UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] 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
[_] Soliciting Material Pursuant to (S) 240.14a-12
SMART & FINAL 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] No fee required
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(1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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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:
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[LOGO OF SMART & FINAL(R) INC.]
SMART & FINAL INC.
600 Citadel Drive
Commerce, California 90040
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 23, 2001
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Smart & Final Inc. (the "Company")
will be held at the Company's corporate headquarters, 600 Citadel Drive,
Commerce, California 90040, on Wednesday, May 23, 2001, at 10:00 a.m., local
time, for the following purposes:
1. To elect four (4) directors of the Company to serve until the 2004
annual meeting and until their successors have been elected and qualified;
2. To approve an amendment to the Long-Term Equity Compensation Plan to
increase from 2,470,000 to 3,600,000 the aggregate number of shares
authorized for grant thereunder and to extend the expiration date of the
plan from December 31, 2006 to December 31, 2010;
3. To ratify the selection of Arthur Andersen LLP, independent public
accountants, as auditors for the Company for the fiscal year ending
December 30, 2001; and
4. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The Board of Directors has determined that only holders of the Company's
Common Stock of record at the close of business on March 30, 2001, will be
entitled to receive notice of, and to vote at, the Annual Meeting or any
adjournment thereof.
WHETHER YOU PLAN TO ATTEND THE ANNUAL MEETING OR NOT, YOU ARE REQUESTED TO
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID
ENVELOPE IN ORDER THAT AS MANY SHARES AS POSSIBLE MAY BE REPRESENTED AT THE
ANNUAL MEETING.
DONALD G. ALVARADO
Secretary
Commerce, California
April 17, 2001
SMART & FINAL INC.
600 Citadel Drive
Commerce, California 90040
----------------
PROXY STATEMENT
----------------
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Smart & Final Inc. (the "Company") for
use at the Annual Meeting of Stockholders to be held at the Company's
corporate headquarters, 600 Citadel Drive, Commerce, California 90040, on
Wednesday, May 23, 2001, at 10:00 a.m., local time, and at any adjournment
thereof, for the purposes set forth herein and in the accompanying Notice. The
approximate date of mailing of this Proxy Statement and the accompanying proxy
is April 17, 2001.
Proxy Information
A stockholder giving a proxy has the power to revoke it at any time before
it is exercised by filing with the Secretary of the Company an instrument
revoking it or a duly executed proxy bearing a later date or by voting in
person at the Annual Meeting. Subject to such revocation, all shares
represented by each properly executed proxy received by the Company will be
voted in accordance with the instructions indicated thereon, and if
instructions are not indicated, will be voted: (i) to elect the nominees for
director named in this Proxy Statement; (ii) to approve an amendment to the
Long-Term Equity Compensation Plan increasing by 1,130,000 the number of
shares authorized for grant thereunder and extending the expiration date of
that plan until December 31, 2010; and (iii) to ratify the selection of Arthur
Andersen LLP, independent public accountants, as auditors. Under the rules of
the New York Stock Exchange, Inc., brokers who hold shares in street name for
customers have the authority to vote on the election of directors and certain
other matters when they have not received instructions from beneficial owners,
but lack such authority on other matters. For all the proposals presented
below, such brokers have authority to vote on the election of directors, the
plan amendment and ratification of the selection of auditors.
Record Date and Voting
As of March 30, 2001, the record date fixed by the Board of Directors, the
outstanding voting securities of the Company consisted of 29,284,964 shares of
Common Stock, par value $.01 per share. Each stockholder of record at the
close of business on March 30, 2001 is entitled to one vote for each share
then held on each matter submitted to a vote of stockholders. A majority of
the shares entitled to vote will constitute a quorum at the Annual Meeting.
Abstentions and broker non-votes (i.e., votes withheld by brokers on non-
routine proposals in the absence of instructions from beneficial owners) are
counted for purposes of determining the presence or absence of a quorum for
the transaction of business.
In the election of directors described below, votes may be cast in favor or
withheld. The four director nominees who receive the greatest number of votes
cast in the election will be elected. Shares marked withheld or otherwise not
voted in the election (including abstentions and broker non-votes) have no
impact on the election. For purposes of the votes on the proposals to amend
the Company's Long-Term Equity Compensation Plan and to ratify the selection
of Arthur Andersen LLP as auditors, abstentions and broker non-votes are
counted in determining the total number of votes present at the meeting and
thus have the effect of a vote against the proposals.
1
ELECTION OF DIRECTORS
Nominees
Four directors of the Company's Board of Directors are to be elected at the
Annual Meeting to hold office until the annual meeting held in 2004 and until
their successors are elected and qualified. The Board of Directors is
currently divided into three classes serving staggered terms normally of three
years each. The term of office of one class of directors expires each year,
and at each annual meeting the successors to the directors of the class whose
term is expiring in that year are elected to hold office for a term of three
years and until their successors are elected and qualified. Four directors
whose terms expire this year, Messrs. Bouchut, McLaughlin, Plaskett and
Snollaerts have been nominated for re-election to a term expiring in 2004. In
the election of directors, unless properly instructed otherwise, the proxy
holders intend to vote for the election of those nominees. It is not
anticipated that any of the nominees will decline or be unable to serve as a
director. If, however, that should occur, the proxy holders will vote the
proxies in their discretion for any nominee designated to fill the vacancy by
the present Board of Directors.
For purposes of reference below, Casino Guichard-Perrachon, S.A. ("Casino
France"), a publicly traded French joint stock limited liability company, is
the principal shareholder of Casino USA, Inc. ("Casino USA"). Casino USA
acquired the Company's then parent company in 1984. Casino France and its
subsidiaries (collectively "Groupe Casino") are currently engaged in retail
grocery, restaurant, food production and other businesses in parts of Europe,
South America and Asia and, through the Company, the United States. Groupe
Casino currently owns approximately 60% of the Company's Common Stock. (see
"Security Ownership of Certain Beneficial Owners and Management" below).
The following table sets forth certain information concerning each person
nominated for election as a director of the Company:
Director Year Term
Name Age Since Would Expire
---- --- -------- ------------
Pierre B. Bouchut.................................. 45 1994 2004
David J. McLaughlin................................ 65 1990 2004
Thomas G. Plaskett................................. 57 1994 2004
Etienne Snollaerts................................. 45 1998 2004
Pierre B. Bouchut. Mr. Bouchut has been a director of the Company since
December 1994 and has been a member of the Board of Directors of Casino France
since September 1996. He currently serves as General Manager for Casino
France. From 1990 to 1997 he was Director of Finance for Casino France. Mr.
Bouchut was an associate at McKinsey & Company Inc. (management consulting)
from 1988 to 1990.
David J. McLaughlin. Mr. McLaughlin has been a director of the Company since
1990 and currently serves on the Audit and Compensation Committees. He has
been a director of Scientific Atlanta, Inc. (communications and
instrumentation products) since 1987 and Troy Biosciences Incorporated since
1994. He is now Vice Chairman of Troy Biosciences Incorporated where he served
as President and Chief Executive Officer from 1996 to 1999. He is also
President and Chief Executive Officer of Pentacle Press LLC (publishing and
research) from January 2000 to date.
Thomas G. Plaskett. Mr. Plaskett has been a director of the Company since
April 1994, currently serves as Chairman of the Audit Committee and is a
member of the Compensation and Governance Committees. Mr. Plaskett served as
Chairman of the Board of Greyhound Lines, Inc. (transportation) from February
1995 to March 1999 and the Managing Director of Fox Run Capital Associates
(private financial advisory and venture capital services) since November 1991.
He is a director of Probex Corporation, an energy technology company in
Carrollton, Texas and the Vice Chairman and Executive Vice President of Legend
Airlines, a privately-held airline based in Dallas, Texas which in December
2000 filed a petition for insolvency under Federal bankruptcy laws. Mr.
Plaskett was a director of Neostar Retail Group, Inc. (formerly, Babbage's,
Inc.) (personal computer
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software), and in September 1996 was elected Chairman of Neostar, which in
September 1996 filed a petition for insolvency under Federal bankruptcy laws.
From 1988 to September 1991, he was Chairman and Chief Executive Officer of
Pan Am Corporation (commercial airline). Mr. Plaskett has been a director of
RadioShack Corporation (retail electronics) since 1986. He is a member of the
audit committee of RadioShack Corporation.
Etienne Snollaerts. Mr. Snollaerts has been a director of the Company since
1998. He is currently the Deputy General Manager and Director of the supply
chain within Groupe Casino. In addition to this responsibility, he supervises
Groupe Casino's U.S. Operations, including Casino USA and its subsidiaries.
Prior to this he was in charge of the international activities of Groupe
Casino which included operations in ten countries. Mr. Snollaerts has been
associated with Casino France since 1990 and served successfully as Director
of Purchasing and Logistics, Director of Retail Distributions, Store
Operations and Information Systems. Prior to joining Casino France, he was a
management consultant with Alexander Proudfoot Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF EACH
NOMINEE NAMED ABOVE TO SERVE FOR THE TERM ELECTED.
Directors Continuing in Office
The following table sets forth certain information concerning the directors
of the Company continuing in office:
Director Year Term
Name Age Since Will Expire
---- --- -------- -----------
Christian P. Couvreux............................... 50 1997 2003
Timm F. Crull....................................... 70 1994 2002
James S. Gold....................................... 49 1994 2003
Antoine Guichard.................................... 74 1986 2003
Joel-Andre Ornstein................................. 46 1999 2002
Ross E. Roeder...................................... 63 1984 2002
Christian P. Couvreux. Mr. Couvreux has been a director of the Company since
September 1997 and currently serves on the Company's Governance Committee.
Since May 1997, he has been Chairman of the Executive Board and Chief
Executive Officer of Casino France and is a director of Casino USA. Mr.
Couvreux was previously Deputy General Manager of Casino France where he was
responsible for purchasing, logistics and marketing. Mr. Couvreux has been
associated with Groupe Casino since 1990 when Casino France purchased La Ruche
Meridionale, a French international trading company of which Mr. Couvreux held
several positions including Chief Executive Officer.
Timm F. Crull. Mr. Crull has been a director of the Company since December
1994. He currently serves on the Company's Audit Committee and is Chairman of
the Compensation Committee. Mr. Crull was Chairman of the Board and Chief
Executive Officer of Nestle USA, Inc. (food and related products) from 1991
until his retirement in 1994. He held the position of Chairman of the Board
and President of Carnation Company (food and related products) from 1985 to
the beginning of 1990. Mr. Crull has been a director of Hallmark Cards, Inc.
(greeting cards) since 1984 and is a member of the Compensation and Audit
Committees of Hallmark Cards, Inc.
James S. Gold. Mr. Gold has been a director of the Company since April 1994.
Mr. Gold was a General Partner of Lazard Freres & Co. (investment banking)
from 1985 until May 1995, when he became a Managing Director. Mr. Gold has
been associated with Lazard Freres & Co., LLC, since 1977. He is also a
director of The Hain Celestial Group, Inc.
Antoine Guichard. Mr. Guichard has been a director of the Company since 1986
and currently serves on the Company's Governance Committee. Mr. Guichard is
the Secretary and a director of Casino USA. Since 1966 he has been a gerant
(managing partner) of Groupe Casino. He served as Chairman of the Executive
Committee
3
of the Company from 1990 until 1998. He is now Chairman of Groupe Casino,
Conseil de Surveillance (Board of Supervisors).
Joel-Andre Ornstein. Mr. Ornstein became a director of the Company in May
1999. Since 1989, Mr. Ornstein has been Senior Adviser to the Chairman and
Chief Executive Officer and a director of Euris, S.A. ("Euris"), a Paris-based
investment holding company controlled by Mr. Jean-Charles Naouri, a French
citizen whose principal business is making corporate investments and who owns
a controlling interest in Casino France, the Company's majority shareholder.
Mr. Ornstein is also Chairman of Euristates, Inc., the U.S. based subsidiary
of Euris. He is a director of Euristates, Inc., The Athlete's Foot Inc., and
Ztango.com, Inc.
Ross E. Roeder. Mr. Roeder has been a director of the Company since 1984,
and became the Chairman, President and Chief Executive Officer in January
1999. Until his appointment as Chairman and CEO he also served as Chairman of
the Audit Committee and a member of the Compensation Committee. Mr. Roeder
became chairman of the Governance Committee in early 1999 and is a member of
the Board of Directors of the Company's foodservice subsidiaries, Smart &
Final Foodservice Distributors (formerly operating under the name Port
Stockton Food Distributors, Inc.) and Henry Lee Company. Until 1998 Mr. Roeder
was Chairman of Morgan-Kaufman Publishers, Inc. (publishers of computer
science text and reference books), where he was also a director from 1986 to
1998. Mr. Roeder served on the Board of Directors of Chico's FAS, Inc. (retail
women's stores) since 1997 and the Board of Directors of Gulf West Bank in St.
Petersburg, Florida since 1995.
Committees of the Board of Directors and Attendance at Meetings
The Company has established three standing committees of the Board of
Directors, an Audit Committee, a Compensation Committee, and a Governance
Committee. Each of these committees is responsible to the full Board of
Directors and its activities are therefore subject to the approval of the
Board of Directors. The functions performed by these committees are summarized
as follows:
The Audit Committee consists of Messrs. Plaskett (as Chairman), Crull, and
McLaughlin. The Audit Committee's functions are more fully described below
under the heading "Report of the Audit Committee". During fiscal 2000, the
Board examined the Audit Committee's composition in light of the adoption by
the New York Stock Exchange of new rules governing audit committees. Based
upon this review, the Board confirmed that all members of the Company's Audit
Committee are "independent" within the meaning of the New York Stock
Exchange's listing standards. During fiscal 2000, there were three regular
meetings of the Audit Committee.
The Compensation Committee consists of Messrs. Crull (as Chairman),
McLaughlin, and Plaskett. The Compensation Committee (i) approves salary
practices and base salary amounts for executive personnel; (ii) approves the
structure of and determines awards under the Company's annual incentive bonus
plan for executive officers; (iii) makes awards under the Company's stock
plans; (iv) approves the strategy and structure of the Company's other
employee plans and benefits; and (v) makes recommendations to the Board of
Directors with respect to base salary and incentive compensation of the Chief
Executive Officer. During fiscal 2000, there were four regular meetings of the
Compensation Committee and three special meetings.
The Governance Committee consists of Messrs. Roeder (as Chairman), Couvreux,
Guichard and Plaskett. The Governance Committee acts as a nominating
committee, seeking out, evaluating and recommending to the Board qualified
nominees for election as directors of the Company and considering other
matters pertaining to the size and composition of the Board. The Governance
Committee gives appropriate consideration to qualified individuals recommended
by stockholders for nomination as directors of the Company, provided that such
recommendations are accompanied by information sufficient to enable the
Governance Committee to evaluate the qualifications of such individuals.
During fiscal 2000, the Governance Committee met once.
During fiscal 2000, the Board of Directors held four regular meetings; each
director with the exception of Messrs. Guichard and Ornstein attended at least
75% of the aggregate of the total meetings of the Board and of the total
meetings of any committees on which he served.
4
Compensation of Directors
During fiscal 2000, all of the Company's non-employee directors served an
entire fiscal year and were compensated by cash payments and shares of the
Company's common stock. For the cash component of their compensation, the non-
employee directors are paid an annual fee consisting of $15,000, paid in
quarterly installments in advance at the beginning of each calendar quarter.
Each non-employee director also received $1,000 in cash for each Board meeting
(including subsidiary Board meetings) and each committee meeting attended in
person and $500 in cash for each meeting attended by telephone. Expenses
incurred in attending meetings in person are reimbursable by the Company.
Directors who are employees of the Company or its subsidiaries are not
compensated for service as members of the Board or any committee of the Board.
In addition to the cash payments described above, on May 1 of each year the
Company's non-employee directors also receive an automatic award of shares
under the Company's Non-Employee Director Stock Plan. This award of the
Company's common stock is valued at approximately $15,000 on the date of the
award, pursuant to the terms of the Non-Employee Director Stock Plan and is
issued to each non-employee director who is serving as such on the award date.
For purposes of the Non-Employee Director Stock Plan, an eligible non-employee
director is one who is a member of the Company's Board of Directors, who is
not and has not been an employee of the Company or its direct or indirect
subsidiaries and who is paid an annual cash retainer fee for his services as a
director. For the May 1, 2000 grant, Messrs. Bouchut, Couvreux, Crull, Gold,
Guichard, McLaughlin, Ornstein, Plaskett and Snollaerts were all eligible non-
employee directors under the Non-Employee Director Stock Plan and each
received 1,791 shares of common stock. Each share award comprises that number
of shares equal to the quotient of $15,000 divided by the fair market value of
a share on the award date as defined in the plan. Cash is paid in lieu of
fractional shares. Any shares awarded must be held by such non-employee
director for at least six months after the award date.
Under the Company's Stock Incentive Plan, as amended, any elected or
appointed non-employee director serving prior to 1998 received an automatic
grant of options to purchase 22,500 shares of the Company's Common Stock, as
of the date of his initial appointment or election. Such options are
nonqualified stock options, have exercise prices equal to the fair market
value of the Common Stock at the date of grant, have to be exercised within
ten years after the date of grant and are subject to early termination in the
event the option holder ceases to be a director, becomes permanently disabled
or dies. One-third of these options become exercisable two years after the
date of grant and each year thereafter, so that 100% would be exercisable four
years after the date of grant. All of the options representing shares reserved
under the Stock Incentive Plan for grant to non-employee directors have been
granted.
The Company also has a Directors Deferred Compensation Plan (the "Directors
Deferred Compensation Plan"), in which the Company's directors are eligible to
defer pre-tax up to 100% of their director's cash fees (with a minimum annual
deferral of $2,500) and any shares of the Company's common stock received as
compensation for their services as a director. Participation is voluntary on
an annual basis. Deferrals of cash amounts are credited to a special
bookkeeping account in the participant's name, and earnings on deferrals are
indexed to certain investment fund options. Deferrals of the Company's common
stock are held within the plan, for the benefit of the deferring director's
account and are not redeemable for cash. The Company pays all benefits and
costs from its general assets and, while it has created a non-qualified
grantor trust whose assets will be used to pay benefits and defray expenses,
the assets of the trust are subject to the claims of the Company's general
creditors in the event of the Company's insolvency or bankruptcy. In general,
participants will receive benefits under the Directors Deferred Compensation
Plan after retirement in one of four pre-elected payment options, one lump-sum
payment or a stream of five, ten or 15 annual payments. Limited withdrawals
prior to retirement are permitted in accordance with the terms of the
Directors Deferred Compensation Plan. The Directors Deferred Compensation Plan
also provides additional death benefits in the event of death prior to
retirement. During 2000, five directors participated in this plan.
On May 4, 1999, each of the nine non-employee directors then in office
received a grant of 12,500 options. One third of these stock options will
become exercisable each year on May 4, 2001, 2002, and 2003. The exercise
5
price for these options is $9.25 per share. These options are currently
unregistered and expire on May 4, 2009. On May 1, 2000, each of the nine non-
employee directors received a grant of 4,000 options. One third of these stock
options will become exercisable each year on May 1, 2002, 2003 and 2004. The
exercise price for these options is $8.375 per share. These options are
currently unregistered and expire on May 1, 2010.
Executive Officers
The following table sets forth as of April 17, 2001, the names, ages and
titles of the executive officers of the Company, Smart & Final Stores,
American Foodservice Distributors, Inc. ("American Foodservice Distributors"),
Port Stockton Food Distributors, Inc. dba Smart & Final Foodservice
Distributors ("Smart & Final Foodservice") and Henry Lee Company ("Henry
Lee"):
Name Age Title
---- --- -----
Ross E. Roeder 63 Chairman of the Board, President and Chief Executive
Officer of the Company and Smart & Final Stores,
President and Chief Executive Officer of American
Foodservice Distributors, Chairman of the Board and
Chief Executive Officer of Smart & Final Foodservice
and Chairman of the Board of Henry Lee
Donald G. Alvarado 46 Senior Vice President, General Counsel and Secretary
of the Company, Senior Vice President and Secretary
of Smart & Final Stores, American Foodservice
Distributors, Smart & Final Foodservice and Henry Lee
Dennis L. Chiavelli 55 Executive Vice President of the Company and Executive
Vice President of Operations for Smart & Final Stores
Zeke Duge 54 Senior Vice President and Chief Information Officer of
Smart & Final Stores
Martin A. Lynch 63 Executive Vice President and Chief Financial Officer
of the Company, Smart & Final Stores, American
Foodservice Distributors, Smart & Final Foodservice
and Henry Lee
Norah Morley 49 Senior Vice President, Marketing of Smart & Final
Stores
Suzanne Mullins 48 Senior Vice President, Operations of Smart & Final
Stores
Richard N. Phegley 45 Vice President and Treasurer of the Company, Smart &
Final Stores, American Foodservice Distributors,
Smart & Final Foodservice and Henry Lee
Robert J. Schofield 51 Executive Vice President and Chief Operating Officer
of American Foodservice Distributors
Timothy M. Snee 47 Senior Vice President, Buying and Merchandising of
Smart & Final Stores
Jeff D. Whynot 44 Senior Vice President, Human Resources of Smart &
Final Stores
Executive officers of the Company are appointed by the Board of Directors of
the Company and serve at the Board's discretion.
Ross E. Roeder. See "ELECTION OF DIRECTORS--Directors Continuing in Office".
Donald G. Alvarado. Mr. Alvarado was named Senior Vice President, General
Counsel of the Company and Smart & Final Stores in September 1996 and also
serves as Secretary of the Company, American Foodservice Distributors and
Smart & Final Stores. From 1997 to 1999 he was Senior Vice President
Law/Development. From 1991 until September 1996 he served as Vice President,
General Counsel and Secretary of the Company. He joined the Company in 1987 as
Assistant General Counsel and was appointed Secretary in 1989. He has been
Secretary of Smart & Final Stores since 1990. He was also Assistant Secretary
of Casino USA and its former wholly-owned subsidiary Casino Realty, Inc.
("Casino Realty") from 1989 to January 1994.
Dennis L. Chiavelli. Mr. Chiavelli was named Executive Vice President,
Operations of the Company and Smart & Final Stores in September 1996. From
September 1991 to September 1996 he served as Senior Vice President of
Operations and Development of Smart & Final Stores. Earlier in 1991, he was
Executive Vice President, Real Estate of Casino Realty. He was a Vice
President and General Manager of Casino Realty and a Vice President of Casino
USA from late 1987 to early 1991.
6
Zeke Duge. Mr. Duge joined Smart & Final Stores in September 2000 as Senior
Vice President and Chief Information Officer in charge of data processing and
technology for the Company and its subsidiaries. Immediately before joining
the Company, Mr. Duge was Vice President and Chief Information Officer of West
Marine, Inc. (boating specialty retailer). Mr. Duge has more than 30 years
experience in data processing having also held various positions at Xerox
Computer Services (computer services), Nissan (automobile manufacturing),
Tandem Computers (computer manufacturing) and Oracle Corporation (computer
software).
Martin A. Lynch. In February 1998, Mr. Lynch resigned from the Board of
Directors of the Company on which he had served since February 1993. Mr. Lynch
continues to serve as Executive Vice President and Chief Financial Officer of
the Company, American Foodservice Distributors and Smart & Final Stores,
positions he has held since joining them in 1989. From 1989 to January 1994,
he was Executive Vice President and Chief Financial Officer for Casino USA. In
May 1999 he was again elected Chief Financial Officer for Casino USA, the
Company's principal stockholder. Prior to joining the Company, Mr. Lynch was
Executive Vice President and Chief Financial Officer of San Francisco-based
Duty Free Shoppers Group, Ltd. (retail) from 1984 to 1989. He served in a
number of key positions with Los Angeles-based Tiger International
(transportation and financial services) from 1970 to 1984 including the
position of Senior Vice President, Chief Financial Officer from 1976 to 1984.
Mr. Lynch's earlier experience includes merger and acquisition activities at
Scot Lad Foods, Inc. (retail grocery) and service as audit manager for Price
Waterhouse & Company (accounting) in Chicago. On April 5, 2001 the Company
announced that Mr. Lynch intends to retire as Chief Financial Officer and from
all other executive positions which he holds with the Company and its
subsidiaries as of May 23, 2001. The Company also anticipates entering into a
two-year consulting agreement with Mr. Lynch for his services thereafter,
until his anticipated retirement from the Company in 2003. See "Lynch
Employment Agreement."
Norah Morley. Ms. Morley joined Smart & Final Stores in August 1999 as
Senior Vice President of Marketing. From 1996 to 1999, Ms. Morley was the
Senior Vice President of Marketing, Buying and Distribution for The Sweet
Factory (retail candy) and from 1992 to 1996, Vice President of Marketing and
Buying with W.H. Smith: The Wall Music. Prior thereto she was Vice President
of Marketing for Frank's Nursery and Crafts, and held various positions in
consumer packaged goods marketing, including Director of Marketing for The
Pillsbury Company (food products).
Suzanne Mullins. Ms. Mullins was appointed Senior Vice President, Store
Operations of Smart & Final Stores in July 1997. She was previously Vice
President, Buying for Smart & Final Stores from August 1994 until her
promotion and Vice President, Operations of Smart & Final Stores from 1991 to
1994. Prior to that, Ms. Mullins held various store operations positions,
including District Manager, since joining Smart & Final Stores in 1987.
Richard N. Phegley. Mr. Phegley joined Smart & Final Stores as Vice
President and Treasurer in August 1996 and was appointed Vice President and
Treasurer of the Company, American Foodservice Distributors, and Henry Lee in
May 1999. Mr. Phegley joined Smart & Final Stores after 17 years with Atlantic
Richfield Company, now a subsidiary of BP Amoco plc. (integrated international
oil and gas), where he served in senior treasury, strategic planning, and
financial management positions. Mr. Phegley has been designated as Chief
Financial Officer of the Company, Smart & Final Stores and American
Foodservice Distributors, following Mr. Lynch's retirement from those
positions on May 23, 2001.
Robert J. Schofield. Mr. Schofield was appointed to the position of
Executive Vice President and Chief Operating Officer of American Foodservice
Distributors in February 2000 and in October 2000, Mr. Schofield assumed the
responsibility of President for both Smart & Final Foodservice and Henry Lee.
In these capacities, he is responsible for all foodservice operations for the
Company. From August 1999 through January 2000, Mr. Schofield served as a
consultant to Smart and Final regarding its Foodservice companies. Mr.
Schofield was President of the western division of US Foodservice (foodservice
distribution) from 1994 to 1999. Prior thereto, he was President of Affiliated
Food Distributors (Giant Stores--retail grocery) and Senior Vice President of
Spartan Stores (retail grocery).
7
Timothy M. Snee. Mr. Snee was appointed Senior Vice President, Buying, of
Smart & Final Stores in June 1999. From 1998 to June 1999, he was Vice
President of Buying and Merchandising. Mr. Snee joined Smart & Final Stores
after 26 years with Ralphs Grocery Company (retail grocery) where he served as
a vice president in charge of various buying departments, and held management
positions in accounting, distribution, and operations.
Jeff D. Whynot. In January 2000, Mr. Whynot joined Smart & Final Stores as
the Senior Vice President of Human Resources. From 1998 to 2000, Mr. Whynot
was employed by Dames & Moore Group, (engineering consulting), most recently
as Vice President of Human Resources. From 1984 to 1998, Mr. Whynot worked for
Knott's Berry Farm (food products and entertainment). During the last five
years of his employment with Knott's Berry Farm, Mr. Whynot served as the Vice
President of Human Resources.
Report of the Audit Committee
Neither the following Report of the Audit Committee nor any other
information included in this proxy statement pursuant to item 7(d)(3) of
Schedule 14A promulgated under the Securities Exchange Act of 1934 or pursuant
to Rule 306 of Regulation S-K constitutes soliciting material and none of such
information should be deemed filed or incorporated by reference into any other
Company filing under the Securities Act of 1933 or the Securities Exchange Act
of 1934, except to the extent the Company specifically incorporates such
information by reference therein.
The Audit Committee has a written charter, a copy of which is reproduced as
Appendix A to this proxy statement.
The Audit Committee has reviewed and discussed with management of the
Company and Arthur Andersen LLP, the independent auditing firm of the Company,
the audited financial statements of the Company as of December 31, 2000 and
for the fiscal year then ended (the "Audited Financial Statements"). In
addition, the Audit Committee has discussed with Arthur Andersen LLP the
matters required to be discussed by Statements on Auditing Standards 61
(codification of Statements on Auditing Standards AU (S) 380).
The Audit Committee received and reviewed the written disclosures and the
letter from Arthur Andersen LLP required by Independence Standards Board
Standard No. 1 (Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees). The Audit Committee has discussed with
that firm its independence from the Company. The Audit Committee additionally
discussed with management of the Company and the auditing firm such other
matters and received such assurances from them as it deemed appropriate.
Management is responsible for the Company's internal controls and the
financial reporting process. Arthur Andersen LLP is responsible for performing
an independent audit of the Company's financial statements in accordance with
generally accepted auditing standards and issuing a report thereon. The Audit
Committee's responsibility is to monitor and oversee these processes.
Based on the above-described reviews and discussions and a review of the
report of Arthur Andersen LLP with respect to the Audited Financial
Statements, and relying thereon, the Audit Committee recommended to the
Company's Board of Directors the inclusion of the Audited Financial Statements
in the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2000.
MEMBERS OF THE AUDIT COMMITTEE
Thomas G. Plaskett, Chairman
Timm F. Crull, Member
David J. McLaughlin, Member
8
Compensation Committee Report on Executive Compensation
The Compensation Committee's basic philosophy (which is intended to apply to
all Company management, including the Chief Executive Officer) is to provide
competitive levels of compensation designed to motivate, retain and attract
management, with incentives linked to the Company's financial performance,
enhanced stockholder value and personal performance. Executive compensation
generally consists of the following main components: (i) a base salary, (ii)
an annual incentive bonus and (iii) the opportunity to receive stock options,
stock appreciation rights or other performance-based compensation under the
Company's Stock Incentive Plan and Equity Compensation Plan.
Base Salaries. Base salaries for executive officers are reviewed annually
and designed to be competitive with salaries paid at other companies of
comparable size and complexity in the retail and wholesale food distribution
business and in other comparable businesses (including, for example, certain
non-food, multi-unit retail companies). The Compensation Committee uses these
companies for comparative purposes because it believes that the Company
competes with these companies in attracting and maintaining the Company's
management. Information on these companies is collected by the Compensation
Committee from published industry surveys. The Compensation Committee's policy
is to adjust salaries in a way that recognizes executive performance and
responsibilities and enables the Company to attract and retain highly
qualified executives. In fiscal 2000, executive base salaries (other than for
the Chief Executive Officer) were increased an average of 6.2% (ranging from
2% to 18%), and, consistent with the Compensation Committee's policy
objectives, were at median levels among the comparison companies.
Chief Executive Officer Compensation. The Compensation Committee has
established a formal process for evaluating the Chief Executive Officer's
performance. This process generally begins at the last scheduled Compensation
Committee meeting of the fiscal year (typically held in late November or early
December). Mr. Roeder assumed the position of Chief Executive Officer of the
Company in January 1999. Mr. Roeder's Employment Agreement with the Company
established a minimum base salary of $600,000, which was subsequently
increased by the Compensation Committee to $650,000 during 2000. Mr. Roeder's
Employment Agreement also provides that he is eligible to receive a bonus of
100% of his base salary if certain performance targets are met. For the fiscal
year 2000, these performance targets were met and Mr. Roeder received a bonus
of 100% of base salary, paid in early 2001.
Annual Incentive Bonus Plan. The Compensation Committee believes that the
annual incentive bonus plan is an integral part of the overall compensation
package offered to the Company's executive officers. The Compensation
Committee specifically approves bonus amounts for executive officers and
determines the bonus amount for the Chief Executive Officer. From
approximately 1993 through fiscal 2000, the Compensation Committee primarily
used corporate earnings per share to determine corporate performance goals.
Once goals were selected, competitive target bonuses were established based on
the same comparative criteria used to establish base salary levels, with
amounts varying by the level of responsibility. In fiscal 2000, target bonuses
ranged from 30% to 60% of base salary for senior management (other than the
Chief Executive Officer).
Actual bonus amounts are determined after the fiscal year end. At that time,
the Chief Executive Officer meets with the Compensation Committee to review
the performance of the executive officers (other than himself) and presents
his recommendations for their actual bonus amounts. The Compensation Committee
determined that management met their profit objectives in fiscal 2000 and as a
result, approved the recommendations of the Chief Executive Officer for bonus
awards. Actual bonuses to executive officers (other than the Chief Executive
Officer) averaged approximately 50% of base salary and ranged from
approximately 30% to 60%.
During fiscal 2000, the Compensation Committee determined that linking the
annual incentive bonus plan to specific financial objectives was a key tool in
encouraging improvements in financial performance. The objectives range from
total financial performance of the Company to performance of particular
operating units, and include individual achievements towards our tactical
objectives. Accordingly in fiscal 2001, the bonuses awarded to executives will
be based upon financial objectives and key strategic goals tied to overall
performance at the Company, Region, and Division levels and specified personal
objectives.
9
Stock Incentive Plan. The Company's Stock Incentive Plan authorizes the
issuance of options covering up to 2,450,000 shares of the Company's Common
Stock. The Stock Incentive Plan is intended to provide executive officers and
key employees with the opportunity to acquire a proprietary interest in the
Company and link their personal interest with the stockholders' interest in
the Company's continuing success. Currently, there are 263 participants in the
Stock Incentive Plan and approximately 890,993 shares available for grant
thereunder. The Compensation Committee has the discretion to determine the
number of options granted to officers and key employees, and awards of options
generally increase as a function of higher positions of responsibility in the
Company. Awards are made at a level calculated to be at median levels when
compared with other companies of comparable size and complexity in the retail
and wholesale food distribution business and in other comparable businesses
(including, for example, certain non-food, multi-unit retail companies).
Options granted to employees under the Stock Incentive Plan are nonqualified
stock options, may be exercised up to ten years after the date of the grant
and are subject to early termination in the event the option holder ceases to
be an employee, becomes permanently disabled or dies. No option can be granted
at an option price of less than 85% of the fair market value of Common Stock
at the time the option is granted. Options are exercisable as determined by
the Compensation Committee at the date of grant and, absent such
determination, one-third of the options become exercisable after two years and
each year thereafter so that 100% are exercisable four years after the date of
grant. For fiscal 2000, the Compensation Committee extended the expiration
date for five years for 22,500 previously granted options held by Mr. Roeder
under the Stock Incentive Plan. These options were scheduled to expire in June
2001. The expiration date for an additional 378,500 previously granted options
held by executive officers was also extended for five years. These options
were scheduled to expire in June 2001 or February 2004. Approximately 591,714
options previously issued under this plan were canceled as part of the
Voluntary Exchange Program discussed below. The Stock Incentive Plan will
expire in June 2001 and the Company does not plan to make any further awards
under this plan.
Long-Term Equity Compensation Plan. The Company also grants stock-based
awards under the Long-Term Equity Compensation Plan ("Equity Compensation
Plan"). The Equity Compensation Plan provides for stock-based awards covering
up to 2,470,000 shares of the Company's Common Stock. Under guidelines set by
the Compensation Committee, incentive-based compensation constitutes a greater
portion of executives' potential long-term pay pursuant to awards granted.
Primary objectives of the Equity Compensation Plan are to optimize the
profitability and growth of the Company through incentives which are
consistent with the Company's goals and which link the personal interests of
participants in the Equity Compensation Plan to those of the Company's
stockholders. In fiscal 2000 the Compensation Committee granted 50,000 options
to Mr. Roeder under the Equity Compensation Plan. The first one-third of these
options, 16,667 shares, will vest on February 15, 2002, the second one-third
of the options, 16,667 shares, will vest on February 15, 2003 and the final
one-third of the options, 16,666 shares, will vest on February 15, 2004. The
Company granted Mr. Roeder an additional 24,421 shares of restricted stock in
2000 under the Equity Compensation Plan (4,421 shares of which were granted as
part of the Voluntary Exchange Program discussed below). In fiscal 2000, the
Company's other executive officers received a total of 154,000 options under
the Equity Compensation Plan. The executive officers of the Company received
139,444 shares of restricted stock of which 60,194 shares were granted as part
of the Voluntary Exchange Program.
Voluntary Exchange Program--Stock Options for Restricted Stock. On November
27, 2000, the Company's Compensation committee adopted a program for the
voluntary exchange of certain outstanding options having an exercise price of
$14.00 or more per share (the "Exchange Program"). These options were issued
to certain directors and employees under the Company's Stock Incentive Plan,
Non-Employee Director Stock Plan, and Long-Term Equity Compensation Plan
(collectively, the "Plans"). In exchange for their options, the participants
in the Exchange Program received shares of common stock issued as "Restricted
Stock" under the terms of the Long-Term Equity Compensation Plan. The number
of restricted shares the option holders received was based on a "fair value"
exchange in which the value of the Restricted Stock was intended to
approximately equal the value of the surrendered options. On December 7, 2000
the full Board of Directors
10
ratified the prior approval by the Compensation Committee authorizing the
Company to implement the Exchange Program with the eligible option holders. On
December 7, 2000, certain members of the board of directors and executive
officers made irrevocable decisions to surrender their eligible options
pursuant to the Exchange Program. After the completion of the Voluntary
Exchange Program on March 9, 2001, of the approximately 971,016 eligible
options defined by the program, approximately 860,114 were surrendered. The
surrendered options were canceled and the shares subject to these canceled
options were returned to the respective plan(s) under which they were first
granted. In exchange for the surrendered options, approximately 177,379 shares
of Restricted Stock were issued to the Company's employees and non-employee
directors under the Exchange Program pursuant to the terms of the Long-Term
Equity Compensation Plan. Since the Company has been a reporting company, it
has not amended or adjusted the exercise price under any stock option or stock
appreciation rights or adopted any program similar to the Exchange Program.
Certain Other Benefits. The Company provides health, welfare, and pension
benefits to the executive officers that are generally available to all full-
time employees of the Company. The Company also provides certain perquisites
to its executive officers, including, depending upon the executive officer,
reimbursement of tax preparation and/or financial planning expenses, club dues
and moving expenses, car allowances, supplemental executive retirement plan,
and executive medical coverage.
Other Matters. The Compensation Committee has reviewed the Company's
compensation plans with regard to the deductibility limitation contained in
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"). The Compensation Committee has decided at present not to alter
the Company's compensation plans to comply with the deductibility requirements
of Section 162(m). The Compensation Committee will continue to review the
issue and monitor whether the Company's compensation plans should be amended
in the future to meet the deductibility requirements. The Equity Compensation
Plan provides that at all times when Internal Revenue Code Section 162(m) is
applicable, all awards granted under the Equity Compensation Plan shall comply
with the requirements of that Section, although the Compensation Committee may
determine that such compliance is not desired with respect to any particular
award.
COMPENSATION COMMITTEE
Timm F. Crull, Chairman
David J. McLaughlin
Thomas G. Plaskett
11
Performance Graph
The graph below compares the cumulative total stockholder return on the
Company's Common Stock over a five year period with the cumulative total
return on the Dow Jones Equity Market Index and the Dow Jones Food Retailers
and Wholesalers Index over the same period (assuming an initial investment of
$100 and the reinvestment of all dividends).
[PERFORMANCE GRAPH APPEARS HERE]
DOW JONES DOW JONES
Measurement Period SMART & EQUITY FOOD RETAILERS
(Fiscal Year Covered) FINAL MARKET & WHOLESALERS
- --------------------- --------------- --------- ----------
Measurement Pt-12/95 $100.00 $100.00 $100.00
FYE 12/96 $102.27 $122.02 $121.19
FYE 12/97 $ 86.44 $160.84 $155.06
FYE 12/98 $ 47.07 $200.88 $224.22
FYE 12/99 $ 35.46 $246.53 $152.45
FYE 12/00 $ 41.57 $223.68 $202.43
Compensation Committee Interlocks and Insider Participation
Relationship Between the Company and Casino USA
For purposes of reference below, Casino USA is a subsidiary of Casino
France. Casino France and its subsidiaries (Groupe Casino) are engaged in the
retail grocery, restaurant, food production and other businesses in France and
elsewhere in the world. Casino USA is ultimately controlled by Mr. Jean-
Charles Naouri, a French citizen whose principal business is making and
managing investments.
Casino France, acting through Casino USA, acquired the Company's then parent
company in 1984. Groupe Casino currently owns approximately 60% of the
outstanding shares of the Company's Common Stock. Since the Common Stock does
not have cumulative voting rights, the holders of shares having more than 50%
of the voting power may elect all of the directors of the Company, and the
holders of the remaining shares would not be able to elect any directors.
Casino France owns approximately 99% of the outstanding shares of Casino
USA's capital stock. There is no agreement between Casino USA and any other
party that would prevent Casino USA from acquiring additional shares of Common
Stock or disposing of shares of Common Stock owned by it. The Company's Board
of Directors currently includes Messrs. Bouchut, Couvreux, Guichard, Ornstein
and Snollaerts who also serve as directors of Casino USA and/or who are
affiliated with Casino France.
Decisions on compensation of the Company's executive officers and the
Company's Chief Executive Officer are generally made by the Compensation
Committee of the Board. All such decisions relating to the compensation of
executive officers are reviewed, and in fiscal 2000 were approved without
change, by the full Board. In fiscal 2000, the Compensation Committee
consisted of Messrs. Crull, McLaughlin and Plaskett. No member of the
Compensation Committee is now or ever has been an employee of the Company or
its subsidiaries.
12
Certain Transactions between the Company and Casino USA
The Company and Casino USA are parties to a 1991 intercompany agreement (the
"Intercompany Agreement"). The Intercompany Agreement provides for the
performance of various administrative services by the Company for Casino USA
and by Casino USA for the Company. None of the parties are obligated to use
such services. Intercompany services are provided at the cost of providing
such services, including the estimated allocable costs of (i) management and
other employees performing the services, (ii) computer time, (iii) allocable
overhead and (iv) out-of-pocket expenses. Cost, for purposes of management and
employees, is based on an estimated allocation of their time based on a study
of the actual time spent in past periods. Any fees for such services cannot
exceed $100,000 in any three-month period without the written consent of the
user of such services.
Since 1986, the Company has performed a variety of services for Casino USA
and its former subsidiary, including accounting, human resources and systems
development work, the cost of which has been charged to the benefited
affiliated company. These charges amounted to approximately $274,000 for
fiscal 2000. It is anticipated that the Company will continue to provide these
administrative services to its affiliates at its cost and that the levels of
future services will not vary significantly from prior levels. The
Intercompany Agreement also provides that Casino USA will not, and will cause
its affiliates that it controls or any corporation of which either holds more
than 5% of the capital stock not to, engage in the Company's business. The
initial term of the Intercompany Agreement was two years, and has been renewed
from time to time as provided therein.
The Company and Casino USA are also parties to a tax sharing arrangement
covering income tax obligations in the State of California. Under this
arrangement, the Company has made tax sharing payments to or received tax
sharing benefits from Casino USA, based upon pre-tax income for financial
reporting purposes adjusted for certain agreed upon items. The Company made
tax sharing payments to Casino USA aggregating $739,000 in fiscal 2000.
In 1998 the Company consolidated certain amounts owed by the Company to
Casino USA into one $55.4 million loan agreement (the "Casino Loan"). The
Casino Loan contains financial covenants similar to those contained in the
Company's bank credit facilities, bears interest at the rate of 25 basis
points over the Company's bank credit facilities and matures on February 15,
2002. Although no principal repayments on the Casino Loan are due prior to the
maturity date, Casino USA acquired shares of the Company's common stock in
exchange for $39.4 million in principal amount due under the Casino Loan in
connection with an SEC registered offering that was consummated in 1999. Thus,
as of March 30, 2001, the Company owed approximately $16,000,000 in principal
amount under the Casino Loan.
13
Executive Compensation
Summary Compensation Table. The following table sets forth information
concerning cash and noncash compensation for each of the last three fiscal
years awarded to or earned by the Chief Executive Officer of the Company and
the four most highly compensated executive officers of the Company other than
the Chief Executive Officer.
SUMMARY COMPENSATION TABLE
Annual Compensation
------------------------------------------------------------------------------------
Long Term
Compensation Awards
---------------------
Restricted Securities
Stock Underlying
Name and Fiscal Salary Bonus Other Annual Awards Options All Other
Principal Position Year ($)(1) ($)(2) Compensation($)(3) ($)(4) (#)(5) Compensation($)(6)
------------------ ------ -------- -------- ------------------ ---------- ---------- ------------------
Ross E. Roeder.............. 2000 $631,577 $650,000 $ -0- $171,210 72,500 $ 36,050
Chairman of the Board and 1999 $599,664 $200,000 $ -0- $606,250 212,500 $ 5,524
Chief Executive Officer 1998 $143,500 N/A N/A N/A N/A N/A
Martin A. Lynch............. 2000 $327,191 $100,000 $ -0- $172,380 112,500 $252,326
Executive Vice President 1999 $286,139 $ 40,000 $ -0- $ -0- 64,700 $ 45,493
And Chief Financial Officer 1998 $280,000 $ -0- $ -0- $ -0- 15,000 $ 39,904
Dennis L. Chiavelli......... 2000 $266,054 $162,000 $ -0- $177,371 54,800 $146,514
Executive Vice 1999 $245,262 $ 51,912 $ -0- $ -0- 43,100 $ 11,106
President, Operations 1998 $240,000 $ -0- $ -0- $ -0- 25,000 $ 11,799
Donald G. Alvarado.......... 2000 $226,539 $115,000 $ -0- $118,080 17,000 $ 84,936
Senior Vice President, 1998 $207,308 $ 30,000 $ -0- $ -0- 27,600 $ 11,228
General Counsel 1998 $193,943 $ -0- $ -0- $ -0- 10,000 $ 14,502
Robert J. Schofield......... 2000 $215,292 $129,000 $ -0- $ 49,844 25,000 $ 19,811
Executive Vice President, 1999 $124,850 N/A N/A N/A N/A N/A
American Foodservice 1998 N/A N/A N/A N/A N/A N/A
Distributors
- --------
(1) Includes amounts deferred by the named officers under the Company's 401(k)
Savings Plan (the "401(k) Savings Plan"), which was established in fiscal
1992 and under which all named officers are or were eligible to
participate during fiscal 2000; and the Company's Supplemental Deferred
Compensation Plan (the "Supplemental Deferred Compensation Plan"), which
was established to first take effect for fiscal 1995. Mr. Schofield's 2000
salary includes $29,234 in consulting fees that he was paid prior to
becoming an employee of the Company. The amount listed for Mr. Roeder in
1998 and for Mr. Schofield for 1999 is for consulting services.
(2) Includes bonus payments made in the year after the listed year for
services performed in the listed year, and excludes bonus payments made in
the listed year for services performed in the prior year.
(3) Includes perquisites and other personal benefits paid to each named
executive officer (including, depending upon the executive officer,
reimbursement of tax preparation and/or financial planning expenses, club
dues and car allowances). Such perquisites and other personal benefits
when stated as zero were less than the lesser of $50,000 or 10% of the
total annual salary and bonus set forth in the columns entitled "Salary"
and "Bonus."
(4) The restricted share values reported in the table above for fiscal 2000
were calculated based on the following: Mr. Roeder, 20,000 shares at
$6.875 per share and 4,421 shares issued in the Voluntary Exchange Program
at $7.625 per share; Mr. Lynch, 5,000 shares at $6.875 per share and
18,099 shares issued in the Voluntary Exchange Program at $7.625 per
share; Mr. Chiavelli, 9,000 shares at $6.875 per share and 15,147 issued
in the Voluntary Exchange Program at $7.625 per share; Mr. Alvarado, 6,000
shares at $6.875 per share and 10,076 shares issued in the Voluntary
Exchange Program at $7.625 per share; and Mr. Schofield 7,250 shares at
$6.875 per share. The restricted share value reported in the table above
for Mr. Roeder for fiscal 1999 was calculated based on 50,000 shares at
$12.125 per share. At December 31,
14
2000, the aggregate restricted stock holdings of such persons, valued at
$8.50 per share (representing the closing price on the NYSE for the Common
Stock on December 31, 2000), were as follows: Mr. Roeder, 24,421 shares with
an aggregate value of $207,579. Mr. Lynch, 30,349 shares with an aggregate
value of $257,967; Mr. Chiavelli, 31,397 with an aggregate value of
$266,874; Mr. Alvarado, 20,076 shares with an aggregate value of $170,646;
and Mr. Schofield, 7,250 shares with an aggregate value of $61,625. The
restricted shares described above which were issued in connection with the
Voluntary Exchange Program vest over a period of three years from the date
of grant. The remaining restricted share awards vest at the earlier of five
(5) years from the date of the initial grant or when the Company's stock
price appreciates 50% from the effective date of grant. If employment
terminates due to normal retirement, the restricted stock will continue to
vest. If employment is terminated due to voluntary resignation or
involuntary termination, unvested awards will be terminated. If employment
is terminated due to disability, death or early retirement, a prorated award
based on service during the grant cycle will be made. Unvested restricted
stock will immediately vest upon a change in control. Dividends, if any, are
required to be paid on the restricted shares reported in the table above.
(5) Includes for Messrs. Roeder, Lynch, Chiavelli, Alvarado and Schofield
options to purchase 50,000, 20,000, 26,000, 17,000 and 25,000 shares,
respectively, granted pursuant to the Equity Compensation Plan. Also
includes for Messrs. Roeder, Lynch and Chiavelli previously granted options
covering 22,500, 92,500 and 28,800 shares, respectively, for which the
expiration dates were extended in May 2000 for a period of five years from
the original expiration date thereunder.
(6) The compensation reported represents amounts contributed by the Company
under the 401(k) Savings Plan, the Supplemental Deferred Compensation Plan,
deferred compensation paid to Mr. Lynch pursuant to his Deferred
Compensation Agreements with the Company, and the dollar value of insurance
premiums paid by the Company with respect to term life insurance and health
care plans for the benefit of the named officer. In fiscal 2000, the
Company changed its vacation policy to include a ceiling or maximum on
vacation accrual. As a result of this change in policy, and pursuant to
California law, Messrs. Lynch, Chiavelli and Alvarado received $176,550,
$125,128, $57,937, respectively, as payment for the vacation days that they
had already accrued in excess of the newly established ceiling. Company
contributions under the 401(k) Savings Plan and the Supplemental Deferred
Compensation Plan during fiscal 2000 were as follows: $2,550 for Messrs.
Roeder, Lynch, Chiavelli, Alvarado and $1,034 for Mr. Schofield. Company
contributions under the 401(k) Savings Plan and the Supplemental Deferred
Compensation Plan during fiscal 1999 were as follows: $1,558 for Mr.
Roeder, $2,400 for Messrs. Lynch, Chiavelli and Alvarado. Company
contributions under the 401(k) Savings Plan and the Supplemental Deferred
Compensation Plan during fiscal 1998 were as follows: $2,400 for Messrs.
Lynch, Chiavelli, and $635 for Mr. Alvarado. Company payments of life and
health insurance premiums during fiscal 2000 were as follows: $12,744 for
Mr. Roeder, $18,853 for Mr. Lynch, $18,836 for Mr. Chiavelli, $24,449 for
Mr. Alvarado and $18,778 for Mr. Schofield. Pursuant to the terms of his
Deferred Compensation Agreements, for fiscal 2000, 1999 and 1998, the
Company paid on behalf of Mr. Lynch deferred compensation in the amounts of
$54,374, $32,614 and $28,000, respectively. During fiscal 1999, Company
payments of life and health insurance premiums were as follows: $3,966 for
Mr. Roeder, $10,479 for Mr. Lynch, $8,706 for Mr. Chiavelli, and $8,828 for
Mr. Alvarado. Company payments of life and health insurance premiums during
fiscal 1998 were as follows: $9,504 for Mr. Lynch, $9,399 for Mr.
Chiavelli, and $13,867 for Mr. Alvarado. In accordance with the Roeder
Employment Agreement, in 2000 Roeder received a bonus of approximately
$20,756 in recognition of interest due under these two loans and the net
amount of personal tax gross-up on the bonus.
15
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
-------------------------------------------------------------
Number of Grant Date
Securities % of Total Exercise Present
Underlying Options Granted Price Value of
Options to Employees in Per Expiration Stock
Name Granted Fiscal Year Share Date Options(3)
- ---- ---------- --------------- -------- ---------- ----------
Ross E. Roeder.......... 50,000(1) 3.97% $6.875 2/15/10 $138,013
22,500(2) 1.79% $10.77 6/18/06 $ 25,416
Martin A. Lynch......... 20,000(1) 1.59% $6.875 2/15/10 $ 55,205
92,500(2) 7.34% $10.77 6/18/06 $104,488
60,000(2)(4) 4.76% $14.00 2/11/09 $ 33,744
Dennis L. Chiavelli..... 26,000(1) 2.06% $6.875 2/15/10 $ 71,767
28,800(2) 2.29% $10.77 6/18/06 $ 32,532
40,000(2)(4) 3.17% $14.00 2/11/09 $ 22,496
Donald G. Alvarado...... 17,000(1) 1.35% $6.875 2/15/10 $ 46,924
30,000(2)(4) 2.38% $14.00 2/11/09 $ 16,872
Robert J. Schofield..... 25,000(1) 1.98% $6.875 2/15/10 $ 69,006
- --------
(1) Options granted are nonqualified stock options granted under the Equity
Compensation Plan, may be exercised up to ten years after the date of the
grant and are subject to early termination in the event the options holder
ceases to be an employee, becomes permanently disabled or dies. No option
can be granted at an option price of less than the fair market value of
Common Stock at the time the option is granted. For the grants made in
2000, one-fifth of the options become exercisable one year after the date
of grant and each year thereafter so that 100% are exercisable five years
after the date of grant. Unvested options will vest immediately upon a
change in control.
(2) Options were previously granted, 100% exercisable, nonqualified stock
options, under the Stock Incentive Plan. These options originally had
expiration dates of either June 2001 or February 2004. In May 2000, the
Company's Board of Directors authorized the extension of the expiration
date of these options for a period of five years. Although these options
remain 100% exercisable, they are subject to early termination in the event
the option holder ceases to be an employee, becomes permanently disabled or
dies.
(3) The Company used the Black-Scholes model of option valuation to determine
the present values at the grant dates. The Company does not advocate or
necessarily agree that the Black-Scholes model can properly determine the
value of an option. Calculations for the named executive officers are based
on the following assumptions: individual option terms of up to 10 years,
volatility of 37.35%, no dividends, and interest rates of 4.779% for Mr.
Roeder, 4.672% for Mr. Lynch, 4.701% for Mr. Chiavelli, 4.718% for Mr.
Alvarado and 4.837% for Mr. Schofield, which corresponds to the weighted
average of the ten year Treasury note rates with a maturity date
corresponding to the option term for each of the grants. The real value of
the options in this table depends upon the actual performance of the
Company's stock during the applicable period and upon when they are
exercised.
(4) All of these options were surrendered on December 7, 2000 pursuant to the
Voluntary Exchange Program discussed above.
16
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
The following table summarizes option exercises during fiscal 2000, and the
number of all options and the value of all in-the-money options held at the
end of fiscal 2000, by the executive officers named in the above Summary
Compensation Table.
Number of Securities
Underlying Unexercised Value of Unexercised
Options at End In-The-Money Options at
Shares Acquired Value of Fiscal 2000 (#) End of Fiscal 2000 ($)(1)
Name on Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- --------------- ------------ ------------------------- -------------------------
Ross E. Roeder(2)....... -0- -0- 160,001/124,999 $0/$81,250
Martin A. Lynch......... -0- -0- 105,440/ 71,760 $0/$32,500
Dennis L. Chiavelli..... -0- -0- 40,754/ 67,146 $0/$42,250
Donald G. Alvarado...... -0- -0- 5,520/ 39,080 $0/$27,625
Robert J. Schofield..... -0- -0- 0/ 25,000 $0/$40,625
- --------
(1) Based on the market value of underlying securities at fiscal year end,
less the exercise price.
(2) Mr. Roeder's options include 22,500 shares of exercisable options and
50,000 shares of total options for his service to the Company, prior to
fiscal year 1999, as a non-employee director.
Pension Plan and 401(k) Savings Plans. The following table sets forth
estimated annual pension benefits under the Smart & Final Pension Plan (the
"Pension Plan"), on a straight life annuity basis for representative years of
service as defined in the Pension Plan. Such benefits are subject to reduction
for certain prior company retirement benefit plans.
PENSION PLAN TABLE
Estimated Annual Retirement Benefits at
Age 65
Final Average For Indicated Years of Credited
Remuneration on Earnings Based Service(1)
which Retirement on Each Year's ---------------------------------------
Benefits are Based(2) Limited Earnings 15 20 25 30 35
- --------------------- ---------------- ------- ------- ------- ------- -------
$125,000.............. $125,000 $18,750 $25,000 $31,250 $37,500 $43,750
$150,000.............. $150,000 $22,500 $30,000 $37,500 $45,000 $52,500
$175,000.............. $170,000 $25,500 $34,000 $42,500 $51,000 $59,500
$200,000.............. $170,000 $25,500 $34,000 $42,500 $51,000 $59,500
$225,000.............. $170,000 $25,500 $34,000 $42,500 $51,000 $59,500
$250,000.............. $170,000 $25,500 $34,000 $42,500 $51,000 $59,500
$300,000.............. $170,000 $25,500 $34,000 $42,500 $51,000 $59,500
$350,000.............. $170,000 $25,500 $34,000 $42,500 $51,000 $59,500
$400,000.............. $170,000 $25,500 $34,000 $42,500 $51,000 $59,500
$450,000.............. $170,000 $25,500 $34,000 $42,500 $51,000 $59,500
$500,000.............. $170,000 $25,500 $34,000 $42,500 $51,000 $59,500
- --------
(1) Amounts shown are for employees hired on January 1, 2001 and assume
retirement at age 65 after employment for the indicated number of years.
Estimated annual retirement benefits are based on the plan in effect on
January 1, 2001 and assume that no other offsets or grandfathered benefits
are applied.
(2) Effective in 1994, the compensation used to determine the retirement
benefit could not exceed $150,000 for all years of service. This limit is
adjusted annually for cost-of-living and is equal to $170,000 for 2001.
For purposes of this table, it is assumed to remain at $170,000 for all
future years.
The Company maintains the Pension Plan for the benefit of all full-time
employees of the Company (other than Smart & Final Foodservice, Henry Lee and
certain Cash & Carry division employees who have their own employee benefit
plans), who meet certain age and service requirements, to provide certain
benefits in the event
17
of normal, early or disability retirement, or death. The benefits are
calculated on the basis of the participant's years of service (with years of
service prior to January 1, 1992 being credited as though each year was 1.5
years) and the participant's average pay during his five highest paid
consecutive years of service in the ten years prior to the date he ceases his
employment, with the participant's minimum benefits being at least equal to
his accrued benefit under the Company's prior pension plan. The compensation
on which payments are based includes bonuses, overtime and other compensation
but does not include amounts to be paid under the Pension Plan or any other
employee benefit plan. A participant becomes 100% vested in his retirement
benefit at the end of the fifth year of service. Under the Pension Plan, at
the end of fiscal 2000, Messrs. Roeder, Lynch, Chiavelli, Alvarado and
Schofield had credited approximately 2, 12, 15, 13 and 1 actual year(s) of
service, respectively, and would have been entitled to minimum annual benefits
of approximately $3,300, $23,805, $31,688, $24,600, and $1,700, respectively.
The Company also maintains a defined contribution plan (the "401(k) Savings
Plan") which is intended to satisfy the tax qualification requirements of
Section 401(k) of the Internal Revenue Code. All employees of the Company
(other than Smart & Final Foodservice and Henry Lee employees who have their
own employee benefit plans) who meet certain age and service requirements are
eligible to participate in the 401(k) Savings Plan, which permits participants
to contribute, for fiscal 2000, up to 15% of their compensation or $10,500,
whichever was lower. The Company automatically matches 25% of each dollar
contributed up to 6% of each participant's eligible compensation and may at
its discretion match up to an additional 75% of each dollar contributed up to
6% of the participant's eligible compensation if the Company exceeds certain
financial and profitability goals. In fiscal 2000, the Company made an
additional 8% discretionary match. Participants' contributions to the 401(k)
Savings Plan, which are deemed to be contributions of the Company for tax
purposes, are deducted from the participants' compensation prior to the
calculation of federal and state income taxes, thereby decreasing the amount
of a participant's compensation subject to tax.
Participants are currently entitled to direct their contributions to one or
more of thirteen investment options. None of a participant's account balance
in the 401(k) Savings Plan may be withdrawn prior to termination of employment
or his attainment of age 70, whichever occurs earlier, except upon certain
qualified financial hardships or through loans. Distribution of a
participant's account balance, if less than $5,000, will generally be made in
a lump sum payment in the year following the termination of employment.
Distribution of a participant's account balance in excess of $5,000 will be
made in accordance with the participant's election following the termination
of employment. A participant's contributions to the 401(k) Savings Plan will
vest immediately. The Company's contributions on behalf of a participant will
vest at the rate of 25% per year beginning after the second year of the
participant's service and will be 100% vested after five years.
Henry Lee and Smart & Final Foodservice each maintain a defined contribution
plan which is intended to satisfy the tax qualification requirements of
Section 401(k) of the Internal Revenue Code. The Henry Lee 401(k) Plan is
similar to the 401(k) Savings Plan with respect to the tax advantages, loan
features and hardship withdrawal provisions. The Henry Lee 401(k) Plan differs
from the Company's plan in several respects. The differences include
eligibility requirements, the Henry Lee automatic match of 50% of each dollar
contributed up to 6% of the participant's contribution, and immediate vesting
in all employer contributions. Participants are entitled to direct their
contributions to eight different investment options. The Smart & Final
Foodservice Plan also calls for a 50% automatic match of each dollar
contributed up to 6% of the participant's contribution. There is a five year
vesting schedule at a rate of 20% per year commencing the first year of
eligible employment. Participants are entitled to direct their contributions
to five different investment options.
Supplemental Executive Retirement Plan. Since 1998, the Company has provided
a Supplemental Executive Retirement Plan ("SERP") to certain of its key
executives and other highly compensated employees which provides for a single
life annuity to be payable monthly commencing at age 65 or upon the
participant's early retirement or disability as those terms are defined in the
SERP document. A participant may be entitled to receive benefits under the
SERP in the event of a change in control of the Company. In addition, in the
event the participant dies prior to his or her retirement, disability or
termination of employment, his or her survivor also
18
may be entitled to receive benefits under the SERP. The amount of the annuity
benefit is determined by multiplying the standard benefit percentage assigned
to each participant according to his or her title and position by the average
of the final five calendar years of a participant's compensation. Participants
in the SERP are selected by the Board of Directors of the Company. The SERP is
administered by a third party administrator. At fiscal year end 2000, there
were 19 participants in the SERP, including all of the executive officers
listed above. In 2000, the SERP was amended to provide for vesting of
participant benefits ratably over a period of 15 years service as a designated
Company officer, with a minimum of five years service required for vesting.
Prior to the amendment, benefits vested only at retirement.
Deferred Compensation Plan. The Company also has a Supplemental Deferred
Compensation Plan (the "Deferred Compensation Plan") in which certain Company
employees who earned annual base compensation of at least $85,000 in 2000 are
eligible to defer pre-tax up to 100% of their base compensation, cash bonus
(with a minimum annual deferral of $2,500), and shares of restricted stock.
Participation is voluntary on an annual basis. Deferrals are credited to a
special bookkeeping account in the participant's name, and earnings on
deferrals are indexed to certain investment fund options. The Company pays all
benefits and costs from its general assets and, while it has created a non-
qualified grantor trust whose assets will be used to pay benefits and defray
expenses, the assets of the trust are subject to the claims of the Company's
general creditors in the event of the Company's insolvency or bankruptcy. In
general, participants will receive benefits under the Deferred Compensation
Plan after retirement (with the minimum age for early retirement being 55 with
ten years of service) in one of four pre-elected payment options, one lump-sum
payment or a stream of five, ten or 15 annual payments. Limited withdrawals
prior to retirement are permitted in accordance with the terms of the Deferred
Compensation Plan. The Deferred Compensation Plan also provides additional
death benefits in the event of death prior to retirement.
Roeder Employment Agreement. In early 1999, the Company and Mr. Roeder
entered into an employment agreement (the "Roeder Employment Agreement")
pursuant to which Mr. Roeder has agreed to serve as Chairman and Chief
Executive Officer of the Company through December 31, 2001. If, prior to
December 31, 2001, either party elects not to extend the Roeder Employment
Agreement through December 31, 2003, then, upon the effective date of
expiration, the Company will continue to pay Mr. Roeder's base salary for a
period of 24 months in accordance with its normal payroll practices and shall
also pay to Mr. Roeder an amount equal to twice the average bonus paid to him
for the three fiscal years ending with the date of expiration of the term and
all benefits to which Mr. Roeder has a vested right, including retirement
benefits and retiree medical insurance.
Mr. Roeder's base salary is determined from time to time by the Board, but
may not be less than $600,000 per year on an annualized basis. Once increased,
the base salary may not be decreased. At present, his base salary is $650,000.
The Roeder Employment Agreement provides that Mr. Roeder has the opportunity
to earn an annual cash bonus and that the minimum target annual bonus
opportunity will be at least 100% of his annual base salary. Mr. Roeder also
has the opportunity to earn long-term incentive awards and participate in all
Company qualified retirement plans, group term life insurance, comprehensive
health and major medical insurance, short and long-term disability and all
other benefits and perquisites in which other executives and employees of the
Company are eligible to participate, including Supplemental Executive
Retirement Plan ("SERP") benefits in an amount not less than $125,000 per
year, automobile allowance, retiree medical coverage and financial planning
services, all as commensurate with Mr. Roeder's position. Mr. Roeder is
entitled to certain tax "gross up" benefits relating to his bonus and
restricted stock awards described below. Mr. Roeder is also entitled to a
minimum of five weeks paid vacation per year.
In fiscal 2000, Mr. Roeder received a grant of 20,000 shares of restricted
stock under the Equity Compensation Plan. All of these shares vested in
February 2001 in accordance with the Roeder Employment Agreement. Mr. Roeder
voluntarily elected, pursuant to Section 83(b) of the Internal Revenue Code of
1986, to be taxed on the fair market value of these shares on the date they
were transferred to Mr. Roeder and, pursuant to the Roeder Employment
Agreement, the Company contemporaneously provided Mr. Roeder with a loan in
the principal amount of $61,951, evidenced by a promissory note bearing
interest at 6.35%. The principal
19
amount of the loan is equal to the amount of income and payroll taxes payable
by Mr. Roeder on the compensation recognized as a result of the issue of
shares of restricted stock and the Section 83(b) election. The principal
amount of the note is due on December 31, 2001 or earlier, due to Mr. Roeder's
death, disability, termination by the Company without cause or termination
with good reason. In fiscal 1999, Mr. Roeder also made a voluntary election
pursuant to Section 83(b) of the Internal Revenue Code with respect to a grant
of 50,000 shares of restricted stock and, pursuant to the Roeder Employment
Agreement, the Company contemporaneously provided Mr. Roeder with a loan in
the principal amount of $273,149, evidenced by a promissory note bearing
interest at 4.84%. In accordance with the Roeder Employment Agreement, in 2000
Roeder received a bonus of approximately $20,756 in recognition of interest
due under these two loans and the net amount of personal tax gross-up on the
bonus. In December 2000, Mr. Roeder received 4,421 shares of restricted stock
as part of the Voluntary Exchange Program, for which Mr. Roeder surrendered
approximately 15,000 stock options of approximately equal value. These shares
have not vested. The Board of Directors also granted Mr. Roeder 50,000 options
from the Equity Compensation Plan on February 15, 2000. These options have a
ten year term and vest as follows: 16,667 shares vest on February 15, 2002;
16,667 shares vest on February 15, 2003; and the remaining 16,666 shares vest
on February 15, 2004. In the event of a Change in Control, termination of the
Roeder Employment Agreement due to his death or disability, a termination by
the Company without cause or a termination with good reason, all outstanding
options will immediately vest and remain exercisable for the two-year period
following the date of termination but in no event beyond the expiration of the
maximum ten year term. The Roeder Employment Agreement further provides that
during its term Mr. Roeder will receive an annual grant of options in an
amount at least equal to 1.5 times the number of options granted to any other
executive officer of the Company. In addition, in June 1999 Mr. Roeder
received a loan from the Company in the amount of $47,101, in connection with
his purchase of stock in the Company's equity offering. The loan bears
interest at 4.84%.
In the event the Roeder Employment Agreement is terminated due to Mr.
Roeder's retirement, death or disability, or the Company terminates his
employment without cause, or Mr. Roeder terminates the Roeder Employment
Agreement with good reason, as defined below, Mr. Roeder is entitled to
receive his base salary for the greater of (i) the number of months remaining
in the employment term under the Roeder Employment Agreement, or (ii) 12
months (the "Severance Period"). Mr. Roeder would also receive a monthly
amount equal to his annual bonus target for the last Company fiscal year
completed prior to the date of termination divided by 12. In addition, Mr.
Roeder would continue to receive payment for continuation of his and his
spouse's medical insurance coverage through COBRA for a period equal to 18
months or until Mr. Roeder were to cease to be eligible for COBRA coverage or
he becomes eligible to receive comparable coverage through another employer.
Mr. Roeder would also receive additional service and compensation credit under
the SERP until he reaches age 65, and continued payment of financial planning
services through the Severance Period, plus all other amounts in which he is
vested or otherwise entitled under the Company's retirement and employee
benefit plans, including retiree medical insurance coverage as described
above, at the time such amounts are normally payable. For purposes of the
Roeder Employment Agreement, disability generally means Mr. Roeder's inability
to perform his duties due to illness or mental infirmity for a period of more
than 180 consecutive days. For purposes of the Roeder Employment Agreement,
"good reason" is defined as a diminution in Mr. Roeder's title and authority,
relocation of the Company's principal office without his consent, the failure
of the Company to pay his salary or any other material breach by the Company,
or the failure of Mr. Roeder to be elected to the Board of Directors or
appointed as Chairman of the Board of Directors during the employment term.
Upon the effective date of a termination due to a Change in Control, the
Company shall continue to pay Mr. Roeder (i) any accrued obligations, (ii) a
lump-sum payment equal to three times his base salary then in effect and (iii)
a lump-sum cash payment equal to three times the greater of (x) the highest
annual bonus paid by the Company in the prior three fiscal years, or (y) his
annual bonus target for the fiscal year of termination. Mr. Roeder would also
receive continuation of health and welfare benefits for three years (subject
to termination if Mr. Roeder obtains employment that offers substantially
similar benefits) as well as three additional years of service and
compensation credit under the SERP. In the event any of the payments in
connection with a Change in Control cause an excise tax to be imposed on Mr.
Roeder under Section 4999 of the Code, the Company shall
20
pay Mr. Roeder in cash an additional amount such that the net amount retained
by Mr. Roeder after deduction for any excise tax and any income tax and excise
tax upon tax payments made by the Company, shall be equal to the amount Mr.
Roeder would have retained had no such excise tax been imposed. For purposes
of the Roeder Employment Agreement, the term "Change in Control" has the same
definition as in the Company's Executive Severance Plan.
The Roeder Employment Agreement also contains Mr. Roeder's covenant not to
compete with the Company during the term and for the longer of twelve months
following the expiration of the Roeder Employment Agreement or any period
during which the amounts are paid under the Roeder Employment Agreement, and a
covenant, for a period of 12 months following the expiration of the Roeder
Employment Agreement, not to attempt to induce other employees of the Company
to terminate employment with the Company or to interfere in a similar manner
with the business of the Company.
Lynch Employment Agreement. The Company and Mr. Lynch are parties to an
employment agreement pursuant to which Mr. Lynch agreed to serve as Executive
Vice President and Chief Financial Officer of the Company through March 31,
2000. In September 1999, the Company and Mr. Lynch entered into an amendment
to this agreement to extend Mr. Lynch's employment to January 3, 2003 (the
agreement, as amended, is referred to as the "1997 Lynch Agreement").
Under the terms of the 1997 Lynch Agreement, Mr. Lynch's base salary is
determined from time to time by the Board, but may not be less than $288,400
per year. Once increased, the base salary may not be decreased. During 2000,
Mr. Lynch's base salary was increased to $335,000 per year subject to periodic
adjustment and consistent with the Company's practice regarding executive
officers. Mr. Lynch has the opportunity to earn an annual cash bonus with a
target annual bonus of at least 60% of his annual base salary. For 2000, Mr.
Lynch's actual bonus was approximately 30% of his annual base salary. Mr.
Lynch also has the opportunity to earn long-term incentive awards and
participate in all Company qualified retirement plans, group term life
insurance, comprehensive health and major medical insurance, short and long-
term disability and all other benefits and perquisites in which other
executives and employees of the Company are eligible to participate. The
Company will provide Mr. Lynch and his surviving spouse full retiree medical
insurance for the remainder of their respective lives in the event of Mr.
Lynch's termination of employment due to death, retirement, disability,
involuntary termination without cause, or termination by the executive for
good reason. Mr. Lynch is entitled to five weeks paid vacation per year. Under
the terms of the 1997 Lynch Agreement, the minimum standard benefit payable to
Mr. Lynch under the Company's Supplemental Executive Retirement Plan is not
less than $175,000.
In the event the 1997 Lynch Agreement is terminated due to Mr. Lynch's
retirement, death or disability, Mr. Lynch is entitled to receive his base
salary through the date of termination plus all other amounts in which he is
vested or otherwise entitled under the Company's retirement and employee
benefit plans, including retiree medical insurance coverage as described
above. "Disability" under the 1997 Lynch Agreement is described as the
inability to perform duties due to illness or mental infirmity for a period of
more than 90 days in the aggregate during any 12 consecutive month period. In
the event the 1997 Lynch Agreement is terminated by Mr. Lynch, the Company is
required to pay to Mr. Lynch his full base salary through the effective date
of termination and a prorata bonus payment based upon the level of achievement
of preestablished performance goals through the effective date of termination
plus all other benefits to which he has a vested right at that time.
At all times prior to six months before the effective date of a Change in
Control (as defined in the 1997 Lynch Agreement) or at any time more than two
years after a Change in Control, the Company may terminate the 1997 Lynch
Agreement at any time for reasons other than death, disability, retirement or
for cause. Upon the effective date of such a termination, the Company shall
continue to pay Mr. Lynch in equal monthly installments the greater of (i) his
base salary then in effect and bonus, equal to the average bonuses paid in the
prior three years plus an additional sum not to exceed $150,000 depending on
the date of such termination, for the extended term of the 1997 Lynch
Agreement, together with any continuation of health and welfare benefits for
the remaining term, or (ii) two full years' base salary and bonus, equal to
the average of bonuses paid in the prior three years, plus a two-year
continuation of health and welfare benefits, and, in all cases, all other
benefits to which Mr. Lynch has a vested right at the time of termination.
21
If the Company terminates the 1997 Lynch Agreement for cause, the Company
will pay Mr. Lynch his base salary through the effective date of termination.
All other rights and benefits other than vested benefits to which Mr. Lynch
would otherwise have been entitled under the 1997 Lynch Agreement will be
forfeited. If Mr. Lynch terminates the 1997 Lynch Agreement at any time prior
to six calendar months prior to a Change in Control, Mr. Lynch will be
entitled to receive the same payments and benefits as if he had been
involuntarily terminated by the Company without cause as discussed above. If
Mr. Lynch terminates the 1997 Lynch Agreement for good reason within a period
commencing six months before a Change in Control and ending 24 months after a
Change in Control or the Company terminates Mr. Lynch's employment within such
period for a reason other than cause, death, disability or retirement, Mr.
Lynch will be entitled to the payments and benefits described below. For
purposes of the 1997 Lynch Agreement, the term "Change in Control" means,
generally, either (i) a change in the beneficial ownership of 35% or more of
the Company's voting power, (ii) during any two consecutive year period there
is a change in those persons constituting a majority of the Board at the
beginning of such period, or (iii) a plan of complete liquidation, an
agreement for the sale of substantially all the Company's assets or a merger,
consolidation or reorganization of the Company involving another corporation
(other than a merger, consolidation or reorganization where current
stockholders obtain at least 65% of the voting power of the Company (or
surviving entity)).
In the event of a termination in connection with a Change in Control during
the period described above, the Company is required to provide to Mr. Lynch
the following: (i) an amount equal to three times Mr. Lynch's highest base
salary, (ii) an amount equal to three times his average annual bonus earned
over the three fiscal years prior to the change in control (whether or not
deferred) plus an additional amount not to exceed $150,000 depending on the
date of such termination, (iii) an amount equal to Mr. Lynch's unpaid base
salary and accrued vacation pay, (iv) an amount equal to Mr. Lynch's unpaid
targeted annual bonus, established for the plan year in which the effective
date of his termination occurs, adjusted for the Company's performance through
the date of termination, prorated, (v) the continuation of the welfare
benefits in effect for three full years after the effective date of
termination, (vi) a lump-sum cash payment of the actuarial present value
equivalent of the aggregate benefits accrued by Mr. Lynch under the terms of
any and all supplemental retirement plans in which he participates, (vii) a
lump-sum cash payment of the entire balance of Mr. Lynch's deferred amount
under the Company's non-qualified deferred compensation plans, with interest,
and (viii) a lump-sum cash payment of all amounts owed to Mr. Lynch under the
deferred compensation plans, with upward adjustments for deemed future
service. In the event any of the payments in connection with a Change in
Control cause an excise tax to be imposed on Mr. Lynch under Section 4999 of
the Code, the Company will pay Mr. Lynch in cash an additional amount such
that the net amount retained by Mr. Lynch after deduction for any excise tax
and any income tax and excise tax upon tax payments made by the Company, will
be equal to the amount Mr. Lynch would have retained had no such excise tax
been imposed.
The 1997 Lynch Agreement also contains Mr. Lynch's covenant not to compete
with the Company during the term and for the longer of twelve months following
the expiration of the 1997 Lynch Agreement or any period during which the
amounts are paid under the 1997 Lynch Agreement, and a covenant, for a period
of 24 months following the expiration of the 1997 Lynch Agreement, not to
attempt to induce other employees of the Company to terminate employment with
the Company or to interfere in a similar manner with the business of the
Company. The Company and Mr. Lynch are also parties to two deferred
compensation agreements, whereby the Company agrees, among other things,
during the term of Mr. Lynch's employment, to defer an annual amount equal to
an aggregate of 10% of his compensation (as defined). Payment of amounts due
under the deferred compensation agreement are subject to forfeiture in the
event that Mr. Lynch's employment is terminated by the Company for cause. In
fiscal 2000, amounts that the Company had previously accrued on behalf of Mr.
Lynch in connection with these deferred compensation agreements were
transferred into an account for Mr. Lynch in the Company's Supplemental
Deferred Compensation Plan, and future contributions required under the
deferred compensation agreements will also be paid to that Plan.
On April 5, 2001 the Company announced that Mr. Lynch will retire as Chief
Financial Officer of the Company and from all other executive positions with
the Company and its subsidiaries as of May 23,
22
2001. The Company and Mr. Lynch intend to enter into a further amendment to
the 1997 Lynch Agreement whereby Mr. Lynch would continue service with the
Company on a consulting basis for a period of approximately two years
commencing June 1, 2001, at the end of which period Mr. Lynch will retire from
the Company. The specific terms of such amendment to the 1997 Lynch Agreement
and of the consulting agreement have not been finalized.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that the Company's executive officers and directors and persons who own more
than ten percent of the Company's Common Stock timely file initial reports of
ownership of the Company's Common Stock and other equity securities and
reports of changes in such ownership with the Securities and Exchange
Commission and the New York Stock Exchange. The Company has instituted
procedures to receive and review such reports. Based solely on a review of
such reports, the Company believes that all required reports have been timely
filed with the exception of one report for Mr. Duge regarding a grant of
options, an amended report for each of Messrs. Alvarado, Bouchut, Chiavelli,
Crull, Gold, Lynch, McLaughlin, Plaskett, Roeder and Ms. Mullins regarding the
extension of the expiration date of previously granted options, and an amended
report for each of Messrs. Bouchut, Couvreux, Crull, Gold, Guichard,
McLaughlin, Ornstein, Plaskett, Snollaerts regarding a grant of options.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding the ownership of the
Company's Common Stock as of March 30, 2001 by: (i) each person known to the
Company to be the beneficial owner of more than five percent of the
outstanding shares of Common Stock; (ii) each director and nominee for
director of the Company; (iii) each executive officer named in the Summary
Compensation Table; and (iv) all directors and executive officers of the
Company and its subsidiaries as a group. Unless otherwise indicated, each of
the stockholders has sole voting and investment power with respect to the
shares beneficially owned, subject to community property laws where
applicable.
Number of
Shares Percent
Beneficially of
Name Owned Class
---- ------------ -------
Casino Guichard-Perrachon S.A.(1)......................... 17,584,060 60%
Baron Capital Group, Inc.(2).............................. 5,814,947 19.9%
Ross E. Roeder(4)......................................... 254,095 *
Martin A. Lynch(4)........................................ 179,138 *
Dennis L. Chiavelli (4)................................... 115,140 *
David J. McLaughlin(3)(4)................................. 47,574 *
James S. Gold(4).......................................... 44,175 *
Donald G. Alvarado(4)..................................... 35,829 *
Timm F. Crull(4)(5)....................................... 29,063 *
Thomas G. Plaskett(4)..................................... 24,497 *
Etienne Snollaerts(4)..................................... 18,813 *
Christian P. Couvreux(4).................................. 18,511 *
Pierre B. Bouchut(4)...................................... 17,497 *
Antoine Guichard(4)....................................... 13,647 *
Joel-Andre Ornstein(4).................................... 11,291 *
Robert J. Schofield....................................... 7,250 *
All directors and executive officers as a group (19
persons)(4).............................................. 909,991 3.1%
- --------
* Less than 1%.
23
(1) Casino Guichard-Perrachon S.A. ("Casino France"), as the owner of
approximately 99% of the capital stock of Casino USA, may be deemed to
beneficially own such shares. The address of Casino USA is 600 Citadel
Drive, Commerce, California 90040, and the address of Casino France is 24,
rue de la Montat, 42008 St.-Etienne Cedex 2, France. Rallye, a publicly
traded French joint stock corporation, holds more than 50% of the voting
interest in Casino France. Mr. Jean-Charles Naouri, through intermediary
companies, indirectly controls more than 50% of the voting interest in
Rallye. This note (1) is based on Amendment No. 5 to Schedule 13D
("Amendment No. 5") filed by Casino USA on May 25, 2000 and prior reports,
and on information provided to the Company by Casino France.
(2) All information with respect to Baron Capital Group, Inc. ("BCG"), a
holding company controlled by Ronald Baron, is based solely on Amendment
No. 13 to Schedule 13D filed on August 8, 2000, by BCG. Mr. Baron has sole
voting and dispositive power over 19,300 shares held by him personally (or
approximately .06% of the outstanding shares) and shared voting and
dispositive power over 5,814,947 shares (or 19.9% of the outstanding
shares). Of the 5,814,947 shares, (a) 3,353,739 shares are held for the
account of BAMCO, Inc. ("BAMCO"), a registered investment advisor
controlled by Mr. Baron, and of this amount 2,638,300 are held for the
account of Baron Asset Fund ("BAF"), a registered investment company
advised by BAMCO, Inc., and (b) 2,461,208 shares are held for the accounts
of investment advisory clients of Baron Capital Management, Inc. ("BCM"),
a registered investment company controlled by Mr. Baron. The address for
BCG, BAMCO, BAF and BCM is 767 Fifth Avenue, 24th Floor, New York, New
York 10153.
(3) Includes shares held in profit sharing or IRA accounts for the benefit of
the named individual or members of his immediate family.
(4) Includes shares which such persons have the right to acquire within 60
days pursuant to the exercise of outstanding stock options. These stock
options include 12,940 options attributable to Mr. Lynch; 4,167 options
attributable to Mr. Roeder; 8,620 options attributable to Mr. Chiavelli;
5,520 options attributable to Mr. Alvarado; 4,167 options each
attributable to Messrs. Bouchut, Couvreux, Crull, Gold, Guichard,
McLaughlin, Plaskett and Snollaerts; 7,500 options attributable to Mr.
Ornstein. An additional 8,160 options will vest within 60 days for the
remaining unnamed executive officers as a group. This amount also includes
restricted shares that the directors and/or executive officers may have
deferred under the Directors Deferred Compensation Plan or the Deferred
Compensation Plan.
(5) Shares held in family trust.
PROPOSAL TO APPROVE THE AMENDMENT OF THE LONG-TERM EQUITY COMPENSATION PLAN
TO INCREASE THE NUMBER OF SHARES OF THE COMPANY'S COMMON STOCK FOR WHICH
OPTIONS, RESTRICTED STOCK AWARDS AND PERFORMANCE UNITS OR PERFORMANCE SHARES
MAY BE AWARDED AND TO EXTEND THE EXPIRATION DATE OF THE PLAN TO DECEMBER 31,
2010
At the Annual Meeting there will be submitted to the stockholders, a
proposal to amend the Company's Long-Term Equity Compensation Plan ("Equity
Compensation Plan") to increase the number of shares for which options,
restricted stock awards, performance units and/or performance shares may be
awarded from 2,470,000 to 3,600,000 shares and to extend the expiration of
this plan from December 31, 2006 to December 31, 2010. On February 20, 2001,
the Board of Directors approved the proposed amendment to the Equity
Compensation Plan, subject to stockholder approval. If the proposed amendment
is not approved by the Company's stockholders, it is automatically null and
void. The Board of Directors approved the Equity Compensation Plan in February
1997 and the stockholders adopted the Equity Compensation Plan in May 1997.
The Equity Compensation Plan was amended by the Board and the stockholders in
1999 to increase the number of shares covered thereby to 2,470,000 and by the
Board in 2000 to clarify that the Equity Compensation Plan permitted the grant
of restricted stock awards to non-employee directors.
The Stock Incentive Plan will expire in June 2001 and the Company has
decided not to make any further awards under this plan. The Company together
with the Board has determined that it does not want to increase
24
the aggregate number of shares available for grant under both the Stock
Incentive Plan and the Equity Compensation Plan. Thus, the Board decided to
submit to the stockholders this proposal to amend the Company's Equity
Compensation Plan to increase the amount of shares available for grant by
slightly less than the shares that would be expected to be available under the
Stock Incentive Plan.
The Board of Directors believes that, among other things, stock-based plans
such as the Equity Compensation Plan and the Company's Stock Incentive Plan
help optimize profitability and growth of the Company through incentives
designed to link the interests of the participants with those of the Company's
stockholders and provide flexibility to the Company in its ability to attract
and retain the services of participants who will make contributions to the
success of the Company. However, with the Stock Incentive Plan expiring in
June 2001 and as of February 2001 only approximately 350,000 shares remaining
available under the Equity Compensation Plan, the Board concluded that the
number of shares remaining available for grant was insufficient to accomplish
these purposes. Accordingly, on February 20, 2001, the Board of Directors
determined to amend the Equity Compensation Plan to increase the shares
available thereunder rather than extend the expiration of the Stock Incentive
Plan because the Board believes that the Equity Compensation Plan is better
suited to all different types of incentive programs as it allows for a variety
of awards. The Board further concluded that, since the number of shares under
the Equity Compensation Plan was being increased, there should be additional
time within which to grant awards covering those shares. Thus, the Board is
seeking stockholder approval to increase by 1,130,000 shares the number of
shares available for awards under the Equity Compensation Plan and to extend
the expiration of the Equity Compensation Plan to December 31, 2010 in order
to allow the Company additional time to utilize this important aspect of the
Company's incentive program.
As of April 6, 2001, under the Equity Compensation Plan, options to purchase
an aggregate of 1,668,862 shares of its Common Stock were outstanding, and
restricted stock awards totaling approximately 350,129 shares have been
granted, including shares granted pursuant to participation in the Voluntary
Exchange Program. Of these restricted shares, grants have been made to 16
company officers (including all executive officers) and to 5 non-employee
directors. In March 2001, 61,850 of the total restricted shares vested in
15 company officers (including all but one executive officer) as a result of a
certain share price objective being met. In February 2000 and 2001, 50,000 and
20,000 restricted shares respectively vested in Mr. Roeder according to the
terms of his Employment Agreement. There are approximately 451,009 shares of
Common Stock available for future awards under the Equity Compensation Plan as
of April 6, 2001. Also as of April 6, 2001, options to purchase an aggregate
of approximately 835,431 shares of common stock were outstanding under the
Company's Stock Incentive Plan, and there were approximately 890,993 shares of
common stock available for future awards under the Stock Incentive Plan.
Certain information regarding options and restricted stock awards granted to
the executive officers named in the Summary Compensation Table and to certain
non-employee directors is set forth under "Executive Compensation" and
"Election of Directors--Compensation of Directors" above.
The following summary of certain principal features of the Equity
Compensation Plan is qualified in its entirety by the complete text of the
Equity Compensation Plan, as amended and as proposed to be amended. As of
March 30, 2001, the closing price of a share of the Company's common stock as
reported on the New York Stock Exchange composite-transactions report was
$10.05.
Purpose. The Equity Compensation Plan is intended to (i) optimize the
profitability and growth of the Company through incentives which are
consistent with the Company's goals and which link the personal interests of
Participants to those of the Company's stockholders, (ii) provide Participants
with an incentive for excellence in individual performance, (iii) promote team
work among Participants, and (iv) provide flexibility to the Company in its
ability to motivate, attract and retain the services of Participants to make
significant contributions to the Company's success and to allow Participants
to share in the success of the Company.
General. The Equity Compensation Plan permits the granting of Stock Options,
Stock Appreciation Rights, Restricted Stock Awards, Performance Units and
Performance Shares to eligible participants. The total number of Shares of the
Company's common stock available for Awards to be granted under the Equity
25
Compensation Plan is currently 2,470,000 shares. In the event that options
granted under the Equity Compensation Plan terminate or expire without being
exercised, shares not purchased under such lapsed options will again become
generally available to be issued on the exercise of additional options granted
under the Equity Compensation Plan.
Administration of the Equity Compensation Plan. The Equity Compensation Plan
is administered by the Compensation Committee of the Company's Board of
Directors. The Equity Compensation Plan does not require that the Committee
members must qualify as "disinterested persons" under Rule 16b-3 under the
Securities Exchange Act of 1934 ("Rule 16b-3"), or as "outside directors"
under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). The Equity Compensation Plan does require, however, in general terms,
(i) that at all times when Code Section 162(m) is applicable, all Awards
granted under the Equity Compensation Plan shall comply with the requirements
of Code Section 162(m) unless the Committee determines that such compliance is
not desired with respect to any Award, and (ii) with respect to "Insiders,"
that transactions under the Equity Compensation Plan are intended to comply
with all applicable conditions of Rule 16b-3. Subject to the terms of the
Equity Compensation Plan, the Committee has the full power to select employees
to participate in the Equity Compensation Plan, determine the sizes and types
of Awards, determine the terms and conditions of Awards, construe and
interpret the Equity Compensation Plan and any agreement entered into under
the Plan, establish, amend or waive any rules and regulations for the Equity
Compensation Plan's administration and, amend the terms and conditions of any
outstanding Award to the extent such terms and conditions are within the
discretion of the Committee. The Committee also has the discretion for making
any adjustments in Awards, the Shares available for Awards and the numerical
limitation for Awards to reflect any transactions such as stock splits or any
merger or reorganization of the Company. The Board of Directors may amend or
terminate the Equity Compensation Plan at any time and for any reason but, as
required under Rule 16b-3, certain material amendments to the Equity
Compensation Plan must be approved by the stockholders.
Eligibility to Receive Awards. Any full-time active employee of the Company
and its subsidiaries is eligible to be selected to receive one or more Awards.
The Company and its subsidiaries currently have approximately 5,640 employees.
The actual number of employees who will receive Awards under the Equity
Compensation Plan cannot be determined because eligibility for participation
in the Equity Compensation Plan is in the discretion of the Committee.
Employee directors are also eligible for Awards under the Equity Compensation
Plan and non-employee directors are eligible to receive restricted stock
awards.
Options. The Committee may grant Nonqualified Stock Options and/or Incentive
Stock Options (which are entitled to favorable tax treatment.) The number of
shares covered by each option will be determined by the Committee, but during
any fiscal year of the Company, no participant may be granted options for more
than 100,000 shares. The price of the shares of the Company's common stock
subject to each option is set by the Committee but cannot be less than 100% of
the fair market value (determined on the date of grant) of the shares covered
by the option. The option price of each option must be paid in full at the
time of exercise. The Committee may permit the option price to be paid in cash
or through the tender of shares of the Company's common stock already owned by
the Participant, or by a combination of cash and shares. The Committee may
also allow the cashless exercise of an option as permitted under the Federal
Reserve Board's Regulation T, subject to applicable securities law
restrictions or by any other means the Committee determines to be consistent
with the Equity Compensation Plan's purposes and applicable law. Options
become exercisable and terminate at the times and on the terms established by
the Committee, but options generally shall not be exercisable later than the
10th anniversary date of the grant.
Stock Appreciation Rights. Stock Appreciation Rights ("SARs") may be granted
as a separate award or together with an option. Upon exercise of a SAR, the
participant will receive a payment from the Company equal to (1) the
difference between the fair market value of a share on the date of exercise
over the grant price multiplied by (2) the number of shares with respect to
which the SAR exercised. The grant price of a free standing SAR equals the
fair market value of a share on the date of grant of the SAR. The grant price
of a
26
Tandem SAR equals the option price of the related option. SARs may be paid in
cash or shares of the Company's common stock, as determined by the Committee.
The number of shares covered by each SAR will be determined by the Committee,
but during any fiscal year of the Company, no participant may be granted SARs
for more than 100,000 shares. The Committee also determines the other terms
and conditions of each SAR. SARs expire at the same times established by the
Committee but subject to the maximum time limits as are applicable to options
granted under the Equity Compensation Plan.
Restricted Stock Awards. Restricted Stock Awards are shares of the Company's
common stock which vest in accordance with terms established by the Committee
in it discretion. For example, the Committee may provide the Restricted Stock
will vest only if one or more performance goals are satisfied and/or only if
the participant remains employed with the Company for a specified period of
time. Any performance measures may by applied on a Company-wide basis or an
individual unit basis, as deemed appropriate in light of the participant's
specific responsibilities. The number of shares covered by each Award of
Restricted Stock will be determined by the Committee, but during any fiscal
year of the Company no participant may be granted Restricted Stock for more
than 100,000 shares.
Performance Units and Performance Shares. Performance Units and Performance
Shares are amounts credited to a bookkeeping account established for the
participant. A Performance Unit has an initial value that is established by
the Committee at the time of its grant. A Performance Share has an initial
value equal to the fair market value of a share of the Company's common stock
on the date of grant. Whether a Performance Unit or Performance Share actually
will result in a payment to a participant will depend upon the extent to which
performance goals established by the Committee are satisfied. Performance
measures may be chosen from among profits, net income (before or after tax),
share price, earnings per share, return on assets, return on equity, operating
income, return on capital, return on investment, shareholder return, sales,
customer service, employee satisfaction or economic value added. The
applicable performance goals (and all other terms and conditions of an award
of Performance Units or Performance Shares) will be determined in the
discretion of the Committee. After a Performance Unit or Performance Share has
vested (that is, after the applicable performance goal or goals have been
achieved), the participant will be entitled to a payout of cash and/or common
stock, as determined by the Committee not to exceed $2,000,000 for any one
participant in any fiscal year.
Non-transferability of Awards. Awards granted under the Equity Compensation
Plan may not be sold, transferred, pledged, assigned, or otherwise alienated
or hypothecated, other than (except in the case of Restricted Stock) by will
or by the applicable laws of dissent and distribution, provided that in the
discretion of the Committee, a participant's award agreement (except in the
case of an Incentive Stock Option) may provide otherwise.
Change in Control. On the occurrence of a change in control, all options and
SARs granted become immediately exercisable, any restriction periods and
restrictions imposed on Restricted Stock lapse and all target pay-out
opportunities attainable under all outstanding awards or restricted stock,
Performance Units and Performance Shares shall be deemed to have been fully
earned for the entire performance period as of the effective date in a change
in control. In addition, the vesting of all awards denominated in shares shall
accelerate as of the effective date of a change in control and certain cash
payments shall be made to participants, with respect to the assumed
achievement of performance goals, on a prorata basis. For purposes of the
Equity Compensation Plan, a "Change in Control" means generally, either (1)
any person acquires beneficial ownership of more than 35% of the Company's
voting power, (2) during any two consecutive year period there is a change in
those persons constituting a majority of the Board at the beginning of such
period, or (3) a plan of complete liquidation, an agreement for the sale of
substantially all the Company's assets or a merger, consolidation or
reorganization of the Company involving current stockholders obtain at least
65% of the voting power of the Company (or surviving entity).
27
Tax Aspects. Based on management's understanding of current federal income
tax laws, the tax consequences of the grant of Awards under the Equity
Compensation Plan are as follows:
A recipient of an option or SAR granted under the Equity Compensation Plan
will not have taxable income at the time of grant. Upon exercise of a
Nonqualified stock option or SAR, the participant generally must recognize as
taxable ordinary income an amount equal to the fair market value on the date
of exercise of the shares exercised minus the option price or grant price. Any
gain or loss recognized upon any later sale or other disposition of the
acquired shares generally will be capital gain or loss.
Upon exercise of an Incentive Stock Option, the participant generally will
not be required to recognize any taxable income on account of the exercise.
Upon a later sale or other disposition of the shares, the participant must
recognize long-term capital gain or ordinary income, depending on the length
of time the participant has held the shares prior to sale.
A participant who receives restricted stock or Performance Units or
Performance Shares will not recognize taxable income upon receipt, but instead
will recognize ordinary income when the shares or units vest. Alternatively,
the participant may elect under Section 83(b) of the Internal Revenue Code to
be taxed at the time of receipt of the restricted stock or Performance Units
or Performance Shares. If the restricted stock or Performance Units or
Performance Shares are subsequently forfeited, the participant is not entitled
to a deduction for the loss. However, if the participant holds the restricted
stock, Performance Units or Performance Shares until after the shares vest and
subsequently sells the shares upon vesting, the gain will be taxed as a
capital gain as opposed to ordinary income. In all cases, the amount of
ordinary income recognized by the participant will be equal to the fair market
value of the shares at the time income is recognized, minus the amount, if
any, paid for the shares.
Any taxes required to be withheld must be paid by the participant at the
time of exercise. With respect to withholding required upon exercise of
options, participants may elect, subject to the approval of the Committee, to
satisfy tax withholding requirements in whole or in part, by having the
Company withhold shares having a fair market value on the date that the tax is
determined equal to the minimum statutory total tax which could be imposed on
the transaction.
The Company generally will be entitled to a tax deduction in connection with
an award made under the Equity Compensation Plan only to the extent that the
participant recognizes ordinary income from the award. Section 162(m) of the
Code contains special rules regarding the federal income tax deductibility of
compensation paid to the Company's Chief Executive Officer and to each of the
four most highly compensated executive officers.
The general rule is that annual compensation paid to any of these specified
executives will be deductible only to the extent that it does not exceed
$1million or qualifies for the Performance-Based Exception under Section
162(m). The Equity Compensation Plan has been designed so that the Committee,
in its discretion, may in the future make grants of options and SARs which
will qualify as Performance Based Compensation under Section 162(m).
The proposed amendment to the Equity Compensation Plan requires the approval
of the affirmative vote of a majority of the outstanding shares of Common
Stock present (in person or by proxy) and entitled to vote at the Annual
Meeting. Abstentions and broker non-votes are counted in determining the total
number of shares present at the Annual Meeting and thus have the effect of a
vote against the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE PROPOSED AMENDMENT TO THE EQUITY COMPENSATION PLAN.
28
SELECTION OF AUDITORS
The Board of Directors of the Company has appointed Arthur Andersen LLP,
independent public accountants, as auditors of the Company for the fiscal year
ending December 30, 2001, and has further directed that management submit the
selection of auditors for ratification by the stockholders at the Annual
Meeting. Ratification of the selection of Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ending December 30, 2001
will require the affirmative vote of a majority of the shares of Common Stock
represented in person or by proxy and entitled to vote at the Annual Meeting.
Abstentions and broker non-votes are counted in determining the total number
of shares present at the Annual Meeting and thus have the effect of a vote
against the proposal. If the selection is not ratified, the Board will select
other independent accountants. Arthur Andersen LLP has audited the Company's
financial statements for the past fourteen years. This firm will have a
representative at the Annual Meeting, who will have an opportunity to make a
statement, if the representative so desires, and will be available to respond
to appropriate questions.
Audit Fees
The aggregate fees billed by Arthur Andersen LLP for professional services
rendered for the audit of the Company's financial statements for the fiscal
year ended December 31, 2000 and for the reviews of the financial statements
included in the Company's Form 10-Qs for that fiscal year were $440,000.
Financial Information Systems Design and Implementation Fees
The Company was not billed any fees for professional services described in
Paragraph (c)(4)(ii) of Rule 2-01 of Regulation S-X rendered by Arthur
Andersen LLP for the fiscal year ended December 31, 2000.
All Other Fees
The aggregate fees billed for services rendered by Arthur Andersen LLP,
other than the services described above under the headings "Audit Fees" and
"Financial Information Systems Design and Implementation Fees," for the fiscal
year ended December 31, 2000 were $190,000.
The Audit Committee has considered whether the provision of services other
than those described above under the heading "Audit Fees" are compatible with
maintaining the independence of the Company's principal accountants.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS FOR THE COMPANY'S FISCAL
YEAR ENDING DECEMBER 30, 2001.
29
ANNUAL REPORT
The Company's Annual Report to Stockholders for fiscal year 2000 is being
mailed to all stockholders. Any stockholder who has not received a copy may
obtain one by writing to the Company.
THE COMPANY WILL PROVIDE WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM
10-K, FOR THE YEAR ENDED DECEMBER 31, 2000 (EXCLUSIVE OF EXHIBITS THERETO),
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, UPON REQUEST OF ANY PERSON
WHO WAS A HOLDER OF RECORD, OR WHO REPRESENTS IN GOOD FAITH THAT HE OR SHE WAS
A BENEFICIAL OWNER, OF COMMON STOCK ON MARCH 30, 2001. ANY SUCH REQUEST SHALL
BE IN WRITING AND ADDRESSED TO THE SECRETARY OF THE COMPANY, 600 CITADEL
DRIVE, COMMERCE, CALIFORNIA 90040, TELEPHONE NUMBER (323) 869-7500.
SUBMISSION OF STOCKHOLDER PROPOSALS
The Company's Bylaws provide that stockholders seeking to bring business
before an annual meeting of stockholders, or to nominate directors at an
annual or special meeting of stockholders, must provide timely notice thereof
in writing. To be timely, a stockholder's notice must be delivered to, or
mailed and received at, the principal executive offices of the Company (i) in
the case of an annual meeting that is called for a date that is within 30 days
before or after the anniversary date of the immediately preceding annual
meeting of stockholders, not less than 60 days nor more than 90 days prior to
such anniversary date and (ii) in the case of an annual meeting that is called
for a date that is not within 30 days before or after the anniversary date of
the immediately preceding annual meeting, or in the case of a special meeting
of stockholders, not later than the close of business on the tenth day
following the day on which notice of the date of the meeting was mailed or
public disclosure of the date of the meeting was made, whichever occurs first.
The Bylaws also specify certain requirements for a stockholder's notice to be
in proper written form. If the Company does not receive timely notice of any
such proposed business, the proxy holders may exercise discretionary authority
with respect to that proposal. If the Company does receive timely notice of
any such proposed business, the proxy holders may exercise discretionary
authority with respect to that proposal but only to the extent permitted by
the regulations of the Securities and Exchange Commission.
A proposal by a stockholder intended to be presented at the 2002 Annual
Meeting must be received by the Company at its principal executive offices by
December 11, 2001, to be included in the Proxy Statement for that Meeting, and
all other conditions for such inclusion must be satisfied.
OTHER MATTERS
The Company knows of no other matters to be brought before the Annual
Meeting. However, if any other matters are properly presented for action, the
persons named in the accompanying proxy intend to vote on such matter in their
discretion.
30
SOLICITATION OF PROXIES
The cost of this solicitation of proxies will be borne by the Company.
Solicitations will be made by mail, telephone or telegram and personally by
directors, officers and other employees of the Company, but such persons will
not receive any compensation for such services over and above their regular
salaries. The Company will reimburse brokers, banks, custodians, nominees and
fiduciaries holding stock in their names or in the names of their nominees for
their reasonable charges and expenses in forwarding proxies and proxy material
to the beneficial owners of such stock.
BY ORDER OF THE BOARD OF DIRECTORS
Donald G. Alvarado
Secretary
April 17, 2001
31
APPENDIX A
AUDIT COMMITTEE
BOARD OF DIRECTORS OF SMART & FINAL INC.
CHARTER
A. Authority
1. The Board of Directors has established the Audit Committee (the
Committee) with oversight responsibilities as described in this Charter
or as additionally requested by the Board.
2. The Charter should be reviewed periodically by the Committee and revised
as necessary, in response to the Company's needs.
3. The Committee is empowered to retain persons having special competence
as necessary to assist the Committee in fulfilling its responsibilities
with concurrence of the Board.
B. Membership
1. Consistent with NYSE requirements, the Committee will consist of at
least three directors, each with no management responsibilities or
business relationships with the Company or its major shareholder, Casino
Guichard-Perrachon, S.A., and its affiliates.
2. The Chairman shall be designated by the Board of Directors.
C. Term of Office
1. Rotation of members will be at the discretion of the Board of Directors
and arranged to maintain continuity and fresh perspectives.
D. Reporting and Communications
1. The Committee Chairman shall report the Committee's activities to the
full Board of Directors on a regular and timely basis.
2. The Committee shall have free and open lines of communication with the
independent and internal auditors, as well as prompt and unrestricted
access to management and all relevant information.
E. Meetings
1. The Committee will meet at least three times a year on a regular basis
and additionally as circumstances require. If necessary, meetings may be
conducted telephonically.
2. Meetings will include private sessions with the internal and independent
auditors.
3. One meeting will be held prior to commencement of the audit to review
the independence of the audit firm, the scope and fees of the audit and
to clarify expectations. (Exhibit A)
4. One meeting will be held near completion of the audit to review the
independence of the audit firm, the scope and fees of the audit and to
clarify expectations. (Exhibit A)
F. Responsibilities of the Audit Committee
1. Monitor the Company's financial organization and system of internal
controls.
a. Evaluate auditor recommendations and management's response.
b. Assess the competence of the financial management organization.
A-1
2. Oversight of the Company's financial reporting.
a. Review and approve the company's annual financial statements and
Form 10-K prior to release.
b. Review and discuss appropriate matters. (see Exhibit B)
3. Monitor the engagement of the independent auditor and the effectiveness
of the firm in carrying out its audit responsibilities.
a. Clarify expectations annually. (see Exhibit A)
b. Review and discuss appropriate matters. (see Exhibit B)
4. Review the resources, qualifications, plans and activities of the
internal audit function and its effectiveness.
5. Other oversight functions as requested as requested by the Board.
a. Periodically review with management procedures and processes in
place to emphasize a high degree of ethical behavior.
b. Judge the nature of the intercompany transactions between the
Company and its affiliates and related parties and evaluate the
appropriateness of the related financial reporting and disclosures.
c. Review technology systems and the Company's use of technology to
more effectively manage the business.
d. Periodically receive reports on the administration of the Company's
pension and 401(k) plans.
A-2
EXHIBIT A
AUDIT COMMITTEE EXPECTATIONS
TO BE CLARIFIED ANNUALLY
1. The independent auditor understands its client is the Board of Directors,
as the shareholders representative.
2. Financial management and the independent auditor will perform a timely
analysis of significant financial reporting issues and practices.
3. Financial management and the independent auditor will discuss with the
audit committee their qualitative judgments about the appropriateness, not
just the acceptability, of accounting principles and financial disclosure
practices used or proposed to be adopted by the Company and, particularly,
about the degree of aggressiveness or conservatism of its accounting
principles and underlying estimates.
4. The independent auditor will be available to the Board of Directors at
least annually to help provide a basis for the Board to recommend to
shareholders the appointment of the auditor or ratification of the Board's
selection of the auditor.
5. Financial management will advise the Committee on a timely basis if and
when it seeks a second opinion on significant accounting issues or has a
disagreement with the independent auditor which would require public reporting
in the event of an auditor change.
6. The committee will maintain open lines of communication with the
independent auditor, the chief accounting and financial officers, and any
internal audit director.
A-3
EXHIBIT B
AUDIT COMMITTEE
DISCUSSION TOPICS WITH THE INDEPENDENT AUDITOR
1. Accounting Principles and Disclosures
a. The auditor's independent qualitative judgments about the
appropriateness, not just the acceptability, of the accounting
principles and the clarity of the financial disclosure practices used or
proposed to be adopted by the Company.
b. The auditor's views about whether management's choices of accounting
principles are conservative, moderate, or extreme from the perspective
of income, asset, and liability recognition, and whether those
principles are common practices or are minority practices.
c. The auditor's reasoning in determining the appropriateness of changes in
accounting principles and disclosure practices.
d. The auditor's reasoning in determining the appropriateness of changes in
accounting principles and disclosure practices adopted by management for
new transactions or events.
e. The auditor's reasoning in accepting or questioning significant
estimates made by management.
f. The auditor's views about how the Company's choices of accounting
principles and disclosure practices may affect shareholders and public
views and attitudes about the company.
2. Internal Control System Matters
a. Independent auditor's recommendations.
b. Management's response and resulting actions.
c. Discussion of specific matters as requested or appropriate.
3. Audit Scope and Audit Independence
a. Adequacy of the independent auditor's scope, approach and reports.
b. The nature and extent of advisory services provided by the audit form
and consideration of any impact on auditor independence.
c. Unusual pressures or other matters which could impair auditor
independence.
4. Other Matters as Appropriate
A-4
APPENDIX B
SMART & FINAL INC.
LONG-TERM EQUITY COMPENSATION PLAN
ARTICLE 1. ESTABLISHMENT, OBJECTIVES, AND DURATION
1.1. Establishment of the Plan. Smart & Final Inc., a Delaware corporation
(hereinafter referred to as the "Company"), hereby establishes an incentive
compensation plan to be known as the "Smart & Final Inc. Long-Term Equity
Compensation Plan" (hereinafter referred to as the "Plan"), as set forth in
this document. The Plan permits the grant of Nonqualified Stock Options,
Incentive Stock Options, Stock Appreciation Rights, Restricted Stock,
Performance Shares and Performance Units.
The Plan shall become effective as of February 21, 1997 (the "Effective
Date") and shall remain in effect as provided in Section 1.3 hereof.
1.2. Objectives of the Plan. The objectives of the Plan are to optimize the
profitability and growth of the Company through incentives which are
consistent with the Company's goals and which link the personal interests of
Participants to those of the Company's stockholders; to provide Participants
with an incentive for excellence in individual performance; and to promote
teamwork among Participants.
The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of Participants who make
significant contributions to the Company's success and to allow Participants
to share in the success of the Company.
1.3. Duration of the Plan. The Plan shall commence on the Effective Date, as
described in Section 1.1 hereof, and shall remain in effect, subject to the
right of the Board of Directors to amend or terminate the Plan at any time
pursuant to Article 15 hereof, until all Shares subject to it shall have been
purchased or acquired according to the Plan's provisions. However, in no event
may an Award be granted under the Plan on or after December 31, 2006.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
2.1. "Award" means, individually or collectively, a grant under this Plan of
Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation
Rights, Restricted Stock, Performance Shares or Performance Units.
2.2. "Award Agreement" means an agreement entered into by the Company and
each Participant setting forth the terms and provisions applicable to Awards
granted under this Plan.
2.3. "Beneficial Owner" or "Beneficial Ownership" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
2.4. "Board" or "Board of Directors" means the Board of Directors of the
Company.
2.5. "Change in Control" of the Company shall be deemed to have occurred (as
of a particular day, as specified by the Board) upon the occurrence of any
event described in this Section 2.5 as constituting a Change in Control.
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A Change in Control will be deemed to have occurred as of the first day any
one (1) or more of the following paragraphs shall have been satisfied:
(a) Any Person (other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company, or a corporation owned directly
or indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), becomes the
Beneficial Owner, directly or indirectly, of securities of the Company,
representing more than thirty-five percent (35%) of the combined voting power
of the Company's then outstanding securities; or
(b) During any period of two (2) consecutive years (not including any period
prior to the Effective Date), individuals who at the beginning of such period
constitute the Board (and any new Director, whose election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
Directors then still in office who either were Directors at the beginning of
the period or whose election or nomination for election was so approved),
cease for any reason to constitute a majority thereof; or
(c) The stockholders of the Company approve: (i) a plan of complete
liquidation of the Company; or (ii) an agreement for the sale or disposition
of all or substantially all the Company's assets; or (iii) a merger,
consolidation, or reorganization of the Company with or involving any other
corporation, other than a merger, consolidation, or reorganization that would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least sixty-five
percent (65%) of the combined voting power of the voting securities of the
Company (or such surviving entity) outstanding immediately after such merger,
consolidation, or reorganization.
However, in no event shall a Change in Control be deemed to have occurred,
with respect to a Participant, if that Participant is part of a purchasing
group which consummates the Change-in-Control transaction. The Participant
shall be deemed "part of a purchasing group" for purposes of the preceding
sentence if the Participant is an equity participant or has agreed to become
an equity participant in the purchasing company or group (except for (i)
passive ownership of less than three percent (3%) of the voting equity
securities of the purchasing company; or (ii) ownership of equity
participation in the purchasing company or group which is otherwise deemed not
to be significant, as determined prior to the Change in Control by a majority
of the continuing Nonemployee Directors).
2.6. "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
2.7. "Committee" means the Compensation Committee of the Board, as specified
in Article 3 herein, or such other Committee appointed by the Board to
administer the Plan with respect to grants of Awards.
2.8. "Company" means Smart & Final Inc., a Delaware corporation, including
any and all Subsidiaries, and any successor thereto as provided in Article 18
herein.
2.9. "Director" means any individual who is a member of the Board of
Directors of the Company.
2.10. "Disability" shall have the meaning ascribed to such term in the
Participant's governing long-term disability plan, or if no such plan exists,
at the discretion of the Committee.
2.11. "Effective Date" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.12. "Employee" means any full-time, active employee of the Company.
Directors who are not employed by the Company shall not be considered
Employees under this Plan.
2.13. "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
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2.14. "Fair Market Value" shall be determined on the basis of the closing
sale price on the principal securities exchange on which the Shares are traded
or, if there is no such sale on the relevant date, then on the last previous
day on which a sale was reported.
2.15. "Freestanding SAR" means an SAR that is granted independently of any
Options, as described in Article 7 herein.
2.16. "Incentive Stock Option" or "ISO" means an option to purchase Shares
granted under Article 6 herein and which is designated as an Incentive Stock
Option and which is intended to meet the requirements of Code Section 422.
2.17. "Insider" shall mean an individual who is, on the relevant date, an
officer, director or ten percent (10%) beneficial owner of any class of the
Company's equity securities that is registered pursuant to Section 12 of the
Exchange Act, all as defined under Section 16 of the Exchange Act.
2.18. "Named Executive Officer" means a Participant who, as of the date of
vesting and/or payout of an Award, as applicable, is one of the group of
"covered employees," as defined in the regulations promulgated under Code
Section 162(m), or any successor statute.
2.19. "Nonemployee Director" means an individual who is a member of the
Board of Directors of the Company but who is not an Employee of the Company.
2.20. "Nonqualified Stock Option" or "NQSO" means an option to purchase
Shares granted under Article 6 herein and which is not intended to meet the
requirements of Code Section 422.
2.21. "Option" means an Incentive Stock Option or a Nonqualified Stock
Option, as described in Article 6 herein.
2.22. "Option Price" or "Exercise Price" means the price at which a Share
may be purchased by a Participant pursuant to an Option.
2.23. "Participant" means an Employee who has outstanding an Award granted
under the Plan. The term "Participant" shall not include Nonemployee
Directors.
2.24. "Performance-Based Exception" means the performance-based exception
from the tax deductibility limitations of Code Section 162(m).
2.25. "Performance Share" means an Award granted to a Participant, as
described in Article 9 herein.
2.26. "Performance Unit" means an Award granted to a Participant, as
described in Article 9 herein.
2.27. "Period of Restriction" means the period during which the transfer of
Shares of Restricted Stock is limited in some way (based on the passage of
time, the achievement of performance goals, or upon the occurrence of other
events as determined by the Committee, at its discretion), and the Shares are
subject to a substantial risk of forfeiture, as provided in Article 8 herein.
2.28. "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) thereof.
2.29. "Restricted Stock" means an Award granted to a Participant pursuant to
Article 8 herein.
2.30. "Retirement" shall have the meaning ascribed to such term in the
Company's tax-qualified retirement plan.
2.31. "Shares" means the shares of common stock of the Company.
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2.32. "Stock Appreciation Right" or "SAR" means an Award, granted alone or
in connection with a related Option, designated as an SAR, pursuant to the
terms of Article 7 herein.
2.33. "Subsidiary" means any corporation, partnership, joint venture, or
other entity in which the Company has a majority voting interest (including
all division, affiliates, and related entities).
2.34. "Tandem SAR" means an SAR that is granted in connection with a related
Option pursuant to Article 7 herein, the exercise of which shall require
forfeiture of the right to purchase a Share under the related Option (and when
a Share is purchased under the Option, the Tandem SAR shall similarly be
canceled).
ARTICLE 3. ADMINISTRATION
3.1. The Committee. The Plan shall be administered by the Compensation
Committee of the Board, or by any other Committee appointed by the Board. The
members of the Committee shall be appointed from time to time by, and shall
serve at the discretion of, the Board of Directors.
3.2. Authority of the Committee. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Committee shall have full power to select Employees who
shall participate in the Plan; determine the sizes and types of Awards;
determine the terms and conditions of Awards in a manner consistent with the
Plan; construe and interpret the Plan and any agreement or instrument entered
into under the Plan as they apply to Employees; establish, amend, or waive
rules and regulations for the Plan's administration as they apply to
Employees; and (subject to the provisions of Article 15 herein) amend the
terms and conditions of any outstanding Award to the extent such terms and
conditions are within the discretion of the Committee as provided in the Plan.
Further, the Committee shall make all other determinations which may be
necessary or advisable for the administration of the Plan, as the Plan applies
to Employees. As permitted by law, the Committee may delegate its authority as
identified herein.
3.3. Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Board shall be final, conclusive and binding on all
persons, including the Company, its stockholders, Employees, Participants, and
their estates and beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
4.1. Number of Shares Available for Grants. Subject to adjustment as
provided in Section 4.2 herein, the number of Shares hereby reserved for
issuance to Participants under the Plan shall be two million four hundred
seventy thousand (2,470,000). The Compensation Committee shall determine the
appropriate methodology for calculating the number of shares issued pursuant
to the Plan.
Unless and until the Committee determines that an Award to a Named Executive
Officer shall not be designed to comply with the Performance-Based Exception,
the following rules shall apply to grants of such Awards under the Plan:
(a) Stock Options: The maximum aggregate number of Shares that may be
granted in the form of Stock Options, pursuant to any Award granted in any
one fiscal year to any one single Participant shall be one hundred thousand
(100,000).
(b) SARs: The maximum aggregate number of Shares that may be granted in
the form of Stock Appreciation Rights, pursuant to any Award granted in any
one fiscal year to any one single Participant shall be one hundred thousand
(100,000).
(c) Restricted Stock: The maximum aggregate grant with respect to Awards
of Restricted Stock granted in any one fiscal year to any one Participant
shall be one hundred thousand (100,000) Shares.
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(d) Performance Shares/Performance Units: The maximum aggregate payout
with respect to Awards of Performance Shares or Performance Units granted
in any one fiscal year to any one Participant shall be the value of two
million dollars ($2 million) at the end of the Performance Period.
4.2. Adjustments in Authorized Shares. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether
or not such reorganization comes within the definition of such term in Code
Section 368) or any partial or complete liquidation of the Company, such
adjustment shall be made in the number and class of Shares which may be
delivered under Section 4.1, in the number and class of and/or price of Shares
subject to outstanding Awards granted under the Plan, and in the Award limits
set forth in subsections 4.1(a) and 4.1(b), as may be determined to be
appropriate and equitable by the Committee, in its sole discretion, to prevent
dilution or enlargement of rights; provided, however, that the number of
Shares subject to any Award shall always be a whole number.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1. Eligibility. Persons eligible to participate in this Plan include all
Employees and members of the Board of the Company and its subsidiaries.
5.2. Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees, those to
whom Awards shall be granted and shall determine the nature and amount of each
Award.
ARTICLE 6. STOCK OPTIONS
6.1. Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such terms,
and at any time and from time to time as shall be determined by the Committee.
6.2. Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as
the Committee shall determine. The Award Agreement also shall specify whether
the Option is intended to be an ISO within the meaning of Code Section 422, or
an NQSO whose grant is intended not to fall under the provisions of Code
Section 422.
6.3. Option Price. The Option Price for each grant of an Option under this
Plan shall be at least equal to one hundred percent (100%) of the Fair Market
Value of a Share on the date the Option is granted.
6.4. Duration of Options. Each Option granted to an Employee shall expire at
such time as the Committee shall determine at the time of grant; provided,
however, that no Option shall be exercisable later than the tenth (10th)
anniversary date of its grant.
6.5. Exercise of Options. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions
as the Committee shall in each instance approve, which need not be the same
for each grant or for each Participant.
6.6. Payment. Options granted under this Article 6 shall be exercised by the
delivery of a written notice of exercise to the Company, setting forth the
number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares.
The Option Price upon exercise of any Option shall be payable to the Company
in full either: (a) in cash or its equivalent, or (b) by tendering previously
acquired Shares having an aggregate Fair Market Value at the time of exercise
equal to the total Option Price (provided that the Shares which are tendered
must have been held by
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the Participant for at least six (6) months prior to their tender to satisfy
the Option Price), or (c) by a combination of (a) and (b).
The Committee also may allow cashless exercise as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law
restrictions, or by any other means which the Committee determines to be
consistent with the Plan's purpose and applicable law.
Subject to any governing rules or regulations, as soon as practicable after
receipt of a written notification of exercise and full payment, the Company
shall deliver to the Participant, in the Participant's name, Share
certificates in an appropriate amount based upon the number of Shares
purchased under the Option(s).
6.7. Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, restrictions under applicable federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws
applicable to such Shares.
6.8. Termination of Employment. Each Participant's Option Award Agreement
shall set forth the extent to which the Participant shall have the right to
exercise the Option following termination of the Participant's employment with
the Company. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with each
Participant, need not be uniform among all Options issued pursuant to this
Article 6, and may reflect distinctions based on the reasons for termination
of employment.
6.9. Nontransferability of Options.
(a) Incentive Stock Options. No ISO granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further, all
ISOs granted to a Participant under the Plan shall be exercisable during
his or her lifetime only by such Participant.
(b) Nonqualified Stock Options. Except as otherwise provided in a
Participant's Award Agreement, no NQSO granted under this Article 6 may be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, except as otherwise provided in a Participant's
Award Agreement, all NQSOs granted to a Participant under this Article 6
shall be exercisable during his or her lifetime only by such Participant.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1. Grant of SARs. Subject to the terms and conditions of the Plan, SARs
may be granted to Participants at any time and from time to time as shall be
determined by the Committee. The Committee may grant Freestanding SARs, Tandem
SARs, or any combination of these forms of SAR.
The Committee shall have complete discretion in determining the number of
SARs granted to each Participant (subject to Article 4 herein) and, consistent
with the provisions of the Plan, in determining the terms and conditions
pertaining to such SARs.
The grant price of a Freestanding SAR shall equal the Fair Market Value of a
Share on the date of grant of the SAR. The grant price of Tandem SARs shall
equal the Option Price of the related Option.
7.2. Exercise of Tandem SARs. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.
Notwithstanding any other provision of this Plan to the contrary, with
respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR
will expire no later than the expiration of the underlying ISO;
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(ii) the value of the payout with respect to the Tandem SAR may be for no more
than one hundred percent (100%) of the difference between the Option Price of
the underlying ISO and the Fair Market Value of the Shares subject to the
underlying ISO at the time the Tandem SAR is exercised; and (iii) the Tandem
SAR may be exercised only when the Fair Market Value of the Shares subject to
the ISO exceeds the Option Price of the ISO.
7.3. Exercise of Freestanding SARs. Freestanding SARs may be exercised upon
whatever terms and conditions the Committee, in its sole discretion, imposes
upon them.
7.4. SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement
that shall specify the grant price, the term of the SAR, and such other
provisions as the Committee shall determine.
7.5. Term of SARs. The term of an SAR granted under the Plan shall be
determined by the Committee, in its sole discretion; provided, however, that
such term shall not exceed ten (10) years.
7.6. Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The difference between the Fair Market Value of a Share on the date
of exercise over the grant price; by
(b) The number of Shares with respect to which the SAR is exercised.
At the discretion of the Committee, the payment upon SAR exercise may be in
cash, in Shares of equivalent value, or in some combination thereof.
7.7. Termination of Employment. Each SAR Award Agreement shall set forth the
extent to which the Participant shall have the right to exercise the SAR
following termination of the Participant's employment with the Company and/or
its subsidiaries. Such provisions shall be determined in the sole discretion
of the Committee, shall be included in the Award Agreement entered into with
Participants, need not be uniform among all SARs issued pursuant to the Plan,
and may reflect distinctions based on the reasons for termination of
employment.
7.8. Nontransferability of SARs. Except as otherwise provided in a
Participant's Award Agreement, no SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, all SARs granted to a
Participant under the Plan shall be exercisable during his or her lifetime
only by such Participant.
ARTICLE 8. RESTRICTED STOCK
8.1. Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Participants in such amounts as the Committee shall
determine. Without limiting the generality of the foregoing, Shares of
Restricted Stock may be granted in connection with payouts under other
compensation programs of the Company.
8.2. Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Award Agreement that shall specify the
Period(s) of Restriction, the number of Shares of Restricted Stock granted,
and such other provisions as the Committee shall determine.
8.3. Transferability. Except as provided in this Article 8, the Shares of
Restricted Stock granted herein may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated until the end of the
applicable Period of Restriction established by the Committee and specified in
the Restricted Stock Award Agreement, or upon earlier satisfaction of any
other conditions, as specified by the Committee in its sole discretion and set
forth in the Restricted Stock Award Agreement. All rights with respect to the
Restricted Stock granted to a Participant under the Plan shall be available
during his or her lifetime only to such Participant.
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8.4. Other Restrictions. The Committee may impose such other conditions
and/or restrictions on any Shares of Restricted Stock granted pursuant to the
Plan as it may deem advisable including, without limitation, a requirement
that Participants pay a stipulated purchase price for each Share of Restricted
Stock, restrictions based upon the achievement of specific performance goals
(Company-wide, divisional, and/or individual), time-based restrictions on
vesting following the attainment of the performance goals, and/or restrictions
under applicable Federal or state securities laws.
The Company shall retain the certificates representing Shares of Restricted
Stock in the Company's possession until such time as all conditions and/or
restrictions applicable to such Shares have been satisfied.
Except as otherwise provided in this Article 8, Shares of Restricted Stock
covered by each Restricted Stock grant made under the Plan shall become freely
transferable by the Participant after the last day of the applicable Period of
Restriction.
8.5. Voting Rights. during the Period of Restriction, Participants holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares.
8.6. Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder may be
credited with regular cash dividends paid with respect to the underlying
Shares while they are so held. The Committee may apply any restrictions to the
dividends that the Committee deems appropriate. Without limiting the
generality of the preceding sentence, if the grant or vesting of Restricted
Shares granted to a Named Executive Officer is designed to comply with the
requirements of the Performance-Based Exception, the Committee may apply any
restrictions it deems appropriate to the payment of dividends declared with
respect to such Restricted Shares, such that the dividends and/or the
Restricted Shares maintain eligibility for the Performance-Based Exception.
8.7. Termination of Employment. Each Restricted Stock Award Agreement shall
set forth the extent to which the Participant shall have the right to receive
unvested Restricted Shares following termination of the Participant's
employment with the Company. Such provisions shall be determined in the sole
discretion of the Committee, shall be included in the Award Agreement entered
into with each Participant, need not be uniform among all Shares of Restricted
Stock issued pursuant to the Plan, and may reflect distinctions based on the
reasons for termination of employment; provided, however that, except in the
cases of terminations connected with a Change in Control and terminations by
reason of death or Disability, the vesting of Shares of Restricted Stock which
qualify for the Performance-Based Exception and which are held by Named
Executive Officers shall occur at the time they otherwise would have, but for
the employment termination.
ARTICLE 9. PERFORMANCE UNITS AND PERFORMANCE SHARES
9.1. Grant of Performance Units/Shares. Subject to the terms of the Plan,
Performance Units and/or Performance Shares may be granted to Participants in
such amounts and upon such terms, and at any time and from time to time, as
shall be determined by the Committee.
9.2. Value of Performance Units/Shares. Each Performance Unit shall have an
initial value that is established by the Committee at the time of grant. Each
Performance Share shall have an initial value equal to the Fair Market Value
of a Share on the date of grant. The Committee shall set performance goals in
its discretion which, depending on the extent to which they are met, will
determine the number and/or value of Performance Units/Shares that will be
paid out to the Participant. For purposes of this Article 9, the time period
during which the performance goals must be met shall be called a "Performance
Period."
9.3. Earning of Performance Units/Shares. Subject to the terms of this Plan,
after the applicable Performance Period has ended, the holder of Performance
Units/Shares shall be entitled to receive payout on the number and value of
Performance Units/Shares earned by the Participant over the Performance
Period, to be determined as a function of the extent to which the
corresponding performance goals have been achieved.
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9.4. Form and Timing of Payment of Performance Units/Shares. Payment of
earned Performance Units/Shares shall be made in a single lump sum following
the close of the applicable Performance Period. Subject to the terms of this
Plan, the Committee, in its sole discretion, may pay earned Performance
Units/Shares in the form of cash or in Shares (or in a combination thereof)
which have an aggregate Fair Market Value equal to the value of the earned
Performance Units/Shares at the close of the applicable Performance Period.
Such Shares may be granted subject to any restrictions deemed appropriate by
the Committee.
At the discretion of the Committee, Participants may be entitled to receive
any dividends declared with respect to Shares which have been earned in
connection with grants of Performance Units and/or Performance Shares which
have been earned, but not yet distributed to Participants (such dividends
shall be subject to the same accrual, forfeiture, and payout restrictions as
apply to dividends earned with respect to Shares of Restricted Stock, as set
forth in Section 8.6 herein). In addition, Participants may, at the discretion
of the Committee, be entitled to exercise their voting rights with respect to
such Shares.
9.5. Termination of Employment Due to Death, Disability, or
Retirement. Unless determined otherwise by the Committee and set forth in the
Participant's Award Agreement, in the event the employment of a Participant is
terminated by reason of death, Disability, or Retirement during a Performance
Period, the Participant shall receive a payout of the Performance Units/Shares
which is prorated, as specified by the Committee in its discretion.
Payment of earned Performance Units/Shares shall be made at a time specified
by the Committee in its sole discretion and set forth in the Participant's
Award Agreement. Notwithstanding the foregoing, with respect to Named
Executive Officers who retire during a Performance Period, payments shall be
made at the same time as payments are made to Participants who did not
terminate employment during the applicable Performance Period.
9.6. Termination of Employment for Other Reasons. In the event that a
Participant's employment terminates for any reason other than those reasons
set forth in Section 9.5 herein, all Performance Units/Shares shall be
forfeited by the Participant to the Company unless determined otherwise by the
Committee, as set forth in the Participant's Award Agreement.
9.7. Nontransferability. Except as otherwise provided in a Participant's
Award Agreement, Performance Units/Shares may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will
or by the laws of descent and distribution. Further, except as otherwise
provided in a Participant's Award Agreement, a Participant's rights under the
Plan shall be exercisable during the Participant's lifetime only by the
Participant or the Participant's legal representative.
ARTICLE 10. PERFORMANCE MEASURES
Unless and until the Committee proposes for shareholder vote and
shareholders approve a change in the general performance measures set forth in
this Article 10, the attainment of which may determine the degree of payout
and/or vesting with respect to Awards to Named Executive Officers which are
designed to qualify for the Performance-Based Exception, the performance
measure(s) to be used for purposes of such grants shall be chosen from among
profits, net income (either before or after taxes), share price, earnings per
share, return on assets, return on equity, operating income, return on
capital, return on investment, shareholder return, sales, customer service,
employee satisfaction, or economic value added.
The Committee shall have the discretion to adjust the determinations of the
degree of attainment of the preestablished performance goals; provided,
however, that Awards which are designed to qualify for the Performance-Based
Exception, and which are held by Named Executive Officers, may not be adjusted
upward (the Committee shall retain the discretion to adjust such Awards
downward).
In the event that applicable tax and/or securities laws change to permit
Committee discretion to alter the governing performance measures without
obtaining shareholder approval of such changes, the Committee shall
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have sole discretion to make such changes without obtaining shareholder
approval. In addition, in the event that the Committee determines that it is
advisable to grant Awards which shall not qualify for the Performance-Based
Exception, the Committee may make such grants without satisfying the
requirements of Code Section 162(m).
ARTICLE 11. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any beneficiary
or beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his or her death before he or
she receives any or all of such benefit. Each such designation shall revoke
all prior designations by the same Participant, shall be in a form prescribed
by the Company, and will be effective only when filed by the Participant in
writing with the Company during the Participant's lifetime. In the absence of
any such designation, benefits remaining unpaid at the Participant's death
shall be paid to the Participant's estate.
ARTICLE 12. DEFERRALS
The Committee may permit or require a Participant to defer such
Participant's receipt of the payment of cash or the delivery of Shares that
would otherwise be due to such Participant by virtue of the exercise of an
Option or SAR, the lapse or waiver of restrictions with respect to Restricted
Stock, or the satisfaction of any requirements or goals with respect to
Performance Units/Shares. If any such deferral election is required or
permitted, the Committee shall, in its sole discretion, establish rules and
procedures for such payment deferrals.
ARTICLE 13. RIGHTS OF EMPLOYEES
13.1. Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Participant's employment at any
time, nor confer upon any Participant any right to continue in the employ of
the Company.
13.2. Participation. No Employee shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected
to receive a future Award.
ARTICLE 14. CHANGE IN CONTROL
14.1. Treatment of Outstanding Awards. Upon the occurrence of a Change in
Control, unless otherwise specifically prohibited under applicable laws, or by
the rules and regulations of any governing governmental agencies or national
securities exchanges:
(a) Any and all Options and SARs granted hereunder shall become
immediately exercisable, and shall remain exercisable throughout their
entire term;
(b) Any restriction periods and restrictions imposed on Restricted Shares
shall lapse;
(c) The target payout opportunities attainable under all outstanding
Awards of Restricted Stock, Performance Units and Performance Shares shall
be deemed to have been fully earned for the entire Performance Period(s) as
of the effective date of the Change in Control. The vesting of all Awards
denominated in Shares shall be accelerated as of the effective date of the
Change in Control, and there shall be paid out in cash to Participants
within thirty (30) days following the effective date of the Change in
Control a pro rata amount based upon an assumed achievement of all relevant
performance goals and upon the length of time within the Performance Period
which has elapsed prior to the Change in Control.
14.2. Termination, Amendment, and Modifications of Change-in-Control
Provisions. Notwithstanding any other provision of this Plan or any Award
Agreement provision, the provisions of this Article 14 may not be terminated,
amended, or modified on or after the date of a Change in Control to affect
adversely any Award theretofore granted under the Plan without the prior
written consent of the Participant with respect to said Participant's
outstanding Awards; provided, however, the Board of Directors, upon
recommendation of the
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Committee, may terminate, amend, or modify this Article 14 at any time and
from time to time prior to the date of a Change in Control.
ARTICLE 15. AMENDMENT, MODIFICATION, AND TERMINATION
15.1. Amendment, Modification, and Termination. The Board may at any time
and from time to time, alter, amend, suspend or terminate the Plan in whole or
in part; provided, however, that no amendment which requires shareholder
approval in order for the Plan to continue to comply with Rule 16b-3 under the
Exchange Act, including any successor to such Rule, shall be effective unless
such amendment shall be approved by the requisite vote of shareholders of the
Company entitled to vote thereon.
15.2. Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual
or nonrecurring events (including, without limitation, the events described in
Section 4.2 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting
principles, whenever the Committee determines that such adjustments are
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan; provided that
no such adjustment shall be authorized to the extent that such authority would
be inconsistent with the Plan's meeting the requirements of Section 162(m) of
the Code, as from time to time amended.
15.3. Awards Previously Granted. No termination, amendment, or modification
of the Plan shall adversely affect in any material way any Award previously
granted under the Plan, without the written consent of the Participant holding
such Award.
15.4. Compliance with Code Section 162(m). At all times when Code Section
162(m) is applicable, all Awards granted under this Plan shall comply with the
requirements of Code Section 162(m); provided, however, that in the event the
Committee determines that such compliance is not desired with respect to any
Award or Awards available for grant under the Plan, then compliance with Code
Section 162(m) will not be required. In addition, in the event that changes
are made to Code Section 162(m) to permit greater flexibility with respect to
any Award or Awards available under the Plan, the Committee may, subject to
this Article 15, make any adjustments it deems appropriate.
ARTICLE 16. WITHHOLDING
16.1. Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an
amount sufficient to satisfy Federal, state, and local taxes, domestic or
foreign, required by law or regulation to be withheld with respect to any
taxable event arising as a result of this Plan.
16.2. Share Withholding. With respect to withholding required upon the
exercise of Options or SARs, upon the lapse of restrictions on Restricted
Stock, or upon any other taxable event arising as a result of Awards granted
hereunder, Participants may elect, subject to the approval of the Committee,
to satisfy the withholding requirement, in whole or in part, by having the
Company withhold Shares having a Fair Market Value on the date the tax is to
be determined equal to the minimum statutory total tax which could be imposed
on the transaction. All such elections shall be irrevocable, made in writing,
signed by the Participant, and shall be subject to any restrictions or
limitations that the Committee, in its sole discretion, deems appropriate.
ARTICLE 17. INDEMNIFICATION
Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit, or
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proceeding to which he or she may be a party or in which he or she may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the Company's approval, or paid by him or her in satisfaction of any
judgement in any such action, suit, or proceeding against him or her, provided
he or she shall give the Company an opportunity, at its own expense, to handle
and defend the same before he or she undertakes to handle and defend it on his
or her own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company's Articles of Incorporation of Bylaws, as a matter
of law, or otherwise, or any power that the Company may have to indemnify them
or hold them harmless.
ARTICLE 18. SUCCESSORS
All obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the
business and/or assets of the Company.
ARTICLE 19. LEGAL CONSTRUCTION
19.1. Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural
shall include the singular and the singular shall include the plural.
19.2. Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
19.3. Requirements of Law. The granting of Awards and the issuance of Shares
under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
19.4. Securities Law Compliance. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions or Rule
16b-3 or its successors under the 1934 Act. To the extent any provision of the
plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the
Committee.
19.5. Governing Law. To the extent not preempted by federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the state of Delaware.
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SMART & FINAL INC.
ADDENDUM TO LONG-TERM EQUITY COMPENSATION PLAN
This addendum to Smart & Final Inc.'s Long-Term Equity Compensation Plan
confirms that, for purposes of Article 8 only, the term "Participants" includes
Non-Employee Directors.
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APPENDIX C
AMENDMENT TO
SMART & FINAL INC.
LONG-TERM EQUITY COMPENSATION PLAN
This amendment to Smart & Final Inc.'s Long-Term Equity Compensation Plan
(the "Plan") is effective as of February 20, 2001.
1. Section 1.3 of the Plan is amended to read in its entirety as follows:
"1.3. Duration of the Plan. The Plan shall commence on the Effective
Date, and shall remain in effect, subject to the right of the Board of
Directors to amend or terminate the Plan at any time pursuant to Article 15
hereof, until all Shares subject to it shall have been purchased or
acquired according to the Plan's provisions. However, in no event may an
Award be granted under the Plan on or after December 31, 2010."
2. The first sentence of the first paragraph of Section 4.1 of the Plan is
amended to read as follows:
"Subject to adjustment as provided in Section 4.2 herein, the number of
Shares hereby reserved for issuance to Participants under the Plan shall be
3,600,000."
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE NOMINEES FOR Please mark your [X]
DIRECTOR AND THE FOLLOWING PROPOSALS. votes like this
FOR WITHHOLD AUTHORITY
all nominees listed to vote for all
below (except nominees listed
as indicated)
1. Election of Directors [_] [_]
Nominees: Pierre B. Bouchut, David J. McLaughlin,
Thomas G. Plaskett, and Etienne Snollaerts
(INSTRUCTION: To withhold authority to vote for any individual, cross his name out above)
FOR AGAINST ABSTAIN
2. Proposal to Amend Long-Term Equity [_] [_] [_]
Compensation Plan:
FOR AGAINST ABSTAIN
3. Proposal to ratify the selection of Arthur Andersen [_] [_] [_]
LLP, as the Company's Auditors:
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN
THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
STOCKHOLDER AND, IF NO DIRECTIONS ARE GIVEN, WILL
BE VOTED FOR THE ELECTION OF THE NOMINEES AND ALL
OF THE PROPOSALS.
Signature _______________________________________________________________ Date _________________________,2001
Signature _______________________________________________________________ Date _________________________,2001
Please sign exactly as your name appears hereon. When signing as attorney, executor, administrator, trustee, or guardian,
set forth your full title. When shares are held in more than one name, both parties should sign. If a corporation, sign in
full corporate name by President or other authorized officer. If a partnership, sign in partnership name by authorized
person.
[LOGO OF SMART & FINAL (R)]
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PROXY SMART & FINAL INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Martin A. Lynch and Donald G. Alvarado, and
each of them, proxies of the undersigned, each with full power to act without
the other and with power of substitution, to represent the undersigned and vote
as directed on the reverse hereof all shares of Common Stock, $.01 par value per
share, of Smart & Final Inc. (the "Company"), which the undersigned may be
entitled to vote at the Annual Meeting of Stockholders of the Company to be held
on May 23, 2001, or any adjournment thereof, and in their discretion upon such
other business as may properly come before the Annual Meeting, or any
adjournments thereof.
(Continued on reverse side)
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FOLD AND DETACH HERE
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Admission Ticket
[LOGO OF SMART & FINAL(R)]
2001 Annual Meeting of Stockholders
Wednesday, May 23, 2001
10:00 AM
Smart & Final Corporate Headquarters
600 Citadel Drive
Commerce, California 90040
PLEASE ADMIT Non-Transferable
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