<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
Genovese Drug Stores, Inc.
- - - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Charter)
Genovese Drug Stores, Inc.
- - - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
GENOVESE DRUG STORES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 13, 1994
---------------------------
The Annual Meeting of Shareholders of Genovese Drug Stores, Inc. (the
"Company"), will be held at the executive offices of the Company, 80 Marcus
Drive, Melville, New York, on Monday, June 13, 1994 at 11:00 A.M., local time.
The items to be considered and acted upon at the meeting will be:
1. The election of two (2) Class II directors to serve until the 1997
Annual Meeting of Shareholders.
2. The approval of an amendment to the 1984 Employee Stock Option and
Stock Appreciation Rights Plan.
3. The approval of an amendment to the 1987 Executive Bonus & Stock
Plan.
4. Such other business as may properly come before the Annual Meeting,
or any adjournments thereof.
Only shareholders of record at the close of business on April 25, 1994 are
entitled to notice of, and to vote at, the Annual Meeting.
Shareholders are invited to attend the Meeting, where they can vote in
person or by proxy. Those Shareholders who can not attend the Meeting are
requested to vote and sign the enclosed proxy card and return it in the enclosed
self-addressed postage paid envelope. Please return the proxy card as soon as
possible to ensure that your vote is counted and to save the Company additional
expenses in soliciting proxies.
A proxy statement and proxy card are furnished herewith, along with
Company's Fiscal 1994 Annual Report.
By Order of the Board of Directors
DONALD W. GROSS
Vice President and Secretary
May 12, 1994
Melville, New York
<PAGE> 3
GENOVESE DRUG STORES, INC.
80 MARCUS DRIVE
MELVILLE, NEW YORK 11747
---------------------------
ANNUAL MEETING OF SHAREHOLDERS
JUNE 13, 1994
PROXY STATEMENT
---------------------------
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of Genovese Drug Stores, Inc. (the
"Company"), of proxies for use at the Annual Meeting of Shareholders to be held
at 11:00 A.M., local time, on Monday, June 13, 1994, at the executive offices of
the Company, 80 Marcus Drive, Melville, New York and at any adjournments
thereof. The Proxy Statement and accompanying form of proxy are being mailed on
or about May 12, 1994 to shareholders of record on April 25, 1994.
SOLICITATION AND REVOCATION OF PROXIES
The proxy is solicited on behalf of the Board of Directors of the Company.
It may be revoked at any time before its exercise by filing with the Secretary
of the Company a written revocation or a duly executed proxy bearing a later
date. It may also be revoked by attendance at the meeting and election to vote
in person.
The entire cost of soliciting proxies will be borne by the Company. Proxies
may be solicited by directors, officers and regular employees of the Company
personally or by telephone, at minimal cost to the Company, for which they will
receive no additional compensation. The Company may reimburse brokers and others
for reasonable costs incurred by them in obtaining voting instructions from
beneficial owners of common stock held by their principals.
If proxy cards in the accompanying form are properly executed and returned,
the shares of common stock represented thereby will be voted as instructed on
the proxy. If no instructions are given, such shares will be voted (i) for the
election as directors of the nominees of the Board of Directors named below,
(ii) for the proposed amendments, and (iii) in the discretion of the proxies
named in the proxy card on any other proposals to properly come before the
meeting or any adjournments thereof.
Participants in the Genovese Drug Stores, Inc. Employee Stock Ownership
Plan (the "ESOP") who receive this Proxy Statement in their capacity as
participants will receive a voting instruction form in lieu of a proxy. The
trustees of the plan will, subject to the requirements of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), vote the shares,
in person or by proxy, in accordance with instructions they receive on or before
June 10, 1994. If voting instructions are not timely received, the trustees of
the ESOP will, subject to the requirements of ERISA, vote all shares for which
timely instructions have not been received in their discretion.
VOTING SECURITIES OF THE COMPANY
Only holders of record as of the close of business on April 25, 1994 are
entitled to vote at the Annual Meeting. On that date, there were 4,416,412
outstanding shares of the Class A Common Stock of the Company, each entitling
the holder thereof to one (1) vote per share and 4,724,421 outstanding shares of
the Class B Common Stock of the Company, each entitling the holder thereof to
ten (10) votes per share.
<PAGE> 4
The election of each nominee for director requires a plurality of the votes
cast. Abstentions and broker non-votes will not be considered votes cast for the
foregoing purposes. Proxy ballots are received and tabulated by the Company's
transfer agent and certified by the inspectors of election.
PROPOSAL 1
ELECTION OF DIRECTORS
In accordance with the By-Laws of the Company the number of directors
constituting the whole Board of Directors for the ensuing year is nine (9).
There is currently one vacancy on the Board due to the death of Edward J. Brady.
Proxies cannot be voted for a greater number of persons than the number of
nominees named. Under the By-Laws of the Company, only the Class II directors
(total of two) are nominees for election at the 1994 Annual Meeting and are
scheduled to serve for a term lasting for three (3) years until the 1997 Annual
Meeting of Shareholders.
The following table sets forth information for each of the two (2) Class II
nominees for election at the Annual Meeting and each director continuing in
office, including their ages, present principal occupations and those held
during the past five years, directorships held in any other publicly held
corporations, and the year in which each first became a director of the Company.
The information provided in connection with this table has been obtained from
the Company's records, information furnished by the directors as of March 15,
1994, and a review of statements filed with the Securities and Exchange
Commission pursuant to Section 13(d) of the Exchange Act and received by the
Company through April 11, 1994.
CLASS II DIRECTORS TO BE ELECTED FOR A TERM WHICH EXPIRES AT THE
1997 ANNUAL MEETING
<TABLE>
<CAPTION>
POSITIONS WITH COMPANY, DIRECTOR
NAME AGE BUSINESS EXPERIENCE, AND OTHER DIRECTORSHIPS SINCE
- - - ------------------- ---- ------------------------------------------------- --------
<S> <C> <C> <C>
CHARLES HAYWARD 62 Consultant; formerly served as Vice President of 1981
(a)(b)(c)(d) Citibank, N.A. and a Director of Citibank (New
York State)
ALLAN PATRICK 47 Executive Vice President of the Company; former 1987
Senior Vice President of the Company
</TABLE>
CLASS III DIRECTORS WHOSE PRESENT TERMS EXPIRE AT THE 1995 ANNUAL MEETING
<TABLE>
<S> <C> <C> <C>
ABRAHAM ALLEN 68 Self-employed; formerly on the Board of Directors 1986
(a)(b)(c)(d) of Independent Bankshares, Inc., First State Bank
of Abilene, Super Rite Foods, Inc., D-Mac, Inc.,
and Chaparrel Airlines, Inc.
THOMAS M. COONEY 68 President of Gibson Foundation since 1988; 1988
(a)(b)(c)(d) Director of Gibson Greetings, Inc.; served as
Chairman of Gibson Greetings from 1987 to 1989
LEONARD GENOVESE 59 Chairman of the Board, Chief Executive Officer 1961
(d)(e) and President of the Company
</TABLE>
2
<PAGE> 5
CLASS I DIRECTORS WHOSE TERMS EXPIRE AT THE
1996 ANNUAL MEETING
<TABLE>
<CAPTION>
POSITIONS WITH COMPANY, DIRECTOR
NAME AGE BUSINESS EXPERIENCE, AND OTHER DIRECTORSHIPS SINCE
- - - ------------------- ---- ------------------------------------------------- --------
<S> <C> <C> <C>
WILLIAM J. MCKENNA 67 President and Chief Executive Officer of Kellwood 1979
(a)(b)(c)(d) Co., during 1991 also assumed title of Chairman
of the Board; Director of United Missouri
Bankshares, Inc.
FRANCES GENOVESE 63 Director of Genovese Drug Stores, Inc. 1975
WANGBERG
(d)(e)
HERBERT J. KETT 61 Vice Chairman of the Company; former Senior Vice 1970
President of the Company
</TABLE>
- - - ---------------
(a) Member of the Audit Committee.
(b) Member of the Compensation Committee.
(c) Member of the Finance Committee.
(d) Member of the Nominating Committee.
(e) Leonard Genovese is the brother-in-law of Frances Genovese Wangberg.
OTHER INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
The Board, which met four times during fiscal year 1994, has standing
Audit, Compensation, Finance and Nominating Committees to assist it in the
discharge of its responsibilities. The Committees and their principal functions
are described below.
The Audit Committee consists of Messrs. Allen, Cooney, Hayward (Chairman),
and McKenna. The Audit Committee met twice in fiscal year 1994. This Committee
recommends to the Board the engagement of independent auditors for the ensuing
year, reviews the scope and budget for the annual audit and reviews with the
auditors the results of their engagement, the financial statements and
management report. In addition, the Audit Committee reviews the scope of and
compliance with the Company's internal controls and reviews recommendations made
by the independent auditors with respect to changes in accounting principles and
internal controls.
The Compensation Committee consists of Messrs. Allen, Cooney, Hayward and
McKenna (Chairman). The Compensation Committee met once in fiscal year 1994 and
approves or recommends to the Board compensation and special compensation for
senior management in the form of bonuses and incentives, and recommends to the
Board the adoption and implementation of incentive compensation plans, stock
option plans and employee benefit plans, as well as any modifications to
existing plans.
The Finance Committee consists of Messrs. Allen, Cooney, Hayward and
McKenna. The Finance Committee met once in fiscal year 1994. It reviews the
financial condition and capital structure of the Company and advises the Board
with respect to acquisitions, divestitures and other financial matters affecting
the Company.
The Nominating Committee consists of Messrs. Allen, Cooney, Genovese
(Chairman), Hayward, McKenna and Frances Genovese Wangberg. The Committee will
consider nominees recommended by Shareholders for election to the Board.
Recommendations should be sent to the Secretary of the Company at the Company's
executive offices. The Nominating Committee met one time in fiscal year 1994 and
reviews and recommends criteria for Board membership.
3
<PAGE> 6
COMPENSATION OF DIRECTORS
The Company's present policy is to pay each director, exclusive of employee
directors, the sum of $4,000 per meeting attended in person or by phone. Members
of the Committees of the Board of Directors are not paid additional amounts for
attending Committee meetings. During the fiscal year, each director attended at
least 75% of the meetings held by the Board and the Committees of which he or
she is a member. Certain directors may receive additional forms of compensation,
as described elsewhere in this Proxy Statement.
OWNERSHIP OF SECURITIES BY PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
Company's Class A and Class B Common Stock owned beneficially as of April 11,
1994, or as otherwise noted, by any person or entity known to the Company to be
the beneficial owner of more than 5% of the outstanding shares of either class
of stock.
CLASS A SHAREHOLDERS
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME & ADDRESS(E) OF BENEFICIAL OWNERSHIP(D) OF CLASS
- - - --------------------------------------------------------- -------------------------- --------
<S> <C> <C>
Genovese Drug Stores, Inc. ESOP 297,675 6.7
T. Rowe Price Associates, Inc.(f) 234,080 5.4
100 E. Pratt Street
Baltimore, MD 21202
(as of December 31, 1993)
CLASS B SHAREHOLDERS
Leonard Genovese(a) 1,507,755 31.9
Frances Genovese Wangberg(b) 1,541,421 32.6
Trust under the Will of the late 1,301,533 27.5
Joseph W. Genovese, Jr.
Trust under the Will of the late 470,551 10.0
Joseph Genovese, Sr.
Donald W. Gross 283,846 6.0
Revocable Living Trust and
Marie A. Gross
Revocable Living Trust(c)
Geraldine Genovese(g) 1,037,204 21.9
</TABLE>
- - - ---------------
(a) Includes 241,760 shares of Class B Common Stock held by the wife of Mr.
Leonard Genovese, 7,310 shares of Class B Common Stock held in trust for
his daughter and 470,551 shares of Class B Common Stock held by the Trust
under the Will of the late Joseph Genovese Sr., of which Mr. Leonard
Genovese is a Co-Trustee. Mr. Genovese disclaims any beneficial ownership
in any such shares. Additionally, Leonard Genovese owns 16,317 shares of
Class A stock and also has options to purchase 34,200 more Class A shares
of the Company.
(b) Includes 1,301,533 shares listed as beneficially owned by the Trust under
the Will of the late Joseph W. Genovese, Jr. of which Frances Genovese
Wangberg, Director of the Company, is Trustee. Additionally, Frances
Genovese Wangberg owns 2,416 shares of Class A stock and also has options
to purchase 8,712 more Class A shares of the Company.
(c) Of the shares stated, 186,471 are owned by the Donald W. Gross Revocable
Living Trust, of which Marie A. Gross is a Co-Trustee and a contingent
beneficiary. The balance, 97,375 shares, are owned by the Marie A. Gross
Revocable Living Trust, of which Donald W. Gross is a Co-Trustee and a
contingent beneficiary. Mr. Gross is deemed to be an associate of the
Donald W. Gross Revocable Living Trust, Marie Gross and the Marie A. Gross
Revocable Living Trust. Mrs. Gross is deemed to be an associate of
4
<PAGE> 7
the Marie A. Gross Revocable Living Trust, Donald Gross and the Donald W.
Gross Revocable Living Trust. None of these shares have been counted more
than once as set forth in Note (d). Mr. Gross is a Vice President and
Secretary of the Company. Additionally, Mr. Gross owns 12,409 shares of
Class A stock and also has options to purchase 23,755 more Class A shares
of the Company.
(d) Certain shares in the table have been counted twice because of certain rules
and regulations of the Securities and Exchange Commission. See notes (a),
(b) and (g).
(e) Except as otherwise noted, the address for all beneficial owners is 80
Marcus Drive, Melville, New York, 11747.
(f) These securities are owned by various individual and institutional investors
for which T. Rowe Price Associates, Inc. ("Price Associates") serves as
investment adviser with power to direct investment and/or sole power to
vote the securities. For purposes of the reporting requirements of the
Securities Exchange Act of 1934, Price Associates is deemed to be a
beneficial owner of such securities; however, Price Associates expressly
disclaims that it is, in fact, the beneficial owner of such securities.
(g) Includes 793,368 shares of Class B Common Stock held by Leonard Genovese,
her husband, and 1,566 shares of Class B Common Stock held in trust for her
daughter. Mrs. Genovese disclaims any beneficial ownership in any such
shares.
Leonard Genovese is the husband of Geraldine Genovese, brother of Marie
Gross and the brother-in-law of Frances Genovese Wangberg. Donald W. Gross is
the husband of Marie Gross, and the brother-in-law of Leonard Genovese. These
persons are deemed "associates" of each other as that term is defined in the
regulations promulgated under the Securities Exchange Act of 1934, as amended.
The Trust under the Will of the late Joseph W. Genovese, Jr. may also be
deemed an "associate" of Frances Genovese Wangberg, and the Trust under the Will
of the late Joseph Genovese, Sr. may be deemed an "associate" of Leonard
Genovese. The term "associate" is used to indicate a relationship with any
person, including, in this situation, any trust or estate as to which such
person has a substantial beneficial interest, or as to which such person serves
as trustee or in any other fiduciary capacity, and any relative or spouse of
such person who has the same home as such person or who is a director or officer
of the Company.
SECURITY OWNERSHIP BY MANAGEMENT
The following table presents the number of shares of the Company's Class A
and Class B Common Stock owned beneficially as of April 11, 1994, by (i) all
directors and nominees, (ii) the executive officers listed in the Summary
Compensation Table, and (iii) all executive officers and directors as a group:
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED
AS OF 4/11/94(A)(B) % OF CLASS
----------------------- --------------
NAME CLASS A CLASS B A B
- - - --------------------------------------------------- ------- --------- --- ----
<S> <C> <C> <C> <C>
Abraham Allen...................................... 11,050 2,195 * *
Thomas M. Cooney................................... 13,769 -- * *
Leonard Genovese(c)(e)............................. 50,517 1,507,755 1.1 31.9
Charles Hayward.................................... 17,151 -- * *
Herbert J. Kett(e)................................. 34,255 60,700 * 1.3
Irwin Livon(e)..................................... 19,408 -- * *
William J. McKenna................................. 10,014 2,195 * *
Allan Patrick(e)................................... 73,968 -- 1.7 *
Jerome Stengel(e).................................. 30,218 44,342 * *
Frances Genovese Wangberg(d)....................... 11,128 1,541,421 * 32.6
All Executive Officers and Directors
as a Group (18 persons)(f)(g).................... 403,697 3,457,631 8.6 73.1
</TABLE>
- - - ---------------
* Indicates less than 1% of Class
5
<PAGE> 8
(a) The persons identified in this table have sole voting and investment power
with respect to the shares set forth opposite their names, except as
otherwise disclosed in the footnotes to the table, according to information
furnished to the Company by each of them.
(b) The number of Class A Common Shares shown in the table includes the right to
acquire such shares through the exercise of stock options pursuant to the
Company's 1984 Employee Stock Option and Stock Appreciation Rights Plan
(the "1984 Plan") as follows: 34,200 shares held by Mr. Genovese; 9,993
shares held by Mr. Hayward; 24,705 shares held by Mr. Kett; 17,100 shares
held by Mr. Livon; 35,633 shares held by Mr. Patrick; 23,755 shares held by
Mr. Stengel; 8,712 shares held by Mrs. Wangberg; and 6,050 shares held by
each of Messrs. Allen, Cooney and McKenna.
(c) Includes 241,760 shares of Class B Common Stock held by the wife of Mr.
Leonard Genovese, 7,310 shares of Class B Common Stock held in trust for
his daughter and 470,551 shares of Class B Common Stock held by the Trust
under the Will of the late Joseph Genovese, Sr., of which Mr. Leonard
Genovese is a Co-Trustee. Mr. Genovese disclaims any beneficial ownership
in any such shares.
(d) Includes 1,301,533 shares of Class B Common Stock held by the Trust under
the Will of the late Joseph W. Genovese, Jr. for the benefit of Mrs.
Wangberg, of which she is a Co-Trustee.
(e) Does not include a vested interest in shares of the Company's Class A Common
Stock held in the Company's ESOP, which shares are counted as part of the
ESOP as follows: 6,877 shares held by Mr. Genovese; 4,298 shares held by
Mr. Kett; 148 shares held by Mr. Livon; 2,610 shares held by Mr. Patrick;
and 3,585 shares held by Mr. Stengel.
(f) Includes 280,613 shares of Class A Common Stock which the Group currently
has the rights to acquire through the exercise of stock options pursuant to
the 1984 Plan.
(g) Does not include 24,442 shares of the Company's Class A Common Stock held in
the vested ESOP accounts of the executive officers of the Company. Such
shares are included in the shares held by the ESOP.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's directors and executive officers, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file with the Securities and Exchange Commission ("SEC")
and the American Stock Exchange initial reports of ownership and reports of
changes in ownership of Common Stock of the Company. Reporting persons are
required by SEC regulation to furnish the Company with copies of all such filed
reports. To the Company's knowledge, based solely on a review of copies of such
filed reports furnished to the Company, the following persons filed untimely
reports required by the Exchange Act: Abraham Allen, nine reports regarding 18
transactions; Thomas M. Cooney, seven reports regarding 11 transactions; Charles
F. Hayward, 22 reports regarding 29 transactions; William McKenna, 13 reports
regarding 20 transactions; Frances Genovese Wangberg, 11 reports regarding 22
transactions; John F. DeMarle, two reports regarding two transactions; Thomas B.
Esposito, seven reports regarding seven transactions; Leonard Genovese, 33
reports regarding 64 transactions; Donald W. Gross, 30 reports regarding 52
transactions; Herbert J. Kett, 25 reports regarding 43 transactions; Dominick
Lettieri, 22 reports regarding 30 transactions; Irwin Livon, five reports
regarding five transactions; Allan Patrick, 23 reports regarding 36
transactions; David C. Reynolds, nine reports regarding ten transactions; and
Jerome Stengel, 27 reports regarding 39 transactions.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth the annual compensation paid by the Company
during the fiscal years ending January 28, 1994, January 29, 1993 and January
31, 1992 to the Chief Executive Officer and the four most highly compensated
executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- ------------
OTHER STOCK ALL
ANNUAL OPTIONS OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION GRANTED COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(A) ($)(B) (#)(C) ($)(D)(E)
- - - ------------------------------- ------ ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
LEONARD GENOVESE............... 1994 400,000 190,000 -0- -0- 13,672
Chairman of the Board, Chief 1993 375,000 187,500 -0- 22,000 14,287
Executive Officer, and 1992 350,000 175,000 449,610 11,000 15,460
President
ALLAN PATRICK.................. 1994 200,000 95,000 -0- -0- 6,916
Executive Vice President and 1993 178,800 89,400 -0- 16,500 5,215
Director 1992 165,000 82,500 192,920 8,250 6,671
HERBERT J. KETT................ 1994 153,000 55,233 -0- -0- 8,275
Vice Chairman and Director 1993 146,600 55,708 -0- 11,440 6,842
1992 141,000 53,580 214,716 5,720 6,418
IRWIN LIVON.................... 1994 136,000 49,096 -0- -0- 5,831
Vice President 1993 131,000 49,780 -0- 11,000 4,241
1992 55,000 20,900 -0- -0- 1,354
JEROME STENGEL................. 1994 133,000 45,486 -0- -0- 6,973
Vice President and Treasurer 1993 127,900 46,044 -0- 11,000 5,674
1992 123,000 44,280 132,169 5,500 5,218
</TABLE>
- - - ---------------
(a) Bonus -- 50% cash, 50% stock; stock is distributed evenly over a five year
period.
(b) Non-Qualified Stock Options -- Amounts reported represent the dollar value
of the difference of price at date of grant and market price on date of
exercise.
(c) Options granted pursuant to the 1984 Plan.
(d) The amounts shown in the table reflect, for the fiscal year 1994, personal
use of the Company's leased automobile on a pro-rated basis in the amounts
of $2,500, $2,170, $1,783, $2,040 and $1,612 respectively; premiums paid by
the Company for life insurance over $50,000 in the amounts of $1,800, $574,
$1,485, $1,485 and $1,485 respectively; and the Company's contributions to
the Executive Retirement Plan added to salary in the amounts of $2,190,
$815, $2,415, $0 and $1,622 respectively. The amount shown for Mr. Genovese
also includes premiums added to salary for two additional insurance
policies in the amount of $1,732. In fiscal year 1994, the Company
contributed $4,076, $2,121, $1,638, $1,457 and $1,424 respectively under
The Genovese Retirement and Savings Plan, a Section 401(k) plan. The
Company has contributed $1,374, $1,236, $954 $849 and $830 respectively,
under the ESOP.
(e) Excludes insurance premiums paid for the benefit of Mr. Genovese which will
be repaid to the Company. Certain amounts set forth in the proxy statement
for fiscal year 1993 have been revised to conform to the presentation
herein.
REPORT OF THE COMPENSATION COMMITTEE
The Company's current executive compensation program reflects the overall
compensation philosophies of the Company. The program is designed with a goal of
fairly compensating executives for their performance and contribution to the
Company's financial results, as well as providing incentives which attract and
retain key executives, instill a long-term commitment to the Company, and
develop a pride and sense of Company
7
<PAGE> 10
ownership, all in a manner consistent with shareholder interests. Given these
objectives, the executive compensation package includes three elements: (1) base
salary; (2) bonuses awarded under 1987 Executive Bonus & Stock Plan (the "1987
Plan"), consisting of one-half cash and one-half grants of Class A stock (which
vest in five equal annual installments, generally commencing shortly after each
grant); and (3) stock options to purchase Class A stock. Options granted under
the 1984 Plan are non-qualified options and have an exercise price of 100% of
the price of the Class A stock on the day of grant. All outstanding options have
a term of five years from the day of grant. Each of the foregoing three elements
are reviewed annually and adjusted in light of the Company's performance for the
year and the individual executive's contribution to that performance.
The Compensation Committee administers the Company's 1987 Plan and the 1984
Plan. In evaluating an executive's performance at the Company, in addition to
financial results of the Company (such as attaining the pre-determined financial
plan), a broad range of performance criteria is considered. These criteria
include standards of business conduct which reflect the social values and
expectations of the Company's associates and shareholders and the communities in
which it operates. In considering salary increases, bonuses and stock option
grants (for persons other than the Chief Executive Officer), the Compensation
Committee considers recommendations submitted by the Chief Executive Officer.
In approving the salary increase and the bonus and option awards to the
Chief Executive Officer, the Committee takes into account his level and scope of
responsibilities and contributions to the Company. The Committee decides on the
Chief Executive Officer's compensation privately, without the Chief Executive
Officer being present.
The Committee consists of all four independent directors, none of whom are
employees of the Company.
This report is submitted by the following persons who constitute the
Compensation Committee:
William McKenna, Chairman
Abraham Allen
Thomas Cooney
Charles Hayward
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee for the 1994 fiscal year consisted of the
following five non-employee directors: William McKenna, Abraham Allen, Thomas
Cooney, Charles Hayward and Edward Brady. In the ordinary course of business,
the Company purchased merchandise from Gibson Greetings, Inc. which during
fiscal year 1994 aggregated approximately $467,000. Thomas Cooney, a director of
the Company, is also a director of Gibson Greetings, Inc. The Company is of the
view that the purchases were made on a basis no less favorable than could have
been obtained from unaffiliated suppliers in similar transactions. During fiscal
year 1994, the Company paid the law firm of Brady & Tarpey, P.C. $293,000 for
legal services. Edward Brady, a member of the firm, was a director of the
Company during fiscal year 1994. Mr. Brady died during fiscal year 1994; the
Company no longer uses the services of Brady & Tarpey, P.C.
EMPLOYEE BENEFIT PLANS AND OTHER REMUNERATION
1987 EXECUTIVE BONUS & STOCK PLAN
The 1987 Plan was adopted during fiscal year 1988. Under the 1987 Plan, the
Compensation Committee can award eligible executives, upon meeting targeted
performance levels, incentive compensation which is paid 50% in cash and 50% in
the Company's Class A Common Stock. The stock is payable in equal installments
of 20% over a five year period, provided the recipient remains employed by the
Company. The Company had available as of January 28, 1994, 50,278 shares of its
Class A stock for awards under the 1987 Plan. For fiscal year 1994, the Company
awarded $308,000 in cash and 39,186 shares. The Company also distributed shares
for amounts awarded in previous years during fiscal 1994.
8
<PAGE> 11
1984 EMPLOYEE STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
The Company's 1984 Plan authorizes the grant of discretionary stock options
to officers and other key employees of the Company and automatic,
non-discretionary stock options to non-employee directors of the Company. The
1984 Plan authorizes the granting of options to purchase shares of Class A
common stock from the Company at an exercise price which is no less than 100% of
the fair market value of the common stock at the time the option is granted. All
outstanding options have a five-year term.
Payment for shares purchased upon exercise of an option must be made in
full at the time of exercise, either in cash, by delivery of shares of common
stock then owned by the optionee or a combination of cash and shares having an
aggregate fair market value equal to the option price, or by participation in a
cashless exercise program. As of January 28, 1994, 207,913 options were
outstanding at exercise prices ranging from $4.79 to $11.02 per share.
The Company did not issue to its executives any options to purchase its
Common Stock during the last fiscal year.
The following table sets forth information with respect to the named
executives concerning the exercise of options during fiscal year 1994 and
unexercised options held at year-end.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR- IN-THE-MONEY OPTIONS AT
END(#) FISCAL YEAR-END($)(A)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - - ------------------------- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Leonard Genovese......... -0- -0- 24,200 -0- 54,692 -0-
Allan Patrick............ -0- -0- 28,133 -0- 109,978 -0-
Herbert Kett............. -0- -0- 19,505 -0- 76,248 -0-
Irwin Livon.............. -0- -0- 12,100 -0- 38,478 -0-
Jerome Stengel........... -0- -0- 18,755 -0- 73,317 -0-
</TABLE>
- - - ---------------
(a) Calculated based on the excess of the fair market value of common stock on
January 28, 1994 ($12.375) over the option exercise price. All awards made
to Leonard Genovese were at an option exercise price equal to 110% of the
market price on the date of the grant.
THE GENOVESE RETIREMENT AND SAVINGS PLAN
The Company maintains a profit sharing and deferred retirement plan
pursuant to Section 401(k) of the Internal Revenue Code of 1986 (the "Code").
All employees participate after one year of service and attainment of age 21.
The Company may make discretionary contributions in an amount determined
annually by the Board of Directors. Company contributions are allocated to
eligible participants in proportion to their compensation. Participants may make
contributions to the Plan on a salary reduction basis, and the Company may make
matching contributions on behalf of each participant. A separate salary
reduction account and matching employer contribution account are maintained for
each participant. All contributions are paid to The Dreyfus Trust Company, as
Trustee, to hold, invest and reinvest the funds. All accounts are vested at
retirement, death, or disability. Upon any other termination of employment,
matching and discretionary contributions vest 20% a year for the first five
years of service. Subject to certain restrictions and tax penalties,
participants may borrow from or make early withdrawals from their salary
reduction accounts.
RETIREMENT INCOME PLAN
The Company's Retirement Income Plan ("the Pension Plan") covers
approximately 830 participants. The Company, during fiscal year 1990, elected to
freeze the Pension Plan as of December 31, 1988. The
9
<PAGE> 12
adoption of this amendment to the Pension Plan resulted in the freezing of
maximum benefits available to employees covered by the Pension Plan as of
December 31, 1988. Employees covered by the Pension Plan will continue to vest
with the passage of time.
The Pension Plan provides 100% vesting after five years of service. Normal
retirement age is 65 and early retirement can be taken after age 55. A
participant's benefits under the Pension Plan are based upon a maximum of 50% of
his average earnings during the final five years of employment up to a maximum
of $30,000, less 75% of his primary Social Security benefits, for 30 years or
more of service. Benefits are reduced proportionately if the participant's
actual years of service are less than 30.
The following named executive officers shall be entitled to receive the
following annual benefits upon retirement at age 65: Leonard Genovese, $4,991;
Herbert Kett, $5,172; Allan Patrick, $2,398; Jerome Stengel, $3,364 and Irwin
Livon, $0.
NON-QUALIFIED PENSION PLAN
In addition, five key officers of the Company participate in a nonqualified
pension plan. The plan provides benefits at retirement equal to 50% of a
participant's base salary with a maximum benefit of $50,000 per year for 10
years. This plan also provides life insurance on the individual officers,
payable to the officers in an amount equal to five years base salary up to a
maximum of $500,000.
EMPLOYEE STOCK OWNERSHIP PLAN
On April 6, 1976, the Board of Directors of the Company approved the
adoption of the ESOP for the benefit of all of its employees, including
officers, who meet certain eligibility requirements, based primarily on age,
length of service and number of hours worked. Under the ESOP, the Company may
make contributions to a trust fund in cash or property, including shares of the
Company's Common Stock, in an amount to be determined annually by the Board of
Directors. The Trustees of the trust fund will be directed to invest any funds
received primarily in the Company's Common Stock and to make distributions in
the form of the Company's Common Stock to participants upon death, disability or
retirement. In the event employment of a participant is terminated prior to
death, disability or retirement, the number of shares he or she will be entitled
to receive as a distribution will depend, in general, upon his or her length of
service with the Company. A participant's share in the contribution for each
year is determined by the ratio of his or her compensation (exclusive of any
bonuses) to the aggregate compensation of all participants (exclusive of
bonuses).
For the fiscal year ended January 28, 1994, the Board of Directors
authorized a contribution of $200,000 worth of shares of the Company's Class A
Common Stock to the ESOP. On April 11, 1994, the ESOP held 297,675 shares of the
Class A Common Stock of the Company.
OTHER REMUNERATION
During fiscal 1994, the Company paid to Leonard Genovese and another member
of the Genovese family, as Trustees under deeds of trust for the benefit of
certain family members, an aggregate of $272,395 for facilities located in Long
Island City, New York, under the terms of a lease which expires on July 31,
2010, and presently provides for the payment to the Trustees of an annual base
rental of $210,000, plus a percentage of annual gross sales generated from the
premises in excess of a specified amount, and for the payment of ceratin real
estate taxes and maintenance charges. The Company is of the view that the lease,
when entered into, was made on terms no less favorable to the Company than could
have been obtained from an unaffiliated person in a similar transaction.
In the ordinary course of business, the Company purchased merchandise from
Gibson Greetings, Inc. which during fiscal 1994 aggregated approximately
$467,000. Thomas M. Cooney, a director of the Company, is also a director of
Gibson Greetings, Inc. The Company is of the view that the purchases were made
on a basis no less favorable than could have been obtained from unaffiliated
suppliers in similar transactions. During fiscal year 1994, the Company paid the
law firm of Brady & Tarpey, P.C. $293,000 for legal services.
10
<PAGE> 13
Edward Brady, a member of the firm, was a director of the Company during fiscal
year 1994. Mr. Brady died during fiscal year 1994; the Company no longer uses
the services of Brady & Tarpey, P.C.
PERFORMANCE GRAPH
The graph below compares the yearly percentage change in the cumulative
total shareholder return on the Company's Class A Common Stock against the
cumulative total return of the American Stock Exchange Market Value Index and a
composite peer group for the period of five years commencing January, 1989 and
ending January, 1994.
COMPARISON OF CUMULATIVE TOTAL RETURN FOR THE
FIVE YEARS ENDED JANUARY 28, 1994
<TABLE>
<CAPTION>
AMERICAN
MEASUREMENT PERIOD GENOVESE DRUG STOCK EX- COMPOSITE
(FISCAL YEAR COVERED) STORES, INC. CHANGE PEER GROUP
<S> <C> <C> <C>
1/89 100 100 100
1/90 101 124 107
1/91 85 101 131
1/92 147 129 166
1/93 135 130 174
1/94 191 156 172
</TABLE>
The graph assumes that the value of the investment in the Company's Common
Stock and each index was $100 in January, 1989 and that all dividends were
reinvested.
11
<PAGE> 14
The peer group consists of the Company and the following drugstore chains:
Arbor Drugs, Inc., Big B, Inc., Drug Emporium, Inc., F&M Distributors, Inc.,
Fay's Incorporated, Hook-SupeRx, Inc., Longs Drug Stores Corp., Perry Drug
Stores, Inc., Revco D.S., Inc., Rite Aid Corp., and Walgreen Co.
CERTIFIED PUBLIC ACCOUNTANTS
The certified public accounting firm of Deloitte & Touche was engaged as
independent auditors by the Board for the fiscal year ended January 28, 1994.
The Board, on the recommendation of its Audit Committee, has retained Deloitte &
Touche to provide accounting services for fiscal 1995. Deloitte & Touche is
expected to have representatives present at the annual meeting who will be
available to respond to shareholders' questions, and, if they desire, will have
an opportunity to make any statement they consider appropriate.
PROPOSAL 2
PROPOSAL TO APPROVE AN AMENDMENT TO THE 1984 EMPLOYEE STOCK OPTION AND STOCK
APPRECIATION RIGHTS PLAN
The 1984 Plan provides for the granting of stock options or stock
appreciation rights with respect to an aggregate of up to 650,000 shares (before
adjustment in accordance with the anti-dilution provisions of the 1984 Plan) of
the Company's Class A common stock, par value $1.00 per share ("Class A Stock").
The 1984 Plan includes provisions authorizing a Stock Option Plan Committee to
administer the 1984 Plan, to grant stock options or stock appreciation rights
thereunder, to construe and interpret the 1984 Plan, to define the terms used
therein, to prescribe, amend and rescind rules and regulations relating to the
1984 Plan, and to make all other determinations necessary or advisable for the
administration of the 1984 Plan. The Stock Option Plan Committee must consist of
at least three disinterested, non-employee directors of the Company. The
Compensation Committee of the Board of Directors serves as the Stock Option
Committee under the 1984 Plan (the "Compensation Committee").
Purpose. The purpose of the 1984 Plan is to encourage the acquisition of a
proprietary interest in the Company by its directors, officers, and other key
employees.
Adoption and Amendments. The 1984 Plan was approved by shareholders of the
Company on June 4, 1984 to be effective as of March 16, 1984 and was to
terminate automatically on March 16, 1994. The 1984 Plan was modified by an
amendment approved by shareholders of the Company on June 6, 1988, which
amendment authorized automatic, non-discretionary grants of stock options to
directors of the Company under the 1984 Plan and increased the number of shares
of Class A Stock authorized to be awarded under the 1984 Plan by 200,000 shares.
The 1984 Plan was further modified by an amendment approved by shareholders of
the Company on June 8, 1992, which amendment increased the number of shares of
Class A Stock authorized to be awarded under the 1984 Plan by 250,000 shares and
extended the term of the 1984 Plan from March 16, 1994 to March 16, 2004.
Persons Eligible. Such officers or other key employees of the Company as
the Compensation Committee in its sole discretion may select are eligible to
receive discretionary grants of stock options and stock appreciation rights
under the 1984 Plan. Non-employee directors of the Company are eligible to
receive automatic, non-discretionary grants of stock options under the 1984
Plan. There are approximately 90 officers and other key employees and 5
non-employee directors currently participating in the 1984 Plan.
Shares Available. 587,474 shares of Class A Stock remain available for
issuance and sale under the 1984 Plan, 280,613 of which are covered by stock
options outstanding thereunder; no stock appreciation rights have been granted
under the 1984 Plan to date. The shares of Class A Stock that may be issued and
sold under the 1984 Plan may be either treasury shares or authorized and
unissued shares of such Class A Stock. The number of authorized shares of Class
A Stock with respect to which stock options have been granted but not exercised
is subject to adjustment if a stock dividend is declared and paid upon the
issued and outstanding shares of common stock of the Company, or if such shares
are split, combined, converted, exchanged, reclassified or in any way
substituted for, or if the Company merges or consolidates with another
corporation.
12
<PAGE> 15
In any such event, a stock option that has been granted and not exercised will
entitle the holder of such stock option upon its future exercise to the number
and kind of securities or other property subject to the terms of the stock
option to which such holder would have been entitled had such holder actually
owned the shares of Class A Stock subject to the unexercised portion of the
stock option at the time of the occurrence of such stock dividend, split,
combination, conversion, exchange, reclassification, substitution, merger or
consolidation. If a stock appreciation right is granted, then, upon the
occurrence of any of the foregoing events, the Compensation Committee in its
sole discretion has the right to determine the amount of cash and/or the number
of shares or other property subject to the terms of the stock appreciation right
so that there will be no decrease or dilution (as determined by the Compensation
Committee in its sole discretion) in the cash and/or the value of the shares or
other property to which the holder of such stock appreciation right upon its
payment is entitled by reason of such events.
Awards. The Compensation Committee may grant options to purchase shares of
Class A Stock to eligible directors, officers and other key employees of the
Company in accordance with the terms and conditions of the 1984 Plan. Such terms
and conditions are described in detail in the 1984 Plan and are summarized
below. The stock options granted under the 1984 Plan may be options that are
intended to qualify as "incentive stock options" within the meaning of Section
422 of the Code or options that are not intended to so qualify. The Compensation
Committee also may grant stock appreciation rights to eligible officers and
other key employees of the Company in accordance with the terms and conditions
of the 1984 Plan. Such terms and conditions also are described in detail in the
1984 Plan and are summarized below. The stock appreciation rights granted under
the 1984 Plan may be free-standing rights or rights that are granted in tandem
with stock options. The form of stock options and stock appreciation rights
granted under the 1984 Plan is determined from time to time by the Compensation
Committee. An Option Certificate or Stock Appreciation Right Certificate is
issued to each person to whom a stock option or stock appreciation right is
granted. If a stock appreciation right is granted in tandem with a stock option,
an Option Certificate, with appropriate modifications as determined by the
Compensation Committee, is issued.
Grants to Employees. The number of shares of Class A Stock subject to
stock options or stock appreciation rights granted to any eligible officer or
other key employee of the Company is determined by the Compensation Committee in
its sole discretion. An individual who has been granted a stock option or stock
appreciation right may be granted additional stock options or stock appreciation
rights if the Compensation Committee so determines, even though stock options or
stock appreciation rights previously granted to that individual remain
outstanding.
Grants to Non-Employee Directors. Each non-employee director of the
Company will receive an annual award under the 1984 Plan of an option to
purchase 2,000 shares of Class A Stock, subject to adjustment in accordance with
the anti-dilution provisions of the 1984 Plan. The award will be made each year,
regardless of whether awards are made to officers or other key employees of the
Company, and the Compensation Committee will not have the discretion to modify
such award (except as provided by the anti-dilution provisions of the 1984
Plan).
Duration of Options or Rights. The duration of each stock option or any
stock appreciation right granted hereunder is for such period as the
Compensation Committee shall determine, but not more than five years from the
date of grant thereof. The duration of each tandem stock appreciation right is
coextensive with the stock option pursuant to which it was granted and expires
at the same time.
Assignability of Stock Options. Stock options, stock appreciation rights
and all rights thereunder granted under the 1984 Plan are not transferrable by
the holder thereof other than by will or the laws of descent and distribution,
and such stock option or stock appreciation right may be exercised during such
holder's lifetime only by or on behalf of such holder.
Price. The price per share of the shares of Class A Stock to be purchased
pursuant to the exercise of a stock option and the price per share of the shares
of Class A Stock subject to a non-tandem stock appreciation right must be not
less than one hundred percent (100%) of the closing sale price of a share of
Class A Stock on the stock exchange on which the shares of Class A Stock are
then primarily listed and traded for such relevant date, or if there have been
no sales on such exchange on the relevant date, the closing sale price on the
13
<PAGE> 16
last preceding day upon which a sale took place, or if the shares of Class A
Stock are not listed, the average of the high and low bid prices in the domestic
over-the-counter market on the relevant date (the "Fair Market Value"), as
determined by the Compensation Committee, of a share of Class A Stock of the
Company on the date of grant of such stock option or stock appreciation right.
The price per share of the shares of Class A Stock subject to a tandem stock
appreciation right must be the same as the price per share of the shares of
Class A Stock to be purchased pursuant to the exercise of the stock option
underlying such tandem stock appreciation right.
Exercise of Stock Options or Stock Appreciation Rights. Stock options and
non-tandem stock appreciation rights are exercisable in whole or in part at such
time and upon such terms and conditions as the Compensation Committee shall
determine. A stock option or any stock appreciation right may be exercised by
delivery of a duly signed notice in writing specifying the number of shares of
Class A Stock with respect to which such exercise occurs, together with the
Option Certificate or Stock Appreciation Right Certificate, and in the case of
the exercise of a stock option, the full purchase price of the shares of Class A
Stock to be purchased pursuant to such exercise, to the Chairman of the Board or
an officer of the Company appointed by the Chairman of the Board for the purpose
of receiving the same; provided, however, that no stock option or stock
appreciation right granted pursuant to the 1984 Plan may be exercised at any
time when the exercise thereof violates any law or governmental order or
regulation. Payment for the shares of Class A stock purchased pursuant to the
exercise of a stock option must be made in full at the time of the exercise of
the stock option by any one or more of the following methods: in cash; by check
payable to the order of the Company; by delivery to the Company of shares of
Class A Stock which will be valued at their Fair Market Value on the date of
exercise of the stock option; by participation in a cashless exercise program
maintained by the Company and a registered broker-dealer or by any other method
acceptable to the Compensation Committee and counsel to the Company, including
loans, advances and guarantees of loans by the Company.
Special Rules Applicable to Stock Appreciation Rights. A stock
appreciation right may be granted by the Compensation Committee to an eligible
officer or other key employee as a free-standing right or may be granted in
tandem with all or any part of a stock option granted under the 1984 Plan at the
time of the grant of such stock appreciation right. Subject to the provisions
set forth below, upon the exercise of a stock appreciation right granted in
tandem with a stock option, the holder thereof may surrender the stock option,
or any applicable portion thereof, to the extent then exercisable but
unexercised and receive cash or shares of Class A Stock or any combination
thereof as determined by the Compensation Committee pursuant to the 1984 Plan.
Such stock option will, to the extent surrendered, thereupon cease to be
exercisable.
A stock appreciation right is subject to the following terms and conditions
and to such other terms and conditions as may from time to time be approved by
the Compensation Committee:
(a) A tandem stock appreciation right is exercisable at such time or
times and to such extent, but only to the extent, that the stock option to
which it relates is exercisable. A tandem stock appreciation right is not
transferrable or assignable separately from the stock option to which it
relates and the exercise or expiration of such stock option will terminate
the related stock appreciation right.
(b) The exercise by the holder of a stock appreciation right may be
made in writing to the Chairman of the Board or an officer of the Company
appointed by the Chairman of the Board for the purpose of receiving the
same, specifying whether such holder desires cash or shares of Class A
Stock or any combination thereof. Such request will be subject to the
absolute right of the Compensation Committee to substitute stock for cash
or cash for stock as set forth in subparagraph (d) below. An exercise by an
officer, director or ten percent (10%) shareholder of the Company electing
a full or partial settlement for cash must be received in writing during
the period beginning on the third business day next following the date of
release by the Company of quarterly or annual financial data and ending on
the twelfth business day following such date of release.
(c) Upon the exercise of a stock appreciation right, the holder
thereof will be entitled to receive from the Company the difference between
(i) the price per share under such stock appreciation right determined in
accordance with the section entitled "Price" above, and (ii) the Fair
Market Value on the
14
<PAGE> 17
date of exercise of one share of Class A Stock, multiplied by the number of
rights with respect to which such stock appreciation right is exercised.
For purposes of this subparagraph, Fair Market Value will be determined by
the Compensation Committee as of the date of exercise of the stock
appreciation right.
(d) Notwithstanding any provision to the contrary herein, the
Compensation Committee may, under such terms and conditions as it deems
appropriate, accept the exercise of a stock appreciation right and
authorize payment to be made in cash or shares of Class A Stock or any
combination thereof. Shares of Class A Stock will be valued at Fair Market
Value as determined by the Compensation Committee as of the date of
exercise of the stock appreciation right.
If the Compensation Committee decides to pay cash upon the exercise of a
stock appreciation right, the Compensation Committee has the discretion to make
such cash payments over a period of time, such period not to exceed five years
from the date of exercise, plus interest at a rate to be determined by the
Compensation Committee from the date of exercise. Shares of Class A Stock with
respect to which a non-tandem stock appreciation right is exercised will be
charged against the maximum number of shares which may be subject to stock
options or non-tandem stock appreciation rights under the 1984 Plan
notwithstanding that payment upon the exercise of such stock appreciation right
is made in whole or in part in cash.
Tax Withholding. In the event that a director, officer or other key
employee elects to exercise a stock option or stock appreciation right, or any
part thereof, pursuant to the 1984 Plan, and if the Company is required to
withhold any amounts under any federal, state or local tax rules or regulations
by reason of the issuance of shares of Class A Stock and/or cash to such holder,
the Company is entitled to deduct and withhold such amounts from any cash
payments to be made to such holder. In any event, such holder must make
available to the Company, promptly when required, sufficient funds to meet the
requirements of such tax withholding obligation, and the Compensation Committee
is entitled to take and authorize such steps as it may deem advisable in order
to have such funds available to the Company when required.
Issuance of Shares and Compliance With Securities Act. Within a reasonable
time after the due exercise of a stock option or stock appreciation right, the
Company will cause to be delivered to the holder thereof a certificate for the
shares of Class A Stock issuable and/or the cash payable pursuant to the
exercise of the stock option or stock appreciation right together with either
(i) an Option Certificate or Stock Appreciation Right Certificate for a number
of shares of Class A Stock, equivalent to the difference between the number of
shares as to which the stock option and/or stock appreciation right had not been
exercised immediately prior to the time of the exercise of the stock option or
stock appreciation right and the number of shares with respect to which the
stock option or stock appreciation right was so exercised, or (ii) the original
Option Certificate or Stock Appreciation Right Certificate endorsed to give
effect to the partial exercise thereof. The Company may postpone the issuance
and delivery of shares of Class A Stock upon any exercise of a stock option or
stock appreciation right until (a) the admission of such shares to listing on
any stock exchange on which shares of the same class are then listed and (b) the
completion of such registration or other qualification of such shares under any
state or federal law, rule or regulation as the Company shall determine to be
necessary or advisable. Any person exercising a stock option or stock
appreciation right must make such representations (including representations to
the effect that such person will not dispose of such shares of Class A Stock in
violation of the Federal securities laws, if required by the Company) and
furnish such information as may in the opinion of counsel to the Company be
appropriate to permit the Company, in the light of the then existence or
nonexistence of an effective registration statement under the Securities Act of
1933, as amended (the "Securities Act"), with respect to such shares, to issue
the shares in compliance with the provisions of that or any comparable act. The
Company may place an appropriate legend on any certificate evidencing the shares
of Class A Stock and may issue stop transfer instructions in respect thereof.
Nothing herein, however, will be deemed to require that the Company file or
amend a registration statement under the Securities Act.
Termination of Options. Notwithstanding any other provisions of the 1984
Plan, any stock option or stock appreciation right not exercised within the
period fixed for such exercise will expire and become void and of no effect.
Termination of Employment. Any unexercised stock option or stock
appreciation right held by an officer or other key employee will terminate
forthwith at the close of business on the fourteenth business day
15
<PAGE> 18
after cessation or termination for any reason of such holder's employment by the
Company. Notwithstanding the foregoing, if the cessation of employment is due to
retirement on or after attaining the age of sixty-five (65) years, disability or
death, or if death occurs within three months of such holder's cessation of
employment by reason of retirement or disability, as aforesaid, such holder or
the legal representatives of the estate of such holder or a specific legatee
under a will or the distributees in intestacy, after distribution of the stock
options or stock appreciation rights to said legatee or distributees, shall have
the privilege within the remaining period of the stock option or stock
appreciation right or within three months of such holder's cessation of
employment, whichever is shorter, of exercising the unexercised stock options or
stock appreciation rights which such holder could have exercised at the time of
such cessation of employment. If the employment with the Company of any officer
or other key employee is terminated because of such officer's or other key
employee's violation of his or her duties with the Company, all unexercised
stock options or stock appreciation rights held by such officer or other key
employee will terminate immediately upon the termination of such holder's
employment with the Company. The Compensation Committee has the right in any
specific case upon the grant of the stock option or stock appreciation right to
provide any other rule or method for termination of the stock option or stock
appreciation right upon termination of employment as the Compensation Committee
deems proper and appropriate under the circumstances.
Amendment by the Board of Directors or the Compensation Committee. Subject
to the provisions of the following paragraph, the Board of Directors or the
Compensation Committee may at any time withdraw or from time to time amend the
1984 Plan and the terms and conditions of any stock options or stock
appreciation rights not theretofore granted, and the Board of Directors or the
Compensation Committee, with the consent of the affected holder of a stock
option or stock appreciation right, may at any time withdraw or from time to
time amend the 1984 Plan and the terms and conditions of any stock appreciation
rights which have been theretofore granted.
Amendments Requiring Stockholder Approval. Notwithstanding the provisions
of the preceding paragraph, any amendment to the 1984 Plan which changes the
option price as set forth in the 1984 Plan, or changes the method of computation
of the amount payable upon exercise of a stock appreciation right pursuant to
the 1984 Plan, or changes the directors, officers or other key employees
eligible to receive stock options or stock appreciation rights under the 1984
Plan will not be effective unless approved by the holders of a majority of the
common stock of the Company present, or represented by proxy, and entitled to
vote thereon at a meeting called for such purposes within twelve months after
the adoption of such amendment by the Board of Directors or the Compensation
Committee.
Plan Benefits. Set forth in the table below are the number of stock
options that were granted under the 1984 Plan during the Company's last
completed fiscal year, and the number of stock options that have been granted
under the 1984 Plan to date, to (i) each of the named executive officers, (ii)
all current executive officers as a group, (iii) all current non-employee
directors as a group, and (iv) all current non-executive officer employees as a
Group. The amounts shown (a) have not been adjusted to reflect any stock
dividends or stock splits subsequent to the date of grant, (b) include options
granted by the Compensation Committee on March 8, 1994, and (c) do not include
options granted to executive officers who have terminated employment.
<TABLE>
<CAPTION>
NUMBER OF STOCK
OPTIONS GRANTED NUMBER OF STOCK
DURING LAST OPTIONS GRANTED
NAME AND POSITION FISCAL YEAR TO DATE
- - - ---------------------------------------------------------------- --------------- ---------------
<S> <C> <C>
Leonard Genovese, President and Chief Executive Officer......... 0 77,950
Allan Patrick, Executive Vice President......................... 0 56,870
Herbert Kett, Vice Chairman..................................... 0 50,710
Irwin Livon, Vice President..................................... 0 15,000
Jerome Stengel, Vice President and Treasurer.................... 0 39,000
All Current Executive Officers as a Group....................... 0 373,230
All Current Non-Employee Directors as a Group................... 0 52,570
All Current Non-Executive Officer Employees as a Group.......... 0 126,150
</TABLE>
No stock appreciation rights have been granted under the 1984 Plan to date.
No stock options granted under the 1984 Plan were exercised during the Company's
last completed fiscal year. Except with respect to automatic, non-discretionary
grants of stock options to non-employee directors, the number of stock options
or
16
<PAGE> 19
stock appreciation rights that will be granted under the 1984 Plan to the
above-named individuals and groups in the future is not determinable at this
time. The number of stock options that will be granted under the 1984 Plan to
non-employee directors is described in the section entitled "Grants to
Non-Employee Directors."
Market Value of Securities Underlying Stock Options. The market price of
Class A Stock as of May 3, 1994 was $12.38 per share.
Federal Income Tax Consequences. The following is a brief summary of
certain of the federal income tax consequences of certain transactions under the
1984 Plan based on federal income tax laws in effect on January 1, 1994. This
summary is not intended to be exhaustive and does not describe state or local
tax consequences.
(a) Tax Consequences to Participants.
Stock Options. In general: (i) no income will be recognized by a
holder of a stock option at the time such stock option is granted; (ii) at
the time of exercise of a stock option, ordinary income will be recognized
by the holder thereof in an amount equal to the difference between the
option price paid for the shares of Class A Stock and the Fair Market Value
of such shares if they are not restricted on the date of exercise; and
(iii) at the time of sale of shares of Class A Stock acquired pursuant to
the exercise of a stock option, any appreciation (or depreciation) in the
value of the shares after the date of exercise will be treated as either
short-term or long-term capital gain (or loss) to the holder thereof,
depending on how long such shares have been held.
Stock Appreciation Rights. No income will be recognized by the holder
of a stock appreciation right in connection with the grant of such stock
appreciation right. When a stock appreciation right is exercised, the
holder thereof normally will be required to include as taxable ordinary
income in the year of exercise an amount equal to the amount of any cash,
and the Fair Market Value of any nonrestricted shares of Class A Stock,
received pursuant to such exercise.
Special Rules Applicable to Officers and Directors. In limited
circumstances where the sale of Class A Stock that is received as the
result of a grant of an award could subject an officer or director to suit
under Section 16(b) of the Exchange Act, the tax consequences to such
officer or director may differ from the tax consequences described above.
In these circumstances, unless a special election has been made, the
principal difference usually will be to postpone valuation and taxation of
the Class A Stock received so long as the sale of the stock received could
subject such officer or director to suit under Section 16(b) of the
Exchange Act, but not longer than six months.
(b) Tax Consequences to the Company. To the extent that a director,
officer or other key employee recognizes ordinary income in the circumstances
described above, the Company will be entitled to a corresponding deduction
provided that, among other things, (i) the income meets the test of
reasonableness, is an ordinary and necessary business expense and is not an
"excess parachute payment" within the meaning of Section 280G of the Code, and
(ii) any applicable withholding obligations are satisfied.
APPROVAL OF AMENDMENT NO. 3 TO THE
1984 EMPLOYEE STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
The Compensation Committee has adopted Amendment No. 3 to the 1984 Plan
("Amendment No. 3") subject to the approval of the shareholders of the Company.
The text of Amendment No. 3 is appended hereto as Exhibit A.
Amendment No. 3 makes three changes to the 1984 Plan. First, under the
current version of the 1984 Plan, each year on the date that the Compensation
Committee grants awards to the Company's officers and other key employees, the
Compensation Committee also grants an option to purchase not more than 500
shares of Class A Common Stock to each member of the Board of Directors. In
1991, 1992 and 1993, the Compensation Committee modified this formula so that
the awards granted to eligible directors under the 1984 Plan were reflective of
the awards granted to officers and other key employees. Amendment No. 3 as
proposed will uniformly increase the annual award to each eligible non-employee
director under the 1984 Plan. The new annual award will be an option to purchase
2,000 shares of Class A Stock, subject to adjustment in
17
<PAGE> 20
accordance with the antidilution provisions of the 1984 Plan. (Employee
directors will continue to be eligible to receive grants of stock options as
approved by the Compensation Committee).
The annual award to non-employee directors will be made each year,
regardless of whether awards are made to officers or other key employees, and
the Compensation Committee will not have the discretion to modify such award
(except as provided by the antidilution provisions of the 1984 Plan).
Second, the current version of the 1984 Plan provides that the Company must
obtain certain consideration from the recipients of stock options and stock
appreciation rights under the plan. The Compensation Committee believes that
these provisions are surplusage. Accordingly, Amendment No. 3 as proposed will
delete the provisions from the 1984 Plan.
Finally, Amendment No. 3 amends the 1984 Plan to authorize specifically the
participation by the Company in a Corporate Stock Option Exercise Program (the
"Cashless Exercise Program") sponsored by Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"). Under the Cashless Exercise Program, whenever a
director, officer or other key employee desires to exercise stock options
without paying the exercise price and any applicable taxes in cash, Merrill
Lynch will execute a cashless exercise of such stock options by (i) selling the
amount of shares of Class A Stock underlying such stock options (or only the
amount of shares necessary to pay the exercise price and any applicable taxes),
(ii) paying the total amount of the exercise price and any applicable taxes to
the Company, (iii) paying itself a brokerage commission (at a reduced corporate
rate), and (iv) depositing the remaining proceeds of the cashless exercise (in
cash and/or shares, at the option of such director, officer or other key
employee) in a cash management account at Merrill Lynch in the name of such
director, officer or key employee.
In all other respects, the current terms and conditions of the 1984 Plan
will remain in effect.
The Compensation Committee and Company management believe that the changes
made to the 1984 Plan by Amendment No. 3 as proposed will further the purpose of
the 1984 Plan and are in the best interests of the Company and its shareholders.
The affirmative vote of the majority of votes entitled to be cast at this
meeting is required for approval of Amendment No. 3 under Proposal 2. THE BOARD
OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THIS
PROPOSAL.
PROPOSAL 3
PROPOSAL TO APPROVE AN AMENDMENT TO
THE 1987 EXECUTIVE BONUS & STOCK PLAN
The Company's 1987 Plan provides for the award to executive officers of the
Company ("executives") of cash bonuses and stock bonuses up to an aggregate of
150,000 shares (before adjustment in accordance with the anti-dilution
provisions of the 1987 Plan) of the Company's Class A Stock. The 1987 Plan
includes provisions authorizing the Compensation Committee, which administers
the 1987 Plan and grants awards thereunder, to construe and interpret the 1987
Plan, to define the terms used therein, to prescribe, amend and rescind rules
and regulations relating to the 1987 Plan, and to make all other determinations
necessary or advisable for the administration of the 1987 Plan.
Purpose. The purpose of 1987 Plan is to encourage the executives to
improve the long-term growth and profitability of the Company and to develop a
long-term commitment to the Company by giving such executives a proprietary
interest in the Company.
Adoption. The 1987 Plan was approved by shareholders of the Company on
June 1, 1987 to be effective as of January 20, 1987 and is to terminate
automatically on January 20, 1997.
Persons Eligible. Such officers or other key employees of the Company as
the Compensation Committee in its sole discretion may select are eligible to
receive cash and stock awards under the 1987 Plan. There are approximately 13
executives of the Company currently participating in the 1987 Plan.
18
<PAGE> 21
Awards. The Compensation Committee or the Board of Directors prior to the
close of each fiscal year must approve for the succeeding fiscal year a targeted
performance level for each executive participating in the 1987 Plan as presented
to it by Company management. The Compensation Committee or the Board of
Directors has, in its sole discretion, the right to accept, reject, modify or
alter any targeted performance level presented to it by Company management. The
Compensation Committee determines the amount of awards granted to each executive
under the 1987 Plan based upon the actual performance of the executive compared
to the executive's targeted performance level.
Within a reasonable time after an award date, the Company pays an executive
in cash fifty percent (50%) of the amount awarded to such executive. The balance
of the amount awarded to such executive is paid in shares of Class A Stock,
which number is determined by dividing (i) the value of fifty percent (50%) of
the total award by (ii) the closing market price of one share of Class A Stock
on the first business day of the fiscal year with respect to which the award is
made. Twenty percent (20%) of the total number of shares awarded to such
executive is paid within a reasonable time after the award date. The balance of
the shares awarded is paid to such executive in the subsequent four fiscal years
at a rate of twenty percent (20%) per year.
In the event of the death, permanent disability or retirement of an
executive, the unpaid balance due to such executive under the 1987 Plan
immediately vests and is due to such executive or his beneficiary. In the event
of a change in control of the Company, being defined as a change of twenty-five
percent (25%) or more of the voting power of the Company's common stock, the
Compensation Committee may in its discretion accelerate the pay-out dates with
respect to the shares of Class A Stock under the 1987 Plan, and authorize the
immediate payment of all shares of Class A Stock due to an executive under the
1987 Plan.
Forfeitures. Upon termination of employment with the Company due to any
reason other than death, disability or retirement, all shares of Class A Stock
granted but not received under the 1987 Plan are forfeited by such terminated
executive. Any stock so forfeited reverts to the 1987 Plan and becomes available
for further awards under the 1987 Plan.
Change in Capitalization. In the event of any stock dividend, stock split,
reclassification or other such change in the common stock of the Company, the
Compensation Committee may make such adjustments as it deems equitable to
accomplish the purpose of the 1987 Plan. The Compensation Committee's
determination as to any such adjustment is final and conclusive.
Tax Withholding. If the Company is required to withhold any amounts under
any federal, state or local tax rules or regulations by reason of payments to an
executive, the Company is entitled to deduct and withhold such amounts from any
payments to be made to such executive. If the amount available to the Company
for withholding in connection with any payment is insufficient, it will be a
condition to the payment that such executive make arrangements satisfactory to
the Company for the payment of the balance of any taxes required to be withheld.
At the discretion of the Compensation Committee, such arrangements may include
relinquishment of a portion of the payment. The Company and an executive may
also make similar arrangements regarding the payment of taxes which are not
required to be withheld.
Amendments by the Board of Directors or the Compensation
Committee. Subject to the provisions of the following paragraph, the Board of
Directors or the Compensation Committee has the right to extend the length of
the 1987 Plan, amend or modify the 1987 Plan from time to time, or terminate the
1987 Plan entirely without shareholder approval.
Amendments Requiring Shareholder Approval. Notwithstanding the provisions
of the preceding paragraph, any amendment to the 1987 Plan which changes the
number of shares of Class A Stock available under the 1987 Plan, or changes the
ratio of cash awards to stock awards as set forth in the section entitled
"Awards" above, will not be effective unless approved by a vote of the majority
of shareholders entitled to vote thereon.
19
<PAGE> 22
Plan Benefits. Set forth in the table below are the amounts of cash and
stock bonuses that were granted under the 1987 Plan for the Company's last
completed fiscal year to (i) each of the named executive officers and (ii) all
current executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT OF STOCK
AMOUNT OF CASH BONUSES AWARDED
BONUSES AWARDED FOR LAST FISCAL
FOR LAST FISCAL YEAR
NAME AND POSITION YEAR (IN SHARES)
- - - ------------------------------------------------------------ --------------- ---------------
<S> <C> <C>
Leonard Genovese............................................ $95,000 12,102
Chairman, President and Chief Executive Officer
Allan Patrick............................................... 47,500 6,051
Executive Vice President
Herbert Kett................................................ 27,617 3,518
Vice Chairman
Irwin Livon................................................. 24,548 3,127
Vice President
Jerome Stengel.............................................. 22,743 2,897
Vice President and Treasurer
All Current Executive Officers as a Group................... $307,607 39,186
</TABLE>
The amount of cash and stock bonuses that will be granted under the 1987
Plan to the above-named individuals and group in the future is not determinable
at this time.
APPROVAL OF AMENDMENT NO. 1 TO
THE 1987 EXECUTIVE BONUS & STOCK PLAN
The Compensation Committee has adopted Amendment No. 1 to the 1987 Plan
("Amendment No. 1") subject to the approval of the shareholders of the Company.
The text of Amendment No. 1 is appended hereto as Exhibit B.
Amendment No. 1 makes three changes to the 1987 Plan. The first change is
to increase the number of shares of Class A Stock that can be awarded under the
1987 Plan. The 1987 Plan as originally approved by shareholders of the Company
provides that 100,000 shares of Class A Stock (before adjustment in accordance
with the anti-dilution provisions of the 1987 Plan), are available for awards
under the 1987 Plan. At the present time, no shares of Class A Stock remain
available for awards even though the 1987 Plan will continue in existence until
January 20, 1997, and the registration statement filed by the Company with the
Securities and Exchange Commission relating to the 1987 Plan registered 150,000
shares of Class A Stock to be available for awards under the 1987 Plan.
Amendment No. 1 as proposed will authorize an additional 50,000 shares of Class
A Stock to be available for awards under the 1987 Plan. The Compensation
Committee and Company management believe that this change is consistent with the
purpose of the 1987 Plan.
The second change made by Amendment No. 1 is to modify the method of
calculating the stock portion of awards made under the 1987 Plan. The 1987 Plan
currently provides that 50% of the amount awarded by the Compensation Committee
to an executive for a fiscal year must be paid to the executive in cash within a
reasonable time after the award date. The remaining 50% of the award is paid to
the executive in shares of Class A Stock in five annual installments, beginning
within a reasonable time after the award date and continuing for the four years
thereafter. (If the executive terminates employment with the Company for any
reason other than death, disability or retirement, the executive will forfeit
any shares of Class A Stock awarded but not yet paid under the 1987 Plan.) The
total number of shares of Class A Stock paid to the executive currently is
determined by dividing (i) the value of 50% of the award, by (ii) an amount not
less than 100% of the closing market price of one share of Class A Stock on the
award date. One-fifth of this number of shares of Class A Stock is then paid to
the executive in each installment, as described above.
20
<PAGE> 23
Amendment No. 1 as proposed will change this formula so that the total
number of shares of Class A Stock paid to the executive is determined by
dividing (i) the value of 50% of the award by (ii) the closing market price of
one share of Class A Stock on the first business day of the fiscal year with
respect to which the award was made. Thus, under Amendment No. 1 as proposed,
the value of the awards made to executives will be greater than the awards made
under the current formula if the closing market price of one share of Class A
Stock on an award date is greater than the closing market price of one share of
Class A Stock on the first business day of the fiscal year to which the award
relates. Conversely, under Amendment No. 1, the value of the awards made to
executives will be less than the awards made under the current formula if the
closing market price of one share of Class A Stock on an award date is less than
the closing market price of one share of Class A Stock on the first business day
of the fiscal year to which the award relates. The Compensation Committee and
Company management believe that this change is consistent with the purpose of
the 1987 Plan and will give executives an added incentive to improve the
long-term growth and profitability of the Company.
The third change made by Amendment No. 1 is to add provisions to the 1987
Plan regarding the withholding by the Company of federal, state or local taxes
in connection with payments made under the 1987 Plan. Amendment No. 1 as
proposed will change the 1987 Plan to provide that, if the amount available to
the Company for withholding in connection with any payment is insufficient, it
will be a condition to the payment that the recipient make arrangements
satisfactory to the Company for the payment of the balance of any taxes required
to be withheld. At the discretion of the Compensation Committee, such
arrangements may include relinquishment of a portion of the payment. The Company
and a recipient may also make similar arrangements regarding the payment of
taxes which are not required to be withheld. The Compensation Committee and
Company management believe that this change will enhance the administration of
the 1987 Plan and simplify the collection and payment of taxes relating to
benefits thereunder.
In all other respects, the current terms and conditions of the 1987 Plan
will remain in effect.
The Compensation Committee and Company management believe that the changes
made to the 1987 Plan by Amendment No. 1 as proposed will further the purpose of
the 1987 Plan and are in the best interests of the Company and its shareholders.
The affirmative vote of the majority of votes entitled to be cast at this
meeting is required for approval of Amendment No. 1 under Proposal 3. THE BOARD
OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THIS
PROPOSAL.
OTHER MATTERS RELATING TO THE ANNUAL MEETING
As of the date of this Proxy Statement, the Board knows of no business
other than that described above to be presented for action at the meeting, but
it is intended that all proxies will be exercised in accordance with the best
judgment of their holders upon any other matters and/or proposals that may
properly come before the meeting of the assembled shareholders, or at any
adjournment thereof, in accordance with the direction of the persons named
therein.
Should any nominee named herein for the office of Director become unable or
unwilling to accept nomination or election, it is intended that the person
acting under the proxy will vote for the election of such other person as the
Board may recommend. However, the board does not know of any reason to
anticipate that any of the nominees will be unable or unwilling to serve, if
elected.
SHAREHOLDER PROPOSALS FOR 1995 ANNUAL MEETING
Any proposal which a holder of Common Stock intends to present at the 1995
Annual Meeting of Shareholders must be received by the Secretary of the Company,
at 80 Marcus Drive, Melville, New York 11747, no later than the close of
business on December 24, 1994. Reference is made to Rule 14a-8 under the
Exchange Act for information concerning the content and form of such proposal
and the manner in which such proposal must be made.
21
<PAGE> 24
ADDITIONAL INFORMATION
The Company's Annual Report, including certain financial statements, is
being mailed concurrently with the Notice and Proxy Statement to all persons who
were shareholders of record on April 25, 1994, which is the record date for
voting purposes. The Annual Report does not constitute a part of the proxy
soliciting material.
Upon the written request of any shareholder, the Company will provide,
without charge, a copy of the Company's Annual Report on Form 10-K for fiscal
year ended January 28, 1994. Written requests for such report should be directed
to the Secretary of the Company, 80 Marcus Drive, Melville, New York 11747.
By Order of the Board of Directors,
DONALD W. GROSS
Vice President & Secretary
22
<PAGE> 25
EXHIBIT A
GENOVESE DRUG STORES, INC.
1984 EMPLOYEE STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
AMENDMENT NO. 3
Pursuant to Section 22 of the Genovese Drug Stores, Inc. 1984 Employee
Stock Option and Stock Appreciation Rights Plan (the "1984 Plan"), the 1984 Plan
is hereby amended as follows:
1. Section 8 of the 1984 Plan is amended by adding the following new
sentence immediately after the first sentence thereof:
"Notwithstanding the foregoing, as soon as reasonably practicable
following the end of each fiscal year of the Company, the Committee
shall grant an option to purchase 2,000 shares to each non-employee who
is then a member of the Board of Directors."
2. Section 13 of the 1984 Plan is deleted in its entirety.
3. The last sentence of Section 14 of the 1984 Plan is deleted in its
entirety and replaced with the following new sentence:
"Payment for the Shares purchased pursuant to the exercise of an
Option shall be made in full at the time of the exercise of such Option
by any one or more of the following methods: in cash; by check payable
to the order of the Company; by the delivery to the Company of Shares
which shall be valued at their Fair Market Value on the date of exercise
of the Option, by participation in the stock option exercise program
established pursuant to the Corporate Stock Option Exercise Program
Agreement by and between the Company and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, or by any other method acceptable to the Committee
and counsel for the Company, including loans, advances and guarantees of
loans by the Company."
4. The foregoing amendment shall be effective on March 7, 1994,
subject to the approval of such amendment by the shareholders of Genovese
Drug Stores, Inc.
A-1
<PAGE> 26
EXHIBIT B
GENOVESE DRUG STORES, INC.
1987 EXECUTIVE BONUS & STOCK PLAN
AMENDMENT NO. 1
Pursuant to Section 11 of the Genovese Drug Stores, Inc. 1987 Executive
Bonus & Stock Plan (the "1987 Plan"), the 1987 Plan is hereby amended as
follows:
1. Section 5 of the 1987 Plan is deleted in its entirety and replaced
with the following new section:
"Section 5. SHARES AVAILABLE. The Committee may, but shall not be
required to, grant in accordance with the Plan not more than 150,000
shares, which may be either treasury shares or authorized but unissued
shares of Class A Common Stock."
2. The first sentence of Section 8(c) of the 1987 Plan is deleted in
its entirety and replaced with the following two sentences:
"The balance of the amount awarded to the participant shall be paid
in shares of the Company's Class A Common Stock. The number of such
shares shall be determined by dividing (i) the balance of the amount
awarded to the participant, by (ii) the closing market price of such
shares on the first business day of the fiscal year with respect to
which such amount was awarded to the participant."
3. The 1987 Plan is further amended by adding the following new
Section 13 at the end thereof:
"Section 13. WITHHOLDING TAXES. To the extent that the Company is
required to withhold federal, state or local taxes in connection with
any payment made to or benefit realized by a participant or other person
under the Plan, and the amounts available to the Company for the
withholding are insufficient, it shall be a condition to the receipt of
any such payment or the realization of any such benefit that the
participant or such other person make arrangements satisfactory to the
Company for payment of the balance of any taxes required to be withheld.
At the discretion of the Committee, any such arrangements may include
relinquishment of a portion of any such payment or benefit. The Company
and any participant or such other person may also make similar
arrangements with respect to the payment of any taxes with respect to
which withholding is not required."
4. The first amendment shall be effective as of January 20, 1987 and
the second and third amendments shall be effective on March 7, 1994,
subject to the approval of such amendments by the shareholders of Genovese
Drug Stores, Inc.
B-1
<PAGE> 27
THIS VOTING INSTRUCTION IS SOLICITED ON BEHALF OF THE TRUSTEES OF
THE
GENOVESE DRUG STORES, INC. EMPLOYEE STOCK OWNERSHIP PLAN
ANNUAL MEETING OF SHAREHOLDERS OF GENOVESE DRUG STORES, INC.
The undersigned participant of Genovese Drug Stores, Inc.
Employee Stock Ownership Plan does hereby nominate and appoint the
Trustees, or any of them, as true and lawful attorneys and proxies
of the undersigned with power of substitution, to vote as
designated below all shares of Common Stock of said Company which
the undersigned is entitled to vote at the Annual Meeting of
Shareholders of said Company at 80 Marcus Drive, Melville, New
York 11747 on June 13, 1994 at 11:00 A.M., local time or at any
adjournment or adjournments thereof to the same extent with all
powers the undersigned would possess if personally present and
voting at said meeting or any adjournments thereof.
<TABLE>
<S> <C> <C>
I. ELECTION OF DIRECTORS
CLASS II Directors elected until the 1997 Annual Meeting:
Charles Hayward / / FOR / / WITHHOLD AUTHORITY
Allan Patrick / / FOR / / WITHHOLD AUTHORITY
</TABLE>
<TABLE>
II. AMENDMENT TO THE 1984 EMPLOYEE STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
<S> <C> <C>
/ / FOR / / AGAINST / / ABSTAIN
III. AMENDMENT TO THE 1987 EXECUTIVE BONUS & STOCK PLAN
/ / FOR / / AGAINST / / ABSTAIN
(Continued on Other Side)
</TABLE>
<PAGE> 28
(Continued from Other Side)
This voting instruction will be voted as directed in the space
provided or, if no direction is given, it will be voted FOR the
election of directors and FOR the two amendments.
Receipt is hereby acknowledged of the Notice of Annual Meeting
of Shareholders and Proxy Statement, each dated May 12, 1994, and
the Annual Report of Genovese Drug Stores, Inc. for the fiscal
year ended January 28, 1994.
Please mark, sign, date and return this voting instruction
promptly using the enclosed envelope.
Dated: ______________________, 1994
Signature: ________________________
___________________________________
(SIGNATURE IF HELD JOINTLY)
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS ON THIS VOTING INSTRUCTION. IF
SIGNING FOR AN ESTATE, TRUST OR
CORPORATION, TITLE OR CAPACITY SHOULD BE
STATED. IF SHARES ARE HELD JOINTLY, EACH
HOLDER SHOULD SIGN.
<PAGE> 29
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS OF GENOVESE DRUG STORES, INC.
The undersigned shareholder of Genovese Drug Stores, Inc. does
hereby nominate and appoint Leonard Genovese and Donald W. Gross,
or either of them, as true and lawful attorneys and proxies of the
undersigned with power of substitution, to vote as designated
below all shares of Common Stock of said Company which the
undersigned is entitled to vote at the Annual Meeting of
Shareholders of said Company at 80 Marcus Drive, Melville, New
York 11747 on June 13, 1994 at 11:00 A.M., local time or at any
adjournment or adjournments thereof to the same extent with all
powers the undersigned would possess if personally present and
voting at said meeting or any adjournments thereof.
I. ELECTION OF DIRECTORS
<TABLE>
<S> <C> <C>
CLASS II Directors elected until the 1997 Annual Meeting:
Charles Hayward / / FOR / / WITHHOLD AUTHORITY
Allan Patrick / / FOR / / WITHHOLD AUTHORITY
II. AMENDMENT TO THE 1984 EMPLOYEE STOCK OPTION AND STOCK
APPRECIATION RIGHTS PLAN
/ / FOR / / AGAINST / / ABSTAIN
III. AMENDMENT TO THE 1987 EXECUTIVE BONUS & STOCK PLAN
/ / FOR / / AGAINST / / ABSTAIN
(Continued on Other Side)
</TABLE>
<PAGE> 30
(Continued from Other Side)
This proxy will be voted as directed in the space provided or,
if no direction is given, it will be voted FOR the election of
directors and FOR the two amendments.
Receipt is hereby acknowledged of the Notice of Annual Meeting
of Shareholders and Proxy Statement, each dated May 12, 1994, and
the Annual Report of Genovese Drug Stores, Inc. for the fiscal
year ended January 28, 1994.
Please mark, sign, date and return this proxy promptly using
the enclosed envelope.
Dated: ____________________, 1994
Signature: ______________________
_________________________________
(SIGNATURE IF HELD JOINTLY)
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS ON THIS PROXY. IF SIGNING FOR
AN ESTATE, TRUST OR CORPORATION, TITLE
OR CAPACITY SHOULD BE STATED. IF SHARES
ARE HELD JOINTLY, EACH HOLDER SHOULD SIGN.
