<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act
of 1934 [fee required]
For the fiscal year ended January 30, 1998
[ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 [no fee required]
For the transition period from ______________ to _________________
Commission file number 1-7623
------
GENOVESE DRUG STORES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 11-1556812
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
80 Marcus Drive, Melville, New York 11747
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (516) 420-1900
--------------
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ----------------
Class A Common Stock, $1 par value American Stock Exchange
Securities registered pursuant to section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
1
<PAGE>
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 15, 1998 was approximately $145,760,000.
The number of shares outstanding of the registrant's two classes of common stock
as of March 15, 1998 was: Class A - 7,244,770; Class B - 6,440,878
Documents incorporated by reference: Portions of registrant's definitive proxy
statement to be filed pursuant to Regulation 14A of the Securities Act of 1934
are incorporated by reference into Part III.
PART I
Item 1. Business
--------
General
- -------
Genovese Drug Stores, Inc. (the "Registrant"), organized in 1924, operates a
chain of retail drug and general merchandise stores primarily under the
"Genovese" name, which as of January 30, 1998 totalled 135 stores in number. Its
primary trading area covers Long Island and New York City. Stores are also
located in southeastern New York and in the states of New Jersey and
Connecticut. During fiscal 1998, the Registrant opened ten stores: four in
Suffolk County, two in Nassau County, two in Queens, one in the Bronx and one in
Connecticut. The Registrant continued a program of acquiring independent drug
stores within its marketing area, purchasing the pharmacy files and inventory of
independent drug stores, in some cases employing the pharmacist owner/managers.
In addition, as of January 30, 1998, the Registrant operated a mail order
prescription division, a professional photo retail store, an arts and craft
store and a discount clearance store.
Operations
- ----------
The Registrant's stores, many of which are located in suburban areas, operate
primarily on a self-service, cash and carry basis, and, as distinguished from
the typical neighborhood pharmacy, service a relatively large trading area and
offer a much broader selection of merchandise. The Registrant's headquarters is
located in Melville, New York.
The Registrant operates a distribution center in Bohemia, New York, which is
shipping approximately seventy-five percent of its store requirements.
Merchandise is also purchased directly from manufacturers and other suppliers
and is drop-shipped directly to each store. The Registrant's business is
seasonal and sales are normally greater during the fourth fiscal quarter of the
year than during any of the first three fiscal quarters.
Merchandising
- -------------
The Registrant's stores contain a prescription drug department staffed by
registered pharmacists and have a full line of prescription medicine. Besides
prescription medicines, the merchandise carried includes health and beauty care,
cosmetics, general sundries, small appliances, greeting cards, candy, photo and
tobacco products. As of January 30, 1998, seventy-two stores offered on-site
photofinishing services through the use of an In-Store Photo Lab.
2
<PAGE>
The merchandising policy of the registrant is to maximize sales volume by
offering a broad line of nationally advertised products at relatively low retail
prices, in many cases below the manufacturer's suggested retail price.
The Registrant also sells private label products in the vitamin, health and
beauty aid and general sundry areas. It is the policy of the Registrant to
replace or return the purchase price of any item, exclusive of prescription
drugs, which proves unsatisfactory to a customer. The Registrant advertises
throughout the year to stimulate customer interest, with particular emphasis on
seasonal merchandise. Advertising is conducted principally through newspapers,
mail, advertising circulars, radio and television.
Trademarks and Service Marks
- ----------------------------
The Genovese trademark is considered to be of material importance to the
business of the Registrant. The Registrant holds the rights to certain other
trademarks and service marks which the Registrant also believes in the aggregate
to be essential to the conduct of its business in the areas in which its stores
are located.
Information as to Industry Segments and Product Lines
- -----------------------------------------------------
Operation of retail drug stores is the registrant's only significant industry
segment. During its last five fiscal years, the only class of similar products
sold by the Registrant which contributed 10 percent or more to total sales and
revenues was prescription drugs, which accounted for approximately the following
percentages of total sales:
1998 40.3%
1997 38.2%
1996 36.1%
1995 35.4%
1994 34.4%
Competition
- -----------
The business of the Registrant is highly competitive. The Registrant competes
with a wide variety of retailers including drug stores, supermarkets, department
stores and variety stores. Its competitors range from small independent stores
to large regional and national chains, some of which have far greater resources
than those of the Registrant. The Registrant believes that its ability to
maintain its competitive position depends upon identifying and obtaining
desirable locations for its stores, merchandising its products successfully,
pricing its merchandise competitively and providing quality services.
Environmental Control
- ---------------------
Compliance with federal, state and local provisions which have been enacted or
adopted regulating the discharge of materials into the environment, or otherwise
relating to the protection of the environment, have had no material effect upon
the capital expenditures, earnings and competitive position of the Registrant.
Employees
- ---------
As of January 30, 1998, the Registrant employed approximately 4,600 full time
and part time associates, of whom approximately 4,100 are involved directly in
store operations.
3
<PAGE>
Item 2. Properties
----------
The Registrant's corporate headquarters is located in Melville, New York, where
it owns a modern one-story brick building containing approximately 78,000 square
feet of floor space. A portion of the building is dedicated to the registrant's
mail order prescription division and an additional area is utilized for the
processing of damaged merchandise returned from the Registrant's stores. The
outstanding balance of the mortgage on the Melville building as of January 30,
1998 was $508,000. The Registrant owns a distribution center located in Bohemia,
New York, which consists of approximately 265,000 square feet. The outstanding
balance of the mortgage on the Bohemia building as of January 30, 1998 was
$1,824,000. The Registrant owns a building with approximately 7,300 square feet
of total floor space in Brooklyn, New York and a building with approximately
25,000 square feet of total floor space in Huntington, New York from which it
operates drug stores. The Registrant also owns a building in Sayville, New York
with approximately 10,000 square feet of space which it is converting into a
drug store. The Registrant also utilizes approximately 100,000 square feet of
public warehouse space for storing seasonal goods and other merchandise.
The 135 drug stores, the one arts & crafts store, the one discount clearance
store and the one professional photo retail store operated by the Registrant are
located in the following areas: Suffolk County (37), Nassau County (32), New
York City (53), southeastern New York State (4), New Jersey (4) and Connecticut
(8). These stores range in selling area from approximately 4,000 square feet to
22,000 square feet, generally averaging about 11,000 square feet of floor space
per store. Nearly all are maintained under leases providing for terms which, in
general, range from 15 to 20 years, presently expiring at various dates from
1998 through 2021.
The fixtures and equipment contained in these operating facilities are generally
owned by the Registrant. The Registrant considers its facilities to be adequate
for its present operations and are in good condition and well maintained.
Item 3. Legal Proceedings
-----------------
There are various routine lawsuits and claims pending against the Registrant. In
the opinion of Registrant's management, after discussion with counsel, none of
these actions will have a material adverse effect on the financial position or
results of operations of the Registrant.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
There were no submissions of matters to a vote of stockholders to report during
the fourth quarter of the Registrant's fiscal year ended January 30, 1998.
Item 4A. Executive Officers of the Registrant
------------------------------------
The information under this Item is furnished pursuant to Instruction 3 to Item
401(b) of Regulation S-K. The following table sets forth the name, age, current
position and principal occupation and employment during the past five years of
the Registrant's executive officers.
4
<PAGE>
Positions and offices held
With the Registrant during
Name of Executive Officer Age Officer Since the past five years
- ------------------------- --- ------------- --------------------------
Leonard Genovese 63 1961 Chairman of the Board of
Directors and President
Allan Patrick 51 1980 Executive Vice President
and Director
John Harlow 40 1996 Senior vice President (Prior
to April 1996 held the position
of National Service Director
of Retail Operations at
Arthur Andersen Consulting)
Jerome Stengel* 61 1973 Vice President, Treasurer
and Chief Financial Officer
Susan Crickmore 43 1993 Vice President - Human Resources
Dominick Lettieri 55 1982 Vice President
Irwin Livon* 61 1991 Vice President
Gene L. Wexler 42 1994 Vice President, General
Counsel and Assistant Secretary
(Prior to January 1994 was
General Counsel at COS
Computer Systems Inc., a
computer leasing concern)
*Mr. Stengel and Mr. Livon are retiring as of May 1, 1998
PART II
Item 5. Market for the Registrant's Common Stock and Related Shareholder Matters
------------------------------------------------------------------------
The Class A common stock of Genovese Drug Stores, Inc. is traded on the American
Stock Exchange (ticket symbol GDXA). The Registrant's Class B common stock is
not traded on any market and is restricted with respect to transfer (see Note 7
of the Notes to Financial Statements).
Quarterly cash dividends aggregating $.25 per share and $.20 per share per
fiscal year (after restatement for the 10 percent stock dividends distributed in
fiscal 1998 and 1997) were paid for both Class A and Class B shares during
5
<PAGE>
the years ended January 30, 1998 and January 31, 1997. The Registrant has
certain loan agreements which contain covenants effectively limiting the payment
of cash dividends (see Note 2 of the Notes to Consolidated Financial
Statements).
High and low stock prices for the last two fiscal years were:
Fiscal 1998 Fiscal 1997
----------- -----------
Fiscal
Quarter High Low High Low
- ------- ---- --- ---- ---
First $13 7/8 $10 3/4 $8 5/8 $7 1/2
Second $21 $14 1/8 $9 5/8 $6 7/8
Third $17 1/4 $14 1/2 $12 3/4 $9 3/8
Fourth $18 1/8 $14 1/8 $15 1/8 $12 1/8
The common stock prices, where appropriate, have been adjusted to reflect the 10
percent stock dividends distributed in fiscal 1998 and 1997.
Appropriate Number of
Record Stockholders
Title of Class (as of January 30, 1998)
------------------ ------------------------
Common Stock:
Class A, Par Value $1.00 per share, one vote per share 6,000*
Class B, Par Value $1.00 per share, ten votes per share 162
* Since a portion of the Class A Common Stock is held in "street" name or
nominee name, the Registrant is unable to determine the exact number of
beneficial holders.
6
<PAGE>
Item 6. Selected Financial Data
-----------------------
The following is a summary of operations of the Registrant for the five years
ended January 30, 1998
FISCAL YEAR ENDED (a)
---------------------
<TABLE>
<CAPTION>
January 30, 1998 January 31, 1997 February 2, 1996 February 3, 1995 January 28, 1994
<S> <C> <C> <C> <C> <C>
Sales $769,460,000 $695,298,000 $612,279,000 $569,975,000 $489,141,000
Net Income $(676,000) $10,401,000 $7,607,000 $9,212,000 $8,306,000
Net income
Per common
share (b)
- - basic $(.05) $.77 $.57 $.69 $.62
- - diluted $(.05) $.76 $.56 $.68 $.62
Total assets $241,989,000 $230,063,000 $204,041,000 $182,778,000 $155,444,000
Working capital $54,004,000 $52,894,000 $40,892,000 $35,839,000 $44,295,000
Long-term
liabilities $76,911,000 $64,021,000 $48,674,000 $40,295,000 $42,652,000
Stockholders'
equity $73,848,000 $77,680,000 $69,668,000 $64,508,000 $57,480,000
Cash dividends per
common share (b) $.25 $.20 $.19 $.17 $.15
</TABLE>
(a) Fiscal 1995 was a 53 week year. All other fiscal years presented are 52 week
(b) Adjusted to reflect the effect of the 10 percent stock dividends
7
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
-----------------------------------------------------------------------
Results of Operations
- ---------------------
Fiscal 1998 versus Fiscal 1997
- ------------------------------
The Registrant achieved record sales for the thirty-fifth consecutive year as
sales increased 10.7 percent to $769,460,000. The sales increase was led by a
comparable store (those open all of fiscal 1998 and 1997) sales increase of 6.3
percent.
The Registrant recorded a net loss of $676,000 for fiscal 1998. On a per common
share basis, the net loss was $.05.
Prescription drug sales accounted for 40.3 percent of total fiscal 1998 sales
versus 38.2 percent in fiscal 1997. Pharmacy sales increased 16.7 percent due to
an increase in the number of prescriptions filled and an increase in the average
prescription selling price.
During fiscal 1998, third party sales accounted for 80.0 percent of the total
prescription sales, compared to 75.8 percent in fiscal 1997.
The Registrant expects this trend to continue as the total number of people
covered by third party plans increases.
The Registrant's non pharmacy sales increased by 6.9 percent.
During fiscal 1998, pharmacy margins decreased approximately 2.0 percentage
points leading to a decrease in overall gross profit margins to 28.0 percent
from 29.7 percent in fiscal 1997.
Selling, general and administrative expenses, which include occupancy costs,
remained constant at 26.5 percent of sales.
On January 30, 1998, the Registrant announced a comprehensive strategic
restructuring plan which included the elimination of approximately 600
positions and the sale or closing of five stores.
The Registrant recorded a pre-tax charge of $9.5 million ($.39 per common share)
related to the restructuring. The charge was comprised of (i) separation costs
($3,070,000); (ii) provision for asset write-offs ($3,045,000); (iii)
lease rejection costs ($2,425,000); and (iv) other ($960,000).
Interest expense was $3.8 million in fiscal 1998 versus $4.0 million in fiscal
1997.
The Registrant's effective income tax rate was 43.8 percent in both fiscal 1998
and 1997.
During fiscal 1998, the Registrant sold the assets of its Living Color photo
processing plant for net proceeds of $3,952,000, which approximated their
carrying value. Simultaneously with the sale of the processing plant, the
Registrant entered into an agreement whereby the Registrant will outsource all
of its out-of-store photo finishing.
8
<PAGE>
Fiscal 1997 versus Fiscal 1996
- ------------------------------
Sales increased 13.6% to $695,298,000. The sales increase was led by a
comparable store (those open all of fiscal 1997 and 1996) sales increase of
8.2%.
Net income for fiscal 1997 was $10,401,000, an increase of 36.1% over the
$7,607,000 recorded in fiscal 1996. On a fully diluted per common share basis,
net income increased to $.76 from $.56.
Prescription drug sales accounted for 38.2% of total fiscal 1997 sales versus
36.1% in fiscal 1996. Pharmacy sales increased 20.0% due to an increase in the
number of prescriptions filled and an increase in the average prescription
selling price.
During fiscal 1997, third party sales accounted for 75.8% of the total
prescription sales, compared to 69.6% in fiscal 1996.
The Registrant's non-pharmacy sales increased by 10.0%.
During fiscal 1997, increases in non-pharmacy gross margins offset decreases in
pharmacy gross margins resulting in the Registrant's gross profit margin
remaining constant at 29.7%.
Selling, general and administrative expenses, including occupancy costs,
decreased to 26.5% of sales versus 27.0% in fiscal 1996. The decrease was
attributable to cost control measures put in place by management, particularly
with respect to payroll expenses, and certain fixed expenses being absorbed by a
larger sales base.
Interest expense was $4.0 million in fiscal 1997 versus $3.9 million in fiscal
1996.
The Registrant's effective tax rate decreased to 43.8% from 44.5% last year.
During fiscal 1996, the Registrant sold the assets of its nursing home division
for net proceeds of approximately $3.0 million, and recorded a gain of $1.3
million on the sale.
Liquidity and Capital Resources
- -------------------------------
As of January 30, 1998, the Registrant had $2,487,000 in cash compared to
$2,368,000 at January 31, 1997. Working capital levels increased to $54.0
million at January 30, 1998 versus $52.4 million at January 31, 1997.
The Registrant's cash requirements arise primarily from the costs associated
with the opening of new stores, remodeling of existing stores, purchasing of
inventory, debt service and payment of dividends.
During fiscal 1998, operating activities provided $11.3 million compared with
$25.9 million in the prior year. The decrease is primarily due to the recording
of a loss in fiscal 1998 versus income in 1997, the recording of a deferred
income tax benefit, increases in merchandise inventory, prepaid expenses and
other and decreases in accounts payable and accrued expenses, partially offset
by the recording of a reserve for restructuring costs and receipt of supplier
advances.
9
<PAGE>
Investing activities used $17.2 million during fiscal 1998 through the purchase
of property and equipment partially offset by proceeds from the sale of the
Living Color Lab. During fiscal 1997 investing activities used $18.5 million
primarily for the purchase of property and equipment.
During fiscal 1998, financing activities provided $6.0 million primarily as a
result of additional net borrowings under a revolving term loan agreement
partially offset by the payment of cash dividends. During fiscal 1997, financing
activities used $7.2 million primarily due to the repayment of debt and the
payment of cash dividends.
As of January 30, 1998 the Registrant maintained a revolving term loan agreement
with three banks which allowed for aggregate borrowings of $90 million. The
registrant has $36 million in available credit under this facility at January
30, 1998.
The Registrant made capital expenditures of $21.1 million during fiscal 1998
compared to $18.5 million during fiscal 1997. These capital expenditures relate
primarily to the opening of new stores, the remodeling of existing stores and
improvements in the Registrant's distribution center and headquarters
facilities. The Registrant anticipates capital expenditures of approximately $20
million for fiscal 1999 primarily related to the opening of approximately 10 new
stores, remodeling of certain existing stores, improvements in the distribution
center and in the corporate office and investments in technology.
Management of the Registrant believes that its operations and capital resources
will provide sufficient cash availability to meet its liquidity needs and
finance planned growth.
Recent Accounting Pronouncements
- --------------------------------
During fiscal 1998 the Registrant adopted Statement of Financial Accounting
Standards No. 128 "Earnings per share." Net income (loss) per common share was
restated for all periods presented.
Year 2000 Computer Issues
- -------------------------
What is commonly known as the "Year 2000 Issue" arises because many computer
hardware and software systems use only two digits to represent the year. As a
result, these systems and programs may not calculate dates beyond 1999, which
may cause errors in information or system failures.
With respect to its internal systems, the Registrant is taking appropriate steps
to remediate the year 2000 issues and does not expect the costs of these efforts
to be material. However, the year 2000 readiness of the Registrant's suppliers
may vary. While the Registrant does not believe the year 2000 matters discussed
above will have a material impact on its business, financial condition or result
of operations, it is uncertain whether or to what extent the Registrant may be
affected by such matters.
Impact of Inflation
- -------------------
Although inflation has slowed in recent years, it is still a factor in our
economy and the Registrant continues to seek ways to mitigate its impact. To the
extent permitted by competition, the Registrant passes increased
10
<PAGE>
costs on to its customers by increasing sales prices over time. Sales reported
in the Registrant's financial statements have increased, in an indeterminable
amount, due to inflationary increases in selling prices.
Forward Looking Statements
- --------------------------
This annual report on From 10-K contains forward looking statements that are
based on current expectations, estimates and plans, which involve risks and
uncertainties. Actual results or achievements may be materially different. The
Registrant's plans and expectations are based upon assumptions involving
judgments with respect to future economic, competitive and market conditions and
future business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Registrant.
Forward-looking statements include the information concerning future results of
operations, sales growth, cost savings and the ability of the Registrant and its
key vendors and suppliers to successfully manage issues presented by the Year
2000; as well as those preceded by, followed by or that otherwise include the
words: "believes," "expects," "anticipates," "intends," "estimates" or other
similar expressions. For those statements, we claim the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. The following important factors could affect the
future results of the Registrant and could cause those results to differ
materially from those expressed in our forward-looking statements: materially
adverse changes in economic conditions generally or in the markets served by the
Registrant; future regulatory and legislative actions affecting the Registrant
and/or the chain-drug industry; competition from other drugstore chains, from
alternative distribution channels such as supermarkets, membership clubs, other
retailers and mail order companies; and from third party plans; and the
continued efforts of health maintenance organizations, managed care
organizations, pharmacy benefit management companies and other third party
payors to reduce prescription drug costs. The forward-looking statements
referred to above are also subject to the Registrant's ability to continue to
secure suitable new store locations on favorable lease terms as it seeks to open
new stores; the Registrant's ability to continue to purchase inventory on
favorable terms; the Registrant's ability to attract, hire and retain suitable
pharmacists and management personnel; relationships with suppliers; and the
impact of inflation.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
The response to this Item is submitted in a separate section of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
---------------------------------------------------------------
There was no change of accountants for the Registrant within the twenty-four
months prior to the date of the most recent financial statements, nor any
disagreement on any matter of accounting principles or practices of financial
disclosure.
11
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
Information with respect to members of the Board of Directors of the Registrant
is contained in the Proxy Statement for the Annual Meeting of Shareholders (the
"1998 Proxy Statement") to be held on June 15, 1998, under the heading "Election
of Directors," and is incorporated herein by reference.
Information regarding the executive officers of the Registrant is included as
Item 4A of Part I as permitted by Instruction 3 to Item 401(b) of Regulation
S-K. The information required by Item 405 of Regulation S-K is incorporated by
reference form the 1998 Proxy Statement.
Item 11. Executive Compensation
----------------------
The information required by this Item is incorporated by reference from the 1998
Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The information required by this Item is incorporated by reference from the 1998
Proxy Statement.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
The information required by this Item is incorporated by reference from the 1998
Proxy Statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Report on Form 8-K
--------------------------------------------------------------
(a) (1) and (2) - The response to this portion of Item 14 is submitted as a
separate section of this report.
(3) Listing of Exhibits
-------------------
3.1 Restated Certificate of Incorporation, as filed with the
Secretary of State of the State of Delaware on June 27, 1995
(Exhibit 3.1 of Annual Report on Form 10-K for the year ended
February 2, 1996)
3.2 By-Laws, as amended (Exhibit 3.2 of Annual Report on Form 10-K
for the year ended January 31, 1992)
3.3 By-Law Section 1.01, as amended through December 4, 1995
(Exhibit 3.3 of Annual Report on Form 10-K for the year ended
February 2, 1996)
10.1 1984 Employee Stock Option and Stock Appreciation Rights Plan
("1984 Plan") (filed June 20, 1996 on Form S-8 Registration
Statement No. 33-6461) (Exhibit 10.1 of Annual Report on Form
10-K for the year ended January 31, 1997)
12
<PAGE>
10.2 Amendment No. 4 to the 1984 Plan, as adopted on June 17, 1996,
and Amendment No. 5 to the 1984 Plan, as adopted on March 12,
1997 (Exhibit 10.2 of Annual Report on Form 10-K for the year
ended January 31, 1997)
10.3 Amendment No 6. to the 1984 Plan, as adopted on June 16, 1997
10.4 1987 Executive Bonus and Stock Plan, as amended through June
13, 1994 ("1987 Plan") (Exhibit 10.2 of Annual Report on Form
10-K for the year ended February 3, 1995)
10.5 Amendment No.2 to the 1987 Plan, as adopted on June 12, 1995,
and Amendment No. 3 to the 1987 Plan, as adopted on March 12,
1997 (Exhibit 10.4 of Annual Report on Form 10-K for the year
ended January 31, 1997)
10.6 Registrant's Retirement Income Plan, as amended and restated
effective as of January 1, 1989 (Exhibit 10.3 of Annual Report
on Form 10-K for the year ended February 3, 1995)
10.7 First Amendment to the Genovese Drug Stores Inc. Retirement
Income Plan (As amended January 1, 1989) (Exhibit 10.8 of
Annual Report on Form 10-K for the year ended February 2,
1996)
10.8 Registrant's Employee Stock Ownership Plan and Trust, as
amended and restated effective January 1, 1989 (Exhibit 10.4
of Annual Report on Form 10-K for the year ended February 3,
1995)
10.9 Amendment to Employee Stock Ownership Plan and Trust, as
adopted on March 10, 1998
10.10 Registrant's Retirement and Savings Plan, effective January 1,
1994 (Exhibit 10.5 of Annual Report on Form 10-K for the year
ended February 3, 1995)
10.11 Split Dollar Insurance Plan between Registrant and Leonard
Genovese, dated October 13, 1994 (Exhibit 10.6 of Annual
Report on Form 10-K for the year ended February 3, 1995)
10.12 Split Dollar Insurance Plan between Registrant and Leonard
Genovese, dated June 29, 1995 (Exhibit 10.9 of Annual Report
on Form 10-K for the year ended February 2, 1996)
10.13 Form of Severance Agreement (Exhibit 10.7 of Annual Report on
Form 10-K for the year and restated effective ended February
2, 1996)
10.14 Amendment No. 1 to Form of Severance Agreement, as adopted on
June 16, 1997 and Amendment No. 2 to Form of Severance
Agreement, as adopted on December 9, 1997
10.15 Revolving Credit Agreement dated January 17, 1997, among
Registrant and Fleet Bank, National Association, The Bank of
New York and State Street Bank and Trust Company (Exhibit
10.12 of Annual Report on Form 10-K for the year ended January
31, 1997)
10.16 First Amendment and Waiver to Revolving Credit Agreement,
dated as of April 28, 1998, among Registrant and Fleet Bank,
National Association, The Bank of New York and State Street
Bank and Trust company
10.17 Form of Employee's Nonqualified Stock Option Agreement, as
adopted on June 16, 1997
10.18 Form of Amendment to June 16, 1997 Nonqualified Stock Option
Agreement, as adopted for non-employee directors on March 10,
1998
10.19 Retirement Agreement dated March 6, 1998 between Registrant
and Herbert J. Kett
10.20 Retirement Agreement dated March 6, 1998 between Registrant
and Jerome Stengel
10.21 Retirement Agreement dated March 6, 1998 between Registrant
and Irwin Livon
10.22 Stockholders Agreement dated June 30, 1998 between Leonard
Genovese and Frances Genovese Wangberg (Exhibit 1 to Amendment
No.3 to joint Schedule 13D filed on July 2, 1997)
11 Computation of Net Income Per Common Share
21 Subsidiaries of the Registrant
13
<PAGE>
23 Consent of Independent Auditors
(b) A Report on Form 8-K was filed on January 30, 1998 for the purpose of
providing the information set forth in a press release issued by the
Registrant on January 30, 1998, a copy of which was filed as Exhibit 99.1 to
the Form 8-K. The press release announced the Registrant's strategic
restructuring, which is described in Item 7 of this Report on Form 10-K.
(c) Exhibits - The response to this portion of Item 14 is submitted as a
separate section of this report.
(d) Financial Statement Schedules - All financial statement schedules are
omitted because they are not applicable or the required information is
disclosed in the financial statements or the notes thereto.
14
<PAGE>
Signatures
- ----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GENOVESE DRUG STORES, INC.
(Registrant)
Dated: April 22, 1998 By: /s/ Jerome Stengel
------------------
Jerome Stengel
Vice President & Treasurer
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
<TABLE>
<S> <C>
By: /s/ Leonard Genovese April 22, 1998
---------------------- --------------
Leonard Genovese, Chairman of the Board Date
and President (Principal Executive Officer)
By: /s/ Jerome Stengel April 22, 1998
---------------------- --------------
Jerome Stengel, Vice President & Treasurer Date
Chief Financial Officer
(Principal Financial Officer)
By: /s/ Christopher Noonan April 22, 1998
---------------------- --------------
Christopher Noonan, Controller Date
(Principal Accounting Officer)
By: /s/ Abraham Allen April 22, 1998
---------------------- --------------
Abraham Allen, Director Date
By: /s/ Thomas M. Cooney April 22, 1998
---------------------- --------------
Thomas M. Cooney, Director Date
By: /s/ Charles Hayward April 22, 1998
---------------------- --------------
Charles Hayward, Director Date
By: /s/ William J. McKenna April 22, 1998
---------------------- --------------
William J. McKenna, Director Date
By: /s/ Thomas J. Moran April 22, 1998
---------------------- --------------
Thomas J. Moran, Director Date
By: /s/ Allan Patrick April 22, 1998
---------------------- --------------
Allan Patrick, Director and Date
Executive Vice President
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
By: /s/ Frances G. Wangberg April 22, 1998
---------------------- --------------
Frances G. Wangberg, Director Date
By: /s/ Robert N. Hiatt April 22, 1998
---------------------- --------------
Robert N. Hiatt, Director Date
</TABLE>
16
<PAGE>
GENOVESE DRUG STORES, INC.
MELVILLE, NEW YORK
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) and (2), (c) and (d)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FINANCIAL STATEMENTS AND CERTAIN EXHIBITS
YEAR ENDED JANUARY 30, 1998
<PAGE>
GENOVESE DRUG STORES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
----
INDEPENDENT AUDITORS' REPORT F-1
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of January 30, 1998
and January 31, 1997 F-2
Consolidated Statements of Operations for the Years Ended
January 30, 1998, January 31, 1997 and February 2, 1996 F-3
Consolidated Statements of Stockholders' Equity for the Years
Ended January 30, 1998, January 31, 1997 and February 2, 1996 F-4 to F-5
Consolidated Statements of Cash Flows for the Years Ended
January 30, 1998, January 31, 1997 and February 2, 1996 F-6
Notes to the Consolidated Financial Statements F-7 to F-16
<PAGE>
INDEPENDENT AUDITORS' REPORT
Genovese Drug Stores, Inc.:
We have audited the accompanying consolidated balance sheets of Genovese Drug
Stores, Inc. and subsidiaries (the "Company") as of January 30, 1998 and January
31, 1997 and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three fiscal years in the period ended
January 30, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at January 30, 1998 and
January 31, 1997, and the results of their operations and their cash flows for
each of the three fiscal years in the period ended January 30, 1998 in
conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
New York, New York
March 4, 1998
F-1
<PAGE>
GENOVESE DRUG STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 30, 1998 AND JANUARY 31, 1997
(Dollars in Thousands)
- --------------------------------------------------------------------------------
ASSETS 1998 1997
---- ----
CURRENT ASSETS:
Cash $ 2,487 $ 2,368
Receivables 20,340 21,179
Merchandise inventories 116,046 113,182
Prepaid expenses and other 6,361 4,527
-------- --------
Total current assets 145,234 141,256
-------- --------
PROPERTY AND EQUIPMENT - At cost:
Land 2,657 2,657
Buildings 18,425 17,110
Leasehold improvements, furniture, fixtures and equipment 142,850 130,080
-------- --------
Total property and equipment 163,932 149,847
Less - accumulated depreciation and amortization 78,457 70,412
-------- --------
PROPERTY AND EQUIPMENT - Net 85,475 79,435
-------- --------
OTHER ASSETS 11,280 9,372
-------- --------
TOTAL $241,989 $230,063
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 63,506 $ 67,558
Accrued expenses 13,934 16,875
Current portion of long-term debt 1,022 871
Reserve for restructuring costs 9,500 --
Deferred income taxes 3,268 3,058
-------- --------
Total current liabilities 91,230 88,362
-------- --------
LONG-TERM DEBT 58,441 49,088
-------- --------
DEFERRED INCOME TAXES 4,198 8,481
-------- --------
OTHER LONG TERM LIABILITIES 14,272 6,452
-------- --------
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY 73,848 77,680
-------- --------
TOTAL $241,989 $230,063
======== ========
See notes to consolidated financial statements.
F-2
<PAGE>
GENOVESE DRUG STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JANUARY 30, 1998, JANUARY 31, 1997 AND FEBRUARY 2, 1996
(Dollars in Thousands, Except per Common Share Amounts)
- --------------------------------------------------------------------------------
1998 1997 1996
---- ---- ----
SALES $ 769,460 $ 695,298 $ 612,279
--------- --------- ---------
COST AND EXPENSES:
Cost of merchandise sold 553,737 488,507 430,505
Selling, general and administrative 203,652 184,283 165,491
Restructuring charges 9,500 -- --
--------- --------- ---------
766,889 672,790 595,996
--------- --------- ---------
OPERATING PROFIT 2,571 22,508 16,283
INTEREST EXPENSE, net (3,774) (4,001) (3,876)
GAIN ON SALE OF DIVISION -- -- 1,300
--------- --------- ---------
(LOSS) INCOME BEFORE INCOME TAXES (1,203) 18,507 13,707
BENEFIT (PROVISION) FOR INCOME TAXES 527 (8,106) (6,100)
--------- --------- ---------
NET (LOSS) INCOME $ (676) $ 10,401 $ 7,607
========= ========= =========
NET (LOSS) INCOME PER COMMON SHARE:
Basic $ (0.05) $ 0.77 $ 0.57
========= ========= =========
Diluted $ (0.05) $ 0.76 $ 0.56
========= ========= =========
See notes to consolidated financial statements.
F-3
<PAGE>
GENOVESE DRUG STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JANUARY 30, 1998, JANUARY 31, 1997 AND FEBRUARY 2, 1996
(Dollars in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Capital
Issued Par Value in Excess
$1.00 Per Share of Par Value
<S> <C> <C>
BALANCE, FEBRUARY 3, 1995 (5,013,449 Class A shares and 5,160,519 Class B shares
issued; and 89,347 Class A shares and 3,001 Class B shares
in treasury) $ 10,174 $ 45,443
Cash dividends -- --
Stock options exercised (2,928 Class A shares) 3 23
Shares issued pursuant to the Executive Bonus and Stock Plan (42,122 Class A shares) 43 285
Treasury stock purchased (39,456 Class A shares) -- --
Treasury stock contributed to the Employee Stock Ownership Plan
(10,000 Class A shares) -- --
Shares issued pursuant to a 10 percent stock dividend (508,170 Class A shares and
509,485 Class B shares and 10,408 Class A shares and 300 Class B shares held
in treasury) 1,017 10,431
Exchange of shares (66,137 Class B shares for 66,137 Class A shares) -- --
Net income -- --
--------- ---------
BALANCE, FEBRUARY 2, 1996 (5,632,806 Class A shares and 5,603,867 Class B shares
issued; and 129,211 Class A shares and 3,301 Class B shares
in treasury) $ 11,237 $ 56,182
========= =========
<CAPTION>
Treasury
Retained Stock
Earnings at Cost Total
<S> <C> <C> <C>
BALANCE, FEBRUARY 3, 1995 (5,013,449 Class A shares and 5,160,519 Class B shares
issued; and 89,347 Class A shares and 3,001 Class B shares
in treasury)
$ 9,885 $ (994) $ 64,508
Cash dividends (2,488) -- (2,488)
Stock options exercised (2,928 Class A shares) -- -- 26
Shares issued pursuant to the Executive Bonus and Stock Plan (42,122 Class A shares) -- -- 328
Treasury stock purchased (39,456 Class A shares) -- (416) (416)
Treasury stock contributed to the Employee Stock Ownership Plan
(10,000 Class A shares) -- 103 103
Shares issued pursuant to a 10 percent stock dividend (508,170 Class A shares and
509,485 Class B shares and 10,408 Class A shares and 300 Class B shares held
in treasury) (11,448) -- --
Exchange of shares (66,137 Class B shares for 66,137 Class A shares) -- -- --
Net income 7,607 -- 7,607
-------- ---------- --------
BALANCE, FEBRUARY 2, 1996 (5,632,806 Class A shares and 5,603,867 Class B shares
issued; and 129,211 Class A shares and 3,301 Class B shares
in treasury) $ 3,556 $ (1,307) $ 69,668
======== ========== ========
</TABLE>
See notes to consolidated financial statements. (Continued)
F-4
<PAGE>
GENOVESE DRUG STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JANUARY 30, 1998, JANUARY 31, 1997 AND FEBRUARY 2, 1996
(Dollars in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Capital
Issued Par Value in Excess
$1.00 Per Share of Par Value
---------------- ------------
<S> <C> <C>
BALANCE, FEBRUARY 2, 1996 (5,632,806 Class A shares and 5,603,867 Class B
shares issued; and 129,211 Class A shares and 3,301 Class B shares in treasury) $ 11,237 $ 56,182
Cash dividends -- --
Stock options exercised (56,491 Class A shares and 61,513 Class A shares in treasury) 57 354
Shares issued pursuant to the Executive Bonus and Stock Plan (28,655 Class A shares) 29 172
Treasury stock purchased (61,543 Class A shares) -- --
Treasury stock contributed to the Employee Stock Ownership Plan (10,000 Class A shares) -- (4)
Shares issued pursuant to a 10 percent stock dividend (579,323 Class A shares and 549,241
Class B shares and 11,094 Class A shares and 330 Class B shares held in treasury) 1,128 10,076
Exchange of shares (112,377 Class B shares for 112,377 Class A shares) -- --
Net income -- --
--------- ---------
BALANCE, JANUARY 31, 1997 (6,409,652 Class A shares and 6,040,731 Class B
shares issued; and 130,335 Class A shares and 3,631 Class B in treasury) 12,451 66,780
Cash dividends -- --
Shares issued pursuant to the Executive Bonus and Stock Plan (44,353 Class A shares) 44 292
Stock options exercised (65,849 Class A shares and 87,402 Class A shares in treasury) 66 281
Treasury stock purchased (73,686 Class A shares) -- --
Shares issued pursuant to a 10 percent stock dividend (658,174 Class A shares and 594,244
Class B shares and 10.461 Class A shares and 363 Class B shares in treasury) 1,252 (1,252)
Exchange of shares (98,849 Class B shares for 98,849 Class A shares) -- --
Net (loss) -- --
--------- ---------
BALANCE, JANUARY 30, 1998 (7,276,877 Class A shares and 6,536,126 Class B shares
issued, and 127,080 Class A shares and 3,994 Class B shares in treasury) $ 13,813 $ 66,101
========= =========
<CAPTION>
Treasury
Retained Stock
Earnings at Cost Total
-------- -------- ------
<S> <C> <C> <C>
BALANCE, FEBRUARY 2, 1996 (5,632,806 Class A shares and 5,603,867 Class B
shares issued; and 129,211 Class A shares and 3,301 Class B shares in treasury) $ 3,556 $ (1,307) $ 69,668
Cash dividends (2,753) -- (2,753)
Stock options exercised (56,491 Class A shares and 61,513 Class A shares in treasury) -- 602 1,013
Shares issued pursuant to the Executive Bonus and Stock Plan (28,655 Class A shares) -- -- 201
Treasury stock purchased (61,543 Class A shares) -- (945) (945)
Treasury stock contributed to the Employee Stock Ownership Plan (10,000 Class A shares) -- 99 95
Shares issued pursuant to a 10 percent stock dividend (579,323 Class A shares and 549,241
Class B shares and 11,094 Class A shares and 330 Class B shares held in treasury) (11,204) -- --
Exchange of shares (112,377 Class B shares for 112,377 Class A shares) -- -- --
Net income 10,401 -- 10,401
---------- ---------- --------
BALANCE, JANUARY 31, 1997 (6,409,652 Class A shares and 6,040,731 Class B
shares issued; and 130,335 Class A shares and 3,631 Class B in treasury) -- (1,551) 77,680
Cash dividends (3,447) -- (3,447)
Shares issued pursuant to the Executive Bonus and Stock Plan (44,353 Class A shares) -- -- 336
Stock options exercised (65,849 Class A shares and 87,402 Class A shares in treasury) -- 1,012 1,359
Treasury stock purchased (73,686 Class A shares) -- (1,404) (1,404)
Shares issued pursuant to a 10 percent stock dividend (658,174 Class A shares and 594,244
Class B shares and 10.461 Class A shares and 363 Class B shares in treasury) -- -- --
Exchange of shares (98,849 Class B shares for 98,849 Class A shares) -- -- --
Net (loss) (676) -- (676)
---------- ---------- --------
BALANCE, JANUARY 30, 1998 (7,276,877 Class A shares and 6,536,126 Class B shares
issued, and 127,080 Class A shares and 3,994 Class B shares in treasury) $ (4,123) $ (1,943) $ 73,848
========== ========== ========
</TABLE>
See notes to consolidated financial statements. (Concluded)
F-5
<PAGE>
GENOVESE DRUG STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 30, 1998, JANUARY 31, 1997 AND FEBRUARY 2, 1996
(Dollars in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (676) $ 10,401 $ 7,607
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation and amortization 14,841 12,341 9,523
Provision for deferred income taxes (4,073) 1,548 2,117
Gain on the sale of the nursing home division -- (1,300)
Provision for other noncash expenses, net 384 (448) 906
Changes in certain assets and liabilities:
Receivables 488 (6,291) (1,971)
Merchandise inventories (2,974) (8,077) (12,069)
Prepaid expenses and other (1,995) 562 (467)
Other assets (5,024) (5,180) (2,545)
Accounts payable - trade (4,052) 14,293 7,171
Accrued expenses (2,941) 3,261 (4,427)
Reserve for restructuring costs 9,500 -- --
Other long-term liabilities 7,820 3,456 939
-------- -------- --------
Net cash provided by operating activities 11,298 25,866 5,484
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (21,143) (18,518) (15,901)
Proceeds from the sale of the Living Color Lab 3,952 -- --
Proceeds from the sale of the nursing home division -- -- 3,014
-------- -------- --------
Net cash used in investing activities (17,191) (18,518) (12,887)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings - debt agreements 42,375 20,000 39,400
Repayments - debt agreements (32,871) (24,548) (29,097)
Issuance of common stock under the Employee
Stock Option and Appreciation Rights Plan 1,359 1,014 26
Payment of cash dividends (3,447) (2,752) (2,488)
Purchase of treasury stock (1,404) (945) (416)
-------- -------- --------
Net cash provided by (used in) financing activities 6,012 (7,231) 7,425
-------- -------- --------
NET INCREASE IN CASH 119 117 22
CASH, BEGINNING OF YEAR 2,368 2,251 2,229
-------- -------- --------
CASH, END OF YEAR $ 2,487 $ 2,368 $ 2,251
======== ======== ========
SUPPLEMENTAL DATA:
Interest paid $ 3,852 $ 4,037 $ 3,900
======== ======== ========
Income taxes paid $ 7,998 $ 5,246 $ 7,002
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
GENOVESE DRUG STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 30, 1998, JANUARY 31, 1997 AND FEBRUARY 2, 1996
(Dollars in Thousands)
- --------------------------------------------------------------------------------
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The accompanying consolidated financial statements
include the accounts of Genovese Drug Stores, Inc. and its wholly owned
subsidiaries (the "Company'). All significant intercompany accounts and
transactions have been eliminated. The Company is primarily engaged in the
operation of a chain of super drug stores located in New York, New Jersey
and Connecticut. The accounting policies relative to the Company are as
follows:
Receivables - A majority of the Company's receivables are due from
third-party providers (various insurance companies, benefit management
companies and governmental agencies). As is industry practice, these
receivables are uncollateralized. As of January 30, 1998 approximately
13.2 percent of receivables were due from a state welfare organization. At
January 30, 1998 and January 31, 1997, the Company's allowance for
doubtful accounts was $1,130 and $780, respectively.
Merchandise Inventories - Merchandise inventories are valued at the lower
of cost, determined on the last-in, first-out method, or market. If the
inventories at January 30, 1998 and January 31, 1997 had been valued at
year-end replacement costs, its value would have increased $18,400 and
$18,700, respectively.
Property and Equipment - Property and equipment are stated at cost.
Depreciation of furniture, fixtures and equipment is on the straight line
method over their estimated useful lives ranging from three to ten years.
Depreciation of buildings is on the straight-line method over their
estimated useful lives of 35 years. Leasehold improvements are amortized
over the lesser of their useful lives or the term of the lease.
Intangible Assets - Intangible assets are amortized on a straight-line
basis over their estimated useful lives ranging from five to twenty years.
The carrying value of intangible assets is periodically reviewed by the
Company based on the expected future undiscounted operating cash flows of
the related business unit. Based upon its most recent analysis, management
of the Company believes that no material impairment of intangible assets
exists at January 30, 1998.
Supplier Advances - The Company receives advances from certain vendors in
connection with long term supply agreements. Such advances are recognized
into earnings over the term of the related agreement.
Income Taxes - The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
(SFAS 109). SFAS 109 is an asset and liability approach that requires the
recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been recognized in the Company's
financial statements or tax returns. In estimating future tax
consequences, SFAS 109 generally considers all expected future events
other than enactments of changes in the tax law or rates.
F-7
<PAGE>
Net Income (Loss) Per Common Share - In January 1998, the Company adopted
Statement of Financial Accounting Standards No. 128 "Earnings Per Share"
and restated net income (loss) per common share for all periods presented.
Net income (loss) per common share-basic was calculated based upon the
weighted average number of common shares outstanding during the respective
periods. Net income (loss) per common share-diluted was calculated based
upon the weighted average number of common shares outstanding and included
the equivalent shares for dilutive options and executive stock bonus
shares outstanding during the respective periods. The weighted average
common shares outstanding for the computation of basic earnings per share
was 13,631,000 in 1998, 13,469,000 in 1997 and 13,413,000 in 1996.
Additionally, 153,000 and 115,000 of equivalent common shares were
included in 1997 and 1996, respectively, for the diluted calculation. No
additional shares were included in the 1998 diluted calculation.
Fiscal Year - The Company's fiscal year ends on the Friday closest to
January 31.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and statements of
income during the periods presented. Actual results could differ from
those estimates.
Disclosure of Fair Value of Financial Instruments - Management of the
Company believes that the fair value of the Company's financial
instruments approximates their recorded value due to the short maturities
of these instruments as of January 30, 1998 and January 31, 1997.
Reclassification - Certain amounts in the 1997 and 1996 financial
statements have been reclassified to conform with the 1998 presentation.
2. LONG-TERM DEBT
Long-term debt consists of the following:
January 30, January 31,
1998 1997
---- ----
Revolving term loan agreement $ 54,000 $ 44,000
Industrial Development Revenue Bonds 2,332 3,049
Other 3,131 2,910
----------- -----------
Aggregate debt 59,463 49,959
Less current maturities (1,022) (871)
----------- -----------
Long-term debt $ 58,441 $ 49,088
=========== ===========
Revolving Term Loan Agreement - During fiscal 1997, the Company entered
into a five year revolving term loan agreement with three banks under
which the banks are committed to lend up to $90 million to the Company.
Subsequent to January 30, 1998, the loan agreement was amended. Under the
amended agreement, borrowings will bear interest at between fifty-five and
one hundred and ten basis points over the London Interbank Offered Rate
("LIBOR") or fifty basis points below the banks' prime lending rate. As of
January 30, 1998, the Company's borrowings bore interest at sixty basis
points over LIBOR (6.73 to 6.83 percent) or fifty basis points below the
banks' prime lending rate (8 percent).
F-8
<PAGE>
The loan agreement, as amended, contains certain covenants which include
(i) maintenance of certain financial ratios, (ii) maintenance of certain
amounts of working capital and tangible net worth, (iii) limitations on
capital expenditures, the payment of dividends and the purchase of
treasury stock, (iv) limitations on other indebtedness, (v) limitations on
the disposal of assets, (vi) limitations on investments, (vii) limitations
on corporate reorganizations, and (viii) the Company must maintain
borrowing levels at or below $70 million for a thirty consecutive day
period during the year.
Information on short-term borrowings and interest rates follows:
1998 1997 1996
---- ---- ----
Maximum amount outstanding -- $ 21,000 $ 29,750
Average daily short-term borrowings -- 13,551 17,797
Weighted average daily interest rate -- 6.2% 6.7%
Industrial Development Revenue Bonds - As of January 30, 1998, the 1985
Industrial Development Revenue Bond had an outstanding balance of $1,824,
which bore interest at 72% of the prime lending rate (6.12% at January 30,
1998), payable in equal monthly installments through January 2001 and was
secured by land and building, with an aggregate carrying value of $8,169.
As of January 30, 1998, the 1982 Industrial Development Revenue Bond had a
outstanding balance of $508, which bore interest at 65% of the prime
lending rate (5.3% at January 30, 1998), payable in equal monthly
installments through August 2002 and was secured by land, building and
equipment, with an aggregate carrying value of $2,979.
Interest expense aggregated approximately $3,774, $4,001 and $3,902 in
1998, 1997 and 1996, respectively.
The aggregate debt maturities subsequent to January 30, 1998 are as
follows:
Fiscal Year
1999 $ 1,022
2000 952
2001 808
2002 109
2003 56,572
--------
Total $ 59,463
========
F-9
<PAGE>
3. RESTRUCTURING COSTS
On January 30, 1998, the Company announced a comprehensive strategic
restructuring plan which included the elimination of approximately 600
positions and the sale or closing of five retail store locations. In
conjunction with the announcement, the Company recorded a pre-tax
provision for restructuring costs of $9.5 million ($.39 per share),
including the following:
Separation costs $ 3,070
Provision for asset write-offs 3,045
Lease rejection costs 2,425
Other 960
-------
$ 9,500
=======
At January 30, 1998, $9.5 million is included in the consolidated balance
sheet as reserve for restructuring costs.
4. OTHER LONG TERM LIABILITIES
Other long term liabilities consist of the following:
1998 1997
---- ----
Supplier advances $ 6,373 $ 467
Deferred rent expense 4,024 2,762
Insurance reserves 3,364 2,272
Other 511 951
------- -------
$14,272 $ 6,452
======= =======
5. INCOME TAXES
The (benefit)provision for income taxes consist of the following:
1998 1997 1996
---- ---- ----
Current:
Federal $ 2,534 $ 4,591 $ 2,683
State and local 1,012 1,967 1,300
Deferred (4,073) 1,548 2,117
------- ------- -------
Total $ (527) $ 8,106 $ 6,100
======= ======= =======
F-10
<PAGE>
The components of the deferred tax liability at January 30, 1998 and
January 31, 1997 are as follows:
1998 1997
---- ----
Excess of tax over book depreciation $ 7,673 $ 7,078
Inventory 6,800 5,532
Liabilities not currently deductible (8,020) (2,241)
Other, net 1,013 1,170
-------- --------
Net deferred tax liability $ 7,466 $ 11,539
======== ========
The Company's effective income tax rate differs from the Federal statutory
rate. The reasons for this difference are as follows:
1998 1997 1996
Amount % Amount % Amount %
Federal statutory rate $ (421) 35.0 $6,477 35.0 $4,797 35.0
Increases due to:
State and local taxes, net of
Federal income tax benefits (105) 8.7 1,610 8.7 1,224 8.9
Other, net (1) 0.1 19 0.1 79 0.6
------ ---- ------ ---- ------ ----
Effective rate $ (527) 43.8 $8,106 43.8 $6,100 44.5
====== ==== ====== ==== ====== ====
6. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is required to make rental payments under noncancelable
operating leases covering retail stores and certain equipment.
Substantially all real estate leases include renewal options of five to
twenty years and many require additional rentals based on a percentage of
sales and increases in real estate taxes. Rent expense for retail stores
and equipment was $30,123 in 1998, $27,465 in 1997 and $24,221 in 1996.
The contingent portion of rent expense amounted to $1,175, $1,037 and $877
in 1998, 1997 and 1996, respectively.
Minimum rental commitments at January 30, 1998 under all noncancelable
operating leases are as follows:
Fiscal Year Total
----------- -----
1999 $ 24,570
2000 24,260
2001 22,714
2002 21,470
2003 20,217
2004-2008 82,462
2009-2013 54,125
2014-2018 20,660
2019-2022 2,826
---------
Total $ 273,304
=========
F-11
<PAGE>
The minimum rental commitments do not include contingent amounts due of
approximately $921, if the purchasers of stores sold by the Company were
to default on the lease obligations assumed.
The Company maintains general liability and workers' compensation
insurance policies with insurance carriers. Certain of these policies
contain either deductible or self-retention limits. As of January 30,
1998, the maximum exposure to the aggregate deductible and self-retention
limits for all open policies was approximately $6.9 million. As of January
30, 1998, a liability of approximately $4.8 million has been recorded as
management's best estimate of the present value (assuming a discount rate
of 5.0%) of all future payments relating to these policies.
The Company has been named as a defendant in certain claims and lawsuits
incidental to the Company's business. Management of the Company, based
upon discussions with legal counsel, believes that the ultimate resolution
of such claims and lawsuits will not result in any material adverse effect
on the Company's financial position or results of operations.
7. COMMON STOCK
The Company has 20,000,000 Class A shares and 12,000,000 Class B shares
authorized. The par value of both classes of common stock is $1.00 per
share. The Class A common stock entitles the holders to one vote per
share. The Class B common stock entitles the holders to ten votes per
share. The Class B common stock is restrictive with respect to transfer.
Upon the sale or change in beneficial ownership of a share of Class B
common stock, the purchaser or new beneficial owner shall only be entitled
to receive Class A common stock, except in certain instances. Neither
class will have preference over the other with regard to dividends or upon
liquidation.
During fiscal 1998, 1997 and 1996, the Company's Board of Directors
declared and effected ten percent stock dividends. Common share amounts
and per common share amounts have been retroactively adjusted to reflect
the effect of the above-mentioned ten percent stock dividends where
appropriate.
Stock Option Plan - As of January 30, 1998, under the 1984 Employee Stock
Option and Appreciation Rights Plan (the "Option Plan"), approximately
1,607,000 shares of Class A common stock were reserved for future issuance
under options granted but not exercised or to be granted for future
periods of up to ten years at an exercise price not less than the fair
market value of the shares at the date of grant. The options may be
granted to officers, directors, other key employees and consultants, and
become vested upon grant or as otherwise determined by the Board of
Directors of the Company.
F-12
<PAGE>
Option activity under the plan was as follows:
<TABLE>
<CAPTION>
Weighted
Average
Number Exercise Exercise
of Shares Price Range Price
---------- -------------- ------
<S> <C> <C> <C>
Outstanding options for shares of Class A
Common Stock - February 3, 1995 408,257 $4.88 - $8.97 $ 7.40
Granted 175,160 7.98 - 8.47 7.97
Exercised (3,897) 4.88 4.87
Canceled and expired (8,997) 7.98 - 8.88 8.51
---------- -------------- ------
Outstanding options for shares of Class A
Common Stock - February 2, 1996 570,523 5.72 - 8.97 7.58
Granted 122,089 7.85 7.85
Exercised (142,182) 5.72 - 8.88 7.12
Canceled and expired (1,829) 7.85 - 8.88 8.08
---------- -------------- ------
Outstanding options for shares of Class A
Common Stock - January 31, 1997 548,601 5.72 - 8.96 7.76
Granted 1,157,640 12.27 - 27.27 20.46
Exercised (168,523) 5.72 - 12.27 8.06
Canceled and expired (42,309) 7.85 - 27.27 19.97
---------- -------------- ------
Outstanding options for shares of Class A
Common Stock - January 30, 1998 1,495,409 $5.72 - $27.27 17.23
========== ============== ======
Exercisable at January 30, 1998 589,559
==========
</TABLE>
As of January 30, 1998, the outstanding options had remaining lives of
between two and nine years with a weighted average life of 8.4 years.
The Company continues to account for the Option Plan using the intrinsic
value method in accordance with Accounting Principles Board No. 25,
"Accounting for Stock Issued to Employees" and its related
interpretations. Accordingly, the Company makes no charge to income in
connection with the Option Plan. Effective with fiscal 1997, the Company
is subject to the provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123").
SFAS 123 established a fair value method of calculating compensation
expense related to stock-based compensation plans, and requires the
disclosure of the pro forma effects of recording such expense. Had
compensation costs of the Plan been determined under the fair value
alternative method as stated in SFAS 123, the Company would have prepared
a fair value model for such options and recorded such amount in the
consolidated statement of operations as compensation expense. On a pro
forma basis, the results from operations and earning per common
share-basic for fiscal 1998 and 1997 would have been $(1,972), or $(.14)
and $10,276, or $.76, respectively. The Company arrived at the fair value
of stock grants at the date of grant by using the Black-Scholes option
pricing model with the following assumptions used for grants; risk free
interest rate of 5.5 percent; expected dividend rate of 2.0 percent;
expected term of options 9.5 years; and expected volatility of 34.4
percent.
F-13
<PAGE>
8. RETIREMENT AND PENSION PLANS
Retirement Income Plan - Net pension expense for the Company's Retirement
Income Plan (the "Plan") for 1998, 1997 and 1996 was $30, $74, and $108,
respectively.
The components of net pension expense for 1998, 1997 and 1996 are
summarized as follows:
1998 1997 1996
---- ---- ----
Interest cost on projected benefit obligations $ 211 $ 207 $ 207
Expected return on plan assets (578) (342) (160)
Other - net 397 209 61
----- ----- -----
Net pension expense $ 30 $ 74 $ 108
===== ===== =====
The funded status of the Plan and the amounts included in the accompanying
balance sheets as of January 30, 1998 and January 31, 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Assets and obligation:
Actuarial present value of the projected benefit obligation -
Vested employees $(3,137) $(3,088)
------- -------
Projected benefit obligations (3,137) (3,088)
Plan assets at fair value 3,829 3,324
Items not yet recognized in earnings:
Unrecognized net obligations at transition date, net of
accumulated amortization of $984 and $945 in 1998 and
1997, respectively 242 281
Unrecognized net loss subsequent to transition date 195 542
------- -------
Prepaid pension expense included in the accompanying
consolidated balance sheets $ 1,129 $ 1,059
======= =======
</TABLE>
Plan assets are invested primarily in bank pooled equity funds, bank fixed
income funds and the Company's Class A common stock. At January 30, 1998,
the Plan held approximately 38,000 shares of the Company's Class A common
stock.
Significant assumptions used in determining net periodic pension expense
and related prepaid pension expense were as follows:
1998 1997 1996
---- ---- ----
Discount rate 7.0% 7.0% 7.5%
Expected long-term rate of return on assets 7.0% 7.0% 7.5%
Benefits under the Plan are frozen at the maximum benefit available to
covered employees as of December 31, 1988.
F-14
<PAGE>
Unrecognized net obligations at transition date are being amortized over
33.57 years and unrecognized gains and losses subsequent to transition
date are being amortized over 17 years.
Employee Stock Ownership Plan - The Company has an Employee Stock
Ownership Plan (the "ESOP"), a defined contribution plan, for the benefit
of all employees meeting certain minimum service requirements.
Contributions to the ESOP are determined annually and are made at the
discretion of the Company's Board of Directors. The ESOP's investments
consists primarily of Class A common stock of the Company. The Company
provided for a contribution of $0 in 1998, $95 in 1997 and $103 in 1996.
At January 30, 1998, the ESOP held approximately 417,000 shares of the
Company's Class A common stock.
Retirement and Savings Plan - The Company maintains the Genovese
Retirement and Savings Plan (the "Savings Plan"), a contributory savings
plan under Section 401(k) of the Internal Revenue Code, for the benefit of
all employees meeting certain minimum service requirements. The Company's
contribution under the Savings Plan, which amounts to 40 percent of the
first four percent of the employees' contribution up to a maximum of 1.6
percent of the employees' compensation, was $578 in 1998, $371 in 1997 and
$373 in 1996.
9. INCENTIVE COMPENSATION PLAN
The 1987 Executive Bonus and Stock Plan (the "Executive Plan") allows the
Compensation Committee of the Board of Directors of the Company to grant
to certain executives of the Company awards based upon the achievement of
certain targeted performance levels. Fifty percent of such awards shall be
paid in cash and the balance shall be paid in Class A common stock of the
Company over a four year period in five equal installments of twenty
percent, assuming the continued employment of such executives. The Company
has reserved approximately 300,000 shares of Class A common stock to be
awarded under the Executive Plan. The Company recorded an expense of $336,
$650, and $331, during fiscal 1998, 1997 and 1996, respectively, related
to the Executive Plan.
10. SALE OF ASSETS
During fiscal 1998, the Company sold the assets of its Living Color photo
processing plant for net proceeds of $3,952 which approximated their
carrying value. Simultaneously with the sale of the processing plant, the
Company entered in to an agreement whereby it will outsource all of its
out of store photo processing. During fiscal 1996, the Company sold the
assets of its nursing home pharmacy division to a third party for net
proceeds of approximately $3,014. The Company recorded a gain of $1,300 on
the sale.
F-15
<PAGE>
11. UNAUDITED QUARTERLY FINANCIAL DATA
Summarized quarterly financial data for the years ended January 30, 1998
and January 31, 1997 follows, adjusted to reflect ten percent stock
dividends:
<TABLE>
<CAPTION>
Sixteen Twelve Twelve Twelve
Weeks Weeks Weeks Weeks
Ended Ended Ended Ended
May 23, August 15, November 7, January 30,
1997 1997 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $ 226,906 $ 173,067 $ 175,246 $ 194,241
=========== ============= =========== =========
Gross profit $ 61,791 $ 49,172 $ 49,061 $ 55,699
=========== ============= =========== =========
Net income (loss) $ 1,829 $ 1,283 $ 517 $ (4,305)(a)
=========== ============= =========== =========
Net income (loss) per common share:
Basic $ 0.13 $ 0.09 $ 0.04 $ (0.31)(a)
=========== ============= =========== =========
Diluted $ 0.13 $ 0.09 $ 0.04 $ (0.31)(a)
=========== ============= =========== =========
</TABLE>
(a) - During the fourth quarter of fiscal 1998, the Company recorded a pre
tax restructuring charge of $9.5 million or $.39 per common share (See
Note 3).
<TABLE>
<CAPTION>
Sixteen Twelve Twelve Twelve
Weeks Weeks Weeks Weeks
Ended Ended Ended Ended
May 24, August 16, November 8, January 31,
1996 1996 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $ 200,823 $ 155,792 $ 159,108 $179,575
=========== =========== =========== ========
Gross profit $ 57,098 $ 45,953 $ 47,657 $ 56,083
=========== =========== =========== ========
Net income $ 1,285 $ 1,816 $ 2,351 $ 4,949
=========== =========== =========== ========
Net income per common share:
Basic $ 0.10 $ 0.14 $ 0.17 $ 0.37
=========== =========== =========== ========
Diluted $ 0.09 $ 0.13 $ 0.17 $ 0.36
=========== =========== =========== ========
</TABLE>
******
F-16
<PAGE>
Index of Exhibits
- -----------------
3.1 Restated Certificate of Incorporation, as filed with the Secretary of
State of the State of Delaware on June 27, 1995 (Exhibit 3.1 of Annual
Report on Form 10-K for the year ended February 2, 1996)
3.2 By-Laws, as amended (Exhibit 3.2 of Annual Report on Form 10-K for the
year ended January 31, 1992)
3.3 By-Law Section 1.01, as amended through December 4, 1995 (Exhibit 3.3
of Annual Report on Form 10-K for the year ended February 2, 1996)
10.1 1984 Employee Stock Option and Stock Appreciation Rights Plan ("1984
Plan") (filed June 20, 1996 on Form S-8 Registration Statement No.
33-6461) (Exhibit 10.1 of Annual Report on Form 10-K for the year ended
January 31, 1997)
10.2 Amendment No. 4 to the 1984 Plan, as adopted on June 17, 1996, and
Amendment No. 5 to the 1984 Plan, as adopted on March 12, 1997 (Exhibit
10.2 of Annual Report on Form 10-K for the year ended January 31, 1997)
10.3 Amendment No 6. to the 1984 Plan, as adopted on June 16, 1997
10.4 1987 Executive Bonus and Stock Plan, as amended through June 13, 1994
("1987 Plan") (Exhibit 10.2 of Annual Report on Form 10-K for the year
ended February 3, 1995)
10.5 Amendment No.2 to the 1987 Plan, as adopted on June 12, 1995, and
Amendment No. 3 to the 1987 Plan, as adopted on March 12, 1997 (Exhibit
10.4 of Annual Report on Form 10-K for the year ended January 31, 1997)
10.6 Registrant's Retirement Income Plan, as amended and restated effective
as of January 1, 1989 (Exhibit 10.3 of Annual Report on Form 10-K for
the year ended February 3, 1995)
10.7 First Amendment to the Genovese Drug Stores Inc. Retirement Income Plan
(As amended January 1, 1989) (Exhibit 10.8 of Annual Report on Form
10-K for the year ended February 2, 1996)
10.8 Registrant's Employee Stock Ownership Plan and Trust, as amended and
restated effective January 1, 1989 (Exhibit 10.4 of Annual Report on
Form 10-K for the year ended February 3, 1995)
10.9 Amendment to Employee Stock Ownership Plan and Trust, as adopted on
March 10, 1998
10.10 Registrant's Retirement and Savings Plan, effective January 1, 1994
(Exhibit 10.5 of Annual Report on Form 10-K for the year ended February
3, 1995)
10.11 Split Dollar Insurance Plan between Registrant and Leonard Genovese,
dated October 13, 1994 (Exhibit 10.6 of Annual Report on Form 10-K for
the year ended February 3, 1995)
10.12 Split Dollar Insurance Plan between Registrant and Leonard Genovese,
dated June 29, 1995 (Exhibit 10.9 of Annual Report on Form 10-K for the
year ended February 2, 1996)
10.13 Form of Severance Agreement (Exhibit 10.7 of Annual Report on Form 10-K
for the year and restated effective ended February 2, 1996)
10.14 Amendment No. 1 to Form of Severance Agreement, as adopted on June 16,
1997 and Amendment No. 2 to Form of Severance Agreement, as adopted on
December 9, 1997
10.15 Revolving Credit Agreement dated January 17, 1997, among Registrant and
Fleet Bank, National Association, The Bank of New York and State Street
Bank and Trust Company (Exhibit 10.12 of Annual Report on Form 10-K for
the year ended January 31, 1997)
<PAGE>
10.16 First Amendment and Waiver to Revolving Credit Agreement, dated as of
April 28, 1998, among Registrant and Fleet Bank, National Association,
The Bank of New York and State Street Bank and Trust company
10.17 Form of Employee's Nonqualified Stock Option Agreement, as adopted on
June 16, 1997
10.18 Form of Amendment to June 16, 1997 Nonqualified Stock Option Agreement,
as adopted for non-employee directors on March 10, 1998
10.19 Retirement Agreement dated March 6, 1998 between Registrant and Herbert
J. Kett
10.20 Retirement Agreement dated March 6, 1998 between Registrant and Jerome
Stengel
10.21 Retirement Agreement dated March 6, 1998 between Registrant and Irwin
Livon
10.22 Stockholders Agreement dated June 30, 1998 between Leonard Genovese and
Frances Genovese Wangberg (Exhibit 1 to Amendment No.3 to joint
Schedule 13D filed on July 2, 1997)
11 Computation of Net Income Per Common Share
21 Subsidiaries of the Registrant
23 Consent of Independent Auditors
<PAGE>
Exhibit 10.3
------------
GENOVESE DRUG STORES, INC.
1984 EMPLOYEE STOCK OPTION AND STOCK APPRECIATION
RIGHTS PLAN
AMENDMENT NO. 6
Pursuant to Section 22 of the Genovese Drug Stores, Inc. 1994 Employee
Stock Option and Stock Appreciation Rights Plan (the "1984 Plan"), the 1984 Plan
is hereby amended as follows:
1. The first sentence of Section 7 of the 1984 Plan is amended to
read as follows:
"Persons eligible to receive discretionary Options or Stock
Appreciation Rights shall be such employees of, or consultants
to, the Company as the Committee shall select in its sole
discretion."
2. The second sentence of Section 8 of the 1984 Plan is amended
to read as follows:
"Notwithstanding the foregoing, (i) each fiscal year of the
Company, the Committee may grant to each non-employee who is
then a member of the Board of Directors options to purchase
such number of Shares as the full Board of Directors shall
determine in its sole discretion, and (ii) the aggregate
number of Shares covered by Options or Stock Appreciation
Rights granted to any person shall not exceed 250,000 in any
one-year period."
3. The foregoing amendments shall be effective as of March 12,
1997, subject to the approval of such amendments by the
shareholders of Genovese Drug Stores, Inc.
A-1
<PAGE>
Exhibit 10.9
AMENDMENT TO GENOVESE DRUG STORES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Genovese Drug Stores, Inc. (the "Company"), hereby adopts the
following amendment to the Genovese Drug Stores, Inc. Employee Stock Ownership
Plan (the "Plan") with reference to the following facts:
WHEREAS, Section 11.1 of the Plan provides that the Board of
Directors of the Company (the "Board") may amend the Plan from time to time,
subject to certain limitations not applicable hereto; and
WHEREAS, the Board has determined that it is necessary and
appropriate to amend the Plan as hereinafter set forth and has authorized an
officer of the Company to execute this amendment.
NOW, THEREFORE, BE IT RESOLVED:
1. Section 2.1 of the Plan is amended by inserting the
following new subsection (d) immediately after subsection (c) thereof:
(d) Election to Terminate Participation -
Notwithstanding any provision of the Plan to the contrary, a
Participant may elect to terminate his active participation in
the Plan at any time. A Participant may make such an election
with respect to a specific Plan Year, or with respect to all
future Plan Years, and may revoke such an election at any time
upon reasonable notice. The Committee or its delegate shall
establish reasonable and nondiscriminatory rules regarding the
time and manner of making and revoking such elections. The
rights and benefits under the Plan of a Participant who elects
to terminate his active participation shall be determined in
accordance with Section 2.2.
2. The first sentence of Section 2.2 of the Plan is amended in
its entirety to read as follows:
A Participant shall not be entitled to receive contributions
in accordance with Article IV on or after the date of his
termination of employment, death or Disability, during any
period in which he is not an Eligible Employee, or for any
Plan Year with respect to
<PAGE>
which he has elected to terminate his active participation in
the Plan.
3. The foregoing amendment to the Plan shall be effective as
of January 1, 1997.
IN WITNESS WHEREOF, the Company has caused this amendment to
be executed on this 10th day of March, 1998.
GENOVESE DRUG STORES, INC.
By: /s/ Gene L. Wexler
-------------------------------------
Gene L. Wexler
Vice President and General Counsel
<PAGE>
Exhibit 10.14
AMENDMENT TO SEVERANCE AGREEMENT
Genovese Drug Stores, Inc. (the "Company"), by authorization
of its Board of Directors, and __________________ (the "Executive") hereby adopt
the following Amendment to the Severance Agreement, dated as of
___________________, by and between the Company and such Executive (the
"Agreement"):
1. Section 3 of the Agreement is amended by replacing each
reference therein to "Section 4" with the term "Sections 4 and 5".
2. The last sentence of Section 4(a)(ii) of the Agreement is
amended by deleting therefrom the clause "Without otherwise limiting the
purposes or effect of Section 5,".
3. Section 4(c) of the Agreement is amended by replacing the
reference therein to "Section 7" with the term "Sections 5 and 7".
4. Section 5 of the Agreement is amended in its entirety to
read as follows:
"5. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event that this Agreement becomes operative and
it is determined (as hereafter provided) that any payment or
distribution by the Company or any of its affiliates to or for the
benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise
pursuant to or by reason of any other agreement, policy, plan, program
or arrangement, including without limitation any stock option, stock
appreciation right or similar right, or the lapse or termination of any
restriction on or the vesting or exercisability of any of the foregoing
(a "Payment"), would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or
any successor provision thereto), by reason of being considered
"contingent on a change in ownership or control" of the Company, within
the meaning of Section 280G of the Code (or any successor provision
thereto) or to any similar tax imposed by state or local law, or any
interest or penalties with respect to such tax (such tax or taxes,
together with any such interest and penalties, being hereafter
collectively referred to as the "Excise Tax"), then the Executive will
be entitled to receive an additional payment or payments (collectively,
a
<PAGE>
"Gross-Up Payment"); provided, however, that no Gross-up Payment will
be made with respect to the Excise Tax, if any, attributable to (i) any
incentive stock option, as defined by Section 422 of the Code ("ISO")
granted prior to the execution of this Agreement or (ii) any stock
appreciation or similar right, whether or not limited, granted in
tandem with any ISO described in clause (i). The Gross-Up Payment will
be in an amount such that, after payment by the Executive of all taxes
on such Gross-Up Payment (including any interest or penalties imposed
with respect to such taxes and any Excise Tax imposed upon the Gross-Up
Payment), the remaining amount payable to the Executive will equal the
Excise Tax imposed upon the Payment.
(b) Subject to the provisions of Section 5(f), all
determinations required to be made under this Section 5, including
whether an Excise Tax is payable by the Executive and the amount of
such Excise Tax and whether a Gross-Up Payment is required to be paid
by the Company to the Executive and the amount of such Gross-Up
Payment, if any, will be made by a nationally recognized accounting
firm (the "Accounting Firm") selected by the Executive in his sole
discretion. The Executive will direct the Accounting Firm to submit its
determination and supporting calculations in reasonable detail to both
the Company and the Executive within 30 calendar days after the
Termination Date, if applicable, and any such other time or times as
may be reasonably requested by the Company or the Executive. If the
Accounting Firm determines that any Excise Tax is payable by the
Executive, the Company will pay the required Gross-Up Payment to the
Executive within five business days after receipt of such determination
and calculations with respect to any Payment to the Executive. If the
Accounting Firm determines that no Excise Tax is payable by the
Executive, it will, at the same time as it makes such determination,
furnish the Company and the Executive an opinion to that effect. As a
result of the possible uncertainty in the application of Section 4999
of the Code (or any successor provision thereto) and the possibility of
similar uncertainty regarding applicable state or local tax law at the
time of any determination by the Accounting Firm hereunder, it may be
that Gross-Up Payments which have not been made by the Company as
aforesaid should have been made (together with, if applicable, interest
and penalties which may be due thereon, an "Underpayment"), consistent
with the calculations required to be made hereunder. In the event that
the Company exhausts or fails to pursue its remedies pursuant to
Section 5(f) and the Executive thereafter is required to make a payment
of any Excise
- 2 -
<PAGE>
Tax, the Executive will direct the Accounting Firm to determine the
amount of the Underpayment that has occurred and to submit its
determination and detailed supporting calculations to both the Company
and the Executive as promptly as possible. Any such Underpayment will
be promptly paid by the Company to, or for the benefit of, the
Executive within five business days after receipt of such determination
and calculations.
(c) The Company and the Executive will each provide
the Accounting Firm access to and copies of any books, records and
documents in the possession of the Company or the Executive, as the
case may be, reasonably requested by the Accounting Firm, and otherwise
cooperate with the Accounting Firm in connection with the preparation
and issuance of the determinations and calculations contemplated by
Section 5(b). Any determination by the Accounting Firm as to the amount
of the Gross-Up Payment will be binding upon the Company and the
Executive.
(d) The federal, state and local income or other tax
returns filed by the Executive will be prepared and filed on a
consistent basis with the determination of the Accounting Firm with
respect to the Excise Tax payable by the Executive. The Executive will
make proper payment of the amount of any Excise Payment, and at the
request of the Company, provide to the Company true and correct copies
(with any amendments) of his federal income tax return as filed with
the Internal Revenue Service and corresponding state and local tax
returns, if relevant, as filed with the applicable taxing authority,
and such other documents reasonably requested by the Company,
evidencing such payment. If prior to the filing of the Executive's
federal income tax return, or corresponding state or local tax return,
if relevant, the Accounting Firm determines that the amount of the
Gross-Up Payment should be reduced, the Executive will within five
business days pay to the Company the amount of such reduction.
(e) The fees and expenses of the Accounting Firm for
its services in connection with the determinations and calculations
contemplated by Section 5(b) will be borne entirely by the Company. If
such fees and expenses are initially paid by the Executive, the Company
will reimburse the Executive the full amount of such fees and expenses
within five business days after receipt from the Executive of a
statement therefor and reasonable evidence of his payment thereof.
- 3 -
<PAGE>
(f) The Executive will notify the Company in writing
of any claim by the Internal Revenue Service or any other taxing
authority that, if successful, would require the payment by the Company
of a Gross-Up Payment. Such notification will be given as promptly as
practicable but no later than 10 business days after the Executive
actually receives notice of such claim and the Executive will further
apprise the Company of the nature of such claim and the date on which
such claim is requested to be paid (in each case, to the extent known
by the Executive). The Executive will not pay such claim prior to the
earlier of (i) the expiration of the 30-calendar-day period following
the date on which he gives such notice to the Company and (ii) the date
that any payment of amount with respect to such claim is due. If the
Company notifies the Executive in writing prior to the expiration of
such period that it desires to contest such claim, the Executive will:
(i) provide the Company any written
records or documents in his possession relating to
such claim reasonably requested by the Company;
(ii) take such action in connection with
contesting such claim as the Company reasonably requests in
writing from time to time, including without limitation
accepting legal representation with respect to such claim by
an attorney competent in respect of the subject matter and
reasonably selected by the Company;
(iii) cooperate with the Company in good faith in
order effectively to contest such claim; and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company will bear and pay directly all
costs and expenses (including if applicable interest and penalties)
incurred in connection with such contest and will indemnify and hold
harmless the Executive, on an after-tax basis, for and against any
Excise Tax or income tax, including if applicable interest and
penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limiting the
generality or effect of the foregoing provisions of this Section 5(f),
the Company will control all proceedings taken in connection with the
contest of any claim contemplated by this Section 5(f) and, at its sole
option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with any taxing
- 4 -
<PAGE>
authority in respect of such claim (provided, however, that the
Executive may participate therein at his own cost and expense) and may,
at its option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and
the Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial jurisdiction
and in one or more appellate courts, as the Company may determine;
provided, however, that if the Company directs the Executive to pay the
tax claimed and sue for a refund, the Company will advance the amount
of such payment to the Executive on an interest-free basis and will
indemnify and hold the Executive harmless, on an after-tax basis, from
any Excise Tax or income or other tax, including if applicable interest
or penalties with respect thereto, imposed with respect to such
advance; and provided further, however, that any extension of the
statute of limitations relating to payment of taxes for the taxable
year of the Executive with respect to which the contested amount is
claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of any such contested claim will be
limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive will be entitled to settle or
contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(g) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 5(f), the Executive
receives any refund with respect to such claim, the Executive will
(subject to the Company's complying with the requirements of Section
5(f)) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after any taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 5(f), a determination is made that
the Executive is not entitled to any refund with respect to such claim
and the Company does not notify the Executive in writing of its intent
to contest such denial or refund prior to the expiration of 30 calendar
days after such determination, then such advance will be forgiven and
will not be required to be repaid and the amount of any such advance
will offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid by the Company to the Executive pursuant to this
Section 5."
5. The foregoing amendments shall be effective as of the date
of execution of this Amendment.
- 5 -
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this amendment
to be executed as of this 16th day of June, 1997.
The "Company"
GENOVESE DRUG STORES, INC.
By:
-----------------------------------
The "Executive"
---------------------------------------
Name:
-----------------------------------
- 6 -
<PAGE>
AMENDMENT NO. 2 TO SEVERANCE AGREEMENT
Genovese Drug Stores, Inc. (the "Company"), by authorization of its
Board of Directors, and ______________________ (the "Executive") hereby adopt
the following Amendment No. 2 to the Severance Agreement, dated as of
___________________________, by and between the Company and such Executive (the
"Agreement"):
1. Section 1(g) of the Agreement is hereby amended by adding the word "or" after
clause (i) and deleting the phrase "or (iii) the Executive's attainment of age
65".
2. The foregoing amendment shall be effective as of the date of execution of
this Amendment No. 2.
IN WITNESS WHEREOF, the undersigned have caused this Amendment No. 2 to
be executed as of this 9th day of December, 1997.
GENOVESE DRUG STORES, INC.
By:
----------------------------------------
Gene L. Wexler
Vice President and General Counsel
The "Executive"
--------------------------------------------
<PAGE>
EXHIBIT 10.16
FIRST AMENDMENT AND WAIVER
TO REVOLVING CREDIT AGREEMENT
FIRST AMENDMENT AND WAIVER dated as of April 28, 1998, (this "Amendment
and Waiver"), with respect to the Revolving Credit Agreement dated as of January
17, 1997 (the "Credit Agreement"), by and among GENOVESE DRUG STORES, INC., as
Borrower; FLEET BANK, NATIONAL ASSOCIATION ("Fleet"), THE BANK OF NEW YORK
("BNY") and STATE STREET BANK AND TRUST COMPANY ("State Street"; collectively,
with Fleet and BNY, the "Banks"); FLEET BANK, NATIONAL ASSOCIATION, as
administrative agent for the Banks (in such capacity, the "Agent") and THE BANK
OF NEW YORK, as documentation agent (in such capacity, the "Document Agent").
RECITALS
The Borrower has requested and the Banks have agreed, subject to the
terms and conditions of this Amendment and Waiver, to waive and amend certain
provisions of the Credit Agreement as herein set forth. Capitalized terms used
herein and not defined herein shall have the meanings given to them in the
Credit Agreement.
Accordingly, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
I. Waiver
Section 1.1. The Banks hereby waive compliance with the provisions of
Sections 9.1, 9.3 and 9.4 of the Credit Agreement for the period ending January
30, 1998.
Section 1.2. The waivers set forth in Section 1.1 are limited
specifically to the matters set forth above and for the specific instance
referred to above and do not constitute directly or by implication a waiver of
any other provision of the Credit Agreement. Furthermore, the waivers granted
pursuant to Section 1.1 shall not entitle the Borrower to any further or future
waivers whatsoever.
II. Amendments.
Section 2.1. The definition of the term "Margin" contained in Section
1.1 of the Agreement is hereby amended and restated to provide in its entirety
as follows:
<PAGE>
"Margin" means, with respect to Loans and the Commitment Fee:
<TABLE>
<CAPTION>
RATIO OF CONSOLIDATED MARGIN
FUNDED DEBT TO CONSOLIDATED LIBOR LOANS AND
EBITDA PURSUANT TO STANDBY LETTERS COMMITMENT
SECTION 9.4 OF CREDIT FEE
<S> <C> <C>
(a) Greater than 2.25:1.00 1.10 0.25
(b) Greater than 1.75:1.00 but
less than or equal to 2.25:1.00 0.85 0.20
(c) Less than or equal to 1.75:1.00 0.55 0.15
</TABLE>
Section 2.2. Article 9 of the Credit Agreement is hereby amended and
restated to provide in its entirety as follows:
ARTICLE 9. FINANCIAL COVENANTS.
So long as any of the Notes or other Obligations shall remain
unpaid, or any Bank shall have any Commitment under this Agreement the
Borrower and its Subsidiaries shall:
Section 9.1. Minimum Consolidated Tangible Net Worth. Maintain at
all times a Consolidated Tangible Net Worth of not less than
$65,000,000 during the first fiscal quarter of the Borrower's fiscal
year ending January 29, 1999, $65,400,000 during the second, third and
through the fourth fiscal quarters of the Borrower's fiscal year ending
January 29, 1999, $68,100,000 at all times from January 29, 1999
through January 27, 2000, $72,000,000 at all times from January 28,
2000 through February 1, 2001, and $78,000,000 from February 2, 2001
and thereafter. This covenant shall be tested quarterly.
Section 9.2. Maximum Consolidated Effective Leverage. Maintain at all
times during the periods set forth below a ratio of (A) Consolidated
Total Liabilities (excluding for purposes of this covenant, deferred
income and deferred taxes) to (B) Consolidated Tangible Net Worth of
not more than the ratio set forth opposite such period:
<PAGE>
Period Ratio
------ -----
January 31, 1998 - August 14, 1998 2.40:1.00
August 15, 1998 - November 6, 1998 2.70:1.00
November 7, 1998 - January 29, 1999 2.45:1.00
January 30, 1999 - January 28, 2000 2.40:1.00
January 29, 2000 and thereafter 2.30:1.00
Notwithstanding the foregoing, during the periods of August 14, 1999 through
November 5, 1999, August 12, 2000 through November 3, 2000 and August 18, 2001
through November 9, 2001, such ratio shall not be more than 2.60:100.
Section 9.3. Minimum Fixed Charge Coverage Ratio. Maintain at all times
during the periods specified below, on a consolidated basis, a ratio of
(A) Consolidated EBITDA plus Consolidated Operating Rents to (B)
Consolidated Interest Expenses plus Consolidated Current Portion of
Long Term Debt plus Capital Expenditures, on a consolidated basis, plus
Consolidated Operating Rents of not less than amounts set forth below:
Period Ratio
------ -----
January 31, 1998 - May 22, 1998 0.96:1.00
May 23, 1998 - August 14, 1998 0.98:1.00
August 15, 1998 - November 6, 1998 1.00:1.00
November 7, 1998 - January 29, 1999 1.08:1.00
January 30, 1999 - January 28, 2000 1.10:1.00
January 29, 2000 and thereafter 1.13:1.00
For purposes of calculating compliance with this covenant, Consolidated
EBITDA shall be calculated without giving effect to a $9,500,000
restructuring charge for the first three quarters of the Borrower's
fiscal year ending January 29, 1999.
This covenant shall be tested quarterly on a rolling four quarters
basis.
Section 9.4. Consolidated Funded Debt to Consolidated EBITDA. Maintain
at all times during the periods specified below, on a consolidated
basis, a ratio of (A) Consolidated Funded Debt to (B) Consolidated
EBITDA of not more than the ratios specified below:
<PAGE>
Fiscal Year Ratio
----------- ------
1999 2.61:1.00
2000 2.16:1.00
2001 2.00:1.00
In addition, on each of the following dates, the Borrower and its
Subsidiaries, on a consolidated basis, shall maintain a ratio of (A)
Consolidated Funded Debt to (B) Consolidated EBITDA of not more than
the ratios specified below:
Date Ratio
---- -----
5/22/98 2.61:1.00
8/14/98 2.31:1.00
11/6/98 2.56:1.00
1/29/99 1.74:1.00
5/21/99 2.00:1.00
8/13/99 1.84:1.00
11/5/99 2.16;1.00
1/28/00 1.66:1.00
5/19/00 1.90:1.00
8/11/00 1.73:1.00
11/3/00 2.00:1.00
2/2/01 1.49:1.00
For purposes of calculating compliance with this covenant, Consolidated
EBITDA shall be calculated without giving effect to a $9,500,000
restructuring charge for the first three quarters of the Borrower's
fiscal year ending January 29, 1999.
This covenant shall be tested quarterly on a rolling four quarters
basis.
Section 9.5 Capital Expenditures. Not make Capital Expenditures in any
fiscal year on a consolidated basis in excess of the amounts listed below for
such fiscal year.
Maximum Consolidated
Fiscal Year Capital Expenditures
----------- --------------------
1997 $25,000,000
1998 and thereafter $24,000,000
<PAGE>
The maximum Capital Expenditures in any fiscal year may be increased by an
amount equal to the net proceeds, but in no event more than $5,000,000 in any
fiscal year, of any sales of assets other than in the ordinary course of
business of the Borrower or the Guarantor, on a consolidated basis. Up to 25% of
any unused Capital Expenditure allowance (before giving effect to the proviso of
the preceding sentence) may be carried over to the following fiscal year;
however, in no event shall any amount be carried over for more than one fiscal
year. For purposes of calculating compliance with this covenant, that portion of
the consideration paid by the Borrower in connection with any Pharmacy Buyout
that is allocable to the purchase of inventory shall not be considered a Capital
Expenditure.
Section 9.6. Limitation on Capital Expenditures and Dividends. The
Borrower shall not permit the sum of Capital Expenditures plus cash
Dividends of the Borrower, determined on a consolidated basis, to
exceed the following percentages of Consolidated EBITDA on an annual
basis: for the Borrower's fiscal year ending January 29, 1999, eighty
(80%) percent, for the Borrower's fiscal year ending January 28, 2000,
seventy (70%) percent and for the Borrower's fiscal year ending
February 2, 2001 and each fiscal year thereafter, sixty-five (65%)
percent. For purposes of calculating compliance with this covenant, the
portion of the consideration paid by the Borrower in connection with
any Pharmacy Buyout that is allocable to the purchase of inventory
shall not be considered a Capital Expenditure.
III. Miscellaneous.
(a) This Amendment and Waiver shall be governed by and construed
in accordance with the laws of the State of New York.
(b) All terms used herein shall have the same meaning as in the
Credit Agreement, as amended hereby, unless specifically defined herein.
(c) This Amendment and Waiver shall constitute a Facility
Document.
(d) As expressly amended hereby, the Credit Agreement remains in
full force and effect in accordance with the terms thereof. The Credit Agreement
is ratified and confirmed in all respects by the Borrower.
(e) The Borrower hereby represents and warrants that (i) the
representations and warranties by the Borrower and each Guarantor pursuant to
the Credit Agreement and each other Facility Document are true and correct on
the date hereof, and (ii) after giving effect to this Amendment and Waiver, no
Default or Event of Default exists under the Credit Agreement or any other
Facility Document.
<PAGE>
(f) This Amendment and Waiver may be executed in one or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one Amendment and Waiver.
IN WITNESS WHEREOF, the Borrower, the Banks, the Agent and the
Documentation Agent have caused this Amendment and Waiver to be duly executed by
their duly authorized officers as of the day and year first above written.
GENOVESE DRUG STORES, INC.
By: /s/ Christopher Noonan
-------------------------------
Name: Christopher Noonan
Title: Controller
FLEET BANK, NATIONAL ASSOCIATION
By: /s/ Alice Adelberg
-------------------------------
Name: Alice Adelberg
Title: Vice President
THE BANK OF NEW YORK
By: /s/ Donna A. Fontanetta
-------------------------------
Name: Donna A. Fontanetta
Title: Assistant Vice President
STATE STREET BANK AND TRUST COMPANY
By: /s/ John D. Gaziano, Jr.
-------------------------------
Name: John D. Gaziano, Jr.
Title: Vice President
<PAGE>
Exhibit 10.17
GENOVESE DRUG STORES, INC.
Employee's Nonqualified Stock Option Agreement
RECITALS:
A. __________________ (the "Optionee") is an officer
or key employee of Genovese Drug Stores, Inc. (the "Company").
B. The Optionee has been selected as a participant in the
Company's 1984 Employee Stock Option and Stock Appreciation
Rights Plan (the "Plan").
C. The Compensation Committee of the Board of Directors of the
Company (the "Committee") has authorized the execution of a stock option
agreement in the form hereof as of June 16, 1997 (the "Date of Grant").
D. The option granted hereby is intended to be a nonqualified
stock option and will not be treated as an "incentive stock option" within the
meaning of that term under Section 422 of the Internal Revenue Code of 1986.
NOW, THEREFORE, pursuant to the Plan and subject to the terms
and conditions thereof and to the terms and conditions herein set forth, the
Company hereby grants to the Optionee a Nonqualified Option (the "Option") to
purchase___________ Common Shares (the "Option Shares") at an exercise price
equal to $19.38 per Option Share (the "Exercise Price").
I. Vesting of Option. (a) Unless terminated as hereinafter provided, the Option
will become fully exercisable upon the fifth anniversary of the Date of Grant,
provided that the Optionee remains in the continuous employ of the Company or an
Affiliate until such date. For the purposes of this Agreement, the continuous
employment of the Optionee with the Company or an Affiliate will not be deemed
to have been interrupted, and the Optionee will not be deemed to have ceased to
be an employee of the Company or an Affiliate, by reason of the transfer of his
or her employment among the Company and its Affiliates or a leave of absence
approved by the Board.
(b) Notwithstanding the provisions of Section
1(a) hereof, if the Optionee's employment with the Company and all Affiliates
terminates prior to the fifth anniversary of the
- 1 -
<PAGE>
Date of Grant by reason of his or her death, Disability or Retirement, the
Option will become fully exercisable.
(c) Notwithstanding the provisions of Sections
1(a) and 1(b) hereof, if a Change in Control occurs while the Optionee is
employed by the Company or an Affiliate and prior to the termination of the
Option as provided in Section 2 hereof, the Option will thereupon become fully
exercisable.
(d) To the extent that the Option becomes
exercisable in accordance with the terms of this Section 1, it may be exercised
in whole or in part from time to time thereafter.
1. Termination of Option. The Option will terminate
automatically and without further action on the earliest of the
following dates:
(a) the date of the voluntary termination by the
Optionee of his or her employment with the Company or an
Affiliate;
(b) the date of the termination by the Company
or an Affiliate of the Optionee's employment for Cause;
(c) six months after the termination of the
Optionee's employment with the Company and all Affiliates by
reason of his or her Disability;
(d) one year after the termination of the
Optionee's employment with the Company and all Affiliates by
reason of his or her death;
(e) two years after the termination of the
Optionee's employment with the Company and all Affiliates by
reason of his or her Retirement;
(f) 30 days after the termination by the Company
and all Affiliates of the Optionee's employment therewith for any
reason other than Cause or Disability; or
(g) ten years after the Date of Grant, if the
Optionee remains in the continuous employ of the Company or an Affiliate during
that ten-year period.
2. Payment of Exercise Price. The Exercise Price applicable to
an Option Share may be paid (a) in cash or check or other cash equivalent
acceptable to the Company, (b) by actual or constructive transfer to the Company
of nonforfeitable, nonrestricted Common Shares, or (c) by any combination of the
foregoing methods of payment. Nonforfeitable, nonrestricted Common Shares that
are transferred by the Optionee in payment of all or any part of the Exercise
Price applicable to an Option
- 2 -
<PAGE>
Share will be valued on the basis of their fair market value as determined by
the Committee from time to time. The requirement of payment in cash will be
deemed satisfied if the Optionee makes arrangements that are satisfactory to the
Company with a broker that is a member of the National Association of Securities
Dealers, Inc. to sell a sufficient number of the Option Shares that are being
purchased pursuant to the exercise so that the net proceeds of the sale
transaction will at least equal the amount of the aggregate Exercise Price and
pursuant to which the broker undertakes to deliver to the Company the amount of
the aggregate Exercise Price not later than the date on which the sale
transaction will settle in the ordinary course of business.
3. Compliance with Law. The Company will make reasonable
efforts to comply with all applicable securities laws; provided, however, that
notwithstanding any other provision of this agreement, the Option will not be
exercisable if the exercise thereof would result in a violation of any such law.
4. Right to Terminate Employment and Adjust Compensation. No
provision of this agreement will limit in any way whatsoever any right that the
Company or an Affiliate may otherwise have to terminate the employment or adjust
the compensation of the Optionee at any time.
5. Relation to Other Benefits. Any economic or other benefit
to the Optionee under this agreement or the Plan will not be taken into account
in determining any benefits to which the Optionee may be entitled under any
profit-sharing, retirement or other benefit or compensation plan maintained by
the Company or an Affiliate and will not affect the amount of any life insurance
coverage available to any beneficiary under any life insurance plan covering
employees of the Company or an Affiliate.
6. The Plan. The Option evidenced hereby will be subject to
the provisions of the Plan, including without limitation the provisions thereof
relating to the transferability and exercisability of Option Rights (including
the Option), adjustments and withholding taxes, as the Plan may from time to
time be amended, provided, however, that, following a Change in Control, no such
amendment adversely affects the rights of the Optionee hereunder without the
Optionee's written consent thereto.
7. Severability. In the event that one or more of the
provisions of this Agreement may be invalidated for any reason by a court, any
provision so invalidated will be deemed to be separable from the other
provisions hereof, and the remaining provisions hereof will continue to be valid
and fully enforceable.
8. Governing Law. This Agreement is made under, and
will be construed in accordance with, the laws of the State of
- 3 -
<PAGE>
New York, without giving effect to the principle of conflict of laws of such
State.
9. Certain Definitions. (a) "Affiliate" means a corporation,
partnership, joint venture, unincorporated association or other entity that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with, the Company.
(b) "Cause" means any act or omission by the
Optionee that is materially inimicable to the business or reputation of the
Company or any Affiliate, as determined in good faith by a majority of the Board
of Directors of the Company after giving the Optionee notice of its intent to
make such a determination and an opportunity to be heard.
(c) "Change in Control" means the occurrence
during the term of this Option of any of the following events:
(i) The Company is merged, consolidated or
reorganized into or with another corporation or other legal person, and
as a result of such merger, consolidation or reorganization less than a
majority of the combined voting power of the then-outstanding
securities entitled to vote generally in the election of directors
("Voting Stock") of such corporation or person immediately after such
transaction are held in the aggregate by the holders of Voting Stock of
the Company immediately prior to such transaction;
(ii) The Company sells or otherwise transfers
all or substantially all of its assets to another corporation or other
legal person, and as a result of such sale or transfer less than a
majority of the combined voting power of the then-outstanding Voting
Stock of such corporation or person immediately after such sale or
transfer is held in the aggregate by the holders of Voting Stock of the
Company immediately prior to such sale or transfer;
(iii) There is a report filed on Schedule 13D
or Schedule 14D-1 (or any successor schedule, form or report), each as
promulgated pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), disclosing that any person (as the term "person"
is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act)
has become the beneficial owner (as the term "beneficial owner" is
defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of securities representing 20% or
more of the combined voting power of the then-outstanding Voting Stock
of the Company;
- 4 -
<PAGE>
(iv) The Company files a report or proxy
statement with the Securities and Exchange Commission pursuant to the
Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any
successor schedule, form or report or item therein) that a change in
control of the Company has occurred or will occur in the future
pursuant to any then-existing contract or transaction; or
(v) If, during any period of two consecutive
years, individuals who at the beginning of any such period constitute
the Directors of the Company cease for any reason to constitute at
least a majority thereof; provided, however, that for purposes of this
clause (v) each Director who is first elected, or first nominated for
election by the Company's stockholders, by a vote of at least
two-thirds of the Directors of the Company (or a committee thereof)
then still in office who were Directors of the Company at the beginning
of any such period will be deemed to have been a Director of the
Company at the beginning of such period.
Notwithstanding the foregoing provisions of Section 10(c)(iii) or
10(c)(iv), unless otherwise determined in a specific case by majority
vote of the Board, a "Change in Control" shall not be deemed to have
occurred for purposes of Section 10(c)(iii) or 10(c)(iv) solely because
(A) the Company, (B) an entity in which the Company directly or
indirectly beneficially owns 50% or more of the outstanding Voting
Stock (a "Subsidiary"), or (C) any Company-sponsored employee stock
ownership plan or any other employee benefit plan of the Company or any
Subsidiary either files or becomes obligated to file a report or a
proxy statement under or in response to Schedule 13D, Schedule 14D-1,
Form 8-K or Schedule 14A (or any successor schedule, form or report or
item therein) under the Exchange Act disclosing beneficial ownership by
it of shares of Voting Stock, whether in excess of 20% or otherwise, or
because the Company reports that a change in control of the Company has
occurred or will occur in the future by reason of such beneficial
ownership.
(d) "Disability" means total and permanent
disability as determined for purposes of any long-term disability plan that is
maintained by the Company or an Affiliate and that is in effect for, or
applicable to, the Optionee.
(e) "Retirement" means termination of employment
with the Company and all Affiliates (i) after the attainment of at least age 55
and the completion of at least 15 calendar years of employment with the Company
and all Affiliates, or (ii) at such other age or under such other circumstances
as the Committee may determine in its sole and absolute discretion.
- 5 -
<PAGE>
This Agreement is executed by the Company on this 16th day of
June, 1997, effective as of the Date of Grant.
GENOVESE DRUG STORES, INC.
By
------------------------------------
Leonard Genovese,
President
The undersigned Optionee hereby acknowledges receipt of an
executed original of this Agreement and accepts the Option granted hereunder,
subject to the terms and conditions of the Plan and the terms and conditions
hereinabove set forth.
---------------------------------------
Optionee
Date:
---------------------------------
- 6 -
<PAGE>
Exhibit 10.18
AMENDMENT TO GENOVESE DRUG STORES, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
Genovese Drug Stores, Inc. (the "Company"), and
________________ (the "Optionee") hereby adopt the following amendment to the
nonqualified stock option agreement dated June 6, 1997 entered into by the
parties effective as of March 10, 1998 (the "Option Agreement").
1. Section I(a) of the Option Agreement is hereby amended in
its entirety to read as follows:
"(a) Until terminated as hereinafter provided, the
Option shall be fully exercisable."
2. Sections I(b) and (c) of the Option Agreement are hereby
deleted in their entirety, and Section I(d) of the Option Agreement is hereby
redesignated as Section I(b).
3. The foregoing amendments to the Option Agreement shall be
effective as of March 10, 1998.
IN WITNESS WHEREOF, the Company and the Optionee have caused
this amendment to be executed on this 13th day of March, 1998.
GENOVESE DRUG STORES, INC.
By:
- ------------------------------- ------------------------
Optionee Leonard Genovese
President
<PAGE>
Exhibit 10.19
Genovese Drug Stores, Inc.
80 Marcus Drive
Melville, New York 11747
CONFIDENTIAL
------------
March 6, 1998
Mr. Herbert Kett
Unit 452-D
Heritage Hills
Somers, New York 10589
Re: Separation from Employment
Dear Mr. Kett:
This letter agreement ("Agreement") sets forth the agreement
reached concerning the termination of your employment with Genovese Drug Stores,
Inc., including its parents, subsidiaries and affiliated corporations, and their
respective current and former successors, assigns, representatives, agents,
attorneys, shareholders, officers, directors and employees ("Genovese").
1. Your employment with Genovese will terminate April 3, 1998.
Gevovese will continue through that date your salary, less applicable
deductions, and all employee welfare benefits under currently existing Genovese
benefit plans in which you are now participating. Genovese also will provide you
with a lump-sum payment, less applicable deductions, which represents the value
of your accrued but unused vacation as of May 1, 1998, if any. As of the date
hereof, you had no accrued but unused vacation; 2 weeks will accrue as of May 1,
1998. Effective April 3, 1998, you will resign from your position as a director
and officer of Genovese, and from any committees of the Board of Directors of
Genovese on which you may be serving at that time. Effective April 3, 1998, you
also will resign your position as a trustee of the Trust under the Genovese
Retirement Income Plan.
<PAGE>
Page 2
2. In consideration for signing this Agreement and in exchange
for the promises, covenants, restrictions and waivers set forth herein, Genovese
will, provided you have not revoked this Agreement as set forth below and
subject to your compliance with its terms, provide you with the following
payments of cash and other benefits:
a. a lump-sum payment of $1,098,582, less
applicable deductions, payable on April 3,
1998, or on the first business day following
the expiration of the revocation period
described in numbered paragraph 21 below,
whichever is later;
b. reasonable attorneys' fees incurred in
connection with negotiation and preparation
of this Agreement, not to exceed $5,000 in
the aggregate, payable within 30 days after
you provide Genovese with a copy of a
billing statement from your attorney;
c. accelerated vesting and payout of shares of
bonus stock--all of your bonus shares (3,332
shares as of the date hereof) in Genovese
will be fully vested and paid to you as of
April 3, 1998;
d. extended expiration date of options--the
expiration date of all of your outstanding
options to purchase shares of Genovese will
be extended until December 31, 2001, and
your eligibility for the Merrill Lynch
cashless exercise program for such options
will continue until the extended expiration
date, provided, however, that such options
shall immediately expire and be forfeited in
the event that you breach any of the
covenants contained in numbered paragraph 13
of this Agreement or in the event that you
breach, in any material respect, any of the
covenants contained in numbered paragraph 10
of this Agreement;
(i) As of the date hereof, you held
options to purchase shares of
Genovese as follows:
Per Share
Grant Exercise
Options Date Price
------- ----- ---------
7,613 3/8/84 8.87
6,921 3/7/95 7.98
4,961 3/26/96 7.85
<PAGE>
Page 3
5,720 3/12/97 12.27
55,000 6/16/97 17.62
(ii) Attached hereto as Appendix A is a
copy of a resolution adopted
January 26, 1998, by the
Compensation Committee of the
Genovese board of directors,
extending the expiration date of
all of your outstanding options
subject to the conclusion of this
Agreement. Genovese hereby
represents that the Compensation
Committee was duly authorized to
take that action, and that no
further or other action by any
person is or was necessary to
effect such an extension of your
options.
e. automobile--the automobile currently
provided by Genovese for your use will be
purchased by Genovese and transferred to
your ownership, without charge, in
accordance with the terms of an arrangement
of general application to certain Genovese
employees that is in the process of being
adopted by Genovese; Genovese will use
commercially reasonable efforts to adopt
such arrangement and effect such transfer on
or before April 3, 1998; you may continue to
use the automobile under the same terms and
conditions as currently apply to such use
until the transfer of ownership actually
occurs; Genovese will pay any sales tax
required to be paid in connection with such
transfer; and
f. retiree purchase discount card--you will
receive and be eligible to use a retiree
purchase discount card for purchases at
Genovese stores, in accordance with the
terms and conditions of the retiree purchase
discount program, for as long as the company
maintains the retiree purchase discount
program; the retiree purchase discount
program currently provides for a 20%
discount on general retail purchases and
prescriptions at cost;
3. You will be entitled to receive the retirement benefits
payable to you pursuant to employee retirement benefit plans of Genovese, which
consist of an annual benefit of $5,172 beginning at age 65 pursuant to the
Genovese Retirement Income Plan; shares of Genovese stock distributable to you
pursuant to the Genovese Employee Stock Ownership Plan (as of December 31, 1996,
you had 6,416.91 shares in
<PAGE>
Page 4
your account; we anticipate a more current valuation shortly), which
distribution is expected to occur on or about April 1, 1999; and your account
balance, if any, in the Genovese Retirement and Savings Plan (401(k) plan). Such
benefits will be paid to you subject to and in accordance with the terms of
those plans.
4. From time to time after April 3, 1998, Genovese may request
that you perform consulting services, which consulting services will be
consistent with the nature of the duties you are performing and the executive
position you occupy during your employment with Genovese in the period
immediately prior to April 3, 1998. You will provide such services only when and
if they can be arranged at mutually convenient times and Genovese may not
require you to perform services. Your consulting fee will be $1,000 per day.
Genovese will reimburse your out-of-pocket business expenses reasonably incurred
in the performance of consulting duties for Genovese, provided that you supply
substantiating documentation of such expenses in accordance with reasonable
expense reimbursement policies and procedures of Genovese in effect from time to
time. You and Genovese acknowledge that your consulting services will be
performed by you as an independent contractor; that Genovese will not be liable
for wage withholding, Social Security contributions, disability insurance
payments or benefits, or any other payroll tax withholding or payment; and that
you will be solely responsible for the payment of any and all income taxes,
Social Security contributions, and other taxes or charges applicable to your
receipt of income for consulting pursuant this Agreement.
5. Genovese will indemnify you with respect to your service as
a director and officer of Genovese and with respect to your service as a trustee
of the Trust under the Genovese Retirement Income Plan to the full extent
permitted by the General Corporation Law of the State of Delaware or any other
applicable laws (including without limitation the provisions of the Employee
Retirement Income Security Act of 1974, as amended) as presently or hereafter in
effect. Genovese will advance expenses for your defense prior to a final
disposition of a claim provided that you execute an undertaking to repay such
advances if it is ultimately determined that you are not entitled to indemnity.
6. Releases
a. In consideration of the payments and other
consideration described in numbered
paragraph 2 above, and for other good and
valuable consideration, you hereby release
and forever discharge, and by this
instrument release and forever discharge,
Genovese from all debts, obligations,
promises, covenants, agreements, contracts,
<PAGE>
Page 5
endorsements, bonds, controversies, suits,
actions, causes of action, judgments,
damages, expenses, claims or demands, in law
or in equity, which you ever had, now have,
or which may be raised in the future,
regarding any matter that occurred or arose
on or before the date of your execution of
this Agreement, including but not limited to
all claims, whether known or unknown and
whether asserted or unasserted, regarding
your employment at or termination of
employment from Genovese, any contract
(express or implied), any claim for
equitable relief or recovery of punitive,
compensatory, or other damages or monies,
attorneys' fees, any tort, and all claims
for alleged discrimination based upon age,
race, color, sex, sexual orientation,
marital status, religion, national origin,
handicap, disability, or retaliation,
including any claim, asserted or unasserted,
which could arise under Title VII of the
Civil Rights Act of 1964; the Civil Rights
Act of 1991; the Equal Pay Act of 1963; the
Age Discrimination in Employment Act of
1967; the Older Workers Benefit Protection
Act of 1990; the Americans With Disabilities
Act of 1990; the Civil Rights Act of 1866,
42 U.S.C. ss. 1981; the Employee Retirement
Income Security Act of 1974; the Family and
Medical Leave Act of 1993; the New York
State Human Rights Law; and any other
federal, state or local laws, rules or
regulations, whether equal employment
opportunity laws, rules or regulations or
otherwise, or any right under any Genovese
pension, welfare, or stock plans, except the
obligations to you that Genovese has
undertaken pursuant to this Agreement,
including the right to receive payments and
benefits in accordance with the provisions
of numbered paragraphs 1 through 4 above;
provided, that nothing in this release shall
affect or diminish your rights to (i)
enforce this Agreement, (ii) receive
accrued, vested benefits, if any, under
Genovese employee benefit plans, or (iii)
obtain COBRA healthcare continuation
coverage at your own expense, unemployment
insurance benefits, or other similar
post-employment rights or benefits, if you
are eligible therefor. This Agreement does
not constitute any admission by Genovese
that it has violated any law or
<PAGE>
Page 6
legal obligation with respect to any aspect
of your employment or termination therefrom.
b. In consideration of the promises contained
herein, and for other good and valuable
consideration, Genovese hereby releases and
forever discharges, and by this instrument
releases and forever discharges, you from
all debts, obligations, promises, covenants,
agreements, contracts, endorsements, bonds,
controversies, suits, actions, causes of
action, judgments, damages, expenses, claims
or demands, in law or in equity, which it
ever had, now has, or which may arise in the
future, regarding any matter arising on or
before the date of your execution of this
Agreement, except the obligations to
Genovese that you have undertaken pursuant
to this Agreement.
c. You agree that prior to the payment of the
amount described in numbered paragraph 2.a.
hereof, and as a condition of Genovese's
obligation to make such payment, you will
provide Genovese with a release,
substantially in the form of the release
contained in subparagraph a. of this
paragraph, in respect of any matter arising
on or after the date of this Agreement and
on or before the date of such payment.
7. You represent and agree that you have not filed any
lawsuits against Genovese, or filed or caused to be filed any charges or
complaints against Genovese with any municipal, state or federal agency charged
with the enforcement of any law. You also agree, to the extent consistent with
applicable law, not to initiate any legal action, charge or complaint against
Genovese in any forum whatsoever, in connection with the claims released by you.
In addition, to the extent any such action may be brought, you expressly waive
any claim to any form of monetary or other damages, or any other form of
recovery or relief in connection with any such action, or in connection with any
action brought by a third party. If you violate this Agreement by filing or
bringing any charges, claims or actions contrary to this paragraph, in addition
to any other rights and remedies Genovese may have, you will immediately
reimburse Genovese for all amounts paid to you pursuant to this Agreement. You
also agree to pay all costs and expenses of Genovese in defending against such
charges, claims or actions brought by you or on your behalf, including
reasonable attorneys' fees.
<PAGE>
Page 7
8. You understand and agree that the consideration provided to
you under numbered paragraphs 2 and 6.b. of this Agreement is in addition to
anything of value to which you are otherwise entitled. You represent, warrant
and acknowledge that Genovese owes you no wages, commissions, bonuses, sick pay,
personal leave pay, severance pay, vacation pay or other compensation or
payments or form of remuneration of any kind or nature, except as expressly set
forth herein.
9. You will not issue any communication, written or otherwise,
that disparages, criticizes or otherwise reflects adversely or encourages any
adverse action against Genovese, except if testifying under oath pursuant to any
lawful court order or subpoena or otherwise responding to or providing
disclosures required by law.
10. Genovese Property; Confidential Information
a. You agree to hold all of Genovese's
Confidential Information (as that term is
defined below) in strictest secrecy and
confidence, and to use it solely for the
performance of your duties as a consultant
for Genovese and for no other purpose. You
agree that you will not otherwise, directly
or indirectly, take, use or disclose (or
enable any other person to take, use or
disclose) any of Genovese's Confidential
Information during the Consulting Period or
thereafter without Genovese's prior written
consent.
b. You agree to return to Genovese at the
termination of your employment all files,
records, specifications, or other documents,
and all computer software files, databases
and the like relating to the business of
Genovese, or which contain Confidential
Information, whether prepared or acquired by
you during the course of your employment
with Genovese (and you similarly agree to
return at the end of the Consulting Period
all such files, records, specifications or
other documents, and all such computer
software, files, databases and the like),
including in each case all photocopies,
extracts or summaries of such material that
are or may then be in your possession,
custody or control. For purposes of this
paragraph 10.b., the term "document" shall
include files, records, correspondence,
memoranda whether in written form or on
computer files, video and audio discs and
tapes and all
<PAGE>
Page 8
other recorded, taped, filmed or graphic
material however produced or reproduced, and
any tangible thing that, in whole or in
part, contains, records, illustrates or
conveys information.
c. For the purposes of this Agreement, the
term, "Confidential Information" shall mean
and include all trade secrets, know-how,
sources of supply, prices, contracts with
third parties and any and all other
information that is disclosed to or acquired
by you during or in the course of your
employment or Consulting Period with
Genovese, that relates to the business of
Genovese, and that is not generally
available to the public or generally known
in the drug or retail industry. Confidential
Information includes, without limitation,
lists of suppliers, customer lists and
names, address and phone numbers of
customers, customers' requirements for
products, pricing information and product
price discount structures. The term also
includes any formulas, patterns, devices,
inventions, methods, techniques, processes,
or combinations thereof, or compilations of
information, records, and specifications,
which are owned by Genovese and regularly
used in its products (offered or to be
offered), research, development, marketing,
pricing, business methods, strategies,
policies, or business opportunities. For the
purposes of this definition, the term
"know-how" shall be deemed to mean any and
all general and specific knowledge and
information relating to Genovese's business
operations not in written or printed form,
and not generally available to the public or
generally known in the industry in which
Genovese is engaged.
d. You further agree that you will deliver to
Genovese at the termination of your
employment, and will then confirm your
performance hereof, any and all property and
equipment of Genovese which may have been in
your possession.
11. You acknowledge and agree that, other than as this
Agreement or its underlying facts and circumstances may be required to be
disclosed pursuant to the rules and regulations of the Securities and Exchange
Commission applicable to
<PAGE>
Page 9
Genovese, you will not disclose the terms, contents or execution of this
Agreement, any claims that have been or could have been raised against Genovese,
or the facts and circumstances underlying this Agreement, except in the
following circumstances:
a. You may disclose the terms of this Agreement
to your immediate family, so long as such
family member agrees to be bound by the
confidential nature of this Agreement;
b. You may disclose the terms of this Agreement
to (i) your tax advisors and financial
planners so long as such persons are advised
of the confidential nature of this
Agreement, (ii) taxing authorities if
requested by such authorities and so long as
they are advised of the confidential nature
of this Agreement or (iii) your legal
counsel; and
c. Pursuant to a subpoena or other legal
process requiring such disclosure or the
order of a court or governmental agency of
competent jurisdiction, or for purposes of
securing enforcement of the terms and
conditions of this Agreement.
12. Upon service on you, or anyone acting on your behalf, of
any subpoena, order, directive or other legal process requiring you to engage in
conduct encompassed within numbered paragraphs 9, 10, or 11 of this Agreement,
you or your attorney shall immediately notify Genovese of such service and of
the content, if known, of any testimony or information to be provided pursuant
to such subpoena, order, directive or other legal process. Such notice shall be
provided as set forth in numbered paragraph 22 below.
13. You agree that for a period of two years following the
termination of your employment with Genovese, you will not (other than by
ownership of 2% or less of the outstanding publicly traded securities of any
entity) directly or indirectly, own, engage in, invest in, manage, operate,
finance, control, be employed by, be associated with, or render services or
advice to any Competing Business (as such term is defined below) or any business
that is then providing real estate sales, brokerage or consulting services
(including without limitation as a buyer's, seller's, lessor's or lessee's
broker or consultant) to, for, on behalf of a Competing Business or in any
actual or potential transaction with Genovese or with any Competing Business.
For purposes of the foregoing, a "Competing Business" shall be any person or
entity, other than Genovese, that owns or operates two or more pharmacies, or
retail or grocery store facilities that regularly have a licensed pharmacist on
the premises, within the
<PAGE>
Page 10
geographic area consisting of the states of New York, New Jersey and/or
Connecticut. Notwithstanding the foregoing, nothing in this Agreement shall
prevent you from owning, investing in, managing, operating, financing,
controlling, being employed by, being associated with, or rendering services or
advice to a Competing Business that is at least 50-percent-owned, individually
or collectively, by you and/or any one or more of your spouse, any of your and
your spouse's children and any of the spouses of your and your spouse's children
(a "Family-Owned Business"), provided that such Family-Owned Business owns or
operates fewer than four pharmacies or retail or grocery store facilities that
regularly have a licensed pharmacist on the premises; and nothing in this
Agreement shall prevent you from performing services as a consultant to, or
broker acting for, Genovese if and when you are engaged in writing by Genovese
to perform such services. This Section 13 shall be terminated and shall have no
further force or effect after the date of an ownership change of Genovese in
which all or substantially all of the voting capital stock or the assets of
Genovese is acquired by a person or group of persons acting in concert, which
person or group is not an affiliate of Genovese immediately prior to such
ownership change. For purposes of the immediately preceding sentence, an
affiliate of Genovese is any person or entity (i) which directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with Genovese, or (ii) fifty percent or more of the voting
capital stock (or in the case of an entity that is not a corporation, fifty
percent or more of the equity interest) of which is beneficially owned or held
by Genovese directly or indirectly through one or more intermediaries; and the
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of an entity (other
than a natural person), whether through the ownership of voting capital stock,
by contract or otherwise.
14. You agree that you will make all reasonable efforts to
assist and cooperate with Genovese in connection with the defense or prosecution
of any claim that may be made against or by Genovese, or in connection with any
ongoing or future investigation or dispute or claim of any kind involving
Genovese, including any proceeding before any arbitral, administrative,
judicial, legislative, or other body or agency, including testifying in any
proceeding to the extent such claims, investigations or proceedings relate to
services performed or required to be performed by you, pertinent knowledge
possessed by you, or any act or omission by you, at reasonable times and in
reasonable circumstances, provided that upon presentation of substantiating
documentation consistent with resonable reimbursement policies and procedures of
Genovese as in effect from time to time, Genovese will reimburse all of your
reasonable expenses incurred to fulfill this obligation, including, without
limitation, reasonable attorneys fees in the event that the matter reasonably
requires you to obtain separate counsel. You further agree to perform all acts
and execute and deliver any documents that may be reasonably necessary to carry
out the provisions of this paragraph.
<PAGE>
Page 11
15. You acknowledge that you have carefully read and
understood all provisions of this Agreement and, having done so, you agree that
any and all restrictions set forth in this Agreement are fair and reasonable and
are reasonably required for the protection of the business and the interest of
Genovese. You acknowledge that if you violate any of the agreements contained in
numbered paragraphs 9, 10, 11 or 13 of this Agreement, Genovese will suffer
irreparable harm and will have no adequate remedy at law. You hereby consent to
the enforcement of such provisions by means of a temporary or permanent
injunction or any other appropriate equitable relief ordered by any court of
competent jurisdiction, which shall be in addition to any other remedies that
Genovese may have under this Agreement (including without limitation forfeiture
of your options to purchase Genovese shares) or otherwise.
16. Except as otherwise expressly provided in this Agreement,
you acknowledge and agree that Genovese has no obligation now or at any time in
the future, to rehire or reemploy you in any capacity, including as an
independent contractor or consultant. By this Agreement, you intend to remove
yourself from consideration from future employment with Genovese. You agree that
execution of this Agreement is good and sufficient cause to reject any
application you may make notwithstanding this paragraph and to terminate your
employment with Genovese should you obtain such employment or enter into any
employment contract with Genovese.
17. This Agreement constitutes the entire agreement between
Genovese and you, and supersedes and cancels all prior written and oral
agreements, if any, between Genovese and you concerning the subject matter
hereof. You affirm that, in entering into this Agreement, you are not relying
upon any oral or written promise or statement made by anyone at any time on
behalf of Genovese.
18. The parties intend that the provisions of this Agreement,
including its covenants and restrictions, shall be enforced to the fullest
extent permitted by law. If any particular portion of its provisions, covenants
or restrictions is adjudicated or otherwise determined to be invalid, illegal,
unenforceable or ineffective, then that portion of the provisions, covenants or
restrictions shall be deemed severable, and the remaining provisions, covenants
and restrictions set forth in this Agreement shall be enforceable to the fullest
extent permissible under applicable law.
19. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to its
provisions concerning conflicts of law. You and Genovese each hereby (i) agree
that any legal action or proceeding against you or against Genovese under,
arising out of or in any manner relating to this Agreement may be brought in any
of the courts of the State of New York
<PAGE>
Page 12
located within the Southern or Eastern Districts of New York or in the United
States District Court for the Southern or Eastern District of New York, (ii)
consent and submit to the personal jurisdiction of any of such courts in any
such action or proceeding, (iii) consent to the service of any complaint,
summons, notice or other process relating to any such action or proceeding by
delivery thereof to him or it by any method authorized by the law and rules of
civil procedure governing actions brought in such courts, (iv) waive and agree
not to assert any claim or defense in any such action or proceeding based on any
alleged lack of personal jurisdiction or improper venue for lack of residence,
inconvenient forum or otherwise.
20. This Agreement has been reached by mutual and purely
voluntary agreement of the parties, and the parties by their signatures indicate
their full agreement with, and understanding of, its terms. You should consult
an attorney before deciding whether to execute this Agreement. You acknowledge:
a. that you understand that this Agreement has
binding legal effect;
b. that you have been apprised that you are
free to disclose this Agreement to the
attorney of your choice, and of the
advisability of doing so; and
c. that you have been given up to 45 days to
consider this Agreement.
d. that you have been given the following
information, attached hereto as Exhibit A:
(i) the group of individuals covered by
this program;
(ii) the eligibility factors for this
program;
(iii) the time limits applicable to this
program;
(iv) the job titles and ages of all
individuals eligible or selected
for this program and the job titles
and ages of all individuals in the
same job classification who are not
eligible or selected for the
program.
<PAGE>
Page 13
In the event that you execute this Agreement before the end of the 45-day period
described above in subparagraph c of this paragraph, you hereby acknowledge that
you do so voluntarily, and you waive and agree not to assert any claim or
defense in any legal action or proceeding against Genovese or against you, as
the case may be, based on any alleged failure to provide you with 45 days to
consider this Agreement.
21. Genovese agrees that you may revoke this Agreement within
7 days from the date you sign this Agreement, in which case this Agreement shall
be null and void and of no force or effect on either Genovese or you. Any
revocation must be in writing and received by Genovese by 5:00 p.m. on or before
the seventh day after this Agreement is executed by you. Such revocation must be
sent to:
Gene L. Wexler, Esq.
Vice President and General Counsel
Genovese Drug Stores Inc.
80 Marcus Drive
Melville, New York 11747
22. All notices, requests, demands and other communications
provided for or permitted under this Agreement shall be in writing and shall be
either personally delivered (including delivery by express courier such as FedEx
or DHL) or sent by prepaid, certified or registered mail, return receipt
requested, addressed to the party to which notice is to be given at the address
as set forth below, or to such other address as such party may have fixed by
notice given in accordance with the terms hereof:
If to Mr. Kett:
Mr. Herbert Kett
Unit 452-D
Heritage Hills
Somers, New York 10589
with a copy to:
David E. Prager, Esq.
Phillips Nizer Benjamin Krim & Ballon LLP
666 Fifth Avenue
New York, New York 10103
If to Genovese:
<PAGE>
Page 14
Genovese Drug Stores, Inc.
80 Marcus Drive
Melville, New York 11747
Attn: General Counsel
with a copy to:
Dean L. Silverberg, Esq.
Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177
Any notice sent as aforesaid shall be deemed given and effective upon the
earlier of (i) delivery to the address for the receiving party provided as set
forth herein and (ii) the date falling three days after notice of attempted
delivery has been left at the address for the receiving party provided as set
forth herein.
23. This Agreement may not be amended and its terms may not be
altered, modified or waived, except by a writing signed by Genovese and by you.
No waiver of one provision shall be construed as a waiver of any other provision
and the fact that an obligation is waived for any period of time shall not be
considered to be a continuing waiver. Without limiting the foregoing, no waiver
of any breach or violation of this Agreement shall be implied from any party's
forbearance or failure to take action.
24. This Agreement shall expire upon the full performance and
satisfaction of all of the obligations hereunder, provided that the provisions
of numbered paragraphs 3, 5, 6, 7, 9, 10.a, 11, 12, 14, 15, 16, 18, 19, 22 and
24 of this Agreement shall survive its termination.
25. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original for all purposes.
<PAGE>
Page 15
By your signature below, you accept this Agreement and agree
to abide by its terms, conditions, and restrictions, effective after the
expiration of the period for revocation set forth in numbered paragraph 21
hereof.
GENOVESE DRUG STORES INC.
By: /s/ Leonard Genovese
------------------------
Name: Leonard Genovese
Title: President
Accepted and Agreed:
Date: March 6, 1998
/s/ Herbert Kett
----------------
Herbert Kett
State of New York )
) ss:
County of Suffolk )
On this 6th day of March, 1998, before me personally came
Herbert Kett, to me known to be the individual described in the foregoing
instrument, who executed the foregoing instrument in my presence, and who duly
acknowledged to me that he executed the same.
/s/ Doreen Dauscher
-------------------
Notary Public
My commission expires: 8/24/99
<PAGE>
Exhibit 10.20
Genovese Drug Stores, Inc.
80 Marcus Drive
Melville, New York 11747
CONFIDENTIAL
------------
March 6, 1998
Mr. Jerome Stengel
2932 Cheryl Road
Merrick, New York 11566
Re: Separation from Employment
Dear Mr. Stengel:
This letter agreement ("Agreement") sets forth the agreement
reached concerning the termination of your employment with Genovese Drug Stores,
Inc., including its parents, subsidiaries and affiliated corporations, and their
respective current and former successors, assigns, representatives, agents,
attorneys, shareholders, officers, directors and employees ("Genovese").
1. Your employment with Genovese will terminate May 1, 1998.
Genovese will continue through that date your salary, less applicable
deductions, and all employee welfare benefits under currently existing Genovese
benefit plans in which you are now participating. Genovese also will provide you
with a lump-sum payment, less applicable deductions, which represents the value
of your accrued but unused vacation as of May 1, 1998, if any. As of the date
hereof, you had 2 weeks of accrued but unused vacation; and an additional 2
weeks will accrue on May 1, 1998. We understand that, effective May 1, 1998, you
will resign from your positions as a trustee of the Trust under the Genovese
Retirement Income Plan and as a member of the Administrative Committee of the
Genovese Employee Stock Ownership Plan, and also will resign as an officer of
Genovese, GenPlus Managed Care, Inc. and Genovese Medcare, Inc.
2. In consideration for signing this Agreement and in exchange
for the promises, covenants, restrictions and waivers set forth herein, Genovese
will, provided you
<PAGE>
have not revoked this Agreement as set forth below and subject to your
compliance with its terms, provide you with the following payments of cash and
other benefits:
a. a lump-sum payment of $896,174, less
applicable deductions, payable on April 15,
1998, or on the first business day following
the expiration of the revocation period
described in numbered paragraph 21 below,
whichever is later;
b. Genovese will continue your family medical
and dental insurance benefits for a period
of 30 months following termination of your
employment commencing May 2, 1998;
thereafter, you may elect COBRA health care
continuation coverage at your own expense,
if eligible.
c. reasonable attorneys' fees incurred in
connection with negotiation and preparation
of this Agreement, not to exceed $5,000 in
the aggregate, payable within 30 days after
you provide Genovese with a copy of a
billing statement from your attorney;
d. accelerated vesting and payout of shares of
bonus stock--all of your bonus shares (2,760
shares as of the date hereof) in Genovese
will be fully vested and paid to you as of
April 15, 1998;
e. extended expiration date of options--the
expiration date of all of your outstanding
options to purchase shares of Genovese will
be extended until December 31, 2001, and
your eligibility for the Merrill Lynch
cashless exercise program for such options
will continue until the extended expiration
date, provided, however that such options
shall immediately expire and be forfeited in
the event that you breach any of the
covenants contained in numbered paragraph 13
of this Agreement or in the event that you
breach, in any material respect, any of the
covenants contained in numbered paragraph 10
of this Agreement;
(i) As of the date hereof, you held
options to purchase shares of
Genovese as follows:
Per Share
Exercise
Options Grant Date Price
------- ---------- ---------
7,321 3/8/94 8.87
6,655 3/7/95 7.98
4,840 3/26/96 7.85
<PAGE>
5,500 3/12/97 12.27
44,000 6/16/97 17.62
(ii) Attached hereto as Appendix A is a
copy of a resolution adopted
January 26, 1998, by the
Compensation Committee of the
Genovese board of directors,
extending the expiration date of
all of your outstanding options
subject to the conclusion of this
Agreement. Genovese hereby
represents that the Compensation
Committee was duly authorized to
take that action, and that no
further or other action by any
person is or was necessary to
effect such an extension of your
options.
f. retiree purchase discount card--you will
receive and be eligible to use a retiree
purchase discount card for purchases at
Genovese stores, in accordance with the
terms and conditions of the retiree purchase
discount program, for as long as the company
maintains the retiree purchase discount
program; the retiree purchase discount
program currently provides for a 20%
discount on general retail purchases and
prescriptions at cost;
3. You will be entitled to receive the retirement benefits
payable to you pursuant to employee retirement benefit plans of Genovese, which
consist of an annual benefit of $3,364 beginning at age 65 pursuant to the
Genovese Retirement Income Plan; shares of Genovese stock distributable to you
pursuant to the Genovese Employee Stock Ownership Plan (as of December 31, 1996,
you had 5,362.46 shares in your account; we anticipate a more current valuation
shortly), which distribution is expected to occur on or about April 1, 1999; and
your account balance, if any, in the Genovese Retirement and Savings Plan
(401(k) plan). Such benefits will be paid to you subject to and in accordance
with the terms of those plans.
4. Beginning May 1, 1998, and continuing for six months
thereafter (the "Consulting Period"), you agree to provide services as a
consultant to Genovese for a monthly consulting fee of $4,166.67. The consulting
services to be provided are financial and accounting services consistent with
the nature of the duties you are performing and the executive position you
occupy during your employment with Genovese in the period immediately prior to
May 1, 1998. You will provide such services only when and if requested by
Genovese, provided, however, that Genovese may not require you to perform
services more often than an average of two days per week during the Consulting
Period, and provided further that Genovese will make reasonable efforts to
arrange for scheduling any required days of consulting services at mutually
convenient times. Your monthly consulting fee will be paid regardless of the
number of days on which you actually perform consulting services for Genovese.
Genovese will reimburse your out-of-pocket business expenses reasonably incurred
in the performance of consulting duties for Genovese, provided, that you supply
substantiating
<PAGE>
documentation of such expenses in accordance with reasonable expense
reimbursement policies and procedures of Genovese in effect from time to time.
You and Genovese acknowledge that your consulting services will be performed by
you as an independent contractor; that Genovese will not be liable for wage
withholding, Social Security contributions, disability insurance payments or
benefits, or any other payroll tax withholding or payment; and that you will be
solely responsible for the payment of any and all income taxes, Social Security
contributions, and other taxes or charges applicable to your receipt of income
for consulting pursuant this Agreement.
5. Genovese will indemnify you with respect to your service as
an officer of Genovese, GenPlus Managed Care, Inc. and Genovese Medcare, Inc.
and with respect to your service as a trustee of the Trust under the Genovese
Retirement Income Plan and as a member of the Administrative Committee of the
Genovese Employee Stock Ownership Plan to the full extent permitted by the
General Corporation Law of the State of Delaware or any other applicable laws
(including without limitation the Employee Retirement Income Security Act of
1974, as amended) as presently or hereafter in effect. Genovese will advance
expenses for your defense prior to a final disposition of an indemnifiable
claim, provided that you execute an undertaking to repay such advances if it is
ultimately determined that you are not entitled to indemnity.
6. Releases
a. In consideration of the payments and other
consideration described in numbered
paragraph 2 above, and for other good and
valuable consideration, you hereby release
and forever discharge, and by this
instrument release and forever discharge,
Genovese from all debts, obligations,
promises, covenants, agreements, contracts,
endorsements, bonds, controversies, suits,
actions, causes of action, judgments,
damages, expenses, claims or demands, in law
or in equity, which you ever had, now have,
or which may be raised in the future,
regarding any matter that occurred or arose
on or before the date of your execution of
this Agreement, including but not limited to
all claims, whether known or unknown and
whether asserted or unasserted, regarding
your employment at or termination of
employment from Genovese, any contract
(express or implied), any claim for
equitable relief or recovery of punitive,
compensatory, or other damages or monies,
attorneys' fees, any tort, and all claims
for alleged discrimination based upon age,
race, color, sex, sexual orientation,
marital status, religion, national origin,
handicap, disability, or retaliation,
including any claim, asserted or unas
serted, which could arise under Title VII of
the Civil Rights Act of 1964; the Civil
Rights Act of 1991; the Equal Pay Act of
1963; the Age Discrimination in Employment
Act of 1967; the
<PAGE>
Older Workers Benefit Protection Act of
1990; the Americans With Disabilities Act of
1990; the Civil Rights Act of 1866, 42
U.S.C. ss. 1981; the Employee Retirement
Income Security Act of 1974; the Family and
Medical Leave Act of 1993; the New York
State Human Rights Law; and any other
federal, state or local laws, rules or
regulations, whether equal employment
opportunity laws, rules or regulations or
otherwise, or any right under any Genovese
pension, welfare, or stock plans, except the
obligations to you that Genovese has
undertaken pursuant to this Agreement,
including the right to receive payments and
benefits in accordance with the provisions
of numbered paragraphs 1 through 4 above;
provided, that nothing in this release shall
affect or diminish your rights to (i)
enforce this Agreement, (ii) receive
accrued, vested benefits, if any, under
Genovese employee benefit plans, or (iii)
obtain COBRA healthcare continuation
coverage at your own expense, unemployment
insurance benefits, or other similar
post-employment rights or benefits, if you
are eligible therefor. This Agreement does
not constitute any admission by Genovese
that it has violated any law or legal
obligation with respect to any aspect of
your employment or termination therefrom.
b. In consideration of the promises contained
herein, and for other good and valuable
consideration, Genovese hereby releases and
forever discharges, and by this instrument
releases and forever discharges, you from
all debts, obligations, promises, covenants,
agreements, contracts, endorsements, bonds,
controversies, suits, actions, causes of
action, judgments, damages, expenses, claims
or demands, in law or in equity, which it
ever had, now has, or which may arise in the
future, regarding any matter arising on or
before the date of your execution of this
Agreement, except the obligations to
Genovese that you have undertaken pursuant
to this Agreement.
c. You agree that prior to the payment of the
amount described in numbered paragraph 2.a.
hereof, and as a condition of Genovese's
obligation to make such payment, you will
provide Genovese with a release,
substantially in the form of the release
contained in subparagraph a. of this
paragraph, in respect of any matter arising
on or after the date of this Agreement and
on or before the date of such payment.
7. You represent and agree that you have not filed any
lawsuits against Genovese, or filed or caused to be filed any charges or
complaints against Genovese with any municipal, state or federal agency charged
with the enforcement of any law. You also agree,
<PAGE>
to the extent consistent with applicable law, not to initiate any legal action,
charge or complaint against Genovese in any forum whatsoever, in connection with
the claims released by you. In addition, to the extent any such action may be
brought, you expressly waive any claim to any form of monetary or other damages,
or any other form of recovery or relief in connection with any such action, or
in connection with any action brought by a third party. If you violate this
Agreement by filing or bringing any charges, claims or actions contrary to this
paragraph, in addition to any other rights and remedies Genovese may have, you
will immediately reimburse Genovese for all amounts paid to you pursuant to this
Agreement. You also agree to pay all costs and expenses of Genovese in defending
against such charges, claims or actions brought by you or on your behalf,
including reasonable attorneys' fees.
8. You understand and agree that the consideration provided to
you under numbered paragraphs 2, 4 and 6.b. of this Agreement is in addition to
anything of value to which you are otherwise entitled. You represent, warrant
and acknowledge that Genovese owes you no wages, commissions, bonuses, sick pay,
personal leave pay, severance pay, vacation pay or other compensation or
payments or form of remuneration of any kind or nature, except as expressly set
forth herein.
9. You will not issue any communication, written or otherwise,
that disparages, criticizes or otherwise reflects adversely or encourages any
adverse action against Genovese, except if testifying under oath pursuant to any
lawful court order or subpoena or otherwise responding to or providing
disclosures required by law.
10. Genovese Property; Confidential Information
a. You agree to hold all of Genovese's
Confidential Information (as that term is
defined below) in strictest secrecy and
confidence, and to use it solely for the
performance of your duties as a consultant
for Genovese and for no other purpose. You
agree that you will not otherwise, directly
or indirectly, take, use or disclose (or
enable any other person to take, use or
disclose) any of Genovese's Confidential
Information during the Consulting Period or
thereafter without Genovese's prior written
consent.
b. You agree to return to Genovese at the
termination of your employment all files,
records, specifications, or other documents,
and all computer software files, databases
and the like relating to the business of
Genovese, or which contain Confidential
Information, whether prepared or acquired by
you during the course of your employment
with Genovese (and you similarly agree to
return at the end of the Consulting Period
all such files, records, specifications or
other documents, and all such computer
software, files, databases and the like),
including in each case all photocopies,
extracts or summaries of such material that
are or
<PAGE>
may then be in your possession, custody or
control. For purposes of this paragraph
10.b., the term "document" shall include
files, records, correspondence, memoranda
whether in written form or on computer
files, video and audio discs and tapes and
all other recorded, taped, filmed or graphic
material however produced or reproduced, and
any tangible thing that, in whole or in
part, contains, records, illustrates or
conveys information.
c. For the purposes of this Agreement, the
term, "Confidential Information" shall mean
and include all trade secrets, know-how,
sources of supply, prices, contracts with
third parties and any and all other
information that is disclosed to or acquired
by you during or in the course of your
employment or Consulting Period with
Genovese, that relates to the business of
Genovese, and that is not generally
available to the public or generally known
in the drug or retail industry. Confidential
Information includes, without limitation,
lists of suppliers, customer lists and
names, address and phone numbers of
customers, customers' requirements for
products, pricing information and product
price discount structures. The term also
includes any formulas, patterns, devices,
inventions, methods, techniques, processes,
or combinations thereof, or compilations of
information, records, and specifications,
which are owned by Genovese and regularly
used in its products (offered or to be
offered), research, development, marketing,
pricing, business methods, strategies,
policies, or business opportunities. For the
purposes of this definition, the term
"know-how" shall be deemed to mean any and
all general and specific knowledge and
information relating to Genovese's business
operations not in written or printed form,
and not generally available to the public or
generally known in the industry in which
Genovese is engaged.
d. You further agree that you will deliver to
Genovese at the termination of your
employment, and will then confirm your
performance hereof, any and all property and
equipment of Genovese which may have been in
your possession.
11. You acknowledge and agree that, other than as this
Agreement or its underlying facts and circumstances may be required to be
disclosed pursuant to the rules and regulations of the Securities and Exchange
Commission applicable to Genovese, you will not disclose the terms, contents or
execution of this Agreement, any claims that have been or could have been raised
against Genovese, or the facts and circumstances underlying this Agreement,
except in the following circumstances:
<PAGE>
a. You may disclose the terms of this Agreement
to your immediate family, so long as such
family member agrees to be bound by the
confidential nature of this Agreement;
b. You may disclose the terms of this Agreement
to (i) your tax advisors and financial
planners so long as such persons are advised
of the confidential nature of this
Agreement, (ii) taxing authorities if
requested by such authorities and so long as
they are advised of the confidential nature
of this Agreement or (iii) your legal
counsel; and
c. Pursuant to a subpoena or other legal
process requiring such disclosure or the
order of a court or governmental agency of
competent jurisdiction, or for purposes of
securing enforcement of the terms and
conditions of this Agreement.
12. Upon service on you, or anyone acting on your behalf, of
any subpoena, order, directive or other legal process requiring you to engage in
conduct encompassed within numbered paragraphs 9, 10, or 11 of this Agreement,
you or your attorney shall immediately notify Genovese of such service and of
the content, if known, of any testimony or information to be provided pursuant
to such subpoena, order, directive or other legal process. Such notice shall be
provided as set forth in numbered paragraph 22 below.
13. You agree that for a period of two years following the end
of your employment with Genovese, you will not, directly or indirectly, own,
engage in, invest in, manage, operate, finance, control, be employed by, be
associated with, or render services or advice to any Competing Business (as such
term is defined below), other than by ownership of 2% or less of the outstanding
publicly traded securities of any entity. For purposes of the foregoing, a
"Competing Business" shall be any person or entity, other than Genovese, that
owns or operates two or more pharmacies, or retail or grocery store facilities
that regularly have a licensed pharmacist on the premises, within the geographic
area consisting of the states of New York, New Jersey and Connecticut.
Notwithstanding the foregoing, this paragraph 13 shall be terminated and shall
have no further force or effect after the date of an ownership change of
Genovese in which all or substantially all of the voting capital stock or the
assets of Genovese is acquired by a person or group of persons acting in
concert, which person or group is not an affiliate of Genovese immediately prior
to such ownership change. For purposes of the immediately preceding sentence, an
affiliate of Genovese is any person or entity (i) which directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with Genovese, or (ii) fifty percent or more of the voting
capital stock (or in the case of an entity which is not a corporation, fifty
percent or more of the equity interest) of which is beneficially owned or held
by Genovese directly or indirectly through one or more intermediaries; and the
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of an entity (other
<PAGE>
than a natural person), whether through the ownership of voting capital stock,
by contract or otherwise.
14. You agree that you will make all reasonable efforts to
assist and cooperate with Genovese in connection with the defense or prosecution
of any claim that may be made against or by Genovese, or in connection with any
ongoing or future investigation or dispute or claim of any kind involving
Genovese, including any proceeding before any arbitral, administrative,
judicial, legislative, or other body or agency, including testifying in any
proceeding to the extent such claims, investigations or proceedings relate to
services performed or required to be performed by you, pertinent knowledge
possessed by you, or any act or omission by you, at reasonable times and in
reasonable circumstances, provided that upon presentation of substantiating
documentation consistent with reasonable reimbursement policies and procedures
of Genovese as in effect from time to time, Genovese will reimburse all of your
reasonable expenses incurred to fulfill this obligation, including, without
limitation, reasonable attorneys fees in the event that the matter reasonably
requires you to obtain separate counsel. You further agree to perform all acts
and execute and deliver any documents that may be reasonably necessary to carry
out the provisions of this paragraph.
15. You acknowledge that you have carefully read and
understood all provisions of this Agreement and, having done so, you agree that
any and all restrictions set forth in this Agreement are fair and reasonable and
are reasonably required for the protection of the business and the interest of
Genovese. You acknowledge that if you violate any of the agreements contained in
numbered paragraphs 9, 10, 11 or 13 of this Agreement, Genovese will suffer
irreparable harm and will have no adequate remedy at law. You hereby consent to
the enforcement of such provisions by means of a temporary or permanent
injunction or any other appropriate equitable relief ordered by any court of
competent jurisdiction, which shall be in addition to any other remedies that
Genovese may have under this Agreement (including without limitation forfeiture
of your options to purchase Genovese shares) or otherwise.
16. Except as otherwise expressly provided in this Agreement,
you acknowledge and agree that Genovese has no obligation now or at any time in
the future, to rehire or reemploy you in any capacity, including as an
independent contractor or consultant. By this Agreement, you intend to remove
yourself from consideration from future employment with Genovese. You agree that
execution of this Agreement is good and sufficient cause to reject any
application you may make notwithstanding this paragraph and to terminate your
employment with Genovese should you obtain such employment or enter into any
employment contract with Genovese.
17. This Agreement constitutes the entire agreement between
Genovese and you, and supersedes and cancels all prior written and oral
agreements, if any, between Genovese and you concerning the subject matter
hereof. You affirm that, in entering into this Agreement, you are not relying
upon any oral or written promise or statement made by anyone at any time on
behalf of Genovese.
<PAGE>
18. The parties intend that the provisions of this Agreement,
including its covenants and restrictions, shall be enforced to the fullest
extent permitted by law. If any particular portion of its provisions, covenants
or restrictions is adjudicated or otherwise determined to be invalid, illegal,
unenforceable or ineffective, then that portion of the provisions, covenants or
restrictions shall be deemed severable, and the remaining provisions, covenants
and restrictions set forth in this Agreement shall be enforceable to the fullest
extent permissible under applicable law.
19. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to its
provisions concerning conflicts of law. You and Genovese each hereby (i) agree
that any legal action or proceeding against you or against Genovese under,
arising out of or in any manner relating to this Agreement may be brought in any
of the courts of the State of New York located within the Southern or Eastern
Districts of New York or in the United States District Court for the Southern or
Eastern District of New York, (ii) consent and submit to the personal
jurisdiction of any of such courts in any such action or proceeding, (iii)
consent to the service of any complaint, summons, notice or other process
relating to any such action or proceeding by delivery thereof to him or it by
any method authorized by the law and rules of civil procedure governing actions
brought in such courts, (iv) waive and agree not to assert any claim or defense
in any such action or proceeding based on any alleged lack of personal
jurisdiction or improper venue for lack of residence, inconvenient forum or
otherwise.
20. This Agreement has been reached by mutual and purely
voluntary agreement of the parties, and the parties by their signatures indicate
their full agreement with, and understanding of, its terms. You should consult
an attorney before deciding whether to execute this Agreement. You acknowledge:
a. that you understand that this Agreement has
binding legal effect;
b. that you have been apprised that you are
free to disclose this Agreement to the
attorney of your choice, and of the
advisability of doing so; and
c. that you have been given up to 45 days to
consider this Agreement.
d. that you have been given the following
information, attached hereto as Exhibit A:
(i) the group of individuals covered by
this program;
(ii) the eligibility factors for this
program;
(iii) the time limits applicable to this
program;
<PAGE>
(iv) the job titles and ages of all
individuals eligible or selected
for this program and the job titles
and ages of all individuals in the
same job classification who are not
eligible or selected for the
program.
In the event that you execute this Agreement before the end of the 45-day period
described above in subparagraph c of this paragraph, you hereby acknowledge that
you do so voluntarily, and you waive and agree not to assert any claim or
defense in any legal action or proceeding against Genovese or against you, as
the case may be, based on any alleged failure to provide you with up to 45 days
to consider this Agreement.
21. Genovese agrees that you may revoke this Agreement within
7 days from the date you sign this Agreement, in which case this Agreement shall
be null and void and of no force or effect on either Genovese or you. Any
revocation must be in writing and received by Genovese by 5:00 p.m. on or before
the seventh day after this Agreement is executed by you. Such revocation must be
sent to:
Gene L. Wexler, Esq.
Vice President and General Counsel
Genovese Drug Stores Inc.
80 Marcus Drive
Melville, New York 11747
22. All notices, requests, demands and other communications
provided for or permitted under this Agreement shall be in writing and shall be
either personally delivered (including delivery by express courier such as FedEx
or DHL) or sent by prepaid, certified or registered mail, return receipt
requested, addressed to the party to which notice is to be given at the address
as set forth below, or to such other address as such party may have fixed by
notice given in accordance with the terms hereof:
If to Mr. Stengel:
Mr. Jerome Stengel
2932 Cheryl Road
Merrick, New York 11566
with a copy to:
David E. Prager, Esq.
Phillips Nizer Benjamin Krim & Ballon LLP
666 Fifth Avenue
New York, New York 10103
<PAGE>
If to Genovese:
Genovese Drug Stores, Inc.
80 Marcus Drive
Melville, New York 11747
Attn: General Counsel
with a copy to:
Dean L. Silverberg, Esq.
Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177
Any notice sent as aforesaid shall be deemed given and effective upon the
earlier of (i) delivery to the address for the receiving party provided as set
forth herein and (ii) the date falling three days after notice of attempted
delivery has been left at the address for the receiving party provided as set
forth herein.
23. This Agreement may not be amended and its terms may not be
altered, modified or waived, except by a writing signed by Genovese and by you.
No waiver of one provision shall be construed as a waiver of any other provision
and the fact that an obligation is waived for any period of time shall not be
considered to be a continuing waiver. Without limiting the foregoing, no waiver
of any breach or violation of this Agreement shall be implied from any party's
forbearance or failure to take action.
24. This Agreement shall expire upon the full performance and
satisfaction of all of the obligations hereunder, provided that the provisions
of numbered paragraphs 3, 5, 6, 7, 9, 10.a, 11, 12, 14, 15, 16, 18, 19, 22 and
24 of this Agreement shall survive its termination.
25. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original for all purposes.
<PAGE>
By your signature below, you accept this Agreement and agree
to abide by its terms, conditions, and restrictions, effective after the
expiration of the period for revocation set forth in numbered paragraph 21
hereof.
GENOVESE DRUG STORES INC.
By: /s/ Leonard Genovese
----------------------
Name: Leonard Genovese
Title: President
Accepted and Agreed:
Date: 3/6/98
/s/ Jerome Stengel
------------------
Jerome Stengel
State of New York )
) ss:
County of Suffolk )
On this 6th day of March, 1998, before me personally came
Jerome Stengel, to me known to be the individual described in the foregoing
instrument, who executed the foregoing instrument in my presence, and who duly
acknowledged to me that he executed the same.
/s/ Doreen Dauscher
-------------------
Notary Public
My commission expires: 8/24/99
<PAGE>
Exhibit 10.21
Genovese Drug Stores, Inc.
80 Marcus Drive
Melville, New York 11747
CONFIDENTIAL
------------
March 6, 1998
Mr. Irwin Livon
26 Meade Drive
Centerport, New York 11721
Re: Separation from Employment
Dear Mr. Livon:
This letter agreement ("Agreement") sets forth the agreement
reached concerning the termination of your employment with Genovese Drug Stores,
Inc., including its parents, subsidiaries and affiliated corporations, and their
respective current and former successors, assigns, representatives, agents,
attorneys, shareholders, officers, directors and employees ("Genovese").
1. Your employment with Genovese will terminate May 1, 1998.
Genovese will continue through that date your salary, less applicable
deductions, and all employee welfare benefits under currently existing Genovese
benefit plans in which you are now participating. Genovese also will provide you
with a lump-sum payment, less applicable deductions, which represents the value
of your accrued but unused vacation as of May 1, 1998, if any. As of the date
hereof, you had one week of accrued but unused vacation; and an additional 2
weeks will accrue on May 1, 1998.
2. In consideration for signing this Agreement and in exchange
for the promises, covenants, restrictions and waivers set forth herein, Genovese
will, provided you have not revoked this Agreement as set forth below and
subject to your compliance with its terms, provide you with the following
payments of cash and other benefits:
<PAGE>
Page 2
a. a lump-sum payment of $607,692, less
applicable deductions, payable on April 15,
1998, or on the first business day following
the expiration of the revocation period
described in numbered paragraph 19 below,
whichever is later;
b. Genovese will continue your family medical
and dental insurance benefits for a period
of 30 months following termination of your
employment commencing May 2, 1998;
thereafter, you may elect COBRA healthcare
continuation coverage at your own expense,
if eligible;
c. reasonable attorneys' fees incurred in
connection with negotiation and preparation
of this Agreement, not to exceed $5,000 in
the aggregate, payable within 30 days after
you provide Genovese with a copy of a
billing statement from your attorney;
d. accelerated vesting and payout of shares of
bonus stock--all of your bonus shares (2,953
shares as of the date hereof) in Genovese
will be fully vested and paid to you as of
April 15, 1998;
e. extended expiration date of options--the
expiration date of all of your outstanding
options to purchase shares of Genovese will
be extended until December 31, 2001, and
your eligibility for the Merrill Lynch
cashless exercise program for such options
will continue until the extended expiration
date, provided, however that such options
shall immediately expire and be forfeited in
the event that you breach any of the
covenants contained in numbered paragraph 11
of this Agreement or in the event that you
breach, in any material respect, any of the
covenants contained in numbered paragraph 8
of this Agreement;
(i) As of the date hereof, you held
options to purchase shares of
Genovese as follows:
Per Share
Grant Exercise
Options Date Price
------- ----- ---------
8,858 3/8/92 6.85
8,858 12/10/92 5.72
<PAGE>
Page 3
7,321 3/8/94 8.87
6,655 3/7/95 7.98
4,840 3/26/96 7.85
5,500 3/12/97 12.27
44,000 6/16/97 17.62
(ii) Attached hereto as Appendix A is a
copy of a resolution adopted
January 26, 1998, by the
Compensation Committee of the
Genovese board of directors,
extending the expiration date of
all your outstanding options
subject to the conclusion of this
Agreement. Genovese hereby
represents that the Compensation
Committee was duly authorized to
take that action, and that no
further or other action by any
person is or was necessary to
effect such an extension of your
options.
f. automobile--the automobile currently
provided by Genovese for your use will be
purchased by Genovese and transferred to
your ownership, without charge, in
accordance with the terms of an arrangement
of general application to certain Genovese
employees that is in the process of being
adopted by Genovese; Genovese will use
commercially reasonable efforts to adopt
such arrangement and effect such transfer on
or before May 1, 1998; you may continue to
use the automobile under the same terms and
conditions as currently apply to such use
until the transfer of ownership actually
occurs; Genovese will pay any sales tax
required to be paid in connection with such
transfer; and
3. You will be entitled to receive the retirement benefits
payable to you pursuant to the Genovese Employee Stock Ownership Plan,
consisting of shares of Genovese stock distributable to you pursuant to such
plan (as of December 31, 1996, you had 258.37 shares in your account; we
anticipate a more current valuation shortly), which distribution is expected to
occur on or about April 1, 1999; and your account balance, if any, in the
Genovese Retirement and Savings Plan (401(K) plan). Such benefits will be paid
to you subject to and in accordance with the terms of those plans.
4. Releases
<PAGE>
Page 4
a. In consideration of the payments and other
consideration described in numbered
paragraph 2 above, and for other good and
valuable consideration, you hereby release
and forever discharge, and by this
instrument release and forever discharge,
Genovese from all debts, obligations,
promises, covenants, agreements, contracts,
endorsements, bonds, controversies, suits,
actions, causes of action, judgments,
damages, expenses, claims or demands, in law
or in equity, which you ever had, now have,
or which may be raised in the future,
regarding any matter that occurred or arose
on or before the date of your execution of
this Agreement, including but not limited to
all claims, whether known or unknown and
whether asserted or unasserted, regarding
your employment at or termination of
employment from Genovese, any contract
(express or implied), any claim for
equitable relief or recovery of punitive,
compensatory, or other damages or monies,
attorneys' fees, any tort, and all claims
for alleged discrimination based upon age,
race, color, sex, sexual orientation,
marital status, religion, national origin,
handicap, disability, or retaliation,
including any claim, asserted or unas
serted, which could arise under Title VII of
the Civil Rights Act of 1964; the Civil
Rights Act of 1991; the Equal Pay Act of
1963; the Age Discrimination in Employment
Act of 1967; the Older Workers Benefit
Protection Act of 1990; the Americans With
Disabilities Act of 1990; the Civil Rights
Act of 1866, 42 U.S.C.ss. 1981; the Employee
Retirement Income Security Act of 1974; the
Family and Medical Leave Act of 1993; the
New York State Human Rights Law; and any
other federal, state or local laws, rules or
regulations, whether equal employment
opportunity laws, rules or regulations or
otherwise, or any right under any Genovese
pension, welfare, or stock plans, except the
obligations to you that Genovese has
undertaken pursuant to this Agreement,
including the right to receive payments and
benefits in accordance with the provisions
of numbered paragraphs 1 through 3 above;
provided, that nothing in this release shall
affect or diminish your rights to
(i) enforce this Agreement, (ii) receive
accrued, vested benefits, if any, under
Genovese employee benefit plans, or (iii)
obtain COBRA healthcare continuation
coverage at your own expense, unemployment
insurance benefits, or other similar post-
employment rights or benefits, if you are
eligible therefor. This Agreement does not
constitute any admission by Genovese that it
<PAGE>
Page 5
has violated any law or legal obligation
with respect to any aspect of your
employment or termination therefrom.
b. In consideration of the promises contained
herein, and for other good and valuable
consideration, Genovese hereby releases and
forever discharges, and by this instrument
releases and forever discharges, you from
all debts, obligations, promises, covenants,
agreements, contracts, endorsements, bonds,
controversies, suits, actions, causes of
action, judgments, damages, expenses, claims
or demands, in law or in equity, which it
ever had, now has, or which may arise in the
future, regarding any matter arising on or
before the date of your execution of this
Agreement, except the obligations to
Genovese that you have undertaken pursuant
to this Agreement.
c. You agree that prior to the payment of the
amount described in numbered paragraph 2.a.
hereof, and as a condition of Genovese's
obligation to make such payment, you will
provide Genovese with a release,
substantially in the form of the release
contained in subparagraph a. of this
paragraph, in respect of any matter arising
on or after the date of this Agreement and
on or before the date of such payment.
5. You represent and agree that you have not filed any
lawsuits against Genovese, or filed or caused to be filed any charges or
complaints against Genovese with any municipal, state or federal agency charged
with the enforcement of any law. You also agree, to the extent consistent with
applicable law, not to initiate any legal action, charge or complaint against
Genovese in any forum whatsoever, in connection with the claims released by you.
In addition, to the extent any such action may be brought, you expressly waive
any claim to any form of monetary or other damages, or any other form of
recovery or relief in connection with any such action, or in connection with any
action brought by a third party. If you violate this Agreement by filing or
bringing any charges, claims or actions contrary to this paragraph, in addition
to any other rights and remedies Genovese may have, you will immediately
reimburse Genovese for all amounts paid to you pursuant to this Agreement. You
also agree to pay all costs and expenses of Genovese in defending against such
charges, claims or actions brought by you or on your behalf, including
reasonable attorneys' fees.
6. You understand and agree that the consideration provided to
you under numbered paragraphs 2 and 4.b. of this Agreement is in addition to
anything of value to which you are otherwise entitled. You represent, warrant
and acknowledge that Genovese owes you no wages, commissions, bonuses, sick pay,
personal leave pay, severance pay, vacation pay or
<PAGE>
Page 6
other compensation or payments or form of remuneration of any kind or nature,
except as expressly set forth herein.
7. You will not issue any communication, written or otherwise,
that disparages, criticizes or otherwise reflects adversely or encourages any
adverse action against Genovese, except if testifying under oath pursuant to any
lawful court order or subpoena or otherwise responding to or providing
disclosures required by law.
8. Genovese Property; Confidential Information
a. You agree to hold all of Genovese's
Confidential Information (as that term is
defined below) in strictest secrecy and
confidence, and to use it solely for the
performance of your duties as a consultant
for Genovese and for no other purpose. You
agree that you will not otherwise, directly
or indirectly, take, use or disclose (or
enable any other person to take, use or
disclose) any of Genovese's Confidential
Information during the Consulting Period or
thereafter without Genovese's prior written
consent.
b. You agree to return to Genovese at the
termination of your employment all files,
records, specifications, or other documents,
and all computer software files, databases
and the like relating to the business of
Genovese, or which contain Confidential
Information, whether prepared or acquired by
you during the course of your employment
with Genovese (and you similarly agree to
return at the end of the Consulting Period
all such files, records, specifications or
other documents, and all such computer
software, files, databases and the like),
including in each case all photocopies,
extracts or summaries of such material that
are or may then be in your possession,
custody or control. For purposes of this
paragraph 8.b., the term "document" shall
include files, records, correspondence,
memoranda whether in written form or on
computer files, video and audio discs and
tapes and all other recorded, taped, filmed
or graphic material however produced or
reproduced, and any tangible thing that, in
whole or in part, contains, records,
illustrates or conveys information.
c. For the purposes of this Agreement, the
term, "Confidential Information" shall mean
and include all trade secrets, know-how,
sources of supply, prices, contracts with
third parties and any and
<PAGE>
Page 7
all other information that is disclosed to
or acquired by you during or in the course
of your employment or Consulting Period with
Genovese, that relates to the business of
Genovese, and that is not generally
available to the public or generally known
in the drug or retail industry. Confidential
Information includes, without limitation,
lists of suppliers, customer lists and
names, address and phone numbers of
customers, customers' requirements for
products, pricing information and product
price discount structures. The term also
includes any formulas, patterns, devices,
inventions, methods, techniques, processes,
or combinations thereof, or compilations of
information, records, and specifications,
which are owned by Genovese and regularly
used in its products (offered or to be
offered), research, development, marketing,
pricing, business methods, strategies,
policies, or business opportunities. For the
purposes of this definition, the term
"know-how" shall be deemed to mean any and
all general and specific knowledge and
information relating to Genovese's business
operations not in written or printed form,
and not generally available to the public or
generally known in the industry in which
Genovese is engaged.
d. You further agree that you will deliver to
Genovese at the termination of your
employment, and will then confirm your
performance hereof, any and all property and
equipment of Genovese which may have been in
your possession.
9. You acknowledge and agree that, other than as this
Agreement or its underlying facts and circumstances may be required to be
disclosed pursuant to the rules and regulations of the Securities and Exchange
Commission applicable to Genovese, you will not disclose the terms, contents or
execution of this Agreement, any claims that have been or could have been raised
against Genovese, or the facts and circumstances underlying this Agreement,
except in the following circumstances:
a. You may disclose the terms of this Agreement
to your immediate family, so long as such
family member agrees to be bound by the
confidential nature of this Agreement;
b. You may disclose the terms of this Agreement
to (i) your tax advisors and financial
planners so long as such persons are advised
of the confidential nature of this
Agreement, (ii) taxing authorities if
requested by such authorities and so long as
they are
<PAGE>
Page 8
advised of the confidential nature of this
Agreement or (iii) your legal counsel; and
c. Pursuant to a subpoena or other legal
process requiring such disclosure or the
order of a court or governmental agency of
competent jurisdiction, or for purposes of
securing enforcement of the terms and
conditions of this Agreement.
10. Upon service on you, or anyone acting on your behalf, of
any subpoena, order, directive or other legal process requiring you to engage in
conduct encompassed within numbered paragraphs 7, 8, or 9 of this Agreement, you
or your attorney shall immediately notify Genovese of such service and of the
content, if known, of any testimony or information to be provided pursuant to
such subpoena, order, directive or other legal process. Such notice shall be
provided as set forth in numbered paragraph 20 below.
11. You agree that for a period of two years following the
termination of your employment with Genovese, you will not, directly or
indirectly, own, engage in, invest in, manage, operate, finance, control, be
employed by, be associated with, or render services or advice to any Competing
Business (as such term is defined below), other than by ownership of 2% or less
of the outstanding publicly traded securities of any entity. For purposes of the
foregoing, a "Competing Business" shall be any person or entity, other than
Genovese, that owns or operates two or more pharmacies, or retail or grocery
store facilities that regularly have a licensed pharmacist on the premises,
within the geographic area consisting of the states of New York, New Jersey and
Connecticut. Notwithstanding the foregoing, this paragraph 11 shall be
terminated and shall have no further force or effect after the date of an
ownership change of Genovese in which all or substantially all of the voting
capital stock or the assets of Genovese is acquired by a person or group of
persons acting in concert, which person or group is not an affiliate of Genovese
immediately prior to such ownership change. For purposes of the immediately
preceding sentence, an affiliate of Genovese is any person or entity (i) which
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with Genovese, or (ii) fifty percent
or more of the voting capital stock (or in the case of an entity which is not a
corporation, fifty percent or more of the equity interest) of which is
beneficially owned or held by Genovese directly or indirectly through one or
more intermediaries; and the term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of an entity (other than a natural person), whether through the
ownership of voting capital stock, by contract or otherwise.
12. You agree that you will make all reasonable efforts to
assist and cooperate with Genovese in connection with the defense or prosecution
of any claim that may be made against or by Genovese, or in connection with any
ongoing or future investigation or
<PAGE>
Page 9
dispute or claim of any kind involving Genovese, including any proceeding before
any arbitral, administrative, judicial, legislative, or other body or agency,
including testifying in any proceeding to the extent such claims, investigations
or proceedings relate to services performed or required to be performed by you,
pertinent knowledge possessed by you, or any act or omission by you, at
reasonable times and in reasonable circumstances, provided that upon
presentation of substantiating documentation consistent with reasonable
reimbursement policies and procedures of Genovese as in effect from time to
time, Genovese will reimburse all of your reasonable expenses incurred to
fulfill this obligation, including, without limitation, reasonable attorneys
fees in the event that the matter reasonably requires you to obtain separate
counsel. You further agree to perform all acts and execute and deliver any
documents that may be reasonably necessary to carry out the provisions of this
paragraph.
13. You acknowledge that you have carefully read and
understood all provisions of this Agreement and, having done so, you agree that
any and all restrictions set forth in this Agreement are fair and reasonable and
are reasonably required for the protection of the business and the interest of
Genovese. You acknowledge that if you violate any of the agreements contained in
numbered paragraphs 7, 8, 9 or 11 of this Agreement, Genovese will suffer
irreparable harm and will have no adequate remedy at law. You hereby consent to
the enforcement of such provisions by means of a temporary or permanent
injunction or any other appropriate equitable relief ordered by any court of
competent jurisdiction, which shall be in addition to any other remedies that
Genovese may have under this Agreement (including without limitation forfeiture
of your options to purchase Genovese shares) or otherwise.
14. Except as otherwise expressly provided in this Agreement,
you acknowledge and agree that Genovese has no obligation now or at any time in
the future, to rehire or reemploy you in any capacity, including as an
independent contractor or consultant. By this Agreement, you intend to remove
yourself from consideration from future employment with Genovese. You agree that
execution of this Agreement is good and sufficient cause to reject any
application you may make notwithstanding this paragraph and to terminate your
employment with Genovese should you obtain such employment or enter into any
employment contract with Genovese.
15. This Agreement constitutes the entire agreement between
Genovese and you, and supersedes and cancels all prior written and oral
agreements, if any, between Genovese and you concerning the subject matter
hereof. You affirm that, in entering into this Agreement, you are not relying
upon any oral or written promise or statement made by anyone at any time on
behalf of Genovese.
16. The parties intend that the provisions of this Agreement,
including its covenants and restrictions, shall be enforced to the fullest
extent permitted by law. If any particular portion of its provisions, covenants
or restrictions is adjudicated or otherwise
<PAGE>
Page 10
determined to be invalid, illegal, unenforceable or ineffective, then that
portion of the provisions, covenants or restrictions shall be deemed severable,
and the remaining provisions, covenants and restrictions set forth in this
Agreement shall be enforceable to the fullest extent permissible under
applicable law.
17. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to its
provisions concerning conflicts of law. You and Genovese each hereby (i) agree
that any legal action or proceeding against you or against Genovese under,
arising out of or in any manner relating to this Agreement may be brought in any
of the courts of the State of New York located within the Southern or Eastern
Districts of New York or in the United States District Court for the Southern or
Eastern District of New York, (ii) consent and submit to the personal
jurisdiction of any of such courts in any such action or proceeding, (iii)
consent to the service of any complaint, summons, notice or other process
relating to any such action or proceeding by delivery thereof to him or it by
any method authorized by the law and rules of civil procedure governing actions
brought in such courts, (iv) waive and agree not to assert any claim or defense
in any such action or proceeding based on any alleged lack of personal
jurisdiction or improper venue for lack of residence, inconvenient forum or
otherwise.
18. This Agreement has been reached by mutual and purely
voluntary agreement of the parties, and the parties by their signatures indicate
their full agreement with, and understanding of, its terms. You should consult
an attorney before deciding whether to execute this Agreement. You acknowledge:
a. that you understand that this Agreement has
binding legal effect;
b. that you have been apprised that you are
free to disclose this Agreement to the
attorney of your choice, and of the
advisability of doing so; and
c. that you have been given up to 45 days to
consider this Agreement.
d. that you have been given the following
information, attached hereto as Exhibit A:
(i) the group of individuals covered by
this program;
(ii) the eligibility factors for this
program;
(iii) the time limits applicable to this
program;
<PAGE>
Page 11
(iv) the job titles and ages of all
individuals eligible or selected
for this program and the job titles
and ages of all individuals in the
same job classification who are not
eligible or selected for the
program.
In the event that you execute this Agreement before the end of the 45-day period
described above in subparagraph c of this paragraph, you hereby acknowledge that
you do so voluntarily, and you waive and agree not to assert any claim or
defense in any legal action or proceeding against Genovese or against you, as
the case may be, based on any alleged failure to provide you with up to 45 days
to consider this Agreement.
19. Genovese agrees that you may revoke this Agreement within
7 days from the date you sign this Agreement, in which case this Agreement shall
be null and void and of no force or effect on either Genovese or you. Any
revocation must be in writing and received by Genovese by 5:00 p.m. on or before
the seventh day after this Agreement is executed by you. Such revocation must be
sent to:
Gene L. Wexler, Esq.
Vice President and General Counsel
Genovese Drug Stores Inc.
80 Marcus Drive
Melville, New York 11747
20. All notices, requests, demands and other communications
provided for or permitted under this Agreement shall be in writing and shall be
either personally delivered (including delivery by express courier such as FedEx
or DHL) or sent by prepaid, certified or registered mail, return receipt
requested, addressed to the party to which notice is to be given at the address
as set forth below, or to such other address as such party may have fixed by
notice given in accordance with the terms hereof:
If to Mr. Livon:
Mr. Irwin Livon
26 Meade Drive
Centerport, New York 11721
with a copy to:
David E. Prager, Esq.
Phillips Nizer Benjamin Krim & Ballon LLP
666 Fifth Avenue
<PAGE>
Page 12
New York, New York 10103
If to Genovese:
Genovese Drug Stores, Inc.
80 Marcus Drive
Melville, New York 11747
Attn: General Counsel
with a copy to:
Dean L. Silverberg, Esq.
Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177
Any notice sent as aforesaid shall be deemed given and effective upon the
earlier of (i) delivery to the address for the receiving party provided as set
forth herein and (ii) the date falling three days after notice of attempted
delivery has been left at the address for the receiving party provided as set
forth herein.
21. This Agreement may not be amended and its terms may not be
altered, modified or waived, except by a writing signed by Genovese and by you.
No waiver of one provision shall be construed as a waiver of any other provision
and the fact that an obligation is waived for any period of time shall not be
considered to be a continuing waiver. Without limiting the foregoing, no waiver
of any breach or violation of this Agreement shall be implied from any party's
forbearance or failure to take action.
22. This Agreement shall expire upon the full performance or
other satisfaction of the obligations hereunder, provided that the provisions of
numbered paragraphs 3, 4, 5, 7, 8.a, 9, 10, 12, 13, 14, 16, 17, 20, and 22 of
this Agreement shall survive its termination.
23. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original for all purposes.
<PAGE>
Page 13
By your signature below, you accept this Agreement and agree
to abide by its terms, conditions, and restrictions, effective after the
expiration of the period for revocation set forth in numbered paragraph 19
hereof.
GENOVESE DRUG STORES INC.
By: /s/ Leonard Genovese
------------------------
Name: Leonard Genovese
Title: President
Accepted and Agreed:
Date: March 6, 1998
/s/ Irwin Livon
---------------
Irwin Livon
State of New York )
) ss:
County of Suffolk )
On this 6th day of March, 1998, before me personally came
Irwin Livon, to me known to be the individual described in the foregoing
instrument, who executed the foregoing instrument in my presence, and who duly
acknowledged to me that he executed the same.
/s/Doreen Dauscher
------------------
Notary Public
My commission expires: 8/24/99
<PAGE>
Exhibit 11
GENOVESE DRUG STORES, INC.
EXHIBIT 11
STATEMENT RE: COMPUTATION OF NET (LOSS) INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FISCAL YEARS ENDED
1998 1997 1996
---- ---- ----
Basic: (a)
Net (loss) income $ (676) $ 10,401 $ 7,607
-------- -------- --------
Weighted average shares outstanding 13,631 13,469 13,414
-------- -------- --------
Net (loss) income per share $ (0.05) $ 0.77 $ 0.57
======== ======== ========
Diluted: (a) (b)
Net (loss) income $ (676) $ 10,401 $ 7,607
-------- -------- --------
Weighted average shares outstanding 13,631 13,469 13,414
Equivalent shares-dilutive stock options -- 122 63
Equivalent shares-dilutive stock bonus -- 31 52
outstanding -------- -------- --------
Adusted weighted average shares 13,631 13,622 13,529
outstanding -------- -------- --------
Diluted net (loss) income per share $ (0.05) $ 0.76 $ 0.56
======== ======== ========
(a) Adjusted, where appropriate, to reflect the effect of the 10 percent
stock dividend distributed in fiscal 1998, 1997, and 1996.
(b) The effect of the potential dilutive common shares for fiscal 1998
would be antidilutive and is therefore not presented.
<PAGE>
Exhibit 21
----------
Subsidiaries of the Registrant
------------------------------
Percentage of
Securities
Name State of Incorporation Owned
- ---- ---------------------- -------------
GenPlus Managed Care, Inc. Delaware 100%
Genovese MedCare, Inc. Delaware 100%
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Genovese Drug Stores, Inc.:
We consent to the incorporation by reference in the Registration Statement on
Forms S-8 for the 1984 Employee Stock Option and Appreciation Rights Plan and
the 1987 Executive Bonus and Stock Plan of our report dated March 4, 1998
appearing in this Annual Report on Form 10-K of Genovese Drug Stores, Inc. for
the year ended January 30, 1998.
/s/ DELOITTE & TOUCHE LLP
New York, New York
April 29, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-30-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> JAN-30-1998
<CASH> 2,487
<SECURITIES> 0
<RECEIVABLES> 20,340
<ALLOWANCES> 0
<INVENTORY> 116,046
<CURRENT-ASSETS> 145,234
<PP&E> 163,932
<DEPRECIATION> 78,457
<TOTAL-ASSETS> 241,989
<CURRENT-LIABILITIES> 91,230
<BONDS> 58,441
0
0
<COMMON> 13,813
<OTHER-SE> 60,035
<TOTAL-LIABILITY-AND-EQUITY> 241,989
<SALES> 769,460
<TOTAL-REVENUES> 769,460
<CGS> 553,737
<TOTAL-COSTS> 553,737
<OTHER-EXPENSES> 213,152
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,774
<INCOME-PRETAX> (1,203)
<INCOME-TAX> (527)
<INCOME-CONTINUING> (676)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (676)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
