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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
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/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Solicitin Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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REVCO, D.S., INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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REVCO D.S., INC.
1925 ENTERPRISE PARKWAY
TWINSBURG, OHIO 44087
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Dear Stockholder:
The 1996 Annual Meeting of Stockholders of Revco D.S., Inc. will be held at
The Ritz-Carlton, 1515 West Third Street, Cleveland, Ohio, on Tuesday, September
24, 1996 at 11:30 a.m. local time, for the following purposes:
(1) To elect directors;
(2) To approve modifications to the bonus component of the Revco D.S.,
Inc. executive compensation program; and
(3) To transact such other business as may properly come before the
meeting.
Stockholders of record at the close of business on August 19, 1996, will be
entitled to receive notice of and vote at the meeting or any adjournment
thereof.
By Order Of The Board Of Directors,
/s/ Jack A. Staph
JACK A. STAPH
Senior Vice President,
Secretary and General Counsel
AUGUST 23, 1996
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND PROMPTLY RETURN
THE PROXY IN THE ENCLOSED ENVELOPE. IN ORDER TO AVOID THE ADDITIONAL EXPENSE TO
THE COMPANY OF FURTHER SOLICITATION, WE ASK YOUR COOPERATION IN MAILING IN YOUR
PROXY PROMPTLY.
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TABLE OF CONTENTS
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PAGE
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GENERAL INFORMATION................................................................. 1
VOTING SECURITIES OF THE COMPANY.................................................... 1
THE BOARD OF DIRECTORS.............................................................. 1
Committees of the Board........................................................ 4
Compensation of the Board...................................................... 5
Stockholder's Agreement........................................................ 6
Certain Relationships and Related Transactions................................. 6
Proceedings Relating to Directors.............................................. 6
ELECTION OF DIRECTORS............................................................... 7
Nominees....................................................................... 7
Voting Information for Proposal One............................................ 7
APPROVAL OF MATERIAL TERMS OF BONUS
COMPONENT OF THE EXECUTIVE COMPENSATION
PROGRAM........................................................................... 7
General........................................................................ 7
Voting Information for Proposal Two............................................ 7
SECURITY OWNERSHIP OF CERTAIN PERSONS............................................... 8
EXECUTIVE COMPENSATION.............................................................. 11
Compensation and Option Tables and Performance Graph........................... 11
Report of the Human Resources Committee........................................ 15
Employment Agreements with Certain Executives.................................. 18
Defined Benefit Plan........................................................... 18
OTHER INFORMATION................................................................... 20
Section 16(a) Beneficial Ownership Reporting Compliance........................ 20
Stockholder Proposals.......................................................... 20
Auditors....................................................................... 20
Solicitation................................................................... 20
EXHIBIT A -- Corporate Incentive Plan............................................... 21
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REVCO D.S., INC.
1925 ENTERPRISE PARKWAY
TWINSBURG, OHIO 44087
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Revco D.S., Inc. (the "Company" or "Revco") of proxies
in the accompanying form to be voted at the Annual Meeting of the Company's
stockholders to be held on September 24, 1996 (the "Annual Meeting"). Shares
represented by each proxy properly executed and returned will be voted unless
revoked. A stockholder may revoke a proxy at any time before it is exercised by
filing with the secretary of the Company a written revocation or a duly executed
proxy bearing a later date or by voting in person at the Annual Meeting.
Properly executed proxies will be voted as specified thereon, and in the absence
of such specification will be voted for the twelve nominees for director, and
for approval of the modifications to the bonus component of the Company's
executive compensation program. This Proxy Statement and the accompanying form
of proxy, together with the Company's annual report to stockholders, are being
mailed to stockholders on or about August 23, 1996.
A majority of the outstanding shares of common stock will constitute a
quorum at the Annual Meeting. Abstentions and broker non-votes are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business. Abstentions are counted in the tabulations of the votes cast on
proposals presented to the stockholders, whereas broker non-votes are not
counted for purposes of determining whether a proposal has been approved.
VOTING SECURITIES OF THE COMPANY
As of August 19, 1996, the Company had a total of 68,561,049 shares of
common stock, $.01 par value per share (the "Common Stock") issued and
outstanding, including 1,202,000 shares of treasury stock. Holders of shares of
Common Stock at the close of business on August 19, 1996 (the "Record Date") are
entitled to vote at the Annual Meeting or any adjournment thereof. Each holder
of shares of the Common Stock is entitled to one vote for each share of Common
Stock owned. On August 19, 1996, the closing price for the Common Stock on the
New York Stock Exchange was $25 7/8 per share.
THE BOARD OF DIRECTORS
The Company's By-Laws provide that the business and affairs of the Company
will be managed by, or under the supervision of, the Board of Directors, and
that the Board of Directors may from time to time fix the number of directors.
The number of directors is currently twelve. During fiscal year 1996, the Board
of Directors held a total of nine meetings. All of the directors, other than Mr.
Zell, attended at least 75% of the meetings of the Board and committees of which
they were members. Biographical information regarding each current director and
each nominee for election as a director is set forth below. Each member of the
Board of Directors will serve until his or her successor is elected by the
stockholders or until his or her earlier resignation or removal. Except where
indicated below, each member of the Board of Directors has served since June 1,
1992.
Carl A. Bellini
Mr. Bellini, age 62, was selected, effective August 1, 1994, by the Board
of Directors to become a member of the Board to fill a vacancy. Mr. Bellini was
elected Executive Vice President and Chief Operating Officer of the Company on
October 13, 1993. From August 18, 1992 to October 13, 1993, Mr. Bellini served
as Executive Vice President of Marketing and Stores for the Company. From
approximately December 1991 to April 1992, Mr. Bellini served as Acting Chief
Operating Officer of Standard Brands Paint Co., which filed
<PAGE> 5
a bankruptcy proceeding in March 1992 and emerged from bankruptcy during 1993.
From June 1989 until June 1991, Mr. Bellini served as President and Chief
Operating Officer of Erol's, Inc., a video and electronics chain based in
Washington, D.C. From December 1987 to June 1989, Mr. Bellini served as
Executive Vice President of Store Operations for the Company.
Livio M. Borghese
Mr. Borghese, age 57, is Chairman of Curtis Industries, Inc., a national
distributor of hardware products, chemicals and automotive replacement parts and
a manufacturer and distributor of security products. He was with Bear Stearns &
Co. from 1968 to 1988, ending as Senior Managing Director and Member of the
Executive Committee. Mr. Borghese was Chairman of International Corporate
Finance at Prudential-Bache Securities in 1989. He presently owns a company
engaged in international trading and investments and is a board member of OMI
Corp., the United Kingdom Corp. and Noel Group, Inc.
William H. Campbell
Dr. Campbell, age 54, is, and has been since August 1992, Professor and
Dean at the University of North Carolina School of Pharmacy, after having served
in academic and administrative positions at Auburn University (from prior to
August 1991 to August 1992), the University of Washington, and Oregon State
University. Throughout his career he has concentrated on identifying and
expanding the opportunities for teaching, research and practice in managed care
pharmacy. He has been actively involved in pharmacy and non-pharmacy
organizations that support the development of cost-effective organizations for
delivery of care, including the American Public Health Association, the American
Society of Hospital Pharmacists, the American Pharmaceutical Association, and
the Academy of Managed Care Pharmacy. He is a Past-President of the American
Association of Colleges of Pharmacy. Dr. Campbell was selected by the Board of
Directors on July 30, 1996 as a nominee for election, at the Annual Meeting, as
a director.
Rod F. Dammeyer
Mr. Dammeyer, age 55, is, and since 1985 has been, President and a director
of Anixter International Inc. ("Anixter"), a holding and distribution company,
and is, and since 1993 has been, Chief Executive Officer of Anixter. Since 1996,
Mr. Dammeyer has served as Managing Director of EGI Corporate Investments, Inc.,
a diversified management and investment company. Mr. Dammeyer is also a director
of Capsure Holdings Corp., ANTEC Corporation, Jacor Communications, Inc., Lukens
Inc., IMC Global Inc., Sealy Corporation, Falcon Building Products, Inc. (where
he has served as Chairman since July 1996), and a trustee of Van Kampen American
Capital, Inc. closed-end mutual funds and series trusts. Mr. Dammeyer is a
member of the executive committee of the general partner of Zell/Chilmark Fund,
L.P. ("Zell/Chilmark"). Mr. Dammeyer was selected, effective December 15, 1992,
by the Board of Directors to become a member of the Board to fill a vacancy.
Talton R. Embry
Mr. Embry, age 49, is, and since 1978 has been, Managing Director and Chief
Investment Officer of Magten Asset Management Corporation, which he established
and which is an investment advisory firm. Mr. Embry is also a director of
Capsure Holdings Corp., Varco International Inc. ("Varco"), TSX Corporation,
Combined Broadcasting, Inc., BDK Holdings, Inc., Thermodyne Holdings Corp. and
Anacomp, Inc. Mr. Embry and Mr. Zell were elected on July 27, 1992, as
Co-Chairmen of the Board of Directors of the Company.
Ben Evans
Mr. Evans, age 67, was a partner of Ernst & Whinney, now Ernst & Young,
until his retirement in 1989. Mr. Evans was an audit partner supervising the
audits of companies in many diverse industries with heavy concentration in
apparel, retailing and commercial finance. From 1978 through 1989, Mr. Evans was
a member of Ernst & Whinney's corporate financial services group concentrating
on bankruptcy assignments
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generally on behalf of unsecured creditors committees, with special emphasis in
the apparel, retailing, food, drug and pharmaceutical industries. Since 1989,
Mr. Evans has been a consultant for the firm of Ernst & Young in their corporate
financial services group continuing work in the bankruptcy area. Mr. Evans is
also a director of Kash n' Karry Food Stores, Inc. and Megafoods Stores, Inc.
John V. Guttag
Dr. Guttag, age 47, is Professor of Computer Science and Engineering at the
Massachusetts Institute of Technology ("MIT"). Since his arrival at MIT in 1979,
Dr. Guttag has headed the Laboratory for Computer Science's Systematic Program
Development Group and currently is Associate Department Head for Computer
Science of the Electrical Engineering and Computer Science Department. Dr.
Guttag is a member of the governing council of the School of Engineering and a
member of the Executive Committee of the Laboratory for Computer Science at MIT.
Dr. Guttag is also a director of INSO Corporation and the Computing Research
Association. Dr. Guttag was selected, effective March 23, 1994, by the Board of
Directors to become a member of the Board to fill a vacancy.
D. Dwayne Hoven
Mr. Hoven, age 54, was elected Chief Executive Officer of the Company
effective August 1993 and was elected President of the Company in July 1992.
From July 1992 to August 1993, Mr. Hoven served as Chief Operating Officer of
the Company. From December 1991 to July 1992, Mr. Hoven served as Executive Vice
President, Marketing and Stores for the Company. From June 1992 to July 1992,
Mr. Hoven served as a member of the interim office of the President of the
Company. From July 1989 to December 1991, Mr. Hoven served as Executive Vice
President of Stores for the Company. From January 1988 to June 1989, Mr. Hoven
served as Senior Vice President of Distribution for the Company. Mr. Hoven is
also a director of OfficeMax, Inc. Mr. Hoven was selected, effective August 27,
1992, by the Board of Directors to become a member of the Board to fill a
vacancy.
Walter B. Reinhold
Mr. Reinhold, age 71, is Chairman of the Board of Varco International, Inc.
("Varco"), a company engaged in the business of manufacturing oil and gas well
drilling equipment and machinery, drilling rig instrumentation and blow out
prevention equipment. He has been with Varco since 1949 and was Chief Executive
Officer from 1979 to April 1991, and prior thereto he served as Executive Vice
President of Varco. Mr. Reinhold is a standing member of the American Petroleum
Institute, Stanford Associates, and the Society of Petroleum Engineers. He is a
Director of the Amdahl Corporation, the National Ocean Industries Association
and the Petroleum Equipment Suppliers Association and a trustee for the City of
Hope.
Sheli Z. Rosenberg
Ms. Rosenberg, age 54, is, and since 1994 has been, President and Chief
Executive Officer, and from 1980, a director and Executive Vice President of
Equity Financial and Management Company and Equity Group Investments, Inc.; is,
and since 1980 has been, a member of Rosenberg & Liebentritt, P.C.; is, and
since 1991 has been a director of American Classic Voyages Co. and Vice
President and Assistant Secretary of American Classic Voyages Co. since 1990 and
1991 respectively; and is, and since 1985 has been, a director, Vice President
and General Counsel of Capsure Holdings Corp., a company engaged in the business
of specialty property and casualty insurance. Ms. Rosenberg is also a director
of Anixter International Inc., Jacor Communications, Inc. (where she serves as
Chair), Falcon Building Products, Inc., Manufactured Home Communities, Inc., a
self-administered and self-managed equity real estate investment trust which
owns and operates properties in 20 states, and Sealy Corporation, and a trustee
of Equity Residential Properties Trust. Ms. Rosenberg has been Vice President of
First Capital Benefits Administrators, Inc. ("First Capital") since July 1987.
First Capital filed a petition under the federal bankruptcy laws on January 3,
1995 which ultimately resulted in First Capital's liquidation on November 11,
1995. Ms. Rosenberg is a member of the executive committee of the general
partner of Zell/Chilmark. Prior to October 4, 1991, Ms. Rosenberg was Vice
President of Madison Management Group, Inc., which filed a petition under
Chapter 11 of the Bankruptcy
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Code on November 8, 1991. Ms. Rosenberg was selected, effective March 23, 1994,
by the Board of Directors to become a member of the Board to fill a vacancy.
David M. Schulte
Mr. Schulte, age 49, is, and since mid-1990 has been, one of two
individuals (the other being Mr. Zell) who act as general partners of the
general partner of Zell/Chilmark, a limited partnership with capital commitments
in excess of $1 billion formed to invest in and provide capital and management
support to companies that are engaged in or are the appropriate subject of
significant recapitalizations or corporate restructurings, both in and out of
the bankruptcy process. Since 1984, Mr. Schulte has been managing general
partner of Chilmark Partners, L.P., a merchant banking firm that has specialized
in providing corporate and investment banking advice to companies on the
restructuring of their business in conjunction with recapitalizations, although
he currently devotes all of his time to the affairs of Zell/Chilmark. Mr.
Schulte is also a director of Sealy Corporation. Mr. Schulte is not a nominee
for election, at the Annual Meeting, as a director.
Thomas O. Thorsen
Mr. Thorsen, age 64, has been a Director of The Travelers Corporation, now
known as The Travelers Group ("Travelers"), a multiline insurance, financial and
health services institution, since 1987. Prior to his retirement in May 1992,
Mr. Thorsen was Vice Chairman of the Board of Travelers since 1990. He was Vice
Chairman and Chief Financial Officer from 1990 to 1991. Prior thereto, he was
Executive Vice President and Chief Financial Officer from 1984 to 1990. Before
joining Travelers, Mr. Thorsen served thirty-one years with General Electric
Company in various financial positions, including Senior Vice President and
Chief Financial Officer from 1980 to 1984. Mr. Thorsen is a director of Iowa
Select Farms, Inc. and a member of the advisory committee of Iowa Select Farms,
L.P., entities engaged in large scale hog production. He is also a director of
PGA Golf Properties, Inc., an affiliate of the PGA of America involved in the
development and ownership of golf facilities.
Samuel Zell
Mr. Zell, age 54, is, and since 1981 has been, Chairman of the Board of
Equity Financial and Management Company and, since 1986 has been Chairman of the
Board of Equity Group Investments, Inc., two privately owned affiliated
investment and management companies; is, and since mid-1990 has been, the other
individual (along with Mr. Schulte) who acts as a general partner of the general
partner of Zell/Chilmark; is, and since 1985 has been, Chairman of the Board of
Anixter; is, and from 1987 has served as Chairman of the Board and Executive
Officer of Capsure Holdings Corp., a company engaged in the business of
specialty property and casualty insurance; is, and since 1993 has been, Chairman
of the Board of Equity Residential Properties Trust, a self-administered,
self-managed equity real estate investment trust; is Chairman of the Board and,
from March 31, 1995 until August 13, 1996, had served as Chief Executive
Officer, and from 1993 to March 31, 1995 had served as Co-Chairman of the Board,
of Manufactured Home Communities, Inc., a self-administered and self-managed
equity real estate investment trust which owns and operates properties in 20
states. Mr. Zell is a member of the board of directors of American Classic
Voyages Co. (where he has served as Chairman of the Board since August 1993),
Sealy Corporation, Quality Food Centers, Inc., Ramco Energy plc, based in the
United Kingdom, a petroleum services company that supplies corrosion control and
ancillary services to the petroleum and marine industries, and Tele Tech
Holdings, Inc., a provider of customer care solutions. Prior to October 4, 1991,
Mr. Zell was President of Madison Management Group, Inc., which filed a petition
under Chapter 11 of the Bankruptcy Code on November 8, 1991. Mr. Zell and Mr.
Embry were elected on July 27, 1992, as Co-Chairmen of the Board of Directors of
the Company.
COMMITTEES OF THE BOARD
The Company's By-Laws provide that the Board may designate one or more
committees, to exercise certain powers and authority of the Board of Directors.
The Board of Directors committees are as follows: the Executive Committee, the
Audit Committee, the Human Resources Committee and the Pension Administra-
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tion/Investment Committee. Each committee consists of one or more of the
directors of the Company, as determined by the Board.
Messrs. Embry (Chairman), Hoven and Zell have been appointed by the Board
of Directors to constitute the Executive Committee of the Board of Directors.
The Executive Committee, which met once during the year, is authorized to
exercise all of the powers and authority of the Board of Directors, except to
the extent restricted by the Delaware General Corporation Law.
The Audit Committee, which met once during the year, consists of five
non-employee directors: Messrs. Evans, Guttag, Reinhold, Schulte and Thorsen
(Chairman). The Audit Committee's responsibilities include the following: (i)
satisfying itself that the Company's internal control system is effective and
sufficient to safeguard the assets of the Company and permit the issuance of
reliable financial reports for both internal and external purposes; (ii)
reviewing the Company's accounting principles and practices and approving
changes that are expected to have a significant impact on the Company's current
or future financial statements; (iii) satisfying itself that the Company's
financial statements present fairly the Company's financial condition and the
results of its operations; (iv) satisfying itself as to the adequacy of the
Company's financial statement disclosure; and (v) serving as an informed voice
on the Board of Directors in evaluating and supporting the financial, accounting
and internal audit functions of the Company.
The Human Resources Committee, which met three times during the year,
consists of four non-employee directors: Messrs. Dammeyer, Embry (Chairman) and
Evans and Ms. Rosenberg. The Human Resources Committee's responsibilities
include the following: (i) reviewing and approving the Company's executive
compensation structure and overall benefits program; (ii) administering certain
of the Company's benefit plans; (iii) monitoring the performance and succession
of senior management and recommending improvements when and as necessary; and
(iv) providing for orderly continuity (including by recommending director
nominees to the full Board) of membership on the Board of Directors and its
Committees. The Human Resources Committee will consider nominees recommended by
stockholders. Stockholders who wish to submit such recommendations should
forward the candidate's name, along with(i) a biographical sketch of the
candidate and a statement of his or her qualifications, and (ii) evidence that
the candidate has consented to serve as a director, if elected, to the Company's
Secretary.
The Pension Administration/Investment Committee, which met once during the
year, consists of three non-employee directors: Messrs. Borghese, Dammeyer
(Chairman) and Schulte. The Pension Administration/Investment Committee's
responsibilities include the following: (i) administering the Revco D.S., Inc.
Retirement Income Plan and Trust, as amended, in a nondiscriminatory manner for
the exclusive benefit of participants and their beneficiaries, as required by
the Plan documents and applicable law; and (ii) administering the Company's
401(k) Savings Plan, as amended, in a nondiscriminatory manner for the exclusive
purpose of providing benefits to the members and their beneficiaries, in
accordance with the Plan documents and applicable law.
COMPENSATION OF THE BOARD
Only directors of the Company who are Revco employees are eligible to
participate in the Company's profit sharing, management incentive or pension
plans, except that, under the Pension Plan, directors who were covered by the
plan as Revco employees with vested rights retain such vested rights.
Only directors of the Company who are not Revco employees are paid fees or
remuneration, as such, for services on the Board or on any committee of the
Board. Such fees consist of an annual stipend of $30,000 for each director plus
$1,000 for each committee member, other than the committee chairman, or $1,250
for the committee chairman, for each committee meeting attended on a date on
which no Board meeting is scheduled. The annual stipend is paid in equal
quarterly payments which are subject to a $1,000 reduction for each missed Board
meeting. Directors also receive payment of travel and lodging expenses in
connection with their attendance at Board and committee meetings.
Pursuant to the terms of the Company's 1992 Non-Employee Directors' Stock
Option Plan, as amended (the "Directors' Plan"), current and future non-employee
directors of the Company other than Messrs. Zell,
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Embry and Schulte are eligible to receive grants of non-qualified stock options.
The current non-employee directors eligible to receive stock options under the
Directors' Plan are Messrs. Borghese, Dammeyer, Evans, Guttag, Reinhold and
Thorsen and Ms. Rosenberg. On July 27, 1992, each of the directors identified
above (other than Messrs. Dammeyer and Guttag and Ms. Rosenberg) as being
eligible to receive options under the Directors' Plan, as well as one former
director who was a director on July 27, 1992, was granted an option to purchase
10,000 shares of Common Stock at the fair market value on the date of grant. Mr.
Dammeyer was granted, on December 15, 1992, an option to purchase 10,000 shares
of Common Stock at the fair market value on the date of grant. Mr. Guttag and
Ms. Rosenberg were each granted, on March 21, 1994, an option to purchase 10,000
shares of Common Stock at the fair market value on the date of grant. On July
27, 1993, July 27, 1994, July 27, 1995 and July 29, 1996, each eligible director
(other than Mr. Guttag and Ms. Rosenberg), and on March 21, 1995 and March 21,
1996, each of Mr. Guttag and Ms. Rosenberg, was granted an option to purchase
5,000 shares of Common Stock at the fair market value on the date of grant.
STOCKHOLDER'S AGREEMENT
The Company and Zell/Chilmark are parties to a stockholder's agreement,
dated June 1, 1992 (the "Stockholder's Agreement"), which provides that the
Company will take all actions necessary to ensure that the following individuals
are nominated to the Board: (i) two members designated by the Company's chief
executive officer, and (ii) subject to the requirements described below, a
number of members designated by Zell/Chilmark determined by multiplying
Zell/Chilmark's percentage Common Stock ownership times nine, with the product
rounded up to the nearest whole number. As of August 19, 1996, Zell/Chilmark
beneficially owned approximately 19% of the Company's outstanding Common Stock,
thereby entitling Zell/Chilmark to designate two nominees. For the Annual
Meeting, Mr. Hoven is the only chief executive officer designee, and Mr. Zell
and Ms. Rosenberg are Zell/Chilmark's designees. Zell/Chilmark is entitled under
any event to designate at least two members, and to designate not less than a
majority of the Board members if Zell/Chilmark owns at least fifty percent of
the outstanding Common Stock. The Stockholder's Agreement terminates upon the
earlier to occur of (x) such time as Zell/Chilmark owns less than one percent of
the outstanding Common Stock, and (y) the tenth anniversary of its execution.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal year 1996, the Company purchased, in the ordinary course of
the Company's remodeling of existing and construction of new retail drugstores,
an aggregate of $543,827 of electrical supplies from a wholly-owned operating
subsidiary of Anixter International, Inc., with which Messrs. Dammeyer and Zell
and Ms. Rosenberg are affiliated. In addition, during fiscal year 1996 the
Company engaged the services of the law firm of Rosenberg & Liebentritt, P.C.,
of which Ms. Rosenberg is a member.
PROCEEDINGS RELATING TO DIRECTORS
On September 9, 1993, Mr. Embry and Magten Asset Management Corporation
("Magten"), without admitting or denying the allegations in a complaint by the
Securities and Exchange Commission (the "Commission"), consented to the entry of
judgments enjoining them from violating (and, in the case of Mr. Embry, aiding
and abetting violations of) anti-fraud and other provisions of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Investment Advisers
Act of 1940, as amended, and the Investment Company Act of 1940, as amended. The
Commission's complaint alleged principally that Mr. Embry failed to advise
clients of certain personal trades relevant to the clients' holdings, to obtain
certain consents required under applicable law in connection therewith and to
comply with certain reporting requirements. The complaint did not involve the
securities of the Company. As part of the settlement, Mr. Embry made a $1
million payment for the benefit of certain of Magten's clients. On April 28,
1995, a Company stockholder, suing derivatively on behalf of the Company, filed
a complaint in U.S. District Court for the Southern District of New York which
named Magten, Mr. Embry, certain of Magten's clients, and the Company as
defendants. The complaint alleges that Magten's clients violated the "short
swing profits" laws, Section 16(b) of the Securities Exchange Act of 1934, by
selling shares issued by the Company in a July 1994 offering within six months
of that offering. Magten's attorneys filed a motion for summary judgment because
the allegedly violative conduct is expressly exempted from the "short swing
profits" laws. On February 6,
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1996, the District Court dismissed the action in its entirety. On February 22,
1996, the plaintiff appealed the District Court's decision.
During fiscal year 1994, Mr. Thorsen consented, without a hearing and
without admitting or denying the matters set forth therein, to the issuance of
an order of the Commission, and to the entry of the findings and imposition of
the remedial sanctions set forth therein. The matters covered by the order have
no relationship either to the Company or its securities.
ELECTION OF DIRECTORS
NOMINEES
The twelve persons nominated by the Board of Directors for election at the
Annual Meeting are Carl A. Bellini, Livio M. Borghese, William H. Campbell, Rod
F. Dammeyer, Talton R. Embry, Ben Evans, John V. Guttag, D. Dwayne Hoven, Walter
B. Reinhold, Sheli Z. Rosenberg, Thomas O. Thorsen and Samuel Zell. Biographical
information regarding the twelve nominees and information regarding their share
ownership is set forth herein under the captions "The Board of Directors" and
"Security Ownership of Certain Persons".
VOTING INFORMATION FOR PROPOSAL ONE
The shares represented by the enclosed proxy will be voted "FOR" the
election of the twelve nominees unless otherwise directed. All elections for
Directors shall be decided by a plurality of the votes of the shares of Common
Stock voting in person or by proxy, and entitled to vote on the election of
Directors, at the Annual Meeting. The Company anticipates that all nominees
will, if elected, be able to serve. However, if any nominee becomes unable to
serve for any reason, the shares represented by the enclosed proxy may be voted
for such substituted nominee as may be designated by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" ALL TWELVE
NOMINEES.
APPROVAL OF MATERIAL TERMS OF BONUS COMPONENT OF THE
EXECUTIVE COMPENSATION PROGRAM
GENERAL
On July 30, 1996, the Human Resources Committee recommended that the Board
of Directors approve, and the Board of Directors so approved, certain
modifications to the Company's existing bonus program. The material terms of the
modified bonus program are described below in the Report of the Human Resources
Committee, and the modified bonus program is set forth in Exhibit A to this
Proxy Statement. The Company is seeking stockholder approval of the
modifications to the bonus program to satisfy the requirements of Section 162(m)
of the Internal Revenue Code of 1986, as amended (the "Code"), as further
discussed in the Report of the Human Resources Committee.
VOTING INFORMATION FOR PROPOSAL TWO
The proposal to approve the modifications to the bonus component of the
Executive Compensation Program requires the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE
MODIFICATIONS TO THE BONUS COMPONENT OF THE EXECUTIVE COMPENSATION PROGRAM.
7
<PAGE> 11
SECURITY OWNERSHIP OF CERTAIN PERSONS
The following table sets forth information regarding the stock ownership as
of August 19, 1996 of all directors of the Company, all directors and officers
as a group, and all persons who are known by the Company to own beneficially
more than 5% of the Company's Common Stock:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES PERCENTAGE
- ---- ---------- ----------
<S> <C> <C> <C> <C>
FMR Corp. 6,019,822 (1) 8.62%(1)
82 Devonshire Street
Boston, Massachusetts 02109
Neuberger & Berman L.P. 4,408,497 (2) 6.31%(2)
605 Third Avenue
New York, New York 10158
Magten Asset Management Corporation 6,650,400 (3) 9.52%(3)
35 East 21st Street
New York, New York 10010
Zell/Chilmark Fund, L.P. 13,102,288 (4) 18.75%(4)
Two North Riverside Plaza,
Suite 1500
Chicago, Illinois 60606
DIRECTORS:
Carl A. Bellini 199,527 (5) *(5)
Livio M. Borghese 33,395 (6) *(6)
William H. Campbell (nominee) 0 *
Rod F. Dammeyer 13,129,315 (7) 18.79%(7)
Talton R. Embry 6,866,149 (8) 9.83%(8)
Ben Evans 39,820 (9) *(9)
John V. Guttag 22,689 (10) *(10)
D. Dwayne Hoven 495,604 (11) *(11)
Walter B. Reinhold 33,506 (12) *(12)
Sheli Z. Rosenberg 13,120,825 (13) 18.78%(13)
David M. Schulte 13,102,288 (4) 18.75%(4)
Thomas O. Thorsen 29,238 (14) *(14)
Samuel Zell 13,102,288 (4) 18.75%(4)
NAMED EXECUTIVE OFFICERS:
D. Dwayne Hoven 495,604 (11) *(11)
Carl A. Bellini 199,527 (5) *(5)
James J. Hagan (15) (15)
James P. Mastrian 147,419 (16) *(16)
Jack A. Staph 143,566 (17) *(17)
All directors and officers as a 21,672,721 31.02%
group
(34 individuals)
(4)(5)(6)(7)(8)(9) (4)(5)(6)(7)(8)(9)
(10)(11)(12)(13)(14) (10)(11)(12)(13)(14)
(15)(16)(17)(18) (15)(16)(17)(18)
</TABLE>
- ---------
* Less than 1%
(1) Based on a Statement on Schedule 13G, dated May 9, 1996, filed by FMR
Corp., a corporation organized under the laws of the Commonwealth of
Massachusetts.
(2) Based on a Statement on Schedule 13G, dated February 12, 1996, filed by
Neuberger & Berman L.P., an investment advisor registered under Section 203
of the Investment Advisors Act of 1940.
(3) Magten Asset Management Corporation ("Magten") has beneficial ownership of
an aggregate of 6,650,400 shares of Common Stock of the Company.
8
<PAGE> 12
Investment advisory clients of Magten beneficially own all of the shares of
Common Stock shown as beneficially owned by Magten (collectively, the
"Investment Advisory Shares"). Magten has shared dispositive power with
respect to all of the shares of Common Stock beneficially owned by the
clients, shared voting power with respect to 4,848,609 of these shares and
no voting power with respect to 1,801,791 of these shares.
Magten may be deemed to be the beneficial owner of the Investment Advisory
Shares because Magten's investment advisory contracts with its investment
advisory clients grant it the power to vote and dispose of such shares.
Magten has declared that pursuant to Rule 13d-4 promulgated under the
Exchange Act, the filing by it of its Schedule 13D shall not be construed
as an admission that it is the beneficial owner of those shares.
(4) All of these shares are owned by Zell/Chilmark. Zell/Chilmark is a Delaware
limited partnership. The general partner of Zell/Chilmark is ZC Limited
Partnership ("ZC Limited"), an Illinois limited partnership whose sole
business is to act as general partner of and manage the investment of the
capital of Zell/Chilmark. The sole general partner of ZC Limited
Partnership is ZC Partnership, a Delaware general partnership, the sole
partners of which are ZC, Inc., an Illinois corporation wholly-owned and
controlled by Samuel Zell, and CZ Inc., a Delaware corporation wholly-owned
and controlled by David M. Schulte. Messrs. Schulte, Zell and Dammeyer and
Ms. Rosenberg are directors of the Company. Under the regulations of the
Commission, Messrs. Schulte, Zell and Dammeyer and Ms. Rosenberg may be
deemed to be the beneficial owners of all of the shares of Common Stock
which are beneficially owned by Zell/Chilmark. Messrs. Schulte, Zell and
Dammeyer and Ms. Rosenberg disclaim beneficial ownership of the shares of
Common Stock beneficially owned by Zell/Chilmark.
(5) Consists of: (i) 53,216 shares held by Mr. Bellini individually, including
18,000 shares of restricted stock; (ii) 1,305 shares held by Mr. Bellini's
son who resides with him; and (iii) 145,006 shares subject to currently
exercisable non-qualified stock options granted pursuant to the Incentive
Plan. Mr. Bellini disclaims beneficial ownership of the shares referred to
in (ii) above.
(6) Consists of: (i) 11,353 shares held by Mr. Borghese individually; and (ii)
22,042 shares subject to currently exercisable nonqualified stock options
granted pursuant to the Directors' Plan.
(7) Consists of: (i) 27,027 shares subject to currently exercisable
non-qualified stock options granted pursuant to the Directors' Plan, and
(ii) 13,102,288 shares owned by Zell/Chilmark. On October 19, 1995, Mr.
Dammeyer became a member of the executive committee of ZC Limited. As a
member of the executive committee, Mr. Dammeyer shares in the power to vote
or to direct the vote of the securities beneficially owned by Zell/Chilmark
and shares in the power to dispose or to direct the disposition of the
securities beneficially owned by Zell/Chilmark. Mr. Dammeyer disclaims
beneficial ownership of the securities beneficially owned by Zell/Chilmark.
(8) Mr. Embry, as sole stockholder and a Managing Director of Magten, may be
deemed to beneficially own all the shares of Common Stock beneficially
owned by Magten, as described in footnote (3) above.
In addition, Mr. Embry owns directly 1,413 shares of Common Stock. Mr.
Embry has sole voting and dispositive power with respect to the 1,413
shares of Common Stock owned directly by him.
Mr. Embry, as trustee of four pension trusts for the benefit of current and
former employees of Magten, including himself (the "Pension Trusts"), also
has sole voting and dispositive power with respect to 203,920 shares of
Common Stock owned by such trusts (collectively, the "Pension Trust
Shares").
Mr. Embry, as trustee for three trusts for members of his family (the
"Family Trusts"), has sole voting and investment power with respect to
8,061 shares of Common Stock (collectively, the "Family Trust Shares").
Mr. Embry, as custodian for his son, has sole dispositive and voting power
with respect to 942 shares of Common Stock, and may be deemed under Section
13(d) of the Exchange Act to have beneficial ownership of 1,413 shares of
Common Stock of the Company owned by his wife.
The shares described in footnote (3) above as beneficially owned by Magten
with respect to which Mr. Embry may be deemed a beneficial owner, together
with the additional shares described in this
9
<PAGE> 13
footnote (8) with respect to which Mr. Embry may also be deemed a
beneficial owner, aggregate 6,866,149 shares of Common Stock.
Mr. Embry has declared that pursuant to Rule 13d-4 the filing by him of his
Schedule 13D shall not be construed as an admission that he is the
beneficial owner of the Investment Advisory Shares, the Pension Trust
Shares (to the extent such shares exceed his and his wife's pro rata
interest as beneficiaries of such trusts) or the Family Trust Shares. Mr.
Embry disclaims beneficial ownership of the shares owned by his wife.
(9) Consists of: (i) 10,582 shares held by Mr. Evans individually; and (ii)
29,238 shares subject to currently exercisable non-qualified stock options
granted pursuant to the Directors' Plan.
(10) Consists of: (i) 8,352 shares held by Mr. Guttag individually; and (ii)
14,337 shares subject to currently exercisable non-qualified stock options
granted pursuant to the Directors' Plan.
(11) Consists of: (i) 63,218 shares held jointly by Mr. Hoven and his wife; (ii)
407,386 shares subject to currently exercisable non-qualified stock options
granted pursuant to the Incentive Plan; and (iii) 25,000 shares of
restricted stock held by Mr. Hoven.
(12) Consists of: (i) 4,268 shares held by Mr. Reinhold individually; and (ii)
29,238 shares subject to currently exercisable non-qualified stock options
granted pursuant to the Directors' Plan.
(13) Consists of (i) 4,200 shares held by Ms. Rosenberg individually; (ii)
14,337 shares subject to currently exercisable non-qualified stock options
granted pursuant to the Directors' Plan; and (iii) 13,102,288 shares owned
by Zell/Chilmark. On October 19, 1995, Ms. Rosenberg became a member of the
executive committee of ZC Limited. As a member of the executive committee,
Ms. Rosenberg shares in the power to vote or to direct the vote of the
securities beneficially owned by Zell/Chilmark and shares in the power to
dispose or to direct the disposition of the securities beneficially owned
by Zell/Chilmark. Ms. Rosenberg disclaims beneficial ownership of the
securities beneficially owned by Zell/Chilmark.
(14) Consists of 29,238 shares subject to currently exercisable non-qualified
stock options granted pursuant to the Directors' Plan.
(15) Mr. Hagan resigned from his position with the Company effective June 3,
1996.
(16) Consists of: (i) 26,884 shares held by Mr. Mastrian individually, including
18,000 shares of restricted stock; and (ii) 120,535 shares subject to
currently exercisable non-qualified stock options granted pursuant to the
Incentive Plan.
(17) Consists of: (i) 21,212 shares held by Mr. Staph individually, including
10,700 shares of restricted stock; and (ii) 122,354 shares subject to
currently exercisable non-qualified stock options granted pursuant to the
Incentive Plan.
(18) Includes 1,304,722 shares subject to currently exercisable non-qualified
stock options granted pursuant to the Directors' Plan and the Incentive
Plan.
10
<PAGE> 14
EXECUTIVE COMPENSATION
COMPENSATION AND OPTION TABLES AND PERFORMANCE GRAPH
The following tables show information with respect to the annual
compensation for services in all capacities to the Company for the fiscal years
ended May 28, 1994, June 3, 1995 and June 1, 1996 of (i) the chief executive
officer and (ii) those persons who were, at June 1, 1996, the other four most
highly compensated executive officers of the Company (the "named executive
officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ------------------------- ---------
------------------------------------- SECURITIES
OTHER RESTRICTED UNDERLYING LONG-TERM
ANNUAL STOCK OPTIONS INCENTIVE
NAME AND SALARY (2) BONUS (3) COMPENS. AWARD(S) GRANTED PAYOUTS
PRINCIPAL POSITION YEAR ($) ($) ($) ($)(6) (#) ($)
- ------------------------------------ ----- ---------- --------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
D. Dwayne Hoven 1996 $635,399 $721,638 (4)(5) $1,156,500 300,000 $ 0
President and Chief Executive
Officer 1995 600,001 877,548 (5) 0 336,009 0
1994 488,461 407,164 (5) 0 105,500 0
Carl A. Bellini 1996 417,693 355,582 (5) 416,340 60,000 0
Executive Vice President and 1995 401,332 439,742 (5) 0 104,263 0
Chief Operating Officer 1994 342,594 227,180 (5) 0 45,000 0
James P. Mastrian 1996 310,211 264,529 (5) 416,340 60,000 0
Executive Vice President, Marketing 1995 285,865 313,254 (5) 0 71,536 0
1994 237,312 157,645 (5) 0 20,000 0
James J. Hagan (1) 1996 254,285 219,716 (5) 0 30,000 0
Executive Vice President-Finance 1995 198,814 168,728 (5) 0 34,828 0
and Chief Financial Officer 1994 188,809 109,077 (5) 0 10,000 0
Jack A. Staph 1996 249,084 186,123 (5) 247,491 36,000 0
Senior Vice President, Secretary 1995 242,208 231,919 (5) 0 41,814 0
and General Counsel 1994 225,241 149,304 (5) 0 0 0
<CAPTION>
ALL
OTHER
NAME AND COMPENS.
PRINCIPAL POSITION ($)
- ------------------------------------ --------
<S> <C>
D. Dwayne Hoven $14,271
President and Chief Executive
Officer 277
0
Carl A. Bellini 19,994
Executive Vice President and 185
Chief Operating Officer 0
James P. Mastrian 8,078
Executive Vice President, Marketing 132
0
James J. Hagan (1) 1,262
Executive Vice President-Finance 0
and Chief Financial Officer 0
Jack A. Staph 6,105
Senior Vice President, Secretary 109
and General Counsel 0
</TABLE>
- ---------------
(1) Mr. Hagan resigned from his position with the Company effective June 3,
1996.
(2) Salary information for fiscal year 1995 is based upon a fifty-three week
reporting period. Salary information for fiscal years 1996 and 1994 is based
upon fifty-two week reporting periods.
(3) Reflects full payment of bonus earned, as described in "Report of the Human
Resources Committee -- Fiscal 1996 Bonus Program" included herein.
(4) Does not include future amounts to be paid pursuant to certain tax
"gross-up" provisions of Mr. Hoven's restricted stock award agreement.
(5) Amounts are below the minimum amount required to be disclosed by applicable
Exchange Act rules.
(6) Reflects the award, at a price of $23.13 per share, of the following number
of shares of restricted stock to the Chief Executive Officer ("CEO") and
each of the named executive officers: D. Dwayne Hoven, 50,000; Carl A.
Bellini, 18,000; James P. Mastrian, 18,000; James J. Hagan, 0; and Jack A.
Staph, 10,700. Restrictions on the restricted stock lapse two years after
the date of the award, except that the restrictions on the shares awarded to
the CEO lapse fifty percent on June 1, 1996 and fifty percent on June 1,
1997. Restricted stock award recipients are entitled to vote their shares on
matters submitted to the stockholders and to receive any dividends declared
on the Company's outstanding common stock. The fair market value of the
restricted stock outstanding at June 1, 1996 for the CEO and each of the
named executive officers was as follows: D. Dwayne Hoven, $1,187,500; Carl
A. Bellini, $427,500; James P. Mastrian, $427,500; and Jack A. Staph,
$254,125.
11
<PAGE> 15
OPTIONS GRANTED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
-------------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
OPTIONS ASSUMED ANNUAL RATES OF STOCK
GRANTED TO PRICE APPRECIATION FOR OPTION TERM
OPTIONS EMPLOYEES EXERCISE OR (2)
GRANTED IN FISCAL BASE PRICE EXPIRATION ----------------------------------
NAME (#) YEAR ($/SH) DATE 5% 10%
- -------------------------- ------- ---------- ----------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
D. Dwayne Hoven 300,000 16.6% $ 23.13 May 02, 2006 $ 3,646,800 $ 10,342,200
Carl A. Bellini 60,000 3.3% 23.13 May 02, 2006 650,220 1,989,300
James P. Mastrian 60,000 3.3% 23.13 May 02, 2006 650,220 1,989,300
James J. Hagan (3) 30,000 1.7% 20.75 August 08, 2005 291,660 892,320
Jack A. Staph 36,000 2.0% 23.13 May 02, 2006 390,132 1,193,580
</TABLE>
- ---------------
(1) All options granted are granted at the fair market value of the common stock
at the date of grant. On each anniversary of the date of grant, the exercise
price for each option granted increases annually by an amount equal to 5% of
the option price then in effect for all non-vested options. Except for the
fiscal 1996 grant to Mr. Hoven, which vests over a three-year period, and
for certain immediately vested options granted in July 1992 (see "Report of
Human Resources Committee"), options granted pursuant to the Incentive Plan
vest as follows: 20% on the first anniversary of the date of grant; 40% on
the second anniversary of the date of grant; 60% on the third anniversary of
the date of grant; 80% on the fourth anniversary of the date of grant and
100% on the fifth anniversary of the date of grant. Options granted are for
a term of not more than ten years from the date of grant.
(2) The dollar amounts under these columns are the result of the calculations at
the 5% and 10% rates set by the Securities and Exchange Commission and,
therefore, are not intended to forecast possible future appreciation, if
any, of the Company's stock price. The dollar amounts assume that the
exercise price increases by 5% per year on all non-vested options.
(3) Mr. Hagan resigned from his position with the Company effective June 3,
1996.
12
<PAGE> 16
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING
UNEXERCISED OPTIONS VALUE OF UNEXERCISED
AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR-END AT FISCAL YEAR-END
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) ($)
- --------------------------------- ----------- -------- -------------------- --------------------
<S> <C> <C> <C> <C>
D. Dwayne Hoven 0 $0 286,996 $3,050,023
729,513 2,361,288
Carl A. Bellini 0 0 99,565 1,038,567
216,198 946,025
James P. Mastrian 0 0 86,575 1,015,446
164,961 724,649
James J. Hagan (1) 0 0 36,717 432,146
78,111 348,252
Jack A. Staph 0 0 94,394 1,236,222
103,920 592,579
</TABLE>
- ---------------
(1) Mr. Hagan resigned from his position with the Company effective June 3,
1996.
13
<PAGE> 17
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG REVCO D.S., INC., S & P 500 INDEX AND PEER GROUP(A)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) REVCO S & P PEER
<S> <C> <C> <C>
JUN-91 91.03 101.6
JUN-92 100 100 100
JUN-93 141.81 111.61 117.15
JUN-94 195.59 116.371 122.85
JUN-95 247.06 139.86 145.46
JUN-96 280 180 188
</TABLE>
(a) Peer group consists of the Company and the following drugstore chains: Arbor
Drugs, Inc.; Big B, Inc.; Drug Emporium, Inc.; Fay's Inc.; Genovese Drug
Stores, Inc.; Longs Drug Stores Corporation; Rite Aid Corporation; and
Walgreen Co.
The first day of trading of the Company's common stock was June 1, 1992.
For purposes of constructing the above performance chart, the base year (i.e.
100) was set at June 1992, the beginning of the Company's 1993 fiscal year.
14
<PAGE> 18
REPORT OF THE HUMAN RESOURCES COMMITTEE
Dear Stockholders:
The Human Resources Committee (the "Committee") was created in June 1992.
The current Committee consists of four members, none of whom is an employee of
the Company. The Committee's functions include the review and approval of the
Company's executive compensation structure and overall benefits program.
Specifically, the Committee (i) reviews and recommends to the Board the
financial targets for the Executive Compensation Program (as described below);
(ii) reviews and approves long-term incentive plans and makes recommendations to
the Board; (iii) reviews and approves other matters relating to officer and key
employee compensation; (iv) approves incentive objectives for members of the
management executive committee for the upcoming fiscal year; (v) reviews and
approves awards for the immediately preceding fiscal year under the Executive
Compensation Program, and advises the Board of Directors; and (vi) reviews and
approves salary increases for members of the management executive committee.
The Committee believes that executive compensation should be tied closely
to corporate performance, and to that end has taken steps to restructure certain
elements of the executive compensation program to ensure that executive
compensation is directly linked to total stockholder value. During the fiscal
year ended June 1, 1996 ("fiscal 1996"), there were three major components of
executive compensation: base salary and bonus under the Revco Executive
Compensation Program, and awards under the Incentive Plan. Each of these
components is further discussed below.
On July 30, 1996, the Committee recommended that the Board of Directors
approve, and the Board so approved, modifications to the bonus program effective
for the fiscal year beginning June 2, 1996 ("fiscal 1997"). The modifications
are summarized below under the caption "Fiscal 1997 Bonus Program".
EXECUTIVE COMPENSATION PROGRAM
Base salary and bonus guidelines are set forth in the Revco Executive
Compensation Program. The purpose of the Executive Compensation Program is to
establish and maintain a performance and achievement oriented environment
throughout the Company. The program emphasizes the development of the Company so
as to achieve and sustain above average growth in earnings with excellence in
management, retailing, pharmacy and customer service. With this emphasis in
mind, the program is designed so that executives may earn higher than average
total compensation (base salary plus bonus) for doing an above-average job.
Base Salary. The Company's overall salary structure is reviewed annually,
using outside executive compensation surveys of the retail industry in general
and chain drugstores in particular, to ensure that it remains competitive.
Positions are classified within the salary structure on the basis of assigned
responsibilities. The salary mid-point of a grade assigned to a position is the
salary level that approximates the Company's judgment, based on an evaluation of
the latest survey information available, as to appropriate compensation levels.
Where salary information is unavailable for a particular position, the salary
grade assigned is based on other positions having similar responsibilities
within the Company and in companies with comparable revenues.
Individual base salaries are reviewed at least annually; however, salaries
are not necessarily increased each year. Decisions relating to salary increases
are based upon guidelines furnished by senior management. Salary increases are
granted based on each executive's performance as well as his position in the
applicable salary range.
Based on the most recent outside executive compensation surveys, the
Committee believes that the Company's executive compensation ranks in the median
among the general retail industry and in the upper quartile among chain
drugstores.
Fiscal 1996 Bonus Program. On July 27, 1993 the Board of Directors
approved the Committee's recommendation, which was based on an extensive review
of the Company's previous bonus program in consultation with an outside firm,
that the bonus program be modified. The objectives underlying the revised bonus
program are to (i) more closely link bonus awards to value added for the
Company's stockholders, and
15
<PAGE> 19
(ii) promote a culture of performance and ownership among the Company's
managers. The program involves sharing certain of the Company's business risks
with stockholders, but also provides access to the upside potential associated
with value creation. Accordingly, the program rewards long-term enduring
improvements in stockholder value. The program, as revised effective with the
1995 fiscal year to ensure the existence of a direct link between bonuses and
total stockholder value, is described below. All executive officers and senior
managers, and certain supervisors, regional and district managers, are eligible
to receive bonuses under the bonus program. As of August 19, 1996, a total of
approximately 340 employees were eligible to participate in the EVA bonus
program.
Awards under the bonus program are focused on the generation of improved
economic value added ("EVA"), which consists of net operating profit after
taxes, as reduced by a capital charge. EVA results from (i) enhanced business
efficiencies, (ii) profitable growth, and (iii) strategic expense reduction. For
fiscal 1996, EVA was $66.094 million and target EVA was $40.334 million. At the
beginning of each fiscal year, participants in the bonus program are credited
with a number of performance units equal to their target bonus, which is a
percentage (ranging from 15% to 60% for the Chief Executive Officer) of their
base compensation. At the end of the fiscal year, the units have a value based
on the Company's EVA performance. If EVA improves sufficiently (for fiscal 1996,
an EVA improvement of $10 million from the average of the previous year's actual
EVA and the previous year's target EVA was required), the units have a $1.00
value and the target award is earned. Underperformance results in a less than
$1.00 unit value while particularly strong performance generates a greater than
$1.00 value. The percentage increase or decrease is determined by reference to
an EVA target interval based on a percentage of the Company's capital (for
fiscal 1996, an EVA increase of $29 million over the annual target EVA was
required in order to achieve a unit value of $2.00). More specifically, the
excess or deficit of actual EVA over target EVA is divided by the target
interval to determine the percentage value of a unit.
The amount of the bonus paid to the participants other than the Chief
Executive Officer is also subject to the participant's satisfaction of
individual performance objectives. The portion of the bonus based on
satisfaction of individual performance goals ranges from 25% to 75%. For fiscal
1996, the Company exceeded target EVA with respect to the named executive
officers by 188.83%, resulting in a value per unit of $1.8883.
On May 2, 1996, the Committee approved the payment of accumulated "bonus
bank" balances to all plan participants, and eliminated the bonus bank for
fiscal 1996 to enable plan participants to receive their EVA bonuses in full.
The Committee's actions were taken in an effort to retain the Company's key
management in light of the failed merger transaction with Rite Aid Corporation,
and in recognition of management's efforts during the pendency of the proposed
merger transaction.
LONG-TERM INCENTIVE PLAN
The Company's 1992 Long-Term Incentive Plan (as amended, the "Incentive
Plan") was adopted by the Board of Directors on July 27, 1992 and approved by
the Company's stockholders on October 14, 1992. There are 6,520,000 shares of
Common Stock reserved for issuance under the Incentive Plan; as of August 19,
1996, 749,921 shares remained available for grants under the Incentive Plan. The
Incentive Plan provides for the grant of incentive and non-qualified stock
options, reload options, stock appreciation rights, restricted stock awards,
stock bonus awards and performance plan awards. The Committee administers the
Incentive Plan and has sole discretion to determine those employees to whom
awards will be granted, the number of awards to be granted, the provisions
applicable to each award and the time periods during which the awards may be
exercised. No awards may be granted after July 27, 2002.
To date, long-term incentive awards granted under the Incentive Plan have
consisted of non-qualified stock options ("NQSO's") and restricted stock. In
order to enhance the link to stockholder value and to create a strong
performance requirement for options, the NQSO's include a 5% cost of capital
charge. Under this approach, the exercise price of NQSO's granted under the
Incentive Plan increases annually by 5% until the shares subject to the option
vest.
Awards made under the Incentive Plan are intended to provide key employees
with additional incentives designed to enhance the profitable growth of the
Company as well as the value of the Company's Common
16
<PAGE> 20
Stock. During fiscal 1996, the Committee awarded non-qualified stock options to
acquire 300,000 shares of Common Stock, at a price per share of $23.13, to the
Chief Executive Officer, and an aggregate of 186,000 shares, at a weighted
average price per share of $22.75, to the other named executive officers, for a
total of 486,000 of the 1,808,700 options that were awarded under the Incentive
Plan during fiscal 1996. During fiscal 1996, the Committee also awarded 50,000
shares of restricted stock to the Chief Executive Officer, and an aggregate of
46,700 shares of restricted stock to other named executive officers, for a total
of 96,700 of the 281,050 shares of restricted stock that were awarded under the
Incentive Plan for fiscal 1996. These awards were made as a retention incentive
and in recognition of management's efforts during the pendency of the Rite Aid
transaction, as described above under the caption "Fiscal 1996 Bonus Program".
The Committee believes that when the value of these stock options and restricted
stock is considered in combination with cash compensation levels, the resulting
total compensation opportunities for each of the named executive officers falls
within the range of retail industry and chain drugstore compensation levels.
With the exception of (i) a total of 50,000 immediately vested grants
(25,000 of which were awarded to the Chief Executive Officer, all of which have
been exercised, and 25,000 of which were awarded to a named executive officer,
4,500 of which have been exercised) made on July 27, 1992 to certain of the
named executive officers, and (ii) the NQSO's granted to the Chief Executive
Officer during fiscal 1996, which vest over a three-year period, the NQSO awards
made under the Incentive Plan vest over a period of five years at a rate of 20%
each year, thereby encouraging the retention of key employees who receive
awards. For the same reasons, restrictions on restricted stock, other than the
shares awarded to the Chief Executive Officer, as to which restrictions lapse
fifty percent on June 1, 1996 and fifty percent on June 1, 1997, lapse two years
after the award date (i.e., on May 2, 1998).
FISCAL 1997 BONUS PROGRAM
On July 30, 1996, the Committee recommended that the Board of Directors
approve, and the Board so approved, the following modifications to the EVA bonus
program: (i) the establishment of a seventy five percent minimum and one hundred
twenty five percent maximum level of EVA performance, and the replacement of the
"unit value" with an adjusted percentage within the applicable bonus opportunity
range, as further described below; (ii) the elimination of the weighting of
individual performance objectives (formerly at percentages ranging from seventy
five percent for certain participants to twenty five percent for each of the
named executive officers other than the Chief Executive Officer) so that the
entire amount of an individual's bonus is at risk based on the individual's
overall achievement of his or her individual performance objectives; and (iii)
the addition of an upward or downward adjustment to the bonus payout, based on
the Company's performance in comparison to the Standard & Poor's 500 Stock Index
(the "S&P Index"). In addition, the Committee modified the target bonus ranges
(formerly from fifteen percent for certain participants to sixty percent for the
Chief Executive Officer) to ten percent for certain participants to seventy five
percent for the Chief Executive Officer.
Under the modified EVA program, a participant would, subject to his or her
achievement of the individual performance objectives and the adjustment based on
the Company's performance in relation to the S&P Index, receive a bonus based on
his or her (x) MINIMUM bonus opportunity percentage if the Company's EVA
performance is seventy five percent of target, (y) TARGET bonus opportunity
percentage if the Company's EVA performance is one hundred percent of target, or
(z) MAXIMUM bonus opportunity percentage if the Company's EVA performance is one
hundred twenty five percent or more of target. If the Company's EVA performance
is (subject to the previously described minimum and maximum percentages) less or
greater than the target, the bonus opportunity will be increased or decreased,
as applicable, from the target percentage; for example, if the Company's EVA
performance is at the midpoint between target and maximum, the bonus opportunity
percentage will be increased to a percentage that represents the midpoint
between the target and maximum bonus opportunity percentages. Conversely, if the
Company's EVA performance is at the midpoint between target and minimum, the
bonus opportunity percentage will be decreased to a percentage that represents
the midpoint between the target and minimum bonus opportunity percentages. After
the foregoing adjustment is made, an adjustment will be made, subject to a
maximum increase or decrease of twenty five percent, based on the Company's
fiscal year stock performance, as reported in the New York Stock Exchange
17
<PAGE> 21
composite transactions, in relation to the S&P Index. If the Company's Common
Stock as so reported increased or decreased by the same amount as the S&P Index,
no further adjustment to the bonus payout will be made. Except with respect to
the Chief Executive Officer, a final adjustment will then be made based on the
individual's achievement of his or her individual objectives.
The maximum dollar amount that may be paid to a participant in the modified
EVA bonus program for fiscal 1997 is $1,171,875, which maximum amount will
increase for subsequent fiscal years to amounts not to exceed $2,500,000.
The amounts payable under the modified EVA bonus program for fiscal 1997
are indeterminable since they are tied to the Company's EVA performance as well
as the previously described adjustment factors, all of which are determined as
of the end of the fiscal year. However, if the modifications had been in effect
for fiscal 1996, bonus payments would have been in the following amounts for the
persons and groups specified: D. Dwayne Hoven, President and Chief Executive
Officer and a Director--$678,339; Carl. A. Bellini, Executive Vice President and
Chief Operating Officer and a Director (a named executive officer)--$249,571;
James J. Hagan, Executive Vice President-Finance and Chief Financial Officer (a
named executive officer who resigned from his position after the end of fiscal
1996)--$154,212; James P. Mastrian, Executive Vice President, Marketing (a named
executive officer)--$185,664; Jack A. Staph, Senior Vice President, Secretary
and General Counsel (a named executive officer)--$125,968; all current executive
officers as a group--$2,817,663; and all employees as a group--$9,227,454. The
EVA bonus program may be further modified from time to time, as determined by
the Committee in its discretion.
COMPLIANCE WITH SECTION 162(m) OF THE CODE
Section 162(m) of the Code, enacted in 1993, generally disallows a tax
deduction to public companies for compensation over $1 million paid to the
corporation's Chief Executive Officer and four other most highly compensated
executive officers. Qualifying "performance-based compensation" will not be
subject to the deduction limit if certain requirements are met. The Committee
has taken steps to comply with the requirements of Section 162(m) with respect
to certain elements of the executive compensation program; however, there can be
no assurance that the incentive and performance-related elements of the program
will in fact qualify as "performance based compensation" under Section 162(m) of
the Code or that the tax deductibility of compensation paid pursuant thereto
will not in fact be limited by the $1 million statutory cap on deductible
executive compensation.
Respectfully submitted,
<TABLE>
<S> <C>
Talton R. Embry, Chairman Ben Evans
Rod F. Dammeyer Sheli Z. Rosenberg
</TABLE>
EMPLOYMENT AGREEMENTS WITH CERTAIN EXECUTIVES
The Company has entered into employment agreements (the "Executive
Employment Agreements") with each of the named executive officers. Each of the
Executive Employment Agreements is effective until terminated by the Company or
the named executive officer, with or without cause. The Executive Employment
Agreements provide that, in the event of a termination for cause by the named
executive officer or a termination without cause by the Company, the Company
will have an obligation to continue benefits and to pay the terminated named
executive officer's salary for a period (the "Severance Period") of 24 months.
Upon the occurrence of a "change in control", as defined in the Executive
Employment Agreements, the Severance Period is increased and certain other
enhanced benefits are to be provided to the named executive officers.
DEFINED BENEFIT PLAN
The Revco Retirement Income Plan and Trust, as amended ("Pension Plan"), is
a defined benefit pension plan generally covering employees of the Company,
other than those covered by collective bargaining agreements that provide for
pension benefits.
18
<PAGE> 22
On reaching normal retirement at or after age 65, a participant is
generally entitled to receive a monthly retirement benefit for life. Alternative
actuarially equivalent forms of benefit payments are provided for in the Pension
Plan. Vesting under the Pension Plan occurs after five years of service (with no
vesting where less than five years of service has been completed).
The annual retirement benefit at the normal retirement age of at least 65
is equal to an amount which, when added to the participant's social security
benefit, is the product of the employee's average earnings for the last five
years of his service and the applicable percentage set forth in the table below.
If the employee has fewer than 30 years of credited service with the Company,
the benefit determined by this formula is reduced by a percentage determined
substantially by the ratio of the number of years of credited service to 30. A
participant who has attained age 55 and has completed five years of service may
elect early retirement with reduced monthly benefit payments.
The amounts shown in the following table are based on the pension being
paid during the lifetime of the retired employee only, including social security
benefits, and would be reduced for service of less than 30 years and on an
actuarially equivalent basis in the event of a survivor benefit or other
optional form of payment.
<TABLE>
<CAPTION>
RETIREMENT BENEFIT
FINAL AVERAGE (% OF FINAL
MONTHLY PAY AVERAGE PAY)
- ------------------------- ------------------
<S> <C>
$ 500 81%
1,000 73
1,500 65
2,000 60
2,500 56
3,000 54
3,500 52
4,000 51
4,500 or more 50
</TABLE>
The following table sets forth the estimated annual benefits (including
social security) payable to a participant who qualifies for normal retirement in
1996 with the specified average earnings during the last five calendar years
prior to retirement and the specified years of credited service:
<TABLE>
<CAPTION>
AVERAGE ANNUAL EARNINGS
FOR YEARS OF CREDITED SERVICE
FIVE-YEAR PERIOD ----------------------------------------------------------------------
PRECEDING RETIREMENT(1) 10 15 20 25 30 OR MORE
- -------------------------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
$125,000 $ 30,818 $ 38,739 $ 46,660 $ 54,581 $ 62,500
150,000 34,984 44,988 54,992 64,996 75,000
175,000 39,148 51,234 63,320 75,406 87,500
200,000 43,318 57,489 71,660 85,831 100,000
225,000 47,484 63,738 79,992 96,246 112,500
250,000 51,650 69,987 88,324 106,661 125,000
300,000 59,984 82,488 104,992 127,496 150,000*
400,000 76,650 107,487 138,324* 169,161* 200,000*
450,000 84,984 119,988 154,992* 189,996* 225,000*
500,000 93,318 132,489 171,660* 210,831* 250,000*
600,000 109,984 157,488* 204,992* 252,496* 300,000*
700,000 126,648 182,484* 238,320* 294,156* 350,000*
800,000 143,316* 207,486* 271,656* 335,826* 400,000*
900,000 159,984* 232,488* 304,992* 377,496* 450,000*
1,000,000 176,648* 257,484* 338,320* 419,156* 500,000*
1,100,000 193,316* 282,486* 371,656* 460,826* 550,000*
1,200,000 209,984* 307,488* 404,992* 502,496* 600,000*
1,300,000 226,652* 332,490* 438,328* 544,166* 650,000*
1,400,000 243,316* 357,486* 471,656* 585,826* 700,000*
</TABLE>
- ---------
19
<PAGE> 23
1. For plan years beginning on or after January 1, 1989, the Code limits the
amount of compensation that can be used for plan calculation purposes to
$200,000 (indexed). For plan years beginning on or after January 1, 1994,
this limit is reduced to $150,000 (indexed).
* As required by the Code, plan payments may not provide annual pension benefits
exceeding a maximum amount, currently $120,000.
The years of credited service of those individuals named in the Cash
Compensation Table as of June 1, 1996 were Mr. Hoven -- 7.9167; Mr.
Bellini -- 4.8333; Mr. Hagan -- 8.5833; Mr. Mastrian -- 5.2500; and Mr.
Staph -- 23.1667. The amounts covered under the Pension Plan include salary and
bonus for each of the named executive officers in the summary compensation
table.
OTHER INFORMATION
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
and Directors to file reports of ownership and changes in ownership with the SEC
and the New York Stock Exchange. The Company believes that during the period
from June 4, 1995 through June 1, 1996, its executive officers and Directors
complied with all applicable Section 16(a) filing requirements. This conclusion
is based solely on a review of the copies of such forms furnished to the Company
in accordance with SEC regulations and certain written representations received
by the Company.
STOCKHOLDER PROPOSALS
Any stockholder proposals for the Company's 1997 annual meeting of
stockholders must be received in writing by the Secretary of the Company at 1925
Enterprise Parkway, Twinsburg, Ohio 44087 no later than April 25, 1997.
AUDITORS
Arthur Andersen LLP audited the Company's consolidated financial statements
for the years ended May 28, 1994, June 3, 1995 and June 1, 1996. Representatives
of Arthur Andersen are expected to be present at the Annual Meeting, will have
the opportunity to make a statement if they desire to do so, and are expected to
be available to respond to appropriate questions.
SOLICITATION
The cost of soliciting proxies in the accompanying form will be borne by
the Company. The solicitation by mail may be followed by solicitation in person,
or by telephone or telegraph, by some regular employees of the Company without
additional compensation. In addition, the Company has retained D.F. King & Co.,
Inc. to assist in solicitation for a fee estimated not to exceed $4,500.
By Order Of The Board Of Directors
/s/ Jack A. Staph
Jack A. Staph
Senior Vice President, Secretary
and General Counsel
August 23, 1996
20
<PAGE> 24
EXHIBIT A
INTRODUCTION
This narrative describes the purpose, components and mechanics of Revco's
modified Corporate Incentive Plan. Specifics about how the plan applies to an
individual participant can be addressed by your supervisor or the Managing
Director, Compensation and Benefits.
PURPOSE
The purpose of the program is to:
1. Effectively manage the Company's P & L statement and balance sheet
through the efficient use of capital;
2. Influence a greater linkage between total compensation and
shareholder returns; and
3. Promote individual objectives that, when achieved, contribute to
value creation.
Solid performance in these areas will deliver incentive compensation with
significant upside potential for participants.
COMPONENTS
The four plan components are:
1. Bonus Opportunities
2. Controllable Earnings
3. Shareholder Return
4. Individual Objectives
BONUS OPPORTUNITIES
A range of bonus opportunities, expressed as a percentage of fiscal year
base salary, has been established for the hierarchy of positions that
participate in the plan.
CONTROLLABLE EARNINGS
Controllable earnings applies the cost of capital against Revco's operating
profits to measure the true earnings to investors after covering both operating
and financing costs (debt and equity). Performance will be measured and rewarded
based upon the following formula:
EVA = NOPAT -- (Cost of Capital x Capital Employed)
Capital Charge
NOPAT = Operating profit after taxes but net of non-economic, non-cash
charges
CAPITAL = Net assets invested in the business
COST OF CAPITAL = The minimum return required to compensate investors for
the risk in the Company's operations.
Each fiscal year an EVA target will be established for the corporation.
SHAREHOLDER RETURN
Attempting to influence a greater linkage between executive compensation
and shareholder returns, the SEC requires public companies like Revco to
disclose a line graph in the proxy that compares a company's five-year total
shareholder return to those of other companies. The award earned by controllable
earnings
21
<PAGE> 25
performance will be adjusted up or down by Revco's year-to-year change in
shareholder return versus the S&P 500 Index. This adjustment will be limited to
25%, up or down.
INDIVIDUAL OBJECTIVES (applies to individuals other than the Chief Executive
Officer)
Individual objectives are an integral plan component and provide impact on
the potential payout since the amount earned via performance versus controllable
earnings and shareholder return will be adjusted by the individual's performance
against predetermined objectives. The maximum rating an individual may receive
is 100%.
VESTING IN THE BONUS
DEATH OR DISABILITY
- Pro-rata payout of current year's bonus award when Revco distributes
awards to all participating employees.
RETIREMENT
- Pro-rata payout of the current year's bonus award when Revco distributes
awards to all participating employees.
WORKFORCE REDUCTION/SALE OF A BUSINESS
- Pro-rata payout of the current year's bonus award when Revco distributes
awards to all participating employees.
QUIT/TERMINATION FOR CAUSE
- If a participant quits or is terminated for cause prior to the end of the
fiscal year, any bonus earned is forfeited.
- All other terminations will result in a pro-rata payout when Revco
distributes awards to all participating employees.
CHANGE IN CONTROL
- Upon a change-in-control, a pro-rata payment will be made to all
participants who are actively employed upon the effective date of the
change-in-control.
MISCELLANEOUS
- Participants in eligible positions for less than the full fiscal year
will be awarded (based upon financial and individual performance)
incentive compensation on a pro-rated basis.
- Participants who change bonus groups prior to March 1st of the fiscal
year will have their final bonus opportunity percentage calculated based
upon their current position at the end of the fiscal year.
-- Those who change bonus groups after March 1st will have their
final bonus opportunity percentage calculated based upon the
previous position held prior to the change.
- Participants who are in the plan for less than three (3) months during
the fiscal year are not eligible for an award from this plan.
- For a given fiscal year, employees are not eligible to participate in
this plan if they are promoted into an eligible position after March 1st.
Participation will begin the next fiscal year.
- Base salary, for bonus calculations, is defined as fiscal year base
salary earnings while in an eligible position.
22
<PAGE> 26
REVCO D.S., INC.
P THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
R The undersigned hereby appoints each of the members of the Board of
O Directors, or any of them, each with the power to appoint a
X substitute, as proxies of the undersigned, and hereby authorizes
Y such members or member to represent and to vote all shares of
Common Stock of Revco D.S., Inc. held of record by the undersigned
as of the close of business on August 19, 1996, at the Annual
Meeting of Stockholders to be held on September 24, 1996.
<TABLE>
<S> <C>
Election of Directors, Nominees: (change of address)
Carl A. Bellini, Livio M. Borghese, William H. Campbell, __________________________________
Rod F. Dammeyer, Talton R. Embry, Ben Evans, __________________________________
John V. Guttag, D. Dwayne Hoven, Walter B. Reinhold, __________________________________
Sheli Z. Rosenberg, Thomas O. Thorsen and Sam Zell. __________________________________
(If you have written in the above
space, please mark the
corresponding box on the reverse
side of this card.)
</TABLE>
THIS PROXY, WHEN PROPERLY EXECUTED, IS VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR PROPOSAL
2.
SEE REVERSE
SIDE
<PAGE> 27
X PLEASE MARK YOUR SHARES IN YOUR NAME
VOTES AS IN THIS
EXAMPLE.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of / / / / 2. Approval of modifi- / / / / / /
Directors cations to the bo-
(see reverse) nus component of
the Revco D.S., Inc.
executive compen-
For, except vote withheld sation program.
from the following
nominee(s):
- ------------------------------
Change
of / /
Address
Attend / /
Meeting PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED
ENVELOPE.
When Shares are held by
joint tenants, both should
sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give
full title as such. If a
corporation, please sign
in full corporate name by
the President or other
SIGNATURE(S) _____________________________ DATE authorized officer. If a
Partnership, please sign in
SIGNATURE(S) _____________________________ DATE partnership name
NOTE: Please sign exactly as name appears
hereon.
<PAGE> 28
CONFIDENTIAL VOTING INSTRUCTIONS
TO:THE NORTHERN TRUST COMPANY, TRUSTEE (THE "TRUSTEE") FOR THE
REVCO D.S., INC.
401(K) SAVINGS PLAN (THE "PLAN").
I, the undersigned, as a Participant in the Plan hereby instruct
the Trustee to vote (in person or by proxy) all shares of Common
Stock of Revco D.S., Inc. ("Corporation") allocated to my account
under the Plan ("Allocated Shares"), as well as a portion of those
unallocated shares held in the Plan ("Unallocated Shares") on the
record date for the Annual Meeting of stockholders of the
Corporation to be held on September 24, 1996.
THE ELECTION OF DIRECTORS: (WHERE AUTHORITY TO VOTE FOR ANY OR ALL
NOMINEES IS NOT EXPRESSLY WITHHELD, AUTHORITY TO VOTE FOR ANY OR
ALL NOMINEES SHALL BE GRANTED.)
Carl A. Bellini, Livio M. Borghese, William H. Campbell,
Rod F. Dammeyer, Talton R. Embry, Ben Evans,
John V. Guttag, D. Dwayne Hoven, Walter B. Reinhold,
Sheli Z. Rosenberg, Thomas O. Thorsen and Sam Zell.
IF YOU REQUEST TO VOTE YOUR UNALLOCATED SHARES
DIFFERENTLY THAN YOUR ALLOCATED SHARES, PLEASE
INDICATE YOUR VOTE ON THE LINES BELOW:_________________________________________
_________________________________________
THESE INSTRUCTIONS, WHEN PROPERLY EXECUTED, ARE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
MADE, THESE INSTRUCTIONS WILL BE VOTED FOR THE ELECTION OF DIRECTORS
AND FOR PROPOSAL 2.
SEE REVERSE
SIDE
<PAGE> 29
X PLEASE MARK YOUR SHARES IN YOUR NAME
VOTES AS IN THIS
EXAMPLE.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of / / / / 2. Approval of modifi- / / / / / /
Directors cations to the bo-
(see reverse) nus component of
the Revco D.S., Inc.
executive compen-
For, except vote withheld sation program.
from the following
nominee(s):
- -------------------------
PLEASE MARK, SIGN, DATE AND
RETURN THESE INSTRUCTIONS
PROMPTLY USING THE ENCLOSED
ENVELOPE.
THE TRUSTEE WILL NOT VOTE
ANY SHARES ALLOCATED TO
YOUR ACCOUNT FOR WHICH
TIMELY INSTRUCTIONS ARE
SIGNATURE _____________________________ DATE NOT RECEIVED.
NOTE: Please sign exactly as name appears
hereon.
