def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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 o
Check the
appropriate box:
o Preliminary
Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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x Definitive
Proxy Statement
o Definitive
Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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LOWES COMPANIES, INC.
(Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
o Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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(1) |
Title of each class of securities to which transaction applies:
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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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Fee paid previously with preliminary materials:
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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.
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(1) |
Amount Previously Paid:
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(2) |
Form, Schedule or Registration Statement No.:
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Lowes
Companies, Inc.
Notice of
Annual Meeting
and
Proxy Statement
2010
Important Notice Regarding the Availability of Proxy
Materials for the Shareholders Meeting to Be Held on
May 28, 2010 the Notice of Annual Meeting of
Shareholders, Proxy Statement and Annual Report are available at
www.proxyvote.com.
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Corporate Offices
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1000 Lowes Boulevard
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Mooresville, North Carolina 28117
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LOWES
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COMPANIES,
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INC.
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April 12, 2010
TO LOWES SHAREHOLDERS:
It is my pleasure to invite you to attend our 2010 Annual
Meeting to be held at the Ballantyne Hotel, 10000 Ballantyne
Commons Parkway, Charlotte, North Carolina, on Friday,
May 28, 2010 at 10:00 a.m., local time. Directions to
the Ballantyne Hotel are printed on the back of this Proxy
Statement.
This year, we are pleased to be again using the
U.S. Securities and Exchange Commission rule that allows
companies to furnish their proxy materials over the Internet. As
a result, we are mailing to many of our shareholders a Notice of
Internet Availability of Proxy Materials instead of a paper copy
of this Proxy Statement and our 2009 Annual Report. The Notice
contains instructions on how to access those documents and vote
online. The Notice also contains instructions on how each of
those shareholders can receive a paper copy of our proxy
materials, including this Proxy Statement, our 2009 Annual
Report and a form of proxy card or voting instruction card. All
shareholders who do not receive a Notice of Internet
Availability will receive a paper copy of the proxy materials by
mail unless they have previously requested delivery of proxy
materials electronically. Continuing to employ this distribution
process will conserve natural resources and reduce the costs of
printing and distributing our proxy materials.
We will broadcast the meeting live on the Internet. To access
the webcast, visit Lowes website
(www.Lowes.com/investor) where a link will be posted a
few days before the meeting. A replay of the Annual Meeting will
also be available beginning approximately three hours after the
meeting concludes and will continue to be available for two
weeks after the meeting.
Details regarding admission to the meeting and the business to
be conducted are more fully described in the accompanying Notice
of Annual Meeting of Shareholders and Proxy Statement. There are
five items of business on this years agenda, each as
described in this Proxy Statement. Your vote by proxy or in
person at the meeting is important.
Yours cordially,
Robert A. Niblock
Chairman of the Board
and Chief Executive Officer
Notice of
Annual Meeting of Shareholders
of Lowes Companies, Inc.
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Time and Date
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10:00 a.m., local time, on Friday, May 28, 2010
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Place
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Ballantyne Hotel, 10000 Ballantyne Commons Parkway, Charlotte,
North Carolina
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Purpose
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1. To elect four Class III directors to a term of one
year.
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2. To ratify the appointment of Deloitte & Touche
LLP as the independent registered public accounting firm of the
Company for the 2010 fiscal year.
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3. To approve an amendment to Lowes Bylaws decreasing
the percentage of shares required for shareholders to call a
special meeting of shareholders.
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4. To consider and vote upon two shareholder proposals set
forth at pages 38 through 43 in the accompanying Proxy
Statement.
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5. To transact such other business as may be properly
brought before the Annual Meeting of Shareholders.
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Record Date
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Only shareholders of record at the close of business on
March 26, 2010 will be entitled to notice of and to vote at
the Annual Meeting of Shareholders or any postponement or
adjournment thereof.
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Meeting Admission
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You are entitled to attend the Annual Meeting only if you were a
Lowes shareholder as of the close of business on
March 26, 2010 or hold a valid proxy for the Annual
Meeting. You should be prepared to present photo identification
for admittance. In addition, if you are a shareholder of record
or hold your shares through the Companys 401(k) Plan,
Employee Stock Purchase Plan or Direct Stock Purchase Program,
your ownership as of the record date will be verified prior to
admittance into the meeting. If you are not a shareholder of
record or a participant in one of the Companys plans or
purchase programs, but hold shares through a broker, trustee or
nominee, you must provide proof of beneficial ownership as of
the record date, such as your most recent account statement
prior to March 26, 2010 or similar evidence of ownership.
If you do not provide photo identification and comply with the
other procedures outlined above, you will not be admitted to the
Annual Meeting.
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Voting
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Your vote is important. Whether or not you plan to attend the
Annual Meeting, we hope you will vote promptly. If you received
a paper copy of the proxy voting materials by mail, you may vote
your shares by proxy by doing any one of the following: vote at
the Internet site address listed on your proxy or voting
instruction card; call the toll-free number listed on your proxy
or voting instruction card; or sign, date and return in the
pre-addressed envelope provided the enclosed proxy or voting
instruction card. If you received only a Notice of Internet
Availability of Proxy Materials by mail, you may vote your
shares at the Internet site address listed on your Notice. You
may also request a paper copy of our proxy materials by visiting
the Internet site address listed on your Notice, or by calling
the toll-free number or sending an
e-mail to
the e-mail
address listed on your Notice.
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The Companys Proxy Statement is attached. Financial and
other information is contained in the Companys Annual
Report to Shareholders, a copy of which accompanies this Notice
of Annual Meeting of Shareholders.
By order of the Board of Directors,
Gaither M. Keener, Jr.
Senior Vice President,
General Counsel, Secretary &
Chief Compliance Officer
Mooresville, North Carolina
April 12, 2010
Table of
Contents
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1
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3
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4
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5
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7
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15
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15
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16
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16
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16
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25
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28
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29
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30
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32
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32
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33
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34
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35
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36
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37
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38
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38
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40
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43
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44
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45
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45
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A-1
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B-1
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Lowes
Companies, Inc.
Proxy
Statement
for
Annual Meeting of Shareholders
May 28, 2010
GENERAL
INFORMATION
This Proxy Statement is being furnished in connection with the
solicitation by the Board of Directors (Board of
Directors or Board) of Lowes Companies,
Inc. (Company or Lowes) of proxies
to be voted at the Annual Meeting of Shareholders to be held at
the Ballantyne Hotel located at 10000 Ballantyne Commons
Parkway, Charlotte, North Carolina on Friday, May 28, 2010
at 10:00 a.m., local time.
In accordance with rules and regulations adopted by the
U.S. Securities and Exchange Commission (SEC),
instead of mailing a printed copy of our proxy materials to each
shareholder of record, we are now furnishing proxy materials to
our shareholders on the Internet. If you received only a Notice
of Internet Availability of Proxy Materials by mail, you will
not receive a printed copy of the proxy materials unless you
request a copy. Instead, the Notice of Internet Availability of
Proxy Materials will instruct you how you may access and review
the proxy materials over the Internet. The Notice of Internet
Availability of Proxy Materials will also instruct you as to how
you may submit your proxy over the Internet. If you received
only a Notice of Internet Availability of Proxy Materials by
mail and would like to receive a printed copy of our proxy
materials, however, you should follow the instructions for
requesting those materials included in the Notice.
The Notice of Internet Availability of Proxy Materials is first
being sent to shareholders on or about April 12, 2010. This
Proxy Statement and the enclosed form of proxy relating to the
2010 Annual Meeting are also first being made available to
shareholders on or about April 12, 2010.
Outstanding
Shares
On March 26, 2010, there were 1,443,389,268 shares of
Company common stock (Common Stock) outstanding and
entitled to vote. Shareholders are entitled to one vote for each
share held on all matters to come before the meeting.
Who May
Vote
Only shareholders of record at the close of business on
March 26, 2010 are entitled to notice of and to vote at the
meeting or any postponement or adjournment thereof.
How To
Vote
You may vote by proxy or in person at the meeting. If you
received a paper copy of the proxy materials by mail, you may
vote your shares by proxy by doing any one of the following:
vote at the Internet site address listed on your proxy or voting
instruction card; call the toll-free number listed on your proxy
or voting instruction card; or mail your signed and dated proxy
or voting instruction card to our tabulator in the
self-addressed envelope provided. If you received only a Notice
of Internet Availability of Proxy Materials by mail, you may
vote your shares online by proxy at the Internet site address
listed on your Notice. You may also request a paper copy of our
proxy materials by visiting the Internet site address listed on
your Notice, or by calling the toll-free number or sending an
e-mail to
the e-mail
address listed on your Notice. Even if you plan to attend the
meeting, we recommend that you vote by proxy prior to the
meeting. You can always change your vote as described below.
How
Proxies Work
The Board of Directors is asking for your proxy. By giving us
your proxy, you authorize the proxyholders (members of
Lowes management) to vote your shares at the meeting in
the manner you direct. If you do not specify how you wish the
proxyholders to vote your shares, they will vote your shares
FOR ALL director nominees, FOR
ratification of the appointment of Deloitte &
Touche LLP as the Companys independent registered public
accounting firm, FOR the proposal to amend
Lowes Bylaws decreasing the percentage of shares required
to call a special meeting of shareholders and
AGAINST each of the two shareholder
proposals. The proxyholders also will vote your shares according
to their discretion on any other matter properly brought before
the meeting.
You may receive more than one Notice of Internet Availability of
Proxy Materials, more than one
e-mail (if
you have elected electronic delivery of proxy materials) or more
than one paper copy of the proxy materials, including multiple
paper copies of this Proxy Statement and multiple proxy or
voting instruction cards, depending on how you hold your shares.
For example, if you hold your shares in more than one brokerage
account, you may receive a separate Notice, a separate
e-mail or a
separate voting instruction card for each brokerage account in
which you hold your shares. If you are a shareholder of record
and your shares are registered in more than one name, you may
receive more than one Notice, more than one
e-mail or
more than one proxy card. To vote all of your shares by proxy,
you must vote at the Internet site address listed on your proxy
or voting instruction card, call the toll-free number listed on
your proxy or voting instruction card, or sign, date and return
each proxy card and voting instruction card that you receive;
and vote over the Internet the shares represented by each Notice
and e-mail
that you receive (unless you have requested and received a proxy
or voting instruction card for the shares represented by one or
more of those Notices or
e-mails).
If for any reason any of the nominees for election as director
becomes unavailable for election, discretionary authority may be
exercised by the proxyholders to vote for substitutes proposed
by the Board of Directors.
Abstentions and shares held of record by a broker or its nominee
(broker shares) that are voted on any matter are
included in determining the number of votes present or
represented at the meeting. Broker shares that are not voted on
any matter at the meeting are not included in determining
whether a quorum is present.
Under New York Stock Exchange (NYSE) rules, the
proposals to ratify the appointment of the independent
registered public accounting firm and approve the proposed
amendment to the Bylaws are considered discretionary
items. This means that brokerage firms may vote in their
discretion on these matters on behalf of clients who have not
furnished voting instructions. The proposal to elect directors
and the two shareholder proposals are
non-discretionary matters, which means that
brokerage firms may not use their discretion to vote on such
matters without express voting instructions from their customers.
Quorum
In order to carry out the business of the meeting, we must have
a quorum. This means that at least a majority of the outstanding
shares eligible to vote must be represented at the meeting,
either by proxy or in person. Shares owned by the Company are
not voted and do not count for this purpose.
Revoking
Your Proxy
The shares represented by a proxy will be voted as directed
unless the proxy is revoked. Any proxy may be revoked before it
is exercised by filing with the Secretary of the Company an
instrument revoking the proxy or a proxy bearing a later date. A
proxy is also revoked if the person who executed the proxy is
present at the meeting and elects to vote in person.
Votes
Needed
Election of Directors. In uncontested
elections, directors are elected by the affirmative vote of a
majority of the outstanding shares of the Companys voting
securities voted at the meeting, including those shares for
which votes are withheld. In the event that a
director nominee fails to receive the required majority vote,
the Board of Directors may decrease the number of directors,
fill any vacancy, or take other appropriate action. If the
number of nominees exceeds the number of directors to be
elected, directors will be elected by a plurality of the votes
cast by the holders of voting securities entitled to vote in the
election.
Other Proposals. Approval of the other
proposals and any other matter properly brought before the
meeting requires the favorable vote of a majority of the votes
cast on the applicable matter at the meeting in person or by
proxy.
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Our
Voting Recommendation
Our Board of Directors recommends that you vote:
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FOR each of our nominees to the Board of
Directors;
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FOR ratifying Deloitte & Touche LLP
as our independent registered public accounting firm;
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FOR the proposal to approve an amendment to
Lowes Bylaws decreasing the percentage of shares required
to call a special meeting of shareholders;
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AGAINST the shareholder proposal regarding
report on political spending; and
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AGAINST the shareholder proposal regarding
separating the roles of Chairman and CEO.
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Proxy cards that are timely signed, dated and returned but do
not contain instructions on how you want to vote will be voted
in accordance with our Board of Directors recommendations.
Voting
Results
The preliminary voting results will be announced at the meeting.
The final voting results will be published in a current report
on
Form 8-K
filed with the SEC within four business days after the meeting.
Attending
In Person
Only shareholders as of the close of business on March 26,
2010, their properly designated proxies and guests of the
Company may attend the Annual Meeting. You must present photo
identification for admittance. If you are a shareholder of
record or hold your shares through the Companys 401(k)
Plan, Employee Stock Purchase Plan or Direct Stock Purchase
Program, your name will be verified against the list of
shareholders of record or plan or purchase program participants
on the record date prior to your admission to the Annual
Meeting. If you are not a shareholder of record or a participant
in one of the Companys plans or purchase programs, but
hold shares through a broker, trustee or nominee, you must
provide proof of beneficial ownership on the record date, such
as your most recent account statement prior to March 26,
2010 or other similar evidence of ownership. If you do not
provide photo identification or comply with the other procedures
outlined above, you will not be admitted to the Annual Meeting.
The meeting will begin promptly at 10:00 a.m., local time,
and check-in will begin at 8:30 a.m., local time.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Articles of Incorporation of the Company previously divided
the Board into three classes, designated Class I,
Class II and Class III, with one class standing for
election each year for a three-year term. At our 2008 Annual
Meeting of Shareholders, the Board of Directors recommended, and
shareholders approved, amendments to the Companys Articles
of Incorporation to declassify the Board over a three-year
period. Accordingly, current directors, including Class I
directors elected to three-year terms at the 2008 Annual Meeting
and Class II directors elected to two-year terms at last
years Annual Meeting, will continue to serve the remainder
of their elected terms. Class III directors with terms
expiring at this years Annual Meeting will be elected to
one-year terms expiring at the 2011 Annual Meeting of
Shareholders. Beginning with the 2011 Annual Meeting of
Shareholders, and at each Annual Meeting thereafter, all
directors will be elected annually.
The number of directors is currently fixed at 11. The four
nominees standing for election as Class III directors at
the 2010 Annual Meeting of Shareholders are: David W. Bernauer,
Leonard L. Berry, Dawn E. Hudson and Robert A. Niblock. If
elected, each Class III nominee will serve until his or her
term expires in 2011 or until a successor is duly elected and
qualified.
All of the nominees are currently serving as directors. Unless
authority to vote in the election of directors is withheld, it
is the intention of the persons named as proxies to vote
FOR ALL of the four nominees. If at the time
of the meeting any of these nominees is unavailable for election
as a director for any reason, which is not expected to occur,
the proxyholders will vote for such substitute nominee or
nominees, if any, as shall be designated by the Board of
Directors.
3
INFORMATION
CONCERNING EXPERIENCE, QUALIFICATIONS,
ATTRIBUTES AND SKILLS OF THE NOMINEES
Nominees
for Election as Class III Directors Term to
Expire in 2011
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David
W. Bernauer
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Director
Since: 2007
Age: 66
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Mr. Bernauer served as the non-executive Chairman of the
board of directors of Walgreen Co., the nations largest
drugstore chain with approximately 7,650 locations in
50 states, the District of Columbia, Guam and Puerto Rico,
from January 2007 until his retirement in July 2007. From
January 2002 until July 2006, he served as Chief Executive
Officer of Walgreens, at which time he ceased to be Chief
Executive Officer and served as executive Chairman of the
company until January 2007. Mr. Bernauer previously served
as President and Chief Operating Officer of Walgreens.
Mr. Bernauer currently serves on the board of directors of
Office Depot, Inc. In addition to his strong leadership and
broad business management skills developed as the Chief
Executive Officer of the nations largest drugstore chain,
Mr. Bernauer brings more than 40 years of retail
industry experience to Lowes Board, including an in-depth
knowledge of the challenges of managing a rapidly-expanding
store base, store operations, marketing, merchandising, finance,
and information technology.
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Leonard
L. Berry, Ph.D
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Director
Since: 1998
Age: 67
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Dr. Berry is a Distinguished Professor of Marketing,
Presidential Professor for Teaching Excellence and holds the
M.B. Zale Chair in Retailing and Marketing Leadership in the
Mays Business School at Texas A&M University.
Dr. Berry has been a Professor of Marketing at Texas
A&M University since 1982, and a Professor of Humanities in
Medicine in the College of Medicine at The Texas A&M
University System Health Science Center, since 2004. He is also
the founder of the Center for Retailing Studies at Texas
A&M University. An accomplished author, he has published
numerous articles and a series of books on service management,
marketing and quality. Dr. Berry currently serves on the
boards of directors of Darden Restaurants, Inc. and Genesco Inc.
Dr. Berrys extensive academic background in teaching
and conducting research in marketing is a valuable asset to
Lowes Board in support of understanding customer
expectations, improving service quality and building a strong
services brand for Lowes.
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Dawn
E. Hudson
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Director
Since: 2001
Age: 52
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Ms. Hudson is Vice Chair of The Parthenon Group, an
advisory firm focused on business strategy consulting.
Ms. Hudson was the President and Chief Executive Officer of
Pepsi-Cola North America, the multi-billion dollar refreshment
beverage unit of PepsiCo, Inc. in the United States and Canada
until November 2007, where she served as President since May
2002 and Chief Executive Officer since March 2005. Previously,
Ms. Hudson served as Chief Executive Officer of the PepsiCo
Foodservice Division from March 2005 to November 2007. Prior to
joining PepsiCo, Ms. Hudson spent 13 years in the
marketing, advertising and branding strategy arena with
leadership positions at major agencies such as DArcy
Masius Benton & Bowles and Omnicom. She currently
serves on the boards of directors of Allergan, Inc. and P.F.
Changs China Bistro, Inc. Ms. Hudson brings to
Lowes Board extensive experience in executive leadership
spanning consumer goods, foodservice and communication
companies. In addition, as a former marketing executive,
Ms. Hudson brings valuable expertise and insights in
leveraging national brands, proprietary brand development and
consumer behavior to Lowes Board.
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Robert
A. Niblock
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Director
Since: 2004
Age: 47
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Mr. Niblock has served as Chairman of the Board and Chief
Executive Officer of Lowes Companies, Inc. since January
2005. Prior to that, he served as President of Lowes from
2003 to 2006. Mr. Niblock joined Lowes in 1993, and
during his career with the Company, has served as Vice President
and Treasurer, Senior Vice President Finance, and
Executive Vice President and Chief Financial Officer. Before
joining Lowes, Mr. Niblock had a nine-
4
year career with accounting firm Ernst & Young. He
currently serves on the board of directors of ConocoPhillips.
Mr. Niblock has also been a member since 2003, and is the
immediate past Chairman of the board of directors of the Retail
Industry Leaders Association (RILA), a trade association based
in Arlington, VA for the retail industry that includes eight of
the top 10 U.S. retailers among its members. During his
17-year
career with the Company, Mr. Niblock has held a number of
different positions with the Company, gaining a deep
understanding of Lowes operations and its organizational
culture and values. With a background in accounting,
Mr. Niblock also brings accounting and related financial
management experience to Lowes Board.
INFORMATION
CONCERNING EXPERIENCE, QUALIFICATIONS,
ATTRIBUTES AND SKILLS OF THE CONTINUING DIRECTORS
Class I
Directors Term to Expire in 2011
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Robert
A. Ingram
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Director
Since: 2001
Age: 67
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Mr. Ingram has been a General Partner of Hatteras Venture
Partners, LLC, a venture capital firm that invests in early
stage life science companies in the southeast United States,
since 2007. He has also served as an advisor to the Chief
Executive Officer of GlaxoSmithKline plc, a pharmaceutical
research and development company, since January 2010.
Mr. Ingram previously served as Vice Chairman
Pharmaceuticals of GlaxoSmithKline, acting as a special advisor
to the Corporate Executive Team and attending its meetings in
that capacity, from January 2003 until December 2009. Prior to
that, Mr. Ingram was Chief Operating Officer and President,
Pharmaceutical Operations of GlaxoSmithKline from January 2001
to January 2003. Previously, he was Chief Executive Officer of
Glaxo Wellcome plc from 1997 to 2000 and Chairman of Glaxo
Wellcome Inc., Glaxo Wellcome plcs United States
subsidiary, from 1999 to 2000. He currently serves on the boards
of directors of Allergan, Inc., Cree, Inc., Edwards Lifesciences
Corporation, OSI Pharmaceuticals, Inc., where he serves as
Chairman of the board, and Valeant Pharmaceuticals
International, where he serves as Lead Director. He was a
director of Misys plc, Nortel Networks Corporation and Wachovia
Corporation until 2005, 2006 and 2008, respectively. In addition
to his strong managerial and leadership skills developed as
Chairman and Chief Executive Officer of one of the worlds
largest pharmaceutical companies, Mr. Ingram brings
valuable board governance and management succession experience
to Lowes Board.
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Robert
L. Johnson
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Director
Since: 2005
Age: 64
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Mr. Johnson is the founder and Chairman of The RLJ
Companies, which owns or holds interests in a diverse portfolio
of companies in the banking, private equity, real estate,
hospitality, professional sports (including the NBA Charlotte
Bobcats), film production, gaming and automobile dealership
industries. Prior to forming The RLJ Companies, he was founder
and Chairman of Black Entertainment Television (BET), which was
acquired in 2001 by Viacom Inc., a media-entertainment holding
company. Mr. Johnson continued to serve as Chief Executive
Officer of BET until 2006. He currently serves on the boards of
directors of KB Home and Strayer Education, Inc. He was a
director of Hilton Hotels Corporation and US Airways Group, Inc.
until 2006 and 2005, respectively. As a successful business
leader and entrepreneur, Mr. Johnson brings to Lowes
Board his experience in a number of critical areas, including
real estate, finance, brand development, multicultural marketing
and providing customer satisfaction.
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Richard
K. Lochridge
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Director
Since: 1998
Age: 66
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Mr. Lochridge is the founder and has served as President of
Lochridge & Company, Inc., a general management
consulting firm, since 1986. He currently serves on the boards
of directors of Dover Corporation and PetSmart, Inc. He was a
director of John H. Harland Company until 2007.
Mr. Lochridge brings to Lowes Board his more than
40 years of experience as a consultant working closely with
senior management on operational and organizational strategies
and challenges at leading companies across a broad range of
industries, including a number of large retailers with
international operations.
5
Class II
Directors Term to Expire in 2011
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Peter
C. Browning
|
Director
Since: 1998
Age: 68
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Mr. Browning has been the managing director of Peter C.
Browning & Associates, LLC, a board advisory
consulting firm, since 2009. Prior to that, he was the Dean of
the McColl Graduate School of Business at Queens University of
Charlotte, North Carolina, from March 2002 to May 2005. From
1998 to 2000, Mr. Browning was President and Chief
Executive Officer, from 1996 to 1998, President and Chief
Operating Officer, and from 1993 to 1996, Executive Vice
President of Sonoco Products Company, a manufacturer of
industrial and consumer packaging products. Before joining
Sonoco, Mr. Browning was Chairman, President and Chief
Executive Officer of National Gypsum Company, a manufacturer and
supplier of building and construction products, from 1990 to
1993. He currently serves on the boards of directors of Acuity
Brands, Inc., EnPro Industries, Inc. and Nucor Corporation,
where he served as non-executive Chair from 2000 to 2006 and
currently serves as Lead Director, and was a director of
Wachovia Corporation and The Phoenix Companies, Inc. until 2008
and 2009, respectively. Mr. Browning brings a unique
breadth and depth of experience and expertise to Lowes
Board, including board governance, board performance and
dynamics and executive leadership transition and succession
planning. Mr. Browning also brings to Lowes Board
industry experience in the building and construction products
sector.
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Marshall
O. Larsen
|
Director
Since: 2004
Age: 61
|
Mr. Larsen has served as Chairman of Goodrich Corporation,
a supplier of systems and services to the aerospace and defense
industry, since October 2003, and President and Chief Executive
Officer, since February 2002 and April 2003, respectively. Prior
to that, Mr. Larsen was Chief Operating Officer of Goodrich
from February 2002 to April 2003, and Executive Vice President
and President and Chief Operating Officer of Goodrich Aerospace
division of Goodrich from 1995 to 2002. He currently serves on
the board of directors of Becton, Dickinson and Company. As
Chairman and Chief Executive Officer of a publicly traded
company for the past seven years, Mr. Larsen has developed
strong executive leadership and strategic management skills.
Mr. Larsen also brings to Lowes Board 30 years
of domestic and international business experience, including
expertise in a number of critical areas, such as accounting and
finance, retail sales and marketing.
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Stephen
F. Page
|
Director
Since: 2003
Age: 70
|
Mr. Page served as Vice Chairman and Chief Financial
Officer of United Technologies Corporation (UTC), a manufacturer
of high-technology products and services to the building systems
and aerospace industries, from 2002 until his retirement in
2004. From 1997 to 2002, Mr. Page was President and Chief
Executive Officer of Otis Elevator Company, a subsidiary of UTC,
and from 1993 to 1997, Executive Vice President and Chief
Financial Officer of UTC. Prior to joining UTC in 1993,
Mr. Page was Chief Financial Officer and Executive Vice
President of The Black & Decker Corporation, a global
manufacturer and marketer of power tools and accessories,
hardware and home improvement products, and technology based
fastening systems. He currently serves on the boards of
directors of Liberty Mutual Holding Company, Inc. and PACCAR
Inc. He served as a director of UTC until 2004. In serving as
Chief Financial Officer for two public companies and as a
certified public accountant for the past 40 years,
Mr. Page has developed strong accounting and financial
management skills, which are a valuable asset to Lowes
Board, particularly on the Audit Committee. Mr. Page also
brings to Lowes Board his demonstrated leadership
abilities as a former chief executive officer and an
understanding of business, both domestically and
internationally. Mr. Page also practiced corporate law for
approximately 10 years.
6
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O.
Temple Sloan, Jr.
|
Director
Since: 2004
Age: 71
|
Mr. Sloan has served as Chairman of General Parts
International, Inc., a distributor of automotive replacement
parts based in Raleigh, North Carolina, since 1961. From 1961 to
December 2008, he served as Chief Executive Officer of General
Parts International. Mr. Sloan also co-founded Highwoods
Properties Inc., a Raleigh-based real estate investment trust.
He currently serves on the boards of directors of Golden Corral
and Highwoods Properties, Inc., where he serves as Chairman of
the board, and was the Lead Director of Bank of America
Corporation until 2009. In serving as Chairman and Chief
Executive Officer of a multi-billion dollar company for more
than 40 years, Mr. Sloan has developed strong
executive leadership and strategic management skills.
Mr. Sloan also brings to Lowes Board significant
experience in a number of important areas, including retail
sales and operations, mergers and acquisitions, accounting and
financial management and board governance, performance and
dynamics.
INFORMATION
ABOUT THE BOARD OF DIRECTORS AND COMMITTEES OF THE
BOARD
Corporate
Governance Guidelines and Code of Business Conduct and
Ethics
The Board of Directors has adopted Corporate Governance
Guidelines setting forth guidelines and standards with respect
to the role and composition of the Board, the functioning of the
Board and its committees, the compensation of directors,
succession planning and management development, the Boards
and its committees access to independent advisers and
other matters. The Governance Committee of the Board of
Directors regularly reviews and assesses corporate governance
developments and recommends to the Board modifications to the
Corporate Governance Guidelines as warranted. The Company has
also adopted a Code of Business Conduct and Ethics
(Code) for its directors, officers and employees.
The Governance Guidelines and Code are posted on the
Companys website at www.Lowes.com/investor.
Director
Independence
Lowes Corporate Governance Guidelines provide that in
accordance with long-standing policy, a majority of the members
of the Companys Board of Directors must qualify as
independent directors. For a director to be considered
independent, the Board must determine that the director does not
have any direct or indirect material relationship with the
Company. The Board has adopted Categorical Standards for
Determination of Director Independence (Categorical
Standards) to assist the Board in making determinations of
independence. A copy of these Categorical Standards is attached
as Appendix A to this Proxy Statement.
The Governance Committee and the Board have evaluated the
transactions, relationships or arrangements between each
director (and his or her immediate family members and related
interests) and the Company in each of the most recent three
completed fiscal years. They include the following, all of which
were entered into by the Company in the ordinary course of
business:
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Temple Sloan was a member of the board of directors of Bank of
America Corporation until May 2009, and Peter Browning and
Robert Ingram were until December 2008 members of the board of
directors of Wachovia Corporation. The Company has commercial
banking and capital markets relationships with subsidiaries of
Bank of America Corporation and with former subsidiaries of
Wachovia Corporation, which merged with Wells Fargo and Company,
effective December 31, 2008. Each of them is or was a less
than 1% shareholder of the respective bank holding companies.
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Temple Sloan is Chairman of the board of directors and an
approximately 1% shareholder of Highwoods Properties, Inc., a
real estate investment trust from which the Company leases a
facility for a data center.
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Stephen Page is a director of Liberty Mutual Holding Company,
Inc. The Company purchases insurance from several of its
subsidiaries covering various business risks. Subsidiaries of
this company also administer Lowes short-term disability
plan and the family and medical leave program for Lowes
employees.
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Robert Johnson is a director and significant shareholder of
Urban Trust Bank, which the Company uses as a depositary
bank. Mr. Johnson controlled and was an officer of the
organization that owned the Charlotte Bobcats NBA team until
March 2010 when he sold majority interest of that organization
to Michael Jordan
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7
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and MJ Basketball Holdings, LLC. The Company has a multi-year
sponsorship agreement with the team that provides marketing and
advertising benefits for the Company.
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Richard Lochridge is a director and less than 1% shareholder of
Dover Corporation, which is a vendor to Lowes for various
products.
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David Bernauer is a director and less than 1% shareholder of
Office Depot, Inc. from which the Company purchases office
equipment and supplies.
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Peter Browning is a director and less than 1% shareholder of
Acuity Brands, Inc. from which the Company purchases various
lighting products.
|
In addition, the Board considered the amount of the
Companys discretionary charitable contributions in each of
the most recent three completed fiscal years to charitable
organizations where a director, or a member of his or her
immediate family, serves as a director or trustee.
As a result of this evaluation, the Board has affirmatively
determined, upon the recommendation of the Governance Committee,
that currently each director, other than Robert Niblock, and all
of the members of the Audit Committee, Compensation Committee,
and Governance Committee, are independent within the
Companys Categorical Standards and the NYSE rules, and, in
the case of Audit Committee members, the separate SEC
requirement, which provides that they may not accept directly or
indirectly any consulting, advisory or other compensatory fee
from the Company other than their compensation as directors.
Compensation
of Directors
Annual Retainer Fees. Directors who are not
employed by the Company are paid an annual retainer of $75,000,
and non-employee directors who serve as a committee chairman
receive an additional $15,000 annually, or $25,000 annually in
the case of the Audit Committee Chairman, for serving in such
position. The independent Lead Director receives an additional
retainer of $25,000 per year. Directors who are employed by the
Company receive no additional compensation for serving as
directors. The annual retainer amount was last increased in 2002.
Stock Awards. In May 2005, shareholders
approved the Lowes Companies, Inc. Amended and Restated
Directors Stock Option and Deferred Stock Unit Plan (the
Directors Plan), allowing the Board to elect
to grant deferred stock units or options to purchase Common
Stock at the first directors meeting following the Annual
Meeting of Shareholders each year (the Award Date)
to non-employee directors. Beginning with the directors
meeting following the Annual Meeting of Shareholders held
May 27, 2005, it has been the Boards policy to grant
only deferred stock units. A deferred stock unit represents the
right to receive one share of Lowes Common Stock. The
annual grant of deferred stock units for each of the
Companys directors who is not employed by the Company is
determined by taking the annual grant amount of $115,000 and
dividing it by the closing price of a share of Lowes
Common Stock as reported on the NYSE on the Award Date, which
amount is then rounded up to the next 100 units. The
deferred stock units receive dividend equivalent credits, in the
form of additional units, for any cash dividends subsequently
paid with respect to Common Stock. All units credited to a
director are fully vested and will be paid in the form of Common
Stock after the termination of the directors service.
The Directors Plan expired by its terms in 2008. At our
2009 Annual Meeting of Shareholders, the Board of Directors
recommended, and shareholders approved, amendments to the
Lowes Companies, Inc. 2006 Long Term Incentive Plan (the
2006 LTIP) that made the Companys non-employee
directors eligible to participate in that plan. Under the
amended and restated 2006 LTIP, the Board of Directors is
continuing to grant deferred stock units following the Annual
Meeting each year to non-employee directors. The annual grant is
determined as it was previously determined under the
Directors Plan, subject to change by the Board of
Directors upon recommendation of the Executive Committee.
Deferral of Annual Retainer Fees. In 1994, the
Board adopted the Lowes Companies, Inc. Directors
Deferred Compensation Plan. This plan allows each non-employee
director to defer receipt of all, but not less than all, of the
annual retainer and any committee chairman or Lead Director fees
otherwise payable to the director in cash. Deferrals are
credited to a bookkeeping account and account values are
adjusted based on the investment measure selected by the
director. One investment measure adjusts the account value based
on interest calculated in the same manner and at the same rate
as interest on amounts invested in the short-term interest fund
option available to employees participating in the Lowes
401(k) Plan, a tax-qualified, defined contribution plan
sponsored by the
8
Company. The other investment measure assumes that the deferrals
are invested in Lowes Common Stock with reinvestment of
all dividends. A director may allocate deferrals between the two
investment measures in 25% multiples. Account balances may not
be reallocated between the investment measures. Account balances
are paid in cash in a single sum payment following the
termination of a directors service.
The following table summarizes the compensation paid to
non-employee directors during fiscal year 2009:
Director
Compensation Table
Fiscal Year 2009
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Fees Earned or
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Stock
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Options
|
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Paid in Cash
|
|
Awards(1)
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Awards(2)
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Total
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Name
|
|
($)
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|
($)
|
|
($)
|
|
($)
|
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David W. Bernauer
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$
|
75,000
|
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$
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115,961
|
|
|
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0
|
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$
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190,961
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Leonard L. Berry
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$
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75,000
|
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$
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115,961
|
|
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0
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$
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190,961
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Peter C. Browning
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$
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75,000
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$
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115,961
|
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0
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$
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190,961
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Dawn E. Hudson
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$
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75,000
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$
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115,961
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0
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$
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190,961
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Robert A. Ingram
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$
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75,000
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$
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115,961
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0
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$
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190,961
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Robert L. Johnson
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$
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75,000
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$
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115,961
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0
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$
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190,961
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Marshall O. Larsen
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$
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90,000
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$
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115,961
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0
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$
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205,961
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Richard K. Lochridge
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$
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75,000
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$
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115,961
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0
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$
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190,961
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Stephen F. Page
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$
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100,000
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$
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115,961
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0
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$
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215,961
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O. Temple Sloan, Jr.
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$
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115,000
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$
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115,961
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0
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$
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230,961
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(1) |
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The dollar amount shown for these stock awards represents the
aggregate grant date fair value computed in accordance with
Financial Accounting Standards Board Accounting Standards
Codification Topic 718 Compensation Stock
Compensation (FASB ASC Topic 718) for 6,100 deferred
stock units granted to each director in fiscal year 2009. See
Note 8, Accounting for Share-Based Payment, to
the Companys consolidated financial statements in its
Annual Report on
Form 10-K
for the fiscal year ended January 29, 2010 for additional
information about the Companys accounting for share-based
compensation arrangements, including the assumptions used for
calculating the grant date value of the deferred stock units.
These amounts do not correspond to the actual value that may be
recognized by a director with respect to these awards when they
are paid in the form of Common Stock after the termination of
the directors service. As of January 29, 2010, each
non-employee director, with the exception of Mr. Bernauer,
held 21,936 deferred stock units. As of January 29, 2010,
Mr. Bernauer (who was first elected a director on
May 25, 2007) held 14,815 deferred stock units. |
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(2) |
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As of January 29, 2010, non-employee directors held
options, all of which are vested, to acquire shares of
Lowes Common Stock previously granted to them under the
Directors Plan as shown in the table below. |
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Total
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Outstanding
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Name
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(#)
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David W. Bernauer
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0
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Leonard L. Berry
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16,000
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Peter C. Browning
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16,000
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Dawn E. Hudson
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16,000
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Robert A. Ingram
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16,000
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Robert L. Johnson
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0
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Marshall O. Larsen
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8,000
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Richard K. Lochridge
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8,000
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Stephen F. Page
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8,000
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O. Temple Sloan, Jr.
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8,000
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9
Board
Meetings, Committees of the Board and Board Leadership
Structure
Attendance at Board and Committee
Meetings. During fiscal year 2009, the Board of
Directors held six meetings. All incumbent directors attended at
least 75% of all meetings of the Board and the committees on
which they served.
Board Leadership Structure. Robert A. Niblock
currently holds the positions of Chairman of the Board and Chief
Executive Officer of the Company. The Corporate Governance
Guidelines of the Company provide for an independent Lead
Director to be elected by the independent directors annually at
the meeting of the Board of Directors held in conjunction with
the annual meeting of shareholders. O. Temple Sloan, Jr.
has served as Lead Director of the Company since August 2008.
The Corporate Governance Guidelines provide that the Lead
Director will:
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preside at all meetings of the Board at which the Chairman of
the Board is not present, including executive sessions of the
non-management directors;
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serve as a liaison between the Chairman and the independent
directors;
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communicate with the Chairman and the Secretary of the Company
to develop an agenda for each Board meeting and determine the
nature and extent of information that shall be provided
regularly to the directors for each scheduled meeting;
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approve meeting schedules to assure that there is sufficient
time for discussion of all agenda items;
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have the authority to call meetings of the independent
directors; and
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be available for consultation and direct communication with
major shareholders upon request at the direction of the Chief
Executive Officer.
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The Lead Director also serves as the Chairperson of the
Governance Committee of the Board of Directors, which functions
as the Boards nominating committee as well, and is
comprised entirely of independent directors.
The Board believes that the Companys current leadership
structure with the combined role of Chairman and CEO promotes
unified leadership and direction for the Company, which allows
for a single, clear focus for management to execute the
Companys strategy and business plans. The Board also
believes that having an independent Lead Director whose
responsibilities closely parallel those of an independent
Chairman ensures that the appropriate level of independent
oversight is applied to all Board decisions.
Boards Role in the Risk Management
Process. Management must take a wide variety of
risks to enhance shareholder value. It is the Board of
Directors responsibility to ensure that management has
established and adequately resourced processes for identifying
and preparing the Company to manage those risks effectively. It
is also the Boards responsibility to challenge management
regularly to demonstrate that those processes are effective in
operation.
Lowes has adopted the concept of enterprise risk
assessment (ERM) using the framework issued in 2004
by the Committee of Sponsoring Organizations of the Treadway
Commission. The Companys Senior Vice President and Chief
Risk Officer, who reports directly to the Chairman and CEO, is
responsible for implementing the Companys ERM processes.
During the extended Board meeting held each November, he
presents to the Board a comprehensive review of the
Companys ERM processes. His presentation includes an
update on any significant new risks that have been identified
and assessed during the year and the strategies management has
developed for managing them. During his presentation, the
directors actively discuss with him and other members of
management present the risks that have been identified to gain a
deeper understanding of the risks the Company faces and
establish a mutual understanding between the Board and
management regarding the Companys willingness to take
risks and the strategies to be used to manage them. The
Companys Senior Vice President and Chief Risk Officer also
presents updates on the Companys ERM processes at other
meetings of the Board during the year.
Although the Board of Directors believes that oversight of the
Companys ERM processes is a responsibility of the full
Board, the Audit Committee of the Board addresses at each of its
regular meetings risk oversight of the Companys major
financial exposures and the steps management has taken to
identify, assess, monitor, control, remediate and report such
exposures. The Audit Committee also reviews periodically with
the Companys Senior Vice President and General Counsel
legal matters that may have a material adverse impact on the
Companys financial statements, compliance with laws and
any material reports received from regulatory agencies. And
finally, as noted in the Compensation
Discussion & Analysis section of this Proxy
Statement, the Compensation
10
Committee of the Board annually conducts a self audit of the
risk associated with the Companys non-equity and equity
incentive plans.
Executive Sessions of the Non-Management
Directors. The non-management directors, all of
whom are independent, met in executive session at each of the
six regularly scheduled Board meetings in fiscal year 2009.
Mr. Sloan, Lead Director, presides over these executive
sessions, and, in his absence, the non-management directors may
select another non-management director present to preside.
Attendance at Annual Meetings of
Shareholders. Directors are expected to attend
the Annual Meeting of Shareholders. All of the incumbent
directors attended last years Annual Meeting of
Shareholders.
Committees of the Board of Directors and their
Charters. The Board has four standing committees:
the Audit Committee, the Compensation Committee, the Executive
Committee and the Governance Committee. Each of these
committees, other than the Executive Committee, acts pursuant to
a written charter adopted by the Board of Directors. The
Executive Committee operates in accordance with the
Companys Bylaws and Corporate Governance Guidelines. A
copy of each written committee charter and the Corporate
Governance Guidelines are available on our website at
www.Lowes.com/investor.
How to Communicate with the Board of Directors and
Independent Directors. Interested persons wishing
to communicate with the Board of Directors may do so by sending
a written communication addressed to the Board or to any member
individually in care of Lowes Companies, Inc., 1000
Lowes Boulevard, Mooresville, North Carolina 28117.
Interested persons wishing to communicate with the independent
directors as a group, may do so by sending a written
communication addressed to O. Temple Sloan, Jr., as Lead
Director, in care of Lowes Companies, Inc., 1000
Lowes Boulevard, Mooresville, North Carolina 28117. Any
communication addressed to a director that is received at
Lowes principal executive offices will be delivered or
forwarded to the individual director as soon as practicable.
Lowes will forward all communications received from its
shareholders or other interested persons that are addressed
simply to the Board of Directors to the Lead Director or to the
chairman of the committee of the Board of Directors whose
purpose and function is most closely related to the subject
matter of the communication.
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Audit Committee
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Number of Members:
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Five
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Members:
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Stephen F. Page (Chairman), David W. Bernauer, Leonard L. Berry,
Peter C. Browning, and O. Temple Sloan, Jr.
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Number of Meetings in Fiscal Year 2009:
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Eight
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Purpose and Functions:
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The primary purpose of the Audit Committee is to assist the
Board of Directors in monitoring (A) the integrity of the
Companys financial statements, (B) compliance by the
Company with its established internal controls and applicable
legal and regulatory requirements, (C) the performance of the
Companys internal audit function and independent
registered public accounting firm, and (D) the independent
registered public accounting firms qualifications and
independence. In addition, the Audit Committee is responsible
for preparing the Report of the Audit Committee included in this
Proxy Statement. The Audit Committee is directly responsible for
the appointment, compensation, retention and oversight of the
work of the Companys independent registered public
accounting firm. In addition, the Audit Committee is solely
responsible for pre-approving all engagements related to audit,
review and attest reports required under the securities laws, as
well as any other engagements permissible under the Securities
Exchange Act of 1934, as amended (the Exchange Act),
for services to be performed for the Company by its independent
registered public accounting firm, including the fees and terms
applicable thereto. The Audit Committee is also responsible for
reviewing and concurring with the Companys Chief Risk
Officer in the appointment, appraisal, replacement, reassignment
or dismissal of the Vice President of Internal Audit. The Audit
Committee reviews the general scope of the Companys annual
audit and the fees charged by the independent registered public
accounting firm for audit services, audit-related services, tax
services and all other
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11
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services; reviews with the Companys Vice President of
Internal Audit the staffing, training and development, and the
work of the Internal Audit Department; reviews the
Companys financial statements and the critical accounting
policies and practices used by management; reviews audit results
and other matters relating to the adequacy of the Companys
internal controls; and reviews with the Companys General
Counsel and Chief Compliance Officer legal matters and the
program of monitoring compliance with the Companys Code.
The Audit Committee has established procedures for the receipt,
retention and treatment of complaints received regarding
accounting, internal accounting controls or auditing matters,
and the confidential, anonymous submission by employees of
concerns regarding accounting or auditing matters. Each member
of the Audit Committee is financially literate, as
that term is defined under NYSE rules, and qualified to review
and assess financial statements. The Board of Directors has
determined that more than one member of the Audit Committee
qualifies as an audit committee financial expert, as
such term is defined by the SEC, and has designated Stephen F.
Page, Chairman of the Audit Committee, as an audit committee
financial expert. Each member of the Audit Committee is also
independent as that term is defined under Rule
10A-3(b)(l)(ii) of the Exchange Act, the Categorical Standards
and the rules of the NYSE. The members of the Audit Committee
annually review the Audit Committee Charter and conduct an
annual performance evaluation of the Audit Committee performance
with the assistance of the Governance Committee.
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Compensation Committee
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Number of Members:
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Five
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Members:
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Marshall O. Larsen (Chairman), Dawn E. Hudson, Robert A. Ingram,
Robert L. Johnson, and Richard K. Lochridge
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Number of Meetings in Fiscal Year 2009:
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Six
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Purpose and Functions:
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The primary purpose of the Compensation Committee is to
discharge the responsibilities of the Board of Directors
relating to compensation for the Companys executives. The
Compensation Committee annually reviews and approves the
corporate goals and objectives relevant to the compensation of
the Chief Executive Officer, evaluates the Chief Executive
Officers performance in light of these established goals
and objectives and, based upon this evaluation, determines and
approves the Chief Executive Officers annual compensation,
which it forwards to the Board for ratification by the
independent directors. The Compensation Committee also reviews
and approves the compensation of all other executive officers of
the Company, and reviews and approves all annual management
incentive plans and all awards under multi-year incentive plans,
including
equity-based
incentive arrangements authorized under the Companys
equity incentive compensation plans. The Compensation Committee
is also responsible for reviewing and discussing with management
the Companys Compensation Discussion and Analysis and
recommending to the Board that the Compensation Discussion and
Analysis be included in the Companys Annual Report and
Proxy Statement. See Executive Officer
Compensation Compensation Discussion and
Analysis elsewhere in this Proxy Statement for a more
detailed description of the Companys processes and
procedures for the consideration and determination of executive
compensation. In addition, the Compensation Committee is
responsible for preparing the Compensation Committee Report
included in this Proxy Statement. The Compensation Committee
conducts an annual performance evaluation of its performance
with the assistance of the Governance Committee. Each member of
the Compensation Committee is independent within the
meaning of the Categorical Standards and the rules of the
NYSE.
|
12
|
|
|
Executive Committee
|
|
Number of Members:
|
|
Four
|
|
Members:
|
|
Robert A. Niblock (Chairman), Marshall O. Larsen, Stephen F.
Page and O. Temple Sloan, Jr.
|
|
Number of Meetings in Fiscal Year 2009:
|
|
Five
|
|
Purpose and Functions:
|
|
The Executive Committee is generally authorized to have and to
exercise all powers of the Board, except those reserved to the
Board of Directors by the North Carolina Business Corporation
Act or the Bylaws. Under the Companys Corporate Governance
Guidelines, the Executive Committee is given responsibilities
related to succession planning for the Chairman and the Chief
Executive Officer and for recommending any changes in director
compensation to the Board of Directors for approval.
|
|
Governance Committee
|
|
Number of Members:
|
|
Ten
|
|
Members:
|
|
O. Temple Sloan, Jr. (Chairman), David W. Bernauer, Leonard L.
Berry, Peter C. Browning, Dawn E. Hudson, Robert A. Ingram,
Robert L. Johnson, Marshall O. Larsen, Richard K. Lochridge and
Stephen F. Page
|
|
Number of Meetings in Fiscal Year 2009:
|
|
Six
|
|
Purpose and Functions:
|
|
The purpose of the Governance Committee, which functions both as
a governance and as a nominating committee, is to (A) identify
and recommend individuals to the Board for nomination as members
of the Board and its committees consistent with the criteria
approved by the Board, (B) develop and recommend to the Board
the Corporate Governance Guidelines applicable to the Company,
and (C) oversee the evaluation of the Board, its committees and
the Chief Executive Officer of the Company. The Governance
Committees nominating responsibilities include (1)
developing criteria for evaluation of candidates for the Board
and its committees, (2) screening and reviewing candidates for
election to the Board, (3) recommending to the Board the
nominees for directors to be appointed to fill vacancies or to
be elected at the next Annual Meeting of Shareholders, (4)
assisting the Board in determining and monitoring whether or not
each director and nominee is independent within the
meaning of the Categorical Standards and applicable rules and
laws, (5) recommending to the Board for its approval the
membership and chairperson of each committee of the Board, and
(6) assisting the Board in annual performance evaluation of the
Board and each of its committees.
|
|
|
|
The Governance Committee will consider nominees recommended by
shareholders, and its process for doing so is no different than
its process for screening and evaluating candidates suggested by
directors, management of the Company or third parties. The
Bylaws require that any such recommendation should be submitted
in writing to the Secretary of the Company not less than
120 days nor more than 150 days prior to the first
anniversary of the preceding years Annual Meeting of
Shareholders. If mailed, such notice shall be deemed to have
been given when received by the Secretary. A shareholders
nomination for director shall set forth (i) as to each person
whom the shareholder proposes to nominate for election or
reelection as a director, (1) information relating to such
person similar in substance to that required to be disclosed in
solicitations of proxies for election of directors pursuant to
Regulation 14A under the Exchange Act, (2) such persons
written consent to being named as a nominee and to serving as a
director if elected, and (3) such persons written consent
to provide information that the Board of Directors reasonably
requests to determine whether such person qualifies as an
independent
|
13
|
|
|
|
|
director under the Companys Corporate Governance
Guidelines, and (ii) as to the shareholder giving the notice,
(A) the name and address, as they appear on the Companys
books, of such shareholder and any Shareholder Associated Person
(as defined in the Bylaws) covered by clauses (B) and (C), (B)
the number of shares of Common Stock which are owned of record
or beneficially by such shareholder and by any Shareholder
Associated Person with respect to the Companys securities
and (C) any derivative positions held of record or beneficially
by the shareholder and any Shareholder Associated Person and
whether and the extent to which any hedging or other transaction
or series of transactions has been entered into by or on behalf
of, or any other agreement, arrangement or understanding has
been made, the effect or intent of which is to increase or
decrease the voting power of, such shareholder or any
Shareholder Associated Person with respect to the Companys
securities. At the request of the Board of Directors, any person
nominated by the Board for election as a director shall furnish
to the Secretary that information required to be set forth in a
shareholders notice of nomination which pertains to the
nominee. The chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination
was not made in accordance with the provisions prescribed by the
Bylaws and, if the chairman should so determine, the chairman
shall so declare to the meeting and the defective nomination
shall be disregarded. The Companys Bylaws are filed as an
exhibit to the Company Annual Report to the SEC on Form 10-K.
|
|
|
|
The Governance Committee is committed to having diverse
individuals from different backgrounds with varying
perspectives, professional experience, education and skills
serving as directors. In identifying nominees for election and
re-election to the Board, the Governance Committee considers
persons with a variety of perspectives, professional experience,
education and skills that possess the following qualifications
as set forth in the Companys Corporate Governance
Guidelines:
|
|
|
|
broad training and experience in policy-making
decisions in business, government, education or technology;
|
|
|
expertise that is useful to the Company and
complementary to the background and experience of other
directors;
|
|
|
willingness to devote the amount of time necessary
to carry out the duties and responsibilities of Board
membership;
|
|
|
commitment to serve on the Board over a period of
several years in order to develop knowledge about the
Companys principal operations; and
|
|
|
willingness to represent the best interests of all
shareholders and objectively appraise management performance.
|
|
|
|
Prior to nominating persons for election or re-election to the
Board each year, the Governance Committee reviews the
composition of the Board, including the perspectives,
professional experiences, education, skills and qualifications
of its members.
|
|
|
|
Under the Companys policy for review, approval or
ratification of transactions with related persons, the
Governance Committee reviews all transactions, arrangements or
relationships that are not pre-approved under the policy and
could potentially be required to be reported under the rules of
the SEC for disclosure of transactions with related persons and
either approves, ratifies or disapproves of the Companys
entry into them.
|
|
|
|
Each member of the Governance Committee is
independent within the meaning of the Categorical
Standards and the current listing rules of the NYSE. The
Governance Committee annually reviews and evaluates its own
performance.
|
14
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows the beneficial ownership of Common
Stock as of March 19, 2010, except as otherwise noted, by
each director, each nominee for election as a director, the
named executive officers listed in the Summary Compensation
Table, each shareholder known by the Company to be the
beneficial owner of more than 5% of the Common Stock, and the
incumbent directors, director nominees and executive officers as
a group. Except as otherwise indicated below, each of the
persons named in the table has sole voting and investment power
with respect to the securities beneficially owned by them as set
forth opposite their name, subject to community property laws
where applicable.
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
Percent of
|
|
Name or Number of Persons in Group
|
|
(#)(1)
|
|
|
Class
|
|
|
David W. Bernauer
|
|
|
24,874
|
|
|
|
*
|
|
Leonard L. Berry
|
|
|
56,489
|
|
|
|
*
|
|
Gregory M. Bridgeford
|
|
|
861,089
|
|
|
|
*
|
|
Peter C. Browning
|
|
|
45,515
|
|
|
|
*
|
|
Charles W. Canter, Jr.
|
|
|
784,395
|
|
|
|
*
|
|
Dawn E. Hudson
|
|
|
33,303
|
|
|
|
*
|
|
Robert F. Hull, Jr.
|
|
|
691,420
|
|
|
|
*
|
|
Robert A. Ingram
|
|
|
38,023
|
|
|
|
*
|
|
Robert L. Johnson
|
|
|
22,023
|
|
|
|
*
|
|
Marshall O. Larsen
|
|
|
32,023
|
|
|
|
*
|
|
Richard K. Lochridge
|
|
|
48,247
|
|
|
|
*
|
|
Robert A. Niblock
|
|
|
2,462,733
|
|
|
|
*
|
|
Stephen F. Page
|
|
|
34,023
|
|
|
|
*
|
|
O. Temple Sloan, Jr.
|
|
|
243,341
|
|
|
|
*
|
|
Larry D. Stone
|
|
|
1,598,297
|
|
|
|
*
|
|
Directors and Executive Officers as a Group (24 total)
|
|
|
9,541,258
|
|
|
|
*
|
|
State Street Corporation
|
|
|
114,724,700
|
(2)
|
|
|
7.9
|
%
|
State Street Financial Center
|
|
|
|
|
|
|
|
|
One Lincoln Street
Boston, MA 02111
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Less than 1% |
|
(1) |
|
Includes shares that may be acquired or issued within
60 days under the Companys stock option and award
plans as follows: Mr. Bernauer 14,874 shares;
Dr. Berry 38,023 shares; Mr. Bridgeford
394,001 shares; Mr. Browning 30,023 shares;
Mr. Canter 344,107 shares; Ms. Hudson
30,023 shares; Mr. Hull 388,484 shares;
Mr. Ingram 38,023 shares; Mr. Johnson
22,023 shares; Mr. Larsen 30,023 shares;
Mr. Lochridge 30,023 shares;
Mr. Niblock 1,431,000 shares;
Mr. Page 30,023 shares; Mr. Sloan
30,023 shares; Mr. Stone 736,000 shares; and all
directors and executive officers as a group
4,991,870 shares. |
|
(2) |
|
Shares held at December 31, 2009, according to a
Schedule 13G filed on February 12, 2010 with the SEC,
which total includes 63,900,848 shares held in trust for
the benefit of the Companys 401(k) Plan participants.
Shares allocated to participants 401(k) Plan accounts are
voted by the participants by giving voting instructions to State
Street Bank and Trust Company, as Trustee. The
Companys administrative committee directs the Trustee in
the manner in which shares not voted by participants are to be
voted. This committee has eight members. |
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4, and any
amendments thereto, furnished to the Company pursuant to
Rule 16a-3(e)
of the Exchange Act during fiscal year 2009, and Forms 5,
and any amendments thereto, furnished to the Company with
respect to fiscal year 2009, and other written representations
from certain reporting persons,
15
the Company believes that all filing requirements under
Section 16(a) applicable to its officers, directors and
greater than 10% beneficial owners have been complied with
during fiscal year 2009 and prior fiscal years.
EXECUTIVE
OFFICER COMPENSATION
|
|
A.
|
Compensation
Discussion and Analysis
|
Summary
The Compensation Committee of the Board of Directors (the
Committee) is responsible for administering the
Companys executive compensation program. The Committee
believes strongly in pay for performance, and the Committee
continued to administer the executive compensation program in
2009 with the pay for performance philosophy firmly in mind.
The Committee continued to use two six-month performance
measurement periods with separate performance targets for each
period for the 2009 non-equity incentive compensation plan. The
Committee first adopted the six-month performance periods for
2008 in response to the rapid changes that were occurring in the
economy and the need to maintain flexibility to respond to those
changes. The Committee continued to use the two six-month
performance measurement periods, because it believed the economy
would remain unpredictable in 2009. The Committee used earnings
before interest and taxes (EBIT) (weighted 75%) and
sales (weighted 25%) as the performance measures for the 2009
non-equity incentive compensation plan.
Despite the continuing external challenges in 2009, the Company
achieved $47.220 billion of sales (98.8% of projected sales
in its 2009 operating plan) and $3.166 billion of EBIT,
excluding approximately $53 million in impairment charges for
operating stores (108% of projected EBIT in its 2009 operating
plan). The Company achieved these results through disciplined
management of inventory levels and store staffing (without
sacrificing customer satisfaction), product mix, inventory
shrink, distribution costs and general and administrative
expenses. In addition, the Company continued its focus on
superior customer service and highlighted repair and
maintenance-related projects in its advertising and provided
information and tips to customers to help them complete their
home improvement projects. The Companys executives earned
above target awards for 2009 under the Companys non-equity
incentive plan for achieving these results.
The Committee approved performance-based restricted stock awards
to senior management employees in 2007 and 2008 that will become
vested only if the Company satisfies a three-year performance
objective set by the Committee when the awards were approved.
The Committee adopted a time-vesting schedule for the regular,
annual restricted stock awards granted on March 1, 2009 due
to the continuing uncertainty in the economy and to aid in the
retention of senior management employees.
Compensation
Philosophy and Objectives
The Committee believes that total compensation should support
Lowes key strategic objectives by:
|
|
|
|
|
Rewarding success in achieving financial performance goals,
long-term shareholder value creation, customer satisfaction and
continuous improvement in the areas of quality and productivity.
|
|
|
|
Ensuring that shareholders and customers view Lowes as a
premier retail organization that demonstrates best practices in
business, operations and personnel.
|
|
|
|
Ensuring incentive plans encourage executives to take
appropriate risks aimed at enhancing Lowes competitive
advantage and expanding shareholder value without threatening
the long-term viability of the Company.
|
Role of
the Compensation Committee
The executive compensation program administered by the Committee
applies to all executive officers, including the executive
officers named in the compensation disclosure tables that follow
this section. Members of the Committee are appointed by the
Board of Directors. There are currently five members of the
Committee, all of whom are independent, non-employee directors.
Robert L. Johnson, a member of the Committee since May 2009, is
an independent, non-employee director, but he is not an outside
director under Section 162(m) of the
16
Internal Revenue Code due to the sponsorship agreement between
the Company and the Charlotte Bobcats NBA team described on
pages 7 and 8. For this reason, Mr. Johnson does not
participate in any decisions with respect to performance based
compensation awarded under the Companys equity and
non-equity incentive plans.
The Committee meets in person four times a year, telephonically
as needed and also occasionally considers and takes action by
written consent. The Chairman of the Committee reports all the
actions and recommendations of the Committee to the Board of
Directors.
The Committee has full discretionary power and authority to
administer the executive compensation program. In carrying out
its responsibilities, the Committee:
|
|
|
|
|
Communicates the Companys executive compensation
philosophies and policies to shareholders;
|
|
|
|
Participates in the continuing development of, and approves any
changes in, the program;
|
|
|
|
Monitors and approves annually the base salary and incentive
compensation portions of the program, including participation,
performance goals and criteria and determination of award
payouts;
|
|
|
|
Initiates and approves all compensation decisions for the
Chairman and Chief Executive Officer of the Company, subject to
final ratification by the independent members of the Board of
Directors;
|
|
|
|
Reviews general compensation levels and programs for all other
Section 16 reporting officers to ensure competitiveness and
appropriateness; and
|
|
|
|
Encourages executives to take appropriate risks aimed at
enhancing Lowes competitive advantage and expanding
long-term shareholder value without threatening the long-term
viability of the Company.
|
Role of
the Independent Compensation Consultant
The Committee has directly engaged and regularly consults with
an independent consultant for advice on executive compensation
matters. For the fiscal year ended January 29, 2010, the
Committee consulted with senior members of the compensation
consulting practice of Hewitt Associates. Hewitt was engaged to
(i) help ensure that the Committees actions are
consistent with the Companys business needs, pay
philosophy, prevailing market practices and relevant legal and
regulatory mandates, (ii) provide market data as background
against which the Committee can consider executive management
base salary, bonus and long-term incentive awards each year and
(iii) consult with the Committee on how best to make
compensation decisions with respect to executive management in a
manner that is consistent with shareholders long-term
interests.
Hewitt does not perform any other consulting services for the
Company with respect to compensation, benefit plan design or
actuarial services. The Lowes administrative committee,
the ERISA named fiduciary for the Lowes 401(k)
Plan, separately engaged Hewitt to provide investment advisor
services to the administrative committee for the 401(k)
Plans investment options. The Committee reviewed the
retention of Hewitt as the investment advisor to the 401(k) Plan
and concluded that the investment advisor services do not
conflict with the compensation consulting services Hewitt
provides to the Committee. The aggregate fees paid to Hewitt in
2009 were $203,304 for executive compensation consulting
services and $155,982 for the 401(k) Plan investment advisor
services.
Role of
Company Management
The Committee is also supported in its work by the
Companys Human Resource Management executives and
supporting personnel. The Companys Senior Vice President
of Human Resources works most closely with the Committee, both
in providing information and analysis for review and in advising
the Committee concerning compensation decisions (except as it
relates specifically to her compensation). The Chairman and
Chief Executive Officer provides input to the Senior Vice
President of Human Resources and her staff to develop
recommendations concerning executive officer compensation, with
the exception of his compensation, and presents these
recommendations to the Committee.
In 2009, the Company retained PricewaterhouseCoopers, LLC
(PwC) to assist with the development of alternative
designs for performance-based equity incentive plan awards. The
Committee reviewed the design alternatives at its November 2009
meeting and referred them to its consultant, Hewitt, for further
review and analysis. At its January 2010 meeting, the Committee
decided to adopt a single, twelve-month performance
17
measurement period for the 2010 non-equity incentive
compensation plan. In view of (i) the change in the
non-equity incentive compensation plan, (ii) the
Committees continued concern over the volatility in the
housing industry and broader economy, (iii) the unknown
long-term cost of proposed federal health care reform
legislation and (iv) the Committees desire to promote
the retention of senior management employees, the Committee
decided not to adopt any of the design alternatives for the 2010
equity incentive plan awards. The aggregate fees paid to PwC in
2009 were $22,143 for the equity incentive plan design services.
PwC also provides tax compliance and review services to the
Company. The aggregate fees paid to PwC in 2009 for those
services were $1,100,976.
General
Principles of the Companys Executive Compensation
Program
Competitive Pay for Performance. The program
is designed to establish a strong link between the creation of
shareholder value and the compensation earned by the
Companys executive officers. The fundamental objectives of
the program are to:
|
|
|
|
|
Maximize long-term shareholder value;
|
|
|
|
Provide an opportunity for executives to earn meaningful stock
ownership;
|
|
|
|
Align executive compensation with the Companys vision,
values and business strategies;
|
|
|
|
Attract and retain executives who have the leadership skills and
motivation deemed critical to support the Companys ability
to enhance long-term shareholder value;
|
|
|
|
Provide compensation that is commensurate with the
Companys performance and the contributions made by
executives toward that performance;
|
|
|
|
Support the long-term growth and success of the Company; and
|
|
|
|
Ensure incentives do not promote inappropriate risk.
|
Analysis of the Market. The
program is intended to provide total annual compensation at the
median of companies of similar size and complexity when the
Company meets its financial performance goals. At the same time,
the program seeks to provide above-average total annual
compensation if the Companys financial performance goals
are exceeded, and below-average total annual compensation
if the Companys financial performance goals are not
achieved.
At the beginning of each fiscal year, the Committee reviews an
independent consultant-prepared analysis of the compensation
paid to executives of a comparable group of companies. The
Committee uses the analysis to review the market and to set
target compensation levels for the fiscal year.
The Committee reviews the composition of the comparable company
group each year to ensure the group consists of companies that
satisfy the Committees guidelines and to make any changes
in the group the Committee deems appropriate. The Committee
believes the groups members should be similar in size and
complexity to the Company and represent companies with whom the
Company competes for employees. The Committee, upon the
recommendation of Hewitt, used the following guidelines to
select the members of the comparable company group for the
Committees 2009 fiscal year compensation decisions:
|
|
|
|
|
Major United States retailers with revenue in excess of
$15 billion and large general industry companies in the
consumer products, broader manufacturing and service industries
with revenues in the $10 billion to $40 billion range;
|
|
|
|
Median 2008 total revenue for the comparable company group of
$24.5 billion (compared to the Companys 2008 revenue
of $48.2 billion); and
|
|
|
|
Median market capitalization at the time Hewitt prepared its
analysis of $23.3 billion (compared with Lowes market
capitalization at that time of approximately $27 billion).
|
The companies in the comparable company group approved by the
Committee were 3M Company; Best Buy Co., Inc.; CVS Caremark
Corporation; Deere & Company; General Mills, Inc.; The
Home Depot, Inc.; J.C. Penney Company, Inc.; Kimberly-Clark
Corporation; Macys, Inc. (formerly Federated Department
Stores, Inc.); Masco Corporation; McDonalds Corporation;
Sara Lee Corporation; Staples, Inc.; SUPERVALU Inc.; Target
Corporation; United Parcel Service, Inc.; Walgreen Co.; Wal-Mart
Stores, Inc.; and Whirlpool Corporation. For the 2009
18
fiscal year, the Committee removed American Standard Companies,
Inc. from the comparable company group because American Standard
sold all of its businesses other than its air conditioning
systems and services business in 2007 and was subsequently
acquired by Ingersoll-Rand Company Limited in 2009.
Hewitt used data from its proprietary Hewitt Total Compensation
Measurementtm
database as the primary data source for the analysis. Hewitt
also used data from proxies filed by the members of the
comparable company group in 2008 for additional reference data.
The Companys compensation philosophy is to pay
compensation at the median of companies of similar size and
complexity. In keeping with this philosophy, the Committee
accepted Hewitts recommendation to use as a guideline the
65th
percentile of the comparable company group data to evaluate
whether each executives (i) base salary,
(ii) threshold, target and maximum annual non-equity
incentive compensation award and (iii) equity incentive
plan award is at the market median. The Committee believes the
65th
percentile is the best match of the size and complexity of the
Company to a market median of the comparable company group. This
percentile is also consistent with the financial performance of
the Company compared to the
65th
percentile of performance of the comparable company group in
several key areas, such as sales growth, growth in earnings per
share, return on capital, return on equity and total shareholder
return, over multiple measurement periods. The Committee also
believes this approach is analogous to using size-adjusted data,
but it eliminates the subjective judgments required to develop
size-adjusted survey data and a hypothetical median based on
that size-adjusted data.
The analysis reviewed by the Committee showed that the total
target compensation opportunities for all the executives other
than Mr. Niblock were within market levels and that the
Companys program generally has more pay at risk (that is,
the executives base salaries are at or below market levels
while their at-risk pay opportunities (non-equity and long-term
equity based incentives) are above market levels) than the
market. The analysis showed that Mr. Niblocks base
salary was below market and his below market base salary results
in his target non-equity incentive and total target compensation
being below market as well.
After reviewing the analysis, the Committee decided to freeze
the base salaries of the Chairman and Chief Executive Officer,
the President and Chief Operating Officer, all executive vice
presidents and all senior vice presidents of the Company for the
2009 fiscal year. The Committee decided to make no changes in
the components of each executives total annual
compensation target based on the analysis and taking into
consideration the re-balancing of compensation elements for the
executive vice presidents the Committee approved for 2008.
In March 2009, the Committee conducted a self audit of the risk
associated with the Companys non-equity and equity
incentive plans. The Committee considered the balance between
pay components, competitive practice, the setting of appropriate
performance targets and the overlap of performance periods. The
Chief Financial Officer actively participated in the Committee
meeting to discuss the setting of performance targets and the
verification of results. The Committee believes the
Companys pay practices, stock ownership and holding
requirements and clawback provisions all discourage
inappropriate risk taking by Company executives.
The following table shows the at-risk elements of pay under the
program for 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Equity
|
|
|
|
|
|
|
|
|
Incentive Plan
|
|
|
|
|
|
|
|
|
Award (Guideline
|
|
|
Annual Non-Equity Incentive Plan
|
|
Value of
|
Title
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Award)
|
|
Chairman and Chief Executive Officer
|
|
35% of base salary
|
|
200% of base salary
|
|
300% of base salary
|
|
7.0 times base salary
|
President and Chief Operating Officer
|
|
35% of base salary
|
|
125% of base salary
|
|
250% of base salary
|
|
4.0 times base salary
|
Executive Vice Presidents
|
|
35% of base salary
|
|
90% of base salary
|
|
180% of base salary
|
|
3.0 times base salary
|
Compensation
Paid under the Executive Compensation Program in 2009
Base Salary. Base salaries for executive
officers are established on the basis of the qualifications and
experience of the executive, the nature of the job
responsibilities and the base salaries for competitive positions
in the market as described above. The Committee reviews and
approves executive officers base salaries annually. Any
19
action by the Committee with respect to the base salary of the
Chairman and Chief Executive Officer is subject to ratification
by the independent members of the Board of Directors. The
Committee did not approve any increases in executive officer
base salaries for 2009. The Committee has also decided not to
provide any increase in executive officer base salaries for 2010.
Non-Equity Incentive Plan
Compensation. Executives earn non-equity
incentive compensation under the program for each fiscal year
based on the Companys achievement of one or more financial
performance measures established by the Committee. Due to the
continued uncertainty of the economic environment in which the
Company operated in 2009, the Committee continued for 2009 the
practice that was first adopted in 2008 of having two six-month
performance measurement periods with separate performance levels
established at the beginning of each six-month period. The
Committee believes the two six-month performance measurement
periods enable the setting of performance goals that would not
be set either too low or too high in the event the economic
environment experienced an improvement or decline that could not
have been foreseen over a longer, one year performance
measurement period.
For both performance measurement periods in 2009, the Committee
adopted EBIT (weighted 75%) and sales (weighted 25%) as the
performance measures for the non-equity incentive compensation
plan. The Committee believes EBIT is an effective performance
measure because it rewards the profitability of existing stores
and the development of new stores that contribute quickly to the
Companys earnings. The Committee included the sales
performance measure to focus the executives on driving market
share gains given the disruptions occurring in the economy.
The following tables show the threshold, target and maximum
performance levels for EBIT and sales established by the
Committee for the two six-month performance measurement periods
in 2009. The target performance levels for both of the six-month
performance periods were based on the Companys operating
plan. The plan required aggressive management of inventory
levels and store staffing (without sacrificing customer
satisfaction), product mix, inventory shrink, distribution costs
and general and administrative expenses. The Companys
actual performance during the two six-month performance periods
is also shown in the following tables.
The threshold, target and maximum EBIT performance levels shown
below for the second six-month period in 2009 did not include
any impairment charges in the plan for operating stores.
Similarly, the actual EBIT performance shown below does not
include approximately $53 million in actual impairment
charges recorded by the Company for operating stores for the
second six-month period. The Company is required to record an
impairment charge for financial accounting purposes if the fair
value of a store is less than the carrying value of the store.
The Committee believes the Companys EBIT without the
impairment charges for operating stores more accurately measures
the earnings produced by store operations.
First
Six-Month Period (February 2009 through July
2009) Performance Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Levels Established by the Compensation
|
|
|
|
|
|
|
Committee
|
|
|
|
|
Performance Measure
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Actual Performance
|
|
|
EBIT
|
|
$
|
1.877 billion
|
|
|
$
|
2.014 billion
|
|
|
$
|
2.151 billion
|
|
|
$
|
2.130 billion
|
|
Sales
|
|
$
|
25.257 billion
|
|
|
$
|
26.309 billion
|
|
|
$
|
27.361 billion
|
|
|
$
|
25.676 billion
|
|
Second
Six-Month Period (August 2009 through January
2010) Performance Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Levels Established by the Compensation
|
|
|
|
|
|
|
Committee
|
|
|
|
|
Performance Measure
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Actual Performance
|
|
|
EBIT
|
|
$
|
838 million
|
|
|
$
|
931 million
|
|
|
$
|
1.024 billion
|
|
|
$
|
1.036 billion
|
(1)
|
Sales
|
|
$
|
20.596 billion
|
|
|
$
|
21.454 billion
|
|
|
$
|
22.312 billion
|
|
|
$
|
21.543 billion
|
|
|
|
|
(1) |
|
Excluding, as described above, approximately $53 million in
impairment charges for operating stores. |
20
Based on the performance measures established by the Committee
and the Companys actual performance, the named executives
earned non-equity incentive awards for the two six-month
performance periods in 2009 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Six-Month Period
|
|
|
Second Six-Month Period
|
|
|
|
EBIT
|
|
|
Sales
|
|
|
Total
|
|
|
EBIT
|
|
|
Sales
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Robert A. Niblock
|
|
$
|
1,174,294
|
|
|
$
|
138,501
|
|
|
$
|
1,312,795
|
|
|
$
|
1,237,500
|
|
|
$
|
289,388
|
|
|
$
|
1,526,888
|
|
Robert F. Hull, Jr.
|
|
$
|
411,365
|
|
|
$
|
46,959
|
|
|
$
|
458,324
|
|
|
$
|
445,500
|
|
|
$
|
82,012
|
|
|
$
|
527,512
|
|
Larry D. Stone
|
|
$
|
727,163
|
|
|
$
|
74,390
|
|
|
$
|
801,553
|
|
|
$
|
787,500
|
|
|
$
|
144,959
|
|
|
$
|
932,459
|
|
Charles W. Canter, Jr.
|
|
$
|
386,434
|
|
|
$
|
44,113
|
|
|
$
|
430,547
|
|
|
$
|
418,500
|
|
|
$
|
77,041
|
|
|
$
|
495,541
|
|
Gregory M. Bridgeford
|
|
$
|
367,735
|
|
|
$
|
41,979
|
|
|
$
|
409,714
|
|
|
$
|
398,250
|
|
|
$
|
73,313
|
|
|
$
|
471,563
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total 2009 Non-Equity
|
|
|
|
Total 2009 Non-Equity
|
|
|
Incentive Award
|
|
Name
|
|
Incentive Award
|
|
|
(% of base salary)
|
|
|
Robert A. Niblock
|
|
$
|
2,839,683
|
|
|
|
258
|
%
|
Robert F. Hull, Jr.
|
|
$
|
985,836
|
|
|
|
149
|
%
|
Larry D. Stone
|
|
$
|
1,734,012
|
|
|
|
206
|
%
|
Charles W. Canter, Jr.
|
|
$
|
926,088
|
|
|
|
149
|
%
|
Gregory M. Bridgeford
|
|
$
|
881,277
|
|
|
|
149
|
%
|
Equity Incentive Plan Awards. The
Companys equity incentive plans authorize awards of stock
options, performance- and time-vested restricted stock,
performance accelerated restricted stock (PARS),
performance shares and stock appreciation rights. Although the
Committee generally has the discretion to establish the terms of
all awards, the equity incentive plans limit certain award
terms. For example, the Committee may not extend the original
term of a stock option or, except as provided by the plans
anti-dilution provision, reduce its exercise price. In addition,
the plans generally require the vesting period for stock awards
to be at least three years, although a period as short as one
year is permitted if based on the satisfaction of financial
performance objectives prescribed by the Committee and stock
options may not be re-priced without shareholder approval.
Each year, at its meeting in January or February, the Committee
makes its annual equity incentive award decisions. Currently,
all store managers and employees in more senior positions are
eligible to receive an annual equity incentive award. The
effective date for the annual equity awards is the March 1
following the Committees January or February meeting.
At the January or February meeting, the Committee considers and
approves the following factors related to the awards:
|
|
|
|
|
|
The base salary multiple to be used to determine the
target value of the equity incentive award. The multiple set by
the Committee is multiplied by each executives actual base
salary amount to determine the target grant date value of the
executives equity incentive award. The Committee used the
following multiples for the 2009 awards: 7.0 times base salary
for Mr. Niblock; 4.0 times base salary for Mr. Stone
and 3.0 times base salary for Messrs. Hull, Bridgeford and
Canter. There was no change in these multiples from 2008.
|
|
|
|
|
The percentage of the total target grant date value of
the award to be awarded as stock options, shares of restricted
stock, PARS or another form of award permitted by the equity
incentive plans. On February 5, 2009, the Committee
determined that 50% of the total grant date value of the awards
to the named executive officers should be in the form of
restricted stock and the remaining 50% should be in the form of
stock options.
|
|
|
|
|
The vesting terms for the awards. The
Committee previously approved a three-year vesting schedule for
stock option awards, and the Committee made no change in that
vesting schedule for the March 1, 2009 stock option awards.
|
|
In February 2009, the Committee observed that 25% of the 2007
restricted stock awards were projected to become vested. The
Committee concluded that the low projected vesting level was the
result of setting performance objectives that did not fully
contemplate the effect of the dramatic
21
economic downturn and its continuing impact on the housing
market and home improvement industry and not the lack of
performance by Company management. The Committee did not
consider any supplemental equity grants or overriding the
performance vesting provisions of the 2007 restricted stock
awards to compensate executives for the low projected vesting
caused by unforeseen external factors that were beyond the
control of the executives. However, the Committee adopted a
time-based vesting schedule for the March 1, 2009
restricted stock awards that provides for 100% vesting on the
third anniversary of the award date. This vesting schedule
represents a change from the performance-vesting schedule the
Committee adopted for the 2007 and 2008 restricted stock awards
due to the continuing uncertainty in the economy and to aid in
the retention of senior management employees.
The performance-vesting schedules adopted for the 2007 and 2008
restricted stock awards provide that the restricted stock will
become vested based on the Companys return on non-cash
average assets (RONCAA) during the three fiscal year
period following the awards. RONCAA is computed on an annual
basis by dividing the Companys EBIT for the year by the
average of the Companys non-cash assets as of the
beginning and end of the year. The return percentages for each
year in the performance period are then averaged to yield a
RONCAA for the three-year performance period.
The performance-vesting period for the 2007 restricted stock
awards expired on January 29, 2010, the last day of the
Companys 2009 fiscal year. The following table shows the
performance-vesting schedule that applied to those awards:
|
|
|
|
|
|
|
Percentage of
|
|
RONCCA for Three Fiscal Year Period Ended January 29,
2010
|
|
Restricted Stock Vested
|
|
|
Less than 12%
|
|
|
0
|
%
|
At least 12% but less than 13%
|
|
|
25
|
%
|
At least 13% but less than 14%
|
|
|
50
|
%
|
At least 14% but less than 15%
|
|
|
75
|
%
|
15% or more
|
|
|
100
|
%
|
The Companys RONCAA for the three-year performance period
was 12.76%. Based on that RONCAA level and the absence of any
incremental vesting for RONCCA between the levels in the table,
25% of the performance-based restricted shares vested. The
remaining 75% of the shares were forfeited.
Based on the Companys performance during the 2008 and 2009
fiscal years, the Committee anticipates that approximately 63%
of the performance-based restricted stock granted on
March 1, 2008 will become vested following the expiration
of the three-year performance period for that grant in 2011.
|
|
|
|
|
|
The value factor for each type of award. The market value
of the Companys Common Stock is multiplied by a value
factor for each type of award to calculate the number of shares
to be included in the awards. The value factor is the same
modified Black-Scholes value factor Hewitt uses for its analysis
of the compensation paid to executives of the comparable group
of companies. For fiscal year 2009 awards, the value factor was
0.269 for stock options and 0.885 for time-vested restricted
stock awards. The market value of the Companys Common
Stock as of March 1 is used to determine the number of shares
included in the equity incentive awards to all executives. The
exercise price for all stock options included in the equity
awards is equal to the closing price of the Companys
Common Stock on the March 1 grant date (or the most recent prior
business day in the event March 1 falls on a non-business day).
|
|
Pursuant to authority delegated by the Committee, on August 1 of
each year, the Chairman and Chief Executive Officer makes equity
incentive awards to all employees who are hired or promoted into
a store manager or more senior position after the preceding
March 1 annual grant date and who are not Section 16
officers. The same number of shares for each position as were
granted on the preceding March 1 are granted on the succeeding
August 1 at the closing price of the Companys Common Stock
on August 1 (or the most recent prior business day in the event
August 1 falls on a
22
non-business day). The Chairman and Chief Executive Officer also
has the authority to make special retention, assignment or
hiring package grants to employees who are not Section 16
officers as of May 1, August 1 or November 1.
Any other equity incentive grants, such as special retention
grants or hiring package grants to Section 16 officers are
reviewed and approved by the Committee at a meeting held prior
to the grant effective date.
Summary
of CEOs 2009 Compensation
The following tables show how Mr. Niblocks actual
2009 compensation compares with actual performance and the
future performance required to realize gains from his 2009
equity incentive plan awards. These tables differ from the
amounts presented for Mr. Niblock in the Summary
Compensation Table on page 28 because the Summary
Compensation Table combines actual compensation received in 2009
and the grant date fair value of his 2009 equity incentive
awards.
The first table provides information as to the actual levels of
compensation Mr. Niblock received during 2009 and a
description of the performance results that generated the
compensation. The equity incentive plan awards were earned over
multiple years. For this reason, the first table provides both
the total value of the equity incentive plan awards and the
ratable amount of compensation earned each year the awards were
outstanding. The second table shows the equity incentive plan
awards granted to Mr. Niblock in 2009 that may be earned
over future years.
Compensation
Received by Mr. Niblock in 2009*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Annualized
|
|
|
|
|
|
Period
|
|
Received
|
|
|
Amount
|
|
|
|
|
|
Covered
|
|
($)
|
|
|
($)
|
|
|
Description
|
|
Base Salary
|
|
2009
|
|
$
|
1,100,000
|
|
|
$
|
1,100,000
|
|
|
Base salary is targeted to be set at the
65th
percentile of the comparable company group. The base salary was
not increased in 2009.
|
Non-Equity Incentive Plan Compensation
|
|
2009
|
|
$
|
2,839,683
|
|
|
$
|
2,839,683
|
|
|
The non-equity incentive compensation paid for 2009 was based on
the Companys EBIT and sales for two six-month performance
measurement periods as described beginning on page 20. The
amount paid was equal to 129% of the 2009 target incentive
award.
|
Equity Incentive Plan Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option Exercises
|
|
2003-2009
|
|
$
|
706,881
|
|
|
$
|
100,983
|
|
|
The amount shown is the gain Mr. Niblock realized when he
exercised stock options for 298,000 shares on November 24,
2009. The options were granted to Mr. Niblock on March 1,
2003.
|
Restricted Stock Vesting
|
|
2007-2009
|
|
$
|
871,413
|
|
|
$
|
290,471
|
|
|
The amount shown is the value (based on the closing market price
of the Companys Common Stock on January 29, 2010 of
$21.65) of 40,250 shares of restricted stock that vested on
March 1, 2010 based on the Companys RONCAA over the three
fiscal year performance period ending with the 2009 fiscal year
as described on page 22. Based on the Companys RONCAA
during the performance period, 25% of the performance-based
restricted shares awarded on March 1, 2007 became vested.
The remaining 75% of the shares (120,750 shares having a
value of $2,614,238) were forfeited.
|
|
|
2005-2009
|
|
$
|
1,251,600
|
|
|
$
|
182,525
|
|
|
The amount shown is the value of 60,000 shares of
restricted Common Stock that vested on September 1, 2009 (based
on the closing market price of the Common Stock on that date of
$20.86). The shares were granted to Mr. Niblock on September 1,
2005.
|
Total Compensation Received in 2009
|
|
2003-2009
|
|
$
|
6,769,577
|
|
|
$
|
4,513,662
|
|
|
|
|
|
|
* |
|
This table does not include the Companys matching
contribution of $166,588 to the Lowes 401(k) and Benefit
Restoration Plans or the value of perquisites. Total perquisites
for 2009 were $37,927. |
23
Summary
of Mr. Niblocks 2009 Equity Incentive Plan
Awards
The amounts presented for Mr. Niblock in the stock awards
and option awards columns of the Summary Compensation Table are
the total accounting expense the Company will recognize for the
awards. The amounts do not reflect what Mr. Niblock will
actually realize if the awards become vested and the vested
stock options are exercised. The amount of compensation
Mr. Niblock will realize from the awards may be nothing or
it may be greater than the amounts presented in the Summary
Compensation Table depending on satisfaction of the performance
criteria and the future value of the Companys Common Stock.
|
|
|
|
|
|
|
Type of Equity
|
|
|
|
|
|
Financial
|
Incentive Plan
|
|
Performance/Vesting
|
|
Performance
|
|
Accounting Expense
|
Award
|
|
Period
|
|
Criteria
|
|
Estimate
|
|
244,000 shares of Restricted Stock
|
|
2009-2011
|
|
Value of the shares, which vest after three years.
|
|
Total grant date fair value = $3,864,960
|
Stock Options for 804,000 shares
|
|
2009-2016
|
|
Share price appreciation over the seven-year term of the stock
options.
|
|
Total grant date fair value = $3,658,200
|
Other
Compensation
The Companys executive officers participate in the
Lowes 401(k) Plan and the other employee benefit plans
sponsored by the Company on the same terms and conditions that
apply to all other employees. The Company makes only nominal use
of perquisites in compensating its executive officers. The
Company provides limited supplemental long-term disability
coverage for all senior vice presidents and more senior officers
whose annual compensation (base salary and target bonus) exceeds
$400,000, provided the executive has also enrolled in and paid
the cost for coverage under the Companys voluntary group
long-term disability plan that is available to all employees.
The Companys total cost for providing such supplemental
coverage to the 31 executives in this category is approximately
$39,948. All senior vice presidents and more senior officers of
the Company are required to use professional tax preparation,
filing and planning services, and the Company reimburses the
cost of such services up to an annual maximum of $5,000. Prior
to 2009, the reimbursement was grossed up for taxes. The tax
gross-up was
eliminated effective January 1, 2009. Such officers are
also required to receive an annual physical examination, at the
Companys expense, subject to maximum amounts that are
based on the officers age. In March 2007, the Committee
approved a policy that permits the President and Chief Operating
Officer to use Company-owned aircraft for up to 25 hours a
year of personal travel. The Committee approved the policy to
provide additional compensation to the President and Chief
Operating Officer and to recognize his assumption and
performance of additional duties and responsibilities. Finally,
the independent members of the Board of Directors require the
Chairman and Chief Executive Officer to utilize corporate
aircraft for all business and personal travel for his safety,
health and security, to enhance his effectiveness, to ensure
immediate access to the Chairman and Chief Executive Officer for
urgent matters and to maintain the confidentiality of the
purpose of the travel. The Company does not provide any tax
gross-up to
the Chairman and Chief Executive Officer or the President and
Chief Operating Officer for the taxable income imputed to them
for their personal use of corporate aircraft.
Nonqualified
Deferred Compensation Programs
The Company sponsors three nonqualified deferred compensation
programs for senior management employees: the Benefit
Restoration Plan, the Cash Deferral Plan and the Deferred
Compensation Program.
The Companys Benefit Restoration Plan provides qualifying
executives with benefits equivalent to those received by all
other employees under the Companys 401(k) Plan. Qualifying
executives are those whose contributions, annual additions and
other benefits, as normally provided to all participants under
the tax-qualified 401(k) Plan, would be curtailed by the effect
of Internal Revenue Code limitations and restrictions.
The Cash Deferral Plan permits qualifying executives to
voluntarily defer a portion of their base salary, non-equity
incentive compensation and certain other bonuses on a
tax-deferred basis. Qualifying executives are those employed by
the Company in more senior positions. The Company does not make
matching or any other contributions to the Cash Deferral Plan.
24
The Deferred Compensation Program is a part of the
Companys equity incentive plans. Only equity incentive
plan compensation realized from pre-2004 awards may be deferred
under the Deferred Compensation Program. Any shares representing
stock incentives that are deferred under the Deferred
Compensation Program are cancelled and tracked as
phantom shares. During the deferral period, the
participants account is credited with amounts equal to the
dividends paid on actual shares.
All of the Companys nonqualified deferred compensation
programs are unfunded. Any deferred compensation payment
obligations under the programs are at all times unsecured
payment obligations of the Company.
Potential
Payments Upon Termination or
Change-in-Control
The Company has previously entered into Management Continuity
Agreements with each of the named executive officers and other
senior officers of the Company. The Committee approved amended
and restated Management Continuity Agreements in 2009 that
comply with the requirements of Section 409A of the
Internal Revenue Code. In connection with the amendment and
restatement process, the Committee established (i) a policy
on which executive and senior officers of the Company should be
covered by a Management Continuity Agreement (resulting in a
decrease in the number of these agreements) and (ii) a
standard level of benefits to be provided under the agreements
that complies with the Senior Executive Severance Policy adopted
by the Board of Directors.
The agreements provide for certain benefits if the Company
experiences a
change-in-control
followed by termination of the executives employment:
|
|
|
|
|
by the Companys successor without cause;
|
|
|
|
by the executive during the
30-day
period following the first anniversary of the
change-in-control; or
|
|
|
|
by the executive for certain reasons, including a downgrading of
the executives position.
|
Cause means continued and willful failure to perform
duties or conduct demonstrably and materially injurious to the
Company or its affiliates.
All of the agreements with the named executives provide for
three-year terms. On the first anniversary, and every
anniversary thereafter, the term is extended automatically for
an additional year unless the Company elects not to extend the
term. All of the agreements automatically expire on the second
anniversary of a
change-in-control
notwithstanding the length of the terms remaining on the date of
the
change-in-control.
If benefits are paid under an agreement, the executive will
receive (i) a lump-sum severance payment equal to the
present value of 2.99 times the executives annual base
salary, non-equity incentive compensation and welfare insurance
costs, and (ii) any other unpaid salary and benefits to
which the executive is otherwise entitled. In addition, the
executive will be compensated for any excise tax liability he
may incur as a result of any benefits paid to the executive
being classified as excess parachute payments under
Section 280G of the Internal Revenue Code and for income
and employment taxes attributable to such excise tax
reimbursement.
All legal fees and expenses incurred by the executives in
enforcing these agreements will be paid by the Company.
The following table shows the amounts that would have been
payable to the named executive officers if a
change-in-control
of the Company had occurred on January 29, 2010 and the
named executive officers employment was terminated by the
Companys successor without cause immediately thereafter:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Welfare
|
|
Stock
|
|
Restricted
|
|
Excise Tax
|
|
|
|
|
Severance
|
|
Benefits
|
|
Options
|
|
Stock
|
|
Gross-up
|
|
Total
|
Name
|
|
($)(1)
|
|
($)(1)
|
|
($)(2)
|
|
($)(3)
|
|
($)
|
|
($)
|
|
Mr. Niblock
|
|
$
|
9,761,718
|
|
|
$
|
45,785
|
|
|
$
|
4,671,240
|
|
|
$
|
17,298,350
|
|
|
$
|
9,476,799
|
|
|
$
|
41,253,892
|
|
Mr. Hull
|
|
$
|
3,708,271
|
|
|
$
|
45,785
|
|
|
$
|
1,202,670
|
|
|
$
|
4,811,713
|
|
|
$
|
2,933,751
|
|
|
$
|
12,702,190
|
|
Mr. Stone
|
|
$
|
5,589,777
|
|
|
$
|
45,785
|
|
|
$
|
2,039,310
|
|
|
$
|
8,005,088
|
|
|
$
|
3,956,735
|
|
|
$
|
19,636,695
|
|
Mr. Canter
|
|
$
|
3,483,527
|
|
|
$
|
45,785
|
|
|
$
|
1,127,140
|
|
|
$
|
4,483,130
|
|
|
$
|
2,635,417
|
|
|
$
|
11,774,999
|
|
Mr. Bridgeford
|
|
$
|
3,314,969
|
|
|
$
|
45,785
|
|
|
$
|
1,074,850
|
|
|
$
|
4,443,663
|
|
|
|
0
|
|
|
$
|
8,879,267
|
|
|
|
|
(1) |
|
Payable in cash in a lump sum. |
25
|
|
|
(2) |
|
Value (based on the closing market price of the Companys
Common Stock on January 29, 2010 of $21.65) of unvested
in-the-money
stock options that would become vested upon a
change-in-control
of the Company. |
|
(3) |
|
Value (based on the closing market price of the Companys
Common Stock on January 29, 2010 of $21.65) of unvested
shares of restricted stock that would become vested upon a
change-in-control
of the Company. |
Stock Ownership Guidelines. The Committee
strongly believes that executive officers should own appropriate
amounts of the Companys Common Stock to align their
interests with those of the Companys shareholders. The
Companys 401(k) Plan, employee stock purchase plan and
equity incentive plans provide ample opportunity for executives
to acquire such Common Stock.
The Committee also has adopted stock ownership and retention
guidelines for all senior vice presidents and more senior
officers of the Company. The ownership target under the current
policy is ten times base salary for the Chairman and Chief
Executive Officer, six times base salary for the President and
Chief Operating Officer, four times base salary for executive
vice presidents and two times base salary for all senior vice
presidents. If an executive meets the age and service
requirements for retirement, the executive may request Board
approval of the executives retirement. If approval is
granted, the executives stock option and restricted stock
awards continue to vest in accordance with their original
vesting schedules and the stock options remain exercisable for
the remainder of their original seven-year term. This ensures an
executives interests are aligned with the Companys
interests even after retirement.
The Committee reviews compliance with the guidelines annually at
its March meeting. The Company determines the number of shares
required to be held by each senior officer as of March 1 each
year. The number of shares is determined by dividing the
ownership requirement (expressed as a dollar amount) by the
average closing price of Lowes stock for the preceding
fiscal year. Shares are counted towards ownership as follows:
|
|
|
|
|
All shares held or credited to a senior officers accounts
under the Lowes 401(k), deferred compensation and employee
stock purchase plans;
|
|
|
|
All shares owned directly by the senior officer and his or her
immediate family members residing in the same household;
|
|
|
|
50% of the number of vested stock options; and
|
|
|
|
50% of the number of shares of unvested time-based restricted
stock.
|
Senior officers may not sell the net shares resulting from a
restricted stock vesting event or stock option exercise until
the ownership requirement has been satisfied. All of the named
executive officers were in compliance with this policy for
fiscal year 2009.
Oversight
of Executive Equity Ownership; Recoupment of Incentive
Compensation
The Committee has always supported governance and compliance
practices that are transparent and protect the interests of the
Companys shareholders. To strengthen the Companys
practices in these areas, the Company has adopted
(i) controls over executive equity awards and ownership and
(ii) a policy on the recoupment of incentive compensation
in the event of significant restatement.
The Companys controls over executive equity awards and
ownership prohibit any executive from:
|
|
|
|
|
Using Company stock as collateral for any purpose, including in
a margin account;
|
|
|
|
Short sales of Company stock;
|
|
|
|
Purchasing or selling publicly-traded options that are based on
the trading price of Lowes stock; or
|
|
|
|
Entering standing purchase or sell orders for Company stock
except for a brief period of time during open window periods.
|
Trading in Lowes stock, including stock held in an account
under the Lowes 401(k) Plan, by an executive and the
executives immediate family members who reside with the
executive or whose transactions are subject to the
executives influence or control, is limited to open window
trading periods designated by the Companys General Counsel
and Chief Compliance Officer. In addition, all transactions by
an executive involving Company stock must be pre-cleared by the
General Counsel and Chief Compliance Officer.
26
The recoupment policy requires the Board of Directors to review
any incentive compensation that was provided to executive
officers on the basis of the Company having met or exceeded
specific performance targets during a performance period that is
subject to a significant restatement of Company financial
results. If (1) the incentive compensation would have been
lower had it been based on the restated financial results and
(2) the Board determines that an executive officer engaged
in fraud or intentional misconduct that caused or substantially
caused the need for the restatement, then the Board is required,
to the extent practicable, to seek to recover, for the benefit
of the Company, the portion of such compensation that would not
have been earned had the incentive compensation been based on
the financial results as restated.
Tax Deductibility of
Compensation. Section 162(m) of the Internal
Revenue Code limits the amount of non-performance based
compensation paid to the named executive officers (other than
Mr. Hull, the Chief Financial Officer) that may be deducted
by the Company for federal income tax purposes in any fiscal
year to $1,000,000. Performance-based compensation that has been
approved by the Companys shareholders and that is
administered by a committee composed entirely of outside
directors is not subject to the $1,000,000 deduction limit. All
of the Companys equity and non-equity incentive plans have
been approved by the Companys shareholders. In addition,
the compensation awarded under the plans is administered by the
members of the Committee who are outside directors under Section
162(m) of the Internal Revenue Code.
Because the Companys plans are shareholder approved and
administered solely by outside directors, all awards under those
plans, other than restricted stock awards that do not vest
solely on the performance of the Company, should qualify as
performance-based compensation that is fully
deductible and not subject to the Internal Revenue Code
Section 162(m) deduction limit. Although the Committee has
not adopted a formal policy that requires all compensation paid
to the named executive officers to be deductible, whenever
practical, the Committee structures compensation plans to make
the compensation paid thereunder fully deductible.
27
|
|
B.
|
Executive
Compensation Disclosure Tables
|
Summary Compensation Table
This table shows the base salary, annual non-equity
incentive compensation and all other compensation paid to the
named executives. The table also shows the grant date fair value
of the stock and option awards made to the named executives.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Plan
|
|
All Other
|
|
|
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Compensation
|
|
Total
|
Name and Principal Position
|
|
Year
|
|
($)
|
|
($)
|
|
($)(1)
|
|
($)(1)
|
|
($)
|
|
($)(2)
|
|
($)
|
|
Robert A. Niblock
|
|
|
2009
|
|
|
$
|
1,100,000
|
|
|
|
0
|
|
|
$
|
3,864,960
|
|
|
$
|
3,658,200
|
|
|
$
|
2,839,683
|
|
|
$
|
204,515
|
|
|
$
|
11,667,358
|
|
Chairman of the Board and
|
|
|
2008
|
|
|
$
|
1,100,000
|
|
|
|
0
|
|
|
$
|
5,608,980
|
|
|
$
|
2,929,835
|
|
|
$
|
1,500,763
|
|
|
$
|
153,201
|
|
|
$
|
11,292,779
|
|
Chief Executive Officer
|
|
|
2007
|
|
|
$
|
1,050,000
|
|
|
|
0
|
|
|
$
|
5,185,810
|
|
|
$
|
2,745,426
|
|
|
|
0
|
|
|
$
|
104,707
|
|
|
$
|
9,085,943
|
|
Robert F. Hull, Jr.
|
|
|
2009
|
|
|
$
|
660,000
|
|
|
|
0
|
|
|
$
|
997,920
|
|
|
$
|
941,850
|
|
|
$
|
985,836
|
|
|
$
|
73,948
|
|
|
$
|
3,659,554
|
|
Executive Vice President
|
|
|
2008
|
|
|
$
|
660,000
|
|
|
|
0
|
|
|
$
|
1,438,200
|
|
|
$
|
750,836
|
|
|
$
|
463,162
|
|
|
$
|
54,859
|
|
|
$
|
3,367,057
|
|
and Chief Financial Officer
|
|
|
2007
|
|
|
$
|
550,000
|
|
|
|
0
|
|
|
$
|
1,534,580
|
|
|
$
|
721,186
|
|
|
|
0
|
|
|
$
|
29,953
|
|
|
$
|
2,835,719
|
|
Larry D. Stone
|
|
|
2009
|
|
|
$
|
840,000
|
|
|
|
0
|
|
|
$
|
1,694,880
|
|
|
$
|
1,597,050
|
|
|
$
|
1,734,012
|
|
|
$
|
127,907
|
|
|
$
|
5,993,849
|
|
President and
|
|
|
2008
|
|
|
$
|
840,000
|
|
|
|
0
|
|
|
$
|
2,444,940
|
|
|
$
|
1,275,896
|
|
|
$
|
765,131
|
|
|
$
|
105,493
|
|
|
$
|
5,431,460
|
|
Chief Operating Officer
|
|
|
2007
|
|
|
$
|
800,000
|
|
|
|
0
|
|
|
$
|
2,254,700
|
|
|
$
|
1,196,514
|
|
|
|
0
|
|
|
$
|
57,438
|
|
|
$
|
4,308,652
|
|
Charles W. Canter, Jr.
|
|
|
2009
|
|
|
$
|
620,000
|
|
|
|
0
|
|
|
$
|
934,560
|
|
|
$
|
882,700
|
|
|
$
|
926,088
|
|
|
$
|
69,537
|
|
|
$
|
3,432,885
|
|
Executive Vice President,
|
|
|
2008
|
|
|
$
|
620,000
|
|
|
|
0
|
|
|
$
|
1,366,290
|
|
|
$
|
708,831
|
|
|
$
|
435,091
|
|
|
$
|
51,991
|
|
|
$
|
3,182,203
|
|
Merchandising
|
|
|
2007
|
|
|
$
|
525,000
|
|
|
|
0
|
|
|
$
|
1,405,740
|
|
|
$
|
655,624
|
|
|
|
0
|
|
|
$
|
25,751
|
|
|
$
|
2,612,115
|
|
Gregory M. Bridgeford
|
|
|
2009
|
|
|
$
|
590,000
|
|
|
|
0
|
|
|
$
|
887,040
|
|
|
$
|
841,750
|
|
|
$
|
881,277
|
|
|
$
|
69,159
|
|
|
$
|
3,269,226
|
|
Executive Vice President,
|
|
|
2008
|
|
|
$
|
590,000
|
|
|
|
0
|
|
|
$
|
1,294,380
|
|
|
$
|
672,077
|
|
|
$
|
414,038
|
|
|
$
|
52,956
|
|
|
$
|
3,023,451
|
|
Business Development
|
|
|
2007
|
|
|
$
|
500,000
|
|
|
|
0
|
|
|
$
|
1,470,160
|
|
|
$
|
688,405
|
|
|
|
0
|
|
|
$
|
28,285
|
|
|
$
|
2,686,850
|
|
|
|
|
(1) |
|
The value of the stock and option awards presented in the table
equal the grant date fair value of the awards for financial
reporting purposes (excluding the effect of estimated
forfeitures) computed in accordance with Financial Accounting
Standards Board Accounting Standards Codification Topic 718
Compensation Stock Compensation (FASB
ASC Topic 718). For financial reporting purposes, the Company
determines the fair value of a stock or option award on the
grant date. The fair value of a stock award is equal to the
closing market price of the Companys Common Stock on the
date of the award. The fair value of an option award is
determined using the Black-Scholes option-pricing model with
assumptions for expected dividend yield, expected term, expected
volatility, a risk-free interest rate and an estimated
forfeiture rate. See Note 8, Accounting for
Share-Based Payment, to the Companys consolidated
financial statements in its Annual Report on
Form 10-K
for the fiscal year ended January 29, 2010 for additional
information about the Companys accounting for share-based
compensation arrangements, including the assumptions used in the
Black-Scholes option-pricing model. |
|
|
|
Executives receive dividends on unvested shares of restricted
stock and the right to receive dividends has been factored into
the determination of the fair value of the stock awards and the
resulting amounts presented above. |
|
(2) |
|
Amounts presented consist of the following for the 2009 fiscal
year: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company Matching
|
|
|
|
|
|
|
|
|
|
|
Contributions to:
|
|
|
|
Personal
|
|
|
|
|
|
|
|
|
Benefit
|
|
|
|
Use of
|
|
Cost of Company
|
|
|
|
|
|
|
Restoration
|
|
Reimbursement of Tax
|
|
Corporate
|
|
Required
|
|
|
|
|
401(k) Plan
|
|
Plan
|
|
Compliance Costs
|
|
Aircraft
|
|
Physical Exam
|
|
Total
|
Name
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
Mr. Niblock
|
|
$
|
6,816
|
|
|
$
|
159,772
|
|
|
$
|
5,000
|
|
|
$
|
30,297
|
|
|
$
|
2,630
|
|
|
$
|
204,515
|
|
Mr. Hull
|
|
$
|
9,334
|
|
|
$
|
60,614
|
|
|
$
|
2,370
|
|
|
|
0
|
|
|
$
|
1,630
|
|
|
$
|
73,948
|
|
Mr. Stone
|
|
$
|
9,039
|
|
|
$
|
100,356
|
|
|
$
|
3,500
|
|
|
$
|
11,275
|
|
|
$
|
3,737
|
|
|
$
|
127,907
|
|
Mr. Canter
|
|
$
|
9,399
|
|
|
$
|
55,375
|
|
|
$
|
2,750
|
|
|
|
0
|
|
|
$
|
2,013
|
|
|
$
|
69,537
|
|
Mr. Bridgeford
|
|
$
|
9,448
|
|
|
$
|
53,081
|
|
|
$
|
5,000
|
|
|
|
0
|
|
|
$
|
1,630
|
|
|
$
|
69,159
|
|
All amounts presented above, other than the amount for personal
use of corporate aircraft, equal the actual cost to the Company
of the particular benefit or perquisite provided. The amount
presented for personal use of corporate aircraft is equal to the
incremental cost to the Company of such use. Incremental cost
includes fuel, landing and ramp fees and other variable costs
directly attributable to the personal use. Incremental cost does
not include an allocable share of the fixed costs associated
with the Companys ownership of the aircraft.
28
Grants of Plan-Based Awards
This table presents the potential annual non-equity
incentive awards the named executives were eligible to earn in
2009, the restricted stock and stock options awarded to the
executives in 2009 and the grant date fair value of the
restricted stock and option awards.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Awards:
|
|
Exercise or
|
|
Grant Date
|
|
|
|
|
|
|
Estimated Future Payouts Under
|
|
Number of
|
|
Number of
|
|
Base
|
|
Fair Value
|
|
|
|
|
Date of
|
|
Non-Equity Incentive Plan
|
|
Shares of
|
|
Securities
|
|
Price of
|
|
of Stock and
|
|
|
|
|
Compensation
|
|
Awards(1)
|
|
Stock or
|
|
Underlying
|
|
Option
|
|
Option
|
|
|
Grant
|
|
Committee
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Units
|
|
Options
|
|
Awards
|
|
Awards
|
Name
|
|
Date
|
|
Action
|
|
($)
|
|
($)
|
|
($)
|
|
(#)(2)
|
|
(#)(3)
|
|
($/Sh)
|
|
($)
|
|
Mr. Niblock
|
|
|
|
|
|
|
|
|
|
$
|
385,000
|
|
|
$
|
2,200,000
|
|
|
$
|
3,300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/01/09
|
|
|
|
02/19/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
804,000
|
|
|
$
|
15.84
|
|
|
$
|
3,658,200
|
|
|
|
|
03/01/09
|
|
|
|
02/19/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
244,000
|
|
|
|
|
|
|
|
|
|
|
$
|
3,864,960
|
|
Mr. Hull
|
|
|
|
|
|
|
|
|
|
$
|
231,000
|
|
|
$
|
594,000
|
|
|
$
|
1,188,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/01/09
|
|
|
|
02/19/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
207,000
|
|
|
$
|
15.84
|
|
|
$
|
941,850
|
|
|
|
|
03/01/09
|
|
|
|
02/19/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63,000
|
|
|
|
|
|
|
|
|
|
|
$
|
997,920
|
|
Mr. Stone
|
|
|
|
|
|
|
|
|
|
$
|
294,000
|
|
|
$
|
1,050,000
|
|
|
$
|
2,100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/01/09
|
|
|
|
02/19/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
351,000
|
|
|
$
|
15.84
|
|
|
$
|
1,597,050
|
|
|
|
|
03/01/09
|
|
|
|
02/19/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
107,000
|
|
|
|
|
|
|
|
|
|
|
$
|
1,694,880
|
|
Mr. Canter
|
|
|
|
|
|
|
|
|
|
$
|
217,000
|
|
|
$
|
558,000
|
|
|
$
|
1,116,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/01/09
|
|
|
|
02/19/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
194,000
|
|
|
$
|
15.84
|
|
|
$
|
882,700
|
|
|
|
|
03/01/09
|
|
|
|
02/19/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,000
|
|
|
|
|
|
|
|
|
|
|
$
|
934,560
|
|
Mr. Bridgeford
|
|
|
|
|
|
|
|
|
|
$
|
206,500
|
|
|
$
|
531,000
|
|
|
$
|
1,062,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/01/09
|
|
|
|
02/19/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
185,000
|
|
|
$
|
15.84
|
|
|
$
|
841,750
|
|
|
|
|
03/01/09
|
|
|
|
02/19/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,000
|
|
|
|
|
|
|
|
|
|
|
$
|
887,040
|
|
|
|
|
(1) |
|
The executives are eligible to earn annual non-equity incentive
compensation under the Companys non-equity incentive plan
for each fiscal year based on the Companys achievement of
one or more performance measures established at the beginning of
the fiscal year by the Committee. For the fiscal year ended
January 29, 2010, the performance measures selected by the
Committee were the Companys earnings before interest and
taxes (weighted 75%) and sales (weighted 25%). The Committee
established separate threshold, target and maximum levels of
performance for both measures for the first half of the 2009
fiscal year and the second half of the 2009 fiscal year. The
performance levels for both measures and the Companys
actual performance are shown beginning on page 20. |
|
(2) |
|
The stock awards become vested on March 1, 2012, the third
anniversary of the grant date. |
|
|
|
In the event an executive terminates employment due to death,
disability or retirement, any unvested shares will become
vested. Retirement for this purpose is defined as termination of
employment with the approval of the Board on or after the date
the executive has satisfied an age and service requirement,
provided the executive has given the Board advance notice of
such retirement. Messrs. Niblock, Stone, Canter and
Bridgeford have satisfied the age and service requirement for
retirement. Mr. Hull will satisfy the age and service
requirement for retirement upon attainment of age 55. The
executives receive all cash dividends paid with respect to the
shares included in the stock awards during the vesting period. |
|
(3) |
|
All options have a seven-year term and an exercise price equal
to the closing price of the Companys Common Stock on the
grant date. The options vest in three equal annual installments
on each of the first three anniversaries of the grant date or,
if earlier, the date the executive terminates employment due to
death or disability or, in the case of Messrs. Niblock,
Stone and Bridgeford, in the event of retirement, and remain
exercisable until their expiration dates. The options granted to
Messrs. Hull and Canter will become exercisable in the
event of retirement in accordance with the original three-year
vesting schedule and remain exercisable until their expiration
dates. Retirement for this purpose has the same meaning as for
the stock awards as described in Footnote 2 above. |
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
Option Awards
|
|
|
|
Market
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Number of
|
|
Value of
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Units of
|
|
Units of
|
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
|
|
Stock That
|
|
Stock That
|
|
|
Options
|
|
Options
|
|
Exercise
|
|
Option
|
|
Have Not
|
|
Have Not
|
|
|
(#)
|
|
(#)
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Vested
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
|
(#)(4)
|
|
($)(5)
|
|
Mr. Niblock
|
|
|
102,000
|
|
|
|
0
|
|
|
$
|
28.37
|
|
|
|
03/01/11
|
|
|
|
799,000
|
|
|
$
|
17,298,350
|
|
|
|
|
144,000
|
|
|
|
0
|
|
|
$
|
29.17
|
|
|
|
03/01/12
|
|
|
|
|
|
|
|
|
|
|
|
|
210,000
|
|
|
|
0
|
|
|
$
|
34.16
|
|
|
|
03/01/13
|
|
|
|
|
|
|
|
|
|
|
|
|
223,334
|
|
|
|
111,666
|
(1)
|
|
$
|
32.21
|
|
|
|
03/01/14
|
|
|
|
|
|
|
|
|
|
|
|
|
186,000
|
|
|
|
372,000
|
(2)
|
|
$
|
23.97
|
|
|
|
03/01/15
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
804,000
|
(3)
|
|
$
|
15.84
|
|
|
|
03/01/16
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Hull
|
|
|
10,000
|
|
|
|
0
|
|
|
$
|
22.85
|
|
|
|
03/01/10
|
|
|
|
222,250
|
|
|
$
|
4,811,713
|
|
|
|
|
21,150
|
|
|
|
0
|
|
|
$
|
28.37
|
|
|
|
03/01/11
|
|
|
|
|
|
|
|
|
|
|
|
|
53,000
|
|
|
|
0
|
|
|
$
|
29.17
|
|
|
|
03/01/12
|
|
|
|
|
|
|
|
|
|
|
|
|
62,000
|
|
|
|
0
|
|
|
$
|
34.16
|
|
|
|
03/01/13
|
|
|
|
|
|
|
|
|
|
|
|
|
58,667
|
|
|
|
29,333
|
(1)
|
|
$
|
32.21
|
|
|
|
03/01/14
|
|
|
|
|
|
|
|
|
|
|
|
|
47,667
|
|
|
|
95,333
|
(2)
|
|
$
|
23.97
|
|
|
|
03/01/15
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
207,000
|
(3)
|
|
$
|
15.84
|
|
|
|
03/01/16
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Stone
|
|
|
98,000
|
|
|
|
0
|
|
|
$
|
28.37
|
|
|
|
03/01/11
|
|
|
|
369,750
|
|
|
$
|
8,005,088
|
|
|
|
|
99,000
|
|
|
|
0
|
|
|
$
|
29.17
|
|
|
|
03/01/12
|
|
|
|
|
|
|
|
|
|
|
|
|
114,000
|
|
|
|
0
|
|
|
$
|
34.16
|
|
|
|
03/01/13
|
|
|
|
|
|
|
|
|
|
|
|
|
97,334
|
|
|
|
48,666
|
(1)
|
|
$
|
32.21
|
|
|
|
03/01/14
|
|
|
|
|
|
|
|
|
|
|
|
|
81,000
|
|
|
|
162,000
|
(2)
|
|
$
|
23.97
|
|
|
|
03/01/15
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
351,000
|
(3)
|
|
$
|
15.84
|
|
|
|
03/01/16
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Canter
|
|
|
21,150
|
|
|
|
0
|
|
|
$
|
28.37
|
|
|
|
03/01/11
|
|
|
|
207,073
|
|
|
$
|
4,483,130
|
|
|
|
|
20,290
|
|
|
|
0
|
|
|
$
|
29.17
|
|
|
|
03/01/12
|
|
|
|
|
|
|
|
|
|
|
|
|
64,000
|
|
|
|
0
|
|
|
$
|
34.16
|
|
|
|
03/01/13
|
|
|
|
|
|
|
|
|
|
|
|
|
56,000
|
|
|
|
28,000
|
(1)
|
|
$
|
32.21
|
|
|
|
03/01/14
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
|
|
|
90,000
|
(2)
|
|
$
|
23.97
|
|
|
|
03/01/15
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
194,000
|
(3)
|
|
$
|
15.84
|
|
|
|
03/01/16
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Bridgeford
|
|
|
82,000
|
|
|
|
0
|
|
|
$
|
19.65
|
|
|
|
03/01/10
|
|
|
|
205,250
|
|
|
$
|
4,443,663
|
|
|
|
|
52,000
|
|
|
|
0
|
|
|
$
|
28.37
|
|
|
|
03/01/11
|
|
|
|
|
|
|
|
|
|
|
|
|
53,000
|
|
|
|
0
|
|
|
$
|
29.17
|
|
|
|
03/01/12
|
|
|
|
|
|
|
|
|
|
|
|
|
62,000
|
|
|
|
0
|
|
|
$
|
34.16
|
|
|
|
03/01/13
|
|
|
|
|
|
|
|
|
|
|
|
|
53,334
|
|
|
|
26,666
|
(1)
|
|
$
|
32.21
|
|
|
|
03/01/14
|
|
|
|
|
|
|
|
|
|
|
|
|
42,667
|
|
|
|
85,333
|
(2)
|
|
$
|
23.97
|
|
|
|
03/01/15
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
185,000
|
(3)
|
|
$
|
15.84
|
|
|
|
03/01/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
These options vested on March 1, 2010. |
|
(2) |
|
These options become vested in two equal annual installments on
March 1, 2010 and March 1, 2011. |
|
(3) |
|
These options become vested in three equal annual installments
on March 1, 2010, March 1, 2011 and March 1, 2012. |
30
|
|
|
(4) |
|
Executives receive dividends on unvested shares of restricted
stock. The unvested stock awards become vested as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 1,
|
|
March 1,
|
|
December 14,
|
|
March 1,
|
|
March 1,
|
|
March 1,
|
|
|
Name
|
|
2010(a)
|
|
2010(b)
|
|
2010
|
|
2011
|
|
2011(c)
|
|
2012
|
|
Total
|
|
Mr. Niblock
|
|
|
36,000
|
|
|
|
161,000
|
|
|
|
0
|
|
|
|
124,000
|
|
|
|
234,000
|
|
|
|
244,000
|
|
|
|
799,000
|
|
Mr. Hull
|
|
|
13,250
|
|
|
|
42,000
|
|
|
|
8,000
|
|
|
|
36,000
|
|
|
|
60,000
|
|
|
|
63,000
|
|
|
|
222,250
|
|
Mr. Stone
|
|
|
24,750
|
|
|
|
70,000
|
|
|
|
0
|
|
|
|
66,000
|
|
|
|
102,000
|
|
|
|
107,000
|
|
|
|
369,750
|
|
Mr. Canter
|
|
|
5,073
|
|
|
|
40,000
|
|
|
|
8,000
|
|
|
|
38,000
|
|
|
|
57,000
|
|
|
|
59,000
|
|
|
|
207,073
|
|
Mr. Bridgeford
|
|
|
13,250
|
|
|
|
38,000
|
|
|
|
8,000
|
|
|
|
36,000
|
|
|
|
54,000
|
|
|
|
56,000
|
|
|
|
205,250
|
|
|
|
|
(a) |
|
These shares are performance accelerated restricted shares or
PARS granted on March 1, 2005. The vesting of 50% of the
PARS included in this grant was accelerated to March 1,
2008 because the Company achieved an average return on non-cash
beginning assets for fiscal years 2005 through 2007 of 20.6%
which return exceeded the 20% return set by the Committee at the
time the PARS were awarded. The Companys average return on
non-cash beginning assets for fiscal years 2005 through 2008 was
less than 20%. Therefore, vesting of the remaining PARS shown
above was not accelerated to March 1, 2009, and the
remaining PARS became vested on March 1, 2010. |
|
(b) |
|
These shares are performance vested restricted shares awarded on
March 1, 2007. Twenty-five percent of these shares vested
on March 1, 2010 based on the Companys average return
on non-cash average assets for the three-year performance period
that included fiscal years 2007 through 2009. The remaining 75%
of the shares were forfeited. |
|
(c) |
|
These shares are performance vested restricted shares awarded on
March 1, 2008. These shares will become vested only if the
Company achieves a target average return on non-cash average
assets set by the Committee for the three-year performance
period that includes fiscal years 2008 through 2010. A portion
of the shares will become vested if the Company achieves an
average return on non-cash average assets that is at least the
threshold level set by the Committee but less than the target
level. |
|
|
|
(5) |
|
Amount is based on the closing market price of the
Companys Common Stock on January 29, 2010 of $21.65. |
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number of Shares
|
|
Value Realized on
|
|
Number of Shares
|
|
Value Realized
|
|
|
Acquired on Exercise
|
|
Exercise
|
|
Acquired on Vesting
|
|
on Vesting
|
Name
|
|
(#)
|
|
($)
|
|
(#)
|
|
($)
|
|
Mr. Niblock
|
|
|
298,000
|
|
|
$
|
706,881
|
|
|
|
60,000
|
|
|
$
|
1,251,600
|
|
Mr. Hull
|
|
|
60,180
|
|
|
$
|
201,668
|
(1)
|
|
|
30,000
|
|
|
$
|
625,800
|
|
Mr. Stone
|
|
|
316,912
|
|
|
$
|
1,376,978
|
|
|
|
40,000
|
|
|
$
|
834,400
|
|
Mr. Canter
|
|
|
55,092
|
|
|
$
|
163,761
|
|
|
|
30,000
|
|
|
$
|
625,800
|
|
Mr. Bridgeford
|
|
|
0
|
|
|
|
0
|
|
|
|
30,000
|
|
|
$
|
625,800
|
|
|
|
|
(1) |
|
Mr. Hull elected under the Companys Deferred
Compensation Program to defer receipt of $187,758 of this amount. |
Nonqualified Deferred
Compensation The Company sponsors three
non-qualified deferred compensation plans for the benefit of
senior management employees: the Benefit Restoration Plan (the
BRP), the Cash Deferral Plan (the CDP)
and the Deferred Compensation Program (the DCP).
BRP
The BRP allows senior management employees to defer receipt of
the difference between (i) 6% of the sum of base salary and
annual non-equity incentive plan compensation and (ii) the
amount the employee is allowed to contribute to the
Companys tax-qualified 401(k) Plan. The deferred amounts
are credited to the employees BRP account. The Company
makes matching contributions to the employees BRP account
under the same matching contribution formula that applies to
employee contributions to the 401(k) Plan. An employees
account under the BRP is deemed to be invested in accordance
with the employees election in one or more of the
investment options available under the 401(k) Plan, except an
employee may not elect to have any amounts deferred under the
BRP after February 1, 2003 to be deemed to be invested in
Company Common Stock. An employee may elect to change the
investment of the employees BRP account as frequently as
each business day. An employees account under the BRP is
paid to the employee in cash after the end of the plan year in
which the employee terminates employment but no earlier than
180 days after the employees termination of
employment.
CDP
The CDP allows a senior management employee to elect to defer
receipt of up to 80% of his or her base salary, annual
non-equity incentive plan compensation and certain other
bonuses. The deferred amounts are credited to the
employees CDP account. The Company does not make any
contributions to the CDP. An employees CDP account is
deemed to be invested in accordance with the employees
election in one or more of the investment options available
under the 401(k) Plan, except an employee may not elect to have
any amounts deferred under the CDP to be deemed to be invested
in Company Common Stock. An employee may elect to change the
investment of the employees CDP account as frequently as
each business day. An employees account under the CDP is
paid to the employee in cash after the end of the plan year in
which the employee terminates employment but no earlier than
180 days after the employees termination of
employment. In addition, an employee may elect to have a portion
of the employees deferrals segregated into a separate
sub-account
that is paid at a date elected by the employee so long as the
date is at least five years from the date of the employees
deferral election.
DCP
Prior to January 1, 2009, the DCP required the deferral of
any equity incentive compensation payable to a named executive
officer to the extent the compensation would not be deductible
for federal income tax purposes under Section 162(m) of the
Internal Revenue Code. The DCP also allowed executives to elect
prior to January 1, 2005 to defer receipt of stock awards
and gains from the exercise of stock options. The Company does
not make any contributions to the DCP. All deferrals under the
DCP are deemed to be invested in shares of the Companys
Common Stock. Any dividends that would have been paid on shares
of stock credited to an executives DCP account are deemed
to be reinvested in additional shares of
32
Common Stock. The aggregate earnings on an executives DCP
account shown in the table below are attributable solely to
fluctuations in the value of the Companys Common Stock and
dividends paid with respect to the Companys Common Stock.
Shares of Company Common Stock credited to an executives
DCP account that are attributable to mandatory deferrals are
paid to the executive when the distribution is fully deductible
by the Company for federal income tax purposes. Shares of
Company Common Stock credited to an executives DCP account
that are attributable to pre-2005 elective deferrals are paid in
accordance with the executives election in a lump sum or
five annual installments after the executives termination
of employment or attainment of a specified age.
The following table presents information about the amounts
deferred by the named executive officers under the
Companys three deferred compensation plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
Registrant
|
|
Aggregate
|
|
Aggregate
|
|
Aggregate
|
|
|
|
|
Contributions in
|
|
Contributions in
|
|
Earnings in
|
|
Withdrawals/
|
|
Balance at
|
|
|
Plan
|
|
Last FY
|
|
Last FY
|
|
Last FY
|
|
Distributions
|
|
Last FYE
|
Name
|
|
Name
|
|
($)(1)
|
|
($)(1)
|
|
($)(1)
|
|
($)
|
|
($)(1)
|
|
Mr. Niblock
|
|
|
BRP
|
|
|
$
|
135,145
|
|
|
$
|
109,709
|
|
|
$
|
579,316
|
|
|
|
0
|
|
|
$
|
2,269,996
|
|
|
|
|
CDP
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
DCP
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
1,048,495
|
|
|
|
0
|
|
|
$
|
6,293,531
|
|
Mr. Hull
|
|
|
BRP
|
|
|
$
|
59,484
|
|
|
$
|
44,692
|
|
|
$
|
162,585
|
|
|
|
0
|
|
|
$
|
702,584
|
|
|
|
|
CDP
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
DCP
|
|
|
$
|
187,758
|
|
|
|
0
|
|
|
$
|
7,088
|
|
|
|
0
|
|
|
$
|
295,876
|
|
Mr. Stone
|
|
|
BRP
|
|
|
$
|
88,801
|
|
|
$
|
69,404
|
|
|
$
|
405,521
|
|
|
|
0
|
|
|
$
|
1,690,231
|
|
|
|
|
CDP
|
|
|
$
|
96,555
|
|
|
|
0
|
|
|
$
|
9,032
|
|
|
|
0
|
|
|
$
|
107,525
|
|
|
|
|
DCP
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
980,435
|
|
|
|
0
|
|
|
$
|
5,885,004
|
|
Mr. Canter
|
|
|
BRP
|
|
|
$
|
55,879
|
|
|
$
|
41,352
|
|
|
$
|
122,969
|
|
|
|
0
|
|
|
$
|
712,898
|
|
|
|
|
CDP
|
|
|
$
|
7,185
|
|
|
|
0
|
|
|
$
|
1,366
|
|
|
|
0
|
|
|
$
|
61,835
|
|
|
|
|
DCP
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Mr. Bridgeford
|
|
|
BRP
|
|
|
$
|
53,175
|
|
|
$
|
38,848
|
|
|
$
|
135,640
|
|
|
|
0
|
|
|
$
|
1,152,206
|
|
|
|
|
CDP
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
DCP
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
844,540
|
|
|
|
0
|
|
|
$
|
5,069,307
|
|
|
|
|
(1) |
|
All of the amounts presented above as Executive
Contributions and Registrant Contributions to
the BRP and as Executive Contributions to the CDP
are reported as compensation for the 2009 fiscal year in the
Summary Compensation Table shown on page 28. |
The amount presented above as Executive
Contributions to the DCP represents the gain from stock
options granted to Mr. Hull in 2003 that he exercised
during the 2009 fiscal year. Mr. Hull had previously
elected to defer the gain under the DCP.
|
|
C.
|
Compensation
Committee Report
|
The Committee has reviewed and discussed the foregoing
Compensation Discussion and Analysis with management of the
Company. Based on such review and discussion, the Committee has
recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in the Companys Annual
Report on
Form 10-K
for the fiscal year ended January 29, 2010.
Marshall O. Larsen, Chairman
Dawn E. Hudson
Robert A. Ingram
Robert L. Johnson
Richard K. Lochridge
33
EQUITY
COMPENSATION PLAN INFORMATION
The following table provides information about stock options
outstanding and shares available for future awards under all of
Lowes equity compensation plans. The information is as of
January 29, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Securities to be
|
|
|
|
|
|
Number of Securities
|
|
|
|
Issued Upon
|
|
|
Weighted-Average
|
|
|
Remaining Available for
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Future Issuance Under
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Equity Compensation
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
Plans (Excluding Securities
|
|
|
|
and Rights
|
|
|
and Rights
|
|
|
Reflected in Column (a))
|
|
Plan Category
|
|
(#)(1)
|
|
|
($)(1)
|
|
|
(#)(2)
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans approved by security holders
|
|
|
23,964,475
|
|
|
$
|
26.42
|
|
|
|
44,053,774
|
(3)
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
23,964,475
|
|
|
$
|
26.42
|
|
|
|
44,053,774
|
(3)
|
|
|
|
(1) |
|
This column contains information regarding stock options,
restricted stock and deferred stock units only; there are no
warrants or stock appreciation rights outstanding. However, the
weighted average exercise price shown in column (b) does
not take into account restricted stock or deferred stock units
because they are granted outright and do not have an exercise
price. |
|
(2) |
|
In accordance with SEC rules, this column does not include
shares available under the Lowes 401(k) Plan. |
|
(3) |
|
Includes the following: |
|
|
|
* |
|
29,503,990 shares available for grants of stock options,
stock appreciation rights, stock awards and performance shares,
deferred stock units and restricted stock units to key employees
and non-employee directors under the 2006 LTIP. Stock options
granted under the 2006 LTIP generally have terms of seven years,
normally vest evenly over three years, and are assigned an
exercise price of not less than the fair market value of the
Common Stock on the date of grant. No awards may be granted
under the 2006 LTIP after 2016. |
|
* |
|
14,549,784 shares available under the Lowes Companies
Employee Stock Purchase Plan Stock Options for
Everyone. Eligible employees may purchase shares of Common Stock
through after-tax payroll deductions. The purchase price of this
stock is equal to 85% of the closing price on the date of
purchase for each semi-annual stock purchase period. |
34
RELATED-PARTY
TRANSACTIONS
Policy
and Procedures for Review, Approval or Ratification
The Company has a written policy and procedures for the review,
approval or ratification of any transactions that could
potentially be required to be reported under the rules of the
SEC for disclosure of transactions in which related persons have
a direct or indirect material interest. Related persons include
directors and executive officers of the Company and members of
their immediate families. The Companys General Counsel and
Chief Compliance Officer is primarily responsible for the
development and implementation of processes and controls to
obtain information from the directors and executive officers
about any such transactions. He is also responsible for making a
recommendation, based on the facts and circumstances in each
instance, whether the Company or the related person has a
material interest in the transaction.
The Policy, which is administered by the Governance Committee of
the Board of Directors, includes several categories of
pre-approved transactions with related persons, such as
employment of executive officers and certain banking related
services. For transactions that are not pre-approved, the
Governance Committee, in determining whether to approve or
ratify a transaction with a related person, takes into account,
among other things, (A) whether the transaction would
violate the Companys Code, (B) whether the
transaction is on terms no less favorable than terms generally
available to or from an unaffiliated third party under the same
or similar circumstances and (C) the extent of the related
persons interest in the transaction as well as the
importance of the interest to the related person. No director
may participate in any discussion or approval of a transaction
for which he or she or a member of his or her immediate family
is a related person.
Approved
Related-Party Transactions
Steven M. Stone, Senior Vice President and Chief Information
Officer of the Company, is the brother of Larry D. Stone, the
Companys President and Chief Operating Officer. For the
2009 fiscal year, Steven M. Stone received a base salary of
$435,000 and a non-equity incentive compensation award of
$543,366. He also received a matching contribution of $29,920
under the Companys Benefit Restoration Plan and a grant of
(i) non-qualified options to purchase 68,000 shares at
an exercise price of $15.84 per share and
(ii) 21,000 shares of restricted stock. Steven M.
Stones compensation was established by the Company in
accordance with its employment and compensation practices
applicable to employees with equivalent qualifications and
responsibilities and holding similar positions. The Compensation
Committee of the Board, which is comprised entirely of
independent directors, reviews and approves all compensation
actions for the Companys executive officers, including
Steven M. Stone. Larry D. Stone does not have a material
interest in the Companys employment relationship with
Steven M. Stone, nor does he share a home with him.
The Company paid approximately $86 million in the fiscal
year ended January 29, 2010 to ECMD, Inc., a vendor to the
Company for over 30 years, for millwork and other building
products. A
brother-in-law
of Gregory M. Bridgeford, the Companys Executive Vice
President of Business Development, is a senior officer and owner
of less than 5% of the common stock of ECMD, Inc. Neither
Mr. Bridgeford nor his
brother-in-law,
Todd Meade, has any direct business relationship with the
transactions between ECMD, Inc. and the Company. We believe the
terms upon which Lowes makes its purchases from ECMD, Inc.
are comparable to, or better than, the terms upon which ECMD,
Inc. sells products to its other customers, and upon which
Lowes could obtain comparable products from other vendors.
The Governance Committee of the Companys Board of
Directors has reviewed all of the material facts and ratified
the transactions with ECMD, Inc. that occurred in the last
fiscal year and approved the transactions that will occur in the
current fiscal year.
35
AUDIT
MATTERS
Report of
the Audit Committee
This report by the Audit Committee is required by the rules
of the SEC. It is not to be deemed incorporated by reference by
any general statement which incorporates by reference this Proxy
Statement into any filing under the Securities Act of 1933 or
the Exchange Act, and it is not to be otherwise deemed filed
under either such Act.
The Audit Committee has five members, all of whom are
independent directors as defined by the Categorical Standards,
Section 303A.02 of the NYSE Listed Company Manual and
Rule 10A-3(b)(1)(ii)
of the Exchange Act. Each member of the Audit Committee is
financially literate, as that term is defined by the
rules of the NYSE, and qualified to review and assess financial
statements. The Board of Directors has determined that more than
one member of the Audit Committee qualifies as an audit
committee financial expert as such term is defined by the
SEC, and has designated Stephen F. Page, Chairman of the Audit
Committee, as an audit committee financial expert.
The Audit Committee reviews the general scope of the
Companys annual audit and the fees charged by the
Companys independent registered public accounting firm,
determines duties and responsibilities of the internal auditors,
reviews financial statements and accounting principles being
applied thereto, and reviews audit results and other matters
relating to internal control and compliance with the
Companys Code.
In carrying out its responsibilities, the Audit Committee has:
|
|
|
|
|
reviewed and discussed the audited consolidated financial
statements with management;
|
|
|
|
met periodically with the Companys Vice President of
Internal Audit and the independent registered public accounting
firm, with and without management present, to discuss the
results of their examinations, the evaluations of the
Companys internal controls, and the overall quality of the
Companys financial reporting;
|
|
|
|
discussed with the independent registered public accounting firm
the matters required to be communicated to those charged with
governance by SAS No. 114 (AICPA, Professional Standards,
Vol. 1 AU Section 380), as adopted by the Public Company
Accounting Oversight Board (PCAOB) and the matters
required to be reported to the Audit Committee by the
independent registered public accounting firm pursuant to SEC
Regulation S-X,
Rule 2.07;
|
|
|
|
received the written disclosures and letter from the independent
registered public accounting firm required by applicable
requirements of the PCAOB regarding the independent registered
public accounting firms communications with the Audit
Committee concerning independence, and has discussed with the
independent registered public accounting firm the independent
registered public accounting firms independence; and
|
|
|
|
reviewed and discussed with management and the independent
registered public accounting firm managements report and
the independent registered public accounting firms report
on our internal control over financial reporting and attestation
on internal control over financial reporting in accordance with
Section 404 of the Sarbanes-Oxley Act of 2002.
|
Based on the reviews and discussions noted above and the report
of the independent registered public accounting firm to the
Audit Committee, the Audit Committee has recommended to the
Board of Directors that the Companys audited financial
statements be included in the Companys Annual Report on
Form 10-K
for the fiscal year ended January 29, 2010.
Stephen F. Page, Chairman
David W. Bernauer
Leonard L. Berry
Peter C. Browning
O. Temple Sloan, Jr.
36
Fees Paid
to the Independent Registered Public Accounting Firm
The aggregate fees billed to the Company for the last two fiscal
years by the Companys independent registered public
accounting firm, Deloitte & Touche LLP
(Deloitte), the member firms of Deloitte Touche
Tohmatsu, and their respective affiliates, were:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
Audit
Fees(1)
|
|
$
|
2,476,586
|
|
|
$
|
2,441,567
|
|
Audit-Related
Fees(2)
|
|
|
202,572
|
|
|
|
120,041
|
|
Tax
Fees(3)
|
|
|
10,057
|
|
|
|
0
|
|
All Other Fees
|
|
|
0
|
|
|
|
0
|
|
|
|
|
(1) |
|
Audit fees consist of fees billed for professional services for
the audit of the Companys consolidated financial
statements included in the Companys Annual Report on
Form 10-K,
review of financial statements included in the Companys
Quarterly Reports on
Form 10-Q
and services provided by the independent registered public
accounting firm in connection with the Companys statutory
filings for the last two fiscal years. Audit fees also include
fees for professional services rendered for the audit of our
internal control over financial reporting. |
|
(2) |
|
Audit-related fees are fees billed by the independent registered
public accounting firm for assurance and related services that
are reasonably related to the performance of the audit or review
of the Companys financial statements, and include audits
of the Companys employee benefit plans and other
consultations concerning financial accounting and reporting
standards. |
|
(3) |
|
Tax fees consist of fees billed for professional services
rendered for tax compliance, tax advice, and tax planning. |
The Audit Committee has considered whether the provision of this
level of audit-related and tax compliance, advice and planning
services is compatible with maintaining the independence of
Deloitte. The Audit Committee, or the Chairman of the Audit
Committee pursuant to a delegation of authority from the Audit
Committee set forth in the Audit Committees charter,
approves the engagement of Deloitte to perform all such services
before Deloitte is engaged to render them.
PROPOSAL TWO
TO RATIFY THE APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed Deloitte to serve as the
Companys independent registered public accounting firm for
fiscal year 2010. Deloitte has served as the Companys
independent registered public accounting firm since 1982 and is
considered by management to be well qualified.
Although shareholder ratification of the Audit Committees
appointment of Deloitte as our independent registered public
accounting firm is not required by the Companys Bylaws or
otherwise, the Board of Directors is submitting the appointment
of Deloitte to the shareholders for ratification. If the
shareholders fail to ratify the Audit Committees
appointment, the Audit Committee will reconsider whether to
retain Deloitte as the Companys independent registered
public accounting firm. In addition, even if the shareholders
ratify the appointment of Deloitte, the Audit Committee may in
its discretion appoint a different independent accounting firm
at any time during the year if the Audit Committee determines
that a change is in the best interests of the Company.
Representatives of Deloitte are expected to be present at the
Annual Meeting of Shareholders, where they will have the
opportunity to make a statement, if they desire to do so, and be
available to respond to appropriate questions.
The Board of Directors recommends a vote FOR
the ratification of the appointment of Deloitte as the
Companys independent registered public accounting firm.
Proxies received by the Board of Directors will be so voted
unless shareholders specify in their proxies a contrary choice.
37
PROPOSAL THREE
TO APPROVE AN AMENDMENT TO LOWES BYLAWS
DECREASING THE PERCENTAGE OF SHARES REQUIRED TO CALL
A SPECIAL MEETING OF SHAREHOLDERS
The Board of Directors has adopted, and recommends that
Lowes shareholders approve, an amendment to
Article II, Section 2(a) of the Companys Bylaws
that would reduce to 25% the percentage of shares required for
shareholders to call a special meeting. Article II,
Section 2(a) of Lowes Bylaws currently provides that
a special meeting of shareholders shall be called by the
Secretary upon the written request of shareholders owning in the
aggregate a majority of the total number of shares of capital
stock of the Company outstanding and entitled to vote on the
matter or matters to be brought before the proposed special
meeting. The complete text of the proposed amendment, including
the requirements and procedures for calling a special meeting of
shareholders, is attached as Appendix B to this Proxy
Statement.
The Board of Directors believes that establishing an ownership
threshold of 25% for the right to call a special meeting strikes
an appropriate balance between enhancing shareholder rights and
protecting against the risk that a small minority of
shareholders could trigger a special meeting to pursue
special interests that are not in the best interests
of the Company and its shareholders in general. This is
important because a special meeting is an extraordinary event
that imposes significant financial expense and administrative
burdens on the Company. The 25% threshold is also consistent
with thresholds adopted by a number of other large public
companies.
Although shareholder approval of the proposed amendment is not
required by the Companys Bylaws or otherwise, the Board of
Directors is submitting the proposal to the shareholders for
approval because of the direct impact the proposal would have on
shareholders rights and to ascertain the level of support
by the Companys shareholders for what the Board believes
is an appropriate threshold for the right to call a special
meeting.
Votes
Needed
The affirmative vote of a majority of the votes cast on the
proposal is required for approval of the proposed amendment. The
proposed amendment would be effective upon approval by the
Companys shareholders. The Board of Directors recommends a
vote FOR the proposed amendment. Proxies
received by the Board of Directors will be so voted unless
shareholders specify in their proxies a contrary choice.
PROPOSAL FOUR
TO CONSIDER AND VOTE UPON THE SHAREHOLDER PROPOSAL
REGARDING REPORT ON POLITICAL SPENDING
The City of Philadelphia Public Employees Retirement System,
Sixteenth Floor, Two Penn Center Plaza, Philadelphia, PA
19102-1721,
owning more than $2,000 of Lowes Common Stock, has
informed us that it intends to submit the following shareholder
proposal at the Annual Meeting. We are not responsible for the
content of the shareholder proposal, which is printed below
exactly as it was submitted. The Board of Directors
recommends voting AGAINST the proposal. Unless otherwise
specified, proxies will be voted AGAINST the proposal.
Resolved, that the shareholders of Lowes
(Company) hereby request that the Company provide a
report, updated semi-annually, disclosing the Companys:
1. Policies and procedures for political contributions and
expenditures (both direct and indirect) made with corporate
funds.
2. Monetary and non-monetary political contributions and
expenditures not deductible under section 162(e)(1)(B) of
the Internal Revenue Code, including but not limited to
contributions to or expenditures on behalf of political
candidates, political parties, political committees and other
political entities organized and operating under 26 USC
Sec. 527 of the Internal Revenue Code and any portion of any
dues or similar payments made to any tax exempt organization
that is used for an expenditure or contribution if made
directly
38
by the corporation would not be deductible under
section 162(e)(1)(B) of the Internal Revenue Code. The
report shall include the following:
a. An accounting through an itemized report that includes
the identity of the recipient as well as the amount paid to each
recipient of the Companys funds that are used for
political contributions or expenditures as described above;
b. Identification of the person or persons in the Company
who participated in making the decisions to make the political
contribution or expenditure; and
The report shall be presented to the board of directors
audit committee other relevant oversight committee and posted on
the companys website to reduce costs to shareholders.
Stockholder
Supporting Statement
As long-term shareholders of Lowes, we support
transparency and accountability in corporate spending on
political activities. These activities include direct and
indirect political contributions to candidates, political
parties or political organizations; independent expenditures; or
electioneering communications on behalf of a federal, state or
local candidate.
Disclosure is consistent with public policy, in the best
interest of the company and its shareholders, and critical for
compliance with recent federal ethics legislation. Absent a
system of accountability, company assets can be used for policy
objectives that may be inimical to the long-term interests of
and may pose risks to the company and its shareholders.
However, relying on publicly available data does not provide a
complete picture of the Companys political expenditures.
For example, the Companys payments to trade associations
used for political activities are undisclosed and unknown. In
many cases, even management does not know how trade associations
use their companys money politically. The proposal asks
the Company to disclose all of its political contributions,
including payments to trade associations and other tax exempt
organizations. This would bring our Company in line with a
growing number of leading companies, including Hewlett-Packard,
Aetna and American Electric Power that support political
disclosure and accountability and present this information on
their websites.
The Companys Board and its shareholders need complete
disclosure to be able to fully evaluate the political use of
corporate assets. Thus, we urge your support for this critical
governance reform.
Lowes
Board of Directors Statement OPPOSING This Proposal
Lowes Board of Directors has considered this proposal and,
while it supports the transparency and accountability
objectives, believes that adopting the proposal is unnecessary
and would not be in the best interests of the Company or its
shareholders.
Our business is subject to extensive regulation at all levels of
government. We seek to be an effective participant in the public
policy decision making process by making prudent political
contributions and expenditures when such contributions or
expenditures advance Lowes business objectives and the
interests of our shareholders. Lowes is fully committed to
complying with all applicable laws regarding political
contributions and expenditures, including laws requiring public
disclosure. Direct corporate funding to make political
contributions or expenditures, when permitted at all, is subject
to extensive governmental regulation and public disclosure
requirements. The vast majority of political contributions and
expenditures are not funded by corporate resources, but rather
are made by Lowes nonpartisan political action committee
(LOWPAC), which is funded primarily by voluntary
employee contributions. In certain limited circumstances in
states where direct corporate political contributions or
expenditures are permitted, Lowes may make direct
corporate contributions or expenditures.
The activities of LOWPAC are subject to comprehensive regulation
by the federal government, including detailed disclosure
requirements. For example, pursuant to federal law, LOWPAC files
regular reports with the Federal Election Commission
(FEC), which has detailed disclosure requirements
for the political contributions or expenditures by federal PACs.
These reports, which are publicly available on the FECs
website (www.FEC.gov), itemize receipts and disbursements
for federal political contributions and expenditures, including
all political contributions over $200 and contributions to the
PACs of trade associations and other tax-exempt organizations.
39
We strongly disagree with the proponents suggestion that
the Companys political contributions and expenditures,
including payments to trade associations, may fund agendas that
are adverse to the long-term interests of, and may pose risks
to, the Company and its shareholders. We make contributions and
maintain memberships in trade associations specific to business
and retail industry interests, such as the Retail Industry
Leaders Association (RILA). RILA and other trade
associations provide significant benefits to the Company and its
shareholders by giving the Company access to their business,
technical and industry expertise and by providing a forum where
members can conduct discussions aimed at understanding common
operational practices, areas of concern and solutions to common
problems. They also have knowledgeable members of their staffs
who strive to insure that lawmakers are educated on the
potential consequences of their decisions on the nations
leading retailers, including the Company. Your Board of
Directors believes that all of these varied activities of the
trade associations to which it contributes are strongly aligned
with the long-term interests of the Company and its shareholders.
Management closely monitors the political activities of the
trade associations in which the Company is a member; however,
trade associations are independent organizations that may have
many positions and views, not all of which are necessarily
shared or supported by the Company. Thus, disclosure of
contributions to trade associations beyond what is legally
required would not provide the Companys shareholders with
a greater understanding of the Companys business
objectives and government relations expenditures and could
instead risk misrepresenting the Companys political
activities and positions. In addition, the Company cannot report
the extent to which any portion of any dues or similar payments
made to trade associations by Lowes is used for political
contributions or expenditures, as the proposal requests, because
it lacks a reliable method for tracking the extent to which any
political contributions or expenditures by these organizations
might be proportionately attributable to Lowes membership
dues. Further, disclosure of the Companys membership dues
to these associations could potentially put the Company at a
disadvantage with its competitors by revealing what are often
negotiated rates of membership, and by highlighting the
Companys strategies and priorities.
As a result of the disclosures currently mandated by law that
management has established procedures to insure the Company is
in compliance with, we believe that sufficient disclosure exists
regarding the Companys political contributions and
expenditures to address the concerns cited in this proposal.
Consequently, we believe that any additional disclosure would be
unnecessary and an unproductive use of your Companys
resources without conferring a commensurate benefit to the
Companys shareholders.
For the foregoing reasons, your Board recommends a vote
AGAINST this proposal.
PROPOSAL FIVE
TO CONSIDER AND VOTE UPON THE SHAREHOLDER PROPOSAL
REGARDING SEPARATING THE ROLES OF CHAIRMAN AND CEO
The Central Laborers Pension Fund,
P.O. Box 1267, Jacksonville, IL 62651, owning more
than $2,000 of Lowes Common Stock, has informed us that it
intends to submit the following shareholder proposal at the
Annual Meeting. We are not responsible for the content of the
shareholder proposal, which is printed below exactly as it was
submitted. The Board of Directors recommends voting AGAINST
the proposal. Unless otherwise specified, proxies will be
voted AGAINST the proposal.
RESOLVED: That stockholders of Lowes
Corporation (Lowes or the Company)
ask the board of directors to adopt a policy that the
boards chairman be an independent director who has not
previously served as an executive officer of the Company. The
policy should be implemented so as not to violate any
contractual obligation. The policy should also specify
(a) how to select a new independent chairman if a current
chairman ceases to be independent during the time between annual
meetings of shareholders; and, (b) that compliance with the
policy is excused if no independent director is available and
willing to serve as chairman.
SUPPORTING
STATEMENT
It is the responsibility of the Board of Directors to protect
shareholders long-term interests by providing independent
oversight of management, including the Chief Executive Officer
(CEO), in directing the corporations business and affairs.
Currently at our Company Mr. Robert Niblock holds the
positions of Chairman of the Board and CEO. We believe that this
current scheme may not adequately protect shareholders.
40
Shareholders of Lowes require an independent leader to
ensure that management acts strictly in the best interests of
the Company. By setting agendas, priorities and procedures, the
position of Chairman is critical in shaping the work of the
Board of Directors. Accordingly, we believe that having an
independent director serve as chairman can help ensure the
objective functioning of an effective Board.
As a long-term shareholder of our Company, we believe that
ensuring that the Chairman of the Board of our Company is
independent will enhance Board leadership at our Company, and
protect shareholders from future management actions that can
harm shareholders. Other corporate governance experts agree. As
a Commission of The Conference Board stated in a 2003 report,
The ultimate responsibility for good corporate governance
rests with the board of directors. Only a strong, diligent and
independent board of directors that understands the key issues,
provides wise counsel and asks management the tough questions is
capable of ensuring that the interests of shareowners as well as
other constituencies are being properly served.
We believe that the recent wave of corporate scandals
demonstrates that no matter how many independent directors there
are on the Board, that (sic) Board is less able to provide
independent oversight of the officers if the Chairman of that
Board is also the CEO of the Company.
We, therefore, urge shareholders to vote FOR this
proposal.
Lowes
Board of Directors Statement OPPOSING This Proposal
Lowes Board of Directors recommends a vote AGAINST
this proposal. This is the second consecutive year that the
proponent has submitted this proposal to our shareholders. At
last years Annual Meeting, our shareholders soundly
rejected this proposal, with only 13.45% of shares voted in
favor of separating the positions of Chairman and CEO. Your
Board understands that some publicly traded companies separate
the roles of Chairman and CEO. For the reasons discussed below,
however, we continue to believe that the Company and its
shareholders are best served by having one person serve as
Chairman and CEO. Accordingly, we ask our shareholders once
again to recognize the benefits of Lowes current
leadership structure and to reject this proposal.
Lowes Board of Directors acknowledges that independent
Board leadership is important and has already taken steps to
ensure that the Board effectively carries out its responsibility
for the oversight of management. For instance, in August 2008,
the Board amended the Companys Corporate Governance
Guidelines to provide for an independent Lead Director to be
elected annually by the independent directors. The role of the
Companys Lead Director closely parallels the role of an
independent Chairman. Specifically, Lowes Corporate
Governance Guidelines provide that the Lead Director will:
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preside at all meetings of the Board at which the Chairman of
the Board is not present, including executive sessions of the
non-Management Directors;
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serve as a liaison between the Chairman and the Independent
Directors;
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communicate with the Chairman and the Secretary of the Company
to develop an agenda for each Board meeting and determine the
nature and extent of information that shall be provided
regularly to the Directors for each scheduled meeting;
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approve meeting schedules to assure that there is sufficient
time for discussion of all agenda items;
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have the authority to call meetings of the Independent
Directors; and
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be available for consultation and direct communication with
major shareholders upon request at the direction of the Chief
Executive Officer.
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The Lead Director also serves as the Chairperson of the
Governance Committee of the Board of Directors, which functions
as the Boards nominating committee as well, and is
comprised entirely of independent directors. Independent
directors also meet in executive session presided over by the
Lead Director at every regularly scheduled Board meeting. We
believe that the existence of an independent Lead Director with
this scope of responsibilities supports strong corporate
governance principles and allows the Board to effectively
fulfill its fiduciary responsibilities to shareholders.
We believe that mandating a separation of the positions of
Chairman and CEO would weaken our leadership structure without
providing any added benefit beyond that already achieved by
having an empowered Lead Director.
41
The CEO serves as a bridge between management and the Board,
ensuring that both groups act with a common purpose. We believe
that separating the roles of Chairman and CEO would risk
creating the perception of having two chiefs,
leading to fractured leadership of the Company and weakening its
ability to develop and implement strategy. In contrast, we
believe that the Companys current leadership structure
with the combined Chairman/CEO leadership role and an
independent Lead Director enhances the Chairman/CEOs
ability to provide insight and direction on important strategic
initiatives to both management and the independent directors
and, at the same time, ensures that the appropriate level of
independent oversight is applied to all Board decisions.
In addition to having an independent Lead Director, Lowes
Board and committee composition ensures independence and
protects against too much power being placed with the Chairman
and CEO. Currently, all of Lowes directors (other than
Mr. Niblock) and each member of the Audit, Governance and
Compensation Committees meet the independence requirements of
the New York Stock Exchange and the Companys Categorical
Standards for determining director independence (a copy of which
is included in this Proxy Statement as Appendix A).
Consequently, independent directors directly oversee such
critical matters as the integrity of the Companys
financial statements, the compensation of executive management,
the selection and evaluation of directors and the development
and implementation of the Companys corporate governance
policies and structures. Further, the Compensation Committee
conducts an annual performance review of the Chairman and CEO
and, based upon this review, determines the CEOs annual
compensation, including salary, bonus, incentive and equity
compensation, which it forwards to the Board for ratification by
the independent directors.
The Governance Committee of the Board of Directors regularly
reviews the Companys governance practices and recommends
to the Board modifications to the Companys fundamental
governance documents. For example, in 2008, the Board, in
recognition of shareholder sentiment and corporate governance
trends, (i) adopted and recommended to shareholders for
approval, amendments to the Companys Articles of
Incorporation to eliminate the Companys classified Board
structure and provide for the annual election of all directors
and (ii) adopted an amendment to the Companys Bylaws
permitting the holders of a majority of the Companys
outstanding Common Stock to call a special meeting. In 2009, the
Board amended its Corporate Governance Guidelines to add a
policy on recouping performance-based executive compensation in
the event of a significant restatement of the Companys
financial results. Additionally, in response to the favorable
vote on a shareholder proposal submitted for inclusion at the
Companys 2008 Annual Meeting, the Board adopted and
recommended for shareholder approval at last years Annual
Meeting, amendments to the Companys Articles of
Incorporation to eliminate the remaining supermajority vote
requirements therein. Finally, the Board has adopted and
recommended for shareholder approval at this years Annual
Meeting (see Proposal Three in this Proxy Statement), an
amendment to the Companys Bylaws to reduce the current
ownership percentage required to call a special shareholders
meeting from the holders of a majority to 25% of the
Companys outstanding Common Stock.
Despite the Proponents preference for a separate Chairman
and CEO, there is no consensus in the U.S. that separating
the roles is a governance best practice or that such a
separation boosts returns for shareholders. The Proponent
inaccurately cites a 2003 report by a Commission of The
Conference Board in support of separating the roles of
Lowes Chairman and CEO. That report does not support the
Proponents position that an independent Chairman is
necessary to enhance Board leadership at our Company, and
protect shareholders from future management actions that can
harm shareholders. Rather, the report acknowledges that
board structures vary greatly among U.S. corporations and
concludes that no single board structure has yet been
demonstrated to be superior in providing the oversight that
leads to corporate success. This conclusion supports the
Boards belief that there is no
one-size-fits-all approach to Board leadership.
Moreover, the governance structure used by Lowes Board
(i.e., combined Chair/CEO position with an independent Lead
Director) is expressly approved by the Commission in the report
as one of the approaches that could be taken to provide the
appropriate balance of power between board and CEO functions.
The authors of a 2004 Wharton School of Business article
entitled Splitting Up the Roles of CEO and Chairman:
Reform or Red Herring? (published June 2, 2004 in
Knowledge@Wharton and available at
http://knowledge.wharton.upenn.edu)
conclude there is no evidence that separating the positions
of Chairman and CEO improves corporate performance, pointing out
that there were separate Chairmen and CEOs at both Enron and
WorldCom when the fraud and corruption scandals occurred at each
company. Specifically, the authors note that statistical studies
show that whether a company does or does not separate the CEO
and Chairman titles has no bearing on corporate financial
performance. The authors of the article further state that
the emphasis on having separate CEOs and chairpersons is
largely a red herring because board independence can
be accomplished in other
42
ways, such as holding meetings without the CEO being
present. Given the lack of support for the benefits of
separating the roles of Chairman and CEO, it is not surprising
that the Spencer Stuart U.S. Board Index 2009 (released
October 2009 and available at www.spencerstuart.com )
found that only 37% of S&P 500 companies now split the
roles of Chairman and CEO, versus 39% last year. Moreover, the
2009 index noted that of the 184 companies that split the
Chairman/CEO roles, only 81 have an independent chair.
Therefore, only 16% of S&P 500 companies have a
Chairman who is considered independent
In view of the overwhelming shareholder support for the
Companys current leadership structure, the Companys
highly independent Board structure, particularly the role of the
independent Lead Director, and the Companys other strong
corporate governance practices, your Board believes that
adopting a policy separating the roles of Chairman and CEO would
weaken our leadership structure without providing any
commensurate benefit. Accordingly, we do not believe that
implementing the proposal would be in the best interest of the
Company or its shareholders.
For all these reasons, the Board of Directors recommends a vote
AGAINST this proposal.
ADDITIONAL
INFORMATION
Solicitation
of Proxies
The cost of the solicitation of proxies will be borne by the
Company. In addition to the use of the mail, the Company may
solicit proxies by personal interview, telephone and similar
means. No director, officer or employee of the Company will be
specially compensated for these activities. The Company may
reimburse brokers or other persons holding stock in their names
or in the names of nominees for their expense in sending proxy
materials to principals and obtaining their proxies. The Company
has engaged the proxy soliciting firm of Georgeson Shareholder
Communications Inc. to assist in distributing proxy materials
and soliciting proxies for the Annual Meeting of Shareholders at
an anticipated cost of $8,000 (plus handling fees).
Voting of
Proxies
When a choice is specified with respect to any matter to come
before the Annual Meeting of Shareholders, the shares
represented by the proxy will be voted in accordance with such
specifications.
When a choice is not so specified, the shares represented by the
proxy will be voted FOR ALL nominees named in
Proposal One, FOR Proposals Two and
Three, and AGAINST Proposals Four and
Five, as set forth in the Notice of Internet Availability of
Proxy Materials, Notice of Annual Meeting of Shareholders and
Proxy or Voting Instruction Card.
Management is not aware that any matters other than those
specified herein will be presented for action at the Annual
Meeting of Shareholders, but if any other matters do properly
come before the Annual Meeting of Shareholders, the proxyholders
will vote upon those matters in accordance with their best
judgment.
In the election of directors, a specification to withhold
authority to vote for the slate of nominees named on the proxy
or voting instruction card will not constitute an authorization
to vote for any other nominee.
Delivery
of Proxy Statements
As permitted by the Exchange Act, in those instances where we
are mailing a paper copy of the Proxy Statement, only one copy
of this Proxy Statement is being delivered to shareholders
residing at the same address, unless such shareowners have
notified the Company of their desire to receive multiple copies
of the Proxy Statement.
The Company will promptly deliver, upon oral or written request,
a separate copy of the Proxy Statement to any shareholder
residing at an address to which only one copy was mailed.
Requests for additional copies
and/or to
request multiple copies of the Proxy Statement in the future
should be directed to our Investor Relations Department, 1000
Lowes Boulevard, Mooresville, North Carolina 28117,
(704) 758-1000.
43
Shareholders residing at the same address and currently
receiving multiple copies of the Proxy Statement may contact our
Investor Relations Department, 1000 Lowes Boulevard,
Mooresville, North Carolina 28117,
(704) 758-1000,
to request that only a single copy of the Proxy Statement be
mailed in the future.
Electronic
Delivery of Proxy Materials
Shareholders can elect to view future proxy materials and annual
reports over the Internet instead of receiving paper copies in
the mail. If you received a paper copy of this years proxy
materials by mail, you may register for electronic delivery of
future proxy materials by following the instructions provided on
your proxy or voting instruction card. If you received only a
Notice of Internet Availability of Proxy Materials by mail, you
may register for electronic delivery of future proxy materials
by following the instructions provided when you vote online at
the Internet site address listed on your Notice.
Choosing to receive your future proxy materials by
e-mail will
help us conserve natural resources and reduce the costs of
printing and distributing our proxy materials. If you choose to
receive future proxy materials by
e-mail, you
will receive an
e-mail with
instructions containing a link to the website where those
materials are available and a link to the proxy voting website.
Your election to receive proxy materials by
e-mail will
remain in effect until you terminate it.
SHAREHOLDER
PROPOSALS FOR THE 2011 ANNUAL MEETING
Proposals of shareholders intended to be presented at the 2011
Annual Meeting of Shareholders must be received by the Board of
Directors for consideration for inclusion in the Proxy Statement
relating to that meeting on or before December 13, 2010.
Such proposals must also comply with SEC regulations under
Rule 14a-8
regarding the inclusion of shareholder proposals in
company-sponsored proxy materials. Proposals should be addressed
to the attention of Gaither M. Keener, Jr., Senior Vice
President, General Counsel, Secretary and Chief Compliance
Officer, at the Companys principal executive offices, 1000
Lowes Boulevard, Mooresville, North Carolina 28117, or
faxed to his attention at
(704) 757-0598.
In addition, shareholder proposals submitted for consideration
at the 2011 Annual Meeting of Shareholders but not submitted for
inclusion in our 2011 Proxy Statement pursuant to
Rule 14a-8,
other than shareholder nominations for candidates for election
as directors, generally must be delivered to, or mailed and
received at, the principal executive offices of the Company not
less than 90 days nor more than 120 days prior to the
first anniversary of the date of the 2010 Annual Meeting of
Shareholders. On the other hand, shareholder nominations for
candidates for election as directors submitted for consideration
at the 2011 Annual Meeting of Shareholders but not submitted for
inclusion in our 2011 Proxy Statement pursuant to
Rule 14a-8,
generally must be delivered to, or mailed and received at, the
principal executive offices of the Company not less than
120 days nor more than 150 days prior to the first
anniversary of the date of the 2010 Annual Meeting of
Shareholders. As a result, for a proposal other than shareholder
nominations for candidates for election as directors, notice
given by a shareholder pursuant to the provisions of the
Companys Bylaws (other than notice pursuant to
Rule 14a-8)
must be received no earlier than January 28, 2011, and no
later than February 27, 2011, and, for shareholder
nominations for candidates for election as directors, notice
given by a shareholder pursuant to the provisions of the
Companys Bylaws (other than notice pursuant to
Rule 14a-8)
must be received no earlier than December 29, 2010, and no
later than January 28, 2011. However, if the date of the
2011 Annual Meeting of Shareholders is moved more than
30 days before or 60 days after May 28, 2011,
then notice by the shareholder of a proposal other than for
shareholder nominations for candidates for election as directors
must be delivered not earlier than the
90th day
prior to the date of such annual meeting and not later than the
close of business on the later of the
60th day
prior to the date of such annual meeting or the
10th day
following the day on which public announcement of the date of
such meeting is first made, and notice by the shareholder for
shareholder nominations for candidates for election as directors
must be delivered not earlier than the
120th day
prior to the date of such annual meeting and not later than the
close of business on the later of the
90th day
prior to the date of such annual meeting or the
10th day
following the day on which public announcement of the date of
such meeting is first made. Shareholder proposals must include
the specified information concerning the proposal or nominee as
described in the Companys Bylaws.
44
ANNUAL
REPORT
The Annual Report to Shareholders accompanies this Proxy
Statement. The Annual Report is also posted at the following
website addresses: www.Lowes.com/investor and
www.proxyvote.com. The Companys Annual Report to
the SEC on
Form 10-K
for the fiscal year ended January 29, 2010 is posted at
www.Lowes.com/investor and is available upon written
request addressed to Lowes Companies, Inc., Investor
Relations Department, 1000 Lowes Boulevard, Mooresville,
North Carolina 28117.
MISCELLANEOUS
The information referred to in this Proxy Statement under the
captions Compensation Committee Report and
Report of the Audit Committee (to the extent
permitted under the Exchange Act) (i) shall not be deemed
to be soliciting material or to be filed
with the SEC or subject to Regulation 14A or the
liabilities of Section 18 of the Exchange Act, and
(ii) notwithstanding anything to the contrary that may be
contained in any filing by Lowes under the Exchange Act or
the Securities Act of 1933, shall not be deemed to be
incorporated by reference in any such filing.
By order of the Board of Directors,
Gaither M. Keener, Jr.
Senior Vice President,
General Counsel, Secretary &
Chief Compliance Officer
Mooresville, North Carolina
April 12, 2010
45
APPENDIX A
CATEGORICAL
STANDARDS
FOR DETERMINATION
OF
DIRECTOR INDEPENDENCE
CATEGORICAL
STANDARDS FOR DETERMINATION OF DIRECTOR INDEPENDENCE
It has been the long-standing policy of Lowes Companies,
Inc. (the Company) to have a substantial majority of
independent directors. No director qualifies as independent
under the New York Stock Exchange (NYSE) corporate
governance rules unless the board of directors affirmatively
determines that the director has no material relationship with
the Company. The NYSEs corporate governance rules include
several bright line tests for director independence.
No director who has a direct or indirect relationship that is
covered by one of those tests shall qualify as an independent
director.
* * * *
The Board of Directors has determined that the following
relationships with the Company, either directly or indirectly,
will not be considered material relationships for purposes of
determining whether a director is independent:
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Relationships in the ordinary course of
business. Relationships involving (1) the
purchase or sale of products or services or (2) lending,
deposit, banking or other financial service relationships,
either by or to the Company or its subsidiaries and involving a
director, his or her immediate family members, or an
organization of which the director or an immediate family member
is a partner, shareholder, officer, employee or director if the
following conditions are satisfied:
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any payments made to, or payments received from, the Company or
its subsidiaries in any single fiscal year within the last three
years do not exceed the greater of (i) $1 million or
(ii) 2% of such other organizations consolidated
gross revenues
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the products and services are provided in the ordinary course of
business and on substantially the same terms and conditions,
including price, as would be available either to similarly
situated customers or current employees
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the relationship does not involve consulting, legal, or
accounting services provided to the Company or its subsidiaries
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any extension of credit was in the ordinary course of business
and was made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for
comparable transactions with other similarly situated borrowers
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Relationships with organizations to which a director is
connected solely as a shareholder or partner. Any other
relationship between the Company or one of its subsidiaries and
a company (including a limited liability company) or partnership
to which a director is connected solely as a shareholder, member
or partner as long as the director is not a principal
shareholder or partner of the organization. For purposes of this
categorical standard, a person is a principal shareholder of a
company if he or she directly or indirectly, or acting in
concert with one or more persons, owns, controls, or has the
power to vote more than 10% of any class of voting securities of
the company. A person is a principal partner of a partnership if
he or she directly or indirectly, or acting in concert with one
or more persons, owns, controls, or has the power to vote a 25%
or more general partnership interest, or more than a 10% overall
partnership interest. Shares or partnership interests owned or
controlled by a directors immediate family member who
shares the directors home are considered to be held by the
director.
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Contributions to charitable
organizations. Contributions made or pledged by
the Company, its subsidiaries, or by any foundation sponsored by
or associated with the Company or its subsidiaries to a
charitable organization of which a director or an immediate
family member is an executive officer, director, or trustee if
the following conditions are satisfied:
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within the preceding three years, the aggregate amount of such
contributions during any single fiscal year of the charitable
organization did not exceed the greater of $1 million or 2%
of the charitable organizations consolidated gross
revenues for that fiscal year
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the charitable organization is not a family foundation created
by the director or an immediate family member.
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A-1
For purposes of this categorical standard, contributions made to
any charitable organization pursuant to a matching gift program
maintained by the Company or by its subsidiaries or by any
foundation sponsored by or associated with the Company or its
subsidiaries shall not be included in calculating the
materiality threshold set forth above.
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Equity relationship. If the director, or an
immediate family member, is an executive officer of another
organization in which the Company owns an equity interest, and
if the amount of the Companys interest is less than 10% of
the total voting interest in the other organization.
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Stock ownership. The director is the
beneficial owner (as that term is defined under Rule 13d of
the Securities Exchange Act of 1934, as amended) of less than
10% of the Companys outstanding capital stock.
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Other family relationships. A relationship
involving a directors relative who is not an immediate
family member of the director.
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Employment relationship. The director has not
been an employee of the Company or any of its subsidiaries
during the last five years.
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Employment of immediate family members. No
immediate family member of the director is a current employee,
or has been an executive officer during the last five years, of
the Company or any of its subsidiaries.
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Relationships with acquired or joint venture
entities. In the last five years, the director
has not been an executive officer, founder or principal owner of
a business organization acquired by the Company, or of a firm or
entity that was part of a joint venture or partnership including
the Company.
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Voting arrangements. The director is not a
party to any contract or arrangement with any member of the
Companys management regarding the directors
nomination or election to the Board, or requiring the director
to vote with management on proposals brought before the
Companys shareholders.
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Definitions
of Terms Used in these Categorical Standards
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Immediate Family Member includes a
persons spouse, parents, children, siblings, mothers and
fathers-in-law,
sons and
daughters-in-law,
brothers and
sisters-in-law,
and anyone (other than domestic employees) who shares such
persons home.
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Executive Officer means the president, any
vice-president in charge of a principal business unit, division
or function (such as sales, administration or finance) or any
other person who performs similar policy-making functions for an
organization.
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A-2
APPENDIX B
ARTICLE II,
SECTION 2 OF LOWES BYLAWS
AS MODIFIED BY
PROPOSED AMENDMENT
ARTICLE II,
SECTION 2 OF LOWES BYLAWS AS MODIFIED BY PROPOSED
AMENDMENT
SECTION 2. SPECIAL MEETINGS.
(a) Special meetings of the shareholders for any purpose or
purposes may be called by the Chairman of the Board or by a
majority of the Board of Directors, and shall be called by the
Secretary upon the written request of shareholders owning in the
aggregate
a majority
not
less than twenty-five percent (25%)
of the total
number of shares of capital stock of the corporation outstanding
and entitled to vote on the matter or matters to be brought
before the proposed special meeting.
(b) A request to the Secretary shall be signed by each
shareholder, or a duly authorized agent of such shareholder,
requesting the special meeting and shall set forth: (i) a
statement of the specific proposal(s) to be brought before the
special meeting, the reasons for conducting such business at the
special meeting and any material interest in such business of
each shareholder requesting the special meeting, (ii) the
name and address, as they appear on the corporations
books, of each shareholder requesting the special meeting,
(iii) the number of shares which are owned by each
shareholder requesting the special meeting, including shares
beneficially owned and shares held of record, and (iv) any
other information that is required to be set forth in a
shareholders notice required to be delivered pursuant to
Section 11 or Section 12 of Article II of these
Bylaws. A request to call a special meeting shall include
documentary evidence of each requesting shareholders
record and beneficial ownership of the corporations shares
of capital stock.
(c) A special meeting requested by shareholders shall be
held at such date and time as may be fixed by the Board of
Directors; provided, however, that the date of any such special
meeting shall be not more than ninety (90) days after the
request to call the special meeting is received by the
Secretary. Notwithstanding the foregoing, a special meeting
requested by shareholders shall not be held if (i) the
Board of Directors calls or has called an annual or special
meeting of shareholders to be held within ninety (90) days
after the Secretary receives the request for the special meeting
and the Board of Directors determines in good faith that the
business of such meeting includes (among any other matters
properly brought before the annual meeting) the purpose(s)
specified in the request or (ii) an annual or special
meeting was held not more than 12 months before the date on
which the request for a special meeting was delivered to the
Secretary that included the purpose(s) specified by the
requesting shareholders in their request for a special meeting,
with such determination being made in good faith by the Board of
Directors.
(d) Business transacted at a special meeting requested by
shareholders shall be limited to the purpose(s) stated in the
request for the special meeting; provided, however, that nothing
herein shall prohibit the Board of Directors from submitting
additional matters to shareholders at any such special meeting.
(e) Any shareholder may revoke a request for a special
meeting at any time by written revocation delivered to the
Secretary, and if, following such revocation, there are
un-revoked requests from shareholders holding in the aggregate
less than the requisite number of shares entitling the
shareholders to request the calling of a special meeting, the
Board of Directors, in its discretion, may cancel the special
meeting.
B-1
Important
Information Concerning the Lowes Annual Meeting
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Check-in
begins: 8:30 a.m. |
Meeting
begins: 10:00 a.m. |
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Lowes shareholders, including joint holders, as of the
close of business on March 26, 2010, the record date for
the Annual Meeting, are entitled to attend the Annual Meeting on
May 28, 2010.
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All shareholders and their proxies should be prepared to present
photo identification for admission to the meeting.
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If you are a record holder or a participant in the
Companys 401(k) Plan, Employee Stock Purchase Plan or
Direct Stock Purchase Program, your share ownership will be
verified against a list of record holders or plan or purchase
program participants as of the record date prior to your being
admitted to the meeting.
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If you are not a record holder or a participant in one of the
Companys plans or purchase programs, but hold shares
through a broker, trustee, or nominee, you will be asked to
present proof of beneficial ownership of Lowes shares as
of the record date, such as your most recent brokerage statement
prior to March 26, 2010 or other evidence of ownership.
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Persons acting as proxies must bring a valid proxy from a record
holder who owns shares as of the close of business on
March 26, 2010.
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Failure to present identification or otherwise comply with the
above procedures will result in exclusion from the meeting.
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THANK YOU FOR YOUR INTEREST AND SUPPORT YOUR VOTE
IS IMPORTANT.
Directions
to the Ballantyne Hotel, 10000
Ballantyne Commons Parkway,
Charlotte, North Carolina
From
Charlotte Douglas International Airport:
Take the airport freeway to Billy Graham Parkway South (you will
exit to your right) and continue approximately 8 miles.
Take I-77 South to I-485 East, take exit 61 Johnston Road and
turn right onto Johnston Road. The Ballantyne Hotel is on your
left at the first traffic light.
From 1-85
North:
Take I-85 North to I-485 South to exit 61 Johnston Road. Turn
right onto Johnston Road and turn left at the next light into
the Ballantyne Hotel.
From 1-85
South:
From I-85 South take the I-485 South/West exit at Concord, NC
and continue on I-485 to exit 61 B Johnston Road (2nd exit
under bridge). Turn right onto Johnston Road (headed South) and
the Ballantyne Hotel is on your left at the second traffic light.
From 1-77
South:
Take I-77 South to I-485 East, take exit 61 Johnston Road and
turn right onto Johnston Road. The Ballantyne Hotel is on your
left at the first traffic light.
From 1-77
North:
Take I-77 North to I-485 East, take exit 61 Johnston Road and
turn right onto Johnston Road. The Ballantyne Hotel is on your
left at the first traffic light.
Printed on Recycled
Paper
Lowes and the gable design
are registered trademarks of LF, LLC.
1000 LOWES BOULEVARD MAIL CODE: NB7IR MOORESVILLE, NC 28117
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 12:00 A.M. Eastern Time on May 28, 2010. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS
If you would like to reduce the costs incurred by Lowes Companies, Inc. in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access shareholder communications electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 12:00 A.M. Eastern Time on May 28, 2010. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Lowes Companies, Inc., c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A - C BELOW AND DATE AND SIGN IN SECTION D AT THE BOTTOM OF THIS CARD.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
M22293-P93645 KEEP THIS PORTION FOR YOUR RECORDS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY
LOWES COMPANIES, INC. For Withhold For All To withhold authority to vote for any individual
All All Except nominee(s), mark For All Except and write the
A Election of Directors - Lowes Board of Directors number(s) of the nominee(s) on the line below.
recommends a vote FOR the listed nominees.
Nominees:
01) David W. Bernauer
02) Leonard L. Berry
03) Dawn E. Hudson
04) Robert A. Niblock
B Proposals of Management - Lowes Board of Directors recommends a vote FOR Proposals 2 and 3. For Against Abstain
2. To ratify the appointment of Deloitte & Touche LLP as the Companys Independent Registered Public Accounting Firm.
3. To approve an amendment to Lowes Bylaws decreasing the percentage of shares required to call a special meeting of shareholders.
C Shareholder Proposals - Lowes Board of Directors recommends a vote AGAINST Proposals 4 and 5. For Against Abstain
4. Shareholder proposal regarding report on political spending.
5. Shareholder proposal regarding separating the roles of Chairman and CEO.
D Authorized Signatures - This section must be completed for your instructions plan Please to indicate attend if this you
to be executed - Date and Sign Below.
meeting.
Please sign exactly as your name appears hereon. Joint owners should each sign. When signing as attorney, executor, Yes No
administrator, trustee, or guardian, please give full title as such, and where more than one name appears, each should
sign. If a corporation, this signature should be that of an authorized officer who should state his or her title.
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
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Important Notice Regarding Internet Availability of Proxy Materials for the Annual Meeting:
The Notice of Annual Meeting of Shareholders, Proxy Statement and Annual Report are available at www.proxyvote.com.
M22294-P93645
2010 Annual Meeting of Shareholders
THIS PROXY IS SOLICITED ON BEHALF OF LOWES BOARD OF DIRECTORS
The undersigned hereby appoints Gaither M. Keener, Jr. and Robert F. Hull, Jr., and each of them, as proxies, each with the full power to appoint his substitute, and hereby authorizes each of them to represent and vote, as designated on the reverse side, all the shares of Common Stock of Lowes Companies, Inc. held of record by the undersigned at the close of business on March 26, 2010, at the Annual Meeting of Shareholders to be held on May 28, 2010, or any adjournment or postponement thereof. The proxies are authorized to vote on such other business as may properly come before the meeting or any postponement or adjournment thereof, exercising their discretion as set forth in the 2010 Notice of Annual Meeting of Shareholders and Proxy Statement.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. If no direction is made, this proxy will be voted FOR ALL nominees named in Proposal 1, FOR Proposals 2 and 3 and AGAINST Proposals 4 and 5.
This card also constitutes voting instruction to State Street Bank and Trust Company, the Trustee of the Lowes 401 (k) Plan, to vote the shares of Common Stock of Lowes Companies, Inc., if any, allocated to the undersigneds 401 (k) account pursuant to the instructions on the reverse side. Any allocated shares for which no instructions are timely received will be voted by the Trustee in the manner directed by a 401 (k) fiduciary committee.
PLEASE MARK, SIGN AND DATE ON THE REVERSE SIDE, AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE, OR FOLLOW THE INSTRUCTIONS TO VOTE BY TELEPHONE OR INTERNET.
(Items to be voted appear on reverse side.)
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