REVERSE, OR FOLLOW THE TELEPHONE
VOTING INSTRUCTIONS.
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, or unless you vote by telephone, by MAY 12, 1998.
Therefore, please sign, date, and return this card promptly in the envelope
provided, or vote via telephone. No postage is required if this envelope is
mailed in the United States.
(Continued on reverse side)
- --------------------------------------------------------------------------------
TO DIRECT THE TRUSTEE TO VOTE: CALL TOLL FREE ON A TOUCH TONE TELEPHONE
1-800-840-1208 - ANYTIME
There is NO CHARGE to you for this call.
OR
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 MIDDLE 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, OR BY VOTING BY TELEPHONE, 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 OR TELEPHONE VOTE IS NOT RECEIVED BY THE TRUSTEE
BY MAY 12, 1998 ("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 15, 1998, 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 12, 1998 FROM THE PLANS' PARTICIPANTS WHO HAVE
RETURNED THIS PROXY/VOTING INSTRUCTION CARD OR VOTED BY TELEPHONE 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 (01) M.A. Burns, (02) J.E. Oesterreicher, (03) Francisco Sanchez-Loaeza, and
(04) C.S. Sanford, Jr. TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED ON THE REVERSE, OR FOLLOW THE TELEPHONE
VOTING INSTRUCTIONS.
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 12, 1998, or if you have voted by telephone
by such date. Therefore, please sign, date, and return this card promptly in the
envelope provided, or vote by telephone. 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 MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ELECTION OF ALL DIRECTORS
AND FOR PROPOSAL 2 AND AGAINST PROPOSALS 3 AND 4.
Please mark your votes as indicated in this example [X]
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS AS
DESCRIBED IN THE PROXY STATEMENT:
1. Election of Directors: 2. Approval of Auditors.
Nominees for Election of Directors for the term set
forth in the Proxy Statement are: 01 M.A. Burns, FOR AGAINST ABSTAIN
02 J.E. Oesterreicher, 03 Francisco Sanchez-Loaeza, [ ] [ ] [ ]
04 C.S. Sanford, Jr.
FOR all nominees AUTHORITY WITHHELD
except as noted as to all nominees
[ ] [ ]
------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOLLOWING PROPOSALS AS
DESCRIBED IN THE PROXY STATEMENT:
3. Stockholder resolution regarding FOR AGAINST ABSTAIN
classification of Board. [ ] [ ] [ ]
4. Stockholder resolution regarding FOR AGAINST ABSTAIN
rights dividend. [ ] [ ] [ ]
- --------------------------------------------------------------------------------
***IF YOU WISH TO VOTE BY TELEPHONE, PLEASE READ THE
YELLOW ENCLOSED INSTRUCTIONS FORM***
- --------------------------------------------------------------------------------
SIGNATURE____________________________ DATE________
PLEASE SIGN AND DATE
Please sign your name exactly as stenciled hereon.
- --------------------------------------------------------------------------------
TO DIRECT THE TRUSTEE TO VOTE: CALL TOLL FREE ON A TOUCH TONE TELEPHONE
1-800-840-1208 - ANYTIME
There is NO CHARGE to you for this call.
OR
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 MIDDLE STUB. THANK YOU.
- --------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ELECTION OF ALL DIRECTORS
AND FOR PROPOSAL 2 AND AGAINST PROPOSALS 3 AND 4.
Please mark your votes as indicated in this example [X]
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS AS
DESCRIBED IN THE PROXY STATEMENT:
1. Election of Directors: 2. Approval of Auditors.
Nominees for Election of Directors for the term set
forth in the Proxy Statement are: 01 M.A. Burns, FOR AGAINST ABSTAIN
02 J.E. Oesterreicher, 03 Francisco Sanchez-Loaeza, [ ] [ ] [ ]
04 C.S. Sanford, Jr.
FOR all nominees AUTHORITY WITHHELD
except as noted as to all nominees
[ ] [ ]
------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOLLOWING PROPOSALS AS
DESCRIBED IN THE PROXY STATEMENT:
3. Stockholder resolution regarding FOR AGAINST ABSTAIN
classification of Board. [ ] [ ] [ ]
4. Stockholder resolution regarding FOR AGAINST ABSTAIN
rights dividend. [ ] [ ] [ ]
- --------------------------------------------------------------------------------
***IF YOU WISH TO VOTE BY TELEPHONE, PLEASE READ THE
YELLOW ENCLOSED INSTRUCTIONS FORM***
- --------------------------------------------------------------------------------
SIGNATURE____________________________ DATE________
PLEASE SIGN AND DATE
Please sign your name exactly as stenciled hereon.
- --------------------------------------------------------------------------------
<PAGE>
J.C. PENNEY COMPANY, INC.
TELEPHONE VOTING INSTRUCTIONS FORM
LISTED BELOW ARE INSTRUCTIONS ON HOW TO VOTE YOUR
ALLOCATED AND YOUR UNALLOCATED AND UNDIRECTED PROXY CARDS
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF TWO WAYS:
1. Call TOLL FREE 1-800-840-1208 on a Touch Tone Telephone and follow the
instructions below, and use the control numbers on the lower right on your
proxy cards. There is NO CHARGE to you for this call.
OR
--
2. Mark, sign and date your proxy cards and return them promptly in the
enclosed envelope.
[PICTURE OF TELEPHONE VOTE BY TELEPHONE [PICTURE OF TELEPHONE
APPEARS HERE] APPEARS HERE]
QUICK *** EASY *** IMMEDIATE
Your telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy cards.
. After dialing the toll-free number listed above, you will be asked to enter
the Control Number on your first proxy card. The number is located in the box
in the lower right hand corner of the card.
- --------------------------------------------------------------------------------
OPTION #1: To vote as the Board of Directors recommends on ALL proposals: Press
1.
- --------------------------------------------------------------------------------
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
- --------------------------------------------------------------------------------
OPTION #2: If you choose to vote on each proposal separately, press 0. You will
hear these instructions:
- --------------------------------------------------------------------------------
Proposal 1: To VOTE FOR ALL nominees, press 1; to WITHHOLD FOR ALL nominees,
press 9.
To WITHHOLD FOR AN INDIVIDUAL nominee, press 0 and listen to the
instructions.
Proposal 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
The Instructions are the same for all remaining proposals.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
. You will be asked to call the toll-free number again to vote your second proxy
card, and will be asked to enter the Control Number which is located in the
box in the lower right hand corner of your second card. The voting
instructions will be the same as above.
. If you also own common stock in addition to those shares beneficially owned in
the Plans, please call the toll-free number again to vote the proxy card for
these shares.
- --------------------------------------------------------------------------------
PLEASE DO NOT RETURN THE PROXY CARDS IF YOU VOTED BY PHONE.
- --------------------------------------------------------------------------------
THANK YOU FOR VOTING.
CALL TOLL FREE ON A TOUCH TONE TELEPHONE
1-800-840-1208 - ANYTIME
There is NO CHARGE to you for this call.
