<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SMART & FINAL INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF SMART & FINAL]
SMART & FINAL INC.
4700 SOUTH BOYLE AVENUE
LOS ANGELES, CALIFORNIA 90058
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 9, 1997
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Smart & Final Inc. (the "Company")
will be held at the Robert J. Emmons Training Center, 4719 South Boyle Avenue,
Los Angeles, California 90058, on Friday, May 9, 1997, at 10:00 a.m., local
time, for the following purposes:
1. To elect four directors of the Company to serve until the 2000 annual
meeting and their successors have been elected and qualified;
2. To approve the amendment of the Company's Stock Incentive Plan to
increase the number of shares of the Company's common stock for which
options may be granted from 2,250,000 shares to 2,450,000;
3. To consider and vote upon the Company's Long-Term Equity Compensation
Plan;
4. To ratify the selection of Arthur Andersen LLP, independent public
accountants, as auditors for the Company for the year ending December 28,
1997; and
5. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The Board of Directors has determined that only holders of the Company's
Common Stock of record at the close of business on March 25, 1997, will be
entitled to receive notice of, and to vote at, the Annual Meeting or any
adjournment thereof.
WHETHER YOU PLAN TO ATTEND THE ANNUAL MEETING OR NOT, YOU ARE REQUESTED TO
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID
ENVELOPE IN ORDER THAT AS MANY SHARES AS POSSIBLE MAY BE REPRESENTED AT THE
ANNUAL MEETING.
DONALD G. ALVARADO
Secretary
Los Angeles, California
April 9, 1997
<PAGE>
SMART & FINAL INC.
4700 SOUTH BOYLE AVENUE
LOS ANGELES, CALIFORNIA 90058
----------------
PROXY STATEMENT
----------------
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Smart & Final Inc. (the "Company") for
use at the Annual Meeting of Stockholders to be held at the Robert J. Emmons
Training Center, 4719 South Boyle Avenue, Los Angeles, California 90058, on
Friday, May 9, 1997, at 10:00 a.m., local time, and at any adjournment
thereof, for the purposes set forth herein and in the accompanying Notice. The
approximate date of mailing of this Proxy Statement and the accompanying proxy
is April 9, 1997.
PROXY INFORMATION
A stockholder giving a proxy has the power to revoke it at any time before
it is exercised by filing with the Secretary of the Company an instrument
revoking it or a duly executed proxy bearing a later date or by voting in
person at the Annual Meeting. Subject to such revocation, all shares
represented by each properly executed proxy received by the Company will be
voted in accordance with the instructions indicated thereon, and if
instructions are not indicated, will be voted (i) to elect the nominees for
director named in this Proxy Statement, (ii) approve the amendment of the
Company's Stock Incentive Plan to increase the number of shares of the
Company's common stock for which options may be granted from 2,250,000 shares
to 2,450,000, (iii) to approve the Company's Long-Term Equity Compensation
Plan and (iv) to ratify the selection of auditors.
RECORD DATE AND VOTING
As of March 25, 1997, the record date fixed by the Board of Directors, the
outstanding voting securities of the Company consisted of 22,035,740 shares of
Common Stock, par value $.01 per share. Each stockholder of record at the
close of business on March 25, 1997 is entitled to one vote for each share
then held on each matter submitted to a vote of stockholders. A majority of
the shares entitled to vote will constitute a quorum at the Annual Meeting.
Abstentions and broker non-votes (i.e., votes withheld by brokers on non-
routine proposals in the absence of instructions from beneficial owners) are
counted for purposes of determining the presence or absence of a quorum for
the transaction of business. For purposes of the votes on the proposals to
consider and vote upon the amendment to the Company's Stock Incentive Plan,
the Company's proposed Long-Term Equity Compensation Plan and to ratify the
selection of auditors, abstention votes (but not broker non-votes) are counted
in determining the total number of votes cast and thus have the effect of a
vote against the proposals.
ELECTION OF DIRECTORS
NOMINEES
Four directors of the Company's Board of Directors are to be elected at the
Annual Meeting to hold office until the year 2000 annual meeting and until
their successors are elected and qualified. The Board of Directors is
currently divided into three classes serving staggered terms normally of three
years each. The term of office of one class of directors expires each year,
and at each annual meeting the successors to the directors of the class whose
term is expiring in that year are elected to hold office for a term of three
years and until their successors are elected and qualified. Three directors
whose terms expire this year, Robert J. Emmons, Antoine Guichard and James S.
Gold, have been nominated for re-election to a term expiring in 2000. A
proposed new director, Christian P. Couvreux, has been nominated for a term
commencing on May 10, 1997 and expiring in 2000. Louis E. Scott, who has been
a director of the Company since 1988, has notified the Board of Directors that
he will retire from the Board effective May 9, 1997.
1
<PAGE>
Persons receiving a plurality of the votes cast at the Annual Meeting will
be elected directors. Plurality means that the individuals who receive the
largest number of votes cast are elected as directors up to the maximum number
of directors to be chosen at the Annual Meeting. Consequently, any shares not
voted (whether by abstention, broker non-votes or otherwise) have no impact on
the election of directors. In the election of directors, unless properly
instructed otherwise, the proxy holders intend to vote for the election of the
nominees named below. It is not anticipated that any of the nominees will
decline or be unable to serve as a director. If, however, that should occur,
the proxy holders will vote the proxies in their discretion for any nominee
designated to fill the vacancy by the present Board of Directors.
The following table sets forth certain information concerning each person
nominated for election as a director of the Company:
<TABLE>
<CAPTION>
DIRECTOR YEAR TERM
NAME AGE SINCE WOULD EXPIRE
---- --- -------- ------------
<S> <C> <C> <C>
Robert J. Emmons................................... 62 1984 2000
Antoine Guichard................................... 70 1986 2000
James S. Gold...................................... 45 1994 2000
Christian P. Couvreux.............................. 46 n/a 2000
</TABLE>
Robert J. Emmons. Mr. Emmons has been Chairman of the Board of Directors of
the Company since 1984, when its then parent company was acquired by Casino
USA. Mr. Emmons was Chief Executive Officer of the Company from 1984 until
December 1993 and President of the Company from 1984 until January 1993. He is
also Chairman of the Board, Chief Executive Officer and Chief Financial
Officer of Casino USA. Casino France has agreed until March 7, 1999 to cause
the shares owned by Casino USA to be voted for the election of Mr. Emmons to
the Company's Board of Directors. Prior to 1984, Mr. Emmons had been President
and Chief Executive Officer of LTI Corporation (food machinery manufacturer),
Master Host International (hotel/restaurant chain), The Institute for
Management and Marketing Studies (international consulting) and Vice President
and General Manager of Baskin Robbins (ice cream franchise retailer).
Antoine Guichard. Mr. Guichard has been a director of the Company since
1986. Mr. Guichard is the Secretary and a director of Casino USA and has been
Chairman of the Executive Committee of Casino Guichard-Perrachon, S.A.
(formerly Etablissements Economiques du Casino, Guichard-Perrachon et Cie)
("Casino France"), a publicly traded French joint stock limited liability
company that is the principal shareholder of Casino USA since its
reorganization in late 1994. Prior to the reorganization, he was a gerant
(managing partner) of Casino France's predecessor since 1966.
James S. Gold. Mr. Gold has been a director of the Company since April 1994.
Mr. Gold was a General Partner of Lazard Freres & Co. (investment banking)
from 1985 until May 1995, when he became a Managing Director of Lazard Freres
& Co., LLC. He has been associated with that firm since 1977.
Christian P. Couvreux. Mr. Couvreux is being nominated for the Board of
Directors of the Company for the first time. He is Executive Director and
Deputy General Manager of Casino France responsible for overall strategy,
purchasing, logistics and marketing. Mr. Couvreux has been associated with
Casino France since 1990 when Casino France purchased La Ruche Meridionale, a
French international trading company of which Mr. Couvreux held several
positions including Chief Executive Officer.
2
<PAGE>
CONTINUING AND RETIRING DIRECTORS
The following table sets forth certain information concerning the continuing
and retiring directors of the Company:
<TABLE>
<CAPTION>
DIRECTOR YEAR TERM
NAME AGE SINCE WILL EXPIRE
---- --- -------- -----------
<S> <C> <C> <C>
Pierre B. Bouchut................................... 41 1994 1998
Timm F. Crull....................................... 66 1994 1999
Martin A. Lynch..................................... 59 1993 1999
Georges Plassat..................................... 47 1994 1999
Roger M. Laverty, III............................... 49 1993 1998
David J. McLaughlin................................. 60 1990 1998
Ross E. Roeder...................................... 59 1984 1999
Thomas G. Plaskett.................................. 53 1994 1998
Louis E. Scott...................................... 73 1988 1997
</TABLE>
Pierre B. Bouchut. Mr. Bouchut has been a director of the Company since
December 1994. Mr. Bouchut has been the Director of Finance of Casino France
since 1990. Mr. Bouchut was an associate at McKinsey & Company Inc.
(management consulting) from 1988 to 1990.
Timm F. Crull. Mr. Crull has been a director of the Company since December
1994 and is Chairman of the Compensation Committee (since May, 1996). Mr.
Crull was Chairman of the Board and Chief Executive Officer of Nestle USA,
Inc. (food and related products) from 1991 until his retirement in 1994. He
held the position of Chairman of the Board and President of Carnation Company
(food and related products) from 1985 to the beginning of 1990. Mr. Crull has
been a director of BankAmerica Corporation (banking) since 1984, a director of
Hallmark Cards, Inc. (greeting cards) since 1984 and a director of Dreyers
Grand Ice Cream Inc. (ice cream manufacturer) since 1995. He has also been a
member of the Executive Personnel and Compensation and Executive Committees of
BankAmerica Corporation and a member of the Compensation and Audit Committees
of Hallmark Cards, Inc. and of Dreyers Grand Ice Cream since 1995.
Roger M. Laverty, III. Mr. Laverty has been Chief Executive Officer of the
Company since January 1994, President and Chief Operating Officer of the
Company since January 1993 and a director of the Company since February 1993.
He has also been President and Chief Operating Officer of Smart & Final Stores
since 1988. He was an Executive Vice President of the Company from 1988 until
January 1993, and was a Senior Vice President of Smart & Final Stores from
1986 to 1988. Mr. Laverty joined the Company in 1979 as General Counsel and
Assistant Secretary and has held a variety of key Vice President positions
including Strategic Planning and Distribution from 1985 to 1986 and
subsequently Senior Vice President, Operations from 1986 to 1988.
David J. McLaughlin. Mr. McLaughlin has been a director of the Company since
1990. He has been President and Chief Executive Officer of Troy Biosciences,
Inc. (biotechnology) since July 1996 and has been Executive Director of Senior
Personnel Executive Forum Inc. (nonprofit professional association) since
1978. He has been a director of Scientific Atlanta, Inc. (communications and
instrumentation products) since 1987, Exide Electronics Group, Inc. (power
protection equipment) since 1990, Troy Biosciences, Inc. since 1994 and Evolve
Software, Inc. (software) since July 1995.
Martin A. Lynch. Mr. Lynch has been Executive Vice President and Chief
Financial Officer of the Company and Smart & Final Stores Corporation ("Smart
& Final Stores") since joining them in 1989. He became a director of the
Company in February 1993. From 1989 to January 1994, he was also Executive
Vice President and Chief Financial Officer for Casino USA, Inc. ("Casino
USA"), a principal stockholder of the Company. Prior to joining the Company,
Mr. Lynch was Executive Vice President and Chief Financial Officer of San
Francisco-based Duty Free Shoppers Group, Ltd. (retail) from 1984 to 1989. He
served in a number of key positions with Los Angeles-based Tiger International
(transportation and financial services) from 1970 to
3
<PAGE>
1984 including the position of Senior Vice President, Chief Financial Officer
from 1976 to 1984. Mr. Lynch's earlier experience includes merger and
acquisition activities at Scot Lad Foods, Inc. (retail grocery) and service as
audit manager for Price Waterhouse & Company (accounting) in Chicago.
Thomas G. Plaskett. Mr. Plaskett has been a director of the Company since
April 1994. Mr. Plaskett also has been the Chairman of the Board of Greyhound
Lines, Inc. (transportation) since February 1995 and the Managing Director of
Fox Run Capital Associates (private financial advisory and venture capital
services) since November 1991. Mr. Plaskett has been a director of Neostar
Retail Group, Inc. (formerly, Babbage's, Inc.) (personal computer software)
since 1992 and in September, 1996 was elected Chairman of Neostar, which on
September 16, 1996 filed a petition for insolvency under Federal bankruptcy
laws. From 1988 to September 1991, he was Chairman and Chief Executive Officer
of Pan Am Corporation (commercial airline). On January 8, 1991, Pan Am
Corporation filed a petition for insolvency under Federal bankruptcy laws. Mr.
Plaskett has been a director of Tandy Corporation (retail electronics) since
1986. He has also been a member of the Organization and Compensation Committee
of Tandy Corporation since 1993 and a member of the Compensation Committee of
Neostar Retail Group, Inc. since March 1995.
Georges Plassat. Mr. Plassat has been a director of the Company since April
1994. Mr. Plassat is a director of Casino USA and has been the Chief Operating
Officer of Casino France since 1992. He was also a gerant (managing partner)
of Casino France's predecessor from 1992 until its reorganization in late
1994. From 1986 to 1990, he was the General Manager of the Catering Division
of Casino France.
Ross E. Roeder. Mr. Roeder has been a director of the Company since 1984 and
is Chairman of the Audit Committee. Mr. Roeder is Chairman of Morgan-Kaufman
Publishers, Inc. (publishers of computer science text and reference books),
where he has been a director since 1986. He has also been Chairman of HTI
Technologies Inc. (a manufacturer of medical and remote sensing equipment)
since 1987. From 1986 until February 1993, Mr. Roeder was President and Chief
Executive Officer of Federal Construction Company (building and civil
engineering). Prior to 1986, he was President, Chief Executive Officer and
Chief Operating Officer of Fotomat Corp. (photographic supplies and
equipment).
Louis E. Scott. Mr. Scott has been a director of the Company since 1988 and
has notified the Company that he will retire from the Board of Directors
effective May 9, 1997. He is the Retired Chairman of the Executive Committee
and a continuing director of Foote Cone & Belding Communications, Inc.
(advertising) for whom he was a management consultant from 1982 to 1987. He
has also been a director of True North Communications, Inc. (the holding
company for Foote Cone & Belding Communications, Inc.) since January 1995,
where he is also a member of its Compensation, Finance, Nominating and Audit
Committees.
SPECIAL COMMITTEES AND ATTENDANCE AT MEETINGS
The Board of Directors has an Audit Committee consisting of Messrs. Roeder
(as Chairman), McLaughlin and Scott. The Audit Committee makes recommendations
regarding the selection of independent public accountants, reviews reports
from the independent public accountants and reviews with them the scope and
results of the audit engagement. During fiscal 1996, there were four regular
meetings and three special meetings (two of which were held telephonically) of
the Audit Committee (see "The Casino Transaction" ).
The Board of Directors also has a Compensation Committee, which during all
of fiscal 1996, consisted of Messrs. Crull, McLaughlin, Plaskett, Roeder and
Scott. Mr. Crull took over the chairmanship of the Compensation Committee from
Mr. McLaughlin in May, 1996. The Compensation Committee (i) approves salary
practices and base salary amounts for executive personnel; (ii) approves the
structure of and determines awards under the Company's annual incentive bonus
plan for executive officers; (iii) grants options to officers under the
Company's Stock Incentive Plan (the "Stock Incentive Plan"); (iv) approves the
strategy and structure of the Company's other employee plans and benefits; and
(v) will make awards under the Long-Term Equity Compensation Plan if such plan
is approved by the stockholders, and (vi) with input from the Governance
Committee, makes recommendations to the Board of Directors with respect to
base salary and incentive compensation of the Chief Executive Officer.
4
<PAGE>
The Board of Directors also has a Governance Committee consisting of Messrs.
Emmons (as Chairman), Scott and Guichard. The Governance Committee acts as a
nominating committee, seeking out, evaluating and recommending to the Board
qualified nominees for election as directors of the Company and considering
other matters pertaining to the size and composition of the Board. The
Governance Committee gives appropriate consideration to qualified individuals
recommended by stockholders for nomination as directors of the Company,
provided that such recommendations are accompanied by information sufficient
to enable the Governance Committee to evaluate the qualifications of such
individuals. The Governance Committee also coordinates the formal evaluation
of the Chief Executive Officer's performance and gives input to the
Compensation Committee with respect to the base salary and incentive
compensation of the Chief Executive Officer. During fiscal 1996, the
Governance Committee met three times. The Governance Committee will consider
and make recommendations to the Board of Directors as to Mr. Scott's
replacement on the various committees upon his retirement from the Board.
The Board of Directors also has an Executive Operating Committee consisting
of Messrs. Emmons (as Chairman), Laverty and Lynch. The Executive Operating
Committee monitors the growth and development of the Company's store and other
operations for compliance with the Company's strategic plan. The Executive
Operating Committee has no authority to act in lieu of or independent from the
Board of Directors. During fiscal 1996, the Executive Operating Committee met
at least monthly, on an as needed basis.
During fiscal 1996, the Board of Directors held four regular meetings and
one special telephonic meeting. Each director with the exception of Mr.
Guichard attended at least 75% of the aggregate of the total meetings of the
Board and of the total meetings of any committees on which he served.
COMPENSATION OF DIRECTORS
During fiscal 1996, the Company's non-employee directors (Messrs. Guichard,
McLaughlin, Roeder, Scott, Plassat, Gold, Plaskett, Bouchut and Crull) were
paid an annual fee consisting of $20,000 in cash and 439 shares of the
Company's common stock (valued at approximately $10,000 on the date of award)
in accordance with the Company's Non-Employee Director Stock Plan. Each
director also received $1,000 in cash for each Board meeting and each
committee meeting attended in person and $500 in cash for each such meeting
attended by telephone. Expenses incurred in attending meetings in person are
reimbursable. Directors who are employees of the Company or its subsidiaries
(including Mr. Emmons) are not compensated for service as members of the Board
or any committee of the Board.
Each of Messrs. Guichard, McLaughlin, Roeder and Scott were granted 22,500
nonqualified stock options with an exercise price of $10.77 per share (as
adjusted to reflect the Company's 1993 three-for-two stock split in the form
of a 50% share dividend), at the time of the Company's initial public
offering. All such options are currently exercisable, expire on June 15, 2001
and are subject to early termination in the event the option holder ceases to
be a director, becomes permanently disabled or dies. Mr. Guichard exercised
his options in April, 1996. Mr. Scott exercised his options in February, 1997.
Each of Messrs. Plassat, Gold, Plaskett, Bouchut and Crull were automatically
granted 22,500 nonqualified stock options, with an exercise price of $16.50
per share on May 4, 1995, upon stockholder approval of an amendment to the
Company's Stock Incentive Plan. One-third of each of such options become
exercisable two years after the date of grant and each year thereafter, so
that 100% are exercisable four years after the date of grant. Such options
expire on May 4, 2005 and are subject to early termination in the event the
option holder ceases to be a director, becomes permanently disabled or dies.
Under the Company's Stock Incentive Plan, as amended, any newly elected or
appointed nonemployee director receives an automatic grant of options to
purchase 22,500 shares of the Company's Common Stock, as of the date of his or
her initial appointment or election. Such options are nonqualified stock
options, have exercise prices equal to the fair market value of the Common
Stock at the date of grant, have to be exercised within ten years after the
date of grant and are subject to early termination in the event the option
holder ceases to be a director, becomes permanently disabled or dies. One-
third of these options become exercisable two years after the date of grant
and each year thereafter, so that 100% would be exercisable four years after
the date of grant.
5
<PAGE>
Under the Company's Non-Employee Director Stock Plan, which was approved by
the shareholders at last year's annual meeting, an award of shares is
automatically made as May 1 of each year to each non-employee director who is
serving as such on the award date. For purposes of the Non-Employee Director
Stock Plan, an eligible non-employee director is one who is a member of the
Company's Board of Directors, who is not and has not been an employee of the
Company or its direct or indirect subsidiaries and who is paid an annual cash
retainer fee for his services as a director. Currently, Messrs. Bouchut,
Crull, Guichard, Gold, McLaughlin, Plaskett, Plassat, Roeder and Scott would
be considered eligible non-employee directors under the Non-Employee Director
Stock Plan. Each share award comprises that number of shares equal to the
quotient of $10,000 divided by the fair market value of a share on the award
date. The fair market value of a share on the award date is equal to the
closing price of a share as reported on the New York Stock Exchange composite-
transactions report for the award date (or, if there is no trading on the New
York Stock Exchange on the award date, then on the first previous date on
which there was trading). As of April 1, 1997, the closing price of a share as
reported on the New York Stock Exchange composite-transactions report was
$19.25. If, however, the award calculation would result in fractional shares,
such awards are rounded down to the nearest whole share number and cash is
paid in lieu of fractional shares. Any shares awarded must be held by such
non-employee director for at least six months after the award date.
All awards of shares under the Non-Employee Director Stock Plan are in lieu
of a portion of the annual cash retainer fees otherwise due to each eligible
non-employee director in consideration of past services performed for the
Company by such individuals. However, such awards of shares are not considered
"covered compensation" for purposes of, and thus the award of such shares may
not be deferred under, the Directors Deferred Compensation Plan described
below.
The Company also has a Directors Deferred Compensation Plan (the "Directors
Deferred Compensation Plan"), in which the Company's directors are eligible to
defer pre-tax up to 100% of their director's fees (with a minimum annual
deferral of $2,500). Participation is voluntary on an annual basis. Deferrals
are credited to a special bookkeeping account in the participant's name, and
earnings on deferrals are indexed to certain investment fund options. The
Company pays all benefits and costs from its general assets and, while it has
created a non-qualified grantor trust whose assets will be used to pay
benefits and defray expenses, the assets of the trust will be subject to the
claims of the Company's general creditors in the event of the Company's
insolvency or bankruptcy. In general, participants will receive benefits under
the Directors Deferred Compensation Plan after retirement in one of four pre-
elected payment options, one lump-sum payment or a stream of five, ten or 15
annual payments. Limited withdrawals prior to retirement are permitted in
accordance with the terms of the Directors Deferred Compensation Plan. The
Directors Deferred Compensation Plan also provides additional death benefits
in the event of death prior to retirement. Under the Company's proposed Long-
Term Equity Compensation Plan described below, all directors are eligible to
receive awards (see "Long-Term Equity Compensation Plan").
6
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth the names, ages and titles of the executive
officers of the Company, Smart & Final Stores, American Foodservice
Distributors, Port Stockton Food Distributors, Inc. ("Port Stockton") and
Henry Lee Company ("Henry Lee"):
<TABLE>
<CAPTION>
NAME AGE TITLE
---- --- -----
<C> <C> <S>
Robert J. Emmons...... 62 Chairman of the Board of Directors of the Company
Roger M. Laverty, III. 49 Chief Executive Officer, President and Chief
Operating Officer of the Company and Smart &
Final Stores
Martin A. Lynch....... 59 Executive Vice President and Chief Financial
Officer of the Company and Smart & Final Stores
Dennis L. Chiavelli... 51 Executive Vice President, Operations of the
Company and Smart & Final Stores
Donald G. Alvarado.... 42 Senior Vice President, Law/Development and
Secretary of the Company and Smart & Final
Stores
John R. Goneau, Jr.... 39 President and Chief Operating Officer of Port
Stockton
Abdul S. Mirza........ 48 Vice President, Accounting of Smart & Final
Stores
Suzanne Mullins....... 44 Vice President, Buying of Smart & Final Stores
Amy J. Parker......... 39 Vice President, Marketing of Smart & Final Stores
James E. Robinson..... 49 Vice President, Human Resources of Smart & Final
Stores
Edward I. Sternlieb... 50 President of Henry Lee
</TABLE>
Executive officers of the Company are appointed by the Board of Directors of
the Company and serve at the Board's discretion.
Dennis L. Chiavelli. Mr. Chiavelli was named Executive Vice President,
Operations of the Company and Smart & Final Stores in September 1996. From
September 1991 to September 1996 he served as Senior Vice President of
Operations and Development of Smart & Final Stores. Earlier in 1991, he was
Executive Vice President, Real Estate of Casino Realty, Inc. ("Casino
Realty"), a wholly owned subsidiary of Casino USA. He was a Vice President and
General Manager of Casino Realty and a Vice President of Casino USA from late
1987 to early 1991.
Donald G. Alvarado. Mr. Alvarado was named Senior Vice President,
Law/Development of the Company and Smart & Final Stores in September, 1996 and
continues as Secretary of the Company and Smart & Final Stores. From 1991
until September 1996 he served as Vice President, General Counsel and
Secretary of the Company. He joined the Company in 1987 as Assistant General
Counsel and was appointed Secretary in 1989. He has been Secretary of Smart &
Final Stores since 1990. He was also Assistant Secretary of Casino USA and
Casino Realty from 1989 to January 1994.
John R. Goneau, Jr. Mr. Goneau has been President and Chief Operating
Officer of Port Stockton since August 1994. He was previously Vice President,
Warehouse and Distribution for Smart & Final Stores from 1993 to 1994 and
Director of Warehousing from December 1990 to 1993. Prior to that, Mr. Goneau
held various operations positions since joining Smart & Final Stores in 1977.
Abdul S. Mirza. Mr. Mirza has been Vice President, Accounting for Smart &
Final Stores since joining Smart & Final Stores in June 1995. He previously
held various positions at Ralphs Grocery Company including, from 1988 until
June 1995, Director of Accounting.
Suzanne Mullins. Ms. Mullins has been Vice President, Buying for Smart &
Final Stores since August 1994. She was previously Vice President, Operations
of Smart & Final Stores from 1991 to 1994. Prior to that, Ms. Mullins held
various store operations positions, including District Manager, since joining
Smart & Final Stores in 1987.
7
<PAGE>
Amy J. Parker. Ms. Parker has been Vice President, Marketing for Smart &
Final Stores since February 1994. Ms. Parker was previously Director of
Marketing for Smart & Final Stores from July 1993 to February 1994. From 1984
to July 1993, Ms. Parker was with Taco Bell Corporation, a subsidiary of
Pepsico, Inc., during which time she held the positions of Director of
Strategic Marketing from August 1991 to July 1993 and Director of New Product
Marketing from May 1990 to August 1991.
James E. Robinson. Mr. Robinson has been Vice President, Human Resources for
Smart & Final Stores since December 1994. He was previously a Senior Vice
President of Human Resources of Zenith National Insurance Corporation from
1992 to 1994. Prior to that, he was a Senior Vice President of the Holden
Group of Companies from 1986 to 1992.
Edward I. Sternlieb. Mr. Sternlieb has been President of Henry Lee since
1982 when Henry Lee was privately owned by his family, and also served as
Chief Operating Officer from 1982 through 1996. The Company acquired Henry Lee
in November 1994. Mr. Sternlieb also held various other operating positions
since joining Henry Lee in 1974.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (i) approves salary practices and base salary
amounts for executive personnel; (ii) approves the structure of and determines
awards under the Company's annual incentive bonus plan for executive officers;
(iii) grants options to officers and other key employees under the Stock
Incentive Plan; (iv) approves the strategy and structure of the Company's
other employee plans and benefits; (v) will make awards under the Long-Term
Equity Compensation Plan if such plan is approved by the stockholders, and
(vi) makes recommendations to the Board of Directors with respect to base
salary and incentive compensation of the Chief Executive Officer, with input
from the Governance Committee, which coordinates the formal evaluation of the
Chief Executive Officer's performance.
The Compensation Committee's basic philosophy (which is intended to apply to
all Company management, including the Chief Executive Officer) is to provide
competitive levels of compensation, designed to motivate, retain and attract
management, with incentives linked to the Company's financial performance,
enhanced stockholder value and personal performance. Executive compensation
generally consists of the following main components: (i) a base salary, (ii)
an annual incentive bonus (iii) the opportunity to receive stock options under
the Stock Incentive Plan, and (iv) the opportunity to receive stock options,
stock appreciation rights and other performance-based compensation under the
proposed Long-Term Equity Compensation Plan described below.
In September, 1996 the Compensation Committee engaged the services of Hewitt
Associates, a nationally-recognized executive compensation consulting firm, to
review senior management compensation plans. Hewitt conducted research and
collected data from many of the comparator companies historically reviewed by
the Compensation Committee. Based upon that review, the Compensation Committee
determined that short term executive compensation (base salary and bonus
amounts) was at or around median levels for the comparator companies. However,
long term incentives for retention of senior executives could benefit from a
new component. (See "Long-Term Equity Compensation Plan" below.)
Base Salaries. Base salaries for executive officers are reviewed annually
and designed to be competitive with salaries paid at other companies of
comparable size and complexity in the retail and wholesale food distribution
business and in other comparable businesses (including, for example, certain
non-food, multi-unit retail companies). The Compensation Committee uses these
companies for comparative purposes because it believes that the Company
competes with these companies in attracting and maintaining the Company's
management. Information on these companies is collected by the Compensation
Committee from published industry surveys and a reference group of about 50
public and private companies, including certain companies contained in the Dow
Jones Food Retailers and Wholesalers Index (shown on the following Performance
Graph). The Compensation Committee's policy is to adjust salaries in a way
that recognizes executive performance and responsibilities, and enables the
Company to attract and retain highly qualified executives. In fiscal 1996,
8
<PAGE>
executive base salaries (other than for the Chief Executive Officer) were
increased an average of 6.1% (ranging from 0% to 17.2%), and, consistent with
the Compensation Committee's policy objectives, were at median levels among
the comparison companies. During fiscal 1996, Mr. Emmons received the
compensation set by his Employment Agreement with the Company and for his
services as Chairman of the Executive Operating Committee described in "Emmons
Employment Agreements" below, without adjustment by the Compensation
Committee.
Annual Incentive Bonus Plan. The Compensation Committee believes that the
annual incentive bonus plan is an integral part of the overall compensation
package offered to the Company's executive officers. The Compensation
Committee specifically approves bonus amounts for executive officers, and the
Compensation Committee, with input from the Governance Committee, determines
the bonus amount for the Chief Executive Officer. Based on its review of the
annual incentive bonus plan commenced in late 1993, the Compensation Committee
narrowed the criteria used to determine corporate performance goals to a
single factor--corporate earnings per share. As a result, the target bonus
amount for executive officers was based almost entirely on the attainment of
certain corporate earnings per share, with a small portion of the target bonus
amount based on the attainment of approximately five to eight individual
performance goals. Once goals were selected, competitive target bonuses were
established at median levels based on the same comparative criteria used to
establish base salary levels, with amounts varying by the level of
responsibility. In fiscal 1996, target bonuses ranged from 20% of base salary
for regional vice presidents to 60% of base salary for senior management
(other than the Chief Executive Officer). Mr. Emmons was not eligible for a
bonus award in fiscal 1996.
Actual bonus amounts are determined after the fiscal year end. At that time,
the Chief Executive Officer meets with the Compensation Committee to review
the performance of the executive officers (other than himself) and present his
recommendations for their actual bonus amounts. The Compensation Committee
felt that management performed well in fiscal 1996 and noted that the earnings
per share goal was met. As a result, bonuses were met or in some cases
exceeded the target amounts. Actual bonuses to executive officers (other than
the Chief Executive Officer) averaged approximately 37% of base salary
(ranging from 0% to approximately 65%).
Chief Executive Officer Compensation. The Compensation and Governance
Committees have established a formal process for evaluating the Chief
Executive Officer's performance. This process is coordinated by the Governance
Committee and has historically begun after the end of the fiscal year with a
written self-assessment presented by the Chief Executive Officer to the
Compensation and Governance Committees. So as to allow sufficient time for
thorough review and discussion, this process begins at the last scheduled
Committee meeting of the fiscal year (typically held in late November or early
December). The Chief Executive Officer's self-assessment is shared with the
entire Board who are invited to comment to the Governance and Compensation
Committees as appropriate.
The Chief Executive Officer's minimum base salary for fiscal 1996 was set by
his Employment Agreement with the Company. See "Executive Compensation-Laverty
Employment Agreements" below. In fiscal 1995, the Compensation and Governance
Committees also approved an 19% increase to the base salary provided by the
1993 Laverty Employment Agreement (defined below). This adjustment was
intended to cover two fiscal years, 1995 and 1996. The Chief Executive
Officer's base salary and bonus amount were established at median levels based
on the same comparative criteria used to establish base salary levels for all
executive officers. The Chief Executive Officer's target bonus amount for
fiscal 1996 was based entirely on the attainment of certain corporate earnings
per share and was set at 100% of his adjusted base salary. As with the other
executive officers, the Compensation Committee determined that the corporate
earnings per share exceeded the goal. The Chief Executive Officer's actual
bonus was $420,000 (or approximately 105% of his adjusted base salary) for
fiscal 1996.
Stock Incentive Plan. At the time of the initial public offering the Company
established a Stock Incentive Plan, which currently authorizes the issuance of
options covering up to 2,250,000 shares of the Company's Common Stock. The
Stock Incentive Plan is intended to provide executive officers and key
employees (other
9
<PAGE>
than Mr. Emmons) with the opportunity to acquire a proprietary interest in the
Company and link their personal interest with the stockholders' interest in
the Company's continuing success. Currently, there are 398 participants in the
Stock Incentive Plan. The Compensation Committee has the discretion to
determine the number of options granted to officers and key employees, and
awards of options generally increase as a function of higher positions of
responsibility in the Company. Awards are made at a level calculated to be at
median levels when compared with other companies of comparable size and
complexity in the retail and wholesale food distribution business and in other
comparable businesses (including, for example, certain non-food, multi-unit
retail companies). Options granted to employees under the Stock Incentive Plan
are nonqualified stock options, may be exercised up to ten years after the
date of the grant and are subject to early termination in the event the option
holder ceases to be an employee, becomes permanently disabled or dies. No
option can be granted at an option price of less than 85% of the fair market
value of Common Stock at the time the option is granted. Options are
exercisable as determined by the Compensation Committee at the date of grant
and, absent such determination, one-third of the options become exercisable
after two years and each year thereafter so that 100% are exercisable four
years after the date of grant. For fiscal 1996, the Compensation Committee
granted no options to the Chief Executive Officer or the other executive
officers under the Stock Incentive Plan.
On September 13, 1996, the Compensation Committee recommended, and the
Company's Board of Directors approved, subject to stockholder approval, an
amendment to the Stock Incentive Plan authorizing the issuance of 200,000
additional shares which will increase the number of shares of the Company's
common stock for which options may be granted from 2,250,000 shares to
2,450,000. (For further information on the Stock Incentive Plan, see "Proposal
to Approve the Amendment of the Stock Incentive Plan".)
Long-Term Equity Compensation Plan. As a result of the work performed by the
Company's executive compensation consultant, Hewitt and Associates, the
Compensation Committee approved and recommended to the Board of Directors a
new Long-Term Equity Compensation Plan. Commencing in 1997, if the proposed
Long-Term Equity Compensation Plan ("Equity Compensation Plan") is approved by
the stockholders, under guidelines set by the Committee, incentive-based
compensation will constitute a greater portion of executives' potential long-
term pay pursuant to awards granted. Primary objectives of the Equity
Compensation Plan are to optimize the profitability and growth of the Company
through incentives which are consistent with the Company's goals and which
link the personal interests of Participants in the Equity Compensation Plan to
those of the Company's stockholders. (see "Long-Term Equity Compensation Plan"
below). The Compensation Committee has approved certain awards under the
Equity Compensation Plan for fiscal 1997, subject to stockholder approval of
the Equity Compensation Plan at this year's Annual Meeting. (See "Long-Term
Equity Compensation Plan--Awards to be Granted to Certain Individuals and
Groups".)
Certain Other Benefits. The Company provides medical and pension benefits to
the executive officers that are generally available to all full-time employees
of the Company. (See "Executive Compensation--Pension Plan and 401(k) Savings
Plan") below. The Company also provides certain perquisites to its executive
officers, including, depending upon the executive officer, reimbursement of
tax preparation and/or financial planning expenses, club dues and moving
expenses, car allowances and executive medical coverage.
Other Matters. The Compensation Committee has reviewed the Company's
compensation plans with regard to the deductibility limitation contained in
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"), enacted as part of the Omnibus Budget Reconciliation Act of
1993 (the "Act"). The Compensation Committee has decided at present not to
alter the Company's compensation plans to comply with the deductibility
requirements of the regulations promulgated under the Act. The Compensation
Committee will continue to review the issue and monitor whether the Company's
compensation plans should be amended in the future to meet the deductibility
requirements. The Equity Compensation Plan provides that at all times when
Internal Revenue Code Section 162(m) is applicable, all awards granted under
the Equity Compensation Plan shall comply with the requirements of that
Section, although the Compensation Committee may determine that such
compliance is not desired with respect to any particular award.
* * * * * *
10
<PAGE>
Amounts paid or accrued during fiscal 1996 under the above described plans
and programs for the Chief Executive Officer of the Company and the executive
officers of the Company and its subsidiaries named in the following Summary
Compensation Table are included in the tables and textual discussion which
follow.
<TABLE>
<S> <C>
COMPENSATION COMMITTEE GOVERNANCE COMMITTEE
Timm F. Crull, Chairman Robert J. Emmons, Chairman
David J. McLaughlin Antoine Guichard
Thomas G. Plaskett Louis E. Scott
Ross E. Roeder
Louis E. Scott
</TABLE>
PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
Company's Common Stock since its initial public offering with the cumulative
total return on the Dow Jones Equity Market Index and the Dow Jones Food
Retailers and Wholesalers Index over the same period (assuming the investment
of $100 and the reinvestment of all dividends.
DOLLARS
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG SMART & FINAL, DOW JONES EQUITY MARKET INDEX AND
DOW JONES FOOD RETAILERS AND WHOLESALERS INDEX
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
DOW JONES
DOW JONES FOOD RETAILERS
Measurement Period SMART & EQUITY MARKET WHOLESALERS
(Fiscal Year Covered) FINAL INDEX INDEX
- --------------------- ------- ------------- --------------
<S> <C> <C> <C>
Measurement Pt- 12/31/91 $100 $100 $100
FYE 12/31/92 $151.9 $108.6 $100.9
FYE 12/31/93 $108.5 $119.4 $ 94.7
FYE 12/30/94 $114.5 $120.3 $ 95.6
FYE 12/29/95 $175.3 $166.3 $121
FYE 12/31/96 $179.3 $205.6 $149.3
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Decisions on compensation of the Company's executive officers are generally
made by the Compensation Committee of the Board, and decisions on the
compensation of the Company's Chief Executive Officer are generally made by
the Compensation Committee and the Governance Committee. All such decisions
relating to the compensation of executive officers are reviewed, and in fiscal
1996 were approved without change, by the full Board. In fiscal 1996, the
Compensation Committee consisted of Messrs. Crull, McLaughlin, Plaskett,
Roeder and Scott. Since the beginning of fiscal 1995, the Governance Committee
has consisted of Messrs. Emmons (as Chairman), Guichard and Scott. Mr. Emmons
did not participate in any decisions that affected him. Except for Mr. Emmons
(who is currently Chairman of the Board and was previously the Chief
11
<PAGE>
Executive Officer of the Company), no other member of the Compensation
Committee or the Governance Committee is now or ever has been an employee of
the Company or its subsidiaries. Messrs. Emmons and Guichard are directors of
Casino USA and affiliated with Casino France. Mr. Emmons also serves as
Chairman of the Board, Chief Executive Officer and Chief Financial Officer of
Casino USA.
Mr. Emmons, Casino USA, Casino France and the Company are parties to a Stock
Purchase Agreement, (the "Stock Purchase Agreement"), under which Mr. Emmons
is obligated to purchase from the Company a total of 1,890,000 shares of
Common Stock. Upon execution of the Stock Purchase Agreement, Mr. Emmons
purchased 1,260,000 shares of Common Stock for approximately $5.44 million.
Subsequently, Mr. Emmons, as an individual and as trustee for the Institute
for Management and Marketing Studies Trust (the "IMMS Trust"), purchased an
additional 262,500 shares for approximately $1.26 million. In December, 1992,
Mr. Emmons, as trustee under the Robert and Christine Emmons Family Trust,
purchased an additional 154,500 shares for approximately $768,000. In
December, 1993, Mr. Emmons, as trustee under the Robert and Christine Emmons
Family Trust, purchased an additional 70,000 shares for approximately
$394,100. The remaining 143,000 shares must be purchased by March 7, 1999. In
1996, the Stock Purchase Agreement was amended to provide for a fixed price
for the remaining shares of $8.90, which represented the book value of the
Company's common stock at the end of fiscal 1996. Previously, the Stock
Purchase Agreement provided that the purchase price would be calculated at the
book value of the shares as of the end of the fiscal year immediately
preceding the year of purchase, as determined by the Company's annual audited
financial statements. The Stock Purchase Agreement also provides Casino USA
with a right of first refusal to purchase any shares of Common Stock that Mr.
Emmons may determine to sell. The Stock Purchase Agreement provides that in
the event the Company proposes to register any of the shares of Common Stock
or other securities under the Securities Act of 1933, it must include in such
registration all of the shares that Mr. Emmons requests to be registered, pay
the fees and expenses of any such offering (excluding underwriting discounts)
and indemnify Mr. Emmons against certain liabilities that may arise in
connection with any such offering. The Stock Purchase Agreement further
provides that Casino France, until March 7, 1999, will cause shares held by
Casino USA to be voted for the election of Mr. Emmons to the Board of
Directors.
The Company, Casino USA and Mr. Emmons are also parties to a Registration
Rights Agreement, as amended, pursuant to which the Company agreed that upon
the request of Casino USA or Mr. Emmons, on up to three occasions for each of
them, the Company will register under the Securities Act of 1933 and
applicable state securities laws the sale of the Common Stock owned by Casino
USA or Mr. Emmons. The Company's obligation is subject to certain limitations
relating to a minimum amount of Common Stock required for registration, the
timing and number of registrations and other similar matters. In addition, the
Company is not obligated to register the Common Stock when, in the good faith
judgment of its Board of Directors, such registration would materially
adversely affect a pending or proposed public offering of the Company's
securities or certain other transactions. The Company is also obligated to
offer Casino USA and Mr. Emmons the right to include shares of Common Stock
owned by them in certain registration statements filed by the Company. The
Company also agreed to indemnify Mr. Emmons and Casino USA against certain
liabilities under the Securities Act of 1933 in connection with any such
offerings. The Company is obligated to pay all expenses incidental to such
registrations, excluding underwriters' discounts and commissions allocable to
the sale of Common Stock offered by Casino USA or Mr. Emmons.
Mr. Emmons also owns Hunter Aviation Ltd. ("Hunter Aviation"), which from
time to time leases to the Company a twin engine airplane on a per trip basis.
Hunter Aviation also leases this airplane to unrelated third parties. In
fiscal 1996, the Company paid Hunter Aviation approximately $36,770. The
Company believes the terms of its lease arrangement with Hunter Aviation are
at least comparable to those available from unrelated third parties.
12
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth information
concerning cash and noncash compensation for each of the last three fiscal
years awarded to or earned by the Chief Executive Officer of the Company and
the four other most highly compensated executive officers of the Company and
its subsidiaries serving at fiscal year end.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------------------------------------------------
LONG TERM
COMPENSATION
AWARDS
------------
SECURITIES
UNDERLYING
NAME AND FISCAL SALARY BONUS OTHER ANNUAL OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR ($)(1) ($)(2) COMPENSATION($)(3) (#) COMPENSATION($)(4)
------------------ ------ -------- -------- ------------------ ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Roger M. Laverty, III... 1996 $400,000 $420,000 -0- -0- $8,011
President and Chief 1995 $398,269 $120,000 -0- -0- $4,536
Executive Officer of 1994 $309,038 $310,000 -0- 120,000 $4,152
the Company
Robert J. Emmons........ 1996 $648,443 $ -0- $11,983(5) -0- $9,411
Chairman of the 1995 $638,819 $ -0- $12,479(5) -0- $8,060
Board 1994 $626,003 $ -0- $11,139(5) -0- $7,947
Martin A. Lynch......... 1996 $268,269 $125,000 -0- -0- $6,785
Executive Vice- 1995 $258,269 $ 45,000 -0- -0- $3,886
President and Chief 1994 $248,270 $140,000 -0- 60,000 $3,715
Financial Officer of
the Company
Edward I. Sternlieb..... 1996 $302,625 $ -0- -0- -0- $8,969
President and Chief 1995 $302,674 $ -0- -0- -0- $4,620
Operating Officer of 1994 $ 47,204(6) $200,000(6) -0- 20,000 $2,252
Henry Lee
Dennis L. Chiavelli..... 1996 $211,096 $140,000 -0- -0- $5,937
Senior Vice-President, 1995 $191,269 $ 40,000 -0- -0- $3,419
Operations and 1994 $181,616 $110,000 -0- 40,000 $3,415
Development of Smart &
Final Stores
</TABLE>
- --------
(1) Includes amounts deferred by the named officer under the Company's 401(k)
Savings Plan (the "401(k) Savings Plan"), which was established in fiscal
1992 and under which all named officers except Mr. Sternlieb are eligible
to participate; the Henry Lee 401(k) Savings Plan (the "Henry Lee 401(k)
Plan"), since November 1, 1994 (the date on which the Company acquired 90%
outstanding shares of Henry Lee) and under which Mr. Sternlieb is eligible
to participate; and the Company's Supplemental Deferred Compensation Plan,
which was established to first take effect for fiscal 1995. In the case of
Mr. Emmons, the compensation reported for fiscal 1996, 1995 and 1994
includes consulting payments totalling approximately $448,000, $437,000
and $426,000, respectively, made under his Employment Agreement with the
Company. In the case of Messrs. Laverty and Lynch, the compensation
reported also includes any portion deferred under their Deferred
Compensation Agreements with the Company.
(2) Includes bonus payments made in the year after the listed year for
services performed in the listed year, and excludes bonus payments made in
the listed year for services performed in the prior year.
13
<PAGE>
(3) Excludes perquisites and other personal benefits paid to each named
executive officer (including, depending upon the executive officer,
reimbursement of tax preparation and/or financial planning expenses, club
dues and moving expenses, car allowances and executive medical coverage).
Such perquisites and other personal benefits, in each instance, were less
than the lesser of $50,000 or 10% of the total annual salary and bonus set
forth in the columns entitled "Salary" and "Bonus."
(4) The compensation reported represents amounts contributed by the Company
under the 401(k) Savings Plan (or, in the case of Mr. Sternlieb, by Henry
Lee under the Henry Lee 401(k) Plan, since the time Henry Lee has been a
subsidiary of the Company) and the dollar value of insurance premiums paid
by the Company (or, in the case of Mr. Sternlieb, by Henry Lee, since the
time Henry Lee has been a subsidiary of the Company) with respect to term
life insurance for the benefit of the named officer. Company contributions
under the 401(k) Savings Plan (or, in the case of Mr. Sternlieb, Henry Lee
contributions under the Henry Lee 401(k) Plan) during fiscal 1996 were as
follows: $2,375 for Mr. Laverty, $2,375 for Mr. Emmons, $2,375 for Mr.
Lynch, $4,750 for Mr. Sterlieb and $2,375 for Mr. Chiavelli. Company
contributions under the 401(k) Savings Plan (or, in the case of Mr.
Sternlieb, Henry Lee contributions under the Henry Lee 401(k) Plan) during
fiscal 1995 were as follows: $2,250 for Mr. Laverty, $2,250 for Mr.
Emmons, $2,250 for Mr. Lynch, $4,620 for Mr. Sternlieb and $2,250 for Mr.
Chiavelli. Company contributions under the 401(k) Savings Plan during
fiscal 1994 (or, in the case of Mr. Sternlieb, Henry Lee contributions
under the Henry Lee 401(k) Plan, during November and December 1994) were
as follows: $2,311 for Mr. Laverty, $2,137 for Mr. Emmons, $2,206 for Mr.
Lynch, $0 for Mr. Sternlieb and $2,293 for Mr. Chiavelli. Company (or, in
the case of Mr. Sternlieb, Henry Lee) payments of life and executive
medical insurance premiums during fiscal 1996 were as follows: $2,610 for
Mr. Laverty, $5,810 for Mr. Emmons, $4,410 for Mr. Lynch, $4,219 for Mr.
Sternlieb and $2,131 for Mr. Chiavelli. Company (or, in the case of Mr.
Sternlieb, Henry Lee) payments of insurance premiums during fiscal 1995
were as follows: $2,286 for Mr. Laverty, $5,810 for Mr. Emmons, $1,636 for
Mr. Lynch, $1,930 for Mr. Sternlieb and $1,169 for Mr. Chiavelli. Company
payments of insurance premiums during fiscal 1994 (or, in the case of Mr.
Sternlieb, Henry Lee payments of insurance premiums during November and
December 1994) were as follows: $1,841 for Mr. Laverty, $5,810 for Mr.
Emmons, $1,509 for Mr. Lynch, $322 for Mr. Sternlieb and $1,122 for Mr.
Chiavelli.
(5) The compensation reported represents payment for taxes for the taxable
effect of perquisites and payment for taxes for prior years, in accordance
with Mr. Emmons' Employment Agreement with the Company.
(6) Mr. Sternlieb was not employed by, nor did he perform any services for,
the Company or its subsidiaries prior to November 1, 1994, the date on
which the Company acquired 90% of the outstanding shares of Henry Lee. His
$200,000 bonus, attributable to fiscal 1994, includes the payment of an
accrued bonus for services rendered to Henry Lee prior to the acquisition.
Options and Stock Appreciation Rights. The Company made no option grants
during fiscal 1996 to the executive officers named in the above Summary
Compensation Table. In fiscal 1996, the Company also had no outstanding stock
appreciation rights. The following table summarizes option exercises during
fiscal 1996, and the number of all options and the value of all in-the-money
options held at the end of fiscal 1996, by the executive officers named in the
above Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT END OF FISCAL OPTIONS AT END OF
SHARES ACQUIRED VALUE 1996 (#) FISCAL 1996($)(1)
NAME ON EXERCISE (#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Roger M. Laverty, III... -0- -0- 154,167/88,333 $1,402,426/$628,124
Robert J. Emmons........ -0- -0- -0-/-0- $0/$0
Martin A. Lynch......... -0- -0- 117,500/40,000 $1,196,175/$300,000
Edward I. Sternlieb..... -0- -0- 6,667/13,333 $46,669/$93,331
Dennis L. Chiavelli..... -0- -0- 46,334/26,666 $454,095/$199,995
</TABLE>
- --------
(1) Based on the market value of underlying securities at fiscal year end,
less the exercise price.
14
<PAGE>
Pension Plan and 401(k) Savings Plan. The following table sets forth
estimated annual pension benefits under the Smart & Final Pension Plan (the
"Pension Plan"), on a straight life annuity basis for representative years of
service as defined in the Pension Plan. Such benefits are subject to reduction
for certain prior company retirement benefit plans.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS AT
AGE 65
FOR INDICATED YEARS OF CREDITED
REMUNERATION ON SERVICE(1)
WHICH RETIREMENT LIMITED ---------------------------------------
BENEFITS ARE BASED EARNINGS 15 20 25 30 35
------------------ -------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$125,000...................... $125,000 $25,000 $34,375 $43,750 $53,125 $62,500
150,000...................... $150,000 $30,000 $41,250 $52,500 $63,750 $75,000
175,000...................... $150,000 $30,000 $41,250 $52,500 $63,750 $75,000
200,000(2)................... $150,000 $30,000 $41,250 $52,500 $63,750 $75,000
225,000(2)................... $150,000 $30,000 $41,250 $52,500 $63,750 $75,000
250,000(2)................... $150,000 $30,000 $41,250 $52,500 $63,750 $75,000
300,000(2)................... $150,000 $30,000 $41,250 $52,500 $63,750 $75,000
400,000(2)................... $150,000 $30,000 $41,250 $52,500 $63,750 $75,000
450,000(2)................... $150,000 $30,000 $41,250 $52,500 $63,750 $75,000
500,000(2)................... $150,000 $30,000 $41,250 $52,500 $63,750 $75,000
</TABLE>
- --------
(1) Amounts shown assume retirement at age 65 on January 1, 1997. Estimated
annual retirement benefits are based on the plan in effect on January 1,
1997 and assume that no other offsets or grandfathered benefits are
applied.
(2) Effective in 1994, the compensation used to determine the retirement
benefit could not exceed $150,000 for all years of service. This limit is
adjusted annually for cost-of-living and is equal to $150,000 through
1996, and will increase to $160,000 for 1997.
The Company maintains the Pension Plan for the benefit of all full-time
employees of the Company (other than Port Stockton and Henry Lee employees who
have their own employee benefit plans), who meet certain age and service
requirements, to provide certain benefits in the event of normal, early or
disability retirement, or death. The benefits are calculated on the basis of
the participant's years of service (with years of service prior to January 1,
1992 being credited as though each year was 1.5 years) and the participant's
average pay during his five highest paid consecutive years of service in the
ten years prior to the date he ceases his employment, with the participant's
minimum benefits being at least equal to his accrued benefit under the
Company's prior pension plan. The compensation on which payments are based
includes bonuses, overtime and other compensation but does not include amounts
to be paid under the Pension Plan or any other employee benefit plan. A
participant becomes 100% vested in his retirement benefit at the end of the
fifth year of service. Under the Pension Plan, at the end of fiscal 1996,
Messrs. Laverty, Emmons, Lynch and Chiavelli had credited approximately 18,
13, 7.5 and 11 actual years of service, respectively, and would have been
entitled to minimum annual benefits of approximately $50,538, $77,873, $17,382
and $24,988, respectively. Mr. Sternlieb is not eligible to participate in the
Pension Plan.
The Company also maintains a defined contribution plan (the "401(k) Savings
Plan") which is intended to satisfy the tax qualification requirements of
Section 401(k) of the Internal Revenue Code. All full-time employees of the
Company (other than Port Stockton and Henry Lee employees who have their own
employee benefit plans) who meet certain age and service requirements are
eligible to participate in the 401(k) Savings Plan, which permitted
participants to contribute for fiscal 1996 up to 15% of their compensation or
$9,500, whichever was lower. The Company automatically matches 25% of each
dollar contributed up to 6% of each participant's compensation and may in its
discretion match up to an additional 75% of each dollar contributed up to 6%
of the participant's compensation if the Company exceeds certain financial and
profitability goals. In fiscal 1996, the Company made an additional
discretionary match of 25% of each dollar contributed up to 6% of each
participant's contribution. Participants' contributions to the 401(k) Savings
Plan, which are deemed to be
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contributions of the Company for tax purposes, are deducted from the
participants' compensation prior to the calculation of federal and state
income taxes, thereby decreasing the amount of a participant's compensation
subject to tax.
Participants are entitled to direct their contributions to one or more of
four investment options. None of a participant's account balance in the 401(k)
Savings Plan may be withdrawn prior to termination of employment or his
attainment of age 70, whichever occurs earlier, except upon certain qualified
financial hardships. Distribution of a participant's account balance will
generally be made in a lump sum at the time of termination of employment.
However, subject to certain conditions, a participant may elect to have
distributions made in installments over a period of up to ten years and
distributions in excess of $3,500 may be deferred. A participant's
contributions to the 401(k) Savings Plan will vest immediately. The Company's
contributions on behalf of such participant will vest at a rate of 25% per
year beginning after the first year of service with 100% vested after five
years.
Henry Lee also maintains a defined contribution plan (the "Henry Lee 401(k)
Plan") which is intended to satisfy the tax qualification requirements of
Section 401(k) of the Internal Revenue Code. As a full-time Henry Lee employee
who has met certain age and service requirements, Mr. Sternlieb is a
participant in the Henry Lee 401(k) Plan. The Henry Lee 401(k) Plan is similar
to the 401(k) Savings Plan with respect to the tax advantages, eligibility
requirements, loan features and hardship withdrawal provisions. The Henry Lee
401(k) Plan differs in several respects. The differences include, among other
things, that Henry Lee automatically matches 50% of each dollar contributed up
to 3% of the participant's compensation, participants may withdraw their
account balances prior to termination when they reach the age of 65, employer
contributions vest over a seven year vesting schedule at a rate of 20% per
year commencing in the third year of participation, and participants are
entitled to direct their contributions to eight different investment options.
Deferred Compensation Plan. The Company also has a Supplemental Deferred
Compensation Plan (the "Deferred Compensation Plan"), in which certain Company
management, with annual base compensation of at least $75,000 in 1996
(adjusted annually), are eligible to defer pre-tax up to 100% of their base
compensation and bonus (with a minimum annual deferral of $2,500).
Participation is voluntary on an annual basis. Deferrals are credited to a
special bookkeeping account in the participant's name, and earnings on
deferrals are indexed to certain investment fund options. The Company pays all
benefits and costs from its general assets and, while it has created a non-
qualified grantor trust whose assets will be used to pay benefits and defray
expenses, the assets of the trust will be subject to the claims of the
Company's general creditors in the event of the Company's insolvency or
bankruptcy. In general, participants will receive benefits under the Deferred
Compensation Plan after retirement (with the minimum age for early retirement
being 55 with ten years of service) in one of four pre-elected payment
options, one lump-sum payment or a stream of five, ten or 15 annual payments.
Limited withdrawals prior to retirement are permitted in accordance with the
terms of the Deferred Compensation Plan. The Deferred Compensation Plan also
provides additional death benefits in the event of death prior to retirement.
Emmons Employment Agreements. The Company and Mr. Emmons are parties to an
employment agreement (the "Emmons Employment Agreement") pursuant to which Mr.
Emmons agreed to serve as the Chairman of the Board and Chief Executive
Officer of the Company through December 31, 1993. The Emmons Employment
Agreement also provides, among other things, that Mr. Emmons will serve as a
consultant to the Company for a period of ten years commencing on January 1,
1994 for an annual consulting fee of $400,000, as adjusted by the consumer
price index as provided in such agreement (currently approximately $448,000).
The consulting arrangement includes a covenant not to compete pursuant to
which Mr. Emmons has agreed that during such ten-year period he will not
engage actively in any business with or be employed by any person or business
that competes in any material respect with the business of the Company. The
Company has also agreed to pay Mr. Emmons an annual fee of $200,000 (payable
in quarterly installments) in consideration of his services as Chairman of the
Company's Executive Operating Committee.
Mr. Emmons also served as Chairman of the Board, President and Chief
Executive Officer of Casino USA pursuant to an employment agreement between
Mr. Emmons and Casino USA which extended through 1993
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with a post-retirement consulting arrangement in effect thereafter. All
compensation pursuant to such agreement is paid by Casino USA, and the Company
does not reimburse Casino USA for such amounts.
1993 Laverty Employment Agreement. Throughout 1996, the Company and Mr.
Laverty were parties to an employment agreement dated August 1, 1993 (the
"1993 Laverty Agreement"), pursuant to which Mr. Laverty agreed to serve as
the Chief Executive Officer of the Company through August 1, 1997. The 1993
Laverty Agreement provided, among other things, for an annual base salary of
at least $260,000, discretionary bonuses as determined by the Board, the
inclusion of Mr. Laverty in all retirement and employee benefit plans and
programs of the Company, the use of an automobile and certain other
perquisites and fringe benefits. The annual base salary payable to Mr. Laverty
was increased to $400,000 in March 1995 and $400,000 for 1996. If the 1993
Agreement had been terminated as a result of Mr. Laverty's death, by the
Company for cause, or by him for any reason other than good reason, Mr.
Laverty would have been entitled to receive his base salary through the date
of termination plus all other amounts to which he was then entitled under the
Company's retirement and employee benefit plans and programs at the time such
payments are due. If the 1993 Laverty Agreement had been terminated prior to a
change of control of the Company, by the Company for other than cause or
disability or by Mr. Laverty for good reason, Mr. Laverty would have been
entitled to (i) receive his base salary through the date of termination, plus
all other amounts to which he was then entitled under the Company's retirement
and employee benefit plans and programs at the time such payments were due;
(ii) receive (at the time such payments would have been made) all salary and
bonus payments that would have been payable to him had he continued to be
employed for the remaining term of the 1993 Agreement (with bonuses of not
less than 60% of his then base salary); and (iii) participate in all the
Company's insurance and other employee benefit plans and programs then in
effect for the remaining term of the 1993 Agreement. If the 1993 Laverty
Agreement had been terminated in connection with or following a change of
control of the Company, by the Company other than for cause, disability or by
reason of his death, or by Mr. Laverty for good reason, then Mr. Laverty would
have been entitled to severance payments equal to (i) his full base salary
through the date of termination, plus all other amounts to which he would have
been then entitled under the Company's retirement and employee benefit plans
and programs; (ii) a cash payment equal to the product of (x) the greater of
(A) the number of full and partial years remaining under the term of the 1993
Agreement or (B) three and (y) the sum of (A) his annual base salary in effect
on the date of termination and (B) the highest annualized bonus paid to him
during the term of his employment in an amount not less than 60% of his annual
base salary in effect on the date of his termination; (iii) a cash payment
equal to the benefits that would have been owed or accrued him under certain
employee benefit plans if he had continued in such plans for an additional
period equal to the greater of the number of full and partial years remaining
under the term of the 1993 Agreement or three years; and (iv) a cash payment
related to certain personal income tax liabilities to which he could have been
subject to as a result of receiving the severance payments. Mr. Laverty would
also have been entitled to continue to participate in the Company's insurance
and other employee benefit plans and programs then in effect for the greater
of the remaining term of the 1993 Laverty Agreement or three years and
reimbursement for all legal fees and expenses incurred as a result of such
termination. The 1993 Laverty Agreement also contained Mr. Laverty's covenant
not to compete with the Company during any period prior to a change in control
while he was employed or receiving his monthly salary or severance benefits.
1997 Laverty Employment Agreement. As of January 1, 1997, The Company and
Mr. Laverty entered into a new employment agreement (the "1997 Laverty
Agreement") pursuant to which Mr. Laverty has agreed to serve as the Chief
Executive Officer of the Company through December 31, 1999. The three-year
term of the 1997 Laverty Agreement will be extended for one additional year at
the end of each year of the 1997 Laverty Agreement unless either Mr. Laverty
or the Company elects not to extend the term by notice given at least 90 days
prior to the end of any calendar year in which event the then-current term
will expire in accordance with the terms of the 1997 Laverty Agreement. If
either party elects not to extend the 1997 Laverty Agreement in accordance
with the foregoing, then, upon the effective date of expiration, the Company
will continue to pay Mr. Laverty's base salary for a period of 24 months in
accordance with its normal payroll practices and shall also pay to Mr. Laverty
an amount equal to twice the average bonus paid to him for the three fiscal
years ending with the date of expiration of the term and all benefits to which
Mr. Laverty has a vested right, including retirement benefits and retiree
medical insurance.
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Under the 1997 Laverty Agreement, Mr. Laverty's base salary shall be
determined from time to time by the Board, but shall not be less than $400,000
per year. Once increased, the base salary shall not be decreased. The 1997
Laverty Agreement provides that Mr. Laverty will have an opportunity to earn
an annual cash bonus and that the minimum target annual bonus opportunity will
be at least 100% of his annual base salary. Mr. Laverty will also have the
opportunity to earn long-term incentive awards and participate in all Company
qualified retirement plans, group term life insurance, comprehensive health
and major medical insurance, short and long-term disability and all other
benefits and perquisites to which other executives and employees of the
Company are eligible to receive, as commensurate with Mr. Laverty's position.
The 1997 Laverty Agreement provides that the Company will provide Mr. Laverty
and his surviving spouse full retiree medical insurance for the remainder of
their respective lives in the event of Mr. Laverty's termination of employment
due to death, retirement, disability, involuntary termination without cause,
termination by the executive for good reason or in the event that the 1997
Laverty Agreement is not renewed by the Company. Mr. Laverty is entitled to a
minimum of five weeks paid vacation per year.
In the event the 1997 Laverty Agreement is terminated due to Mr. Laverty's
retirement, death or disability, Mr. Laverty is entitled to receive his base
salary through the date of termination plus all other amounts in which he is
vested or otherwise entitled under the Company's retirement and employee
benefit plans, including retiree medical insurance coverage as described
above, at the time such amounts are normally payable. For purposes of the 1997
Laverty Agreement, disability generally means Mr. Laverty's inability to
perform his duties due to illness or mental infirmity for a period of more
than 90 days in the aggregate during any 12 consecutive month period. In the
event the Laverty Employment 1997 Laverty Agreement is terminated by Mr.
Laverty, the Company shall pay to Mr. Laverty his full base salary through the
effective date of termination and a prorata bonus payment based upon the level
of achievement of preestablished performance goals through the effective date
of termination plus all other benefits to which he has a vested right at that
time.
At all times prior to six months before the effective date of a Change in
Control (as defined in the 1997 Laverty Agreement) or at any time more than
two years after a Change in Control, the Company may terminate the 1997
Laverty Agreement at any time for reasons other than death, disability,
retirement or for cause. Upon the effective date of such a termination, the
Company shall continue to pay Mr. Laverty in equal monthly installments the
greater of (i) his base salary then in effect and bonus, equal to the average
bonuses paid in the prior three years, for the remaining term of the 1997
Laverty Agreement, together with any continuation of health and welfare
benefits for the remaining term, or (ii) two full years base salary and bonus,
equal to the average of bonuses paid in the prior three years, plus a two-year
continuation of health and welfare benefits, and, in all cases, all other
benefits to which Mr. Laverty has a vested right at the time of termination.
If the Company terminates the 1997 Laverty Agreement for cause, the Company
shall pay Mr. Laverty his base salary through the effective date of
termination and all other rights and benefits (other than vested benefits) to
which Mr. Laverty would otherwise have been entitled under the 1997 Laverty
Agreement shall be forfeited.
If Mr. Laverty terminates the 1997 Laverty Agreement at any time prior to
six calendar months prior to a Change in Control, Mr. Laverty shall be
entitled to receive the same payments and benefits as if he had been
involuntarily terminated by the Company without cause as discussed above.
If Mr. Laverty terminates the 1997 Laverty Agreement for good reason within
a period commencing six months before a Change in Control and ending 24 months
after a Change in Control or the Company terminates Mr. Laverty's employment
within such period for a reason other than cause, death, disability or
retirement, Mr. Laverty shall be entitled to the payments and benefits
described below. For purposes of the 1997 Laverty Agreement, the term "Change
in Control" means, generally, either (i) a change in the beneficial ownership
of 35% or more of the Company's voting power, (ii) during any two consecutive
year period there is a change in those persons constituting a majority of the
Board at the beginning of such period, or (iii) a plan of complete
liquidation, an 1997 Laverty Agreement for the sale of substantially all the
Company's assets or a merger, consolidation or reorganization of the Company
involving another corporation (other than a merger, consolidation or
reorganization where current stockholders obtain at least 65% of the voting
power of the
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Company (or surviving entity)). In the event of a termination of the 1997
Laverty Agreement in connection with a Change in Control during the period
described above, the Company shall pay to Mr. Laverty and provide him with the
following severance benefits: (i) an amount equal to three times Mr. Laverty's
highest base salary, (ii) an amount equal to three times his average annual
bonus earned over the three fiscal years prior to the change in control
(whether or not deferred), (iii) an amount equal to Mr. Laverty's unpaid base
salary and accrued vacation pay, (iv) an amount equal to Mr. Laverty's unpaid
targeted annual bonus, established for the plan year in which the effective
date of his termination occurs, adjusted for the Company's performance through
the date of termination, prorated, (v) the continuation of the welfare
benefits in effect for three full years after the effective date of
termination, (vi) a lump-sum cash payment of the actuarial present value
equivalent of the aggregate benefits accrued by Mr. Laverty under the terms of
any and all supplemental retirement plans in which he participates, (vii) a
lump-sum cash payment of the entire balance of Mr. Laverty's deferred amount
under the Company's non-qualified deferred compensation plans, with interest,
and (viii) a lump-sum cash payment of all amounts owed to Mr. Laverty under
the deferred compensation plans, with upward adjustments for deemed future
service. In the event any of the payments in connection with a Change in
Control cause an excise tax to be imposed on Mr. Laverty under Section 4999 of
the Code, the Company shall pay Mr. Laverty in cash an additional amount such
that the net amount retained by Mr. Laverty after deduction for any excise tax
and any income tax and excise tax upon tax payments made by the Company, shall
be equal to the amount Mr. Laverty would have retained had no such excise tax
been imposed.
The 1997 Laverty Agreement also contains Mr. Laverty's covenant not to
compete with the Company during the term and for the longer of twelve months
following the expiration of the 1997 Laverty Agreement or any period during
which the amounts are paid under the 1997 Laverty Agreement, and a covenant,
for a period of 24 months following the expiration of the 1997 Laverty
Agreement, not to attempt to induce other employees of the Company to
terminate employment with the Company or to interfere in a similar manner with
the business of the Company.
The Company and Mr. Laverty are also parties to a deferred compensation
agreement, effective as of January 1, 1994, whereby the Company agrees, among
other things, during the term of Mr. Laverty's employment, to defer an annual
amount equal to 5% of the annual compensation paid or payable to him by the
Company (subject to adjustment in the event of increases in the Consumer Price
Index) and to pay a final additional contribution (as described in such
deferred compensation agreement). Payment of amounts due under the deferred
compensation agreement are subject to forfeiture in the event that Mr.
Laverty's employment is terminated by the Company for cause.
1993 Lynch Employment Agreement. Throughout 1996, the Company and Mr. Lynch
were parties to an employment agreement dated August 1, 1993 (the "1993 Lynch
Agreement"). The 1993 Lynch Agreement provided, among other things, for an
annual base salary of at least $240,000, discretionary bonuses as determined
by the Board, the inclusion of Mr. Lynch in all retirement and employee
benefit plans and programs of the Company, the use of an automobile and
certain other perquisites and fringe benefits. The annual base salary payable
to Mr. Lynch was increased to $260,000 in March 1995 and was further increased
to $270,000 in February 1996. In the event that the Lynch Employment Agreement
had been terminated as a result of his death, by the Company for cause, or by
him for any reason other than good reason, Mr. Lynch would have been entitled
to receive his base salary through the date of termination plus all other
amounts to which he was then entitled under the Company's retirement and
employee benefit plans and programs at the time such payments were due. In the
event that the 1993 Lynch Agreement had been terminated prior to a change of
control of the Company, by the Company for other than cause or disability or
by Mr. Lynch for good reason, Mr. Lynch would have been entitled to (i)
receive his base salary through the date of termination, plus all other
amounts to which he would have then been entitled under the Company's
retirement and employee benefit plans and programs at the time such payments
were due; (ii) receive (at the time such payments would have been made) all
salary and bonus payments that would have been payable to him had he continued
to be employed for the remaining term of the 1993 Lynch Agreement (with
bonuses of not less than 50% of his then base salary); and (iii) participate
in all the Company's insurance and other employee plans and programs then in
effect for the remaining term of the
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Agreement. In the event that the 1993 Lynch Agreement had been terminated in
connection with or following a change of control of the Company, by the
Company other than for cause, disability or by reason of his death, or by Mr.
Lynch for good reason, then Mr. Lynch would have been entitled to severance
payments equal to (i) his full base salary through the date of termination,
plus all other amounts to which he would have then been entitled under the
Company's retirement and employee benefit plans and programs; (ii) a cash
payment equal to the product of (x) the greater of (A) the number of full and
partial years remaining under the term of the Agreement or (B) three and (y)
the sum of (A) his annual base salary in effect on the date of termination and
(B) the highest annualized bonus paid to him during the term of his employment
in an amount not less than 50% of his annual base salary in effect on the date
of his termination; (iii) a cash payment equal to the benefits that would have
been owed or accrued him under certain employee benefit plans if he had
continued in such plans for an additional period equal to the greater of the
number of full and partial years remaining under the term of the Agreement or
three years; and (iv) a cash payment related to certain personal income tax
liabilities to which he could be subject as a result of receiving the
severance payments. Mr. Lynch would also have been entitled to continue to
participate in the Company's insurance and other employee benefit plans and
programs then in effect for the greater of the remaining term of the Agreement
or three years and would have been reimbursed for all legal fees and expenses
incurred as a result of such termination. The 1993 Lynch Agreement also
contained Mr. Lynch's covenant not to compete with the Company during any
period prior to a change in control while he is employed or is receiving his
monthly salary or severance benefits.
As of April 1, 1997, The Company and Mr. Lynch entered into a new employment
agreement (the "1997 Lynch Agreement") pursuant to which Mr. Lynch has agreed
to serve as Executive Vice President and Chief Financial Officer of the
Company through March 31, 2000. The three-year term of the 1997 Lynch
Agreement will be extended for one additional year at the end of each year of
the 1997 Lynch Agreement unless either Mr. Lynch or the Company elects not to
extend the term by notice given at least 90 days prior to the end of any
calendar year in which event the then-current term will expire. If either
party elects not to extend the 1997 Lynch Agreement in accordance with the
foregoing, then, upon the effective date of expiration, the Company will
continue to pay Mr. Lynch's base salary for a period of 24 months in
accordance with its normal payroll practices and shall also pay to Mr. Lynch
an amount equal to twice the average bonus paid to him for the three fiscal
years ending with the date of expiration of the term and all benefits to which
Mr. Lynch has a vested right, including retirement benefits and retiree
medical insurance.
Mr. Lynch's base salary shall be determined from time to time by the Board,
but shall not be less than $280,000 per year. Once increased, the base salary
shall not be decreased. The 1997 Lynch Agreement provides that Mr. Lynch will
have an opportunity to earn an annual cash bonus and that the minimum target
annual bonus opportunity will be at least 60% of his annual base salary. Mr.
Lynch will also have the opportunity to earn long-term incentive awards and
participate in all Company qualified retirement plans, group term life
insurance, comprehensive health and major medical insurance, short and long-
term disability and all other benefits and perquisites to which other
executives and employees of the Company are eligible to receive, as
commensurate with Mr. Lynch's position. The 1997 Lynch Agreement provides that
the Company will provide Mr. Lynch and his surviving spouse full retiree
medical insurance for the remainder of their respective lives in the event of
Mr. Lynch's termination of employment due to death, retirement, disability,
involuntary termination without cause, termination by the executive for good
reason or in the event that the 1997 Lynch Agreement is not renewed by the
Company. Mr. Lynch is entitled to a minimum of five weeks paid vacation per
year.
In the event the 1997 Lynch Agreement is terminated due to Mr. Lynch's
retirement, death or disability, Mr. Lynch is entitled to receive his base
salary through the date of termination plus all other amounts in which he is
vested or otherwise entitled under the Company's retirement and employee
benefit plans, including retiree medical insurance coverage as described
above, at the time such amounts are normally payable. For purposes of the 1997
Lynch Agreement, disability generally means Mr. Lynch's inability to perform
his duties due to illness or mental infirmity for a period of more than 90
days in the aggregate during any 12 consecutive month period. In the event the
Lynch Employment 1997 Lynch Agreement is terminated by Mr. Lynch, the Company
shall pay to Mr. Lynch his full base salary through the effective date of
termination and a prorata bonus payment based
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upon the level of achievement of preestablished performance goals through the
effective date of termination plus all other benefits to which he has a vested
right at that time.
At all times prior to six months before the effective date of a Change in
Control (as defined in the 1997 Lynch Agreement) or at any time more than two
years after a Change in Control, the Company may terminate the 1997 Lynch
Agreement at any time for reasons other than death, disability, retirement or
for cause. Upon the effective date of such a termination, the Company shall
continue to pay Mr. Lynch in equal monthly installments the greater of (i) his
base salary then in effect and bonus, equal to the average bonuses paid in the
prior three years plus an additional sum not to exceed $150,000 depending on
the date of such termination, for the remaining term of the 1997 Lynch
Agreement, together with any continuation of health and welfare benefits for
the remaining term, or (ii) two full years base salary and bonus, equal to the
average of bonuses paid in the prior three years, plus a two-year continuation
of health and welfare benefits, and, in all cases, all other benefits to which
Mr. Lynch has a vested right at the time of termination.
If the Company terminates the 1997 Lynch Agreement for cause, the Company
shall pay Mr. Lynch his base salary through the effective date of termination
and all other rights and benefits (other than vested benefits) to which Mr.
Lynch would otherwise have been entitled under the 1997 Lynch Agreement shall
be forfeited.
If Mr. Lynch terminates the 1997 Lynch Agreement at any time prior to six
calendar months prior to a Change in Control, Mr. Lynch shall be entitled to
receive the same payments and benefits as if he had been involuntarily
terminated by the Company without cause as discussed above.
If Mr. Lynch terminates the 1997 Lynch Agreement for good reason within a
period commencing six months before a Change in Control and ending 24 months
after a Change in Control or the Company terminates Mr. Lynch's employment
within such period for a reason other than cause, death, disability or
retirement, Mr. Lynch shall be entitled to the payments and benefits described
below. For purposes of the 1997 Lynch Agreement, the term "Change in Control"
means, generally, either (i) a change in the beneficial ownership of 35% or
more of the Company's voting power, (ii) during any two consecutive year
period there is a change in those persons constituting a majority of the Board
at the beginning of such period, or (iii) a plan of complete liquidation, an
agreement for the sale of substantially all the Company's assets or a merger,
consolidation or reorganization of the Company involving another corporation
(other than a merger, consolidation or reorganization where current
stockholders obtain at least 65% of the voting power of the Company (or
surviving entity)). In the event of a termination of the 1997 Lynch Agreement
in connection with a Change in Control during the period described above, the
Company shall pay to Mr. Lynch and provide him with the following severance
benefits: (i) an amount equal to three times Mr. Lynch's highest base salary,
(ii) an amount equal to three times his average annual bonus earned over the
three fiscal years prior to the change in control (whether or not deferred)
plus an additional amount not to exceed $150,000 depending on the date of such
termination, (iii) an amount equal to Mr. Lynch's unpaid base salary and
accrued vacation pay, (iv) an amount equal to Mr. Lynch's unpaid targeted
annual bonus, established for the plan year in which the effective date of his
termination occurs, adjusted for the Company's performance through the date of
termination, prorated, (v) the continuation of the welfare benefits in effect
for three full years after the effective date of termination, (vi) a lump-sum
cash payment of the actuarial present value equivalent of the aggregate
benefits accrued by Mr. Lynch under the terms of any and all supplemental
retirement plans in which he participates, (vii) a lump-sum cash payment of
the entire balance of Mr. Lynch's deferred amount under the Company's non-
qualified deferred compensation plans, with interest, and (viii) a lump-sum
cash payment of all amounts owed to Mr. Lynch under the deferred compensation
plans, with upward adjustments for deemed future service. In the event any of
the payments in connection with a Change in Control cause an excise tax to be
imposed on Mr. Lynch under Section 4999 of the Code, the Company shall pay Mr.
Lynch in cash an additional amount such that the net amount retained by Mr.
Lynch after deduction for any excise tax and any income tax and excise tax
upon tax payments made by the Company, shall be equal to the amount Mr. Lynch
would have retained had no such excise tax been imposed.
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The 1997 Lynch Agreement also contains Mr. Lynch's covenant not to compete
with the Company during the term and for the longer of twelve months following
the expiration of the 1997 Lynch Agreement or any period during which the
amounts are paid under the 1997 Lynch Agreement, and a covenant, for a period
of 24 months following the expiration of the 1997 Lynch Agreement, not to
attempt to induce other employees of the Company to terminate employment with
the Company or to interfere in a similar manner with the business of the
Company.
The Company and Mr. Lynch are also parties to a deferred compensation
agreement, effective as of January 1, 1994, whereby the Company agrees, among
other things, during the term of Mr. Lynch's employment, to defer an annual
amount equal to 5% of the annual compensation paid or payable to him by the
Company (subject to adjustment in the event of increases in the Consumer Price
Index) and to pay a final additional contribution (as described in such
agreement). Payment of amounts due under the deferred compensation agreement
are subject to forfeiture in the event that Mr. Lynch's employment is
terminated by the Company for cause.
Sternlieb Employment Agreement. Mr. Sternlieb and Henry Lee are parties to
an employment agreement, pursuant to which he has agreed to serve as the
President of Henry Lee through October 31, 1998. The employment agreement
provides, among other things, for an annual base salary of $300,000; an annual
bonus for calendar years 1995, 1996, 1997 and 1998 equal to 15% (12.5% for
1998) of the amount by which Henry Lee's earnings before provision for income
taxes exceed the profit plan for that year, up to a maximum of $100,000
($83,333 for 1998); the inclusion in all retirement and employee benefit plans
and programs of Henry Lee; the use of an automobile; and certain other
perquisites and fringe benefits. The employment agreement may be terminated
prior to the expiration of its term (i) upon mutual agreement; (ii) upon the
death or disability of Mr. Sternlieb; (iii) by Mr. Sternlieb, for good cause;
or (iv) by Henry Lee, for good cause. It also contains Mr. Sternlieb's
covenant not to compete with Henry Lee for four years after the execution of
the employment agreement.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that the Company's executive officers and directors and persons who own more
than ten percent of the Company's Common Stock timely file initial reports of
ownership of the Company's Common Stock and other equity securities and
reports of changes in such ownership with the Securities and Exchange
Commission and the New York Stock Exchange. The Company has instituted
procedures to receive and review such insider reports. After a review of such
insider reports, the Company believes that all required reports have been
timely filed with the exception of one report which the Company filed
inadvertently late involving the purchase and sale of a small number of shares
by Amy S. Parker, Vice President of Smart & Final Stores.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
Relationship Between the Company and Casino USA. Casino USA currently owns
approximately 56.3% of the outstanding shares of the Company's Common Stock.
Casino France owns approximately 99% of the outstanding shares of Casino USA's
capital stock. There is no agreement between Casino USA and any other party,
including the Company, that would prevent Casino USA from acquiring additional
shares of Common Stock or disposing of shares of Common Stock owned by it.
The Company's twelve-member Board of Directors includes Messrs. Emmons,
Guichard, Plassat and Bouchut who also serve as directors of Casino USA and/or
who are affiliated with Casino France. Mr. Couvreux, who has been nominated to
the Board of Directors, is also affiliated with Casino France. In addition,
Mr. Emmons serves as Chief Executive Officer and Chief Financial Officer of
Casino USA. During fiscal 1996, Mr. Emmons devoted the substantial portion of
his efforts to the Company's business. For information concerning certain
other relationships of Mr. Emmons with the Company, see also "Compensation
Committee Interlocks and Insider Participation" above.
22
<PAGE>
Certain Consulting Agreements. Yves Guichard and Gilles Pinoncely, past
directors of the Company and affiliates of Casino France, are each party to a
Consulting Agreement with the Company, pursuant to which each has agreed to
provide consulting services to the Company from October 1, 1995 until
September 30, 1997, in exchange for the sum of $80,000, payable quarterly, in
advance.
Registration Rights Agreement. The Company, Casino USA and Mr. Emmons are
parties to a Registration Rights Agreement, as amended, pursuant to which the
Company agreed that upon the request of Casino USA or Mr. Emmons, on up to
three occasions for each of them, the Company will register under the
Securities Act of 1933 and applicable state securities laws the sale of the
Common Stock owned by Casino USA or Mr. Emmons. The Company's obligation is
subject to certain limitations relating to a minimum amount of Common Stock
required for registration, the timing and number of registrations and other
similar matters. In addition, the Company is not obligated to register the
Common Stock when, in the good faith judgment of its Board of Directors, such
registration would materially adversely affect a pending or proposed public
offering of the Company's securities or certain other transactions. The
Company is also obligated to offer Casino USA and Mr. Emmons the right to
include shares of Common Stock owned by them in certain registration
statements filed by the Company. The Company also agreed to indemnify Mr.
Emmons and Casino USA against certain liabilities under the Securities Act of
1933 in connection with any such offerings. The Company is obligated to pay
all expenses incidental to such registrations, excluding underwriters'
discounts and commissions allocable to the sale of Common Stock offered by
Casino USA or Mr. Emmons.
The Casino Transaction. Effective December 29, 1996 (as approved by the
shareholders of the Company at a Special Meeting of Shareholders held on March
19, 1997), the Company acquired (pursuant to an Agreement for Conveyance of
Real Property, as amended) 91 properties with a net book value of $71,440,000
from Casino USA and Casino Realty (collectively "Casino") which were being
operated as Smart & Final stores, office and warehouse facilities for a
purchase price of approximately $76 million (the "Casino Transaction"). The
purchase consideration for the Casino Transaction consisted of 1,625,000
shares of the Company's common stock valued at $23.375 per share and
$38,000,000 in two five-year unsecured notes. As part of the Casino
Transaction the Company agreed to assist in and assure Casino the sale of
certain properties that are not being operated as stores for aggregate sales
proceeds of $5.7 million, with the first $500,000 of any excess proceeds being
paid to the Company and any remaining proceeds split 2/3 to Casino and 1/3 to
the Company. Casino also agreed to pay to the Company certain management and
administrative fees.
Real Estate Transactions. Of the 168 Smart & Final Stores facilities
operating in the United States at fiscal year end (after giving effect to the
Casino Transaction) 69 are leased from unaffiliated third parties including 10
which are ground leased, and 33 are leased from either Casino USA or Casino
Realty. Either the Company or Smart & Final Stores has a right of first
refusal to purchase each of the remaining properties owned by Casino Realty
which are leased to the Company or Smart & Final Stores. See also
"Intercompany Agreement" below. Aggregate lease payments to Casino USA and
Casino Realty for fiscal 1996 were $16,546,000. The aggregate amount of future
minimum rentals through fiscal 2001 due in connection with facilities leased
from Casino USA or Casino Realty was approximately $23,723,000 at December 29,
1996.
Henry Lee leases its truck facility from Edward Sternlieb, an executive
officer of the Company and an affiliate of the minority shareholder of Henry
Lee, and its warehouse and office facilities from Mr. Sternlieb's parents, who
are also affiliates of the minority shareholder of Henry Lee. Henry Lee has a
right of first refusal and an option to purchase each of these leased
properties from Mr. Sternlieb or his parents, as the case may be. The
aggregate amount of future minimum rentals through fiscal 2001 due in
connection with these leased facilities was approximately $4,452,000 at
December 29, 1996. Total payments for fiscal 1996 were $842,000.
Intercompany Agreement. The Company, Casino USA and Casino Realty are
parties to an intercompany agreement (the "Intercompany Agreement") in order
to regulate and provide for the relationships between the Company, Casino USA
and Casino Realty and to provide for certain other transactions between them.
In particular, the Intercompany Agreement provides for the performance of
various administrative services by the Company for Casino USA and Casino
Realty and by Casino USA for the Company. None of the Company,
23
<PAGE>
Casino USA or Casino Realty is obligated to use such services. Intercompany
services are provided at the cost of providing such services, including the
estimated allocable costs of (i) management and other employees performing the
services, (ii) computer time, (iii) allocable overhead and (iv) out-of-pocket
expenses. Cost, for purposes of management and employees, is based on an
estimated allocation of their time, based on a study of the actual time spent
in past periods. Any fees for such services cannot exceed $100,000 in any
three-month period without the written consent of the user of such services.
Since 1986, the Company has performed a variety of services for Casino USA
and Casino Realty, including accounting, human resources and systems
development work, the cost of which has been charged to the benefited
affiliated company. These charges amounted to $402,000 for fiscal 1996. It is
anticipated that the Company will continue to provide these administrative
services to its affiliates at its cost and that the levels of future services
will not vary significantly from prior levels.
In addition, under the Intercompany Agreement Casino USA grants the Company
a right of first refusal on any potential transaction or matter that may be a
corporate opportunity for either Casino USA (or its affiliates that it
controls) and the Company (or its affiliates that it controls). A "corporate
opportunity" includes a business opportunity that the Company or its
subsidiaries is financially able to undertake and which by its nature is
within the line of business of the Company or its subsidiaries, or an
opportunity in which the Company or its subsidiaries has an actual or
expectant interest, or such other opportunities as may be considered corporate
opportunities under Delaware law at such time as the corporate opportunity
arises. Under the Intercompany Agreement, the Company is also granted a right
of first refusal to lease, sublease or purchase any store real property
between 10,000 and 60,000 square feet in size and all warehouse properties in
which either Casino USA or Casino Realty acquires a fee or leasehold interest
after the date of the Intercompany Agreement. The Intercompany Agreement also
provides that Casino USA and Casino Realty will not, and will cause its
affiliates that it controls or any corporation of which either holds more than
5% of the capital stock not to, engage in the Company's business. The initial
term of the Intercompany Agreement was two years, and has been renewed from
time to time as provided therein.
Other Arrangements. In addition to charges for services, there have been
cash advances to and from the Company and its affiliates in prior years for
which interest, at then-current short-term investment rates, was charged or
credited. As of December 29, 1996, the Company owed $3,475,000 to Casino USA
and Casino Realty owed $469,000 to the Company, all related to payments for
services and taxes. During fiscal 1996, certain intercompany advances of cash
were made between the Company and Casino USA and Casino Realty. As of December
29, 1996, Casino USA had borrowed approximately $3,335,000 from the Company
(the majority of which was used to acquire shares of Company common stock from
Mr. Emmons) and the Company had borrowed approximately $9,295,000 from Casino
Realty.
In March 1991, Casino USA agreed to unconditionally guarantee the Company's
obligations under a lease agreement pursuant to which the Company leases
certain computer equipment. The aggregate amounts due under such lease
agreement for fiscal 1996 total approximately $232,000. Henry Lee also
guarantees $2,800,000 of obligations of Mr. Sternlieb and his parents related
to Henry Lee's truck facility and warehouse.
Tax Agreement. In connection with the Company's initial public offering, the
Company and Casino USA became parties to a tax termination agreement, which
provides, among other things, that the Company and Casino USA will settle the
tax effects of timing differences for the pre-termination period. In
accordance with this agreement, the Company made final tax termination
payments to Casino USA aggregating $257,000 in fiscal 1996.
The Company and Casino USA are parties to a state tax sharing arrangement
covering income tax obligations in the State of California. Under this
arrangement, the Company has made tax sharing payments to Casino USA, based
upon pre-tax income for financial reporting purposes adjusted for certain
agreed upon items. The Company made tax sharing payments to Casino USA
aggregating $2,303,000 in fiscal 1996.
24
<PAGE>
Other Transactions Related to Henry Lee. In November 1994, the Company
acquired 90% of Henry Lee, pursuant to a stock purchase agreement among the
Company, Sternlieb Family Investments, Ltd., a Florida limited partnership and
the selling shareholder, and Mr. Sternlieb and his parents. The purchase price
for the acquired shares was paid by delivery of $10,663,000 in cash and a non-
negotiable promissory note, in the initial principal amount of $8,000,000. The
note accrues interest at the rate of 7.5% per annum, subject to increase in
the event of default, and matures on October 31, 1999. As a part of the
acquisition, the Company was also granted an option to purchase, and right of
first refusal on, the remaining minority shares of Henry Lee. The Company is
prohibited from selling, transferring, hypothecating or otherwise disposing of
any Henry Lee shares (except as otherwise permitted by a shareholders
agreement).
Henry Lee and a company wholly-owned by Mr. Sternlieb's father are parties
to a consulting agreement through October 31, 1998. Among other things, the
consulting agreement provides for a monthly consulting fee of $14,583.33 and
permits termination of the consulting agreement prior to the expiration of its
term (i) upon mutual agreement; (ii) upon the death or disability of Mr.
Sternlieb's father; (iii) by the company wholly-owned by Mr. Sternlieb's
father, for good cause or upon 30 days written notice; or (iv) by Henry Lee,
for good cause. It also contains a covenant not to compete with Henry Lee for
four years after the execution of the consulting agreement. For fiscal 1996,
payments under the consulting agreement aggregated $175,000. Henry Lee and
Mr. Sternlieb are also parties to an employment agreement. (See "Executive
Compensation--Sternlieb Employment Agreement" above.)
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the ownership of the
Company's Common Stock as of March 25, 1997 by (i) each person known to the
Company to be the beneficial owner of more than five percent of the
outstanding shares of Common Stock; (ii) each director and nominee for
director of the Company; (iii) each executive officer named in the Summary
Compensation Table; and (iv) all directors and executive officers of the
Company and its subsidiaries as a group. Unless otherwise indicated, each of
the stockholders has sole voting and investment power with respect to the
shares beneficially owned, subject to community property laws where
applicable.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
BENEFICIALLY PERCENT OF
NAME OWNED CLASS
---- ------------ ----------
<S> <C> <C>
Casino USA, Inc.(1).................................. 12,415,925 56.3%
Antoine Guichard(2).................................. 12,461,364 56.5
Pierre B. Bouchut(2)................................. 12,423,864 56.4
Georges Plassat(2)................................... 12,423,864 56.4
Ronald Baron(3)...................................... 3,345,895 15.2
U.S. Trust Company of New York(4).................... 1,263,000 5.7
Robert J. Emmons(5).................................. 767,200 3.5
Roger M. Laverty, III(6)(7).......................... 272,920 1.2
Martin A. Lynch(6)................................... 166,906 *
Dennis L. Chiavelli(6)............................... 93,036 *
Ross E. Roeder(6)(8)................................. 30,939 *
David J. McLaughlin(6)(8)............................ 30,389 *
James S. Gold(6)..................................... 10,939 *
Timm F. Crull(6)(9).................................. 9,939 *
Thomas G. Plaskett(6)................................ 8,939 *
Louis E. Scott(8).................................... 7,939 *
Edward I. Sternlieb(6)............................... 7,667 *
All directors and executive officers as a group
(20 persons)(2)(5)(6)(7)(8)(9)...................... 14,044,518 63.7%
</TABLE>
- --------
* Less than 1%.
25
<PAGE>
(1) Casino France, as the owner of approximately 99% of the capital stock of
Casino USA, may be deemed to beneficially own such shares. The address of
Casino USA is 524 Chapala Street, Santa Barbara, California 93101, and the
address of Casino France is 24, rue de la Montat, 42008 St.-Etienne Cedex
2, France.
(2) Includes 10,790,925 shares beneficially owned by Casino France, which
Messrs. Guichard, Plassat and Bouchut may be deemed to beneficially own
by virtue of their relationships and/or positions as shareholders and/or
officers of Casino France and its ownership of approximately 99% of the
capital stock of Casino USA. The address of Messrs. Guichard, Plassat and
Bouchut is 24, rue de la Montat, 42008 St. Etienne Cedex 2, France.
(3) All information with respect to Mr. Baron is based solely on Amendment No.
3 to Schedule 13D dated February 3, 1997, filed by him. Mr. Baron has sole
voting and dispositive power over 318,000 shares (or 1.4% of the
outstanding shares) and shared voting and dispositive power over 3,027,895
shares (or 13.7% of the outstanding shares). Of the 318,000 shares,
300,000 are held in his capacity as General Partner of Baron Capital
Partners, L.P. and 18,000 shares are held by him personally. Of the
3,027,895 shares, 2,405,100 shares are held for the account of two
registered investment companies, Baron Asset Fund and Baron Growth &
Income Fund (the "Baron Funds"), which are advised by BAMCO, Inc., a
registered investment advisor controlled by Mr. Baron, and 622,795 shares
are held for the accounts of investment advisory clients of Baron Capital
Management, Inc. ("BCM"), a registered investment company controlled by
Mr. Baron. Mr. Baron disclaims beneficial ownership of shares held by the
Baron Funds and for the accounts of investment advisory clients of BCM.
The address of Mr. Baron is 767 Fifth Avenue, 24th Floor, New York, New
York 10153.
(4) All information with respect to U.S. Trust Company of New York ("U.S.
Trust") is based solely on a Schedule 13G dated February 14, 1996, filed
by it. U.S. Trust acquired its beneficial ownership on behalf of others
either through a trust/fiduciary capacity and/or a portfolio
management/agency relationship. The address of U.S. Trust is 114 West 47
Street, New York, New York 10036.
(5) Includes 612,400 shares held by the Robert & Christine Emmons Family
Trust, of which Mr. Emmons is the trustee and a beneficiary, and 11,800
shares held by the Robert & Christine Emmons Charitable Trust of which Mr.
Emmons is a trustee, and 143,000 shares which Mr. Emmons has the
obligation to acquire under the Stock Purchase Agreement. Mr. Emmons is
the Chairman of the Board, President and Chief Financial Officer of Casino
USA but disclaims beneficial ownership of the shares of Common Stock owned
by Casino USA. The address of Mr. Emmons is 524 Chapala Street, Santa
Barbara, California 93101.
(6) Includes shares which such persons have the right to acquire within 60
days pursuant to the exercise of outstanding stock options of which
242,500 shares are attributable to Mr. Laverty, 157,500 shares are
attributable to Mr. Lynch, 73,000 shares are attributable to Mr.
Chiavelli, 22,500 shares are attributable to Mr. McLaughlin, 22,500 shares
are attributable to Mr. Roeder, 7,500 shares are attributable to each of
Messrs. Bouchut, Crull, Plaskett and Plassat and 705,500 shares are
attributable to all directors and executive officers as a group.
(7) Includes 450 shares held directly by Mr. Laverty's wife, which Mr. Laverty
may be deemed to beneficially own, and 42,470 shares held of record in a
revocable living trust of which Mr. Laverty and his wife are trustees.
(8) Includes shares held in profit sharing or IRA accounts for the benefit of
the named individual or members of his immediate family.
(9) Shares held in family trust.
26
<PAGE>
PROPOSAL TO APPROVE THE AMENDMENT OF THE STOCK INCENTIVE PLAN TO INCREASE THE
NUMBER OF SHARES OF THE COMPANY'S COMMON STOCK FOR WHICH OPTIONS MAY BE
GRANTED FROM 2,250,000 SHARES TO 2,450,000 SHARES
At the Annual Meeting there will be submitted to stockholders a proposal to
amend the Company's Stock Incentive Plan to increase the number of shares for
which options may be granted from 2,250,000 to 2,450,000 shares. On September
13, 1996, the Board of Directors approved the proposed amendment to the Stock
Incentive Plan, subject to stockholder approval. If the proposed amendment is
not approved by the Company's stockholders it is automatically null and void.
The Board approved the amendment to ensure that the Company will continue to
be able to grant options to officers and key employees of the Company and its
subsidiaries who may or may not be eligible for the Company's proposed Long-
Term Equity Compensation Plan. The Stock Incentive Plan currently authorizes
the issuance of up to 2,250,000 shares of Common Stock pursuant to (i) options
granted or to be granted to officers and key employees of the Company and its
subsidiaries (other than Mr. Emmons) as selected by the Compensation Committee
of the Board of Directors (approximately 405 individuals), and (ii) options
granted to the nonemployee directors of the Company in accordance with a
formula approved by the stockholders at the 1995 Annual Meeting (six
individuals). The aggregate number of shares for which options may be granted
under the Stock Incentive Plan (and the number of shares subject to and the
exercise prices of outstanding options) are subject to adjustment in the event
of any change in the outstanding shares by reason of recaptalizations, stock
dividends, stock splits, split-ups, combinations or exchanges of shares and
the like. The Company has already granted options to purchase an aggregate of
1,994,577 shares of its Common Stock under the Stock Incentive Plan to 398
officers and key employees and six non-employee directors. After taking into
account the grant of these options, option exercises and cancellation of
previously granted options, there are approximately 28,260 shares of Common
Stock available for future option grants under the Stock Incentive Plan
(provided, however, in the event that options granted under the Stock
Incentive Plan terminate or expire without being exercised, shares not
purchased under such lapsed options will again become generally available to
be issued on the exercise of additional options granted under the Stock
Incentive Plan). For further information regarding options granted to the
executive officers named in the Summary Compensation Table and to certain non-
employee directors see "Executive Compensation" "Compensation of Directors"
above.
Under the terms of the Stock Incentive Plan, Messrs. Bouchut, Crull,
Guichard, McLaughlin, Plaskett, Plassat, Roeder and Scott, as non-employee
directors, are not eligible to receive option grants, as all options available
for grant to nonemployee directors have been granted and the proposed
amendment will not increase the number of shares for which options may be
granted to non-employee directors. At the 1996 Annual Meeting the stockholders
approved a new Non-Employee Director Stock Plan which provides for a portion
of the compensation paid to nonemployee directors to be paid in shares of the
Company's common stock.
Subject to the stockholders' approval of the proposed amendment of the Stock
Incentive Plan, the additional options would have exercise prices equal to
100% of the fair market value of Common Stock at the date of grant, would have
to be exercised within ten years after the date of the grant and would be
subject to early termination in the event the option holder ceases to be an
employee, becomes permanently disabled or dies. One-third of these options
would become exercisable two years after the date of grant and each year
thereafter so that 100% would be exercisable four years after the date of
grant. Remaining option grants under the Stock Incentive Plan would be made in
the sole discretion of the Compensation Committee.
The proposed amendment to the Stock Incentive Plan is subject to the
approval of the affirmative vote of a majority of the outstanding shares of
Common Stock entitled to vote and present at the Annual Meeting. Abstention
votes, unlike broker non-votes, are counted in determining the total number of
votes cast on this proposal and thus have the effect of a vote against the
proposal.
The Board of Directors recommends that the stockholders vote "FOR" the
proposed amendment to the Stock Incentive Plan.
27
<PAGE>
PROPOSAL TO APPROVE THE COMPANY'S
LONG-TERM EQUITY COMPENSATION PLAN
Effective as of February 21, 1997, the Company's Board of Directors adopted,
subject to the stockholder approval, the Smart & Final Inc. Long-Term Equity
Compensation Plan (the "Equity Compensation Plan").
At the Annual Meeting there will be submitted to stockholders a proposal to
adopt the Long-Term Equity Compensation Plan (the "Equity Compensation Plan").
The Board of Directors unanimously approved the adoption of the Equity
Compensation Plan on February 21, 1997, subject to stockholder approval. If
the Equity Compensation Plan is not approved by the Company's stockholders it
is automatically null and void. If the Equity Compensation Plan is approved by
the Company's stockholders, the Equity Compensation Plan would be in addition
to the Company's Annual Incentive Bonus Plan, Stock Incentive Plan and Non-
Employee Director Stock Plan described above. The following summary of the
principal features of the Equity Compensation Plan is qualified in its
entirety by the full text of the Equity Compensation Plan, a copy of which is
attached hereto as Exhibit A. The terms used below which commence with capital
letters and are not otherwise defined herein, shall have the meaning ascribed
to them in the Equity Compensation Plan.
Purpose. The Equity Compensation Plan is intended to (i) optimize the
profitability and growth of the Company through incentives which are
consistent with the Company's goals and which link the personal interests of
Participants to those of the Company's stockholders, (ii) provide Participants
with an incentive for excellence in individual performance, (iii) promote team
work among Participants, and (iv) provide flexibility to the Company in its
ability to motivate, attract and retain the services of Participants to make
significant contributions to the Company's success and to allow Participants
to share in the success of the Company.
General. The Equity Compensation Plan permits the granting of Stock Options,
Stock Appreciation Rights, Restricted Stock Awards, Performance Units and
Performance Shares to eligible participants. The total number of Shares of the
Company's common stock available for Awards to be granted under the Equity
Compensation Plan is 1,270,000 Shares.
Administration of the Equity Compensation Plan. The Equity Compensation Plan
will be administered by the Compensation Committee of the Company's Board of
Directors. The Equity Compensation Plan does not require that the Committee
members must qualify as "disinterested persons" under Rule 16b-3 under the
Securities Exchange Act of 1934 ("Rule 16b-3"), or as "outside directors"
under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). The Equity Compensation Plan does require, however, in general terms,
(i) that at all times when Code Section 162(m) is applicable, all Awards
granted under the Equity Compensation Plan shall comply with the requirements
of Code Section 162(m) unless the Committee determines that such compliance is
not desired with respect to any Award, and (ii) with respect to Insiders, that
transactions under the Equity Compensation Plan are intended to comply with
all applicable conditions of Rule 16b-3. Subject to the terms of the Equity
Compensation Plan, the Committee has the full power to select employees to
participate in the Equity Compensation Plan, determine the sizes and types of
Awards, determine the terms and conditions of Awards, construe and interpret
the Equity Compensation Plan and any agreement; entered into under the Plan,
establish, amend or waive any rules and regulations for the Equity
Compensation Plan's administration and, amend the terms and conditions of any
outstanding Award to the extent such terms and conditions are within the
discretion of the Committee. The Committee also has the discretion for making
any adjustments in Awards, the Shares available for Awards and the numerical
limitation for Awards to reflect any transactions such as stock splits or any
merger or reorganization of the Company. The Board of Directors may amend or
terminate the Equity Compensation Plan at any time and for any reason but, as
required under Rule 16b-3, certain material amendments to the Equity
Compensation Plan must be approved by the stockholders.
Eligibility to Receive Awards. Any full-time active employee of the Company
and its subsidiaries is eligible to be selected to receive one or more Awards.
The Company and its subsidiaries currently have approximately 4,615 employees.
The actual number of employees who will receive Awards under the Equity
28
<PAGE>
Compensation Plan cannot be determined because eligibility for participation
in the Equity Compensation Plan is in the discretion of the Committee.
Directors are also eligible for Awards under the Equity Compensation Plan.
Options. The Committee may grant Non-qualified Stock Options and/or
Incentive Stock Options (which are entitled to favorable tax treatment.) The
number of Shares covered by each Option will be determined by the Committee,
but during any fiscal year of the Company, no participant may be granted
options for more than 100,000 Shares. The price of the Shares of the Company's
common stock subject to each Option is set by the Committee but cannot be less
than 100% of the fair market value (determined on the date of grant of the
Shares covered by the Option.
The Option Price of each Option must be paid in full at the time of
exercise. The Committee may permit the Option Price to be paid in cash or
through the tender of Shares of the Company's common stock already owned by
the Participant, or by a combination of cash and Shares. The Committee may
also allow the cashless exercise of an Option as permitted under Federal
reserve Board's Regulation T, subject to applicable securities law
restrictions or by any other means the Committee determines to be consistent
with the Equity Compensation Plan's purposes and applicable law. Options
become exercisable and terminate at the times and on the terms established by
the Committee, but Options generally shall not be exercisable later than the
10th anniversary date of the grant.
Stock Appreciation Rights. Stock Appreciation Rights ("SARs") may be granted
as a separate Award or together with an Option. Upon exercise of a SAR, the
participant will receive a payment from the Company equal to (1) the
difference between the fair market value of a share on the date of exercise
over the grant price multiplied by (2) the number of Shares with respect to
which the SAR exercised. The grant price of a free standing SAR equals the
fair market value of a share on the date of grant of the SAR. The grant price
of a Tandem SAR equals the Option Price of the related Option. SARs may be
paid in cash or Shares of the Company's common stock, as determined by the
Committee. The number of Shares covered by each SAR will be determined by the
Committee, but during any fiscal year of the Company, no Participant may be
granted SARs for more than 100,000 Shares. The Committee also determines the
other terms and conditions of each SAR. SARs expire at the same times
established by the Committee but subject to the maximum time limits as are
applicable to Options granted under the equity Compensation Plan.
Restricted Stock Awards. Restricted Stock Awards are Shares of the Company's
common stock which vest in accordance with terms established by the Committee
in it discretion. For example, the Committee may provide the Restricted Stock
will vest only if one or more performance goals are satisfied and/or only if
the Participant remains employed with the Company for a specified period of
time. Any performance measures may by applied on a Company-wide basis or an
individual unit basis, as deemed appropriate in light of the Participant's
specific responsibilities. The number of Shares covered by each Award of
Restricted Stock will be determined by the Committee, but during any fiscal
year of the Company no participant may be granted Restricted Stock for more
than 100,000 shares.
Performance Units and Performance Shares. Performance Units and Performance
Share are amounts credited to a bookkeeping account established for the
Participant. A Performance Unit has an initial value that is established by
the Committee at the time of its grant. A Performance Share has an initial
value equal to the fair market value of a share of the Company's common stock
on the date of grant. Whether a Performance Unit or Performance Share actually
will result in a payment to a Participant will depend upon the extent to which
performance goals established by the Committee are satisfied. Performance
measures may be chosen from among profits, net income (before or after tax),
share price, earnings per share, return on assets, return on equity, operating
income, return on capital, return on investment, shareholder return, sales,
customer service, employee satisfaction or economic value added. The
applicable performance goals (and all other terms and conditions of an Award
of Performance Units or Performance Shares) will be determined in the
discretion of the Committee. After a Performance Unit or Performance share has
bested (that is, after the applicable performance goal or goals have been
achieved), the Participant will be entitled to a payout of cash and/or common
stock, as determined by the Committee not to exceed $2,000,000 for any one
Participant in any fiscal year.
29
<PAGE>
Awards to Be Granted to Certain Individuals and Groups. The following table
provides information on the Stock Options and Performance Shares Awards
granted by the Compensation Committee on February 21, 1997 to the named
executive officers and the group indicated for 1997, subject to stockholder
approval of the Equity Compensation Plan at this year's Annual Meeting. If the
stockholders do not approve the Equity Compensation Plan, no Awards will be
granted.
<TABLE>
<CAPTION>
GRANT DATE NUMBER OF DOLLAR VALUE OF
NUMBER OF PRESENT VALUE PERFORMANCE PERFORMANCE
NAME STOCK OPTIONS OF STOCK OPTIONS(2) SHARES(3) SHARES(4)
---- ------------- ------------------- ----------- ---------------
<S> <C> <C> <C> <C>
Roger M. Laverty, III... 52,857 $ 292,299 20,000 $ 663,750
Martin A. Lynch......... 25,000 $ 138,250 7,250 $ 240,609
Dennis L. Chiavelli..... 25,000 $ 138,250 7,250 $ 240,609
Donald G. Alvarado...... 14,000 $ 77,420 4,000 $ 132,750
John R. Goneau, Jr. .... 14,000 $ 55,300 3,000 $ 99,563
Abdul S. Mirza.......... 4,500 $ 24,885 1,200 $ 39,825
Suzanne Mullins......... 14,000 $ 77,420 4,000 $ 132,750
Amy J. Parker........... 14,000 $ 77,420 4,000 $ 132,750
James E. Robinson....... 14,000 $ 77,420 4,000 $ 132,750
All key employees and
executive officers as a
group.................. 240,357 $1,207,514 72,100 $1,815,356
</TABLE>
- --------
(1) Options granted are nonqualified stock options, may be exercised up to ten
years after the date of the grant and are subject to early termination in
the event the option holder ceases to be an employee, becomes permanently
disabled or dies. No option can be granted at an option price of less than
the fair market value of Common Stock at the time the option is granted.
Options are exercisable as determined by the Compensation Committee at the
date of grant and, absent such determination, one-third of the options
become exercisable after two years and each year thereafter so that 100%
are exercisable four years after the date of grant.
(2) Based on information provided by Hewitt Associates using a modified Black-
Scholes option pricing model, a model that reflects certain arbitrary
assumptions regarding variable factors such as interest rates, stock price
volatility and dividend yield. Neither the "Grant Date Present Value"
shown above nor the "Dollar Value of Performance Shares" in footnote (4)
should be considered predictions of future Company common stock prices.
(3) The Performance Period for the Performance Shares will end at the earlier
of five (5) years from the date of grant or when the Company's stock price
appreciates 50% from the date of grant. Dividends on the Performance
Shares will accrue during the Performance period and will be paid out at
the end of the Performance Period. If employment terminates due to normal
retirement, Performance Shares will continue to vest. If employment is
terminated due to voluntary resignation or involuntary termination,
unvested Awards will be terminated. If employment is terminated due to
disability, death or early retirement, a prorated Award based on service
during the three-year grant cycle will be paid when the grant vests.
Unvested Performance Shares will immediately vest upon a Change in
Control.
(4) The listed Dollar Value is based on the following assumptions: (i) the
initial value per Share is equal to the closing price per share as of the
effective date of grant, which if the stockholders approve the Equity
Compensation Plan will be $22.125, the closing price per share on
February 21, 1997, (ii) the Awards fully vest within five years of grant
for all awardees, (iii) the Share price increases by the maximum 50% of
grant price at time of vesting, and (iv) no dividends accrue with respect
to the Performance Shares. Present value considerations are ignored.
As described above, the Committee has discretion to determine the number of
Awards (if any) to be granted to any employee. Accordingly, the actual number
of Awards to be granted to any individual is not determinable.
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Non-transferability of Awards. Awards granted under the Equity Compensation
Plan may not be sold, transferred, pledged, assigned, or otherwise alienated
or hypothecated, other than (except in the case of Restricted Stock) by will
or by the applicable laws of dissent and distribution, provided that in the
discretion of the Committee, a Participant's Award agreement, except in the
case of an Incentive Stock Option, may provide otherwise.
Change in Control. On the occurrence of a Change in control, all Options and
SARs granted become immediately exercisable, any restriction periods and
restrictions imposed on Restricted Stock lapse and all target pay-out
opportunities attainable under all outstanding Awards or Restricted Stock,
Performance Units and Performance Shares shall be deemed to have been fully
earned for the entire performance period as of the effective date in a Change
in Control. In addition, the vesting of all Awards denominated in Shares shall
accelerate as of the effective date of a Change in Control and certain cash
payments shall be made to Participants, with respect to the assumed
achievement of performance goals, on a prorata basis. For purposes of the
equity Compensation Plan, a "Change in Control" means generally, either (1)
any person acquires beneficial ownership of more than 35% of the Company's
voting power, (2) during any two consecutive year period there is a change in
those persons constituting a majority of the Board at the beginning of such
period, or (3) a plan of complete liquidation, an agreement for the sale of
substantially all the Company's assets or a merger, consolidation or
reorganization of the Company involving current stockholders obtain at least
65% of the voting power of the Company (or surviving entity).
Tax Aspects. Based on management's understanding of current federal income
tax laws, the tax consequences of the grant of Options under the Equity
Compensation Plan are as follows:
A recipient of an Option or SAR granted under the Equity Compensation Plan
will not have taxable income at the time of grant. Upon exercise of a Non-
Qualified Stock Option or SAR, the Participant generally must recognize as
taxable income an amount equal to the fair market value on the date of
exercise of the Shares exercised minus the Option Price or grant price. Any
gain or loss recognized upon any later sale or other disposition of the
acquired Shares generally will be capital gain or loss.
Upon exercise of an Incentive Stock Option, the Participant generally will
not be required to recognize any taxable income on account of the exercise.
Upon a later sale or other disposition of the Shares, the Participant must
recognize long-term capital gain or ordinary income, depending on t he length
of time the Participant has held the Shares prior to sale.
A Participant who receives Restricted Stock or Performance Units or
Performance Shares will not recognize taxable income upon receipt, but instead
will recognize ordinary income when the Share or units vest. Alternatively,
the Participant may elect under Section 83(b) of the Code to be taxed at the
time of receipt of the Restricted Stock or Performance Units or Performance
Shares. In all cases, the amount of ordinary income recognized by the
participant will be equal to the fair market value of the Shares at the time
income is recognized, minus the amount, if any, paid for the Shares.
Any taxes required to be withheld must be paid by the Participant at the
time of exercise. With respect to withholding required upon exercise of
Options, Participants may elect, subject to the approval of the Committee, to
satisfy tax withholding requirements in whole or in part, by having the
Company withhold Shares having a fair market value on the date that the tax is
determined equal to the minimum statutory total tax which could be imposed on
the transaction.
The Company generally will be entitled to a tax deduction in connection with
an Award made under the Equity Compensation Plan only to the extent that the
Participant recognizes ordinary income from the Award. Section 162(m) of the
Code contains special rules regarding the federal income tax deductibility of
compensation paid to the Company's Chief Executive Officer and to each of the
other four most highly compensated executive officers.
The general rule is that annual compensation paid to any of these specified
executives will be deductible only to the extent that it does not exceed $1
million or qualifies for the Performance-Based Exception under Section 162(m).
The Equity Compensation Plan has been designed so that, following stockholder
approval at the 1997 Annual Meeting, the Committee, in its discretion may in
the future make grants of Options and SARs which will qualify as Performance
Based Compensation under Section 162(m).
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Approval of the Proposal. The Equity Compensation Plan was adopted by the
Board effective as of February 21, 1997, subject to the affirmative vote of a
majority of the outstanding shares of Common Stock which are present in person
or by proxy and entitled to vote at the Annual Meeting. Abstention votes,
unlike broker non-votes, are counted in determining the total number of votes
cast on this proposal and thus have the effect of a vote against the proposal.
By its terms, the Equity Compensation Plan is automatically null and void in
the event that such stockholder approval is not obtained.
The Board of Directors recommends that the stockholders vote "FOR" the
adoption of the Equity Compensation Plan.
SELECTION OF AUDITORS
The Board of Directors of the Company has appointed Arthur Andersen LLP,
independent public accountants, as auditors of the Company for the year ending
December 28, 1997, and has further directed that management submit the
selection of auditors for ratification by the stockholders at the Annual
Meeting. Arthur Andersen LLP has audited the Company's financial statements
for the past eleven years. This firm will have representatives at the Annual
Meeting, who will have an opportunity to make a statement and will be
available to respond to appropriate questions.
ANNUAL REPORT
The Company's Annual Report to Stockholders for fiscal year 1996 is being
mailed to all stockholders. Any stockholder who has not received a copy may
obtain one by writing to the Company.
THE COMPANY WILL PROVIDE WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM
10-K, FOR THE YEAR ENDED DECEMBER 29, 1996 (EXCLUSIVE OF EXHIBITS THERETO),
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, UPON REQUEST OF ANY PERSON
WHO WAS A HOLDER OF RECORD, OR WHO REPRESENTS IN GOOD FAITH THAT HE OR SHE WAS
A BENEFICIAL OWNER, OF COMMON STOCK ON MARCH 25, 1997. ANY SUCH REQUEST SHALL
BE IN WRITING AND ADDRESSED TO THE SECRETARY OF THE COMPANY, 4700 SOUTH BOYLE
AVENUE, LOS ANGELES, CALIFORNIA 90058, TELEPHONE NUMBER (213) 589-1054.
SUBMISSION OF STOCKHOLDER PROPOSALS
The Company's Bylaws provide that stockholders seeking to bring business
before an annual meeting of stockholders, or to nominate directors at an
annual or special meeting of stockholders, must provide timely notice thereof
in writing. To be timely, a stockholder's notice must be delivered to, or
mailed and received at, the principal executive offices of the Company (i) in
the case of an annual meeting that is called for a date that is within 30 days
before or after the anniversary date of the immediately preceding annual
meeting of stockholders, not less than 60 days nor more than 90 days prior to
such anniversary date and (ii) in the case of an annual meeting that is called
for a date that is not within 30 days before or after the anniversary date of
the immediately preceding annual meeting, or in the case of a special meeting
of stockholders, not later than the close of business on the tenth day
following the day on which notice of the date of the meeting was mailed or
public disclosure of the date of the meeting was made, whichever occurs first.
The Bylaws also specify certain requirements for a stockholder's notice to be
in proper written form.
A proposal by a stockholder intended to be presented at the 1997 Annual
Meeting must be received by the Company at its principal executive offices by
April 10, 1997, to be included in the Proxy Statement for that Meeting, and
all other conditions for such inclusion must be satisfied.
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OTHER MATTERS
The Company knows of no other matters to be brought before the Annual
Meeting. However, if any other matters are properly presented for action, the
persons named in the accompanying proxy intend to vote on such matter in their
discretion.
SOLICITATION OF PROXIES
The cost of this solicitation of proxies will be borne by the Company.
Solicitations will be made by mail, telephone or telegram and personally by
directors, officers and other employees of the Company, but such persons will
not receive any compensation for such services over and above their regular
salaries. The Company will reimburse brokers, banks, custodians, nominees and
fiduciaries holding stock in their names or in the names of their nominees for
their reasonable charges and expenses in forwarding proxies and proxy material
to the beneficial owners of such stock.
BY ORDER OF THE BOARD OF DIRECTORS
Donald G. Alvarado
Secretary
April 9, 1997
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EXHIBIT A
SMART & FINAL INC.
LONG-TERM EQUITY COMPENSATION PLAN
ARTICLE 1. ESTABLISHMENT, OBJECTIVES, AND DURATION
1.1. Establishment of the Plan. Smart & Final Inc., a Delaware corporation
(hereinafter referred to as the "Company"), hereby establishes an incentive
compensation plan to be known as the "Smart & Final Inc. Long-Term Equity
Compensation Plan" (hereinafter referred to as the "Plan"), as set forth in
this document. The Plan permits the grant of Nonqualified Stock Options,
Incentive Stock Options, Stock Appreciation Rights, Restricted Stock,
Performance Shares and Performance Units.
The Plan shall become effective as of February 21, 1997 (the "Effective
Date") and shall remain in effect as provided in Section 1.3 hereof.
1.2. Objectives of the Plan. The objectives of the Plan are to optimize the
profitability and growth of the Company through incentives which are
consistent with the Company's goals and which link the personal interests of
Participants to those of the Company's stockholders; to provide Participants
with an incentive for excellence in individual performance; and to promote
teamwork among Participants.
The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of Participants who make
significant contributions to the Company's success and to allow Participants
to share in the success of the Company.
1.3. Duration of the Plan. The Plan shall commence on the Effective Date, as
described in Section 1.1 hereof, and shall remain in effect, subject to the
right of the Board of Directors to amend or terminate the Plan at any time
pursuant to Article 15 hereof, until all Shares subject to it shall have been
purchased or acquired according to the Plan's provisions. However, in no event
may an Award be granted under the Plan on or after December 31, 2006.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
2.1. "Award" means, individually or collectively, a grant under this Plan of
Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation
Rights, Restricted Stock, Performance Shares or Performance Units.
2.2. "Award Agreement" means an agreement entered into by the Company and
each Participant setting forth the terms and provisions applicable to Awards
granted under this Plan.
2.3. "Beneficial Owner" or "Beneficial Ownership" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
2.4. "Board" or "Board of Directors" means the Board of Directors of the
Company.
2.5. "Change in Control" of the Company shall be deemed to have occurred (as
of a particular day, as specified by the Board) upon the occurrence of any
event described in this Section 2.5 as constituting a Change in Control.
A Change in Control will be deemed to have occurred as of the first day any
one (1) or more of the following paragraphs shall have been satisfied:
(a) Any Person (other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company, or a corporation owned
directly or indirectly by the stockholders of the Company in
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substantially the same proportions as their ownership of stock of the
Company), becomes the Beneficial Owner, directly or indirectly, of
securities of the Company, representing more than thirty-five percent
(35%) of the combined voting power of the Company's then outstanding
securities; or
(b) During any period of two (2) consecutive years (not including any
period prior to the Effective Date), individuals who at the beginning
of such period constitute the Board (and any new Director, whose
election by the Company's stockholders was approved by a vote of at
least two-thirds ( 2/3) of the Directors then still in office who
either were Directors at the beginning of the period or whose election
or nomination for election was so approved), cease for any reason to
constitute a majority thereof; or
(c) The stockholders of the Company approve: (i) a plan of complete
liquidation of the Company; or (ii) an agreement for the sale or
disposition of all or substantially all the Company's assets; or (iii)
a merger, consolidation, or reorganization of the Company with or
involving any other corporation, other than a merger, consolidation, or
reorganization that would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least sixty-five percent (65%)
of the combined voting power of the voting securities of the Company
(or such surviving entity) outstanding immediately after such merger,
consolidation, or reorganization.
However, in no event shall a Change in Control be deemed to have occurred,
with respect to a Participant, if that Participant is part of a purchasing
group which consummates the Change-in-Control transaction. The Participant
shall be deemed "part of a purchasing group" for purposes of the preceding
sentence if the Participant is an equity participant or has agreed to become
an equity participant in the purchasing company or group (except for (i)
passive ownership of less than three percent (3%) of the voting equity
securities of the purchasing company; or (ii) ownership of equity
participation in the purchasing company or group which is otherwise deemed not
to be significant, as determined prior to the Change in Control by a majority
of the continuing Nonemployee Directors).
2.6. "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
2.7. "Committee" means the Compensation Committee of the Board, as specified
in Article 3 herein, or such other Committee appointed by the Board to
administer the Plan with respect to grants of Awards.
2.8. "Company" means Smart & Final Inc., a Delaware corporation, including
any and all Subsidiaries, and any successor thereto as provided in Article 18
herein.
2.9. "Director" means any individual who is a member of the Board of
Directors of the Company.
2.10. "Disability" shall have the meaning ascribed to such term in the
Participant's governing long-term disability plan, or if no such plan exists,
at the discretion of the Committee.
2.11. "Effective Date" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.12. "Employee" means any full-time, active employee of the Company.
Directors who are not employed by the Company shall not be considered
Employees under this Plan.
2.13. "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
2.14. "Fair Market Value" shall be determined on the basis of the closing
sale price on the principal securities exchange on which the Shares are traded
or, if there is no such sale on the relevant date, then on the last previous
day on which a sale was reported.
2.15. "Freestanding SAR" means an SAR that is granted independently of any
Options, as described in Article 7 herein.
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2.16. "Incentive Stock Option" or "ISO" means an option to purchase Shares
granted under Article 6 herein and which is designated as an Incentive Stock
Option and which is intended to meet the requirements of Code Section 422.
2.17. "Insider" shall mean an individual who is, on the relevant date, an
officer, director or ten percent (10%) beneficial owner of any class of the
Company's equity securities that is registered pursuant to Section 12 of the
Exchange Act, all as defined under Section 16 of the Exchange Act.
2.18. "Named Executive Officer" means a Participant who, as of the date of
vesting and/or payout of an Award, as applicable, is one of the group of
"covered employees," as defined in the regulations promulgated under Code
Section 162(m), or any successor statute.
2.19. "Nonemployee Director" means an individual who is a member of the
Board of Directors of the Company but who is not an Employee of the Company.
2.20. "Nonqualified Stock Option" or "NQSO" means an option to purchase
Shares granted under Article 6 herein and which is not intended to meet the
requirements of Code Section 422.
2.21. "Option" means an Incentive Stock Option or a Nonqualified Stock
Option, as described in Article 6 herein.
2.22. "Option Price" or "Exercise Price" means the price at which a Share
may be purchased by a Participant pursuant to an Option.
2.23. "Participant" means an Employee who has outstanding an Award granted
under the Plan. The term "Participant" shall not include Nonemployee
Directors.
2.24. "Performance-Based Exception" means the performance-based exception
from the tax deductibility limitations of Code Section 162(m).
2.25. "Performance Share" means an Award granted to a Participant, as
described in Article 9 herein.
2.26. "Performance Unit" means an Award granted to a Participant, as
described in Article 9 herein.
2.27. "Period of Restriction" means the period during which the transfer of
Shares of Restricted Stock is limited in some way (based on the passage of
time, the achievement of performance goals, or upon the occurrence of other
events as determined by the Committee, at its discretion), and the Shares are
subject to a substantial risk of forfeiture, as provided in Article 8 herein.
2.28. "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) thereof.
2.29. "Restricted Stock" means an Award granted to a Participant pursuant to
Article 8 herein.
2.30. "Retirement" shall have the meaning ascribed to such term in the
Company's tax-qualified retirement plan.
2.31. "Shares" means the shares of common stock of the Company.
2.32. "Stock Appreciation Right" or "SAR" means an Award, granted alone or
in connection with a related Option, designated as an SAR, pursuant to the
terms of Article 7 herein.
2.33. "Subsidiary" means any corporation, partnership, joint venture, or
other entity in which the Company has a majority voting interest (including
all division, affiliates, and related entities).
2.34. "Tandem SAR" means an SAR that is granted in connection with a related
Option pursuant to Article 7 herein, the exercise of which shall require
forfeiture of the right to purchase a Share under the related Option (and when
a Share is purchased under the Option, the Tandem SAR shall similarly be
canceled).
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ARTICLE 3. ADMINISTRATION
3.1. The Committee. The Plan shall be administered by the Compensation
Committee of the Board, or by any other Committee appointed by the Board. The
members of the Committee shall be appointed from time to time by, and shall
serve at the discretion of, the Board of Directors.
3.2. Authority of the Committee. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Committee shall have full power to select Employees who
shall participate in the Plan; determine the sizes and types of Awards;
determine the terms and conditions of Awards in a manner consistent with the
Plan; construe and interpret the Plan and any agreement or instrument entered
into under the Plan as they apply to Employees; establish, amend, or waive
rules and regulations for the Plan's administration as they apply to
Employees; and (subject to the provisions of Article 15 herein) amend the
terms and conditions of any outstanding Award to the extent such terms and
conditions are within the discretion of the Committee as provided in the Plan.
Further, the Committee shall make all other determinations which may be
necessary or advisable for the administration of the Plan, as the Plan applies
to Employees. As permitted by law, the Committee may delegate its authority as
identified herein.
3.3. Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Board shall be final, conclusive and binding on all
persons, including the Company, its stockholders, Employees, Participants, and
their estates and beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
4.1. Number of Shares Available for Grants. Subject to adjustment as
provided in Section 4.2 herein, the number of Shares hereby reserved for
issuance to Participants under the Plan shall be one million two hundred
seventy thousand ($1,270,000). The Compensation Committee shall determine the
appropriate methodology for calculating the number of shares issued pursuant
to the Plan.
Unless and until the Committee determines that an Award to a Named Executive
Officer shall not be designed to comply with the Performance-Based Exception,
the following rules shall apply to grants of such Awards under the Plan:
(a) Stock Options: The maximum aggregate number of Shares that may be
granted in the form of Stock Options, pursuant to any Award granted in
any one fiscal year to any one single Participant shall be one hundred
thousand (100,000).
(b) SARs: The maximum aggregate number of Shares that may be granted in the
form of Stock Appreciation Rights, pursuant to any Award granted in any
one fiscal year to any one single Participant shall be one hundred
thousand (100,000).
(c) Restricted Stock: The maximum aggregate grant with respect to Awards of
Restricted Stock granted in any one fiscal year to any one Participant
shall be one hundred thousand (100,000) Shares.
(d) Performance Shares/Performance Units: The maximum aggregate payout with
respect to Awards of Performance Shares or Performance Units granted in
any one fiscal year to any one Participant shall be the value of two
million dollars ($2 million) at the end of the Performance Period.
4.2. Adjustments in Authorized Shares. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether
or not such reorganization comes within the definition of such term in Code
Section 368) or any partial or complete liquidation of the Company, such
adjustment shall be made in the number and class of Shares which may be
delivered under Section 4.1, in the number and class of and/or price of Shares
subject to outstanding Awards granted under the Plan, and in the Award limits
set forth in subsections 4.1(a) and 4.1(b), as may be determined to be
appropriate and equitable by
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the Committee, in its sole discretion, to prevent dilution or enlargement of
rights; provided, however, that the number of Shares subject to any Award
shall always be a whole number.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1. Eligibility. Persons eligible to participate in this Plan include all
Employees and members of the Board of the Company and its subsidiaries.
5.2. Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees, those to
whom Awards shall be granted and shall determine the nature and amount of each
Award.
ARTICLE 6. STOCK OPTIONS
6.1. Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such terms,
and at any time and from time to time as shall be determined by the Committee.
6.2. Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as
the Committee shall determine. The Award Agreement also shall specify whether
the Option is intended to be an ISO within the meaning of Code Section 422, or
an NQSO whose grant is intended not to fall under the provisions of Code
Section 422.
6.3. Option Price. The Option Price for each grant of an Option under this
Plan shall be at least equal to one hundred percent (100%) of the Fair Market
Value of a Share on the date the Option is granted.
6.4. Duration of Options. Each Option granted to an Employee shall expire at
such time as the Committee shall determine at the time of grant; provided,
however, that no Option shall be exercisable later than the tenth (10th)
anniversary date of its grant.
6.5. Exercise of Options. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions
as the Committee shall in each instance approve, which need not be the same
for each grant or for each Participant.
6.6. Payment. Options granted under this Article 6 shall be exercised by the
delivery of a written notice of exercise to the Company, setting forth the
number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares.
The Option Price upon exercise of any Option shall be payable to the Company
in full either: (a) in cash or its equivalent, or (b) by tendering previously
acquired Shares having an aggregate Fair Market Value at the time of exercise
equal to the total Option Price (provided that the Shares which are tendered
must have been held by the Participant for at least six (6) months prior to
their tender to satisfy the Option Price), or (c) by a combination of (a) and
(b).
The Committee also may allow cashless exercise as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law
restrictions, or by any other means which the Committee determines to be
consistent with the Plan's purpose and applicable law.
Subject to any governing rules or regulations, as soon as practicable after
receipt of a written notification of exercise and full payment, the Company
shall deliver to the Participant, in the Participant's name, Share
certificates in an appropriate amount based upon the number of Shares
purchased under the Option(s).
6.7. Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including,
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without limitation, restrictions under applicable federal securities laws,
under the requirements of any stock exchange or market upon which such Shares
are then listed and/or traded, and under any blue sky or state securities laws
applicable to such Shares.
6.8. Termination of Employment. Each Participant's Option Award Agreement
shall set forth the extent to which the Participant shall have the right to
exercise the Option following termination of the Participant's employment with
the Company. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with each
Participant, need not be uniform among all Options issued pursuant to this
Article 6, and may reflect distinctions based on the reasons for termination
of employment.
6.9. Nontransferability of Options.
(a) Incentive Stock Options. No ISO granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further,
all ISOs granted to a Participant under the Plan shall be exercisable
during his or her lifetime only by such Participant.
(b) Nonqualified Stock Options. Except as otherwise provided in a
Participant's Award Agreement, no NQSO granted under this Article 6 may
be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, except as otherwise provided in a Participant's
Award Agreement, all NQSOs granted to a Participant under this Article
6 shall be exercisable during his or her lifetime only by such
Participant.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1. Grant of SARs. Subject to the terms and conditions of the Plan, SARs
may be granted to Participants at any time and from time to time as shall be
determined by the Committee. The Committee may grant Freestanding SARs, Tandem
SARs, or any combination of these forms of SAR.
The Committee shall have complete discretion in determining the number of
SARs granted to each Participant (subject to Article 4 herein) and, consistent
with the provisions of the Plan, in determining the terms and conditions
pertaining to such SARs.
The grant price of a Freestanding SAR shall equal the Fair Market Value of a
Share on the date of grant of the SAR. The grant price of Tandem SARs shall
equal the Option Price of the related Option.
7.2. Exercise of Tandem SARs. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.
Notwithstanding any other provision of this Plan to the contrary, with
respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR
will expire no later than the expiration of the underlying ISO; (ii) the value
of the payout with respect to the Tandem SAR may be for no more than one
hundred percent (100%) of the difference between the Option Price of the
underlying ISO and the Fair Market Value of the Shares subject to the
underlying ISO at the time the Tandem SAR is exercised; and (iii) the Tandem
SAR may be exercised only when the Fair Market Value of the Shares subject to
the ISO exceeds the Option Price of the ISO.
7.3. Exercise of Freestanding SARs. Freestanding SARs may be exercised upon
whatever terms and conditions the Committee, in its sole discretion, imposes
upon them.
7.4. SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement
that shall specify the grant price, the term of the SAR, and such other
provisions as the Committee shall determine.
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7.5. Term of SARs. The term of an SAR granted under the Plan shall be
determined by the Committee, in its sole discretion; provided, however, that
such term shall not exceed ten (10) years.
7.6. Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The difference between the Fair Market Value of a Share on the date of
exercise over the grant price; by
(b) The number of Shares with respect to which the SAR is exercised.
At the discretion of the Committee, the payment upon SAR exercise may be in
cash, in Shares of equivalent value, or in some combination thereof.
7.7. Termination of Employment. Each SAR Award Agreement shall set forth the
extent to which the Participant shall have the right to exercise the SAR
following termination of the Participant's employment with the Company and/or
its subsidiaries. Such provisions shall be determined in the sole discretion
of the Committee, shall be included in the Award Agreement entered into with
Participants, need not be uniform among all SARs issued pursuant to the Plan,
and may reflect distinctions based on the reasons for termination of
employment.
7.8. Nontransferability of SARs. Except as otherwise provided in a
Participant's Award Agreement, no SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, all SARs granted to a
Participant under the Plan shall be exercisable during his or her lifetime
only by such Participant.
ARTICLE 8. RESTRICTED STOCK
8.1. Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Participants in such amounts as the Committee shall
determine. Without limiting the generality of the foregoing, Shares of
Restricted Stock may be granted in connection with payouts under other
compensation programs of the Company.
8.2. Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Award Agreement that shall specify the
Period(s) of Restriction, the number of Shares of Restricted Stock granted,
and such other provisions as the Committee shall determine.
8.3. Transferability. Except as provided in this Article 8, the Shares of
Restricted Stock granted herein may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated until the end of the
applicable Period of Restriction established by the Committee and specified in
the Restricted Stock Award Agreement, or upon earlier satisfaction of any
other conditions, as specified by the Committee in its sole discretion and set
forth in the Restricted Stock Award Agreement. All rights with respect to the
Restricted Stock granted to a Participant under the Plan shall be available
during his or her lifetime only to such Participant.
8.4. Other Restrictions. The Committee may impose such other conditions
and/or restrictions on any Shares of Restricted Stock granted pursuant to the
Plan as it may deem advisable including, without limitation, a requirement
that Participants pay a stipulated purchase price for each Share of Restricted
Stock, restrictions based upon the achievement of specific performance goals
(Company-wide, divisional, and/or individual), time-based restrictions on
vesting following the attainment of the performance goals, and/or restrictions
under applicable Federal or state securities laws.
The Company shall retain the certificates representing Shares of Restricted
Stock in the Company's possession until such time as all conditions and/or
restrictions applicable to such Shares have been satisfied.
Except as otherwise provided in this Article 8, Shares of Restricted Stock
covered by each Restricted Stock grant made under the Plan shall become freely
transferable by the Participant after the last day of the applicable Period of
Restriction.
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8.5. Voting Rights. During the Period of Restriction, Participants holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares.
8.6. Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder may be
credited with regular cash dividends paid with respect to the underlying
Shares while they are so held. The Committee may apply any restrictions to the
dividends that the Committee deems appropriate. Without limiting the
generality of the preceding sentence, if the grant or vesting of Restricted
Shares granted to a Named Executive Officer is designed to comply with the
requirements of the Performance-Based Exception, the Committee may apply any
restrictions it deems appropriate to the payment of dividends declared with
respect to such Restricted Shares, such that the dividends and/or the
Restricted Shares maintain eligibility for the Performance-Based Exception.
8.7. Termination of Employment. Each Restricted Stock Award Agreement shall
set forth the extent to which the Participant shall have the right to receive
unvested Restricted Shares following termination of the Participant's
employment with the Company. Such provisions shall be determined in the sole
discretion of the Committee, shall be included in the Award Agreement entered
into with each Participant, need not be uniform among all Shares of Restricted
Stock issued pursuant to the Plan, and may reflect distinctions based on the
reasons for termination of employment; provided, however that, except in the
cases of terminations connected with a Change in Control and terminations by
reason of death or Disability, the vesting of Shares of Restricted Stock which
qualify for the Performance-Based Exception and which are held by Named
Executive Officers shall occur at the time they otherwise would have, but for
the employment termination.
ARTICLE 9. PERFORMANCE UNITS AND PERFORMANCE SHARES
9.1. Grant of Performance Units/Shares. Subject to the terms of the Plan,
Performance Units and/or Performance Shares may be granted to Participants in
such amounts and upon such terms, and at any time and from time to time, as
shall be determined by the Committee.
9.2. Value of Performance Units/Shares. Each Performance Unit shall have an
initial value that is established by the Committee at the time of grant. Each
Performance Share shall have an initial value equal to the Fair Market Value
of a Share on the date of grant. The Committee shall set performance goals in
its discretion which, depending on the extent to which they are met, will
determine the number and/or value of Performance Units/Shares that will be
paid out to the Participant. For purposes of this Article 9, the time period
during which the performance goals must be met shall be called a "Performance
Period."
9.3. Earning of Performance Units/Shares. Subject to the terms of this Plan,
after the applicable Performance Period has ended, the holder of Performance
Units/Shares shall be entitled to receive payout on the number and value of
Performance Units/Shares earned by the Participant over the Performance
Period, to be determined as a function of the extent to which the
corresponding performance goals have been achieved.
9.4. Form and Timing of Payment of Performance Units/Shares. Payment of
earned Performance Units/Shares shall be made in a single lump sum following
the close of the applicable Performance Period. Subject to the terms of this
Plan, the Committee, in its sole discretion, may pay earned Performance
Units/Shares in the form of cash or in Shares (or in a combination thereof)
which have an aggregate Fair Market Value equal to the value of the earned
Performance Units/Shares at the close of the applicable Performance Period.
Such Shares may be granted subject to any restrictions deemed appropriate by
the Committee.
At the discretion of the Committee, Participants may be entitled to receive
any dividends declared with respect to Shares which have been earned in
connection with grants of Performance Units and/or Performance Shares which
have been earned, but not yet distributed to Participants (such dividends
shall be subject to the same accrual, forfeiture, and payout restrictions as
apply to dividends earned with respect to Shares of Restricted Stock, as set
forth in Section 8.6 herein). In addition, Participants may, at the discretion
of the Committee, be entitled to exercise their voting rights with respect to
such Shares.
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9.5. Termination of Employment Due to Death, Disability, or
Retirement. Unless determined otherwise by the Committee and set forth in the
Participant's Award Agreement, in the event the employment of a Participant is
terminated by reason of death, Disability, or Retirement during a Performance
Period, the Participant shall receive a payout of the Performance Units/Shares
which is prorated, as specified by the Committee in its discretion.
Payment of earned Performance Units/Shares shall be made at a time specified
by the Committee in its sole discretion and set forth in the Participant's
Award Agreement. Notwithstanding the foregoing, with respect to Named
Executive Officers who retire during a Performance Period, payments shall be
made at the same time as payments are made to Participants who did not
terminate employment during the applicable Performance Period.
9.6. Termination of Employment for Other Reasons. In the event that a
Participant's employment terminates for any reason other than those reasons
set forth in Section 9.5 herein, all Performance Units/Shares shall be
forfeited by the Participant to the Company unless determined otherwise by the
Committee, as set forth in the Participant's Award Agreement.
9.7. Nontransferability. Except as otherwise provided in a Participant's
Award Agreement, Performance Units/Shares may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will
or by the laws of descent and distribution. Further, except as otherwise
provided in a Participant's Award Agreement, a Participant's rights under the
Plan shall be exercisable during the Participant's lifetime only by the
Participant or the Participant's legal representative.
ARTICLE 10. PERFORMANCE MEASURES
Unless and until the Committee proposes for shareholder vote and
shareholders approve a change in the general performance measures set forth in
this Article 10, the attainment of which may determine the degree of payout
and/or vesting with respect to Awards to Named Executive Officers which are
designed to qualify for the Performance-Based Exception, the performance
measure(s) to be used for purposes of such grants shall be chosen from among
profits, net income (either before or after taxes), share price, earnings per
share, return on assets, return on equity, operating income, return on
capital, return on investment, shareholder return, sales, customer service,
employee satisfaction, or economic value added.
The Committee shall have the discretion to adjust the determinations of the
degree of attainment of the preestablished performance goals; provided,
however, that Awards which are designed to qualify for the Performance-Based
Exception, and which are held by Named Executive Officers, may not be adjusted
upward (the Committee shall retain the discretion to adjust such Awards
downward).
In the event that applicable tax and/or securities laws change to permit
Committee discretion to alter the governing performance measures without
obtaining shareholder approval of such changes, the Committee shall have sole
discretion to make such changes without obtaining shareholder approval. In
addition, in the event that the Committee determines that it is advisable to
grant Awards which shall not qualify for the Performance-Based Exception, the
Committee may make such grants without satisfying the requirements of Code
Section 162(m).
ARTICLE 11. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any beneficiary
or beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his or her death before he or
she receives any or all of such benefit. Each such designation shall revoke
all prior designations by the same Participant, shall be in a form prescribed
by the Company, and will be effective only when filed by the Participant in
writing with the Company during the Participant's lifetime. In the absence of
any such designation, benefits remaining unpaid at the Participant's death
shall be paid to the Participant's estate.
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ARTICLE 12. DEFERRALS
The Committee may permit or require a Participant to defer such
Participant's receipt of the payment of cash or the delivery of Shares that
would otherwise be due to such Participant by virtue of the exercise of an
Option or SAR, the lapse or waiver of restrictions with respect to Restricted
Stock, or the satisfaction of any requirements or goals with respect to
Performance Units/Shares. If any such deferral election is required or
permitted, the Committee shall, in its sole discretion, establish rules and
procedures for such payment deferrals.
ARTICLE 13. RIGHTS OF EMPLOYEES
13.1. Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Participant's employment at any
time, nor confer upon any Participant any right to continue in the employ of
the Company.
13.2. Participation. No Employee shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected
to receive a future Award.
ARTICLE 14. CHANGE IN CONTROL
14.1. Treatment of Outstanding Awards. Upon the occurrence of a Change in
Control, unless otherwise specifically prohibited under applicable laws, or by
the rules and regulations of any governing governmental agencies or national
securities exchanges:
(a) Any and all Options and SARs granted hereunder shall become immediately
exercisable, and shall remain exercisable throughout their entire term;
(b) Any restriction periods and restrictions imposed on Restricted Shares
shall lapse;
(c) The target payout opportunities attainable under all outstanding Awards
of Restricted Stock, Performance Units and Performance Shares shall be
deemed to have been fully earned for the entire Performance Period(s)
as of the effective date of the Change in Control. The vesting of all
Awards denominated in Shares shall be accelerated as of the effective
date of the Change in Control, and there shall be paid out in cash to
Participants within thirty (30) days following the effective date of
the Change in Control a pro rata amount based upon an assumed
achievement of all relevant performance goals and upon the length of
time within the Performance Period which has elapsed prior to the
Change in Control.
14.2. Termination, Amendment, and Modifications of Change-in-Control
Provisions. Notwithstanding any other provision of this Plan or any Award
Agreement provision, the provisions of this Article 14 may not be terminated,
amended, or modified on or after the date of a Change in Control to affect
adversely any Award theretofore granted under the Plan without the prior
written consent of the Participant with respect to said Participant's
outstanding Awards; provided, however, the Board of Directors, upon
recommendation of the Committee, may terminate, amend, or modify this Article
14 at any time and from time to time prior to the date of a Change in Control.
ARTICLE 15. AMENDMENT, MODIFICATION, AND TERMINATION
15.1. Amendment, Modification, and Termination. The Board may at any time
and from time to time, alter, amend, suspend or terminate the Plan in whole or
in part; provided, however, that no amendment which requires shareholder
approval in order for the Plan to continue to comply with Rule 16b-3 under the
Exchange Act, including any successor to such Rule, shall be effective unless
such amendment shall be approved by the requisite vote of shareholders of the
Company entitled to vote thereon.
15.2. Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual
or nonrecurring events (including, without limitation, the events described in
Section 4.3
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hereof) affecting the Company or the financial statements of the Company or of
changes in applicable laws, regulations, or accounting principles, whenever
the Committee determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan; provided that no such adjustment shall be
authorized to the extent that such authority would be inconsistent with the
Plan's meeting the requirements of Section 162(m) of the Code, as from time to
time amended.
15.3. Awards Previously Granted. No termination, amendment, or modification
of the Plan shall adversely affect in any material way any Award previously
granted under the Plan, without the written consent of the Participant holding
such Award.
15.4. Compliance with Code Section 162(m). At all times when Code Section
162(m) is applicable, all Awards granted under this Plan shall comply with the
requirements of Code Section 162(m); provided, however, that in the event the
Committee determines that such compliance is not desired with respect to any
Award or Awards available for grant under the Plan, then compliance with Code
Section 162(m) will not be required. In addition, in the event that changes
are made to Code Section 162(m) to permit greater flexibility with respect to
any Award or Awards available under the Plan, the Committee may, subject to
this Article 15, make any adjustments it deems appropriate.
ARTICLE 16. WITHHOLDING
16.1. Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an
amount sufficient to satisfy Federal, state, and local taxes, domestic or
foreign, required by law or regulation to be withheld with respect to any
taxable event arising as a result of this Plan.
16.2. Share Withholding. With respect to withholding required upon the
exercise of Options or SARs, upon the lapse of restrictions on Restricted
Stock, or upon any other taxable event arising as a result of Awards granted
hereunder, Participants may elect, subject to the approval of the Committee,
to satisfy the withholding requirement, in whole or in part, by having the
Company withhold Shares having a Fair Market Value on the date the tax is to
be determined equal to the minimum statutory total tax which could be imposed
on the transaction. All such elections shall be irrevocable, made in writing,
signed by the Participant, and shall be subject to any restrictions or
limitations that the Committee, in its sole discretion, deems appropriate.
ARTICLE 17. INDEMNIFICATION
Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she
may be involved by reason of any action taken or failure to act under the Plan
and against and from any and all amounts paid by him or her in settlement
thereof, with the Company's approval, or paid by him or her in satisfaction of
any judgement in any such action, suit, or proceeding against him or her,
provided he or she shall give the Company an opportunity, at its own expense,
to handle and defend the same before he or she undertakes to handle and defend
it on his or her own behalf. The foregoing right of indemnification shall not
be exclusive of any other rights of indemnification to which such persons may
be entitled under the Company's Articles of Incorporation of Bylaws, as a
matter of law, or otherwise, or any power that the Company may have to
indemnify them or hold them harmless.
ARTICLE 18. SUCCESSORS
All obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the
business and/or assets of the Company.
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ARTICLE 19. LEGAL CONSTRUCTION
19.1. Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural
shall include the singular and the singular shall include the plural.
19.2. Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
19.3. Requirements of Law. The granting of Awards and the issuance of Shares
under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
19.4. Securities Law Compliance. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions or Rule
16b-3 or its successors under the 1934 Act. To the extent any provision of the
plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the
Committee.
19.5. Governing Law. To the extent not preempted by federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the state of Delaware.
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- -------------------------------------------------------------------------------
PROXY SMART & FINAL INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert J. Emmons and Donald G. Alvarado, and
each of them, proxies of the undersigned, each with full power to act without
the other and with power of substitution, to represent the undersigned and
vote as directed on the reverse hereof all shares of Common Stock, $.01 par
value per share, of Smart & Final Inc. (the "Company"), which the undersigned
may be entitled to vote at the Annual Meeting of Stockholders of the Company
to be held on May 9, 1997, or any adjournment thereof, and in their discretion
upon such other business as may properly come before the Annual Meeting, or
any adjournments thereof.
(Continued on reverse side)
- --------------------------------------------------------------------------------
-- FOLD AND DETACH HERE --
<PAGE>
Please mark your votes like this [X]
- -------------------------
COMMON
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
NOMINEES FOR DIRECTOR AND EACH OF THE FOLLOWING PROPOSALS.
1. Election of Directors
FOR ALL NOMINEES LISTED BELOW (EXCEPT AS INDICATED BELOW) [_]
WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED BELOW [_]
Nominees: Robert J. Emmons, Antoine Guichard, James S. Gold and
Christian Couvreux
(INSTRUCTION: To withhold authority to vote for any individual, cross his name
out above.)
2. Proposal to approve the amendment of the Company's Stock Incentive Plan to
increase the number of shares for which options may be granted from 2,250,000
shares to 2,450,000 shares:
FOR [_] AGAINST [_] ABSTAIN [_]
3. Proposal to approve the Company's LONG-TERM EQUITY COMPENSATION plan:
FOR [_] AGAINST [_] ABSTAIN [_]
4. Proposal to ratify the selection of Arthur Andersen LLP, as the Company's
Auditors:
FOR [_] AGAINST [_] ABSTAIN [_]
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER AND, IF NO DIRECTIONS ARE GIVEN, WILL BE VOTED
FOR THE ELECTION OF THE NOMINEES AND THE PROPOSALS.
Signature _______________________________ Date _________________________,1997
Signature _______________________________ Date _________________________,1997
Please sign exactly as your name appears hereon. When signing as attorney,
executor, administrator, trustee, or guardian, set forth your full title. When
shares are held in more than one name, both parties should sign. If a
corporation, sign in full corporate name by President or other authorized
officer. If a partnership, sign in partnership name by authorized person.
<PAGE>
ADMISSION TICKET
[LOGO OF SMART & FINAL INC.(R)]
1997 ANNUAL MEETING OF STOCKHOLDERS
FRIDAY, MAY 9, 1997
10:00 AM
SMART & FINAL
ROBERT J. EMMONS TRAINING CENTER
4719 BOYLE AVENUE
VERNON, CALIFORNIA 90058
PLEASE ADMIT NON-TRANSFERABLE
<PAGE>
[MAP]
IF YOU ARE COMING FROM LAX:
Take the 105 east to 710 north and exit on Atlantic South/Bandini West and
stay to the left. Freeway exit merges into Atlantic. Make a right on District.
Continue straight, District will become Leonis. Make a right on Boyle Ave.
IF YOU ARE COMING NORTH ON 710 FREEWAY:
Exit at Atlantic South/Bandini West and stay to the left. Freeway exit merges
into Atlantic. Make a right on District. Continue straight, District will become
Leonis. Make a right on Boyle Ave.
IF YOU ARE COMING SOUTH ON 710 FREEWAY:
Exit at Atlantic South/Bandini West and stay to the left. Freeway exit merges
into Atlantic. Make a right at District. Continue straight, District will become
Leonis. Make a right on Boyle Ave.
IF YOU ARE COMING NORTH ON 5 FREEWAY:
Exit south on Atlantic and continue to District. Make a right on District.
Continue straight, District will become Leonis. Make a right on Boyle Ave.
IF YOU ARE COMING SOUTH ON 5 FREEWAY:
Keep to far right at transition for 60 & 5 freeways. Exit Soto St.; exit will
merge with Soto south. Make a left on Leonis. Make a left on Boyle Ave.
