<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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 (S) 240.14a-11(c) or (S) 240.14a-12
SMART & FINAL INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
[LOGO OF SMART & FINAL(R) INC.]
SMART & FINAL INC.
600 Citadel Drive
Commerce, California 90040
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 17, 2000
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Smart & Final Inc. (the "Company")
will be held at the Company's corporate headquarters, 600 Citadel Drive,
Commerce, California 90040, on Wednesday, May 17, 2000, at 10:00 a.m., local
time, for the following purposes:
1. To elect three (3) directors of the Company to serve until the 2003
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 fiscal year ending
December 31, 2000; 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 31, 2000, 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
Commerce, California
April 10, 2000
<PAGE>
SMART & FINAL INC.
600 Citadel Drive
Commerce, California 90040
----------------
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 Company's
corporate headquarters, 600 Citadel Drive, Commerce, California 90040, on
Wednesday, May 17, 2000, 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 10, 2000.
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
Arthur Andersen LLP, independent public accountants, as 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 all 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 31, 2000, the record date fixed by the Board of Directors, the
outstanding voting securities of the Company consisted of 29,186,995 shares of
Common Stock, par value $.01 per share. Each stockholder of record at the
close of business on March 31, 2000 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 three 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
Three directors of the Company's Board of Directors are to be elected at the
Annual Meeting to hold office until the annual meeting held in 2003 and until
their successors are elected and qualified. The Board of Directors
1
<PAGE>
is currently divided into three classes serving staggered terms normally of
three years each. The term of office of one class of directors expires each
year, and at each annual meeting the successors to the directors of the class
whose term is expiring in that year are elected to hold office for a term of
three years and until their successors are elected and qualified. Three
directors whose terms expire this year, Messrs. Couvreux, Gold and Guichard
have been nominated for re-election to a term expiring in 2003. 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.
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. Casino France and its
subsidiaries (collectively "Groupe Casino") 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. Groupe
Casino currently owns approximately 59.3% of the Company's Common Stock. (see
"Security Ownership of Certain Beneficial Owners and Management" below).
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>
Christian P. Couvreux.............................. 49 1997 2003
James S. Gold...................................... 48 1994 2003
Antoine Guichard................................... 73 1986 2003
</TABLE>
Christian P. Couvreux. Mr. Couvreux has been a director of the Company since
September 1997 and currently serves on the Company's Governance Committee.
Since May 1997, he has been Chairman of the Executive Board and Chief
Executive Officer of Casino France and is a director of Casino USA. Mr.
Couvreux was previously Deputy General Manager of Casino France where he was
responsible for purchasing, logistics and marketing. Mr. Couvreux has been
associated with Groupe Casino 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.
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. Mr. Gold has
been associated with Lazard Freres & Co., LLC, since 1977. He is also a
director of the Hain Food Group.
Antoine Guichard. Mr. Guichard has been a director of the Company since 1986
and currently serves on the Company's Governance Committee. Mr. Guichard is
the Secretary and a director of Casino USA. Since 1966 he has been a gerant
(managing partner) of Groupe Casino. He served as Chairman of the Executive
Committee of the Company from 1990 until 1998. He is now Chairman of Casino
France, Conseil de Surveillance (Board of Supervisors).
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF EACH
NOMINEE NAMED ABOVE TO SERVE FOR THE TERM ELECTED.
2
<PAGE>
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>
Pierre B. Bouchut................................... 44 1994 2001
Timm F. Crull....................................... 69 1994 2002
David J. McLaughlin................................. 64 1990 2001
Joel-Andre Ornstein................................. 45 1999 2002
Thomas G. Plaskett.................................. 56 1994 2001
Ross E. Roeder...................................... 62 1984 2002
Etienne Snollaerts.................................. 44 1998 2001
</TABLE>
Pierre B. Bouchut. Mr. Bouchut has been a director of the Company since
December 1994 and has been a member of the Board of Directors of Casino France
since September 1996. He currently serves as General Manager for Casino
France. From 1990 to 1997 he was Director of Finance for Casino France. Mr.
Bouchut was an associate at McKinsey & Company Inc. (management consulting)
from 1988 to 1990.
Timm F. Crull. Mr. Crull has been a director of the Company since December
1994. He currently serves on the Company's 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
1990. Mr. Crull has been a director of BankAmerica Corporation (banking) since
1984, a director of Hallmark Cards, Inc. (greeting cards) since 1984 and is a
member of the Compensation and Audit Committees of Hallmark Cards, Inc.
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 a director of Scientific Atlanta, Inc. (communications and
instrumentation products) since 1987 and Troy Biosciences Incorporated since
1994. He is now Vice Chairman of Troy Biosciences Incorporated where he served
as President and Chief Executive Officer from 1996 to 1999. He is also
President and Chief Executive Officer of Pentacle Press LLC (publishing and
research) from January 2000 to date.
Joel-Andre Ornstein. Mr. Ornstein became a director of the Company for the
first time in May 1999. Since 1989, Mr. Ornstein has been Senior Adviser to
the Chairman and Chief Executive Officer and a director of Euris, S.A.
("Euris"), a Paris-based investment holding company controlled by Mr. Jean-
Charles Naouri, a French citizen whose principal business is making corporate
investments and who owns a controlling interest in Casino France, the
Company's majority shareholder. Mr. Ornstein is also Chairman of Euristates,
Inc., the U.S. based subsidiary of Euris. He is a director of Euristates,
Inc., The Athlete's Foot Inc., and Ztango.com, Inc.
Thomas G. Plaskett. Mr. Plaskett has been a director of the Company since
April 1994, currently serves as Chairman of the Audit Committee and is a
member of the Compensation and Governance Committees. Mr. Plaskett served as
Chairman of the Board of Greyhound Lines, Inc. (transportation) from February
1995 to March 1999 and has been the Managing Director of Fox Run Capital
Associates (private financial advisory and venture capital services) since
November 1991. He is Chairman, President and Chief Executive Officer of Probex
Corporation, an energy technology company in Carrollton, Texas and the Vice
Chairman and Executive Vice President of Legend Airlines, a privately-held
airline based in Dallas, Texas. Mr. Plaskett was 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). Mr. Plaskett has been a director of Tandy
Corporation (retail electronics) since 1986. He is a member of the Audit
committee of Tandy Corporation.
3
<PAGE>
Ross E. Roeder. Mr. Roeder has been a director of the Company since 1984,
and succeeded Robert J. Emmons as Chairman, President and Chief Executive
Officer effective January 4, 1999. Until his appointment as Chairman and CEO
he also served as Chairman of the Audit Committee and a member of the
Compensation Committee. Mr. Roeder became chairman of the Governance Committee
in early 1999 and is a member of the Board of Directors of the Company's
foodservice subsidiaries, Smart & Final Foodservice Distributors (formerly
operating under the name Port Stockton Food Distributors, Inc.) and Henry Lee
Company. Until 1998 Mr. Roeder was Chairman of Morgan-Kaufman Publishers, Inc.
(publishers of computer science text and reference books), where he was also a
director from 1986 to 1998. Mr. Roeder also serves on the Board of Directors
of Chico's FAS, Inc. (women's apparel stores) since 1997 and Gulf West Bank in
St. Petersburg, Florida since 1995. 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).
Etienne Snollaerts. Mr. Snollaerts has been a director of the Company since
1998. He is the Deputy General Manager and Director of International
Operations of Casino France. He is in charge of the International Activities
of that Company which includes, to date, operations in ten countries. Mr.
Snollaerts has been associated with Casino France since 1990 and served
successfully as Director of Purchasing and Logistics, Director of Retail
Distributions, Store Operations and Information Systems. Prior to joining
Casino France, he was a management consultant with Alexander Proudfoot
Company.
Committees of the Board of Directors and Attendance at Meetings
The Company has established three standing committees of the Board of
Directors--an Audit Committee, a Compensation Committee, and a Governance
Committee. Each of these committees is responsible to the full Board of
Directors and its activities are therefore subject to approval of the Board of
Directors. The functions performed by these committees are summarized as
follows:
The Audit Committee consists of Messrs. Plaskett (as Chairman), Crull, and
McLaughlin. The Audit Committee makes recommendations regarding the selection
of independent public accountants, reviews reports from the independent public
accountants and reviews with them the planned scope and results of the audit
engagement. The Audit Committee also reviews major accounting changes made or
contemplated and the effectiveness and efficiency of the Company's internal
accounting staff. During fiscal 1999, there were four regular meetings of the
Audit Committee.
The Compensation Committee during fiscal 1999 consisted of Messrs. Crull (as
Chairman), McLaughlin, and Plaskett. 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 1999, there were four regular meetings of the
Compensation Committee.
The Board of Directors also has a Governance Committee, which consists of
Messrs. Roeder (as Chairman), Couvreux, Guichard and Plaskett. 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 1999, the
Governance Committee met two times.
4
<PAGE>
During fiscal 1999, the Board of Directors held four regular meetings, one
special meeting and one telephonic meeting. Each director with the exception
of Mr. Guichard 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.
Compensation of Directors
During fiscal 1999, the Company's non-employee directors who served an
entire fiscal year (Messrs. Bouchut, Couvreux, Crull, Gold, Guichard,
McLaughlin, Plaskett and Snollaerts) were paid an annual fee consisting of (i)
$15,000 in cash and (ii) shares of the Company's common stock valued at
approximately $15,000 on the date of the award and as issued from the Non-
Employee Director Stock Plan. The cash portion of each non-employee director's
compensation is paid in advance at the beginning of each calendar quarter.
Each non-employee director who was in office on May 1, 1999 received a grant
of 1,490 shares of the Company's common stock 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 by the Company. Mr. Ornstein was elected to the Board
at the annual meeting on May 11, 1999 and thus received a pro-rata share of
the annual cash fee. Directors who are employees of the Company or its
subsidiaries (including during 1999, Mr. Roeder) are not compensated for
service as members of the Board or any committee of the Board. In 1999 Mr.
Roeder received $13,500 for attending Board meetings in fiscal year 1998,
prior to his appointment as Chief Executive Officer of the Company.
Under the Company's Non-Employee Director Stock Plan, an award of shares is
automatically made as of 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. For the May 1, 2000
grant, Messrs. Bouchut, Couvreux, Crull, Gold, Guichard, McLaughlin, Ornstein,
Plaskett and Snollaerts 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 $15,000 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.
Under the Company's Stock Incentive Plan, as amended, any elected or
appointed non-employee director serving prior to 1998 received an automatic
grant of options to purchase 22,500 shares of the Company's Common Stock, as
of the date of his 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. All of the options representing shares reserved
under the Stock Incentive Plan for grant to non-employee directors have been
granted. Grants of options upon initial appointment of a director commencing
in 1998 were made under the Company's Long-Term Equity Compensation Plan
discussed below.
Under the Company's Long Term Equity Compensation Plan ("Equity Compensation
Plan") as amended in May 1997 and as thereafter amended in 1999, 2,470,000
shares of common stock are available for award as stock options, stock
appreciation rights, restricted stock awards, performance units or performance
shares. All directors are eligible to receive awards under this plan, which is
administered by the Compensation Committee of the Company's Board of
Directors. A 22,500 share option award was granted to Mr. Ornstein under this
plan when he became a member of the Board of Directors in 1999. This award is
of nonqualified stock options, has an exercise price equal to the fair market
value of the Common Stock at the date of grant, must be exercised within ten
years after the date of grant and is subject to early termination in the event
the option holder ceases to
5
<PAGE>
be a director, becomes permanently disabled or dies. One-third of this award
becomes 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. On May 4, 1999 all directors then serving received an additional grant
of 12,500 options from the Equity Compensation Plan. One third of these stock
options will become exercisable on May 4 in each year for the years 2000, 2001
and 2002 at an exercise price of $9.25 per share. These options expire on May
4, 2009. In 1999, the Company issued a total of 135,000 shares to ten
directors under the Equity Compensation Plan.
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) and any shares of the Company's common stock received as
compensation for their services as a director. Participation is voluntary on
an annual basis. Deferrals of cash amounts are credited to a special
bookkeeping account in the participant's name, and earnings on deferrals are
indexed to certain investment fund options. Deferrals of the Company's common
stock are held within the plan, for the benefit of the deferring director's
account and are not redeemable for cash. The Company pays all benefits and
costs from its general assets and, while it has created a non-qualified
grantor trust whose assets will be used to pay benefits and defray expenses,
the assets of the trust will be subject to the claims of the Company's general
creditors in the event of the Company's insolvency or bankruptcy. In general,
participants will receive benefits under the Directors Deferred Compensation
Plan after retirement in one of four pre-elected payment options, one lump-sum
payment or a stream of five, ten or 15 annual payments. Limited withdrawals
prior to retirement are permitted in accordance with the terms of the
Directors Deferred Compensation Plan. The Directors Deferred Compensation Plan
also provides additional death benefits in the event of death prior to
retirement. During 1999 four directors participated in this plan.
Executive Officers
The following table sets forth as of April 10, 2000, the names, ages and
titles of the executive officers of the Company, Smart & Final Stores
Corporation ("Smart & Final Stores"), American Foodservice Distributors, Inc.
("American Foodservice Distributors"), Port Stockton Food Distributors, Inc.
dba Smart & Final Foodservice Distributors ("Smart & Final Foodservice") and
Henry Lee Company ("Henry Lee"):
<TABLE>
<CAPTION>
Name Age Title
---- --- -----
<C> <C> <S>
Ross E. Roeder 62 Chairman of the Board, President and Chief Executive
Officer of the Company, Chairman of the Board,
President, Chief Executive Officer and Chief
Operating Officer of Smart & Final Stores, President
and Chief Executive Officer of American Foodservice
Distributors, Chairman of the Board and Chief
Executive Officer of Smart & Final Foodservice and
Chairman of the Board of Henry Lee
Donald G. Alvarado 45 Senior Vice President, General Counsel and Secretary
of the Company, Senior Vice President and Secretary
of Smart & Final Stores, American Foodservice
Distributors, Smart & Final Foodservice and Henry Lee
Dennis L. Chiavelli 54 Executive Vice President of the Company and Executive
Vice President of Operations for Smart & Final Stores
Martin A. Lynch 62 Executive Vice President and Chief Financial Officer
of the Company, Smart & Final Stores, American
Foodservice Distributors, Smart & Final Foodservice
and Henry Lee
Norah Morley 48 Senior Vice President, Marketing of Smart & Final
Stores
Suzanne Mullins 47 Senior Vice President, Operations of Smart & Final
Stores
Robert J. Schofield 50 Executive Vice President and Chief Operating Officer,
American Foodservice Distributors
Timothy M. Snee 46 Senior Vice President, Buying of Smart & Final Stores
Jeff D. Whynot 43 Senior Vice President, Human Resources of Smart &
Final Stores
</TABLE>
6
<PAGE>
Executive officers of the Company are appointed by the Board of Directors of
the Company and serve at the Board's discretion.
Ross E. Roeder. See "ELECTION OF DIRECTORS--Directors Continuing in Office".
Donald G. Alvarado. Mr. Alvarado was named Senior Vice President, General
Counsel of the Company and Smart & Final Stores in September 1996 and also
serves as Secretary of the Company, American Foodservice Distributors and
Smart & Final Stores. From 1997 to 1999 he was Senior Vice President
Law/Development. 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 its former wholly-owned subsidiary Casino Realty, Inc.
("Casino Realty") from 1989 to January 1994.
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. He was a Vice
President and General Manager of Casino Realty and a Vice President of Casino
USA from late 1987 to early 1991.
Martin A. Lynch. In February 1998, Mr. Lynch resigned from the Board of
Directors of the Company on which he had 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 Executive Vice President and Chief Financial Officer for Casino USA. In
May 1999 he was again elected Chief Financial Officer for Casino USA, the
Company's principal stockholder. 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.
Norah Morley. Ms. Morley joined Smart & Final Stores in August 1999 as
Senior Vice President of Marketing. Most recently, Ms. Morley was previously
the Senior Vice President of Marketing, Buying and Distribution for The Sweet
Factory (retail candy) from 1996 to 1999 and Vice President of Marketing and
Buying with W.H. Smith: The Wall Music. Earlier she was Vice President of
Marketing for Frank's Nursery and Crafts, and held various positions in
consumer packaged goods marketing, including Director of Marketing for The
Pillsbury Company (food products).
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.
Robert J. Schofield. Mr. Schofield was appointed to the position of
Executive Vice President and Chief Operating Officer of American Foodservice
Distributors in February 2000; in this capacity, he is responsible for all
foodservice operations for the Company. Since August 1999, Mr. Schofield
served as a consultant to Smart and Final regarding its Foodservice companies.
Prior to joining the company Mr. Schofield was President of US Foodservice
(foodservice distribution) from 1994 to 1999. Earlier he was President of
Affiliated Food Distributors (Giant Stores--retail grocery) and Senior Vice
President of Spartan Stores (retail grocery).
Timothy M. Snee. Mr. Snee was appointed Senior Vice President, Buying, in
June 1999. He was previously Vice President, Buying and Merchandising from May
1998 until his promotion to Senior Vice President. Mr. Snee joined Smart &
Final Stores after 26 years with Ralphs Grocery Company (retail grocery)
7
<PAGE>
where he served as a vice president in charge of various buying departments,
and held management positions in accounting, distribution, and operations.
Jeff D. Whynot. In January 2000, Mr. Whynot joined the Company as the Senior
Vice President of Human Resources. Mr. Whynot was recently the Vice President
of Human Resources for Dames & Moore Group, (engineering consulting). From
1984 to 1998, Mr. Whynot worked for Knott's Berry Farm (food products and
entertainment). During the last five years of his employment with Knott's
Berry Farm, Mr. Whynot served as the Vice President of Human Resources.
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 Company's 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. 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 1999, executive base salaries (other than for
the Chief Executive Officer) were increased an average of 4.5% (ranging from
2% to 20%), and, consistent with the Compensation Committee's policy
objectives, were at median levels among the comparison companies.
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 at the last scheduled Committee meeting
of the fiscal year (typically held in late November or early December).
Mr. Roeder assumed the position of Chief Executive Officer of the Company in
January 1999. His minimum base salary of $600,000 for fiscal 1999 was set by
his Employment Agreement with the Company. Mr. Roeder was also eligible to
receive for 1999 a bonus of up to 100% of his base salary if certain earnings
per share goals in 1999 were met.
Annual Incentive Bonus Plan. The Compensation Committee believes that the
annual incentive bonus plan is an integral part of the overall compensation
package offered to the Company's executive officers. The Compensation
Committee specifically approves bonus amounts for executive officers, and the
Compensation Committee, with input from the Governance Committee, determines
the bonus amount for the Chief Executive Officer. Based on its review of the
annual incentive bonus plan commenced in late 1993, the Compensation Committee
narrowed the criteria used to determine corporate performance goals to a
single factor--corporate earnings per share. As a result, the target bonus
amount for executive officers was based almost entirely on the attainment of
certain corporate earnings per share, with a small portion of the target bonus
amount based on the attainment of approximately five to eight individual
performance goals. Once goals were selected, competitive target bonuses were
established based on the same comparative criteria used to establish base
salary levels, with amounts varying by the level of responsibility. In fiscal
1999, target bonuses ranged from up to 30% of base salary for regional vice
presidents to up to 60% of base salary for senior management (other than the
Chief Executive Officer).
8
<PAGE>
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 presents
his recommendations for their actual bonus amounts. The Compensation Committee
determined that management made significant strides in 1999 and as a result,
bonuses were awarded but at less than target amounts. Actual bonuses to
executive officers (other than the Chief Executive Officer) averaged
approximately 10.8% of base salary and ranged from 0% to 21%.
Stock Incentive Plan. The Company's Stock Incentive Plan authorizes the
issuance of options covering up to 2,450,000 shares of the Company's Common
Stock. The Stock Incentive Plan is intended to provide executive officers and
key employees with the opportunity to acquire a proprietary interest in the
Company and link their personal interest with the stockholders' interest in
the Company's continuing success. Currently, there are 314 participants in the
Stock Incentive Plan. The Compensation Committee has the discretion to
determine the number of options granted to officers and key employees, and
awards of options generally increase as a function of higher positions of
responsibility in the Company. Awards are made at a level calculated to be at
median levels when compared with other companies of comparable size and
complexity in the retail and wholesale food distribution business and in other
comparable businesses (including, for example, certain non-food, multi-unit
retail companies). Options granted to employees under the Stock Incentive Plan
are nonqualified stock options, may be exercised up to ten years after the
date of the grant and are subject to early termination in the event the option
holder ceases to be an employee, becomes permanently disabled or dies. No
option can be granted at an option price of less than 85% of the fair market
value of Common Stock at the time the option is granted. Options are
exercisable as determined by the Compensation Committee at the date of grant
and, absent such determination, one-third of the options become exercisable
after two years and each year thereafter so that 100% are exercisable four
years after the date of grant. For fiscal 1999, the Compensation Committee
granted no options to the Chief Executive Officer or the other executive
officers under the Stock Incentive Plan.
Long-Term Equity Compensation Plan. The Company also grants stock-based
awards under the Long-Term Equity Compensation Plan ("Equity Compensation
Plan"). 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. In May 1999, the Compensation Committee granted
200,000 options to Mr. Roeder under the Equity Compensation Plan. The first
one-third of these options (66,667 shares) vested on December 31, 1999, the
second one-third of the options (66,667 shares) will vest on December 31, 2000
and the final one-third of the options (66,666 shares) will vest on December
31, 2001. In addition, Mr. Roeder received 12,500 options that will vest over
three years as compensation for acting as a non-employee director during
fiscal year 1998. The Company also granted Mr. Roeder an additional 50,000
shares of restricted stock in 1999 under the Equity Compensation Plan. Other
executive officers of the Company received in fiscal 1999 a total of 414,975
options under the Equity Compensation Plan.
Certain Other Benefits. The Company provides health, welfare, and pension
benefits to the executive officers that are generally available to all full-
time employees of the Company. 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, supplemental executive retirement plan,
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
9
<PAGE>
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 Ross E. Roeder, Chairman
David J. McLaughlin Christian P. Couvreux
Thomas G. Plaskett Antoine Guichard
</TABLE>
Performance Graph
The graph below compares the cumulative total stockholder return on the
Company's Common Stock over a five year period 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 an initial investment of
$100 and the reinvestment of all dividends).
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG SMART & FINAL INC., DOW JONES EQUITY MARKET INDEX
AND DOW JONES FOOD RETAILERS & WHOLESALERS INDEX
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
DOW JONES
DOW JONES FOOD RETAILERS &
Measurement Period SMART & EQUITY WHOLESALERS
(Fiscal Year Covered) FINAL INC. MARKET INDEX INDEX
- --------------------- ---------- ------------ ----------------
<S> <C> <C> <C>
Measurement Pt- 12/94 $100.00 $100.00 $100.00
FYE 12/95 $153.14 $138.37 $126.51
FYE 12/96 $156.62 $170.84 $156.29
FYE 12/97 $132.37 $227.18 $211.93
FYE 12/98 $ 72.08 $291.64 $326.29
FYE 12/99 $ 54.55 $351.05 $215.37
</TABLE>
10
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Relationship Between the Company and Casino USA.
For purposes of reference below, Casino USA is a subsidiary of Casino
France, a business organization which is publicly-traded in France and is
engaged in the retail grocery, restaurant, food production and other
businesses in France and elsewhere in the world. Casino USA is ultimately
controlled by Mr. Jean-Charles Naouri, a French citizen whose principal
business is making and managing investments.
Casino France, acting through Casino USA, acquired the Company's then parent
company in 1984. Casino France currently owns approximately 59.3% of the
outstanding shares of the Company's Common Stock. Since the Common Stock does
not have cumulative voting rights, the holders of shares having more than 50%
of the voting power may elect all of the directors of the Company, and the
holders of the remaining shares would not be able to elect any directors.
Casino France owns approximately 99% of the outstanding shares of Casino
USA's capital stock. There is no agreement between Casino USA and any other
party 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 currently includes Messrs. Bouchut,
Couvreux, Guichard, Ornstein and Snollaerts who also serve as directors of
Casino USA and/or who are affiliated with Casino France. In May 1999,
Mr. Lynch was elected Chief Financial Officer of Casino USA.
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
1999 were approved without change, by the full Board. In fiscal 1999, the
Compensation Committee consisted of Messrs. Crull, McLaughlin and Plaskett. In
fiscal 1999, the Governance Committee consisted of Messrs. Couvreux, Guichard,
Plaskett, and Roeder. Mr. Roeder did not participate in any decisions that
affected him. Except for Mr. Roeder, 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.
Certain Transactions between the Company and Casino USA.
The Company and Casino USA are parties to a 1991 intercompany agreement (the
"Intercompany Agreement"). The Intercompany Agreement provides for the
performance of various administrative services by the Company for Casino USA
(and before its dissolution, Casino Realty) and by Casino USA for the Company.
None of the parties are 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 its former subsidiary, including accounting, human resources and systems
development work, the cost of which has been charged to the benefited
affiliated company. These charges amounted to $261,000 for fiscal 1999. 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 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.
11
<PAGE>
The Company and Casino USA are parties to a tax sharing arrangement covering
income tax obligations in the State of California. Under this arrangement, the
Company has made tax sharing payments to or received tax sharing benefits from
Casino USA, based upon pre-tax income for financial reporting purposes
adjusted for certain agreed upon items. The Company received tax sharing
payments from Casino USA aggregating $598,000 in fiscal 1999.
Effective November 13, 1998, the Company consolidated and replaced certain
prior cash advances and unsecured notes with a single $55.4 million loan
agreement with Casino USA ("Casino Loan"). The unsecured notes were originally
issued in conjunction with the 1996 acquisition of real property from Casino
USA and Casino Realty that had an outstanding balance in late 1998 of $30.4
million. The Casino Loan also contains financial covenants similar to those
contained in the Company's bank credit facilities. The Casino Loan matures on
February 15, 2002. No principal repayments are due prior to the final
maturity.
The Company decided to increase equity capital in 1999 to provide greater
financial flexibility for the Company and to reduce the debt owed on the
Casino Loan. In an equity offering registered with the SEC and completed in
the second quarter of 1999, the Company issued 6,486,406 shares of common
stock at a fixed subscription price of $9.25 per share. In addition to
reimbursing Casino USA for $450,000 in expenses that it incurred, Casino USA
was issued 10,000 shares as a fee for acting as a standby purchaser in the
equity offering. Casino USA exercised all of its subscription rights and as a
result, increased its shares held by 4,271,935 shares and its ownership
interest in the Company from approximately 55 percent to 57.3 percent at that
time. Consideration for shares subscribed by Casino USA was the exchange of
$39.4 million of its $55.4 million loan to the Company. The offering increased
stockholders' equity approximately $57.9 million after expenses of the
offering. After the completion of its equity offering, the Company's overall
debt was reduced, including the pay-down of $19.0 million on the Revolving
Loan and a reduction of $39.4 million on the Casino Loan. In connection with
the equity offering, Lazard Freres & Co., LLC, an investment banking firm,
provided advice to Casino France and Casino USA regarding the Company and the
equity offering. One of the Company's directors, Mr. Gold, is also a Managing
Director with Lazard Freres & Co., LLC.
Certain Transactions Relating to Mr. Roeder.
The Board of Directors appointed Mr. Roeder as Chairman of the Board and
Chief Executive Officer of the Company effective January 4, 1999. Later in
1999, Mr. Roeder additionally assumed the position of President of the
Company. In early 1999, the Company and Mr. Roeder entered into an employment
agreement (the "Roeder Employment Agreement") pursuant to which Mr. Roeder has
agreed to serve as Chairman and Chief Executive Officer of the Company through
December 31, 2001. If, prior to December 31, 2001, either party elects not to
extend the Roeder Employment Agreement through December 31, 2003, then, upon
the effective date of expiration, the Company will continue to pay Mr.
Roeder's base salary for a period of 24 months in accordance with its normal
payroll practices and shall also pay to Mr. Roeder 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. Roeder has a vested
right, including retirement benefits and retiree medical insurance.
Mr. Roeder's base salary is determined from time to time by the Board, but
shall not be less than $600,000 per year. Once increased, the base salary
shall not be decreased. In February 2000, Mr. Roeder's base salary was
increased to $650,000 per year. The Roeder Employment Agreement provides that
Mr. Roeder will have an opportunity to earn an annual cash bonus and that the
minimum target annual bonus opportunity will be at least 100% of his annual
base salary. Mr. Roeder will also have the opportunity to earn long-term
incentive awards and participate in all Company qualified retirement plans,
group term life insurance, comprehensive health and major medical insurance,
short and long-term disability and all other benefits and perquisites to which
other executives and employees of the Company are eligible to receive,
including Supplemental Executive Retirement Plan ("SERP") benefits in an
amount not less than $125,000 per year, automobile allowance, retiree medical
coverage and financial planning services, all as commensurate with Mr.
Roeder's position. Mr. Roeder is entitled to certain tax "gross up" benefits
relating to his bonus and restricted stock awards described below. Mr. Roeder
is also entitled to a minimum of five weeks paid vacation per year.
12
<PAGE>
Mr. Roeder received a grant of 50,000 shares of restricted stock under the
Equity Compensation Plan; all of these shares vested in February 2000 in
accordance with the Roeder Employment Agreement. Pursuant to the terms of the
Roeder Employment Agreement, Mr. Roeder voluntarily elected, pursuant to
Section 83(b) of the Internal Revenue Code of 1986, to be taxed on the fair
market value of these shares on the date they were transferred; and the
Company contemporaneously provided Mr. Roeder with a loan, evidenced by a
promissory note. The principal of the loan is equal to the amount of income
and payroll taxes payable by Mr. Roeder on the compensation recognized as a
result of the shares of restricted stock and the Section 83(b) election. The
principal amount of the note is due on December 31, 2001 or earlier, due to
Mr. Roeder's death, disability, termination by the Company without cause or
termination with good reason. In addition, Mr. Roeder received an additional
award of 20,000 shares of restricted stock in February 2000; these shares have
not vested. Mr. Roeder has made a similar election pursuant to Section 83(b)
with respect to the value of these shares and the Company contemporaneously
provided Mr. Roeder with an additional loan in the amount income and payroll
taxes due by Mr. Roeder as a result of the election. The Board of Directors
also granted Mr. Roeder 200,000 options from the Equity Compensation Plan on
May 4, 1999. These options have a ten year term and vest as follows:
66,667 shares vested on December 31, 1999; 66,667 vest on December 31, 2000;
and the remaining 66,666 vest on December 31, 2001. Mr. Roeder also received
in February 2000, a grant of 50,000 stock options that have a ten year term
and vest as follows: 16,667 shares vest in 2002; 16,667 shares vest in 2003;
and 16,666 shares vest in 2004. In the event of a Change in Control,
termination of the Roeder Employment Agreement due to his death or disability,
a termination by the Company without cause or a termination with good reason,
all outstanding options shall immediately vest and remain exercisable for the
two-year period following the date of termination but in no event beyond the
expiration of the maximum ten year term. The Roeder Employment Agreement
further provides that during its term Mr. Roeder will receive an annual grant
of options in an amount at least equal to 1.5 times the number of options
granted to any other executive officer of the Company. In addition, in June
1999 Mr. Roeder received a loan from the Company in the amount of $47,101, in
connection with his purchase of stock in the Company's equity offering. The
loan bears interest at a market rate.
In the event the Roeder Employment Agreement is terminated due to Mr.
Roeder's retirement, death or disability, or the Company terminates his
employment without cause, or Mr. Roeder terminates the Roeder Employment
Agreement with good reason, as defined below, Mr. Roeder is entitled to
receive his base salary for the greater of (i) the number of months remaining
in the employment term under the Roeder Employment Agreement, or (ii) 12
months (the "Severance Period"). Mr. Roeder would also receive a monthly
amount equal to his annual bonus target for the last Company fiscal year
completed prior to the date of termination divided by 12. In addition, Mr.
Roeder would continue to receive payment for continuation of his and his
spouse's medical insurance coverage through COBRA for a period equal to 18
months or until Mr. Roeder were to cease to be eligible for COBRA coverage or
he becomes eligible to receive comparable coverage through another employer.
Mr. Roeder would also receive additional service and compensation credit under
the SERP until he reaches age 65, and continued payment of financial planning
services through the Severance Period, 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
Roeder Employment Agreement, disability generally means Mr. Roeder's inability
to perform his duties due to illness or mental infirmity for a period of more
than 180 consecutive days. For purposes of the Roeder Employment Agreement,
"good reason" is defined as a diminution in Mr. Roeder's title and authority,
relocation of the Company's principal office without his consent, the failure
of the Company to pay his salary or any other material breach by the Company,
or the failure of Mr. Roeder to be elected to the Board of Directors or
appointed as Chairman of the Board of Directors during the employment term.
Upon the effective date of a termination due to a Change in Control, the
Company shall continue to pay Mr. Roeder any (i) accrued obligations, (ii) a
lump-sum payment equal to three times his base salary then in effect, (iii) a
lump-sum cash payment equal to three times the greater of (x) the highest
annual bonus paid in the prior three fiscal years, or (y) his annual bonus
target for the fiscal year of termination. Mr. Roeder would also receive
continuation of health and welfare benefits for three years (subject to
termination if Mr. Roeder obtains employment that offers substantially similar
benefits) as well as three additional years of service and
13
<PAGE>
compensation credit under the SERP. In the event any of the payments in
connection with a Change in Control cause an excise tax to be imposed on Mr.
Roeder under Section 4999 of the Code, the Company shall pay Mr. Roeder in
cash an additional amount such that the net amount retained by Mr. Roeder
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. Roeder would
have retained had no such excise tax been imposed. For purposes of the Roeder
Employment Agreement, the term "Change in Control" has the same definition as
in the Company's Executive Severance Plan.
The Roeder Employment Agreement also contains Mr. Roeder's covenant not to
compete with the Company during the term and for the longer of twelve months
following the expiration of the Roeder Employment Agreement or any period
during which the amounts are paid under the Roeder Employment Agreement, and a
covenant, for a period of 12 months following the expiration of the Roeder
Employment 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.
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, the
four other most highly compensated executive officers of the Company and up to
two additional executive officers that would have been included except for the
fact that they were not serving as executive officers at the end of the fiscal
year and provided that they earned over $100,000 in 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
--------------------------------------------------------------------------------------
Long Term
Compensation Awards
---------------------
Restricted Securities
Stock Underlying
Fiscal Salary Bonus Other Annual Awards Options All Other
Year ($)(1) ($)(2) Compensation($)(3) ($)(4) (#)(5) Compensation($)(6)
Name and Principal Position ------ ---------- -------- ------------------ ---------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ross E. Roeder............... 1999 $ 599,664 $200,000 $ -0- $606,250 212,500 $ 5,524
Chairman of the Board and 1998 $ 143,500 N/A N/A N/A N/A N/A
Chief Executive Officer 1997 $ 14,000 N/A N/A N/A N/A N/A
Robert J. Emmons............. 1999 $ 703,331 $ -0- $ -0- $ -0- -0- $ -0-
Former Chairman of the...... 1998 $1,229,913 $ -0- $91,783 $ -0- 200,000 $21,127
Board and Chief............. 1997 $ 663,242 $ -0- $ -0- $ -0- -0- $22,743
Executive Officer(7)
Martin A. Lynch.............. 1999 $ 318,753 $ 40,000 $ -0- $ -0- 64,700 $12,879
Executive Vice President.... 1998 $ 308,000 $ -0- $ -0- $ -0- 15,000 $11,904
And Chief Financial Officer. 1997 $ 312,019 $ -0- $48,367 $160,406 25,000 $ 8,917
Dennis L. Chiavelli.......... 1999 $ 245,262 $ 51,912 $ -0- $ -0- 43,100 $11,106
Executive Vice.............. 1998 $ 240,000 $ -0- $ -0- $ -0- 25,000 $11,799
President, Operations....... 1997 $ 241,154 $ -0- $49,769 $160,406 25,000 $11,786
Donald G. Alvarado........... 1999 $ 207,308 $ 30,000 $ -0- $ -0- 27,600 $11,228
Senior Vice President,...... 1998 $ 193,943 $ -0- $ -0- $ -0- 10,000 $14,502
General Counsel............. 1997 $ 166,442 $ -0- $51,163 $ 88,500 14,000 $13,061
Suzanne Mullins.............. 1999 $ 183,946 $ 38,000 $ -0- $ -0- 25,800 $ 9,375
Senior Vice President,...... 1998 $ 180,000 $ -0- $ -0- $ -0- 10,000 $ 8,233
Store Operations............ 1997 $ 176,346 $ -0- $38,302 $ 88,500 14,000 $ 5,657
</TABLE>
- --------
(1) Includes amounts deferred by the named officers 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 are or were eligible to
participate during fiscal 1999; and the Company's Supplemental Deferred
Compensation Plan (the "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 1999, 1998 and 1997 includes
salary
14
<PAGE>
payments for one month of 1999, the entire year of 1998 and two months of
1997, and consulting payments of $479,126, $472,000 and $463,000,
respectively, made under his Employment Agreement with the Company. In the
case of Mr. Lynch the compensation reported also includes any portion
deferred under his Deferred Compensation Agreement with the Company. The
amounts listed for Mr. Roeder in 1998 and 1997 are for consulting services.
(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, car allowances and also for Mr. Emmons, certain income tax
reimbursements). 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."
(4) The listed dollar value of restricted shares shown in the table for Mr.
Roeder is based on the closing price per share on the date of grant of
$12.125, all other restricted shares shown for 1997 were granted at
$22.125. Mr. Roeder held 50,000 restricted shares that had an aggregate
1999 fiscal year end value of $362,500. Messrs. Lynch and Chiavelli each
held 7,250 restricted shares, each having an aggregate 1999 fiscal year
end value of $52,563; Mr. Alvarado and Ms. Mullins each held 4,000
restricted shares, each having an aggregate fiscal year end value of
$29,000. All 1999 fiscal year end valuations are based on the NYSE closing
price per share of $7.25. The performance period for the restricted stock
will end at the earlier of five (5) years from the date of the initial
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) As approved by the Board of Directors, Mr. Roeder received 200,000 options
from the Equity Compensation Plan. He received an additional 12,500
options in 1999 for his service as a director of the Company before he was
appointed Chief Executive Officer.
(6) The compensation reported represents amounts contributed by the Company
under the 401(k) Savings Plan, the Supplemental Deferred Compensation
Plan, and the dollar value of insurance premiums paid by the Company with
respect to term life insurance and health care plans for the benefit of
the named officer. Company contributions under the 401(k) Savings Plan and
the Supplemental Deferred Compensation Plan during fiscal 1999 were as
follows: $1,558 for Mr. Roeder, $0 for Mr. Emmons, $2,400 for Messrs.
Lynch, Chiavelli, Alvarado and for Ms. Mullins. Company contributions
under the 401 (k) Savings Plan and the Supplemental Deferred Compensation
Plan during fiscal 1998 were as follows: $2,400 for Messrs. Emmons, Lynch,
Chiavelli, and for Ms. Mullins, and $635 for Mr. Alvarado. Company
contributions under the 401 (k) Savings Plan and the Supplemental Deferred
Compensation Plan during fiscal 1997 were as follows: $1,875 for Mr.
Emmons, $2,375 for Messrs. Lynch and Chiavelli, $1,883 for Mr. Alvarado
and $1,639 for Ms. Mullins. Company payments of life and health insurance
premiums during fiscal 1999 were as follows: $3,966 for Mr. Roeder, $0 for
Mr. Emmons, $10,479 for Mr. Lynch, $8,706 for Mr. Chiavelli, $8,828 for
Mr. Alvarado and $6,975 for Ms. Mullins. Company payments of insurance
premiums during fiscal 1998 were as follows: $18,727 for Mr. Emmons,
$9,504 for Mr. Lynch, $9,399 for Mr. Chiavelli, $13,867 for Mr. Alvarado
and $5,833 for Ms. Mullins. Company insurance premiums during fiscal 1997
were as follows: $20,868 for Mr. Emmons, $6,542 for Mr. Lynch, $9,411 for
Mr. Chiavelli, $11,178 for Mr. Alvarado and $4,018 for Ms. Mullins.
(7) Mr. Emmons retired and resigned from all positions at the Company
effective January 4, 1999.
15
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------------------
Number of Grant Date
Securities % of Total Present
Underlying Options Granted Exercise Value of
Options to Employees Price Expiration Stock
Name Granted(1) in Fiscal Year Per Share Date Options(2)
---- ---------- --------------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Ross E. Roeder...... 212,500 16.8% $9.250 5/4/09 $680,080
Robert J. Emmons.... -0- N/A N/A N/A N/A
Martin A. Lynch..... 64,700 5.1% $9.250 5/4/09 $245,555
Dennis L. Chiavelli. 43,100 3.4% $9.250 5/4/09 $163,577
Donald G. Alvarado.. 27,600 2.2% $9.250 5/4/09 $104,750
Suzanne Mullins..... 25,800 2.0% $9.250 5/4/09 $ 97,918
</TABLE>
- --------
(1) Options granted are nonqualified stock options granted under the Equity
Compensation Plan, may be exercised up to ten years after the date of the
grant and are subject to early termination in the event the options 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. For the grants made in
1999, one-fifth of the options become exercisable one year after the date
of grant and each year thereafter so that 100% are exercisable five years
after the date of grant. Unvested options will vest immediately upon a
change in control. Mr. Roeder received two grants in 1999. For the grant
of 200,000 options, one third vested on December 31, 1999, the first
anniversary of the commencement of Mr. Roeder's employment, with the
remaining shares vesting equally on the second and third anniversaries
thereof. The second grant of 12,500 options, made with respect to Mr.
Roeder's services as a director in 1998, completely vests in three years
(one-third each year) commencing on the first anniversary of the grant.
(2) The Company used the Black-Scholes model of option valuation to determine
the present values at the grant dates. 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
35.24%, no dividends, and an interest rate of 6.337% for Mr. Roeder and
6.408% for all other officers, which correspond to the 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 FISCAL YEAR END OPTION
VALUES
The following table summarizes option exercises during fiscal 1999, and the
number of all options and the value of all in-the-money options held at the
end of fiscal 1999, 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 1999 (#) of Fiscal 1999($)(1)
Name on Exercise(#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
---- --------------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Ross E. Roeder(2)....... -0- -0- 89,167/160,833 $0/$0
Robert J. Emmons........ -0- -0- 200,000/-0- $0/$0
Donald G. Alvarado...... -0- -0- 34,667/46,933 $0/$0
Dennis L. Chiavelli..... -0- -0- 77,134/84,766 $0/$0
Martin A. Lynch......... -0- -0- 160,834/96,366 $0/$0
Suzanne Mullins......... -0- -0- 57,167/45,133 $0/$0
</TABLE>
- --------
(1) Based on the market value of underlying securities at fiscal year end,
less the exercise price.
(2) Mr. Roeder's options include 22,500 shares of exercisable options and
50,000 shares of total options for his service to the Company, prior to
fiscal year 1999, as a non-employee director.
16
<PAGE>
Pension Plan and 401(k) Savings Plans. The following table sets forth
estimated annual pension benefits under the Smart & Final Pension Plan (the
"Pension Plan"), on a straight life annuity basis for representative years of
service as defined in the Pension Plan. Such benefits are subject to reduction
for certain prior company retirement benefit plans.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Estimated Annual Retirement Benefits at
Age 65
Final Average For Indicated Years of Credited
Remuneration on Earnings Based Service(1)
which Retirement on Limited ---------------------------------------
Benefits are Based(2) 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................. $170,000 $25,000 $34,000 $42,500 $51,000 $59,500
200,000................. $170,000 $25,000 $34,000 $42,500 $51,000 $59,500
225,000................. $170,000 $25,000 $34,000 $42,500 $51,000 $59,500
250,000................. $170,000 $25,000 $34,000 $42,500 $51,000 $59,500
300,000................. $170,000 $25,000 $34,000 $42,500 $51,000 $59,500
350,000................. $170,000 $25,000 $34,000 $42,500 $51,000 $59,500
400,000................. $170,000 $25,000 $34,000 $42,500 $51,000 $59,500
450,000................. $170,000 $25,000 $34,000 $42,500 $51,000 $59,500
500,000................. $170,000 $25,000 $34,000 $42,500 $51,000 $59,500
</TABLE>
- --------
(1) Amounts shown are for employees hired on January 1, 2000 and assume
retirement at age 65 after employment for the indicated number of years.
Estimated annual retirement benefits are based on the plan in effect on
January 1, 2000 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 from 1997 through 1999. The limit was adjusted
to $170,000 for 2000. For purposes of this table, it is assumed to remain
at $170,000 for all future years.
The Company maintains the Pension Plan for the benefit of all full-time
employees of the Company (other than Smart & Final Foodservice, Henry Lee and
certain Cash & Carry division 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 1999, Messrs. Roeder, Lynch, Chiavelli and Alvarado
and Ms. Mullins had credited approximately 1, 11, 14, 12 and 13 actual years
of service, respectively, and would have been entitled to minimum annual
benefits of approximately $1,600, $21,000, $29,800, $22,400, and 24,000,
respectively. Mr. Emmons retired from the Company as of January 4, 1999.
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 employees of the Company
(other than Smart & Final Foodservice 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 1999 up to 15% of their compensation or
$10,000, whichever was lower. The Company automatically matches 25% of each
dollar contributed up to 6% of each participant's eligible compensation and
may at its discretion match up to an additional 75% of each dollar contributed
up to 6% of the participant's eligible compensation if the Company exceeds
certain financial and
17
<PAGE>
profitability goals. In fiscal 1999, 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 currently entitled to direct their contributions to one or
more of thirteen investment options. None of a participant's account balance
in the 401(k) Savings Plan may be withdrawn prior to termination of employment
or his attainment of age 70, whichever occurs earlier, except upon certain
qualified financial hardships or loans. Distribution of a participant's
account balance, if less than $5,000, will generally be made in a lump sum
payment in the year following the termination of employment. Distribution of a
participant's account balance in excess of $5,000 will be made in accordance
with the participant's election following the termination of employment. 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 second year of service with 100% vested
after five years.
Henry Lee and Smart & Final Foodservice each maintain a defined contribution
plan which is intended to satisfy the tax qualification requirements of
Section 401(k) of the Internal Revenue Code. The Henry Lee 401(k) Plan is
similar to the 401(k) Savings Plan with respect to the tax advantages, loan
features and hardship withdrawal provisions. The Henry Lee 401(k) Plan differs
from the Company's plan in several respects. The differences include,
eligibility requirements, the Henry Lee automatic match of 50% of each dollar
contributed up to 6% of the participant's contribution, and immediate vesting
in all employer contributions. Participants are entitled to direct their
contributions to eight different investment options. The Smart & Final
Foodservice Plan also calls for a 50% automatic match of each dollar
contributed up to 6% of the participant's contribution. There is a five year
vesting schedule at a rate of 20% per year commencing the first year of
eligible employment. Participants are entitled to direct their contributions
to five different investment options.
Executive Severance Plan. In 1997 the Board of Directors approved
implementation of an Executive Severance Plan ("Severance Plan") covering
certain then 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 including termination relating to a Change in Control. The
Severance Plan provides for the payment of continued salary benefits for one
month for every year of employment, or a minimum of twelve months, 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. For purposes of the Severance Plan "Change in
Control" will be deemed to have occurred as of the first day any one or more
of the following shall have been satisfied: (i) any person (other than a
trustee or other fiduciary holding securities under an employee benefit plan
of the Company, or a corporation owned directly or indirectly by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company), becomes the Beneficial Owner, directly or
indirectly, of securities of the Company, representing more than twenty-five
percent (25%) of the combined voting power of the Company's then outstanding
securities; (ii) during any period of two (2) consecutive years, individuals
who at the beginning of such period constitute the Board (and any new
Director, whose election by the Company's stockholders was approved by a vote
of at least two-thirds (2/3) of the Directors then still in office who either
were Directors at the beginning of the period or whose election or nomination
for election was so approved), cease for any reason to constitute a majority
thereof; (iii) the stockholders of the Company approve: (a) a plan of complete
liquidation of the Company; or (b) an agreement for the sale or disposition of
all or substantially all the Company's assets; or (c) a merger, consolidation,
or reorganization of the Company with or involving any other corporation,
other than a merger, consolidation, or reorganization that would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least eighty percent (80%)
of the combined voting
18
<PAGE>
power of the voting securities of the Company (or such surviving entity)
outstanding immediately after such merger, consolidation, or reorganization.
There are 15 executive officers currently eligible to participate in the
Executive Severance Plan. The participants were informed by the Board of
Directors in March, 1998 that the Severance Plan would not be renewed past its
current expiration date of December 31, 2000.
Supplemental Executive Retirement Plan. Beginning in 1998, the Company
provided a Supplemental Executive Retirement Plan ("SERP") to certain of its
key executives and other highly compensated employees which will provide 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 document. A participant may be entitled to receive benefits under the
SERP in the event of a change in control of the Company. In addition, in the
event the participant dies prior to their retirement, disability or
termination of employment, his or her survivor may also be entitled to receive
benefits under the SERP. 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 Board of Directors of the Company. The SERP is administered by
a third party administrator. At fiscal year end 1999, there were 13
participants in the SERP, including certain of the executive officers
currently serving who are listed above.
Deferred Compensation Plan. The Company also has a Supplemental Deferred
Compensation Plan (the "Deferred Compensation Plan"), in which certain Company
employees who earn annual base compensation of at least $80,000 in 1999
(adjusted to $85,000 in 2000), are eligible to defer pre-tax up to 100% of
their base compensation, cash bonus (with a minimum annual deferral of
$2,500), and shares of restricted stock. 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.
Roeder Employment Agreement. See "Compensation Committee Interlocks and
Insider Participation--Certain Transactions Relating to Mr. Roeder."
Lynch Employment Agreement. The Company and Mr. Lynch are parties to an
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. In September 1999, the Company and
Mr. Lynch entered into an agreement to extend Mr. Lynch's employment to
January 3, 2003. Under the terms of the extension to Mr. Lynch's employment
agreement, the minimum standard benefit payable to Mr. Lynch under the
Company's Supplemental Executive Retirement Plan shall be no less than
$175,000. Effective on March 15, 1999, Mr. Lynch's base salary was established
at $288,400 per year subject to periodic adjustment pursuant to his Employment
Agreement and consistent with historical Company practice and the Company's
treatment of other executive officers.
Mr. Lynch's base salary shall be determined from time to time by the Board,
but shall not be less than $288,400 per year. Once increased, the base salary
shall not be decreased. Mr. Lynch has the opportunity to earn an annual cash
bonus with a minimum target annual bonus of at least 60% of his annual base
salary. Mr. Lynch also has 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. The Company
will provide Mr. Lynch and his surviving spouse full retiree medical insurance
19
<PAGE>
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.
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. "Disability" under the 1997 Lynch Agreement is described as inability
to perform 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 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 extended 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.
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 in connection with a Change
in Control during the period described above, the Company shall provide to Mr.
Lynch the following: (i) an amount equal to three times Mr. Lynch's highest
base salary, (ii) an amount equal to three times his average annual bonus
earned over the three fiscal years prior to the change in control (whether or
not deferred) plus an additional amount not to exceed $150,000 depending on
the date of such termination, (iii) an amount equal to Mr. Lynch's unpaid base
salary and accrued vacation pay, (iv) an amount equal to Mr. Lynch's unpaid
targeted annual bonus, established for the plan year in which the effective
date of his termination occurs, adjusted for the Company's performance through
the date of termination, prorated, (v) the continuation of the welfare
benefits in effect for three full years after the effective date of
termination, (vi) a lump-sum cash payment of the actuarial present value
equivalent of the aggregate benefits accrued by Mr. Lynch under the terms of
any and all supplemental retirement plans in which he participates, (vii) a
lump-sum cash payment of the entire balance of Mr. Lynch's deferred amount
under the Company's non-qualified deferred compensation plans, with interest,
and (viii) a lump-sum cash payment of all amounts owed to Mr. Lynch under the
deferred compensation plans, with
20
<PAGE>
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 two deferred
compensation agreements, whereby the Company agrees, among other things,
during the term of Mr. Lynch's employment, to defer an annual amount equal to
an aggregate of 10% 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.
Emmons Employment Agreement. The Company and Mr. Emmons are parties to an
employment agreement, as amended (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. The Employment Agreement
also allows Mr. Emmons to participate in all plans or programs sponsored by
the Company for any of its employees. The consulting arrangement is not
affected by Mr. Emmons' retirement in 1999 as Chairman and Chief Executive
Officer of the Company.
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 reports, the Company believes that all required reports have been
timely filed with the exception of two reports which the Company filed
inadvertently late, one regarding a transaction by Mr. Crull and the other
reporting for Ms. Morley a grant of options.
21
<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 31, 2000 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 and former 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
Name Owned of Class
---- ------------ --------
<S> <C> <C>
Casino Guichard-Perrachon S.A.(1)..................... 17,285,360 59.3%
Baron Capital Group, Inc.(2).......................... 6,178,192 21.2%
Robert J. Emmons(3)................................... 1,002,258 3.4%
Martin A. Lynch(5).................................... 216,826 *
Ross E. Roeder(4)(5).................................. 182,673 *
Dennis L. Chiavelli (5)(6)............................ 141,086 *
Suzanne Mullins (5)................................... 78,581 *
Donald G. Alvarado (5)................................ 57,381 *
Timm F. Crull(5)(6)................................... 37,504 *
David J. McLaughlin (4)(5)............................ 37,449 *
James S. Gold(5)...................................... 34,050 *
Thomas G. Plaskett(5)................................. 32,938 *
Pierre B. Bouchut(5).................................. 25,938 *
Christian P. Couvreux(5).............................. 11,082 *
Antoine Guichard(5)................................... 3,522 *
Etienne Snollaerts(5)................................. 1,917 *
Joel-Andre Ornstein................................... 2,000 *
All directors and executive officers as a group ( 19
persons)............................................. 899,342 3.1%
</TABLE>
- --------
*Less than 1%.
(1) Casino Guichard-Perrachon S.A. ("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 600 Citadel
Drive, Commerce, California 90040, 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 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 on Amendment No. 4 to Schedule 13D
("Amendment No. 4") filed by Casino USA on February 7, 2000 and prior
reports, and on information provided to the Company by Casino France.
(2) All information with respect to Baron Capital Group, Inc. ("BCG"), a
holding company controlled by Ronald Baron, is based solely on Amendment
No. 12 to Schedule 13D dated February 4, 2000, filed by BCG. Mr. Baron has
sole voting and dispositive power over 19,300 shares held by him
personally (or approximately .06% of the outstanding shares) and shared
voting and dispositive power over 6,178,192 shares (or 21.2% of the
outstanding shares). Of the 6,178,192 shares, 3,623,220 shares are held
for the account of BAMCO, Inc. ("BAMCO"), a registered investment advisor
controlled by Mr. Baron, and of this amount 2,900,000 are held for the
account of Baron Asset Fund ("BAF"), a registered investment company
advised by BAMCO, Inc., and 2,554,972 shares are held for the accounts of
investment advisory clients of Baron Capital Management, Inc. ("BCM"), a
registered investment company controlled by Mr. Baron. The address for
BCG, BAMCO, BAF and BCM is 767 Fifth Avenue, 24th Floor, New York, New
York 10153.
22
<PAGE>
(3) Includes 10,000 shares held by the Institute for Management and Marketing
Studies Trust of which Mr. Emmons is a beneficiary, 792,258 shares held by
the Robert & Christine Emmons Family Trust, of which Mr. Emmons is the
trustee and a beneficiary, and options to purchase 200,000 shares which
Mr. Emmons is entitled to exercise under the Equity Compensation Plan.
(4) Includes shares held in profit sharing or IRA accounts for the benefit of
the named individual or members of his immediate family.
(5) Includes shares which such persons have the right to acquire within 60
days pursuant to the exercise of outstanding stock options. These stock
options include 200,000 options attributable to Mr. Emmons; 174,167
options attributable to Mr. Lynch; 94,167 options attributable to Mr.
Roeder; 90,467 options attributable to Mr. Chiavelli; 65,168 options
attributable to Ms. Mullins; 42,668 options attributable to Mr. Alvarado;
22,500 shares each attributable to Messrs. Bouchut, Crull, Gold, and
Plaskett; 17,500 options attributable to Mr. McLaughlin; and 7,500 options
attributable to Mr. Couvreux.
(6) Includes 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
December 31, 2000, 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 fourteen years. This firm will have a
representative 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
DECEMBER 31, 2000.
ANNUAL REPORT
The Company's Annual Report to Stockholders for fiscal year 1999 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 2, 2000 (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 31, 2000. ANY SUCH REQUEST SHALL
BE IN WRITING AND ADDRESSED TO THE SECRETARY OF THE COMPANY, 600 CITADEL
DRIVE, COMMERCE, CALIFORNIA 90040, TELEPHONE NUMBER (323) 869-7500.
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
23
<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 2001 Annual
Meeting must be received by the Company at its principal executive offices by
December 15, 2000, 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 10, 2000
24
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
NOMINEES FOR DIRECTOR AND THE FOLLOWING PROPOSALS.
Please mark
your votes [X]
like this
FOR WITHHOLD AUTHORITY
all nominees listed to vote for all
below (except as nominees listed
1. Election of Directors indicated below) below
Nominees: Christian P. Couvreux, [_] [_]
James S. Gold and Antoine Guichard
(INSTRUCTION: To withhold authority to vote for any individual, cross his name
out above.)
2. Proposal to ratify the selection of FOR AGAINST ABSTAIN
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 ALL OF THE PROPOSALS.
Signature _______________________________ Date _________________________,2000
Signature _______________________________ Date _________________________,2000
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>
[LOGO OF SMART & FINAL(R)]
<PAGE>
- -------------------------------------------------------------------------------
PROXY SMART & FINAL INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Martin A. Lynch 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 17, 2000, 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>
Admission Ticket
[LOGO OF SMART & FINAL(R)]
2000 Annual Meeting of Stockholders
Wednesday, May 17, 2000
10:00 AM
Smart & Final Corporate Headquarters
600 Citadel Drive
City of Commerce, California 90040
PLEASE ADMIT Non-Transferable
