<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
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 Section 240.14a-11(c) or Section 240.14a-12
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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Notes:
<PAGE>
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
TWO PARAGON DRIVE
MONTVALE, NEW JERSEY 07645
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held July 14, 1998
----------------
To the Stockholders of
The Great Atlantic & Pacific Tea Company, Inc.
Notice is Hereby Given that the Annual Meeting of Stockholders of The Great
Atlantic & Pacific Tea Company, Inc. (the "Company") will be held at
Springfield Marriott Hotel, 1500 Main Street, Springfield, Massachusetts on
Tuesday, July 14, 1998 at 10:00 A.M. (E.D.T.) for the following purposes:
1. To elect a Board of eleven directors to serve until the next annual
meeting of stockholders and until the election and qualification of their
successors;
2. To elect independent auditors of the Company for the fiscal year ending
February 27, 1999; and
3. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
The Board of Directors has fixed May 19, 1998 as the record date for the
determination of stockholders entitled to notice of and to vote at the
meeting. Accordingly, only stockholders of record at the close of business on
that date are entitled to vote at the meeting or at any adjournment thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE AND SIGN THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO THE COMPANY IN THE STAMPED RETURN
ENVELOPE ENCLOSED FOR YOUR USE.
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended February 28, 1998 accompanies this proxy statement.
By order of the Board of Directors
Peter R. Brooker
Vice President and Secretary
Dated: May 28, 1998
You are cordially invited to attend the meeting. Whether or not
you plan to do so, please sign, date and vote or otherwise
indicate your choices with respect to the matters to be voted upon
on the accompanying proxy card and mail it at once in the enclosed
envelope, which requires no postage if mailed in the United
States.
<PAGE>
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 14, 1998. 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 28,
1998.
VOTING AT MEETING
Only stockholders of record at the close of business on May 19, 1998, will
be entitled to vote at the annual meeting. As of May 19, 1998, there were
outstanding 38,252,966 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, 1998, 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 20,910,000 shares of the Company's Common Stock (approximately 54.66%
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.
Except as set forth above, at May 1, 1998 no person beneficially owned, to
the knowledge of the Company, more than 5% of the outstanding shares of the
Company's Common Stock.
<PAGE>
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.
Each nominee is a member 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 51, was elected a director on July 9, 1996. He is a member
of the Retirement Benefits Committee.
Mr. Barline, 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.
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 a member of the
Board of the Franciscan Foundation and the Board of the Tacoma Art Museum.
ROSEMARIE BAUMEISTER
EXECUTIVE VICE PRESIDENT AND HEAD OF THE PUBLIC RELATIONS DEPARTMENT OF
TENGELMANN
Mrs. Baumeister, age 64, 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 has 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 58, has been a director since 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.
Mr. Corrado is a director of Batteries Batteries, Inc. He is also a director
of Covenant House.
CHRISTOPHER F. EDLEY
PRESIDENT EMERITUS AND FORMER PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE
UNITED NEGRO COLLEGE FUND, INC.
Mr. Edley, age 70, 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.
2
<PAGE>
Mr. Edley served as President and Chief Executive Officer, United Negro
College Fund, Inc. from 1973 until his retirement in 1991. After serving for
21 years he is retiring at the expiration of his term May 20, 1998 from his
position as a director of AMR Corporation.
CHRISTIAN WILHELM ERICH HAUB
PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE COMPANY
Mr. Haub, age 33, was elected a director on December 3, 1991, President and
Chief Operating Officer of the Company on December 7, 1993 and Co-Chief
Executive Officer on April 2, 1997. He was elected to his current position
effective May 1, 1998. During the past 5 years and prior to becoming President
of the Company, Mr. Haub served as Corporate Vice President and Assistant to
the Executive Vice President, Development and Strategic Planning. He is an ex
officio member of the Executive, Finance and Retirement Benefits Committees.
Mr. Haub is on the board of the Food Marketing Institute.
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 63, 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 Mr. Erivan Haub and
mother of Mr. Christian Haub.
BARBARA BARNES HAUPTFUHRER
Mrs. Hauptfuhrer, age 69, 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, IKON Office Solutions, Inc.
and the Raytheon Company. She is a Trustee Emeritus of Wellesley College, and
also a director of the Ladies Professional Golf Association.
WILLIAM A. LIFFERS
Mr. Liffers, age 69, was elected a director on July 9, 1996. He is Chairman
of the Audit Review Committee and a member of the Executive Committee.
Mr. Liffers 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 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 Policy Association.
3
<PAGE>
FRITZ TEELEN
CHIEF OPERATING OFFICER OF TENGELMANN IN EUROPE
Mr. Teelen, age 62, 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, including 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.
ROBERT L. "SAM" WETZEL
PRESIDENT AND CHIEF EXECUTIVE OFFICER OF WETZEL INTERNATIONAL, INC.
Mr. Wetzel, age 67, 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 President of European Foods, Inc. an
import-export company based in Columbus, Georgia.
Mr. Wetzel is an advisory director of Columbus Bank & Trust Company,
Columbus, Georgia, a subsidiary of Synovus Financial Corporation. He is also a
director of Consolidated Fusion Technologies, Inc., Columbus, Georgia.
JAMES WOOD
CHAIRMAN OF THE BOARD
Mr. Wood, age 68, was elected Chairman of the Board of Directors and Chief
Executive Officer in 1980. On April 2, 1997 he was elected Chairman of the
Board and Co-Chief Executive Officer and retired from that office on April 30,
1998. He is Chairman of the Executive Committee. 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 board of the Food Marketing Institute and a member of the Board
of Governors of World USO.
4
<PAGE>
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, 1998, by each director and nominee,
each named executive officer and by all directors and executive officers as a
group:
<TABLE>
<CAPTION>
SHARES STOCK
BENEFICIALLY OPTION % OF
OWNED SHARES(1) TOTAL CLASS
------------ --------- --------- -----
<S> <C> <C> <C> <C>
John D. Barline, Esq. (2)............... 2,200 2,200 4,400 *
Rosemarie Baumeister (2)................ 2,800 2,800 5,600 *
Fred Corrado............................ 200 25,000 25,200 *
Christopher F. Edley.................... 1,100 2,800 3,900 *
George Graham........................... 5,000 15,000 20,000 *
Christian Haub (2)...................... 200 190,000 190,200 *
Helga Haub (2).......................... 2,800 2,800 5,600 *
Barbara B. Hauptfuhrer (3).............. 1,300 2,800 4,100 *
William A. Liffers...................... 1,000 2,200 3,200 *
Aaron Malinsky.......................... 0 90,000 90,000 *
Peter J. O'Gorman....................... 3,850 40,000 43,850 *
Fritz Teelen (2)........................ 3,300 2,800 6,100 *
Robert L. "Sam" Wetzel.................. 500 2,800 3,300 *
James Wood.............................. 11,321 700,000 711,321 1.9
All directors and executive officers as
a group (21 persons)................... 38,971 1,381,200 1,420,171 3.7
</TABLE>
- --------
* Less than 1%
(1) The amounts shown include all purchase options granted under Company stock
option 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.
Erivan Haub and the organizations which he controls and same are not
included herein.
(3) Mrs. Hauptfuhrer disclaims beneficial ownership over any shares held by
any funds or trusts of the companies of which she also serves as a
director and any such shares are not included herein.
BOARD MEETINGS, COMMITTEES AND COMPENSATION
During the last fiscal year, the Board of Directors held 6 meetings and
committees thereof held 10 meetings. The Audit Review Committee held 3
meetings, and the Compensation Policy Committee held 2 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 at least 75% of the aggregate of (i) the
total number of meetings of the Board of Directors and (ii) the total number
of meetings held by all Committees of the Board on which they served as
members with the exception of Mr. Edley who attended 71%. Overall attendance
was 95%.
Directors who are neither officers nor employees of the Company are each
paid fees consisting of an annual retainer of $26,000 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
5
<PAGE>
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 $26,000) for a period equal to
their years of service up to 15 years. The directors had 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
of 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 to the retired director equally over
the subsequent 180 months or the 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 initial
term expires October 31, 2003, with four 5-year renewal options. The base
annual rental is 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. Schmitz-Scholl ("Wissoll"),
which is an affiliate of Tengelmann, approximately $1.2 million worth of the
Black Forest line and Master Choice candy.
The Company owns a jet aircraft which Tengelmann leases under a full cost
reimbursement lease that also allows the Company to charter the aircraft for
its use at a below market charter rate. During fiscal 1997 Tengelmann was
obligated to reimburse the Company an average monthly cost of $255,800.
Under an agreement between the Company and Tengelmann, Peter J. O'Gorman,
Executive Vice President--International Store and Product Development,
provided certain services to Tengelmann during fiscal year 1997 and the
Company was reimbursed $286,650 representing the cost of Mr. O'Gorman's salary
and benefits related to the time spent in those services.
In 1997 as a condition of Craig Sturken's relocating to the Detroit area his
interest free loan was increased by $50,000 and was extended so that the
largest aggregate amount since the beginning of fiscal 1997 was $151,538. The
loan is being repaid through period payroll deductions and is $126,282 as of
the latest practicable date.
Within the past five years Aaron Malinsky was Chairman and CEO of food
retailers Victory Markets, Inc. and New Almacs, Inc. prior to their filing for
Chapter 11 proceedings.
6
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth the compensation paid by the Company and its
subsidiaries for services rendered in all capacities during each of the last
three fiscal years to or for the account of Messrs. Wood and Haub and the
other four most highly compensated executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
---------------------- --------------------- ALL OTHER
PRINCIPAL POSITION DURING SECURITIES UNDERLYING COMPENSATION
FISCAL YEAR YEAR SALARY($)(1) BONUS($) OPTIONS/SAR'S(#) ($)(2)
- ------------------------- ---- ------------ --------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
James Wood 1997 1,182,817 829,000 143,056
Chairman, 1996 1,160,500 1,005,910 142,656
Co-Chief Executive
Officer 1995 1,160,500 810,920 142,656
Christian Haub 1997 382,212 100,000 100,000 7,219
President & Co-Chief 1996 347,308 84,608 6,738
Executive Officer 1995 313,846 37,500 25,000 6,529
Fred Corrado 1997 498,885 75,000 40,997
Vice Chairman, 1996 478,100 75,000 39,672
Chief Financial Officer 1995 461,423 75,000 25,000 38,230
George Graham 1997 372,019 62,500 13,714
Executive Vice
President, 1996 363,462 62,500 13,267
Chief Merchandising
Officer 1995 345,000 93,750 15,000 12,534
Aaron Malinsky 1997 433,173 65,000 9,184
Executive Vice President 1996 240,288 34,850 65,000 1,160
Development & Strategic
Planning(3)
Peter J. O'Gorman 1997 372,019 62,500 25,000 17,780
Executive Vice
President, 1996 363,462 62,500 17,260
International Store and 1995 345,000 62,500 15,000 15,570
Product Development
</TABLE>
- --------
(1) 1997 salary amounts include an additional week because fiscal 1997 was a
53-week year.
(2) Consists of, respectively, Company contributions to the Retirement/Savings
Plan and the cost for insurance, for 1997: Mr. Wood, ($6,400 and
$106,656); Mr. Haub, ($6,400 and $819); Mr. Corrado, ($11,150 and
$24,847); Mr. Graham, ($11,150 and $2,564); Mr. Malinsky, ($6,400 and
$2,784); and Mr. O'Gorman, ($11,150 and $6,630). Additionally, a tax
preparation and planning fee is included of $30,000 and $5,000
respectively for Messrs. Wood and Corrado.
(3) Mr. Malinsky was re-hired by the Company August 1, 1996.
EMPLOYMENT AND TERMINATION AGREEMENTS
Mr. Wood's employment contract which expired April 30, 1998, provided for a
minimum base annual salary of $875,000, regular Company benefits, 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 as well as 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. 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
7
<PAGE>
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.
Effective May 1, 1998, Mr. Wood became non-executive Chairman of the Board, at
a salary of $400,000 with no entitlement to an incentive bonus. He will remain
Chairman of the Board until April 30, 2001 and during such time shall remain
entitled to an office and certain executive level benefits and services,
including transportation and security. By a separate Phantom Stock Agreement
dated December 1, 1988 between Tengelmann and Mr. Wood, as amended February 3,
1994, Tengelmann grants to him 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. Malinsky's employment
contract provides a minimum base annual salary of $425,000, an initial bonus
base of $125,000 under the management incentive plan, a sign on bonus of
65,000 stock options which were granted in 1996, life insurance coverage in
the amount of $1,000,000, membership in SERP and other benefits applicable to
his position. In the event Mr. Malinsky is terminated involuntarily without
cause, he is entitled to one year's salary. Mr. O'Gorman, who is vested in his
pension under SERP, has an entitlement to an unreduced benefit at age 62.
OPTION TABLES
The following tables provide information with respect to stock options/stock
appreciation rights ("SARs") granted to or exercised by the named executive
officers during the last fiscal year and the fiscal year-end value of options
held by such officers.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS EXERCISE
OPTION/SARS GRANTED TO OR BASE GRANT DATE
GRANTED EMPLOYEES IN PRICE EXPIRATION PRESENT
(#)(1) FY(2) ($/SH) DATE VALUE($)(3)
----------- ------------ -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Christian Haub........ 100,000 29.6 $27.750 3/17/07 $1,091,000
Peter O'Gorman........ 25,000 7.4 $26.125 5/12/07 253,000
</TABLE>
- --------
(1) The options vest in 25% increments commencing on the first anniversary of
the grant. All grants have a ten year term.
(2) Based on total grants during the year of 337,500.
(3) These values were calculated using the Black Scholes option pricing model.
The Black-Scholes model is a complicated mathematical formula which is
widely used and accepted for valuing traded stock options. The model is
premised on immediate exercisability and transferability of the options.
This is not generally true for the Company's options granted to executive
officers and other employees. Therefore, the values shown are purely
theoretical and do not reflect the market value of the Company's stock at
a future date. In addition to the stock prices at time of grants and the
exercise prices, which are identical, and the ten-year term of each
option, the following assumptions were used to calculate the values shown
for options granted during fiscal 1997: expected dividend yield of 1.44
percent and 1.53 percent, expected stock price volatility (30 percent
based on the Bloomburg historical price volatility calculation), risk-free
rate of return of
8
<PAGE>
6.64 percent and 6.59 percent and a weighted average of 7 years from date
of grant to date of exercise. If the named officers realize the grant date
values shown in the table, such values will be less than one percent of the
total shareholder appreciation.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
SHARES AT FY-END AT FY-END (1)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
(#) ($) (#) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
James Wood.............. None 0 700,000 0 1,137,500 0
Christian Haub.......... None 0 57,500 112,500 251,719 300,781
Fred Corrado............ None 0 70,000 12,500 273,281 32,031
George Graham........... None 0 36,875 7,500 75,117 19,219
Aaron Malinsky.......... None 0 16,250 48,750 47,734 143,203
Peter J. O'Gorman....... 25,000 188,750 27,500 32,500 47,656 127,031
</TABLE>
- --------
(1) Based on the closing price of the Common Stock on February 27, 1998,
$30.4375.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------
REMUNERATION 15 20 25 30 35
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$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
</TABLE>
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 Messrs. Wood and Haub. Mr. Wood's entitlement to a
pension benefit 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 which is an offset to his
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 of 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. Malinsky, 20 years; and Mr. O'Gorman, 20
years.
9
<PAGE>
PERFORMANCE GRAPHS
The performance graph as set forth below 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 the peer group of
companies in the retail grocery industry as used in prior years 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 26, 1993, and that dividends paid during
the period were reinvested to purchase additional shares.
--------------
PEER GROUP
--------------
100
106
105
117
132
183
(Company fiscal year ends-last Saturday in February)
The performance graph set forth below makes a similar comparison except
using a larger peer group of eleven companies. The change is due to the
diminution of the prior peer group on account of the bankruptcy of an included
company. The new peer group deletes Bruno's, Inc. and adds Albertsons, Inc.,
Food Lion, Inc., Fred Meyer, Inc., Hannaford Co., The Penn Traffic Company,
and Winn Dixie Stores, Inc.
----------------
OLD PEER GROUP
----------------
100
114
112
147
196
223
(Company fiscal year ends-last Saturday in February)
10
<PAGE>
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 chief executive officers and the
other four 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 utilized in
determining the appropriate salary for an officer. For the named executive
officers, during the 1997 fiscal year a salary increase of 6% was granted to
Fred Corrado who had not received a salary increase for two years.
ANNUAL INCENTIVE PLAN
The Company has an annual management incentive plan which, for executive
officers, provides target bonus awards contingent upon the attainment of
goals, with the maximum bonus determined by the 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 goals comprise
profit and management objectives with the addition of sales for those
executives responsible for an operating segment of the business. 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.
Seventy-five percent of the executive's bonus is predicated on the
attainment of the profit, and if applicable, sales goals. The profit and sales
goals for the 1997 fiscal year were established by the Compensation Policy
Committee taking 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. Twenty-five percent of
such bonus is attributable to the achievement of the management objectives. On
the Compensation Policy Committee's recommendation, the Board confirmed that
the management objectives were achieved for purposes of the management
incentive plan and approved the payment of the profit and sales bonuses earned
and the contractually committed bonuses. Overall a total management incentive
bonus for the fiscal year ranging from 25% to 100% of the executive officer's
target bonus was paid.
11
<PAGE>
EQUITY BASED COMPENSATION
The Company's 1994 Stock Option Plan, 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 1997 fiscal year
options/SARs were awarded to two of the named executive officers as set forth
in the Options/SAR Grants in Last Fiscal Year, supra.
DISCUSSION OF FISCAL 1997 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICERS
The Compensation Policy Committee recommends the compensation level of the
Chief Executive Officer, taking into account all of the factors described in
this report. During fiscal 1997 this office was shared by Messrs. Wood and
Haub. 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 1997 annual salary reflects salary
increases granted through 1993 when he received his last increase. Under the
terms of his Employment Agreement, Mr. Wood received a management incentive
bonus equal to 1% of pretax profit of the Company. Mr. Haub's salary remained
unchanged; however, for the 1998 fiscal year wherein effective May 1, 1998 he
became the sole chief executive officer, the Compensation Policy Committee has
approved a salary of $600,000, and an incentive bonus base of $330,000 based
upon a report received for this transition period from Sibson & Company, an
executive compensation consultant firm engaged by the Committee. Mr. Haub also
received a grant of 50,000 stock options effective March 24, 1998.
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 Mr. James Wood's compensation will not be deductible in respect of the 1997
fiscal year. Effective April 2, 1997 Christian Haub was elected Co-Chief
Executive Officer, thereafter serving in such capacity with James Wood. The
salary and bonuses of each of the other named executive officers for the 1997
fiscal year and the 1998 fiscal year including the compensation of Christian
Haub, 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-
two 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.
12
<PAGE>
STOCKHOLDER PROPOSALS
The Company will consider including a stockholder's proposal for action at
the 1999 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 28, 1999.
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 28, 1998
EACH PERSON SOLICITED BY THIS PROXY STATEMENT, INCLUDING ANY PERSON WHO ON
MAY 19, 1998 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.
13
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
JULY 14, 1998
Please Detach and Mail in the Envelope Provided
- --------------------------------------------------------------------------------
A [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
[ ]
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
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the following line):
- ----------------------------------------
2. Election of Deloitte & Touche LLP as independent auditors for the fiscal
year ending February 27, 1999. (the directors favor a vote "for")
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
The Confidential Voting Instruction form represents voting rights in the
following number of equivalent shares of A & P Common Stock as of May 19, 1998.
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 or estate should be indicated.
<PAGE>
- --------------------------------------------------------------------------------
CONFIDENTIAL VOTING INSTRUCTION FORM
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
SAVINGS PLAN
BANK OF NEW YORK - TRUSTEE
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 14, 1998, 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.
By my signature on the reverse, I hereby acknowledge receipt of the Notice
of the Annual Meeting, the Proxy Statement of the Company dated May 28, 1998,
and a copy of the Annual Report.
Please sign, date and return this form before July 7, 1998. As to matters
coming before the meeting for which no signed direction is received by the
Trustee prior to July 7, 1998, 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.
<PAGE>
May 28, 1998
Dear Shareholder:
We are pleased to send you our 1997 Annual Report and Proxy Statement and to
invite you to attend the Annual Meeting of Shareholders to be held at 10:00 A.M.
(E.D.T.) on Tuesday, July 14, 1998 at Springfield Marriott Hotel, 1500 Main
Street, Springfield, Massachusetts.
If you are interested in further information about the Company, you are invited
to contact the Treasury Department at the executive offices in Montvale, New
Jersey or contact the A&P home page at www.aptea.com.
Sincerely,
Peter R. Brooker
Vice President, Planning
and Corporate Secretary
- Please Detach and Mail in the Envelope Provided -
- --------------------------------------------------------------------------------
A [X] Please mark your
votes as in this
example.
FOR ALL NOMINEES WITHHOLD
LISTED AT RIGHT (EXCEPT AUTHORITY TO
AS MARKED TO THE VOTE ALL NOMINEES
CONTRARY BELOW) LISTED AT RIGHT
(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. Teelen
R.L. Wetzel
J. Wood
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the following line):
- ----------------------------------------
2. Election of Deloitte & Touche LLP as independent auditors.
(THE DIRECTORS FAVOR A VOTE "FOR")
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Upon such other business as may properly come before said meeting and of any
adjournment 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 or estate should be indicated.
<PAGE>
- --------------------------------------------------------------------------------
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
PROXY - FOR THE ANNUAL MEETING - JULY 14, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned having received the Notice of Meeting and Proxy
Statement dated May 28, 1998, appoints CHRISTIAN HAUB, 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.
(E.D.T.) July 14, 1998, at Springfield Marriott Hotel, 1500 Main Street,
Springfield, Massachusetts, or at any adjournment thereof, with all powers which
the undersigned would possess if personally present.
THE SHARES REPRESENTED BY THIS PROXIES 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), ALL 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)
