SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT /X/
FILED BY A PARTY OTHER THAN THE REGISTRANT / /
CHECK THE APPROPRIATE BOX:
/ / PRELIMINARY PROXY STATEMENT
/X/ DEFINITIVE PROXY STATEMENT
/ / DEFINITIVE ADDITIONAL MATERIALS
/ / SOLICITING MATERIAL PURSUANT TO RULE 14a-11(c) OR RULE 14a-12
SUPERMARKETS GENERAL HOLDINGS CORPORATION
________________________________________________________________________________
(Name of Registrant as Specified in its Charter)
SUPERMARKETS GENERAL HOLDINGS CORPORATION
________________________________________________________________________________
(Name of Person Filing Proxy Statement)
Payment of Filing Fee (Check appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration No.:
3) Filing Party:
4) Date Filed:
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
301 BLAIR ROAD, P.O. BOX 5301, WOODBRIDGE, N.J. 07095
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 20, 1996
To the Stockholders of
Supermarkets General Holdings Corporation:
Notice is Hereby Given that an Annual Meeting (the "Annual Meeting") of the
Common Stockholder and the holders (the "Preferred Stockholders") of the $3.52
Cumulative Exchangeable Redeemable Preferred Stock (the "Preferred Stock") of
Supermarkets General Holdings Corporation, a Delaware corporation, will be held
on June 20, 1996, at 4:00 P.M., local time, at the offices of the Company
located at 200 Milik Street, Carteret, NJ 07008 for the following purposes:
1) For the Common Stockholder to consider and vote upon the election of
eight members of the Board of Directors to serve until the election of their
successors at any meeting of stockholders for the purpose of electing
directors; and
2) For the Preferred Stockholders to consider and vote upon the election
of two members of the Board of Directors to serve until either the election
of their successors at any meeting of stockholders for the purpose of
electing directors or upon the termination of the voting rights of the
Preferred Stockholders upon the payment in full of all accumulated dividends
on the Preferred Stock.
Only Stockholders of record at the close of business on May 10, 1996, the
record date for the Annual Meeting, are entitled to receive notice of and to
vote at the Annual Meeting and any adjournment or postponement thereof.
To ensure that your vote will be counted, please complete, date and sign the
enclosed proxy card and return it promptly in the enclosed prepaid envelope,
whether or not you plan to attend the Annual Meeting. Your proxy may be revoked
in the manner described in the accompanying Proxy Statement at any time before
it has been voted at the Annual Meeting.
By Order of the Board of Directors,
Marc A. Strassler
Secretary
Woodbridge, New Jersey
May 22, 1996
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
301 BLAIR ROAD, P.O. BOX 5301, WOODBRIDGE, N.J. 07095
-------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
-------------------
This Proxy Statement and the accompanying proxy card are furnished in
connection with the solicitation of proxies by the Board of Directors of
Supermarkets General Holdings Corporation ("Holdings" or the "Company") for use
in the Annual Meeting of the sole holder (SMG-II Holdings Corporation, the
"Common Stockholder" or "SMG-II") of the Class A common stock, par value $.01
per share (the "Common Stock") and the holders (the "Preferred Stockholders" and
together with the Common Stockholder the "Stockholders") of the $3.52 Cumulative
Exchangeable Redeemable Preferred Stock (the "Preferred Stock") of the Company
(the "Annual Meeting") to be held on June 20, 1996 and at any adjournment(s)
thereof, at the time and place set forth in the accompanying Notice of Annual
Meeting. The purpose of the Annual Meeting is for the Common Stockholder to
elect eight directors (the "Common Directors") and the Preferred Stockholders to
elect two additional directors (the "Preferred Directors") to the Board of
Directors of the Company. The Preferred Stockholders have the right to elect two
additional directors because the Company has not paid quarterly dividends on the
Preferred Stock for 13 consecutive quarters. This Proxy Statement and the
accompanying proxy card were mailed to the Common Stockholder and the Preferred
Stockholders on or about May 23, 1996.
VOTING AND REVOCATION OF PROXIES
All holders of shares of Common Stock and Preferred Stock which are
represented at the Annual Meeting by properly executed proxies received prior to
or at the Annual Meeting, and not revoked, will be voted at the Annual Meeting
in accordance with the instructions indicated on such proxies. If no
instructions are indicated, such proxies will be voted FOR the election by the
Common Stockholder of each of the eight Nominees and by the Preferred
Stockholders of each of the two additional nominees for the Board of Directors
nominated by the Company. There are no matters, other than the election of the
Preferred Directors by the Preferred Stockholders that may properly be presented
by the Preferred Stockholders for consideration at the Annual Meeting.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of the Company, at or before the taking of the vote at the
Annual Meeting, a written notice of revocation bearing a later date than the
proxy, (ii) duly executing a subsequent proxy relating to the same Common Stock
or Preferred Stock and delivering it to the Secretary of the Company before the
Annual Meeting or (iii) attending the Annual Meeting and voting in person
(although attendance at the Annual Meeting will not in and of itself constitute
a revocation of a proxy). Any written notice revoking a proxy should be sent to:
Supermarkets General Holdings Corporation, 301 Blair Road, P.O. Box 5301,
Woodbridge, N.J. 07095, Attention: Secretary, or hand delivered to the Secretary
at or before the taking of the vote at the Annual Meeting.
RECORD DATE; VOTING AT THE ANNUAL MEETING
The Board of Directors has fixed May 10, 1996 as the Record Date for the
determination of Stockholders entitled to notice of and to vote at the Annual
Meeting. Accordingly, only holders of record of Common Stock or Preferred Stock
on the Record Date will be entitled to notice of and to vote at the Annual
Meeting or at any adjournments or postponements thereof. As of the Record Date,
the Common Stock of the Company outstanding and entitled to vote at the Annual
Meeting consisted of
<PAGE>
1,075,000 shares, all held by the Common Stockholder and the Preferred Stock of
the Company outstanding and entitled to vote at the Annual Meeting consisted of
4,890,671 shares, held by approximately 1,000 holders of record. The Common
Stockholder is obligated, under the terms of the SMG-II Stockholders Agreement
(as hereinafter defined), to re-elect the Common Directors. Each holder of
record of Preferred Stock on the Record Date is entitled to cast one vote per
share of Preferred Stock on each nominee properly nominated for the vote of
Preferred Stockholders, exercisable in person or by properly executed proxy, at
the Annual Meeting. The presence, in person or by properly executed proxy, of
the holders of a majority of the outstanding Preferred Stock entitled to vote is
necessary to constitute a quorum at the Annual Meeting for the purpose of
electing two Preferred Directors.
The By-Laws of the Company provide that a vote of the majority of the
Preferred Stock, present in person or proxy at the Annual Meeting, is required
to elect the two additional nominees to the Board of Directors as Preferred
Directors. Abstentions and broker non-votes will have the effect of a negative
vote.
PROXY SOLICITATION
Proxies are being solicited by and on behalf of the Board of Directors. All
expenses of this solicitation, including the cost of preparing and mailing this
Proxy Statement, will be borne by the Company. In addition to solicitation by
use of the mails, proxies may be solicited by directors, officers and employees
of the Company in person or by telephone, telegram or other means of
communication. Such directors, officers and employees will not be additionally
compensated, but may be reimbursed for out-of-pocket expenses in connection with
such solicitation. Arrangements will also be made with custodians, nominees and
fiduciaries for forwarding of proxy solicitation materials to beneficial owners
of Preferred Stock held of record by such custodians, nominees and fiduciaries,
and the Company may reimburse such custodians, nominees and fiduciaries for
reasonable expenses incurred in connection therewith.
INTRODUCTION
Pursuant to the Certificate of Stock Designation for the Preferred Stock
(the "Certificate of Designation"), the Company was required to pay cash
dividends to the Preferred Stockholders at an annual rate of $3.52 per share
beginning on January 15, 1993. Such dividends are cumulative and have accrued
since that time. The Certificate of Designation provides that the Preferred
Stock is non-voting, except that if an amount equal to six quarterly dividends
is in arrears in whole, or in part, the Preferred Stockholders voting as a class
are entitled to elect an additional two members to the Board of Directors of the
Company. The Company is currently in arrears on the payment of 13 quarterly
dividends, and therefore the Preferred Stockholders presently have the right to
elect two Preferred Directors.
The Annual Meeting to which this proxy statement relates is being called by
a proper officer of the Company.
The Company is a wholly-owned subsidiary of the Common Stockholder, SMG-II
Holdings Corporation, a privately held company, a majority of whose capital
stock is held by affiliates of Merrill Lynch & Co. (the "ML Investors" or
"Merrill Lynch Investors"). Merrill Lynch & Co. ("ML & Co.") is a financial
services holding company providing investment and financing, real estate,
insurance and related services. The Company's primary business activity is the
management of its operating subsidiary, Pathmark Stores, Inc. ("Pathmark").
ANNUAL REPORT
A copy of the Annual Report of the Company on Form 10-K for the fiscal year
ended February 3, 1996 accompanies this Proxy Statement.
2
<PAGE>
(a) DIRECTORS OF THE COMPANY
The following table sets forth the name, age, principal occupation or
employment at the present time and during the last five years, and the name and
principal business of any corporation or other organization in which such
occupation or employment is or was conducted, of each nominee for election as a
director.
Pursuant to a stockholders agreement among SMG-II and its stockholders dated
as of February 4, 1991 (the "SMG-II Stockholders Agreement"), the Merrill Lynch
Investors are entitled to designate seven directors, the Management Investors
are entitled to designate three directors and the Equitable Investors are
entitled to designate one director to Holdings' Board of Directors. Currently,
seven of the persons serving as directors were designated by the Merrill Lynch
Investors (Messrs. Boyle, Burke, Cuti, Michas, Khanna, McLean and Rubenstein),
none were designated by the Management Investors and one was designated by the
Equitable Investors (Mr. Gummeson). In accordance with said agreement, each of
the aforementioned individuals will be re-elected to the Board of Directors of
the Company by the vote of the Common Stockholder of the Company at or before
the Annual Meeting. No family relationship exists between any director or
nominee and any other director or nominee or executive officer of the Company.
See "Certain Relationships and Related Transactions."
<TABLE>
<CAPTION>
DIRECTOR OF THE
NAME, AGE, PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS COMPANY SINCE
- ------------------------------------------------------------------------------ ---------------
<S> <C>
NOMINEES TO BE ELECTED BY COMMON STOCKHOLDER
JOHN W. BOYLE, 67, Chairman and Chief Executive Officer of the Company. Vice 1996
Chairman (retired), Eckerd Corporation, a drug store chain, between 1983 and
1995. Mr. Boyle is also a Director of Eckerd Corporation.(1)
JAMES J. BURKE, JR., 44, Partner and a Director of Stonington Partners, Inc. 1988
("SPI"), a private investment firm, since 1993, and a Director of Merrill
Lynch Capital Partners, Inc. ("MLCP") since 1987; Partner of MLCP from 1993
to 1994; President and Chief Executive Officer of MLCP from1987 to 1993. Mr.
Burke was also a Managing Director of Merrill Lynch & Co. ("ML & Co.") until
1994. Mr. Burke is also a Director of Ann Taylor Stores Corp., Borg-Warner
Security Corp., Education Management Corp., United Artists Theatre Circuit,
Inc. and Wherehouse Entertainment, Inc.
ANTHONY J. CUTI, 50, Chairman and Chief Executive Officer of Duane Reade, 1993
Inc., a drug store chain (since April 1996); President of the Company from
August 1993 to April 1996, and Chief Financial Officer from October 1990 to
September 1994; Executive Vice President from October 1990 to August 1993.
U. PETER C. GUMMESON, 37, Managing Director of Alliance Corporate Finance 1987
Group, Incorporated, an investment firm affiliated with the Equitable Life
Assurance Society of the United States (the "Equitable") and an investment
officer of the Equitable. Mr. Gummeson is also a director of U.S.
Foodservice, Inc., RI Holdings Corp., and Sports Holdings Corp.
SUNIL C. KHANNA, 39, Principal of SPI since 1993; Principal of MLCP from 1993 1987
to 1994; Vice President of MLCP from 1989 to 1993; a Director of the
Investment Banking Division of ML & Co. from 1993 to 1994, and a Vice
President thereof prior thereto. Mr. Khanna is also a Director of Ithaca
Holdings, Inc.
STEPHEN M. McLEAN, 38, Partner and a Director of SPI since 1993; Partner of 1987
MLCP from 1993 to 1994; Senior Vice President of MLCP from 1987 to 1993;
Director of MLCP since 1987; Managing Director of the Investment Banking
Division of ML & Co. until 1994. Mr. McLean is also a Director of CMI
Industries, Inc., Dictaphone Corporation and Ithaca Holdings, Inc.
</TABLE>
- ------------
(1) Mr. Boyle was retained on March 20, 1996 to act as the Company's interim
Chairman and Chief Executive Officer until a successor is chosen. He
replaces Jack Futterman who retired on March 20, 1996.
3
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR OF THE
NAME, AGE, PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS COMPANY SINCE
- ------------------------------------------------------------------------------ ---------------
<S> <C>
ALEXIS P. MICHAS, 38, Partner and a Director of SPI since 1993, and a Director 1994
of MLCP since 1989; Partner of MLCP from 1993 to 1994; Senior Vice President
of MLCP from 1989 to 1993; Managing Director of Investment Banking Division
of ML & Co. from 1991 to 1994; Director in the Investment Banking Division
of ML & Co. from 1990 to 1991. Mr. Michas is also a Director of Blue Bird
Corporation, Borg-Warner Automotive, Inc., Borg-Warner Security Corp.,
Dictaphone Corporation and Eckerd Corporation.
JERRY G. RUBENSTEIN, 66, Managing Partner, Omni Management Associates; 1988
Consultant to MLCP since 1988.
</TABLE>
(B) NOMINEES FOR PREFERRED DIRECTORS OF THE COMPANY
The following table sets forth the name, age, principal occupation or
employment at the present time and during the last five years, and the name and
principal business of any corporation or other organization in which such
occupation or employment is or was conducted of the persons nominated to be
elected Preferred Directors of the Company by the Preferred Stockholders, all of
whom are citizens of the United States.
<TABLE>
<CAPTION>
DIRECTOR OF THE
NAME, AGE, PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS COMPANY SINCE
- ------------------------------------------------------------------------------ ---------------
<S> <C>
JAMES B. UPCHURCH, 37, President and Chief Operating Officer of Libra 1995
Investments, Inc., an NASD licensed broker/dealer since June 1991;
President, Upchurch & Company, Inc. from February 1991 to May 1991; Senior
Vice President, Investments, Columbia Savings & Loan Association, prior
thereto.
STEVEN L. VOLLA, 49, Chairman and Chief Executive Officer of Primary Health 1995
Systems, L.P., a hospital management company, since June 1994; Chairman,
President and Chief Executive Officer of American Health Care Management,
Inc., prior thereto.
</TABLE>
Pursuant to the SMG-II Stockholders Agreement, the Merrill Lynch Investors
(as defined under "Principal Stockholders") are entitled to designate seven
directors, the Management Investors are entitled to designate three directors
and The Equitable Investors are entitled to designate one director to Holdings'
Board of Directors. By having the ability to designate a majority of Holdings'
Board of Directors, the Merrill Lynch Investors will have the ability to control
the Company. Currently, seven of the persons serving as directors were
designated by the Merrill Lynch Investors (Messrs. Boyle, Burke, Cuti, Khanna,
Michas, McLean and Rubenstein), none was designated by the Management Investors
and one was designated by the Equitable Investors (Mr. Gummeson). No family
relationship exists between any director and any other director or executive
officer of the Company.
(C) EXECUTIVE OFFICERS
The following table sets forth the name, age, principal occupation or
employment at the present time and during the last five years, and the name of
any corporation or other organization in which such occupation or employment is
or was conducted, of the executive officers of the Company, all of whom are
citizens of the United States unless otherwise indicated and serve at the
discretion of the Board of Directors of the Company. The executive officers fo
the Company listed below were elected to office for
4
<PAGE>
an indefinite period of time. No family relationship exists between any
executive officer and any other executive officer or director of the Company.
<TABLE>
<CAPTION>
OFFICER OF THE
COMPANY
NAME AGE POSITIONS AND OFFICE SINCE(1)
- --------------------- --- --------------------------------------------- --------------
<S> <C> <C> <C>
JOHN W. BOYLE 67 Chairman and Chief Executive Officer (since 1996
March 1996)(2)
NEILL CROWLEY 53 Executive Vice President--Distribution since 1994
May 1995; Executive Vice President--
Marketing from May 1994 to May 1995;
Executive Vice President--Marketing and
Store Support, The Vons Companies, Inc. (a
supermarket chain) prior thereto.
ROBERT JOYCE 50 Executive Vice President--Operations (since 1989
January 1996; Senior Vice President--
Operations--from March 1995 to January 1996;
March 1995); Senior Vice President--
Administration prior thereto. Mr. Joyce
jointed the Company in 1963.
RON MARSHALL 42 Executive Vice President and Chief Financial 1994
Officer since October 1994. Senior Vice
President and Chief Financial Officer of
Dart Group Corporation (a diversified
retailer) from 1991 to September 1994. Vice
President and Chief Financial Officer of
Barnes and Noble Bookstores, Inc., prior
thereto.
RONALD RALLO 58 Executive Vice President--Merchandising 1993
(since May 1995; Senior Vice President--
Merchandising from July 1993 to May 1995);
Senior Vice President--Merchandising
Pathmark division (from September 1992 to
July 1993); Senior Vice
President--Perishable Merchandising,
Pathmark division prior thereto. Mr. Rallo
joined the Company in 1962.
JOSEPH W. ADELHARDT 49 Senior Vice President and Controller since 1987
January 1996; Vice President and Controller
prior thereto. Mr. Adelhardt joined the
Company in 1976.
HARVEY M. GUTMAN 50 Senior Vice President--Retail Development of 1990
the Company (since December 1991); Vice
President--Retail Development of the Company
(from October 1990 to December 1991); Vice
President--Grocery/Frozen Sales &
Merchandising, Pathmark division (from
January 1990 to September 1990); Vice
President--Non-Foods/Pharmacy Sales &
Merchandising, Pathmark division prior
thereto. Mr. Gutman joined the Company in
1976.
MAUREEN MCGURL 48 Vice President--Human Resources. Ms. McGurl 1984
joined the Company in 1973.
MARC A. STRASSLER 48 Vice President, Secretary and General Counsel 1987
(since December 1991); Secretary and General
Counsel prior thereto. Mr. Strassler joined
the Company in 1974.
</TABLE>
- ------------
(1) Includes service with Pathmark's predecessor.
(2) Member of the Company's Board of Directors.
5
<PAGE>
<TABLE>
<CAPTION>
OFFICER OF THE
COMPANY
NAME AGE POSITIONS AND OFFICE SINCE(1)
- --------------------- --- --------------------------------------------- --------------
<S> <C> <C> <C>
MYRON D. WAXBERG 62 Vice President and General Counsel--Real 1991
Estate (since December 1991); General
Counsel--Real Estate prior thereto. Mr.
Waxberg joined the Company in 1976.
</TABLE>
BOARD OF DIRECTORS AND ITS COMMITTEES
There were four meetings of the Board of Directors of Holdings in fiscal
year 1995. During fiscal year 1995, each Director attended at least 75% of the
aggregate of the total number of Board meetings held while he or she was a
Director, except for Mr. Volla, who attended 50% of the Board of Directors'
meetings held while he was a Director. The Board of Directors of Holdings does
not have Committees, but SMG-II has an Audit Committee (the "Audit Committee")
and a Compensation Committee (the "Compensation Committee") which, pursuant to
authority delegated by the Board of Directors, acts on behalf of the Company.
See "Compensation Committee Report on Executive Compensation."
The Audit Committee, which held two meetings in fiscal year 1995, recommends
the firm to be appointed as independent accountants to audit the financial
statements of SMG-II and its subsidiaries, discusses the scope and results of
the audit with the independent accountants, reviews with management and the
independent accountants the Company's interim and year-end operating results,
considers the adequacy of the internal accounting controls and audit procedures
of the Company and reviews the non-audit services to be performed by the
independent accountants. The members of the Audit Committee are Messrs. Khanna
and Rubenstein. Mr. Rubenstein attended 50% of the Audit Committee meetings held
in 1995 while he was a committee member.
The Compensation Committee, which held three meetings in fiscal year 1995,
reviews and recommends the compensation arrangements for top management of the
Company, including salaries, bonuses and, if directed by the Board, grants of
options to purchase shares under SMG-II's Management Investors Stock Option
Plan. The members of the Compensation Committee are Messrs. Burke, McLean and
Khanna. Mr. Burke attended 67% of the Compensation Committee meetings held while
he was a member in 1995.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the Company's executive officers and
directors, the Company believes that all Section 16(a) filing requirements
applicable to its executive officers, directors and greater than ten percent
beneficial owners were complied with during fiscal year 1995.
6
<PAGE>
EXECUTIVE COMPENSATION.
The following table summarizes compensation paid by the Company (including
its subsidiaries) for services rendered during fiscal 1995, 1994, and 1993 by
the Chief Executive Officer and four most highly compensated executives of the
Company other than the Chief Executive Officer (collectively, the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
---------------------------------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION FY SALARY($) BONUS($) ($)(1) OPTIONS(2) ($)(3)
- ------------------------------------ ------ --------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Jack Futterman(4)................... 1995 526,442 332,658 -- -- 5,250
Chairman and Chief Executive 1994 491,346 92,127 -- -- 5,250
Officer 1993 462,539 138,762 -- -- 8,254
Anthony J. Cuti(5).................. 1995 325,500 205,396 -- -- 5,250
President 1994 306,750 57,516 -- -- 5,250
1993 280,250 76,260 -- 3,000 8,254
Neill Crowley....................... 1995 247,212 112,241 -- -- 4,341
Executive Vice 1994 168,712 21,089 -- 1,000 --
President--Logistics
Ron Marshall........................ 1995 280,289 168,173 -- -- --
Executive Vice President and 1994 89,904 53,942 -- 2,000 --
Chief Financial Officer
Ronald Rallo........................ 1995 227,500 113,585 4,399 -- 5,250
Executive Vice President-- 1994 200,385 21,141 4,265 -- 5,250
Merchandising 1993 177,500 42,600 4,311 750 8,098
</TABLE>
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(1) Represents payments as reimbursement for interest paid to Holdings for a
loan of less than $60,000 from Holdings in connection with the purchase of
SMG-II Class A Common Stock and includes an amount sufficient to pay any
income taxes resulting therefrom after taking into account the value of any
deduction available as a result of the payment of such interest and taxes.
(2) Stock options shown were granted pursuant to the Management Investors 1987
Stock Option Plan of SMG-II (the "Plan") and relate to shares of Class A
Common Stock of SMG-II.
(3) Represents Pathmark's matching contribution to the SGC Savings Plan (the
"Savings Plan").
(4) Mr. Futterman, 62, retired on March 20, 1996.
(5) Mr. Cuti resigned as President on April 10, 1996.
None of the Named Executive Officers were granted stock options in the
fiscal year ended February 3, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS
FY-END (#)
EXERCISABLE/
NAME UNEXERCISABLE
- ---------------------------------------------------------------------------- ------------
<S> <C>
Jack Futterman.............................................................. 13,000/0
Anthony J. Cuti............................................................. 5,800/0
Neill Crowley............................................................... 666/334
Ron Marshall................................................................ 1,350/650
Ronald Rallo................................................................ 2,850/0
</TABLE>
- ------------
(1) Options shown were granted pursuant to the Plan and relate to shares of
Class A Common Stock of SMG-II. No options were exercised in Fiscal 1995 by
any of the Named Executive Officers.
7
<PAGE>
PENSION PLAN TABLE(1)
<TABLE>
<CAPTION>
YEARS OF SERVICE
-------------------------------------------------------------------------
FINAL AVERAGE PAY 10 15 20 25 30 35
- ------------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$150,000.......... $ 20,000 $ 30,000 $ 40,000 $ 50,000 $ 60,000 $ 60,000
200,000........... 26,667 40,000 53,333 66,667 80,000 80,000
225,000........... 30,000 45,000 60,000 75,000 90,000 90,000
250,000........... 33,333 50,000 66,667 83,333 100,000 100,000
300,000........... 40,000 60,000 80,000 100,000 120,000 120,000
350,000........... 46,667 70,000 93,333 116,667 140,000 140,000
400,000........... 53,333 80,000 106,667 133,333 160,000 160,000
450,000........... 60,000 90,000 120,000 150,000 180,000 180,000
500,000........... 66,667 100,000 133,333 166,667 200,000 200,000
550,000........... 73,333 110,000 146,667 183,333 220,000 220,000
600,000........... 80,000 120,000 160,000 200,000 240,000 240,000
650,000........... 86,667 130,000 173,333 216,667 260,000 260,000
700,000........... 93,333 140,000 186,667 233,333 280,000 280,000
750,000........... 100,000 150,000 200,000 250,000 300,000 300,000
</TABLE>
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(1) The table above illustrates the aggregate annual pension benefits payable
under the SGC Pension Plan and Excess Benefit Plan (collectively, the
"Pension Plans"). The retirement benefit for individuals with 30 years of
credited service is 40% of the individual's average compensation during his
or her highest five compensation years in the last ten years before
retirement, less one-half of the social security benefit received. The
retirement benefit is reduced by 3.33% for every year of credited service
less than 30. Covered compensation under the Pension Plans includes all cash
compensation subject to withholding plus amounts deferred under the Savings
Plans pursuant to Section 401(k) of the Internal Revenue Code of 1986, as
amended, and as to the Named Executive Officers, would be the amount set
forth in that table under the headings "Salary" and "Bonus". The table shows
the estimated annual benefits an individual would be entitled to receive if
normal retirement at age 65 occurred in January 1996 after the indicated
number of years of covered employment and if the average of the
participant's covered compensation for the five years out of the last ten
years of such employment yielding the highest such average equalled the
amounts indicated. The estimated annual benefits are based on the assumption
that the individual will receive retirement benefits in the form of a single
life annuity (married participants may elect a joint survivorship option)
and are before applicable deductions for social security benefits in effect
as of January 1996. As of December 31, 1995, the following individuals had
the number of years credited service indicated after their names: Mr.
Futterman, 22.6; Mr. Cuti, 4.0; Mr. Crowley, 0.5; Mr. Rallo, 30 and Mr.
Marshall, 0.0. As described below in "Compensation Plans and
Arrangements--Supplemental Retirement Agreements", each of the named
executives is party to a Supplemental Retirement Agreement with Pathmark.
COMPENSATION PLANS AND ARRANGEMENTS
Supplemental Retirement Agreements. The Company has entered into
supplemental retirement agreements with certain key executives, including the
Named Executive Officers, which provide that the executive will be paid upon
termination of employment after attainment of age 60 a supplemental pension
benefit in such an amount as to assure him or her an annual amount of pension
benefits payable under the supplemental retirement agreement, the Company's
qualified pension plans and certain other plans of the Company, including
Savings Plan balances as of March 31, 1983, (a) in the case of Mr. Futterman,
equal to $525,000, (b) in the case of Mr. Cuti equal to 30% of his final average
Compensation (as hereinafter defined) based on ten years of service with the
Company and increasing 1% per year for each year of service thereafter to a
maximum of 40% of his final average Compensation based on 20 years of service,
(c) in the case of Mr. Rallo equal to (i) 30% of his final average Compensation
based on ten years of service with the Company and increasing 1% per year for
each year of service thereafter, to a maximum of 40% of his final average
Compensation based on 20 years of service, or (ii) $150,000, whichever is less,
and (d) in the case of Messrs. Crowley and Marshall, equal
8
<PAGE>
to 12.5% of his final average Compensation based on five years of service with
the Company and increasing 2.5% per year for each year of service thereafter to
a maximum of 35% of his final average Compensation based on 14 years of service.
"Compensation" includes base salary and payments under the Executive Incentive
Plan, but excludes Company matching contributions under the Savings Plan and
cash awards under the Supermarkets' former Long-Term Incentive Plan. If the
executive leaves the Company prior to completing 20 years of service (other than
for disability), the supplemental benefit would be reduced proportionately.
Should the executive die, the surviving spouse then receiving or, if he or she
was not then receiving a supplemental pension benefit, the spouse would be
entitled to a benefit equal to two-thirds of the benefit to which the executive
would have been entitled, provided the executive has attained at least ten years
of service with the Company. Pursuant to the Resignation Agreement (as
hereinafter defined), Mr. Cuti shall be credited with 20 years of Vesting
Service for purposes of his Supplemental Retirement Agreement.
Employment Agreements: As of May 23, 1994, the Company entered into an
employment agreement with Mr. Crowley. As of September 9, 1994, the Company
entered into an employment agreement with Mr. Marshall. As of June 1, 1995, the
Company entered into an employment agreement with Mr. Rallo. The three above
mentioned employment agreements are hereinafter referred to collectively as the
"Employment Agreements". Each of the Employment Agreements is for an initial
term of 26 months, 28 months and two years for Messrs. Crowley, Marshall and
Rallo, respectively. The term of each Employment Agreement is automatically
extended for an additional year on (a) August 1, 1996 for Mr. Crowley and on
each successive August 1st thereafter; (b) February 1, 1997 for Mr. Marshall and
on each successive February 1st thereafter, and (c) June 1, 1996 for Mr. Rallo
and on each successive June 1st thereafter. Under the terms of his respective
Employment Agreement, each executive is entitled to a minimum annual base salary
of (a) $245,000 for Mr. Crowley; (b) $300,000 for Mr. Marshall, and (c) $245,000
for Mr. Rallo, which salary is subject to upward adjustment by the Company. The
Employment Agreements also provide that each executive shall be entitled to
receive an annual bonus of up to 60% of his annual base salary and shall be
provided the opportunity to participate in pension and welfare plans, programs
and arrangements that are generally made available to executives of Pathmark or
as may be deemed appropriate by the Compensation Committee of the Board of
Directors of SMG-II.
In the event one of the three above named executives' employment is
terminated by the Company without Cause (as defined in the Employment
Agreements), or the executive terminates his employment for Good Reason (as
defined in the Employment Agreements) prior to the termination of the applicable
Employment Agreement, such executive will be entitled to continue to receive his
base salary and continued coverage under health and insurance plans for the
period commencing on the date of such termination or resignation through the
date the applicable Employment Agreement would have expired had it not been
automatically renewed but for said termination or resignation, reduced by any
compensation or benefits which the executive is entitled to receive in
connection with his employment by another employer during said period.
Under the Employment Agreements, the executives agree not to compete with
the Company as long as they are receiving payments thereunder and the executives
also agree not to disclose confidential information.
On March 20, 1996 (the "Effective Date"), Mr. Futterman retired as Chairman
and Chief Executive Officer of the Company. Pursuant to an agreement entered
into as of said date (the "Retirement Agreement"), Mr. Futterman will be
entitled to receive his base salary at the annual rate of $525,000 per year
during the period, commencing on the day following the Effective Date and ending
on July 31, 1998, or the date of his death, if earlier (the "Benefit Period"),
plus the bonus or bonuses attributable to the financial targets set forth for
the Company under its Executive Incentive Plan ("EIP") that he would have earned
(a maximum of 75% of base salary) had his employment continued through the
Benefit Period, subject to the Company reaching the applicable financial targets
set under the EIP or any other bonus plan; provided however, that the minimum
bonus paid for each fiscal year of
9
<PAGE>
the Company ending during the Benefit Period will not be less than 25% of the
75% target amount. Additionally, Mr. Futterman will be entitled to receive
continued health coverage through the Benefit Period under the Company's health
and insurance plans applicable to him immediately prior to the Effective Date.
Each of the above described payments and benefits will be reduced by any
compensation or benefits he is entitled to receive in connection with any
employment by another employer during the Benefit Period; provided, however,
that such reduction will not apply to the first $100,000 of compensation and
benefits earned by Mr. Futterman for any calendar year during the Benefit
Period. The Retirement Agreement also provides that Mr. Futterman will be
entitled to be reimbursed by the Company for secretarial and office expenses
incurred by him during the two year period beginning September 1, 1996, up to
$30,000 per year (or an aggregate reimbursement of $60,000). Additionally,
pursuant to the terms of the Retirement Agreement, the Company made a cash lump
sum payment to Mr. Futterman of $1.5 million on April 1, 1996. Mr. Futterman has
agreed to be available to consult with the Company through December 31, 1996 and
not to compete with the Company during the period commencing with the Effective
Date and ending December 31, 1996.
On April 10, 1996 (the "Termination Date"), Mr. Cuti resigned as President
of the Company. Pursuant to an agreement entered into as of said date (the
"Resignation Agreement"), Mr. Cuti will be entitled to receive his base salary
at the annual rate of $325,000 per year during the period commencing on the day
following the Termination Date and ending on the second anniversary of the
Termination Date, or the date of his death, if earlier (the "Severance Period"),
plus the bonus or bonuses attributable to the financial targets set forth for
the Company under the EIP that he would have earned (a maximum of 75% of base
salary) had his employment continued through the Severance Period, subject to
the Company reaching the applicable financial targets set under the EIP or any
other bonus plan; provided, however, that the minimum bonus paid for each fiscal
year of the Company ending during the Severance Period will not be less than 25%
of the 75% target amount. Additionally, Mr. Cuti will be entitled to receive
continued health coverage through the Severance Period under the Company's
health and insurance plans applicable to him immediately prior to the
Termination Date. Each of the above described payments will be reduced by any
compensation or benefits he is entitled to receive in connection with any
employment by another employer during the Severance Period; provided, however,
that such reduction will not apply to the first $100,000 of compensation earned
by Mr. Cuti during the twelve-month period following the first anniversary of
the Termination Date and the first $100,000 of compensation earned during the
twelve-month period following the first anniversary of the Termination Date.
Additionally, pursuant to the terms of the Resignation Agreement, the Company
will make a cash lump sum payment to Mr. Cuti of $0.5 million on or before April
30, 1996 and will credit him with 20 years of vesting service for purposes of
determining his benefit under his Supplemental Retirement Agreement. Mr. Cuti
has agreed not to compete with the Company during the period commencing with the
Termination Date and ending December 31, 1996, except for his employment with
Duane Reade, Inc.
Compensation of Directors
Each director who is not employed by the Company or one of its subsidiaries,
SPI or the Equitable Investors or its affiliates receives an annual retainer of
$20,000 per year, plus travel expenses.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Burke, Khanna and McLean comprise the Compensation Committee and
were responsible for decisions concerning compensation of the executive officers
of the Company. Messrs. Burke and McLean are directors of MLCP and they, along
with Mr. Khanna, have been retained by MLCP as consultants. MLCP is an indirect
wholly-owned subsidiary of ML & Co. See "Security Ownership of Certain
Beneficial Ownership and Management."
10
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY
The Compensation Committee is composed entirely of non-employee directors
and is responsible for developing and making recommendations to the Board with
respect to the Company's executive compensation policies. The Compensation
Committee, pursuant to authority delegated by the Board of Directors, determines
on an annual basis the compensation to be paid to the Chief Executive Officer
and certain other executive officers of the Company and its subsidiaries.
The objectives of the Company's executive compensation program are to:
. Provide compensation that will attract and retain superior talent and
reward individual performance.
. Support the achievement of desired Company performance goals.
. Align the executive officers' interests with the interests of the
Company by placing a portion of pay at risk with payout dependent upon
corporate performance.
The executive compensation program is designed to provide an overall level
of compensation opportunity that is above the median level of the market
contingent on achieving superior levels of performance. Base salaries are
generally at or around the labor market median. Annual and long-term incentive
targets are established so that compensation is greater or less than the market
average depending on corporate and individual performance. The Compensation
Committee will use its discretion to set executive compensation where in its
judgement, circumstances warrant it.
Competitive pay levels are determined by reviewing compensation levels of
food retail and supermarket industries, as well as with a broader group of
companies of comparable size and complexity. The Company uses survey data from
several compensation consulting firms to determine these pay levels.
EXECUTIVE OFFICER COMPENSATION PROGRAM
The Company's executive officer compensation program is comprised of base
salary, annual cash incentive compensation, long-term incentive compensation in
the form of stock options, and various benefits, including medical and pension
plans generally available to non-union full-time associates of the Company.
BASE SALARY
Salary levels for executive officers, are determined by:
. evaluating each position's responsibilities and accountabilities, as
compared to other positions within the Company, and
. comparing to salaries at companies in the food retail and supermarket
industries and at other comparable companies as previously described.
Each year, a formal performance review is conducted and salary increases are
granted to reward performance under the Company's "Pay for Performance" program.
Increases to salary are influenced by 1) individual performance against
established goals, 2) an associate's position within his/her established salary
range, and 3) budgetary guidelines.
These salary increase guidelines are set each year, taking into account
published salary planning information from compensation consultants, economic
data available from the Bureau of Labor Statistics, surveys of selected food
retail and supermarket chains with whom we routinely share compensation data,
competitive position against the market, and expected Company financial
performance.
11
<PAGE>
To determine increases to the salaries of certain executive officers, the
Compensation Committee follows the "Pay for Performance" concept and considers
changes in responsibilities and any equity issues that may exist.
ANNUAL INCENTIVE COMPENSATION
The Executive Incentive Plan ("EIP") is the Company's annual incentive
program for executive officers. The purpose of the plan is to provide a direct
financial incentive in the form of an annual cash award to executives who
achieve pre-established individual performance goals and/or the Company's
financial goals. Goals for Company and business unit performance are set near
the beginning of each fiscal year and are measured based on Earnings Before
Interest, Taxes, Depreciation, Amortization and LIFO charges ("EBITDA").
Target incentive awards for executives range from 31.25% to 75% of base
salary and are set at a competitive level as previously discussed and depends on
the level of each position based on an evaluation of its responsibilities and
accountabilities and its contribution to Company results. Individual performance
is taken into account in determining bonuses. For Fiscal 1995, the Compensation
Committee authorized an incentive payment equal to 85% of maximum incentive
opportunity for each named executive officer, including the Chief Executive
Officer, based on the Company's performance against its financial targets. The
Compensation Committee authorized this payment in recognition of the favorable
level of operating cash flow achieved compared to the Company's key competitors
and compared to the prior year's results.
STOCK OPTION PROGRAM AND INVESTMENT OPPORTUNITY
The stock option program is the Company's long-term incentive plan for
executive officers. The objectives of the program are to align executive and
Company long-term interests by creating a strong and direct link between
executive pay and financial results, and to encourage executives to develop and
maintain a significant, long-term stock ownership position in the Company.
The 1987 Management Investor Stock Option Plan authorizes the Compensation
Committee to award stock options, either incentive or non-qualified, to key
executives at an option price which equals the fair market value of the
Company's Common Stock on the date of grant. Options are awarded based on an
executive's position level and contribution to Company results. Options have
ten-year terms. The amount, timing and type of awards are as the Committee, in
its discretion, deems appropriate.
In addition, certain executives are given the opportunity to invest in the
Company directly through the purchase of shares of Common Stock. Certain
executives can participate in a low-interest loan program to help finance stock
purchases.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Futterman's base pay is below the base compensation paid to chief
executives of many similar companies in the supermarket industry as reported in
published industry compensation surveys.
Mr. Futterman's salary has been below the established Company salary range
minimum for his position.
Mr. Futterman had been Chief Executive Officer since 1989 until his
retirement in March, 1996. At the beginning of fiscal 1995, Mr. Futterman's
salary was $500,000. Effective June 4, 1995, Mr. Futterman received a 5% merit
increase to $525,000 in light of his base salary being under Company minimum,
and under median of comparative companies.
As indicated above, Mr. Futterman received an incentive payment equal to 85%
of his maximum incentive opportunity (75% of base salary).
In 1995 no stock options were awarded to Mr. Futterman.
The Compensation Committee
Stephen M. McLean, Chairman
James. J. Burke, Jr.
Sunil C. Khanna
12
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Since February 4, 1991, all shares of the Holdings Common Stock are held by
SMG-II. All shares of SMG-II Capital stock are subject to the terms and
provisions of the SMG-II Stockholders Agreement. See Certain Relationships and
Related Transactions. As of May 14, 1996, the number of shares of (a) SMG-II (i)
Class A Common Stock, (ii) Class B Common Stock, (iii) Series A Preferred Stock,
and (iv) Series B Preferred Stock and (b) Holdings Preferred Stock beneficially
owned by the persons known by management of the Company to be the beneficial
owners of more than 5% of the outstanding shares of any class as "beneficial
ownership" has been defined under Rule 13d-3, as amended, under the Securities
Exchange Act of 1934, are set forth in the following table:
<TABLE>
<CAPTION>
NUMBER % OF
NAME OF SHARES CLASS
- --------------------------------------------------------------------- --------- --------
<S> <C> <C>
SMG-II Class A Common Stock
Merrill Lynch Capital Appreciation Partnership No. IX, L.P.(2)..... 488,704.8 67.3
ML Offshore LBO Partnership No. IX(2).............................. 12,424.7 1.7
Barfield House
St. Julians Avenue
St. Peter Port
Guernsey
Channel Islands
ML Employees LBO Partnership No. I, L.P.(2)........................ 12,148.6 1.7
ML IBK Positions, Inc.(3).......................................... 21,258.9 2.9
Merchant Banking L.P. No. 1(3)..................................... 8,119 1.1
Merrill Lynch KECALP L.P. 1987(3).................................. 7,344 1.0
CBC Capital Partners, Inc.(4)...................................... 30,000 4.1
270 Park Avenue
New York, NY 10017
Management and other employees (including former employees of 146,884 (1) 20.2
Pathmark)............................................................
301 Blair Road
Woodbridge, NJ 07095
SMG-II Class B Common Stock
The Equitable Life Assurance Society of the United States(5)....... 114,000 35.6
c/o Alliance Corporate Finance Group Incorporated
1345 Avenue of the Americas, 39th Floor
New York, NY 10005
Equitable Deal Flow Fund, L.P.(5).................................. 150,000 46.9
c/o Alliance Corporate Finance Group Incorporated
1345 Avenue of the Americas, 39th Floor
New York, NY 10005
Equitable Variable Life Insurance Company(5)....................... 36,000 11.3
c/o Alliance Corporate Finance Group Incorporated
1345 Avenue of the Americas, 39th Floor
New York, NY 10005
CBC Capital Partners, Inc.(4)...................................... 20,000 6.2
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NUMBER % OF
NAME OF SHARES CLASS
- --------------------------------------------------------------------- --------- --------
<S> <C> <C>
SMG-II Series A Preferred Stock(6)
Merrill Lynch Capital Appreciation Partnership No. B-X, L.P.(2).... 133,043 56.2
ML Offshore LBO Partnership No. B-X(2)............................. 40,950 17.3
MLCP Associates, L.P. No. II(2).................................... 1,740 .7
ML IBK Positions, Inc.(3).......................................... 46,344.5 19.6
Merchant Banking L.P. No. IV(3).................................... 3,779 1.6
Merrill Lynch KECALP L.P. 1989(3).................................. 7,000 3.0
Merrill Lynch KECALP L.P. 1991(3).................................. 3,874.5 1.6
SMG-II Series B Preferred Stock(6)
CBC Capital Partners, Inc.(4)...................................... 12,500 6.9
Equitable Variable Life Insurance Company(5)....................... 20,192 11.2
The Equitable Life Assurance Society of the United States(5)....... 63,942 35.4
Equitable Deal Flow Fund, L.P.(5).................................. 84,135 46.5
Holdings Preferred Stock(7)(8)
Fidelity Management & Research Company(9).......................... 680,248 13.9
82 Devonshire Street
Boston, MA 02109
Sun America, Inc................................................... 641,785 13.1
1 Sun American Center
Century City
Los Angeles, CA 90067-6022
Massachusetts Financial Services Company(10)....................... 591,925 12.1
500 Boylston Street
Boston, MA 02116
State Street Research & Management Company(12)..................... 494,740 10.1
One Financial Center, 38th Floor
Boston, MA 02111
IDS Financial Services, Inc.(11)................................... 359,972 7.3
80 South 8th Street
Minneapolis, MN 55440
</TABLE>
- ------------
(1) Includes presently exercisable options granted under the Plan for 73,759
shares of SMG-II Class A Common Stock held by Management Investors and 500
shares of SMG-II Class A Common Stock that SMG-II has agreed to sell to two
of the Company's former employees, including 250 shares to Mr. Cuti. Does
not include 39,187 options to purchase shares of SMG-II Class A Common
Stock granted to non-management employees of the Company, which options are
not exercisable until a public offering of SMG-II Common Stock occurs. See
Table on page 15.
(2) MLCP and its affiliates are the direct or indirect managing partners of ML
Offshore LBO Partnership No. IX, Merrill Lynch Capital Appreciation
Partnership No. IX, L.P., ML Employees LBO Partnership No. 1, L.P., Merrill
Lynch Capital Appreciation Partnership No. B-X, L.P., ML Offshore LBO
Partnership No. B-X and MLCP Associates, L.P. No. II. Such entities and
those disclosed in footnote (3) below, are referred to herein as the
"Merrill Lynch Investors" or ML Investors. The address of such entities is
c/o Merrill Lynch Capital Partners, Inc., in care of Stonington Partners,
Inc., 767 Fifth Avenue, New York, New York 10153. MLCP is an indirect
wholly owned subsidiary of ML&Co. The partners and principals of SPI
including Messrs. Burke, Michas, McLean and Khanna are consultants to MLCP.
(3) Merchant Banking L.P. No. 1, Merchant Banking L.P. No. IV, Merrill Lynch
KECALP L.P. 1987, Merrill Lynch KECALP L.P. 1989, Merrill Lynch KECALP L.P.
1991 and ML IBK Positions, Inc. are indirectly controlled by ML&Co. The
address of such entities is c/o
(footnotes continued on following page)
14
<PAGE>
(footnotes continued from preceding page)
James Caruso, Merrill Lynch & Co., Inc., World Financial Center, South
Tower, New York, New York 10080-6123.
(4) CBC Capital Partners, Inc. is a wholly owned subsidiary of Chase Manhattan
Corp.
(5) Such entities are referred to herein as the "Equitable Investors". The
Equitable Investors are separate purchasers who are affiliates of each
other.
(6) SMG-II Series A Preferred Stock and SMG-II Series B Preferred Stock are
collectively referred to herein as "SMG-II Preferred Stock". SMG-II
Preferred Stock may be converted into an equivalent number of shares of
common stock of SMG-II in accordance with its terms.
(7) Voting rights are limited to the election of two directors to the Board of
Holdings.
(8) The information with respect to State Street Research & Management Company
and IDS Financial Services, Inc. was derived from investment information
contained in semiannual reports filed with the Commission in 1995 and 1996.
The information with respect to Massachusetts Financial Services Company
was derived from investment information contained in the Annual Reports
filed with the Commission in 1995 and 1996. The information with respect to
Fidelity Management & Research Company was derived from investment
information in Forms N-30D and Annual Reports filed with the Commission in
1994 and 1995.
(9) To the best of the Company's knowledge, shares of Holdings Preferred Stock
are owned by five funds managed by Fidelity Management & Research Company.
Such shares are owned of record as follows: 249,727 shares by Fidelity
Capital & Income Fund, 243,979 shares by Fidelity Spartan High Income Fund,
100,562 shares by Fidelity Equity-Income Fund, 41,600 shares by Fidelity
Asset Manager, and 33,480 shares by Fidelity Advisor High Yield Fund.
(10) To the best of the Company's knowledge, shares of Holdings Preferred Stock
are owned by two funds managed by Massachusetts Financial Services Company.
Such shares are owned of record as follows: 569,098 shares by MFS High
Income Fund and 22,827 shares by MFS Multimarket Income Trust.
(11) To the best of the Company's knowledge, shares of Holdings Preferred Stock
are owned by two funds managed by American Express Financial Advisors. Such
shares are owned of record as follows: 275,000 shares by IDS Extra Income
Fund and 120,972 shares by IDS Bond Fund.
(12) To the best of the Company's knowledge, shares of Holdings Preferred Stock
are owned by two funds managed by State Street Research and Management
Company. Such shares are owned of record as follows: 18,200 by State Street
Research Equity Income Fund and 453,540 shares by State Street Research
High Income Fund.
15
<PAGE>
No officer or director claims beneficial ownership of any share of Holdings
Common Stock or of SMG-II stock other than SMG-II Class A Common Stock. The
number of shares of SMG-II Class A Common Stock and Holdings Preferred Stock
beneficially owned by each director, by each nominee for director, by each of
the five highest compensated executive officers and by all directors and all
current and executive officers as a group is as follows:
<TABLE>
<CAPTION>
SMG-II CLASS A
COMMON STOCK HOLDINGS PREFERRED
NAME NUMBER OF SHARES % OF CLASS NUMBER OF SHARES % OF CLASS
- ------------------------------------ ---------------- ---------- ------------------ ----------
<S> <C> <C> <C> <C>
John W. Boyle....................... -- -- -- --
James J. Burke, Jr.(1) ............. -- -- -- --
Anthony J. Cuti(2).................. 6,050 * -- --
Jack Futterman(2)................... 23,000 3.1 -- --
Neill Crowley(2).................... 666 * -- --
U. Peter C. Gummeson................ -- -- -- --
Sunil C. Khanna..................... 700 * -- --
Stephen M. McLean(1)................ -- -- -- --
Alexis P. Michas(1)................. -- -- -- --
Ron Marshall(2)..................... 1,350 * -- --
Ronald Rallo(2)..................... 3,250 * 966 *
Jerry G. Rubenstein(2).............. 2,500 * -- --
James B. Upchurch................... -- -- -- --
Steven L. Volla..................... -- -- -- --
Directors and Executive Officers as
a group(1)(2)..................... 50,751 6.9 966 *
</TABLE>
- ------------
* Less than 1%
(1) Does not include 550,000 shares of SMG-II Class A Common Stock or 236,731.5
shares of SMG-II Series A Preferred Stock owned beneficially by a group of
which MLCP is a part. Messrs. Burke, McLean and Michas, directors of MLCP,
disclaim beneficial ownership in all such shares.
(2) Includes 250 shares of SMG-II Class A Common Stock that SMG-II has agreed to
sell to Mr. Cuti and presently exercisable options granted under the Plan to
purchase shares of SMG-II Class A Common Stock, as follows: Mr. Cuti, 5,800;
Mr. Futterman, 13,000; Mr. Crowley, 666; Mr. Marshall, 1,350; Mr. Rallo,
2,850 and Mr. Rubenstein, 1,000, and all directors and officers as a group,
33,951.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During Fiscal 1995, the Company retained ML & Co. to advise it in connection
with its sale of its drug stores. The Company believes that the terms of the
transactions referred to under this paragraph are no less favorable than those
obtainable in transactions with unrelated persons. See "Security Ownership of
Certain Beneficial Owners and Management".
In connection with the sale of its drug store business, the Company used
approximately $21.8 million of the sale proceeds to partially prepay certain
indebtedness, including accrued interest and debt premium, held by the Equitable
Investors. Mr. Gummeson, a director of the Company, is an executive officer of a
subsidiary of the Equitable Life Assurance Society of the United States. See
Item 12 "Security Ownership of Certain Beneficial Owners and Management".
The holders of SMG-II Preferred Stock are a party with the holders of SMG-II
Common Stock to a stockholders agreement (the "SMG-II Stockholders Agreement"),
which, among other things, restricts the transferability of SMG-II capital stock
and relates to the corporate governance of SMG-II and Holdings. Among other
provisions, the SMG-II Stockholders Agreement requires a vote of at least 80% of
the members of the Board of Directors to cause the Company to conduct any
business other than that engaged in by the Company in February 1991 and the
approval of stockholders representing 66 2/3% of the number of shares of SMG-II
voting capital stock voting together as a single class for SMG-II to enter into
any Significant Transaction (as defined), including certain mergers, sales of
assets, acquisitions, sales or redemptions of stock, the amendment of the
certificate of incorporation or by-laws or the
16
<PAGE>
liquidation of SMG-II. The SMG-II Stockholders Agreement also provides that
SMG-II must obtain the prior written consent of the Equitable Investors with
respect to certain of these transactions and that the Equitable Investors have
certain preemptive rights with respect to the sale of capital stock of Holdings
or the Company.
The SMG-II Stockholders Agreement also contains an agreement of the
stockholders of SMG-II with respect to the composition of SMG-II's and Holdings'
Board of Directors. Under this agreement, the Merrill Lynch Investors will be
entitled to designate up to seven directors, the Management Investors will be
entitled to designate up to three directors and the Equitable Investors will be
entitled to designate one director to both of SMG-II's and Holdings' Boards of
Directors. Such agreement furthermore entitles the Merrill Lynch Investors to
designate a majority of Holdings' Board of Directors at all times. By having the
ability to designate a majority of Holdings' Board of Directors, the Merrill
Lynch Investors have the ability to control the Company. The Merrill Lynch
Investors are controlled by ML&Co.
In addition to the foregoing, the SMG-II Stockholders Agreement contains
terms restricting the transfer of SMG-II Common Stock and SMG-II Preferred Stock
(collectively, the "SMG-II Stock") by the stockholders of SMG-II, and providing
to the stockholders of SMG-II rights of first offer with respect to resales of
SMG-II Stock, rights of first refusal with respect to certain issuances of
shares of SMG-II Stock, certain rights to demand or participate in registrations
of shares of SMG-II Stock under the Securities Act and certain "tag-along"
rights.
The Company retained John W. Boyle, a Director of the Company, to act as its
interim Chairman and Chief Executive Officer for the period of March 20, 1996
through June 30, 1996 (the "Transition Period"). Under the terms of the
consulting arrangement between the Company and Mr. Boyle, the Company shall pay
Mr. Boyle a consulting fee of $41,667 per month plus living and travel expenses
during the Transition Period. In addition, Mr. Boyle will be entitled to a
completion bonus of $100,000 if he is still serving in the above capacities when
a new Chief Executive Officer is hired.
In March 1990, Jerry G. Rubenstein, a Director, borrowed from Holdings
$100,000 in order to help finance his purchase of Holdings' Class A Common
Stock. Subsequently, such shares of Holdings' Class A Common Stock were
exchanged for shares of SMG-II Class A Common Stock. The foregoing indebtedness
to Holdings is evidenced by a full recourse promissory note (the "Recourse
Note"). The Recourse Note is for a term of ten years and bears interest at the
rate of 8.02% per annum, payable annually. Except as otherwise provided in the
Recourse Note, no principal on such recourse loan shall be due and payable until
the tenth anniversary of the date of issue of such Recourse Note. Under the
terms of the agreement pursuant to which the shares of Holdings' Class A Common
Stock were exchanged for shares of SMG-II Class A Common Stock, the Company is
obligated to pay to each Management Investor who pays interest on his Recourse
Note (except under certain circumstances) an amount equal to such interest, plus
an amount sufficient to pay any income taxes resulting from the above described
payment after taking into account the value of any deduction available to him as
a result of the payment of such interest or taxes. As of April 1, 1996, Mr.
Rubenstein remained indebted to Holdings in the amount of $100,000.
By Order of the Board of Directors
Marc A. Strassler
Secretary
17
<PAGE>
[X] Please mark
your votes as
in this example.
In the absence of specific directions noted below, it is understood that the
undersigned's shares of Preferred Stock will be voted in favor of proposal No.
1. Receipt of a copy of the Annual Report on Form 10-K, Notice of Annual
Meeting of Stockholders, and Proxy Statement dated May 22, 1996 is hereby
acknowledged.
Item 1 - Proposal to elect James [ ] FOR [ ] WITHHOLD
Upchurch and Steven L. Volla
as directors
If you wish to vote the election of
directors and withhold authority to
vote for any of the individual
nominees, enter the name(s) of
such nominee(s) below.
WILL ATTEND [ ]
MEETING
Change of [ ]
address on
reverse side
SIGNATURE(S) DATE
-------------------------------------------------------
Note: Please sign as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
PROXY PREFERRED STOCK
SUPERMARKETS GENERAL
HOLDINGS CORPORATION
Proxy for Special Meeting of Preferred Stockholders, June 20, 1996
(The Solicitation of This Proxy is Made on Behalf of the Board of Directors)
The undersigned hereby appoints Ron Marshall, Joseph Adelhardt, and Marc
Strassler, or a majority of them, with full power of substitution and
revocation, as proxies to represent the undersigned at the Special Meeting of
Preferred Stockholders of Supermarkets General Holdings Corporation to be held
at 200 Milik Street, Carteret, New Jersey, on Thursday, June 20, 1996 at 4:00
P.M. local time, and at any adjournment thereof, and to vote the shares of
Preferred Stock the undersigned would be entitled to vote if personally present.
Change of Address
----------------------------------------
----------------------------------------
----------------------------------------
(If you have written in the above space,
please mark the corresponding box on
the reverse side of this card)
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
PLEASE DATE, SIGN AND MAIL THIS PROXY TODAY
