<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Definitive Proxy Materials
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
Rykoff-Sexton, Inc.
- - -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Rykoff-Sexton, Inc.
- - -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
Paid with initial filing on July 14, 1994.
[ ] $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 transactions applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
------------------------------------------------------------------------
(3) Filing party:
------------------------------------------------------------------------
(4) Date filed:
------------------------------------------------------------------------
- - ---------------
1 Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE> 2
RYKOFF-SEXTON, INC.
761 TERMINAL STREET
LOS ANGELES, CALIFORNIA 90021
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 9, 1994
------------------------
TO THE STOCKHOLDERS OF RYKOFF-SEXTON, INC.:
The Annual Meeting of Stockholders of Rykoff-Sexton, Inc. (the "Company")
will be held at the Sheraton Grande, 333 South Figueroa Street, Los Angeles,
California 90071 on Friday, September 9, 1994, at 10:00 A.M., or at any
adjournment thereof, for the following purposes:
1. To elect two persons to the Board of Directors for terms ending in
1997;
2. To increase the number of authorized shares of Common Stock from
twenty million (20,000,000) to forty million (40,000,000);
3. To ratify the appointment of Arthur Andersen & Co. as independent
public accountants for the Company for fiscal 1995; and
4. To transact any other business that may properly come before the
meeting or any adjournment thereof.
Pursuant to due action of the Board of Directors, stockholders of record as
of the close of business on July 20, 1994 will be entitled to vote at the
meeting or any adjournments thereof.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE AS PROMPTLY AS
POSSIBLE. IF YOU ATTEND THE MEETING, YOU MAY WITHDRAW THE PROXY AND VOTE IN
PERSON.
By Order of the Board of Directors
NEIL I. SELL
Secretary
July 28, 1994
<PAGE> 3
PROXY STATEMENT
OF
RYKOFF-SEXTON, INC.
761 TERMINAL STREET
LOS ANGELES, CALIFORNIA 90021
------------------------
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
SEPTEMBER 9, 1994
------------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Rykoff-Sexton, Inc. (the "Company") for use
at the Annual Meeting of Stockholders (the "Annual Meeting") of the Company to
be held on September 9, 1994 and any adjournment thereof. The approximate date
of mailing of this Proxy Statement and the accompanying proxy to stockholders is
July 28, 1994.
The number of outstanding voting securities of the Company at the close of
business on the record date, July 20, 1994, was 11,639,693 shares of Common
Stock, $.10 par value per share (the "Common Stock"). Each share of Common Stock
is entitled to one vote. Only stockholders of record at the close of business on
July 20, 1994, will be entitled to vote at the meeting or any adjournments
thereof.
The holders of a majority of the shares issued and outstanding and entitled
to vote at the Annual Meeting, present in person or by proxy, shall constitute a
quorum at the Annual Meeting. Directors are elected by plurality vote. Approval
of the increase in the number of authorized shares of Common Stock requires the
affirmative vote of a majority of the issued and outstanding shares of Common
Stock. Ratification of the appointment of the independent public accountants and
approval of all other matters to be acted upon at the Annual Meeting requires
the affirmative vote of the holders of a majority of the shares having voting
power and present in person or by proxy.
Votes cast in person or by proxy at the Annual Meeting will be tabulated by
the inspectors of election appointed for the meeting and will determine whether
or not a quorum is present. With respect to the election of directors, votes may
be cast in favor or withheld. Abstentions may be specified on all proposals
(other than the election of directors), will be counted for purposes of
determining the total votes cast on the matter for which such abstention is
noted and will have the effect of a negative vote on such matter. Broker
non-votes on a particular matter are not deemed to be shares present and
entitled to vote on such matter.
Each stockholder who signs and returns a proxy in the form enclosed with
this Proxy Statement may revoke the same at any time prior to its use by giving
notice of such revocation to the Company in writing or in open meeting. Unless
so revoked, the shares represented by each such proxy will be voted at the
meeting and any adjournment thereof. Presence at the meeting of a stockholder
who has signed a proxy does not alone revoke that proxy.
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<PAGE> 4
The Company will bear the cost of soliciting proxies for the meeting. The
Company will also reimburse brokerage houses and other custodians, nominees and
fiduciaries for their reasonable expenses in forwarding the soliciting material
to beneficial owners of stock. Proxies are being solicited primarily by mail,
but officers and regular employees of the Company may also solicit proxies
personally, by telephone or by special letter. The Company will also use the
services of Chemical Bank to aid in the solicitation of proxies at an
anticipated fee of $4,500 plus reasonable expenses.
ELECTION OF DIRECTORS
NOMINATION AND CLASSIFICATION
The Restated Certificate of Incorporation of the Company provides that the
Company's Board of Directors shall be divided into three classes and requires
that at each Annual Meeting, successors to directors whose terms expire at that
Annual Meeting shall be elected for three-year terms. The terms of the directors
in Class C expire with this Annual Meeting. The Board of Directors has nominated
Mr. R. Burt Gookin and Mr. Neil I. Sell for election as directors in Class C at
this meeting to serve for three-year terms expiring at the 1997 Annual Meeting
of Stockholders, or until their successors are elected and qualified. Both
nominees have consented to serve for the new term if elected.
All proxies will be voted in favor of the two nominees listed below unless
a contrary choice is specified. If prior to the Annual Meeting the Board of
Directors learns that a nominee will be unable to serve by reason of death,
incapacity or other unexpected occurrence, the proxies will be voted for the
election of such substitute nominee as may be selected by the Board of
Directors.
Biographical information for each person nominated and for each person
whose term of office as a director will continue after the Annual Meeting is set
forth below and on the following page.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE DIRECTOR
NAME AND AGE PAST FIVE YEAR AND DIRECTORSHIP SINCE
- - ------------------------------ ----------------------------------------------- --------
<S> <C> <C>
NOMINEES
CLASS C (TERMS ENDING IN 1997)
R. Burt Gookin (80)........... Retired since 1979. Mr. Gookin was previously 1985
Vice Chairman of the Board and Chief Executive
Officer of H. J. Heinz Company.
Neil I. Sell (53)............. Secretary of the Company. Mr. Sell is a partner 1982
in the law firm of Maslon Edelman Borman &
Brand. He is a director of Grand Casinos, Inc.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE DIRECTOR
NAME AND AGE PAST FIVE YEAR AND DIRECTORSHIP SINCE
- - ------------------------------ ----------------------------------------------- --------
<S> <C> <C>
CONTINUING DIRECTORS
CLASS A (TERMS EXPIRING IN
1996)
James I. Maslon (67).......... Retired since 1992. Mr. Maslon was previously 1962
Vice President--Manufacturing of the Company's
S.E. Rykoff & Co. division.
Robert G. Zeller (76)......... Retired since 1979. Mr. Zeller was previously 1972
Chairman of the Board and Chief Executive
Officer of F. Eberstadt & Co., Inc., an
investment banking firm. He is a director of
Salomon Inc.
CLASS B (TERMS EXPIRING IN
1995)
James P. Miscoll (59)......... Retired since 1992. Mr. Miscoll was previously 1992
Vice Chairman of BankAmerica Corporation. He is
a director of SPI Pharmaceuticals, Inc., Coast
Federal Financial, Inc., Northern Technology,
Inc., Montgomery-Watson, Inc., Winkler McManus
and CHELA (California Higher Education Loan
Authority).
Bernard Sweet (70)............ Retired since 1985. Mr. Sweet was previously 1978
President and Chief Executive Officer of
Republic Airlines, Inc. He is a director of G&K
Services, Inc.
Mark Van Stekelenburg (43).... President and Chief Executive Officer of the 1992
Company since December 1992. Mr. Van
Stekelenburg joined the Company in 1991 and was
Executive Vice President until December 1992.
He was previously President and Chief Executive
Officer of Grootverbruik Ahold, the foodservice
division of Royal Ahold, N.V., The Netherlands.
</TABLE>
3
<PAGE> 6
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors held fifteen meetings during the last fiscal year.
The Board of Directors has an Audit Committee, a Management Development --
Compensation Committee, a Stock Option Committee and a Nominating Committee.
The Company's Audit Committee, which consists of Messrs. James I. Maslon,
James P. Miscoll, Neil I. Sell, Bernard Sweet and Robert G. Zeller, held two
meetings during the last fiscal year. The Audit Committee recommends to the full
Board of Directors the engagement of the independent public accountants, reviews
the audit plan and results of the audit engagement, reviews the independence of
the auditors and reviews the adequacy of the Company's system of internal
accounting controls.
The Company's Management Development -- Compensation Committee, which
consists of Messrs. R. Burt Gookin, James P. Miscoll, Neil I. Sell and Robert G.
Zeller, held two meetings during the last fiscal year. The Management
Development -- Compensation Committee reviews the Company's remuneration
policies and practices, administers the Company's incentive compensation
programs and makes recommendations to the full Board of Directors in connection
with all compensation matters affecting the Company.
The Company's Stock Option Committee, which consists of Messrs. R. Burt
Gookin, James I. Maslon, James P. Miscoll and Bernard Sweet held one meeting
during the last fiscal year. The Stock Option Committee administers the
Rykoff-Sexton, Inc. 1980 Stock Option Plan, the 1988 Stock Option and
Compensation Plan and the 1989 Director Stock Option Plan.
The Company's Nominating Committee, which consists of Messrs. R. Burt
Gookin, James I. Maslon, Bernard Sweet and Robert G. Zeller, held one meeting
during the last fiscal year. The Nominating Committee makes recommendations to
the full Board of Directors on the following matters: the size and constituency
of the Board of Directors, the age limit for Board of Directors membership, the
filling of vacancies on the Board of Directors and the removal of any director
for cause. In recommending persons to the Board of Directors as potential
nominees for election as directors, the Nominating Committee will consider
written suggestions regarding the qualifications that nominees should possess,
but it will not entertain stockholder nominations of specific individuals.
COMPENSATION OF DIRECTORS
During fiscal 1994, directors who were not employees of the Company
received a retainer of $8,750, which was increased to an annual retainer of
$15,000 commencing June 20, 1994. Directors also receive a fee of $1,750 for
each meeting of the Board of Directors attended, $875 for each telephonic
meeting of the Board of Directors, and $500 for each committee meeting attended.
Pursuant to the 1989 Director Stock Option Plan, directors who are not employees
of the Company can elect to receive non-qualified stock options in lieu of up to
100% of their annual retainers through fiscal 1995. The Board of Directors has
determined to discontinue granting options under the 1989 Director Stock Option
Plan commencing in fiscal 1996. On May 2, 1993, Messrs. Sweet and Zeller each
received options to purchase 424 shares of common stock at an exercise price of
$1.00 per share in lieu of 100% of their annual retainer for fiscal 1994. The
number of stock options to be received is determined by dividing the deferred
amount of the annual retainer by the difference between the fair market value of
the common stock on the date of grant and the exercise price. These options have
a ten year term and generally become exercisable on the first
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<PAGE> 7
anniversary of the grant date. In addition, the 1993 Director Stock Option Plan
provides for an annual grant to non-employee directors of options to purchase
1,000 shares at an option exercise price equal to the fair market value of such
shares on the grant date. Each such option has a ten year term and generally
becomes exercisable on the first anniversary of the grant date. Messrs. Gookin,
Maslon, Miscoll, Sell, Sweet and Zeller each were granted options to purchase
1,000 shares at an exercise price of $17.375 on September 14, 1993. Each of
these directors also received a one-time grant of options to purchase 5,000
shares of common stock at an exercise price of $14.00 on June 21, 1993 pursuant
to the 1993 Director Stock Option Plan. These options have ten year terms and
generally become exercisable in three equal annual installments commencing on
June 21, 1994.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth all persons known by the Company to be the
beneficial owners of more than five percent (5%) of the outstanding Common Stock
of the Company as of the record date:
<TABLE>
<CAPTION>
SHARES PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF CLASS
- - -------------------------------------------------------------- --------------------- --------
<S> <C> <C>
State Farm Mutual Automobile Insurance Company and related
entities.................................................... 1,297,128 11.14%
One State Farm Plaza
Bloomington, Illinois 61701
The Prudential Insurance Company of America................... 806,425 6.93%
Prudential Plaza
Newark, New Jersey 07102-3777
John Hancock Mutual Life Insurance Company and related
entities.................................................... 748,850 6.43%
P.O. Box 111
Boston, Massachusetts 02117
Archer Daniels Midland Company................................ 603,700 5.19%
4666 Faries Parkway
P.O. Box 1470
Decatur, Illinois 62525
</TABLE>
- - ---------------
(1) Based on the most recent Schedule 13D or 13G on file with the Securities and
Exchange Commission.
5
<PAGE> 8
The following table sets forth beneficial ownership of Common Stock as of
the record date for each director of the Company, each executive officer named
in the Summary Compensation Table under "EXECUTIVE COMPENSATION" herein and all
directors and executive officers as a group. Unless otherwise stated and subject
to applicable community property laws, each beneficial owner has sole voting and
investment powers with respect to the shares shown.
<TABLE>
<CAPTION>
SHARES PERCENT
NAME BENEFICIALLY OWNED(1) OF CLASS
- - -------------------------------------------------------------- --------------------- --------
<S> <C> <C>
Mark Van Stekelenburg......................................... 164,675(1) 1.40%
Harold E. Feather............................................. 56,998(2) *
R. Burt Gookin................................................ 4,292(3) *
Alan V. Giuliani.............................................. 26,688(4) *
Robert J. Harter, Jr.......................................... 20,000(5) *
Richard J. Martin............................................. 15,125(6) *
James I. Maslon............................................... 309,623(7) 2.66%
James P. Miscoll.............................................. 4,667(8) *
Neil I. Sell.................................................. 4,998(9) *
Bernard Sweet................................................. 7,603(10) *
Robert G. Zeller.............................................. 25,478(11) *
All directors and executive officers as a group (sixteen
persons).................................................... 705,037(12) 5.90%
</TABLE>
- - ---------------
* Less than 1%.
(1) Includes options exercisable within 60 days to purchase 152,625 shares
pursuant to the 1988 Stock Option and Compensation Plan. Also includes 50
shares owned by one of his children.
(2) Includes options exercisable within 60 days to purchase 45,625 shares
pursuant to the 1980 Stock Option Plan and the 1988 Stock Option and
Compensation Plan.
(3) Includes 1,375 shares owned by his spouse. Includes options exercisable to
purchase 2,667 shares within 60 days pursuant to the 1993 Director Stock
Option Plan.
(4) Includes options exercisable within 60 days to purchase 21,688 shares
pursuant to the 1988 Stock Option and Compensation Plan.
(5) Includes options exercisable within 60 days to purchase 16,000 shares
pursuant to the 1988 Stock Option and Compensation Plan.
(6) Includes options exercisable within 60 days to purchase 14,813 shares
pursuant to the 1988 Stock Option and Compensation Plan.
(7) Includes 27,619 shares held of record by Mr. Maslon as trustee for his
children, 162,768 shares held of record by Mr. Maslon as co-trustee for his
mother and 100 shares owned by his spouse. Includes options exercisable
within 60 days to purchase 2,667 shares pursuant to the 1993 Director Stock
Option Plan.
(8) Includes options exercisable to purchase 2,667 shares within 60 days
pursuant to the 1993 Director Stock Option Plan.
6
<PAGE> 9
(9) Includes options exercisable to purchase 2,667 shares within 60 days
pursuant to the 1993 Director Stock Option Plan.
(10) Includes 1,125 shares owned by his spouse. Also includes options
exercisable within 60 days to purchase 5,228 shares pursuant to the 1989
Director Stock Option Plan and the 1993 Director Stock Option Plan.
(11) Includes 2,250 shares owned by his spouse. Also includes options
exercisable within 60 days to purchase 3,091 shares pursuant to the 1989
Director Stock Option Plan and the 1993 Director Stock Option Plan.
(12) Includes options exercisable within 60 days to purchase an aggregate of
316,623 shares pursuant to the Company's stock option plans.
The information contained in the foregoing footnotes is for explanatory
purposes only and none of the persons named therein is the beneficial owner of
shares designated as beneficially owned by or held in trust for any other
person, including family members.
REPORT OF THE MANAGEMENT DEVELOPMENT -- COMPENSATION COMMITTEE
AND THE STOCK OPTION COMMITTEE
The following report of the Management Development -- Compensation
Committee and the Stock Option Committee, as well as the Performance Graph set
forth herein, are not soliciting materials, are not deemed filed with the
Securities and Exchange Commission (the "SEC") and are not incorporated by
reference in any filing of the Company under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), whether made before or after the date of this Proxy Statement and
irrespective of any general incorporation language in any such filing.
As described on page four of this Proxy Statement, the Management
Development -- Compensation Committee is responsible for establishing and
reviewing the Company's executive compensation policies and advising the full
Board of Directors on all compensation matters, and the Stock Option Committee
is responsible for the administration of the Company's stock option plans,
except for the 1993 Director Stock Option Plan, which is administered by the
entire Board of Directors. Both the Management Development -- Compensation
Committee and the Stock Option Committee (collectively, the "Committees") are
composed exclusively of outside directors. All decisions of the Management
Development -- Compensation Committee relating to compensation of the President
and Chief Executive Officer and the executives who report directly to the
President and Chief Executive Officer are reviewed and approved by the full
Board of Directors. Decisions by the Stock Option Committee on grants or awards
pursuant to the Company's 1988 Stock Option and Compensation Plan (the "1988
Plan") are made solely by the Stock Option Committee.
The Company's executive compensation policies are designed to foster the
Company's business goals of achieving profitable growth and premium returns to
stockholders. The principal objectives of these policies are as follows: (1) to
attract, motivate and retain executives of outstanding ability and character,
(2) to provide rewards that are closely related to the performance of the
Company and the individual executive by placing a significant portion of
compensation at risk and (3) to align the interests of executives and
stockholders through long-term, equity-based incentives. Towers Perrin assists
both
7
<PAGE> 10
the Management Development -- Compensation Committee and the Stock Option
Committee in developing and evaluating compensation plans in order to achieve
the foregoing objectives. Towers Perrin also provides data and advice in
connection with specific compensation decisions.
This report discusses the manner in which base salaries, annual cash
bonuses and long term, equity-based incentives for the Company's President and
Chief Executive Officer and the other executive officers named in the Summary
Compensation Table (the "Named Executives") were determined for the 1994 fiscal
year.
The key components of executive compensation are base salary, annual cash
bonuses and long-term, equity-based incentives. Base salary levels are generally
targeted to be competitive with the average salaries paid at other companies of
similar size and complexity both within and outside of the foodservice
distribution and manufacturing industries. The Committees periodically have
commissioned Towers Perrin to analyze competitive compensation levels at
companies with annual revenues comparable to that of the Company or to the
relevant business unit. Towers Perrin uses existing compensation surveys of
general industry and the food processing, wholesale trade, and nondurable goods
manufacturing industries to develop a market rate for each executive position
based upon the average compensation paid to executives holding such positions in
the surveyed companies. The surveyed companies include several hundred
companies, and are not limited to the approximately 90 companies that are
included in the Dow Jones Consumer Non-Cyclical Index used in formulating the
Performance Graph that appears on page 19 hereof. The performance of such
comparable companies is not considered in determining such market rate. Towers
Perrin performed comparative compensation analyses in fiscal 1992 (the "1992
Survey") and in fiscal 1994 (the "1994 Survey").
Fiscal 1994 base salaries were based on fiscal 1993 base salaries, with
adjustments based primarily on individual performance evaluations and overall
annual salary budget guidelines. Fiscal 1994 base salaries for Named Executives
were in the middle to the upper end of the range for comparable companies, based
upon the 1992 and 1994 Surveys. The Committee intends that base salaries should
be set at approximately the 50th percentile of comparable companies, and has
determined to limit base salary increases in fiscal 1995 for Named Executives
whose base salaries are above the 50th percentile, except where the Management
Development -- Compensation Committee deems merit increases to be warranted on
an individual basis, or necessary to retain key executives or to remain
reasonably competitive.
The Named Executives and other executives of the Company and its
subsidiaries are eligible for annual cash bonuses under the Company's Senior
Executive Compensation Plan. This plan, which is administered by the Management
Development -- Compensation Committee, is designed to reward executives for
their contributions to the Company's achievement of specified financial
performance goals. The Management Development -- Compensation Committee selects
participants, determines each participant's minimum, targeted and maximum bonus
opportunities and establishes the annual financial performance goals for the
Company and its operating units. Performance goals for the Named Executive
Officers are based upon the consolidated results for the Company. Fiscal 1994
performance goals were comprised 60% on the percent of budgeted operating profit
achieved; 20% on revenues; and 20% on sales of Company-manufactured products. No
bonuses were payable to the Named Executives unless the Company achieved a
minimum of 70% of budgeted operating profit. Named Executives were eligible for
bonuses that ranged from 20% to 40% of base salary if the performance goals were
met, and
8
<PAGE> 11
for maximum bonuses that ranged from 40% to 80% of base salary if the
performance goals were exceeded by 20% or more. In fiscal 1994, the Company
achieved approximately 80% of its budgeted operating profit and 96% of its
revenue goals. The Company did not achieve its goal for sales of
Company-manufactured products. For fiscal 1994, the Named Executives were
awarded bonuses in the aggregate amount of $172,206, with individual awards
ranging from approximately 7% to 16% of base salary.
The Company also grants stock options and other economic incentives under
its 1988 Plan in order to link compensation to the Company's long-term growth
and performance and to increases in stockholder value. Under the Plan, the Stock
Option Committee may grant stock options, stock appreciation rights, stock
awards, restricted stock, performance shares and cash awards to eligible
employees of the Company and its subsidiaries. The Stock Option Committee has
broad discretion to establish the terms of such grants. It typically grants
awards on an annual basis and may also grant awards to designated employees upon
commencement of employment or following a significant change in an employee's
responsibility or title. Awards are based on guidelines relating to the
employee's position in the Company which are set by the stock option committee,
as well as the employee's current performance and anticipated future
contributions. The Stock Option Committee also considers the amount and terms of
stock options previously granted to each of the Named Executives. Each member of
the Stock Option Committee individually evaluates these factors with respect to
the Named Executives and then the Stock Option Committee reaches consensus on
the appropriate award. In fiscal 1994, the Named Executives were eligible to
receive options for 5,000 to 50,000 shares of common stock. Named Executives
were awarded non-qualified options to purchase an aggregate 109,500 shares of
common stock with individual awards ranging between 10,000 and 37,500 shares.
The options have an exercise price of $14.00 per share, which was the fair
market value on the date of grant. Messrs. Harter and Martin were also each
awarded non-qualified converging stock options for 20,000 shares of common
stock. The converging stock options have an initial exercise price of $35.00,
which is subject to reductions in each of the first five years in the event that
the Company attains predetermined performance objectives. These performance
objectives are a 15% return on equity, or an increase in return on equity of
2.5% or more over the highest annual return on equity achieved in fiscal 1992 or
any subsequent fiscal year. The performance objectives were not met in fiscal
1994. The converging stock option awards to Messrs. Harter and Martin were
intended to make their compensation packages comparable with the other Named
Executives, who received converging stock option awards in fiscal 1993. Detailed
information on the stock option awards is set forth in the Option/SAR Grants in
Last Fiscal Year table under "EXECUTIVE COMPENSATION."
The base salary of Mr. Van Stekelenburg, the Company's President and Chief
Executive Officer, is primarily based upon a survey of salaries paid to Chief
Executive Officers of companies of similar size and complexity. Mr. Van
Stekelenburg's fiscal 1993 base salary and total cash compensation was
substantially below the indicated market rate based upon the 1992 Survey.
Accordingly, for fiscal 1994, the Management Development -- Compensation
Committee increased Mr. Van Stekelenburg's base salary to $400,000, plus a
$12,000 car allowance. The Management Development -- Compensation Committee
subsequently increased Mr. Van Stekelenburg's base salary to $450,000 plus a
$12,000 car allowance, commencing on December 7, 1993, which the Management
Development -- Compensation Committee believes is at the middle of the range for
comparable companies, based upon the 1994 Survey. As part of the initial
compensation package offered to Mr. Van Stekelenburg when he joined the
9
<PAGE> 12
Company as an Executive Vice President in fiscal 1991, the Company made an
interest-free, secured demand loan to Mr. Van Stekelenburg in connection with
the purchase of his residence. The maximum amount outstanding under such loan in
fiscal 1994 was $469,000. The Management Development -- Compensation Committee
believes that the loan enhances the competitiveness of Mr. Van Stekelenburg's
compensation package, and encourages Mr. Van Stekelenburg to remain with the
Company, as the Company might elect to exercise its right to demand payment of
the note in the event that Mr. Van Stekelenburg determined to leave the Company.
Mr. Van Stekelenburg was awarded a $67,050 cash bonus for fiscal 1994, which was
approximately 16% of his fiscal 1994 base salary. Mr. Van Stekelenburg also was
granted non-qualified stock option to purchase 24,500 shares of common stock in
fiscal 1994. Such options have an exercise price of $14.00 per share, which was
the fair market value on the grant date.
The Committees believe that Mr. Van Stekelenburg's leadership was a
significant factor in the Company's fiscal 1994 performance, as described below.
The Company made significant progress under its "Project RESULTS" (Realizing
Excellence through Strategy, Unity, Leadership, Teamwork and Systems) program in
fiscal 1994. Income before an extraordinary item rose to $7,362,000, or $.63 per
share, from a net loss in fiscal 1993 of $18,960,000, or $1.63 per share. The
prior year's loss reflected a one-time restructuring charge of $31,000,000, or
$1.68 per share, as well as a positive adjustment of $732,000, or $.06 per share
from the implementation of SFAS 109, accounting for income taxes. In fiscal
1994, an extraordinary item of $1,444,000, or $.12 per share, which related to
the write-off of deferred finance costs in connection with a senior debt
refinancing, reduced net income to $5,918,000, or $.51 per share. During fiscal
1994, sales increased to $1.52 billion, or 2.5% over the prior year, and
increased 5.0% on a comparable branch basis over the prior year. Operating
expenses were reduced by $9,341,000, and decreased as a percentage of sales from
22.2% to 21.1%, compared with fiscal 1993. Mr. Van Stekelenburg was also
instrumental in arranging the Company's issuance of $130,000,000 of 8 7/8%
senior subordinated notes due in 2003 and in securing a new $120,000,000 credit
facility. The net proceeds from the sale of the notes, together with borrowings
under the new credit facility, were used to retire the Company's outstanding
senior notes and to repay senior indebtedness under an existing credit facility.
The Company believes that the refinancing has provided the Company with greater
liquidity and the financial ability to execute its strategies.
Section 162(m) of the Internal Revenue Code of 1986
In 1993, changes were made to the federal corporate income tax law that
limit the ability of public companies to deduct compensation in excess of $1
million paid annually to the five most highly compensated executive officers.
There are exemptions from this limit, including compensation that is based on
the attainment of performance goals established by either of the Committees and
approved by the Company's stockholders. It is the Committees' policy to seek to
qualify executive compensation for deductibility to the extent consistent with
the Company's overall objectives in attracting, motivating and retaining its
executives. The Committees have reviewed the Company's executive compensation
structure in light of the new tax law. The Committees believe that grants of
stock options and stock appreciation rights under the 1988 Plan qualify as
stockholder-approved performance-based compensation under a transition rule
proposed by the Internal Revenue Service and, therefore, will be fully
deductible when an option is exercised. Grants of restricted stock, performance
stock and cash awards under the 1988 Plan and the Company's Senior Executive
Compensation Plan do not qualify as
10
<PAGE> 13
stockholder-approved performance-based compensation and, therefore, may not be
fully deductible to the extent that such compensation, when added to other
non-exempt compensation for a particular executive, exceeds the limit in any tax
year. However, the Committees believe that, based upon current compensation
levels, only compensation paid to the Company's President and Chief Executive
Officer, Mark Van Stekelenburg, may be at risk of not being fully deductible
under certain circumstances. The Committees believe that other non-exempt
components of the Company's executive compensation, including bonuses under the
Senior Executive Compensation Plan, when added together for any executive, are
unlikely to materially exceed $1,000,000 in any tax year. The Committees will
continue to evaluate the advisability of qualifying the deductibility of the
Company's executive compensation.
The Company sponsors other employee benefit plans for both executives and
non-management employees. The Management Development -- Compensation Committee
neither administers nor makes any determinations with respect to any such plan
or program.
<TABLE>
<CAPTION>
MANAGEMENT DEVELOPMENT --
COMPENSATION COMMITTEE: STOCK OPTION COMMITTEE:
----------------------------- -----------------------------
<S> <C>
Robert G. Zeller, Chairman R. Burt Gookin, Chairman
R. Burt Gookin James I. Maslon
James P. Miscoll James P. Miscoll
Neil I. Sell Bernard Sweet
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Management Development -- Compensation Committee are
Messrs. R. Burt Gookin, James P. Miscoll, Neil I. Sell and Robert G. Zeller. The
members of the Stock Option Committee are Messrs. R. Burt Gookin, James I.
Maslon, James P. Miscoll and Bernard Sweet. James I. Maslon was Vice
President-Manufacturing of the Company's S.E. Rykoff & Co. division prior to his
retirement in October 1992. Neil I. Sell is the Secretary of the Company but
receives no additional compensation for his services in such capacity. He is a
partner in the law firm of Maslon Edelman Borman & Brand, which provided legal
services to the Company during fiscal 1994.
11
<PAGE> 14
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table below sets forth annual and long term compensation for each of
the last three fiscal years awarded to or earned by the President and Chief
Executive Officer of the Company and the four other most highly compensated
executive officers of the Company and its subsidiaries who were serving as
executive officers at the end of the last fiscal year.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS
------------------------------------ -------------------------------
SECURITIES ALL
OTHER RESTRICTED UNDERLYING OTHER
ANNUAL STOCK OPTIONS/ COMPEN-
FISCAL COMPEN- AWARD(S) SARS SATION
NAME AND PRINCIPAL POSITION YEAR(1) SALARY($)(2) BONUS($) SATION($)(3) ($)(4) (#) ($)
- - ---------------------------- ------- ------------ -------- ------------ ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Mark Van Stekelenburg(5).... 1994 $432,000 $67,050 $ 31,483 $ 0 24,500 $3,348 (6)
President and Chief 1993 $371,407 $ 0 $ 31,905 $ 0 225,000 $ 0
Executive Officer 1992 $363,931 $33,398 $ 39,869 $ 198,750 0 $ 0
of the Company
Harold E. Feather(7)........ 1994 $347,200 $44,336 $ 0 $ 0 37,500 $ 0
President of the Company's 1993 $307,200 $ 0 $ 0 $ 0 60,000 $ 0
Rykoff-Sexton Distribution 1992 $313,108 $52,961 $ 0 $ 109,313 0 $ 0
Division and President
of the John Sexton & Co.
subsidiary
Alan V. Giuliani............ 1994 $232,560 $25,329 $ 0 $ 0 18,750 $ 0
President of the Company's 1993 $221,048 $14,110 $ 0 $ 0 33,000 $ 0
Rykoff-Sexton
Manufacturing 1992 $220,154 $ 4,212 $ 0 $ 0 4,000 $ 0
Division
Robert J. Harter, Jr........ 1994 $219,960 $15,940 $ 0 $ 0 30,000 $ 0
Senior Vice President -- 1993 $217,401 $ 0 $ 0 $ 0 4,000 $ 0
Human Resources 1992 $209,846 $16,480 $ 0 $ 0 8,000 $ 0
and General Counsel
of the Company
Richard J. Martin........... 1994 $210,000 $19,551 $ 0 $ 0 38,750 $ 0
Senior Vice President 1993 $184,140 $ 0 $ 0 $ 0 4,000 $ 0
and Chief Financial
Officer 1992 $183,462 $14,400 $ 0 $ 0 2,500 $ 0
of the Company
</TABLE>
- - ---------------
(1) Information furnished is for the 52-week fiscal year ended April 30, 1994,
the 52-week fiscal year ended May 1, 1993, and the 53-week fiscal year
ended May 2, 1992.
12
<PAGE> 15
(2) Includes amounts deferred by the named executive officer under the Company's
401(k) Savings Plan. Includes cash automobile allowances.
(3) Represents an imputed amount of interest during each fiscal year on Mr. Van
Stekelenburg's interest-free demand mortgage loan, which had a principal
balance of $469,000 from May 31, 1991 through the end of fiscal 1994. The
imputed rate of interest is based on the interest charged by commercial
banks on short-term residential mortgage loans during each of the fiscal
years; and is calculated for informational purposes only. The Company
believes that the mortgage loan to Mr. Van Stekelenburg meets the
conditions set forth in Internal Revenue Code Regulation 1.7872-5(c) and
therefore no interest need be imputed for income tax purposes.
(4) In fiscal 1992, Mr. Van Stekelenburg was awarded 10,000 shares of restricted
stock and Mr. Feather was awarded 5,500 shares of restricted stock. The
values of these awards (net of the consideration paid by each officer) are
based on the New York Stock Exchange closing price of $20 7/8 on July 1,
1991, the grant date. Each of the foregoing restricted stock awards vests
in installments of 25% each year beginning on the first anniversary of the
grant date. Based on the New York Stock Exchange closing price of $18 7/8
on April 30, 1994, the last day of trading for fiscal 1994, the number and
value of the aggregate restricted stock holdings which remained unvested at
the end of fiscal 1994 for each officer named in the foregoing table (net
of the consideration paid by such officer) are as follows: Mr. Van
Stekelenburg, 5,000 shares with a value of $89,375; Mr. Feather, 2,750
shares with a value of $49,156; and Mr. Giuliani, 1,250 shares with a value
of $22,344. Messrs. Harter and Martin had no restricted stock holdings as
of the end of fiscal 1994. Dividends are paid on restricted stock at the
times and in the same amounts as dividends paid to all stockholders.
(5) Mr. Van Stekelenburg became President and Chief Executive Officer in
December 1992 and previously served as Executive Vice President. Effective
as of June 1994, Mr. Van Stekelenburg also is serving as the interim
President of the Rykoff-Sexton Distribution Division until a successor to
Mr. Feather is named.
(6) Term life insurance premiums.
(7) Mr. Feather was named to the position of Executive Vice President-Corporate
Planning effective June 1994.
13
<PAGE> 16
OPTION GRANTS IN LAST FISCAL YEAR
The table below sets forth information on grants of stock options during
fiscal 1994 to the executive officers named in the Summary Compensation Table
under the Company's 1988 Stock Option and Compensation Plan. No stock
appreciation rights were granted to any of such executive officers in fiscal
1994.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS GRANT DATE VALUE
-------------------------------------------------------------- ------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR
OPTIONS GRANTED TO EMPLOYEES IN BASE PRICE EXPIRATION GRANT DATE
NAME (#) FISCAL YEAR ($/SH) DATE PRESENT VALUE $(3)
- - ------------------------ --------------- --------------- ------------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
Mark Van Stekelenburg... 24,500(1) 12.41% $ 14.00 6/21/03 $ 98,000
Harold E. Feather....... 37,500(1) 18.99% $ 14.00 6/21/03 $150,000
Alan V. Giuliani........ 18,750(1) 9.49% $ 14.00 6/21/03 $ 75,000
Robert J. Harter, Jr.... 10,000(1) 5.06% $ 14.00 6/21/03 $ 40,000
20,000(2) 10.13% $ 35.00 6/21/03 $ 44,200
Richard J. Martin....... 18,750(1) 9.49% $ 14.00 6/21/03 $ 75,000
20,000(2) 10.13% $ 35.00 6/21/03 $ 44,200
</TABLE>
- - ---------------
(1) All of these non-qualified stock options were granted at a price equal to
the fair market value of the Company's Common Stock on the grant date. The
options have a ten-year term and become exercisable in cumulative
installments of 25% each year commencing on the first anniversary of the
grant date, except if specified corporate changes occur.
(2) These options are converging non-qualified stock options. The $35.00 per
share initial purchase price of these options was greater than the fair
market value of the Company's Common Stock on the grant date. The purchase
price will be subject to reductions for each year through fiscal 1997 in
which the Company attains predetermined performance objectives. The minimum
exercise price if all performance objectives were met would be $20 per
share. If the market price of the Company's Common Stock and the purchase
price of the options converge, the options will become immediately
exercisable in full and the final purchase price will be set at the
converging price for the remainder of the options' term. If the market
price and the purchase price do not converge, commencing in fiscal 1998,
the options will become exercisable in cumulative installments of 25% each
year, and the final purchase price for the options for the remainder of
their term will be the purchase price in effect on September 14, 1997.
(3) The Company used the Black-Scholes option pricing model to calculate the
estimated grant date present values of all options. The Black-Scholes
model, which is the most widely accepted method of estimating stock option
market values, is based on such factors as exercise price, option term and
market price at time of grant, as well as certain underlying assumptions
that include the risk-free interest rate, which was assumed to be 6.20%,
expected dividend yield, which was assumed to be 3.10% and expected stock
price volatility, which was assumed to be 0.262. Stock option values
14
<PAGE> 17
cannot be precisely determined under any valuation model, and the ultimate
value of all options (other than the converging stock options) will depend
on the future movement of the Company's stock price. With respect to the
converging stock options, the ultimate value of these options will depend
on both the future movement of the Company's stock price and the Company's
attainment of predetermined performance objectives during the five-year
measurement period. In the foregoing table, the grant date present value
for the non-qualified stock options (other than the converging options) is
estimated at $4.00 per share, which includes a 3% annual discount for the
four year vesting period applicable to such options to adjust for the risk
of forfeiture during such period. The grant date present value for the
converging stock options is estimated at $2.21 per share and reflects an
assumption that the predetermined performance objectives will be attained
in three of the five years and that the final exercise price will be set at
$26 per share. If the performance objectives are not achieved in any year
during the five-year measurement period and the exercise price remains at
the initial price of $35.00 per share, the present value of the converging
options would be $1.42 per share. No discount for risk of forfeiture was
applied to the converging stock options as these options are performance
driven.
AGGREGATE OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth information on stock options held by the
executive officers named in the Summary Compensation Table at the end of fiscal
1994. None of such officers exercised any stock options or stock appreciation
rights in fiscal 1994.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED VALUE FISCAL YEAR END (#) FISCAL YEAR END ($)
ON EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - -------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark Van Stekelenburg..... 0 0 112,500 137,000 $32,000 $ 215,438
Harold E. Feather......... 0 0 33,750 95,000 $ 9,063 $ 203,438
Alan V. Giuliani.......... 0 0 4,000 51,750 $ 5,550 $ 107,906
Robert J. Harter, Jr...... 0 0 4,250 43,000 $ 2,750 $ 99,656
Richard J. Martin......... 0 0 6,000 36,000 $ 2,750 $ 57,000
</TABLE>
15
<PAGE> 18
RETIREMENT BENEFITS
The Qualified Pension Plan Table below is based on the Company's
tax-qualified noncontributory defined benefit pension plan (the "Pension Plan").
That table contains the estimated annual retirement benefits payable on a single
life annuity basis to participating employees, including officers, based on
average earnings and years of participation at retirement.
QUALIFIED PENSION PLAN TABLE
<TABLE>
<CAPTION>
REMUNERATION 10 15 20 25 30 35 40
- - ------------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
$150,000 $15,000 $22,500 $30,000 $37,500 $45,000 $52,500 $60,000
$175,000 17,500 26,250 35,000 43,750 52,500 61,250 70,000
$200,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000
$225,000 22,500 33,750 45,000 56,250 67,500 78,750 90,000
$235,840 23,584 35,376 47,168 58,960 70,752 82,544 94,336
</TABLE>
The Company and one of its subsidiaries, John Sexton & Co., maintain the
Pension Plan for officers and other eligible employees who are not covered by a
union sponsored retirement plan. The Pension Plan covers employees of the
Company for periods after April 29, 1989. Full vesting under the Pension Plan
occurs after five years of service with the Company and its subsidiaries.
The Pension Plan provides an annual lifetime benefit equal to one percent
(1%) of a participant's final average pay for each year of participation. This
annual benefit is subject to actuarial reduction if the pension is payable
before age 65. Final average pay means the average of the participant's eligible
compensation for the highest five calendar years during the participant's final
fifteen years of participation. Eligible compensation generally includes all
cash compensation, exclusive of deferred compensation and, for fiscal years
beginning after 1993, excludes amounts exceeding $150,000 annually. The $150,000
limit will be adjusted for inflation in $10,000 increments, to be added each
time the cumulative adjustment equals or exceeds $10,000. However, the limit for
compensation earned in the 1993 calendar year was $235,840, and Pension benefits
based on that compensation will not be reduced below the level accrued as April
30, 1994. Benefits under the Pension Plan are not subject to deduction for
Social Security or other offset amounts.
Executive officers named in the Summary Compensation Table have the
following years of participation as of May 1, 1994: Mr. Van Stekelenburg--3, Mr.
Feather--29, Mr. Giuliani--3, Mr. Martin--5 and Mr. Harter-- 4. Mr. Feather's
annual pension benefit payable at age 65 is estimated to be $100,674 ($9,846
more than his projected benefit under the qualified plan) because he is accruing
benefits under a supplemental non-qualified plan using a more favorable and
complex formula provided in the Pension Plan prior to 1989. This supplemental
plan is subject to the compensation limits described in the preceding paragraph.
16
<PAGE> 19
The following Pension Plan Table for President and Chief Executive Officer
is based on an individual arrangement between the Company and Mark Van
Stekelenburg. The Company has entered into a separate agreement to provide Mr.
Van Stekelenburg with a supplemental executive retirement plan (the "SERP"),
effective July 20, 1994, in connection with his employment agreement. The table
shows the estimated annual retirement benefits payable to Mr. Van Stekelenburg
under the Pension Plan and the SERP on a joint and survivor basis, based on his
average earnings and years of service at retirement. Accrued SERP benefits are
fully vested after five years of Company service or upon disability.
PENSION PLAN TABLE FOR PRESIDENT AND CHIEF EXECUTIVE OFFICER
<TABLE>
<CAPTION>
YEARS OF SERVICE
-----------------------------------------------
REMUNERATION 5 10 15 20
- - ------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
$450,000 $ 67,500 $135,000 $202,500 $270,000
$500,000 $ 75,000 $150,000 $225,000 $300,000
$600,000 $ 90,000 $180,000 $270,000 $360,000
$700,000 $105,000 $210,000 $315,000 $420,000
$800,000 $120,000 $240,000 $360,000 $480,000
$900,000 $135,000 $270,000 $405,000 $540,000
</TABLE>
The SERP and the Pension Plan (described above) together provide an annual
lifetime benefit equal to sixty percent (60%) of Mr. Van Stekelenburg's final
average pay, reduced by three percent (3%) for each year of Company service less
than 20 years. The annual SERP benefit is reduced by any Social Security
retirement benefits received by Mr. Van Stekelenburg and is actuarially reduced
if the pension is payable before age 60. Final average pay under the SERP means
the average of Mr. Van Stekelenburg's cash compensation during the last three
years of his Company employment. The amounts in the Pension Table For President
and Chief Executive Officer include both SERP and Pension Plan benefits, but
have not been reduced by any Social Security benefits (currently a maximum of
$13,770 annually).
The SERP provides a lifetime disability benefit, payable without actuarial
reduction. The minimum disability benefit is thirty percent (30%) of Mr. Van
Stekelenburg's final average pay. After his death, the SERP also provides a
lifetime benefit for his surviving spouse. The surviving spouse's pension is
sixty percent (60%) of Mr. Van Stekelenburg's retirement benefits under the SERP
and the Pension Plan, reduced by any survivor benefits paid under the Pension
Plan.
EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company entered into an employment agreement with Mark Van Stekelenburg
effective July 20, 1994. The employment agreement provides for a five year term
(with automatic one-year renewals thereafter unless either party gives notice of
termination), a minimum annual base salary of $450,000, and a minimum annual
incentive bonus under the Senior Executive Incentive Plan (or any similar plan)
of 50% of annual base salary if certain performance goals are met.
17
<PAGE> 20
If Mr. Van Stekelenburg's employment is involuntarily terminated without
cause, he will be entitled to receive salary, health and welfare benefits, and
an annual bonus (equal to the average amount of his incentive bonuses during the
three years preceding termination) for the two years following such termination.
In addition, if such involuntary termination occurs during the five year initial
term of the employment agreement, Mr. Van Stekelenburg's stock options will
become immediately exercisable and his years of service for calculating SERP
benefits will be increased by two years. Severance payments will be offset by
any payments (other than tax reimbursements) made under his "change in control"
agreement described below. In general, "cause" is defined as a willful and
continued failure to perform assigned duties after notice of such failure, or
willful misconduct that is materially injurious to the Company. Mr. Van
Stekelenburg will be deemed to have been involuntary terminated without cause in
any of the following events: (1) the Company's non-renewal of his employment
agreement without cause; (2) Mr. Van Stekelenburg's disability, failure to be
reappointed as President or Chief Executive Officer, or failure to be re-elected
to the Board of Directors or (3) the Board of Director's failure to approve Mr.
Van Stekelenburg's strategic plans for the Company as a result of irreconcilable
differences with respect to the future direction of the Company.
The Company entered into an employment agreement with Harold E. Feather
effective June 20, 1994, which provides that Mr. Feather will be paid a minimum
base salary of $275,000 and an annual car allowance of $7,200 through December
31, 1998. In the event that Mr. Feather is terminated by the Company for any
reason other than Mr. Feather's death, disability, or for cause, Mr. Feather
will continue to receive his base salary through December 31, 1998, provided
that Mr. Feather does not directly or indirectly compete against the Company.
The Company has entered into agreements with each executive officer named
in the Summary Compensation Table and certain other officers that provide for
the payment of specified benefits if, within two years after a "change in
control," the Company terminates the employment of the officer other than for
disability or cause or if the officer elects to terminate his employment for
"good reason" (as defined in such agreements). In general, a "change in control"
is deemed to occur if any person becomes the beneficial owner of 25% or more of
the combined voting power of the Company's outstanding securities, or upon a
change in the membership of the Company's Board of Directors within any 12 month
period, with the result that the incumbent directors do not constitute a
majority of the Board of Directors. Under such circumstances, the officer will
receive an amount equal to 2.99 times the sum of his base salary plus the amount
that would otherwise be earned under any executive compensation plan. Mr. Van
Stekelenburg will receive an amount equal to 2.99 times the sum of his base
salary plus the amount that would otherwise be earned under any executive
compensation plan if, within two years subsequent to a change in control, his
employment is terminated by the Company for any or no reason or if Mr. Van
Stekelenburg elects to terminate his employment for any or no reason. The
agreements with Messrs. Van Stekelenburg and Feather also provide for payment of
an amount necessary to restore any benefit diminution if the special excise tax
imposed under Section 4999 of the Internal Revenue Code is applicable.
18
<PAGE> 21
PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
Common Stock of the Company for the last five fiscal years with the cumulative
total return on the Standard & Poor's 500 Index and the Dow Jones Consumer
Non-Cyclical Index over the same period (assuming the investment of $100 in the
Company's Common Stock and in each index on April 30, 1989 and the reinvestment
of all dividends).
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG RYKOFF-SEXTON, INC., THE S & P 500 INDEX
AND THE DOW JONES CONSUMER NON-CYCLICAL INDEX
INSERT GRAPH HERE
19
<PAGE> 22
CERTAIN TRANSACTIONS
During fiscal 1994, Mr. Mark Van Stekelenburg, President and Chief
Executive Officer of the Company, was indebted to the Company in connection with
the purchase of his principal residence. The amount of such indebtedness
outstanding at all times during fiscal 1994 and as of July 20, 1994 was
$469,000. The indebtedness is evidenced by a secured, non-interest bearing
demand promissory note.
The law firm of Maslon Edelman Borman & Brand, of which Mr. Neil I. Sell is
a partner, provided legal services to the Company during fiscal 1994.
PROPOSAL TO AMEND THE RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has unanimously approved and recommends to the
stockholders an amendment to the Company's Restated Certificate of Incorporation
which would increase the number of shares of Common Stock authorized for
issuance from twenty million (20,000,000) to forty million (40,000,000). As of
July 20, 1994, 11,639,693 shares of Common Stock were outstanding, and the
remaining shares have been available for issuance pursuant to outstanding
options, warrants, and securities convertible into shares of Common Stock. The
proposed amendment is attached as Exhibit A.
The principal purpose of the proposed amendment is to give the Company
greater flexibility in its financial affairs by making twenty million additional
shares of Common Stock available for issuance by the Company, without further
action by its stockholders, in such transaction or transactions as the Board of
Directors may approve, whether in public or private offers, as stock splits or
dividends or otherwise, at such time or times as the Board of Directors may
approve, whether prior to (subject to the approval by the Company's
stockholders, and the taking effect of such proposed amendment as described
below), or after the meeting. The Company has no present plans, understandings
or agreements for the issuance or use of the proposed additional shares of
Common Stock. Because stockholders do not have preemptive rights under the
Restated Certificate of Incorporation, the rights of existing stockholders may
(depending on the particular circumstances in which additional Common Stock is
issued) be diluted by any such issuance. Although the Company is unaware of any
specific effort to obtain control of the Company, the increased authorized
shares could be used to make an attempt to effect a merger or other change in
control more difficult and less likely or to dilute the interest of a party
attempting to obtain control of the Company.
The Board of Directors recommends a vote FOR the proposal to amend the
Restated Certificate of Incorporation to increase the authorized shares of
Common Stock. Your appointed proxies will vote your shares FOR approval unless
you instruct otherwise in the proxy. The affirmative vote of the holders of a
majority of the issued and outstanding shares of Common Stock is required for
approval.
20
<PAGE> 23
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit Committee, has
selected Arthur Andersen & Co. as independent public accountants for fiscal
1995. Arthur Andersen & Co. has been the independent public accountants for the
Company since 1972. A representative of Arthur Andersen & Co. is expected to
attend the meeting and to have an opportunity to make a statement and respond to
appropriate questions from stockholders.
Unless instructed to the contrary, all proxies will be voted for
ratification of the appointment of Arthur Andersen & Co. as independent public
accountants for the Company for fiscal 1995.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who beneficially own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the SEC. Officers, directors and greater
than ten percent beneficial owners are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms filed by them.
Based solely on its review of copies of such forms furnished to the
Company, or written representations that no filings of Form 5 reports were
required, the Company believes that during the fiscal year ended April 30, 1994,
the Company's officers, directors and greater than ten percent beneficial owners
complied with all Section 16(a) filing requirements applicable to them.
PROPOSALS OF STOCKHOLDERS
All proposals of stockholders intended to be presented at the 1995 Annual
Meeting of Stockholders of the Company pursuant to the Exchange Act must be
received by the Company at its executive offices on or before March 31, 1995.
OTHER MATTERS
The Board of Directors does not intend to present to the meeting any other
matters not referred to above and does not presently know of any matters that
may be presented to the meeting by others. If other matters are properly brought
before the meeting, the persons named in the enclosed proxy will vote in
accordance with their best judgment.
By Order of the Board of Directors
NEIL I. SELL
Secretary
21
<PAGE> 24
EXHIBIT A
PROPOSED AMENDMENT OF
THE RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK OF
RYKOFF-SEXTON, INC. (THE "CORPORATION")
RESOLVED: That, pursuant to the recommendation of the Corporation's Board of
Directors, the Certificate of Incorporation of the Corporation be amended by
deleting the number "30,000,000" from the first paragraph of ARTICLE FOURTH and
substituting therefor the number "50,000,000," and by deleting the number
"20,000,000" from clause (b) of the first paragraph of ARTICLE FOURTH and
substituting therefor the number "40,000,000."
As amended, ARTICLE FOURTH reads as follows:
FOURTH: The total number of shares of capital stock which the corporation
has authority to issue is 50,000,000 shares, consisting of:
(a) 10,000,000 shares shall be Preferred Stock, issuable in series, of
the par value of $.10 per share; and
(b) 40,000,000 shares shall be Common Stock of the par value of $.10
per share.
A-1
<PAGE> 25
RYKOFF-SEXTON, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS--SEPTEMBER 9, 1994
The undersigned, a stockholder of Rykoff-Sexton, Inc. hereby appoints
Mark Van Stekelenburg and James P. Miscoll, and each of them, as proxies, with
full power of substitution, to vote on behalf of the undersigned the number of
shares which the undersigned is then entitled to vote, at the Annual Meeting of
the Stockholders of Rykoff-Sexton, Inc. to be held at the Sheraton Grande, 333
South Figueros Street, Los Angeles, California 90017, on Friday, September 9,
1994, at 10:00 A.M., and at any adjournments thereof, with all the powers which
the undersigned would possess if personally present, upon the following:
(CONTINUED ON THE REVERSE SIDE)
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. It will be voted
on the proposals set forth herein as directed by the stockholder, but if no
direction is made in the space provided, it will be voted FOR each of the
proposals.
PLEASE MARK YOUR CHOICE
IN BLUE OR BLACK INK
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH PROPOSAL
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(1) To elect two persons to the Board of Directors for terms ending in 1997 R. BURT GOOKIN NEIL I. SELL
FOR all nominees WITHHOLD AUTHORITY
(except as marked to vote for all nominees (INSTRUCTION: To withhold authority to vote
to the contrary) listed for any individual nominee write that
nominee's name on the space provided below.)
____________________________________________
(2) Increase the number of authorized (3) Approval of Arthur Andersen & (4) Upon such other business as may
shares of Common Stock from twenty Co. as independent public properly come before the meeting
million (20,000,000) to forty accountants for the Company or any adjournment thereof.
million (40,000,000). for fiscal 1995.
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FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
/ / / / / / / / / / / /
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The undersigned hereby revokes all previous proxies relating to
the shares covered hereby and acknowledges receipt of the Notice
and Proxy Statement relating to the Annual Meeting.
Dated ____________________________________, 1994
_________________________________________________________________
Signature
_________________________________________________________________
Signature
(Stockholder must sign exactly as the name appears at left.
When signed as a corporate officer, executor, administrator,
trustee, guardian, etc., please give full title as such. Both
joint tenants must sign.)
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