<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SMART & FINAL
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(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(R)]
SMART & FINAL INC.
4700 SOUTH BOYLE AVENUE
LOS ANGELES, CALIFORNIA 90058
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 13, 1998
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 Wednesday, May 13, 1998, at 10:00 a.m.,
local time, for the following purposes:
1. To elect four directors of the Company to serve until the 2001 annual
meeting and their successors have been elected and qualified;
2. To ratify the selection of Arthur Andersen LLP, independent public
accountants, as auditors for the Company for the year ending January 3,
1999; and
3. 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 26, 1998, 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 13, 1998
<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
Wednesday, May 13, 1998, 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 13, 1998.
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, and (ii) to ratify the selection of
auditors. Under the rules of the New York Stock Exchange, Inc., brokers who
hold shares in street name for customers have the authority to vote on the
election of directors and certain other matters when they have not received
instructions from beneficial owners, but lack such authority on other matters.
For the proposals presented below, such brokers have authority to vote on the
election of directors and ratification of the selection of auditors.
RECORD DATE AND VOTING
As of March 26, 1998, the record date fixed by the Board of Directors, the
outstanding voting securities of the Company consisted of 22,410,182 shares of
Common Stock, par value $.01 per share. Each stockholder of record at the
close of business on March 26, 1998 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.
In the election of directors described below, votes may be cast in favor or
withheld. The 4 director nominees who receive the greatest number of votes
cast in the election will be elected. Shares marked withheld or otherwise not
voted in the election have no impact on the election. On other matters for
which abstentions may be marked, 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 proposal.
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 2001 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
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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, Pierre B. Bouchut, David J. McLaughlin, and Thomas G. Plaskett, have
been nominated for re-election to a term expiring in 2001. A proposed new
director, Etienne Snollaerts, has been nominated for a term commencing on May
13, 1998 and expiring in 2001. 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.
Louis E. Scott has retired, and Roger M. Laverty, III (whose term would have
expired in 1998), and Martin A. Lynch and Georges Plassat (whose terms would
have expired in 1999) have resigned from the Company's Board of Directors.
For purposes of reference below, Casino Guichard-Perrachon, S.A. ("Casino
France"), a publicly traded French joint stock limited liability company, is
the principal shareholder of Casino USA, Inc. ("Casino USA"). Casino USA
acquired the Company's then parent company in 1984 and is currently the record
holder of more than 50% of the Company's Common Stock. See "Security Ownership
of Certain Beneficial Owners and Management." Casino France and its
subsidiaries are currently engaged in retail grocery, restaurant, food
production and other businesses in parts of Europe, South America and Asia
and, through the Company, the United States.
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>
Pierre B. Bouchut.................................. 42 1994 2001
David J. McLaughlin................................ 62 1990 2001
Thomas G. Plaskett................................. 54 1994 2001
Etienne Snollaerts................................. 42 n/a 2001
</TABLE>
Pierre B. Bouchut. Mr. Bouchut has been a director of the Company since
December 1994. Mr. Bouchut has been a member of the Board of Directors of
Casino France since September 1996 and its Director of Finance since 1990. Mr.
Bouchut was an associate at McKinsey & Company Inc. (management consulting)
from 1988 to 1990.
David J. McLaughlin. Mr. McLaughlin has been a director of the Company since
1990 and currently serves on the Audit and Compensation Committees. He has
been President and Chief Executive Officer of Troy Biosciences Incorporated
(biotechnology) since July 1996. He has been a director of Scientific Atlanta,
Inc. (communications and instrumentation products) since 1987, Troy
Biosciences Incorporated since 1994 and Evolve Software, Inc. (enterprise
software) since July 1995.
Thomas G. Plaskett. Mr. Plaskett has been a director of the Company since
April 1994 and currently serves on the Audit and Compensation Committees. 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. From 1992 to the present, Mr. Plaskett has been a
director of Neostar Retail Group, Inc. (formerly, Babbage's, Inc.) (personal
computer software), 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.
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Etienne Snollaerts. Mr. Snollaerts is a Director of Casino France
responsible for purchasing and distribution. He previously served with Casino
France and its subsidiaries since 1985 as a Director in retail distribution,
store operations and information systems. Prior to joining Casino France, he
was a management consultant with Alexander Proudfoot Company.
DIRECTORS CONTINUING IN OFFICE
The following table sets forth certain information concerning the directors
of the Company continuing in office:
<TABLE>
<CAPTION>
DIRECTOR YEAR TERM
NAME AGE SINCE WILL EXPIRE
---- --- -------- -----------
<S> <C> <C> <C>
Jean-Louis Bourgier................................. 51 1997 1999
Christian P. Couvreux............................... 47 1997 2000
Timm F. Crull....................................... 67 1994 1999
Robert J. Emmons.................................... 63 1984 2000
James S. Gold....................................... 46 1994 2000
Antoine Guichard.................................... 70 1986 2000
Ross E. Roeder...................................... 60 1984 1999
</TABLE>
Jean-Louis Bourgier. Mr. Bourgier was appointed to the Board of Directors in
September, 1997. Mr. Bourgier is Deputy Managing Director of Casino France in
charge of the international activities of Groupe Casino. He has previously
served with Casino France since 1989, as chief operating officer of the
restaurant, supermarket and "superettes" divisions, managing director of the
headquarters operation and general counsel.
Christian P. Couvreux. Mr. Couvreux 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.
Timm F. Crull. Mr. Crull has been a director of the Company since December
1994, currently serves on the Audit Committee, and is Chairman of the
Compensation Committee. 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.
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. In December 1997, Mr. Emmons reassumed the position of Chief Executive
Officer of the Company, a position which he previously held from 1984 until
December 1993. He was 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).
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. He is also a
director of the Hain Food Group.
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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 France since 1994. Prior to the
reorganization, he was a gerant (managing partner) of Casino France's
predecessor since 1966.
Ross E. Roeder. Mr. Roeder has been a director of the Company since 1984,
and currently serves as Chairman of the Audit Committee, a member of the
Compensation Committee and is a member of the Board of Directors of the
Company's foodservice subsidiaries, Smart & Final Foodservice Distributors
(formerly named Port Stockton Foodservice Distributors, Inc.) and Henry Lee
Company. 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).
SPECIAL COMMITTEES AND ATTENDANCE AT MEETINGS
The Board of Directors has an Audit Committee which until May 1997,
consisted of Messrs. Roeder (as Chairman), McLaughlin, and until his
retirement, Scott. Messrs. Crull and Plaskett were appointed to the Audit
Committee in September, 1997. 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 1997, there were two regular
meetings and one special meeting (which was held telephonically) of the Audit
Committee.
The Board of Directors also has a Compensation Committee, which during
fiscal 1997, consisted of Messrs. Crull (as Chairman), McLaughlin, Plaskett,
Roeder and until his retirement, Scott. 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) makes awards under
the Company's stock plans; (iv) approves the strategy and structure of the
Company's other employee plans and benefits; and (v) 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. During fiscal 1997, the Compensation Committee met five times.
The Board of Directors also has a Governance Committee consisting of Messrs.
Emmons (as Chairman), Scott (until May 1997) 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 1997, the
Governance Committee met two times.
The Board of Directors also has an Executive Operating Committee consisting,
during fiscal 1997, 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 1997, the
Executive Operating Committee met at least monthly, on an as needed basis.
During fiscal 1997, the Board of Directors held four regular meetings. Each
director with the exception of Mr. Couvreux attended at least 75% of the
aggregate of the total meetings of the Board during his tenure as a Board
member and of the total meetings of any committees on which he served.
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COMPENSATION OF DIRECTORS
During fiscal 1997, the Company's non-employee directors who served an
entire fiscal year (Messrs. Bouchut, Crull, Gold, Guichard, McLaughlin,
Plaskett, and Roeder) were paid an annual fee consisting of $20,000 in cash.
Those non-employee directors who served a partial year (Messrs. Bourgier,
Couvreux and Scott) were paid prorated fees of $10,000, $12,857.14 and
$10,000, respectively. Each non-employee director who was in office on May 1,
1997 received 516 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 non-employee director also received
$1,000 in cash for each Board meeting (including subsidiary Board meetings)
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. In 1997, Mr. Roeder received
consulting fees of $10,000 for management consulting services related the
Company's purchase of 91 properties and leasehold interests from Casino USA
and its subsidiary, which purchase was approved by the stockholders of the
Company at a special meeting held February 19, 1997. In 1998, Mr. Roeder will
receive consulting fees of $1,000 per day of service for his assistance with
the Company's Florida operations. In early 1998 Mr. Roeder received a grant of
15,000 options under the Stock Incentive Plan in connection with his
consulting services.
Under the Company's Stock Incentive Plan, as amended, any newly elected or
appointed non-employee 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.
Under the Company's Non-Employee Director Stock Plan, which was approved by
the shareholders at the 1996 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,
Bourgier, Couvreux, Crull, Guichard, Gold, McLaughlin, Plaskett, and Roeder
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 as defined in the plan. 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.
The stockholders of the Company approved a Long Term Equity Compensation
Plan ("Equity Compensation Plan") in May 1997. All directors are eligible to
receive awards under this Plan, which is administered by the Compensation
Committee of the Company's Board of Directors. No awards under the Equity
Compensation Plan were made to non-employee Directors in 1997.
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 cash 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
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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.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF EACH
NOMINEE NAMED ABOVE.
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, Inc. ("American Foodservice Distributors"), Port Stockton Food
Distributors, Inc. (now doing business as Smart & Final Foodservice
Distributors ("Port Stockton") and Henry Lee Company ("Henry Lee"):
<TABLE>
<CAPTION>
NAME AGE TITLE
---- --- -----
<C> <C> <S>
Robert J. Emmons............ 63 Chairman of the Board of Directors and Chief
Executive Officer of the Company(1)
Roger M. Laverty, III....... 50 President and Chief Operating Officer of the
Company, Smart & Final Stores and American
Foodservice Distributors(2)
Martin A. Lynch............. 60 Executive Vice President and Chief Financial
Officer of the Company, Smart & Final
Stores and American Foodservice
Distributors
Dennis L. Chiavelli......... 52 Executive Vice President of the Company and
Executive Vice President, Operations of
Smart & Final Stores
Donald G. Alvarado.......... 43 Senior Vice President, Law/Development and
Secretary of the Company and Smart & Final
Stores and Vice President and Secretary,
American Foodservice Distributors
Gerald L.Good............... 55 Executive Vice President, Buying, Marketing
and Distribution of Smart & Final Stores
James O. Crittenden......... 51 Vice President, Buying and Merchandising of
Smart & Final Stores
John R. Goneau, Jr.......... 40 President and Chief Operating Officer of
Port Stockton
Abdul S. Mirza.............. 49 Vice President, Accounting of Smart & Final
Stores
Suzanne Mullins............. 45 Senior Vice President, Operations of Smart &
Final Stores and Vice President, American
Foodservice Distributors
Amy J. Parker............... 40 Vice President, Marketing of Smart & Final
Stores
Michael Primrose............ 47 President and Chief Executive Officer of
Henry Lee(3)
James E. Robinson........... 50 Vice President, Human Resources of Smart &
Final Stores
Edward I. Sternlieb......... 51 Chairman of the Board of Henry Lee
</TABLE>
- --------
(1) Mr. Emmons assumed the position of Chief Executive Officer in December
1997.
(2) Mr. Laverty served as Chief Executive Officer until December 1997 and will
serve as President until April 30, 1998.
(3) Effective September 1997.
Executive officers of the Company are appointed by the Board of Directors of
the Company and serve at the Board's discretion.
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, American Foodservice Distributors 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.
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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.
James O. Crittenden. Mr. Crittenden rejoined Smart & Final Stores in July
1997 as Vice President, Buying and Merchandising. He previously served as
Director and then Vice President of Buying from 1987 until 1994 when he left
to pursue other opportunities. Mr. Crittenden held the position of Vice
President, Sales and Merchandising at American Stores Corporation from 1994
until his return to Smart & Final Stores.
Robert J. Emmons. (See "Directors Continuing in Office" above.)
Gerald L. Good. Mr. Good joined Smart & Final Stores in August 1997 as
Executive Vice President, Buying, Marketing and Distribution, after 14 years
with The Great Atlantic and Pacific Tea Company, Inc., the parent company for
over 900 A&P Supermarkets, where he was most recently executive vice president
of merchandising and marketing. Mr. Good also served as CEO of A&P Canada, a
$1.5 billion subsidiary, for two years.
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.
Roger M. Laverty, III. Through early December 1997, Mr. Laverty served as
Chief Executive Officer of the Company, a position he has held since January
1994, and, until April 30, 1998 will serve as President and Chief Operating
Officer of the Company. Mr. Laverty was a director of the Company from
February 1993 until December 1997, when he and the Company reached an
agreement detailing the terms of Mr. Laverty's separation from the Company
(see "Laverty Employment Agreement").
Martin A. Lynch. In February 1998, Mr. Lynch resigned from the Board of
Directors of the Company on which he has served since February, 1993. Mr.
Lynch continues to serve as Executive Vice President and Chief Financial
Officer of the Company, American Foodservice Distributors and Smart & Final
Stores, positions he has held since joining them in 1989. 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 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.
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 was appointed Senior Vice President, Store
Operations of Smart & Final Stores in July 1997. She was previously Vice
President, Buying for Smart & Final Stores from August 1994 until her
promotion and 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. Ms.
Mullins was appointed Vice President of American Foodservice Distributors in
1997.
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
7
<PAGE>
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.
Michael Primrose. Mr. Primrose joined Henry Lee in February 1997 as Chief
Operating Officer and Executive Vice President. He was promoted to President
and Chief Executive Officer of that subsidiary in September, 1997. From 1985
until he joined Henry Lee, Mr. Primrose was with Alliant Foodservice (formerly
Kraft Foodservice) in Indianapolis, Indiana, where he served as President from
1995 to February, 1997, General Manager from July, 1986 to 1995, and prior to
that, Sales Manager.
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 served as President of Henry Lee from
1982 when Henry Lee was privately owned by his family, until September 1997
when he became Chairman of its Board of Directors. He 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 at
Henry Lee since joining the company in 1974. In early 1998, Mr. Sternlieb
became a consultant to Henry Lee (see "Sternlieb Employment Agreements").
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
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 and (iii) the opportunity to receive stock options,
stock appreciation rights and other performance-based compensation under the
Stock Incentive Plan and Equity Compensation Plan.
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 1997,
executive base salaries (other than for the Chief Executive Officer) were
increased an average of 7.3% (ranging from 0% to 20.0%), and, consistent with
the Compensation Committee's policy objectives, were at median levels among
the comparison companies. During fiscal 1997, 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 below,
without adjustment by the Compensation Committee. Mr. Emmons' base salary was
adjusted for fiscal 1998 pursuant to an amendment to his Employment Agreement
(see "Emmons Employment Agreements").
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
8
<PAGE>
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 1997, target bonuses ranged from 30% 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 1997.
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
awarded no bonuses in fiscal 1997 because the Company did not achieve its
targeted financial goals for the year. Certain bonuses guaranteed pursuant to
employment agreements to two executive officers (other than the Chief
Executive Officer) averaged approximately 34% of their base salaries.
Executive Severance Plan. In 1997 the Board of Directors approved
implementation of an Executive Severance Plan ("Severance Plan") covering the
executive officers of the Company. The Severance Plan provides for the payment
of continued salary, a percentage of the target bonus, continuation of medical
insurance benefits and certain other benefits in the event of an involuntary
termination of a covered executive officer's employment. The Severance Plan
provides for the payment of continued salary benefits for a minimum of twelve
months or one month for every year of employment, whichever is less. No
benefits are payable if the officer is terminated by the Company for cause. In
the event that a participant finds employment during the period in which
benefits are payable, Severance Plan benefits are offset by the salary and
other benefits received from the new employer. The Severance Plan also
provides for payment of certain benefits in the event of a change in control
of the Company. In the event of a termination due to retirement, disability or
death, benefits are paid in accordance with the company's pension and/or
disability plans.
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.
Mr. Laverty's minimum base salary for fiscal 1997 was set by his Employment
Agreement with the Company. See "Executive Compensation--Laverty Agreements"
below. The 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. Mr. Laverty's target bonus amount for fiscal 1997
was based entirely on the attainment of certain corporate earnings per share
and was set at 100% of his adjusted base salary. No bonus was awarded to Mr.
Laverty in 1997.
Stock Incentive Plan. The Company's Stock Incentive Plan currently
authorizes the issuance of options covering up to 2,450,000 shares of the
Company's Common Stock. Currently, there are 430 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. For fiscal 1997, the Compensation Committee granted no options to the
Chief Executive Officer or the other executive officers under the Stock
Incentive Plan.
9
<PAGE>
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 in
early 1997 a new Long-Term Equity Compensation Plan ("Equity Compensation
Plan") approved by the Company's stockholders at the annual meeting held May
9, 1997. Under guidelines set by the Compensation Committee, incentive-based
compensation constitutes 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. For fiscal 1997, the Compensation Committee
granted a total of 52,857 options to Mr. Laverty and 214,500 options to other
executive officers under the Equity Compensation Plan. The Committee also
granted a total of 20,000 shares of restricted stock to Mr. Laverty and
187,500 shares of restricted stock to other executive officers under the
Equity Compensation Plan.
Supplemental Executive Retirement Plan. Beginning in 1998, the Company will
provide a Supplemental Executive Retirement Plan ("SERP") to its key
executives and other highly compensated employees which will provide a for a
single life annuity to be payable monthly, commencing at age 65 or upon the
participant's early retirement or disability as those terms are defined in the
SERP plan document. A participant or his or her survivor may also be entitled
to receive benefits under the SERP in the event of a change in control of the
Company, or in the event the participant dies prior to the participant's
retirement, disability or termination of employment. The amount of the annuity
benefit is determined by multiplying the standard benefit percentage assigned
to each participant according to his or her title and position by the average
of the final five calendar years of a participant's compensation. Participants
in the SERP are selected by the Plan Administrator appointed by the Board of
Directors of the Company. The SERP is administered by a third party
administrator. There are currently 22 participants in the SERP including all
of the executive officers.
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"). The Compensation Committee has decided at present not to alter
the Company's compensation plans to comply with the deductibility requirements
of Section 162(m). 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.
<TABLE>
<S> <C>
COMPENSATION COMMITTEE GOVERNANCE COMMITTEE
Timm F. Crull, Chairman Robert J. Emmons, Chairman
David J. McLaughlin Antoine Guichard
Thomas G. Plaskett
Ross E. Roeder
</TABLE>
10
<PAGE>
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).
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG SMART & FINAL INC., DOW JONES AND DOW JONES FDR
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period DOW
(Fiscal Year Covered) SMF DOW JONES JONES FDR
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt- 12/31/93 $100.0 $100.0 $100.0
FYE 12/31/94 $105.5 $100.7 $100.9
FYE 12/31/95 $161.6 $138.7 $127.7
FYE 12/31/96 $163.9 $170.7 $157.6
FYE 12/31/97 $139.7 $228.6 $213.6
</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
1997 were approved without change, by the full Board. In fiscal 1997, the
Compensation Committee consisted of Messrs. Crull, McLaughlin, Plaskett,
Roeder and until his retirement, Scott. Since the beginning of fiscal 1995,
the Governance Committee has consisted of Messrs. Emmons (as Chairman),
Guichard and, until his retirement, Scott. Mr. Emmons did not participate in
any decisions that affected him. Except for Mr. Emmons (who is currently
Chairman of the Board and Chief 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 dated March 7, 1989, (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.
11
<PAGE>
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.
At a special meeting of stockholders of the Company held on February 19,
1997, the stockholders approved the acquisition by the Company (pursuant to an
Agreement for Conveyance of Real Property, as amended) of 91 properties with a
net book value of $71,440,000 from Casino USA and its wholly-owned subsidiary
Casino Realty, Inc. (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 by
December 31, 1998 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. As of fiscal year end, the Company had sold eight of the twelve
properties for total gross sales proceeds of $2,407,000. Casino also agreed to
pay to the Company certain management and administrative fees in connection
with the properties. Of the 167 Smart & Final Stores facilities operating in
the United States at fiscal year end, the Company leased 86 properties
directly from third party lessors, with an average remaining lease term of
13 years, and 12 properties under its two lease programs. In addition, the
Company has 8 stores on real property that is ground leased from third party
lessors. The remaining properties are owned.
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
January 4, 1998, the Company owed $234,000 to Casino Realty and Casino USA
owed $2,646,000 to the Company, all related to payments for services and
taxes. As of January 4, 1998, the Company had borrowed approximately
$10,046,000 from Casino USA and approximately $10,955,000 from Casino Realty.
12
<PAGE>
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 1997, the Company paid Hunter Aviation approximately $55,830. The
Company believes the terms of its lease arrangement with Hunter Aviation are
at least comparable to those available from unrelated third parties.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth information
concerning cash and noncash compensation for each of the last three fiscal
years awarded to or earned by the Chief Executive Officer of the Company and
the four other most highly compensated executive officers of the Company and
its subsidiaries serving at fiscal year end.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------------------------------------------------
LONG TERM
COMPENSATION AWARDS
---------------------
RESTRICTED SECURITIES
STOCK UNDERLYING
NAME AND FISCAL SALARY BONUS OTHER ANNUAL AWARDS OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR ($)(1) ($)(2) COMPENSATION($)(3) ($)(4) (#) COMPENSATION($)(5)
------------------ ------ -------- -------- ------------------ ---------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Roger M. Laverty, III... 1997 $457,693 $ -0- $71,281 $422,500 52,857 $19,393
President(6) 1996 $400,000 $420,000 $ -0- $ -0- -0- $18,498
1995 $398,269 $120,000 $ -0- $ -0- -0- $14,092
Robert J. Emmons........ 1997 $663,242 $ -0- $ -0- $ -0- -0- $22,743
Chairman of the 1996 $648,443 $ -0- $ -0- $ -0- -0- $19,898
Board and Chief 1995 $638,819 $ -0- $ -0- $ -0- -0- $17,616
Executive Officer of
the Company(7)
Martin A. Lynch......... 1997 $283,654 $ -0- $48,367 $153,156 25,000 $ 8,917
Executive Vice- 1996 $268,269 $125,000 $ -0- $ -0- -0- $11,774
President and Chief 1995 $258,269 $ 45,000 $ -0- $ -0- -0- $ 8,394
Financial Officer of
the Company
Edward I. Sternlieb..... 1997 $308,497 $ -0- $ -0- $ -0- -0- $ 6,778
Chairman of the Board 1996 $302,625 $ -0- $ -0- $ -0- -0- $ 8,969
of Henry Lee(8) 1995 $302,674 $ -0- $ -0- $ -0- -0- $ 6,550
Dennis L. Chiavelli..... 1997 $241,154 $ -0- $49,769 $153,156 25,000 $11,786
Senior Vice-President, 1996 $211,096 $140,000 $ -0- $ -0- -0- $13,768
Operations of the 1995 $191,269 $ 40,000 $ -0- $ -0- -0- $10,097
Company
</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 1997, 1996, and 1995
includes consulting payments totaling approximately $463,000, $448,000,
and $437,000, respectively, made under his Employment Agreement with the
Company. In the case of Messrs. Laverty and Lynch, the compensation
reported also includes the portion deferred under their Deferred
Compensation Agreements with the Company.
13
<PAGE>
(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.
(3) Includes 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, and car allowances). Such perquisites and other
personal benefits when stated as zero 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." Financial planning expenses were paid as
follows: $48,222 for Mr. Laverty, and $37,967 for each of Messrs. Lynch
and Chiavelli.
(4) The listed dollar value is based on the closing price per share on the
date of grant of $21.125. At fiscal year end, Mr. Laverty held 20,000
restricted shares having an aggregate fiscal year end value of $362,500,
and Messrs. Lynch and Chiavelli each held 7,250 restricted shares, each
having an aggregate fiscal year end value of $131,406. The performance
period for the restricted stock 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 effective date of grant. If employment terminates due to normal
retirement, the restricted stock 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 grant cycle will be made. Unvested restricted stock will
immediately vest upon a change in control.
(5) 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 1997 were as
follows: $2,375 for Mr. Laverty, $1,875 for Mr. Emmons, $2,375 for Mr.
Lynch, $4,750 for Mr. Sternlieb 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 1996 were as follows: $2,375 for Mr. Laverty, $2,375 for
Mr. Emmons, $2,375 for Mr. Lynch, $4,750 for Mr. Sternlieb 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 (or, in the case of Mr. Sternlieb, Henry
Lee) payments of insurance premiums during fiscal 1997 were as follows:
$17,018 for Mr. Laverty, $20,868 for Mr. Emmons, $6,542 for Mr. Lynch,
$2,028 for Mr. Sternlieb, and $9,411 for Mr. Chiavelli. Company (or, in
the case of Mr. Sternlieb, Henry Lee) payments of insurance premiums
during fiscal 1996 were as follows: $16,123 for Mr. Laverty, $17,523 for
Mr. Emmons, $9,399 for Mr. Lynch, $4,219 for Mr. Sternlieb and $11,393 for
Mr. Chiavelli. Company (or, in the case of Mr. Sternlieb, Henry Lee)
payments of insurance premiums during fiscal 1995 were as follows: $11,842
for Mr. Laverty, $15,366 for Mr. Emmons, $6,144 for Mr. Lynch, $1,930 for
Mr. Sternlieb and $7,847 for Mr. Chiavelli.
(6) Mr. Laverty will serve as President until April 30, 1998.
(7) Mr. Emmons reassumed the position of Chief Executive Officer in December
1997.
(8) Mr. Sternlieb became Chairman of Henry Lee in September 1997.
14
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------------
% OF TOTAL GRANT DATE
NUMBER OF SECURITIES OPTIONS GRANTED EXERCISE PRESENT
UNDERLYING OPTIONS TO EMPLOYEES PRICE EXPIRATION VALUE OF STOCK
NAME GRANTED(1) IN FISCAL YEAR PER SHARE DATE OPTIONS(2)
---- -------------------- --------------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Roger M. Laverty, III... 52,857 11.6% $21.125 5/9/07 $554,999
Robert J. Emmons........ -0- -0- $ -0- -0- $ -0-
Martin A. Lynch......... 25,000 5.5% $21.125 5/9/07 $262,500
Edward I. Sternlieb..... -0- -0- $ -0- -0- $ -0-
Dennis L. Chiavelli..... 25,000 5.5% $21.125 5/9/07 $262,500
</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.
One-third of the 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. Unvested options will vest immediately upon a
change in control.
(2) The Company used a Black-Scholes model of option valuation to determine
grant date present value. The Company does not advocate or necessarily
agree that the Black-Scholes model can properly determine the value of an
option. Calculations for the named executive officers are based on the
following assumptions: option term of 10 years, volatility of 29.52%
(calculated daily over the one year period prior to grant date), dividends
of $0.20 per share and interest rate of 6.71% (ten year Treasury note rate
with a maturity date corresponding to the option term). The real value of
the options in this table depends upon the actual performance of the
Company's stock during the applicable period and upon when they are
exercised.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
The following table summarizes option exercises during fiscal 1997, and the
number of all options and the value of all in-the-money options held at the
end of fiscal 1997, by the executive officers named in the above Summary
Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS AT END OF FISCAL THE-MONEY OPTIONS AT END
SHARES ACQUIRED VALUE 1997 (#) OF FISCAL 1997($)(1)
NAME ON EXERCISE (#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Robert J. Emmons........ -0- -0- -0-/-0- $0/$0
Roger M. Laverty, III... 10,000 $123,739 192,500/92,857 $952,625/$160,000
Martin A. Lynch......... 5,000 $ 73,365 132,500/45,000 $828,775/$80,000
Edward I. Sternlieb..... -0- -0- 13,334/6,666 $46,669/$23,331
Dennis L. Chiavelli..... 4,200 $ 59,085 55,467/38,333 $314,892/$53,332
</TABLE>
- --------
(1) Based on the market value of underlying securities at fiscal year end,
less the exercise price.
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.
15
<PAGE>
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS AT
AGE 65 FOR INDICATED YEARS OF CREDITED
SERVICE(1)
REMUNERATION ON ---------------------------------------
WHICH RETIREMENT LIMITED
BENEFITS ARE BASED EARNINGS 15 20 25 30 35
- ------------------ -------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$125,000.................... $125,000 $18,750 $25,000 $31,250 $37,500 $43,750
150,000.................... $150,000 $22,500 $30,000 $37,500 $45,000 $52,500
175,000.................... $160,000(2) $24,000 $32,000 $40,000 $48,000 $56,000
200,000.................... $160,000 $24,000 $32,000 $40,000 $48,000 $56,000
225,000.................... $160,000 $24,000 $32,000 $40,000 $48,000 $56,000
250,000.................... $160,000 $24,000 $32,000 $40,000 $48,000 $56,000
300,000.................... $160,000 $24,000 $32,000 $40,000 $48,000 $56,000
400,000.................... $160,000 $24,000 $32,000 $40,000 $48,000 $56,000
450,000.................... $160,000 $24,000 $32,000 $40,000 $48,000 $56,000
500,000.................... $160,000 $24,000 $32,000 $40,000 $48,000 $56,000
</TABLE>
- --------
(1) Amounts shown assume retirement at age 65 on January 1, 1998. Estimated
annual retirement benefits are based on the plan in effect on January 1,
1998 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 increased 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 1997,
Messrs. Laverty, Emmons, Lynch and Chiavelli had credited approximately 19,
14, 8.5 and 12 actual years of service, respectively, and would have been
entitled to minimum annual benefits of approximately $52,118, $77,873, $17,752
and $26,568, 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 1997 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 1997, the Company made no additional
discretionary match. Participants' contributions to the 401(k) Savings Plan,
which are deemed to be 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
16
<PAGE>
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 1997
(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.
In 1997 Mr. Laverty borrowed the sum of $29,965 against his current deferred
compensation account. This loan is payable over 5 years and bears interest at
8%.
Emmons Employment Agreements. The Company and Mr. Emmons are parties to an
employment agreement (the "Emmons Employment Agreement") pursuant to which Mr.
Emmons originally 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. 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. In fiscal 1997, the Company also
paid Mr. Emmons a fee of $200,000 (paid in quarterly installments) in
consideration of his services as Chairman of the Company's Executive Operating
Committee. In connection with Mr. Emmons' reassumption of the position of
Chief Executive Officer, Mr. Emmons will receive a base salary of $650,000 in
1998, and he will be eligible for a bonus of up to 100% of his base salary
based on the achievement of certain earnings per share goals by the Company in
such fiscal year. Mr. Emmons also received in early 1998 a grant of 100,000
options which will become exercisable in November 1998, and 100,000 options
which will become exercisable in November 1999 under the Equity Compensation
Plan.
17
<PAGE>
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 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.
Laverty Employment Agreement. As of January 1, 1997, the Company and Mr.
Laverty entered into a new employment agreement (the "Laverty Employment
Agreement") which was to be effective through December 31, 1999. The Laverty
Employment Agreement provided that if either party elects not to extend the
Laverty Employment Agreement in accordance with the foregoing, then, upon the
effective date of expiration, the Company would 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. Under the
Laverty Employment Agreement, Mr. Laverty's base salary was determined by the
Board of Directors. Mr. Laverty also had the opportunity to earn an annual
cash bonus of at least 100% of his annual base salary. Mr. Laverty also had
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 Laverty Employment Agreement further provided 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 Laverty Employment Agreement was not renewed by the
Company. The 1997 Agreement further provided for a minimum of five weeks paid
vacation per year.
In February 1998, the Company entered into a Separation Agreement and Mutual
General Release ("Separation Agreement") whereby the Company and Mr. Laverty
reached agreement on the terms of his separation from the Company to take
place April 30, 1998. The Separation Agreement provides for cash payments to
Mr. Laverty and continuation of certain Company benefits for a period of 36
consecutive months commencing May 1, 1998. During those 36 months Mr. Laverty
shall be entitled to continuation of all health and life insurance coverage,
eligibility to make contributions to the 401(k) plan and Deferred Compensation
Plan, automobile allowance, and accrual of years of service for purposes of
computing his benefits under the Supplemental Executive Retirement Plan. In
the event of a change in control during the 36-month period as defined in the
Separation Agreement, Mr. Laverty would be entitled to immediate payment of
all remaining installments. For fiscal 1998, payments to Mr. Laverty under the
Separation Agreement will total approximately $489,000.
In April 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,
18
<PAGE>
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 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
19
<PAGE>
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.
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 Agreements. During fiscal 1997, Mr. Sternlieb and Henry
Lee were parties to an employment agreement. The employment agreement
provided, 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; 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 was terminable 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. The employment agreement also contained Mr. Sternlieb's
covenant not to compete with Henry Lee for four years after the execution of
the employment agreement. In early 1998, the employment agreement was
terminated by mutual agreement and the parties entered into a consulting
agreement whereby Mr. Sternlieb will act as a consultant to Henry Lee for a
minimum of 750 hours per year through December 31, 1999. Mr. Sternlieb will
receive compensation of $12,500 per quarter and reimbursement of certain
expenses. He will also be eligible to receive a bonus of $25,000 if Henry Lee
achieves 100% of its profit plan for 1999 and $50,000 if the company achieves
125% of its profit plan for 1999. Under the terms of the consulting agreement
Mr. Sternlieb's former rights under his employment agreement with respect to
stock option vesting and exercise shall continue to be in effect through
December 31, 1999. The consulting agreement may be terminated (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. The
consulting agreement also contains Mr. Sternlieb's covenant not to compete
with Henry Lee during its term.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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
20
<PAGE>
reports, the Company believes that all required reports have been timely filed
with the exception of two reports which the Company filed inadvertently late
involving one transaction each by Antoine Guichard, a member of the Board of
Directors and by John R. Goneau, Jr., President and Chief Operating Officer of
Port Stockton.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
Relationship Between the Company and Casino USA. Casino USA currently owns
approximately 55.4% 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. The Company was informed in March 1998 that Mr. Jean-Charles
Naouri now owns more than 50% of the voting interest in Casino France through
an intermediary company. There is no agreement between Casino USA and any
other party 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 Board of Directors includes Messrs. Emmons, Guichard, Bouchut,
Bourgier and Couvreux who also serve as directors of Casino USA and/or who are
affiliated with Casino France. Mr. Snollaerts, 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 1997, 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.
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.
Real Estate Transactions. Henry Lee leases its truck facility from Edward
Sternlieb, a consultant to the Company and former 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 2005 due in
connection with these leased facilities was approximately $7,547,000 at
January 4, 1998. Total operating lease payments for fiscal 1997 were $836,000.
Henry Lee also guarantees $2,779,000 of obligations of Mr. Sternlieb and his
parents related to Henry Lee's truck facility and warehouse.
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, 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 $300,000 for fiscal 1997. 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. 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.
21
<PAGE>
Tax Agreement. 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 $2,353,000 in fiscal 1997.
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. In early 1998,
the Company purchased the remaining 10% of Henry Lee pursuant to a new stock
purchase agreement. The purchase price for the remainder of the shares was
$1,923,603 in cash. The new stock purchase agreement did not affect the terms
of the promissory note given in the earlier purchase transaction.
Throughout 1997, Henry Lee and a company wholly-owned by Mr. Sternlieb's
father were parties to a consulting agreement which provided for a monthly
consulting fee of $14,583.33. The consulting agreement is terminable 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 1997, payments under the consulting agreement aggregated $175,000. In
connection with the purchase of the remaining interest in Henry Lee, Henry
Sternlieb's consulting agreement was amended to extend its expiration date
from October 31, 1998 through December 31, 1998. Henry Sternlieb will receive
payments of $12,500 per quarter throughout the term. Henry Lee and Mr.
Sternlieb were also parties to an employment agreement in 1997. (See
"Executive Compensation--Sternlieb Employment Agreement" above.)
22
<PAGE>
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 26, 1998 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 55.4%
Ronald Baron(2)...................................... 4,227,920 18.9
U.S. Trust Company of New York(3).................... 1,465,534 6.5
Robert J. Emmons(4).................................. 731,500 3.3
Roger M. Laverty, III(6)............................. 322,920 1.4
Martin A. Lynch...................................... 189,159 *
Dennis L. Chiavelli.................................. 109,419 *
Ross E. Roeder(7).................................... 31,455 *
David J. McLaughlin(7)............................... 26,405 *
James S. Gold(5)..................................... 18,955 *
Timm F. Crull(5)(8).................................. 17,955 *
Thomas G. Plaskett(5)................................ 16,955 *
Pierre B. Bouchut(5)................................. 15,955 *
Edward I. Sternlieb.................................. 14,334 *
Antoine Guichard..................................... 955 *
All directors and executive officers as a group
(23 persons) ....................................... 1,688,930 75.3%
</TABLE>
- --------
* Less than 1%.
(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. Rallye, a publicly traded French joint stock corporation, holds
owns more than 50% of the voting interest in Casino France. Mr. Jean-
Charles Naouri, through intermediary companies, indirectly controls more
than 50% of the voting interest in Rallye. This note (1) is based solely
on information provided to the Company by Casino France.
(2) All information with respect to Mr. Baron is based solely on Amendment No.
6 to Schedule 13D dated December 19, 1997, filed by him. Mr. Baron has
sole voting and dispositive power over 429,500 shares (or 1.9% of the
outstanding shares) and shared voting and dispositive power over 3,798,420
shares (or 16.9% of the outstanding shares). Of the 429,500 shares,
411,500 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
3,798,420 shares, 2,797,900 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 1,000,520
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.
(3) All information with respect to U.S. Trust Company of New York ("U.S.
Trust") is based solely on a Schedule 13G/A dated February 6, 1998, 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.
23
<PAGE>
(4) Includes 588,500 shares held by the Robert & Christine Emmons Family
Trust, of which Mr. Emmons is the trustee and a beneficiary, 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.
(5) Includes shares which such persons have the right to acquire within 60
days pursuant to the exercise of outstanding stock options of which 7,500
shares each are attributable to Messrs. Bouchut, Crull, Gold and Plaskett.
(6) Includes 450 shares held directly by Mr. Laverty's wife, which Mr. Laverty
may be deemed to beneficially own.
(7) Includes shares held in profit sharing or IRA accounts for the benefit of
the named individual or members of his immediate family.
(8) Shares held in family trust.
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
January 3, 1999, and has further directed that management submit the selection
of auditors for ratification by the stockholders at the Annual Meeting. If the
selection is not ratified, the Board will select other independent
accountants. Arthur Andersen LLP has audited the Company's financial
statements for the past twelve 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.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF ARTHUR
ANDERSEN LLP AS INDEPENDENT AUDITORS FOR THE COMPANY'S YEAR ENDING JANUARY 3,
1999.
ANNUAL REPORT
The Company's Annual Report to Stockholders for fiscal year 1997 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 JANUARY 4, 1998 (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 26, 1998. 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
24
<PAGE>
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 1999 Annual
Meeting must be received by the Company at its principal executive offices by
December 14, 1998, to be included in the Proxy Statement for that Meeting, and
all other conditions for such inclusion must be satisfied.
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 13, 1998
25
<PAGE>
- -------------------------------------------------------------------------------
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 13, 1998, 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>
- --------------------------------------------------------------------------------
- ------------------ THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION
COMMON OF EACH OF THE NOMINEES FOR DIRECTOR AND THE FOLLOWING
PROPOSAL. Please mark [X]
your votes
like this
FOR WITHHOLD AUTHORITY
ALL NOMINEES LISTED TO VOTE FOR ALL
BELOW (EXCEPT AS NOMINEES LISTED
INDICATED BELOW) BELOW
1. Election of Directors [_] [_]
Nominees: Pierre B. Bouchut,
David J. McLaughlin, Thomas G.
Plaskett and Etienne Snollaerts
(INSTRUCTION: To withhold authority to vote for any individual, cross his name
out above.)
FOR AGAINST ABSTAIN
2. Proposal to ratify the selection [_] [_] [_]
of Arthur Andersen LLP, as the
Company's Auditors:
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
PROPOSAL.
Signature _______________________________ Date _________________________,1998
Signature _______________________________ Date _________________________,1998
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
WEDNESDAY, MAY 13, 1998
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.
