<PAGE>
SUPER FOOD SERVICES, INC.
3233 NEWMARK DRIVE
DAYTON, OHIO 45342
(937) 439-7500
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about October 25, 1996 to
the holders of record of the Common Shares, par value $1.00 per share (the
"Shares") of Super Food Services, Inc., a Delaware corporation (the "Company")
at the close of business on or about October 21, 1996. You are receiving this
Information Statement in connection with the possible election to the Company's
Board of Directors of that number of persons designated by NFC Acquisition
Corporation, a Delaware corporation (the "Purchaser"), Nash-Finch Company, a
Delaware corporation (the "Parent") or their affiliates equal to that number of
directors, rounded up to the next whole number, on the Company's Board of
Directors as will give the Parent and Purchaser representation on the Board of
Directors equal to the product of the total number of directors on such Board
multiplied by the percentage of the total outstanding Shares that are owned by
the Parent, Purchaser or any of their affiliates, including Shares accepted for
payment pursuant to the Offer.
The Agreement and Plan of Merger among the Company, Parent and Purchaser
(the "Merger Agreement") requires the Company, at the request of the Purchaser
or Parent, to take all action necessary to cause Parent's and Purchaser's
designees to be elected to the Board under the circumstances described therein.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934 (the "Exchange Act") and Rule 14f-1 thereunder.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in the Schedule 14D-9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
October 9, 1996. The Offer is scheduled to expire at 12:00 midnight, New York
City time, on Wednesday, November 6, 1996, unless the Offer is extended.
The information contained in this Information Statement concerning the
Purchaser and Parent has been furnished to the Company by the Parent and
Purchaser, and the Company assumes no responsibility for the accuracy or
completeness of such information.
<PAGE>
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of October 8, 1996, there were
10,997,448 Shares issued and outstanding. The Board presently consists of seven
members, and there are currently no vacancies on the Board. Each director holds
office until such director's successor is elected and qualified or until such
director's earlier resignation, death or removal.
RIGHT TO DESIGNATE DIRECTORS; PURCHASER'S DESIGNEES
In the Merger Agreement, the Company has agreed that promptly upon the
purchase by the Parent, Purchaser or their affiliates of at least a majority of
the total outstanding Shares, and from time to time thereafter, the Parent and
Purchaser or their affiliates shall be entitled to designate such number of
directors ("Purchaser Designees"), rounded up to the next whole number, on the
Board of Directors of the Company as will give the Parent and Purchaser
representation on the Board of Directors equal to at least that number of
directors that equals the product of the total number of directors on such Board
multiplied by the percentage of the total of outstanding Shares that are owned
by the Parent, Purchaser or any of their affiliates, including Shares accepted
for payment pursuant to the Offer. From and after the time that the Parent's
Designees constitute a majority of the Company's Board of Directors, any
amendment or termination of the Merger Agreement or any other action by the
Company under the Merger Agreement may be effected only by the action of a
majority of the directors of the Company then in office who were directors of
the Company on the date of the Merger Agreement ("Continuing Directors"). In
addition, prior to the effective time of the Merger, there shall be at least
three Continuing Directors on the Company's Board of Directors.
It is expected that the Purchaser Designees may assume office at any time
following the purchase by the Purchaser of a majority of the Shares outstanding
on a fully diluted basis pursuant to the Offer, which purchase cannot be earlier
than midnight on Wednesday, November 6, 1996 and that, upon assuming office, the
Purchaser Designees will thereafter constitute at least a majority of the Board
of Directors. To the extent the Company's Board of Directors will consist of
persons who are not Purchaser Designees, the Board of Directors is expected to
consist of Continuing Directors who are currently directors of the Company who
have not resigned.
The Purchaser Designees will be selected by Purchaser and Parent from among
the individuals listed below. Each of the following individuals has consented
to serve as a director of the Company if appointed or elected. None of the
following individuals owns any Shares. In addition, none of the following
individuals is a director of, or holds any position with, the Company. The
name, age, present principal occupation or employment and five-year employment
history of each of the following individuals are set forth below. Each person
is a citizen of the United States, and, except as indicated otherwise, the
business address of each such person is 7600 France Avenue South, Edina,
Minnesota 55435.
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Present Principal Occupation or
Employment; Material Positions
Name and Age Held During the past Five Years
------------ -------------------------------
Alfred N. Flaten (61) President and Chief Executive Officer of Parent.
Mr. Flaten was elected Chief Executive Officer of
Parent in November 1994. His election as
President and Chief Operating Officer of Parent
was effective in November 1991. He had been
elected Executive Vice President, Sales and
Operations of Parent in February 1991. Mr. Flaten
is also a director of Parent, and the President
and a director of Purchaser.
William T. Bishop (56) Senior Vice President, Sales and Logistics of
Parent. Mr. Bishop was elected as Senior Vice
President, Sales and Logistics of Parent effective
in December 1994 after joining the Parent in the
same month. He was previously employed by
Scrivner, Inc., a wholesale and retail food
distribution company located in Oklahoma City,
Oklahoma, serving as its President and Chief
Operating Officer from 1987 to 1994.
John R. Scherer (46) Vice President and Chief Financial Officer of
Parent. Mr. Scherer was appointed as Chief
Financial Officer of Parent in November 1995. His
election as Vice President of Parent was effective
in December 1994, and he served as Vice President,
Planning and Financial Services of Parent from
December 1994 to November 1995. He previously
served as director of Strategic Planning and
Financial Services of Parent from April 1994 to
December 1994, and Director of Planning and
Budgets of Parent from January 1988 through April
1994. Mr. Scherer is also the Treasurer and a
director of Purchaser.
Norman R. Soland (55) Vice President, Secretary and General Counsel of
Parent. Mr. Soland is also the Secretary and a
director of Purchaser.
DIRECTORS OF THE COMPANY
The Company's Restated Certificate of Incorporation, as amended, provides
that there shall be three classes of directors of as nearly equal size as
possible, each class being elected for a three-year term and only one class
being elected each year. The total number of directors is such number fixed by
the Company's By-Laws, except that the total number of directors shall not be
less than six nor more than twelve. The Board of Directors is presently
comprised of seven directors, three of whom are salaried employees of the
Company. The terms of the Class I, Class II and Class III directors expire at
the 1998, 1996 and 1997 Annual Meetings, respectively.
Set forth below is certain information concerning the Company's directors,
including their classes and terms, ages, present principal occupations, their
business experience during the past five years and the period they have served
as directors. The business address of each director is 3233 Newmark Drive,
Dayton, Ohio 45342.
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<TABLE>
<CAPTION>
Class of
Present Principal Occupation or Director and
Employment, Material Positions Expiration
Name and Age Held During the past Five Years of Term
- ------------ ------------------------------- ------------
<S> <C> <C>
John Demos (65) Vice Chairman of the Board, Secretary and General Counsel of Class I
the Company since September 22, 1986 and a director of the Director,
Company since 1969. Mr. Demos was Executive Vice President 1998
of the Company from October 22, 1980 to September 21, 1986,
Vice President from November 25, 1969 to October 22, 1980
and Secretary and Counsel since July 3, 1968.
Sam Robinson (56) President and Chief Operating Officer of the Company since Class I
September 22, 1986 and a director of the Company since 1986. Director,
From September 1, 1982 to September 21, 1986, Mr. Robinson 1998
was Senior Vice President-Ohio Operations and from August 31,
1979 to August 31, 1982, Mr. Robinson was Division Manager
of the Company's Cincinnati, Ohio Division.
John W. Berry (74) A director of the Company since 1969. He has been Chairman Class II
of the Board of Berry Investments, Inc., Dayton, Ohio, an Director
investment firm, since August 1, 1986. Mr. Berry was Vice 1996
Chairman of the Board of L.M. Berry and Company, telephone
directory advertising, from April, 1986 to July 31, 1987 and
Chairman of the Board and Chief Executive Officer of L.M. Berry
and Company from 1978 to April, 1986.
C. Elwood Shaffer (83) A director of the Company since 1970, Mr. Shaffer was Vice
Chairman of the Board of the Company from September 1, 1982
to September 10, 1983 and President and Chief Operating Officer
of the Company from April 8, 1970 to August 31, 1982.
Dr. Thomas S. Haggai (65) A director of the Company since 1971. He has been Chairman of Class III
the Board of IGA, Inc., Chicago, Illinois, a wholesale-owned Director,
service company since January 1, 1987. Dr. Haggai is also 1997
President of Tom Haggai & Associates, Inc., High Point, North
Carolina, lecturer, author and radio commentator, since 1976,
and a director of Davids Limited, Australia.
Dr. Edward H. Jennings A director of the Company since 1990. Dr. Jennings is Class III
(59) President Emeritus and Professor of Finance, Ohio State University, Director
Columbus, Ohio, since September, 1990. Dr. Jennings was 1997
President of Ohio State University from September 1, 1981 to
August 31, 1990. Dr. Jennings is also a director of Borden
Chemical Plastics, Inc., Lancaster Colony, Inc., and Hymedix, Inc.
</TABLE>
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<TABLE>
<CAPTION>
Class of
Present Principal Occupation or Director and
Employment, Material Positions Expiration
Name and Age Held During the past Five Years of Term
- ------------ ------------------------------- ------------
<S> <C> <C>
Jack Twyman (62) Chairman of the Board and Chief Executive Officer of the Class III
Company since November 28, 1972 and a director of the Company Director,
since 1970. Mr. Twyman was also President and Chief Operating 1997
Officer of the Company from September 1, 1982 to September 21, 1986.
Mr. Twyman is also a director of PNC Bank, Ohio, N.A.
</TABLE>
CERTAIN INFORMATION REGARDING THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
OF DIRECTORS
All corporate powers are exercised, and the Company's business, property
and affairs are managed by, or under the direction of the Board of Directors.
During the fiscal year ended August 31, 1996, the Board of Directors had six
regular meetings. All directors attended 100% of all meetings of the Board and
of each Committee of the Board of which the director was a member.
The Company has standing Executive, Audit, Compensation and Stock Option
and Nominating Committees. The members of each standing committee are elected
by the Board of Directors at its organizational meeting following the annual
shareholders meeting, each for a term of one year or until his or her successor
is duly elected. The functions performed by such committees, their number of
meetings and membership are set forth below.
The Executive Committee has and may exercise all of the powers of the Board
of Directors when the Board of Directors is not in session, with the exception
of the power to approve an amendment to the Restated Certificate of
Incorporation, as amended, adopt an agreement of merger or consolidation,
recommend to the shareholders the sale, lease or exchange of all or
substantially all of the Company's property or assets, recommend to the
shareholders a dissolution of the Company or a revocation of dissolution, amend
the By-Laws of the Company, or amend, alter or repeal any resolution of the
Board of Directors which by its terms provides that it shall not be amended,
altered or repealed by the Executive Committee. The Executive Committee is
composed of Jack Twyman, Chairman of the Board, John W. Berry, Dr. Thomas S.
Haggai, Dr. Edward H. Jennings and C. Elwood Shaffer.
The Audit Committee recommends to the Board of Directors the appointment of
the independent auditors, reviews the scope of the audit and the results of the
annual audit, reviews the fees of the independent auditors and approves each
professional service provided by the independent auditors. The Audit Committee
also reviews the scope and function of the internal audit work for propriety.
The members of the Audit Committee are John W Berry, Dr. Thomas S. Haggai and
Dr. Edward H. Jennings, none of whom is either an officer or employee of the
Company.
The Compensation and Stock Option Committee is composed of John W. Berry,
Dr. Thomas S. Haggai and Dr. Edward H. Jennings. The nature and scope of the
Compensation and Stock Option Committee's responsibilities are set forth below
under "Report on Executive Compensation."
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<PAGE>
The Nominating Committee considers and recommends to the Board of Directors
candidates for vacancies occurring from time to time and the nominees to be
proposed on behalf of the Board of Directors for election to the Board of
Directors to be voted upon by the shareholders at the Annual Meeting. The
members of the Committee are Dr. Edward H. Jennings and C. Elwood Shaffer.
There is currently one vacancy on the Nominating Committee. No formal procedure
currently exists for consideration by the Nominating Committee of candidates
proposed by shareholders for election as directors.
COMPENSATION OF DIRECTORS
Directors who are not officers or employees of the Company receive (i) an
annual retainer of $12,000 payable quarterly, (ii) a fee of $750 for each Board
Meeting attended, and (iii) a fee of $600 for each Committee meeting attended
unless the Committee meeting is held on the same day as a Board meeting in which
case the fee is $300. In addition, directors receive traveling expenses.
Employees of the Company who are directors receive no additional compensation
for their services as directors.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information concerning the executive
officers of the Company who are not directors:
<TABLE>
<CAPTION>
Executive
Present Position Officer
Name Age with the Company Since
---- --- -------------------------------------- ----------
<S> <C> <C> <C>
Robert F. Koogler 62 Senior Vice President-Finance, Treasurer
and Assistant Secretary 1970
Stan Lamping 67 Senior Vice President-Merchandising 1992
Richard Metzgar 59 Senior Vice President-Human Resources 1986
John Batista 61 Senior Vice President-Distribution 1986
Robert McCarthy 50 Senior Vice President-Management
Information Systems 1992
</TABLE>
All executive officers hold office from one annual meeting of the Board of
Directors until the next annual meeting of the Board of Directors or until their
successors are elected.
There are no arrangements or understandings between any of the executive
officers of the Company and any other person (not an officer or director of the
Company acting as such) pursuant to which any of the executive officers were
selected as an executive officer of the Company.
Each of the executive officers of the Company listed above has been employed by
the Company for more than five years.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table shows as of the date of the most recent Schedule 13G
filing made with the Securities and Exchange Commission, the total number of the
Shares beneficially owned by persons known by the Company to be the beneficial
owners of more than 5% of the Shares, as the term "beneficial ownership" is
defined by Rule 13d-3 of the Exchange Act.
Name and Address of Amount and Nature of
BENEFICIAL OWNER OF CLASS BENEFICIAL OWNERSHIP PERCENT
- ------------------------- --------------------- -------
Dimensional Fund Advisors, Inc. 553,650 (1) 5.0%
1299 Ocean Avenue
Santa Monica, California 90401
Franklin Advisory Services, Inc. 1,076,500 (2) 9.8%
One Parker Plaza
Fort Lee, New Jersey 07024
(1) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 553,650 Shares, all of
which shares are held in portfolios of DFA Investment Dimensions Group,
Inc., a registered open-end investment company, or in series of the DFA
Investment Trust Company, a Delaware business trust, or the DFA Group Trust
and the DFA Participating Group Trust, investment vehicles for qualified
employee benefit plans, all of which Dimensional serves as investment
manager. Dimensional has sole voting power with respect to 459,830 of such
Shares and sole investment power with respect to all of such Shares.
Dimensional disclaims beneficial ownership of all such Shares.
(2) Franklin Advisory Services, Inc. is the manager and advisor of two funds
(Franklin Balance Sheet Investment Fund and Franklin Value Fund) that hold
a total of 967,900 Shares and is a sub-advisor to two funds that hold a
total of 108,600 Shares.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of October 23, 1996, the number of Shares
beneficially owned by each director, each executive officer included in the
Summary Compensation Table and all directors and executive officers as a group:
Name of Amount and Nature of Percent
BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) (2) OF CLASS
- ---------------- ---------------------------- --------
John W. Berry 160,743 (3) 1.5%
John Demos 92,089 *
Dr. Thomas S. Haggai 6,142 *
Dr. Edward H. Jennings 200 *
Robert F. Koogler 59,506 *
Richard Metzgar 55,841 *
Sam Robinson 64,472 *
C. Elwood Shaffer 46,713 *
Jack Twyman 229,174 2.1%
All directors and executive
officers as a group (13 persons) 760,442 6.9%
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* Less than 1%
(1) Included in the above number as beneficially owned are 101,610 Shares which
the executive officers have the right to acquire through the exercise of
outstanding stock options within 60 days of October 23, 1996, including
30,000 Shares for Mr. Twyman, 22,500 Shares for Mr. Robinson, 16,250 Shares
for Mr. Demos, 8,860 Shares for Mr. Koogler and 12,000 Shares for Mr.
Metzgar.
(2) Included in the above number are Shares owned or held by spouse and Shares
in which the director or executive officer either has or shares voting
and/or investment power even though the party disclaims any beneficial
interest in such Shares.
(3) Mr. John W. Berry has sole voting power and sole investment power with
respect to 154,680 Shares held in his own name. Mr. Berry has shared
voting power and shared investment power with respect to 2,133 Shares held
in trust for his son. In addition, 3,930 Shares are owned by a trust of
which Mr. Berry is the beneficiary.
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SUMMARY COMPENSATION TABLE
The following table sets forth the annual and long-term compensation for
the Company's Chief Executive Officer and the four highest paid executive
officers, as well as the total compensation paid to each individual for services
rendered in all capacities for the Company's three previous fiscal years.
<TABLE>
<CAPTION>
Long-Term Compensation
-----------------------------------------------
Annual Compensation Awards Payouts
----------------------------------------------------------------------------------
Other Restricted Securities All Other
Annual Stock Underlying LTIP Compen-
Name and Position Salary Bonus Compensa- Awareds Options Payouts sation
Principal Position Year ($) (1) ($) (2) tion ($)(3) ($) SARs ($) ($) ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jack Twyman, Chairman 1996 525,000 250,000 0 0 0
of Board and Chief 1995 525,000 150,000 0 0 0 0 0
Executive Officer 1994 525,000 160,000 0 0 0 0 0
Sam Robinson 1996 196,000 40,000 0 0 0 0 0
President and Chief 1995 196,000 35,000 0 0 0 0 0
Operating Officer 1994 195,538 38,000 0 0 0 0 0
John Demos, Vice 1996 194,538 27,000 0 0 0 0 0
Chairman, Secretary 1995 188,538 23,500 0 0 0 0 0
and General Counsel 1994 182,538 23,000 0 0 0 0 0
Robert F. Koogler 1996 126,769 17,000 0 0 0 0 0
Senior Vice President- 1995 123,769 14,500 0 0 0 0 0
Finance, Treasurer and 1994 120,769 14,500 0 0 0 0 0
Assistant Secretary
Richard Metzgar 1996 106,500 12,000 0 0 0 0 0
Senior Vice President 1996 106,346 11,000 0 0 0 0 0
Human Resources 1994 104,308 11,000 0 0 0 0 0
</TABLE>
(1) Includes amounts deferred under the Company's Savings Plan pursuant to
Section 401(k) of the Internal Revenue Code.
(2) Incentive compensation awards under the Company's Incentive Compensation
Plan for services rendered in the fiscal year indicated even though
payments were made in the following fiscal year.
(3) Does not include items in the form of perquisites which are less than the
level required for reporting which is the lesser of $50,000 or 10% of
annual salary and bonus.
REPORT ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee of the Board of Directors (the
"Compensation Committee") is responsible for administering the executive
compensation programs of the Company. With
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<PAGE>
Board authorization, the Compensation Committee fixes the compensation of the
Chief Executive Officer and the other executive officers of the Company elected
by the Board of Directors. In addition, the Compensation Committee recommends
and administers compensation plans for all officers and key employees and is
authorized to grant awards under the Company's Restricted Stock Plan. The
Compensation Committee is comprised of the three non-employee directors whose
names appear at the end of this report.
COMPONENTS OF COMPENSATION
The executive compensation program is designed to attract and retain
outstanding management personnel required for the continued growth and
profitability of the Company. It also reflects conditions in the wholesale food
distribution business in which the Company is engaged. The three main elements
of the Company's executive compensation program are comprised of base salary,
incentive compensation awards, and long-term incentives in the form of grants of
restricted stock. The compensation program also includes retirement and other
benefits. These elements of the current compensation program for executive
officers and other key employees are discussed below.
BASE SALARY. The Compensation Committee annually reviews executive
compensation and establishes the salaries to be paid to the Chief Executive
Officer and other executive officers during the coming fiscal year. In
establishing and making periodic adjustments to base salaries, the Compensation
Committee considers several factors including the executive's past job
performance, the duties and level of responsibility in each position, length of
service in the position, competitive pay practices in the wholesale food
distribution industry, the performance of the Company as a whole and
recommendations made by the Chief Executive Officer. In making its decision on
salary levels, the Compensation Committee does not use any predetermined formula
or assign relative weights to these factors but exercises its discretion and
makes a judgment after considering the foregoing factors.
INCENTIVE COMPENSATION AWARDS. Under the Company's Incentive Compensation
Plan, incentive compensation awards may be granted to executive officers and key
employees of the Company and its subsidiaries based on the annual earnings
performance of the Company and the performance of the individual employees
during the year. A discretionary bonus fund is accrued each year for the
purpose of rewarding executive officers and key employees based on criteria
established by management and is generally paid in October of each year with
respect to the preceding fiscal year. In considering incentive compensation
awards for executives other than the Chief Executive Officer, the Compensation
Committee meets with the Chief Executive Officer to evaluate the performance of
the executive officers and to consider recommendations submitted by the Chief
Executive Officer for incentive awards. The Compensation Committee meets in the
absence of the Chief Executive Officer to evaluate his performance and to fix
his incentive compensation.
RESTRICTED STOCK. Under the Company's 1989 Restricted Stock Plan, the
Compensation Committee may award shares of restricted stock to executive
officers and key employees of the Company. No restricted stock awards were made
in the fiscal year ended August 31, 1996 and there are currently no awards of
restricted shares outstanding.
BENEFIT PROGRAMS. The executive officers also participate in various
health, life insurance and retirement benefit programs that are generally
available to all salaried employees, including the Employee Stock Purchase Plan
which provides a method by which employees of the Company and its subsidiaries
may purchase Shares through payroll deductions and the Company's non-
contributory 401(k) Plan which permits eligible employees to make before tax
contributions to a savings plan.
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<PAGE>
COMPENSATION OF CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Jack Twyman has served as Chairman of the Board and Chief Executive Officer
of the Company since 1972. Mr. Twyman participates in the same executive
compensation programs available to the Company's other executive officers. Mr.
Twyman received a base salary of $525,000 in fiscal 1996 which was unchanged
from the prior fiscal year. Mr. Twyman last received an increase in his base
salary in November, 1992. Under the terms of Mr. Twyman's employment agreement,
base salary cannot be less than $200,000 per year. Mr. Twyman's base salary has
been increased since 1981 to its present level. Mr. Twyman received no awards
of restricted stock in fiscal 1996. The Compensation Committee awarded Mr.
Twyman an incentive compensation award of $250,000 for fiscal 1996. The
Compensation Committee believes that the component parts of Mr. Twyman's total
annual compensation in fiscal 1996 (base salary and incentive compensation)
comprise a conservative compensation package relevant to the Company's peer
group used in the performance graph based on Mr. Twyman's long tenure as Chief
Executive Officer of the Company, his significant contributions to the Company
since 1972 when he became Chairman, the performance of the Company under
difficult industry conditions and Mr. Twyman's present duties and
responsibilities as Chief Executive Officer. In making its decision on Mr.
Twyman's compensation, the Compensation Committee did not quantify or assign
relative weights to any of these factors but exercised its discretion and made a
subjective determination after considering all of these factors.
FEDERAL INCOME TAX DEDUCTIBILITY
Section 162(m) to the Internal Revenue Code generally provides that certain
compensation in excess of $1 million per year paid to the Company's chief
executive officer and any of its four other highest paid execution officers is
not deductible unless the compensation qualifies as performance based
compensation. No officer of the Company received compensation in fiscal 1996
which would result in the nondeductibility of such compensation expense to the
Company. The Compensation Committee intends to review the potential effect of
Section 162(m) periodically and will take appropriate action in the future if
warranted.
CONCLUSION
The Compensation Committee believes that the base salaries and incentive
compensation awards established for the Company's executive officers reflect
appropriate levels given Company and individual performance by management during
fiscal 1996. The Committee will continue to review and evaluate the Company's
executive compensation programs to assure that the programs are competitive in
the marketplace to attract and retain outstanding management employees and to
appropriately award performance. The Board of Directors accepted the report of
the Compensation Committee and approved the recommended adjustments in base
salary and incentive compensation awards.
This report is respectfully submitted by the Compensation and Stock Option
Committee of the Board of Directors composed of:
John W. Berry
Dr. Thomas S. Haggai
Dr. Edward H. Jennings
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<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return
(assuming reinvestment of dividends) on the Shares during the last five fiscal
years ended August 31, 1996 with the S&P 500 Index and a group of peer companies
in the wholesale food industry. The performance graph assumes an initial
investment of $100.00 on August 31, 1991. The information contained in the
graph is not necessarily indicative of future performance.
Comparison of Five-Year Cumulative Total Return Among Company,
Peer Group and S&P 500 Index
[GRAPH]
<TABLE>
<CAPTION>
AUG. 91 AUG. 92 AUG. 93 AUG. 94 AUG. 95 AUG. 96
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
Super Food Services, Inc. 100 80 79 93 107 100
Peer Group 100 98 130 112 123 114
S&P 500 100 108 124 131 159 189
</TABLE>
11
<PAGE>
The composite peer group is composed of Fleming Companies, Inc., Nash Finch
Company, SUPERVALU, Inc., and Richfood Holdings, Inc., which were selected on
the basis that each is primarily a wholesale food distributor. The returns of
the peer group were weighted based on their respective market capitalization.
Super Rite Corp., which had been included in the peer group in prior years, was
acquired by Richfood Holdings, Inc., a member of the peer group.
EMPLOYMENT CONTRACTS
In 1976, The Company entered into an employment agreement with Mr. Twyman.
In 1981, Mr. Twyman's employment agreement was amended at which time the Company
also entered into an employment agreement with Mr. Demos. As amended, the
agreement with Mr. Twyman provides, among other things, for his continued
employment as Chairman of the Board and Chief Executive Officer of the Company
and its subsidiaries at an annual base salary of not less than $200,000 per
year. His present annual base salary is $525,000. In the event of the
permanent disability of Mr. Twyman, the Company will continue to pay him or his
designated beneficiary his then prevailing base salary for a period of twelve
months. If Mr. Twyman is discharged by the Company other than for cause, or if
he is not continued as Chairman of the Board and Chief Executive Officer during
the term of the agreement, or if the shareholders of the Company fail to re-
elect him as a director of the Company, Mr. Twyman has the right to terminate
the agreement and to receive his then prevailing base salary for the full term
of the agreement remaining. The agreement also contains a covenant against
competition for a period of twelve months after termination of employment in the
event Mr. Twyman voluntarily resigns or is discharged for cause. The employment
agreement with Mr. Demos is similar to that described above for Mr. Twyman and
provides for an annual base salary of not less than $75,000 per year. His
present annual base salary is $203,000. The agreement affords Mr. Demos the
same rights afforded Mr. Twyman to terminate the agreement and receive his then
prevailing annual base salary if his employment is not continued until the
expiration date in the same executive capacity he held at the time the agreement
was entered into or if the shareholders of the Company fail to re-elect him as a
director of the Company. The term of Mr. Twyman's employment agreement will
terminate on March 2, 1999 and the term of Mr. Demos' employment agreement will
terminate on March 2, 1998.
Mr. Twyman's and Mr. Demos' employment agreements (collectively, the
"Employment Agreements") have been amended to provide that, effective upon the
date the Purchaser purchases any Shares pursuant to the Offer or, if no Shares
are purchased pursuant to the Offer prior to the Merger, the date that the
Merger is completed (such effective date being the "Payment Date"), the amounts
to which said officers are entitled to through the end of the respective
termination dates of the Employment Agreements will be accelerated so that the
Company shall pay to said officers the sum of: (i) the amount of all unpaid
salary benefits accrued under the Employment Agreement through the Payment Date
not previously paid, and (ii) an amount equal to full base salary for the period
from the Payment Date through the date the Employment Agreements would have been
otherwise terminated, determined without discount. Upon such payment, the
Employment Agreements shall terminate with no further obligation or liability of
either party thereunder. In the event that the Merger Agreement is terminated
for any reason prior to the Payment Date, the above described amendment
thereupon shall terminate and be of no further force or effect.
PENSION PLAN
The following table shows the estimated annual retirement benefits to
employees in the specified remuneration and years of service classifications
indicated payable upon retirement to participants attaining age 65 in 1996,
under the Company's qualified non-contributory defined benefit Retirement Plan
For Employees of Super Food Services, Inc. (the "Retirement Plan"), and if
applicable, amounts attributable to the Company's Amended and Restated
Supplemental Executive Retirement Plan ("Supplemental Plan"), which is a non-
qualified plan maintained for certain officers which provides benefits that
would otherwise be denied by certain limitations imposed on qualified benefit
plans by the Internal Revenue Code (the "Code"):
-12-
<PAGE>
<TABLE>
<CAPTION>
Average Earnings in
Highest Five Consecutive
Years of Last Ten Years Estimated Annual Retirement Benefits for Years
Prior to Retirement Date of Credited Service For Individuals At Age 65 in 1996
- ---------------------------------------------------------------------------------------------
15 20 25 30 35
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
$100,000 . . . . . . . . . . . . . . . $19,444 $25,926 $32,407 $38,889 $45,370
150,000 . . . . . . . . . . . . . . . 29,945 39,926 49,907 59,889 69,870
200,000 . . . . . . . . . . . . . . . 40,444 53,926 67,407 80,889 94,370
250,000 . . . . . . . . . . . . . . . 50,845 67,926 84,907 101,889 118,870
300,000 . . . . . . . . . . . . . . . 61,345 81,926 102,407 122,889 143,370
350,000 . . . . . . . . . . . . . . . 71,845 95,926 119,907 143,889 167,870
400,000 . . . . . . . . . . . . . . . 82,345 109,926 137,407 164,889 192,370
450,000 . . . . . . . . . . . . . . . 92,845 123,926 154,907 185,889 216,870
500,000 . . . . . . . . . . . . . . . 103,444 137,926 172,407 206,889 241,370
550,000 . . . . . . . . . . . . . . . 113,944 151,926 189,907 227,889 265,870
600,000 . . . . . . . . . . . . . . . 124,444 165,926 207,407 248,889 290,370
650,000 . . . . . . . . . . . . . . . 134,944 179,926 224,907 269,889 314,870
700,000 . . . . . . . . . . . . . . . 145,444 193,926 242,407 290,889 339,370
750,000 . . . . . . . . . . . . . . . 155,944 207,926 259,907 311,889 363,870
</TABLE>
Annual retirement benefits payable under the Retirement Plan are calculated
on the basis of l% of the employee's average annual earnings (salary and
incentive compensation) for the highest five consecutive years of earnings
during the last ten calendar years of employment preceding retirement, up to the
employee's average annual compensation level, plus 1.4% of average annual
earnings in excess of the employee's average annual covered compensation level,
multiplied by the employee's years of credited service up to a maximum of 35
years. Covered compensation is the average of an employee's Social Security
Wage Bases during the 35 year period ending in the calendar year in which the
employee is eligible for unreduced Social Security benefits. Benefits shown in
the table are computed on a straight-life annuity basis at normal retirement age
of 65 with no survivor benefits. The retirement benefits would be reduced if an
employee elected early retirement or elected to provide a surviving spouse's
benefit. The benefits shown are not subject to reduction for any Social
Security benefits received. Under the Retirement Plan, a participant with five
years of vesting service may retire with an unreduced pension at age 62. The
credited years of service under the Retirement Plan for individuals listed in
the Summary Compensation Table as of January 1, 1996 were as follows: Mr.
Twyman, 23.42 years; Mr. Robinson, 23.75 years; Mr. Demos, 31.25 years; Mr.
Koogler, 27.33 years; and Mr. Metzgar, 17.5 years.
The above table does not reflect the limits on annual covered compensation
under Section 401(a) (17) of the Code ($150,000 per year) or the limits on
annual benefits payable from the Retirement Plan under Section 415 of the Code
($120,000 per year). To the extent that benefits cannot be provided under the
Retirement Plan, the Company has adopted the Supplemental Plan which is a non-
qualified plan maintained for certain highly compensated employees designated as
participants by the Board of Directors (including the executive officers named
in the Summary Compensation Table) which provides retirement benefits which an
employee is entitled to receive under the Retirement Plan were it not for the
limitations imposed by the Code.
The Company has entered into a grantor trust to provide for the payment of
amounts due under the Supplemental Plan. Pursuant to the trust which is
irrevocable, the Company has deposited, and is obligated to maintain on deposit
with the trustee, cash, marketable securities and/or insurance policies
sufficient to fund such payments. The trust will terminate upon the earlier of
the exhaustion of the trust funds or the final payment to the participants in
the Supplemental Plan, and any remaining assets will be paid to the Company.
-13-
<PAGE>
Upon a change in control, such as the acquisition of Shares pursuant to the
Offer, the Supplemental Plan requires that the Company contribute to the grantor
trust the amount required to make the assets in the trust equal to the present
value of benefits payable to each executive participating in the Supplemental
Plan. The contribution must be made as soon as possible, but not later than 30
days after the change in control and is based on the greater of (i) the present
value of benefits determined as though the executive terminated employment on
the date of the change in control and began immediate payments from the
Company's tax qualified pension plan or (ii) the present value of benefits
determined as if the executive continued employment at his highest level of
compensation until normal retirement age under the Company's tax qualified
pension plan.
The Supplemental Plan and grantor trust also provide that the trustee of
the trust must, within 60 days after the change in control, purchase group or
individual annuity contracts guaranteeing the payment of each participating
executive's accrued benefit under the Supplemental Plan, determined as of the
date of the change in control.
In addition, the Supplemental Plan and grantor trust provide that, within
30 days after the end of each calendar year after a change in control, the
trustee of the trust must purchase an additional amount of annuity equal to the
additional benefit accruing to each participant under the Supplemental Plan
during such calendar year or, if less, the amount accrued since the change in
control. The trustee of the Trust will own the annuity contract(s) described
above.
Effective October 8, 1996, the Supplemental Plan was amended to provide
that each participant's accrued benefit under the Supplemental Plan, determined
as of any date after a change in control, shall not be less than the
participant's accrued benefit on the date of that change in control.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
No stock options or stock appreciation rights were granted in the fiscal
year ended August 31, 1996 to the executive officers listed in the Summary
Compensation Table.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUE TABLE
The following table provides information on option exercises in the fiscal
year ended August 31, 1996 by the executive officers listed in the Summary
Compensation Table and the value of such officers' unexercised options/SARs at
the end of such date. The actual amount, if any, realized upon the exercise of
stock options will depend upon the market price of the Shares relative to the
exercise price per share at the time the option is exercised. As permitted by
the Merger Agreement, the Company intends, effective upon completion of the
Offer, to pay to each holder of outstanding options to purchase Shares an amount
equal to the excess of the Merger Consideration over the per Share exercise
price of the stock options held by such holder multiplied by the number of
Shares then exercisable pursuant to such stock options in exchange for the
surrender and cancellation of such stock options. Also, as permitted by the
Merger Agreement, the Company has accelerated the exercisability or vesting of
all stock options effective upon completion of the Offer, and the following
table reflects such action. At the effective time of the Merger, any stock
options which the holder thereof has not exercised in full or surrendered for
cancellation shall expire.
-14-
<PAGE>
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money
Options/SARs at FY-End (#) Options/SARs at FY-End ($)
Shares
Acquired
on
Exercise Value
(#) Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Name ($) (#) (#) ($) ($) ($)
- ------------------------------------------------------------------------------------------------------------
Jack Twyman 0 0 30,000 0 58,650 0
Sam Robinson 0 0 22,500 0 43,988 0
John Demos 0 0 16,250 0 31,769 0
Robert F. Koogler 0 0 8,860 0 17,321 0
Richard Metzgar 0 0 12,000 0 23,460 0
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the last fiscal year, the Company in the ordinary course of business
maintained bank accounts in and relationships with PNC Bank, Ohio, N.A.,
Cincinnati, Ohio. The Company also has an existing loan agreement with PNC
Bank, Ohio, N.A., for a $10,000,000 revolving credit facility. Jack Twyman,
Chairman of the Board of Directors of the Company is a director of PNC Bank,
Ohio, N.A. The Company expects to continue having banking transactions with PNC
Bank, Ohio, N.A., during the current fiscal year.
All of the above transactions were made in the ordinary course of business
and, in the opinion of management, were on substantially the same terms to the
Company or its subsidiaries as those prevailing at the time from unrelated
parties for comparable transactions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Jack Twyman, Chairman of the Board of the Company serves as a director
of IGA, Inc. Dr. Thomas S. Haggai, Chairman of the Board of IGA, Inc., serves
as a director of the Company and is a member of the Compensation and Stock
Option Committee of the Board of Directors.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and, if any, persons who own more than ten percent of the
Shares to file with the Securities and Exchange Commission and the New York
Stock Exchange initial reports relating to beneficial ownership and reports of
changes in beneficial ownership of such Shares. Copies of these reports must
also be furnished to the Company. Based solely on a review of copies of such
reports furnished to the Company and on written representations from the
reporting persons that no other reports were required, the Company believes that
all applicable Section 16(a) reporting requirements were complied with in the
fiscal year ended August 31, 1996.
