THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
2 PARAGON DRIVE
MONTVALE, NEW JERSEY 07645
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held July 14, 2005
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To the Stockholders of
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of The Great
Atlantic & Pacific Tea Company, Inc. (the "Company") will be held at The
Woodcliff Lake Hilton, 200 Tice Boulevard, Woodcliff Lake, New Jersey, on July
14, 2005, at 9:00 A.M. (E.D.T.). At the meeting, stockholders will act on the
following matters:
1. Election of nine (9) directors, each for a term of one (1) year;
2. Amendment to the 1998 Long Term Incentive and Share Award Plan (the
"Plan") to increase the number of shares that may be issued under the
Plan by 3,000,000; and
3. Any other matters that properly come before the meeting and any
adjournments thereof.
The Board of Directors has fixed May 20, 2005, as the record date for the
determination of stockholders entitled to notice of, and to vote at, the
meeting. Accordingly, only stockholders of record at the close of business on
that date are entitled to vote at the meeting or at any adjournment thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE EITHER COMPLETE AND
SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO THE COMPANY IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, OR
USE THE INTERNET OR PHONE VOTING OPTIONS DETAILED ON THE PROXY CARD.
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended February 26, 2005, accompanies this proxy statement.
By Order of the Board of Directors
MITCHELL P. GOLDSTEIN
Executive Vice President, Chief Financial Officer
& Secretary
Dated: May 27, 2005
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You are cordially invited to attend the meeting. Whether or not
you plan to do so, your vote is important. Please promptly submit
your proxy by mail, telephone or internet.
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THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
2 PARAGON DRIVE
MONTVALE, NEW JERSEY 07645
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PROXY STATEMENT
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SOLICITATION OF PROXIES
This proxy statement is furnished by the Board of Directors of The Great
Atlantic & Pacific Tea Company, Inc. (the "Company") for use at the Company's
Annual Meeting of Stockholders to be held on July 14, 2005 (the "Annual
Meeting"). It is expected that the solicitation of proxies will be primarily by
mail. Proxies may also be solicited personally by regular employees of the
Company, by telephone or by other means of communication at nominal cost. The
Company will bear the cost of such solicitation. It will reimburse banks,
brokers and trustees, or their nominees, for reasonable expenses incurred by
them in forwarding proxy material to beneficial owners of stock in accordance
with the New York Stock Exchange ("NYSE") schedule of charges. This proxy
statement is first being mailed to stockholders on or about May 27, 2005.
TREATMENT AND REVOCATION OF PROXIES
A stockholder may revoke a proxy at any time prior to its exercise at the Annual
Meeting by giving notice in writing to the Secretary of the Company by July 1,
2005, by executing a later-dated proxy or by casting a ballot at the Annual
Meeting in person. All shares represented by a properly executed proxy will be
voted unless it is revoked and, if a choice is specified, in accordance with
such specification. If no choice is specified, a proxy will be voted FOR the
election of the nine (9) nominees named under "Election of Directors" and FOR
the approval of the Amendment to the 1998 Long Term Incentive and Share Award
Plan in order to reserve an additional 3,000,000 shares of the Company's $1 par
value common stock (the "Common Stock") for issuance under such plan. There are
no appraisal or dissenter's rights with respect to any matter to be voted on at
the Annual Meeting. The Company will treat proxies marked as abstaining
(including proxies containing broker non-votes) on any matter to be acted upon
by stockholders, as present at the Annual Meeting for purposes of determining a
quorum, but will not count such proxies as votes cast on such matters.
VOTING SECURITIES
Only stockholders of record at the close of business on May 20, 2005, will be
entitled to vote at the Annual Meeting. As of May 20, 2005, there were
outstanding 39,537,186 shares of Common Stock, each of which is entitled to one
vote.
ITEM 1--ELECTION OF DIRECTORS
Nine (9) directors will be elected to the Board of Directors of the Company
("Board of Directors" or "Board") at the Annual Meeting. The persons named as
proxies in the accompanying proxy intend to vote, unless otherwise instructed,
for the election to the Board of the persons named below. Each nominee is
presently a member of the Board and was elected at the Company's annual meeting
for the fiscal year ended February 28, 2004 ("Fiscal 2003").
Each nominee listed below has consented to nomination and to serve for a
one-year term. If elected, each nominee will serve until the Company's Annual
Meeting in 2006 and until his/her successor is duly elected and qualified. The
Board has determined that five (5) of the nine (9) nominees are independent
directors under the Company's Standards of Independence, which conform to, and
are more stringent than, the independence requirements in the NYSE listing
rules. The Standards of Independence are included in the Company's Corporate
Governance Guidelines, which can be found on the Company's website,
www.aptea.com.
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THE BOARD RECOMMENDS A VOTE FOR THE FOLLOWING NOMINEES: John D. Barline, Dr.
Jens-Jurgen Bockel, Bobbie Andrea Gaunt, Christian W. E. Haub, Helga Haub, Dan
Plato Kourkoumelis, Edward Lewis, Richard L. Nolan and Maureen B. Tart-Bezer.
The affirmative vote of a majority of the votes cast at the Annual Meeting is
required for the election of each director.
JOHN D. BARLINE
Mr. Barline, age 58, has been a member of the Board since July 9, 1996. He is a
member of the Compensation, Executive and IT Oversight Committees.
Mr. Barline, an attorney in private practice since 1973, is currently of counsel
at the law firm of Williams, Kastner & Gibbs LLP in Tacoma, Washington. His
areas of practice include corporate tax law, mergers and acquisitions, general
business law, estate planning and real estate. He provides personal legal
services to the Haub family, including Helga and Christian W. E. Haub.
Mr. Barline is a member of the board of directors and corporate secretary of Sun
Mountain Resorts, Inc. and a director of Wissoll Trading Company, Inc. and Sun
Mountain Lodge, Inc., each a small closely held corporation owned primarily by
the Haub family. He is also chair of the board of directors of the Le May
Automobile Museum, and a director and chair of the compensation committee of
Precision Machine Works, Inc.
DR. JENS-JURGEN BOCKEL
Dr. Bockel, age 62, has been a member of the Board since April 29, 2004. He is a
member of the Executive and Finance Committees.
Dr. Bockel has served as the chief financial officer of Tengelmann
Warenhandelsgesellschaft KG ("Tengelmann") since January 1, 2000. From January,
1995 through December, 1999, Dr. Bockel served as chief financial officer and as
a member of the executive board of Schickedanz Holding - Stiftung & Co. KG, in
Furth, Germany.
Dr. Bockel is a member of the supervisory board of Kaiser's Tengelmann AG, in
Viersen, Germany, OBI AG, in Wermelskirchen, Germany, Lowa and Zielpunkt GmbH,
in Vienna, Austria, and Getroncis NV, in Amsterdam, Netherlands. He is also
chair of the family council and vice-chairman of the advisory board of
Fahrzeug-Werke Lueg AG, in Bochum, Germany.
BOBBIE ANDREA GAUNT
Mrs. Gaunt, age 58, has been an independent member of the Board since May 15,
2001. She is Lead Director, Chair of the Compensation Committee and a member of
the Audit, Governance and Executive Committees.
Mrs. Gaunt was elected as an officer, and as vice president, of the Ford Motor
Company in June, 1999, and served as president and chief executive officer of
the Ford Motor Company of Canada, Ltd., from 1997 until her retirement from the
company in December of 2000. Mrs. Gaunt began her automotive career with Ford in
1972 and for over 28 years served in various managerial positions in the areas
of sales, marketing, research and building customer relationships. Between the
months of June through October, 2004, Ms. Gaunt served as Interim Chief
Executive Officer of ADVO, Inc. in Windsor, Connecticut.
Mrs. Gaunt is a member of the board of advisors of the Katz Business School,
University of Pittsburgh; is a member and chair of the board of the Saugatuck
Center for the Arts, in Saugatuck, Michigan; and, serves on the board of
directors and as chair of the compensation committee, and is a member of the
Governance Committee of ADVO, Inc., Windsor, Connecticut.
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CHRISTIAN W. E. HAUB
Mr. Haub, age 40, has been a member of the Board since December 3, 1991. He
currently serves as Chairman of the Board & Chief Executive Officer of the
Company, Chair of the Executive Committee and a member of the Finance Committee.
Mr. Haub has served as Chief Executive Officer of the Company since May 1, 1998
and Chairman of the Board since May 1, 2001. In addition, Mr. Haub also served
as President of the Company from December 7, 1993 through February 24, 2002, and
from November 4, 2002 through November 15, 2004.
Mr. Haub, son of Helga Haub, is a partner and Co-Chief Executive Officer of
Tengelmann. Mr. Haub is on the board of directors of the Food Marketing
Institute and on the board of trustees of St. Joseph's University, in
Philadelphia, Pennsylvania.
HELGA HAUB
Mrs. Haub, age 70, has been a member of the Board since 1979. She is a member of
the Executive and Finance Committees.
Mrs. Haub is a member of the supervisory board of Kaiser's Tengelmann AG, an
affiliate of Tengelmann, a consultant to Tengelmann and has an interest in Tenga
Capital Corporation. She is also a director of The George C. Marshall Home
Preservation Fund, Inc. and the Elizabeth Haub Unterstutzungskasse e.V., a
member of the board of governors of World USO, president of the board of
trustees of the Elizabeth Haub Foundation for Environmental Policy and Law and a
member of the supervisory board of GfK Gesellschaft fur Konsumforschung, in
Nurnberg, Germany.
Mrs. Haub is the mother of Christian W. E. Haub.
DAN PLATO KOURKOUMELIS
Mr. Kourkoumelis, age 54, has been an independent member of the Board since
March 21, 2000. Mr. Kourkoumelis is Chair of the IT Oversight Committee and a
member of the Audit, Executive and Governance Committees.
Mr. Kourkoumelis was president and chief operating officer of Quality Food
Centers, Inc. from May 1989 until September 1996, and thereafter president and
chief executive officer of Quality Food Centers, Inc. until September 25, 1998,
when he retired after Quality Food Centers, Inc. was acquired. He also served as
a director of Quality Food Centers, Inc. from April 1991 until March 1998. Mr.
Kourkoumelis is a director of Expeditors International Inc. and a director and
past president of the Western Association of Food Chains. Mr. Kourkoumelis is a
member of the compensation and audit committees of Expeditors International.
EDWARD LEWIS
Mr. Lewis, age 65, has been an independent member of the Board since May 16,
2000. Mr. Lewis is Chair of the Finance Committee and a member of the
Compensation and Governance Committees.
Mr. Lewis is chairman and cofounder of ESSENCE magazine. He is also a director
of the Lower Manhattan Development Corporation, and a member of the leadership
council of the Tanenbaum Center for Interreligious Understanding, the Harvard
Business School Board of Directors of the Associates, the Economic Club of New
York, the New York City Partnership, the Central Park Conservancy, Girls, Inc.,
NYC2012 and the board of Jazz at Lincoln Center for the Performing Arts. He also
served as chairman of the Magazine Publishers of America from 1997 to 1999,
becoming the first African-American to hold this position in the 75-year history
of the organization.
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RICHARD L. NOLAN
Mr. Nolan, age 65, has been an independent member of the Board since October 5,
1999. He is Chair of the Governance Committee and a member of the Audit and IT
Oversight Committees.
Mr. Nolan, the Philip M. Condit Professor of Business Administration at the
University of Washington Business School and the William Barclay Harding
Professor of Business Administration (Emeritus) at the Harvard Business School,
is the originator of the "Stages Theory," one of the most widely used management
frameworks for information technology baselining and planning. He is also a
member of the board of directors of Novell and ArcStream. Mr. Nolan is chairman
of the IT Oversight Committee and a member of the compensation committee of
Novell.
MAUREEN B. TART-BEZER
Ms. Tart-Bezer, age 49, has been an independent member of the Board since May
15, 2001. Ms. Tart-Bezer is Chair of the Audit Committee and a member of the
Finance and Governance Committees.
Ms. Tart-Bezer is executive vice president and chief financial officer of Virgin
Mobile USA, a wireless MVNO (mobile virtual network operator) venture in the
United States. Prior to her current position, Ms. Tart-Bezer was executive vice
president and general manager of the American Express Company, U.S. Consumer
Charge Group through December, 2001. From 1977 to 2000, Ms. Tart-Bezer was with
AT&T Corporation, serving as a senior financial officer of the company,
including positions as senior vice president and corporate controller and senior
vice president and chief financial officer for the Consumer Services Group.
Ms. Tart-Bezer is currently a trustee of Caldwell College, a private college in
Caldwell, New Jersey and has served as a trustee of the AT&T Foundation and as a
director of AT&T Capital Corp. and Lucent Technologies. She is a prior director
of MaMamedia.com and trustee to St. Peter's College in Jersey City, New Jersey.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
BENEFICIAL OWNERSHIP OF MORE THAN 5% OF THE COMPANY'S COMMON STOCK
Except as set forth below, as of May 16, 2005, no person beneficially owned, to
the knowledge of the Company, more than 5% of the outstanding shares of the
Company's Common Stock.
Amount and Nature of Beneficial Ownership
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Sole Shared
Total Beneficial Voting/Investment Voting/Investment
Name and Address of Beneficial Owner Ownership Power Power % of Class
------------------------------------------------------- ---------------- ----------------- ----------------- ----------
Christian W. E. Haub (1) 22,483,371 487,500 (2) 21,995,871(3) 57.2%
2 Paragon Drive
Montvale, NJ 07645
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Erivan Karl Haub (1) 22,130,471 135,100 21,995,371 56.3%
Wissollstrasse 5-43
45478 Mulheim an der Ruhr, Germany
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Karl-Erivan Warder Haub (1) 21,995,371 0 21,995,371 55.9%
Wissollstrasse 5-43
45478 Mulheim an der Ruhr, Germany
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Tengelmann Warenhandelsgesellschaft KG (1) 21,995,371 0 21,995,371 55.9%
Wissollstrasse 5-43
45478 Mulheim an der Ruhr, Germany
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Tengelmann Verwaltungs und Beteiligungs GmbH (1) 21,995,371 0 21,995,371 55.9%
Wissollstrasse 5-43
45478 Mulheim an der Ruhr, Germany
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Prentice Capital Management, LP (4) 3,192,600 0 3,192,600 8.1%
623 Fifth Avenue, 32nd Floor
New York, NY 10022
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Dimensional Fund Advisors, Inc. (5) 3,107,350 3,107,350 0 8.0%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
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Barclays Global Investors, NA and affiliates (6) 2,745,556 2,531,650/2,745,556 0 7.0%
45 Fremont Street
San Francisco, CA 94105
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Goodwood Inc. and affiliates (7) 2,075,100 0 2,075,100 5.3%
212 King Street West
Suite 201
Toronto, Canada M5H 1K5.
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(1) The Company obtained the information regarding Tengelmann, Tengelmann
Verwaltungs- und Beteiligungs GmbH ("TVB"), Erivan Karl Haub ("Erivan"),
Karl-Erivan W. Haub ("Karl") and Christian W. E. Haub ("Christian") from
such persons, from a Schedule 13G filed with the Securities and Exchange
Commission (the "SEC") on August 8, 2002 and from Form 4s filed with the
SEC on October 26, 2004, September 21, 2004, August 4, 2004 and July 28,
2004. Tengelmann is engaged in general retail marketing and controls, among
others, Kaiser's Tengelmann AG, a supermarket retailer in Germany, as well
as OBI AG, a home improvement retailer in Europe and Asia. The general
partners of Tengelmann are Erivan, TVB and two of Erivan's sons, Karl and
Christian. The sole limited partner of Tengelmann is Georg R. O. Haub
("Georg"), Erivan's other son, who manages the real estate activities of
the Haub family. Erivan owns six percent (6%) of the partnership interests
of Tengelmann. The rest is divided equally among Karl, Christian and Georg.
TVB, the sole managing partner of Tengelmann, has the exclusive right to
direct Tengelmann and is solely responsible for its conduct. TVB, whose
only shareholders are Erivan and his three sons, is not an operating
company. Karl and Christian are the only Managing Directors of TVB.
(2) Includes options to purchase 482,500 shares of Common Stock, all of which
are exercisable within sixty (60) days.
(3) Includes the 500 shares of Common Stock held by the wife of Christian W. E.
Haub and the 21,995,371 shares of Common Stock that are held by Tengelmann.
(4) On May 12, 2005, Prentice Capital Management, LP, a Delaware limited
partnership ("Prentice Capital"), and Michael Zimmerman, a United States
citizen, jointly filed a Schedule 13G with the SEC, with respect to
3,192,600 shares of Common Stock (the "Prentice Shares") over which
Prentice Capital and Zimmerman share voting and investment power. As
indicated in the Schedule 13G, the Prentice Shares are held by a number of
investment funds, including Prentice Capital Partners, LP, Prentice Capital
Partners QP, LP and Prentice Capital Offshore, Ltd., and managed accounts
over which Prentice Capital serves as principal investment manager. As
investment manager, Prentice Capital has voting and dispositive authority
over the Prentice Shares. Mr. Zimmerman is the Managing Member of Prentice
Management GP, LLC, the general partner of Prentice Capital and Prentice
Capital GP, LLC, the general partner of certain investment funds, and thus,
may also be deemed to control and to be the beneficial owner of the
Prentice Shares. Prentice Capital and Michael Zimmerman, to the extent
permitted by law, disclaim beneficial ownership over the Prentice Shares.
- 6 -
(5) The Company derived the information regarding Dimensional Fund Advisors
Inc., a Delaware corporation ("Dimensional"), from a Schedule 13G filed
with the SEC on February 9, 2005. Dimensional is an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940. It
furnishes investment advice to four registered investment companies, and
serves as investment manager to certain other commingled group trusts and
separate accounts (collectively, the "Funds"). In its role as investment
advisor or manager, Dimensional possesses voting and/or investment power
over the securities of the Company that are owned by the Funds. Dimensional
disclaims beneficial ownership of such securities.
(6) The Company obtained the information regarding Barclays Global Investors,
N.A. and certain of its affiliates from a Schedule 13G filed with the SEC
on February 14, 2005. Barclays Global Investors, N.A., and Barclays, 2005
Global Fund Advisors, report sole voting power over 1,794,568 and 737,082,
respectively and investment power over 2,007,441 shares and 738,115,
respectively.
(7) On February 14, 2005, Goodwood Fund ("Fund"), Arrow Goodwood Fund
("Arrow"), Goodwood Capital Fund ("Capital Fund"), The Goodwood Fund 2.0
Ltd. ("2.0"), KBSH Goodwood Canadian Long/Short Fund ("KBSH"), Goodwood
Inc. ("Goodwood"), 1354037 Ontario Inc. ("Ontario"), Peter H. Puccetti
("Puccetti"), 620088 BC Limited ("BC") and J. Cameron MacDonald
("MacDonald"), collectively, filed a Schedule 13G with the SEC. This
Schedule 13G indicates that Goodwood acts as the investment manager of each
of Fund, Arrow, Capital Fund, 2.0 and KBSH, which are the sole owners of
1,145,000 shares, 700,500 shares, 99,300 shares, 90,900 shares and 24,400
shares of the Company's Common Stock, respectively. As investment manager,
Goodwood is deemed to beneficially own all of the foregoing 2,060,100
shares (the "Goodwood Shares"). Goodwood, however, disclaims such
ownership. Goodwood is controlled by Ontario, which in turn is controlled
by Mr. MacDonald and Mr. Puccetti. Mr. MacDonald, Mr. Puccetti and Ontario,
are therefore, deemed to beneficially own the Goodwood Shares. Mr.
MacDonald, Mr. Puccetti and Ontario, however, disclaim such beneficial
ownership. Lastly, BC, which is controlled by Mr. MacDonald, holds 15,000
shares of the Company's Common Stock. Mr. MacDonald disclaims beneficial
ownership of such 15,000 shares.
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth the number of shares of the Company's Common
Stock beneficially owned as of May 16, 2005, by each director and nominee, the
chief executive officer of the Company (the "CEO") and the four (4) most highly
compensated officers of the Company other than the CEO who were serving as
executive officers of the Company at the end of the fiscal year ended February
26, 2005 ("Fiscal 2004") (collectively, with the CEO, the "Named Executive
Officers") and by all directors and the Named Executive Officers as a group:
SHARES STOCK
BENEFICIALLY OPTION DEFERRED % OF
OWNED SHARES(1) PLAN (2) TOTAL CLASS
------------- --------- -------- ---------- -----
John D. Barline (3) 10,644 4,100 13,230 27,974 *
Jens- Jurgen Bockel 2,000 0 7,232 9,232 *
Eric Claus 5,885 0 0 5,885 *
Christian W. E. Haub (3) 21,995,871 482,500 0 22,478,371 57.2%
Helga Haub (3) 9,744 2,500 0 12,244 *
Bobbie Andrea Gaunt 1,000 3,000 21,063 25,063 *
Mitchell P. Goldstein 5,300 67,499 0 72,799 *
Dan Kourkoumelis 8,444 3,500 10,499 22,443 *
Edward Lewis 8,944 3,500 11,284 23,728 *
John E. Metzger 3,500 107,999 0 111,499 *
Richard L. Nolan 100 3,500 17,282 20,882 *
Brian C. Piwek 2,000 150,000 0 152,000 *
Maureen B. Tart-Bezer 2,000 3,000 10,531 15,531 *
All directors and named executive officers as a 22,055,432 831,098 91,121 22,977,651 58.4%
group (13 persons)
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* Less than 1%
(1) The amounts shown include all stock options granted under the Company's
stock option plans exercisable within sixty (60) days from May 16, 2005.
(2) These shares represent the stock equivalent units accrued under the
Company's deferred compensation plan for non-employee directors. These share
equivalents are subject to Common Stock market price fluctuations.
(3) The association of Dr. Bockel and Mr. Barline with Helga and Christian Haub
and with Tengelmann is set forth under "Item 1 -- Election of Directors." Mr.
Christian W. E. Haub has shared voting and investment power over the shares of
Common Stock owned by Tengelmann and they are therefore included in the number
of shares beneficially owned by him. Mrs. Haub disclaims any investment or
voting power over the shares owned by Mr. Erivan Haub and the same are not
included herein.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's executive officers and directors, and persons who own
more than 10% of the Company's Common Stock, to file reports with the SEC
regarding their ownership of such Common Stock. Based on a review of the reports
and written certifications provided to the Company, the Company believes that
during Fiscal 2004, except as indicated in the following sentences, all such
reports were filed on a timely basis. Dr. Bockel, a director of the Company,
filed a Form 4 on June 23, 2004 for a May 25, 2004 purchase of 2,000 shares of
Common Stock. Prior to the adoption of the 2004 Non-Employee Director
Compensation Plan at the July 2004 stockholder meeting, the Company compensated
non-employee directors under the Directors' Deferred Payment Plan, pursuant to
which the Company, on a monthly basis, credited a portion of each non-employee
director's retainer to a common stock equivalent account. Each director reported
such transactions on a Form 5, filed timely after the end of each fiscal year,
including Fiscal 2004. Due to a recent change in the Form 4 and Form 5 filing
rules, for Fiscal 2004, such transactions should have been reported on a Form 4
on a monthly basis.
THE BOARD OF DIRECTORS OF THE COMPANY
GOVERNANCE OF THE COMPANY
The Board of Directors is responsible for the supervision of the overall affairs
of the Company. The Board has adopted a Code of Business Conduct and Ethics that
applies to all employees, officers and directors of the Company, and has
established a set of Corporate Governance Guidelines, which set forth the
policies and principles of the Board and the Company.
The Company's website, www.aptea.com, includes the Company's governance
materials, including without limitation, the Corporate Governance Guidelines,
the Code of Business Conduct and Ethics, information regarding the process by
which stockholders can send communications to the Board and the Company's policy
regarding the attendance of members of the Board at annual meetings.
BOARD MEETINGS AND COMMITTEES
During Fiscal 2004, the Board of Directors held eight (8) meetings (one (1) by
telephone) and committees thereof held twenty-six (26) meetings. Each director
attended at least 75% of the aggregate of (i) the total number of meetings of
the Board and (ii) the total number of meetings held by all Committees of the
Board on which such director served. Each meeting includes an executive session
of the independent directors, which is chaired by the Lead Director. The
independent directors elect the Lead Director each December for the following
calendar year. The Lead Director for 2005 is Bobbie Gaunt. The Board has an
Executive Committee, a Finance Committee, an Audit Committee, a Compensation
Committee, a Governance Committee and an IT Oversight Committee. The Audit
Committee, Compensation Committee, Governance Committee and IT Oversight
Committee each have a written charter, which outlines the respective committee's
duties and responsibilities. The committee charters are published in the
Corporate Governance section of the Company's website, www.aptea.com. A copy of
the Audit Committee charter is also attached as Appendix A to this proxy
statement.
- 8 -
Because Tengelmann owns more than 50% of the Company's Common Stock, the Company
qualifies as a "controlled company" under the NYSE listing standards. As a
controlled company, the Company is exempt from the NYSE's requirement that it
have a majority of independent directors and entirely independent compensation
and nominating and corporate governance committees. As indicated below, with the
exception of the Compensation Committee, which although not entirely independent
does not include any management directors, the Company has voluntarily complied
with the NYSE's independence requirements. Additionally, the Company has chosen
to have the entirely independent Governance Committee, rather than the
Compensation Committee, review and recommend changes to the CEO's compensation.
The Audit Committee, which held twelve (12) meetings in Fiscal 2004 (eight (8)
by telephone), consists of Maureen Tart-Bezer, as Chair, Bobbie Gaunt, Dan
Kourkoumelis and Richard Nolan. The Board has determined that each member of the
Audit Committee is independent in accordance with the NYSE listing rules, the
Company's Standards of Independence and Rule 10A-3 of the Exchange Act. In
addition, the Board has determined that each member of the Audit Committee
qualifies as an "audit committee financial expert," as defined by the SEC. The
Audit Committee (i) reviews annual financial statements prior to submission to
the Board and reports thereon, (ii) reviews quarterly results prior to release,
(iii) at its discretion, examines and considers matters relating to the internal
and external audit of the Company's accounts and financial affairs, (iv)
appoints the independent accountants, (v) determines the compensation and
retention of, and oversees, the outside accountants, and (vi) as appropriate,
meets with Company personnel in the performance of its functions.
The Compensation Committee, which held eight (8) meetings in Fiscal 2004,
consists of Bobbie Gaunt, as Chair, John Barline and Edward Lewis. The
Compensation Committee (i) except with respect to the Company's CEO, establishes
and approves salaries and salary increases and benefits where the median base
annual compensation for the salary level is at least $273,000, (ii) recommends
to the Board and interprets incentive plans, and (iii) serves as the committee
to administer the employee stock option and long term incentive and share award
plans.
The Governance Committee, which held three (3) meetings in Fiscal 2004, consists
of Richard Nolan, as Chair, Bobbie Gaunt, Dan Kourkoumelis, Edward Lewis and
Maureen Tart-Bezer. The Board has determined that each member of the Governance
Committee is independent. The Committee's primary purpose is to (i) evaluate the
performance of the members of the Board individually and as a group, (ii) review
and recommend any changes to the CEO's compensation, (iii) recommend to the
Board guidelines and policies for the corporate governance of the Company, (iv)
oversee and recommend changes to the governance policies of the Company, examine
the relationship between management and the Board and annually review the status
of director compensation, and (v) act as a committee for the nomination of
candidates for election to the Board.
The Governance Committee will consider director candidates suggested by members
of the Board, as well as candidates suggested by management and by stockholders.
To submit a recommendation for the Company's next annual meeting, to be held in
July, 2006, please provide the prospective candidate's name, contact
information, biographical data and qualifications, together with the prospective
candidate's written consent to being named as a nominee and to serving on the
Board if nominated and elected, to the Governance Committee, c/o The Great
Atlantic & Pacific Tea Company, Inc., Chief Legal Officer, 2 Paragon Drive,
Montvale, NJ, 07645, by February 1, 2006.
The Governance Committee screens all potential candidates in the same manner
regardless of the source of the recommendation. For each candidate, the
Governance Committee determines whether the candidate meets the Company's
minimum qualifications and specific qualities and skills for directors, which
are set forth in the Corporate Governance section of the Company's website, and
evaluates the candidate's (i) character, judgment, personal and professional
ethics, integrity, values and familiarity with national and international issues
affecting business, (ii) depth of experience, skills and knowledge complementary
to the Board and the Company's business, and (iii) willingness to devote
sufficient time to carry out the duties and responsibilities effectively. The
Governance Committee also considers such other relevant factors as it deems
appropriate.
- 9 -
BOARD OF DIRECTOR COMPENSATION
The Company does not pay directors who are also officers of the Company any
additional compensation or benefits for serving on the Board. The Company pays
non-employee directors pursuant to the 2004 Non-Employee Director Compensation
Plan (the "Plan"), which provides for the payment of a portion of each
non-employee director's fees in cash and a portion in shares of Common Stock.
The Plan was adopted by the stockholders at the Company's annual meeting for
Fiscal 2003.
Under the Plan, the Company pays non-employee directors an annual retainer of
$32,000, plus an attendance fee of $1,000 for each Board meeting attended and
$1,000 for each Committee meeting attended if substantial time or effort is
involved, plus expenses of attendance. If two (2) or more compensable meetings
are held on the same day, the fee for the second meeting is limited to $500. The
Company pays the Chair of each Committee, except the Executive Committee Chair,
an additional $5,000 per year. In addition, the Company makes an annual grant to
each non-employee of that number of shares of Common Stock equal to (x) $45,000,
divided by (y) the closing price of the Company's Common Stock on the NYSE, as
reported in the Wall Street Journal on the date of grant, which is the first
business day after the applicable annual meeting of stockholders.
Each non-employee director may elect to defer all or any portion of his/her cash
and equity compensation. A non-employee director shall always be fully vested in
his/her deferral account. The Company's obligation to pay benefits under the
Plan, however, represents an unfunded, unsecured obligation of the Company and
no non-employee director will have any secured interest or claim in any assets
or property of the Company.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
A&P Properties Limited, a subsidiary of the Company, leases a store in Windsor,
Ontario, Canada that sits on property of Tenga Capital Corporation, which is
owned by Erivan and Helga Haub. The lease, which commenced in 1983, currently
expires on October 31, 2013 and provides for four five (5) year renewal options.
The base annual rental is CN$388,540 until October 31, 2013. During the first
option the base annual rent increases to CN$407,967; during the second option to
CN$427,934; and the final two options are at rent to be determined.
During Fiscal 2003, the Company entered into a three (3) year agreement with OBI
International, a subsidiary of Tengelmann, to purchase seasonal merchandise to
be sold in the Company's stores. In Fiscal 2004, the Company's purchases from
OBI International totaled $4.7 million.
The Company owns a jet aircraft, which Tengelmann leases from the Company under
a full cost reimbursement lease. During Fiscal 2004, Tengelmann was obligated to
and has reimbursed the Company $3,507,959, for its use of the aircraft.
- 10 -
SUMMARY COMPENSATION TABLE(1)
LONG TERM
COMPENSATION
AWARDS
--------------------------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
------------------- UNDERLYING COMPENSATION
PRINCIPAL POSITION DURING FISCAL YEAR YEAR SALARY ($)(2) BONUS ($) OPTIONS/SARS(#) ($)(6)
------------------------------------- ---- ------------- --------- --------------- ------------
Christian W. E. Haub 2004 US $752,000 $768,550 -- $156,247
Chairman & Chief Executive Officer 2003 766,462 413,600 -- 38,756
2002 752,000 -- -- 37,962
Brian C. Piwek (3) 2004 US $500,000 $455,875 -- $59,785
President and Chief Operating Officer 2003 509,615 450,000 50,000 31,616
2002 372,462 291,000 100,000 44,152
Eric Claus (4) 2004 CN $500,000 $455,875 -- $23,791
President and Chief Executive Officer, 2003 509,615 240,000 50,000 2,153
A&P Canada 2002 144,426 116,400 75,000 785
Mitchell P. Goldstein (5) 2004 US $364,519 $435,000 -- $35,591
Executive Vice President, Chief Financial 2003 346,538 219,120 50,000 21,624
Officer & Secretary 2002 340,000 90,760 20,000 20,479
John E. Metzger 2004 US $305,000 $373,625 -- $79,923
Senior Vice President, Chief Information 2003 $310,865 188,490 50,000 20,397
Officer 2002 305,000 179,071 -- 19,189
(1) The cash amounts included in the Summary Compensation Table are reported in
American dollars for Mr. Haub, Mr. Piwek, Mr. Goldstein and Mr. Metzger, and in
Canadian dollars for Mr. Claus.
(2) The Named Executive Officers earned fifty-two (52) weeks of Salary in Fiscal
2004, fifty-three (53) weeks of Salary in Fiscal 2003 and fifty-two (52) weeks
of Salary in Fiscal 2002.
(3) Mr. Piwek was promoted from President and Chief Executive Officer of A&P
U.S. to President and Chief Operating Officer on November 15, 2004.
(4) Mr. Claus was hired as President and Chief Executive Officer, A&P Canada on
November 11, 2002.
(5) Mr. Goldstein was promoted from Senior Vice President, Chief Financial
Officer to Executive Vice President, Chief Financial Officer & Secretary on
November 15, 2004.
(6) For Fiscal 2002 and Fiscal 2003, the amounts reported in All Other
Compensation include contributions by the Company to the 401(k) Plan and the
Supplemental Retirement and Benefit Restoration Plan and premiums paid by the
Company for life insurance. For Fiscal 2004 the amounts reported in All Other
Compensation include: (a) a contribution by the Company to the 401(k) Plan and
the Supplemental Retirement and Benefit Restoration Plan for Mr. Haub ($34,845),
Mr. Claus ($2,461), Mr. Goldstein ($20,296), Mr. Metzger ($18,113) and Mr. Piwek
($25,346); (b) premiums paid by the Company for life insurance for Mr. Haub
($2,646), Mr. Claus ($1,314), Mr.Goldstein ($2,249), Mr. Metzger ($2,566) and
Mr. Piwek ($5,286); (c) premiums paid for health insurance under the Company's
Executive Medical Plan for Mr. Haub ($14,500), Mr.Goldstein ($12,574), Mr.
Metzger ($14,420) and Mr. Piwek ($14,420); and (d) amounts paid by the Company
for cars for Mr.Goldstein ($471), Mr. Metzger ($16,832), Mr. Claus ($20,016) and
Mr. Piwek ($14,733) and amounts paid by the Company for a car and a full-time
driver for Mr. Haub ($89,380). The Fiscal 2004 amounts reported in All Other
Compensation also include (y) for Mr. Metzger, a tax gross-up of $7,003 for
income of $13,860 imputed to him as a result of the Company's reimbursement of
certain living expenses, and (z) for Mr. Haub and Mr. Metzger, imputed interest
payments on deferred compensation under The Great Atlantic & Pacific Tea
Company, Inc., Executive Deferred Compensation Plan of $19,877 and $7,129,
respectively. The amounts indicated in this footnote are reported in American
dollars for Mr. Haub, Mr. Piwek, Mr. Goldstein and Mr. Metzger, and in Canadian
dollars for Mr. Claus.
- 11 -
EMPLOYMENT AND TERMINATION AGREEMENTS
The Company is a party to employment agreements with each of Mr. Claus, Mr.
Goldstein, Mr. Metzger and Mr. Piwek (the "Employment Agreements") that provide
for the continued employment of such executives for a rolling eighteen (18)
month term commencing May 11, 2004 for Mr. Claus, August 24, 2004 for Mr.
Goldstein, November 14, 2002 for Mr. Metzger and May 11, 2004 for Mr. Piwek. The
Employment Agreements also provide for participation in Company benefit programs
(including bonus programs) and services, facilities and perquisites appropriate
to their positions, including without limitation, the Executive Medical Plan.
Following termination other than for Cause or resignation for Good Reason and in
the absence of a Change of Control (as such terms are defined in the Employment
Agreements), Mr. Claus, Mr. Goldstein, Mr. Metzger and Mr. Piwek are entitled to
receive (i) a pro rata bonus for the year of termination, (ii) continued
insurance coverage for a period of twenty-four (24) months, for Mr. Claus and
Mr. Piwek, and for a period of eighteen (18) months, for Mr. Goldstein and Mr.
Metzger, and (iii) equal monthly payments of one-twelfth of annual base salary
plus average bonus for a period of twenty-four (24) months, for Mr. Claus and
Mr. Piwek, and for a period of eighteen (18) months, for Mr. Goldstein and Mr.
Metzger. In addition, for Mr. Piwek, in connection with a departure for Good
Reason (as defined in his Employment Agreement), which relates to the changes in
the Company's organizational structure that occurred on November 15, 2004, the
Company shall (i) immediately vest all of his outstanding but unvested options,
and such options shall become exercisable for a period of one (1) year from the
date of his departure, and (ii) immediately vest Mr. Piwek's SERP benefits at
the ten (10) year benefit level.
In the event of a Change of Control, in addition to certain other amounts, the
Company shall pay to the applicable executive, as a severance benefit, an amount
equal to three (3) times the sum of (i) the executive's final base salary, and
(ii) the average of the applicable executive's three (3) highest bonuses in the
(5) calendar years preceding the termination. Such amount shall be paid in a
lump sum within forty-five (45) days after the date of such termination of
employment. The Company shall also pay to the executive, on or about the date on
which bonuses for the applicable year are paid to executives of the Company, a
pro-rata bonus for the calendar year in which the termination occurred.
Additionally, the insurance continuation is extended to three (3) years. These
provisions apply to terminations without cause or resignations for Good Reason
occurring within thirteen (13) months following a Change of Control and for any
reason during the thirty (30) days beginning on the first anniversary of a
Change of Control. The Employment Agreements also provide for gross-up payments
to the executive in the event that any payment or distribution made, or benefit
provided, to or for the benefit of the executive is subject to an excise tax.
- 12 -
OPTION TABLES
The following tables provide information with respect to the Fiscal Year-end
value of options held by the Named Executive Officers. The Company did not grant
stock options to the Named Executive Officers during Fiscal 2004.
FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING OPTIONS/SARS IN-THE MONEY
AT FY-END OPTIONS/SARS AT FY-END($)(1)
SHARES ACQUIRED VALUE ------------------------- ----------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
-------------------------- --------------- -------- ----------- ------------- ------------ ---------------
Christian W. E. Haub ..... -- -- 482,500 0 370,500 --
Brian C. Piwek ........... -- -- 208,333 91,667 495,998 541,752
Eric Claus ............... -- -- 3,500 79,167 19,600 498,752
Mitchell P. Goldstein .... -- -- 107,916 44,584 195,683 274,317
John E. Metzger .......... -- -- 93,416 44,584 195,683 274,317
------
(1) Based on the closing price of the Common Stock on February 25, 2005 of
$11.53.
PENSION PLAN TABLE
YEARS OF SERVICE
-----------------------------------------------------------------------------------------
10 15 20 25 30 35
-------- -------- -------- -------- -------- ---------
Remuneration
$450,000 ............... $135,000 $202,500 $270,000 $270,000 $270,000 $270,000
500,000 ................ 150,000 225,000 300,000 300,000 300,000 300,000
550,000 ................ 165,000 247,500 330,000 330,000 330,000 330,000
600,000 ................ 180,000 270,000 360,000 360,000 360,000 360,000
650,000 ................ 195,000 292,500 390,000 390,000 390,000 390,000
700,000 ................ 210,000 315,000 420,000 420,000 420,000 420,000
The table above indicates the amount of annual benefit payable to a person at
age 65 in the specified final average remuneration and years-of-service
classifications under SERP, except that such benefits do not reflect the
requisite reduction for any applicable Social Security, or other Company
retirement benefits. SERP is an unfunded defined benefit final average pay plan
that covers, among the Named Executive Officers, Mr. Claus and Mr. Piwek. In
addition, the Company has agreed that Mr. Metzger will be included in SERP if,
upon reaching the age of 55, he is still employed by the Company.
The compensation covered by SERP is base salary, the "Annual Salary" reflected
in the Summary Compensation Table, computed as an average of such base salary
over the highest compensated five (5) years of employment during the last ten
(10) years. The benefit is computed at the rate of 3% for up to twenty (20)
years of service with a maximum benefit of up to 60% of such average base
salary. Estimated credited years of service at retirement for Mr. Claus and Mr.
Piwek are eighteen (18) years and fourteen (14) years respectively.
- 13 -
PERFORMANCE GRAPH
The following performance graph compares the five-year cumulative total
stockholder return (assuming reinvestment of dividends) of the Company's Common
Stock to the Standard & Poor's 500 Index and the UBS Warburg Dillon Read Index
of Supermarkets, which consists of the Company, Albertson's, Inc., The Kroger
Co. and Safeway, Inc., as its peer group. Winn-Dixie Stores, Inc., which has
filed for bankruptcy and been delisted, is no longer included as a member of the
Peer Group. The performance graph assumes $100 is invested in the Company's
Common Stock, the Standard & Poor's 500 Index and the UBS Warburg Dillon Read
Index on February 26, 1999, and that dividends paid during the period were
reinvested to purchase additional shares.
[GRAPHIC OMITTED]
(Company fiscal year ends--last Saturday in February)
FISCAL YEAR ENDING S&P 500 A&P PEER GROUP
------------------ ------- ---- ----------
02/25/00 $100 $100 $100
02/23/01 $95 $45 $118
02/22/02 $84 $118 $124
02/21/03 $67 $22 $65
02/27/04 $90 $34 $86
02/25/05 $95 $50 $82
- 14 -
REPORT OF THE COMPENSATION AND GOVERNANCE COMMITTEES
The Compensation Committee establishes the salaries and other compensation of
the Executive Officers and other key employees of the Company, including, with
the exception of the CEO, the Named Executive Officers. The Governance Committee
is responsible for recommending and approving the compensation level of the CEO.
The Company's executive compensation program consists of salaries, annual
incentives and long-term incentive compensation. It is designed to:
o for both the short and long-term, attract, retain and motivate
Executive Officers; compensate them competitively; and reward
them for their contributions to the Company;
o link each Executive Officer's compensation to the performance of
the Company and the leadership demonstrated by the individual
executive; and
o recognize consistently the level of performance with the
appropriate level of compensation.
EVALUATION OF EXECUTIVE OFFICER PERFORMANCE IN FISCAL 2004
Although the Compensation Committee considers "performance against" both
financial and non-financial objectives to establish executive compensation
levels, it does not rely solely on predetermined formulae or a limited set of
criteria when it evaluates the performance of the Company's executives. There
are three (3) primary financial measures reviewed: net income, cash flow and
individual performance. In addition to these three measurements, the
Compensation Committee considers the executives' performance against the
following:
o fortifying the Company's financial condition;
o improving the financial performance of the U.S. operations;
o strengthening the profitable Canadian operations; and
o growing stockholder value through improving profitability, EPS
growth and liquidity.
The Compensation Committee has concluded after a thorough review of the
measurements that the short-term financial objectives were exceeded in most
areas.
TOTAL COMPENSATION
To establish target total compensation levels for the Company's executives, the
Compensation Committee considers competitive market total compensation. The
Company periodically examines competitors' pay practices to ensure that the
Company's compensation policies continue to enable it to attract outstanding new
people with critical skill sets, and motivate and retain current valuable
employees. The total compensation package for each executive consists of three
(3) components: salary; an annual incentive; and a long-term incentive - a
detailed discussion of each follows. The target salary and annual incentive
levels are set at the median of the individual executive's competitive peer
group.
The Compensation Committee intends to continue its practice of compensating
executives based on performance against designated goals and strategies - Pay
for Performance - consistent with compensation practices throughout the Company.
SALARIES
The Compensation Committee considers several criteria in establishing salaries
for the Company's executives, including the Named Executive Officers. Key
factors affecting the Compensation Committee's judgment include the nature and
scope of the applicable executive's responsibilities, and his/her effectiveness
in leading the Company's initiatives. The Compensation Committee also considers
the compensation practices and performances of other major corporations that are
most likely to compete with the Company for the services of executives.
- 15 -
In Fiscal 2004, Mr. Goldstein received a salary increase in connection with his
promotion to Executive Vice President, Chief Financial Officer & Secretary. No
other Named Executive Officer received a salary increase in Fiscal 2004.
ANNUAL INCENTIVE
The Company's Annual Incentive Plan provided target annual incentive awards for
Fiscal 2004 contingent upon the attainment of established performance goals.
With respect to Corporate Staff executives, 30% of the incentive was based on
the attainment of a net income goal, 30% on a free cash flow goal and 40% on
achieving individual performance goals. With respect to operating unit
executives, 25% of the incentive was based on the attainment of sales goals, 25%
on the attainment of operating income goals, 25% on the attainment of operating
cash flow goals and 25% on achieving individual performance goals.
LONG TERM INCENTIVE
The 1998 Long Term Incentive Plan and Share Award Plan currently authorizes
grants through July 13, 2008 of up to 5,000,000 shares for stock options, stock
appreciation rights, restricted stock and other stock based awards
(collectively, "Long Term Incentive Awards").
In Fiscal 2004, the Company did not issue any Long Term Incentive Awards. In
Fiscal 2003, the Long Term Incentive Awards that the Company issued were
contingent upon the attainment of pre-established financial goals for Fiscal
2003 and Fiscal 2004, respectively, all of which had to be achieved in order for
vesting to occur. The goals established for Fiscal 2003 and Fiscal 2004 were
met.
2005 Turnaround Incentive Compensation Plan
It is the view of the Board that executives with significant impact on the
future success of the Company should have a substantial "at risk" personal
equity investment in the Company's Common Stock. Further, the Board believes
that there needs to be a method by which it attracts, retains and rewards key
employees for completing a successful and sustained "turnaround", as described
below, of the Company. For these reasons, on February 24, 2005, the Board
approved the "2005 Turnaround Incentive Compensation Plan" (the "Turnaround
Plan").
In conjunction with the Turnaround Plan's adoption, on March 3, 2005, the
Company issued, subject to stockholder approval of Item 2 herein, Restricted
Stock Units (as defined in the Turnaround Plan) to certain executives, including
certain Named Executive Officers. Pursuant to the Plan, the Restricted Stock
Units will have no value unless and until the Company returns to profitability
for a full fiscal year during the Company's fiscal years ending, February 26,
2006 ("Fiscal 2005"), February 25, 2007 ("Fiscal 2006") and February 24, 2008
("Fiscal 2007"). Additionally, the Restricted Stock Units will not vest
completely unless the Company sustains that profitability.
As indicated in the Turnaround Plan, the return to profitability criteria will
be met if the Company achieves a Net Profit, defined as a profit after taxes and
after adjusting for specific matters which the Company considers to be of a
non-operating nature, for either Fiscal 2006 or Fiscal 2007. If the Company
achieves net profitability for Fiscal 2006, one-third of the Restricted Stock
Units shall vest in April 2007. If the Company sustains net profitability during
Fiscal 2007, another third shall vest in April 2008, and if the Company sustains
net profitability in Fiscal 2008, the last third shall vest in April 2009. If
the Company does not achieve net profitability for Fiscal 2006, but achieves net
profitability for Fiscal 2007, one-half of the Restricted Stock Units shall vest
in April 2008 and if the Company sustains net profitability in Fiscal 2008, the
remaining half shall vest in April 2009.
The Board believes, further, that it is necessary to link the economic interests
of key managers with each other and with the stockholders in general. This will
promote key management stability, retention, motivation and long-term focus on
corporate strategy. As such, the Compensation Committee recommended to the Board
and the Board approved, the following executive share-ownership requirements:
(i) three (3) times base salary for the Chief Executive Officer; (ii) two (2)
times base salary for members of the Executive Management Team; and (iii) one
(1) times base salary for members of the Senior Management Team. Executives have
up to five (5) years to meet such ownership requirement.
- 16 -
DISCUSSION OF FISCAL 2004 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
The Governance Committee, which is composed entirely of independent directors,
is responsible for the compensation level of the CEO. In Fiscal 2004, the CEO
did not receive a salary increase. The CEO's salary remains at the $752,000
annual rate that became effective October 1, 2001, with an annual performance
incentive target of $526,400. For Fiscal 2004, based on performance against
pre-established financial and individual performance objectives, the CEO earned
$768,550 in incentive payments. It is the opinion of the Board, that given the
overall financial results for Fiscal 2004, the CEO earned 146% of his target
incentive.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code, enacted in 1993, subject to certain
exceptions, disallows a tax deduction to public companies for compensation over
$1,000,000 paid to the CEO and the four (4) other most highly compensated
executives at fiscal year end. The exceptions to the $1,000,000 deduction limit
include compensation paid under preexisting employment agreements and
performance-based compensation meeting certain requirements. The Company's 1994
Stock Option Plan and the 1998 Long Term Incentive and Share Award Plan have
been tailored to comply with the provisions of Section 162(m) so that amounts
received upon the exercise of options and SARs thereunder should be exempt from
Section 162(m) limitations.
As a matter of practice, the Compensation Committee and with respect to the CEO,
the Governance Committee, intends to set performance-based goals annually under
the Company's variable compensation plans and to deduct compensation paid under
these plans to the extent consistent with the provisions of Section 162(m).
However, if complying with Section 162(m) conflicts with what the Compensation
Committee or the Governance Committee, as applicable, believes is in the best
interest of the Company and its stockholders, the applicable Committee may
conclude that paying non-deductible compensation is more consistent with the
stockholders' best interests.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee or the Governance Committee indicated
below has ever been an officer or employee of the Company or any of its
subsidiaries.
COMPENSATION COMMITTEE GOVERNANCE COMMITTEE
Bobbie Gaunt, Chair Dan Kourkoumelis, Chair
John Barline Bobbie Gaunt
Edward Lewis Edward Lewis
Richard Nolan
Maureen Tart-Bezer
AUDIT COMMITTEE
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is composed of four independent directors and operates under
a written charter adopted by the Board of Directors, a copy of which is attached
as Appendix A, to this Proxy Statement. The Audit Committee recommends to the
Board of Directors, subject to stockholder ratification, the selection of the
Company's independent auditors.
Management is responsible for the Company's internal controls and the financial
reporting process. The independent auditors are responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with auditing standards generally accepted in the United States and
to express an opinion as to the conformity of such financial statements with
generally accepted accounting principles. The Audit Committee's responsibility
is to monitor and oversee these processes on behalf of the Board.
- 17 -
In performance of its oversight function, the Audit Committee has reviewed and
discussed the Company's audited financial statements for Fiscal 2004 and the
performance and fees of PricewaterhouseCoopers LLP ("PwC"), the Company's
independent auditors, with management. The Audit Committee has also met and
discussed with PwC the matters required to be discussed by SAS 61 (Codification
of Statements on Auditing Standards, AU 380), as may be modified or
supplemented, relating to the conduct of the audit. The Audit Committee has
received the written disclosures and the letter from PwC required by
Independence Standards Board No. 1 (Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committee), as may be modified or
supplemented, and has discussed with PwC, its independence. Lastly, the Audit
Committee has met with the internal auditors to assure that PwC, management and
the internal auditors were carrying out their respective responsibilities. Both
PwC and the internal auditors have full access to the Audit Committee, including
regular meetings without management present. Based on the review of the audited
financial statements and the discussions and review with the independent public
accountants mentioned above, the Audit Committee recommended to the Board that
the audited financial statements for Fiscal 2004 be included in the Company's
Annual Report on Form 10-K for Fiscal 2004.
AUDIT COMMITTEE
Maureen Tart-Bezer, Chair
Bobbie Gaunt
Dan Kourkoumelis
Richard Nolan
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon the Audit Committee's recommendation, has
reappointed PwC, independent auditors, as the Company's independent auditors for
Fiscal 2005. One or more representative(s) of PwC will be present at the Annual
Meeting, will be given an opportunity to make a statement and will be available
to respond to questions.
FEES AND SERVICES
The following table presents aggregate fees billed to the Company by PwC for
professional services rendered for Fiscal 2004 and Fiscal 2003.
FEES AND SERVICES
The following table presents aggregate fees billed to the Company by PwC for
professional services rendered for Fiscal 2004 and Fiscal 2003.
2004 2003
---------- ----------
Audit Fees (1) $3,279,000 $1,200,000
Audit-Related Fees (2) 1,705,962 663,000
Tax Fees (3) 49,574 205,000
Other (4) 348,099 31,000
---------- ----------
PwC Total Fees $5,382,635 $2,099,000
========== ==========
--------------------------
(1) Audit Fees represent fees for professional services provided in connection
with the audit of the Company's consolidated annual financial statements and
review of the quarterly financial statements and internal controls over
financial reporting, and audit services in connection with statutory or
regulatory filings, consents or other SEC matters. Audit fees increased from
Fiscal 2003 to Fiscal 2004 primarily because of the implementation of Section
404 of the Sarbanes-Oxley Act of 2002.
- 18 -
(2) Audit-Related Fees consist of fees billed for assurance and related services
that are reasonably related to the performance of the audit or review of the
Company's consolidated financial statements and are not reported under "Audit
Fees." In Fiscal 2004, this category consisted primarily of fees associated with
the Fiscal 2001 re-audit and the audit of employee benefit plans. In Fiscal
2003, this category consisted primarily of services related to employee benefit
plan audits and, in connection with the sale of the Company's Eight O'Clock
Coffee business, the stand-alone audit of Eight O'Clock Coffee which was
disposed of during 2003.
(3) Tax Fees consist of fees billed for professional services rendered for tax
consulting services.
(4) Other Fees consist of fees for products and services other than those
reported above. In Fiscal 2004, Other Fees consisted of services related to our
Canadian Food Basics litigation as well as a review of accounting for certain
real estate transactions. In Fiscal 2003, Other Fees consisted of consulting
services relating to swap arrangements and real estate properties.
PRE-APPROVAL PROCESS AND POLICY
Our Audit Committee's policy is to pre-approve all audit and permissible
non-audit services provided by the independent auditors. Our Audit Committee
pre-approved all such audit and non-audit services provided by the independent
auditors in Fiscal 2004. These services have included audit services,
audit-related services, tax services and other services.
RELATIONSHIP WITH INDEPENDENT AUDITORS
As part of its duties, the Audit Committee also considered and determined that
the provision of services, other than audit services, during Fiscal 2004 by PwC
is compatible with maintaining the independence of PwC.
ITEM 2 - AMENDMENT TO THE 1998 LONG TERM INCENTIVE AND SHARE AWARD PLAN
On February 24, 2005, the Board of Directors adopted, subject to stockholder
approval, an amendment to the Company's 1998 Long Term Incentive and Share Award
Plan (the "Plan"), to increase the number of shares of Common Stock ("Shares")
available for issuance from 5,000,000 to 8,000,000 ("Amendment").
The Board believes this increase is necessary to provide sufficient Shares for
the Company to continue to attract, retain and motivate employees upon whom the
continued success, growth and development of the Company is dependent. The
Board, therefore, recommends that the stockholders vote "FOR" the proposed
Amendment.
The Plan was originally approved by the stockholders at the Company's annual
meeting of stockholder in July, 1999. As of May 16, 2005, there were 1,214,101
Shares available for future grant under the Plan. The following is a general
description of the principal features of the Plan, which is qualified in its
entirety by reference to the actual Plan, a copy of which is included as
Appendix B.
DESCRIPTION OF THE PLAN
GENERAL. The purpose of the Plan is to enhance the interests of the Company and
its stockholders by providing a means to attract, retain and motivate employees
upon whose judgment, initiative and efforts the continued success, growth and
development of the Company is dependant.
ADMINISTRATION. The Plan is administered by the Compensation Committee, or such
other committee of the Board (the "Committee"), which consists solely of two or
more "non-employee directors" (as defined in Rule 16b-3 under the Exchange Act).
The Committee is authorized to, among other things, determine the type(s) of
Awards (as defined in the Plan), the number of Shares to which an Award may
relate and the terms and conditions of the Awards. The Committee may make all
decisions and determinations regarding the Plan as may deem necessary or
advisable.
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ELIGIBILITY. The Committee may grant Awards to all employees of the Company, or
a subsidiary or an affiliate of the Company. Non-employee directors are not
eligible to participate in the Plan. As of the date of this Proxy Statement,
there are approximately 78,000 employees, including officers and other key
management personnel who are eligible to receive Awards. The Committee, in its
discretion, selects the participants to whom Awards may be granted from those
eligible.
NUMBER OF SHARES OF COMMON STOCK AVAILABLE UNDER THE PLAN. The Plan initially
had 5,000,000 Shares available for issuance. If the stockholders approve this
proposal, the number of available Shares would be increased by 3,000,000. The
Committee may not grant an Award if the number of Shares to which such Award
relates, when added to the number of Shares previously issued under the Plan,
exceeds the total number of Shares available for issuance. Shares awarded under
the Plan may be authorized and un-issued shares or treasury shares.
AWARD TYPES AND APPLICABLE AWARD PROVISIONS
OPTIONS. Options granted under the Plan may be incentive stock options ("ISO")
or non-qualified stock options ("NQSO"). No participant may be granted options
for more than 500,000 Shares in any calendar year. The Committee determines the
exercise price of an option at the time such option is granted, provided, that
the exercise price of an incentive stock option may not be less than 100% of the
fair market value of the Company's Common Stock on the date such option is
granted. Fair market value is determined by the Common Stock's closing price on
the New York Stock Exchange on the date the option is granted. As of May 16,
2005, the closing price for the Company's Common Stock was $21.24 per share.
RESTRICTED SHARES/UNITS. Restricted Shares/Units (each as defined in the Plan)
shall be subject to such restrictions, if any, as the Committee may impose at
the date of grant or thereafter, which restrictions may lapse separately or in
combination at such times, under such circumstances, in such installments, or
otherwise, as the Committee may determine. Except to the extent restricted under
the Award Agreement, the holder of Restricted Shares shall have all of the
rights of a stockholder, including the right to vote and to receive dividends
thereon. Stock dividends will be treated as additional Restricted Shares and
will be subject to the same terms and conditions as the initial grant, unless
otherwise provided by the Committee.
As explained in the "Report of the Compensation and Governance Committees", the
Company granted, subject to stockholder approval of this Amendment, 175,000
Restricted Stock Units to Christian Haub, 125,000 Restricted Stock Units to
Brian Piwek, 100,000 Restricted Stock Units to Mitchell P. Goldstein and 70,000
Restricted Stock Units to John E. Metzger. The Company granted a total of
625,000 Restricted Stock Units to the Executive Officers as a group, and 975,000
Restricted Stock Units to the non-executive officer/employee group.
TERM. The Committee shall determine the term of each Award; provided, however,
that in no event shall the term of any ISO exceed a period of ten (10) years
from its grant date (or such shorter period as may be applicable under Section
422 of the Code).
TRANSFERABILITY. Unless otherwise expressly indicated by the Committee, Awards
are not transferable except by will or the laws of descent and distribution and
shall be exercisable during the lifetime of the holder only by such holder or
his/her guardian or legal representative.
ADJUSTMENTS UPON CORPORATE TRANSACTION. In the event that a recapitalization,
Share split, reverse split, reorganization, merger, consolidation, spin-off,
repurchase or other similar corporate transaction or event affects the Shares,
such that an adjustment is appropriate in order to prevent dilution or
enlargement of the rights of Award holders, the Committee may adjust the
aggregate number of shares reserved for issuance under the Plan, the number of
shares covered by each outstanding award, and the amounts to be paid by Award
holders or the Company on any outstanding Award. No such adjustment may increase
the aggregate value of any outstanding award.
CHANGE OF CONTROL. In the event of a Change of Control (as defined in the Plan),
all outstanding Awards pursuant to which a holder may have rights the exercise
of which is restricted or limited, shall become full exercisable, all
restrictions or limitations on outstanding Awards shall lapse, and all
performance criteria and other conditions shall be deemed to be achieved or
fulfilled and shall be waived by the Company.
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AMENDMENT AND TERMINATION. No Awards may be granted under the Plan subsequent to
July 14, 2008. The Board may terminate the Plan at an earlier date, or amend the
Plan at any time. However, the Company must obtain stockholder approval for any
Plan amendment to the extent required by applicable legal or regulatory
requirements or as required for the Plan to satisfy the requirements of 422 of
the Code. In addition, the award holder's written consent is required for any
amendment or termination of the Plan which will adversely affect any previously
granted award.
FEDERAL INCOME TAX CONSEQUENCES. The following description of the U.S. federal
income tax consequences of Awards under the Plan is a general summary. This
description is intended for the information of stockholders considering how to
vote at the Annual Meeting and not as tax guidance to participants of the Plan.
An Option granted under the Plan may be an ISO, which satisfies the requirements
of Section 422 of the Code or a NQSO, which is not intended to meet such
requirements. The federal income tax treatment for the two types of Options
differs as follows:
Incentive Stock Options. Generally, the optionee recognizes no taxable income
and the Company is not entitled to a deduction at the time of an ISO's grant. If
an optionee exercises an ISO in accordance with the ISO's terms and does not
dispose of the shares acquired thereby (the "ISO Shares") (i) within two (2)
years from the date of the grant of the ISO or (ii) within one (1) year from the
date of exercise of the ISO, the optionee will not recognize income by reason of
the exercise, and the Company will not be entitled to a deduction by reason of
the grant or exercise. The optionee will, however, recognize taxable income in
the year in which the ISO Shares are sold or otherwise made the subject of a
taxable disposition. For federal tax purposes, dispositions are divided into two
categories: qualifying and disqualifying. A qualifying disposition occurs if the
sale or other disposition is made after the optionee has held the shares for
more than two (2) years after the ISO grant date and more than one (1) year
after the exercise date. If either of these two holding periods is not
satisfied, then a disqualifying disposition will result.
If there is a qualifying disposition of ISO Shares, the optionee will recognize
long-term capital gain or loss in an amount equal to the difference of the
amount realized upon the sale or other disposition of such ISO Shares over the
optionee's basis therein, and the Company will not be entitled to a deduction.
If there is a disqualifying disposition of ISO Shares, then the excess of the
fair market value of ISO Shares acquired on the exercise date (or the amount
realized on a disqualifying disposition, if less) over the optionee's basis in
such ISO Shares will be taxable as ordinary income to the optionee, and the
Company will ordinarily be entitled to a deduction. Any additional gain or loss
recognized upon the disposition of ISO Shares will be taxable as a capital gain
or loss, provided the optionee holds the ISO Shares as a capital asset at the
time of the disposition.
Non-qualified Stock Options. Generally, no taxable income is recognized by an
optionee upon the grant of a NQSO. The optionee will in general recognize
ordinary income in the year in which a NQSO is exercised, equal to the excess of
the fair market value of the purchased shares on the exercise date over the
exercise price paid for such shares, and the optionee will be required to
satisfy the tax withholding requirements applicable to such income.
The Company will generally be entitled to an income tax deduction equal to the
amount of ordinary income recognized by the optionee with respect to the
exercise of a NQSO. The deduction will in general be allowed for the taxable
year of the Company in which such ordinary income is recognized by the optionee.
The foregoing statement is only a summary of the Federal income tax consequences
of the Plan and is based on the Company's understanding and interpretation of
present Federal tax laws, regulations and rulings. Since tax laws, regulations
and rulings may change or interpretations may differ, each participant should
consult his or her own tax advisor regarding the tax consequences related to
participation in the Plan.
------------------
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The Board has unanimously approved the amendment to the 1998 Long Term Incentive
and Share Award Plan, in order to reserve an additional 3,000,000 shares of
Common Stock, and recommends that you vote FOR its approval. Unless directed
otherwise, the persons named in the enclosed form of proxy have indicated they
intend to vote FOR the approval of the Amendment.
STOCKHOLDER PROPOSALS
The Company will consider including a stockholder's proposal in the proxy
statement and form of proxy for the Annual Meeting of Stockholders for Fiscal
2005 if it receives such proposal at the principal office of the Company no
later than January 24, 2006. In order for a proposal submitted outside of Rule
14a-8 of the Exchange Act to be considered "timely" within the meaning of Rule
14a-14(c), such proposal must be received by April 9, 2006.
- 22 -
OTHER MATTERS
No business other than that set forth in the attached Notice of Annual Meeting
is expected to come before the Annual Meeting. However, should any other matters
requiring a vote of stockholders arise, including the question of adjourning the
Annual Meeting, the persons named in the accompanying proxy will vote thereon
according to their best judgment in the interest of the Company. In the event
that any of the above-named nominees for the office of director shall withdraw
or otherwise become unavailable, the persons named as proxies may vote for other
persons in their place in the best interest of the Company.
By Order of the Board of Directors
MITCHELL P. GOLDSTEIN
Executive Vice President, Chief Financial Officer
& Secretary
Dated: May 27, 2005
EACH PERSON SOLICITED BY THIS PROXY STATEMENT, INCLUDING ANY PERSON WHO ON MAY
20, 2005 IS A BENEFICIAL OWNER OF THE COMPANY'S COMMON STOCK, MAY REQUEST A COPY
OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE LAST FISCAL YEAR.
SUCH WRITTEN REQUESTS SHOULD BE DIRECTED TO THE SECRETARY OF THE COMPANY AT ITS
ADDRESS AFORESAID.
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APPENDIX A
AUDIT COMMITTEE CHARTER
I. ORGANIZATION
There shall be a Committee of the Board of Directors of The Great
Atlantic & Pacific Tea Company, Inc. (the "Company") to be known as the Audit
Committee. The Audit Committee shall be composed of three or more directors who,
as determined and disclosed by the Board of Directors, (i) meet the independence
requirements of the New York Stock Exchange (the "NYSE") and the Securities
Exchange Act of 1934, as amended (the "1934 Act"), as well as the rules and
regulations thereunder, and (ii) have sufficient financial literacy to enable
him/her to discharge the responsibilities of a Committee member. Additionally,
at least one member of the Audit Committee shall be an "Audit Committee
Financial Expert," as defined by the Securities and Exchange Commission ("SEC").
No member of the Audit Committee shall simultaneously serve on the audit
committee of more than two (2) other public companies. The Audit Committee shall
comply with all applicable rules and regulations of the SEC and the NYSE.
The Audit Committee shall meet four times per year or more frequently
as circumstances require and may ask members of management or others to attend
meetings and provide pertinent information as necessary.
To carry out its duties, the Audit Committee shall have the authority
to engage and obtain advice and assistance from outside legal, accounting and
other advisors to the extent it deems necessary and shall receive appropriate
funding, as determined in its sole judgment, from the Company for payment of
compensation to any and all outside advisors employed by the Audit Committee and
for ordinary administrative expenses necessary to carry out its duties.
Additionally, the Audit Committee shall meet separately, periodically, with the
independent auditors, with the internal auditors, with management and with the
Chief Legal Officer.
II. PURPOSE
The Audit Committee's primary purpose is to assist the Board of
Directors in its oversight of (i) the integrity of the Company's financial
statements, (ii) the qualifications and independence of the Company's
independent auditors, (iii) the performance of the Company's internal audit
function and the independent auditors, the system of internal financial and
accounting controls established by management and the audit process, and (iv)
compliance by the Company with legal and regulatory requirements. The Audit
Committee shall provide an open avenue of communication between the internal
auditors, the independent auditors, the Board of Directors and Company
management. The Audit Committee shall also function as the Company's qualified
legal compliance committee ("QLCC"), as defined in Rule 205.2(k) promulgated
under the 1934 Act.
It is not the responsibility of the Audit Committee to plan or conduct
audits, to prepare the Company's financial statements or to determine that the
Company's financial statements conform with generally accepted accounting
principles ("GAAP"). Management is responsible for the preparation of the
Company's financial statements and the independent auditors are responsible for
auditing those financial statements. It is also not the responsibility of the
Audit Committee to assure compliance with laws and regulations and the Company's
code of conduct. Management is responsible for assuring compliance with
applicable laws and regulations and with the Company's code of conduct.
- 24 -
III. RESPONSIBILITIES
In carrying out its oversight responsibilities, the Audit Committee
shall perform the following functions:
A. RELATIONSHIP WITH INDEPENDENT AUDITORS
The Audit Committee shall appoint a firm of certified public
accountants to conduct the audits of the financial statements of the Company,
and selected subsidiaries, for the fiscal year in which the firm is appointed.
The Audit Committee shall be directly responsible for the appointment,
compensation, retention and oversight of the independent auditors and such
independent auditors shall report directly to the Audit Committee. In
fulfillment of such responsibilities, the Audit Committee shall:
1. Pre-approve all audit and permissible non-audit services of
the independent auditors.
2. Meet with the independent auditors and financial management of
the Company to review (i) the scope and fees of the proposed
audit for the current year and the planned audit procedures
and (ii) any audit problems or difficulties, including without
limitation, restrictions on the scope of the independent
auditor's activities or on access to requested information,
any significant disagreements with management, communications
between the audit team and the independent auditors' national
office, and any "management" or "internal control" letter
issued, or proposed to be issued, by the independent auditors,
and management's response thereto.
3. Be directly responsible for the resolution of disagreements
between management and the independent auditors regarding
financial reporting.
4. Obtain from the independent auditors each year a formal
written statement delineating (i) the independent auditors'
internal quality-control procedures, any material issues
raised by the independent auditor's most recent internal
quality-control review or by any inquiry or investigation,
within the preceding five (5) years, by governmental or
professional authorities with respect to any independent audit
carried out by the auditor, and any steps taken to deal with
any such issues and (ii) all relationships between the
independent auditors and the Company.
5. Periodically engage in a dialogue with the independent
auditors regarding any relationships or services that may
impact the objectivity and independence of the auditors, and
recommend that the Board of Directors take appropriate action
in response to the independent auditors' report to oversee and
satisfy itself of the auditors' independence.
6. Review and discuss with the independent auditors (i) the
Company's annual audited financial statements and quarterly
financial statements, including the Company's disclosures
under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and (ii) the matters
required to be discussed by Statement on Auditing Standards
No. 61, as amended.
7. Review with the independent auditors all critical accounting
policies used by the Company, alternative accounting
treatments discussed with management along with the potential
ramifications of using those alternatives, and other written
communications provided by the independent auditors to
management, including a schedule of unadjusted audit
differences.
8. Set clear hiring policies for employees or former employees of
the Company's independent auditors.
B. OVERSIGHT OF FINANCIAL REPORTING
In carrying out its responsibilities with respect to oversight of the
Company's financial reporting, the Audit Committee shall:
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1. Review and discuss with management the Company's annual
audited financial statements and quarterly financial
statements prior to submission to the Board of Directors,
including the Company's disclosures under "Management's
Discussion and Analysis of Financial Condition and Results of
Operations".
2. Discuss the Company's earnings press releases, as well as
financial information and earnings guidance provided to
analysts and rating agencies.
3. Review the Annual Report on Form 10-K and the Proxy Statement
prior to submission to the SEC.
4. Meet separately, periodically, with management, with the
internal auditors and with the independent auditors. Among the
items to be discussed in these meetings are the independent
auditors' evaluation of the Company's financial, accounting
and auditing personnel, and the cooperation that the
independent auditors received during the course of the audit.
5. Discuss major financial risk exposures and the Company's
guidelines and policies with respect to financial risk
assessment and management.
6. Establish procedures for the receipt, retention and treatment
of complaints regarding accounting, internal accounting
controls or auditing matters and for the confidential,
anonymous submission by employees of concerns regarding
questionable accounting or auditing matters.
C. INTERNAL AUDIT
In carrying out its responsibilities with respect to oversight of the
Company's internal audit function, the Audit Committee shall:
The review should also include discussion of the
1. Review the internal audit function of the Company including
the independence and authority of its reporting obligations;
the proposed audit plans for the coming year and the
coordination of such plans with the independent auditors.
2. Receive quarterly, a summary of findings from completed
internal audits and a progress report on the proposed internal
audit plan, with explanations for any deviations from the
original plan.
3. Discuss with management and the internal auditors, the quality
of and compliance with the Company's internal controls and the
responsibilities, budget and staffing of the Company's
internal audit function.
D. LEGAL AND REGULATORY COMPLIANCE
In carrying out its responsibilities with respect to oversight of the
Company's compliance with legal and regulatory requirements, the Audit Committee
shall:
1. Review and reassess on an annual basis, the adequacy of the
Audit Committee's charter and the Audit Committee's
performance.
2. Issue annually a report to be included in the Company's Proxy
Statement as required by the rules of the SEC.
3. Review with the Company's Chief Legal Officer, legal matters
that could have a significant impact on the Company's
financial statements.
- 26 -
E. QUALIFIED LEGAL COMPLIANCE COMMITTEE
The Audit Committee, in its capacity as a QLCC, shall receive reports
of material violations of the securities laws, breaches of fiduciary duties or
similar violations governed by such rule from attorneys representing the
Company, including in-house counsel and take such actions as may be permitted or
required of a QLCC under applicable law and the procedures adopted by the Board
of Directors.
F. REPORTS TO THE BOARD
The Audit Committee shall submit the minutes of all meetings of the
Audit Committee to, or review the matters discussed at each Audit Committee
meeting with, the Board of Directors.
In addition to the responsibilities outlined above, the Audit Committee
shall examine and consider such other matters in relation to the internal and
external audit of the Company's accounts and in relation to the financial
affairs of the Company and its books of account as the Audit Committee
determines to be desirable or as requested by the Board of Directors.
- 27 -
APPENDIX B
1998 LONG TERM INCENTIVE AND SHARE AWARD PLAN
1. Purposes.
The purposes of the 1998 Long Term Incentive and Share Award
Plan are to advance the interests of The Great Atlantic & Pacific Tea Company,
Inc. and its shareholders by providing a means to attract, retain, and motivate
employees of the Company upon whose judgment, initiative and efforts the
continued success, growth and development of the Company is dependent.
2. Definitions.
For purposes of the Plan, the following terms shall be defined as set forth
below:
a) "Affiliate" means any entity other than the Company and its
Subsidiaries that is designated by the Board or the Committee as a
participating employer under the Plan, provided that the Company
directly or indirectly owns at least 20% of the combined voting power
of all classes of stock of such entity or at least 20% of the
ownership interests in such entity.
b) "Award" means any Option, SAR, Restricted Share, Restricted Share
Unit, Performance Share, Performance Unit, Dividend Equivalent, or
Other Share-Based Award granted to an Eligible Person under the Plan.
c) "Award Agreement" means any written agreement, contract, or other
instrument or document evidencing an Award.
d) "Beneficiary" means the person, persons, trust or trusts which have
been designated by the Eligible Person in his or her most recent
written beneficiary designation filed with the Company to receive the
benefits specified under this Plan upon the death of the Eligible
Person, or, if there is no designated Beneficiary or surviving
designated Beneficiary, then the person, persons, trust or trusts
entitled by will or the laws of descent and distribution to receive
such benefits.
e) "Board" means the Board of Directors of the Company.
f) "Code" means the Internal Revenue Code of 1986, as amended from time
to time. References to any provision of the Code shall be deemed to
include successor provisions thereto and regulations thereunder.
g) "Committee" means the Compensation Policy Committee of the Board, or
such other Board committee as may be designated by the Board to
administer the Plan; provided, however, that the Committee shall
consist of two or more directors of the Company, each of whom is a
"non-employee director" within the meaning of Rule 16b-3 under the
Exchange Act, to the extent applicable.
h) "Company" means The Great Atlantic & Pacific Tea Company, Inc., a
corporation organized under the laws of Maryland, or any successor
corporation.
i) "Dividend Equivalent" means a right, granted under Section 5(g), to
receive cash, Shares, or other property equal in value to dividends
paid with respect to a specified number of Shares. Dividend
Equivalents may be awarded on a free-standing basis or in connection
with another Award, and may be paid currently or on a deferred basis.
j) "Eligible Person" means an employee of the Company, a Subsidiary or an
Affiliate, including any director who is an employee.
- 28 -
k) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time. References to any provision of the Exchange Act
shall be deemed to include successor provisions thereto and
regulations thereunder.
l) "Fair Market Value" means, with respect to Shares or other property,
the fair market value of such Shares or other property determined by
such methods or procedures as shall be established from time to time
by the Committee. If the Shares are listed on any established stock
exchange or a national market system, unless otherwise determined by
the Committee in good faith, the Fair Market Value of a Share shall
mean the closing price of the Share on the date on which it is to be
valued hereunder (or, if the Shares were not traded on that day, the
next preceding day that the Shares were traded) on the principal
exchange on which the Shares are traded, as such prices are officially
quoted on such exchange.
m) "ISO" means any option intended to be and designated as an incentive
stock option within the meaning of Section 422 of the Code.
n) "NQSO" means any Option that is not an ISO.
o) "Option" means a right, granted under Section 5(b), to purchase
Shares.
p) "Other Share-Based Award" means a right, granted under Section 5(h),
that relates to or is valued by reference to Shares.
q) "Participant" means an Eligible Person who has been granted an Award
under the Plan.
r) "Performance Share" means a performance share granted under Section
5(f).
s) "Performance Unit" means a performance unit granted under Section
5(f).
t) "Plan" means this 1998 Long Term Incentive and Share Award Plan.
u) "Restricted Shares" means an Award of Shares under Section 5(d) that
may be subject to certain restrictions and to a risk of forfeiture.
v) "Restricted Share Unit" means a right, granted under Section 5(e), to
receive Shares or cash at the end of a specified deferral period.
w) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities
and Exchange Commission under Section 16 of the Exchange Act.
x) "SAR" or "Share Appreciation Right" means the right, granted under
Section 5(c), to be paid an amount measured by the difference between
the exercise price of the right and the Fair Market Value of Shares on
the date of exercise of the right, with payment to be made in cash,
Shares, or property as specified in the Award or determined by the
Committee.
y) "Shares" means common stock, $1 par value per share, of the Company.
z) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of
the corporations (other than the last corporation in the unbroken
chain) owns shares possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in the
chain.
- 29 -
3. Administration.
a) Authority of the Committee. The Plan shall be administered by
the Committee, and the Committee shall have full and final
authority to take the following actions, in each case subject
to and consistent with the provisions of the Plan:
i. to select Eligible Persons to whom Awards may be
granted;
ii. to designate Affiliates;
iii. to determine the type or types of Awards to be
granted to each Eligible Person;
iv. to determine the type and number of Awards to be
granted, the number of Shares to which an Award may
relate, the terms and conditions of any Award granted
under the Plan (including, but not limited to, any
exercise price, grant price, or purchase price, and
any bases for adjusting such exercise, grant or
purchase price, any restriction or condition, any
schedule for lapse of restrictions or conditions
relating to transferability or forfeiture,
exercisability, or settlement of an Award, and waiver
or accelerations thereof, and waivers of performance
conditions relating to an Award, based in each case
on such considerations as the Committee shall
determine), and all other matters to be determined in
connection with an Award;
v. to determine whether, to what extent, and under what
circumstances an Award may be settled, or the
exercise price of an Award may be paid, in cash,
Shares, other Awards, or other property, or an Award
may be canceled, forfeited, exchanged, or
surrendered;
vi. to determine whether, to what extent, and under what
circumstances cash, Shares, other Awards, or other
property payable with respect to an Award will be
deferred either automatically, at the election of the
Committee, or at the election of the Eligible Person;
vii. to determine whether, to what extent, and under what
circumstances any cash, Shares, other Awards, or
other property payable on a deferred basis will be
adjusted for interest or earnings equivalents and, if
so, the basis for determining such equivalents;
viii. to prescribe the form of each Award Agreement, which
need not be identical for each Eligible Person;
ix. to adopt, amend, suspend, waive, and rescind such
rules and regulations and appoint such agents as the
Committee may deem necessary or advisable to
administer the Plan;
x. to correct any defect or supply any omission or
reconcile any inconsistency in the Plan and to
construe and interpret the Plan and any Award, rules
and regulations, Award Agreement, or other instrument
hereunder;
xi. to accelerate the exercisability or vesting of all or
any portion of any Award or to extend the period
during which an Award is exercisable; and
xii. to make all other decisions and determinations as may
be required under the terms of the Plan or as the
Committee may deem necessary or advisable for the
administration of the Plan.
- 30 -
1. Manner of Exercise of Committee Authority.
The Committee shall have sole discretion in
exercising its authority under the Plan. Any
action of the Committee with respect to the
Plan shall be final, conclusive, and binding
on all persons, including the Company,
Subsidiaries, Affiliates, Eligible Persons,
any person claiming any rights under the
Plan from or through any Eligible Person,
and shareholders. The express grant of any
specific power to the Committee, and the
taking of any action by the Committee, shall
not be construed as limiting any power or
authority of the Committee. The Committee
may delegate to officers or managers of the
Company or any Subsidiary or Affiliate the
authority, subject to such terms as the
Committee shall determine, to perform
administrative functions and, with respect
to Awards granted to persons not subject to
Section 16 of the Exchange Act, to perform
such other functions as the Committee may
determine, to the extent permitted under
Rule 16b-3 (if applicable) and applicable
law.
2. Limitation of Liability. Each member of the
Committee shall be entitled to, in good
faith, rely or act upon any report or other
information furnished to him or her by any
officer or other employee of the Company or
any Subsidiary or Affiliate, the Company's
independent certified public accountants, or
other professional retained by the Company
to assist in the administration of the Plan.
No member of the Committee, nor any officer
or employee of the Company acting on behalf
of the Committee, shall be personally liable
for any action, determination, or
interpretation taken or made in good faith
with respect to the Plan, and all members of
the Committee and any officer or employee of
the Company acting on their behalf shall, to
the extent permitted by law, be fully
indemnified and protected by the Company
with respect to any such action,
determination, or interpretation.
3. Limitation on Committee's Discretion.
Anything in this Plan to the contrary
notwithstanding, in the case of any Award
which is intended to qualify as
"performance-based compensation" within the
meaning of Section 162(m)(4)(C) of the Code,
unless the Award Agreement specifically
provides otherwise, the Committee shall have
no discretion to increase the amount of
compensation payable under the Award to the
extent such an increase would cause the
Award to lose its qualification as such
performance-based compensation.
4. Quorum, Acts of Committee. A majority of the
Committee shall constitute a quorum, and the
acts of a majority of the members present at
any meeting at which a quorum is present, or
acts approved in writing by all of the
members, shall be acts of the Committee.
4. Shares Subject to the Plan.
a) Subject to adjustment as provided in Section 4(c) hereof, the total
number of Shares reserved for issuance in connection with Awards under
the Plan shall be 8,000,000. No Award may be granted if the number of
Shares to which such Award relates, when added to the number of Shares
previously issued under the Plan, exceeds the number of Shares reserved
under the preceding sentence. If any Awards are forfeited, canceled,
terminated, exchanged or surrendered or such Award is settled in cash
or otherwise terminates without a distribution of Shares to the
Participant, any Shares counted against the number of Shares reserved
and available under the Plan with respect to such Award shall, to the
extent of any such forfeiture, settlement, termination, cancellation,
exchange or surrender, again be available for Awards under the Plan.
Upon the exercise of any Award granted in tandem with any other Awards,
such related Awards shall be canceled to the extent of the number of
Shares as to which the Award is exercised.
b) Subject to adjustment as provided in Section 4(c) hereof, the
maximum number of Shares with respect to which options or SARs may be
granted during a calendar year to any Eligible Person under this Plan
shall be 500,000 Shares.
c) In the event that the Committee shall determine that any dividend in
Shares, recapitalization, Share split, reverse split, reorganization,
merger, consolidation, spin-off, combination, repurchase, or share
exchange, or other similar corporate transaction or event, affects the
Shares such that an adjustment is appropriate in order to prevent
dilution or enlargement of the rights of Eligible Persons under the
Plan, then the Committee shall make such equitable changes or
adjustments as it deems appropriate and, in such manner as it may deem
equitable, adjust any or all of (i) the number and kind of shares which
may thereafter be issued under the Plan, (ii) the number and kind of
shares, other securities or other consideration issued or issuable in
respect of outstanding Awards, and (iii) the exercise price, grant
price, or purchase price relating to any Award; provided, however, in
each case that, with respect to ISOs, such adjustment shall be made in
accordance with Section 424(a) of the Code, unless the Committee
determines otherwise. In addition, the Committee is authorized to make
adjustments in the terms and conditions of, and the criteria and
performance objectives included in, Awards in recognition of unusual or
non-recurring events (including, without limitation, events described
in the preceding sentence) affecting the Company or any Subsidiary or
Affiliate or the financial statements of the Company or any Subsidiary
or Affiliate, or in response to changes in applicable laws,
regulations, or accounting principles; provided, however, that, in the
case of an Award which is intended to qualify as "performance-based
compensation" within the meaning of Section 162(m)(4)(C) of the Code,
such authority shall be subject to Section 3(d) hereof.
- 31 -
d) Any Shares distributed pursuant to an Award may consist, in whole or
in part, of authorized and unissued Shares or treasury Shares including
Shares acquired by purchase in the open market or in private
transactions.
5. Specific Terms of Awards.
a) General. Awards may be granted on the terms and conditions set forth
in this Section 5. In addition, the Committee may impose on any Award
or the exercise thereof, at the date of grant or thereafter (subject to
Section 8(d)), such additional terms and conditions, not inconsistent
with the provisions of the Plan, as the Committee shall determine,
including terms regarding forfeiture of Awards or continued
exercisability of Awards in the event of termination of employment by
the Eligible Person.
b) Options. The Committee is authorized to grant Options, which may be
NQSOs or ISOs, to Eligible Persons on the following terms and
conditions:
a) Exercise Price. The exercise price per Share purchasable under
an Option shall be determined by the Committee, and the
Committee may, without limitation, set an exercise price that
is based upon achievement of performance criteria if deemed
appropriate by the Committee.
b) Option Term. The term of each Option shall be determined by
the Committee.
c) Time and Method of Exercise. The Committee shall determine at
the date of grant or thereafter the time or times at which an
Option may be exercised in whole or in part (including,
without limitation, upon achievement of performance criteria
if deemed appropriate by the Committee), the methods by which
such exercise price may be paid or deemed to be paid
(including, without limitation, broker-assisted exercise
arrangements), the form of such payment (including, without
limitation, cash, Shares, notes or other property), and the
methods by which Shares will be delivered or deemed to be
delivered to Eligible Persons.
d) ISOs. The terms of any ISO granted under the Plan shall comply
in all respects with the provisions of Section 422 of the
Code, including but not limited to the requirement that the
ISO shall be granted within ten years from the earlier of the
date of adoption or shareholder approval of the Plan. ISOs may
only be granted to employees of the Company or a Subsidiary.
c) SARs. The Committee is authorized to grant SARs (Share Appreciation
Rights) to Eligible Persons on the following terms and conditions:
- 32 -
i. Right to Payment. An SAR shall confer on the Eligible Person to whom it
is granted a right to receive with respect to each Share subject
thereto, upon exercise thereof, the excess of (1) the Fair Market Value
of one Share on the date of exercise (or, if the Committee shall so
determine in the case of any such right, the Fair Market Value of one
Share at any time during a specified period before or after the date of
exercise) over (2) the base amount of the SAR as determined by the
Committee as of the date of grant of the SAR (which, in the case of an
SAR granted in tandem with an Option, shall be equal to the exercise
price of the underlying Option).
ii. Other Terms. The Committee shall determine, at the time of grant or
thereafter, the time or times at which an SAR may be exercised in whole
or in part, the method of exercise, method of settlement, form of
consideration payable in settlement, method by which Shares will be
delivered or deemed to be delivered to Eligible Persons, whether or not
an SAR shall be in tandem with any other Award, and any other terms and
conditions of any SAR. Unless the Committee determines otherwise, an
SAR (1) granted in tandem with an NQSO may be granted at the time of
grant of the related NQSO or at any time thereafter and (2) granted in
tandem with an ISO may only be granted at the time of grant of the
related ISO.
a. Restricted Shares. The Committee is authorized to grant
Restricted Shares to Eligible Persons on the following terms
and conditions:
i. Issuance and Restrictions. Restricted Shares shall be subject
to such restrictions on transferability and other
restrictions, if any, as the Committee may impose at the date
of grant or thereafter, which restrictions may lapse
separately or in combination at such times, under such
circumstances (including, without limitation, upon achievement
of performance criteria if deemed appropriate by the
Committee), in such installments, or otherwise, as the
Committee may determine. Except to the extent restricted under
the Award Agreement relating to the Restricted Shares, an
Eligible Person granted Restricted Shares shall have all of
the rights of a shareholder including, without limitation, the
right to vote Restricted Shares and the right to receive
dividends thereon. The Committee must certify in writing prior
to the lapse of restrictions conditioned on achievement of
performance criteria that such performance criteria were in
fact satisfied.
ii. Forfeiture. Except as otherwise determined by the Committee,
at the date of grant or thereafter, upon termination of
employment during the applicable restriction period,
Restricted Shares and any accrued but unpaid dividends or
Dividend Equivalents (and any accrued but unpaid interest or
earnings equivalents thereon) that are at that time subject to
restrictions shall be forfeited; provided, however, that the
Committee may provide, by rule or regulation or in any Award
Agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Restricted
Shares will be waived in whole or in part in the event of
terminations resulting from specified causes, and the
Committee may in other cases waive in whole or in part the
forfeiture of Restricted Shares.
iii. Certificates for Shares. Restricted Shares granted under the
Plan may be evidenced in such manner as the Committee shall
determine. If certificates representing Restricted Shares are
registered in the name of the Eligible Person, such
certificates shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such
Restricted Shares, and the Company shall retain physical
possession of the certificate.
iv. Dividends. Dividends paid on Restricted Shares shall be either
paid at the dividend payment date, or deferred (with or
without the crediting of interest or earnings equivalents
thereon as determined by the Committee) for payment to such
date as determined by the Committee, in cash or in
unrestricted Shares having a Fair Market Value equal to the
amount of such dividends; provided, however, that any such
dividends (and any interest or earnings equivalents credited
thereon) shall be subject to forfeiture upon such conditions,
if any, as the Committee may specify. Shares distributed in
connection with a Share split or dividend in Shares, and other
property distributed as a dividend, shall be subject to
restrictions and a risk of forfeiture to the same extent as
the Restricted Shares with respect to which such Shares or
other property has been distributed.
- 33 -
e) Restricted Share Units. The Committee is authorized
to grant Restricted Share Units to Eligible Persons,
subject to the following terms and conditions:
i. Award and Restrictions. Delivery of Shares or cash, as the
case may be, will occur upon expiration of the deferral period
specified for Restricted Share Units by the Committee (or, if
permitted by the Committee, as elected by the Eligible
Person). In addition, Restricted Share Units shall be subject
to such restrictions as the Committee may impose, if any
(including, without limitation, the achievement of performance
criteria if deemed appropriate by the Committee), at the date
of grant or thereafter, which restrictions may lapse at the
expiration of the deferral period or at earlier or later
specified times, separately or in combination, in installments
or otherwise, as the Committee may determine. The Committee
must certify in writing prior to the lapse of restrictions
conditioned on the achievement of performance criteria that
such performance criteria were in fact satisfied.
ii. Forfeiture. Except as otherwise determined by the Committee at
date of grant or thereafter, upon termination of employment
(as determined under criteria established by the Committee)
during the applicable deferral period or portion thereof to
which forfeiture conditions apply (as provided in the Award
Agreement evidencing the Restricted Share Units), or upon
failure to satisfy any other conditions precedent to the
delivery of Shares or cash to which such Restricted Share
Units relate, all Restricted Share Units that are at that time
subject to deferral or restriction shall be forfeited;
provided, however, that the Committee may provide, by rule or
regulation or in any Award Agreement, or may determine in any
individual case, that restrictions or forfeiture conditions
relating to Restricted Share Units will be waived in whole or
in part in the event of termination resulting from specified
causes, and the Committee may in other cases waive in whole or
in part the forfeiture of Restricted Share Units.
f) Performance Shares and Performance Units. The
Committee is authorized to grant Performance Shares
or Performance Units or both to Eligible Persons on
the following terms and conditions:
i. Performance Period. The Committee shall determine a
performance period (the "Performance Period") of one or more
years and shall determine the performance objectives for
grants of Performance Shares and Performance Units.
Performance objectives may vary from Eligible Person to
Eligible Person and shall be based upon such performance
criteria as the Committee may deem appropriate. Performance
Periods may overlap and Eligible Persons may participate
simultaneously with respect to Performance Shares and
Performance Units for which different Performance Periods are
prescribed.
ii. Award Value. At the beginning of a Performance Period, the
Committee shall determine for each Eligible Person or group of
Eligible Persons with respect to that Performance Period the
range of number of Shares, if any, in the case of Performance
Shares, and the range of dollar values, if any, in the case of
Performance Units, which may be fixed or may vary in
accordance with such performance or other criteria specified
by the Committee, which shall be paid to an Eligible Person as
an Award if the relevant measure of Company performance for
the Performance Period is met.
iii. Significant Events. If during the course of a Performance
Period there shall occur significant events as determined by
the Committee which the Committee expects to have a
substantial effect on a performance objective during such
period, the Committee may revise such objective; provided,
however, that, in the case of an Award which is intended to
qualify as "performance-based compensation" within the meaning
of Section 162(m)(4)(C) of the Code, such authority shall be
subject to Section 3(d) hereof.
iv. Forfeiture. Except as otherwise determined by the Committee,
at the date of grant or thereafter, upon termination of
employment during the applicable Performance Period,
Performance Shares and Performance Units for which the
Performance Period was prescribed shall be forfeited;
provided, however, that the Committee may provide, by rule or
regulation or in any Award Agreement, or may determine in an
individual case, that restrictions or forfeiture conditions
relating to Performance Shares and Performance Units will be
waived in whole or in part in the event of terminations
resulting from specified causes, and the Committee may in
other cases waive in whole or in part the forfeiture of
Performance Shares and Performance Units.
- 34 -
v. Payment. Each Performance Share or Performance Unit may be
paid in whole Shares, or cash, or a combination of Shares and
cash either as a lump sum payment or in installments, all as
the Committee shall determine, at the time of grant of the
Performance Share or Performance Unit or otherwise, commencing
as soon as practicable after the end of the relevant
Performance Period. The Committee must certify in writing
prior to the payment of any Performance Share or Performance
Unit that the performance objectives and any other material
terms were in fact satisfied.
a. Dividend Equivalents. The Committee is authorized to
grant Dividend Equivalents to Eligible Persons. The
Committee may provide, at the date of grant or
thereafter, that Dividend Equivalents shall be paid
or distributed when accrued or shall be deemed to
have been reinvested in additional Shares, or other
investment vehicles as the Committee may specify,
provided that Dividend Equivalents (other than
freestanding Dividend Equivalents) shall be subject
to all conditions and restrictions of the underlying
Awards to which they relate.
b. Other Share-Based Awards. The Committee is
authorized, subject to limitations under applicable
law, to grant to Eligible Persons such other Awards
that may be denominated or payable in, valued in
whole or in part by reference to, or otherwise based
on, or related to, Shares, as deemed by the Committee
to be consistent with the purposes of the Plan,
including, without limitation, unrestricted shares
awarded purely as a "bonus" and not subject to any
restrictions or conditions, other rights convertible
or exchangeable into Shares, purchase rights for
Shares, Awards with value and payment contingent upon
performance of the Company or any other factors
designated by the Committee, and Awards valued by
reference to the performance of specified
Subsidiaries or Affiliates. The Committee shall
determine the terms and conditions of such Awards at
date of grant or thereafter. Shares delivered
pursuant to an Award in the nature of a purchase
right granted under this Section 5(h) shall be
purchased for such consideration, paid for at such
times, by such methods, and in such forms, including,
without limitation, cash, Shares, notes or other
property, as the Committee shall determine. Cash
awards, as an element of or supplement to any other
Award under the Plan, shall also be authorized
pursuant to this Section 5(h).
6. Certain Provisions Applicable to Awards.
a) Stand-Alone, Additional, Tandem and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Committee, be
granted to Eligible Persons either alone or in addition to, in tandem
with, or in exchange or substitution for, any other Award granted under
the Plan or any award granted under any other plan or agreement of the
Company, any Subsidiary or Affiliate, or any business entity to be
acquired by the Company or a Subsidiary or Affiliate, or any other
right of an Eligible Person to receive payment from the Company or any
Subsidiary or Affiliate. Awards may be granted in addition to or in
tandem with such other Awards or awards, and may be granted either as
of the same time as or a different time from the grant of such other
Awards or awards. The per Share exercise price of any Option, grant
price of any SAR, or purchase price of any other Award conferring a
right to purchase Shares which is granted, in connection with the
substitution of awards granted under any other plan or agreement of the
Company or any Subsidiary or Affiliate or any business entity to be
acquired by the Company or any Subsidiary or Affiliate, shall be
determined by the Committee, in its discretion.
b) Terms of Awards. The term of each Award granted to an Eligible
Person shall be for such period as may be determined by the Committee;
provided, however, that in no event shall the term of any ISO or an SAR
granted in tandem therewith exceed a period of ten years from the date
of its grant (or such shorter period as may be applicable under Section
422 of the Code).
- 35 -
c) Form of Payment Under Awards. Subject to the terms of the Plan and
any applicable Award Agreement, payments to be made by the Company or a
Subsidiary or Affiliate upon the grant, maturation, or exercise of an
Award may be made in such forms as the Committee shall determine at the
date of grant or thereafter, including, without limitation, cash,
Shares, or other property, and may be made in a single payment or
transfer, in installments, or on a deferred basis. The Committee may
make rules relating to installment or deferred payments with respect to
Awards, including the rate of interest or earnings equivalents to be
credited with respect to such payments.
d) Nontransferability. Unless otherwise set forth by the Committee in
an Award Agreement, Awards (except for vested shares) shall not be
transferable by an Eligible Person except by will or the laws of
descent and distribution (except pursuant to a Beneficiary designation)
and shall be exercisable during the lifetime of an Eligible Person only
by such Eligible Person or his or her guardian or legal representative.
An Eligible Person's rights under the Plan may not be pledged,
mortgaged, hypothecated, or otherwise encumbered, and shall not be
subject to claims of the Eligible Person's creditors.
7. Change of Control Provisions.
a) Acceleration of Exercisability and Lapse of Restrictions. In the
event of a Change of Control, the following acceleration provisions
shall apply unless otherwise provided by the Committee at the time of
the Award grant:
All outstanding Awards pursuant to which the Participant may have
rights the exercise of which is restricted or limited, shall become
fully exercisable at the time of the Change of Control. Unless the
right to lapse of restrictions or limitations is waived or deferred
by a Participant prior to such lapse, all restrictions or
limitations (including risks of forfeiture and deferrals) on
outstanding Awards subject to restrictions or limitations under the
Plan shall lapse, and all performance criteria and other conditions
to payment of Awards under which payments of cash, Shares or other
property are subject to conditions shall be deemed to be achieved
or fulfilled and shall be waived by the Company at the time of the
Change of Control.
b) Definitions of Certain Terms. For purposes of this Section 7, the
following definitions, in addition to those set forth in Section 2,
shall apply:
i. "Change of Control" means and shall be deemed to have occurred
if:
a. any person (within the meaning of the Exchange Act), other
than the Company, a Related Party or Tengelmann
Warenhandelsgesellschaft, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of Voting Securities representing 40 percent or more of the total
voting power of all the then-outstanding Voting Securities; or
b. the individuals who, as of the effective date of the Plan,
constitute the Board, together with those who first become directors
subsequent to such date and whose recommendation, election or
nomination for election to the Board was approved by a vote of at least
a majority of the directors then still in office who either were
directors as of the effective date of the Plan or whose recommendation,
election or nomination for election was previously so approved (the
"Continuing Directors"), cease for any reason to constitute a majority
of the members of the Board; or
c. the stockholders of the Company approve a merger,
consolidation, recapitalization or reorganization of the Company or a
Subsidiary, reverse split of any class of Voting Securities, or an
acquisition of securities or assets by the Company or a Subsidiary, or
consummation of any such transaction if stockholder approval is not
obtained, other than (I) any such transaction in which the holders of
outstanding Voting Securities immediately prior to the transaction
receive (or, in the case of a transaction involving a Subsidiary and
not the Company, retain), with respect to such Voting Securities,
voting securities of the surviving or transferee entity representing
more than 60 percent of the total voting power outstanding immediately
after such transaction, with the voting power of each such continuing
holder relative to other such continuing holders not substantially
altered in the transaction, or (II) any such transaction which would
result in a Related Party beneficially owning more than 50 percent of
the voting securities of the surviving entity outstanding immediately
after such transaction; or
- 36 -
d. the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets
other than any such transaction which would result in a Related Party
owning or acquiring more than 50 percent of the assets owned by the
Company immediately prior to the transaction.
i. "Related Party" means (a) a majority-owned subsidiary of the
Company; (b) an employee or group of employees of the Company
or any majority-owned subsidiary of the Company; (c) a trustee
or other fiduciary holding securities under an employee
benefit plan of the Company or any majority-owned subsidiary
of the Company; or (d) a corporation owned directly or
indirectly by the stockholders of the Company in substantially
the same proportion as their ownership of Voting Securities.
ii. "Voting Securities" means any securities of the Company which
carry the right to vote generally in the election of
directors.
- 37 -
8. General Provisions.
a) Compliance with Legal and Trading Requirements. The Plan, the
granting and exercising of Awards thereunder, and the other obligations
of the Company under the Plan and any Award Agreement, shall be subject
to all applicable federal and state laws, rules and regulations, and to
such approvals by any regulatory or governmental agency as may be
required. The Company, in its discretion, may postpone the issuance or
delivery of Shares under any Award until completion of such stock
exchange or market system listing or registration or qualification of
such Shares or other required action under any state or federal law,
rule or regulation as the Company may consider appropriate, and may
require any Participant to make such representations and furnish such
information as it may consider appropriate in connection with the
issuance or delivery of Shares in compliance with applicable laws,
rules and regulations. No provisions of the Plan shall be interpreted
or construed to obligate the Company to register any Shares under
federal or state law.
b) No Right to Continued Employment or Service. Neither the Plan nor
any action taken thereunder shall be construed as giving any employee
or director the right to be retained in the employ or service of the
Company or any of its Subsidiaries or Affiliates, nor shall it
interfere in any way with the right of the Company or any of its
Subsidiaries or Affiliates to terminate any employee's or director's
employment or service at any time.
c) Taxes. The Company or any Subsidiary or Affiliate is authorized to
withhold from any Award granted, any payment relating to an Award under
the Plan, including from a distribution of Shares, or any payroll or
other payment to an Eligible Person, amounts of withholding and other
taxes due in connection with any transaction involving an Award, and to
take such other action as the Committee may deem advisable to enable
the Company and Eligible Persons to satisfy obligations for the payment
of withholding taxes and other tax obligations relating to any Award.
This authority shall include authority to withhold or receive Shares or
other property and to make cash payments in respect thereof in
satisfaction of an Eligible Person's tax obligations.
d) Changes to the Plan and Awards. The Board may amend, alter, suspend,
discontinue, or terminate the Plan or the Committee's authority to
grant Awards under the Plan without the consent of shareholders of the
Company or Participants, except that any such amendment, alteration,
suspension, discontinuation, or termination shall be subject to the
approval of the Company's shareholders to the extent such shareholder
approval is required under Section 422 of the Code; provided, however,
that, without the consent of an affected Participant, no amendment,
alteration, suspension, discontinuation, or termination of the Plan may
materially and adversely affect the rights of such Participant under
any Award theretofore granted to him or her. The Committee may waive
any conditions or rights under, amend any terms of, or amend, alter,
suspend, discontinue or terminate, any Award theretofore granted,
prospectively or retrospectively; provided, however, that, without the
consent of a Participant, no amendment, alteration, suspension,
discontinuation or termination of any Award may materially and
adversely affect the rights of such Participant under any Award
theretofore granted to him or her.
e) No Rights to Awards; No Shareholder Rights. No Eligible Person or
employee shall have any claim to be granted any Award under the Plan,
and there is no obligation for uniformity of treatment of Eligible
Persons and employees. No Award shall confer on any Eligible Person any
of the rights of a shareholder of the Company unless and until Shares
are duly issued or transferred to the Eligible Person in accordance
with the terms of the Award.
f) Unfunded Status of Awards. The Plan is intended to constitute an
"unfunded" plan for incentive compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing
contained in the Plan or any Award shall give any such Participant any
rights that are greater than those of a general creditor of the
Company; provided, however, that the Committee may authorize the
creation of trusts or make other arrangements to meet the Company's
obligations under the Plan to deliver cash, Shares, other Awards, or
other property pursuant to any Award, which trusts or other
arrangements shall be consistent with the "unfunded" status of the Plan
unless the Committee otherwise determines with the consent of each
affected Participant
- 38 -
g) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the shareholders of the Company for
approval shall be construed as creating any limitations on the power of
the Board to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of options and
other awards otherwise than under the Plan, and such arrangements may
be either applicable generally or only in specific cases.
h) Not Compensation for Benefit Plans. No Award payable under this Plan
shall be deemed salary or compensation for the purpose of computing
benefits under any benefit plan or other arrangement of the Company for
the benefit of its employees or directors unless the Company shall
determine otherwise.
i) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash, other Awards, or other property shall be issued
or paid in lieu of such fractional Shares or whether such fractional
Shares or any rights thereto shall be forfeited or otherwise
eliminated.
j) Governing Law. The validity, construction, and effect of the Plan,
any rules and regulations relating to the Plan, and any Award Agreement
shall be determined in accordance with the laws of New Jersey without
giving effect to principles of conflict of laws.
k) Effective Date; Plan Termination. The Plan shall become effective as
of July 14, 1998 (the "Effective Date"), subject to approval by the
vote of the holders of a majority of the shares of stock of the Company
present or represented at the annual meeting of stockholders to be held
in July 1999. Awards may be made prior to such approval by
stockholders, but each such Award shall be subject to the approval of
this Plan by the stockholders, and if this Plan shall not be so
approved, all Awards granted under this Plan shall be of no effect. The
Plan shall terminate as to future awards on the date which is ten (10)
years after the Effective Date.
l) Relationship to 1998 Restricted Stock Plan. This Plan constitutes an
amendment and restatement of The Great Atlantic & Pacific Tea Company,
Inc. 1998 Restricted Stock Plan (the "Restricted Stock Plan") effective
as of July 14, 1998, the date of inception of the Restricted Stock
Plan. Any awards of shares of Restricted Stock made under the
Restricted Stock Plan shall be deemed to be Awards of Restricted Shares
under this Plan and shall be subject to all the terms and conditions of
this Plan.
m) Titles and Headings. The titles and headings of the sections in the
Plan are for convenience of reference only. In the event of any
conflict, the text of the Plan, rather than such titles or headings,
shall control.
- 39 -
ANNUAL MEETING OF STOCKHOLDERS OF
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
JULY 14, 2005
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
| |
v Please detach along perforated line and mail in the envelope provided. v
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND PROPOSAL 2.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE |x|
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FOR AGAINST ABSTAIN
(1) ELECTION OF DIRECTORS (2) Proposal to amend the 1998 Long Term |_| |_| |_|
Incentive and Share Award Plan (the
NOMINEES: "Plan") to increase the number of shares
that may be issued under the Plan by
|_| FOR ALL NOMINEES |_| J. D. Barline 3,000,000.
|_| J. J. Boeckel
|_| WITHHOLD AUTHORITY |_| B. Gaunt FOR ALL NOMINEES (THE DIRECTORS RECOMMEND A VOTE "FOR")
C. W. E. Haub |_| H. Haub
|_| D. Kourkoumelis
|_| FOR ALL EXCEPT |_| E. Lewis
(See instructions below) |_| R. L. Nolan
|_| M. B. Tart-Bezer
INSTRUCTION: To withhold authority to vote for any individual
nominee(s), mark "FOR ALL EXCEPT" and fill in the
circle next to each nominee you wish to withhold,
as shown here: o
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To change the address on your account, please check the box |_|
at right and indicate your new address in the address space
above. Please note that changes to the registered name(s) on
the account may not be submitted via this method.
-----------------------------------------------------------------
Signature of Stockholder Date: Signature of Stockholder Date:
------------------------ ---------- -------------------------- -----------
NOTE: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign.
When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer
is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
Dear Stockholder:
We are pleased to send you our 2004 Annual Report and Proxy Statement. The
Annual Meeting of Stockholders will be held at 9:00 A.M. (E.D.T.) on Thursday,
July 14, 2005 at the The Woodcliff Lake Hilton, 200 Tice Boulevard, Woodcliff
Lake, New Jersey.
If you are interested in further information about the Company, you are invited
to contact the Treasury Department at the executive offices at 2 Paragon Drive,
Montvale, New Jersey or contact the A&P's home page at www.aptea.com.
Sincerely,
Mitchell P. Goldstein
Executive Vice President, Chief
Financial Officer & Secretary
IMPORTANT NOTICE: All Annual Meeting attendees may be asked to present
a valid government-issued photo identification, such as a driver's
license or passport, before entering the meeting. In addition, video
and audio recording devices and other electronic devices will not be
permitted at the Annual Meeting, and attendees will be subject to
security inspections.
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
PROXY - FOR THE ANNUAL MEETING - JULY 14, 2005
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
The undersigned, having received the Notice of Meeting and Proxy
Statement dated May 27, 2005, appoints CHRISTIAN W. E. HAUB, MITCHELL P.
GOLDSTEIN and MARY ELLEN OFFER, and each or any of them as Proxies with full
power of substitution, to represent and vote all the shares of Common Stock
which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders to be held at 9:00 A.M. (E.D.T.) July 14, 2005, at The Woodcliff
Lake Hilton, 200 Tice Boulevard, Woodcliff Lake, New Jersey, or at any
adjournment thereof, with all powers which the undersigned would possess if
personally present.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THE PROXY WILL BE
VOTED "FOR" ITEMS (1) AND (2), ALL OF SAID ITEMS BEING MORE FULLY DESCRIBED IN
THE NOTICE OF MEETING AND THE ACCOMPANYING PROXY STATEMENT. THE UNDERSIGNED
RATIFIES AND CONFIRMS ALL THAT SAID PROXIES OR THEIR SUBSTITUTES MAY LAWFULLY DO
BY VIRTUE HEREOF.
(TO BE SIGNED ON REVERSE SIDE)
14475
ANNUAL MEETING OF STOCKHOLDERS OF
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
JULY 14, 2005
---------------------------------
PROXY VOTING INSTRUCTIONS
---------------------------------
MAIL - Date, sign and mail your proxy card in the
envelope provided as soon as possible.
---------------------- ----------------------
- OR -
COMPANY NUMBER
---------------------- ----------------------
TELEPHONE - Call toll-free 1-800-PROXIES
(1-800-776-9437) from any touch-tone telephone and ACCOUNT NUMBER
follow the instructions. Have your proxy card
available when you call. ---------------------- ----------------------
- OR -
INTERNET - Access "WWW.VOTEPROXY.COM" and follow the ---------------------- ----------------------
on-screen instructions. Have your proxy card
available when you access the web page.
------------------------------------------------------------------------------------------------------------------------------------
You may enter your voting instructions at 1-800-PROXIES or www.voteproxy.com up until 11:59 PM Eastern Daylight Time the day before
the cut-off or meeting date.
------------------------------------------------------------------------------------------------------------------------------------
| |
v Please detach along perforated line and mail in the envelope provided. v
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
------------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND PROPOSAL 2.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE |x|
------------------------------------------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
(1) ELECTION OF DIRECTORS (2) Proposal to amend the 1998 Long Term |_| |_| |_|
Incentive and Share Award Plan (the
NOMINEES: "Plan") to increase the number of shares
that may be issued under the Plan by
|_| FOR ALL NOMINEES |_| J. D. Barline 3,000,000.
|_| J. J. Boeckel
|_| WITHHOLD AUTHORITY |_| B. Gaunt FOR ALL NOMINEES (THE DIRECTORS RECOMMEND A VOTE "FOR")
C. W. E. Haub |_| H. Haub
|_| D. Kourkoumelis
|_| FOR ALL EXCEPT |_| E. Lewis
(See instructions below) |_| R. L. Nolan
|_| M. B. Tart-Bezer
INSTRUCTION: To withhold authority to vote for any individual
nominee(s), mark "FOR ALL EXCEPT" and fill in the
circle next to each nominee you wish to withhold,
as shown here: o
-----------------------------------------------------------------
-----------------------------------------------------------------
To change the address on your account, please check the box |_|
at right and indicate your new address in the address space
above. Please note that changes to the registered name(s) on
the account may not be submitted via this method.
-----------------------------------------------------------------
Signature of Stockholder Date: Signature of Stockholder Date:
------------------------ ---------- -------------------------- -----------
NOTE: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign.
When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer
is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
ANNUAL MEETING OF STOCKHOLDERS OF
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
JULY 14, 2005
---------------------------------
PROXY VOTING INSTRUCTIONS
---------------------------------
MAIL - Date, sign and mail your proxy card in the
envelope provided as soon as possible.
---------------------- ----------------------
- OR -
COMPANY NUMBER
---------------------- ----------------------
TELEPHONE - Call toll-free 1-800-PROXIES
(1-800-776-9437) from any touch-tone telephone and ACCOUNT NUMBER
follow the instructions. Have your proxy card
available when you call. ---------------------- ----------------------
- OR -
INTERNET - Access "WWW.VOTEPROXY.COM" and follow the ---------------------- ----------------------
on-screen instructions. Have your proxy card
available when you access the web page.
------------------------------------------------------------------------------------------------------------------------------------
You may enter your voting instructions at 1-800-PROXIES or www.voteproxy.com up until 11:59 PM Eastern Daylight Time the day before
the cut-off or meeting date.
------------------------------------------------------------------------------------------------------------------------------------
| |
v Please detach along perforated line and mail in the envelope provided. v
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
------------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND PROPOSAL 2.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE |x|
------------------------------------------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
(1) ELECTION OF DIRECTORS (2) Proposal to amend the 1998 Long Term |_| |_| |_|
Incentive and Share Award Plan (the
NOMINEES: "Plan") to increase the number of shares
that may be issued under the Plan by
|_| FOR ALL NOMINEES |_| J. D. Barline 3,000,000.
|_| J. J. Boeckel
|_| WITHHOLD AUTHORITY |_| B. Gaunt FOR ALL NOMINEES (THE DIRECTORS RECOMMEND A VOTE "FOR")
C. W. E. Haub |_| H. Haub
|_| D. Kourkoumelis
|_| FOR ALL EXCEPT |_| E. Lewis
(See instructions below) |_| R. L. Nolan
|_| M. B. Tart-Bezer
INSTRUCTION: To withhold authority to vote for any individual
nominee(s), mark "FOR ALL EXCEPT" and fill in the
circle next to each nominee you wish to withhold,
as shown here: o
-----------------------------------------------------------------
-----------------------------------------------------------------
To change the address on your account, please check the box |_|
at right and indicate your new address in the address space
above. Please note that changes to the registered name(s) on
the account may not be submitted via this method.
-----------------------------------------------------------------
Signature of Stockholder Date: Signature of Stockholder Date:
------------------------ ---------- -------------------------- -----------
NOTE: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign.
When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer
is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
CONFIDENTIAL VOTING INSTRUCTION FORM
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
SAVINGS PLAN
PRUDENTIAL TRUST COMPANY - TRUSTEE
I hereby direct that the voting rights pertaining to shares of The
Great Atlantic & Pacific Tea Company, Inc. held by the Trustee and allocated to
my account shall be exercised at the Annual Meeting of Stockholders of the
Company, to be held on July 14, 2005, and at any adjournment of such meeting, as
specified herein, and if no vote is specified, that such rights be exercised
"FOR" items (1) and (2).
By my signature on the reverse, I hereby acknowledge receipt of the
Notice of the Annual Meeting, the Proxy Statement of the Company dated May 27,
2005, and a copy of the Annual Report.
PLEASE SIGN, DATE AND RETURN THIS FORM BEFORE JULY 5, 2005. AS TO
MATTERS COMING BEFORE THE MEETING FOR WHICH NO SIGNED DIRECTION IS RECEIVED BY
THE TRUSTEE PRIOR TO JULY 8, 2005, THE TRUSTEE MAY EXERCISE VOTING RIGHTS ON
YOUR BEHALF IN SUCH MANNER AS THE TRUSTEE MAY, IN ITS DISCRETION, DETERMINE.
PLEASE MARK, SIGN AND DATE ON THE REVERSE SIDE, AND RETURN IN THE
ENCLOSED ENVELOPE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
14475