<PAGE>
ECKERD CORPORATION
8333 Bryan Dairy Road
Largo, Florida 34647
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
To Be Held May 17, 1994
To the Stockholders of Eckerd Corporation:
The annual meeting of the stockholders of Eckerd Corporation
will be held at the corporate headquarters of the Company, 8333
Bryan Dairy Road, Largo, Florida 34647 on May 17, 1994 at 10:00
a.m., Eastern Daylight Savings Time, for the following purposes:
1. To elect three (3) directors each for a term of three
years as set forth in the accompanying Proxy Statement;
2. To ratify the selection by the Company's Board of
Directors of the firm of KPMG Peat Marwick as independent
auditors of the Company for the fiscal year ending
January 28, 1995; and
3. To transact such other business as may properly come
before the meeting or any adjournments or postponements
thereof.
Holders of shares of Common Stock of record at the close of
business on April 1, 1994 will be entitled to vote at the
meeting. A list of such holders shall be available at the
headquarters of the Company for examination by any stockholder
for a period of at least ten days before the meeting.
By Order of the Board of Directors
SIGNATURE
James M. Santo, Secretary
IMPORTANT
All stockholders are cordially invited to attend the meeting.
Whether or not you plan to attend in person, you are urged to
date and sign the enclosed Proxy and return it promptly in the
envelope provided. This will assure your representation and a
quorum for the transaction of business at the meeting.
If you do attend the meeting in person, the Proxy will not be
used if you so request.
<PAGE>
ECKERD CORPORATION
8333 Bryan Dairy Road
Largo, Florida 34647
PROXY STATEMENT - MEETING, May 17, 1994
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of Eckerd Corporation (the
"Company" or "Eckerd") of proxies in the accompanying form to be
voted at the Annual Meeting of the Company's stockholders to be
held on May 17, 1994. Shares represented by each proxy properly
executed and returned will be voted unless revoked. A stockholder
may revoke a proxy at any time before it is exercised by filing
with the Secretary of the Company a written revocation or a duly
executed proxy bearing a later date or by voting in person at the
Annual Meeting. Properly executed proxies will be voted as
specified thereon, and in the absence of such specification will
be voted for the three nominees for director in Class I and for
approval of KPMG Peat Marwick as the Company's independent
auditors. This Proxy Statement and the accompanying form of
proxy, together with the Company's annual report to stockholders,
are being mailed to stockholders on or about April 18, 1994.
A majority of the outstanding shares of Common Stock will
constitute a quorum at the Annual Meeting. Directors shall be
elected by a plurality of the votes cast in the election of directors.
Under applicable Delaware law, broker non-votes, if any, will have no
effect on the outcome of the vote. Abstentions and broker
non-votes are counted as present for purposes of determining the
presence or absence of a quorum for the transaction of business.
Abstentions are counted in the tabulations of the votes cast on
proposals presented to the stockholders, whereas broker non-votes
are not counted as present for purposes of determining whether a
proposal has been approved.
VOTING SECURITIES OF THE COMPANY
As of the close of business on April 1, 1994, the record date
for determining the stockholders entitled to vote at the Annual
Meeting, there were issued and outstanding a total of 31,037,880
8shares of common stock, par value $.01 per share (the "Common
Stock"), each share being entitled to one vote on each matter
presented to the meeting. On March 31, 1994, the closing price
for the Common Stock on the New York Stock Exchange was $21.875
per share.
NOMINATION AND ELECTION OF DIRECTORS
The Board of Directors
The Company's By-Laws provide that the business and affairs of
the Company will be managed by, or under the supervision of, the
Board of Directors, which held six meetings during the fiscal
year. All of the directors attended at least 75% of the meetings
of the Board and of the committees of which they were members,
except Mr. Sidhu who attended 71% of such meetings.
The Company's Restated Certificate of Incorporation provides
that the Board of Directors shall consist of not less than three
nor more than fifteen directors, with the exact number of
directors to be determined from time to time by resolution
adopted by the affirmative vote of a majority of the directors
then in office. At present there are nine members who are divided
into three classes, designated Class I, Class II and Class III,
consisting of three directors each. The term of the Class I
directors will expire on the date of the 1994 Annual Meeting; the
term of the Class II directors will expire on the date of the
1995 Annual Meeting; and term of the Class III directors will
expire on the date of the 1996 Annual Meeting.
The Board has three standing committees: the Executive
Committee, the Audit Committee and the Executive Compensation and
Stock Option Committee. The Board does not have a Nominating
Committee. The entire Board considers nominations for prospective
directors.
The Executive Committee meets on call during the intervals
between Board of Directors' meetings and has authority to act on
most matters requiring Board action. The Executive Committee did
not meet during the fiscal year. Messrs. Dunn, Fitzgibbons and
Turley (Chairman) are members of the Executive Committee.
<PAGE>
The Audit Committee reviews with management and with
independent and internal auditors the annual results of
operations, accounting and reporting policies and the adequacy of
internal controls. The committee also recommends to the Board the
independent auditors to serve for the following year, approves
the type and scope of services to be performed by the auditors
and reviews the related costs. The committee met two times during
the fiscal year. Messrs. Doluisio, Dunn (Chairman) and Lehr are
members of the Audit Committee, all of whom are non-management
directors.
The Executive Compensation and Stock Option Committee
determines the compensation of the Company's officers and
administers its stock option and management incentive plans. The
committee met three times during the fiscal year. Messrs. Dunn,
Fitzgibbons and Lehr (Chairman) are members of the Executive
Compensation and Stock Option Committee, all of whom are
non-management 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.
In 1986, Jack Eckerd Corporation, a Florida corporation ("Old
Eckerd"), was merged into Eckerd Holdings, Inc., a Delaware
corporation, which changed its name to Jack Eckerd Corporation.
In August 1993, Jack Eckerd Corporation changed its name to the
Eckerd Corporation.
NOMINEES FOR ELECTION OF DIRECTORS IN CLASS I
WITH TERMS EXPIRING IN 1997
The persons named in the Proxy will vote for the election of
each of the nominees named below as directors in Class I for a
term of three years until the Annual Meeting in 1997 and until
their successors are elected and qualified. The shares
represented by the enclosed proxy will be voted "for" the
election of the three nominees unless otherwise directed. All
elections for directors shall be decided by a plurality of the
votes of the shares of Common Stock voting in person or by proxy,
and entitled to vote on the election of directors at the Annual
Meeting. The Company anticipates that all nominees will, if
elected, be able to serve. If, for any reason, any nominee should
become unavailable for election, which management does not
anticipate, discretionary authority may be exercised to vote for
a substitute nominee.
John W. Boyle . . . Age 65. 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. Prior to joining Old Eckerd, Mr. Boyle
served as Vice Chairman of the Board (1978-1980) and, thereafter,
as Chairman of the Board (1980-1983) of May Department Store Co.,
St. Louis, Missouri. He has been a director of the Company since
1986, and was a director of Old Eckerd between 1983 and 1986.
Dr. James T. Doluisio . . . Age 58. 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. He has been a director of the Company
since 1986.
Rupinder S. Sidhu . . . Age 37. Mr. Sidhu has been a director
of Merrill Lynch Capital Partners, Inc. ("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 Merrill Lynch & Co. ("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. He has been a
director of the Company since 1988.
The Board of Directors recommends that stockholders vote "FOR"
all three nominees.
DIRECTORS IN CLASS II WITH TERMS EXPIRING IN 1995
The following directors are in Class II and their terms expire
on the date of the Annual Meeting in 1995 and until their
successors are elected and qualified.
Donald F. Dunn . . . Age 68. 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. He has been a director
of the Company since 1986.
<PAGE>
Alexis P. Michas . . . Age 36. 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. He has been a director of the
Company since 1990.
Francis A. Newman . . . Age 45. 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.
DIRECTORS IN CLASS III WITH TERMS EXPIRING IN 1996
The following directors are in Class III and their terms
expire on the date of the Annual Meeting in 1996 and until their
successors are elected and qualified.
Albert J. Fitzgibbons, III . . . Age 48. 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 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, AmeriFoods Companies, Inc., U.S. Foodservice, Inc.
and United Artists Theatre Circuit, Inc. He has been a director
of the Company since 1986.
Lewis W. Lehr . . . Age 73. 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. He has been a director of the
Company since 1986.
Stewart Turley . . . Age 59. 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 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 in 1975. He
is also a director of Barnett Banks, Inc., Sprint Corporation and
Springs Industries, Inc. He has been a director of the Company
since 1986, and was a director of Old Eckerd between 1971
and 1986.
EXECUTIVE OFFICERS
The name, age and office or principal occupation of the
executive officers of the Company (not including executive
officers who are also directors) 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> <S>
Harry W. Lambert 60 Senior Vice President and President of
Eckerd Drug Company
Edward W. Kelly 48 Senior Vice President/Merchandising
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 41 Vice President/Treasurer
</TABLE>
<PAGE>
Mr. Lambert has served as Senior Vice President of the Company
and President of Eckerd Drug Company, formerly Old Eckerd's
principal subsidiary and now the Company's principal division, ("Eckerd
Drug Company"), for more than the past five years. He retired from both
positions effective September 30, 1993. See "Separation Agreements."
Mr. Kelly was appointed Senior Vice President/Merchandising in
February 1993. Prior thereto he served as Vice President of
Merchandising of Eckerd Drug Company, for more than the past five years.
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.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN PERSONS
The following table sets forth information regarding the stock
ownership as of March 26, 1994 of all persons known to the
Company to be the beneficial owner of more than five percent of
the Common Stock, the directors (which includes nominees) of the
Company, the named executive officers and all directors and
executive officers as a group:
<TABLE>
<CAPTION>
Number of
Name (1) Shares (2)(3) Percentage
<S> <C> <C>
Merrill Lynch Investors (4) 14,697,104 46.45
The Equitable Life Assurance
Society of the United States (5) 1,654,526 5.23
Directors (who are not named executive officers)
Dr. James Doluisio (6) 6,437 *
Donald F. Dunn (7) 13,217 *
Albert J. Fitzgibbons, III (8)(9) 4,717 *
Lewis W. Lehr (10) 9,017 *
Alexis P. Michas (8)(11) 4,675 *
Rupinder S. Sidhu (8)(12) 4,717 *
Named Executive Officers
Stewart Turley (13) 567,623 1.79
John W. Boyle (14) 144,505 *
Francis A. Newman 5,400 *
Harry W. Lambert (15) 271,894 *
Richard W. Roberson (16) 119,999 *
Robert L. Myers (17) 66,633 *
All directors and executive officers as a group
(18 individuals) (18)(19) 1,651,781 5.19
_____________________________
* Less than one percent
<FN>
<F1>(1) Table does not include J.P. Morgan Capital Corporation ("MCC"),
which beneficially owns 1,036,400 shares of Common Stock and
605,022 shares of Non-Voting Common Stock. MCC may convert
shares of Non-Voting Common Stock into shares of Common Stock to
the extent that it would not own more than 4.9% of the voting
securities of the Company. The address for MCC is 60 Wall Street,
New York, New York 10260.
<F2>(2) Prior to the consummation of the initial public offering of
the Common Stock in August 1993 (the "IPO"), certain members of
management 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 effected in connection with the IPO (See
"Compensation Committee Interlocks and Insider Participation").
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 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").
<PAGE>
<FN>
<F3>(3) Does not include 1,409,522 shares of Common Stock beneficially
owned by the Company Employees' Profit Sharing Plan (the "Plan")
(4.45% of the Common Stock). The address for the plan is P.O. Box
4689, Clearwater, Florida 34618. NationsBank of Georgia, N.A. is
the trustee of the Plan. The Company has irrevocably committed to
deposit to the Plan 192,000 shares of Common Stock over fiscal
1994, 1995 and 1996.
<F4>(4) Shares of Common Stock 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 each of
the aforementioned record holders is c/o Merrill Lynch & Co.,
Inc., Merrill Lynch World Headquarters, North Tower, l8th Floor,
New York, New York 10281-1201. The foregoing are collectively
referred to herein as the "Merrill Lynch Investors".
<F5>(5) 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.
<F6>(6) 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.
<F7>(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.
<F8>(8) 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 5th
Avenue, 48th Floor, New York, New York 10153.
<F9>(9) 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.
<F10>(10) 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.
<F11>(11) 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.
<F12>(12) 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.
<F13>(13) 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.
<F14>(14) 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 ownership of such shares.
<F15>(15) 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.
<F16>(16) 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.
<F17>(17) 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.
<F18>(18) 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) Mr. Whiddon who resigned his employment with the
Company in March 1994.
<F19>(19) 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.
</TABLE>
<PAGE>
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 (collectively,
the "named executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
Awards (9) Payouts
Other Number of Long-Term All
Annual Securities Incentive Other
Name and Principal Compensation Underlying Plan Compensation
Position (1) Year Salary Bonus (2) Options Payouts (5)(6)
<S> <C> <C> <C> <C> <C> <C> <C>
Stewart Turley, 1993 $601,467 $201,419 $ - 25,000 $138,750 $ -
Chairman of the 1992 591,351 135,906 324,696(3) - 133,200 469,097
Board and CEO 1991 556,244 306,388 - - 87,450 -
Francis A. Newman, 1993 $285,601 $250,00) $ - 215,000 $ - $ -
President and Chief
Operating Officer (4)
Harry W. Lambert, 1993 $361,467 $120,851 $ - - $ 83,750 $ -
Senior Vice 1992 356,351 81,774 120,577 - 80,400 209,828
President 1991 336,244 184,937 - - 52,800 -
President - Eckerd
Drug Co.(7)
John W. Boyle, 1993 $319,467 $106,752 $ - 20,000 $ 72,500 $ -
Vice Chairman 1992 311,351 71,408 168,935 - 69,600 297,251
of the Board 1991 291,244 160,095 - - 45,540 -
Richard W. Roberson, 1993 $187,297 $ 60,414 $ - 12,000 $ 42,250 $ -
Senior Vice 1992 181,558 51,950 67,089 - 40,560 117,635
President, 1991 170,244 62,926 - - 26,400 -
President - Eckerd
Vision Group,
Chairman of the
Board and CEO
Insta-Care (8)
Robert L. Myers, 1993 $142,197 $ 92,231 $ - 12,000 $ 31,875 $ -
Senior Vice 1992 136,108 33,551 40,797 - 30,600 69,439
President - 1991 128,744 68,823 - - 19,800 -
Pharmacy
_____________________________
<FN>
<F1>(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."
<F2>(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 note (6)) that are reflected under the
heading "All Other Compensation," and (ii) with respect to Mr.
Turley, certain perquisites. See Note (3).
<F3>(3) Included in this amount are an automobile allowance of $27,812
and payments for long-term disability insurance of $18,480.
<F4>(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.
<F5>(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
</TABLE>
<PAGE>
[FN]
<F5>(continued)
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 are as follows: Mr. Turley, $16,622, Mr.
Lambert, $9,870, Mr.Boyle, $8,533, Mr. Roberson, $3,106 and Mr.
Myers, $3,122.
<F6>(6) The balances of the amounts shown in 1992 consist of the
following amounts paid equaling the principal amounts due on
certain notes ("Management Notes") of the named executive
officers used to purchase certain convertible debentures (the
"Convertible Debentures") of the Company 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 the Management Notes. See "Compensation Committee Interlocks
and Insider Participation."
<F7>(7) Mr. Lambert retired from his position 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 were included
in his 1993 salary totaled $120,502. See "Separation Agreements."
<F8>(8) Mr. Roberson resigned from his employment with the Company
effective March 31, 1994. See "Separation Agreements."
<F9>(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
Number % of Total
of Options/ Potential Realizable
Securities SARs Value at Assumed Annual
Underlying Granted to Exercise Market Rates of Stock Price
Options/ Employees or Base Price on Appreciation for Option
SARs in Fiscal Price per Date of Expiration Term
Name Granted Year(1) Share Grant 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 $ 57,810
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 0 105,564 267,749
Robert L. Myers 12,000 1.4 14.00 14.00 08/12/03 0 105,654 267,749
_____________________________
<FN>
<F1>(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% in each of fiscal years 1994,
1995, 1996 and 1997.
<F2>(2) The market price on the date of grant used herein was the
initial public offering price.
</TABLE>
<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>
Number of Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End FY-End
Name (Exercisable/Unexercisable) (Exercisable/Unexercisable)
<S> <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
_____________________________
<FN>
<F1>(1) None of the named executive officers exercised any options
during the 1993 fiscal year.
</TABLE>
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
Period Until Estimated Future Payouts Under
Maturation or Non Stock Price-Based Plans
Name 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
____________________________
<FN>
<F1>(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.
</TABLE>
<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:
<TABLE>
<CAPTION>
PENSION PLAN TABLE
Final Average Credited Years of Service (1)(2)
Compensation 15 Years 20 Years 25 Years 30 Years 35 Years
<C> <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
450,000 106,640 142,200 177,750 177,750 177,750
550,000 130,350 173,800 217,250 217,250 217,250
650,000 154,050 205,400 256,750 256,750 256,750
750,000 177,750 237,000 296,250 296,250 296,250
850,000 201,450 268,600 335,750 335,750 335,750
950,000 225,150 300,200 375,250 375,250 75,250
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
_________________________
<FN>
<F1>(1) 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.
<F2>(2) Mr. Newman is not eligible to participate in this plan because
he has not met the minimum length of service requirements.
</TABLE>
<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 Salary(1) Annual Benefit Payable(2)
<C> <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
_____________________________
<FN>
<F1>(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 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.
<F2>(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.
</TABLE>
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
provides similar terms, was terminated effective September 30,
1993 pursuant to a consulting agreement. See "Separation
Agreements."
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's
employment agreement. See "Separation Agreements."
<PAGE>
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
"Certain 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.
Compensation Committee Interlocks and Insider Participation
The Company's Executive Compensation and Stock Option
Committee consists 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 11/2% 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
<PAGE>
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 for 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.
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.
Merrill Lynch Capital Partners formed EDS Holdings, Inc.
("EDS") and its wholly owned subsidiary, Eckerd Holdings II,
Inc. ("EH II") in 1990 to acquire certain additional drug stores
from Revco to be operated by Eckerd. Eckerd operated the stores
as Eckerd Drug stores pursuant to a Management Agreement dated as
of July 13, 1990 (the "EH II Management Agreement"). Pursuant to
the EH II Management Agreement, EH II was required to pay Eckerd
an annual management fee equal to 15% of the first $50.0 million
of EH II's gross revenues and 3% of EH II's revenues in excess
thereof. The EH II Management Agreement, however, permitted EH II
to defer payment of the management fee. 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. EH II
obtained the funds necessary for such payments from cash
generated by its operations and from borrowings of approximately
$31.6 million under a new revolving credit and term 2loan
agreement dated as of June 7, 1993. As of July 29, 1993,
immediately prior to the consummation of the IPO on August 12,
1993, the Company and the stockholders of EDS (which included
certain of the Merrill Lynch Investors and certain members of
management) amended the Exchange Agreement dated as of July 23,
1990 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 a 2 for 3 reverse stock split
effected in connection with the IPO). 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. Immediately thereafter, EDS was merged
into Eckerd with EH II, containing 94 drug stores (representing
the remaining stores acquired from Revco after others had been
liquidated, sold or closed in the interim), becoming a wholly
owned subsidiary of Eckerd, and the EH II Management Agreement
was terminated.
Certain members of management (the "Management Group")
purchased, at the effective time of the acquisition of Old
Eckerd, 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.
On August 12, 1993, the Company completed the IPO in which it
issued and sold 5,175,000 shares of Common stock for $14.00 per
share. Merrill Lynch 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.
On November 2, 1993, the Company consummated the sale of
$200.0 million aggregate principal amount of 91/4% Senior
Subordinated Notes due 2004 (the "Notes"). 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.
On March 31, 1994, the Company filed a registration statement
for the public sale of approximately 5,750,000 shares (including
750,000 shares that the underwriters have the option to purchase
to cover over-allotments, if any) of Common Stock (the
"Offering") to be sold by certain shareholders (the "Selling
Shareholders"). After consummation of the Offering, the Merrill
Lynch Investors will own approximately 37.51% of the outstanding
Common Stock (approximately 36.17% if the over-allotment option
is exercised in full). As a result of such stock ownership, if
the Merrill Lynch Investors and certain members of management
were to vote together, they would continue to be in a position to
elect the Board of Directors of the Company, to approve or
disapprove of other matters requiring stockholder approval and to
effectively control the affairs and policies of the Company.
Three of the nine members of the Board of Directors of the
Company are employees of Merrill Lynch Capital Partners and serve
as representatives of the Merrill Lynch Investors. The Selling
Stockholders have agreed to pay Merrill Lynch an underwriting
<PAGE>
commission in connection with the Offering, the Company has
agreed to pay the expenses of the Offering and the Company and
the Selling Stockholders have agreed to indemnify Merrill Lynch,
as one of the underwriters, against certain civil liabilities
including liabilities under the Securities Act of 1933, as
amended.
REPORT OF THE EXECUTIVE COMPENSATION AND STOCK OPTION
COMMITTEE ON EXECUTIVE COMPENSATION
The Executive Compensation and Stock Option Committee of the
Board of Directors (the "Committee"), composed of three
non-management directors of the Board of Directors of the
Company, reviews the performance of the Company's executive
personnel and develops and makes recommendations to the Board
with respect to executive compensation policies. The Committee
reviews, approves and submits to the Board for its acceptance the
financial targets for the executive compensation program, long
term incentive plans, incentive objectives for management for the
upcoming fiscal year and salary increases for
members of management.
The Committee has access to independent compensation data and
is authorized, if determined appropriate in any particular case,
to engage outside compensation consultants.
The objectives of the Committee are to support the achievement
of desired company performance, to provide compensation and
benefits that will attract and retain superior talent and reward
performance, and to make a portion of compensation relate
specifically to the outcome of corporate performance. It is
anticipated that in 1994 all compensation to executives will be
fully deductible under Section 162(m) of the Internal Revenue
Code. The Committee will undertake a complete review of all
aspects of the executive compensation program during the year,
including the prospective impact of the referenced Code section.
The executive compensation program is generally comprised of
base salary, performance bonuses in the form of the Key
Management Bonus Plan, and long term incentives in the form of
stock options and the Company's Executive Three Year Bonus Plan.
The compensation program also includes various benefits,
including a supplemental executive retirement program, health
insurance plans and programs, and pension, profit sharing and
retirement plans in which substantially all of the Company's
employees participate. The following sections of this report
contain information concerning each component of the Company's
executive compensation program.
Base Salary
In determining the base salary levels for the Company's
executive officers, the Committee reviews independent
compensation data which provide compensation information with
respect to companies in the same or similar business, companies
of similar size and companies with comparable locations. Based on
a review of this information, the Committee attempts to set its
base salaries at competitive levels. Because of its desire to
maintain flexibility, the committee does not necessarily set its
base salaries at a specific level relative to other companies. In
each instance, base salary takes into account the individual's
level of experience and the individual's performance on behalf of
the company.
Key Management Bonus Plan
Executives of the Company (including the named executive
officers) as well as certain other employees participate in the
Key Management Bonus Plan ("KMBP"). KMBP is a performance-based
plan which takes into account the Company's overall financial
performance for the previous fiscal year. Generally the plan
considers the following three factors relating to Company
performance for the previous fiscal year: the Company's earnings
before interest and taxes; return on investment; and sales. In
addition to these three factors, bonuses for certain executives
(other than the named executive officers, except for Mr. Roberson
and Mr. Myers) and for certain key employees are based upon
financial indicators related to such officer's or employee's
geographic business area or business group.
Executive Three Year Bonus Plan
Bonus awards made under this plan are made annually 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 at the beginning of a three year
performance period. The maximum amount of the bonus award is
fifty percent of the participating executives' annual base salary
at the beginning of a performance period. The Board of Directors,
upon recommendation of the Committee, determines which executives
may participate in this Plan. All named executive officers
participate in this Plan.
<PAGE>
1993 Stock Option and Incentive Plan
The Committee believes that employee equity ownership provides
significant additional motivation to executive officers to
maximize values for the Company's stockholders and therefore
periodically recommends to the Board of Directors grants of stock
options to the Company's employees, including its executive
officers. The Committee believes that the grant of stock options
provides a long term incentive to such persons to contribute to
the growth of the Company and establishes a direct link between
compensation and stockholder return, measured by the same index
used by stockholders to measure company performance.
The plan provides that 1,666,667 shares of common stock will
be reserved for future issuance under the plan. Awards are
available under the plan in the form of stock options, stock
appreciation rights, limited stock appreciation rights, and
restricted stock. The purpose of the plan is to advance the
interest of the Company and its shareholders by providing
eligible employees with an opportunity to acquire a proprietary
interest in the Company, to increase their efforts on behalf of
the Company, to promote the successful conduct of its business,
and to provide them with an incentive to remain in the Company's
employment. The Committee has the exclusive discretion to select
the employees and the time or times at which awards will be
granted, to determine the type, size and terms of each award, to
modify the terms of any award and to determine when awards will
be granted and paid.
In general the Committee makes its awards based upon
subjective factors such as relative position and responsibilities
of each recipient, and historical and expected contributions of
each recipient to the Company. In determining the amount of an
award the Committee also considers the amount and terms of
options and restricted stock already held by recipients.
Chief Executive Officer Compensation and Company Performance
The Chief Executive Officer's compensation for 1993 was earned
pursuant to the executive compensation plans described in the
preceding sections of this report. He participated in both the
Key Management Bonus Plan and the Executive Three Year Bonus
Plan, and the performance factors and criteria on which his 1993
compensation was based are thus the same as those applicable to
each of those plans, as summarized in the preceding sections.
Because the KMBP and the Executive Three Year Bonus Plan are
based upon the Company's earnings before interest and taxes,
annual return on investment, and sales (KMBP only), a significant
part of the Chief Executive Officer's compensation was tied
directly to the Company's performance in these areas. The Chief
Executive Officer's award under the 1993 Stock Option and
Incentive Plan was based upon the Committee's consideration of
the subjective factors of the Chief Executive Officer's relative
position and responsibilities, and his historical and expected
contributions to the Company.
Lewis W. Lehr, Chairman
Donald F. Dunn
Albert J. Fitzgibbons, III
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph represents the return that would have been
realized (assuming reinvestment of dividends) by an investor who
invested $100 on August 6, 1993 (the first date on which the
Company's Common Shares were traded on the New York Stock
Exchange) in the Company's Common Stock, and who invested $100 on
July 31, 1993 in each of (i) the Standard and Poors Retail Stores-
Composite Index, and (ii) the Standard & Poors 500 index.
[DESCRIPTION]
GRAPHIC #1: Line Graph Chart: COMPARISON OF 6 MONTH CUMULATIVE TOTAL RETURN*
AMONG ECKERD CORPORATION, THE S & P 500 INDEX AND THE
S & P RETAIL STORES-COMPOSITE INDEX
The following is a description of the above graph:
<TABLE>
<CAPTION>
ECK
CUMULATIVE TOTAL RETURN
8/93 1/94 3841CECK
<S> <C> <C> <C> <C>
ECKERD CORP DEL ECK 100 133 04/08/94
S & P 500 I500 100 109 37411500
S & P STRS-COMPOSITE IRSC 100 104 37411RSC
<FN>
*$100 INVESTED ON 08/06/93 IN STOCK OR
ON 07/31/93 IN INDEXES
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JANUARY 29.
</TABLE>
CERTAIN TRANSACTIONS
The Company sold the business and assets of its Vision Group
effective January 30, 1994 to an investor group which included
Richard W. Roberson, President of Vision Group and Senior Vice
President of the Company for an amount in cash and notes
approximately equal to the book value of the assets. Mr. Roberson
is not a member of the Board of Directors and took no part in the
Board's decision to approve the sale to the investment group.
See also "Compensation Committee Interlocks and Insider
Participation."
<PAGE>
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Upon the approval of a majority of the stockholders the Board
of Directors proposes to adopt a resolution appointing KPMG Peat
Marwick as auditors of the Company for the ensuing year. KPMG
Peat Marwick, and its predecessor, Peat, Marwick, Mitchell & Co.,
has audited the Company's books for the past 34 years.
Representatives of KPMG Peat Marwick will be present at the
meeting with an opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS FOR 1995 ANNUAL MEETING
Stockholders of the Company who wish to make a proposal to be
included in the Company's Proxy Statement and form of proxy for
the Company's 1995 Annual Meeting of Stockholders must cause such
proposal to be received by the Company at its principal office no
later than December 20, 1994. All proposals must be a proper
subject for action at the 1995 Annual Meeting, and should be sent
to the attention of the Secretary, Eckerd Corporation, 8333 Bryan
Dairy Road, Largo, Florida 34647.
EXPENSES OF PROXY SOLICITATION
Arrangements will be made with brokerage houses and other
custodians, nominees and fiduciaries to send proxies and proxy
material to their principals and the Company will reimburse them
for their expenses in so doing. Certain officers and other
regular employees of the Company may also request the return of
proxies by telephone, mail, telegram or in person. In addition,
MacKenzie Partners, Inc., New York, New York has been retained to
aid in the solicitation of proxies for an estimated fee of
$5,000, to be paid by the Company.
By Order of the Board of Directors
SIGNATURE
James M. Santo, Secretary
Eckerd Corporation
Date: April 18, 1994
