<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 14a-11(c) or 14a-12
Safeway Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE> 2
[SAFEWAY LOGO]
SAFEWAY INC.
5918 STONERIDGE MALL ROAD
PLEASANTON, CA 94588-3229
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Safeway
Inc., a Delaware corporation (the "Company"), will be held at the San Ramon
Marriott Hotel, 2600 Bishop Drive, San Ramon, California on Tuesday, May 9, 2000
at 1:30 p.m. for the following purposes:
1. To elect three directors of the Company to serve for a term of three
years and until their successors are elected and have qualified;
2. To consider and vote upon a stockholder proposal requesting the Board of
Directors to adopt a policy of removing genetically engineered foods
from the Company's private label products, which proposal is opposed by
the Board of Directors;
3. To consider and vote upon a stockholder proposal requesting the Board of
Directors to take the necessary steps to provide for cumulative voting,
which proposal is opposed by the Board of Directors;
4. To ratify the appointment of Deloitte & Touche LLP as independent
auditors for fiscal year 2000; and
5. To transact such other business as may properly come before the meeting
and any adjournments thereof.
Only stockholders of record at the close of business on March 14, 2000 will
be entitled to notice of and to vote at the Annual Meeting and at any and all
adjournments thereof. A complete list of stockholders entitled to vote at the
Annual Meeting shall be open to the examination of any stockholder, for any
purpose germane to the Annual Meeting, during ordinary business hours for at
least 10 days prior to the Annual Meeting, at the San Ramon Marriott Hotel, 2600
Bishop Drive, San Ramon, California.
Whether or not you plan to attend the Annual Meeting in person, in order to
ensure your representation, please vote by completing, signing, dating and
promptly returning the enclosed proxy card by mail. A return envelope, which
requires no postage if mailed in the United States, has been provided for your
use. If you attend the Annual Meeting and inform the Secretary of the Company in
writing that you wish to vote your shares in person, your proxy will not be
used.
By Order of the Board of Directors,
MICHAEL C. ROSS
Secretary
Pleasanton, California
Dated: March 28, 2000
<PAGE> 3
SAFEWAY INC.
5918 STONERIDGE MALL ROAD
PLEASANTON, CA 94588-3229
------------------------
PROXY STATEMENT
This Proxy Statement is furnished to the stockholders on behalf of the
Board of Directors of Safeway Inc., a Delaware corporation ("Safeway" or the
"Company"), in connection with the solicitation by the Board of Directors of
proxies for use at the Annual Meeting of Stockholders of the Company, to be held
at the San Ramon Marriott Hotel, 2600 Bishop Drive, San Ramon, California on
Tuesday, May 9, 2000, at 1:30 p.m. and at any and all adjournments thereof. It
is anticipated that the mailing to stockholders of this Proxy Statement and the
enclosed proxy will commence on March 31, 2000.
Only stockholders of record at the close of business on March 14, 2000 will
be entitled to vote at the meeting. At the close of business on March 14, 2000
there were 494,604,443 issued and outstanding shares of Common Stock. A majority
of the issued and outstanding shares of Common Stock will constitute a quorum
for the transaction of business. Each share of Common Stock not in the treasury
is entitled to one vote. There is no provision in the Company's Restated
Certificate of Incorporation for cumulative voting.
If shares are not voted in person, they cannot be voted on your behalf
unless a signed proxy is given. Even if you expect to attend the Annual Meeting
in person, in order to ensure your representation, please vote by completing,
signing and dating the enclosed proxy and mailing it promptly in the enclosed
envelope. A stockholder giving a proxy pursuant to the present solicitation may
revoke it at any time before it is exercised by giving a subsequent proxy or by
delivering to the Secretary of the Company a written notice of revocation prior
to the voting of the proxy at the Annual Meeting. If you attend the Annual
Meeting and inform the Secretary of the Company in writing that you wish to vote
your shares in person, your proxy will not be used. If you receive two or more
proxy cards, please vote with respect to each in accordance with the procedures
described above to complete your representation. All shares represented by each
properly executed and unrevoked proxy, in the accompanying form, will be voted
unless the proxy is mutilated or otherwise received in such form or at such time
as to render it unusable.
Votes cast at the Annual Meeting will be tabulated by the persons appointed
by the Company to act as inspectors of election for the Annual Meeting. Shares
represented by proxies that reflect abstentions or "broker non-votes" (i.e.,
shares held by a broker or nominee which are represented at the meeting, but
with respect to which such broker or nominee is not empowered to vote on a
particular proposal) will be counted as shares that are present and entitled to
vote for purposes of determining the presence of a quorum. Directors will be
elected by a plurality of the shares voting, which means that abstentions and
broker non-votes will not affect the election of the candidates receiving the
plurality of votes. In accordance with the Company's Bylaws, for purposes of
determining the outcome of any other proposal as to which proxies reflect
abstentions or broker non-votes, shares represented by such proxies will be
treated as not present and not entitled to vote with respect to that proposal.
The cost of this solicitation will be borne by the Company. Solicitation
will be made by mail, by telecopy and telephone, and personally by a few
officers and regular employees of the Company who will not receive additional
compensation for solicitation. Brokers, nominees and fiduciaries will be
reimbursed for out-of-pocket expenses incurred in obtaining proxies or
authorizations from the beneficial owners of the Common Stock. In addition, the
Company has retained Georgeson Shareholder Communications Inc. to assist in the
solicitation for a fee of approximately $7,500 plus expenses.
The purpose of the meeting and the matters to be acted upon are set forth
in the foregoing attached Notice of Annual Meeting of Stockholders. As of the
date of this Proxy Statement, management knows of no other business which will
be presented for consideration at the Annual Meeting. However, if any such other
business shall properly come before the Annual Meeting, votes will be cast
pursuant to said proxies in respect of any such other business in accordance
with the best judgment of the persons acting under said proxies.
<PAGE> 4
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation and Bylaws provide that
the Board of Directors is divided into three classes. Each year the stockholders
are asked to elect the members of a class for a term of three years or less,
depending on the class to which the Board has assigned a director not previously
elected by the stockholders. If a quorum is present in person or by proxy, the
affirmative vote of a plurality of the voting power of the shares represented at
the Annual Meeting and entitled to vote will be sufficient to elect directors.
It is intended that the shares represented by proxies, in the accompanying
form, will be voted for the election of the three nominees named below unless
authority to so vote is withheld. All of the nominees have consented to being
named herein and to serve if elected. If any of them should become unavailable
prior to the Annual Meeting, the proxy will be voted for a substitute nominee or
nominees designated by the Board of Directors, or the number of directors may be
reduced accordingly.
The Board of Directors recommends the three nominees named below for
election as directors. The three directors will be elected to office for a
three-year term ending at the Annual Meeting in 2003 and until their successors
are elected and have qualified.
The following information, which has been provided by the directors, sets
forth for each of the nominees for election to the Board of Directors and for
each director whose term continues, such person's age and principal occupation
or employment during the past five years, the name of the corporation or other
organization, if any, in which such occupation or employment is or was carried
on and the period during which such person has served as a Safeway director.
2000 NOMINEES
James H. Greene, Jr., age 49, has been a member of the Board of Directors
since December 17, 1987. Mr. Greene is a General Partner of KKR Associates, L.P.
("KKR Associates") and was a General Partner of Kohlberg Kravis Roberts & Co.
("KKR") from January 1, 1993 until January 1, 1996 when he became a member of
the limited liability company which serves as the general partner of KKR. Mr.
Greene is also a director of Accuride Corporation, CAIS Internet Inc.,
Intermedia Communications, Inc. and Owens-Illinois, Inc.
Paul Hazen, age 58, has been a member of the Board of Directors since July
18, 1990. Mr. Hazen has been Chairman of Wells Fargo & Co. since January 1995.
He was Chief Executive Officer of Wells Fargo & Co. and of Wells Fargo Bank,
N.A., from January 1995 to November 1998. Mr. Hazen is also a director of
E.piphany, Inc., Phelps Dodge Corporation and Vodafone AirTouch PLC.
Hector Ley Lopez, age 52, has been nominated to become a director to serve
in the class of directors whose term will expire in 2003. For the past five
years he has been the General Director of Casa Ley S.A. de C.V. ("Casa Ley"),
which operates 86 food and general merchandise stores in western Mexico. Safeway
has a 49% ownership interest in Casa Ley.
CONTINUING DIRECTORS
Steven A. Burd, age 50, has been a member of the Board of Directors since
September 7, 1993 and has served as Chairman of the Board of Directors since May
12, 1998. He has been Chief Executive Officer of the Company since April 30,
1993 and President of the Company since October 26, 1992.
Robert I. MacDonnell, age 62, has been a member of the Board of Directors
since November 26, 1986. Mr. MacDonnell is a General Partner of KKR Associates
and was a General Partner of KKR until January 1, 1996 when he became a member
of the limited liability company which serves as the general partner of KKR. Mr.
MacDonnell is also a director of Owens-Illinois, Inc.
2
<PAGE> 5
Peter A. Magowan, age 57, has been a member of the Board of Directors since
November 26, 1986. He served as Chairman of the Board of Directors from November
26, 1986 to May 12, 1998. Mr. Magowan has been Managing General Partner and
President of the San Francisco Giants since 1993. Mr. Magowan is also a director
of Caterpillar, Inc. and DaimlerChrysler AG.
George R. Roberts, age 56, has been a member of the Board of Directors
since July 23, 1986. Mr. Roberts is a Founding Partner of KKR and KKR
Associates. Effective January 1, 1996, he became a managing member of the
limited liability company which serves as the general partner of KKR. Mr.
Roberts is also a director of Accuride Corporation, Amphenol Corporation,
Borden, Inc., The Boyd's Collection, Ltd., Evenflo Company Inc., IDEX
Corporation, KinderCare Learning Centers, Inc., KSL Recreation Corporation,
Owens-Illinois, Inc., PRIMEDIA Inc., and Spalding Holdings Corporation.
Rebecca A. Stirn, age 47, has been a member of the Board of Directors since
May 11, 1999 and is currently a business consultant. She was Vice President,
Sales and Marketing, North America, of Collagen Aesthetics, Inc. (formerly
Collagen Corporation) ("Collagen"), which develops and manufactures human tissue
treatment products, from January 1998 until the sale of Collagen in September
1999, and was Vice President, Global Marketing Strategy, of Collagen from
January 1996 to January 1998. She was a consultant from March 1995 to January
1996.
William Y. Tauscher, age 50, has been a member of the Board of Directors
since May 12, 1998. Mr. Tauscher has been Chief Executive Officer of MainStreet
USA Corporation ("MainStreet"), a newly formed marketing and technology
e-commerce venture, since January 2000. He was Chairman of the Board of Vanstar
Corporation ("Vanstar"), a technology service and networking company, from 1987,
and Chief Executive Officer of Vanstar from 1988, until its acquisition by
Inacom Corp. in February 1999. He was President of Vanstar from September 1988
to July 1995. Mr. Tauscher is also a director of Inacom Corp.
Mr. MacDonnell and Mr. Roberts are brothers-in-law.
Messrs. Burd, MacDonnell and Tauscher are in the class of directors whose
term will expire in 2001.
Messrs. Magowan and Roberts and Ms. Stirn are in the class of directors
whose term will expire in 2002.
Henry R. Kravis, whose term as director expires at the Annual Meeting, has
advised the Company that he will resign from the Board effective upon conclusion
of the Annual Meeting.
3
<PAGE> 6
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth certain information regarding the beneficial
ownership of Safeway's outstanding Common Stock as of March 14, 2000 by (i) each
of Safeway's directors and nominees who is a stockholder, (ii) the Company's
Chief Executive Officer, (iii) each of the Company's four other most highly
compensated executive officers who were serving as executive officers at the end
of fiscal 1999, (iv) all executive officers and directors of Safeway as a group
and (v) each person believed by Safeway to own beneficially more than 5% of its
outstanding shares of Common Stock. Except as indicated by the notes to the
following table, the holders listed below have sole voting power and investment
power over the shares beneficially held by them. The address of KKR Associates,
KKR 1996 GP L.L.C. ("KKR 1996 GP"), SSI Equity Associates, L.P. ("SSI Equity
Associates") and SSI Partners, L.P. ("SSI Partners") is 9 West 57th Street, New
York, New York 10019.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENTAGE OF
NAME OF BENEFICIAL OWNER OWNED(1) CLASS(1)
------------------------ ---------------- -------------
<S> <C> <C>
KKR Associates, L.P.(2)................................... 30,375,647 6.1
KKR 1996 GP L.L.C.(3)..................................... 8,027,964 1.6
James H. Greene, Jr.(4)................................. 148,918 *
Henry R. Kravis(5)...................................... 4,516 *
Robert I. MacDonnell(6)................................. 85,504 *
George R. Roberts(7).................................... 4,516 *
SSI Equity Associates, L.P.(8)............................ 6,429,533 1.3
Paul Hazen................................................ 300,000 *
Peter A. Magowan.......................................... 2,752,352 *
Rebecca A. Stirn.......................................... 3,457 *
William Y. Tauscher(9).................................... 6,700 *
Steven A. Burd(10)........................................ 4,919,317 *
Kenneth W. Oder(10)(11)................................... 2,177,249 *
David G. Weed(10)......................................... 353,300 *
Larree M. Renda (10)...................................... 411,924 *
Michael C. Ross(10)....................................... 799,374 *
All executive officers and directors as a group
(19 persons, excluding Messrs. Greene, Kravis
MacDonnell and Roberts)(9)(10).......................... 13,561,041 2.7
FMR Corp.(12)............................................. 51,603,406 10.4
</TABLE>
- ---------------
* Less than 1%
(1) For purposes of this table, a person or a group of persons is deemed to
have "beneficial ownership" as of a given date of any shares which such
person has the right to acquire within 60 days after such date. For
purposes of computing the percentage of outstanding shares held by each
person or group of persons named above on a given date, any shares which
such person or persons has the right to acquire within 60 days after such
date are deemed to be outstanding, but are not deemed to be outstanding for
the purpose of computing the percentage ownership of any other person.
(2) Messrs. Greene, Kravis, MacDonnell, Roberts, Edward A. Gilhuly, Perry
Golkin, Michael W. Michelson, Paul E. Raether, Scott Stuart and Michael T.
Tokarz, as general partners of KKR Associates, may be deemed to share
beneficial ownership of any shares beneficially owned by KKR Associates,
but disclaim any such beneficial ownership. Messrs. Greene, Kravis,
MacDonnell and Roberts are members of Safeway's Board of Directors.
(3) Represents shares held by RFM Acquisition L.L.C., a limited liability
company ("RFM Acquisition"), the senior member of which is KKR 1996 Fund
L.P. The general partner with voting and investment control of KKR 1996
Fund L.P. is KKR Associates 1996 L.P., and the sole general partner of KKR
Associates 1996 L.P. is KKR 1996 GP. Messrs. Greene, Kravis, MacDonnell,
Roberts, Gilhuly, Golkin,
4
<PAGE> 7
Michelson, Raether, Stuart and Tokarz, as members of KKR 1996 GP, may be
deemed to share beneficial ownership of any shares beneficially owned by
KKR 1996 GP, but disclaim any such beneficial ownership. Messrs. Greene,
Kravis, MacDonnell and Roberts are members of Safeway's Board of Directors.
(4) Represents 74,516 shares owned by Mr. Greene or jointly by Mr. Greene and
his wife and 74,402 shares issuable upon exercise of stock options. Does
not include 20,000 shares owned by Mrs. Greene, as to which Mr. Greene
disclaims any beneficial ownership. Does not include 12,000 shares held in
trust by Mrs. Greene for the benefit of their children, as to which Mr.
Greene disclaims any beneficial ownership.
(5) Does not include 800,000 shares held by Mr. Kravis as a trustee of an
irrevocable trust created by Mr. Roberts for the benefit of his children
(the "Roberts Trust"). As co-trustee, Mr. Kravis shares the authority to
vote and dispose of the shares, but has no economic interest in the shares.
(6) Represents shares issuable upon exercise of stock options. Does not include
120,000 shares held in an irrevocable trust created by Mr. MacDonnell for
the benefit of his children (the "MacDonnell Trust") with respect to which
Mr. MacDonnell disclaims any beneficial ownership.
(7) Does not include 120,000 shares held by Mr. Roberts as a trustee of the
MacDonnell Trust. As co-trustee, Mr. Roberts shares the authority to vote
and to dispose of the shares, but has no economic interest in the shares.
Does not include 800,000 shares held in the Roberts Trust with respect to
which Mr. Roberts disclaims any beneficial ownership.
(8) SSI Equity Associates is a Delaware limited partnership, the sole general
partner of which is SSI Partners, L.P., a Delaware limited partnership. SSI
Partners, in its capacity as general partner, may be deemed to own any
shares beneficially owned by SSI Equity Associates. Messrs. Kravis,
MacDonnell, Raether and Roberts, as general partners of SSI Partners, may
be deemed to share beneficial ownership of any shares beneficially owned by
SSI Partners, but disclaim any such beneficial ownership. Messrs. Kravis,
MacDonnell and Roberts are members of Safeway's Board of Directors. Safeway
is the sole limited partner of SSI Equity Associates. All of the warrants
held by SSI Equity Associates are attributable to Safeway's limited
partnership interests in SSI Equity Associates. Safeway intends to hold
such warrants until they expire in November 2001 and not to exercise such
warrants.
(9) Includes 2,233 shares issuable upon exercise of stock options.
(10) Includes shares issuable upon exercise of stock options as follows: Mr.
Burd, 4,462,262; Mr. Oder, 2,080,000; Mr. Weed, 335,000; Ms. Renda,
375,000; Mr. Ross, 745,000; and all executive officers and directors as a
group, 9,722,841. Does not include shares issuable upon exercise of stock
options which are not vested and will not become vested within 60 days
after March 14, 2000.
(11) Does not include 7,790 shares held by Mr. Oder as trustee of irrevocable
trusts created by Mr. Burd for the benefit of his children. As trustee, Mr.
Oder has the authority to vote and dispose of the shares, but has no
economic interest in the shares.
(12) All information regarding FMR Corp. and its affiliates is based on
information disclosed in the Schedule 13G, as amended, filed by FMR Corp.,
Edward C. Johnson 3d and Abigail Johnson on February 14, 2000 (the "FMR
Schedule 13G"). According to the FMR Schedule 13G, (i) Fidelity Management
& Research Company, a wholly owned subsidiary of FMR Corp., is the
beneficial owner of 47,850,770 of such shares as a result of acting as
investment adviser to various investment companies, (ii) Fidelity
Management Trust Company, a wholly owned subsidiary of FMR Corp., is the
beneficial owner of 3,179,355 of such shares as a result of its serving as
investment manager of institutional account(s), (iii) Fidelity
International Limited is the beneficial owner of 573,281 of such shares as
a result of its providing investment advisory and management services to a
number of non-U.S. investment companies and certain institutional
investors, and (iv) FMR Corp. and Edward C. Johnson 3d each has sole
dispositive power over 51,030,125 of such shares and sole voting power over
2,515,955 of such shares. The address of FMR Corp. is 82 Devonshire Street,
Boston, Massachusetts 02109.
5
<PAGE> 8
BOARD MEETINGS, COMMITTEES AND COMPENSATION
The Company's Board of Directors held four regular meetings and three
special meetings in fiscal 1999. Each director, except Mr. Kravis, attended 75%
or more of the total number of Board meetings and meetings of Board committees
on which the director served during the time such director served on the Board
or committee. The Board of Directors has established the following standing
committees: Audit Committee, Compensation and Stock Option Committee and Section
162(m) Committee. There is no standing Nominating Committee.
Audit Committee: Paul Hazen, Chairman; Rebecca A. Stirn; William Y.
Tauscher. As directed by the Board, the functions of the committee include
recommending independent auditors to be employed by the Company; conferring with
the independent auditors regarding their audit of the Company; reviewing the
fees of such auditors and other terms of their engagement; considering the
adequacy of internal financial controls and the results of fiscal policies and
financial management of the Company; meeting with the Company's internal
auditors; reviewing with the independent and internal auditors the results of
their examinations; and recommending changes in financial policies or procedures
as suggested by the auditors. During fiscal 1999 the Audit Committee held three
meetings.
Compensation and Stock Option Committee: William Y. Tauscher, Chairman;
James H. Greene, Jr., Paul Hazen, Robert I. MacDonnell and Rebecca A. Stirn. The
functions of the committee are to review new or modified programs in the areas
of executive salary and incentive compensation, deferred compensation and stock
plans; to review direct and indirect compensation matters; and to review
management's compensation actions for executive officers and other key
personnel. During fiscal 1999 the Compensation and Stock Option Committee held
three meetings.
Section 162(m) Committee: Rebecca A. Stirn, Chairman; Paul Hazen. The
functions of the committee are to approve grants of stock options to executive
officers; establish performance goals with respect to performance-based
compensation for executive officers; certify whether performance goals have been
met before performance-based compensation is made to executive officers; and
perform any other action required to be performed by a committee of "outside
directors" (pursuant to Section 162(m) of the Internal Revenue Code of 1986), or
by a committee of "non-employee directors" (pursuant to Rule 16b-3 under the
Securities Exchange Act of 1934). During fiscal 1999 the Section 162(m)
Committee did not hold any meetings.
Director Compensation: Directors who are not employees of the Company or
its subsidiaries were paid an annual fee of $40,000 in 1999.
The 1999 Equity Participation Plan (the "Plan") generally provides for the
grant to non-employee directors of options to purchase shares of Common Stock of
the Company and requires non-employee directors to purchase shares of Common
Stock as a condition to membership on the Board. The Plan provides for the grant
of an option to purchase the number of shares of Common Stock equal to $200,000
divided by the Purchase Price (defined as 80% of the fair market value of a
share of Common Stock on the date of grant) to (a) each non-employee director
serving as of May 11, 1999 (the effective date of the Plan) who had not already
received a grant under the Outside Director Equity Purchase Plan (the "Prior
Director Plan") and (b) each non-employee director initially elected or
appointed to the Board after May 11, 1999. The foregoing option grants are
conditioned on the purchase by such non-employee directors of shares of Common
Stock as set forth in the Plan.
Pursuant to the Plan, each non-employee director also receives automatic
grants of options to purchase 2,000 shares of Common Stock as of the date of
each annual meeting of stockholders occurring after such director's initial
election to the Board. In addition, the Plan provides that any non-employee
director who received an initial grant of stock options under the Prior Director
Plan, but had not yet received a grant of stock options after three continuous
years of service as provided under the Prior Director Plan, will be granted
non-qualified stock options to purchase 100,000 shares of Common Stock after
serving on the Board for three continuous years. All director options vest
ratably over a three-year term.
Under the Deferred Compensation Plan for Safeway Directors, a non-employee
director may elect to defer, until a specified calendar year or until retirement
from the Board, all or any portion of the director's cash
6
<PAGE> 9
compensation. The director may elect to have such compensation credited to a
cash credit account (which accrues interest at the prime rate) or a stock credit
account (based on an equivalent number of shares of Common Stock that could have
been purchased with the deferred compensation). All distributions of a
director's cash or stock credit account are made in cash.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Mr. Magowan resigned from his position as Chief Executive Officer of the
Company effective April 30, 1993 and from his position as Chairman of the Board
of the Company on May 12, 1998. He continues to serve as a director of the
Company and commenced receiving an annual director's fee effective January 1,
1998. Mr. Magowan continues to receive insurance benefits and, upon his
retirement from the Company in April 1997, became entitled to receive retirement
benefits in accordance with the terms of the Company's qualified retirement plan
of $70,089 per year, and an additional $566,843 per year from the Company.
During 1999, the Company sold approximately $3.97 million in private label
products to Casa Ley for resale in Casa Ley's retail stores, and Casa Ley sold
approximately $307,890 in food products to the Company for resale in the
Company's retail stores. It is anticipated that purchases of a similar magnitude
of such products will be made in 2000. Hector Ley Lopez, a nominee for election
as a director at the Annual Meeting, is the General Director of Casa Ley.
Safeway has a 49% ownership interest in Casa Ley, and the remaining 51% is owned
by adult members of the Ley family, including Hector Ley Lopez (who individually
has a less than 10% equity interest in Casa Ley).
In July 1999, the Company entered into a loan agreement with Dick W.
Gonzales, Senior Vice President, pursuant to which the Company loaned Mr.
Gonzales $400,000 under a promissory note in connection with Mr. Gonzales'
relocation to northern California. The note is secured by Mr. Gonzales'
residence, bears no interest and is due in July 2004. During fiscal 1999, the
largest aggregate amount of indebtedness outstanding for Mr. Gonzales was
$400,000, and Mr. Gonzales remained indebted to the Company for this amount as
of March 14, 2000.
See COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION for
additional relationships and transactions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership (Forms 3, 4
and 5) of Common Stock with the Securities and Exchange Commission (the "SEC")
and the New York Stock Exchange. Officers, directors and
greater-than-ten-percent holders are required to furnish the Company with copies
of all such forms which they file.
To the Company's knowledge, based solely on the Company's review of copies
of such reports or written representations from certain reporting persons that
no Forms 5 were required to be filed by those persons, the Company believes that
for fiscal 1999 all filing requirements applicable to its officers, directors,
greater-than-ten-percent beneficial owners and other persons subject to Section
16 of the Exchange Act were complied with.
7
<PAGE> 10
EXECUTIVE COMPENSATION
The following Summary Compensation Table shows compensation paid by the
Company for services rendered during fiscal years 1999, 1998 and 1997 for the
Chief Executive Officer and the four most highly compensated executive officers
of the Company who were serving as executive officers at the end of fiscal 1999.
SUMMARY COMPENSATION TABLE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION ------------
---------------- SECURITIES
SALARY BONUS UNDERLYING
NAME AND PRINCIPAL POSITION YEAR ($)(A) ($)(B) OPTIONS(#)
--------------------------- ---- ------ ------ ------------
<S> <C> <C> <C> <C>
Steven A. Burd......................................... 1999 750 1,011 --
Chairman, President and CEO 1998 750 1,125 1,200,000
1997 687 631 --
Kenneth W. Oder........................................ 1999 500 524 --
Executive Vice President 1998 500 600 --
1997 452 324 600,000
David G. Weed.......................................... 1999 339 338 --
Executive Vice President and CFO 1998 271 298 100,000
1997 304 260 --
Larree M. Renda........................................ 1999 314 313 150,000
Executive Vice President 1998 284 312 --
1997 216 113 100,000
Michael C. Ross........................................ 1999 362 263 100,000
Senior Vice President, Secretary 1998 344 275 --
and General Counsel 1997 320 191 --
</TABLE>
- ---------------
(a) 1997 salary amounts include an additional week because fiscal 1997 was a
53-week year.
(b) Represents cash and stock bonuses earned by the named individual during the
fiscal year indicated.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Greene, Hazen and MacDonnell served as members, and Mr. Tauscher
served as Chairman, of the Compensation and Stock Option Committee (the
"Compensation Committee") of the Company's Board of Directors during fiscal
1999. Ms. Stirn became a member of the Compensation Committee on August 31,
1999. Mr. Hazen served as a member of the Section 162(m) Committee during fiscal
1999. Mr. Tauscher served as Chairman of the Section 162(m) Committee until his
resignation from that committee on August 31, 1999, whereupon Ms. Stirn was
appointed Chairman of the Section 162(m) Committee. Mr. Greene was a Vice
President and Assistant Secretary of the Company from August 1986 to November
1986. No other member of the Compensation Committee or the Section 162(m)
Committee is a current or former officer or employee of the Company or any of
its subsidiaries.
In July 1999, the Company and Randall's Food Markets, Inc. ("Randall's")
entered into an Agreement and Plan of Merger (the "Merger Agreement") pursuant
to which Randall's was merged with a subsidiary of the Company (the "Merger")
and the shares of common stock of Randall's outstanding immediately prior to the
effective time of the Merger were converted into the right to receive a total of
$675.3 million in cash and 11.4 million shares of Common Stock. The Merger was
consummated in September 1999. RFM Acquisition LLC, an affiliate of KKR, owned
18,579,686 shares of Randall's common stock and an option to purchase an
additional 3,606,881 of such shares and received in the Merger in exchange for
such shares and option a total of approximately $475.7 million and 8,027,964
shares of Common Stock. Messrs. Greene, Kravis, MacDonnell and Roberts are
members of KKR 1996 GP, which is the sole general partner of the sole general
partner
8
<PAGE> 11
of the sole member of RFM Acquisition LLC. KKR received a fee in the amount of
$8.6 million for its advisory services in connection with the Merger.
In connection with the Merger, all stock options held by directors of
Randall's were canceled in exchange for cash and Common Stock. Each of Messrs.
Greene, Kravis and Roberts were directors of Randall's and owned 5,000 shares of
Randall's common stock and options to purchase 10,000 shares of Randall's common
stock and each received, in exchange for his Randall's shares and director
options, $267,450 and 4,516 shares of Common Stock.
Safeway holds an 80% interest in Property Development Associates, a
California general partnership formed in 1987 ("PDA"). The general partners of
PDA are Pacific Resources Associates, L.P., a Delaware limited partnership
("PRA"), which is a company controlled by an affiliate of KKR, and Safeway. PDA
was organized to purchase, manage and dispose of certain Safeway facilities
which are no longer used in Safeway's retail grocery business. No properties
were transferred in 1999 between the Company and PDA. During 1999, Safeway paid
PDA $2.7 million for reimbursement of expenses related to management and real
estate services provided by PDA in connection with certain of Safeway's
properties no longer used in the retail grocery business. At year-end 1999, PDA
held 186 properties which were recorded at an aggregate net book value of $97.6
million. The accounts of PDA are consolidated with those of the Company, and a
minority interest of $19.9 million is included in accrued claims and other
liabilities in the Company's consolidated balance sheet at year-end 1999. In
March 2000, PDA transferred one leasehold property to the Company, which
property had a net book value of $300,000. PDA made a corresponding distribution
in cash to PRA in order to permit PRA to maintain its proportionate ownership
interest in PDA. No gains or losses were recognized on this transaction in the
Company's financial statements.
In March 2000, Safeway transferred 27 non-operating properties to PRA for
an aggregate purchase price of $37.58 million. The Company believes that the
consideration paid by PRA for such properties is at least as favorable as could
be obtained from an unrelated third party.
In March 2000, the Company and PRA reached an agreement in principle to
partition the properties owned by PDA between the Company and PRA according to
their respective partnership interests and to wind down and dissolve PDA. The
partition process will allow certain properties that are strategically valuable
to Safeway to be independently appraised and allocated to Safeway. The remaining
properties will be valued by mutual agreement of the parties or, if no agreement
as to valuation is reached, by independent appraisal. Thereafter, the parties
will take turns selecting properties according to their respective partnership
interests until all properties have been selected, at which time there will be a
compensating cash payment to reach an 80% - 20% allocation.
During fiscal 1999, the Company paid approximately $275,000 in rent to
Carmel Valley Partners with respect to a lease for one of the Company's retail
grocery stores. Carmel Valley Partners is a general partnership 80% of which is
owned by a subsidiary of Pacific Realty Associates, L.P., which is a partnership
controlled by an affiliate of KKR. In addition, during fiscal 1999, the Company
paid approximately $1.2 million in rent and maintenance fees to PDA with respect
to leases for 13 of the Company's retail grocery stores. The Company believes
that the rates charged with respect to the foregoing leases were the same as or
less than the rates that could be obtained from unrelated third parties.
In January 2000, the Company entered into a loan agreement with MainStreet
pursuant to which the Company loaned MainStreet $2 million under a promissory
note to assist MainStreet in paying certain expenses. The Company also entered
into a non-binding letter of intent to invest $25 million in MainStreet, subject
to certain conditions. The note is secured by all of MainStreet's personal
property and intangibles and bears interest at 10% per annum. The note is due on
the earlier of (a) termination of the letter of intent or (b) the date that the
Company makes the investment in MainStreet as contemplated by the letter of
intent. Mr. Tauscher is Chief Executive Officer of MainStreet and is expected to
own a less than ten percent equity interest in MainStreet.
In 1998, Mr. Tauscher purchased 4,467 shares of Common Stock of the Company
pursuant to the Plan. In connection with such purchase, Mr. Tauscher delivered
to the Company a full recourse note in the amount
9
<PAGE> 12
of $133,070 which matures in 2008 and bears interest at 5.75% per annum. Mr.
Tauscher remained indebted to the Company for such amount (plus accrued
interest) as of March 14, 2000.
In 1999, Ms. Stirn purchased 3,457 shares of Common Stock of the Company
pursuant to the Plan. In connection with such purchase, Ms. Stirn delivered to
the Company a full recourse note in the amount of $139,900 which matures in 2009
and bears interest at 5.5% per annum. Ms. Stirn remained indebted to the Company
for such amount (plus accrued interest) as of March 14, 2000.
* * * * *
The following Report of the Compensation Committee and of the Section
162(m) Committee and the Stock Performance Graph are not to be deemed to be
"soliciting material" or to be "filed" with the SEC or subject to Regulation 14A
or 14C or to the liabilities of Section 18 of the Exchange Act except to the
extent the Company specifically requests that such information be treated as
soliciting material or specifically incorporates it by reference into any filing
under the Securities Act of 1933, as amended, or the Exchange Act.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
REPORT OF THE SECTION 162(m) COMMITTEE
The Company's policies with respect to the compensation of executive
officers, which policies are approved by the Compensation Committee, are (1) to
base a significant portion (up to approximately 55%) of total yearly
compensation of executive officers on the performance of the Company and the
individual performances of the executive officers, (2) to award the Company
performance-based portions of compensation only when overall Company performance
reaches pre-established levels, and (3) to pay base salaries and, subject to
approval by the Section 162(m) Committee, award stock options to executive
officers based on a review of competitive compensation practices of various
industry groups and comparable size companies, overall financial, strategic and
operational Company performance, improvement in market value of the Company's
stock and each individual executive officer's performance.
The relationship of Company performance to the compensation of executive
officers, including the Chief Executive Officer ("CEO"), is as follows.
The Company undertakes an annual planning process which culminates in the
adoption and approval of an operating plan for the Company. The operating plan
includes a target level for Company operating performance for the following
year. The specific elements of Company operating performance that are relevant
to compensation determinations are sales, operating profit and working capital.
No operating performance-based compensation is awarded to executive officers,
including the CEO, unless an operating performance threshold based upon target
level performance is met. The operating performance threshold can be met only if
specific performance thresholds for sales and operating profit are met. The
amount of operating performance-based compensation awardable is then increased
or decreased depending on the extent to which the working capital threshold is
or is not met. If the operating performance threshold is met, operating
performance-based compensation of up to 120% of the CEO's base salary is awarded
based upon the extent to which Company performance exceeds the threshold, and
executive officers other than the CEO are eligible to receive operating
performance-based compensation up to a maximum percentage of each such executive
officer's base salary, which maximum percentage ranges from 48% to 120%. The
amount of operating performance-based compensation awarded to such executive
officers may be reduced by the CEO and is based on individual,
participant-specific performance factors, and the amount of a particular
individual's award cannot exceed the maximum percentage for such individual. The
foregoing ranges of percentages of base salary payable to the CEO and other
executive officers were established based on a review of competitive
compensation levels with a view to allowing for higher than average incentive
compensation to supplement lower than average base compensation.
Operating performance-based compensation may, at the option of the
executive, be paid in cash, in stock, or in a combination of cash and stock.
Based on actual operating results in 1999, Company performance
10
<PAGE> 13
exceeded the threshold of operating performance and, accordingly, operating
performance-based compensation was awarded to the CEO and other executive
officers.
In addition to operating performance-based compensation, the most senior
executive officers who are responsible for making capital investment decisions,
including the CEO, are also eligible for capital performance-based compensation,
payment of which is contingent on new capital investments of the Company
achieving targeted rates of return established at the outset of each new capital
investment project. Capital performance is measured for the first and third
years following completion of a particular project. With respect to each such
year, if the capital performance threshold is met, compensation of up to 15%
(for a total of up to 30%) of the executive officer's base salary is awarded
based upon the extent to which capital performance exceeded the threshold. The
foregoing percentage was established at a level intended to emphasize the
importance of capital spending to the Company's business. Based on the results
of the measured projects, all of which exceeded the pre-established targeted
rates of return, the CEO and certain other executive officers earned a capital
performance-based bonus in 1999 with respect to measured first and third year
projects.
Base salaries are evaluated annually for all executive officers, including
the CEO. Base salaries for executive officers, including the CEO, are based in
part on overall financial, strategic and operational Company performance,
improvement in market value of the Company's stock, individual performance and
competitive salary levels. Of these factors, the most significance is accorded
to overall Company performance and improvement in market value of the Company's
stock, followed by individual performance and competitive salary levels. The
determination of whether to make certain one-time payments, such as signing
bonuses, including the amount of any such payments, is evaluated on a
case-by-case basis. Competitive compensation practices are reviewed by position
and various industry groups, and this competitive data is used to determine
appropriate ranges of base salary levels and annual increases to attract and
retain qualified executives. The companies surveyed for this purpose include
grocery companies and non-grocery companies. The non-grocery companies were
selected because they were considered to be the significant competitors with
respect to executive officer positions. All grocery companies whose executive
pay practices were surveyed for this purpose are included in the peer group
identified in footnote (a) to the Stock Performance Graph set forth elsewhere in
this proxy statement, except for those companies whose common stock was not
publicly traded for the period covered by the Stock Performance Graph. The
Company's executive salary levels, including with respect to the CEO, generally
are at the median of or lower than the executive compensation levels of the
companies surveyed.
Stock option grants are considered periodically by the Section 162(m)
Committee for all executive officers, including the CEO. A primary consideration
in granting stock options is to encourage members of management to hold
significant equity ownership in the Company. The aggregated option exercise
table shows stock options owned by the individuals named in the Summary
Compensation Table. The amounts of stock options granted in any given year,
including those granted to executive officers, are derived based upon the same
factors, and with the same relative significance, as are set forth in the
preceding paragraph with respect to establishment of base salary levels,
although less weight is accorded to competitive compensation levels because of
the difficulty in making a meaningful comparison with respect to stock options.
All stock option grants to executive officers are subject to approval by the
Section 162(m) Committee.
The Compensation Committee and the Section 162(m) Committee believe that
the executive compensation policies and programs described above serve the
interests of all stockholders and the Company and substantially link
compensation of the Company's executive officers with the Company's performance.
11
<PAGE> 14
During 1993, the Internal Revenue Code of 1986, as amended (the "Code"),
was amended to include a provision which denies a deduction to any publicly held
corporation for compensation paid to any "covered employee" (defined as the CEO
and the Company's other four most highly compensated officers, as of the end of
a taxable year) to the extent that the compensation exceeds $1 million in any
taxable year of the corporation beginning after 1993. Compensation which is
payable pursuant to written binding agreements entered into before February 18,
1993 and compensation which constitutes "performance-based compensation" is
excludable in applying the $1 million limit. It is the Company's policy to
qualify all compensation paid to its top executives, in a manner consistent with
the Company's compensation policies, for deductibility under the 1993 law in
order to maximize the Company's income tax deductions. However, this policy does
not rule out the possibility that compensation may be approved that may not
qualify for the compensation deduction, if in light of all applicable
circumstances it would be in the best interests of the Company for such
compensation to be paid.
<TABLE>
<S> <C>
Compensation and Stock Option Committee: Section 162(m) Committee:
William Y. Tauscher Rebecca A. Stirn
James H. Greene, Jr. Paul Hazen
Paul Hazen
Robert I. MacDonnell
Rebecca A. Stirn
</TABLE>
12
<PAGE> 15
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the Company's
cumulative total stockholder return on its common stock to that of the S&P 500
and a group of peer companies in the retail grocery industry.
<TABLE>
<CAPTION>
SAFEWAY S&P 500 PEER GROUP(A)
------- ------- -------------
<S> <C> <C> <C>
12/30/94 100.00 100.00 100.00
12/29/95 161.57 134.69 133.49
12/31/96 268.24 162.24 170.61
12/31/97 396.86 212.24 230.17
12/31/98 764.71 269.39 346.47
12/31/99 448.63 321.43 245.57
</TABLE>
- ---------------
(a) The peer group companies are: The Kroger Co., Safeway Inc., The Great
Atlantic & Pacific Tea Company, Inc., Winn-Dixie Stores, Inc., Albertson's
Inc., Delhaize America, Inc. (formerly Food Lion, Inc.) ("Delhaize"), and
Hannaford Bros. Co. ("Hannaford"). In August 1999, Delhaize and Hannaford
announced that Delhaize had agreed to acquire Hannaford, which acquisition
is pending as of the date of this proxy statement. The peer group does not
include American Stores Company or Fred Meyer, Inc., each of which had been
included in the 1998 peer group, because American Stores Company was
acquired by Albertson's, Inc. in June 1999, and Fred Meyer, Inc. was
acquired by The Kroger Co. in May 1999.
13
<PAGE> 16
OPTION GRANTS IN 1999 FISCAL YEAR
The following table sets forth information concerning individual grants of
stock options made during fiscal 1999 to each of the individuals identified in
the Summary Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------- POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES OF
OPTIONS STOCK PRICE APPRECIATION FOR
NUMBER OF GRANTED OPTION TERM(C)
SECURITIES UNDERLYING TO EMPLOYEES EXERCISE PRICE EXPIRATION -----------------------------
NAME OPTIONS GRANTED(#) IN FISCAL 1999 ($/SHARE) DATE 5%($) 10%($)
---- --------------------- -------------- -------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steven A. Burd... -- --
Kenneth W.
Oder........... -- --
David G. Weed.... -- --
Larree M.
Renda.......... 150,000(a) 2.3 30.9375 12/11/09 2,918,464 7,395,961
Michael C.
Ross........... 100,000(b) 1.5 52.375 3/31/09 3,293,836 8,347,226
</TABLE>
- ---------------
(a) Options granted under the 1999 Equity Participation Plan. Options vest at a
rate of 15% per year beginning with the anniversary of the date of grant
through the sixth anniversary of the date of grant, with the remaining 10%
becoming exercisable on the seventh anniversary of the date of the grant.
Upon the occurrence of a Change in Control of the Company, options shall
become exercisable as to all shares covered thereby, notwithstanding that
such options may not have fully vested at such time. A "Change in Control of
the Company" is deemed to have occurred (pursuant to the provisions of the
individual stock option agreement) generally when: (i) any person (other
than an employee benefit plan of the Company) becomes the beneficial owner
of 25% or more of the Company's then-outstanding voting securities; or (ii)
as a result of a tender offer or exchange offer for Company securities, or
as a result of a proxy contest, merger, consolidation or sale of assets,
individuals who at the beginning of any two-year period constitute the
Board, plus new directors whose election was approved by a vote of at least
2/3 of the continuing board members (the "Continuing Board Members"), cease
to constitute a majority of the Board; or (iii) the Company's security
holders approve (A) a merger or consolidation of the Company with any other
corporation, other than that which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent at
least 80% of the surviving corporation's then outstanding voting securities,
or (B) a plan of complete liquidation of the Company or a sale of all or
substantially all of the Company's assets. Notwithstanding the foregoing
definition, none of the foregoing events shall constitute a Change in
Control of the Company if prior to the occurrence of the event, the
Continuing Board Members unanimously approve the event.
(b) Options granted under the 1994 Amended and Restated Stock Option and
Incentive Plan for Key Employees. Options vest at a rate of 15% per year
beginning with the anniversary of the date of grant through the sixth
anniversary of the date of grant, with the remaining 10% becoming
exercisable on the seventh anniversary of the date of the grant. Upon the
occurrence of a Change in Control of the Company, options shall become
exercisable as to all shares covered thereby, notwithstanding that such
options may not have fully vested at such time. A "Change in Control of the
Company" is deemed to have occurred (pursuant to the provisions of the
individual stock option agreement) generally when: (i) any person (other
than an employee benefit plan of the Company) becomes the beneficial owner
of 50% or more of the Company's then-outstanding voting securities; or (ii)
as a result of a tender offer or exchange offer for Company securities, or
as a result of a proxy contest, merger, consolidation or sale of assets, the
Continuing Board Members cease to constitute a majority of the Board; or
(iii) the Company's security holders approve (A) a merger or consolidation
of the Company with any other corporation, other than that which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent at least 80% of the surviving corporation's
then outstanding voting securities, or (B) a plan of complete liquidation of
the Company or a sale of all or substantially all of the Company's assets.
Notwithstanding the foregoing definition, none of the foregoing events shall
constitute a Change in Control of the Company if (x) immediately after the
occurrence of the event, SSI Associates, L.P., KKR Partners II, L.P. or any
other affiliated entity is the beneficial
14
<PAGE> 17
owner of 30% or more of the Company's then-outstanding voting securities or (y)
prior to the occurrence of the event, the Continuing Board Members unanimously
approve the event.
(c) The assumed annual rates of appreciation in the table are shown for
illustrative purposes only pursuant to applicable SEC requirements. Actual
values realized on stock options are dependent on actual future performance
of the Company's stock, among other factors. Accordingly, the amounts shown
may not necessarily be realized.
AGGREGATED OPTION EXERCISES DURING 1999
FISCAL YEAR AND 1999 FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning exercise of stock
options during fiscal 1999 by each of the individuals identified in the Summary
Compensation Table and the value of unexercised options at the end of fiscal
1999.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT 1999 YEAR-END(#) AT 1999 YEAR-END($)(B)
ON EXERCISE VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($)(A) UNEXERCISABLE UNEXERCISABLE
---- ----------- -------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
Steven A. Burd... -- -- 4,162,262/ 125,244,185/
1,520,000 14,593,750
Kenneth W.
Oder........... 200,000 9,443,000 1,930,000/ 55,885,625/
670,000 9,764,375
David G. Weed.... -- -- 295,000/ 8,586,250/
175,000 2,752,500
Larree M.
Renda.......... -- -- 349,500/ 9,642,841/
312,500 4,080,465
Michael C.
Ross........... 150,000 7,556,258 620,000/ 19,631,875/
230,000 4,061,875
</TABLE>
- ---------------
(a) Value realized is (i) the fair market value of the stock at the date of
exercise less the exercise price of the options exercised multiplied by (ii)
the number of shares represented by such options.
(b) Potential unrealized value is (i) the fair market value at fiscal 1999
year-end ($35.75 per share) less the exercise price of "in-the-money,"
unexercised options multiplied by (ii) the number of shares represented by
such options.
PENSION PLANS
Pension benefits are provided to the executive officers of the Company
under the Employee Retirement Plan, a qualified defined benefit pension plan,
and the Retirement Restoration Plan (collectively, the "Retirement Plans"). The
Retirement Restoration Plan became effective on January 1, 1994. It provides
benefits to certain employees, including the individuals named in the Summary
Compensation Table, that cannot be paid under the qualified Employee Retirement
Plan due to Internal Revenue Code limitations on the amount of compensation that
may be recognized and the amount of benefits that may be paid. The Retirement
Restoration Plan also recognizes any compensation deferred under the Company's
Deferred Compensation Plans for purposes of determining such benefits.
Effective July 1, 1999, the Employee Retirement Plan was amended to provide
benefits primarily under a cash balance formula. Benefits accrued prior to the
change were converted to an opening cash balance as of July 1, 1999 equal to the
present value of accrued benefits on June 30, 1999. Future benefits under the
cash balance formula are accrued by the addition of compensation-based credits
and interest credits to each participant's cash balance until retirement.
Investment credits are based on the annual rate of return on 30-year treasury
securities.
15
<PAGE> 18
The normal retirement age is age 65 in the Retirement Plans, with reduced
early retirement benefits available at any time following termination of
employment. The normal retirement benefit is determined as a life annuity that
is actuarially equivalent (based on the annual rate of return on 30-year
treasury securities and mortality assumptions specified in the Employee
Retirement Plan) to the cash balance at retirement. Active participants as of
June 30, 1999 are also eligible for a minimum benefit based on the benefit
formulas under the Retirement Plans in effect prior to July 1, 1999, under which
benefits continue to accrue for a period of seven years from the date of the
change.
For the purposes of the Retirement Plans, compensation-based credits are
determined as a percent of compensation which includes pay earned from full-time
employment, contingent pay and pay for part-time employment, but excludes stock
options and any special pay made solely in the discretion of the employer. The
percentage applied to each year's compensation increases with years of
participation in the Retirement Plans (from 6% upon commencement of
participation to a maximum of 13% after completing 25 years of participation).
Compensation under the cash balance formula for the individuals named in the
Summary Compensation Table generally corresponds with the aggregate of the
earned salary, plus bonuses and long-term compensation for each such person.
The following table illustrates estimated total annual retirement benefits
under the Retirement Plans for each of the named executive officers payable as a
single life annuity. These estimated benefits are based on an assumed interest
credit percentage of 7% and no future increases in compensation under the
Retirement Plans.
<TABLE>
<CAPTION>
YEAR ESTIMATED
REACHING ANNUAL
NAME AGE 65 BENEFIT
---- -------- ---------
<S> <C> <C>
S. A. Burd............................................ 2014 $663,911
K. W. Oder............................................ 2012 349,648
D. G. Weed............................................ 2016 353,219
L. M. Renda........................................... 2023 639,080
M. C. Ross............................................ 2013 226,256
</TABLE>
PROPOSAL 2
STOCKHOLDER PROPOSAL #1
The Sisters of Notre Dame de Namur, 14800 Bohlman Road, Saratoga,
California 95070-6399, who are the owners of 8,800 shares of Common Stock, and
The Educational Foundation of America, 35 Church Lane, Westport, Connecticut
06880-3504, which is the owner of 26,800 shares of Common Stock, have given
notice that they jointly intend to present for action at the Annual Meeting the
following resolution:
WHEREAS: International markets for genetically engineered (GE) foods
are threatened by extensive resistance to gene protection technology,
transgenic technology and genetically altered foods;
Several of Europe's largest food retailers, including Tesco, Sainsbury
Group, Carrefour, and Rewe, have committed to removing GE ingredients from
their store-brand products;
In the UK, three fast-food giants -- McDonald's, Burger King and
Kentucky Fried Chicken -- are eliminating GE soya and corn ingredients from
their menus;
Gerber Products Co. announced in July 1999 that they would not allow
GE corn or soybeans in any of their baby foods;
Archer Daniels Midland asked its grain suppliers in August 1999 to
segregate their genetically engineered crops from conventional crops;
There is increasing scientific concern that genetically engineered
agricultural products may be harmful to humans, animals, or the
environment;
16
<PAGE> 19
The U.S. Department of Agriculture has acknowledged (July 13, 1999)
the need to develop a comprehensive approach to evaluating long-term and
secondary effects of GE products;
Some GE crops have been engineered to have higher levels of toxins,
such as Bacillus thuringiensis (Bt), to make them insect-resistant;
In 1998, research showed that Bt crops are building up Bt toxins in
the soil;
In 1999, the European Union suspended approval of new genetically
engineered organisms until a new safety law for genetically engineered
organisms is implemented in 2002. This followed a new study that showed Bt
corn pollen may harm monarch butterflies.
In the U.S., we have a long tradition of citizens' "Right to Know"; an
expression of this includes the current laws requiring nutritional labeling
of foods;
A January 1999 Time/CNN poll indicated that 81% of Americans said that
GE food should be labeled as such;
GE crops may incorporate genes that are allergens or from animal
species. Individuals cannot avoid them for health or religious reasons
unless they are labeled;
The European Union requires labeling of GE foods, as will Japan, New
Zealand, and Australia.
RESOLVED: Shareholders request the Board of Directors to adopt a
policy of removing genetically engineered crops, organisms, or products
thereof from all products sold under its brand names or private labels,
where feasible, until long-term safety testing has shown that they are not
harmful to humans, animals, and the environment; with the interim step of
labeling and identifying these products that may contain these ingredients,
and reporting to the shareholders by August 2000.
The following statement was submitted in support of such resolution:
We believe that this technology involves significant social, economic,
and environmental risks. Our company should take a leadership position in
delaying market adoption of genetically engineered crops and foods. Failure
to do so could leave our company financially liable, should detrimental
effects to public health or the environment appear in the future.
The Board of Directors recommends a vote against this proposal for the
following reasons.
We share and actively support our customers' interests in food safety. We
also believe consumers have a right to relevant information about the food they
buy so that they can make informed purchasing decisions. As a retailer, however,
we are neither qualified nor entitled to establish food safety regulations and
labeling requirements.
To date, the Food and Drug Administration, the Environmental Protection
Agency, the U.S. Department of Agriculture, the World Health Organization, the
American Medical Association and the American Dietetic Association have
generally endorsed the use of genetic modification and food biotechnology and
stand firmly behind their safety. The FDA already requires labeling of
genetically engineered foods if the food is significantly changed from its
traditional form (for instance, if the nutritional content is altered), or if
there is a potential health or safety effect (such as the presence of an
allergen). We believe that the FDA's regulations in this area are based on sound
scientific principles, and that the FDA possesses the best available safety and
risk assessment procedures. Moreover, we believe that the FDA and other
regulatory authorities who are charged with protecting the health and safety of
the public and the environment are the proper entities, rather than a retailer
like Safeway, to evaluate and make judgments about the sale and labeling of
genetically engineered products. Safeway complies, and will continue in the
future to comply, with all government food labeling regulations.
This proposal is not practicable because Safeway would have serious
difficulty determining what constitutes "genetically engineered crops, organisms
or products thereof." FDA Commissioner Jane E. Henney, M.D. has stated that
virtually all crops have been genetically modified through traditional plant
breeding for more than a hundred years. Even if we could determine what
constituted "genetically
17
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engineered" ingredients, we believe it is currently impracticable for us to
identify which of our private label products contain these ingredients. We
understand that certain genetically engineered ingredients are so similar to
their unmodified counterparts that they are virtually undetectable with current
testing techniques. It would be impracticable (even if we had the testing
capability) for our quality assurance operations to identify all genetically
engineered foods in our private label products and to label them accordingly.
Moreover, we do not believe we could require food manufacturers to test for and
label genetically engineered ingredients that may be used in our private label
products. Therefore, we do not believe it would be possible for Safeway to
enforce the policy requested by the proposal.
We also understand that the use of genetic engineering with respect to
certain staple foods (such as soybeans) is widespread in the U.S. Even when
these foods are produced in unmodified form, under current practices they are
combined with other genetically engineered foods during storage and
distribution, making it extremely difficult, if not impossible, for us to obtain
these staple foods, in an unmodified or uncombined form, in sufficient
quantities for sale or processing of private label food products.
If we were simply to label all of our private label products as possibly,
but not necessarily, containing genetically engineered ingredients, we would
face additional problems. Labeling a product to say that it "may" contain
genetically engineered ingredients would not advance the consumer's ability to
make an informed choice, would create confusion and would likely place Safeway's
products at a competitive disadvantage. Because other products would not be
required to carry the same label information, consumers who are concerned about
genetically engineered ingredients might choose a competing product which itself
might contain genetically engineered ingredients but not be so labeled.
Moreover, because private label products are intended generally to provide a
lower-priced alternative to national brand items, they tend to follow the
national brands regarding product specifications and in response to consumer
trends. Safeway would likely face significant competitive harm if it were
required to take a novel position in the market regarding the use and labeling
of genetically engineered ingredients in its private label products.
Accordingly, we believe that this proposal is impracticable and, even if it
could be implemented, could put Safeway at a competitive disadvantage.
The Board unanimously recommends a vote AGAINST the adoption of this
stockholder proposal. The affirmative vote of holders of a majority of shares
present in person or by proxy at the meeting and entitled to vote on this matter
is necessary to approve the adoption of this stockholder proposal. Unless
otherwise instructed, proxies will be voted AGAINST approval of adoption of this
stockholder proposal.
PROPOSAL 3
STOCKHOLDER PROPOSAL #2
Mrs. Evelyn Y. Davis, 2600 Virginia Ave., N.W. #215, Washington, D.C.
20037, who is the owner of 800 shares of Common Stock, has given notice that she
intends to present for action at the Annual Meeting the following resolution:
RESOLVED: That the stockholders of Safeway Inc., assembled in Annual
Meeting in person and by proxy, hereby request the Board of Directors to
take the necessary steps to provide for cumulative voting in the election
of directors, which means each stockholder shall be entitled to as many
votes as shall equal the number of shares he or she owns multiplied by the
number of directors to be elected, and he or she may cast all of such votes
for a single candidate, or any two or more of them as he or she may see
fit.
The following statement was submitted in support of such resolution:
REASONS: Many states have mandatory cumulative voting, so do National
Banks. In addition, many corporations have adopted cumulative voting. Last
year, the owners of 134,745,708 shares, representing approximately 38% of
the shares voting, voted FOR this proposal.
If you AGREE, please mark your proxy FOR this resolution.
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<PAGE> 21
BOARD RECOMMENDATION
The Board of Directors recommends a vote against this proposal for the
following reasons:
This proposal was presented at the 1997, 1998 and 1999 Annual Meetings.
Owners of 311,073,422, 235,129,073 and 220,825,231 shares, respectively,
representing approximately 81%, 61% and 62%, respectively, of the shares voting
on the proposal, voted against the proposal or abstained.
The Company's present system for election of directors, which is like that
of many major publicly traded corporations, allows all stockholders to vote on
the basis of their share ownership. The Board of Directors believes that this
method is the fairest and is most likely to produce a Board which will
effectively represent the interests of all of the Company's stockholders.
In contrast, cumulative voting promotes special interest representation on
the Board. This, in turn, can lead to factionalism and contention among
directors, which could have a negative impact on the Company and its
stockholders. In addition, the use of cumulative voting has declined
significantly over the years. Many companies have eliminated cumulative voting,
and most states that once mandated cumulative voting in corporate elections have
repealed that requirement.
The proponent of this proposal has offered no evidence that cumulative
voting would produce a more qualified or effective Board of Directors for
Safeway, nor has the proponent expressed any concerns regarding the members of
Safeway's Board, any particular action of the Board or the effectiveness of the
Board. Moreover, the Company's financial and operational performance in recent
years suggests that there is no reason for any change in the method of voting
for Safeway's directors.
Accordingly, we believe that the present method of voting best promotes the
election of directors who will represent the interests of the stockholders as a
whole and that there have been no valid reasons submitted for implementing
cumulative voting.
The Board unanimously recommends a vote AGAINST the adoption of this
stockholder proposal. The affirmative vote of holders of a majority of shares
present in person or by proxy at the meeting and entitled to vote on this matter
is necessary to approve the adoption of this stockholder proposal. Unless
otherwise instructed, proxies will be voted AGAINST approval of adoption of this
stockholder proposal.
PROPOSAL 4
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, acting on the recommendation of its Audit
Committee, has selected the firm of Deloitte & Touche LLP, which has served as
independent auditors of the Company since 1987, to conduct an audit, in
accordance with generally accepted auditing standards, of the Company's
consolidated financial statements for the 52-week fiscal year ending December
30, 2000. A representative of that firm is expected to be present at the Annual
Meeting to respond to appropriate questions and will be given an opportunity to
make a statement if he or she so desires. This selection is being submitted for
ratification at the meeting. If not ratified, the selection will be reconsidered
by the Board, although the Board of Directors will not be required to select
different independent auditors for the Company. Unless otherwise instructed,
proxies will be voted FOR ratification of the selection of Deloitte & Touche
LLP.
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<PAGE> 22
GENERAL
STOCKHOLDER PROPOSALS
Stockholder proposals for presentation at the 2001 Annual Meeting of
Stockholders must be received at the Company's principal executive offices on or
before December 2, 2000. The Company's Bylaws provide that stockholders desiring
to nominate a director or bring any other business before the stockholders at an
annual meeting must notify the Secretary of the Company thereof in writing 50 to
75 days before the meeting (or, if less than 65 days' notice or prior public
disclosure of the meeting date is given, within 15 days after such notice was
mailed or publicly disclosed, whichever first occurs). Such notice must set
forth certain information specified in the Company's Bylaws.
ANNUAL REPORT
The Company's Annual Report to Stockholders for the fiscal year ended
January 1, 2000 is being mailed to all stockholders of record with this Proxy
Statement.
By Order of the Board of Directors,
MICHAEL C. ROSS
Secretary
Dated: March 28, 2000
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[RECYCLING LOGO]
Printed on recycled paper
<PAGE> 24
SAFEWAY INC.
PROXY - For the Annual Meeting - May 9, 2000
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
PROXY
The undersigned, having received the Notice of Meeting and Proxy Statement
dated March 28, 2000, appoints Steven A. Burd and Michael C. Ross, and each
or any of them as Proxies, with full power of substitution, to represent and
vote all the shares of Common Stock which the undersigned may be entitled to
vote at the Annual Meeting of Stockholders to be held at the San Ramon
Marriott Hotel, 2600 Bishop Drive, San Ramon, California on Tuesday, May 9,
2000, at 1:30 p.m. or at any and all adjournments thereof, with all powers
which the undersigned would possess if personally present.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED
"FOR" ALL NOMINEES LISTED UNDER ITEM (1), "FOR" THE PROPOSAL DESCRIBED IN
ITEM (4) AND "AGAINST" THE STOCKHOLDER PROPOSALS DESCRIBED IN ITEMS (2) AND
(3), ALL OF SAID ITEMS BEING MORE FULLY DESCRIBED IN THE NOTICE OF ANNUAL
MEETING OF STOCKHOLDERS AND THE ACCOMPANYING PROXY STATEMENT. IF ANY OF THE
NAMED NOMINEES SHOULD BECOME UNAVAILABLE PRIOR TO THE ANNUAL MEETING, THE
PROXY WILL BE VOTED FOR ANY SUBSTITUTE NOMINEE OR NOMINEES DESIGNATED BY THE
BOARD OF DIRECTORS. THE UNDERSIGNED RATIFIES AND CONFIRMS ALL THAT SAID
PROXIES OR THEIR SUBSTITUTES MAY LAWFULLY DO BY VIRTUE HEREOF.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE
SIDE
<PAGE> 25
Please mark your
[X] votes as in this
example.
The Board of Directors recommends a vote AGAINST stockholder proposals 2 and 3
and FOR proposal 4.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of Nominees: [ ] [ ] [ ]
Directors James H.
Greene, Jr.
Paul Hazen
Hector Ley Lopez
For, except vote withheld for the following nominee(s):
- ---------------------------------------------------
2. Stockholder proposal on
policy of removing
genetically engineered
foods from private label
products.
3. Stockholder proposal on
cumulative voting.
4. Appointment of Deloitte &
Touche LLP as independent
auditors for fiscal year
2000.
5. In accordance with the
judgments of the proxies,
upon such other business
as may properly come
before the meeting and at
any and all adjournments
thereof.
Please date and sign exactly as name appears hereon.
Joint owners should each sign. The full name or capacity
of any person signing for a corporation, partnership,
trust or estate should be indicated.
MARK HERE
FOR ADDRESS
CHANGE AND
NOTE AT LEFT
- ----------------------------------------------------
- ----------------------------------------------------
SIGNATURE(S) DATE
