<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) Of The Securities Exchange Act of 1934
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
SAFEWAY INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee 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> 2
SAFEWAY
SAFEWAY INC.
5918 STONERIDGE MALL ROAD
PLEASANTON, CA 94588-3229
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Safeway
Inc., a Delaware corporation (the "Company"), will be held at the Sheraton
Portland Airport Hotel, 8235 N.E. Airport Way, Portland, Oregon on Tuesday, May
13, 1997 at 10:30 a.m. for the following purposes:
1. To elect three directors of the Company to serve for a term of three
years and until their successors are elected and have qualified;
2. To consider and vote upon one stockholder proposal requesting the Board
of Directors to take the necessary steps to provide for cumulative
voting, which proposal is opposed by the Board of Directors;
3. To ratify the appointment of Deloitte & Touche LLP as independent
auditors for fiscal year 1997; and
4. To transact such other business as may properly come before the meeting
and any adjournments thereof.
Only stockholders of record at the close of business on March 18, 1997 will
be entitled to notice of and to vote at the Annual Meeting and at any and all
adjournments thereof. A complete list of stockholders entitled to vote at the
Annual Meeting shall be open to the examination of any stockholder, for any
purpose germane to the Annual Meeting, during ordinary business hours for at
least 10 days prior to the Annual Meeting, at the Company's hiring office
located at 5432 S.E. 82nd, Portland, Oregon.
Whether or not you plan to attend the meeting in person, in order to ensure
your representation, please complete, sign, date and promptly return the
enclosed proxy card. A return envelope, which requires no postage if mailed in
the United States, has been provided for your use. If you attend the Annual
Meeting and inform the Secretary of the Company in writing that you wish to vote
your shares in person, your proxy will not be used.
BY ORDER OF THE BOARD OF DIRECTORS,
MICHAEL C. ROSS
Secretary
Pleasanton, California
Dated: March 24, 1997
<PAGE> 3
SAFEWAY INC.
5918 STONERIDGE MALL ROAD
PLEASANTON, CA 94588-3229
PROXY STATEMENT
This Proxy Statement is furnished to the stockholders on behalf of the
Board of Directors of Safeway Inc., a Delaware corporation ("Safeway" or the
"Company"), in connection with the solicitation by the Board of Directors of
proxies for use at the Annual Meeting of Stockholders of the Company, to be held
at the Sheraton Portland Airport Hotel, 8235 N.E. Airport Way, Portland, Oregon
on Tuesday, May 13, 1997, at 10:30 a.m. and at any and all adjournments thereof.
It is anticipated that the mailing to stockholders of this Proxy Statement and
the enclosed proxy will commence on March 28, 1997.
Only stockholders of record at the close of business on March 18, 1997 will
be entitled to vote at the meeting. At the close of business on March 18, 1997
there were outstanding 222,140,287 shares of the Common Stock. A majority of the
outstanding shares of Common Stock will constitute a quorum for the transaction
of business. Each share of Common Stock not in the treasury is entitled to one
vote. There is no provision in the Company's Restated Certificate of
Incorporation for cumulative voting.
If shares are not voted in person, they cannot be voted on your behalf
unless a signed proxy is given. Even if you expect to attend the Annual Meeting
in person, in order to ensure your representation, please complete, sign and
date the enclosed proxy and mail it promptly in the enclosed envelope. A
stockholder giving a proxy pursuant to the present solicitation may revoke it at
any time before it is exercised by giving a subsequent proxy or by delivering to
the Secretary of the Company a written notice of revocation prior to the voting
of the proxy at the Annual Meeting. If you attend the Annual Meeting and inform
the Secretary of the Company in writing that you wish to vote your shares in
person, your proxy will not be used. If you receive two or more proxy cards,
please complete, sign, date and return each to complete your representation. All
shares represented by each properly executed and unrevoked proxy, in the
accompanying form, will be voted unless the proxy is mutilated or otherwise
received in such form or at such time as to render it unusable.
Votes cast at the Annual Meeting will be tabulated by the persons appointed
by the Company to act as inspectors of election for the Annual Meeting. Shares
represented by proxies that reflect abstentions or "broker non-votes" (i.e.,
shares held by a broker or nominee which are represented at the meeting, but
with respect to which such broker or nominee is not empowered to vote on a
particular proposal) will be counted as shares that are present and entitled to
vote for purposes of determining the presence of a quorum. Directors will be
elected by a plurality of the shares voting, which means that abstentions and
broker non-votes will not affect the election of the candidates receiving the
plurality of votes. In accordance with the Company's Bylaws, for purposes of
determining the outcome of any other proposal as to which proxies reflect
abstentions or broker non-votes, shares represented by such proxies will be
treated as not present and not entitled to vote with respect to that proposal.
The cost of this solicitation will be borne by the Company. Solicitation
will be made by mail, by telegraph and telephone, and personally by a few
officers and regular employees of the Company who will not receive additional
compensation for solicitation. Brokers, nominees and fiduciaries will be
reimbursed for out-of-pocket expenses incurred in obtaining proxies or
authorizations from the beneficial owners of the Common Stock.
The purpose of the meeting and the matters to be acted upon are set forth
in the foregoing attached Notice of Annual Meeting of Stockholders. As of the
date of this Proxy Statement, management knows of no other business which will
be presented for consideration at the meeting. However, if any such other
business shall properly come before the meeting, votes will be cast pursuant to
said proxies in respect of any such other business in accordance with the best
judgment of the persons acting under said proxies.
<PAGE> 4
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation and Bylaws provide that
the Board of Directors is divided into three classes. Each year the stockholders
are asked to elect the members of a class for a term of three years or less,
depending on the class to which the Board has assigned a director not previously
elected by the stockholders. If a quorum is present in person or by proxy, the
affirmative vote of a plurality of the voting power of the shares represented at
the meeting and entitled to vote will be sufficient to elect directors.
It is intended that the shares represented by proxies, in the accompanying
form, will be voted for the election of the three nominees named below unless
authority to so vote is withheld. All of the nominees have consented to being
named herein and to serve if elected. If any of them should become unavailable
prior to the Annual Meeting, the proxy will be voted for a substitute nominee or
nominees designated by the Board of Directors, or the number of directors may be
reduced accordingly.
The nominees named below are currently directors of the Company and each
was elected by the stockholders. The Board of Directors recommends the three
nominees for election as directors. The three directors will hold office for a
three-year term ending at the Annual Meeting in 2000 and until their successors
are elected and have qualified.
The following information, which has been provided by the directors, sets
forth for each of the nominees for election to the Board of Directors and for
each director whose term continues, his name, age and principal occupation or
employment during the past five years, the name of the corporation or other
organization, if any, in which such occupation or employment is or was carried
on and the period during which such person has served as a Safeway director.
1997 NOMINEES
JAMES H. GREENE, JR., age 46, has been a member of the Board of Directors
since December 17, 1987. Mr. Greene is a General Partner of KKR Associates, L.P.
("KKR Associates") and was a General Partner of Kohlberg Kravis Roberts & Co.
("KKR") from January 1, 1993 until January 1, 1996 when he became a member of
the limited liability company which serves as the general partner of KKR, and he
has been an executive of KKR during the last five years. Mr. Greene is also a
director of Bruno's, Inc., Owens-Illinois, Inc., Owens-Illinois Group, Inc.,
Union Texas Petroleum Holdings, Inc. and The Vons Companies, Inc. ("Vons").
PAUL HAZEN, age 55, has been a member of the Board of Directors since July
18, 1990. Mr. Hazen has served as President and Chief Operating Officer and
director of Wells Fargo & Co. and its principal subsidiary, Wells Fargo Bank,
National Association, since 1984 and was elected Chairman and Chief Executive
Officer in January 1995. Mr. Hazen is also a director of Phelps Dodge
Corporation and AirTouch Communications, Inc.
HENRY R. KRAVIS, age 53, has been a member of the Board of Directors since
November 26, 1986. Mr. Kravis is a Founding Partner of KKR and KKR Associates.
Effective January 1, 1996, he became a managing member of the limited liability
company which serves as the general partner of KKR. Mr. Kravis is also a
director of AutoZone, Inc., Borden, Inc., Bruno's, Inc., Flagstar Companies,
Inc., Flagstar Corporation, The Gillette Company, IDEX Corporation, K-III
Communications Corporation., Merit Behavioral Care Corporation, Newsquest
Capital, PLC, Owens-Illinois, Inc., Owens-Illinois Group, Inc., Sotheby's
Holdings, Inc., Union Texas Petroleum Holdings, Inc. and World Color Press, Inc.
CONTINUING DIRECTORS
STEVEN A. BURD, age 47, has been Chief Executive Officer of the Company
since April 30, 1993 and President of the Company since October 26, 1992. He was
first elected to the Board of Directors on September 7, 1993. Previously, he was
the sole owner of Burd & Associates, a management consulting firm. Mr. Burd is a
director of Vons.
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<PAGE> 5
SAM GINN, age 59, has been a member of the Board of Directors since January
15, 1991. Mr. Ginn has served as Chairman of the Board and Chief Executive
Officer of AirTouch Communications, Inc., formerly PacTel Corporation, since
December 1993. From 1988 until that time, Mr. Ginn served as Chairman of the
Board, President and Chief Executive Officer of Pacific Telesis Group. Mr. Ginn
is also a director of Chevron Corporation, Hewlett-Packard Company and
Transamerica Corporation.
ROBERT I. MACDONNELL, age 59, has been a member of the Board of Directors
since November 26, 1986. Mr. MacDonnell is a General Partner of KKR Associates
and was a General Partner of KKR until January 1, 1996 when he became a member
of the limited liability company which serves as the general partner of KKR. Mr.
MacDonnell is also a director of AutoZone, Inc., Owens-Illinois, Inc.,
Owens-Illinois Group, Inc. and Vons.
PETER A. MAGOWAN, age 54, has served as Chairman of the Board of Directors
since November 26, 1986. He served as Chief Executive Officer of the Company
from November 26, 1986 to April 30, 1993 and served as President of the Company
from March 27, 1988 to October 26, 1992. From December 1979 to November 26,
1986, Mr. Magowan served as Chairman of the Board and Chief Executive Officer of
the Company's predecessor, Safeway Stores, Incorporated, a Maryland corporation.
Mr. Magowan is also a director of Caterpillar, Inc., Chrysler Corporation and
Vons. Mr. Magowan is Managing General Partner and President of the San Francisco
Giants.
GEORGE R. ROBERTS, age 53, has been a member of the Board of Directors
since July 1986. Mr. Roberts is a Founding Partner of KKR and KKR Associates.
Effective January 1, 1996, he became a managing member of the limited liability
company which serves as the general partner of KKR. Mr. Roberts is also a
director of AutoZone, Inc., Borden, Inc., Bruno's, Inc., Flagstar Companies,
Inc., Flagstar Corporation, IDEX Corporation, K-III Communications Corporation.,
Merit Behavioral Care Corporation, Newquest Capital, PLC, Owens-Illinois, Inc.,
Owens-Illinois Group, Inc., Union Texas Petroleum Holdings, Inc. and World Color
Press, Inc.
MICHAEL T. TOKARZ, age 47, has been a member of the Board of Directors
since December 17, 1987. Mr. Tokarz was a General Partner of KKR from January 1,
1993 until January 1, 1996 when he became a member of the limited liability
company which serves as the general partner of KKR, and he has been an executive
of KKR during the last five years. Mr. Tokarz is also a director of Flagstar
Companies, Inc., Flagstar Corporation, IDEX Corporation, K-III Communications
Corporation and Walter Industries, Inc.
Mr. Roberts and Mr. Kravis are first cousins. Mr. MacDonnell and Mr.
Roberts are brothers-in-law.
Messrs. Burd, Ginn and MacDonnell are in the class of directors whose term
will expire in 1998.
Messrs. Magowan, Roberts and Tokarz are in the class of directors whose
term will expire in 1999.
Under Securities Purchase Agreements dated August 11, 1986, as amended
December 1, 1987, each of two partnerships which are the principal stockholders
of Safeway and which are affiliated with KKR has the right, so long as either
owns any shares of the Common Stock, to elect at least one director to Safeway's
Board of Directors in order to substantially participate in and substantially
influence the conduct of the management of Safeway and its business. See
"Beneficial Ownership of Securities."
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<PAGE> 6
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth certain information regarding the beneficial
ownership of Safeway's outstanding Common Stock as of March 18, 1997 by (i) each
of Safeway's directors and nominees who is a stockholder, (ii) the Company's
Chief Executive Officer, (iii) each of the Company's four other most highly
compensated executive officers who were serving as executive officers at the end
of fiscal 1996, (iv) all executive officers and directors of Safeway as a group
and (v) each person believed by Safeway to own beneficially more than 5% of its
outstanding shares of Common Stock. Except as indicated by the notes to the
following table, the holders listed below have sole voting power and investment
power over the shares beneficially held by them. The address of KKR Associates,
SSI Equity Associates, L.P. and SSI Partners, L.P. is 9 West 57th Street, New
York, New York 10019. See "Certain Relationships and Transactions" for certain
information concerning the Company's pending acquisition of Vons and related
transactions in the Common Stock involving KKR Associates, SSI Equity
Associates, L.P. and certain of the directors named below.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENTAGE OF
NAME OF BENEFICIAL OWNER OWNED(1) CLASS(1)
--------------------------------------------- ---------------- -------------
<S> <C> <C>
KKR Associates, L.P.(2)...................... 109,232,263 49.2%
James H. Greene, Jr.(3).................... 35,000 *
Henry R. Kravis(4)......................... --
Robert I. MacDonnell(5).................... --
George R. Roberts(6)....................... --
Michael T. Tokarz.......................... 10,000 *
SSI Equity Associates, L.P.(7)............... 23,405,953 9.5
Sam Ginn(8).................................. 85,412 *
Paul Hazen(8)................................ 85,412 *
Peter A. Magowan(9).......................... 2,253,796 1.0
Steven A. Burd(9)............................ 1,444,429 *
Kenneth W. Oder(9)(10)....................... 921,072 *
Julian C. Day(9)............................. 281,178 *
E. Richard Jones(9)(11)...................... 770,926 *
Michael C. Ross(9)........................... 311,850 *
All executive officers and directors as a
group (16 persons, excluding Messrs.
Greene, Kravis, Roberts, MacDonnell and
Tokarz)(9)................................. 7,280,305 3.2
FMR Corp(12)................................. 12,946,400 5.8
</TABLE>
- ---------------
* Less than 1%
(1) For purposes of this table, a person or a group of persons is deemed to
have "beneficial ownership" as of a given date of any shares which such
person has the right to acquire within 60 days after such date. For
purposes of computing the percentage of outstanding shares held by each
person or group of persons named above on a given date, any shares which
such person or persons has the right to acquire within 60 days after such
date are deemed to be outstanding, but are not deemed to be outstanding for
the purpose of computing the percentage ownership of any other person.
(2) The shares are owned of record by SSI Associates, L.P. and KKR Partners II,
L.P., the sole general partner of each of which is KKR Associates, a New
York limited partnership. KKR Associates, in its capacity as general
partner, may be deemed to beneficially own such shares. Messrs. Greene,
Kravis, MacDonnell, Roberts, Tokarz, Edward A. Gilhuly, Perry Golkin,
Michael W. Michelson, Paul E. Raether, Clifton S. Robbins and Scott Stuart,
as general partners of KKR Associates, may be deemed to share beneficial
ownership of any shares beneficially owned by KKR Associates, but disclaim
any such beneficial ownership. Messrs. Greene, Kravis, MacDonnell, Roberts
and Tokarz are members of Safeway's Board of Directors.
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<PAGE> 7
(3) Represents shares owned jointly by Mr. Greene and his wife. Does not
include 10,000 shares owned by Mrs. Greene, as to which Mr. Greene
disclaims any beneficial ownership. Does not include 6,000 shares held in
trust by Mrs. Greene for the benefit of their children, as to which Mr.
Greene disclaims any beneficial ownership.
(4) Does not include 400,000 shares held by Mr. Kravis as a trustee of an
irrevocable trust created by Mr. Roberts for the benefit of his children
(the "Roberts Trust"). As co-trustee, Mr. Kravis shares the authority to
vote and dispose of the shares, but has no economic interest in such
shares.
(5) Does not include 60,000 shares held in an irrevocable trust created by Mr.
MacDonnell for the benefit of his children (the "MacDonnell Trust") with
respect to which Mr. MacDonnell disclaims any beneficial ownership.
(6) Does not include 60,000 shares held by Mr. Roberts as a trustee of the
MacDonnell Trust. As co-trustee, Mr. Roberts shares the authority to vote
and to dispose of the shares, but has no economic interest in such shares.
Does not include 400,000 shares held in the Roberts Trust with respect to
which Mr. Roberts disclaims any beneficial ownership.
(7) SSI Equity Associates, L.P. is a Delaware limited partnership, the sole
general partner of which is SSI Partners, L.P., a Delaware limited
partnership. SSI Partners, L.P., in its capacity as general partner, may be
deemed to own any shares beneficially owned by SSI Equity Associates, L.P.
Messrs. Kravis, MacDonnell, Raether and Roberts, as general partners of SSI
Partners, L.P., may be deemed to share beneficial ownership of any shares
beneficially owned by SSI Partners, L.P., but disclaim any such beneficial
ownership. Messrs. Kravis, MacDonnell and Roberts are members of Safeway's
Board of Directors.
(8) Includes 64,578 shares issuable upon exercise of stock options.
(9) Includes shares issuable upon exercise of stock options as follows: Mr.
Magowan, 870,000; Mr. Burd, 1,300,000; Mr. Oder, 865,000; Mr. Day, 245,000;
Mr. Jones, 237,500; Mr. Ross, 285,000; and all executive officers and
directors as a group, 4,813,166. Does not include shares issuable upon
exercise of stock options which are not vested.
(10) Does not include 2,568 shares held by Mr. Oder as trustee of irrevocable
trusts created by Mr. Burd for the benefit of his children. As trustee, Mr.
Oder has the authority to vote and dispose of the shares, but has no
economic interest in such shares.
(11) Does not include 10,000 shares held by Mr. Jones as trustee for the benefit
of his children, as to which shares Mr. Jones disclaims any beneficial
ownership.
(12) All information regarding FMR Corp. and its affiliates is based on
information disclosed in the Schedule 13G filed by FMR Corp., Edward C.
Johnson 3d and Abigail Johnson on February 13, 1997 (the "Schedule 13G").
According to the Schedule 13G, (i) Fidelity Management & Research Company,
a wholly owned subsidiary of FMR Corp., is the beneficial owner of
11,894,100 of such shares as a result of acting as investment adviser to
various investment companies, (ii) Fidelity Management Trust Company, a
wholly owned subsidiary of FMR Corp., is the beneficial owner of 689,800 of
such shares as a result of its serving as investment manager of
institutional account(s), (iii) Fidelity International Limited is the
beneficial owner of 362,500 of such shares as a result of its providing
investment advisory and management services to a number of non-U.S.
investment companies and certain institutional investors, (iv) FMR Corp.,
Edward C. Johnson 3d and Abigail Johnson each has sole dispositive power
over all of such shares and (v) FMR has sole voting power over 607,600 of
such shares. The address of FMR Corp. is 82 Devonshire Street, Boston,
Massachusetts 02109.
BOARD MEETINGS, COMMITTEES AND COMPENSATION
The Company's Board of Directors held four regular meetings and five
special meetings in fiscal 1996. Each director, except Messrs. Greene, Kravis
and Tokarz, attended 75% or more of the total number of Board meetings and
meetings of Board committees on which the director served during the time he
served on the
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<PAGE> 8
Board or committee. The Board of Directors has established the following
standing committees: Audit Committee, Compensation and Stock Option Committee
and Section 162(m) Committee. There is no standing Nominating Committee.
Audit Committee: Paul Hazen, Chairman; Sam Ginn. As directed by the Board,
the functions of the committee include recommending independent auditors to be
employed by the Company; conferring with the independent auditors regarding
their audit of the Company; reviewing the fees of such auditors and other terms
of their engagement; considering the adequacy of internal financial controls and
the results of fiscal policies and financial management of the Company; meeting
with the Company's internal auditors; reviewing with the independent and
internal auditors the results of their examinations; and recommending changes in
financial policies or procedures as suggested by the auditors. During fiscal
1996 the Audit Committee held three meetings.
Compensation and Stock Option Committee: Sam Ginn, Chairman; James H.
Greene, Jr., Paul Hazen and Robert I. MacDonnell. The functions of the committee
are to review new or modified programs in the areas of executive salary and
incentive compensation, deferred compensation and stock plans; to review direct
and indirect compensation matters; and to review management's compensation
actions for executive officers and other key personnel. During fiscal 1996 the
Compensation and Stock Option Committee held two meetings.
Section 162(m) Committee: Sam Ginn, Chairman; Paul Hazen. The functions of
the committee are to approve grants of stock options to executive officers;
establish performance goals with respect to performance-based compensation for
executive officers; certify whether performance goals have been met before
performance-based compensation is made to executive officers; and perform any
other action required to be performed, pursuant to Section 162(m) of the
Internal Revenue Code of 1986, by a committee of "outside directors." During
fiscal 1996, the Section 162(m) Committee did not hold any meetings.
Director Compensation: Directors who are not employees of the Company or
its subsidiaries were paid an annual fee of $40,000. See "Compensation Committee
Interlocks and Insider Participation" for a description of fees paid to KKR by
the Company for management, consulting and financial services.
The Outside Director Equity Purchase Plan (the "Director Plan") generally
provides for the grant to "Outside Directors" (as defined in the Director Plan)
of options to purchase shares of Common Stock of the Company and requires
Outside Directors to purchase shares of Common Stock as a condition to
membership on the Board. Pursuant to the Director Plan, each Outside Director
shall be granted, on the later to occur of (a) the adoption of the Director Plan
by the Board, or (b) such Outside Director's appointment to the Board, an option
to purchase the number of shares of Common Stock equal to $150,000 (increased by
10% on every other anniversary of the date the Director Plan was adopted by the
Board) divided by the Purchase Price (defined as $4.80 for Outside Directors
eligible to be granted options as of the date of adoption of the Director Plan
by the Board, and 80% of the fair market value of a share of Common Stock on the
date of grant for all other initial grants). The foregoing option grants are
conditioned on the purchase by such Outside Director of shares of Common Stock
as set forth in the Director Plan. Mr. Ginn and Mr. Hazen each has purchased
20,834 shares of Common Stock. In connection with such purchases, Mr. Ginn and
Mr. Hazen each delivered to Safeway a full recourse note in the amount of
$99,900. Each note matures in 2001 and bears interest at 8.87% per annum. In
addition, pursuant to the Director Plan, each Outside Director shall be granted,
on the later to occur of (i) May 9, 1995 (the adoption of the First Amendment to
the Director Plan by the Board) or (ii) the date such Outside Director completes
three continuous years of service as a member of the Board, an option to
purchase an additional 50,000 shares of Common Stock at an exercise price equal
to the fair market value of a share of Common Stock on the date of grant.
Under the Deferred Compensation Plan for Safeway Directors, a non-employee
director may elect to defer, until a specified calendar year or retirement from
the Board, all or any portion of the director's compensation. The director may
elect to have such compensation credited to a cash credit account (which accrues
interest at the prime rate) or a stock credit account (based on an equivalent
number of shares of Common Stock that could have been purchased with the
deferred compensation). All distributions of a director's cash or stock credit
account are made in cash.
6
<PAGE> 9
CERTAIN RELATIONSHIPS AND TRANSACTIONS
In December 1996, the Company and Vons entered into an Agreement and Plan
of Merger (the "Merger Agreement") pursuant to which Vons will be merged into a
subsidiary of the Company (the "Merger") and each share of common stock of Vons
outstanding immediately prior to the effective time of the Merger (other than
shares owned directly or indirectly by the Company) will be converted into the
right to receive 1.425 shares of Common Stock. In connection with the Merger,
the Company entered into an Amended and Restated Stock Purchase Agreement (the
"Repurchase Agreement") in January 1997 with SSI Associates, L.P., an affiliate
of KKR, for the repurchase (the "Repurchase") by the Company of 32 million
shares of Common Stock for $1.376 billion ($43 per share). Messrs. Greene,
Kravis, MacDonnell, Roberts and Tokarz are members of the limited liability
company which serves as the general partner of KKR. SSI Associates, L.P. has the
right to assign to SSI Equity Associates, L.P. and/or KKR Partners II, L.P. a
portion of its rights and obligations under the Repurchase Agreement. Following
the Merger and after giving effect to the Repurchase, SSI Associates, L.P. and
KKR Partners II, L.P. will collectively own approximately 33% of the outstanding
Common Stock.
Also in connection with the Merger, the Company will offer to replace, at
the effective time of the Merger, all outstanding Vons stock options granted to
its outside directors with replacement options to purchase Common Stock
("Replacement Options"). Each Replacement Option will represent the right to
purchase, on substantially the same terms and conditions as were applicable
under the Vons stock option being replaced, the number (rounded to the nearest
whole number) of shares of Common Stock as such holder of such Vons stock option
would have been entitled to receive pursuant to the Merger had such holder
exercised such Vons stock option in full immediately prior to the effective time
of the Merger (not taking into account whether such Vons stock option was in
fact exercisable), at a price per share equal to (x) the aggregate exercise
price for Vons common stock otherwise purchasable pursuant to such Vons stock
option divided by (y) the number of shares of Common Stock purchasable pursuant
to such Replacement Option. Each Replacement Option will be fully exercisable
regardless of whether the Vons stock option was exercisable prior to the
effective time of the Merger. The Replacement Options, like the Vons stock
options, generally will be exercisable until three months after resignation (or
one year in the case of a director who is over 60 years old). Messrs. Burd,
Greene, MacDonnell and Magowan are directors of Vons and will receive in
connection with the Merger Replacement Options representing the right to
purchase shares of Common Stock as follows: Mr. Burd, 41,131 shares; Mr. Greene,
37,199 shares; Mr. MacDonnell, 42,750 shares; and Mr. Magowan, 42,750 shares.
The Replacement Options will be fully exercisable.
In September and December 1996, the Company acquired a total of 13.8% of
the limited partnership interests in SSI Equity Associates, L.P. for $126.5
million. Safeway acquired the interests, using bank borrowings, from parties
unrelated to Safeway or any of its affiliates. The purchase price of the
interests was determined by arms'-length negotiations between the Company and
the selling parties. SSI Equity Associates, L.P. is a limited partnership whose
sole assets are warrants to purchase 23,405,953 shares of Common Stock at $1.00
per share. See "Beneficial Ownership of Securities." Messrs. Kravis, MacDonnell
and Roberts, who are directors of the Company, are general partners of SSI
Partners, L.P., which is the general partner of, and holds a one percent
interest in, SSI Equity Associates, L.P.
In 1996, Safeway made payments totaling approximately $190,000 for the
direct or indirect benefit of the San Francisco Giants. Mr. Magowan, Chairman of
the Board of the Company, is the Managing General Partner and President of the
San Francisco Giants. Such payments were made in connection with advertising,
promotional events and marketing programs involving the San Francisco Giants and
Safeway.
Mr. Magowan resigned from his position as Chief Executive Officer of the
Company effective April 30, 1993 and has continued as Chairman of the Board of
the Company. The Company employed Mr. Magowan at an annual salary of $737,500
until December 31, 1994, after which he has received and will continue to
receive a monthly salary of $42,500 ($510,000 annually) until his retirement on
April 30, 1997. Mr. Magowan will continue to receive insurance benefits, and he
received a prorated bonus under the Company's operating performance and capital
performance bonus programs with respect to the first four months of 1993. The
Company paid Mr. Magowan $125,000 for 1993 and an additional $125,000 for 1994
with regard to operating
7
<PAGE> 10
performance and capital performance bonuses pertaining to his performance
previous to 1993 under the Company's bonus programs. Upon retirement, Mr.
Magowan will be entitled to receive retirement benefits in accordance with the
terms of the Company's qualified retirement plan of $70,089 per year, and an
additional $566,843 per year from the Company.
From December 1986 through December 1989, certain members of management
(the "Management Investors") purchased shares of Common Stock and/or acquired
options to purchase an aggregate of 19,272,000 shares of Common Stock. The
Management Investors paid $1.00 per share, and stock options held by the
Management Investors are exercisable primarily at $1.00 per share. Each such
Management Investor also entered into a subscription agreement with Safeway,
pursuant to which all shares of Common Stock held by such Management Investor
are subject to certain restrictions on transfer and certain repurchase rights
and obligations under certain circumstances, primarily relating to such
Management Investor's termination of employment.
See COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION for
additional relationships and transactions.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership (Forms 3, 4
and 5) of Common Stock with the Securities and Exchange Commission (the "SEC"),
the New York Stock Exchange and the Pacific Stock Exchange. Officers, directors
and greater-than-ten-percent holders are required to furnish the Company with
copies of all such forms which they file.
To the Company's knowledge, based solely on the Company's review of copies
of such reports or written representations from certain reporting persons that
no Forms 5 were required to be filed by those persons, the Company believes that
during fiscal 1996 all filing requirements applicable to its officers,
directors, greater-than-ten-percent beneficial owners and other persons subject
to Section 16 of the Exchange Act were complied with, except that Melissa
Plaisance filed one report late covering one transaction.
8
<PAGE> 11
EXECUTIVE COMPENSATION
The following Summary Compensation Table shows compensation paid by the
Company for services rendered during fiscal years 1996, 1995 and 1994 for the
Chief Executive Officer and the four most highly compensated executive officers
of the Company who were serving as executive officers at the end of fiscal 1996.
SUMMARY COMPENSATION TABLE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
----------------------------------- ------------
OTHER ANNUAL SECURITIES
NAME AND PRINCIPAL SALARY BONUS COMPENSATION UNDERLYING
POSITION YEAR ($) ($)(A) ($) OPTIONS(#)
- ----------------------------------------- ----- ------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Steven A. Burd........................... 1996 650 715 -- --
President and CEO 1995 650 706 -- --
1994 619 644 -- 1,000,000
Kenneth W. Oder.......................... 1996 425 425 -- --
Executive Vice President 1995 420 420 -- --
1994 407 407 54(b) 500,000
Julian C. Day............................ 1996 365 387 -- --
Executive Vice President 1995 365 367 -- --
and CFO 1994 327 340 -- 100,000
E. Richard Jones......................... 1996 358 393 -- --
Executive Vice President 1995 358 373 -- --
1994 358 369 -- --
Michael C. Ross.......................... 1996 300 240 -- --
Senior Vice President, 1995 297 238 103(c) --
Secretary & General 1994 261 209 59(c) 100,000
Counsel
</TABLE>
- ---------------
(a) Represents the dollar value of the cash and stock bonuses earned by the
named individual during the fiscal year indicated.
(b) Represents a transportation allowance paid to Mr. Oder.
(c) Represents amounts reimbursed to Mr. Ross for the payment of taxes on
relocation expenses.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Ginn, Greene, Hazen and MacDonnell served as members of the
Compensation and Stock Option Committee (the "Committee") of the Company's Board
of Directors during fiscal 1996. Mr. Greene was a Vice President and Assistant
Secretary of the Company from August 1986 to November 1986. No other member of
the Committee is a current or former officer or employee of the Company or any
of its subsidiaries.
Safeway holds an 80% interest in Property Development Associates, a
California general partnership formed in 1987 ("PDA"). The general partners of
PDA are Pacific Resources Associates, L.P., a Delaware limited partnership
("PRA"), which is a company controlled by an affiliate of KKR, and Safeway. PDA
was organized to purchase, manage and dispose of certain Safeway facilities
which are no longer used in Safeway's retail grocery business. During 1996, the
Company contributed to PDA 16 properties no longer used in the Company's retail
grocery business which had an aggregate net book value of $8.4 million, and PRA
made a corresponding capital contribution in cash to maintain its proportionate
ownership interest in PDA. No gains or losses were recognized on these
transactions in the financial statements. During 1996, Safeway paid PDA
9
<PAGE> 12
$1.6 million for reimbursement of expenses related to management and real estate
services provided by PDA in connection with certain of Safeway's properties no
longer used in the retail grocery business. At year-end 1996, PDA held 220
properties which were recorded at an aggregate net book value of $126.3 million.
The accounts of PDA are consolidated with those of the Company, and a minority
interest of $25.1 million is included in accrued claims and other liabilities in
the Company's consolidated balance sheet at year-end 1996.
During fiscal 1996, the Company paid approximately $223,800 in rent to
Carmel Valley Partners with respect to a lease for one of the Company's retail
grocery stores. Carmel Valley Partners is a general partnership 80% of which is
owned by a subsidiary of Pacific Realty Associates, L.P., which is a partnership
controlled by an affiliate of KKR. In addition, during fiscal 1996, the Company
paid approximately $393,000 in rent and maintenance fees to PDA with respect to
leases for three of the Company's retail grocery stores. The Company believes
that the rates charged with respect to the foregoing leases were the same as or
less than the rates that could be obtained from unrelated third parties.
KKR provides management, consulting and financial services to Safeway for
an annual management fee. Such services include, but are not necessarily limited
to, advice and assistance concerning any and all aspects of the operation,
planning and financing of Safeway, as needed from time to time. In 1996, the
Company paid KKR a management fee of $1.35 million and reimbursed expenses in
the amount of approximately $14,000.
The Company received approximately $102,235 in charter fees from RIM Air,
Inc. for the use of the Company's airplane during fiscal 1996. RIM Air, Inc. is
a corporation one-half of which is owned by Mr. MacDonnell, a director of the
Company. In addition, the Company received approximately $155,075 in charter
fees from KKR, Mr. MacDonnell and Saul Fox (a former general partner of KKR
Associates), for the use of the Company's airplane during fiscal 1996. The
Company believes that the rates paid by RIM Air, Inc., KKR and Messrs.
MacDonnell and Fox were at least the same as the rates that could be obtained
from unrelated third parties.
Messrs. Ginn and Hazen each purchased 20,834 shares of Common Stock of the
Company in 1991 pursuant to the Director Plan which requires Outside Directors
to purchase shares of Common Stock as a condition to membership on the Board. In
connection with such purchases, Messrs. Ginn and Hazen each delivered to the
Company a full recourse note in the amount of $99,900. Each note matures in 2001
and bears interest at 8.87% per annum. Each of Messrs. Ginn and Hazen remained
indebted to the Company for such amount (plus accrued interest) as of March 18,
1997.
* * * * *
The following Report of the Compensation and Stock Option Committee and of
the Section 162(m) Committee and Stock Performance Graph are not to be deemed to
be "soliciting material" or to be "filed" with the SEC or subject to Regulation
14A or 14C or to the liabilities of Section 18 of the Exchange Act except to the
extent the Company specifically requests that such information be treated as
soliciting material or specifically incorporates it by reference into any filing
under the Securities Act of 1933, as amended, or the Exchange Act.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
REPORT OF THE SECTION 162(M) COMMITTEE
The Company's policies with respect to the compensation of executive
officers, which policies are approved by the Compensation and Stock Option
Committee, are (1) to base a significant portion (up to approximately 50%) of
total yearly compensation of executive officers on the performance of the
Company and the individual performances of the executive officers, (2) to award
the Company performance-based portions of compensation only when overall Company
performance reaches pre-established levels, and (3) to pay base salaries and,
subject to approval by the Section 162(m) Committee, award stock options to
executive officers based on a review of competitive compensation practices of
various industry groups and comparable size companies, overall financial,
strategic and operational Company performance, improvement in market value of
the Company's stock and each individual executive officer's performance.
10
<PAGE> 13
The relationship of Company performance to the compensation of executive
officers, including the Chief Executive Officer ("CEO"), is as follows.
The Company undertakes an annual planning process which culminates in the
adoption and approval of an operating plan for the Company. The operating plan
includes a target level for Company operating performance for the following
year. The specific elements of Company operating performance that are relevant
to compensation determinations are sales, operating profit and working capital.
No operating performance-based compensation is awarded to executive officers,
including the CEO, unless an operating performance threshold based upon target
level performance is met. The operating performance threshold can be met only if
specific performance thresholds for sales and operating profit are met. The
amount of operating performance-based compensation awardable is then increased
or decreased depending on the extent to which the working capital threshold is
or is not met. If the operating performance threshold is met, operating
performance-based compensation of up to 80% of the CEO's base salary is awarded
based upon the extent to which Company performance exceeds the threshold, and
executive officers other than the CEO are eligible to receive operating
performance-based compensation up to a maximum percentage of each such executive
officer's base salary, which maximum percentage ranges from 48% to 100%. The
amount of operating performance-based compensation awarded to such executive
officers may be reduced by the CEO and is based on individual,
participant-specific performance factors, and the amount of a particular
individual's award cannot exceed the maximum percentage for such individual. The
foregoing ranges of percentages of base salary payable to the CEO and other
executive officers were established based on a review of competitive
compensation levels with a view to allowing for higher than average incentive
compensation to supplement lower than average base compensation.
Operating performance-based compensation may, at the option of the
executive, be paid in cash, in stock, or in a combination of cash and stock.
Based on actual operating results in 1996, Company performance exceeded the
threshold of operating performance and, accordingly, operating performance-based
compensation was awarded to the CEO and other executive officers.
In addition to operating performance-based compensation, the most senior
executive officers who are responsible for making capital investment decisions,
including the CEO, are also eligible for capital
performance-based compensation, payment of which is contingent on new capital
investments of the Company achieving targeted rates of return established at the
outset of each new capital investment project. Capital performance is measured
for the first and third years following completion of a particular project. With
respect to each such year, if the capital performance threshold is met,
compensation of up to 15% of the executive officer's base salary is awarded
based upon the extent to which capital performance exceeded the threshold. The
foregoing percentage was established at a level intended to emphasize the
importance of capital spending to the Company's business. Based on the results
of the measured projects, all of which exceeded the pre-established targeted
rates of return, the CEO and certain other executive officers earned a capital
performance-based bonus in 1996 with respect to measured first and third year
projects.
Base salaries are evaluated annually for all executive officers, including
the CEO. Base salaries for executive officers, including the CEO, are based in
part on overall financial, strategic and operational Company performance,
improvement in market value of the Company's stock, individual performance and
competitive salary levels. Of these factors, the most significance is accorded
to overall Company performance and improvement in market value of the Company's
stock, followed by individual performance and competitive salary levels. The
determination of whether to make certain one-time payments, such as signing
bonuses, including the amount of any such payments, is evaluated on a
case-by-case basis. Competitive compensation practices are reviewed by position
and various industry groups, and this competitive data is used to determine
appropriate ranges of base salary levels and annual increases to attract and
retain qualified executives. The companies surveyed for this purpose include
grocery companies and non-grocery companies. The non-grocery companies were
selected because they were considered to be the significant competitors with
respect to executive officer positions. All grocery companies whose executive
pay practices were surveyed for this purpose are included in the peer group
identified in footnote (a) to the Stock Performance Graph set forth elsewhere in
this proxy statement, except for those companies whose common stock was not
publicly traded for the period covered by the Stock Performance Graph. The
Company's executive salary levels, including
11
<PAGE> 14
with respect to the CEO, generally are at the median of or lower than the
executive compensation levels of the companies surveyed.
Stock option grants are considered periodically by the Committee for all
executive officers, including the CEO. A primary consideration in granting stock
options is to encourage members of management to hold significant equity
ownership in the Company. The aggregated option exercise table shows stock
options owned by the individuals named in the Summary Compensation Table. The
amounts of stock options granted in any given year, including those granted to
executive officers, are derived based upon the same factors, and with the same
relative significance, as are set forth in the preceding paragraph with respect
to establishment of base salary levels, although less weight is accorded to
competitive compensation levels because of the difficulty in making a meaningful
comparison with respect to stock options. All stock option grants to executive
officers are subject to approval by the Section 162(m) Committee.
The Committee believes that the executive compensation policies and
programs described above serve the interests of all stockholders and the Company
and substantially link compensation of the Company's executive officers with the
Company's performance.
During 1993, the Internal Revenue Code of 1986, as amended (the "Code"),
was amended to include a provision which denies a deduction to any publicly held
corporation for compensation paid to any "covered employee" (defined as the CEO
and the Company's other four most highly compensated officers, as of the end of
a taxable year) to the extent that the compensation exceeds $1 million in any
taxable year of the corporation beginning after 1993. Compensation which is
payable pursuant to written binding agreements entered into before February 18,
1993 and compensation which constitutes "performance-based compensation" is
excludable in applying the $1 million limit. It is the Company's policy to
qualify all compensation paid to its top executives, in a manner consistent with
the Company's compensation policies, for deductibility under the 1993 law in
order to maximize the Company's income tax deductions. However, this policy does
not rule out the possibility that the Committee may approve compensation that
may not qualify for the compensation deduction, if in light of all applicable
circumstances it would be in the best interests of the Company for such
compensation to be paid.
<TABLE>
<S> <C>
Compensation and
Stock Option Committee: Section 162(m) Committee:
Sam Ginn Sam Ginn
James H. Greene, Jr. Paul Hazen
Paul Hazen
Robert I. MacDonnell
</TABLE>
12
<PAGE> 15
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the Company's
cumulative total stockholder return on its common stock to that of the S&P 500
and a group of peer companies in the retail grocery industry.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Safeway S&P 500 Peer Group(a)
<S> <C> <C> <C>
12/27/91 100.00 100.00 100.00
12/31/92 72 111 103
12/31/93 118 122 100
12/30/94 177 124 108
12/28/95 286 170 135
12/31/96 475 211 179
</TABLE>
- ---------------
(a) The peer group companies are: The Kroger Co., American Stores Co., Safeway
Inc., The Great Atlantic & Pacific Tea Company, Inc., Winn-Dixie Stores,
Inc., Albertson's Inc., Food Lion, Inc., The Vons Companies, Inc., Giant
Food, Inc., Fred Meyer, Inc., The Penn Traffic Company, Smith's Food & Drug
Centers, Inc. and Hannaford Bros. Co.
13
<PAGE> 16
AGGREGATED OPTION EXERCISES DURING 1996
FISCAL YEAR AND 1996 FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning exercise of stock
options during fiscal 1996 by each of the individuals identified in the Summary
Compensation Table and the value of unexercised options at the end of fiscal
1996.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY OPTIONS
UNEXERCISED OPTIONS AT 1996
SHARES VALUE AT 1996 YEAR-END(#) YEAR-END($)(B)
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) ($)(A) UNEXERCISABLE UNEXERCISABLE
- ----------------------------- ----------- ---------- ------------------- ---------------------
<S> <C> <C> <C> <C>
Steven A. Burd............... 90,000 3,864,375 1,150,000/1,300,000 39,875,000/41,062,500
Kenneth W. Oder.............. -- -- 790,000/510,000 27,018,750/15,543,750
Julian C. Day................ -- -- 225,000/275,000 7,189,688/8,554,063
E. Richard Jones............. 420,000 16,068,750 237,500/12,500 9,261,719/403,906
Michael C. Ross.............. -- -- 210,000/290,000 7,068,750/9,593,750
</TABLE>
- ---------------
(a) Value realized is (i) the fair market value of the stock at the date of
exercise less the exercise price of the options exercised multiplied by (ii)
the number of shares represented by such options.
(b) Potential unrealized value is (i) the fair market value at fiscal 1996
year-end ($41.25 per share) less the exercise price of "in-the-money,"
unexercised options multiplied by (ii) the number of shares represented by
such options.
PENSION PLANS
Pension benefits are paid to executive officers under the Employee
Retirement Plan, a qualified defined benefit pension plan, and the Retirement
Restoration Plan. The Retirement Restoration Plan, which became effective on
January 1, 1994, provides benefits to certain employees, including the
individuals named in the Summary Compensation Table, that cannot be paid under
the qualified Retirement Plan due to Internal Revenue Code limitations on the
amount of compensation that may be recognized and the amount of benefits that
may be paid.
The Employee Retirement Plan and the Retirement Restoration Plan
(collectively, the "Retirement Plans") provide benefits under a formula based in
part on years of service, age at retirement date, and the employee's highest
60-month average compensation out of the 120 consecutive months preceding
retirement. Unreduced benefits under the formula are payable as early as age 62,
and reduced early retirement benefits are available at ages 55 through 61.
The following table illustrates the total estimated annual benefits payable
as of December 28, 1996 from the Retirement Plans to persons in specified
remuneration and years of credited service classifications. The benefits shown
in the table are based on the Retirement Plans' final average earnings benefit
formula, retirement at age 65, and payment in the form of a single life annuity.
14
<PAGE> 17
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ANNUAL FINAL YEARS OF CREDITED SERVICE UNDER PLANS
AVERAGE EARNINGS ----------------------------------------------------
USED FOR PLANS 15 20 25 30 35
- -------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 100,000................................... $ 19,680 $ 26,240 $ 32,800 $ 39,360 $ 45,920
200,000.................................. 41,430 55,240 69,050 82,860 96,670
300,000.................................. 63,180 84,240 105,300 126,360 147,420
400,000.................................. 84,930 113,240 141,550 169,860 198,170
500,000.................................. 106,680 142,240 177,800 213,360 248,920
600,000.................................. 128,430 171,240 214,050 256,860 299,670
800,000.................................. 171,930 229,240 286,550 343,860 401,170
1,000,000.................................. 215,430 287,240 359,050 430,860 502,670
1,500,000.................................. 324,180 432,240 540,300 648,360 756,420
</TABLE>
Remuneration under the final average earnings formula illustrated in the
foregoing table includes pay earned from full-time employment, contingent pay
and pay for part-time employment, but excludes stock options and any special pay
made solely in the discretion of the employer. Remuneration under this final
average earnings formula for the individuals named in the Summary Compensation
Table generally corresponds with the aggregate of the earned salary, plus
bonuses and long-term compensation for each such person. Credited years of
service as of December 28, 1996 under the final average earnings formula for the
five individuals named in the Summary Compensation Table were: S. A. Burd,
three; J. C. Day, two; E. R. Jones, 13; K. W. Oder, three; M.C. Ross, three.
In addition to benefits provided under the final average earnings benefit
formula, the Retirement Plans provide retirement benefits under an account
balance feature. The normal form of benefit under this feature is a life annuity
commencing at age 65, and early retirement benefits are available at ages 55 and
greater. The annual account balance benefit at age 65 is equal to 12% of an
employee's accumulated account balance. Additions to an employee's account
balance are based on the employee's salary, exclusive of bonuses and other
contingent or special pay, and interest in accordance with an interest index.
Estimated annual retirement benefits under the account balance feature for the
individuals named in the Summary Compensation Table are shown below, and assume
a 6% annual interest index factor and no increases in salary.
<TABLE>
<CAPTION>
NAME YEAR REACHING AGE 65 ESTIMATED ANNUAL BENEFIT
--------------------------------------- -------------------- ------------------------
<S> <C> <C>
S. A. Burd............................. 2014 $148,781
J. C. Day.............................. 2017 96,700
E. R. Jones............................ 2009 92,796
K. W. Oder............................. 2012 81,506
M.C. Ross.............................. 2013 59,664
</TABLE>
15
<PAGE> 18
PROPOSAL 2
STOCKHOLDER PROPOSAL
Mrs. Evelyn Y. Davis, 2600 Virginia Ave., N.W. #215, Washington, D.C.
20037, who is the owner of 400 shares of Common Stock, has given notice that she
intends to present for action at the Annual Meeting the following resolution:
RESOLVED: That the stockholders of Safeway Inc., assembled in
Annual Meeting in person and by proxy, hereby request the Board
of Directors to take the necessary steps to provide for
cumulative voting in the election of directors, which means each
stockholder shall be entitled to as many votes as shall equal
the number of shares he or she owns multiplied by the number of
directors to be elected, and he or she may cast all of such
votes for a single candidate, or any two or more of them as he
or she may see fit.
The following statement was submitted in support of such resolution:
REASONS: Many states have mandatory cumulative voting, so do
National Banks. In addition, many corporations have adopted
cumulative voting.
If you AGREE, please mark your proxy FOR this resolution.
BOARD RECOMMENDATION
The Board of Directors recommends a vote against this proposal for the
following reasons:
The Company's present system for election of directors, which is like that
of many major publicly traded corporations, allows all stockholders to vote on
the basis of their share ownership. The Board of Directors believes that this
method is the fairest and is most likely to produce an effective Board which
will represent the interests of all of the Company's stockholders. In addition,
the Company's performance in recent years, including an average annual return to
stockholders of over 60% since 1992, suggests that a change in the method of
voting for directors is not necessary or desirable.
In contrast, cumulative voting promotes special interest representation on
the Board. This, in turn, can lead to factionalism and contention among
directors, which could have a negative impact on the Company and its
stockholders. Moreover, the proponent of this stockholder proposal has offered
no evidence that cumulative voting produces a more qualified or effective board.
In fact, the proponent has not expressed any concerns regarding the members of
the Board or the effectiveness of the Board.
Accordingly, the Company believes that the present method of voting best
promotes the election of directors who will represent the interests of the
stockholders as a whole and that there have been no valid reasons submitted for
implementing cumulative voting.
The Board unanimously recommends a vote AGAINST the adoption of this
stockholder proposal. The affirmative vote of holders of a majority of shares
present in person or by proxy at the meeting and entitled to vote on this matter
is necessary to approve the adoption of this stockholder proposal. Unless
otherwise instructed, proxies will be voted AGAINST approval of adoption of this
stockholder proposal.
16
<PAGE> 19
PROPOSAL 3
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, acting on the recommendation of its Audit
Committee, has selected the firm of Deloitte & Touche LLP, which has served as
independent auditors since 1987, to conduct an audit, in accordance with
generally accepted auditing standards, of the Company's consolidated financial
statements for the 53-week fiscal year ending January 3, 1998. A representative
of that firm is expected to be present at the Annual Meeting to respond to
appropriate questions and will be given an opportunity to make a statement if he
or she so desires. Neither the firm nor any of its partners has any direct
financial interest or any indirect financial interest in the Company or any of
its subsidiaries, other than as independent auditors. This selection is being
submitted for ratification at the meeting. If not ratified, the selection will
be reconsidered by the Board, although the Board of Directors will not be
required to select different independent auditors for the Company. Unless
otherwise instructed, proxies will be voted FOR ratification of the selection of
Deloitte & Touche LLP.
GENERAL
STOCKHOLDER PROPOSALS
Stockholder proposals for presentation at the 1998 Annual Meeting of
Stockholders must be received at the Company's principal executive offices on or
before November 28, 1997. The Company's Bylaws provide that stockholders
desiring to bring any other business before the stockholders at an annual
meeting must notify the Secretary of the Company thereof in writing 50 to 75
days before the meeting (or, if less than 65 days' notice or prior public
disclosure of the meeting date is given, within 15 days after such notice was
mailed or publicly disclosed, whichever first occurs). Such notice must set
forth (i) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the proposing stockholder's name and record address, (iii) the
class and number of shares of Company stock beneficially owned by the
stockholder, and (iv) any material interest of the stockholder in such business.
ANNUAL REPORT
The Company's Annual Report to Stockholders for the year ended December 28,
1996 is being mailed to all stockholders of record with this Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
MICHAEL C. ROSS
Secretary
Dated: March 24, 1997
17
<PAGE> 20
Please mark your
X votes as in this B283
example.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
The Board of Directors recommends a vote AGAINST stockholder proposal 2 and FOR proposal 3.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of Nominees: James H. 2. Stockholder proposal
Directors Greene, Jr., Paul on cumulative voting.
Hazen, Henry R.
Kravis
For, except vote withheld for the following nominee(s): 3. Appointment of
Deloitte & Touche LLP
as independent
------------------------------------------------------- auditors for fiscal year
1997.
- ------------------------------------------------------------------------------------------------------------------------------------
4. In accordance with the judgments of the proxies, upon
such other business as may properly come before the
meeting and at any and all adjournments thereof.
MARK HERE
FOR ADDRESS
CHANGE AND
NOTE AT LEFT
Please date and sign exactly as name appears hereon. Joint
owners should each sign. The full name or capacity of any
person signing for a corporation, partnership, trust or
estate should be indicated.
----------------------------------------------------------
----------------------------------------------------------
SIGNATURE(S) DATE
</TABLE>
SAFEWAY INC.
PROXY - For the Annual Meeting - May 13, 1997
P
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
R
The undersigned, having received the Notice of Meeting and Proxy
O Statement dated March 24, 1997, appoints Steven A. Burd and Michael C.
Ross, and each or any of them as Proxies, with full power of
X substitution, to represent and vote all the shares of Common Stock which
the undersigned may be entitled to vote at the Annual Meeting of
Y Stockholders to be held at the Sheraton Portland Airport Hotel, 8235
N.E. Airport Way, Portland, Oregon on Tuesday, May 13, 1997, at 10:30
a.m. or at any and all adjournments thereof, with all powers which the
undersigned would possess if personally present.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THE PROXY
WILL BE VOTED "FOR" ALL NOMINEES LISTED UNDER ITEM (1), "FOR" THE
PROPOSAL DESCRIBED IN ITEM (3) AND "AGAINST" THE STOCKHOLDER PROPOSAL
DESCRIBED IN ITEM (2), ALL OF SAID ITEMS BEING MORE FULLY DESCRIBED IN
THE NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND THE ACCOMPANYING PROXY
STATEMENT. IF ANY OF THE NAMED NOMINEES SHOULD BECOME UNAVAILABLE PRIOR
TO THE ANNUAL MEETING, THE PROXY WILL BE VOTED FOR ANY SUBSTITUTE
NOMINEE OR NOMINEES DESIGNATED BY THE BOARD OF DIRECTORS. THE
UNDERSIGNED RATIFIES AND CONFIRMS ALL THAT SAID PROXIES OR THEIR
SUBSTITUTES MAY LAWFULLY DO BY VIRTUE HEREOF.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
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SEE REVERSE
SIDE
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