<PAGE> 1
SCHEDULE 14A
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant[ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Section 240.14a-11(c) or
Section 240.14a-12
DOMINICK'S SUPERMARKETS, 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: Not Applicable.
(2) Aggregate number of securities to which transaction applies:
Not Applicable.
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: Not Applicable.
(4) Proposed maximum aggregate value of transaction: Not
Applicable.
(5) Total fee paid: Not Applicable.
[ ] 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: Not Applicable.
(2) Form, Schedule or Registration Statement No.: Not Applicable.
(3) Filing party: Not Applicable.
(4) Date Filed: Not Applicable.
<PAGE> 2
DOMINICK'S SUPERMARKETS, INC.
505 RAILROAD AVENUE
NORTHLAKE, ILLINOIS 60164
________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 4, 1997
The 1997 Annual Meeting of Stockholders (the "Annual Meeting") of
Dominick's Supermarkets, Inc. (the "Company") will be held at the Westin O'Hare
Hotel located at 6100 North River Road, Rosemont, Illinois 60018, on Tuesday,
March 4, 1997, at 11:00 a.m., local time, for the following purposes:
1. To elect four directors to serve until the 2000 Annual Meeting
of Stockholders of the Company and until their successors are
elected and qualified;
2. To approve the Dominick's Supermarkets, Inc. Directors
Deferred Compensation and Restricted Stock Plan, to be
effective as of March 4, 1997, as described herein; and
3. To transact such other business as may properly come before
the Annual Meeting and any adjournment thereof.
The Board of Directors of the Company (the "Board of Directors") has
fixed the close of business on Friday, January 24, 1997 as the record date for
the determination of stockholders entitled to notice of, and to vote at, the
Annual Meeting and any adjournment thereof.
In order to ensure your representation at the Annual Meeting, you are
requested to sign and date the enclosed proxy as promptly as possible and
return it in the enclosed envelope. If you attend the Annual Meeting and vote
your shares in person or file with the Secretary of the Company an instrument
revoking your proxy or a duly executed proxy bearing a later date, your proxy
will not be used.
All stockholders are cordially invited to attend the Annual Meeting.
By Order of the Board of Directors,
/s/ Darren W. Karst
DARREN W. KARST
Secretary
Northlake, Illinois
February 7, 1997
<PAGE> 3
DOMINICK'S SUPERMARKETS, INC.
---------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
MARCH 4, 1997
This Proxy Statement is furnished to stockholders of Dominick's
Supermarkets, Inc., a Delaware corporation (the "Company"), in connection with
the solicitation of proxies in the form enclosed herewith for use at the 1997
Annual Meeting of Stockholders (the "Annual Meeting") of the Company to be held
at the Westin O'Hare Hotel located at 6100 North River Road, Rosemont, Illinois
60018, on Tuesday, March 4, 1997, at 11:00 a.m., local time, for the following
purposes:
1. To elect four directors to serve until the 2000 Annual Meeting
of Stockholders of the Company and until their successors are
elected and qualified;
2. To approve the Dominick's Supermarkets, Inc. Directors
Deferred Compensation and Restricted Stock Plan, to be
effective as of March 4, 1997, as described herein; and
3. To transact such other business as may properly come before
the Annual Meeting.
The approximate date on which this Proxy Statement and accompanying form of
proxy will first be sent to the Company's stockholders is February 7, 1997.
This solicitation is made on behalf of the Board of Directors of the
Company (the "Board of Directors"). Costs of the solicitation will be borne by
the Company. Directors, officers and employees of the Company and its
affiliates may also solicit proxies by telephone, telegraph, fax or personal
interview. The Company will reimburse banks, brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses incurred by them
in sending proxy material to stockholders. Kissel Blake Inc. will assist in
the solicitation of proxies by the Company for an estimated fee of $1,500, plus
reasonable out-of-pocket expenses.
Holders of record of common stock, par value $.01 per share (the
"Common Stock"), of the Company as of the close of business on January 24, 1997
are entitled to receive notice of, and to vote at, the Annual Meeting. The
outstanding Common Stock constitutes the only class of securities of the
Company entitled to vote at the Annual Meeting, and each share of Common Stock
entitles the holder thereof to one vote. Stockholders are not permitted to
cumulate their shares for the purpose of electing directors or otherwise. At
the close of business on January 24, 1997, there were 16,080,074 shares of
Common Stock issued and outstanding.
Unless contrary instructions are indicated on the proxy, all shares
represented by valid proxies received pursuant to this solicitation (and not
revoked before they are voted) will be voted at the Annual Meeting FOR the
nominees named below for election as Directors and FOR the approval of the
Dominick's Supermarkets, Inc. Directors Deferred Compensation and Restricted
Stock Plan. With respect to any other business which may properly come before
the Annual Meeting and be submitted to a vote of stockholders, proxies received
by the Board of Directors will be voted in accordance with the best judgment of
the designated proxy holders. A stockholder may revoke his or her proxy at any
time before exercise by delivering to the Secretary of the Company a written
notice of such revocation, by filing with the Secretary of the Company a duly
executed proxy bearing a later date, or by voting in person at the Annual
Meeting.
A majority of the outstanding shares of Common Stock, represented in
person or by proxy, will constitute a quorum at the Annual Meeting. Shares
represented by proxies that reflect abstentions or "broker non-votes" (i.e.,
shares held by a broker or nominee which are represented at the Annual Meeting,
but with respect to which such broker or nominee is not empowered to vote on a
particular proposal) will be counted as shares that are present and entitled to
vote for purposes of determining the presence of a quorum. Directors will be
elected by a favorable vote of a plurality of the votes of the shares of Common
Stock present in person
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<PAGE> 4
or represented by proxy at the Annual Meeting, providing that a quorum is
present. All other proposals to come before the Annual Meeting require the
approval of a majority of the shares of Common Stock present in person or
represented by proxy at the Annual Meeting. Therefore, as to any particular
proposal, including the election of directors, abstentions will have the same
effect as a vote against that proposal and broker non-votes will not be counted
as votes for or against the proposal, and will not be included in counting the
number of votes necessary for approval of the proposal.
The principal executive offices of the Company are located at 505
Railroad Avenue, Northlake, Illinois 60164. The Company's telephone number is
(708) 562-1000.
2
<PAGE> 5
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
GENERAL
The Board of Directors is currently comprised of eleven members
divided into three classes serving staggered terms of three years each.
Pursuant to the Company's Amended and Restated Certificate of Incorporation
(the "Certificate of Incorporation") and Amended and Restated Bylaws (the
"Bylaws"), the term of office of one class of directors expires each year and
at each annual meeting the successors 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. The current terms of four directors
expire in each of 1997 and 1998, and the current terms of three directors
expire in 1999.
In the absence of instructions to the contrary, the persons named as
proxy holders in the accompanying proxy intend to vote in favor of the election
of the four nominees designated below, all of whom are currently directors of
the Company, to serve until the 2000 Annual Meeting of Stockholders of the
Company and until their respective successors are elected and qualified. The
Board of Directors expects that each of the nominees will be available to serve
as a director, but if any such nominee should become unavailable for election,
it is intended that the shares represented by the proxy will be voted for such
substitute nominee as may be designated by the Board of Directors.
Under the Bylaws, nominations of persons for election to the Board of
Directors, other than those made by or at the direction of the Board of
Directors, may be made at the Annual Meeting only if pursuant to a timely
notice thereof to the Secretary of the Company. To be timely, a stockholder's
notice must be delivered to the Secretary of the Company at the principal
executive offices of the Company not later than the close of business on the
60th day nor earlier than the close of business on the 90th day prior to the
first anniversary of the preceding year's annual meeting. A notice of
nomination must set forth certain information as required under the Bylaws.
NOMINEES FOR ELECTION AS DIRECTOR
<TABLE>
<CAPTION>
PRESENT POSITION
NAME AGE WITH THE COMPANY DIRECTOR SINCE
---- --- ---------------- --------------
<S> <C> <C> <C>
Ronald W. Burkle 44 Chairman of the Board 1995
Evan Bayh 41 Director 1997
Patrick L. Graham 47 Director 1995
Antony P. Ressler 36 Director 1995
</TABLE>
RONALD W. BURKLE has been Chairman of the Board of the Company since
March 1995 and served as Chief Executive Officer from March 1995 to January
1996. Mr. Burkle co-founded The Yucaipa Companies ("Yucaipa"), a private
investment group specializing in the acquisition and management of supermarket
chains, in 1986 and has served as director and Chairman of the Board of Food 4
Less Holdings, Inc. ("Food 4 Less") whose principal operating subsidiary is
Ralphs Grocery Company ("Ralphs"), and Chairman of the Board and Chief
Executive Officer of its predecessor, Food 4 Less Supermarkets, Inc. since
1987. Mr. Burkle has been a director and the Chief Executive Officer of
Smith's Food & Drug Centers, Inc. ("Smith's") since May 1996 and was Chairman
of the Board of Smitty's Supermarkets, Inc. ("Smitty's") from 1994 until its
merger into Smith's in May 1996. Mr. Burkle also serves as a director of
Kaufman and Broad Home Corporation. Before founding Yucaipa, Mr. Burkle held a
number of supermarket executive positions and was a private investor in
Southern California.
EVAN BAYH has served as a director of the Company since January 1997.
Governor Bayh is a member of the law firm of Baker & Daniels. Governor Bayh
was Governor of the State of Indiana from January 1989 to January 1997. He has
served as chairman of the National Education Goals Panel and the Education
Commission of the States and as a member of the National Assessment in
Education Panel. Governor Bayh was a member of the executive committee of the
National Governors' Association and is a past chairman of the Democratic
Governors' Association.
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<PAGE> 6
PATRICK L. GRAHAM has served as a director of the Company since March
1995. Mr. Graham has served as a director of Food 4 Less and Ralphs since 1995
and served as Vice President and a director of Smitty's from June 1994 until
its merger with Smith's in May 1996. Mr. Graham joined Yucaipa as a general
partner in 1993. Prior to that time he was a Managing Director in the
corporate finance department of Libra Investments, Inc. from 1992 to 1993 and
PaineWebber Inc. from 1990 to 1992. Prior to 1990, he was a Managing Director
in the corporate finance department of Drexel Burnham Lambert Incorporated.
ANTONY P. RESSLER has served as a director of the Company since March
1995. In 1990, Mr. Ressler was one of the founding principals of Apollo
Advisors, L.P. ("Apollo") which, together with an affiliate, serves as the
managing general partner of Apollo Investment Fund, L.P., AIF II, L.P., and
Apollo Investment Fund III, L.P., which are private securities investment
funds, and of Lion Advisors, L.P., which acts a financial advisor to and
representative for certain institutional investors with respect to securities
investments. Prior to 1990, Mr. Ressler was a Senior Vice President in the
high yield bond department of Drexel Burnham Lambert Incorporated. Mr. Ressler
is also a director of Family Restaurants, Inc., United International Holdings,
Vail Resorts, Inc. and PRI Holdings, Inc.
DIRECTORS CONTINUING IN OFFICE
<TABLE>
<CAPTION>
DIRECTOR TERM
NAME AGE SINCE EXPIRES
---- --- ----- -------
<S> <C> <C> <C>
Grace Barry . . . . . . . . . . . . . . . . . . . . . 55 1997 1998
Peter P. Copses . . . . . . . . . . . . . . . . . . . 38 1995 1998
Linda McLoughlin Figel . . . . . . . . . . . . . . . 32 1996 1999
David B. Kaplan . . . . . . . . . . . . . . . . . . . 29 1995 1999
Darren W. Karst . . . . . . . . . . . . . . . . . . . 37 1995 1999
Robert A. Mariano . . . . . . . . . . . . . . . . . . 46 1995 1998
Mark A. Resnik . . . . . . . . . . . . . . . . . . . 49 1995 1998
</TABLE>
GRACE BARRY has served as a director of the Company since January
1997. Ms. Barry has been the Executive Director of The Economic Club of
Chicago since July 1986. From 1991 through 1995, Ms. Barry was the President
and owner of Cafe Galleria, Inc., a retail company in the food and gift
business. In 1994, Ms. Barry co-founded Grabur International, Inc., a retail
gift and concession business. From 1989 through 1996, Ms. Barry served as the
Cable Commissioner for the City of Chicago. Ms. Barry also serves on the
boards of The Chicago Network, The Joffrey Ballet of Chicago, Institute for
Urban Life, The Golden Apple Foundation, Toronto Sister Cities Committee, Old
St. Patrick's Church and The Arts Matter.
PETER P. COPSES has served as a director of the Company since March
1995. Mr. Copses also has served as a director of Food 4 Less and Ralphs since
1995. Since 1990, Mr. Copses has been a limited partner of Apollo and Lion
Advisors, L.P. From March to September 1990, Mr. Copses was a Vice President
in the investment banking department of Donaldson, Lufkin & Jenrette Securities
Corporation. Prior to 1990, he was employed by Drexel Burnham Lambert
Incorporated. Mr. Copses is also a director of Food 4 Less and Family
Restaurants, Inc.
LINDA MCLOUGHLIN FIGEL has been a director of the Company since August
1996. Ms. Figel also has served as a director of Smith's since May 1996. She
joined Yucaipa in 1989 and became a general partner in 1991. Prior to 1989,
Ms. Figel was employed by Bankers Trust Company in its Structured Finance
Group.
DAVID B. KAPLAN has served as a director of the Company since March
1995. Since 1991, Mr. Kaplan has been associated with and is a limited partner
of Apollo and Lion Advisors, L.P. Prior to 1991, Mr. Kaplan was a member of
the corporate finance department of Donaldson, Lufkin & Jenrette Securities
Corporation. Mr. Kaplan also serves as a director of Family Restaurants, Inc.,
PRI Holdings, Inc. and BDK Holdings, Inc.
4
<PAGE> 7
DARREN W. KARST joined the Company in March 1995 as Senior Vice
President, Chief Financial Officer, Secretary and a director and was appointed
Executive Vice President, Finance and Administration in March 1996. Mr. Karst
joined Yucaipa in 1988 and has been a general partner since 1991. Prior to
1988, he was a manager at Ernst & Young LLP.
ROBERT A. MARIANO has been the President and a director of the Company
since March 1995 and Chief Executive Officer since January 1996. Mr. Mariano
also served as Chief Operating Officer from March 1995 until January 1996. Mr.
Mariano joined the Company in 1972 and was Senior Vice President of Marketing
and Merchandising from 1994 to 1995, Senior Vice President of Perishable
Merchandising from 1989 to 1994, Senior Vice President of Operations from 1987
to 1989, and held a number of managerial positions prior to 1987.
MARK A. RESNIK has served as a director of the Company since March
1995. Mr. Resnik co-founded Yucaipa in 1986, and has served as a director or
Food 4 Less and Ralphs since 1995 and as a director and Vice President of its
predecessor, Food 4 Less Supermarkets, Inc., since 1987. Mr. Resnik served as
Vice President and a director of Smitty's from June 1994 until its merger with
Smith's in May 1996. From 1986 until 1988, Mr. Resnik served as a director and
Vice President of Jurgensen's.
All of the directors named above, other than Ms. Barry and Governor
Bayh, also serve on the board of directors of Dominick's Finer Foods, Inc.
("Dominick's"), the operating subsidiary of the Company.
BOARD MEETINGS AND COMMITTEES
Prior to January 31, 1997, the Board of Directors consisted of nine
persons: Messrs. Burkle, Copses, Graham, Kaplan, Karst, Mariano, Resnik and
Ressler and Ms. Figel. On January 31, 1997, the total number of directors
constituting the Board of Directors was increased to eleven and, pursuant to
the Certificate of Incorporation, Ms. Barry and Governor Bayh were elected to
serve on the Board of Directors by the affirmative vote of a majority of the
directors then in office. Ms. Barry and Governor Bayh are "Independent
Directors" under the rules established by the New York Stock Exchange.
The Board of Directors held five meetings during the fiscal year ended
November 2, 1996. The Board of Directors has an Executive Committee and an
Audit Committee. There is no standing Nominating Committee.
Executive Committee. Messrs. Burkle, Graham and Mariano currently
serve on the Executive Committee. Subject to the Company's conflict of
interest policies and certain other limitations, the Executive Committee has
been granted all powers and authority of the Board of Directors in the
management of the business and affairs of the Company. The Executive Committee
was created in 1995 and held no meetings in fiscal 1996.
Audit Committee. Ms. Barry and Governor Bayh currently serve on the
Audit Committee. The Audit Committee makes recommendations concerning the
engagement of independent auditors, reviews with independent auditors the plans
and results of the audit engagement, approves professional services provided by
the independent auditors, reviews the independence of the independent auditors,
considers the range of audit and non-audit fees, and reviews the adequacy of
the Company's internal accounting controls. The Audit Committee was
established in January 1997.
DIRECTOR COMPENSATION
Historically the Company has not paid any compensation to its
directors for serving on the Board of Directors, but has reimbursed such
persons for their out-of-pocket expenses incurred in connection with attending
meetings of the Board of Directors. Effective as of the date of the Annual
Meeting, the Company will pay its non-employee directors (other than those
affiliated with Yucaipa) an annual retainer of $25,000 in addition to fees in
the amount of $2,500 per regular meeting of the Board of Directors, $1,000 per
meeting of any committee of the Board of Directors and $1,000 per special
meeting of the Board of Directors. If approved by the stockholders of the
Company, pursuant to the Dominick's Supermarkets, Inc. Directors Deferred
Compensation and Restricted Stock Plan, directors of the Company may elect to
receive any such annual retainers and meeting fees in the form of restricted
shares of Common Stock or to defer such fees until retirement or other
specified date or event. See "Dominick's Supermarkets, Inc. Directors Deferred
5
<PAGE> 8
Compensation and Restricted Stock Plan." The Company anticipates that it will
continue to reimburse all directors for their out-of-pocket expenses incurred
in connection with attending meetings of the Board of Directors.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Section 145 of the General Corporation Law of the State of Delaware
(the "Delaware General Corporation Law") gives Delaware corporations broad
powers to indemnify their present and former directors and officers against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with threatened,
pending or completed actions, suits or proceedings to which they are parties or
are threatened to be made parties by reason of being or having been such
directors or officers, subject to specified conditions and exclusions; gives a
director or officer who successfully defends an action the right to be so
indemnified; and permits a corporation to buy directors' and officers'
liability insurance. Such indemnification is not exclusive of any other rights
to which those indemnified may be entitled under any by-law, agreement, vote of
stockholders or otherwise.
As permitted by Section 145 of the Delaware Corporation Law, Article V
of the Certificate of Incorporation provides for the indemnification by the
Company of its directors, officers, employees and agents against liabilities
and expenses incurred in connection with actions, suits or proceedings brought
against them by a third party or in the right of the corporation, by reason of
the fact that they were or are such directors, officers, employees or agents.
Article VI of the Certificate of Incorporation provides that to the
fullest extent permitted by the Delaware Corporation Law as the same exists or
may hereafter be amended, a director of the Company shall not be liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty
as a director.
The Company has entered into, or intends to enter into, agreements to
indemnify its directors and executive officers in addition to the
indemnification provided for in the Certificate of Incorporation and Bylaws.
These agreements, among other things, will indemnify the Company's directors
and executive officers for certain expenses (including attorneys' fees) and all
losses, claims, liabilities, judgments, fines and settlement amounts incurred
by such person arising out of or in connection with such person's service as a
director or officer of the Company to the fullest extent permitted by
applicable law.
VOTE REQUIRED
The election of each director requires the affirmative vote of a
plurality of the votes of the shares of Common Stock present in person or
represented by proxy at the Annual Meeting. THE BOARD OF DIRECTORS RECOMMENDS
THAT STOCKHOLDERS VOTE FOR EACH OF THE DIRECTORS NOMINATED IN PROPOSAL 1.
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<PAGE> 9
PROPOSAL NO. 2:
APPROVAL OF DOMINICK'S SUPERMARKETS, INC.
DIRECTORS DEFERRED COMPENSATION AND RESTRICTED STOCK PLAN
GENERAL
On January 31, 1997, the Board of Directors adopted, subject to
stockholder approval, the Dominick's Supermarkets, Inc. Directors Deferred
Compensation and Restricted Stock Plan (the "Plan") described herein. The
stockholders are asked to approve the adoption of the Plan.
The Company desires to implement the Plan effective as of March 4,
1997. The purpose of the Plan is to attract and retain individuals of
outstanding competence as members of the Board of Directors, by permitting such
individuals (i) to receive any compensation in connection with their service on
the Board of Directors in the form of restricted shares of Common Stock and
thus benefit directly from the Company's growth, development and financial
success or (ii) to defer until retirement or some other specified date or event
any such compensation.
The following is a description of the material provisions of the Plan,
a copy of which is set forth in Appendix A to this Proxy Statement. Unless
otherwise defined, capitalized terms used herein have the meanings ascribed to
them in the Plan. The summary which follows is not intended to be complete and
reference should be made to the Plan for a complete statement of its terms and
provisions.
ADMINISTRATION
The Plan will be administered by the Board of Directors. The Board of
Directors will have all powers necessary to carry out the provisions of the
Plan including, without limitation, the power to promulgate rules of Plan
administration, the power to promulgate forms to be used with regard to the
Plan, the power to settle any disputes as to rights or benefits arising from
the Plan, and the power to make such decisions or to take such action as the
Board of Directors, in its sole discretion, deems necessary or advisable to aid
in the proper maintenance of the Plan.
ELIGIBILITY AND PARTICIPATION
Any member of the Board of Directors who receives an annual retainer
and fees ("Compensation") is eligible to participate in the Plan. Any eligible
member of the Board of Directors (a "Participant") may participate in the Plan
with respect to any Plan Year by executing an irrevocable election with respect
to his or her Compensation for such Plan Year. A separate election must be
made to defer Compensation for each Plan Year. If no election is made by a
Participant with respect to a given Plan Year, such Participant will receive
Compensation in cash. See "Election of Directors -- Director Compensation."
FORM OF ELECTION
A Participant may elect to receive all, but not less than all, of his
or her Compensation for each Plan Year in the form of restricted shares of
Common Stock ("Restricted Shares") rather than cash. If so elected, the number
of Restricted Shares granted will be determined by dividing 110% of the
Compensation for which such an election is made by the median of the high and
low trading price of the Common Stock, as quoted in the New York Stock Exchange
Composite Transactions, on the applicable grant date. The grant date for the
portion of Compensation attributable to a Participant's annual retainer will be
the date of the Company's annual meeting of stockholders occurring in such Plan
Year. The applicable grant date for the portion of Compensation attributable
to a Participant's meeting fees will be the last day of each March, June,
September and December, with respect to any meetings occurring in each such
quarterly period.
Alternatively, a Participant may elect to defer all, but not less than
all, of his or her Compensation with respect to any Plan Year until some later
date or event by making a timely deferral election which shall specify, among
other things, (i) the date or the event on which payment of such cash is to
commence (which must be at least two years from the date of the deferral
election) and (ii) whether such payment is to be paid out in a single lump sum
or in approximately equal annual installments over a period not to exceed
fifteen (15) years.
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<PAGE> 10
RESTRICTED SHARES
All Restricted Shares issued to a Participant may not be sold or
transferred until the earliest to occur of the following: (1) three years have
lapsed from the date the applicable shares are granted to the Participant (the
"Restriction Period"); (2) the Participant's death or disability; (3) the
Participant, after being nominated for re-election to the Board of Directors,
is not elected by the stockholders of the Company; (4) the Participant is not
nominated for re-election to the Board of Directors at the conclusion of his or
her existing term; (5) the Participant's service on the Board of Directors
terminates because of his or her resignation at the request of the Board of
Directors or his or her removal by action of the Company's stockholders; (6)
the Participant's service on the Board of Directors terminates because the
Participant is seeking election to government office or has taken a position
with a governmental agency in public service that does not permit membership on
the board of directors of a publicly-held corporation; or (7) the occurrence of
a Change in Control, as defined in the Company's 1996 Equity Participation Plan
or any successor plan thereto.
If the Participant's service on the Board of Directors terminates
prior to the end of the Restriction Period for any reason other than those
listed above, the Participant will immediately forfeit the Restricted Shares to
the Company. Upon any such forfeiture, however, the Participant will be
entitled to receive from the Company an amount in cash equal to the amount such
Participant would have received through such forfeiture date had such
Participant elected to defer Compensation in cash rather than to receive
Restricted Shares.
The maximum number of Restricted Shares issuable under the Plan is
100,000.
DEFERRAL ACCOUNTS
If a Participant elects to defer cash Compensation, the Company will
establish a separate bookkeeping account (a "Deferral Account") for each
Participant with respect to each Plan Year in order to record the deferrals and
additions of such Participant for such Plan Year. Each Participant's Deferral
Account will be credited with the amount of Compensation deferred by such
Participant by a quarterly crediting in the amount of cash Compensation that
would have been payable by the Company to such Participant in such quarter.
The Participant's Deferral Account will be increased as of the last day of
March, June, September and December in such Plan Year by the amount obtained by
multiplying the Deferral Account balance as of the first day of such quarterly
period by one-fourth of the average prime rate as published in the Wall Street
Journal in effect as of the first day of such quarterly period. The
Participant's Deferral Account will be reduced by any payments made to the
Participant or his or her beneficiary, estate or representative.
MISCELLANEOUS PROVISIONS
Notwithstanding any other provision in the Plan, a Participant (or
beneficiary designated by a Participant) may withdraw an amount of cash from
his or her Deferral Account upon a finding by the Board of Directors in its
sole determination that an unanticipated emergency that is caused by an event
beyond the control of such Participant (or beneficiary) has occurred and that
such emergency would result in severe financial hardship to such Participant
(or beneficiary). In the event of the death of any Participant, the balance in
the Participant's Deferral Account will be paid or distributed to the
Participant's beneficiary within thirty (30) days after the date of such death.
The Company may amend or terminate the Plan at any time by action of the Board
of Directors, subject to the rights of Participants thereunder.
FEDERAL INCOME TAX CONSEQUENCES
If a Participant elects to receive his or her Compensation in the form
of Restricted Shares, the Participant generally will recognize ordinary income
when the Restricted Shares vest and the Company generally will be entitled to a
deduction for the amount equal to the fair market value of the Restricted
Shares at the date of vesting. Participants who elect to defer their
Compensation generally will recognize income and the Company generally will be
entitled to a deduction for the amount of such deferred Compensation at the
time it is actually paid to the Participant.
8
<PAGE> 11
VOTE REQUIRED
Stockholder approval of Proposal 2 requires the affirmative vote of
the holders of a majority of the shares of Common Stock present in person or by
represented by proxy at the Annual Meeting. THE BOARD OF DIRECTORS RECOMMENDS
THAT STOCKHOLDERS VOTE FOR PROPOSAL NO. 2.
9
<PAGE> 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of January 24, 1997, the beneficial
ownership of Common Stock by (i) each person known by the Company to be the
beneficial owner of 5% or more of the Common Stock, (ii) each person who is a
director or Named Executive Officer (as defined below) of the Company and (iii)
all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
---------------------------------------------------------------
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS(1)(2)
------------------------ -------------------------------------- -----------------------
<S> <C> <C>
Yucaipa and affiliates:
Yucaipa Blackhawk Partners, L.P. . . . . . . . . . . . 2,007,256 12.5%
Yucaipa Chicago Partners, L.P. . . . . . . . . . . . . 253,470 1.6
Yucaipa Dominick's Partners, L.P. . . . . . . . . . . . 663,333 4.1
The Yucaipa Companies(3) . . . . . . . . . . . . . . . -- --
Yucaipa Management L.L.C.(4) . . . . . . . . . . . . . -- --
Ronald W. Burkle(5) . . . . . . . . . . . . . . . . . . 2,924,059 18.2
Linda McLoughlin Figel(3)(6) . . . . . . . . . . . . . -- --
Patrick L. Graham(3)(7) . . . . . . . . . . . . . . . . -- --
Darren W. Karst(3)(8) . . . . . . . . . . . . . . . . . 17,838 *
Mark A. Resnik(3)(9) . . . . . . . . . . . . . . . . . -- --
Total . . . . . . . . . . . . . . . . . . . . . . . 2,941,897 18.3
Robert A. Mariano(10) . . . . . . . . . . . . . . . . . . 224,969 1.4
Robert E. McCoy(11) . . . . . . . . . . . . . . . . . . . 97,591 *
Alice F. Smedstad(12) . . . . . . . . . . . . . . . . . . 9,318 *
Herbert R. Young(13) . . . . . . . . . . . . . . . . . . 97,591 *
Grace Barry . . . . . . . . . . . . . . . . . . . . . . . -- *
Evan Bayh . . . . . . . . . . . . . . . . . . . . . . . . -- *
Apollo and affiliates:
Peter P. Copses(14) . . . . . . . . . . . . . . . . . . 5,855,181 31.6
David B. Kaplan(14) . . . . . . . . . . . . . . . . . . 5,855,181 31.6
Antony P. Ressler(14) . . . . . . . . . . . . . . . . . 5,855,181 31.6
Apollo Investment Fund, L.P.(15) . . . . . . . . . . . 2,927,591 16.9
Apollo Investment Fund III, L.P.(16) . . . . . . . . . 2,668,412 15.5
Apollo Overseas Partners III, L.P.(17) . . . . . . . . 160,036 *
Apollo (U.K.) Partners III, L.P.(18) . . . . . . . . . 99,142 *
Total(19) . . . . . . . . . . . . . . . . . . . . . 5,855,181 31.6
Chase Equity Associates L.P.(20) . . . . . . . . . . . 1,063,961 6.2
All directors and executive
officers as a group (18 persons) . . . . . . . . . . . 9,236,547 49.2
</TABLE>
_________________
* Less than 1.0%
(1) Shares which each identified stockholder has the right to acquire within
60 days of the date of the table set forth above are deemed to be
outstanding in calculating the percentage ownership of such stockholder,
but are not deemed to be outstanding as
10
<PAGE> 13
to any other person. Except as otherwise indicated, the Company believes
that the beneficial owners of shares of Common Stock listed above have
sole investment and voting power with respect to such shares, subject to
community property laws where applicable.
(2) Based on 16,080,074 shares of Common Stock outstanding as of January 24,
1997.
(3) Share amounts and percentages for Yucaipa do not include 3,874,492 shares
of Common Stock issuable to Yucaipa upon exercise of a warrant (the
"Yucaipa Warrant") issued to Yucaipa by the Company in connection with
the acquisition of Dominick's by the Company (the "Acquisition"). The
Yucaipa Warrant entitles Yucaipa to purchase 3,874,492 shares of Common
Stock (less a number of shares equal to the aggregate exercise price, if
exercised on a cashless basis) at an exercise price of $20.73 per share.
Yucaipa is controlled by Ronald W. Burkle. The address of Yucaipa is
10000 Santa Monica Blvd., Los Angeles, California 90067. Ms. Figel and
Messrs. Graham, Karst and Resnik disclaim beneficial ownership of any
shares of Common Stock issuable upon exercise of the Yucaipa Warrant.
(4) Yucaipa Management L.L.C. is a Delaware limited liability company
controlled by Ronald W. Burkle. Yucaipa Management L.L.C. is the sole
general partner of Yucaipa Blackhawk Partners, L.P., Yucaipa Chicago
Partners, L.P., and Yucaipa Dominick's Partners, L.P., which own
2,007,256, 253,470 and 663,333 shares of Common Stock, respectively. The
foregoing limited partnerships are parties to an Amended and Restated
Stockholders Agreement dated as of November 1, 1996 (the "Stockholders
Agreement") which gives Yucaipa the right to nominate up to six directors
of the Company.
(5) Represents shares owned by Yucaipa Blackhawk Partners, L.P., Yucaipa
Chicago Partners, L.P., and Yucaipa Dominick's Partners, L.P. These
entities are affiliated partnerships controlled indirectly by Ronald W.
Burkle. Mr. Burkle is the controlling general partner of Yucaipa and the
sole managing member of Yucaipa Management L.L.C. See notes (3) and (4).
(6) Ms. Figel is a general partner of Yucaipa and a limited partner of
Yucaipa Blackhawk Partners, L.P. and Yucaipa Dominick's Partners, L.P.
See notes (3) and (4).
(7) Mr. Graham is a general partner of Yucaipa and a limited partner of
Yucaipa Blackhawk Partners, L.P. and Yucaipa Dominick's Partners, L.P.
See notes (3) and (4).
(8) Excludes options for 58,552 shares which are not exercisable within 60
days. Mr. Karst is a general partner of Yucaipa and a limited partner of
Yucaipa Blackhawk Partners, L.P. See notes (3) and (4).
(9) Mr. Resnik is a general partner of Yucaipa, a member of Yucaipa
Management L.L.C. and a limited partner of Yucaipa Blackhawk Partners,
L.P. See notes (3) and (4).
(10) Excludes options for 117,103 shares of Common Stock which are not
exercisable within 60 days.
(11) Excludes options for 48,788 shares of Common Stock which are not
exercisable within 60 days.
(12) Excludes options for 21,957 shares of Common Stock which are not
exercisable within 60 days.
(13) Excludes options for 48,788 shares of Common Stock which are not
exercisable within 60 days.
(14) Includes 2,455,224 shares of Class B Common Stock, which is convertible
into shares of Common Stock on a share-for-share basis at the election of
the holder at any time. The shares reported for each of Messrs. Copses,
Kaplan and Ressler are beneficially owned by Apollo Investment Fund,
L.P., Apollo Investment Funds III, L.P., Apollo Overseas Partners III,
L.P. or Apollo (U.K.) Partners III, L.P. (collectively, the "Apollo
Funds"). Messrs. Copses, Kaplan and Ressler are associated with Apollo
Advisors, L.P. and Apollo Advisors II, L.P. (collectively, "Advisors"),
the managing general partners of the Apollo Funds. Messrs. Copses,
Kaplan and Ressler disclaim beneficial ownership of the Common Stock and
the Class B Common Stock held by the Apollo Funds. The Apollo Funds are
parties to the Stockholders Agreement, which entitles them to nominate up
to three directors of the Company. The address of Advisors is 2
Manhattanville Road, Purchase, New York 10577.
(15) Includes 1,227,612 shares of Class B Common Stock, which is convertible
into shares of Common Stock on a share-for-share basis at the election of
the holder at any time.
(16) Includes 1,118,940 shares of Class B Common Stock, which is convertible
into shares of Common Stock on a share-for-share basis at the election of
the holder at any time.
(17) Includes 67,100 shares of Class B Common Stock, which is convertible into
shares of Common Stock on a share-for-share basis at the election of the
holder at any time.
(18) Includes 41,572 shares of Class B Common Stock, which is convertible into
shares of Common Stock on a share-for-share basis at the election of the
holder at any time.
(19) Includes 2,455,224 shares of Class B Common Stock, which is convertible
into shares of Common Stock on a share-for-share basis at the election of
the holder at any time.
(20) Consists of 1,063,961 shares of Class B Common Stock, which is
convertible into shares of Common Stock on a share-for-share basis at the
election of the holder at any time. The holder disclaims beneficial
ownership of shares of Common Stock issuable upon conversion of such
Class B Common Stock. The address of Chase Equity Associates, L.P. is
380 Madison Avenue, New York, New York 10017.
11
<PAGE> 14
EXECUTIVE OFFICERS
The following table sets forth the names, ages and positions of each
of the executive officers of the Company and its subsidiaries.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Ronald W. Burkle 44 Chairman of the Board
Robert A. Mariano 46 President and Chief Executive Officer
Darren W. Karst 37 Executive Vice President, Finance and Administration,
Chief Financial Officer and Secretary
Robert E. McCoy 49 Executive Vice President, Operations
John W. Boyle 38 Group Vice President, Information Technology and Store
Development
Robert R. DiPiazza 45 Group Vice President, Perishable Merchandising
Donald G. Fitzgerald 35 Group Vice President, Non-Perishable Merchandising and
Logistics
Donald S. Rosanova 47 Group Vice President, Omni Division
Alice F. Smedstad 47 Group Vice President, Human Resources
Herbert R. Young 55 Group Vice President, Sales, Marketing and Advertising
</TABLE>
In addition to Messrs. Burkle, Mariano and Karst, whose biographies
appear above, the following persons are executive officers of the Company or
its subsidiaries:
ROBERT E. MCCOY has been Executive Vice President of Operations since
1996 and served as Senior Vice President of Operations from 1989 to 1996.
Prior to that time, he was Vice President of Operations at Jewel Food Stores,
where he began his career in 1969.
JOHN W. BOYLE has been Group Vice President, Information Technology
and Store Development since March 1996. Mr. Boyle joined Dominick's in January
1995 as Vice President, Management Information Systems and became Vice
President, Administration in March 1995. Prior to joining Dominick's, Mr.
Boyle had been employed as Vice President, Information Systems at Food 4 Less
Supermarkets, Inc. since 1993, and, before that, had been employed as a Senior
Vice President at Thrifty Drugstores.
ROBERT R. DIPIAZZA has been Group Vice President, Perishable
Merchandising since March 1996, and, prior to that, had served as Vice
President, Produce Operations since 1990. Before 1990, Mr. DiPiazza held a
number of other managerial positions at Dominick's.
DONALD G. FITZGERALD has been Group Vice President, Non-Perishable
Merchandising and Logistics since March 1996. Prior to that time Mr.
Fitzgerald had served as Vice President, Grocery Merchandising since 1994, as a
director of grocery merchandising from 1993 to 1994 and as director of grocery
purchasing since 1990. Before 1990 Mr. Fitzgerald held several other
managerial positions at Dominick's.
DONALD S. ROSANOVA has been Group Vice President, Omni since March
1996 and, prior to that, had been Vice President, Distribution and
Transportation since 1992. Before 1992 Mr. Rosanova held several other
managerial positions at Dominick's.
12
<PAGE> 15
ALICE F. SMEDSTAD has been Group Vice President, Human Resources since
December 1996. Mrs. Smedstad joined Dominick's in October 1995 as Vice
President of Human Resources. Prior to that time, Ms. Smedstad held several
senior human resource positions at The Dial Corporation from 1980 to 1995. Ms.
Smedstad began her professional career in manufacturing with the Proctor &
Gamble Company in 1973.
HERBERT R. YOUNG has been Group Vice President, Sales, Marketing and
Advertising since March 1996 and served as Senior Vice President of Marketing
from March 1995 to 1996. Prior to that time, Mr. Young was Senior Vice
President and General Manager of Omni from 1994 to 1995 and was Senior Vice
President of Marketing and Non-Perishable Merchandising from 1990 to 1994.
Before joining Dominick's, he was Executive Vice President of Topco Associates,
Inc. from 1986 to 1990.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation
of the Chief Executive Officer and other four most highly compensated executive
officers of the Company (the "Named Executive Officers"), whose total salary
and bonus for the year ended November 2, 1996 exceeded $100,000 for services
rendered in all capacities to the Company and its subsidiaries.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION(1)
------------------- ---------------
SECURITIES
NAME AND FISCAL YEAR UNDERLYING ALL OTHER
PRINCIPAL POSITION ENDED SALARY BONUS OPTIONS(#) COMPENSATION
- ---------------------------------- ---------------- ----------- -------------- ---------------- ---------------------
<S> <C> <C> <C> <C> <C>
Ronald W. Burkle(2) . . . . . . . November 2, 1996 -- -- -- --
Chairman of the Board October 28, 1995 -- -- -- --
October 29, 1994 -- -- -- --
Robert A. Mariano(3) . . . . . . November 2, 1996 $482,700 $463,500 -- $ 14,700(4)
President and Chief October 28, 1995 334,200 216,000 146,379 3,463,700(4)(5)
Executive Officer October 29, 1994 216,000 216,000 -- 22,400(4)
Darren W. Karst(6) . . . . . . . November 2, 1996 $289,700 $255,000 -- $7,100(4)
Executive Vice President, October 28, 1995 151,570 -- 73,189 1,700(4)
Finance and Administration, October 29, 1994 -- -- -- --
Chief Financial Officer and
Secretary
Robert E. McCoy . . . . . . . . . November 2, 1996 $289,400 $250,000 -- $ 878,600(4)(7)
Executive Vice President, October 28, 1995 236,400 216,000 146,379 2,916,300(4)(5)
Operations October 29, 1994 216,000 216,000 -- 14,500(4)
Alice F. Smedstad(8) . . . . . . November 2, 1996 $155,800 $17,000 -- $2,700(4)
Group Vice President, October 28, 1995 -- -- 21,957 --
Human Resources October 29, 1994 -- -- -- --
Herbert R. Young . . . . . . . . November 2, 1996 $229,300 $225,000 -- $ 865,100(4)(7)
Group Vice President, Sales, October 28, 1995 225,600 210,900 146,379 2,923,000(4)(5)
Marketing and Administration October 29, 1994 210,900 210,900 -- 21,000(4)
</TABLE>
_________________
(1) Information for Messrs. Mariano, McCoy and Young excludes equity-based
compensation of Dominick's which was extinguished in connection with the
Acquisition.
(2) Mr. Burkle served as Chairman of the Board and Chief Executive Officer
from March 1995 to January 1996, and continues to serve as Chairman of
the Board. Mr. Burkle provides services to the Company (other than as
Chairman of the Board) pursuant to a Management Agreement (the
"Management Agreement") between Yucaipa and the Company. Pursuant a
Consulting Agreement between Yucaipa and the Company, the Company paid
Yucaipa $2.6 million in the fiscal year ended November 2, 1996 and $1.5
million in the 32 weeks ended October 28, 1995 for the services (other
than as Chairman of the Board or as directors, as applicable) of Messrs.
Burkle, Resnik and Graham and Ms. Figel and other Yucaipa personnel
(other than Mr. Karst). Such payments to Yucaipa are not reflected in
the table set forth above. See "Certain Transactions--Yucaipa Management
Agreement" and "Certain Transactions--Yucaipa Consulting Agreement."
13
<PAGE> 16
(3) Mr. Mariano was appointed President and Chief Operating Officer in March
1995 and was subsequently appointed Chief Executive Officer in January
1996.
(4) Includes (i) insurance premiums paid under senior management benefit
plans, (ii) benefits paid under a senior management financial planning
plan, (iii) profit sharing plan contributions made by the Company, (iv)
other employee benefits and (v) for Mr. Mariano, interest forgiven on a
promissory note.
(5) Includes the redemption for cash of all Dominick's stock appreciation
rights held by Messrs. Mariano, McCoy and Young at the time of the
Acquisition in the amounts of $3,450,093, $2,901,460, and $2,901,460,
respectively.
(6) Mr. Karst joined the Company as Senior Vice President, Chief Financial
Officer and Secretary in March 1995 and was appointed Executive Vice
President, Finance and Administration in March 1996. Mr. Karst is a
general partner of Yucaipa, which provides services to the Company
pursuant to the Management Agreement. See "Certain Transactions--Yucaipa
Management Agreement."
(7) Includes $864,000 and $843,708 paid to Messrs. McCoy and Young,
respectively, in connection with their respective employment agreements.
See "Employment Agreements."
(8) Ms. Smedstad was appointed Group Vice President, Human Resources in
December 1996.
EMPLOYMENT AGREEMENTS
Mariano Employment Agreement. Dominick's and Mr. Mariano entered into
a three-year employment agreement dated March 22, 1995 pursuant to which Mr.
Mariano was employed as President and Chief Operating Officer (or such other
offices as Dominick's board of directors may designate) at an annual base
salary of $400,000 (subject to increases at the discretion of the board). In
January 1996, the board of directors appointed Mr. Mariano to the office of
Chief Executive Officer and raised his annual base salary to $500,000. If
Dominick's meets certain financial targets determined by its board of
directors, Mr. Mariano will also be entitled to receive an annual incentive
bonus not to exceed 200% of his annual base salary. Mr. Mariano is eligible to
participate in employee benefit plans generally made available by Dominick's to
its executive officers. At the closing of the Acquisition, Mr. Mariano
received a payment of $864,000 in consideration of the cancellation of certain
rights under his prior employment agreement. Concurrently with the closing of
the Acquisition, Mr. Mariano exchanged 1,200 shares of Dominick's common stock
for 190,293 shares of Common Stock of the Company in a tax-deferred
transaction. The employment agreement may be terminated by either party upon
30 days' notice for any reason, or immediately by Dominick's for cause. If
during the term of the employment contract, Mr. Mariano resigns or his
employment is terminated by Dominick's for any reason other than for cause, he
will be entitled to receive a cash payment equal to three times his annual base
salary, less $864,000, and maintenance at Dominick's expense of medical, dental
and other benefits for 24 months following such employment termination.
McCoy Employment Agreement. Dominick's and Mr. McCoy entered into a
three-year employment agreement dated March 22, 1995 pursuant to which Mr.
McCoy was employed at an annual base salary of $250,000. In March 1996, the
board of directors appointed Mr. McCoy to Executive Vice President, Operations
and raised his annual base salary to $300,000. Mr. McCoy is also entitled to
receive an annual incentive bonus, not to exceed 100% of base salary, if
Dominick's meets certain financial targets determined by its board of
directors. Mr. McCoy is entitled to participate in employee benefit plans
generally made available to by Dominick's to its executive officers. The
employment agreement may be terminated by either Dominick's or Mr. McCoy upon
30 days' notice for any reason, or immediately by Dominick's for cause. In
consideration of the cancellation of certain rights under his prior employment
agreement, Mr. McCoy received a payment of $864,000 on March 22, 1996. If Mr.
McCoy resigns or his employment is terminated by Dominick's other than for
cause, he is entitled to receive the discounted present value of the aggregate
base salary for the remaining term of the employment agreement less $864,000,
plus the maximum bonus payable in the year of termination. Unless terminated
for cause, Mr. McCoy is also entitled to continue to receive medical, dental
and other employee benefits for the full three-year term of the employment
agreement.
Young Employment Agreement. Dominick's and Mr. Young entered into a
three-year employment agreement dated March 22, 1995 pursuant to which Mr.
Young is employed at an annual base salary of $225,000. Mr. Young is also
entitled to receive an annual incentive bonus, not to exceed 100% of base
salary, if Dominick's meets certain financial targets determined by its board
of directors. Mr. Young is also entitled to participate in employee benefit
plans generally made available by Dominick's to its executive officers. The
employment agreement may be terminated by Dominick's or Mr. Young upon 30 days'
notice for any reason, or immediately by Dominick's for cause. In
consideration of the cancellation of certain rights under his prior employment
agreement, Mr. Young received a payment of $843,708 on March 22, 1996. In the
event Mr. Young resigns or is terminated other than for cause, he is entitled
to receive the discounted present value of the aggregate base salary for the
remaining term of the employment agreement less $843,708, plus the maximum
bonus payable in the year of termination. Unless terminated for cause, Mr.
Young will also continue to receive medical, dental and other employee benefits
for the full three-year term of the employment agreement.
14
<PAGE> 17
OPTION GRANTS
No Named Executive Officer received stock options during the fiscal
year ended November 2, 1996.
YEAR-END OPTION VALUE TABLE
No Named Executive Officer exercised stock options during the fiscal
year ended November 2, 1996. The following table sets forth certain
information concerning the number of stock options held by the Named Executive
Officers as of November 2, 1996, and the value of in-the-money options
outstanding as of such date.
<TABLE>
<CAPTION>
Number of Unexercised Options Value of Unexercised In-the-Money Options
at November 2, 1996 at November 2, 1996(1)
------------------------------------------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------------------- ------------------------------------------------------
<S> <C> <C> <C> <C>
Ronald W. Burkle . . . . . . . . . . . . . . -- -- -- --
Robert A. Mariano . . . . . . . . . . . . . 29,276 117,103 $ 370,927 $1,483,695
Darren W. Karst . . . . . . . . . . . . . . . 14,638 58,552 185,463 741,854
Robert E. McCoy . . . . . . . . . . . . . . . 97,591 48,788 1,736,144 618,144
Herbert R. Young . . . . . . . . . . . . . . 97,591 48,788 1,736,144 618,144
Alice F. Smedstad . . . . . . . . . . . . . . -- 21,956 -- 278,183
</TABLE>
_________________
(1) Value is based upon the closing price of the Common Stock on the
composite tape for the New York Stock Exchange at November 1, 1996
minus the exercise price.
MANAGEMENT INCENTIVE PLAN
The Company's Management Incentive Plan (the "MIP program") covers all
executive officers and other key managers. Its purpose is to provide a direct
financial incentive in the form of an annual bonus to achieve or exceed
pre-determined financial and individual objectives. The MIP program provides
for varying levels of payout to participants depending on the individual's
level within the organization. The Chief Executive Officer may receive a bonus
ranging from 0% up to 200% of base salary. Executive Vice Presidents may
receive a bonus of up to 100% of base salary, and Group Vice Presidents may
receive a bonus of up to 75% of base salary, except for Herbert R. Young, who
is eligible to receive a bonus of up to 100% of base salary pursuant to his
employment agreement.
SENIOR MANAGEMENT DISABILITY PLANS
The Company maintains a Short Term Disability Plan ("STD Plan") for
its senior management. Under the STD Plan, an eligible employee who is
disabled will receive payments equal to either 66.67% or 100% of base salary,
depending upon the length of service with the Company, for a period of up to 26
weeks. An eligible employee is considered disabled if, as a result of injury,
covered illness or pregnancy, the employee is unable to perform the duties of
the officer's regular occupation.
The Company maintains a Long Term Disability Plan ("LTD Plan") for its
senior management, which is designed to provide salary continuation beyond the
coverage extended through the STD Plan. Under the LTD Plan, an eligible
employee who is disabled for 180 days will receive monthly payments equal to
60% of the employee's monthly earnings (base salary plus bonus), not to exceed
a maximum of $30,000 per month, for the benefit duration specified in the LTD
Plan. An eligible employee is considered disabled, if as a result of injury or
illness for which the employee is under a doctor's care, the employee cannot
perform all of the material and substantial duties of the employee's regular
occupation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not have a board committee performing the functions
of a compensation committee. Ronald W. Burkle, the Chairman of the Board, and
Robert A. Mariano, the President and Chief Executive Officer, made decisions
with regard to executive officer compensation for fiscal 1996.
15
<PAGE> 18
REPORT ON COMPENSATION OF EXECUTIVE OFFICERS
The Board of Directors is responsible for developing the Company's
executive compensation policies and approves on an annual basis the
compensation policies applicable to the Chief Executive Officer and other
executive officers of the Company. The objectives of the Company's executive
compensation program are to support the achievement of desired performance by
the Company, provide compensation that will attract and retain superior talent
and reward performance, and align the executive officers' personal interests
and financial remuneration with the success of the Company by basing a
significant portion of their compensation upon Company performance.
The executive compensation program provides an overall level of
compensation opportunity that is competitive within the retail food and drug
industry, including those companies which compete directly with the Company in
its region, as well as companies outside the industry with which the Company
may compete for executive talent. Companies are selected for the purpose of
comparing compensation practices on the basis of a number of factors relative
to the Company, such as their size and complexity, the nature of their
businesses, the regions in which they operate, the structure of their
compensation programs (including the extent to which they rely on bonuses and
other contingent forms of compensation) and the availability of compensation
information. In reviewing the compensation practices of other companies, the
Board of Directors considers the fact that the compensation structures of most
peer companies tend to be significantly different than those of the Company in
a number of respects, particularly in such areas as the amount of bonus
relative to salary paid by such companies, their use of stock appreciation
rights and stock options, the time period over which stock options vest and the
nature and amount of pension benefits made available to executive officers.
For these reasons, although the Board of Directors has considered the
compensation policies of certain peer companies, the Board of Directors does
not believe that all such companies are comparable to the Company for the
purpose of setting the compensation for the Company's executive officers. The
Board of Directors uses its discretion to set executive compensation at levels
warranted by external, internal and individual circumstances. Actual
compensation levels may be greater or less than average compensation levels in
other companies based upon annual and long-term performance of the Company and
each individual executive officer's performance.
The Company's executive officer compensation program is comprised of
base salary, cash bonus compensation, long-term incentive compensation in the
form of stock options, and other benefits such as those available through the
Company's medical and defined contribution plans.
Base Salary. Base salary levels for the Company's executive officers,
including the Chief Executive Officer, are set such that the overall cash
compensation package for executive officers, including bonus opportunity
compares favorably to companies with which the Company competes for executive
talent. In determining salaries, the Board of Directors also takes into
account a number of factors, which primarily include individual experience and
performance, the officer's level of responsibility, the cost of living and
historical salary levels. The measures of individual performance considered
include, to the extent applicable to an individual executive officer, a number
of quantitative and qualitative factors such as the Company's historical and
recent financial performance, the individual's achievement within his or her
responsibility of particular financial and non-financial goals, and other
contributions made by the officer to the Company's success. Specific factors
related to an individual's performance considered by the Board of Directors
include financial measures such as EBITDA (as adjusted), net income, sales,
same store sales, and cost savings and non-financial measures such as store
openings, site acquisitions or other specific tasks. The Board of Directors
has not found it practicable, and has not attempted, to assign relative weights
to the specific factors considered in determining base salary levels, and the
specific factors used may vary among achievement of any specific,
pre-determined performance targets.
Cash Bonus. The Company's Management Incentive Plan covers all
executive officers and other key managers. Its purpose is to provide a direct
financial incentive in the form of an annual bonus to achieve or exceed
pre-determined financial and individual objectives. The MIP program provides
for varying levels of payout to participants depending on the individual's
level within the organization. The Chief Executive Officer may receive a bonus
ranging from 0% up to 200% of base salary. Executive Vice Presidents may
receive a bonus of up to 100% of base salary, and Group Vice Presidents may
receive a bonus of up to 75% of base salary, except for Herbert R. Young, who
is eligible to receive a bonus of up to 100% of base salary pursuant to his
employment agreement.
In fiscal 1996, the MIP program was based on actual results achieved
compared to targeted performance in a number of categories. For the Chief
Executive Officer, Executive Vice Presidents and Mr.
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Young, EBITDA (as adjusted) was the sole measurement. For all other
management, the criteria of measurement was based on sales, EBITDA (as
adjusted), the management of certain asset balances and certain other
individual performance objectives.
1996 Equity Participation Plan. The Company's 1996 Equity
Participation Plan (the "1996 Plan") authorizes the Board of Directors to
provide incentives for officers, employees and consultants through granting of
stock options, restricted stock and other awards (collectively, "Awards"),
thereby stimulating their personal and active interest in the Company's
development and financial success, and inducing them to remain in the Company's
employ. Grants of Awards are made in amounts commensurate with the
individual's responsibility and at a level calculated to be competitive within
the retail food and drug industries as well as a broader group of companies of
comparable size and complexity. Options granted to date to executive officers
vest over a five-year period after the grant date, and do not include any
specific, pre-determined performance targets as a condition to vesting or
granting. The Company believes that such long-term grants serve the primary
objective of retaining executives and key managers, while also aligning
executives and shareholder interests by creating a strong and direct link
between compensation and shareholder return and by enabling executives and key
managers to develop and maintain a significant, long-term ownership interest in
the Company. No additional stock options were granted to the named executive
officers in fiscal 1996 because the Board of Directors determined that, in
general, stock and options held by such officers (including the stock holdings
of the Chief Executive Officer) were currently adequate to achieve the goals
discussed above. Grants of additional stock options to the named executive
officers may be considered in future periods by the Board of Directors.
Benefits. The Company provides medical and certain other benefits to
executive officers, including the Chief Executive Officer, that are generally
available to the Company's employees. The Company also provides executive
officers with supplemental death and disability benefits. The benefits
available under such arrangements are substantially similar for each of the
Company's executive officers, including the Chief Executive Officer, except to
the extent benefits are payable based upon the length of an officer's
employment with the Company.
Chief Executive Officer Compensation. The Chief Executive Officer's
compensation is reviewed and approved independently by the Board of Directors
subject to the provisions of his employment agreement. The Board of Directors
determines the Chief Executive Officer's compensation based upon the factors
applicable to the Company's other executive officers, which are described in
detail above, as well as a number of additional qualitative and quantitative
factors appropriate to his position as the Company's principal executive.
In accordance with the Company's compensation policies for all
executive officers, a large component of the Chief Executive Officer's
compensation is paid in the form of bonus, which, in order to provide an
appropriate incentive to maximize the Company's financial performance, is
determined based upon preset bonus maximums and the amount of the Company's
actual EBITDA (as adjusted) compared to targeted EBITDA (as adjusted). For
fiscal 1996, the Company did not achieve the targeted level of EBITDA (as
adjusted). Accordingly, the maximum pre-determined Chief Executive Officer
bonus for fiscal 1996 was not paid. Rather, the Chief Executive Officer
received a bonus of $463,500.
The Board of Directors believes that the Chief Executive Officer's
total cash compensation is appropriate in light of the Company's performance in
fiscal 1996 and other factors described above.
January 24, 1996 Ronald W. Burkle
Peter P. Copses
Linda McLoughlin Figel
Patrick L. Graham
David B. Kaplan
Darren W. Karst
Robert A. Mariano
Mark A. Resnik
Antony P. Ressler
The Report on Compensation of Executive Officers shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, and shall not
otherwise be deemed filed under such Acts.
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STOCK PERFORMANCE GRAPH
A stock performance graph is not included herein because the Company
consummated its initial public offering (the "Offering") of Common Stock on
November 1, 1996 and therefore such stock was publicly traded for only three
days in the Company's fiscal year ended November 2, 1996.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than
ten percent of a registered class of the Company's equity securities, to file
reports of ownership and changes of ownership with the Commission and each
exchange on which the Company's securities are registered. Officers, directors
and greater than ten percent stockholders are required by Commission
regulations to furnish the Company with copies of all ownership forms they
file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain persons that no such forms were
required for those persons, the Company believes that, during the fiscal year
ended November 2, 1996, its officers, directors and greater than ten percent
stockholders complied with applicable Section 16 filing requirements.
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1996 EQUITY PARTICIPATION PLAN
GENERAL
On October 28, 1996, the Company adopted its 1996 Equity Participation
Plan. The 1996 Plan was approved by the stockholders of the Company on October
23, 1996. The principal purposes of the 1996 Plan are to provide incentives
for officers, employees and consultants of the Company through granting of
options, restricted stock and other awards, thereby stimulating their personal
and active interest in the Company's development and financial success, and
inducing them to remain in the Company's employ. In addition to Awards made to
officers, employees or consultants, the 1996 Plan provides for the granting of
options ("Director Options") to the Company's independent non-employee
directors.
The prices for shares of Common Stock subject to options and stock
appreciation rights ("SARs") or pursuant to other awards which may be granted
or made under the 1996 Plan shall be set by the Board of Directors, or a
committee thereof appointed as provided in the 1996 Plan; provided, however,
that such price shall be no less than the par value of a share of Common Stock,
unless otherwise permitted by applicable law, and (i) in the case of Incentive
Stock Options and Non-Qualified Stock Options (in each case, as defined in the
1996 Plan) intended to qualify as performance-based compensation as described
in Section 162(m)(4)(C) of the Internal Revenue Code of 1986, as amended (the
"Code"), such price shall not be less than 100% of the Fair Market Value (as
defined in the 1996 Plan) of a share of Common Stock on the date such option is
granted; (ii) in the case of Incentive Stock Options granted to an individual
then owning (within the meaning of Section 424(d) of the Code) more than 10% of
the total combined voting power of all classes of stock of the Company or any
subsidiary or parent corporation thereof (within the meaning of Section 422 of
the Code) such price shall not be less than 110% of the Fair Market Value of a
share of Common Stock on the date such option is granted; and (iii) in the case
of options granted to the Company's independent non-employee directors, such
price shall equal 100% of the Fair Market Value of a share of Common Stock on
the date such option is granted.
Under the 1996 Plan, not more than 1,000,000 shares of Common Stock
(or the equivalent in other equity securities) are authorized for issuance upon
exercise of options, SARs and other Awards, or upon vesting of restricted or
deferred stock Awards. Furthermore, the maximum number of shares of Common
Stock which may be subject to options or SARs granted under the 1996 Plan to
any individual in any calendar year cannot exceed 500,000.
The shares of Common Stock available under the 1996 Plan upon exercise
of stock options, SARs and other Awards, and for issuance as restricted or
deferred stock Awards, may be either previously unissued shares or treasury
shares, and may be equity securities of the Company other than Common Stock.
The Committee (as defined below) (or the Board of Directors of the Company, in
the case of Director Options) has the discretion to make appropriate
adjustments in the number and kind of securities subject to the 1996 Plan and
to outstanding Awards thereunder to reflect dividends or other distributions; a
recapitalization, reclassification, stock split, reverse stock split, or
reorganization, merger or consolidation of the Company; the split-up, spin-off,
combination, liquidation or dissolution of the Company; or disposition of all
or substantially all of the assets of the Company or exchange of Common Stock
or other securities of the Company; or other similar corporate transaction or
event.
If any portion of a stock option, SAR or other Award terminates or
lapses unexercised, or is cancelled upon grant of a new option, SAR or other
Award (which may be at a higher or lower exercise price than the option, SAR or
other Award so cancelled), the shares of Common Stock which were subject to the
unexercised portion of such option, SAR or other Award, will continue to be
available for issuance under the 1996 Plan.
The principal features of the 1996 Plan are summarized below, but the
summary is qualified in its entirety by reference to the 1996 Plan itself.
ADMINISTRATION
The 1996 Plan will be administered by the Board of Directors until
such time as the Board of Directors shall, in its sole discretion, appoint a
committee (the "Committee") of the Board of Directors to administer the 1996
Plan; provided, however, that the entire Board of Directors will administer the
1996 Plan with respect to Director Options. The Committee will consist of at
least two members of the Board of Directors, each of whom is a "non-employee
director" for purposes of Rule 16b-3 under the Exchange Act ("Rule 16b-3") and,
to the extent that Incentive Stock Options and SARs granted under the 1996 Plan
are
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intended to qualify as performance-based compensation under Section 162(m) of
the Code after the expiration of the transition period specified in Treasury
Regulation Section 1.162-27(f), an "outside director" for the purposes of
Section 162(m) of the Code. Subject to the terms and conditions of the 1996
Plan, the Board of Directors (or the Committee) has the authority to select the
persons to whom Awards are to be made, to determine the number of shares of
Common Stock to be subject thereto and the terms and conditions thereof, and to
make all other determinations and to take all other actions necessary or
advisable for the administration of the 1996 Plan. Similarly, the Board of
Directors has discretion to determine the terms and conditions of, and to
interpret and administer the 1996 Plan with respect to, Director Options. The
Board of Directors (or the Committee) is also authorized to adopt, amend and
rescind rules relating to the administration of the 1996 Plan.
ELIGIBILITY
Options, SARs restricted stock and other Awards under the 1996 Plan
may be granted to individuals who are then officers or other employees of the
Company or any of its present or future subsidiaries. Such Awards also may be
granted to consultants of the Company selected by the Board of Directors (or
the Committee) for participation in the 1996 Plan. Approximately 225 employees
are eligible to participate in the 1996 Plan. More than one Award may be
granted to an employee or consultant; however, the aggregate fair market value
(determined at the time of grant) of shares with respect to which an Incentive
Stock Option is first exercisable by an optionee (i.e., "vests") during any
calendar year cannot exceed $100,000.00.
PAYMENT FOR SHARES
The exercise or purchase price for all options, Director Options,
SARs, restricted stock and other Awards that provide a right to acquire shares
of Common Stock, together with any applicable tax required to be withheld, must
be paid in full in cash at the time of exercise or purchase or may, with the
approval of the Board of Directors (or, with respect to Awards other than
Director Options, the Committee) be paid in whole or in part in shares of
Common Stock valued at their fair market value on the date of exercise (which
may, except with respect to Incentive Stock Options, include an assignment of
the right to receive the cash proceeds from the sale of shares of Common Stock
subject to an option or other right pursuant to a "cashless exercise"
procedure) or by delivery of other property, or by a recourse promissory note
payable to the Company, or by a combination of the foregoing.
AWARDS UNDER THE 1996 PLAN
The 1996 Plan provides that the Board of Directors (or the Committee)
may grant or issue stock options, SARs, restricted stock, deferred stock,
dividend equivalents, performance awards, stock payments and other stock
related benefits, or any combination thereof. Each Award will be set forth in
a separate agreement between the Company and the person receiving the Award and
will indicate the type, terms and conditions of the Award.
Nonqualified Stock Options ("NQSOs") will provide for the right to
purchase shares of Common Stock at a specified price which, except with respect
to NQSOs intended to qualify as performance-based compensation under Section
162(m) of the Code, may be less than the fair market value of such shares on
the date of grant (but not less than the par value of such shares), and usually
will become exercisable (in the discretion of the Board of Directors (or the
Committee)) in one or more installments after the grant date, subject to the
participant's continued employment with the Company and/or subject to the
satisfaction of individual or Company performance targets established by the
Board of Directors (or the Committee). NQSOs may be granted for any term
specified by the Board of Directors (or the Committee).
Incentive Stock Options ("ISOs"), will be designed to comply with the
provisions of, and will be subject to certain restrictions contained in, the
Code. Among such restrictions, ISOs must have an exercise price not less than
the fair market value of a share of Common Stock on the date of grant, may only
be granted to employees, must expire within a specified period of time
following the Optionee's termination of employment and must be exercised within
ten years after the date of grant. ISOs may be subsequently modified to
disqualify them from treatment as ISOs. In the case of an ISO granted to an
individual who owns (or is deemed to own) at least 10% of the total combined
voting power of all classes of stock of the Company, the 1996 Plan provides
that the exercise price must be at least 110% of the fair market value of a
share of Common Stock on the date of grant and the ISO must expire upon the
fifth anniversary of the date of grant.
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Restricted Stock may be sold to participants at various prices (but
not below par value) and made subject to such conditions or restrictions as may
be determined by the Board of Directors (or the Committee). Typically,
Restricted Stock may be repurchased by the Company at the original purchase
price if such conditions or restrictions are not met. In general, Restricted
Stock may not be sold, or otherwise transferred or hypothecated, until such
conditions or restrictions are removed or expire. Purchasers of Restricted
Stock, unlike recipients of options, will have voting rights and will receive
dividends prior to the time when such conditions or restrictions lapse.
Deferred Stock may be awarded to participants, typically without
payment of consideration, but subject to vesting conditions based on continued
employment or on performance criteria established by the Board of Directors (or
the Committee). Like Restricted Stock, Deferred Stock may not be sold, or
otherwise transferred or hypothecated, until vesting conditions are removed or
expire. Unlike Restricted Stock, Deferred Stock will not be issued until the
Deferred Stock Award has vested, and recipients of Deferred Stock generally
will have no voting or dividend rights prior to the time when vesting
conditions are satisfied.
Stock Appreciation Rights may be granted in connection with stock
options or other Awards, or separately. SARs granted by the Board of Directors
(or the Committee) in connection with stock options or other awards typically
will provide for payments to the holder based upon increases in the price of
the Common Stock over the exercise price of the related option or other Awards,
but alternatively may be based upon criteria such as book value. Except as
required by Section 162(m) of the Code with respect to an SAR intended to
qualify as performance-based compensation as described in Section 162(m)(4)(C)
of the Code, there are no restrictions specified in the 1996 Plan on the
exercise of SARs or the amount of gain realizable therefrom, although
restrictions may be imposed by the Board of Directors (or the Committee) in the
SAR agreements. The Board of Directors (or the Committee) may elect to pay
SARs in cash or in Common Stock or in a combination of both.
Dividend Equivalents represent the value of the dividends per share
paid by the Company, calculated with reference to the number of shares covered
by the stock options, SARs or other Awards held by the participant.
Performance Awards may be granted by the Board of Directors (or the
Committee) on an individual or group basis. Generally, these Awards will be
based upon specific performance targets and may be paid in cash or in Common
Stock or in a combination of both. Performance Awards may include "phantom"
stock Awards that provide for payments based upon increases in the price of the
Common Stock over a predetermined period. Performance Awards may also include
bonuses which may be granted by the Board of Directors (or the Committee) on an
individual or group basis and which may be payable in cash or in Common Stock
or in a combination of both.
Stock Payments may be authorized by the Board of Directors (or the
Committee) in the form of shares of Common Stock or an option or other right to
purchase Common Stock as part of a deferred compensation arrangement in lieu of
all or any part of compensation, including bonuses, that would otherwise be
payable in cash to the key employee or consultant.
DIRECTOR OPTIONS
Director Options are NQSOs to purchase shares of Common Stock granted
to non-employee directors of the Company at the discretion of the Board of
Directors. The exercise price of the Director Options shall be the fair market
value of a share of Common Stock on the date of grant. The period during which
the right to exercise Director Options vests in the optionee shall be set by
the Board of Directors; provided, however, to the extent permitted by Rule
16b-3, the Board of Directors may accelerate the exercisability of Director
Options upon the occurrence of certain specified extraordinary corporate
transactions or events. No portion of a Director Option shall be exercisable
after the tenth anniversary of the date of grant and no portion of a Director
Option shall be exercisable upon the expiration of one year following
termination of such director's services as director of the Company.
AMENDMENT AND TERMINATION
Amendments to the 1996 Plan to increase the number of shares as to
which Awards may be made (except for adjustments resulting from stock splits
and the like, and mergers, consolidations and other corporate transactions)
require the approval of the Company's stockholders. In all other respects the
1996 Plan can be amended, modified, suspended or terminated by the Board of
Directors (or the Committee), unless
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such action would otherwise require stockholder approval as a matter of
applicable law, regulation or rule. Amendments to the 1996 Plan will not,
without the consent of the participant, affect such person's rights under an
Award previously awarded, unless the Award Agreement governing such Award
otherwise expressly so provides. Unless sooner terminated by the Board of
Directors or the Committee, the 1996 Plan will expire on October 23, 2006.
Such termination will not affect the validity of any Award outstanding under
the 1996 Plan on the date of termination.
MISCELLANEOUS PROVISIONS
The Board of Directors (or, with respect to Awards other than Director
Options, the Committee) has discretion under the 1996 Plan to provide that
options and other rights to acquire Common Stock will expire at specified times
following, or become exercisable in full upon, the occurrence of certain
specified extraordinary corporate events; but in such event the Board of
Directors or the Committee, as applicable, may also give optionees and other
grantees the right to exercise their outstanding options or rights in full
during some period prior to such event, even though the options or other Awards
have not yet become fully exercisable, and the Board of Directors or the
Committee, as applicable, may also provide that all restrictions imposed on
some or all shares of Restricted Stock and/or Deferred Stock shall lapse, and
some or all shares of Restricted Stock may cease to be subject to the Company's
right to repurchase, if any, after such event.
The 1996 Plan specifies that the Company may make loans to
participants to enable them to exercise options, purchase shares or realize the
benefits of other Awards granted under the 1996 Plan. The terms and conditions
of such loans, if any, shall be set by the Board of Directors (or, with respect
to Awards other than Director Options, the Committee).
The dates on which options or other Awards under the 1996 Plan first
become exercisable and on which they expire will be set forth in individual
Award agreements setting forth the terms of the Awards. Such agreements
generally will provide that options and other Awards expire upon termination of
the participant's status as an employee, consultant or director, although the
Board of Directors (or the Committee) may provide that options or other Awards
granted to employees or consultants continue to be exercisable following a
termination without Cause (as defined in the 1996 Plan), or following a Change
in Control of the Company, or because of the grantee's retirement, death,
disability or otherwise. Similarly, Restricted Stock granted under the 1996
Plan which has not vested generally will be subject to repurchase by the
Company in the event of the grantee's termination of employment or consultancy,
although the Board of Directors (or the Committee) may make exceptions, based
on the reason for termination or on other factors.
No option, SAR, Director Option or other Award granted under the 1996
Plan may be assigned or transferred by the grantee, except by will or the laws
of descent and distribution, although the shares underlying such Awards may be
transferred if all applicable restrictions have lapsed. During the lifetime of
the holder of any option or right, the option or right may be exercised only by
the holder.
As a condition to the issuance or delivery of stock or payment of
other compensation pursuant to the exercise or lapse of restrictions of any
option or other Award granted under the 1996 Plan, the Company requires
participants to discharge applicable withholding tax obligations. Shares of
Common Stock held by or to be issued to a participant may also be used to
discharge tax withholding obligations related to exercise of options or receipt
of other Awards, subject to the discretion of the Board of Directors (or the
Committee) to disapprove such use. In addition, the Board of Directors (or the
Committee) may grant to employees a cash bonus in the amount of any tax related
to awards.
The value of options granted under the 1996 Plan depends on the future
market value of a share of Common Stock on the date of exercise and such value
is not presently determinable.
FEDERAL INCOME TAX CONSEQUENCES
The tax consequences of the 1996 Plan under current federal law are
summarized in the following discussion which deals with the general tax
principles applicable to the 1996 Plan and is intended for general information
only. Alternative minimum tax and state and local income taxes are not
discussed. Tax laws are complex and subject to change and may vary depending
on individual circumstances and from locality to locality. The tax information
summarized is not tax advice.
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Nonqualified Stock Options. For federal income tax purposes, an
optionee generally will not recognize taxable income on the grant of an NQSO
under the 1996 Plan, but will recognize ordinary income, and the Company
generally will be entitled to a deduction, upon the exercise of an NQSO. The
amount of income recognized (and the amount deductible by the Company)
generally will be equal to the excess, if any, of the fair market value of the
shares at the time of exercise over the aggregate exercise price paid for the
shares, regardless of whether the exercise price is paid in cash or in shares
or other property. An optionee's basis for the stock for purposes of
determining his or her gain or loss upon a subsequent disposition of the shares
generally will be the fair market value of the stock on the date of exercise of
the NQSO, and any subsequent gain or loss will generally be taxable as capital
gains or losses.
Incentive Stock Options. An optionee generally will not recognize
taxable income upon either the grant or exercise of an ISO; however, the amount
by which the fair market value of the shares at the time of exercise exceeds
the exercise price will be an "item of tax preference" for the optionee.
Generally, upon the sale or other taxable disposition of the shares of Common
Stock acquired upon exercise of an ISO, the optionee will recognize income
taxable as capital gains in an amount equal to the excess, if any, of the
amount realized in such disposition over the option exercise price, provided
that no disposition of the shares has taken place within either (a) two years
from the date of grant of the ISO or (b) one year from the date of exercise.
If the shares of Common Stock are sold or otherwise disposed of before the end
of the one-year and two-year periods specified above, the difference between
the ISO exercise price and the fair market value of the shares on the date of
exercise generally will be taxable as ordinary income and the balance of the
amount realized from such disposition, if any, generally will be taxed as
capital gain. If the shares of Common Stock are disposed of before the
expiration of the one-year and two-year periods and the amount realized is less
than the fair market value of the shares at the date of exercise, the
optionee's ordinary income generally is limited to the excess, if any, of the
amount realized in such disposition over the option exercise price paid. The
Company generally will be entitled to a tax deduction with respect to an ISO
only to the extent the optionee has ordinary income upon sale or other
disposition of the shares of Common Stock.
Restricted Stock and Deferred Stock. An employee to whom Restricted
Stock or Deferred Stock is issued generally will not recognize taxable income
upon such issuance and the Company generally will not then be entitled to a
deduction, unless, in the case of Restricted Stock, an election is made under
Section 83(b) of the Code. However, when restrictions on shares of Restricted
Stock lapse, such that the shares are no longer subject to a substantial risk
of forfeiture, the employee generally will recognize ordinary income and the
Company generally will be entitled to a deduction for an amount equal to the
excess of the fair market value of the shares at the date such restrictions
lapse over the purchase price therefor. Similarly, when Deferred Stock vests
and is issued to the employee, the employee generally will recognize ordinary
income and the Company generally will be entitled to a deduction for the amount
equal to the fair market value of the shares at the date of issuance. If an
election is made under Section 83(b) with respect to qualifying Restricted
Stock, the employee generally will recognize ordinary income at the date of
issuance equal to the excess, if any, of the fair market value of the shares at
that date over the purchase price therefor and the Company will be entitled to
a deduction for the same amount. The Code does not permit a Section 83(b)
election to be made with respect to deferred stock.
Stock Appreciation Rights. No taxable income is generally recognized
upon the receipt of an SAR, but upon exercise of the SAR the fair market value
of the shares (or cash in lieu of shares) received generally will be taxable as
ordinary income to the recipient in the year of such exercise. The Company
generally will be entitled to a compensation deduction for the same amount
which the recipient recognizes as ordinary income.
Dividend Equivalents. A recipient of a Dividend Equivalent Award
generally will not recognize taxable income at the time of grant, and the
Company will not be entitled to a deduction at that time. When a Dividend
Equivalent is paid, the participant generally will recognize ordinary income,
and the Company will be entitled to a corresponding deduction.
Performance Awards. A participant who has been granted a Performance
Award generally will not recognize taxable income at the time of grant, and the
Company will not be entitled to a deduction at that time. When a Performance
Award is paid, whether in cash or Common Stock, the participant generally will
recognize ordinary income, and the Company will be entitled to a corresponding
deduction.
Stock Payments. A participant who receives a Stock Payment in lieu of
a cash payment that would otherwise have been made will generally be taxed as
if the cash payment has been received, and the Company generally will be
entitled to a deduction for the same amount.
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Deferred Compensation. Participants who defer compensation generally
will recognize no income, gain or loss for federal income tax purposes when
NQSOs are granted in lieu of amounts otherwise payable, and the Company will
not be entitled to a deduction at that time. When and to the extent such NQSOs
are exercised, the rules regarding NQSOs outlined above will generally apply.
Section 162(m) of the Code. Under Section 162(m) of the Code, which
became law in August 1993, income tax deductions of publicly-held corporations
may be limited to the extent total compensation (including base salary, annual
bonus, stock option exercises and non-qualified benefits paid in 1994 and
thereafter) for certain executive officers exceeds $1 million (less the amount
of any "excess parachute payments" as defined in Section 280G of the Code) in
any taxable year of the corporation. However, under Section 162(m), the
deduction limit does not apply to certain "performance-based" compensation
which is paid based upon the attainment of objective financial performance
goals which are established by an independent compensation committee pursuant
to business criteria which is adequately disclosed to, and approved by,
stockholders of the corporation and which meets certain other requirements. In
addition, under a special rule for stock options and SARs, stock options and
SARs will satisfy the "performance-based" exception if the awards are made by a
qualifying compensation committee, the plan sets the maximum number of shares
that can be granted to any person within a specified period and the
compensation is based solely on an increase in the stock price after the grant
date (i.e., the exercise price is equal to or greater than the fair market
value of the stock subject to the award on the grant date). In its current
form, the 1996 Plan does not conform to the "performance-based" exception under
Section 162(m) of the Code; however, under a transitional rule adopted by the
Internal Revenue Service for private companies which become publicly held, in
general, Section 162(m) of the Code does not apply to remuneration paid under a
plan that existed during the period in which the corporation was not publicly
held prior to the earlier of the following dates: (i) the expiration of the
plan, (ii) the material modification of the plan, (iii) the issuance of all
employer stock and other compensation that has been allocated under the plan or
(iv) the first meeting of the corporation's shareholders at which directors are
to be elected that occurs after the close of the third calendar year following
the calendar year in which the corporation's public offering occurred.
RESTATED 1995 STOCK OPTION PLAN
Under the Company's Restated 1995 Stock Option Plan (the "1995 Plan"),
certain officers and key employees of the Company received grants of NQSOs and
ISOs. As required by the 1995 Plan, all Incentive Stock Options granted
thereunder have a per share exercise price at least equal to 100% of the Fair
Market Value (as defined in the 1995 Plan) of Common Stock on the date of grant
and all Incentive Stock Options granted thereunder to employees who at the time
such option was granted owned (within the meaning of Section 424(d) of the
Code) more than 10% of the total combined voting power of all classes of
capital stock of the Company have a per share exercise price at least equal to
110% of the Fair Market Value of Common Stock on the date of grant. The 1995
Plan is administered by the Board of Directors which designates the individuals
who shall receive options, whether an optionee will receive ISOs, NQSOs or
both, and the amount, price restrictions and all other terms and provisions of
such options. Options granted and presently outstanding under the 1995 Plan
have terms of ten years and become exercisable either (i) as to at least 20% of
the shares of Common Stock covered thereby on each anniversary of the date such
option is granted or (ii) as to at least 25% of the shares of Common Stock
covered thereby on each anniversary of the date such option is granted
commencing with the second anniversary of such date.
In general, and except as set forth above, the description of NQSOs
and ISOs, and the federal income tax consequences with respect thereto, are the
same as those set forth in the discussion of options under "1996 Equity
Participation Plan."
24
<PAGE> 27
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
YUCAIPA CONSULTING AGREEMENT
On March 22, 1995, the Company and Dominick's entered into a five-year
consulting agreement (the "Consulting Agreement") with Yucaipa for certain
management and financial advisory services to be provided to the Company and
its subsidiaries. During the term of the Consulting Agreement, the services of
Messrs. Burkle, Resnik and Graham and Ms. Figel, and the services of other
Yucaipa personnel (other than Mr. Karst) were provided to the Company,
Dominick's and its subsidiaries pursuant to the Consulting Agreement. Messrs.
Burkle, Resnik and Graham and Ms. Figel, together with Mr. Karst, are general
partners of Yucaipa. The Consulting Agreement provided for the payment to
Yucaipa of annual management fees in an amount equal to two percent (2.0%) of
Dominick's EBITDA (defined in the Consulting Agreement as net income (or loss)
of Dominick's and its subsidiaries on a consolidated basis, determined in
accordance with generally accepted accounting principles, excluding (i) all net
extraordinary gains or losses, (ii) total interest expense of Dominick's and
its subsidiaries on a consolidated basis, (iii) provisions for taxes based on
income, (iv) total depreciation expense, (v) total amortization expense, (vi)
LIFO provision, and (vii) other non-cash items reducing net income and other
non-cash items increasing net income), plus reimbursement of out-of-pocket
expenses. In connection with the Offering, the Company paid $10.5 million to
Yucaipa to terminate its obligations under the Consulting Agreement. Fees paid
or accrued under the Consulting Agreement in connection with management
services were approximately $2.6 million during the fiscal year ended November
2, 1996.
MANAGEMENT AGREEMENT
On November 1, 1996, the Company and Dominick's entered into a
five-year management agreement (the "Management Agreement") with Yucaipa. In
light of the reduced levels of services anticipated following the consummation
of the Offering, the Management Agreement provides for the payment of an annual
fee to Yucaipa in the amount of $1.0 million per year. In addition, the
Company may retain Yucaipa in an advisory capacity in connection with certain
acquisition or sale transactions, in which case the Company will pay Yucaipa an
advisory fee equal to one percent (1.0%) of the transaction value. The term of
the agreement is automatically renewed on April 1 of each year for a five-year
term unless 90 days' notice is given by either party. The Management Agreement
may be terminated at any time by the Company upon 90 days' written notice,
provided that Yucaipa will be entitled to full payment of the annual fee under
the agreement for the remaining term thereof, unless the Company terminates for
cause pursuant to the terms of the agreement. Yucaipa may terminate the
agreement if the Company fails to make a payment due thereunder, or upon a
Change of Control (as generally defined in the Management Agreement to include
certain mergers and asset sales, and acquisitions of beneficial ownership of
greater than 51% of the Company's outstanding voting securities by persons
other than Yucaipa). Upon any such termination, Yucaipa will be entitled to
full payment of the annual fee for the remaining term of the agreement.
YUCAIPA WARRANT
Upon the closing of the Acquisition, the Company issued to Yucaipa a
warrant to purchase 3,874,492 shares of Common Stock. The Yucaipa Warrant
became exercisable at the election of Yucaipa upon the consummation of the
Offering at an exercise price of $20.73 per share. If not exercised, the
Yucaipa Warrant will expire on March 22, 2000; provided, however, that if on
such date certain financial performance requirements are satisfied, the
expiration date will be extended to March 22, 2002 and, in such case, the
exercise price will be increased daily at a rate of 25% per annum. The Yucaipa
Warrant may be exercised for cash or on a cashless basis. Pursuant to the
cashless exercise provisions of the Yucaipa Warrant, upon exercise in full
Yucaipa would be entitled to receive a number of shares equal to the difference
between 3,874,492 shares and the number of shares having a market value as of
the exercise date equal to $80.3 million (i.e., the aggregate exercise price).
25
<PAGE> 28
INDEPENDENT AUDITORS
Ernst & Young LLP audited the Company's financial statements for the
fiscal year ended November 2, 1996, and has been the Company's independent
auditors since its formation in January 1995. The Board of Directors has
selected Ernst & Young LLP to serve as independent auditors for the Company for
the fiscal year ending November 1, 1997. A representative of Ernst & Young LLP
is expected to be present at the Annual Meeting and will be given the
opportunity to make a statement if he or she desires to do so, and it is
expected that such representative will be available to respond to appropriate
questions from the stockholders at the Annual Meeting.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
FOR 1998 ANNUAL MEETING
Any stockholder intending to submit to the Company a proposal for
inclusion in the Company's proxy materials relating to the 1998 Annual Meeting
of Stockholders of the Company must submit such proposal so that it is received
by the Company no later than Friday, January 2, 1998.
OTHER MATTERS
The Company is not aware of any matters that may be presented for
action by the stockholders at the Annual Meeting other than those set forth
above. If any other matter shall properly come before the Annual Meeting, the
persons named in the accompanying form of proxy intend to vote thereon in
accordance with their best judgment.
The Company's Annual Report to Stockholders, including the Company's
audited financial statements for the year ended November 2, 1996, is being
mailed herewith to all stockholders of record. THE COMPANY WILL PROVIDE
WITHOUT CHARGE TO ANY PERSON SOLICITED HEREBY, UPON THE WRITTEN REQUEST OF ANY
SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED NOVEMBER 2, 1996 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. SUCH
REQUESTS SHOULD BE DIRECTED TO C. MARK HUSSEY, VICE PRESIDENT, INVESTOR
RELATIONS, DOMINICK'S SUPERMARKETS, INC., 505 RAILROAD AVENUE, NORTHLAKE,
ILLINOIS 60164.
STOCKHOLDERS ARE URGED TO IMMEDIATELY MARK, DATE, SIGN AND RETURN THE ENCLOSED
PROXY IN THE ENVELOPE PROVIDED, TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED
IN THE UNITED STATES.
By Order of the Board of Directors,
/s/ Darren W. Karst
DARREN W. KARST
Secretary
February 7, 1996
Northlake, Illinois
26
<PAGE> 29
ANNEX A
DOMINICK'S SUPERMARKETS, INC.
DIRECTORS DEFERRED COMPENSATION
AND RESTRICTED STOCK PLAN
SECTION 1. ESTABLISHMENT AND PURPOSE. Dominick's Supermarkets,
Inc. (the "Company") hereby establishes effective as of March 4, 1997, a plan
known as the Dominick's Supermarkets, Inc. Directors Deferred Compensation and
Restricted Stock Plan (the "Plan"). The purpose of the Plan is to attract and
retain certain individuals of outstanding competence as members of the Board of
Directors of the Company by permitting such individuals to elect (i) to receive
their compensation from the Company in restricted shares of the Company's
Common Stock or (ii) to defer payment of their compensation from the Company to
a later date or event.
SECTION 2. DEFINITIONS. As used in this Plan, the following
terms shall have the indicated meanings:
A. Board: The Board of Directors of the Company.
B. Common Stock: The Company's Common Stock, par value $.01 per
share.
C. Company: Dominick's Supermarkets, Inc.
D. Compensation: The annual retainer and all fees (excluding any
reimbursed expenses) directly payable to a Director in his or
her capacity as a member of the Board in any year.
E. Director: Any member of the Board who directly receives
Compensation in his or her capacity as a member of the Board.
F. Fair Market Value: As of any valuation date, the median of
the high and low trading price of the Common Stock, as quoted
in the New York Stock Exchange Composite Transactions on such
date, as reported in the Wall Street Journal (or, if there is
no reported sale on such date, on the last preceding date on
which any reported sale occurred).
G. Participant: Any Director who becomes a participant in the
Plan as provided in Section 3 of the Plan.
H. Plan: Dominick's Supermarkets, Inc. Directors Deferred
Compensation and Restricted Stock Plan, as it may be amended
from time to time.
I. Plan Year: Each 12-month period as to which an election is
made to defer Compensation in accordance with the provisions
of Section 3 of the Plan. Such 12-month period shall be from
each January 1 to the following December 31.
J. Restricted Shares: Shares of Common Stock subject to the
restrictions set forth in Section 5 of the Plan.
K. Retirement: Any termination or resignation from membership on
the Board.
SECTION 3. ELIGIBILITY AND PARTICIPATION; ANNUAL ELECTIONS.
A. All Directors shall be eligible to participate in the Plan. A
Director may become a Participant for a Plan Year by executing an irrevocable
election (in the form attached hereto or on such other form as may
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<PAGE> 30
be prescribed by the Board) with respect to such Plan Year. Such election
shall relate only to Compensation for the succeeding Plan Year, or to
Compensation for the remainder of a Plan Year if Section 3.B applies, and a
separate election must be made with respect to Compensation for any subsequent
Plan Year. Except as provided in Section 3.B, such election shall be executed
on or before the first Monday in December preceding such Plan Year. In the
event of a failure to make a timely election for any Plan Year, any
Compensation for such Plan Year will be paid directly to the Director in cash
and no portion of the Compensation for such Plan Year may be deferred or issued
in the form of Restricted Shares under this Plan.
B. With respect to an individual who first becomes eligible to
participate in the Plan after the beginning of a Plan Year by reason of an
election or appointment to the Board, such individual may become a Participant
for the remainder of such Plan Year by executing an irrevocable election with
respect to his or her Compensation as soon as practicable, but in any event
within thirty (30) days of the date such individual becomes a Director. A
Director, at the time the Plan becomes effective, may become a Participant for
the remainder of such Plan Year by executing such a form within 30 days of the
date of approval of the Plan by the Board.
SECTION 4. FORM OF ELECTIONS.
A. Restricted Shares Election. A Participant may elect to
receive all, but not less than all, of his or her Compensation for each Plan
Year in the form of Restricted Shares rather than cash. If so elected, the
number of Restricted Shares granted shall be determined by dividing 110% of the
Compensation for which such an election is made by the Fair Market Value on the
applicable grant date. The grant date for the portion of Compensation
attributable to a Participant's annual retainer shall be the date of the
Company's Annual Meeting of Stockholders occurring in such Plan Year. The
applicable grant date for the portion of Compensation attributable to a
Participant's meeting fees shall be the last day of each March, June, September
and December, with respect to any meetings occurring in each such quarterly
period. The Company shall issue certificates for Restricted Shares pursuant to
Section 5 hereof as soon as practicable following each such applicable grant
date.
B. Cash Deferral Election. A Participant may elect to defer all,
but not less than all, of his or her Compensation for each Plan Year. Each
deferral election shall designate:
(1) the date or the event on which payment is to
commence; provided, however, that any specified date
or event shall be at least two years from the date of
the deferral election;
(2) the method of payment; and
(3) the beneficiary to receive any payment or delivery if
the Participant dies before receiving all amounts to
which he or she is entitled under the Plan.
SECTION 5. RESTRICTED SHARES.
A. Share Restrictions. All Restricted Shares issued to a
Participant in lieu of cash payments for such Participant's Compensation shall
be subject to the restriction that they may not be sold or transferred until
the earliest to occur of the following:
(1) three years have lapsed from the date the applicable
shares are granted to the Participant (the
"Restriction Period");
(2) the Participant's death or disability;
(3) the Participant, after being nominated for
re-election to the Board, is not elected by the
stockholders of the Company;
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<PAGE> 31
(4) the Participant is not nominated for re-election to
the Board at the conclusion of his or her existing
term;
(5) the Participant's service on the Board terminates
because of his or her resignation at the request of
the Board or his or her removal by action of the
Company's stockholders;
(6) the Participant's service on the Board terminates
because the Participant is seeking election to
government office or has taken a position with a
governmental agency in public service that does not
permit membership on the board of directors of a
publicly-held corporation; or
(7) the occurrence of a Change in Control, as defined in
the Company's 1996 Equity Participation Plan or any
successor plan thereto.
B. Lapsing and Forfeiture. In the event the restrictions on
Restricted Shares lapse upon the occurrence of any of the events specified in
Section 5.A hereof, a certificate for the applicable shares of Common Stock,
free and clear of all restrictions, will be delivered to the Participant as
soon as practicable thereafter. If the Participant's service on the Board
terminates prior to the end of the Restriction Period for any reason other than
those identified in Section 5.A hereof, the Participant shall immediately
forfeit the shares to the Company. Upon any such forfeiture, the Participant
shall receive from the Company an amount in cash equal to the amount such
Participant would have in a Deferral Account had such Participant elected to
defer Compensation pursuant to Section 4 rather than to receive Restricted
Shares pursuant to Section 3.
C. Share Certificates. The certificates for Restricted Shares
may be registered in the name of the Participant, or in the name of the
Participant and one other individual as joint tenants, and shall be held by the
Company during the Restriction Period. Any dividends or distributions, payable
in cash or in kind with respect to the Restricted Shares which have been
issued, shall be paid to the Participant. All Restricted Shares issued
hereunder shall be fully paid and non-assessable and the Participant shall have
all voting rights with respect thereto. The Company shall pay all original
issue taxes with respect to the issue of Restricted Shares and all other fees
and expenses necessarily incurred by Company in connection therewith.
D. Fractions of Shares. The Company shall not issue fractions of
Restricted Shares. Whenever under the terms of the Plan, a fractional share
would otherwise be required to be issued, the Participant shall be paid in cash
for such fractional share.
E. Shares Available. Shares of Common Stock issuable under the
Plan shall be acquired by the Company on the open market or shall be taken from
authorized but unissued or treasury shares of the Company, as shall from time
to time be necessary for issuance pursuant to the Plan. The maximum number of
shares of Common Stock issuable under the Plan shall be one hundred thousand
(100,000).
F. Change in Capital Structure. In the event of any change in
the Common Stock by reason of any stock dividend, split, combination of shares,
exchange of shares, warrants or rights offering to purchase Common Stock at a
price below its Fair Market Value, reclassification, recapitalization,
reorganization, merger, consolidation or other change in the capital structure
of the Company, appropriate adjustment shall be made by the Company in the
number and kind of shares subject to the Plan and any other relevant provisions
of the Plan, which determination shall be binding and conclusive on all
persons.
SECTION 6. PARTICIPANT'S DEFERRAL ACCOUNT.
A. The Company shall establish bookkeeping accounts ("Deferral
Accounts") to record the deferrals under Section 4.A and additions under this
Plan. Each Participant shall have a separate Deferral Account for each Plan
Year, and each Deferral Account shall be increased and decreased as provided in
this Section 6.
A-3
<PAGE> 32
B. During the Plan Year, each Participant's Deferral Account
shall be credited with the amount of Compensation deferred by each Participant
by a quarterly crediting at the end of each March, June, September and December
of the amount of cash Compensation which would have been payable to such
Participant in such quarter (determined without regard to such Participant's
deferral election under Section 4).
C. The Participant's Deferral Account shall be increased as of
the quarterly dates specified in Section 6.B by the amount obtained by
multiplying the Deferral Account balance as of the first day of such quarter by
one-fourth of the average prime rate, as published in the Wall Street Journal,
in effect as of the first day of such quarterly period. Participant's Deferral
Account (reduced in accordance with Section 6.D) shall continue to be increased
in accordance with this Section 6.C during any installment payment period which
may have been elected by the Participant under Section 8.C or approved by the
Board under Section 8.C.
D. The Participant's Deferral Account shall be reduced by any
payments made to the Participant or his or her beneficiary, estate or
representative.
SECTION 7. FUNDING PROHIBITIONS. All entries in a Participant's
Deferral Account shall be bookkeeping entries only and shall not represent a
special reserve or otherwise constitute a funding of the Company's unsecured
promise to pay any amounts hereunder. All payments to be made under the Plan
shall be paid from the general funds of the Company. Participants and their
beneficiaries shall have no right, title or interest in or to any investments
which the Company may make to aid it in meeting its obligations under the Plan.
All such assets shall be the property solely of the Company and shall be
subject to the claims of the Company's unsecured general creditors. To the
extent a Participant or any other person acquires a right to receive payments
from the Company under the Plan, such right shall be no greater than the right
of any unsecured general creditor of the Company and such person shall have
only the unsecured promise of the Company that such payments shall be made.
SECTION 8. PAYMENT OF DEFERRAL ACCOUNTS.
A. Payment of amounts credited to a Participant's Deferral
Account shall be made in the manner and at the time or times specified herein.
All payments shall be made by Company check.
B. When the Participant makes a deferral election for a Plan
Year, he or she shall also elect the time at which or the event (such as
Retirement) after which payment of the amounts credited to the Deferral Account
established for such Plan Year shall commence. Subject to the second paragraph
of Section 8.C below, once made, such election of time of commencement of
payment for such Plan Year shall be irrevocable. Payment of amounts credited
to each Participant's Deferral Account for such Plan Year shall commence within
thirty (30) days of the date or the occurrence of the event specified by the
Participant in such election.
C. When the Participant makes a deferral election he or she shall
also elect to have the balance of his or her Deferral Account paid out in one
of two methods: (1) a single lump sum or (2) approximately equal annual
installments (calculated on the basis of the amount in the Participant's
Deferral Account and the amounts to be accrued during the installment payment
period) over a period of years selected by the Participant not to exceed
fifteen. Subject to the second paragraph of this Section 8.C, once made, such
election of payment method shall be irrevocable.
Notwithstanding any other provision of the Plan to the
contrary, a Participant or beneficiary may withdraw cash from his or her
Deferral Account upon a finding by the Board in its sole discretion that an
unanticipated emergency that is caused by an event beyond the control of such
Participant or beneficiary has occurred and that such emergency would result in
severe financial hardship to such Participant or beneficiary if early
withdrawal were not permitted. The amount which may be withdrawn pursuant to
this Section 8.C shall not exceed the amount necessary to meet such financial
hardship as determined by the Board
A-4
<PAGE> 33
in its sole discretion. The Board shall have the right to require such
Participant or beneficiary to submit such documentation as it deems appropriate
for the purpose of determining the existence, cause and extent of such
financial hardship.
D. Notwithstanding any provision of the Plan to the contrary, in
the event of the death of any Participant, the balance in the Participant's
Deferral Account shall be paid to the Participant's beneficiary as designated
on the Participant's deferral election form in a single lump sum within thirty
(30) days after the Board is notified of such death.
Each Participant shall designate a beneficiary to whom any
balance in his or her Deferral Account under this Plan shall be payable on his
or her death. A Participant may also designate an alternate beneficiary to
receive such payment in the event that the designated beneficiary cannot
receive the payment for any reason. Each Participant may at any time revoke or
change any beneficiary designation. A change of beneficiary designation must
be made in writing and delivered to the Board or its delegate. If there is no
unrevoked beneficiary designation on file with the Board or its delegate at the
time of the Participant's death, or if the beneficiary or beneficiaries
designated therein shall have all predeceased the Participant or otherwise
ceased to exist, such payments shall be made in accordance with the
Participant's will or, in the absence of a will, to the administrator of the
Participant's estate.
SECTION 9. WITHHOLDING TAXES. The Company shall be authorized
to withhold from any payment due under the Plan any taxes required to be
withheld by federal, state or local governments, unless other provisions
satisfactory to the Company shall have been made for the payment of such taxes.
SECTION 10. ADMINISTRATION. The Plan shall be administered by
the Board. The Board shall have all powers necessary to carry out the
provisions of the Plan, including without limitation, the power to delegate
administrative matters to other persons, the power to promulgate rules of Plan
administration, the power to promulgate forms to be used with regard to the
Plan, the power to settle any disputes as to rights or benefits arising from
the Plan, and the power to make such decisions or to take such action as the
Board, in its sole discretion, deems necessary or advisable to aid in the
proper maintenance of the Plan.
SECTION 11. MISCELLANEOUS.
A. Termination of the Plan. The Company may at any time by
action of the Board terminate this Plan. Upon termination of the Plan, no
further issuances of Restricted Shares or deferrals of Compensation will be
permitted, and each Participant's Compensation which was then subject to an
election under Section 4 will be restored on a non-deferred basis. Each
Participant's Deferral Accounts as they then exist will be maintained, credited
and paid pursuant to the provisions of this Plan and the Participant's
elections.
B. Amendment. The Company may at any time amend this Plan in any
respect by action of the Board; provided, however, that no such amendment shall
adversely effect the right of Participants or their beneficiaries to any
amounts credited or to be credited to the Participants' Deferral Accounts with
respect to any Plan Year which has commenced prior to the adoption of any such
amendment.
C. No Alienation of Benefits. To the extent permitted by law,
Participants and beneficiaries shall not have the right to alienate,
anticipate, commute, sell, assign, transfer, pledge, encumber or otherwise
convey the right to receive any payments under this Plan, and any payments
under this Plan or rights thereto shall not be subject to the debts,
liabilities, contracts, engagements or torts of Participants or beneficiaries
nor to attachment, garnishment or execution, nor shall they be transferable by
operation of law in the event of bankruptcy or insolvency. Any attempt,
whether voluntary or involuntary, to effect any such action shall be null, void
and of no effect.
D. No Right to Continue as a Director. Nothing contained herein
shall be construed as conferring upon a Director the right to continue as a
member of the Board of Directors. Nothing in the Plan
A-5
<PAGE> 34
shall confer upon any Participant any right to serve on the Board for any
period of time or to continue his or her current or any other rate of
compensation.
E. Approval of Plan by Stockholders. This Plan will be submitted
for the approval of the Company's stockholders within twelve months of the date
of the Board's initial adoption of this Plan.
F. Limitations Applicable to Section 16 Persons. Notwithstanding
any other provision of this Plan, this Plan, shall be subject to any additional
limitations set forth in any applicable exemptive rule under Section 16 of the
Exchange Act (including any amendment to Rule 16b-3) that are requirements for
the application of such exemptive rule. To the extent permitted by applicable
law, this Plan shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule.
G. Effect of Plan Upon Options and Compensation Plans. The
adoption of this Plan shall not affect any other compensation or incentive
plans in effect for the Company or any of its subsidiaries. Nothing in this
Plan shall be construed to limit the right of the Company (i) to establish any
other forms of incentives or compensation for employees, directors or
consultants of the Company or any of its subsidiaries or (ii) to grant or
assume options or other rights otherwise than under this Plan in connection
with any proper corporate purpose.
H. Compliance with Laws. This Plan and the issuance and delivery
of shares of Common Stock and the payment of money under this Plan are subject
to compliance with all applicable federal and state laws, rules and regulations
(including, but not limited to, state and federal securities law and federal
margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities delivered under
this Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary or desirable
to assure compliance with all applicable legal requirements. To the extent
permitted by applicable law, this Plan shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.
I. General Restrictions. The issuance of Common Stock or the
delivery of certificates for such shares to Participants under the Plan shall
be subject to the requirement that, if at any time the General Counsel or
Secretary of the Company shall reasonably determine, in his or her discretion,
that the listing, registration or qualification of such Common Stock upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental body, is necessary or desirable as a condition of,
or in connection with, the issuance of such shares, payment or delivery shall
not take place unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
reasonably acceptable to the General Counsel or Secretary.
J. Titles. Titles are provided herein for convenience only and
are not to serve as a basis for interpretation or construction of this Plan.
K. Governing Law. This Plan shall be administered, interpreted
and enforced under the internal laws of the State of Illinois without regard to
conflicts of laws thereof.
* * *
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<PAGE> 35
DOMINICK'S SUPERMARKETS, INC.
P ANNUAL MEETING OF STOCKHOLDERS--MARCH 4, 1997
R
O THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
X
Y The undersigned stockholder of DOMINICK'S SUPERMARKETS, INC. does hereby
nominate, constitute and appoint Robert A. Mariano and Darren W. Karst or
either of them, the true and lawful proxies, agents and attorneys of the
undersigned, with full power of substitution, to vote for the undersigned
all of the common stock of said corporation standing in the name of the
undersigned on its books at the close of business on January 24, 1997 at
the Annual Meeting of Stockholders to be held at the Westin O'Hare Hotel
located at 6100 North River Road, Rosemont, Illinois 60018, on Tuesday,
March 4, 1997 at 11:00 a.m., local time, or any adjournment thereof, with
all of the powers which would be possessed by the undersigned if personally
present as follows on the reverse side.
CONTINUED AND TO BE SIGNED ON OTHER SIDE.
<PAGE> 36
[X] Please mark votes as in this example.
This Proxy when properly expected will be voted in the manner herein by
the undersigned stockholder(s). If no direction is made, this proxy
will be voted FOR proposals 1 and 2.
<TABLE>
<S> <C>
1. Election of For Withheld Nominees: 3. In their discretion, the Proxies are
Directors: [ ] [ ] Ronald W. Burkle authorized to vote upon such other
Evan Bayh business matters as may properly come before
Patrick L. Graham the meeting.
Antony P. Ressler
For, except vote withheld from the following nominee(s): I will attend the Annual Meeting [ ]
Address Change [ ]
______________________________________
2. Adoption of the Dominick's Supermarkets, Inc. The undersigned hereby acknowledges receipt
Directors Deferred Compensation and Restricted Stock Plan of the Notice of Annual Meeting of Stockholders
and the Proxy Statement furnished therewith.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
_______________________________________
_______________________________________
SIGNATURE(S) DATE
_______________________________________________________
For, except vote withheld from the following nominee(s):
</TABLE>
NOTE: Please sign name exactly as your name (or names)
appears on the stock certificate. When signing as
attorney, executor, administrator, trustee or guardian
please give full title. If more than one trustee, all
should sign. All joint owners must sign.
