SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
Amendment No. 1
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended February 1, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file No. 1-11274
FRED MEYER, INC.
(Exact name of registrant as specified in its charter)
Delaware 93-0798201
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
3800 SE 22nd Avenue
Portland, Oregon 97202
(Address of principal executive offices) (Zip Code)
(503) 232-8844
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of class on which registered
Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /x/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part II of this Form 10-K or any amendment to this
Form 10-K. / /
Aggregate market value of Common stock held by nonaffiliates of the
Registrant at March 1, 1997: $1,025,998,079
Number of shares of Common Stock outstanding at March 1, 1997: 26,298,768
<PAGE>
TABLE OF CONTENTS
Item of Form 10-K/A Page
- ------------------- ----
PART III
Item 10. Directors and Executive Officers of the Registrant 3
Item 11. Executive Compensation 6
Item 12. Security Ownership of Certain Beneficial
Owners and Management 13
Item 13. Certain Relationships and Related Transactions 14
SIGNATURE 16
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PART III
Item 10. Directors and Executive Officers of the Registrant
Board of Directors
The directors of the Company are elected at the Annual Meeting of the
Company to serve for one year and until their successors are elected. The
directors of the Company 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, 1997(1) Percent
------------- -------------------- --- ------------------- -----------
<S> <C> <C> <C> <C>
Vivian A. Bull President, Linfield 62 2,696(2) *
(1996) College
James J. Curran Retired Chairman of the 57 3,898(2)(3) *
(1996) Board and Chief
Executive Officer of First
Interstate Bank,
Northwest Region
A. M. Gleason Retired Chief Executive 66 26,679(2)(4) *
(1992) Officer of PacifiCorp
David J. Johnson Chairman of the Board 50 2,724(2) *
(1996) and Chief Executive
Officer, KinderCare
Learning Centers, Inc.
Roger S. Meier President, 71 22,279(2)(5) *
(1985) AMCO, Inc.
Robert G. Miller Chairman of the Board 52 433,292(6) 1.6%
(1991) and Chief Executive
Officer of the Company
Steven R. Rogel President and Chief 54 2,696(2) *
(1996) Executive Officer,
Willamette Industries, Inc.
* Less than 1%.
(1) Shares held directly with sole voting and sole investment power unless
otherwise indicated. See Item 12 below.
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(2) Includes shares subject to the Non-Employee Directors Stock
Compensation Plan as follows: 2,696; 2,898; 1,173; 2,724; 1,173 and
2,696 for Dr. Bull and Messrs. Curran, Gleason, Johnson, Meier and
Rogel, respectively.
(3) Includes 1,000 shares held in a family trust.
(4) Includes 1,300 shares owned by Mr. Gleason's spouse as to which
beneficial ownership is disclaimed.
(5) Includes 7,000 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.
(6) Includes 1,625 shares owned by Mr. Miller's son. Beneficial ownership
is disclaimed as to such shares.
</TABLE>
Dr. Bull has been President of Linfield College since August 1992.
Prior to that time she was in the Department of Economics at Drew University
from 1960 to 1992. Dr. Bull is a former Director at Chemical Bank in New Jersey.
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. Gleason retired from PacifiCorp, a diversified public utility in
May 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. and
Comdial Corporation and President of the Port of Portland.
Mr. Johnson became Chairman of the Board, Chief Executive Officer and
a director of KinderCare Learning Centers in February 1997. From 1991 until
February 1997, he was Chairman of the Board and Chief Executive Officer of Red
Lion Hotels.
Mr. Meier has been President and Chief Executive Officer of AMCO,
Inc., a privately owned investment enterprise, for more than twenty years.
During that time Mr. Meier was Chairman of the State of Oregon Investment
Council, a member of the Board of Directors of Red Lion Inns, Ltd. and a
Director of Key Bank of Oregon. He is trustee of Acorn Fund, Acorn International
and Acorn USA. He is also an Advisory Board Member of Key Bank of Oregon and
Chairman of the Investment Committee for Legacy Health Systems.
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
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director of PacifiCorp, Pathmark Stores, Inc. and Supermarkets General
Holdings Corp.
Mr. Rogel has been Chief Executive Officer and a director of
Willamette Industries, Inc. since October 1995 and President since 1991. He
served as Chief Operating Officer of Willamette Industries, Inc. until October
1995 and, prior to that time, as an executive and group vice president for more
than five years.
Section 16(a) Beneficial Ownership Reporting Compliance
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
1, 1997 all Section 16(a) filing requirements applicable to its officers,
directors and greater than ten-percent beneficial owners were complied with,
except for the following instances: Wayne W. Abbott and Sammy K. Duncan,
officers of the Company, each filed a late report of initial statement of
beneficial ownership on March 7, 1996; James J. Curran, a director of the
Company, and Joseph Intile, an officer of the Company, each filed a late report
of initial statement of beneficial ownership on July 17, 1996; and David R.
Jessick, an officer of the Company, filed a late report of initial statement of
beneficial ownership on February 5, 1997.
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<PAGE>
Item 11. 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
Other Restricted Underlying Incentive
Name and Annual Stock Options Plan All Other
Principal Position Year Salary(1) Bonus(1) Compensation Awards(2) (# of Shares) Payouts Compensation(3)
- ------------------ ---- --------- -------- ------------ ---------- ------------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert G. Miller 1996 $581,923 $196,329 -- $ 49,046 75,000 $ -- $ 59,593
Chairman of the 1995 597,115 86,250 -- -- -- 8,072 56,026
Board and Chief 1994 555,481 -- -- -- -- -- 63,831
Executive Officer
Curt A. Lerew, III 1996 392,923 115,054 -- -- 125,000 -- 46,025
Former President 1995 280,705 24,438 -- -- 25,000 3,736 40,682
1994 249,327 6,000 -- -- -- -- 41,898
Mary F. Sammons 1996 287,308 56,422 -- 14,066 -- -- 41,398
Senior Vice 1995 281,538 24,438 -- -- 25,000 7,334 39,905
President, 1994 251,635 -- -- -- -- -- 40,497
Apparel and Home
Electronics Group
Edward A. Dayoob 1996 210,769 49,424 -- 424,834 -- -- 38,271
Senior Vice 1995 207,115 17,965 -- -- 10,000 15,253 37,513
President, 1994 190,962 47,414 -- -- -- -- 38,382
President, Fred
Meyer
Jewelers, Inc.
Ronald J. McEvoy 1996 238,231 -- -- -- 10,000 -- 38,908
Former Senior Vice 1995 237,692 19,242 -- -- 10,000 3,736 37,835
President and Chief 1994 219,538 -- -- -- -- -- 39,486
Information Officer
(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
$9,500 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) Represents restricted stock grants made to Mr. Miller, Ms. Sammons and
Mr. Dayoob in the amounts of 1,189, 341 and 10,299 shares,
respectively. The amount included in the table represents the market
value of the shares at March 31, 1997.
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<PAGE>
(3) Amounts shown for the fiscal year 1996 consist of: (i) Company
contributions of $28,523, $17,252, $13,320, $9,749 and $10,986 to the
above-named executive officers, respectively, under the Profit Sharing
Plan and Excess Deferral Plan, (ii) $6,070, $3,773, $3,078, $3,522 and
$2,922 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.
</TABLE>
Pursuant to an agreement with Mr. Lerew, who resigned as President of the
Company effective April 2, 1997, Mr. Lerew will receive (i) eighteen months'
salary continuation at his current base pay rate and continued health insurance
during such period, (ii) a cash payment of $23,011, which is 20% of his 1996
bonus plan payment that would otherwise have been paid to the Capital Bonus
Plan, (iii) forgiveness of a loan from the Company in the amount of $100,000
which funds had been made available to Mr. Lerew for the purchase of Company
Common Stock and (iv), if requested by Mr. Lerew, out-placement assistance at a
cost not to exceed $20,000. In addition, the Company has accelerated the vesting
of options previously awarded to Mr. Lerew for 50,000 shares of Company Common
Stock.
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 1996 pursuant to the
Company's 1990 Stock Incentive Plan. No SARs were granted during 1996.
<TABLE>
<CAPTION>
Potential Realizable Value
Number of Percentage of at Assumed Annual Rates
Securities Total Options of Stock Price
Underlying Granted to Exercise Appreciation
Options Employees Price Expiration for Option Term(2)
Name Granted(1) in Fiscal Year Per Share Date 5% 10%
---- ---------- -------------- --------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Robert G. Miller 75,000 4.61% $28.00 July 2006 $1,320,750 $3,346,500
Curt A. Lerew, III 100,000 6.14 22.25 February 1,399,000 3,536,000
2006
25,000 1.54 28.00 July 2006 440,250 1,115,500
Mary F. Sammons -- -- -- -- -- --
Edward A. Dayoob -- -- -- -- -- --
Ronald J. McEvoy 10,000 0.61 28.00 July 2006 176,100 446,200
(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 20% per year on the first five anniversaries of the
original grant date.
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<PAGE>
If the employment of any of the 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) The dollar amounts under these columns are the result of calculations
of 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.
</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 1996, 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 1, 1997, 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 1, 1997 at February 1, 1997(2)
Shares Acquired Value -------------------------- --------------------------
Name on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
- ------------------ --------------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert G. Miller 4,597 $ 22,410 295,403 75,000 $3,803,314 $ 496,875
Curt A. Lerew, III -- -- 105,000 145,000 1,206,250 1,578,125
Mary F. Sammons 35,641 699,062 49,155 20,000 1,000,106 175,000
Edward A. Dayoob 5,859 21,239 33,442 8,000 562,139 70,000
Ronald J. McEvoy -- -- 52,000 18,000 898,750 136,250
(1) Aggregate market value on the exercise date of the shares covered by
the option, less the aggregate exercise price.
(2) Calculated based on the January 31, 1997 stock price of $34.625.
</TABLE>
Executive Officer Loans
During 1995, the Company made interest-free loans to executive
officers of the Company to enable the executive officers to purchase Common
Stock of the Company. The amount of each loan was a maximum of $100,000, and the
loans are payable in a lump sum in June 1998, or upon earlier termination of
employment or sale of stock. At April 22, 1997 loans were outstanding to the
following executive officers under this program: Wayne W.
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<PAGE>
Abbott, Roger A. Cooke, Michael H. Don, Sammy K. Duncan, Keith W. Lovett, Cheryl
D. Perrin, John A. Velke and Scott L. Wippel.
Retirement Benefits
The Company has adopted a nonqualified Supplemental Income Plan to
provide supplemental retirement and death benefits to key 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 and Dayoob
and Ms. Sammons upon retirement at normal retirement age would be $60,400,
$21,300 and $100,600, respectively.
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.
Directors Compensation
Directors who are not employees of the Company receive an annual fee
of $15,000 and participate in the Non-Employee Directors Stock Compensation
Plan. Under the Non-Employee Directors Stock Compensation Plan, participants are
awarded $87,500 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 $17,500 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
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<PAGE>
with respect to the shares. Directors who are not employees of the Company also
receive a fee of $1,000 per board or committee meeting attended.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors (the "Committee")
is composed of four 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 officers 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 1996 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
two years ago 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.
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
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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 1996, 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. Eighty percent of the annual bonus
payable to each executive officer at bonus plan targeted pretax income, net
inventory, operational income and/or departmental expense was paid in cash. The
remaining twenty percent was withheld pursuant to the Company's Capital Bonus
Plan and paid in the form of restricted shares of Company Common Stock. The
shares were issued based on the closing price of the Company's Common Stock on
March 31, 1997 and vest in an equal number of shares over three years (i.e.,
1996's restricted shares vest on March 31, 1998; March 31, 1999 and March 31,
2000), subject to the officer being an employee at the time of vesting. The
shares also vest on the retirement, death or disability of the officer.
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
or 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, 1994 and 1996. The Chief Executive's current annual base salary is
$590,000. The factors considered by the Committee in approving the increases
were (1) the achievement of the goals that the
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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
James J. Curran
A. M. Gleason
David J. Johnson
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Item 12. Security Ownership of Certain Beneficial Owners and Management
The Common Stock is the only authorized voting security of the Company
currently outstanding. The Common Stock is 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, 1997, 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 current and former executive officers of the Company
and by all executive officers and directors as a group:
<TABLE>
<CAPTION>
Number of Approximate
Name Shares(1) Percent
- ---- ------------ -----------
<S> <C> <C>
Metropolitan Life Insurance Company 3,645,667(2) 13.9%
1 Madison Avenue
New York, New York 10010
Cramer Rosenthal McGlynn, Inc. 1,897,350(3) 7.2
707 Westchester Avenue
White Plains, New York 10604
Robert G. Miller 433,292(4)(5) 1.6
Curt Lerew, III 139,300(4)(6) *
Mary F. Sammons 96,969(4)(7) *
Edward A. Dayoob 53,401(4) *
Ronald J. McEvoy 4,400(8) *
21 Current Executive Officers and Directors as a group 1,026,715(9) 3.8
* Less than 1%.
(1) Shares held directly with sole voting and sole investment power unless
otherwise indicated.
(2) Based upon information provided by the shareholder in a Schedule 13G,
dated February 6, 1997, filed with the Securities and Exchange
Commission.
(3) Based upon information provided by the shareholder in a Schedule 13G,
dated April 14, 1997, filed with the Securities and Exchange
Commission, shares are held directly with shared voting and shared
investment power.
(4) Includes 295,403, 125,000, 33,442 and 49,155 shares of Messrs. Miller,
Lerew and Dayoob and Ms. Sammons, respectively, subject to options
that are currently exercisable or become exercisable within 60 days of
the date of this table.
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(5) Includes 1,625 shares owned by Mr. Miller's son. Beneficial ownership
is disclaimed as to such shares.
(6) Mr. Lerew resigned as an officer of the Company on April 2, 1997.
(7) Includes 1,161 shares held by Ms. Sammons' spouse and son for which
beneficial ownership is disclaimed.
(8) Number of shares owned on February 4, 1997, the date Mr. McEvoy
resigned as an officer of the Company.
(9) Includes 620,643 shares subject to options that are currently
exercisable or become exercisable within 60 days of the date of this
table. Includes 18,886 shares for which beneficial ownership is
disclaimed.
</TABLE>
See Item 10 of this Annual Report on Form 10-K for information
relating to stock ownership by directors of the Company.
Item 13. Certain Relationships and Related Transactions
At February 1, 1997, the Company leased or subleased 10 of its
locations (land, buildings, and improvements) from Real Estate Properties
Limited Partnership, an Oregon limited partnership ("Properties"). At February
1, 1997, Metropolitan Life Insurance Company, (the "Institutional Investor")
which holds approximately 14% of the outstanding stock of the Company, held
approximately 71% 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
return of capital; and allocations for income tax purposes of various items
arising from the operation of Properties. Properties made cash distributions of
approximately $23,489,500 and allocations of taxable income and losses of
approximately $17,086,000 to the Institutional Investor for the 1996 partnership
year (including amounts paid after year-end relating to such year).
Net lease payments made by the Company to Properties for the year
ended February 1, 1997 were approximately $13,379,000. 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 1, 1997
amounted to approximately $1,816,000. The Company leased two properties directly
from two companies under common control with Properties for the year ended
February 1, 1997. Rents and property taxes paid under these leases for the year
totaled approximately $2,313,000 and $259,000, respectively.
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At February 1, 1997, the Institutional Investor owned 36 properties
which were leased to the Company. The Institutional Investor purchased these 36
properties from Properties in 1986 and 1987. During the year ended February 1,
1997, the Company paid approximately $46,070,000 in lease payments and
approximately $5,528,000 in property taxes under these leases.
During the year ended February 1, 1997, the Company entered into
purchase agreements with Properties for the acquisition of seven properties
leased to the Company by Properties. The acquisitions were completed using a
bank to acquire the properties and lease them to the Company pursuant to a
synthetic lease financing vehicle. In addition, the Company and Properties
terminated the lease by the Company of one property and extended lease terms and
set modified rent at other properties leased by Properties to the Company.
On February 4, 1997, the Company and the Institutional Investor
entered into purchase agreements covering six retail store locations and a
distribution center, under which the fee interests in such locations were sold
to the Company (or its bank designee in connection with sale and leaseback
financing). The purchase price for the properties aggregated approximately
$112,000,000 and was determined on the basis of discounted rental obligations
for the remaining terms of the leases. In connection with the transactions,
lease renewal options were exercised and rental amounts were amended for the
remaining 29 retail locations and the Company acquired options to buy land
relating to 18 locations leased from the Institutional Investor. The amount of
the purchase price and the other terms of this transaction were negotiated on
behalf of the Company by Mr. Miller and approved by the disinterested members of
the Board of Directors.
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.
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: May 20, 1997 FRED MEYER, INC.
By: DAVID R. JESSICK
-------------------------------------
David R. Jessick
Chief Financial Officer and
Senior Vice President
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