SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / X /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/ X / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Fred Meyer, Inc.
- -----------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Fred Meyer, Inc.
- -----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ X / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A
/ / $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11
1) Title of each class of securities to which
transaction applies:
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2) Aggregate number of securities to which transaction
applies:
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3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act
Rule 0-11: (Set forth the amount on which the
filing fee is calculated and state how it was
determined.)
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<PAGE>
4) Proposed maximum aggregate value of transaction:
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5) Total free paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify
the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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<PAGE>
FRED MEYER, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS, JUNE 27, 1996
TO THE SHAREHOLDERS OF FRED MEYER, INC.:
The annual meeting of the shareholders of Fred Meyer, Inc., a
Delaware corporation, will be held on Thursday, June 27, 1996 at 1:00 p.m.,
Pacific Time at the Fred Meyer Corporate Conference Center, 3500 S.E. 22nd
Avenue, Portland, Oregon for the following purposes:
1. to elect a Board of Directors for the ensuing year; and
2. to transact such other business as may properly come before
the meeting and at any adjournment thereof.
Only shareholders of record at the close of business on Wednesday,
May 1, 1996 will be entitled to vote at the Annual Meeting.
YOU ARE RESPECTFULLY REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY
AND RETURN IT IN THE POSTAGE PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE.
You may attend the meeting in person even though you have sent in your
proxy, since retention of the proxy is not necessary for admission to or
identification at the meeting.
By Order of the Board of Directors
Roger A. Cooke
Senior Vice President, General Counsel
and Secretary
Portland, Oregon
May 3, 1996
<PAGE>
PROXY STATEMENT
The mailing address of the principal executive offices of the
Company is P.O. Box 42121, Portland, Oregon 97242. The approximate date
this proxy statement and the accompanying proxy form are first being sent
to shareholders is May 15, 1996.
UPON WRITTEN REQUEST TO ROGER A. COOKE, SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY, ANY PERSON WHOSE PROXY IS SOLICITED BY THIS
PROXY STATEMENT WILL BE PROVIDED WITHOUT CHARGE A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K.
SOLICITATION AND REVOCABILITY OF PROXY
The enclosed proxy is solicited on behalf of the Board of
Directors of Fred Meyer, Inc., a Delaware corporation, for use at the
Annual Meeting of Shareholders to be held on June 27, 1996 and at any
adjournment thereof. The Company will bear the cost of preparing and
mailing the proxy, proxy statement, and any other material solicited by use
of the mails. Officers and employees of the Company may also solicit
proxies by telephone or personal contact. Copies of solicitation materials
will be furnished to fiduciaries, custodians and brokerage houses for
forwarding to beneficial owners of the stock held in their names.
Any person giving a proxy in the form accompanying this proxy
statement has the power to revoke it at any time before its exercise. The
proxy may be revoked by filing with the Company, attention Roger A. Cooke,
Senior Vice President, General Counsel and Secretary, an instrument of
revocation or a duly executed proxy bearing a later date. The proxy may
also be revoked by affirmatively electing to vote in person while in
attendance at the meeting. However, a shareholder who attends the meeting
need not revoke his proxy and vote in person unless he wishes to do so. All
valid, unrevoked proxies will be voted at the annual meeting.
1
<PAGE>
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
The Common Stock is the only authorized voting security of the
Company currently outstanding. The record date for determining holders of
Common Stock entitled to vote at the Annual Meeting is May 1, 1996. On that
date there were 26,704,755 shares of Common Stock outstanding entitled to
one vote per share. The Common Stock does not have cumulative voting
rights.
The following table shows ownership of shares of Common Stock of
the Company on March 1, 1996, except as noted, by the only persons who, to
the knowledge of the Board of Directors, beneficially owned more than 5% of
the Common Stock, by certain executive officers of the Company and by all
officers and directors as a group:
<TABLE>
<CAPTION>
Number of Approximate
Name Shares(1) Percent
- ---- --------- -------
<S> <C> <C>
KKR Associates 10,700,038(2) 37.8%
9 West 57th Street
New York, NY 10019
Robert G. Miller 386,842(3) 1.4%
Cyril K. Green 179,859(4) (5)
Curt Lerew, III 94,300(3) (5)
Mary F. Sammons 107,367(3)(6) (5)
Ronald J. McEvoy 49,440(3) (5)
22 Executive Officers and 11,976,563(7) 41.4%
Directors as a group
- ---------------
<FN>
(1) Shares held directly with sole voting and sole investment power unless
otherwise indicated.
(2) KKR Associates is a limited partnership of which Paul E. Raether,
Michael W. Michelson and Saul A. Fox, directors of the Company, are
three of twelve general partners. Jerome Kohlberg, Jr., a director of
the Company, is a limited partner of KKR Associates. Shares shown as
owned by KKR Associates are owned of record by FMI Associates Limited
Partnership ("FMI Associates"), of which KKR Associates is the sole
general partner and as to which it possesses 100% of the voting power
and investment power. Messrs. Raether, Michelson and Fox beneficially
own an additional 11,000, 4,000 and 6,000 shares, respectively. Shares
shown as beneficially owned by KKR Associates include 1,566,441 shares
which FMI Associates has the right to acquire pursuant to a presently
exercisable option. See "Certain Transactions." The FMI Associates
limited partnership agreement is, by its terms, to dissolve on
December 31, 1996 unless amended by all of the limited partners to
extend the term beyond such date. There can be no assurance that KKR
Associates will have sole discretion regarding the disposition of such
Common Stock, including public or private sales of such Common Stock,
the distribution of such Common Stock to the limited partners of FMI
Associates, or a combination of the foregoing. If shares of Common
Stock are distributed to the limited partners of FMI Associates, each
limited partner will thereafter have sole discretion with respect to
its Common Stock.
(3) Includes 200,000, 80,000, 45,000 and 79,796 shares for Messrs. Miller,
Lerew and McEvoy and Ms. Sammons, respectively, subject to options
that are currently exercisable or become exercisable within 60 days of
March 1, 1996.
(4) Number of shares owned on February 3, 1996, the date Mr. Green retired
from the Company.
(5) Less than 1%.
(6) Includes 581 shares held by Ms. Sammons' spouse for which beneficial
ownership is disclaimed.
(7) Includes 2,221,055 shares subject to options that are currently or
become exercisable within 60 days of March 1, 1996. Includes 9,159,944
shares for which beneficial ownership is disclaimed.
</FN>
</TABLE>
2
<PAGE>
ELECTION OF DIRECTORS
The directors of the Company are elected at the Annual Meeting in
June to serve for one year and until their successors are elected. The
nominees for director are listed below together with certain information
about each of them.
<TABLE>
<CAPTION>
Name and Year Principal Occupation Number of
Elected or Position Shares Held Approximate
to Board with Company Age on March 1,1996(1) Percent
-------- ------------ --- ------------------ -------
<S> <C> <C> <C> <C>
James J. Curran Retired Executive 56 200 less than
(1996 nominee) Committee Member of 1%
First Interstate Bancorp
Saul A. Fox General Partner, 42 10,706,038 37.9%
(1986) Kohlberg Kravis
Roberts & Co.
A. M. Gleason Retired Chief Executive 65 25,908(2) less than
(1992) Officer of PacifiCorp 1%
Jerome Kohlberg, Jr. General Partner, 70 -- --
(1981) Kohlberg & Co.
Roger S. Meier President, 70 19,508(3) less than
(1985) AMCO, Inc. 1%
Michael W. Michelson General Partner, 44 10,704,038(4) 37.9%
(1981) Kohlberg Kravis
Roberts & Co.
Robert G. Miller Chairman of the Board 51 386,842 1.4%
(1991) and Chief Executive
Officer of the Company
Paul E. Raether General Partner, 49 10,711,038(5) 37.9%
(1986) Kohlberg Kravis Roberts
& Co.
- --------------
<FN>
(1) Shares held directly with sole voting and sole investment power
unless otherwise indicated. See "Voting Securities and Principal
Shareholders."
(2) Includes 1,300 shares owned by Mr. Gleason's spouse as to which
beneficial ownership is disclaimed. Also includes 804 shares
subject to the Non-Employee Directors Stock Compensation Plan.
(3) Includes 5,000 shares owned by Mr. Meier's spouse and 2,500
shares owned by a family partnership of which Mr. Meier is
general partner. Beneficial ownership is disclaimed as to such
shares. Also includes 804 shares subject to the Non-Employee
Directors Stock Compensation Plan.
4) Includes 2,334 shares owned by a family trust. Also includes
1,666 shares owned by a family trust as to which ownership is
disclaimed.
(5) Ownership is disclaimed as to 11,000 shares, which are owned by a
family trust.
</FN>
</TABLE>
3
<PAGE>
Mr. Curran retired from First Interstate Bancorp in April, 1996.
At the time of his retirement he was a member of the Executive Operating
Committee of First Interstate Bancorp and Chairman and Chief Executive
Officer of First Interstate Bank-Northwest Region. Mr. Curran is a director
of Coeur d'Alene Mines Corp.
Mr. Fox became a general partner of Kohlberg Kravis Roberts & Co.
("KKR") in 1990 and prior to that time had been an executive of KKR since
June 1984. Mr. Fox is a director of American Re Corporation and Union Texas
Petroleum Holdings, Inc.
Mr. Gleason retired from PacifiCorp, a diversified public utility,
on May 1, 1995. At the time of his retirement he was Vice Chairman of
PacifiCorp, having previously served as its President and Chief Executive
Officer. Prior to that time he served as Chairman and Chief Executive
Officer of Pacific Telecom, Inc., a PacifiCorp subsidiary. Mr. Gleason is a
director of Tektronix, Inc., Blount, Inc. and Comdial Corporation and
President of the Port of Portland.
Mr. Kohlberg was a general partner of KKR from its organization in
1976 until 1987 when he became a limited partner. He has been a general
partner of Kohlberg & Co., a privately owned merchant banking enterprise,
since its organization in 1987. Mr. Kohlberg is a director of ABT Building
Products Corporation.
Mr. Meier has been president and chief executive officer of AMCO,
Inc., a privately owned investment enterprise, for more than the last five
years. Mr. Meier is a director of Key Bank of Oregon and Red Lion
Properties, Inc. and a trustee of Acorn Investment Trust.
Mr. Michelson has been associated with KKR since July 1981 and has
been a general partner since January 1987. Mr. Michelson is a director of
Auto Zone, Inc., Owens-Illinois, Inc., Owens-Illinois Group, Inc., Union
Texas Petroleum Holdings, Inc., Red Lion Hotels, Inc. and Red Lion
Properties, Inc.
Mr. Miller became Chairman of the Board and Chief Executive
Officer of the Company in August 1991. Prior to that time he was employed
by Albertson's Inc., where his most recent positions were Executive Vice
President of Retail Operations from 1989 to 1991 and Senior Vice President
and Regional Manager from 1985 to 1989. Mr. Miller is a director of
PacifiCorp.
Mr. Raether has been a general partner of KKR since April 1986.
Mr. Raether is a director of Bruno's Inc., Duracell International Inc.,
IDEX Corporation, The Stop & Shop Companies, Inc., Flagstar Companies, Inc.
and Flagstar Corporation.
Further information with respect to Messrs. Fox, Kohlberg,
Michelson and Raether is set forth in "Voting Securities and Principal
Shareholders" and "Certain Transactions."
The Board of Directors met six times during the last fiscal year.
Each director (except for Messrs. Fox and Kohlberg) attended at least 75%
of the aggregate number of meetings of the Board of Directors and any
committee of which the director was a member for the period during which
such director served. Directors who are not employees of the Company
receive an annual fee of $22,500 unless such director participates in the
Non-Employee Directors Stock Compensation Plan. Directors who participate
in the Non-Employee Directors Stock Compensation Plan receive an annual fee
of $10,000. Under the Non-Employee Directors Stock Compensation Plan, the
balance of the current annual fee is paid in the Company's Common Stock.
Participants are awarded $62,500 worth of the Company's Common Stock every
five years. Participants having fewer than five years of service remaining
before reaching retirement age receive stock awards equivalent to $12,500
for each remaining year. Shares awarded under this plan are subject to
forfeiture over the five-year period following the award (or shorter period
to retirement) if the recipient ceases to be a director. The shares awarded
under the plan are purchased in the market with funds supplied by the
Company, and the certificates are then held by the Company until the
forfeiture restrictions lapse. Directors have voting and dividend rights
with respect to the shares.
4
<PAGE>
Directors who are not employees of the Company also receive a fee
of $500 per board or committee meeting attended. The current standing
committees of the Board of Directors are as follows:
-- The Board of Directors has an Executive Committee consisting of
Robert G. Miller (Chairman), Roger S. Meier and Michael W.
Michelson. There were no meetings of the Executive Committee held
in 1995. The Executive Committee has the authority to act for the
Board of Directors of the Company between meetings of the Board
to the full extent permitted by the Delaware General Corporation
Law.
-- The Board of Directors has an Audit Committee consisting of A. M.
Gleason (Chairman) and Roger S. Meier. The Audit Committee met
three times during 1995. It reviews the planned scope and results
of the annual audit, confers with the independent auditors and
reviews their recommendations with respect to accounting,
internal controls and other matters, and confers with Company
finance, accounting and internal audit personnel.
-- The Board of Directors has a Compensation Committee consisting of
Roger S. Meier (Chairman), Saul A. Fox and Michael W. Michelson.
It met three times during 1995. The Board of Directors has
delegated the authority to administer the Company's stock
incentive plans and other compensation matters to the
Compensation Committee.
The shares represented by each proxy will be voted with respect to
the election of the nominees in accordance with the instructions specified
in the proxy form. If no instructions are given, proxies will be voted for
the election of the nominees and in accordance with this proxy statement on
any other business that may properly come before the meeting. If for some
unforeseen reason any of the nominees should not be available as a
candidate for director, the number of directors constituting the Board of
Directors may be reduced prior to the meeting or the proxies may be voted
for such other candidate or candidates as may be nominated by the Board of
Directors, in accordance with the authority conferred in the proxy.
Directors are elected by a plurality of the votes cast by holders
of the shares entitled to vote at the Annual Meeting if a quorum is
present. Abstentions are counted for purposes of determining whether a
quorum exists at the Annual Meeting, but have no effect in the
determination of whether a plurality exists with respect to a given
nominee.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation paid to the Chief
Executive Officer of the Company and the other four most highly compensated
executive officers of the Company for services in all capacities to the
Company and its subsidiaries during each of the last three fiscal years.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------- ----------------------------------
Awards Payouts
------------------------ ---------
Securities Long-Term
Name and Other Restricted Underlying Incentive All
Principal Annual Stock Options Plan Other
Position Year Salary(1) Bonus(1) Compensation Awards (# of Shares) Payouts Compensation(2)
- ------------------ ---- --------- -------- ------------ ------ ------------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert G. Miller 1995 597,115 $ 86,250 -- -- -- $8,072 $56,026
Chairman of the 1994 555,481 -- -- -- -- -- 63,831
Board and Chief 1993 531,634 212,654 $55,008(3) -- -- -- 36,893
Executive Officer
Cyril K. Green 1995 335,000 32,760 -- -- -- 12,405 44,473
President and 1994 306,258 -- -- -- -- -- 47,135
Chief Operating 1993 297,875 83,405 -- -- -- -- 20,549
Officer(4)
Curt A. Lerew, III 1995 280,705 24,438 -- -- 25,000 3,736 40,682
Senior Vice 1994 249,327 6,000 -- -- -- -- 41,898
President 1993 242,006 60,859 -- -- -- -- 14,478
Mary F. Sammons 1995 281,538 24,438 -- -- 25,000 7,334 39,905
Senior Vice 1994 251,635 -- -- -- -- -- 40,497
President 1993 225,481 43,100 -- -- -- -- 13,293
Ronald J. McEvoy 1995 237,692 19,242 -- -- 10,000 3,736 37,835
Senior Vice 1994 219,538 -- -- -- -- -- 39,486
President 1993 211,538 54,546 -- -- -- -- 12,263
- ------------------
<FN>
(1) Includes compensation deferred at the election of the executive
under the Company's Profit Sharing Plan and under the Company's
Excess Deferral Plan. Under the Company's Profit Sharing Plan,
officers and other employees of the Company may elect to defer
up to the lesser of $9,240 or 15% of their compensation, subject
to limitations under the Internal Revenue Code. Amounts under
these plans are generally paid to employees upon retirement.
(2) Amounts shown for the fiscal year 1995 consist of: (i) Company
contributions of $24,956, $13,969, $11,936, $11,833 and $9,920
to the above-named executive officers, respectively, under the
Profit Sharing Plan and Excess Deferral Plan, (ii) $6,070,
$5,504, $3,746, $3,072, and $2,915 paid by the Company to the
above-named executive officers, respectively, as premiums under
its Long-Term Disability Plan; and (iii) $25,000 for each named
executive officer paid by the Company for life insurance under
the Supplemental Income Plan.
(3) Consists primarily of relocation expenses.
(4) Mr. Green retired from the Company on February 3, 1996.
</FN>
</TABLE>
6
<PAGE>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information as to options to purchase
Common Stock granted to certain executive officers during 1995 pursuant to
the Company's 1990 Stock Incentive Plan. No SARs were granted during 1995.
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
-------------------------------------------- Value at Assumed
Number of Percentage of Annual Rates of Stock
Securities Total Options Price Appreciation for
Underlying Granted to Exercise Option Term(3)
Options Employees Price Expiration -------------------------
Name Granted(1) in Fiscal Year Per Share(2) Date 5% 10%
---- ---------- -------------- ------------ -------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert G. Miller -- -- -- -- -- --
Cyril K. Green -- -- -- -- -- --
Curt A. Lerew, III 25,000 5.52% $25.875 July 2005 $406,816 $1,030,952
Mary F. Sammons 25,000 5.52 25.875 July 2005 406,816 1,030,952
Ronald J. McEvoy 10,000 2.21 25.875 July 2005 162,726 412,381
- ---------------
<FN>
(1) Options were granted for the numbers of shares indicated at an
exercise price equal to the fair market value of the Common Stock
on the date of grant. The options, which have terms of ten years,
become exercisable as follows: 20% per year on the first five
anniversaries of the original grant date. If the employment of
any of the three optionees is terminated within one year after a
change in control of the Company, the options held by such
optionee become exercisable free of any limitation on the number
of shares with respect to which the option may be exercised.
(2) Subject to certain conditions, the exercise price and tax
withholding obligations related to exercise may be paid by
delivery of previously acquired shares of Common Stock.
(3) The dollar amounts under these columns are the result of
calculations at the 5% and 10% rates required by the Securities
and Exchange Commission for the maximum option term of 10 years
and therefore are not intended to and may not accurately forecast
possible future appreciation, if any, of the Company's Common
Stock price.
</FN>
</TABLE>
STOCK OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES.
The following table indicates (i) stock options exercised by
certain executive officers during 1995, including the value realized on the
date of exercise, (ii) the number of shares subject to exercisable (vested)
and unexercisable (unvested) stock options as of February 3, 1996, and
(iii) the value of "in-the-money" options, which represents the positive
spread between the exercise price of existing stock options and the
year-end price of the Common Stock.
<TABLE>
<CAPTION>
Number of Value of
Securities Underlying Unexercised In-the-Money
Unexercised Options Held Options Held
at February 3, 1996 at February 3, 1996
Shares Acquired -------------------------- --------------------------------
Name on Exercise Value Realized Exercisable Unexercisable Exercisable(1) Unexercisable(1)
---- --------------- -------------- ----------- ------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Robert G. Miller -- -- 200,000 100,000 $100,000 $50,000
Cyril K. Green -- -- -- -- -- --
Curt A. Lerew, III -- -- 80,000 45,000 -- --
Mary F. Sammons -- -- 79,796 25,000 667,192 --
Ronald J. McEvoy 15,000 $206,250 45,000 15,000 236,250 26,250
- --------------
<FN>
(1) Calculated based on the February 2, 1996 stock price of $22.25.
</FN>
</TABLE>
7
<PAGE>
LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR
The following table provides information regarding incentive
awards granted to the executive officers under the Company's Capital Bonus
Plan (the "Capital Bonus Plan") for 1995. Under the Capital Bonus Plan, 20%
of the annual bonus an individual officer would earn at the Company's bonus
plan targeted goals for pre-tax income, control of net inventory (inventory
less accounts payable), operational income, and/or departmental expenses
are deferred and held in a Company account, to be paid to the officer based
upon a defined distribution formula that compares actual retail cash flows
to projected retail cash flows for new stores and major remodels with
capital expenditure budgets that exceed $1,000,000 each. The amount paid
out will be based on actual results achieved, measured by the aggregate
cash flow for all projects, plus interest earnings based on the Company's
average borrowing rate.
<TABLE>
<CAPTION>
Number of Performance Estimated Future Payouts
Shares, Units or Other Period under Non-Stock Price-Based Plans
or Other Until Maturation -------------------------------------------------
Name Rights or Payout(1) Threshold(2)(5) Target(3)(5) Maximum(4)(5)
---- ------ ------------ --------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Robert G. Miller -- 4/98 $0 $28,750 $57,500
4/99 0 28,750 57,500
Cyril K. Green -- 4/98 0 10,920 21,840
4/99 0 10,920 21,840
Curt A. Lerew, III -- 4/98 0 8,146 16,292
4/99 0 8,146 16,292
Mary F. Sammons -- 4/98 0 8,146 16,292
4/99 0 8,146 16,292
Ronald J. McEvoy -- 4/98 0 6,414 12,828
4/99 0 6,414 12,828
- --------
<FN>
(1) Payments will be made after the end of the second and third full
years' operations after a remodel/new store is in service. Fifty
percent (50%) of the participant's investment in the deferred
account will be paid out in the third year following the year in
which the investment was set aside and the balance will be paid
out in the fourth year.
(2) Cash flows of 90% of the projected cash flow entitle the officer
to a 50% payout; the Board of Directors has discretion to
determine payouts when cash flows are less than 90%, which could
be zero.
(3) The target award is 20% of a participant's annual bonus earned at
bonus plan targeted pretax income, control of net inventory
(inventory less accounts payable), operational income, and/or
departmental expense determined by multiplying the individual's
base salary by a pre-approved bonus percentage.
(4) Cash flows of 120% of the projected cash flow entitle the
participant to a 200% payout.
(5) Excludes the amount of interest earned, which will be determined
based on the Company's average borrowing rate.
</FN>
</TABLE>
8
<PAGE>
RETIREMENT BENEFITS.
The Company has adopted a nonqualified Supplemental Income Plan to
provide supplemental retirement and death benefits to key executive
employees. The plan is administered by the Compensation Committee. Any key
executive of the Company who holds a position of Senior Vice President or
higher is eligible to participate in this plan. The Committee selects
participants from those eligible employees recommended by the Company's
Chief Executive Officer. A participant is entitled to receive full benefits
under the Supplemental Income Plan upon normal retirement by termination of
employment after age 62. A participant is also entitled to receive reduced
benefits if the participant voluntarily terminates his or her employment,
is terminated without cause or dies before age 62. The normal retirement
benefit under the Supplemental Income Plan is a projected annual amount, to
be paid in equal monthly installments for 15 years, based upon the
estimated cash surrender value, less the premiums paid and other expenses
of the Company, of a Company-owned life insurance policy purchased on the
life of the executive. The actual benefit will vary from the projected
benefit based on actual dividend experience. The Company guarantees each
participant a minimum benefit equal to at least 60 percent of the projected
benefit. Based on certain assumptions, the projected annual benefits
payable to Messrs. Miller, Lerew and McEvoy and Ms. Sammons upon retirement
at normal retirement age would be $63,000, $102,400, $102,400 and $96,250,
respectively. Mr. Green, who retired from the Company at the end of 1995,
was not a participant in the Supplemental Income Plan. In lieu of
participation, the Company paid the premiums, in amounts substantially
equal to those which would have been paid under the Supplemental Income
Plan, on a split life insurance policy for Mr. Green. The Company retains
an interest in the policy equal to the premiums it has paid.
The Company has agreed to pay certain benefits to Mr. Miller in
connection with his employment, including certain death, disability,
retiree medical and retirement benefits. In the event of his termination
for any reason other than cause, death or permanent disability, Mr. Miller
is entitled to payment of two years of compensation at his then-current,
annual salary (payable without interest). Assuming Mr. Miller retires at
age 62, he will be entitled to receive an additional monthly retirement
benefit of $10,805 for the remainder of his life.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION.
The Compensation Committee of the Board of Directors (the
"Committee") is composed of three outside directors and, pursuant to
authority delegated by the Board, determines the compensation to be paid to
the Chief Executive Officer and each of the other executive officers of the
Company.
The Company's objectives for executive compensation are to (i)
attract and retain key executives important to the long term success of the
Company; (ii) reward executives for performance and enhancement of
shareholder value; and (iii) align the interests of the executive officer
with the success of the Company by making a portion of the compensation
based upon corporate performance.
Section 162(m) of the Internal Revenue Code of 1986 generally
disallows a federal income tax deduction to the Company for compensation
over $1,000,000 paid to any of the Company's chief executive officer and
four other most highly compensated executive officers unless such
compensation is payable only on account of the attainment of one or more
performance goals determined by a Board committee such as the Compensation
Committee and otherwise qualifies as performance based pursuant to Section
162(m). The levels of salary and bonus paid by the Company for fiscal 1995
did not exceed the $1,000,000 limit.
The Compensation Committee's policy with respect to the tax
deductibility of executive compensation under Section 162(m) of the
Internal Revenue code is to qualify such compensation for deductibility
where practicable. In this regard, the Company amended the 1990 Stock
Incentive Plan last year to impose an individual limit on the maximum
number of stock option shares which may be granted to participants to
ensure that compensation resulting from stock option exercises by the Chief
Executive Officer and the other four most highly compensated proxy-named
executives will be tax deductible by the Company.
Executive Officer Compensation Program. The primary components of
the Company's executive officer compensation program are base salary,
annual bonus plan, and long term incentive compensation in the form of
stock options and capital bonus plan.
9
<PAGE>
Base salary levels for the Company's executive officers are set
relative to companies of similar size in the retail industry and other
companies in the Pacific Northwest. In determining salaries, the Company
also takes into account individual experience, job responsibility and
performance.
The Company's Bonus Plan is an annual incentive program for
executive officers, department and group managers and other selected
employees of the Company. The purpose of the Bonus Plan is to provide a
direct financial incentive in the form of an annual cash bonus to
executives to achieve predetermined departmental and Company financial
goals. Target bonuses are set for each executive officer as a percentage of
base compensation. The target bonus percentage depends upon level of
responsibility within the Company. In fiscal 1995, the financial measure of
performance under the Plan for the Company was pretax income and, to a
lesser extent, control of net inventory. Department performance is
determined in relation to pre-established targets for store contribution
income and control of net inventory and for departmental operational income
or expense. Generally, no bonus is paid under the Bonus Plan if threshold
levels for Company, store or department performance are not achieved.
Twenty percent of the annual bonus payable to each executive officer at
bonus plan targeted pretax income, net inventory, operational income,
and/or departmental expense is withheld pursuant to the Company's Capital
Bonus Plan. The Capital Bonus Plan provides for amounts to be paid to
executive officers based upon the comparison of actual cash flow to
projected cash flow for new stores and major remodeling projects over the
three years following construction. Depending upon cash flow results,
officers may receive nothing or up to twice the amount withheld under the
Capital Bonus Plan, plus earnings on the deferred amount. For fiscal 1995,
threshold levels for executive officers were not achieved. The Compensation
Committee determined to award executive officers bonuses equal to 50% of
the amount that would have been paid under the Bonus Plan if threshold
levels had been achieved. A portion of the bonus payable to each officer
was withheld in accordance with the terms of the Capital Bonus Plan.
The Company's stock option program is intended as a long term
incentive plan for executives, managers and selected salaried employees of
the Company. The objectives of the program are to align employee and
shareholder long term interests by creating a strong direct link between
compensation and shareholder value. The Company's Stock Incentive Plan
authorizes the Committee to award stock options to executive officers and
other employees of the Company. Stock options are granted at an option
price equal to the fair market value of the Company's Common Stock on the
day preceding the date of grant. Options generally become exercisable to
the extent of 25 or 20 percent of the grant on the anniversary date of the
grant for the four or five succeeding years. Stock options generally have
10-year terms and terminate shortly after termination of employment. The
amount of stock option grants for an individual depends upon his/her level
of responsibility and position in the Company.
Compensation of the Chief Executive Officer. The compensation of
the Chief Executive Officer of the Company was determined by negotiation of
an employment agreement at the time of his employment in September 1991.
The agreement was amended in 1994. The employment agreement provides that
Mr. Miller receive an annual salary and be eligible for an annual bonus in
an amount up to 100 percent of his annual salary based upon the achievement
of financial objectives approved by the Board of Directors. The employment
agreement also provides for disability, pension, and severance benefits,
the amount of which will depend upon the term of Mr. Miller's employment
with the Company. Pursuant to the employment agreement, the Compensation
Committee of the Board of Directors reviewed and increased the Chief
Executive's base salary in 1992, 1993 and 1994. The Chief Executive's
current annual base salary is $575,000. The factors considered by the
Committee in approving the increases were (1) the achievement of the goals
that the Board had established for the Company's management, including
goals for operating profit, performance relative to competitors and new and
remodeled store development, (2) the contribution made by the Chief
Executive in establishing the long-term strategic and business plan of the
Company, including the establishment and achievement of organizational and
management development goals, (3) enhancement of shareholder value during
the prior year and (4) levels of compensation paid to other senior
executives in the industry.
Roger S. Meier, Chairman
Saul A. Fox
Michael W. Michelson
10
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
The following graph provides a comparison of the five year
cumulative total shareholder return on (i) the Company's Common Stock, (ii)
the S&P Retail Stores Composite Industry Index, in each case assuming the
reinvestment of any dividends, and (iii) the S&P 500 Index.
[graphic line chart]
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
FRED MEYER, INC. $100.00 $201.85 $240.74 $272.22 $240.74 $162.04
S&P 500 INDEX 100.00 122.69 135.67 153.14 153.96 213.48
S&P RETAIL STORES COMPOSITE INDEX 100.00 139.73 166.79 160.75 148.85 160.50
</TABLE>
The graph assumes that $100 was invested on January 31, 1991 in
Company Common Stock, the S&P 500 Index and the S&P Retail Stores Composite
Industry Index, and that all dividends were reinvested.
11
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own more than
ten percent of a registered class of the Company's equity securities, to
file with the Securities and Exchange Commission (the "SEC") initial
reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Officers, directors and greater
than ten-percent shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies
of such reports furnished to the Company and representations that no other
reports were required, the Company believes that during the fiscal year
ended February 3, 1996 all Section 16(a) filing requirements applicable to
its officers, directors and greater than ten-percent beneficial owners were
complied with.
CERTAIN TRANSACTIONS
RELATIONSHIP WITH PROPERTIES
At February 3, 1996, the Company leased or subleased 21 of its
locations (land, buildings, and improvements) from Real Estate Properties
Limited Partnership (formerly Fred Meyer Real Estate Properties, Ltd.), an
Oregon limited partnership ("Properties"). At March 21, 1996, Cyril K.
Green, President of the Company, held approximately .7% of the aggregate
Class A limited partnership interests in Properties and Metropolitan Life
Insurance Company (the "Institutional Investor") held approximately 70.9%
of the aggregate Class A limited partnership interests in Properties. Class
A limited partners are entitled to a cumulative 10.25% annual return on
their adjusted capital contributions; an annual distribution of 45% of
certain funds of Properties available after payment of certain expenses,
interest on indebtedness, and the fixed current return to the Class A
limited partners; 45% of other distributions (other than Properties' final
distribution), including distributions of the net proceeds realized by
Properties from any sale of its properties after payment of a pro rata
share of returns of capital; and allocations for income tax purposes of
various items arising from the operation of Properties.
Mr. Green also holds approximately 5% of the limited partnership
interests in FMGP Associates, an Oregon limited partnership, and the
general partner of Properties. KKR Associates holds 66% of the limited
partnership interests in FMGP Associates and the general partner of FMGP
Associates, FMGP Incorporated, holds 1% of the partnership interests in
FMGP Associates. Messrs. Raether, Michelson, and Fox are three of the eight
general partners, and Mr. Kohlberg is a limited partner of KKR Associates.
Messrs. Raether, Michelson, and Kohlberg are shareholders of FMGP
Incorporated, a Delaware corporation. See "Voting Securities and Principal
Shareholders." As general partner of Properties, FMGP Associates is
entitled to an annual distribution of 15% of certain funds of Properties
available after payment of certain expenses, interest on indebtedness, and
the fixed current return to the Class A limited partners; 15% of other
distributions (other than Properties' final distribution), including
distributions of the net proceeds realized by Properties from any sale of
its properties after payment of a pro rata share of returns of capital; and
allocations for income tax purposes of various items arising from the
operations of Properties. KKR Associates is entitled to 99% and FMGP
Incorporated is entitled to 1% of an annual priority allocation and special
distribution from Properties, which for calendar year 1995 was $402,628,
and which will remain at that level for subsequent years.
12
<PAGE>
The following table sets forth the approximate cash distributions
and allocations of taxable income and losses (including priority
allocations) from Properties to its partners for the 1995 partnership year
(including certain amounts paid after year-end relating to such year):
Calendar Year 1995
------------------
Cash distributions:
Total $14,402,600
Mr. Cyril Green 178,000
KKR Associates and KKR 1,260,700
The Institutional Investor 5,843,800
Allocation of taxable income:
Total $19,124,900
Mr. Cyril Green 124,300
KKR Associates and KKR 888,300
The Institutional Investor 9,273,243
Net lease payments made by the Company to Properties for the year
ended February 3, 1996 were approximately $15,607,000. Leases between the
Company and Properties require the Company to pay all property taxes and
certain other amounts relating to the right to use the properties leased to
the Company. Such property taxes paid by the Company during the year ended
February 3, 1996 amounted to approximately $2,017,000.
The Company leased two properties directly from two companies
under common control with Properties for the year ended February 3, 1996.
Rents and property taxes paid under these leases for the year totaled
approximately $2,333,000 and $247,000, respectively.
The Institutional Investor owns 36 properties which are leased to
the Company. The Institutional Investor is an investor in FMI Associates
and a limited partner of Properties and purchased these 36 properties from
Properties in 1986 and 1987. At March 1, 1996 the Institutional Investor
held a 29.1% Class 1 limited partnership interest and all of the Class 2
partnership interest in FMI Associates. The FMI Associates partnership
agreement provides generally that (i) each Class 1 limited partner is
entitled to a pro rata distribution upon the sale of the Company's Common
Stock by FMI Associates determined on the basis of the shares sold plus
approximately 85% of the gain realized on the sale of the shares and (ii)
the Class 2 limited partner, upon the sale of the FMI Associates option or
option shares, is entitled to a distribution in an amount equal to the
basis of the option or option shares plus 85% of the gain realized on the
sale of the option or option shares. See "Voting Securities and Principal
Shareholders." Under the leases for the 36 properties purchased from
Properties in 1986 and 1987, the Company paid approximately $46,070,000
during the year ended February 3, 1996. Property taxes paid by the Company
under these leases during this period were approximately $5,512,000.
During 1995, the Company agreed with Properties and companies
under common control with Properties to terminate leases, expiring in years
ranging from 2012 to 2015, on three retail store locations in the Portland
Metropolitan area and to purchase the fee interests in such locations. The
purchase price for the properties aggregated approximately $24,600,000 and
was determined on the basis of discounted rental obligations for the
remaining terms of the leases. The amount of the purchase price was
negotiated by Mr. Miller and approved by the disinterested members of the
Board of Directors. The acquisition was consummated in May 1995. The
Company has the right to acquire seven additional properties from
Properties and an affiliated company under certain circumstances.
13
<PAGE>
In December 1981, the Company and Properties agreed to guarantee
certain of the other's liabilities assumed from the predecessor of the
Company. This guarantee remains outstanding; however, to date the Company
has not been required to make payment on any obligations assumed by
Properties. The transactions discussed herein were on terms believed by the
Board of Directors of the Company to be fair to the Company and no less
favorable than the Company could have obtained with an unrelated party. The
renegotiation, from time to time, of leases by the Company is in the
ordinary course of the Company's business.
INDEPENDENT AUDITORS
Deloitte & Touche LLP audited the Company's financial statements
for the year ended February 3, 1996. Representatives of Deloitte & Touche
LLP will be present at the annual meeting, will have the opportunity to
make a statement if they so desire and will be available to respond to
appropriate questions. The Board of Directors has selected Deloitte &
Touche LLP as auditors for the current fiscal year.
DISCRETIONARY AUTHORITY
While the Notice of Annual Meeting of Shareholders provides for
transaction of such other business as may properly come before the meeting,
the Board of Directors has no knowledge of any matters to be presented at
the meeting other than those referred to herein. However, the enclosed
proxy gives discretionary authority in the event that any other matters
should be presented.
SHAREHOLDER PROPOSALS
Any shareholder proposals to be considered for inclusion in proxy
material for the Company's June 1997 annual meeting must be received at the
principal executive offices of the Company no later than January 16, 1997.
By Order of the Board of Directors
Roger A. Cooke
Senior Vice President, General Counsel
and Secretary
May 3, 1996
14
<PAGE>
FRED MEYER, INC.
Annual Meeting, June 27, 1996
Proxy/Voting Instruction Card
I appoint Robert G. Miller, Kenneth Thrasher and Roger A. Cooke,
individually and together, proxies with full power of substitution, to vote
all of my Fred Meyer, Inc. common stock at the Annual Meeting of
Shareholders to be held at the Fred Meyer Corporate Conference Center, 3500
S.E. 22nd Avenue, Portland, Oregon, on Thursday, June 27, 1996 at 1:00 p.m.
and at any adjournment thereof; with all powers that I would possess if
personally present.
YOUR VOTE IS IMPORTANT. PLEASE MARK THIS PROXY AS INDICATED ON THE
REVERSE SIDE TO VOTE ON ANY ITEM. IF YOU WISH TO VOTE IN ACCORDANCE WITH
THE BOARD OF DIRECTORS' RECOMMENDATIONS, PLEASE SIGN THE REVERSE SIDE; NO
BOXES NEED TO BE CHECKED.
Fold and Detach Here
<PAGE>
- -----------------------------------------------------------------------------
PROXY/VOTING INSTRUCTION CARD / X / Please mark
your votes
as indicated
in this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1
Item 1--Election of Directors
NOMINEES: James J. Curran, Saul A. Fox, A.M. Gleason,
Jerome Kohlberg, Jr., Roger S. Meier, Michael W. Michelson,
Robert G. Miller and Paul E. Raether
FOR WITHHELD FOR ALL
/ / / /
To withhold authority to vote for any individual, draw a line through that
nominee's name in the list provided.
Item 2--In their discretion, upon any and all such other matters
as may come before this meeting or any adjournment
thereof.
COMMENTS/ADDRESS CHANGE / /
Please mark this box if you
have written comments/address
change below
Signature(s) _________________________________________ Date _______________
Please sign exactly as name(s) appear(s) hereon. If acting as an executor,
administrator, trustee, guardian, etc., you should so indicate in signing.
If the shareholder is a corporation, please sign the full corporate name, by
duly authorized officer. If shares are held jointly, each shareholder
named should sign. Date and promptly return this card in the envelope
provided.
Fold and Detach Here
