<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
ECKERD CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
ECKERD CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[ECKERD LOGO]
April 23, 1996
Dear Fellow Stockholder:
You are cordially invited to attend the 1996 Annual Meeting of Eckerd
Corporation stockholders to be held at the corporate headquarters, 8333 Bryan
Dairy Road, Largo, Florida on Thursday, May 23, 1996 at 10:00 a.m.
At the meeting, you are being asked to vote for three directors and to
approve the appointment of KPMG Peat Marwick LLP as independent auditors of the
Company for fiscal year 1996. Management recommends that you vote for each of
the directors nominated by the Board of Directors and for the appointment of the
auditors.
YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the meeting, it
is important that your shares be represented and voted. Regardless of the size
of your holdings, you are encouraged to sign, date and mail the enclosed proxy.
The prompt return of your proxy will save additional solicitation expense and
will not affect your right to vote in person in the event you are able to attend
the meeting.
If you desire to attend the meeting in person, please call telephone number
(813)399-6380 to indicate your plans to attend.
On behalf of the Board of Directors and the associates of Eckerd
Corporation, let me express our appreciation for your support and interest in
the Company.
Yours very truly,
/s/ Stewart Turley
------------------------
STEWART TURLEY
Chairman
<PAGE> 3
ECKERD CORPORATION
8333 BRYAN DAIRY ROAD
LARGO, FLORIDA 34647
------------------------
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD MAY 23, 1996
------------------------
April 23, 1996
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 23, 1996 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 LLP as independent auditors of the Company for
the fiscal year ending February 1, 1997; 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
March 29, 1996 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
/s/ James M. Santo
--------------------------
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> 4
ECKERD CORPORATION
8333 BRYAN DAIRY ROAD
LARGO, FLORIDA 34647
------------------------
PROXY STATEMENT -- MEETING, MAY 23, 1996
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 (the "Annual Meeting") to be held on May 23, 1996. 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
III and for approval of KPMG Peat Marwick LLP 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 23, 1996.
A majority of the outstanding shares of common stock, par value $.01 per
share (the "Common Stock") will constitute a quorum at the Annual Meeting.
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.
Matters presented to the stockholders (other than the election of directors)
require the affirmative vote of a majority of the outstanding shares present at
the meeting and entitled to vote for approval. Directors are elected by a
plurality of votes cast.
All information in this Proxy Statement relating to the Company's Common
Stock or options to acquire the Company's Common Stock have been adjusted to
give effect to a two-for-one stock split payable in the form of a stock dividend
that the Company declared on April 1, 1996 payable on or about May 13, 1996 to
stockholders of record as of April 22, 1996.
VOTING SECURITIES OF THE COMPANY
As of the close of business on March 29, 1996, the record date for
determining the stockholders entitled to vote at the Annual Meeting, there were
issued and outstanding a total of 69,966,834 shares of Common Stock, each share
being entitled to one vote on each matter presented to the meeting.
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 nine 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.
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 ten members who are divided into three
classes, designated Class I, Class II and Class III. Classes I and III consist
of three directors each and Class II consists of four directors. The term of the
Class I directors will expire on the date of the 1997 Annual Meeting; the term
of the Class II directors will expire on the date of the 1998 Annual Meeting;
and the term of the Class III directors will expire on the date of the
1
<PAGE> 5
1996 Annual Meeting. Alexis P. Michas has advised the Company that he intends to
resign from Class II of the Company's Board of Directors immediately after the
Annual Meeting. The size of the Board will then be reduced from ten to nine
members.
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.
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 Boyle 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 $24,000 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. Pursuant to the
Company's 1995 Stock Option and Incentive Plan, each outside director
automatically receives an award of options to purchase 4,000 shares of the
Company's Common Stock on the day following each annual meeting of the Company.
Additionally, each new outside director automatically receives an award of
options to purchase 10,000 shares of Common Stock upon the initial election (or
appointment) to the Board and an award of options to purchase 4,000 shares of
Common Stock on the day following each subsequent annual meeting of
stockholders.
In August 1993, Messrs. Fitzgibbons, Sidhu and Michas, together with other
former colleagues from Merrill Lynch Capital Partners, Inc. ("Merrill Lynch
Capital Partners"), founded Stonington Partners, Inc. ("Stonington Partners").
In July 1994, Messrs. Fitzgibbons, Sidhu and Michas left the employment of
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("ML & Co."), although each
has continued as a director of Merrill Lynch Capital Partners and certain other
companies in which certain affiliates of ML & Co. have equity investments (such
other companies, the "ML & Co. Affiliates"). In this connection, each of Messrs.
Fitzgibbons, Sidhu and Michas entered into a consulting agreement with Merrill
Lynch Capital Partners which provides, among other things, for his continued
availability to serve on the Board of Directors of the Company and the
respective boards of directors of the ML & Co. Affiliates until requested to
resign by Merrill Lynch Capital Partners, and for his compensation (directly or
indirectly) by Merrill Lynch Capital Partners for serving in such director
capacities and for other consulting 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 Eckerd Corporation.
NOMINEES FOR ELECTION OF DIRECTORS IN CLASS III WITH TERMS EXPIRING IN 1999
The persons named in the Proxy will vote for the election of each of the
nominees named below as directors in Class III for a term of three years until
the Annual Meeting in 1999 and until their successors are elected and qualified.
The shares represented by the enclosed proxy will be voted "for" the election of
the
2
<PAGE> 6
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.
Albert J. Fitzgibbons, III -- Age 50. Mr. Fitzgibbons has been a director
of Merrill Lynch Capital Partners since 1988. He has been a director of
Stonington Partners since August 1993; a Partner of Stonington Partners since
November 1993; a partner of Merrill Lynch Capital Partners from 1993 to July
1994; 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. from
1978 to July 1994; and Vice President of ML & Co. from 1974 to 1988. He is also
a director of Borg-Warner Security Corporation, Borg-Warner Automotive, Inc.,
Dictaphone Corporation and United Artists Threatre Circuit, Inc. He has been a
director of the Company since 1986.
Lewis W. Lehr -- Age 75. 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 61. Mr. Turley has served as Chairman of the Board
of the Company since 1986. He served as Chief Executive Officer of the Company
from 1986 until February 1996 and 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.
The Board of Directors recommends that stockholders vote "FOR" all three
nominees.
DIRECTORS IN CLASS I WITH TERMS EXPIRING IN 1997
The following directors are in Class I and their terms expire on the date
of the Annual Meeting in 1997 and until their successors are elected and
qualified.
John W. Boyle -- Age 67. Mr. Boyle retired as Vice Chairman of the Board
and Chief Financial Officer of the Company on December 31, 1994, positions he
had held since February, 1993. He served as a consultant to the Company during
the month of January, 1995. Prior to being Vice Chairman, he was Senior Vice
President/Finance and Administration of the Company, a position he held for more
than 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 is also a
director of Pathmark Stores, Inc. and Supermarkets General Holding Corporation
and has served as Interim Chairman and Chief Executive Officer of those
companies since March 1996. 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 60. 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 39. Mr. Sidhu has been a director of Merrill
Lynch Capital Partners since 1987. He is also the President of Merion Capital
Management LLC, a private investment company. He has been a Partner of
Stonington Partners since August 1993; a partner of Merrill Lynch Capital
Partners from
3
<PAGE> 7
1993 to July 1994; a Senior Vice President of Merrill Lynch Capital Partners
from 1987 to July 1994; 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 1994; 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., First USA Paymentech, Inc. and Wherehouse Entertainment, Inc. He has been
a director of the Company since 1988.
DIRECTORS IN CLASS II WITH TERMS EXPIRING IN 1998
The following directors are in Class II and their terms expire on the date
of the Annual Meeting in 1998 and until their successors are elected and have
qualified.
Donald F. Dunn -- Age 70. Mr. Dunn is the 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 Proffitt's, Inc.
He has been a director of the Company since 1986.
Margaret H. Jordan -- Age 52. Ms. Jordan has been the President and Chief
Executive Officer of Dallas Medical Resource since February 1996. She served as
Vice President -- Health Care and Employee Services of Southern California
Edison Company from 1992 to February 1996. Prior thereto she worked for Kaiser
Foundation Health Plan, Inc. for more than the preceding five years, most
recently as Vice President and Regional Manager, Texas Region. Ms. Jordan also
serves as a director of Epitope, Inc. She has been a director of the Company
since September 1995.
Alexis P. Michas -- Age 38. Mr. Michas has been a director of Merrill
Lynch Capital Partners since 1989. He has been a Partner of Stonington Partners
since November 1993; a director of Stonington Partners since August 1993; a
partner of Merrill Lynch Capital Partners from 1993 to July 1994; a Senior Vice
President of Merrill Lynch Capital Partners from 1989 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. from 1991 to July 1994; 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 Borg-Warner Security Corporation, Borg-Warner Automotive,
Inc., Blue Bird Corporation, Dictaphone Corporation, Pathmark Stores, Inc. and
Supermarkets General Holding Corporation. He has been a director of the Company
since 1990. Mr. Michas has advised the Company that he intends to resign from
the Company's Board of Directors immediately after the Annual Meeting.
Francis A. Newman -- Age 47. Mr. Newman has been Chief Executive Officer
of the Company since February 1996. He is also President, Chief Operating
Officer and a director of the Company, positions he has held since July 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. F&M filed bankruptcy under Chapter 11 of the United States
Bankruptcy Code in December 1994. 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.
4
<PAGE> 8
SECURITY OWNERSHIP OF CERTAIN PERSONS
The following table sets forth information regarding the stock ownership as
of March 29, 1996 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 SHARES(1) PERCENTAGE
-------------------------------------------------------------- --------- ----------
<S> <C> <C>
Merrill Lynch Investors(2).................................... 4,041,268 5.78
Loomis, Sayles & Company, L.P.(3)............................. 5,296,418 7.57
Directors (who are not named executive officers)
John W. Boyle(4).............................................. 288,534 *
Dr. James Doluisio(5)......................................... 13,874 *
Donald F. Dunn................................................ 26,434 *
Albert J. Fitzgibbons, III(6)................................. 9,434 *
Margaret H. Jordan............................................ -0- *
Lewis W. Lehr(7).............................................. 18,034 *
Alexis P. Michas(6)........................................... 9,350 *
Rupinder S. Sidhu(6).......................................... 107,060 *
Named Executive Officers
Stewart Turley(8)............................................. 950,076 1.36
Francis A. Newman(9).......................................... 206,700 *
James M. Santo(10)............................................ 102,106 *
Samuel G. Wright(11).......................................... 125,508 *
Kenneth L. Flynn.............................................. -0- *
All directors and executive officers as a group
(19 individuals)(12)........................................ 1,972,336 2.80
</TABLE>
- ---------------
* Less than one percent
(1) Does not include 3,075,044 shares of Common Stock beneficially owned by the
Company Employees' Profit Sharing Plan (the "Plan") (4.40% of the Common
Stock). The address for the Plan is P.O. Box 4689, Clearwater, Florida
34618. NationsBank, N.A. (South) is the trustee of the Plan. The Company
has irrevocably committed to deposit 128,000 shares of Common Stock to the
Plan during fiscal 1996.
(2) Shares of Common Stock are owned of record as follows: 201,016 shares by
Merrill Lynch Capital Corporation, 2,935,828 shares by Merrill Lynch
Capital Appreciation Partnership No. II, L.P., 74,268 shares by ML Offshore
LBO Partnership No. II, 54,530 shares by ML Employees LBO Partnership No.
I, L.P., 18,662 shares by Merrill Lynch KECALP L.P. 1986, 340,266 shares by
Merrill Lynch Capital Appreciation Partnership No. B-IX, L.P., 199,310
shares by ML Offshore LBO Partnership No. B-IX, 5,068 shares by MLCP
Associates L.P. No. II., 28,244 shares by Merrill Lynch KECALP L.P. 1989,
174,262 shares by ML IBK Positions, Inc. and 9,814 shares by Merchant
Banking L.P. No. IV. The address for each of the aforementioned record
holders is c/o Merrill Lynch & Co., Inc., Merrill Lynch World Headquarters,
North Tower, New York, New York 10281. The foregoing are collectively
referred to herein as the "Merrill Lynch Investors". As previously
disclosed in connection with the Company's December 1995 secondary stock
offering, certain of the Merrill Lynch Investors that are limited
partnerships distributed approximately 921,212 shares of Common Stock owned
by them to certain of their partners in April 1996. As a result of such
distribution, the Merrill Lynch Investors owned 3,120,056 shares of Common
Stock, representing approximately 4.45% of the Company's outstanding Common
Stock.
(3) Loomis, Sayles & Company, L.P. has sole voting power over 1,687,440 shares
of Common Stock, shared voting power over 800 shares of common Stock and
shared dispositive power over 5,296,418 shares of
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<PAGE> 9
Common Stock. The address for Loomis, Sayles & Company, L.P. is One
Financial Center, Boston, Massachusetts 02111. The foregoing information is
based on a Form 13G dated February 12, 1996.
(4) Total does not reflect 244,786 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 41,600
shares of Common Stock which are exercisable as of March 29, 1996 or within
60 days thereafter.
(5) Total includes options covering 6,668 shares of Common Stock which are
exercisable as of March 29, 1996 or within 60 days thereafter.
(6) Messrs. Fitzgibbons, Michas and Sidhu are directors of the Company and
Merrill Lynch Capital Partners. Until July 1994 they were officers of
Merrill Lynch Capital Partners and employees of ML & Co. 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.
(7) Total includes options covering 6,668 shares of Common Stock which are
exercisable as of March 29, 1996 or within 60 days thereafter.
(8) Total does not reflect the 91,990 shares of Common Stock transferred by Mr.
Turley to certain family members. Mr. Turley disclaims beneficial ownership
of such shares. Total includes 32,000 shares transferred by Mr. Turley to
The Stewart Turley Foundation, Inc. Mr. Turley disclaims beneficial
ownership of such shares. Total includes options covering 88,842 shares of
Common Stock which are exercisable as of March 29, 1996 or within 60 days
thereafter.
(9) Total includes options covering 200,000 shares of Common Stock which are
exercisable as of March 29, 1996 or within 60 days thereafter.
(10) Total includes options covering 18,200 shares of Common Stock which are
exercisable as of March 29, 1996 or within 60 days thereafter.
(11) Total includes options covering 18,200 shares of Common Stock which are
exercisable as of March 29, 1996 or within 60 days thereafter.
(12) Total includes options covering 393,178 shares of Common Stock which are
exercisable as of March 29, 1996 or within 60 days thereafter.
All filings required to be filed by the Company's directors and executive
officers pursuant to Section 16(a) of the Securities Exchange Act of 1934, as
amended, for fiscal year 1995 were filed on a timely basis except that a Form 5
for Mr. Boyle for fiscal year 1995 that reflected a gift by him of 476 shares
made during fiscal year 1995 was filed two days late.
6
<PAGE> 10
EXECUTIVE COMPENSATION
The following table sets forth certain information for the 1995, 1994 and
1993 fiscal years with respect to the Chief Executive Officer and each of the
four most highly paid executive officers of the Company who were serving as
executive officers at February 3, 1996 (collectively, the "named executive
officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------
AWARDS(2)
---------- PAYOUTS
ANNUAL COMPENSATION NUMBER OF ------------
----------------------------------------- SECURITIES LONG-TERM ALL OTHER
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING INCENTIVE COMPENSATION
POSITION(1) YEAR SALARY BONUS COMPENSATION OPTIONS PLAN PAYOUTS (3)
- ----------------------- ---- -------- -------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stewart Turley,........ 1995 $651,570 $513,886 $ 63,076(4) 40,000 $258,300 $ --
Chairman of the 1994 621,574 511,428 60,542(4) -- 147,500 18,005
Board and CEO 1993 601,467 201,419 -- 50,000 138,750 11,327
Francis A. Newman,..... 1995 $533,449 $419,805 $ -- 30,000 $184,894 $ --
President and Chief 1994 516,574 424,815 -- -- 65,705 13,861
Operating Officer(5) 1993 285,601 250,000 -- 430,000 -- --
James M. Santo,........ 1995 $222,569 $156,537 $ -- 20,000 $ 73,185 $ --
Executive Vice 1994 187,602 153,160 -- -- 40,250 2,699
President -- 1993 171,796 57,069 -- 24,000 37,750 3,239
Administration and
Secretary
Samuel G. Wright,...... 1995 $231,504 $163,653 $ -- 60,000 $ 71,463 $ --
Executive Vice 1994 184,247 150,592 -- -- 40,250 2,677
President -- Chief 1993 167,797 55,726 -- 24,000 37,750 3,101
Financial Officer
Kenneth L. Flynn,...... 1995 $302,405 $213,460 $ -- 20,000 $ 43,050 $ --
Senior Vice 1994 43,259 75,000 -- 50,000 -- --
President -- Store
Operations(6)
</TABLE>
- ---------------
(1) The Company has entered into employment agreements with each of the named
executive officers that provide for severance payments upon the occurrence
of events such as death, termination or a change in control. See
"Employment Agreements."
(2) No restricted stock or stock appreciation rights were awarded or granted to
the named executive officers during the year ended February 3, 1996.
(3) Each named executive officer participates in the Eckerd Corporation Profit
Sharing Plan (the "Profit Sharing Plan") and the Eckerd Corporation
Executive Excess Plan (the "Executive Excess Plan"). Mr. Flynn began
participation in the Executive Excess Plan in January 1996. The Executive
Excess Plan replaces benefits under the Profit Sharing Plan (and the Eckerd
Corporation Pension Plan) which are reduced under provisions of the
Internal Revenue Code of 1986 (the "Code"). The amounts allocable in 1995
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 1994 and 1993
are shown in this column.
(4) Included in this amount are transportation allowances and expenses of
$29,233 in 1995 and $28,022 in 1994 and payments for long-term disability
insurance of $18,480 in each of 1995 and 1994.
(5) Under the terms of Mr. Newman's employment, which commenced on July 6, 1993,
the aggregate amount of his annual bonus and Long Term Incentive Plan
payouts were guaranteed to be not less than $250,000 in each of 1993 and
1994. Mr. Newman became the Chief Executive Officer of the Company in
February 1996.
(6) Mr. Flynn became Senior Vice President-Store Operations in December 1994.
7
<PAGE> 11
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table presents information concerning grants of stock options
during the 1995 fiscal year to each of the named executive officers. No stock
appreciation rights were granted during the 1995 fiscal year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OPTION TERM(2)
OPTIONS/SARS TO EMPLOYEES IN PRICE PER EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR(1) SHARE DATE 5% 10%
- --------------------------------- ------------ --------------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Stewart Turley................... 40,000 6.57% $ 15.75 5/24/05 $396,204 $1,004,058
Francis A. Newman................ 30,000 4.93 15.75 5/24/05 297,153 753,043
James M. Santo................... 20,000 3.29 15.75 5/24/05 198,102 502,029
Samuel G. Wright................. 40,000 6.57 12.81 2/06/05 322,308 816,793
20,000 3.29 15.75 5/24/05 198,102 502,029
Kenneth L. Flynn................. 20,000 3.29 15.75 5/24/05 198,102 502,029
</TABLE>
- ---------------
(1) Based on a total of 1,057,800 options granted to all employees. Except for
the grant of 40,000 options to Mr. Wright which occurred on February 6,
1995, all options granted to the named executive officers were granted on
May 24, 1995. Commencing three years after date of grant, the options are
exercisable to the extent of 50% with an additional 25% exercisable after
each of the next two successive years.
(2) The assumed rates of growth were selected by the Securities and Exchange
Commission for illustration purposes and are not intended to forecast the
future appreciation, if any, in the price of the Company's Common Stock. If
the named executive officers realize these values, the Company's
stockholders will realize aggregate appreciation in the price of the
Company's Common Stock. For example, the market value of 69.958 million
shares of the Company's Common Stock on May 24, 1995 based on the market
price on that date was approximately $1.102 billion. If the share price of
the Company's Common Stock increases by 5% and 10% per year for the same
number of shares, the approximate market value on May 24, 2005 would be
approximately $1.795 billion and $2.858 billion, respectively.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES(1)
The following table presents information concerning the value of
unexercised stock options at the end of the 1995 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.................................. 88,842/90,000 $1,522,308/$977,500
Francis A. Newman............................... 200,000/260,000 $3,350,000/$3,972,500
James M. Santo.................................. 18,200/44,000 $311,857/$474,000
Samuel G. Wright................................ 18,200/84,000 $311,857/$831,500
Kenneth L. Flynn................................ 0/70,000 $0/$507,500
</TABLE>
- ---------------
(1) None of the named executive officers exercised any options during the 1995
fiscal year.
8
<PAGE> 12
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR(1)
The following table presents information regarding Long-Term Incentive Plan
Awards made during the 1995 fiscal year to each of the named executive officers.
<TABLE>
<CAPTION>
PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER
OTHER PERIOD NON STOCK PRICE-BASED PLANS
UNTIL MATURATION -------------------------------
NAME OR PAYOUT THRESHOLD TARGET MAXIMUM
- -------------------------------------------------- ---------------- --------- -------- --------
<S> <C> <C> <C> <C>
Stewart Turley.................................... 1995-1997 $32,500 $279,825 $325,000
Francis A. Newman................................. 1995-1997 26,550 228,596 265,500
James M. Santo.................................... 1995-1997 11,000 94,710 110,000
Samuel G. Wright.................................. 1995-1997 11,500 99,015 115,000
Kenneth L. Flynn.................................. 1995-1997 15,000 129,150 150,000
</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 range of payment of the bonus award is
from zero to fifty percent of the participating executive's annual base
salary at the beginning of a performance period. The threshold amount is
the amount that would be paid for meeting the minimum level of performance
for which an award would be payable under the plan. 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.
The Eckerd Corporation Pension Plan
The 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, Newman, Santo and
Wright under The Eckerd Corporation Executive Excess Plan (the "Excess Plan")
which is not qualified under the Code. Mr. Flynn did not participate in the
Excess Plan until January 1996.
9
<PAGE> 13
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)
FINAL AVERAGE ----------------------------------------------------
COMPENSATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- -------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 250,000.................................. $ 59,250 $ 79,000 $ 98,750 $ 98,750 $ 98,750
350,000.................................. 82,950 110,600 138,250 138,250 138,250
450,000.................................. 106,640 142,200 177,750 177,750 177,750
550,000.................................. 130,350 173,800 217,250 217,250 217,250
650,000.................................. 154,050 205,400 256,750 256,750 256,750
750,000.................................. 177,750 237,000 296,250 296,250 296,250
850,000.................................. 201,450 268,600 335,750 335,750 335,750
950,000.................................. 225,150 300,200 375,250 375,250 375,250
1,050,000.................................. 248,850 331,800 414,750 414,750 414,750
1,150,000.................................. 272,550 363,400 454,250 454,250 454,250
1,250,000.................................. 296,250 395,000 493,750 493,750 493,750
1,350,000.................................. 319,950 426,600 533,250 533,250 533,250
1,450,000.................................. 343,650 458,200 572,750 572,750 572,750
</TABLE>
- ---------------
(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 which are
set forth under the headings "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, 29 years and $1,370,319, Mr. Newman, 2
years and $1,050,354, Mr. Santo, 19 years and $436,583, Mr. Wright, 13
years and $432,923 and Mr. Flynn, 1 year and $318,807. The final average
compensation for retirement purposes for the relevant five year period is
as follows: Mr. Turley $1,061,041, Mr. Santo, $307,929 and Mr. Wright,
$299,967. Because Mr. Newman and Mr. Flynn have not completed 5 years of
service with the Company and therefore do not yet have a vested benefit,
there are no relevant final average compensation calculations for them.
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.
10
<PAGE> 14
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)
- ----------------- -------------------------
<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 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 covered salaries for 1995 recognized
for retirement purposes for the named executive officers are as follows:
Mr. Turley, $615,200, Mr. Newman, $508,800, Mr. Santo, $261,200, Mr.
Wright, $287,300 and Mr. Flynn, $287,300. As of 1995, the years of service
recognized for retirement purposes with respect to the ESBP 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 participant's covered salary, or (b) an
amount equal to 90% of the participant's covered salary for the first year
after death plus 45% of the covered salary annually for the next nine
years.
(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
Mr. Turley entered in an employment and consulting agreement with the
Company which became effective on February 4, 1996. The agreement provides for
Mr. Turley to serve as the Company's Chairman of the Board until January 31,
1998 and then to serve as a consultant to the Company until February 3, 2001.
The agreement provides for an annual base salary of $650,000 for his services as
Chairman, an annual consulting fee of $325,000 for his services as a consultant,
and that Mr. Turley will continue to participate in the Company's Executive
Three Year Bonus Plan while serving as Chairman. The agreement provides that (i)
upon Mr. Turley's death or disability during the term of the agreement, the
Company will pay Mr. Turley or his estate a lump sum payment in the amount of
the base salary or consulting fee or both, as the case may be, that would have
been payable to him during the remainder of the term (the "Termination
Payment"), (ii) upon an involuntary termination other than for cause, the
Company will pay the Termination Payment plus, if the termination occurs while
he is serving as the Chairman of the Company, a pro rata portion of any bonus
compensation payable to him under the Executive Three Year Bonus Plan and the
Company will continue certain insurance and medical benefits for a period of 18
months, and (iii) upon the termination of Mr. Turley's agreement by the Company
or by Mr. Turley for Good Reason (as defined in the agreement) within two years
after a Change in Control (as defined in the agreement), the Company will pay
him the Termination Payment plus all accrued but unpaid bonus compensation, and
all previously granted incentive awards will become vested and, if the
termination occurs during his service as Chairman, the Company will pay him an
additional payment equal to two times his annual base salary and will continue
certain insurance and medical benefits for a period of two years.
The Company entered into an employment agreement with Mr. Newman that
became effective on February 4, 1996 that provides for an initial base salary of
$575,000. The agreement is for an initial term of one year and is thereafter
automatically renewed on a year-to-year basis, unless terminated by the Company
or Mr. Newman. 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
11
<PAGE> 15
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
provides that upon the termination of employment by the Company or by Mr. Newman
for Good Reason (as defined in the agreement) within two years after a Change in
Control (as defined in the agreement), the Company will (a) pay Mr. Newman a
lump sum severance payment in an amount equal to 2.9 times his base salary, plus
a pro rata portion of his applicable bonus compensation, (b) continue certain
insurance and medical benefits for a period of two years, and (c) immediately
vest all previously granted incentive awards.
The Company entered into employment agreements with Messrs. Santo, Wright
and Flynn that became effective on February 4, 1996 that provide for initial
base annual salaries of $241,000, $265,000, and $309,000, respectively, and for
bonuses pursuant to bonus plans that the Company allows them to participate in
from time to time. Each employment agreement is for an initial term of one year
and is thereafter automatically renewed on a year-to-year basis, unless
terminated by the Company or the employee. Each of the three employment
agreements provides (i) upon an involuntary termination other than for cause,
the Company will continue to pay their base annual salaries in monthly
installments for a period of two years with respect to Messrs. Santo and Wright
and for a period of one year with respect to Mr. Flynn, and will also pay them a
pro rata portion of such employees' applicable bonus compensation and that the
Company will continue certain insurance and medical benefits for a period of two
years with respect to Mr. Santo and Wright and one year with respect to Mr.
Flynn, (ii) upon the termination of employment by the Company or by the
employees for Good Reason (as defined in the agreements) within two years after
a Change in Control (as defined in the agreements), the Company will (a) pay the
employees a lump sum severance payment in an amount equal to 2.9 times the
employees' base salary, plus a pro rata portion of such employees' applicable
bonus compensation, (b) continue certain insurance and medical benefits for a
period of two years, and (c) immediately vest all of them previously granted
incentive awards.
In the event any payment by the Company to Messrs. Turley, Newman, Santo,
Wright or Flynn upon a Change in Control is determined to be subject to the
excise tax imposed by Section 4999 of the Code, the Company is required to pay
them an amount on an after-tax basis equal to the excise tax imposed.
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. Fitzgibbons is
a member of the Board of Directors of Merrill Lynch Capital Partners and, until
July 1994, was a Managing Director of ML & Co. Both Merrill Lynch Capital
Partners and ML & Co. are affiliated with the Merrill Lynch Investors. The
Merrill Lynch Investors held 38.33% of the Company's Common Stock as of March
31, 1995 and 5.78% of the Company's Common Stock as of March 29, 1996.
Merrill Lynch Capital Partners, a Delaware corporation and an affiliate of
ML & Co., 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 or its affiliates 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, Merchant Banking L.P. No. IV, ML Oklahoma
Venture Partners, Limited Partnership and ML Venture Partners II, L.P., which
are, or during fiscal 1995 were, stockholders of the Company. Merrill Lynch
Capital Corporation and ML IBK Positions, Inc., affiliates of Merrill Lynch
Capital Partners, are also a stockholders 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,
12
<PAGE> 16
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. An affiliate of ML &
Co. was paid a management fee of approximately $74,000 in 1995 out of such lease
payments. 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 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 February 3, 1996,
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 totaling approximately $43,000 for the year
ended February 3, 1996. 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 July 27, 1995, the Company completed the sale of 12,351,000 shares of
the Company's Common Stock (the "August Offering"). Of the shares sold in the
August Offering, 5,350,000 shares were sold by the Company and 7,001,000 shares
were sold by the Merrill Lynch Investors. The Company and the Merrill Lynch
Investors paid ML & Co. approximately $3.0 million in underwriting commissions
and related fees in connection with the August Offering.
On December 7, 1995, the Company completed the sale of 12,000,000 shares of
the Company's Common Stock (the "December Offering"), all of which were sold by
the Merrill Lynch Investors. The Merrill Lynch Investors paid ML & Co.
approximately $5.0 million in underwriting commissions and related fees in
connection with the December Offering.
The Company paid the expenses of the August Offering and the December
Offering and the Company and the Merrill Lynch Investors also agreed to
indemnify ML & Co., 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 executives.
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.
The Committee has access to independent compensation data and is
authorized, if determined appropriate in any particular case, to engage outside
compensation consultants. The Committee engaged a compensation consultant during
1994 to review the Company's executive compensation program and made certain
previously disclosed changes to the Company's executive compensation program
based on the consultant's recommendations.
13
<PAGE> 17
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.
All of the Company's 1995 compensation is anticipated to be fully
deductible under Section 162(m) of the Code ("Section 162(m)"). 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 key 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) and for certain key
employees are based upon financial performance 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 range of a
bonus award is from zero to a maximum of 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.
1993 and 1995 Stock Option and Incentive Plans
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 Company believes that granting 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. As of
March 31, 1996, approximately 360 individuals had been granted stock options
under the Company's two option plans since the inception of the plans.
The plans provide that a total of 7,333,334 shares (3,333,334 shares under
the 1993 plan and 4,000,000 shares under the 1995 plan) of common stock were
reserved for issuance under the plans. Awards are available under these plans in
the form of stock options, stock appreciation rights, limited stock appreciation
14
<PAGE> 18
rights, and restricted stock. The purpose of these plans 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 has historically made 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, and in determining the amount of an award also considers the amount and
terms of options and restricted stock already held by recipients. In 1995 the
Committee decided to consider granting stock option awards annually pursuant to
suggested option award guidelines developed by the Committee. The Committee
followed these guidelines in making option awards in 1995.
Chief Executive Officer Compensation and Company Performance
The Chief Executive Officer's compensation for 1995 was earned pursuant to
the executive compensation plans described in the preceding sections of this
report. He participated in both the KMBP and the Executive Three Year Bonus
Plan, and the performance factors and criteria on which his 1995 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 1995 stock option
award was made by the Committee pursuant to the guidelines developed by the
Committee.
Lewis W. Lehr, Chairman
Donald F. Dunn
Albert J. Fitzgibbons, III
15
<PAGE> 19
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 Stock was traded on the
New York Stock Exchange) in the Company's Common Stock, and who invested $100 on
August 6, 1993 in each of (i) the Standard & Poor's Retail Stores Composite
Index, and (ii) the Standard & Poor's 500 Index.
CUMULATIVE TOTAL RETURN COMPARISON
AMONG ECKERD CORPORATION, S&P 500 INDEX AND S&P RETAIL STORES COMPOSITE
[GRAPH]
<TABLE>
<CAPTION>
S&P RETAIL
MEASUREMENT PERIOD ECKERD S&P 500 STORES
(FISCAL YEAR COVERED) CORPORATION INDEX COMPOSITE
<S> <C> <C> <C>
8/6/93 100 100 100
1/29/94 133 108 101
1/28/95 182 109 94
2/3/96 292 150 100
</TABLE>
CERTAIN TRANSACTIONS
During fiscal 1995, the Company purchased approximately $396,000 of
merchandise from SunBelt, a division of Tandycraft, Inc. The President of
SunBelt is the brother of Edward W. Kelly, Senior Vice President/Merchandising
of the Company. Mr. Kelly previously recused himself from any dealing on behalf
of the Company with SunBelt. The Company believes that the terms of its
purchases from SunBelt are consistent with its ordinary purchasing practices and
are no less favorable than could have been obtained from unaffiliated third
parties.
On December 7, 1995, the Company loaned Francis A. Newman, the Company's
Chief Executive Officer and President, $1.0 million pursuant to a promissory
note that charged interest at the same rate of interest charged to the Company
pursuant to the Company's Credit Agreement with its senior lenders. Mr. Newman
repaid the principal amount of the loan together with all interest accrued
thereon on April 16, 1996.
See "Compensation Committee Interlocks and Insider Participation."
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 LLP as auditors of
the Company for the ensuing year. KPMG Peat Marwick LLP and its predecessors
have audited the Company's books for the past 36 years.
16
<PAGE> 20
Representatives of KPMG Peat Marwick LLP 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 1997 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 1997 Annual
Meeting of Stockholders must cause such proposal to be received by the Company
at its principal office no later than December 24, 1996. All proposals must be a
proper subject for action at the 1997 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 $4,000, to be paid by the Company.
By Order of the Board of Directors
/s/ James M. Santo
-----------------------------------
James M. Santo,
Secretary
Eckerd Corporation
Date: April 23, 1996
17
<PAGE> 21
APPENDIX A
<TABLE>
<S> <C> <C> <C>
Please mark
your votes as [X]
indicated in
this example
1. Election of Directors. NOMINEES: Albert J. Fitzgibbons, III, Lewis W. Lehr, Stewart Turley
FOR WITHHOLD (INSTRUCTION: To withhold authority to vote for any individual nominee,
all nominees listed AUTHORITY write that nominee's name in the space provided below.)
to the right to vote for all
(except as marked nominees listed ________________________________________________________________________
to the contrary) to the right
[ ] [ ]
(The Board of Directors recommends a vote "FOR") 3. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting or any
2. Ratification of KPMG Peat Marwick LLP as the independent adjournment thereof.
certified public accountants of the Company.
FOR AGAINST ABSTAIN Please sign exactly as name appears hereon. When shares are held
[ ] [ ] [ ] by joint tenants, both should sign. When signing as attorney,
(The Board of Directors recommends a vote "FOR") executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate
name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
Dated ____________________________________________________, 1996
________________________________________________________________
(Signature)
________________________________________________________________
(Signature if held jointly)
PLEASE SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
FOLD AND DETACH HERE
</TABLE>
Annual Meeting
of
Eckerd Corporation Stockholders
Thursday, May 23, 1996
10:00 a.m.
R.S.V.P. and additional information available at (813) 399-6380
Agenda
-- Election of Directors
-- Ratification of the Appointment of Independent Public Accountants
-- Report on the Progress of the Company
<PAGE> 22
REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ECKERD CORPORATION
The undersigned hereby appoints Stewart Turley and James M. Santo proxies,
each with power to act without the other and with power of substitution, and
hereby authorizes them to represent and vote, as designated on the other side,
all the shares of stock of Eckerd Corporation standing in the name of the
undersigned with all powers which the undersigned would possess if present at
the Annual Meeting of Stockholders of the Company to be held May 23, 1996, or
any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" ALL NOMINEES FOR ELECTION OF DIRECTORS AND FOR PROPOSAL 2.
(Continued, and to be marked, dated and signed, on the other side)
FOLD AND DETACH HERE
ECKERD CORPORATION
Annual Meeting of Stockholders
Held at Corporate Offices
8333 Bryan Dairy Road
Largo, Florida 34647
Thursday, May 23, 1996
10:00 a.m.
