1
The Great Atlantic & Pacific Tea Company,
Inc. two paragon drive
montvale, new jersey 07645
PROXY STATEMENT
SOLICITATION AND REVOCATION OF PROXIES
The accompanying proxy is solicited by the Board of Directors of
The Great Atlantic & Pacific Tea Company, Inc. (the "Company") for use
at the Annual Meeting of Stockholders to be held on July 9, 1996. The
Company will bear the cost of such solicitation. It is expected that the
solicitation of
proxies will be primarily by mail. Proxies may be solicited personally
by
regular employees of the Company, by telephone, or other means
of
communication at nominal cost. The Company will reimburse banks, brokers
and trustees, or their nominees, for reasonable expenses incurred by
them in
forwarding proxy material to beneficial owners of stock in accordance
with The New York Stock Exchange schedule of charges. Any stockholder
giving a proxy has the power to revoke it at any time prior to its
exercise by giving notice in writing to the Secretary, or by casting a
ballot at the meeting in
person or by proxy. This proxy statement is first being mailed
to
stockholders on or about May 24, 1996.
VOTING AT MEETING
Only stockholders of record at the close of business on May 21, 1996
will be entitled to vote at the annual meeting. As of May 21, 1996,
there were outstanding 38,220,333 shares of Common Stock (par value $1 per
share) of the Company, each of which is entitled to one vote. Proxies
marked as abstaining (including proxies containing broker non-votes) on
any matter to be acted upon by
stockholders will be treated as present at the meeting for purposes
of determining a quorum but will not be counted as votes cast on
such matters.
CERTAIN BENEFICIAL OWNERS
As of May 1, 1996, the Company is informed that
Tengelmann Warenhandelsgesellschaft (a partnership organized under the
laws of the Federal Republic of Germany, hereinafter "Tengelmann"),
which is a general retailer in Germany, controlled by Mr. Erivan Haub,
owned beneficially and of record 20,655,000 shares of the Company's Common
Stock (approximately 54.03%
of the outstanding shares). Mr. Haub additionally controls, among
others, PLUS Warenhandelsgesellschaft mbH & Co. oHG and Kaiser's Kaffee-
Geschaft AG, also general retailers in Germany, and Tenga Capital
Corporation.
The address of Tengelmann and Mr. Haub is c/o
Tengelmann Warenhandelsgesellschaft, Wissollstrasse 5-43, 45478
Mulheim/Ruhr, Germany.
By letter dated February 14, 1996, FMR Corp. (Fidelity
Investments), whose reported address is FMR Corp., 82 Devonshire Street,
Boston, MA 201093614, informed the Company by copy of Schedule 13G that as
of December 31, 1995 FMR Corp. beneficially owned 4,349,386 shares of
the Company's Common
Stock (representing 11.38% of the outstanding shares). FMR Corp. has
sole voting power with respect to 152,806 shares and sole dispositive
power with respect to 4,349,386 shares.
Except as set forth above, at May 1, 1996 no person beneficially
owned, to the knowledge of the Company, more than 5% of the outstanding
shares of
the Company's Common Stock.
ELECTION OF DIRECTORS
Eleven directors are to be elected to hold office until the next
annual meeting and until their successors are elected and shall
qualify. The
persons named as proxies in the accompanying proxy intend to vote,
unless otherwise instructed, for the election to the Board of Directors
of the persons named below, each of whom has consented to nomination and
to serve when elected. Nine of the nominees are members of the
present Board of
Directors. The affirmative vote of a majority of the votes cast at
the
Annual Meeting is required for the election of each director.
NOMINEES
John D. Barline, Esq.
Mr. Barline, age 49, an attorney in private practice since 1973,
is currently associated with the law firm Williams, Kastner & Gibbs
LLP in Tacoma, Washington. His areas of practice include corporate tax
law, mergers and acquisitions, general business law, estate planning and
real estate.
He
provides personal legal services to the Haub family, including Helga
and Erivan Haub and Christian Haub. He is a member of the Pierce
County, Washington State and the American Bar Associations and special
district counsel to the Washington State Bar Association.
Mr. Barline is a member of the Board of Directors and corporate
secretary of Sun Mountain Resorts, Inc.. He is also on the Board of
Directors of Sun Mountain Lodge, Inc. and Wissoll Trading Company, Inc.
These are small closely held corporations owned primarily by the Haub
family. He is Chairman of the Board of the Franciscan Foundation and on
the Board of the Tacoma Art Museum.
Rosemarie Baumeister
Executive Vice President and Head of the Public Relations Department of
Tengelmann.
Mrs. Baumeister, age 62, has been a member of the Company's Board
of Directors since 1979. She is a member of the Compensation Policy
Committee. Prior to assuming her present position, she served in
various executive capacities with Tengelmann.
Mrs. Baumeister is a member of the management executive committee
of Tengelmann, a member of the Supervisory Board of Kaiser's Kaffee-
Geschaft AG, an affiliate of Tengelmann, and a member of the Advisory
Board of Deutsche Bank.
Fred Corrado
Vice Chairman of the Board and Chief Financial Officer.
Mr. Corrado, age 56, was elected a director on December 4, 1990. He
is Vice Chairman of the Executive Committee and a member of the Finance
and Retirement Benefits Committees.
During the past five years, Mr. Corrado also served as Treasurer,
and Executive Vice President of the Company.
Christopher F. Edley
President Emeritus and former President and Chief Executive Officer
of the United Negro College Fund, Inc.
Mr. Edley, age 68, has been a member of the Company's Board of
Directors since 1981. He is Chairman of the Compensation Policy Committee
and a member of the Audit Review, Executive, and Retirement Benefits
Committees.
Mr. Edley served as President and Chief Executive Officer, United
Negro College Funds, Inc. from 1973 until his retirement in 1991.
He is also a director of The Allstate Corporation, AMR Corporation
and The Student Loan Corporation.
Christian Wilhelm Erich Haub
President and Chief Operating Officer
Mr. Haub, age 31, was elected a director on December 3, 1991 and
was elected President of the Company on December 7, 1993. He is a member
of the Finance Committee.
During the past 5 years and prior to assuming his present position
he served as Corporate Vice President and Assistant to the Executive
Vice President, Development and Strategic Planning, and before joining the
Company Mr. Haub was a partner in the investment banking firm, Global
Reach, which he had joined in early 1991, from the investment banking firm
of Dillon Read & Co., Inc. in New York City.
Mr. Haub is a partner and a member of the management executive
committee of Tengelmann and a son of Erivan and Helga Haub.
Helga Haub
Mrs. Haub, age 61, has been a member of the Company's Board of
Directors since 1979. She is a member of the Executive and the Finance
Committees.
Mrs. Haub is a member of the Supervisory Board of Kaiser's Kaffee-
Geschaft AG, an affiliate of Tengelmann, a consultant to Tengelmann and has
an interest in Tenga Capital Corporation. She also is a director of The
George C. Marshall Home Preservation Fund, Inc., a member of the Board of
Governors of World USO and president of the Board of Trustees of the
Elizabeth Haub Foundation for Environmental Policy and Law. Mrs. Haub is
the wife of Erivan Haub and mother of Christian Haub.
Barbara Barnes Hauptfuhrer
Mrs. Hauptfuhrer, age 67, has been a member of the Company's Board
of Directors since 1975. She is Chairman of
the Retirement Benefits Committee and a member of the Audit Review,
Executive and Finance Committees.
Mrs. Hauptfuhrer is a director of The Vanguard Group of
Investment Companies and each of its mutual funds. She is also a
director of Knight-Ridder, Inc., The Massachusetts Mutual Life Insurance
Company, Alco Standard Corporation and the Raytheon Company. She is a
Trustee Emeritus of Wellesley College.
William A. Liffers
Mr. Liffers, age 67, served as Vice Chairman of American Cyanamid
Company (principally engaged in the manufacture and sale of medical,
agricultural, chemical and consumer products) from 1978 until his
retirement in 1993. He was a member of its Board of Directors from 1977
until he retired. He also had served in other executive capacities
with the company in the United States and abroad.
Mr. Liffers is a Senior Advisor to the United Nations
Development Programme, assisting the Peoples Republic of China in its
efforts to reform its state owned enterprises.
He is also a member of the Board of Overseers of the New Jersey
Institute of Technology and a member of the Board of Trustees of the
Washington, D.C. based National Planning Association.
Fritz Teelen
Chief Operating Officer of Tengelmann in Europe
Mr. Teelen, age 60, has been a member of the Company's Board of
Directors since 1979. He is a member of the Finance Committee.
Prior to assuming his present position, Mr. Teelen served in
various executive capacities with the Company and with Tengelmann, most
recently serving as President of PLUS Warenhandelsgesellschaft mbH & Co.
oHG.
He is also a member of the Supervisory Board of Kaiser's Kaffee-
Geschaft AG , an affiliate of Tengelmann, and a member of the
Administrative Board of PLUS Italia.
Robert L. "Sam" Wetzel
President and Chief Executive Officer of Wetzel International, Inc.
Mr. Wetzel, age 65, was elected a director effective May 21, 1991. He
is Chairman of the Finance Committee and a member of the Audit
Review, Compensation Policy and Retirement Benefits Committees.
Mr. Wetzel has been President and Chief Executive Officer of
Wetzel International, Inc., a management consulting firm
specializing in international marketing and joint ventures in the
aerospace, defense and commercial industries based in Columbus, Georgia,
since his retirement as a Lieutenant General in June 1986 from his
position as Commanding General V (U.S.) Corps, Frankfurt, Germany.
He is also an advisory director of Columbus Bank & Trust
Company, Columbus, Georgia, a subsidiary of Synovus Financial Corporation.
James Wood
Chairman of the Board and Chief Executive Officer of the Company
Mr. Wood, age 66, was elected Chairman of the Board of Directors
and Chief Executive Officer in 1980. He is Chairman of the Executive
Committee and is an ex officio member of the Finance and
Retirement Benefits Committees. During the past five years he also
served as President of the
Company.
Mr. Wood is a director of ASARCO Inc. and Schering-Plough
Corporation. He is also on the boards of the Food Marketing Institute,
the United States Committee for UNICEF, and a member of the board of
governors of World USO.
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth the number of shares of Common Stock
of the Company beneficially owned as of May 1, 1996, by each director
and nominee, each named executive officer and by all directors and
executive officers as a group:
Shares Stock
BeneficiallyOption % of
owned shares(1) Total
Class
John D. Barline, Esq. (2) 2,000 - 2,000 *
Rosemarie Baumeister (2) 2,800 2,400 5,200 *
Fred Corrado 200 25,000 25,200 *
Christopher F. Edley 1,100 2,400 3,500 *
George Graham 5,000 15,000 20,000 *
Christian Haub (2) 200 40,000 40,200 *
Helga Haub (2) 2,800 2,400 5,200 *
Barbara B. Hauptfuhrer (3) 1,300 2,400 3,700 *
William A. Liffers 1,000 - 1,000 *
John D. Moffatt - 50,000 50,000 *
Paul C. Nagel, Jr. (3)(4) 2,800 2,400 5,200 *
Peter J. O'Gorman 3,850 15,000 18,850 *
Eckart C. Siess(4) 7,500 2,400 9,900 *
Fritz Teelen (2) 3,300 2,400 5,700 *
Henry W. Van Baalen(4) 1,800 2,400 4,200 *
Robert L. "Sam" Wetzel 500 2,400 2,900 *
James Wood 11,321 700,000 711,321 1.9
All directors and executive officers
as a group (22 persons) (5). 49,571 921,600 971,171 2.5
- - - - - -------------------------
* Less than 1%
(1) The amounts shown include all options granted under Company
plans regardless of whether exercisable within 60 days.
(2) The association of Mmes. Baumeister and Haub, and Messrs. Barline,
Haub and Teelen with Tengelmann and Mr. Erivan Haub is set forth
herein under "Nominees". Mr. Christian Haub disclaims investment and
voting power over the shares owned by Tengelmann and they are
excluded herein. Mrs. Haub disclaims any investment or voting power
over the shares owned by Mr. E. Haub and the organizations which
he controls and same are not included herein.
(3) Mrs. Hauptfuhrer and Mr. Nagel disclaim beneficial ownership over
any shares held by any funds or trusts of the companies of which she/he
also serves as a director and any such shares are not included herein.
(4) After years of distinguished service as members of the Board
of Directors, Paul C. Nagel, Jr. (first elected in 1979), Eckart C.
Siess (first elected in 1980) and Henry W. Van Baalen (first elected
in 1979) are retiring from the Board effective July 9, 1996. The
Board and Management of the Company extend their sincere appreciation
to them.
(5) On a timely Form 5, Mr. Harris reported an acquisition of the Company's
Common Stock that should have been reported earlier on a Form 4.
BOARD MEETINGS, COMMITTEES AND COMPENSATION
During the last fiscal year the Board of Directors held 6 meetings
and committees thereof held 11 meetings. The Audit Review Committee
held 3 meetings, and the Compensation Policy Committee held 4
meetings. Such Committees are composed of non-employee directors.
The Audit Review Committee reviews annual financial statements prior
to submission to the Board and reports thereon; at its discretion,
examines and considers matters relating to the internal and external audit
of the Company's accounts and financial affairs; recommends the employment
of outside accountants and their compensation; and, as appropriate, meets
with Company personnel in performance of its functions. The Compensation
Policy Committee approves salaries and salary increases and benefits where
the base annual compensation is at least $150,000, approves and
interprets incentive plans, and serves as the committee to administer
the employee stock option plan. There is no standing Nominating Committee.
All directors attended more than 75% of the aggregate of (i) the total
number of meetings of the Board of Directors held while they were members,
and (ii) the total number of meetings held by all Committees of the Board
on which they served as members. Overall attendance was 96%.
Directors who are neither officers nor employees of the Company are
each paid fees consisting of an annual retainer of $24,000 plus an
attendance fee of $1,000 for each Board meeting attended, and $1,000
for each committee meeting attended if substantial time or effort is
involved, plus expenses of attendance. If two compensable meetings are
held on the same day the fee for the second meeting is limited to $500.
The Chairman of each Committee, except the Executive Committee, is
paid an additional $10,000 per year. Under the directors stock option
plan, non-employee directors are entitled to an initial stock option grant
of 2,000 shares with 200 shares granted after each Annual Meeting
thereafter. These shares vest in one-third increments on succeeding Annual
Meeting dates.
The Company revised the compensation program for its non-
employee directors effective May 1, 1996. It suspended the retirement
plan pursuant to which directors, after serving 5 years and attaining age
70, were entitled upon retirement from the Board to an annual benefit
equal to the highest annual retainer paid during their tenure
(currently $24,000) for a period equal to their years of service up to
15 years. The directors have a one time election to transfer the present
value of their accrued benefits to the new plan. Under the new
deferred compensation plan, the Company will contribute to book
accounts of all new directors and all directors with less than fifteen
years' service an amount equal to 75% of the current retainer. Up to all
and at least 50% of these deferred payments will be credited to a Company
Common Stock equivalent account. The balance, at the director's
election in increments of 25% will be credited to a 10-year U. S.
Treasury bond equivalent account. The directors will be fully vested
in their accounts. Accruals will be made to these accounts through
the fifteenth anniversary of Board service. Upon termination from
service as a director, the value of the Company Common Stock equivalent
account will be determined using the final average market value of the
Company's shares for the prior 180 calendar days, inclusive of
appreciation for the effect of dividends. The value of the bond
equivalent account will be the sum of the credits and interest to the date
of termination. Benefits will then be paid equally over the subsequent
180 months, the director's life or length of service, whichever is
shorter. However, in the event of death, benefits will continue to be
paid to the director's beneficiary for a maximum of ten years, which
includes any period of payment before death.
Directors who are also officers or employees of the Company receive
no extra compensation or benefits for such service.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Tenga Capital Corporation, which is owned by Erivan and Helga Haub,
owns property in Windsor, Ontario, Canada on which an indirect subsidiary
of the Company, A&P Properties Limited, has leased a store since 1983.
The lease has an initial 20-year term that expires October 31, 2003,
with four 5-year renewal options, and a base annual rental which increased
in the eleventh year to CN$467,603, with percentage rents subject to
specified caps.
The Company is a party to agreements granting Tengelmann and
its affiliates the exclusive right to use the "A&P" trademark in
Germany and other European countries pursuant to which the Company
received $100,000 which is the maximum annual royalty fee under such
agreements. The Company
also is a party to agreements under which it purchased from Wilh.
SchmitzScholl ("Wissoll"), which is an affiliate of Tengelmann,
approximately $565,686 worth of Black Forest label candy.
At Tengelmann's request the Company secured and owns a jet aircraft
which Tengelmann leases under a full cost reimbursement lease. During
fiscal 1995 Tengelmann was obligated to reimburse the Company an average
monthly cost of $215,000. Under the terms of said lease, the Company
may charter the aircraft for its use at a below market charter rate.
Under an agreement between the Company and Tengelmann, applicable
during fiscal year 1995, Peter O'Gorman spent a portion of his work time
with Tengelmann. The Company was reimbursed $116,025 representing a pro
rata portion of Mr. O'Gorman's salary and benefits.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth the compensation paid by the Company and
its subsidiaries for services rendered in all capacities during each of the
last three fiscal years to or for the account of the Chief Executive
Officer and the other four most highly compensated executive officers.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards All Other
Principal Salary Bonus Other Securities
Compensation
Annual Underlying (2)
Position Year ($) ($) Compensation Option/SAR's ($)
($)(1) (#)
James Wood 1995 1,160,500 810,920 142,656
Chairman 1994 1,160,500 22,865 134,606
Chief 1993 1,120,192 65,610 18,420 200,000 108,577
Executive
Officer
Fred Corrado 1995 461,423 75,000 25,000 38,230
Vice 1994 451,000 37,500 37,110
Chairman, 1993 425,769 31,250 40,000 36,318
Chief
Financial
Officer
George Graham1995 345,000 93,750 15,000 12,534
Senior Vice 1994 343,462 41,250 12,108
President, 1993 325,000 31,250 22,500 17,345
Merchandising
Officer
J.D. Moffatt 1995 402,490 146,360 859
Chairman & 1994 196,610 71,376 50,000 426
Chief
Executive
Officer
(Canadian
Company)(3)
Peter J. 1995 345,000 62,500 15,000 15,570
O'Gorman 1994 343,462 31,250 14,382
Executive 1993 325,000 31,250 30,000 20,171
Vice-
President
International
Store and
Product
Development
(1) Represents income in 1994 of $12,835 and in 1993 of $9,643 on the
Trust and reimbursement in 1994 of $10,030 and in 1993 of $8,777 for the
respective prior year's taxes thereon as described under the heading
"Employment and Termination Agreements" infra.
(2) Consists of, respectively, Company contributions to
the
Retirement/Savings Plan and the cost for insurance, for 1995: Mr.
Wood, ($6,000 and $106,656); Mr. Corrado, ($10,620 and $22,610); Mr.
Graham, ($10,620 and $1,914); and Mr. O'Gorman, ($10,620 and $4,950); and
the cost of insurance for Mr. Moffatt, $859. Additionally, a tax
preparation and planning fee is included of $30,000 and $5,000
respectively for Messrs. Wood and Corrado.
(3) Mr. Moffatt was hired September 1, 1994.
Employment and Termination Agreements
Mr. Wood's employment contract, with an extended expiration date of
April 30, 1998, provides for a minimum base annual salary of $875,000,
regular Company benefits applicable to his position, life insurance equal
in face value to three times his base annual salary and the grant of
various options under the Company's Stock Option Plans. He is also
entitled to receive an annual bonus equal to 1% of the Company's pre-
tax profit reduced by any bonuses awarded for that year under the
Company's management incentive plan. Bonus payments are included in the
Summary Compensation Table. He is also entitled to a pension benefit
which includes a surviving spouse's benefit. Upon a change in his duties
or involuntary termination by the Company other than for disability or
cause, Mr. Wood or his beneficiary is entitled to receive his then base
salary for the longer of the remaining contract term, or 3 years, and
to receive his pension. Termination for disability would result in
payment of his then salary for a period of two years. Upon his voluntary
termination or termination for cause, no further remuneration payments
would be due him except pension benefits. His pension is fully vested,
and funded through a Trust Agreement dated December 29, 1988.
Benefits became payable thereunder upon his attaining age 65. All
amounts
contributed to the Trust were treated as compensation to him in the
year contributed. The Trust is irrevocable for the duration of the
pension obligations with any residual monies reverting to the Company.
The Company is responsible for the trustee's commissions, fees, charges
and expenses, and additional contributions to fund the Trust's obligations,
and indemnifies the trustee. By a separate, successor Phantom Stock
Agreement dated December 1, 1988 between Tengelmann and Mr. Wood, as
amended February 3, 1994, Tengelmann continued its grant to him of
1,794,593 phantom stock units ("Units"), each equivalent to one share of
Common Stock of the Company. These Units are fully vested. Tengelmann
will pay Mr. Wood an amount equal to the number of Units Mr. Wood holds
times the difference between $44.758 and the higher value of the
Company's Common Stock, on April 30, 2000, or his earlier election.
All payments under the Phantom Stock Agreement are payable by
Tengelmann, without expense to the Company.
Mr. Corrado's employment contract, which expires May 20, 2002
unless sooner terminated upon three years' advance written notice,
generally provides a minimum base annual salary of $451,000, regular
Company benefits applicable to his position and incentive compensation
with a $125,000 initial annual base at 100%. Mr. Corrado's contract
further provides immediate vesting of his age 65 benefit at age 62 under
SERP, discussed infra, and life insurance equal in face value to three
times his base annual salary. Mr. O'Gorman, who is vested in his pension
under SERP, was granted entitlement to an unreduced benefit at age 62.
Mr. Moffatt's employment contract, which expires August 31, 1999
unless sooner terminated, generally provides a minimum annual salary of
CN$550,000, regular Company benefits applicable to his position and a
management incentive bonus of CN$200,000, participation in SERP, discussed
infra, and a Company car. The agreement, as to compensation, would
continue for six months in the event of disability and for twelve
months after his death. He is also entitled to receive a special bonus
equal to the greater of 1% of the pretax profit of the Canadian Company or
1/2 of 1% of the Canadian Company's Group Contribution as reported
internally, less his management incentive bonus.
Stock Option/SAR Grants and Exercises
No stock options or stock appreciation rights ("SARs") were exercised
during the last fiscal year by the named executive officers. The following
tables set forth information with respect to stock options/SARs granted to
or held by the named executive officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
Number of %of Total
Securities Options/SARs Exercise
Underlying Granted to or Base Grant Date
Options/SARs Employees in Price Expiration Present
Granted (#)(1) FY(2) ($/Sh) Date Value($)(3)
Fred Corrado 25,000 3.7 $27.875 7/10/05 280,000
George Graham 15,000 2.2 27.875 7/10/05 168,000
Peter O'Gorman15,000 2.2 27.875 7/10/05 168,000
(1) The options vest in 25% increments commencing on the first anniversary
of the grant. All grants have a ten year term.
(2) Based on total grants during the year of 679,000.
(3) These values were calculated using the Black-Scholes option
pricing model. The Black-Scholes model is a complicated mathematical
formula which is widely used and accepted for valuing traded stock
options. The model is premised on immediate exercisability and
transferability of the options. This is not generally true for the
Company's options granted to executive officers and other employees.
Therefore, the values shown are purely theoretical and do not reflect
the market value of the Company's stock at a future date. In addition
to the stock prices at time of grants and the exercise prices, which
are identical, and the ten-year term of each option, the following
assumptions were used to calculate the values shown for options granted on
July 11, 1995: expected dividend yield (0.89 percent), expected stock
price volatility (30 percent based on the Bloomburg historical price
volatility calculation), risk-free rate of return (5.78 percent) and
a
weighted average of 7 years from date of grant to date of exercise. If
the named officers realize the grant date values shown in the table, such
values will be less than one percent of the total shareholder appreciation.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-
End Option/SAR Values
Value of
Number of Securities Unexercised
Shares Underlying In-the-Money
Acquired Options/SARs at Options/SARs
on Value FY-End at FY-End(1)
Name Exercise Realized Exercis Unexercis Exercis
Unexercis
able able able able
(#) ($) (#) (#) ($) ($)
James Wood None 0 700,000 0 0 0
Fred Corrado None 0 37,500 45,000 0 0
George Graham None 0 31,250 26,250 0 0
J.D. Moffatt None 0 12,500 37,500 0 0
Peter J. O'Gorman None 0 30,000 30,000 0 0
(1) Based on the closing price of the Common Stock on February 23, 1996,
$22.375.
PENSION PLAN TABLE
YEARS OF SERVICE
REMUNERATION 15 20 25 30 35
$300,000 $112,500 $135,000 $135,000 $135,000 $135,000
350,000 131,250 157,500 157,500 157,500 157,500
400,000 150,000 180,000 180,000 180,000 180,000
450,000 168,750 202,500 202,500 202,500 202,500
500,000 187,500 225,000 225,000 225,000 225,000
The table above indicates the amount of annual benefit payable to a person
at age 65 in the specified final average remuneration and
years-of-service
classifications under the Supplemental Executive Retirement Plan
("SERP") except that such benefits do not reflect the requisite
reduction for any applicable Social Security, or other Company retirement
benefits. SERP is an unfunded defined benefit
final average pay plan that covers the named
executives, excluding Mr. Wood. Mr. Wood's entitlement to a pension
benefit is provided in his Employment Agreement which is described supra
under the heading "Employment and Termination Agreements". Mr. Graham
participated in the Company's former defined benefit plan and
has an annuity therefrom and
Mr. Moffatt is a participant in the Company's Canadian Retirement
Plan.
Their benefits from these plans are an offset to their benefit
entitlements under SERP.
The compensation covered by SERP is base salary, i.e., essentially
the "Salary" reflected in the Summary Compensation Table computed as an
average of such base salary over the highest compensated five years of
employment during the last 10 years. The benefit is computed at the rate
of 3% for each year up to 10 years' service, plus 1 1/2% of such
compensation for up to 10 additional years of service
with a maximum benefit equal to 45% of such
average base salary. Estimated or actual credited years of service
at retirement for each participating named executive officers are: Mr.
Corrado, 18 years; Mr. Graham, 20 years; Mr. Moffatt, 18 years; and Mr.
O'Gorman, 20
years.
PERFORMANCE GRAPH
The following performance graph compares the five-year cumulative
total shareholder return (assuming reinvestment of dividends) on the
Company's Common Stock to the Standard & Poor's 500 Index and a peer group
of companies in the retail grocery industry comprised of the following
six companies: American Stores Company, Bruno's, Inc., Giant Food, Inc.,
Safeway, Inc., The Great Atlantic & Pacific Tea
Company, Inc., and The Kroger Co. The
performance graph assumes $100 is invested in the Company's Common Stock,
the Standard & Poor's 500 Index and a composite index for the peer
companies on February 22, 1991, and that dividends paid during the period
were reinvested to purchase additional shares. The peer group
consists of significant unionized food retailers operating in the
eastern/southeastern
United States or, in the case of Safeway Inc., a significant unionized
food
retailer with substantial operations in Canada.
COMPARISION OF FIVE YEAR CUMULATIVE RETURN
AMONG A&P, S&P 500 INDEX AND PEER GROUP INDEX
Measurement period
(Fiscal year Covered) A&P S&P 500 PEER GROUP
- - - - - ----------------------- --- ------- ---
02/22/91 $ 100 $ 100 $100
02/21/92 $ 61 $ 116 $ 82
02/23/93 $ 48 $ 126 $ 70
02/23/94 $ 54 $ 141 $ 88
02/23/95 $ 41 $ 150 $ 91
02/23/96 $ 48 $ 208 $124
(Company fiscal year ends--last Saturday in February)
Report of the Compensation Policy Committee
The Company's Compensation Policy Committee approves the compensation
of all executive officers and other key employees and acts as the
Company's Stock Option Plan Committee.
Principles and Program
The Company's executive compensation program includes the
following policy objectives:
Compensation must be sufficient to attract and retain
talented executives.
Incentives are included in the executive compensation
package based upon criteria which also enhance shareholder value.
Improvements in compensation should bear a relationship to
the Company's improvement in performance.
To meet these objectives the program has salary, incentive and
equity elements. The Committee considers each of these elements, setting
salary and bonus levels that reflect the above-described objectives and
awarding stock
appreciation rights or stock options to provide an equity-based
compensation element.
Salaries
The Compensation Policy Committee employs several criteria in fixing
the salaries of the executive officers (including the five most
highly
compensated officers). These criteria include the responsibility of
the position, the officer's performance, the Company's financial
performance and the business and economic climate in which the Company
operates. Executive officers with responsibility for a business unit are
also evaluated on the basis of the unit's performance. Additional
criteria such as success in achieving desired business goals are also
utilized in determining the appropriate salary for an officer. Only
one of the five most highly compensated officers received a salary
increase during the 1995 fiscal year approximating 3% per annum for the
two years since his last salary increase.
The Compensation Policy Committee reviews with the Chief
Executive Officer his evaluation of and the salaries to be awarded to the
remainder of the approximately 40 most highly compensated corporate
executives.
Annual Incentive Plan
The Company has an annual U.S. management incentive plan,
first established in 1982, which, on a corporate basis provides for bonus
awards ranging up to approximately 40% of base salary, depending upon the
attainment of overall corporate sales and profit goals (in the case
of executive officers only profit goals). The determination of the
bonus awards to individuals under the Plan is based upon the following
factors: percentage of base salary previously awarded to the
individual, ability of the individual to make a direct contribution to
the financial performance of the Company and the responsibility of the
position held by the individual. The
profit goals for executive officers were established by the
Compensation Policy Committee for the 1995 fiscal year. In setting
the goals the Compensation Policy Committee takes into account the
performance of the Company relative to the performance of comparable
companies and relative to the competitive and economic environment in
which the Company operates. For 1995, following the Compensation Policy
Committee's setting of overall profit goals, the Committee decided that
75% of the management incentive bonus should be determined by attainment
of the profit goals and 25% of such bonus by attainment of goals set by
management. If established goals are exceeded, a bonus is computed on the
excess, but is deferred and not payable unless (a) a subsequent bonus is
less than 100% of bonus target, whereupon the deferred bonus is payable
to the extent of the deficiency, or (b) a participant retires or
suffers permanent disability. In consideration of the significant
turnaround in performance achieved in the latter part of the 1995 fiscal
year and considering the Board's prior decision to defer salary
increases for employees earning (or expected to earn) a salary of
$150,000 or more, and notwithstanding that the established goals were
not objectively met, on the Compensation Policy Committee's
recommendation the Board voted a minimum corporate management incentive
bonus equal to 25% of bonus target for 1995. Based upon such turnaround
and their contribution to the turnaround, Messrs. Corrado, Graham, and
O'Gorman were awarded a bonus equal to 50% of bonus target for 1995.
Mr. Moffatt's bonus was paid in accordance with the terms of his
Employment Agreement.
Equity Based Compensation
The Company's 1994 Stock Option Plan as amended, which was adopted
with shareholder approval, authorizes grants through March 17, 2004 of
up to 1,500,000 shares for stock options and tandem or independent SARs.
In the
1995 fiscal year options/SARs were awarded by the Compensation
Policy Committee to three of the five most highly compensated officers as
set forth in the Option/SAR Grant Table supra.
Discussion of Fiscal 1995 Compensation for the Chairman and Chief
Executive Officer
The Compensation Policy Committee recommends the compensation level
of
the Chairman and Chief Executive Officer, taking into account all of
the factors described in this report. The compensation of Mr. Wood for the
last fiscal year was determined predominantly by the terms of his 1988
Employment Agreement under which Mr. Wood was to receive base compensation
of at least $875,000, and an annual salary review. Accordingly, Mr.
Wood's 1995 annual salary rate of $1,160,500 reflects salary increases
granted through 1993. No salary increase has been granted to Mr. Wood
since October 1993 when the Committee granted Mr. Wood a salary rate
increase equivalent to 3.86% per annum from the date of his prior
salary increase. Under the terms of his Employment Agreement, Mr. Wood
received a management incentive bonus equal to 1% of pretax profit of the
Company.
Compliance With Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code, enacted in 1993, subject
to certain exceptions, disallows a tax deduction to public companies
for compensation over $1,000,000 paid to the Chief Executive Officer and
the four other most highly compensated officers at fiscal year end. The
exceptions to the $1,000,000 deduction limit include compensation paid
under preexisting employment agreements and performance based
compensation meeting certain requirements. By reason of this
limitation, it is anticipated that a portion of the Chief Executive
Officer's compensation will not be deductible in respect of the 1996 fiscal
year; however, the salary and bonuses of each of the four other most
highly compensated officers for the 1996 fiscal year are expected to be
less than $1,000,000 and the compensation payable to such officers
therefore should be fully deductible. Moreover, the Company's 1994 Stock
Option Plan has been tailored to comply with the provisions of
Section 162(m) so that amounts received upon the exercise of options and
SARs thereunder should be exempt from Section 162(m) limitations.
Compensation Policy Committee
Christopher F. Edley, Chairman
Rosemarie Baumeister
Robert L. "Sam" Wetzel
ELECTION OF AUDITORS
In keeping with the Company's historic custom and practice,
independent auditors are to be elected at the meeting. Pursuant to the
recommendation of the Audit Review Committee and Board of Directors, the
persons named in the accompanying proxy intend to vote, unless otherwise
instructed, for Deloitte & Touche LLP, who have audited the accounts of
the Company for the past forty fiscal years. Representatives of that firm
are expected to be present at the meeting to respond to appropriate
questions and make such statements as they may desire. Should the firm
not receive a majority vote, the Board of Directors will reconsider its
selection of independent auditors.
STOCKHOLDER PROPOSALS
The Company will consider including a stockholder's proposal for
action at the 1997 Annual Meeting of Stockholders in the proxy material to
be mailed to its stockholders in connection with that meeting if such
proposal is received at the principal office of the Company no later
than January 24, 1997.
Management carefully considers all proposals and suggestions
from stockholders. If adoption is clearly in the best interest of the
Company and can be accomplished without stockholder approval, the proposal
is implemented without inclusion in the proxy material.
However, Management opposes the following proposals for the reasons
hereinafter stated.
STOCKHOLDER PROPOSAL ON NON-EMPLOYEE DIRECTOR RETIREMENT PLAN
The following stockholder proposal has been submitted to the Company
for action at the meeting by William Steiner, 4 Radcliff Drive, Great Neck,
New York 11024, owner of 1,500 shares of the Company's common stock.
The
affirmative vote of a majority of the votes cast at the meeting by or
on behalf of the stockholders is required for approval of a
stockholder proposal. The text of the proposal is as follows:
"RESOLVED, that the shareholders assembled in person and by proxy,
recommend (i) that all future non-employee directors not be granted
pension benefits and (ii) current non-employee directors voluntarily
relinquish their pension benefits."
The above named holder has submitted the following statement in
support of his proposal:
"SUPPORTING STATEMENT: At last year's annual meeting of stockholders
a similar resolution was approved by a significant number of
voting shareholders. Aside from the usual reasons, presented in the past,
regarding "double dipping", that is outside (non-employee) directors who are
in almost all cases amply rewarded with their pension at their
primary place of employment, and in many instances serving as outside
pensioned directors with other companies, there are other more cogent
reasons that render this policy as unacceptable.
Traditionally, pensions have been granted in both the private and
public sectors for long term service. The service component usually
represents a significant number of hours per week. The practice of
offering pensions for consultants is a rarity. Outside directors' service
could logically fit the definition of consultants and pensions for this
type of service is an abuse of the term.
But more importantly, outside directors, although retained by
corporate management,
namely the C.E.O., are in reality representatives of
shareholders. Their purpose is to serve as an impartial group to
which management is accountable. Although outside directors are certainly
entitled to compensation for their time and expertise, pensions have the
pernicious effect of compromising their impartiality. In essence,
pensions are
management's grants to outside directors to insure their
unquestioning loyalty and acquiescence to whatever policy management
initiates, and at times, serving their own self interests. Thus,
pensions become another device to enhance and entrench management's
controls over corporate policies while being accountable only to
themselves. As a founding member of the Investors Rights Association of
America I feel this practice perpetuates a culture of corporate
management "cronyism" that can easily be at odds with shareholder and
company interest.
A final note in rebuttal to management's contention that many
companies offer their outside directors pensions, so they can attract
and retain persons of the highest quality. Since there are also companies
that do not offer their outside directors pensions, can management
demonstrate that those companies that offer pensions have a better
performance record than their nonpensioned peers? In addition, do we
have any evidence of a significant improvement in corporate
profitability with the advent of pensions for outside directors?
I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION."
Your Board of Directors recommends a vote AGAINST the adoption of
this proposal.
The pension plan for non-employee directors, which required a minimum
of five years' service and attainment of age 70 to receive the
pension entitlement, was suspended effective May 1, 1996. As of that
date a new directors' deferred payment plan was adopted. As detailed
infra, under the new program at least 50% if not all of the deferred
payments made by the
Company on behalf of new directors and
current directors with less than fifteen
years service will be credited to a Company
common stock equivalent account.
Consequently, your board, and Company
management oppose this proposal because,
concerning the first point, the pension plan
for non-employee directors already has been
suspended. As to the second point, the
current directors should not be asked to
relinquish their vested benefits. Last
year, a similar proposal was rejected by the
stockholders by 30,109,423 votes (90.9%). It is important
that the Company have the ability to attract and
retain well-qualified, talented directors. In
order to do so, the Company must provide a
state of the art compensation package and honor
its prior commitments.
The persons named in the enclosed form
of proxy have indicated they intend to vote
AGAINST this proposal unless directed otherwise.
STOCKHOLDER PROPOSAL ON DIRECTOR COMPENSATION
The Company has been advised that Dr. Charles
Miller, 23 Park Circle, Great Neck, New York
11023 holder of 500 shares of the Company's
Common Stock will cause to be introduced at the
Annual Meeting the resolution set forth below:
"RESOLVED that the shareholders recommend that
the board of directors take the necessary
steps to ensure that from here forward all
non-employee directors should receive a
minimum of fifty percent of their total
compensation in the form of company stock
which cannot be sold for three years."
The above named holder has submitted the
following statement in
support of his proposal:
"SUPPORTING STATEMENT: A significant equity
ownership by outside directors is probably the best
motivator for facilitating identification with
shareholders.
Traditionally, outside directors, usually
selected by management, were routinely
compensated with a fixed fee, regardless of
corporate performance. In today's competitive
global economy, outside directors must
exercise a critical oversight of
management's performance in furthering
corporate profitability. All too often, outside
directors oversight has been marked by
complacency, cronyism, and inertia.
Corporate America has too many examples of
management squandering company assets on an
extended series of strategic errors.
Meanwhile, Boards of Directors stood by and
passively allowed the ineptitude to continue,
well after disaster struck. They fiddled while
Rome was burning.
When compensation is in company stock, there
is greater likelihood that outside directors
will be more vigilant in protecting their own,
as well as corporate, and shareholder
interests.
What is being recommended in this proposal is
neither novel nor untried. A number of
corporations have already established versions
of such practices, namely, Scott Paper, The
Travelers, and Hartford Steam Boiler.
Robert B. Stobough, Professor of Business
Administration at the Harvard Business
School, did a series of studies comparing
highly successful to poorly performing
companies. He found that outside directors in
the better performing companies had
significantly larger holdings of company stock
than outside directors in the mediocre
performing companies.
It can be argued that awarding stock
options to outside directors
accomplishes the same purpose of insuring
director's allegiance to a company's
profitability as paying them exclusively in
stock. However, it is
our contention that stock options are rewarding
on the upside, but offer no penalties on the
downside, where shareholders bear the full
downside risks. There are few strategies
that are more likely to cement outside
directors with shareholder interests and
company profitability than one which results in
their sharing the same bottom line."
Your Board of Directors recommends a
vote AGAINST adoption of this proposal.
Your directors and management believe
that to attract and retain the appropriate
caliber of directors the Company must offer
a competitive compensation package. In
addition, the well-being and long term viability
of the Company demand directors who are
sufficiently committed to the Company and
financially sufficiently independent of the
Company that their personal interests in high
stock prices and dividends will not
override their judgments.
Effective May 1, 1996 a new deferred
compensation plan for non-employee directors,
discussed infra, was adopted. This plan
provides that at least 50% if not all of the
deferred payments for the director will be
credited to a Company common stock
equivalent account, and deferred until
retirement. This new plan will further the
directors' commitment by providing a
significant vested interest in the quality of
their decision making and provide an
overall competitive, reasonable and fair
remuneration program commensurate with the
responsibilities undertaken as director. The
essence of this proposal is embodied in the new
total compensation arrangements for non-
employee directors.
The persons named in the enclosed form
of proxy have indicated they intend to vote
AGAINST this proposal unless directed otherwise.
OTHER MATTERS
No business other than that set forth in
the attached Notice of Annual Meeting is
expected to come before the meeting, but should
any other matters requiring a vote of
stockholders arise, including the question of
adjourning the meeting, the persons named in
the accompanying proxy will vote thereon
according to their best judgment in the
interest of the Company. In the event that
any of the above-named nominees for the office
of director or the nominee for independent
auditors shall withdraw or otherwise become
unavailable, the persons named as proxies may
vote for other persons in their place in the
best interest of the Company.
By Order of the Board of Directors
PETER R. BROOKER
Vice President and Secretary
Dated: May 24, 1996
Each person solicited by this proxy
statement, including any person who on May
21, 1996 is a beneficial owner of the Company's
Common Stock, may request a copy of the
Company's annual report on Form 10-K for the
last fiscal year.
Such written requests should be directed to
the Secretary of the Company at its address
aforesaid.
THE GREAT ATLANTIC & PACIFIC TEA COMPANY,
INC.
PROXY - FOR THE ANNUAL MEETING JULY 9, 1996
THIS PROXY IS SOLICITED BY THE BOARD OF
DIRECTORS
The undersigned, having received the
Notice of Meeting and Proxy Statement dated
May 24, 1996, appoints JAMES WOOD, FRED
CORRADO and PETER R. BROOKER, and each or any
of them as Proxies with full power of
substitution, to represent and vote all the
shares of Common Stock which the undersigned
may be entitled to vote at the Annual Meeting
of Stockholders to be held at 10:00 A.M.,
July 9, 1996, at The Marriott Waterfront
Hotel, 80 Compromise Street, Annapolis,
Maryland or at any adjournment thereof, with
all powers which the undersigned would
possess if personally present.
The shares represented by this Proxy will be
voted in the manner directed herein by the
undersigned. If no direction is made, the
Proxy will be voted "FOR" items (1) and (2)
and "AGAINST" items (3) and (4), both of said
items being more fully described in the
Notice of Meeting and the accompanying Proxy
Statement. The undersigned ratifies and
confirms all that said Proxies or their
substitutes may lawfully do by virtue hereof.
(To be Signed on Reverse Side)
- - - - - ---------------------------------------------
- - - - - --------------------------------
X Please mark your
votes as in this example.
(1) Election of Directors FOR all nominees
listed at
right (except as
marked to
the contrary below)
WITHHOLD AUTHORITY
to vote all nominees
listed at right
INSTRUCTION: To withhold authority to vote
for any individual nominee, write that
nominee's
name on the following line:
- - - - - -----------------------------------------
Nominees: J. D. Barline
R. Baumeister
F. Corrado
C. F. Edley
C.W. E. Haub
H. Haub
B. B. Hauptfuhrer
W. A. Liffers
F. Teelen
R. L. Wetzel
J. Wood
2. Election of Deloitte & Touche LLP
as independent auditors
(THE DIRECTORS FAVOR A VOTE "FOR")
3. Stockholder proposal on non-employee
director retirement plan
(THE DIRECTORS FAVOR A VOTE "AGAINST")
4. Stockholder proposal on director
compensation
(THE DIRECTORS FAVOR A VOTE "AGAINST")
Upon such other business as may properly
come before said meeting
and at any adjournments thereof.
SIGNATURE(S):____________________________
Date:_________________
NOTE: Please date and sign exactly as name
appears hereon. Joint owners should each
sign. The full title or capacity of any
person signing for a corporation,
partnership, trust of estate should be
indicated.
CONFIDENTIAL The Great Atlantic & Pacific
Tea Company, Inc. CONFIDENTIAL
VOTING A&P Savings Plan
VOTING
INSTRUCTION FORM HARRIS TRUST AND SAVINGS BANK -
TRUSTEE INSTRUCTION FORM
I hereby direct that the voting rights
pertaining to shares of THE GREAT ATLANTIC &
PACIFIC TEA COMPANY, INC. held by the Trustee
and allocated to my account shall be
exercised at the Annual Meeting of
Stockholders of the Company, to be held on
July 9, 1996 and at any adjournment of such
meeting, as specified herein, and if no vote
is specified, that such rights be exercised
"FOR" items 1 and 2 and "AGAINST" items 3 and
4.
By my signature below I hereby
acknowledge receipt of the Notice of the
Annual Meeting, the Proxy Statement of the
Company dated May 24, 1996, and a copy of the
Annual Report.
PLEASE SIGN, DATE AND RETURN THIS FORM
BEFORE July 1, 1996. As to the matters
coming before the meeting for which no signed
direction is received by the Trustee prior to
July 1, 1996, the Trustee may exercise voting
rights on your behalf in such manner as the
Trustee may, in its discretion, determine.
PLEASE
MARK, SIGN AND
DATE ON
THE REVERSE SIDE,
AND RETURN
IN THE
ENCLOSED
ENVELOPE
(Continued
and to be signed
on
reverse side.)
_____________________________________________
______________________________
THE GREAT ATLANTIC & PACIFIC TEA COMPANY,
INC., SAVINGS PLAN
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING
MANNER USING DARK INK ONLY.
[
]
1. Election of Directors--
Nominees: J. D. Barline, R. Baumeister,
F. Corrado, C. F. Edley, C. W. E. Haub, H. Haub, B. B.
Hauptfuhrer, W. A. Liffers, F. Teelan, R. L. Wetzel,
and J. Wood
FOR WITHHOLD FOR ALL (Except Nominee(s) written below)
_______________________
2. Election of Deloitte & Touche LLP as
independent auditors for the fiscal year ending February 22,1997.
The Directors favor a vote "FOR").
FOR AGAINST ABSTAIN
3. Proposal on non-employee director
retirement plan. (The Directors favor a vote "AGAINST").
FOR AGAINST ABSTAIN
4. Proposal on director compensation. (The
Directors favor a vote "AGAINST".
FOR AGAINST ABSTAIN
The Board of Directors of the Company favor a
vote "FOR" items 1,
and 2 and "AGAINST" items 3 and 4.
Dated:_______________________, 1996
Signature(s)_________________________________
____________________________________________
Please sign here exactly
as your name appears hereon
This Confidential Voting Instruction Form
represents voting rights to the following
number of equivalent shares of A&P Common
Stock as of May 21, 1996:
May 24, 1996
Securities and Exchange Commission
Division of Corporation Finance
450 5th Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: The Great Atlantic & Pacific Tea Company, Inc.
1996 Proxy Material
Gentlemen:
On behalf of The Great Atlantic & Pacific Tea Company, Inc.
(the "Company") we herewith electronically file pursuant to Rule 14a-
6(b) of Regulation 14A definitive copies of each of the following
documents in the form in which such material is being sent commencing on
or about May 24, 1996 to stockholders of the Company and participants in
the A&P Savings Plan entitled to vote at its forthcoming Annual Meeting.
1. Notice of Annual Meeting of Stockholders and Proxy Statement;
2. Form of Proxy;
3. Confidential Voting Instruction (eligible Savings
Plan Participants, only).
Payment of the $125.00 filing fee has been wired and received at
the lock box at Mellon Bank in Pittsburgh, PA.
The Performance Graph as contained in the Proxy Statement is
furnished electronically as prescribed in Rule 304(d) of Regulation
S-T with a supplemental paper copy submitted to the Division of
Corporation Finance Branch Chief.
Securities and Exchange Commission
May 24, 1996
Page -2-
As a separate package and solely for the information of the
Commission and not as part of the proxy solicitation material, we forward
to the SEC pursuant to Rule 14a-3(c) seven (7) copies of the Company's
Annual Report for the last fiscal year. Further, we note that the
financial statements in the report do not reflect a change from the
preceding year in any accounting principles or practices or in the
method of applying such principles or practices.
Very truly yours,
MARY ELLEN OFFER MEO/pbw
Enclosures
cc: New York Stock Exchange
