SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 3, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
- -------
For the transition period from to
-------- ----------
Commission file number 1-5392
AMERICAN STORES COMPANY
(Exact name of registrant as specified in its charter)
Delaware 87-0207226
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
709 East South Temple
Salt Lake City, Utah 84102
(Address of principal executive offices) (Zip Code)
801-539-0112
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of August 31, 1996: Common Stock, Par Value $1.00 - 145,660,114
shares.
Part I. Financial Information
Item 1. Financial Statements
AMERICAN STORES COMPANY
Consolidated Condensed Statements of Earnings
(unaudited)
(In thousands, except per share data)
Thirteen Weeks Ended
August 3, July 29,
1996 1995
Sales $4,625,066 $4,494,890
Cost of merchandise sold, including
warehousing and transportation expenses 3,398,738 3,344,000
Gross profit 1,226,328 1,150,890
Operating expenses 1,038,674 985,613
Operating profit 187,654 165,277
Other income (expense):
Interest expense (42,421) (39,430)
Other (1,163) 3,188
Net other income (expense) (43,584) (36,242)
Earnings before income taxes 144,070 129,035
Federal and state income taxes 60,941 55,098
Net earnings $ 83,129 $ 73,937
Net earnings per share $0.57 $0.50
Average shares outstanding 145,715 148,318
Dividends per share $0.16 $0.14
See accompanying notes to consolidated condensed financial statements.
AMERICAN STORES COMPANY
Consolidated Condensed Statements of Earnings
(unaudited)
(In thousands, except per share data)
Twenty-Six Weeks Ended
August 3, July 29,
1996 1995
Sales $9,205,094 $8,857,127
Cost of merchandise sold, including
warehousing and transportation expenses 6,783,590 6,585,368
Gross profit 2,421,504 2,271,759
Operating expenses 2,077,036 1,971,906
Operating profit 344,468 299,853
Other income (expense):
Interest expense (82,154) (79,118)
Other (6,910) 2,336
Net other income (expense) (89,064) (76,782)
Earnings before income taxes 255,404 223,071
Federal and state income taxes 108,035 95,251
Net earnings $ 147,369 $ 127,820
Net earnings per share $1.01 $0.87
Average shares outstanding 146,020 147,249
Dividends per share $0.32 $0.28
See accompanying notes to consolidated condensed financial statements.
AMERICAN STORES COMPANY
Consolidated Condensed Balance Sheets
(unaudited)
(In thousands of dollars)
August 3, February 3,
1996 1996
Assets
Current Assets:
Cash and cash equivalents $ 112,921 $ 102,422
Inventories 1,483,023 1,572,242
Other current assets 336,463 409,303
Total current assets 1,932,407 2,083,967
Property, plant and equipment, less
accumulated depreciation and amortization
of $2,275,667 on August 3, 1996 and
$2,126,550 on February 3, 1996 3,404,508 3,205,900
Goodwill 1,697,011 1,722,892
Other assets 325,165 350,205
Assets $7,359,091 $7,362,964
Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term debt and
capital lease obligations $ 56,849 $ 135,152
Accounts payable 888,800 996,354
Other current liabilities 728,135 856,197
Total current liabilities 1,673,784 1,987,703
Long-term debt and obligations under capital
leases, less current maturities 2,336,109 2,105,016
Other liabilities 916,303 915,749
Shareholders' Equity - shares outstanding of
145,649,943 on August 3, 1996 and
146,447,785 on February 3, 1996 2,432,895 2,354,496
Liabilities and Shareholders' Equity $7,359,091 $7,362,964
See accompanying notes to consolidated condensed financial statements.
AMERICAN STORES COMPANY
Consolidated Condensed Statements of Cash Flows
(unaudited)
(In thousands of dollars)
Twenty-Six Weeks Ended
August 3, July 29,
1996 1995
Cash Flows from Operating Activities:
Net earnings $ 147,369 $ 127,820
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 219,156 200,119
Net loss (gain) on asset sales 3,861 (2,006)
Changes in operating assets and liabilities (61,246) (138,074)
Total adjustments 161,771 60,039
Net cash provided by operating activities 309,140 187,859
Cash Flows from Investing Activities:
Expended for property, plant and equipment (395,889) (315,309)
Proceeds from sale of other assets 13,428 28,635
Net cash (used in) investing activities (382,461) (286,674)
Cash Flows from Financing Activities:
Proceeds from long-term borrowings 350,000 200,000
Payments on long-term borrowings (100,000) (63,120)
Net (decrease) in borrowings (97,210) (113,742)
Other changes in equity 15,541 11,076
Repurchase of common stock (37,798) (34,874)
Cash dividends (46,713) (41,572)
Net cash provided by (used in)
financing activities 83,820 (42,232)
Net increase (decrease) in cash and
cash equivalents 10,499 (141,047)
Cash and cash equivalents:
Beginning of year 102,422 195,689
End of quarter $ 112,921 $ 54,642
Supplementary Information - Statements of Cash Flows:
Cash paid during the year for:
Interest (net of amounts capitalized) $ 80,564 $ 81,492
Income taxes, net of refunds $ 98,197 $ 91,839
Noncash investing and financing activities:
Conversion of convertible notes to equity $120,311
AMERICAN STORES COMPANY
Notes to Consolidated Condensed Financial Statements
(unaudited)
August 3, 1996
Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated condensed
financial statements contain all normal recurring adjustments necessary to
present fairly the financial position of American Stores Company and its
subsidiaries as of August 3, 1996 and February 3, 1996 and the results of its
operations for the thirteen weeks ended August 3, 1996 and July 29, 1995 and
results of operations and cash flows for the twenty-six weeks ended August 3,
1996 and July 29, 1995. The operating results for the interim periods are not
necessarily indicative of results for a full year. For a further discussion of
the Company's accounting policies, please refer to the Company's Form 10-K for
the fiscal year ended February 3, 1996.
Advertising Reclassification
Beginning in the first quarter of 1996, the Company is classifying advertising
expense as a cost of merchandise sold. Previously theses expenses were
classified as operating expenses. Prior years have been reclassified to conform
to the current year presentation.
Net Earnings Per Share
Earnings per share are determined by dividing the year-to-date weighted average
number of shares outstanding into net earnings. Common share equivalents in the
form of stock options are excluded from the calculation of primary earnings per
share since they have no material dilutive effect on per share figures.
Employee Stock Purchase Plan
The Employee Stock Purchase Plan (ESPP) allows eligible employees the right to
purchase common stock on a quarterly basis at the lower of 85% of the market
price at the beginning or end of each three-month offering period. During 1996
the following purchases have been made:
Purchase Purchase Number
Date Price of Shares
April 3, 1996 $22.90 128,817
July 3, 1996 $28.63 113,389
As of August 3, 1996, 6,757,794 shares remained authorized for issuance under
the ESPP.
Part I - Financial Information (continued)
Repurchase of Common Stock
During the first half of 1996, the Company repurchased 1,035,000 shares of its
common stock at an average price of $34.48 per share in accordance with an
existing stock repurchase program authorized in 1993. In June 1996, this
repurchase program was replaced by a new stock repurchase program authorizing
the repurchase of up to two million shares of common stock. During the second
quarter, 55,000 shares of common stock were repurchased under the new program at
an average price of $38.31. As of August 3, 1996, an additional 1,945,000
shares remained authorized for repurchase under the new program.
Shareholder Rights Plan
On June 25, 1996, the Board of Directors of the Company approved an amendment to
the Rights Agreement dated March 8, 1988, as amended March 20, 1990, to reduce
the ownership threshold at which the rights are triggered from 20% to 10%.
Under the amended plan, if any person or group acquires beneficial ownership of
10% or more of the Company's common stock, each holder of a right (other than
the acquiring person) will have the right to buy $125 of the Company's common
stock for $62.50. The amended plan provides that the rights are not triggered
as a result of the current stock ownership of Mr. L.S. Skaggs, former Chairman
of the Board of the Company, his wife and related trusts and foundations or with
respect to additional purchases of up to 1% of the Company's shares by such
entities.
Long-Term Debt Issuance
On June 10, 1996, the Company issued $350 million principal amount of 8.0%
debentures due June 1, 2026 at 99.262% to yield 8.066%. The Company received net
proceeds of approximately $344 million which were used to refinance a portion of
the Company's long-term indebtedness and to refinance additional short-term
variable rate borrowings under the Company's principal bank credit agreement.
Part I - Financial Information (continued)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Total sales and the percentage change in comparable store sales for the second
quarter and year-to-date 1996 and 1995 are presented in the table below. Sales
have increased for the second quarter and year-to-date 1996 at all three
operating divisions due in part to increased capital spending and successful
marketing programs such as the preferred customer card promotions and
neighborhood marketing programs in the eastern and western food operations.
Sales at the drug store operations increased due to higher pharmacy sales,
including increased generic and third party prescription sales. The increase in
year-to-date total and comparable sales for the western food operations also
reflects the impact of the nine day labor dispute in northern California in the
first quarter of 1995.
<TABLE>
13 Weeks Ended 26 Weeks Ended
Comparable Store August 3, July 29, Comparable Store August 3, July 29,
% Change 1996 1995 % Change 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Sales:
Eastern food operations 2.6% $1,520,692 $1,513,302 3.1% $3,031,622 $2,975,535
Western food operations 1.5% 1,834,064 1,767,281 2.6% 3,644,892 3,475,593
Drug store operations 5.8% 1,262,522 1,211,480 5.4% 2,514,788 2,400,961
Other 7,788 2,827 13,792 5,038
Total sales 3.0% $4,625,066 $4,494,890 3.5% $9,205,094 $8,857,127
</TABLE>
Eastern food operations include Acme Markets and Jewel Food Stores
Western food operations include Lucky Northern California Division, Lucky
Southern California Division and Jewel Osco Southwest
Drug store operations include Osco Drug and Sav-on
Comparable store sales include stores open one year or more and replacement
stores
Beginning in the first quarter of 1996, the Company is classifying advertising
expense as a cost of merchandise sold. Previously theses expenses were
classified as operating expenses. Prior years have been reclassified to conform
to the current year presentation.
Gross profit as a percent of sales increased to 26.5% in the second quarter and
26.3% year-to-date 1996, compared to 25.6% in the same periods of 1995. Gross
profit for the second quarter and year-to-date increased as a percent of sales
over the prior year primarily as a result of decreases in advertising expenses
at all three operating divisions. In addition, drug store operations gross
profit increased in the second quarter due to improved margins in third party
contracts. The 1995 year-to-date gross profit as a percent to sales was
negatively impacted by a nine-day labor dispute in the Western food operations
in the first quarter.
Part I - Financial Information (continued)
Operating expense as a percent of sales increased to 22.5% in the second quarter
of 1996, compared to 21.9% in 1995. Operating expense as a percent of sales for
the first twenty-six weeks of 1996 increased to 22.6% compared to 22.3% in 1995.
Second quarter and year-to-date operating expense as a percent of sales
increased primarily as a result of increased expenses related to the capital
investment program and new store activity and lower corrugated paper recycling
income. These items were slightly offset by reductions in self insurance costs.
Total operating profit for the second quarter and year-to-date 1996 and 1995 is
presented in the table below. Operating profit was 4.1% of sales in the second
quarter of 1996 compared to 3.7% of sales in the second quarter of 1995.
Operating profit year-to-date 1996 was 3.7% of sales compared to 3.4% of sales
for the same period of 1995. Second quarter operating profit increased 13.5%
and year-to-date operating profit increased 14.9% over the prior year primarily
reflecting higher operating profits in the western food operations which was
unfavorably impacted in 1995 by a nine-day labor dispute in northern California.
13 Weeks Ended 26 Weeks Ended
August 3, July 29, August 3, July 29,
1996 1995 1996 1995
Operating Profit:
Eastern food operations $68,682 $ 66,473 $131,667 $122,949
Western food operations 79,686 64,335 147,902 116,334
Drug store operations 63,743 61,402 116,703 114,179
LIFO (8,000) (9,000) (16,000) (18,000)
Purchase accounting amortization(19,723) (19,227) (39,144) (38,485)
Other 3,266 1,294 3,340 2,876
Total operating profit $187,654 $165,277 $344,468 $299,853
Interest expense increased in the second quarter and year-to-date 1996 over the
same periods in 1995 due to an increase in average outstanding debt and the
issuance of $350 million, thirty-year 8% debentures during the second quarter of
1996, which partially replaced variable rate debt.
The Company's effective income tax rates were 42.3% in 1996 compared to 42.7% in
the prior year. The current year effective tax rates are down due to higher
earnings in the current year and lower state tax rates.
Net earnings per share amounted to $0.57 per share in the second quarter of 1996
compared to $0.50 per share in the same quarter of the prior year and $1.01 per
share year-to-date 1996 compared to $0.87 per share for the same period of 1995.
Part I - Financial Information (continued)
Liquidity and Capital Resources
Cash provided by operating activities increased by $121.3 million year-to-date
1996 compared to the same period of 1995 primarily due to increased earnings
before depreciation and amortization. Cash flows from changes in operating
assets and liabilities increased $76.8 million and represent changes in the
components of working capital and is not indicative of long-term trends.
Cash capital expenditures year-to-date 1996 and 1995 amounted to $395.9 million
and $315.3 million, respectively. Total capital expenditures including the net
present value of leases amounted to $437.5 million in 1996, compared to $353.6
million in 1995. For the first half of 1996, 28 new stores were opened, 38
stores were closed and 32 stores were remodeled. Capital expenditures for
fiscal 1996 are expected to approximate $900 million and will be funded from
cash flows from operations and existing credit facilities. The Company
currently plans to open 100 new stores and remodel 79 stores in 1996.
On June 10, 1996, the Company issued $350 million principal amount of 8.0%
debentures due June 1, 2026 at 99.262% to yield 8.066%. The Company received net
proceeds of approximately $344 million which were used to refinance a portion of
the Company's long-term indebtedness and to refinance additional short-term
variable rate borrowings under the Company's principal bank credit agreement.
During the first half of 1996, the Company repurchased 1,035,000 shares of its
common stock at an average price of $34.48 per share in accordance with an
existing stock repurchase program authorized in 1993. In June 1996, this
repurchase program was replaced by a new stock repurchase program authorizing
the repurchase of up to two million shares of common stock. During the second
quarter, 55,000 shares of common stock were repurchased under the new program at
an average price of $38.31. As of August 3, 1996, an additional 1,945,000
shares remained authorized for repurchase under the new program.
The net increase in debt of $152.8 million in the first half of 1996 is compared
to a net increase of $23.1 million for the same period of 1995. The ratio of
total debt (debt plus obligations under capital leases) to total capitalization
(total debt plus common shareholders' equity) amounted to 49.6% at August 3,
1996 and 48.8% at February 3, 1996. These increases are primarily due to the
increased capital investment program and the repurchase of common stock.
The Company believes that its cash flow from operations, supplemented by credit
available under the Company's existing credit facility, as well as its ability
to refinance debt, will be adequate to meet its presently identifiable cash
requirements.
Part I - Financial Information (continued)
Contingencies
The Company has identified environmental contamination sites related primarily
to underground petroleum storage tanks at various store, warehouse, office and
manufacturing facilities (related to current operations as well as previously
disposed of businesses). Although the ultimate outcome and expense of
environmental remediation is uncertain, the Company believes that the required
costs of remediation and continuing compliance with environmental laws will
not have a material adverse effect on the financial condition or operating
results of the Company.
The Company, from time to time, has disposed of leased properties and may retain
certain contingent lease liabilities, either by contract or law. Although the
Company is unaware of any material assertions against it from such dispositions,
such claims may arise in the future. If such claims were asserted the expense
to the Company would consist of unpaid lease obligations, such as rents, which
may be offset by subletting the property, negotiating favorable lease
terminations, operating the facilities or applying existing reserves.
Part II - Other Information
Item 1.Legal Proceedings -- For a description of legal proceedings, please
refer to the footnote entitled "Legal Proceedings" contained in the
Notes to Consolidated Financial Statements section of the Company's Form
10-K for the fiscal year ended February 3, 1996.
The Company is also involved in various claims, administrative
proceedings and other legal proceedings which arise from time to time in
connection with the ordinary conduct of the Company's business.
Item 2.Changes in Securities -- On June 25, 1996, the Board of Directors of the
Company amended the Rights Agreement dated March 8, 1988, as amended
March 20, 1990, to reduce the ownership threshold at which rights are
triggered from 20% to 10%, as described in the current report on Form 8-
K dated July 2, 1996.
Item 3.Defaults upon Senior Securities -- None
Part II - Other Information (continued)
Item 4.Submission of Matters to a Vote of Security Holders -- The Annual
Meeting of the Company's Shareholders was held June 19, 1996 at which
time the shareholders voted on the following matters:
Election of Directors
Nominee In Favor Withheld
Henry I. Bryant 131,889,804 1,750,043
Louis H. Callister 132,903,708 736,139
Arden B. Engebretsen 132,925,801 714,046
James B. Fisher 132,858,916 780,931
Donald B. Holbrook 132,593,987 1,045,860
Victor L. Lund 132,599,453 1,040,394
Michael T. Miller 132,676,978 962,869
L. Tom Perry 132,657,157 982,690
Barbara Scott Prieskel 132,891,863 747,984
J.L. Scott 132,648,597 991,250
Don L. Skaggs 132,610,326 1,029,521
Fernando R. Gumucio, Leon G. Harmon, John E. Masline, L.S. Skaggs, and
Aurthur K. Smith also serve as directors of the Company and their
terms of office continued after the annual meeting.
Approval of Ernst & Young as independent certified public accountants to
audit the accounts and records of the Company for fiscal year ending
February 1, 1997:
For Against Abstain
133,228,127 249,467 162,253
Shareholder Proposal regarding the American Stores Company Retirement
Plan for Non-Employee Directors:
For Against Abstain Broker Non-votes
37,492,131 87,603,515 1,347,992 7,196,209
Item 5.Other Information -- None
Item 6.Exhibits and Reports on Form 8-K --
(a) Exhibits --
1.1 Underwriting Agreement dated June 4, 1996 pertaining to the 8%
Debentures due 2026
4.1 Form of 8.0% Debenture Due 2026
10.1 Amendment to the Key Management Long-Term Performance
Incentive Plan (1995-1997) and (1994-1996) dated July 25, 1996
Part II - Other Information (continued)
10.2 Amendment to the Key Management Annual Incentive Bonus Plan of
American Stores Company for fiscal year 1996 dated July 25,
1996
10.3 Third Amendment to the American Stores Company Supplemental
Executive Retirement Plan dated August 16, 1996
10.4 Form of Amendment to Employment Agreement together with
Schedule of fifteen officers who entered into Amendment to
Employment Agreements with the Company
10.5 Form of Employment Agreement together with Schedule of eleven
officers who entered into Employment Agreements with the
Company dated as of July 25, 1996
10.6 Description of Key Management Long-Term Performance Incentive
Plan (1996-1998)
10.7 Form of Employment Agreement together with Schedule of two
executive officers who entered into Employment Agreements with
the Company dated as of July 25, 1996
11.1 Calculations of earnings per share
27.1 Financial Data Schedule
(b) Reports on Form 8-K filed during the quarter -- The Company filed a
report on Form 8-K dated July 2, 1996 reporting the amendment to the
Rights Agreement dated March 8, 1988, as amended March 20, 1990.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
American Stores Company
(Registrant)
Dated September 17, 1996 /s/ Teresa Beck
Teresa Beck
Chief Financial Officer
(Principal Financial Officer)
Dated September 17, 1996 /s/ Kathleen E. McDermott
Kathleen E. McDermott
Chief Legal Officer and Assistant Secretary
Dated September 17, 1996 /s/ Bradley M. Vierig
Bradley M. Vierig
Senior Vice President and Controller
(Chief Accounting Officer)
<TABLE>
Exhibit 11.1
AMERICAN STORES COMPANY
Calculation of Earnings Per Share
(unaudited)
(In thousands of dollars, except per share data)
Thirteen Weeks Ended Twenty-Six Weeks Ended
August 3, July 29, August 3, July 29,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Primary Earnings Per Share
Primary earnings applicable to
shareholders $ 83,129 $ 73,937 $ 147,369 $ 127,820
Primary earnings per share $0.57 $0.50 $1.01 $0.87
Average shares outstanding 145,715 148,318 146,020 147,249
Fully Diluted Earnings Per Share
Earnings applicable to shareholders $ 83,129 $ 73,937 $ 147,369 $ 127,820
Plus interest on convertible debentures 0 0 0 0
Fully diluted earnings applicable to
shareholders $ 83,129 $ 73,937 $ 147,369 $ 127,820
Fully diluted earnings per share $0.57(1) $0.50(1) $1.01(1) $0.86(1)
Fully diluted average shares outstanding 146,441 149,011 146,736 147,945
Calculation of Fully Diluted Average Shares Outstanding
Effect of assumed exercise of stock options:
Proceeds from assumed exercise $ 64,454 $ 45,541 $ 52,833 $ 36,649
Shares under options outstanding 2,409 2,237 2,095 1,938
Shares assumed acquired with proceeds
under the treasury stock method (1,683) (1,544) (1,379) (1,242)
Incremental shares due to assumed
exercise of stock options 726 693 716 696
Fully diluted average shares outstanding:
Average shares outstanding 145,715 148,318 146,020 147,249
Assumed exercise of stock options 726 693 716 696
Assumed conversion of debentures 0 0 0 0
Total 146,441 149,011 146,736 147,945
</TABLE>
(1) Dilution is less than 3%.
AMENDMENT TO THE AMERICAN STORES COMPANY
LONG-TERM PERFORMANCE INCENTIVE PLANS
Each American Stores Company Long-Term Performance Incentive Plan currently in
effect is hereby amended by adding a new paragraph at the end of the Section
entitled `Administration of Plan'' in each such Plan which reads as follows:
`` Upon the occurrence of a Change in Control, as such term is defined in the
American Stores Company Employee Severance Policy, each participant in the Plan
shall receive a prorated performance award payable in a lump sum within 30 days
after the date of such Change in Control (the `Change in Control Award''). For
purposes of calculating the Change in Control Award:
i. `Total Three Year E.P.S. As Percent of Target'on the E.P.S. Award
Schedule attached as Exhibit 1 shall be deemed to be equal to (A) if at
least one fiscal year in the current performance cycle has completed as of
the date of such Change in Control, the quotient (expressed as a
percentage) resulting from the division of (I) the total E.P.S. for all
fiscal years in the current performance cycle that have been completed as
of the date of such Change in Control by (II) the sum of the targeted
annual E.P.S. for each such completed fiscal year as reflected in the
materials considered by the Board of Directors at the time the Plan was
adopted (the `Board Materials''), as thereafter adjusted pursuant to the
terms of the Plan; or (B) if no fiscal year in the current performance
cycle has completed prior to the date of such Change in Control, 100%; and
ii. The `Average annual base salary' for each participant shall be deemed
to equal the quotient resulting from the division of (I) the total base
salary accrued by such participant from the beginning of the current
performance cycle through the date of such Change in Control by (II) 3.
Moreover, within 10 days after the occurrence of such Change in Control, the
Company shall provide to each participant a written accounting of the basis for
the calculations described above (including the targeted annual E.P.S. for
completed fiscal years) as reflected in the Board Materials."
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet and income statements for the twenty-six week period ended
August 3, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-1-1997
<PERIOD-END> AUG-3-1996
<CASH> 112,921
<SECURITIES> 0
<RECEIVABLES> 261,494
<ALLOWANCES> 0
<INVENTORY> 1,483,023
<CURRENT-ASSETS> 1,932,407
<PP&E> 5,502,086
<DEPRECIATION> 2,169,031
<TOTAL-ASSETS> 7,359,091
<CURRENT-LIABILITIES> 1,673,784
<BONDS> 2,336,109
0
0
<COMMON> 149,889
<OTHER-SE> 2,283,006
<TOTAL-LIABILITY-AND-EQUITY> 7,359,091
<SALES> 9,205,094
<TOTAL-REVENUES> 9,205,094
<CGS> 6,783,590
<TOTAL-COSTS> 6,783,590
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 82,154
<INCOME-PRETAX> 255,404
<INCOME-TAX> 108,035
<INCOME-CONTINUING> 147,369
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 147,369
<EPS-PRIMARY> $1.01
<EPS-DILUTED> $1.01
<FN>All numbers except EPS are in (000's).
</FN>
</TABLE>
AMENDMENT TO THE AMERICAN STORES COMPANY
ANNUAL INCENTIVE PLANS
The American Stores Company Key Management Annual Incentive Plan for Fiscal 1996
and the other annual incentive plans maintained by the Company's operating
subsidiaries are hereby amended as follows:
1. A new sentence is added at the end of the first paragraph of the American
Stores Company Key Management Annual Incentive Plan for Fiscal 1996 in the
section entitled `Computation of the Earnings Bonus'' which reads as follows:
`Notwithstanding the foregoing, from and after the occurrence of a `Change in
Control' (as such term is defined in the American Store Company Employee
Severance Policy), adjusted earnings shall be determined without regard for or
reduction on account of (i) any interest expense incurred by the Company in
excess of the amount of interest expense set forth in the Company's 1996 Annual
Budget or (ii) any expenses incurred as a result of or in connection with a
Change in Control.''
2. A new paragraph is added to all annual incentive plans at the end of the
section entitled `Administration'' which reads as follows:
`Notwithstanding anything herein to the contrary, this Plan may not be
terminated or amended in or with respect to a year in which a Change in Control
(as such term is defined in the American Stores Company Employee Severance
Policy) takes place, except for any amendment which does not have the effect of
reducing or otherwise limiting the awards available hereunder to any
participant."
THIRD AMENDMENT TO THE AMERICAN STORES COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
1994 RESTATEMENT
Effective August 1, 1996, the American Stores Company Supplemental Executive
Retirement Plan (1994 Restatement) (`Plan'') is hereby amended in the following
respects.
1. A new Section 2.02A shall be added to the Plan and shall read as follows:
CHANGE IN CONTROL - `Change in Control'' shall have the same meaning as
`Change in Control'' as defined in the American Stores Company Employee
Severance Policy, as amended.
2. Section 6.01(a) of the Plan shall be amended to add a new sentence to the
end thereof which shall read as follows:
The 12-month limitation set forth in the preceding sentence shall not apply
to any Deferral Agreements or amendments to Deferral Agreements executed
pursuant to Section 6.01(f).
3. Section 6.01(b) of the Plan shall be amended to read as follows:
(b) Each Deferral Agreement shall, in connection with amounts deferred
under Section 4.01 hereof and Company contributions under Section 4.02 hereof,
together with earnings thereon, specify the commencement and term of
distributions in the event of (i) death prior to commencement of payment, (ii)
long-term disability prior to commencement of payment, (iii) Separation from
Service, (iv) attainment of age 59-1/2, whether or not there has been a
Separation from Service, or (v) effective August 1, 1996, a Change in Control,
whether or not there has been a Separation from Service.
4. A new Section 6.01(f) shall be added to the Plan and shall read as follows:
Special Election - Notwithstanding anything in this Plan to the contrary,
within 30 days of August 1, 1996, each Participant may elect in writing to
receive distribution of the amount of the Participant's entire vested
Bookkeeping Account balance as a lump sum payable within 30 days after the date
of a Change in Control. The Company shall make such distribution
notwithstanding anything in the Plan or any Deferral Agreement to the contrary.
5. The first sentence of Section 6.05 shall be amended to read as follows:
Notwithstanding any other provision of SERP to the contrary, and except in
the event of a Change in Control, if the Committee determines that any
distribution or portion thereof to a Participant or Beneficiary would not be
deductible for federal income tax purposes solely by reason of the limitation
imposed by Code Section 162(m) (or any successor provision thereto), then the
Committee may defer all or any portion of such distribution to the extent
necessary to ensure the total deductibility of such payment.
IN WITNESS WHEREOF, this instrument of amendment is executed this 16th day
of August, 1996.
AMERICAN STORES COMPANY
By: Scott Bergeson
Senior Vice President
Chairman, Benefit Plans Committee
AMENDMENT TO EMPLOYMENT AGREEMENT
Amendment dated as of July 25, 1996 (Amendment) to Employment Agreement
dated as of November 1, 1994 (Employment Agreement) between American Stores
Company, a Delaware corporation (Company) and <firstname> <middle> <lastname>
(Executive). The Company and Executive are collectively referred to as the
Parties, and individually as a Party.
WHEREAS, the Parties desire to amend certain provisions of the Employment
Agreement;
NOW THEREFORE, in consideration of the premises and their mutual agreements
hereinafter set forth, the Parties hereto agree as follows:
1. Section II-A of the Employment Agreement is hereby amended to read as
follows:
`II-A. The term of this Agreement shall expire on November 1, 2000,
provided, that the term shall be automatically extended for subsequent one-year
terms until terminated by written notice given by the Company at least two years
prior to the end of the term, or until terminated as described below.''
2. Section IX-C of the Employment Agreement is hereby amended to read as
follows:
`IX-C. If Company terminates Executive's employment without cause or
Executive terminates employment because of Company's breach of a material
provision of this Agreement, the Company shall pay to the Executive in a lump
sum in cash within 30 days after the effective date of termination the aggregate
of the following amounts:
1. the sum of (i) the Executive's annual base salary through the date
of termination to the extent not theretofore paid and (ii) the prorated portion
of Executive's bonus that has been earned (despite any contrary provision in the
then-existing bonus plan), and a lump sum payment equal to the value of premiums
for COBRA coverage that is available to the Executive; and
2. the amount equal to the product of (i) three and (ii) the sum of
(x) the Executive's annual base salary and (y) the Executive's target bonus for
the current year under the Company's annual and long term incentive plans.
If the Company had relocated Executive within twelve (12) months prior to the
date of termination under this Section IX-C, Company will relocate Executive
within the continental United States pursuant to the Company's relocation
policy; provided that Executive's relocation move is completed within twelve
(12) months from the date of termination. If the Executive's employment
terminates under Section IX-C, benefits under SLRRP shall be calculated as
though the Executive completed ten (10) years of service; all of the provisions
of Section VI-B of this Agreement shall continue to have full force and effect;
and the provisions of Section VIII-B3 ( the covenant not to compete for one year
following termination of employment) shall thereupon have no force or effect.
Notwithstanding the foregoing, all of the other provisions of Sections VI and
VII hereof shall remain effective. The foregoing payments and benefits shall be
in lieu of any payments to which Executive might otherwise be entitled to under
the American Stores Termination Allowance Plan or any other contract or
arrangement providing for salary or bonus upon termination (excluding, for this
purpose, the Company's Key Executive Stock Purchase Incentive Plan).''
3. The Employment Agreement, as amended by this Amendment, constitutes the
entire agreement of the subject matter hereof and may not be amended unless by a
written agreement signed by the Parties.
4. This Amendment is made in and is governed by the laws of the State of Utah.
IN WITNESS WHEREOF, the Parties have executed this Amendment as of the date
first above written.
AMERICAN STORES COMPANY
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
EXECUTIVE
<firstname> <middle> <lastname>
Schedule of Officers Entering Into Amendment
David L. Maher
Kent T. Anderson
Teresa Beck
James R. Clark
Robert P. Hermanns
Stephen L. Mannschreck
Kathleen E. McDermott
Francis J. Raucci
Martin A. Scholtens
Don L. Skaggs
James C. Horn
D. B. Holt
Richard L. Davis
Roger Wilhelm
Arlyn White
EMPLOYMENT AGREEMENT
AGREEMENT by and between American Stores Company, a Delaware
corporation (the "Company") and (the "Executive"), dated as of the 25th day of
July, 1996.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date" shall mean the
first date during the Change of Control Period (as defined in Section 1(b)) on
which a Change of Control (as defined in Section 2) occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of Control occurs and if
the Executive's employment with the Company is terminated prior to the date on
which the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing
on the date hereof and ending on the third anniversary of the date hereof;
provided, however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual an-
niversary thereof shall be hereinafter referred to as the "Renewal Date"), un-
less previously terminated, the Change of Control Period shall be automatically
extended so as to terminate three years from such Renewal Date, unless at least
60 days prior to the Renewal Date the Company shall give notice to the Executive
that the Change of Control Period shall not be so extended.
2. Change of Control. For the purpose of this Agreement, a "Change
of Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition di-
rectly from the Company, (ii) any acquisition by the Company, (iii) any acquisi-
tion by any employee benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company or (iv) any acquisition
by any corporation pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Section 2; or
(b) (i) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director sub-
sequent to the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this pur-
pose, any such individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board or (ii) a majority of
the members of the Board ceases to be comprised of Directors whose most recent
election to the Board was approved by at least a majority of the Incumbent Board
prior to such election; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business Combi-
nation, (i) all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote gener-
ally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership, im-
mediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business Combina-
tion; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. Employment Period. The Company hereby agrees to continue the Ex-
ecutive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the third anniversary of
such date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties. (i) During the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 120-day period
immediately preceding the Effective Date and (B) the Executive's services shall
be performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location less than 35 miles from
such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such responsi-
bilities. During the Employment Period it shall not be a violation of this
Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any activities have been conducted by the Executive prior to the Effective Date,
the continued conduct of such activities (or the conduct of activities similar
in nature and scope thereto) subsequent to the Effective Date shall not thereaf-
ter be deemed to interfere with the performance of the Executive's responsi-
bilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period,
the Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately preceding the month
in which the Effective Date occurs. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Agreement shall refer to Annual Base Salary as so in-
creased. As used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common control with the
Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to the
Executive's target bonus in effect before the Effective Date for the year in
which the Effective Date occurs under the Company's incentive plans (both annual
and long-term) (the "Recent Annual Bonus"). Each such Annual Bonus shall be
paid no later than the end of the third month of the fiscal year next following
the fiscal year for which the Annual Bonus is awarded, unless the Executive
shall elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs as in effect at any
time during the 120-day period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
(iv) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
which are less favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
(v) Expenses. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the Execu-
tive shall be entitled to fringe benefits, including, without limitation, tax
and financial planning services, payment of club dues, and, if applicable, use
of an automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the Employment Period,
the Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and its affiliated companies at any time during
the 120-day period immediately preceding the Effective Date or, if more favor-
able to the Executive, as provided generally at any time thereafter with respect
to other peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
5. Termination of Employment. (a) Death or Disability. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 12(b) of this Agreement of its inten-
tion to terminate the Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Executive shall not
have returned to full-time performance of the Executive's duties. For purposes
of this Agreement, "Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for 180 consecutive
business days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal rep-
resentative.
(b) Cause. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or one of its
affiliates (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically identifies the manner
in which the Board or Chief Executive Officer believes that the Executive
has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and speci-
fying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or responsibilities
as contemplated by Section 4(a) of this Agreement, or any other action by
the Company which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by
the Executive;
(ii) any failure by the Company to comply with any of the provisions
of Section 4(b) of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is remedied by
the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be based at any
office or location other than as provided in Section 4(a)(i)(B) hereof or
the Company's requiring the Executive to travel on Company business to a
substantially greater extent than required immediately prior to the
Effective Date;
(iv) any purported termination by the Company of the Executive's em-
ployment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
(d) Window Termination. Even if Good Reason does not exist, the
Executive's employment may be terminated by the Executive for any reason or for
no reason at all during the 30-day period (the "Window Period") immediately
following the first anniversary of the Effective Date. A termination of
employment by the Executive without Good Reason during the Window Period shall
hereinafter be referred to as a "Window Termination".
(e) Notice of Termination. Any termination by the Company for Cause,
or by the Executive for Good Reason or as a Window Termination, shall be com-
municated by Notice of Termination to the other party hereto given in accordance
with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice
of Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the termination date
(which date shall be not more than thirty days after the giving of such notice).
The failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
(f) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason or as a Window Termination, the date of receipt of the
Notice of Termination or any later date specified therein, as the case may be,
(ii) if the Executive's employment is terminated by the Company other than for
Cause or Disability, the Date of Termination shall be the date on which the
Company notifies the Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death or Disability, the Date of Ter-
mination shall be the date of death of the Executive or the Disability Effective
Date, as the case may be.
6. Obligations of the Company upon Termination. (a) Good Reason;
Window Termination; Other Than for Cause, Death or Disability. If, during the
Employment Period, the Company shall terminate the Executive's employment other
than for Cause or Disability or the Executive shall terminate employment for
Good Reason or there shall occur a Window Termination:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
A. the sum of (1) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid and (2) the
product of (x) the higher of (I) the Recent Annual Bonus and (II) the
Annual Bonus paid or payable, including any bonus or portion thereof
which has been earned but deferred (and annualized for any fiscal year
consisting of less than twelve full months or during which the
Executive was employed for less than twelve full months), for the most
recently completed fiscal year which commenced during the Employment
Period, if any (such higher amount being referred to as the "Highest
Annual Bonus") and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365 (the sum of the
amounts described in clauses (1) and (2) shall be hereinafter referred
to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) three and (2) the sum
of (x) the Executive's Annual Base Salary and (y) the Highest Annual
Bonus; and
(ii) for three years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to those which would
have been provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b)(iv) of this Agreement
(excluding disability coverage) if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in effect generally
at any time thereafter with respect to other peer executives of the Company
and its affiliated companies and their families, provided, however, that if
the Executive becomes reemployed with another employer and is eligible to
receive medical or other welfare benefits under another employer provided
plan, the medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such applicable
period of eligibility. For purposes of determining eligibility (but not
the time of commencement of benefits) of the Executive for retiree benefits
pursuant to such plans, practices, programs and policies, the Executive
shall be considered to have remained employed until three years after the
Date of Termination and to have retired on the last day of such period;
(iii) the Company shall, at its sole expense as incurred, provide the
Executive with outplacement services the scope and provider of which shall
be selected by the Executive in his sole discretion; and
(iv) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to
receive under any plan, program, policy or practice or contract or
agreement of the Company and its affiliated companies (such other amounts
and benefits shall be hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be
paid to the Executive's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized in this Section 6(b)
shall include, without limitation, and the Executive's estate and/or beneficia-
ries shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Company and affiliated companies to the estates and
beneficiaries of peer executives of the Company and such affiliated companies
under such plans, programs, practices and policies relating to death benefits,
if any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of the Executive's death
with respect to other peer executives of the Company and its affiliated
companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this Section
6(c) shall include, and the Executive shall be entitled after the Disability
Effective Date to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its affiliated
companies to disabled executives and/or their families in accordance with such
plans, programs, practices and policies relating to disability, if any, as in
effect generally with respect to other peer executives and their families at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive and/or the Executive's family, as in effect at
any time thereafter generally with respect to other peer executives of the Com-
pany and its affiliated companies and their families.
(d) Cause; Other than for Good Reason or Window Termination. If the
Executive's employment shall be terminated for Cause during the Employment
Period, this Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive (x) his Annual Base
Salary through the Date of Termination, (y) the amount of any compensation
previously deferred by the Executive, and (z) Other Benefits, in each case to
the extent theretofore unpaid. If the Executive voluntarily terminates employ-
ment during the Employment Period, excluding a termination for Good Reason or a
Window Termination, this Agreement shall terminate without further obligations
to the Executive, other than for Accrued Obligations and the timely payment or
provision of Other Benefits. In such case, all Accrued Obligations shall be
paid to the Executive in a lump sum in cash within 30 days of the Date of
Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the Execu-
tive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its af-
filiated companies at or subsequent to the Date of Termination shall be payable
in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 9) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments. Notwithstanding the
foregoing provisions of this Section 9(a), if it shall be determined that the
Executive is entitled to a Gross-Up Payment, but that the Payments do not exceed
110% of the greatest amount (the "Reduced Amount") that could be paid to the
Executive such that the receipt of Payments would not give rise to any Excise
Tax, then no Gross-Up Payment shall be made to the Executive and the Payments,
in the aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Ernst & Young
LLP or such other certified public accounting firm as may be designated by the
Executive (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group ef-
fecting the Change of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall
be paid by the Company to the Executive within five days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Company and the Executive. As a result of the uncertainty
in the application of Section 4999 of the Code at the time of the initial deter-
mination by the Accounting Firm hereunder, it is possible that Gross-Up Payments
which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to Sec-
tion 9(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 9(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted violation of the
provisions of this Section 10 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be governed by and con-
strued in accordance with the laws of the State of Delaware, without reference
to principles of conflict of laws. The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
name
street
city
If to the Company:
709 East South Temple
Salt Lake City, Utah 84102
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 5(c)(i)-(v) of this Agreement or as a Window Termination
pursuant to Section 5(d) of this Agreement, shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.
(f) Prior to the Effective Date, the Executive's employment shall be
governed by the agreement between the parties dated November 1, 1994 (the "Prior
Agreement"). From and after the Effective Date this Agreement shall supersede
any other agreement between the parties with respect to the subject matter
hereof, including, without limitation, the Prior Agreement; provided, however,
that the provisions of Section VI-B of the Prior Agreement shall remain in full
force and effect, and any termination of employment which entitles the Executive
to receive benefits pursuant to Section 6(a) hereof (but excluding, for this
purpose, a Window Termination pursuant to Section 5(d) hereof) shall be deemed,
for purposes of determining the Executive's eligibility for benefits pursuant
to such Section VI-B, to be a termination from employment by the Company without
cause within the meaning of Section VI-B5 of the Prior Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the Company
has caused these presents to be executed in its name on its behalf, all as of
the day and year first above written.
EXECUTIVE
By
name
AMERICAN STORES COMPANY
By
Schedule of Officers entering into Agreement
Victor L. Lund
David L. Maher
Kent T. Anderson
Teresa Beck
James R. Clark
Robert P. Hermanns
Stephen L. Mannschreck
Kathleen E. McDermott
Francis J. Raucci
Martin A. Scholtens
Don L. Skaggs
AMERICAN STORES COMPANY
KEY MANAGEMENT
LONG-TERM PERFORMANCE INCENTIVE PLAN
1996 - 1997 - 1998
PLAN PURPOSE
The purposes of the American Stores Company Long-Term Performance Incentive Plan
("Plan") are to:
" focus executive's attention prospectively on long-term results
and balance the effect of the short-term incentive plan;
" direct attention to overall corporate performance and reward
achievement of the Company's long-term financial goals; and
" maintain the competitiveness of the American Stores' compensation
program, and assist in retaining executives.
ELIGIBILITY
Participation in the American Stores Company Long-Term Performance Incentive
Plan is limited to key executives who have a significant impact on the long-term
results of the Company. Participation will be on a selected basis, reflecting
position responsibilities and impact on long-term results.
PERFORMANCE CYCLES
Performance cycles will be three years in length, with a new cycle starting
every year. Cash payments, if warranted by Corporate performance, will be made
at the end of the three-year cycle. Assuming performance goals continue to be
met, payments will be made annually upon completion of each cycle, based on
results over the previous three years.
TARGETED AWARDS
Long-term performance award opportunities are designed to balance the effect of
the Company's short-term incentive awards, to provide meaningful long-term
incentive compensation and to result in competitive total direct compensation
levels. The degree of attainment of the Corporation's long-term performance
goals determines the actual size of the participant's awards. Target awards are
20% of the participant's average annual base salary over the three-year
performance cycle based on achieving 100% of target earnings per share (E.P.S.).
The award is increased for each 1% above the target E.P.S. (see Exhibit I). The
maximum award attainable is 70% of the participant's average annual base salary
over the three-year performance cycle.
PERFORMANCE MEASUREMENT
The 96-97-98 Plan will be based on total earnings performance based on E.P.S.
and will be set by the Compensation and Stock Option Committee.
DETERMINATION OF INDIVIDUAL AWARDS
The award schedule is shown in Exhibit I. Exhibit II provides an example of the
performance award calculation.
The E.P.S. award is based upon how the Company's total E.P.S. over the three-
year cycle compares to the preset goal, as set by the Compensation and Stock
Option Committee. As an example, if American Stores' total three year E.P.S. is
100% of target, the E.P.S. award would be 20% of the participant's average
annual base salary over the three-year performance cycle.
ADMINISTRATION OF PLAN
The following are administrative guidelines for the American Stores Company
Long-Term Performance Incentive Plan:
" The Compensation and Stock Option Committee of the Board of Directors
has final approval of the Plan. Determination of attainment of the
performance measure will be made by the Compensation and Stock Option
Committee.
" Awards will be made in April following each performance cycle after
the final financial results of American Stores Company have been
approved.
" All awards will be made in cash.
" In the case of death, disability as determined under the American
Stores Long-Term Disability Plan, or retirement at or after age 57,
generally a pro rata award will be made based upon the number of
months of service completed during the award cycle(s) and the
participant's average annual base salary. Payment will be made at the
end of the performance cycle(s) (i.e., after the final financial
results of American Stores Company have been approved). A pro rata
award will not be made to individuals retiring at or after age 57 who
begin competing with the company within 1 year of leaving employment.
For purposes of this paragraph the word "competing" shall mean
working or consulting for a retail establishment in the food or drug
business in direct competition with a business operated by the Company
or its subsidiaries as a supermarket store, a drug store, a warehouse
store, a club store or any combination thereof, or that primarily
sells the products which constitute at least ten percent (10%) of the
products sold in any of the stores described above.
" Individuals who are selected to participate in the Plan during a cycle
will receive an award prorated based on the salary received during the
period they were participants in the Plan.
" Nothing contained in this Plan should be construed as an express or
implied contractual obligation. The Company reserves the right to
promote, demote, discipline, terminate, make compensation decisions,
and otherwise manage its employees as it deems fit.
" In the event the participant's position or responsibilities change
(other than termination) to the extent that it is determined that he
or she is no longer eligible to participate in the Plan, the
participant will be paid at the end of the cycle an award prorated on
the basis of time he or she was a participant.
" Unless otherwise approved in writing by the Chairman of the Board, any
participant who resigns or is terminated during a performance cycle
forfeits all rights to any awards.
" The Compensation and Stock Option Committee has authority to interpret
the Plan and make all determinations required to administer the Plan.
" For those bonus payments made after the calendar year in which the
employee either dies or retires at or after age 57, an additional
payment will be made at the same time the bonus payment is made. The
calculation for this payment will be:
Bonus payment multiplied by the latest available American Store
Retirement Estates (ASRE)
company contribution on pay factor.
Plus
Bonus payment multiplied by 6% and this result multiplied by the
latest available ASRE
company match on personal deposits factor.
" Upon the occurrence of a Change in Control, as such term is defined in
the American Stores Company Employee Severance Policy, each
participant in the Plan shall receive a prorated performance award
payable in a lump sum within 30 days after the date of such Change in
Control (the `Change in Control Award''). For purposes of
calculating the Change in Control Award:
i. `Total Three Year E.P.S. As Percent of Target'on the E.P.S. Award
Schedule attached as Exhibit 1 shall be deemed to be equal to (A) if
at least one fiscal year in the current performance cycle has
completed as of the date of such Change in Control, the quotient
(expressed as a percentage) resulting from the division of (I) the
total E.P.S. for all fiscal years in the current performance cycle
that have been completed as of the date of such Change in Control by
(II) the sum of the targeted annual E.P.S. for each such completed
fiscal year as reflected in the materials considered by the Board of
Directors at the time the Plan was adopted (the `Board Materials''),
as thereafter adjusted pursuant to the terms of the Plan; or (B) if no
fiscal year in the current performance cycle has completed prior to
the date of such Change in Control, 100%; and
ii. The `Average annual base salary' for each participant shall be
deemed to equal the quotient resulting from the division of (I) the
total base salary accrued by such participant from the beginning of
the current performance cycle through the date of such Change in
Control by (II) 3.
Moreover, within 10 days after the occurrence of such Change in
Control, the Company shall provide to each participant a written
accounting of the basis for the calculations described above
(including the targeted annual E.P.S. for completed fiscal years) as
reflected in the Board Materials.
EXHIBIT I
AMERICAN STORES COMPANY
96-97-98 LONG-TERM INCENTIVE PLAN
E.P.S. AWARD SCHEDULE
Total Three Year Performance Award As A
E.P.S. As Percent Percent of Average Annual
of Target Base Salary For the Cycle* Ratio
120% 70% = Maximum Award
3:1
110% 40%
2:1
100% 20%
1:1
90% 10%
1:1
80% 0%
* Performance award is paid at the end of each performance cycle (one
cycle ending every three years), and is calculated using average annual
base salary over the three-year performance cycle times the percentage of
performance award earned.
EARNINGS PER SHARE FOR 1996 - 1997 - 1998 PLAN
THREE YEAR TARGETED E.P.S. IS $7.72
The three year target E. P. S. of $7.72 is based on the current number of
outstanding common shares which is approximately 147,000,000. In the event that
the amount of common shares outstanding is increased through stock dividends or
stock splits or conversion of convertible debt the target earnings per share
will be adjusted.
EXHIBIT II
AMERICAN STORES COMPANY
PERFORMANCE AWARD CALCULATIONS
1996-1997-1998
To calculate your bonus determine the actual E.P.S. as a percentage of target
and convert this into the "performance award" as a percentage of average
annual base salary.
For example, if the total 3-year E.P.S. as a percentage of target is 105%,
the performance award is 30% of your average annual base salary:
20% at target plus 2% for each 1% above 100% of target ( 5 x 2% = 10%)
for a total of 30%.
"Average annual base salary" is calculated by totaling your salary while a
participant and dividing by 3.
Example #1:Year Salary
96 95,000 Participant for full cycle
0 97 100,000 "average annual base
98 105,000 salary" is 100,000
Average annual base salary x performance award as a percentage of average
annual base salary = LTIP Bonus Award
100,000 X 30% = LTIP Bonus of $30,000
Example #2:Year Salary
Participant for last 30
96 47,500 months of cycle
97 100,000 "average annual base
98 105,000 salary" is 84,167
Average annual base salary x performance award as a percentage of average
annual base salary = LTIP Bonus Award
84,167 x 30% =LTIP Bonus of $25,250
EMPLOYMENT AGREEMENT
AGREEMENT by and between American Stores Company, a Delaware
corporation (the "Company") and (the "Executive"), dated as of the 25th day of
July, 1996.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date" shall mean the
first date during the Change of Control Period (as defined in Section 1(b)) on
which a Change of Control (as defined in Section 2) occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of Control occurs and if
the Executive's employment with the Company is terminated prior to the date on
which the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing
on the date hereof and ending on the third anniversary of the date hereof;
provided, however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual an-
niversary thereof shall be hereinafter referred to as the "Renewal Date"), un-
less previously terminated, the Change of Control Period shall be automatically
extended so as to terminate three years from such Renewal Date, unless at least
60 days prior to the Renewal Date the Company shall give notice to the Executive
that the Change of Control Period shall not be so extended.
2. Change of Control. For the purpose of this Agreement, a "Change
of Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition di-
rectly from the Company, (ii) any acquisition by the Company, (iii) any acquisi-
tion by any employee benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company or (iv) any acquisition
by any corporation pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Section 2; or
(b) (i) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director sub-
sequent to the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this pur-
pose, any such individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board or (ii) a majority of
the members of the Board ceases to be comprised of Directors whose most recent
election to the Board was approved by at least a majority of the Incumbent Board
prior to such election; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business Combi-
nation, (i) all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote gener-
ally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership, im-
mediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business Combina-
tion; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the third anniversary of
such date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties. (i) During the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 120-day period
immediately preceding the Effective Date and (B) the Executive's services shall
be performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location less than 35 miles from
such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such responsi-
bilities. During the Employment Period it shall not be a violation of this
Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period,
the Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately preceding the month
in which the Effective Date occurs. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Agreement shall refer to Annual Base Salary as so in-
creased. As used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common control with the
Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to the
Executive's target bonus for the year prior to the year in which the Effective
Date occurs under the Company's incentive plans (both annual and long-term) (the
"Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the
end of the third month of the fiscal year next following the fiscal year for
which the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs as in effect at any
time during the 120-day period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
(iv) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
which are less favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
(v) Expenses. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the Execu-
tive shall be entitled to fringe benefits, including, without limitation, tax
and financial planning services, payment of club dues, and, if applicable, use
of an automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the Employment Period,
the Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and its affiliated companies at any time during
the 120-day period immediately preceding the Effective Date or, if more favor-
able to the Executive, as provided generally at any time thereafter with respect
to other peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
5. Termination of Employment. (a) Death or Disability. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 12(b) of this Agreement of its inten-
tion to terminate the Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Executive shall not
have returned to full-time performance of the Executive's duties. For purposes
of this Agreement, "Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for 180 consecutive
business days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal rep-
resentative.
(b) Cause. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or one of its
affiliates (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically identifies the manner
in which the Board or Chief Executive Officer believes that the Executive
has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or responsibilities
as contemplated by Section 4(a) of this Agreement, or any other action by
the Company which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by
the Executive;
(ii) any failure by the Company to comply with any of the provisions
of Section 4(b) of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is remedied by
the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be based at any
office or location other than as provided in Section 4(a)(i)(B) hereof or
the Company's requiring the Executive to travel on Company business to a
substantially greater extent than required immediately prior to the
Effective Date;
(iv) any purported termination by the Company of the Executive's em-
ployment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the Com-
pany to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
6. Obligations of the Company upon Termination. (a) Good Reason;
Other Than for Cause, Death or Disability. If, during the Employment Period,
the Company shall terminate the Executive's employment other than for Cause or
Disability or the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
A. the sum of (1) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid and (2) the
product of (x) the higher of (I) the Recent Annual Bonus and (II) the
Annual Bonus paid or payable, including any bonus or portion thereof
which has been earned but deferred (and annualized for any fiscal year
consisting of less than twelve full months or during which the
Executive was employed for less than twelve full months), for the most
recently completed fiscal year during the Employment Period, if any
(such higher amount being referred to as the "Highest Annual Bonus")
and (y) a fraction, the numerator of which is the number of days in
the current fiscal year through the Date of Termination, and the
denominator of which is 365 (the sum of the amounts described in
clauses (1) and (2) shall be hereinafter referred to as the "Accrued
Obligations"); and
B. the amount equal to the product of (1) two and (2) the sum of
(x) the Executive's Annual Base Salary and (y) the Highest Annual
Bonus; and
(ii) for two years after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to those which would
have been provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b)(iv) of this Agreement
(excluding disability coverage) if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in effect generally
at any time thereafter with respect to other peer executives of the Company
and its affiliated companies and their families, provided, however, that if
the Executive becomes reemployed with another employer and is eligible to
receive medical or other welfare benefits under another employer provided
plan, the medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such applicable
period of eligibility. For purposes of determining eligibility (but not
the time of commencement of benefits) of the Executive for retiree benefits
pursuant to such plans, practices, programs and policies, the Executive
shall be considered to have remained employed until two years after the
Date of Termination and to have retired on the last day of such period;
(iii) the Company shall, at its sole expense as incurred, provide the
Executive with outplacement services the scope and provider of which shall
be selected by the Executive in his sole discretion; and
(iv) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to
receive under any plan, program, policy or practice or contract or
agreement of the Company and its affiliated companies (such other amounts
and benefits shall be hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be
paid to the Executive's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized in this Section 6(b)
shall include, without limitation, and the Executive's estate and/or benefi-
ciaries shall be entitled to receive, benefits at least equal to the most
favorable benefits provided by the Company and affiliated companies to the
estates and beneficiaries of peer executives of the Company and such affiliated
companies under such plans, programs, practices and policies relating to death
benefits, if any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of the Executive's death
with respect to other peer executives of the Company and its affiliated
companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this Section
6(c) shall include, and the Executive shall be entitled after the Disability
Effective Date to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its affiliated
companies to disabled executives and/or their families in accordance with such
plans, programs, practices and policies relating to disability, if any, as in
effect generally with respect to other peer executives and their families at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive and/or the Executive's family, as in effect at
any time thereafter generally with respect to other peer executives of the Com-
pany and its affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the Executive's employment
shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive (x) his Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by the
Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the
Employment Period, excluding a termination for Good Reason, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations and the timely payment or provision of Other Benefits. In such
case, all Accrued Obligations shall be paid to the Executive in a lump sum in
cash within 30 days of the Date of Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the Execu-
tive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its af-
filiated companies at or subsequent to the Date of Termination shall be payable
in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 9) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments. Notwithstanding the
foregoing provisions of this Section 9(a), if it shall be determined that the
Executive is entitled to a Gross-Up Payment, but that the Payments do not exceed
110% of the greatest amount (the "Reduced Amount") that could be paid to the
Executive such that the receipt of Payments would not give rise to any Excise
Tax, then no Gross-Up Payment shall be made to the Executive and the Payments,
in the aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Ernst & Young
LLP or such other certified public accounting firm as may be designated by the
Executive (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group ef-
fecting the Change of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall
be paid by the Company to the Executive within five days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Company and the Executive. As a result of the uncertainty
in the application of Section 4999 of the Code at the time of the initial deter-
mination by the Accounting Firm hereunder, it is possible that Gross-Up Payments
which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to Sec-
tion 9(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 9(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted violation of the
provisions of this Section 10 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be governed by and con-
strued in accordance with the laws of the State of Delaware, without reference
to principles of conflict of laws. The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
name
street
city
If to the Company:
709 East South Temple
Salt Lake City, Utah 84102
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a) hereof, prior to the Effective Date, the
Executive's employment and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the Effective Date, in which case
the Executive shall have no further rights under this Agreement. From and after
the Effective Date this Agreement shall supersede any other agreement between
the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the Company
has caused these presents to be executed in its name on its behalf, all as of
the day and year first above written.
EXECUTIVE
By
Name
AMERICAN STORES COMPANY
By
Schedule of Officers Entering into Agreement
J. Greg Spencer
Bradley M. Vierig
Exhibit 4.1
[FACE OF DEBENTURE]
REGISTERED
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CUSIP 030096 AF 8
SEE REVERSE FOR CERTAIN DEFINITIONS
AMERICAN STORES COMPANY
[SPECIMEN]
8.00% DEBENTURE DUE June 1, 2026
American Stores Company, a corporation duly organized and existing under the
laws of the State of Delaware (herein called the "Company") for value received,
hereby promises to pay to
8.00% 8.00%
DUE DUE
JUNE 1, 2026 JUNE 1, 2026
, or registered assigns, the principal sum of DOLLARS
upon presentation and surrender of this Debenture, on the first day of June,
2026, at the office or agency of the Company maintained for that purpose in The
City of New York or any other office or agency maintained for such purpose, in
such coin or currency of the United States of America as at the time of payment
is legal tender for public and private debts, and to pay interest on said
principal sum at the rate of 8.00% per annum in like coin or currency, in each
case in immediately available funds, from the June 1 or December 1,
as the case may be, next preceding the date hereof to which interest has been
paid on the Debentures referred to on the reverse hereof (unless the date hereof
is the date to which interest has been paid on such Debentures, in which case
from the date hereof, or unless the date hereof is prior to December 1, 1996, in
which case from June 10, 1996), semiannually on June 1 and December 1, until
payment of said principal sum has been made or duly provided for. Notwithstand-
ing the foregoing, if this Debenture is dated after any May 15 and before the
following June 1, or after any November 15 and before the following December 1,
then this Debenture shall bear interest from such following June 1 or December
1; provided, however, that if the Company shall default in the payment of
interest due on such following June 1 or December 1, this Debenture shall bear
interest from the next preceding June 1 or December 1 to which interest has been
paid on such Debentures, or if no interest has been paid on such Debentures,
then from June 10, 1996. The interest so payable on any December 1 or June 1
will, subject to certain exceptions provided in the Indenture referred to on the
reverse hereof, be paid to the person in whose name this Debenture is registered
at the close of business on the November 15 prior to such December 1 or the May
15 prior to such June 1. If the Company shall default in the payment of the
interest due on such interest payment date, such defaulted interest shall then
cease to be payable to the Holder on such record date by virtue of having been
such Holder, and shall be paid to the
person in whose name this Debenture is registered at the close of
business on a subsequent record date (which shall be not less than five
Business Days prior to the date of payment of such defaulted interest)
for the payment of such defaulted interest established by notice given by
mail by or on behalf of the Company to Holders not less than 15 days
preceding such subsequent record date.
Reference is hereby made to the further provisions of this
Debenture set forth on the reverse hereof, and such further provisions
shall for all purposes have the same effect as though fully set forth at
this place.
This Debenture shall not be entitled to any benefits under the
Indenture referred to on the reverse hereof or any indenture supplement
thereto, or become valid or obligatory for any purpose, until the
certificate of authentication hereon shall have been signed by or on
behalf of the Trustee under such Indenture.
DATED:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION AMERICAN STORES COMPANY THIS IS
ONE OF THE SECURITIES OF THE SERIES DESIGNATED
AND REFERRED TO IN THE WITHIN-MENTIONED INDENTURE.
THE FIRST NATIONAL BANK OF CHICAGO
BY TRUSTEE
[SEAL] BY BY
[Facsimile signature] [Facsimile signature]
AUTHORIZED OFFICER SENIOR VICE PRESIDENT, CHAIRMAN OF THE BOARD AND
TREASURER AND CHIEF EXECUTIVE OFFICER
ASSISTANT SECRETARY
[BACK OF DEBENTURE]
AMERICAN STORES COMPANY
[SPECIMEN]
8.00% DEBENTURE
DUE JUNE 1, 2026
This Debenture is one of a duly authorized issue of unsecured
debentures, debentures or other evidences of indebtedness of the Company
(hereinafter called the "Securities") of the series hereinafter specified,
unlimited in aggregate principal amount, all issued or to be issued under the
indenture dated as of May 1, 1995, executed between the Company and THE FIRST
NATIONAL BANK OF CHICAGO, as Trustee; to which indenture and all indentures
supplemental thereto (herein collectively called the "Indenture") reference is
hereby made for a specification of the rights and limitation of rights
thereunder of the Holders of the Securities, the rights and obligations
thereunder of the Company and the rights, duties and immunities thereunder of
the Trustee. The Securities may be issued in one or more series, which dif-
ferent series may be issued in various aggregate principal amounts, may mature
at different times, may bear interest (if any) at different rates and may
otherwise vary as in the Indenture provided. This Debenture is one of a series
designated as the "8.00% Debentures due June 1, 2026" of the Company
(hereinafter referred to as the "Debentures"), limited in aggregate principal
amount to $350,000,000. All terms used in this Debenture which are defined in
the Indenture shall have the meanings assigned to them in the Indenture.
The indebtedness evidenced by this Debenture is unsecured and will
rank pari passu with all other unsecured and unsubordinated debt of the Company.
The Debentures are not subject to redemption prior to maturity.
The provisions of Article Ten of the Indenture relating to defeasance
shall apply to the Debentures, which provisions shall have the same effect as if
set forth herein in their entirety.
In case an Event of Default, as defined in the Indenture, shall occur
and be continuing with respect to the Debentures, the principal amount of all
Debentures then outstanding under the Indenture may be declared or may become
due and payable upon the conditions and in the manner and with the effect
provided in the Indenture. The Indenture provides that such declaration may in
certain events be annulled by the Holders of a majority in principal amount of
the Debentures outstanding.
To the extent permitted by, and as provided in, the Indenture,
indentures supplemental thereto may be entered into with the consent of the
Company and with the consent of the Holders of not less than a majority in
principal amount of the outstanding Securities of any series affected thereby.
The Indenture also provides that the Holders of a majority in
principal amount of the Securities of any series then outstanding may waive any
past default under the Indenture and its consequences, except a default in the
payment of the principal of or interest or premium, if any, on any of the
Securities.
No reference herein to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
interest on this Debenture at the place, at the respective times, at the rate,
and in the currency, herein prescribed.
This Debenture is transferable or exchangeable by the registered
Holder hereof or by his attorney duly authorized in writing at the office or
agency of the Company in The City of New York or any other office or agency
maintained for such purpose, without charge except for any tax or other
governmental charge imposed in relation thereto, but only in the manner and
subject to the limitations provided in the Indenture and upon surrender of this
Debenture. Upon any such transfer or exchange a Debenture or Debentures of au-
thorized denominations for a like aggregate principal amount and bearing a
number not contemporaneously outstanding will be issued in exchange therefor.
The Debentures are issuable only in registered form, without coupons, in
denominations of $1,000 and any integral multiple thereof.
The Company, the Trustee, and any agent of the Company or the Trustee
may deem and treat the registered Holder hereof as the absolute owner hereof
(whether or not this Debenture shall be overdue and notwithstanding any notation
of ownership or other writing thereon) for the purpose of receiving payment of
or on account of the principal hereof and interest hereon and for all other
purposes, and neither the Company nor the Trustee nor any agent of the Company
or the Trustee shall be affected by any notice to the contrary. All such
payments shall be valid and effectual to satisfy and discharge the liability
upon this Debenture to the extent of the sum or sums so paid.
No recourse shall be had for the payment of the principal of or the
interest on this Debenture or for any claim based hereon or otherwise in any
manner in respect hereof, or in respect of the Indenture, against any incor-
porator, shareholder, employee, officer or director, past, present or future, of
the Company or of any predecessor or successor corporation, whether by virtue of
any constitutional provision or statute or rule of law, or by the enforcement of
any assessment or penalty or in any other manner, all such liability being
expressly waived and released by the acceptance hereof and as part of the
consideration for the issue hereof. In the event of any sale or transfer of all
or substantially all of the assets to a successor corporation, the predecessor
corporation may be dissolved and liquidated as more fully set forth in the
Indenture.
The following abbreviations when used in the inscription on the face
of the instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- Custodian
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of survivorship Under Uniform Gifts
and not as tenants in common to Minors
Act State
Additional abbreviations may also be used though not in the above list
NOTICE OF TRANSFER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
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(Name and Address of Assignee, including zip code, must be printed or
typewritten) the within Debenture, and all rights thereunder, hereby
irrevocably constituting and appointing to transfer said Debenture on the
books of the Company, with full power of substitution in the premises.
Dated: Signature
NOTICE: The signature to this assignment must correspond with the names as it
appears upon the face of the within Debenture in every particular without
alteration or enlargement or any change whatever. Signature must be guaranteed
by an eligible guarantor institution participating in a Securities Transfer
Association recognized signature guarantee program.
Exhibit 1.1
CONFORMED COPY
$350,000,000
AMERICAN STORES COMPANY
8.00% Debentures due June 1, 2026
Underwriting Agreement
June 4, 1996
J.P. Morgan Securities Inc.
Lehman Brothers Inc.
Morgan Stanley & Co. Incorporated
Solomon Brothers
c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Dear Sirs:
American Stores Company, a Delaware corporation
(the "Company"), proposes to issue and sell to the underwriters listed in
Schedule I hereto (the "Underwriters"), $350,000,000 principal amount of its
8.00% Debentures due June 1, 2026 (the "Securities"). The Securities will be
issued pursuant to the provisions of a Senior Indenture dated as of May 1, 1995
between the Company and The First National Bank of Chicago, as Trustee (the
"Trustee").
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Securities Act"), a registration
statement (File No. 33-52331), including a prospectus, relating to the
Securities. The registration statement as amended at the time when it became
effective, or, if a post-effective amendment is filed with respect thereto, as
amended by such posteffective amendment at the time of its effectiveness, is
referred to in this Agreement as the "Registration Statement", and the
prospectus (including the prospectus supplement specifically relating to the
Securities) in the form first used to confirm sales of Securities is referred to
in this Agreement as the "Prospectus". Any reference in this Agreement to the
Registration Statement, any preliminary prospectus or the Prospectus shall be
deemed to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Securities Act, as of the effective
date of the Registration Statement or the date of such preliminary prospectus or
the Prospectus, as the case may be, and any reference to "amend", "amendment" or
"supplement" with respect to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to refer to and include any
documents filed after such date under the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder
(collectively, the "Exchange Act") that are deemed to be incorporated by
reference therein.
The Company hereby agrees with the Underwriters as
follows:
1. The Company agrees to issue and sell the
Securities to the several Underwriters as hereinafter provided, and each
Underwriter, upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, agrees to purchase,
severally and not jointly, from the Company the respective principal amount of
Securities set forth opposite such Underwriter's name in Schedule I hereto at a
price (the "Purchase Price") equal to 98.387% of their principal amount, plus
accrued interest, if any, from June 10, 1996 to the date of payment and
delivery.
2. The Underwriters intend (i) to make a public
offering of their respective portions of the Securities as soon after this
Agreement has become effective as in the judgment of the Underwriters is
advisable and (ii) initially to offer the Securities upon the terms set forth in
the Prospectus.
3. Payment for the Securities shall be made to
the Company or to its order by wire transfer in immediately available funds to
the account specified by the Company to the Underwriters (no later than noon the
Business Day Prior to the Closing Date (as defined herein)). The closing shall
occur at the office of Davis Polk & Wardwell, 450 Lexington Avenue, New York,
New York 10017 at 10:00 A.M., New York City time on June 10, 1996, or at such
other time on the same or such other date, not later than the fifth Business Day
thereafter, as the Underwriters and the Company may agree upon in writing. The
time and date of such payment for the Securities are referred to herein as the
Closing Date. As used herein, the term "Business Day" means any day other than a
day on which banks are permitted or required to be closed in New York City.
Payment for the Securities shall be made against delivery to the
Underwriters of the Securities registered in such names and in such
denominations as the Underwriters shall request in writing not later than two
full Business Days prior to the Closing Date with any transfer taxes payable in
connection with the transfer to the Underwriters of the Securities duly paid by
the Company. The certificates for the Securities will be made available for
inspection and packaging by the Underwriters at the office of J.P. Morgan
Securities Inc., 60 Wall Street, New York, New York 10260, not later than 1:00
P.M., New York City time, on the Business Day prior to the Closing Date.
4. The Company represents and warrants to each
Underwriter that:
(a) no order preventing or suspending the use of
any preliminary prospectus has been issued by the Commission, and each
preliminary prospectus filed as part of the Registration Statement as originally
filed or as part of any amendment thereto, or filed pursuant to Rule 424 under
the Securities Act, complied when so filed in all material respects with the
Securities Act, and did not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; provided that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in conformity
with information furnished to the Company in a letter from the Underwriters
expressly for use therein;
(b) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that purpose has
been instituted or, to the knowledge of the Company, threatened by the
Commission; and, except for statements in such documents which do not constitute
part of the Registration Statement or the Prospectus pursuant to Rule 412 of
Regulation C under the Securities Act and after substituting therefor any
modifying or superseding statements, the Registration Statement and Prospectus
(as amended or supplemented if the Company shall have furnished any amendments
or supplements thereto) conform, or will conform, as the case may be, in all
material respects with the Securities Act and the Trust Indenture Act of 1939,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Trust Indenture Act") and do not and will not, as of the
applicable effective date as to the Registration Statement and any amendment
thereto and as of the date of the Prospectus and any amendment or supplement
thereto, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and the Prospectus, as amended or supplemented at the
Closing Date, if applicable, will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they are made, not misleading;
except that the foregoing representations and warranties shall not apply to (i)
that part of the Registration Statement which constitutes the Statement of
Eligibility and Qualification (Form T-1) of the Trustee under the Trust
Indenture Act, and (ii) statements or omissions in the Registration Statement or
the Prospectus made in reliance upon and in conformity with information
furnished to the Company in a letter from the Underwriters expressly for use
therein;
(c) except for statements in such documents which do not
constitute part of the Registration Statement or the Prospectus pursuant to Rule
412 of Regulation C under the Securities Act and after substituting therefor any
modifying or superseding statements, the documents incorporated by reference in
the Prospectus, when they were filed with the Commission, as amended at or prior
to the date the Registration Statement became effective, conformed in all
material respects to the requirements of the Exchange Act and none of such
documents contained an untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and any further
documents so filed and incorporated by reference in the Prospectus, when such
documents are filed with the Commission, will conform in all material respects
to the requirements of the Exchange Act, and will not contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading;
(d) the financial statements, and the related notes thereto,
included or incorporated by reference in the Registration Statement and the
Prospectus present fairly, in all material respects, the financial position of
the Company and its consolidated subsidiaries as of the dates indicated and the
results of their operations and the changes in their consolidated cash flows for
the periods specified; said financial statements have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis, and the supporting schedules included or incorporated by reference in the
Registration Statement present fairly, in all material respects, the information
required to be stated therein as of the dates indicated;
(e) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has not been any
material adverse change in the business, business prospects, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole, otherwise than as set forth or contemplated in
the Prospectus;
(f) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with power and authority (corporate and other) to own its properties
and conduct its business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to require such
qualification, other than where the failure to be so qualified or in good
standing would not have a material adverse effect on the Company and its
subsidiaries taken as a whole;
(g) each Significant Subsidiary (as defined in Regulation S-X
promulgated by the Commission) of the Company has been duly incorporated and is
validly existing as a corporation under the laws of its jurisdiction of
incorporation, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus, and has been
duly qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each jurisdiction in which it owns or leases
properties or conducts any business so as to require such qualification, other
than where the failure to be so qualified or in good standing would not have a
material adverse effect on the Company and its subsidiaries taken as a whole;
and all the outstanding shares of capital stock of each Significant Subsidiary
have been duly authorized and validly issued, are fully-paid and non-assessable,
and are owned by the Company, directly or indirectly, free and clear of all
liens, encumbrances, security interests and claims;
(h) this Agreement has been duly authorized, executed and
delivered by the Company;
(i) the Securities have been duly authorized, and when validly
authenticated and when issued and delivered in accordance with the Indenture and
sold to the Underwriters pursuant to this Agreement, will have been duly
executed, issued and delivered and will constitute valid and binding obligations
of the Company entitled to the benefits provided by the Indenture; the Indenture
has been duly authorized, executed and delivered by the Company and constitutes
a valid and binding instrument of the Company; the Indenture has been duly
qualified under the Trust Indenture Act; and the Indenture conforms, and the
Securities will conform, to the descriptions thereof in the Prospectus;
(j) neither the Company nor any Significant Subsidiary is, or
with the giving of notice or lapse of time or both would be, in violation of or
in default under, its Certificate of Incorporation or By-Laws or any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any Significant Subsidiary is a party or by which it or any
of them or any of their respective properties is bound, except for violations
and defaults which individually and in the aggregate would not have a material
adverse effect on the Company and its subsidiaries taken as a whole; the issue
and sale of the Securities and the performance by the Company of all of the
provisions of its obligations under the Securities, the Indenture and this
Agreement and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, any material indenture, mortgage,
deed of trust, loan agreement or other material agreement or instrument to which
the Company or any Significant Subsidiary is a party or by which the Company or
any Significant Subsidiary is bound or to which any of the property or assets of
the Company or any Significant Subsidiary is subject, nor will any such action
result in any violation of the provisions of the Restated Certificate of
Incorporation or the By-Laws of the Company or any material violation of any
applicable law or statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company, any
Significant Subsidiary or any of their respective properties; and no consent,
approval, authorization, order, registration or qualification of or with any
such court or governmental agency or body is required for the issue and sale of
the Securities or the consummation by the Company of the transactions
contemplated by this Agreement or the Indenture, except such consents,
approvals, authorizations, registrations or qualifications as have been obtained
under the Securities Act and the Trust Indenture Act and as may be required
under the applicable securities or Blue Sky Laws of the various states and other
jurisdictions in connection with the issue, sale and distribution of the
Securities;
(k) other than as set forth or contemplated in the Prospectus,
there are no legal or governmental proceedings pending or, to the knowledge of
the Company, threatened to which the Company or any Significant Subsidiary is
or may be a party or to which any property of the Company or any Significant
Subsidiary is or may be the subject that are required to be described in the
Registration Statement or the Prospectus that are not so described; and there
are no contracts or other documents of a character required to be filed as an
exhibit to the Registration Statement or required to be described in the
Registration Statement or the Prospectus which are not filed or described as
required; and
(l) the Company has complied with and will comply with all provisions
of Section 517.075, Florida Statutes (Chapter 92-198, Laws of Florida).
5. The Company covenants and agrees with the several Underwriters as
follows:
(a) to use its best efforts to cause any post-effective amendment to the
Registration Statement to become effective at the earliest possible time and,
if required, to file the final Prospectus with the Commission within the time
periods specified by Rule 424(b) under the Securities Act;
(b) to deliver, at the expense of the Company, to the Underwriters,
three signed copies of the Registration Statement (as originally filed) and
each amendment thereto, in each case including exhibits and documents
incorporated by reference therein, and, during the period mentioned in
paragraph (e) below, to each of the Underwriters as many copies of the
Prospectus (including all amendments and supplements thereto and documents
incorporated by reference therein) as the Underwriters may reasonably request;
(c) before filing any amendment or supplement to the Registration
Statement or the Prospectus, to furnish to the Underwriters a copy of the
proposed amendment or supplement for review a reasonable time prior to filing
and to discuss such proposed amendment or supplement in good faith with the
Underwriters if requested;
(d) to advise the Underwriters promptly, and to confirm such advice in
writing, (i) when any amendment to the Registration Statement shall have
become effective, (ii) of any request by the Commission for any amendment to
the Registration Statement or any amendment or supplement to the Prospectus or
for any additional information, (iii) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the
initiation or threatening of any proceeding for that purpose, and (iv) of the
receipt by the Company of any notification with respect to any suspension of
the qualification of the Securities for offer and sale in any jurisdiction or
the initiation or threatening of any proceeding for such purpose; and to use
its best efforts to prevent the issuance of any such stop order or
notification and, if issued, to obtain as soon as possible the withdrawal
thereof;
(e) if, during such period after the first date of the public
offering of the Securities as in the opinion of counsel for the Underwriters a
prospectus relating to the Securities is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event shall occur as a
result of which it is necessary to amend or supplement the Prospectus in order
to make the statements therein, in the light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, or if it is necessary to
amend or supplement the Prospectus to comply with law, forthwith to prepare and
furnish, at the expense of the Company, to the Underwriters and to the dealers
(whose names and addresses the Underwriters will furnish to the Company) to
which Securities may have been sold by the Underwriters and to any other dealers
upon request, such amendments or supplements to the Prospectus as may be
necessary so that the statements in the Prospectus as so amended or supplemented
will not, in the light of the circumstances when the Prospectus is delivered to
a purchaser, be misleading or so that the Prospectus will comply with law;
(f) to take such actions as the Underwriters may reasonably request
to qualify the Securities for offer and sale under the securities or Blue Sky
laws of such jurisdictions as the Underwriters shall reasonably request and to
continue such qualification in effect so long as reasonably required for
distribution of the Securities; provided that the Company shall not be obligated
to subject itself to any material additional tax liabilities, to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or required to file a general consent to service of process
in any jurisdiction;
(g) to make generally available to its security holders and to the
Underwriters as soon as practicable an earnings statement covering a period of
at least twelve months beginning with the first fiscal quarter of the Company
occurring after the effective date of the Registration Statement, which shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 of
the Commission promulgated thereunder;
(h) so long as the Securities are outstanding, to furnish to the
Underwriters copies of all reports or other communications (financial or other)
furnished to holders of the Securities, and copies of any reports and financial
statements publicly filed with the Commission;
(i) during the period beginning on the date hereof and continuing to
and including the Business Day following the Closing Date, not to offer, sell,
contract to sell or otherwise dispose of any debt securities of or guaranteed by
the Company which are substantially similar to the Securities without the prior
written consent of the Underwriters; and
(j) to pay all costs and expenses incident to the performance of its
obligations hereunder, including without limiting the generality of the
foregoing, all costs and expenses (i) incident to the preparation, issuance,
execution, authentication and delivery of the Securities, including any
expenses of the Trustee, (ii) incident to the preparation, printing and filing
under the Securities Act of the Registration Statement, the Prospectus and any
preliminary prospectus (including in each case all exhibits, amendments and
supplements thereto), (iii) incurred in connection with the registration or
qualification and determination of eligibility for investment of the
Securities under the laws of such jurisdictions as the Underwriters may
designate (including reasonable fees and disbursements of counsel for the
Underwriters in connection therewith, not to exceed $15,000), (iv) in
connection with the printing (including word processing and duplication costs)
and delivery of this Agreement, the Indenture, the Preliminary and
Supplemental Blue Sky Memoranda and any Legal Investment Survey and the
furnishing to Underwriters and dealers of copies of the Registration Statement
and the Prospectus, including mailing and shipping to the Underwriters, as
herein provided and (v) payable to rating agencies in connection with the
rating of the Securities.
6. The several obligations of the Underwriters hereunder to purchase the
Securities are subject to the
performance by the Company of its obligations hereunder and to the following
additional conditions:
(a) no stop order suspending the effectiveness of the Registration
Statement shall be in effect, and no proceedings for such purpose shall be
pending before or threatened by the Commission; and all requests for additional
information on the part of the Commission shall have been complied with to the
reasonable satisfaction of the Underwriters;
(b) the representations and warranties of the Company contained herein
are true and correct in all material respects on and as of the Closing Date as
if made on and as of the Closing Date and the Company shall have complied in
all material respects with all agreements on its part to be performed
hereunder at or prior to the Closing Date;
(c) subsequent to the execution and delivery of this Agreement and prior
to the Closing Date, there shall not have occurred any downgrading, nor shall
any notice have been given of any intended or potential downgrading or other
negative review in the rating accorded any senior unsecured securities of the
Company by any of Standard & Poor's Rating Service, Moody's Investors Service,
Inc., Duff & Phelps Inc. or Fitch Investors Service, Inc.;
(d) since the respective dates as of which information is given in the
Prospectus there shall not have been any material adverse change in the
business, business prospects, financial position, stockholders' equity or
results of operations of the Company and its subsidiaries, taken as a whole,
otherwise than as set forth or contemplated in the Prospectus, the effect of
which in the judgment of the Underwriters makes it impracticable to proceed
with the public offering or the delivery of the Securities on the terms and in
the manner contemplated in the Prospectus;
(e) the Underwriters shall have received on and as of the Closing Date a
certificate of the Company (signed by an executive officer) reasonably
satisfactory to the Underwriters to the effect set forth in subsections (a)
through (c) of this Section and to the further effect that, except as set forth
in such certificate, since the respective dates as of which information is given
in the Prospectus, there has not occurred any material adverse change in the
business, business prospects, financial position, stockholders' equity or
results of operations of the Company and its subsidiaries taken as a whole from
that set forth or contemplated in the Prospectus;
(f) Wachtell, Lipton, Rosen & Katz, special
counsel for the Company, shall have furnished to the Underwriters their written
opinion, dated the Closing Date, in form and substance reasonably satisfactory
to the Underwriters, to the effect that:
(i) this Agreement has been duly authorized, executed and delivered
by the Company;
(ii) the Securities are in a form contemplated by the Indenture, have
been duly authorized, executed and delivered by the Company and, when duly
authenticated in accordance with the terms of the Indenture and delivered
to and paid for by the Underwriters in accordance with the terms of this
Agreement, will constitute valid and binding obligations of the Company
entitled to the benefits provided by the Indenture, subject to the effect
of (A) bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting the rights of creditors generally and (B) the
application of general principles of equity (regardless of whether
enforcement is considered in proceedings at law or in equity);
(iii) the Indenture has been duly authorized, executed and delivered by
the Company and constitutes a valid and binding instrument of the Company,
subject to the effect of (A) bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights of
creditors generally and (B) the application of general principles of equity
(regardless of whether enforcement is considered in proceedings at law or
in equity); and the Indenture has been duly qualified under the Trust
Indenture Act;
(iv) the issue and sale of the Securities and the performance by the
Company of its obligations under the Securities, the Indenture and this
Agreement and the consummation of the transactions herein and therein
contemplated will not (a) conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, any indenture, mortgage,
deed of trust or loan agreement set forth on a Schedule previously furnished to
the Underwriters (such counsel may assume compliance with the financial
covenants contained therein), (b) result in any violation of the provisions of
the Restated Certificate of Incorporation or the By-Laws of the Company or (c)
violate the federal securities laws or regulations, the Delaware General
Corporation Law or any law, statute, order, rule or regulation known to such
counsel (without independent investigation) of any court or governmental agency
or body of the State of New York having jurisdiction over the Company, any
Significant Subsidiary or any of their respective properties, except, in the
case of clauses (a) and (c), for conflicts, breaches, defaults or violations
which would not have a material adverse effect on the financial condition,
results of operations, assets or business of the Company and its subsidiaries
taken as a whole;
(v) no consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body is required
for the issue and sale of the Securities, except such consents, approvals,
authorizations, registrations or qualifications as have been obtained under the
Securities Act and the Trust Indenture Act and as may be required under the
securities or Blue Sky laws of the various states and other jurisdictions which
are applicable in connection with the issue, sale and distribution of the
Securities;
(vi) the Securities and the Indenture conform in all material
respects to the descriptions thereof in the Prospectus; and
(vii) (A) each document incorporated by reference in the Registration
Statement and the Prospectus (except for the financial statements and
related schedules and notes or other financial or statistical data included
or incorporated by reference therein as to which such counsel need express
no opinion) complied as to form, in all material respects, as amended as of
the time the Registration Statement became effective, with the Exchange
Act; and (B) the Registration Statement and the Prospectus as amended or
supplemented (except for the financial statements and related schedules and
notes or other financial or statistical data included or incorporated by
reference therein as to which such counsel need express no opinion) comply
as to form in all material respects with the requirements of the Securities
Act. In rendering such opinions, such counsel may rely (A) upon the
opinion furnished to the Underwriters pursuant to Section 6(g); (B) upon
oral advice of the staff of the Commission; and (C) as to matters of fact,
to the extent such counsel deems proper, on certificates of responsible
officers of the Company and certificates or other written statements of
officials of jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company. With respect to the
matters to be covered in subparagraph (vii) above counsel may state their
opinion is based upon their participation in the preparation of the
Registration Statement and the Prospectus and any amendment or supplement
thereto (excluding any documents incorporated by reference thereto, in
which case such opinion is based upon their review of such documents) and
discussions with representatives of the Company and its auditors (including
discussions in which the Underwriters and their counsel participated) but
is without independent check or verification except as specified. Such
counsel shall state that in the course of such participation, review and
discussions no facts have come to such counsel's attention which lead such
counsel to believe that (except for the financial statements and related
schedules and notes or other financial or statistical data included or
incorporated by reference therein as to which such counsel need express no
belief and except for that part of the Registration Statement which
constitutes the Form T-1 of the Trustee under the Trust Indenture Act) the
Registration Statement and the prospectus included therein at the time the
Registration Statement became effective contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
that the Prospectus as amended or supplemented, if applicable, contains any
untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Such counsel may
further state that such counsel have not verified, and are not passing upon
and do not assume any responsibility for, the accuracy, completeness or
fairness of the statements contained in the Registration Statement or the
Prospectus (other than those statements referred to in subparagraph (vi)
above).
(g) Kathleen E. McDermott, Chief Legal Officer and Assistant
Secretary of the Company, shall have furnished to the Underwriters her written
opinion, dated the Closing Date, in form and substance reasonably satisfactory
to the Underwriters, to the effect that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus;
(ii) the Company has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties, or conducts any
business, so as to require such qualification, other than where the failure to
be so qualified or in good standing would not have a material adverse effect on
the Company and its subsidiaries taken as a whole;
(iii) each Significant Subsidiary has been duly incorporated
and is validly existing as a corporation under the laws of its jurisdiction
of incorporation, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus, and has
been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other jurisdiction
in which it owns or leases properties, or conducts any business, so as to
require such qualification, other than where the failure to be so qualified
or in good standing would not have a material adverse effect on the Company
and its subsidiaries taken as a whole; and all of the outstanding shares of
capital stock of each Significant Subsidiary have been duly authorized and
validly issued, are fully paid and non-assessable, and are owned directly
or indirectly by the Company, free and clear of all material liens,
encumbrances, equities or claims;
(iv) other than as set forth or contemplated in the Prospectus,
such counsel does not know of any legal or governmental proceedings pending
to which the Company or any Significant Subsidiary is a party or to which
any property of the Company or any Significant Subsidiary is the subject
which are required to be described in the Prospectus as amended or
supplemented which are not described as required; and such counsel does not
know of any contracts or other documents of a character required to be
filed as an exhibit to the Registration Statement or required to be
described in the Registration Statement or the Prospectus which are not
filed or described as required; and
(v) the statements in the Prospectus incorporated by reference
from Item 3 of Part I of the Company's Annual Report on Form 10-K for the
year ended February 3, 1996, as modified or amended by any subsequent
documents incorporated by reference in the Registration Statement or the
Prospectus, insofar as such statements constitute a summary of the legal
matters, documents or proceedings referred to therein, fairly present the
information called for with respect to such legal matters, documents or
proceedings.
(h) on the Closing Date, Ernst & Young LLP shall have furnished to the
Underwriters a letter, dated the Closing Date, in form and substance reasonably
satisfactory to the Underwriters, containing statements and information of the
type customarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
or incorporated by reference in the Registration Statement and the Prospectus;
and
(i) the Underwriters shall have received on and as of the Closing Date
an opinion of Davis Polk & Wardwell, counsel to the Underwriters, with
respect to the validity of the Indenture and the Securities, the
Registration Statement, the Prospectus and other related matters as the
Underwriters may reasonably request, and such counsel shall have received
such papers and information as they may reasonably request to enable them
to pass upon such matters.
7. The Company agrees to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages and liabilities (including without
limitation the reasonable legal fees and other expenses incurred in connection
with investigating, preparing to defend or defending any suit, action or
proceeding or any claim asserted which shall be reimbursed as such legal fees
and other expenses are incurred) arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or, in
the case of the Registration Statement or the Prospectus (as amended or
supplemented), necessary to make the statements therein not misleading or, in
the case of any preliminary prospectus, necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except insofar as such losses, claims, damages or liabilities arise
out of or are based upon any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with information
furnished to the Company in a letter from the Underwriters expressly for use
therein; provided that the foregoing indemnity with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter (or to the benefit
of any person controlling such Underwriter) for any such losses, claims, damages
or liabilities (a) resulting solely from the Underwriter having sold Securities
to a person to whom there was not sent or given, if required by law, at or prior
to the time of written confirmation of such sale, a copy of the Prospectus (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or (b) if such losses, claims, damages or liabilities
results from an untrue statement or omission or alleged untrue statement or
omission made in such preliminary prospectus that is eliminated or remedied in
the Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) and, if required by law, a copy of the
Prospectus (as so amended or supplemented) shall not have been furnished to such
person at or prior to the written confirmation of the sale of such Securities to
such person.
Each Underwriter agrees, severally and not jointly, to indemnify and hold
harmless the Company, its directors, its officers and each person who controls
the Company within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Company to each Underwriter, but only with reference to any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with information furnished to the Company in a letter
from the Underwriters expressly for use in the Registration Statement, the
Prospectus, any amendment or supplement thereto, or any preliminary prospectus.
If any suit, action, proceeding (including any governmental or regulatory
investigation), claim or demand shall be brought or asserted against any person
in respect of which indemnity may be sought pursuant to either of the two
preceding paragraphs, such person (the "Indemnified Person") shall promptly
notify the person against whom such indemnity may be sought (the "Indemnifying
Person"), "in writing, and the Indemnifying Person shall be entitled to
participate in and, to the extent that it shall desire, to assume the defense
thereof, with counsel reasonably satisfactory to the Indemnified Person to
represent the Indemnified Person and any others the Indemnifying Person may
designate in such proceeding and shall pay the fees and expenses of such counsel
related to such proceeding. In any such proceeding, any Indemnified Person shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have mutually agreed to the
contrary, (ii) the Indemnifying Person has failed within a reasonable time to
retain counsel reasonably satisfactory to the Indemnified Person or (iii) the
named parties in any such proceeding (including any impleaded parties) include
both the Indemnifying Person and the Indemnified Person and representation of
both parties by the same counsel would be inappropriate due to actual or
potential conflicts of interests between them. It is understood that the
Indemnifying Person shall not, in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for the fees and expenses of more
than one separate firm (in addition to any local counsel) for all Indemnified
Persons, and that all such fees and expenses shall be reimbursed as they are
incurred. Any such separate firm for the Underwriters and such control persons
of Underwriters shall be designated in writing by J.P. Morgan Securities Inc.
and any such separate firm for the Company, its directors, its officers and such
control persons of the Company shall be designated in writing by the Company.
The Indemnifying Person shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the Indemnifying Person agrees to
indemnify any Indemnified Person from and against any loss or liability by
reason of such settlement or judgment to the extent set forth in this Section 7.
No Indemnifying Person shall, without the prior written consent of the
Indemnified Person, effect any settlement of any pending proceeding in respect
of which any Indemnified Person is a party and with respect to which such
Indemnified Person could reasonably have been entitled to indemnity hereunder
from such Indemnifying Person, unless such settlement includes an unconditional
release of such Indemnified Person from all liability on claims that are the
subject matter of such proceeding.
If the indemnification provided for in the first and second paragraphs of
this Section 7 is unavailable to an Indemnified Person in respect of any losses,
claims, damages or liabilities referred to therein, then each Indemnifying
Person under such paragraph, in lieu of indemnifying such Indemnified Person
thereunder, shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities (i) in such
proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other hand from the offering of the Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and the Underwriters on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Underwriters on the other shall be deemed
to be in the same respective proportions as the net proceeds from the offering
(before deducting expenses) received by the Company and the total underwriting
discounts and commissions received by the Underwriters in each case as set forth
in the table on the cover of the Prospectus, bear to the aggregate public
offering price of the Securities. The relative fault of the Company on the one
hand and the Underwriters on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the underwriters and the parties,
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall an
Underwriter be required to contribute any amount in excess of the amount by
which the total price at which the Securities underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages that
such Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters, obligations to
contribute pursuant to this Section 7 are several in proportion to the
respective principal amount of the Securities set forth opposite their names in
Schedule I hereto, and not joint.
The indemnity and contribution agreements contained in this Section 7 are
in addition to any liability which the Indemnifying Persons may otherwise have
to the Indemnified Persons referred to above.
The indemnity and contribution agreements contained in this Section 7 and
the representations and warranties of the Company set forth in this Agreement
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
any Underwriter or any person controlling any Underwriter or by or on behalf of
the Company, its officers or directors or any other person controlling the
Company and (iii) acceptance of and payment for any of the Securities.
8. Notwithstanding anything herein contained,
this Agreement may be terminated in the absolute discretion of the Underwriters,
by notice given to the Company, if after the execution and delivery of this
Agreement and prior to the Closing Date (i) trading generally shall have been
suspended or materially limited on or by the New York Stock Exchange, (ii)
trading of any securities of the Company shall have been suspended on any
exchange or in any over-the-counter market, (iii) a general moratorium on
commercial banking activities in New York shall have been declared by either
Federal or New York State authorities, or (iv) there shall have occurred any
outbreak or escalation of hostilities or other calamity or crisis (including a
crisis in the financial markets) the effect of which, in the case of any of the
foregoing clauses (i) through (iv), is so material and adverse as to make it, in
the judgment of the Underwriters, impracticable to market the Securities on the
terms and in the manner contemplated in the Prospectus.
9. This Agreement shall become effective upon the execution and delivery
hereof by the parties hereto. If, on the Closing Date any one or more of the
Underwriters shall fail or refuse to purchase Securities which it or they have
agreed to purchase hereunder on such date, and the aggregate principal amount of
Securities which such defaulting Underwriter or Underwriters agreed but failed
or refused to purchase is not more than one-tenth of the aggregate principal
amount of the Securities to be purchased on such date, the other Underwriters
shall be obligated severally in the proportions that the principal amount of
Securities set forth opposite their respective names in Schedule I hereto bears
to the aggregate principal amount of Securities set forth opposite the names of
all such non-defaulting Underwriters, or in such other proportions as they
Underwriters may specify, to purchase the Securities which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date; provided that in no event shall the principal amount of Securities that
any Underwriter has agreed to purchase pursuant to Section 1 be increased
pursuant to this Section 9 by an amount in excess of one-ninth of such principal
amount of Securities without the written consent of such Underwriter. If, on
the Closing Date any Underwriter or Underwriters shall fail or refuse to
purchase Securities which it or they have agreed to purchase hereunder on such
date, and the aggregate principal amount of Securities with respect to which
such default occurs is more than one-tenth of the aggregate principal amount of
Securities to be purchased on such date, and arrangements satisfactory to the
Underwriters and the Company for the purchase of such Securities are not made
within 36 hours after such default, this Agreement shall terminate without
liability on the part of any non-defaulting Underwriter or the Company. In any
such case either the Underwriters or the Company shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Registration Statement and in the
Prospectus or in any other documents or arrangements may be effected. Any action
taken under this paragraph shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.
10. If this Agreement shall be terminated pursuant to Section 8 or 9
hereof, the Company shall not be under any liability to any Underwriter except
as provided in Section 5(j) and Section 7. If this Agreement shall be terminated
by the Underwriters, or any of them, because of any failure or refusal on the
part of the Company to comply with the terms or to fulfill any of the conditions
of this Agreement, or if for any reason the Company shall be unable to perform
its obligations under this Agreement or any condition of the Underwriters'
obligations cannot be fulfilled, the Company agrees to reimburse the
Underwriters or such Underwriters as have so terminated this Agreement with
respect to themselves, severally, for all reasonable out-of-pocket expenses
(including the reasonable fees and expenses of their counsel) reasonably
incurred by such Underwriters in connection with this Agreement or the offering
contemplated hereunder.
11. This Agreement shall inure to the benefit of and be binding upon
the Company, the Underwriters, and, to the extent provided in Section 7, any
controlling persons of any Underwriter and the officers, directors and
controlling persons of the Company, and their respective heirs, executors,
administrators, successors and assigns. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person, firm or
corporation any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision herein contained. No purchaser of Securities
from any Underwriter shall be deemed to be a successor or assign by reason
merely of such purchase.
12. Any action by the Underwriters hereunder may
be taken by the Underwriters jointly or by J.P. Morgan Securities Inc. alone on
behalf of the Underwriters, and any such action taken by the Underwriters
jointly or by J.P. Morgan Securities Inc. alone shall be binding upon the
Underwriters. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if mailed or transmitted by
any standard form of telecommunication and shall be effective upon receipt.
Notices to the Underwriters shall be given to the Underwriters c/o J.P. Morgan
Securities Inc., 60 Wall Street, New York, New York 10260-0060 (telecopy: (212)
648-5909); Attention: Syndicate Department. Notices to the Company shall be
given to it at 709 East South Temple, Salt Lake City, Utah 84102 (telecopy:
(801) 537-7808); Attention: Kathleen E. McDermott.
13. This Agreement may be signed in counterparts, each of which shall be
an original and all of which together shall constitute one and the same
instrument. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without giving effect to the conflicts of
laws provisions thereof. If the foregoing is in accordance with your
understanding, please sign and return four counterparts hereof.
Very truly yours,
AMERICAN STORES COMPANY
By: /s/ J. Greg Spencer
Title: Senior Vice
President, Treasurer
and Assistant Secretary
Accepted: June 04, 1996
J.P. MORGAN SECURITIES INC.
Acting severally on behalf of
themselves and the several
Underwriters named herein
By J.P. MORGAN SECURITIES INC.
By: /s/ Robert D. Post
Title: Vice President
SCHEDULE I
Principal Amount of Securities Underwriter
To Be Purchased
J.P. Morgan Securities Inc. $ 87,500,000.00
Lehman Brothers Inc. 87,500,000.00
Morgan Stanley & Co. Incorporated 87,500,000.00
Solomon Brothers, Inc. 87,500,000.00
Total:........ $350,000,000.00
