<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Safeway Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------
(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):
---------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------
[ ] 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
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
---------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------------
<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 San Ramon
Marriott Hotel, 2600 Bishop Drive, San Ramon, California on Tuesday, May 12,
1998 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 a proposal to amend the Company's Restated
Certificate of Incorporation to increase the total number of authorized
shares of the Company's Common Stock from 750,000,000 to 1,500,000,000;
3. To consider and vote upon adoption of two amendments to the Operating
Performance Bonus Plan for Executive Officers of Safeway Inc.;
4. To consider and vote upon adoption of the Capital Performance Bonus Plan
for Executive Officers of Safeway Inc.;
5. To consider and vote upon a 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;
6. To ratify the appointment of Deloitte & Touche LLP as independent
auditors for fiscal year 1998; and
7. 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 17, 1998 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 San Ramon Marriott Hotel, 2600
Bishop Drive, California.
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 27, 1998
<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 San Ramon Marriott Hotel, 2600 Bishop Drive, San Ramon, California on
Tuesday, May 12, 1998, 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 31, 1998.
The information contained in this Proxy Statement has been adjusted, where
appropriate, to give effect to a two-for-one stock split whereby each holder of
the Company's common stock ("Common Stock") was entitled to receive on February
25, 1998 one additional share of Common Stock for each share owned as of
February 10, 1998.
Only stockholders of record at the close of business on March 17, 1998 will
be entitled to vote at the meeting. At the close of business on March 17, 1998
there were 478,717,562 outstanding shares of 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. The proposed amendment to the Company's Restated Certificate
of Incorporation to increase the total number of authorized shares of Common
Stock will require the affirmative vote of holders of a majority of the issued
and outstanding Common Stock; accordingly, with respect to the proposed
amendment, abstentions and broker non-votes will have the same effect as
negative 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. In addition, the
Company has retained MacKenzie Partners, Inc. to assist in the solicitation for
a fee of approximately $7,500 plus expenses.
<PAGE> 4
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.
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 Board of Directors recommends the three nominees named below for
election as directors. The three directors will be elected to office for a
three-year term ending at the Annual Meeting in 2001 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.
1998 NOMINEES
STEVEN A. BURD, age 48, has been appointed Chairman of the Board of
Directors effective immediately after the conclusion of the Annual Meeting. He
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.
ROBERT I. MACDONNELL, age 60, has been a member of the Board of Directors
since November 26, 1986. Mr. MacDonnell is a General Partner of KKR Associates,
L.P. ("KKR Associates") and was a General Partner of Kohlberg Kravis Roberts &
Co. ("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 Owens-Illinois, Inc. and Owens-Illinois Group, Inc.
WILLIAM Y. TAUSCHER, age 48, has been nominated to become a director to
serve in the class of directors whose term will expire in 2001. Mr. Tauscher has
served as Chairman of the Board of Vanstar Corporation ("Vanstar") since 1987
and as Chief Executive Officer of Vanstar since 1988. He was President of
Vanstar from September 1988 to July 1995.
CONTINUING DIRECTORS
JAMES H. GREENE, JR., age 47, has been a member of the Board of Directors
since December 17, 1987. Mr. Greene is a General Partner of KKR Associates and
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
2
<PAGE> 5
partner of KKR. Mr. Greene is also a director of Accuride Corporation, Bruno's,
Inc., Owens-Illinois, Inc., Owens-Illinois Group, Inc., Randall's Food Markets,
Inc. and Union Texas Petroleum Holdings, Inc.
PAUL HAZEN, age 56, 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 54, 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 Accuride Corporation, Amphenol Corporation, Borden, Inc., Bruno's,
Inc., Evenflo & Spalding Holdings Corporation, The Gillette Company, IDEX
Corporation, Kindercare Learning Centers, Inc., KSL Recreation Group, Inc.,
Newsquest Capital, plc, Owens-Illinois, Inc., Owens-Illinois Group, Inc.,
PRIMEDIA, Inc., Randall's Food Markets, Inc., Sotheby's Holdings, Inc., Union
Texas Petroleum Holdings, Inc. and World Color Press, Inc.
PETER A. MAGOWAN, age 55, has served as Chairman of the Board of Directors
since November 26, 1986 and will resign as Chairman effective immediately after
the conclusion of the Annual Meeting. 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. and
Chrysler Corporation. Mr. Magowan is Managing General Partner and President of
the San Francisco Giants.
GEORGE R. ROBERTS, age 54, has been a member of the Board of Directors
since July 23, 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 Accuride Corporation, Amphenol Corporation,
Borden, Inc., Bruno's, Inc., Evenflo & Spalding Holdings Corporation, IDEX
Corporation, Kindercare Learning Centers, Inc., KSL Recreation Group, Inc,
Owens-Illinois, Inc., Owens-Illinois Group, Inc., PRIMEDIA, Inc., Randall's Food
Markets, Inc., Union Texas Petroleum Holdings, Inc. and World Color Press, Inc.
Mr. Roberts and Mr. Kravis are first cousins. Mr. MacDonnell and Mr.
Roberts are brothers-in-law.
Messrs. Magowan and Roberts are in the class of directors whose term will
expire in 1999.
Messrs. Greene, Hazen and Kravis are in the class of directors whose term
will expire in 2000.
Sam Ginn and Michael Tokarz have advised the Company that they will resign
from the Board effective immediately after the conclusion of the Annual Meeting.
Under Securities Purchase Agreements dated August 11, 1986, as amended
December 1, 1987, each of two partnerships which are the significant
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."
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth certain information regarding the beneficial
ownership of Safeway's outstanding Common Stock as of March 17, 1998 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 1997, (iv) one individual who would have been included in the group
described in clause (iii) above but for the fact that such individual was not
serving as an executive officer at the end of fiscal 1997, (v) all executive
officers and directors of Safeway as a group and (vi) each person believed by
Safeway to own beneficially more than 5% of
3
<PAGE> 6
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., SSI Partners, L.P., SSI Associates, L.P. and KKR
Partners II, L.P. is 9 West 57th Street, New York, New York 10019.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENTAGE OF
NAME OF BENEFICIAL OWNER OWNED(1) CLASS(1)
------------------------ ---------------- -------------
<S> <C> <C>
KKR Associates, L.P.(2)......................... 104,529,450 21.8
James H. Greene, Jr.(3)....................... 144,402 *
Henry R. Kravis(4)............................
Robert I. MacDonnell(5)....................... 85,504 *
George R. Roberts(6)..........................
Michael T. Tokarz............................. 20,000 *
SSI Equity Associates, L.P.(7).................. 28,297,940 5.7
Sam Ginn(8)..................................... 204,168 *
Paul Hazen(8)................................... 204,168 *
Peter A. Magowan(9)............................. 3,903,600 *
Steven A. Burd(9)............................... 3,370,100 *
Kenneth W. Oder(9)(10).......................... 2,112,144 *
Julian C. Day(9)................................ 503,105 *
Michael C. Ross(9).............................. 774,024 *
Gary D. Smith(9)................................ 263,331 *
E. Richard Jones(9)(11)......................... 1,094,788 *
All executive officers and directors as a group
(16 persons, excluding Messrs. Greene, Kravis,
Roberts, MacDonnell and Tokarz)(9)............ 12,701,328 2.6
FMR Corp.(12)................................... 42,115,364 8.8
American Express Company and American Express
Financial Corporation(13)..................... 29,279,798 6.1
</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.
(3) Represents shares owned jointly by Mr. Greene and his wife. Does not
include 20,000 shares owned by Mrs. Greene, as to which Mr. Greene
disclaims any beneficial ownership. Does not include 12,000 shares held in
trust by Mrs. Greene for the benefit of their children, as to which Mr.
Greene disclaims any beneficial ownership.
4
<PAGE> 7
(4) Does not include 800,000 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 120,000 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 120,000 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 800,000 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 162,500 shares issuable upon exercise of stock options.
(9) Includes shares issuable upon exercise of stock options as follows: Mr.
Magowan, 1,240,000; Mr. Burd, 3,082,262; Mr. Oder, 2,000,000; Mr. Day,
430,000; Mr. Ross, 720,000; Mr. Smith, 227,400; and all executive officers
and directors as a group, 9,047,282. Does not include shares issuable upon
exercise of stock options which are not vested and will not become vested
within 60 days after March 17, 1998.
(10) Does not include 6,480 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 16,000 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 14, 1998 (the "FMR Schedule
13G"). According to the FMR Schedule 13G, (i) Fidelity Management &
Research Company, a wholly owned subsidiary of FMR Corp., is the beneficial
owner of 37,842,974 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
3,182,390 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 1,090,000 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 Corp. has sole voting power over
2,765,990 of such shares. The address of FMR Corp. is 82 Devonshire Street,
Boston, Massachusetts 02109.
(13) All information regarding American Express Company and American Express
Financial Corporation is based on information disclosed in a Schedule 13G
filed by American Express Company and American Express Financial
Corporation on January 30, 1998 (the "AMEX Schedule 13G"). According to the
AMEX Schedule 13G, American Express Company disclaims beneficial ownership
of the securities referred to in the AMEX Schedule 13G. The address of
American Express Company is American Express Tower, 200 Vesey Street, New
York, New York 10285, and the address of American Express Financial
Corporation is IDS Tower 10, Minneapolis, Minnesota 55440.
The limited partnership agreement pursuant to which SSI Associates was
organized will, by its terms, expire on December 31, 1998 unless amended by all
of the limited partners to extend the term beyond such date. There can be no
assurance that KKR Associates (the general partner of SSI Associates) will seek
such amendments, or, if sought, that such amendments will be approved by the
limited partners. If such partnership
5
<PAGE> 8
agreement expires, the limited partnership will dissolve. In the event of the
dissolution and winding up of SSI Associates, KKR Associates will have sole
discretion regarding the timing (which may be one or more years after the
expiration of the partnership agreement) and manner of the disposition of any
Common Stock held by such partnership, including public or private sales of such
Common Stock, the distribution of such Common Stock to the limited partners of
SSI Associates, or a combination of the foregoing.
BOARD MEETINGS, COMMITTEES AND COMPENSATION
The Company's Board of Directors held four regular meetings and two special
meetings in fiscal 1997. Each director, except Messrs. Kravis, Roberts 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 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. William Tauscher will
succeed to Mr. Ginn's position on the Audit Committee effective immediately
after the conclusion of the Annual Meeting. 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
1997 the Audit Committee held three meetings.
Compensation and Stock Option Committee: Sam Ginn, Chairman; James H.
Greene, Jr., Paul Hazen and Robert I. MacDonnell. William Tauscher will succeed
to Mr. Ginn's position as Chairman of the Compensation and Stock Option
Committee immediately after the conclusion of the Annual Meeting. 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 1997 the Compensation and Stock Option Committee held
three meetings.
Section 162(m) Committee: Sam Ginn, Chairman; Paul Hazen. William Tauscher
will succeed to Mr. Ginn's position as Chairman of the Section 162(m) Committee
immediately after the conclusion of the Annual Meeting. 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 by a committee of "outside directors"
(pursuant to Section 162(m) of the Internal Revenue Code of 1986), or by a
committee of "non-employee directors" (pursuant to Rule 16b-3 under the
Securities Exchange Act of 1934). During fiscal 1997, the Section 162(m)
Committee did not hold any meetings.
Director Compensation: Directors who are not employees of the Company or
its subsidiaries (other than Mr. Magowan) were paid an annual fee of $40,000 in
1997. 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 is
granted, on the later to occur of (a) December 14, 1990 (the date of 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 $2.40
for Outside Directors eligible to be granted options as
6
<PAGE> 9
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 41,668 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 is granted, on the later to occur of (i) May 9, 1995
(the date of 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 100,000
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 until 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.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
In December 1996, the Company and The Vons Companies, Inc. ("Vons") entered
into an Agreement and Plan of Merger (the "Merger Agreement") pursuant to which
Vons was 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) was
converted into the right to receive 2.85 shares of Common Stock. The Merger was
consummated in April 1997. 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,
pursuant to which the Company repurchased (the "Repurchase") 64 million shares
of Common Stock for $1.376 billion ($21.50 per share) effective immediately
after consummation of the Merger. Messrs. Greene, Kravis, MacDonnell, Roberts
and Tokarz are members of the limited liability company which serves as the
general partner of KKR.
Also in connection with the Merger, the Company replaced all outstanding
Vons stock options granted to its outside directors with replacement options to
purchase Common Stock ("Replacement Options"). Each Replacement Option
represents 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
is 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 are exercisable until three months after
resignation (or one year after resignation in the case of a director who is over
60 years old). Messrs. Burd, Greene, MacDonnell and Magowan were directors of
Vons and received, in connection with the Merger, Replacement Options
representing the right to purchase shares of Common Stock as follows: Mr. Burd,
82,262 shares; Mr. Greene, 74,398 shares; Mr. MacDonnell, 85,500 shares; and Mr.
Magowan, 85,500 shares. The Replacement Options are fully exercisable.
Mr. Magowan resigned from his position as Chief Executive Officer of the
Company effective April 30, 1993 and will continue as Chairman of the Board of
the Company until the conclusion of the Annual Meeting, after which he will
continue as a director of the Company and be entitled to receive an annual
directors fee. The Company employed Mr. Magowan at an annual salary of $737,500
until December 31, 1994, after which
7
<PAGE> 10
he received a monthly salary of $42,500 ($510,000 annually) until his retirement
from the Company on April 30, 1997. Mr. Magowan will continue to receive
insurance benefits and, upon his retirement, became 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.
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")
and the New York 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
for fiscal 1997 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 E. Richard Jones, Gary D.
Smith and Richard A. Wilson each filed one report late, in each case 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 1997, 1996 and 1995 for the
Chief Executive Officer, the four most highly compensated executive officers of
the Company who were serving as executive officers at the end of fiscal 1997 and
E. Richard Jones, who resigned as an executive officer in October 1997. The
table does not include Replacement Options received by Mr. Burd in connection
with the Merger. See "Certain Relationships and Transactions."
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) ($)(B) ($) OPTIONS(#)
------------------ ---- ------ ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Steven A. Burd............................ 1997 687 631 -- --
President and CEO 1996 650 715 -- --
1995 650 706 -- --
Kenneth W. Oder........................... 1997 452 324 -- 600,000
Executive Vice President 1996 425 425 -- --
1995 420 420 -- --
Julian C. Day............................. 1997 372 294 -- --
Executive Vice President 1996 365 387 -- --
and CFO 1995 365 367 -- --
Michael C. Ross........................... 1997 320 191 -- --
Senior Vice President, 1996 300 240 -- --
Secretary & General Counsel 1995 297 238 103(c) --
Gary D. Smith............................. 1997 216 113 -- 100,000
Senior Vice President 1996 174 104 -- --
1995 155 80 -- --
E. Richard Jones.......................... 1997 309 292 -- --
Former Executive Vice President 1996 358 393 -- --
1995 358 373 -- --
</TABLE>
- ---------------
(a) 1997 salary amounts include an additional week because fiscal 1997 was a
53-week year.
(b) Represents the dollar value of cash and stock bonuses earned by the named
individual during the fiscal year indicated.
(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 1997. 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 1997, the
Company contributed to PDA six properties no longer used in the Company's retail
grocery business which had an aggregate net book value of $4.9 million, and PRA
made a
9
<PAGE> 12
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 1997, Safeway paid PDA $1.5
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 1997, PDA held 207
properties which were recorded at an aggregate net book value of $119.7 million.
The accounts of PDA are consolidated with those of the Company, and a minority
interest of $24.0 million is included in accrued claims and other liabilities in
the Company's consolidated balance sheet at year-end 1997.
During fiscal 1997, the Company paid approximately $247,000 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 1997, the Company
paid approximately $1,217,000 in rent and maintenance fees to PDA with respect
to leases for 14 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 1997, the
Company paid KKR a management fee of $1.35 million and reimbursed expenses in
the amount of approximately $49,000.
The Company received approximately $61,360 in charter fees from KKR for the
use of the Company's airplane during fiscal 1997. The Company believes that the
rates paid by KKR were at least the same as the rates that could be obtained
from unrelated third parties.
In 1991, Messrs. Ginn and Hazen each purchased 41,668 shares of Common
Stock of the Company 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 17, 1998.
* * * * *
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 55%) 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.
The relationship of Company performance to the compensation of executive
officers, including the Chief Executive Officer ("CEO"), is as follows.
10
<PAGE> 13
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 120% 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 120%. The
maximum percentages for the CEO and for certain other executive officers were
increased in October 1997 (see Proposal 3). 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 1997, 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%
(for a total of up to 30%) 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 1997 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 with respect to the CEO, generally
are at the median of or lower than the executive compensation levels of the
11
<PAGE> 14
companies surveyed. The CEO received a 15% increase in base salary in October
1997. In approving this increase, the Committee considered the significant
recent improvement in the Company's performance as well as the fact that the CEO
had not received a salary increase since 1994.
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>
Safeway S&P 500 Peer Group(a)
<S> <C> <C> <C>
12/31/92 100.00 100.00 100.00
12/31/93 163.46 110.00 100.66
12/30/94 245.19 112.00 107.16
12/28/95 396.15 152.00 133.99
12/31/96 657.69 192.00 174.68
12/31/97 973.08 250.00 226.11
</TABLE>
- ---------------
(a) The peer group companies are: The Kroger Co., American Stores Company,
Safeway Inc., The Great Atlantic & Pacific Tea Company, Inc., Winn-Dixie
Stores, Inc., Albertson's Inc., Food Lion, Inc., Giant Food Inc., Fred
Meyer, Inc., The Penn Traffic Company and Hannaford Bros. Co. The peer group
does not include The Vons Companies, Inc. or Smith's Food & Drug Centers,
Inc., each of which had been included in the 1996 peer group, because The
Vons Companies, Inc. was acquired by the Company in April 1997 and Smith's
Food and Drug Centers was acquired by Fred Meyer, Inc. in September 1997.
13
<PAGE> 16
OPTION GRANTS IN 1997 FISCAL YEAR
The following table sets forth information concerning individual grants of
stock options made during fiscal 1997 to each of the individuals identified in
the Summary Compensation Table. The table does not include Replacement Options
received by Mr. Burd in connection with the Merger. See "Certain Relationships
and Transactions."
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------- ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(B)
OPTIONS EMPLOYEES EXERCISE PRICE EXPIRATION ---------------------
NAME GRANTED(#) IN FISCAL 1997 ($/SHARE) DATE 5%($) 10%($)
---- ---------- -------------- -------------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Steven A. Burd................. -- --
Kenneth W. Oder................ 600,000(a) 15.1 29.875 12/17/07 11,272,936 28,567,834
Julian C. Day.................. -- --
Michael C. Ross................ -- --
Gary D. Smith.................. 100,000(a) 2.5 26.40625 7/23/07 1,660,678 4,208,484
E. Richard Jones............... -- --
</TABLE>
- ---------------
(a) Options vest at a rate of 15% per year beginning with the anniversary of the
date of grant through the sixth anniversary of the date of grant, with the
remaining 10% becoming exercisable on the seventh anniversary of the date of
the grant. Upon the occurrence of a Change of Control of the Company,
options shall become exercisable as to all shares covered thereby,
notwithstanding that such options may not have fully vested at such time. A
"Change of Control of the Company" is deemed to have occurred (pursuant to
the provisions of the individual stock option agreement) generally when: (i)
any person (other than an employee benefit plan of the Company) becomes the
beneficial owner of 50% or more of the Company's then-outstanding voting
securities; or (ii) as a result of a tender offer or exchange offer for
Company securities, or as a result of a proxy contest, merger, consolidation
or sale of assets, individuals who at the beginning of any two-year period
constitute the Board, plus new directors whose election was approved by a
vote of at least 2/3 of the continuing board members (the "Continuing Board
Members"), cease to constitute a majority of the Board; or (iii) the
Company's security holders approve (A) a merger or consolidation of the
Company with any other corporation, other than that which would result in
the voting securities of the Company outstanding immediately prior thereto
continuing to represent at least 80% of the surviving corporation's then
outstanding voting securities, or (B) a plan of complete liquidation of the
Company or a sale of all or substantially all of the Company's assets.
Notwithstanding the foregoing definition, none of the foregoing events shall
constitute a Change of Control of the Company if (x) immediately after the
occurrence of the event, SSI Associates, KKR Partners II or any other
affiliated entity is the beneficial owner of 30% or more of the Company's
then-outstanding voting securities or (y) prior to the occurrence of the
event, the Continuing Board Members unanimously approve the event.
(b) The assumed annual rates of appreciation in the table are shown for
illustrative purposes only pursuant to applicable SEC requirements. Actual
values realized on stock options are dependent on actual future performance
of the Company's stock, among other factors. Accordingly, the amounts shown
may not necessarily be realized.
14
<PAGE> 17
AGGREGATED OPTION EXERCISES DURING 1997
FISCAL YEAR AND 1997 FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning exercise of stock
options during fiscal 1997 by each of the individuals identified in the Summary
Compensation Table and the value of unexercised options at the end of fiscal
1997.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY OPTIONS
UNEXERCISED OPTIONS AT 1997
SHARES VALUE AT 1997 YEAR-END(#) YEAR-END($)(B)
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) ($)(A) UNEXERCISABLE UNEXERCISABLE
---- ----------- ---------- ------------------- --------------------
<S> <C> <C> <C> <C>
Steven A. Burd..................... 500,000 12,976,600 2,782,262/ 75,970,680/
1,700,000 44,537,500
Kenneth W. Oder.................... 200,000 4,728,140 1,850,000/ 51,268,750/
1,150,000 14,618,750
Julian C. Day...................... 220,000 4,852,764 390,000/ 10,288,110/
390,000 10,242,488
Michael C. Ross.................... -- -- 570,000/ 15,731,250/
430,000 11,743,750
Gary D. Smith...................... 56,000 1,309,000 243,400/ 7,177,856/
104,600 633,882
E. Richard Jones................... -- -- 490,000/ 14,802,183/
10,000 269,687
</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 1997
year-end ($31.4375 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.
15
<PAGE> 18
The following table illustrates the total estimated annual benefits payable
as of January 3, 1998 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.
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............................. $ 19,545 26,060 32,575 39,090 45,605
200,000............................ 41,295 55,060 68,825 82,590 96,355
300,000............................ 63,045 84,060 105,075 126,090 147,105
400,000............................ 84,795 113,060 141,325 169,590 197,855
500,000............................ 106,545 142,060 177,575 213,090 248,605
600,000............................ 128,295 171,060 213,825 256,590 299,355
800,000............................ 171,795 229,060 286,325 343,590 400,855
1,000,000............................ 215,295 287,060 358,825 430,590 502,355
1,500,000............................ 324,045 432,060 540,075 648,090 756,105
</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 January 3, 1998 under the final average earnings formula for the
individuals named in the Summary Compensation Table were: S. A. Burd, four; J.
C. Day, three; K. W. Oder, five; M.C. Ross, four, G. D. Smith, 29, and E. R.
Jones, 14.
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 $163,411
J. C. Day............................ 2017 104,274
K. W. Oder........................... 2012 90,046
M. C. Ross........................... 2013 66,419
G. D. Smith.......................... 2008 43,291
E. R. Jones.......................... 2009 91,894
</TABLE>
16
<PAGE> 19
PROPOSAL 2
APPROVAL OF PROPOSAL TO AMEND THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors is presenting, for approval by the stockholders, a
proposal to amend the Company's Restated Certificate of Incorporation to
increase the number of authorized shares of Common Stock from 750,000,000 to
1,500,000,000.
On January 28, 1998, the Board approved a two-for-one split of the
outstanding Common Stock. The stock split was effected in the form of a
distribution to stockholders on February 25, 1998 of one additional share of
Common Stock for each share owned as of February 10, 1998. The Board believes
that the stock split is in the best interests of the stockholders because it
should broaden the market for the Company's shares and ultimately result in an
increased number of stockholders.
Although the stock split resulted in doubling the number of shares of
Common Stock outstanding, it did not affect the number of shares of Common Stock
or Preferred Stock authorized under the Company's Restated Certificate of
Incorporation. As of March 17, 1998, there were 478,717,562 shares of Common
Stock outstanding and approximately 68,174,588 shares of Common Stock reserved
for issuance pursuant to outstanding options and warrants. There are no shares
of Preferred Stock outstanding.
The text of the proposed amendment to Article IV of the Company's Restated
Certificate of Incorporation is as follows:
RESOLVED, that Article IV of the Company's Restated Certificate of
Incorporation be amended to read as follows, subject to the required consent of
the stockholders of the Company:
ARTICLE IV
The total number of shares of all classes of stock which the Corporation
shall have authority to issue is One Billion Five Hundred Twenty Five Million
(1,525,000,000), consisting of One Billion Five Hundred Million (1,500,000,000)
shares of common stock, par value $.01 per share (the "Common Stock"), and
Twenty-Five Million (25,000,000) shares of preferred stock, par value $.01 per
share (the "Preferred Stock"). The designation, powers, preferences and
relative, participating, optional or other special rights, including voting
rights, and qualifications, limitations or restrictions of the Preferred Stock
shall be established by resolution of the Board of Directors pursuant to Section
151 of the General Corporation Law of the State of Delaware.
The Board believes it is advisable for the Company, particularly in light
of the recent stock split, to have an increased number of authorized shares of
Common Stock which would be available for future issuance for various corporate
purposes. While the Board has no present arrangement, agreement or plan to
approve the issuance of any of the proposed additional authorized shares of
Common Stock, such shares may be issued for a variety of corporate purposes.
Such purposes might include, without limitation, the issuance and sale of Common
Stock (i) as part or all of the consideration required to be paid for an
acquisition of an ongoing business or other assets, (ii) in public or private
offerings as a means of obtaining additional capital, (iii) to satisfy any
current or future obligation of the Company, whether or not relating to
financings, (iv) in connection with the exercise of options, warrants or rights,
or the conversion of convertible securities of the Company, (v) in public or
private exchange offers for other securities of the Company, (vi) as part or all
of the consideration to repay or retire any debt of the Company, (vii) in
connection with stock splits and dividends, or (viii) with respect to existing
or new employee benefit or stock ownership plans or employment agreements. The
proposed increase in the number of authorized shares of Common Stock will not
change the number of shares of stock outstanding or the rights of the holders of
such stock. Issuance of authorized shares of Common Stock can be made generally
at the discretion of the Board, except under limited circumstances where
stockholder approval is required.
17
<PAGE> 20
Although the Board of Directors believes that it is in the best interest of
the stockholders for the Board to have the flexibility to approve the issuance
of additional shares of Common Stock in any or all of the above circumstances,
the issuance of additional shares of Common Stock could, in certain instances,
discourage an attempt by another person or entity to acquire control of the
Company. Moreover, the availability of sufficient authorized and unissued shares
of Common Stock would facilitate the adoption and implementation of a
shareholder rights plan. While rights plans may provide management with
additional flexibility in negotiating a higher price for the Company's Common
Stock in connection with a proposed acquisition of the Company, and otherwise
dealing with an unsolicited acquirer, such plans may make it more difficult for
an acquirer to effect a change of control. The Board of Directors currently has
no intention of adopting such a plan. The issuance of additional Common Stock,
whether or not in connection with a contest for control, would, in most
instances, dilute the voting power of each stockholder, and may dilute earnings
and book value on a per share basis.
BOARD RECOMMENDATION
The Board unanimously recommends a vote FOR approval of the adoption of the
amendment to the Restated Certificate of Incorporation to increase the number of
authorized shares of Common Stock. The affirmative vote of the holders of a
majority of the outstanding shares is necessary to approve the adoption of the
amendment to the Restated Certificate of Incorporation. Unless otherwise
instructed, proxies will be voted FOR approval of the adoption of the amendment
to the Restated Certificate of Incorporation to increase the number of
authorized shares of Common Stock.
PROPOSAL 3
ADOPTION OF AMENDMENTS TO THE OPERATING PERFORMANCE BONUS
PLAN FOR EXECUTIVE OFFICERS
At the Annual Meeting, stockholders are being asked to approve the adoption
of the Second Amendment (the "Second Amendment") and the Third Amendment (the
"Third Amendment" and, together with the Second Amendment, the "Amendments") to
the Operating Performance Bonus Plan for Executive Officers of Safeway Inc. (as
amended, the "Bonus Plan"). The original Bonus Plan was approved by the
stockholders in May 1994. The Second Amendment was approved by the Board of
Directors in October 1997, and the Third Amendment was approved by the Board of
Directors in March 1998. There are currently 13 executive officers eligible to
participate in the Bonus Plan. The Board is seeking stockholder approval of the
Amendments in order for all bonuses paid under the Bonus Plan to continue to
satisfy the requirements for qualified performance-based compensation under the
Internal Revenue Service's regulations under Section 162(m) of the Code and,
accordingly, be eligible for deductibility by the Company.
DESCRIPTION OF THE BONUS PLAN
The following information includes summaries of certain provisions of the
Bonus Plan. This information does not purport to be complete and is qualified in
its entirety by reference to the provisions of the Bonus Plan. Copies of the
Bonus Plan will be available at the Annual Meeting and may also be obtained by
making written request of the Company's Secretary.
Bonus Awards to CEO.
Eligibility. The CEO is eligible for a bonus award for each fiscal year in
an amount not to exceed 120% of the amount determined by multiplying his regular
weekly base salary rate by the number of weeks during such year that he served
as CEO, up to a maximum bonus of $1.5 million. The Second Amendment increased
the foregoing percentage from 80%.
Business Criteria. The CEO's bonus is based on a preestablished performance
target which shall include three components which shall be based on (i)
identical store sales, (ii) income and (iii) working capital,
18
<PAGE> 21
respectively. For purposes of such goal, planned identical store sales and
income shall include all Company operations.
Bonus Amount. The bonus award for the CEO is based on the achievement of
specified levels above the performance target. Prior to the payment of a bonus
award to the CEO, the Section 162(m) Committee must certify in writing the level
of the performance goals attained by the Company.
Bonus Awards to Executive Officers.
Eligibility. Each executive officer of the Company (including the Senior
Vice President -- Supply but excluding the CEO) is eligible for a bonus award
for each fiscal year in an amount equal to a preestablished percentage,
determined in the discretion of the CEO but ranging from 30% to 120%, of the
amount determined by multiplying his or her regular weekly base salary rate by
the number of weeks during such year that he or she served as an executive
officer, up to a maximum bonus of $1.5 million. The Second Amendment increased
the foregoing maximum percentage from 100%, and the Third Amendment decreased
the foregoing minimum percentage from 40%.
Business Criteria. Each executive officer's bonus is based on a
preestablished performance target which shall include three components which
shall be based on (i) identical store sales, (ii) income and (iii) working
capital, respectively. For purposes of such goal, planned identical store sales
and income shall include all Company operations.
Bonus Amount. The bonus award for any executive officer is based on the
achievement of specified levels above the performance target; provided, however,
that the CEO, in his discretion, may reduce the amount payable to any executive
officer. Prior to the payment of a bonus award to an executive officer, the
Section 162(m) Committee must certify in writing the level of the performance
goals attained by the Company.
Additional Bonus Award to Senior Vice President -- Supply.
Eligibility. The Senior Vice President -- Supply is eligible for a bonus
award for each fiscal year in an amount not to exceed 55% of the amount
determined by multiplying his regular weekly base salary rate by the number of
weeks during such year that he served as Senior Vice President -- Supply, up to
a maximum bonus of $550,000.
Business Criteria. The Senior Vice President -- Supply's bonus is based on
a preestablished performance target which shall include three components which
shall be based on (i) total Supply Division earnings, (ii) plant performance,
and (iii) outside sales profit contribution, respectively. Each of the
components shall be based on total Supply Division operations.
Bonus Amount. In calculating the bonus award to be paid to the Senior Vice
President -- Supply, the relative weight given to each component is as follows:
(i) 60% to total Supply Division earnings, (ii) 20% to plant performance, and
(iii) 20% to outside sales profit contribution. The bonus award for the Senior
Vice President -- Supply is based on the achievement of specified levels above
the performance target. Prior to the payment of a bonus award to the Senior Vice
President -- Supply, the Section 162(m) Committee must certify in writing the
level of the performance goals attained by the Supply Division.
General
Base Salary Adjustments. The Third Amendment permitted any change in base
salary effected after the first day of the fiscal year to be taken into account,
on a proportionate basis, in computing any bonus award for the fiscal year.
Method of Payment. Each bonus award may be paid, at the option of the
recipient, in cash or in stock, or in any combination of cash and stock. Stock
bonuses shall be awarded in accordance with the provisions of the 1994 Amended
and Restated Stock Option and Incentive Plan for Key Employees of Safeway Inc.,
as amended.
19
<PAGE> 22
Amendment. The Bonus Plan may be wholly or partially amended or otherwise
modified, suspended or terminated at any time or from time to time by the Board.
However, to the extent required by Section 162(m) with respect to bonus awards
which the Section 162(m) Committee determines should qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code,
no action of the Board may modify the performance targets, target bonus awards,
or the percentages to be used to determine such bonus awards after the
commencement of the fiscal year with respect to which such bonus awards relate.
NEW PLAN BENEFITS
OPERATING PERFORMANCE BONUS PLAN FOR EXECUTIVE OFFICERS,
AS AMENDED BY THE AMENDMENTS
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE($)(A)
----------------- ------------------
<S> <C>
Steven A. Burd...................................... 424,989
President and CEO
Kenneth W. Oder..................................... 324,309
Executive Vice President
Julian C. Day....................................... 182,141
Executive Vice President and CFO
Michael C. Ross..................................... 191,433
Senior Vice President, Secretary & General Counsel
Gary D. Smith....................................... 74,516
Senior Vice President
E. Richard Jones.................................... 199,486
Former Executive Vice President
Executive Group..................................... 1,711,534
Non-Executive Director Group........................ N/A
Non-Executive Officer Employee Group................ 199,486
</TABLE>
- ---------------
(a) Represents bonuses paid under the Bonus Plan for fiscal 1997. The following
amounts represent that portion of such bonuses attributable to the changes
effected by the Amendments: Mr. Burd, $64,589; Mr. Oder, $29,750; Mr. Day,
$0; Mr. Ross, $8,460; Mr. Smith, $12,862; Mr. Jones, $0; Executive Group,
$154,111; and Non-Executive Officer Employee Group, $0.
BOARD RECOMMENDATION
The Board unanimously recommends a vote FOR the approval of the adoption of
the Amendments because the Board believes it is in the best interest of the
Company to qualify performance-based compensation for deductibility under
Section 162(m) of the Code in order to maximize the Company's income tax
deductions. The affirmative vote of the holders of a majority of shares present
in person or by proxy and entitled to vote at the meeting is necessary to
approve the adoption of the Amendments. Unless otherwise instructed, proxies
will be voted FOR approval of adoption of the Amendments.
PROPOSAL 4
ADOPTION OF CAPITAL PERFORMANCE BONUS PLAN
FOR EXECUTIVE OFFICERS OF SAFEWAY INC.
At the Annual Meeting, stockholders are being asked to approve the adoption
of the Capital Performance Bonus Plan for Executive Officers of Safeway Inc.
(the "Capital Bonus Plan"). There are currently six executive officers eligible
to participate in the Capital Bonus Plan. The Board is seeking stockholder
approval of the Capital Bonus Plan in order for bonuses paid under the Capital
Bonus Plan to satisfy the requirements for qualified performance-based
compensation under the Internal Revenue Service's regulations under Section
162(m) of the Code and, accordingly, be eligible for deductibility by the
Company.
20
<PAGE> 23
DESCRIPTION OF THE CAPITAL BONUS PLAN
The following information includes summaries of certain provisions of the
Capital Bonus Plan. This information does not purport to be complete and is
qualified in its entirety by reference to the provisions of the Capital Bonus
Plan. Copies of the Capital Bonus Plan will be available at the Annual Meeting
and may also be obtained by making written request of the Company's Secretary.
Bonus Awards to CEO.
Eligibility. The CEO is eligible for a bonus award for each fiscal year in
an amount not to exceed 30% of the amount determined by multiplying his regular
weekly base salary rate by the number of weeks during such year that he served
as CEO, up to a maximum bonus of $375,000.
Business Criteria. The CEO's bonus is based on a preestablished performance
goal for each eligible new store or remodel project which shall be based on a
targeted return on invested capital for such project.
Bonus Amount. The bonus award for the CEO is based on the achievement of
specified levels above the performance goal. Prior to the payment of a bonus
award to the CEO, the Section 162(m) Committee must certify in writing the level
of the performance goals attained by the eligible projects.
Bonus Awards to Other Executive Officers.
Eligibility. Each executive officer of the Company (except the CEO)
eligible to participate in the Capital Bonus Plan is eligible for a bonus award
for each fiscal year in an amount equal to a preestablished percentage,
determined in the discretion of the CEO but ranging from 15% to 30%, of the
amount determined by multiplying his regular weekly base salary rate by the
number of weeks during such year that he served as an executive officer, up to a
maximum bonus of $300,000.
Business Criteria. Each eligible executive officer's bonus is based on a
preestablished performance goal for each eligible new store or remodel project
which shall be based on a targeted return on invested capital for such project.
Bonus Amount. The bonus award for each eligible executive officer is based
on the achievement of specified levels above the performance goal; however, the
CEO, in his discretion, may reduce the amount payable to any such executive
officer. Prior to the payment of a bonus award to an eligible executive officer,
the 162(m) Committee must certify in writing the level of the performance goals
attained by the eligible projects.
General
Base Salary Adjustment. Any change in base salary effected after the first
day of the fiscal year shall be taken into account, on a proportionate basis, in
computing any bonus award for the fiscal year.
Method of Payment. Each bonus award shall be paid in cash.
Amendment. The Capital Bonus Plan may be wholly or partially amended or
otherwise modified, suspended or terminated at any time or from time to time by
the Board. However, to the extent required by Section 162(m) with respect to
bonus awards which the Section 162(m) Committee determines should qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code,
no action of the Board may modify the performance goals, target bonus awards, or
the percentages to be used to determine such bonus awards after the commencement
of the fiscal year with respect to which such bonus awards relate.
21
<PAGE> 24
NEW PLAN BENEFITS
CAPITAL PERFORMANCE BONUS PLAN FOR EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE($)(A)
----------------- -------------------
<S> <C>
Steven A. Burd................................... 206,246
President and CEO
Kenneth W. Oder.................................. N/A
Executive Vice President
Julian C. Day.................................... 111,606
Executive Vice President and CFO
Michael C. Ross.................................. N/A
Senior Vice President, Secretary & General
Counsel
Gary D. Smith.................................... 38,804
Senior Vice President
E. Richard Jones................................. 92,814
Former Executive Vice President
Executive Group.................................. 439,323
Non-Executive Director Group..................... N/A
Non-Executive Officer Employee Group............. 92,814
</TABLE>
- ---------------
(a) Represents bonuses paid under the Capital Bonus Plan for fiscal 1997.
BOARD RECOMMENDATION
The Board unanimously recommends a vote FOR the approval of the adoption of
the Capital Bonus Plan because the Board believes it is in the best interest of
the Company to qualify performance-based compensation for deductibility under
Section 162(m) of the Code in order to maximize the Company's income tax
deductions. The affirmative vote of the holders of a majority of shares present
in person or by proxy and entitled to vote at the meeting is necessary to
approve the adoption of the Capital Bonus Plan. Unless otherwise instructed,
proxies will be voted FOR approval of adoption of the Capital Bonus Plan.
PROPOSAL 5
STOCKHOLDER PROPOSAL
Mrs. Evelyn Y. Davis, 2600 Virginia Ave., N.W. #215, Washington, D.C.
20037, who is the owner of 800 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.
Last year, the owners of 35,534,552 shares [pre-split], representing
approximately 16% of the shares voting, voted FOR this proposal.
If you AGREE, please mark your proxy FOR this resolution.
22
<PAGE> 25
BOARD RECOMMENDATION
The Board of Directors recommends a vote against this proposal for the
following reasons:
This proposal was presented at the 1997 Annual Meeting. Owners of
155,536,711 shares (pre-split), representing approximately 81.5% of the shares
voting on the proposal, voted against the proposal or abstained.
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 a Board which will
effectively 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 58% since 1993, 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.
PROPOSAL 6
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 of the Company since 1987, to conduct an audit, in
accordance with generally accepted auditing standards, of the Company's
consolidated financial statements for the 52-week fiscal year ending January 2,
1999. 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 1999 Annual Meeting of
Stockholders must be received at the Company's principal executive offices on or
before December 2, 1998. The Company's Bylaws provide that stockholders desiring
to nominate a director or 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 certain information specified in the Company's Bylaws.
23
<PAGE> 26
ANNUAL REPORT
The Company's Annual Report to Stockholders for the year ended January 3,
1998 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 27, 1998
24
<PAGE> 27
(LOGO)
<PAGE> 28
SAFEWAY INC.
PROXY - For the Annual Meeting - May 12, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
PROXY
The undersigned, having received the Notice of Meeting and Proxy Statement
dated March 27, 1998, appoints Steven A. Burd and Michael C. Ross, and each or
any of them as Proxies, with full power of substitution, to represent and vote
all the shares of Common Stock which the undersigned may be entitled to vote at
the Annual Meeting of Stockholders to be held at the San Ramon Marriott Hotel,
2600 Bishop Drive, San Ramon, California on Tuesday, May 12, 1998, 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 PROPOSALS DESCRIBED IN
ITEMS (2), (3), (4) and (6) AND "AGAINST" THE STOCKHOLDER PROPOSAL DESCRIBED IN
ITEM (5), 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
SEE REVERSE
SIDE
<PAGE> 29
Please mark your
X votes as in this
example
The Board of Directors recommends a vote AGAINST stockholder proposal 5
and FOR proposals 2, 3, 4 and 6.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of Nominees: Steven
Directors A. Burd, Robert I.
MacDonnell,
William Y.
Tauscher
For, except vote withheld for the following nominee(s):
2. Amendment of Restated
Certificate of Incorporation to
increase total number of
authorized shares of
Common Stock.
3. Adoption of Amendments
to Operating Performance
Bonus Plan for Executive
Officers.
4. Adoption of Capital
Performance Bonus Plan for
Executive Officers.
5. Stockholder proposal
on cumulative voting.
6. Appointment of Deloitte
& Touche LLP as
independent auditors for
fiscal year 1998.
7. 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 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
