UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended February 3, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission File Number 1-4844
ECKERD CORPORATION
(Exact name of registrant as specified in its charter
DELAWARE 13-3302437
(State of incorporation) (I.R.S. Employer Identification No.)
8333 Bryan Dairy Road
Largo, FL 34647
(Address and zip code of principal executive offices)
(813) 399-6000
(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each
Title of each class exchange on which registered
------------------- ----------------------------
Common Stock, par value $.01 New York Stock Exchange
9 1/4% Senior Subordinated Notes Due 2004 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the Company as of March 29, 1996 was $1,548,335,443 (Calculated on the
assumption that all directors, all executive officers, and certain entities
affiliated with Merrill Lynch & Co. are affiliates).
As of March 29, 1996, 69,966,834 shares of common stock, par value $.01,
were outstanding (adjusted to give effect to a two-for-one stock split payable
in the form of a stock dividend declared April 1, 1996 and payable on or about
May 13, 1996).
DOCUMENTS INCORPORATED BY REFERENCE
(1) Certain portions of the Annual Report to Stockholders
for the fiscal year ended February 3, 1996 Parts II & IV
(2 Certain portions of the Definitive Proxy Statement for
Stockholder Meeting to be held on May 23, 1996 Part III
<PAGE>
ECKERD CORPORATION
FEBRUARY 3, 1996 FORM 10-K ANNUAL REPORT
Table of Contents
Item Page
- ---- PART I ----
1. Business 3
2. Properties 9
3. Legal Proceedings 10
4. Submission of Matters to a Vote of Security Holders 10
Executive Officers of the Registrant 10
PART II
5. Market for the Registrant's Common Equity and Related
Stockholder Matters 12
6. Selected Financial Data 12
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
8. Financial Statements and Supplementary Data 13
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 13
PART III
10. Directors and Executive Officers of the Registrant 13
11. Executive Compensation 13
12. Security Ownership of Certain Beneficial Owners and Management 14
13. Certain Relationships and Related Transactions 14
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 14
2
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PART I
Item 1. Business
General
Eckerd Corporation (the "Company" or "Eckerd") operates the Eckerd drug
store chain, which is one of the largest drug store chains in the United States.
At February 3, 1996, the Eckerd chain consisted of 1,715 stores in 13 states
located primarily in the Sunbelt. Over its 43-year history, the Eckerd drug
store chain has built a strong market position in areas where demographic
characteristics are favorable to drug store growth. The Company's stores are
concentrated in 10 of the 12 metropolitan statistical areas with the largest
percentage growth in population from 1980 to 1990, and, according to industry
sources, the Company ranks first or second in terms of drug store sales in 12 of
the major metropolitan markets in which it operates.
The primary focus of Eckerd stores is the sale of prescription and
over-the-counter drugs, which, during fiscal 1995, generated approximately 62%
of the Company's sales. Eckerd stores sell a wide variety of nonpharmacy
merchandise, including health and beauty aids, convenience foods, greeting cards
and numerous other convenience products. Another significant focus of Eckerd
stores is photofinishing. The Company offers overnight photofinishing services
in all Eckerd stores and at February 3, 1996 operated Eckerd Express Photo
one-hour photofinishing mini-labs in 515 stores.
The Company believes that customer service and convenience are critical
in positioning itself as the alternative to mass merchandisers, supermarkets and
other large format retailing channels. The Company emphasizes service and
convenience through pharmacy support services, store location and design,
merchandising programs and operating hours geared to the needs of the particular
market.
The Company was formed in 1985 for the purpose of acquiring the former
Jack Eckerd Corporation ("Old Eckerd"), in a leveraged buyout in April 1986 (the
"Acquisition"). On August 12, 1993, the Company completed an initial public
offering (the "IPO") in which it issued and sold 10,350,000 shares of Common
Stock for $7.00 per share (adjusted for the two-for-one stock split declared
April 1, 1996 and payable on or about May 13, 1996). In connection with the IPO
the Company's name was changed from "Jack Eckerd Corporation" to "Eckerd
Corporation."
The Drug Store Industry
Prescription and over-the-counter medications have traditionally been
sold by independent drug stores as well as drug store chains, such as Eckerd.
The drug store industry has recently undergone significant changes as a result
of the following important trends: (i) the increase in third-party payments for
prescription drugs, (ii) the consolidation within the drug store industry, (iii)
the aging of the United States population and (iv) the increase in competition
from non-traditional retailers of prescription and over-the-counter drugs.
During the last several years, a growing percentage of prescription drug
volume throughout the industry has been accounted for by sales to customers who
are covered by third-party payment programs ("managed care sales"). In a typical
managed care sale, the drug store has a contract with a managed care payor, such
as an insurance company, health maintenance organization ("HMO"), preferred
provider organization ("PPO"), other managed care provider, government agency or
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<PAGE>
private employer, which agrees to pay for part or all of the customer's eligible
prescription purchases. Although these managed care sales contracts often
provide a high volume of prescription sales, such sales typically generate lower
gross margins than non-managed care sales due principally to the highly
competitive nature of this business and the high level of competition between
managed care firms and the resulting efforts to reduce costs. Larger drug store
chains, such as Eckerd, are better able to service the growing managed care
segment than independent drug stores and smaller chains as a result of the
larger chains' more sophisticated technology systems, larger number of stores
and greater penetration within their markets.
As a result of the economies of scale from which larger drug store
chains benefit as well as the managed care payment trend, the number of
independent drug stores and smaller drug store chains has decreased as many of
such retailers have been acquired by larger drug store chains. This trend is
expected to continue because larger chains are better positioned to handle the
increased managed care sales, purchase inventory on more advantageous terms and
achieve other economies of scale with respect to their marketing, advertising,
distribution and other expenditures. The Company believes that the number of
independent drug stores and smaller drug store chains remaining in operation may
provide significant acquisition opportunities for larger drug store chains, such
as the Company.
Strong demographic trends have also contributed to changes in the drug
store industry, as the group of persons over age 50 is the fastest growing
segment of the United States population. This trend has had, and is expected to
continue to have, a marked effect on the pharmacy business in the United States
because consumer prescription and over-the-counter drug usage generally
increases with age. The Company's markets have large concentrations of, and are
continuing to experience significant growth in, the number of persons over age
65.
Eckerd Drug Stores
As of February 3, 1996, the Company operated the number of Eckerd stores
and Eckerd Express Photo centers indicated below in each of the following
states:
Drug Stores
Eckerd With Eckerd
Drug Express Photo
Stores Centers
------ -------
Florida 575 247
Texas 475 138
North Carolina 178 46
Georgia 163 46
Louisiana 95 20
South Carolin 76 13
New Jersey 38 1
Tennessee 35 1
Mississippi 26 -
Oklahoma 26 -
Alabama 16 3
Delaware 11 -
Maryland 1 -
----- ---
Total 1,715 515
===== ===
4
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Over the past five years the Company has implemented several initiatives
designed to improve the quality and operating performance of the Company's store
base. Among such initiatives are the opening, relocation and acquisition of
additional stores, the closure or divestiture of underperforming stores and an
extensive remodeling program. Since the beginning of fiscal 1990, 390 Eckerd
drug stores have been opened or acquired within the Company's existing markets,
more than 300 underperforming stores have been closed or divested, and more than
50% of the Company's remaining stores have been remodeled. In addition, the
Company opened more than 300 Express Photo centers. The Company has also
increased the degree to which merchandise is tailored to specific markets,
instituted a chainwide shrinkage reduction program and made a significant
investment in its management information systems.
The following table summarizes the number of Eckerd drug stores operated
by the Company and the sales on an aggregate and per store basis for the last
five years.
<TABLE>
<CAPTION>
Fiscal Years
------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Number of Eckerd drug stores at
beginning of period 1,735 1,718 1,696 1,675 1,673
Stores opened or acquired (1) 88 (2) 39 52 50 22
Stores sold or closed (108) (3) (22) (30) (29) (20)
----- ---- ---- ---- ----
Number of Eckerd drug stores
at end of period 1,715 1,735 1,718 1,696 1,675
===== ===== ===== ===== =====
Number with Express Photo centers 515 481 413 378 321
Sales of Eckerd drug stores (in thousands) $4,986,804 4,436,926 4,052,302 3,759,246 3,629,037
Average annual sales per Eckerd drug
store (in thousands) $2,925 2,584 2,388 2,244 2,163
</TABLE>
(1) Excludes relocations.
(2) Includes 40 Florida stores acquired from Rite Aid of Florida, Inc.
(3) Consists of (i) 84 stores that were closed as a result of the Company's
decision in the fourth quarter of fiscal 1994 to accelerate the closing
of approximately 90 geographically dispersed, under-performing stores,
and (ii) 24 stores closed in the normal course of business.
The Company intends to continue to expand its business through both
internal expansion and acquisitions of drug store chains and independent drug
stores. Although the Company currently plans to expand within the Company's
existing markets, the Company also considers strategic acquisitions in other
markets. The Company opened or acquired 120 drug stores including 32 relocations
in fiscal 1995 and has a goal of opening (including relocations) 100 drug stores
in fiscal 1996 and expects the rate of new store development to accelerate about
20% each year thereafter, through fiscal 2000. The majority of the new and
relocated stores are expected to be freestanding locations. In addition to such
openings and acquisitions, the Company expects to sell or close a small number
of drug stores per year in fiscal 1996 and thereafter through fiscal 2000. The
cash costs associated with opening a drug store are estimated to be
approximately $545,000, which includes initial inventory costs of approximately
$315,000. The Company intends to use cash flow from operations to finance the
cash costs of this growth, although borrowings may also be available to finance
such growth. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations-Liquidity and Capital Resources."
In determining the areas in which to open or acquire drug stores, the
Company evaluates a number of demographic considerations, including the size,
growth pattern and per capita income of the population, as well as the
competitive environment and the accessibility of a proposed site to the customer
and to the Company's warehouse and distribution facilities. The Company also
continually reviews these factors and the performance of individual stores in
determining whether to close or relocate certain stores.
5
<PAGE>
Products and Services
Pharmacy
The primary focus of Eckerd drug stores is the sale of prescription and
over-the-counter drugs. The Company seeks to position pharmacists as health-care
professionals who build relationships with their customers. Over the years,
marketing and advertising campaigns have been focused on reinforcing the
professionalism of the Company's pharmacists and positioning them as a key
factor in high quality pharmacy service. The Company has also instituted several
health-related programs such as health screenings, education and outreach
programs.
Eckerd pharmacy departments are modern, clean and clearly identified by
attractive signs. The pharmacy areas in the Company's newer and remodeled stores
provide a consultation area and a waiting area with comfortable seating,
informational brochures and free blood pressure testing. The pharmacy areas are
designed to be conducive to customer service and counseling by the pharmacists.
The Company has devoted substantial resources to marketing to managed
care payors, such as insurance companies, HMO's, PPO's and other managed care
providers and government agencies. This effort has produced managed care sales
of approximately 71% of prescription sales in fiscal 1995 compared to
approximately 36% in fiscal 1990. The Company's computer systems provide on-line
adjudication which permits the Company and the managed care payor to determine
electronically, at the time of sale, eligibility of the customer, coverage of
the prescription and pricing and co-payment requirement, if any, and
automatically bills the respective plan. On-line adjudication reduces losses
from rejected claims and eliminates a portion of the Company's paperwork for
billing and collection of receivables and costs associated therewith.
Nonpharmacy Merchandise
In addition to prescription and over-the-counter drugs, Eckerd stores
sell a wide variety of nonpharmacy merchandise, including health and beauty
aids, convenience foods, greeting cards and numerous other convenience products.
Eckerd-brand products, which are attractively priced and provide higher margins
than similar national brand products, represent a growing segment of products
offered. Items such as Eckerd Award soft drinks, bottled water and cookies are
recent additions to the Eckerd brand products offered by Eckerd stores.
Health merchandise offerings include a broad assortment of popular
national brands as well as private label over-the-counter drugs and other
products related to dental care, foot care, vitamins and nutritional
supplements, feminine hygiene, family planning and baby care. Eckerd stores
offer an assortment of popular brand name cosmetics, fragrances and other beauty
products. Skin care products are an increasingly important component of the
beauty category due to the aging population and growing concern about the
effects of the environment on the skin. The greeting card department in Eckerd
stores offers a wide selection of contemporary and traditional cards, gift wrap,
bows and novelties. This wide selection and the locations of its stores should
enable customers to satisfy their card and gift needs more conveniently than at
traditional card stores. The convenience products merchandise category consists
of an assortment of items, including candy, soft drinks, cookies, bottled water,
tobacco products, books and magazines, household products, seasonal merchandise
and toys. The Company also seeks to serve its customers' needs by specifically
tailoring items in this category to meet the needs of its customers in specific
store locations.
6
<PAGE>
Photofinishing
The Company believes that it is the leading source of photofinishing in
all of the major markets in which it operates. The Company believes that its
branded processing programs, which emphasize quality and service, have helped
position the Company as a leader in photofinishing. The Company's photo
departments also offer camera and photo accessories, small electronics,
batteries and audio and video tapes.
Store Operations
The Company will continue to remodel and reset its stores to provide
modern, well-identified stores, which are easily accessible to customers and
will seek to open new stores in easily accessible high traffic locations. The
Company also tailors its merchandising to provide the product mix and selection
to best serve the customers of each particular store. The Company typically
provides several conveniently located, modern stores in a community. The
Company's stores range in size from 8,200 to 11,000 square feet and are located
primarily in neighborhood strip centers or freestanding locations. Such stores
are typically open every day of the year except Christmas, with some open until
midnight or 24 hours a day.
Purchasing and Distribution
Merchandising, buying and supplier payments are generally centralized at
Company headquarters to assure consistency and efficiency. The Company uses an
electronic buying system to aid in inventory and gross profit management which
enables the Company to take better advantage of quantity discounts and forward
buying opportunities, which the Company believes will lower the average cost of
inventory.
Approximately 85% of store merchandise is purchased centrally and
distributed, principally by Company-operated trucks, through the Company's five
centrally located distribution facilities located in or near Orlando, Florida;
Atlanta, Georgia; Charlotte, North Carolina; and Dallas and Houston, Texas. The
remainder of store merchandise is shipped directly to the stores, some of which
is purchased at the store level.
Advertising and Marketing
A combination of newspaper advertising and TV and radio commercials is
used throughout the year to promote sales. The Company's concentration of stores
within its markets enables it to achieve economies of scale in its advertising
and marketing expenditures and also enables the Company to negotiate favorable
rates for advertising time and print production. The Company believes that its
current level of advertising expenditures is appropriate to support its existing
marketing strategies.
Information and Technology
The Company intends to continue to invest in information systems to
improve customer service, reduce operating costs, provide information needed to
support management decisions and enhance the Company's competitive position with
managed care payors. In fiscal 1994 and 1995 the Company completed the
installation of a satellite communications network, enhanced the point of sale
("POS") reporting system and enhanced the merchandise and store information
management systems. In fiscal 1996 the Company will complete the rollout of POS
scanning equipment to all stores and also complete the installation of a state
of the art pharmacy system for the stores.
7
<PAGE>
In 1993, the Company and Integrated Systems Solutions Corporation
("ISSC"), a wholly-owned subsidiary of IBM, entered into a Systems Operations
Service Agreement. Under the Company's supervision, ISSC manages the entire
information systems operation and is responsible for providing technology
services to the Company. The Systems Operations Services Agreement has a 10-year
term, and the total payments to be made by the Company thereunder are expected
to be $480.0 million over such term, based on currently anticipated services.
The Company believes that this arrangement has and will continue to enable the
Company to further improve customer service, replace the Company's existing
systems, reduce operating costs and capital expenditures for hardware, obtain
information needed to support management decisions on an improved basis and
increase the Company's focus on its core business.
Competition
The Company's retail drug stores operate in a highly competitive
industry. The Company's drug stores compete primarily on the basis of customer
service, convenience of location and store design, price and product mix and
selection.
In addition to traditional competition from independent drug stores and
other drug store chains, the Company faces competition from discount stores,
supermarkets, combination food and drug stores, mail order distributors,
hospitals and HMOs. These other formats have experienced significant growth in
their market share of the prescription and over-the-counter drug business.
The Company's Express Photo centers compete with a variety of photo
processors including other mini-labs, retail stores and photo specialty stores.
The Company's Express Photo business competes primarily on the basis of quality
of processing, quality and speed of service and value.
Seasonality
The Company's sales and earnings are higher during peak holiday periods
and from Christmas through Easter in selected geographic areas. Sales of
health-related products peak during seasonal outbreaks of cough and cold/flu
virus, typically during the winter and spring. Accordingly, sales and earnings
are typically highest in the fourth quarter followed by the first quarter.
Regulation
All of the Company's pharmacists and stores are required to be licensed
by the appropriate state boards of pharmacy. The Company's drug stores and
distribution centers are also registered with the Federal Drug Enforcement
Administration. Most of the stores sell beer and wine and are subject to various
state and local liquor licensing requirements. By virtue of these license and
registration requirements, the Company is obligated to observe certain rules and
regulations, and a violation of such rules and regulations could result in a
suspension or revocation of a license or registration.
The Company has a number of managed care payor contracts pursuant to
which the Company is a provider of prescription drugs. "Freedom of choice" state
statutes, pursuant to which all pharmacies would be entitled to be a provider
under such a contract, have been enacted in certain states, including Alabama,
Delaware, Georgia, Louisiana, Maryland, Mississippi, New Jersey, North Carolina,
South Carolina, Tennessee and Texas, and may be enacted in others. Although such
8
<PAGE>
statutes may adversely affect certain of the Company's managed care contracts,
they may also provide the Company with opportunities regarding additional
managed care contracts.
In recent years, an increasing number of legislative proposals have been
introduced or proposed in Congress and in some state legislatures that would
effect major changes in the health care system, either nationally or at the
state level. The Company cannot predict whether any federal or state health care
reform legislation will eventually be passed, and if so, the impact thereof on
the Company's financial position or results of operations. Health care reform,
if implemented, could adversely affect the pricing of prescription drugs or the
amount of reimbursement from governmental agencies and managed care payors, and
consequently could be adverse to the Company. However, to the extent health care
reform expands the number of persons receiving health care benefits covering the
purchase of prescription drugs, it may also result in increased purchases of
such drugs and could thereby have a favorable impact on both the Company and the
retail drug industry in general. Nevertheless, there can be no assurance that
any future federal or state health care reform legislation will not adversely
affect the Company or the retail drug store industry generally.
Employees
As of February 3, 1996, the Company had approximately 44,600 employees,
of which 23,300 were full-time employees. The Company believes that overall
employee relations are good. None of the Company's employees are represented by
unions.
Patents, Trademarks and Tradenames
No patent, trademark, license, franchise or concession is considered to
be of material importance to the business of the Company other than the trade
names under which the Company operates its retail businesses, including the
Eckerd name. The Company also holds servicemarks for its photofinishing
products, private label products and information systems.
Item 2. Properties
The Company conducts substantially all of its retail businesses from
stores located in leased premises. Substantially all of these leases will expire
within the next twenty years. In the normal course of business, however, it is
expected that leases will be renewed through the exercise of existing options or
amendments, or replaced by leases on other properties. Most of the Company's
store leases provide for a fixed minimum rental together with a percentage
rental based on sales.
The material office and distribution center properties owned or leased
by the Company at February 3, 1996 are as follows:
Owned or
Location Square Feet Leased
-------- ----------- --------
Largo, Flor 488,000 Owned (1)
Charlotte, North 587,000 Owned
Garland, Texas 270,000 Owned
Conroe, Texas 345,000 Owned
Orlando, Florida 587,000 Leased (2)
Newnan, Georg 244,000 Owned (3)
Hammond, Louisia 185,000 Owned (3)(4)
9
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------------------------------
(1) Includes the Company headquarters.
(2) In January 1993 the Company assumed a lease for an office and
distribution facility of approximately 587,000 square feet (lease expires
2005). The Company's existing Orlando facilities and the Largo
distribution center facility were consolidated into the new facility
during 1993.
(3) Construction was financed pursuant to revenue bond issues. Because these
properties are currently leased subject to nominal purchase options with
development authorities which the Company anticipates it will exercise,
they are listed as owned by the Company.
(4) The Company closed the Hammond distribution center and previously
subleased the former Hammond, Louisiana office and distribution center.
The property has been listed for sale.
The Company considers that all property owned or leased is well
maintained and in good condition.
Item 3. Legal Proceedings
In the ordinary course of its business, the Company and its subsidiaries
are parties to various legal actions which the Company believes are routine in
nature and incidental to the operation of the business of the Company and its
subsidiaries. The Company believes that the outcome of the proceedings to which
the Company and its subsidiaries currently are parties will not have a material
adverse effect upon its operations or financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the last
quarter of the fiscal year ended February 3, 1996.
Executive Officers of the Registrant
The name, age and office of the executive officers of the Company as of
February 3, 1996 and certain information relating to their business experience
are set forth below:
Name Age Position
- ---- --- --------
Stewart Turley 61 Director, Chairman of the Board
Francis A. Newman 47 Director, President and Chief Executive Officer
James M. Santo 54 Executive Vice President/Administration and
Secretary
Samuel G. Wright 45 Executive Vice President and Chief Financial
Officer
Kenneth L. Flynn 51 Senior Vice President/Store Operations
Edward W. Kelly 50 Senior Vice President/Merchandising
Richard R. Powis 48 Senior Vice President/Pharmacy Services
Martin W. Gladysz 43 Vice President/Treasurer
Robert E. Lewis 35 Vice President/General Counsel and Assistant
Secretary
Thomas M. Nash 48 Vice President/Real Estate
N. John Simmons, Jr. 40 Vice President/Controller
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. He is also a
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<PAGE>
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.
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, Inc., a retail firm, from 1984 to 1986 and the Senior Vice
President of Merchandising for F.W. Woolworth, a retail firm, from 1980 to 1984.
Mr. Newman is also a director of FabriCenters of America, a retail firm.
Mr. Santo was appointed Executive Vice President/Administration of the
Company in May 1995. Prior thereto he served as Senior Vice
President/Administration (February 1993) and was also Vice President/Legal
Affairs of the Company, a position he held for more than the past five years
prior to 1993. In addition, Mr. Santo was appointed Secretary of the Company
effective January 1, 1992.
Mr. Wright was appointed Executive Vice President/Chief Financial
Officer of the Company in May 1995. Prior thereto he was appointed Senior Vice
President and Chief Financial Officer in February 1995. Mr. Wright also served
as Senior Vice President/Finance from February 1993 until February 1995 and Vice
President and Controller of the Company, from September 1988 until February
1993. Mr. Wright became a Vice President of the Company in June 1986. In
addition, Mr. Wright served as Vice President of Finance of Eckerd Drug Company,
formerly Old Eckerd's principal subsidiary ("Eckerd Drug Company") and now the
Company's principal division, since May 1985.
Mr. Flynn was appointed Senior Vice President/Store Operations of the
Company in December 1994. Prior to joining the Company, Mr. Flynn was Executive
Vice President with the Thrifty/Payless drug chain in Portland, Oregon. Prior to
joining Thrifty/Payless in August 1993, Mr. Flynn was employed by Lucky Stores,
Inc. for over 30 years, most recently as Senior Vice President/Store Operations.
Mr. Kelly was appointed Senior Vice President/Merchandising of the
Company in February 1993. Prior thereto he served as Vice President of
Merchandising of Eckerd Drug Company for more than the preceding five years.
Mr. Powis was appointed Senior Vice President/Pharmacy Services of the
Company in April 1995. Prior to joining the Company, he was Senior Vice
President Pharmacy Services for the American Board of Retired Persons ("AARP").
Prior to joining AARP in September 1994, Mr. Powis was employed for over 19
years by Hooks SupRx, Inc., most recently as Senior Vice President Pharmacy
Services.
Mr. Gladysz was appointed Vice President/Treasurer of the Company in May
1994. Prior to joining the Company, Mr. Gladysz was Executive Vice
President/Treasurer for Fortune Bancorp, a Florida banking organization, a
position he held for more than the five years prior to 1994.
Mr. Lewis was appointed Vice President/General Counsel and Assistant
Secretary of the Company in August 1994. He was a shareholder in the law firm of
Shackleford, Farrior, Stallings & Evans, P.A. in Tampa, Florida, from January
1992 to August 1994 and was an associate at that firm for more than five years
prior thereto.
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Mr. Nash was appointed Vice President/Real Estate of the Company in
August 1995. Prior to joining the Company, he served as Vice President Real
Estate at Checkers Drive-In Restaurants, Inc. from 1993 until 1995 and at
Morrison Restaurants, Inc. from 1990 until 1993.
Mr. Simmons was appointed Vice President/Controller of the Company in
August 1995. Prior to joining the Company, Mr. Simmons served as Vice President
of Finance and Chief Financial Officer of Checkers Drive-In Restaurants, Inc.
from January 1993 until August 1995. Prior thereto, he was a partner at KPMG
Peat Marwick LLP for more than the preceding five years.
Officers are elected for a one-year term by the Board of Directors at
its annual meeting. There is no family relationship between any of the
aforementioned officers or directors of the Company.
PART II
Item 5.Market for the Registrant's Common Equity and Related Stockholder Matters
The Company's common stock is listed on the New York Stock Exchange
(Symbol: ECK). The approximate number of shareholders of record on March 29,
1996 was 965. All market price per share information below has been restated to
reflect a two-for-one stock split effected in the form of a stock dividend
declared April 1, 1996 (payable on or about May 13, 1996).
Fiscal 1995
Quarter Ended
Market Price -------------
Per Share Information 4/29/95 7/29/95 10/28/95 2/3/96
- --------------------- ------- ------- -------- ------
High 15.12 17.31 21.00 22.37
Low 12.25 14.19 16.31 19.06
Fiscal 1994
Quarter Ended
Market Price -------------
Per Share Information 4/30/94 7/30/94 10/29/94 1/28/95
- --------------------- ------- ------- -------- -------
High 12.00 12.62 15.75 16.00
Low 9.25 9.06 11.62 12.69
The Company is subject to restrictive covenants under its Credit
Agreement and the 9 1/4% Senior Subordinated Notes which restrict the payment of
dividends. The Company has not paid or declared any dividends on its common
stock.
Item 6. Selected Financial Data
The selected financial information required by this item is included in
the Company's 1995 annual report to stockholders on page 11 under the heading
"Five Year Financial Operating Summary." Such information is incorporated herein
by reference. The ratio of earnings to fixed charges was 2.1X, 1.7X and 1.0X in
fiscal 1995, 1994 and 1991, respectively. In fiscal 1993 and 1992 earnings were
inadequate to cover fixed charges, and the Company had a deficiency in earnings
to fixed charges of $2,941,000 and $4,123,000 in fiscal 1993 and 1992,
respectively.
12
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required by this item is included in the Company's 1995
annual report to stockholders on pages 12 through 15 under the heading
"Management's Discussion and Analysis of Results of Operations and Financial
Condition." Such information is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The following consolidated financial statements as of February 3, 1996
and January 28, 1995 and for each of the years in the three year period ended
February 3, 1996 included in the Company's 1995 annual report to stockholders on
pages 16 through 27 are incorporated herein by reference:
Consolidated Statements of Operations
Consolidated Balance Sheets
Consolidated Statements of Stockholders' Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Information on selected quarterly financial data also required by this
item is included in the Company's 1995 annual report to stockholders on page 30
under the heading "Quarterly Information (Unaudited)." Such information is
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information required by this item regarding the directors of the Company
is included in the Company's definitive proxy statement dated April 23, 1996 for
the 1996 annual meeting of stockholders on pages 2 through 4 under the headings
"Nominees For Election of Directors In Class III With Terms Expiring in 1999";
"Directors in Class I With Terms Expiring in 1997" and "Directors in Class II
With Terms Expiring in 1998." Such information is incorporated herein by
reference. Information required by this item regarding executive officers of the
Company is contained in Part I of this Form 10-K under the item entitled
"Executive Officers of the Registrant." Information required by this item
regarding compliance with Section 16(a) of the Exchange Act is included in the
Company's definitive proxy statement dated April 23, 1996 for the 1996 annual
meeting of stockholders on page 5 under the heading "Security Ownership of
Certain Persons." Such information is incorporated herein by reference.
Item 11. Executive Compensation
Information regarding management remuneration is included in the
Company's definitive proxy statement dated April 23, 1996 for the 1996 annual
meeting of stockholders on pages 1 and 2, and 7 through 13 under the headings
13
<PAGE>
"Nomination and Election of Directors" and "Executive Compensation." Such
information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information regarding security ownership of certain beneficial owners
and of management is included in the Company's definitive proxy statement dated
April 23, 1996 for the 1996 annual meeting of stockholders on pages 5 and 6
under the heading "Security Ownership Of Certain Persons." Such information is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information regarding certain relationships and related transactions is
included in the Company's definitive proxy statement dated April 23, 1996 for
the 1996 annual meeting of stockholders on pages 12 and 16 under the headings
"Executive Compensation - Compensation Committee Interlocks and Insider
Participation" and "Certain Transactions." Such information is incorporated
herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Listed below are all financial statements, notes, schedules, and
exhibits filed as part of this Form 10-K annual report:
(a) Financial Statements and Schedules
1. The following financial statements and schedules of the Company
together with the Report of Independent Certified Public Accountants
dated March 26, 1996 in this Form 10-K are filed herewith:
Eckerd Corporation and Subsidiaries
Financial Statements:
Independent Auditors' Report
Consolidated Balance Sheets as of February 3, 1996 and January
28, 1995
Consolidated Statements of Operations for the Years Ended
February 3, 1996, January 28, 1995 and January 29,
1994
Consolidated Statements of Stockholders' Equity (Deficit) for
the Years Ended February 3, 1996, January 28, 1995
and January 29, 1994
Consolidated Statements of Cash Flows for the Years Ended
February 3, 1996, January 28, 1995 and January 29,
1994
Notes to Consolidated Financial Statements
Schedules:
II - Reserves
Independent Auditors' Report
14
<PAGE>
All other schedules for the Company are omitted as the required
information is inapplicable or the information is presented in the
respective consolidated financial statements or related notes.
Also filed in this Form 10-K is the consent of KPMG Peat
Marwick LLP to the incorporation by reference of their auditors'
report dated March 26, 1996, relating to the consolidated financial
statements appearing in the Form 10-K, into Registration Statement
Numbers 33-49977, 33-50755 and 33-60175 on Form S-8 and Registration
Statement Numbers 33-50223 and 33-56261 on Form S-3.
2. Exhibits:
Exhibits previously filed or filed by incorporation by reference:
3.1 Restated Certificate of Incorporation of Eckerd Corporation (the
"Company") (incorporated by reference to Exhibit 3.1(i) to the
Registration Statement on Form S-3 of the Company (No. 33-50223)).
4.1 Form of certificate for the Company's Common Stock, par value $.01 per
share (incorporated by reference to Exhibit 4.1 to the Registration
Statement on Form S-2 of the Company (No. 33-64906)).
4.2 Form of 9-1/4% Senior Subordinated Notes Due 2004 of the Company
(incorporated by reference to Exhibit 4.01 to the Current Report on
Form 8-K dated October 26, 1993 of the Company (File No. 1-4844)).
4.3 Indenture dated as of November 1, 1993 between the Company and State
Street Bank and Trust Company of Connecticut, National Association, as
Trustee relating to the Company's 9-1/4% Senior Subordinated Notes Due
2004 (incorporated by reference to Exhibit 4.02 to the Current Report
on Form 8-K dated October 26, 1993 of the Company (File No. 1-4844)).
4.4 Amendment Agreement dated as of November 29, 1995 to the Credit
Agreement dated as of June 14, 1993, as amended and restated as of
August 3, 1994, among the Company, the lenders named therein, Chemical
Bank and NationsBank of Florida, N.A., as managing agents and
swingline lenders, and Chemical Bank as administrative agent and
NationsBank of Florida, N.A. as documentation agent (incorporated by
reference to Exhibit 4.4 to the Registration Statement on Form S-3 of
the Company (No. 33-64409)).
10.1 Commercial Paper Placement Agency Agreement dated July 17, 1989
between the Company and Merrill Lynch Money Markets, Inc.
(incorporated by reference to Exhibit 10.15 of Form 10-K of the
Company for the period ended February 3, 1990).
10.2 Registration Rights Agreement dated as of April 30, 1986 by and among
the Company, the Merrill Lynch Investors, Morgan Capital Corporation
and the other bank affiliates listed therein, the institutional and
corporate investors listed therein and certain members of management
of the Company (incorporated by reference to Exhibit 10.19 to the
Registration Statement on Form S-2 of the Company (No. 33-64906)).
15
<PAGE>
10.3 First Amendment to Registration Rights Agreement among the Company,
EDS Holdings Inc., the Merrill Lynch Investors, the Bank Affiliates,
the Institutional Investors and the Management Investors (incorporated
by reference to Exhibit 10.20 to Amendment No. 1 to the Registration
Statement on Form S-2 of the Company (No.
33-64906)).
10.4 Master Lease Agreement I dated as of May 18, 1993 between the Company
and Imaging Financial Services d/b/a EKCC ("IFS") (incorporated by
reference to Exhibit 10.28 to Amendment No. 1 to the Registration
Statement on Form S-2 of the Company (No. 33-64906)).
10.5 Master Lease Agreement II dated as of June 15, 1993 between the
Company and IFS (incorporated by reference to Exhibit 10.29 to
Amendment No. 1 to the Registration Statement on Form S-2 of the
Company (No. 33-64906)).
10.6 Systems Operations Service Agreement dated as of July 14, 1993 between
the Company and Integrated Systems Solutions Corporation (incorporated
by reference to Exhibit 10.30 to Amendment No. 1 to the Registration
Statement on Form S-2 of the Company (No. 33-64906))
10.7 Letter dated March 16, 1993 between IFS and the Company relating to
IFS Sale and Leaseback (incorporated by reference to Exhibit 10.31 to
Amendment No. 2 of the Registration Statement on Form S-2 of the
Company (No. 33-64906)).
10.8 1993 Stock Option and Incentive Plan of the Company (incorporated by
reference to Exhibit 99.1 to the Registration Statement on Form S-8 of
the Company (No. 33-49977)).
10.9 1995 Stock Option and Incentive Plan of the Company (incorporated by
reference to Exhibit 99.1 to the Registration Statement on Form S-8 of
the Company (No. 33-60175)).
10.10 Receivables Purchase Agreement dated as of January 26, 1995 between
the Company and Three Rivers Funding Corporation (incorporated by
reference to Exhibit 10.18 to Form 10-K405 for the year ended January
28, 1995 of the Company (File No. 1-4844)).
10.11 First Amendment to Receivables Purchase Agreement dated as of March
31, 1995 between the Company and Three Rivers Funding Corporation
(incorporated by reference to Exhibit 10.19 to Form 10-K405 for the
year ended January 28, 1995 of the Company (File No. 1-4844)).
10.12 Registration Rights Agreement dated as of December 31, 1994 by and
among the Company and the Eckerd Corporation Profit Sharing Plan
(incorporated by reference to Exhibit 10.20 to Form 10-K405 for the
year ended January 28, 1995 of the Company (File No. 1-4844)).
10.13 Guarantee Agreement dated as of June 14, 1993 as amended and restated
as of August 3, 1994 (the "Guarantee Agreement") among the
subsidiaries of the Company listed therein and Chemical Bank, as
collateral agent (incorporated by reference to Exhibit 10.21 to Form
10-K405 for the year ended January 28, 1995 of the Company (File No.
1-4844)).
10.14 Indemnity, Subrogation and Contribution Agreement dated as of June 14,
1993 as amended and restated as of August 3, 1994 (the "Indemnity,
Subrogation and Contribution Agreement"), among the Company, each
subsidiary of the Company listed therein and Chemical Bank, as
collateral agent (incorporated by reference to Exhibit 10.22 to Form
10-K405 for the year ended January 28, 1995 of the Company (File No.
1-4844)).
16
<PAGE>
10.15 Pledge Agreement dated as of June 14, 1993 as amended and restated as
of August 3, 1994 among the Company, each subsidiary of the Registrant
listed therein and Chemical Bank, as collateral agent (incorporated by
reference to Exhibit 10.23 to Form 10-K405 for the year ended January
28, 1995 of the Company (File No.
1-4844)).
10.16 Security Agreement dated as of June 14, 1993 as amended and restated
as of August 3, 1994 among the Company, each subsidiary of the Company
listed therein and Chemical Bank, as collateral agent (incorporated by
reference to Exhibit 10.24 to Form 10-K405 for the year ended January
28, 1995 of the Company (File No.
1-4844)).
10.17 Trademark Security Agreement dated as of June 14, 1993 as amended and
restated as of August 3, 1994 among the Company, each subsidiary of
the Company listed therein and Chemical Bank, as collateral agent
(incorporated by reference to Exhibit 10.25 to Form 10-K405 for the
year ended January 28, 1995 of the Company (File No.
1-4844)).
10.18 Revolving Note, dated as of August 3, 1994, made by the Company in
favor of Chemical Bank issued pursuant to the Credit Agreement
(incorporated by reference to Exhibit 10.26 to Form 10-K405 for the
year ended January 28, 1995 of the Company (File No. 1-4844)).
10.19 Term Note, dated as of August 3, 1994, made by the Company in favor of
Chemical Bank issued pursuant to the Credit Agreement (incorporated by
reference to Exhibit 10.27 to Form 10-K405 for the year ended January
28, 1995 of the Company (File No. 1-4844)).
10.20 Swingline Note, dated as of August 3, 1994, made by the Company in
favor of Chemical Bank issued pursuant to the Credit Agreement
(incorporated by reference to Exhibit 10.28 to Form 10-K405 for the
year ended January 28, 1995 of the Company (File No. 1-4844)).
10.21 Deed of Trust, Security Agreement and Assignment of Leases and Rents
dated as of June 14, 1993, as amended and restated as of August 3,
1994, by the Company in favor of Kenneth Plifka, as trustee, for the
benefit of Chemical Bank, as collateral agent, relating to certain
real property located in Dallas County, Texas (incorporated by
reference to Exhibit 10.29 to Form 10-K405 for the year ended January
28, 1995 of the Company (File No. 1-4844)).
10.22 Deed of Trust, Security Agreement and Assignment of Leases and Rents
dated as of June 14, 1993, as amended and restated as of August 3,
1994, by the Company in favor of Kenneth Plifka, as trustee, for the
benefit of Chemical Bank, as collateral agent, relating to certain
real property located in Montgomery County, Texas (incorporated by
reference to Exhibit 10.30 to Form 10-K405 for the year ended January
28, 1995 of the Company (File No. 1-4844)).
10.23 Amendment, Consent and Waiver dated as of October 31, 1994 to the
Credit Agreement, the Guarantee Agreement, the Indemnity, Subrogation
and Contribution Agreement (incorporated by reference to Exhibit 10.31
to Form 10-K405 for the year ended January 28, 1995 of the Company
(File No. 1-4844)).
10.24 Amended and Restated Mortgage, Security Agreement and Assignment of
Leases and Rents dated as of August 3, 1994, as mortgagor and Chemical
Bank, as mortgagee (incorporated by reference to Exhibit 10.32 to Form
10-K405 for the year ended January 28, 1995 of the Company (File No.
1-4844)).
17
<PAGE>
12.1 Statement regarding computation of ratio of earnings to fixed charges
of the Company (incorporated by reference to Exhibit 12.1 to the
Registration Statement on Form S-3 of the Company (No. 33-50223)).
Exhibits filed herewith:
3.2 Amended and Restated By-Laws of the Company.
10.25 Employment and Consulting Agreement dated February 4, 1996 between the
Company and Stewart Turley.
10.26 Employment Agreement dated February 4, 1996 between the Company and
Francis A. Newman.
10.27 Employment Agreement dated February 4, 1996 between the Company and
James M. Santo.
10.28 Employment Agreement dated February 4, 1996 between the Company and
Samuel G. Wright.
10.29 Employment Agreement dated February 4, 1996 between the Company and
Kenneth L. Flynn.
10.30 The Executive Excess Benefit Plan of Jack Eckerd Corporation and Its
Subsidiaries.
10.31 Eckerd Corporation Executive Three (3) Year Bonus Plan.
12.2 Statement regarding computation of ratio of earnings to fixed charges
of the Company.
13 The following sections of the 1995 annual report to stockholders of
the Company incorporated by reference and included in Parts II and IV
of this Form 10-K:
Five Year Financial Operating Summary.
Management's Discussion and Analysis of Results of Operations and
Financial Condition.
Consolidated Financial Statements and Independent Auditors' Report.
Quarterly Information (Unaudited).
21.1 Subsidiaries of the Company.
23.1 Consent of Independent Certified Public Accountants.
27 Financial data schedules.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the fourteen
weeks ended February 3, 1996.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-K report to be
signed on its behalf by the undersigned, thereunto duly authorized.
April 30, 1996 ECKERD CORPORATION
By:/s/Samuel G. Wright
----------------------------------------
Samuel G. Wright
Executive Vice President
Chief Financial and Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on the date indicated.
Signature Titles Date
--------- ------ ----
/s/Stewart Turley
- ----------------------------------
Stewart Turley Chairman of the Board April 30, 1996
/s/Francis A. Newman
- ----------------------------------
Francis A. Newman President, Chief Executive
Officer and Director April 30, 1996
/s/John W. Boyle
- ----------------------------------
John W. Boyle Director April 30, 1996
/s/James T. Doluisio
- ----------------------------------
James T. Doluisio Director April 30, 1996
/s/Donald F. Dunn
- ----------------------------------
Donald F. Dunn Director April 30, 1996
/s/Albert J. Fitzgibbons, III
- ----------------------------------
Albert J. Fitzgibbons, III Director April 30, 1996
/s/Margaret H. Jordan
- ----------------------------------
Margaret H. Jordan Director April 30, 1996
/s/Lewis W. Lehr
- ----------------------------------
Lewis W. Lehr Director April 30, 1996
/s/Alexis P. Michas
- ----------------------------------
Alexis P. Michas Director April 30, 1996
/s/Rupinder S. Sidhu
- ----------------------------------
Rupinder S. Sidhu Director April 30, 1996
19
<PAGE>
<TABLE>
<CAPTION>
Schedule II
ECKERD CORPORATION AND SUBSIDIARIES
RESERVES
Years ended February 3, 1996, January 28, 1995 and January 29, 1994
(In Thousands)
Balance at Charged Balance at
Beginning to End
Description of Period earnings Deductions Other of Period
<S> <C> <C> <C> <C> <C>
Allowance for doubtful receivables (a)
Year ended February 3, 1996 $3,000 $4,564 $4,564 - $3,000
====== ====== ====== ========== ======
Year ended January 28, 1995 $5,000 $7,148 $4,924 ($4,224) $3,000
====== ====== ====== ========== ======
Year ended January 29, 1994 $5,000 $7,000 $7,000 - $5,000
====== ====== ====== ========== ======
</TABLE>
- --------------
Notes:
(a) This reserve is deducted from receivables in the balance sheets.
Independent Auditors' Report
----------------------------
The Board of Directors
Eckerd Corporation and Subsidiaries
Under date of March 26, 1996, we reported on the consolidated balance sheets of
Eckerd Corporation and subsidiaries as of February 3, 1996 and January 28, 1995,
and the related consolidated statements of operations, stockholders' equity
(deficit), and cash flows for each of the years in the three-year period ended
February 3, 1996, which are incorporated by reference in the Form 10-K. In
connection with our audits of the aforementioned consolidated financial
statements, we also audited the related consolidated financial statement
schedule in the Form 10-K. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
As discussed in note 9 to the consolidated financial statements, the Company
changed its accounting policy in fiscal year 1994 related to the timing of the
recognition of closed store obligations.
KPMG PEAT MARWICK LLP
Tampa, Florida
March 26, 1996
<PAGE>
Exhibit Index
Eckerd Corporation Form 10-K
for the Fiscal Year Ended February 3, 1996
Exhibit Page
Index Description of Exhibit Number
- ------- ---------------------- ------
3.1 Restated Certificate of Incorporation of Eckerd Corporation *
(the "Company") (incorporated by * reference to Exhibit 3.1(i)
to the Registration Statement on Form S-3 of the Company (No.
33-50223)).
3.2 Amended and Restated By-laws of the Company.
4.1 Form of certificate for the Company's Common Stock, par value *
$.01 per share (incorporated by * reference to Exhibit 4.1 to
the Registration Statement on Form S-2 of the Company (No.
33-64906)).
4.2 Form of 9 1/4% Senior Subordinated Notes Due 2004 of the *
Company (incorporated by reference * to Exhibit 4.01 to the
Current Report on Form 8-K dated October 26, 1993 of the
Company (File No. 1-4844)).
4.3 Indenture dated as of November 1, 1993 between the Company and *
State Street Bank and Trust * Company of Connecticut, National
Association, as Trustee relating to the Company's 9 1/4% Senior
Subordinated Notes Due 2004 (incorporated by reference to
Exhibit 4.02 to the Current Report on Form 8-K dated October
26, 1993 of the Company (File No. 1-4844)).
4.4 Amendment Agreement dated as of November 29, 1995 to the Credit *
Agreement dated as of June * 14, 1993, as amended and restated
as of August 3, 1994, among the Company, the lenders named
therein, Chemical Bank and NationsBank of Florida, N.A., as
managing agents and swingline lenders, and Chemical Bank as
administrative agent and NationsBank of Florida, N.A. as
documentation agent (incorporated by reference to Exhibit 4.4
to the Registration Statement on Form S-3 of the Company (No.
33-64409)).
10.1 Commercial Paper Placement Agency Agreement dated July 17, 1989 *
between the Company and * Merrill Lynch Money Markets, Inc.
(incorporated by reference to Exhibit 10.15 of Form 10-K of the
Company for the period ended February 3, 1990).
10.2 Registration Rights Agreement dated as of April 30, 1986 by and *
among the Company, the * Merrill Lynch Investors, Morgan
Capital Corporation and the other bank affiliates listed
therein, the institutional and corporate investors listed
therein and certain members of management of the Company
(incorporated by reference to Exhibit 10.19 to the Registration
Statement on Form S-2 of the Company (No. 33-64906)).
10.3 First Amendment to Registration Rights Agreement among the *
Company, EDS Holdings Inc., the * Merrill Lynch Investors, the
Bank Affiliates, the Institutional Investors and the Management
Investors (incorporated by reference to Exhibit 10.20 to
Amendment No. 1 to the Registration Statement on Form S-2 of
the Company (No. 33-64906)).
10.4 Master Lease Agreement I dated as of May 18, 1993 between the *
Company and Imaging Financial * Services d/b/a EKCC ("IFS")
(incorporated by reference to Exhibit 10.28 to Amendment No. 1
to the Registration Statement on Form S-2 of the Company (No.
33-64906)).
<PAGE>
10.5 Master Lease Agreement II dated as of June 15, 1993 between the *
Company and IFS (incorporated * by reference to Exhibit 10.29
to Amendment No. 1 to the Registration Statement on Form S-2 of
the Company (No. 33-64906)).
10.6 Systems Operations Service Agreement dated as of July 14, 1993 *
between the Company and * Integrated Systems Solutions
Corporation (incorporated by reference to Exhibit 10.30 to
Amendment No. 1 to the Registration Statement on Form S-2 of
the Company (No. 33-64906)).
10.7 Letter dated March 16, 1993 between IFS and the Company *
relating to IFS Sale and Leaseback * (incorporated by reference
to Exhibit 10.31 to Amendment No. 2 of the Registration
Statement on Form S-2 of the Company (No. 33-64906)).
10.8 1993 Stock Option and Incentive Plan of the Company *
(incorporated by reference to Exhibit * 99.1 to the
Registration Statement on Form S-8 of the Company (No.
33-49977)).
10.9 1995 Stock Option and Incentive Plan of the Company *
(incorporated by reference to Exhibit * 99.1 to the
Registration Statement on Form S-8 of the Company (No.
33-60175)).
10.10 Receivables Purchase Agreement dated as of January 26, 1995 *
between the Company and Three * Rivers Funding Corporation
(incorporated by reference to Exhibit 10.18 to Form 10-K405 for
the year ended January 28, 1995 of the Company (File No.
1-4844)).
10.11 First Amendment to Receivables Purchase Agreement dated as of *
March 31, 1995 between the * Company and Three Rivers Funding
Corporation (incorporated by reference to Exhibit 10.19 to Form
10-K405 for the year ended January 28, 1995 of the Company
(File No. 1-4844)).
10.12 Registration Rights Agreement dated as of December 31, 1994 by *
and among the Company and the * Eckerd Corporation Profit
Sharing Plan (incorporated by reference to Exhibit 10.20 to
Form 10-K405 for the year ended January 28, 1995 of the Company
(File No. 1-4844)).
10.13 Guarantee Agreement dated as of June 14, 1993 as amended and *
restated as of August 3, 1994 * (the "Guarantee Agreement")
among the subsidiaries of the Company listed therein and
Chemical Bank, as collateral agent (incorporated by reference
to Exhibit 10.21 to Form 10-K405 for the year ended January 28,
1995 of the Company (File No. 1-4844)).
10.14 Indemnity, Subrogation and Contribution Agreement dated as of *
June 14, 1993 as amended and * restated as of August 3, 1994
(the "Indemnity, Subrogation and Contribution Agreement"),
among the Company, each subsidiary of the Company listed
therein and Chemical Bank, as collateral agent (incorporated by
reference to Exhibit 10.22 to Form 10-K405 for the year ended
January 28, 1995 of the Company (File No. 1-4844)).
10.15 Pledge Agreement dated as of June 14, 1993 as amended and *
restated as of August 3, 1994 among * the Company, each
subsidiary of the Registrant listed therein and Chemical Bank,
as collateral agent (incorporated by reference to Exhibit 10.23
to Form 10-K405 for the year ended January 28, 1995 of the
Company (File No. 1-4844)).
<PAGE>
10.16 Security Agreement dated as of June 14, 1993 as amended and *
restated as of August 3, 1994 * among the Company, each
subsidiary of the Company listed therein and Chemical Bank, as
collateral agent (incorporated by reference to Exhibit 10.24 to
Form 10-K405 for the year ended January 28, 1995 of the Company
(File No. 1-4844)).
10.17 Trademark Security Agreement dated as of June 14, 1993 as *
amended and restated as of August * 3, 1994 among the Company,
each subsidiary of the Company listed therein and Chemical
Bank, as collateral agent (incorporated by reference to Exhibit
10.25 to Form 10-K405 for the year ended January 28, 1995 of
the Company (File No. 1-4844)).
10.18 Revolving Note, dated as of August 3, 1994, made by the Company *
in favor of Chemical Bank * issued pursuant to the Credit
Agreement (incorporated by reference to Exhibit 10.26 to Form
10-K405 for the year ended January 28, 1995 of the Company
(File No. 1-4844)).
10.19 Term Note, dated as of August 3, 1994, made by the Company in *
favor of Chemical Bank issued * pursuant to the Credit
Agreement (incorporated by reference to Exhibit 10.27 to Form
10-K405 for the year ended January 28, 1995 of the Company
(File No. 1-4844)).
10.20 Swingline Note, dated as of August 3, 1994, made by the Company *
in favor of Chemical Bank * issued pursuant to the Credit
Agreement (incorporated by reference to Exhibit 10.28 to Form
10-K405 for the year ended January 28, 1995 of the Company
(File No. 1-4844)).
10.21 Deed of Trust, Security Agreement and Assignment of Leases and *
Rents dated as of June 14, * 1993, as amended and restated as
of August 3, 1994, by the Company in favor of Kenneth Plifka,
as trustee, for the benefit of Chemical Bank, as collateral
agent, relating to certain real property located in Dallas
County, Texas (incorporated by reference to Exhibit 10.29 to
Form 10-K405 for the year ended January 28, 1995 of the Company
(File No. 1-4844)).
10.22 Deed of Trust, Security Agreement and Assignment of Leases and *
Rents dated as of June 14, * 1993, as amended and restated as
of August 3, 1994, by the Company in favor of Kenneth Plifka,
as trustee, for the benefit of Chemical Bank, as collateral
agent, relating to certain real property located in Montgomery
County, Texas (incorporated by reference to Exhibit 10.30 to
Form 10-K405 for the year ended January 28, 1995 of the Company
(File No. 1-4844)).
10.23 Amendment, Consent and Waiver dated as of October 31, 1994 to *
the Credit Agreement, the * Guarantee Agreement, the Indemnity,
Subrogation and Contribution Agreement (incorporated by
reference to Exhibit 10.31 to Form 10-K405 for the year ended
January 28, 1995 of the Company (File 1-4844)).
10.24 Amended and Restated Mortgage, Security Agreement and *
Assignment of Leases and Rents dated as * of August 3, 1994, as
mortgagor and Chemical Bank, as mortgagee (incorporated by
reference to Exhibit 10.32 to Form 10-K405 for the year ended
January 28, 1995 of the Company (File 1-4844)).
10.25 Employment and Consulting Agreement dated February 4, 1996
between the Company and Stewart Turley.
10.26 Employment Agreement dated February 4, 1996 between the Company
and Francis A. Newman.
<PAGE>
10.27 Employment Agreement dated February 4, 1996 between the Company
and James M. Santo.
10.28 Employment Agreement dated February 4, 1996 between the Company
and Samuel G. Wright.
10.29 Employment Agreement dated February 4, 1996 between the Company
and Kenneth L. Flynn.
10.30 The Executive Excess Benefit Plan of Jack Eckerd Corporation
and Its Subsidiaries.
10.31 Eckerd Corporation Executive Three (3) Year Bonus Plan.
12.1 Statement regarding computation of ratio of earnings to fixed *
charges of the Company * (incorporated by reference to Exhibit
12.1 to the Registration Statement on Form S-3 of the Company
(No. 33-50223).
12.2 Statement regarding computation of ratio of earnings to fixed
charges of the Company.
13 The following sections of the 1995 annual report to *
stockholders of the Company incorporated * by reference and
included in Parts II and IV of this Form 10-K:
Five Year Financial Operating Summary.
Management's Discussion and Analysis of Results of Operations
and Financial Condition.
Consolidated Financial Statements and Independent Auditors'
Report.
Quarterly Information (Unaudited).
21.1 Subsidiaries of the Company.
23.1 Consent of Independent Certified Public Accountants.
27 Financial data schedules.
- ------------------------------
* Filed by incorporation by reference.
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
ECKERD CORPORATION
(hereinafter called the "Corporation")
(As of February 8, 1996)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The Annual Meetings of Stockholders shall
be held on such date and at such time as shall be designated from time to time
by the Board of Directors and stated in the notice of the meeting, at which
meetings the stockholders shall elect by a plurality vote a Board of Directors,
and transact such other business as may properly be brought before the meeting.
Written notice of the Annual meeting stating the place, date and hour of the
meeting shall be given to each stockholder entitled to vote at such meeting not
less than ten nor more than sixty days before the date of the meeting.
Section 3. Special Meetings. Unless otherwise prescribed by law or by
the Certificate of Incorporation, Special Meetings of Stockholders, for any
purpose or purposes, may be called by either the Chairman, if there be one, the
President or the Secretary and shall be called by either such officer at the
request in writing of a majority of the Board of Directors or at the request in
writing of stockholders owning a majority of the capital stock of the
Corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting. Written notice of a
Special Meeting stating the place, date and hour of the meeting and the purpose
or purposes for which the meeting is called shall be given not less than ten nor
more than sixty days before the date of the meeting to each stockholder entitled
to vote at such meeting and only such business as is stated in such notice shall
be acted thereat.
Section 4. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder entitled to vote at
the meeting.
Section 5. Voting. Unless otherwise required by law, the Certificate
of Incorporation or these Amended and Restated By-Laws, any question brought
before any meeting of stockholders shall be decided by the vote of the holders
of a majority of the stock represented and entitled to vote thereat. Each
stockholder represented at a meeting of stockholders shall be entitled to cast
one vote for each share of the capital stock entitled to vote thereat held by
such stockholder. Such votes may be cast in person or by proxy but no proxy
shall be voted on or after three years from its date, unless such proxy provides
for a longer period. The Board of Directors, in its discretion, or the officer
of the Corporation presiding at a meeting of stockholders, in his discretion,
may require that any votes cast at such meeting shall be cast by written ballot.
Section 6. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
Section 7. Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 6 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
Section 8. Nomination of Directors. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors of the Corporation. Nominations of persons for election to the Board
of Directors may be made at any annual meeting of stockholders, or at any
special meeting of stockholders called for the purpose of electing directors,
(a) by or at the direction of the Board of Directors (or any duly authorized
committee thereof) or (b) by any stockholder of the Corporation (i) who is a
stockholder of record on the date of the giving of the notice provided for in
this Section 8 and on the record date for the determination of stockholders
entitled to vote at such meeting and (ii) who complies with the notice
procedures set forth in this Section 8.
In addition to any other applicable requirements, for a
nomination to be made by a stockholder, such stockholder must have given timely
notice thereof in proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation (a) in the case of an annual meeting, not less than sixty (60) days
nor more than ninety (90) days prior to the anniversary date of the immediately
preceding annual meeting of stockholders; provided, however, that in the event
that the annual meeting is called for a date that is not within thirty (30) days
before or after such anniversary date, notice by the stockholder to be timely
must be so received not later than the close of business on the tenth (10th) day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure of the date of the annual meeting was made,
whichever first occurs; and provided, further, that with respect to the
Corporation's first annual meeting of stockholders held subsequent to August 12,
1993, to be timely, a stockholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than sixty (60) days nor more than ninety (90) days prior to the date of
the annual meeting, unless less than seventy (70) days' notice or prior public
disclosure of the date of the annual meeting is given or made to stockholders,
in which case notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth (10th) day following
the day on which such notice of the date of the annual meeting was mailed or
such public disclosure of the date of the annual meeting was made, whichever
first occurs; and (b) in the case of a special meeting of stockholders called
for the purpose of electing directors, not later than the close of business on
the tenth (10th) day following the day on which notice of the date of the
special meeting was mailed or public disclosure of the date of the special
meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth (a) as to each person whom the stockholder proposes to
nominate for election as a director (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or employment of
the person, (iii) the class or series and number of shares of capital stock of
the Corporation that are owned beneficially or of record by the person and (iv)
any other information relating to the person that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder; and (b) as to the
stockholder giving the notice (i) the name and record address of such
stockholder, (ii) the class or series and number of shares of capital stock of
the Corporation that are owned beneficially or of record by such stockholder,
(iii) a description of all arrangements or understandings between such
stockholder and each proposed nominee and any other person or persons (including
their names) pursuant to which the nomination(s) are to be made by such
stockholder, (iv) a representation that such stockholder intends to appear in
person or by proxy at the meeting to nominate the persons named in its notice
and (v) any other information relating to such stockholder that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a written consent of
each proposed nominee to being named as a nominee and to serve as a director if
elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 8. If the Chairman of the meeting determines that a nomination was not
made in accordance with the foregoing procedures, the Chairman shall declare to
the meeting that the nomination was defective and such defective nomination
shall be disregarded.
Section 9. Business at Annual Meetings. No business may be transacted
at an annual meeting of stockholders, other than business that is either (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors (or any duly authorized committee
thereof), (b) otherwise properly brought before the annual meeting by or at the
direction of the Board of Directors (or any duly authorized committee thereof)
or (c) otherwise properly brought before the annual meeting by any stockholder
of the Corporation (i) who is a stockholder of record on the date of the giving
of the notice provided for in this Section 9 and on the record date for the
determination of stockholders entitled to vote at such annual meeting and (ii)
who complies with the notice procedures set forth in this Section 9.
In addition to any other applicable requirements, for business to be
properly brought before an annual meeting by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary of
the Corporation.
To be timely, a stockholder's notice to the Secretary must be delivered
to or mailed and received at the principal executive offices of the Corporation
not less than sixty (60) days nor more than ninety (90) days prior to the
anniversary date of the immediately preceding annual meeting of stockholders;
provided, however, that in the event that the annual meeting is called for a
date that is not within thirty (30) days before or after such anniversary date,
notice by the stockholder to be timely must be so received not later than the
close of business on the tenth (10th) day following the day on which such notice
of the date of the annual meeting was mailed or such public disclosure of the
date of the annual meeting was made, whichever first occurs; and provided,
further, that with respect to the Corporation's first annual meeting of
stockholders held subsequent to August 12, 1993, to be timely, a stockholder's
notice to the Secretary must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than sixty (60) days nor
more than ninety (90) days prior to the date of the annual meeting, unless less
than seventy (70) days' notice or prior public disclosure of the date of the
annual meeting is given or made to stockholders, in which case notice by the
stockholder in order to be timely must be so received not later than the close
of business on the tenth (10th) day following the day on which such notice of
the date of the annual meeting was mailed or such public disclosure of the date
of the annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary
must set forth as to each matter such stockholder proposes to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and record address of such stockholder, (iii) the
class or series and number of shares of capital stock of the Corporation that
are owned beneficially or of record by such stockholder, (iv) a description of
all arrangements or understandings between such stockholder and any other person
or persons (including their names) in connection with the proposal of such
business by such stockholder and any material interest of such stockholder in
such business and (v) a representation that such stockholder intends to appear
in person or by proxy at the annual meeting to bring such business before the
meeting.
No business shall be conducted at the annual meeting of stockholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section 9, provided, however, that, once business
has been properly brought before the annual meeting in accordance with such
procedures, nothing in this Section 9 shall be deemed to preclude discussion by
any stockholder of any such business. If the Chairman of an annual meeting
determines that business was not properly brought before the annual meeting in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.
ARTICLE III
DIRECTORS
Section 1. Election of Directors. Except as provided in Section 2 of
this Article III, Directors shall be elected by a plurality of the votes cast at
Annual Meetings of Stockholders, and each director so elected shall hold office
as provided by Article FIFTH, Section 3 of the Restated Certificate of
Incorporation. Any director may resign at any time upon notice to the
Corporation. Directors need not be stockholders.
Section 2. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and
qualified, or until their earlier resignation or removal.
Section 3. Duties and Powers. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these Amended and
Restated By-Laws directed or required to be exercised or done by the
stockholders.
Section 4. Meetings. The Board of Directors of the Corporation may
hold meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called by
the Chairman, if there be one, or the President or by a majority of the
directors then in office. Notice thereof stating the place, date and hour of the
meeting shall be given to each director either by mail not less than forty-eight
(48) hours before the date of the meeting, by telephone or telegram on
twenty-four (24) hours' notice, or on such shorter notice as the person or
persons calling such meeting may deem necessary or appropriate in the
circumstances.
Section 5. Quorum. Except as may be otherwise specifically provided by
law, the Restated Certificate of Incorporation or these Amended and Restated
By-Laws, at all meetings of the Board of Directors, a majority of the entire
Board of Directors shall constitute a quorum for the transaction of business and
the act of a majority of the directors present at any meeting at which there is
a quorum shall be the act of the Board of Directors. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 6. Action by Written Consent. Unless otherwise provided by the
Certificate of Incorporation or these Amended and Restated By-Laws, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting, if all the members of the
Board of Directors or of any committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board of Directors or committee.
Section 7. Meetings by Means of Conference Telephone. Unless otherwise
provided by the Restated Certificate of Incorporation or these Amended and
Restated By-Laws, members of the Board of Directors of the Corporation, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors or such committee by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to this
Section 7 shall constitute presence in person at such meeting.
Section 8. Committees. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any absent or disqualified member. Any committee, to the extent allowed by law
and provided in the resolution establishing such committee, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation. Each committee shall
keep regular minutes and report to the Board of Directors when required.
Section 9. Compensation. The directors may be paid their expenses, if
any, of attendance at each meeting of the Board of Directors and may be paid a
fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director, or both. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Section 10. Interested Directors. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen by
the Board of Directors and shall be a President, a Secretary and a Treasurer.
The Board of Directors, in its discretion, may also choose a Chairman of the
Board of Directors (who must be a director), a Vice Chairman (who also must be a
director) and one or more Vice Presidents, Assistant Secretaries, Assistant
Treasurers and other officers. Any number of offices may be held by the same
person, unless otherwise prohibited by law, the Restated Certificate of
Incorporation or these Amended and Restated By-Laws. The officers of the
Corporation need not be stockholders of the Corporation nor, except in the case
of the Chairman of the Board of Directors, need such officers be directors of
the Corporation.
Section 2. Election. The Board of Directors at its first meeting held
after each Annual Meeting of Stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The salaries of all officers of the Corporation shall be fixed by
the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the President or any Vice President and any
such officer may, in the name of and on behalf of the Corporation, take all such
action as any such officer may deem advisable to vote in person or by proxy at
any meeting of security holders of any corporation in which the Corporation may
own securities and at any such meeting shall possess and may exercise any and
all rights and power incident to the ownership of such securities and which, as
the owner thereof, the Corporation might have exercised and possessed if
present. The Board of Directors may, by resolution, from time to time confer
like powers upon any other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman of the
Board of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors. Except where by law the signature of
the President is required, the Chairman of the Board of Directors shall possess
the same power as the President to sign all contracts, certificates and other
instruments of the Corporation which may be authorized by the Board of
Directors. During the absence or disability of the President, the Chairman of
the Board of Directors shall exercise all the powers and discharge all the
duties of the President. The Chairman of the Board of Directors shall also
perform such other duties and may exercise such other powers as from time to
time may be assigned to him by these Amended and Restated By-Laws or by the
Board of Directors.
Section 5. President. The President shall be the Chief Executive
Officer of the Corporation. The President shall, subject to the control of the
Board of Directors and, if there be one, the Chairman of the Board of Directors,
have general supervision of the business of the Corporation and shall see that
all orders and resolutions of the Board of Directors are carried into effect. He
shall execute all bonds, mortgages, contracts and other instruments of the
Corporation requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except that
the other officers of the Corporation may sign and execute documents when so
authorized by these Amended and Restated By-Laws, the Board of Directors or the
President. In the absence or disability of the Chairman of the Board of
Directors, or if there be none, the President shall preside at all meetings of
the stockholders and the Board of Directors. The President shall also perform
such other duties and may exercise such other powers as from time to time may be
assigned to him by these Amended and Restated By-Laws or by the Board of
Directors.
Section 6. Vice Presidents. At the request of the President or in his
absence or in the event of his inability or refusal to act (and if there be no
Chairman of the Board of Directors), the Vice President or the Vice Presidents
if there is more than one (in the order designated by the Board of Directors)
shall perform the duties of the President, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the President. Each
Vice President shall perform such other duties and have such other powers as the
Board of Directors from time to time may prescribe. If there be no Chairman of
the Board of Directors and no Vice President, the Board of Directors shall
designate the officer of the Corporation who, in the absence of the President or
in the event of the inability or refusal of the President to act, shall perform
the duties of the President, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the President.
Section 7. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be. If the Secretary shall be unable
or shall refuse to cause to be given notice of all meetings of the stockholders
and special meetings of the Board of Directors, and if there be no Assistant
Secretary, then either the Board of Directors or the President may choose
another officer to cause such notice to be given. The Secretary shall have
custody of the seal of the Corporation and the Secretary or any Assistant
Secretary, if there be one, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by the signature
of the Secretary or by the signature of any such Assistant Secretary. The Board
of Directors may give general authority to any other officer to affix the seal
of the Corporation and to attest the affixing by his signature. The Secretary
shall see that all books, reports, statements, certificates and other documents
and records required by law to be kept or filed are properly kept or filed, as
the case may be.
Section 8. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 9. Assistant Secretaries. Except as may be otherwise provided
in these Amended and Restated By-Laws, Assistant Secretaries, if there be any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President,
if there be one, or the Secretary, and in the absence of the Secretary or in the
event of his disability or refusal to act, shall perform the duties of the
Secretary, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President,
if there be one, or the Treasurer, and in the absence of the Treasurer or in the
event of his disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Treasurer. If required by the Board of Directors,
an Assistant Treasurer shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 11. Other Officers. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number of
shares owned by him in the Corporation.
Section 2. Signatures. Where a certificate is countersigned by (i) a
transfer agent other than the Corporation or its employee, or (ii) a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as the Board of Directors shall require and/or to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable
in the manner prescribed by law and in these Amended and Restated By-Laws.
Transfers of stock shall be made on the books of the Corporation only by the
person named in the certificate or by his attorney lawfully constituted in
writing and upon the surrender of the certificate therefor, which shall be
cancelled before a new certificate shall be issued.
Section 5. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or entitled to express consent to corporate action
in writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty days nor less than ten days
before the date of such meeting, nor more than sixty days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Restated Certificate of Incorporation or these Amended and Restated By-Laws, to
be given to any director, member of a committee or stockholder, such notice may
be given by mail, addressed to such director, member of a committee or
stockholder, at his address as it appears on the records of the Corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Written notice
may also be given personally or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by law,
the Restated Certificate of Incorporation or these Amended and Restated By-Laws,
to be given to any director, member of a committee or stockholder, a waiver
thereof in writing, signed, by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent
thereto.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Restated Certificate of
Incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting, and may be paid in cash, in property, or in shares of the
capital stock. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the Board
of Directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings other
Than Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director or officer of the Corporation,
or is or was a director or officer of the Corporation serving at the request of
the Corporation as a director or officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or
in the Right of the Corporation. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director or officer of the Corporation, or is or was a
director or officer of the Corporation serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation; except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 3. Authorization of Indemnification. Any indemnification under
this Article VIII (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because he has met the applicable standard of conduct set forth in Section 1 or
Section 2 of this Article VIII, as the case may be. Such determination shall be
made (i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (ii) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (iii) by the stockholders. To the extent, however, that a director
or officer of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding described above, or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith, without the necessity of authorization in the specific
case.
Section 4. Good Faith Defined. For purposes of any determination under
Section 3 of this Article VIII, a person shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or books of account of the Corporation or
another enterprise, or on information supplied to him by the officers of the
Corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise. The term "another enterprise" as used in this Section 4 shall mean
any other corporation or any partnership, joint venture, trust, employee benefit
plan or other enterprise of which such person is or was serving at the request
of the Corporation as a director, officer, employee or agent. The provisions of
this Section 4 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Sections 1 or 2 of this Article VIII, as the
case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to any court of competent jurisdiction in the State of
Delaware for indemnification to the extent otherwise permissible under Sections
1 and 2 of this Article VIII. The basis of such indemnification by a court shall
be a determination by such court that indemnification of the director or officer
is proper in the circumstances because he has met the applicable standards of
conduct set forth in Sections 1 or 2 of this Article VIII, as the case may be.
Neither a contrary determination in the specific case under Section 3 of this
Article VIII nor the absence of any determination thereunder shall be a defense
to such application or create a presumption that the director or officer seeking
indemnification has not met any applicable standard of conduct. Notice of any
application for indemnification pursuant to this Section 5 shall be given to the
Corporation promptly upon the filing of such application. If successful, in
whole or in part, the director or officer seeking indemnification shall also be
entitled to be paid the expense of prosecuting such application.
Section 6. Expenses Payable in Advance. Expenses incurred by a
director or officer in defending or investigating a threatened or pending
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized in this Article VIII.
Section 7. Nonexclusivity of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by or granted
pursuant to this Article VIII shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled under any By-Law, agreement, contract, vote of stockholders or
disinterested directors or pursuant to the direction (howsoever embodied) of any
court of competent jurisdiction or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, it
being the policy of the Corporation that indemnification of the persons
specified in Sections 1 and 2 of this Article VIII shall be made to the fullest
extent permitted by law. The provisions of this Article VIII shall not be deemed
to preclude the indemnification of any person who is not specified in Sections 1
or 2 of this Article VIII but whom the Corporation has the power or obligation
to indemnify under the provisions of the General Corporation Law of the State of
Delaware, or otherwise.
Section 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power or the obligation to indemnify him against such
liability under the provisions of this Article VIII.
Section 9. Certain Definitions. For purposes of this Article VIII,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer of
such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, shall stand in
the same position under the provisions of this Article VIII with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued. For purposes of
this Article VIII, references to "fines" shall include any excise taxes assessed
on a person with respect to an employee benefit plan; and references to "serving
at the request of the Corporation" shall include any service as a director,
officer, employee or agent of the Corporation which imposes duties on, or
involves services by, such director or officer with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the Corporation" as
referred to in this Article VIII.
Section 10. Survival of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article VIII shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
Section 11. Limitation on Indemnification. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5 hereof),
the Corporation shall not be obligated to indemnify any director or officer in
connection with a proceeding (or part thereof) initiated by such person unless
such proceeding (or part thereof) was authorized or consented to by the Board of
Directors of the Corporation.
Section 12. Indemnification of Employees and Agents. The Corporation
may, to the extent authorized from time to time by the Board of Directors,
provide rights to indemnification and to the advancement of expenses to
employees and agents of the Corporation similar to those conferred in this
Article VIII to directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
Section 1. These Amended and Restated By-Laws may be altered, amended
or repealed, in whole or in part, or new By-Laws may be adopted by the
stockholders or by the Board of Directors, provided, however, that notice of
such alteration, amendment, repeal or adoption of new By-Laws be contained in
the notice of such meeting of stockholders or Board of Directors as the case may
be. All such amendments must be approved by either the holders of a majority of
the outstanding capital stock entitled to vote thereon or by a majority of the
entire Board of Directors then in office.
Section 2. Entire Board of Directors. As used in this Article IX and
in these Amended and Restated By-Laws generally, the term "entire Board of
Directors" means the total number of directors which the Corporation would have
if there were no vacancies.
EXHIBIT 10.25
EMPLOYMENT AND CONSULTING AGREEMENT
AGREEMENT made as of February 4, 1996 by and between ECKERD
CORPORATION, a Delaware corporation (the "Company") and STEWART TURLEY, residing
at 401 St. Andrews Drive, Belleair, Florida 34616 ("Turley").
WHEREAS, upon the terms and subject to the conditions of this
Agreement, the Company desires to employ Turley and to engage him as a
consultant to the Company and Turley is willing to accept employment by the
Company and to render consulting services to the Company.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
I. EMPLOYMENT
1. Employment.
Upon the terms and subject to the conditions of this
Agreement, the Company hereby employs Turley and Turley hereby accepts
employment by the Company in the capacity hereinafter set forth.
2. Term of Employment.
The term of Turley's employment by the Company under this
Agreement shall commence on February 4, 1996 and shall continue through January
31, 1998, subject to termination as provided in Section 14 hereof (the
"Employment Period").
3. Duties; Extent of Services.
(a) During the Employment Period, Turley shall serve as the
Chairman of the Board of the Company or in such other executive capacity as
shall be determined from time to time by agreement between Turley and the Board
of Directors of the Company and shall perform the duties, undertake the
responsibilities and exercise the authority customarily performed, undertaken
and exercised by a person in such position in the business in which the Company
is engaged.
(b) Except as otherwise provided herein and except for
illness, permitted vacation periods and permitted leaves of absence during the
Employment Period, Turley shall (i) devote such time and attention during normal
business hours to the business of the Company and its subsidiaries as Turley and
the Company shall agree; (ii) use his efforts to
promote the Company's and its subsidiaries' interest; and (iii) discharge such
other and further executive and administrative duties as may be reasonably
assigned to him by the Board of Directors of the Company and its subsidiaries.
4. Compensation.
(a) In consideration of the services rendered by Turley as an
employee under this Agreement, the Company shall pay Turley a base annual salary
(the "Base Salary") in the amount of Six Hundred Fifty Thousand Dollars
($650,000) payable monthly on the fifteenth (15th) of each month during the
Employment Period.
(b) During the Employment Period, as additional compensation
for his services and as a further incentive and inducement to Turley to accept
employment by the Company and to devote his efforts to the business and affairs
of the Company and its subsidiaries, Turley shall be entitled to participate in
the Company's Executive Three Year Bonus Plan (or any bonus plan replacing such
plan). Turley's participation in the Company's Key Management Bonus Plan shall
terminate on February 3, 1996, although the Board of Directors may, in its
discretion, pay additional bonuses to Turley during the Employment Period.
(c) The Company agrees that Turley shall be entitled to defer
some portion or all of his Base Salary for any calendar year in accordance with
the provisions of the Company's Executive Deferred Compensation Plan as adopted
by the Board of Directors.
5. Fringe Benefits.
In addition to the compensation provided in Section 4 above,
during the Employment Period Turley shall be entitled to the following benefits:
(a) Turley shall be entitled to paid vacation time annually in
accordance with the Company policy as determined by the Board of Directors.
(b) Turley shall be entitled to participate in all employee
benefit programs now or hereafter maintained by the Company for executive
personnel for which he is eligible, including, without limitation, group life
insurance, short and long-term disability, profit sharing, pension, automobile
allowance or leasing, stock option (subject to approval by the Board of
Directors), supplemental retirement income (subject to approval by the Board of
Directors), hospitalization and medical and dental reimbursement plan or
program, his participation in such programs to be based upon the applicable
provisions of such programs as they may exist from time to time.
II. CONSULTING
6. Consultant.
Upon the terms and subject to the conditions of this
Agreement, the Company hereby agrees to retain Turley, and Turley hereby agrees
to serve the Company, as a consultant.
7. Term of Consultant Relationship.
The term of Turley's retention as a consultant to the Company
shall commence on February 1, 1998 and shall continue through February 3, 2001,
subject to termination as provided in Section 13 hereof (the "Consulting
Period") (the Employment Period and the Consulting Period are collectively
referred to herein as the "Contract Period").
8. Duties; Extent of Service.
During the Consulting Period, Turley shall serve as a
consultant to the Company and its subsidiaries to act in an advisory capacity
thereto. Turley shall furnish such consulting services as may be reasonably
requested of him from time to time during the Consulting Period as are
commensurate with his knowledge, ability and experience, provided that he shall
not be called upon to render such services more than fifty (50) days during any
fiscal year of the Company during the Consulting Period. Turley shall be
available to advise and counsel the Company and its subsidiaries at such
reasonable times and locations as may be agreed upon from time to time by Turley
and the Board of Directors or Chief Executive Officer of the Company.
9. Compensation.
In consideration of the consulting services rendered by Turley
under this Agreement, the Company shall pay Turley an annual consulting fee (the
"Consulting Fee") in the amount of Three Hundred Twenty-Five Thousand Dollars
($325,000) payable monthly on the fifteenth (15th) of each month during the
Consulting Period.
10. Fringe Benefits.
In addition to the compensation provided in Section 9 above,
during the Consulting Period Turley shall be entitled to participate in the same
life insurance and hospitalization and medical and dental reimbursement plan or
programs that he participates in during the Employment Period.
11. Consultant Relationship.
During the Consulting Period, Turley shall be an independent
contractor and, except as provided in Section 10 above or as otherwise provided
by the Board of Directors, shall not be entitled to participate in any pension,
profit sharing, stock purchase or option plan, or any plan of life, disability
or heath insurance or incentive compensation plan or any other employee benefit
plan or program of the Company. During the Consulting Period, Turley shall be
responsible for payment of all taxes, including Federal, state and local taxes
arising out of activities engaged in during the Consulting Period, including but
not limited to all federal and state income tax, social security tax,
unemployment insurance taxes and any other applicable taxes.
III. GENERAL
12. Expenses.
The Company shall pay or reimburse Turley for all reasonable
expenses reasonably incurred or paid by him in connection with the performance
of his duties under this Agreement (whether as an employee or as a consultant)
upon presentation of expense statements or vouchers and such other supporting
documentation as the Company may from time to time reasonably request.
13. Benefits Payable Upon Disability or Death.
(a) In the event of the disability (as hereinafter defined) of
Turley during the Contract Period, the Company shall continue to pay Turley the
applicable compensation provided in Section 4 or Section 9 hereof (as the case
may be) during the period of his disability or earlier termination hereof;
provided, however, that in the event Turley is disabled for a continuous period
exceeding six (6) consecutive calendar months, the Company may, at its election,
terminate this Agreement at the close of business on the date thirty (30) days
after the Company shall have delivered a written notice of such election to
Turley, in which event Turley shall be entitled to (i) receive benefits under
the Company's Long Term Disability Plan as such plan may exist as of the date of
termination of this Agreement (provided that he is then participating in such
plan), and (ii) promptly receive a lump sum payment equal to the amount of Base
Salary or Consulting Fee, or both, as the case may be, that would otherwise have
been payable to him during the remainder of the Contract Period pursuant to this
Agreement.
As used in this Agreement, the term "disability" shall mean
the inability of Turley due to illness or physical or mental infirmity to
perform his duties under this Agreement as determined by a physician selected by
Turley and acceptable to the Company.
(b) During the period Turley shall be entitled to receive
monthly payments under Section 13(a) above, to the extent that he is physically
and mentally able to do so, he shall, upon the request of the Company, furnish
information and assistance to the Company, and, in addition, upon reasonable
request of Chief Executive Officer or the Board of Directors, he shall make
himself available to the Company to undertake reasonable assignments consistent
with the dignity, importance and scope of his position and his physical and
mental health.
(c) In the event of the death of Turley during the Contract
Period, the Company shall pay, or cause to be paid, to Turley's designated
beneficiary or beneficiaries or estate or legal representatives: (i) the payment
due pursuant to the terms of the group term insurance policies together with
such other death benefits as may be payable under the Company's benefit plans
which he then participates in, and (ii) a lump sum payment equal to the amount
of Base Salary or Consulting Fee, or both, as the case may be, that would
otherwise have been payable to him during the remainder of the Contract Period
pursuant to this Agreement.
14. Termination.
(a) Except as otherwise provided in subsection (c) and (d)
hereof, this Agreement and the Company's contractual relationship with Turley
hereunder shall terminate upon the earliest to occur of the dates specified
below:
(i) the close of business on the date that is the last day of
the Contract Period;
(ii) the close of business on the date of death of Turley;
(iii) the close of business on the date the Company delivers
to Turley a written notice of its election to terminate this Agreement for
"Cause" (as defined in paragraph (b) below);
(iv) the close of business on the date thirty (30) days after
the Company shall have delivered to Turley a written notice of its intention to
terminate this Agreement because the Board of Directors has determined that such
termination is in the best interests of the Company and such termination is not
for cause, death, or disability; or
(v) the close of business on the date of a termination by the
Company pursuant to Section 13(a) hereof; or
(vi) the close of business on the date on which Turley
terminates this Agreement other than pursuant to Section 17(c) hereof.
(b) For purposes of this Agreement, the term "Cause" shall
mean: (i) Turley's conviction (which, through lapse of time or otherwise, is not
subject to appeal) of, or a plea of guilty or nolo contendre to, any crime or
offense which constitutes a felony in the jurisdiction involved or involves
moral turpitude, (ii) the commission of an act of fraud, embezzlement or
intentional dishonesty against the Company or any of its subsidiaries, (iii) a
breach of this Agreement by Turley, or (iv) breach of fiduciary duty resulting
in injury to the Company or its subsidiaries.
(c) For purposes hereof, upon termination of this Agreement as
provided in Section 14(a)(i)-(vi), all obligations and liabilities of the
parties hereto shall cease and be of no effect except for those liabilities and
obligations provided for in Section 13, 15 and 16 hereof.
(d) For purposes of clause (iv) of Section 14(a) above, Turley
shall be relieved of his duties and shall vacate his office and the Company's
premises on the date of receipt of the notice required by such clause unless
requested by the Company to remain in the active employment of, or as a
consultant to, the Company during such period between the receipt of notice and
the effective date of termination.
15. Payments to Employee Upon Termination.
(a) Upon the termination of this Agreement by the Company in
accordance with clause (iv) of Section 14(a) of this Agreement, the Company
shall pay to Turley, or in the event of his subsequent death, to his beneficiary
or beneficiaries or his estate or legal representative, as severance pay (i) a
lump sum payment equal to the amount of Base Salary or Consulting Fee, or both,
as the case may be, that would otherwise have been payable to him during the
remainder of the Contract Period pursuant to this Agreement, plus (ii) if the
termination occurs during the Employment Period, subject to the terms and
provisions of the Executive Three Year Bonus Plan, a pro rata portion of any
bonus compensation payable to Turley under the Company's Executive Three Year
Bonus Plan.
(b) Upon the termination of this Agreement pursuant to clause
(iv) of Section 14(a) of this Agreement during the Employment Period, the
Company shall at its expense continue on behalf of Turley the following
benefits: life insurance, short and long-term disability insurance,
hospitalization insurance and medical and dental reimbursement plan insurance.
The coverage of any such insurance provided by the Company hereunder shall be no
less favorable to Turley, in terms of amounts and deductibles, than the coverage
provided under the benefit programs maintained by the Company from time to time
for the Company's executives. The Company's obligation hereunder with respect to
each of the foregoing benefit plans shall terminate upon the earlier of the end
of the Severance Period or the date Turley obtains any such benefits pursuant to
a subsequent employer's benefit plans.
(c) Benefits pursuant to the Company's Profit Sharing and
Pension Plans (and such other plans in which Employee participates) shall be
payable to Turley in accordance with the terms of such Plans.
(d) For purposes of this Agreement, the Severance Period shall
mean eighteen (18) months.
(e) Turley further acknowledges that as a condition precedent
to receiving any benefits under this Agreement, Turley shall complete, execute
and deliver to the Company at the time of the termination of this Agreement a
Release in the form of Exhibit "A" hereto which releases any and all claims that
Turley may have against the Company as of the date of termination arising under
federal, state, local or common law.
16. Covenants of Turley.
(a) Turley agrees that during the Contract Period and for a
period of time equal to (i) one year in the event of a termination of this
Agreement in accordance with clause (iii) of Section 14(a); (ii) two years in
the event of a termination of this Agreement in accordance with Section 13(a);
or (iii) the Severance Period in the event of a termination of this Agreement in
accordance with clause (iv) of Section 14(a) or in the event of a termination
under any other circumstance, he will not, directly or indirectly, engage,
assist or participate in, whether as a director, officer, employee, agent,
manager, consultant, partner, owner or independent contractor or other
participant, any business, firm, corporation, partnership, enterprise or
organization that competes with the business engaged or hereafter engaged in by
the Company or any of its subsidiaries (including, but not limited to, the
operation of retail drug stores in which prescription drugs are sold, the sale
of photofinishing products or services, the mail order pharmacy business, and/or
the pharmacy benefits management business) in the Company's or such
subsidiaries' trade areas (for purposes hereof "trade areas" shall mean any
county in any state of the United States in which retail drug stores operated by
the Company and its subsidiaries are located or in which services are provided
by the Company or its subsidiaries). Nothing contained herein shall prevent
Turley from acquiring less than 2% of any class of outstanding securities of any
Company that has any of its securities listed on a national securities exchange
or traded in the over-the-counter market.
(b) Turley agrees that during the Contract Period and for a
period of two years after the termination of this Agreement for any reason, he
will not directly induce or solicit any person employed or hereafter employed by
the Company or any of its subsidiaries to leave the employ of the Company or any
of its subsidiaries.
(c) Turley agrees and acknowledges that the Confidential
Information of the Company and its subsidiaries (as hereinafter defined) is
valuable, special and unique to their business; that such business depends on
such Confidential Information; and that the Company wishes to protect such
Confidential Information by keeping it confidential for the use and benefit of
the Company. Based on the foregoing, Turley agrees to undertake the following
obligations with respect to such Confidential Information:
(i) Turley agrees to keep any and all Confidential Information
in trust for the use and benefit of the Company;
(ii) Turley agrees that, except as required by Turley's duties
or authorized in writing by the Company and its subsidiaries or required by
applicable law, he will not at any time during and for a period of five (5)
years after the termination of this Agreement, disclose, directly or indirectly,
any Confidential Information of the Company or any of its subsidiaries.
(iii) Turley agrees to take all reasonable steps necessary, or
reasonably requested by the Company and its subsidiaries, to ensure that all
Confidential Information of the Company is kept confidential for the use and
benefit of the Company and its subsidiaries; and
(iv) Turley agrees that, upon termination of this Agreement by
the Company or any of its subsidiaries or at any other time the Company may in
writing so request, he will promptly deliver to the Company all materials
constituting Confidential Information (including all copies thereof) that are in
his possession or under his control. Turley further agrees that, if requested by
the Company to return any Confidential Information pursuant to this Subsection
(iv), he will not make or retain any copy or extract from such materials.
For purposes of this Section 16(c), Confidential Information
means any and all information developed by or for the Company or any of its
subsidiaries of which Turley gained knowledge by reason of his employment by (or
consultant relationship with) the Company or any of its subsidiaries prior to
the date hereof or his employment under this Agreement that is not generally
known in any industry in which the Company is or may become engaged.
Confidential Information includes, but is not limited to, any and all
information developed by or for the Company concerning plans, marketing and
sales methods, materials, processes, business forms, procedures, devices used by
the Company, its subsidiaries, suppliers and customers with which the Company
had dealt prior to Turley's termination of this Agreement, plans for development
of new products, services and expansion into new areas or markets, internal
operations, and any trade secrets and proprietary information of any type owned
by the Company and its subsidiaries, together with all written, graphic and
other materials relating to all or any part of the same.
17. Change of Control
(a) Definition of Change of Control. No benefits shall be
payable under this Section 17 unless there shall have been a Change of Control,
as set forth below, and this Agreement shall thereafter have been terminated in
accordance with Section 17(b) below. As used herein, the term "Change of
Control" shall mean:
(i) the acquisition by any individual, firm, corporation or
other entity or any group of individuals, firms, corporations or other entities
acting in concert ("Person") together with all Affiliates and Associates (as
such terms are defined in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934 (the "Exchange Act") of such Person of
beneficial ownership (as such term is defined in Rule 13d-3 under the Exchange
Act) of more than 25% of the outstanding shares of voting stock of the Company;
(ii) any change in the composition of the Board of Directors
of the Company resulting in members of the Board on the date hereof (or such
other persons who are elected by, or on the recommendation of, a majority of
such members or other persons who had been elected by, or on the recommendation
of, a majority of such members) ("Continuing Directors") ceasing to constitute a
majority of the Board of Directors; or
(iii) any other event determined by a majority of the Board of
Directors of the Company to constitute a Change of Control.
(b) Termination Following Change of Control. If any of the
events described in Section 17(a) above constituting a Change of Control shall
have occurred, Turley shall be entitled to the benefits provided in Section
17(e) hereof upon the subsequent termination of employment during the time
period referred to in Section 17(e) hereof if such termination is (i) by the
Company pursuant to Subsections 14(a)(iv) or (v) hereof or (ii) by Turley for
Good Reason.
(c) Definition of Good Reason.
(A) Turley shall be entitled to terminate for Good Reason. For
purposes of this Agreement, "Good Reason" shall without Turley's express written
consent, mean, following a Change of Control:
(1) the assignment to Turley of any duties inconsistent with
Turley's status as a senior executive officer of, or consultant to, the Company
or a substantial alteration in the nature or status of Turley's responsibilities
from those in effect immediately prior to a Change of Control; or an adverse and
substantial alteration in Turley's reporting responsibilities, title or offices
as in effect immediately prior to a Change of Control or any removal of Turley
from or failure to reelect Turley to any such positions except in connection
with the termination of this Agreement for Disability or Cause or as a result of
death or by Turley other than for Good Reason;
(2) a reduction by the Company in Turley's annual Base Salary
as in effect on the date hereof during the Employment Period or in the
Consulting Fee during the Consulting Period;
(3) any material breach by the Company of any provision of
this Agreement; or
(4) any purported termination of this Agreement which is not
effected pursuant to a Notice of Termination satisfying the requirements of
Section 17(d) below and, for purposes of this Agreement, no such purported
termination shall be effective.
(B) Turley's right to terminate his employment pursuant to
this Subsection 17(c) shall not be affected by Turley's incapacity due to
physical or mental illness.
(d) Notice of Termination. Any purported termination by the
Company or by Turley shall be communicated by written Notice of Termination to
the other party hereto in accordance with Section 19 hereof. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision of this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of this Agreement under the provision so
indicated. For purposes of this Agreement, no such purported termination shall
be effective without such Notice of Termination.
(e) Compensation for Termination. If this Agreement shall be
terminated by the Company within two years after a Change of Control but prior
to the end of the Contract Period (a) by the Company pursuant to Subsections
(14)(a)(iv) or (v), or (b) by Turley for Good Reason, then:
(i) within five (5) days of the date of such termination, the
Company shall pay Turley a single severance payment in cash in an amount equal
to the amount of Base Salary or Consulting Fee, or both, as the case may be,
that would otherwise have been payable to him during the remainder of the
Contract Period pursuant to this Agreement plus, if such termination occurs
during the Employment Period, a lump sum payment equal to two (2) times the
amount of Turley's Base Salary, plus (x) if the termination occurs during the
Employment Period, all accrued but unpaid Base Salary and a pro rata amount of
the bonus payable pursuant to Section 4 hereof through the date of termination,
or (y) if the termination occurs during the Consulting Period, all accrued but
unpaid amounts of the Consulting Fee;
(ii) for a period of two (2) years after a termination that
occurs during
the Employment Period, the Company shall at its expense continue on behalf of
Turley the benefits described in Section 15(b) of this Agreement; and
(iii) any restrictions on any outstanding incentive awards
(including, but not limited to, restricted stock) granted to Turley under any of
the Company's benefit plans or otherwise shall lapse and such incentive awards
shall become 100% vested.
(f) Mitigation. Turley shall not be required to mitigate the
amount of any payment provided for in this Section 17 by seeking other
employment or otherwise nor shall the amount of any payment or benefit provided
for in this Section 17 be reduced by any compensation earned by Turley as the
result of employment by another employer or by retirement benefits after the
date of termination or otherwise.
(g) Compensation Election. If Turley receives compensation
pursuant to this Section 17, Turley shall not be entitled to any other benefits
hereunder, other than that referred to in subsection (e) above, the receipt of
any compensation which Turley had earned but previously elected to defer receipt
of and the right to exercise options in accordance with the terms of the
Company's Stock Option Plans under which such options were granted.
(h) Excise Tax Payment. In the event that any payment or
benefit (within the meaning of Section 280G(b)(2) of the Internal Revenue Code
of 1986, as amended (the "Code")), to Turley or for this benefit paid or payable
or distributed or distributable pursuant to the terms of this Agreement or
otherwise in connection with, or arising out of, his employment or consulting
with the Company or a Change in Control of the Company (a "Payment" or
"Payments"), would be subject to the excise tax imposed by Section 4999 of the
Code or any interest or penalties are incurred by Turley with respect to such
excise tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then Turley will be
entitled to immediately receive an additional payment (a "Gross-Up Payment") in
an amount such that after payment by Turley of all taxes (including any interest
or penalties, other than interest and penalties imposed by reason of Turley's
failure to file timely a tax return or pay taxes shown due on his return,
imposed with respect to such taxes and the Excise Tax), including any Excise Tax
imposed upon the Gross-Up Payment, Turley retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
18. Successors and Assigns.
(a) This Agreement shall be binding upon and shall inure to
the benefit of the Company, its successors and assigns. The term "Company" as
used herein shall include such successors and assigns. The term "successors and
assigns" as used herein shall mean a corporation or other entity acquiring all
or substantially all the assets and business of this Company (including this
Agreement) whether by operation of law or otherwise.
(b) Neither this Agreement nor any right or interest hereunder
shall be assignable by Turley, his beneficiaries, or legal representatives
without the Company's prior written consent; provided, however, that nothing in
this Section 18 shall preclude (i) Turley from designating a beneficiary to
receive any benefit payable hereunder upon his death, or (ii) the executors,
administrators, or other legal representatives of Turley or his estate from
assigning any rights hereunder to distributees, legatees, beneficiaries,
testamentary trustees or other legal heirs of Turley.
(c) After a Change of Control, the Company will require any
successor or assign (whether direct or indirect, by purchase, merger,
consolidation of otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession or assignment shall be a breach of this Agreement and shall
entitle Turley to compensation from the Company in the same amount and on the
same terms as Turley would be entitled hereunder if Turley terminated employment
for Good Reason except that, for purposes of implementing the foregoing, the
date on which any such succession or assignment becomes effective shall be
deemed the date of termination. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor or assign to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
19. Notices.
Any notice required or permitted by this Agreement shall be
given by registered or certified mail, return receipt requested, addressed to
the Company at its then principal office, or to Turley at his address specified
on page 1 of this Agreement, or to either party hereto at such other address or
addresses as he or it may from time to time specify for such purposes in a
notice similarly given.
20. Governing Law; Litigation; Expenses.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without giving effect to the
conflicts of law principles thereof.
(b) Turley and the Company hereby agree that the courts of the
State of Florida shall have exclusive jurisdiction to hear and determine any
claims or disputes pertaining to this Agreement or to any matter arising
therefrom. Each of Turley and the Company expressly submits and consents in
advance to such jurisdiction in any action commenced in such courts hereby
waiving personal service of the summons and complaint or other process or papers
issued therein, and agreeing that service of such summons and complaint, or
other process or papers, may be made by registered or certified mail addressed
to the Company at its then principal office or to Turley at his address
specified on page 1 of this Agreement, or to either party hereto at such other
addresses as it or he from time to time specify to the other party in writing
for such purpose. The exclusive choice of forum set forth in this Section 20
shall not be deemed to preclude the enforcement of any judgment obtained in such
forum or the taking of any action under this Agreement to enforce such judgment
in any appropriate jurisdiction.
(c) All costs and expenses (including attorneys' fees)
incurred in connection with any litigation relating to a claim or dispute
pertaining to this Agreement shall be paid by the party incurring such expenses,
except if the claim or dispute pertains to the enforcement of Section 17 hereof,
in which case the prevailing party shall be entitled to an award of such costs
and expenses from the non-prevailing party.
(d) Nothing contained in this Section 20 shall be deemed to
limit the Company's obligation to indemnify Turley to the fullest extent
permitted by applicable law in respect of any actions, claims or proceedings
which are based upon acts or omissions of Turley related to the performance of
his duties hereunder to the extent he would have otherwise been entitled to
indemnification under the by-laws or charter of the Company or any of its
subsidiaries or to the extent to which indemnification is to be paid to officers
and directors as a matter of law.
21. Entire Agreement.
This instrument contains the entire agreement of the parties
relating to the subject matter hereof and supersedes any and all other
agreements and understandings, whether written, oral or otherwise, with respect
to the subject matter hereof and all of such other agreements and understandings
shall be of no force or effect. Nothing contained in this Agreement shall in any
way limit any benefits that Turley shall otherwise be entitled to under the
Company's profit sharing or pension plans or other employee benefit plans that
Turley participated or participates in either prior to or after the date hereof.
No modification of this Agreement shall be valid unless in writing and signed by
the parties hereto. The waiver of a breach of any term or condition of this
Agreement shall not be deemed to constitute a waiver of any subsequent breach of
the same or any other term or condition of this Agreement.
22. Severability.
If any term or provision of this Agreement or the application
thereof to any person, property or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement, or the application of such
term or provision to persons, property or circumstances other than those as to
which it is invalid or unenforceable shall not be affected thereby, and each
term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
23. Injunctive Relief.
(a) Turley acknowledges and agrees that the covenants and
obligations contained in Sections 16(a), 16(b) and 16(c) of this Agreement
relate to special, unique and extraordinary matters and that a violation of any
of the terms of such Sections will cause the Company irreparable injury for
which adequate remedies at law are not available. Therefore, Turley agrees that
the Company shall be entitled to an injunction, restraining order, or other
equitable relief from any court of competent jurisdiction, restraining Turley
from committing any violation of the covenants and obligations set forth in
Sections 16(a), 16(b) and 16(c) hereof.
(b) The Company's rights and remedies under this Section 23
are cumulative and are in addition to any other rights and remedies the Company
may have at law or in equity. In connection with the foregoing provision of this
Section 23, Turley represents that his economic means and circumstances are such
that such provisions will not prevent him from providing for himself and his
family on a basis satisfactory to him.
24. Withholding Taxes.
The Company may deduct from any payments to be made hereunder
any federal, state or local withholding or other taxes which the Company
determines it is required to deduct under applicable law.
25. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day, month and year first written above.
ECKERD CORPORATION TURLEY
By: /s/ James M. Santo /s/ Stewart Turley
Name: James M. Santo Stewart Turley
Its: Executive Vice President
a: turley
EXHIBIT 10.26
EMPLOYMENT AGREEMENT
AGREEMENT made as of February 4, 1996, by and between Eckerd
Corporation, a Delaware corporation (the "Company") and Frank Newman residing at
820 South Bayside Drive, Tampa, Florida 33609, (the "Employee").
WHEREAS, upon the terms and subject to the conditions of this
Agreement, the Company desires to employ the Employee and the Employee is
willing to accept employment by the Company,
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:
1. Employment.
Upon the terms and subject to the conditions of this
Agreement, the Company hereby employs the Employee and the Employee hereby
accepts employment by the Company in the capacity hereinafter set forth.
2. Term of Employment.
The term of the Employee's employment by the Company under
this Agreement shall commence on the date hereof, and shall be for a term of
twelve (12) months, subject to extension and termination as provided in Section
8 hereof (the "Contract Period").
3. Duties; Extent of Services.
(a) During the Contract Period, the Employee shall serve as
the Chief Executive Officer, President and Chief Operating Officer of the
Company and shall perform the duties, undertake the responsibilities and
exercise the authority customarily performed, undertaken and exercised by a
person in such position in the business in which the Company is engaged.
(b) Except as otherwise provided herein and except for
illness, permitted vacation periods and permitted leaves of absence during the
Contract Period, the Employee shall (i) devote his full time and attention
during normal business hours to the business of the Company and its
subsidiaries; (ii) use his best efforts to promote the Company's and its
subsidiaries' interests; (iii) discharge such other and further executive and
administrative duties not inconsistent with his position as may be assigned to
him by the Board of Directors of the Company or its chief executive officer; and
(iv) in addition to serving as a director of the Company (if elected), serve as
director of any subsidiary of the Company if elected as such.
(c) Except for directorships held by the Employee on the date
of this Agreement, during the Contract Period the Employee will not, without the
prior written consent of the Company's Board of Directors, such consent not to
be unreasonably withheld, serve as a director of any corporation, joint venture,
association or other commercial enterprise not controlled by, controlling or
under common control with, the Company and its subsidiaries.
4. Compensation.
(a) In consideration of the services rendered by the Employee
under this Agreement, the Company shall pay the Employee a base annual salary
(the "Base Salary") in the amount of $575,000 (or such other higher amount as
the Board of Directors of the Company shall determine) payable monthly on the
fifteenth (15th) of each month during the Contract Period. The Base Salary shall
be reviewed as of February 1, 1997 and annually thereafter.
(b) During the Contract Period, as additional compensation for
his services and as a further incentive and inducement to the Employee to accept
employment by the Company and to devote his best efforts to the business and
affairs of the Company and its subsidiaries, the Company shall pay to the
Employee additional compensation (the "Bonus Compensation") in the following
amounts:
(i) The Employee shall be entitled to participate in the
Company's annual bonus, and three-year bonus plans (and such other plans as may
be in effect from time to time) on the same terms and conditions generally
applicable to the other senior executive officers of the Company as determined
by the Board of Directors of the Company from time to time.
(c) The Company agrees that the Employee shall be entitled to
defer some portion or all of his Base Salary for any calendar year in accordance
with the provisions of the Company's Executive Deferred Compensation Plan as
adopted by the Board of Directors.
(d) The Company shall provide either a top of the line
domestic model automobile for Employee's use in accordance with the Company's
standard policies, or, at Employee's option, a monthly automobile allowance
sufficient for Employee to lease a top of the line domestic model automobile,
together with reimbursement of automobile expenses provided the expenses do not
exceed those associated with a top of the line domestic model automobile.
5. Fringe Benefits.
In addition to the compensation provided in Section 4 above,
during the Contract Period the Employee shall be entitled to the following
benefits:
(a) The Employee shall be entitled to paid vacation time for
at least four (4) weeks annually.
(b) The Employee shall be entitled to participate in all
employee benefit programs now or hereafter maintained by the Company for senior
executive personnel for which he is eligible, including, without limitation,
group life insurance, short and long-term disability, profit sharing, pension,
stock option, supplemental retirement income, hospitalization and medical and
dental reimbursement plan or program, his participation in such programs to be
based upon the applicable provisions of such programs as they may exist from
time to time.
(c) The Employee shall be entitled to a private office and a
secretary and such other assistance and accommodations as shall be suitable to
the character of the Employee's position with the Company and adequate for the
performance of his duties hereunder.
6. Expenses.
The Company shall pay or reimburse the Employee for all
reasonable and normal business expenses, including reasonable expenses
associated with participation in professional or similar business organizations
reasonably incurred or paid by him in connection with the performance of his
duties hereunder upon presentation of expense statements or vouchers and such
other supporting documentation as the Company may from time to time reasonably
request.
7. Benefits Payable Upon Disability.
(a) In the event of the disability (as hereinafter defined) of
the Employee during the Contract Period, the Company shall, subject to the
provisions of Section 9 hereof, continue to pay the Employee the compensation
provided in Section 4 hereof during the period of his disability or earlier
termination hereof; provided, however, that in the event the Employee is
disabled for a continuous period exceeding six (6) consecutive calendar months,
the Company may, at its election, terminate this Agreement at the close of
business on the date thirty (30) days after the Company shall have delivered a
written notice of such election to the Employee, in which event the Employee
shall be entitled to receive benefits under the Company's Long Term Disability
Plan as such plan may exist as of the date of termination of this Agreement and
compensation provided in Section 4(a) hereof shall cease, provided however, that
Employee shall receive not less than $25,000 per month up to age sixty-five
(65).
As used in this Agreement the term "disability" shall mean the
inability of the Employee due to illness or physical or mental infirmity to
perform his duties under this Agreement as determined by a physician selected by
the Employee and acceptable to the Company.
(b) During the period the Employee shall be entitled to
receive payments under Section 7(a) above, to the extent that he is physically
and mentally able to do so, he shall, upon the request of the Company furnish
information and assistance to the Company, and, in addition, upon reasonable
request of the chief executive officer of the Company, he shall make himself
available to the Company to undertake reasonable assignments consistent with the
dignity, importance and scope of his position and his physical and mental
health.
(c) In the event of the death of Employee during the Contract
Period, the Company shall pay, or cause to be paid, to the Employee's designated
beneficiary or beneficiaries or estate or legal representatives, the payment due
pursuant to the terms of the group term insurance policies together with such
other death benefits as may be payable under the Company's benefit plans.
8. Termination.
(a) Except as otherwise provided in Sections 7, 9 and 10
hereof, this Agreement and the employment of the Employee hereunder shall
terminate upon the earliest to occur of the dates specified below:
(i) the close of business on the date that is one year after
the date hereof (the "Initial Period"), except that this Agreement and the
employment of the Employee hereunder shall be automatically extended from year
to year thereafter unless terminated by the Company or the Employee by the
delivery of not less than ninety (90) days written notice to the Employee or the
Company, as the case may be, (in which case the employment of the Employee shall
terminate on the date specified for termination in such notice);
(ii) the close of business on the date of death of the
Employee;
(iii) the close of business on the date the Company delivers
to the Employee a written notice of its election to terminate his employment for
"cause" (as defined in paragraph (b) below);
(iv) the close of business on the date thirty (30) days after
the Company shall have delivered to the Employee a written notice of its
intention to terminate his employment because the Board of Directors has
determined that such termination is in the best interests of the Company and
such termination is not for cause, death, disability or failure to extend
pursuant to Section 8(a)(i) hereof; or
(v) the close of business on the date of a termination by the
Company pursuant to Section 7(a) hereof.
(b) For purposes of this Agreement, the term "cause" shall
include a willful refusal to perform duties in accordance with the Company's
policies, commission by Employee of a material act of fraud or intentional
dishonesty, breach of fiduciary duty resulting in significant injury to the
Company and Employee's conviction for, or a plea of nolo contendere to, a
felony.
9. Payments to Employee Upon Termination of Employment.
(a) Upon the termination of the Employee's full-time
employment hereunder by the Company in accordance with clauses (i), (iv) or (v)
of Section 8(a) of this Agreement, the Company shall pay to the Employee, or in
the event of his subsequent death, to his beneficiary or beneficiaries or his
estate or legal representative, as severance pay an amount equal to two (2)
times the then current Base Salary paid to the Employee under this Agreement,
payable in twenty-four (24) equal monthly payments plus (y) a pro rata portion
of any Bonus Compensation which would have been paid to the Employee pursuant to
Section 4(b)(i) hereof in respect of the year of termination if he had not been
so terminated. The Employee shall continue to be entitled to receive any
compensation which Employee had earned but previously elected to defer receipt
of.
(b) For a period of two (2) years following the termination of
the Employee's full-time employment hereunder for any reason which termination
occurs during the Contract Period other than termination by the Company for
cause or death, the Company shall at its expense provide on behalf of the
Employee the following benefits: life insurance, short and long-term disability
insurance, hospitalization insurance and medical and dental reimbursement plan
insurance with coverage in terms of amounts and deductibles comparable to that
provided from time to time during such two year period to senior executives of
the Company. The Company's obligation hereunder with respect to each of the
foregoing benefit plans shall be limited to the extent that the Employee obtains
any such benefits pursuant to a subsequent employer's benefit plans in which
case the Company may reduce the coverage of any benefits it is required to
provide the Employee under the foregoing plans as long as the aggregate coverage
of the combined benefit plans is no less favorable to the Employee, in terms of
amounts and deductibles, than the coverage provided under the benefit programs
maintained by the Company for senior executives of the Company from time to time
during such two year period.
(c) If the Company terminates Employee pursuant to clauses
(ii) or (iii) of Section 8(a) or the Employee terminates employment pursuant to
clause (i) of Section 8(a), the Employee shall be entitled to Base Salary up to
the date of termination plus any benefits, if any, to the extent provided for in
any Company plans, and no other compensation or benefits, except that: (i) in
the case of a termination pursuant to clause (ii) of Section 8(a), the death
benefits referred to in Section 7(c) shall be payable, and (ii) Employee shall
continue to be entitled to receive any compensation which Employee had earned
but previously elected to defer receipt of.
10. Covenants of the Employee.
(a) The Employee agrees (unless Employee is terminated by the
Company pursuant to clause (iii) of Section 8(a), which termination has not been
intentionally induced by Employee) that during the Contract Period and for a
period of two (2) years thereafter, (herein referred to as the "Non-Compete
Period"), he will not, directly or indirectly, engage, assist or participate in,
whether as a director, officer, employee, agent, manager, consultant, partner,
owner or independent contractor or other participant, any business, firm,
corporation, partnership, enterprise or organization that through the operation
of any of the following types of business operations (collectively referred to
herein as "Competitive Business"):
(i) retail drug chains similar to those operated by the
Company;
(ii) "deep discount" drug chains;
(iii) "food/drug" combination retail chains;
(iv) Walmart or any similar type of discount chain stores of a
regional nature which are predominately operating in the same states as the
Company's stores are located; or
(v) any other chain retail organizations whose sales are
comprised of thirty-five (35%) percent or more of prescription drug sales is
engaged in Competitive Business in any states in which the Company or any of its
subsidiaries is engaged in Competitive Business during the Contract Period, on
the date of termination of Employee's employment, or in any states in which the
Company or any of its subsidiaries plans (which plans are evidenced by some
written documentation), as of the date of Employee's termination of employment,
to engage in Competitive Business within the next three (3) years, provided
however, that Employee's covenants herein shall not extend beyond the
Non-Compete Period. Nothing contained herein shall prevent the Employee from
acquiring less than 2% of any class of outstanding securities of any company
that has any of its securities listed on a national securities exchange or
traded in the over-the-counter market.
(b) The Employee agrees that during the Contract Period and
for a period of two years after the termination of this Agreement for any
reason, he will not directly induce or solicit any person employed or hereafter
employed by the Company or any of its subsidiaries in an executive or key
management position to leave the employ of the Company or any of its
subsidiaries.
(c) The Employee agrees and acknowledges that the Confidential
Information of the Company and its subsidiaries (as hereinafter defined) is
valuable, special and unique to their business; that such business depends on
such Confidential Information; and that the Company wishes to protect such
Confidential Information by keeping it confidential for the use and benefit of
the Company. Based on the foregoing, the Employee agrees to undertake the
following obligations with respect to such Confidential Information:
(i) The Employee agrees to keep any and all Confidential
Information in trust for the use and benefit of the Company;
(ii) The Employee agrees that, except as required by the
Employee duties or authorized in writing by the Company and its subsidiaries or
required by applicable law, he will not at any time during and for a period of
five (5) years after the termination of his employment with the Company and its
subsidiaries, disclose, directly or indirectly, any Confidential Information of
the Company or any of its subsidiaries;
(iii) The Employee agrees to take all reasonable steps
necessary, or reasonably requested by the Company and its subsidiaries, to
ensure that all Confidential Information of the Company is kept confidential for
the use and benefit of the Company and its subsidiaries; and
(iv) The Employee agrees that, upon termination of his
employment by the Company or any of its subsidiaries or at any other time the
Company may in writing so request, he will promptly deliver to the Company all
materials constituting Confidential Information (including all copies thereof)
that are in the possession of or under the control of the Employee. The Employee
further agrees that, if requested by the Company to return any Confidential
Information pursuant to this Subsection (iv), he will not make or retain any
copy or extract from such materials.
For purposes of this Section 10(c), Confidential Information
means any and all information developed by or for the Company or any of its
subsidiaries of which the Employee gained knowledge by reason of his employment
by the Company or any of its subsidiaries prior to the date hereof or his
employment under this Agreement and does not include information: (i) that is
generally known in any industry in which the Company is or may become engaged
(ii) that is generally available to the public other than as a result of a
disclosure by Employee (iii) that becomes available to Employee on a
non-confidential basis from a source other than the Company or one of its
representatives; or (iv) information that Employee is legally compelled (by oral
question or request for information or documents in legal proceedings,
interrogatories, subpoena, civil investigative demand or similar process) to
disclose provided that prior to complying with such request Employee gives the
Company prompt notice of such request so that the Company may seek an
appropriate protective order and/or waive Employee's compliance with this
Section 10(c). Confidential Information includes, but is not limited to, any and
all information developed by or for the Company concerning plans, marketing and
sales methods, materials, processes, business forms, procedures, devices used by
the Company, its subsidiaries, suppliers and customers with which the Company
had dealt prior to the Employee's termination of employment with the Company and
its subsidiaries, plans for development of new products, services and expansion
into new areas or markets, internal operations, and any trade secrets and
proprietary information of any type owned by the Company and its subsidiaries,
together with all written, graphic and other materials relating to all or any
part of the same.
11. Change of Control.
(a) Definition of Change of Control. No benefits shall be
payable under this Section 11 unless there shall have been a Change of Control,
as set forth below, and Employee's employment by the Company shall thereafter
have been terminated in accordance with Section 11(b) below. As used herein, the
term "Change of Control" shall mean:
(i) the acquisition by any individual, firm, corporation or
other entity or any group of individuals, firms, corporations or other entities
acting in concert ("Person") together with all Affiliates and Associates (as
such terms are defined in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934 (the "Exchange Act") of such Person of
beneficial ownership (as such term is defined in Rule 13d-3 under the Exchange
Act) of more than 25% of the outstanding shares of voting stock of the Company;
(ii) any change in the composition of the Board of Directors
of the Company resulting in members of the Board on the date hereof (or such
other persons who are elected by, or on the recommendation of, a majority of
such members or other persons who had been elected by, or on the recommendation
of, a majority of such members) ("Continuing Directors") ceasing to constitute a
majority of the Board of Directors; or
(iii) any other event determined by a majority of the Board of
Directors of the Company to constitute a Change of Control.
(b) Termination Following Change of Control. If any of the
events described in Section 11(a) above constituting a Change of Control shall
have occurred, Employee shall be entitled to the benefits provided in Section
11(e) hereof upon the subsequent termination of employment during the time
period referred to in Section 11(e) hereof if such termination is (i) by the
Company pursuant to Subsections 8(a)(i), (iv) or (v) hereof or (ii) by Employee
for Good Reason.
(c) Definition of Good Reason.
(i) Employee shall be entitled to terminate employment for
Good Reason. For purposes of this Agreement, "Good Reason" shall without
Employee's express written consent, mean, following a Change of Control:
(a) the assignment to Employee of any duties inconsistent with
Employee's status as a senior executive officer of the Company or a substantial
alteration in the nature or status of Employee's responsibilities from those in
effect immediately prior to a Change of Control; or an adverse and substantial
alteration in Employee's reporting responsibilities, titles or offices as in
effect immediately prior to a Change of Control or any removal of Employee from
or failure to reelect Employee to any of such positions except in connection
with the termination of employment for Disability, Retirement or Cause or as a
result of death or by Employee other than for Good Reason.
(b) a reduction by the Company in Employee's annual Base
Salary as in effect on the date hereof.
(c) any material breach by the Company of any provision of
this Agreement;
(d) any purported termination of Employee's employment which
is not effected pursuant to a Notice of Termination satisfying the requirements
of Section 11(d) below and, for purposes of this Agreement, no such purported
termination shall be effective.
(ii) Employee's right to terminate his employment pursuant to
this Subsection 11(c) shall not be affected by Employee's incapacity due to
physical or mental illness.
(d) Notice of Termination. Any purported termination by the
Company or by Employee shall be communicated by written Notice of Termination to
the other party hereto in accordance with Section 13 hereof. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of employment under the provision so indicated.
For purposes of this Agreement, no such purported termination shall be effective
without such Notice of Termination.
(e) Compensation for Termination. If Employee's employment by
the Company shall be terminated within two years after a Change of Control (a)
by the Company pursuant to Subsections (8)(a)(i), (iv), (v) or (b) by Employee
for Good Reason then:
(i) within five (5) days of the date of such termination, the
Company shall pay Employee a single severance payment in cash in an amount equal
to 2.9 multiplied by Employee's Base Salary paid to Employee by the Company in
the Company's fiscal year immediately preceding the year in which the
termination occurs plus all accrued but unpaid Base Salary and a pro rata bonus
amount payable pursuant to Section 4 hereof through the date of termination;
(ii) for a period of two (2) years after such termination, the
Company shall at its expense continue on behalf of Employee the benefits
described in Section 9(b) of this Agreement; and
(iii) any restrictions on any outstanding incentive awards
(including, but not limited to, restricted stock) granted to Employee under any
of the Company's benefit plans or otherwise shall lapse and such incentive
awards shall become 100% vested.
(f) Mitigation. Employee shall not be required to mitigate the
amount of any payment provided for in this Section 11 by seeking other
employment or otherwise nor shall the amount of any payment or benefit provided
for in this Section 11 be reduced by any compensation earned by Employee as the
result of employment by another employer or by retirement benefits after the
date of termination or otherwise.
(g) Compensation Election. If Employee receives compensation
pursuant to this Section 11, Employee shall not be entitled to any other
benefits hereunder, other than that referred to in subsection (e) above, the
receipt of any compensation which Employee had earned but previously elected to
defer receipt of and the right to exercise options in accordance with the terms
of the Company's Stock Option Plans under which such options were granted.
(h) Excise Tax Payment. In the event that any payment or
benefit (within the meaning of Section 280G(b)(2) of the Internal Revenue Code
of 1986, as amended (the "Code")), to Employee or for this benefit paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise in connection with, or arising out of, his employment with the
Company or a Change in Control of the Company (a "Payment" or "Payments"), would
be subject to the excise tax imposed by Section 4999 of the Code or any interest
or penalties are incurred by the Employee with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Employee will be
entitled to immediately receive an additional payment (a "Gross-Up Payment") in
an amount such that after payment by the Employee of all taxes (including any
interest or penalties, other than interest and penalties imposed by reason of
the Employee's failure to file timely a tax return or pay taxes shown due on his
return, imposed with respect to such taxes and the Excise Tax), including any
Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
12. Successors and Assigns.
(a) This Agreement shall be binding upon and shall inure to
the benefit of the Company, its successors and assigns. The term "Company" as
used herein shall include such successors and assigns. The term "successors and
assigns" as used herein shall mean a corporation or other entity acquiring all
or substantially all the assets and business of this Company (including this
Agreement) whether by operation of law or otherwise.
(b) Neither this Agreement nor any right or interest hereunder
shall be assignable by the Employee, his beneficiaries, or legal representatives
without the Company's prior written consent; provided, however, that nothing in
this Section 12 shall preclude (i) the Employee from designating a beneficiary
to receive any benefit payable hereunder upon his death, or (ii) the executors,
administrators, or other legal representatives of the Employee or his estate
from assigning any rights hereunder to distributees, legatees, beneficiaries,
testamentary trustees or other legal heirs of the Employee.
(c) After a Change of Control, the Company will require any
successor or assign (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession or assignment shall be a breach of this Agreement and shall
entitle Employee to compensation from the Company in the same amount and on the
same terms as Employee would be entitled hereunder if Employee terminated
employment for Good Reason except that, for purposes of implementing the
foregoing, the date on which any such succession or assignment becomes effective
shall be deemed the date of termination. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any successor or assign to
its business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
13. Notices.
Any notice required or permitted by this Agreement shall be
given by registered or certified mail, return receipt requested, addressed to
the Company at its then principal office, or to the Employee at his address
specified on page 1 of this Agreement, or to either party hereto at such other
address or addresses as he or it may from time to time specify for such purpose
in a notice similarly given.
14. Governing Law; Litigation; Expenses.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without giving effect to the
conflicts of law principles thereof.
(b) The Employee and the Company hereby agree that the courts
of the State of Florida shall have exclusive jurisdiction to hear and determine
any claims or disputes pertaining to this Agreement or to any matter arising
therefrom. Each of the Employee and the Company expressly submits and consents
in advance to such jurisdiction in any action commenced in such courts hereby
waiving personal service of the summons and complaint or other process or papers
issued therein, and agreeing that service of such summons and complaint, or
other process or papers, may be made by registered or certified mail addressed
to the Company at its then principal office or to the Employee at his address
specified on page 1 of this Agreement, or to either party hereto at such other
addresses as it or he from time to time specify to the other party in writing
for such purpose. The exclusive choice of forum set forth in this Section 14
shall not be deemed to preclude the enforcement of any judgment obtained in such
forum or the taking of any action under this Agreement to enforce such judgment
in any appropriate jurisdiction.
(c) All costs and expenses (including attorneys' fees)
incurred in connection with any litigation relating to a claim or dispute
pertaining to this Agreement shall be paid by the party incurring such expenses
except all costs and expenses (including attorneys' fees) incurred in connection
with any litigation relating to a claim or dispute pertaining to this Agreement
shall be paid by the party incurring such expenses, except if the claim or
dispute pertains to the enforcement of Section 11 hereof, in which case the
prevailing party shall be entitled to an award of such costs and expenses from
the non-prevailing party.
(d) Nothing contained in this Section 14 shall be deemed to
limit the Company's obligation to indemnify the Employee to the fullest extent
permitted by applicable law in respect of any actions, claims or proceedings
which are based upon acts or omissions of the Employee related to the
performance of his duties hereunder to the extent he would have otherwise been
entitled to indemnification under the by-laws or charter of the Company or any
of its subsidiaries or to the extent to which indemnification is to be paid to
officers and directors as a matter of law.
15. Entire Agreement.
This instrument contains that entire agreement of the parties
relating to the subject matter hereof, and there are no restrictions,
agreements, promises, covenants, undertakings, representations or warranties
with respect to the subject matter hereof other than those expressly set forth
herein. No modification of this Agreement shall be valid unless in writing and
signed by the parties hereto. The waiver of a breach of any term or condition of
this Agreement shall not be deemed to constitute a waiver of any subsequent
breach of the same or any other term or condition of this Agreement.
16. Severability.
If any term or provision of this Agreement or the application
thereof to any person, property or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement, or the application of such
term or provision to persons, property or circumstances other than those as to
which it is invalid or unenforceable shall not be affected thereby, and each
term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
17. Injunctive Relief.
(a) The Employee acknowledges and agrees that the covenants
and obligations contained in Sections 10(a), 10(b) and 10(c) of this Agreement
relate to special, unique and extraordinary matters and that a violation of any
of the terms of such Sections will cause the Company irreparable injury for
which adequate remedies at law are not available. Therefore, the Employee agrees
that the Company shall be entitled to an injunction, restraining order, or other
equitable relief from any court of competent jurisdiction, restraining the
Employee from committing any violation of the covenants and obligations set
forth in Sections 10(a), 10(b), and 10(c) hereof.
(b) The Company's rights and remedies under this Section 17
are cumulative and are in addition to any other rights and remedies the Company
may have at law or in equity. The Company's rights and remedies under this
Section 17 are cumulative and are in addition to any other rights and remedies
the Company may have at law or in equity.
20. Withholding Taxes.
The Company may deduct from any payments to be made hereunder
any federal, state or local withholding or other taxes which the Company
determines it is required to deduct under applicable law.
21. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original of which together shall constitute one
and the same instrument..
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day, month and year first written above.
ECKERD CORPORATION EMPLOYEE
By: /s/ James M. Santo /s/ Frank A. Newman
Name: James M. Santo Frank A. Newman
Its: Executive Vice President
EXHIBT 10.27
EMPLOYMENT AGREEMENT (Exec. VP)
AGREEMENT made as of February 1, 1996, by and between ECKERD
CORPORATION, a Delaware corporation (the "Company) and JAMES M. SANTO, residing
at 5113 S. Nichol Street , Tampa, Florida 33611 (the "Employee").
WHEREAS, upon the terms and subject to the conditions of this
Agreement, the Company desires to employ the Employee and the Employee is
willing to accept employment by the Company.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Employment.
Upon the terms and subject to the conditions of this
Agreement, the Company hereby employs the Employee and the Employee hereby
accepts employment by the Company in the capacity hereinafter set forth.
2. Term of Employment.
The term of the Employee's employment by the Company under
this Agreement shall commence on the date hereof and shall be for a term of
twelve (12) months, subject to extension and termination as provided in Section
8 hereof (the "Contract Period").
3. Duties; Extent of Services.
(a) During the Contract Period, the Employee shall serve as
Executive Vice President/Administration of the Company or in such other
executive capacity as shall be determined from time to time by the Board of
Directors of the Company and shall perform the duties, undertake the
responsibilities and exercise the authority customarily performed, undertaken
and exercised by a person in such position in the business in which the Company
is engaged.
(b) Except as otherwise provided herein and except for
illness, permitted vacation periods and permitted leaves of absence during the
Contract Period, the Employee shall (i) devote his full time and attention
during normal business hours to the business of the Company and its
subsidiaries; (ii) use his best efforts to promote the Company's and its
subsidiaries' interest; and (iii) discharge such other and further executive and
administrative duties as may be assigned to him by the Board of Directors of the
Company and its subsidiaries.
(c) Except for directorships held by the Employee on the date
of this Agreement, during the Contract Period the Employee will not, without the
prior written consent of the Company's Board of Directors, serve as a director
of any corporation, joint venture, association or other commercial enterprise
not controlled by, controlling or under common control with, the Company and its
subsidiaries.
4. Compensation.
(a) In consideration of the services rendered by the Employee
under this Agreement, the Company shall pay the Employee a base annual salary
(the "Base Salary") in the amount of $241,000 (or such other amount as the Board
of Directors of the Company shall determine) payable monthly on the fifteenth
(15th) of each month during the Contract Period.
(b) During the Contract Period, as additional compensation for
his services and as a further incentive and inducement to the Employee to accept
employment by the Company and to devote his best efforts to the business and
affairs of the Company and its subsidiaries, the Employee shall be entitled to
participate in such additional compensation plans (the "Bonus Compensation")
which the Company allows the Employee to participate in from time to time.
(c) The Company agrees that the Employee shall be entitled to
defer some portion or all of his Base Salary for any calendar year in accordance
with the provisions of the Company's Executive Deferred Compensation Plan as
adopted by the Board of Directors.
5. Fringe Benefits.
In addition to the compensation provided in Section 4 above,
during the Contract Period the Employee shall be entitled to the following
benefits:
(a) The Employee shall be entitled to paid vacation time
annually in accordance with the Company policy as determined by the Board of
Directors.
(b) The Employee shall be entitled to participate in all
employee benefit programs now or hereafter maintained by the Company for
executive personnel for which he is eligible, including, without limitation,
group life insurance, short and long-term disability, profit sharing, pension,
automobile allowance or leasing, stock option (subject to approval by the Board
of Directors), supplemental retirement income (subject to approval by the Board
of Directors), hospitalization and medical and dental reimbursement plan or
program, his participation in such programs to be based upon the applicable
provisions of such programs as they may exist from time to time.
6. Expenses.
The Company shall pay or reimburse the Employee for all
reasonable expenses reasonably incurred or paid by him in connection with the
performance of his duties hereunder upon presentation of expense statements or
vouchers and such other supporting documentation as the Company may from time to
time reasonably request.
7. Benefits Payable Upon Disability, Death, or Retirement.
(a) In the event of the disability (as hereinafter defined) of
the Employee during the Contract Period, the Company shall continue to pay the
Employee the compensation provided in Section 4 hereof during the period of his
disability or earlier termination hereof; provided, however, that in the event
the Employee is disabled for a continuous period exceeding six (6) consecutive
calendar months, the Company may, at its election, terminate this Agreement at
the close of business on the date thirty (30) days after the Company shall have
delivered a written notice of such election to the Employee, in which event the
Employee shall be entitled to receive benefits under the Company's Long Term
Disability Plan as such plan may exist as of the date of termination of this
Agreement.
As used in this Agreement, the term "disability" shall mean
the inability of the Employee due to illness or physical or mental infirmity to
perform his duties under this Agreement as determined by a physician selected by
the Employee and acceptable to the Company.
(b) During the period the Employee shall be entitled to
receive payments under Section 7(a) above, to the extent that he is physically
and mentally able to do so, he shall, upon the request of the Company, furnish
information and assistance to the Company, and, in addition, upon reasonable
request of Senior Management or the Board of Directors, he shall make himself
available to the Company to undertake reasonable assignments consistent with the
dignity, importance and scope of his position and his physical and mental
health.
(c) In the event of the death of the Employee during the
Contract Period, the Company shall pay, or cause to be paid, to the Employee's
designated beneficiary or beneficiaries or estate or legal representatives, the
payment due pursuant to the terms of the group term insurance policies together
with such other death benefits as may be payable under the Company's benefit
plans.
(d) In the event of the retirement of the Employee on his
Normal Retirement Date (as such term is defined in the Company's Pension Plan)
the Employee shall be entitled to such retirement benefits, if any, as are
available to the Employee upon retirement pursuant to the Company's retirement
benefit plans.
8. Termination.
(a) Except as otherwise provided in subsection (c) and (d)
hereof, this Agreement and the employment of the Employee hereunder shall
terminate upon the earliest to occur of the dates specified below:
(i) the close of business on the date that is one year after
the date hereof (the "Initial Period"), except that this Agreement and the
employment of the Employee hereunder shall be automatically extended from year
to year thereafter unless (x) terminated by the Company by delivery of not less
than 60 days written notice to the Employee prior to the end of the Initial
Period or any extension thereof in which case the employment of the Employee
shall terminate on the date specified for termination in such notice, or (y)
terminated by the Employee by delivery of not less than 60 days written notice
to the Company prior to the end of the Initial Period or any extension thereof
in which case the employment of the Employee shall terminate on the date
specified for termination in such notice;
(ii) the close of business on the date of death of the
Employee;
(iii) the close of business on the date the Company delivers
to the Employee a written notice of its election to terminate his employment for
"Cause" (as defined in paragraph (b) below);
(iv) the close of business on the date thirty (30) days after
the Company shall have delivered to the Employee a written notice of its
intention to terminate his employment because the Board of Directors has
determined that such termination is in the best interests of the Company and
such termination is not for Cause, death, disability or failure to extend
pursuant to Section 8(a)(i)(x) hereof;
(v) the close of business on the date of a termination by the
Company pursuant to Section 7(a) hereof; or
(vi) the close of business on the date of the retirement of
the Employee pursuant to Section 7(d) hereof.
(b) For purposes of this Agreement, the term "Cause" shall
mean: (i) the Employee's conviction (which, through lapse of time or otherwise,
is not subject to appeal) of, or a plea of guilty or nolo contendre to, any
crime or offense which constitutes a felony in the jurisdiction involved or
involves moral turpitude, (ii) the commission of an act of fraud, embezzlement
or intentional dishonesty against the Company or any of its subsidiaries, (iii)
a breach of this Agreement by the Employee, (iv) breach of fiduciary duty
resulting in injury to the Company or its subsidiaries (v) gross misconduct in
connection with the Employee's performance of the Employee's duties hereunder,
or (vi) the Employee's continued or willful failure or refusal to comply with
the Company's policies or the policies or written directives of the Company's
Senior Management or the Board of Directors.
(c) For purposes hereof, upon termination of this Agreement
and employment of Employee as provided in Section 8(a)(i)-(vi), all obligations
and liabilities of the parties hereto shall cease and be of no effect except for
those liabilities and obligations provided for in Section 7, 9 and 10 hereof.
(d) For purposes of clauses (i) and (iv) of Section 8(a)
above, the Employee shall be relieved of his duties and shall vacate his office
and the Company's premises on the date of receipt of the notice required by such
clauses unless requested by the Company to remain in the active employment of
the Company during such period between the receipt of notice and the effective
date of termination of employment.
9. Payments to Employee Upon Termination of Employment.
(a) Upon the termination of the Employee's full-time
employment hereunder by the Company in accordance with clauses (i)(x) or (iv) of
Section 8(a) of this Agreement, the Company shall pay to the Employee, or in the
event of his subsequent death, to his beneficiary or beneficiaries or his estate
or legal representative, as severance pay (i) an amount equal the Employee's
Base Salary on the date of termination for the Applicable Severance Period
payable in monthly installments on the fifteenth (15th) of each month during the
Applicable Severance Period plus (ii) subject to the terms and provisions of any
additional compensation plans that the Employee participates in from time to
time, a pro rata portion of any bonus compensation payable to the Employee.
(b) Upon the termination of the Employee's full-time
employment hereunder pursuant to clauses (i)(x) or (iv) of Section 8(a) of this
Agreement, the Company shall at its expense continue on behalf of the Employee
the following benefits: life insurance, short and long-term disability
insurance, hospitalization insurance and medical and dental reimbursement plan
insurance. The coverage of any such insurance provided by the Company hereunder
shall be no less favorable to the Employee, in terms of amounts and deductibles,
than the coverage provided under the benefit programs maintained by the Company
from time to time for the Company's executives. The Company's obligation
hereunder with respect to each of the foregoing benefit plans shall terminate
upon the earlier of the end of the Applicable Severance Period or the date the
Employee obtains any such benefits pursuant to a subsequent employer's benefit
plans. The Employee agrees that the Company's continued provision of benefits
described in this Section 9(b) shall count toward satisfying any obligation that
the Company may have under COBRA.
(c) Benefits pursuant to the Company's Profit Sharing and
Pension Plans (and such other plans in which Employee participates) shall be
payable to Employee in accordance with the terms of such Plans.
(d) For purposes of this Agreement, the Applicable Severance
Period shall be two (2) years.
(e) Employee further acknowledges that as a condition
precedent to receiving any benefits under this Agreement, Employee shall
complete, execute and deliver to the Company at the time of his termination of
employment a Release in the form of Exhibit "A" hereto which releases any and
all claims that the Employee may have against the Company as of the date of
termination arising under federal, state, local or common law.
10. Covenants of the Employee.
(a) The Employee agrees that during the Contract Period and
for a period of time equal to (i) one year in the event of a termination of
employment in accordance with clauses (i)(y) or (iii) of Section 8(a); (ii) two
years in the event of a termination of employment in accordance with Section
7(a) or retirement in accordance with Section 7(d); or (iii) the Applicable
Severance Period in the event of a termination of employment in accordance with
clauses (i)(x) or (iv) of Section 8(a), he will not, directly or indirectly,
engage, assist or participate in, whether as a director, officer, employee,
agent, manager, consultant, partner, owner or independent contractor or other
participant, any business, firm, corporation, partnership, enterprise or
organization that competes with the business engaged or hereafter engaged in by
the Company or any of its subsidiaries (including, but not limited to, the
operation of retail drug stores in which prescription drugs are sold, the sale
of photofinishing products or services, the mail order pharmacy business, and/or
the pharmacy benefits management business) in the Company's or such
subsidiaries' trade areas (for purposes hereof "trade areas" shall mean any
county in any state of the United States in which retail drug stores operated by
the Company and its subsidiaries are located or in which services are provided
by the Company or its subsidiaries). Nothing contained herein shall prevent the
Employee from acquiring less than 2% of any class of outstanding securities of
any Company that has any of its securities listed on a national securities
exchange or traded in the over-the-counter market.
(b) The Employee agrees that during the Contract Period and
for a period of two years after the termination of this Agreement for any
reason, he will not directly induce or solicit any person employed or hereafter
employed by the Company or any of its subsidiaries to leave the employ of the
Company or any of its subsidiaries nor will he directly or indirectly call upon,
solicit, write, direct, divert or accept business with respect to any account or
customer of the Company or its subsidiaries, including, without limitation,
accounts or customers obtained before or during the term of this Agreement.
(c) The Employee agrees and acknowledges that the Confidential
Information of the Company and its subsidiaries (as hereinafter defined) is
valuable, special and unique to their business; that such business depends on
such Confidential Information; and that the Company wishes to protect such
Confidential Information by keeping it confidential for the use and benefit of
the Company. Based on the foregoing, the Employee agrees to undertake the
following obligations with respect to such Confidential Information:
(i) The Employee agrees to keep any and all Confidential
Information in trust for the use and benefit of the Company;
(ii) The Employee agrees that, except as required by the
Employee's duties or authorized in writing by the Company and its subsidiaries
or required by applicable law, he will not at any time during and for a period
of five (5) years after the termination of his employment with the Company and
its subsidiaries, disclose, directly or indirectly, any Confidential Information
of the Company or any of its subsidiaries.
(iii) The Employee agrees to take all reasonable steps
necessary, or reasonably requested by the Company and its subsidiaries, to
ensure that all Confidential Information of the Company is kept confidential for
the use and benefit of the Company and its subsidiaries; and
(iv) The Employee agrees that, upon termination of his
employment by the Company or any of its subsidiaries or at any other time the
Company may in writing so request, he will promptly deliver to the Company all
materials constituting Confidential Information (including all copies thereof)
that are in the possession of or under the control of the Employee. The Employee
further agrees that, if requested by the Company to return any Confidential
Information pursuant to this Subsection (iv), he will not make or retain any
copy or extract from such materials.
For purposes of this Section 10(c), Confidential Information
means any and all information developed by or for the Company or any of its
subsidiaries of which the Employee gained knowledge by reason of his employment
by the Company or any of its subsidiaries prior to the date hereof or his
employment under this Agreement that is not generally known in any industry in
which the Company is or may become engaged. Confidential Information includes,
but is not limited to, any and all information developed by or for the Company
concerning plans, marketing and sales methods, materials, processes, business
forms, procedures, devices used by the Company, its subsidiaries, suppliers and
customers with which the Company had dealt prior to the Employee's termination
of employment with the Company and its subsidiaries, plans for development of
new products, services and expansion into new areas or markets, internal
operations, and any trade secrets and proprietary information of any type owned
by the Company and its subsidiaries, together with all written, graphic and
other materials relating to all or any part of the same.
11. Change of Control
(a) Definition of Change of Control. No benefits shall be
payable under this Section 11 unless there shall have been a Change of Control,
as set forth below, and Employee's employment by the Company shall thereafter
have been terminated in accordance with Section 11(b) below. As used herein, the
term "Change of Control" shall mean:
(i) the acquisition by any individual, firm, corporation or
other entity or any group of individuals, firms, corporations or other entities
acting in concert ("Person") together with all Affiliates and Associates (as
such terms are defined in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934 (the "Exchange Act") of such Person of
beneficial ownership (as such term is defined in Rule 13d-3 under the Exchange
Act) of more than 25% of the outstanding shares of voting stock of the Company;
(ii) any change in the composition of the Board of Directors
of the Company resulting in members of the Board on the date hereof (or such
other persons who are elected by, or on the recommendation of, a majority of
such members or other persons who had been elected by, or on the recommendation
of, a majority of such members) ("Continuing Directors") ceasing to constitute a
majority of the Board of Directors; or
(iii) any other event determined by a majority of the Board of
Directors of the Company to constitute a Change of Control.
(b) Termination Following Change of Control. If any of the
events described in Section 11(a) above constituting a Change of Control shall
have occurred, Employee shall be entitled to the benefits provided in Section
11(e) hereof upon the subsequent termination of employment during the time
period referred to in Section 11(e) hereof if such termination is (i) by the
Company pursuant to Subsections 8(a)(i), (iv) or (v) hereof or (ii) by Employee
for Good Reason.
(c) Definition of Good Reason.
(A) Employee shall be entitled to terminate employment for
Good Reason. For purposes of this Agreement, "Good Reason" shall without
Employee's express written consent, mean, following a Change of Control:
(1) the assignment to Employee of any duties inconsistent with
Employee's status as a senior executive officer of the Company or a substantial
alteration in the nature or status of Employee's responsibilities from those in
effect immediately prior to a Change of Control; or an adverse and substantial
alteration in Employee's reporting responsibilities, title or offices as in
effect immediately prior to a Change of Control or any removal of Employee from
or failure to reelect Employee to any such positions except in connection with
the termination of employment for Disability, Retirement or Cause or as a result
of death or by Employee other than for Good Reason;
(2) a reduction by the Company in Employee's annual Base
Salary as in effect on the date hereof;
(3) any material breach by the Company of any provision of
this Agreement; or
(4) any purported termination of Employee's employment which
is not effected pursuant to a Notice of Termination satisfying the requirements
of Section 11(d) below and, for purposes of this Agreement, no such purported
termination shall be effective.
(B) Employee's right to terminate his employment pursuant to
this Subsection 11(c) shall not be affected by Employee's incapacity due to
physical or mental illness.
(d) Notice of Termination. Any purported termination by the
Company or by Employee shall be communicated by written Notice of Termination to
the other party hereto in accordance with Section 13 hereof. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision of this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of employment under the provision so indicated.
For purposes of this Agreement, no such purported termination shall be effective
without such Notice of Termination.
(e) Compensation for Termination. If Employee's employment by
the Company shall be terminated within two years after a Change of Control (a)
by the Company pursuant to Subsections (8)(a)(i), (iv), or (v) or (b) by
Employee for Good Reason, then:
(i) within five (5) days of the date of such termination, the
Company shall pay Employee a single severance payment in cash in an amount equal
to 2.9 multiplied by Employee's Base Salary paid to Employee by the Company in
the Company's fiscal year immediately preceding the year in which the
termination occurs plus all accrued but unpaid Base Salary and a pro rata bonus
amount payable pursuant to Section 4 hereof through the date of termination;
(ii) for a period of two (2) years after such termination, the
Company shall at its expense continue on behalf of Employee the benefits
described in Section 9(b) of this Agreement; and
(iii) any restrictions on any outstanding incentive awards
(including, but not limited to, restricted stock) granted to Employee under any
of the Company's benefit plans or otherwise shall lapse and such incentive
awards shall become 100% vested.
(f) Mitigation. Employee shall not be required to mitigate the
amount of any payment provided for in this Section 11 by seeking other
employment or otherwise nor shall the amount of any payment or benefit provided
for in this Section 11 be reduced by any compensation earned by Employee as the
result of employment by another employer or by retirement benefits after the
date of termination or otherwise.
(g) Compensation Election. If Employee receives compensation
pursuant to this Section 11, Employee shall not be entitled to any other
benefits hereunder, other than that referred to in subsection (e) above, the
receipt of any compensation which Employee had earned but previously elected to
defer receipt of and the right to exercise options in accordance with the terms
of the Company's Stock Option Plans under which such options were granted.
(h) Excise Tax Payment. In the event that any payment or
benefit (within the meaning of Section 280G(b)(2) of the Internal Revenue Code
of 1986, as amended (the "Code")), to Employee or for this benefit paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise in connection with, or arising out of, his employment with the
Company or a Change in Control of the Company (a "Payment" or "Payments"), would
be subject to the excise tax imposed by Section 4999 of the Code or any interest
or penalties are incurred by the Employee with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Employee will be
entitled to immediately receive an additional payment (a "Gross-Up Payment") in
an amount such that after payment by the Employee of all taxes (including any
interest or penalties, other than interest and penalties imposed by reason of
the Employee's failure to file timely a tax return or pay taxes shown due on his
return, imposed with respect to such taxes and the Excise Tax), including any
Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
12. Successors and Assigns.
(a) This Agreement shall be binding upon and shall inure to
the benefit of the Company, its successors and assigns. The term "Company" as
used herein shall include such successors and assigns. The term "successors and
assigns" as used herein shall mean a corporation or other entity acquiring all
or substantially all the assets and business of this Company (including this
Agreement) whether by operation of law or otherwise.
(b) Neither this Agreement nor any right or interest hereunder
shall be assignable by the Employee, his beneficiaries, or legal representatives
without the Company's prior written consent; provided, however, that nothing in
this Section 12 shall preclude (i) the Employee from designating a beneficiary
to receive any benefit payable hereunder upon his death, or (ii) the executors,
administrators, or other legal representatives of the Employee or his estate
from assigning any rights hereunder to distributees, legatees, beneficiaries,
testamentary trustees or other legal heirs of the Employee.
(c) After a Change of Control, the Company will require any
successor or assign (whether direct or indirect, by purchase, merger,
consolidation of otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession or assignment shall be a breach of this Agreement and shall
entitle Employee to compensation from the Company in the same amount and on the
same terms as Employee would be entitled hereunder if Employee terminated
employment for Good Reason except that, for purposes of implementing the
foregoing, the date on which any such succession or assignment becomes effective
shall be deemed the date of termination. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any successor or assign to
its business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
13. Notices.
Any notice required or permitted by this Agreement shall be
given by registered or certified mail, return receipt requested, addressed to
the Company at its then principal office, or to the Employee at his address
specified on page 1 of this Agreement, or to either party hereto at such other
address or addresses as he or it may from time to time specify for such purposes
in a notice similarly given.
14. Governing Law; Litigation; Expenses.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without giving effect to the
conflicts of law principles thereof.
(b) The Employee and the Company hereby agree that the courts
of the State of Florida shall have exclusive jurisdiction to hear and determine
any claims or disputes pertaining to this Agreement or to any matter arising
therefrom. Each of the Employee and the Company expressly submits and consents
in advance to such jurisdiction in any action commenced in such courts hereby
waiving personal service of the summons and complaint or other process or papers
issued therein, and agreeing that service of such summons and complaint, or
other process or papers, may be made by registered or certified mail addressed
to the Company at its then principal office or to the Employee at his address
specified on page 1 of this Agreement, or to either party hereto at such other
addresses as it or he from time to time specify to the other party in writing
for such purpose. The exclusive choice of forum set forth in this Section 13
shall not be deemed to preclude the enforcement of any judgment obtained in such
forum or the taking of any action under this Agreement to enforce such judgment
in any appropriate jurisdiction.
(c) All costs and expenses (including attorneys' fees)
incurred in connection with any litigation relating to a claim or dispute
pertaining to this Agreement shall be paid by the party incurring such expenses,
except if the claim or dispute pertains to the enforcement of Section 11 hereof,
in which case the prevailing party shall be entitled to an award of such costs
and expenses from the non-prevailing party.
(d) Nothing contained in this Section 14 shall be deemed to
limit the Company's obligation to indemnify the Employee to the fullest extent
permitted by applicable law in respect of any actions, claims or proceedings
which are based upon acts or omissions of the Employee related to the
performance of his duties hereunder to the extent he would have otherwise been
entitled to indemnification under the by-laws or charter of the Company or any
of its subsidiaries or to the extent to which indemnification is to be paid to
officers and directors as a matter of law.
15. Entire Agreement.
This instrument contains the entire agreement of the parties
relating to the subject matter hereof and supersedes any and all other
agreements and understandings, whether written, oral or otherwise, with respect
to the employment of the Employee by the Company and all of such other
agreements and understandings shall be of no force or effect. No modification of
this Agreement shall be valid unless in writing and signed by the parties
hereto. The waiver of a breach of any term or condition of this Agreement shall
not be deemed to constitute a waiver of any subsequent breach of the same or any
other term or condition of this Agreement.
16. Severability.
If any term or provision of this Agreement or the application
thereof to any person, property or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement, or the application of such
term or provision to persons, property or circumstances other than those as to
which it is invalid or unenforceable shall not be affected thereby, and each
term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
17. Injunctive Relief.
(a) The Employee acknowledges and agrees that the covenants
and obligations contained in Sections 10(a), 10(b) and 10(c) of this Agreement
relate to special, unique and extraordinary matters and that a violation of any
of the terms of such Sections will cause the Company irreparable injury for
which adequate remedies at law are not available. Therefore, the Employee agrees
that the Company shall be entitled to an injunction, restraining order, or other
equitable relief from any court of competent jurisdiction, restraining the
Employee from committing any violation of the covenants and obligations set
forth in Sections 10(a), 10(b) and 10(c) hereof.
(b) The Company's rights and remedies under this Section 17
are cumulative and are in addition to any other rights and remedies the Company
may have at law or in equity. In connection with the foregoing provision of this
Section 17, the Employee represents that his economic means and circumstances
are such that such provisions will not prevent him from providing for himself
and his family on a basis satisfactory to him.
18. Withholding Taxes.
The Company may deduct from any payments to be made hereunder
any federal, state or local withholding or other taxes which the Company
determines it is required to deduct under applicable law.
19. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day, month and year first written above.
ECKERD CORPORATION
By: /s/ Frank Newman
Name: Frank Newman
Its: President/CEO/COO
EMPLOYEE
/s/ James M. Santo
JAMES M. SANTO
g: employ1/winword/forms
EXHIBIT 10.28
EMPLOYMENT AGREEMENT (Exec. VP)
AGREEMENT made as of February 1, 1996, by and between ECKERD
CORPORATION, a Delaware corporation (the "Company) and SAMUEL G. WRIGHT,
residing at 1520 Gulf Blvd. #1504, Clearwater, Florida 34630 (the "Employee").
WHEREAS, upon the terms and subject to the conditions of this
Agreement, the Company desires to employ the Employee and the Employee is
willing to accept employment by the Company.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Employment.
Upon the terms and subject to the conditions of this
Agreement, the Company hereby employs the Employee and the Employee hereby
accepts employment by the Company in the capacity hereinafter set forth.
2. Term of Employment.
The term of the Employee's employment by the Company under
this Agreement shall commence on the date hereof and shall be for a term of
twelve (12) months, subject to extension and termination as provided in Section
8 hereof (the "Contract Period").
3. Duties; Extent of Services.
(a) During the Contract Period, the Employee shall serve as
Executive Vice President/Chief Financial Officer of the Company or in such other
executive capacity as shall be determined from time to time by the Board of
Directors of the Company and shall perform the duties, undertake the
responsibilities and exercise the authority customarily performed, undertaken
and exercised by a person in such position in the business in which the Company
is engaged.
(b) Except as otherwise provided herein and except for
illness, permitted vacation periods and permitted leaves of absence during the
Contract Period, the Employee shall (i) devote his full time and attention
during normal business hours to the business of the Company and its
subsidiaries; (ii) use his best efforts to promote the Company's and its
subsidiaries' interest; and (iii) discharge such other and further executive and
administrative duties as may be assigned to him by the Board of Directors of the
Company and its subsidiaries.
(c) Except for directorships held by the Employee on the date
of this Agreement, during the Contract Period the Employee will not, without the
prior written consent of the Company's Board of Directors, serve as a director
of any corporation, joint venture, association or other commercial enterprise
not controlled by, controlling or under common control with, the Company and its
subsidiaries.
4. Compensation.
(a) In consideration of the services rendered by the Employee
under this Agreement, the Company shall pay the Employee a base annual salary
(the "Base Salary") in the amount of $265,000 (or such other amount as the Board
of Directors of the Company shall determine) payable monthly on the fifteenth
(15th) of each month during the Contract Period.
(b) During the Contract Period, as additional compensation for
his services and as a further incentive and inducement to the Employee to accept
employment by the Company and to devote his best efforts to the business and
affairs of the Company and its subsidiaries, the Employee shall be entitled to
participate in such additional compensation plans (the "Bonus Compensation")
which the Company allows the Employee to participate in from time to time.
(c) The Company agrees that the Employee shall be entitled to
defer some portion or all of his Base Salary for any calendar year in accordance
with the provisions of the Company's Executive Deferred Compensation Plan as
adopted by the Board of Directors.
5. Fringe Benefits.
In addition to the compensation provided in Section 4 above,
during the Contract Period the Employee shall be entitled to the following
benefits:
(a) The Employee shall be entitled to paid vacation time
annually in accordance with the Company policy as determined by the Board of
Directors.
(b) The Employee shall be entitled to participate in all
employee benefit programs now or hereafter maintained by the Company for
executive personnel for which he is eligible, including, without limitation,
group life insurance, short and long-term disability, profit sharing, pension,
automobile allowance or leasing, stock option (subject to approval by the Board
of Directors), supplemental retirement income (subject to approval by the Board
of Directors), hospitalization and medical and dental reimbursement plan or
program, his participation in such programs to be based upon the applicable
provisions of such programs as they may exist from time to time.
6. Expenses.
The Company shall pay or reimburse the Employee for all
reasonable expenses reasonably incurred or paid by him in connection with the
performance of his duties hereunder upon presentation of expense statements or
vouchers and such other supporting documentation as the Company may from time to
time reasonably request.
7. Benefits Payable Upon Disability, Death, or Retirement.
(a) In the event of the disability (as hereinafter defined) of
the Employee during the Contract Period, the Company shall continue to pay the
Employee the compensation provided in Section 4 hereof during the period of his
disability or earlier termination hereof; provided, however, that in the event
the Employee is disabled for a continuous period exceeding six (6) consecutive
calendar months, the Company may, at its election, terminate this Agreement at
the close of business on the date thirty (30) days after the Company shall have
delivered a written notice of such election to the Employee, in which event the
Employee shall be entitled to receive benefits under the Company's Long Term
Disability Plan as such plan may exist as of the date of termination of this
Agreement.
As used in this Agreement, the term "disability" shall mean
the inability of the Employee due to illness or physical or mental infirmity to
perform his duties under this Agreement as determined by a physician selected by
the Employee and acceptable to the Company.
(b) During the period the Employee shall be entitled to
receive payments under Section 7(a) above, to the extent that he is physically
and mentally able to do so, he shall, upon the request of the Company, furnish
information and assistance to the Company, and, in addition, upon reasonable
request of Senior Management or the Board of Directors, he shall make himself
available to the Company to undertake reasonable assignments consistent with the
dignity, importance and scope of his position and his physical and mental
health.
(c) In the event of the death of the Employee during the
Contract Period, the Company shall pay, or cause to be paid, to the Employee's
designated beneficiary or beneficiaries or estate or legal representatives, the
payment due pursuant to the terms of the group term insurance policies together
with such other death benefits as may be payable under the Company's benefit
plans.
(d) In the event of the retirement of the Employee on his
Normal Retirement Date (as such term is defined in the Company's Pension Plan)
the Employee shall be entitled to such retirement benefits, if any, as are
available to the Employee upon retirement pursuant to the Company's retirement
benefit plans.
8. Termination.
(a) Except as otherwise provided in subsection (c) and (d)
hereof, this Agreement and the employment of the Employee hereunder shall
terminate upon the earliest to occur of the dates specified below:
(i) the close of business on the date that is one year after
the date hereof (the "Initial Period"), except that this Agreement and the
employment of the Employee hereunder shall be automatically extended from year
to year thereafter unless (x) terminated by the Company by delivery of not less
than 60 days written notice to the Employee prior to the end of the Initial
Period or any extension thereof in which case the employment of the Employee
shall terminate on the date specified for termination in such notice, or (y)
terminated by the Employee by delivery of not less than 60 days written notice
to the Company prior to the end of the Initial Period or any extension thereof
in which case the employment of the Employee shall terminate on the date
specified for termination in such notice;
(ii) the close of business on the date of death of the
Employee;
(iii) the close of business on the date the Company delivers
to the Employee a written notice of its election to terminate his employment for
"Cause" (as defined in paragraph (b) below);
(iv) the close of business on the date thirty (30) days after
the Company shall have delivered to the Employee a written notice of its
intention to terminate his employment because the Board of Directors has
determined that such termination is in the best interests of the Company and
such termination is not for Cause, death, disability or failure to extend
pursuant to Section 8(a)(i)(x) hereof;
(v) the close of business on the date of a termination by the
Company pursuant to Section 7(a) hereof; or
(vi) the close of business on the date of the retirement of
the Employee pursuant to Section 7(d) hereof.
(b) For purposes of this Agreement, the term "Cause" shall
mean: (i) the Employee's conviction (which, through lapse of time or otherwise,
is not subject to appeal) of, or a plea of guilty or nolo contendre to, any
crime or offense which constitutes a felony in the jurisdiction involved or
involves moral turpitude, (ii) the commission of an act of fraud, embezzlement
or intentional dishonesty against the Company or any of its subsidiaries, (iii)
a breach of this Agreement by the Employee, (iv) breach of fiduciary duty
resulting in injury to the Company or its subsidiaries (v) gross misconduct in
connection with the Employee's performance of the Employee's duties hereunder,
or (vi) the Employee's continued or willful failure or refusal to comply with
the Company's policies or the policies or written directives of the Company's
Senior Management or the Board of Directors.
(c) For purposes hereof, upon termination of this Agreement
and employment of Employee as provided in Section 8(a)(i)-(vi), all obligations
and liabilities of the parties hereto shall cease and be of no effect except for
those liabilities and obligations provided for in Section 7, 9 and 10 hereof.
(d) For purposes of clauses (i) and (iv) of Section 8(a)
above, the Employee shall be relieved of his duties and shall vacate his office
and the Company's premises on the date of receipt of the notice required by such
clauses unless requested by the Company to remain in the active employment of
the Company during such period between the receipt of notice and the effective
date of termination of employment.
9. Payments to Employee Upon Termination of Employment.
(a) Upon the termination of the Employee's full-time
employment hereunder by the Company in accordance with clauses (i)(x) or (iv) of
Section 8(a) of this Agreement, the Company shall pay to the Employee, or in the
event of his subsequent death, to his beneficiary or beneficiaries or his estate
or legal representative, as severance pay (i) an amount equal the Employee's
Base Salary on the date of termination for the Applicable Severance Period
payable in monthly installments on the fifteenth (15th) of each month during the
Applicable Severance Period plus (ii) subject to the terms and provisions of any
additional compensation plans that the Employee participates in from time to
time, a pro rata portion of any bonus compensation payable to the Employee.
(b) Upon the termination of the Employee's full-time
employment hereunder pursuant to clauses (i)(x) or (iv) of Section 8(a) of this
Agreement, the Company shall at its expense continue on behalf of the Employee
the following benefits: life insurance, short and long-term disability
insurance, hospitalization insurance and medical and dental reimbursement plan
insurance. The coverage of any such insurance provided by the Company hereunder
shall be no less favorable to the Employee, in terms of amounts and deductibles,
than the coverage provided under the benefit programs maintained by the Company
from time to time for the Company's executives. The Company's obligation
hereunder with respect to each of the foregoing benefit plans shall terminate
upon the earlier of the end of the Applicable Severance Period or the date the
Employee obtains any such benefits pursuant to a subsequent employer's benefit
plans. The Employee agrees that the Company's continued provision of benefits
described in this Section 9(b) shall count toward satisfying any obligation that
the Company may have under COBRA.
(c) Benefits pursuant to the Company's Profit Sharing and
Pension Plans (and such other plans in which Employee participates) shall be
payable to Employee in accordance with the terms of such Plans.
(d) For purposes of this Agreement, the Applicable Severance
Period shall be two (2) years.
(e) Employee further acknowledges that as a condition
precedent to receiving any benefits under this Agreement, Employee shall
complete, execute and deliver to the Company at the time of his termination of
employment a Release in the form of Exhibit "A" hereto which releases any and
all claims that the Employee may have against the Company as of the date of
termination arising under federal, state, local or common law.
10. Covenants of the Employee.
(a) The Employee agrees that during the Contract Period and
for a period of time equal to (i) one year in the event of a termination of
employment in accordance with clauses (i)(y) or (iii) of Section 8(a); (ii) two
years in the event of a termination of employment in accordance with Section
7(a) or retirement in accordance with Section 7(d); or (iii) the Applicable
Severance Period in the event of a termination of employment in accordance with
clauses (i)(x) or (iv) of Section 8(a), he will not, directly or indirectly,
engage, assist or participate in, whether as a director, officer, employee,
agent, manager, consultant, partner, owner or independent contractor or other
participant, any business, firm, corporation, partnership, enterprise or
organization that competes with the business engaged or hereafter engaged in by
the Company or any of its subsidiaries (including, but not limited to, the
operation of retail drug stores in which prescription drugs are sold, the sale
of photofinishing products or services, the mail order pharmacy business, and/or
the pharmacy benefits management business) in the Company's or such
subsidiaries' trade areas (for purposes hereof "trade areas" shall mean any
county in any state of the United States in which retail drug stores operated by
the Company and its subsidiaries are located or in which services are provided
by the Company or its subsidiaries). Nothing contained herein shall prevent the
Employee from acquiring less than 2% of any class of outstanding securities of
any Company that has any of its securities listed on a national securities
exchange or traded in the over-the-counter market.
(b) The Employee agrees that during the Contract Period and
for a period of two years after the termination of this Agreement for any
reason, he will not directly induce or solicit any person employed or hereafter
employed by the Company or any of its subsidiaries to leave the employ of the
Company or any of its subsidiaries nor will he directly or indirectly call upon,
solicit, write, direct, divert or accept business with respect to any account or
customer of the Company or its subsidiaries, including, without limitation,
accounts or customers obtained before or during the term of this Agreement.
(c) The Employee agrees and acknowledges that the Confidential
Information of the Company and its subsidiaries (as hereinafter defined) is
valuable, special and unique to their business; that such business depends on
such Confidential Information; and that the Company wishes to protect such
Confidential Information by keeping it confidential for the use and benefit of
the Company. Based on the foregoing, the Employee agrees to undertake the
following obligations with respect to such Confidential Information:
(i) The Employee agrees to keep any and all Confidential
Information in trust for the use and benefit of the Company;
(ii) The Employee agrees that, except as required by the
Employee's duties or authorized in writing by the Company and its subsidiaries
or required by applicable law, he will not at any time during and for a period
of five (5) years after the termination of his employment with the Company and
its subsidiaries, disclose, directly or indirectly, any Confidential Information
of the Company or any of its subsidiaries.
(iii) The Employee agrees to take all reasonable steps
necessary, or reasonably requested by the Company and its subsidiaries, to
ensure that all Confidential Information of the Company is kept confidential for
the use and benefit of the Company and its subsidiaries; and
(iv) The Employee agrees that, upon termination of his
employment by the Company or any of its subsidiaries or at any other time the
Company may in writing so request, he will promptly deliver to the Company all
materials constituting Confidential Information (including all copies thereof)
that are in the possession of or under the control of the Employee. The Employee
further agrees that, if requested by the Company to return any Confidential
Information pursuant to this Subsection (iv), he will not make or retain any
copy or extract from such materials.
For purposes of this Section 10(c), Confidential Information
means any and all information developed by or for the Company or any of its
subsidiaries of which the Employee gained knowledge by reason of his employment
by the Company or any of its subsidiaries prior to the date hereof or his
employment under this Agreement that is not generally known in any industry in
which the Company is or may become engaged. Confidential Information includes,
but is not limited to, any and all information developed by or for the Company
concerning plans, marketing and sales methods, materials, processes, business
forms, procedures, devices used by the Company, its subsidiaries, suppliers and
customers with which the Company had dealt prior to the Employee's termination
of employment with the Company and its subsidiaries, plans for development of
new products, services and expansion into new areas or markets, internal
operations, and any trade secrets and proprietary information of any type owned
by the Company and its subsidiaries, together with all written, graphic and
other materials relating to all or any part of the same.
11. Change of Control
(a) Definition of Change of Control. No benefits shall be
payable under this Section 11 unless there shall have been a Change of Control,
as set forth below, and Employee's employment by the Company shall thereafter
have been terminated in accordance with Section 11(b) below. As used herein, the
term "Change of Control" shall mean:
(i) the acquisition by any individual, firm, corporation or
other entity or any group of individuals, firms, corporations or other entities
acting in concert ("Person") together with all Affiliates and Associates (as
such terms are defined in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934 (the "Exchange Act") of such Person of
beneficial ownership (as such term is defined in Rule 13d-3 under the Exchange
Act) of more than 25% of the outstanding shares of voting stock of the Company;
(ii) any change in the composition of the Board of Directors
of the Company resulting in members of the Board on the date hereof (or such
other persons who are elected by, or on the recommendation of, a majority of
such members or other persons who had been elected by, or on the recommendation
of, a majority of such members) ("Continuing Directors") ceasing to constitute a
majority of the Board of Directors; or
(iii) any other event determined by a majority of the Board of
Directors of the Company to constitute a Change of Control.
(b) Termination Following Change of Control. If any of the
events described in Section 11(a) above constituting a Change of Control shall
have occurred, Employee shall be entitled to the benefits provided in Section
11(e) hereof upon the subsequent termination of employment during the time
period referred to in Section 11(e) hereof if such termination is (i) by the
Company pursuant to Subsections 8(a)(i), (iv) or (v) hereof or (ii) by Employee
for Good Reason.
(c) Definition of Good Reason.
(A) Employee shall be entitled to terminate employment for
Good Reason. For purposes of this Agreement, "Good Reason" shall without
Employee's express written consent, mean, following a Change of Control:
(1) the assignment to Employee of any duties inconsistent with
Employee's status as a senior executive officer of the Company or a substantial
alteration in the nature or status of Employee's responsibilities from those in
effect immediately prior to a Change of Control; or an adverse and substantial
alteration in Employee's reporting responsibilities, title or offices as in
effect immediately prior to a Change of Control or any removal of Employee from
or failure to reelect Employee to any such positions except in connection with
the termination of employment for Disability, Retirement or Cause or as a result
of death or by Employee other than for Good Reason;
(2) a reduction by the Company in Employee's annual Base
Salary as in effect on the date hereof;
(3) any material breach by the Company of any provision of
this Agreement; or
(4) any purported termination of Employee's employment which
is not effected pursuant to a Notice of Termination satisfying the requirements
of Section 11(d) below and, for purposes of this Agreement, no such purported
termination shall be effective.
(B) Employee's right to terminate his employment pursuant to
this Subsection 11(c) shall not be affected by Employee's incapacity due to
physical or mental illness.
(d) Notice of Termination. Any purported termination by the
Company or by Employee shall be communicated by written Notice of Termination to
the other party hereto in accordance with Section 13 hereof. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision of this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of employment under the provision so indicated.
For purposes of this Agreement, no such purported termination shall be effective
without such Notice of Termination.
(e) Compensation for Termination. If Employee's employment by
the Company shall be terminated within two years after a Change of Control (a)
by the Company pursuant to Subsections (8)(a)(i), (iv), or (v) or (b) by
Employee for Good Reason, then:
(i) within five (5) days of the date of such termination, the
Company shall pay Employee a single severance payment in cash in an amount equal
to 2.9 multiplied by Employee's Base Salary paid to Employee by the Company in
the Company's fiscal year immediately preceding the year in which the
termination occurs plus all accrued but unpaid Base Salary and a pro rata bonus
amount payable pursuant to Section 4 hereof through the date of termination;
(ii) for a period of two (2) years after such termination, the
Company shall at its expense continue on behalf of Employee the benefits
described in Section 9(b) of this Agreement; and
(iii) any restrictions on any outstanding incentive awards
(including, but not limited to, restricted stock) granted to Employee under any
of the Company's benefit plans or otherwise shall lapse and such incentive
awards shall become 100% vested.
(f) Mitigation. Employee shall not be required to mitigate the
amount of any payment provided for in this Section 11 by seeking other
employment or otherwise nor shall the amount of any payment or benefit provided
for in this Section 11 be reduced by any compensation earned by Employee as the
result of employment by another employer or by retirement benefits after the
date of termination or otherwise.
(g) Compensation Election. If Employee receives compensation
pursuant to this Section 11, Employee shall not be entitled to any other
benefits hereunder, other than that referred to in subsection (e) above, the
receipt of any compensation which Employee had earned but previously elected to
defer receipt of and the right to exercise options in accordance with the terms
of the Company's Stock Option Plans under which such options were granted.
(h) Excise Tax Payment. In the event that any payment or
benefit (within the meaning of Section 280G(b)(2) of the Internal Revenue Code
of 1986, as amended (the "Code")), to Employee or for this benefit paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise in connection with, or arising out of, his employment with the
Company or a Change in Control of the Company (a "Payment" or "Payments"), would
be subject to the excise tax imposed by Section 4999 of the Code or any interest
or penalties are incurred by the Employee with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Employee will be
entitled to immediately receive an additional payment (a "Gross-Up Payment") in
an amount such that after payment by the Employee of all taxes (including any
interest or penalties, other than interest and penalties imposed by reason of
the Employee's failure to file timely a tax return or pay taxes shown due on his
return, imposed with respect to such taxes and the Excise Tax), including any
Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
12. Successors and Assigns.
(a) This Agreement shall be binding upon and shall inure to
the benefit of the Company, its successors and assigns. The term "Company" as
used herein shall include such successors and assigns. The term "successors and
assigns" as used herein shall mean a corporation or other entity acquiring all
or substantially all the assets and business of this Company (including this
Agreement) whether by operation of law or otherwise.
(b) Neither this Agreement nor any right or interest hereunder
shall be assignable by the Employee, his beneficiaries, or legal representatives
without the Company's prior written consent; provided, however, that nothing in
this Section 12 shall preclude (i) the Employee from designating a beneficiary
to receive any benefit payable hereunder upon his death, or (ii) the executors,
administrators, or other legal representatives of the Employee or his estate
from assigning any rights hereunder to distributees, legatees, beneficiaries,
testamentary trustees or other legal heirs of the Employee.
(c) After a Change of Control, the Company will require any
successor or assign (whether direct or indirect, by purchase, merger,
consolidation of otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession or assignment shall be a breach of this Agreement and shall
entitle Employee to compensation from the Company in the same amount and on the
same terms as Employee would be entitled hereunder if Employee terminated
employment for Good Reason except that, for purposes of implementing the
foregoing, the date on which any such succession or assignment becomes effective
shall be deemed the date of termination. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any successor or assign to
its business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
13. Notices.
Any notice required or permitted by this Agreement shall be
given by registered or certified mail, return receipt requested, addressed to
the Company at its then principal office, or to the Employee at his address
specified on page 1 of this Agreement, or to either party hereto at such other
address or addresses as he or it may from time to time specify for such purposes
in a notice similarly given.
14. Governing Law; Litigation; Expenses.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without giving effect to the
conflicts of law principles thereof.
(b) The Employee and the Company hereby agree that the courts
of the State of Florida shall have exclusive jurisdiction to hear and determine
any claims or disputes pertaining to this Agreement or to any matter arising
therefrom. Each of the Employee and the Company expressly submits and consents
in advance to such jurisdiction in any action commenced in such courts hereby
waiving personal service of the summons and complaint or other process or papers
issued therein, and agreeing that service of such summons and complaint, or
other process or papers, may be made by registered or certified mail addressed
to the Company at its then principal office or to the Employee at his address
specified on page 1 of this Agreement, or to either party hereto at such other
addresses as it or he from time to time specify to the other party in writing
for such purpose. The exclusive choice of forum set forth in this Section 13
shall not be deemed to preclude the enforcement of any judgment obtained in such
forum or the taking of any action under this Agreement to enforce such judgment
in any appropriate jurisdiction.
(c) All costs and expenses (including attorneys' fees)
incurred in connection with any litigation relating to a claim or dispute
pertaining to this Agreement shall be paid by the party incurring such expenses,
except if the claim or dispute pertains to the enforcement of Section 11 hereof,
in which case the prevailing party shall be entitled to an award of such costs
and expenses from the non-prevailing party.
(d) Nothing contained in this Section 14 shall be deemed to
limit the Company's obligation to indemnify the Employee to the fullest extent
permitted by applicable law in respect of any actions, claims or proceedings
which are based upon acts or omissions of the Employee related to the
performance of his duties hereunder to the extent he would have otherwise been
entitled to indemnification under the by-laws or charter of the Company or any
of its subsidiaries or to the extent to which indemnification is to be paid to
officers and directors as a matter of law.
15. Entire Agreement.
This instrument contains the entire agreement of the parties
relating to the subject matter hereof and supersedes any and all other
agreements and understandings, whether written, oral or otherwise, with respect
to the employment of the Employee by the Company and all of such other
agreements and understandings shall be of no force or effect. No modification of
this Agreement shall be valid unless in writing and signed by the parties
hereto. The waiver of a breach of any term or condition of this Agreement shall
not be deemed to constitute a waiver of any subsequent breach of the same or any
other term or condition of this Agreement.
16. Severability.
If any term or provision of this Agreement or the application
thereof to any person, property or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement, or the application of such
term or provision to persons, property or circumstances other than those as to
which it is invalid or unenforceable shall not be affected thereby, and each
term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
17. Injunctive Relief.
(a) The Employee acknowledges and agrees that the covenants
and obligations contained in Sections 10(a), 10(b) and 10(c) of this Agreement
relate to special, unique and extraordinary matters and that a violation of any
of the terms of such Sections will cause the Company irreparable injury for
which adequate remedies at law are not available. Therefore, the Employee agrees
that the Company shall be entitled to an injunction, restraining order, or other
equitable relief from any court of competent jurisdiction, restraining the
Employee from committing any violation of the covenants and obligations set
forth in Sections 10(a), 10(b) and 10(c) hereof.
(b) The Company's rights and remedies under this Section 17
are cumulative and are in addition to any other rights and remedies the Company
may have at law or in equity. In connection with the foregoing provision of this
Section 17, the Employee represents that his economic means and circumstances
are such that such provisions will not prevent him from providing for himself
and his family on a basis satisfactory to him.
18. Withholding Taxes.
The Company may deduct from any payments to be made hereunder
any federal, state or local withholding or other taxes which the Company
determines it is required to deduct under applicable law.
19. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day, month and year first written above.
ECKERD CORPORATION
By: /s/ Frank Newman
Name: Frank Newman
Its: President/CEO/COO
EMPLOYEE
/s/ Samuel G. Wright
SAMUEL G. WRIGHT
g: employ1/winword/forms
EXHIBIT 10.29
EMPLOYMENT AGREEMENT (Sen. Exec.)
AGREEMENT made as of February 1, 1996, by and between ECKERD
CORPORATION, a Delaware corporation (the "Company) and KENNETH L. FLYNN,
residing at 8673 Laurel Drive, Pinellas Park, Florida 34666 (the "Employee").
WHEREAS, upon the terms and subject to the conditions of this
Agreement, the Company desires to employ the Employee and the Employee is
willing to accept employment by the Company.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Employment.
Upon the terms and subject to the conditions of this
Agreement, the Company hereby employs the Employee and the Employee hereby
accepts employment by the Company in the capacity hereinafter set forth.
2. Term of Employment.
The term of the Employee's employment by the Company under
this Agreement shall commence on the date hereof and shall be for a term of
twelve (12) months, subject to extension and termination as provided in Section
8 hereof (the "Contract Period").
3. Duties; Extent of Services.
(a) During the Contract Period, the Employee shall serve as
Senior Vice President/Operations of the Company or in such other executive
capacity as shall be determined from time to time by the Board of Directors of
the Company and shall perform the duties, undertake the responsibilities and
exercise the authority customarily performed, undertaken and exercised by a
person in such position in the business in which the Company is engaged.
(b) Except as otherwise provided herein and except for
illness, permitted vacation periods and permitted leaves of absence during the
Contract Period, the Employee shall (i) devote his full time and attention
during normal business hours to the business of the Company and its
subsidiaries; (ii) use his best efforts to promote the Company's and its
subsidiaries' interest; and (iii) discharge such other and further executive and
administrative duties as may be assigned to him by the Board of Directors of the
Company and its subsidiaries.
(c) Except for directorships held by the Employee on the date
of this Agreement, during the Contract Period the Employee will not, without the
prior written consent of the Company's Board of Directors, serve as a director
of any corporation, joint venture, association or other commercial enterprise
not controlled by, controlling or under common control with, the Company and its
subsidiaries.
4. Compensation.
(a) In consideration of the services rendered by the Employee
under this Agreement, the Company shall pay the Employee a base annual salary
(the "Base Salary") in the amount of $309,000 (or such other amount as the Board
of Directors of the Company shall determine) payable monthly on the fifteenth
(15th) of each month during the Contract Period.
(b) During the Contract Period, as additional compensation for
his services and as a further incentive and inducement to the Employee to accept
employment by the Company and to devote his best efforts to the business and
affairs of the Company and its subsidiaries, the Employee shall be entitled to
participate in such additional compensation plans (the "Bonus Compensation")
which the Company allows the Employee to participate in from time to time.
(c) The Company agrees that the Employee shall be entitled to
defer some portion or all of his Base Salary for any calendar year in accordance
with the provisions of the Company's Executive Deferred Compensation Plan as
adopted by the Board of Directors.
5. Fringe Benefits.
In addition to the compensation provided in Section 4 above,
during the Contract Period the Employee shall be entitled to the following
benefits:
(a) The Employee shall be entitled to paid vacation time
annually in accordance with the Company policy as determined by the Board of
Directors.
(b) The Employee shall be entitled to participate in all
employee benefit programs now or hereafter maintained by the Company for
executive personnel for which he is eligible, including, without limitation,
group life insurance, short and long-term disability, profit sharing, pension,
automobile allowance or leasing, stock option (subject to approval by the Board
of Directors), supplemental retirement income (subject to approval by the Board
of Directors), hospitalization and medical and dental reimbursement plan or
program, his participation in such programs to be based upon the applicable
provisions of such programs as they may exist from time to time.
6. Expenses.
The Company shall pay or reimburse the Employee for all
reasonable expenses reasonably incurred or paid by him in connection with the
performance of his duties hereunder upon presentation of expense statements or
vouchers and such other supporting documentation as the Company may from time to
time reasonably request.
7. Benefits Payable Upon Disability, Death, or Retirement.
(a) In the event of the disability (as hereinafter defined) of
the Employee during the Contract Period, the Company shall continue to pay the
Employee the compensation provided in Section 4 hereof during the period of his
disability or earlier termination hereof; provided, however, that in the event
the Employee is disabled for a continuous period exceeding six (6) consecutive
calendar months, the Company may, at its election, terminate this Agreement at
the close of business on the date thirty (30) days after the Company shall have
delivered a written notice of such election to the Employee, in which event the
Employee shall be entitled to receive benefits under the Company's Long Term
Disability Plan as such plan may exist as of the date of termination of this
Agreement.
As used in this Agreement, the term "disability" shall mean
the inability of the Employee due to illness or physical or mental infirmity to
perform his duties under this Agreement as determined by a physician selected by
the Employee and acceptable to the Company.
(b) During the period the Employee shall be entitled to
receive payments under Section 7(a) above, to the extent that he is physically
and mentally able to do so, he shall, upon the request of the Company, furnish
information and assistance to the Company, and, in addition, upon reasonable
request of Senior Management or the Board of Directors, he shall make himself
available to the Company to undertake reasonable assignments consistent with the
dignity, importance and scope of his position and his physical and mental
health.
(c) In the event of the death of the Employee during the
Contract Period, the Company shall pay, or cause to be paid, to the Employee's
designated beneficiary or beneficiaries or estate or legal representatives, the
payment due pursuant to the terms of the group term insurance policies together
with such other death benefits as may be payable under the Company's benefit
plans.
(d) In the event of the retirement of the Employee on his
Normal Retirement Date (as such term is defined in the Company's Pension Plan)
the Employee shall be entitled to such retirement benefits, if any, as are
available to the Employee upon retirement pursuant to the Company's retirement
benefit plans.
8. Termination.
(a) Except as otherwise provided in subsection (c) and (d)
hereof, this Agreement and the employment of the Employee hereunder shall
terminate upon the earliest to occur of the dates specified below:
(i) the close of business on the date that is one year after
the date hereof (the "Initial Period"), except that this Agreement and the
employment of the Employee hereunder shall be automatically extended from year
to year thereafter unless (x) terminated by the Company by delivery of not less
than 60 days written notice to the Employee prior to the end of the Initial
Period or any extension thereof in which case the employment of the Employee
shall terminate on the date specified for termination in such notice, or (y)
terminated by the Employee by delivery of not less than 60 days written notice
to the Company prior to the end of the Initial Period or any extension thereof
in which case the employment of the Employee shall terminate on the date
specified for termination in such notice;
(ii) the close of business on the date of death of the
Employee;
(iii) the close of business on the date the Company delivers
to the Employee a written notice of its election to terminate his employment for
"Cause" (as defined in paragraph (b) below);
(iv) the close of business on the date thirty (30) days after
the Company shall have delivered to the Employee a written notice of its
intention to terminate his employment because the Board of Directors has
determined that such termination is in the best interests of the Company and
such termination is not for Cause, death, disability or failure to extend
pursuant to Section 8(a)(i)(x) hereof;
(v) the close of business on the date of a termination by the
Company pursuant to Section 7(a) hereof; or
(vi) the close of business on the date of the retirement of
the Employee pursuant to Section 7(d) hereof.
(b) For purposes of this Agreement, the term "Cause" shall
mean: (i) the Employee's conviction (which, through lapse of time or otherwise,
is not subject to appeal) of, or a plea of guilty or nolo contendre to, any
crime or offense which constitutes a felony in the jurisdiction involved or
involves moral turpitude, (ii) the commission of an act of fraud, embezzlement
or intentional dishonesty against the Company or any of its subsidiaries, (iii)
a breach of this Agreement by the Employee, (iv) breach of fiduciary duty
resulting in injury to the Company or its subsidiaries (v) gross misconduct in
connection with the Employee's performance of the Employee's duties hereunder,
or (vi) the Employee's continued or willful failure or refusal to comply with
the Company's policies or the policies or written directives of the Company's
Senior Management or the Board of Directors.
(c) For purposes hereof, upon termination of this Agreement
and employment of Employee as provided in Section 8(a)(i)-(vi), all obligations
and liabilities of the parties hereto shall cease and be of no effect except for
those liabilities and obligations provided for in Section 7, 9 and 10 hereof.
(d) For purposes of clauses (i) and (iv) of Section 8(a)
above, the Employee shall be relieved of his duties and shall vacate his office
and the Company's premises on the date of receipt of the notice required by such
clauses unless requested by the Company to remain in the active employment of
the Company during such period between the receipt of notice and the effective
date of termination of employment.
9. Payments to Employee Upon Termination of Employment.
(a) Upon the termination of the Employee's full-time
employment hereunder by the Company in accordance with clauses (i)(x) or (iv) of
Section 8(a) of this Agreement, the Company shall pay to the Employee, or in the
event of his subsequent death, to his beneficiary or beneficiaries or his estate
or legal representative, as severance pay (i) an amount equal the Employee's
Base Salary on the date of termination for the Applicable Severance Period
payable in monthly installments on the fifteenth (15th) of each month during the
Applicable Severance Period plus (ii) subject to the terms and provisions of any
additional compensation plans that the Employee participates in from time to
time, a pro rata portion of any bonus compensation payable to the Employee.
(b) Upon the termination of the Employee's full-time
employment hereunder pursuant to clauses (i)(x) or (iv) of Section 8(a) of this
Agreement, the Company shall at its expense continue on behalf of the Employee
the following benefits: life insurance, short and long-term disability
insurance, hospitalization insurance and medical and dental reimbursement plan
insurance. The coverage of any such insurance provided by the Company hereunder
shall be no less favorable to the Employee, in terms of amounts and deductibles,
than the coverage provided under the benefit programs maintained by the Company
from time to time for the Company's executives. The Company's obligation
hereunder with respect to each of the foregoing benefit plans shall terminate
upon the earlier of the end of the Applicable Severance Period or the date the
Employee obtains any such benefits pursuant to a subsequent employer's benefit
plans. The Employee agrees that the Company's continued provision of benefits
described in this Section 9(b) shall count toward satisfying any obligation that
the Company may have under COBRA.
(c) Benefits pursuant to the Company's Profit Sharing and
Pension Plans (and such other plans in which Employee participates) shall be
payable to Employee in accordance with the terms of such Plans.
(d) For purposes of this Agreement, the applicable Severance
Period shall mean (i) twelve (12) months for a termination which occurs prior to
the Employee's tenth (10th) anniversary of employment with the Company, or (ii)
eighteen (18) months for a termination which occurs after the Employee's tenth
(10th) anniversary of employment with the Company.
(e) Employee further acknowledges that as a condition
precedent to receiving any benefits under this Agreement, Employee shall
complete, execute and deliver to the Company at the time of his termination of
employment a Release in the form of Exhibit "A" hereto which releases any and
all claims that the Employee may have against the Company as of the date of
termination arising under federal, state, local or common law.
10. Covenants of the Employee.
(a) The Employee agrees that during the Contract Period and
for a period of time equal to (i) one year in the event of a termination of
employment in accordance with clauses (i)(y) or (iii) of Section 8(a); (ii) two
years in the event of a termination of employment in accordance with Section
7(a) or retirement in accordance with Section 7(d); or (iii) the Applicable
Severance Period in the event of a termination of employment in accordance with
clauses (i)(x) or (iv) of Section 8(a), he will not, directly or indirectly,
engage, assist or participate in, whether as a director, officer, employee,
agent, manager, consultant, partner, owner or independent contractor or other
participant, any business, firm, corporation, partnership, enterprise or
organization that competes with the business engaged or hereafter engaged in by
the Company or any of its subsidiaries (including, but not limited to, the
operation of retail drug stores in which prescription drugs are sold, the sale
of photofinishing products or services, the mail order pharmacy business, and/or
the pharmacy benefits management business) in the Company's or such
subsidiaries' trade areas (for purposes hereof "trade areas" shall mean any
county in any state of the United States in which retail drug stores operated by
the Company and its subsidiaries are located or in which services are provided
by the Company or its subsidiaries). Nothing contained herein shall prevent the
Employee from acquiring less than 2% of any class of outstanding securities of
any Company that has any of its securities listed on a national securities
exchange or traded in the over-the-counter market.
(b) The Employee agrees that during the Contract Period and
for a period of two years after the termination of this Agreement for any
reason, he will not directly induce or solicit any person employed or hereafter
employed by the Company or any of its subsidiaries to leave the employ of the
Company or any of its subsidiaries nor will he directly or indirectly call upon,
solicit, write, direct, divert or accept business with respect to any account or
customer of the Company or its subsidiaries, including, without limitation,
accounts or customers obtained before or during the term of this Agreement.
(c) The Employee agrees and acknowledges that the Confidential
Information of the Company and its subsidiaries (as hereinafter defined) is
valuable, special and unique to their business; that such business depends on
such Confidential Information; and that the Company wishes to protect such
Confidential Information by keeping it confidential for the use and benefit of
the Company. Based on the foregoing, the Employee agrees to undertake the
following obligations with respect to such Confidential Information:
(i) The Employee agrees to keep any and all Confidential
Information in trust for the use and benefit of the Company;
(ii) The Employee agrees that, except as required by the
Employee's duties or authorized in writing by the Company and its subsidiaries
or required by applicable law, he will not at any time during and for a period
of five (5) years after the termination of his employment with the Company and
its subsidiaries, disclose, directly or indirectly, any Confidential Information
of the Company or any of its subsidiaries.
(iii) The Employee agrees to take all reasonable steps
necessary, or reasonably requested by the Company and its subsidiaries, to
ensure that all Confidential Information of the Company is kept confidential for
the use and benefit of the Company and its subsidiaries; and
(iv) The Employee agrees that, upon termination of his
employment by the Company or any of its subsidiaries or at any other time the
Company may in writing so request, he will promptly deliver to the Company all
materials constituting Confidential Information (including all copies thereof)
that are in the possession of or under the control of the Employee. The Employee
further agrees that, if requested by the Company to return any Confidential
Information pursuant to this Subsection (iv), he will not make or retain any
copy or extract from such materials.
For purposes of this Section 10(c), Confidential Information
means any and all information developed by or for the Company or any of its
subsidiaries of which the Employee gained knowledge by reason of his employment
by the Company or any of its subsidiaries prior to the date hereof or his
employment under this Agreement that is not generally known in any industry in
which the Company is or may become engaged. Confidential Information includes,
but is not limited to, any and all information developed by or for the Company
concerning plans, marketing and sales methods, materials, processes, business
forms, procedures, devices used by the Company, its subsidiaries, suppliers and
customers with which the Company had dealt prior to the Employee's termination
of employment with the Company and its subsidiaries, plans for development of
new products, services and expansion into new areas or markets, internal
operations, and any trade secrets and proprietary information of any type owned
by the Company and its subsidiaries, together with all written, graphic and
other materials relating to all or any part of the same.
11. Change of Control
(a) Definition of Change of Control. No benefits shall be
payable under this Section 11 unless there shall have been a Change of Control,
as set forth below, and Employee's employment by the Company shall thereafter
have been terminated in accordance with Section 11(b) below. As used herein, the
term "Change of Control" shall mean:
(i) the acquisition by any individual, firm, corporation or
other entity or any group of individuals, firms, corporations or other entities
acting in concert ("Person") together with all Affiliates and Associates (as
such terms are defined in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934 (the "Exchange Act") of such Person of
beneficial ownership (as such term is defined in Rule 13d-3 under the Exchange
Act) of more than 25% of the outstanding shares of voting stock of the Company;
(ii) any change in the composition of the Board of Directors
of the Company resulting in members of the Board on the date hereof (or such
other persons who are elected by, or on the recommendation of, a majority of
such members or other persons who had been elected by, or on the recommendation
of, a majority of such members) ("Continuing Directors") ceasing to constitute a
majority of the Board of Directors; or
(iii) any other event determined by a majority of the Board of
Directors of the Company to constitute a Change of Control.
(b) Termination Following Change of Control. If any of the
events described in Section 11(a) above constituting a Change of Control shall
have occurred, Employee shall be entitled to the benefits provided in Section
11(e) hereof upon the subsequent termination of employment during the time
period referred to in Section 11(e) hereof if such termination is (i) by the
Company pursuant to Subsections 8(a)(i), (iv) or (v) hereof or (ii) by Employee
for Good Reason.
(c) Definition of Good Reason.
(A) Employee shall be entitled to terminate employment for
Good Reason. For purposes of this Agreement, "Good Reason" shall without
Employee's express written consent, mean, following a Change of Control:
(1) the assignment to Employee of any duties inconsistent with
Employee's status as a senior executive officer of the Company or a substantial
alteration in the nature or status of Employee's responsibilities from those in
effect immediately prior to a Change of Control; or an adverse and substantial
alteration in Employee's reporting responsibilities, title or offices as in
effect immediately prior to a Change of Control or any removal of Employee from
or failure to reelect Employee to any such positions except in connection with
the termination of employment for Disability, Retirement or Cause or as a result
of death or by Employee other than for Good Reason;
(2) a reduction by the Company in Employee's annual Base
Salary as in effect on the date hereof;
(3) any material breach by the Company of any provision of
this Agreement; or
(4) any purported termination of Employee's employment which
is not effected pursuant to a Notice of Termination satisfying the requirements
of Section 11(d) below and, for purposes of this Agreement, no such purported
termination shall be effective.
(B) Employee's right to terminate his employment pursuant to
this Subsection 11(c) shall not be affected by Employee's incapacity due to
physical or mental illness.
(d) Notice of Termination. Any purported termination by the
Company or by Employee shall be communicated by written Notice of Termination to
the other party hereto in accordance with Section 13 hereof. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision of this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of employment under the provision so indicated.
For purposes of this Agreement, no such purported termination shall be effective
without such Notice of Termination.
(e) Compensation for Termination. If Employee's employment by
the Company shall be terminated within two years after a Change of Control (a)
by the Company pursuant to Subsections (8)(a)(i), (iv), or (v) or (b) by
Employee for Good Reason, then:
(i) within five (5) days of the date of such termination, the
Company shall pay Employee a single severance payment in cash in an amount equal
to 2.9 multiplied by Employee's Base Salary paid to Employee by the Company in
the Company's fiscal year immediately preceding the year in which the
termination occurs plus all accrued but unpaid Base Salary and a pro rata bonus
amount payable pursuant to Section 4 hereof through the date of termination;
(ii) for a period of two (2) years after such termination, the
Company shall at its expense continue on behalf of Employee the benefits
described in Section 9(b) of this Agreement; and
(iii) any restrictions on any outstanding incentive awards
(including, but not limited to, restricted stock) granted to Employee under any
of the Company's benefit plans or otherwise shall lapse and such incentive
awards shall become 100% vested.
(f) Mitigation. Employee shall not be required to mitigate the
amount of any payment provided for in this Section 11 by seeking other
employment or otherwise nor shall the amount of any payment or benefit provided
for in this Section 11 be reduced by any compensation earned by Employee as the
result of employment by another employer or by retirement benefits after the
date of termination or otherwise.
(g) Compensation Election. If Employee receives compensation
pursuant to this Section 11, Employee shall not be entitled to any other
benefits hereunder, other than that referred to in subsection (e) above, the
receipt of any compensation which Employee had earned but previously elected to
defer receipt of and the right to exercise options in accordance with the terms
of the Company's Stock Option Plans under which such options were granted.
(h) Excise Tax Payment. In the event that any payment or
benefit (within the meaning of Section 280G(b)(2) of the Internal Revenue Code
of 1986, as amended (the "Code")), to Employee or for this benefit paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise in connection with, or arising out of, his employment with the
Company or a Change in Control of the Company (a "Payment" or "Payments"), would
be subject to the excise tax imposed by Section 4999 of the Code or any interest
or penalties are incurred by the Employee with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Employee will be
entitled to immediately receive an additional payment (a "Gross-Up Payment") in
an amount such that after payment by the Employee of all taxes (including any
interest or penalties, other than interest and penalties imposed by reason of
the Employee's failure to file timely a tax return or pay taxes shown due on his
return, imposed with respect to such taxes and the Excise Tax), including any
Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
12. Successors and Assigns.
(a) This Agreement shall be binding upon and shall inure to
the benefit of the Company, its successors and assigns. The term "Company" as
used herein shall include such successors and assigns. The term "successors and
assigns" as used herein shall mean a corporation or other entity acquiring all
or substantially all the assets and business of this Company (including this
Agreement) whether by operation of law or otherwise.
(b) Neither this Agreement nor any right or interest hereunder
shall be assignable by the Employee, his beneficiaries, or legal representatives
without the Company's prior written consent; provided, however, that nothing in
this Section 12 shall preclude (i) the Employee from designating a beneficiary
to receive any benefit payable hereunder upon his death, or (ii) the executors,
administrators, or other legal representatives of the Employee or his estate
from assigning any rights hereunder to distributees, legatees, beneficiaries,
testamentary trustees or other legal heirs of the Employee.
(c) After a Change of Control, the Company will require any
successor or assign (whether direct or indirect, by purchase, merger,
consolidation of otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession or assignment shall be a breach of this Agreement and shall
entitle Employee to compensation from the Company in the same amount and on the
same terms as Employee would be entitled hereunder if Employee terminated
employment for Good Reason except that, for purposes of implementing the
foregoing, the date on which any such succession or assignment becomes effective
shall be deemed the date of termination. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any successor or assign to
its business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
13. Notices.
Any notice required or permitted by this Agreement shall be
given by registered or certified mail, return receipt requested, addressed to
the Company at its then principal office, or to the Employee at his address
specified on page 1 of this Agreement, or to either party hereto at such other
address or addresses as he or it may from time to time specify for such purposes
in a notice similarly given.
14. Governing Law; Litigation; Expenses.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without giving effect to the
conflicts of law principles thereof.
(b) The Employee and the Company hereby agree that the courts
of the State of Florida shall have exclusive jurisdiction to hear and determine
any claims or disputes pertaining to this Agreement or to any matter arising
therefrom. Each of the Employee and the Company expressly submits and consents
in advance to such jurisdiction in any action commenced in such courts hereby
waiving personal service of the summons and complaint or other process or papers
issued therein, and agreeing that service of such summons and complaint, or
other process or papers, may be made by registered or certified mail addressed
to the Company at its then principal office or to the Employee at his address
specified on page 1 of this Agreement, or to either party hereto at such other
addresses as it or he from time to time specify to the other party in writing
for such purpose. The exclusive choice of forum set forth in this Section 13
shall not be deemed to preclude the enforcement of any judgment obtained in such
forum or the taking of any action under this Agreement to enforce such judgment
in any appropriate jurisdiction.
(c) All costs and expenses (including attorneys' fees)
incurred in connection with any litigation relating to a claim or dispute
pertaining to this Agreement shall be paid by the party incurring such expenses,
except if the claim or dispute pertains to the enforcement of Section 11 hereof,
in which case the prevailing party shall be entitled to an award of such costs
and expenses from the non-prevailing party.
(d) Nothing contained in this Section 14 shall be deemed to
limit the Company's obligation to indemnify the Employee to the fullest extent
permitted by applicable law in respect of any actions, claims or proceedings
which are based upon acts or omissions of the Employee related to the
performance of his duties hereunder to the extent he would have otherwise been
entitled to indemnification under the by-laws or charter of the Company or any
of its subsidiaries or to the extent to which indemnification is to be paid to
officers and directors as a matter of law.
15. Entire Agreement.
This instrument contains the entire agreement of the parties
relating to the subject matter hereof and supersedes any and all other
agreements and understandings, whether written, oral or otherwise, with respect
to the employment of the Employee by the Company and all of such other
agreements and understandings shall be of no force or effect. No modification of
this Agreement shall be valid unless in writing and signed by the parties
hereto. The waiver of a breach of any term or condition of this Agreement shall
not be deemed to constitute a waiver of any subsequent breach of the same or any
other term or condition of this Agreement.
16. Severability.
If any term or provision of this Agreement or the application
thereof to any person, property or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement, or the application of such
term or provision to persons, property or circumstances other than those as to
which it is invalid or unenforceable shall not be affected thereby, and each
term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
17. Injunctive Relief.
(a) The Employee acknowledges and agrees that the covenants
and obligations contained in Sections 10(a), 10(b) and 10(c) of this Agreement
relate to special, unique and extraordinary matters and that a violation of any
of the terms of such Sections will cause the Company irreparable injury for
which adequate remedies at law are not available. Therefore, the Employee agrees
that the Company shall be entitled to an injunction, restraining order, or other
equitable relief from any court of competent jurisdiction, restraining the
Employee from committing any violation of the covenants and obligations set
forth in Sections 10(a), 10(b) and 10(c) hereof.
(b) The Company's rights and remedies under this Section 17
are cumulative and are in addition to any other rights and remedies the Company
may have at law or in equity. In connection with the foregoing provision of this
Section 17, the Employee represents that his economic means and circumstances
are such that such provisions will not prevent him from providing for himself
and his family on a basis satisfactory to him.
18. Withholding Taxes.
The Company may deduct from any payments to be made hereunder
any federal, state or local withholding or other taxes which the Company
determines it is required to deduct under applicable law.
19. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day, month and year first written above.
ECKERD CORPORATION
By: /s/ Frank Newman
Name: Frank Newman
Its: President/CEO/COO
EMPLOYEE
/s/ Kenneth L. Flynn
KENNETH L. FLYNN
g: employ1/winword/forms
EXHIBIT 10.30
THE
EXECUTIVE EXCESS BENEFIT PLAN
OF
JACK ECKERD CORPORATION
AND ITS SUBSIDIARIES
Effective December 1, 1989, JACK ECKERD CORPORATION, a Delaware
corporation, hereby establishes this EXECUTIVE EXCESS BENEFIT PLAN to provide
benefits on behalf of those of its executive officers participating in its
Profit Sharing Plan and Pension Plan (as hereinafter defined) whose benefits
under those plans are reduced by reason of the limits imposed by either or both
of Sections 401(a)(17) and 415 of the Code. The Plan is intended solely to
replace (and thus to provide benefits equal to) the amount of Profit Sharing
Plan and Pension Plan benefits that participating employees will be prevented
from earning under those Plans by reason of such limits but would have earned
had such limits not applied. Accordingly, the Plan provides benefits only to the
extent that such limits reduce the Profit Sharing Plan and Pension Plan benefits
to which participating employees would otherwise be entitled.
It is intended that the Plan shall benefit only those executive
employees of the Company who are nominated by either its Chief Executive Officer
or its Senior Vice President, Finance and Administration and who are approved by
the Executive Compensation and Stock Option Committee of its Board of Directors.
1. Definitions Provided in Pension Plan. Except as otherwise provided
in Section 2, the terms used herein shall have the meanings assigned to them
under the Jack Eckerd Corporation Pension Plan, as now in effect and as it may
be amended hereafter from time to time.
2. Specific Definitions. Notwithstanding Section 1, the following
terms, when used herein, shall have the following meanings unless a different
meaning is plainly required by the context:
a."Account" shall mean a Participant's Excess Pension Account or
Excess Profit Sharing Account, or both, as the context requires.
b."Beneficiary" shall mean either or both of a Pension Beneficiary or
a Profit Sharing Beneficiary, as the context requires.
c."Board" or "Board of Directors" shall mean the Board of Directors of
Jack Eckerd Corporation.
d."Change in Control" shall have the meaning ascribed to that term in
the Trust.
e."Code" shall mean the Internal Revenue of 1986, as amended from time
to time.
f."Committee" shall mean the Administrative Committee appointed to
manage and administer the Plan in accordance with the provisions of
Section 14. The members of the Committee at any time shall be the
same individuals who are at that time members of the Pension
Committee under the Pension Plan.
g."Company" shall mean Jack Eckerd Corporation and any of its direct
and indirect subsidiaries that are authorized to participate in the
Pension Plan and the Profit Sharing Plan.
h."Compensation Committee" shall mean the Executive Compensation and
Stock Option Committee of the Board.
i."Computation Date" shall mean the earliest of (i) the day before the
date as of which the Participant begins receiving benefits under the
Pension Plan, (ii) the date as of which the Compensation Committee
determines, in accordance with Section 3(b), that the Participant is
no longer employed in a position that qualifies him/her to
participate in the Plan, and (iii) the day before the date the Plan
is terminated.
j."Disabled" or "Disability" shall mean that a Participant has been
determined, in accordance with Section 5.1 of the Pension Plan, to be
entitled to receive a disability pension under the Pension Plan.
k."Employee" shall mean any person regularly employed full time by the
Company in any capacity (including officers and directors who
regularly render services to the Company as regular full-time
employees). Employees shall not include part-time employees,
consultants or independent contractors of the Company.
l."Excess Pension Account" shall mean the account established to
record a participant's Excess Pension Amount (as defined in Section
4(d)) under the Plan.
m."Excess Pension Benefit" shall have the meaning ascribed to that
term in Section 8(a).
n."Excess Profit Sharing Account" shall mean the Account established
to record amounts credited to a Participant under Sections 4(b) and
4(c).
o."Excess Profit Sharing Benefit" shall have the meaning ascribed to
that term in Section 8(a).
p."Participant" shall mean an Employee who is eligible to participate
in the Plan and has become a participant in the Plan in accordance
with Section 3.
q."Pension Beneficiary" shall mean the Participant's spouse (if the
spouse survives the Participant), except that if, on the date of his
death, the Participant has attained the age of fifty-five (55) years,
has completed any Service Period (as defined in the Pension Plan)
that may then be required for such purpose under the provision of the
Pension Plan that corresponds to clause (i)(B) of Section 6(a)
hereof, and is unmarried but has children under the age of twenty-one
(21) years living at home or enrolled in an educational institution,
his Pension Beneficiary shall be his eligible children
(collectively).
r."Pension Plan" shall mean the Jack Eckerd Corporation Pension Plan,
as amended from time to time.
s."Pension Retirement Date" shall mean the Normal Retirement Date as
defined in the Pension Plan or, in the case of a Participant who is
eligible for, and who has elected to receive, an early retirement
pension under Article 4 of the Pension Plan, the date the Participant
becomes eligible for an early retirement pension under the Pension
Plan.
t."Plan" shall mean the Executive Excess Benefit Plan of Eckerd
Corporation and its subsidiaries, which shall be evidenced by this
instrument, as amended from time to time, and by each Plan Agreement.
u."Plan Agreement" shall mean the written agreement, in the form
attached hereto as Exhibit A, that is entered into from time to time
by and between the Company and a Participant.
v."Plan Year" shall mean the period from December 1, 1989 through
December 31, 1989, and each calendar year thereafter.
w."Profit Sharing Account" shall mean the account maintained for a
Participant in the Profit Sharing Plan.
x."Profit Sharing Beneficiary" shall mean the person or persons
(including a trust created by a person or the estate of a person)
designated by a Participant to receive the Participant's Excess
Profit Sharing Benefit under the Plan upon the death of the
Participant or, in the event no such person or persons are designated
or survive the Participant, then the Participant's beneficiary under
the Profit Sharing Plan.
y."Profit Sharing Normal Retirement Date" shall mean the Normal
Retirement Date as defined in the Profit Sharing Plan.
z."Profit Sharing Plan" shall mean the Jack Eckerd Corporation Profit
Sharing Plan. References herein to Sections or provisions of the
Profit Sharing Plan refer to Sections or provisions of the Profit
Sharing Plan document in effect on December 31, 1988 (as such
Sections or provisions may be subsequently renumbered or amended).
aa."Retirement" and "Retire" shall mean severance from employment with
the Company on or after a Participant's Pension Retirement Date or
Profit Sharing Normal Retirement Date.
bb."Section" shall mean, unless specified otherwise, a section hereof.
cc."Section 401(a)(17) Limitations" and "Section 415 Limitations" shall
mean the limitations imposed by Section 401(a)(17) or 415 of the
Code, respectively, and regulations and other governmental
interpretations thereunder and by the provisions of any qualified
plan maintained by the Company that are intended to give effect to
those limitations.
dd."Trust" shall mean the Jack Eckerd Corporation Benefit Plans Trust,
as amended from time to time.
ee."Trustee" shall mean the trustee of the Trust.
3. Eligibility to Participate in the Plan.
a. Those executive Employees who are participants in the Pension Plan
and the Profit Sharing Plan and who are selected from time to time by the
Compensation Committee upon the recommendation of the Chief Executive Officer or
the Senior Vice President, Finance and Administration of the Company shall be
eligible to become Participants in the Plan. As a condition of participation,
each individual so selected shall complete, execute and return to the
Compensation Committee a Plan Agreement in the form attached hereto as Exhibit A
and shall comply with such further conditions as may be established by and in
the sole discretion of the Compensation Committee.
b. In the event that subsequent to commencement of participation in the
Plan, a Participant fails to maintain a position of employment in the Company
that, in the sole discretion of the Compensation Committee, qualifies for
participation in the Plan, then such Participant shall have his Account balance
adjusted, in accordance with Section 4(e) below, by the amount of his Excess
Pension Benefit, and shall cease to accrue further benefits under the Plan. Such
Participant shall be entitled to receive his vested benefits, if any, at the
time and in the manner provided by the Plan.
c. An individual shall remain a Participant so long as any amount is
credited to any of his Accounts, whether or not he is still an Employee at the
time such amount continues to be credited to his Accounts.
4. Computation of Benefits.
a. Calculation of Imputed Profit Sharing Allocation. For each Plan Year
with respect to which the Participant is an active participant in the Profit
Sharing Plan and the Pension Plan, a Participant's "Imputed Profit Sharing
Allocation" shall be equal to the amount of Company contributions and
forfeitures that would be allocated to the Participant's Profit Sharing Account
for the Plan Year of the Profit Sharing Plan that ends on the last day of the
Plan Year of the Plan under Sections 6.2 and 7.1 of the Profit Sharing Plan if
the Section 415 Limitations and Section 401(a)(17) Limitations did not apply to
the Profit Sharing Plan.
b. Annual Adjustment of Account.
(i) As of each Adjustment Date (as defined in the Profit
Sharing Plan), the Excess Profit Sharing Account of
each Participant shall be adjusted upward or downward
by the same percentage as the accounts of
participants in the Profit Sharing Plan are adjusted
in accordance with Section 7.3 of the Profit Sharing
Plan.
(ii) As of the Adjustment Date (as defined in the Profit
Sharing Plan) for each Plan Year with respect to
which a Participant is an active participant in the
Profit Sharing Plan and the Pension Plan, the Excess
Profit Sharing Account of each Participant (after
adjustment in accordance with subparagraph (1) of
this paragraph (b)) shall be credited with the
Participant's Imputed Profit Sharing Allocation
reduced (but not below zero) by the amount of Company
contributions and forfeitures actually credited to
such Participant's Profit Sharing Account for that
Plan Year.
c. Final Adjustment. If the Quarterly Valuation Date (as defined in the
Profit Sharing Plan) immediately preceding a Participant's Computation Date is
not an Adjustment Date (as defined in the Profit Sharing Plan), the
Participant's Excess Profit Sharing Account as of such Quarterly Valuation Date
shall be multiplied by the adjustment ratio calculated under Section 7.6 of the
Profit Sharing Plan for such Quarterly Valuation Date.
d. Calculation of Excess Pension Amount. A Participant's "Excess
Pension Amount" shall be computed as of his Computation Date and shall be equal
to (i) the amount that the Participant would have accrued as a benefit under the
Pension Plan (as in effect on his Computation Date) if the Section 401(a)(17)
Limitations and the Section 415 Limitations did not apply to the Pension Plan,
the Profit Sharing Plan, or any other qualified plan maintained by the Company,
reduced (but not below zero) by (ii) the Participant's Accrued Benefit under the
Pension Plan. In computing, in accordance with clause (i) of the preceding
sentence, the amount that a Participant would have accrued as a benefit under
the Pension Plan, (I) the amount of the offset for the benefit under the Profit
Sharing Plan shall be computed as if the Section 401(a)(17) Limitations and the
Section 415 Limitations did not apply to the Profit Sharing Plan, and (II) all
provisions of the Pension Plan and the Profit Sharing Plan effective on the
Computation Date, including, but not limited to, any provisions freezing any
benefits as of a date prior to or coincident with the Computation Date, shall be
taken into account. In determining a Participant's Excess Pension Amount, the
Committee shall reduce, in accordance with Section 4.,2 of the Pension Plan, the
level of any benefits that commence prior to the Participant's Pension Normal
Retirement Date.
e.One-Time Adjustment of Excess Pension Account. As of a Participant's
Computation Date, the Committee shall credit his Excess Pension Account with his
Excess Pension Amount.
5. Retirement or Death After Retirement.
a. Retirement. If a Participant Retires on or after his Pension
Retirement Date, distribution of his Excess Pension Benefit shall commence in
the form determined in accordance with Section 8(b) on the same date as the
distribution of the Participant's benefits under the Pension Plan. If a
Participant Retires on or after his Profit Sharing Normal Retirement Date,
distribution of his Excess Profit Sharing Benefit shall be made in a single lump
sum in cash as soon as administratively practicable after the Participant
terminates service.
b. Death After Retirement or Disability. If a Participant dies after
Retiring or becoming Disabled but before receiving all payments from his Excess
Pension Account under the Plan, the Participant's Pension Beneficiary shall
receive the remaining payments from the Participant's Excess Pension Account to
which the Participant would have been entitled if the Participant had lived. If
a Participant dies after Retiring or becoming Disabled, but before receiving a
distribution of his entire vested interest in his Excess Profit Sharing Account,
his Profit Sharing Beneficiary shall receive a single lump sum cash payment of
the Participant's Excess Profit Sharing Account.
6. Death Before Retirement, Disability and Termination of Employment.
a. Benefits in the Case of a Death. If a Participant dies (whether or
not he is an Employee on the date of his death) before Retirement and is not
Disabled at the time of his death, (i)(A) if the Participant is married on the
date of his death, his Excess Pension Benefit shall be paid to his Pension
Beneficiary in a Single Life Annuity (as defined in Section 8(b)) commencing on
the same date as the distribution of the Pension Beneficiary's benefits under
Article 7 of the Pension Plan, and (B) if, on the date of his death, the
Participant has attained the age of fifty-five (55) years, has completed any
Service Period (as defined in the Pension Plan) that may then be required for
such purpose under the provision of the Pension Plan that corresponds to his
clause (B), and is unmarried but has children under the age of twenty-one (21)
years living at home or enrolled in an educational institution, his Excess
Pension Benefit shall be paid to his eligible children (collectively) in a
Single Life Annuity (as defined in Section 8(b)) commencing on the same date as
the distribution of benefits to such children under Article 7 of the Pension
Plan; and (ii) his Excess Profit Sharing Benefit shall be paid to his Profit
Sharing Beneficiary in a single lump sum cash distribution as soon as
administratively practicable after the Participant's death. If an unmarried
Participant dies before Retirement and is not Disabled at the time of his death,
and if subparagraph (i)(B) of this Section 6(a) does not apply to the
Participant, then his Excess Pension Benefit shall be forfeited.
b. Benefits in the Case of Disability. If a Participant is Disabled, he
shall be entitled to receive (i) his Excess Pension Benefit in the form
determined in accordance with Section 8(b) and commencing on the same date as
the distribution of his disability benefits under Article 5 of the Pension Plan,
and (ii) his Excess Profit Sharing Benefit in a single lump sum cash
distribution as soon as administratively practicable after he is determined to
be Disabled.
c. Benefits in the Case of Termination of Employment. Upon termination
of employment (other than by Retirement, as provided in Section 5, death or
Disability), a Participant shall be entitled to receive (i) his Excess Pension
Benefit, payable in the form determined in accordance with Section 8(b) and
commencing on the same date as the distribution of his benefits under Article 6
of the Pension Plan, and (ii) his Excess Profit Sharing Benefit in a single lump
sum cash distribution as soon as administratively practicable after his
termination.
7. Obligation to Pay Benefits Hereunder. Except as required by the
Trust, the Company shall have no obligation to fund a trust fund or escrow
account or otherwise to segregate assets to guarantee, secure or assure the
payment of any benefit under the Plan, but the Company may (and to the extent
required by the Trust, shall) fund a non-qualified grantor trust to provide for
the payment of benefits under the Plan. The establishment or funding of any such
non-qualified grantor trust shall not relieve the Company of any of its
obligations pursuant to the Plan, except that amounts paid to the Participants
or other payees hereunder from any such trust shall be offset against the amount
of payments required to be made hereunder by the Company to the Participant or
other payee. To the extent that any person acquires a right to receive payments
from the Company or from any trust pursuant to the Plan, such right shall be no
greater than the right of an unsecured general creditor of the Company and shall
not be deemed to be a right to payment of wages for purposes of any law
providing for a lien or any other priority for claims for wages. Any trust
established to provide for any payments hereunder shall be subject to the claims
of creditors of the Company in the event of any insolvency of the Company, and
all the Company's obligations to pay benefits pursuant to the Plan shall
constitute only a general and unsecured contractual liability of the Company to
the Participants and other payees hereunder in accordance with the terms hereof.
Amounts payable hereunder, whether from such a non-qualified grantor trust or
from the Company's general assets, shall be subject in all respects to claims of
general creditors of the Company until actually paid over to the person(s)
entitled to receive the same.
8. Vesting and Payment of Benefits.
a. Vesting. A Participant's Excess Pension Benefit under the Plan shall
be equal to the vested percentage of the amount credited to his Excess Pension
Account. At any given time, such vested percentage shall be equal to the vested
percentage of the Participant's Accrued Benefit under the Pension Plan. A
Participant's Excess Profit Sharing Benefit under the Plan shall be equal to the
vested percentage of the amount credited to his Excess Profit Sharing Account.
At any given time, such vested percentage shall be equal to the vested
percentage of the Participant's account balance under the Profit Sharing Plan.
b. Election of Form of Distribution of Excess Pension Benefit. An
Eligible Employee who has been approved, in accordance with Section 3, to
participate in the Plan, and who is married on the day before the date he
commences participation in the Plan, shall file, prior to his commencement of
participation, an irrevocable written election of the form of distribution of
his Excess Pension Benefit upon his Retirement or other termination of service
(his "Initial Election"). The Initial Election shall be made on a form provided
by the Committee. Such married Eligible Employee may elect either consecutive,
approximately level monthly payments for life with no survivor benefit (a
"Single Life Annuity") or a joint and survivor annuity that is the actuarial
equivalent of a Single Life Annuity and that provides consecutive, approximately
level monthly payments for the life of the Eligible Employee and, after his
death, consecutive, approximately level monthly payments to the Eligible
Employee's Pension Beneficiary in a monthly amount equal to 50%, 75% or 100% (as
elected by the Eligible Employee as part of his Initial Election) of the monthly
amount paid to the Eligible Employee during his life (a "Joint and Survivor
Annuity"). An Eligible Employee who has been approved, in accordance with
Section 3, to participate in the Plan and who is unmarried on the day before the
date he commences participation in the Plan, shall receive his Excess Pension
Benefit in the form of a Single Life Annuity, except that, if he is married on
or after the date he commences participation in the Plan but prior to
commencement of payment of his Excess Pension Benefit, then he may irrevocably
elect, within 90 days after the date of his marriage, a 50%, 75% or 100% (as
elected by the Eligible Employee as part of such election) Joint and Survivor
Annuity (a "Marital Election"). If such a Participant fails to make such Marital
Election within 90 days after the date of his marriage, he shall receive his
Excess Pension Benefit in the form a of a Single Life Annuity. A Participant's
Initial Election or Martial Election to receive a Joint and Survivor Annuity
shall be null and void if, prior to the date of the commencement of payment of
his Excess Pension Benefit, (i) the spouse to whom the Participant was married
on the date of such Initial Election or Marital Election dies, or (ii) the
Participant is divorced from such spouse, and in that event the Participant
shall receive his Excess Pension Benefit in the form of a Single Life Annuity;
provided that, if a widowed or divorced Participant described in this sentence
is subsequently married prior to the date of commencement of payment of his
Excess Pension Benefit, he may make a new Marital Election in accordance with
the preceding sentence.
c. Withholding Taxes, Etc. All amounts payable during the lifetime of a
Participant shall be paid directly to the Participant unless applied for the
Participant's benefit in accordance with Section 11. All amounts payable,
whether to a living person or to the estate of a deceased person, shall be paid
out net after the withholding of any federal, state or local income, earnings
and other taxes that might be required to be withheld from such payments.
d. Notwithstanding any provisions hereof to the contrary, if a
Participant (or Beneficiary of a deceased Participant) submits to the Committee
evidence satisfactory to the Committee (in its reasonable judgment) that the
Internal Revenue Service has determined that any portion (which may include all)
of his benefit under the Plan is includible in his gross income for any year
prior to the year in which such portion of his benefit would be paid to him
accordance with the provisions of the Plan other than this Section 8(d), then
such portion of his benefit shall be paid to him in a single lump sum cash
distribution as soon as administratively practicable after the Committee has
received such evidence.
9. Profit Sharing Beneficiary.
a. Each Participant shall specifically designate, by name, on forms
provided by the Company, the Profit Sharing Beneficiary or Beneficiaries who
shall receive any benefits that might be payable under the Plan from his Excess
Profit Sharing Account after his death. Such designation may be made at any time
satisfactory to the Company. If a Participant has not designated a Profit
Sharing Beneficiary in the manner provided above, the Participant's beneficiary
under the Profit Sharing Plan shall also be his Profit Sharing Beneficiary under
the Plan.
b. A designation of a Profit Sharing Beneficiary may be changed or
revoked in writing without the consent of the Profit Sharing Beneficiary at any
time or from time to time in such manner as may be provided by the Company, and
the Company shall have no duty to notify any person designated as a Profit
Sharing Beneficiary of any change in any such designation that might affect such
person's present or future rights hereunder. If the designated Profit Sharing
Beneficiary does not survive the Participant, all amounts that would have been
paid to such deceased Profit Sharing Beneficiary shall be paid to the
alternative or successor Profit Sharing Beneficiary or Beneficiaries (if any)
designated by the Participant or, if the Participant has not designated any
alternative or successor Profit Sharing Beneficiary, to the estate of the
deceased Participant. Not more than five (5) persons or, if a greater number,
that number of persons as shall be necessary to permit the Participant to
designate as simultaneous Profit Sharing Beneficiaries any or all of the
Participant's surviving children and spouse, may be named as simultaneous Profit
Sharing Beneficiaries of any Participant at any one time, and, if two or more
persons are to be simultaneous Profit Sharing Beneficiaries, or, if the
Participant wishes to designate alternative, successor or contingent Profit
Sharing Beneficiaries, the Participant shall specify the shares, terms and
conditions upon which amounts shall be paid to such multiple, alternative,
successor or contingent Profit Sharing Beneficiaries, all of which must be
clearly stated to the satisfaction of the Committee.
c. If a designated Beneficiary, having survived the Participant, dies
before receiving all of the amount payable hereunder to such Beneficiary, the
amount that such Beneficiary would have received had he lived shall be paid to
the estate of such deceased Beneficiary unless a contrary direction was made by
the Participant in writing in such manner as may be satisfactory to the Company,
in which event such direction shall control.
10. Payee Presumed Competent. Every person receiving or claiming
amounts payable under this Plan shall be conclusively presumed to be mentally
competent and of legal age until the Company receives a written notice, in form,
manner and substance acceptable to it, that such person has been adjudged
legally incompetent or is a minor or that a guardian or other person legally
vested with the care of such person's estate has been appointed.
11. Distribution to Persons Under a Legal Disability. If any amount
payable hereunder is payable to a minor or other person under legal disability,
the Company shall make payments thereof in one (or any combination) of the
following ways, as the Committee shall determine in its sole discretion;
provided, however, the Company shall have the right, but is not obligated, to
insist that a legal guardian be appointed before making any payments hereunder:
a. directly to said minor or other person;
b. to the legal representatives of said minor or other person; or
c.to some relative or friend of said minor or other person for the
support, welfare or education of such minor or other person.
The Company shall not be required to see to the application of any payment so
made, and the receipt of the person in one of the above three categories to whom
such payment is actually made shall fully discharge the Company from any further
accountability or responsibility with respect to the amount so paid.
12. Notice of Address; Lost Payees.
a. Every Participant shall file a notice of his or her post office
address and of the post office address and Social Security number of each
Beneficiary designated by him or her and of each change of any such address, in
writing, with the Company. Any communication, statement or notice addressed to
any such person at the latest post office address on file shall be binding upon
such person for all purposes, and the Company shall not be obliged to search for
or attempt to ascertain the whereabouts of any such person except as hereinafter
provided. If a Participant fails or neglects to file such addresses, the
Participant's address shall be presumed to be his or her last address on file in
the personnel records of the Company, and, in the case of a person whose rights
accrued through or from a Participant, his or her last address shall be presumed
to be in care of the last address of such Participant on file in the personnel
records of the Company.
b. If the Company is unable to locate any person entitled to receive a
payment hereunder or the estate of any such person, if deceased, and if the
Company shall make a search for such person and/or such person's estate in the
manner hereinafter prescribed, the right and interest of such payee in and to
the amount payable shall terminate on the last day of the one (1) year period
commencing with the publication of the notice hereinafter described, and the
amount so payable shall be payable to the estate of the Participant to whom such
amount had originally been payable; provided, however, that, if the estate of
such Participant cannot be located within an additional one (1) year period, the
unclaimed amount shall be forfeited. In its search for such payee, the Company
shall mail a notice, postage prepaid, by U.S. registered or certified mail,
return receipt requested and return postage guaranteed, to the last known
address of such payee or (if the payee is not the Participant and if the address
of the payee is unknown) to such payee in care of the last known address of the
Participant from whom such payee's rights are derived. If all notices sent as
aforesaid are returned unclaimed or addressee unknown, the Company shall publish
a notice in a newspaper having a general circulation in the same general area as
the last known address of the payee stating that the Company holds an amount of
payment hereunder and giving such additional information as may be reasonably
calculated to come to the notice of the parties having an interest herein. The
foregoing actions shall satisfy the Company's obligation to conduct a search for
such payee or the estate of the Participant; provided, however, that the Company
shall never be required to expend in such search an amount greater than the
amount payable hereunder, and all amounts so expended shall be charged against
the amounts held for payment.
13. No Liability for Participant's Debts (Other than Indebtedness to
the Company). If, at the time any benefit becomes payable hereunder, there is
any indebtedness due the Company from the payee thereof, the Company (without
being obligated to do so) may direct that some or all of the amount payable to
such party be applied against such indebtedness (including any interest properly
payable on such indebtedness), and only the unapplied balance shall be paid to
the party otherwise entitled to receive such payment. Except to the extent
amounts otherwise payable are applied against indebtedness of the Participant or
Beneficiary to the Company in accordance with the foregoing authority, this Plan
and the amounts payable hereunder shall not, in any manner, be liable for or
subject to the debts or liabilities of any payee, and no amount payable
hereunder shall, at any time or in any manner, be subject to anticipation,
alienation, sale, transfer, assignment, pledge or encumbrance of any kind,
whether to the Company or to any other party whomsoever, and whether with or
without consideration. If any payee shall attempt to, or shall, anticipate,
alienate, sell, transfer, assign, pledge or otherwise encumber any amounts
payable hereunder or any part thereof, or, if by reason of bankruptcy or other
event, such amounts would at any time be received or enjoyed by persons other
than such payee except as otherwise permitted by this Plan, the Company, in its
sole discretion, may terminate such person's interest in any such amounts and
hold or apply such amounts to or for the use of such person or such person's
spouse, children or other dependents, or any of them, as the Company may
determine.
14. Administration. This Plan shall be administered by the Committee,
which shall have full power, authority and discretion to do all things necessary
or appropriate to the proper administration hereof, except that the Compensation
Committee shall have sole power to determine whether any Employee is entitled to
participate in the Plan. The Committee's power, authority and discretion shall
include, without limiting the generality of the foregoing, full power, authority
and discretion to construe and interpret the Plan and the Plan Agreements and to
determine all questions that may arise hereunder relating to the administration
of the Plan and the Plan Agreement (other than eligibility to participate in the
Plan), including questions relating to the status and rights of Participants,
Beneficiaries and other persons hereunder. Any rules adopted by the Committee
shall be administered uniformly and applied with equal effectiveness and in a
nondiscriminatory manner to all persons similarly situated. Notwithstanding any
other provision hereof, the Trustee shall have the power, authority, and
discretion, pursuant to and to the extent provided in the Trust, to override any
determination or interpretation by the Committee, the Compensation Committee or
the Company affecting the rights of any Participant or Beneficiary to a benefit
under the Plan. Notwithstanding any other provision hereof, all power, authority
and discretion vested in the Committee, the Compensation Committee, or the
Company under the Plan shall, on and after the date on which a Change in Control
occurs, no longer be vested in the Company, the Compensation Committee, or the
Committee and instead shall be vested in the Trustee.
15. Negation of Employment Contract. This Plan is intended to, and does,
relate exclusively to benefits payable after termination of employment and does
not create an employment contract. Nothing contained herein shall be deemed:
a.to give a Participant the right to be retained in the employ of the Company;
b.to interfere with the right of the Company to discharge or demote a
Participant at any time;
c.to give the Company the right to require a Participant to remain in
its employ; or
d.to interfere with the right of a Participant to terminate employment
at any time.
16. Modification, Amendment or Termination.
a. The Company reserves the absolute right to modify or amend this Plan
in whole or in part, at any time and from time to time, effective as of any
specified prior, current or future date, by action of the Board of Directors or
its delegate, including the right to modify or amend the Plan in a manner that
would reduce the amount that would otherwise be credited to a Participant's
Accounts under the Plan. Notwithstanding the preceding sentence, the Company
shall have no power to modify or amend the Plan in any manner that would reduce
any Participant's Excess Profit Sharing Account balance hereunder on the later
of (I) the effective date or (II) the adoption date, of the modification or
amendment, or that would reduce the Excess Pension Benefit that any Participant
would be entitled to hereunder if his Computation Date were the day before the
later of (I) the effective date or (II) the adoption date of the modification or
amendment, unless such action is necessary to prevent the Plan from being
subject to any provision of Title I, Subtitle B, Parts 2, 3 or 4 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or any successor
thereto or to comply with applicable law. Notwithstanding the first sentence of
this Section 16a, on or after the date of a Change in Control, the Company shall
have no power to modify, amend or interpret the Plan in any manner that would
result in any Participant receiving a smaller Excess Pension Benefit or Excess
Profit Sharing Benefit than such Participant would have received under the terms
of the Plan as in effect on the day before the date on which the Change in
Control occurs. Nothing contained herein shall prevent the Company from
amending, prior to a Change in Control, to the extent permitted by the Code and
ERISA, and the regulations thereunder, any provision of the Pension Plan that
would affect the amount credited to a Participant's Excess Pension Account under
the Plan.
b. The Company also reserves the right to terminate this Plan, in whole
or in part, voluntarily as of any specified current or future date by action of
the Board. This Plan shall be automatically terminated upon a dissolution of the
Company (but not upon a merger, consolidation, reorganization or
recapitalization of the Company if a surviving corporation therein assumes this
Plan); upon the Company being legally adjudicated a bankrupt; upon the
appointment of a receiver or trustee in bankruptcy with respect to the Company's
assets and business if such appointment is not set aside within ninety (90) days
thereafter; or upon the making by the Company of an assignment for the benefit
of creditors. Upon termination of this Plan, no additional Employees shall be
selected to participate herein, and no additional benefits shall be accrued
hereunder. Notwithstanding the total or partial termination of this Plan, no
Participant affected thereby shall be deprived of the right to receive all
amounts credited to all of his Accounts as of the date of termination of the
Plan at the time and in the manner provided by this Plan upon observance and
performance of his obligations under the Plan Agreement to which the Participant
is a party unless such action is necessary to prevent this Plan from being
subject to any provision of Title I, Subtitle B, Parts 2, 3 or 4 of ERISA or any
successor thereto.
c. In the event of the death of a Participant or any Beneficiary
designated by him, the Company need not make any payment provided for under this
Plan until it shall have received proof satisfactory to it of such death and of
the identity, existence and location of the party thereafter entitled to receive
payments under the Plan.
d. In making any payment or taking any action under this Plan, the
Company and the Committee shall be absolutely protected in relying upon any
finding or statement of facts believed by it to be true, and on any written
instrument believed by it to have been signed by the proper party.
e. The Plan and all Plan Agreements entered into hereunder shall be
construed and enforced under and in accordance with the laws of the State of
Delaware, except to the extent superseded by federal law.
17. Plan Agreement. Each Participant shall be entitled to benefits in
accordance with the Plan and his Plan Agreement. In the event of a conflict
between the Plan Agreement and the Plan, the Plan shall control.
18. Claims Procedure. In the event that benefits under the Plan are not
paid to the Participant (or his Beneficiary in the case of the Participant's
death), and such person believes that he is entitled to receive them, a claim
shall be made in writing to the Committee within sixty (60) days from the date
payments are claimed to be due but not made. Such claim shall be reviewed by the
Committee in its sole discretion. If the claim is denied in full or in part, the
Committee shall provide a written notice within ninety (90) days setting forth
the specific reasons for denial, specific reference to the provisions of the
Plan or the Plan Agreement upon which the denial is based and any additional
material or information necessary to perfect the claim. Also, such written
notice shall indicate the steps to be taken if a review of the denial is
desired. However, under no circumstances shall a notification of denial that
does not satisfy all of the foregoing requirements be deemed to constitute an
acceptance of a claim. If the Committee does not provide the Participant (or the
Beneficiary in the case that the Participant is deceased) with notice of its
decision within ninety (90) days, the claim shall be deemed to be denied. If a
claim is denied and a review is desired, the Participant, or his Beneficiary in
the case of the Participant's death, shall so notify the Committee in writing
within sixty (60) days after receipt of either the notification of denial or the
expiration of the ninety (90)-day period, whichever first occurs.
In requesting a review, the Participant or his Beneficiary may review
this Plan document or his Plan Agreement or any documents relating to it and
submit any written issues and comments he believes are appropriate. In its sole
discretion, the Committee shall then review the claim and provide a written
decision, likewise, shall state the specific reasons for the decision and shall
include reference to specific provisions of the Plan or the Plan Agreement on
which the decision is based.
19. Gender and Number. In order to shorten and to improve the
understandability of the Plan document by eliminating the repeated usage of such
phrases as "her or his" or "Participant or Participants", masculine terminology
herein also shall include the feminine (and neuter, where applicable), and any
term used herein in the singular also shall refer to the plural except when
indicated otherwise by the context.
IN WITNESS WHEREOF, JACK ECKERD CORPORATION has caused this Plan to be
executed, and its corporate seal to be hereunto affixed, by its officers
thereunto duly authorized, effective as of the date first written above.
JACK ECKERD CORPORATION
By: /s/ Stewart Turley
Title:
(SEAL)
Attest:
/s/ Jackie Post
Secretary
EXHIBIT A
EXECUTIVE EXCESS BENEFIT PLAN AGREEMENT
OF JACK ECKERD CORPORATION AND ITS SUBSIDIARIES
The undersigned executive employee ("Employee") acknowledges that as an
employee of Jack Eckerd Corporation and its subsidiaries ("Employer"), Employee
has been offered an opportunity to participate in the Executive Excess Benefit
Plan of Jack Eckerd Corporation and its subsidiaries ("Plan") subject to the
terms and conditions stated in the Plan, a copy of which is attached hereto and
incorporated herein by reference. In the event of any inconsistency between the
provisions of this plan Agreement and the Plan, the provisions of the Plan shall
prevail. Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to those terms in the Plan.
1. Employee elects the following form of distribution of his Excess
Pension Benefit under the Plan following his retirement or termination for any
other reason except death (elect one option only):
[ ] a. Single Life Annuity with no survivor benefit.
[ ] b. Life Annuity with 50% survivor benefit.
[ ] c. Life Annuity with 75% survivor benefit.
[ ] d. Life Annuity with 100% survivor benefit.
2. Profit Sharing Beneficiary(ies):
a. Employee hereby designates the following person or persons as
primary beneficiary or beneficiaries to receive any Excess Profit Sharing
Benefit payable under the Plan after the death of Employee:
Primary Profit Sharing Beneficiary(ies):
Name Share Relationship Address and Social
Security Number
S.S. #
b. Employee designates the following person or persons as successor
Profit Sharing Beneficiary or Beneficiaries to receive any Excess Profit Sharing
Benefit payable under the Plan after the death of Employee and the primary
Profit Sharing Beneficiary(ies).
Successor Profit Sharing Beneficiary(ies):
Name Share Relationship Address and Social
Security Number
S.S. #
3. Employee has read this Plan Agreement and the Plan and is aware of
and accepts the terms and conditions set forth in each document. In particular,
Employee understands that the benefits payable pursuant to the Plan and the Plan
Agreement are unsecured contractual obligations of the Employer.
IN WITNESS WHEREOF the parties hereto have hereunto set their hands this
day of , 19 .
EMPLOYER:
ATTEST: JACK ECKERD CORPORATION
By:
- ----------------------- ----------------------------
Title: Chairman of the Board
WITNESS: EMPLOYEE:
- -----------------------
Signature Signature
------------------------------
Type or Print Name
------------------------------
------------------------------
Address of Employee
EXHIBIT 10.31
ECKERD CORPORATION
EXECUTIVE THREE (3) YEAR BONUS PLAN
1. Purpose. The purpose of the Executive Three (3) Year Bonus Plan (the
"Plan") of Eckerd Corporation (the "Company") is to aid in maintaining and
developing strong management by rewarding those executive employees who
contribute materially toward the Company's objective of earnings growth and
return on investment and to provide an incentive for the continued service of
such executive employees with the Company and its subsidiaries.
2. Administration. The Plan shall be administered by the Board of
Directors of the Company. The Board may delegate the administration of the
Plan to the Executive Compensation and Stock Option Committee of the Board of
Directors comprised of three or more members of the Board or such other
committee as the Board may designate from time to time (the "Committee"). The
Board of Directors or the Committee may, from time to time, establish such
rules and regulations for carrying out the Plan as they shall deem necessary
or desirable. The Board of Directors or the Committee shall decide all
questions of fact arising in the application of the Plan and shall interpret
and construe the provisions of the Plan and of any other documents relating to
the Plan or a bonus award hereunder and any such decision, interpretation or
construction shall be conclusive and binding upon all persons.
3. Effective Date of Plan. This Plan shall become effective as of
January 29, 1995 upon approval by: (i) the Board of Directors upon the
recommendation of the Committee, and (ii) the Company's Shareholders.
4. Eligibility of Executive Employees. Those executive employees of the
Company and its subsidiaries selected from time to time by the Committee upon
the recommendation of the Chairman of the Board or the President shall be
eligible to participate in the Plan. For purposes of the Plan, executive
employees shall mean corporate, regional and district officers and other key
employees of the Company and its subsidiaries.
5. Selection of Executive Employees. For purposes of this Plan, each
performance period shall be a three (3) year performance period. The first
performance period shall be for the 1994, 1995, and 1996 fiscal years of the
Company. The Committee, within ninety (90) days of the end of the 1994 fiscal
year of the Company, shall select and notify in writing each executive
employee who is to participate (a "Participant") under the Plan for a bonus
award during the 1994, 1995, and 1996 fiscal years of the Company (the "1994 -
1996 Performance Period") and the 1995, 1996 and 1997 fiscal years of the
Company (the "1995 - 1997 Performance Period"). Thereafter, within ninety (90)
days after the end of each fiscal year, the Committee may select Participants
for a new performance period so that, for example, within ninety (90) days of
the end of the 1995 fiscal year of the Company, the Committee may select and
notify Participants for a performance period to be designated the 1996-1998
Performance Period. In addition, where an executive employee is added or a
present employee is promoted to an executive status during a performance
period, the Committee, upon the special recommendation of the Chairman of the
Board or the President, may select any such executive employee to participate
in the Plan for a pro rata portion of the performance period and on a pro rata
basis.
6. Determination of the Amount of a Bonus Award. For purposes of the
determination of a Participant's bonus award, the following terms shall have
the meaning described below:
Adjusted EBIT shall mean, with respect to any fiscal year, (a)
earnings of the Company and its consolidated subsidiaries
before interest and income taxes for such fiscal year, plus
(b) extraordinary or non-recurring losses of the Company and
its consolidated subsidiaries for such fiscal year, less (c)
extraordinary or non-recurring gains of the Company and its
consolidated subsidiaries for such fiscal year relating to
management strategies, approved by the Committee.
Return on Investment shall mean, with respect to any fiscal
year, Adjusted EBIT for such fiscal year divided by the
monthly average during such fiscal year of the: (i) the total
assets of the Company, less (ii) liabilities exclusive of
interest accruing debt.
The amount of a bonus award to a Participant will be that percentage of
a Participant's annual base salary at the beginning of a performance period
which is determined by the average annual increase in Adjusted EBIT and the
average annual Return on Investment determined by the Committee. The Committee
may change the manner in which Adjusted EBIT and average annual Return on
Investment are calculated from time to time. The maximum bonus award payable
to a Participant may not exceed $1,000,000 with respect to any fiscal year of
the Company. The Committee is authorized to set the levels of Adjusted EBIT
and average annual Return on Investment which must be met for the payment of
bonus awards under this Plan and the percentage of base salary which will be
paid as a bonus award: (i) within ninety (90) days after the end of the
Company's 1994 fiscal year for the 1994 - 1996 Performance Period and the 1995
- 1997 Performance Period, and (ii) within ninety days after the end of each
succeeding fiscal year for each performance period beginning thereafter.
The Committee, in its sole discretion, is authorized to change or
modify the performance objectives and to add earnings per share or sales (or
any combination thereof) as additional or alternative performance criteria in
any respect for any future performance period and to establish durations of
greater or less than three (3) years for future performance periods which
performance periods may overlap or be co-extensive with other performance
periods. In addition, the Committee, in its sole discretion, is authorized to
change or modify the criteria for any performance period in the event of an
acquisition, disposition or other change in the composition of the Company
during such period.
7. Payment of Awards. Payment of bonus awards shall, at the option of
the Committee, be made: (i) 100% in cash, (ii) 50% in cash and 50% in shares
of common stock of the Company, or (iii) any other combination of cash and
common stock of the Company, as determined by the Committee. Payments shall be
made as soon as practical after the end of each performance period. The
percentage of a bonus award that is payable in shares of common stock of the
Company shall be valued at the market value of the common stock of the Company
as of the close of business on the day prior to the date the Company publicly
discloses its earnings for the final fiscal year of the respective performance
period. As soon as practical after the public disclosure of the earnings, the
Committee shall notify each Participant of the Participant's bonus award. At
the time of receipt of written notice of the Participant's bonus award, each
Participant shall arrange with the Company for the payment of the amount of
any taxes required to be collected or withheld as a result of the payment of
the bonus award. Upon receipt of the aforesaid taxes, the Company shall cause
the bonus award to be paid.
8. Award Shares. The maximum number of shares of common stock reserved
for the payment of awards under this Plan shall be 250,000, subject to
adjustment for stock splits, reverse stock splits, stock dividends, and like
transactions. The source of the Company's stock which may be made subject to
awards under the Plan shall be shares of the $ .01 per value common stock of
the Company. Such shares may be treasury shares or shares of original issue or
a combination of the forgoing. Fractional shares of common stock shall not be
issued as an award and any award which would be represented by a fractional
share shall be paid in cash.
9. Termination of Obligation to Pay Award. The obligation of the
Company to pay any bonus award shall terminate upon the occurrence of any of
the following:
a. Upon the failure of the Company to achieve the performance
objectives set by the Board of Directors or the Committee pursuant to
Paragraph 6.
b. Upon the date of a change in the position held by the
Participant with the Company or one of its subsidiaries unless such new
position, in the sole judgment of the Board of Directors or the Committee,
qualifies for participation in the Plan.
c. Upon the termination of employment of a Participant with
the Company or its subsidiaries; provided, however, the Board of Directors or
the Committee, in its sole discretion, may pay a prorated bonus award to any
Participant who has terminated employment with the Company or its
subsidiaries, provided (i) the Participant was not terminated for cause (as
defined in the Participant's written employment agreement with the Company
and, if none, as defined by the Committee from time to time), and (ii) the
Participant participated in the Plan for a period up to at least six (6)
months prior to the end of the performance period for which the bonus award is
payable.
d. Upon the death, disability or retirement of a Participant;
provided, however, the Board of Directors or the Committee, in its sole
discretion, may pay a prorated bonus award to a Participant or the estate of
any Participant who has become disabled, retired or died during the
performance period, provided that such Participant had participated in the
Plan for a period of time equal to or greater than one-third (1/3) of the
total number of months comprising the performance period for which the bonus
award is payable. For purposes hereof: (i) retire or retirement shall mean
retirement pursuant to the Eckerd Corporation Pension Plan (Pension Plan) at
or on the Participant's Normal Retirement Date (as that term is defined in the
Pension Plan) or retirement at an earlier date with the consent of the Board
of Directors, and (ii) disabled or disability shall mean the inability of the
Participant to perform substantially such Participant's duties and
responsibilities to the Company or any of its subsidiaries by reason of
physical or mental disability or infirmity for a continuous period of six (6)
months. The date of such disability shall be on the last day of such six (6)
month period.
e. Upon the commission of an intentional act by a Participant
determined by the Board of Directors or the Committee to be contrary to the
interests of the Company or its subsidiaries.
10. Termination of Plan. The Plan shall terminate upon the close of
business on January 31, 2004, unless it shall have sooner terminated by action
of the Board of Directors.
11. Requirements of Law. If any law, regulation of the Securities and
Exchange Commission, or any regulation of any other commission or agency
having jurisdiction shall require the Company or any Participant to take any
action with respect to the shares of common stock acquired by reason of a
bonus award, then the date upon which the Company shall issue or cause to be
issued the certificate or certificates for the shares of common stock shall be
postponed until full compliance has been made with all such requirements of
law or regulation. Further, if requested by the Company, at or before the time
of the issuance of the shares of common stock with respect to which a bonus
award has been made, the Participant shall deliver to the Company his written
statement, satisfactory in form and content to the Company, that he intends to
hold the shares so awarded him for investment and not with a view to resale or
other distribution thereof to the public in violation of the requirements of
the exemption contained in Section 4 (2) of the Securities Act of 1933, as
amended. Moreover, in the event that the Company shall determine that, in
compliance with the Securities Act of 1933, or other applicable statutes or
regulations, it is necessary to register any of the shares of common stock
with respect to which an award has been made or to qualify any such shares for
exemption from any of the requirements of the Securities Act of 1933 or any
other applicable statute or regulation, the shares of common stock shall not
be issued to the Participant until such action has been completed.
12. Amendment or Discontinuance of Plan. The Board of Directors or the
Committee may, insofar as permitted by law, amend, suspend or discontinue this
Plan at any time without restriction, provided, however, that the Board may
not alter or amend or discontinue or revoke or otherwise impair the
participation of any Participant notified by the Board of Directors or the
Committee in accordance with Paragraph 5 hereof except as provided in
Paragraph 9 hereof or unless there is secured the written consent of the
Participant. Nothing contained in this paragraph, however, shall, in any way,
condition or limit the termination of an award as provided in Paragraph 9
hereof.
13. Liquidation of the Corporation. In the event of the complete
liquidation or dissolution of the Company (except for a reorganization,
merger, consolidation, acquisition or sale of substantially all of the assets
of the Company as provided in Paragraph 14), any participation under the Plan
shall be deemed canceled without regard to or limitation by any other
provision of this Plan. In the event of a complete liquidation or dissolution
of a subsidiary of the Company or in the event that such a subsidiary ceases
to be a subsidiary corporation as defined hereinabove, any participation by
employees of such subsidiary pursuant to this Plan shall be deemed canceled
unless the employee shall, at or before the time of the liquidation or
dissolution or cessation of subsidiary relationship, be or become employed by
the Company or by any other subsidiary of the Company in a position which, in
the sole judgment of the Board of Directors or the Committee, qualifies for
participation in the Plan, or in the event that the Board or the Committee, in
its sole discretion, elects to pay a prorated bonus award in accordance with
Paragraph 9 (c).
14. Merger, Sale of Assets. In the event of a reorganization, merger,
consolidation, acquisition or sale of substantially all of the assets of the
Company, any participation under the Plan shall be deemed canceled; provided,
however, the Board or the Committee, in its sole discretion, may pay a
prorated bonus award to Participants who have participated in the Plan for a
period equal to or greater than one-third (1/3) of the total number of months
comprising the performance period for which the bonus award is payable.
15. Shareholder Approval. The Plan shall be submitted to the next
annual meeting of the shareholders of the Company for the purpose of its
approval and ratification of the shareholders as provided in Paragraph 3.
a: 3yrexec1/disk
Exhibit 12.2
<TABLE>
<CAPTION>
ECKERD CORPORATION AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
Years Ended February 3, 1996 and January 28, 1995
February 3, 1996 January 28, 1995
---------------- ----------------
<S> <C> <C>
Earnings before income taxes and extraordinary item $123,383 87,084
Add:
Portion of rents representative of the interest factor (*) 39,599 37,282
Interest expense 76,836 93,735
-------- -------
Income as adjusted $239,818 218,101
======== =======
Fixed charges:
Interest expense 76,836 93,735
Portion of rents representative of interest factor 39,599 37,282
-------- -------
Total fixed charges $116,435 131,017
======== =======
Ratio of earnings to fixed charges 2.06 1.66
==== ====
(*) The portion of rents representative of the interest factor is calculated
as 33-1/3% of minimum rentals.
</TABLE>
<TABLE>
EXHIBIT 13
Five Year Financial Operating Summary
(In thousands, except per share amounts Fiscal years ended February 3, January 28, January 29, January 30
and drug stores) and February 1, respectively (1) (2)
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Summary of Operations Data:
Sales and other operating revenue $4,997,073 4,589,517(3) 4,228,747 3,923,750 3,774,852
Cost of sales, including store
occupancy, warehousing and
delivery expense 3,874,723 3,484,627 3,213,583 2,933,202 2,773,545
Operating and administrative
expenses 922,131 924,071(3) 857,980 855,165 854,209
Earnings before interest expense 200,219 180,819 157,184 135,383 147,098
Net interest expense 76,836 93,735 113,215 137,404 143,194
Earnings (loss) before income taxes
and extraordinary items 123,383 87,084 43,969 (2,021) 3,904
Income tax expense 20,600 8,753(3) 2,556 2,864 2,927
Earnings (loss) before extraordinary
items 102,783 78,331 41,413 (4,885) 977
Extraordinary item-early retirement
of debt and preferred stock,
net of tax benefit (9,306) (30,523) (44,354) -- --
Extraordinary item-tax effect of
utilization of net operating loss
carryforward -- -- -- 762 1,680
Net earnings (loss) for the year 93,477 47,808 (2,941) (4,123) 2,657
Preferred stock dividends -- -- 4,924 10,815 10,823
Net earnings (loss) available
to common shares $ 93,477 47,808 (7,865) (14,938) (8,166)
Earnings (loss) before extraordinary
items per common share $ 1.50 1.21 .62 (.30) (.19)
Net earnings (loss) per common share $ 1.36 .74 (.13) (.28) (.16)
Dividends per common share $ -- -- -- -- --
Weighted average common shares
outstanding 68,606 64,863 58,786 53,148 51,354
Balance Sheet Data:
Working capital $ 320,618 280,289 306,588 367,027 328,617
Total assets 1,490,699 1,342,347 1,420,137 1,418,922 1,412,249
Long-term debt (4) 702,818 787,013 954,891 1,048,222 1,023,106
Preferred stock -- -- -- 75,000 75,000
Stockholders' equity (deficit) 54,741 (122,742) (179,022) (243,291) (228,353)
Drug Store Data:
Stores open at end of year 1,715 1,735 1,718 1,696 1,675
Comparable store sales growth 8.8% 8.1 6.1 3.1 5.7
</TABLE>
Notes:
(1) Years ended the Saturday nearest January 31. All fiscal
years include 52 weeks of operations except fiscal year
ended February 3, 1996 which includes 53 weeks of
operations.
(2) All fiscal years have been restated to reflect the
two-for-one stock split effected in the form of a stock
dividend declared April 1, 1996 (payable May 13, 1996).
Fiscal years prior to January 29, 1994 have been restated to
reflect the reclassification of previously issued Class A
and Class B common stock into Common Stock, to reflect a
two-for-three reverse stock split and the exchange of EDS
Holdings Inc. common stock and merger into the Company.
(3) Sales and other operating revenue includes $54,125 and
income tax expense includes $4,655 from the gain on the sale
of Insta-Care Pharmacy Services and operating and
administrative expenses includes a $48,988 charge for future
store closings.
(4) Includes current installments.
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
<TABLE>
Condensed Consolidated Statements of Operations
(In thousands) 1995 Fiscal Year 1994 Fiscal Year 1993 Fiscal Year
Ended February 3, Ended January 28, Ended January 29,
1996 1995 1994
As Reported As Adjusted(1) As Reported As Adjusted(2)
<S> <C> <C> <C> <C> <C>
Sales and other operating revenue $4,997,073 4,589,517 4,446,728 4,228,747 4,060,614
Cost of sales 3,874,723 3,484,627 3,425,860 3,213,583 3,104,734
Operating and administrative expenses 922,131 924,071 849,253 857,980 805,603
Earnings before interest expense 200,219 180,819 171,615 157,184 150,277
Interest expense 76,836 93,735 93,735 113,215 113,215
Income tax expense 20,600 8,753 3,895 2,556 2,155
Earnings before extraordinary items 102,783 78,331 73,985 41,413 34,907
Extraordinary items (9,306) (30,523) (30,523) (44,354) (44,354)
Net earnings (loss) for the year $ 93,477 47,808 43,462 (2,941) (9,447)
</TABLE>
(1) Sales and other operating revenue excludes $54.1 million
from the gain on the sale of Insta-Care Holdings, Inc.
("Insta-Care"), as well as $88.7 million of Insta-Care sales
prior to the disposition. Cost of sales, operating and
administrative expenses and income tax expense exclude $58.8
million, $25.8 million and $4.9 million of expenses related
to Insta-Care's operations and sale. Operating and
administrative expenses also exclude a charge of $49.0
million for future store closings.
(2) Sales and other operating revenue excludes $168.1 million
for the Vision Group and Insta-Care operations prior to
disposition. Cost of sales, operating and administrative
expenses and income tax expense exclude $108.8 million,
$52.4 million and $0.4 million of expenses related to the
Vision Group and Insta-Care operations.
Results of Operations
Fiscal Year 1995 compared with Fiscal Year 1994
The preceding as adjusted condensed consolidated
statement of operations for fiscal 1994 and the following
management's discussion and analysis exclude the items noted
above in footnote (1) to the condensed consolidated statement of
operations to eliminate the operations and gain on the sale of
Insta-Care (sold effective November 15, 1994) and exclude the
charge for accelerated future store closings.
The Company's sales and other operating revenue for
fiscal 1995 were $5.0 billion, a 12.4% increase over fiscal 1994.
Sales benefited from significant increases in both prescription
and front end sales. Also contributing to the increased sales
were revenues from Florida drug stores acquired from Rite Aid
(the "Florida Rite Aid Acquisition") and from one additional week
in fiscal 1995 which was a 53 week year compared to fiscal 1994
which was a 52 week year. For fiscal 1995, prescription sales
were $2.7 billion, a 19.6% increase over fiscal 1994. In
addition, front end sales increased to $2.3 billion, a 5.1%
increase over fiscal 1994.
Comparable drug store sales (stores open for one year or
more, excluding relocated stores open less than one year) for
identical periods increased 8.8% during fiscal 1995 compared to
an 8.1% increase in fiscal 1994. The increase in comparable drug
store sales was primarily attributable to the increase in sales
of prescription drugs. Comparable drug store sales growth was
also positively affected by increased sales of non-prescription
items in the health, greeting card, convenience food and
photofinishing categories.
Prescription sales as a percentage of drug store sales
was 53.7% for fiscal 1995 compared with 50.5% for fiscal 1994.
The growth in prescription sales was primarily the result of
increased managed care prescription sales, the Company's
competitive cash pricing strategy and the Florida Rite Aid
Acquisition. Additionally, these sales benefited from a higher
incidence of cough, cold and flu virus during both the first and
fourth quarters of fiscal 1995 compared to fiscal 1994. Managed
care prescription sales represented 70.6% and 64.6% of the
Company's prescription sales in fiscal 1995 and 1994,
respectively. The Company expects prescription sales to managed
care payors, in terms of both dollar volume and as a percentage
of total prescription sales, to continue to increase in fiscal
1996 and for the foreseeable future. Managed care payors
typically negotiate lower prescription prices than those
of non-managed care prescriptions, resulting in decreasing gross
profit margins on the Company's prescription sales. However,
contracts with managed care payors generally increase the volume
of prescription sales and gross profit dollars.
<PAGE>
Cost of sales and related expenses in fiscal 1995 were
$3.9 billion, a 13.1% increase over fiscal 1994. As a percentage
of sales, cost of sales and related expenses were 77.5% and 77.0%
for fiscal 1995 and 1994, respectively. The increase in cost of
sales and related expenses as a percentage of sales resulted
primarily from the continued increase in managed care
prescription sales, which generally have lower gross profit
margins than non-managed care prescription sales. The LIFO charge
was $15.0 million in fiscal 1995 compared to $10.8 million in
fiscal 1994.
Operating and administrative expenses in fiscal 1995 were
$922.1 million, an 8.6% increase over fiscal 1994. As a
percentage of sales, operating and administrative expenses were
reduced to 18.5% for fiscal 1995 from 19.1% for fiscal 1994. The
decrease in operating and administrative expenses in fiscal 1995
as a percentage of sales resulted primarily from operating
efficiencies related to the higher sales (including benefits
derived from closing certain under-performing stores) and cost
controls which helped produce lower costs as a percentage of
sales in such expense categories as payroll and insurance.
Earnings before interest expense, income taxes and
extraordinary items in fiscal 1995 were $200.2 million, a 16.7%
increase over fiscal 1994. The increase in earnings before
interest expense, income taxes and extraordinary items was due
primarily to the increase in gross profit dollars as a result of
higher sales and other operating revenue and the decrease in
operating and administrative expenses as a percentage of sales
due to improved productivity and expense control in fiscal 1995
compared to fiscal 1994.
Total interest expense was $76.8 million in fiscal 1995,
a decrease of 18.0% from fiscal 1994. The decrease in interest
expense was due to lower average borrowings in fiscal 1995, due
primarily to paydowns of borrowings from net proceeds from the
sale of non-retail drug store operations, lower bank loan
interest spreads and the early retirement of high interest cost
subordinated debentures.
Income tax expense was $20.6 million (17% effective rate)
and $3.9 million (5% effective rate) in fiscal 1995 and 1994,
respectively. Income tax expense in both fiscal years represents
alternative minimum tax and state income taxes for the Company,
and reflects the utilization of net operating loss carryforwards.
As a result of the foregoing factors, the Company had
earnings before extraordinary items of $102.8 million in fiscal
1995 compared to earnings on an adjusted basis before
extraordinary items of $74.0 million in fiscal 1994, an increase
of $28.8 million or 38.9%, and net income more than doubled to
$93.5 million in fiscal 1995 compared to $43.5 million on an
adjusted basis in fiscal 1994, a $50.0 million increase.
The Company had extraordinary items of $9.3 million (net
of tax benefit of $1.9 million) and $30.5 million (net of tax
benefit of $1.6 million) in fiscal 1995 and 1994, respectively.
The extraordinary items in fiscal 1995 and 1994 are primarily
from the write-off of deferred costs related to the significant
revisions of the bank credit agreement, as well as the write-off
of deferred costs and original issue discount from the early
retirement of $95.5 million in 1995 and $50.0 million in 1994 of
the 11.125% subordinated debentures.
Fiscal Year 1994 compared with Fiscal Year 1993
The following fiscal 1994 comparison is based on the
preceding as adjusted condensed consolidated statements of
operations and footnotes for fiscal 1994 and fiscal 1993. The
fiscal 1994 results exclude the operations and gain on the sale
of Insta-Care and the charge for accelerated future store
closings. The fiscal 1993 results exclude the Company's Vision
Group (sold effective January 30, 1994) and Insta-Care
operations.
The Company's sales and other operating revenue for
fiscal 1994 were $4.4 billion, a 9.5% increase over fiscal 1993.
Sales benefited from significant increases in prescription sales
and increases in front end sales. For fiscal 1994, prescription
sales were $2.2 billion, a 15.2% increase over fiscal 1993. In
addition, front end sales increased to $2.2 billion, a 4.2%
increase over fiscal 1993.
Comparable drug store sales (stores open for one year or
more) increased 8.1% during fiscal 1994 compared to a 6.1%
increase in fiscal 1993. The increase in comparable drug store
sales was primarily attributable to the increase in sales of
prescription drugs. Comparable drug store sales growth was also
positively affected by increased sales of non-prescription
categories such as health, toiletries, convenience food and
photofinishing items resulting from increased marketing emphasis
and shelf space for these categories.
<PAGE>
Prescription sales as a percentage of drug store sales
was 50.5% for fiscal 1994 compared with 48.0% for fiscal 1993.
The growth in prescription sales was primarily the result of
increased managed care prescription sales and the Company's
competitive cash pricing strategy. These sales were strong
despite a lower incidence of cough, cold and flu virus during the
first and fourth quarters of fiscal 1994 compared to fiscal 1993.
Managed care prescription sales represented 64.6% and 58.0% of
the Company's prescription sales in fiscal 1994 and 1993,
respectively.
Cost of sales and related expenses in fiscal 1994 were
$3.4 billion, a 10.3% increase over fiscal 1993. As a percentage
of sales, cost of sales and related expenses were 77.0% and 76.5%
for fiscal 1994 and 1993, respectively. The increase in cost of
sales and related expenses as a percentage of sales resulted
primarily from the continued increase in managed care
prescription sales which generally have lower gross profit
margins than non-managed care prescription sales. The LIFO charge
was $10.8 million in fiscal 1994 compared to $8.5 million in
fiscal 1993.
Operating and administrative expenses in fiscal 1994 were
$849.3 million, a 5.4% increase over fiscal 1993. As a percentage
of sales, operating and administrative expenses were reduced to
19.1% for fiscal 1994 from 19.8% in fiscal 1993. The decrease in
operating and administrative expenses in fiscal 1994 as a
percentage of sales resulted primarily from the economies of
scale related to the higher sales and cost controls which helped
produce lower costs as a percentage of sales in such expense
categories as payroll, insurance and supplies.
In the fourth quarter of fiscal 1994, the Company decided
to accelerate the closing of approximately 90 geographically
dispersed, under-performing stores, and established a $49.0
million reserve for future store closings. These closings were in
addition to the small number of stores the Company closes in the
normal course of business. The $49.0 million reserve included
approximately $27.0 million for lease settlements and
obligations, approximately $4.0 million for severance and other
expenses directly related to the store closings, and
approximately $18.0 million for the write-off of impaired assets
which include inventory liquidation and the write-off of
intangible and fixed assets.
Earnings before interest expense, income taxes and
extraordinary items in fiscal 1994 were $171.6 million, a 14.2%
increase over fiscal 1993. The increase in earnings before
interest expense, income taxes and extraordinary items was due
primarily to the increase in gross profit dollars as a result of
higher sales and other operating revenue and the decrease in
operating and administrative expenses as a percentage of sales in
fiscal 1994 compared to fiscal 1993.
Total interest expense was $93.7 million in fiscal 1994,
a decrease of 17.2% from fiscal 1993. The decrease was due
primarily to the lower cost of debt to the Company resulting from
fiscal 1993's refinancing, initial public offering of stock and
9.25% senior subordinated note issuance and the bank credit
agreement revision which provided improved pricing. In addition,
the decrease in interest expense was due to lower average
borrowings in fiscal 1994, due primarily to paydowns of
borrowings from net proceeds from the sale of Vision Group and
Insta-Care operations, partially offset by the numerous
marketplace interest rate increases during fiscal 1994.
Income tax expense was $3.9 million and $2.2 million in
fiscal 1994 and 1993, respectively. Income tax expense in both
fiscal years represents alternative minimum tax and state income
taxes for the Company, and reflects the utilization of net
operating loss carryforwards.
As a result of the foregoing factors, the Company had
earnings on an adjusted basis before extraordinary items of $74.0
million in fiscal 1994 compared to $34.9 million in fiscal 1993,
an increase of $39.1 million or 111.9%, and net income of $43.5
million in fiscal 1994 compared to a net loss before $4.9 million
of preferred dividends of $9.4 million in fiscal 1993, a $52.9
million increase.
The Company had extraordinary items of $30.5 million (net
of tax benefit of $1.6 million) and $44.4 million (net of tax
benefit of $0.9 million) in fiscal 1994 and 1993, respectively.
The extraordinary item in fiscal 1994 is primarily from the
write-off of deferred costs related to the significant revision
of the bank credit agreement, as well as the write-off
of deferred costs and original issue discount from the early
retirement of $50.0 million of the 11.125% subordinated
debentures. The extraordinary item in fiscal 1993 is
primarily from the write-off of deferred costs and original issue
discount from the early retirement of a portion of the
<PAGE>
11.125% subordinated debentures, all of the 13% subordinated
debentures and the redemption of the 14.5% preferred stock.
Liquidity and Capital Resources
On November 29, 1995, the Company entered into a
significant revision of the bank credit agreement. The revised
agreement provides for a total loan facility of $750.0 million.
The revolving loan facility was increased to $500.0 million and
the term loan facility was reduced to $250.0 million to be
amortized equally over five years. Although the revision did not
provide any additional proceeds to the Company, it does provide
improved pricing and increased operating flexibility with respect
to acquisitions and term loan amortization.
At February 3, 1996, the Company had approximately $230.0
million outstanding under the term loan facility, $230.0 million
outstanding under the revolving loan facility and $184.4 million
available for borrowing under the revolving loan facility portion
of the bank credit agreement which is net of $85.6 million of
letters of credit. Pursuant to the bank credit agreement,
the Company is required to make scheduled payments of the
outstanding principal amount of the term loan facility in
quarterly payments. Prepayments made pursuant to the bank credit
agreement are applied pro rata among the remaining scheduled term
loan principal payments. The bank credit agreement matures in
November 2000.
On February 3, 1996, the Company had working capital of
$320.6 million and a current ratio of 1.5 to 1 compared to $280.3
million and 1.5 to 1 at January 28, 1995. Cash flow provided by
operating activities increased $45.3 million to $164.3 million
for fiscal 1995 compared with $119.0 million for fiscal 1994. The
increase was principally attributable to higher net earnings
which increased $45.7 million during fiscal 1995 partially offset
by a reduction of $20.9 million in non-cash extraordinary charges
related to the early retirement of debt and significant revisions
to the bank credit agreement. Depreciation and amortization
including original issue discount amortization increased $2.9
million in 1995 to a total of $86.6 million. Working capital
items, including receivables, inventory, other assets,
accounts payable and accrued expenses, combined to use operating
cash of $27.0 million in fiscal 1995 compared to a source of cash
of $9.5 million in fiscal 1994, an increase in use of funds of
$36.5 million.
Net cash from investing activities for fiscal 1995 and
1994 used $171.5 million and provided $50.6 million,
respectively. Uses of cash were principally for capital
expenditures of $109.8 million and $57.2 million for
fiscal 1995 and 1994, respectively, for additions to the
Company's drug stores and Express Photo units and improvements to
existing stores and for the installation of point-of-sale product
scanning equipment. Fiscal 1995 also included the acquisition of
$76.9 million in drug store assets primarily as a result of the
Florida Rite Aid Acquisition. In fiscal 1994, a source of
cash to the Company from investing activities was provided by the
sales of the Insta-Care and Vision Group operations. Capital
improvements planned for fiscal 1996, including those to be
acquired under a deferred payment arrangement and through
operating leases, are expected to total approximately
$130 million. Funds for the planned cash capital expenditures are
expected to come from cash flow from operating activities and
available borrowings, if necessary.
Financing activities for fiscal 1995 provided $6.2
million. Proceeds from the sale of common stock of $82.4 million
combined with increased bank debit balances of $15.2 million at
year end together offset the redemption of the remaining $95.5
million of 11.125% subordinated debentures. Financing
activities for fiscal 1994 used $172.8 million primarily for the
reduction of bank borrowings and the early retirement of $50.0
million of the 11.125% subordinated debentures.
Based upon the Company's ability to generate cash flow
from operating activities, the available unused portion of the
revolving loan facility under the bank credit agreement and other
existing sources, the Company believes that it will have the
funds necessary to meet the principal and interest payments on
its debt as they become due and to operate and expand its
business.
The payment of dividends and other distributions by the
Company is subject to restrictions under certain of the financing
agreements to which the Company is a party, including the bank
credit agreement and the 9.25% senior subordinated notes. The
Company currently does not plan to pay dividends on its common
stock.
<PAGE>
<TABLE>
Consolidated Statements of Operations
(In thousands, except per share amounts) February 3, January 28 and January 29, respectively
1996 1995 1994
<S> <C> <C> <C>
Sales and other operating revenue (note 1(c)) $4,997,073 4,589,517 4,228,747
Costs and expenses:
Cost of sales, including store occupancy, warehousing
and delivery expense 3,874,723 3,484,627 3,213,583
Operating and administrative expenses (note 9) 922,131 924,071 857,980
4,796,854 4,408,698 4,071,563
Earnings before interest expense 200,219 180,819 157,184
Interest expense:
Interest expense, net 75,030 87,838 105,999
Amortization of original issue discount
and deferred debt expenses 1,806 5,897 7,216
Total interest expense 76,836 93,735 113,215
Earnings before income taxes and extraordinary items 123,383 87,084 43,969
Income tax expense (note 5) 20,600 8,753 2,556
Earnings before extraordinary items 102,783 78,331 41,413
Extraordinary items:
Early retirement of debt and preferred stock,
net of tax benefit of $1,907, $1,607 and $929 (note 4) (9,306) (30,523) (44,354)
Net earnings (loss) for the year 93,477 47,808 (2,941)
Preferred stock dividends -- -- 4,924
Net earnings (loss) attributable to common shares $ 93,477 47,808 (7,865)
Earnings (loss) per common share:
Earnings before extraordinary items $ 1.50 1.21 .62
Extraordinary items (.14) (.47) (.75)
Net earnings (loss) $ 1.36 .74 (.13)
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
Consolidated Balance Sheets
(In thousands, except share amounts) February 3 and January 28, respectively
1996 1995
<S> <C> <C>
Assets
Current assets:
Cash $ 7,922 8,898
Receivables, less allowance for doubtful receivables of $3,000 70,137 52,487
Merchandise inventories 835,551 771,122
Prepaid expenses and other current assets 4,396 2,366
Total current assets 918,006 834,873
Property, plant and equipment, at cost:
Land 17,420 17,814
Buildings 73,955 74,002
Furniture and equipment 368,251 306,962
Transportation equipment 14,225 11,911
Leasehold improvements 160,172 131,502
634,023 542,191
Less accumulated depreciation 282,974 249,214
Net property, plant and equipment 351,049 292,977
Excess of cost over net assets acquired, less accumulated amortization of
$19,986 and $16,715 62,162 27,667
Favorable lease interests, less accumulated amortization of $404,001 and $383,708 131,961 153,664
Unamortized debt expenses (note 4) 6,086 10,138
Other assets 21,435 23,028
$1,490,699 1,342,347
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Bank debit balances $ 59,620 44,373
Current installments of long-term debt (note 4) 1,020 1,452
Accounts payable 311,411 287,551
Accrued interest 12,533 19,246
Accrued payroll 70,205 70,640
Other accrued expenses (note 9) 142,599 131,322
Total current liabilities 597,388 554,584
Other noncurrent liabilities (note 9) 136,772 124,944
Long-term debt, excluding current installments (note 4) 701,798 785,561
Stockholders' equity (deficit) (notes 1 and 6):
Preferred stock of $.01 par value. Authorized 20,000,000 shares;
none issued or outstanding -- --
Voting common stock of $.01 par value. Authorized 96,481,272
shares; issued 69,937,790 and 64,211,548 700 642
Nonvoting common stock of $.01 par value. Authorized
3,518,728 shares; no shares issued -- --
Capital in excess of par value 317,654 233,706
Retained deficit (263,613) (357,090)
Total stockholders' equity (deficit) 54,741 (122,742)
Commitments and related party transactions (notes 7 and 8)
$1,490,699 1,342,347
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
Consolidated Statements of Stockholders' Equity (Deficit)
(In thousands, except share amounts) Years ended February 3, 1996, January 28, 1995 and January 29, 1994
Capital Total
Voting Nonvoting in stockholders'
common common excess of Retained equity
stock stock par value deficit (deficit)
<S> <C> <C> <C> <C> <C>
Balance at January 30, 1993 $472 6 153,264 (397,033) (243,291)
Reclassification of common stock previously
subject to put options 42 -- 7,258 -- 7,300
Common stock sold under employee
stock option plan 2 -- 271 -- 273
Common stock sold in public stock offering,
net of expenses of sale 104 -- 64,457 -- 64,561
Net loss for the year -- -- -- (2,941) (2,941)
14 1/2% preferred stock cash dividends -- -- -- (4,924) (4,924)
Balance at January 29, 1994 620 6 225,250 (404,898) (179,022)
Expenses for secondary public stock offering -- -- (953) -- (953)
Common stock sold under employee
stock option plan 2 -- 951 -- 953
Contribution of common stock to
profit sharing plan 2 -- 894 -- 896
Issuance of 606,120 shares of common stock at
$12.50 per share for drug store acquisition 6 -- 7,570 -- 7,576
Conversion of nonvoting common stock
to voting common stock 12 (6) (6) -- --
Net income for the year -- -- -- 47,808 47,808
Balance at January 28, 1995 642 -- 233,706 (357,090) (122,742)
Common stock sold in public stock offering,
net of expenses of sale 54 -- 82,340 -- 82,394
Expenses for secondary public stock offering -- -- (329) -- (329)
Common stock sold under employee
stock option plan 2 -- 1,043 -- 1,045
Contribution of common stock to
profit sharing plan 2 -- 894 -- 896
Net income for the year -- -- -- 93,477 93,477
Balance at February 3, 1996 $700 -- 317,654 (263,613) 54,741
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
(In thousands) February 3, January 28 and January 29, respectively
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) for the year $ 93,477 47,808 (2,941)
Adjustments to reconcile net earnings (loss) for the
year to net cash provided by operating activities:
Gain on sale of subsidiary -- (54,125) --
Extraordinary charge related to early retirement of debt
and preferred stock 11,213 32,130 45,283
Depreciation and amortization 84,750 77,794 85,660
Amortization of original issue discount and
deferred debt expenses 1,806 5,897 7,216
Decrease (increase) in receivables (17,650) 12,047 (13,867)
Increase in merchandise inventories (44,475) (22,621) (35,455)
Decrease (increase) in prepaid expenses and other
current assets (2,030) 3,048 (3,408)
Increase in accounts payable and accrued expenses 37,183 17,010 87,393
Net cash provided by operating activities 164,274 118,988 169,881
Cash flows from investing activities:
Additions to property, plant and equipment* (109,782) (57,246) (39,327)
Sale of property, plant and equipment 8,255 4,253 37,942
Net proceeds from sale of subsidiaries 5,231 114,912 --
Acquisition of certain drug store assets (76,902) (6,080) (14,314)
Other 1,733 (5,216) (3,341)
Net cash provided by (used in) investing activities (171,465) 50,623 (19,040)
Cash flows from financing activities:
Increase in bank debit balances 15,247 3,399 28,743
14 1/2% preferred stock cash dividends -- -- (4,924)
Additions to long-term debt 1,985 1,604 1,476
Reductions of long-term debt (1,848) (2,926) (3,769)
Net reductions under prior credit agreement -- -- (221,723)
Net additions (reductions) under current credit agreement 4,627 (120,816) 576,189
Redemption of 141/2% preferred stock -- -- (75,000)
Common stock sold in public stock offering, net of expenses of sale 82,394 -- 64,561
Issuance of 91/4% senior subordinated notes -- -- 200,000
Redemption of 13% and 111/8% subordinated debentures (95,500) (50,000) (490,165)
Redemption of senior notes -- -- (168,000)
Other, including redemption fees and deferred financing costs (690) (4,084) (64,761)
Net cash provided by (used in) financing activities 6,215 (172,823) (157,373)
Net decrease in cash (976) (3,212) (6,532)
Cash at beginning of year 8,898 12,110 18,642
Cash at end of year $ 7,922 8,898 12,110
</TABLE>
See accompanying notes to consolidated financial statements.
* Total capital expenditures for fiscal years 1995, 1994 and
1993 were $117,680, $84,694 and $41,960, of which $7,898,
$27,448 and $2,633 were acquired under a deferred payment
arrangement.
<PAGE>
Notes to Consolidated Financial Statements
February 3, 1996, January 28, 1995 and January 29, 1994
(In thousands, except share amounts and drug stores)
(1) Organization of Business
(a) Description of Business
Eckerd Corporation (Company) operates the Eckerd Drug
store chain, which is one of the largest drug store chains in the
United States. The Company's stores are located primarily in the
Sunbelt, with the largest concentration of stores being in
Florida and Texas.
During 1993, 1994 and 1995, the Company purchased 74 drug
stores in four transactions at an aggregate cost of $85,517. The
operations of such stores, which have been included in the
consolidated financial statements from dates of acquisition, are
not material to the Company and, accordingly, pro forma
comparative operating numbers are not presented.
(b) Initial and Secondary Public Offerings
On August 12, 1993, the Company completed an initial
public offering (IPO) in which it issued and sold 10,350,000
shares of its Common Stock par value $.01 per share (Common
Stock) for $7.00 per share. In connection with the IPO, the
Company amended its Restated Certificate of Incorporation to
effect, among other things: (i) the reclassification of its Class
A common stock and Class B common stock into Common Stock at
certain specified rates (Reclassification); (ii) a two-for-three
reverse stock split (Stock Split); (iii) the adoption of certain
provisions, such as a classified board of directors and the
prohibition of stockholder action by written consent, which
could make non-negotiated acquisitions of the Company more
difficult; and (iv) the change of the Company's name from "Jack
Eckerd Corporation" to "Eckerd Corporation."
On May 2, 1994, the Company completed an underwritten
secondary offering of 6,398,112 shares of its Common Stock for
$9.50 per share. The secondary offering only included shares
owned by certain institutional stockholders. The Company did not
receive any of the proceeds from the sale of shares of common
stock and was required to pay certain expenses of the secondary
offering.
On August 3, 1995, the Company completed an underwritten
primary and secondary offering of 12,351,000 shares of its Common
Stock for $16.12 per share. The offering consisted of 5,350,000
shares sold by the Company and 7,001,000 shares sold by certain
institutional stockholders.
On December 15, 1995, the Company completed an
underwritten secondary offering of 12,000,000 shares of its
Common Stock for $21.00 per share. The secondary offering only
included shares owned by certain institutional stockholders. The
Company did not receive any of the proceeds from the sale of
shares of common stock and was required to pay certain expenses
of the secondary offering.
(c) Sales of Subsidiaries
On March 31, 1994, the Company closed on the sale
of its Vision Group operations which were sold effective
January 30, 1994 for an amount in cash and notes approximately
equal to the book value of the related assets. In 1993, Vision
Group sales were approximately $61,000 and earnings before
interest and taxes were approximately $3,000.
On November 15, 1994, the Company closed on the sale of
its Insta-Care Pharmacy Services (Insta-Care) operations for a
total consideration of $112,000 in cash. The net proceeds after
certain closing adjustments were approximately $94,000.
Insta-Care operations are included in the consolidated financial
statements up to the closing date of the sale. In 1994,
Insta-Care sales were approximately $89,000 and earnings before
interest and income taxes were approximately $4,000. The Company
recognized a gain on the sale of Insta-Care of $49,470, net of
income taxes of $4,655. The gain of $54,125 before income taxes
is reported in the consolidated statement of operations as part
of sales and other operating revenue.
(2) Summary of Significant Accounting Policies
(a) Use of Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
<PAGE>
contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
(b) Principles of Consolidation
The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. All
significant intercompany accounts have been eliminated in the
consolidation.
(c) Definition of Fiscal Year
The Company's fiscal year ends on the Saturday nearest
January 31. Fiscal year 1995 ended February 3, 1996 and consisted
of 53 weeks. Fiscal years 1994 and 1993 ended January 28, 1995
and January 29, 1994, respectively, and consisted of 52 weeks.
(d) Merchandise Inventories
Inventories consist principally of merchandise held for
resale and are based on physical inventories taken throughout the
year. Inventories are stated at the lower of cost (last-in,
first-out) or market. At February 3, 1996 and January 28, 1995,
inventories would have been higher than reported by approximately
$91,900 and $76,900, respectively, if the first-in, first-out
method of valuing inventories had been used by the Company.
(e) Income Taxes
Effective January 31, 1993, the Company adopted Statement
of Financial Accounting Standards No. 109 (SFAS No. 109),
Accounting for Income Taxes. Under the asset and liability method
of SFAS No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under SFAS No. 109, the effect of a
change in tax rates on deferred tax assets or liabilities is
recognized in income in the period that includes the enactment
date.
(f) Depreciation Policy and Maintenance and Repairs
Plant and equipment is depreciated principally by the
straight-line method over the estimated useful lives of such
assets. The principal lives used to compute depreciation are:
buildings, 16-45; furniture and equipment, 1-10; transportation
equipment, 1-8; and leasehold improvements, 2-20.
Maintenance and repairs are charged to expense as
incurred. The Company's policy is to capitalize expenditures for
renewals and betterments and to reduce the asset accounts and the
related allowance for depreciation for the cost and accumulated
depreciation of items replaced, retired or fully depreciated.
(g) Favorable Lease Interests
Favorable lease interests represent the present value of
the excess of current market rents at dates of acquisition over
the below market rents of leases acquired (principally store
locations). Such costs are amortized over the lives of the
favorable leases averaging approximately twenty years.
(h) Unamortized Debt Expenses
Unamortized debt expenses represent underwriting
discounts, professional fees and other costs related to long-term
debt (see note 4) which are amortized over the life of the debt
instruments.
(i) Advertising Costs
Net advertising costs are expensed when incurred and were
$24,752, $24,050 and $26,758 for the years ended February 3,
1996, January 28, 1995 and January 29, 1994, respectively.
(j) Reclassification
Certain amounts have been reclassified in the 1993 and
1994 consolidated financial statements to conform to the 1995
consolidated financial statement presentation.
(k) Supplemental Cash Flow Information
The Company considers all liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
<PAGE>
During 1994, the Company issued $7,576 of Common Stock in
connection with the acquisition of certain drug stores.
Cash paid for interest was $82,152, $86,821 and $120,329
for the years ended February 3, 1996, January 28, 1995 and
January 29, 1994, respectively.
Cash paid for income taxes was $5,337, $7,294 and $1,273
for the years ended February 3, 1996, January 28, 1995 and
January 29, 1994, respectively.
(l) Earnings (Loss) Per Share and Stock Split
Primary earnings per share have been computed based on
the weighted average number of shares of common stock outstanding
during each fiscal year (68,606,482 in 1995, 64,863,438 in 1994
and 58,785,610 in 1993). All share information in these
consolidated financial statements has been restated to reflect
the two-for-one stock split declared April 1, 1996 (payable May
13, 1996) and the August 12, 1993 Reclassification and Stock
Split.
(m) Recent Accounting Pronouncements
The Company will adopt Statement of Financial Accounting
Standards No. 121 (SFAS No. 121), Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
during the first quarter of fiscal year 1996. SFAS No. 121 is not
expected to have a material impact on the consolidated financial
statements of the Company.
In October 1995, Statement of Financial Accounting
Standards No. 123 (SFAS No. 123), Accounting for Stock - Based
Compensation, was issued, which is effective for fiscal year
1996. Under SFAS No. 123, the Company can elect, but is not
required, to recognize compensation expense for all stock-based
awards using a fair value method. The Company expects to
implement the disclosure-only provisions, as permitted by SFAS
No. 123, in fiscal year 1996.
(3) Employees' Benefit Plans
(a) Profit Sharing Plan
The Company has in effect a noncontributory profit
sharing plan which covers all regular, full-time employees. The
Company makes annual contributions to the Plan at the discretion
of the Company's Board of Directors. All funds are held by a bank
as trustee under a trust agreement. Included in operating and
administrative expenses are charges accrued for contributions
to the Plan of $11,231, $9,712 and $8,765 for February 3, 1996,
January 28, 1995 and January 29, 1994, respectively.
Plan assets at fair value, consisting of fixed income
securities, the Company's stock and listed stocks, amounted to
approximately $256,800 for the plan year ended December 31, 1995.
(b) Pension Plans
The Company has in effect a noncontributory pension plan
covering all full-time employees who qualify as to age and length
of service. Benefits are computed based on the average annual
compensation for the five consecutive years that produce the
highest average during the final ten years of creditable service.
The Company's policy is to fund the Plan in accordance with
minimum Internal Revenue Service (IRS) requirements.
The Company accounts for pension costs in accordance with
Statement of Financial Accounting Standards No. 87, Employers'
Accounting for Pensions.
The funded status of the Company's pension plan at
February 3, 1996 and January 28, 1995 was:
1996 1995
(Projected)
Accumulated benefit obligation (including
vested benefits of $40,743 and $34,792 at
January 1, 1995 (most recent valuation
date) and January 1,1994, respectively) $(45,107) (37,814)
Effect of anticipated future compensation
levels and other events (11,130) (8,824)
Projected benefit obligation for service
rendered to date (56,237) (46,638)
Plan assets at fair value, consisting of
fixed income securities and listed stocks 44,751 34,602
Plan assets less than projected benefit
obligation (11,486) (12,036)
Unrecognized prior service cost 2,245 2,436
Unrecognized net loss 8,791 10,290
Unrecognized net transition asset at
January 1, 1987, which is
being amortized over 13 years (2,100) (2,777)
Accrued pension cost $(2,550) (2,087)
<PAGE>
Net periodic pension costs for the years ended
February 3, 1996, January 28, 1995 and January 29, 1994 included
the following (income) expense components:
1996 1995 1994
Service costs (benefits earned
during the period) $3,606 3,552 2,818
Interest cost on projected
benefit obligation 3,790 3,159 2,548
Return on assets (3,536) (3,411) (3,271)
Amortization of prior service cost 191 (204) (161)
Amortization of net transition asset (677) (677) (677)
Amortization of net loss 101 461 --
Net periodic pension cost $3,475 2,880 1,257
Assumptions used in determining the accumulated and projected
benefit obligations were:
Weighted average discount rate 7.5% 8.25% 7.5%
Weighted average long-term
rate of return on assets 9% 9% 9%
Rate of compensation increases 5% 5% 5%
The Company has in effect an Executive Supplemental
Benefit Plan to provide additional income for its executives
after their retirement as well as pre-retirement death benefits
to beneficiaries of such executives. Annual benefits will
generally be no greater than 25 percent of the participant's
salary mid-point on the date the participant retires or separates
from service with the Company.
(4) Long-Term Debt
Long-term debt at February 3, 1996 and January 28, 1995
was:
1996 1995
Term loan, due November 29, 2000 (a) $230,000 434,373
Revolving credit and bankers
acceptances (a) 230,000 21,000
9 1/4% Senior Subordinated Notes
due February 15, 2004,
$200,000 face amount (b) 200,000 200,000
11 1/8% Subordinated Debentures
due May 1, 2001, $95,500 face amount,
net of original issue discount of
$6,542 (c) -- 88,958
Variable rate demand industrial development
revenue refunding bonds, due $8,250
March 1, 2009 and $10,000
May 1, 2013 (d) 18,250 18,250
Other (principally notes secured by
fixtures and equipment) 24,568 24,432
Total long-term debt 702,818 787,013
Less amounts due within one year 1,020 1,452
Amounts due after one year $701,798 785,561
The aggregate minimum annual maturities of long-term debt
for the next five fiscal years are: 1996 - $31,020; 1997 -
$50,729; 1998 - $50,667; 1999 - $50,605; and 2000 - $280,548.
Although the term loan commitment requires a repayment of $30,000
during fiscal year 1996, the Company has excess availability
under the revolving credit commitment, and accordingly, has not
treated the 1996 required repayment as current.
(a) On June 15, 1993, the Company entered into a Credit
Agreement which was subsequently revised on August 3, 1994. The
original agreement was for a total of $950,000. The revised
agreement provided for a total loan facility of $850,000. The
revised loan facility did not provide any additional proceeds to
the Company, but it provided improved pricing and increased
operating flexibility with respect to acquisitions, capital
expenditures and lease payments. The revolving loan facility was
extended a year and increased to $350,000 (with $30,000 available
as a bank swingline loan facility and $155,000 available as
a letter of credit and bankers' acceptance facility) (Revolving
Loan), and a five-year amortizing term loan facility (Term Loan)
was reduced to $500,000.
On November 29, 1995, the Company entered into another
significant revision of the Credit Agreement. The new agreement
provides for a total loan facility of $750,000. The new loan
facility did not provide any additional proceeds to the Company,
but it does provide improved pricing and increased operating
flexibility through reduced annual term loan amortization. The
Revolving Loan facility matures on November 29, 2000 and was
increased to $500,000 (including the bank swingline loan facility
and the letter of credit and bankers' acceptance facility), and
the Term Loan facility maturity was extended to November 29,
2000, and was reduced to $250,000.
<PAGE>
The Term Loan and the Revolving Loan bear interest at
various rates approximating, at the Company's option (i)
Alternate Base Rate (ABR) (as defined) or (ii) adjusted LIBOR
plus 5/8%. The spread above LIBOR may decrease or increase by
1/8% in two separate instances if certain ratios of cash flow to
interest expense are achieved by the Company. The spread above
LIBOR may also decrease by an additional 1/8% if a certain ratio
of cash flow to interest expense is achieved and the bank
facility receives an investment grade rating by both major rating
agencies.
Interest on ABR borrowings is payable quarterly. Interest
on LIBOR borrowings is payable at the end of the relevant
interest period (one, two, three or six month periods, except
that with respect to six month periods, interest shall be payable
every three months). The Company is required to pay a commitment
fee of 1/4% per annum on the undrawn amount of the Revolving
Loan facility and it may decrease or increase by 1/16% in two
separate instances if certain ratios of cash flows to interest
expense are achieved by the Company. The Company is also required
to pay letter of credit fees and bankers' acceptance fees.
The Company has entered into interest rate cap agreements
relating to the Credit Agreement. The cap agreements are for
$200,000 and mature at various dates in 1996. The cap agreements
have an approximate 6% interest rate. At February 3, 1996, these
agreements had a value to the Company of approximately $164 below
their carrying values.
Principal of the Term Loan will be amortized in quarterly
payments and mature in full on November 29, 2000. Required annual
principal payments are $30,000 in 1996 and $50,000 in 1997
through 2000. The Company has the right to prepay any borrowings
under the Credit Agreement in whole or in part at any time.
The Company is required to prepay borrowings under the
Credit Agreement with (i) in any fiscal year, the excess of the
aggregate net proceeds of dispositions of assets of the Company
and its subsidiaries over $10,000; (ii) in any fiscal year, the
net proceeds of any incurrence of debt (other than indebtedness
permitted under the Credit Agreement); and (iii) the net proceeds
of the sale and leaseback of any asset. Prepayments are to be
applied pro rata against the remaining scheduled payments due in
respect to the Term Loan and, after such loan is paid in full, to
the swingline loans and then the Revolving Loan.
The borrowings under the Credit Agreement are secured by
a pledge of all capital stock of the Company's subsidiaries, as
well as substantially all personal property, including inventory
and accounts receivable and certain real property (as defined),
contain certain restrictive covenants which provide limitations
on the Company with respect to incurring debt, the incurring of
liens, making investments in excess of $7,000, payment of
dividends and purchase of shares of stock of the Company,
consolidations and mergers, sale of assets, acquisitions, and
transactions with affiliates. The Credit Agreement also requires
the Company to satisfy certain financial ratios. At February 3,
1996, the Company was in compliance with these covenants.
(b) On November 2, 1993, the Company issued $200,000
aggregate principal amount of 91/4% Senior Subordinated Notes
(Notes) due February 15, 2004. The Notes are unsecured and
subordinated to all existing and future senior debt (as defined)
of the Company and are redeemable at the option of the Company,
in whole or in part, at any time after February 15, 1999 at
various redemption prices (as defined) plus accrued interest to
the date of redemption. Interest is payable semi-annually on
February 15 and August 15 of each year.
(c) The 11 1/8% Subordinated Debentures were subordinated
to all existing and future senior debt (as defined) of the
Company, and were redeemable at the option of the Company, in
whole or in part, at any time at 100% of their principal amount
plus accrued interest to the date of redemption. During 1994 and
1995, $50,000 face amount and the remaining $95,500 face amount,
respectively, of these subordinated debentures were redeemed by
the Company.
(d) The variable rate demand industrial development
revenue refunding bonds currently have an interest rate which is
a daily rate established by First National Bank of Chicago and is
indicative of current bid-side yields of high grade tax-exempt
securities. At the Company's option, and under certain
conditions, the interest rate may be changed to a monthly rate or
a fixed rate. The bonds are secured by the related buildings,
leases and letters of credit.
(e) An extraordinary charge of $30,523 (net of tax
benefit of $1,607) was recognized during the year ended January
28, 1995, primarily from the write-off of unamortized debt
expenses related to the significant revision of the Credit
Agreement, as well as the early repayment of debt from a portion
of the net proceeds from the sale of Insta-Care.
An extraordinary charge of $9,306 (net of tax benefit of
$1,907) was recognized during the year ended February 3, 1996,
primarily from the write-off of original issue discount and
unamortized debt expenses on the redemption of the 11 1/8%
Subordinated Debentures and from the write-off of unamortized
debt expenses related to the significant revision of the Credit
Agreement.
<PAGE>
(f ) The fair value of the Term Loan, Revolving Loan and
the variable rate demand industrial development revenue refunding
bonds approximate their carrying value, based on the frequency of
the interest rate reset periods. The fair value of the Notes is
approximately $215,250, based on its quoted market price. The
fair value of the other long-term debt approximates its
carrying value, based on the relatively short remaining maturity
of the debt.
(5) Income Taxes
Income tax expense before extraordinary items for the
years ended February 3, 1996, January 28, 1995 and January 29,
1994 was:
1996 1995 1994
Current:
Federal $19,309 5,278 2,232
State 1,291 3,475 2,324
Total $20,600 8,753 2,556
For fiscal years 1995, 1994 and 1993, the income tax
expense differs from amounts computed by applying the Federal
statutory rate of 35% to earnings before income taxes and
extraordinary items. The actual tax differs from the expected tax
for the years ended February 3, 1996, January 28, 1995
and January 29, 1994 as follows:
1996 1995 1994
Expected tax $43,184 30,479 15,389
State taxes, net of Federal benefit 839 2,259 211
Changes in valuation allowance
through the use of loss
carryforwards (42,239) (29,263) (15,276)
Other 18,816 5,278 2,232
$20,600 8,753 2,556
"Other" consists principally of alternative minimum tax.
In addition to alternative minimum tax credit
carryforwards of approximately $21,000, the Company has Federal
income tax loss carryforwards of approximately $177,000, which
are available to offset future taxable income, if any, through
2008.
The Company's Federal income tax returns have been
examined through April 30, 1986 and any assessments have been
paid or accrued. The Federal income tax returns for the fiscal
periods ended January 31, 1987 and January 30, 1988 are currently
being examined. The Company has established a valuation allowance
for the full amount of its loss carryforward. The valuation
allowance will be reviewed in the future, based on management's
estimates of the expected outcome of these examinations.
Temporary differences and carryforwards which give rise
to deferred tax assets and liabilities as of February 3, 1996 and
January 28, 1995 are as follows:
1996 1995
Deferred tax assets:
Reserves and other liabilities $13,620 23,880
Amortization 7,452 7,804
Other 6,351 7,613
Loss carryforwards 67,111 82,745
Credit carryforwards 25,803 8,364
Gross deferred tax assets 120,337 130,406
Less valuation allowance (67,111) (94,176)
Net deferred tax assets $53,226 36,230
Deferred tax liabilities:
Inventory $37,698 23,481
Fixed assets 15,528 12,749
Gross deferred tax liabilities $53,226 36,230
(6) Stockholders' Equity
(a) Common Stock
The Company's authorized common stock consists of
100,000,000 shares of Common Stock, par value $.01 per share (of
which 3,518,728 shares are Nonvoting Common Stock (Series I), par
value $.01 per share).
(b) Preferred Stock
The Company's authorized preferred stock consists of
20,000,000 shares. The preferred stock is issuable in series with
terms as fixed by the Board of Directors. No preferred stock has
been issued.
(c) Stock Options
The Company has reserved 6,782,406 shares of its Common
Stock for the granting of stock options and other incentive
awards to officers, directors and key employees under the 1993
and 1995 Stock Option and Incentive Plans of Eckerd Corporation.
Options are granted at prices which are not less than the
fair market value of a share of common stock on the date of
grant. Commencing three years after the date of grant, all
options are exercisable to the extent of 50%, with an additional
<PAGE>
25% exercisable after each of the next two successive years.
Unexercised options expire ten years after the date of grant.
Options granted under prior plans were surrendered and granted
under the terms of the 1993 plan. Shares under option and option
prices have been adjusted to reflect the Reclassification and the
Stock Split (note 1(b)) and the two-for-one stock split (note
2(l)).
As of February 3, 1996, January 28, 1995 and January 29,
1994, 3,531,658, 458,354 and 445,336 shares of Common Stock were
available for grant. At February 3, 1996, options for 758,308
shares of Common Stock were exercisable at $2.59 to $7.00 per
share. At January 28, 1995, options for 699,720 shares of Common
Stock were exercisable at $.28 to $7.00 per share. At January 29,
1994, options for 900,786 shares of Common Stock were exercisable
at $.28 to $7.00 per share.
A summary of changes during the years ended February 3,
1996, January 28, 1995 and January 29, 1994 is set forth below:
Shares under Option
option prices
Outstanding January 30, 1993 1,373,920 $ .28 - $18.75
Granted 1,711,830 $ 5.00 - $ 7.00
Exercised (148,790) $ 2.82 - $ 4.62
Cancelled (122,952) $ 2.82 - $18.00
Outstanding January 29, 1994 2,814,008 $ .28 - $ 7.00
Granted 171,000 $ 7.00 - $14.63
Exercised (248,998) $ .28 - $ 7.00
Cancelled (184,018) $ .28 - $12.32
Outstanding January 28, 1995 2,551,992 $ .28 - $14.63
Granted 1,059,134 $12.81 - $22.00
Exercised (227,940) $ .28 - $ 7.00
Cancelled (132,438) $ 7.00 - $19.31
Outstanding at February 3, 1996 3,250,748 $ 2.59 - $22.00
Options previously granted at prices greater than $7.00
per share were modified to $7.00 per share at the date of the
IPO.
(7) Commitments
The Company conducts the major portion of its retail
operations from leased store premises under leases that will
expire within the next 20 years. Such leases generally contain
renewal options exercisable at the option of the Company. In
addition to minimum rental payments, certain leases provide
for payment of taxes, maintenance and percentage rentals based
upon sales in excess of stipulated amounts.
Rental expense for the years ended February 3, 1996,
January 28, 1995 and January 29, 1994 was:
1996 1995 1994
Minimum rentals $118,797 111,845 111,072
Percentage rentals 25,651 20,971 18,369
$144,448 132,816 129,441
At February 3, 1996, minimum rental commitments for the
next five fiscal years and thereafter under noncancelable leases
were as follows: 1996 - $110,423; 1997 - $103,451; 1998 -
$90,791; 1999 - $82,881; 2000, - $75,030; and thereafter -
$529,864. These amounts include any rental commitments for
under-performing stores closed or to be closed (note 9).
In 1987, the Company entered into an operating lease
agreement for 72 stores with a third-party lessor established by
an affiliate of Merrill Lynch & Co. (which, through affiliated
entities, controls approximately 6% of the Company's common
stock). The lease agreement has certain restrictive covenants,
which, upon violation by the Company, give the lessor the right
to require the lessee to purchase the leased stores at the
remaining balance of the lease contract. At February 3, 1996, the
balance subject to the repurchase terms is $35,774. At February
3, 1996, the Company was in compliance with these covenants.
During 1995, 1994 and 1993, the Company sold certain
photo processing equipment to an unrelated third party for
approximately $4,900, $14,800 and $35,000, respectively, and
entered into five-year leases with respect to such equipment. No
gain or loss was recorded in connection with these transactions.
Annual lease payments by the Company of $6,801 are required
over the term of the leases.
During 1993, the Company and Integrated Systems Solutions
Corporation (ISSC) entered into a Systems Operations Service
Agreement (Service Agreement) pursuant to which ISSC will manage
the Company's entire information systems operation, including the
implementation of a new point-of-sale system with scanning
capabilities. The Service Agreement has a ten year term, and the
total payments to be
<PAGE>
made by the Company are expected to be $480,000 over such term,
based on currently anticipated services. A portion of these
payments is being accounted for as capital expenditures. As of
February 3, 1996, the Company has acquired $83,711 of equipment,
of which $37,979 has been acquired under a deferred payment
arrangement.
(8) Transactions with Related Parties
In April 1989, the Company entered into a "Master Lease"
agreement with a third-party lessor established by an affiliate
of Merrill Lynch & Co. (which, through affiliated entities,
controls approximately 6% of the Company's common stock) whereby
such lessor would finance the acquisition of store sites and the
construction of buildings and acquisition of equipment. As of
February 3, 1996, there were 12 stores leased under the agreement
with an aggregate cost of approximately $18,400. The Company pays
the Merrill Lynch affiliate a structure fee of 1% of the cost of
land, buildings and equipment financed under the Master Lease
plus an administration fee. The Company paid the Merrill Lynch
affiliate fees aggregating $43, $43 and $44 for the years ended
February 3, 1996, January 28, 1995 and January 29, 1994,
respectively.
During 1993, Merrill Lynch & Co., as one of the
representatives of the underwriters in the IPO, received
underwriting commissions and related fees of $1,847. In addition,
as sole underwriter in the issuance of the Notes, Merrill Lynch &
Co. received approximately $4,000 in underwriting discounts from
the Company. During 1995, Merrill Lynch & Co., as one of the
representatives of the underwriters in the August offering,
received underwriting commissions and related fees of $3,000.
During 1994, Merrill Lynch & Co. acted as financial
advisors to the Company in connection with the sale of Insta-Care
and received a fee of $1,417 for its services.
(9) Store Closing Charges
In 1994, the Company changed its accounting policy for
closed stores to record the loss at the time the decision is made
to close the store, in accordance with Emerging Issues Task Force
Issue No. 94-3. In the fourth quarter of 1994, the Company
established a $48,988 provision for future drug store closings.
In addition to the small number of stores the Company would
close in the normal course of business, the Company accelerated
the closing of approximately 90 geographically dispersed
under-performing stores. At February 3, 1996, 84 of the
approximately 90 under-performing stores had been
closed. The total charge of $48,988 was included in operating and
administrative expenses on the 1994 consolidated statement of
operations. Of the total charge, approximately $31,000 related to
lease settlements and obligations and other expenses to be
incurred in connection with the store closings. The remaining
charge of approximately $18,000 was for the write-off of impaired
assets which included inventory liquidation and the write-off of
intangible and fixed assets. The effect of this accounting change
on prior periods was immaterial.
In 1995, approximately $20,400 of the provision was
utilized for lease obligations, settlements and asset write-offs.
Remaining expenses are anticipated to be less than the balance of
the provision; therefore, approximately $10,800 of the provision
is available for the 1996 store closings primarily related to
relocation of existing stores.
<PAGE>
Independent Auditors' Report
The Board of Directors
Eckerd Corporation and Subsidiaries:
We have audited the accompanying consolidated balance
sheets of Eckerd Corporation and subsidiaries as of February 3,
1996 and January 28, 1995, and the related consolidated
statements of operations, stockholders' equity (deficit), and
cash flows for each of the years in the three-year period ended
February 3, 1996. These consolidated financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Eckerd Corporation and subsidiaries at
February 3, 1996 and January 28, 1995, and the results of their
operations and their cash flows for each of the years in the
three-year period ended February 3, 1996, in conformity with
generally accepted accounting principles.
As described in note 9, the Company changed its
accounting policy in fiscal year 1994 related to the timing of
the recognition of closed store obligations.
/s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Tampa, Florida
March 26, 1996
<PAGE>
<TABLE>
Quarterly Information (Unaudited)
(In thousands, except per share amounts) Fiscal 1995 Quarters Ended
4/29/95 7/29/95 10/28/95 2/3/96
<S> <C> <C> <C> <C>
Financial Information
Sales and other operating revenue $1,219,594 1,138,724 1,164,907 1,473,848
Cost of sales, including store occupancy,
warehousing and delivery expense 939,488 885,108 915,137 1,134,990
Operating and administrative expenses 220,591 221,832 224,301 255,407
Interest expense 20,356 19,593 18,720 18,167
Earnings before income taxes
and extraordinary item 39,159 12,191 6,749 65,284
Income taxes 8,615 115 1,147 10,723
Earnings before extraordinary item 30,544 12,076 5,602 54,561
Extraordinary item-early retirement
of debt, net of tax benefit -- (1,021) (5,012) (3,273)
Net earnings $ 30,544 11,055 590 51,288
Earnings before extraordinary
item per common share $ .47 .18 .08 .76
Net earnings per common share $ .47 .17 .01 .71
Weighted average common shares outstanding 65,626 65,794 71,242 71,764
Market Price Per Share Information
High $ 15-1/8 17-5/16 21 22-3/8
Low 12-1/4 14-3/16 16-5/16 19-1/16
(In thousands, except per share amounts) Fiscal 1994 Quarters Ended
4/30/94 7/30/94 10/29/94 1/28/95
Financial Information
Sales and other operating revenue $1,136,195 1,066,890 1,071,036 1,315,396
Cost of sales, including store occupancy,
warehousing and delivery expense 866,083 820,281 831,513 966,750
Operating and administrative expenses 217,846 215,767 215,476 274,982
Interest expense 23,901 24,491 23,410 21,933
Earnings before income taxes
and extraordinary item 28,365 6,351 637 51,731
Income taxes 1,420 330 32 6,971
Earnings before extraordinary item 26,945 6,021 605 44,760
Extraordinary item - early retirement
of debt, net of tax benefit -- -- (26,620) (3,903)
Net earnings (loss) $ 26,945 6,021 (26,015) 40,857
Earnings before extraordinary
item per common share $ .42 .09 .01 .68
Net earnings (loss) per common share $ .42 .09 (.40) .62
Weighted average common shares outstanding 64,448 64,492 64,844 65,670
Market Price Per Share Information
High $ 12 12-5/8 15-3/4 16
Low 9-1/4 9-1/16 11-5/8 12-11/16
</TABLE>
The Company's stock is listed on the New York Stock Exchange
(Symbol: ECK). The approximate number of shareholders of record
on March 29, 1996 was 965.
The Company is subject to restrictive covenants under its
bank credit agreement and its 91/4% senior subordinated notes
which restrict the payment of dividends. The Company has not paid
or declared any dividend distributions on its common stock.
Earnings (loss) per common share are computed independently
for each of the quarters. Therefore, the sum of the quarterly
earnings (loss) per share may not equal the annual earnings per
common share.
All quarters have been restated to reflect a two-for-one
stock split effected in the form of a stock dividend declared
April 1, 1996 (payable May 13, 1996).
Exhibit 21.1
ECKERD CORPORATION
Subsidiaries of the Company
At February 3, 1996, Eckerd Corporation, incorporated in the State of
Delaware, had eight wholly-owned subsidiaries, which are included in the
consolidated financial statements of the Company. The names of the eight
subsidiaries have been omitted because these unnamed subsidiaries, considered in
the aggregate as a single subsidiary, do not constitute a significant
subsidiary.
Exhibit 23.1
The Board of Directors
Eckerd Corporation and Subsidiaries
Re: Registration Statement on Form S-3 (No. 33-50223)
Registration Statement on Form S-8 (No. 33-49977)
Registration Statement on Form S-8 (No. 33-50755)
Registration Statement on Form S-3 (No. 33-56261)
Registration Statement on Form S-8 (No. 33-60175)
We consent to the incorporation by reference in the above referenced
registration statements of Eckerd Corporation and subsidiaries of our report
dated March 26, 1996, relating to the consolidated balance sheets of Eckerd
Corporation and subsidiaries as of February 3, 1996 and January 28, 1995, and
the related consolidated statements of operations, stockholders' equity
(deficit), and cash flows, and related schedules for each of the years in the
three-year period ended February 3, 1996, which report appears in the February
3, 1996 Annual Report on Form 10-K of Eckerd Corporation and subsidiaries.
KPMG Peat Marwick LLP
Tampa, Florida
April 25, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000031364
<NAME> ECKERD CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-END> FEB-03-1996
<CASH> 7,922
<SECURITIES> 0
<RECEIVABLES> 73,137
<ALLOWANCES> 3,000
<INVENTORY> 835,551
<CURRENT-ASSETS> 918,006
<PP&E> 634,023
<DEPRECIATION> 282,974
<TOTAL-ASSETS> 1,490,699
<CURRENT-LIABILITIES> 597,388
<BONDS> 701,798
<COMMON> 700
0
0
<OTHER-SE> 54,041
<TOTAL-LIABILITY-AND-EQUITY> 1,490,699
<SALES> 4,997,073
<TOTAL-REVENUES> 4,997,073
<CGS> 3,874,723
<TOTAL-COSTS> 3,874,723
<OTHER-EXPENSES> 917,567
<LOSS-PROVISION> 4,564
<INTEREST-EXPENSE> 76,836
<INCOME-PRETAX> 123,383
<INCOME-TAX> 20,600
<INCOME-CONTINUING> 102,783
<DISCONTINUED> 0
<EXTRAORDINARY> (9,306)
<CHANGES> 0
<NET-INCOME> 93,477
<EPS-PRIMARY> 1.36 <F1>
<EPS-DILUTED> 1.36 <F1>
<FN>
<F1>EPS PRIMARY AND DILUTED REFLECTS THE TWO-FOR-ONE STOCK SPLIT EFFECTED IN THE
FORM OF A STOCK DIVIDEND DECLARED APRIL 1, 1996 AND PAYABLE ON OR ABOUT MAY
13, 1996. EPS PRIMARY AND DILUTED FOR PREVIOUSLY FILED FINANCIAL DATA
SCHEDULES HAVE NOT BEEN RESTATED FOR THE STOCK SPLIT.
</FN>
</TABLE>
