SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
[Amendment No. ]
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
RITE AID CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
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4) Proposed maximum aggregate value of transaction:
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*Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:_______________________________________________
2) Form Schedule or Registration Statement No.:__________________________
3) Filing Party:_________________________________________________________
4) Date Filed:___________________________________________________________
<PAGE>
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[LOGO] RITE
AID
RITE AID CORPORATION
P. O. BOX 3165
HARRISBURG, PENNSYLVANIA 17105
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1996 ANNUAL MEETING of the stockholders of Rite Aid Corporation will be
held at the Radisson Penn Harris Hotel & Convention Center, 1150 Camp Hill
Bypass, Camp Hill, Pennsylvania 17011, on June 26, 1996 at 11:00 a.m. for the
following purposes:
1. To elect three directors to hold office until the 1999 Annual Meeting of
Stockholders and to elect one director to hold office until the 1997 Annual
Meeting of Stockholders and until their respective successors are duly
elected and qualified.
2. To consider a stockholder proposal to redeem preferred stock purchase
rights issued in 1989 unless issuance is approved by the stockholders.
3. To transact such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on May 10, 1996 as the
record date for the meeting. Only stockholders of record as of that date are
entitled to notice of and to vote at the meeting and any adjournment and
postponement thereof.
The accompanying form of proxy is solicited by the Board of Directors of the
Company. Reference is made to the attached Proxy Statement for further
information with respect to the business to be transacted at the meeting.
By order of the Board of Directors
I. Lawrence Gelman,
Vice President and Secretary
Camp Hill, Pennsylvania
May 23, 1996
PLEASE COMPLETE AND RETURN YOUR SIGNED PROXY CARD
Please complete and promptly return your proxy in the envelope
provided. This will not prevent you from voting in person at the
meeting. It will, however, help to assure a quorum and to avoid
added proxy solicitation costs.
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<PAGE>
RITE AID CORPORATION PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
This proxy statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of Rite Aid Corporation, a Delaware
corporation (the "Company"), for use at the Company's 1996 Annual Meeting of
Stockholders (the "Meeting") to be held at the Radisson Penn Harris Hotel &
Convention Center, 1150 Camp Hill Bypass, Camp Hill, Pennsylvania 17011, on
June 26, 1996 at 11:00 a.m. or any adjournment or postponement thereof for
the purposes set forth in the foregoing notice. This proxy statement, the
foregoing notice and the enclosed proxy are being mailed to stockholders on
or about May 23, 1996. Only stockholders of record at the close of business
on May 10, 1996 shall be entitled to notice of and to vote at the Meeting.
If the enclosed proxy is properly executed and returned prior to voting at
the Meeting, the shares represented thereby will be voted in accordance with
the instructions marked thereon. In the absence of instructions, the shares
will be voted FOR the nominees of the Board of Directors in the election of
directors and AGAINST the stockholder proposal as indicated in the
accompanying notice. Management does not intend to bring any matter before
the Meeting other than as indicated in the notice and does not know of anyone
else who intends to do so other than the aforementioned stockholder proposal.
If any other matters properly come before the Meeting, however, the persons
named in the enclosed proxy, or their duly constituted substitutes acting at
the Meeting, will be deemed authorized to vote or otherwise act thereon in
accordance with their judgment on such matters.
Any proxy may be revoked at any time prior to its exercise by notifying the
Secretary in writing, by delivering a duly executed proxy bearing a later
date or by attending the Meeting and voting in person.
On May 10, 1996, the Company had outstanding and entitled to vote 83,880,661
shares of Common Stock. There must be present at the Meeting in person or by
proxy holders of 41,940,331 shares to constitute a quorum for the Meeting.
Proxies marked "Abstain" are included in determining a quorum, but broker
proxies which have not voted on a particular proposal are not included in
determining a quorum with respect to that proposal. Each holder of Common
Stock is entitled to one vote per share of Common Stock held of record by him
on the record date. There is no cumulative voting in the election of
directors.
Directors will be elected by a plurality of votes cast. Abstentions and
broker non-votes are not treated as votes cast in the election of directors,
and thus are not the equivalent of votes cast against a nominee. The
affirmative vote of the holders of a majority of the Company's Common Stock
present at the Meeting in person or by proxy and entitled to vote is required
to approve other matters. An abstention will be counted as present at the
Meeting and is the equivalent of a vote against (i.e., to take affirmative
action, the number of affirmative votes must exceed the combined number
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of "no" votes and abstentions). Broker non-votes on any matter other than the
election of directors will not be counted as shares present at the Meeting, nor
will they affect the vote with respect to that matter.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of May 10, 1996, certain information
concerning the beneficial shareholdings of each director, each nominee for
director, each executive officer named in the Summary Compensation Table
appearing elsewhere herein and by all directors and executive officers as a
group. Each of the persons named below has sole voting power and sole
investment power with respect to the shares set forth opposite his name,
except as otherwise noted. Except as set forth below, no person was known by
the Company to own beneficially more than five percent (5%) of the Company's
outstanding Common Stock.
<TABLE>
<CAPTION>
Number of
Common Shares
Beneficial Owners Beneficially Owned(1) Percent of Class
---------------------------------------------- ---------------------- ----------------
<S> <C> <C>
Alex Grass ................................... 2,190,605(2) 2.6%
Franklin C. Brown ............................ 285,163(3) *
Martin L. Grass .............................. 1,559,509(4) 1.9%
Nancy A. Lieberman ........................... 1,000 *
Philip Neivert ............................... 1,458,113(5) 1.7%
Leonard Stern ................................ 2,000 *
Henry Taub ................................... 2,000 *
Preston Robert Tisch ......................... 2,000 *
Gerald Tsai, Jr. ............................. 1,000 *
Timothy J. Noonan ............................ 150,808 *
Frank M. Bergonzi ............................ 64,000 *
Kevin J. Mann ................................ 15,000 *
FMR Corp.
82 Devonshire Street
Boston, MA 02109 ............................. 6,142,842(6) 7.3%
Chancellor Capital Management, Inc.
Chancellor Trust Company
1166 Avenue of the Americas
New York, NY 10036 ........................... 5,348,654(7) 6.4%
Putnam Investments, Inc.
One Post Office Square
Boston, MA 02109 ............................. 4,563,740(8) 5.4%
Scudder, Stevens & Clarke, Inc.
345 Park Avenue
New York, NY 10154 ........................... 5,225,875(9) 6.2%
All executive officers and directors (23 persons) 5,064,491 (2)(3)(4)(5) 6.0%
</TABLE>
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* Percentage less than 1% of class.
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<PAGE>
(1) Beneficial ownership has been determined in accordance with Rule 13d-3 of
the Securities Exchange Act of 1934, as amended.
(2) Includes 519,096 shares of Common Stock held in trust for the benefit of
Mr. Grass' children and of which Mr. Grass is a trustee, and includes
68,952 shares of Common Stock owned by the Grass Family Foundation of
which Mr. Grass is a director. Also includes 385,284 shares of Common
Stock held in trust for the benefit of Lois Grass and of which Mr. Grass
is an alternate trustee, and 400,000 shares owned by Grass Family
Partnership, Ltd. of which partnership Mr. Grass is a limited partner.
(3) Includes 175,163 shares owned by Mr. Brown's wife as to which Mr. Brown
disclaims any beneficial interest. All options and stock-based awards
held by Mr. Brown have been assigned to his wife and children and he
disclaims any beneficial interest in those shares.
(4) Includes 84,574 shares held in trusts for Mr. Grass' benefit and of which
Mr. Grass is a co-trustee. Includes 400,000 shares owned by Grass Family
Partnership, Ltd. of which partnership Mr. Grass is a general partner.
Also includes 385,284 shares held in trust for the benefit of Lois Grass
of which trust Mr. Grass is a co-trustee. In addition, Mr. Grass is the
beneficiary of a trust which holds 129,774 shares of Common Stock; these
shares are not included in the total.
(5) Includes 720,000 shares held in trust as to which Mr. Neivert is both a
co-trustee and a co-beneficiary. Mr. Neivert's wife owns 382,749 shares.
Mr. Neivert disclaims any beneficial interest in those shares owned by
his wife.
(6) FMR Corp., through its wholly-owned subsidiary, Fidelity Management &
Research Company, a registered investment advisor, and through its
wholly-owned subsidiary, Fidelity Management Trust Company, a bank, is
deemed to beneficially own 6,142,842 shares, as to which it has sole
dispositive power over all of the shares and sole voting power as to
481,835 of the shares. This information is derived from a Schedule 13G
filed by FMR Corp. with the Securities and Exchange Commission.
(7) Chancellor Capital Management, Inc. and Chancellor Trust Company, as
investment advisors for various fiduciary accounts, have sole dispositive
and voting power over all of the shares. This information is derived from
a Schedule 13G filed by Chancellor Capital Management, Inc. and
Chancellor Trust Company with the Securities and Exchange Commission.
(8) Putnam Investments, Inc., through its wholly-owned subsidiaries, Putnam
Investment Management, Inc. and The Putnam Advisory Company, Inc.,
registered investment advisors, is deemed to have shared dispositive
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power over all of the shares and shared voting power with respect to 51,000
of such shares. This information is derived from a Schedule 13G filed by
Putnam Investments, Inc. on behalf of itself and Putnam Investment
Management, Inc., The Putnam Advisory Company, Inc. and Marsh & McLennan
Companies, Inc., the parent of Putnam Investments, Inc., with the Securities
and Exchange Commission.
(9) Scudder, Stevens & Clarke, Inc., a registered investment advisor
("SS&C"), has sole dispositive power over all of the shares, sole voting
power as to 1,144,495 of the shares and shared voting power as to
2,633,300 of the shares. SS&C disclaims beneficial ownership of these
shares. This information has been derived from a Schedule 13G filed by
SS&C with the Securities and Exchange Commission.
ELECTION OF DIRECTORS
The Company's By-Laws provide that the Board of Directors may be composed of
up to a maximum of fifteen members. Traditionally, the Board has operated
with fewer directors. The Board is divided into three classes serving
staggered three-year terms, the term of one class of directors to expire each
year. Three of the directors to be elected at this Meeting will hold office
until the 1999 Annual Meeting of Stockholders and one director will hold
office until the 1997 Annual Meeting of Stockholders. The remaining directors
will be elected at the 1997 and 1998 Annual Meetings of Stockholders. Of the
present nominees for director to be elected at this Meeting, Leonard Stern
and Timothy J. Noonan, nominees for terms expiring in 1999, and Henry Taub,
the nominee for the term expiring in 1997, currently serve as directors of
the Company. The Board has also nominated Nancy A. Lieberman to serve as a
director for the term expiring in 1999. In light of Ms. Lieberman's
nomination, Mr. Taub, whose term also expires in 1996, has been nominated to
serve in the class of directors with terms expiring in 1997. Although there
are fewer nominees for election than the number allowed pursuant to the
By-Laws of the Company, proxies cannot be voted for a greater number of
persons than the four nominees named above.
Management believes that all of its nominees are willing and able to serve
the Company as directors. If any nominee at the time of election is unable or
unwilling to serve or is otherwise unavailable for election, and as a
consequence thereof, other nominees are designated, the persons named in the
proxy or their substitutes will have the discretion and authority to vote or
to refrain from voting for other nominees in accordance with their judgment.
The Board of Directors does not have a nominating committee.
The following is a brief description of the nominees for election as
directors and of the other directors of the Company.
4
<PAGE>
NOMINEES FOR DIRECTOR
TERM TO EXPIRE 1999
TIMOTHY J. NOONAN was appointed a Director of the Company on March 4, 1995
concurrently with his election as President and Chief Operating Officer.
Prior to March 4, 1995, and for more than five years, Mr. Noonan was
Executive Vice President of the Company. Age 54.
NANCY A. LIEBERMAN has been a partner for more than five years in the law
firm of Skadden, Arps, Slate, Meagher & Flom, which from time to time has
provided legal counsel to the Company. Age 39.
LEONARD STERN is Chairman of the Board of The Hartz Group, Inc. and
affiliated companies, a position he has held since 1979. Mr. Stern has been a
member of the Board of Directors of the Company since 1986. Age 58.
NOMINEE FOR DIRECTOR
TERM TO EXPIRE 1997
HENRY TAUB became Honorary Chairman of the Board of Automatic Data
Processing, Inc. in 1986. He had been Chairman of the Board of A.D.P., Inc.
since 1983. Mr. Taub has been a member of the Board of Directors of the
Company since 1984. He is also director of Hasbro, Inc. Age 68.
DIRECTORS CONTINUING IN OFFICE
TERM TO EXPIRE 1998
ALEX GRASS, Founder of the Company, has been Honorary Chairman of the Board
of Directors and Chairman of the Board's Executive Committee since March 4,
1995 when he retired as Chairman of the Board and Chief Executive Officer,
positions he held since the founding of the Company. He is also director of
Hasbro, Inc. Mr. Grass is the father of Martin Grass. Age 68.
PHILIP NEIVERT is a private investor whose operations are based in Rochester,
New York. Mr. Neivert has been a member of the Board of Directors of the
Company since 1969. Age 70.
GERALD TSAI, JR. is Chairman, President and Chief Executive Officer of Delta
Life Corporation, a position he has held since February 1993. He had been
Chairman of the Executive Committee of the Board of Directors of Primerica
Corporation (formerly American Can Company) from December 1988 until April
1991. For the years 1987 and 1988, Mr. Tsai had been Chairman and Chief
5
<PAGE>
Executive Officer of Primerica. Prior thereto he had been Vice Chairman and
Chief Executive Officer. Mr. Tsai is also a director of Proffitt's Inc., Triarc
Companies, Sequa Corporation and Zenith National Insurance Corp., and a trustee
of Meditrust. Mr. Tsai has been a member of the Board of Directors of the
Company since 1987. Age 67.
DIRECTORS CONTINUING IN OFFICE
TERM TO EXPIRE 1997
FRANKLIN C. BROWN is Executive Vice President and Chief Legal Counsel of the
Company. Prior to his appointment as Executive Vice President in April, 1993,
Mr. Brown served the Company for 13 years as Senior Vice President and
General Counsel. Mr. Brown has been a member of the Board of Directors of the
Company since 1981. Age 68.
MARTIN L. GRASS has been Chairman of the Board and Chief Executive Officer of
the Company since March 4, 1995. Previously, Mr. Grass was President and
Chief Operating Officer since April 1989, had been Executive Vice President
for three years and prior thereto, had served as Senior Vice President. He
has served the Company in various capacities since 1978. Mr. Grass has been a
member of the Board of Directors of the Company since 1982. He is the son of
Alex Grass. Age 42.
PRESTON ROBERT TISCH has been Co-Chairman and Co-Chief Executive Officer of
Loews Corporation since October 18, 1994. He was President and Co-Chief
Executive Officer of Loews Corporation from March 1988 to October 1994. In
addition, since March 1991 he has been Chairman of the Board of the N.Y.
Football GIANTS, Inc. From August 1986 to March 1988, he was Postmaster
General of the United States. Prior thereto, he had been President and Chief
Operating Officer of Loews Corporation. Mr. Tisch has been a member of the
Board of Directors of the Company since 1988. Mr. Tisch is also a director of
Loews Corporation, CNA Financial Corporation, Bulova Watch Co., and Hasbro,
Inc. Age 70.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board's Audit Committee, which held three meetings during the last fiscal
year, oversees management's fulfillment of its financial reporting and
disclosure responsibilities and its maintenance of an appropriate internal
control system. It recommends appointment of the Company's independent public
accountants and oversees the activities of the Company's internal audit
function. To ensure independence, the independent public accountants and
internal auditors meet with the Audit Committee with and without the presence
of management representatives. Its current members are Philip Neivert, Henry
Taub and Gerald Tsai, Jr.
6
<PAGE>
The Board's Compensation Committee met twice during the last fiscal year for
the purpose of evaluating key officers' salaries and bonuses. Members of the
Compensation Committee during the last fiscal year were Philip Neivert,
Leonard Stern and Gerald Tsai, Jr. See "Report of the Compensation Committee
on Executive Compensation."
DIRECTORS' ATTENDANCE AT MEETINGS
The Board of Directors meets regularly four times each year. The Board also
is available for interim meetings. Each incumbent director of the Company
attended at least 75% of the meetings of the Board of Directors and meetings
held by all committees on which such director served.
DIRECTORS' FEES
Each director who is not also an officer and full-time employee of the
Company received an annual director fee in the amount of $25,000. Directors
who are officers and full-time employees of the Company receive no separate
compensation for service as a director or committee member. Members of the
Audit Committee and the Compensation Committee are each paid $1,000 for
attendance at each formal meeting. Additionally, the Chairmen of the Audit
Committee and the Compensation Committee are paid an annual fee of $2,500.
Board members are also reimbursed for travel and lodging expenses associated
with attending Board and Committee meetings. In fiscal year 1995, each of the
Company's non-employee directors was granted a restricted stock award of
1,000 shares of Common Stock. The award vests upon the earlier of the third
anniversary of the grant date and the date when the non-employee director
retires from the Board of Directors. In addition, Alex Grass, Honorary
Chairman and a director of the Company, provided consulting services to the
Company during fiscal year 1996 for which he was paid $400,000.
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<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table shows, for the fiscal years ended March 2, 1996, March 4,
1995 and February 26, 1994, the annual and long-term compensation paid or
accrued by the Company and its subsidiaries to the Company's Chief Executive
Officer and to the four most highly compensated executive officers whose
total annual salary and bonus exceeded $100,000.
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
------------------------------------------------- -------------------------------------------
Other All
Annual Restricted Securities Other
Name and Compen- Stock Underlying LTP Compen-
Principal Fiscal sation Awards Options/ Payouts sation
Position Year Salary($) Bonus($)(1) ($)(2) ($) SARs(#) ($)(3) ($)(4)
- -------------------- -------- ------------ ---------- --------- ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Martin L. Grass .... 1996 $1,000,000 $600,000 -- -- 200,000 $2,875,000 $2,000
Chairman and Chief 1995 $ 927,000 $165,000 -- -- 200,000 $ 87,500 $2,000
Executive Officer 1994 $ 900,000 -- -- -- -- -- $2,000
Timothy J. Noonan .. 1996 $ 500,000 $300,000 -- -- 55,000 $1,150,000 $2,000
President and Chief 1995 $ 299,854 $ 82,500 -- -- 55,000 $ 26,250 $2,000
Operating Officer 1994 $ 288,554 -- -- -- -- -- $2,000
Franklin C. Brown .. 1996 $ 450,000 $243,000 -- -- 55,000 $1,437,500 $2,000
Executive Vice 1995 $ 417,846 $ 82,500 -- -- 55,000 $ 13,125 $2,000
President 1994 $ 400,925 -- -- -- -- -- $2,000
Frank M. Bergonzi .. 1996 $ 345,000 $186,000 -- -- 32,000 $ 718,750 $2,000
Executive Vice 1995 $ 295,000 $ 82,500 -- -- 32,000 -- $2,000
President 1994 $ 257,692 -- -- -- -- -- $2,000
Kevin J. Mann ...... 1996 $ 258,962 $136,867 -- -- 20,000 $ 287,500 $2,000
Executive Vice 1995 $ 234,007 $ 37,500 -- -- 20,000 -- $2,000
President 1994 $ 212,289 -- -- -- -- -- $2,000
</TABLE>
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(1) Represents annual performance bonuses determined by the Compensation
Committee of the Board of Directors under the Annual Performance-Based
Incentive Program. See "Report of the Compensation Committee on Executive
Compensation." Bonuses are paid in the fiscal year following the fiscal
year in which they are earned.
(2) Did not exceed, for each named officer, the lesser of $50,000 or ten
percent of such officer's total annual salary and bonus for such year.
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<PAGE>
(3) Represents cash payments made by the Company to the named persons in
consideration for their continuing in the Company's employment for a five
year period which ended in fiscal year 1996, which payments were
calculated on the basis of the appreciation in the market price of the
Company's Common Stock over the five year period.
(4) Represents amounts paid by the Company on behalf of the named persons in
connection with the Company's Profit Sharing Plan.
STOCK OPTION HOLDINGS
The following tables set forth certain information concerning stock options
and stock options in tandem with stock appreciation rights ("SARs") granted
to and exercised by the persons named in the Summary Compensation Table above
during fiscal year 1996 and unexercised stock options held by such persons at
the end of fiscal year 1996.
OPTION GRANTS DURING FISCAL YEAR 1996
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Percentage of Annual Rates of Stock Price
Number of Total Appreciation
Securities Options/SARs Exercise or for Option Terms (4)
Underlying Granted Base Price Expiration ----------------------------
Name(1) Options (2) in Fiscal 1996 ($/Share) (3) Date 5%($) 10%($)
------------------ ------------ --------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Martin L. Grass .. 200,000 24.3% 24.781 1/06/03 $2,017,671 $4,702,032
Timothy J. Noonan . 55,000 6.7% 24.781 1/06/03 $ 554,860 $1,293,059
Franklin C. Brown . 55,000 6.7% 24.781 1/06/03 $ 554,860 $1,293,059
Frank M. Bergonzi . 32,000 3.9% 24.781 1/06/03 $ 322,827 $ 752,325
Kevin J. Mann .... 20,000 2.4% 24.781 1/06/03 $ 201,767 $ 470,203
</TABLE>
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(1) See Summary Compensation Table for titles of the persons named above.
(2) The options listed in the table were issued as the result of the
attainment of certain performance objectives as determined by the
Compensation Committee of the Board of Directors when the 1993
Accelerating Vesting Options were granted.
(3) All options were granted at fair market value at date of grant.
(4) Gains are reported net of option exercise price but before taxes
associated with exercise. These amounts represent assumed rates of
appreciation only. Actual gains, if any, on the options are dependent
upon future performance of the Common Stock, and the amounts reflected on
the table may not necessarily be achieved. The Company did not use an
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<PAGE>
alternative formula for a grant date valuation insofar as the Company is not
aware of any formula which would determine with reasonable accuracy a
present value based on future unknown or volatile factors. No gain is
possible without appreciation in the market price of the Common Stock, which
will benefit all stockholders of the Company commensurably.
OPTION EXERCISES IN FISCAL 1996 AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options at Fiscal In The Money Options
Year End at Fiscal Year End ($)(3)
Value --------------------------- ----------------------------
Shares Acquired Realized
Name (1) on Exercise $ (2) Exercisable / Unexercisable Exercisable / Unexercisable
- --------- --------------- ---------- --------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Martin L. Grass .. -- -- 400,000 500,000 $5,200,000 $5,058,750
Timothy J. Noonan . -- -- 110,000 137,500 $1,430,000 $1,391,156
Franklin C. Brown . -- -- 110,000 137,500 $1,430,000 $1,391,156
Frank M. Bergonzi . -- -- 64,000 80,000 $ 832,000 $ 809,400
Kevin J. Mann .... 25,000 $373,750 15,000 50,000 $ 195,000 $ 505,875
</TABLE>
- ------
(1) See Summary Compensation Table for titles of the persons named above.
(2) Calculated by subtracting the exercise price from the fair market value
of the underlying shares on the exercise date. May be paid as
appreciation rights at the option of the Compensation Committee.
(3) Calculated by subtracting the exercise price from the market price at
March 2, 1996.
10
<PAGE>
LONG-TERM INCENTIVE PLAN
The following table sets forth certain information concerning long-term
incentive awards made by the Company to the persons named in the Summary
Compensation Table above during fiscal year 1996.
<TABLE>
<CAPTION>
Number of Estimated Future Payout
Shares, Performance or Other Under Non-Stock Price-Based Plans (3)
Units or Period Until -------------------------------------
Other Rights Maturation or Threshold Target Maximum
Name (1) (#)(2) Payout (#) (#) (#)
------------------ --------------- -------------------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
Martin L. Grass .. 500,000 FY1996-1999 100,000 -- 500,000
Timothy J. Noonan . 300,000 FY1996-1999 60,000 -- 300,000
Franklin C. Brown . 150,000 FY1996-1999 30,000 -- 150,000
Frank M. Bergonzi . 150,000 FY1996-1999 30,000 -- 150,000
Kevin J. Mann .... 150,000 FY1996-1999 30,000 -- 150,000
</TABLE>
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(1) See Summary Compensation Table for titles of the persons named above.
(2) Represents shares of the Company's Common Stock.
(3) Represents the number of shares of the Company's Common Stock which will
be issued to the named person (or, at the discretion of the Board of
Directors, the equivalent value of such shares paid in cash) depending
upon the percentage increase in the earnings per share of the Company
over the measurement period, calculated at 8% per annum for the Threshold
Payout and at 12.5% per annum for the Maximum Payout.
DEFERRED COMPENSATION PROGRAM
The Company has established a Deferred Compensation Program (the
"Program") in which employees of the Company with the position of Vice
President or higher are entitled to participate. Under the Program, eligible
participants generally are entitled, upon retirement at age 65 or upon death,
to receive an annual benefit payable over fifteen years, equal to a
percentage (ranging from 40% to 60% depending upon the participant's position
with the Company) of the average of the three highest base annual salaries
received by the participant during the ten year period prior to the year in
which the event giving rise to the payment of deferred compensation occurs.
The percentage of the average annual compensation payable under the Program
to each of the persons named in the Summary Compensation Table above is 60%.
11
<PAGE>
RELATED PARTY TRANSACTIONS
The Company rents 74,200 square feet of storage space at a warehouse owned
by Realm R.R. Avenue Partnership, of which both Alex Grass and Martin L.
Grass are general partners. Annual rental paid to the Partnership by Rite Aid
during fiscal year 1996, which included a pro rata portion of common area
charges, real estate taxes and insurance, amounted to $230,234. The current
lease term expires in August 1997.
In January 1996, the Company acquired from S. Robert Grass and Rosalie A.
Grass all of the outstanding stock of White Shield, Inc., a corporation which
owned 14 drugstores, for a cash purchase price of approximately $1,000,000.
S. Robert Grass is the brother of Alex Grass.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee"),
composed of outside directors of the Board of Directors of the Company,
reviews the performance of the Company's executive personnel and develops and
makes recommendations to the Board with respect to executive compensation
policies. The Compensation Committee is empowered by the Board to award
appropriate bonuses and to recommend to the Board those executive officers to
whom stock options and stock appreciation rights ("SARs") should be granted
and the number of shares of common stock to which such options and SARs
should be subject.
The Committee has access to independent compensation data and is
authorized, if determined appropriate in any particular case, to engage
outside compensation consultants.
The objectives of the Committee are to support the achievement of desired
Company performance, to provide compensation and benefits that will attract
and retain superior talent and reward performance and to fix a portion of
compensation to the outcome of corporation performance.
The executive compensation program is generally composed of base salary,
discretionary performance bonuses and long term incentives in the form of
stock options, SARs, stock based awards and restricted stock warrants. The
compensation program also includes various benefits, including a deferred
compensation program described elsewhere herein, health insurance plans and
programs and pension and profit sharing and retirement plans in which
substantially all of the Company's employees participate.
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Base salary for the Company's executive officers are competitively set
relative to salaries of officers of companies comparable in business and
size, including three companies in the NACDS Index reproduced below as well
as other publicly owned retail companies similar in size to the Company. In
each instance, base salary takes into account individual experience and
performance specific to the Company. The Committee generally attempts to
provide compensation approximating the median of comparable companies. Except
for increases associated with promotions or increased responsibility,
increases in base salaries for executive officers of the Company from year to
year are limited to adjustments to reflect increases in the rate of
inflation.
The Committee is aware that a recent amendment to the Internal Revenue
Code of 1986 treats certain elements of executive compensation in excess of
$1 million a year as an expense not deductible by the Company for federal
income tax purposes. At the present time, no executive officer's compensation
exceeds the cap on deductibility. To the extent compensation to an executive
officer exceeds the cap in the future, the Committee will consider the facts
and circumstances at that time to reach a determination regarding the impact
of the cap on such compensation.
The Committee is empowered to recommend for full Board approval the
payment of cash performance bonuses to employees, including executive
officers, of the Company. During fiscal year 1995, the Committee established
the Annual Performance-Based Incentive Program (the "Annual Incentive Plan").
The purpose of the Annual Incentive Plan is to provide an incentive for
executives of the Company and to reward them in relation to the degree to
which specified earnings goals are achieved, as measured by year to year
growth and earnings per share. Each year, the Committee determines a range of
growth and earnings per share over the previous year. Additionally, a
targeted incentive as a percentage of salary is determined each year by the
Committee, ranging from a maximum of 50% for the Chief Executive Officer to
15% depending on executive position. Depending upon the actual worth and
earnings per share during such year, participants are entitled to a
percentage, ranging from 0% to 200%, of the targeted incentive award fixed by
the Committee. For fiscal year 1996, the earnings goals as set by the
Committee were achieved and, consequently, certain bonuses were paid in
fiscal year 1997 to the executive officers who were participants in the Plan
during fiscal year 1996.
The Committee believes that employee equity ownership provides significant
additional motivation to executive officers to maximize value for the
Company's stockholders and, therefore, periodically grants stock options to
the Company's employees, including executive officers. Stock options are
granted typically at prevailing market price and, therefore, will only have
value if the Company's stock price increases over the exercise price. The
Committee believes that the grant of stock options provides a
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long term incentive to such persons to contribute to the growth of the
Company and establishes a direct link between compensation and stockholder
return, measured by the same index used by stockholders to measure Company
performance. The terms of options granted by the Board of Directors,
including vesting, exercisability and option term, are determined by the
Committee, based upon relative position and responsibilities of each
executive officer, historical and expected contributions of each officer of
the Company, previous option grants to executive officers and a review of
competitive equity compensation for executive officers of similar rank in
companies that are comparable to the Company's industry and size.
For information regarding these and other options held by the Company's
executive officers, reference is made to the tables set forth in the Proxy
Statement under the caption "Compensation of Executive Officers."
Compensation Committee
Philip Neivert
Leonard Stern
Gerald Tsai, Jr.
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STOCK PERFORMANCE GRAPH
The graph below compares the yearly percentage change in the cumulative
total stockholder return on the Common Stock of the Company for the last five
fiscal years with the cumulative total return on the S&P 500 Index and NACDS
Peer Group Index over the same period (assuming the investment of $100 in the
Company's Common Stock and such indices on March 2, 1991 and reinvestment of
dividends).
The NACDS Peer Group Index is compiled by the National Association of
Chain Drug Stores and includes: Arbor Drugs, Inc.; Big B, Inc.; Drug
Emporium, Inc.; Fays Incorporated; Genovese Drug Stores; Longs Drug Stores;
Revco D.S., Inc.; Rite Aid Corporation; and Walgreen Co.
$250|-----------------------------------------------------------------|
| |
| * |
$200|------------------------------------------------------------&----|
D | # |
O | |
L $150|------------------------------------------------*&---------------|
L | & & |
A | *& * * # |
R $100|---*&#--------#---------#-----------#----------------------------|
S | |
| |
%50|-----------------------------------------------------------------|
| |
| |
$0|----|---------|---------|-----------|-----------|-----------|----|
1991 1992 1993 1994 1995 1996
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
NACDS * = $100 $113 $118 $128 $151 $208
S & P 500 & = $100 $116 $128 $139 $149 $201
RITE AID # = $100 $104 $101 $101 $134 $175
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STOCKHOLDER PROPOSAL
PROPOSED REDEMPTION OF PREFERRED STOCK PURCHASE RIGHTS:
Amalgamated Bank of New York LongView Collective Investment Fund, 11-15 Union
Square, New York, NY 10003, which is a stockholder of record of shares of
Common Stock constituting in excess of $1,000 in market value, has advised
that it intends to introduce the following resolution at the meeting:
"RESOLVED, that the stockholders of Rite Aid Corporation ("Rite Aid"
or the "Company") request the Board of Directors to redeem preferred
stock purchase rights issued in 1989 unless such issuance is
approved by the affirmative vote of a majority of the outstanding
shares at a meeting of the stockholders to be held as soon as may be
practicable."
The reasons given by such stockholder in support of such resolution are as
follows:
"On April 5, 1989, the Board of Directors of Rite Aid declared,
without stockholder approval, a dividend of preferred stock purchase
rights ("rights"). We strongly believe that such rights are a type
of anti-takeover device, commonly known as a poison pill, which
injures stockholders by reducing management accountability and
adversely affecting stockholder value.
The stockholders of the Company believe that the terms of the rights
are designed to discourage or thwart an unwanted takeover of the
Company. While management and the Board of Directors should have
appropriate tools to ensure that all stockholders benefit from any
proposal to acquire the Company, the stockholders do not believe
that the future possibility of a takeover justifies the unilateral
implementation of such a poison pill.
Rather, we believe that it is the stockholders who should have the
right to vote on the necessity of such a powerful tool, which could
be used to entrench existing management. Rights plans such as the
Company's have become increasingly unpopular in recent years.
The negative effects of poison pill rights plans on the trading
value of companies' stock have been the subject of extensive
research. A 1986 study (covering 245 companies adopting poison pills
between 1983 and July 1986) was prepared by the Office of the Chief
Economist of the U.S. Securities and Exchange Commission on the
effect of poison pills on the wealth of target stockholders. It
states that "empirical tests, taken together, show that poison pills
are harmful to target shareholders, on net." A 1992 study by
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Professor John Pound of Harvard's Corporate Research Project and Lilli A.
Gordon of the Gordon Group found a correlation between high
corporate performance and the absence of poison pills.
At the 1994 annual meeting 63.5% of the voting shares were cast in
favor of this proposal. The resolution was resubmitted to the
stockholders for a vote in 1995, but the Company improperly excluded
it from the proxy materials sent to its stockholders.
We therefore resubmit this stockholder proposal based upon our
continuing belief that the unilateral and undemocratic adoption of
the rights plan by the Company was unjustified and that the
continued existence of such a rights plan is unjustified and not in
the best interests of the stockholders. We believe that the
preferred share rights should either be redeemed or voted on by
stockholders.
WE URGE YOU TO VOTE FOR THIS RESOLUTION!"
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND A VOTE AGAINST THIS
RESOLUTION FOR THE FOLLOWING REASONS:
The Stockholder Proposal is intended to encourage the Company's Board of
Directors to redeem the Preferred Stock Purchase Rights that all stockholders
possess under the Company's Stockholder Rights Plan (the "Rights Plan"). The
Board believes redemption of the Rights at this time would remove valuable
protections for stockholders and eliminate an important tool designed to
protect your interests and could deprive you of substantial economic benefits
in the future.
This stockholder proponent submitted this same proposal for the 1994 Annual
Meeting, and its statement in support of the proposal this year simply
repeats most of the arguments presented in the 1994 Proxy Statement. At the
1994 Annual Meeting, the Company's stockholders voted to reject the proposal
and, in effect, to favor the continuance of the Rights Plan. We thank the
Company's stockholders for their support.
WHAT RIGHTS PLANS DO
The Rights Plan is intended to protect all of the stockholders, not to
entrench management. The Board of Directors originally adopted the Rights
Plan to protect the Company's stockholders from the abusive takeover
practices and unfair treatment of minority stockholders so prevalent in the
1980s. A key function of a rights plan is to encourage bidders to negotiate
with the board of the target company, resulting in better offers for all
stockholders. Rights plans give boards time to evaluate offers, investigate
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<PAGE>
alternatives, and take steps necessary to maximize value for all
stockholders. A study issued by Georgeson & Company, Inc. in October 1988
confirms the Board's judgment in connection with its adoption of the Rights
Plan in 1989 that a rights plan can be beneficial to all stockholders. The
study found that the total appreciation in shareholder value for companies
with plans was 54.8%, while companies without plans gained only 45.2%. See,
Georgeson & Company, Inc. Poison Pill Impact Study II (October 31, 1988).
A consensus has gradually emerged among many major United States corporations
that rights plans help inhibit abusive conduct and assist directors in
fulfilling their fiduciary duty to all stockholders. A substantial number of
companies of all sizes have found adoption of a rights plan to be a prudent
step to take to protect stockholder interests even though they were not the
subject of current takeover bids. In deciding to adopt the Rights Plan in
1989, your directors sought, received and carefully weighed information and
advice from experienced, independent legal and financial advisors. The Board
also drew on its collective experience with many other corporations and
situations and its intimate knowledge of the Company's own business,
prospects and circumstances.
Rights plans do not preclude corporate takeovers. Many corporations which
adopted rights plans were later acquired by others. The Company's Rights Plan
encourages any individual or group seeking to acquire at least 15% of the
Company's stock (representing more than a $250 million investment at current
market prices) to negotiate with the Company to obtain its approval of the
acquisition. This permits the Board of Directors to ensure that the
acquisition is fair and in the best interests of all other stockholders.
RESPONSIBILITY AND ACCOUNTABILITY
The Board of Directors, elected by and answerable to the stockholders, is
charged with the responsibility of protecting your interests. You have the
right, with your fellow stockholders, to elect the directors you want to
manage your investment in the Company. A majority of this Company's Board of
Directors is independent in that five of the Company's nine directors are
neither employees nor officers of the Company. They add a broad range of
experience in business, finance and academia. If confronted with an
unsolicited bid for the Company, these outside directors are expected to be
independent of management and knowledgeable of, and particularly sensitive
to, their fiduciary duty under Delaware law to represent the stockholders and
not management when evaluating the merits of an acquisition proposal.
The Board of Directors continues to consider the Rights Plan to be in the
best interests of all stockholders. The Rights Plan represents a sound and
reasonable means of protecting both a stockholders' right to retain an equity
investment in the Company and full value of that investment, while not
foreclosing a fair acquisition bid for the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
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PROPOSALS OF SECURITY HOLDERS
All proposals of any stockholder of the Company which the holder desires be
presented at the next Annual Meeting of Stockholders and be included in the
proxy statement and form of proxy prepared for that meeting must be received
by the Company at its principal executive offices no later than January 7,
1997. All such proposals must be submitted in writing to the Secretary of the
Company at the address appearing on the notice accompanying this proxy
statement.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP performed the customary auditing services for the
fiscal year ended March 2, 1996, and has been selected to perform these
services for the next fiscal year. A representative of KPMG Peat Marwick LLP
is expected to be present at the Meeting and will be available to respond to
questions from the floor and will be afforded an opportunity to make any
statement which he may deem appropriate.
SOLICITATION OF PROXIES
The cost of the solicitation of proxies will be borne by the Company. In
addition to the use of the mails, solicitations may be made by telephone and
personal interviews by officers, directors and regularly engaged employees of
the Company. It is not anticipated that anyone will be specifically engaged
by the Company or by any other person to solicit proxies. Brokerage houses,
custodians, nominees and fiduciaries will be requested to forward this proxy
statement to the beneficial owners of the stock held of record by such
persons, and the Company will reimburse them for their charges and expenses
in this connection.
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON SOLICITED BY THIS
PROXY STATEMENT, AT THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K (INCLUDING THE FINANCIAL STATEMENTS AND
THE SCHEDULES THERETO) AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
FOR ITS MOST RECENT FISCAL YEAR. SUCH WRITTEN REQUESTS SHOULD BE DIRECTED TO
RICHARD VARMECKY, AT THE ADDRESS OF THE COMPANY APPEARING ON THE FIRST PAGE
OF THIS PROXY STATEMENT.
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[LOGO]
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Rite Aid Corporation
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
[ ]
1. Election of Directors,
Timothy J. Noonan, Nancy A. Lieberman, For All
Leonard Stern, Henry Taub For Withheld Except
[ ] [ ] [ ]
---------------------------------------
(Except nominee[s] written above.
2. To consider a stockholder proposal For Against Abstain
to redeem preferred stock purchase rights [ ] [ ] [ ]
Signature of Stockholder:
----------------------------------------------------
- -----------------------------------------------------------------------------
Dated: , 1996
--------------
NOTE: When signing as attorney-in-fact, executor,
administrator, trustee or guardian, please add your title as
such, and if signer is a corporation, please sign with full
corporate name by duly authorized officer or officers and
affix the corporate seal. Where stock is issued in the
name of two or more persons, all such persons should sign.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED, OR IF NO
SPECIFICATIONS ARE MADE, WILL BE VOTED FOR THE ELECTION OF THE ABOVE NOMINEES
FOR DIRECTOR AND AGAINST THE STOCKHOLDER PROPOSAL, AND THE NAMED PROXIES WILL
USE THEIR DISCRETION TO VOTE ON ANY OTHER MATTER AS MAY PROPERLY COME BEFORE
THE MEETING.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF MEETING AND
PROXY STATEMENT FURNISHED HEREWITH, AND HEREBY CONFIRMS THAT THIS PROXY
SHALL, BE VALID AND MAY BE VOTED WHETHER OR NOT THE STOCKHOLDER'S NAME IS SET
FORTH BELOW OR A SEAL IS AFFIXED OR THE DESCRIPTION, AUTHORITY OR CAPACITY OF
THE PERSON SIGNING IS GIVEN OR OTHER DEFECT OF SIGNATURE EXISTS.
RITE AID CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 26, 1996
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Martin Grass and Franklin
Brown or either one of them, as proxies, with full power of substitution, to
vote all shares of stock of Rite Aid Corporation (the "Company") which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of stockholders of the Company to be held at the Radisson Penn Harris
Hotel & Convention Center, 1150 Camp Hill Bypass, Camp Hill, Pennsylvania, at
11:00 o'clock a.m., on June 26, 1996, or at any adjournments or postponements
thereof:
(continued on reverse side)
