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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 1, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________ .
COMMISSION FILE NUMBER 1-41
SAFEWAY INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
DELAWARE 94-3019135
(STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OR
ORGANIZATION)
5918 STONERIDGE MALL ROAD
PLEASANTON, CALIFORNIA 94588
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (925) 467-3000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, $0.01 par value per share New York Stock Exchange
9.30% Senior Secured Debentures due 2007 New York Stock Exchange
10% Senior Notes due 2002 New York Stock Exchange
10% Senior Subordinated Notes due 2001 New York Stock Exchange
9.65% Senior Subordinated Debentures due 2004 New York Stock Exchange
9.875% Senior Subordinated Debentures due 2007 New York Stock Exchange
6.85% Senior Notes due 2004 New York Stock Exchange
7.00% Senior Notes due 2007 New York Stock Exchange
7.45% Senior Debentures due 2027 New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
(TITLE OF CLASS)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of the voting stock held by non-affiliates of
Registrant as of March 14, 2000, was $16.3 billion.
As of March 14, 2000, there were issued and outstanding 494.6 million shares
of the Registrant's common stock.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference to the extent specified
herein:
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DOCUMENT DESCRIPTION 10-K PART
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1999 Annual Report to Stockholders.......................... I, II, III, IV
Proxy Statement dated March 28, 2000........................ III
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PART I
ITEM 1. BUSINESS AND ITEM 2. PROPERTIES
GENERAL:
Information appearing on pages 5 through 16 of the 1999 Annual Report to
Stockholders of Safeway Inc. ("Safeway" or the "Company") is incorporated herein
by this reference.
CAPITAL EXPENDITURES:
Information appearing under the caption "Capital Expenditure Program" on
page 15 of the Company's 1999 Annual Report to Stockholders is incorporated
herein by this reference.
Safeway's stores opened, remodels completed, and stores closed or sold
during the last five years were as follows:
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TOTAL
FIVE
YEARS 1999 1998 1997 1996 1995
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Stores opened:
New locations............................ 99 32 28 15 14 10
Replacements............................. 113 35 18 22 16 22
--- ----- ----- ----- ----- -----
212 67 46 37 30 32
=== ===== ===== ===== ===== =====
Remodels completed: (Note A)
Expansions............................... 137 33 28 34 29 13
"Four-Wall" remodels..................... 778 218 206 147 112 95
--- ----- ----- ----- ----- -----
915 251 234 181 141 108
=== ===== ===== ===== ===== =====
Randall's stores acquired.................. 117 117 -- -- -- --
Carrs stores acquired...................... 32 32 -- -- -- --
Dominick's stores acquired................. 113 -- 113 -- -- --
Vons stores acquired....................... 316 -- -- 316 -- --
Stores closed or sold...................... 193 54 30 37 37 35
Total stores at year-end......... 1,659 1,497 1,368 1,052 1,059
</TABLE>
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Note A. Defined as store projects (other than maintenance) generally requiring
expenditures in excess of $200,000.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS:
Note L to the consolidated financial statements, included on page 38 of the
Company's 1999 Annual Report to Stockholders, is incorporated herein by this
reference.
TRADEMARKS:
Safeway has invested significantly in the development and protection of the
"Safeway" name. The right to use the "Safeway" name is considered to be an
important asset. Safeway also owns approximately 150 other trademarks registered
or pending in the United States Patent and Trademark Office, including its
product line names such as Safeway, Safeway SELECT, Lucerne and Mrs. Wright's,
and the marks Vons, Pavilions, Dominick's, Carrs, Randalls and Tom Thumb. Each
trademark registration is for an initial period of 10 or 20 years and is
renewable for as long as the use of the trademark continues. Safeway considers
certain of its trademarks to be of material importance to its business and
actively defends and enforces such trademarks. Safeway has also registered
certain of its trademarks in Canada.
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WORKING CAPITAL:
At year-end 1999, working capital deficit was composed of $3.1 billion of
current assets and $3.6 billion of current liabilities. Normal operating
fluctuations in these substantial balances can result in changes to cash flow
from operations presented in the Consolidated Statements of Cash Flows that are
not necessarily indicative of long-term operating trends. There are no unusual
industry practices or requirements relating to working capital items.
COMPETITION:
Food retailing is intensely competitive. The number of competitors and the
amount of competition experienced by Safeway's stores vary by market area. The
principal competitive factors that affect the Company's business are location,
quality, service, price and consumer loyalty to other brands and stores.
Local, regional, and national food chains as well as independent food
stores and markets comprise the Company's principal competition, although
Safeway also faces substantial competition from convenience stores, liquor
retailers, membership warehouse clubs, specialty retailers, supercenters, and
large-scale drug and pharmaceutical chains. Safeway and its competitors engage
in price competition which, from time to time, has adversely affected operating
margins in many of the Company's markets.
RAW MATERIALS:
Various agricultural commodities constitute the principal raw materials
used by the Company in the manufacture of its food products. Management believes
that raw materials for its products are not in short supply, and all are readily
available from a wide variety of independent suppliers.
COMPLIANCE WITH ENVIRONMENTAL LAWS:
The Company's compliance with the federal, state, and local provisions
which have been enacted or adopted regulating the discharge of materials into
the environment or otherwise relate to the protection of the environment has not
had and is not expected to have a material adverse effect upon the financial
position or results of operations of the Company.
EMPLOYEES:
At year-end 1999, Safeway had more than 193,000 full and part-time
employees. Approximately 90% of Safeway's employees in the United States and
Canada are covered by collective bargaining agreements negotiated with local
unions affiliated with one of 12 different international unions. There are
approximately 400 such agreements, typically having three-year terms, with some
agreements having terms of up to five years. Accordingly, Safeway renegotiates a
significant number of these agreements every year.
In the last three years there has been one significant work stoppage.
During the second quarter of 1997, Safeway was engaged in a 75-day labor dispute
affecting 74 stores in the Alberta, Canada operating area. The work stoppage was
resolved in a manner that management considered generally satisfactory. Safeway
estimates that the Alberta strike reduced 1997 net income by approximately $0.04
per share.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES:
Note L to the consolidated financial statements, included on page 38 of the
Company's 1999 Annual Report to Stockholders and incorporated herein by this
reference, contains financial information by geographic area.
ITEM 3. LEGAL PROCEEDINGS
Information about legal proceedings appearing under the caption "Legal
Matters" as reported in Note K to the consolidated financial statements on pages
37 and 38 of the Company's 1999 Annual Report to Stockholders is incorporated
herein by this reference.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the stockholders during the fourth
quarter of 1999.
EXECUTIVE OFFICERS OF THE COMPANY
The names and ages of the current executive officers of the Company and
their positions as of March 14, 2000, are set forth below. Unless otherwise
indicated, each of the executive officers served in various managerial
capacities with the Company over the past five years. None of the executive
officers named below is related to any other executive officer or director by
blood, marriage or adoption. Officers serve at the discretion of the Board of
Directors.
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YEAR FIRST ELECTED
NAME AND ALL POSITIONS WITH THE COMPANY -------------------------
HELD AT MARCH 14, 2000 AGE OFFICER PRESENT OFFICE
--------------------------------------- --- ------- --------------
<S> <C> <C> <C>
Steven A. Burd.............................................. 50 1992 1993
Chairman, President and Chief Executive Officer
Richard W. Dreiling......................................... 46 1994 1999
Executive Vice President
Marketing and Manufacturing Operations
Kenneth W. Oder............................................. 52 1993 1993
Executive Vice President
Labor Relations, Human Resources, Law, Public
Affairs and Information Technology
Larree M. Renda............................................. 41 1991 1999
Executive Vice President
Retail Operations
David G. Weed............................................... 48 1992 1998
Executive Vice President and
Chief Financial Officer
David F. Bond(1)............................................ 46 1997 1997
Senior Vice President
Finance and Control
David T. Ching.............................................. 47 1994 1994
Senior Vice President and
Chief Information Officer
David F. Faustman(2)........................................ 47 2000 2000
Senior Vice President
Labor Relations and Public Affairs
Dick W. Gonzales(3)......................................... 53 1998 1998
Senior Vice President
Human Resources
Lyman C. Gordon............................................. 53 1993 1998
Senior Vice President
Strategic Development
Lawrence V. Jackson(4)...................................... 46 1997 1997
Senior Vice President
Supply Operations
Melissa C. Plaisance........................................ 40 1993 1995
Senior Vice President
Finance and Investor Relations
Michael C. Ross............................................. 52 1993 1993
Senior Vice President
Secretary and General Counsel
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<CAPTION>
YEAR FIRST ELECTED
NAME AND ALL POSITIONS WITH THE COMPANY -------------------------
HELD AT MARCH 14, 2000 AGE OFFICER PRESENT OFFICE
--------------------------------------- --- ------- --------------
<S> <C> <C> <C>
Kenneth M. Shachmut......................................... 51 1994 1999
Senior Vice President
Corporate Reengineering
Donald P. Wright............................................ 47 1991 1991
Senior Vice President
Real Estate and Engineering
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(1) Mr. Bond was previously a partner at the accounting firm of Deloitte &
Touche LLP.
(2) Mr. Faustman was previously a partner at the law firm of Carlton, DiSante
and Freudenberger LLP.
(3) Mr. Gonzales held the positions of Group Vice President -- Human Resources,
and Senior Vice President -- Human Resources at The Vons Companies, Inc.
from 1993 to 1998.
(4) Mr. Jackson was previously the Senior Vice President, Worldwide Operations
of PepsiCo Food Systems, a division of PepsiCo, Inc., from 1995 to 1997, and
Vice President and General manager of Pepsi-Cola Company, a unit of PepsiCo,
Inc., from 1992 to 1995.
Section 16(a) Beneficial Ownership. Information appearing under the caption
"Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's 2000
Proxy Statement is incorporated herein by this reference.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock, $0.01 par value, is listed on the New York
Stock Exchange. Information as to quarterly sales prices for the Company's
common stock appears in Note N to the consolidated financial statements on page
40 of the Company's 1999 Annual Report to Stockholders and is incorporated
herein by this reference. There were 10,177 stockholders of record as of March
14, 2000; however, approximately 90% of the Company's outstanding stock is held
in "street name" by depositories or nominees on behalf of beneficial holders.
The price per share of common stock, as reported on the New York Stock Exchange
Composite Tape, was $36 1/8 at the close of business on March 14, 2000.
Holders of common stock are entitled to receive dividends if, as, and when
declared by the Board of Directors out of funds legally available therefor,
subject to the dividend and liquidation rights of any preferred stock that may
be issued. The Company has not paid dividends on common stock through 1999 and
has no current plans for dividend payments.
ITEM 6. SELECTED FINANCIAL DATA
The "Five-Year Summary Financial Information" included on page 17 of the
Company's 1999 Annual Report to Stockholders is incorporated herein by this
reference. The Five-Year Summary should be read in conjunction with the
Company's consolidated financial statements and accompanying notes incorporated
by reference in Item 8, Consolidated Financial Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information appearing under the caption "Financial Review" on pages 18
through 20 and under the captions "Capital Expenditure Program" and "Market Risk
from Financial Instruments" on page 16 of the Company's 1999 Annual Report to
Stockholders is incorporated herein by this reference.
Information regarding the terms of outstanding indebtedness appearing in
Note C to the consolidated financial statements on pages 30 and 31 of the
Company's 1999 Annual Report to Stockholders is incorporated herein by this
reference.
Information appearing under the caption "Year 2000" on page 20 of the
Company's 1999 Annual Report to Stockholders is incorporated herein by this
reference.
In June 1998 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which was amended by SFAS 137, which
defines derivatives, requires that derivatives be carried at fair value, and
provides for hedge accounting when certain conditions are met. This statement is
effective for Safeway beginning in the first quarter of 2001. Although the
Company has not fully assessed the implications of this new statement, the
Company believes adoption of this statement will not have a material impact on
its financial statements.
During the first quarter of 1999, the Company adopted SOP 98-5, "Reporting
on the Costs of Start-Up Activities," which requires that costs incurred for
start-up activities, such as store openings, be expensed as incurred. This SOP
did not have a material impact on Safeway's financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information appearing under the caption "Market Risk from Financial
Instruments" on page 16 of the Company's 1999 Annual Report to Stockholders is
incorporated herein by this reference.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS
Pages 21 through 41 of the Company's 1999 Annual Report to Stockholders,
which include the consolidated financial statements and the Independent
Auditors' Report as listed in Item 14(a)1 below, are incorporated herein by this
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT AND COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT
Directors of the Company. Information on the nominees for election as
Directors and the continuing Directors of the Company, which appears under the
caption "Election of Directors" in the Company's 2000 Proxy Statement, is
incorporated herein by this reference.
Executive Officers of the Company. See PART I under the caption "Executive
Officers of the Company".
ITEM 11. EXECUTIVE COMPENSATION
Information appearing under the captions "Executive Compensation" and
"Pension Plans" in the Company's 2000 Proxy Statement is incorporated herein by
this reference. Information appearing under the captions "Report of the
Compensation and Stock Option Committee; Report of the Section 162(m) Committee"
and "Stock Performance Graph" in the Company's 2000 Proxy Statement is not
incorporated herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information appearing under the caption "Beneficial Ownership of
Securities" in the Company's 2000 Proxy Statement is incorporated herein by this
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Note J to the consolidated financial statements, included on page 36 of the
Company's 1999 Annual Report to Stockholders, and the captions "Certain
Relationships and Transactions" and "Compensation Committee Interlocks and
Insider Participation" in the Company's 2000 Proxy Statement contain information
about certain relationships and related transactions and are incorporated herein
by this reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
1. Consolidated Financial Statements of the Company are incorporated
by reference in PART II, Item 8:
Consolidated Statements of Income for fiscal 1999, 1998, and 1997.
Consolidated Balance Sheets as of the end of fiscal 1999 and 1998.
Consolidated Statements of Cash Flows for fiscal 1999, 1998, and 1997.
Consolidated Statements of Stockholders' Equity for fiscal 1999, 1998,
and 1997.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
2. Consolidated Financial Statement Schedules:
None required
3. The following exhibits are filed as part of this report:
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Exhibit 2.1 Agreement and Plan of Merger, dated as of July 22, 1999,
among Safeway Inc., SI Merger Sub, Inc. and Randall's Food
Markets Inc. (incorporated by reference to Exhibit 2 to the
Registrant's Form 8-K dated August 3, 1999).
Exhibit 2.2 Agreement and Plan of Merger dated as of August 6, 1998
among Carr-Gottstein Foods Co., Safeway Inc. and ACG Merger
Sub, Inc. and Stockholder Support Agreement dated August 6,
1998 entered into by Green Equity Investors, L.P. for the
benefit of Safeway Inc. (incorporated by reference to
Exhibit 2.1 of the Registrant's Form 10-Q for the quarterly
period ended September 12, 1998).
Exhibit 2.3 Agreement and Plan of Merger dated as of October 13, 1998,
by and among Safeway Inc., Windy City Acquisition Corp. and
Dominick's Supermarkets, Inc. (incorporated by reference to
Exhibit (c)(1) to Registrant's Schedule 14D-1 dated October
19, 1998), and Stockholders Agreement dated as of October
12, 1998 between Safeway Inc., Windy City Acquisition Corp.,
and each of the stockholders of Dominick's Supermarkets,
Inc. named on the signature pages thereto (incorporated by
reference to Exhibit (c)(2) to Registrant's Schedule 14D-1
dated October 19, 1998).
Exhibit 2.4 Amended and Restated Stock Purchase Agreement, dated as of
January 8, 1997 by and between Safeway Inc. and SSI
Associates, L.P. (incorporated by reference to Exhibit 2.1
to Registrant's Current Report on Form 8-K dated January 8,
1997).
Exhibit 3.1 Restated Certificate of Incorporation of the Company and
Certificate of Amendment of Restated Certificate of
Incorporation by the Company (incorporated by reference to
Exhibit 3.1 to the Registrant's Quarterly Report on Form
10-Q for the quarterly period ended June 15, 1996) and
Certificate of Amendment of Restated Certificate of
Incorporation of Safeway Inc. (incorporated by reference to
Exhibit 3.1 to the Registrant's Quarterly Report on Form
10-Q for the quarterly period ended June 20, 1998).
Exhibit 3.2 Form of By-laws of the Company as amended and restated.
Exhibit 4(i).1 Specimen Common Stock Certificate (incorporated by reference
to Exhibit 4(i).2 to Registration Statement No. 33-33388).
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Exhibit 4(i).2 Registration Rights Agreement dated November 25, 1986
between the Company and certain limited partnerships
(incorporated by reference to Exhibit 4(i).4 to Registration
Statement No. 33-33388) and Amendment to the Registration
Rights Agreement dated as of July 22, 1999 by and between
the Company, certain limited partnerships and RFM
Acquisition LLC (incorporated by reference to Exhibit 4.5 to
Registration Statement No. 333-84749).
Exhibit 4(i).3 Indenture dated as of September 1, 1992 between the Company
and The Chase Manhattan Bank (National Association), as
Trustee, relating to the Company's Debt Securities
(incorporated by reference to Exhibit 4.1 of Registrant's
Form 8-K dated September 16, 1992), as supplemented by the
Supplemental Indenture dated as of September 4, 1997
(incorporated by reference to Exhibit 4(i).9 to Registrant's
Form 10-K for the year ended January 3, 1998).
Exhibit 4(i).4 Form of Officers' Certificate relating to the Company's
Fixed Rate Medium-Term Notes and the Company's Floating Rate
Medium-Term Notes, form of Fixed Rate Note and form of
Floating Rate Note (incorporated by reference to Exhibits
4.2, 4.3 and 4.4 of Registrant's Form 8-K dated September
16, 1992).
Exhibit 4(i).5 Form of Officers' Certificate establishing the terms of a
separate series of Safeway Inc.'s Medium-Term Notes entitled
10% Senior Notes due November 1, 2002, including the form of
Note (incorporated by reference to Exhibits 4.1 and 4.2 of
Registrant's Form 8-K dated November 5, 1992).
Exhibit 4(i).6 Form of Officers' Certificate establishing the terms of a
separate series of Safeway Inc.'s Medium-Term Notes entitled
Medium-Term Notes due June 1, 2003 (Series OPR-1), including
the form of Note (incorporated by reference to Exhibits 4.1
and 4.2 of Registrant's Form 8-K dated June 1, 1993).
Exhibit 4(i).7 Common Stock Purchase Warrants to purchase shares of Safeway
Inc. common stock (incorporated by reference to Exhibit
4(i).13 to Registrant's Form 10-K for the year ended January
3, 1998) and Amendment to Safeway Inc. Common Stock Purchase
Warrant dated as of January 29, 1999 (incorporated by
reference to Exhibit A to Registrant's Form 8-K dated
February 11, 1999).
Exhibit 4(i).8 Credit Agreement dated as of April 8, 1997 among Safeway
Inc., The Vons Companies, Inc. and Canada Safeway Limited as
Borrowers; Bankers Trust Company as Administrative Agent;
The Chase Manhattan Bank as Syndication Agent; The Bank of
Nova Scotia and Bank of America National Trust and Savings
Association as Documentation Agents; the agents listed
therein as Agents; and the lenders listed therein as
Lenders. (incorporated by reference to Exhibit 4(i).1 of the
Registrant's Form 10-Q for the quarterly period ended March
22, 1997).
Exhibit 4(i).9 Indenture, dated as of September 10, 1997, between Safeway
Inc. and The Bank of New York, as Trustee (incorporated by
reference to Exhibit 4.1 to Registrant's Form 8-K dated
September 10, 1997).
Exhibit 4(i).10 Form of Officers' Certificate establishing the terms of the
Registrant's 6.85% Senior Notes due 2004, the Registrant's
7.00% Senior Notes due 2007 and the Company's 7.45% Senior
Debentures due 2027, including the forms of Notes
(incorporated by reference to Exhibits 4.2, 4.3, 4.4, 4.5
and 4.6 to Registrant's Form 8-K dated September 10, 1997).
</TABLE>
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Exhibit 4(i).11 Form of Officers' Certificate establishing the terms of the
Registrant's 5.75% Notes due 2000, 5.875% Notes due 2001,
6.05% Notes due 2003, and 6.50% Notes due 2008, including
forms of Notes (incorporated by reference to Exhibits 4.2,
4.3, 4.4, 4.5 and 4.6 to Registrant's Form 8-K dated
November 9, 1998).
Exhibit 4(i).12 Form of Officers' Certificate establishing terms of the
Registrant's 7.00% Notes due 2002, 7.25% Notes due 2004, and
7.5% Notes due 2004, including the forms of Notes
(incorporated by reference to Exhibits 4.2, 4.3, 4.4, 4.5
and 4.6 to Registrant's Form 8-K dated September 14, 1999).
Exhibit 4(iii) Registrant agrees to provide the Securities and Exchange
Commission, upon request, with copies of instruments
defining the rights of holders of long-term debt of the
Registrant and all of its subsidiaries for which
consolidated financial statements are required to be filed
with the Securities and Exchange Commission.
Exhibit 10(iii).1* 1999 Amended and Restated Equity Participation Plan of
Safeway Inc. (incorporated by reference to Exhibit 10(iii).1
to the Registrant's Quarterly Report on Form 10-Q for the
quarterly period ending June 19, 1999).
Exhibit 10(iii).2* Share Appreciation Rights Plan of Canada Safeway Limited
(incorporated by reference to Exhibit 10(iii).17 to
Registrant's Form 10-K for the year ended December 29, 1990)
and Amendment No. 1 thereto dated December 13, 1991
(incorporated by reference to Exhibit 10(iii).17 to
Registrant's Form 10-K for the year ended December 28,
1991).
Exhibit 10(iii).3* Share Appreciation Rights Plan of Lucerne Foods Ltd.
(incorporated by reference to Exhibit 10(iii).18 to
Registrant's Form 10-K for the year ended December 29, 1990)
and Amendment No. 1 thereto dated December 13, 1991
(incorporated by reference to Exhibit 10(iii).18 to
Registrant's Form 10-K for the year ended December 28,
1991).
Exhibit 10(iii).4* Amended and Restated 1997 Stock Purchase and Option Plan for
Key Employees for Randall's Food Markets, Inc. and
Subsidiaries (incorporated by reference to Exhibit 4.3 to
Randall's Food Markets, Inc.'s Registration Statement on
Form S-8 dated January 19, 1999).
Exhibit 10(iii).5* Randall's Food Markets, Inc. Stock Option Plan and
Restricted Stock Plan (incorporated by reference to Exhibit
4.2 of Registration Statement 333-84749).
Exhibit 10(iii).6* Amendment dated September 11, 1999 to the Randall's Food
Markets, Inc. Stock Option and Restricted Stock and the
Amended and Restated 1997 Stock Purchase and Option Plan for
Randall's Food Markets, Inc. and Subsidiaries (incorporated
by reference to Exhibit 4.3 of Registration Statement
333-84749).
Exhibit 10(iii).7* The 1996 Equity Participation Plan of Dominick's
Supermarkets, Inc. (incorporated by reference to Exhibit
10.13 to Dominick's Supermarkets, Inc.'s Form 10-K for the
year ended November 1, 1996).
Exhibit 10(iii).8* The 1995 Amended and Restated Stock Option Plan of
Dominick's Supermarkets, Inc. (incorporated by reference to
Exhibit 10.12 to Dominick's Supermarkets, Inc.'s Form 10-K
for the year ended November 1, 1996).
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<TABLE>
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Exhibit 10(iii).9* Form of Amendment to Stock Option Agreements under The 1996
Equity Participation Plan of Dominick's Supermarkets, Inc.,
and the 1995 Amended and Restated Stock Option Plan of
Dominick's Supermarkets, Inc. (incorporated by reference to
Exhibit 4.5 to Registrant's Registration on Form S-8 No.
333-67575 dated November 19, 1998).
Exhibit 10(iii).10* Operating Performance Bonus Plan for Executive Officers of
Safeway Inc. (incorporated by reference to Exhibit 10(iii).9
to Registrant's Form 10-K for the year ended January 1,
1994); First Amendment thereto dated January 1, 1997.
(incorporated by reference to Exhibit 10(iii).12 of
Registrant's Form 10-K for the year ended December 28,
1996); Second Amendment thereto dated October 7, 1997; and
Third Amendment thereto dated March 10, 1998 (incorporated
by reference to Exhibit 10(iii).7 of Registrant's Form 10-K
for the year ended January 2, 1998).
Exhibit 10(iii).11* Capital Performance Bonus Plan for Executive Officers of
Safeway Inc. (incorporated by reference to Exhibit 10(iii).8
of Registrant's Form 10-K for the year ended January 2,
1998).
Exhibit 10(iii).12* Retirement Restoration Plan of Safeway Inc. (incorporated by
reference to Exhibit 10(iii).11 to Registrant's Form 10-K
for the year ended January 1, 1994).
Exhibit 10(iii).13* Deferred Compensation Plan for Safeway Directors
(incorporated by reference to Exhibit 10(iii).11 of
Registrant's Form 10-K for the year ended December 31,
1994).
Exhibit 10(iii).14* Form of stock option agreement for former directors of The
Vons Companies, Inc. (incorporated by reference to Exhibit
10(iii).12 of Registrant's Form 10-K for the year ended
December 28, 1996).
Exhibit 10(iii).15* The Vons Companies, Inc. Management Stock Option Plan
(incorporated by reference to Exhibit 10.3 to The Vons
Companies, Inc. Annual Report on Form 10-K for the
twenty-seven weeks ended January 3, 1988).
Exhibit 10(iii).16* The Vons Companies, Inc. 1990 Stock Option and Restricted
Stock Plan (incorporated by reference to Appendix A to The
Vons Companies, Inc. Proxy Statement for its May 17, 1990
Annual Meeting of Shareholders).
Exhibit 10(iii).17* Amendment, dated February 17, 1993, to The Vons Companies,
Inc. 1990 Stock Option and Restricted Stock Plan
(incorporated by reference to Exhibit 10.13.1 to The Vons
Companies, Inc. Form 10-Q for the quarterly period ended
March 28, 1993).
Exhibit 10(iii).18* Safeway Executive Deferred Compensation Plan and Deferral
Election Form.
Exhibit 10(iii).19* Canada Safeway Limited Executive Deferred Compensation Plan
and Deferral Election Form.
Exhibit 10(iii).20* Safeway Inc. Stock Option Gain Deferred Compensation Plan
and Deferral Election Form.
Exhibit 10(iii).21* Amendment, effective as of December 13, 1996, to The Vons
Companies, Inc. 1990 Stock Option and Restricted Stock Plan
(incorporated by reference to Exhibit 10.7.2 to The Vons
Companies, Inc. Form 10-K for the fiscal year ended December
29, 1996).
</TABLE>
11
<PAGE> 12
<TABLE>
<S> <C>
Exhibit 10(iii).22* Form of Amendments, dated April 8, 1997, to The Vons
Companies, Inc. Management Stock Option Plan and The Vons
Companies, Inc. 1990 Stock Option and Restricted Stock Plan
(incorporated by reference to Exhibit 4.5 to Registrant's
Form S-4 filed on March 5, 1997).
Exhibit 11.1 Computation of Earnings per Share (incorporated by reference
to page 39 of the Company's 1999 Annual Report to
Stockholders).
Exhibit 12.1 Computation of Ratio of Earnings to Fixed Charges.
Exhibit 13.1 Registrant's 1999 Annual Report to Stockholders (considered
filed to the extent specified in Item 1, Item 2, Item 3,
Item 5, Item 6, Item 7, Item 8, Item 13 and Exhibit 11.1
above).
Exhibit 22.1 Schedule of Subsidiaries.
Exhibit 23.1 Independent Auditors' Consent.
Exhibit 27 Financial Data Schedule (electronic filing only).
</TABLE>
- ---------------
* Management contract, or compensatory plan or arrangement.
(b) REPORTS ON FORM 8-K:
On September 14, 1999 the Company filed a current report on Form 8-K under
Item 5. "Other Events" that on September 13, Safeway completed an underwritten
offering of $600 million 7% Notes Due 2002, $400 million 7 1/4% Notes Due 2004
and $500 million 7 1/2 Notes Due 2009.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: March 31, 2000 SAFEWAY INC.
By: /s/ STEVEN A. BURD
--------------------------------------
Steven A. Burd
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ DAVID G. WEED Executive Vice President and March 31, 2000
- ----------------------------------------------------- Chief Financial Officer
David G. Weed
/s/ DAVID F. BOND Senior Vice President Finance March 31, 2000
- ----------------------------------------------------- and Control
David F. Bond
/s/ STEVEN A. BURD Director March 31, 2000
- -----------------------------------------------------
Steven A. Burd
/s/ JAMES H. GREENE, JR. Director March 31, 2000
- -----------------------------------------------------
James H. Greene, Jr.
/s/ PAUL HAZEN Director March 31, 2000
- -----------------------------------------------------
Paul Hazen
/s/ HENRY R. KRAVIS Director March 31, 2000
- -----------------------------------------------------
Henry R. Kravis
/s/ ROBERT I. MACDONNELL Director March 31, 2000
- -----------------------------------------------------
Robert I. MacDonnell
/s/ PETER A. MAGOWAN Director March 31, 2000
- -----------------------------------------------------
Peter A. Magowan
/s/ GEORGE R. ROBERTS Director March 31, 2000
- -----------------------------------------------------
George R. Roberts
/s/ REBECCA A. STIRN Director March 31, 2000
- -----------------------------------------------------
Rebecca A. Stirn
/s/ WILLIAM Y. TAUSCHER Director March 31, 2000
- -----------------------------------------------------
William Y. Tauscher
</TABLE>
13
<PAGE> 14
EXHIBIT INDEX
LIST OF EXHIBITS FILED WITH FORM 10-K
FOR THE PERIOD ENDED JANUARY 1, 2000
<TABLE>
<S> <C>
Exhibit 3.2 Form of By-laws of the Company as amended and restated.
Exhibit 10(iii).18 Safeway Executive Deferred Compensation Plan and Deferral
Election Form.
Exhibit 10(iii).19 Canada Safeway Limited Executive Deferred Compensation Plan
and Deferral Election Form.
Exhibit 10(iii).20 Safeway Inc. Stock Option Gain Deferred Compensation Plan
and Deferral Election Form.
Exhibit 12.1 Computation of Ratio of Earnings to Fixed Charges.
Exhibit 13.1 Registrant's 1999 Annual Report to Stockholders (considered
filed to the extent specified in Item 1, Item 2, Item 3,
Item 5, Item 6, Item 7, Item 8, Item 13 and Exhibit 11.1
above).
Exhibit 22.1 Schedule of Subsidiaries.
Exhibit 23.1 Independent Auditors' Consent.
Exhibit 27 Financial Data Schedule (electronic filing only).
</TABLE>
14
<PAGE> 1
EXHIBIT 3.2
================================================================================
BY-LAWS
OF
SAFEWAY INC.
================================================================================
<PAGE> 2
BY-LAWS OF SAFEWAY INC.
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I OFFICES
Section 1. Registered Office................................................... 1
Section 2. Other Offices....................................................... 1
ARTICLE II MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings................................................... 1
Section 2. Annual Meeting of Stockholders ..................................... 1
Section 3. Quorum; Adjourned Meetings and Notice Thereof....................... 3
Section 4. Voting ............................................................. 4
Section 5. Proxies............................................................. 4
Section 6. Special Meetings.................................................... 5
Section 7. Notice of Stockholder's Meetings.................................... 5
Section 8. Maintenance and Inspection of Stockholder List...................... 6
Section 9. Stockholder Action by Written Consent Without Meeting............... 6
ARTICLE III DIRECTORS
Section 1. The Number of Directors............................................. 7
Section 2. Vacancies............................................................ 9
Section 3. Powers.............................................................. 10
Section 4. Place of Directors' Meetings........................................ 10
Section 5. Regular Meetings ................................................... 10
Section 6. Special Meetings ................................................... 11
Section 7. Quorum.............................................................. 11
Section 8. Action Without Meeting.............................................. 11
Section 9. Telephonic Meetings................................................. 12
Section 10. Committees of Directors ............................................ 12
Section 11. Minutes of Committee Meetings ...................................... 13
Section 12. Compensation of Directors .......................................... 13
Section 13. Indemnification..................................................... 14
ARTICLE IV OFFICERS
Section 1. Officers............................................................ 19
Section 2. Election of Officers................................................ 20
Section 3. Subordinate Officers................................................ 20
Section 4. Compensation of Officers............................................ 20
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 5. Term of Office; Removal and Vacancies............................... 20
Section 6. Chairman of the Board............................................... 21
Section 7. President........................................................... 21
Section 8. Vice President...................................................... 22
Section 9. Secretary .......................................................... 22
Section 10. Assistant Secretaries............................................... 23
Section 11. Treasurer .......................................................... 23
Section 12. Assistant Treasurers................................................ 24
ARTICLE V CERTIFICATES OF STOCK
Section 1. Certificates........................................................ 24
Section 2. Signatures on Certificates.......................................... 24
Section 3. Statement of Stock Rights, Preferences, Privileges.................. 25
Section 4. Lost Certificates................................................... 25
Section 5. Transfers of Stock.................................................. 26
Section 6. Fixing Record Date.................................................. 26
Section 7. Registered Stockholders............................................. 27
ARTICLE VI GENERAL PROVISIONS
Section 1. Dividends............................................................27
Section 2. Payment of Dividends; Directors' Duties..............................28
Section 3. Checks...............................................................28
Section 4. Fiscal year ........................................................ 28
Section 5. Corporate Seal ..................................................... 28
Section 6. Manner of Giving Notice............................................. 29
Section 7. Waiver of Notice.................................................... 29
Section 8. Annual Statement.................................................... 29
ARTICLE VII AMENDMENTS
Section 1. Amendment by Directors or Stockholders...............................29
CERTIFICATE OF SECRETARY.........................................................31
</TABLE>
<PAGE> 4
BY-LAWS OF SAFEWAY INC.
ARTICLE I
OFFICERS
Section 1. The registered office shall be in the City of Dover, County
of Kent, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Meetings of stockholders shall be held at any place within
or outside the State of Delaware designated by the Board of Directors. In the
absence of any such designation, stockholders' meetings shall be held at the
principal executive office of the corporation.
Section 2. The annual meeting of stockholders shall be held on such
date and at such time and place as may be fixed by the Board of Directors and
stated in the notice of the meeting, for the purpose of electing directors and
for the transaction of such other business as is properly brought before the
meeting in accordance with these By-Laws.
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<PAGE> 5
To be properly brought before the annual meeting, business must be
either (i) specified in the notice of annual meeting (or any supplement or
amendment thereto) given by or at the direction of the Board of Directors, (ii)
otherwise brought before the annual meeting by or at the direction of the Board
of Directors, or (iii) otherwise brought before the annual meeting by a
stockholder. In addition to any other applicable requirements, for business to
be properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
corporation. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the corporation, not less
than fifty (50) days nor more than seventy-five (75) days prior to the meeting;
provided, however, that in the event that less than sixty-five (65) days' notice
or prior public disclosure of the date of the annual meeting is given or made to
stockholders, notice by a stockholder to be timely must be so received not later
than the close of business on the fifteenth (15th) day following the day on
which such notice of the date of the annual meeting was mailed or such public
disclosure was made, whichever first occurs. A stockholder's notice to the
Secretary shall set forth (a) as to each matter the stockholder proposes to
bring before the annual meeting (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 name and record address of the
stockholder proposing such
-2-
<PAGE> 6
business, (iii) the class, series and number of shares of the corporation which
are beneficially owned by the stockholder, and iv) any material interest of the
stockholder in such business and (b) as to the stockholder giving the notice (i)
the name and record address of the stockholder and (ii) the class and number of
shares of capital stock of the corporation which are beneficially owned by the
stockholder. Notwithstanding anything in the By-Laws to the contrary, no
business shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Article II, Section 2. The officer of the
corporation presiding at an annual meeting shall, if the facts warrant,
determine and declare to the annual meeting that business was not properly
brought before the annual meeting in accordance with the provisions of this
Article II, Section 2, and if he should so determine, he shall so declare to the
annual meeting and any such business not properly brought before the meeting
shall not be transacted. Written notice of the annual meeting stating the place,
date and hour of the annual meeting shall be given to each stockholder entitled
to vote at such meeting not less than ten (10) nor more than sixty (60) days
before the date of the meeting.
Section 3. A majority of the stock issued and outstanding and
entitled to vote at any meeting of stockholders, the holders of which are
present in person or represented by proxy, shall constitute a quorum for the
transaction business except as otherwise provided by law, by the Certificate of
Incorporation,
-3-
<PAGE> 7
or by these By-Laws. A quorum, once established, shall not be broken by the
withdrawal of enough votes to leave less than a quorum and the votes present may
continue to transact business until adjournment. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, a majority of
the voting stock represented in person or by proxy may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote thereat.
Section 4. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy at the meeting and entitled to vote on the subject matter
shall decide any questions brought before such meeting, unless the question is
one upon which by express provisions of the statutes, or the Certificate of
Incorporation or these By-Laws, a different vote is required in which case such
express provision shall govern and control the decision of such question.
Directors or the corporation shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting
-4-
<PAGE> 8
and entitled to vote on the election of directors. Shares represented by proxies
that reflect, with respect to a proposal, abstentions or limited voting
authority, including "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 or proposals) shall be
counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. For purposes of determining the outcome of
any proposal, shares represented by such proxies will be treated as not present
and not entitled to vote with respect to the proposal or proposals.
Section 5. At each meeting of the stockholders, each stockholder
having the right to vote may vote in person or may authorize another person or
persons to act for him by proxy appointed by an instrument in writing subscribed
by such stockholder and bearing a date not more than three years prior to said
meeting, unless said instrument provides for a longer period. All proxies must
be filed with the Secretary of the corporation at the beginning of each meeting
in order to be counted in any vote at the meeting. Each stockholder shall have
one vote for each share of stock having voting power, registered in his name on
the books of the corporation on the record date set by the Board of Directors as
provided in Article V, Section 6 hereof. All elections shall be had and all
questions decided by a plurality vote.
-5-
<PAGE> 9
Section 6. Special meetings of the stockholders, for any purpose, or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the President and shall be called by the
President or the Secretary at the request in writing of a majority of the Board
of Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding,
and entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 7. Whenever stockholders are required or permitted to take
any action at a meeting, a written notice of the meeting shall be given which
notice shall state the place, date and hour of the meeting, and, in the case of
a special meeting, the purpose or purposes for which the meeting is called. The
written notice of any meeting shall be given to each stockholder entitled to
vote at such meeting not less than ten nor more than sixty days before the date
of the meeting. If mailed, notice is given when deposited in the United States
mail, postage prepaid, directed to the stockholder at his address as it appears
on the records of the corporation.
Section 8. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in
-6-
<PAGE> 10
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 9. Unless otherwise provided in the Certificate of
Incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
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<PAGE> 11
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
Board shall be nine (9). The directors need not be stockholders. Only persons
who are nominated in accordance with the following procedures shall be eligible
for election as directors. Nominations of persons for election to the Board of
Directors of the corporation at the annual meeting may be made at such meeting
by or at the direction of the Board of Directors, by any committee of persons
appointed by the Board of Directors or by any stockholder of the corporation
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in this Article III, Section 1. Such nominations
by any stockholder shall be made pursuant to timely notice in writing to the
Secretary of the corporation. To be timely, a stockholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
corporation not less that 50 days nor more than 75 days prior to the meeting;,
provided, however, that in the event that less than 65 days notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business of the fifteenth (15th) day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was made,
whichever first occurs. Such
-8-
<PAGE> 12
stockholder's notice to the Secretary shall set forth (i) as to each person whom
the stockholder proposes to nominate for election or reelection as a director,
(a) the name, age, business address and residence address of the person, (b) the
principal occupation or employment of the person, (c) the class and number of
shares of capital stock of the corporation which are beneficially owned by the
person, and (d) any other information relating to the person that is required to
be disclosed in solicitations for proxies for election of directors pursuant to
the Rules and Regulations of the Securities and Exchange Commission under
Section 14 of the Securities Exchange Act of 1934, as amended; and (ii) as to
the stockholder giving the notice (a) the name and record address of the
stockholder and (b) the class and number of shares of capital stock of the
corporation which are beneficially owned by the stockholder. The corporation may
require any proposed nominee to furnish such other information as may reasonably
be required by the corporation to determine the eligibility of such proposed
nominee to serve as a director of the corporation. No person shall be eligible
for election as a director of the corporation unless nominated in accordance wit
the procedures set forth herein. The officer of the corporation presiding at an
annual meeting shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the foregoing procedure, and
if he should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
-9-
<PAGE> 13
The directors shall be elected at the annual meeting of the stockholders, except
as provided in Section 2 of this Article III, and each director elected shall
hold office until his successor is elected and qualified; provided, however,
that unless otherwise restricted by the Certificate of Incorporation or law, any
director or the entire the Board of Directors may be removed, either with or
without cause, from the Board of Directors at any meeting of stockholders by a
majority of the stock represented and entitled to vote thereat.
Section 2. Vacancies on the Board of Directors by reason of death,
resignation, retirement, disqualification, removal from office, or otherwise,
and newly created directorships resulting from any increase in the authorized
number of directors may be filled by a majority of the directors then in office,
although less than a quorum, or by a sole remaining director. The directors so
chosen shall hold office until the next annual election of directors and until
their successors are duly elected and shall qualify, unless sooner displaced. If
there are no directors in office, then an election of directors may be held in
the manner provided by statute. If, at the time of filling any vacancy or any
newly created directorship, the directors then in office shall constitute less
than a majority of the whole Board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent of the total number of the shares at
the time outstanding having the right to vote for
-10-
<PAGE> 14
such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. The property and business of the corporation shall be
managed by or under the direction of its Board of Directors. In addition to the
powers and authorities by these By-Laws expressly conferred upon them, the Board
may exercise all such powers of the corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-Laws directed or required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The directors may hold their meetings and have one or more
offices, and keep the books of the corporation outside of the State of Delaware.
Section 5. Regular meetings of the Board of Directors may be held
without notice at such time and place as shall from time to time be determined
by the Board.
Section 6. Special meetings of the Board of Directors may be called
by the President on forty-eight hours' notice to each director, either
personally or by mail or by telegram; special meetings shall be called by the
President or
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<PAGE> 15
the Secretary in like manner and on like notice on the written request of two
directors unless the Board consists of only one director; in which case special
meetings shall be called by the President or Secretary in like manner or on like
notice on the written request of the sole director.
Section 7. At all meetings of the Board of Directors a majority of
the authorized number of directors shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the vote of a majority
of the directors present at any meeting at which there is a quorum, shall be the
act of the Board of Directors, except as may be otherwise specifically provided
by statute, by the Certificate of Incorporation or by these By-Laws. If a quorum
shall not be present at any meeting of the Board of Directors the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present. If only one
director is authorized, such sole director shall constitute a quorum.
Section 8. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
Section 9. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any
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<PAGE> 16
committee, by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at such
meeting.
COMMITTEES OF DIRECTORS
Section 10. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each such
committee to consist of one or more of the directors of the corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease
-13-
<PAGE> 17
or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the By-Laws of the corporation; and,
unless the resolution or the Certificate of Incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
Section 11. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 12. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
INDEMNIFICATION
Section 13(a). The corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding,
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<PAGE> 18
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amount paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer, employee
or agent of
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<PAGE> 19
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no such indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the corporation unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
corporation shall be successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraph (a) and (b), or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification under paragraphs (a) and (b) (unless ordered
by a court) shall be made by the corporation only
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<PAGE> 20
as authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in paragraphs (a) and
(b). Such determination shall be made (1) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable, a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses incurred by an officer or director in defending a civil
or criminal action, suit or proceeding may be paid by the corporation in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this Section 13. Such expenses incurred by
other employees and agents may be so paid upon such terms and conditions, if
any, as the Board of Directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of this Section 13 shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
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official capacity and as to action in another capacity while holding such
office.
If a claim for indemnification or payment of expenses under this
Section 13 is not paid in full within ninety (90) days after a written claim
therefor has been received by the corporation, the claimant may file suit to
recover the unpaid amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such claim. In any such
action the corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification or payment of expenses under
applicable law.
(g) The Board of Directors may authorize, by a vote of a majority of
a quorum of the Board of Directors, the corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability under the provisions of this Section 13.
(h) The Board of Directors may authorize the corporation to enter
into a contract with any person who is or was a director, officer,
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employee or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise providing for
indemnification rights equivalent to or, if the Board of Directors so
determines, greater than those provided in Section 13.
(i) For the purposes of this Section 13, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent or a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Section with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
(j) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include service
as a director, officer, employee or agent of the corporation which imposes
duties on, or involves services by, such director,
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officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interest of the corporation" as referred to in
this section.
(k) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 13 shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE IV
OFFICERS
Section 1. The officers of this corporation shall be chosen by the
Board of Directors and shall include a President, a Secretary, and a Treasurer.
The corporation may also have at the discretion of the Board of Directors such
other officers as are desired, including a Chairman of the Board, one or more
Vice Presidents, one or more Assistant Secretaries and Assistant Treasurers, and
such other officers as may be appointed in accordance with the provisions of
Section 3 hereof. In the event there are two or more Vice Presidents, then one
or more may be designated as Executive Vice President, Senior Vice President, or
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other similar or dissimilar title. At the time of the election of officers, the
directors may by resolution determine the order of their rank. Any number of
offices may be held by the same person, unless the Certificate of Incorporation
or these By-Laws otherwise provide.
Section 2. The Board of Directors, at its first meeting after each
annual meeting of stockholders, shall choose the officers of the corporation.
Section 3. The Board of Directors may appoint such other officers and
agents as its shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify in their stead. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors. If the office of any
officer or officers becomes vacant for any reason, the vacancy shall be filled
by the Board of Directors.
CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if such an officer be elected,
shall, if present, preside at all meetings of the Board of Directors and
exercise and perform such other powers and
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duties as may be from time to time assigned to him by the Board of Directors or
prescribed by these By-Laws. If there is no President, the Chairman of the Board
shall in addition be the Chief Executive Officer of the corporation and shall
have the powers and duties prescribed in Section 7 of this Article IV.
PRESIDENT
Section 7. Subject to such supervisory powers, if any, as may be give
by the Board of Directors to the Chairman of the Board, if there be such an
officer, the President shall be the Chief Executive Officer of the corporation
and shall, subject to the control of the Board of Directors, have general
supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the stockholders and, in the
absence of the Chairman of the Board, or if there be none, at all meeting of the
Board of Directors. He shall be an ex-officio member of all committees and shall
have the general powers and duties of management usually vested in the office of
President and Chief Executive Officer of corporations, and shall have such other
powers and duties as may be prescribed by the Board of Directors or these
By-Laws.
VICE PRESIDENTS
Section 8. In the absence or disability of the President, the Vice
Presidents in order of their rank as fixed by the Board of Directors, or if not
ranked, the Vice President designated by the Board of Directors, shall perform
all the duties of the President, and when so acting shall have all the powers of
and be
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subject to all the restrictions upon the President. The Vice Presidents shall
have such other duties as from time to time may be prescribed for them,
respectively, the Board of Directors.
SECRETARY AND ASSISTANT SECRETARY
Section 9. The Secretary shall attend all sessions of the Board of
Directors and all meetings of the stockholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose; and shall
perform like duties for the standing committees when required by the Board of
Directors. He shall give, or cause to be given, notice of all meetings of the
stockholders and of the Board of Directors, and shall perform such other duties
as may be prescribed the Board of Directors or these By-Laws. He shall keep in
safe custody the seal of the corporation, and when authorized by the Board,
affix the same to any instrument requiring it, and when so affixed it shall be
attested by his signature or by the signature of an Assistant Secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the corporation and to attest the affixing by his signature.
Section 10. The Assistant Secretary, or if there be more than one,
the Assistant Secretaries in the order determined by the Board of Directors, or
if there be no such determination, the Assistant Secretary designated by the
Board of Directors, shall, in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary and shall perform
such
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other duties and have such other powers as the Board of Directors may from time
to time prescribe.
TREASURER AND ASSISTANT TREASURER
Section 11. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
moneys, and other valuable effects in the name and to the credit of the
corporation, in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the Board of Directors, at its regular meetings, or when the Board of
Directors so requires, an account of all his transactions as Treasurer and of
the financial condition of the corporation. If required by the Board of
Directors, he shall give the corporation a bond, in such sum and with such
surety or sureties as shall be satisfactory to the Board of Directors, for the
faithful performance of the duties of his office and for the restoration to the
corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 12. The Assistant Treasurer, or if there shall be more than
one, the Assistant Treasurers in the order determined by the Board of Directors,
or if there be no such determination,
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the Assistant Treasurer designated by the Board of Directors, shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
ARTICLE V
CERTIFICATES OF STOCK
Section 1. Every holder of stock of the corporation shall be entitled
to have a certificate signed by, or in the name of the corporation by, the
Chairman or Vice Chairman of the Board of Directors, or the President or a Vice
President, and by the Secretary or an Assistant Secretary, or the Treasurer or
an Assistant Treasurer or the corporation, certifying the number of shares
represented by the certificate owned by such stockholder in the corporation.
Section 2. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent, or registrar at the date of issue.
Section 3. If the corporation shall be authorized to issue more than
one class of stock or more than one series of any
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class, the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualification, limitations or restrictions of such preferences and/or rights
shall be set forth in full or summarized on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock,
provided that, except as otherwise provided in section 202 of the General
Corporation Law of Delaware, in lieu of the foregoing requirements, there may be
set forth on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
LOST, STOLEN OR DESTROYED CERTIFICATES
Section 4. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such
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lost, stolen or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the corporation a bond in such sum as it may direct as indemnity against
any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
Section 5. Upon surrender to the corporation, or the transfer agent
of the corporation, of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 6. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of the
stockholders, or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix a
record date which shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action. A
determination of
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stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
the Board of Directors may fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 7. The corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact thereof and
accordingly shall not be bound to recognize any equitable or other claim or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof, save as expressly provided by the laws of
the State of Delaware.
ARTICLE VI
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their
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absolute discretion, think proper as a reserve fund to meet contingencies, or
for equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the directors shall think conducive to
the interests of the corporation, and the directors may abolish any such
reserve.
CHECKS
Section 3. All checks of demands for money and notes of the
corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 5. The corporate seal shall have inscribed thereon the name
of the corporation, the year or its organization and the words "Corporate Seal,
Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
NOTICES
Section 6. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these By-Laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
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corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 7. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
By-Laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ANNUAL STATEMENT
Section 8. The Board of Directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the corporation.
ARTICLE VII
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed or new
By-Laws may be adopted by the stockholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the Certificate of
Incorporation, at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such
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alteration, amendment, repeal or adoption of new By-Laws be contained in the
notice of such special meeting. If the power to adopt, amend or repeal By-Laws
is conferred upon the Board of Directors by the Certificate of Incorporation it
shall not divest or limit the power of the stockholders to adopt, amend or
repeal By-Laws.
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CERTIFICATE OF ASSISTANT SECRETARY
I, the undersigned, do hereby certify:
1. That I am the duly elected and acting Assistant Secretary of
Safeway Inc., a Delaware corporation; and
2. That the foregoing By-Laws constitute the By-Laws of said
corporation as adopted by the written consent of the Incorporator of said
corporation as of July 23, 1986 and as last amended on May 10, 1999. IN WITNESS
WHEREOF, I have hereunto subscribed my name as of this 10th day of May, 1999.
-------------------------
Meredith S. Parry
Assistant Secretary
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EXHIBIT 10(iii).18
SAFEWAY EXECUTIVE
DEFERRED COMPENSATION PLAN
WHEREAS, Safeway Inc., a Delaware corporation (the
"Company") desires to establish the Safeway Executive Deferred Compensation Plan
to provide supplemental retirement income benefits for a select group of
management and highly compensated employees through deferrals of salary and
incentive compensation as well as Company contributions, effective as of
November 1, 1999.
NOW, THEREFORE, effective as of November 1, 1999, the Plan
is hereby adopted to read as follows:
ARTICLE I.
TITLE AND DEFINITIONS
1.1 Title.
This Plan shall be known as the Safeway Executive Deferred
Compensation Plan.
1.2 Definitions.
Whenever the following words and phrases are used in this
Plan, with the first letter capitalized, they shall have the meanings specified
below.
(a) "Account" or "Accounts" shall mean a Participant's Deferred
Account, 401(k) Excess Account and/or Company Discretionary Contribution
Account.
(b) "Base Salary" shall mean a Participant's annual base
salary, excluding bonus, incentive and all other remuneration for services
rendered to the Company, prior to reduction for any salary contributions to a
plan established pursuant to Section 125 of the Code or qualified pursuant to
Section 401(k) of the Code.
(c) "Beneficiary" or "Beneficiaries" shall mean the person or
persons, including a trustee, personal representative or other fiduciary, last
designated in writing by a Participant in accordance with the procedures
established by the Committee to receive the benefits specified hereunder in the
event of the Participant's death. However, no designation of a Beneficiary other
than the Participant's spouse shall be valid unless consented in writing by such
spouse. No Beneficiary designation shall become effective until it is filed with
the Committee. Any designation shall be revocable at any time through a written
instrument filed by the Participant with the Committee with or without the
consent of the previous Beneficiary. If there is no Beneficiary designation in
effect, or the designated beneficiary does not survive the Participant, then the
Participant's spouse shall be the Beneficiary. If there is no surviving spouse,
the duly appointed and currently acting personal representative of the
Participant's estate (which shall include either the Participant's probate
estate or living trust) shall be the Beneficiary. In any case where there is no
such personal representative of the Participant's estate duly appointed and
acting in that capacity within 90 days after the Participant's death (or such
extended period as the Committee determines is reasonably necessary to allow
such personal representative to be
<PAGE> 2
appointed, but not to exceed 180 days after the Participant's death), then
Beneficiary shall mean the person or persons who can verify by affidavit or
court order to the satisfaction of the Committee that they are legally entitled
to receive the benefits specified hereunder. In the event any amount is payable
under the Plan to a minor, payment shall not be made to the minor, but instead
be paid (a) to that person's living parent(s) to act as custodian, (b) if that
person's parents are then divorced, and one parent is the sole custodial parent,
to such custodial parent, or (c) if no parent of that person is then living, to
a custodian selected by the Committee to hold the funds for the minor under the
Uniform Transfers or Gifts to Minors Act in effect in the jurisdiction in which
the minor resides. If no parent is living and the Committee decides not to
select another custodian to hold the funds for the minor, then payment shall be
made to the duly appointed and currently acting guardian of the estate for the
minor or, if no guardian of the estate for the minor is duly appointed and
currently acting within 60 days after the date the amount becomes payable,
payment shall be deposited with the court having jurisdiction over the estate of
the minor. Payment by the Company pursuant to any unrevoked Beneficiary
designation, or to the Participant's estate if no such designation exists, of
all benefits owed hereunder shall terminate any and all liability of the
Company.
(d) "Board of Directors" or "Board" shall mean the Board of
Directors of the Company.
(e) "Bonuses" shall mean the incentive compensation earned
during the Company's fiscal year.
(f) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(g) "Committee" shall mean the Committee appointed by the Board
to administer the Plan in accordance with Article VII.
(h) "Company" shall mean Safeway Inc. and any successor
corporations. Company shall also include each corporation which is a member of a
controlled group of corporations (within the meaning of Section 414(b) of the
Code) of which Safeway Inc. is a component member, if the Board provides that
such corporation shall participate in the Plan and such corporation's governing
board of directors adopts this Plan.
(i) "Company Discretionary Contribution Account" shall mean the
bookkeeping account maintained by Company for each Participant that is credited
with an amount equal to the Company Discretionary Amount, if any, and earnings
and losses pursuant to Section 4.2.
(j) "Company Discretionary Contributions" shall mean, for each
Participant for a Plan Year, an additional discretionary amount allocated to a
Participant under this Plan as determined by the Committee. Such amount may
differ from Participant to Participant both in amount, including no
contribution, and as a percentage of Compensation.
(k) "Compensation" shall mean Base Salary, and Bonuses that the
Participant is entitled to receive for services rendered to the Company.
(l) "Deferred Amount" shall mean the bookkeeping account
maintained by the Committee for each Participant that is credited with amounts
equal to (1) the portion of the
2
<PAGE> 3
Participant's Compensation that he or she elects to defer pursuant to Section
3.1, and (2) the Interest Rate pursuant to Section 4.1(b).
(m) "Disability" shall mean a "disability" as defined in the
Company's long-term disability plan, as then in effect.
(n) "Distributable Amount" shall mean the sum of the vested
balance of a Participant's Deferred Account, 401(k) Excess Account and Company
Discretionary Contribution Account.
(o) "Early Distribution" shall mean an election by a
Participant in accordance with Section 6.2 to receive a withdrawal of amounts
from his or her Deferral Account, 401(k) Excess Account and Company
Discretionary Contribution Account prior to the time in which such Participant
would otherwise be entitled to such amounts.
(p) "Effective Date" shall mean November 1, 1999.
(q) "Eligible Employee" shall mean individuals selected by the
Committee from those employees of the Company (i) at the level of "director" or
above and/or who are eligible to participate in the director level bonus plan,
and (ii) whose potential maximum Compensation for a Calendar Year is at least
$100,000, as adjusted by the Committee from time to time. The Committee may, in
its sole discretion, select such other individuals to participate in the Plan
who do not otherwise meet the foregoing criteria.
(r) "401(k) Excess Account" shall mean the bookkeeping account
maintained by the Committee for each Participant that is credited with amounts
equal to (1) the Participant's 401(k) Excess Contributions, and (2) the Interest
Rate pursuant to Section 4.3(b).
(s) "401(k) Excess" shall mean the amount, if any, limited by
or distributable to a Participant from the 401(k) Plan by reason of Code Section
401(k)(8) and the regulations issued thereunder, or which may not be contributed
to the 401(k) Plan by reason of the limitations set forth in Code Section
402(g).
(t) "401(k) Plan" shall mean the defined contribution plan, if
any, maintained by the Company under Code Section 401(k), as in effect from time
to time.
(u) "Fund" or "Funds" shall mean one or more of the investment
funds selected by the Committee pursuant to Section 3.2(b).
(v) "Hardship Distribution" shall mean a severe financial
hardship to the Participant resulting from (i) a sudden and unexpected illness
or accident of the Participant or of his or her Dependent (as defined in Section
152(a) of the Code), (ii) loss of a Participant's property due to casualty, or
(iii) other similar extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of the Participant. The circumstances that
would constitute an unforeseeable emergency will depend upon the facts of each
case, but, in any case, a Hardship Distribution may not be made to the extent
that such hardship is or may be relieved (A) through reimbursement or
compensation by insurance or otherwise, (B) by liquidation of the Participant's
3
<PAGE> 4
assets, to the extent the liquidation of such assets would not itself cause
severe financial hardship, or (C) by cessation of deferrals under this Plan.
(w) "Initial Election Period" for an Eligible Employee on the
Effective Date shall mean the period ending October 27, 1999 and for each other
Eligible Employee the 30-day period following the time an individual receives
notice of eligibility to participate in the Plan.
(x) "Interest Rate" shall mean, for each Fund, an amount equal
to the net rate of gain or loss on the assets of such Fund during each month.
(y) "Participant" shall mean any Eligible Employee who becomes
a Participant in accordance with Section 2.1
(z) "Payment Date" shall mean the time as soon as practicable
after (1) the first day of the month following the end of the calendar quarter
in which the Participant's employment terminates for any reason, or (2) the
Scheduled Withdrawal Date.
(aa) "Plan" shall mean the Safeway Executive Deferred
Compensation Plan set forth herein, now in effect, or as amended from time to
time.
(bb) "Plan Year: shall mean the initial period beginning on
November 1, 1999 and ending on December 31, 1999 and thereafter the 12
consecutive month period beginning on each January 1 and ending on each December
31.
(cc) "Retirement" shall mean a Participant's voluntary
retirement from employment with the Company on or after age 55 in accordance
with the Company's retirement policies as then in effect.
(dd) "Scheduled Withdrawal Date" shall be in January in the
year elected by the Participant for an in-service withdrawal of all amounts of
Compensation or 401(k) Excess deferred or Company Discretionary Contributions in
a given Plan Year, and earnings and losses attributable thereto, as set forth on
the election forms for such Plan Year; provided that the Scheduled Withdrawal
Date for Company Discretionary Contributions shall not be sooner than two (2)
years following the date the Participant becomes fully vested in any such
contributions.
(ee) "Termination of Employment" shall mean the Participant
ceasing to be an employee of the Company for reasons other than death,
Disability or Retirement.
(ff) "Trust" shall mean the Safeway Executive Deferred
Compensation Plan Trust.
ARTICLE II.
PARTICIPATION
An Eligible Employee shall become a Participant in the Plan
by (1) electing to defer a portion of his or her Compensation in accordance with
Section 3.1, and (2) filing such other forms as the Committee may reasonably
require for participation hereunder. An Eligible
4
<PAGE> 5
Employee who completes the requirements of the preceding sentence shall commence
participation in this Plan as of the first day of the month in which
Compensation is deferred.
ARTICLE III.
DEFERRAL ELECTIONS
3.1 Elections to Defer Compensation.
(a) Initial Election Period. Subject to the provisions of
Article II, each Eligible Employee may defer Base Salary, Bonuses and/or 401(k)
Excess by filing with the Committee an election that conforms to the
requirements of this Section 3.1, on a form provided by the Committee, no later
than the last day of his or her Initial Election Period.
(b) General Rule. The amount of Compensation which a
Participant may elect to defer is such Compensation earned on or after the time
at which the Participant elects to defer in accordance with Section 3.1(a) and
shall be a flat dollar amount or a percentage of Base Salary and/or Bonus which
shall not exceed 100% of the Participant's Base Salary and/or 100% of his Bonus,
provided that the total amount deferred by a Participant shall be limited in any
calendar year, if necessary, to satisfy the Employee's income and employment tax
withholding obligations (including Social Security, unemployment and Medicare),
and the Employee's employee benefit plan contribution requirements, as
determined in the sole and absolute discretion of the Committee. The minimum
contribution which may be made in any Plan Year by a Participant shall not be
less than $5,000 ($2,500 in the initial Plan Year), provided such minimum
contribution can be satisfied from either deferrals of Base Salary, Bonus and/or
401(k) Excess.
(c) Duration of Compensation Deferral Election. An Eligible
Employee's initial election to defer Compensation or 401(k) Excess must be filed
before the Initial Election Period and is to be effective for the next pay
period. A Participant may modify or suspend his election to defer Compensation
or 401(k) Excess effective as of each March 1, June 1 and October 1 of a Plan
Year by filing such an election at least 30 days prior to the effective date of
such modification or suspension. A Participant must file a new election for each
subsequent Plan Year on or before December 1, which election shall be effective
on the first day of the next following Plan Year. In the event a Participant
fails to timely file an election, he should be deemed to have elected not to
have deferred any Compensation or 401(k) Excess for any relevant period.
(d) Elections other than Elections during the Initial Election
Period. Subject to the limitations of Section 3.1(b) above, any Eligible
Employee who fails to elect to defer Compensation and/or 401(k) Excess during
his or her Initial Election Period may subsequently become a Participant, and
any Eligible Employee who has terminated a prior deferral election may elect to
again defer Compensation and/or 401(k) Excess, by filing an election, on a form
provided by the Committee, to defer Compensation as described in Sections 3.1(b)
and 3.1(c) above. An election to defer Compensation and/or 401(k) Excess must be
filed at least 30 days prior to the effective date of such election and will be
effective for Compensation and/or 401(k) Excess earned during periods beginning
after the effective date of such election.
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3.2 Investment Elections.
(a) At the time of making the deferral elections described in
Section 3.1, the Participant shall designate, on a form provided by the
Committee, the types of investment funds the Participant's Account will be
invested in for purposes of determining the amount of earnings to be credited to
that Account. In making the designation pursuant to this Section 3.2, the
Participant may specify that all or any multiple of his Deferral Account shall
be deemed to be invested in one or more of the types of investment funds
provided under the Plan. Effective as of the first day of the next calendar
month a Participant may change the designation made under this Section 3.2 by
filing an election, on a form provided by the Committee, at least five calendar
days prior to the end of the month prior to the month in which such change will
be effective. If a Participant fails to elect a type of fund under this Section
3.2, he or she shall be deemed to have elected the Money Market type of
investment fund.
(b) Although the Participant may designate the type of
investment funds in Section 3.2(a) above, the Committee shall not be bound by
such designation. The Committee shall select from time to time, in its sole
discretion, such investment funds to be the Funds available under the Plan. The
Interest Rate of each such investment fund shall be used to determine the amount
of earnings or losses to be credited to Participant's Account under Article IV.
ARTICLE IV.
ACCOUNTS AND TRUST FUNDING
4.1 Deferral Accounts.
The Committee shall establish and maintain a Deferral
Account for each Participant under the Plan. Each Participant's Deferral Account
shall be further divided into separate subaccounts ("investment fund
subaccounts"), each of which corresponds to a investment fund elected by the
Participant pursuant to Section 3.2(a). A Participant's Deferral Account shall
be credited as follows:
(a) Within five business days after each payroll date, the
Committee shall credit the investment fund subaccounts of the Participant's
Deferral Account with an amount equal to Compensation deferred by the
Participant during each pay period in accordance with the Participant's election
under Section 3.2(a); that is, the portion of the Participant's deferred
Compensation that the Participant has elected to be deemed to be invested in a
certain type of investment fund shall be credited to the investment fund
subaccount corresponding to that investment fund;
(b) As of the last day of each month, each investment fund
subaccount of a Participant's Deferral Account shall be credited with earnings
or losses in an amount equal to that determined by multiplying the balance
credited to such investment fund subaccount as of the last day of the preceding
month plus contributions during the current month commencing on the date such
contributions are credited to the investment fund subaccount by the Interest
Rate for the corresponding fund selected by the Company pursuant to Section
3.2(b).
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(c) In the event that a Participant elects for a given Plan
Year's deferral of Compensation to have a Scheduled Withdrawal Date, all amounts
attributed to the deferral of Compensation for such Plan Year shall be accounted
for in a manner which allows separate accounting for the deferral of
Compensation and investment gains and losses associated with such Plan Year's
deferral of Compensation.
4.2 Company Discretionary Contribution Account.
The Committee shall establish and maintain a Company
Discretionary Contribution Account for each Participant under the Plan, which
shall be credited the amount of Company Discretionary Contributions, if any,
contributed to the Plan on behalf of such Participant. Each Participant's
Company Discretionary Contribution Account shall be further divided into
separate investment fund subaccounts corresponding to the investment fund
elected by the Participant pursuant to Section 3.2(a). A Participant's Company
Discretionary Contribution Account shall be credited as follows:
(a) The Committee shall credit the investment fund subaccounts
of the Participant's Company Discretionary Contribution Account with an amount
equal to the Company Discretionary Contribution Amount, if any, applicable to
that Participant, that is, the proportion of the Company Discretionary
Contribution Amount, if any, which the Participant elected to be deemed to be
invested in a certain type of investment fund shall be credited to the
corresponding investment fund subaccount; and
(b) As of the last day of each month, each investment fund
subaccount of a Participant's Company Discretionary Contribution Account shall
be credited with earnings or losses in an amount equal to that determined by
multiplying the balance credited to such investment fund subaccount as of the
last day of the preceding month plus contributions during the current month
commencing on the date such contributions are credited to the investment fund
subaccount by the Interest Rate for the corresponding Fund selected by the
Company pursuant to Section 3.2(b).
4.3 401(k) Excess Account.
The Committee shall establish and maintain a 401(k) Excess
Account for each Participant under the Plan, which shall be credited the amount
of 401(k) Excess, if any, contributed to the Plan on behalf of such Participant.
Each Participant's 401(k) Excess Account shall be further divided into separate
investment fund subaccounts corresponding to the investment fund elected by the
Participant pursuant to Section 3.2(a). A Participant's 401(k) Excess Account
shall be credited as follows:
(a) The Committee shall credit the investment fund subaccounts
of the Participant's 401(k) Excess Account with an amount equal to the 401(k)
Excess, if any, applicable to that Participant, that is, the proportion of the
401(k) Excess, if any, which the Participant elected to be deemed to be invested
in a certain type of investment fund shall be credited to the corresponding
investment fund subaccount; and
(b) As of the last day of each month, each investment fund
subaccount of a Participant's 401(k) Excess Account shall be credited with
earnings or losses in an amount equal
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to that determined by multiplying the balance credited to such investment fund
subaccount as of the last day of the preceding month plus contributions during
the current month commencing on the date such contributions are credited to the
investment fund subaccount by the Interest Rate for the corresponding Fund
selected by the Company pursuant to Section 3.2(b).
4.4 Trust Funding.
The Company has created the Trust to hold contributions
made to this Plan. The Company shall contribute to the Trust an amount equal to
the amount deferred by each Participant for the Plan Year.
Although the principal of the Trust and any earnings
thereon shall be held separate and apart from other funds of Company and shall
be used exclusively for the uses and purposes of Plan Participants and
beneficiaries as set forth therein, neither the Participant nor their
beneficiaries shall have any preferred claim on, or any beneficial ownership in,
any assets of the Trust prior to the time such assets are paid to the
Participants or beneficiaries as benefits and all rights created under this Plan
shall be unsecured contractual rights of Plan Participants and beneficiaries
against the Company. Any assets held in the Trust will be subject to the claims
of Company's general creditors under federal and state law in the event of
insolvency as defined in Section 3 of the Trust.
Except as provided in Section 4.5, the assets of the Plan
and Trust shall never inure to the benefit of the Company and the same shall be
held for the exclusive purpose of providing benefits to Participants and their
beneficiaries, other than reasonable expenses of administering the Plan and
Trust.
4.5 Forfeitures.
The Company may use (i) forfeitures of any non-vested
Company Discretionary Contributions, (ii) amounts forfeited under Section 6.2(d)
upon Early Distribution, and (iii) amounts forfeited under Section 6.4, to pay
expenses and costs associated with the administration of the Plan and Trust
and/or to restore Participants' Accounts under Section 6.4.
ARTICLE V.
VESTING
A Participant's Deferral Account and 401(k) Excess Account
shall be 100% vested at all times. A Participant's Company Discretionary
Contribution Account, if any, shall be subject to such vesting schedule as the
Committee may establish at the time the Company Discretionary Contributions are
made to the Plan.
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ARTICLE VI.
DISTRIBUTIONS
6.1 Distribution of Accounts.
(a) Distribution upon Termination of Employment. Upon
Termination of Employment or the death of the Participant while in the employ of
the Company, the Distributable Amount shall be paid to the Participant (and
after his or her death to his or her Beneficiary) in a lump sum on the
Participant's Payment Date.
(b) Distribution upon Disability or Retirement. Upon the
Disability or Retirement of the Participant from employment with the Company,
the Distributable Amount shall be paid to the Participant in substantially equal
quarterly installments over ten (10) years beginning on the Participant's
Payment Date. An optional form of payment upon Disability or Retirement may be
elected by the Participant on the form provided by Company at the time of his
deferral election from among the following:
(1) Substantially equal quarterly installments
over five (5) years beginning on the Participant's Payment Date,
(2) Substantially equal quarterly installments
over fifteen (15) years beginning on the Participant's Payment Date, or
(3) A lump sum.
Notwithstanding, any provision to the contrary,
in the event a Participant's Distributable Amount is equal to or less than
$50,000, such Distributable Amount shall be distributed to the Participant or
his Beneficiary in a lump sum . A Participant may change his election with
respect to the frequency of payment, provided such change in the frequency of
payment occurs at least one year prior to the Participant's Termination of
Employment because of Retirement.
The Participant's Accounts shall continue to be
credited with earnings pursuant to Section 4.1 of the Plan until all amounts
credited to his or her Accounts under the Plan have been distributed.
(c) Distribution With Scheduled Withdrawal Date. In the case of
a Participant who has elected a Scheduled Withdrawal Date for a distribution
while still in the employ of the Company, such Participant shall receive his or
her Distributable Amount, but only with respect to those deferrals of
Compensation, 401(k) Excess and vested Company Discretionary Contributions and
earnings on such amounts as shall have been elected by the Participant to be
subject to the Scheduled Withdrawal Date in accordance with Section 1.2(y) of
the Plan. A Participant's Scheduled Withdrawal Date with respect to amounts of
Compensation and/or 401(k) Excess deferred in a given Plan Year be at least two
(2) years from the last day of the Plan Year for which such deferrals are made.
A Participant's Scheduled Withdrawal Date with respect to Company Discretionary
Contributions must be at least two (2) years after the Participant becomes fully
vested in such Company Discretionary Contributions.
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Amounts to be distributed on a Scheduled
Withdrawal Date shall be paid in a lump sum, unless the Participant elects an
optional form of payment. A Participant may elect an optional form of payment
only if the amount to be distributed on the Scheduled Withdrawal Date exceeds
$50,000. The Participant may elect the optional form of payment on the form
provided by the Company at the time of his deferral election with respect to his
deferrals of Compensation and/or 401(k) Excess and at the time he becomes fully
vested in his Company Discretionary Contributions, if any. The optional forms of
payments that the Participant may elect are payments in substantially equal
quarterly installments over a period of two (2) years, three (3) years, four (4)
years or five (5) years beginning on the Participant's Payment Date.
A Participant may extend the Scheduled Withdrawal
Date for the deferral of Compensation and Company Discretionary Contributions
for any Plan Year, provided such extension occurs at least one year before the
Scheduled Withdrawal Date and is for a period of not less than two (2) years
from the Scheduled Withdrawal Date. The Participant shall have the right to
modify any Scheduled Withdrawal Date only once, without the consent of the
Committee. A Participant who has modified a Scheduled Withdrawal Date, may again
once further modify the Scheduled Withdrawal Date, but only with the consent of
the Committee.
In the event a Participant's Termination of
Employment prior to a Scheduled Withdrawal Date, the Participant's entire
Distributable Amount will be paid as soon as practicable after the Termination
of Employment in a lump sum. In the event of Participant's Disability or
Retirement prior to a Scheduled Withdrawal Date, the Participant's entire
Distributable Amount will be paid in accordance with Section 6.1(b).
(d) In the event a Participant dies after he has begun
receiving distributions under Section 6.1(b) with a remaining balance in his or
her Account, the balance shall be paid in a lump sum.
6.2 Early Distributions.
A Participant shall be permitted to elect an Early
Distribution from his or her Deferral Account, 401(k) Excess Account and vested
Company Discretionary Contribution Account prior to the Payment Date, subject to
the following restrictions:
(a) The election to take an Early Distribution shall be made by
filing a form provided by and filed with the Committee prior to the end of any
calendar month.
(b) The amount of the Early Distribution shall in all cases be
an amount not less than $10,000.
(c) The amount described in subsection (b) above shall be paid
in a single cash lump sum as soon as practicable after the end of the calendar
month in which the Early Distribution election is made.
(d) If a Participant requests an Early Distribution, 10% of the
gross amount to be distributed shall be permanently forfeited and the Company
shall have no obligation to the Participant or his Beneficiary with respect to
such forfeited amount.
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(e) If a Participant receives an Early Distribution the
Participant will be ineligible to contribute deferrals to the Plan for the
remainder of the Plan Year and for the next following Plan Year.
6.3 Hardship Distribution.
A Participant shall be permitted to elect a Hardship
Distribution in accordance with Section 1.2(r) of the Plan prior to the Payment
Date, subject to the following restrictions:
(a) The election to take a Hardship Distribution shall be made
by filing form provided by and filed with Committee prior to the end of any
calendar month.
(b) The Committee shall have made a determination that the
requested distribution constitutes a Hardship Distribution in accordance with
Section 1.2(r) of the Plan.
(c) The amount determined by the Committee as a Hardship
Distribution shall be paid in a single cash lump sum as soon as practicable
after the end of the calendar month in which the Hardship Distribution election
is made and approved by the Committee.
(d) If a Participant receives a Hardship Distribution, the
Participant will be ineligible to contribute deferrals to the Plan, for the
balance of the Plan Year and the following Plan Year.
6.4 Inability to Locate Participant.
In the event that the Committee is unable to locate a
Participant or Beneficiary within two years following the required Payment Date,
the amount allocated to the Participant's Account shall be forfeited. If, after
such forfeiture, the Participant or Beneficiary later claims such benefit, such
benefit shall be reinstated without interest or earnings, subject to applicable
escheat laws.
ARTICLE VII.
ADMINISTRATION
7.1 Committee.
A Committee shall be appointed by, and serve at the
pleasure of, the Board of Directors. The number of members comprising the
Committee shall be determined by the Board which may from time to time vary the
number of members. A member of the Committee may resign by delivering a written
notice of resignation to the Board. The Board may remove any member by
delivering a certified copy of its resolution of removal to such member.
Vacancies in the membership of the Committee shall be filled promptly by the
Board.
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7.2 Committee Action.
The Committee shall act at meetings by affirmative vote of
a majority of the members of the Committee. Any action permitted to be taken at
a meeting may be taken without a meeting if, prior to such action, a written
consent to the action is signed by all members of the Committee and such written
consent is filed with the minutes of the proceedings of the Committee. A member
of the Committee shall not vote or act upon any matter which relates solely to
himself or herself as a Participant. The Chairman or any other member or members
of the Committee designated by the Chairman may execute any certificate or other
written direction of behalf of the Committee.
7.3 Powers and Duties of the Committee.
(a) The Committee, on behalf of the Participants and their
Beneficiaries, shall enforce the Plan in accordance with its terms, shall be
charged with the general administration of the Plan, and shall have all powers
necessary to accomplish its purposes as set forth herein, including, but not by
way of limitation, the following:
(1) To select the funds in accordance with
Section 3.2(b) hereof;
(2) To construe and interpret the terms and
provisions of the Plan and to remedy any inconsistencies or ambiguities
hereunder;
(3) To select employees eligible to participate
in the Plan;
(4) To compute and certify to the amount and kind
of benefits payable to Participants and their Beneficiaries;
(5) To maintain all records that may be necessary
for the administration of the Plan;
(6) To provide for the disclosure of all
information and the filing or provision of all reports and statements to
Participants, Beneficiaries or governmental agencies as shall be required by
law;
(7) To make and publish such rules for the
regulation of the Plan and procedures for the administration of the Plan as are
not inconsistent with the terms hereof;
(8) To appoint a plan administrator or any other
agent, and to delegate to them such powers and duties in connection with the
administration of the Plan as the Committee may from time to time prescribe; and
(9) To take all actions necessary for the
administration of the Plan.
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7.4 Construction and Interpretation.
The Committee shall have full discretion to construe and
interpret the terms and provisions of this Plan, which interpretations or
construction shall be final and binding on all parties, including but not
limited to the Company and any Participant or Beneficiary. The Committee shall
administer such terms and provisions in a uniform and nondiscriminatory manner
and in full accordance with any and all laws applicable to the Plan.
7.5 Information.
To enable the Committee to perform its functions, the
Company shall supply full and timely information to the Committee on all matters
relating to the Compensation of all Participants, their death or other events
which cause termination of their participation in this Plan, and such other
pertinent facts as the Committee may require.
7.6 Compensation, Expenses and Indemnity.
(a) The members of the Committee shall serve without
compensation for their services hereunder.
(b) The Committee is authorized at the expense of the Company
to employ such legal counsel and other advisors as it may deem advisable to
assist in the performance of its duties hereunder. Expenses and fees in
connection with the administration of the Plan shall be paid by the Company.
(c) To the extent permitted by applicable state law, the
Company shall indemnify and save harmless the Committee and each member thereof,
the Board of Directors and any delegate of the Committee who is an employee of
the Company against any and all expenses, liabilities and claims, including
legal fees to defend against such liabilities and claims arising out of their
discharge in good faith of responsibilities under or incident to the Plan, other
than expenses and liabilities arising out of willful misconduct. This indemnity
shall not preclude such further indemnities as may be available under insurance
purchased by the Company or provided by the Company under any bylaw, agreement
or otherwise, as such indemnities are permitted under state law.
7.7 Quarterly Statements.
Under procedures established by the Committee, a
Participant shall receive a statement with respect to such Participant's
Accounts on a quarterly basis as of each March 31, June 30, September 30 and
December 31.
7.8 Disputes.
(a) Claim.
A person who believes that he or she is being
denied a benefit to which he or she is entitled under this Agreement
(hereinafter referred to as "Claimant") may file a written
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request for such benefit with the Company, setting forth his or her claim. The
request must be addressed to the President of the Company at its then principal
place of business.
(b) Claim Decision.
Upon receipt of a claim, the Company shall advise the
Claimant that a reply will be forthcoming within ninety (90) days and shall, in
fact, deliver such reply within such period. The Company may, however, extend
the reply period for an additional ninety (90) days for special circumstances.
If the claim is denied in whole or in part, the Company
shall inform the Claimant in writing, using language calculated to be understood
by the Claimant, setting forth: (i) the specified reason or reasons for such
denial; (ii) the specific reference to pertinent provisions of this Agreement on
which such denial is based; (iii) a description of any additional material or
information necessary for the Claimant to perfect his or her claim and an
explanation of why such material or such information is necessary; (iv)
appropriate information as to the steps to be taken if the Claimant wishes to
submit the claim for review; and (v) the time limits for requesting a review
under subsection (c).
(c) Request For Review.
With sixty (60) days after the receipt by the Claimant of
the written opinion described above, the Claimant may request in writing that
the Committee review the determination of the Company. Such request must be
addressed to the Secretary of the Company, as its then principal place of
business. The Claimant or his or her duly authorized representative may, but
need not, review the pertinent documents and submit issues and comments in
writing for consideration by the Committee. If the Claimant does not request a
review within such sixty (60) day period, he or she shall be barred and estoppel
from challenging the Company's determination.
(d) Review of Decision.
Within sixty (60) days after the Committee's receipt of a
request for review, after considering all materials presented by the Claimant,
the Committee will inform the Participant in writing, in a manner calculated to
be understood by the Claimant, the decision setting forth the specific reasons
for the decision contained specific references to the pertinent provisions of
this Agreement on which the decision is based. If special circumstances require
that the sixty (60) day time period be extended, the Committee will so notify
the Claimant and will render the decision as soon as possible, but no later than
one hundred twenty (120) days after receipt of the request for review.
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ARTICLE VIII.
MISCELLANEOUS
8.1 Unsecured General Creditor.
Participants and their Beneficiaries, heirs, successors,
and assigns shall have no legal or equitable rights, claims, or interest in any
specific property or assets of the Company. No assets of the Company shall be
held in any way as collateral security for the fulfilling of the obligations of
the Company under this Plan. Any and all of the Company's assets shall be, and
remain, the general unpledged, unrestricted assets of the Company. The Company's
obligation under the Plan shall be merely that of an unfunded and unsecured
promise of the Company to pay money in the future, and the rights of the
Participants and Beneficiaries shall be no greater than those of unsecured
general creditors. It is the intention of the Company that this Plan be unfunded
for purposes of the Code and for purposes of Title I of ERISA.
8.2 Restriction Against Assignment.
The Company shall pay all amounts payable hereunder only to
the person or persons designated by the Plan and not to any other person or
corporation.
(a) No right, title or interest in the Plan or in any account
may be sold, pledged, assigned or transferred in any manner other than by will
or the laws of descent and distribution. No right, title or interest in the Plan
or in any Account shall be liable for the debts, contracts or engagements of the
Participant or his successors in interest or shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any other
means whether such disposition be voluntary or involuntary or by operation of
law by judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect, except to the extent that such disposition is
permitted by the preceding sentence.
(b) Notwithstanding the provisions of a subsection, a
Participant's interest in his Account may be transferred by the Participant
pursuant to a domestic relations order that constitutes a "qualified domestic
relations order" as defined by the Code or Title 1 of ERISA.
8.3 Withholding.
There shall be deducted from each payment made under the
Plan or any other Compensation payable to the Participant (or Beneficiary) all
taxes which are required to be withheld by the Company in respect to such
payment or this Plan. The Company shall have the right to reduce any payment (or
compensation) by the amount of such of cash sufficient to provide the amount of
said taxes.
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8.4 Amendment, Modification, Suspension or Termination.
The Committee may amend, modify, suspend or terminate the
Plan in whole or in part, except that no amendment, modification, suspension or
termination shall have any retroactive effect to reduce any amounts allocated to
a Participant's Accounts. In the event that this Plan is terminated, the amounts
allocated to a Participant's Accounts shall be distributed to the Participant
or, in the event of his or her death, his or her Beneficiary in a lump sum
within thirty (30) days following the date of termination.
8.5 Governing Law.
This Plan shall be construed, governed and administered in
accordance with the laws of the State of California.
8.6 Receipt of Release.
Any payment to a Participant or the Participant's
Beneficiary in accordance with the provisions of the Plan shall, to the extent
thereof, be in full satisfaction of all claims against the Committee and the
Company. The Committee may require such Participant or Beneficiary, as a
condition precedent to such payment, to execute a receipt and release to such
effect.
8.7 Payments on Behalf of Persons Under Incapacity.
In the event that any amount becomes payable under the Plan
to a person who, in the sole judgment of the Committee, is considered by reason
of physical or mental condition to be unable to give a valid receipt therefore,
the Committee may direct that such payment be made to any person found by the
Committee, in its sole judgment, to have assumed the care of such person. Any
payment made pursuant to such termination shall constitute a full release and
discharge of the Committee and the Company.
8.8 Limitation of Rights and Employment Relationship
Neither the establishment of the Plan and Trust nor any
modification thereof, nor the creating of any fund or account, nor the payment
of any benefits shall be construed as giving to any Participant or other person
any legal or equitable right against the Company or the trustee of the Trust
except as provided in the Plan and Trust, and in no event shall the terms of
employment of any Employee or Participant be modified or in any be effected by
the provisions of the Plan and Trust.
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8.9 Exempt ERISA Plan
The Plan is intended to be an unfunded plan maintained
primarily to provide deferred compensation benefits for a select group of
management or highly compensated employees within the meaning of Sections 201,
301 and 401 of ERISA and therefore to be exempt from Parts 2, 3 and 4 of Title I
of ERISA.
8.10 Notice
Any notice or filing required or permitted to be given to
the Committee under the Plan shall be sufficient if in writing and hand
delivered, or sent by registered or certified mail, to the principal office of
the Company, directed to the attention of the General Counsel and Secretary of
the Company. Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the receipt
for registration or certification.
8.11 Errors and Misstatements
In the event of any misstatement or omission of fact by a
Participant to the Committee or any clerical error resulting in payment of
benefits in an incorrect amount, the Committee shall promptly cause the amount
of future payments to be corrected upon discovery of the facts and shall pay or,
if applicable, cause the Trustee to pay, the Participant or any other person
entitled to payment under the Plan any underpayment in a lump sum or to recoup
any overpayment from future payments to the participant or any other person
entitled to payment under the Plan in such amounts as the Committee shall direct
or to proceed against the Participant or any other person entitled to payment
under the Plan for recovery of any such overpayment.
8.12 Pronouns and Plurality
The masculine pronoun shall include the feminine pronoun,
and the singular the plural where the context so indicates.
8.13 Severability
In the event that any provision of the Plan shall be
declared unenforceable or invalid for any reason, such unenforceability or
invalidity shall not affect the remaining provisions of the Plan but shall be
fully severable, and the Plan shall be construed and enforced as if such
unenforceable or invalid provision had never been included herein.
8.14 Status
The establishment and maintenance of, or allocations and
credits to, the Account of any Participant shall not vest in any Participant any
right, title or interest in and to any Plan assets or benefits except at the
time or times and upon the terms and conditions and to the extent expressly set
forth in the Plan and in accordance with the terms of the Trust.
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8.15 Headings.
Headings and subheadings in this Plan are inserted for
convenience of reference only and are not to be considered in the construction
of the provisions hereof.
IN WITNESS WHEREOF, the Company has caused this document
to be executed by its duly authorized officer on this 1st day of November, 1999.
By: /s/ DICK W. GONZALES
Its: Senior Vice President
<PAGE> 19
TABLE OF CONTENTS
<TABLE>
<CAPTION>
AGE
---
<S> <C> C>
ARTICLE I. TITle and definitions.....................................1
1.1 Title.....................................................1
1.2 Definitions...............................................1
ARTICLE II. PARTICIPATION.............................................4
ARTICLE III. DEFERRAL ELECTIONS........................................5
3.1 Elections to Defer Compensation...........................5
3.2 Investment Elections......................................6
ARTICLE IV. ACCOUNTS AND TRUST FUNDING................................6
4.1 Deferral Accounts.........................................6
4.2 Company Discretionary Contribution Account................7
4.3 401(k) Excess Account.....................................7
4.4 Trust Funding.............................................8
4.5 Forfeitures...............................................8
ARTICLE V. VESTING...................................................8
ARTICLE VI. DISTRIBUTIONS.............................................9
6.1 Distribution of Accounts..................................9
6.2 Early Distributions......................................10
6.3 Hardship Distribution....................................11
6.4 Inability to Locate Participant..........................11
ARTICLE VII. ADMINISTRATION...........................................11
7.1 Committee................................................11
7.2 Committee Action.........................................12
7.3 Powers and Duties of the Committee.......................12
7.4 Construction and Interpretation..........................13
7.5 Information..............................................13
7.6 Compensation, Expenses and Indemnity.....................13
7.7 Quarterly Statements.....................................13
7.8 Disputes.................................................13
ARTICLE VIII. 15
</TABLE>
i
18
<PAGE> 20
<TABLE>
<S> <C> <C>
8.1 Unsecured General Creditor...............................15
8.2 Restriction Against Assignment...........................15
8.3 Withholding..............................................15
8.4 Amendment, Modification, Suspension or Termination.......16
8.5 Governing Law............................................16
8.6 Receipt of Release.......................................16
8.7 Payments on Behalf of Persons Under Incapacity...........16
8.8 Limitation of Rights and Employment Relationship.........16
8.9 Exempt ERISA Plan........................................17
8.10 Notice...................................................17
8.11 Errors and Misstatements.................................17
8.12 Pronouns and Plurality...................................17
8.13 Severability.............................................17
8.14 Status.................................................. 17
8.15 Headings.................................................18
</TABLE>
ii
<PAGE> 21
SAFEWAY EXECUTIVE
DEFERRED COMPENSATION PLAN
<PAGE> 22
INITIAL PARTICIPANT INFORMATION FORM
[SAFEWAY LOGO]
EXECUTIVE DEFERRED COMPENSATION PLAN
================================================================================
Participant Information:
(Please type or print legibly)
_________________________________ __________/________/_________________
Last Name, First Name Social Security Number
_________________________________ _____________________________________
Former Name, If applicable Email Address
_________________________________ _____________________________________
Mailing Address*
_____________________________________________________________________________
City State Zip
(___)_____________________ _____/____/_____ ___________________________
Home Phone Date of Birth Mother's Maiden Name
(___)_____________________ _____/____/_____ ___________________________
Work Phone Date of Hire Employee Number
(see "EMP, ID" on pay stub)
__________________________ ________________ ___________________________
Job Title Division Work Location
_________________________________ _____________________________________
Signature Date
* Note: any discrepancies with address on file will be reported to the
Company's Human Resources Department
PLEASE SEND COMPLETED FORM TO TBG FINANCIAL DOCUMENT CENTER,
2029 CENTURY PARK EAST, 37TH FLOOR, LOS ANGELES, CA 90067
NO FAXED FORMS ACCEPTED. QUESTIONS:
CALL (800) 824-0040 M - F BETWEEN 7:00 A.M. AND 7:00 P.M. PST
<PAGE> 23
DEFERRAL ELECTION FORM
[SAFEWAY LOGO] FOR THE PLAN YEAR JANUARY 1 - DECEMBER 31, 2000
EXECUTIVE DEFERRED COMPENSATION PLAN
================================================================================
1. Subject to the minimum deferral requirement $5,000 for each Plan Year (to
be satisfied from Base Salary and/or Bonus). I elect the following:
A) SALARY DEFERRAL
I elect to defer the following portion (up to 100%) of my Base Salary
commencing with Base Salary earned during the first pay period
beginning on or after January 1, 2000, and continuing in effect through
December 31, 2000 (select dollar amount or percentage):
_______% (whole percentages only) OR
$_______ per annum
B) BONUS DEFERRAL
I elect to defer the following portion (up to 100%) of my Bonus earned
in the Plan Year ending December 31, 2000 paid in the year 2001 (select
one option):
_______% (whole percentages only) OR
_______% (whole percentages only) up to a maximum of $_____ OR
$_______, if my bonus is less than this amount, 100% of my Bonus
I understand that to defer the Salary and/or Bonus payable to me in
subsequent Plan Years, I must make a separate election during the
enrollment period prior to the Plan Year in which the compensation is
earned. Deferrals are irrevocable for the Plan Year.
C) 401(k) EXTENSION
When I reach the maximum 401(k) limits, I want my contributions to now
be deferred into Executive Deferred Compensation Plan at (select
percentage):
_______% (whole percentages only)
D) 401(k) REFUND
If it is determined that I must be refunded a portion of my Plan year
2000 401(k) deferrals (refunded in 2001) and I qualify for the minimum,
I elect to defer the refund:
[ ] Yes [ ] No
2. DEFERRED COMPENSATION AGREEMENT
I acknowledge that I understand the terms of the Plan. I hereby agree to
defer the above specified amounts of my taxable compensation and to have
that taxable compensation paid to me at a later date pursuant to the terms
and conditions of the Plan which is incorporated herein by reference.
A. I understand that no deferral election shall be effective if it will
reduce my non-deferred compensation below the amount necessary to pay
applicable FICA/Medicare and other employment taxes, employee benefit
plan withholding, and income tax withholding.
B. I understanding that I must submit a life insurance consent form with
my initial Deferral Election Form. My failure to file this form may
void the execution of this Deferral Election Form.
C. I understand that the establishment of this Plan does not create a
legal or equitable right or claim against the Company, except as
expressly provided in the Plan, and in no event shall the terms of my
employment be modified or in any way affected by the Plan. I further
understand that the Plan is not an employment agreement and is not a
guarantee of future compensation of employment.
D. I understand that any Base Salary, Bonuses and/or 401(k) Contributions
that I defer will remain an asset of the Company and subject to the
claims of the general creditors of the Company, in the event of its
bankruptcy or insolvency.
[ ] I do not wish to participate in the Executive Deferred Compensation Plan
for this Plan Year.
___________________________________ ________________________________
Participant's Last Name, First Name Participant's Signature
(please print or type)
___________________________________ ________________________________
Social Security Number Date
THIS FORM MUST BE RECEIVED BY OCTOBER 27, 1999
PLEASE SEND COMPLETED FORM TO TBG FINANCIAL DOCUMENT CENTER,
2029 CENTURY PARK EAST, 37TH FLOOR, LOS ANGELES, CA 90067
NO FAXED FORMS ACCEPTED. QUESTIONS:
CALL (800) 824-0040 M - F BETWEEN 7:00 A.M. AND 7:00 P.M. PST
<PAGE> 24
INVESTMENT ELECTION FORM
[SAFEWAY LOGO]
EXECUTIVE DEFERRED COMPENSATION PLAN
- --------------------------------------------------------------------------------
1. Please select Plan Year(s)* this election will cover.
[ ] 1999 Plan year
[ ] 2000 Plan year
[ ] ALL YEARS (default)
This election affects all balances and future deferrals for the elected Plan
Year(s).
2. I designate that all deferrals for the Plan Year(s) elected above be
deemed to be invested in the funds(1) listed below and in the percentages
indicate (percentages must total 100% and must be in whole numbers for any
selected fund).
--------------------------------------------------------
INVESTMENT CATEGORY/FUND ALLOCATION
--------------------------------------------------------
AGGRESSIVE
T. Rowe Price Science & Technology Trust _________%
AIM Mid Cap Growth Trust _________%
Fidelity Overseas Trust _________%
GROWTH
Fidelity Mid Cap Blend Trust _________%
T. Rowe Price Blue Chip Growth Trust _________%
GROWTH & INCOME
Manufacturers Equity Index Trust _________%
Wellington Growth & Income Trust _________%
INCOME
Miller Anderson & Sherrerd High Yield Trust _________%
Capital Guardian Diversified Bond Trust _________%
MULTI-ASSET
Capital Guardian Income and Value Trust _________%
MONEY MARKET
Manufacturers Money Market Trust _________%
-------------------------------------------------------
TOTAL 100%
(1) Non-retail funds available only through variable life insurance products.
I understand each year's deferrals may have a different investment allocation.
I understand that I may change my investment allocation monthly by submitting
an Investment Election Change Form to TBG Financial at least 5 days prior to
the end of the calendar month. Changes are effective the first business day of
the month after receipt by TBG Financial.
- ------------------------------------- -------------------------------------
Participant's Last Name, First Name Participant's Signature
(please print or type)
/ /
- ----------------- ------------------ -------------------------------------
Date Social Security Contact Telephone Number or
Number Email Address
(for confirmation or receipt by
TBG Financial)
PLEASE SEND COMPLETED FORM TO TBG FINANCIAL DOCUMENT CENTER, 2029 CENTURY PARK
EAST, 37TH FLOOR, LOS ANGELES, CA 90067
NO FAXED FORMS ACCEPTED. QUESTIONS: CALL (800) 824-0040 M - F BETWEEN
7:00 A.M. AND 7:00 P.M. PST
<PAGE> 25
[SAFEWAY LOGO] DISTRIBUTION ELECTION FORM
2000 PLAN YEAR
Executive Deferred Compensation Plan
- --------------------------------------------------------------------------------
DEFAULT DISTRIBUTION UPON RETIREMENT/LONG-TERM DISABILITY
- --------------------------------------------------------------------------------
If no election is on file, your deferral account balance attributable to the
2000 Plan Year will be distributed at retirement/long-term disability as
follows:
Account Balance more than $50,000................quarterly installments
over 10 years
Account balance equal to or less than $50,000....lump sum payment,
regardless of election
If you ACCEPT this default, please read the General Information on the reverse,
and then complete the Sign Here information at the bottom of this page.
If you wish to elect an OPTIONAL FORM OF DISTRIBUTION, please go to Optional
Forms of Distribution - Instructions.
- --------------------------------------------------------------------------------
OPTIONAL FORMS OF DISTRIBUTION - INSTRUCTIONS
- --------------------------------------------------------------------------------
SCHEDULED IN-SERVICE WITHDRAWAL
- - READ General Information on the reverse side of this page
- - COMPLETE In-Service Withdrawal to elect year (while still employed) in
which payment commences, and select distribution method
- - COMPLETE Retirement Payment Method to elect form of payment in the event
you retire/become disabled prior to the elected In-Service
Withdrawal distribution date
- - SIGN where indicated below
OPTIONAL FORM OF RETIREMENT/LONG-TERM DISABILITY DISTRIBUTION
The election to receive your 2000 Plan Year deferrals and earnings thereon at
Termination is IRREVOCABLE.
- - READ General Information on the reverse side of this page
- - COMPLETE Retirement Payment Method to elect form of payment at
retirement/long-term disability
- - SIGN where indicated below
- --------------------------------------------------------------------------------
OPTIONAL FORMS OF DISTRIBUTION - ELECTION
- --------------------------------------------------------------------------------
IN-SERVICE DISTRIBUTION
- --------------------------------------------------------------------------------
In-Service Commencing 2 _ _ _ (enter 2003 or later)
Withdrawal (Please read General Information on reverse side for
installment eligibility)
- --------------------------------------------------------------------------------
RETIREMENT
- --------------------------------------------------------------------------------
Retirement Quarterly installments over [ ] 15 or [ ] 10 or [ ] 5 years,
Payment Method or a [ ] lump sum (Please read General Information on
reverse side for installment eligibility)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGN HERE
- --------------------------------------------------------------------------------
I have read the General Information on reverse side.
- ------------------------------------ ------------------------------------
Participant's Last Name, First Name Participant's Signature
(please print or type)
- ------------------------------------ ------------------------------------
Social Security Number Date
PLEASE SEND COMPLETED FORM TO TBG FINANCIAL DOCUMENT CENTER,
2029 CENTURY PARK EAST, 37th FLOOR, LOS ANGELES, CA 90067
NO FAXED FORMS ACCEPTED. QUESTIONS: CALL (800) 824-0040
M - F BETWEEN 7:00 A.M. AND 7:00 P.M. PST
<PAGE> 26
BENEFICIARY DESIGNATION FORM
[SAFEWAY LOGO] Executive Deferred Compensation Plan
- --------------------------------------------------------------------------------
I designate the following Primary Beneficiary(ies) to receive my Deferral
Account balance if I die before I receive a full distribution of my Account
under the Executive Deferred Compensation Plan.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Primary Beneficiary(ies) (If more than one Primary Beneficiary, % Shares must total 100%)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Name: Social Security #: Relationship: Date of Birth: % Share:
- ----------------------------------------------------------------------------------------------------------------------
OR (if applicable) Name of Trust and Trustee: Tax I.D. # (if applicable): Trust Date (if applicable):
- ----------------------------------------------------------------------------------------------------------------------
Street Address: City: State: Zip Code:
=======================================================================================================================
1. Name: Social Security #: Relationship: Date of Birth: % Share:
- ----------------------------------------------------------------------------------------------------------------------
OR (if applicable) Name of Trust and Trustee: Tax I.D. # (if applicable): Trust Date (if applicable):
- ----------------------------------------------------------------------------------------------------------------------
Street Address: City: State: Zip Code:
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
If I outlive the above-designated Primary Beneficiary(ies), or if such Primary
Beneficiary(ies) is/are legally unable to act as such, I designate that upon my
death the following Contingent Beneficiary(ies) is/are to receive any
undistributed balance of my Deferral Account under the Executive Deferred
Compensation Plan.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Contingent Beneficiary(ies) (optional) (If more than one Contingent Beneficiary, % Shares must total 100%)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Name: Social Security #: Relationship: Date of Birth: % Share:
- ----------------------------------------------------------------------------------------------------------------------
OR (if applicable) Name of Trust and Trustee: Tax I.D. # (if applicable): Trust Date (if applicable):
- ----------------------------------------------------------------------------------------------------------------------
Street Address: City: State: Zip Code:
=======================================================================================================================
1. Name: Social Security #: Relationship: Date of Birth: % Share:
- ----------------------------------------------------------------------------------------------------------------------
OR (if applicable) Name of Trust and Trustee: Tax I.D. # (if applicable): Trust Date (if applicable):
- ----------------------------------------------------------------------------------------------------------------------
Street Address: City: State: Zip Code:
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
I understand that if I am married and have not designated my spouse as my sole
Primary Beneficiary, my spouse must sign the consent below. This designation of
beneficiary(ies) is for the following. (Please check the appropriate box:)
<TABLE>
<S> <C> <C>
- --------------------------------------------------- ------------------------------- -----------------
Participant's Last Name, First Name (print or type) Participant's Signature Date
- --------------------------------------------------- -------------------------------
Participant's Social Security Number Participant's Telephone Number
I hereby certify that I am the spouse of the above Participant, and consent to
the above-designated Primary Beneficiary(ies).
- --------------------------------------------------- ------------------------------- -----------------
Spouse's Last Name, First Name (print or type) Spouse's Signature Date
</TABLE>
PLEASE SEND COMPLETED FORM TO TBG FINANCIAL DOCUMENT CENTER,
2029 CENTURY PARK EAST, 37TH FLOOR, LOS ANGELES, CA 90067
NO FAXED FORMS ACCEPTED. QUESTIONS: CALL (800) 824-0040
M-F BETWEEN 7:00 A.M. AND 7:00 P.M., PST
<PAGE> 1
EXHIBIT 10(iii).19
CANADA SAFEWAY LIMITED
EXECUTIVE DEFERRED COMPENSATION PLAN
1. PURPOSE OF THE PLAN
The purpose of the Plan is to provide a tax deferred capital accumulation
opportunity to a select group of management or other key employees through
deferral of compensation and to provide the Company with a method of rewarding
and retaining such selected employees.
2. DEFINITIONS
For the purposes of the Plan, the terms contained in this Section shall
have the following meanings.
(a) "ADMINISTRATION COMMITTEE" shall mean the committee appointed by the Board
from time to time to administer the Plan, or where the Board has not
appointed a committee, the Board.
(b) "BONUS" shall mean any annual bonus payable under the Company's annual
bonus program that will become payable to an Executive.
(c) "BOARD" shall mean the Board of Directors of the Company.
(d) "BUSINESS DAY" shall mean a day, other than Saturday or Sunday, on which
banking institutions in Calgary are not authorized or obligated by law to
close.
(e) "COMPANY" shall mean Canada Safeway Limited, an Alberta corporation, or
its successors and assigns.
(f) "DIVIDEND EQUIVALENTS" means a bookkeeping entry, whereby each Deferred
Share Unit is credited with the equivalent amount of the dividend paid on
a Share in accordance with Section 5(d).
(g) "DEFERRED SHARE UNIT" or "DSU" shall mean a share unit credited to a
Participant's account in accordance with the terms and conditions of the
Plan.
(h) "EXECUTIVE" shall mean an employee of Canada Safeway Limited who is
selected to participate in the Plan by the Administration Committee.
(i) "FAIR MARKET VALUE" of a Share as of a given date shall be (a) the closing
price of a Share on the principal exchange on which Shares are then
trading, if any (or as reported on any composite index which includes such
principal exchange), on such date, or if Shares were not traded on such
date, then on the next preceding date on which a trade occurred, or (b) if
Shares are not traded on an exchange but are quoted on NASDAQ or a
successor quotation system, the mean between the closing representative
bid and asked prices for a Share on such date as reported by NASDAQ or
such successor quotation system, or (c) if Shares are not publicly traded
on an exchange and not quoted on NASDAQ or a successor quotation system,
<PAGE> 2
the Fair Market Value of a Share as established by the Administration
Committee acting in good faith. In determining the Fair Market Value of a
Share under subsection (a) of this Section 1(i), the Administration
Committee may rely on the closing price as reported in the New York Stock
Exchange composite transactions published in the Western Edition of the
Wall Street Journal.
(j) "PARTICIPANT" shall mean an Executive who has been granted DSUs under the
Plan.
(k) "PERMANENT DISABILITY" shall have the meaning ascribed to such term in the
long-term disability plan or policy of the Company applicable to a
Participant.
(l) "PLAN" shall mean the Canada Safeway Limited Executive Deferred
Compensation Plan as set forth herein and as it may be amended from time
to time.
(m) "PLAN YEAR" shall have the meaning set forth in Section 16.
(n) "RESIGNATION DATE" shall mean, in respect of a Participant, the date on
which
(i) the Participant has ceased to be employed by the Company for any
reason whatsoever, including termination of employment,
voluntary resignation, retirement from active employment,
Permanent Disability or death of the Participant, or,
(ii) if later, the Participant has ceased to be a member of the Board
of the Company if the Participant had ceased employment with the
Company, but had continued (without any interruption between the
date he or she ceased to be so employed) to be a member of the
Board of the Company after the cessation of such employment.
(o) "SETTLEMENT DATE" with respect to a Participant to whom a Resignation Date
has occurred shall be, subject to Section 11, the last Business Day of the
calendar year following the calendar year during which the Resignation
Date occurs. Provided that a Participant may, on or before the Resignation
Date, elect in writing a date which is after the Resignation Date but
before the date which would otherwise be the Settlement Date (the "ELECTED
DATE"). Subject to the approval of the Administration Committee and
compliance with all applicable laws, regulations or rules, the Settlement
Date shall be the Elected Date.
(p) "SHARE" shall mean a common share of Safeway Inc., par value $0.01 per
share, and any equity security of Safeway Inc. issued or authorized to be
issued in the future, but excluding any preferred stock and any warrants,
options or other rights to purchase shares.
3. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Administration Committee. The
Administration Committee shall have full and complete authority to interpret the
Plan, to prescribe such rules and regulations (including those with respect to
the holding of meetings by telephone) and to make such other determinations as
it deems necessary or desirable for the administration of the
2
<PAGE> 3
Plan. All actions taken and decisions made by the Administration Committee shall
be final, conclusive and binding on all parties concerned.
No member of the Administration Committee shall be liable for any action
or determination made in good faith pursuant to the Plan. To the full extent
permitted by law, the Company shall indemnify and save harmless each person
made, or threatened to be made, a party to any action or proceeding by reason of
the fact that such person is or was a member of the Administration Committee
and, as such, is or was required or entitled to take action pursuant to the
terms of the Plan.
4. ELIGIBILITY
The Plan shall apply to Executives of the Company as selected and
designated by the Administration Committee in its sole and unfettered
discretion. Notwithstanding the foregoing, an Executive shall not be eligible to
be a Participant unless the Executive (i) has a minimum potential compensation
for the year in excess of $CDN100,000 and (ii) has achieved at least the level
of a director or is eligible to participate in the director level bonus plan.
5. DEFERRAL ELECTION
Each Participant may elect, in the manner prescribed herein, to be
allocated DSUs in lieu of receiving a cash payment in respect of a Bonus, up to
100% thereof.
a. Method of Electing. A Participant must complete and deliver to the
Administration Committee, or to such person as the Administration
Committee may direct, a written election, which shall designate the
amount of the Bonus in respect of a Plan Year that the Participant
elects to convert to DSUs. Once made, an election is irrevocable. An
election must be completed and delivered to the Administration
Committee on or before December 31 of the calendar year in respect of
which the Bonus is earned, to be effective for any future payment to
be made in respect of that Bonus. If an election is not made in
respect of a Plan Year, or not validly made before the applicable
deadline, an election in respect of a previous Plan Year shall not be
effective for a succeeding Plan Year and a Participant shall not be
permitted to convert any portion of his or her Bonus in respect of
such Plan Year to DSUs.
b. Minimum Election. Notwithstanding the above, no election shall reduce
a Participant's compensation below the amount necessary to satisfy
applicable withholding requirements or taxes. The minimum aggregate
election in respect of any Plan Year shall be $CDN7,500.
c. Deferred Share Units. If a Participant elects to convert all or a
specified amount of his or her Bonus in respect of a Plan Year to
DSUs, such Participant shall have DSUs allocated to an account
maintained for the Participant on the books of the Company. DSUs
(including fractional DSUs) shall be allocated to a Participant's
account effective
3
<PAGE> 4
as of the day the Bonus would have otherwise been payable to the
Participant. The amount of the Bonus that the Participant elected to
convert into DSUs shall be converted into United States dollars by
using the mid-market foreign exchange rate (as prepared by the Bank of
Montreal Treasury Group and published in the Globe & Mail) on the day
the Bonus would, but for the Participant's election hereunder, have
otherwise been payable to the Participant. The number of DSUs to be
credited to a Participant's account shall be determined by dividing
the amount of the Bonus that the Participant elected to convert into
DSUs (after conversion into United States dollars) by the Fair Market
Value of a Share on the date DSUs are to be allocated. A Participant
shall not be entitled to any certificate or other document evidencing
the DSUs and under no circumstances shall DSUs be considered as
Shares, nor shall they entitle any Participant to exercise voting
rights or any other rights attaching to the ownership or control of
Shares. A Participant shall at all times be vested in his or her
elected deferrals.
d. Dividend Equivalents. DSUs shall be credited with Dividend Equivalents
when dividends are paid on Shares and such Dividend Equivalents shall
be converted to additional DSUs based on the Fair Market Value of a
Share on the date credited.
6. SETTLEMENT OF DEFERRED SHARE UNITS
On the Settlement Date, the Company shall cause the Participant to receive a
number of Shares equal to the number of DSUs recorded in the Participant's
account on the Settlement Date; provided that, however, the Company may reduce
the number of Shares otherwise deliverable to the Participant to reflect the
minimum amount of withholding taxes and other source deductions required by law
to be withheld by the Company in connection with the satisfaction of the
Participant's entitlement.
In order to satisfy its obligation under this Section 6, the Company may obtain
Shares in respect of a Participant's entitlement from the open market or such
Shares may be issued from Safeway Inc.'s treasury. If the Company chooses to
satisfy its obligation under this Section 6 by purchasing Shares in respect of a
Participant's entitlement on the open market, the Company shall, on the
Settlement Date, notify an investment dealer that is independent from the
Company and Safeway Inc. (the "BROKER") of the number of Shares to be purchased
on behalf of the Participant on the New York Stock Exchange or other applicable
stock exchange approved by the Administration Committee. As soon as practicable
thereafter, the Broker shall purchase the number of Shares which the Company has
requested and shall notify the Participant and the Company of:
(a) the aggregate purchase price ("Aggregate Purchase Price") of the
Shares;
(b) the purchase price per Share, or if the Shares were purchased at
different prices, the average purchase price (computed on a weighted
average basis) per Share ("Price per Common Share");
4
<PAGE> 5
(c) the amount of any reasonable brokerage commission related to such
purchase of Shares; and
(d) the date of payment for such purchase of Shares;
On the date of payment, upon payment of the Aggregate Purchase Price and related
reasonable brokerage commission by the Company, the Broker shall deliver to the
Participant, or his designate, as the case may be, the certificate attesting the
Shares purchased on behalf of the Participant or shall cause such Shares to be
transferred electronically to an account designated by the Participant.
Any entitlement to fractional Shares shall be paid in cash based on the Fair
Market Value of a Share on the Settlement Date. The Participant shall have no
further entitlement under the Plan upon receipt of Shares (and where applicable,
cash in lieu of fractional Shares) as provided for in this Section 6.
7. ADJUSTMENTS TO THE NUMBER OF DEFERRED SHARE UNITS
The Administration Committee may, in its discretion, make such
adjustments to any outstanding DSUs as it deems necessary or advisable to
reflect the occurrence of any transaction or event described in Section 10 of
this Plan or any change in control of Safeway Inc. or the Company.
8. PARTICIPANT ACCOUNTS
The Company shall maintain or cause to be maintained in its books an
account for each Participant recording at all times the number of DSUs credited
to the Participant. Upon payment in satisfaction of DSUs pursuant to Section 6,
such DSUs shall be cancelled. A written notification of the balance in the
account maintained for each Participant shall be mailed by the Company or by an
administrator on behalf of the Company to each Participant at least annually. A
Participant shall not be entitled to any certificate or other document
evidencing the grant of DSUs to him or her.
9. RIGHTS OF PARTICIPANTS
Except as specifically herein provided, no Participant shall have any
claim or right to any Shares that may be delivered in settlement of DSUs
credited pursuant to the Plan.
Under no circumstances shall DSUs be considered to be Shares nor shall
they entitle any Participant to exercise voting rights or any other rights
attaching to the ownership or control of Shares.
Neither participation in the Plan nor any action taken under the Plan
shall give or be deemed to give any Participant a right to continued employment
with the Company and shall not interfere with any right of the Company to
terminate the employment of any Participant. The payment of
5
<PAGE> 6
any sum of money in cash in lieu of notice of termination of employment shall
not be considered as extending the period of employment for the purposes of the
Plan.
10. REORGANIZATION
The existence of DSUs shall not affect in any way the right or power of
Safeway Inc. or the Company or their shareholders to make or authorize any
adjustment, recapitalization, reorganization or other change in capital
structure or business, any amalgamation, combination, exchange, merger or
consolidation, spin-off or other distribution, or to create or issue any bonds,
debentures, shares or other securities or to change the rights and conditions
attaching thereto, or to effect a dissolution, liquidation, sale or transfer of
all or any part of its assets or business, or any other corporate act or
proceeding, whether of a similar nature or otherwise.
11. DEATH OF PARTICIPANT
Upon the death of a Participant prior to the settlement of the DSUs
credited to the account of such Participant, the Administration Committee shall,
on the Settlement Date, cause to be delivered to the estate or the designated
beneficiary of the deceased Participant the number of Shares such Participant
would have been entitled to in accordance with Section 6 if the Participant had
previously ceased to be employed by the Company on the day prior to his or her
death. For purposes of the definition of Settlement Date, in case of death of a
Participant, unless the Participant had previously elected otherwise in
accordance with Section 2(o), the Settlement Date shall be the day which is
sixty (60) days after the date of death.
12. DESIGNATION OF A BENEFICIARY
To the extent permissible by law, a Participant may, by written notice to
the Secretary of the Company (or to such other person as the Administration
Committee or the Secretary may designate), designate a person to receive the
benefits payable under the Plan on the Participant's death, and may also by
written notice to the Secretary of the Company (or to such other person as the
Administration Committee or the Secretary may designate) alter or revoke such
designation from time to time, subject always to the provisions of any
applicable law. Such written notice shall be in such form and shall be executed
in such manner as the Administration Committee in its discretion may from time
to time determine.
13. WITHHOLDING TAXES
The Company may reduce the number of Shares that the Company would
otherwise cause to be delivered to a Participant to reflect the minimum amount
of withholding taxes and other source deductions required by law to be withheld
by the Company in connection with the satisfaction of the Participant's
entitlement. The Company may adopt and apply such rules and regulations that in
its opinion will ensure that the Company will be able to so comply.
14. TRANSFERABILITY
6
<PAGE> 7
The rights or interests of a Participant under the Plan shall not be
assignable or transferable, otherwise than by testamentary disposition or in
accordance with the laws governing the devolution of property in the event of
death and such rights or interests shall not be encumbered.
15. EFFECTIVE DATE OF THE PLAN
The effective date of the Plan shall be November 1, 1999.
16. PLAN YEAR
A Plan Year shall coincide with a calendar year. The first Plan Year in
respect of which an election may be made under section 5 is the 1999 calendar
year.
17. AMENDMENTS, SUSPENSION OR TERMINATION OF, THE PLAN
The Board may from time to time amend, suspend or terminate the Plan in
whole or in part or amend the terms of DSUs credited to a Participant in
accordance with the Plan. If any such amendment, suspension or termination will
both materially and adversely affect the rights of a Participant with respect to
DSUs credited to such Participant, the written consent of such Participant to
such amendment, suspension or termination shall be obtained. Notwithstanding the
foregoing, the obtaining of any required consent of any Participant to an
amendment, suspension or termination with respect to any credited DSUs shall not
be required if such amendment, suspension or termination is required to comply
with applicable laws, regulations, rules, orders of government or regulatory
authorities or the requirements of any stock exchange on which shares of the
Company are listed.
If the Administration Committee terminates the Plan, DSUs previously
credited to Participants shall remain outstanding and in effect and be settled
in due course in accordance with the terms of the Plan (which shall continue to
have effect, but only for such purposes) on the Settlement Date.
Notwithstanding the foregoing, the Administration Committee shall, on the
date which is five (5) years from the effective date of the Plan, re-evaluate
the Plan in light of the above-stated purposes.
18. GOVERNING LAW
The Plan shall be governed and interpreted in accordance with the laws in
force in the Province of Alberta.
7
<PAGE> 8
CANADA
[SAFEWAY LOGO]
LIMITED EXECUTIVE DEFERRED COMPENSATION PLAN
================================================================================
INITIAL PARTICIPANT INFORMATION FORM
Participant Information:
(Please type or print legibly)
/ /
- ----------------------------------------- ------------------------------------
Last Name, First Name Social Insurance Number
- ----------------------------------------- ------------------------------------
Former Name, if applicable Work Email Address
- --------------------------------------------------------------------------------
Home Mailing Address
- --------------------------------------------------------------------------------
City Province Postal Code
( ) / /
- ------------------------- -------------------- --------------------------
Home Phone Date of Birth Mother's Maiden Name
( ) / /
- ------------------------- -------------------- --------------------------
Work Phone Date of Hire Employee Number
(see "EMP. ID"
on pay stub)
- ------------------------- -------------------- --------------------------
Job Title Division Work Location
================================================================================
DEFERRAL ELECTION FORM
1. Subject to the minimum deferral requirement of $CDN 7,500 for Plan Year
1999, (to be satisfied from bonus payable to me in the year 2000), I elect
the following:
BONUS DEFERRAL
I elect to defer the following portion (up to 100%) of my Bonus earned
in the Plan year ending December 31, 1999
(SELECT ONE OPTION): $______ OR _____________% (whole percentages only)
I understand that these bonus deferrals will be credited in Safeway Stock units
and will be valued according to the fair market values of Safeway Stock. I
understand that to defer the Bonus payable to me in subsequent Plan years, I
must make a separate election during the annual enrollment period by filing a
new Deferral Election Form by December 31 of the year PRIOR to the year in which
the bonus is paid. Bonus deferrals are irrevocable.
2. COMPENSATION AGREEMENT
I acknowledge that I understand the terms of the Plan. I hereby agree to
defer the above specified amounts of my taxable compensation and to have
that taxable compensation paid to me at a later date pursuant to the terms
and conditions of the Plan which is incorporated herein by reference.
A. I understand that the establishment of this Plan does not create a
legal or equitable right or claim against the Company, except as
expressly provided in the Plan, and in no event shall the terms of
my employment be modified or in any way affected by the Plan. I
further understand that the Plan is not an employment agreement and
is not a guarantee of future compensation or employment.
B. I understand that any bonus that I defer will remain an asset of the
Company and subject to the claims of the general creditors of the
Company, in the event of its bankruptcy or insolvency.
[ ] I do NOT wish to participate in the Deferred Compensation Plan for this Plan
year.
- ----------------------------------- -----------------------------------------
Participant's Last Name, First Name Participant's Signature
(please print or type)
- ----------------------------------- -----------------------------------------
Social Insurance Number Date
PLEASE SEND COMPLETED FORM TO TBG FINANCIAL DOCUMENT CENTER,
2029 CENTURY PARK EAST, 37TH FLOOR, LOS ANGELES, CA 90067
NO FAXED FORMS ACCEPTED. QUESTIONS: CALL (800) 824-0040 M - F
BETWEEN 7:00 A.M. AND 7:00 P.M. PST
<PAGE> 1
EXHIBIT 10(iii).20
SAFEWAY INC. STOCK OPTION GAIN
DEFERRED COMPENSATION PLAN
<PAGE> 2
SAFEWAY INC. STOCK OPTION GAIN
DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
age
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<S> <C>
ARTICLE I. DEFINITIONS...................................................................................1
Section 1.1.
Account..................................................................................................1
Section 1.2. Administrator.........................................................................1
Section 1.3. Board.................................................................................1
Section 1.4. Code..................................................................................1
Section 1.5. Committee.............................................................................2
Section 1.6. Common Stock..........................................................................2
Section 1.7. Company...............................................................................2
Section 1.8. Deferral..............................................................................2
Section 1.9. Deferral Election Form................................................................2
Section 1.10. Disability...........................................................................2
Section 1.11. Employee.............................................................................2
Section 1.12. ERISA................................................................................2
Section 1.13. Exchange Act.........................................................................3
Section 1.14. Exercise Date........................................................................3
Section 1.15. Exercise Declaration Form............................................................3
Section 1.16. Fair Market Value....................................................................3
Section 1.17. Independent Director.................................................................3
Section 1.18. Military Leave.......................................................................3
Section 1.19. Participant..........................................................................4
Section 1.20. Plan.................................................................................4
Section 1.21. Plan Year............................................................................4
Section 1.22. Retirement...........................................................................4
Section 1.23. Rule 16b-3...........................................................................4
Section 1.24. Separation from Service..............................................................4
Section 1.25. Stock-for-Stock Exercise.............................................................5
Section 1.26. Stock Option.........................................................................5
Section 1.27. Stock Option Gains...................................................................5
Section 1.28. Sub-Account..........................................................................5
Section 1.29. Subsidiary...........................................................................5
Section 1.30. Trust................................................................................5
Section 1.31. Trustee..............................................................................5
Section 1.32. Unforeseeable Emergency..............................................................5
Section 1.33. Valuation Date.......................................................................6
ARTICLE II. ELIGIBILITY..................................................................................6
Section 2.1. Requirements for Participation........................................................6
Section 2.2. Election to Participate...............................................................6
</TABLE>
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<TABLE>
<S> <C>
Section 2.3. Content of Deferral Election Form.....................................................6
Section 2.4. Continuation of Participation.........................................................6
ARTICLE III. PARTICIPANTS' DEFERRALS....................................................................7
Section 3.1. Deferral of Stock Option Gains........................................................7
Section 3.2. Amount of Deferral....................................................................7
Section 3.3. Deferral Conditions...................................................................7
Section 3.4. Method of Exercise....................................................................8
Section 3.5. Minimum and Maximum Deferrals.........................................................8
ARTICLE IV. DEFERRAL ACCOUNTS...........................................................................9
Section 4.1. Account Maintenance; Balance..........................................................9
Section 4.2. Crediting of Dividends................................................................9
Section 4.3. Fractional Shares.....................................................................9
Section 4.4. Statement of Account..................................................................9
ARTICLE V. DISTRIBUTIONS OF ACCOUNTS...................................................................10
Section 5.1. Commencement of Distributions........................................................10
Section 5.2. Form of Distribution.................................................................10
Section 5.3. Irrevocability of Elections; Amendments to Elections.................................11
Section 5.4. Withdrawal for Unforeseeable Emergency...............................................11
ARTICLE VI. SEPARATION FROM SERVICE....................................................................12
Section 6.1. Separation from Service Other than for Disability or Retirement......................12
Section 6.2. Disability or Retirement.............................................................12
ARTICLE VII. PROVISIONS RELATING TO SECTION 16 OF THE EXCHANGE ACT AND SECTION 162(m) OF THE CODE.....12
Section 7.1. Compliance with Section 16 of the Exchange Act.......................................12
Section 7.2. Compliance with Code Section 162(m)..................................................13
ARTICLE VIII. ADMINISTRATIVE PROVISIONS................................................................13
Section 8.1. Administrator's Duties and Powers....................................................13
Section 8.2. Limitations Upon Powers..............................................................14
Section 8.3. Final Effect of Administrator Action.................................................14
Section 8.4. Committee............................................................................14
Section 8.5. Majority Rule........................................................................14
Section 8.6. Indemnification by Company; Liability Insurance......................................14
Section 8.7. Recordkeeping........................................................................15
Section 8.8. Inspection of Records................................................................15
Section 8.9. Identification of Fiduciaries........................................................15
Section 8.10. Procedure for Allocation of Fiduciary Responsibilities..............................15
Section 8.11. Claims Procedure....................................................................16
Section 8.12. Conflicting Claims..................................................................17
</TABLE>
ii
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<TABLE>
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Section 8.13. Service of Process..................................................................17
ARTICLE IX. MISCELLANEOUS PROVISIONS...................................................................17
Section 9.1. Limitation on Transfer...............................................................17
Section 9.2. Amendment/Termination of the Plan....................................................18
Section 9.3. Changes in Common Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events.........................18
Section 9.4. Tax Withholding......................................................................19
Section 9.5. Unfunded Status of Plan; Unsecured General Creditor..................................20
Section 9.6. Establishment of Trusts..............................................................21
Section 9.7. Limitation on Rights of Employees....................................................21
Section 9.8. No Rights as Stockholder.............................................................21
Section 9.9. Satisfaction of Claims...............................................................22
Section 9.10. Compliance..........................................................................22
Section 9.11. Sources of Stock....................................................................22
Section 9.12. Exempt ERISA Plan...................................................................22
Section 9.13. Notice22
Section 9.14. Errors and Misstatements............................................................23
Section 9.15. Payment on Behalf of Minor, Etc.....................................................23
Section 9.16. Governing Law.......................................................................23
Section 9.17. Pronouns and Plurality..............................................................23
Section 9.18. Titles23
Section 9.19. References..........................................................................23
Section 9.20. Assumption of Risk..................................................................24
Section 9.21. Severability........................................................................24
Section 9.22. Status24
ARTICLE X. EFFECTIVE DATE..............................................................................24
Section 10.1. Effective Date......................................................................24
</TABLE>
iii
<PAGE> 5
SAFEWAY INC. STOCK OPTION GAIN
DEFERRED COMPENSATION PLAN
Safeway Inc., a Delaware corporation, by resolution of its
Board of Directors has adopted this Safeway Inc. Stock Option Gain Deferred
Compensation Plan (the "Plan"), effective as of November 1, 1999, for the
benefit of its eligible employees.
The Plan is a nonqualified deferred compensation plan
pursuant to which certain eligible employees of the Company (as defined below)
may elect to defer the receipt of shares of the Company's common stock which
they would otherwise receive upon the exercise of Stock Options (as defined
below). The Plan is unfunded and is maintained primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees, within the meaning of Sections 201(2), 301(a)(3) and
401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended.
ARTICLE I.
DEFINITIONS
Whenever the following terms are used in the Plan with the
first letter capitalized, they shall have the meaning
specified below unless the context clearly indicates to the contrary.
Section 1.1. Account
"Account" shall mean, with respect to any Participant, the
account and Sub-Accounts established for the Participant pursuant to Article III
which are credited with shares of Common Stock attributable to (i) Deferrals
pursuant to Section 3.2, (ii) Common Stock Dividends pursuant to Section 4.2(a),
and (iii) Non-Stock Dividends pursuant to Section 4.2(b). Accounts shall be
maintained solely as bookkeeping entries by the Company to evidence unfunded
obligations of the Company.
Section 1.2. Administrator
"Administrator" shall mean the Committee appointed pursuant
to Section 8.4 to administer the Plan, or such other person or persons to whom
the Committee has delegated its duties pursuant to Section 8.1.
Section 1.3. Board
"Board" shall mean the Board of Directors of Safeway Inc.
Section 1.4. Code
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
<PAGE> 6
Section 1.5. Committee
"Committee" shall mean the Compensation Committee of the
Board or another committee or subcommittee of the Board appointed to administer
the Plan pursuant to Section 8.4.
Section 1.6. Common Stock
"Common Stock" shall mean shares of the common stock of the
Company, par value $0.01 per share, and any equity security of the Company
issued or authorized to be issued in the future, but excluding any preferred
stock and any warrants, options or other rights to purchase Common Stock.
Section 1.7. Company
"Company" shall mean Safeway Inc., a Delaware corporation,
and any successor company which assumes or continues the Plan under Section
9.3(b).
Section 1.8. Deferral
"Deferral" or "Deferrals" shall mean, as appropriate, the
amount of individual or aggregate Stock Option Gains which a Participant defers
under the Plan.
Section 1.9. Deferral Election Form
"Deferral Election Form" shall mean the form on which a
Participant designates a specified Stock Option or portion of a Stock Option
which, when exercised, shall result in the deferral of the ensuing Stock Option
Gains thereon under the Plan. The Deferral Election Form shall be in such form
as may be prescribed by the Administrator.
Section 1.10. Disability
"Disability" shall mean a "disability" as defined in the
Company's long-term disability plan, as then in effect.
Section 1.11. Employee
"Employee" shall mean any person who renders services to
the Company or a Subsidiary in the status of an employee as that term is defined
in Code Section 3121(d), including officers but not including directors who
serve solely in that capacity.
Section 1.12. ERISA
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time.
2
<PAGE> 7
Section 1.13. Exchange Act
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
Section 1.14. Exercise Date
"Exercise Date" shall mean, with respect to a Stock Option,
the date on which the Participant exercises such Stock Option.
Section 1.15. Exercise Declaration Form
"Exercise Declaration Form" shall mean the form filed with
the Administrator indicating the date(s) on which
Options previously designated on a Deferral Election Form are to be exercised.
The Exercise Declaration Form shall be in such form as may be prescribed by the
Administrator.
Section 1.16. Fair Market Value
"Fair Market Value" of a share of Common Stock as of a
given date shall be (a) the closing price of a share of
Common Stock on the principal exchange on which shares of Common Stock are then
trading, if any (or as reported on any composite index which includes such
principal exchange), on such date, or if shares were not traded on such date,
then on the next preceding date on which a trade occurred, or (b) if Common
Stock is not traded on an exchange but is quoted on NASDAQ or a successor
quotation system, the mean between the closing representative bid and asked
prices for the Common Stock on such date as reported by NASDAQ or such successor
quotation system; or (c) if Common Stock is not publicly traded on an exchange
and not quoted on NASDAQ or a successor quotation system, the Fair Market Value
of a share of Common Stock as established by the Administrator acting in good
faith. In determining the Fair Market Value of the Company's Common Stock under
subsection (a) of this Section 1.16, the Administrator may rely on the closing
price as reported in the New York Stock Exchange composite transactions
published in the Western Edition of the Wall Street Journal.
Section 1.17. Independent Director
"Independent Director" shall mean a member of the Board who
is not an Employee of the Company.
Section 1.18. Military Leave
Any Employee who leaves the Company directly to perform
service in the Armed Forces of the United States or the United States Public
Health Service under conditions entitling him to reemployment rights as provided
in the laws of the United States shall, solely for the purposes of the Plan and
irrespective of whether he is compensated by the Company during such period of
service, be presumed on "Military Leave." If such Employee voluntarily resigns
from the Company during such period of service, or if he fails to make
application for reemployment within the period specified by such laws for the
preservation of his reemployment rights, such
3
<PAGE> 8
Employee shall be regarded as having had a Separation from Service by
resignation on the day such Military Leave expired.
Section 1.19. Participant
"Participant" shall mean any person covered by the Plan as
provided in Article II.
Section 1.20. Plan
"Plan" shall mean this Safeway Inc. Stock Option Gain
Deferred Compensation Plan, as amended from time to time.
Section 1.21. Plan Year
"Plan Year" shall mean the twelve-month period commencing
on January 1 and ending on December 31.
Section 1.22. Retirement
"Retirement" shall mean a Participant's voluntary
retirement from employment with the Company on or after age 55
in accordance with the Company's retirement policies as then in effect.
Section 1.23. Rule 16b-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the
Exchange Act, as such Rule may be amended from time to time.
Section 1.24. Separation from Service
(a) "Separation from Service" of an Employee shall mean his
resignation from or discharge by the Company or a Subsidiary, or his death or
retirement, but shall not include his transfer among the Company and any of its
Subsidiaries.
(b) A leave of absence or sick leave authorized by the
Company in accordance with established policies, a vacation period, a temporary
layoff for lack of work or a Military Leave shall not constitute a Separation
from Service; provided, however, that
(i) continuation upon a temporary layoff for lack
of work for a period in excess of six months shall be
considered a discharge effective as of the commencement of
such period;
(ii) failure to return to work upon expiration of
any leave of absence, sick leave, Military Leave or
vacation or within three days after recall from a temporary
layoff for lack of work shall be considered a resignation
effective as of the date of expiration of such leave of
absence, sick leave, Military Leave or vacation or the
expiration of the third day after recall from any such
temporary layoff.
4
<PAGE> 9
Section 1.25. Stock-for-Stock Exercise
"Stock-for-Stock Exercise" shall mean the exercise of a
Stock Option in the manner described in Section 3.4.
Section 1.26. Stock Option
"Stock Option" shall mean an option to purchase Common
Stock which is not an incentive stock option within the meaning of Section 422
of the Code.
Section 1.27. Stock Option Gains
"Stock Option Gains" shall mean the amount of a
Participant's net gain resulting from the Participant's a Stock-for-Stock
Exercise of Stock Options.
Section 1.28. Sub-Account
"Sub-Account" shall mean, with respect to each Stock Option
for which a Participant has filed a Deferral
Election Form, the portion of the Participant's Account attributable to such
Stock Option.
Section 1.29. Subsidiary
"Subsidiary" shall mean any corporation in an unbroken
chain of corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain then owns stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
Section 1.30. Trust
"Trust" shall mean the trust or trusts, if any, established
by the Company under the Plan pursuant to Section 9.6.
Section 1.31. Trustee
"Trustee" shall mean a trustee of a Trust.
Section 1.32. Unforeseeable Emergency
"Unforeseeable Emergency" shall mean, with respect to a
Participant, an unanticipated emergency that is caused by an event beyond the
control of the Participant and that would result in severe financial hardship to
the Participant if early withdrawal from the Participant's Account were not
permitted, as determined by the Administrator in its sole discretion.
5
<PAGE> 10
Section 1.33. Valuation Date
"Valuation Date" shall mean the date on which the number of
shares of Common Stock credited to an Account is determined from time to time
pursuant to the terms of the Plan.
ARTICLE II.
ELIGIBILITY
Section 2.1. Requirements for Participation
Any management or highly compensated Employee who is
designated by the Administrator in writing shall be eligible to be a Participant
in the Plan.
Section 2.2. Election to Participate
The Administrator shall deliver to each Employee who may be
a Participant in the Plan for a Plan Year a Deferral Election Form on which the
Participant may elect to defer his Stock Option Gains under Article III. An
Employee shall become a Participant in the Plan after properly completing and
signing a Deferral Election Form and timely submitting it to the Administrator.
Section 2.3. Content of Deferral Election Form
The Participant shall set forth on the Deferral Election
Form:
(a) his consent that he, his successors in interest and
assigns and all persons claiming under him shall be bound, to the extent
authorized by law, by the statements contained therein and by the provisions of
the Plan as they now exist, and as they may be amended from time to time;
(b) the specific Stock Option Gains (including the specific
Stock Option to which such Stock Option Gains relate) to be deferred under the
Plan;
(c) the times at which his Account attributable to such
Stock Option Gains shall be distributed to him under the Plan; and
(d) such other information as the Administrator may
determine in its sole discretion.
Section 2.4. Continuation of Participation
An Employee who has elected to participate in the Plan by
properly submitting a Deferral Election Form shall continue as a Participant in
the Plan until the entire balance of the Participant's Account has been
distributed to the Participant. In the event a Participant becomes ineligible to
continue participation in the Plan, but remains an Employee of the Company, the
6
<PAGE> 11
Participant's Account shall be held and administered in accordance with the Plan
until such time as the Participant's Account is completely distributed.
ARTICLE III.
PARTICIPANTS' DEFERRALS
Section 3.1. Deferral of Stock Option Gains
Subject to the terms and conditions set forth herein and
such terms and conditions as the Administrator may determine, Participants may
elect to defer Stock Option Gains attributable to the exercise of a Stock Option
or a specified portion of a Stock Option by timely completing and delivering to
the Administrator a Deferral Election Form.
Section 3.2. Amount of Deferral
With respect to each Deferral Election Form properly
delivered to the Administrator, the Company shall, on the Exercise Date of the
Stock Option to which such Deferral Election Form relates, credit the
Participant's Account and/or Sub-Account with that number of shares of Common
Stock equal to the quotient obtained by dividing (x) the amount of Stock Option
Gains attributable to such Deferral by (y) the Fair Market Value of a share of
Common Stock on the Exercise Date.
Section 3.3. Deferral Conditions
In order for an election to defer Stock Option Gains to be
valid, all of the following conditions must be satisfied:
(a) A properly completed and executed Deferral Election
Form must be timely delivered to the Administrator and accepted by the
Administrator (i) no later than the last day of a Plan Year preceding the Plan
Year in which the Exercise Date occurs and (ii) at least six (6) months prior to
the Exercise Date, except with respect to (x) any Stock Option which by its
terms will expire on or before March 31, 2000, in which case the Deferral
Election Form must be delivered to and accepted by the Administrator at least
four (4) months prior to the Exercise Date or (y) any Stock Options which are
held by an Employee who becomes a Participant in the Plan after 1999 and which
will expire less than six (6) months after the date on which the Employee
becomes a Participant, in which case the Participant's Deferral Election Form
with respect to any such Stock Option must be delivered to and accepted by the
Administrator at least four (4) months prior to the Exercise Date;
(b) Not later than five (5) days prior to exercise of a
Stock Option designated on a Deferral Election Form, the Participant shall file
with the Administrator an Exercise Declaration Form with respect to such Stock
Option which shall state the date upon which the Stock Option is to be
exercised, identify the shares of Common Stock which the Participant will use to
exercise the Option and contain any additional information which the
Administrator may require;
7
<PAGE> 12
(c) The Stock Option must be exercised pursuant to a
Stock-for-Stock Exercise;
(d) The Common Stock delivered by the Participant to
exercise the Stock Option must comply with the provisions of Section 3.4 hereof;
(e) The Participant must have paid to the Company any
amounts required to be withheld by the Company to satisfy FICA, Medicare and any
other applicable taxes which are payable with respect to the exercise of the
Stock Option; and
(f) Such election(s) to defer shall be irrevocable and
shall not be amendable, except to the extent permitted by Section 5.3.
Section 3.4. Method of Exercise
A Participant exercising a Stock Option with respect to
which the Participant has made an effective deferral
election shall effect such exercise by actually delivering to the whole shares
of Company Common Stock with a Fair Market Value on the Exercise Date equal to
the aggregate exercise price of the Stock Option in the manner contemplated by
the Internal Revenue Service's Revenue Ruling 80-244. If the aggregate exercise
price would require the payment of a fractional share, such fractional share
shall be paid in cash and not in Common Stock. Common Stock used for this
purpose shall be either (i) Common Stock which was not acquired by the
Participant from the Company, with a loan or other extension of credit by the
Company or otherwise in a transaction involving the Company, or (ii) Common
Stock acquired by the Participant in a transaction involving the Company and
which has been held by the Participant for a period of more than six (6) months
prior to the Exercise Date; provided, however, that if the Participant delivers
to the Company Common Stock acquired through the exercise of an "incentive stock
option" as defined in Section 422 of the Code, such Common Stock shall have been
held by the Participant for a period of more than (i) twenty-four (24) months
after the date on which such incentive stock option was granted to the
Participant and (ii) twelve (12) months after the date on which such incentive
stock option was exercised by the Participant.
Section 3.5. Minimum and Maximum Deferrals
The Administrator may, in its absolute discretion,
establish a minimum and/or maximum amount of Stock Option
Gains which a Participant may defer under the Plan, either in the aggregate or
on an annual basis. Subject to change by the Administrator, as of the effective
date of this Plan, the minimum number of shares of Common Stock with respect to
which a Participant may elect to defer Stock Option Gains shall be 1,000 shares.
8
<PAGE> 13
ARTICLE IV.
DEFERRAL ACCOUNTS
Section 4.1. Account Maintenance; Balance
Solely for recordkeeping purposes, the Company shall
maintain an Account, and, if applicable, one or more Sub-Accounts, for each
Participant. A Participant's Account balance or Sub-Account balance, as the case
may be, as of each Valuation Date shall be equal to the number of shares of
Common Stock allocated to such Account or Sub-Account as of the immediately
preceding Valuation Date less any shares of Common Stock or cash distributed to
the Participant from such Account or Sub-Account plus any shares of Common Stock
(i) credited to such Account or Sub-Account pursuant to Section 3.2 as a result
of Deferrals, (ii) credited to such Account or Sub-Account pursuant to Section
4.2(a) as a result of Common Stock Dividends, and (iii) credited to such Account
or Sub-Account pursuant to Section 4.2(b) as a result of Non-Stock Dividends, in
each case made (credited or debited) since the immediately preceding Valuation
Date.
Section 4.2. Crediting of Dividends
Stock and non-stock dividends paid with respect to Common
Stock allocated to a Participant's Account and/or Sub-Account shall be credited
by the Administrator to the Participant's Account and/or Sub-Account in the form
of additional shares or fractional shares of Common Stock as of the date upon
which the Company makes such a distribution to its stockholders, as follows:
(a) The Participant's Account and/or Sub-Account shall be
credited with any additional shares of Common Stock distributed as a dividend
with respect to Common Stock credited to the Participant's Account and/or
Sub-Account ("Common Stock Dividends") and
(b) In the event of a cash dividend or other distribution
with respect to the Common Stock ("Non-Stock Dividends"), the Participant's
Account and/or Sub-Account shall be credited with that number of shares of
Common Stock equal to the quotient obtained by dividing (x) the aggregate amount
of the Non-Stock Dividend attributable to the Common Stock allocated to the
Participant's Account or Sub-Account by (y) the Fair Market Value of a share of
Common Stock on the date on which such Non-Stock Dividends are paid to the
Company's stockholders.
Section 4.3. Fractional Shares
Credits, debits and valuations of Accounts and Sub-Accounts
shall be made only in the form of whole and fractional shares of Common Stock.
Section 4.4. Statement of Account
Within one hundred eighty days after the last day of each
Plan Year, the Administrator shall furnish to each Participant a statement
setting forth the balance of his
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Account and Sub-Accounts as of the last day of such Plan Year and such other
information as the Administrator shall deem advisable to furnish.
ARTICLE V.
DISTRIBUTIONS OF ACCOUNTS
Section 5.1. Commencement of Distributions
With respect to each Stock Option for which a Participant
has filed a Deferral Election Form, the Participant shall designate on such form
the date (the "Distribution Commencement Date") on which the distribution of the
Sub-Account attributable to such Stock Option shall commence, provided that,
except as provided in Section 6.1, such Distribution Commencement Date shall not
be less than two (2) years or more than fifteen (15) years after the Exercise
Date.
Section 5.2. Form of Distribution
With respect to each Sub-Account, the Participant shall
elect in the applicable Deferral Election Form to receive a distribution of such
Sub-Account, subject to Sections 6.1 and 6.2, in (i) with respect to any
distribution, a lump sum, (ii) in the case of an Account and its Sub-Accounts
with an aggregate balance of more than $50,000.00, with respect to a
distribution which commences on the Participant's Separation Date, annual
installments over a period of five (5), ten (10) years or fifteen (15) years
from the Distribution Date or (iii) in the case of a Sub-Account with a balance
of more than $50,000.00, with respect to a distribution which commences prior to
the Participant's Separation Date, annual installments over a period of not more
than ten (10) years from the Distribution Date (any such period of distribution,
the "Payment Period") as follows:
(a) If the Participant has elected to receive a lump-sum
distribution, the Company shall, within thirty (30) days after the Distribution
Commencement Date, distribute to the Participant (i) the number of whole shares
of Common Stock credited to such Sub-Account as of the Distribution Commencement
Date, and (ii) in lieu of any fractional share of Common Stock credited to such
Sub-Account as of such date, an amount of cash equal to the product of such
fraction multiplied by the Fair Market Value of a share as of the Distribution
Commencement Date. Any such distribution shall be subject to tax withholding by
the Company as provided in Section 9.4.
(b) If the Participant has elected to receive a
distribution in installments, the Company shall, within thirty (30) days after
the Distribution Commencement Date and within thirty (30) days after each
anniversary thereof during the Participant's Payment Period (each, a
"Distribution Date"), distribute to the Participant that number of shares of
Common Stock equal to the quotient obtained by dividing the number of shares of
Common Stock credited to such Sub-Account as of the applicable Distribution Date
by the number of years remaining in the
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Participant's Payment Period (including the year in which such installment is
being paid), rounded down to the nearest whole share. Except with respect to the
final Distribution Date during the Payment Period, any fractional shares of
Common Stock resulting from the above calculation shall not be distributed to
the Participant, but shall be credited back to such Sub-Account as of the
Distribution Date. With respect to the final Distribution Date, the Company
shall, in addition to the shares to which the Participant is entitled pursuant
to this Section 5.2(b) and in lieu of any fractional share of Common Stock
credited to such Sub-Account as of such date, distribute to the Participant an
amount of cash equal to the product of such fraction multiplied by the Fair
Market Value of a share as of the final Distribution Date. Any such
distributions shall be subject to tax withholding by the Company as provided in
Section 9.4.
Section 5.3. Irrevocability of Elections; Amendments to Elections
Elections made by a Participant pursuant to a Deferral
Election Form or an Exercise Declaration Form shall be irrevocable and shall not
be amendable after they have been delivered to the Administrator, provided,
however, that a Participant may amend a Deferral Election Form at any time prior
to one (i) year before the Distribution Commencement Date designated in the
Deferral Election Form to defer the Distribution Commencement Date by two (2) or
more years after the previously designated Distribution Commencement Date,
provided, however, that a Participant shall only be permitted to make two (2)
such amendments with respect to any Deferral Election Form.
Section 5.4. Withdrawal for Unforeseeable Emergency
A Participant may make a withdrawal from his Account on
account of an Unforeseeable Emergency, subject to the following requirements:
(a) The Participant shall have delivered a written request
to the Administrator for a withdrawal due to an Unforeseeable Emergency, and
shall have received the Administrator's approval of such request.
(b) The Participant's Unforeseeable Emergency withdrawal
shall not exceed the lesser of (i) the Participant's Account balance, calculated
based on the Fair Market Value of a share of Common Stock on the date of the
Administrator's approval of the Participant's request, or (ii) the amount which
is necessary to satisfy the Unforeseeable Emergency, less any amount which can
be satisfied from other resources which are reasonably available to the
Participant.
(c) The denial of the Participant's Unforeseeable Emergency
withdrawal request would result in severe financial hardship to the Participant.
(d) The Participant has not received a withdrawal due to an
Unforeseeable Emergency within the twelve (12) month period preceding the
withdrawal.
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ARTICLE VI.
SEPARATION FROM SERVICE
Section 6.1. Separation from Service Other than for Disability or
Retirement
(a) In the event that a Participant incurs a Separation
from Service for any reason other than the Participant's Disability or
Retirement, the Company shall, within thirty (30) days after the effective date
of such Separation from Service (the "Separation Date"), notwithstanding any
contrary election made by the Participant, distribute to the Participant (or, in
the case of the Participant's death, to his beneficiary, and if he has
designated no beneficiary, to his estate) (i) the number of whole shares of
Common Stock credited to the Participant's Account as of the Separation Date,
and (ii) in lieu of any fractional share of Common Stock credited to the
Participant's Account as of such date, an amount of cash equal to the product of
such fraction multiplied by the Fair Market Value of a share as of the
Separation Date.
(b) Upon the distribution of a Participant's Account
pursuant to subsection (a) above, the Participant shall cease to be a
participant in the Plan and all Deferral Election Forms with respect to Stock
Options not theretofore exercised shall be void and of no further force and
effect.
Section 6.2. Disability or Retirement
In the event that a Participant incurs a Separation from
Service by reason of the Participant's Disability or Retirement, the
Participant's Account shall be continue to be distributed pursuant to the
Participant's Deferral Election Form(s) in accordance with Section 5.2.
ARTICLE VII.
PROVISIONS RELATING TO
SECTION 16 OF THE EXCHANGE ACT AND SECTION 162(m) OF THE CODE
Section 7.1. Compliance with Section 16 of the Exchange Act
(a) With respect to any Employee who is then subject to
Section 16 of the Exchange Act, only the Committee may designate such Employee
as a Participant in the Plan.
(b) With respect to any Participant who is then subject to
Section 16 of the Exchange Act, any function of the Administrator under the Plan
relating to such Employee or Participant shall be performed solely by the
Committee, if and to the extent required to ensure the availability of an
exemption under Section 16 of the Exchange Act for any transaction relating to
such Employee or Participant under the Plan.
(c) Notwithstanding any other provision of the Plan or any
rule, instruction, election form or other form, the Plan and any such rule,
instruction or form shall be subject to any additional conditions or limitations
set forth in any applicable exemptive rule under Section
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16 of the Exchange Act (including any amendment to Rule 16b-3) that are
requirements for the application of such exemptive rule. To the extent permitted
by applicable law, such provision, rule, instruction or form shall be deemed
amended to the extent necessary to conform to such applicable exemptive rule.
Section 7.2. Compliance with Code Section 162(m)
It is the intent of the Company that any compensation
(including shares of Common Stock subject to Stock Options) which is deferred
under the Plan by a person who is, with respect to the year of distribution,
deemed by the Administrator to be a "covered employee" within the meaning of
Code Section 162(m) and regulations thereunder, which compensation constitutes
either "qualified performance-based compensation" within the meaning of Code
Section 162(m) and regulations thereunder or compensation not otherwise subject
to the limitation on deductibility under Section 162(m) and regulations
thereunder, shall not, as a result of deferral hereunder, become compensation
with respect to which the Company in fact would not be entitled to a tax
deduction under Code Section 162(m). Accordingly, unless otherwise determined by
the Administrator, if any compensation would become so disqualified under
Section 162(m) as a result of deferral hereunder, the terms of such deferral
shall be automatically modified to the extent necessary to ensure that the
compensation would not, at the time of distribution, be so disqualified.
ARTICLE VIII.
ADMINISTRATIVE PROVISIONS
Section 8.1. Administrator's Duties and Powers
The Committee appointed pursuant to Section 8.4 shall be
the Administrator and shall conduct the general administration of the Plan in
accordance with the Plan and shall have all the necessary power and authority to
carry out that function. Among its necessary powers and duties are the
following:
(a) Except to the extent provided otherwise by Sections 7.1
and 7.2, to delegate all or part of its function as Administrator to others and
to revoke any such delegation.
(b) To determine questions of eligibility of Participants
and their entitlement to benefits, subject to the provisions of Section 8.11.
(c) To select and engage attorneys, accountants, actuaries,
trustees, appraisers, brokers, consultants, administrators, physicians, the
Committee under Section 8.4, or other persons to render service or advice with
regard to any responsibility the Administrator or the Board has under the Plan,
or otherwise, to designate such persons to carry out fiduciary responsibilities
(other than trustee responsibilities) under the Plan, and (with the Committee,
the Company, the Board and its officers, trustees and Employees) to rely upon
the advice, opinions or valuations of any such persons, to the extent permitted
by law, being fully protected in acting or relying thereon in good faith.
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(d) To interpret the Plan for purpose of the administration
and application of the Plan, in a manner not inconsistent with the Plan or
applicable law and to amend or revoke any such interpretation.
(e) To conduct claims procedures as provided in Section
8.11.
Section 8.2. Limitations Upon Powers
The Plan shall be uniformly and consistently administered,
interpreted and applied with regard to all Participants in similar
circumstances. The Plan shall be administered, interpreted and applied fairly
and equitably and accordance with the specified purposes of the Plan.
Section 8.3. Final Effect of Administrator Action
Except as provided in Section 8.11, all actions taken and
all determinations made by the Administrator in good faith shall be final and
binding upon all Participants and any person interested in the Plan.
Section 8.4. Committee
The Committee shall consist solely of two or more
Independent Directors appointed by and holding office at the pleasure of the
Board, each of whom is both a "non-employee director" as defined by Rule 16b-3
and an "outside director" for purposes of Section 162(m) of the Code.
Appointment of Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may be filled by the Board.
Section 8.5. Majority Rule
The Committee shall act by a majority of its members in
office; provided, however, that the Committee may appoint one of its members or
a delegate to act on behalf of the Committee on matters arising in the ordinary
course of administration of the Plan or on specific matters.
Section 8.6. Indemnification by Company; Liability Insurance
(a) The Company shall pay or reimburse any of its officers,
directors, Committee members or Employees who are fiduciaries with respect to
the Plan and/or Trust for all expenses incurred by such persons in, and shall
indemnify and hold them harmless from, all claims, liability and costs
(including reasonable attorneys' fees) arising out of the good faith performance
of their fiduciary functions.
(b) The Company may obtain and provide for any such person,
at the Company's expense, liability insurance against liabilities imposed on him
by law.
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Section 8.7. Recordkeeping
(a) The Administrator shall maintain suitable records as
follows:
(i) Records of each Participant's Account which,
among other things, shall show separately deferrals, dividends, and
distributions with respect to such Account.
(ii) Records which show the assets, liabilities
and operations of the Plan and the Trust during each Plan Year.
(iii) Records of its deliberations and decisions.
(b) The Administrator shall appoint a secretary, and at its
discretion, an assistant secretary, to keep the record of proceedings, to
transmit its decisions, instructions, consents or directions to any interested
party, to execute and file, on behalf of the Administrator, such documents,
reports or other matters as may be necessary or appropriate under ERISA and to
perform ministerial acts.
(c) The Administrator shall not be required to maintain any
records or accounts which duplicate any records or accounts maintained by the
Company or the Trustee.
Section 8.8. Inspection of Records
Copies of the Plan and records of a Participant's Account
shall be open to inspection by him or his duly authorized representatives at the
office of the Administrator at any reasonable business hour.
Section 8.9. Identification of Fiduciaries
(a) The Administrator shall be the named fiduciary of the
Plan and, as permitted or required by law, shall have exclusive authority and
discretion to operate and administer the Plan.
(b) The Committee, any other Administrator, the Trustee,
the Board, the Company, and every person who exercises any discretionary
authority or discretionary control respecting the Plan or who has any
discretionary authority or discretionary responsibility in the administration of
the Plan, including any person designated by the named fiduciary to carry out
fiduciary responsibilities under the Plan, shall be a fiduciary and as such
shall be subject to provisions of ERISA and other applicable laws governing
fiduciaries.
(c) Any person or group of persons may serve in more than
one fiduciary capacity with respect to the Plan (including, but not limited to,
service as a Trustee, a director of the Company and a member of the Committee).
Section 8.10. Procedure for Allocation of Fiduciary Responsibilities
(a) Fiduciary responsibilities under the Plan are allocated
as follows:
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(i) The sole duties, responsibilities and powers
allocated to the Board, any Company, the Administrator, the Committee
and any fiduciary shall be those expressly provided in the relevant
Sections of the Plan.
(ii) All fiduciary responsibilities not allocated
to the Board, or the Company, are hereby allocated to the
Administrator, subject to delegation.
(b) Fiduciary responsibilities under the Plan may be
reallocated among fiduciaries by amending the plan in the manner prescribed in
Section 9.2, followed by the fiduciaries' acceptance of, or operation under,
such amended Plan.
Section 8.11. Claims Procedure
(a) No distributions under this Plan to a Participant,
former Participant or any beneficiary or representative thereof shall be made
except upon a claim filed in writing with the Administrator or to a claims
official designated by the Administrator.
(b) If the Administrator or claims official wholly or
partially denies the claim, it or he shall, within a reasonable period of time
after receipt of the claim provide the claimant with written notice of such
denial, setting forth, in a manner calculated to be understood by the claimant:
(i) the specific reason or reasons for such
denial;
(ii) specific reference to pertinent Plan
provisions on which the denial is based;
(iii) a description of any additional material or
information necessary for the claimant to perfect the claim and an
explanation of why such material or information is necessary; and
(iv) an explanation of the Plan's claims review
procedure.
(c) The Administrator shall provide each claimant with a
reasonable opportunity to appeal a denial of a claim to the Administrator or its
authorized delegate for a full and fair review. The claimant or his duly
authorized representative:
(i) may request a review upon written application
to the Administrator or its authorized delegate (which shall be filed
with the claims official);
(ii) may review pertinent documents; and
(iii) may submit issues and comments in writing.
(d) The Administrator or its authorized delegate may
establish such time limits within which a claimant may request review of a
denied claim as are reasonable in relation to the nature of the benefit which is
the subject of the claim and to other attendant circumstances
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but which, in no event, shall be less than sixty (60) days after receipt by the
claimant of written notice of denial of his claim.
(e) The decision by the Administrator or its authorized
delegate upon review of a claim shall be made not later than sixty (60) days
after receipt by the Administrator or its authorized delegate of the request for
review, unless special circumstances require an extension of time for
processing, in which case a decision shall be rendered as soon as possible, but
not later than one hundred twenty (120) days after receipt of such request for
review.
(f) The decision on review shall be in writing and shall
include specific reasons for the decision written in a manner calculated to be
understood by the claimant with specific references to the pertinent Plan
provisions on which the decision is based.
(g) To the extent permitted by law, the decision of the
Committee or claims official, if no appeal is filed, or the decision of the
Administrator or its delegate on review, when warranted on the record and
reasonably based on the law and the provisions of the Plan, shall be final and
binding on all parties.
Section 8.12. Conflicting Claims
If the Administrator is confronted with conflicting claims
concerning a Participant's Account, the Administrator may interplead the
claimants in an action at law, or in an arbitration conducted in accordance with
the rules of the American Arbitration Association, as the Administrator shall
elect in its sole discretion, and in either case, the attorneys' fees, expenses
and costs reasonably incurred by the Administrator in such proceeding shall be
paid from the Participant's Account.
Section 8.13. Service of Process
The General Counsel of Safeway Inc. is hereby designated as
agent of the Plan for the service of legal process.
ARTICLE IX.
MISCELLANEOUS PROVISIONS
Section 9.1. Limitation on Transfer
(a) No right, title or interest in the Plan or in any
Account may be sold, pledged, assigned or transferred in any manner other than
by will or the laws of descent and distribution. No right, title or interest in
the Plan or in any Account shall be liable for the debts, contracts or
engagements of the Participant or his successors in interest or shall be subject
to disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment or
any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding sentence.
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(b) Notwithstanding the provisions of subsection, a
Participant's interest in his Account may be transferred by the Participant
pursuant to a domestic relations order that constitutes a "qualified domestic
relations order" as defined by the Code or Title I of ERISA.
Section 9.2. Amendment/Termination of the Plan
The Administrator may, with prospective or retroactive
effect, amend, alter, suspend, discontinue, or terminate
the Plan at any time without the consent of Participants, stockholders, or any
other person, including amendments necessary to conform to the provisions and
requirements of ERISA or the Code or regulations thereunder; provided, however,
that, without the consent of a Participant, no such action shall materially and
adversely affect the rights of such Participant with respect to any rights to
payment of amounts credited to such Participant's Account. Notwithstanding the
foregoing, the Administrator may, in its sole discretion, terminate the Plan and
distribute to Participants the amounts credited to their Accounts.
Section 9.3. Changes in Common Stock or Assets of the Company,
Acquisition or Liquidation of the Company and Other
Corporate Events
(a) In the event that the Administrator determines that any
dividend or other distribution (whether in the form of cash, Common Stock, other
securities, or other property), recapitalization, reclassification, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, liquidation, dissolution, or sale, transfer, exchange
or other disposition of all or substantially all of the assets of the Company,
or exchange of Common Stock or other securities of the Company, issuance of
warrants or other rights to purchase Common Stock or other securities of the
Company, or other similar corporate transaction or event, in the Administrator's
sole discretion, affects the Common Stock such that an adjustment is determined
by the Administrator to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan or with respect to any Account under the Plan, then the
Administrator shall, in such manner as it may deem equitable, adjust the number
and/or kind of shares of Common Stock (or other securities or property) credited
to Participants' Accounts.
(b) In the event of any transaction or event described in
Section 9.3(a) or any unusual or nonrecurring transactions or events affecting
the Company, any affiliate of the Company, or the financial statements of the
Company or any affiliate, or of changes in applicable laws, regulations, or
accounting principles, the Administrator, in its sole and absolute discretion
and on such terms and conditions as it deems appropriate, by action taken prior
to the occurrence of such transaction or event, is hereby authorized to take any
one or more of the following actions whenever the Administrator determines that
such action is appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan or
with respect to any Account under the Plan, to facilitate such transactions or
events, or to give effect to such changes in laws, regulations or principles:
(i) To provide for the complete distribution of
Participants' Accounts in connection with such transactions or
events;
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(ii) To provide that Participants' Accounts and
the Company's rights and obligations with respect thereto shall be
assumed by the successor or survivor corporation, or a parent or
subsidiary thereof;
(iii) To provide that the Common Stock credited
to Participants' Accounts shall be replaced by stock of the successor
or survivor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and/or kind of shares; and
(iv) To make adjustments to the number and/or
kind of shares of Common Stock (or other securities or property)
credited to Participants' Accounts.
(c) Notwithstanding the foregoing, in the event that the
Company becomes a party to a transaction that is intended to qualify for
"pooling of interests" accounting treatment and, but for one or more of the
provisions of this Plan would so qualify, then this Plan shall be interpreted so
as to preserve such accounting treatment, and to the extent that any provision
of the Plan would disqualify the transaction from pooling of interests
accounting treatment, then such provision shall be null and void. All
determinations to be made in connection with the preceding sentence shall be
made by the independent accounting firm whose opinion with respect to "pooling
of interests" treatment is required as a condition to the Company's consummation
of such transaction.
(d) The existence of the Plan and the Accounts shall not
affect or restrict in any way the right or power of the Company or the
shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any issue
of stock or of options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to or
affect the Common Stock or the rights thereof or which are convertible into or
exchangeable for Common Stock, or the dissolution or liquidation of the company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or otherwise.
Section 9.4. Tax Withholding
(a) At the time a Participant exercises a Stock Option with
respect to which the Participant has filed a valid Deferral Election Form and at
the time any dividends are credited to the Participant's Account, the
Participant must pay to the Company, in cash only, any amounts required to be
withheld by the Company to satisfy FICA, Medicare and any other applicable taxes
which are payable with respect to the exercise of the Stock Option or the
crediting of the dividends to the Participant's Account, as the case may be.
(b) A Participant shall make appropriate arrangements with
the Company for satisfaction of any federal, state or local income tax
withholding requirements and any other employment tax requirements applicable to
the payment of Common Stock (and cash in lieu of fractional shares) under the
Plan. If no other arrangements are made, the Company and any subsidiary shall
have the right to deduct from amounts otherwise payable in settlement of an
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Account any sums that federal, state, local or foreign tax law requires to be
withheld with respect to such payment. The Administrator, in its discretion, may
allow a Participant to elect to have Shares of Common Stock withheld from his
distributions under the Plan to satisfy income tax withholding requirements with
respect to his distributions, provided that shares issued or delivered under any
plan, program, employment agreement or other arrangement may be withheld only in
accordance with the terms of such plan, program, employment agreement or other
arrangement and any applicable rules, regulations, or resolutions thereunder.
Notwithstanding the foregoing, the number of shares of Common Stock which may be
so withheld shall be limited to the number of shares which have an aggregate
Fair Market Value equal to the aggregate amount of such requirements based on
the minimum statutory withholding rates for federal, state, local and foreign
income tax and payroll tax purposes that are applicable to such supplemental
taxable income.
Section 9.5. Unfunded Status of Plan; Unsecured General Creditor
The Plan is intended to constitute an "unfunded" plan
providing for deferred compensation for all purposes, including for tax purposes
and for purposes of Title I of ERISA, and the Company's obligations under the
Plan shall constitute unfunded and unsecured promises to distribute Common
Stock, and cash with respect to fractional shares of Common Stock, in the
future. With respect to any payment not yet made to a Participant under the
Plan, nothing contained in the Plan shall give any Participant any rights that
are greater than those of a general unsecured creditor of the Company and no
Participant or successor shall have any legal or equitable rights, interests, or
claims in or to any assets of the Company.
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Section 9.6. Establishment of Trusts
The Company shall establish and fund one or more Trusts
under the Plan to meet the Company's obligations under the Plan, which Trusts or
other arrangements shall be consistent with the "unfunded" status of the Plan as
required by Section 9.5 and shall conform to the terms of the model trust
described in the Internal Revenue Service's Revenue Procedure 92-64 or its
successors, and the Company shall make periodic contributions in cash or Common
Stock to such Trusts in amounts and values equal to Participants' Stock Option
Gains under the Plan and any dividends credited thereon. The assets of a Trust
shall be subject to the claims of the Company's creditors to the extent required
by the Internal Revenue Service in order for Participants not to be taxable on
their Accounts until the Accounts are distributed to them. If permitted by a
Trust, distributions from Accounts shall be made directly by the Trustee, or its
designated agent, from Trust assets to the Participant. To the extent any
Account distributions under the Plan are actually paid from a Trust, the Company
shall have no further obligation with respect thereto, but to the extent not so
paid, such amounts shall remain the obligation of, and shall be paid by, the
Company. The Company shall not be required to fund any Trust with respect to any
Participant if the Company determines that it is reasonably likely that such
funding would cause the Participant to be taxable on the Participant's Accounts
prior to the date on which they are distributed to the Participant.
Section 9.7. Limitation on Rights of Employees
The Plan is strictly a voluntary undertaking on the part of
the Company and shall not constitute a contract between the Company and any
Employee, or consideration for, or an inducement or condition of, the employment
of an Employee. Nothing contained in the Plan shall give any Employee the right
to be retained in the service of the Company or to interfere with or restrict
the right of the Company, which is hereby expressly reserved, to discharge or
retire any Employee, except as otherwise provided by a written employment
agreement between the Company and the Employee, at any time without notice and
with or without cause. Inclusion under the Plan will not give any Employee any
right or claim to any benefit hereunder except to the extent such right has
specifically become fixed under the terms of the Plan. The doctrine of
substantial performance shall have no application to Employees, Participants or
any other persons entitled to payments under the Plan. Each condition and
provision, including numerical items, has been carefully considered and
constitutes the minimum limit on performance which will give rise to the
applicable right.
Section 9.8. No Rights as Stockholder
No Participant shall have any of the rights or privileges
of a stockholder of the Company under the Plan, including as a result of the
crediting of shares of Common Stock to an Account, or the creation of any Trust
and deposit of such Common Stock therein, except at such time as Common Stock
may be actually delivered in settlement of an Account. Common Stock allocated in
the Trust will be voted by the trustee thereof in accordance with the Trust
Agreement related thereto.
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Section 9.9. Satisfaction of Claims
Payments or distributions to any Participant in accordance
with the provisions of the Plan shall, to the extent thereof, be in full
satisfaction of all claims against the Company, any subsidiary thereof, the
Committee, or the Administrator for the compensation or other amounts deferred
and relating to the Account (or portion thereof) to which the payments relate.
Section 9.10. Compliance
A Participant shall have no right to receive payment with
respect to the Participant's Account until all legal and contractual obligations
of the Company relating to establishment of the Plan and the making of such
payments shall have been complied with in full. In addition, the Company shall
impose such restrictions on Common Stock delivered to a Participant hereunder
and any other interest constituting a security as it may deem advisable in order
to comply with the Securities Act of 1933, as amended, the requirements of the
New York Stock Exchange or any other stock exchange or automated quotation
system upon which the Common Stock is then listed or quoted, any state
securities laws applicable to such a transfer, any provision of the Company's
Certificate of Incorporation or Bylaws, or any other applicable law or
applicable regulation.
Section 9.11. Sources of Stock
If Common Stock is credited to an Account under the Plan in
connection with a deferral of Stock Option Gains with respect to a Stock Option
award under another plan, program, employment agreement or other arrangement
that provides for the issuance of shares, the shares of Common Stock so credited
shall be deemed to have originated, and may be counted against the number of
shares reserved, under such plan, program or arrangement, in accordance with the
terms and conditions of such plan, program or arrangement. The number of shares
of Common Stock credited to such Account shall in no event exceed the number of
shares subject to the Stock Option Gains deferred under the Plan plus any
additional shares of Common Stock dividends or Common Stock purchased with cash
dividends on shares allocated to such Account.
Section 9.12. Exempt ERISA Plan
The Plan is intended to be an unfunded plan maintained
primarily to provide deferred compensation benefits for a select group of
management or highly compensated employees within the meaning of Sections 201,
301 and 401 of ERISA and therefore to be exempt from Parts 2, 3 and 4 of Title I
of ERISA.
Section 9.13. Notice
Any notice or filing required or permitted to be given to
the Administrator under the Plan shall be sufficient if in writing and hand
delivered, or sent by registered or certified mail, to the principal office of
the Company, directed to the attention of the General Counsel and Secretary of
the Company. Such notice shall be deemed given as of the date of delivery or, if
22
<PAGE> 27
delivery is made by mail, as of the date shown on the postmark on the receipt
for registration or certification.
Section 9.14. Errors and Misstatements
In the event of any misstatement or omission of fact by a
Participant to the Administrator or any clerical error resulting in payment of
benefits in an incorrect amount, the Administrator shall promptly cause the
amount of future payments to be corrected upon discovery of the facts and shall
pay or, if applicable, cause the Trustee to pay, the Participant or any other
person entitled to payment under the Plan any underpayment in cash or Common
Stock in a lump sum or to recoup any overpayment from future payments to the
participant or any other person entitled to payment under the Plan in such
amounts as the Administrator shall direct or to proceed against the Participant
or any other person entitled to payment under the Plan for recovery of any such
overpayment.
Section 9.15. Payment on Behalf of Minor, Etc.
In the event any amount becomes payable under the Plan to a
minor or a person who, in the sole judgment of the Administrator is considered
by reason of physical or mental condition to be unable to give a valid receipt
therefor, the Administrator may direct that such payment be made to any person
found by the administrator in its sole judgment, to have assumed the care of
such minor or other person. Any payment made pursuant to such determination
shall constitute a full release and discharge of the Trustee, the Company, the
Board, the Administrator, the Committee and their officers, directors and
employees.
Section 9.16. Governing Law
Except to the extent preempted by ERISA, this Plan shall be
governed and construed in accordance with the laws of the State of Delaware
applicable to agreements made and to be performed entirely therein, and
applicable substantive provisions of federal law.
Section 9.17. Pronouns and Plurality
The masculine pronoun shall include the feminine pronoun,
and the singular the plural where the context so indicates.
Section 9.18. Titles
Titles are provided herein for convenience only and are not
to serve as a basis for interpretation or construction of the Plan.
Section 9.19. References
Unless the context clearly indicates to the contrary, a
reference to a statute, regulation or document shall be construed as referring
to any successor statute, regulation or document.
23
<PAGE> 28
Section 9.20. Assumption of Risk
Participants shall assume all risk in connection with any
decrease in value of the Accounts, including any decrease in the value of the
Common Stock, and the Company, Committee and the Administrator shall not be
liable or responsible therefor.
Section 9.21. Severability
In the event that any provision of the Plan shall be
declared unenforceable or invalid for any reason, such unenforceability or
invalidity shall not affect the remaining provisions of the Plan but shall be
fully severable, and the Plan shall be construed and enforced as if such
unenforceable or invalid provision had never been included herein.
Section 9.22. Status
The establishment and maintenance of, or allocations and
credits to, the Account of any Participant shall not vest in any Participant any
right, title or interest in and to any Plan assets or benefits except at the
time or times and upon the terms and conditions and to the extent expressly set
forth in the Plan and in accordance with the terms of the Trust.
ARTICLE X.
EFFECTIVE DATE
Section 10.1. Effective Date
The Plan shall be effective as of November 1, 1999.
24
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers duly
authorized effective as of November 1, 1999.
SAFEWAY INC.
By: /s/ DICK W. GONZALES
Name: Dick W. Gonzales
Title: Senior Vice President
25
<PAGE> 30
(S logo)
2000 Stock Option Gain Deferral
Distribution Election Form
DEFAULT DISTRIBUTION UPON RETIREMENT OR TOTAL DISABILITY
If no election is on file, your option deferral account balance attributable to
your 2000 option gain deferral will be distributed in Safeway Stock at
retirement or total disability as follows:
ACCOUNT BALANCE GREATER THAN $50,000:.........ANNUAL INSTALLMENTS OVER 10 YEARS.
ACCOUNT BALANCE EQUAL OR LESS THAN $50,000:...LUMP SUM PAYMENT, REGARDLESS
OF ELECTION.
If you ACCEPT this default, please read the General Information on the reverse,
and then complete the Sign Here information at the bottom of this page.
Otherwise, if you wish to elect an OPTIONAL FORM OF DISTRIBUTION, please go
below to Optional Forms of Distribution - Instructions.
OPTIONAL FORM OF DISTRIBUTION - INSTRUCTIONS
SCHEDULED IN-SERVICE WITHDRAWAL
- - READ General Information on the reverse side of this page
- - COMPLETE Section below entitled In-Service Withdrawal to elect year
(while still employed) in which payment commences, and select
distribution method.
- - COMPLETE Section below entitled Retirement Payment
Method to elect form of payment in the event you retire or
become totally disabled prior to the elected In-Service
Withdrawal distribution date (Otherwise, the Plan default
distribution will govern)
- - SIGN Where indicated below
OPTIONAL FORM OF RETIREMENT/TOTAL DISABILITY DISTRIBUTION
The election to receive your 2000 "option gain" stock and any earnings thereon
at retirement/total disability is IRREVOCABLE.
- - READ General Information on the reverse side of this page
- - COMPLETE Retirement Payment Method to elect form of payment at
retirement or total disability (Otherwise, the Plan default
distribution will govern)
- - SIGN Where indicated below
OPTIONAL FORMS OF DISTRIBUTION - ELECTIONS
SCHEDULED IN-SERVICE Commencing 2_______ (enter 2003 or later)
WITHDRAWAL [ ] Annual installments over ____
(enter 2-10) years
OR
[ ] Lump Sum
RETIREMENT PAYMENT Annual installments over [ ] 15 or [ ] 10 or
METHOD [ ] 5, or a [ ] Lump Sum
(Please read General Information on reverse side
for installment eligibility)
SIGN HERE
I have read the General Information on reverse side.
- ---------------------------------------- -----------------------------------
Participant's Name (please print or type) Participant's Signature
- ---------------------------------------- -----------------------------------
Social Security Number Date
Please send completed form to TBG Financial Document Center, 2029 Century Park
East, 37th Floor, Los Angeles, CA 90067. NO FAXED FORMS ACCEPTED. Questions:
Call (800) 824-0040 M - F between 7:00 a.m. and 7:00 p.m. PST.
<PAGE> 31
To:
STOCK OPTION GAIN DEFERRAL ELECTION FORM
NAME:__________________________________ SSN:________________________________
Subject to a minimum exercise of 1000 shares, I hereby irrevocably elect to
defer the gain on the following option exercises. The gains will be converted
into stock and paid as shares of Safeway Common Stock as indicated below. I
understand that to defer the stock option gains in subsequent Plan years, I must
make a separate election no less than 6 months prior to exercise and in the year
prior to the year in which I exercise the stock option. I understand that
deferral elections are irrevocable.
<TABLE>
<CAPTION>
Grant Date # of Options Exercise Price Expiration Date
- ---------- ------------ -------------- ---------------
<S> <C> <C> <C>
- ---------------- -------------------- ------------------- ---------------------
- ---------------- -------------------- ------------------- ---------------------
- ---------------- -------------------- ------------------- ---------------------
- ---------------- -------------------- ------------------- ---------------------
</TABLE>
EMPLOYEE SIGNATURE DATE
-------------------------------------------------------
APPROVED BY DATE
--------------------------------------------------------------
<PAGE> 1
Exhibit 12.1
SAFEWAY INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
<TABLE>
<CAPTION>
Fiscal Year
-----------------------------------------------------------------------
52 Weeks 52 Weeks 53 Weeks 52 Weeks 52 Weeks
1999 1998 1997 1996 1995
----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income before income taxes and
extraordinary loss $ 1,674.0 $ 1,396.9 $ 1,076.3 $ 767.6 $ 556.5
Add interest expense 362.2 235.0 241.2 178.5 199.8
Add interest on rental expense (a) 183.0 108.2 88.5 90.0 87.5
Less equity in earnings of unconsolidated
affiliates (34.5) (28.5) (34.9) (50.0) (26.9)
Add minority interest in subsidiary 5.9 5.1 4.4 3.4 3.9
--------- --------- --------- ------- -------
Earnings $ 2,190.6 $ 1,716.7 $ 1,375.5 $ 989.5 $ 820.8
========= ========= ========= ======= =======
Interest expense $ 362.2 $ 235.0 $ 241.2 $ 178.5 $ 199.8
Add capitalized interest 9.3 8.5 5.7 4.4 4.6
Add interest on rental expense(a) 183.0 108.2 88.5 90.0 87.5
--------- --------- --------- ------- -------
Fixed charges $ 554.5 $ 351.7 $ 335.4 $ 272.9 $ 291.9
========= ========= ========= ======= =======
Ratio of earnings to fixed charges 3.95 4.88 4.10 3.63 2.81
========= ========= ========= ======= =======
</TABLE>
- ---------------------
(a) Based on a 10% discount factor on the estimated present value of future
operating lease payments.
<PAGE> 1
(page 5)
EXHIBIT 10.13
TAKING CARE OF BUSINESS
Every day, in hundreds of cities and towns across the U.S. and Canada, we work
hard to take care of our customers, our stockholders, our employees and the
communities we serve. We do this best by "taking care of business."
As a multi-regional food and drug retailer committed to continuous
improvement, we strive to combine the best practices found in our divisions and
apply them throughout the company. We believe this creates a better shopping
experience for our customers, greater value for our investors, enhanced
training and advancement potential for our employees, and increased financial
and in-kind support for our communities.
As we see it, balancing the diverse needs of our various stakeholders is
not merely good corporate citizenship, it's a business imperative.
<PAGE> 2
(PAGE 6)
TAKING CARE OF CUSTOMERS
[PHOTO OF JOE KIM]
Our customers are the central focus of everything we do, from the location
and design of our stores to the assortment and display of the products we sell.
Through daily interaction with shoppers, supplemented by extensive consumer
research and cutting-edge technology, we stay close to our customers so we can
anticipate and respond to their changing needs. We aren't satisfied until they
are.
To achieve and sustain a competitive advantage in our business, we must
differentiate ourselves from other retailers. It's not enough to earn our
customers' trust and confidence. We must also provide them with a shopping
experience they cannot duplicate elsewhere. Our goal is to delight and surprise
shoppers by consistently delivering superior quality, selection, value and
service in attractive, conveniently located stores. As we continue to gain
market share in most of our operating areas, we believe we are making good
progress toward this goal.
"Getting to know our CUSTOMERS enables me to SERVE their families' health
care needs better--and often more COST-EFFECTIVELY."
Joe Kim, Pharmacist, Dominick's Store #4135
<PAGE> 3
(PAGE 7)
TAKING CARE OF INVESTORS
"I enjoy dealing with our STOCKHOLDERS and try to deliver the same GREAT
service we provide in the stores."
Rashida Suminski, Investor Relations Specialist,
Safeway Corporate Headquarters
[Photo of Rashida Suminski]
Just as we must continuously win our customers' loyalty in the
marketplace, we must also earn our investors' confidence in the financial arena.
To improve communications with the financial community, in July we held a
conference for supermarket industry analysis and institutional investors.
During the conference we reiterated our commitment to increasing sales,
reducing costs, managing capital effectively and pursuing acquisitions. We also
reviewed our financial performance and discussed our growth strategy.
To further enhance communications with investors, we are expanding the
financial content of our web site to include more useful, timely information
about the company. We also announced a share repurchase program under which we
bought back $651 million of an authorized $1 billion of our common stock. In
addition, we recently completed an odd lot buyback program to reduce
administrative expense.
<PAGE> 4
(Page 8)
TAKING CARE OF EMPLOYEES
"Safeway lets us know HOW we're doing and how we can contribute to the company's
SUCCESS."
JOHN CHAVEZ, TRUCK DRIVER, THE VONS COMPANIES, INC.
[PHOTO OF JOHN CHAVEZ]
With more than 193,000 employees across North America, communicating our
vision, values and priorities throughout the organization is one of our greatest
challenges. It's also one of our biggest opportunities.
During the year we launched several initiatives to improve internal
communications and training. Knowledgeable, well informed employees take pride
in their work and enjoy their jobs. Of equal importance, motivated employees
are highly productive and helpful to our customers. To attract and retain such
people, we try to cultivate an environment in which work is challenging,
satisfying and fun.
As we build more new stores and remodel existing ones, we create greater
career advancement opportunities for our employees. Excluding acquisitions, we
added almost 1,400 new retail jobs during 1999.
In addition to their pay and benefits, many of our people share in the
company's success as stockholders. More than 25% of eligible employees
participated in our payroll-deduction stock purchase plan in 1999.
<PAGE> 5
(PAGE 9)
TAKING CARE OF COMMUNITIES
[PHOTO OF KATHY LUSSIER]
"I'm PROUD of the active role my company plays in community activities and
local FUNDRAISING programs."
KATHY LUSSIER, PUBLIC AFFAIRS DIRECTOR, RANDALL'S FOOD MARKETS, INC.
In 1999 we made cash and in-kind contributions of more than $80 million to
non-profit organizations throughout the communities we serve. The primary
recipients of our donations are food banks, educational institutions and local
charities.
During the year we donated some $50 million worth of merchandise to food
banks and various programs to assist the hungry in the U.S. and Canada. We also
contributed more than $20 million to local schools through innovative
fundraising programs. In addition, we supported hundreds of local civic,
charitable and cultural organizations throughout our operating areas.
Since becoming a corporate sponsor of Easter Seals in 1985, the company and
its employees have raised over $63 million to help people with disabilities lead
more productive, independent lives.
Many Safeway employees lend their time, energy and talents to community
organizations and causes. We encourage and support these efforts through our
Community Pride program, augmenting our employees' good work with financial
contributions from the company.
<PAGE> 6
(Page 10)
CONTINUED PERFORMANCE
During the past seven years, Safeway has consistently ranked among the
industry's leaders in the following key measures of financial performance:*
- - Sales growth
- - Expense ratio reduction
- - Working capital management
- - Operating cash flow margin
- - Earnings per share growth
We have achieved these results by focusing on the three priorities detailed on
the following pages.
*Based on latest available information
<PAGE> 7
(page 11)
INCREASING SALES
- -------------------------------------------------------------------------------
Generating strong sales growth is an ongoing priority at Safeway. Since 1992 we
have focused primarily on improved store standards, enhanced service and
competitive pricing to drive top-line growth. During 1999 we began developing
and implementing several new sales-building initiatives. With the Randall's
acquisition, our fourth in the past three years, we have expanded our sales base
and extended our geographic reach.
WE CONTINUED TO EXCHANGE BEST
MARKETING PRACTICES AMONG RECENTLY
ACQUIRED OPERATIONS AND CORE
SAFEWAY DIVISIONS.
WE OPERATED 1,074 STORES WITH
PHARMACIES AT YEAR-END 1999,
RANKING AS AMONG THE TOP 10 DRUG
RETAILERS IN NORTH AMERICA.
WE INTRODUCED 185 NEW ITEMS UNDER
THE SAFEWAY SELECT BRAND OF PREMIUM
QUALITY PRIVATE-LABEL PRODUCTS.
FURTHER PROGRESS IN CATEGORY
MANAGEMENT ENABLED US TO MEET OUR
CUSTOMERS' NEEDS MORE EFFECTIVELY.
[BAR GRAPH]
Annual Sales Growth
(in billions)
<TABLE>
<S> <C>
1995 $16.4
1996 17.3
1997 22.5
1998 24.5
1999 28.9
</TABLE>
THROUGH INTERNAL GROWTH AND ACQUISITIONS, SALES HAVE INCREASED AT AN ANNUAL
COMPOUND RATE OF 13.1% DURING THE PAST FIVE YEARS.
<PAGE> 8
(page 12)
CONTROLLING EXPENSES
- -------------------------------------------------------------------------------
Pro forma operating and administrative expense as a percentage of sales declined
again in 1999, continuing a seven-year trend. The ongoing improvement reflects
concerted efforts throughout the company to streamline support functions,
simplify work practices and maintain labor cost parity. No other major food and
drug retailer has come close to Safeway in the magnitude of expense reduction,
measured as a percentage of sales, since 1992.
WE MADE FURTHER IMPROVEMENTS
IN COST OF GOODS SOLD BY APPLYING BEST
PRACTICES IN PRODUCT PROCUREMENT,
DISTRIBUTION AND CATEGORY MANAGEMENT.
WE CONVERTED CARRS, AND ALL REMAINING
VONS AND DOMINICK'S APPLICATIONS,
TO SAFEWAY'S ACCOUNTING AND
MERCHANDISING SYSTEMS.
WE BEGAN CONSOLIDATING CORPORATE
ADMINISTRATIVE FUNCTIONS AT CARRS
AND RANDALL'S INTO SAFEWAY'S
OPERATIONS, AND CONTINUED THE
PROCESS AT DOMINICK'S
WE NEGOTIATED COMPETITIVE LABOR
AGREEMENTS IN SEVERAL KEY MARKETS.
[BAR GRAPH]
Improvement in Annual Operating and Administrative Expense Margin
(In basis points)
1995 56
1996 48
1997* 35
1998 28
1999* 30
OUR O&A EXPENSE MARGIN IMPROVED
FOR THE SEVENTH CONSECUTIVE YEAR,
DECLINING 30 BASIS POINTS IN 1999.
*Pro forma as defined on page 18
<PAGE> 9
(page 13)
MANAGING CAPITAL
- -------------------------------------------------------------------------------
Capital spending increased to $1.5 billion in 1999, up from $1.2 billion in
1998. As shown on the chart below, we have invested more than $4.6 billion over
the past five years to keep our store system and support facilities up to date.
During this period, a significant majority of our capital investments have
exceeded targeted rates of return. In 1999 we maintained a strong interest
coverage ratio despite the additional debt incurred to finance the Carrs and
Randall's acquisitions and the stock repurchase program.
WE OPENED 67 NEW STORES, EXPANDED
OR REMODELED 251 EXISTING STORES AND
ACQUIRED 149 STORES.
THROUGH CAPITAL EXPENDITURES AND
ACQUISITIONS, WE INCREASED TOTAL RETAIL
SQUARE FOOTAGE BY 15%.
WE MAINTAINED NEGATIVE WORKING
CAPITAL FOR THE SIXTH CONSECUTIVE
YEAR BY MANAGING INVENTORY AND
PAYABLES EFFECTIVELY.
WE REPLACED $290 MILLION OF HIGHER
RATE LONG-TERM DEBT AT CARRS AND
RANDALL'S WITH LOWER RATE BORROWINGS.
[BAR GRAPH]
Capital Expenditures*
(In millions)
1995 $ 503.2
1996 620.3
1997 829.4
1998 1,189.7
1999 1,485.6
CAPITAL INVESTMENTS HAVE INCREASED
STEADILY SINCE 1993, REFLECTING
STRONG OPERATING RESULTS.
*Defined on page 15
<PAGE> 10
(Page 14)
- -------------------------------------------------------------------------------
Company in Review
- -------------------------------------------------------------------------------
Safeway Inc. ("Safeway" or the "Company") is one of the largest food and drug
chains in North America, with 1,659 stores at year-end 1999.
The Company's U.S. retail operations are located principally in northern
California, southern California, Oregon, Washington, Alaska, Colorado, Arizona,
Texas, the Chicago metropolitan area, and the Mid-Atlantic region. The Company's
Canadian retail operations are located principally in British Columbia, Alberta
and Manitoba/Saskatchewan. In support of its retail operations, the Company has
an extensive network of distribution, manufacturing and food processing
facilities.
In addition, Safeway has a 49% interest in Casa Ley, S.A. de C.V. ("Casa Ley"),
which operates 86 food and general merchandise stores in Western Mexico.
ACQUISITION OF RANDALL'S FOOD MARKETS, INC. ("Randall's") In September 1999,
Safeway acquired all of the outstanding shares of Randall's in exchange for $1.3
billion consisting of $754 million of cash and 12.7 million shares of Safeway
stock (the "Randall's Acquisition"). On the acquisition date, Randall's operated
117 stores in Texas. The Randall's Acquisition was accounted for as a purchase.
Safeway funded the cash portion of the acquisition, and subsequent repayment of
approximately $403 million of Randall's debt, through the issuance of senior
notes. Randall's sales for its last full fiscal year prior to the acquisition
were $2.6 billion.
ACQUISITION OF CARR-GOTTSTEIN FOODS CO. ("CARRS") In April 1999, Safeway
completed its acquisition of all of the outstanding shares of Carrs for
approximately $106 million in cash (the "Carrs Acquisition"). On the acquisition
date, Carrs operated 49 stores. The Carrs Acquisition was accounted for as a
purchase. Safeway funded the acquisition, and subsequent repayment of
approximately $239 million of Carrs' debt, with issuance of commercial paper.
Carrs' sales for its last full fiscal year prior to the acquisition were $602
million.
STORES Safeway's average store size is approximately 43,000 square feet.
Safeway's primary new store prototype is 55,000 square feet and is designed to
accommodate changing consumer needs and to achieve certain operating
efficiencies. The Company determines the size of a new store based on a number
of considerations, including the needs of the community the store serves, the
location and site plan, and the estimated return on capital invested. Most
stores offer a wide selection of both food and general merchandise and feature a
variety of specialty departments such as bakery, delicatessen, floral and
pharmacy.
Safeway continues to operate a number of smaller stores which also offer an
extensive selection of food and general merchandise, and generally include one
or more specialty departments. These stores remain an important part of the
Company's store network in smaller communities and certain other locations where
larger stores may not be feasible because of space limitations and/or community
needs or restrictions.
The following table summarizes Safeway's stores by size at year-end 1999:
<TABLE>
<CAPTION>
Number Percent
of Stores of Total
<S> <C> <C>
Less than 30,000 square feet 341 20%
30,000 to 50,000 794 48
More than 50,000 524 32
----- ---
Total stores 1,659 100%
===== ===
</TABLE>
<PAGE> 11
(Page 14)
STORE OWNERSHIP At year-end 1999, Safeway owned approximately one-third of its
stores and leased its remaining stores. In recent years, the Company has
preferred ownership because it provides control and flexibility with respect to
financing terms, remodeling, expansions and closures.
MERCHANDISING Safeway's operating strategy is to provide value
to its customers by maintaining high store standards and a wide selection of
high quality products at competitive prices. To provide one-stop shopping for
today's busy shoppers, the Company emphasizes high quality produce and meat, as
well as specialty departments, including in-store bakery, delicatessen, floral
and pharmacy.
Safeway has developed a line of more than 1,100 premium corporate brand products
since 1993 under the "Safeway SELECT" banner. The award-winning Safeway SELECT
line is designed to offer premium quality products that the Company believes are
equal or superior in quality to comparable best-selling nationally advertised
brands, or are unique to the category and not available from national brand
manufacturers.
(Page 15)
The Safeway SELECT line of products includes carbonated soft drinks; unique
salsas; the Indulgence line of cookies and other sweets; the Verdi line of fresh
and frozen pastas, pasta sauces and olive oils; Artisan fresh-baked breads;
Twice-the-Fruit yogurt; NutraBalance Pet Food; Ultra laundry detergents and dish
soaps; and Softly paper products. The Safeway SELECT line also includes an
extensive array of ice cream, frozen yogurt and sorbets; Healthy Advantage items
such as low-fat ice cream and low-fat cereal bars; and Gourmet Club frozen
entrees and hors d'oeuvres.
In addition, Safeway has repackaged over 2,500 corporate brand products
primarily under the Safeway, Lucerne and Mrs. Wright's labels.
MANUFACTURING AND WHOLESALE The principal function of manufacturing operations
is to purchase, manufacture and process private label merchandise sold in stores
operated by the Company. As measured by sales dollars, approximately one-half of
Safeway's private label merchandise is manufactured in company-owned plants, and
the remainder is purchased from third parties.
Safeway's Canadian subsidiary has a wholesale operation that distributes both
national brands and private label products to independent grocery stores and
institutional customers.
Safeway operated the following manufacturing and processing facilities at
year-end 1999:
<TABLE> U.S. Canada
------ --------
<S> <C> <C>
Milk plants 7 3
Bread baking plants 6 2
Ice cream plants 4 2
Cheese and meat packaging plants 1 2
Soft drink bottling plants 4 --
Fruit and vegetable processing plants 2 3
Other food processing plants 4 1
Pet food plant 1 --
-- --
Total 29 13
== ==
</TABLE>
In addition, the Company operates laboratory facilities for quality assurance
and research and development in certain of its plants and at its corporate
offices.
DISTRIBUTION Each of Safeway's 12 retail operating areas is served by a regional
distribution center consisting of one or more facilities. Safeway has 16
distribution/warehousing centers (13 in the United States and three in Canada),
which collectively provide the majority of all products to Safeway stores.
<PAGE> 12
(Page 15)
Safeway's distribution centers in northern California and British Columbia are
operated by third parties. During 1999, Safeway acquired three distribution
centers through its acquisitions of Carrs and Randall's.
Capital Expenditure Program
A component of the Company's long-term strategy is its capital expenditure
program. The Company's capital expenditure program funds, among other things,
new stores, remodels, manufacturing plants, distribution facilities, and
information technology advances. Over the last several years, Safeway management
has significantly strengthened its program to select and approve new capital
investments, resulting in continuing strong returns on investment. The table
below reconciles cash paid for property additions reflected in the Consolidated
Statements of Cash Flows to Safeway's broader definition of capital
expenditures, and also details changes in the Company's store base over the last
three years:
<TABLE>
<CAPTION>
(Dollars in millions) 1999 1998 1997
-------- -------- ------
<S> <C> <C> <C>
Cash paid for property
additions $1,333.6 $1,075.2 $758.2
Less: Purchases of
previously leased
properties (37.2) (35.7) (28.2)
Plus: Present value of all lease
obligations incurred 179.5 117.4 91.3
Mortgage notes assumed
in property acquisitions 9.7 32.8 0.9
Vons first quarter
expenditures -- -- 7.2
-------- -------- ------
Total capital expenditures $1,485.6 $1,189.7 $829.4
======== ======== ======
Capital expenditures as
a percent of sales 5.1% 4.9% 3.7%
Stores opened (Note 1) 67 46 37
Stores closed or sold 54 30 37
Remodels (Note 2) 251 234 181
Total retail square footage
at year-end (in millions) 70.8 61.6 53.2
</TABLE>
Note 1: Excludes acquisitions.
Note 2: Defined as store projects (other than maintenance) generally requiring
expenditures in excess of $200,000.
Improved operations and lower project costs have kept the return on capital
projects at a high level, allowing Safeway to increase capital expenditures to
$1.5 billion in 1999 and open 67 stores and remodel 251 stores. In 2000, Safeway
expects to spend more than $1.6 billion and open 70 to 75 new stores and
complete approximately 250 remodels.
(Page 16)
Performance-Based Compensation
The Company has performance-based compensation plans that cover approximately
13,000 management and professional employees. Performance-based compensation
plans set overall bonus levels based upon both operating results and working
capital management. Individual bonuses are based on job performance. Certain
employees are covered by capital investment bonus plans which measure the
performance of capital projects based on operating performance over several
years.
<PAGE> 13
(Page 16)
Market Risk from Financial Instruments
Safeway manages interest rate risk through the strategic use of fixed and
variable interest rate debt and, to a limited extent, interest rate swaps. As of
year-end 1999, the Company had effectively converted $200.0 million of its
floating rate debt to fixed interest rate debt through interest rate swap
agreements. Under one swap agreement, Safeway pays interest of 6.2% on the
$100.0 million notional amount and receives a variable interest rate based on
Federal Reserve rates quoted for commercial paper. This agreement expires in
2007. Additionally, the Company assumed two interest rate swap agreements, with
notional amounts of $50.0 million each, as part of the Randall's Acquisition.
Under these swap agreements, Safeway pays interest of 5.30% and 5.49%,
respectively, on the $50 notional amounts and receives a variable interest rate
based on Federal Reserve rates quoted for commercial paper. These swap
agreements expire in 2001.
The Company does not utilize financial instruments for trading or other
speculative purposes, nor does it utilize leveraged financial instruments. The
Company does not consider the potential losses in future earnings, fair values
and cash flows from reasonable possible near-term changes in interest rates and
exchange rates to be material.
The table below presents principal amounts and related weighted average rates by
year of maturity for the Company's debt obligations at year-end 1999 and 1998
(dollars in millions):
<TABLE>
<CAPTION>
January 1, 2000 2000 2001 2002 2003 2004 Thereafter Total
<S> <C> <C> <C> <C> <C> <C> <C>
Commercial paper:
Principal -- -- $2,358.1 -- -- -- $2,358.1(2)
Weighted average interest rate -- -- 6.81% -- -- -- 6.81%
Bank borrowings:
Principal $129.7 -- $ 75.7 -- -- -- $ 205.4(2)
Weighted average interest rate 6.27% -- 5.18% -- -- -- 5.87%
Long-term debt:(1)
Principal $427.4 $548.6 $ 637.2 $377.2 $700.0 $1,225.2 $3,915.6(2)
Weighted average interest rate 5.89% 6.80% 7.03% 6.19% 7.43% 7.25% 6.93%
</TABLE>
<TABLE>
<CAPTION>
January 2, 1999 1999 2000 2001 2002 2003 Thereafter Total
------ ------ ------ -------- ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Commercial paper:
Principal -- -- -- $1,745.1 -- -- $1,745.1(2)
Weighted average interest rate -- -- -- 5.99% -- -- 5.99%
Bank borrowings:
Principal $161.8 -- -- $ 89.1 -- -- $ 250.9(2)
</TABLE>
<PAGE> 14
(Page 16)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Weighted average interest rate 5.80% -- -- 5.57% -- -- 5.72%
Long-term debt:(1)
Principal $118.0 $427.5 $549.6 $ 37.8 $377.6 $1,015.9 $2,526.4(2)
Weighted average interest rate 8.97% 5.93% 6.88% 8.95% 6.28% 7.22% 6.89%
</TABLE>
(1) Primarily fixed rate debt
(2) Carrying value approximates fair value
<PAGE> 15
(page 17)
Five-Year Summary Financial Information
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS 53 WEEKS 52 WEEKS 52 WEEKS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 1999 1998 1997 1996 1995
- ---------------------------------------------- ------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Sales $ 28,859.9 $ 24,484.2 $ 22,483.8 $ 17,269.0 $ 16,397.5
============= ============= ============= ============= =============
Gross profit 8,510.7 7,124.5 6,414.7 4,774.2 4,492.4
Operating and administrative
expense (6,411.4) (5,466.5) (5,093.2) (3,872.1) (3,754.6)
Goodwill amortization (101.4) (56.3) (41.8) (10.4) (10.4)
------------- ------------- ------------- ------------- -------------
Operating profit 1,997.9 1,601.7 1,279.7 891.7 727.4
Interest expense (362.2) (235.0) (241.2) (178.5) (199.8)
Equity in earnings of
unconsolidated affiliates (Note 1) 34.5 28.5 34.9 50.0 26.9
Other income, net 3.8 1.7 2.9 4.4 2.0
------------- ------------- ------------- ------------- -------------
Income before income taxes
and extraordinary loss 1,674.0 1,396.9 1,076.3 767.6 556.5
Income taxes (703.1) (590.2) (454.8) (307.0) (228.2)
------------- ------------- ------------- ------------- -------------
Income before extraordinary loss 970.9 806.7 621.5 460.6 328.3
Extraordinary loss, net of
tax benefit of $41.1 and $1.3 -- -- (64.1) -- (2.0)
------------- ------------- ------------- ------------- -------------
Net income $ 970.9 $ 806.7 $ 557.4 $ 460.6 $ 326.3
============= ============= ============= ============= =============
Diluted earnings per share:
Income before extraordinary loss $ 1.88 $ 1.59 $ 1.25 $ 0.97 $ 0.68
Extraordinary loss -- -- (0.13) -- --
------------ ------------ ------------ ------------ ------------
Net income $ 1.88 $ 1.59 $ 1.12 $ 0.97 $ 0.68
============ ============ ============ ============ ============
FINANCIAL STATISTICS
Comparable-store sales increases (Note 2) 2.2% 4.1% 2.3% 5.8% 5.4%
Identical-store sales increases (Note 2) 1.7% 3.7% 1.3% 5.1% 4.6%
Gross profit margin 29.49% 29.10% 28.53% 27.65% 27.40%
Operating and administrative
expense margin (Note 3) 22.57% 22.56% 22.84% 22.48% 22.96%
Operating profit margin 6.9% 6.5% 5.7% 5.2% 4.4%
Capital expenditures (Note 4) $ 1,485.6 $ 1,189.7 $ 829.4 $ 620.3 $ 503.2
Depreciation 594.2 475.1 414.0 328.1 319.3
Total assets 14,900.3 11,389.6 8,493.9 5,545.2 5,194.3
Total debt 6,956.3 4,972.1 3,340.3 1,984.2 2,190.2
</TABLE>
<PAGE> 16
(page 17)
<TABLE>
<S> <C> <C> <C> <C> <C>
Stockholders' equity 4,085.8 3,082.1 2,149.0 1,186.8 795.5
Weighted average shares outstanding -
diluted (in millions) 515.4 508.8 497.7 475.7 481.2
OTHER STATISTICS
Randall's stores acquired 117 -- -- -- --
Carrs stores acquired 32 -- -- -- --
Dominick's stores acquired -- 113 -- -- --
Vons stores acquired -- -- 316 -- --
Stores opened 67 46 37 30 32
Stores closed or sold 54 30 37 37 35
Total stores at year-end 1,659 1,497 1,368 1,052 1,059
Remodels completed (Note 5) 251 234 181 141 108
Total retail square footage
at year-end (in millions) 70.8 61.6 53.2 40.7 40.1
</TABLE>
- ----------
Note 1. Includes equity in Vons' earnings through the first quarter of 1997.
Note 2. Defined as stores operating the entire year in both the current year and
the previous year. Comparable stores include replacement stores while
identical-stores do not. 1997 and 1996 sales increases exclude British Columbia
stores, which were closed during a labor dispute in 1996.
Note 3. Includes goodwill amortization.
Note 4. Defined in the table on page 15 under "Capital Expenditure Program".
Note 5. Defined as store projects (other than maintenance) generally requiring
expenditures in excess of $200,000.
<PAGE> 17
(page 18)
- -------------------------------------------------------------------------------
Financial Review
- -------------------------------------------------------------------------------
Stock Repurchase
In October 1999, Safeway announced that its Board of Directors had authorized a
stock repurchase program under which Safeway may acquire up to $1.0 billion of
its common stock. The purpose of this program is, in part, to replace treasury
stock issued in connection with the Randall's Acquisition. By the end of the
year, the Company incurred $651.0 million in short-term debt to repurchase 17.9
million shares of common stock. Due to the timing of the repurchases, the net
impact of the reduced shares outstanding and the related interest expense
increased annual earnings by only two-tenths of a cent per share.
Acquisition of Randall's Food Markets, Inc. ("Randall's")
In September 1999, Safeway acquired all of the outstanding shares of Randall's
in exchange for $1.3 billion consisting of $754 million of cash and 12.7 million
shares of Safeway stock (the "Randall's Acquisition"). On the acquisition date,
Randall's operated 117 stores in Texas. The Randall's Acquisition was accounted
for as a purchase. Safeway funded the cash portion of the acquisition, and
subsequent repayment of approximately $403 million of Randall's debt, through
the issuance of senior notes. Randall's sales for its last full fiscal year
prior to the acquisition were $2.6 billion.
Acquisition of Carr-Gottstein Foods Co. ("Carrs")
In April 1999, Safeway completed its acquisition of all of the outstanding
shares of Carrs for approximately $106 million in cash (the "Carrs
Acquisition"). On the acquisition date, Carrs operated 49 stores. The Carrs
Acquisition was accounted for as a purchase. Safeway funded the acquisition, and
subsequent repayment of approximately $239 million of Carrs' debt, with the
issuance of commercial paper. Carrs' sales for its last full fiscal year prior
to the acquisition were $602 million.
Acquisition of Dominick's Supermarkets, Inc. ("Dominick's")
In November 1998, Safeway completed its acquisition of all of the outstanding
shares of Dominick's for approximately $1.2 billion in cash (the "Dominick's
Acquisition"). The Dominick's Acquisition was accounted for as a purchase.
Safeway funded the Dominick's Acquisition, including repayment of approximately
$560 million in debt and lease obligations, with a combination of bank
borrowings and commercial paper.
Merger with The Vons Companies, Inc. ("Vons")
In April 1997, Safeway completed a merger with Vons pursuant to which the
Company issued 83.2 million shares of Safeway common stock for all of the shares
of Vons common stock that Safeway did not already own (the "Vons Merger"). The
Vons Merger was accounted for as a purchase. In connection with the Vons merger,
Safeway repurchased 64.0 million shares of its common stock from a partnership
affiliated with KKR & Co., L.L.C. at $21.50 per share, for an aggregate purchase
price of $1.4 billion. Safeway funded the purchase through bank borrowings.
Results of Operations
Safeway's net income was $970.9 million ($1.88 per share) in 1999, $806.7
million ($1.59 per share) in 1998 and $557.4 million ($1.12 per share) in 1997.
<PAGE> 18
(page 18)
In 1997, income before an extraordinary item related to debt refinancing was
$621.5 million ($1.25 per share).
Safeway's recent acquisitions have affected its operating results. Safeway's
1999 income statement includes Dominick's and Vons' operating results for a full
year, Carrs' operating results for 40 weeks and Randall's operating results for
one quarter. Safeway's 1998 income statement includes Vons' operating results
for the full year and Dominick's operating results for eight weeks. Safeway's
1997 income statement includes Vons' operating results since the second quarter
plus the effect of Safeway's 34.4% equity interest in Vons in the first quarter
of 1997. In order to facilitate an understanding of the Company's operations,
this financial review presents certain pro forma information as if the
Dominick's, Carrs and Randall's Acquisitions had been effective for the
comparable period of 1998. See Note B to the Company's 1999 Consolidated
Financial Statements.
During the second quarter of 1997, Safeway was engaged in a 75-day labor dispute
affecting 74 stores in the Alberta, Canada operating area. The Company estimates
that the strike reduced 1997 net income by approximately $0.04 per share.
(page 19)
Sales
Strong store operations helped to increase identical-store sales (stores
operating the entire year in both 1999 and 1998, excluding replacement stores)
1.7% in 1999, while comparable-store sales, which include replacement stores,
increased 2.2%. In 1998, identical-store sales increased 3.7% while
comparable-store sales increased 4.1%. Total sales for the 52 weeks of 1999 were
$28.9 billion, compared to $24.5 billion for the 52 weeks of 1998 and $22.5
billion for the 53 weeks of 1997. Total sales increases are attributed to
comparable-store sales increases, the Vons Merger in 1997, the Dominick's
Acquisition in 1998, and the Carrs and Randall's Acquisitions in 1999.
Gross Profit
Safeway's continuing improvement in buying practices and product mix helped to
increase gross profit to 29.49% of sales, from 29.10% in 1998 and 28.53% in
1997. On a pro forma basis, gross profit increased 51 basis points from 28.98%
in 1998. Application of the LIFO method resulted in increases in cost of goods
sold of $1.2 million in 1999 and $7.1 million in 1998, and a decrease of $6.1
million in 1997.
Operating and Administrative Expense
Operating and administrative expense, including amortization of goodwill, was
22.57% of sales in 1999 compared to 22.56% in 1998 and 22.84% in 1997. Safeway's
operating and administrative expense-to-sales ratio increased in 1999 because
Dominick's, Carrs and Randall's operating and administrative expense ratio had
historically been higher than Safeway's. Increased sales and ongoing efforts to
reduce or control expenses improved this expense ratio in 1998. Annual goodwill
amortization has increased to $101.4 million in 1999 from $56.3 million in 1998
and $41.8 million in 1997. On a pro forma basis, operating and administrative
expense declined 30 basis points from 22.87% in 1998.
Interest Expense
Interest expense was $362.2 million in 1999, compared to $235.0 million in 1998
and $241.2 million in 1997. Interest expense increased in 1999 primarily because
of the debt incurred to finance the Dominick's, Carrs and Randall's Acquisitions
and, to a lesser extent, debt incurred to refinance the repurchase of Safeway
stock. Interest expense in 1998 included debt incurred in connection with the
Dominick's Acquisition, which was partially offset by the paydown of certain
other indebtedness.
During 1997, Safeway recorded an extraordinary loss of $64.1 million ($0.13 per
share) for the redemption of $589.0 million of Safeway's public debt, $285.5
<PAGE> 19
(page 19)
million of Vons' public debt, and $40.0 million of medium-term notes, which was
financed with $600 million of new public senior debt securities and the balance
with commercial paper.
As of year-end 1999, the Company had effectively converted $200.0 million of its
floating rate debt to fixed interest rate debt through interest rate swaps
agreements. Under one swap agreement, Safeway pays interest of 6.2% on the
$100.0 million notional amount and receives a variable interest rate based on
Federal Reserve rates quoted for commercial paper. This agreement expires in
2007. Additionally, the Company assumed two interest rate swap agreements, with
notional amounts of $50.0 million each, as part of the Randall's Acquisition.
Under these swap agreements, Safeway pays interest of 5.30% and 5.49%,
respectively, on the $50 million notional amounts and receives a variable rate
based on Federal Reserve rates quoted for commercial paper. These swap
agreements expire in 2001. Interest rate swap agreements, and a cap agreement
that expired in 1999, increased interest expense by $1.7 million in 1999, $2.8
million in 1998 and $3.3 million in 1997.
Equity in Earnings of Unconsolidated Affiliates
Safeway's investment in affiliates consists of a 49% ownership interest in Casa
Ley, S.A. de C.V. ("Casa Ley"), which operates 86 food and general merchandise
stores in western Mexico. Through the first quarter of 1997, Safeway also held a
34.4% interest in Vons. Safeway records its equity in earnings of unconsolidated
affiliates on a one-quarter delay basis.
Income from Safeway's equity investment in Casa Ley increased to $34.5 million
in 1999, from $28.5 million in 1998 and $22.7 million in 1997. Casa Ley's
financial results have been improving since 1995, when Mexico suffered from the
adverse effects of high interest rates and inflation.
Equity in earnings of unconsolidated affiliates included Safeway's share of Vons
earnings of $12.2 million in the first quarter of 1997.
Liquidity and Financial Resources
Net cash flow from operations was $1,488.4 million in 1999, $1,252.7 million in
1998 and $1,221.6 million in 1997. Net cash flow from operations increased in
1999 and 1998 largely due to increased net income.
Cash flow used by investing activities was $2,064.3 million in 1999, $2,186.4
million in 1998 and $607.7 million in 1997. The change in cash flow used by
investing activities in 1999 and 1998 is primarily due to the Randall's and
Dominick's Acquisitions as well as increased capital expenditures. Safeway
opened 67 new stores and remodeled 251 stores in 1999. In 1998, Safeway opened
46 new stores and remodeled 234 stores. The Company completed a new distribution
center in Maryland and opened a new manufacturing plant in California during
1998.
(page 20)
Cash flow from financing activities was $636.0 million in 1999 primarily due to
borrowings related to the Randall's and Carrs Acquisitions. Cash flow from
financing activities was $903.4 million in 1998, reflecting borrowings related
to the Dominick's Acquisition. Cash flow used by financing activities was $614.6
million in 1997 primarily due to Safeway's reduction of total debt.
Net cash flow from operations as presented on the Statement of Cash Flows is an
important measure of cash generated by the Company's operating activities.
Operating cash flow, as defined below, is similar to net cash flow from
operations because it excludes certain non-cash items. However, operating cash
flow also excludes interest expense and income taxes. Management believes that
operating cash flow is relevant because it assists investors in evaluating
Safeway's ability to service its debt by providing a commonly used measure of
cash available to pay interest. Operating cash flow also facilitates comparisons
<PAGE> 20
(page 20)
of Safeway's results of operations with companies having different capital
structures. Other companies may define operating cash flow differently, and as a
result, such measures may not be comparable to Safeway's operating cash flow.
Safeway's computation of operating cash flow is as follows:
<TABLE>
<CAPTION>
(Dollars in millions) 1999 1998 1997
- --------------------- ---- ---- ----
<S> <C> <C> <C>
Income before income taxes
and extraordinary loss $ 1,674.0 $ 1,396.9 $ 1,076.3
LIFO expense (income) 1.2 7.1 (6.1)
Interest expense 362.2 235.0 241.2
Depreciation and amortization 695.6 531.4 455.8
Equity in earnings of
unconsolidated affiliates (34.5) (28.5) (34.9)
------- ------- -------
Operating cash flow $ 2,698.5 $ 2,141.9 $ 1,732.3
======= ======= =======
As a percent of sales 9.35% 8.75% 7.70%
==== ==== ====
As a multiple of
interest expense 7.45x 9.11x 7.18x
==== ==== ====
</TABLE>
Total debt, including capital leases, increased to $6.96 billion at year-end
1999 from $4.97 billion at year-end 1998 and $3.34 billion at year-end 1997,
primarily due to the Randall's, Carrs and Dominick's Acquisitions, the Vons
Merger and the Safeway stock repurchase. Annual debt maturities over the next
five years are set forth in Note C of the Company's 1999 consolidated financial
statements.
Based upon the current level of operations, Safeway believes that operating cash
flow and other sources of liquidity, including borrowings under Safeway's
commercial paper program and bank credit agreement, will be adequate to meet
anticipated requirements for working capital, capital expenditures, interest
payments and scheduled principal payments for the foreseeable future. There can
be no assurance, however, that the Company's business will continue to generate
cash flow at or above current levels. The bank credit agreement is used
primarily as a backup facility to the commercial paper program.
Year 2000
In 1997, the Company established a year 2000 project group to coordinate the
Company's year 2000 compliance efforts. Before the end of calendar year 1999,
the year 2000 project group determined what modifications or replacements to the
computer-based systems and applications were necessary to achieve compliance;
implemented the modifications; conducted the tests necessary to verify that the
modified systems were operational; and transitioned the compliant systems into
the Company's regular operations. The Company also examined its relationships
with key outside vendors and others with whom the Company has significant
business relationships to determine, to the extent practical, the degree of such
parties' year 2000 compliance.
The Company spent approximately $30 million, and Randall's spent $2.6 million
prior to the acquisition, to address year 2000 issues, which included costs of
modifications, testing and consultants' fees. The cost of the year 2000
compliance efforts were funded from current operations and did not significantly
impact the Company's operational decisions during the time the year 2000 issues
were being addressed. The Company has not experienced any material adverse
effects on its liquidity or results of operations relating to the year 2000
issues associated with its systems or those of key outside vendors or others
with whom the Company has significant business relationships.
Forward-Looking Statements
<PAGE> 21
(page 20)
This Annual Report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Such statements relate to, among other things, capital expenditures,
acquisitions, operating improvements, the effect of our share repurchase program
on earnings per share and cost reductions and are indicated by words or phrases
such as "continuing," "on-going," "expects," and similar words or phrases. The
following factors are among the principal factors that could cause actual
results to differ materially from the forward-looking statements: general
business and economic conditions in our operating regions, including the rate of
inflation, population, employment and job growth in our markets; pricing
pressures and competitive factors, which could include pricing strategies, store
openings and remodels; results of our programs to reduce costs; the ability to
integrate any companies we acquire and achieve operating improvements at those
companies; increases in labor costs and relations with union bargaining units
representing our employees; opportunities or acquisitions that we pursue; and
the availability and terms of financing. Consequently, actual events and results
may vary significantly from those included in or contemplated or implied by such
statements.
<PAGE> 22
(page 21)
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
<TABLE>
52 WEEKS 52 WEEKS 53 WEEKS
1999 1998 1997
-------- --------- ---------
<S> <C> <C> <C>
(Dollars in millions, except per
share amounts)
Sales $ 28,859.9 $ 24,484.2 $ 22,483.8
Cost of goods sold (20,349.2) (17,359.7) (16,069.1)
--------- --------- ---------
Gross profit 8,510.7 7,124.5 6,414.7
Operating and administrative
expense (6,411.4) (5,466.5) (5,093.2)
Goodwill amortization (101.4) (56.3) (41.8)
--------- --------- ---------
Operating profit 1,997.9 1,601.7 1,279.7
Interest expense (362.2) (235.0) (241.2)
Equity in earnings of
unconsolidated affiliates 34.5 28.5 34.9
Other income, net 3.8 1.7 2.9
--------- --------- ---------
Income before income taxes
and extraordinary loss 1,674.0 1,396.9 1,076.3
Income taxes (703.1) (590.2) (454.8)
--------- --------- ---------
Income before extraordinary loss 970.9 806.7 621.5
Extraordinary loss related to
early retirement of debt,
net of income tax benefit
of $41.1 -- -- (64.1)
--------- --------- ---------
Net income $ 970.9 $ 806.7 $ 557.4
========= ========= =========
Basic earnings per share:
Income before extraordinary
loss $ 1.95 $ 1.67 $ 1.35
Extraordinary loss -- -- (0.14)
---------- --------- ----------
Net income $ 1.95 $ 1.67 $ 1.21
========== ========= ==========
Diluted earnings per share:
Income before extraordinary
loss $ 1.88 $ 1.59 $ 1.25
Extraordinary loss -- -- (0.13)
---------- --------- ----------
Net income $ 1.88 $ 1.59 $ 1.12
========== ========= ==========
Weighted average shares
outstanding - basic 498.6 482.8 462.3
Weighted average shares
outstanding - diluted 515.4 508.8 497.7
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 23
(page 22)
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year-end Year-end
(in millions) 1999 1998
----------- -----------
<S> <C> <C>
Assets
Current assets:
Cash and equivalents $ 106.2 $ 45.7
Receivables 292.9 200.1
Merchandise inventories, net of LIFO reserve of $81.5 and $80.2 2,444.9 1,856.0
Prepaid expenses and other current assets 208.1 218.1
----------- -----------
Total current assets 3,052.1 2,319.9
----------- -----------
Property:
Land 996.2 794.1
Buildings 2,502.3 2,069.9
Leasehold improvements 1,784.3 1,498.3
Fixtures and equipment 3,852.4 3,282.6
Property under capital leases 591.4 379.2
----------- -----------
9,726.6 8,024.1
Less accumulated depreciation and amortization (3,281.9) (2,841.5)
----------- -----------
Total property, net 6,444.7 5,182.6
Goodwill, net of accumulated amortization of $314.4 and $211.0 4,786.6 3,348.0
Prepaid pension costs 405.6 369.6
Investment in unconsolidated affiliate 131.6 115.2
Other assets 79.7 54.3
----------- -----------
Total assets $ 14,900.3 $ 11,389.6
=========== ===========
(page 23)
Year-end Year-end
(in millions, except per share amounts) 1999 1998
----------- -----------
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of notes and debentures $ 557.1 $ 279.8
Current obligations under capital leases 41.8 41.7
Accounts payable 1,878.4 1,595.9
Accrued salaries and wages 387.7 348.9
Other accrued liabilities 717.6 627.3
----------- -----------
Total current liabilities 3,582.6 2,893.6
----------- -----------
Long-term debt:
Notes and debentures 5,922.0 4,242.6
Obligations under capital leases 435.4 408.0
----------- -----------
Total long-term debt 6,357.4 4,650.6
Deferred income taxes 379.1 216.9
Accrued claims and other liabilities 495.4 546.4
Total liabilities 10,814.5 8,307.5
Commitments and contingencies
Stockholders' equity:
Common stock: par value $0.01 per share;
1,500 shares authorized; 559.0 and 550.9 shares outstanding 5.6 5.5
Additional paid-in capital 2,993.4 2,599.9
</TABLE>
<PAGE> 24
(page 23)
<TABLE>
<S> <C> <C>
Cumulative translation adjustments (11.5) (19.7)
Retained earnings 2,895.9 1,925.0
----------- -----------
5,883.4 4,510.7
Less: Treasury stock at cost; 65.4 and 60.6 shares (1,671.6) (1,302.6)
Unexercised warrants purchased (126.0) (126.0)
----------- -----------
Total stockholders' equity 4,085.8 3,082.1
----------- -----------
Total liabilities and stockholders' equity $ 14,900.3 $ 11,389.6
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 25
(page 24)
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
52 weeks 52 weeks 53 weeks
(in millions) 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cash Flow from Operations:
Net income $ 970.9 $ 806.7 $ 557.4
Reconciliation to net cash flow from operations:
Extraordinary loss related to early retirement of debt,
before income tax benefit -- -- 105.2
Depreciation and amortization 695.6 531.4 455.8
Amortization of deferred finance costs 4.8 1.6 1.7
Deferred income taxes 244.7 59.4 55.9
LIFO expense (income) 1.2 7.1 (6.1)
Equity in earnings of unconsolidated affiliates (34.5) (28.5) (34.9)
Net pension income (35.1) (18.3) (4.1)
Contributions to Canadian pension plan (0.9) (6.8) (10.0)
Decrease in accrued claims and other liabilities (8.4) (17.5) (13.9)
(Gain) loss on property retirements (30.6) 13.3 (12.4)
Changes in working capital items:
Receivables (31.9) (5.5) 25.8
Inventories at FIFO cost (283.1) (48.0) 37.5
Prepaid expenses and other current assets 23.0 (36.9) 2.7
Payables and accruals (27.3) (5.3) 61.0
-------- -------- --------
Net cash flow from operations 1,488.4 1,252.7 1,221.6
-------- -------- --------
Cash Flow from Investing Activities:
Cash paid for property additions (1,333.6) (1,075.2) (758.2)
Proceeds from sale of property 143.5 47.6 75.6
Net cash used to acquire Randall's (729.8) -- --
Net cash used to acquire Carrs (94.4) -- --
Net cash used to acquire Dominick's -- (1,144.9) --
Net cash acquired in merger with Vons -- -- 55.3
Other (50.0) (13.9) 19.6
-------- -------- --------
Net cash flow used by investing activities (2,064.3) (2,186.4) (607.7)
-------- -------- --------
(page 25)
52 weeks 52 weeks 53 weeks
(in millions) 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cash Flow from Financing Activities:
Additions to short-term borrowings $ 204.9 $ 251.7 $ 414.5
Payments on short-term borrowings (237.0) (299.9) (287.5)
Additions to long-term borrowings 3,840.7 2,722.3 4,254.3
Payments on long-term borrowings (2,520.0) (1,789.9) (3,553.5)
Purchase of treasury stock (651.0) -- (1,376.0)
</TABLE>
<PAGE> 26
(page 25)
<TABLE>
<S> <C> <C> <C>
Net proceeds from exercise of warrants and stock options 22.9 34.5 43.9
Premiums paid on early retirement of debt -- -- (97.7)
Other (24.5) (15.3) (12.6)
---------- ---------- ----------
Net cash flow from (used by) financing activities 636.0 903.4 (614.6)
---------- ---------- ----------
Effect of changes in exchange rates on cash 0.4 (1.2) (1.8)
---------- ---------- ----------
Increase (decrease) in cash and equivalents 60.5 (31.5) (2.5)
Cash and Equivalents:
Beginning of year 45.7 77.2 79.7
---------- ---------- ----------
End of year $ 106.2 $ 45.7 $ 77.2
========== ========== ==========
Other Cash Flow Information:
Cash payments during the year for:
Interest $ 351.4 $ 241.0 $ 263.6
Income taxes, net of refunds 378.2 468.7 214.6
Noncash Investing and Financing Activities:
Stock issued for acquisition of Randall's Food Markets, Inc. 546.4 -- --
Stock issued for acquisition of The Vons Companies, Inc. -- -- 1,693.0
Tax benefit from stock options exercised 77.0 85.2 42.4
Capital lease obligations entered into 24.8 34.2 37.3
Mortgage notes assumed in property additions 9.7 32.8 0.9
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 27
(Page 26)
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accu-
mulated
Other
Compre- Total
Common Stock Additional Treasury Stock Unexercised hensive Stock- Compre-
-------------- Paid-in ----------------- Warrants Retained Income holders' hensive
(In millions) Shares Amount Capital Shares Cost Purchased Earnings (Loss) Equity Income
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, year-end 1996 442.8 $ 4.4 $ 748.1 (322.7) $ 745.0 $ 12.0 $1,186.8 $452.3
======
Net income -- -- -- -- 557.4 -- 557.4 $557.4
Translation adjustments -- -- -- -- -- (11.4) (11.4) (11.4)
Equity in Vons'
pre-merger earnings
due to timing of
recording earnings -- -- -- -- 12.6 -- 12.6 --
Shares issued for
acquisition of Vons 83.2 0.8 1,692.2 -- -- -- 1,693.0 --
Treasury stock purchased -- -- -- (64.0) $(1,376.0) -- -- -- (1,376.0) --
Options and warrants
exercised 11.4 0.1 26.8 2.8 59.4 -- -- -- 86.3 --
Stock bonuses -- -- 0.3 -- -- -- -- -- 0.3 --
------ ----- -------- ------- --------- ------- -------- ------ -------- ------
Balance, year-end 1997 537.4 5.3 2,467.4 (61.2) (1,316.6) (322.7) 1,315.0 0.6 2,149.0 $546.0
======
Net income -- -- -- -- -- -- 806.7 -- 806.7 $806.7
Translation adjustments -- -- -- -- -- -- -- (20.3) (20.3) (20.3)
Dominick's options converted - -- 27.0 -- -- -- -- -- 27.0 --
Options and warrants
exercised 13.5 0.2 105.5 0.6 14.0 -- -- -- 119.7 --
Warrants canceled -- -- -- -- -- 196.7 (196.7) -- -- --
------ ----- -------- ------- --------- ------- -------- ------ -------- ------
Balance, year-end 1998 550.9 5.5 2,599.9 (60.6) (1,302.6) (126.0) 1,925.0 (19.7) 3,082.1 $786.4
======
Net income -- -- -- -- -- -- 970.9 -- 970.9 $970.9
Translation adjustments -- -- -- -- -- -- -- 8.2 8.2 8.2
Shares issued for acquisition
of Randall's -- -- 272.8 12.7 273.6 -- -- -- 546.4 --
Randall's options converted -- -- 29.3 -- -- -- -- -- 29.3 --
Treasury stock purchased -- -- -- (17.9) (651.0) -- -- -- (651.0) --
Options and warrants
</TABLE>
<PAGE> 28
(Page 26)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
exercised 8.1 0.1 91.4 0.4 8.4 -- -- -- 99.9 --
----- ----- -------- ----- --------- ------- -------- ------ --------- ------
Balance, year-end 1999 559.0 $ 5.6 $2,993.4 (65.4) $(1,671.6) $(126.0) $2,895.9 $(11.5) $ 4,085.8 $979.1
===== ===== ======== ===== ========= ======= ======== ====== ========= ======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 29
(Page 27)
Notes to Consolidated Financial Statements
Note A: The Company and Significant Accounting Policies
The Company
Safeway Inc. ("Safeway" or the "Company") is one of the largest food
and drug chains in North America, with 1,659 stores as of year-end 1999.
Safeway's U.S. retail operating areas are located principally in northern
California, southern California, Oregon, Washington, Alaska, Colorado, Arizona,
Texas, the Chicago metropolitan area and the Mid-Atlantic region. The Company's
Canadian retail operations are located principally in British Columbia, Alberta
and Manitoba/Saskatchewan. In support of its retail operations, the Company has
an extensive network of distribution, manufacturing and food processing
facilities.
As discussed in Note B, in September 1999 the Company acquired all of the
outstanding shares of Randall's Food Markets, Inc. ("Randall's") in exchange for
$1.3 billion consisting of $754 million of cash and 12.7 million shares of
Safeway stock (the "Randall's Acquisition"). The acquisition was accounted for
as a purchase and Randall's operating results have been consolidated with
Safeway's since the beginning of the fourth quarter of 1999.
Also discussed in Note B, in April 1999 Safeway completed its acquisition of all
of the outstanding shares of Carr-Gottstein Foods Co. ("Carrs") for
approximately $106 million in cash (the "Carrs Acquisition"). The Carrs
acquisition was accounted for as a purchase. Safeway's 1999 income statement
includes 40 weeks of Carrs' operating results.
In November 1998 the Company acquired Dominick's Supermarkets, Inc.
("Dominick's"), by purchasing all of the outstanding shares of Dominick's for a
total of approximately $1.2 billion in cash (the "Dominick's Acquisition"). The
Dominick's Acquisition was accounted for as a purchase. Dominick's operating
results have been consolidated with Safeway's since approximately midway through
the fourth quarter of 1998.
In April 1997 Safeway completed a merger with The Vons Companies, Inc. ("Vons")
pursuant to which the Company issued 83.2 million shares of Safeway common stock
for all of the shares of Vons common stock that it did not already own for an
aggregate purchase price of $1.4 billion (the "Vons Merger"). The Vons Merger
was accounted for as a purchase. Beginning in the second quarter of 1997,
Safeway's consolidated financial statements include Vons' financial results.
In addition to these operations, the Company has a 49% ownership interest in
Casa Ley, S.A. de C.V. ("Casa Ley"), which operates 86 food and general
merchandise stores in western Mexico.
Basis of Consolidation
The consolidated financial statements include Safeway Inc., a Delaware
corporation, and all majority-owned subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation. The Company's
investment in Casa Ley is reported using the equity method. Prior to the Vons
Merger in the second quarter of 1997, the Company's investment in Vons was
reported using the equity method.
Fiscal Year
The Company's fiscal year ends on the Saturday nearest December 31. The last
three fiscal years consist of the 52-week period ending January 1, 2000, the
52-week period ended January 2, 1999 and the 53-week period ended January 3,
1998.
Revenue Recognition
Revenue is recognized at the point of sale for retail sales. Vendor allowances
and credits that relate to the Company's buying and merchandising activities are
recognized as earned.
<PAGE> 30
(Page 27)
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Translation of Foreign Currencies
Assets and liabilities of the Company's Canadian subsidiaries and Casa Ley are
translated into U.S. dollars at year-end rates of exchange, and income and
expenses are translated at average rates during the year. Adjustments resulting
from translating financial statements into U.S. dollars are reported, net of
applicable income taxes, as a separate
(Page 28)
component of comprehensive income in the Statements of Stockholders' Equity.
Merchandise Inventories
Merchandise inventory of $1,823 million at year-end 1999 and $1,326 million at
year-end 1998 is valued at the lower of cost on a last-in, first-out ("LIFO")
basis or market value. Such LIFO inventory had a replacement or current cost of
$1,905 million at year-end 1999 and $1,406 million at year-end 1998.
Liquidations of LIFO layers did not have a significant effect on the results of
operations. All remaining inventory is valued at the lower of cost on a
first-in, first-out ("FIFO") basis or market value. The FIFO cost of inventory
approximates replacement or current cost.
Property and Depreciation
Property is stated at cost. Depreciation expense on buildings and equipment is
computed on the straight-line method using the following lives:
Stores and other buildings 7 to 40 years
Fixtures and equipment 3 to 15 years
Property under capital leases and leasehold improvements are amortized on a
straight-line basis over the shorter of the remaining terms of the lease or the
estimated useful lives of the assets.
Self-Insurance
The Company is primarily self-insured for workers' compensation, automobile, and
general liability costs. The self-insurance liability is determined actuarially,
based on claims filed and an estimate of claims incurred but not yet reported.
The present value of such claims was accrued using a discount rate of 6.0% in
1999 and 5.5% in 1998. The current portion of the self-insurance liability of
$103.2 million at year-end 1999 and $107.3 million at year-end 1998 is included
in Other Accrued Liabilities in the consolidated balance sheets. The long-term
portion of $243.2 million at year-end 1999 and $265.5 million at year-end 1998
is included in Accrued Claims and Other Liabilities. Claims payments were $123.6
million in 1999, $98.2 million in 1998 and $100.0 million in 1997. The total
undiscounted liability was $391.9 million at year-end 1999 and $413.1 million at
year-end 1998.
Income Taxes
The Company provides a deferred tax expense or benefit equal to the change in
the deferred tax liability during the year in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes."
Deferred income taxes represent tax credit carryforwards and future net tax
effects resulting from temporary differences between the financial statement and
tax basis of assets and liabilities using enacted tax rates in effect for the
year in which the differences are expected to reverse.
Statement of Cash Flows
Short-term investments with original maturities of less than three months are
considered to be cash equivalents.
Off-Balance Sheet Financial Instruments
As discussed in Note E, the Company has entered into interest rate swap
agreements to limit the exposure of certain of its floating interest rate debt
to changes in market interest rates. Interest rate swap agreements involve the
exchange with a counterparty of fixed and floating rate interest payments
periodically over the life of the agreements
<PAGE> 31
(Page 28)
without exchange of the underlying notional principal amounts. The differential
to be paid or received is recognized over the life of the agreements as an
adjustment to interest expense. The Company's counterparties are major financial
institutions.
Fair Value of Financial Instruments
Generally accepted accounting principles require the disclosure of the fair
value of certain financial instruments, whether or not recognized in the balance
sheet, for which it is practicable to estimate fair value. Safeway estimated the
fair values presented below using appropriate valuation methodologies and market
information available as of year-end. Considerable judgment is required to
develop estimates of fair value, and the estimates presented are not necessarily
indicative of the amounts that the Company could realize in a current market
exchange. The use of different market assumptions or estimation methodologies
could have a material effect on the estimated fair values. Additionally, these
fair values were estimated at year-end, and current estimates of fair value may
differ significantly from the amounts presented.
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
Cash and equivalents, accounts receivable, accounts payable and short-term debt
The carrying amount of these items approximates fair value.
Long-term debt
Market values quoted on the New York Stock Exchange are used to estimate the
fair value of publicly traded debt. To estimate the fair value of debt issues
that are not quoted on an exchange, the Company uses those interest rates that
are currently available to it for issuance of debt with similar terms and
remaining maturities. At year-end 1999 and 1998, the estimated fair value of
debt approximated carrying value.
(Page 29)
Off-balance sheet instruments
The fair value of interest rate swaps are the amount at which they could be
settled based on estimates obtained from dealers. At year-end 1999, net
unrealized gains on such agreements were $4.7 million compared to an unrealized
loss of $7.0 million at year-end 1998. Since the Company intends to hold these
agreements as hedges for the term of the agreements, the market risk associated
with changes in interest rates should not be significant.
Impairment of Long-Lived Assets
When Safeway decides to close a store or other facility, the Company accrues
estimated future losses, if any, which may include lease payments or other costs
of holding the facility, net of estimated future income in accordance with the
provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of." The operating costs, including
depreciation, of stores or other facilities to be sold or closed are expensed
during the period they remain in use. Safeway had an accrued liability of $87.3
million at year-end 1999 and $84.6 million at year-end 1998 for such estimated
future losses, which is included in Accrued Claims and Other Liabilities in the
Company's consolidated balance sheets.
Goodwill
Goodwill is $4.8 billion at year-end 1999 and $3.3 billion at year-end
1998, and is being amortized on a straight-line basis over its estimated useful
life of 40 years. If it became probable that the projected future undiscounted
cash flows of acquired assets were less than the carrying value of the goodwill,
Safeway would recognize an impairment loss in accordance with the provisions of
SFAS No. 121. Goodwill amortization was $101.4 million in 1999, $56.3 million in
1998 and $41.8 million in 1997. Goodwill and related amortization have increased
due to the acquisitions of Randall's, Dominick's and Carrs and the Vons Merger
discussed in Note B.
Stock-Based Compensation
Safeway accounts for stock-based awards to employees using the intrinsic
<PAGE> 32
(page 29)
value method in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." The disclosure requirements of SFAS
No. 123, "Accounting for Stock-Based Compensation," are set forth in Note F.
New Accounting Standards
In June 1998 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which was amended by SFAS 137, which
defines derivatives, requires that derivatives be carried at fair value, and
provides for hedge accounting when certain conditions are met. This statement is
effective for Safeway beginning in the first quarter of 2001. Although the
Company has not fully assessed the implications of this new statement, the
Company believes adoption of this statement will not have a material impact on
its financial statements.
During the first quarter of 1999, the Company adopted SOP 98-5, "Reporting on
the Costs of Start-Up Activities," which requires that costs incurred for
start-up activities, such as store openings, be expensed as incurred. This SOP
did not have a material impact on Safeway's financial statements.
Note B: Acquisitions
In September 1999, Safeway acquired all of the outstanding shares of Randall's
in exchange for $1.3 billion consisting of $754 million of cash and 12.7 million
shares of Safeway stock. The Randall's Acquisition was accounted for as a
purchase and resulted in goodwill of approximately $1.3 billion which will be
amortized over 40 years. Safeway used proceeds from the issuance of subordinated
debt to fund the cash portion of the acquisition.
In April 1999, Safeway acquired Carrs by purchasing all of the outstanding
shares of Carrs for approximately $106 million in cash. The Carrs Acquisition
was accounted for as a purchase and resulted in goodwill of approximately $213
million which will be amortized over 40 years. Safeway funded the acquisition,
and subsequent repayment of approximately $239 million of Carrs' debt, with
issuance of commercial paper
In November 1998 Safeway completed its acquisition of all of the outstanding
shares of Dominick's for a total of approximately $1.2 billion in cash. The
Dominick's Acquisition was accounted for as a purchase and resulted in
additional goodwill of $1.6 billion which is being amortized over 40 years.
Safeway funded the Dominick's Acquisition, including the repayment of
approximately $560 million of debt and lease obligations, with a combination of
bank borrowings and commercial paper.
The following unaudited pro forma combined summary financial information is
based on the historical consolidated results of operations of Safeway,
Dominick's, Carrs and Randall's as if the Dominick's, Carrs and Randall's
Acquisitions had occurred as of the beginning of each year presented. This pro
forma financial information is presented for informational purposes only and may
not be indicative of what the actual consolidated results of operations would
have been if the acquisitions had been effective as of the beginning of the
years presented. Pro forma adjustments were applied to the respective historical
financial statements to account for the Dominick's, Carrs and Randall's
(page 30)
Acquisitions as purchases. Under purchase accounting, the purchase price is
allocated to acquired assets and liabilities based on their estimated fair
values at the date of acquisition, and any excess is allocated to goodwill. For
Randall's and Carrs, such allocations are subject to final determination based
on real estate, leasehold and equipment valuation studies, and a review of the
books, records and accounting policies of Randall's and Carrs, which are
expected to be complete before the end of the third quarter and first quarter of
fiscal 2000, respectively. Accordingly, the final allocations may be different
<PAGE> 33
(page 30)
from the amount reflected herein, although management does not expect such
differences to be material.
<TABLE>
<CAPTION>
Pro Forma
(in millions, except per-share amounts) 1999 1998
- --------------------------------------- ---- ----
<S> <C> <C>
Sales $ 30,801.8 $29,474.1
Net income $ 957.6 $ 706.2
Diluted earnings per share:
Net income $ 1.82 $ 1.42
</TABLE>
Note C: Financing
Notes and debentures were composed of the following at year-end (in millions):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Commercial paper $ 2,358.1 $ 1,745.0
Bank credit agreement, unsecured 75.7 89.1
9.30% Senior Secured
Debentures due 2007 24.3 24.3
6.85% Senior Notes due 2004, unsecured 200.0 200.0
7.00% Senior Notes due 2007, unsecured 250.0 250.0
7.45% Senior Debentures
due 2027, unsecured 150.0 150.0
5.75% Senior Notes due 2000, unsecured 400.0 400.0
5.875% Senior Notes due 2001, unsecured 400.0 400.0
6.05% Senior Notes due 2003, unsecured 350.0 350.0
6.50% Senior Notes due 2008, unsecured 250.0 250.0
7.00% Senior Notes due 2002, unsecured 600.0 --
7.25% Senior Notes due 2004, unsecured 400.0 --
7.50% Senior Notes due 2009, unsecured 500.0 --
9.35% Senior Subordinated Notes
due 1999, unsecured -- 66.7
10% Senior Subordinated Notes
due 2001, unsecured 79.9 79.9
9.65% Senior Subordinated Debentures
due 2004, unsecured 81.2 81.2
9.875% Senior Subordinated Debentures
due 2007, unsecured 24.2 24.2
10% Senior Notes due 2002, unsecured 6.1 6.1
Mortgage notes payable, secured 75.6 115.9
Other notes payable, unsecured 98.8 102.7
Medium-term notes, unsecured 25.5 25.5
Short-term bank borrowings, unsecured 129.7 161.8
---------- ----------
6,479.1 4,522.4
Less current maturities (557.1) (279.8)
---------- ----------
Long-term portion $ 5,922.0 $ 4,242.6
========== ==========
</TABLE>
Commercial Paper
The amount of commercial paper borrowings is limited to the unused borrowing
capacity under the bank credit agreement. Commercial paper is classified as
long-term because the Company intends to and has the ability to refinance these
borrowings on a long-term basis through either continued commercial paper
borrowings or utilization of the bank credit agreement, which matures in 2002.
The weighted average interest rate on commercial paper borrowings was 5.37%
during 1999 and 6.79% at year-end 1999.
Bank Credit Agreement
Safeway's total borrowing capacity under the bank credit agreement is $3.0
billion. Of the $3.0 billion credit line, $2.0 billion matures in 2002 and has
two one-year extension options, and $1.0 billion is renewable
<PAGE> 34
(page 30)
annually through 2004. The restrictive covenants of the bank credit agreement
limit Safeway with respect to, among other things, creating liens upon its
assets and disposing of material amounts of assets other than in the ordinary
course of business. Safeway is also required to meet certain financial tests
under the bank credit agreement. At year-end 1999, the Company had total unused
borrowing capacity under the bank credit agreement of $520 million.
U.S. borrowings under the bank credit agreement carry interest at one of the
following rates selected by the Company: (i) the prime rate; (ii) a rate based
on rates at which Eurodollar deposits are offered to first-class banks by the
lenders in the bank credit agreement plus a pricing margin based on the
Company's debt rating or interest coverage ratio (the "Pricing Margin"); or
(iii) rates quoted at the discretion of the lenders. Canadian borrowings
denominated in U.S. dollars carry interest at one of the following rates
selected by the Company: (a) the Canadian base rate or (b) the Canadian
Eurodollar rate plus the Pricing Margin. Canadian borrowings denominated in
Canadian dollars carry interest at one of the following rates selected by the
Company: (i) the Canadian prime rate or (ii) the rate for Canadian bankers
acceptances plus the Pricing Margin.
The weighted average interest rate on borrowings under the bank credit agreement
was 5.59% during 1999 and 5.18% at year-end 1999.
Senior Secured Indebtedness
The 9.30% Senior Secured Debentures due 2007 are secured by a deed of trust
which created a lien on the land, buildings and equipment owned by Safeway at
its distribution center in Tracy, California.
(page 31)
Senior Unsecured Indebtedness
In September 1999, Safeway issued senior unsecured debt facilities consisting of
7.00% Notes due 2002, 7.25% Notes due 2004, and 7.5% Notes due 2009.
In 1998 Safeway issued senior unsecured debt securities consisting of 5.75%
Notes due 2000, 5.875% Notes due 2001, 6.05% Notes due 2003, and 6.5% Notes due
2008.
In 1997 Safeway issued senior unsecured debt securities consisting of 6.85%
Senior Notes due 2004, 7.00% Senior Notes due 2007, and 7.45% Senior Debentures
due 2027. The Company used the proceeds from this debt to redeem a portion of
the Senior Subordinated Indebtedness, described below.
Senior Subordinated Indebtedness
The 10% Senior Subordinated Notes due 2001, 9.65% Senior Subordinated Debentures
due 2004, and 9.875% Senior Subordinated Debentures due 2007 are subordinated in
right of payment to, among other things, the Company's borrowings under the bank
credit agreement, the 9.30% Senior Secured Debentures, the Senior Unsecured
Indebtedness, and mortgage notes payable.
Mortgage Notes Payable
Mortgage notes payable at year-end 1999 have remaining terms ranging from one to
19 years, have a weighted average interest rate of 8.64% and are secured by
properties with a net book value of approximately $298 million.
Other Notes Payable
Other notes payable at year-end 1999 have remaining terms ranging from one to 10
years and a weighted average interest rate of 7.28%.
Redemptions
During 1997, the Company redeemed $588.5 million of the Senior Subordinated
Indebtedness, $285.5 million of Vons' public debt, and $40.0 million of
medium-term notes using proceeds from the Senior Unsecured Indebtedness and
commercial paper program. In connection with this redemption, Safeway recorded
an extraordinary loss of $64.1 million ($0.13 per share). The extraordinary loss
represents the payment of redemption premiums and the write-off of deferred
finance costs, net of the related tax benefits.
Annual Debt Maturities
As of year-end 1999, annual debt maturities were as follows (in millions):
<TABLE>
<S> <C>
2000 $ 557.1
</TABLE>
<PAGE> 35
(page 31)
<TABLE>
<S> <C>
2001 548.6
2002 3,071.0
2003 377.2
2004 700.0
Thereafter 1,225.2
------------
$ 6,479.1
============
</TABLE>
Letters of Credit
The Company had letters of credit of $89.3 million outstanding at year-end 1999
of which $46.3 million were issued under the bank credit agreement. The letters
of credit are maintained primarily to support performance, payment, deposit, or
surety obligations of the Company. The Company pays commitment fees ranging from
0.15% to 1.00% on the outstanding portion of the letters of credit.
Note D: Lease Obligations
Approximately two-thirds of the premises that the Company occupies are leased.
The Company had approximately 1,600 leases at year-end 1999, including
approximately 220 which are capitalized for financial reporting purposes. Most
leases have renewal options, some with terms and conditions similar to the
original lease, others with reduced rental rates during the option periods.
Certain of these leases contain options to purchase the property at amounts that
approximate fair market value.
As of year-end 1999, future minimum rental payments applicable to non-cancelable
capital and operating leases with remaining terms in excess of one year were as
follows (in millions):
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------ ------
<S> <C> <C>
2000 $ 91.0 $ 325.8
2001 97.9 302.7
2002 77.0 306.2
2003 72.6 289.1
2004 77.9 264.4
Thereafter 460.9 2,482.5
------ --------
Total minimum lease payments 877.3 $3,970.7
------ --------
Less amounts representing interest (400.1)
</TABLE>
<TABLE>
<S> <C> <C>
Present value of net minimum
lease payments 477.2
Less current obligations (41.8)
------
Long-term obligations $435.4
======
</TABLE>
Future minimum lease payments under non-cancelable capital and operating lease
agreements have not been reduced by minimum sublease rental income of $241.8
million.
Amortization expense for property under capital leases was $38.5
million in 1999, $22.3 million in 1998 and $21.1 million in 1997. Accumulated
amortization of property under capital leases was $132.3 million at year-end
1999 and $136.1 million at year-end 1998.
(page 32)
The following schedule shows the composition of total rental expense for all
operating leases (in millions). In general, contingent rentals are based on
individual store sales.
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Property leases:
Minimum rentals $ 280.3 $ 208.7 $ 206.0
Contingent rentals 18.6 19.2 12.3
</TABLE>
<PAGE> 36
(page 32)
<TABLE>
<S> <C> <C> <C>
Less rentals from
subleases (13.2) (12.0) (13.4)
-------- -------- --------
285.7 215.9 204.9
Equipment leases 42.9 22.4 19.3
-------- -------- --------
$ 328.6 $ 238.3 $ 224.2
======== ======== ========
</TABLE>
Note E: Interest Expense
Interest expense consisted of the following (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Bank credit agreement $ 19.4 $ 10.8 $ 36.9
Commercial paper 87.4 83.7 43.8
9.30% Senior Secured Debentures 2.3 2.3 5.3
6.85% Senior Notes 13.7 13.7 4.1
7.00% Senior Notes 17.5 17.5 5.2
7.45% Senior Debentures 11.2 11.2 3.4
5.75% Senior Notes 23.0 3.5 --
5.875% Senior Notes 23.5 3.6 --
6.05% Senior Notes 21.2 3.2 --
6.50% Senior Notes 16.3 2.5 --
7.00% Senior Notes 12.8 -- --
7.25% Senior Notes 8.8 -- --
7.5% Senior Notes 11.4 -- --
9.35% Senior Subordinated Notes 1.3 6.2 12.3
10% Senior Subordinated Notes 8.0 8.0 19.3
9.65% Senior Subordinated
Debentures 7.8 7.8 17.8
9.875% Senior Subordinated
Debentures 2.4 2.4 8.2
10% Senior Notes 0.6 0.6 4.3
Vons Debentures -- -- 10.2
Mortgage notes payable 7.3 12.1 22.0
Other notes payable 16.0 9.5 9.9
Medium-term notes 2.1 2.1 4.4
Short-term bank borrowings 4.9 10.6 8.8
Obligations under capital leases 46.1 27.8 26.0
Amortization of deferred
finance costs 4.8 1.6 1.7
Interest rate swap and
cap agreements 1.7 2.8 3.3
Capitalized interest (9.3) (8.5) (5.7)
-------- -------- --------
$ 362.2 $ 235.0 $ 241.2
======== ======== ========
</TABLE>
As of year-end 1999, the Company had effectively converted $200.0 million of its
floating rate debt to fixed interest rate debt through interest rate swap
agreements. Under one swap agreement, Safeway pays interest of 6.2% on the
$100.0 million notional amount and receives a variable interest rate based on
Federal Reserve rates quoted for commercial paper. This agreement expires in
2007.
Additionally, the Company assumed two interest rate swap agreements, with
notional amounts of $50.0 million each, as part of the Randall's Acquisition.
Under these swap agreements, Safeway pays interest of 5.30% and 5.49%,
respectively, on the $50 million notional amounts and receives a variable rate
based on Federal Reserve rates quoted for commercial paper. These swap
agreements expire in 2001. Interest rate swap agreements, and a cap agreement
that expired in 1999, increased interest expense by $1.7 million in 1999, $2.8
million in 1998 and $3.3 million in 1997. At year-end 1999, the net unrealized
<PAGE> 37
(page 32)
gain on interest rate swap agreements was $4.7 million compared to an unrealized
loss of $7.0 million at year-end 1998.
The Company is not subject to credit risk because the notional amounts do not
represent cash flows. The Company is subject to risk from nonperformance of the
counterparties to the swap agreements in the amount of any interest differential
to be received. Because the Company monitors the credit ratings of its
counterparties, which are limited to major financial institutions, Safeway does
not anticipate nonperformance by the counterparties.
Because the Company intends to hold these agreements as hedges for the term of
the agreements, the market risk associated with changes in interest rates should
not be significant.
Note F: Capital Stock
Shares Authorized and Issued
Authorized preferred stock consists of 25 million shares of which none was
outstanding during 1999, 1998 or 1997. Authorized common stock consists of 1.5
billion shares at $0.01 par value. Common stock outstanding at year-end 1999 was
493.6 million shares (net of 65.4 million shares of treasury stock) and 490.3
million shares at year-end 1998 (net of 60.6 million shares of treasury stock).
Stock Option Plans
Under Safeway's stock option plans, the Company may grant incentive and
non-qualified options to purchase common stock at an exercise price equal to or
greater than the fair market value at the grant date, as determined by the
Compensation and Stock Option Committee of the Board of Directors. Options
generally vest over seven years. Vested options are exercisable in part or in
full at any time prior to the expiration date of 10 to 15 years from the date of
the grant. Options to purchase 16.9 million shares were available for grant at
year-end 1999.
(page 33)
Activity in the Company's stock option plans for the three-year period ended
January 1, 2000 was as follows:
<TABLE>
<CAPTION>
Weighted Average
Options Exercise Price
------- --------------
<S> <C> <C>
Outstanding, year-end 1996 38,773,156 $ 5.07
1997 Activity:
Granted 3,981,766 26.25
Converted Vons options 7,578,098 7.34
Canceled (962,522) 10.01
Exercised (8,373,270) 5.06
----------
Outstanding, year-end 1997 40,997,228 7.53
1998 Activity:
Granted 4,987,038 40.28
Converted Dominick's options 922,701 19.70
Canceled (848,482) 14.61
Exercised (6,680,083) 3.90
----------
Outstanding, year-end 1998 39,378,402 12.15
1999 Activity:
Granted 6,455,276 43.17
Converted Randall's options 1,069,432 15.54
Canceled (1,325,892) 37.81
Exercised (5,070,905) 4.95
----------
Outstanding, year-end 1999 40,506,313 17.44
==========
Exercisable, year-end 1997 25,887,094 4.75
==========
Exercisable, year-end 1998 24,447,905 5.79
==========
Exercisable, year-end 1999 23,775,488 7.84
==========
</TABLE>
<PAGE> 38
(page 33)
Weighted average fair value of options granted during the year:
<TABLE>
<S> <C>
1997 $ 12.43
1998 17.06
1999 20.83
</TABLE>
The following table summarizes stock option information at year-end 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------- ------------------------------
Weighted-Average
Range of Number Remaining Weighted-Average Number Weighted-Average
Exercise Prices of Options Contractual Life Exercise Price of Options Exercise Price
--------------- ---------- ---------------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
$ 1.57 to $3.22 7,701,712 6.95 years $ 2.91 7,661,712 $ 2.91
3.25 to 6.28 7,122,251 6.46 4.55 6,637,323 4.53
6.31 to 9.44 7,017,977 4.51 7.18 4,988,185 7.14
9.67 to 26.41 7,145,707 7.34 18.28 3,364,247 17.17
26.72 to 41.25 7,266,509 8.67 35.43 998,500 34.75
42.06 to 60.94 4,252,157 9.26 50.09 125,521 46.74
---------- ----------
1.57 to 60.94 40,506,313 7.06 17.44 23,775,488 7.84
</TABLE>
Additional Stock Plan Information
The Company accounts for its stock-based awards using the intrinsic value method
in accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and its related interpretations. Accordingly, no
compensation expense has been recognized in the financial statements for
employee stock option awards granted at fair market value.
SFAS No. 123, "Accounting for Stock-Based Compensation," requires the disclosure
of pro forma net income and earnings per share as if the Company had adopted the
fair value method as of the beginning of fiscal 1995. Under SFAS 123, the fair
value of stock-based awards to employees is calculated through the use of option
pricing models, even though such models were developed to estimate the fair
value of freely tradable, fully transferable options without vesting
restrictions, which significantly differ
(page 34)
from the Company's stock option awards. These models also require subjective
assumptions, including future stock price volatility and expected time to
exercise, which greatly affect the calculated values. The Company's calculations
were made using the Black-Scholes option pricing model with the following
weighted average assumptions: seven to nine years expected life; stock
volatility of 31% in 1999, 1998 and 1997; risk-free interest rates of 5.79% in
1999, 5.26% in 1998 and 6.29% in 1997; and no dividends during the expected
term.
The Company's calculations are based on a single option valuation approach and
forfeitures are recognized as they occur. However, the impact of outstanding
non-vested stock options granted prior to 1995 has been excluded from the pro
forma calculation; accordingly, the pro forma results presented below are not
indicative of future period pro forma results. Had compensation cost for
Safeway's stock option plans been determined based on the fair value at the
grant date for awards in 1999, 1998 and 1997, consistent with the provisions of
SFAS No. 123, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:
<PAGE> 39
(page 34)
<TABLE>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net income (in millions):
As reported $ 970.9 $ 806.7 $ 557.4
Pro forma 951.5 794.8 553.5
Basic earnings per share:
As reported $ 1.95 $ 1.67 $ 1.21
Pro forma 1.91 1.65 1.20
Diluted earnings per share:
As reported $ 1.88 $ 1.59 $ 1.12
Pro forma 1.85 1.56 1.11
</TABLE>
Note G: Taxes on Income
The components of income tax expense are as follows (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ 333.7 $ 398.8 $ 303.6
State 62.3 80.0 57.5
Foreign 62.4 52.0 37.8
-------- -------- --------
458.4 530.8 398.9
-------- -------- --------
Deferred:
Federal 188.9 44.4 40.4
State 38.1 12.2 8.4
Foreign 17.7 2.8 7.1
-------- -------- --------
244.7 59.4 55.9
-------- -------- --------
$ 703.1 $ 590.2 $ 454.8
======== ======== ========
</TABLE>
Extraordinary losses are presented net of related tax benefits. Therefore, 1997
income tax expense excludes the $41.1 million tax benefit on an extraordinary
loss related to the early retirement of debt. Tax benefits from the exercise of
employee stock options of $77.0 million in 1999, $85.2 million in 1998 and $42.4
million in 1997 were credited directly to paid-in capital and, therefore, are
excluded from income tax expense.
The reconciliation of the provision for income taxes at the U.S. federal
statutory income tax rate to the Company's income taxes is as follows (dollars
in millions):
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Statutory rate 35% 35% 35%
Income tax expense using
federal statutory rate $ 585.9 $ 488.9 $ 376.7
State taxes on income net
of federal benefit 65.2 59.9 42.8
Taxes provided on equity in
earnings of unconsolidated
affiliates at rates below
the statutory rate (12.1) (10.0) (9.4)
Taxes on foreign earnings not
permanently reinvested 8.3 7.9 8.9
Nondeductible expenses
and amortization 32.9 17.6 13.6
Difference between
statutory rate and
foreign effective rate 16.6 11.1 10.6
Other accruals 6.3 14.8 11.6
-------- -------- --------
$ 703.1 $ 590.2 $ 454.8
======== ======== ========
</TABLE>
<PAGE> 40
(page 34)
Significant components of the Company's net deferred tax liability at year-end
were as follows (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Deferred tax assets:
Workers' compensation
and other claims $ 144.7 $ 158.5 $ 138.8
Accruals not currently
deductible 111.3 106.6 80.3
Accrued claims and
other liabilities 28.9 48.0 48.8
Employee benefits 46.1 34.7 18.4
U.S. operating loss
carryforward -- 12.1 --
Other assets 42.7 51.5 14.6
-------- -------- --------
$ 373.7 $ 411.4 $ 300.9
======== ======== ========
Deferred tax liabilities:
Property $ (387.8) $ (315.7) $ (280.8)
Prepaid pension costs (165.4) (166.4) (161.3)
LIFO inventory reserves (171.3) (125.7) (106.0)
Investments in
unconsolidated affiliates (5.8) (16.7) (15.3)
Cumulative translation
adjustments (4.9) (3.8) (16.2)
Other liabilities (17.6) -- (18.3)
-------- -------- --------
(752.8) (628.3) (597.9)
-------- -------- --------
Net deferred tax liability $ (379.1) $ (216.9) $ (297.0)
======== ======== ========
</TABLE>
(page 35)
Note H: Employee Benefit Plans and Collective Bargaining Agreements
Retirement Plans.
The Company maintains defined benefit, non-contributory retirement plans for
substantially all of its employees not participating in multi-employer pension
plans.
In connection with the Randall's Acquisition and the Vons Merger, the Company
assumed the obligations of Randall's and Vons' retirement plans. The actuarial
assumptions for the existing Randall's and Vons retirement plans are comparable
to the existing plans of the Company. Randall's and Vons' retirement plans have
been combined with Safeway's for financial statement presentation.
The following tables provide a reconciliation of the changes in the retirement
plans' benefit obligation and fair value of assets over the two-year period
ending January 1, 2000 and a statement of the funded status as of year-end 1999
and 1998 (in millions):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Change in benefit obligation:
Beginning balance $ 1,165.7 $ 1,056.8
Service cost 54.4 52.5
Interest cost 81.6 69.7
Plan amendments 17.5 18.2
Actuarial (gain) loss (129.4) 65.1
Acquisition of Randall's 28.1 --
Benefit payments (87.3) (79.8)
Change in assumption (23.4) (0.5)
Currency translation adjustment 12.5 (16.3)
---------- ----------
Ending balance $ 1,119.7 $ 1,165.7
========== ==========
</TABLE>
<PAGE> 41
(page 35)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Change in fair value of plan assets:
Beginning balance $ 1,766.1 $ 1,662.6
Actual return on plan assets 432.4 193.2
Acquisition of Randall's 27.6 --
Employer contributions 0.9 6.8
Benefit payments (87.3) (79.8)
Currency translation adjustment 13.7 (16.7)
---------- ----------
Ending balance $ 2,153.4 $ 1,766.1
========== ==========
</TABLE>
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Funded status:
Fair value of plan assets $ 2,153.4 $ 1,766.1
Projected benefit obligation (1,119.7) (1,165.7)
---------- ----------
Funded status 1,033.7 600.4
Adjustment for difference in book
and tax basis of assets (165.1) (165.1)
Unamortized prior service cost 97.2 95.5
Unrecognized gain (560.2) (161.2)
---------- ----------
Prepaid pension cost $ 405.6 $ 369.6
========== ==========
</TABLE>
The following table provides the components of 1999, 1998 and 1997 net pension
income for the retirement plans (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Estimated return on assets $ 162.7 $ 141.5 $ 118.3
Service cost (54.4) (52.5) (42.5)
Interest cost (81.6) (69.7) (60.1)
Amortization of prior
service cost (15.4) (14.3) (11.6)
Amortization of
unrecognized gains 23.8 13.3 --
--------- --------- ---------
Net pension income $ 35.1 $ 18.3 $ 4.1
========= ========= =========
</TABLE>
Prior service costs are amortized on a straight-line basis over the average
remaining service period of active participants. Actuarial gains and losses are
amortized over the average remaining service life of active participants when
the accumulation of such gains and losses exceeds 10% of the greater of the
projected benefit obligation and the fair value of plan assets.
The actuarial assumptions used to determine year-end plan status were as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Discount rate used to
determine the projected
benefit obligation:
United States Plans 7.8% 6.5% 7.0%
Canadian Plan 7.5 6.3 6.3
Combined weighted
average rate 7.7 6.5 6.8
Expected return on plan assets:
United States Plan 9.0% 9.0% 9.0%
Canadian Plans 8.0 8.0 8.0
Rate of compensation increase:
</TABLE>
<PAGE> 42
(page 35)
<TABLE>
<S> <C> <C> <C>
United States Plan 5.0% 5.0% 5.0%
Canadian Plans 5.0 4.5 4.5
</TABLE>
(page 36)
Retirement Restoration Plan
The Retirement Restoration Plan provides death benefits and supplemental income
payments for senior executives after retirement. The Company recognized expense
of $5.4 million in 1999, $5.0 million in 1998 and $4.3 million in 1997. The
aggregate projected benefit obligation of the Retirement Restoration Plan was
approximately $48.4 million at year-end 1999 and $53.8 million at year-end 1998.
Multi-Employer Pension Plans
Safeway participates in various multi-employer pension plans, covering virtually
all Company employees not covered under the Company's non-contributory pension
plans, pursuant to agreements between the Company and employee bargaining units
which are members of such plans. These plans are generally defined benefit
plans; however, in many cases, specific benefit levels are not negotiated with
or known by the employer-contributors. Contributions of $144 million in 1999,
$119 million in 1998 and $130 million in 1997 were made and charged to expense.
Under U.S. legislation regarding such pension plans, a company is required to
continue funding its proportionate share of a plan's unfunded vested benefits in
the event of withdrawal (as defined by the legislation) from a plan or plan
termination. Safeway participates in a number of these pension plans, and the
potential obligation as a participant in these plans may be significant. The
information required to determine the total amount of this contingent
obligation, as well as the total amount of accumulated benefits and net assets
of such plans, is not readily available. During 1988 and 1987, the Company sold
certain operations. In most cases, the party acquiring the operation agreed to
continue making contributions to the plans. Safeway is relieved of the
obligations related to these sold operations to the extent the acquiring parties
continue to make contributions. Whether such sales could result in withdrawal
under ERISA and, if so, whether such withdrawals could result in liability to
the Company, is not determinable at this time.
Collective Bargaining Agreements
At year-end 1999, Safeway had more than 193,000 full and part-time employees.
Approximately 90% of Safeway's employees in the United States and Canada are
covered by collective bargaining agreements negotiated with local unions
affiliated with one of 12 different international unions. There are
approximately 400 such agreements, typically having three-year terms, with some
agreements having terms up to five years. Accordingly, Safeway negotiates a
significant number of these agreements every year.
Note I: Investment in Unconsolidated Affiliates
At year-end 1999, Safeway's investment in unconsolidated affiliate consists of a
49% ownership interest in Casa Ley, which operates 86 food and general
merchandise stores in western Mexico. Income from Safeway's equity investment in
Casa Ley, recorded on a one-quarter delay basis, was $34.5 million in 1999,
$28.5 million in 1998 and $22.7 million in 1997. Through April 8, 1997, Safeway
also owned 15.1 million common shares, or 34.4% of the total shares outstanding
of Vons. Vons is now a wholly-owned subsidiary of Safeway, and as of the
beginning of the second quarter of 1997, Safeway's consolidated financial
statements include Vons' financial position and results of operations. Safeway's
share of Vons' earnings was $12.2 million for the first quarter of 1997.
Note J: Related-Party Transactions
The Company holds an 80% interest in Property Development Associates ("PDA"), a
partnership formed in 1987 with a company controlled by an affiliate of KKR, to
<PAGE> 43
(page 36)
purchase, manage and dispose of certain Safeway facilities which are no longer
used in the retail grocery business. The financial statements of PDA are
consolidated with those of the Company, and a minority interest of $19.9 million
and $23.9 million at year-end 1999 and 1998, respectively, is included in
accrued claims and other liabilities in the accompanying consolidated balance
sheets. Safeway paid PDA $2.7 million in 1999, $1.9 million in 1998 and $1.5
million in 1997 for reimbursement of expenses related to management and real
estate services provided by PDA.
(page 37)
Note K: Commitments and Contingencies
Legal Matters In July 1988, there was a major fire at the Company's dry grocery
warehouse in Richmond, California. Through February 10, 2000, in excess of
126,000 claims for personal injury and property damage arising from the fire
have been settled for an aggregate amount of approximately $123.9 million. The
Company's loss as a result of the fire damage to its property and settlement of
the above claims was substantially covered by insurance.
As of February 10, 2000, there were still pending approximately 2,600 claims
against the Company for personal injury (including punitive damages), and
approximately 290 separate active claims for property damage, arising from the
smoke, ash and embers generated by the fire. A substantial percentage of these
claims have been asserted in lawsuits against the Company filed in the Superior
Court for Alameda County, California. There can be no assurance that the pending
claims will be settled or otherwise disposed of for amounts and on terms
comparable to those settled to date.
On July 10, 1998, Safeway was served with a new case filed in the Superior Court
for Alameda County, California, authored by the same attorney who had filed a
previous class action relating to the Richmond warehouse fire that was dismissed
and affirmed on appeal. The July 1998 action, as amended, alleges that Safeway
committed fraud and breach of contract in connection with settlements involving
the Richmond warehouse fire. The case purports to be filed on behalf of
approximately 21,500 individual plaintiffs. Plaintiffs seek damages according to
proof, plus interest and punitive damages. On March 5, 1999, the court sustained
the Company's demurrer to plaintiffs' fraud claim. On May 20, 1999, the court
granted the Company's motion for judgment on the pleadings on plaintiffs'
contract claim. Plaintiffs filed a notice of appeal, and the appeal is pending.
The Company believes that the claims in this case are without merit and that the
judgment of the trial court will be affirmed.
The Company has received notice from its insurance carrier denying coverage for
the claims asserted in the two purported class action suits described above.
Safeway strongly disagrees with the insurance carrier's denial of coverage.
Safeway continues to believe that coverage under its insurance policy will be
sufficient and available for resolution of all remaining personal injury and
property damage claims arising out of the fire.
On September 13, 1996, a class action lawsuit entitled McCampbell, et al. v.
Ralphs Grocery Company, et al., was filed in the Superior Court of San Diego
County, California against Vons and two other grocery store chains operating in
southern California. The complaint alleged, among other things, that Vons and
the other defendants conspired to fix the retail price of eggs in southern
California, in violation of the California Cartwright Act, and that they engaged
in unfair competition. The court subsequently certified a class of retail
purchasers of white chicken eggs by the dozen in southern California from
September 1992 to October 1997. A jury trial commenced in July 1999, and
plaintiffs asked the jury to award damages against Vons (before trebling) of
$36.8 million. On September 2, 1999, the jury returned a verdict in favor of
Vons and the other defendants. On October 15, 1999, the court denied plaintiffs'
<PAGE> 44
(page 37)
motion for judgment notwithstanding the verdict or a new trial, and also denied
their motion for judgment on the unfair competition claim. On November 1, 1999,
judgment was entered in favor of defendants, and plaintiffs appealed. The appeal
is pending. The Company believes that plaintiffs have no meritorious grounds for
an appeal and expects the judgment to be affirmed.
Safeway acquired Dominick's in November 1998. At that time, there was pending
against Dominick's a class action lawsuit that had been filed in the U.S.
District Court for the Northern District of Illinois in March 1995, alleging
gender discrimination and seeking compensatory and punitive damages in an
unspecified amount. The lawsuit also alleged national origin discrimination, but
the court denied plaintiffs' class certification motion as to those claims. On
December 20, 1999, the court granted the parties' request for preliminary
approval of a proposed settlement agreement that provides for the Company, while
denying all liability, to implement job posting programs and other similar forms
of relief, to establish a $7.7 million settlement fund to be available for
distribution to eligible class members, and to pay attorneys' fees to current
and former class counsel in the maximum amount of $2.2 million. These amounts
are included in Other Accrued Liabilities at year-end 1999. The court has
scheduled a final fairness hearing on the proposed settlement for March 31,
2000.
(page 38)
In April 1999, a lawsuit entitled Sanders, et al. v. Lucky Stores, Inc., et al.
was filed in the California Superior Court, San Francisco County, against the
Company and five other retail grocery store operations. The complaint alleges,
among other things, that the Company conspired with the other defendants to fix
the retail price of milk in six San Francisco Bay Area counties in violation of
the California Cartwright Act and the California Unfair Competition Act. The
plaintiffs purport to bring the lawsuit as a class action on behalf of all
persons who reside, and who purchased milk from the defendants, in the Bay Area
counties from April 1995 to the present. The complaint seeks unspecified
damages, an injunction enjoining the defendants from fixing the price of milk
and restitution of profits earned through the allegedly unlawful practices. If
damages were to be awarded, they may be trebled under the applicable statute. On
November 5, 1999, the defendants filed a motion for summary judgment.
Subsequently, plaintiffs began entering into settlement agreements with various
defendants. On February 9, 2000, plaintiffs and the Company agreed in principle
to a settlement whereby the action would be dismissed and the Company, without
admitting liability, would pay $15,000 in cash and make $17,500 worth of product
donations to local food banks. The settlement agreement must be documented and
submitted to the court for approval.
Commitments
The Company has commitments under contracts for the purchase of property and
equipment and for the construction of buildings. Portions of such contracts not
completed at year-end are not reflected in the consolidated financial
statements. These unrecorded commitments were $94.2 million at year-end 1999.
Note L: Segments
Safeway's retail grocery business, which represents more than 98% of
consolidated sales and operates in the United States and Canada, is its only
reportable segment.
The following table presents information about the Company by geographic area
(in millions):
<TABLE>
<CAPTION>
U.S. Canada Total
---- ------ -----
<S> <C> <C> <C>
1999
Sales $ 25,535.3 $ 3,324.6 $ 28,859.9
</TABLE>
<PAGE> 45
(page 38)
<TABLE>
<S> <C> <C> <C>
Operating profit 1,815.4 182.5 1,997.9
Income before income taxes 1,499.0 175.0 1,674.0
Total assets 13,960.2 940.1 14,900.3
1998
Sales $ 21,241.7 $ 3,242.5 $ 24,484.2
Operating profit 1,467.3 134.4 1,601.7
Income before income taxes 1,272.3 124.6 1,396.9
Total assets 10,541.9 847.7 11,389.6
1997
Sales $ 19,075.9 $ 3,407.9 $ 22,483.8
Operating profit 1,169.6 110.1 1,279.7
Income before income taxes and extraordinary loss 978.4 97.9 1,076.3
Total assets 7,613.7 880.2 8,493.9
</TABLE>
(page 39)
Note M: Computation of Earnings Per Share
<TABLE>
<CAPTION>
1999 1998 1997
(in millions, except -------------------- -------------------- ---------------------
per-share amounts) Diluted Basic Diluted Basic Diluted Basic
<S> <C> <C> <C> <C> <C> <C>
Income before extraordinary loss $ 970.9 $ 970.9 $ 806.7 $ 806.7 $ 621.5 $ 621.5
Extraordinary loss -- -- -- -- (64.1) (64.1)
Net income $ 970.9 $ 970.9 $ 806.7 $ 806.7 $ 557.4 $ 557.4
======= ======== ======== ======== ======== ========
Weighted average common
shares outstanding 498.6 498.6 482.8 482.8 462.3 462.3
======== ======== ========
Common share equivalents 16.8 26.0 35.4
Weighted average shares outstanding 515.4 508.8 497.7
======= ======== ========
Earnings per common share
and common share equivalent:
Income before extraordinary loss $ 1.88 $ 1.95 $ 1.59 $ 1.67 $ 1.25 $ 1.35
Extraordinary loss -- -- -- -- (0.13) (0.14)
------- -------- -------- -------- -------- --------
Net income $ 1.88 $ 1.95 $ 1.59 $ 1.67 $ 1.12 $ 1.21
======= ======== ======== ======== ======== ========
Calculation of common share
equivalents:
Options and warrants to purchase
common shares 37.7 48.0 58.6
Common shares assumed purchased
with potential proceeds (20.9) (22.0) (23.2)
Common share equivalents 16.8 26.0 35.4
======= ======== ========
Calculation of common shares assumed
</TABLE>
<PAGE> 46
(page 39)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
purchased with potential
proceeds:
Potential proceeds from exercise
of options and warrants to
purchase common shares $986.8 $913.9 $597.4
Common stock price used under
the treasury stock method $ 47.26 $ 41.60 $ 25.75
Common shares assumed purchased
with potential proceeds 20.9 22.0 23.2
</TABLE>
(page 40)
Note N: Quarterly Information (Unaudited)
The summarized quarterly financial data presented below reflect all adjustments
which, in the opinion of management, are of a normal and recurring nature
necessary to present fairly the results of operations for the periods presented.
<TABLE>
<CAPTION>
Last 16 Third 12 Second 12 First 12 52
(in millions, except per-share amounts) Weeks Weeks Weeks Weeks Weeks
- --------------------------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
1999
Sales $ 28,859.9 $ 9,934.7 $ 6,475.0 $ 6,337.0 $ 6,113.2
Gross profit 8,510.7 2,875.3 1,918.8 1,895.0 1,821.6
Operating profit 1,997.9 649.9 453.3 469.6 425.2
Income before income taxes 1,674.0 526.4 385.2 401.4 361.1
Net income 970.9 305.3 223.4 236.4 205.8
Earnings per share:
Basic $ 1.95 $ 0.60 $ 0.45 $ 0.48 $ 0.42
Diluted 1.88 0.59 0.44 0.46 0.40
Price range, New York Stock Exchange 62 7/16 46 7/4 55 56 62 7/16
to 29 5/16 to 29 5/16 to 42 11/16 to 43 15/16 to 50 5/16
</TABLE>
<TABLE>
<CAPTION>
Last 16 Third 12 Second 12 First 12 52
(in millions, except per-share amounts) Weeks Weeks Weeks Weeks Weeks
<S> <C> <C> <C> <C> <C>
1998
Sales $ 24,484.2 $ 7,922.6 $ 5,589.0 $ 5,583.3 $ 5,389.3
Gross profit 7,124.5 2,288.1 1,650.1 1,622.2 1,564.1
Operating profit 1,601.7 511.8 377.8 380.9 331.2
Income before income taxes 1,396.9 441.6 335.5 334.4 285.4
Net income 806.7 255.0 193.7 193.2 164.8
Earnings per share:
Basic $ 1.67 $ 0.52 $ 0.40 $ 0.40 $ 0.34
Diluted 1.59 0.50 0.38 0.38 0.33
Price range, New York Stock Exchange 61 3/8 61 3/8 46 3/4 40 7/16 37 1/4
to 30 1/2 to 37 5/8 to 37 1/4 to 34 to 30 1/2
</TABLE>
<PAGE> 47
(page 41)
Management's Report
FINANCIAL STATEMENTS Safeway Inc. is responsible for the preparation, integrity
and fair presentation of its published financial statements. The accompanying
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles and necessarily include amounts that
are based on judgments and estimates made by management. Safeway also prepared
the other information included in the annual report and is responsible for its
accuracy and consistency with the financial statements.
The financial statements have been audited by Deloitte & Touche LLP, independent
auditors, which was given unrestricted access to all financial records and
related data, including minutes of all meetings of stockholders, the Board of
Directors, and committees of the Board. Safeway believes that all
representations made to the independent auditors during their audit were valid
and appropriate. The report of Deloitte & Touche LLP is presented below.
INTERNAL CONTROL SYSTEM Safeway maintains a system of internal control over
financial reporting, which is designed to provide reasonable assurance to
management and the Board of Directors regarding the preparation of reliable
published financial statements. The system includes a documented organizational
structure and division of responsibility; established policies and procedures
including a code of conduct to foster a strong ethical climate, which are
communicated throughout Safeway; and the careful selection, training and
development of employees. Internal auditors monitor the operation of the
internal control system and report findings and recommendations to management
and the Board, and corrective actions are taken to address control deficiencies
and other opportunities for improving the system as they are identified. The
Board, operating through its Audit Committee, which is composed entirely of
outside directors, provides oversight to the financial reporting process.
There are inherent limitations in the effectiveness of any system of internal
control, including the possibility of circumvention or overriding of controls.
Accordingly, even an effective internal control system can provide only
reasonable assurance with respect to financial statement preparation.
Furthermore, the effectiveness of an internal control system can change with
circumstances. As of January 1, 2000, Safeway believes its system of internal
controls over financial reporting was effective for providing reliable
financial statements.
/s/ Steven A. Burd /s/ David G. Weed
Chairman, President and Executive Vice President
Chief Executive Officer and Chief Financial Officer
<PAGE> 48
(page 41)
Independent Auditors' Report
The Board of Directors and
Stockholders of Safeway Inc:
We have audited the accompanying consolidated balance sheets of Safeway Inc. and
subsidiaries as of January 1, 2000 and January 2, 1999, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three fiscal years in the period ended January 1, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Safeway Inc. and subsidiaries as
of January 1, 2000 and January 2, 1999, and the results of their operations and
their cash flows for each of the three fiscal years in the period ended January
1, 2000 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
San Francisco, California
February 25, 2000
<PAGE> 1
EXHIBIT 22.1
SAFEWAY INC.
SCHEDULE OF SUBSIDIARIES
As of January 1, 2000
Registrant: Safeway Inc.
Subsidiaries of Registrant (Tier I subsidiaries):
Safeway Canada Holdings, Inc.
Safeway Australia Holdings, Inc.
Safeway Leasing, Inc.
Oakland Property Brokerage, Inc.
Glencourt, Inc.
Milford Insurance Ltd.
Milford Insurance Brokerage Services, Inc.
Pak 'N Save, Inc.
Safeway Trucking, Inc.
Photo Acquisition I, Inc.
Photo Acquisition II, Inc.
Safeway Southern California, Inc.
Safeway Denver, Inc.
Safeway Richmond, Inc.
Safeway Dallas, Inc.
Safeway Supply, Inc.
Safeway Corporate, Inc.
Safeway Stores 42, Inc.
Safeway Stores 43, Inc.
Safeway Stores 64, Inc.
Safeway Claim Services, Inc.
Safeway Stores, Incorporated
Safeway Stores 99, Inc.
Safeway SELECT Gift Source, Inc.
Vons REIT, Inc.
Taylor Properties, Inc.
SSI - AK Holdings, Inc.
Randall's Food Markets, Inc.
SUBSIDIARIES OF TIER I SUBSIDIARIES (Tier II subsidiaries):
Subsidiaries of Safeway Southern California, Inc.:
Safeway Stores 18, Inc.
Safeway Stores 26, Inc.
Safeway Stores 28, Inc.
Safeway Stores 31, Inc.
The Vons Companies, Inc.
Subsidiaries of Safeway Denver, Inc.
Safeway Stores 44, Inc.
Safeway Stores 45, Inc.
Safeway Stores 46, Inc.
Safeway Stores 47, Inc.
Safeway Stores 48, Inc.
Safeway Stores 49, Inc.
Safeway Stores 50, Inc.
Subsidiaries of Safeway Richmond, Inc.
Safeway Stores 58, Inc.
Safeway Stores 59, Inc.
Subsidiaries of Safeway Corporate, Inc.
Safeway Stores 67, Inc.
Safeway Stores 68, Inc.
Safeway Stores 69, Inc.
Safeway Stores 70, Inc.
Subsidiaries of Safeway Supply, Inc.
Safeway Stores 71, Inc.
Safeway Stores 72, Inc.
Safeway Stores 73, Inc.
Safeway Stores 74, Inc.
Safeway Stores 75, Inc.
Safeway Stores 76, Inc.
Safeway Stores 77, Inc.
Consolidated Procurement Services, Inc.
(continued)
<PAGE> 2
Subsidiaries of Safeway Dallas, Inc.:
Safeway Stores 78, Inc.
Safeway Stores 79, Inc.
Safeway Stores 80, Inc.
SMC Rx, Inc.
Safeway Stores 82, Inc.
Safeway Stores 85, Inc.
Safeway Stores 86, Inc.
Safeway Stores 87, Inc.
Safeway Stores 88, Inc.
Safeway Stores 89, Inc.
Safeway Stores 90, Inc.
Safeway Stores 91, Inc.
Safeway Stores 92, Inc.
Safeway Stores 96, Inc.
Safeway Stores 97, Inc.
Safeway Stores 98, Inc.
Subsidiaries of Photo Acquisition I, Inc.:
Everett Realty Advisors, Inc.
Subsidiary of SSI - AK Holdings, Inc.
Carr-Gottstein Foods Co.
Subsidiaries of Randall's Food Markets, Inc.
Randall's Properties, Inc.
Randall's Food & Drugs, Inc.
SUBSIDIARIES OF TIER I SUBSIDIARIES (Non-tier Subsidiaries):
Subsidiaries of Safeway Canada Holdings, Inc.:
Safeway New Canada, Inc. and its subsidiary
Safeway Foreign Sales Ltd. and its subsidiary:
Canada Safeway Limited and its subsidiary:
Safeway International Finance Corp. of Barbados Ltd.
Subsidiary of Vons REIT, Inc.:
Dominick's Supermarkets, Inc.
Subsidiaries of Dominick's Supermarkets, Inc.:
Dominick's Finer Foods, Inc.
Blackhawk Properties, Inc.
Blackhawk Developments, Inc.
Subsidiaries of Dominick's Finer Foods, Inc.:
DFF Equipment Leasing Co.
Dominick's Finer Foods, Inc. of Illinois
The Dominick's/Omni Foundation (non-profit)
Dodi Hazelcrest, Inc.
Kohl's of Bloomingdale, Inc.
Save-It Discount Foods, Inc.
SUBSIDIARIES OF TIER II SUBSIDIARIES (Tier III Subsidiaries):
Subsidiary of Safeway Stores 59, Inc.:
Safelease, Inc.
Subsidiary of The Vons Companies, Inc.:
Vons Food Services, Inc.
Subsidiaries of Carr-Gottstein Foods Co.
AOL Express, Inc.
APR Forwarders, Inc.
Oaken Keg Spirit Shops, Inc.
Alaska Advertisers, Inc.
CGF Properties, Inc.
Seldovia Mart, Inc.
Subsidiaries of Randall's Food & Drugs, Inc.
Food Depot, Inc.
Gooch Packing Company, Inc.
American Community Stores Corp.
Randall's Management Co. Inc.
Randall's Beverage Co., Inc.
19 companies are not listed as they are maintained solely for the purpose of
holding licenses.
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference of our report dated February 25,
2000, included and incorporated by reference in the Annual Report on Form 10-K
of Safeway Inc. and subsidiaries for the fiscal year ended January 1, 2000, in
the following Registration Statements of Safeway Inc. and subsidiaries:
No. 33-36753 on Form S-8 regarding the Safeway Inc. Outside Director Equity
Purchase Plan,
No. 33-37207 on Form S-8 regarding the Profit Sharing Plan of Safeway Inc.
and its United States Subsidiaries,
No. 33-42232 on Forms S-3 and S-8 regarding the Amended and Restated Stock
Option and Incentive Plan for Key Employees of Safeway Inc.,
No. 33-48884 on Form S-8 regarding the Amended and Restated Stock Option and
Incentive Plan for Key Employees of Safeway Inc.,
No. 33-51119 on Form S-8 regarding the Stock Option Plan for Consultants of
Safeway Inc.,
No. 33-54581 on Form S-8 regarding the Employee Stock Purchase Plan of
Safeway Inc.,
No. 33-63803 on Form S-8 regarding the 1994 Amended and Restated Stock
Option and Incentive Plan for Key Employees of Safeway Inc.,
No. 333-13677 on Form S-8 regarding the 1987 Plan for Consultants of Safeway
Stores, Inc.,
No. 333-22837 on Form S-8 regarding The Vons Companies, Inc. Management
Stock Option Plan,
No. 333-65903 on Form S-3 regarding Debt Securities,
No. 333-84201 on Form S-3 regarding Debt Securities,
No. 333-67575 on Form S-8 regarding the 1996 Equity Participation Plan of
Dominick's Supermarkets, Inc. and the 1995 Amended and Restricted
Stock Option Plan of Dominick's Supermarkets, Inc.,
No. 333-84749 on Form S-8 regarding Randall's Food Markets, Inc. Stock
Option Plan and Restricted Stock Plan and Amended and Restated 1997
Stock Purchase and Option Plan for Key Employees for Randall's Food
Markets, Inc. and Subsidiaries,
No. 333-87289 on Form S-8 regarding the 1999 Amended and Restated Equity
Participation Plan,
No. 333-91975 on Form S-8 regarding Randall's Food Markets, Inc. ESOP/401(k)
Savings Plan and Dominick's Finer Foods, Inc. 401(k) Retirement
Plan for Union Employees, as Amended, and Dominick's Finer Foods,
Inc. 401(k) Retirement Plan for Non-Union Employees, as Amended,
and
No. 333-30820 on Form S-8 regarding the Safeway Executive Deferred
Compensation Plan and Canada Safeway Limited Executive Deferred
Compensation Plan.
DELOITTE & TOUCHE LLP
March 30, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND THE CONSOLIDATED STATEMENTS OF INCOME ON PAGES
19 THROUGH 21 OF THE COMPANY'S ANNUAL REPORT TO STOCKHOLDERS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JAN-03-1999
<PERIOD-END> JAN-01-2000
<CASH> 106,200
<SECURITIES> 0
<RECEIVABLES> 292,200
<ALLOWANCES> 0
<INVENTORY> 2,444,900
<CURRENT-ASSETS> 3,052,100
<PP&E> 9,726,600
<DEPRECIATION> 3,281,900
<TOTAL-ASSETS> 14,900,300
<CURRENT-LIABILITIES> 3,582,600
<BONDS> 6,357,400
0
0
<COMMON> 5,600
<OTHER-SE> 4,050,200
<TOTAL-LIABILITY-AND-EQUITY> 14,900,300
<SALES> 28,859,900
<TOTAL-REVENUES> 28,859,900
<CGS> (20,349,200)
<TOTAL-COSTS> (20,349,200)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (362,200)
<INCOME-PRETAX> 1,674,000
<INCOME-TAX> (703,100)
<INCOME-CONTINUING> 970,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 970,900
<EPS-BASIC> 1.95
<EPS-DILUTED> 1.88
</TABLE>
