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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED JANUARY 29, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-4844
ECKERD CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3302437
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
8333 BRYAN DAIRY ROAD
LARGO, FL 34647
(ADDRESS AND ZIP CODE OF PRINCIPAL EXECUTIVE OFFICES)
(813) 399-6000
(REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ----------------------------- -------------------------
COMMON STOCK, PAR VALUE $.01 NEW YORK STOCK EXCHANGE
11 1/8% SUBORDINATED AMERICAN STOCK EXCHANGE
DEBENTURES DUE 2001
9 1/4% SENIOR SUBORDINATED NEW YORK STOCK EXCHANGE
NOTES DUE 2004
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for the past 90 days. Yes _X_ No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
The aggregate market value of the voting stock held by non-affiliates of
the Company as of March 26, 1994 was $347,938,887 (Calculated on the assumption
that all directors, all executive officers, and Merrill Lynch Investors are
affiliates).
As of March 26, 1994, 31,642,902 shares of common stock, par value $.01,
were outstanding.
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<PAGE>
EXPLANATORY NOTE
This Amendment to the Annual Report on Form 10-K for the fiscal year ended
January 29, 1994 of Eckerd Corporation (the "Company") is being filed by the
Company to amend the following sections for the reasons specified: (a) Item 8
to correct a typographical error contained in the unaudited selected quarterly
financial data for the fiscal quarter ended May 2, 1992; (b) Item 10 to add the
disclosure concerning Harry W. Lambert, Richard W. Roberson and Thomas E.
Whiddon and to correct the list of directorships of Dr. James T. Doluisio,
Albert J. Fitzgibbons, III and Lewis W. Lehr; (c) Item 11 to reflect Robert
L. Myers as a named executive officer in lieu of James M. Santo and to correct
the disclosure concerning the vesting of certain options granted to Francis
A. Newman; (d) Item 12 to reflect the security ownership of Robert L. Myers as
a named executive officer in lieu of James M. Santo, to correct the business
address for certain directors of the Company and to clarify that Richard W.
Roberson and Thomas E. Whiddon are included in the group of directors and
executive officers; and (e) Item 14 to refile the Independent Auditors'
Report to correct a clerical error and to change the exhibit index to reflect
the filing of the employment agreement of Robert L. Myers as a new exhibit,
the elimination of the employment agreement of James M. Santo as an
exhibit and the refiling of the Consent of Independent Certified Public
Accountants as an exhibit to correct a clerical error.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and auditors' report for the Company
as set forth under Item 14 of this Form 10-K are incorporated herein by
reference.
Unaudited information on selected quarterly financial data of the Company
for the years ended January 29, 1994 and January 30, 1993 required by this Item
is presented below (in thousands):
<TABLE>
<CAPTION>
FISCAL 1993 QUARTERS ENDED
------------------------------------------------
05/01/93 07/31/93 10/30/93 01/29/94
------------- --------- --------- -----------
FINANCIAL INFORMATION
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales and other operating revenue........................... $ 1,055,152 981,195 972,675 1,181,517
Cost of sales, including store occupancy, warehousing and
delivery expense.............................................. 793,329 742,672 744,906 894,468
Operating and administrative expenses....................... 210,420 209,526 212,200 225,834
Net interest expenses....................................... 32,660 30,870 25,161 24,524
------------- --------- --------- -----------
Earnings (loss) before income taxes and extraordinary
item.......................................................... 18,743 (1,873) (9,592) 36,691
Income taxes................................................ 923 1,332 (455) 756
------------- --------- --------- -----------
Earnings (loss) before extraordinary item................... 17,820 (3,205) (9,137) 35,935
Extraordinary item-early retirement of debt and preferred
stock......................................................... -- (27,663) (2,421) (14,270)
------------- --------- --------- -----------
Net earnings (loss)......................................... 17,820 (30,868) (11,558) 21,665
Preferred stock dividends................................... 2,708 2,216 -- --
------------- --------- --------- -----------
Net earnings (loss) available to common shares.............. $ 15,112 (33,084) (11,558) 21,665
------------- --------- --------- -----------
------------- --------- --------- -----------
Net earnings (loss) before extraordinary items per common
share......................................................... $ .56 (.20) (.29) 1.12
Net earnings (loss) per common share........................ $ .56 (1.25) (.37) .68
Weighted average common shares outstanding.................. 26,917 26,505 31,606 32,073
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1992 QUARTERS ENDED
----------------------------------------------
05/02/92 08/01/92 10/31/92 01/30/93
----------- --------- --------- -----------
FINANCIAL INFORMATION
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales and other operating revenue............................. $ 973,813 913,905 907,493 1,091,816
Cost of sales, including store occupancy, warehousing and
delivery expense................................................ 717,652 675,406 686,109 817,312
Operating and administrative expenses......................... 214,169 213,310 207,817 219,869
Net interest expenses......................................... 34,896 33,436 34,001 35,071
----------- --------- --------- -----------
Earnings (loss) before income taxes and extraordinary item.... 7,096 (8,247) (20,434) 19,564
Income taxes.................................................. 2,857 (1,661) 664 1,004
----------- --------- --------- -----------
Earnings (loss) before extraordinary item..................... 4,239 (6,586) (21,098) 18,560
Extraordinary item-tax effect of utilization of net operating
loss carryforward............................................... 2,317 (2,317) -- 762
----------- --------- --------- -----------
Net earnings (loss)........................................... 6,556 (8,903) (21,098) 19,322
Preferred stock dividends..................................... 2,698 2,669 2,709 2,739
----------- --------- --------- -----------
Net earnings (loss) available to common shares................ $ 3,858 (11,572) (23,807) 16,583
----------- --------- --------- -----------
----------- --------- --------- -----------
Net earnings (loss) before extraordinary items per common
share........................................................... $ .06 (.34) (.88) .59
Net earnings (loss) per common share.......................... $ .15 (.43) (.88) .61
Weighted average common shares outstanding.................... 26,068 26,977 26,977 27,012
</TABLE>
1
<PAGE>
Earnings (loss) per common share are computed independently for each of the
quarters. Therefore, the sum of the quarterly earnings per share may not equal
the annual earnings (loss) per common share.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
The name, age and office or principal occupation of the executive officers
and directors of the Company who served during the year ended January 29, 1994
and certain information relating to their business experience are set forth
below:
<TABLE> <CAPTION>
NAME AGE POSITION
- -------------------------------------------- ------- -------------------------------------------------------------
<S> <C> <C>
Stewart Turley.............................. 59 Director, Chairman of the Board and Chief Executive Officer
Francis A. Newman........................... 45 Director, President and Chief Operating Officer
John W. Boyle............................... 65 Director and Vice Chairman of the Board
Dr. James T. Doluisio....................... 58 Director
Donald F. Dunn.............................. 68 Director
Albert J. Fitzgibbons, III.................. 48 Director
Lewis W. Lehr............................... 73 Director
Alexis P. Michas............................ 36 Director
Rupinder S. Sidhu........................... 37 Director
Edward W. Kelly............................. 48 Senior Vice President/Merchandising
Harry W. Lambert............................ 60 Senior Vice President and
President of Eckerd Drug
Company
Richard W. Roberson......................... 47 Senior Vice President
James M. Santo.............................. 52 Senior Vice President/Administration and Secretary
Samuel G. Wright............................ 43 Senior Vice President/Finance
Robert L. Myers............................. 48 Senior Vice President/Pharmacy
Robert D. Boos.............................. 54 Vice President
Oren M. Peacock............................. 56 Vice President
Thomas E. Whiddon........................... 47 Vice President/Treasurer
</TABLE>
Mr. Turley is Chairman of the Board and Chief Executive Officer
of the Company, positions he has held since 1986. He served as President
of the Company from 1986 until July 1993. He joined Old Eckerd in 1966
and has served as Senior Vice President (1971-1974) and President and Chief
Executive Officer (1974-1975) prior to being elected to Chairman of the Board,
President and Chief Executive Officer. He is also a director of Barnett Banks,
Inc., Sprint Corporation and Springs Industries, Inc.
Mr. Newman is President, Chief Operating Officer and a director of the
Company, positions he has held since July 6, 1993. Prior to joining the Company,
Mr. Newman served as President, Chief Executive Officer and a director of F&M
Distributors, Inc. ("F&M"), a drug store chain, since 1986. Prior to joining
F&M, he was the Executive Vice President of Household Merchandising, a retail
firm, from 1984 to 1985 and the Senior Vice President of Merchandising for F.W.
Woolworth, a retail firm, from 1980 to 1984. Mr. Newman is also a director of
FabriCenters of America, a retail firm.
Mr. Boyle was appointed Vice Chairman of the Board in February 1993. Prior
thereto he was Senior Vice President/Finance and Administration of the Company,
a position he has held for more than the past five years. He joined Old Eckerd
as Senior Vice President/Finance and Administration in 1983.
Dr. Doluisio is Dean of the College of Pharmacy, University of Texas,
Austin, Texas. Dr. Doluisio has been Dean since 1973 and has served as chairman
of the American Pharmaceutical Association, the American Association of College
of Pharmacy Council of Deans, the American Association for the Advancement of
Science and as a trustee of the United States Pharmacopeia. He is also a
director of COR Therapeutics, Inc.
Mr. Dunn is retired Chairman of the Board and Chief Executive Officer of
Maas Brothers/Jordan Marsh, a division of Allied Stores Corporation, New York,
New York. In his 39-year career with Allied Stores, starting as an executive
trainee, Mr. Dunn held numerous management positions including that of executive
group manager of Allied Stores for Jordan Marsh and Maas Brothers in Florida,
Cain-Sloan in Tennessee and Joske's in Texas. Mr. Dunn is also a director of
Tech Data Corporation and Younkers, Inc.
2
<PAGE>
Mr. Fitzgibbons has been a director of Merrill Lynch Capital Partners since
1988. He has been a Partner of Merrill Lynch Capital Partners since 1993; an
Executive Vice President of Merrill Lynch Capital Partners from 1988 to 1993; a
Senior Vice President of Merrill Lynch Capital Partners from 1987 to 1988; a
Managing Director of the Investment Banking Division of Merrill Lynch & Co. ("ML
& Co.") since 1978; and Vice President of Merrill Lynch from 1974 to 1988. He is
also a director of Amstar Corporation, Borg-Warner Security Corporation,
Borg-Warner Automotive, Inc., Consumer Markets, Inc., ESSTAR Corporation, U.S.
Foodservice, Inc., AmeriFoods Companies, Inc. and United Artists Theatre
Circuit, Inc.
Mr. Lehr is former Chairman of the Board of 3M Company, St. Paul,
Minnesota. In his 39-year career with 3M Company, starting as an engineer, Mr.
Lehr held numerous management positions and from 1980 to March 1986, when he
retired, was Chairman of the Board and Chief Executive Officer. He also serves
as a director of Peregrine Semiconductor Corporation and various IDS Funds.
Mr. Michas has been a director of Merrill Lynch Capital Partners since
1989. He has been a Partner of Merrill Lynch Capital Partners since 1993; a
Senior Vice President of Merrill Lynch Capital Partners from 1990 to 1993; a
Vice President of Merrill Lynch Capital Partners from 1987 to 1989; a Managing
Director of the Investment Banking Division of ML & Co. since 1991; a Director
of the Investment Banking Division of ML & Co. from 1990 to 1991; and a Vice
President of the Investment Banking Division of ML & Co. from 1987 to 1989. He
is also a director of Amstar Corporation, Borg-Warner Security Corporation,
Borg-Warner Automotive, Inc. and Blue Bird Body Corporation.
Mr. Sidhu has been a director of Merrill Lynch Capital Partners since 1988.
He has been a Partner of Merrill Lynch Capital Partners since 1993; a Senior
Vice President of Merrill Lynch Capital Partners since 1987; a Vice President of
Merrill Lynch Capital Partners from 1985 to 1987; a Managing Director of the
Investment Banking Division of ML & Co. from 1989 to 1993; and a Director of the
Investment Banking Division of ML & Co. from 1987 to 1989. He is also a director
of Clinton Mills, Inc., First-USA, Inc., John Alden Financial Corporation and
Wherehouse Entertainment, Inc.
Mr. Kelly was appointed Senior Vice President/Merchandising in February
1993. Prior thereto he served as Vice President of Merchandising of Eckerd Drug
Company, formerly Old Eckerd's principal subsidiary ("Eckerd Drug Company") and
now the Company's principal division, for more than the past five years.
Mr. Lambert, who has served as Senior Vice President of the Company and
President of Eckerd Drug Company for more than the past five years, retired
from both positions effective September 30, 1993. See "Separation Agreements."
Mr. Roberson was Senior Vice President of the Company and President of
Eckerd Vision Group, positions he held from August 1988 until March 1994. In
addition, Mr. Roberson was Chairman of the Board and Chief Executive Officer
of Insta-Care Pharmacy Services, Inc., a subsidiary of the Company, from 1991 to
1994. Mr. Roberson served as Vice President/Controller and Treasurer of the
Company prior to August 1988. Mr. Roberson resigned his employment in March
1994. See "Separation Agreements."
Mr. Santo was appointed Senior Vice President/Administration in February
1993. Prior thereto he was Vice President/Legal Affairs of the Company, a
position he has held for more than the past five years. In addition, Mr. Santo
was appointed Secretary of the Company effective January 1, 1992.
Mr. Wright was appointed Senior Vice President/Finance in February 1993.
Prior thereto he was Vice President and Controller of the Company, a position he
has held since September 1988. Mr. Wright became Vice President of the Company
in June 1986. In addition, Mr. Wright has served as Vice President of Finance of
Eckerd Drug Company since May 1985.
Mr. Myers was appointed Senior Vice President/Pharmacy in February 1993.
Prior thereto he was Vice President of the Company, a position he has held for
more than the past five years. In addition, Mr. Myers has served as Vice
President of Pharmacy Services of Eckerd Drug Company for more than the past
five years.
Mr. Boos was appointed Vice President of the Company in April 1991. In
addition, Mr. Boos has been Vice President of Real Estate and Development of
Eckerd Drug Company since August 1985. Mr. Boos joined Eckerd Drug Company in
1982.
Mr. Peacock is Vice President of the Company, a position he has held for
more than the past five years. Mr. Peacock is also a Senior Regional Vice
President for the North Texas Region of Eckerd Drug Company.
Mr. Whiddon was Vice President and Treasurer of the Company, a position he
held from September 1988 until March 1994. Mr. Whiddon resigned his employment
in March 1994.
3
<PAGE>
Messrs. Turley, Boyle, Doluisio, Dunn, Fitzgibbons and Lehr have been
directors of the Company since May 1986. Mr. Sidhu became a director of the
Company in April 1988 and Mr. Michas became a director of the Company in April
1990, and Mr. Newman became a director in July 1993.
The Board of Directors of the Company is divided into three classes serving
staggered three-year terms. The terms of office of Messrs. Boyle, Doluisio and
Sidhu will expire in 1994, the terms of office of Messrs. Michas, Dunn and
Newman will expire in 1995 and the terms of office of Messrs. Fitzgibbons,
Turley and Lehr will expire in 1996.
Messrs. Doluisio, Dunn and Lehr serve as members of the Audit Committee,
Messrs. Fitzgibbons, Dunn and Lehr serve as members of the Executive
Compensation and Stock Option Committee, and Messrs. Turley, Dunn and
Fitzgibbons serve as members of the Executive Committee, of the Board of
Directors of the Company. Officers of the Company serve at the discretion of the
Board of Directors. Messrs. Fitzgibbons, Sidhu and Michas are employees of
Merrill Lynch Capital Partners and serve on the Board of Directors of the
Company as representatives of the Merrill Lynch Investors.
Officers are elected for a one-year term by the Board of Directors at its
annual meeting. There is no family relationship between any of the
aforementioned officers or directors of the Company.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information for the 1993, 1992 and
1991 fiscal years with respect to the Chief Executive Officer, each of the four
most highly paid executive officers of the Company who were serving as executive
officers at January 29, 1994 and one of the five most highly compensated
executive officers of the Company during fiscal 1993 who was no longer an
executive officer at January 29, 1994.
SUMMARY COMPENSATION TABLE
<TABLE> <CAPTION>
LONG-TERM COMPENSATION
------------------------
AWARDS(9) PAYOUTS
----------- -----------
ANNUAL COMPENSATION NUMBER OF LONG-TERM
------------------------------------- SECURITIES INCENTIVE
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING PLAN ALL OTHER
POSITION(1) YEAR SALARY BONUS COMPENSATION(2) OPTIONS PAYOUTS COMPENSATION(5)(6)
- ------------------------------------ --------- --------- --------- --------------- ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stewart Turley, Chairman of the 1993 $ 601,467 $ 201,419 $ -- 25,000 $ 138,750 $ --
Board, and CEO 1992 591,351 135,906 324,696(3) -- 133,200 469,097
1991 556,244 306,388 87,450
Francis A. Newman, President and 1993 $ 285,601 $ 250,000 $ -- 215,000 $ -- $ --
Chief Operating Officer(4)
Harry W. Lambert, Senior Vice 1993 $ 361,467 $ 120,851 $ -- -- $ 83,750 $ --
President, President--Eckerd Drug 1992 356,351 81,774 120,577 -- 80,400 209,828
Company(7) 1991 336,244 184,937 52,800
John W. Boyle, Vice Chairman of the 1993 $ 319,467 $ 106,752 $ -- 20,000 $ 72,500 $ --
Board 1992 311,351 71,408 168,935 -- 69,600 297,251
1991 291,244 160,095 45,540
Richard W. Roberson, Senior Vice 1993 $ 187,297 $ 60,414 $ -- 12,000 $ 42,250 $ --
President, President--Eckerd 1992 181,558 51,950 67,089 -- 40,560 117,635
Vision Group, Chairman of the 1991 170,244 62,926 26,400
Board and CEO Insta-Care (8)
Robert L. Myers, Senior Vice 1993 $ 142,197 $ 92,231 $ -- 12,000 $ 31,875 $ --
President/Pharmacy 1992 136,108 33,551 40,797 -- 30,600 69,439
1991 128,744 68,823 19,800
</TABLE>
- ---------------
(1) The Company entered into employment agreements with each of the named
executive officers that provide for severance payments upon the occurrence
of events such as death or termination. See "Employment Agreements."
(2) The amounts shown in this column consist of (i) tax "gross up" payments made
with respect to certain compensation, including payments made with respect
to the named executive officers' Management Notes (see
(Footnotes continued on following page)
4
<PAGE>
(Footnotes continued from preceding page)
note (6)) that are reflected under the heading "All Other Compensation," and
(ii) with respect to Mr. Turley, certain perquisites. See note (3).
(3) Included in this amount are an automobile allowance of $27,812 and payments
for long-term disability insurance of $18,480.
(4) Mr. Newman's employment with the Company commenced on July 6, 1993. Under
Mr. Newman's employment agreement, the aggregate amount of his annual bonus
and Long Term Incentive Plan payouts are guaranteed to be not less than
$250,000 in each of 1993 and 1994.
(5) Each named executive officer participates in The Jack Eckerd Corporation
Profit Sharing Plan (the "Profit Sharing Plan") and The Jack Eckerd
Corporation Executive Excess Plan (the "Executive Excess Plan"). The
Executive Excess Plan replaces benefits under the Profit Sharing Plan (and
The Jack Eckerd Corporation Pension Plan) which are reduced under provisions
of the Internal Revenue Code. The amounts allocable in 1993 to the named
executive officers under the Profit Sharing Plan and the Executive Excess
Plan (with respect to the Profit Sharing Plan) were not calculable as of the
date hereof. The amounts allocable in 1992 were as follows: Mr. Turley,
$16,622, Mr. Lambert, $9,870, Mr. Boyle, $8,533, Mr. Roberson, $3,106, and
Mr. Myers, $3,122.
(6) The balances of the amounts shown in 1992 consist of the following amounts
paid to each named executive officer equaling the principal amounts due on
the named executive officers' Management Notes and the excess, if any, of
the interest due on their Management Notes over the interest payable by the
Company on their Convertible Debentures: Mr. Turley, $452,475, Mr. Lambert,
$199,958, Mr. Boyle, $288,718, Mr. Roberson, $114,529, and Mr. Myers
$66,317. In 1992, payment on the Management Notes was accelerated and the
Company made additional payments to the named executive officers in an
amount equal to the remaining principal amount due on their Management
Notes. The Management Notes were repaid in full and there are no future
obligations by the Company or the named executive officers on these
Management Notes. See "Compensation Committee Interlocks and Insider
Participation."
(7) Mr. Lambert retired from his positions as Senior Vice President of the
Company and President of Eckerd Drug Company and became a consultant to the
Company effective September 30, 1993. Amounts paid to Mr. Lambert after
September 30, 1993 which are included in his 1993 salary totalled $120,502.
See "Separation Agreements."
(8) Mr. Roberson resigned from his employment with the Company effective March
31, 1994. See "Separation Agreements."
(9) No restricted stock was awarded during the year ended January 29, 1994. As
of January 29, 1994 the named executive officers restricted stock holdings
(number of shares and value) were as follows: Mr. Turley, 28,081, $554,600,
Mr. Lambert, 15,431, $304,762, Mr. Roberson, 6,755, $133,411 and Mr. Myers,
3,687, $72,818. Mr. Newman and Mr. Boyle had no restricted stock
holdings at January 29, 1994.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table presents information concerning grants of stock options
during the 1993 fiscal year to each of the named executive officers. No stock
appreciation rights were granted during the 1993 fiscal year.
<TABLE> <CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL ASSUMED
SECURITIES OPTIONS/SARS MARKET ANNUAL RATES OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE OR PRICE APPRECIATION FOR OPTION TERM(2)
OPTION/SARS EMPLOYEES IN BASE PRICE ON DATE OF EXPIRATION -----------------------------------
NAME GRANTED FISCAL YEAR(1) PER SHARE GRANT(2) DATE 0% 5% 10%
- ------------------------ ----------- --------------- ----------- ----------- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stewart Turley.......... 25,000 2.9% $ 14.00 $ 14.00 08/12/03 $ 0 $ 220,113 $ 557,810
Francis A. Newman....... 200,000 23.4 10.00 14.00 08/12/03 800,000 1,257,789 3,187,485
15,000 1.8 14.00 14.00 08/12/03 0 132,068 334,686
Harry W. Lambert........ -- -- -- -- -- -- -- --
John W. Boyle........... 20,000 2.3 14.00 14.00 08/12/03 0 176,090 446,248
Richard W. Roberson..... 12,000 1.4 14.00 14.00 08/12/03 0 105,654 267,749
Robert L. Myers......... 12,000 1.4 14.00 14.00 08/12/03 0 105,654 267,749
</TABLE>
- ---------------
(1) Based on a total of 855,915 options granted to all employees. All options
granted to the named executive officers were granted on August 12, 1993.
Commencing three years after date of grant, the options (other than a
portion of Mr. Newman's) are exercisable to the extent of 50%, with an
additional 25% exercisable after each of the next two successive years. Mr.
Newman's grant of options with respect to 200,000 shares is exercisable to
the extent of 25% commencing one year after date of grant, with an
additional 25% exercisable after each of the next three successive years.
(2) The market price on the date of grant used herein was the initial public
offering price.
5
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES (1)
The following table presents information concerning the exercise of stock
options during the 1993 fiscal year and the value of unexercised stock options
at the end of the 1993 fiscal year with respect to the named executive officers.
No SARs are currently outstanding.
<TABLE> <CAPTION>
VALUE OF UNEXERCISED
IN-THE MONEY
OPTIONS/SARS
NUMBER OF SECURITIES UNDERLYING AT FY-END
UNEXERCISED OPTIONS/SARS AT FY-END (EXERCISABLE/
NAME (EXERCISABLE/UNEXERCISABLE) UNEXERCISABLE)
- -------------------------------------------------- -------------------------------------- ------------------------
<S> <C> <C> <C> <C>
Stewart Turley.................................... 44,421 /25,000 $467,275 /$143,750
Francis A. Newman................................. -0- /215,000 $ -0- /$2,036,250
Harry W. Lambert.................................. 20,800 /-0- $218,800 /-0-
John W. Boyle..................................... 20,800 /20,000 $218,800 /$115,000
Richard W. Roberson............................... 10,400 /12,000 $109,400 /$69,000
Robert L. Myers................................... 6,500 /12,000 $ 68,375 /$69,000
</TABLE>
- ---------------
(1) None of the named executive officers exercised any options during the 1993
fiscal year.
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR (1)
The following table presents information regarding Long-Term Incentive Plan
Awards made during the 1993 fiscal year to each of the named executive officers.
<TABLE> <CAPTION>
PERFORMANCE
OR OTHER ESTIMATED FUTURE PAYOUTS UNDER
PERIOD UNTIL NON-STOCK PRICE-BASED PLANS
MATURATION -------------------------------------
NAME OR PAYOUT THRESHOLD TARGET MAXIMUM
- ------------------------------------------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Stewart Turley............................. 1993-1995 $ 30,073 $ 150,367 $ 300,734
Francis A. Newman.......................... 1993-1995 25,000 125,000 250,000
Harry W. Lambert........................... 1993-1995 6,024 30,122 60,244
John W. Boyle.............................. 1993-1995 15,973 79,867 159,734
Richard W. Roberson........................ 1993-1995 -- -- --
Robert L. Myers............................ 1993-1995 7,110 35,549 71,099
</TABLE>
- ---------------
(1) All amounts shown represent grants made pursuant to the Company's Executive
Three Year Bonus Plan. The bonus awards are granted annually and the payment
of such awards are contingent on the attainment of certain performance
criteria. The total payment with respect to a grant is based on the annual
average increase in the Company's earnings before interest and taxes, as
adjusted, and the average annual return on investment, during a three-year
performance period consisting of the current year and the succeeding two
years, subject to achieving certain specified minimum performance objectives
for the three-year period, and are calculated as a percentage of a
participant's annual base salary as of the beginning of a three-year
performance period. The maximum amount of the bonus award is 50% of the
participating executives' annual base salary at the beginning of a
performance period. Since a target award is not applicable, the target
amount is representative of the amount which would be paid on the payout
date based on the previous fiscal year's performance results.
6
<PAGE>
THE JACK ECKERD CORPORATION PENSION PLAN
The Jack Eckerd Corporation Pension Plan (the "Pension Plan") is qualified
under the Code and is non-contributory. Employees who retire or terminate as
vested participants are entitled to receive retirement benefits under a final
average compensation formula. To the extent benefits cannot be provided under
the Pension Plan due to the limitations imposed by Sections 415 and 401(a)(17)
of the Code, such benefits will be provided for Messrs. Turley, Lambert and
Boyle under The Jack Eckerd Corporation Executive Excess Plan (the "Excess
Plan") which is not qualified under the Code. Mr. Roberson and Mr. Myers do not
participate in the Excess Plan. Mr. Newman is not eligible to participate in
this plan because he has not met the minimum length of service requirement.
The following table sets out the estimated Minimum Annual Retirement
Benefits payable at age 65 for the noted levels of final average annual
compensation and years of service:
PENSION PLAN TABLE
<TABLE> <CAPTION>
CREDITED YEARS OF SERVICE(1)(2)
FINAL AVERAGE ---------------------------------------------------------------
COMPENSATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- --------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 150,000 $ 35,550 $ 47,400 $ 59,250 $ 59,250 $ 59,250
250,000 59,250 79,000 98,750 98,750 98,750
350,000 82,950 110,600 138,250 138,250 138,250
450,000 106,650 142,200 177,750 177,750 177,750
550,000 130,350 173,800 217,250 217,250 217,250
650,000 154,050 205,400 256,750 256,750 256,750
750,000 177,750 237,000 296,250 296,250 296,250
850,000 201,450 268,600 335,750 335,750 335,750
950,000 225,150 300,200 375,250 375,250 375,250
1,050,000 248,850 331,800 414,750 414,750 414,750
1,150,000 272,550 363,400 454,250 454,250 454,250
1,250,000 296,250 395,000 493,750 493,750 493,750
</TABLE>
- ---------------
(1) The Pension Plan provides for a Minimum Annual Retirement Benefit at age 65
after 25 years of service equal to 24% of final average compensation plus
15.5% of final average compensation in excess of an employee's average
Social Security maximum taxable wage base for the 35 years ending with the
employee's Social Security normal retirement age. The Minimum Annual
Retirement Benefit includes the income which could be provided by a monthly
annuity for life purchased with the Profit Sharing Plan vested account
balance. Final average compensation is the average compensation (including
base salary, Key Management Bonus, and Executive Three-Year Bonus)
("Salary," "Bonus," and "Long-Term Incentive Plan Payouts" in the Summary
Compensation Table) for the highest consecutive five of the final ten years
of employment. It also includes certain perquisites. The retirement benefit
amounts shown are age 65 single life annuity amounts and are not subject to
any deduction for Social Security or other offset amounts. The years of
service and the current level of compensation recognized for retirement
purposes (which would be used to calculate average annual compensation) for
the named executive officers are as follows: Mr. Turley, 27 years and
$716,181, Mr. Lambert, 23 years and $431,788, Mr. Boyle, 10 years and
$372,321, Mr. Roberson, 16 years and $223,319, and Mr. Myers, 22 years and
$170,897. The final average compensation for retirement purposes for the
relevant five-year period is as follows: Mr. Turley $957,623, Mr. Lambert,
$569,811, Mr. Boyle, $492,938, Mr. Roberson, $216,720, and Mr. Myers,
$209,917.
(2) Mr. Newman is not eligible to participate in this plan because he has not
met the minimum length of service requirements.
7
<PAGE>
THE EXECUTIVE SUPPLEMENTAL BENEFIT PLAN
The Executive Supplemental Benefit Plan (the "ESBP") is a non-qualified,
non-contributory plan that provides for supplemental retirement and death
benefits for the executive officers, including the named executive officers, and
other key management employees of the Company and its subsidiaries.
The following table sets out the estimated annual benefits payable at age
65 for the noted levels of mid-point salaries:
<TABLE> <CAPTION>
COVERED ANNUAL BENEFIT
SALARY(1) PAYABLE(2)
- ---------------- ------------------------
<S> <C>
$ 100,000 $ 25,000
200,000 50,000
300,000 75,000
400,000 100,000
500,000 125,000
600,000 150,000
700,000 175,000
</TABLE>
- ---------------
(1) Under the ESBP, the Company is obligated to pay a participant commencing at
age 65 an annual amount equal to 25% of the participant's covered salary in
equal monthly installments for 15 years. The covered salary is the mid-point
salary of a salary range for a particular executive position that is
calculated by the Company. It does not relate to the figures provided in the
Summary Compensation Table. The mid-point range for 1993 recognized for
retirement purposes of the named executive officers are as follows: Mr.
Turley, $512,400, Mr. Newman, $484,500, Mr. Lambert, $318,200, Mr. Boyle,
$263,000, Mr. Roberson, $163,200 and Mr. Myers, $135,000. The years of
service for 1993 recognized for retirement purposes were the same as those
provided with respect to the Pension Plan. The ESBP also provides that, in
the event of the death of a participant prior to retirement, the
participant's beneficiary is entitled to receive either (a) a lump sum
payment equal to four times the participants covered salary, or (b) an
amount equal to 90% of the participant's covered salary for the first year
after death plus 45% of the covered salary annually for the next nine years.
(2) Assumes the sum of the participant's age and the number of years of service
(which cannot be less than 5) is at least 70. If less than 70, benefits are
prorated pursuant to a formula.
EMPLOYMENT AGREEMENTS
Messrs. Boyle and Turley entered into employment agreements with the
Company which became effective April 30, 1986 that provided for base salaries of
$216,000 and $410,000, respectively, and for such bonuses under the Company's
bonus plan as the Board, in its discretion, shall determine. Each employment
agreement provides for an initial term of employment of three years and,
thereafter, is automatically renewed on a year-to-year basis, unless terminated
by the Company or such employee.
Each of the above employment agreements provides that (i) upon the death of
the employee, the Company will make a lump sum payment to his beneficiary,
estate or representative in an amount equal to his current annual base salary
and (ii) upon involuntary termination of employment for disability or any reason
other than for cause, the Company will make a lump sum payment to such employee
equal to two times such employee's current annual base salary (or, if greater,
the base salary which would have been paid to such employee during the remaining
term of his employment agreement if he had not been terminated) plus a pro rata
portion of any bonus payable to the employee under certain bonus compensation
plans in the year of such disability or involuntary termination and, subject to
certain limitations, will continue such employee's life, disability and
hospitalization insurance and medical and dental plans for a two-year period.
The employment agreement with Mr. Lambert and the Company, which provided
similar terms, was terminated effective September 30, 1993 pursuant to a
consulting agreement. See "Separation Agreements."
8
<PAGE>
In October 1988 the Company entered into an employment agreement with Mr.
Myers that provides that upon involuntary termination of employment (except for
cause) the Company will pay him a severance payment in an amount equal to his
then current annual base salary in monthly installments plus a pro rata portion
of certain bonus compensation payable under certain bonus plans, and, subject to
certain limitations, the Company will continue certain insurance and medical
benefits. The severance payments and benefits are payable for one year or 18
months, depending on length of service. The agreement is for a one-year term and
is automatically renewed on a year-to-year basis, unless terminated by the
Company or Mr. Myers. Mr. Roberson had an employment agreement which was
terminated effective March 31, 1994 and had substantially the same terms as Mr.
Myers' employment agreement. See "Separation Agreements."
On June 9, 1993, the Company entered into an employment agreement with Mr.
Newman whose period of employment as President of the Company commenced July 6,
1993. The agreement provides that upon involuntary termination of employment
(except for cause) the Company will pay Mr. Newman a severance payment in an
amount equal to two times his then current annual base salary in monthly
installments plus a pro rata portion of certain bonus compensation payable under
certain bonus plans, and, subject to certain limitations, the Company will
continue certain insurance and medical benefits. The severance payments and
benefits are payable for two years. The agreement is for a two-year term and is
automatically renewed on a year-to-year basis, unless terminated by the Company
or Mr. Newman.
SEPARATION AGREEMENTS
Harry W. Lambert, who served as Senior Vice President of the Company and
President of Eckerd Drug Company for more than the past five years, retired from
both positions effective September 30, 1993. Mr. Lambert entered into a
consulting agreement with the Company which became effective October 1, 1993
(the "Consulting Agreement"), pursuant to which Mr. Lambert has agreed to act as
a consultant and advisor to the Company. In consideration of such services, Mr.
Lambert is entitled to compensation in the amount of $30,000 per month until
March 31, 1994 and $19,726 per month from April 1, 1994 until April 15, 1997,
the date the Consulting Agreement terminates, and will continue to participate
in certain of the Company's employee benefit programs.
Richard W. Roberson, who served as Senior Vice President of the Company,
President of the Vision Group and Chairman of the Board and Chief Executive
Officer of Insta- Care, entered into a separation agreement with the Company
effective as of March 31, 1994 in conjunction with the sale of the assets of the
Vision Group to an investor group which includes Mr. Roberson. See "Item 13.
Certain Relationships and Related Transactions." Under the terms of the
separation agreement, the Company will pay Mr. Roberson an aggregate of $200,000
in quarterly payments of $25,000 commencing July 15, 1994 and ending on April
15, 1996, which payments are contingent upon his continued employment with
Visionworks.
MANAGEMENT RESTRICTED STOCK
Prior to the consummation of the IPO, the Management Investors and certain
other employees of Eckerd owned shares of Class B common stock, 60% of which was
fully vested. The remaining non-vested shares of Class B common stock were
designed to vest upon the achievement of specified levels of financial
performance and other criteria. Immediately prior to the consummation of the
IPO, all shares of vested Class B common stock and 50% of the non-vested shares
of Class B common stock were exchanged for Common Stock at the rate of 0.69118
shares of Common Stock for each share of Class B common stock (prior to the
Stock Split). The remaining shares of non-vested Class B common stock were
exchanged at the same exchange ratio for shares of Common Stock subject to
certain restrictions (the "Management Restricted Stock"). The Management
Restricted Stock will vest automatically on July 31, 1998 provided that the
holder thereof is then employed by the Company. The Management Restricted Stock
may vest earlier over a three-year period upon the achievement by the Company of
9
<PAGE>
certain levels of performance as indicated by the market price of the Common
Stock of the Company during each of the 12-month periods ended July 31, 1994,
1995 and 1996 (each of the dates or events upon which the Management Restricted
Stock may vest is referred to as a "Restricted Stock Event").
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
At January 29, 1994, the Company's Executive Compensation and Stock Option
Committee consisted of Lewis W. Lehr, Donald F. Dunn and Albert J. Fitzgibbons,
III. Mr. Turley, an executive officer of the Company, was a member of the
Executive Compensation and Stock Option Committee until August 5, 1993, at which
time he was replaced by Mr. Dunn. Mr. Fitzgibbons is Executive Vice President
and a member of the Board of Directors of Merrill Lynch Capital Partners and is
a Managing Director of ML & Co., which are affiliates of the Company.
Merrill Lynch Capital Partners is a Delaware corporation and a wholly owned
subsidiary of ML & Co. which initiates and structures transactions commonly
referred to as leveraged or management buyouts involving publicly owned
companies, privately owned companies and subsidiaries and divisions of both
publicly and privately owned companies, and manages a fund of equity capital
committed by institutional investors for investment in the equity portion of
leveraged buyout transactions.
Merrill Lynch Capital Partners is the direct or indirect managing partner
of Merrill Lynch Capital Appreciation Partnership No. II, L.P., ML Offshore LBO
Partnership No. II, ML Employees LBO Partnership No. I, L.P., Merrill Lynch
KECALP L.P. 1986, Merrill Lynch Capital Appreciation Partnership No. B-IX, L.P.,
ML Offshore LBO Partnership No. B-IX, MLCP Associates L.P. No. II, Merrill Lynch
KECALP L.P. 1989, ML IBK Positions, Inc., Merchant Banking L.P. No. IV, ML
Oklahoma Venture Partners, Limited Partnership and ML Venture Partners II, L.P.,
which are stockholders of the Company. Merrill Lynch Interfunding, Inc., an
affiliate of Merrill Lynch Capital Partners, is also a stockholder of the
Company.
In January 1987, the Company entered into a sale and leaseback agreement
involving 72 Eckerd Drug stores, in a transaction arranged by and including
certain affiliates of ML & Co. Pursuant to this agreement, the Company sold 72
Eckerd Drug stores for $48.1 million and is obligated to lease them back for a
minimum term of ten years. The Company paid a fee equal to 1 1/2% of the sales
price, or approximately $721,500, to an affiliate of ML & Co. for arranging the
transaction. Lease payments by the Company, payable semi-annually, are
approximately $5.9 million per annum. In addition, an affiliate of ML & Co. will
receive a management fee of approximately $100,000 per annum, payable out of
such lease payments during the term of the lease. The Company believes that the
terms of this agreement were no less favorable to the Company than could have
been obtained from unaffiliated third parties.
In April 1989, the Company entered into a Master Lease (the "Master Lease")
with a third-party lessor ("Lessor") established by an affiliate of ML & Co.
Under the Master Lease the Lessor finances the purchase of sites for development
as Visionworks and Eckerd Drug stores and finances the construction of the
buildings and the acquisition of equipment. The selection of sites and
construction of improvements was undertaken by the Company acting as the
Lessor's agent pursuant to a construction agency agreement (the "Agreement for
Lease"). Under the Agreement for Lease, the Company constructed the improvements
and leased the properties from the Lessor pursuant to the Master Lease. As of
January 29, 1994, there were 12 stores leased under the Master Lease with a
total acquisition and construction cost of approximately $18.4 million. The
Company pays a structure fee to the ML & Co. affiliate equal to 1% of the cost
of the land, building and equipment leased under the Master Lease plus an
administration fee. The Company paid the ML & Co. affiliate fees totalling
$44,000, $45,000 and $408,000 for the years ended January 29, 1994, January 30,
1993 and February 1, 1992, respectively. The Company believes that the terms of
this arrangement were no less favorable to the Company than could have been
obtained from unaffiliated third parties.
10
<PAGE>
In July 1989, the Company entered into a Placement Agency Agreement with
Merrill Lynch Money Markets, Inc., an affiliate of ML & Co. Under the Placement
Agency Agreement, Merrill Lynch Money Markets, Inc. acted as the exclusive
Placement Agent for the private placement to accredited investors of the
Company's unsecured notes with maturities of up to 270 days from date of issue.
The Company did not pay Merrill Lynch Money Markets, Inc. any amounts in
connection with this facility during the year ended January 29, 1994. The
Company believes that the terms of this arrangement were no less favorable to
the Company than could have been obtained from unaffiliated third parties.
On June 15, 1993, the Company, EDS and EH II amended the EH II Management
Agreement (the "EH II Management Agreement Amendment"). Pursuant to the EH II
Management Agreement Amendment, EH II paid to Eckerd an accrued and previously
deferred management fee, including interest payable thereon, of approximately
$22.0 million and an advance, representing prepayment by EH II of the management
fee to be earned by Eckerd in the future, of approximately $18.0 million. Such
advance was evidenced by the EH II Note. The EH II Management Agreement was
terminated, and the EH II Note was repaid, upon consummation of the IPO.
Eckerd also entered into an Exchange Agreement dated as of July 23, 1990
(the "EDS Exchange Agreement") pursuant to which the holders of EDS common stock
had the right to exchange their shares for shares of Class A common stock of
Eckerd on a share-for-share basis (subject to anti-dilution adjustments) and
which granted Eckerd rights of first refusal on the common stock and certain
assets of EH II. The Company and the stockholders of EDS amended the Exchange
Agreement as of July 29, 1993 to provide for the exchange of EDS common stock
for Common Stock at the rate of 1.95 shares of Common Stock for each share of
EDS common stock (prior to the Stock Split). Such exchange rate was determined
based upon the analysis and opinion of Bear, Stearns & Co. Inc., one of the
representatives of the underwriters in the IPO. The Merrill Lynch Investors
owned approximately 74.14% of the common stock of EDS.
Certain members of management (the "Management Group") purchased, at the
effective time of the Acquisition, an aggregate of $8.36 million principal
amount of convertible debentures of the Company in exchange for $3.14 million in
recourse notes and $5.22 million in non-recourse notes (the "Management Notes").
In April 1992, the Management Notes, which then totaled $2.83 million, were paid
in their entirety and the convertible debentures which totaled $8.09 million
were exchanged for 1,304,289 shares of Class A common stock of Eckerd. During
1992 and 1993 a total of seven members of the Management Group left the Company.
The Company repurchased the Common Stock (507,939 shares) from these former
members of the Management Group for cash and notes totaling $13.35 million.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), an
affiliate of each of ML & Co. and Merrill Lynch Capital Partners, acted as one
of the representatives of the underwriters in the IPO and received underwriting
commissions and related fees of approximately $1.85 million in connection
therewith.
In addition, in its role as sole underwriter in the issuance of the Notes,
Merrill Lynch received approximately $4.0 million in underwriting discounts from
the Company.
COMPENSATION OF DIRECTORS
Members of the Board of Directors who are not employees of the Company are
paid for their services as members of the Board an annual fee of $18,000 and a
fee of $1,500 for each Board or Committee meeting attended, unless the Committee
meeting is held in conjunction with a Board meeting, in which case the Committee
member is paid a fee of $1,000 for attending the Committee meeting. Employee
directors receive no fee for Board or Committee services.
11
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 26, 1994 by (i) each of the directors
of the Company, (ii) each of the named executive officers of the Company (iii)
each person known by the Company to be the beneficial owner of approximately
five percent or more of the outstanding Common Stock and (iv) all of the
Company's directors and executive officers as a group. Unless otherwise
indicated, the Company believes that the beneficial owner has sole voting and
investment power over such shares. The following table treats the 136,808 shares
of Management Restricted Stock as issued and outstanding.
<TABLE> <CAPTION>
SHARES OF
NAME COMMON STOCK PERCENTAGE
- ----------------------------------------------------------------------------------- -------------- -----------
<S> <C> <C>
Merrill Lynch Investors(1)......................................................... 14,697,104 46.45%
The Equitable Life Assurance Society of the
United States(2)................................................................. 1,654,526 5.23
J.P. Morgan Capital Corp.(3)....................................................... 1,641,422 5.19
Company Employees' Profit Sharing Plan(4).......................................... 1,409,522 4.45
Stewart Turley(5).................................................................. 567,623 1.79
Francis A. Newman.................................................................. 5,400 *
John W. Boyle(6)................................................................... 144,505 *
Dr. James Doluisio(7).............................................................. 6,437 *
Donald F. Dunn(8).................................................................. 13,217 *
Albert J. Fitzgibbons, III(9)(10).................................................. 4,717 *
Lewis W. Lehr(11).................................................................. 9,017 *
Alexis P. Michas(9)(12)............................................................ 4,675 *
Rupinder S. Sidhu(9)(13)........................................................... 4,717 *
Harry W. Lambert(14)............................................................... 271,894 *
Richard W. Roberson(15)............................................................ 119,999 *
Robert L. Myers(16)................................................................ 66,633 *
All directors and executive officers as a group (18 persons) (17)(18).............. 1,651,781 5.19
</TABLE>
- ---------------
* Less than one percent
(1) Shares of Common Stock beneficially owned by the Merrill Lynch Investors
are owned of record as follows: 941,148 shares by Merrill Lynch
Interfunding, Inc., 9,816,294 shares by Merrill Lynch Capital Appreciation
Partnership No. II, L.P., 249,567 shares by ML Offshore LBO Partnership No.
II, 244,022 shares by ML Employees LBO Partnership No. I, L.P., 98,597
shares by Merrill Lynch KECALP L.P. 1986, 1,350,577 shares by Merrill Lynch
Capital Appreciation Partnership No. B-IX, L.P., 791,101 shares by ML
Offshore LBO Partnership No. B-IX, 21,419 shares by MLCP Associates L.P.
No. II., 133,856 shares by Merrill Lynch KECALP L.P. 1989, 895,676 shares
by ML IBK Positions, Inc., 46,513 shares by Merchant Banking L.P. No. IV,
15,491 shares by ML Oklahoma Venture Partners, Limited Partnership and
92,843 shares by ML Venture Partners II, L.P. The address for the Merrill
Lynch Investors and each of the aforementioned record holders is c/o
Merrill Lynch & Co., Inc., Merrill Lynch World Headquarters, North Tower,
18th Floor, New York, New York 10281-1201.
(2) Includes 165,452 shares of Common Stock beneficially owned by Equitable
Variable Life Insurance Company. The address for The Equitable Life
Assurance Society of the United States and Equitable Variable Life
Insurance Company is 1285 Avenue of the Americas, 19th Floor, New York, New
York 10019.
(3) Includes 1,036,400 shares of Common Stock and 605,022 shares of Non-Voting
Common Stock beneficially owned by J.P. Morgan Capital Corporation ("MCC").
MCC may convert shares of Non-Voting Common Stock into shares of Common
Stock to the extent that it would not own more
(Footnotes continued on following page)
12
<PAGE>
(Footnotes continued from preceding page)
than 4.9% of the voting securities of the Company. The address for MCC is
60 Wall Street, New York, NY 10260.
(4) The address for the Company Employees' Profit Sharing Plan is P.O. Box
4689, Clearwater, Florida 34618. NationsBank of Georgia, N.A. is the
trustee of the Company Employees' Profit Sharing Plan. Total does not
reflect the 192,000 shares of Common Stock of the Company that the Company
has irrevocably committed to deposit to the Company Employees' Profit
Sharing Plan over fiscal 1994, 1995 and 1996.
(5) Total does not reflect the 40,234 shares of Common Stock transferred by Mr.
Turley to certain family members. Mr. Turley disclaims beneficial ownership
of such shares. Total includes options covering 44,421 shares of Common
Stock which are exercisable as of March 26, 1994 or within 60 days
thereafter. Includes 28,081 shares of Management Restricted Stock which
vest upon the occurrence of Restricted Stock Events but does not reflect
the 6,650 shares of Management Restricted Stock transferred by Mr. Turley
to certain family members. Mr. Turley disclaims beneficial ownership of
such shares.
(6) Total does not reflect 127,393 shares of Common Stock transferred to
certain irrevocable trusts established by Mr. Boyle. Mr. Boyle disclaims
beneficial ownership of such shares. Total includes options covering 20,800
shares of Common Stock which are exercisable as of March 26, 1994 or within
60 days thereafter. Total does not reflect 15,432 shares of Management
Restricted Stock which vest upon the occurrence of Restricted Stock Events
transferred by Mr. Boyle to certain family members. Mr. Boyle disclaims
beneficial ownersip of such shares.
(7) Total includes options covering 3,334 shares of Common Stock which are
exercisable as of March 26, 1994 or within 60 days thereafter. Includes 277
shares of Management Restricted Stock which vest upon the occurrence of
Restricted Stock Events.
(8) Total includes options covering 3,334 shares of Common Stock which are
exercisable as of March 26, 1994 or within 60 days thereafter. Includes 277
shares of Management Restricted Stock which vest upon the occurrence of
Restricted Stock Events.
(9) Messrs. Fitzgibbons, Michas and Sidhu are directors of the Company and
officers of Merrill Lynch Capital Partners, ML & Co. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated. Each disclaims beneficial ownership of
shares of Common Stock beneficially owned by the Merrill Lynch Investors.
The business address for Messrs. Fitzgibbons, Michas and Sidhu is
767 Fifth Avenue, 48th Floor, New York, New York 10153.
(10) Total includes options covering 3,334 shares of Common Stock which are
exercisable as of March 26, 1994 or within 60 days thereafter. Total
includes 277 shares of Management Restricted Stock which vest upon the
occurrence of Restricted Stock Events.
(11) Total includes options covering 3,334 shares of Common Stock which are
exercisable as of March 26, 1994 or within 60 days thereafter. Total
includes 277 shares of Management Restricted Stock which vest upon the
occurrence of Restricted Stock Events.
(12) Total includes options covering 4,675 shares of Common Stock which are
exercisable as of March 26, 1994 or within 60 days thereafter, including
options covering 295 shares of Common Stock which vest upon the occurrence
of Restricted Stock Events.
(13) Total includes options covering 4,717 shares of Common Stock which are
exercisable as of March 26, 1994 or within 60 days thereafter, including
options covering 277 shares of Common Stock which vest upon the occurrence
of Restricted Stock Events.
(14) Total includes options covering 20,800 shares of Common Stock which are
exercisable as of March 26, 1994 or within 60 days thereafter. Includes
15,431 shares of Management Restricted Stock which vest upon the occurrence
of Restricted Stock Events.
(Footnotes continued on following page)
13
<PAGE>
(Footnotes continued from preceding page)
(15) Total includes options covering 10,400 shares of Common Stock which are
exercisable as of March 26, 1994 or within 60 days thereafter. Includes
6,755 shares of Management Restricted Stock which vest upon the occurrence
of Restricted Stock Events.
(16) Total includes options covering 6,500 shares of Common Stock which are
exercisable as of March 26, 1994 or within 60 days thereafter. Includes
3,687 shares of Management Restricted Stock which vest upon the occurrence
of Restricted Stock Events.
(17) The total number of all directors and executive officers as a group
includes (i) Harry W. Lambert who retired from his positions with the
Company effective September 30, 1993 and is currently a consultant and
advisor to the Company, (ii) Richard W. Roberson who resigned his
employment with the Company in March 1994 and (iii) Thomas E. Whiddon
who resigned his employment with the Company in March 1994.
(18) Total includes options covering 168,524 shares of Common Stock which are
exercisable as of March 26, 1994 or within 60 days thereafter, including
options covering 941 shares of Common Stock which vest upon the occurrence
of Restricted Stock Events. Total includes 78,500 shares of Management
Restricted Stock which vest upon the occurrence of Restricted Stock Events.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Listed below are all financial statements, notes, schedules, and exhibits
filed as part of the Form 10-K annual report:
(a)(1) Financial statements and Schedules
The following financial statements and schedules of the Company together
with the Report of Independent Certified Public Acocuntants dated March 18, 1994
on pages 43 through 62 of the Form 10-K are filed with the Form 10-K:
ECKERD CORPORATION AND SUBSIDIARIES
Financial Statements:
Report of Independent Certified Public Accountants
Consolidated Balance Sheets as of January 29, 1994 and January 30,
1993
Consolidated Statements of Operations for the Years Ended January 29,
1994, January 30, 1993 and February 1, 1992,
Consolidated Statements of Stockholders' Equity (Deficit) for the
Years Ended January 29, 1994, January 30, 1993 and February 1, 1992
Consolidated Statements of Cash Flows for the Years Ended January 29,
1994, January 30, 1993 and February 1, 1992
Notes to Consolidated Financial Statements
Schedules:
V --Property, Plant and Equipment
VI --Accumulated Depreciation and Amortization of Plant and Equipment
VIII --Reserves
All other schedules for the Company are omitted as the required information
is inapplicable or the information is presented in the respective consolidated
financial statements or related notes.
Also filed in the Form 10-K is the consent of KPMG Peat Marwick to the
incorporation by reference of their auditors' report dated March 18, 1994,
relating to the consolidated financial statements appearing in the Form 10-K,
into Registration Statement Numbers 33-49977 and 33-50755 on Form S-8 and
Registration Statement Numbers 33-10721 and 33-50223 on Form S-3.
14
<PAGE>
(a)(2) Exhibits
Exhibits previously filed herewith or previously filed by incorporation by
reference:
<TABLE>
<S> <C>
3.1(i) --Restated Certificate of Incorporation of Eckerd Corporation (the "Company") (incorporated by
reference to Exhibit 3.1(i) to the Registration Statement on Form S-3 of the Company (No.
33-50223)).
3.2(ii) --Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3.2(ii) to the
Registration Statement on Form S-3 of the Company (No. 33-50223)).
4.1 --Form of certificate for the Company's Common Stock, par value $.01 per share (incorporated by
reference to Exhibit 4.1 to the Registration Statement on Form S-2 of the Company (No. 33-64906)).
4.2 --Indenture dated as of May 1, 1986 by and between the Company and Mellon Bank, N.A. as trustee,
relating to the 11 1/8% Subordinated Debentures due 2001 (incorporated by reference to the
Registration Statement on Form S-1 of Eckerd Holdings Inc. (No. 33-4576)). (On February 6, 1991,
Mellon Bank, N.A. was succeeded by Security Pacific National Trust Company, as trustee.)
4.3 --Indenture dated as of May 1, 1986 between the Company and Chemical Bank (as successor by merger to
Manufacturers Hanover Trust Company), relating to the Company's Discount Subordinated Debentures
due 2006 (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-1 of
the Company (No. 33-10721)).
4.4 --Indenture dated as of November 1, 1993 between the Company and State Street Bank and Trust Company
of Connecticut, National Association, as Trustee (incorporated by reference to Exhibit 4.02 to the
Current Report on Form 8-K dated October 26, 1993 of the Company (File No. 1-4844)).
4.5 --Form of 9 1/4% Senior Subordinated Note due 2004 of the Company (incorporated by reference to
Exhibit 4.01 to the Current Report on Form 8-K dated October 26, 1993 of the Company (File No.
1-4844)).
10.1 --Credit Agreement dated as of June 14, 1993 (the "Credit Agreement") among the Company, the lenders
named therein, Chemical Bank and NationsBank of Florida, N.A., as managing agents and swingline
lenders, and Chemical Bank, as administrative agent (incorporated by reference to Exhibit 10.1 to
the Registration Statement on Form S-2 of the Company (No. 33-64906)).
10.2 --Guarantee Agreement dated as of June 14, 1993 (the "Guarantee Agreement") among the subsidiaries
of the Company listed therein and Chemical Bank, as collateral agent (incorporated by reference to
Exhibit 10.2 to the Registration Statement on Form S-2 of the Company (No. 33-64906)).
10.3 --Indemnity, Subrogation and Contribution Agreement dated as of June 14, 1993 (the "Contribution
Agreement"), among the Company, each subsidiary of the Company listed therein and Chemical Bank,
as collateral agent (incorporated by reference to Exhibit 10.3 to the Registration Statement on
Form S-2 of the Company (No. 33-64906)).
10.4 --Pledge Agreement dated as of June 14, 1993 (the "Pledge Agreement") among the Company, each
subsidiary of the Registrant listed therein and Chemical Bank, as
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
collateral agent (incorporated by reference to Exhibit 10.4 to the Registration Statement on Form
S-2 of the Company (No. 33-64906)).
10.5 --Security Agreement dated as of June 14, 1993 (the "Security Agreement") among the Company, each
subsidiary of the Company listed therein and Chemical Bank, as collateral agent (incorporated by
reference to Exhibit 10.5 to the Registration Statement on Form S-2 of the Company (No.
33-64906)).
10.6 --Trademark Security Agreement dated as of June 14, 1993 (the "Trademark Security Agreement") among
the Company, each subsidiary of the Company listed therein and Chemical Bank, as collateral agent
(incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-2 of the
Company (No. 33-64906)).
10.7 --Amendment No. 1 dated as of August 3, 1993 to the Credit Agreement (incorporated by reference to
Exhibit 10.7 to the Registration Statement on Form S-3 of the Company (No. 33-50223)).
10.8 --Supplement No. 1 to the Guarantee Agreement dated as of August 12, 1993 (incorporated by reference
in Exhibit 10.8 to the Registration Statement on Form S-3 of the Company (No. 33-50223)).
10.9 --Supplement No. 1 to the Contribution Agreement dated as of August 12, 1993 (incorporated by
reference to Exhibit 10.9 to the Registration Statement on Form S-3 of the Company (No.
33-50223)).
10.10 --Supplement No. 1 to the Pledge Agreement dated as of August 12, 1993 (incorporated by reference to
Exhibit 10.10 to the Registration Statement on Form S-3 of the Company (No. 33-50223)).
10.11 --Supplement No. 1 to the Security Agreement dated as of August 12, 1993 (incorporated by reference
to Exhibit 10.11 to the Registration Statement on Form S-3 of the Company (No. 33-50223)).
10.12 --Supplement No. 1 to the Trademark Security Agreement dated as of August 12, 1993 (incorporated by
reference to Exhibit 10.12 to the Registration Statement on Form S-3 of the Company (No.
33-50223)).
10.13 --Amendment No. 2, Consent and Waiver dated as of September 30, 1993 to the Credit Agreement
(incorporated by reference to Exhibit 10.01 to the Current Report on Form 8-K dated October 26,
1993 of the Company (File No. 1-4844).
10.14 --Merrill Lynch Common Stock Purchase Agreement dated as of April 1, 1986 by and among the Company
and the Merrill Lynch Investors (incorporated by reference to the Registration Statement on Form
S-4 of Eckerd Holdings Inc. (No. 33-4497)).
10.15 --Commercial Paper Placement Agency Agreement dated July 17, 1989 between the Company and Merrill
Lynch Money Markets, Inc. (incorporated by reference to Exhibit 10.15 of Form 10-K of the Company
for the period ended February 3, 1990.
10.16 --Receivables Purchase Agreement dated March 29, 1990 as Amended and Restated as of May 16, 1991
between the Company and Mellon Bank, N.A. (incorporated by reference to Exhibit 10.9 to the
Registration Statement on Form S-2 of the Company (No. 33-64906)).
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
10.17 --Amendment No. 1 to Receivables Purchase Agreement dated as of April 20, 1992 between the Company
and Mellon Bank, N.A. (incorporated by reference to Exhibit 10.28 of Form 10-K of the Company for
the period ended February 1, 1992).
10.18 --Amendment No. 2 to Receivables Purchase Agreement between the Company and Mellon Bank, N.A.
(incorporated by reference to Exhibit 10.35 of Post-Effective Amendment No. 5 to the Registration
Statement on Form S-2 of the Company (No. 33-37544)).
10.19 --Amendment No. 3 to Receivables Purchase Agreement between the Company and Mellon Bank, N.A.
(incorporated by reference to Exhibit 10.36 of Post-Effective Amendment No. 5 to the Registration
Statement on Form S-2 of the Company (No. 33-37544)).
10.20 --Amendment No. 4 to Receivables Purchase Agreement dated as of June 11, 1993 between the Company
and Mellon Bank, N.A. (incorporated by reference to Exhibit 10.13 to the Registration Statement on
Form S-2 of the Company (No. 33-64906)).
10.21 --Reimbursement Agreement dated as of January 24, 1992 among the Company, the guarantors listed
therein and Westpac Banking Corporation, New York Branch (incorporated by reference to Exhibit
10.34 of Post-Effective Amendment No. 5 to the Registration Statement on Form S-2 of the Company
(No. 33-37544)).
10.22 --Registration Rights Agreement dated as of April 30, 1986 by and among the Company, the Merrill
Lynch Investors, Morgan Capital Corporation and the other bank affiliates listed therein, the
institutional and corporate investors listed therein and certain members of management of the
Company (incorporated by reference to Exhibit 10.19 to the Registration Statement on Form S-2 of
the Company (No. 33-64906)).
10.23 --First Amendment to Registration Rights Agreement among the Company, EDS Holdings Inc., the Merrill
Lynch Investors, the Bank Affiliates, the Institutional Investors and the Management Investors
(incorporated by reference to Exhibit 10.20 to Amendment No. 1 to the Registration Statement on
Form S-2 of the Company (No. 33-64906)).
10.24 --First Employees Management Stock Option Plan (incorporated by reference to the Registration
Statement on Form S-8 of the Company (No. 33-30761)).
10.25 --Employment Agreement dated as of April 30, 1986, between the Company and Stewart Turley
(incorporated by reference to Exhibit 10.23 to the Registration Statement on Form S-2 of the
Company (No. 33-64906)).
10.26 --Employment Agreement dated as of April 30, 1986, between the Company and Harry W. Lambert
(incorporated by reference to Exhibit 10.24 to the Registration Statement on Form S-2 of the
Company (No. 33-64906)).
10.27 --Employment Agreement dated as of April 30, 1986, between the Company and John W. Boyle
(incorporated by reference to Exhibit 10.25 to the Registration Statement on Form S-2 of the
Company (No. 33-64906)).
10.28 --Employment Agreement dated October 1, 1988, between the Company and Richard W. Roberson
(incorporated by reference to Exhibit 10.26 to the Registration Statement on Form S-2 of the
Company (No. 33-64906)).
10.29 --Employment Agreement dated June 9, 1993, between the Company and Francis A. Newman (incorporated
by reference to Exhibit 10.27 to the Registration Statement on Form S-2 of the Company (No.
33-64906)).
</TABLE>
17
<PAGE>
<TABLE>
<S> <C>
10.30 --Master Lease Agreement I dated as of May 18, 1993 between the Company and Imaging Financial
Services d/b/a EKCC ("IFS") (incorporated by reference to Exhibit 10.28 to Amendment No. 1 to the
Registration Statement on Form S-2 of the Company (No. 33-64906)).
10.31 --Master Lease Agreement II dated as of June 15, 1993 between the Company and IFS (incorporated by
reference to Exhibit 10.29 to Amendment No. 1 to the Registration Statement on Form S-2 of the
Company (No. 33-64906)).
10.32 --Systems Operations Service Agreement dated as of July 14, 1993 between the Company and Integrated
Systems Solution Corporation (incorporated by reference to Exhibit 10.30 to Amendment No. 1 to the
Registration Statement on Form S-2 of the Company (No. 33-64906)).
10.33 --Letter dated March 16, 1993 between IFS and the Company relating to IFS Sale and Leaseback
(incorporated by reference to Exhibit 10.31 to Amendment No. 2 of the Registration Statement on
Form S-2 of the Company (No. 33-64906)).
10.34 --Consulting Agreement dated as of September 30, 1993, between the Company and Harry W. Lambert
(incorporated by reference to Exhibit 10.33 to Amendment No. 2 to the Registration Statement on
Form S-3 of the Company (No. 33-50223)).
10.35 --1993 Stock Option and Incentive Plan of the Company (incorporated by reference to Exhibit 99.1 to
the Registration Statement on Form S-8 of the Company (No. 33-49977)).
10.36 --Form of Separation Agreement between the Company and Richard W. Roberson.
10.37 --Consent and Waiver dated as of January 15, 1994 to the Credit Agreement.
12.1 --Statement regarding computation of ratio of earnings to fixed charges of the Company (incorporated
by reference to Exhibit 12.1 to the Registration Statement on Form S-3 of the Registrant (No.
33-50223)).
22.1 --Subsidiaries of the Company.
99.1 --Pro Forma Financial Data for the fiscal year ended January 29, 1994.
Exhibit filed herewith:
10.38 --Employment Agreement dated October 1, 1988 between the Company and Robert L. Myers.
23.1 --Consent of Independent Certified Public Accountants.
</TABLE>
(b) Reports on Form 8-K
The Company filed a report on Form 8-K dated January 4, 1994 announcing an
agreement in principle to sell its Vision Group division.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-K/A report to
be signed on its behalf by the undersigned, thereunto duly authorized.
April 14, 1994 ECKERD CORPORATION
By /s/ SAMUEL G. WRIGHT
________________________
Samuel G. Wright
Senior Vice President-Finance
(Principal Accounting Officer)
19
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
ECKERD CORPORATION AND SUBSIDIARIES:
We have audited the accompanying consolidated balance sheets of Eckerd
Corporation and subsidiaries as of January 29, 1994 and January 30, 1993, and
the related consolidated statements of operations, stockholders' equity
(deficit), and cash flows for each of the years in the three-year period ended
January 29, 1994. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Eckerd
Corporation and subsidiaries at January 29, 1994 and January 30, 1993, and the
results of their operations and their cash flows for each of the years in the
three-year period ended January 29, 1994, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick
Tampa, Florida
March 18, 1994
20
<PAGE>
ECKERD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 29, 1994 AND JANUARY 30, 1993
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term interest-bearing deposits plus accrued interest................ $ 12,110 18,642
Receivables, less allowance for doubtful receivables of $5,000 and $5,000.......... 92,672 78,555
Merchandise inventories............................................................ 765,653 725,231
Prepaid expenses and other current assets.......................................... 6,232 2,824
------------ ------------
Total current assets....................................................... 876,667 825,252
------------ ------------
Property, plant and equipment, at cost:
Land............................................................................... 19,260 19,269
Buildings.......................................................................... 73,404 68,196
Furniture and equipment............................................................ 273,867 326,145
Transportation equipment........................................................... 13,050 14,660
Leasehold improvements............................................................. 127,480 123,344
------------ ------------
507,061 551,614
Less accumulated depreciation................................................... 238,425 223,488
------------ ------------
Net property, plant and equipment.......................................... 268,636 328,126
------------ ------------
Excess of cost over net assets acquired, less accumulated amortization of $15,083 and
$12,837.............................................................................. 31,594 29,693
Favorable lease interests, less accumulated amortization of $357,912 and $314,917.... 177,803 205,057
Unamortized debt expenses............................................................ 38,779 19,775
Other assets......................................................................... 24,025 11,019
------------ ------------
$ 1,417,504 1,418,922
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Bank debit balances................................................................ $ 40,974 12,231
Current installments of long-term debt (note 4).................................... 1,905 3,669
Accounts payable................................................................... 363,136 266,468
Accrued interest................................................................... 17,749 31,962
Accrued payroll.................................................................... 69,085 68,536
Other accrued expenses............................................................. 77,230 75,359
------------ ------------
Total current liabilities.................................................. 570,079 458,225
------------ ------------
Other noncurrent liabilities......................................................... 73,461 74,958
Long-term debt, excluding current installments (note 4).............................. 952,986 1,044,553
14 1/2% cumulative redeemable preferred stock (note 6)............................... -- 75,000
Voting common stock of $.01 par value held by the management group and key employees;
0 and 2,432,456 shares, respectively................................................. -- 9,477
Stockholders' equity (deficit) (notes 1 and 7):
Preferred stock of $.01 par value. Authorized 20,000,000 shares; none issued or
outstanding.......................................................................... -- --
Voting common stock of $.01 par value. Authorized 96,481,272 shares; issued
31,031,811 and 23,631,264............................................................ 310 236
Nonvoting common stock of $.01 par value. Authorized 3,518,728 shares; issued
605,022 shares....................................................................... 6 6
Capital in excess of par value..................................................... 225,560 153,500
Retained deficit................................................................... (404,898) (397,033)
------------ ------------
Total stockholders' deficit................................................ (179,022) (243,291)
Commitments, related party transactions and subsequent event (notes 8, 9 and 10).....
------------ ------------
$ 1,417,504 1,418,922
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE>
ECKERD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993, AND FEBRUARY 1, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 30, FEBRUARY 1,
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
Sales and other operating revenue.................................... $ 4,190,539 3,887,027 3,739,852
------------- ------------- -------------
Costs and expenses:
Cost of sales, including store occupancy, warehousing, and delivery
expense.............................................................. 3,175,375 2,896,479 2,738,545
Operating and administrative expenses.............................. 857,980 855,165 854,209
------------- ------------- -------------
4,033,355 3,751,644 3,592,754
------------- ------------- -------------
Earnings before interest expenses.......................... 157,184 135,383 147,098
------------- ------------- -------------
Interest expenses:
Interest expense, net.............................................. 105,999 130,435 126,681
Amortization of original issue discount and deferred debt
expenses............................................................. 7,216 6,969 16,513
------------- ------------- -------------
Total interest expenses.................................... 113,215 137,404 143,194
------------- ------------- -------------
Earnings (loss) before income taxes and extraordinary
items................................................................ 43,969 (2,021) 3,904
Income tax provision (note 5)........................................ 2,556 2,864 2,927
------------- ------------- -------------
Earnings (loss) before extraordinary items................. 41,413 (4,885) 977
Extraordinary items:
Early retirement of debt and preferred stock, net of tax benefit of
$929 (note 4(a))..................................................... (44,354) -- --
Tax effect of utilization of net operating loss carryforward (note
5)................................................................... -- 762 1,680
------------- ------------- -------------
Net earnings (loss) for the year........................... (2,941) (4,123) 2,657
Preferred stock dividends 4,924 10,815 10,823
------------- ------------- -------------
Net loss available to common shares........................ $ (7,865) (14,938) (8,166)
------------- ------------- -------------
------------- ------------- -------------
Earnings (loss) per common share:
Earnings (loss) before extraordinary items......................... $ 1.24 (.59) (.38)
Extraordinary items................................................ (1.51) .03 .06
------------- ------------- -------------
Net loss................................................... $ (.27) (.56) (.32)
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE>
ECKERD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
CAPITAL TOTAL
VOTING NONVOTING IN EXCESS RETAINED STOCKHOLDERS'
COMMON COMMON OF PAR EARNINGS EQUITY
STOCK STOCK VALUE (DEFICIT) (DEFICIT)
----------- --------------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Balance at February 2, 1991......................... $ 236 6 153,500 (373,929) (220,187)
Net earnings for the year........................... -- -- -- 2,657 2,657
14 1/2% preferred stock cash dividends.............. -- -- -- (10,823) (10,823)
----------- --------- ---------- ------------
Balance at February 1, 1992......................... 236 6 153,500 (382,095) (228,353)
Net loss for the year............................... -- -- -- (4,123) (4,123)
14 1/2% preferred stock cash dividends.............. -- -- -- (10,815) (10,815)
----------- --------- ---------- ------------
Balance at January 30, 1993......................... 236 6 153,500 (397,033) (243,291)
Reclassification of common stock previously subject
to put options...................................... 21 -- 7,279 -- 7,300
Common stock sold under employee stock option
plan................................................ 1 -- 272 -- 273
Common stock sold in a Public Stock Offering, net of
expenses of sale.................................... 52 -- 64,509 -- 64,561
Net loss for the year -- -- -- (2,941) (2,941)
14 1/2% preferred stock cash dividends.............. -- -- -- (4,924) (4,924)
----------- --------- ---------- ------------
Balance at January 29, 1994......................... $ 310 6 225,560 (404,898) (179,022)
--
--
----------- --------- ---------- ------------
----------- --------- ---------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE>
ECKERD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 30, FEBRUARY 1,
1994 1993 1992
------------ ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) for the year....................................... $ (2,941) (4,123) 2,657
Adjustments to reconcile net earnings (loss) for the year to net cash
provided by operating activities:
Extraordinary charge related to early retirement of debt and
preferred stock.......................................................... 45,283 -- --
Depreciation and amortization..................................... 85,068 92,759 97,383
Amortization of original issue discount and deferred debt
expenses................................................................. 7,216 6,969 16,513
Increase in receivables........................................... (13,867) (633) (5,907)
Increase in merchandise inventories............................... (35,455) (19,104) (15,690)
Decrease (increase) in prepaid expenses and other current
assets................................................................... (3,408) 1,108 407
Increase in accounts payable and accrued expenses................. 87,393 1,963 30,595
------------ ----------- -----------
Net cash provided by operating activities...................... 169,289 78,939 125,958
------------ ----------- -----------
Cash flows from investing activities:
Additions to property, plant and equipment............................. (33,091) (51,389) (49,410)
Sale of property, plant and equipment.................................. 37,942 3,303 2,103
Sale/Purchase of long-term investments (net)........................... 1,173 1,161 (1,068)
Acquisition of certain drug store assets............................... (14,314) (30,475) --
Other.................................................................. (10,158) 1,437 (2,092)
------------ ----------- -----------
Net cash used in investing activities.......................... (18,448) (75,963) (50,467)
------------ ----------- -----------
Cash flows from financing activities:
Increase (decrease) in bank debit balances............................. 28,743 (5,919) 10,927
14 1/2% preferred stock cash dividends................................. (4,924) (10,815) (10,823)
Additions to long-term debt............................................ 1,476 1,435 4,227
Reductions of long-term debt........................................... (3,769) (4,730) (5,561)
Net reductions of prior credit agreement............................... (221,723) 34,913 (70,515)
Net additions under new credit agreement............................... 576,189 -- --
Redemption of 14 1/2% preferred stock.................................. (75,000) -- --
Common stock sold in a public stock offering, net of expenses of
sale..................................................................... 64,561 -- --
Issuance of 9 1/4% senior subordinated notes........................... 200,000 -- --
Redemption of 13% and 11 1/8% subordinated debentures.................. (490,165) -- --
Redemption of senior notes............................................. (168,000) -- --
Federal and state income taxes......................................... -- (111) (1,293)
Other, including redemption fees and deferred financing costs.......... (64,761) (7,545) (2,948)
------------ ----------- -----------
Net cash provided by (used in) financing activities............ (157,373) 7,228 (75,986)
------------ ----------- -----------
Net increase (decrease) in cash and cash equivalents..................... (6,532) 10,204 (495)
Cash and short-term interest-bearing deposits plus accrued interest at
beginning of year........................................................ 18,642 8,438 8,933
------------ ----------- -----------
Cash and short-term interest-bearing deposits plus accrued interest at
end of year.............................................................. $ 12,110 18,642 8,438
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE>
ECKERD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(1) ORGANIZATION OF BUSINESS
(a) Acquisitions and Merger
On April 30, 1986, all of the outstanding capital stock of Jack Eckerd
Corporation (predecessor company) was acquired by certain affiliates of Merrill
Lynch Capital Partners, Inc., affiliates of certain banks which provided a
portion of the financing for the acquisition and certain members of management.
The acquisition has been accounted for using the purchase method of accounting.
The cost of acquiring the capital stock has been allocated to assets based on
fair market values at April 30, 1986 as determined by American Appraisal
Associates, Inc.
The excess of cost over net assets acquired at May 1, 1986, as well as
subsequent acquisitions, are being amortized on a straight-line basis over a
period of 20 years.
During 1992 and 1993, Eckerd Corporation (Company) purchased fifty-two drug
stores (7 stores were closed subsequent to the acquisition) in three
transactions at an aggregate cost of $41,926. The operations of such stores,
which have been included in the consolidated financial statements from dates of
acquisition, are not material to the Company and, accordingly, pro forma
comparative operating numbers are not presented.
(b) Initial Public Offering and Common Stock Exchange
On August 12, 1993, the Company completed an initial public offering (IPO)
in which it issued and sold 5,175,000 shares of its Common Stock par value $.01
per share (Common Stock) for $14.00 per share. In addition in connection with
the IPO, the Company amended its Restated Certificate of Incorporation to
effect, among other things: i) the reclassification of its Class A common stock
and Class B common stock into Common Stock at certain specified rates
(Reclassification); ii) a 2-for-3 reverse stock split (Stock Split); iii) the
adoption of certain provisions, such as a classified board of directors and the
prohibition of stockholder action by written consent, which could make
non-negotiated acquisitions of the Company more difficult, and iv) the change of
the Company's name from "Jack Eckerd Corporation" to "Eckerd Corporation."
In connection with the consummation of the IPO, the shareholders of EDS
Holdings Inc. (EDS) exchanged their shares for shares of the Company's common
stock. This transaction was accounted for as a combination of companies under
common control in a manner similar to a pooling of interests.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts have
been eliminated in the consolidation.
(b) Definition of Fiscal Year
The fiscal year ends on the Saturday nearest January 31. Fiscal years 1993,
1992 and 1991 ended January 29, 1994, January 30, 1993 and February 1, 1992,
respectively, consisted of 52 weeks.
(c) Merchandise Inventories
Inventories consist principally of merchandise held for resale and are
based on physical inventories taken throughout the year. Inventories are stated
at the lower of cost (last-in, first-out--LIFO) or market. At January 29, 1994
and January 30, 1993, if the first-in, first-out (FIFO) method of valuing
25
<PAGE>
ECKERD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
inventories had been used by the Company, inventories would have been higher
than reported by approximately $66,100 and $57,600, respectively.
(d) Income Taxes
Effective January 31, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 (SFAS), "Accounting for Income Taxes." Under the
asset and liability method of SFAS No. 109, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Under SFAS No. 109, the effect of a change in tax rates on deferred tax
assets or liabilities is recognized in income in the period that included the
enactment.
Previously, the Company accounted for income taxes under Accounting
Principles Board Opinion No. 11, which did not give recognition to future events
other than the recovery of assets and settlement of liabilities at their
carrying amounts. The adoption of SFAS No. 109 had no material effect on the
Company's financial position or results of operations. Prior years' financial
statements were not restated.
(e) Depreciation Policy and Maintenance and Repairs
Plant and equipment is depreciated principally by the straight-line method
over the estimated useful lives of such assets. The principal lives used to
compute depreciation are:
Buildings........................................... 16-45
Furniture and equipment............................. 1-10
Transportation equipment............................ 1-8
Leasehold improvements.............................. 2-20
---------
---------
Maintenance and repairs are charged to expense as incurred. The Company's
policy is to capitalize expenditures for renewals and betterments and to reduce
the asset accounts and the related allowance for depreciation for the cost and
accumulated depreciation of items replaced, retired or fully depreciated.
The 1992 balances for plant and equipment have been restated to reflect the
write-off of certain fully depreciated assets during 1993.
(f) Favorable Lease Interests
Favorable lease interests represent the present value of the excess of
current market rents at dates of acquisition over the below market rents of the
Company's then existing operating leases of real property (principally store
locations). Such costs are amortized by the interest method over the lives of
the favorable leases averaging approximately twenty years.
(g) Unamortized Debt Expenses
Unamortized debt expenses represent underwriting discounts, professional
fees and other costs related to the two issues of subordinated debentures which
are amortized over the life of the related debentures; and professional fees and
other costs related to the Company's long-term debt refinancings (see note 4)
which are amortized over the life of the related agreements.
26
<PAGE>
ECKERD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
(h) Original Issue Debt Discount
Original issue debt discount is the difference between the principal amount
of the two issues of subordinated debentures and their issue price to the
public. Such discount which is treated as a reduction of the principal amount of
such debentures is amortized to provide a level interest cost over the term of
the respective debenture issues.
(i) Advertising Costs
Advertising costs are expensed when incurred and were $26,758, $45,918 and
$47,998 for the years ended January 29, 1994, January 30, 1993 and February 1,
1992, respectively.
(j) Reclassifications
Certain amounts have been reclassified in the 1991 and 1992 financial
statements to conform to the 1993 financial statement presentation.
(k) Statement of Cash Flows
The Company considers all liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
During 1992, the Company converted debentures, which were held by certain
members of management, totaling $8,092 to 1,304,289 shares of Common Stock.
Cash paid for interest was $120,329, $128,896 and $116,661 for the years
ended January 29, 1994, January 30, 1993 and February 1, 1992, respectively.
(1) Earnings (Loss) Per Share
Primary earnings per share have been computed based on the weighted average
number of shares of common stock outstanding during each fiscal year (29,392,805
in 1993, 26,573,902 in 1992, and 25,677,103 in 1991) restated for the August 12,
1993 Reclassification and Stock Split.
(3) EMPLOYEES' BENEFIT PLANS
(a) Profit Sharing Plan
The Company has in effect a noncontributory profit sharing plan which
covers all regular, full-time employees. The Company makes annual contributions
to the Plan at the discretion of the Company's Board of Directors. All funds are
held by a bank as trustee under a trust agreement. Included in operating and
administrative expenses are charges accrued for contributions to the Plan of
$8,765, $7,433 and $8,517 for January 29, 1994, January 30, 1993 and February 1,
1992, respectively.
Plan assets at fair value, consisting of fixed income securities, the
Company's stock and listed stocks, amounted to approximately $199.4 million for
the plan year ended December 31, 1993.
(b) Pension Plans
The Company has in effect a noncontributory pension plan covering all
full-time employees who qualify as to age and length of service. Benefits are
computed based on the average annual compensation for the five consecutive years
that produce the highest average during the final ten years of creditable
service. The Company's policy is to fund the Plan in accordance with minimum
Internal Revenue Service (IRS) requirements.
27
<PAGE>
ECKERD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(3) EMPLOYEES' BENEFIT PLANS--(CONTINUED)
The Company accounts for pension costs in accordance with Statement of
Financial Accounting Standards No. 87, "Employers' Accounting for Pensions."
The following table sets forth the funded status of the Company's pension
plan as of the most recent actuarial measurement dates, December 31, 1993 and
1992:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
(PROJECTED)
<S> <C> <C>
Accumulated benefit obligation at December 31, 1993 (including vested benefits of $24,210
and $22,756 at January 1, 1993 and January 1, 1992, the most recent valuation dates)... $ (36,829) $ (27,841)
Effect of anticipated future compensation levels and other events........................ (1,806) --
---------- ----------
Projected benefit obligation for service rendered to date................................ (38,635) (27,841)
Plan assets at fair value, consisting of fixed income securities and listed stocks....... 38,139 38,361
---------- ----------
Plan assets in excess (less than) projected benefit obligation................. (496) 10,520
Unrecognized prior service cost.......................................................... (1,281) (1,442)
Unrecognized net (gain) loss............................................................. 3,974 (4,947)
Unrecognized net asset at January 1, 1987 being amortized over 13 years.................. (3,454) (4,131)
---------- ----------
Accrued pension cost........................................................... $ (1,257) --
---------- ----------
---------- ----------
</TABLE>
Net periodic pension costs for the years ended January 29, 1994, January
30, 1993 and February 1, 1992 included the following (income) expense
components:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Service costs (benefits earned during the period)........................... $ 2,818 $ 1,300 $ 1,197
Interest cost on projected benefit obligation............................... 2,548 2,245 2,351
Return on assets............................................................ (3,271) (2,707) (2,710)
Unrecognized prior service cost............................................. (161) (161) (161)
Amortization of transitional asset.......................................... (677) (677) (677)
---------- ---------- ----------
Net periodic pension cost......................................... $ 1,257 -- --
---------- ---------- ----------
---------- ---------- ----------
Assumptions used in determining net periodic pension cost were:
Weighted average discount rate............................................ 7.5% 9% 9%
Weighted average long-term rate of return on assets....................... 9% 9% 9%
Rate of compensation increases............................................ 5% 5% 5%
</TABLE>
The Company has in effect an Executive Supplemental Benefit Plan to provide
additional income for its executives after their retirement as well as
pre-retirement death benefits to beneficiaries of such executives. Annual
benefits will generally be no greater than 25 percent of the participant's
salary mid-point on the date the participant retires or separates from service
with the Company.
28
<PAGE>
ECKERD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(4) LONG-TERM DEBT
Long-term debt at January 29, 1994 and January 30, 1993 was:
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
----------- -------------
<S> <C> <C>
Tranche A term loans, due July 31, 1999 (a).......................................... $ 429,948 --
Tranche B term loans, due June 15, 2000 (a).......................................... 141,741 --
Revolving credit and bankers acceptances (a)......................................... 4,500 --
9 1/4% senior subordinated notes due February 15, 2004, $200,000 face amount (b)..... 200,000 --
11 1/8% subordinated debentures due May 1, 2001, $145,500 and 290,500 face amount,
net of original issue discount of $10,943 and $23,604 (b)(c)....................... 134,557 266,896
Bank term/revolving credit and working capital loans and Hancock senior notes,
including $9,100 of bankers acceptances, due January 31, 1994 and January 31, 1995
(a).................................................................................. -- 221,723
Senior secured floating rate and fixed rate notes due April 15, 1997 (a)............. -- 123,000
13% subordinated debentures, due May 1, 2006, $345,165 face amount (a)............... -- 345,165
11.75% senior notes, due April 15, 1995 (a).......................................... -- 45,000
Variable rate demand industrial development revenue refunding bonds, due $8,250 March
1, 2009 and $10,000 May 1, 2013 (d).................................................. 18,250 18,250
Other (principally notes secured by fixtures and equipment).......................... 25,895 28,188
----------- -------------
Total long-term debt....................................................... 954,891 1,048,222
Less amounts due within one year..................................................... 1,905 3,669
----------- -------------
Amounts due after one year................................................. $ 952,986 1,044,553
----------- -------------
----------- -------------
</TABLE>
The aggregate minimum annual maturities of long-term debt for the next five
fiscal years are: 1994, $1,905; 1995, $67,765; 1996, $85,870; 1997, $85,583 and
1998, $95,040. Although the Tranche A term loan commitment requires a repayment
of $28,348 during fiscal year 1994, the Company has excess availability under
the revolving credit commitment, and accordingly, has not treated the 1994
required repayment as current.
(a) On June 15, 1993, The Company entered into a new Credit Agreement,
which provides for i) a $650,000 term loan facility (Senior Term Loans)
consisting of a six-year amortizing Tranche A term loan facility of $500,000
(Tranche A Term Loans) and a seven-year amortizing Tranche B term loan facility
of $150,000 (Tranche B Term Loans); and ii) a $300,000 six-year revolving credit
facility ($30,000 of which is available as a swingline loan facility and
$155,000 as a letter of credit and bankers' acceptance facility) (Revolving
Loans).
The Company used the proceeds of (i) Tranche A Term Loan borrowings of
$500,000, (ii) Tranche B Term Loan borrowings of $150,000, and (iii) Revolving
Loan borrowings of $70,000 to (a) repay in full all amounts outstanding under
the prior credit agreement dated as of July 13, 1990, as amended, with Morgan
Guaranty Trust Company of New York and other lenders, which consisted of a
revolving credit facility and a term loan facility; (b) to prepay in full the
Hancock Senior Notes and the 11.75% Senior Notes, (c) to deposit with a trustee
an amount sufficient to satisfy and discharge in full all indebtedness under the
Floating Rate Notes; (d) to redeem approximately $295,200 of the 13% Discount
Debentures (the remaining $50,000 was subsequently redeemed with the proceeds
from the
29
<PAGE>
ECKERD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(4) LONG-TERM DEBT--(CONTINUED)
issuance of the 9 1/4% Senior Subordinated Notes (note 4(b)); (e) to redeem the
14 1/2% Preferred Stock in full; and (f) to pay fees and expenses in connection
with these transactions.
An extraordinary charge of $44,354 (net of tax benefit of $929) was
recognized during the year ended January 29, 1994 in connection with the early
repayment of debt and preferred stock from the proceeds of the new Credit
Agreement, IPO and the Note issuance (note 4(b)).
The Tranche A Term Loans and the Revolving Loans bear interest at various
rates approximating, at the Companys option (i) Prime plus 1 3/4% or (ii)
Adjusted LIBOR plus 2 3/4%. The spread above Prime and LIBOR may decrease by 1/2
of 1% in two separate instances if certain levels of funded debt and ratios of
funded debt to specified measures of earnings are achieved by the Company.
The Tranche B Term Loans bear interest at various rates approximating, at
the Company's option (i) Prime plus 2% or (ii) Adjusted LIBOR plus 3%.
Interest on Prime borrowings will be paid quarterly. Interest on LIBOR
borrowings will be payable at the end of the relevant interest period (one, two,
three or six month periods, except that with respect to six-month periods,
interest shall be payable every three months). The Company is required to pay a
commitment fee of 1/2 of 1% per annum on the undrawn amount of the term loan and
revolving facilities. The Company is also required to pay Letter of Credit fees
and Bankers' Acceptance fees.
During 1993, the Company entered into interest rate cap agreements relating
to the Credit Agreement. The cap agreements are for $200,000 and mature at
various dates over the next three years. The cap agreements have an approximate
6% interest rate.
Principal of the Tranche A Term Loans and the Tranche B Term Loans will be
amortized on the following schedule:
TRANCHE A TRANCHE B
FISCAL YEAR TERM LOAN TERM LOAN
----------- ----------- -----------
1994...................................... $ 28,348 --
1995...................................... 66,146 --
1996...................................... 85,045 --
1997...................................... 85,045 --
1998...................................... 85,044 9,449
1999...................................... 80,320 18,899
2000...................................... -- 113,393
----------- -----------
----------- -----------
Principal of the Tranche A Term Loans will be amortized in quarterly
payments and mature in full on July 31, 1999. Principal of the Tranche B Term
Loans will be amortized in semi-annual payments and mature in full on June 15,
2000. The Company has the right to prepay any borrowings under the Credit
Agreement in whole or in part at any time.
The Company is required to prepay borrowings under the Credit Agreement
with (i) 50% of the consolidated excess cash flow (as calculated in accordance
with the Credit Agreement) of the Company for the preceding fiscal year; (ii) in
any fiscal year, the excess of the aggregate net proceeds of dispositions of
assets of the Company and its subsidiaries over $6,000; (iii) in any fiscal
year, the net proceeds of any incurrence of debt (other than indebtedness
permitted under the Credit Agreement); and (iv) all of the net proceeds of any
equity issuance until such prepayment or prepayments equal $75,000
(approximately 8,000 remain at January 29, 1994), and thereafter, 75% of such
net proceeds.
30
<PAGE>
ECKERD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(4) LONG-TERM DEBT--(CONTINUED)
Prepayments are to be applied pro rata between outstanding Tranche A Term loans
and Tranche B Term Loans, applied pro rata among scheduled payments, and, after
such loans are paid in full, to the Swingline Loans and then the Revolving
Loans.
The borrowings under the Credit Agreement are secured by a pledge of all
capital stock of the Company's subsidiaries, as well as substantially all
personal property, including inventory and accounts receivable and certain real
property (as defined), contain certain restrictive covenants which provide
limitations on the Company with respect to incurring debt, the incurring of
liens, making investments, payment of dividends and purchase of shares of stock
of the Company, payment of lease expenses, consolidations and mergers, sale of
assets, and transactions with affiliates. The Credit Agreement also requires the
Company to satisfy certain financial ratios. At January 29, 1994, the Company
was in compliance with these covenants.
(b) On November 2, 1993, the Company issued $200,000 aggregate principal
amount of 9 1/4% Senior Subordinated Notes (Notes) due February 15, 2004. The
Notes are unsecured and subordinated to all existing and future senior debt (as
defined) of the Company and are redeemable at the option of the Company, in
whole or in part, at any time after February 15, 1999 at various redemption
prices (as defined) plus accrued interest to the date of redemption. Interest is
payable semi-annually on February 15 and August 15 of each year, commencing
February 15, 1994.
The Company used the net proceeds from the issuance of the Notes to redeem
the remaining $50,000 of the 13% Discount Subordinated Debentures and $145,000
of the 11 1/8% Subordinated Debentures (note 4(c)).
(c) The 11 1/8% subordinated debentures are subordinated to all existing
and future senior debt (as defined) of the Company, and are redeemable at the
option of the Company, in whole or in part, at anytime at 100% of their
principal amount plus accrued interest to the date of redemption. During 1993,
$145,000 face amount of these subordinated debentures were redeemed by the
Company (note 4(b)).
(d) The variable rate demand industrial development revenue refunding bonds
currently have an interest rate which is a daily rate established by First
National Bank of Chicago and is indicative of current bid-side yields of high
grade tax-exempt securities. At the Company's option, and under certain
conditions, the interest rate may be changed to a monthly rate or a fixed rate.
The bonds are secured by the related buildings, leases and letters of credit.
31
<PAGE>
ECKERD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(5) INCOME TAXES
For fiscal years 1993, 1992 and 1991, the income tax provision before
utilization of net operating losses and extraordinary item amounted to $2,556,
$2,864 and $2,927, which differs from amounts computed by applying the Federal
and State statutory rates of 38% in the year ended January 29, 1994 and 34% for
the years ended January 30, 1993 and February 1, 1992 to earnings (loss) before
income taxes and extraordinary items. The actual tax differs from the expected
tax (benefit) as follows:
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------
JANUARY 29, JANUARY 30, FEBRUARY 2,
1994 1993 1992
----------- ------------- -------------
<S> <C> <C> <C>
Expected tax (benefit)................................................... $ 16,708 (687) 1,327
Amortization of goodwill................................................. 709 722 732
Other.................................................................... 2,346 2,829 868
----------- ------------- -------------
19,763 2,864 2,927
Effect of extraordinary item............................................. (17,207) -- --
----------- ------------- -------------
Tax provision before utilization of net operating loss carryforward...... $ 2,556 2,864 2,927
----------- ------------- -------------
----------- ------------- -------------
</TABLE>
"Other" consists principally of alternative minimum tax which is caused by
differences in net operating loss utilization rates and depreciation. The amount
of alternative minimum tax paid is available in future years to offset regular
corporate income tax.
For the years ended January 30, 1993 and February 1, 1992, the Company
utilized approximately $762 and $1,680, respectively, of net operating loss
carryforwards for financial statement purposes.
The Company has Federal income tax loss carryforwards of approximately
$332,600 for income tax purposes which are available to offset future taxable
income, if any, through 2008.
The Company's Federal income tax returns have been examined through
year-end 1984 and any assessments have been paid or accrued. The Federal income
tax returns for 1985, 1986, 1987 and 1988 are currently being examined. The
Company believes that an adequate provision for income taxes has been made for
all open years.
32
<PAGE>
ECKERD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(5) INCOME TAXES--(CONTINUED)
Temporary differences and carryforwards which give rise to deferred tax
assets and liabilities are as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Reserves and other liabilities............................................... $ 16,950
Other........................................................................ 8,318
Loss carryforwards........................................................... 125,377
Credit carryforwards......................................................... 5,246
------------
Gross deferred tax assets................................................. 155,891
Less valuation allowance..................................................... (108,958)
------------
Net deferred tax assets................................................... $ 46,933
------------
------------
Deferred tax liabilities:
Inventory.................................................................... $ 22,091
Bad debts.................................................................... 846
Fixed assets................................................................. 23,996
------------
Gross deferred tax liabilities............................................ $ 46,933
------------
------------
</TABLE>
Upon adoption of Statement 109, effective January 31, 1993, the Company
determined a valuation allowance requirement in the amount of $108.9 million.
(6) REDEEMABLE PREFERRED STOCK
As discussed in note 4(a), seventy-five thousand shares of 14 1/2%
cumulative redeemable preferred stock with a stated value of $1,000 ($.01 par
value) were redeemed during 1993. Dividends of $4,924 were paid during 1993.
(7) STOCKHOLDERS' EQUITY
(a) Common Stock
The Company's authorized common stock consists of 100,000,000 shares of
Common Stock, par value $.01 per share (of which 3,518,728 shares are Nonvoting
Common Stock (Series I), par value $.01 per share).
(b) Preferred Stock
The Company's authorized preferred stock consists of 20,000,000 shares. The
preferred stock is issuable in series with terms as fixed by the Board of
Directors. No preferred stock has been issued.
(c) Stock Options
The Company reserves 1,666,667 shares of its Common Stock for the granting
of stock options and other incentive awards to officers, directors and key
employees under the 1993 Stock Option and Incentive Plan of Eckerd Corporation.
Options are granted at prices which are not less than the fair market value of a
share of common stock on the date of grant. Commencing three years after the
date of grant, all options are exercisable to the extent of 50%, with an
additional 25% exercisable after each of the next two successive years.
Unexercised options expire ten years after the date of grant. Options
33
<PAGE>
ECKERD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(7) STOCKHOLDERS' EQUITY--(CONTINUED)
granted under prior plans were surrendered and granted under the terms of the
1993 plan. Shares under option and option prices have been adjusted to reflect
the Reclassification and the Stock Split (note 1(b)).
As of January 29, 1994, January 30, 1993 and February 1, 1992, 222,668,
363,451 and 96,929 shares of Common Stock were available for grant. At January
29, 1994, options for 450,393 shares of Common Stock were exercisable at
$.56-$14.00 per share. At January 30, 1993, options for 490,777 shares of Common
Stock were exercisable at $.56-$30.00 per share. At February 1, 1992, options
for 488,357 shares of Common Stock were exercisable at $.56-$20.62 per share.
A summary of changes during the years ended January 29, 1994, January 30,
1993 and February 1, 1992 is set forth below:
<TABLE>
<CAPTION>
SHARES UNDER
OPTION OPTION PRICES
------------ ----------------
<S> <C> <C>
Outstanding February 2, 1991..................................................... 680,881 $ .56-$20.62
Granted........................................................................ 13,533 $ 36.00-$37.50
Exercised...................................................................... (7,200) $ 5.64-$15.75
Cancelled...................................................................... (14,747) $ 5.64-$36.00
------------
Outstanding February 1, 1992..................................................... 672,467 $ .56-$37.50
Granted........................................................................ 44,392 $ 27.00-$31.47
Exercised...................................................................... (24,100) $ 5.64-$26.75
Cancelled...................................................................... (5,799) $ 5.16-$36.00
------------
Outstanding January 30, 1993..................................................... 686,960 $ .56-$37.50
Granted........................................................................ 855,915 $ 10.00-$14.00
Exercised...................................................................... (74,395) $ 5.64-$ 9.23
Cancelled...................................................................... (61,476) $ 5.64-$36.00
------------
Outstanding January 29, 1994..................................................... 1,407,004 $ .56-$14.00
------------
------------
</TABLE>
Options previously granted at prices greater than $14.00 per share were
modified to $14.00 per share at the date of the IPO.
No accounting entries will be made until after the options have been
exercised at which time the par value of shares sold will be credited to common
stock and the excess of the proceeds of the sale over par value of shares sold
will be credited to capital in excess of par value.
(8) COMMITMENTS
The Company conducts the major portion of its retail operations from leased
store premises under leases that will expire within the next 25 years. Such
leases generally contain renewal options exercisable at the option of the
Company. In addition to minimum rental payments, certain leases provide for
payment of taxes, maintenance, and percentage rentals based upon sales in excess
of stipulated amounts.
34
<PAGE>
ECKERD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(8) COMMITMENTS--(CONTINUED)
The rental expense for the years ended January 29, 1994, January 30, 1993
and February 1, 1992 was:
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 30, FEBRUARY 1,
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Minimum rentals................................... $ 110,998 103,689 97,304
Percentage rentals................................ 18,369 16,938 15,824
----------- ----------- -----------
$ 129,367 120,627 113,128
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
At January 29, 1994, minimum rental commitments under noncancelable leases
were as follows:
FISCAL YEAR
-----------
1994.............................................. $ 102,834
1995.............................................. 98,440
1996.............................................. 93,590
1997.............................................. 86,977
1998.............................................. 75,255
Thereafter........................................ 471,496
-----------
$ 928,592
-----------
-----------
In 1987, the Company entered into an operating lease agreement for 72
stores with a third-party lessor established by an affiliate of Merrill Lynch &
Co. (which, through affiliated entities, controls a majority of the Company's
common stock). The lease agreement has certain restrictive covenants, which,
upon violation by the Company, gives the lessor the right to require the lessee
to purchase the leased stores at the remaining balance of the lease contract. At
January 29, 1994, the balance subject to the repurchase terms is $38,046. At
January 29, 1994, the Company was in compliance with these covenants.
During 1993, the Company sold certain photo processing equipment to an
unrelated third party for approximately $35,000, and entered into a five-year
lease with respect to such equipment. No gain or loss was recorded in connection
with this transaction. Annual lease payments of $6,892 are required over the
term of the lease.
During 1993, the Company and Integrated Systems Solutions Corporation
(ISSC) entered into a Systems Operations Service Agreement (Service Agreement)
pursuant to which ISSC will manage the Company's entire information systems
operation, including the implementation of a new point-of-sale system with
scanning capabilities. The Service Agreement has a ten year term and the total
payments to be made by the Company are expected to be between $320,000 and
$440,000 over such term, depending on the optional services utilized.
(9) TRANSACTIONS WITH RELATED PARTIES
In April 1989, the Company entered into a "Master Lease" agreement with a
third-party lessor established by an affiliate of Merrill Lynch & Co. (which,
through affiliated entities controls a majority of the Company's common stock)
whereby such lessor would finance the acquisition of store sites and the
construction of buildings and acquisition of equipment. As of January 29, 1994,
there were 12 stores leased under the agreement with an aggregate cost of
approximately $18,400. The Company pays the
35
<PAGE>
ECKERD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(9) TRANSACTIONS WITH RELATED PARTIES--(CONTINUED)
Merrill Lynch affiliate a structure fee of 1% of the cost of land, buildings and
equipment financed under the Master Lease plus an administration fee. The
Company paid the Merrill Lynch affiliate fees aggregating $44, $45 and $408 for
the years ended January 29, 1994, January 30, 1993 and February 1, 1992,
respectively.
In July 1989, the Company entered into a Placement Agency Agreement with an
affiliate of Merrill Lynch & Co. whereby such affiliate would act as exclusive
placement agent for the private placement of up to a maximum of $200,000 at any
one time, of unsecured notes. The Company did not issue any of these unsecured
notes during the years ended January 29, 1994 and January 30, 1993. There were
no notes outstanding under this facility at January 29, 1994 and January 30,
1993.
During 1993, Merrill Lynch & Co., as one of the representatives of the
underwriters in the IPO, received underwriting commissions and related fees of
$1,847. In addition, as sole underwriter in the issuance of the Notes, Merrill
Lynch & Co. received approximately $4,000 in underwriting discounts from the
Company.
(10) SUBSEQUENT EVENT
Effective January 30, 1994, the Company entered into an agreement in
principal to sell certain assets of its Vision Group division. The Company does
not expect to recognize any significant gain or loss upon disposition.
36
<PAGE>
SCHEDULE V
ECKERD CORPORATION AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER
BALANCE AT CHANGES BALANCE AT
BEGINNING ADDITIONS RETIREMENTS INCREASE END
CLASSIFICATION OF PERIOD AT COST OR SALES (DECREASE) OF PERIOD
- -------------------------------------------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Year Ended January 29, 1994:
Land...................................... $ 19,269 $ 1 $ 10 $ -- $ 19,260
Buildings................................. 68,196 4,381 29 856(a) 73,404
Furniture and equipment................... 326,145 20,418 59,869 19(a)
280(b)
(13,126)(a)
Transportation equipment.................. 14,660 104 1,721 7(a) 13,050
Leasehold improvements.................... 123,344 8,187 3,464 (882)(a) 127,480
295(b)
----------- ----------- ----------- ---------- -----------
$ 551,614 $ 33,091 $ 65,093 $ (12,551) $507,061
----------- ----------- ----------- ---------- -----------
----------- ----------- ----------- ---------- -----------
Year Ended January 30, 1993:
Land...................................... $ 19,343 $ 11 $ 85 $ -- $ 19,269
Buildings................................. 66,181 1,337 8 686(a) 68,196
Furniture and equipment................... 299,169 36,519 11,410 1,867(b) 326,145
Transportation equipment.................. 19,117 33 4,532 42(b) 14,600
(686)(a)
Leasehold improvements.................... 113,995 13,489 4,117 663(b) 123,344
----------- ----------- ----------- ---------- -----------
$ 517,805 $ 51,389 $ 20,152 $ 2,572 $ 551,614
----------- ----------- ----------- ---------- -----------
----------- ----------- ----------- ---------- -----------
Year Ended February 1, 1992:
Land...................................... $ 19,677 $ 10 $ 344 $ -- $ 19,343
Buildings................................. 64,640 516 11 1,036(a) 66,181
Furniture and equipment................... 272,989 33,687 7,507 -- 299,169
Transportation equipment.................. 18,052 4,900 3,835 -- 19,117
Leasehold improvements.................... 107,361 10,297 2,627 (1,036)(a) 113,995
----------- ----------- ----------- ---------- -----------
$ 482,719 $ 49,410 $ 14,324 $ -- $ 517,805
----------- ----------- ----------- ---------- -----------
----------- ----------- ----------- ---------- -----------
</TABLE>
- ---------------
Notes:
(a) Transfers from construction in progress and reclassifications.
(b) Acquisition of certain drug store assets.
37
<PAGE>
SCHEDULE VI
ECKERD CORPORATION AND SUBSIDIARIES
ACCUMULATED DEPRECIATION AND AMORTIZATION OF PLANT AND EQUIPMENT
YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS OTHER
BALANCE AT CHARGED CHANGES BALANCE
BEGINNING TO RETIREMENTS INCREASE AT END
CLASSIFICATION OF PERIOD EARNINGS OR SALES (DECREASE) OF PERIOD
- ----------------------------------------------- ----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Year Ended January 29, 1994:
Buildings.................................... $ 23,155 $ 3,222 $ 5 $ 198(a) $ 26,570
Furniture and equipment...................... 143,547 32,586 23,902 (4)(a) 144,866
(7,361)(a)
Transportation equipment..................... 8,725 1,303 1,683 -- 8,345
Leasehold improvements....................... 48,061 12,338 1,561 (194)(a) 58,644
----------- --------- ----------- ----------- -----------
$ 223,488 $ 49,449 $ 27,151 $ (7,361) $ 238,425
----------- --------- ----------- ----------- -----------
----------- --------- ----------- ----------- -----------
Year Ended January 30, 1993:
Buildings.................................... $ 19,135 $ 4,058 $ 346 $ 308(a) $ 23,155
Furniture and equipment...................... 117,105 35,717 9,275 -- 143,547
Transportation equipment..................... 10,994 2,029 4,298 -- 8,725
Leasehold improvements....................... 39,349 11,950 2,930 (308)(a) 48,061
----------- --------- ----------- ----------- -----------
$ 186,583 $ 53,754 $ 16,849 $ -- $ 223,488
----------- --------- ----------- ----------- -----------
----------- --------- ----------- ----------- -----------
Year Ended February 1, 1992:
Buildings.................................... $ 15,767 $ 3,336 $ 6 $ 38(a) $ 19,135
Furniture and equipment...................... 91,576 32,321 6,803 11(a) 117,105
Transportation equipment..................... 11,852 2,773 3,631 -- 10,994
Leasehold improvements....................... 30,055 11,124 1,781 (49)(a) 39,349
----------- --------- ----------- ----------- -----------
$ 149,250 $ 49,554 $ 12,221 $ -- $ 186,583
----------- --------- ----------- ----------- -----------
----------- --------- ----------- ----------- -----------
</TABLE>
- ---------------
Notes: (a) Reclassifications.
Depreciation is expensed principally by the straight line method over the
estimated useful lives of such assets as follows: Buildings 16-45 years;
furniture and equipment 1-10 years; transportation equipment 1-8 years and
leasehold improvements 2-20 years.
38
<PAGE>
SCHEDULE VIII
ECKERD CORPORATION AND SUBSIDIARIES
RESERVES
YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED BALANCE
BEGINNING TO AT END
DESCRIPTION OF PERIOD EARNINGS DEDUCTIONS OF PERIOD
- ------------------------------------------------------------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Allowance for doubtful receivables (a):
Year ended January 29, 1994..................................... $ 5,000 $ 7,000 $ 7,000 $ 5,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year ended January 30, 1993..................................... $ 4,600 $ 4,475 $ 4,075 $ 5,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year ended February 1, 1992..................................... $ 4,250 $ 4,155 $ 3,805 $ 4,600
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
- ---------------
Notes:
(a) This reserve is deducted from receivables in the balance sheets.
39
<PAGE>
EXHIBIT INDEX
ECKERD CORPORATION FORM 10-K/A
FOR THE FISCAL YEAR ENDED JANUARY 29, 1994
<TABLE> <CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- --------- ------------------------------------------------------------------------------------------------- ---------
<S> <C> <C>
3.1(i) Restated Certificate of Incorporation of Eckerd Corporation (the "Company") (incorporated by
reference to Exhibit 3.1(i) to the Registration Statement on Form S-3 of the Company (No.
33-50223))....................................................................................... *
3.2(ii) Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3.2(ii) to the
Registration Statement on Form S-3 of the Company (No. 33-50223))................................ *
4.1 Form of certificate for the Company's Common Stock, par value $.01 per share (incorporated by
reference to Exhibit 4.1 to the Registration Statement on Form S-2 of the Company (No.
33-64906))....................................................................................... *
4.2 Indenture dated as of May 1, 1986 by and between the Company and Mellon Bank, N.A. as trustee,
relating to the 11 1/8% Subordinated Debentures due 2001 (incorporated by reference to the
Registration Statement on Form S-1 of Eckerd Holdings Inc. (No. 33-4576)). (On February 6, 1991,
Mellon Bank, N.A. was succeeded by Security Pacific National Trust Company, as trustee.)......... *
4.3 Indenture dated as of May 1, 1986 between the Company and Chemical Bank (as successor by merger
to Manufacturers Hanover Trust Company), relating to the Company's Discount Subordinated
Debentures due 2006 (incorporated by reference to Exhibit 4.2 to the Registration Statement on
Form S-1 of the Company (No. 33-10721)).......................................................... *
4.4 Indenture dated as of November 1, 1993 between the Company and State Street Bank and Trust
Company of Connecticut, National Association, as Trustee (incorporated by reference to Exhibit
4.02 to the Current Report on Form 8-K dated October 26, 1993 of the Company (File No.
1-4844))......................................................................................... *
4.5 Form of 9 1/4% Senior Subordinated Note due 2004 of the Company (incorporated by reference to
Exhibit 4.01 to the Current Report on Form 8-K dated October 26, 1993 of the Company (File No.
1-4844))......................................................................................... *
10.1 Credit Agreement dated as of June 14, 1993 (the "Credit Agreement") among the Company, the
lenders named therein, Chemical Bank and NationsBank of Florida, N.A., as managing agents and
swingline lenders, and Chemical Bank, as administrative agent (incorporated by reference to
Exhibit 10.1 to the Registration Statement on Form S-2 of the Company (No. 33-64906))............ *
10.2 Guarantee Agreement dated as of June 14, 1993 (the "Guarantee Agreement") among the subsidiaries
of the Company listed therein and Chemical Bank, as collateral agent (incorporated by reference
to Exhibit 10.2 to the Registration Statement on Form S-2 of the Company (No. 33-64906))......... *
10.3 Indemnity, Subrogation and Contribution Agreement dated as of June 14, 1993 (the "Contribution
Agreement"), among the Company, each subsidiary of the Company listed therein and Chemical Bank,
as collateral agent (incorporated by reference to Exhibit 10.3 to the Registration Statement on
Form S-2 of the Company (No. 33-64906)).......................................................... *
10.4 Pledge Agreement dated as of June 14, 1993 (the "Pledge Agreement") among the Company, each
subsidiary of the Registrant listed therein and Chemical Bank, as collateral agent (incorporated
by reference to Exhibit 10.4 to the Registration Statement on Form S-2 of the Company (No.
33-64906))....................................................................................... *
</TABLE>
40
<PAGE>
<TABLE> <CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- --------- ------------------------------------------------------------------------------------------------- ---------
<S> <C> <C>
10.5 Security Agreement dated as of June 14, 1993 (the "Security Agreement") among the Company, each
subsidiary of the Company listed therein and Chemical Bank, as collateral agent (incorporated by
reference to Exhibit 10.5 to the Registration Statement on Form S-2 of the Company (No.
33-64906))....................................................................................... *
10.6 Trademark Security Agreement dated as of June 14, 1993 (the "Trademark Security Agreement") among
the Company, each subsidiary of the Company listed therein and Chemical Bank, as collateral agent
(incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-2 of the
Company (No. 33-64906)).......................................................................... *
10.7 Amendment No. 1 dated as of August 3, 1993 to the Credit Agreement (incorporated by reference to
Exhibit 10.7 to the Registration Statement on Form S-3 of the Company (No. 33-50223))............ *
10.8 Supplement No. 1 to the Guarantee Agreement dated as of August 12, 1993 (incorporated by
reference in Exhibit 10.8 to the Registration Statement on Form S-3 of the Company (No.
33-50223))....................................................................................... *
10.9 Supplement No. 1 to the Contribution Agreement dated as of August 12, 1993 (incorporated by
reference to Exhibit 10.9 to the Registration Statement on Form S-3 of the Company (No.
33-50223))....................................................................................... *
10.10 Supplement No. 1 to the Pledge Agreement dated as of August 12, 1993 (incorporated by reference
to Exhibit 10.10 to the Registration Statement on Form S-3 of the Company (No. 33-50223))........ *
10.11 Supplement No. 1 to the Security Agreement dated as of August 12, 1993 (incorporated by reference
to Exhibit 10.11 to the Registration Statement on Form S-3 of the Company (No. 33-50223))........ *
10.12 Supplement No. 1 to the Trademark Security Agreement dated as of August 12, 1993 (incorporated by
reference to Exhibit 10.12 to the Registration Statement on Form S-3 of the Company (No.
33-50223))....................................................................................... *
10.13 Amendment No. 2, Consent and Waiver dated as of September 30, 1993 to the Credit Agreement
(incorporated by reference to Exhibit 10.01 to the Current Report on Form 8-K dated October 26,
1993 of the Company (File No. 1-4844)............................................................ *
10.14 Merrill Lynch Common Stock Purchase Agreement dated as of April 1, 1986 by and among the Company
and the Merrill Lynch Investors (incorporated by reference to the Registration Statement on Form
S-4 of Eckerd Holdings Inc. (No. 33-4497))....................................................... *
10.15 Commercial Paper Placement Agency Agreement dated July 17, 1989 between the Company and Merrill
Lynch Money Markets, Inc. (incorporated by reference to Exhibit 10.15 of Form 10-K of the Company
for the period ended February 3, 1990............................................................ *
10.16 Receivables Purchase Agreement dated March 29, 1990 as Amended and Restated as of May 16, 1991
between the Company and Mellon Bank, N.A. (incorporated by reference to Exhibit 10.9 to the
Registration Statement on Form S-2 of the Company (No. 33-64906))................................ *
10.17 Amendment No. 1 to Receivables Purchase Agreement dated as of April 20, 1992 between the Company
and Mellon Bank, N.A. (incorporated by reference to Exhibit 10.28 of Form 10-K of the Company for
the period ended February 1, 1992)............................................................... *
10.18 Amendment No. 2 to Receivables Purchase Agreement between the Company and Mellon Bank, N.A.
(incorporated by reference to Exhibit 10.35 of Post-Effective Amendment No. 5 to the Registration
Statement on Form S-2 of the Company (No. 33-37544))............................................. *
</TABLE>
41
<PAGE>
<TABLE> <CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- --------- ------------------------------------------------------------------------------------------------- ---------
<S> <C> <C>
10.19 Amendment No. 3 to Receivables Purchase Agreement between the Company and Mellon Bank, N.A.
(incorporated by reference to Exhibit 10.36 of Post-Effective Amendment No. 5 to the Registration
Statement on Form S-2 of the Company (No. 33-37544))............................................. *
10.20 Amendment No. 4 to Receivables Purchase Agreement dated as of June 11, 1993 between the Company
and Mellon Bank, N.A. (incorporated by reference to Exhibit 10.13 to the Registration Statement
on Form S-2 of the Company (No. 33-64906))....................................................... *
10.21 Reimbursement Agreement dated as of January 24, 1992 among the Company, the guarantors listed
therein and Westpac Banking Corporation, New York Branch (incorporated by reference to Exhibit
10.34 of Post-Effective Amendment No. 5 to the Registration Statement on Form S-2 of the Company
(No. 33-37544)).................................................................................. *
10.22 Registration Rights Agreement dated as of April 30, 1986 by and among the Company, the Merrill
Lynch Investors, Morgan Capital Corporation and the other bank affiliates listed therein, the
institutional and corporate investors listed therein and certain members of management of the
Company (incorporated by reference to Exhibit 10.19 to the Registration Statement on Form S-2 of
the Company (No. 33-64906))...................................................................... *
10.23 First Amendment to Registration Rights Agreement among the Company, EDS Holdings Inc., the
Merrill Lynch Investors, the Bank Affiliates, the Institutional Investors and the Management
Investors (incorporated by reference to Exhibit 10.20 to Amendment No. 1 to the Registration
Statement on Form S-2 of the Company (No. 33-64906))............................................. *
10.24 First Employees Management Stock Option Plan (incorporated by reference to the Registration
Statement on Form S-8 of the Company (No. 33-30761))............................................. *
10.25 Employment Agreement dated as of April 30, 1986, between the Company and Stewart Turley
(incorporated by reference to Exhibit 10.23 to the Registration Statement on Form S-2 of the
Company (No. 33-64906)).......................................................................... *
10.26 Employment Agreement dated as of April 30, 1986, between the Company and Harry W. Lambert
(incorporated by reference to Exhibit 10.24 to the Registration Statement on Form S-2 of the
Company (No. 33-64906)).......................................................................... *
10.27 Employment Agreement dated as of April 30, 1986, between the Company and John W. Boyle
(incorporated by reference to Exhibit 10.25 to the Registration Statement on Form S-2 of the
Company (No. 33-64906)).......................................................................... *
10.28 Employment Agreement dated October 1, 1988, between the Company and Richard W. Roberson
(incorporated by reference to Exhibit 10.26 to the Registration Statement on Form S-2 of the
Company (No. 33-64906)).......................................................................... *
10.29 Employment Agreement dated June 9, 1993, between the Company and Francis A. Newman (incorporated
by reference to Exhibit 10.27 to the Registration Statement on Form S-2 of the Company (No.
33-64906))....................................................................................... *
10.30 Master Lease Agreement I dated as of May 18, 1993 between the Company and Imaging Financial
Services d/b/a EKCC ("IFS") (incorporated by reference to Exhibit 10.28 to Amendment No. 1 to the
Registration Statement on Form S-2 of the Company (No. 33-64906))................................ *
10.31 Master Lease Agreement II dated as of June 15, 1993 between the Company and IFS (incorporated by
reference to Exhibit 10.29 to Amendment No. 1 to the Registration Statement on Form S-2 of the
Company (No. 33-64906)).......................................................................... *
10.32 Systems Operations Service Agreement dated as of July 14, 1993 between the Company and Integrated
Systems Solution Corporation (incorporated by reference to Exhibit
</TABLE>
42
<PAGE>
<TABLE> <CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- --------- ------------------------------------------------------------------------------------------------- ---------
<S> <C> <C>
10.30 to Amendment No. 1 to the Registration Statement on Form S-2 of the Company (No.
33-64906))....................................................................................... *
10.33 Letter dated March 16, 1993 between IFS and the Company relating to IFS Sale and Leaseback
(incorporated by reference to Exhibit 10.31 to Amendment No. 2 of the Registration Statement on
Form S-2 of the Company (No. 33-64906)).......................................................... *
10.34 Consulting Agreement dated as of September 30, 1993, between the Company and Harry W. Lambert
(incorporated by reference to Exhibit 10.33 to Amendment No. 2 to the Registration Statement on
Form S-3 of the Company (No. 33-50223)).......................................................... *
10.35 1993 Stock Option and Incentive Plan of the Company (incorporated by reference to Exhibit 99.1 to
the Registration Statement on Form S-8 of the Company (No. 33-49977))............................ *
10.36 Form of Separation Agreement between the Company and Richard W. Roberson......................... *
10.37 Consent and Waiver dated as of January 15, 1994 to the Credit Agreement.......................... *
10.38 Employment Agreement dated October 1, 1988 between the Company and Robert L. Myers...............
12.1 Statement regarding computation of ratio of earnings to fixed charges of the Company
(incorporated by reference to Exhibit 12.1 to the Registration Statement on Form S-3 of the
Registrant (No. 33-50223))....................................................................... *
22.1 Subsidiaries of the Company...................................................................... *
23.1 Consent of Independent Certified Public Accountants..............................................
99.1 Pro Forma Financial Data for the fiscal year ended January 29, 1994.............................. *
</TABLE>
- ---------------
* Previously filed herewith or previously filed by incorporation by reference.
43
EXHIBIT 10.38
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of October 1, 1988, by and between JACK
ECKERD CORPORATION, a Delaware corporation (the "Company") and
ROBERT L. MYERS, residing at 34 North Pine Circle, Belleair,
Florida 34616, (the "Employee").
WHEREAS, upon the terms and subject to the conditions of this
Agreement, the Company desires to employ the Employee and the
Employee is willing to accept employment by the Company.
NOW, THEREFORE, in consideration of the mutual covenants set
forth herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:
1. Employment.
----------
Upon the terms and subject to the conditions of
this Agreement, the Company hereby employs the Employee and the
Employee hereby accepts employment by the Company in the capacity
hereinafter set forth.
2. Term of Employment.
------------------
The term of the Employee's employment by the Company under
this Agreement shall commence on the date hereof and shall be for
a term of twelve (12) months, subject to extension and termina-
tion as provided in Section 8 hereof (the "Contract Period").
<PAGE>
3. Duties; Extent of Services.
--------------------------
(a) During the Contract Period, the Employee shall
serve as Vice President, Pharmacy Services of the Eckerd Drug
---------------------------------
Company Division of the Company or in such other executive capacity
as shall be determined from time to time by the Board of Directors
of the Company and shall perform the duties, undertake the
responsibilities and exercise the authority customarily
performed, undertaken and exercised by a person in such
position in the businesses in which the Company is engaged.
(b) Except as otherwise provided herein and except for
illness, permitted vacation periods and permitted leaves of
absence during the Contract Period, the Employee shall (i) devote
his full time and attention during normal business hours to the
business of the Company and its subsidiaries; (ii) use his best
efforts to promote the Company's and its subsidiaries' interests;
and (iii) discharge such other and further executive and adminis-
trative duties as may be assigned to him by the Board of Direc-
tors of the Company and its subsidiaries.
(c) Except for directorships held by the Employee on
the date of this Agreement, during the Contract Period the
Employee will not, without the prior written consent of the
Company's Board of Directors, serve as a director of any corpora-
tion, joint venture, association or other commercial enterprise
not controlled by, controlling or under common control with, the
Company and its subsidiaries.
2
<PAGE>
4. Compensation.
------------
(a) In consideration of the services rendered by the
Employee under this Agreement, the Company shall pay the Employee
a base annual salary (the "Base Salary") in the amount of
$110,000 (or such higher amount as the Board of Directors of the
--------
Company shall determine) payable monthly on the fifteenth (15th)
of each month during the Contract Period.
(b) During the Contract Period, as additional compensa-
tion for his services and as a further incentive and inducement
to the Employee to accept employment by the Company and to devote
his best efforts to the business and affairs of the Company and
its subsidiaries, the Company shall pay to the Employee addition-
al compensation (the "Bonus Compensation") in the following
amounts:
(i) The Company shall pay, or shall cause to be
paid, to the Employee the payments described in the
letter agreement dated April 30, 1986 between the
Company and the Employee, the form of which is attached
hereto as Exhibit A; and
(ii) The Employee shall be entitled to participate
in the Company's Key Management Bonus Plan (KMBP), 3-
Year Bonus Plan (3-Year Bonus) and such other plans as
may be in effect from time to time as determined by the
Board of Directors of the Company from time to time.
3
<PAGE>
(c) The Company agrees that the Employee shall be
entitled to defer some portion or all of his Base Salary for any
calendar year in accordance with the provisions of the Company's
Executive Deferred Compensation Plan as adopted by the Board of
Directors.
5. Fringe Benefits.
---------------
In addition to the compensation provided in Section 4
above, during the Contract Period the Employee shall be entitled
to the following benefits:
(a) The Employee shall be entitled to paid vacation
time annually in accordance with the Company policy as determined
by the Board of Directors.
(b) The Employee shall be entitled to participate in
all employee benefit programs now or hereafter maintained by the
Company for executive personnel for which he is eligible, includ-
ing, without limitation, group life insurance, short and long-
term disability, profit sharing, pension, automobile allowance or
leasing, stock option (subject to approval by the Board of
Directors), supplemental retirement income (subject to approval
by the Board of Directors), hospitalization and medical and
dental reimbursement plan or program, his participation in such
programs to be based upon the applicable provisions of such
programs as they may exist from time to time.
6. Expenses.
--------
The Company shall pay or reimburse the Employee for all
reasonable expenses reasonably incurred or paid by him in connec-
4
<PAGE>
tion with the performance of his duties hereunder upon presen-
tation of expense statements or vouchers and such other support-
ing documentation as the Company may from time to time reasonably
request.
7. Benefits Payable Upon Disability, Death, or Retirement.
------------------------------------------------------
(a) In the event of the disability (as hereinafter de-
fined) of the Employee during the Contract Period, the Company
shall continue to pay the Employee the compensation provided in
Section 4 hereof during the period of his disability or earlier
termination hereof; provided, however, that in the event the
--------
Employee is disabled for a continuous period exceeding six (6)
consecutive calendar months, the Company may, at its election,
terminate this Agreement at the close of business on the date
thirty (30) days after the Company shall have delivered a written
notice of such election to the Employee, in which event the
Employee shall be entitled to receive benefits under the Company's
Long Term Disability Plan as such plan may exist as of the date of
termination of this Agreement.
As used in this Agreement, the term "disabil-
ity" shall mean the inability of the Employee due to illness or
physical or mental infirmity to perform his duties under this
5
<PAGE>
Agreement as determined by a physician selected by the Employee
and acceptable to the Company.
(b) During the period the Employee shall be entitled
to receive payments under Section 7(a) above, to the extent that
he is physically and mentally able to do so, he shall, upon the
request of the Company, furnish information and assistance to the
Company, and, in addition, upon reasonable request of Senior
Management or the Board of Directors, he shall make himself
available to the Company to undertake reasonable assignments
consistent with the dignity, importance and scope of his position
and his physical and mental health.
(c) In the event of the death of the Employee during
the Contract Period, the Company shall pay, or cause to be paid,
to the Employee's designated beneficiary or beneficiaries or
estate or legal representatives, the payment due pursuant to the
terms of the group term insurance policies together with such
other death benefits as may be payable under the Company's
benefit plans.
(d) In the event of the retirement of the Employee on
his Normal Retirement Date (as such term is defined in the
Company's Pension Plan) in addition to such retirement benefits
that are available to the Employee upon retirement pursuant to
the Company's retirement benefit plans, the Company shall reduce
the principle amount of the Employee's aggregate obligation under
6
<PAGE>
the Employee's 10% Recourse Secured Promissory Note and 10% Non-
Recourse Secured Promissory Note dated as of April 30, 1986
(hereinafter collectively referred to as the "Notes") by an
amount equal to the amount such Notes would have been reduced had
the Employee remained in the employment of the Company for a
period of two (2) years from the date of retirement and shall pay
the Employee an additional amount equal to the federal, state or
local income taxes deemed to be payable by the Employee in
respect of the reduction in the principle amount of the Notes
pursuant to this clause.
8. Termination.
-----------
(a) Except as otherwise provided in subsection (c)
(d) and (e) hereof, this Agreement and the employment of the
Employee hereunder shall terminate upon the earliest to occur of
the dates specified below:
(i) the close of business on September 30,
1989 (the "Initial Period"), except that this Agreement
and the employment of the Employee hereunder shall be
automatically extended from year to year thereafter
unless (x) terminated by the Company by delivery of not
less than 60 days written notice to the Employee prior
to the end of the Initial Period or any extension
thereof in which case the employment of the Employee
shall terminate on the date specified for termination
7
<PAGE>
in such notice, or (y) terminated by the Employee by
delivery of not less than 60 days written notice to the
Company prior to the end of the Initial Period or any
extension thereof in which case the employment of the
Employee shall terminate on the date specified for
termination in such notice;
(ii) the close of business on the date of
death of the Employee;
(iii) the close of business on the date the
Company delivers to the Employee a written notice of
its election to terminate his employment for "cause"
(as defined in paragraph (b) below);
(iv) the close of business on the date thirty
(30) days after the Company shall have delivered to the
Employee a written notice of its intention to terminate
his employment because the Board of Directors has
determined that such termination is in the best inter-
ests of the Company and such termination is not for
cause, death, disability or failure to extend pursuant
to Section 8(a)(i)(x) hereof;
(v) the close of business on the date of a
termination by the Company pursuant to Section 7(a)
hereof; or
8
<PAGE>
(vi) the close of business the date of the
retirement of the Employee pursuant to Section 7(d)
hereof.
(b) For purposes of this Agreement, the term "cause"
shall be limited to (i) a felony conviction or (ii) the commis-
sion of an act of fraud or embezzlement against the Company or
any of its subsidiaries.
(c) For purposes hereof, upon termination of this
Agreement and employment of Employee as provided in Section 8(a)
(i) - (vi), all obligations and liabilities of the parties hereto
shall cease and be of no effect except for those liabilities and
obligations provided for in Sections 7, 9, 10, and 11 hereof.
(d) For purposes of clauses (i) and (iv) of Section
8(a) above, the Employee shall be relieved of his duties and
shall vacate his office and the Company's premises on the date
of receipt of the notice required by such clauses unless request-
ed by the Company to remain in the active employment of the
Company during such period between the receipt of notice and the
effective date of termination of employment.
(e) Notwithstanding the provisions of this Section 8,
the Company in its sole discretion may, in connection with the
termination of all of the employment agreements dated as of this
date between the Company and the Management Group (as such term is
defined in the Registration Rights Agreements), terminate this
9
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Agreement upon 3 months written notice; provided, however, that
if termination of this Agreement under this provision results in
the termination of employment of Employee by the Company other
than for cause, death, disability or retirement within one (1)
year from the effective date of the termination of this Agreement
under this clause (e), Employee shall be entitled to the benefits
and shall be bound by the obligations provided in Sections 9, 10
and 11 hereof.
9. Payments to Employee Upon Termination of Employment.
---------------------------------------------------
(a) Upon the termination of the Employee's full-time
employment hereunder by the Company in accordance with clauses
(i) (x) or (iv) of Section 8(a) of this Agreement, the Company
shall pay to the Employee, or in the event of his subsequent
death, to his beneficiary or beneficiaries or his estate or legal
representative, as severance pay (i) an amount equal to the
Employee's Base Salary on the date of termination for the Appli-
cable Severance Period payable in monthly installments on the
fifteenth (15th) of each month during the Applicable Severance
Period plus (ii) a pro rata portion of the lower of (x) the bonus
compensation which would have been paid to Employee pursuant to
the KMBP in respect of the year of termination if he had not been
terminated and (y) the amount of Bonus Compensation which would
have been paid to Employee under the KMBP in such year if the
Company had met Target as such term is defined in the KMBP plus
10
<PAGE>
(iii) a pro rata portion of any Bonus Compensation payable under
the 3-Year Bonus Plan for any 3-year Performance Period in which
Employee has been a participant for a period of 12 months plus
(iv) an amount equal to the value as of the valuation date next
preceding the date of termination of this Agreement of the pro
rata portion of any of the Employee's shares of Class B Common
Stock that would have become Vested Shares in respect of the year
of termination if he had not been terminated. Any payments due
Employee hereunder with respect to the KMBP, 3-Year Bonus Plan or
Vested Class B Stock shall be paid promptly after the determina-
tion of such amounts.
(b) Upon the termination of the Employee's full-time
employment hereunder pursuant to (i)(x) or (iv) of Section 8(a)
of this Agreement, the Company shall at its expense continue on
behalf of the Employee the following benefits: life insurance,
short and long-term disability insurance, hospitalization insur-
ance and medical and dental reimbursement plan insurance. The
coverage of any such insurance provided by the Company hereunder
shall be no less favorable to the Employee, in terms of amounts
and deductibles, than the coverage provided under the benefit
programs maintained by the Company from time to time for the
Company's executives. The Company's obligation hereunder with
respect to each of the foregoing benefit plans shall terminate
upon the earlier of the end of the Applicable Severance Period or
11
<PAGE>
the date the Employee obtains any such benefits pursuant to a
subsequent employer's benefit plans.
(c) Benefits pursuant to the Company's Profit Sharing
and Pension Plans (and such other plans in which Employee partic-
ipates) shall be payable to Employee in accordance with the terms
of such Plans.
(d) Upon the termination of the Employee's full-time
employment hereunder by the Company in accordance with clauses
(i)(x) or (iv) of Section 8(a) of this Agreement, the Company
shall reduce the principal amount of the Employee's aggregate
obligation under the Employee's 10% Recourse Secured Promissory
Note and 10% Non-Recourse Secured Promissory Note dated as of
April 30, 1986 by an amount equal to the amount such Notes would
have been reduced had the Employee remained in the employment of
the Company through the end of the Applicable Severance Period
and shall pay the Employee an additional amount equal to the
federal, state or local income taxes deemed to be payable by the
Employee in respect of the reduction in the principal amount of
the Notes pursuant to this clause.
(e) For purposes of this Agreement, Applicable Sever-
ance Period shall mean (i) one year (12 months) for a termination
which occurs prior to the Employee's tenth (10th) anniversary of
employment with the Company or (ii) one and one-half years (18
12
<PAGE>
months) for a termination which occurs after the Employee's tenth
(10th) anniversary of employment with the Company.
10. Covenants of the Employee.
-------------------------
(a) The Employee agrees that during the Contract
Period and for a period of time equal to (i) one year in the
event of a termination of employment in accordance with clauses
(i)(y) or (iii) of Section 8(a); (ii) two years in the event of a
termination of employment in accordance with Section 7(a) or
retirement in accordance with Section 7(d); or (iii) the Appli-
cable Severance Period in the event of a termination of employ-
ment in accordance with clauses (i)(x) or (iv) of Section 8(a),
he will not, directly or indirectly, engage, assist or partici-
pate in, whether as a director, officer, employee, agent, manag-
er, consultant, partner, owner or independent contractor or other
participant, any business, firm, corporation, partnership,
enterprise or organization that through the operation of retail
stores in which prescription drugs are sold competes with the
business engaged or hereafter engaged in by the Company or any of
its subsidiaries in the Company's or such subsidiaries' trade areas
(for purposes hereof "trade areas" shall mean any county in any
state of the United States in which retail drug stores operated by
the Company and its subsidiaries are located).
13
<PAGE>
Nothing contained herein shall prevent the Employee from acquiring
less than 2% of any class of outstanding securities of any company
that has any of its securities listed on a national securities
exchange or traded in the over-the-counter market.
(b) The Employee agrees that during the Contract
Period and for a period of two years after the termination of
this Agreement for any reason, he will not directly induce or
solicit any person employed or hereafter employed by the Company
or any of its subsidiaries to leave the employ of the Company or
any of its subsidiaries.
(c) The Employee agrees and acknowledges that the
Confidential Information of the Company and its subsidiaries (as
hereinafter defined) is valuable, special and unique to their
business; that such business depends on such Confidential Infor-
mation; and that the Company wishes to protect such Confidential
Information by keeping it confidential for the use and benefit of
the Company. Based on the foregoing, the Employee agrees to
undertake the following obligations with respect to such Confi-
dential Information:
14
<PAGE>
(i) The Employee agrees to keep any and all Confiden-
tial Information in trust for the use and benefit of the
Company;
(ii) The Employee agrees that, except as required by
the Employee duties or authorized in writing by the Company
and its subsidiaries or required by applicable law, he will
not at any time during and for a period of five (5) years
after the termination of his employment with the Company and
its subsidiaries, disclose, directly or indirectly, any
Confidential Information of the Company or any of its sub-
sidiaries.
(iii) The Employee agrees to take all reasonable
steps necessary, or reasonably requested by the Company and
its subsidiaries, to ensure that all Confidential Informa-
tion of the Company is kept confidential for the use and
benefit of the Company and its subsidiaries; and
(iv) The Employee agrees that, upon termination of his
employment by the Company or any of its subsidiaries or at
any other time the Company may in writing so request, he
will promptly deliver to the Company all materials consti-
tuting Confidential Information (including all copies there-
of) that are in the possession of or under the control of
the Employee. The Employee further agrees that, if request-
ed by the Company to return any Confidential Information
15
<PAGE>
pursuant to this Subsection (iv), he will not make or retain
any copy or extract from such materials.
For purposes of this Section 10(c), Confidential
Information means any and all information developed by or for the
Company or any of its subsidiaries of which the Employee gained
knowledge by reason of his employment by the Company or any of
its subsidiaries prior to the date hereof or his employment under
this Agreement that is not generally known in any industry in
which the Company is or may become engaged. Confidential Infor-
mation includes, but is not limited to, any and all information
developed by or for the Company concerning plans, marketing and
sales methods, materials, processes, business forms, procedures,
devices used by the Company, its subsidiaries, suppliers and
customers with which the Company had dealt prior to the Employe-
e's termination of employment with the Company and its subsidiar-
ies, plans for development of new products, services and expan-
sion into new areas or markets, internal operations, and any
trade secrets and proprietary information of any type owned by
the Company and its subsidiaries, together with all written,
graphic and other materials relating to all or any part of the
same.
11. Covenant Not to Sue.
-------------------
Employee hereby covenants and agrees with the Company,
its successors and assigns forever to refrain from making,
16
<PAGE>
instituting, pressing or in any way aiding any claim, demand,
action or cause of action against the Company and its officers and
agents arising in connection with his employment, modification of
employment or termination thereof, including claims, demands,
actions or causes of action arising under federal and state fair
employment practice or discrimination laws, laws pertaining to
breach of employment contract or wrongful discharge and any other
federal, state or local laws relating in any way to Employee's
employment with the Company or the termination thereof. Employee
further understands and agrees that this covenant not to sue
applies to any and all forms of relief, whether monetary or
other, which Employee might seek in connection with his employ-
ment, modification of employment or termination thereof. Provid-
ed, however, that this covenant not to sue shall not prohibit
Employee from making, instituting or pressing any claim, demand,
action or cause of action to enforce the benefits payable to
Employee pursuant to Sections 7 and 9 of the Agreement upon
termination of employment with the Company or arising under the
Management Subscription Agreement dated April 30, 1986 or any
employee benefit plan maintained by the Company or any claim
under the workman's compensation laws of any state.
Employee further acknowledges that as a condition
precedent to Employee receiving any benefits under this Agree-
ment, Employee shall complete, execute and deliver to the Company
17
<PAGE>
at the time of his termination of employment a Release in the
form of Exhibit "B" hereto which releases any and all claims that
the Employee may have against the Company as of the date of
termination arising under federal, state, local or common law.
12. Successors and Assigns.
----------------------
(a) This Agreement shall be binding upon and shall
inure to the benefit of the Company, its successors and assigns.
The term "Company" as used herein shall include such successors
and assigns. The term "successors and assigns" as used herein
shall mean a corporation or other entity acquiring all or sub-
stantially all the assets and business of this Company (including
this Agreement) whether by operation of law or otherwise.
(b) Neither this Agreement nor any right or interest
hereunder shall be assignable by the Employee, his beneficiaries,
or legal representatives without the Company's prior written
consent; provided, however, that nothing in this Section 11 shall
preclude (i) the Employee from designating a beneficiary to
receive any benefit payable hereunder upon his death, or (ii) the
executors, administrators, or other legal representatives of the
Employee or his estate from assigning any rights hereunder to
distributees, legatees, beneficiaries, testamentary trustees or
other legal heirs of the Employee.
18
<PAGE>
13. Notices.
-------
Any notice required or permitted by this Agreement
shall be given by registered or certified mail, return receipt
requested, addressed to the Company at its then principal office,
or to the Employee at his address specified on page 1 of this
Agreement, or to either party hereto at such other address or
addresses as he or it may from time to time specify for such
purposes in a notice similarly given.
14. Governing Law; Litigation; Expenses.
-----------------------------------
(a) This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida without
giving effect to the conflicts of law principles thereof.
(b) The Employee and the Company hereby agree that the
courts of the State of Florida shall have exclusive jurisdiction
to hear and determine any claims or disputes pertaining to this
Agreement or to any matter arising therefrom. Each of the
Employee and the Company expressly submits and consents in
advance to such jurisdiction in any action commenced in such
courts hereby waiving personal service of the summons and com-
plaint or other process or papers issued therein, and agreeing
that service of such summons and complaint, or other process or
papers, may be made by registered or certified mail addressed to
the Company at its then principal office or to the Employee at
his address specified on page 1 of this Agreement, or to either
party hereto at such other addresses as it or he from time to
19
<PAGE>
time specify to the other party in writing for such purpose. The
exclusive choice of forum set forth in this Section 14 shall not
be deemed to preclude the enforcement of any judgment obtained in
such forum or the taking of any action under this Agreement to
enforce such judgment in any appropriate jurisdiction.
(c) All costs and expenses (including attorneys' fees)
incurred in connection with any litigation relating to a claim or
dispute pertaining to this Agreement shall be paid by the party
incurring such expenses.
(d) Nothing contained in this Section 14 shall be
deemed to limit the Company's obligation to indemnify the Employ-
ee to the fullest extent permitted by applicable law in respect
of any actions, claims or proceedings which are based upon acts
or omissions of the Employee related to the performance of his
duties hereunder to the extent he would have otherwise been
entitled to indemnification under the by-laws or charter of the
Company or any of its subsidiaries or to the extent to which
indemnification is to be paid to officers and directors as a
matter of law.
15. Entire Agreement.
----------------
This instrument contains the entire agreement of the
parties relating to the subject matter hereof, and there are no
restrictions, agreements, promises, covenants, undertakings,
representations or warranties with respect to the subject matter
20
<PAGE>
hereof other than those expressly set forth herein and in the
following instruments and agreements to which the Company and the
Employee are parties: the Recourse Note, the Non-Recourse Note,
the Convertible Debentures, the Compensation Letter, the Manage-
ment Subscription Agreement, the Registration Rights Agreement,
the Stockholders' Agreement and the Pledge Agreement (such
instruments and agreements to have the same defined meanings as
such instruments and agreements are defined in the Management
Subscription Agreement). No modification of this Agreement shall
be valid unless in writing and signed by the parties hereto. The
waiver of a breach of any term or condition of this Agreement
shall not be deemed to constitute a waiver of any subsequent
breach of the same or any other term or condition of this Agree-
ment.
16. Severability.
------------
If any term or provision of this Agreement or the
application thereof to any person, property or circumstance shall
to any extent be invalid or unenforceable, the remainder of this
Agreement, or the application of such term or provision to
persons, property or circumstances other than those as to which
it is invalid or unenforceable shall not be affected thereby, and
each term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
21
<PAGE>
17. Injunctive Relief.
-----------------
(a) The Employee acknowledges and agrees that the
covenants and obligations contained in Sections 10(a), 10(b) and
10(c) of this Agreement relate to special, unique and extraordi-
nary matters and that a violation of any of the terms of such
Sections will cause the Company irreparable injury for which
adequate remedies at law are not available. Therefore, the
Employee agrees that the Company shall be entitled to an injunc-
tion, restraining order, or other equitable relief from any court
of competent jurisdiction, restraining the Employee from commit-
ting any violation of the covenants and obligations set forth in
Sections 10(a), 10(b) and 10(c) hereof.
(b) The Company's rights and remedies under this
Section 17 are cumulative and are in addition to any other rights
and remedies the Company may have at law or in equity. In
connection with the foregoing provisions of this Section 17, the
Employee represents that his economic means and circumstances are
such that such provisions will not prevent him from providing for
himself and his family on a basis satisfactory to him.
18. Withholding Taxes.
-----------------
The Company may deduct from any payments to be made
hereunder any federal, state or local withholding or other taxes
which the Company determines it is required to deduct under
applicable law.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly
executed and delivered this Agreement as of the day, month and
year first written above.
JACK ECKERD CORPORATION
By: /s/ Stewart Turley
___________________________
Stewart Turley, President
EMPLOYEE
/s/ Robert L. Myers
______________________________
Robert L. Myers
23
EXHIBIT 23.1
The Board of Directors
Eckerd Corporation and Subsidiaries:
Re: Registration Statement on Form S-3 (No. 33-50223)
Registration Statement on Form S-8 (No. 33-49977)
Registration Statement on Form S-3 (No. 33-10721)
Registration Statement on Form S-8 (No. 33-50755)
We consent to the incorporation by reference in the above
referenced registration statements of Eckerd Corporation and
subsidiaries of our report dated March 18, 1994, relating to the
consolidated balance sheets of Eckerd Corporation and
subsidiaries as of January 29, 1994 and January 30, 1993, and the
related consolidated statements of operations, stockholders'
equity (deficit), and cash flows and related schedules for each
of the years in the three-year period ended January 29, 1994,
which report appears in the January 29, 1994 annual report on
Form 10-K of Eckerd Corporation and subsidiaries.
KPMG Peat Marwick
Tampa, Florida
March 31, 1994
