<PAGE> 1
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
American Stores Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
American Stores Company
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
Set forth the amount on which the filing fee is calculated and state how it
was determined.
/X/ Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: $125.00
2) Form, Schedule or Registration Statement No.: Pre 14A
3) Filing Party: Registrant
4) Date Filed: April 11, 1994
<PAGE> 2
[LOGO]
AMERICAN STORES COMPANY
709 EAST SOUTH TEMPLE, SALT LAKE CITY, UTAH 84102
P.O. BOX 27447, SALT LAKE CITY, UTAH 84127-0447
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of American
Stores Company, a Delaware corporation, will be held at the Red Lion Hotel, 255
South West Temple, Salt Lake City, Utah on Tuesday, June 21, 1994 at 10:00 a.m.,
local time, for the following purposes:
1. To elect five Class I Directors of the Company to serve for a term of
three years;
2. To amend the Company's Restated Certificate of Incorporation to increase
the number of authorized shares of the Company's Common Stock from
200,000,000 to 325,000,000;
3. To ratify the appointment of Ernst & Young as independent certified
public accountants for fiscal year 1994; and
4. To transact such other business as may properly come before the meeting.
Only shareholders of record at the close of business on April 25, 1994 will
be entitled to notice of and to vote at the meeting and at any adjournment
thereof.
You are cordially invited to attend the Annual Meeting. No admission ticket
or other credentials will be necessary. Whether or not you plan to attend the
meeting, PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD. A
RETURN ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, HAS
BEEN PROVIDED FOR YOUR USE.
JACK LUNT
Secretary
April 29, 1994
<PAGE> 3
AMERICAN STORES COMPANY
709 EAST SOUTH TEMPLE, SALT LAKE CITY, UTAH 84102
P.O. BOX 27447, SALT LAKE CITY, UTAH 84127-0447
PROXY STATEMENT
The solicitation of the proxy enclosed with this statement is made by and
on behalf of the Board of Directors of American Stores Company (the "Company")
for use at the 1994 Annual Meeting of Shareholders of the Company to be held on
Tuesday, June 21, 1994 at 10:00 a.m. local time, at the Red Lion Hotel, 255
South West Temple, Salt Lake City, Utah and at any postponements or adjournments
thereof. It is anticipated that this Proxy Statement, together with the form of
proxy and the Company's 1993 Annual Report to Shareholders, will first be mailed
on or about April 29, 1994. Each holder of record of shares of the Company's
common stock, par value $1.00 per share (the "Common Stock"), on April 25, 1994,
the record date, is entitled to one vote for each share so held. The number of
outstanding shares of Common Stock of the Company as of the record date is
142,727,318 (after giving effect to the two-for-one stock split effective April
7, 1994). A complete list of the shareholders entitled to vote at the Annual
Meeting will be available for inspection by any shareholder, for any purpose
germane to the meeting, during ordinary business hours for a period of ten days
prior to the Annual Meeting at the Company's corporate headquarters located at
709 East South Temple, Salt Lake City, Utah. Votes cast by proxy or in person at
the Annual Meeting will be tabulated by the inspectors of election appointed for
the meeting and will determine whether or not a quorum is present. The
inspectors of election will treat abstentions as shares that are present and
entitled to vote for purposes of determining the presence of a quorum but as
unvoted for purposes of determining the approval of any matter submitted to the
shareholders for a vote. If a broker indicates on the proxy that it does not
have discretionary authority as to certain shares to vote on a particular
matter, those shares will not be considered as present and entitled to vote with
respect to that matter. Shares represented by properly executed proxies in the
accompanying form will be voted as directed. If no direction is given, proxies
will be voted FOR the Election of Directors, FOR the amendment to the Company's
Restated Certificate of Incorporation to increase the authorized number of
shares of the Company's Common Stock, and FOR the ratification of the
appointment of Ernst & Young as Independent Certified Public Accountants.
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Restated Certificate of Incorporation of the Company provides for a
Board of not less than 5 nor more than 20 directors, the exact number to be
fixed by the Board of Directors. The Board has currently fixed that number at
fifteen, effective June 22, 1993. The Board is divided into three classes, with
one class elected at each annual meeting to serve for a term of three years. The
Board of Directors has nominated five individuals to be elected in 1994, as
Class I directors, each to serve until the annual meeting to be held in 1997 and
until their respective successors have been duly elected and qualified. All of
the nominees are currently directors of the Company. Only the five members of
Class I are to be elected at the 1994 Annual Meeting. Directors are elected by
plurality vote. Proxies will be voted in favor of the election of each of the
nominees named below unless otherwise directed. If any of the nominees should be
unable to serve, proxies will be voted for such person, if any, as may be
designated by the Board of Directors to fill any such vacancy. The information
provided below for each director or nominee for election as a director is
provided as of March 1, 1994.
<PAGE> 4
INFORMATION REGARDING THE NOMINEES STANDING FOR ELECTION IN 1994 AS CLASS I
DIRECTORS
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION AND OTHER INFORMATION AGE SINCE
- -------------------- -------------------------------------------- --- --------
<S> <C> <C> <C>
Class I Directors Whose Terms of Office will Continue Until 1997 if Elected
Fernando R. Gumucio Retired. Former Chairman of the Board and 59 1991
Chief Executive Officer of Del Monte USA
from 1987 to 1988 and President from 1985 to
1987. Director of Basic American Foods
Corporation and Bay View Federal Savings, a
California savings and loan company.
Leon G. Harmon Retired. Member of the Executive Board and 68 1982
former President and Chief Executive Officer
of First Interstate Bank of Utah, N.A. for
more than five years.
John E. Masline Retired. Former Senior Partner, Ernst & 66 1988
Young from 1967 to October 1986.
L. S. Skaggs Chairman of the Board of the Company since 70 1950
1962. President of the Company from February
1987 to September 1988.
Arthur K. Smith President of the University of Utah since 56 1992
August 1991. Executive Vice President and
Provost of the University of South Carolina
from 1988 through August 1991. Director of
First Security Corp.
</TABLE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE NOMINEES FOR DIRECTOR.
INFORMATION REGARDING DIRECTORS WHO ARE NOT NOMINEES FOR ELECTION AND WHOSE
TERMS CONTINUE BEYOND 1994
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION AND OTHER INFORMATION AGE SINCE
- -------------------- -------------------------------------------- --- --------
<S> <C> <C> <C>
Class II Directors Whose Terms of Office Continue Until 1995
Arden B. Engebretsen Chairman of the Board of Herpak Limited, an 62 1988
international financial consulting firm,
since January 1991. Vice Chairman of the
Board of Hercules Incorporated from March
1987 to January 1991. Chief Financial
Officer of Hercules Incorporated from 1978
to January 1991. Director of Mellon Bank
Delaware. Member of Corporate Finance
Committee of Financial Executives Institute.
Member, National Advisory Council,
University of Utah. Trustee, Financial
Accounting Foundation.
James B. Fisher Retired. Former President and Director of J. 62 1988
G. Boswell Company, an agricultural
production, processing and marketing
company, from 1980 to September 1984.
Victor L. Lund Chief Executive Officer and President of the 46 1988
Company since August 1992; Co-Chief
Executive Officer from March 1992 to August
1992; Chief Financial and Administrative
Officer from February 1989 to March 1992.
Vice Chairman of the Board of the Company
from September 1988 to August 1992.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION AND OTHER INFORMATION AGE SINCE
- -------------------- -------------------------------------------- --- --------
<S> <C> <C> <C>
Class II Directors Whose Terms of Office Continue Until 1995 (Continued)
L. Tom Perry Member of the Council of the Twelve Apostles 71 1980
of The Church of Jesus Christ of Latter-day
Saints, Salt Lake City, Utah for more than
five years prior to the date hereof.
Chairman of the Board of ZCMI, Inc. and
Director of Zions First National Bank.
J. L. Scott Retired. Former Co-Chief Executive Officer 64 1987
of the Company from March 1992 to August
1992 and President from September 1990 to
August 1992. Chief Executive Officer from
February 1989 to March 1992; Vice Chairman
of the Board of the Company from September
1987 to June 1990. Director of TJ
International.
Class III Directors Whose Terms of Office Continue Until 1996
Henry I. Bryant Managing Director of the Financial 51 1992
Institutions Group in the Corporate Finance
Unit of J. P. Morgan & Co. Incorporated, an
investment banking firm, since July 1992;
prior thereto, Managing Director, Corporate
Finance, Western Region for more than five
years. Director of J. P. Morgan California
from 1990 to 1992.
Louis H. Callister Chairman of the Board and Senior Partner in 58 1985
the law firm of Callister, Duncan & Nebeker,
P.C., Salt Lake City, Utah for more than
five years. Vice Chairman, University of
Utah Board of Trustees. Member, Board of
Trustees of the Economic Development
Corporation of Utah.
Michael T. Miller President and Executive Director of the 53 1992
ALSAM Foundation, a private charitable
foundation, since July 1992. Chief Executive
Officer and President of Jewel Osco
Southwest, Inc., a subsidiary of the
Company, from June 1991 through June 1992;
Chief Executive Officer and President of
Alpha Beta Company, a former subsidiary of
the Company, from October 1990 through May
1991; Senior Vice President Governmental
Relations of the Company from February 1989
to October 1990.
Barbara Scott Retired. Former Senior Vice President and 69 1985
Preiskel General Counsel of the Motion Picture
Association of America, a trade association,
from 1977 to March 1983. Director of General
Electric Company, Massachusetts Mutual Life
Insurance Co., Textron, Inc. and The
Washington Post Co.
Aline W. Skaggs Member, Salt Lake City Airport Authority 68 1981
from January 1986 until January 1989.
Member, National Advisory Council,
University of Utah, Member, Health Sciences
Council, University of Utah, and civic
leader. Aline W. Skaggs is the wife of L. S.
Skaggs, Chairman of the Board of the
Company.
</TABLE>
3
<PAGE> 6
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth, as of January 29, 1994, the number of
shares of the Company's Common Stock owned by directors (including nominees for
director), the five executive officers named in the Summary Compensation Table
on page 8 hereof, and by all executive officers and directors as a group. The
information set forth below also includes the number of shares of the Company's
Common Stock owned by each person known to the Company to be a beneficial owner
of more than five percent of such stock as of January 29, 1994.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
NAME(1) BENEFICIALLY OWNED(2)(3) BENEFICIALLY OWNED(2)(4)
---------------------------------- ------------------------ ------------------------
<S> <C> <C>
Scott Bergeson.................... 146,432 *
Henry I. Bryant................... 3,000 *
Louis H. Callister................ 31,800 *
Lawrence A. Del Santo............. 301,306 *
Arden B. Engebretsen.............. 27,200 *
James B. Fisher................... 23,936 *
Fernando R. Gumucio............... 20,400 *
Leon G. Harmon.................... 40,400 *
Victor L. Lund.................... 516,446 *
David L. Maher.................... 256,420 *
John E. Masline................... 24,000 *
Michael T. Miller................. 77,568 *
L. Tom Perry...................... 1,200 *
Barbara Scott Preiskel............ 21,400 *
J. L. Scott....................... 102,436 *
Aline W. Skaggs................... 185,452 *
L. S. Skaggs...................... 24,818,960 17.42%
Arthur K. Smith................... 20,000 *
All directors and executive
officers as a group
(30 persons).................... 27,356,854 19.20%
Fayez S. Sarofim (5).............. 9,466,998 6.64%
</TABLE>
- ---------------
* Does not exceed one percent of the outstanding shares.
(1) Correspondence to all officers and directors of the Company may be mailed to
709 East South Temple, Salt Lake City, Utah 84102. The address of Fayez S.
Sarofim is Two Houston Center, Suite 2907, Houston, Texas 77010.
(2) On March 21, 1994, the Board of Directors of the Company approved a
two-for-one stock split, effected in the form of a 100% stock dividend paid
on April 21, 1994 to shareholders of record on April 7, 1994. All share and
per share amounts set forth in the proxy statement reflect such two-for-one
stock split.
(3) These totals include, pursuant to rules of the Securities and Exchange
Commission (the "SEC"), shares as to which sole or shared voting power or
sole or shared dispositive power is possessed. These totals also include:
(i) the indicated number of shares of Common Stock which such persons have
the right to acquire through stock options exercisable within 60 days: Mr.
Bergeson -- 40,560; Mr. Del Santo -- 60,568; Mr. Lund -- 5,876; Mr.
Maher -- 2,264, Mr. Skaggs -- 0; all directors and executive officers as a
group (30 persons) -- 266,360; and (ii) the following number of shares of
Common Stock that could be allocated to the American Stores Retirement
Estates accounts of such persons for voting purposes on December 31, 1993:
Mr. Bergeson -- 0; Mr. Del Santo -- 0; Mr. Lund -- 0; Mr. Maher -- 7,588;
Mr. Skaggs -- 169,000; all directors and executive officers as a group (30
persons) -- 240,910.
(4) On January 29, 1994, there were 142,503,702 shares of Common Stock issued
and outstanding, after giving effect to the two-for-one stock split.
4
<PAGE> 7
(5) Based upon information contained in a Schedule 13G filed with the SEC, as of
December 31, 1993, Mr. Sarofim may be deemed to be the beneficial owner of
9,466,998 shares of Common Stock. Of such shares, Mr. Sarofim has sole
voting or dispositive power as to 200,000 shares and shared voting or
dispositive power as to 9,266,998 shares. All of the securities that are not
subject to sole voting and dispositive power are held in accounts managed by
Fayez Sarofim & Co. (of which Mr. Sarofim is the majority shareholder) or by
its wholly-owned subsidiary, Sarofim Trust Co., except for 6,200 shares
which are held in trust with respect to which Mr. Sarofim is one of several
trustees.
Compliance with Section 16(a) of the Exchange Act. 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 and the New York Stock Exchange. Officers,
directors and greater-than-ten-percent holders are required to furnish the
Company with copies of all forms filed by them. To the Company's knowledge,
based solely on the Company's review of copies of such reports or written
representations from certain reporting persons that no Forms 5 were required to
be filed by those persons, the Company believes that during the fiscal year
ended January 29, 1994, its officers, directors, greater-than-ten-percent
beneficial owners and other persons subject to Section 16 of the Exchange Act
complied with the applicable filing requirements of Section 16(a).
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company held a total of six meetings during
fiscal year 1993. The Board had as standing committees on April 1, 1994, an
Audit Committee, a Compensation and Stock Option Committee, an Executive
Committee, a Finance Committee and a Nominating Committee.
The Audit Committee is composed of eight directors who are not full-time
employees of the Company. It recommends to the Board the selection of the
independent certified public accountants for the Company, subject to
ratification by the shareholders at the Annual Meeting; reviews the audit
activities of the independent certified public accountants and the Company's
internal audit staff, the scope of non-audit functions to be performed by the
independent certified public accountants and the financial and accounting
control policies and practices of the Company; reviews related party
transactions; and periodically meets with the independent certified public
accountants, internal audit staff and management. There were four Audit
Committee meetings held in fiscal year 1993. Its current members are: John E.
Masline (Chairperson), Henry I. Bryant, Arden B. Engebretsen, James B. Fisher,
Fernando R. Gumucio, Michael T. Miller, L. Tom Perry and J. L. Scott.
The Compensation and Stock Option Committee is composed of seven
non-employee directors. It is responsible for administering the Company's stock
option plans and for setting compensation of officers and directors. Four
meetings of the Compensation and Stock Option Committee were held in fiscal year
1993. Its current members are: Leon G. Harmon (Chairperson), Henry I. Bryant,
Louis H. Callister, Arden B. Engebretsen, James B. Fisher, L. Tom Perry and
Barbara S. Preiskel.
The Executive Committee is composed of seven directors. It has authority to
act for the Board on most matters during intervals between Board meetings. The
Executive Committee did not meet in fiscal year 1993. Its current members are:
Leon G. Harmon (Chairperson), Louis H. Callister, Victor L. Lund, L. Tom Perry,
Aline W. Skaggs, L. S. Skaggs and Arthur K. Smith.
The Finance Committee is composed of seven directors. Its duties are to
evaluate the Company's financial planning, including the annual capital budget
and periodic financial forecasts, and to review and make recommendations on
matters related to the Company's financial requirements, resources and policies.
There were five meetings of the Finance Committee held in fiscal year 1993. The
current members of the Finance Committee are: L. Tom Perry (Chairperson), Leon
G. Harmon, Victor L. Lund, John E. Masline, J. L. Scott, L. S. Skaggs and Arthur
K. Smith.
The Nominating Committee is composed of six directors who are not full-time
employees of the Company. This Committee recommends persons to the Board of
Directors to be nominated for election to the
5
<PAGE> 8
Board of Directors and for election as officers of the Company. The Nominating
Committee has no established procedure for consideration of persons recommended
by shareholders. The Nominating Committee held four meetings in fiscal year
1993. Its current members are: Barbara S. Preiskel (Chairperson), Louis H.
Callister, Fernando R. Gumucio, Leon G. Harmon, Michael T. Miller and Aline W.
Skaggs.
During fiscal year 1993, no director attended less than 75% of the
aggregate number of meetings of the Board of Directors and Committees on which
he or she served.
In addition to the foregoing committees of the Board of Directors, the
Company has a Benefit Plans Committee composed of one employee director (Victor
L. Lund) and five members of management. The members of the Committee are
appointed by the Board of Directors. This Committee is responsible for the
administration, funding, investment of assets, interpretation and management of
all benefit plans of the Company other than its stock purchase and stock option
plans and the annual and LTIP bonus plans. The Benefit Plans Committee held nine
meetings in fiscal year 1993.
The Investment Management Subcommittee is composed of four directors, three
members of management and two other individuals. This Subcommittee acts as an
advisor to the Benefit Plans Committee on matters relating to benefit plan fund
structure, asset allocation, investment manager selection and evaluation of
investment manager performance. The Subcommittee has authority to make
recommendations to the Benefit Plans Committee. The Investment Management
Subcommittee held two meetings in fiscal year 1993. The following directors are
current members of the Committee: Leon G. Harmon, Victor L. Lund, John E.
Masline and Michael T. Miller.
At its March 22, 1994 meeting, the Board discussed the advisability of
meeting more frequently and on making decisions as a whole that were previously
referred first to a Board Committee. The discussions included the possibility of
eliminating the Nominating and the Finance Committees, but leaving intact the
Executive Committee and the independent Audit and Compensation and Stock Option
Committees. It is anticipated that the Board will determine whether this course
of action is advisable at its June 21, 1994 meeting.
DIRECTORS' COMPENSATION
Directors who are active, full-time employees of the Company or one of its
subsidiaries receive no additional compensation as directors. All other
directors receive an annual retainer fee of $30,000, plus an additional $1,000
for each Board meeting attended. Members of the Audit, the Compensation and
Stock Option, and the Nominating Committees receive a fee of $1,000 for each
Committee meeting attended, with the Chairpersons of the Audit, the Compensation
and Stock Option, the Executive and the Finance Committees receiving an
additional $8,000 per year for serving as Chairpersons. The Nominating Committee
Chairperson receives an additional $4,000 per year. Non-employee members of the
Finance Committee receive an annual fee of $7,500. All non-employee members of
the Executive Committee receive an annual fee of $10,000 per year. No additional
fees are paid for attendance at Finance or Executive Committee meetings. Members
of the Investment Management Subcommittee who are not active, full-time
employees of the Company or one of its subsidiaries are paid $5,000 for each
meeting attended.
As noted above, at its March 22, 1994 meeting, the Board discussed the
advisability of meeting more frequently and of making decisions as a whole that
were previously referred first to a Board Committee. In light of these
contemplated changes, the Board also considered the advisability of revising its
compensation for directors who are not active, full-time employees of the
Company by eliminating fees paid for attendance at Board and Committee meetings
or for serving as a member of a Board Committee or as a Chairperson of any Board
Committee, and increasing the annual retainer fee from $30,000 to $80,000. It is
anticipated that the Board will determine the advisability of revising the
Directors' compensation at its June 21, 1994 meeting.
Directors who are not active, full-time employees of the Company or one of
its subsidiaries are eligible to participate in a deferred compensation plan
which permits each director to elect that a portion or all of the compensation
earned by the director for service on the Board and its committees be deferred
until the period
6
<PAGE> 9
subsequent to the termination of the director's service on the Board. Any
amounts so deferred earn interest during the period of the deferral at a stated
fluctuating rate.
Directors who are not active, full-time employees of the Company or one of
its subsidiaries and their spouses are eligible and encouraged to participate in
the Scripps Executive Health Program that is available to certain key executive
officers of the Company and its subsidiaries. The program consists of a
comprehensive physical evaluation, private consultations covering exercise,
nutrition and stress management, and attendance at a seminar covering various
topics. The frequency of the examination is generally based on the director's
age. The cost of the examination, including travel and hotel expenses, is paid
by the Company.
On February 1, 1989 the Board adopted the American Stores Company
Retirement Plan for Non-Employee Directors (the "NED Plan"). Under the NED Plan,
non-employee directors are eligible for a retirement benefit if they retire from
the Board (i) between the ages of 65 and 71 and have served on the Board for at
least ten years, or (ii) at or after age 71 and have served on the Board for at
least five years. An eligible non-employee director who retires from the Board
is entitled to receive for the remainder of his or her life, annual compensation
equal to the annual retainer fees the director received in the year just prior
to retiring. A non-employee director who becomes permanently and totally
disabled, or who retires from the Board between the ages of 65 and 71 and has
served less than ten years, or who retires from the Board after the age of 71
and has less than five years of service, is entitled to annual compensation
equal to the annual retainer fees the director received just prior to retiring
for the same number of years and months the director served on the Board prior
to retirement. A retired non-employee director receiving payments under the NED
Plan is considered a Director Emeritus, must remain available on a reasonable
basis to consult with the Company and may not engage in any activity in
competition with the Company. All benefit payments under the NED Plan terminate
upon the death of the retired non-employee director. The NED Plan is
administered by the Benefit Plans Committee of the Company.
During 1992, the Company's shareholders approved the Board of Directors
Stock Purchase Incentive Plan (the "Director Plan"). All members of the Board of
Directors who are not officers or employees of the Company or its subsidiaries,
or the spouses of officers or employees, and who are younger than 69 years of
age, are eligible to participate in the Director Plan (the "Eligible
Directors"). Under the Director Plan, Eligible Directors are granted rights to
purchase up to 20,000 shares of the Company's Common Stock on a specified date
at the average market price of the Common Stock on such date. Eligible Directors
also receive from the Company a full-recourse, interest-bearing loan for the
entire purchase price of the Common Stock, and a deferred cash incentive award
which is generally payable at the end of a five-year performance cycle. A
description of the deferred cash incentive award under a similar plan for
executive officers is included in the Compensation Committee's report on
executive compensation and can be found on page 13 of this proxy statement. The
Director Plan provides that the loans will have an eight-year term and will
accrue interest at the applicable federal rate (as determined by Section 1274(d)
of the Internal Revenue Code of 1986, as amended) for eight-year loans on the
purchase date, compounded annually. Interest on the loans is payable during the
first five years at the rate of two percent per annum on the original principal
amount of the loan (which rate was approximately equal to the dividend yield on
the Common Stock at the time the Director Plan was approved). The Director Plan
provides that the proceeds of the deferred cash incentives be applied to prepay
the loans. Following such prepayment, the balance of the loans at the end of the
five-year performance cycle, together with accrued and unpaid interest thereon,
will be payable in three equal installments (plus interest) on the sixth,
seventh and eighth anniversaries of the purchase date. The payment of the loan
will be accelerated if a director's service is terminated during the performance
cycle for any reason other than retirement, and the loan will generally become
due on the 120th day after termination of service. In the event of retirement,
the loan must be repaid over a three-year period following retirement. The loan
may also be prepaid at any time at the director's option. On June 16, 1992, the
following directors each exercised purchase awards for 20,000 shares of the
Company's Common Stock and each received from the Company a loan with an
interest rate of 7.04% in the amount of $348,750.00: Messrs. Callister,
Engebretsen, Fisher, Gumucio, Harmon and Masline, and Mrs. Preiskel. On December
30, 1992, Messrs. Bryant and Smith exercised purchase awards and received loans
with an interest rate of 6.15% in the indicated amounts: Mr. Bryant -- 3,000
shares, $65,343.75; and Mr. Smith -- 20,000 shares, $435,625.00. As of January
29, 1994, the aggregate
7
<PAGE> 10
outstanding balance of loans made pursuant to the Director Plan was $3,200,870,
which includes accrued, unpaid interest, and which sum is the largest aggregate
amount outstanding during the fiscal year. At the end of the Company's 1993
fiscal year, all of the directors who are participants in the Director Plan were
vested in 7 1/2% of the service award component of the deferred cash incentive
award, the dollar amount of which is as follows: Messrs. Callister, Engebretsen,
Fisher, Gumucio, Harmon and Masline, and Mrs. Preiskel -- $27,475; Mr.
Smith -- $34,028; and Mr. Bryant -- $5,104.
EXECUTIVE COMPENSATION
The following table shows compensation paid by the Company to the Chief
Executive Officer and the four other most highly compensated executive officers
at January 29, 1994 for services performed by such individuals for all
capacities in which they served during the last three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION(1)
------------------
ANNUAL COMPENSATION(1) AWARDS PAYOUTS
NAME AND -------------------------------- -------- -------
PRINCIPAL POSITION OTHER ANNUAL OPTIONS/ LTIP ALL OTHER
AT END OF 1993 SALARY BONUS COMPENSATION SARS PAYOUTS COMPENSATION
FISCAL YEAR YEAR ($) ($)(2) ($)(3)(4) ($) ($)(5) ($)(3)(6)
- -------------------------------- ----- ------- ------- ------------ -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
VICTOR L. LUND 1993 737,500 259,145 -- 0 683,785 159,922
President and Chief 1992 656,666 351,885 -- 0 343,835 188,763
Executive Officer 1991 445,834 105,173 -- 0 290,695 --
SCOTT BERGESON 1993 340,000 119,470 -- 0 157,188 78,146
Senior Vice President, 1992 340,000 182,194 -- 0 233,419 116,707
Human Resources 1991 340,000 80,207 -- 0 238,000 --
LAWRENCE A. DEL SANTO 1993 495,834 174,228 -- 0 407,932 107,339
Senior Executive Vice 1992 475,000 203,015 -- 0 0 96,473
President and Chief 1991 470,192 221,797 -- 0 0 --
Operating Officer -- Food
DAVID L. MAHER 1993 433,333 152,266 -- 0 381,809 84,048
Senior Executive Vice 1992 344,167 106,399 -- 0 210,363 97,453
President and Chief 1991 312,500 43,467 -- 0 169,194 --
Operating Officer -- Drug
L. S. SKAGGS 1993 500,000 175,692 -- 0 108,898 110,969
Chairman of the Board 1992 500,000 267,933 -- 0 316,565 161,101
1991 483,334 114,019 -- 0 299,445 --
</TABLE>
- ---------------
(1) Compensation deferred at the election of the executive, pursuant to the
American Stores Retirement Estates 401(k) plan ("ASRE") and the Supplemental
Executive Retirement Plan ("SERP"), is included in the year earned.
(2) The bonus amount is payable pursuant to the Company's Key Management Annual
Incentive Plan described in the Compensation Committee Report on Executive
and CEO Compensation on page 12 of this proxy statement. Cash bonuses for
services rendered in fiscal years 1993, 1992 and 1991 have been listed in
the year earned, and were generally paid in April of the following fiscal
year.
(3) In accordance with the transitional provisions applicable to the rules of
the SEC, information with respect to amounts of Other Annual Compensation
and All Other Compensation for fiscal year 1991 has not been included.
(4) Perquisites and other personal benefits paid to each named executive officer
in each instance aggregated less than $50,000 and, accordingly, are omitted
from the table as permitted by the rules of the SEC. Additionally, there is
no other annual compensation requiring disclosure.
(5) The LTIP payout amounts reported represent (a) amounts payable pursuant to
the Company's Key Management Long-Term Performance Incentive Plan described
in the Compensation Committee Report on Executive and CEO Compensation on
page 12 of this proxy statement, and (b) the vested amount of the service
component of the deferred cash incentive award earned under the Key
Executive Stock
8
<PAGE> 11
Purchase Incentive Plan described in the Compensation Committee Report on
Executive and CEO Compensation on page 13 of this proxy statement. The
payout amounts pursuant to the Key Management Long-Term Performance
Incentive Plan for services rendered in fiscal years 1993, 1992 and 1991
have been listed in the year earned, were generally paid in April of the
following fiscal year and for 1993 were as follows for the named executive
officers: Mr. Lund -- $135,082; Mr. Bergeson -- $74,883; Mr. Del
Santo -- $106,145; Mr. Maher -- $80,022 and Mr. Skaggs -- $108,898. The
vested amount of the service component is a deferred award that is payable
at the end of the five-year performance cycle and the full amount of the
deferred award, less applicable taxes, must be applied towards repayment of
the Purchase Loan, also described on page 13. The amounts of the service
award that vested during 1993 for the named executive officers are as
follows: Mr. Lund -- $548,703; Mr. Bergeson -- $82,305; Mr. Del
Santo -- $301,787; and Mr. Maher -- $301,787. Mr. Skaggs is not a
participant in the Key Executive Plan.
(6) The compensation reported represents (a) Company contributions under ASRE,
(b) Company contributions under SERP, and (c) the dollar value of Company
paid insurance premiums for term life insurance for the executives. The
amounts contributed by the Company during fiscal year 1993 to the
executives' ASRE and SERP accounts, and the insurance premiums paid were as
follows: Mr. Lund -- $23,372; $132,169; $4,381; Mr. Bergeson -- $23,372;
$52,754; $2,020; Mr. Del Santo -- $23,372; $81,022; $2,945; Mr.
Maher -- $23,372; $58,102; $2,574; and Mr. Skaggs -- $23,372; $87,498; $99.
The following table shows information concerning the exercise of stock
options by each of the named executive officers and the fiscal year end value of
unexercised options.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUE
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT FISCAL IN-THE-MONEY OPTIONS/SARS
VALUE YEAR END(#) AT FISCAL YEAR END($)(4)
SHARES ACQUIRED REALIZED ------------------------------ ---------------------------
NAME ON EXERCISE(#)(1) ($)(2) EXERCISABLE UNEXERCISABLE(3) EXERCISABLE UNEXERCISABLE
- ------------------------- ----------------- ---------- ----------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Victor L. Lund........... 14,284 $ 302,195 5,876 42,864 $ 50,023 $ 900,144
Scott Bergeson........... 80,000 $1,112,500 40,560 71,440 $ 690,510 $ 828,365
Lawrence A. Del Santo.... 0 0 60,568 93,728 $ 841,928 $ 1,860,788
David L. Maher........... 8,856 $ 180,441 2,264 14,576 $ 17,121 $ 306,096
L. S. Skaggs............. 0 0 0 0 0 0
</TABLE>
- ---------------
(1) Totals include the gross number of options exercised and do not exclude
shares exercised as stock appreciation rights.
(2) Represents the average of the high and low value of the Company's common
stock at date of exercise minus the exercise price.
(3) If a Change of Control (as defined in the stock options plan(s) under which
the options were granted) were to occur before these options vest, the
options would become immediately exercisable.
(4) Represents the difference between the closing price of the Company's Common
Stock at 1993 fiscal year end ($21.25 per share) and the exercise price of
the options.
The following table provides information concerning cash-incentive awards
made during fiscal year 1993 under the Company's 1993-1994-1995 Key Management
Long-Term Performance Incentive Plan (the "93-94-95 LTIP"). Each award
represents the right to receive an amount in cash for the three-year period
ending February 3, 1996 based on earnings per share over the three-year period
compared to the target established by the Compensation Committee. If earnings
per share performance falls between the threshold level and the target level or
between the target level and the maximum level then the amount of the award is
prorated accordingly. Payments under the 93-94-95 LTIP will be made in April
1996 and will be reported in the Summary Compensation Table of the Company's
1996 Proxy Statement.
9
<PAGE> 12
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE
NUMBER OF OR OTHER ESTIMATED FUTURE PAYOUTS UNDER
SHARES, UNITS PERIOD UNTIL NON-STOCK PRICE BASED PLANS
OR OTHER MATURATION -------------------------------------------
NAME RIGHTS(#) OR PAYOUT THRESHOLD($) TARGET($)(1) MAXIMUM($)(2)
- --------------------------- ------------- ---------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Victor L. Lund............. -- February 3, 1996 0 149,167 522,083
Scott Bergeson............. -- February 3, 1996 0 44,000 154,000
Lawrence A. Del Santo...... -- February 3, 1996 0 99,722 349,028
David L. Maher............. -- February 3, 1996 0 88,889 311,111
L. S. Skaggs............... -- February 3, 1996 0 100,000 350,000
</TABLE>
- ---------------
(1) Target awards are 20% of the executive's average annual base salary over the
three-year performance cycle. The target payout shown above assumes the
executive's 1994 base salary remains unchanged through the remainder of the
three-year performance cycle.
(2) The maximum attainable award is 70% of the executive's average annual base
salary over the three-year performance cycle. The maximum payout shown above
assumes the executive's 1994 base salary remains unchanged through the
remainder of the three-year performance cycle.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE AND
CEO COMPENSATION
The SEC requires reporting companies to provide detailed information on
compensation and benefits provided to their CEO and to the four most highly
compensated executive officers whose annual base salary and bonus compensation
was in excess of $100,000. Pursuant to these rules, the following report on
executive and CEO compensation is submitted by the following members of the
Compensation and Stock Option Committee of the Board of Directors of the Company
(the "Committee"): Leon G. Harmon (Chairman), Henry I. Bryant, Louis H.
Callister, Arden B. Engebretsen, James B. Fisher, L. Tom Perry and Barbara S.
Preiskel. None of the Committee members is now or has been an employee of the
Company, and the Committee members are ineligible to participate in any of the
compensation plans that they administer. As permitted by law and the Company's
Certificate of Incorporation, the Board has delegated to the Committee, among
other duties, responsibility for establishing policies and making decisions
relating to executive compensation. The Committee regularly reports to the Board
on its activities, and decisions made by the Committee are ratified by the full
Board.
The Committee's report summarizes the Company's compensation policies for
its executive officers and explains how the compensation plans are closely
linked to the achievement of the Company's financial goals and to increases in
the Company's stock price.
COMPENSATION PHILOSOPHY
A primary objective of the Company is to increase shareholder value. A key
element in achieving this objective is the Company's ability to attract and
retain a core group of executive officers whose individual and combined efforts
will provide the greatest likelihood of success. To this end, the Company and
the Committee have applied the following principles in developing a compensation
program applicable to all of the Company's and its subsidiaries' executive
management, including the CEO:
- Align the financial interests of the Company's executive officers more
closely with those of the Company's shareholders by linking a significant
percentage of the officers' total target compensation to the attainment
of Company profitability and corporate goals.
- Provide for each position competitive total target compensation at the
median level based on industry, peer group and national surveys.
- Annually review performance measures necessary to establish varying bonus
levels to ensure consistency with the Company's overall strategic goals.
10
<PAGE> 13
- Create additional incentives to promote the long-term growth and
financial success of the Company by encouraging and making it possible
for executives to increase their ownership of the Company's Common Stock
through the use of stock option and stock purchase plans that have been
approved by the Company's shareholders.
The Committee determines and approves the compensation paid to the CEO and the
executives named in the summary compensation table as well as the compensation
paid to all other Company officers. Additionally, the Committee reviews the
compensation paid to the officers of the Company's subsidiaries. In reviewing
the individual performance of the executives whose compensation is detailed in
this proxy statement (other than Mr. Lund), the Committee takes into account the
views of Mr. Lund and other members of management and outside consultants to the
extent deemed appropriate by the Committee.
Pursuant to Section 162(m) of the Internal Revenue Code, enacted in 1993,
publicly traded corporations will not be permitted to deduct compensation in
excess of $1 million paid to the CEO and the four other most highly compensated
executive officers for 1994 and thereafter, unless the compensation qualifies
for an exception for "performance-based compensation." To qualify as
"performance-based," compensation payments must be based solely upon the
achievement of objective performance goals and made under a plan that is
administered by a committee of outside directors. In addition, the material
terms of the plan must be disclosed to and approved by shareholders, and the
Compensation Committee must certify that the performance goals were achieved
before payments can be made. The Compensation Committee is currently studying
the effect of this limitation on the Company's compensation programs and
believes that it would be premature to take any action at this time, as the $1
million limitation is newly enacted, and the Internal Revenue Service has not
yet promulgated final regulations interpreting it. It is not anticipated that
compensation payable to any executive officer in 1994 would be non-deductible.
The Committee will continue to address this issue when formulating compensation
arrangements for executive officers.
RELATIONSHIP OF PAY TO PERFORMANCE UNDER COMPENSATION PLANS
The Company uses industry, peer group and national surveys that are updated
annually to establish target compensation grade levels for its CEO and executive
officers that are based on median target compensation paid to individuals
holding similar positions at other companies in the retail food and drug
industries and companies of similar size. This comparison group includes some of
the companies comprising the Peer Group Index described on page 14. The
Committee uses the same criteria in establishing Mr. Lund's target compensation
objective as it does in determining compensation for the Company's other
executive officers. The cash compensation objective for executive officers and
Mr. Lund consists of a base salary and an overall bonus target of 50% of the
base salary (30% from the annual bonus plan and 20% from the long-term incentive
plan). Thus, base salaries represent approximately 67% of the targeted cash
compensation objective, and the combination of the annual and long-term
incentive payments, which are based on sales and/or earnings of the Company or
its subsidiaries, represent approximately 33% of the executive's targeted cash
compensation objective.
Base salaries for executive officers are determined by evaluating the
responsibilities of the position held and the experience of the individual,
considered in the context of the total compensation paid to individuals in
similar positions at other companies in the retail food and drug industries and
companies of similar size. Executives' base salaries are reviewed by the
Committee on an annual basis and adjustments are determined by evaluating the
performance of the Company (or a subsidiary) and of each executive officer.
Changes in base salary also take into account changes in the responsibilities of
executives. In September 1992, Mr. Lund was elected CEO and President, and at
that time the Committee authorized an increase in Mr. Lund's salary to $750,000,
effective April 1, 1993. The Committee believes that Mr. Lund's total
compensation objective, including his base salary of $750,000, reflects the
median compensation paid to CEOs of peer companies and companies of similar size
and Mr. Lund's experience and qualifications for the position.
11
<PAGE> 14
The executive compensation program also includes two stock option plans and
a stock purchase incentive plan. The performance features of these plans,
together with the Company's annual and long-term incentive bonus plans, are
described below.
ANNUAL BONUS PLAN
The Key Management Annual Incentive Plan is the Company's annual bonus
program (the "Annual Plan") for executive officers and key management. At the
beginning of each year, the Committee establishes minimum, target and maximum
performance goals on which a bonus may be paid. The Annual Plan for 1993 was
designed to provide an incentive for participants to focus on achieving and
exceeding annual earnings goals. For Messrs. Lund, Bergeson, Del Santo, Maher,
and Skaggs, these performance goals were based on earnings of the Company. The
target performance goals approved by the Committee required achievement of
earnings above the prior year's results. Individuals participating in the Annual
Plan received an incentive award equal to a specified percentage of their
average annual salary during the fiscal year. The target annual bonus for key
executive officers was 30% of base salary, which corresponded to 20% of the
executives' targeted cash compensation objective. The Committee determined the
individual's percentage participation by the individual's job classification and
responsibilities. In fiscal 1993, the Company exceeded its earnings target
level. The bonus under the Annual Plan paid to Mr. Lund and the four executives
in the summary compensation table represents 35% of each individual's average
base compensation for fiscal year 1993.
LONG-TERM PERFORMANCE INCENTIVE PLAN
The Key Management Long-Term Performance Incentive Plan ("LTIP") is
intended to focus attention prospectively on the Company's long-term results and
reward achievement of the Company's long-term financial goals. Participation in
LTIP, as determined by the Committee, is limited to key executives and officers
who have a significant impact on the long-term results of the Company. LTIP
performance cycles are three years in length, with a new three-year cycle
starting every fiscal year. At the beginning of each cycle, the Committee sets
specific performance criteria and establishes a minimum and a maximum range of
performance on which a bonus will be paid. If the Company's performance meets
the minimum performance criteria at the end of the three-year cycle,
participants receive a cash payment. The degree of attainment of the Company's
long-term performance goals determines the actual size of the participant's
awards. Target awards are 20% of the participants' average annual base salary,
which corresponds to 13% of the executives' targeted cash compensation objective
over the three-year performance cycle. The performance measurement for bonus
amounts payable under the 1991-1992-1993 LTIP was based on earnings per share
for the three-year period, and the Company exceeded its target level by 1% for
this LTIP cycle. The LTIP bonus paid to Mr. Lund and the four executives in the
summary compensation table represents 22% of each individual's average base
compensation for fiscal years 1991, 1992, and 1993.
STOCK OPTION PLANS
The Committee believes that stock option plans can serve as an effective
incentive to the Company's executive officers and key employees to further the
long-term growth and performance of the Company since the value of an option
bears a direct relationship to the Company's stock price. The Committee
administers the Company's stock option plans and determines the individuals to
whom stock options, stock appreciation rights ("SARs") and restricted stock
awards are granted. The Committee, however, does not grant stock options on a
regular basis. The Committee did not grant any stock options, SARs or restricted
stock awards to Mr. Lund or any of the other executives listed in the summary
compensation table during 1993. Additionally, the Committee did not reprice any
outstanding options or SARs during 1993.
STOCK PURCHASE INCENTIVE PLAN
During 1992, the Company's shareholders approved the Key Executive Stock
Purchase Incentive Plan (the "Executive Plan"). The Executive Plan was developed
in consultation with an outside compensation consultant after a review by the
Committee and such consultant of the Company's existing compensation programs.
The Executive Plan is intended to promote the long-term growth and financial
success of the
12
<PAGE> 15
Company by strengthening the links between the Company's management and its
shareholders. The Executive Plan affords certain key executive officers of the
Company and its subsidiaries the opportunity to significantly increase their
ownership of the Company's Common Stock. The Executive Plan also offers the
potential for substantial financial incentives (in addition to potential
appreciation in the value of the Common Stock) based on continued service and
long-term stock price performance, but in a manner that places such executive
officers at risk in the event of poor Company performance. By having
participants in the Executive Plan share in both the upside and downside
potential inherent in stock ownership by purchasing Common Stock using
full-recourse, interest-bearing loans, the Committee believes the Executive Plan
incorporates an important element of investment risk that generally is not found
in other executive incentive plans.
During June 1992, under the Executive Plan, Mr. Lund, three of the
executives named in the summary compensation table and certain other executive
officers selected by the Committee received the rights to purchase a specified
number of shares of the Company's Common Stock on June 16, 1992 at the average
market price of the Common Stock on such date. Pursuant to the Executive Plan,
the executive officers also received from the Company full-recourse,
interest-bearing loans for the entire purchase price of the Common Stock. Each
executive officer was required to pledge the Common Stock he or she purchased
with the proceeds of the loan to secure such loan. The loans have an eight-year
term and accrue interest at the rate of 7.04%, compounded annually. Interest is
payable prior to maturity to the extent of dividends paid on the shares
purchased under the Executive Plan, with the balance due at the maturity of the
loan. Under the Executive Plan, Mr. Lund and three of the executives in the
summary compensation table purchased the indicated amounts of Common Stock at a
purchase price of $17.44 per share: Mr. Lund -- 400,000 shares; Mr.
Bergeson -- 60,000 shares; Mr. Del Santo -- 220,000 shares; and Mr.
Maher -- 220,000 shares. Due to Mr. Skaggs's current significant stock
ownership, he was not selected by the Committee to participate in the Executive
Plan.
Participants in the Executive Plan are also eligible to receive a deferred
cash incentive award (the "deferred award") which is generally payable at the
end of a five-year performance cycle. In the case of the executives listed in
the summary compensation table, the five-year performance cycle will end on June
16, 1997. One-half of the deferred award will be based on the executive
officer's continued service with the Company during the performance cycle (the
"service award"), while the other half will be based on the Company's Common
Stock performance (including reinvested dividends) over the five-year
performance cycle relative to shareholder returns for specified companies in the
retail food and drug industry (the "performance award"). The maximum amount of
the deferred award which can be earned by the executive officers is equal to the
amount of the loan and accrued and unpaid interest. Any deferred award must be
applied towards repayment of the loan. Certain deferred awards will be forfeited
if, prior to the end of the five-year performance cycle, an executive officer
sells shares purchased under the Executive Plan or the executive officer's
service with the Company is terminated.
Each executive officer will vest annually in a portion of the service award
in an amount equal to a cumulative percentage of the outstanding loan balance at
the time the service award is earned. The cumulative percentages for each year
are as follows: first year -- 7 1/2%; second year -- 15%; third year -- 22 1/2%;
fourth year -- 30%; and fifth year -- 50%. The service award may not exceed 50%
of the loan balance. At the end of the Company's 1993 fiscal year, all of the
executives listed in the summary compensation table who participated in the
Executive Plan were vested in 7 1/2% of the service award, which amounts are
included in the LTIP Payout Column of the Summary Compensation Table.
The portion of the performance award earned as a percentage of the loan
amount at the time the performance award is paid will vary depending upon the
Company's total shareholder return versus shareholder returns of the members of
the specified peer group, with no performance award earned if the Company's
total shareholder return ranks below the 50th percentile of the peer group, and
100% of the performance award earned if the Company's total shareholder return
is ranked in the 80th or higher percentile of the peer group. The performance
award may not exceed 50% of the loan balance. For the period from June 16, 1992
through March 31, 1994, the Company's total shareholder return versus the
members of the peer group ranked in the 88.9th percentile, and therefore 100% of
the performance award would have been earned, which would be 50% of the loan
balance, assuming such performance was maintained through the full
13
<PAGE> 16
five-year performance cycle. For a comparison of the Company's total shareholder
return over the last five years with the peer group selected for comparison
purposes under the Executive Plan, and a list of the members of the peer group,
see pages 14 and 15. If the Company's Common Stock price declines from the
market value on the day of the award, the loan balance may exceed the combined
value of the stock and plan payments to participants after taxes, in which event
the participants would be required to pay the remaining loan balance with
personal funds.
OTHER COMPENSATION PLANS
The executive compensation program also includes other benefit plans that
are generally available to employees of the Company, including a profit
sharing/401(k) pension plan, a medical plan and a life insurance plan. The
Company has not maintained a defined benefit pension plan for its employees
since the end of 1984. Certain executive officers, including the executives
listed in the summary compensation table, are eligible to participate in a
supplemental executive retirement plan, which is a non-qualified plan intended
to provide benefits where limitations are imposed upon Company contributions to
certain employees due to limits under the Federal tax laws. Except for the
Company's profit sharing/401(k) pension plan, none of the foregoing plans are
tied to Company performance. The Committee believes these plans are comparable
to other companies in the food and drug industries and companies of similar
size.
CONCLUSION
Through the programs described above, a very significant portion of the
Company's executive compensation is linked directly to individual and corporate
performance and stock price appreciation. The adoption of the Executive Plan by
the Company in 1992, which was approved by the shareholders at the 1992 annual
meeting, was a significant step in further strengthening the link between
executive pay and Company stock price performance. The Committee intends to
continue the policy of linking executive compensation to corporate performance
and return to shareholders.
Submitted by the Compensation and Stock Option Committee of the Board of
Directors of the Company.
<TABLE>
<S> <C>
Leon G. Harmon, Chairman
Henry I. Bryant James B. Fisher
Louis H. Callister L. Tom Perry
Arden B. Engebretsen Barbara S. Preiskel
</TABLE>
AMERICAN STORES COMPANY STOCK PRICE PERFORMANCE
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock against
the cumulative total return of the S & P Composite-500 Stock Index and a group
of nine publicly-traded retail food and/or drug companies, which include The
Great Atlantic & Pacific Tea Company, Inc., Albertson's, Inc., The Kroger Co.,
Longs Drug Stores Corporation, Safeway Inc., Smith's Food & Drug Centers, Inc.,
The Vons Companies, Inc., Walgreen Co., and Winn-Dixie Stores, Inc. (the "Peer
Group Index") for the five-year fiscal period ended January 30, 1994. The
companies in the peer group are the same as those used in calculating the
performance awards under the Company's Key Executive Stock Purchase Incentive
Plan. Comparisons are based on the assumption that the value of the investment
on January 28, 1989 in the Company's Common Stock, the securities comprising the
S & P Composite-500 Stock Index, and the Peer Group Index, was $100 and that all
dividends were reinvested.
14
<PAGE> 17
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
AMERICAN STORES COMPANY COMMON, S&P COMPOSITE-500
& PEER GROUP INDICES
<TABLE>
<CAPTION>
MEASUREMENT PERIOD AMERICAN
(FISCAL YEAR COVERED) PEER GROUP S&P 500 STORES
<S> <C> <C> <C>
1/27/89 $100.00 $100.00 $100.00
2/ 2/90 126.80 116.47 102.13
2/ 1/91 159.51 125.19 111.53
1/31/92 181.86 153.94 118.83
1/29/93 224.41 170.21 160.31
1/28/94 231.34 190.86 159.53
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Bryant, a member of the Company's Board of Directors and its
Compensation and Stock Option Committee, is the Managing Director of the
Financial Institutions Group in the Corporate Finance unit of J. P. Morgan & Co.
Incorporated ("J. P. Morgan"). In connection with the acquisition of Lucky
Stores, Inc. in 1988, the Company entered into an agreement (the "Credit
Agreement") with a group of commercial banks including Morgan Guaranty Trust
Company of New York, a wholly-owned subsidiary of J. P. Morgan, as agent bank
and a lender under the Credit Agreement. During the 1993 fiscal year, the
Company paid fees to J. P. Morgan Securities Inc., another wholly-owned
subsidiary of J. P. Morgan, as an agent for the Company's $250 million of
Medium-Term Notes, Series A, the net proceeds of which were used to reduce
indebtedness under the Credit Agreement.
OTHER INFORMATION PERTAINING TO DIRECTORS AND EXECUTIVE OFFICERS
Mr. Lawrence A. Del Santo is the Senior Executive Vice President and Chief
Operating Officer -- Food of the Company and the former Chairman of the Board
and Chief Executive Officer of Lucky Stores, Inc. ("Lucky"), a subsidiary of the
Company acquired in 1988. Lucky and Mr. Del Santo entered into a compensation
agreement on March 27, 1985 (the "Deferred Agreement"). Under the Deferred
Agreement, the right to payment is conditioned on Mr. Del Santo's rendering
certain services to Lucky (generally, full-time employment until age 60 or
earlier death, and availability as a consultant to Lucky after retirement) and
on Mr. Del Santo's not engaging in activities competitive with the business of
Lucky. Mr. Del Santo's Deferred Agreement provides for ten annual payments of
$35,000 per year, with payments to begin upon cessation of employment. Upon Mr.
Del Santo's death, payments may be made to a designated beneficiary until the
aggregate amount paid reaches $225,000. Upon the Company's acquisition of Lucky
in 1988, Mr. Del Santo and the Company amended the Deferred Agreement to provide
that, upon leaving employment, Mr. Del Santo will be entitled to receive a lump
sum payment of the then present value of the future stream of payments to which
he would be entitled.
15
<PAGE> 18
From June 1991 through June 1992, Mr. Michael T. Miller was the President
of Jewel Osco Southwest, Inc. ("Jewel Osco"), one of the Company's primary
operating subsidiaries. In connection with the sale in April 1992 of the
majority of the Jewel Osco assets to Albertson's, Inc., Jewel Osco entered into
an extended employment and separation agreement with Mr. Miller. Pursuant to the
terms of the agreement, Mr. Miller resigned from his position as President of
Jewel Osco and began an extended employment status that expires on December 31,
1995. During the term of the agreement, Mr. Miller performs such services as the
Company may request in connection with its business. The agreement provides that
the Company will pay to Mr. Miller as compensation during the term of the
agreement the amount of $8,976.00 per month. The agreement also entitles Mr.
Miller to participate in all benefit programs available to executive officers of
the Company during the term of the agreement, except long-term disability. The
agreement requires Mr. Miller, until January 1, 1997, to refrain from performing
part-time or full-time services in any capacity for any competitor of the
Company or any of its subsidiaries without the Company's prior written consent,
to keep confidential non-public information he became familiar with as a result
of his employment, and to refrain from attempting to induce employees of the
Company or its subsidiaries to resign without the Company's prior written
consent.
On September 22, 1992, the Company entered into an extended employment
agreement with Mr. J. L. Scott, who has served as a director of the Company
since 1987 and who has held various officer positions with the Company, most
recently as Co-Chief Executive Officer and President. Mr. Scott's agreement
expired on January 31, 1994. The agreement was entered into to ensure an orderly
transition of authority from Mr. Scott, upon the termination of his active
employment, to the Company's new Chief Executive Officer and President, and to
retain the benefit of Mr. Scott's experience and knowledge as an internal
advisor and as a member of the Board of Directors of the Company. Pursuant to
the Agreement, Mr. Scott resigned his position as Co-Chief Executive Officer and
President and entered into an extended employment status as a regular and
continuing consultant employee of the Company. The Agreement provided that the
Company pay to Mr. Scott as compensation during the term of the agreement the
amount of $4,000.00 per month, and long-term incentive plan payments based on
actual results under plans in effect during his employment, which amounted to
$522,522 paid in April 1993 and $116,239 in April 1994. Additionally, Mr. Scott
received a lump sum payment of $1,152,000 in December 1992 and his previously
granted but unvested stock options vested at that time. The agreement also
entitled Mr. Scott to participate in all benefit programs available to executive
officers of the Company during the term of the agreement, except long-term
disability. The agreement required Mr. Scott, through January 31, 1995, to
refrain from performing part-time or full-time services in any capacity for any
competitor of the Company or any of its subsidiaries without the Company's prior
written consent, to keep confidential non-public information he became familiar
with as a result of his employment, and to refrain from attempting to induce
employees of the Company or its subsidiaries to resign without the Company's
prior written consent.
During 1992, Mr. Lund, three of the other executives in the summary
compensation table and certain other executive officers received full-recourse,
interest bearing loans for the entire purchase price of Common Stock of the
Company they purchased pursuant to the terms of the Executive Plan described on
page 13. The loans have an eight-year term and accrue interest at the Applicable
Federal Rate for eight-year loans with interest compounded annually, as
determined by Section 1274(d) of the Internal Revenue Code of 1986, as amended,
in effect on the Purchase Date. Interest is payable prior to maturity to the
extent of dividends paid on the shares purchased under the Executive Plan, with
the balance due at the maturity of the loan. The proceeds of the deferred cash
incentives awarded during the five-year performance cycle under the Executive
Plan must also be applied to prepay the loans. Following such prepayment, the
balance of the loans at the end of the five-year performance cycle, together
with accrued and unpaid interest thereon, will be payable in three equal
installments (plus interest) on the sixth, seventh and eighth anniversaries of
the purchase date. The payment of the loan will be accelerated if an executive
officer's service is terminated during the performance cycle for any reason
other than retirement or following a change of control, and the loan will
generally become due on the 120th day after termination of service. In the event
of retirement or a change of control, the loan must be repaid over a three-year
period. The loan may also be prepaid at any time at the executive officer's
option. On June 16, 1992, Mr. Lund and three of the other executives in the
summary compensation table received loans in the indicated amounts: Mr.
Lund -- $6,975,000; Mr. Bergeson -- $1,046,250; Mr. Del Santo -- $3,836,250; and
Mr. Maher -- $3,836,250. As of January 29, 1994, the aggregate outstanding
balance of loans made pursuant to the Executive Plan was $42,558,897, which
includes accrued, unpaid interest. The largest aggregate amount outstanding
during the fiscal year was $42,585,368.
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<PAGE> 19
PROPOSAL 2 -- AMENDMENT OF THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors proposes and recommends that the shareholders adopt
an amendment to Section 4.01 of Article FOURTH of the Company's Restated
Certificate of Incorporation to increase the number of shares of Common Stock
which the Company is authorized to issue from 200,000,000 to 325,000,000. The
proposed amendment would not change the terms of the Common Stock.
On March 21, 1994, the Board of Directors unanimously approved resolutions
declaring such amendment advisable. If approved by the shareholders, Section
4.01 of Article FOURTH will read in its entirety as follows:
4.01 The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 335,000,000, consisting of (a)
325,000,000 shares of Common Stock, par value $1 per share ("Common
Stock"), and (b) 10,000,000 shares of Preferred Stock, par value $1 per
share ("Preferred Stock").
At its March 21, 1994 meeting, the Board of Directors declared a
two-for-one stock split, entitling each holder of Common Stock to receive one
additional share of Common Stock for each share of Common Stock held of record.
The record date for the stock split was April 7, 1994, and the distribution date
was April 21, 1994. A shareholder's equity interest in the Company or other
relative rights or interests did not change as a result of the Common Stock
split because each shareholder received additional shares of Common Stock in
direct proportion to his or her holdings at the record date.
Prior to the stock split, there were 200,000,000 shares of Common Stock
authorized, of which 71,356,897 shares of Common Stock were issued and
outstanding, exclusive of 914,181 shares of Common Stock held in the Company's
treasury. Accordingly, there remained 127,728,922 shares of Common Stock
available for issuance, of which 7,128,975 shares have been reserved for
issuance in connection with the Company's stock purchase, stock option and stock
award plans, and its 7 1/4% Convertible Subordinated Notes. Following the stock
split, there were 142,713,794 shares of Common Stock issued and outstanding,
exclusive of 1,828,362 shares of treasury stock, leaving only 55,457,844 shares
of Common Stock available for issuance.
The Board of Directors believes that it is desirable and in the best
interest of the Company and its shareholders that the number of authorized but
unissued shares of Common Stock be increased so that approximately the same
proportionate number of authorized but unissued shares will be available for
issuance following the stock split as there were prior to the stock split. The
Board of Directors believes that it is desirable to have authorized but unissued
shares of Common Stock available for proper corporate purposes, including,
without limitation, the raising of additional capital, stock dividends or
splits, acquisitions, and issuance pursuant to stock option or other employee
benefit or incentive compensation plans. If authorization of any increase in the
Common Stock is postponed until a specific need arises, the delay and expense
incident to obtaining the approval of shareholders at that time could impair the
Company's ability to meet its objectives. There are currently no plans for, or
negotiations relating to, any issuance of Common Stock, except in connection
with the Company's stock purchase, stock option and stock award plans, and its
7 1/4% Convertible Subordinated Notes.
If the proposed amendment to Article FOURTH is approved, the additional
shares of Common Stock (as well as the existing authorized but unissued shares
of Common Stock and Preferred Stock) would be available for issuance without
further action by the shareholders, unless otherwise required by applicable law
or by the rules of any stock exchange on which the Company's securities are
listed. The New York Stock Exchange, on which the Common Stock of the Company is
listed, currently requires shareholder approval as a prerequisite for listing
Common Stock to be issued in any transaction or series of related transactions,
other than a public offering for cash, if the Common Stock has or will have upon
issuance voting power equal to or in excess of 20% of the voting power
outstanding before the issuance of such stock or if the issuance will result in
a change of control.
The additional shares of Common Stock would be identical to the Common
Stock currently outstanding. No shareholder has any preemptive rights, and
issuance of the additional (as well as the existing authorized but unissued)
Common Stock could dilute the voting rights of present holders of Common Stock.
It is possible, depending upon the type of transaction in which Common Stock is
issued, that issuance of such
17
<PAGE> 20
Common Stock could have a dilutive effect on shareholders' equity and earnings
per share attributable to present holders.
The additional shares of Common Stock (as well as the existing authorized
but unissued shares of Common Stock and Preferred Stock) could also be used to
impede an unsolicited bid for control of the Company which the Board of
Directors believed was not in the best interests of the Company and its
shareholders. The availability of the additional Common Stock as a defensive
response to a takeover attempt was not a motivating factor in the Board's
approval of the proposed amendment to Article FOURTH, and the Board is not aware
of any effort to obtain control of the Company.
The affirmative vote of a majority of the outstanding Common Stock is
required for approval of the proposed amendment to the Restated Certificate of
Incorporation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE PROPOSED AMENDMENT OF THE RESTATED CERTIFICATE OF INCORPORATION TO INCREASE
THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK.
PROPOSAL 3 -- RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of the Audit Committee, has
selected the firm of Ernst & Young, Independent Certified Public Accountants, to
audit the records of the Company for the fiscal year ending January 28, 1995.
This selection is subject to ratification by the shareholders. A representative
of Ernst & Young will be present at the Annual Meeting of Shareholders. The
representative will have an opportunity to make a statement and will be
available to respond to appropriate questions. Ernst & Young is the Company's
independent certified public accountant for the fiscal year ended January 29,
1994.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG AS INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS.
SHAREHOLDERS' PROPOSALS FOR 1995 ANNUAL MEETING
Any proper shareholder proposal to be included in the Company's Proxy
Statement for the 1995 Annual Meeting of Shareholders must be received by the
Company no later than December 30, 1994 and should be sent to the Secretary,
American Stores Company, P.O. Box 27447, Salt Lake City, Utah 84127-0447 or 709
East South Temple, Salt Lake City, Utah 84102.
METHOD OF PROXY SOLICITATION
The Company has retained D. F. King & Co., Inc., 77 Water Street, New York,
New York 10005, to assist in the solicitation of proxies. For these services,
the Company will pay a fee of $8,000 plus out-of-pocket expenses. The expense of
soliciting proxies will be borne by the Company. Solicitation of proxies may
also be made by directors, officers, and regularly engaged employees of the
Company, without additional compensation therefor.
OTHER MATTERS
The Annual Meeting is called for those purposes set forth in the Notice of
Annual Meeting of Shareholders and for the transaction of such other business as
may properly come before the meeting. Management presently knows of no other
business which may be presented at the Annual Meeting. However, if other matters
are presented, it is the intention of the persons named in the enclosed proxy to
vote in accordance with their judgment.
It is important that all proxies be returned promptly to American Stores
Company, c/o First Chicago Trust Company of New York, P.O. Box 8187, Edison, New
Jersey 08818 or American Stores Company, P.O. Box 27447, Salt Lake City, Utah
84127-0447. Proxies are revocable at any time prior to the exercise thereof by
written notice to the Secretary. A proxy may also be revoked if the shareholder
attends the meeting and elects to vote in person. Therefore, shareholders are
urged to mark, sign, date and mail the enclosed proxy in the envelope provided,
which requires no postage if mailed in the United States. Whether or not you
plan to attend the meeting, PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THE
ENCLOSED PROXY CARD.
18
<PAGE> 21
PROXY
AMERICAN STORES COMPANY
This Proxy is Solicited on Behalf of the Board of Directors
for the Annual Meeting on June 21, 1994
The undersigned hereby constitutes and appoints Teresa Beck, Donald B.
Holbrook, Kathleen E. McDermott and each of them, his/her true and lawful
agents and proxies with full power of substitution in each, to represent the
undersigned at the Annual Meeting of Shareholders of AMERICAN STORES COMPANY
to be held at 10:00 AM, local time on June 21, 1994, at the Red Lion Hotel,
255 South West Temple, Salt Lake City, Utah, and at any postponements or
adjournments thereof, on all matters coming before such meeting.
You are encouraged to specify your choices by marking the appropriate boxes,
SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. Your shares cannot be
voted unless you sign this card on the reverse and return it to the Company.
(change of address/comments)
____________________________
____________________________
____________________________
____________________________
SEE REVERSE
SIDE
<PAGE> 22
/X/ Please mark your
votes as in this
example
This proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR election of directors and
FOR Proposals 2 and 3.
The Board of Directors recommends a vote FOR proposals 1, 2 and 3.
1. Election of Directors.
FOR / / WITHHELD / /
Nominees for Directors: Fernando R. Gumucio, Leon G. Harmon, John E. Masline,
L.S. Skaggs, Arthur K. Smith
For, except vote withheld from the following nominee(s):
____________________________________________________________
2. Approval of Ernst & Young, independent certified public accountants, to
audit the accounts and records of the Company for the fiscal year ending
January 28, 1995.
FOR / / AGAINST / / ABSTAIN / /
3. Proposal to amend the Restated Certificate of Incorporation to increase the
number of authorized shares of common stock.
FOR / / AGAINST / / ABSTAIN / /
4. In their discretion upon such other matters as may properly come before the
meeting.
I PLAN TO ATTEND THE 1994 ANNUAL MEETING / /
CHANGE OF ADDRESS/COMMENTS ON REVERSE SIDE / /
SIGNATURE(S) __________________________ DATE __________________ 1994
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
