<PAGE> 1
ALBERTSON'S, INC.
250 PARKCENTER BOULEVARD LOGO
P.O. BOX 20
BOISE, IDAHO 83726
April 18, 1997
Dear Fellow Stockholder:
It is our pleasure to invite you to attend the 1997 Annual Meeting of
Stockholders. This year's Annual Meeting will be held on Friday, May 23, 1997,
at 10:00 a.m., Mountain Daylight Time, in the Eyries Room at the Boise Centre on
the Grove, 850 Front Street, Boise, Idaho.
Information about the business of the meeting and the nominees for election as
members of the Board of Directors is set forth in the Notice of Meeting and the
Proxy Statement on the following pages. This year you are asked to elect
directors; to ratify the appointment of independent auditors for the fiscal year
ending January 29, 1998; and to approve the Albertson's, Inc. Senior Operations
Executive Officer Bonus Plan which provides for performance-based bonuses to be
awarded to senior operations executive officers. In addition, two stockholder
proposals, which are opposed by your Board of Directors, may be presented for
consideration and voting.
It is important that your shares be represented at the meeting. Accordingly,
whether or not you plan to attend the meeting, we urge you to complete, date and
sign the enclosed proxy card, and return it in the envelope provided.
We look forward to personally greeting those stockholders able to attend.
Very truly yours,
ALBERTSON'S, INC.
/s/ GARY G. MICHAEL
-------------------------
Gary G. Michael
Chairman of the Board
and Chief Executive Officer
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS LOGO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
- -------------------------------------------------------------------------------------------------
<S> <C>
Notice of Annual Meeting of Stockholders 1
- -------------------------------------------------------------------------------------------------
Proxy Statement 2
- -------------------------------------------------------------------------------------------------
Voting Securities and Principal Holders Thereof 3
- -------------------------------------------------------------------------------------------------
Election of Directors (Proposal 1) 6
- -------------------------------------------------------------------------------------------------
Nominees for Election as Class II Directors 7
- -------------------------------------------------------------------------------------------------
Nominee for Election as Class I Director 8
- -------------------------------------------------------------------------------------------------
Continuing Class III Directors 8
- -------------------------------------------------------------------------------------------------
Continuing Class I Directors 9
- -------------------------------------------------------------------------------------------------
Certain Transactions 11
- -------------------------------------------------------------------------------------------------
Committees and Meetings of the Board of Directors 11
- -------------------------------------------------------------------------------------------------
Directors' Fees 13
- -------------------------------------------------------------------------------------------------
Compensation of Executive Officers 14
- -------------------------------------------------------------------------------------------------
Summary Compensation Table 14
- -------------------------------------------------------------------------------------------------
Option Grants in Last Fiscal Year 17
- -------------------------------------------------------------------------------------------------
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values 18
- -------------------------------------------------------------------------------------------------
Retirement Benefits 18
- -------------------------------------------------------------------------------------------------
Compensation Committee/Executive Committee Report 19
- -------------------------------------------------------------------------------------------------
Compensation Committee and Executive Committee Interlocks and Insider Participation 23
- -------------------------------------------------------------------------------------------------
Performance Graph 24
- -------------------------------------------------------------------------------------------------
Ratification of Appointment of Independent Auditors (Proposal 2) 25
- -------------------------------------------------------------------------------------------------
Approval of Albertson's, Inc. Senior Operations Executive Officer Bonus Plan (Proposal 3) 25
- -------------------------------------------------------------------------------------------------
Stockholder Proposal (Proposal 4) 26
- -------------------------------------------------------------------------------------------------
Board of Directors' Statement in Opposition 28
- -------------------------------------------------------------------------------------------------
Stockholder Proposal (Proposal 5) 29
- -------------------------------------------------------------------------------------------------
Board of Directors' Statement in Opposition 30
- -------------------------------------------------------------------------------------------------
Other Matters 30
- -------------------------------------------------------------------------------------------------
Section 16(a) Beneficial Ownership Reporting Compliance 30
- -------------------------------------------------------------------------------------------------
Deadline for Receipt of Stockholders' Proposals 31
- -------------------------------------------------------------------------------------------------
Exhibit A -- Albertson's, Inc. Senior Operations Executive Officer Bonus Plan A-1
- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
FREE PARKING FOR MEETING
For three hours of free parking at the Eastman Garage, Capital Terrace Garage,
Statehouse Inn (roof-top only) and surface parking areas as indicated on the map
below, your admittance badge for the Meeting will include a validation sticker.
Handicap parking is available as indicated on the map. Parking is not available
at Boise Centre on the Grove.
LOGO
<PAGE> 4
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 23, 1997, AT BOISE, IDAHO
ALBERTSON LOGO
- --------------------------------------------------------------------------------
TO THE STOCKHOLDERS OF ALBERTSON'S, INC.:
The Annual Meeting of Stockholders of Albertson's, Inc., a Delaware corporation
("Company"), will be held on Friday, May 23, 1997, at 10:00 a.m., Mountain
Daylight Time, in the Eyries Room at the Boise Centre on the Grove, 850 Front
Street, Boise, Idaho, for the following purposes:
(1) To elect five Class II directors to hold office for three years and one
Class I director to hold office for two years;
(2) To ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending January 29, 1998;
(3) To approve the Albertson's, Inc. Senior Operations Executive Officer Bonus
Plan;
(4) To consider and act upon, if properly presented, two proposals, each
submitted by a single stockholder and each opposed by the Board of
Directors; and
(5) To transact such other business as may properly come before the meeting or
any adjournments or postponements thereof.
All of the above matters are more fully described in the accompanying Proxy
Statement.
Stockholders of record at the close of business on April 8, 1997, will be
entitled to notice of, and to vote at, the meeting.
A complete list of the stockholders entitled to vote at the meeting will be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for the ten-day period ending immediately prior
to the date of the meeting at 250 Parkcenter Boulevard, Boise, Idaho.
All stockholders are cordially invited to attend the meeting in person. WHETHER
OR NOT YOU PLAN TO ATTEND, PLEASE RETURN YOUR PROXY PROMPTLY. It is important
that you mark, sign, date and return the accompanying Proxy, regardless of the
size of your holdings, as promptly as possible. A postage prepaid envelope (if
mailed in the United States) is enclosed for your convenience.
Any stockholder of record attending the meeting may vote in person even if that
stockholder returned a proxy card. If you plan to attend the meeting and your
shares are held in the name of a broker or other nominee, please bring a
statement or letter from the broker or nominee confirming your ownership of
shares.
By Order of the Board of Directors
/s/ Kaye L. O'Riordan
Kaye L. O'Riordan
Corporate Secretary
April 18, 1997
YOUR COPY OF THE COMPANY'S ANNUAL REPORT FOR THE
FISCAL YEAR ENDED JANUARY 30, 1997 IS ENCLOSED.
<PAGE> 5
PROXY STATEMENT
- --------------------------------------------------------------------------------
This Proxy Statement and the accompanying proxy card, which are being mailed to
stockholders on or about April 18, 1997, are furnished in connection with the
solicitation of proxies by the Board of Directors of Albertson's, Inc., a
Delaware corporation ("Company"), for use at the Annual Meeting of Stockholders
to be held on May 23, 1997, including any adjournments or postponements thereof.
The Annual Meeting is called for the purposes stated in the accompanying Notice
of Meeting. All stockholders of record of the Company's Common Stock as of the
close of business on April 8, 1997 are entitled to vote at the meeting. As of
that date, there were 250,694,050 shares of Common Stock outstanding. On each
matter coming before the meeting, a stockholder is entitled to one vote for each
share of stock held of record as of the record date.
If the accompanying proxy card is properly signed and is not revoked by the
stockholder, the shares it represents will be voted at the meeting by the proxy
holder in accordance with the instructions of the stockholder. If no specific
instructions are designated, the shares will be voted as recommended by the
Board of Directors.
A proxy may be revoked at any time before it is voted at the meeting. Any
stockholder who attends the meeting and wishes to vote in person may revoke his
or her proxy at that time. Otherwise, revocation of a proxy must be mailed or
delivered to the Corporate Secretary of the Company at 250 Parkcenter Boulevard,
P.O. Box 20, Boise, Idaho 83726 and received prior to the meeting.
This solicitation is made on behalf of the Board of Directors and all expenses
of this solicitation will be paid by the Company. Initial solicitations will be
made by mail. However, in order to assure sufficient representation, some
directors, officers or regular employees of the Company may solicit proxies in
person or by telephone, facsimile or telegram without special compensation.
Also, to assist in the solicitation of proxies, the Company has engaged
Georgeson and Company, Inc. for a fee estimated not to exceed $25,000 plus
reimbursement of expenses. In addition, arrangements have been made with
brokerage houses and other custodians to send proxies and proxy solicitation
material to their principals, and the Company will reimburse such brokerage
houses and custodians for their expenses in doing so.
Under Delaware law and the Company's Restated Certificate of Incorporation, if a
quorum is present at the meeting (i) there will be an election of directors and,
if they receive a plurality of the votes cast in the election of directors, the
six nominees will be elected; and (ii) proposals 2, 3, 4 and 5, if properly
brought before the meeting, must be approved by the affirmative vote of a
majority of the shares present in person or by proxy and entitled to vote on the
matter. With regard to the election of directors, abstentions and broker
non-votes will be disregarded and will have no effect on the outcome of the
vote. With regard to proposals 2 and 3; each of the two stockholder proposals,
if properly brought before the meeting; and other matters that may properly come
before the meeting, abstentions will be counted and will have the same effect as
a vote against the matter, and broker non-votes will be disregarded and will
have no effect on the outcome of the vote.
2
<PAGE> 6
LOGO
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
- --------------------------------------------------------------------------------
The following table shows the persons (including any group deemed a "person"
under Section 13(d)(3) of the Securities Exchange Act of 1934) known to the
Company who beneficially own more than 5 percent of the Company's Common Stock.
It also shows beneficial ownership for each director, for each executive officer
named in the Summary Compensation Table and for the executive officers and
directors as a group.
SHARES BENEFICIALLY OWNED AND NATURE OF
BENEFICIAL OWNERSHIP AS OF MARCH 27, 1997(1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGREGATE
NAME (AND ADDRESS SHARED SOLE SHARED AMOUNT
FOR BENEFICIAL SOLE VOTING VOTING INVESTMENT INVESTMENT BENEFICIALLY PERCENT OF
OWNERS OVER 5%) POWER POWER POWER POWER OWNED(2) CLASS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Markus Stiftung(3) 29,152,800 -- 29,152,800 -- 29,152,800 11.62
Timmasper Weg
2353 Nortorf
Federal Republic of Germany
Alscott Limited Partnership
#1(4) -- 26,846,046 -- 26,846,046 26,846,046 10.70
380 E. Parkcenter Blvd.
Boise, ID 83706
Kathryn Albertson(4) 2,000(6) 28,026,046(5) 2,000(6) 28,026,046(5) 28,028,046(5,6) 11.17
380 E. Parkcenter Blvd.
Boise, ID 83706
A. Gary Ames 9,000(6) -- 9,000(6) -- 9,000(6) +
Cecil D. Andrus 7,300(6) 800 7,300(6) 800 8,100(6) +
John B. Carley 521,421 -- 520,450(7) -- 521,421 +
Paul I. Corddry 4,000(6) 10,000 4,000(6) 10,000 14,000(6) +
John B. Fery 21,285(6) -- 21,285(6) -- 21,285(6) +
Clark A. Johnson 24,850(6) 4,000 24,850(6) 4,000 28,850(6) +
Charles D. Lein 11,925(6) 14,200 11,925(6) 14,200 26,125(6) +
Warren E. McCain 1,170,970(6) -- 1,170,970(6) -- 1,170,970(6) +
Gary G. Michael 266,641(8) -- 265,670(7,8) -- 266,641(8) +
Beatriz Rivera 4,000(6) -- 4,000(6) -- 4,000(6) +
J.B. Scott(4) 2,000(6) 28,026,046(5) 2,000(6) 28,026,046(5) 28,028,046(5,6) 11.17
380 E. Parkcenter Blvd.
Boise, ID 83706
Thomas L. Stevens, Jr. 500 -- 500 -- 500 +
Will M. Storey 9,000(6) -- 9,000(6) -- 9,000(6) +
Steven D. Symms 4,000(6) 1,502 4,000(6) 1,502 5,502(6) +
Richard L. King 9,287(8) 11,974 8,800(7,8) 11,974 21,261(8) +
Carl W. Pennington 10,904(8) 162,000 10,000(7,8) 162,000 172,904(8) +
Ronald D. Walk 10,903(8) 241,876 10,000(7,8) 241,876 252,779(8) +
All directors (including 2,394,982(6,8) 28,810,718(5) 2,383,874 6,7,8) 28,810,718(5) 31,205,700 5,6,8) 12.44
nominees) and all executive
officers as a group (31)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Indicates that the percentage of shares beneficially owned does not exceed one
percent of the Company's outstanding Common Stock.
(1) Beneficial ownership is determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934. Shares are considered to be "beneficially"
owned if the person has the sole or shared power to vote or direct the voting of
the securities or the sole or shared power to dispose of or direct the
disposition of the securities. A person is also considered to be the beneficial
owner of shares if that person has the right to acquire beneficial ownership of
the shares within 60 days following March 27, 1997.
(2) Each director and executive officer disclaims beneficial ownership of any
shares owned by his or her spouse, children or grandchildren and by trusts for
such persons, whether or not the director or officer is a trustee or co-trustee
thereof.
<PAGE> 7
- --------------------------------------------------------------------------------
(3) According to a Schedule 13D filed with the Securities and Exchange
Commission on or about January 18, 1990, Mr. Theo Albrecht is also a beneficial
owner of these shares. Mr. Albrecht's address is the same as that of Markus
Stiftung.
On February 15, 1980, the Company entered into an agreement with Theo Albrecht
Stiftung, the name of which was changed to Markus Stiftung on April 22, 1988,
relating to its ownership of the Company's voting securities. As amended on
April 11, 1984, September 25, 1989 and December 5, 1994, this agreement provides
that until February 14, 2000 (subject to earlier termination under certain
limited circumstances), (i) Markus Stiftung shall not acquire or permit its
affiliates to acquire any additional shares of the Company's Common Stock or any
other voting securities of the Company if such acquisition would cause it or its
affiliates to own directly or indirectly more than 14 percent of the Company's
outstanding voting securities; provided that, if the number of outstanding
voting securities is reduced for any reason, including purchases by the Company
of its voting securities, Markus Stiftung shall not be required to dispose of
any of its holdings of voting securities even if such reduction in outstanding
voting securities results in Markus Stiftung owning in excess of 14 percent of
the outstanding voting securities, and (ii) the Company has a right of first
refusal with respect to the voting securities of the Company held by Markus
Stiftung if it should desire to dispose of such securities. This agreement also
restricts the manner in which the voting securities of the Company may be sold
by Markus Stiftung in the event the Company does not elect to exercise such
right of first refusal.
(4) The Managing General Partner of Alscott Limited Partnership #1 (the
"Partnership") is Alscott, Inc., an Idaho corporation controlled by Kathryn
Albertson and J.B. Scott.
The Company entered into an agreement with the Partnership on February 2, 1996,
which provides for an orderly sale and purchase of the Company's Common Stock
which had been owned by Kathryn Albertson ("New Agreement"). Also on February 2,
1996, Kathryn Albertson, the Partnership and the Company entered into a
Stockholders' Agreement to coordinate the actions to be taken under the New
Agreement and the agreement entered into between the Company and Kathryn
Albertson on December 31, 1979 ("Old Agreement") which continues to apply to any
shares of the Company's Common Stock owned by her and which provides for an
orderly sale and purchase of such stock. The New Agreement and the Old Agreement
are together referred to herein as the "Agreements," and the shares of the
Company's Common Stock held by the Partnership which had been owned by Kathryn
Albertson and any shares of stock owned by Kathryn Albertson are collectively
referred to herein as the "Designated Shares."
The Agreements provide that in the event either the Partnership or Kathryn
Albertson, as applicable, proposes to sell or dispose of (other than through
gift) any of the Designated Shares, the Company shall be given notice and an
opportunity to purchase such Designated Shares for a specified period at a price
and upon terms set forth in the notice. Should the Company decline to exercise
its option to purchase all of the Designated Shares offered for sale within the
specified period, the Partnership or Kathryn Albertson, as applicable, may sell
such Designated Shares on terms and at a price equivalent to or exceeding that
offered to the Company within nine months.
The Agreements do not deprive the Partnership or Kathryn Albertson, as
applicable, of the privilege to make gifts of Designated Shares during Kathryn
Albertson's lifetime, but the donees must, within a period not to exceed one
year following the date of a gift, grant to the Company an option to purchase
all of the Designated Shares received as a gift at a price that is approximately
96 percent of the then market price. Should the Company not exercise the option
to purchase all of such Designated Shares within the specified option period,
the donee is entitled to hold these Designated Shares, deal with them and
exercise all rights of ownership thereof free from any provisions of the
Agreements.
Upon the death of Kathryn Albertson, the Company has an irrevocable and
exclusive option to purchase all of the Designated Shares at the time of death
at a price which is approximately 96 percent of the then market price. If the
Company does not exercise its option, the personal representative of the estate
is obligated to sell the Designated Shares through a secondary public offering,
the expenses of which are to be borne by the Company.
Except as summarized above, the Agreements do not in any respect deprive the
Partnership or Kathryn Albertson, as applicable, of the rights of ownership of
the Designated Shares, including unrestricted voting rights and the right to
receive and retain all cash and stock dividends.
J.B. Scott holds a revocable power of attorney that enables him to vote any
shares of the Company's Common Stock held by Kathryn Albertson.
(5) Includes 1,180,000 shares owned by the J.A. and Kathryn Albertson
Foundation, Inc., of which Kathryn Albertson and J.B. Scott are directors and
officers. Kathryn Albertson and J.B. Scott disclaim any beneficial ownership of
these shares.
(6) Includes 2,000 shares in the case of each of Kathryn Albertson, Clark A.
Johnson, Warren E. McCain and J.B. Scott and 4,000 shares in the case of each
re-
4
<PAGE> 8
LOGO
- --------------------------------------------------------------------------------
maining indicated Director (40,000 shares total) not held of record on March 27,
1997, but which could have been acquired within 60 days thereafter under the
Company's 1995 Stock Option Plan for Non-Employee Directors.
(7) Shares credited to the Employee Stock Ownership Plan accounts of the
individuals named and all executive officers as a group are not included in the
column headed "Sole Investment Power" since the shares cannot be sold. Such
shares are included in the column headed "Sole Voting Power" and in the column
headed "Aggregate Amount Beneficially Owned."
(8) Includes 75,600 shares not held of record on March 27, 1997, but which could
have been acquired within 60 days thereafter under the Company's 1982 Incentive
Stock Option Plan and 1986 Nonqualified Stock Option Plan by certain executive
officers included in all executive officers as a group. Of these shares, 16,000
shares could have been acquired within 60 days thereafter under the Company's
1986 Nonqualified Stock Option Plan by Gary G. Michael; 4,800 shares could have
been acquired within 60 days under the Company's 1982 Incentive Stock Option
Plan and 4,000 shares could have been acquired within 60 days under the
Company's 1986 Nonqualified Stock Option Plan by Richard L. King; 10,000 shares
could have been acquired within 60 days thereafter under the Company's 1986
Nonqualified Stock Option Plan by Carl W. Pennington; and 10,000 shares could
have been acquired within 60 days thereafter under the Company's 1986
Nonqualified Stock Option Plan by Ronald D. Walk. Includes 20,571 shares as to
which certain directors and executive officers included in all directors and
executive officers as a group have sole voting and investment power but which
are held for minor children and relatives and as to which they disclaim any
other beneficial interest. None of these shares could have been acquired by or
are held by any of the named individuals.
5
<PAGE> 9
- --------------------------------------------------------------------------------
ELECTION OF DIRECTORS
(PROPOSAL 1)
- --------------------------------------------------------------------------------
The Board of Directors is divided into three classes, each serving for a
three-year term. Five of the directors are in each class, and all the directors
in one class stand for election each year. This year five Class II directors are
to be elected for three-year terms and one Class I director is to be elected for
a two-year term.
The Board of Directors has nominated the following candidates to stand for
election as Class II directors, all of whom are nominated for terms expiring in
2000: Kathryn Albertson, A. Gary Ames, John B. Carley, Paul I. Corddry and
Beatriz Rivera and the following candidate to stand for election as a Class I
director for a term expiring in 1999: Thomas L. Stevens, Jr. Except as otherwise
specified in any proxy, the proxies will be voted for the election of all these
nominees.
The Board of Directors is informed that each of the six nominees has consented
to being named in this Proxy Statement as a nominee for director and to serve as
a director if elected; however, if for any reason any of the nominees shall
become unavailable for election, the proxy will be voted as directed by the
Board of Directors. It is not anticipated that any nominee will be unavailable
for election.
All of the nominees are now directors of the Company. Thomas L. Stevens, Jr.,
was appointed to the Board effective September 3, 1996 and has not previously
been elected by the stockholders. Each of the other nominees has previously been
elected by the stockholders.
Information as to the nominees and as to each other director whose term will
continue after the 1997 Annual Meeting of Stockholders is given on pages 7-10.
Unless otherwise indicated, the nominees have been engaged in the same principal
occupation for the past five years. Directors' ages are as of March 27, 1997.
6
<PAGE> 10
NOMINEES FOR ELECTION AS CLASS II DIRECTORS LOGO
TERM EXPIRING IN 2000
- --------------------------------------------------------------------------------
KATHRYN ALBERTSON
Director
since 1958
Age 88
President and a director of Alscott, Inc., real estate and other investments.
Prior to 1993, homemaker. Grandmother of J.B. Scott. Mrs. Albertson is a
director of the J.A. and Kathryn Albertson Foundation, Inc.
- --------------------------------------------------------------------------------
A. GARY AMES
Director
since 1988
Age 52
President and Chief Executive Officer, U S WEST International, a
telecommunications company and a wholly-owned subsidiary of U S WEST, Inc.,
since July 1995. President and Chief Executive Officer, U S West Communications
from 1990 to 1995. Mr. Ames is a director of Flextech, Tektronix, Inc. and
Telewest. Chairman of the Grantor Trust Committee and member of the Compensation
and Nominating Committees.
- --------------------------------------------------------------------------------
JOHN B. CARLEY
Director
since 1979
Age 63
Chairman of the Executive Committee of the Board of Directors since February 2,
1996 and formerly President and Chief Operating Officer of the Company. Mr.
Carley is a director of Boise Cascade Office Products Corporation, Idaho Power
Company and AgriBeef Co. Chairman of the Executive Committee and member of the
Nominating and Non-Employee Directors' Deferred Compensation Committees.
- --------------------------------------------------------------------------------
PAUL I. CORDDRY
Director
since 1987
Age 60
Served as Senior Vice President, Europe, of H.J. Heinz Company, a worldwide
provider of processed food products and services, until his retirement in 1992.
Mr. Corddry has been Chairman and a director of Bzircus Entertainment
Corporation since 1994 and is a director of Ameristar Casinos, Inc. Member of
the Audit and Grantor Trust Committees.
- --------------------------------------------------------------------------------
7
<PAGE> 11
- --------------------------------------------------------------------------------
BEATRIZ RIVERA
Director
since 1995
Age 46
Member of the Public Utilities Commission of the State of New Mexico since 1995.
Formerly owner of Infiniti of Albuquerque, an automobile dealership, from 1990
to 1995. Ms. Rivera is a director of the Tomas Rivera Center, a trustee of the
University of New Mexico Foundation and a member of the Defense Advisory
Committee on Women in the Services. Member of the Audit and Nominating
Committees.
- --------------------------------------------------------------------------------
NOMINEE FOR ELECTION AS CLASS I DIRECTOR
TERM EXPIRING IN 1999
- --------------------------------------------------------------------------------
THOMAS L. STEVENS, JR.
Director
since 1996
Age 63
Served as President, Los Angeles Trade-Technical College (LATTC) until his
retirement in 1996. Mr. Stevens was a member of the Board of Directors of the
Federal Reserve Bank of San Francisco, Los Angeles Branch until his retirement
from LATTC. He is the Chairman of the Board of the Achievement Council and the
Los Angeles Opportunities Industrialization Center, Inc. Member of the Audit and
Nominating Committees.
- --------------------------------------------------------------------------------
CONTINUING CLASS III DIRECTORS
TERMS EXPIRING IN 1998
- --------------------------------------------------------------------------------
CECIL D. ANDRUS
Director
since 1995
Age 65
Chairman of the Andrus Center for Public Policy, a public policy forum located
at Boise State University dealing in natural resource issues, since January 1995
and of counsel to the Gallatin Group, a consulting firm, since February 1995.
Elected Governor of the State of Idaho in 1987 and served until January 1995.
Served as Secretary of the Interior in the Carter Administration from 1977
through 1980. Mr. Andrus is a director of Coeur d'Alene Mines Corp., KeyCorp.,
PCS Learning Centers and the J.A. and Kathryn Albertson Foundation, Inc. Member
of the Executive and Grantor Trust Committees.
- --------------------------------------------------------------------------------
8
<PAGE> 12
LOGO
- --------------------------------------------------------------------------------
JOHN B. FERY
Director
since 1974
Age 67
Served as Chairman of the Board of Boise Cascade Corporation, a timber and paper
products company, until his retirement in 1995 and Chief Executive Officer from
1972 to 1994. Mr. Fery is a director of F&C Enterprises, Inc., Hewlett-Packard
Company, The Boeing Company and U.S. Bancorp. Chairman of the Compensation
Committee and member of the Executive and Grantor Trust Committees.
- --------------------------------------------------------------------------------
WARREN E. MCCAIN
Director
since 1973
Age 71
Served as Chairman of the Executive Committee of the Board of Directors until
his retirement on February 1, 1996 and Chairman of the Board and Chief Executive
Officer of the Company from 1976 to 1991. Mr. McCain is a director of Pope &
Talbot. Chairman of the Nominating Committee and member of the Executive
Committee.
- --------------------------------------------------------------------------------
J.B. SCOTT
Director
since 1993
Age 43
Vice President and a director of Alscott, Inc., real estate and other
investments. Grandson of Kathryn Albertson. Mr. Scott is President and a
director of the J.A. and Kathryn Albertson Foundation, Inc. Member of the Audit
Committee.
- --------------------------------------------------------------------------------
WILL M. STOREY
Director
since 1992
Age 65
Served as Executive Vice President and Chief Financial Officer, American
President Companies, a provider of container transportation services, until his
retirement in 1995. Mr. Storey is a director of T.I.S. Mortgage Investment
Company. Member of the Audit and Compensation Committees.
- --------------------------------------------------------------------------------
CONTINUING CLASS I DIRECTORS
TERMS EXPIRING IN 1999
- --------------------------------------------------------------------------------
CLARK A. JOHNSON
Director
since 1989
Age 65
Chairman of the Board and Chief Executive Officer of Pier 1 Imports, Inc., a
retailer of imported goods. Mr. Johnson is a director of Pier 1 Imports, Inc.,
Heritage Media Corporation, InterTan, Inc. and Metromedia International Group.
Member of the Compensation, Nominating and Grantor Trust Committees.
- --------------------------------------------------------------------------------
9
<PAGE> 13
- --------------------------------------------------------------------------------
CHARLES D. LEIN
Director
since 1975
Age 55
President and Chief Operating Officer of Stuller Settings, Inc., a jewelry
manufacturing company, since January 1994. Formerly Chairman of the Board,
President and Chief Executive Officer of Black Hills Jewelry Manufacturing Co.
from 1982 to 1993. President, University of South Dakota from 1977 to 1982 and
Dean of the College of Business, Boise State University from 1973 to 1977. Mr.
Lein is a director of Stuller Settings, Inc. and First National Bank of
Lafayette. Chairman of the Audit Committee and member of the Executive
Committee.
- --------------------------------------------------------------------------------
GARY G. MICHAEL
Director
since 1979
Age 56
Chairman of the Board and Chief Executive Officer of the Company. Mr. Michael is
a member of the Board of Directors of the Federal Reserve Bank of San Francisco
and a director of Questar Corporation. Chairman of the Non-Employee Directors'
Deferred Compensation Committee and member of the Executive Committee.
- --------------------------------------------------------------------------------
STEVEN D. SYMMS
Director
since 1993
Age 58
President of Symms, Lehn & Associates, Inc., a consulting firm, since January
1993. Elected United States Senator from the State of Idaho in 1980 and served
until January 1993. Vice President and Secretary of Boise Air Service, Inc.
since 1983. Mr. Symms is a director of Symms, Lehn & Associates, Inc., Boise Air
Service, Inc. and Symms Fruit Ranch, Inc. Member of the Audit Committee.
- --------------------------------------------------------------------------------
10
<PAGE> 14
LOGO
- --------------------------------------------------------------------------------
CERTAIN TRANSACTIONS
- --------------------------------------------------------------------------------
During the fiscal year ended January 30, 1997, two store leases and two office
space leases were held by Alscott Real Estate LLC, as landlord, and Albertson's,
Inc., as tenant. Alscott Real Estate LLC is managed by Alscott, Inc., an Idaho
corporation which is also the manager of Alscott Limited Partnership #1, the
owner of 10.70% of the Company's Common Stock. Kathryn Albertson, a director of
the Company, is President and a director of Alscott, Inc., in which she has a
majority ownership interest, as well as in Alscott Real Estate LLC. J.B. Scott,
a director of the Company, is Vice President and a director of Alscott, Inc., in
which Mr. Scott has an indirect majority ownership interest. The terms of the
two store leases are for periods of 37 and 46 years with expiration dates
occurring in 2007 and 2005. The two office space leases are both for five-year
terms expiring in 2001. The total rentals and common area maintenance fees paid
by the Company under the leases to this landlord during the fiscal year ended
January 30, 1997 were $740,191.
Steven D. Symms, a director of the Company, is a director of Symms Fruit Ranch,
Inc. During the fiscal year ended January 30, 1997, the Company paid Symms Fruit
Ranch $706,986 for food products purchased for resale in the Company's stores.
Ste. Chapelle Winery is a wholly-owned subsidiary of Symms Fruit Ranch, Inc.
During the fiscal year ended January 30, 1997, the Company paid $1,823,817 to
distributors for Ste. Chapelle wine purchased for resale in the Company's
stores.
Donald Carley, brother of John B. Carley, a director of the Company, is a
controlling stockholder of the Vendredi Company, a food brokerage company based
in San Diego, California. During the fiscal year ended January 30, 1997, the
Company paid the Vendredi Company $887,523 for merchandise supplied by that firm
to the Company for resale in the Company's stores.
Richard Ogle, son-in-law of Warren E. McCain, a director of the Company, is the
owner of The Office Environment Company, an office supply company. During the
fiscal year ended January 30, 1997, the Company paid $2,632,608 to The Office
Environment Company for office furniture, equipment and supplies.
James Smith, brother-in-law of Richard J. Navarro, Group Vice President and
Controller of the Company, is the owner of Tynick Services, Inc., a retail and
wholesale electronics distributor. During the fiscal year ended January 30,
1997, the Company paid $107,096 to Tynick Services, Inc. for electronics
equipment.
Dennis C. Lucas, Senior Vice President and Regional Manager of the Company,
obtained a loan from the Company to assist in the purchase of a new residence
due to his relocation by the Company. The highest aggregate amount of
indebtedness during the fiscal year ended January 30, 1997 was $61,218. No
interest was charged on this loan which was re-paid in full in April 1996.
In the opinion of management, all of the foregoing transactions were fair and
reasonable and were entered into on terms not less favorable than could be
obtained in transactions with responsible third parties.
- --------------------------------------------------------------------------------
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
The Board of Directors held four regular meetings during the last full fiscal
year of the Company. All incumbent directors attended at least 75 percent of the
total meetings of the Board of Directors and the committees of which they were
members.
11
<PAGE> 15
- --------------------------------------------------------------------------------
The Company has an Executive Committee, which is a standing committee of the
Board of Directors, presently consisting of six members who are John B. Carley,
Chairman, Cecil D. Andrus, John B. Fery, Charles D. Lein, Warren E. McCain and
Gary G. Michael. There were four meetings of the Executive Committee held during
the last fiscal year. The Executive Committee was established to exercise the
authority of the Board of Directors between meetings of the full Board subject
to limitations under Delaware law.
The Company has an Audit Committee, which is a standing committee of the Board
of Directors, presently consisting of seven members who are Charles D. Lein,
Chairman, Paul I. Corddry, Beatriz Rivera, J.B. Scott, Thomas L. Stevens, Jr.,
Will M. Storey and Steven D. Symms. Four meetings of the Audit Committee were
held during the last fiscal year. The Audit Committee's responsibilities
include: (i) reviewing the plan, scope and results of the independent audit and
reporting to the full Board whether financial information is fairly presented
and whether generally accepted accounting principles are followed; (ii)
monitoring the internal accounting and financial functions of the Company to
assure quality of staff and proper internal controls; and (iii) investigating
conflicts of interest, compliance with ethical standards and compliance with
laws and regulations.
The Company has a Compensation Committee, which is a standing committee of the
Board of Directors, presently consisting of four members who are John B. Fery,
Chairman, A. Gary Ames, Clark A. Johnson and Will M. Storey. Two meetings of the
Compensation Committee were held during the last fiscal year. The Compensation
Committee is responsible for reviewing annual salaries and bonuses paid to the
officers appointed by the Board of Directors and certain other officers of the
Company and for selecting key employees who are to receive stock option grants
and determining the terms thereof.
The Company has a Nominating Committee, which is a standing committee of the
Board of Directors, presently consisting of six members who are Warren E.
McCain, Chairman, A. Gary Ames, John B. Carley, Clark A. Johnson, Beatriz Rivera
and Thomas L. Stevens, Jr. There were three meetings of the Nominating Committee
held during the last fiscal year. The Nominating Committee is responsible for
selecting nominees to fill Board vacancies and to replace retiring members of
the Board. The Nominating Committee reviews possible nominees for membership on
the Board of Directors, including any nominees recommended in good faith by a
registered stockholder with the consent of the proposed nominee, and makes
recommendations concerning nominees to the Board of Directors. Stockholders
wishing to propose director candidates for consideration by the Nominating
Committee may do so by writing to the Corporate Secretary of the Company, giving
the candidate's name, biographical data and qualifications. In addition, the
Company's By-Laws permit stockholders to make nominations for directors at a
meeting of stockholders, but only if, among other things, timely written notice
of an intent to make such a nomination is given to the Corporate Secretary of
the Company. To be timely, such notice, except in certain circumstances, must be
received by the Company not less than 60 days nor more than 90 days prior to the
anniversary date of the immediately preceding annual meeting of stockholders.
The Company has a Grantor Trust Committee, which is a special committee of the
Board of Directors, presently consisting of five members who are A. Gary Ames,
Chairman, Cecil D. Andrus, Paul I. Corddry, John B. Fery and Clark A. Johnson,
none of whom has a financial interest in the deferred compensation plans and
trusts established by the Company for its executives, except Cecil D. Andrus who
is receiving payments of compensation deferred from his service as a Director
from 1984 to 1987 and who will abstain from any decisions made by the Grantor
Trust Committee which would affect such payments. There was one meeting of the
Grantor Trust Committee held during the last fiscal year. The Grantor Trust
Committee was established to administer the Company's deferred compensation
plans and pension benefit makeup plan for its executives and the trusts
established to protect the benefits to be received under these plans.
12
<PAGE> 16
LOGO
- --------------------------------------------------------------------------------
The plans and trusts are described more fully herein.
The Company has a Non-Employee Directors' Deferred Compensation Committee which
is a special committee created to administer the Non-Employee Directors'
Deferred Compensation Plan. The committee presently consists of two members who
are Gary G. Michael, Chairman, and John B. Carley, neither of whom has a
financial interest in this plan. The committee held no meetings during the last
fiscal year.
- --------------------------------------------------------------------------------
DIRECTORS' FEES
- --------------------------------------------------------------------------------
Directors who are employees of the Company do not receive additional
compensation as directors. Directors who are not employees receive directors'
fees of $30,000 per year plus $1,000 for each Board of Directors' and committee
meeting attended.
Non-employee directors may elect to defer payment of their directors' fees into
the Non-Employee Directors' Deferred Compensation Plan described in footnote 1
to the Summary Compensation Table on page 14.
Pursuant to the Albertson's, Inc. 1995 Stock Option Plan for Non-Employee
Directors which became effective on May 26, 1995, each non-employee director is
granted an option on the first business day after each annual stockholders'
meeting of the Company during the ten-year term of the Plan to purchase 2,000
shares of the Common Stock of the Company at the closing market price on the
date of grant and which may be exercised for ten years from the date of grant
pursuant to the terms of the Plan.
13
<PAGE> 17
- --------------------------------------------------------------------------------
COMPENSATION OF EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION ------------
----------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND FISCAL SALARY(1) BONUS(1) COMPENSATION(2) OPTIONS(3) COMPENSATION(4)
PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- ------------------------------------------- ------ -------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Gary G. Michael 1996 $750,000 $292,500 $50,391 0 $ 121,310
Chairman of the Board and Chief 1995 693,923 315,000 -- 50,000 108,631
Executive Officer and a director 1994 655,500 327,600 58,327 0 97,191
John B. Carley(5) 1996 500,423 0 -- 0 119,485
Chairman of the Executive Committee 1995 610,000 256,200 -- 0 108,558
of the Board and a director 1994 585,077 292,800 -- 0 98,499
Richard L. King 1996 387,692 175,500 -- 50,000 1,575
President and Chief Operating Officer 1995 229,616 105,000 -- 50,000 1,100
1994 158,539 70,000 32,582 0 767
Carl W. Pennington 1996 326,692 87,100 -- 0 24,901
Executive Vice President, 1995 287,616 91,000 -- 25,000 19,846
Corporate Merchandising 1994 265,462 100,000 -- 0 15,552
Ronald D. Walk 1996 326,692 87,100 -- 0 21,430
Executive Vice President, 1995 283,462 91,000 -- 25,000 17,039
Retail Operations 1994 264,616 145,750 -- 0 13,092
</TABLE>
- --------------------------------------------------------------------------------
(1) Certain officers, including certain of the individuals named in the above
table, were entitled to defer up to 50 percent of the aggregate amount of their
salaries and bonuses and non-employee directors were entitled to defer up to 100
percent of their directors' fees pursuant to two substantially similar deferred
compensation plans for officers and directors approved by the Board of Directors
on December 5, 1983. A third plan, the 1990 Deferred Compensation Plan ("1990
Plan") was approved by the Board of Directors on December 4, 1989, effective as
of January 1, 1990. Under the 1990 Plan, certain officers, including the
individuals named in the above table, and certain highly compensated employees
are entitled to defer up to 35 percent of their salaries, and the Compensation
Committee will defer, for "covered employees" as that term is defined in Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code") that
portion of the annual bonus which, in the judgment of the Compensation
Committee, would not be deductible by the Company pursuant to the provisions of
Section 162(m). The Company does not expect that any amounts so deferred will be
material in fiscal year 1997.
Salaries, bonuses and fees deferred into these plans accrue interest until
benefits are completely distributed at the monthly Corporate Bond Yield Average
with respect to average corporations as determined from the Moody's Bond Record
published by Moody's Investor's Service, Inc. ("Moody's Average"), except when
benefits are paid upon termination of employment following a change in control,
death, disability prior to termination of employment (under the two initial
plans) or retirement ("Certain Events"). In the case of such Certain Events,
deferred amounts accrue interest at a rate equal to the Moody's Average plus 4
percent under the two initial plans or the Moody's Average plus 3 percent under
the 1990 Plan. A fourth plan, the Non-Employee Directors' Deferred Compensation
Plan was approved by the Board of Directors and by a special committee of the
Board consisting of three employee directors on December 4, 1989. This plan
permits non-employee directors to defer up to 100% of their directors' fees.
Interest is accrued until benefits are completely distributed at the Moody's
Average plus 3 percent in the case of Certain Events and at the Moody's Average
in all other cases.
The Company has purchased cost recovery life insurance to cover its obligations
under the two initial deferred compensation plans for officers and directors,
and the Company is the owner of these policies. The Company has also purchased
cost recovery life insurance to cover its obligations under the 1990 Plan and
has transferred ownership of these policies to the trustee of the grantor trust
established for the 1990 Plan (see discussion below). If assumptions as to
mortality, experience, interest rates and other factors are realized, the
Company or the trustee of the grantor
14
<PAGE> 18
LOGO
- --------------------------------------------------------------------------------
trust, as applicable, will recover from such policies an amount equal to the
benefit payments under these plans and the premium payments on the insurance
policies. The plans, except for the Non-Employee Directors' Deferred
Compensation Plan, are administered by the Grantor Trust Committee of the Board
of Directors. The Non-Employee Directors' Deferred Compensation Plan is
administered by the Non-Employee Directors' Deferred Compensation Committee, a
committee of the Board consisting of two directors, none of whom has a financial
interest in the plan.
Pursuant to the foregoing plans, the individuals named in the table on page 14
have deferred the following amounts of salary paid or allocated to them for
services rendered during the fiscal year ended January 30, 1997 (which includes,
for Mr. Michael, $18,000 of bonus deferred by the Compensation Committee): Mr.
Michael, $93,000; Mr. King, $16,350; Mr. Pennington, $114,087; and Mr. Walk,
$97,933. Pursuant to the foregoing plans, the individuals named in the table on
page 14 deferred the following amounts of salary paid or allocated to them for
services rendered during the fiscal year ended February 1, 1996: Mr. Michael,
$61,442; Mr. King, $10,900; Mr. Pennington, $99,514; and Mr. Walk, $91,504.
Pursuant to the foregoing plans, the individuals named in the table on page 14
deferred the following amounts of salary paid or allocated to them for services
rendered during the fiscal year ended February 2, 1995: Mr. Michael, $60,000;
Mr. King, $8,050; Mr. Pennington, $88,510; and Mr. Walk, $91,789. These amounts
are included in the column for salary in the table on page 14.
In order to secure the compensation deferred and interest accrued thereon under
the deferred compensation plans already described, except for the Non-Employee
Directors' Deferred Compensation Plan, the Company has established the Executive
Deferred Compensation Trust and the 1990 Deferred Compensation Trust ("Deferred
Compensation Trusts"), which are grantor trusts within the meaning of the
Internal Revenue Code, Section 671. The Company has or intends to contribute
cash, real estate, insurance policies or other property into the Deferred
Compensation Trusts to provide for payment of benefits under the deferred
compensation plans in the event of a change in control of the Company. The
trusts are administered by the Grantor Trust Committee of the Board of
Directors. These trusts become irrevocable upon the occurrence of certain events
described in each trust as constituting a "potential change in control," and the
Company is required to make certain contributions of cash to each trust upon the
occurrence of certain other events described in each trust as constituting a
"change in control."
The individuals named in the table on page 14 are eligible, along with all
"eligible" employees (those who complete at least 1,000 hours of service during
the twelve-month period commencing with their date of hire or with any
anniversary thereof, are age 21 or over and (with certain exceptions) are not
covered by a collective bargaining agreement), to defer a portion of their
salary into the Albertson's Tax Deferred Savings Plan ("Savings Plan") which is
a salary deferral plan pursuant to Section 401(k) of the Code. During the fiscal
year ended January 30, 1997, the individuals named in the table on page 14
deferred the following amounts into the Savings Plan: Mr. Michael, $6,620; Mr.
King, $9,810; and Mr. Walk, $9,465. During the fiscal year ended February 1,
1996, the individuals named in the table on page 14 deferred the following
amounts into the Savings Plan: Mr. Michael, $6,184; Mr. King, $9,804; and Mr.
Walk, $9,234. During the fiscal year ended February 2, 1995, the individuals
named in the table on page 14 deferred the following amounts into the Savings
Plan: Mr. Michael, $5,950; Mr. King, $8,978; and Mr. Walk, $9,317. All amounts
deferred into the Savings Plan by these individuals are included in the column
for salary in the table on page 14.
(2) This column includes the value for income tax purposes of noncash personal
benefits; except that amounts, when aggregated, which did not exceed the lesser
of $50,000 or 10% of compensation for any of the named executives are not
included. The amounts indicated for Mr. Michael for fiscal years 1996 and 1994
include $28,922 and $39,400, respectively, which is the value of personal use of
corporate aircraft. The amount indicated for Mr. King for 1994 includes $26,692
in moving expenses which were reimbursed by the Company.
(3) The Company has granted options to its employees for the purchase of the
Company's Common Stock pursuant to three stock option plans: (i) the 1982
Incentive Stock Option Plan ("1982 Plan"), which was adopted by the stockholders
in May 1982 and which expired in February, 1992; (ii) the 1986 Nonqualified
Stock Option Plan ("1986 Plan"), which was adopted by the stockholders in May
1986 and expired in May 1996; and (iii) the 1995 Stock-Based Incentive Plan
("1995 Plan"), which was adopted by the stockholders in May 1995 and will expire
in May 2005. The 1982 Plan and 1986 Plan provided and the 1995 Plan provides for
the issuance of stock options from time to time to key employees of the Company,
including executive officers, designated by the Compensation Committee of the
Board as holding positions of substantial responsibility, demonstrating special
capabilities and contributing significantly to fiscal performance. The stock
option plans and related agreements contain provisions that, in certain
circumstances, may cause the date of exercise for options granted thereunder to
accelerate in the event there is a change in control of the Company. Richard L.
King was granted a stock option under the 1995 Plan for 50,000 shares at
15
<PAGE> 19
- --------------------------------------------------------------------------------
the closing market price on December 2, 1996, the date the option was granted.
The option becomes exercisable in 20% annual increments after it has been held
for five years.
(4) This column includes $22,000 in fiscal years 1996, 1995 and 1994 for each of
Gary G. Michael and John B. Carley, which is a fixed annual amount, in addition
to salary and bonus, contributed by the Company and deferred into the deferred
compensation plans described in footnote 1. The remaining amount consists of the
"above-market" (as such term is defined in Item 402(b)(2)(iii)(C), Instruction
3, of Regulation S-K of the Securities and Exchange Commission) portion of the
interest credited to the account of each of the named executives under the
deferred compensation plans described in footnote 1. The "above-market" portion
of the interest accrued when benefits are paid following the occurrence of
"Certain Events," as that term is defined in footnote 1, is set forth in the
table on page 14 because it is the larger amount of interest credited.
(5) Effective February 2, 1996, John B. Carley entered into an employment
contract with the Company as Chairman of the Executive Committee of the Board of
Directors for an annual salary of $500,000 for a period of three years, as well
as all perquisites provided by the Company to senior executive officers and the
annual $22,000 contribution to deferred compensation for the three-year period.
No bonus is to be paid for services rendered during the three-year period.
16
<PAGE> 20
LOGO
- --------------------------------------------------------------------------------
OPTION GRANTS IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANT DATE VALUE
UNDERLYING GRANTED TO ----------------
OPTIONS EMPLOYEES EXERCISE OR GRANT DATE
GRANTED IN FISCAL BASE PRICE EXPIRATION PRESENT VALUE(2)
NAME (#) YEAR ($/SH)(1) DATE ($)
- ----------------------------------------------------- ---------- ---------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Richard L. King 50,000 6.53% $ 35.00 12/01/06(3) $570,700
President and Chief Operating Officer
</TABLE>
- --------------------------------------------------------------------------------
(1) The closing market price on the date the option was granted.
(2) In accordance with the rules of the Securities and Exchange Commission,
"Grant Date Value" has been calculated using the Black-Scholes model of option
valuation, adjusted to reflect the option term representative of the
individual's grant. The model also assumes: (a) a risk-free rate of return
represented by the interest rate on a U.S. Treasury Bond with a maturity date
corresponding to that of the adjusted option term; (b) expected volatility
calculated using historical weekly stock prices prior to the grant date for the
number of weeks corresponding to that of the adjusted option term; and (c) a
dividend yield determined by dividing the 1996 cash dividends declared by the
average stock price as of the beginning and end of the fiscal year. The values
which may ultimately be realized by the holder of the reported option will
depend on the market value of the Company's Common Stock during the periods
during which the option is exercisable, which may vary significantly from the
assumptions underlying the Black-Scholes model.
(3) Richard L. King was granted a stock option under the 1995 Plan for 50,000
shares at the closing market price on December 2, 1996, the date the option was
granted. The option becomes exercisable in 20% annual increments after it has
been held for five years.
17
<PAGE> 21
- --------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE+ OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR-END YEAR-END
ACQUIRED ON VALUE+ --------------------------- ---------------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- --------------------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gary G. Michael 32,000 $906,000 16,000 178,000 $ 288,000 $ 2,666,000
Chairman of the Board and Chief
Executive Officer and a director
Richard L. King 0 0 8,800 134,200 174,300 652,450
President and Chief Operating Officer
Carl W. Pennington 10,000 253,750 10,000 55,000 180,000 615,000
Executive Vice President, Corporate
Merchandising
Ronald D. Walk 0 0 10,000 65,000 180,000 795,000
Executive Vice President, Retail
Operations
</TABLE>
- --------------------------------------------------------------------------------
+ The dollar values are calculated by determining the difference between the
closing price on the New York Stock Exchange Composite Tape for the Company's
Common Stock at exercise or at fiscal year-end (January 30, 1997) for
exercisable and unexercisable options and the exercise price of the options.
RETIREMENT BENEFITS
The Company has adopted two defined benefit pension plans that cover certain
salaried and hourly-paid employees of the Company, both of which are governed by
the Employee Retirement Income Security Act of 1974 ("ERISA"). One plan covers
eligible salaried employees of the Company and the other plan covers eligible
hourly-paid employees. "Eligible" employees are those who complete at least
1,000 hours of service during the twelve-month period commencing with their date
of hire or with any anniversary thereof, are age 21 or over and (with certain
exceptions) are not covered by a collective bargaining agreement. The amount of
benefit paid under the plans depends upon the credited years of service and the
compensation level of the participant. The compensation used in determining the
retirement benefit for the individuals named in the Summary Compensation Table
on page 14 consists of the employee's salary and deferred compensation and does
not include bonus and noncash compensation.
The following table gives the estimated annual benefit payable upon retirement
for participants in the salaried pension plan including benefits payable under
the Makeup Plan discussed below. The estimates assume normal retirement at age
62 for employees at specified compensation levels (based on average earnings for
the highest five consecutive years of service out of the last ten years) with
various years of service with the Company.
18
<PAGE> 22
LOGO
- --------------------------------------------------------------------------------
PENSION PLAN TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS OF SERVICE
COMPENSATION -------------------------------------------------------------------------
LEVEL 20 25 30 35 40 45
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$100,000 $ 27,000 $ 33,750 $ 40,500 $ 47,250 $ 54,000 $ 60,750
200,000 54,000 67,500 81,000 94,500 108,000 121,500
300,000 81,000 101,250 121,500 141,750 162,000 182,250
400,000 108,000 135,000 162,000 189,000 216,000 243,000
500,000 135,000 168,750 202,500 236,250 270,000 303,750
600,000 162,000 202,500 243,000 283,500 324,000 364,500
700,000 189,000 236,250 283,500 330,750 378,000 425,250
800,000 216,000 270,000 324,000 378,000 432,000 486,000
</TABLE>
- --------------------------------------------------------------------------------
As of January 30, 1997, the years of service credited to the executive officers
listed in the Summary Compensation Table on page 14 were: Mr. Michael, 31; Mr.
Carley, 43; Mr. King, 31; Mr. Pennington, 33; and Mr. Walk, 35. Also as of such
date, the covered compensation for the last fiscal year of these executive
officers under the Company's pension plans was: Mr. Michael, $772,000; Mr.
Carley, $502,116; Mr. King, $386,538; Mr. Pennington, $326,538; and Mr. Walk,
$326,538.
The amounts presented in the pension table are single life annuities
notwithstanding the availability of joint and survivor annuity provisions. The
pension benefit is not subject to any deduction for social security or other
offset amounts.
Retirement benefits otherwise available to key executives under the Company's
qualified defined benefit plans have been limited by the effects of the Internal
Revenue Code of 1986, as amended (the "Code"). For example, the maximum annual
benefit under a qualified pension plan under the Code is limited to $125,000
(subject to certain exceptions). The Company has complied with this limitation
to assure continuing qualification of its plans. To offset the loss of
retirement benefits associated with tax law limitations, the Company adopted a
nonqualified "makeup" benefit plan ("Makeup Plan") effective June 1, 1988.
Benefits are provided under this plan for key employees equal to those that
would otherwise be lost by such plan qualification limitations. The Makeup Plan
was amended effective 1990 to extend certain benefits to participants in the
1990 Deferred Compensation Plan. All amounts for any benefits accrued under the
Makeup Plan are included in the figures in the Summary Compensation Table on
page 14.
In order to protect the benefits payable under the Makeup Plan, the Company has
established the Executive Pension Makeup Trust ("Makeup Trust"), which is a
grantor trust that is substantially similar to the Deferred Compensation Trusts
described in footnote 1 to the Summary Compensation Table on page 14. The Makeup
Trust is administered by the Grantor Trust Committee of the Board of Directors
as are the Deferred Compensation Trusts.
COMPENSATION COMMITTEE/EXECUTIVE
COMMITTEE REPORT
OVERVIEW
For the fiscal year ended January 30, 1997, the Compensation Committee
established the annual salaries of the Chairman and Chief Executive Officer
("CEO") and the President and Chief Operating Officer ("President") and
determined that the annual salaries of the Executive Vice Presidents recommended
by the CEO were reasonable based upon its analysis of the factors discussed
below and approved those annual salaries. The annual salaries of the other
executive officers were determined by the CEO and were reviewed by the
Compensation Committee. The Executive Committee reviewed and approved the annual
salaries of all of the executive officers. The Compensation Committee determined
that the bonus policy for all officers of the Company
19
<PAGE> 23
- --------------------------------------------------------------------------------
recommended by the CEO and the Executive Committee was reasonable based upon its
analysis of the factors discussed below, approved the bonus policy and
determined the amount of the annual bonuses paid for the fiscal year. The
Compensation Committee approved all grants of stock options during the fiscal
year, as recommended by the CEO; and options were granted to one of the five
executives named in the Summary Compensation Table. All decisions of the
Compensation Committee and the Executive Committee were reported to the Board of
Directors.
EXECUTIVE OFFICER COMPENSATION POLICY
The compensation policy of the Company, which is applied by the Compensation
Committee and the Executive Committee to the compensation of the CEO, President
and Executive Vice Presidents and by the CEO to the compensation of the other
executive officers, is to set compensation so as to attract and retain the
highest quality people who will contribute to the long-term performance and
long-term growth of the Company. To this end, annual compensation for executive
officers (except for the Chairman of the Executive Committee) consists of an
annual salary which is not directly dependent upon the Company's performance in
that fiscal year and an annual bonus which is paid after the end of the fiscal
year and which is computed as a percentage of annual salary. As discussed in
more detail below, the annual bonus is directly dependent upon the Company's
performance in the completed fiscal year. It is the Company's long-standing
policy that the annual bonus make up a substantial portion of executive officer
compensation. An additional bonus may be granted to an executive officer for
exceptional services to the Company as approved by the Compensation Committee.
In accordance with this overall policy, the Company provides retirement benefits
to encourage executive officers to stay with the Company. To this end, the
executive officers participate in the defined benefit pension plan that covers
eligible salaried employees of the Company as well as in the nonqualified
"makeup" benefit plan which provides benefits for key employees equal to those
that would otherwise be lost by certain plan qualification limitations imposed
by the Internal Revenue Code of 1986, as amended (the "Code"). Both of these
plans are described under the heading "Retirement Benefits." For each of the CEO
and Chairman of the Executive Committee, the Company has agreed to contribute
$22,000 for the fiscal year, in lieu of salary, to the deferred compensation
plans established by the Company which are described in footnote 1 to the
Summary Compensation Table. The executive officers are also eligible to
contribute amounts from their annual salary into the Company-wide 401(k) plan
and/or the deferred compensation plans described in footnote 1 to the Summary
Compensation Table.
During the last fiscal year, the remuneration paid to the CEO exceeded the
deductibility limit under Section 162(m) of the Code by $18,000, and the
Compensation Committee has deferred under the 1990 Deferred Compensation Plan
(the "1990 Plan") which is described in footnote 1 to the Summary Compensation
Table, that amount which will be paid to the CEO pursuant to the terms of the
1990 Plan upon termination or retirement in years when it is anticipated that
such amounts would be deductible by the Company. The Compensation Committee has
approved the Albertson's, Inc. Senior Operations Executive Officer Bonus Plan
which was adopted by the Board of Directors and is designed to meet the
requirements of Section 162(m) of the Code and which is being voted upon by the
stockholders at the Annual Meeting.
Executive Officer Compensation
Executive officer compensation (except the compensation for the Chairman of the
Executive Committee) consists of two annual components: (i) an annual salary
which is determined upon the basis of a number of factors, only one of which is
the Company's overall performance in prior fiscal years and (ii) an annual bonus
which is determined solely on the basis of the Company's performance during the
fiscal year (an additional bonus may be granted for exceptional services to the
Company as approved by the Compensation Committee); and one long-term
20
<PAGE> 24
LOGO
- --------------------------------------------------------------------------------
component: stock options, the value of which is directly dependent upon the
Company's long-term performance.
Annual Salaries -- Compensation Committee
In determining the annual salaries (including increases) for the CEO, the
President and the Executive Vice Presidents for the last fiscal year, the
Compensation Committee considered a number of factors. These factors included
the experience and responsibilities of the executive officers, the Company's
overall performance in prior fiscal years and the role of the executive officers
in achieving such performance. The consideration of overall performance was not
based on specific measures of performance. The Compensation Committee did not
give any specific weight to these factors in determining the annual salary
component of compensation. For background purposes only, and not to establish
specific target compensation levels, the Compensation Committee also reviewed
three wholesaler/retailer compensation comparison surveys prepared by third
parties. One of the third-party comparison surveys included four of the six
companies in the Standard & Poor's Retail Store-Food Chains Index used in the
Performance Graph on page 24, one of the surveys included three of those
companies and the remaining survey included one of those companies. The annual
salary of the Chairman of the Executive Committee was established pursuant to an
employment agreement which is described in footnote 5 to the Summary
Compensation Table. The Chairman of the Executive Committee did not receive a
bonus and was not eligible to be granted stock options.
Annual Salaries --
Compensation Committee
and Executive Committee
In reviewing the annual salary structure for the other executive officers for
the last fiscal year, the Compensation Committee and the Executive Committee
considered the recommendations of the CEO as well as factors similar to those
set forth above. The Compensation Committee and the Executive Committee did not
give any specific weight to any of these factors in determining the annual
salary component of compensation.
Annual Bonus --
Compensation Committee
and Executive Committee
The bonus policy approved by the Compensation Committee and by the Executive
Committee set forth a scale of percentages of annual salary to be paid if
certain Company-wide sales volume increases over the prior fiscal year were
achieved by the Company and a scale of percentages of annual salary to be paid
if certain Company-wide net earnings increases over the prior fiscal year were
achieved by the Company. An additional bonus may be granted to an executive
officer for exceptional services to the Company as approved by the Compensation
Committee. In addition, the percentage of annual salary to be paid as annual
bonus increased for the more senior officers in recognition of the leadership
roles of the senior officers.
The Compensation Committee established the annual bonuses based upon the sales
volume increases and the net earnings increases that were achieved. Accordingly,
the annual bonus of the CEO was set at 39% of his current annual salary, and the
annual bonus of the President was set at 39% of his current annual salary. The
Chairman of the Executive Committee did not receive an annual bonus. The annual
bonus of the Executive Vice President, Corporate Merchandising whose
compensation is disclosed in the Summary Compensation Table was set at 26% of
his current annual salary. The annual bonus of the Executive Vice President,
Retail Operations whose compensation is disclosed in the Summary Compensation
Table was set at 26% of his current annual salary.
Stock Options --
Compensation Committee
Stock options are granted from time to time by the Compensation Committee to
certain employees of the Company, including executive officers. Stock options
are granted by the Compensation Committee to attract and retain the best
available
21
<PAGE> 25
- --------------------------------------------------------------------------------
personnel for positions of substantial responsibility, provide additional
incentive to employees and thus promote the success of the business of the
Company. Criteria used by the Compensation Committee in making stock option
grants include the potential for a person in the employee's position to make a
significant contribution to the Company's performance; the employee's past
performance; the employee's length of service with the Company; an evaluation of
the employee's potential for advancement; and factors bearing on the
desirability of encouraging continuance of the employee's employment with the
Company. The Committee also considers the amount and terms of previous option
grants when determining the grant of options. Based on these factors, the
Compensation Committee determined that the recommendations received from the CEO
of those employees to whom it would be appropriate to grant stock options were
reasonable and granted those stock options. Stock options were granted during
the last fiscal year to one of the five executive officers named in the Summary
Compensation Table as set forth in that table. These options were granted based
on the factors outlined above.
Compensation of the CEO --
Compensation Committee
The compensation of Gary G. Michael, Chairman of the Board and Chief Executive
Officer, consists of the same elements as for other executive officers, which
are annual salary, annual bonus based upon the performance of the Company during
the fiscal year and stock options, as well as the $22,000 payment, in lieu of
salary, to the deferred compensation plans described in footnote 1 to the
Summary Compensation Table. Mr. Michael also participates in the retirement
programs and in the optional deferrals of annual salary into the 401(k) plan and
the deferred compensation plans discussed herein.
Mr. Michael's annual salary was not based upon specific measures of the
Company's performance during the fiscal year. His annual salary determination
was based on the Compensation Committee's evaluation of his performance during
the prior fiscal year which included the financial results reflected in the
Performance Graph set forth on page 24 of this Proxy Statement and nonfinancial
factors including strategic planning for the future of the Company, as well as
the factors discussed previously under the heading "Annual
Salaries -- Compensation Committee." His annual bonus was based upon the
achievement of the specific Company-wide sales volume increases and net earnings
increases discussed previously under the heading "Annual Bonus -- Compensation
Committee and Executive Committee." His annual bonus was 39% of his current
annual salary. As discussed above, $18,000 of Mr. Michael's annual bonus was
deferred by the Compensation Committee into the 1990 Plan.
22
<PAGE> 26
LOGO
- --------------------------------------------------------------------------------
COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS
<TABLE>
<S> <C>
John B. Fery, Clark A. Johnson
Chairman Will M. Storey
A. Gary Ames
</TABLE>
EXECUTIVE COMMITTEE OF THE BOARD OF DIRECTORS
<TABLE>
<S> <C>
John B. Carley, Charles D. Lein
Chairman Warren E. McCain
Cecil D. Andrus Gary G. Michael*
John B. Fery
</TABLE>
*Mr. Michael did not participate as a member of the Executive Committee in any
of the decisions that are described in the Compensation Committee/Executive
Committee Report.
COMPENSATION COMMITTEE AND
EXECUTIVE COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The members of the Compensation Committee are John B. Fery, Chairman, A. Gary
Ames, Clark A. Johnson and Will M. Storey. The members of the Executive
Committee are John B. Carley, Chairman, Cecil D. Andrus, John B. Fery, Charles
D. Lein, Warren E. McCain and Gary G. Michael.
Gary G. Michael, Chairman of the Board and Chief Executive Officer, has served
on the Executive Committee since 1993. Mr. Michael did not participate as a
member of the Executive Committee in any of the decisions that are described in
the Compensation Committee/Executive Committee Report.
23
<PAGE> 27
- --------------------------------------------------------------------------------
PERFORMANCE GRAPH
The following graph provides a comparison of the five-year cumulative total
return* for the Standard & Poor's 500 Index, the Standard & Poor's Retail
Store-Food Chains Index and the Company.
<TABLE>
<CAPTION>
Measurement Period S & P RETAIL (FOOD
(Fiscal Year Covered) ALBERTSON'S, INC. S & P 500 CHAINS)
<S> <C> <C> <C>
1/92 100 100 100
1/93 124 111 128
1/94 138 123 125
1/95 157 125 134
1/96 180 174 170
1/97 189 220 199
</TABLE>
* $100 invested on January 31, 1992 in stock or index, including reinvestment of
dividends. Fiscal year ending January 31.
24
<PAGE> 28
LOGO
- --------------------------------------------------------------------------------
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL 2)
- --------------------------------------------------------------------------------
Upon the recommendation of its Audit Committee, the Board of Directors has
reappointed Deloitte & Touche LLP as independent auditors for the fiscal year
ending January 29, 1998, and is requesting ratification by the stockholders for
such reappointment. Deloitte & Touche LLP has audited the financial statements
of the Company for each fiscal year since 1967.
In the event this proposal is defeated, the adverse vote will be considered as a
direction to the Board of Directors to select other auditors for the next fiscal
year. However, because of the difficulty and expense of making any substitution
of auditors after the beginning of a fiscal year, it is contemplated that the
appointment for the 1997 fiscal year will be permitted to stand unless the Board
of Directors finds other reasons for making a change.
Services to be performed by Deloitte & Touche LLP for the 1997 fiscal year will
include, among other things, audit of annual financial statements, limited
review of quarterly financial information and consultations in connection with
various financial reporting, accounting and income tax matters. Representatives
of Deloitte & Touche LLP will attend the Annual Meeting and will have an
opportunity to make a statement, if they desire to do so, and to respond to
appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 2.
- --------------------------------------------------------------------------------
APPROVAL OF ALBERTSON'S, INC. SENIOR OPERATIONS EXECUTIVE OFFICER BONUS PLAN
(PROPOSAL 3)
- --------------------------------------------------------------------------------
Upon the recommendation of its Compensation Committee, the Board of Directors
adopted, subject to stockholder approval, the Albertson's, Inc. Senior
Operations Executive Officer Bonus Plan (the "Bonus Plan") which is administered
by the Compensation Committee of the Board of Directors (the "Committee").
The purposes of the Bonus Plan are to attract and retain highly-qualified senior
operations executives by providing appropriate performance-based incentive
awards and to serve as a qualified performance-based compensation program under
Section 162(m) of the Internal Revenue Code of 1986, as amended. Section 162(m)
denies a deduction by an employer for certain compensation in excess of $1
million per year paid by a publicly-held corporation to its chief executive
officer and the next four most highly compensated executive officers (the
"Covered Employees"). Certain compensation, including compensation based on
performance goals, is excluded from this deduction limit.
While the Company's bonus plans have historically been and will continue to be
based on performance goals, in order for performance-based compensation to
qualify for this exclusion, the material terms under which the compensation is
to be paid must be disclosed to and approved by the stockholders in a separate
vote prior to the payment of the bonuses. Accordingly, the Bonus Plan is being
submitted to the stockholders for approval at the 1997 Annual Meeting of
Stockholders.
The following description of the Bonus Plan is qualified in its entirety by the
terms of the Bonus Plan, a copy of which is attached as Exhibit A to this Proxy
Statement.
The eligible participants of the Bonus Plan are the senior operations executive
officers of the Company. There are currently eight eligible participants. The
Bonus Plan provides for the payment of annual incentive bonus awards to
participants if, and only to the extent that, performance goals established by
the Committee are met.
25
<PAGE> 29
- --------------------------------------------------------------------------------
The goals established by the Committee can be expressed in terms of one or more
pre-set financial or other objective goals as they relate to an individual, the
Company as a whole or to a portion of operations for which a particular senior
operations executive is responsible, such as a division or region. Financial
goals may be expressed, for example, in terms of sales, earnings per share,
stock price or return on equity. The goals established by the Committee can be
(but need not be) different each year and goals with respect to a particular
plan year will be established not later than the latest date permissible under
Section 162(m). Any such goals shall (i) be determined in accordance with the
Company's audited financial statements and generally accepted accounting
principals, or (ii) be based upon a standard under which a third party with
knowledge of the relevant facts could determine whether the goal is met.
Subject to the approval of this Bonus Plan by the stockholders, the Committee
has established performance goals for the 1997 plan year measured in terms of
sales increases and net earnings increases. The maximum bonus that can be paid
to any senior operations executive in any plan year is $1,500,000. The Committee
may reduce or eliminate the amount payable to any participant (including a
Covered Employee), in each case based upon such factors as the Committee may
deem relevant, but shall not (i) increase the amount payable to any participant
(including a Covered Employee); (ii) accelerate the payment of compensation
(unless such payment is appropriately discounted to reflect the time value of
money) or (iii) defer the payment of compensation (unless any additional amounts
paid with respect to such compensation reflect crediting of not more than a
reasonable rate in interest or the rate of return on a predetermined actual
investment). Before any bonuses are paid, the Committee must certify that the
performance goals have been satisfied.
If the Bonus Plan is not approved by the stockholders, then bonuses will not be
paid pursuant to the Bonus Plan; however, it would be expected that the
Committee would give some form of bonuses to the senior operations executives
for the 1997 fiscal year to reasonably reward them for their performance. Any
compensation that would not be deductible pursuant to Section 162(m) would be
deferred by the Committee under the 1990 Deferred Compensation Plan described in
footnote 1 to the Summary Compensation Table to be paid pursuant to the terms of
that plan upon termination or retirement in years when it is anticipated that
such amounts would be deductible by the Company.
The Board of Directors can from time to time amend, suspend or discontinue the
Bonus Plan; provided, however, that no amendment which requires stockholder
approval in order for the Bonus Plan to continue to comply with Section 162(m)
will be effective unless it receives the requisite stockholder approval. In
addition, the Committee can make such amendments as it deems necessary to comply
with other applicable laws, rules and regulations.
Because performance goal criteria may vary from year to year and from
participant to participant, benefits under the Bonus Plan are not presently
determinable.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 3.
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSAL
(PROPOSAL 4)
- --------------------------------------------------------------------------------
The International Brotherhood of Teamsters General Fund, located at 25 Louisiana
Avenue, N.W., Washington D.C. 20001, the holder of 80 shares of the Company's
Common Stock, has notified the Company that it intends to present at the Annual
Meeting the following resolution. In accordance with applicable proxy
regulations, the proposed resolution and supporting statement, for which the
Board of Directors and the Company accept no responsibility, are set forth
below.
26
<PAGE> 30
LOGO
- --------------------------------------------------------------------------------
STOCKHOLDER RESOLUTION:
RESOLVED: That Albertson's Inc. stockholders urge the Board of Directors take
the necessary steps, in compliance with state law, to declassify the Board for
the purpose of director elections. The board declassification shall be completed
in a manner that does not affect the unexpired terms of directors previously
elected.
STOCKHOLDER SUPPORTING STATEMENT:
Albertson's board is divided into three classes of directors serving staggered
three-year terms. This means an individual director faces election only once
every three years, and shareholders only vote on roughly one-third of the board
each year.
We think a better way to insure continuity is through re-election. When
directors are performing well they routinely are re-elected with majorities over
95%.
We believe that annual elections can pave the way for improved board sensitivity
to important shareholder issues. In particular, it can help speed the
diversification of Albertson's board.
According to the 1996 proxy statement, our company's "Board of Directors is
committed to providing equal opportunities for employment, development and
advancement for all of the Company's employees..." and that "The Company has in
fact made steady strides in recent years in advancing women and minorities to
managerial positions." Yet, only two women sit on our Company's board. Does this
illustrate our Company's "steady strides?" Chairman Michael publicly commits
himself to excellence. Does Albertson's board diversity reflect such excellence?
Teamster affiliated pension funds are committed to good corporate governance and
board diversity. In fact, the Teamsters recently nominated former Congresswoman
Patricia Schroeder to the board of Texaco. Texaco's current board is struggling
with the recent EEOC racial discrimination lawsuit where the company agreed to
pay plaintiffs $176.1 million.
Albertson's has had similar problems in the past: In 1993, Albertson's settled a
gender and race discrimination lawsuit; in 1991 the EEOC charged Albertson's
with sex discrimination and our Company agreed to pay damages; in 1986 the EEOC
cited Albertson's for engaging in employment practices which kept women in
low-level jobs. Problems such as discrimination and employment bias can best be
avoided when a company is dedicated to diversity and equality within its ranks.
In the past year, Albertson's has been outpaced by both the S & P 500 and the S
& P Retail Store-Food Chains. Our company needs maximum flexibility in its board
composition to best manage in trying times; a declassified board can give
Albertson's added flexibility.
Generally, shareholders have grown hostile to classified boards. In 1996,
shareholders overturned staggered boards at General Instrument, Rowan, Alumax,
Liz Claiborne, and Stride Rite. Overall support for declassification proposals
increased to 42.4% in 1996, from 39.1% in 1995, according to the IRRC's review
of elections.
By adopting annual elections, Albertson's can demonstrate its commitment to
fuller accountability to shareholders, accountability that respects the
importance of men and women of all races among our company's key constituents,
and accountability that honors shareholder prerogatives.
We urge you to vote YES for this proposal.
27
<PAGE> 31
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION
- --------------------------------------------------------------------------------
Your Board of Directors recommends a vote AGAINST Proposal 4 for the following
reasons:
This stockholder proposal was submitted to the Company by the International
Brotherhood of Teamsters General Fund (the "International") for the fourth year
in a row. The Company is regularly engaged in negotiating labor agreements with
various Teamster local unions, and management believes this proposal reflects an
attempt by the International to gain leverage for use in labor negotiations with
the Company.
Your Board of Directors believes that a classified board continues to serve the
Company, you the stockholders and those with whom the Company does business by
permitting all to rely on the consistency and continuity of corporate policy. At
the same time, annual elections, in which approximately one-third of the board
is elected each year, offer stockholders a regular opportunity to renew and
reinvigorate corporate decision-making while maintaining the basic integrity of
corporate policy year-to-year for the benefit of all who rely on it.
A system of classified directors also benefits stockholders by making corporate
takeovers by proxy contest more difficult. Since only approximately one-third of
the Company's directorships are filled at any annual meeting of stockholders, it
is impossible to elect an entire new board or even a majority of the board at a
single meeting. Incumbent directors always represent a majority of the Board and
are in a position to protect the interests of all stockholders.
The stockholders of the Company adopted the present system of classified
directors at the 1980 Annual Meeting of Stockholders by a margin of 77% of the
outstanding shares.
Our stockholders have consistently rejected the International's proposal for the
past three years. While the International has the right to submit this proposal
again this year (and year after year, provided the proposal receives at least
10% of the vote), your Board of Directors believes that the arguments made in
prior years by the Company remain persuasive and that the proposal should
continue to be defeated by the stockholders.
Finally, while this proposal does not address directly the issue of equal
employment opportunity, the statement by the International in support of this
proposal does. Your Board of Directors is committed to providing equal
opportunities for employment, development and advancement for all of the
Company's employees, with an emphasis on personal and career development. The
Company has in fact made steady strides in recent years in advancing women and
minorities to managerial positions. Most recently, Thomas L. Stevens, Jr., an
African-American, was appointed to your Board of Directors.
FOR THE FOREGOING REASONS, YOUR BOARD OF DIRECTORS BELIEVES THAT THIS PROPOSAL
IS NOT IN THE BEST INTERESTS OF THE COMPANY AND UNANIMOUSLY RECOMMENDS THAT YOU
VOTE AGAINST PROPOSAL 4.
28
<PAGE> 32
LOGO
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSAL
(PROPOSAL 5)
- --------------------------------------------------------------------------------
Gerald R. Armstrong, the holder of 1,914 shares of the Company's Common Stock,
whose address is 910 Fifteenth Street, No. 754, Denver, Colorado 80202, has
notified the Company that he intends to present the following resolution at the
Annual Meeting. In accordance with applicable proxy regulations, the proposed
resolution and supporting statement, for which the Board of Directors and the
Company accept no responsibility, are set forth below.
STOCKHOLDER RESOLUTION:
RESOLVED: That the shareholders of ALBERTSON'S, INC., assembled in person and by
proxy in an annual meeting, now request the Board of Directors to take those
steps necessary to restore those provisions which allow the shareholders to
ratify the appointment of the independent auditors in future annual meetings of
shareholders; and, that in each proxy statement for an annual meeting, the
following information is to be disclosed:
- -- Disclosure of the address, telephone number, and name of managing partner
assigned to the audit of ALBERTSON'S, INC.,
- -- Notification to shareholders, suppliers, and employees of ALBERTSON'S, INC.
of this information and that any inquiry or information presented to the
independent accountants shall be held in strictest confidence and without
prejudice to their dealings or employment with ALBERTSON'S, INC.,
- -- Disclosure of fees paid or invoiced by the accountants itemized as follows:
audit, income taxes, consultation, proposed expansion, and internal
audit -- for the past year and previous year,
- -- The length of service of the auditors to ALBERTSON'S, INC., and,
- -- Disclosure of transactions with the accountants and members of management and
the Board.
STOCKHOLDER SUPPORTING STATEMENT:
In the 1996 annual meeting of shareholders, management deleted this important
shareholder right to "streamline" the annual meeting after allowing it for 24
years.
To the proponent's knowledge, ALBERTSON'S was the only New York Stock Exchange
listed company to do so in 1996. In 1995, there were only two: KeyCorp and a
corporation in re-organization.
In KeyCorp's 1996 annual meeting, this was restored. A Director of ALBERTSON'S,
former Governor Cecil Andrus, is a Director of KeyCorp.
Nearly all major corporations allow their shareholders this privilege and those
of ALBERTSON'S should not be excepted.
"INDEPENDENCE" should be the by-word in allowing any accounting firm to audit
our financial statements. The legal arguments for this position are many -- most
of all, all are reminded of the need of independence.
Morrison Knudsen's 1993 financial statements carry the same opinion from
Deloitte-Touche as do Albertson's for 1995. What has been done differently at
ALBERTSON'S? Deloitte-Touche has now been removed as internal auditors at
Morrison Knudsen.
If you agree, please vote FOR this proposal. If you don't agree, vote against
it. If your proxy card is unmarked, your shares will be automatically voted
"AGAINST" this proposal.
29
<PAGE> 33
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION
- --------------------------------------------------------------------------------
Your Board of Directors recommends a vote AGAINST Proposal 5 for the following
reasons:
Because formal approval by the stockholders of the appointment of the
independent public accountants who audit the Company's financial statements is
not required by the Securities and Exchange Commission, your Board of Directors
decided last year to eliminate that approval process from the 1996 Proxy
Statement and Proxy Card. The 1996 Proxy Statement did contain a description of
the auditors and the functions to be performed by them for the Company, and
representatives of Deloitte & Touche LLP were present at the 1996 Annual Meeting
and were available to answer appropriate questions.
One stockholder, Gerald R. Armstrong, objected to the elimination of this
approval at the 1996 Annual Meeting. In response, we have decided to reinstate
the vote on the approval of the appointment of the independent auditors which is
Proposal 2 in this 1997 Proxy Statement and on the accompanying 1997 Proxy Card.
As a result, the Company has substantially complied with Mr. Armstrong's
stockholder proposal (Proposal 5). However, we do not agree to add his proposed
list of itemized disclosures to the proxy statement. If we did so for one
stockholder, we could, arguably, be obliged to do so for every other stockholder
who submitted a similar request for itemized disclosures in the proxy statement.
This, of course, would not be realistic. We have told Mr. Armstrong, however,
that we would be pleased to supply any of the requested information to him or to
any other stockholder. Just write to the Corporate Secretary, Albertson's, Inc.,
P.O. Box 20, Boise, Idaho 83726.
FOR THE FOREGOING REASONS, YOUR BOARD OF DIRECTORS BELIEVES THAT THIS PROPOSAL
IS NOT IN THE BEST INTERESTS OF THE COMPANY AND UNANIMOUSLY RECOMMENDS THAT YOU
VOTE AGAINST PROPOSAL 5.
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
The United Food & Commercial Workers Union, Local 99R located in Phoenix,
Arizona (the "Phoenix Union") notified the Company that it intended to present a
proposal at the Company's 1997 Annual Meeting of Stockholders recommending the
adoption of confidential voting. The Company has been advised that the Phoenix
Union does not intend to present the proposal or to solicit proxies in favor of
the proposal. If the proposal should be properly presented at the Annual
Meeting, the Company intends to exercise discretionary authority to vote against
the proposal.
The Company is not aware of any other matters to be submitted at the Annual
Meeting of Stockholders. If any other matters properly come before the meeting,
it is the intention of the proxy holders to vote the shares they represent as
the Board of Directors may recommend.
- --------------------------------------------------------------------------------
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- --------------------------------------------------------------------------------
As required by Securities and Exchange Commission rules under Section 16 of the
Securities Exchange Act of 1934, as amended, the Company notes the late filing
of a Form 5 for a former officer, Allen R. Rowland.
30
<PAGE> 34
LOGO
- --------------------------------------------------------------------------------
DEADLINE FOR RECEIPT OF STOCKHOLDERS' PROPOSALS
- --------------------------------------------------------------------------------
Proposals by stockholders of the Company that are intended to be presented to
the stockholders at the Company's 1998 Annual Meeting must be received by the
Company no later than December 19, 1997 in order that they may be included in
the Proxy Statement and proxy card for that meeting.
31
<PAGE> 35
EXHIBIT A
[LOGO]
ALBERTSON'S, INC. SENIOR OPERATIONS EXECUTIVE OFFICER BONUS PLAN
- --------------------------------------------------------------------------------
1. PURPOSES.
The purposes of the Albertson's, Inc. Senior Operations Executive Officer Bonus
Plan (the "Plan") are to attract and retain highly-qualified senior operations
executives by providing appropriate performance-based incentive awards and to
serve as a qualified performance-based compensation program under Section 162(m)
of the Code, in order to preserve the Company's tax deduction for compensation
paid under the Plan to Covered Employees.
2. DEFINITIONS.
The following terms, as used herein, shall have the following meanings:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Bonus" shall mean any annual incentive bonus award granted pursuant
to the Plan, the payment of which shall be contingent upon the attainment
of Performance Goals with respect to a Plan Year.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(d) "Committee" shall mean the Compensation Committee of the Board.
(e) "Company" shall mean Albertson's, Inc., a corporation organized
under the laws of the State of Delaware, or any successor corporation.
(f) "Covered Employee" shall have the meaning set forth in Section
162(m)(3) of the Code (or any successor provision).
(g) "Operations" shall mean the retail, merchandising and distribution
functions of the Company as distinguished from support functions such as
legal, finance, accounting, store development, human resources or
information systems and technology.
(h) "Participant" shall mean a Senior Operations Executive Officer.
(i) "Performance Goals" shall mean the criteria and objectives which
must be met during the Plan Year as a condition of the Participant's
receipt of payment with respect to a Bonus, as described in Section 3
hereof.
(j) "Plan" shall mean the Albertson's, Inc. Senior Operations Executive
Officer Bonus Plan, as amended from time to time.
(k) "Plan Year" shall mean the Company's fiscal year.
(l) "Senior Operations Executive Officer" shall mean an officer of the
Company who is the Chief Executive Officer; the Vice Chairman; the
President; the Chief Operating Officer; an Executive Vice President
involved in Operations; or a Senior Vice President involved in Operations
and any other key employee(s) as designated by the Committee.
3. PERFORMANCE GOALS.
Performance goals for each Plan Year shall be established by the Committee not
later than the latest date permissible under Code Section 162(m). Such
Performance Goals may be expressed in terms of one or more financial or other
objective goals which may be Company-wide or otherwise, including on a
A-1
<PAGE> 36
division basis, regional basis or on an individual basis. Financial goals may be
expressed, for example, in terms of sales, earnings per share, stock price,
return on equity, net earnings growth, net earnings, related return ratios, cash
flow, earnings before interest, taxes, depreciation and amortization (EBITDA),
return on assets or total stockholder return. Other objective goals may include
the attainment of various productivity and long-term growth objectives,
including, without limitation, reductions in the Company's overhead ratio and
expense to sales ratios. Any criteria may be measured in absolute terms or as
compared to another company or companies. To the extent applicable, any such
Performance Goal shall be determined (i) in accordance with the Company's
audited financial statements and generally accepted accounting principles and
reported upon by the Company's independent accountants or (ii) so that a third
party having knowledge of the relevant facts could determine whether such
Performance Goal is met. Performance Goals shall include a threshold level of
performance below which no Bonus payment shall be made, levels of performance at
which specified percentages of the target Bonus shall be paid and a maximum
level of performance above which no additional Bonus shall be paid. The
Performance Goals established by the Committee may be (but need not be)
different for each Plan Year and different Performance Goals may be applicable
to different Participants.
4. BONUSES.
(a) In General. For each Plan Year commencing with the Plan Year ending
January 29, 1998, the Committee shall, no later than the time specified in
paragraph 3 hereof, specify the Performance Goals applicable to such Plan
Year. The Committee may, in its discretion, reduce or eliminate the amount
payable to any Participant (including a Covered Employee), in each case
based upon such factors as the Committee may deem relevant, but shall not
(i) increase the amount payable to any Participant (including a Covered
Employee); (ii) accelerate the payment of compensation (unless such payment
is appropriately discounted to reflect the time value of money) or (iii)
defer the payment of compensation (unless any additional amounts paid with
respect to such compensation reflect crediting of not more than a
reasonable rate of interest or the rate of return on a predetermined actual
investment). Payment of a Bonus for a particular Plan Year shall be made
only if and to the extent the Performance Goals with respect to such Plan
Year are attained and only if the Participant is employed by the Company on
the last day of such Plan Year.
(b) Time of Payment. Unless otherwise determined by the Committee, or
except as provided in Section 6(e) hereof, all payments in respect of
Bonuses granted under this Section 4 shall be made no later than two and
one-half months after the end of the Plan Year. In the case of Participants
who are Covered Employees, except as provided in Section 6(e) hereof, such
payments shall be made only after achievement of the Performance Goals has
been certified by the Committee.
(c) Form of Payment. Payment of a Participant's Bonus for any Plan Year
shall be made in cash or as otherwise determined by the Committee.
(d) Maximum Payment. No Bonus shall be paid to any Participant in
excess of $1,500,000 (valued as of the date of the award) for any Plan
Year.
5. ADMINISTRATION.
The Plan shall be administered by the Committee. The Committee shall have the
authority in its sole discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers either specifically granted to it under the Plan or necessary or
advisable in the administration of the Plan, including, without limitation, the
power to grant Bonuses; to determine the persons to whom and the time or times
at which Bonuses shall be granted; to determine the terms, conditions,
restrictions and performance criteria relating to any Bonus; to make adjustments
in the
A-2
<PAGE> 37
[LOGO]
Performance Goals in response to changes in applicable laws, regulations, or
accounting principles to the extent not inconsistent with Section 162(m) of the
Code and the regulations thereunder; except as otherwise provided in Section
4(a) hereof, to adjust compensation payable upon attainment of Performance
Goals; to construe and interpret the Plan and any Bonus; to prescribe, amend and
rescind rules and regulations relating to the Plan; and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
The Committee shall consist of two or more persons each of whom is an "outside
director" within the meaning of Section 162(m) of the Code. All determinations
of the Committee shall be made by a majority of its members either present in
person or participating by conference telephone at a meeting or by unanimous
written consent. The Committee may delegate to one or more of its members or to
one or more agents such administrative duties as it may deem advisable, and the
Committee or any person to whom it has delegated duties as aforesaid may employ
one or more persons to render advice with respect to any responsibility the
Committee, or such person, may have under the Plan. All decisions,
determinations and interpretations of the Committee shall be final and binding
on all persons, including the Company, the Participants (or any person claiming
any rights under the Plan from or through any Participant) and any stockholder.
No member of the Board or the Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Bonus granted
hereunder.
6. GENERAL PROVISIONS.
(a) Compliance with Legal Requirements. The Plan and the granting of
Bonuses, as well as the other obligations of the Company under the Plan,
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.
(b) No Right to Continued Employment. Nothing in the Plan or in any
Bonus granted shall confer upon any Participant the right to continue in
the employ of the Company or any of its subsidiaries or to be entitled to
any remuneration or benefits not set forth in the Plan or to interfere with
or limit in any way the right of the Company to terminate such
Participant's employment.
(c) Withholding Taxes. The Company or subsidiary employing any
Participant shall deduct from all payments and distributions under the Plan
any taxes required to be withheld by federal, state or local governments.
(d) Amendment and Termination of the Plan. The Board may at any time
and from time to time alter, amend, suspend, or terminate the Plan in whole
or in part; provided, however, that no amendment which requires stockholder
approval in order for the Plan to continue to comply with Code Section
162(m) shall be effective unless the same shall be approved by the
requisite vote of the shareholders of the Company. Additionally, the
Committee may make such amendments as it deems necessary to comply with
other applicable laws, rules and regulations. Notwithstanding the
foregoing, no amendment shall affect adversely any of the rights of any
Participant, without such Participant's consent, under any Bonus previously
paid under the Plan.
(e) Participant Rights. No Participant shall have any claim to be
granted any Bonus under the Plan, and there is no obligation for uniformity
of treatment among Participants.
(f) Unfunded Status of Bonuses. The Plan is intended to constitute an
"unfunded" plan for incentive compensation. With respect to any payments
which at any time are not yet made to a Participant pursuant to a Bonus,
nothing contained in the Plan or any Bonus shall give any such Participant
any rights that are greater than those of a general creditor of the
Company.
A-3
<PAGE> 38
(g) Governing Law. The Plan and the rights of all persons claiming
hereunder shall be construed and determined in accordance with the laws of
the State of Delaware without giving effect to the choice of law principles
thereof.
(h) Effective Date. The Plan shall first be effective with respect to
the Plan Year ending January 29, 1998, but only if the Plan shall have been
approved at the 1997 annual meeting by the requisite vote approval of the
shareholders of the Company.
(i) Interpretation. The Plan is designed and intended to comply with
Section 162(m) of the Code, to the extent applicable, and all provisions
hereof shall be construed in a manner to so comply.
A-4
<PAGE> 39
(recycled symbol)
printed on recycled paper
<PAGE> 40
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ALBERTSON'S INC.
The undersigned hereby appoints Gary G. Michael, John B. Carley and Warren E.
McCain, and each of them, as Proxies for the undersigned, each with full power
of substitution, to represent the undersigned and to vote all shares of Common
Stock of Albertson's, Inc. (the "Company") that the undersigned is entitled to
vote in the manner indicated on the reverse side hereof, and with discretionary
authority as to any other matters that may properly come before the meeting as
set forth under the heading "Other Matters" in the accompanying Proxy
Statement. If no other indication is made, the proxyholders will vote FOR the
election of director nominees, the ratification of the appointment of the
independent auditors and the approval of the bonus plan and will vote AGAINST
proposals 4, 5 and 6 at the Annual Meeting of Stockholders of the Company to be
held on Friday, May 23, 1997, and at any and all adjournments thereof.
(PLEASE DATE AND SIGN ON REVERSE SIDE)
-----------------------------------------
FOLD AND DETACH HERE
[ALBERTSON'S LOGO]
ANNUAL MEETING OF STOCKHOLDERS
FRIDAY, MAY 23, 1997
10:00 a.m.
BOISE CENTRE ON THE GROVE
850 FRONT STREET
BOISE, IDAHO
<PAGE> 41
PLEASE MARK YOUR VOTE LIKE THIS X
___
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE
VOTED AS DIRECTED THEREIN. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1,2 AND 3 AND AGAINST PROPOSALS 4, 5 AND 6.
- -------------
COMMON
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
1. ELECTION OF FIVE DIRECTORS TO CLASS II AND ONE DIRECTOR TO CLASS I.
NOMINEES: Kathryn Albertson, A. Gary Ames, John B. Carley, Paul I.
Corddry, Beatriz Rivera and Thomas L. Stevens, Jr.
FOR all nominees WITHHOLD AUTHORITY to vote
for all nominees
_____ _____
To withhold authority for any individual nominee, check the "FOR" all nominee
box above and write that nominee's name on line below:
_________________________________________
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS.
FOR____ AGAINST____ ABSTAIN____
3. APPROVAL OF ALBERTSON'S, INC. SENIOR OPERATIONS EXECUTIVE OFFICER BONUS
PLAN.
<PAGE> 42
FOR____ AGAINST____ ABSTAIN____
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSALS 4, 5 AND 6.
4. STOCKHOLDER PROPOSAL TO DECLASSIFY THE BOARD OF DIRECTORS.
FOR___ AGAINST____ ABSTAIN____
5. STOCKHOLDER PROPOSAL REGARDING INDEPENDENT AUDITORS.
FOR____ AGAINST____ ABSTAIN____
6. STOCKHOLDER PROPOSAL TO INSTITUTE CONFIDENTIAL VOTING.
FOR____ AGAINST____ ABSTAIN____
THIS PROXY SHOULD BE SIGNED EXACTLY AS NAME APPEARS HEREON.
Executors, administrators, trustees and so forth, should give full title as
such. If the signatory is a corporation, please sign full corporate name by a
duly authorized officer. If a partnership, please sign in partnership name by
an authorized party. If shares are held in multiple names, at least one must
sign as an authorized party.
Dated:__________________,1997
_____________________________
Signature
_____________________________
Signature
