SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 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):
[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(j)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(j)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(j)(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.
[ ] 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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
Notes:
______
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 Wednesday, June 21, 1995 at 10:00 a.m.,
local time, for the following purposes:
1. To amend the Company's Restated Certificate of Incorporation to
provide for the annual election of Directors;
2. To elect six Directors of the Company;
3. To approve the American Stores Company 1995 Employee Stock Purchase
Plan;
4. To ratify the appointment of Ernst & Young as independent certified
public accountants for fiscal year 1995; and
5. To transact such other business as may properly come before the
meeting.
Only shareholders of record at the close of business on April 24, 1995
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 27, 1995
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 1995 Annual Meeting of Shareholders of the Company to be held on
Wednesday, June 21, 1995 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 1994 Annual Report to Shareholders, will first be mailed
on or about April 27, 1995. Each holder of record of shares of the Company's
common stock, par value $1.00 per share (the "Common Stock"), on April 24, 1995,
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
_________________ . 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 amendment to the Company's Restated Certificate of
Incorporation to provide for the annual election of Directors, FOR the Election
of Directors, FOR the approval of the American Stores Company 1995 Employee
Stock Purchase Plan, and FOR the ratification of the appointment of Ernst &
Young as Independent Certified Public Accountants.
PROPOSAL 1 - AMENDMENT OF THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO
PROVIDE FOR THE ANNUAL ELECTION OF DIRECTORS
The Board of Directors proposes and recommends that the shareholders adopt
an amendment to Section 10.01 of Article TENTH of the Restated Certificate of
Incorporation (the "Certificate") to eliminate the classification of the
Directors and provide that upon expiration of the terms for which the current
directors have been elected, their successors shall be elected for terms of one
year. If the shareholders approve the proposed amendment at the Annual Meeting,
the persons named in the enclosed proxy will vote to elect the six nominees
named in this Proxy Statement for a one-year term. As the terms of the
directors previously elected expire, their successors will also be elected for
one-year terms so that at the 1997 Annual Meeting of Shareholders all of the
directors will be elected for one-year terms.
If approved by the shareholders, Section 10.01 of Article TENTH of the
Certificate will read in its entirety as follows:
10.01 The Board of Directors shall consist of such number of
directors not less than five nor more than twenty as may be
determined from time to time by the Board of Directors. Each
director elected prior to 1995 shall hold office for the term of
years for which that director was elected and until that director's
successor is elected and qualified or until that director's earlier
resignation or removal, and each director elected after January 1,
1995 shall hold office until the next annual meeting of shareholders
and until that director's successor is elected and qualified or until
that director's earlier resignation or removal.
If the amendment to Article TENTH of the Certificate is approved, the Board
of Directors will adopt conforming amendments to the Company's By-laws.
Section 10.01 of Article TENTH of the Certificate was adopted by the
Company's shareholders at the Company's 1981 Annual Meeting of Shareholders as
one of several amendments to the Company's charter documents dealing with
takeovers. The amendments were adopted in response to the increasing number of
hostile takeovers that were occurring at that time and were intended to enhance
the ability of the Board of Directors to negotiate on behalf of the Company with
any person seeking to acquire control and to protect the Company and its
shareholders against abusive takeover practices. The classification of the
Board of Directors makes it more difficult for any shareholder or shareholders
to change a majority of the directors by generally requiring at least two annual
meetings of shareholders to effect such a change.
Since the adoption of a classified Board, certain types of takeover
practices have become less prevalent, and shareholders have generally become
more active in seeking greater direct accountability of management. The Board
of Directors believes that the elimination of the classified board will provide
shareholders with a greater degree of control over management by permitting them
to elect the entire Board each year and to register their views on the
performance of the Board of Directors, collectively, and each individual
director, on an annual basis.
The Board also believes that in order to provide for an orderly transition,
the classified board should be phased out over time by electing the nominees at
the 1995 Annual Meeting for a one-year term and by electing the successors to
the current directors for one-year terms as the three-year terms of the current
directors expire. Accordingly, if the proposal is approved, approximately two-
thirds of the directors will be elected for one-year terms at the 1996 Annual
Meeting, and all of the directors will be elected for one-year terms beginning
at the 1997 Annual Meeting.
The affirmative vote of 80% of the outstanding Common Stock, as well as a
majority of the total outstanding shares of common stock not held by any person
or entity which, together with its affiliates, directly or indirectly
beneficially owns 10% or more of the Company's Common Stock, are 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 TO THE RESTATED CERTIFICATE OF INCORPORATION TO PROVIDE
FOR THE ANNUAL ELECTION OF DIRECTORS.
PROPOSAL 2 - 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 fixed that number at sixteen,
effective October 24, 1994. The Board is currently divided into three classes,
with one class elected at each annual meeting to serve for a term of three
years. The terms of six directors expire at the 1995 Annual Meeting, and the
Board of Directors has nominated those six individuals to be elected in 1995.
If Proposal 1 relating to the elimination of the classified Board of Directors
is approved, upon their election such nominees will serve for a one-year term;
otherwise, upon their election such nominees will serve as Class II directors
for a three-year term, or until their successors have been duly elected and
qualified. All of the nominees are currently directors of the Company.
Only the six nominees who are currently Class II Directors are to be elected at
the 1995 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, 1995.
INFORMATION REGARDING THE NOMINEES STANDING FOR ELECTION IN 1995
Director
Name Principal Occupation and Other Information Age Since
Arden B. Engebretsen Chairman of the Board of Herpak Limited, 63 1988
an 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.
Donald B. Holbrook Retired. Of Counsel to the law firm of Jones, 70 1994
Waldo, Holbrook and McDonough, P. C., since November 1994. Prior thereto,
Executive Vice President and Chief Legal Officer of the Company from October
1989 until October 1994. Director of the Company from June 1990 until June
1993 and since October 1994. Director, Kearns-Tribune Corporation. Trustee,
Utility Shareholder Association of Utah. (1)
James B. Fisher Retired. Former President and Director of 63 1988
J. 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 47 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.
L. Tom Perry Member of the Council of the Twelve Apostles 72 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 65 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.
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 1995
Director
Name Principal Occupation and Other Information Age Since
Class I Directors Whose Terms of Office Continue Until 1997
Fernando R. Gumucio Retired. Former Chairman of the Board and 60 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 of 69 1982
First Interstate Bank of Utah, N.A. Former President and Chief
Executive Officer of First Interstate Bank of Utah, N. A. for more
than five years.
John E. Masline Retired. Former Partner, Ernst & Young 67 1988
from 1967 to October 1986.
L. S. Skaggs Chairman of the Board of the Company since 71 1950
1962. (2)
Arthur K. Smith President of the University of Utah since 57 1992
August 1991. Executive Vice President and Provost of the University
of South Carolina from 1988 through August 1991. Director of First
Security Corp.
Class III Directors Whose Terms of Office Continue Until 1996
Henry I. Bryant Managing Director, Southern Region in the 52 1992
Corporate Finance Unit of J. P. Morgan & Co. Incorporated, an
investment banking firm, since August 1994; prior thereto, Managing
Director Financial Institutions Group from 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.
(3)
Louis H. Callister Chairman of the Board and Senior Partner in 59 1985
the law firm of Callister, Nebeker & McCullough, 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. (4)
Michael T. Miller President and Executive Director of the ALSAM 54 1992
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 Preiskel Retired. Former Senior Vice President and 70 1985
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.
Don L. Skaggs Chairman of the Board and General Manager of 39 1994
Skaggs Telecommunications Service, Inc., a wholly-owned subsidiary of the
Company, for more than five years. Executive Vice President and General Manager
STS of the Company since March 1993. (2)
FOOTNOTES TO THE FOREGOING INFORMATION REGARDING
DIRECTORS AND NOMINEES FOR DIRECTOR OF THE COMPANY
(1) At its meeting held on October 24, 1994, the Board elected Mr. Holbrook a
director. Mr. Holbrook is of counsel to the law firm of Jones, Waldo, Holbrook
& McDonough, Salt Lake City, Utah, which firm has performed legal services for
the Company and its subsidiaries since 1959, including fiscal year 1994. The
Company paid the law firm $1,701,022 for services during the firm's latest
fiscal year, which amount was in excess of 5% of that firm's gross revenues.
The Company will continue to use such firm from time to time during the current
fiscal year.
(2) At its meeting held on September 20, 1994, the Board elected Mr. Don L.
Skaggs a director effective October 1, 1994 to fill the position rendered vacant
by the resignation of Aline W. Skaggs. Don L. Skaggs is the son of L. S.
Skaggs, Chairman of the Board of the Company.
(3) Mr. Henry I. Bryant is the Managing Director of the Southern Region in the
Corporate Finance unit of J. P. Morgan & Co. Incorporated ("J. P. Morgan"),
which provides investment banking services to the Company from time to time.
During 1994, the Company entered into a $1.0 billion revolving credit facility
(the "Credit Facility") with a group of commercial banks, including Morgan
Guaranty Trust Company of New York ("Morgan"), a wholly-owned subsidiary of J.
P. Morgan, as agent bank and a lender under the Credit Facility. The Credit
Facility replaced an existing $800 million credit facility that would have
expired in 1996, for which Morgan also acted as agent bank and a lender. Under
the Credit Facility, Morgan receives a quarterly fee for acting as agent bank
and facility, commitment, and interest payments on the same terms as other
participating lenders. The Company is also a party to an Interest Rate and
Currency Exchange Agreement with Morgan pertaining to the exchange of dollars
for yen, which has a final exchange date of July 6, 1999.
(4) Mr. Callister is a senior partner of the law firm of Callister, Nebeker &
McCullough, P. C., Salt Lake City, Utah, which firm performed legal services for
one of the Company's subsidiaries during fiscal year 1994. The amount paid to
the firm for such services was less than $10,000.
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth, as of January 28, 1995, 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 ___
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 the beneficial owner of more
than five percent of such stock as of January 28, 1995.
Number of Shares Percent of Shares
Name (1) Beneficially Owned (2) Beneficially Owned (3)
William J. Bolton 66,000 *
Henry I. Bryant 3,000 *
Louis H. Callister 33,525 *
Arden B. Engebretsen 27,200 *
James B. Fisher 23,936 *
Fernando R. Gumucio 20,400 *
Leon G. Harmon (4) 40,400 *
Robert P. Hermanns 83,900 *
Donald B. Holbrook 8,448 *
Victor L. Lund 510,570 *
David L. Maher 255,302 *
John E. Masline 24,000 *
Michael T. Miller (4) 77,568 *
L. Tom Perry 1,200 *
Barbara Scott Preiskel 21,400 *
J. L. Scott 74,294 *
Don L. Skaggs (4) 414,714 *
L. S. Skaggs (4) 24,329,556 17.02%
Arthur K. Smith 20,000 *
All directors and executive officers
as a group (31 persons) 26,787,128 18.74%
Fayez S. Sarofim (5) 7,520,100 5.26%
* 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) These totals include, pursuant to rules of the Securities and Exchange
Commission (the "SEC"), shares as to which sole or shared voting power or
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. Bolton -
6,000; Mr. Hermanns -3,900; Mr. Lund -0; Mr. Maher - 6,000; Mr. L. S.
Skaggs - 0; all directors and executive officers as a group (31 persons) -
104,460; 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, 1994: Mr. Bolton - 0; Mr.
Hermanns - 0; Mr. Lund - 0; Mr. Maher - 7,588; Mr. L. S. Skaggs - 0; all
directors and executive officers as a group (31 persons) - 68,872.
(3) On January 28, 1995, there were 142,971,062 shares of Common Stock
issued and outstanding.
(4) Does not include 2,744,430 shares owned by a charitable foundation.
Leon Harmon, Michael Miller, Don L. Skaggs and L. S. Skaggs are members of
the managing committee of such foundation and, in this fiduciary capacity,
share voting and dispositive power with respect to such shares. None of
such persons has any pecuniary interest in the shares owned by the
foundation and each disclaims beneficial ownership of such shares.
(5) Based upon information contained in a Schedule 13G filed with the SEC
on February 14, 1995, as of December 31, 1994, Mr. Sarofim may be deemed to
be the beneficial owner of 7,520,100 shares of Common Stock. Of such
shares, Mr. Sarofim has sole voting or dispositive power as to 50,000
shares, and shared voting or dispositive power as to 7,470,100 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 4,000 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 28, 1995, 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 1994. The Board had as standing committees on April 1,
1995, an Audit Committee, a Compensation and Stock Option Committee, and an
Executive Committee. Effective July 1, 1994, the Board eliminated its
Finance and Nominating Committees, and the responsibilities of those
Committees were assumed by the full Board.
The Audit Committee is composed of eight non-employee directors. 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 three Audit Committee
meetings held in fiscal year 1994. Its current members are: John E.
Masline (Chairperson), Henry I. Bryant, Louis H. Callister, Arden B.
Engebretsen, James B. Fisher, Fernando R. Gumucio, Donald B. Holbrook, and
J. L. Scott.
The Compensation and Stock Option Committee is composed of six non-
employee directors. It is responsible for administering the Company's Board
and shareholder approved compensation plans and for setting compensation of
officers and directors. Four meetings of the Compensation and Stock Option
Committee were held in fiscal year 1994. Its current members are: Leon G.
Harmon (Chairperson), Louis H. Callister, Arden B. Engebretsen, James B.
Fisher, L. Tom Perry, and Barbara S. Preiskel.
The Executive Committee is composed of six directors. It has authority
to act for the Board on most matters during intervals between Board
meetings. The Executive Committee held one meeting in fiscal year 1994.
Its current members are: Leon G. Harmon (Chairperson), Victor L. Lund,
Michael T. Miller, L. Tom Perry, Don L. Skaggs, and L. S. Skaggs. Louis H.
Callister and Arthur K. Smith serve as alternate members of the Executive
Committee.
The Finance Committee held two meetings during fiscal year 1994 prior
to its elimination on July 1, 1994. The members of the Finance Committee
were: 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 held two meetings during fiscal year 1994
prior to its elimination on July 1, 1994. The members of the Nominating
Committee were: Barbara S. Preiskel (Chairperson), Louis H. Callister,
Fernando R. Gumucio, Leon G. Harmon, Michael T. Miller, and Aline W. Skaggs.
During fiscal year 1994, 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 five meetings in fiscal year 1994.
The Investment Management Subcommittee is composed of four directors,
three members of management and three 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 1994.
The following directors are current members of the Committee: Leon G.
Harmon, Victor L. Lund, John E. Masline and Michael T. Miller.
DIRECTORS' COMPENSATION
Fees
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 which is payable in quarterly
installments. Effective July 1, 1994, the Board increased the number of its
regularly scheduled Board meetings from four to eight, increased the annual
retainer fee from $30,000 to $80,000, and eliminated 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 except that non-
employee members of the Investment Management Subcommittee continue to be
paid $5,000 for each meeting of that Subcommittee attended.
Prior to the change in compensation on July 1, 1994, eligible directors
received 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 received 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 received an additional $4,000 per year.
Non-employee members of the Finance Committee received an annual fee of
$7,500. All non-employee members of the Executive Committee received an
annual fee of $10,000 per year. No additional fees were paid for attendance
at Finance or Executive Committee meetings. In connection with the change
in compensation policy, all payments based on the number of meetings
attended were paid with respect to meetings held on or prior to July 1,
1994, and all annual payments were prorated and paid through July 1, 1994.
Plans
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 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"). The NED Plan
was amended during 1994 to take into consideration the amended fee structure
for non-employee directors described above and in early 1995 to change the
eligibility requirements. The effect of the amendments was to decrease the
benefits payable to non-employee directors under the plan. Under the NED
Plan, as amended, in order to be eligible for a retirement benefit, an
individual must have served as a non-employee director of the Company for a
full ten years. An eligible non-employee director who retires from the
Board at or after age 65 is entitled to receive for the remainder of his or
her life, annual compensation equal to one-half of the annual retainer fee
for non-employee directors in effect at the time of such director's
retirement. An eligible non-employee director who retires from the Board
prior to age 65 shall receive, upon attaining the age of 65, a retirement
benefit equal to one-half of the actual annual retainer for non-employee
directors in effect at the time of such director's retirement for the same
number of years and months the director served on the Board as a non-
employee director. 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"), and shortly thereafter
certain directors purchased stock pursuant to awards that were granted to
them under the Director Plan. At its March 21, 1995 meeting, the Board of
Directors accelerated the expiration date of the Director Plan to March 21,
1995 effectively terminating it on such date; however, the termination does
not affect or impair the terms of any awards that were outstanding on such
termination date. A description of the material terms of the Director Plan
follows. All members of the Board of Directors who were not officers or
employees of the Company or its subsidiaries, or the spouses of officers or
employees, and who were younger than 69 years of age, were eligible to
participate in the Director Plan (the "Eligible Directors"). Under the
Director Plan, Eligible Directors were 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 received 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. The maximum amount of the deferred award that can be earned by the
Eligible Directors is equal to the amount of the loan and accrued and
unpaid interest. Any deferred award must be applied toward repayment of the
loan. 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 ___ of this proxy
statement. The Director Plan provided that the loans have an eight-year
term and 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 provided that the proceeds of the
deferred cash incentives be applied to prepay the loans. The balance of the
loans after taking into account any such prepayment, together with accrued
and unpaid interest thereon, is payable in three equal installments (plus
interest) on the sixth, seventh and eighth anniversaries of the purchase
date. If a director's service is terminated during the performance cycle
for any reason other than retirement, 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 28, 1995, the aggregate outstanding balance of
loans made pursuant to the Director Plan was $3,360,513, 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 1994 fiscal
year, each of the directors who are participants in the Director Plan was
vested in a service award equal to 15% of the outstanding loan balance, the
dollar amount of which is as follows: Messrs. Callister, Engebretsen,
Fisher, Gumucio, Harmon and Masline, and Mrs. Preiskel - $60,301; Mr. Smith
- - $71,281; and Mr. Bryant - $10,692.
Other Arrangements
On November 30, 1994, the Company entered into a one-year consulting
agreement with respect to the Company's drug store operations with Donald B.
Holbrook, who served as Executive Vice President and Chief Legal Officer of
the Company from October 1989 until October 1994. The agreement provides
for payment to Mr. Holbrook of consulting fees of $12,500 per quarter plus
reimbursement of expenses. The term of the agreement may be extended by
mutual consent of the parties.
During 1994, the Company paid Michael T. Miller $8,976.00 per month
pursuant to an extended employment and separation agreement that was entered
into by the Company and Mr. Miller in May 1992. 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 and bonus plans. The Agreement expires on December 31, 1995.
On November 1, 1994, the Company entered into an employment agreement
with Don L. Skaggs that is identical to the agreements entered into with
seventeen of the Company's other executive officers, the material terms of
which are described on page hereof. Mr. Skaggs' employment
agreement provides for a target compensation objective that includes a base
salary plus target bonuses at the target rate of 50%. Mr. Skaggs' initial
target compensation objective under the agreement is $315,244. On March 21,
1995, Mr. Skaggs was granted an award under the Key Executive Stock Purchase
Incentive Plan, the material terms of which are described on page
hereof. On March 31, 1995, Mr. Skaggs exercised his award and purchased
60,000 shares of the Company's Common Stock at a purchase price of $25.5625
per share. Pursuant to the Executive Plan, Mr. Skaggs purchased the shares
with a loan he received from the Company for $1,533,750, which accrues
interest at the rate of 7.75%, compounded annually. Under the Executive
Plan, Mr. Skaggs is also entitled to receive a deferred cash incentive award
under the same terms and conditions as the other executive officers. The
maximum amount of the deferred award that can be earned by Mr. Skaggs is
equal to the amount of the loan plus accrued and unpaid interest. Any
deferred award must be applied toward repayment of the loan.
EXECUTIVE COMPENSATION
The following table shows compensation paid by the Company to the Chief
Executive Officer and the four other most highly compensated executive
officers at January 28, 1995 for services performed by such individuals for
all capacities in which they served during the last three fiscal years:
<TABLE>
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION (1)
ANNUAL AWARDS PAYOUTS
COMPENSATION
(1)
NAME AND YEAR SALARY BONUS OTHER ANNUAL OPTIONS/ LTIP PAYOUTS ALL OTHER COMPEN-
PRINCIPAL POSITION ($) ($) (2) COMPEN-SATION SARS ($)(4) SATION
AT END OF 1994 ($)(1)(3) (#) ($)(5)
FISCAL YEAR
<S> <C> <C> <C> <C> <C> <C> <C>
Victor L. Lund 1994 750,000 339,764 --- 0 1,007,250 159,869
President and Chief 1993 737,500 259,145 --- 0 683,785 159,922
Executive Officer 1992 656,666 351,885 --- 0 343,835 188,763
William J. Bolton
Executive Vice
President & General 1994 225,000 148,589 0 214,763 44,524
Manager - Jewel 1993 222,500 93,508 0 126,183 60,386
Food Stores 1992 210,000 65,834 0 119,479 23,282
Robert P. Hermanns
Senior Executive Vice 1994 510,016 184,039 --- 0 254,520 57,870
President & Chief 1993 223,154 113,184 --- 0 130,567 47,474
Operating Officer-Food 1992 216,361 54,084 --- 0 0 33,708
David L. Maher
Senior Executive Vice 1994 450,000 203,859 0 563,127 84,433
President & Chief 1993 433,333 152,266 --- 0 381,809 84,048
Operating Officer-Drug 1992 344,167 106,399 --- 0 210,363 97,453
L. S. Skaggs 1994 500,000 226,510 --- 0 284,370 110,980
Chairman of the Board 1993 500,000 175,692 --- 0 108,898 110,969
1992 500,000 267,933 --- 0 316,565 161,101
(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 of this proxy statement. Cash bonuses for
services rendered in fiscal years 1994, 1993 and 1992 have been listed in the
year earned, and were generally paid in April of the following fiscal year.
(3) 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.
(4) The LTIP payout amounts reported represent (a) amounts payable pursuant to
the Company's Key Management Long-Term Performance Incentive Plan ("LTIP Plan")
described in the Compensation Committee Report on Executive and CEO Compensation
on page 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 Purchase Incentive Plan described in the Compensation Committee
Report on Executive and CEO Compensation on page of this proxy
statement. The payout amounts pursuant to the LTIP Plan for services rendered
in fiscal years 1994, 1993 and 1992 have been listed in the year earned, and
were generally paid in April of the following fiscal year. The amounts paid
under the LTIP Plan during 1994 were as follows for the named executive
officers: Mr. Lund - $406,490; Mr. Bolton - $124,649; Mr.Hermanns - $164,406;
Mr. Maher - $232,709; and Mr. Skaggs - $284,370. 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. The amounts of the service award that vested
during 1994 for the named executive officers are as follows: Mr. Lund -
$600,760; Mr. Bolton - $90,114; Mr. Hermanns - $90,114; and Mr. Maher -
$330,418. Mr. Skaggs is not a participant in the Key Executive Plan.
(5) 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 1994 to the executives' ASRE and
SERP accounts, and the insurance premiums paid were as follows: Mr. Lund -
$24,352, $130,587, $4,930; Mr. Bolton - $24,352, $18,693, $1,479; Mr. Hermanns
- - $24,352, $30,866, $2,652; Mr. Maher - $24,352, $57,123, $2,958; Mr. Skaggs
$24,352, $86,518, $110.
The following table shows information concerning the exercise of stock
options by each of the named executive officers and the fiscal year-end value
of unexercised options.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUE
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT FISCAL IN-THE-MONEY OPTIONS/SARS
AT FISCAL YEAR END (#) AT FISCAL YEAR END ($)(4)
NAME SHARES ACQUIRED ON VALUE REALIZED EXERCISABLE UNEXERCISABLE(3) EXERCISABLE UNEXERCISABLE
EXERCISE (#) (1) ($)(2)
<S> <C> <C> <C> <C> <C> <C>
Victor L. Lund 5,876 $69,855 0 42,864 0 $1,023,378
William J. Bolton
24,000 $242,249 0 6,000 0 $51,937
Robert P. Hermanns
2,500 $27,031 3,900 6,752 $40,706 $139,704
David L. Maher 2,264 $27,876 0 14,576 0 $348,002
L. S. Skaggs 0 0 0 0 0 0
(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 1994 fiscal year end ($24.125 per share) and the exercise
price of the options.
The following table provides information concerning cash-incentive awards
made during fiscal year 1994 under the Company's 1994-1995-1996 Key Management
Long-Term Performance Incentive Plan (the "94-95-96 LTIP"). Each award
represents the right to receive an amount in cash for the three-year period
ending February 1, 1997 based on earnings per share for the three-year period
compared to the three-year earnings per share target established by the
Compensation Committee as follows: 80% of target or less - no award; 90% of
target - 10% of average annual base salary; 100% of target - 20% of average
annual base salary; 110% of target - 40% of average annual base salary; and
120% or more of target - 70% of average annual base salary. Payments under
the 94-95-96 LTIP will be made in April 1997 and will be reported in the
Summary Compensation Table of the Company's 1997 Proxy Statement.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
NAME PERFORMANCE
NUMBER OF OR OTHER ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK PRICE
SHARES, UNITS PERIOD UNTIL BASED PLANS
OR OTHER MATURATION
RIGHTS (#) OR PAYOUT THRESHOLD($)(1) TARGET($)(2) MAXIMUM($)(3)
<S> <C> <C> <C>
Victor L. Lund --- February 1, 1997 0 $150,000 $525,000
William J. Bolton --- February 1, 1997 0 $46,833 $163,917
Robert P. Hermanns
--- February 1, 1997 0 $89,833 $314,417
David L.Maher --- February 1, 1997 0 $92,750 $324,625
L. S. Skaggs --- February 1, 1997 0 $100,000 $350,000
</TABLE>
(1) No awards will be made if the Company's earnings per share for the three-
year period are 80% or less of the targeted amount.
(2) The target award is 20% of the executive's average annual base salary
over the three-year performance cycle and is awarded if the Company exactly
achieves its earnings per share target for the three-year period. The target
payout shown above assumes the executive's 1995 base salary remains unchanged
through the remainder of the three-year performance cycle.
(3) The maximum attainable award is 70% of the executive's average annual
base salary over the three-year performance cycle and is awarded if the
Company's earnings per share for the three-year period equals 120% or more
of the target. The maximum payout shown above assumes the executive's 1995
base salary remains unchanged through the remainder of the three-year
performance cycle.
EMPLOYMENT AGREEMENTS
During 1994, the Company entered into Employment Agreements (the
"Agreements") with Messrs. Bolton, Hermanns, Lund, and Maher, and 13 other
officers of the Company in order to encourage such executives to remain with
the Company on an extended basis, have undivided loyalty to the Company and
refrain from competing with the Company. One additional agreement was
entered into in early 1995. All of the Agreements are for a term of three
years, except for Mr. Lund's Agreement, which is for a five-year term. The
Agreements are automatically renewed for subsequent three-year terms (in the
case of Mr. Lund, five-year terms) unless the Company provides notice to the
contrary one year prior to the expiration of any term. The Agreements may be
terminated only for cause during the term of the Agreement or any extensions
thereof. The Agreements provide for a target compensation objective ("TCO")
that includes a base salary plus target bonuses at the target rate of 50%
through participation in the Company's Key Management Annual Incentive Plan
(30%) and the Company's Long-Term Incentive Performance Plan (20%). The
initial TCO for the named executive officers is as follows: Mr. Bolton -
$336,333; Mr. Hermanns - $642,814; Mr. Lund - $1,117,944; and Mr. Maher -
$666,833. The Company can increase but cannot decrease an executive's TCO by
more than 20% except in the case of a general reduction affecting at least
90% of the officers of the Company. The executives are entitled to
participate in any other bonus programs subject to the right of the Company
to alter the terms and conditions of any such bonus programs, including the
elimination thereof. The Agreements provide the executives with a special
long-range retirement plan (the "Retirement Plan"), pursuant to which the
executives are entitled to receive an annual payment from the Company for a
period of 20 years beginning at age 57 or upon termination of employment,
whichever occurs later. The retirement benefit is calculated as a percentage
of the executive's average TCO for the two years prior to the termination of
employment under the Agreement based on years of service completed under the
Agreement. In order to receive the minimum retirement benefit of 9% of
average TCO, the executives must have completed three years of service from
the date of the Agreements. The maximum retirement benefit requires ten
years of service and for 15 of the executives is 30% of the two-year average
TCO. The maximum retirement benefit for Messrs. Hermanns, Lund, and Maher is
40% of the two-year average TCO. The executives forfeit all rights,
including vested rights, to these retirement benefits if they breach the non-
compete provision of the Agreements. In the event an executive is terminated
for cause or voluntarily terminates employment, he or she is entitled to a
retirement benefit equal to the amounts vested at that time. If an executive
is terminated without cause, or if the executive terminates employment
because the Company has materially breached the Agreement, the executive is
entitled to the maximum retirement benefit regardless of the number of
service years he or she has accrued. In the event of the executive's death,
the Agreement provides for a lump sum payment to the executive's estate that
is equal to the present value of the remaining retirement benefit to which
the executive would otherwise be entitled. The executives are required to
(i) keep confidential any non-public information they become familiar with as
a result of their employment, (ii) refrain from performing part-time or full-
time services in any capacity for any competitor of the Company, (iii)
refrain from attempting to induce employees of the Company or its
subsidiaries to resign; and (iv) refrain from interfering with or impeding
the Company's relationships with customers, suppliers or vendors, lending
institutions, lessors and land owners, and governmental agencies. The
Agreements also entitle the executives to participate in all of the Company's
benefit plans, including retirement and profit sharing, long-term disability,
accidental death and dismemberment, and health and insurance plans. The
Company can change the executives' duties and job titles at will, and can
relocate the executives as needed, including a transfer to one of the
Company's subsidiaries; provided that the executives shall remain officers of
the Company or its subsidiaries and shall perform duties of an executive
nature equal in status, dignity and responsibility to their duties at the
time the Agreements were entered into.
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 (Chairperson),
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
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.
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 as well as the Company's other executive
officers (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 recently enacted, and
the Internal Revenue Service has not yet promulgated final regulations
interpreting it. None of the compensation paid to any executive in 1994 was
non-deductible, and it is not anticipated that any compensation payable to
any executive officer in 1995 would be non-deductible. The Committee will
continue to address this issue when formulating compensation arrangements for
executive officers and expects that it will attempt to maximize the
deductibility of executive compensation under the limitation.
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 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 ___. 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.
Payments made under the Company's annual bonus and long-term incentive plans
may be more or less than the target amount depending on the Company's
performance. In years such as 1994, when the Company exceeds its targets,
the compensation actually paid to executives will rise to the high end of the
compensation surveys, although if the industry performs well as a whole, it
is anticipated that executive compensation paid by the Company's peers may
also increase above the amounts reflected in the surveys.
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 executive officer and, to the extent applicable, his or
her operating unit (the Company or a subsidiary). Adjustments are made based
on a number of factors, none of which is controlling, and objective targets
are not utilized in adjusting base salaries. Changes in base salary may also
result from promotions and 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 base salary to $750,000,
effective April 1, 1993. Mr. Lund's salary was not increased during 1994.
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. In making such
determination, the Committee considered several factors on a subjective
basis, with no single factor controlling, including the nature and scope of
Mr. Lund's responsibilities, the size of the Company relative to its peers,
the Company's results of operations, earnings per share, and strategic plans
for the future.
During 1994, the Company entered into employment agreements with Mr.
Lund and 16 other executive officers of the Company. One additional
employment agreement was entered into in early 1995. The agreements were
structured to provide an incentive to the Company's executives to remain with
the Company for an extended period, have undivided loyalty to the Company and
refrain from competing with the Company during the time of their employment
as well as after their employment has ceased. In order to accomplish this
objective, and in addition to the other terms of the agreements, the
agreements provide for the payment of a special retirement benefit calculated
as a percentage of the executive's average target compensation objective
during the last two years of his or her employment with the Company. The
benefit ranges from 9% to 30% of such average TCO (up to 40% in the case of
Messrs. Hermanns, Lund and Maher) based on years of service with the Company
and is payable for a period of twenty years commencing at the time the
executive's employment with the Company terminates or at age 57, whichever is
later. The benefit is forfeited if the executive engages in competition with
the Company either during or after the term of the agreement. The Committee
believes that by providing the Company's key executives with a higher degree
of job security and the prospect of an income stream that continues beyond
the time they cease performing duties for the Company, the agreements will
provide a substantial incentive for the executives to remain with the Company
for the duration of their careers and will provide the executives with peace
of mind with respect to their future financial security and allow them to
focus their talents and attention on the growth and profitability of the
Company. In addition, by providing for the forfeiture of the benefits if the
executive should engage in competition with the Company, it is believed that
the agreements provide an incentive for such executives to devote their
talents exclusively to the Company and to continue to provide the benefit of
their counsel and experience to the Company even after they retire. The
employment agreements are discussed in more detail beginning on page
of this proxy statement and the form of the agreements is included as an
exhibit to the Company's annual report on Form 10-K for the year ended
January 28, 1995. The foregoing discussion is qualified by reference to the
employment agreements.
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 for the Company on which a bonus will be paid. The
Committee determines the percentage of base salary for the fiscal year that
will be payable as a bonus (the "Target Bonus") to each participant in the
Annual Plan if the Company exactly meets its target. This determination is
based on the individual's job classification and responsibilities. The
Target Bonus for the Company's chief executive officer and the other four
executives named in the summary compensation table is 30% of their respective
average base salary, which corresponds to 20% of each executive's total
target compensation objective. The amount of the Target Bonus that will
actually be paid to the participants varies based on the extent to which the
Company meets, exceeds or fails to achieve its target. The Plan contains a
schedule setting forth in 1% increments the percentage of the target goal
achieved by the Company and the amount of the Target Bonus that is payable at
each increment. No bonus is paid if the Company achieves 77% or less of the
target, and the maximum bonus is paid if the Company achieves 123% or more of
its target.
The Annual Plan for 1994 established a target based on earnings above
the prior year and provided for an across the board reduction in the amount
of any Target Bonus if certain specified minimum reductions in personnel were
not accomplished. During the 1994 fiscal year, the Company exceeded its
earnings target and accomplished the reductions in personnel. As a result,
the Target Bonus paid to Mr. Lund and three of the four executives named in
the summary compensation table represents approximately 45.3% of each
individual's base salary for the 1994 fiscal year. The Target Bonus paid to
Mr. Bolton represents 66% of his base salary for the 1994 fiscal year.
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 for the three-year period on
which a bonus will be paid. If the Company exactly achieves the performance
goals, the participants receive a bonus equal to 20% of their average annual
base salary over the three-year performance cycle, which corresponds to 13%
of the executive's targeted cash compensation objective over the three-year
performance cycle. If the Company's performance falls above or below the
target, the percentage of average annual base salary to be paid as a bonus
will be increased or decreased in accordance with a schedule included in the
LTIP Plan. The minimum award is zero, and the maximum award is 70% of the
executive's average annual base salary over the three-year performance cycle.
The performance measurement for bonus amounts payable under the 1992-
1993-1994 LTIP was based 80% on an earnings per share target for the three-
year period, and the Company exceeded its earnings per share target level by
14.5% for this LTIP cycle. The remaining 20% of the LTIP bonus was based on
relative stock price performance versus the stock price performance of the
following companies: The Great Atlantic & Pacific Tea Company, Inc.;
Albertson's, Inc.; Food Lion, Inc.; The Kroger Co.; The Vons Companies, Inc.;
Walgreen Co.; and Winn-Dixie Stores, Inc. The Company's relative stock price
performance was third among this group for the three-year cycle. The peer
group for the 92-93-94 LTIP Plan is different from the Executive Plan peer
group described on page hereof in that the latter peer group includes
three additional companies and excludes one company. The excluded company
was deleted because, as a result of the Company's sale of certain assets, it
is no longer a competitor. Three additional companies were included because
they are among all of the Company's major competitors. The LTIP bonus paid
to Mr. Lund and the four executives in the summary compensation table
represents approximately 57% of each individual's average annual base salary
for fiscal years 1992, 1993, and 1994.
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 increases in 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, any of the other
executives listed in the summary compensation table, or any other individuals
during 1994. Additionally, the Committee did not reprice any outstanding
options or SARs during 1994.
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 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 right 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. Bolton - 60,000 shares; Mr. Hermanns - 60,000 shares; and
Mr. Maher - 220,000 shares. Additionally, on March 31, 1994, in connection
with a change in title and increased responsibilities, Mr. Hermanns purchased
an additional 20,000 shares at a purchase price of $25.53 per share with
proceeds of a Company loan having a 5.36% interest rate, and a new
performance cycle commenced with respect to such shares. Due to Mr. L. S.
Skaggs' 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, except with respect to the
20,000 shares purchased by Mr. Hermanns in March 1994. 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 _ 71/2%; second year _ 15%; third
year _ 221/2%; 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 1994
fiscal year, each of the executives listed in the summary compensation table
who participated in the Executive Plan was vested in a portion of the service
award equal to 15% of the outstanding loan balance, except with respect to
the 20,000 shares purchased by Mr. Hermanns in March 1994. The amount of the
service award that vested during 1994 is 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 on an unweighted basis, 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, 1995, the
Company's total shareholder return versus the members of the peer group
ranked in the 55.6th percentile, and therefore 39% of the performance award
would have been earned, which would represent 19.5% of the loan balance,
assuming such performance was maintained through the full five-year
performance cycle. The members of the peer group 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. 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 qualified plans on behalf of 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 is tied to Company performance.
The Committee believes these plans are comparable to plans of 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.
Leon G. Harmon, Chairperson
Louis H. Callister James B. Fisher
Arden B. Engebretsen L. Tom Perry
Barbara S. Preiskel
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 28, 1995. 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 February 2, 1990 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.
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
AMERICAN STORES COMPANY COMMON, S&P COMPOSITE-500
& PEER GROUP INDICES
2/2/90 2/1/91 1/31/92 1/29/93 1/28/94 1/27/95
Peer Group $100.00 $124.71 $139.22 $163.97 $156.76 $184.35
S&P 500 $100.00 $107.49 $132.17 $146.14 $163.87 $165.52
American Stores $100.00 $109.20 $116.35 $156.97 $156.20 $177.34
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation and Stock Option Committee include Leon
G. Harmon, Chairperson, Louis H. Callister, Arden B. Engebretsen, James B.
Fisher, L. Tom Perry and Barbara S. Preiskel.
Mr. Callister is Chairman of the Board and a senior partner of the law
firm of Callister, Nebeker & McCullough, P.C., Salt Lake City, Utah, which
firm performed legal services for one of the Company's subsidiaries during
fiscal year 1994. The amount paid to the firm for such services was under
$10,000.
OTHER INFORMATION PERTAINING TO DIRECTORS AND EXECUTIVE OFFICERS
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 ___ . Mr. Hermanns received an additional loan in
1994 to purchase 20,000 shares under the Executive Plan. The loans have
eight-year terms 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(s) under the
Executive Plan must also be applied to prepay the loans. The balance of the
loans after taking into account any such prepayment 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. If an executive officer's service is terminated during a performance
cycle for any reason other than retirement or following a change of control,
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. To date, Mr. Lund and three of the other
executives in the summary compensation table have received loans in the
indicated amounts: Mr. Lund - $7,853,124; Mr. Bolton - $1,177,969; Mr.
Hermanns - $1,701,564; and Mr. Maher - $4,319,218. As of January 28, 1995,
the aggregate outstanding balance of loans made pursuant to the Executive
Plan was $38,110,382, which includes accrued, unpaid interest. The largest
aggregate amount outstanding during the fiscal year for continuing
participants in the Executive Plan was $38,247,427.
PROPOSAL 3 - APPROVAL OF THE AMERICAN STORES COMPANY 1995 EMPLOYEE STOCK
PURCHASE PLAN
The Company's shareholders are being asked to approve the American
Stores Company 1995 Employee Stock Purchase Plan (the "Purchase Plan"), which
was authorized by the Board of Directors on March 21, 1995 and approved by
the Executive Committee of the Board of Directors on April 1, 1995. A
summary description of the Purchase Plan is set forth below. The summary is
qualified in its entirety by reference to the full text of the Purchase Plan
which is attached to this Proxy Statement as Exhibit A.
The purpose of the Purchase Plan is to provide the Company's employees
with an opportunity to purchase shares of the Company's Common Stock through
payroll deductions and to provide such employees with the increased incentive
to improve their performance which is expected to result from their stock
ownership.
The Purchase Plan is intended to qualify under Section 423 of the
Internal Revenue Code of 1986, as amended. A total of 7,000,000 shares of
the Company's common stock is available for purchase by the Company's
employees under the Purchase Plan. Employees are generally eligible to
participate in the next full offering period under the Purchase Plan if they
have been employed by the Company for a period of at least one year.
Eligible employees may enroll in the Purchase Plan and authorize payroll
deductions of not less than $5.00 per week to be applied toward the purchase
of stock under the Purchase Plan. Employees may not purchase shares of the
Company's Common Stock under the Purchase Plan having a market value greater
than $25,000 in any one calendar year.
The applicable IRS regulations prohibit persons owning 5% or more of the
Company's Common Stock (after taking into account shares that could be
acquired by option exercises and certain other constructive ownership rules)
from participating in the Purchase Plan. In addition, the Compensation and
Stock Option Committee of the Board of Directors may (but is not required to)
exclude from participation in any offering all or any class of employees who
consist of "highly compensated employees" within the meaning of Section
414(q) of the Internal Revenue Code (generally officers who earn more than
$66,000 per year). The Compensation Committee has indicated that it will
initially exclude all officers of the Company and its subsidiaries who hold
the title of Vice President or above from participating in the Purchase Plan.
The Purchase Plan will initially provide for four three-month offering
periods in each year commencing on the first Wednesday of January, April,
July and October ("Grant Date"). At the end of each offering period (the
"Exercise Date"), the contributions accumulated in the employees accounts
will be used to purchase shares of the Company's Common Stock at a purchase
price per share which is the lesser of (a) 85% of its fair market value on
the Grant Date, or (b) 85% of its fair market value on the Exercise Date.
Fair market value is defined as the average of the highest and lowest quoted
sales prices per share as reported on the New York Stock Exchange Composite
Transaction Tape.
Purchases of shares under the Purchase Plan are made automatically on
the Exercise Date, and a new Grant Date is fixed automatically on the same
date. A participant may withdraw from the Purchase Plan at any time.
Appropriate adjustments in the number of shares issuable under the Purchase
Plan shall be made in the event of any future stock dividends, stock splits
or corporate reorganizations.
If any employee desires to sell any of the shares acquired under the
Purchase Plan prior to the expiration of a two-year restrictive period, such
employee must first offer the shares to the Company for repurchase at the
lesser of the original purchase price paid for such shares or the fair market
value of such shares at the time of sale.
The Purchase Plan will be administered by the Compensation and Stock
Option Committee of the Board of Directors or its designee. The Committee
will have full authority to interpret and apply the terms of the Purchase
Plan, including the power to determine eligibility or participation in the
Purchase Plan, establish and change the minimum contributions that will be
accepted, and to change the offering periods. No offering period may be
longer than 27 months. The Board of Directors may alter, suspend or
discontinue the Purchase Plan following the close of any offering period;
provided, that the Board of Directors may not, without shareholder approval,
amend the Purchase Plan to increase the number of shares subject to the
Purchase Plan or to materially increase the benefits to be received by the
participants in the Purchase Plan.
Contributions to the Purchase Plan will be included in the contributing
employee's taxable income and will not be tax deductible, and an employee's
purchase of stock through the Purchase Plan will not result in the
recognition of income for tax purposes, nor will it result in an income tax
deduction for the Company. When an employee sells shares acquired under the
Purchase Plan at least two years after the Exercise Date for the shares
acquired, the employee will recognize ordinary income equal to the lesser of
(i) fifteen percent of the fair market value of the shares on the Grant Date
or (ii) the amount by which the fair market value of the shares at the time
of sale exceeded the price paid by the employee. If the amount received upon
such a disposition exceeds the fair market value of the shares on such Grant
Date, then the excess will be characterized as a long-term capital gain. If
the employee has incurred a loss in connection with such a disposition, then
the employee will realize no ordinary income, and the loss will be a long-
term capital loss. If an employee sells shares before the expiration of the
two-year holding period, the employee will recognize ordinary income equal to
the difference between the fair market value of the shares on the Exercise
Date and the price paid by the employee. The employee will have a capital
gain or loss to the extent of the difference, if any, between the amount
received upon sale and the fair market value of the shares on such Exercise
Date. Such capital gain or loss will be long-term or short-term depending on
whether or not the shares were held for more than one year from the
applicable Exercise Date. The Company is not entitled to a deduction for
amounts taxed as ordinary income upon the disposition of shares acquired
pursuant to the Purchase Plan, except in cases where an employee realizes
ordinary income by reason of a sale of the shares before the expiration of
the two-year holding period described above.
Since purchase rights are subject to discretion, including an employee's
decision not to participate in the Plan, and the first offering period under
the Plan will not begin until January of 1996, awards under the Purchase Plan
for the current fiscal year are not determinable.
The Board of Directors believes that the Purchase Plan will be an
important employee benefit and that the Company and its shareholders will
benefit by encouraging employees to own the Company's Common Stock.
The affirmative vote of a majority of the shares present and voting at
the Annual Meeting is required to approve the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR APPROVAL OF THE PURCHASE PLAN.
PROPOSAL 4 - 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
February 3, 1996. 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 28, 1995.
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 1996 ANNUAL MEETING
In February 1995, the Company's by-laws were amended to limit the
business to be conducted at a shareholders' meeting to (i) the items set
forth in the Company's notice of meeting; (ii) matters raised by or at the
direction of the Board of Directors; or (iii) matters raised by a shareholder
at a meeting that were properly submitted in writing to the Company's
secretary at least 30 days but no more than 90 days prior to the anniversary
date of the previous year's annual meeting except where the date of the
Annual Meeting is changed. The foregoing is a summary of the relevant by-law
provisions and is qualified by reference to Section 2.04.1 of the Company's
by-laws. Matters to be raised by a shareholder at the 1995 Annual Meeting
must be submitted to the Company's Secretary no later than May 22, 1995
unless the announced date for the meeting is changed. Matters to be raised
by a shareholder at the Company's 1996 Annual Meeting of Shareholders, other
than pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), must be submitted to the Company's Secretary by
no later than May 22, 1996 but not prior to March 23, 1996. Such notices
must include the information relating to such business and the shareholder as
well as the information specified in the Company's by-laws.
Any proper shareholder proposal made pursuant to Rule 14a-8 under the
Exchange Act, to be included in the Company's Proxy Statement for the 1996
Annual Meeting of Shareholders must be received by the Company no later than
December 29, 1995 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 fees estimated to be approximately $10,000
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.
Exhibit A
AMERICAN STORES COMPANY 1995
EMPLOYEE STOCK PURCHASE PLAN
0. Purpose
The American Stores Company Employee Stock Purchase Plan (the "Plan")
is intended to provide an opportunity to participate in the ownership of
American Stores Company (the "Company") for eligible union and non-union
employees of the Company and such other companies ("Participating Companies") as
the Board of Directors of the Company (the "Board") shall from time to time
designate; provided that each such company shall qualify as a "parent
corporation" or "subsidiary corporation" as defined in Section 425(e) and (f) of
the Internal Revenue Code of 1986 (the "Code"), (a "Corporate Affiliate") on the
first day of the relevant Offering Period. It is further intended that the Plan
shall qualify as an "employee stock purchase plan" as defined in Section 423 of
the Code.
1. Administration
(a) Administrative Body. The Plan shall be administered by the
Compensation and Stock Option Committee of the Board of Directors of the Company
(the "Board"), or its designee (the "Committee"). The Committee or its designee
shall have full authority to interpret and construe any provision of the Plan
and to adopt such rules and regulations for administering the Plan as it may
deem necessary. Decisions of the Committee or its designee shall be final and
binding on all parties who have an interest in the Plan.
(b) Rule 16b-3 Limitations. Notwithstanding the provisions of
Subparagraph 2(a), in the event that Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended, or any successor provision ("Rule 16b-3")
provides specific requirements for the administrators of plans of this type, the
Plan shall be only administered by such a body and in such a manner as shall
comply with the applicable requirements of Rule 16b-3.
2. Effective Date and Term of Plan
(a) Effective Date. The Plan was approved by the Board on March 21,
1995, and by the Executive Committee on April 1, 1995 and shall become effective
on January 1, 1996, subject to approval by the holders of at least a majority of
the Company's voting stock represented and voting at a duly-held meeting at
which a quorum is present. If such shareholder approval is not obtained, then
the Plan shall terminate and no purchase rights shall be granted.
(b)Termination of Plan. The Plan shall continue in effect until the
date on which all shares available for issuance under the Plan shall have been
issued unless earlier terminated pursuant to Paragraph 9.
3. Stock Subject to the Plan
( ) Number of Shares. The stock subject to the Plan shall be shares of
the common stock of the Company which are authorized but unissued or which have
been reacquired ("Common Stock"). In connection with the sale of shares under
the Plan, the Company may repurchase shares of Common Stock in the open market
or otherwise. The aggregate amount of Common Stock which may be issued pursuant
to the Plan shall not exceed 7,000,000 shares (subject to adjustment as provided
in Subparagraph 4(b)).
(a) Adjustment. If any change is made in the Common Stock subject to the
Plan, or subject to any purchase right granted under the Plan (through merger,
consolidation, reorganization, recapitalization, stock dividend, split-up,
combination of shares, exchange of shares, change in corporate structure, or
otherwise), appropriate adjustments shall be made as to (i) the class and
maximum number of shares subject to the Plan, (ii) the class of shares
purchasable by each participant, and (iii) the class and number of shares and
price per share of stock subject to outstanding purchase rights in order to
prevent the dilution or enlargement of benefits thereunder.
4. Offering Periods
Common Stock shall be offered for purchase under the Plan through a
series of successive Offering Periods. Each Offering Period shall have a
maximum duration of twenty-seven (27) months. Unless otherwise designated by
the Committee, each Offering Period shall begin on the first Wednesday of
January, April, July and October ("Grant Date"), and end on the first Wednesday
of the next succeeding three month period ("Exercise Date").
5. Eligibility and Participation
( ) General Rules. Unless excluded pursuant to Subparagraph 6(b), each
employee of the Company or any of the Participating Companies who is employed on
a part-time or full-time basis shall be an eligible employee on any date if, on
that date he or she has completed one year of service for the Company or any of
the Participating Companies. An employee who has become an eligible employee
before the first day of an offering Period shall be eligible to participate in
the Plan during that Offering Period. Each eligible employee may become a
participant with respect to an Offering Period by executing such instruments as
the Committee may specify and delivering them to such persons and at such time
prior to the first day of the Offering Period as the Committee may specify.
(a) Highly Compensated Employee. The Compensation and Stock Option
Committee may exclude from participation in any Offering Period, all or a class
of highly compensated employees within the meaning of Code Section 414(q) (or
successor provision). If the Compensation and Stock Option Committee determines
that a participant has become a member of an excluded class of employees,
payroll deductions will cease for that participant, and payroll deductions
collected and not applied to the purchase of stock will be held for the
purchase of stock at the end of the Offering Period unless the participant
elects to have the funds returned as soon as practicable.
(b) Five Percent Owner. Under no circumstances shall purchase rights be
granted under the Plan to any employee if such individual would, immediately
after the grant, own (within the meaning of Code Section 424(d)), or hold
outstanding options or other rights to purchase, stock possessing five percent
(5%) or more of the total combined voting power or value of all classes of stock
of the Company or any Corporate Affiliate.
6. Purchase Rights
Each participant shall be granted a separate purchase right for each
Offering Period in which the individual participates. The purchase right shall
be granted on the date on which such individual first joins the Offering Period
and shall be automatically exercised on the Exercise Date.
Purchase rights shall be evidenced by instruments in such form as the
Committee may from time to time approve, and shall conform to the following
terms and conditions:
( ) Exercise of Purchase Rights. Payroll deductions will be collected
during each Offering Period and applied to the purchase of whole shares of
Common Stock on the Exercise Date. A new Grant Date for the successive Offering
Period will be fixed on the same day.
(a) Purchase Price. The Purchase Price of each share purchased on any
date within an Offering Period shall be the lower of (i) eighty-five percent
(85%) of the fair market value per share of the Company's Common Stock on the
Grant Date, or (ii) eighty-five percent (85%) of the fair market value per share
of the Company's Common Stock on the Exercise Date.
(b) Fair Market Value. For purposes of the Plan, the fair market value
per share of the Company's Common Stock on any relevant day shall be the average
of the highest and lowest quoted sales prices per share of Common Stock on the
date in question as such price is officially quoted on the New York Stock
Exchange Composite Transactions Tape. If there is no reported sale of Common
Stock on such exchange on the date in question, then the fair market value shall
be the average of the highest and lowest quoted sales prices per share as
reported on the next preceding date for which such quotation exists.
(c) Payroll Deductions. Payroll deductions shall begin with the first pay
day following the participant's entry date into the Offering Period and shall
(unless sooner terminated by the participant) remain in effect for successive
Offering Periods. A participant may authorize payroll deductions of not less
than a minimum amount specified by the Committee (initially five dollars ($5.00)
per week), and not more than the participant's compensation paid during the
payroll period, subject to the limitation in Subparagraph 7(k), to be
contributed to the Plan. Compensation for this purpose will include straight
time gross earnings, overtime pay, and bonuses paid to the participant during
the pay period before reduction for elective contributions under a 401(k) plan
or cafeteria plan qualified under Section 125 (or a successor provision) of the
Code, and will exclude severance payments, moving allowance and reimbursement
of expenses or any other additional compensation paid to the participant during
the pay period.
(d) Termination of or Changes to Payroll Deductions. Unless a participant
has irrevocably elected otherwise, the participant may terminate payroll
deductions at any time by filing the appropriate form with the Committee subject
to such advance notice as the Committee may require. All further payroll
deductions will cease, and any payroll deductions previously collected from the
participant shall be held for the purchase of shares on the next Exercise Date
immediately following such termination, unless the participant elects to have
the funds refunded as soon as practicable. A participant may increase or
decrease the rate of payroll deductions as determined by the Committee. The
Committee shall determine, in its discretion, when such rate change shall become
effective.
(e) Termination of Employment. If a participant ceases to be employed by
the Company or a Participating Company for any reason, including death or
disability, prior to the end of an Offering Period, the participant's purchase
right shall terminate, and any payroll deductions previously collected from the
participant shall be held for the purchase of shares on the next Exercise Date
immediately following such termination, unless the participant or the deceased
participant's estate elects to have the funds refunded as soon as practicable.
The Committee may provide, on a uniform basis with respect to any Offering
Period, that an employee who is on a leave of absence will be deemed to have
terminated employment after a specified period.
(f) Proration of Purchase Rights. If the total number of shares of Common
Stock for which purchase rights are to be granted on any date in accordance with
the terms of the Plan exceed the number of shares then remaining available under
the Plan (after deduction of all shares for which purchase rights have been
exercised or are then outstanding), the Committee shall make a pro rata
allocation of the shares remaining available in as near as uniform a manner as
shall be practicable and as it shall deem equitable. The Committee shall give
written notice of such allocation to each participant affected thereby.
(g) Exercise. Each purchase right shall be exercised automatically on the
Exercise Date for the full number of purchasable shares, unless the purchase
right has been previously terminated pursuant to Paragraph 7(e) or 7(f).
Amounts not applied to the purchase of whole shares will be held for purchase of
shares on the next Exercise Date.
(h) Assignability. Purchase rights under the Plan shall not be assignable
or transferable by the participant other than by will or by the laws of descent
and distribution and during the life of the participant shall be exercisable
only by the participant.
(i) Rights as Shareholder. A participant shall have no rights as a
shareholder with respect to shares covered by any purchase right granted under
the Plan until the purchase right is exercised. No adjustments will be made for
dividends or other rights for which the record date is prior to the date of
exercise.
(j) Accrual Limitations. No purchase right shall permit the rights of a
participant to purchase stock under all "employee stock purchase plans" (as
defined in Section 423 of the Code) of the Company or a Corporate Affiliate to
accrue at a rate that exceeds $25,000 of fair market value of such stock
(determined at the time such purchase right is granted) for each calendar year
in which such purchase right is outstanding at any time.
(k) Other Provisions. Instruments evidencing purchase rights may contain
such other provisions, not inconsistent with the Plan, as the Committee deems
advisable.
7. Company's Repurchase Right
If a participant offers to sell shares acquired under the Plan before
the expiration of the two-year restrictive period, the Participant must first
offer the shares to the Company for repurchase at the lesser of (i) the original
purchase price for such shares, or (ii) the fair market value of such shares at
the time of the sale.
8. Amendment and Termination
( ) Amendment. The Board may from time to time alter, amend, suspend, or
discontinue the Plan following the close of any Offering Period with respect to
any shares at any time not subject to purchase rights; provided that no such
action of the Board may, without the approval of shareholders of the Company,
(i) materially increase the benefits accruing to participants under the Plan,
(ii) materially increase the number of shares which may be issued under the
Plan, or (iii) make any other change with respect to which the Board determines
that shareholder approval is required by applicable law or regulatory standards.
(a) Termination. The Board shall have the right, exercisable in its sole
discretion, to terminate the Plan immediately following any Exercise Date.
Should the Board elect to exercise such right, then no further purchase rights
shall thereafter be granted or exercised, and no further payroll deductions
shall thereafter be collected under the Plan.
9. No Employment Obligation
Nothing contained in the Plan (or in any purchase right granted
pursuant to the Plan) shall confer upon any employee any right to continue in
the employ of the Company or any Corporate Affiliate or constitute any contract
or agreement of employment or interfere in any way with the right of the Company
or a Corporate Affiliate to reduce such employee's compensation from the rate in
existence at the time of the granting of a purchase right or to terminate such
employee's employment at any time, with or without cause. However, nothing
contained herein or in any purchase right shall affect any contractual rights of
an employee pursuant to a written employment agreement.
10. Use of Proceeds
The cash proceeds received by the Company from the issuance of shares
pursuant to purchase rights under the Plan shall be used for general corporate
purposes.
11. Regulatory Approval
The implementation of the Plan, the granting of any purchase right
under the Plan, and the issuance of Common Stock upon the exercise of any such
purchase right shall be subject to the Company's compliance with all applicable
requirements of the 1933 Act, all applicable listing requirements of any
securities exchange on which the Common Stock is listed and all other applicable
requirements established by law or regulation.
12. Governing Law
To the extent not otherwise governed by federal law, the Plan and its
implementation shall be governed by and construed in accordance with the laws of
the State of Utah.
PROXY
AMERICAN STORES COMPANY
This Proxy is Solicited on Behalf of the Board of
Directors
for the Annual Meeting on June 21, 1995
The undersigned hereby constitutes and appoints Teresa Beck, Kathleen
E. McDermott, Neal J. Rider 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, 1995, 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>
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 1, 3 and 4.
The Board of Directors recommends a vote FOR proposals 1, 2,
3 and 4.
1. Proposal to amend the Restated Certificate of Incorporation to
provide for the annual election of directors.
FOR AGAINST ABSTAIN
__________ __________ __________
FOR WITHHELD
Nominees for Directors:
2. Election of Arden B. Engebretsen
Directors _______ ________ Donald B. Holbrook
James B. Fisher
For, except vote withheld from the following nominee(s): Victor L. Lund
L. Tom Perry
J. L. Scott
3. Proposal to approve the American Stores Company 1995 Employee
Stock Purchase Plan.
FOR AGAINST ABSTAIN
__________ __________ __________
4. Approval of Ernst & Young independent certified public
accountants, to audit the accounts and records of the Company for the fiscal
year ending February 3, 1996.
FOR AGAINST ABSTAIN
__________ __________ __________
5. In their discretion upon such other matters as may properly come
before this meeting.
I PLAN TO ATTEND THE 1995 ANNUAL MEETING __________
CHANGE OF ADDRESS/COMMENTS ON REVERSE SIDE __________
SIGNATURE(S)_____________________________________ DATE ______________
1995
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.
