-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Sg4eFphuQnwwPUrsCrhiVpk17Oy0QIA8eycBvZHu7Z4FzoXnIvliMua8upO8uXLb 4/oVwE5QzSKiUl19VUuzJQ== 0000912057-95-005682.txt : 19950728 0000912057-95-005682.hdr.sgml : 19950728 ACCESSION NUMBER: 0000912057-95-005682 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950915 FILED AS OF DATE: 19950727 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: RYKOFF SEXTON INC CENTRAL INDEX KEY: 0000085973 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & RELATED PRODUCTS [5140] IRS NUMBER: 952134693 STATE OF INCORPORATION: DE FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-08105 FILM NUMBER: 95556422 BUSINESS ADDRESS: STREET 1: 761 TERMINAL ST CITY: LOS ANGELES STATE: CA ZIP: 90021 BUSINESS PHONE: 2136224131 MAIL ADDRESS: STREET 1: 761 TERMINAL ST CITY: LA STATE: CA ZIP: 90021 FORMER COMPANY: FORMER CONFORMED NAME: RYKOFF S E & CO DATE OF NAME CHANGE: 19850124 DEF 14A 1 SCHEDULE 14A RYKOFF-SEXTON, INC. 1050 WARRENVILLE ROAD LISLE, ILLINOIS 60532-5201 ------------------------ NOTICE OF ANNUAL MEETING OF STOCKHOLDERS SEPTEMBER 15, 1995 --------------------- TO THE STOCKHOLDERS OF RYKOFF-SEXTON, INC.: The Annual Meeting of Stockholders of Rykoff-Sexton, Inc. (the "Company") will be held at the Park Hyatt Hotel, 800 North Michigan Avenue, Chicago, Illinois 60611 on Friday, September 15, 1995 at 10:00 A.M., or at any adjournment thereof, for the following purposes: 1. To elect four persons to the Board of Directors, three of whom will serve in Class B with terms ending in 1998 and one of whom will serve in Class C with a term ending in 1997; 2. To ratify the appointment of Arthur Andersen LLP as independent public accountants for the Company for fiscal 1996; and 3. To transact any other business that may properly come before the meeting or any adjournment thereof. Pursuant to due action of the Board of Directors, stockholders of record as of the close of business on July 21, 1995 will be entitled to vote at the meeting or any adjournments thereof. ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE AS PROMPTLY AS POSSIBLE. IF YOU ATTEND THE MEETING, YOU MAY WITHDRAW THE PROXY AND VOTE IN PERSON. By Order of the Board of Directors Neil I. Sell SECRETARY July 27, 1995 PROXY STATEMENT OF RYKOFF-SEXTON, INC. 1050 WARRENVILLE ROAD LISLE, ILLINOIS 60532-5201 ------------------------ ANNUAL MEETING OF STOCKHOLDERS TO BE HELD SEPTEMBER 15, 1995 --------------------- GENERAL INFORMATION This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Rykoff-Sexton, Inc. (the "Company") for use at the Annual Meeting of Stockholders (the "Annual Meeting") of the Company to be held on September 15, 1995 and any adjournment thereof. The approximate date of mailing of this Proxy Statement and the accompanying proxy to stockholders is July 27, 1995. The number of outstanding voting securities of the Company at the close of business on the record date, July 21, 1995, was 14,614,158 shares of common stock, $.10 par value per share (the "Common Stock"). Each share of Common Stock is entitled to one vote. Only stockholders of record at the close of business on July 21, 1995 will be entitled to vote at the meeting or any adjournments thereof. All share amounts included herein give effect to a five-for-four stock split, effected in the form of a stock dividend, which was distributed on January 24, 1995 to stockholders of record on December 21, 1994. The holders of a majority of the shares issued and outstanding and entitled to vote at the Annual Meeting, present in person or by proxy, shall constitute a quorum at the Annual Meeting. Directors are elected by plurality vote. Ratification of the appointment of the independent public accountants and approval of all other matters to be acted upon at the Annual Meeting requires the affirmative vote of the holders of a majority of the shares having voting power and present in person or by proxy. Votes cast in person or by proxy at the Annual Meeting will be tabulated by the inspectors of election appointed for the meeting and who will determine whether or not a quorum is present. With respect to the election of directors, votes may be cast in favor or withheld. Abstentions may be specified on all proposals (other than the election of directors), will be counted for purposes of determining the total votes cast on the matter for which such abstention is noted and will have the effect of a negative vote on such matter. Broker non-votes on a particular matter are not deemed to be shares present and entitled to vote on such matter. Each stockholder who signs and returns a proxy in the form enclosed with this Proxy Statement may revoke the same at any time prior to its use by giving notice of such revocation to the Company in writing or in open meeting. Unless so revoked, the shares represented by each such proxy will be voted at the meeting and any adjournment thereof. Presence at the meeting of a stockholder who has signed a proxy does not alone revoke that proxy. The Company will bear the cost of soliciting proxies for the meeting. The Company will also reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable expenses in forwarding the soliciting material to beneficial owners of stock. Proxies are being solicited primarily by mail, but officers and regular employees of the Company may also solicit proxies personally, by telephone or by special letter. The Company will also use the services of Chemical Mellon Shareholder Services to aid in the solicitation of proxies at an anticipated fee of $4,500, plus reasonable expenses. 1 ELECTION OF DIRECTORS NOMINATION AND CLASSIFICATION The Restated Certificate of Incorporation of the Company provides that the Company's Board of Directors shall be divided into three classes and requires that at each Annual Meeting, successors to directors whose terms expire at that Annual Meeting shall be elected for three-year terms. The terms of the directors in Class B expire with this Annual Meeting. On June 19, 1995, the Board of Directors unanimously approved an increase in the size of the Board from seven to eight members. In connection therewith, the Board determined to place the newly created board seat in Class C to equalize the relative size between the classes. The terms of the directors in Class C expire in 1997. The Board of Directors has nominated Mr. James P. Miscoll, Mr. Bernard Sweet and Mr. Mark Van Stekelenburg for election as directors in Class B at this meeting to serve for three-year terms expiring at the 1998 Annual Meeting of Stockholders, and has also nominated Mr. Jan W. Jeurgens for election as a director in Class C to serve a two-year term expiring at the 1997 Annual Meeting of Stockholders, or until their respective successors are elected and qualified. Each nominee has consented to serve for their term if elected. All proxies will be voted in favor of the four nominees listed below unless a contrary choice is specified. If, prior to the Annual Meeting, the Board of Directors learns that a nominee will be unable to serve by reason of death, incapacity or other unexpected occurrence, the proxies will be voted for the election of such substitute nominee as may be selected by the Board of Directors. Biographical information for each person nominated and for each person whose term of office as a director will continue after the Annual Meeting is set forth below.
PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE PAST FIVE YEARS AND DIRECTOR NAME AND AGE DIRECTORSHIPS SINCE - -------------------------------------- ------------------------------ -------- NOMINEES CLASS B (TERMS EXPIRING IN 1998) James P. Miscoll (60) Retired since 1992. Mr. 1992 Miscoll was previously Vice Chairman of BankAmerica Corporation. He is a director of Coast Federal Financial, Inc., Northern Technology, Inc., Montgomery-Watson, Inc., Winkler McManus and CHELA (California Higher Education Loan Authority). Bernard Sweet (71) Retired since 1985. Mr. Sweet 1978 was previously President and Chief Executive Officer of Republic Airlines, Inc. He is a director of G&K Services, Inc. Mark Van Stekelenburg (44) President and Chief Executive 1992 Officer of the Company since December 1992. Mr. Van Stekelenburg joined the Company in 1991 and was Executive Vice President until December 1992. He was previously President and Chief Executive Officer of Grootverbruik Ahold, the foodservice division of Royal Ahold, N.V., The Netherlands. CLASS C (TERM EXPIRING IN 1997) Jan W. Jeurgens (74) Retired since 1983. From Nominee 1968-1983, Mr. Jeurgens served as Chief Executive Officer of Netherlands-based Makro International, a world-wide wholesaler of food and non-food products. Mr. Jeurgens continues an active involvement in the international distribution industry.
2
PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE PAST FIVE YEARS AND DIRECTOR NAME AND AGE DIRECTORSHIPS SINCE - -------------------------------------- ------------------------------ -------- CONTINUING DIRECTORS CLASS A (TERMS EXPIRING IN 1996) James I. Maslon (68) Retired since 1992. Mr. Maslon 1962 was previously Vice President -- Manufacturing of the Company's S.E. Rykoff & Co. division. Robert G. Zeller (77) Retired since 1979. Mr. Zeller 1972 was previously Chairman of the Board and Chief Executive Officer of F. Eberstadt & Co., Inc., an investment banking firm. He is a director of Salomon Inc. CLASS C (TERMS ENDING IN 1997) R. Burt Gookin (81) Retired since 1979. Mr. Gookin 1985 was previously Vice Chairman of the Board and Chief Executive Officer of H. J. Heinz Company. Neil I. Sell (54) Secretary of the Company. Mr. 1982 Sell is a partner in the law firm of Maslon Edelman Borman & Brand, a Professional Limited Liability Partnership. He is a director of Grand Casinos, Inc. and Stratosphere Corporation.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES The Board of Directors held twelve meetings during the last fiscal year, and took action by Written Consent on two occasions. The Board of Directors has an Audit Committee, a Management Development -- Compensation and Stock Option Committee and a Nominating Committee. In fiscal 1995, the Board of Directors determined to consolidate each of its Management Development -- Compensation and Stock Option Committees into a single committee, which it named the Management Development -- Compensation and Stock Option Committee. The Company's Audit Committee, which consists of Messrs. James I. Maslon, James P. Miscoll, Neil I. Sell, Bernard Sweet and Robert G. Zeller, held two meetings during the last fiscal year. The Audit Committee recommends to the full Board of Directors the engagement of the independent public accountants, reviews the audit plan and results of the audit engagement, reviews the independence of the auditors and reviews the adequacy of the Company's system of internal accounting controls. The Company's Management Development -- Compensation and Stock Option Committee, which consists of Messrs. R. Burt Gookin, James P. Miscoll, Bernard Sweet and Robert G. Zeller, held an aggregate of seven meetings during the last fiscal year. Three of these meetings were held by the committee formerly known as the Stock Option Committee and four were held by the committee formerly known as the Management Development -- Compensation Committee. The Management Development -- Compensation and Stock Option Committee reviews the Company's remuneration policies and practices, administers each of the Rykoff-Sexton, Inc. 1980 Stock Option Plan, the 1988 Stock Option and Compensation Plan (the "1988 Plan") and the 1989 Director Stock Option Plan, administers the Company's incentive compensation programs and makes recommendations to the full Board of Directors in connection with all compensation matters affecting the Company. The Company's Nominating Committee, which consists of Messrs. R. Burt Gookin, James I. Maslon, Neil I. Sell and Bernard Sweet, held one meeting during the last fiscal year. The Nominating Committee makes recommendations to the full Board of Directors on the following matters: the size and constituency of the Board of Directors, the age limit for Board of Directors membership, the filling of vacancies on the Board of Directors and the removal of any director for cause. In recommending 3 persons to the Board of Directors as potential nominees for election as directors, the Nominating Committee will consider written suggestions regarding the qualifications that nominees should possess, but it will not entertain stockholder nominations of specific individuals. COMPENSATION OF DIRECTORS During fiscal 1995, directors who were not employees of the Company received an annual retainer of $15,000. Directors also receive a fee of $1,750 for each meeting of the Board of Directors attended, $875 for each telephonic meeting of the Board of Directors and $500 for each committee meeting attended. The 1993 Director Stock Option Plan provides for an annual grant to non-employee directors of options to purchase 1,250 shares at an option exercise price equal to the fair market value of such shares on the grant date. Each such option has a ten year term and generally becomes exercisable on the first anniversary of the grant date. Messrs. Gookin, Maslon, Miscoll, Sell, Sweet and Zeller each were granted options to purchase 1,250 shares at an exercise price of $16.30 on September 9, 1994. Each of these directors also received a one-time grant of options to purchase 6,250 shares of Common Stock at an exercise price of $11.20 on June 21, 1993. These options have ten year terms and generally become exercisable in three equal annual installments commencing on June 21, 1994. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth all persons known by the Company to be the beneficial owners of more than five percent (5%) of the outstanding Common Stock of the Company as of July 1, 1995:
SHARES BENEFICIALLY PERCENT NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OF CLASS - ------------------------------------------------------- ------------ -------- State Farm Mutual Automobile Insurance Company and related entities.................................. 1,538,635 10.53% One State Farm Plaza Bloomington, Illinois 61701 John Hancock Mutual Life Insurance Company and related entities.............................................. 1,279,062 8.75% P.O. Box 111 Boston, Massachusetts 02117 The Prudential Insurance Company of America............ 1,063,406 7.27% Prudential Plaza Newark, New Jersey 07102-3777 David L. Babson & Co., Inc............................. 843,125 5.77% One Memorial Drive Cambridge, Massachusetts 02142 FMR Corp............................................... 814,575 5.57% 82 Devonshire Street Boston, Massachusetts 02109-3605 ICM Asset Management, Inc.............................. 791,119 5.41% 601 West Main Avenue, Suite 917 Spokane, Washington 99201 Archer Daniels Midland Company......................... 754,625 5.16% 4666 Faries Parkway P.O. Box 1470 Decatur, Illinois 62525
4 The following table sets forth beneficial ownership of Common Stock as of a recent date for each director of the Company, each executive officer named in the Summary Compensation Table under "EXECUTIVE COMPENSATION" herein and all directors and executive officers as a group. Unless otherwise stated and subject to applicable community property laws, each beneficial owner has sole voting and investment powers with respect to the shares shown.
SHARES BENEFICIALLY PERCENT NAME OWNED OF CLASS - ------------------------------------------------------ ------------- -------- Mark Van Stekelenburg................................. 260,829(1) 1.76% Harold E. Feather..................................... 100,813(2) * R. Burt Gookin........................................ 8,697(3) * Alan V. Giuliani...................................... 50,896(4) * Robert J. Harter, Jr.................................. 54,742(5) * Richard J. Martin..................................... 32,109(6) * James I. Maslon....................................... 372,728(7) 2.55% James P. Miscoll...................................... 9,167(8) * Neil I. Sell.......................................... 9,580(9) * Bernard Sweet......................................... 12,837(10) * Robert G. Zeller...................................... 31,368(11) * All directors and executive officers as a group (fourteen persons)................................... 998,682(12) 6.61% - ------------------------ * Less than 1%. (1) Includes options exercisable within 60 days to purchase 233,438 shares pursuant to the 1988 Stock Option and Compensation Plan. Also includes 62 shares owned by one of his children. (2) Includes options exercisable within 60 days to purchase 84,376 shares pursuant to the 1980 Stock Option Plan and the 1988 Stock Option and Compensation Plan. (3) Includes options exercisable within 60 days to purchase 6,667 shares pursuant to the 1993 Director Stock Option Plan. Also includes 1,718 shares owned by his spouse. (4) Includes options exercisable within 60 days to purchase 42,969 shares pursuant to the 1988 Stock Option and Compensation Plan. (5) Includes options exercisable within 60 days to purchase 31,250 shares pursuant to the 1988 Stock Option and Compensation Plan. (6) Includes options exercisable within 60 days to purchase 31,719 shares pursuant to the 1988 Stock Option and Compensation Plan. (7) Includes 23,515 shares held of record by Mr. Maslon as trustee for his children, 203,460 shares held of record by Mr. Maslon as co-trustee for his mother and 125 shares owned by his spouse. Includes options exercisable within 60 days to purchase 6,667 shares pursuant to the 1993 Director Stock Option Plan. (8) Includes options exercisable within 60 days to purchase 6,667 shares pursuant to the 1993 Director Stock Option Plan. (9) Includes options exercisable within 60 days to purchase 6,667 shares pursuant to the 1993 Director Stock Option Plan. (10) Includes options exercisable within 60 days to purchase 8,666 pursuant to the 1989 Director Stock Option Plan and the 1993 Director Stock Option Plan. Also includes 1,406 shares owned by his spouse. (11) Includes options exercisable within 60 days to purchase 7,197 shares pursuant to the 1989 Director Stock Option Plan and the 1993 Director Stock Option Plan. (12) Includes options exercisable within 60 days to purchase an aggregate of 502,902 shares pursuant to the Company's stock option plans.
5 The information contained in the foregoing footnotes is for explanatory purposes only and none of the persons named therein is the beneficial owner of shares designated as beneficially owned by or held in trust for any other person, including family members. REPORT OF THE MANAGEMENT DEVELOPMENT - COMPENSATION AND STOCK OPTION COMMITTEE The following report of the Management Development -- Compensation and Stock Option Committee (the "Committee"), as well as the Performance Graph set forth herein, are not soliciting materials, are not deemed filed with the Securities and Exchange Commission (the "SEC") and are not incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether made before or after the date of this Proxy Statement and irrespective of any general incorporation language in any such filing. As described on page three of this Proxy Statement, the Committee is responsible for establishing and reviewing the Company's executive compensation policies, advising the full Board of Directors on all compensation matters and administering the Company's stock option plans (other than the 1993 Director Stock Option Plan, which is administered by the entire Board of Directors). The Committee is comprised exclusively of outside directors. All decisions of the Committee relating to compensation of the President and Chief Executive Officer are reviewed and approved by the full Board of Directors. Decisions by the Committee on grants or awards pursuant to the 1988 Plan are made solely by the Committee. COMPENSATION POLICY The Company's executive compensation policies are designed to foster the Company's business goals of achieving profitable growth and premium returns to stockholders. The principal objectives of these policies are as follows: (1) to attract, motivate and retain executives of outstanding ability and character, (2) to provide rewards that are closely related to the performance of the Company and the individual executive by placing a significant portion of compensation at risk and (3) to align the interests of executives and stockholders through long-term, equity-based incentives and programs to encourage and reward stock ownership. The Committee uses the services of independent executive compensation consultants in developing and evaluating compensation plans in order to achieve the foregoing objectives. This report discusses the manner in which base salaries, short-term incentive compensation and long-term, equity-based incentives for the Company's President and Chief Executive Officer and the other executive officers named in the Summary Compensation Table (the "Named Executives") were determined for the 1995 fiscal year. EXECUTIVE COMPENSATION The key components of executive compensation are base salary, short-term incentive compensation and long-term, equity-based incentives. Base salary levels are generally targeted to be competitive with the average salaries paid at other companies of similar size and complexity both within and outside of the foodservice distribution and manufacturing industries. The Committee periodically has commissioned outside independent executive compensation consultants to analyze competitive compensation levels at comparable companies. BASE SALARY The Committee intends that base salaries should be set at approximately the 50th percentile of comparable companies, and previously determined to limit base salary increases for those Named Executives whose base salaries were above the 50th percentile, except where the Committee deemed merit increases to be warranted on an individual basis or necessary to retain key executives. Fiscal 1995 base salaries were based on fiscal 1994 base salaries, with adjustments based primarily on 6 individual performance evaluations and overall annual salary budget guidelines. Fiscal 1995 base salaries for the Named Executives were in the middle to the upper end of the range for comparable companies. SHORT-TERM INCENTIVE COMPENSATION The Named Executives and other executives of the Company and its subsidiaries are eligible for annual cash bonuses under the Company's Management Incentive Plan. This plan, which is administered by the Committee, is designed to reward executives for their contributions to the Company's achievement of specified annual financial performance goals. The Committee selects participants, determines each participant's minimum, targeted and maximum bonus opportunities and establishes the annual financial performance goals for the Company and its operating units. Performance goals for the Named Executives are based upon the consolidated results for the Company. Fiscal 1995 performance goals for the Named Executives were based upon a matrix of the Company's attainment of operating profit and average return on equity goals. No bonuses are payable to the Named Executives under the Company's Management Incentive Plan unless the Company achieves a minimum of 80% of budgeted operating profit. Named Executives are eligible for targeted bonuses that range from 30% to 50% of base salary if the performance goals are met, and for maximum bonuses that range from 60% to 100% of base salary if maximum performance goals are met. In fiscal 1995, the Company achieved more than the 80% minimum of its budgeted operating profit and, when weighted on a matrix in combination with the average return on equity, payout achievement was approximately 49% of an individual's target objectives. During fiscal 1995, the Board of Directors awarded a discretionary bonus of $300,000 to Mr. Van Stekelenburg and $50,000 to each of the Named Executives in recognition of their accomplishments while implementing "Project RESULTS" (Realizing Excellence through Strategy, Unity, Leadership, Teamwork and Systems). These awards were made in light of the significant progress made by the Company under Project RESULTS in fiscal 1995. During this period, income from continuing operations rose to $9,376,000, or $.64 per share, from $4,121,000 or $.28 per share in the prior year. Sales also increased to $1.57 billion or 8.6% over the prior year, while operating expenses from continuing operations decreased as a percentage of sales from 20.6% to 19.2%. The Committee believes that Mr. Van Stekelenburg's leadership was a significant factor in the Company's fiscal 1995 performance. In order to encourage equity ownership in the Company by its executive officers, including the Named Executives, and the executive management of its operating companies, the Company implemented a Convertible Award Plan which provides that participants may elect to receive up to 50% of their annual incentive bonus under the Management Incentive Plan in the form of shares of Common Stock, based on a per share price equal to the closing price on the New York Stock Exchange of the Common Stock on the fourth day following the announcement of the Company's annual earnings for the year preceding the year in which the annual incentive bonus is calculated. If the participant makes such election, the participant is awarded one additional share of Common Stock for each five shares received in accordance with the foregoing calculation. Although such stock is owned by the participant and any dividends that the Company may declare will be paid to the participant, certain restrictions on transferability and forfeiture apply to these shares during the three years following the original date of issue. LONG-TERM INCENTIVE COMPENSATION The Company also grants stock options and other equity incentives under the 1988 Plan in order to link compensation to the Company's long-term growth and performance and to increases in stockholder value. Under the 1988 Plan, the Committee may grant stock options, stock appreciation rights, stock awards, restricted stock, performance shares and cash awards to eligible employees of the Company and its subsidiaries. The Committee has broad discretion to establish the terms of such grants. It typically grants awards on an annual basis and may also grant awards to designated employees upon commencement of employment or following a significant change in any employee's 7 responsibility or title. Awards are based on guidelines relating to the employee's position in the Company which are set by the Committee, as well as the employee's current performance and anticipated future contributions. The Committee also considers the amount and terms of stock options previously granted to each of the Named Executives. Each member of the Committee individually evaluates these factors with respect to each Named Executive and then the Committee reaches consensus on the appropriate award. All stock options granted in fiscal 1995 had an exercise price that was equal to the fair market value of the Common Stock on the date of grant. CANCELLATION OF CONVERGING STOCK OPTIONS In fiscal 1993 and 1994, the Company granted converging non-qualified stock options to a total of seven executive officers, including the Named Executives. These options had an initial exercise price of $28.00 per share, which was substantially in excess of the $13.90 and $11.20 fair market value of the Common Stock on the respective grant dates. During the first five years of the options' ten-year term, the exercise price was subject to reductions for each year the Company attained predetermined performance objectives. If the market price of the Common Stock and the adjusted exercise price of these stock options converged during the first five years of the option term, the options were to become immediately exercisable at the converging price. In fiscal 1994, the Committee reviewed the converging stock option grants in light of the Company's announced restructuring effort, and concluded that these options would not provide sufficient incentive to the executives as the Company focused on improving its operational performance and earnings during this transition period. Accordingly, the Committee granted new non-qualified stock options with an exercise price equal to $15.40, the fair market value of the Common Stock on June 20, 1994. This amount was within the range recommended by the Committee's independent outside compensation consulting firm. The new grants were subject, in each such case, to the cancellation of the converging stock option grant. The details with respect to the option exchange are set forth more fully in the Ten-Year Option Repricing Table appearing on page 12 of this Proxy Statement. COMPENSATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER The base salary of Mr. Van Stekelenburg, the Company's President and Chief Executive Officer, is primarily based upon a survey of salaries paid to Chief Executive Officers of competitor companies. In 1994, the Company entered into a five-year employment agreement with Mr. Van Stekelenburg which provides for a minimum annual salary of $450,000, and a minimum target award of annual incentive bonus under the Management Incentive Plan (or any similar plan) of 50% of annual base salary if certain performance goals are met. A detailed discussion of Mr. Van Stekelenburg's employment agreement is set forth under "Employment Agreements and Change-in-Control Arrangements" under "EXECUTIVE COMPENSATION". As part of the initial compensation package offered to Mr. Van Stekelenburg when he joined the Company as an Executive Vice President in fiscal 1991, the Company made an interest-free, secured demand loan to him in connection with the purchase of his residence (the "1991 Loan"). The maximum amount outstanding under such loan in fiscal 1995 was $469,000, which Mr. Van Stekelenburg repaid in March 1995. The Company subsequently made an interest-free, secured demand loan to Mr. Van Stekelenburg in connection with the purchase of another residence following the Company's relocation to Illinois (the "1995 Loan"). The maximum amount outstanding under this loan in fiscal 1995 was $350,000. The Committee believes that these loans have enhanced the competitiveness of Mr. Van Stekelenburg's compensation package, and will encourage Mr. Van Stekelenburg to remain with the Company, in view of the Company's right to demand repayment of the 1995 Loan in the event Mr. Van Stekelenburg were to leave the Company. Mr. Van Stekelenburg was awarded a $109,710 cash bonus under the Management Incentive Plan for fiscal 1995, half of which he elected to convert into shares of Common Stock under the Company's Convertible Award Plan. Mr. Van Stekelenburg also received the $300,000 discretionary bonus described above related to Company improvements under Project RESULTS, and was granted a non- 8 qualified stock option to purchase 77,500 shares of Common Stock, in connection with the cancellation of his converging stock options. These options had an exercise price of $15.40 per share, which was the fair market value of the Common Stock on the grant date. SECTION 162(M) OF THE INTERNAL REVENUE CODE OF 1986 In 1993, changes were made to the federal corporate income tax law that limit the ability of public companies to deduct compensation in excess of $1 million paid annually to the five most highly compensated executive officers. There are exemptions from this limit, including compensation that is based on the attainment of performance goals that are established by the Committee and subsequently approved by the Company's stockholders, and forms of current compensation provided under a binding contract pre-dating the new tax law. It is the Committee's policy to seek to qualify executive compensation for deductibility to the extent consistent with the Company's overall objectives in attracting, motivating and retaining its executives. The Committee has reviewed the Company's executive compensation structure in light of the new tax law and believes that grants of stock options and stock appreciation rights under the 1988 Plan qualify as stockholder-approved performance-based compensation under a transition rule proposed by the Internal Revenue Service and, therefore, will be fully deductible when an option is exercised. Grants of restricted stock, performance stock and cash awards made after the new tax law's effective date, under each of the 1988 Plan and the Company's Management Incentive Plan, however, do not qualify as stockholder-approved performance-based compensation and, therefore, may not be fully deductible to the extent that such compensation, when added to other non-exempt compensation for a particular executive, exceeds the limit in any tax year. The Committee believes, however, that based upon current compensation levels, only compensation paid to the Company's President and Chief Executive Officer, Mark Van Stekelenburg, is at risk of not being fully deductible. In fiscal 1995, due to the receipt of payments made in connection with the Company's relocation to the Chicago area, the compensation of the Company's President and Chief Executive Officer exceeded the $1,000,000 pay limit by almost $100,000. The excess amount resulted from payments totaling $277,561 related to Mr. Van Stekelenburg's relocation to Chicago, Illinois. The Committee will continue to evaluate the advisability of qualifying the deductibility of the Company's executive compensation. The Company sponsors other employee benefit plans for both executives and non-management employees. The Committee neither administers nor makes any determinations with respect to any such plan or program. MANAGEMENT DEVELOPMENT-COMPENSATION AND STOCK OPTION COMMITTEE Robert G. Zeller, Chairman R. Burt Gookin James P. Miscoll Bernard Sweet 9 EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The table below sets forth annual and long-term compensation for each of the last three fiscal years awarded to or earned by the President and Chief Executive Officer of the Company and the four other most highly compensated executive officers of the Company and its subsidiaries who were serving as executive officers at the end of the last fiscal year.
LONG TERM COMPENSATION AWARDS ANNUAL COMPENSATION --------------------------- ----------------------------- RESTRICTED SECURITIES FISCAL OTHER ANNUAL STOCK UNDERLYING ALL OTHER NAME AND PRINCIPAL YEAR SALARY BONUS COMPENSATION AWARDS(S) OPTIONS COMPENSATION POSITION (1) ($)(2) ($)(3) ($) ($)(7) (#)(8) ($)(5) - -------------------- ------- -------- -------- -------------- ----------- ----------- ------------- Mark Van 1995 453,485 354,855 314,821(4)(6) 75,758 77,500 6,696 Stekelenburg ...... 1994 432,000 67,050 31,483(4) 0 30,625 3,348 President and Chief 1993 371,407 0 31,905(4) 0 262,500(9) 0 Executive Officer Harold E. 1995 289,839 81,444 0 21,368 37,500 0 Feather ........... 1994 347,200 44,336 0 0 46,875 0 Executive Vice 1993 307,200 0 0 0 62,500(9) 0 President, Corporate Planning Alan V. Giuliani ... 1995 238,653 71,262 0 29,348 25,000 0 President of the 1994 232,560 25,329 0 0 23,438 0 Company's 1993 221,048 14,110 0 0 35,000(9) 0 Rykoff-Sexton Manufacturing Division Robert J. Harter, 1995 222,083 65,737 84,531(6) 21,735 22,500 0 Jr. ............... 1994 219,960 15,940 0 0 32,500(9) 0 Senior Vice 1993 217,401 0 0 0 5,000 0 President -- Human Resources and General Counsel Richard J. 1995 221,054 81,597 0 0 21,250 0 Martin ............ 1994 210,000 19,551 0 0 43,438(9) 0 Senior Vice 1993 184,140 0 0 0 5,000 0 President and Chief Financial Officer - ------------------------------ (1) Information furnished is for the 52-week fiscal years ended April 29, 1995, April 30, 1994, and May 1, 1993. (2) Includes amounts deferred by the Named Executive under the Company's 401(k) Savings Plan. Includes cash automobile allowances. (3) Does not include portion of a participant's bonus which the participant elected to receive in the form of restricted Common Stock of the Company. The discretionary portion of each bonus awarded to a Named Executive for fiscal year 1995 was $300,000 for Mr. Van Stekelenburg and $50,000 for each of the other Named Executives. (4) Includes $ 37,260, as the aggregate amount of imputed interest during fiscal year 1995 on Mr. Van Stekelenburg's interest-free demand mortgage loans. The imputed interest for prior years is also shown in this column. The 1991 Loan had a principal balance of $469,000 from May, 1991 through March, 1995, and the 1995 Loan had a principal balance of $350,000 at April 29, 1995. The imputed rate of interest is based on the interest charged by commercial banks on short-term residential mortgage loans during each of the fiscal years, and is calculated for informational purposes only. The Company believes that the mortgage loans to Mr. Van Stekelenburg meet the conditions set forth in Treasury Regulation 1.7872-5T(c) and, therefore, no interest need be imputed for income tax purposes. (5) Term life insurance premiums. (6) Includes payments totaling $277,561 and $84,531 to each of Messrs. Van Stekelenburg and Harter, respectively, relating to their relocation to Chicago, Illinois. (7) The amount presented is the value of the shares awarded under the Company's Convertible Award Plan. For fiscal year 1995, the number of restricterd shares awarded to the Named Executives, including the one-for-five matching, were as follows: Mr. Van Stekelenburg -- 4,331; Mr. Feather -- 1,223; Mr. Giuliani -- 1,679; Mr. Harter -- 1,242; and Mr. Martin -- 0. The number of shares earned is calculated by dividing the amount of annual incentive bonus deferred by the Named Executive by the price of the Company's Common Stock on the New York Stock Exchange ("NYSE") on the fourth day following the announcement of the Company's annual earnings for the year preceding the year in which the annual incentive bonus was earned. For fiscal year 1995, the shares under the plan were earned at a price of $15.20 per share, and were awarded at a price of $17.75 per share, the closing price of the Company's Common Stock on the NYSE on the fourth day following the announcement of the Company's annual earnings for fiscal year 1995. The shares awarded under the plan are not transferable by the recipient for three years following receipt thereof; however, any dividends that the Company may declare, will be paid to the recipient during the three-year restriction period. (8) Stock option awards for fiscal years 1994 and 1993 have been adjusted to reflect the Company's 5-for-4 stock dividend of January 24, 1995, with the exception of converging stock option awards, which were canceled in June 1994. (9) Stock option awards under the Company's Converging Stock Option Award program which was canceled in fiscal year 1995. See summary of shares canceled in "Ten-Year Option Repricing" table on page 12.
10 OPTION GRANTS IN LAST FISCAL YEAR The table below sets forth information on grants of stock options during fiscal 1995 to the Named Executives under the 1988 Plan. OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS - ------------------------------------------------------------------------------ % OF TOTAL GRANT DATE NUMBER OF OPTIONS VALUE SECURITIES GRANTED TO ------------ UNDERLYING EMPLOYEES EXERCISE OR GRANT DATE OPTIONS IN FISCAL BASE EXPIRATION PRESENT NAME GRANTED (#)(1) YEAR PRICE($/SH) DATE VALUE ($)(4) - ------------------------- ---------- ---------- ------------ ---------- ------------ Mark Van Stekelenburg.... 77,500(2) 23.80% 15.40 6/20/04 437,100 Harold E. Feather........ 37,500(2) 11.52% 15.40 6/20/04 211,500 Alan V. Giuliani......... 25,000(2) 7.68% 15.40 6/20/04 141,000 Robert J. Harter, Jr..... 22,500(3) 6.91% 15.40 6/20/04 126,900 Richard J. Martin........ 21,250(3) 6.53% 15.40 6/20/04 119,850 - ------------------------ (1) All of these non-qualified stock options were granted at a price equal to the fair market value of the Company's Common Stock on the grant date and will expire ten years from the date of grant. (2) 50% of these options become exercisable immediately upon signing of the Stock Option Agreement and an additional 25% become exercisable on each of the first and second anniversaries of the grant date. (3) 25% of these options become exercisable immediately upon signing of the Stock Option Agreement and 25% each year commencing on the first anniversary of the grant date. (4) The estimated grant date present value reflected in the above table is determined using a modified Black-Scholes model. The material assumptions and adjustments incorporated in the Black-Scholes model in estimating the value of the options reflected in the above table include the following: (i) a grant price of $15.40 per share; (ii) an exercise price of $15.40; (iii) a stock volatility factor of 0.27; (iv) a risk-free interest rate of 5.94%; (v) a dividend yield of 2.60%; (vi) an option term of 10 years; and (vii) a 3% annual discount for the four-year vesting period applicable to such options to adjust for the risk of forfeiture during such period. The ultimate values of the options will depend on the future market price of the Common Stock, which cannot be forecast with reasonable accuracy. The actual value, if any, an optionee will realize upon exercise of an option will depend on the excess of the market value of the Common Stock over the exercise price on the date an option is exercised.
11 AGGREGATE OPTION EXERCISES AND YEAR-END OPTION VALUES The following table sets forth information on stock options held by the Named Executives at the end of fiscal 1995. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS OPTIONS AT FISCAL AT FISCAL SHARES YEAR END (#) YEAR END ($) ACQUIRED ON VALUE --------------------------- --------------------------- NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ------------------------- ------------- ------------- ----------- ------------- ----------- ------------- Mark Van Stekelenburg.... 0 0 202,656 92,969 $ 268,609 $365,078 Harold E. Feather........ 0 0 75,783 60,516 181,643 289,609 Alan V. Giuliani......... 0 0 7,110 36,329 89,165 160,995 Robert J. Harter, Jr..... 0 0 20,000 30,000 56,500 107,000 Richard J. Martin........ 0 0 18,516 36,797 61,446 156,338
TEN-YEAR OPTION REPRICINGS The table below sets forth information on the Company's repricing of stock options held by any executive officer of the Company during the last ten completed fiscal years. In fiscal 1993 and 1994, the Company granted converging non-qualified stock options to a total of seven executive officers, including the Named Executives, with an initial exercise price of $28.00 per share, which was substantially in excess of the $13.40 and $11.20 fair market value of the Common Stock on the respective grant dates. During the first five years of the options' ten-year term, the purchase price was subject to reductions for each year the Company attained predetermined performance objectives. If the market price of the Common Stock and the adjusted price of these stock options converged during the first five years of the option term, the options were to become immediately exercisable at the converging price. In fiscal 1994, the Committee reviewed the converging stock option grants in light of the Company's announced restructuring effort, and concluded that these options would not provide sufficient incentive to executives as the Company focused on improving its operational performance and earnings during this transition period. Accordingly, the Committee granted new non-qualified stock options with an exercise price equal to $15.40, the fair market value of the Common Stock on June 20, 1994. This amount which was within the range recommended by the Committee's independent outside compensation consulting firm. The new grants were subject, in each such case, to the cancellation of the converging stock option grant. TEN-YEAR OPTION REPRICINGS
NUMBER OF SECURITIES LENGTH OF UNDERLYING MARKET PRICE EXERCISE OPTION TERM OPTIONS OF STOCK AT PRICE AT NEW REMAINING AT REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR NAME DATE AMENDED (#) AMENDMENT ($) AMENDMENT ($) PRICE ($) AMENDMENT - ------------------------- ------- ----------- ------------ ------------ -------- ------------ Mark Van Stekelenburg.... 6/20/94 77,500 15.40 28.00 15.40 Eight Years Harold E. Feather........ 6/20/94 37,500 15.40 28.00 15.40 Eight Years Alan V. Giuliani......... 6/20/94 25,000 15.40 28.00 15.40 Eight Years Robert J. Harter, Jr..... 6/20/94 22,500 15.40 28.00 15.40 Nine Years Richard J. Martin........ 6/20/94 21,250 15.40 28.00 15.40 Nine Years Chris G. Adams........... 6/20/94 18,750 15.40 28.00 15.40 Eight Years Donald E. Willis, Jr..... 6/20/94 21,250 15.40 28.00 15.40 Ten Years
12 RETIREMENT BENEFITS The Pension Plan Table below is based on the Company's tax-qualified noncontributory defined benefit pension plan (the "Pension Plan"). That table contains the estimated annual retirement benefits payable on a single life annuity basis to participating employees, including officers, based on average earnings and years of participation at retirement. PENSION PLAN TABLE
YEARS OF SERVICE - ----------------------------------------------------------------------------- REMUNERATION 10 15 20 25 30 35 40 - ------------- ------- ------- ------- ------- ------- ------- ------- $150,000 $15,000 $22,500 $30,000 $37,500 $45,000 $52,500 $60,000 175,000 17,500 26,250 35,000 43,750 52,500 61,250 70,000 200,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 225,000 22,500 33,750 45,000 56,250 67,500 78,750 90,000 235,840 23,584 35,376 47,168 58,960 70,752 82,544 94,336
The Company and its subsidiary, John Sexton & Co., maintain the Pension Plan for officers and other eligible employees who are not covered by a union sponsored retirement plan. The Pension Plan covers employees of the Company for periods after April 29, 1989. Full vesting under the Pension Plan occurs after five years of service with the Company and its subsidiaries. The Pension Plan provides an annual lifetime benefit equal to one percent (1%) of a participant's final average pay for each year of participation. This annual benefit is subject to actuarial reduction if the pension is payable before age 65. Final average pay means the average of the participant's eligible compensation for the highest five calendar years during the participant's final fifteen years of participation. Eligible compensation generally includes all cash compensation, and for fiscal years beginning after 1993, excludes amounts exceeding $150,000 annually. The $150,000 limit will be adjusted for inflation in $10,000 increments, to be added each time the cumulative adjustment equals or exceeds $10,000. However, the limit for compensation earned in the 1993 calendar year was $235,840, and pension benefits based on that compensation will not be reduced below the level accrued as of April 30, 1994. Benefits under the Pension Plan are not subject to deduction for Social Security or other offset amounts. The Named Executives have the following years of participation as of April 29, 1995: Mr. Van Stekelenburg -- 4, Mr. Feather -- 30, Mr. Giuliani -- 4, Mr. Martin -- 6 and Mr. Harter -- 5. Mr. Feather's annual pension benefit payable at age 65 is estimated to be $100,752 ($9,800 more than his projected benefit under the qualified plan) because he is accruing benefits under a supplemental non-qualified plan using a more favorable and complex formula provided in the Pension Plan prior to 1989. This supplemental plan is subject to the compensation limits described in the preceding paragraph. The following Pension Plan Table for the President and Chief Executive Officer is based on an individual arrangement between the Company and Mr. Van Stekelenburg. The Company has entered into a separate agreement to provide Mr. Van Stekelenburg with a supplemental executive retirement plan (the "SERP"), effective July 20, 1994, in connection with his employment agreement. The table shows the estimated annual retirement benefits payable to Mr. Van Stekelenburg under the Pension Plan and the SERP on a joint and survivor basis, based on his average earnings and years of service at retirement. Accrued SERP benefits are fully vested after five years of Company service or upon disability. 13 PENSION PLAN TABLE FOR PRESIDENT AND CHIEF EXECUTIVE OFFICER
YEARS OF SERVICE -------------------------------------------------- REMUNERATION 5 10 15 20 - ------------- ----------- ----------- ----------- ----------- $ 450,000 $ 67,500 $ 135,000 $ 202,500 $ 270,000 500,000 75,000 150,000 225,000 300,000 600,000 90,000 180,000 270,000 360,000 700,000 105,000 210,000 315,000 420,000 800,000 120,000 240,000 360,000 480,000 900,000 135,000 270,000 405,000 540,000
The SERP and the Pension Plan (described above) together provide an annual lifetime benefit equal to sixty percent (60%) of Mr. Van Stekelenburg's final average pay, reduced by three percent (3%) for each year of Company service less than 20 years. The annual SERP benefit is reduced by any Social Security retirement benefits received by Mr. Van Stekelenburg and is actuarially reduced if the pension is payable before age 60. Final average pay under the SERP means the average of Mr. Van Stekelenburg's cash compensation during the last three years of his Company employment. The amounts in the Pension Plan Table For President and Chief Executive Officer include both SERP and Pension Plan benefits, but have not been reduced by any Social Security benefits (currently a maximum of $14,400 annually). The SERP provides a lifetime disability benefit, payable without actuarial reduction. The minimum disability benefit is thirty percent (30%) of Mr. Van Stekelenburg's final average pay. After his death, the SERP also provides a lifetime benefit for his surviving spouse. The surviving spouse's pension is sixty percent (60%) of Mr. Van Stekelenburg's retirement benefits under the SERP and the Pension Plan, reduced by any survivor benefits paid under the Pension Plan. EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS The Company entered into an employment agreement with Mark Van Stekelenburg effective July 20, 1994. The employment agreement provides for a five-year term (with automatic one-year renewals thereafter unless either party gives notice of termination), a minimum annual base salary of $450,000, and a minimum annual incentive bonus under the Management Incentive Plan (or any similar plan) of 50% of annual base salary if certain performance goals are met. If Mr. Van Stekelenburg's employment is involuntarily terminated without cause, he will be entitled to receive salary, health and welfare benefits, and an annual bonus (equal to the average amount of his incentive bonuses during the three years preceding termination) for the two years following such termination. In addition, if such involuntary termination occurs during the five year initial term of the employment agreement, Mr. Van Stekelenburg's stock options will become immediately exercisable and his years of service for calculating SERP benefits will be increased by two years. Severance payments will be offset by any payments (other than tax reimbursements) made under his "change in control" agreement described below. In general, "cause" is defined as a willful and continued failure to perform assigned duties after notice of such failure, or willful misconduct that is materially injurious to the Company. Mr. Van Stekelenburg will be deemed to have been involuntarily terminated without cause in any of the following events: (1) the Company's non-renewal of his employment agreement without cause; (2) Mr. Van Stekelenburg's disability, failure to be reappointed as President or Chief Executive Officer, or failure to be re-elected to the Board of Directors or (3) the Board of Director's failure to approve Mr. Van Stekelenburg's strategic plans for the Company as a result of irreconcilable differences with respect to the future direction of the Company. The Company entered into an employment agreement with Harold E. Feather effective June 20, 1994, which provides that Mr. Feather will be paid a minimum base salary of $275,000 and an annual car allowance of no less than $7,200 through December 31, 1998. In the event that Mr. Feather is 14 terminated by the Company for any reason other than Mr. Feather's death, disability, or for cause, Mr. Feather will continue to receive his base salary through December 31, 1998, provided that Mr. Feather does not directly or indirectly compete against the Company. The Company has entered into agreements with each Named Executive and certain other officers that provide for the payment of specified benefits if, within two years after a "change in control," the Company terminates the employment of the officer other than for disability or cause or if the officer elects to terminate his employment for "good reason" (as defined in such agreements). In general, a "change in control" is deemed to occur if any person becomes the beneficial owner of 25% or more of the combined voting power of the Company's outstanding securities, or upon a change in the membership of the Company's Board of Directors within any 12 month period, with the result that the incumbent directors do not constitute a majority of the Board of Directors. Under such circumstances, the officer will receive an amount equal to 2.99 times the sum of his base salary plus the amount that would otherwise be earned under any executive compensation plan. Mr. Van Stekelenburg will receive an amount equal to 2.99 times the sum of his base salary plus the amount that would otherwise be earned under any executive compensation plan if, within two years subsequent to a change in control, his employment is terminated by the Company for any or no reason or if Mr. Van Stekelenburg elects to terminate his employment for any or no reason. The agreements with Messrs. Van Stekelenburg and Feather also provide for payment of an amount necessary to restore any benefit diminution if the 20% excise tax imposed under Section 4999 of the Internal Revenue Code is applicable to their agreements. 15 PERFORMANCE GRAPH The graph below compares the cumulative total stockholder return on the Common Stock of the Company for the last five fiscal years with the cumulative total return on the Standard & Poor's 500 Index and the Dow Jones Consumer Non-Cyclical Index over the same period (assuming the investment of $100 in the Company's Common Stock and in each index on April 29, 1990 and the reinvestment of all dividends). COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG RYKOFF-SEXTON, INC., THE S&P 500 INDEX AND THE DOW JONES CONSUMER NON-CYCLICAL INDEX EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
RYKOFF-SEXTON, INC. Cumulative Total Re- turn 4/90 4/91 4/92 4/93 4/94 4/95 Rykoff-Sexton, Inc. $100 $116 $122 $98 $128 $149 S&P 500 Index $100 $118 $134 $147 $154 $181 Dow Jones Consumer Non-Cyclical Index $100 $143 $166 $152 $158 $206
16 CERTAIN TRANSACTIONS During fiscal 1995, Mr. Mark Van Stekelenburg, President and Chief Executive Officer of the Company, was indebted to the Company in the amount of $469,000 in connection with the 1991 Loan. This amount was repaid in full in March 1995. Mr. Van Stekelenburg was also indebted to the Company during fiscal 1995 in the amount of $350,000 in connection with the 1995 Loan. The largest aggregate amount of indebtedness outstanding during fiscal 1995 was $469,000. The amount of such indebtedness outstanding as of July 21, 1995 was $350,000. The 1995 indebtedness is evidenced by a secured, non-interest bearing demand promissory note. The law firm of Maslon Edelman Borman & Brand, a Professional Limited Liability Partnership, of which Mr. Neil I. Sell is a partner, provided legal services to the Company during fiscal 1995. APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS The Board of Directors, upon the recommendation of the Audit Committee, has selected Arthur Andersen LLP as independent public accountants for fiscal 1996. Arthur Andersen LLP has been the independent public accountants for the Company since 1972. A representative of Arthur Andersen LLP is expected to attend the meeting and to have an opportunity to make a statement and respond to appropriate questions from stockholders. Unless instructed to the contrary, all proxies will be voted for ratification of the appointment of Arthur Andersen LLP as independent public accountants for the Company for fiscal 1996. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 Section 16(a) of the Exchange Act requires the Company's officers and directors, and persons who beneficially own more than ten percent of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than ten percent beneficial owners are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms filed by them. Based solely on its review of copies of such forms furnished to the Company, or written representations that no filings of Form 5 reports were required, the Company believes that during the fiscal year ended April 29, 1995, the Company's officers, directors and greater than ten percent beneficial owners complied with all Section 16(a) filing requirements applicable to them. PROPOSALS OF STOCKHOLDERS All proposals of stockholders intended to be presented at the 1996 Annual Meeting of Stockholders of the Company pursuant to the Exchange Act must be received by the Company at its executive offices on or before March 30, 1996. OTHER MATTERS The Board of Directors does not intend to present to the meeting any other matters not referred to above and does not presently know of any matters that may be presented to the meeting by others. If other matters are properly brought before the meeting, the persons named in the enclosed proxy will vote in accordance with their best judgment. By Order of the Board of Directors Neil I. Sell SECRETARY 17 RYKOFF-SEXTON, INC. PROXY FOR ANNUAL MEETING OF STOCKHOLDERS--SEPTEMBER 15, 1995 The undersigned, a stockholder of Rykoff-Sexton, Inc., hereby appoints James I. Maslon and R. Burt Gookin, and each of them, as proxies, with full power of substitution, to vote on behalf of the undersigned the number of shares which the undersigned is then entitled to vote, at the Annual Meeting of the Stockholders of Rykoff-Sexton, Inc. to be held at the Park Hyatt Hotel, 800 North Michigan Avenue, Chicago, Illinois, 60611, on Friday, September 15, 1995, at 10:00 A.M., and at any adjournments thereof, with all the powers which the undersigned would possess if personally present, upon the following: (CONTINUED ON THE REVERSE SIDE) THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. It will be voted on the proposals set forth herein as directed by the stockholders, but if no direction is made in the space provided, it will be voted FOR each of the proposals. /X/ PLEASE MARK YOUR CHOICES LIKE THIS ------------------- ------------------------- COMMON D.R.S. PLEASE MARK YOUR CHOICE IN BLUE OR BLACK INK - -------------------------------------------------------------------------------- THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH PROPOSAL - -------------------------------------------------------------------------------- (1) To elect four persons to the Board of Directors, three of whom have terms ending in 1998 and one of whom has a term ending in 1997. FOR all nominees WITHHOLD AUTHORITY (except as marked to vote for all nominees to the contrary) listed / / / / James P. Miscoll Bernard Sweet Jan W. Jeurgens Mark Van Stekelenburg (INSTRUCTION: To withhold authority to vote for any individual nominee write that nominee's name in the space provided below.) _______________________________________________________________________________ (2) Approval of Arthur Andersen, LLP as independent public accountants for the Company for fiscal 1996. (3) Upon such other business as may properly come before the meeting or any adjornment thereof. FOR AGAINST ABSTAIN / / / / / / The undersigned hereby revokes all previous proxies relating to the shares covered hereby and acknowledges receipt of the Notice and Proxy Statement relating to the Annual Meeting. Dated ___________________________________ ,1995 _______________________________________________ Signature _______________________________________________ Signature (Stockholder must sign exactly as the name appears at left. When signed as a corporate officer, executor, administrator, trustee, guardian, etc., please give full title as such. Both joint tenants must sign.) -----END PRIVACY-ENHANCED MESSAGE-----