<Page>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<Table>
Filed by the Registrant / /
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 Section240.14a-12
PATHMARK STORES, INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</Table>
Payment of Filing Fee (Check the appropriate box):
<Table>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------
</Table>
<Page>
PATHMARK STORES, INC.
200 MILIK STREET, CARTERET,
NJ 07008
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 13, 2002
------------------------
To the Stockholders of the Company:
The Annual Meeting of Stockholders of PATHMARK STORES, INC. will be held at
the corporate headquarters, 200 Milik Street, Carteret, New Jersey 07008, on
Thursday, June 13, 2002, at 3:00 p.m., local Eastern Time, for the following
purposes:
1. To elect seven directors;
2. To consider and vote upon amendments to the Pathmark Stores, Inc. 2000
Employee Equity Plan;
3. To ratify our selection of Deloitte & Touche LLP as our independent
auditors for 2002; and
4. To transact such other business as properly may be brought before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on April 19, 2002 are
entitled to notice of and to vote at the annual meeting or any adjournments
thereof.
Your attention is called to the Proxy Statement on the following pages. We
hope that you will attend the meeting. If you do not plan to attend, please fill
in, sign, date and mail the enclosed proxy in the enclosed envelope, which
requires no postage if mailed in the United States.
By Order of the Board of Directors,
Marc A. Strassler
SENIOR VICE PRESIDENT,
SECRETARY AND GENERAL COUNSEL
May 3, 2002
<Page>
PATHMARK STORES, INC.
200 MILIK STREET
CARTERET, NEW JERSEY 07008
------------------------
PROXY STATEMENT
------------------------
INTRODUCTION
This Proxy Statement is sent to you in connection with the solicitation of
proxies by the Board of Directors of Pathmark Stores, Inc., a Delaware
corporation, for use at the 2002 Annual Meeting of Stockholders. The meeting
will be held at the Company's headquarters, 200 Milik Street, Carteret, New
Jersey 07008, at 3:00 p.m. (local Eastern Time), on Thursday, June 13, 2002, and
any adjournment or postponement thereof. Copies of this Proxy Statement and the
accompanying proxy are being mailed to stockholders on or about May 10, 2002.
As used in this Proxy Statement, "Annual Meeting" refers to the meeting
described above. "Company" or "Pathmark" refers to Pathmark Stores, Inc.,
"Common Stock" refers to the Company's common stock, par value $0.01, and
"Record Date" for the Annual Meeting refers to April 19, 2002.
On July 12, 2000 (the "Petition Date"), Pathmark and its then three parent
entities, PTK Holdings, Inc. ("PTK"), Supermarkets General Holdings Corporation
("Holdings") and SMG-II Holdings Corporation ("SMG-II"), filed a prepackaged
plan of reorganization (the "Plan of Reorganization") in the U.S. Bankruptcy
Court in Delaware (the "Court") pursuant to Chapter 11 of the United States
Bankruptcy Code ("Chapter 11"). On September 7, 2000, the Court entered an order
confirming the Plan of Reorganization, which became effective on September 19,
2000 (the "Plan Effective Date"), at which time the Company formally exited
Chapter 11. As part of the Plan of Reorganization, all subordinated debt in the
amount of approximately $1 billion was canceled and the holders of such
subordinated debt received 100% of the Common Stock and warrants to purchase an
additional 15% of the Common Stock (the "Warrants"). Additionally, as part of
the Plan of Reorganization, (a) PTK merged with Pathmark, with Pathmark being
the surviving entity; (b) immediately thereafter Holdings merged with Pathmark,
with Pathmark being the surviving entity; and (c) immediately thereafter, SMG-II
merged with Pathmark, with Pathmark being the surviving entity, on the Plan
Effective Date.
<Page>
VOTING INFORMATION
STOCKHOLDERS WHO MAY VOTE
Only holders of record of the Common Stock at the close of business on the
Record Date are entitled to vote at the Annual Meeting. On the Record Date,
there were outstanding for voting purposes 30,067,407 shares of Common Stock.
Each stockholder shall have one vote per share on all business of the Annual
Meeting.
QUORUM; EFFECT OF VOTES
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of the Company's Common Stock will constitute a quorum at the
Annual Meeting. Outstanding shares of Common Stock represented by stockholders
who duly execute and return proxies on the accompanying proxy card will be
treated as being present at the Annual Meeting for purposes of determining a
quorum.
Directors are to be elected by a plurality of the votes cast at the meeting
in person or by proxy by the holders of shares entitled to vote in the election.
With respect to the proposals to approve amendments to the 2000 Employee Equity
Plan of the Company (the "EEP") and to ratify the selection of our auditors, the
affirmative vote of a majority of the shares present, or represented, and
entitled to vote at the Annual Meeting is required. Stockholders may vote for or
withhold voting for any or all nominees for the Board of Directors and may vote
for or against, or abstain from voting on the EEP proposal and/or the auditor
ratification proposal by so indicating on the accompanying proxy card. If a
proxy instruction indicates an abstention under the EEP or auditor proposals or
that a vote is being withheld in connection with the election of one or more
nominees for director, the shares represented by that proxy will not be counted
as casting votes with respect to the EEP or auditor proposals or for such
director nominees, although they will be included in determining the number of
shares present at the meeting and entitled to vote on the subject matter. Shares
held in street name by a broker who does not have express or discretionary
authority to vote on a particular matter ("broker non-votes") also will not be
counted as casting votes with respect to the matter but will be counted for
purposes of establishing a quorum.
Brokers who hold shares in street name for customers who have not instructed
the broker as to the voting of their shares have the authority to vote on the
election of directors and ratification of the auditors, but lack such authority
on other matters, including the approval of the EEP. The shares subject to such
"broker non-votes" would not be counted as votes for or against the EEP and
would not be included in determining the number of shares entitled to vote on
that proposal. They would, however, count for the purposes of the election of
directors and ratification of the auditors.
The Company does not presently know of any other business that may properly
come before the stockholders for a vote at the Annual Meeting. As to any such
other matters, unless a greater or different vote were required by applicable
law, the certificate of incorporation or the by-laws, the affirmative vote of a
majority of the shares present in person or represented by proxy at the Annual
Meeting and entitled to vote on the subject matter would be required to approve
such matter, and abstentions and broker non-votes would be treated as described
above.
PROXY SOLICITATION
Proxies are being solicited by and on behalf of the Board of Directors. All
expenses of this solicitation, including the cost of preparing and mailing this
Proxy Statement, will be borne by the Company. In addition to solicitation by
use of the mails, proxies may be solicited by directors, officers and employees
of the Company in person or by telephone, facsimile or other means of
communication. Such directors, officers and employees will not be additionally
compensated, but may be reimbursed by out-of-pocket expenses in connection with
such solicitation. Arrangements will also be made with custodians, nominees and
fiduciaries for forwarding of proxy solicitation materials to beneficial owners
of Common Stock held of record by such custodians, nominees and fiduciaries, and
the Company may reimburse such custodians, nominees and fiduciaries for
reasonable expenses incurred in connection therewith.
2
<Page>
PROXY VOTING AND REVOCATION OF PROXY
The proxy solicited by this Proxy Statement, if properly signed and received
by the Company in time for the Annual Meeting, will be voted in accordance with
the instructions it contains. A stockholder may revoke the proxy at any time
prior to its use at the Annual Meeting by filing written notice of such
revocation with the Secretary of the Company at 200 Milik Street, Carteret, New
Jersey 07008, by submitting a later dated and properly executed proxy, or by
appearing at the Annual Meeting and giving the Secretary notice of your
intention to vote in person. Representatives of Mellon Investor Services will
tabulate the votes and act as inspectors of election.
YOU ARE REQUESTED TO COMPLETE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT
PROMPTLY IN THE ENVELOPE PROVIDED FOR THAT PURPOSE. Unless you indicate
otherwise in your proxy, the persons named as your proxies will vote FOR all of
the nominees for director, FOR approval of the EEP and FOR ratification of the
independent auditors. Although the Company does not presently know of any other
business to be presented at the meeting, should any other business properly come
before the meeting, the persons named as your proxies, to the extent permitted
by law, will have discretion to vote and will vote in accordance with their best
judgment.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of seven members. At
this Annual Meeting, seven directors are to be elected to hold office until the
next Annual Meeting of Stockholders and until their successors are elected and
qualified. All director nominees are currently directors of the Company and each
has consented to serve as director until the expiration of his term. If any of
them should decline or be unable to act as a director, the persons named in the
proxy will vote for such substitute nominee or nominees, as may be designated by
the Board, unless the Board reduces the number of directors accordingly.
NOMINEES
<Table>
<Caption>
DIRECTOR OF THE
NAME AGE POSITIONS AND OFFICE COMPANY SINCE
- ---- -------- -------------------- ---------------
William J. Begley.............. 59 Currently retired. Former Deputy Chairman at 2000
Wasserstein Perella Co., Inc., an investment
bank, and President of the firm's trading
division. He is currently Chairman Emeritus of
Dresdner Kleinwort
Wasserstein-Grantchester, Inc. Mr. Begley is
also a Director of the Bank of Somerset Hills.
James L. Donald(1)............. 48 Chairman of the Board, President and Chief 1996
Executive Officer ("CEO") of the Company since
October 1996. President of the Eastern Division
of Safeway, Inc., a supermarket chain, prior
thereto. Mr. Donald is a member of the Board of
Directors of Modell's Sporting Goods and Nash
Finch Company.
</Table>
3
<Page>
<Table>
<Caption>
DIRECTOR OF THE
NAME AGE POSITIONS AND OFFICE COMPANY SINCE
- ---- -------- -------------------- ---------------
Daniel H. Fitzgerald........... 49 Currently retired. Formerly, a Managing 2000
Director at Gleacher Natwest, an investment
bank, from 1996 to 2000 where he was head of
its High Yield Bond Department. Prior thereto,
Mr. Fitzgerald spent 14 years at Donaldson
Lufkin Jenrette, an investment bank, as
Managing Director--High Yield Sales.
Eugene M. Freedman............. 70 Senior Advisor and Director of Monitor Clipper 2000
Partners, Inc., a private equity firm, since
January 2000, and Senior Advisor of Monitor
Company Group Limited Partnership, an
international business strategy and consulting
firm which he joined in 1995. He was a Managing
Director and President of Monitor Clipper from
its foundation in 1997 until the end of 1999.
Until October 1994, and for more than five
years prior thereto, Mr. Freedman was a senior
partner of Coopers & Lybrand, where he served
as Chairman and Chief Executive Officer of
Coopers & Lybrand LLP, U.S., and as Chairman of
Coopers & Lybrand, International. Mr. Freedman
is currently a director of The Limited, Inc., a
NYSE listed company, Bernard
Technologies, Inc., e-Studio Live, Inc, J Net
Enterprises, Inc. and Outcome Sciences, Inc.
Robert G. Miller(1)............ 58 Chairman of the Board and Chief Executive 2000
Officer of Rite Aid Corporation, a drugstore
chain, since January 2000; Vice Chairman of
Kroger Corporation, a supermarket chain, from
May 1999 to December 1999; Chairman and Chief
Executive Officer of Fred Meyer, Inc., a
diversified retailer, prior thereto.
Mr. Miller is a member of the Board of
Directors of Scottish Power, Harrah's
Entertainment, Advance P.C.S., and the Jim
Pattison Group. Mr. Miller previously served on
the Board of Directors of the Company from
January 10, 1997 through March 6, 2000.
Frank G. Vitrano(1)............ 46 Executive Vice President, Chief Financial 2000
Officer and Treasurer of the Company since
January 2000; Senior Vice President, Chief
Financial Officer and Treasurer from September
1998 to January 2000, and Vice President and
Treasurer prior thereto.
</Table>
4
<Page>
<Table>
<Caption>
DIRECTOR OF THE
NAME AGE POSITIONS AND OFFICE COMPANY SINCE
- ---- -------- -------------------- ---------------
Steven L. Volla(1)............. 54 Currently retired. Formerly, Chairman of 2000
Primary Health Systems, Inc., a hospital
management company from June 1994 until
February 2001. From 1995 through the Plan
Effective Date, Mr. Volla was a Director of
Holdings. Mr. Volla is also a Director of Sun
Healthcare Group, Inc.
</Table>
- ------------------------
(1) Mr. Donald was Chairman of the Board of Directors and CEO of the Company and
Holdings, and Mr. Volla was a member of the Board of Directors of Holdings,
on the Petition Date. Mr. Miller resigned from the Board of Directors of the
Company and Holdings on March 6, 2000. Mr. Vitrano served as the Company's
Executive Vice President and Chief Financial Officer on the Petition Date.
The Plan of Reorganization was confirmed by the Court on September 7, 2000
and the Company emerged from Chapter 11 on the Plan Effective Date.
BOARD RECOMMENDATION
The Board unanimously recommends a vote FOR election of the above nominees
as directors.
INFORMATION REGARDING THE BOARD AND ITS COMMITTEES
The Company's Board of Directors met six times during the fiscal year ended
February 2, 2002 ("Fiscal 2001"). No incumbent director attended fewer than 75%
of the total number of meetings held by the Board and committees of the Board on
which he served.
The Company's Board of Directors has an Audit Committee and a Compensation
Committee. There is no nominating committee. During Fiscal 2001, the Audit
Committee held five meetings and the Compensation Committee met three times.
Messrs. Fitzgerald, Freedman (Chairman) and Volla serve on the Audit Committee,
and Messrs. Begley, Miller and Volla (Chairman) serve on the Compensation
Committee.
ROLE OF THE AUDIT COMMITTEE
The Audit Committee: (1) oversees financial and operational matters
involving accounting, internal and independent auditing, internal controls,
financial reporting, compliance and business ethics; (2) reviews areas of
potential significant financial risk to the Company; (3) recommends to the Board
each year an accounting firm to audit the consolidated financial statements of
the Company, and monitors the independence and performance of the independent
accounting firm; and (4) provides an avenue of communication among the
independent auditors, management, the internal auditing functions and the Board
of Directors.
AUDIT COMMITTEE REPORT(1)
The Audit Committee of the Board is responsible for providing independent,
objective oversight of the Company's financial and operational matters involving
accounting, internal and independent auditing, internal controls, financial
reporting, compliance and business ethics. The Audit Committee is composed of
three directors, each of whom is independent as defined by the NASD listing
standards.
- ------------------------
(1) This Report is not deemed filed with the SEC and shall not be deemed to be
incorporated by reference in any filing of the Company under the Securities
Act of 1933 or the Securities Exchange Act of 1934, by any general
incorporation language in any such filing, except to the extent that the
Company specifically incorporates the Report by reference in any such
filing.
5
<Page>
The Audit Committee operates under a written charter approved by the Board of
Directors. A copy of the charter is attached to this Proxy Statement as
Appendix A.
Management is responsible for the Company's internal controls and financial
reporting process. The independent auditors are accountable to the Audit
Committee and the Board of Directors and are responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with auditing standards generally accepted in the United States of
America and to issue a report thereon. The Audit Committee's responsibility is
to monitor and oversee these processes.
In connection with these responsibilities, the Audit Committee in fiscal
2001, reviewed the overall audit scope, plans and results of the audit
engagement and met with management and the independent auditors to review and
discuss the audited consolidated financial statements for the year ended
February 2, 2002. Prior to the filing of each requisite quarterly report with
the Securities and Exchange Commission ("SEC"), the Audit Committee reviewed any
significant issues arising out of the independent auditors quarterly review. The
Audit Committee also discussed and reviewed with the independent auditors all
communications required by generally accepted auditing standards, including the
matters required by Statement on Auditing Standards No. 61 (Communication with
Audit Committees). The Audit Committee also received written disclosures from
the independent auditors required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees). The Audit Committee
discussed with the independent auditors any relationships that may impact their
objectivity and independence, and satisfied itself as to the independent
auditors' independence. The Audit Committee also discussed with management as
well as the independent auditors and internal auditors the quality and adequacy
of the Company's internal controls and elicited recommendations for increases in
controls.
Based upon the Audit Committee's discussions with management and the
independent auditors, and the Audit Committee's review of the representations of
management and the independent auditors, the Audit Committee recommended that
the Board of Directors include the audited consolidated financial statements in
the Company's Annual Report on Form 10-K for the year ended February 2, 2002,
filed with the SEC. The Committee also recommended to the Board of Directors,
and the Board approved, subject to stockholder ratification, the selection of
the Company's independent auditors.
THE AUDIT COMMITTEE
Eugene M. Freedman (Chairman)
Daniel H. Fitzgerald
Steven L. Volla
ROLE OF THE COMPENSATION COMMITTEE
The Compensation Committee reviews and approves compensation elements such
as base salary, bonus awards, employment agreements and supplemental retirement
agreements for Company officers (no member of the Committee may be a member of
management or eligible for compensation other than as a director or consultant)
and grants stock options to officers and employees of the Company under the EEP.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Company's Compensation Committee is a current or former
officer or employee of the Company. In addition, there are no compensation
committee interlocks between Pathmark and other entities involving Pathmark
executive officers and Pathmark Board members who serve as executive officers of
such other entities.
6
<Page>
BOARD COMPENSATION AND BENEFITS
RETAINER AND FEES. Non-employee directors receive retainers in quarterly
increments based on an annualized rate of $22,000 a year. Directors also receive
$1,500 for each Board and $750 for each committee meeting attended. In addition,
non-employee directors also receive a retainer of $750 per year for serving as a
member of a committee ($1,500 for the Committee Chairman). Directors who are
also employees of the Company, such as Messrs. Donald and Vitrano, receive no
additional compensation for service on the Board.
OPTIONS. Each member of the Board who has not been an employee of the
Company or any of its subsidiaries for at least one year prior to the date of
grant automatically receives a NON-QUALIFIED option to purchase (i) 15,000
shares of the Common Stock on the date that a non-employee director is initially
elected or appointed to the Board, and (ii) 5,000 shares on the date of each
Annual Meeting of Stockholders beginning in 2002, pursuant to the Company's
amended 2000 Non-Employee Directors Equity Incentive Plan (the "Directors
Plan"). The option price for each option granted is the fair market value of the
Common Stock on the date of grant. Options are generally exercisable twelve
months from the date of grant (subject to vesting and the individual serving as
director for the duration of that period), vest in three equal annual
installments beginning on the first anniversary of the grant date, and expire
five years after the date of grant (subject to earlier termination if the
director ceases to serve as a director).
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the amount of shares of Common Stock
beneficially owned (as of April 5, 2002 unless otherwise indicated) by current
directors of the Company and the named executive officers reported in the
"Executive Compensation--Summary Compensation Table" below, and all directors
and executive officers as a group. Percentage of ownership is calculated using
the number of outstanding shares as of the Record Date, plus the number of
shares the individual or group have the right to acquire within 60 days, as
indicated in the notes following the table.
<Table>
<Caption>
SHARES OF
COMMON STOCK PERCENTAGE
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF OWNERSHIP
- ---------------- --------------------- ------------
Directors:
James L. Donald........................................... 299,957 1%
Frank G. Vitrano.......................................... 93,520 *
William J. Begley......................................... 5,000 *
Daniel H. Fitzgerald...................................... 5,000 *
Eugene M. Freedman........................................ 5,000 *
Robert G. Miller.......................................... 5,000 *
Steven L. Volla........................................... 5,000 *
Other Named Executive Officers:
Robert J. Joyce........................................... 81,850 *
Eileen R. Scott........................................... 89,000 *
Harvey M. Gutman.......................................... 19,572 *
All Directors and Officers as group (14 persons)............ 664,242 2.2
</Table>
- ------------------------
* Less than 1% of outstanding shares.
(1) Includes shares which directors and executive officers have, or will have,
within 60 days, the current right to acquire upon exercise of options under
the EEP or Directors Plan, as applicable, Mr. Donald, 247,500 shares;
Ms. Scott and Mr. Vitrano, 87,500 shares each; Mr. Joyce, 81,250
7
<Page>
shares; Mr. Gutman, 19,000 shares; Messrs. Begley, Fitzgerald, Freedman,
Miller and Volla, 5,000 shares each; and all directors and executive
officers as a group, 602,250 shares. Also includes with respect to
Mr. Vitrano, 202 shares of Common Stock which Mr. Vitrano has a right to
acquire upon the exercise of 202 warrants to purchase shares of Common Stock
expiring September 19, 2010. The exercise price of the Warrants is $22.31
per share.
BY OTHERS
Management of the Company knows of no person, except as set forth below, who
is the beneficial owner of more than 5% of the Company's issued and outstanding
Common Stock as of April 5, 2002.
<Table>
<Caption>
NAME AND ADDRESS SHARES OF COMMON STOCK PERCENTAGE OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED OWNERSHIP
- ------------------- ---------------------- -------------
FMR Corp.................................................... 8,070,081(1) 26.8
82 Devonshire Street
Boston, MA 02109
Daruma Asset Management, Inc................................ 1,510,200(2) 5.0
60 E. 42nd Street
New York, NY 10165
Northeast Investors Trust................................... 1,600,398(3) 5.3
50 Congress St., Suite 1000
Boston, MA 02109
</Table>
- ------------------------
(1) Based on the Schedule 13G/A filed with the SEC on February 14, 2002 for the
calendar year ended December 31, 2001 by FMR Corp. reporting sole
dispositive power as to all shares shown and sole voting power as to 527,262
of such shares. Shares of Common Stock Beneficially Owned include 1,638,362
shares of Common Stock which the beneficial owner has a right to acquire
upon exercise of 1,638,362 Warrants to purchase Common Stock expiring
September 19, 2010. The exercise price of the Warrants is $22.31 per share.
(2) Based on Schedule 13G filed with the SEC on January 29, 2002 for the
calendar year ended December 31, 2001 by Daruma Asset Management, Inc.
reporting sole dispositive power as to all shares shown and sole voting
power as to 921,800 of such shares.
(3) Based on Schedule 13G/A filed with the SEC on February 7, 2002 by Northeast
Investors Trust reporting sole dispositive power and sole voting power as to
all shares shown.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the directors
and executive officers of the Company and persons who own more than ten percent
of a registered class of the Company's equity securities ("Reporting Persons")
to file with the SEC initial reports of ownership and reports of changes in
ownership of Common Stock. Specific due dates for these reports have been
established, and the Company is required to disclose in this proxy statement any
failure to file by these dates during Fiscal 2001. Based solely on a review of
the copies of such reports furnished to the Company, or written representations
from our Reporting Persons, the Company believes all of these requirements were
satisfied during Fiscal 2001.
8
<Page>
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company during
the last three fiscal years to the Chief Executive Officer and the four highest
paid executive officers of the Company in Fiscal 2001:
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
LONG TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION ---------------------------------
----------------------------------------- RESTRICTED SECURITIES
NAME AND SALARY BONUS OTHER ANNUAL STOCK UNDERLYING
PRINCIPAL POSITION YEAR ($) ($)(1) COMPENSATION($)(2) AWARDS($)(3) OPTIONS/SARS(#)(4)
- ------------------ -------- -------- --------- ------------------ ------------ ------------------
James L. Donald............. 2001 671,154 595,434 -- -- 500,000
Chairman, President 2000 611,539 2,152,885 843,750 1,193,941 490,000
and Chief Executive Officer 1999 600,000 750,000 1,125,000 -- --
Robert J. Joyce............. 2001 255,000 134,965 -- -- 100,000
Executive Vice President-- 2000 242,234 240,000 2,328 -- 225,000
Administration 1999 231,749 173,811 2,195 -- --
Eileen R. Scott............. 2001 295,000 156,136 -- -- 100,000
Executive Vice President-- 2000 264,641 280,000 -- -- 250,000
Merchandising & Distribution 1999 231,075 173,306 -- -- --
Frank G. Vitrano............ 2001 295,000 156,136 -- -- 100,000
Executive Vice President and 2000 275,537 280,000 -- -- 250,000
Chief Financial Officer 1999 209,272 174,825 -- -- --
Harvey M. Gutman............ 2001 225,638 95,728 -- -- 20,000
Senior Vice President-- 2000 222,750 165,226 4,077 -- 56,000
Retail Development 1999 213,665 117,516 3,841 -- --
<Caption>
ALL OTHER
NAME AND COMPENSATION
PRINCIPAL POSITION ($)(5)
- ------------------ ------------
James L. Donald............. 9,068
Chairman, President 8,722
and Chief Executive Officer 8,422
Robert J. Joyce............. 6,031
Executive Vice President-- 21,950
Administration 5,600
Eileen R. Scott............. 6,112
Executive Vice President-- 5,950
Merchandising & Distribution 5,600
Frank G. Vitrano............ 6,112
Executive Vice President and 5,950
Chief Financial Officer 5,600
Harvey M. Gutman............ 5,981
Senior Vice President-- 33,950
Retail Development 5,600
</Table>
- --------------------------
(1) The amounts with respect to Fiscal 2001 and Fiscal 1999 in this column
represent payments made pursuant to the Company's Executive Incentive Plan.
Amounts with respect to Fiscal 2000 were paid pursuant to retention
agreements approved as part of the Plan of Reorganization and, with respect
to Mr. Donald, pursuant to the Donald Agreement (as hereinafter defined).
(2) Represents (i) with respect to Mr. Donald, forgiveness of loan payments due
to the Company of $1,125,000 in 1999 and $843,750 in 2000; and (ii) with
respect to Messrs. Joyce and Gutman, payments as reimbursement for interest
paid to the Company for a loan, in each case of under $60,000 and includes
an amount sufficient to pay any income taxes resulting therefrom after
taking into account the value of any deductions available as a result of the
payment of such interest and taxes.
(3) On October 3, 2000, Mr. Donald was granted an award of 98,510 restricted
shares of Common Stock (the "Award"). The Award vested on January 2, 2002.
Mr. Donald surrendered 46,053 shares to the Company to satisfy tax
withholding obligations upon vesting. As of the Record Date, Mr. Donald held
52,457 of such shares and the value of such shares as of the end of Fiscal
2001 was $1,219,101.
(4) No Stock Appreciation Rights (SARs) have been granted and none are
outstanding. These are options for shares of Common Stock issued pursuant to
the EEP.
(5) Represents in Fiscal 2001 (i) with respect to Mr. Donald, payments of $3,622
for a term life insurance premium on Mr. Donald's life and the Company's
matching contribution to the Company's 401(k) Plan (the "Savings Plan");
(ii) with respect to Ms. Scott, Mr. Vitrano, Mr. Joyce and Mr. Gutman, the
Company's matching contribution under the Savings Plan.
9
<Page>
FISCAL YEAR OPTION GRANTS
The following table sets forth the number of options granted and the
estimated grant date present value for the named executive officers during the
fiscal year ended February 2, 2002:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<Table>
<Caption>
NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS/SARS
OPTIONS/SARS GRANTED TO EXERCISE OR GRANT DATE
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME (#)(1) FISCAL YEAR ($/SH) DATE ($)(2)(3)
- ---- ------------ ------------ ----------- ---------- -------------
J. Donald.......................... 500,000 31.2% 17.25 3/29/11 2,685,000
R. Joyce........................... 100,000 6.2% 17.25 3/29/11 537,000
E. Scott........................... 100,000 6.2% 17.25 3/29/11 537,000
F. Vitrano......................... 100,000 6.2% 17.25 3/29/11 537,000
H. Gutman.......................... 20,000 1.2% 17.25 3/29/11 107,400
</Table>
- ------------------------
(1) No Stock Appreciation Rights (SARs) were granted in Fiscal 2001.
Non-qualified stock options and Incentive Stock Options were granted in
Fiscal 2001 pursuant to the EEP at an option price equal to the fair market
value of the stock at the date of grant. The option price may be paid by
delivery of cash or already owned shares, subject to certain conditions. The
number of options exercisable increases in 25% increments after each
successive anniversary of the date of grant. Options may become exercisable
sooner in the event of death, involuntary termination, disability, or
retirement or in the event of a change in control. The options have a term
of ten years, subject to earlier expiration in the event of termination of
employment.
(2) Grant date present value estimates were made using a variation of the
Black-Scholes pricing model. The following factors and assumptions were
used:
<Table>
Option and market price (fair market value on grant date)... $17.25
Expected Life of option..................................... 4 years
Risk free rate of return.................................... 4.54%
Dividend yield.............................................. 0%
Volatility.................................................. 30.5%
</Table>
(3) Although the Black-Scholes pricing model is widely used, the value of stock
options cannot be guaranteed because of the wide range of assumptions and
variations which may occur from time to time. No assumptions made in
connection with this table are intended to represent a forecast of possible
future appreciation of the Common Stock, stockholder return, or performance
of the Company.
OPTION EXERCISES AND YEAR-END OPTION VALUES
The table below shows the number of exercisable and unexercisable
in-the-money options and their values at fiscal year end. No Stock Appreciation
Rights (SARs) have been granted. An option is in-the-money if the fair market
value of the underlying securities exceeds the exercise price of the option.
10
<Page>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<Table>
<Caption>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES VALUE AT FY-END(#) AT FY-END($)(2)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
J. Donald......................... -- -- 122,500 867,500 1,139,250 6,412,750
R. Joyce.......................... -- -- 56,250 268,750 523,125 2,168,375
E. Scott.......................... -- -- 62,500 287,500 581,250 2,342,750
F. Vitrano........................ -- -- 62,500 287,500 581,250 2,342,750
H. Gutman......................... -- -- 14,000 62,000 130,200 510,400
</Table>
- ------------------------
(1) Represents the difference between the exercise price and the fair market
value determined on the date of exercise; no options were exercised in
Fiscal 2001.
(2) Values were calculated by subtracting the exercise price of the option from
the closing market price of the Common Stock at February 1, 2002 ($23.24),
and multiplying the result by the respective number of shares relating to
in-the-money options.
PENSION PLANS
Pension benefits are provided to all nonunion employees (including executive
officers) of the Company under the Pension Plan, a qualified defined benefit
pension plan, and the Excess Benefit Plan (collectively, the "Pension Plans").
The Excess Benefit Plan provides benefits to certain employees, including those
named in the Summary Compensation Table, that cannot be paid under the qualified
Pension Plan due to Internal Revenue Code limitations on the amount of
compensation that may be recognized and the amount of benefits that may be paid.
The table below illustrates the aggregate annual pension benefits payable under
the Pension Plans.
PENSION PLAN TABLE
<Table>
<Caption>
YEARS OF SERVICE
------------------------------------------------------
FINAL AVERAGE PAY 10 15 20 25 30 OR MORE
----------------- -------- -------- -------- -------- ----------
300,000........ 40,000 60,000 80,000 100,000 120,000
350,000........ 46,667 70,000 93,333 116,667 140,000
400,000........ 53,333 80,000 106,667 133,333 160,000
450,000........ 60,000 90,000 120,000 150,000 180,000
500,000........ 66,667 100,000 133,333 166,667 200,000
550,000........ 73,333 110,000 146,667 183,333 220,000
600,000........ 80,000 120,000 160,000 200,000 240,000
650,000........ 86,667 130,000 173,333 216,667 260,000
700,000........ 93,333 140,000 186,667 233,333 280,000
750,000........ 100,000 150,000 200,000 250,000 300,000
800,000........ 106,667 160,000 213,334 266,668 320,000
850,000........ 113,333 170,000 226,666 283,333 340,000
900,000........ 120,000 180,000 240,000 300,000 360,000
950,000........ 126,667 190,000 253,334 316,668 380,000
1,000,000...... 133,334 200,000 266,668 333,335 400,000
1,100,000...... 146,666 220,000 293,332 366,665 440,000
1,200,000...... 160,000 240,000 320,000 400,000 480,000
1,300,000...... 173,334 260,000 346,668 433,335 520,000
1,400,000...... 186,666 280,000 373,332 466,665 560,000
1,500,000...... 200,000 300,000 400,000 500,000 600,000
1,600,000...... 213,332 320,000 426,664 533,330 640,000
1,700,000...... 226,666 340,000 453,332 566,669 680,000
</Table>
11
<Page>
The retirement benefit for individuals with 30 years of credited service is
40% of the individual's average compensation during his or her highest five
compensation years in the last ten years before retirement, less one-half of the
social security benefit received. The retirement benefit is reduced by 3.33% for
every year of credited service less than 30. Covered compensation under the
Pension Plans includes all cash compensation subject to withholding, plus
amounts deferred under the Savings Plan pursuant to Section 401(k) of the
Internal Revenue Code of 1986, as amended, and as to individuals identified in
the Summary Compensation Table, would be the amount set forth in that table
under the headings "Salary" and "Bonus". The above table shows the estimated
annual benefits an individual would be entitled to receive if normal retirement
at age 65 occurred in January 2002 after the indicated number of years of
covered employment and if the average of the participant's covered compensation
for the five years out of the last ten years of such employment yielding the
highest such average equaled the amounts indicated. The estimated annual
benefits are based on the assumption that the individual will receive retirement
benefits in the form of a single life annuity (married participants may elect a
joint survivorship option) and are before applicable deductions for social
security benefits in effect as of January 2002. As of December 31, 2001, the
following individuals had the number of years of credited service indicated
after their names: Mr. Donald, 5.2; Mr. Vitrano, 24.2; Mr. Joyce, 30;
Ms. Scott, 26.8, and Mr. Gutman, 25.8. As described below in "Compensation Plans
and Arrangements--Supplemental Retirement Agreements", each of the named
executive officers is a party to a Supplemental Retirement Agreement with
Pathmark.
COMPENSATION PLANS AND ARRANGEMENTS
SUPPLEMENTAL RETIREMENT AGREEMENTS. The Company has entered into
supplemental retirement agreements with Messrs. Vitrano, Gutman, Joyce,
Ms. Scott and Mr. Donald (the "SERPs"), which provide that said executive
officers will be paid upon termination of employment after attainment of age 60
a supplemental pension benefit in such an amount as to assure him or her an
annual amount of pension benefits payable under the SERP, the Pension Plans and
certain other plans of the Company, including Savings Plan balances as of
March 31, 1983, (A) with respect to Ms. Scott and Messrs. Gutman, Joyce and
Vitrano, equal to (i) 30% of his or her final average "Compensation" based on
ten years of service with the Company and increasing 1% per year for each year
of service thereafter, to a maximum of 40%, of his or her final average
Compensation (as defined in the Supplemental Retirement Agreement) based on
20 years of service, or (ii) $250,000 ($150,000 with respect to Mr. Gutman),
whichever is less, and (B) with respect to Mr. Donald, equal to (i) 30% of his
final average Compensation based on ten years of service with the Company and
increasing 2% per year for each year of service thereafter, to a maximum of 50%
of his final average Compensation based on 20 years of service, or
(ii) $600,000, whichever is less. With respect to Mr. Donald's SERP, seven years
have been added to his actual years of service with the Company. "Compensation"
includes base salary and bonus payments, but excludes Company matching
contributions under the Savings Plan. If the executive leaves the Company prior
to completing 20 years of service (other than for disability), the supplemental
benefit would be reduced proportionately. Should the executive die, the
surviving spouse would be entitled to a benefit equal to two-thirds of the
benefit to which the executive would have been entitled, provided the executive
has attained at least ten years of service with the Company.
EMPLOYMENT AGREEMENTS
EMPLOYMENT AGREEMENT BETWEEN PATHMARK AND JAMES L. DONALD. On October 8,
1996 (the "Effective Date"), the Company entered into an employment agreement
with Mr. Donald pursuant to which Mr. Donald was elected Chairman, President and
Chief Executive Officer for a term of five years, which agreement, as amended on
May 9, 1999, July 1, 2000 and March 29, 2001, was extended as of the Plan
Effective Date (the "Donald Agreement") until October 8, 2005. The Donald
Agreement provides Mr. Donald with a minimum annual base salary of $700,000 and
provides that he shall participate in the Pathmark Executive Incentive Plan,
under which Mr. Donald may earn an annual
12
<Page>
bonus of up to 125% (100% beginning in Fiscal 2002) of his annual salary based
on performance targets that are set by the Compensation Committee. Under the
Donald Agreement, Mr. Donald is guaranteed an annual bonus in each year during
the term of the Donald Agreement of at least 25% of his base salary. The Donald
Agreement provides Mr. Donald with the right to defer up to 50% of his annual
bonus and salary, which shall be held in a grantor trust established by the
Company. During the term of the Donald Agreement, in addition to the base
salary, bonus eligibility and other customary annual benefits and perquisites
that the Company generally provides to its executive officers, the Company will
provide Mr. Donald with a company car and term life insurance in the amount of
$3.2 million.
In the event of Mr. Donald's Involuntary Termination, Pathmark will pay him
(w) the full amount of any accrued but unpaid base salary, plus a cash payment
(calculated on the basis of the base salary then in effect) for all unused
vacation time which Mr. Donald may have accrued as of the date of Involuntary
Termination; (x) the amount of any earned but unpaid annual bonus for any Fiscal
Year of Pathmark ended on or prior to the date of Involuntary Termination;
(y) any unpaid reimbursement for business expenses; and (z) a severance amount
equal to four times Mr. Donald's annual rate of salary, based upon the annual
rate then in effect immediately prior to the date of termination, payable in
monthly installments over 24 months. In addition, in the event of an Involuntary
Termination, Mr. Donald and his eligible dependents shall continue to be
eligible to participate in the medical, dental, health and life insurance plans
applicable to Mr. Donald immediately prior to the Involuntary Termination on the
same terms and conditions in effect immediately prior to such Involuntary
Termination until the earliest to occur of (i) the end of the 24-month period
after the date of termination; (ii) the date Mr. Donald becomes eligible to be
covered under the benefit plans of a subsequent employer, and (iii) the date
Mr. Donald breaches any of the protective covenants described below. During the
30-day period beginning six months after a change in control, Mr. Donald shall
be eligible to resign from the Company for no stated reason and receive all the
amounts listed in clauses (w), (x), (y) and (z) above. Any such resignation in
such 30-day period following a change in control shall be treated as an
Involuntary Termination for all purposes of the Donald Agreement.
In the event Mr. Donald voluntarily resigns his employment at any time
during the term, the Company shall pay him only the amounts described in clauses
(w), (x) and (y) above.
Although, in the event of an Involuntary Termination, Mr. Donald has no duty
to mitigate the severance amount by seeking new employment, any severance amount
payable during the second year of the severance period shall be reduced by any
compensation or benefits Mr. Donald earns in connection with any employment by
another employer.
The Donald Agreement includes protective covenants that prohibit Mr. Donald
from engaging (i) in any activity in competition with Pathmark, or any parent or
subsidiary thereof, or (ii) in soliciting employees or customers of Pathmark, or
any parent or subsidiary thereof, during his term of employment and up to two
years thereafter. The Donald Agreement also includes a confidentiality clause
which prohibits Mr. Donald from disclosing any confidential information
regarding Pathmark.
OTHER EXECUTIVE EMPLOYMENT AGREEMENTS
As of February 1, 1999, Pathmark entered into employment agreements with
each of Ms. Scott and Messrs. Vitrano, Joyce and Gutman. Each employment
agreement has a two-year term which renews automatically each year for an
additional one year unless proper notice is provided by either party to the
other of such party's desire to terminate the agreement. Each employment
agreement provides for a certain minimum level of compensation ($300,000 per
annum base salary for Ms. Scott and Mr. Vitrano; $260,000 per annum base salary
for Mr. Joyce; and $225,600 for Mr. Gutman), and benefits.
13
<Page>
Each of the employment agreements also provide that each executive shall be
entitled an annual bonus opportunity of up to 75% (60% for Mr. Gutman) of his or
her annual base salary and shall be provided the opportunity to participate in
pension and welfare plans, programs and arrangements that are generally made
available to executives of Pathmark or as may be deemed appropriate by the
Compensation Committee. Beginning in Fiscal 2002, the annual bonus opportunity
for each executive will be reduced to 60% (45% for Mr. Gutman) of his or her
annual base salary.
In the event of the Involuntary Termination of any of the four above named
executives, that executive is entitled to receive his or her base salary and
continued coverage under health and insurance plans for a period of two years
from the date of such termination or resignation.
The employment agreements contain agreements by the executives not to
compete with Pathmark as long as they are receiving payments under the
employment agreement.
As used in the Donald Agreement and the other executive employment
agreements, "Involuntary Termination" means termination of the executive's
employment by Pathmark other than for Cause or termination by the executive for
Good Reason. "Cause" is defined generally as a felony conviction, perpetration
by the executive of a material dishonest act or fraud against Pathmark, material
breach or willful and repeated failure to perform material duties of employment.
"Good Reason" is defined generally as demotion, reduction in compensation,
unapproved relocation (except for Mr. Donald), material breach of the employment
agreement by Pathmark, and failure to extend the term of the employment
agreement (except for Mr. Donald).
SALE AGREEMENTS
The Company has entered into agreements with each of the named executive
officers, providing for the payment under specified conditions of a sale bonus.
MR. DONALD'S AGREEMENT. Mr. Donald will become entitled to receive a sale
bonus in the event that an event that could result in a change in control
(defined as a "Triggering Event" in Mr. Donald's sale bonus agreement) occurs on
or before September 19, 2002 and a change in control contemplated by such
Triggering Event occurs thereafter. The amount of the sale bonus shall be equal
to 0.0043 multiplied by an amount equal to the sum of the aggregate fair market
value of any securities issued and any other non-cash consideration delivered,
and any cash consideration paid to the stockholders of the Company in connection
with a change in control, plus the amount of all indebtedness of the Company
which is assumed or acquired by any purchaser in connection with a change in
control or retired or defeased in connection with such change in control (which
amount is defined as the "Aggregate Consideration"), offset by the value
received in connection with his stock options that are redeemed for cash or
exchanged for other securities in connection with such change in control.
JOYCE, SCOTT, VITRANO AND GUTMAN SALE AGREEMENTS. Under the same
circumstances which would entitle Mr. Donald to a sale bonus, the Executives
will also become entitled to receive a sale bonus. The Executives will become
entitled to receive a sale bonus in the event that a Triggering Event (as
defined in each of their sale bonus agreements) occurs on or before
September 19, 2002 and a change in control contemplated by such Triggering Event
occurs thereafter. The amount of the sale bonus will be equal to a specified
number (.002 for Mr. Vitrano; .001 for Ms. Scott; and .00075 for Messrs. Joyce
and Gutman, respectively), multiplied by an amount equal to the Aggregate
Consideration, offset by the value received in connection with their stock
options that are redeemed for cash or exchanged for other securities in
connection with such change in control.
As used in the sale bonus agreements, a "Change in Control" is generally
defined to include a variety of events, including significant changes in the
stock ownership of Pathmark, changes in Pathmark's Board of Directors, certain
mergers and consolidations of Pathmark, and the sale or disposition of all or
substantially all of the consolidated assets of Pathmark.
14
<Page>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION(1)
OVERVIEW AND PHILOSOPHY
The Compensation Committee is composed entirely of non-employee directors
and is responsible for developing and making recommendations to the Board with
respect to the Company's executive compensation policies. The Compensation
Committee, pursuant to authority delegated by the Board of Directors, determines
on an annual basis the compensation to be paid to the Chief Executive Officer
and all executive vice presidents and administers the Executive Incentive Plan
and the Equity Plan. The Compensation Committee is comprised solely of members
who are "outside directors" under Section 162(m) of the Internal Revenue Code.
The objectives of the Company's executive compensation program are to:
- Provide compensation that will attract and retain superior talent and
reward individual performance.
- Support the achievement of the Company's strategic business plan and short
and long-term financial and operating goals which, in turn, will maximize
stockholder value.
- Align the executive officers' interest with the interests of the Company
by placing a portion of pay at risk, with payout dependent upon corporate
performance.
The executive compensation program is designed to provide an overall level
of compensation opportunity that is above the median level of the market
contingent on achieving superior levels of performance. During Fiscal 2001, the
Committee, after studying survey data with respect to executive compensation,
concluded that the appropriate compensation level for the Company's most senior
executive officers should be set at: base salary--50th percentile of market
consensus; short-term incentive--75th percentile of market consensus; and
long-term incentive--75th percentile of market consensus.
Competitive pay levels are determined by reviewing compensation levels of
food retail and supermarket industries, as well as with a broader group of
retail companies of comparable size and complexity. The Company uses survey data
from several compensation consulting firms to determine these pay levels.
EXECUTIVE OFFICER COMPENSATION FOR FISCAL 2001
The Company's executive officer compensation program is comprised of base
salary, annual cash incentive compensation, long-term incentive compensation in
the form of stock options, and various benefits, including medical and pension
plans generally available to non-union full-time associates of the Company.
BASE SALARY
Salary levels for executive officers are determined by:
- evaluating each position's responsibilities and accountabilities, as
compared to other positions within the Company, and
- comparing to salaries at companies in the food retail and supermarket
industries and at other comparable retail companies as previously
described.
- ------------------------
(1) This Report is not deemed filed with the SEC and shall not be determined to
be incorporated by reference in any filing of the Company under the
Securities Act of 1933 or the Securities Exchange Act of 1934, by any
general incorporation language in any such filing, except to the extent that
the Company specifically incorporates the Report by reference in any such
filing.
15
<Page>
Each year, a formal performance review is conducted and salary increases are
granted to reward performance under the Company's "Pay for Performance" program.
Increases to salary are influenced by 1) individual performance against goals;
2) an executive's position within his/her established salary range, and
3) budgetary guidelines.
These salary increase guidelines are set each year, taking into account
published salary planning information from compensation consultants, economic
data available from the Bureau of Labor Statistics, surveys of selected food
retail and supermarket chains with whom we routinely share compensation data,
competitive position against the market, and expected Company financial
performance.
To determine increases to the salaries of certain executive officers, the
Compensation Committee follows the "Pay for Performance" concept and considers
changes in responsibilities and any equitable issues that may exist.
ANNUAL INCENTIVE COMPENSATION
The Executive Incentive Plan ("EIP") is the Company's annual incentive
program for executive officers. The purpose of the plan is to provide a direct
financial incentive in the form of an annual cash award to executives who
achieve pre-established individual performance goals and/or the Company's
financial goals. Goals for Company and business unit performance are set near
the beginning of each fiscal year and, with respect to Fiscal 2001, were
measured based on Earnings Before Interest, Taxes, Depreciation, Amortization
and LIFO charges ("EBITDA"), same-store sales targets and personal goals.
Target incentive awards for executives in Fiscal 2001 ranged from 50% to
125% of base salary and were set at a competitive level as previously discussed
and depend on the level of each position based on an evaluation of its
responsibilities and accountabilities and its contribution to Company results.
For Fiscal 2001, 90% of an eligible executive's maximum bonus opportunity was
allocated to the Company's performance against predetermined financial goals and
10% was allocated to the executive's personal goals. Performance against the
predetermined goals was measured after the end of the year, and the amount of
the executive's bonus for that year was determined on the basis of such measured
performance as a percentage of the maximum potential bonus.
Based on performance for Fiscal 2001, the Compensation Committee approved
bonus payments to eligible executives, including Mr. Donald, totaling
approximately 70.6% of the maximum bonus opportunity.
STOCK OPTION PROGRAM
Long-term incentives are intended to closely align shareholder and executive
interests through the achievement of the Company's strategic business plan.
Currently, long-term incentives are granted in the form of stock options under
the Equity Plan. Under the plan, the Committee may award stock options, stock
appreciation rights, stock awards, restricted stock units, and performance units
which have terms not to exceed ten years and are granted at no less than the
fair market value of Pathmark common stock on the date of the award grant. Stock
options granted during Fiscal 2001 were part of the Compensation Committee's
annual review and these option grants were made at levels which the Compensation
Committee determined to be appropriate long-term equity based incentives to such
executives. In determining the specific levels of individual option grants for
Fiscal 2001, the Compensation Committee considered a number of factors,
including the executive's position, responsibilities, salary and performance
levels, projected stock option values and long-term compensation practices for
both grocery and non-grocery companies.
16
<Page>
CHIEF EXECUTIVE OFFICER COMPENSATION
The fiscal compensation for Mr. Donald is set forth in his employment
agreement (the "Donald Agreement"). The compensation elements under the Donald
Agreement include base salary and bonus. These compensation elements were
extensively negotiated between Mr. Donald and the Board prior to his employment
with the Company. In 2001, the Compensation Committee, after taking into account
the fact that Mr. Donald had not had an increase in base salary in his five-year
tenure with the Company, the performance of the Company through the
restructuring and its emergence therefrom and where his base salary fell with
respect to the market consensus data, the Compensation Committee set
Mr. Donald's 2001 base salary at a rate of $700,000 per annum.
BONUS
Mr. Donald received a bonus of $595,434, which was earned in accordance with
the EIP targets set for Fiscal 2001
LONG-TERM INCENTIVES
The long-term incentives for Mr. Donald consists of stock options.
In Fiscal 2001, Mr. Donald received a stock option to purchase 500,000
shares of Pathmark common stock. The stock option was granted at fair market
value and consists of nonqualified and incentive stock options. The stock option
grant is intended to provide Mr. Donald with an incentive to enhance stockholder
equity value and to remain employed by the Company.
SECTION 162(m) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code disallows a deduction for
federal income tax purposes by public corporations for compensation paid in
excess of $1,000,000 in any year to a "covered employee" except under certain
circumstances, including the attainment of objective "performance-based" goals.
"Covered employees" are defined as the CEO and the other four most highly
compensated executive officers of a company. It is the Company's policy to
qualify all compensation paid to its top executives, in a manner consistent with
the Company's compensation policies, for deductibility under Section 162(m) in
order to maximize the Company's income tax deductions. However, this policy does
not rule out the possibility that compensation may be approved that may not
qualify for the compensation deduction, if in light of all applicable
circumstances it would be in the best interests of the Company for such
compensation to be paid.
THE COMPENSATION COMMITTEE
Steven L. Volla (Chairman)
William J. Begley
Robert G. Miller
17
<Page>
PERFORMANCE GRAPH(1)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Dollars
<Table>
<Caption>
9/28/00 2/21/01 5/4/01 8/3/01 11/2/01 2/1/02
PATHMARK STORES, INC. 100 139.26 159.58 208.16 198.86 194.67
S&P GROUP INDEX 100 95.45 87.56 85.16 74.78 80.04
S&P 500 INDEX 100 114.58 122.27 115.74 106.67 97.77
</Table>
<Table>
<Caption>
9/28/00 2/02/01 5/04/01 8/03/01 11/02/01 2/01/02
-------- -------- -------- -------- -------- --------
Pathmark.................................... 100.00 139.26 159.58 208.16 198.86 194.67
S&P 500 Index............................... 100.00 95.45 87.56 85.16 74.78 80.04
S&P Food Retail Index....................... 100.00 114.58 122.27 115.74 106.67 97.77
</Table>
The above graph compares the cumulative total stockholder return on Common
Stock (based on its market price) since September 28, 2000, the date Pathmark's
common shares began trading on the Nasdaq Stock Market, through February 2,
2002, with the Standard & Poor's 500 Stock Index ("S&P 500") and the Standard &
Poor's Retail (Food Chains) Index for the same period. The graph assumes:
(1) $100 invested on September 28, 2000, and (2) that all dividends have been
reinvested.
Stock price performance shown on the graph is not necessarily indicative of
future price performance and in no way reflects the Company's forecast of future
financial performance.
- ------------------------
(1) This performance graph is not deemed filed with the SEC and shall not be
deemed to be incorporated by reference in any filing of the Company under
the Securities Act of 1933 or the Securities Exchange Act of 1934, by any
general incorporation language in any such filing, except to the extent that
the Company specifically incorporates the performance graph by reference in
any such filing.
18
<Page>
PROPOSAL 2
APPROVAL OF AMENDMENTS TO THE PATHMARK STORES, INC.
2000 EMPLOYEE EQUITY PLAN
At the Annual Meeting, stockholders are being asked to approve amendments to
the EEP. The EEP previously received stockholder approval before the Company
became public in 2000. The EEP, as amended, will specify performance criteria
and limits for certain grants. Approval of the amendments is being recommended
to preserve the company's federal income tax deduction for compensation paid to
its chief executive officer and its for other most highly compensated executive
officers. Section 162(m) of the Internal Revenue Code of 1986, as amended,
limits the federal income tax deduction for compensation paid to the chief
executive officer and each of the for other most highly compensated executive
officers of a publicly held corporation to $1 million per fiscal year, with
exemption for certain performance-based compensation made under qualifying
plans. Pursuant to the requirements of Section 162(m) and the corresponding
regulations, the company is submitting the amendments to the EEP for approval by
stockholders in order to be able to take advantage of the exemption provided
under Section 162(m).
DESCRIPTION OF THE EEP
The following information includes summaries of certain provisions of the
EEP and the amendments. This information does not purport to be complete and is
qualified in its entirety by reference to the provisions of the EEP, as amended,
a copy of which is attached as Appendix B to the Proxy Statement.
PURPOSE AND SCOPE OF THE EEP
The purposes of the EEP are to attract, retain and motivate key employees of
the Company, to compensate them for their contributions to the growth and
profits of the Company and to encourage ownership by them of Common Stock.
The EEP is administered by the Compensation Committee. The Compensation
Committee has broad authority to determine who should receive awards under the
plan and to interpret the terms of the plan generally. Once the Compensation
Committee makes a determination with regard to the EEP, that determination is
final and binding on the Company and any person who has received an award under
the EEP. Subject to adjustments that may be required due to changes in the
Company's corporate structure, up to 5,164,118 shares of Common Stock may be
issued pursuant to awards under the EEP.
PERSONS ELIGIBLE FOR AWARDS UNDER THE EEP
The Compensation Committee may make awards under the EEP to any individual
who is an: (i) officer or other key employee of the company; (ii) employee of
joint ventures, partnerships or similar business organizations in which the
company has a direct or indirect equity interest; or (iii) individual who
provides services to any similar joint ventures or business organizations in
which the company may participate in the future. Members of the Compensation
Committee are expressly precluded from receiving any award under the EEP.
AWARDS IN GENERAL
Awards under the Plan may consist of stock options, stock appreciation
rights, stock awards, restricted stock units, performance units or other awards.
The terms and provisions of an award are set forth in a written award agreement,
the form and terms of which are approved by the Compensation Committee. The
award agreement will generally set forth the vesting, exercisability, payment
and other
19
<Page>
restrictions applicable to an award and such other terms as the Compensation
Committee may determine are appropriate. The Compensation Committee may provide
participants with the right to receive dividends or payments equivalent to
dividends or interest with respect to outstanding awards.
STOCK OPTIONS. An award of a stock option entitles the participant to
purchase a specified number of shares of Common Stock during a specified period
at a price that will generally equal the fair market value of the Common Stock
subject to the option on the date of grant. The Compensation Committee
determines the vesting provisions applicable to each grant of options although
no grant may become vested sooner than one year after the date of grant. The
Compensation Committee also determines the term during which the option may be
exercised as long as that period does not exceed ten years after the date of
grant.
STOCK APPRECIATION RIGHTS. An award of a stock appreciation right entitles
the participant to receive, upon satisfaction of the conditions to the payment
specified in the applicable award agreement, an amount equal to the excess, if
any, of the fair market value on the exercise date of the number of shares of
Common Stock for which the stock appreciation right is exercised, over the
exercise price for such stock appreciation right specified in the applicable
award agreement. At the sole discretion of the Compensation Committee, payments
to a participant upon exercise of a stock appreciation right may be made in
cash, in shares of Common Stock having an aggregate fair market value as of the
date of exercise equal to such amount, or in a combination of cash and shares
having an aggregate value as of the date of exercise equal to such amount. A
stock appreciation right may be granted alone or in addition to other awards, or
in tandem with a stock option. Special terms may apply to such tandem grants.
STOCK AWARDS. A stock award consists of one or more shares of Common Stock
granted to a participant for no consideration other than the provision of
services.
RESTRICTED STOCK UNITS. An award of restricted stock units consists of a
grant of units, each of which represents the right of the participant to receive
one share of Common Stock, subject to the terms and conditions established by
the Compensation Committee. Upon satisfaction of the conditions to vesting and
payment specified in the applicable award agreement, restricted stock units will
be payable in Common Stock, equal to the fair market value of the shares subject
to such restricted stock units.
PERFORMANCE UNITS. Performance units may be granted as fixed or variable
share- or dollar-denominated units subject to such conditions of vesting and
time of payment as the Compensation Committee may determine. Performance units
may be paid in Common Stock, cash or a combination of Common Stock and cash, as
the Compensation Committee may determine.
OTHER AWARDS. In addition to the awards described above, the Compensation
Committee has the authority to grant other equity-based awards provided that the
terms of such awards are consistent with the purpose of the EEP and the
interests of the company.
ACCELERATED VESTING; FORFEITURE; TERMINATION OF EMPLOYMENT
Unless the Compensation Committee determines that alternative terms will
apply, the terms described in this paragraph will be applicable to each
participant in the EEP and each award made thereunder. In the event of a change
in control of the company, all unvested awards under the EEP will become vested
immediately prior to the change in control occurs. With certain exceptions, in
the event that a participant's employment with the company is terminated for any
reason, the unvested portion of any outstanding award held by such participant
shall lapse and become void and the vested portion of any such awards will
remain exercisable for a period of sixty days after the date of such
termination.
20
<Page>
OTHER MATERIAL TERMS OF THE EEP
Awards are generally not transferable by the participant until they convert
to unrestricted and freely tradable shares of Common Stock or cash. All awards
under the EEP are subject to equitable adjustment by the Compensation Committee
in the event that the company is restructured, reorganized or under goes a
similar corporate change such as recapitalization. The Board of Directors or the
Compensation Committee may at any time alter, amend, suspend or terminate the
Plan in whole or in part, except any such modification will be subject to the
requirements of all applicable laws and stock exchange rules. Except with
respect to adjustments made as a consequence of corporate restructuring and
similar transactions, neither the Board of Directors nor the Committee may
increase the number of shares subject to the EEP or reduce the exercise price of
any stock option or stock appreciation right unless such action is approved by
the stockholders of the company.
AMENDMENTS TO THE EEP
The amendments provide that two types of awards intended to qualify for the
exemption under Section 162(m) ("qualifying awards") may be granted by the
Compensation Committee under the Plan. The first type is qualifying awards that
are stock options or stock appreciation rights. No participant may be granted in
any sixty-month period beginning on or after January 1, 2002 qualifying awards
that are stock options or stock appreciation rights which, in the aggregate,
cover more than 3,000,000 shares of Common Stock. The second type is qualifying
awards that are stock awards, restricted stock units, performance units or other
equity-based awards, whose payment is conditioned on the achievement of a
performance goal for a performance period established by the Compensation
Committee in accordance with Section 162(m). The performance goals may include
same-store sales, earnings before interest, taxes, depreciation and
amortization, working capital, operating profit and return on equity, earnings
per share and return on invested capital. The Compensation Committee shall have
discretion to reduce the amount that would otherwise be payable under the award
by reason of the achievement of a performance goal. No participant may be
granted in any sixty-month period beginning on or after January 1, 2002
qualifying awards that are stock awards, restricted stock units, performance
units or other equity-based awards which, in the aggregate, cover more than
1,000,000 shares of Common Stock.
BOARD RECOMMENDATION
The Board unanimously recommends a vote FOR the approval of the amendments
to the EEP. The Board believes it is in the best interest of the Company to
qualify performance-based compensation for deductibility under Section 162(m) of
the Code in order to maximize the Company's income tax deductions. The
affirmative vote of the holders of a majority of shares present in person or by
proxy and entitled to vote at the meeting is necessary to approve the EEP.
Unless otherwise instructed, proxies will be voted FOR approval of the EEP.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board, upon recommendation of the Audit Committee, has selected the firm
of Deloitte & Touche LLP as the Company's independent auditors for the current
year. Deloitte & Touche LLP has served as independent auditor of the Company
since fiscal 1970.
Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting, will have the opportunity to make a statement if they desire to
do so, and will be available to respond to appropriate questions. This selection
is being submitted for ratification at the Annual Meeting. If not ratified, the
selection will be reconsidered by the Board, although the Board of Directors
will not be required to select different independent auditors for the Company.
Unless otherwise instructed, proxies will be voted FOR ratification of the
selection of Deloitte & Touche LLP.
21
<Page>
AUDIT FEES
The aggregate fees billed by Deloitte & Touche LLP ("Deloitte") for
professional services rendered for the audit of the Company's annual financial
statements for the fiscal year ended February 2, 2002 and for the reviews of the
financial statements included in the Company's Quarterly Reports on Form 10-Q
for the fiscal year were $432,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The aggregate fees billed by Deloitte for services rendered for information
technology services relating to financial information systems design and
implementation for the fiscal year ended February 2, 2002 were approximately
$2.3 million. These fees were incurred in connection with the Company's
implementation in 2001 of new financial systems software. Management views this
as a one-time project. Deloitte was selected to participate as an advisor for
this project because of their experience and technical expertise with the
software. Additionally, management interviewed a number of other purchasers of
the software regarding Deloitte's capabilities. Based on this information and
because the individuals providing these services were completely independent of
Deloitte's audit team, management and the Audit Committee determined that using
Deloitte for these services would be most cost-effective for the Company and
would not impair the auditors' independence.
ALL OTHER FEES
The aggregate fees billed by Deloitte for services rendered to the Company,
other than the services described above under "Audit Fees" and "Financial
Information Systems Design and Implementation Fees", for the fiscal year ended
February 2, 2002 were approximately $953,000. Audit related services, which
include fees for work on SEC registration statements, totaled approximately
$185,000. Non-audit services primarily consist of fees for tax consultations,
tax return review, and other tax planning projects and totaled approximately
$768,000.
The Audit Committee has considered whether the provision of financial
information systems design and implementation services and other services is
compatible with maintaining the auditors' independence.
ANNUAL REPORT
A copy of the 2001 Annual Report to Stockholders on Form 10-K, which
includes the financial statements (but excludes Form 10-K exhibits) is being
mailed to each stockholder of record as of April 19, 2002, together with the
proxy materials.
DEADLINE FOR STOCKHOLDER PROPOSALS
To be considered for inclusion in next year's Proxy Statement, any proposal
of an eligible stockholder must be in writing and received by the Secretary of
the Company at its principal executive offices located at 200 Milik Street,
Carteret, New Jersey 07008 on or before January 3, 2003.
For any proposal that is not submitted for inclusion in next year's Proxy
Statement, but is instead sought to be presented directly at the 2003 annual
meeting, under our By-Laws, and as permitted by the rules of the SEC, certain
procedures are provided which a stockholder must follow to nominate persons for
election as Directors or to introduce an item of business at an annual meeting
of stockholders. These procedures provide that nominations for Director
nominees, and/or an item of business to be introduced at an annual meeting of
stockholders, must be submitted in writing to the Secretary of the Company at
200 Milik Street, Carteret, New Jersey 07008. A notice of intention to propose
an item of business must set forth as to each proposal (i) a brief description
of the business desired to be brought before the meeting and the reasons for
conducting such business at the meeting,
22
<Page>
(ii) the proposing stockholder's name and address, (iii) the class and number of
shares of the Company's stock which are beneficially owned by the stockholder,
and (iv) any material interest of the stockholder in such business. A notice of
intention to nominate a director must include certain information regarding the
nominee and contain the nominee's consent to serve if elected. A notice of
intention to introduce a nomination or proposed item of business at the
Company's 2003 Annual Meeting must be received by the Company:
- no earlier than 90 but no later than 60 days in advance of the 2003 Annual
Meeting, if it is being held within 30 days preceding the anniversary date
of this year's meeting (June 13, 2002); or
- no earlier than 120 but no later than 90 days in advance of the meeting,
if it is being held on or after the anniversary date of this year's
meeting; or
- by the tenth day following the date of public disclosure of the date of
the meeting in all other cases.
Our Annual Meeting of Stockholders is generally held on the second Thursday
of June. Assuming that our 2003 Annual Meeting is held on schedule, we must
receive notice of your intention to introduce a nomination or other item of
business at that meeting by April 13, 2003. If we do not receive notice by that
date, or if we meet other requirements of the SEC rules, the persons named as
proxies in the proxy materials relating to that meeting will use their
discretion in voting the proxies when these matters are raised at the meeting.
OTHER BUSINESS
As of the date of this Proxy Statement, neither the Board nor Management
knows of any other matters to be brought before the stockholders at this Annual
Meeting. If any other matters properly come before the meeting, action my be
taken thereon pursuant to the proxies in the form enclosed, which confer
discretionary authority on the persons named therein or their substitute with
respect to such matters.
By Order of the Board of Directors,
May 3, 2002
Marc A. Strassler
Senior Vice President
Secretary and General Counsel
23
<Page>
The shares represented by this proxy will be voted as Please mark your
directed by the shareholder. If no direction is made, votes as |X|
this proxy will be voted for proposals 1, 2 and 3. indicated in
this example
1. Election of Directors
FOR WITHHELD
FOR ALL
|_| |_|
Messrs. 01 William J. Begley, 02 James L. Donald, 03 Daniel H. Fitzgerald, 04
Eugene M. Freedman, 05 Robert G. Miller, 06 Frank G. Vitrano and 07 Steven L.
Volla
WITHHELD FOR: (Write that nominee's name in the space provided below)
- ----------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of the Amendments to the |_| |_| |_|
2000 Employee Equity Plan
3. Approval of Deloitte & Touche LLP, FOR AGAINST ABSTAIN
independent public accountants, as |_| |_| |_|
auditors for 2002.
4. In their discretion, the Proxyholders are authorized to vote upon such
other matters that may properly come before the Meeting or any
adjourments thereof.
If you plan to attend the Annual Meeting please mark the box |_|
Signature_____________________Signature_________________________Date____________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
Dear Stockholder:
On behalf of the Board of Directors of Pathmark Stores, Inc., thank you for your
continued interest and support.
We realize that many of you may be unable to attend our Annual Meeting of
Stockholders in June. Because your vote is important, we encourage you to
promptly complete and return your proxy.
Regards,
James L. Donald, Chairman
PROXY
PATHMARK STORES, INC.
200 Milik Street
Carteret, New Jersey 07008
Proxy for Annual Meeting of Stockholders, June 13, 2002
(The Solicitation of This Proxy is Made on Behalf of the Board of Directors)
The undersigned hereby appoints James Donald, Frank Vitrano and Marc
Strassler, or a majority of them, with full power of substitution and
revocation, as proxies to represent the undersigned at the Annual Meeting of
Stockholders of Pathmark Stores, Inc. to be held at 200 Milik Street, Carteret,
New Jersey, Thursday, June 13, 2002 at 3:00 P.M. local time, and at any
adjournment thereof, and to vote all the shares of stock the undersigned would
be entitled to vote if personally present. Change of Address
Change of Address
----------------------------------------
----------------------------------------
----------------------------------------
(If you have written in the above space,
please mark the corresponding box on the
reverse side of this card)
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
PLEASE DATE, SIGN AND MAIL THIS PROXY TODAY
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^