AMERICAN STORES CO /NEW/, DEF 14A, 1997-04-28

AMERICAN STORES CO /NEW/
DEF 14A, 1997-04-28
GROCERY STORES

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<PAGE> 1

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [ ]

Filed by a Party other than the Registrant [X]

Check the appropriate box:

<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>

AMERICAN STORES COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:
<PAGE> 2

LOGO

AMERICAN STORES COMPANY
709 East South Temple, Salt Lake City, Utah 84102
P.O. Box 27447, Salt Lake City, Utah 84127-0447

------------------------

NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS

------------------------

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of American
Stores Company,
a Delaware corporation, will be held at the Little America Hotel, 500 South Main
Street, Salt Lake City, Utah on Tuesday, June 17, 1997 at 10:00 a.m., local
time, for the following purposes:

1. To elect eleven Directors of the Company;

2. To amend Article THIRD of the Company's Restated Certificate of
Incorporation to permit the Company to engage in any lawful
business;

3. To amend Article FOURTH of the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of the
Company's Common Stock from 325,000,000 to 700,000,000;

4. To approve the American Stores Company 1997 Key Management Annual
Incentive Plan;

5. To approve the American Stores Company 1997 Stock Option and Stock
Award Plan;

6. To approve the American Stores Company 1997 Stock Plan for
Non-Employee Directors;

7. To ratify the appointment of Ernst & Young LLP as independent
certified public accountants for fiscal year 1997; and

8. To transact such other business as may properly come before the
meeting.

Only shareholders of record at the close of business on April 25, 1997 will
be entitled to notice of and to vote at the meeting and at any postponements or
adjournments thereof.

You are cordially invited to attend the Annual Meeting. No admission ticket
or other credentials will be necessary. Whether or not you plan to attend the
meeting, PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD. A
RETURN ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, HAS
BEEN PROVIDED FOR YOUR USE.

JACK LUNT
Secretary

May 2, 1997
<PAGE> 3

AMERICAN STORES COMPANY
709 East South Temple, Salt Lake City, Utah 84102
P.O. Box 27447, Salt Lake City, Utah 84127-0447
------------------------

PROXY STATEMENT
------------------------

The solicitation of the proxy enclosed with this statement is made by and
on behalf of the Board of
Directors of American Stores Company (the "Company") for use at the 1997 Annual
Meeting of Shareholders of the Company to be held on Tuesday, June 17, 1997 at
10:00 a.m. local time, at the Little America Hotel, 500 South Main Street, Salt
Lake City, Utah and at any postponements or adjournments thereof. It is
anticipated that this Proxy Statement, together with the form of proxy and the
Company's 1996 Annual Report to Shareholders, will first be mailed on or about
May 2, 1997. Each holder of record of shares of the Company's common stock, par
value $1.00 per share (the "Common Stock"), on April 25, 1997, the record date,
is entitled to one vote for each share so held. The number of outstanding shares
of Common Stock of the Company as of the record date is 136,146,702. A complete
list of the shareholders entitled to vote at the Annual Meeting will be
available for inspection by any shareholder, for any purpose germane to the
meeting, during ordinary business hours for a period of ten days prior to the
Annual Meeting at the Company's corporate headquarters located at 709 East South
Temple, Salt Lake City, Utah. Votes cast by proxy or in person at the Annual
Meeting will be tabulated by the inspectors of election appointed for the
meeting and will determine whether or not a quorum is present. The inspectors of
election will treat abstentions as shares that are present and entitled to vote
for purposes of determining the presence of a quorum but as unvoted for purposes
of determining the approval of any matter submitted to the shareholders for a
vote. If a broker indicates on the proxy that it does not have discretionary
authority as to certain shares to vote on a particular matter, those shares will
not be considered as present and entitled to vote with respect to that matter.
Shares represented by properly executed proxies in the accompanying form will be
voted as directed. If no direction is given, proxies will be voted FOR the
Election of Directors, FOR the amendments to the Company's Restated Certificate
of Incorporation, FOR the approval of the American Stores Company 1997 Key
Management Annual Incentive Plan, FOR the approval of the American Stores
Company 1997 Stock Option and Stock Award Plan, FOR the approval of the American
Stores Company 1997 Stock Plan for Non-Employee Directors, and FOR the
ratification of the appointment of Ernst & Young as Independent Certified Public
Accountants.

PROPOSAL 1 -- ELECTION OF DIRECTORS

The Restated Certificate of Incorporation of the Company provides for a
Board of not less than 5 nor more than 20 directors, the exact number to be
fixed by the Board of Directors. The Board has fixed that number at eleven,
effective June 17, 1997. Eleven directors are to be elected at the 1997 Annual
Meeting for terms of one year. All of the nominees are currently directors of
the Company. Directors are elected by plurality vote. Proxies will be voted in
favor of the election of each of the nominees named below unless otherwise
directed. If any of the nominees should be unable to serve, proxies will be
voted for such person, if any, as may be designated by the Board of Directors to
fill any such vacancy. The information provided below for each nominee for
election as a director is provided as of April 1, 1997.
<PAGE> 4

INFORMATION REGARDING THE NOMINEES STANDING FOR ELECTION IN 1997

<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION AND OTHER INFORMATION AGE SINCE
- ------------------------- ----------------------------------------------------- --- --------
<S> <C> <C> <C>
Pamela G. Bailey......... Chief Executive Officer of The Healthcare Leadership 48 1997
Council since 1990. President of the National
Committee for Quality Health Care from February 1987
to January 1997.
Henry I. Bryant.......... Managing Director, Southern Region in the Corporate 54 1992
Finance Unit of J. P. Morgan & Co. Incorporated, an
investment banking firm, since August 1994; prior
thereto, Managing Director Financial Institutions
Group from July 1992; prior thereto, Managing
Director, Corporate Finance, Western Region for more
than five years. (1)
Arden B. Engebretsen..... Chairman of the Board of Herpak Limited, an 65 1988
international financial consulting firm, since
January 1991. Partner in the law firm of Morris,
James, Hitchens & Williams since October 1994.
Director of Mellon Bank Delaware. Member, National
Advisory Council, University of Utah.
James B. Fisher.......... Retired. Former President and Director of J. G. 65 1988
Boswell Company, an agricultural production,
processing and marketing company, from 1980 to
September 1984.
Fernando R. Gumucio...... Owner and President of The Lafayette Group, a 62 1991
management consulting company, since 1993. Chairman
of the Board and Chief Executive Officer of Del Monte
USA from 1987 to 1988 and President from 1985 to
1987. Director of Basic Vegetable Products
Corporation.
Leon G. Harmon........... Retired. Former President and Chief Executive Officer 71 1982
of First Interstate Bank of Utah, N. A. from July
1981 to October 1987.
Victor L. Lund........... Chairman of the Board of the Company since June 1995 49 1988
and Chief Executive Officer since August 1992;
President from August 1992 to June 1995.
John E. Masline.......... Retired. Former Partner, Ernst & Young from 1967 to 69 1988
October 1986.
Barbara Scott Preiskel... Retired. Former Senior Vice President and General 72 1985
Counsel of the Motion Picture Association of America,
a trade association, from 1977 to March 1983.
Director of General Electric Company, Massachusetts
Mutual Life Insurance Co., Textron, Inc. and The
Washington Post Co.
</TABLE>

2
<PAGE> 5

<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION AND OTHER INFORMATION AGE SINCE
- ------------------------- ----------------------------------------------------- --- --------
<S> <C> <C> <C>
J. L. Scott.............. Retired. Former Co-Chief Executive Officer of the 67 1987
Company from March 1992 to August 1992 and President
from September 1990 to August 1992. Chief Executive
Officer from February 1989 to March 1992; Vice
Chairman of the Board of the Company from September
1987 to June 1990. Director of TJ International.
Arthur K. Smith.......... Chancellor of the University of Houston System and 59 1992
President of the University of Houston main campus
since April 1997. President of the University of Utah
from August 1991 through March 1997. Director of
First Security Corp.
</TABLE>

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
EACH OF THE NOMINEES FOR DIRECTOR.
- ---------------

FOOTNOTES TO THE FOREGOING INFORMATION REGARDING
NOMINEES FOR DIRECTOR OF THE COMPANY

- ---------------
(1) Mr. Henry I. Bryant is the Managing Director of the Southern Region in the
Corporate Finance unit of J. P. Morgan & Co. Incorporated ("J. P. Morgan"),
which provides investment banking services to the Company from time to time.
In April 1997, J. P. Morgan Securities Inc. and J. P. Morgan Securities
Ltd., affiliates of J. P. Morgan, acted as co-managing domestic and
international underwriters, respectively, of a secondary offering of
15,407,910 shares of the Company's Common Stock sold by certain selling
shareholders and 2,311,186 shares by the Company pursuant to the
over-allotment option. Morgan received customary underwriters fees in
connection with the offering, which were paid by the Company. In March 1997,
the Company entered into a $2.0 billion revolving credit facility (the
"Credit Facility") with a group of commercial banks, including Morgan
Guaranty Trust Company of New York ("Morgan"), a wholly-owned subsidiary of
J. P. Morgan, as agent bank and a lender under the Credit Facility. Under
the Credit Facility, Morgan receives a quarterly fee for acting as agent
bank, and facility and interest payments on the same terms as other
participating lenders. In March 1997, the Company also reactivated its
commercial paper program for which Morgan will act as one of four dealers
and will receive compensation on the same terms as the other dealers. During
the 1996 fiscal year, J. P. Morgan Securities Inc. acted as an underwriter
of $350 million of the Company's 8% Debentures, for which the Company paid
customary fees. On July 8, 1996, in connection with the prepayment of a
foreign currency loan, the Company entered into a transaction with Morgan to
unwind an Interest Rate and Currency Exchange Agreement. Morgan was selected
for the transaction through a competitive bidding process. On June 26, 1996,
the Company engaged J. P. Morgan Securities Inc. to provide financial
advisory services to the Company on a continuing basis for which it agreed
to pay an initial fee of $150,000 and monthly fees in the amount of $50,000
per month. The arrangement was terminated in April 1997 following completion
of the secondary offering.

BENEFICIAL OWNERSHIP OF SECURITIES

The following table sets forth, as of April 8, 1997, the number of shares
of the Company's Common Stock owned by the nominees for director, the five
executive officers named in the Summary Compensation Table on page 8 hereof, and
by all executive officers and directors as a group. No other person or entity
was known to the Company to be the beneficial owner of more than 5% of the
Company's Common Stock as of such date.

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<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
NAME(1) BENEFICIALLY OWNED(2) BENEFICIALLY OWNED(3)
- -------------------------------------------------------- --------------------- ---------------------
<S> <C> <C>
Pamela G. Bailey........................................ 0 0
Teresa Beck............................................. 66,041 *
Henry I. Bryant......................................... 3,000 *
Arden B. Engebretsen.................................... 27,200 *
James B. Fisher......................................... 23,936 *
Fernando R. Gumucio..................................... 20,400 *
Leon G. Harmon.......................................... 40,400 *
Robert P. Hermanns...................................... 80,008 *
Victor L. Lund.......................................... 510,570 *
David L. Maher.......................................... 259,715 *
John E. Masline......................................... 24,000 *
Barbara Scott Preiskel.................................. 21,400 *
Martin A. Scholtens..................................... 68,248 *
J. L. Scott............................................. 71,374 *
Arthur K. Smith......................................... 20,000 *
All directors and executive officers as a group (23
persons).............................................. 1,648,430 1.1%
</TABLE>

- ---------------
* Does not exceed one percent of the outstanding shares.

(1) Correspondence to all officers and directors of the Company may be mailed to
709 East South Temple, Salt Lake City, Utah 84102.

(2) These totals include, pursuant to rules of the Securities and Exchange
Commission (the "SEC"), shares as to which sole or shared voting power or
dispositive power is possessed. These totals also include: (i) the indicated
number of shares of Common Stock which such persons have the right to
acquire through stock options exercisable within 60 days: Ms. Beck -- 0; Mr.
Hermanns -- 0; Mr. Lund -- 0; Mr. Maher -- 0; Mr. Scholtens -- 0; all
directors and executive officers as a group (23 persons) -- 8,000; and (ii)
the following number of shares of Common Stock that could be allocated to
the American Stores Retirement Estates accounts of such persons for voting
purposes on December 31, 1996: Ms. Beck -- 5,859; Mr. Hermanns -- 0; Mr.
Lund -- 0; Mr. Maher -- 11,143; Mr. Scholtens -- 0; all directors and
executive officers as a group (23 persons) -- 78,613.

(3) On April 8, 1997, there were 136,027,737 shares of Common Stock issued and
outstanding.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership (Forms 3, 4
and 5) of Common Stock with the Securities and Exchange Commission and the New
York Stock Exchange. Officers, directors and greater-than-ten-percent holders
are required to furnish the Company with copies of all forms filed by them. To
the Company's knowledge, based solely on the Company's review of copies of such
reports or written representations from certain reporting persons that no Forms
5 were required to be filed by those persons, the Company believes that during
the fiscal year ended February 1, 1997, its officers, directors,
greater-than-ten-percent beneficial owners and other persons subject to Section
16 of the Exchange Act complied with the applicable filing requirements of
Section 16(a).

BOARD OF DIRECTORS AND COMMITTEES

The Board of Directors of the Company held a total of 14 meetings during
fiscal year 1996. The Board had as standing committees on April 1, 1997, an
Audit Committee, a Compensation and Stock Option Committee, and a Nominating
Committee. During fiscal year 1996, no director attended less than 75% of the
aggregate number of meetings of the Board of Directors and Committees on which
he or she served.

The Audit Committee is composed of eight non-employee directors. It
recommends to the Board the selection of the independent certified public
accountants for the Company, subject to ratification by the shareholders at the
Annual Meeting; reviews the audit activities of the independent certified public

4
<PAGE> 7

accountants and the Company's internal audit staff, the scope of non-audit
functions to be performed by the independent certified public accountants and
the financial and accounting control policies and practices of the Company;
reviews certain related party transactions; and periodically meets with the
independent certified public accountants, internal audit staff and management.
There were four Audit Committee meetings held in fiscal year 1996. Its current
members are: John E. Masline (Chairman), Henry I. Bryant, Louis H. Callister,
Arden B. Engebretsen, James B. Fisher, Fernando R. Gumucio, Donald B. Holbrook,
and J. L. Scott.

The Compensation and Stock Option Committee is composed of five
non-employee directors. It is responsible for administering the Company's Board
and shareholder approved compensation plans and for setting compensation of
officers and directors. Eight meetings of the Compensation and Stock Option
Committee were held in fiscal year 1996. Its current members are: Leon G. Harmon
(Chairman), Louis H. Callister, Arden B. Engebretsen, James B. Fisher, and
Barbara S. Preiskel.

The Nominating Committee is composed of seven non-employee directors. This
Committee recommends persons to the Board of Directors to be nominated for
Committee membership and for election to the Board of Directors. In fulfilling
this responsibility, the Nominating Committee will consider recommendations
received from shareholders and other qualified sources. Shareholder
recommendations must be in writing and addressed to the Chairman of the
Nominating Committee, c/o Corporate Secretary, American Stores Company, P.O. Box
27447, Salt Lake City, UT 84127-0447. If a shareholder intends to make a
nomination at an Annual Meeting, the by-laws of the Company require that the
shareholder provide advance notice to the Company, the procedure for which is
described in the section titled "Shareholders' Proposals for the 1998 Annual
Meeting" on page 36 hereof. The Nominating Committee held six meetings during
the 1996 fiscal year. The members of the Nominating Committee are: Barbara S.
Preiskel (Chairman), Louis H. Callister, James B. Fisher, Fernando R. Gumucio,
Leon G. Harmon, John E. Masline, and Arthur K. Smith.

The Executive Committee held three meetings in fiscal year 1996 before it
was dissolved on June 24, 1996. The members of the Executive Committee were Leon
G. Harmon (Chairman), Victor L. Lund, Michael T. Miller, L. Tom Perry, Don L.
Skaggs, and L. S. Skaggs. Louis H. Callister and Arthur K. Smith served as
alternate members of the Executive Committee.

In addition to the foregoing Committees of the Board of Directors, the
Company has a Benefit Plans Committee composed of one employee director (Victor
L. Lund) and seven members of management. The members of the Committee are
appointed by the Board of Directors. This Committee is responsible for the
administration, funding, investment of assets, interpretation and management of
all benefit plans of the Company other than its stock purchase and stock option
plans and the annual and LTIP bonus plans. The Benefit Plans Committee held five
meetings in fiscal year 1996.

The Investment Management Subcommittee of the Benefit Plans Committee is
composed of three directors, three members of management and three other
individuals. This Subcommittee acts as an advisor to the Benefit Plans Committee
on matters relating to benefit plan fund structure, asset allocation, investment
manager selection and evaluation of investment manager performance. The
Subcommittee has authority to make recommendations to the Benefit Plans
Committee. The Investment Management Subcommittee held three meetings in fiscal
year 1996, one of which was by telephone conference. The following directors are
current members of the Committee: Leon G. Harmon, Victor L. Lund, and John E.
Masline.

DIRECTORS' COMPENSATION

Fees

Employee directors receive no additional compensation as directors. All
other directors receive an annual retainer fee of $80,000, which is payable in
quarterly installments. No fees are paid for attendance at Board and Committee
meetings or for serving as a member of a Board Committee or as a Chairman of any
Board Committee. As discussed under "Proposal 6 -- Proposal to Approve the
American Stores Company 1997 Stock Plan for Non-Employee Directors," the annual
retainer is proposed to be changed effective July 1, 1997. Non-employee members
of the Investment Management Subcommittee of the Company are paid $7,000 for
each meeting of that Subcommittee attended. No fees are paid to such members for
meetings held by telephone conference.

5
<PAGE> 8

Plans

Directors who receive retainer fees are eligible to participate in a
deferred compensation plan which permits each director to defer the compensation
earned by the director for service on the Board and its Committees until the
period subsequent to the termination of the director's service on the Board. Any
amounts so deferred earn interest during the period of the deferral at a stated
fluctuating rate.

Non-employee directors and their spouses are eligible and encouraged to
participate in the Scripps Executive Health Program that is available to certain
key executive officers of the Company and its subsidiaries. The program consists
of a comprehensive physical evaluation, private consultations covering exercise,
nutrition and stress management, and attendance at a seminar covering various
topics. The frequency of the examination is generally based on the director's
age. The cost of the examination, including travel and hotel expenses, is paid
by the Company.

On February 1, 1989 the Board adopted the American Stores Company
Retirement Plan for Non-Employee Directors (the "NED Plan"). As discussed under
"Proposal 6 -- Proposal to Approve the American Stores Company 1997 Stock Plan
for Non-Employee Directors," it is proposed that the NED Plan be terminated
effective July 1, 1997. Under the NED Plan, as amended, in order to be eligible
for a retirement benefit, an individual must have served as a non-employee
director of the Company for a full ten years. An eligible non-employee director
who retires from the Board at or after age 65 is entitled to receive, for the
remainder of his or her life, annual compensation equal to one-half of the
annual retainer fee for non-employee directors in effect at the time of such
director's retirement. An eligible non-employee director who retires from the
Board prior to age 65 shall receive, upon attaining the age of 65, a retirement
benefit equal to one-half of the actual annual retainer for non-employee
directors in effect at the time of such director's retirement for the same
number of years and months as the director served on the Board as a non-employee
director. A retired non-employee director receiving payments under the NED Plan
is considered a Director Emeritus, must remain available on a reasonable basis
to consult with the Company and may not engage in any activity in competition
with the Company. All benefit payments under the NED Plan terminate upon the
death of the retired non-employee director. The NED Plan is administered by the
Benefit Plans Committee of the Company.

The Board of Directors Stock Purchase Incentive Plan (the "Director Plan")
was in effect from 1992 through March 21, 1995. Under the Director Plan, certain
non-employee directors were granted rights to purchase up to 20,000 shares of
the Company's Common Stock on a specified date at the average market price of
the Common Stock on such date. Those Directors also received from the Company a
full-recourse, interest-bearing loan for the entire purchase price of the Common
Stock, and a deferred cash incentive award which is generally payable at the end
of a five-year performance cycle. The maximum amount of the deferred award that
can be earned is equal to the amount of the loan and accrued and unpaid
interest. Any deferred award must be applied toward repayment of the loan. A
description of the deferred cash incentive award under a similar plan for
executive officers is included in the Compensation Committee's report on
executive compensation and can be found on page 18 of this proxy statement. On
June 16, 1992, the following directors each exercised purchase awards for 20,000
shares of the Company's Common Stock at a purchase price of $17.4375 per share
and each received from the Company a loan with an interest rate of 7.04% in the
amount of $348,750.00: Messrs. Callister, Engebretsen, Fisher, Gumucio, Harmon
and Masline, and Mrs. Preiskel. On December 30, 1992, Messrs. Bryant and Smith
exercised purchase awards at $21.78 per share and received loans with an
interest rate of 6.15% in the indicated amounts: Mr. Bryant -- 3,000 shares,
$65,343.75; and Mr. Smith -- 20,000 shares, $435,625.00. As of February 1, 1997,
the aggregate outstanding balance of loans made pursuant to the Director Plan
was $3,717,177, which includes accrued and unpaid interest. The largest
aggregate amount outstanding during the fiscal year was $3,722,352. At the end
of the Company's 1996 fiscal year, each of the directors who was a participant
in the Director Plan was vested in a service award equal to 30% of the
outstanding loan balance, the dollar amount of which is as follows: Messrs.
Callister, Engebretsen, Fisher, Gumucio, Harmon and Masline, and Mrs.
Preiskel -- $133,757; Mr. Bryant -- $23,329; and Mr. Smith -- $155,529. The
loans have eight-year terms and accrue interest at the applicable federal rate
(as determined by Section 1274(d) of the Internal Revenue Code of 1986, as
amended) for eight-year loans on the purchase date, compounded annually.
Interest on the loans is payable during the first five years at the rate

6
<PAGE> 9

of two percent per annum on the original principal amount of the loan (which
rate was approximately equal to the dividend yield on the Common Stock at the
time the Director Plan was approved). Proceeds of the deferred cash incentives
must be applied to prepay the loans. The balance of the loans after taking into
account any such prepayment, together with accrued and unpaid interest thereon,
is payable in three equal installments (plus interest) on the sixth, seventh and
eighth anniversaries of the purchase date. If a director's service is terminated
during the performance cycle for any reason other than retirement, the loan will
generally become due on the 120th day after termination of service. In the event
of retirement, the loan must be repaid over a three-year period following
retirement. The loan may also be prepaid at any time at the director's option.

Other Arrangements

On November 1, 1994, the Company entered into an employment agreement with
Don L. Skaggs who served as a director of the Company from October 1994 until
April 9, 1997. The agreement is identical to the agreements entered into with
seventeen of the Company's other executive officers, the material terms of which
are described on page 11 hereof. Mr. Skaggs' employment agreement provides for a
target compensation objective that includes a base salary plus target bonuses at
the target rate of 50%. Mr. Skaggs' initial target compensation objective under
the agreement is $315,244. On March 21, 1995, Mr. Skaggs was granted an award
under the Key Executive Stock Purchase Incentive Plan, the material terms of
which are described on page 17 hereof. On March 31, 1995, Mr. Skaggs exercised
his award and purchased 60,000 shares of the Company's Common Stock at a
purchase price of $25.5625 per share. Pursuant to the Executive Plan, Mr. Skaggs
purchased the shares with a loan he received from the Company for $1,533,750,
which accrues interest at the rate of 7.75%, compounded annually. As of February
1, 1997, the outstanding balance of such loan was $1,686,495. Under the
Executive Plan, Mr. Skaggs is also entitled to receive a deferred cash incentive
award under the same terms and conditions as the other executive officers. The
maximum amount of the deferred award that can be earned by Mr. Skaggs is equal
to the amount of the loan plus accrued and unpaid interest. Any deferred award
must be applied toward repayment of the loan. As of February 1, 1997, Mr. Skaggs
was vested in a service award equal to 7.5% of the outstanding loan balance, the
dollar amount of which is $126,487.

Effective August 1, 1995, the Company entered into a consulting agreement
with Mr. L. S. Skaggs, a former director and the former Chairman of the Board of
the Company, pursuant to which Mr. Skaggs agreed to provide consulting and
advisory services to the Board of Directors and/or the Company's Chief Executive
Officer upon their request, provided that Mr. Skaggs will not be required to
devote more than 50% of his business time to such services. The term of the
agreement is until the earliest of (i) July 31, 2000, (ii) Mr. Skaggs' death, or
any physical or mental incapacity resulting in his inability to perform the
services contemplated by the consulting agreement for a continuous period of one
year, or (iii) the effective date of any written notice of termination from Mr.
Skaggs. Pursuant to the consulting agreement, Mr. Skaggs receives $750,000 per
year for his services and is entitled to be reimbursed for all reasonable costs
and expenses in connection with the maintenance and operation of an office, an
executive secretary, a driver and other costs and expenses reasonably and
necessarily incurred by Mr. Skaggs in connection with the performance of his
duties thereunder. For the fiscal year ended February 1, 1997, the aggregate
amount of expenses reimbursed by the Company to Mr. Skaggs pursuant to the
consulting agreement was $128,617. Mr. Skaggs is also entitled to such other
perquisites made available to senior executive officers of the Company in
accordance with the Company's policies and practices prevailing during the 1994
fiscal year and as such policies and practices may be modified in the future to
provide additional or increased benefits. Mr. Skaggs has agreed not to disclose
the Company's proprietary and confidential information and, during the term of
the agreement and for a period of one year following its expiration or
termination, without the consent of the Company's Board of Directors, not to
serve as an employee, officer, or director of, or consultant to any other
business or entity engaged in the retail grocery or drug store business.

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<PAGE> 10

EXECUTIVE COMPENSATION

The following table shows compensation paid by the Company to the Chairman
of the Board and Chief Executive Officer and the four other most highly
compensated executive officers at February 1, 1997 for services performed by
such individuals for all capacities in which they served during the last three
fiscal years:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION (1)
-------------------
ANNUAL COMPENSATION (1) AWARDS PAYOUTS
NAME AND PRINCIPAL ---------------------------------- -------- -------
POSITION OTHER ANNUAL OPTIONS/ LTIP ALL OTHER
AT END OF 1996 FISCAL SALARY BONUS COMPENSATION SARS PAYOUTS COMPENSATION
YEAR YEAR ($) ($)(2) ($)(3) (#) ($)(4) ($)(5)
- ------------------------ ---- ------- ------- ------------ -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Victor L. Lund.......... 1996 750,000 422,195 -- 60,000 138,722 135,047
Chairman of the Board 1995 750,000 307,175 87,176 30,000 384,791 190,011
and Chief Executive 1994 750,000 339,764 -- 0 406,490 159,869
Officer
Teresa Beck............. 1996 295,833 125,006 -- 20,000 48,141 60,372
Chief Financial 1995 266,667 109,218 -- 20,000 114,936 32,887
Officer 1994 218,333 98,909 -- 0 108,534 38,474
Robert P. Hermanns(6)... 1996 482,917 203,938 -- 20,000 83,271 106,970
Chief Operating 1995 468,750 191,984 111,172 20,000 192,507 201,719
Officer Procurement 1994 510,016 184,039 -- 0 164,406 57,870
and Logistics
David L. Maher.......... 1996 512,500 216,439 -- 30,000 89,655 121,400
President and Chief 1995 491,666 201,370 -- 25,000 236,464 75,602
Operating Officer 1994 450,000 203,859 -- 0 232,709 84,433
Martin A. Scholtens..... 1996 366,667 155,017 -- 20,000 57,210 68,782
Chief Operating 1995 306,442 121,334 -- 20,000 141,950 36,414
Officer Retail 1994 254,808 79,500 -- 0 149,610 87,190
</TABLE>

- ---------------
(1) Compensation deferred at the election of the executive, pursuant to the
American Stores Retirement Estates 401(k) plan ("ASRE") and the Supplemental
Executive Retirement Plan ("SERP"), is included in the year earned.

(2) The bonus amount is payable pursuant to the Company's Key Management Annual
Incentive Plan described in the Compensation Committee Report on Executive
and CEO Compensation on page 15 of this proxy statement. Cash bonuses for
services rendered in fiscal years 1996, 1995 and 1994 have been listed in
the year earned, and were generally paid in April of the following fiscal
year.

(3) Unless otherwise provided, perquisites and other personal benefits paid to
each named executive officer in the current year in each instance aggregated
less than $50,000 and, accordingly, are omitted from the table as permitted
by the rules of the SEC. Additionally, there is no other annual compensation
requiring disclosure.

(4) The LTIP payout amounts reported represent amounts payable pursuant to the
Company's Key Management Long-Term Performance Incentive Plan ("LTIP Plan")
described in the Compensation Committee Report on Executive and CEO
Compensation on page 16 of this Proxy Statement. The payout amounts pursuant
to the LTIP Plan for services rendered in the three-year periods ended in
fiscal years 1996, 1995 and 1994 have been listed in the year earned, and
were generally paid in April of the following fiscal year. Amounts do not
include any accrued deferred cash incentive awards under the Key Executive
Stock Purchase Incentive Plan described in the Compensation Committee Report
on Executive and CEO Compensation on page 17 of this proxy statement.

(5) The compensation reported represents (a) Company contributions under ASRE,
(b) Company contributions under SERP, and (c) the dollar value of Company
paid insurance premiums for term life insurance for the executives. The
amounts contributed by the Company during fiscal year 1996 to the
executives' ASRE and SERP accounts, and the insurance premiums paid were as
follows: Mr. Lund -- $16,456, $114,001, $4,590; Ms. Beck -- $16,456,
$42,105, $1,811; Mr. Hermanns -- $16,456, $87,558, $2,956; Mr.
Maher -- $16,456, $101,869, $3,075; and Mr. Scholtens -- $16,456, $50,082,
$2,244.

(6) On March 31, 1997 Mr. Hermanns' employment with the Company was terminated
on a no-fault basis, and he received the amounts to which he was entitled
under his employment agreement, which is described on page 11 of this proxy
statement.

8
<PAGE> 11

OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (1)
---------------------------------------------------------------------------
% OF TOTAL
OPTIONS/SARS
GRANTED TO
OPTIONS/SARS EMPLOYEES EXERCISE OR GRANT DATE
GRANTED IN FISCAL BASE PRICE PRESENT VALUE
NAME (#) YEAR ($/SH) EXPIRATION DATE ($)(2)
- --------------------------------- ------------ ------------ ----------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Victor L. Lund................... 60,000 4.42% 35.8125 July 25, 2004 700,200
Teresa Beck...................... 20,000 1.47% 35.8125 July 25, 2004 233,400
Robert P. Hermanns(3)............ 20,000 1.47% 35.8125 July 25, 2004 233,400
David L. Maher................... 30,000 2.21% 35.8125 July 25, 2004 350,100
Martin A. Scholtens.............. 20,000 1.47% 35.8125 July 25, 2004 233,400
</TABLE>

- ---------------
(1) The options generally become exercisable in one-third increments on July 25,
1997, July 25, 1998, and July 25, 1999, respectively. If a Change of Control
(as defined in the stock options plan(s) under which the options were
granted) were to occur before those dates, however, the options would become
immediately exercisable.

(2) Present value determinations were made using a Black-Scholes option pricing
model based on the following assumptions: an expected stock-price volatility
factor of 21.8, a risk-free rate of return of 6.13%, a dividend yield of
1.80%, and the actual option term of eight years. The actual value, if any,
the executive may realize depends on a number of factors, including the
future performance of the Common Stock, overall market conditions, and the
timing of option exercises, if any. Therefore, there is no assurance the
value realized by an executive will be at or near the value estimated by the
Black-Scholes model. The Company used the Black-Scholes model rather than
the 5% and 10% assumed rates of appreciation used in its 1996 proxy
statement in order to be consistent with the valuation method utilized in
the Company's financial statements for its fiscal year ended February 1,
1997.

(3) Mr. Hermanns' options were forfeited in accordance with their terms when he
ceased to be employed by the Company.

The following table shows information concerning the exercise of stock
options by each of the named executive officers and the fiscal year-end value of
unexercised options.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUE

<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT FISCAL IN-THE-MONEY OPTIONS/SARS
SHARES YEAR END (#) AT FISCAL YEAR END ($)(2)
ACQUIRED ON VALUE ------------------------------ ------------------------------
NAME EXERCISE(#) REALIZED ($) EXERCISABLE UNEXERCISABLE(1) EXERCISABLE UNEXERCISABLE(1)
- ------------------------ ----------- ------------ ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Victor L. Lund.......... 0 $0 0 90,000 0 $900,000
Teresa Beck............. 0 $0 0 40,000 0 $476,250
Robert P. Hermanns(3)... 0 $0 0 40,000 0 $476,250
David L. Maher.......... 0 $0 0 55,000 0 $626,250
Martin A. Scholtens..... 0 $0 0 40,000 0 $476,250
</TABLE>

- ---------------
(1) If a Change of Control (as defined in the stock options plan(s) under which
the options were granted) were to occur before these options otherwise
become exercisable, the options would become immediately exercisable.

(2) Represents the difference between the closing price of the Company's Common
Stock at 1996 fiscal year end ($42.00 per share) and the exercise price of
the options.

(3) Mr. Hermanns' options were forfeited in accordance with their terms when he
ceased to be employed by the Company.

The following table provides information concerning cash-incentive awards
made during fiscal year 1996 under the Company's 1996-1997-1998 Key Management
Long-Term Performance Incentive Plan (the "96-97-98 LTIP"). Each award
represents the right to receive an amount in cash for the three-year period
ending January 30, 1999 based on earnings per share for the three-year period
compared to the three-year earnings per share target established by the
Compensation Committee as follows: 80% of target or less -- no award; 90% of
target -- 10% of average annual base salary; 100% of target -- 20% of average
annual base salary; 110% of target -- 40% of average annual base salary; and
120% or more of target -- 70% of average annual base salary. Payments under the
96-97-98 LTIP will be made in April 1999 and will be reported in the Summary
Compensation Table of the Company's 1999 Proxy Statement. In the event of a
change of control

9
<PAGE> 12

during the three year cycle, a prorated distribution under the 96-97-98 LTIP
would be made, using actual performance for completed fiscal years.

If the American Stores Company 1997 Stock Option and Stock Award Plan is
approved by the shareholders, the Performance Incentive Plan will be implemented
and participants in the Company's outstanding LTIP plans may elect to convert
the cash payments projected to be paid under such plans to shares of restricted
stock that could not be sold until the years in which the LTIP payments would
have been made. In the event of voluntary termination or termination for cause
before the restrictions lapse, the restricted stock would be forfeited. If a
participant elects to receive the restricted stock in lieu of cash, the number
of shares of restricted stock awarded would be calculated by (i) taking the
projected payout of the 1996-1997-1998 LTIP using actual results for fiscal year
1996 and forecasted results for 1997 and 1998 as of February 24, 1997, (ii)
increasing such amount by fifteen percent to compensate the participant for loss
of benefits resulting from payment in the form of stock rather than cash,
including the loss of individual and Company contributions to the Company's
401(k) plan, the inability to defer such amounts for tax purposes, and the
inability of such amounts to grow on a tax-free basis, and (iii) dividing the
result by the fair market value of the Company's Common Stock on July 1, 1997.
The participants have until July 1, 1997 to make such election, and as of May 2,
1997 none of the named executive officers had made their election. If the named
executive officers elect to receive the restricted stock award, the dollar
amount of their respective restricted stock awards would be approximately as
follows: Mr. Lund -- $190,155; Ms. Beck -- $85,951; Mr. Maher -- $125,774; and
Mr. Scholtens -- $92,588. The actual amount the participants will realize will
be the value of the stock on the date the restrictions lapse.

LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
PERFORMANCE
NUMBER OF OR OTHER ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK PRICE
SHARES, UNITS PERIOD UNTIL BASED PLANS
OR OTHER MATURATION -------------------------------------------------
NAME RIGHTS (#) OR PAYOUT THRESHOLD ($)(1) TARGET ($)(2) MAXIMUM ($)(3)
- ------------------------ ------------- ---------------- ---------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Victor L. Lund.......... -- January 30, 1999 0 154,167 539,585
Teresa Beck............. -- January 30, 1999 0 71,944 251,804
Robert P. Hermanns(4)... -- January 30, 1999 -- -- --
David L. Maher.......... -- January 30, 1999 0 105,278 368,474
Martin A. Scholtens..... -- January 30, 1999 0 77,500 271,250
</TABLE>

- ---------------
(1) No awards will be made if the Company's earnings per share for the
three-year period are 80% or less of the targeted amount.

(2) The target award is 20% of the executive's average annual base salary over
the three-year performance cycle and is awarded if the Company exactly
achieves its earnings per share target for the three-year period. The target
payout shown above assumes the executive's 1997 base salary remains
unchanged through the remainder of the three-year performance cycle.

(3) The maximum attainable award is 70% of the executive's average annual base
salary over the three-year performance cycle and is awarded if the Company's
earnings per share for the three-year period equals 120% or more of the
target. The maximum payout shown above assumes the executive's 1997 base
salary remains unchanged through the remainder of the three-year performance
cycle.

(4) Mr. Hermanns received a prorated bonus under the 1996-1997-1998 LTIP in the
amount of $39,044 on the date his employment terminated.

PENSION PLANS

The tables set forth below show the estimated annual special retirement
benefits payable to the named executive officers pursuant to their employment
agreements with the Company. The executives are entitled to receive an annual
payment from the Company for a period of twenty years beginning at age 57 or
upon termination of employment with the Company, whichever occurs later,
provided that payments will terminate if the Executive enters into competition
with the Company. The retirement benefit is calculated as a percentage of the
executive's average target compensation objective ("TCO") for the two years
prior to the termination of employment based on the years of service completed
under the employment agreement. The executives are not entitled to any benefit
until they have completed three years of service under the

10
<PAGE> 13

employment agreements and are entitled to the maximum benefit after they have
completed ten years of service. Executives who are terminated without cause will
be deemed to have served for the full ten-year period and will be entitled to
the maximum benefit. The employment agreements with the named executive officers
were entered into on November 1, 1994 and the minimum benefits will vest in
November 1997. The employment agreements are described in more detail under the
caption "Employment Agreements" immediately following this section.

The following table illustrates the estimated annual benefits payable to
Messrs. Lund and Maher, which range from 12% to 40% of their two-year average
TCO. As of February 1, 1997, the average TCOs of Messrs. Lund and Maher for the
period from November 1, 1994 through the 1996 year-end were $1,162,431 and
$746,713, respectively. As of February 1, 1997, each of such persons had been
credited with two full years of service under his respective employment
agreement and was not entitled to any of the retirement benefit.

<TABLE>
<CAPTION>
YEARS OF SERVICE
(YEARS OF SERVICE UNDER EMPLOYMENT AGREEMENTS)
REMUNERATION -------------------------------------------------------------------------------------
(AVERAGE TWO-YEAR TCO) 3 4 5 6 7 8 9 10
- -------------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$650,000............................ $ 78,000 $104,000 $130,000 $156,000 $182,000 $208,000 $234,000 $260,000
$700,000............................ 84,000 112,000 140,000 168,000 196,000 224,000 252,000 280,000
$750,000............................ 90,000 120,000 150,000 180,000 210,000 240,000 270,000 300,000
$800,000............................ 96,000 128,000 160,000 192,000 224,000 256,000 288,000 320,000
$900,000............................ 108,000 144,000 180,000 216,000 252,000 288,000 324,000 360,000
$1,000,000............................ 120,000 160,000 200,000 240,000 280,000 320,000 360,000 400,000
$1,100,000............................ 132,000 176,000 220,000 264,000 308,000 352,000 396,000 440,000
$1,200,000............................ 144,000 192,000 240,000 288,000 336,000 384,000 432,000 480,000
$1,300,000............................ 156,000 208,000 260,000 312,000 364,000 416,000 468,000 520,000
$1,400,000............................ 168,000 224,000 280,000 336,000 392,000 448,000 504,000 560,000
</TABLE>

The following table illustrates the estimated annual benefits payable to
Ms. Beck and Mr. Scholtens, which range from 9% to 30% of their two-year average
TCO. As of February 1, 1997, the two-year average TCOs of Ms. Beck and Mr.
Scholtens for the period from November 1, 1994 through the 1996 year-end were
$413,584 and $488,675, respectively. As of February 1, 1997, each of such
persons had been credited with two years of service under his or her employment
agreement and was not entitled to any of the retirement benefit.

In connection with the termination of Mr. Hermanns' employment, he became
entitled to special retirement benefits in the form of twenty annual payments of
$282,663 each commencing at the time he attains age 57, provided he has not
competed with the Company prior to that time. The retirement payments will
terminate immediately if Mr. Hermanns' enters into competition with the Company
at any time.

EMPLOYMENT AGREEMENTS

Standard Employment Agreements

During 1994, the Company entered into Employment Agreements (the
"Agreements") with Ms. Beck and Messrs. Hermanns, Lund, Maher and Scholtens, and
12 other officers of the Company in order to encourage such executives to remain
with the Company on an extended basis, have undivided loyalty to the Company and
refrain from competing with the Company. One additional agreement was entered
into in early 1995. All of the Agreements were amended during 1996. A
description of the Agreements, as amended, is as follows: All of the Agreements
except for Mr. Lund's expire in November 2000 and are automatically renewed for
one-year periods if notice of non-renewal is not provided at least two years
prior to their expiration. Mr. Lund's Agreement expires in November 2001 and is
automatically renewed for two-year periods if notice

11
<PAGE> 14

of non-renewal is not provided at least three years prior to its expiration. The
Agreements may be terminated only for cause during the term of the Agreement or
any extensions thereof. If an executive is terminated without cause, he or she
is entitled to a lump sum payment in an amount equal to the value of unpaid
salary and target bonuses that would have been paid under the remaining term of
the contract. The Agreements provide for a target compensation objective ("TCO")
that includes a base salary plus target bonuses at the target rate of 50%
through participation in the Company's Key Management Annual Incentive Plan
(30%) and the Company's Long-Term Incentive Performance Plan (20%). The initial
TCO for the named executive officers is as follows: Ms. Beck -- $330,667; Mr.
Hermanns -- $642,814; Mr. Lund -- $1,117,944; Mr. Maher -- $666,833; and Mr.
Scholtens -- $397,111. The Company can increase or decrease an executive's TCO,
but no such decrease may be by more than 20% except in the case of a general
reduction affecting at least 90% of the officers of the Company. The executives
are entitled to participate in any other bonus programs, subject to the right of
the Company to alter the terms and conditions of any such bonus programs,
including the elimination thereof. The Agreements provide the executives with a
special long-range retirement plan (the "Retirement Plan"), pursuant to which
the executives are entitled to receive an annual payment from the Company for a
period of 20 years beginning at age 57 or upon termination of employment,
whichever occurs later. The retirement benefit is calculated as a percentage of
the executive's average TCO for the two years prior to the termination of
employment under the Agreement based on years of service completed under the
Agreement. In order to receive the minimum retirement benefit of 9% of average
TCO, the executives must have completed three years of service from the date of
the Agreements. The maximum retirement benefit requires ten years of service;
for 15 of the executives the maximum benefit is 30% of the two-year average TCO,
and for Messrs. Lund and Maher the maximum benefit is 40% of the two-year
average TCO. In the event an executive is terminated for cause or voluntarily
terminates employment, he or she is entitled to a retirement benefit equal to
the amounts vested at that time. If an executive is terminated without cause, or
if the executive terminates employment because the Company has materially
breached the Agreement, the executive is entitled to the maximum retirement
benefit regardless of the number of service years he or she has accrued. In the
event of the executive's death, the Agreement provides for a lump sum payment to
the executive's estate that is equal to the present value of the remaining
retirement benefit to which the executive would otherwise be entitled. The
executives are required to (i) keep confidential any non-public information they
become familiar with as a result of their employment, (ii) refrain from
performing part-time or full-time services in any capacity for any competitor of
the Company, (iii) refrain from attempting to induce employees of the Company or
its subsidiaries to resign; and (iv) refrain from interfering with or impeding
the Company's relationships with customers, suppliers or vendors, lending
institutions, lessors and land owners, and governmental agencies, and the
executives forfeit all rights, including vested rights, to these retirement
benefits if they breach this provision of the Agreements. The Agreements also
entitle the executives to participate in all of the Company's benefit plans,
including retirement and profit sharing, long-term disability, accidental death
and dismemberment, and health and insurance plans. The Company can change the
executives' duties and job titles at will, and can relocate the executives as
needed, including a transfer to one of the Company's subsidiaries; provided that
the executives shall remain officers of the Company or its subsidiaries and
shall perform duties of an executive nature equal in status, dignity and
responsibility to their duties at the time the Agreements were entered into. As
described above, on March 31, 1997 Mr. Hermanns' employment with the Company was
terminated on a no-fault basis, and on April 1, 1997 he was paid the amounts to
which he was entitled under his employment agreement. Additionally on such date
he became entitled to receive the maximum retirement benefit provided under his
agreement commencing in 2000, provided he is not competing with the Company at
that time. Should Mr. Hermanns begin competing with the Company at any time
either before or after 2000, all of his rights to receive future retirement
benefits will cease.

Change of Control Employment Agreements

12
<PAGE> 15

termination of employment in anticipation of a change of control, and upon the
occurrence of such an event supersede certain provisions of the employment
agreements described above. The Agreements for Mr. Lund and the named executive
officers provide for a three-year term after the change of control, during which
time the status quo is preserved for the executive in terms of duties,
responsibilities and employee benefits. The Agreements for the other officers
provide for either a three-year or two-year term after the change of control. A
change of control and an involuntary termination or constructive termination is
required to trigger a severance benefit. Additionally, in the case of the named
executive officers and six of the other officers, a severance benefit is also
payable after a voluntary termination of employment following the change of
control, whether or not for good reason, provided that such voluntary
termination occurs during a 30-day window period beginning one year after the
change of control. The severance benefit payable to the named executive officers
and 16 of the other officers is three times the executive's total annual
compensation. The severance benefit payable to the remaining 26 officers is
twice their total annual compensation. The severance benefit is subject to
certain excise taxes to the executive if the change of control benefit exceeds
three times the executive's "base amount" as defined by the Internal Revenue
Service. The Company's Change of Control agreements provide a "gross-up"
provision to ensure that the executive is in the same after-tax position as if
there were no excise tax. However, any executive whose total severance payment
from all sources exceeds the safe harbor by no more than 10% would be cut back
to the safe harbor amount.

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE AND
CEO COMPENSATION

The Compensation and Stock Option Committee of the Board of Directors (the
"Committee) is composed of five independent, non-employee directors of the
Company, each of whom is ineligible to participate in any of the compensation
plans they administer. The Board of Directors has delegated to the Committee,
among other duties, responsibility for establishing policies and making
decisions relating to executive compensation. The Committee regularly reports to
the Board on its activities and decisions.

The Committee's report summarizes the Company's compensation policies for
its executive officers during the last fiscal year and explains how the
compensation plans are closely linked to the achievement of the Company's
financial goals and to increases in the Company's stock price.

COMPENSATION PHILOSOPHY

A primary objective of the Company is to increase shareholder value. A key
element in achieving this objective is the Company's ability to attract and
retain a core group of executive officers whose individual and combined efforts
will provide the greatest likelihood of success. To this end, the Company and
the Committee have applied the following principles in developing a compensation
program applicable to all of the Company's and its subsidiaries' executive
management, including the CEO:

- - Align the financial interests of the Company's executive officers closely with
those of the Company's shareholders by linking a significant percentage of the
officers' total target compensation to the attainment of Company profitability
and corporate goals.

- - Provide for each position competitive total target compensation in the median
range based on industry, peer group and national surveys.

- - Annually review performance measures necessary to establish varying bonus
levels to ensure consistency with the Company's overall strategic goals.

- - Create additional incentives to promote the long-term growth and financial
success of the Company by encouraging and making it possible for executives to
increase their ownership of the Company's Common Stock through the use of
stock option and stock purchase plans.

The Committee determines and approves the compensation paid to the CEO and
the executives named in the summary compensation table as well as the
compensation paid to all other Company officers. In reviewing the individual
performance of the executives whose compensation is detailed in this proxy
statement

13
<PAGE> 16

as well as the Company's other executive officers (other than Mr. Lund), the
Committee takes into account the views of Mr. Lund, other members of management
and outside consultants to the extent deemed appropriate by the Committee.

Section 162(m) of the Internal Revenue Code, effective for the 1994 tax
year and thereafter, limits the deductibility of compensation paid by public
corporations to the executives named in the Summary Compensation Table for any
single year. The Committee's policy with respect to tax deductibility of
compensation under Section 162(m) is to qualify such compensation for
deductibility where practicable. The Committee also considers the deductibility
of compensation in formulating compensation arrangements, although this factor
is not determinative. In order to maximize the deductibility of compensation
paid in 1997 and thereafter, the Company is presenting to its shareholders for
their approval at the Annual Meeting (i) the 1997 Key Management Annual
Incentive Plan, and (ii) the 1997 Stock Option and Stock Award Plan. These plans
have been designed to comply with the requirements of Section 162(m) and, as
such, all incentive payments earned under the plans are expected to be tax
deductible by the Company when paid. The compensation to be paid under the
Company's Key Executive Stock Purchase Incentive Plan will be exempt from the
deductibility limits of Section 162(m) pursuant to an exemption for binding
agreements entered into prior to February 17, 1993.

With respect to the 1996 year, compensation in the form of stock options
granted under the Company's stock option plans was exempt under the transition
rules although the salary and bonuses paid under the Company's annual bonus and
long term incentive plans were subject to the deductibility limits except to the
extent that payment of such compensation was deferred. None of the compensation
paid to any of the named executive officers in 1996 was non-deductible except
$2,474 of the compensation paid to Victor Lund.

RELATIONSHIP OF PAY TO PERFORMANCE UNDER COMPENSATION PLANS

The Company uses industry, peer group and national surveys that are updated
annually to establish target compensation grade levels for its CEO and executive
officers that are based on median compensation paid to individuals holding
similar positions at other companies in the retail food and drug industries and
companies of similar size. This comparison group includes but is not limited to
some of the companies comprising the Peer Group Index described on page 19. The
Committee uses the same criteria in establishing Mr. Lund's target compensation
objective as it does in determining compensation for the Company's other
executive officers. The cash compensation objective for executive officers
consists of a base salary and an overall bonus target of 50% of the base salary
(30% from the annual bonus plan and 20% from the long-term incentive plan).
Thus, base salaries represent approximately 67% of the targeted cash
compensation objective, and the combination of the annual and long-term
incentive payments, which are based on sales and/or earnings of the Company
and/or its subsidiaries, represent approximately 33% of the executive's targeted
cash compensation objective. Mr. Lund's bonus target is 60% of his base salary
(40% from the annual bonus plan and 20% from the long-term incentive plan).
Therefore, his base salary represents 62.5% of his targeted cash compensation
objective and his combined annual and long-term incentive payments represent
approximately 37.5% of his targeted cash compensation objective. Payments made
under the Company's annual bonus and long-term incentive plans may be more or
less than the target amount depending on the Company's performance. In years
when the Company exceeds its targets, the compensation actually paid to
executives will rise to the high end of the compensation surveys, although if
the industry performs well as a whole, it is anticipated that executive
compensation paid by the Company's peers may also increase above the amounts
reflected in the historical surveys.

Base salaries for executive officers are determined by evaluating the
responsibilities of the position held and the experience of the individual,
considered in the context of the total compensation paid to individuals in
similar positions at other companies in the retail food and drug industries and
companies of similar size. Executives' base salaries are reviewed by the
Committee on an annual basis and adjustments are determined by evaluating the
performance of the executive officer and, to the extent applicable, his or her
operating unit (the Company or a subsidiary). Adjustments are made based on a
number of factors, none of which is controlling, and objective criteria are not
the sole factor in adjusting base salaries. Changes in base salary may also
result from promotions and changes in the responsibilities of executives. During
the 1996 fiscal year,

14
<PAGE> 17

Mr. Lund's base salary did not increase from $750,000, which it had been since
1993; however, his target annual bonus was increased from 30% to 40% of his
average base salary. On April 7, 1997, the Committee increased Mr. Lund's base
salary to $825,000, which it believes is in the median range of compensation
paid to CEOs of peer companies and companies of similar size. The Committee
believes that this increase is commensurate with Mr. Lund's experience and
qualifications and is appropriate for the responsibilities of his position. In
making such determination, the Committee considered several factors on a
subjective basis, with no single factor controlling, including the nature and
scope of Mr. Lund's responsibilities, the size of the Company relative to its
peers, the Company's results of operations, earnings per share, and strategic
plans for the future.

During 1994, the Company entered into employment agreements with Mr. Lund
and 16 other executive officers of the Company. One additional employment
agreement was entered into in early 1995. The agreements were structured to
provide an incentive to the Company's executives to remain with the Company for
an extended period, have undivided loyalty to the Company and refrain from
competing with the Company during the time of their employment as well as after
their employment has ceased. In order to accomplish this objective, and in
addition to the other terms of the agreements, the agreements provide for the
payment of a special retirement benefit calculated as a percentage of the
executive's average target compensation objective during the last two years of
his or her employment with the Company. The benefit ranges from 9% to 30% of
such average TCO (up to 40% in the case of Messrs. Lund and Maher) based on
years of service with the Company and is payable for a period of twenty years
commencing at the time the executive's employment with the Company terminates or
at age 57, whichever is later. The benefit is forfeited if the executive engages
in competition with the Company either during or after the term of the
agreement. The Committee believes that by providing the Company's key executives
with a higher degree of job security and the prospect of an income stream that
continues beyond the time they cease performing duties for the Company, the
agreements will provide a substantial incentive for the executives to remain
with the Company for the duration of their careers and will provide the
executives with peace of mind with respect to their future financial security
and allow them to focus their talents and attention on the growth and
profitability of the Company. In addition, by providing for the forfeiture of
the benefits if the executives should engage in competition with the Company, it
is believed that the agreements provide an incentive for such executives to
devote their talents exclusively to the Company and to continue to provide the
benefit of their counsel and experience to the Company even after they retire.
The employment agreements are discussed in more detail beginning on page 11 of
this Proxy Statement, and the form of the agreements is included as an exhibit
to the Company's annual report on Form 10-K for the year ended January 28, 1995.
The foregoing discussion is qualified by reference to the employment agreements.

During 1996, the Compensation Committee authorized Change of Control
Employment Agreements for Messrs. Lund, Hermanns, Maher and Scholtens and Ms.
Beck and 42 other senior officers of the Company and its subsidiaries. Mr.
Hermanns' agreement terminated when he ceased to be employed by the Company. The
Change of Control agreements were entered into to reduce the officers' personal
anxiety resulting from speculation in the press concerning future control of the
Company in light of its founder's announced intent to sell all or part of his
Common Stock. The Change of Control Agreements only become effective upon a
change of control or in the event of a termination of employment in anticipation
of a change of control, and in such event supersede certain provisions of the
employment agreements described above. The Change of Control agreements are
discussed in more detail beginning on page 12 of this Proxy Statement, and the
form of the Agreements is included as an exhibit to the Company's quarterly
report on Form 10-Q for the quarter ended August 3, 1996.

The executive compensation program also includes a stock option plan and a
stock purchase incentive plan. The performance features of these plans, together
with the Company's annual and long-term incentive bonus plans, are described
below.

Annual Bonus Plan

The Key Management Annual Incentive Plan is the Company's annual bonus
program (the "Annual Plan") for executive officers and key management. At the
beginning of each year, the Committee establishes

15
<PAGE> 18

minimum, target and maximum performance goals for the Company on which a bonus
will be paid. The Committee determines the percentage of base salary for the
fiscal year that will be payable as a bonus (the "Target Bonus") to each
participant in the Annual Plan if the Company exactly meets its target. This
determination is based on the individual's job classification and
responsibilities. The Target Bonus for the Company's chief executive officer is
40% of his average base salary, which corresponds to 25% of his total target
compensation objective. The target bonus for the other four executives in the
summary compensation table is 30% of their respective average base salary, which
corresponds to 20% of each executive's total target compensation objective. The
amount of the Target Bonus that will actually be paid to the participants varies
based on the extent to which the Company meets, exceeds or fails to achieve its
target. The Plan contains a schedule setting forth in 1% increments the
percentage of the target goal achieved by the Company and the amount of the
Target Bonus that is payable at each increment. No bonus is paid if the Company
achieves 80% or less of the target, and the maximum bonus is paid if the Company
achieves 120% or more of its target. As described under "Proposal 4 -- Proposal
to Approve the American Stores Company 1997 Key Management Annual Incentive
Plan," the Annual Plan is being submitted to the Company's shareholders for
their approval at the Annual Meeting.

The Annual Plan for fiscal 1996 established a target based on sales and
earnings above the prior year. During the 1996 fiscal year, the Company achieved
100.7% of its sales target and 105.9% of its earnings target. As a result, the
Target Bonus paid to Mr. Lund represents 56.3% of his base salary for the 1996
fiscal year. The Target Bonus paid to the other four executives named in the
summary compensation table represents approximately 42.2% of each individual's
base salary for the 1996 fiscal year.

Long-Term Performance Incentive Plan

The Key Management Long-Term Performance Incentive Plan ("LTIP") is
intended to focus attention prospectively on the Company's long-term results and
reward achievement of the Company's long-term financial goals. Participation in
LTIP, as determined by the Committee, is limited to key executives and officers
who have a significant impact on the long-term results of the Company. LTIP
performance cycles are three years in length, with a new three year cycle
starting every fiscal year. At the beginning of each cycle, the Committee sets
specific performance criteria and establishes a minimum and a maximum range of
performance for the three-year period on which a bonus will be paid. If the
Company exactly achieves the performance goals, the participants receive a bonus
equal to 20% of their average annual base salary over the three-year performance
cycle, which corresponds to approximately 13% of each executive's target cash
compensation objective over the three-year performance cycle. If the Company's
performance falls above or below the target, the percentage of average annual
base salary to be paid as a bonus will be increased or decreased in accordance
with a schedule included in the LTIP Plan. The minimum award is zero, and the
maximum award is 70% of the executive's average annual base salary over the
three-year performance cycle.

The performance measurement for bonus amounts payable under the
1994-1995-1996 LTIP was based 100% on an earnings per share target for the
three-year period, and the Company achieved 98.5% of its earnings per share
target level for this LTIP cycle. The LTIP bonus paid to Mr. Lund and the four
executives in the summary compensation table represents approximately 18.5% of
each individual's average annual base salary for fiscal years 1994, 1995, and
1996.

If the 1997 Stock Option and Stock Award Plan is approved by the
shareholders at the Annual Meeting, the Performance Incentive Plan will be
implemented, and no further awards will be made under LTIP. In addition,
participants in ongoing LTIPs may elect to convert the cash payments projected
to be paid under such plans to shares of restricted stock that cannot be sold
until the year(s) in which the LTIP payments would have been made.

Stock Option Plans

The Committee believes that stock option plans can serve as an effective
incentive to the Company's executive officers and key employees to further the
long-term growth and performance of the Company, since the value of an option
bears a direct relationship to increases in the Company's stock price. In
addition, the

16
<PAGE> 19

Committee believes that the utilization of vesting periods provides incentives
for key employees to remain with the Company. The Committee administers the
Company's stock option plans and determines the individuals to whom stock
options, stock appreciation rights ("SARs") and restricted stock awards are
granted. The Committee, however, does not grant stock options on a regular
basis. During 1996, the Committee authorized a broad-based grant of stock
options to officers of the Company, including Mr. Lund and the four other named
executive officers. The options were granted at the market price in effect on
the date of grant, have a term of seven years and become exercisable in
one-third increments on July 25, 1997, July 25, 1998 and July 25, 1999,
respectively. The named executive officers were granted options pertaining to an
aggregate of 150,000 shares of the Company's common stock which represented
11.04% of the total number of options granted. The options were granted to
provide additional incentive to focus on their responsibilities and continue
their employment with the Company during a period of speculation about the
Company and its future resulting from the Form 13D filing by L. S. Skaggs
stating his intention to monitor his investment in the Company's Common Stock
and consider a number of strategies for enhancing value, including, without
limitation: the acquisition of additional securities; an extraordinary corporate
transaction such as a merger, reorganization or liquidation involving the
Company; a change in the board of directors or management of the Company; a sale
or transfer of a material amount of assets of the Company or any of its
subsidiaries; a material change in the capitalization or dividend policy of the
Company; or other strategies set forth in such report. In determining grants,
the Committee took into account the individuals' responsibilities and experience
but did not consider stock ownership. The Committee did not grant any SARs or
restricted stock awards, nor did it reprice any outstanding options or SARs
during 1996.

As discussed under "Proposal 5 -- Proposal to Approve the American Stores
Company 1997 Stock Option and Stock Award Plan," the Company is submitting a new
stock option and stock award plan to the shareholders for their approval at the
Annual Meeting.

Stock Purchase Incentive Plan

During 1992, the Company's shareholders approved the Key Executive Stock
Purchase Incentive Plan (the "Executive Plan"). The Executive Plan was developed
in consultation with an outside compensation consultant after a review by the
Committee and such consultant of the Company's existing compensation programs.
The Executive Plan is intended to promote the long-term growth and financial
success of the Company by strengthening the links between the Company's
management and its shareholders. The Executive Plan affords certain key
executive officers of the Company and its subsidiaries the opportunity to
significantly increase their ownership of the Company's Common Stock. The
Executive Plan also offers the potential for substantial financial incentives
(in addition to potential appreciation in the value of the Common Stock) based
on continued service and long-term stock price performance, but in a manner that
places such executive officers at risk in the event of poor Company performance.
By having participants in the Executive Plan share in both the upside and
downside potential inherent in stock ownership by purchasing Common Stock using
full-recourse, interest-bearing loans, the Committee believes the Executive Plan
incorporates an important element of investment risk that generally is not found
in other executive incentive plans.

During June 1992, under the Executive Plan, Mr. Lund, four of the
executives named in the summary compensation table and certain other executive
officers selected by the Committee received the right to purchase a specified
number of shares of the Company's Common Stock on June 16, 1992 at the average
market price of the Common Stock on such date. Pursuant to the Executive Plan,
the executive officers also received from the Company full-recourse,
interest-bearing loans for the entire purchase price of the Common Stock. Each
executive officer was required to pledge the Common Stock he or she purchased
with the proceeds of the loan to secure such loan. The loans have an eight-year
term and accrue interest at the rate of 7.04%, compounded annually. Interest is
payable prior to maturity to the extent of dividends paid on the shares
purchased under the Executive Plan, with the balance due at the maturity of the
loan. Under the Executive Plan, Mr. Lund and the four executives named in the
summary compensation table purchased the indicated amounts of Common Stock at a
purchase price of $17.44 per share: Mr. Lund -- 400,000 shares; Ms. Beck --
60,000 shares; Mr. Hermanns -- 60,000 shares; Mr. Maher -- 220,000 shares; and
Mr. Scholtens -- 60,000 shares. Additionally, on March 31, 1994, in connection
with a change in title and increased responsibilities,

17
<PAGE> 20

Mr. Hermanns purchased an additional 20,000 shares at a purchase price of $25.53
per share with proceeds of a Company loan having a 5.36% interest rate, and a
new performance cycle commenced with respect to such shares.

Participants in the Executive Plan are also eligible to receive a deferred
cash incentive award (the "deferred award") which is generally payable at the
end of a five-year performance cycle. In the case of the executives listed in
the summary compensation table, the five-year performance cycle will end on June
16, 1997, except with respect to the 20,000 shares purchased by Mr. Hermanns in
March 1994. One-half of the deferred award will be based on the executive
officer's continued service with the Company during the performance cycle (the
"service award"), while the other half will be based on the Company's Common
Stock performance (including reinvested dividends) over the five-year
performance cycle relative to shareholder returns for specified companies in the
retail food and drug industry (the "performance award"). The maximum amount of
the deferred award which can be earned by the executive officers is equal to the
amount of the loan and accrued and unpaid interest. Any deferred award must be
applied towards repayment of the loan. Certain deferred awards will be forfeited
if, prior to the end of the five-year performance cycle, the executive officer
sells shares purchased under the Executive Plan or the executive officer's
service with the Company is terminated.

Each executive officer will vest annually in a portion of the service award
in an amount equal to a cumulative percentage of the outstanding loan balance at
the time the service award is earned. The cumulative percentages for each year
are as follows: first year -- 7 1/2%; second year -- 15%; third year -- 22 1/2%;
fourth year -- 30%; and fifth year -- 50%. The service award may not exceed 50%
of the loan balance. At the end of the Company's 1996 fiscal year, each of the
executives listed in the summary compensation table who participated in the
Executive Plan was vested in a portion of the service award equal to 30% of the
outstanding loan balance with respect to the shares issued in 1992.

The portion of the performance award earned as a percentage of the loan
amount at the time the performance award is paid will vary depending upon the
Company's total shareholder return versus shareholder returns of the members of
the specified peer group on an unweighted basis, with no performance award
earned if the Company's total shareholder return ranks below the 50th percentile
of the peer group, and 100% of the performance award earned if the Company's
total shareholder return is ranked in the 80th or higher percentile of the peer
group. The performance award may not exceed 50% of the loan balance. For the
period from June 16, 1992 through March 31, 1997, the Company's total
shareholder return versus the members of the peer group ranked in the 55.6
percentile, and therefore 39% of the performance award would have been earned,
which would represent 19.5% of the loan balance, assuming such performance was
maintained through the full five-year performance cycle. The original members of
the peer group include The Great Atlantic & Pacific Tea Company, Inc.,
Albertson's, Inc., The Kroger Co., Longs Drug Stores Corporation, Safeway Inc.,
Smith's Food & Drug Centers, Inc., The Vons Companies, Inc., Walgreen Co., and
Winn-Dixie Stores, Inc. The Vons Companies, Inc. was a member of the peer group
until April 8, 1997 when its stock ceased to be traded. If the Company's Common
Stock price declines significantly from the market value on the day of the
award, the loan balance may exceed the combined value of the stock and plan
payments to participants after taxes, in which event the participants would be
required to pay the remaining loan balance with personal funds. On April 1,
1997, in connection with the termination of Mr. Hermanns' employment, his
accrued combined deferred cash award was applied to his outstanding loan
balances, and he paid the remaining balance of his loans in full with personal
funds. Mr. Hermanns' combined loan balance was $1,853,013, of which $727,528 was
paid with the combined deferred cash award and $1,125,485 with personal funds.

Other Compensation Plans

In 1996, the Board authorized an amendment to the Company's Employee Stock
Purchase Plan ("ESPP") that permitted officers of the Company to participate in
that plan. ESPP was approved by the shareholders at the 1995 Annual Meeting and
provides the Company's employees with an opportunity to purchase shares of the
Company's Common Stock through payroll deductions. The Committee believes that
stock ownership by the Company's officers and employees provides increased
incentive for such individuals to

18
<PAGE> 21

improve their performance. The executive compensation program also includes
other benefit plans that are generally available to employees of the Company,
including a profit sharing/401(k) pension plan, a medical plan and a life
insurance plan. The Company has not maintained a defined benefit pension plan
for its employees since the end of 1984. Certain executive officers, including
the executives listed in the summary compensation table, are eligible to
participate in a supplemental executive retirement plan, which is a non-
qualified plan intended to provide benefits where limitations are imposed upon
Company contributions to qualified plans on behalf of certain employees due to
limits under the Federal tax laws. Except for the Company's profit
sharing/401(k) pension plan and ESPP, none of the foregoing plans is tied to
Company performance. The Committee believes these plans are comparable to plans
of other companies in the food and drug industries and companies of similar
size.

CONCLUSION

Through the programs described above, a significant portion of the
Company's executive compensation is linked directly to individual and corporate
performance and stock price appreciation. The Committee intends to continue the
policy of linking executive compensation to corporate performance and return to
shareholders, as evidenced by the plans being submitted to the shareholders for
their consideration at the 1997 Annual Meeting.

Submitted by the Compensation and Stock Option Committee of the Board of
Directors of the Company.

<TABLE>
<S> <C>
Leon G. Harmon, Chairman
Louis H. Callister James B. Fisher
Arden B. Engebretsen Barbara S. Preiskel
</TABLE>

AMERICAN STORES COMPANY STOCK PRICE PERFORMANCE

Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock against
the cumulative total return of the S&P Composite-500 Stock Index and a group of
nine publicly-traded retail food and/or drug companies, which include The Great
Atlantic & Pacific Tea Company, Inc., Albertson's, Inc., The Kroger Co., Longs
Drug Stores Corporation, Safeway Inc., Smith's Food & Drug Centers, Inc., The
Vons Companies, Inc., Walgreen Co., and Winn-Dixie Stores, Inc. (the "Peer Group
Index") for the five-year fiscal period ended February 1, 1997. The companies in
the peer group are the same as those used in calculating the performance awards
under the Company's Key Executive Stock Purchase Incentive Plan. Comparisons are
based on the assumption that the value of the investment on January 31, 1992 in
the Company's Common Stock, the securities comprising the S&P Composite-500
Stock Index, and the Peer Group Index was $100 and that all dividends were
reinvested.

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<PAGE> 22

COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
AMERICAN STORES COMPANY COMMON STOCK, S&P COMPOSITE-500
& PEER GROUP INDICES

<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) AMERICAN STORES S&P 500 PEER GROUP
<S> <C> <C> <C>
1/31/92 100 100 100
1/29/93 135 111 118
1/28/94 134 124 113
1/27/95 155 125 135
2/3/96 168 173 184
2/1/97 281 219 234
</TABLE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The following non-employee directors served on the Compensation and Stock
Option Committee during fiscal 1996: Leon G. Harmon, Chairman, Louis H.
Callister, Arden B. Engebretsen, James B. Fisher, L. Tom Perry and Barbara S.
Preiskel. There were no Compensation Committee interlocks with respect to any
member of that Committee during fiscal 1996.

OTHER INFORMATION PERTAINING TO DIRECTORS AND EXECUTIVE OFFICERS

During 1992, Mr. Lund, the four other executives in the summary
compensation table and certain other executive officers received full-recourse,
interest bearing loans for the entire purchase price of Common Stock of the
Company they purchased pursuant to the terms of the Executive Plan described on
page 17. Mr. Hermanns received an additional loan in 1994 to purchase 20,000
shares under the Executive Plan. The loans have eight-year terms and accrue
interest at the Applicable Federal Rate for eight-year loans with interest
compounded annually, as determined by Section 1274(d) of the Internal Revenue
Code of 1986, as amended, in effect on the Purchase Date. Interest is payable
prior to maturity to the extent of dividends paid on the shares purchased under
the Executive Plan, with the balance due at the maturity of the loan. The
proceeds of the deferred cash incentives awarded during the five-year
performance cycle(s) under the Executive Plan must also be applied to prepay the
loans. The balance of the loans after taking into account any such prepayment
together with accrued and unpaid interest thereon, will be payable in three
equal installments (plus interest) on the sixth, seventh and eighth
anniversaries of the purchase date. If an executive officer's service is
terminated during a performance cycle for any reason other than retirement or
following a change of control, the loan will generally become due on the 120th
day after termination of service. In the event of retirement or a change of
control, the loan must be repaid over a three-year period. The loan may also be
prepaid at any time at the executive officer's option. As of February 1, 1997,
the outstanding balances of the loans (including accrued and unpaid interest)
made to Mr. Lund and the other four executives in the summary compensation table
were: Mr. Lund -- $8,513,267; Ms. Beck -- $1,276,990; Mr. Hermanns --
$1,834,380; Mr. Maher -- $4,682,267; and Mr. Scholtens -- $1,276,990. As of
February 1, 1997, the

20
<PAGE> 23

aggregate outstanding balances of the loans (including accrued and unpaid
interest) made pursuant to the Executive Plan was $36,933,125. The largest
aggregate amount outstanding during the fiscal year was $37,047,588. On April 1,
1997, in connection with the termination of Mr. Hermanns' employment, his
accrued combined deferred cash award was applied to his outstanding loan
balances, and he paid the remaining balance of his loans in full with personal
funds. Mr. Hermanns' combined loan balance was $1,853,013, of which $727,528 was
paid with the combined deferred cash award and $1,125,485 with personal funds.

On April 8, 1997, the Company purchased 12,222,222 shares of the Company's
Common Stock for $550 million from L. S. Skaggs, a former director and the
former Chairman of the Board of the Company, certain of his family members, and
certain family and charitable trusts (collectively, the "Selling Stockholders").
The transaction was effected in accordance with the terms of the Stock Purchase
Agreement (the "Stock Purchase Agreement") dated February 20, 1997, and the
purchase price of $45 per share was equal to the closing price of the Company's
common stock on the New York Stock Exchange on the date of such agreement. On
February 20, 1997, the Company also entered into a Registration Rights Agreement
(the "Registration Rights Agreement") with the Selling Stockholders pursuant to
which, among other things, the Company registered for sale in a secondary
offering approximately 15.4 million additional shares of common stock held by
the Selling Stockholders. The secondary offering was completed on April 8, 1997
after the sale of 15,407,910 shares by the Selling Stockholders and 2,311,186
shares by the Company pursuant to the overallotment option. The Company paid the
costs and expenses of the Selling Stockholders incurred in connection with the
Stock Purchase Agreement and the offering, including the underwriters' discount
of approximately $23.1 million and approximately $3.4 million in other expenses.
The agreements contain standstill provisions precluding the Selling Stockholders
from purchasing or selling the Company's Common Stock or taking certain other
actions for a period of ten years.

During 1995 L. S. Skaggs retained Skaggs Telecommunications Service, Inc.,
a wholly-owned subsidiary of the Company ("STS"), to provide mill work,
electrical services and supplies in connection with certain construction
projects. STS completed its work for Mr. Skaggs during 1996. During 1996, Mr.
Skaggs paid an aggregate of $1,120,205 for the services and supplies provided by
STS including the general contractor's mark-up. The supplies were provided at
approximately the same gross margin charged by STS to its own and affiliated
Company employees, and services were billed at the same rates at which such
services are provided to other businesses and employees of the Company. This
transaction was reviewed and approved by the Audit Committee of the Board of
Directors.

During 1996, Don L. Skaggs purchased electrical equipment and services in
the amount of $248,758 from STS. The supplies were provided at approximately the
same gross margin charged by STS to its other employees, and services were
billed at the same rates at which such services are provided to other businesses
and employees of the Company. This transaction was reviewed and approved by the
Audit Committee of the Board of Directors.

During 1996, Robert P. Hermanns, former Chief Operating Officer Procurement
and Logistics, purchased custom woodwork and millwork in the amount of $184,045
from a mill owned by American Stores Properties, Inc. ("ASPI"), one of the
subsidiaries of the Company. The millwork was billed to Mr. Hermanns at the same
rates at which such services are provided to other businesses and employees of
the Company. This transaction was reviewed and approved by the Audit Committee
of the Board of Directors.

During 1996, Stephen L. Mannschreck, Chief Human Resources Officer of the
Company, purchased custom woodwork and millwork from ASPI in the amount of
$99,699. Mr. Mannschreck also purchased electrical equipment and services in the
amount of $4,988 from STS. The millwork was billed to Mr. Mannschreck at the
same rates at which such services are provided to other businesses and employees
of the Company. The price Mr. Mannschreck paid to STS for supplies included
approximately the same gross margin charged by STS to its own and affiliated
Company employees, and services were billed at the same rates at which such
services are provided to other businesses and employees of the Company. This
transaction was reviewed and approved by the Audit Committee of the Board of
Directors.

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<PAGE> 24

PROPOSAL 2 -- PROPOSAL TO AMEND ARTICLE THIRD OF THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION TO PERMIT THE COMPANY TO ENGAGE IN
ANY LAWFUL BUSINESS

The Board of Directors proposes and recommends that the shareholders adopt
an amendment to Article THIRD of the Company's Restated Certificate of
Incorporation captioned "Purposes," to permit the Company to engage in any
lawful business. On April 7, 1997, the Board of Directors unanimously approved
resolutions declaring such amendment advisable. If approved by the shareholders,
Article THIRD will read in its entirety as follows:

ARTICLE THIRD

PURPOSES

The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.

Article THIRD of the Company's Restated Certificate of Incorporation was
adopted in 1979 and limits the purpose of the Company to acquiring and holding
stock of other corporations for the purpose of controlling the management of
affairs of such other corporations. The Board believes that this language is
antiquated and unduly restrictive and that the purposes clause should be
modernized and expanded to provide the Company with the maximum flexibility in
conducting its business. The article as proposed to be amended will provide the
Company with the authority to engage in any type of business activity authorized
by law. The amendment is patterned after the language customarily used by
Delaware corporations.

APPROVAL

The affirmative vote of a majority of the outstanding Common Stock is
required for approval of the proposed amendment to the Restated Certificate of
Incorporation. The following resolution will be offered by the Board of
Directors at the Annual Meeting:

RESOLVED, that the amendment to Article THIRD of the Company's
Restated Certificate of Incorporation as set forth in the Company's
1997 Proxy Statement be, and hereby is, authorized, approved and
adopted.

THE BOARD OF DIRECTORS' RECOMMENDATION

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSED
AMENDMENT OF ARTICLE THIRD OF THE RESTATED CERTIFICATE OF INCORPORATION TO
PERMIT THE COMPANY TO ENGAGE IN ANY LAWFUL BUSINESS.

PROPOSAL 3 -- PROPOSAL TO AMEND ARTICLE FOURTH OF THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK

The Board of Directors proposes and recommends that the shareholders adopt
an amendment to Section 4.01 of Article FOURTH of the Restated Certificate of
Incorporation to increase the number of shares of Common Stock which the Company
is authorized to issue from 325,000,000 to 700,000,000. The proposed amendment
would not change the terms of the Common Stock.

On April 7, 1997, the Board of Directors unanimously approved resolutions
declaring such amendment advisable. If approved by the shareholders, Section
4.01 of Article FOURTH will read in its entirety as follows:

4.01 The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 710,000,000 consisting of
a) 700,000,000 shares of Common Stock, par value

22
<PAGE> 25

$1 per share ("Common Stock"), and b) 10,000,000 shares of Preferred Stock,
par value $1 per share ("Preferred Stock").

As of April 8, 1997, there were 136,027,737 shares of Common Stock issued
and outstanding exclusive of 13,861,499 shares of Common Stock held in the
Company's treasury. Accordingly, as of April 8, 1997 there remained 202,833,762
shares of Common Stock available for issuance, of which 11,493,510 shares have
been reserved for issuance in connection with the Company's stock option, stock
award and employee stock purchase plans. If the shareholders approve the
American Stores Company 1997 Stock Option and Stock Award Plan and the American
Stores Company 1997 Stock Plan for Non-Employee Directors (Proposals 5 and 6) at
the Annual Meeting, an additional 6,750,000 shares will be required to be
reserved, leaving only 184,590,252 shares available for issuance.

The Board of Directors believes that it is desirable and in the best
interest of the Company and its shareholders that the number of authorized but
unissued shares of Common Stock be increased so that there are sufficient
unissued shares of Common Stock available for proper corporate purposes,
including, without limitation, the raising of additional capital, stock
dividends or splits, acquisitions, and issuance pursuant to stock option or
other employee benefit or incentive compensation plans. If authorization of any
increase in the Common Stock is postponed until a specific need arises, the
delay and expense incident to obtaining the approval of shareholders at that
time could impair the Company's ability to meet its objectives.

If the proposed amendment to Article FOURTH is approved, the additional
shares of Common Stock (as well as treasury shares and the existing authorized
but unissued shares of Common Stock and Preferred Stock) would be available for
issuance without further action by the shareholders, unless otherwise required
by applicable law or by the rules of any stock exchange on which the Company's
securities are listed. The New York Stock Exchange, on which the Common Stock of
the Company is listed, currently requires shareholder approval as a prerequisite
for listing Common Stock to be issued in any transaction or series of related
transactions, other than a public offering for cash, if the Common Stock has or
will have upon issuance voting power equal to or in excess of 20% of the voting
power outstanding before the issuance of such stock or if the issuance will
result in a change of control.

The additional shares of Common Stock would be identical to the Common
Stock currently outstanding. No shareholder has any preemptive rights, and
issuance of the additional (as well as treasury shares and the existing
authorized but unissued) Common Stock could dilute the voting rights of present
holders of Common Stock. It is possible, depending upon the type of transaction
in which Common Stock is issued, that issuance of such Common Stock could have a
dilutive effect on shareholders' equity and earnings per share attributable to
present holders.

The additional shares of Common Stock (as well as treasury shares and the
existing authorized but unissued shares of Common Stock and Preferred Stock)
could also be used to impede an unsolicited bid for control of the Company which
the Board of Directors believed was not in the best interests of the Company and
its shareholders. The availability of the additional Common Stock as a defensive
response to a takeover attempt was not a motivating factor in the Board's
approval of the proposed amendment to Article FOURTH, and the Board is not aware
of any effort to obtain control of the Company.

APPROVAL

The affirmative vote of the holders of a majority of the outstanding Common
Stock is required for approval of the proposed amendment to the Restated
Certificate of Incorporation. The following resolution will be offered by the
Board of Directors at the Annual Meeting:

RESOLVED, that the amendment to Article FOURTH of the Company's
Restated Certificate of Incorporation as set forth in the Company's
1997 Proxy Statement be, and hereby is, authorized, approved and
adopted.

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THE BOARD OF DIRECTORS' RECOMMENDATION

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSED
AMENDMENT OF ARTICLE FOURTH OF THE RESTATED CERTIFICATE OF INCORPORATION TO
INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK.

PROPOSAL 4 -- TO APPROVE THE AMERICAN STORES COMPANY 1997 KEY MANAGEMENT ANNUAL
INCENTIVE PLAN

On February 24, 1997, the Compensation and Stock Option Committee of the
Board of Directors adopted the 1997 Key Management Annual Incentive Plan (the
"Annual Incentive Plan" or the "Plan"), subject to approval by the Company's
shareholders at the Annual Meeting. The Annual Incentive Plan is designed to
align the financial interests of the Company's key employees with those of the
Company's shareholders by linking a significant percentage of the employee's
total target compensation to the achievement of financial and corporate goals by
the Company. The Annual Incentive Plan also provides a competitive compensation
program that permits the Company to attract and retain qualified executives. The
Annual Incentive Plan is substantially identical to the annual bonus plan that
has been utilized by the Company for the past several years. The Board of
Directors has decided to seek shareholder approval of the Annual Incentive Plan
so that the compensation paid under such plan can qualify for tax deductibility
under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code").

The Code was amended in 1993 to provide that, effective January 1, 1994,
with certain exceptions, a publicly held corporation such as the Company could
not take a federal income tax deduction for compensation paid to a "covered
employee" in a taxable year to the extent that the compensation deduction would
otherwise exceed $1,000,000. A "covered employee" is the Chief Executive Officer
on the last day of the taxable year and any other officer who is among the four
highest compensated officers (other than the CEO) as reported in the Proxy
Statement. Generally, these would be the same officers named each year in the
Summary Compensation Table in the Proxy Statement.

The $1,000,000 limit on deductibility does not apply to compensation that
meets the requirements for "qualified performance-based compensation" under
regulations adopted under the Code. These requirements include the following:
(i) the compensation must be paid solely on account of the attainment of one or
more pre-established, objective performance goals, (ii) the performance goals
must be timely established by a compensation committee consisting solely of two
or more outside directors, (iii) the material terms of the performance goals
must be disclosed to and approved by the shareholders, and (iv) the compensation
committee must certify in writing prior to payment of the compensation that the
performance goals and any other material terms were in fact satisfied.

SUMMARY OF THE 1997 KEY MANAGEMENT ANNUAL INCENTIVE PLAN

The following discussion constitutes a general summary of certain key
provisions of the Annual Incentive Plan and is subject to qualification by
reference to the Annual Incentive Plan, a copy of which is attached to this
Proxy Statement as Exhibit A.

1. ELIGIBLE EMPLOYEES AND MAXIMUM AWARD. Exempt (salaried) employees of
the Company are eligible to participate in the Annual Incentive Plan. Currently,
approximately 2,300 employees participate. The Plan provides that the maximum
award payable to "covered employees" in any calendar year is $2,000,000,
although the highest award that could be paid under the Plan for the 1997 fiscal
year would be approximately $825,000.

2. ADMINISTRATION. The Compensation and Stock Option Committee of the
Board of Directors (the "Committee") is responsible for the implementation and
administration of the Plan. The Committee's functions include, but are not
limited to: interpretation of the Plan and establishment of the rules and
regulations governing Plan administration; selection of participants; approval
of performance objectives upon which the percentage of payment of awards are
based; determination of the degree of the attainment of the performance
objectives; and determination of the size of individual awards and payments to
participants.

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<PAGE> 27

In reaching its decisions, the Committee will consider recommendations made by
the CEO and such other members of management as the CEO designates. Members of
the Committee must be "outside directors" as defined in the regulations under
the Code and may not participate in the Plan.

3. PERFORMANCE OBJECTIVES AND TARGETS. Not later than three months after
the beginning of each year, the Committee establishes minimum, target and
maximum performance objectives for each participant. Such performance objectives
may consist of financial objectives, individual objectives, or a combination
thereof, except that with respect to "covered employees," the performance
objectives may consist of financial objectives only. Financial objectives are
established by the Committee each year based upon one or more of the following
performance measures: cash flow, comparable stores sales, earnings per share,
operating income, revenues, return on assets, return on sales, return on equity,
shareholder return (measured in terms of stock price appreciation) and/or total
shareholder return (measured in terms of stock price appreciation and/or
dividend growth), achievement of cost control, working capital, or stock price
of the Corporation or such subsidiary, division or department of the Corporation
for or within which the participant is primarily employed, in each case as
reported or as adjusted for non-recurring events and the effects thereof. Such
performance objectives also may be based upon attaining specified levels of
Corporation performance under one or more of the measures described above
relative to the performance of other corporations. The performance objectives
may be established on a corporate-wide basis or established with respect to one
or more operating units, divisions, acquired businesses, minority investments,
partnerships or joint ventures. Such performance objectives are intended to
qualify under Section 162(m)(4)(c) of the Code and must be set by the Committee
within the time period prescribed by Rule 162(m) of the Code and related
regulations. At the time the Committee establishes the performance objectives,
it also establishes the amount of the bonus (the "target bonus"), expressed as a
percentage of base salary, that will be paid to each participant if the Company
achieves its financial goals and establishes a schedule setting forth in
increments the percentage of the target goal achieved by the Company and the
amount by which the target bonus will be increased if the Company exceeds its
goals or decreased if it fails to achieve its goals. The Committee may alter or
adjust financial objectives during the course of a year, or alter or adjust the
financial results otherwise reported or achieved by the Company during such
year, except with respect to the "covered employees," for whom the Committee
shall have no discretion to increase, but may decrease, the amount of a bonus
payable based upon the range of achievement of the financial objectives. The
maximum target bonus payable under the Plan is 50% of a Participant's average
base salary, and the maximum bonus payable under the Plan is 125% of a
Participant's average base salary. Currently, the target bonus for the Company's
Chief Executive Officer is 40%, and the target bonus for the other four
executives named in the summary compensation table is 30%, of their respective
average base salary. The maximum bonus payable to any participant in the Plan
except Mr. Lund is 75% of his or her average base salary. The maximum bonus
payable to Mr. Lund is 100% of his average base salary.

4. OTHER AWARD CRITERIA. Except with respect to "covered employees," the
Committee may also, as to a participant, make a portion of the bonus opportunity
subject to qualitative or quantitative individual goals to be achieved.
Individual objectives may be altered or amended during an award year to properly
reflect changed business conditions and priorities, subject to approval by the
Committee.

5. PAYMENT OF BONUSES. Payment of earned bonuses is generally made eight
to ten weeks following the end of the fiscal year in which the bonuses are
earned. No bonus is earned with respect to a financial objective at or below the
minimum level of achievement established; the target bonus opportunity with
respect to a financial objective is earned if the target is achieved;
achievement between the minimum and the target levels results in a pro rata
award with respect to that financial objective as set forth in the schedule. An
amount larger than the target bonus for each financial objective can be earned
for exceeding the target.

If a participant's employment is terminated because of death, disability,
retirement or with the approval of the Committee in connection with a "no fault"
termination, the participant will receive a pro rata award payment based on the
portion of the year the participant was employed by the Company in an eligible
position while the award was outstanding and the degree to which the performance
objectives were achieved. However, if a participant's employment is terminated
during the first six months of any year, the payment will be a pro

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rata portion of the target bonus. No bonus will be payable to any participant
who voluntarily resigns his/her employment or is terminated for cause prior to
the payment date for such bonus.

In addition to awards granted to participants under the Plan, the Committee
may from time to time make grants and awards to participants pursuant to other
compensation plans of the Company.

6. CHANGE OF CONTROL. In the event of a Change of Control of the Company,
then immediately after such event becomes effective, the Company will pay to
each participant the pro rata amount of the participant's target bonus for the
applicable year. Reasonable legal fees incurred by a participant in enforcing
rights under such Change of Control provisions will be paid for by the Company
in addition to sums otherwise due under the Plan. A Change of Control generally
is deemed to occur if: (i) any person becomes the owner of 20% or more of the
Company's voting securities; (ii) individuals who, as of the date of the Plan,
constitute the Board of Directors (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board (provided that any person who
subsequently becomes a director and is approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such person were a member of the Incumbent Board); (iii) a merger or
consolidation in which the Company's voting securities do not continue to
represent at least 60% of the surviving entity; or (iv) a liquidation,
dissolution or sale of all or substantially all of the Company's assets.

7. AMENDMENT. The Plan may be amended by the Board of Directors upon a
recommendation of the Committee, except that, without approval of the
shareholders, the Board or Committee may not change (i) the performance measures
with respect to awards of "covered employees," (ii) the individuals or class of
individuals eligible to participate or (iii) the maximum amount payable to a
"covered employee" under the Plan.

8. EFFECTIVENESS. If the Plan is approved by shareholders at this Annual
Meeting, it will be effective in the form approved with respect to grants of
awards to be earned during 1997 and thereafter until 2001. No awards shall be
granted under the Plan subsequent to the 2001 Award Year unless the Plan is
extended by the Board of Directors and approved by the shareholders.

APPROVAL AND RELATED MATTERS

The affirmative vote of a majority of the shares present and voting at the
Annual Meeting is required to approve the Annual Incentive Plan. The following
resolution will be offered by the Board of Directors at the Annual Meeting:

RESOLVED, that the American Stores Company 1997 Key Management
Annual Incentive Plan in the form of Exhibit A attached to this Proxy
Statement be, and hereby is, authorized, approved and adopted.

THE BOARD OF DIRECTORS' RECOMMENDATION

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THIS RESOLUTION. UNLESS OTHERWISE SPECIFIED BY THE SHAREHOLDER, THE BOARD
INTENDS THE ACCOMPANYING PROXY TO BE VOTED FOR THIS RESOLUTION.

PROPOSAL 5 -- TO APPROVE THE AMERICAN STORES COMPANY 1997 STOCK OPTION AND STOCK
AWARD PLAN

On April 7, 1997, the Compensation and Stock Option Committee of the Board
of Directors (the "Committee") adopted the American Stores Company 1997 Stock
Option and Stock Award Plan (the "1997 Stock Plan") subject to approval by the
Company's shareholders at the Annual Meeting. The general purpose of the 1997
Stock Plan is two-fold. First, the 1997 Stock Plan will give the Company a
competitive advantage in attracting, retaining, and developing a management team
capable of assuring the future success of the Company. Second, the 1997 Stock
Plan will provide the Company and its subsidiaries with a stock-based incentive
plan which will directly link participant's interests to the profitability of
the Company's businesses

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<PAGE> 29

and to increases in shareholder value. The 1997 Stock Plan replaces the
Company's 1989 Stock Option and Stock Award Plan (the "1989 Plan"), which the
shareholders approved at the 1989 annual meeting, but whose reserve of shares
available for future award has been depleted during the past eight years. The
Board recommends that the 1997 Stock Plan be adopted. The Board of Directors has
decided to seek shareholder approval of the 1997 Stock Plan, including the
material terms of the performance goals thereunder, in part so that the
compensation paid under such plan can qualify for tax deductibility under
Section 162(m) of the Code as discussed above with respect to the Annual
Incentive Plan.

SUMMARY OF THE 1997 STOCK OPTION AND STOCK AWARD PLAN

The following discussion constitutes a general summary of certain key
provisions of the 1997 Stock Plan and is subject to qualification by reference
to the 1997 Stock Plan, a copy of which is attached to this Proxy Statement as
Exhibit B.

1. ADMINISTRATION. The 1997 Stock Plan is to be administered by the
Committee, which is authorized to interpret the 1997 Stock Plan, to prescribe,
amend and rescind rules and regulations relating to it, and to make all other
determinations necessary or advisable for its administration. The Committee
currently consists of five members of the Board of Directors who are
"non-employee directors" (as such term is defined under Rule 16b-3 of the
Exchange Act), and "outside directors" (as such term is defined under Section
162(m) of the Code).

2. NUMBER OF SHARES SUBJECT TO 1997 STOCK PLAN. The number of shares of
Company Common Stock for which options, stock appreciation rights, restricted
stock awards and performance units may be granted under the 1997 Stock Plan is
limited to an aggregate of 6,500,000 shares, representing approximately 4.8% of
the outstanding shares of the Company's Common Stock on April 8, 1997, without
giving effect to the shares proposed to be reserved for issuance under the 1997
Stock Plan for Non-Employee Directors. The options, stock appreciation rights,
restricted stock awards and performance units are subject to anti-dilution
adjustments in the event of certain changes affecting the Company's
capitalization.

3. ELIGIBLE EMPLOYEES AND MAXIMUM AWARD. Officers and employees of the
Company, its subsidiaries and affiliates who are responsible for or contribute
to the management, growth and profitability of the business of the Company, its
subsidiaries and affiliates are eligible to be granted awards under the 1997
Stock Plan. No individual may be granted awards covering in excess of 2,000,000
shares of Common Stock over the life of the 1997 Stock Plan. Such performance
goals may consist of financial objectives, individual objectives, or a
combination thereof, except that with respect to "covered employees," the
performance objectives may consist of financial objectives only. Financial
objectives will be established by the Committee based upon one or more of the
following performance measures: cash flow, comparable stores sales, earnings per
share, operating income, revenues, return on assets, return on sales, return on
equity, shareholder return (measured in terms of stock price appreciation)
and/or total shareholder return (measured in terms of stock price appreciation
and/or dividend growth), achievement of cost control, working capital, or stock
price of the Corporation or such subsidiary, division or department of the
Corporation for or within which the participant is primarily employed, in each
case as reported or as adjusted for non-recurring events and the effects
thereof. Such performance goals also may be based upon attaining specified
levels of Corporation performance under one or more of the measures described
above relative to the performance of other corporations. The performance goals
may be established on a corporate-wide basis or established with respect to one
or more operating units, divisions, acquired businesses, minority investments,
partnerships or joint ventures. Any such performance goals are intended to
qualify under Section 162(m)(4)(c) of the Code and shall be set by the Committee
within the time period prescribed by Rule 162(m) of the Code and related
regulations.

4. FORM OF AWARDS. The 1997 Stock Plan provides for the grant of
incentive and non-qualified stock options, stock appreciation rights, restricted
stock awards, and performance units. Prior to the grant of any award, the
Committee may establish performance goals that are based on the attainment of
specified corporate objectives.

Stock Options. The terms of stock option awards will be determined by the
Committee. Each award is evidenced by a written agreement between the Company
and the individual to whom the award is made. The

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<PAGE> 30

option agreement will specify the option price, the expiration date of the
option, the number of shares to which the option pertains, and any conditions to
the exercise of the option and such other terms and conditions as the Committee
shall determine. The award agreement will also specify whether the option is
intended to be an incentive stock option eligible for preferential tax treatment
under Section 422 of the Code or a non-qualified stock option.

The option price per share of Common Stock purchasable under a stock option
will be determined by the Committee. Payment by option holders upon the exercise
of an option may be made in cash or, with the consent of the Committee, by
delivering previously owned shares of the Company's Common Stock.

Stock option awards will be exercisable over a period determined by the
Committee (but not more than ten years from the date of grant). Options may not
be transferred during the lifetime of the holder other than pursuant to the laws
of descent and distribution, a qualified domestic relations order or to members
of immediate family and trusts under certain limited circumstances if expressly
permitted under the applicable option agreement by the Committee. All
unexercised options will expire upon the termination of the holder's employment
with the Company, its subsidiaries and affiliates; provided that in the event
the holder's employment is terminated by reason of retirement at or after age
57, death or disability, the holder's right to exercise then-exercisable options
will be extended, and, upon death or disability, the holder's right to exercise
certain options may be accelerated.

Stock Appreciation Rights. The Committee may grant stock appreciation
rights in connection with stock options granted under the 1997 Stock Plan
entitling the option holder upon exercise of such rights to receive an amount in
cash, shares of Common Stock or both, in value equal to the excess of the fair
market value of one share of Common Stock over the option price per share
specified in the related stock option multiplied by the number of shares in
respect of which the stock appreciation right shall have been exercised. The
exercise of a stock appreciation right with respect to an option will result in
the expiration of the related option to the extent of the number of shares as to
which the stock appreciation right is exercised.

Restricted Stock Awards. The Committee may grant, without payment therefor
to the Company, shares of Company Common Stock which are subject to restrictions
on transfer and forfeiture under certain circumstances (such shares, while
subject to such restrictions are referred to as "restricted shares"). The
Committee will establish a period during which the restrictions apply and may in
its discretion at any time and from time to time accelerate the time at which
any of the restrictions will lapse.

Performance Units. The 1997 Stock Plan also provides for the award of
Performance Units. At the time of award, the Committee will determine the number
of Performance Units to be awarded, the duration of the award cycle and any
other terms and conditions of the award. The Committee may condition the
settlement of the award on the continued service of the individual, the
attainment of performance goals, or both. At the end of the award cycle, the
Committee shall evaluate the Company's performance in light of the performance
goals for such award to the extent applicable, and shall determine the number of
earned Performance Units to be granted to the individual. The Committee may then
elect to deliver to the individual (1) a number of shares of Common Stock equal
to the number of earned Performance Units, or (2) cash equal to the fair market
value of such number of shares of Common Stock. If an individual's employment is
terminated for any reason during the award cycle or before any applicable
performance goals are satisfied, the right to shares still covered by the award
will be forfeited. However, in the event of retirement or a termination other
than for cause, the Committee has the discretion to waive any or all of the
remaining payment limitations with respect to any or all of such individual's
Performance Units.

5. CHANGE OF CONTROL PROVISIONS. In the event of a Change of Control of
the Company, then immediately after such event becomes effective, any
outstanding stock options and stock appreciation rights shall become fully
exercisable and vested to the full extent of the original grant, any
restrictions and deferral limitations applicable to restricted stock shall
lapse, and all performance units shall be considered to be earned and payable in
full. For the definition of Change of Control, please refer to the description
of the Change of Control provisions for the Annual Incentive Plan contained on
page 26 of this Proxy Statement.

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The 1997 Stock Plan also provides, with respect to options that are
unaccompanied by stock appreciation rights, that during the 60-day period
following a Change of Control an option holder may, in lieu of exercising his
option for stock, elect to receive an amount in cash equal to the excess of the
fair market value of the Company's shares over the exercise price of the option.
The fair market value of the Company's shares for this purpose is defined (i)
with respect to nonqualified stock options, as the higher of (x) the highest
price of the shares during the 60-day period preceding the change of control or
(y) the highest price paid in a Change of Control transaction and (ii) with
respect to incentive stock options, as the mean of the high and low prices of
the common stock on the New York Stock Exchange on the date of exercise.

6. AMENDMENTS TO AND TERM OF THE 1997 STOCK PLAN. The 1997 Stock Plan
will terminate on June 17, 2007. The Board of Directors may terminate the plan
at an earlier date or may amend the plan as it deems advisable; provided, that
no such amendment shall be made without shareholder approval to the extent such
approval is required by law or agreement. The Committee may authorize amendments
to outstanding options that are not inconsistent with the terms of the 1997
Stock Plan, but no such amendment may impair the rights of any holder without
the holder's consent.

FEDERAL INCOME TAX CONSEQUENCES

The following is a brief summary of the current federal income tax rules
relevant to awards issued under the 1997 Stock Plan. These rules are subject to
change in the future.

Incentive Stock Options

No taxable income is realized by an option holder upon the grant or
exercise of an incentive stock option. If shares of Company common stock are
issued to an option holder pursuant to the exercise of an incentive stock option
granted under the 1997 Plan, and if no disqualifying disposition of such shares
is made by such option holder within two years after the date of grant or within
one year after the transfer of such shares to such option holder, then (a) upon
sale of such shares, any amount realized in excess of the option price will be
taxed to such option holder as a long-term capital gain and any loss sustained
will be a long-term capital loss, and (b) no deduction will be allowed to the
Company for federal income tax purposes. Upon exercise of an incentive stock
option, the option holder may be subject to alternative minimum tax on certain
items of tax preference.

If shares of Company common stock acquired upon the exercise of an
incentive stock option are disposed of prior to the expiration of the two
years-from-grant/one-year-from-transfer holding period, generally (a) the option
holder will realize ordinary income in the year of disposition in an amount
equal to the excess (if any) of the fair market value of the shares at exercise
(or, if less, the amount realized on the disposition of the shares) over the
option price thereof, and (b) the Company will be entitled to deduct such
amount. Any further gain or loss realized will be taxed as short-term or
long-term capital gain or loss, as the case may be, and will not result in any
deduction by the Company.

Nonqualified Stock Options

With respect to nonqualified stock options under the 1997 Plan, (a) no
income is realized by the option holder at the time the option is granted, (b)
generally, at exercise, ordinary income is realized by the option holder in an
amount equal to the difference between the option price (the amount paid for the
shares) and the fair market value of the shares on the date of exercise, and the
Company receives a tax deduction for the same amount, and (c) at disposition,
appreciation or depreciation after the date of exercise is treated as either
short-term or long-term capital gain or loss depending on whether the shares
have been held more than twelve months.

Stock Appreciation Rights

No income will be realized by a holder in connection with the grant of a
stock appreciation right. When the stock appreciation right is exercised, the
holder will generally be required to include as taxable ordinary income in the
year of exercise an amount equal to the amount of cash received and fair market
value of any

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stock received on the exercise. The Company will be entitled to a deduction for
Federal income tax purposes at the same time equal to the amount included in
such holders' income by reason of the exercise.

Restricted Stock

A recipient of restricted stock generally will be subject to tax at
ordinary income rates on the fair market value of stock at the time the stock is
no longer subject to forfeiture. However, a recipient who so elects under
Section 83(b) of the Internal Revenue Code within 30 days of the date of the
grant will have ordinary taxable income on the date of the grant equal to the
fair market value of the shares of restricted stock as if the shares were
unrestricted and could be sold immediately. If the shares subject to such
election are forfeited, the recipient will not be entitled to any deduction,
refund or loss for tax purposes with respect to the forfeited shares. Upon sale
of the shares after the forfeiture period has expired, the holding period to
determine whether the recipient has long-term or short-term capital gain or loss
begins when the restriction period expires. The tax basis of the shares will be
equal to the fair market value of the shares at the time the stock is no longer
subject to forfeiture. However, if the recipient timely elects to be taxed as of
the date of the grant, the holding period commences on the date of the grant and
the tax basis will be equal to the fair market value of the shares on the date
of the grant as if the shares were then unrestricted and could be sold
immediately. If the above special Section 83(b) tax election has been made, cash
dividends paid to the award holder will be taxable dividend income to the award
holder when paid, but the Company will not be entitled to any corresponding
deduction; and if such election has not been made, the award holder will have
taxable compensation income and the Company will generally have a corresponding
deduction when the dividends are paid.

Performance Units

A recipient of a performance unit recognizes no taxable income at the time
of grant. Whether a performance unit award is paid in cash or shares of Company
Stock, the award holder will have ordinary income and the Company will generally
have a corresponding deduction when the award is paid. The measure of such
income and deduction will be the fair market value of the shares at the time of
payment.

Tax Offset Bonus

A recipient of a tax offset bonus recognizes taxable income and the Company
will generally have a corresponding deduction when the bonus is paid.

Deduction Limit for Executive Compensation

Section 162(m) of the Internal Revenue Code limits federal income tax
deductions for compensation paid to the chief executive officer and the four
other most highly compensated officers of a public company to $1 million per
year, but contains an exception for performance-based compensation that
satisfies certain conditions.

The Company believes that the stock options and stock appreciation rights
to be granted under the Plan with a fair market value exercise price will
qualify for the performance-based compensation exception to the deduction limit
because the compensation is based solely on an increase in value of the stock
after the date of the award. Grants of performance units and tax bonus offsets
should also qualify for this exception when the compensation is determined
solely by increases in the value of the stock or is contingent on attaining a
qualifying performance goal. Restricted stock awards and other performance unit
and tax bonus offset awards will only qualify as performance-based compensation
if the granting or vesting is contingent on attaining a performance goal and
otherwise satisfies the standards for performance-based compensation. However,
due to the complexity of the requirements of Section 162(m), there can be no
assurance that any awards under the 1997 Plan will qualify for the performance
based compensation exception to the deduction limit.

Corporate "Insiders" Subject to Section 16(b) of the Securities Exchange Act
of 1934 ("34 Act")

Certain large shareholders, directors and officers (collectively
"insiders") of the Company are subject to Section 16(b) of the 34 Act. Section
16 provides that any profits which Company insiders earn by reason of

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the purchase and sale (or sale and purchase) of the Company stock within a
period of less than six months must be paid over to the Company. Generally, any
grant or award under the 1997 Stock Plan to an insider should be exempt from
Section 16(b) as not constituting a "purchase" as long as: 1) the grant or award
is approved in advance by the Company's Board of Directors or by the
Compensation Committee; or 2) the grant or award is approved or ratified by the
Company shareholders; or 3) the Company stock is held by the insider for at
least six months before its disposition. Insiders generally are subject to the
same rule as non-insiders as to when they recognize taxable compensation income
from the exercise of a stock option, stock appreciation right or performance
unit settled in stock. However, the time when an insider recognizes taxable
compensation income may be delayed if other purchases of stock by the insider
would create a "purchase and sale" combination subject to Section 16(b) if the
stock acquired in an exercise of an option, or stock received for a stock
appreciation right or performance unit were to be sold within six months of
another stock purchase.

Golden Parachute Tax

If an award or grant is accelerated as a result of a change of control, all
or a portion of the value of the award or grant at that time may be a parachute
payment for purposes of the Internal Revenue Code's excess parachute provisions.
Those provisions generally provide that if parachute payments exceed three times
an award holder's average compensation for the five tax years preceding the year
of the change of control, the Company loses its deduction and the recipient is
subject to a 20 percent excise tax for the amount of the parachute payments in
excess of such average compensation.

AWARDS UNDER THE 1997 STOCK PLAN

Key Executive Equity Program

In February 1997, in anticipation of the expiration of the 1992 Key
Executive Stock Purchase Incentive Plan on June 16, 1997, the Compensation
Committee approved a new stock-based management incentive program. The new
program will continue to link executive incentive compensation to shareholder
return. The program involves the grant of market-priced stock options that would
ordinarily begin to vest on the fifth anniversary of the grant date but which
will vest on an accelerated basis over a period of four years (i) with respect
to one-half the grant, if the executive acquires and continuously holds shares
of the Company's common stock equal to one-sixth the amount of the grant, and
(ii) with respect to the remaining one-half of the grant if the Company achieves
performance goals that are established annually by the Compensation Committee.
The Company may extend full recourse loans to certain employees to enable them
to satisfy the minimum stock ownership requirements if such employees can
demonstrate a need for financial assistance after reasonably reallocating their
resources. A total of approximately 1.8 million options were granted to 16
senior officers under the new program on February 24, 1997, and a total of
approximately 1.3 million options were granted to an additional 30 senior
officers on March 27, 1997, in each case with an exercise price of $45 per
share. All of such option grants include covenants not to compete. The Committee
intends to grant approximately 1.2 million additional options to the same 46
officers and to grant approximately 2.2 million options to approximately 113
other officers of the Company if the 1997 Stock Plan is approved by the
Company's shareholders at the 1997 Annual Shareholders' Meeting. The following
option amounts were granted to four of the five named executive officers and all
executive officers as a group on February 24, 1997 and March 27, 1997: Mr.
Lund -- 386,000; Ms. Beck -- 186,000; Mr. Maher -- 180,000; Mr. Scholtens --
186,000; and all executive officers as a group (13 persons) -- 1,420,000. Mr.
Hermanns is no longer employed by the Company and did not receive a grant. If
the shareholders approve the 1997 Stock Plan, the Committee currently
contemplates granting the following additional stock options on June 17, 1997 to
three of the five named executive officers and all executive officers as a
group: Mr. Lund -- 154,000 options; Ms. Beck -- 74,000 options; Mr.
Scholtens -- 74,000 options; and all executive officers as a group (13
persons) -- 599,700 options. The Committee does not intend to grant additional
options in June to Mr. Maher.

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<PAGE> 34

Performance Incentive Program

In February 1997, the Compensation Committee approved a new long term
incentive program, known as the Performance Incentive Plan ("PIP"), that is
designed to focus attention prospectively on the long-term performance of the
Company's common stock by rewarding the achievement of annual performance
objectives with shares of restricted stock under the 1997 Stock Plan that must
be held for a period of two years. Under PIP, the Compensation Committee will
establish certain performance objectives within three months after the beginning
of each fiscal year. The performance objectives will consist of one or more of
the performance objectives described above with respect to the 1997 Stock Plan.
At the time the performance objectives are established, the Compensation
Committee will also establish the amount of the bonus (the "target bonus"),
expressed as a percentage of base salary, that will be paid if the Company
achieves its objectives and establish a schedule setting forth the respective
amounts by which the target bonus will be increased or decreased if the Company
exceeds or fails to meet the target performance objective. No award will be
earned with respect to a performance objective at or below the minimum, the
target bonus will be earned if the targeted financial objective is achieved, and
an amount larger than the target bonus will be earned if the Company exceeds the
target performance objective. The bonus will be paid in the form of restricted
shares of the Company's common stock that cannot be sold or transferred (except
in certain limited circumstances) for a period of two years. The number of
shares to be issued will be determined by calculating the dollar value of the
performance award, multiplying it by 1.25 (to provide an offset for the loss of
benefits resulting from the payment of the award in the form of stock rather
than cash including the fact that the bonus will not be eligible for individual
or Company contributions under the Company's 401(k) plan), and dividing the
result by the average market price for the Company's common stock over a period
of five trading days following dissemination to the public of the Company's
annual earnings. The restricted awards granted under PIP are intended to qualify
for tax deductibility under Section 162(m) of the Code.

APPROVAL AND RELATED MATTERS

The affirmative vote of a majority of the shares present and voting at the
Annual Meeting is required to approve the American Stores Company 1997 Stock
Option and Stock Award Plan. The following resolution will be offered by the
Board of Directors at the Annual Meeting:

RESOLVED, that the American Stores Company 1997 Stock Option and Stock
Award Plan in the form of Exhibit B attached to this Proxy Statement be, and
hereby is, authorized, approved and adopted.

THE BOARD OF DIRECTORS' RECOMMENDATION

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE ADOPTION OF THE AMERICAN STORES COMPANY 1997 STOCK OPTION AND STOCK AWARD
PLAN. UNLESS OTHERWISE SPECIFIED BY THE SHAREHOLDERS, THE BOARD INTENDS THE
ACCOMPANYING PROXY TO BE VOTED FOR THIS RESOLUTION.

PROPOSAL 6 -- TO APPROVE THE AMERICAN STORES COMPANY 1997 STOCK PLAN FOR NON-
EMPLOYEE DIRECTORS

On February 24, 1997, the Board of Directors adopted the American Stores
Company Stock Plan for Non-Employee Directors (the "Director Stock Plan" or the
"Plan"), subject to approval by the Company's shareholders at the Annual
Meeting. If the Director Stock Plan is approved by the shareholders, the cash
portion of the annual retainer for non-employee directors will be reduced from
$80,000 to $40,000 and the Retirement Plan for Non-Employee Directors will be
terminated. The Director Stock Plan provides for: (i) the grant on an annual
basis of 1,000 shares of the Company's Common Stock (the "Retainer Stock"),
which Retainer Stock shall be subject to forfeiture if a non-employee director
terminates service as a director prior to the next shareholders' meeting at
which directors are elected; (ii) the grant on an annual basis to non-employee
directors meeting the minimum stock ownership requirement of stock options to
acquire 600 shares of the Company's Common Stock at the market price for such
stock on the date of grant, which options shall vest in two equal annual
installments of 300 shares each commencing on the date of the next annual
shareholders' meeting at which directors are elected; and (iii) the issuance on
a one-time basis to the non-

32
<PAGE> 35

employee directors on the date of the Annual Meeting (except for Pamela G.
Bailey) of a number of shares of Common Stock determined to compensate such
directors for their respective interests in the Retirement Plan for Non-employee
Directors described on page 6 of this Proxy Statement (the "Retirement Stock").
The Retainer Stock and the Retirement Stock shall be issued in the form of a
credit to a bookkeeping account maintained for each non-employee director, to be
delivered in the form of stock certificates on the appropriate delivery date as
discussed below. The purpose of the Director Plan is to enable the Company to
attract and retain qualified persons to serve as directors, to enhance the
equity interest of directors in the Company, to solidify the common interests of
the directors and shareholders in enhancing the value of the Company's Common
Stock, and to encourage the highest level of director performance by providing
such directors with a proprietary interest in the Company's performance and
progress.

SUMMARY OF DIRECTOR STOCK PLAN

The following summary of the Director Stock Plan is qualified by reference
to the complete terms of such Plan, a copy of which is attached to this Proxy
Statement as Exhibit C.

1. ELIGIBLE PARTICIPANTS. Each individual who is a director of the
Company on the date of the Annual Meeting, and each individual who becomes a
director during the term of the Director Stock Plan, shall be a participant
("Participant") in the Plan, in each case during such period as such individual
remains a director and is not an employee of the Company. It is anticipated that
there will be 10 non-employee directors on the date the Plan becomes effective.

2. ADMINISTRATION. The Director Stock Plan shall be administered by a
committee (the "Committee") consisting of the Company's Chief Executive Officer,
President, and Chief Financial Officer. The Committee shall have full authority
to construe and interpret the Plan, to establish, amend and rescind rules and
regulations relating to the Plan, and to take all such actions and make all such
determinations in connection with the Plan as it may deem necessary or
desirable, provided, however, that neither the Committee nor the Board shall be
authorized to exercise any discretion with respect to the selection of persons
to receive grants under the Plan or concerning the amount or timing of grants
under the Plan.

3. SHARES AVAILABLE. The maximum number of shares of Common Stock which
may be issued or credited to deferred stock accounts or be subject to stock
options granted pursuant to the Director Stock Plan is 250,000, subject to
adjustment upon extraordinary changes in the capitalization of the Company due
to merger, stock split, stock dividend or other similar event. Such shares may
consist in whole or in part of authorized and unissued shares or treasury
shares.

4. ACCOUNTS; CREDIT OF SHARES. The Company shall maintain a bookkeeping
account ("deferred stock account") for each Participant. On the effective date
of the Plan, such deferred stock account shall be credited with the number of
shares of Retirement Stock determined for such Participant as described below.
In addition, on the effective date of the Plan and on July 1 of each year
thereafter, such account shall be credited with 1,000 shares of Retainer Stock.
All rights to the Retainer Stock will be forfeited if any Participant terminates
service as a director prior to the next shareholders' meeting at which directors
are elected. Any Participant who becomes a director after July 1 of any year,
shall receive a pro rata payment in shares of Retainer Stock credited to such
Participant's deferred stock account for the remaining portion of the Plan year.

Each Participant's account shall also be credited with a number of shares
equal to the total deferred stock account multiplied by the Dividend Equivalent
for each dividend paid with respect to Common Stock during the year. "Dividend
Equivalent" for a given dividend means a number of shares of Common Stock having
a fair market value, as defined in the Plan, equal to the amount of cash and
other property that is distributed with respect to one share of Common Stock
pursuant to such dividend.

5. DELIVERY OF SHARES. All shares of Retirement Stock and Retainer Stock
in a Participant's deferred stock account shall be delivered or begin to be
delivered on the first to occur of the following events: (i) the death of the
Participant, (ii) a Change of Control, (iii) in the case of the Retirement Stock
and Dividend Equivalents paid with respect thereto, the later of the date the
Participant attains age 65 or the date the

33
<PAGE> 36

Participant ceases to serve as a Director; and (iv) in the case of the Retainer
Stock and the Dividend Equivalents paid with respect thereto, the first
anniversary of the date of grant. A Participant may make an installment delivery
election to have the shares and Dividend Equivalent Amounts held in his or her
account delivered in a lump sum or in periodic installments occurring after the
delivery dates described above. Upon delivery, a Participant shall be entitled
to all rights of a shareholder with respect to such issued shares, including the
right to vote the shares.

6. STOCK OPTIONS. On the effective date of the Director Stock Plan and on
July 1 of each year thereafter, the Company shall grant each Participant who
satisfies the Minimum Stock Ownership Requirement a stock option entitling him
or her to purchase up to 600 shares of the Company's Common Stock at an exercise
price equal to the fair market value for the Common Stock on the date of grant.
The options shall have a term of ten years and shall become exercisable in two
equal annual installments of 300 shares each, commencing on the date of the next
Annual Shareholders' Meeting at which directors are elected. At the time a
Participant ceases to serve as a director, any unvested options shall be
forfeited. The Minimum Stock Ownership Requirement shall be 3,000 shares of
Common Stock for current non-employee directors. Newly elected non-employee
directors shall have a period of 36 months from the date of their election in
which to satisfy the Minimum Stock Ownership Requirement and shall be granted
stock options during such period even if the Minimum Stock Ownership Requirement
is not satisfied. The options shall be subject to the same terms and conditions
set forth with respect to options in the 1997 Stock Plan.

7. CHANGE OF CONTROL. In the event of a Change of Control of the Company,
all vesting and other restrictions applicable to the stock options, the Retainer
Stock, the Retirement Stock and the Dividend Equivalents applicable thereto
shall terminate, and all shares of Common Stock held in the deferred stock
accounts immediately prior to such Change of Control shall be delivered to the
Participants effective as of the time of such Change of Control so that such
shares of Common Stock will be treated in the same manner as other shares of
Common Stock that were issued and outstanding prior to the date of such Change
of Control.

8. EFFECTIVENESS. If the Director Stock Plan is approved by shareholders
at the Annual Meeting, it will become effective in the form approved on July 1,
1997 and will remain in effect until terminated by the Board of Directors or
until no shares of Common Stock remain available under the Plan.

9. AMENDMENT. The Board of Directors may terminate the Director Stock
Plan at any time and, except as otherwise described herein, may amend the Plan
from time to time in any respect as the Board deems to be in the best interest
of the Company; provided, however, that no such amendment shall be effective
without the approval of the shareholders of the Company if shareholder approval
is then required pursuant to the securities laws or any other requirement
applicable to the Company.

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<PAGE> 37

AWARDS UNDER THE DIRECTOR STOCK PLAN

The table below shows the number of shares of Retirement Stock and Retainer
Stock that will be awarded to non-employee directors under the Director Plan if
it is approved by the shareholders at the Annual Meeting. The number of shares
of Retirement Stock to be credited to each non-employee director was determined
based on a number of factors including age, years of board service, projected
retirement age and life expectancy.

<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES NUMBER OF
NAME OF DIRECTOR RETIREMENT STOCK RETAINER STOCK STOCK OPTIONS
- ----------------------------------------------- ---------------- ---------------- -------------
<S> <C> <C> <C>
Pamela G. Bailey............................... 0 1,000 600
Henry I. Bryant................................ 3,250 1,000 600
Louis H. Callister(1).......................... 9,500 0 0
Arden B. Engebretsen........................... 11,500 1,000 600
James B. Fisher................................ 12,000 1,000 600
Fernando R. Gumucio............................ 5,000 1,000 600
Leon G. Harmon................................. 12,000 1,000 600
Donald B. Holbrook(1).......................... 2,250 0 0
John E. Masline................................ 11,500 1,000 600
Barbara Scott Preiskel......................... 12,000 1,000 600
J.L. Scott..................................... 4,000 1,000 600
Arthur K. Smith................................ 3,500 1,000 600
All current non-employee directors as a
group........................................ 86,500 10,000 6,000
</TABLE>

- ---------------
(1) Messrs. Callister and Holbrook's term of office will not continue beyond
June 17, 1997.

APPROVAL AND RELATED MATTERS

The affirmative vote of a majority of the shares present and voting at the
Annual Meeting is required to approve the Director Stock Plan. The following
resolution will be offered by the Board of Directors at the Annual Meeting:

RESOLVED, that the American Stores Company 1997 Stock Plan for Non-employee
Directors pertaining to 250,000 shares of the Company's Common Stock in the form
of Exhibit C attached to this Proxy Statement be, and hereby is, authorized,
approved and adopted.

THE BOARD OF DIRECTORS' RECOMMENDATION

PROPOSAL 7 -- TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS FOR FISCAL YEAR 1997

The Board of Directors, upon the recommendation of the Audit Committee, has
selected the firm of Ernst & Young LLP, Independent Certified Public
Accountants, to audit the records of the Company for the fiscal year ending
January 31, 1998. This selection is subject to ratification by the shareholders.
A representative of Ernst & Young will be present at the Annual Meeting of
Shareholders. The representative will have an opportunity to make a statement
and will be available to respond to appropriate questions. Ernst & Young LLP was
the Company's independent certified public accountant for the fiscal year ended
February 1, 1997.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS.

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<PAGE> 38

SHAREHOLDERS' PROPOSALS FOR 1998 ANNUAL MEETING

The Company's by-laws limit the business to be conducted at a shareholders'
meeting to (i) the items set forth in the Company's notice of meeting; (ii)
matters raised by or at the direction of the Board of Directors; or (iii)
matters raised by a shareholder at a meeting that were properly submitted in
writing to the Company's secretary at least 60 days but no more than 90 days
prior to the anniversary date of the previous year's annual meeting except where
the date of the Annual Meeting is changed. The foregoing is a summary of the
relevant by-law provisions and is qualified by reference to Section 2.04.1 of
the Company's by-laws. Matters to be raised by a shareholder at the Company's
1998 Annual Meeting of Shareholders, other than pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), must be
submitted to the Company's Secretary by no later than April 18, 1998 but not
prior to March 13, 1998. Such notices must include the information relating to
such business and the shareholder as well as the information specified in the
Company's by-laws.

Any proper shareholder proposal made pursuant to Rule 14a-8 under the
Exchange Act, to be included in the Company's Proxy Statement for the 1998
Annual Meeting of Shareholders, must be received by the Company no later than
January 1, 1998 and should be sent to the Secretary, American Stores Company,
P.O. Box 27447, Salt Lake City, Utah 84127-0447 or 709 East South Temple, Salt
Lake City, Utah 84102.

METHOD OF PROXY SOLICITATION

The Company has retained D. F. King & Co., Inc., 77 Water Street, New York,
New York 10005, to assist in the solicitation of proxies. For these services,
the Company will pay fees estimated to be approximately $8,500 plus
out-of-pocket expenses. The expense of soliciting proxies will be borne by the
Company. Solicitation of proxies may also be made by directors, officers, and
regularly engaged employees of the Company, without additional compensation
therefor.

OTHER MATTERS

The Annual Meeting is called for those purposes set forth in the Notice of
Annual Meeting of Shareholders and for the transaction of such other business as
may properly come before the meeting. Management presently knows of no other
business which may be presented at the Annual Meeting. However, if other matters
are presented, it is the intention of the persons named in the enclosed proxy to
vote in accordance with their judgment.

It is important that all proxies be returned promptly to American Stores
Company, c/o First Chicago Trust Company of New York, P.O. Box 8187, Edison, New
Jersey 08818 or American Stores Company, P.O. Box 27447, Salt Lake City, Utah
84127-0447. Proxies are revocable at any time prior to the exercise thereof by
written notice to the Secretary. A proxy may also be revoked if the shareholder
attends the meeting and elects to vote in person. Therefore, shareholders are
urged to mark, sign, date and mail the enclosed proxy in the envelope provided,
which requires no postage if mailed in the United States. Whether or not you
plan to attend the meeting, PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THE
ENCLOSED PROXY CARD.

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<PAGE> 39

EXHIBIT A

1997 KEY MANAGEMENT ANNUAL INCENTIVE PLAN

1. PURPOSE. The 1997 Key Management Annual Incentive Plan is intended to
align the financial interests of the Company's key employees with those of its
shareholders by linking a significant percentage of the employee's total target
compensation to the achievement of financial and corporate goals by the Company.
It is the purpose of the Plan to motivate key employees to the attainment of
demanding goals by providing recognition and rewards in the form of incentive
bonuses. The Plan has the further purpose of fulfilling the Corporation's
objective of offering a competitive total compensation package to its key
employees, thus enabling American Stores Company to attract and retain employees
of the highest caliber and ability.

2. DEFINITIONS. The following terms used in the Plan are defined as
follows:

(a) Award Year -- the fiscal year of the Corporation during which
Performance Objectives must be achieved by the Participant.

(b) Board of Directors -- the Corporation's Board of Directors.

(d) Committee -- the Compensation and Stock Option Committee of the
Board of Directors. The Committee shall be composed solely of two or more
"outside directors" as defined in the regulations under Section 162(m) of
the Internal Revenue Code ("the Code").

(e) Corporation -- American Stores Company

(f) Covered Employee -- Participant whom the Committee determines is
likely to be a "covered employee" under Section 162(m) of the Code at the
time when the Corporation would claim a tax deduction for a bonus
hereunder.

(g) Disability -- "Disability" means eligibility for disability
benefits under the terms of the American Stores Company Long-Term
Disability Plan in effect at the time the Participant becomes disabled.

(h) Early Retirement -- means retirement from the Company at or after
age 57.

(i) Management -- The CEO and such other member of American Stores
Company management as the CEO may from time to time designate to take
action with respect to the Plan.

(j) American Stores Company -- American Stores Company and its 50% or
more owned subsidiaries and partnerships in which American Stores Company
owns 50% or more of the partnership interests.

(k) Normal Retirement -- means termination of employment from the
Corporation on or after age 65.

(l) Participant -- a key employee of American Stores Company whose
decisions and actions significantly affect the Corporation's growth and
profitability and who receives a bonus opportunity under the Plan as
determined by the Committee.

(m) Performance Objectives -- significant financial or individual
objectives to be achieved by the Participant during the Award Year and upon
which the percentage of payment of the Target Bonus shall be based.

(n) Plan -- The American Stores Company 1997 Key Management Annual
Incentive Plan.

(o) Retirement -- means Normal or Early Retirement.

(p) Target Bonus -- the payment that shall be made to the Participant
if the Participant's Performance Objectives are achieved during the
applicable Award Year.

A-1
<PAGE> 40

3. EFFECTIVE DATE. Subject to compliance with all applicable legal
requirements, the Plan shall be effective as of February 2, 1997, subject to the
approval by shareholders at the 1997 Annual Meeting. The 1997 fiscal year shall
be the first Award Year of the Plan. No future awards shall be granted
subsequent to the 2001 Award Year unless the Plan is extended by the Board of
Directors.

4. ADMINISTRATION. The Committee shall be responsible for the
implementation and administration of the Plan. No Committee member shall be
eligible for a Target Bonus under the Plan while serving as a Committee member.
The Committee's functions shall include, but not be limited to: (a)
interpretation of the Plan (which interpretation shall be final and binding,
unless otherwise determined by the Board of Directors) and establishment of the
rules and regulations governing Plan administration; (b) selection of
Participants; (c) determination of Target Bonus; (d) approval of Performance
Objectives; (e) determination of the degree of the attainment of the Performance
Objectives; and (f) determination of the size of individual awards and payments
to Participants. In reaching its decisions, the Committee shall consider
recommendations made by Management. The Committee may, in discharging its
responsibilities under the Plan, delegate such duties to officers or other
employees of American Stores Company as it deems appropriate, with the exception
of decisions which affect the Covered Employees. In addition, the Committee is
authorized to use the services of the Corporation's Corporate Audit Department
and/or independent auditors to determine the level of achievement of Performance
Objectives, subject to the certification of the Committee with respect to the
achievement of the Performance Objectives for the Covered Employees.

5. ELIGIBILITY. The Committee shall select Participants based on
recommendations of Management. Selection as a Participant shall be limited to
exempt (salaried) employees who play a key role in the operations of the
Corporation or its subsidiaries. No Committee member shall be eligible to be a
Participant while serving as a Committee member, but a director of the
Corporation who is also a full-time employee, but not a member of the Committee,
shall be eligible to be a Participant. No Participant or employee of American
Stores Company shall have any right to be awarded any Target Bonus or actual
payment under the Plan. In addition to or in lieu of awards granted to
Participants pursuant to this Plan, the Committee may from time to time make
grants and awards to Participants pursuant to the 1997 Stock Option and Stock
Award Plan and/or other incentive compensation plans of the Corporation.

6. TARGET BONUS. The amount of the Target Bonus for each Participant
shall be determined by the Committee at or near the start of the applicable
Award Year based upon Management's recommendation. For Covered Employees, the
Target Bonus, the related award schedule, and the Performance Objective(s) will
be established within 90 days of the beginning of the Plan Year.

7. PERFORMANCE OBJECTIVES. Performance Objectives for each Participant
shall be established as provided in this section at demanding levels so that
their achievement reflects commendable performance by the Participant. The
Performance Objectives may consist of Financial Objectives, Individual
Objectives, or a combination of Financial and Individual Objectives. With
respect to Covered Employees, the Performance Objectives shall consist of
Financial Objectives only. Financial and Individual Objectives are defined as
follows:

(a) Financial Objectives -- Financial Objectives shall be expressed in
terms of one or more of the following performance measures established by
the Committee for each year: cash flow, comparable stores sales, earnings
per share, operating income, revenues, return on assets, return on sales,
return on equity, shareholder return (measured in terms of stock price
appreciation) and/or total shareholder return (measured in terms of stock
price appreciation and/or dividend growth), achievement of cost control,
working capital, or stock price of the Corporation or such subsidiary,
division or department of the Corporation for or within which the
participant is primarily employed, in each case as reported or as adjusted
for non-recurring events and the effects thereof. Such Performance Goals
also may be based upon attaining specified levels of Corporation
performance under one or more of the measures described above relative to
the performance of other corporations. Such Performance Goals are intended
to qualify under Section 162(m)(4)(c) of the Code. At the time the
Performance Goals are established, the Committee shall also establish a
"range" of achievement for financial objectives ranging from "zero" to
"target" (100% of Target Bonus relating to Financial Objectives) to
"maximum." The Committee shall

A-2
<PAGE> 41

have the authority to alter or adjust Financial Objectives during the
course of an Award Year, or to alter or adjust the financial results
otherwise reported or achieved by the Corporation during such Award Year,
if it is deemed appropriate to do so, except with respect to the Covered
Employees who are subject to the terms of the last sentence of Section
9(b).

(b) Individual Objectives -- Individual Objectives, if appropriate for
a Participant, shall be expressed in terms of significant qualitative or
quantitative individual goals to be achieved during the Award Year.
Individual Objectives usually shall be established jointly by the
Participant and the Participant's immediate superior, subject to approval
by the CEO, or his delegate. A Participant's Individual Objectives may be
altered or amended during an Award Year, if necessary, to properly reflect
changed business conditions and priorities, subject to approval by the CEO
or his delegate.

8. NOTICE OF AWARD. Except as may otherwise be determined by the
Committee, a Participant shall be notified in writing on or near the start of
the Award Year of the amount of the Participant's Target Bonus and the
Performance Objectives.

9. AWARD DETERMINATION. As soon as practicable following the completion
of each Award Year, the level of achievement of Performance Objectives for each
Participant and the amount of the Award payment shall be determined by
Management and with respect to Covered Employees approved by the Committee. The
Award payments for the Covered Employees, are subject to review and approval by
the Committee. The level of achievement of the Performance Objectives shall be
determined in the following manner:

(a) Financial Objectives -- For performance at or below the "zero"
level of achievement, there shall be no payment. Performance between the
"zero" level of achievement and the "target" level shall result in a
payment in accordance with the established range of achievement payment
schedule. Performance between the "target" and the "maximum" level of
achievement shall result in a payment in accordance with the established
range of achievement payment schedule.

(b) Adjustments in Financial Calculations -- Except as provided below
with respect to Covered Employees, the Committee in its sole discretion has
the authority to effect adjustments from time to time in connection with
determining the degree of achievement of the Financial Objectives for
American Stores Company or a business unit of American Stores Company for
the applicable year in question, and to make any other determinations, as
it deems equitable, fair or advisable for the purpose of ascertaining the
amount of any payments under this Plan. With respect to Covered Employees,
the Committee shall have no discretion to increase, but may decrease, the
amount of an award payable based upon the range of achievement of the
Financial Objectives established under Sections 6 and 7 hereof.

(c) Individual Objectives -- The attainment of Individual Objectives
shall be determined by the Participant's superior, subject to review by
Management for consistent and equitable evaluations and judgments.

(d) Actual Awards -- The sum of the award based on achievement of
Financial Objectives and, if applicable, Individual Objectives.

(e) Maximum Awards -- Where one or more objectives (but not
necessarily all) have been clearly and demonstrably exceeded, a Participant
(other than a Covered Employee) may be paid an amount in excess of the
portion of the award related to such objectives. The maximum award payable
to any Covered Employee for any Plan Year is $2,000,000.

10. PAYMENT OF AWARDS. Award payments shall be made, less required tax
and applicable benefits withholdings, as soon as practicable after the
determination and final approval of such payments as provided in Section 9.

11. TERMINATION OF EMPLOYMENT. If a Covered Employee's employment with
American Stores Company terminates during an Award Year because of death or
Disability, or any other Participant's employment with American Stores Company
terminates during an Award Year because of death, Disability, Retirement or with
the approval of the Committee in connection with a "no fault" termination as
provided in the Corporation's policies and procedures (for example, a reduction
in force or a change in job requirements),

A-3
<PAGE> 42

the Participant (or the Participant's designated beneficiary or estate in the
absence of a surviving designated beneficiary) shall receive a pro rata Award
payment based on the portion of the Award Year the Participant was employed by
American Stores Company in an eligible position while the Target Bonus was
outstanding and the degree to which during such Award Year the Performance
Objectives were achieved; provided, that if a Participant's employment is so
terminated during the first six months of an Award Year, such payment shall be a
pro rata portion of the Target Bonus. A Participant whose employment with
American Stores Company terminates during an Award Year for any other reason
shall not be eligible for any payment of an Award for such Award Year. Neither
the Plan nor any action taken hereunder shall be construed as giving any
Participant any right to be retained in the employ of American Stores Company. A
leave of absence, approved by the Committee, shall not be deemed to be a
termination of employment for purposes of this Plan, and may warrant a full or
pro rata award as determined by the Committee.

No Award shall be payable to any Participant who voluntarily resigns
his/her employment prior to the payment date for such Award. For purposes of the
preceding sentence, death, Disability or Retirement, or "no fault" termination
shall not be deemed a voluntary resignation.

12. TRANSFER. If a Participant is transferred within American Stores
Company during an Award Year to a position that is not considered as eligible
for participation in the Plan, the Committee may, in its sole and absolute
discretion, authorize a pro rata Award Payment based on the number of full
months during which the Participant was in an eligible position while the Target
Bonus was outstanding and the degree to which during such Award Year the
Performance Objectives were achieved.

13. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN. The Board of
Directors may at any time based upon a recommendation of the Committee, amend,
suspend, or terminate the Plan, except that, without approval of the
shareholders, the Board or Committee may not change (i) the performance measures
in Section 7(a) with respect to Covered Employees, (ii) the individuals or class
of individuals eligible to participate in the Plan, or (iii) the maximum amount
payable to a Covered Employee under the Plan.

14. NON-ASSIGNMENT OF RIGHTS. A Participant's Target Bonus may not be
assigned or transferred, and is not subject to attachment, garnishment,
execution, or other creditor's processes. In the event of a Participant's death,
the payment of the Award as provided in the Plan, if any, shall be made to the
Participant's designated beneficiary, or estate in the absence of a surviving
beneficiary.

15. COSTS OF THE PLAN. The expenses incurred in administering the Plan,
including any Committee fees, charges by the Corporation's independent auditors,
or other costs, shall be borne by the Corporation.

16. CHANGE OF CONTROL. In the event of a Change of Control of the
Corporation, then immediately after such event becomes effective (the "Effective
Date"), the Corporation shall pay to each Participant the pro rata amount of
said Participant's Target Bonus for said Award Year, determined solely by the
ratio which the number of calendar quarters during which the award had been
outstanding (including the calendar quarter in which the Change of Control
occurred) bears to four (4). The Change of Control shall not be considered to
result in a termination of the Plan, and if the awards that actually become
payable for such Award Year exceed the amounts paid pursuant to the preceding
sentence, the excess shall be paid to Participants in accordance herewith.

For purposes of this Plan, the term "Change of Control" shall mean any of
the following events:

(a) An acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of 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 (1) the then outstanding shares
of common stock of the Corporation (the "Outstanding Corporation Common
Stock") or (2) the combined voting power of the then outstanding voting
securities of the Corporation entitled to vote generally in the election of
directors (the "Outstanding Corporation Voting Securities"); excluding,
however, the following: (1) Any acquisition directly from the Corporation,
other than an acquisition by virtue of the exercise of a conversion
privilege unless the security being so converted was itself acquired
directly from the Corporation, (2) Any acquisition by the Corporation, (3)
Any acquisition by any employee benefit

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plan (or related trust) sponsored or maintained by the Corporation or any
corporation controlled by the Corporation, or (4) Any acquisition by any
corporation pursuant to a transaction which complies with clauses (1), (2)
and (3) of subsection (iii) of this Section 16; or

(b) A change in the composition of the Board such that the individuals
who, as of the effective date of the Plan, constitute the Board (such Board
shall be hereinafter referred to as the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided, however,
for purposes of this Section 16, that any individual who becomes a member
of the Board subsequent to the effective date of the Plan, whose election,
or nomination for election by the Corporation's shareholders, was approved
by a vote of at least a majority of those individuals who are members of
the Board and who were also members of the Incumbent Board (or deemed to be
such pursuant to this proviso) shall be considered as though such
individual were a member of the Incumbent Board; but, provided further,
that any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board shall not be so considered as
a member of the Incumbent Board; or

(c) The consummation by the Corporation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of
the assets of the Corporation ("Corporate Transaction"); excluding however,
such a Corporate Transaction pursuant to which (1) all or substantially all
of the individuals and entities who are the beneficial owners,
respectively, of the Outstanding Corporation Common Stock and Outstanding
Corporation Voting Securities immediately prior to such Corporate
Transaction will beneficially own, directly or indirectly, more than 60%
of, respectively, the outstanding shares of common stock, and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns the
Corporation or all or substantially all of the Corporation's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Corporation Common Stock and Outstanding
Company Voting Securities, as the case may be, (2) no Person (other than
the Corporation, any employee benefit plan (or related trust) of the
Corporation or such corporation resulting from such Corporate Transaction)
will beneficially own, directly or indirectly, 20% or more of,
respectively, the outstanding shares of common stock of the corporation
resulting from such Corporate Transaction or the combined voting power of
the outstanding voting securities of such corporation entitled to vote
generally in the election of directors except to the extent that such
ownership existed prior to the Corporate Transaction, and (3) individuals
who were members of the Incumbent Board which approved the agreement
providing for the Corporate Transaction will constitute at least a majority
of the members of the board of directors of the corporation resulting from
such Corporate Transaction; or

(d) The approval by the stockholders of the Corporation of a complete
liquidation or dissolution of the Corporation.

The reasonable legal fees incurred by any Participant to enforce his/her
valid rights hereunder shall be paid for by the Corporation to the Participant
in addition to sums otherwise due under this Plan, whether or not the
Participant is successful in enforcing his/her rights or whether or not the
matter is settled.

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EXHIBIT B

1997 STOCK OPTION AND STOCK AWARD PLAN

SECTION 1. PURPOSE; DEFINITIONS

The purpose of the Plan is to give the Corporation a competitive advantage
in attracting, retaining and motivating officers and employees and to provide
the Corporation and its subsidiaries with a stock plan providing incentives more
directly linked to the profitability of the Corporation businesses and increases
in shareholder value.

For purposes of the Plan, the following terms are defined as set forth
below:

(a) "Affiliate" means a corporation or other entity controlled by the
Corporation and designated by the Committee from time to time as such.

(b) "Award" means a Stock Appreciation Right, Stock Option, Restricted
Stock or Performance Units.

(c) "Award Cycle" shall mean a period of consecutive fiscal years or
portions thereof designated by the Committee over which Performance Units
are to be earned.

(d) "Board" means the Board of Directors of the Corporation.

(e) "Cause" means (1) conviction of a participant for committing a
felony under federal law or the law of the state in which such action
occurred, (2) dishonesty in the course of fulfilling a participant's
employment duties or (3) willful and deliberate failure on the part of a
participant to perform his employment duties in any material respect, or
such other events as shall be determined by the Committee. The Committee
shall have the sole discretion to determine whether "Cause" exists, and its
determination shall be final.

(f) "Change in Control" and "Change in Control Price" have the
meanings set forth in Sections 10(b) and (c), respectively.

(g) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.

(h) "Commission" means the Securities and Exchange Commission or any
successor agency.

(i) "Committee" means the Committee referred to in Section 2.

(j) "Common Stock" means common stock, par value $1.00 per share, of
the Corporation.

(k) "Corporation" means American Stores Company, a Delaware
corporation.

(l) "Covered Employee" means a participant designated prior to the
grant of shares of Restricted Stock or Performance Units by the Committee
who is or may be a "covered employee" within the meaning of Section
162(m)(3) of the Code in the year in which Restricted Stock or Performance
Units are expected to be taxable to such participant.

(m) "Disability" means permanent and total disability as determined
under procedures established by the Committee for purposes of the Plan.

(n) "Early Retirement" means retirement from active employment with
the Corporation, a subsidiary or Affiliate at or after age 57.

(o) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.

(p) "Fair Market Value" means, except as provided in Sections 5(j) and
6(b)(ii)(2), as of any given date, the mean between the highest and lowest
reported sales prices of the Common Stock on the New York Stock Exchange
Composite Tape or, if not listed on such exchange, on any other national

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securities exchange on which the Common Stock is listed or on NASDAQ. If
there is no regular public trading market for such Common Stock, the Fair
Market Value of the Common Stock shall be determined by the Committee in
good faith.

(q) "Incentive Stock Option" means any Stock Option designated as, and
qualified as, an "incentive stock option" within the meaning of Section 422
of the Code.

(r) "Non-Employee Director" means a member of the Board who qualifies
as a non-employee director as defined in Rule 16b-3(b)(3)(i), as
promulgated by the Commission under the Exchange Act, or any successor
definition adopted by the Commission.

(s) "NonQualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.

(t) "Normal Retirement" means retirement from active employment with
the Corporation, a subsidiary or Affiliate at or after age 65.

(u) "Performance Goals" means the performance goals established by the
Committee prior to the grant of Restricted Stock or Performance Units or
other Award that are based on the attainment of one or any combination of
the following: cash flow, comparable stores sales, earnings per share,
operating income, revenues, return on assets, return on sales, return on
equity, shareholder return (measured in terms of stock price appreciation)
and/or total shareholder return (measured in terms of stock price
appreciation and/or dividend growth), achievement of cost control, working
capital, or stock price of the Corporation or such subsidiary, division or
department of the Corporation for or within which the participant is
primarily employed, in each case as reported or as adjusted for
non-recurring events and the effects thereof. Such Performance Goals also
may be based upon attaining specified levels of Corporation performance
under one or more of the measures described above relative to the
performance of other corporations. The Performance Goals may be established
on a corporate-wide basis or established with respect to one or more
operating units, divisions, acquired businesses, minority investments,
partnerships or joint ventures. Such Performance Goals are intended to
qualify under Section 162(m)(4)(c) of the Code and shall be set by the
Committee within the time period prescribed by Section 162(m) of the Code
and related regulations.

(v) "Performance Units" means an award made pursuant to Section 8.

(w) "Plan" means the American Stores Company 1997 Stock Option and
Stock Award Plan, as set forth herein and as hereinafter amended from time
to time.

(x) "Restricted Stock" means an award granted under Section 7.

(y) "Retirement" means Normal or Early Retirement.

(z) "Rule 16b-3" means Rule 16b-3, as promulgated by the Commission
under Section 16(b) of the Exchange Act, as amended from time to time.

(aa) "Stock Appreciation Right" means a right granted under Section 6.

(bb) "Stock Option" means an option granted under Section 5.

(cc) "Termination of Employment" means the termination of the
participant's employment with the Corporation and any subsidiary or
Affiliate. A participant employed by a subsidiary or an Affiliate shall
also be deemed to incur a Termination of Employment if the subsidiary or
Affiliate ceases to be such a subsidiary or an Affiliate, as the case may
be, and the participant does not immediately thereafter become an employee
of the Company or another subsidiary or Affiliate. Temporary absences from
employment because of illness, vacation or leave of absence and transfers
among the Corporation and its subsidiaries and Affiliates shall not be
considered Terminations of Employment.

In addition, certain other terms used herein have definitions given to them
in the first place in which they are used.

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SECTION 2. ADMINISTRATION

The Plan shall be administered by the Compensation and Stock Option
Committee or such other committee of the Board as the Board may from time to
time designate (the "Committee"), which shall be composed of not less than two
Non-Employee Directors, each of whom shall be an "outside director" for purposes
of Section 162(m)(4) of the Code, and shall be appointed by and serve at the
pleasure of the Board.

The Committee shall have plenary authority to grant Awards pursuant to the
terms of the Plan to officers and employees of the Company and its subsidiaries
and Affiliates.

Among other things, the Committee shall have the authority, subject to the
terms of the Plan:

(a) To select the officers and employees to whom Awards may from time
to time be granted;

(b) Determine whether and to what extent Incentive Stock Options,
NonQualified Stock Options, Stock Appreciation Rights, Restricted Stock and
Performance Units or any combination thereof are to be granted hereunder;

(d) Determine the terms and conditions of any Award granted hereunder
(including, but not limited to, the option price (subject to Section 5(a)),
any vesting condition, restriction or limitation (which may be related to
the performance of the participant, the Company or any subsidiary or
Affiliate) and any vesting acceleration or forfeiture waiver regarding any
Award and the shares of Common Stock relating thereto, based on such
factors as the Committee shall determine;

(e) Modify, amend or adjust the terms and conditions of any Award, at
any time or from time to time, including but not limited to Performance
Goals; provided, however, that the Committee may not adjust upwards the
amount payable to a designated Covered Employee with respect to a
particular award upon the satisfaction of applicable Performance Goals;

(f) Determine to what extent and under what circumstances Common Stock
and other amounts payable with respect to an Award shall be deferred; and

(g) Determine under what circumstances an Award may be settled in cash
or Common Stock under Sections 5(j) and 8(b)(i).

The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall
from time to time deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any agreement relating thereto)
and to otherwise supervise the administration of the Plan.

The Committee may act only by a majority of its members then in office,
except that the members thereof may: (i) delegate to an officer of the Company
the authority to make decisions pursuant to paragraphs (c), (f), (g), (h) and
(i) of Section 5 (provided that no such delegation may be made that would cause
Awards or other transactions under the Plan to cease to be exempt from Section
16(b) of the Exchange Act); and (ii) authorize any one or more of their number
or any officer of the Company to execute and deliver documents on behalf of the
Committee.

Any determination made by the Committee or pursuant to delegated authority
pursuant to the provisions of the Plan with respect to any Award shall be made
in the sole discretion of the Committee or such delegate at the time of the
grant of the Award or, unless in contravention of any express term of the Plan,
at any time thereafter. All decisions made by the Committee or any appropriately
delegated officer pursuant to the provisions of the Plan shall be final and
binding on all persons, including the Corporation and Plan participants.

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SECTION 3. COMMON STOCK SUBJECT TO PLAN

The total number of shares of Common Stock reserved and available for grant
under the Plan shall be 6,500,000. No participant may be granted Awards covering
in excess of 2,000,000 shares of Common Stock over the life of the Plan. Shares
subject to an Award under the Plan may be authorized and unissued shares or may
be treasury shares.

Subject to Section 7(c)(iv), if any shares of Restricted Stock are
forfeited for which the participant did not receive any benefits of ownership
(as such phrase is construed by the Commission or its Staff), or if any Stock
Option (and related Stock Appreciation Right, if any) terminates without being
exercised, or if any Stock Appreciation Right is exercised for cash, shares
subject to such Awards shall again be available for distribution in connection
with Awards under the Plan.

In the event of any change in corporate capitalization, such as a stock
split or a corporate transaction, such as any merger, consolidation, separation,
including a spin-off or other distribution of stock or property of the
Corporation, any reorganization (whether or not such reorganization comes within
the definition of such term in Section 368 of the Code) or any partial or
complete liquidation of the Corporation, the Committee or Board may make such
substitution or adjustments in the aggregate number and kind of shares reserved
for issuance under the Plan, in the number, kind and option price of shares
subject to outstanding Stock Options and Stock Appreciation Rights, in the
number and kind of shares subject to other outstanding Awards granted under the
Plan and/or such other equitable substitution or adjustments as it may determine
to be appropriate in its sole discretion; provided, however, that the number of
shares subject to any Award shall always be a whole number. Such adjusted option
price shall also be used to determine the amount payable by the Corporation upon
the exercise of any Stock Appreciation Right associated with any Stock Option.

SECTION 4. ELIGIBILITY

Officers and employees of the Corporation, its subsidiaries and Affiliates
who are responsible for or contribute to the management, growth and
profitability of the business of the Corporation, its subsidiaries and
Affiliates are eligible to be granted Awards under the Plan. No grant shall be
made under this Plan to a director who is not an officer or a salaried employee
of the Corporation, its subsidiaries or Affiliates.

SECTION 5. STOCK OPTIONS

Stock Options may be granted alone or in addition to other Awards granted
under the Plan and may be of two types: Incentive Stock Options and Nonqualified
Stock Options. Any Stock Option granted under the Plan shall be in such form as
the Committee may from time to time approve.

The Committee shall have the authority to grant any optionee Incentive
Stock Options, Nonqualified Stock Options or both types of Stock Options (in
each case with or without Stock Appreciation Rights); provided, however, that
grants hereunder are subject to the aggregate limit on grants to individual
participants set forth in Section 3. Incentive Stock Options may be granted only
to employees of the Corporation and its subsidiaries (within the meaning of
Section 424(f) of the Code). To the extent that any Stock Option is not
designated as an Incentive Stock Option or even if so designated does not
qualify as an Incentive Stock Option, it shall constitute a Nonqualified Stock
Option.

Stock Options shall be evidenced by option agreements, the terms and
provisions of which may differ. An option agreement shall indicate on its face
whether it is intended to be an agreement for an Incentive Stock Option or a
Nonqualified Stock Option. The grant of a Stock Option shall occur on the date
the Committee by resolution selects an individual to be a participant in any
grant of a Stock Option, determines the number of shares of Common Stock to be
subject to such Stock Option to be granted to such individual, and specifies the
terms and provisions of the Stock Option. The Corporation shall notify a
participant of any grant of a Stock Option, and a written option agreement or
agreements shall be duly executed and delivered by the Corporation to the
participant. Such agreement or agreements shall become effective upon execution
by the Corporation and the participant.

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<PAGE> 48

Anything in the Plan to the contrary notwithstanding, no term of the Plan
relating to Incentive Stock Options shall be interpreted, amended or altered nor
shall any discretion or authority granted under the Plan be exercised so as to
disqualify the Plan under Section 422 of the Code or, without the consent of the
optionee affected, to disqualify any Incentive Stock Option under such Section
422.

Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions as
the Committee shall deem desirable:

(a) Option Price. The option price per share of Common Stock
purchasable under a Stock Option shall be determined by the Committee and
set forth in the option agreement.

(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than 10
years after the date the Stock Option is granted.

(c) Exercisability. Except as otherwise provided herein, Stock
Options shall be exercisable at such time or times and subject to such
terms and conditions as shall be determined by the Committee, including
subjecting exercisability of Stock Options to Performance Goals or
ownership of Common Stock by an Optionee. If the Committee provides that
any Stock Option is exercisable only in installments, the Committee may at
any time waive such installment exercise provisions, in whole or in part,
based on such factors as the Committee may determine. In addition, the
Committee may at any time accelerate the exercisability, and/or extend the
exercise period, of any Stock Option.

(d) Method of Exercise. Subject to the provisions of this Section 5
and the terms of any Stock Option agreement, Stock Options may be
exercised, in whole or in part, at any time during the option term by
giving written notice of exercise to the Corporation specifying the number
of shares of Common Stock subject to the Stock Option to be purchased.

Such notice shall be accompanied by payment in full of the purchase
price by certified or bank check or such other instrument as the Company
may accept. If approved by the Committee, payment, in full or in part, may
also be made in the form of unrestricted Common Stock already owned by the
optionee of the same class as the Common Stock subject to the Stock Option
(based on the Fair Market Value of the Common Stock on the date the Stock
Option is exercised); provided, however, that, in the case of an Incentive
Stock Option, the right to make a payment in the form of already owned
shares of Common Stock of the same class as the Common Stock subject to the
Stock Option may be authorized only at the time the Stock Option is
granted.

In the discretion of the Committee, payment for any shares subject to
a Stock Option may also be made by delivering a properly executed exercise
notice to the Corporation, together with a copy of irrevocable instructions
to a broker to deliver promptly to the Corporation the amount of sale or
loan proceeds to pay the purchase price, and, if requested, by the amount
of any federal, state, local or foreign withholding taxes. To facilitate
the foregoing, the Corporation may enter into agreements for coordinated
procedures with one or more brokerage firms.

In addition, in the discretion of the Committee, payment for any
shares subject to a Stock Option may also be made by instructing the
Committee to withhold a number of such shares having a Fair Market Value on
the date of exercise equal to the aggregate exercise price of such Stock
Option.

No shares of Common Stock shall be issued until full payment therefor
has been made. An optionee shall have all of the rights of a shareholder of
the Corporation holding the class or series of Common Stock that is subject
to such Stock Option (including, if applicable, the right to vote the
shares and the right to receive dividends), when the optionee has given
written notice of exercise, has paid in full for such shares and, if
requested, has given the representation described in Section 13(a).

(e) Nontransferability of Stock Options. No option (or related stock
appreciation rights, if any) granted under the Plan shall be transferable
by the optionee other than (i) by will or by the laws of

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<PAGE> 49

descent and distribution; (ii) in the case of a Non-Qualified Stock Option,
pursuant to a qualified domestic relations order (as defined in the Code or
Title I of the Employee Retirement Income Security Act of 1974, as amended,
or the rules thereunder); or (iii) pursuant to approval by the Committee on
the terms set forth below. The Committee may, in its discretion, authorize
all or a portion of the options granted or to be granted to an optionee to
be on terms which permit transfer by such optionee to (i) the spouse,
children or grandchildren of the optionee ("Immediate Family Members"),
(ii) a trust or trusts for the exclusive benefit of such Immediate Family
members, or (iii) a partnership in which such Immediate Family Members are
the only partners, provided that (x) there may be no consideration for any
such transfer, (y) the stock option agreement pursuant to which such
options are granted must be approved by the Committee and must expressly
provide for transferability in a manner consistent with this Section 5(e),
and (z) subsequent transfers of transferred options shall be prohibited
except those in accordance with this Section 5(e). Following transfer, any
such options shall continue to be subject to the same terms and conditions
as were applicable immediately prior to transfer, provided that for
purposes of Section 5(e) hereof the term "optionee" shall be deemed to
refer to the transferee. The events of termination of employment of Section
5(i) hereof shall continue to be applied with respect to the original
optionee, following which the options shall be exercisable by the
transferee only to the extent, and for the periods specified in Section
5(i). All options shall be exercisable, subject to the terms of the Plan,
during the optionee's lifetime only by the optionee or by the transferee.
In the event an option or options are transferred by an optionee in the
manner provided herein, the original optionee shall remain subject to
withholding taxes for the amount of the income realized upon exercise of
the options, and the Company shall have no obligation to provide notice to
the transferee of the termination of the option due to termination of the
original optionee's employment or the death, disability or retirement of
such original optionee. Further, the Company shall be under no obligation
to file a registration statement under the Securities Act of 1933, as
amended, with respect to the shares issuable upon exercise of the options
that have been transferred.

(f) Termination by Death. Unless otherwise determined by the
Committee, if an optionee's employment terminates by reason of death, any
Stock Option held by such optionee may thereafter be exercised, to the
extent then exercisable, or on such accelerated basis as the Committee may
determine, for a period of one year (or such other period as the Committee
may specify in the option agreement) from the date of such death or until
the expiration of the stated term of such Stock Option, whichever period is
the shorter.

(g) Termination by Reason of Disability. Unless otherwise determined
by the Committee, if an optionee's employment terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be
exercised by the optionee to the extent it was exercisable at the time of
termination, or on such accelerated basis as the Committee may determine,
for a period of three years (or such shorter period as the Committee may
specify in the option agreement) from the date of such termination of
employment or until the expiration of the stated term of such Stock Option,
whichever period is the shorter; provided, however, that if the optionee
dies within such period, any unexercised Stock Option held by such optionee
shall, notwithstanding the expiration of such period, continue to be
exercisable to the extent to which it was exercisable at the time of death
for a period of 12 months from the date of such death or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter. In the event of termination of employment by reason of Disability,
if an Incentive Stock Option is exercised after the expiration of the
exercise periods that apply for purposes of Section 422 of the Code, such
Stock Option will thereafter be treated as a Nonqualified Stock Option.

(h) Termination by Reason of Retirement. Unless otherwise determined
by the Committee, if an optionee's employment terminates by reason of
Retirement, any Stock Option held by such optionee may thereafter be
exercised by the optionee, to the extent it was exercisable at the time of
such Retirement, or on such accelerated basis as the Committee may
determine, for a period of five years (or such shorter period as the
Committee may specify in the option agreement) from the date of such
termination of employment or until the expiration of the stated term of
such Stock Option, whichever period is the shorter; provided, however, that
if the optionee dies within such period any unexercised Stock Option held

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by such optionee shall, notwithstanding the expiration of such period,
continue to be exercisable to the extent to which it was exercisable at the
time of death for a period of 12 months from the date of such death or
until the expiration of the stated term of such Stock Option, whichever
period is the shorter. In the event of termination of employment by reason
of Retirement, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of Section 422
of the Code, such Stock Option will thereafter be treated as a Nonqualified
Stock Option.

(i) Other Termination. Unless otherwise determined by the Committee:
(A) if an optionee incurs a Termination of Employment for Cause, all Stock
Options held by such optionee shall thereupon terminate; and (B) if an
optionee incurs a Termination of Employment for any reason other than
death, Disability or Retirement or for Cause, any Stock Option held by such
optionee, to the extent then exercisable, or on such accelerated basis as
the Committee may determine, may be exercised for the lesser of three
months from the date of such Termination of Employment or the balance of
such Stock Option's term; provided, however, that if the optionee dies
within such three-month period, any unexercised Stock Option held by such
optionee shall, notwithstanding the expiration of such three-month period,
continue to be exercisable to the extent to which it was exercisable at the
time of death for a period of 12 months from the date of such death or
until the expiration of the stated term of such Stock Option, whichever
period is the shorter. Notwithstanding the foregoing, if an optionee incurs
a Termination of Employment at or after a Change in Control (as defined
Section 10(b)), other than by reason of death, Disability or Retirement,
any Stock Option held by such optionee shall be exercisable for the lesser
of (1) six months and one day from the date of such Termination of
Employment, and (2) the balance of such Stock Option's term. In the event
of Termination of Employment, if an Incentive Stock Option is exercised
after the expiration of the exercise periods that apply for purposes of
Section 422 of the Code, such Stock Option will thereafter be treated as a
Nonqualified Stock Option.

(j) Cashing Out of Stock Option. On receipt of written notice of
exercise, the Committee may elect to cash out all or part of the portion of
the shares of Common Stock for which a Stock Option is being exercised by
paying the optionee an amount, in cash or Common Stock, equal to the excess
of the Fair Market Value of the Common Stock over the option price times
the number of shares of Common Stock for which the Option is being
exercised on the effective date of such cash-out.

(k) Change in Control Cash-Out. Notwithstanding any other provision
of the Plan, during the 60-day period from and after a Change in Control
(the "Exercise Period"), unless the Committee shall determine otherwise at
the time of grant, an optionee shall have the right, whether or not the
Stock Option is fully exercisable and in lieu of the payment of the
exercise price for the shares of Common Stock being purchased under the
Stock Option and by giving notice to the Corporation, to elect (within the
Exercise Period) to surrender all or part of the Stock Option to the
Corporation and to receive cash, within 30 days of such notice, in an
amount equal to the amount by which the Change in Control Price per share
of Common Stock on the date of such election shall exceed the exercise
price per share of Common Stock under the Stock Option (the "Spread")
multiplied by the number of shares of Common Stock granted under the Stock
Option as to which the right granted under this Section 5(k) shall have
been exercised; provided, however, that if the Change in Control is within
six months of the date of grant of a Stock Option held by an optionee who
is an officer or director of the Corporation and is subject to Section
16(b) of the Exchange Act, and if the exercise or surrender of such Stock
Option by such optionee would not be an exempt transaction under Section
16b, no such election shall be made by such optionee with respect to such
Stock Option prior to six months from the date of grant. However, if the
end of such 60-day period from and after a Change in Control is within six
months of the date of grant of a Stock Option held by an optionee who is an
officer or director of the Corporation and is subject to Section 16(b) of
the Exchange Act, and the exercise or surrender of such Stock Option would
not be an exempt transaction under Section 16(b), such Stock Option shall
be cancelled in exchange for a cash payment to the optionee, effected on
the day which is six months and one day after the grant of such Option,
equal to the Spread multiplied by the number of shares of Common Stock
granted under the Stock Option. Notwithstanding the foregoing, if any right
granted pursuant to this Section 5(k) would make a Change in Control
transaction ineligible for pooling of interests accounting under APB No. 16

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that but for this Section 5(k) would otherwise be eligible for such
accounting treatment, the Committee shall have the ability to substitute
the cash payable pursuant to this Section 5(k) with Stock with a Fair
Market Value equal to the cash that would otherwise be payable hereunder.

SECTION 6. STOCK APPRECIATION RIGHTS

(a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In
the case of a Nonqualified Stock Option, such rights may be granted either
at or after the time of grant of such Stock Option. In the case of an
Incentive Stock Option, such rights may be granted only at the time of
grant of such Stock Option. A Stock Appreciation Right shall terminate and
no longer be exercisable upon the termination or exercise of the related
Stock Option.

A Stock Appreciation Right may be exercised by an optionee in
accordance with Section 6(b) by surrendering the applicable portion of the
related Stock Option in accordance with procedures established by the
Committee. Upon such exercise and surrender, the optionee shall be entitled
to receive an amount determined in the manner prescribed in Section 6(b).
Stock Options which have been so surrendered shall no longer be exercisable
to the extent the related Stock Appreciation Rights have been exercised.

(b) Terms and Conditions. Stock Appreciation Rights shall be subject
to such terms and conditions as shall be determined by the Committee,
including the following:

(i) Stock Appreciation Rights shall be exercisable only at such
time or times and to the extent that the Stock Options to which they
relate are exercisable in accordance with the provisions of Section 5
and this Section 6.

(ii) Upon the exercise of a Stock Appreciation Right, an optionee
shall be entitled to receive an amount in cash, shares of Common Stock
or both, equal in value to the excess of the Fair Market Value of one
share of Common Stock over the option price per share specified in the
related Stock Option multiplied by the number of shares in respect of
which the Stock Appreciation Right shall have been exercised, with the
Committee having the right to determine the form of payment.

(iii) Stock Appreciation Rights shall be transferable only to
permitted transferees of the underlying Stock Option in accordance with
Section 5(e).

(iv) Upon the exercise of a Stock Appreciation Right, the Stock
Option or part thereof to which such Stock Appreciation Right is related
shall be deemed to have been exercised for the purpose of the limitation
set forth in Section 3 on the number of shares of Common Stock to be
issued under the Plan, but only to the extent of the number of shares
covered by the Stock Appreciation Right at the time of exercise based on
the value of the Stock Appreciation Right at such time.

SECTION 7. RESTRICTED STOCK

(a) Administration. Shares of Restricted Stock may be awarded either
alone or in addition to other Awards granted under the Plan. The Committee
shall determine the officers and employees to whom and the time or times at
which grants of Restricted Stock will be awarded, the number of shares to
be awarded to any participant (subject to the aggregate limit on grants to
individual participants set forth in Section 3), the conditions for
vesting, the time or times within which such Awards may be subject to
forfeiture and any other terms and conditions of the Awards, in addition to
those contained in Section 7(c).

The Committee may, prior to grant, condition the vesting of Restricted
Stock upon the attainment of Performance Goals. The Committee may, in
addition to or instead of requiring satisfaction of Performance Goals,
condition vesting upon the continued service of the participant. The
provisions of Restricted Stock Awards (including the applicable Performance
Goals) need not be the same with respect to each recipient.

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(b) Awards and Certificates. Shares of Restricted Stock shall be
evidenced in such manner as the Committee may deem appropriate, including
book-entry registration or issuance of one or more stock certificates. Any
certificate issued in respect of shares of Restricted Stock shall be
registered in the name of such participant and shall bear an appropriate
legend referring to the terms, conditions, and restrictions applicable to
such Award, substantially in the following form:

"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the American Stores Company 1997 Stock Option and Stock
Award Plan and a Restricted Stock Agreement. Copies of such Plan and
Agreement are on file at the offices of American Stores Company, Salt
Lake City, Utah."

The Committee may require that the certificates evidencing such shares be held
in custody by the Company until the restrictions thereon shall have lapsed and
that, as a condition of any Award of Restricted Stock, the participant shall
have delivered a stock power, endorsed in blank, relating to the Common Stock
covered by such Award.

(i) Subject to the provisions of the Plan and the Restricted Stock
Agreement referred to in Section 7(c)(vi), during the period, if any,
set by the Committee, commencing with the date of such Award for which
such participant's continued service is required (the "Restriction
Period"), and until the later of (i) the expiration of the Restriction
Period and (ii) the date the applicable Performance Goals (if any) are
satisfied, the participant shall not be permitted to sell, assign,
transfer, pledge or otherwise encumber shares of Restricted Stock;
provided that the foregoing shall not prevent a participant from
pledging Restricted Stock as security for a loan, the sole purpose of
which is to provide funds to pay the option price for Stock Options.
Within these limits, the Committee may provide for the lapse of
restrictions based upon period of service in installments or otherwise
and may accelerate or waive, in whole or in part, restrictions based
upon period of service or upon performance; provided, however, that in
the case of Restricted Stock subject to Performance Goals granted to a
participant who is a Covered Employee, the applicable Performance Goals
have been satisfied.

(ii) Except as provided in this paragraph (ii) and Section 7(c)(i)
and the Restricted Stock Agreement, the participant shall have, with
respect to the shares of Restricted Stock, all of the rights of a
stockholder of the Corporation holding the class or series of Common
Stock that is the subject of the Restricted Stock, including, if
applicable, the right to vote the shares and the right to receive any
cash dividends. If so determined by the Committee in the applicable
Restricted Stock Agreement and subject to Section 13(e) of the Plan, (1)
cash dividends on the class or series of Common Stock that is the
subject of the Restricted Stock Award shall be automatically deferred
and reinvested in additional Restricted Stock, held subject to the
vesting of the underlying Restricted Stock, or held subject to meeting
Performance Goals applicable only to dividends, and (2) dividends
payable in Common Stock shall be paid in the form of Restricted Stock of
the same class as the Common Stock with which such dividend was paid,
held subject to the vesting of the underlying Restricted Stock, or held
subject to meeting Performance Goals applicable only to dividends.

(iii) Except to the extent otherwise provided in the applicable
Restricted Stock Agreement and Sections 7(c)(i), 7(c)(iv) and 10(a)(ii),
upon a participant's Termination of Employment for any reason during the
Restriction Period or before the applicable Performance Goals are
satisfied, all shares still subject to restriction shall be forfeited by
the participant.

(iv) Except to the extent otherwise provided in Section 10(a)(ii),
in the event that a participant retires or such participant's employment
is involuntarily terminated (other than for Cause), the Committee shall
have the discretion to waive, in whole or in part, any or all remaining
restrictions (other than, in the case of Restricted Stock with respect
to which a participant is a Covered Employee, satisfaction of the
applicable Performance Goals unless the participant's

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<PAGE> 53

employment is terminated by reason of death or Disability) with respect
to any or all of such participant's shares of Restricted Stock.

(v) If and when any applicable Performance Goals are satisfied and
the Restriction Period expires without a prior forfeiture of the
Restricted Stock, unlegended certificates for such shares shall be
delivered to the participant upon surrender of the legended
certificates.

(vi) Each Award shall be confirmed by, and be subject to, the terms
of a Restricted Stock Agreement.

SECTION 8. PERFORMANCE UNITS

(a) Administration. Performance Units may be awarded either alone or in
addition to other Awards granted under the Plan. The Committee shall determine
the officers and employees to whom and the time or times at which Performance
Units shall be awarded, the number of Performance Units to be awarded to any
participant (subject to the aggregate limit on grants to individual participants
set forth in Section 3), the duration of the Award Cycle and any other terms and
conditions of the Award, in addition to those contained in Section 8(b).

The Committee may condition the settlement of Performance Units upon the
continued service of the participant, the attainment of Performance Goals, or
both. The provisions of such Awards (including the applicable Performance Goals)
need not be the same with respect to each recipient.

(b) Terms and Conditions. Performance Units Awards shall be subject to the
following terms and conditions:

(i) Subject to the provisions of the Plan and the Performance Units
Agreement referred to in Section 8(b)(vi), Performance Units may not be
sold, assigned, transferred, pledged or otherwise encumbered during the
Award Cycle. At the expiration of the Award Cycle, the Committee shall
evaluate the Company's performance in light of the Performance Goals for
such Award to the extent applicable, and shall determine the number of
Performance Units granted to the participant which have been earned, and
the Committee may then elect to deliver (1) a number of shares of Common
Stock equal to the number of Performance Units determined by the Committee
to have been earned, or (2) cash equal to the Fair Market Value of such
number of shares of Common Stock to the participant.

(ii) Except to the extent otherwise provided in the applicable
Performance Unit Agreement and Sections 8(b)(iii) and 10(a)(iii), upon a
participant's Termination of Employment for any reason during the Award
Cycle or before any applicable Performance Goals are satisfied, the rights
to the shares still covered by the Performance Units Award shall be
forfeited by the participant.

(iii) Except to the extent otherwise provided in Section 10(a)(iii),
in the event that a participant's employment is terminated (other than for
Cause), or in the event a participant retires, the Committee shall have the
discretion to waive, in whole or in part, any or all remaining payment
limitations (other than, in the case of Performance Units with respect to
which a participant is a Covered Employee, satisfaction of any applicable
Performance Goals unless the participant's employment is terminated by
reason of death or Disability) with respect to any or all of such
participant's Performance Units.

(iv) A participant may elect to further defer receipt of the
Performance Units payable under an Award (or an installment of an Award)
for a specified period or until a specified event, subject in each case to
the Committee's approval and to such terms as are determined by the
Committee (the "Elective Deferral Period"). Subject to any exceptions
adopted by the Committee, such election must generally be made prior to
commencement of the Award Cycle for the Award (or for such installment of
an Award).

(v) If and when any applicable Performance Goals are satisfied and the
Elective Deferral Period expires without a prior forfeiture of the
Performance Units, payment in accordance with Section 8(b)(i) hereof shall
be made to the participant.

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(vi) Each Award shall be confirmed by, and be subject to, the terms of
a Performance Unit Agreement.

SECTION 9. TAX OFFSET BONUSES

At the time an Award is made hereunder or at any time thereafter, the
Committee may grant to the participant receiving such Award the right to receive
a cash payment in an amount specified by the Committee, to be paid at such time
or times (if ever) as the Award results in compensation income to the
participant, for the purpose of assisting the participant to pay the resulting
taxes, all as determined by the Committee and on such other terms and conditions
as the Committee shall determine.

SECTION 10. CHANGE IN CONTROL PROVISIONS

(a) Impact of Event. Notwithstanding any other provision of the Plan to
the contrary, in the event of a Change in Control, except as otherwise provided
at the time of grant:

(i) Any Stock Options and Stock Appreciation Rights outstanding as of
the date such Change in Control is determined to have occurred, and which
are not then exercisable and vested, shall become fully exercisable and
vested to the full extent of the original grant.

(ii) The restrictions and deferral limitations applicable to any
Restricted Stock shall lapse, and such Restricted Stock shall become free
of all restrictions and become fully vested and transferable to the full
extent of the original grant and share certificates relating to Restricted
Stock shall be delivered to participants forthwith.

(iii) All Performance Units shall be considered to be earned and
payable in full, and any deferral or other restriction shall lapse and such
Performance Units shall be settled in cash as promptly as is practicable.

(b) Definition of Change in Control. For purposes of the Plan, a "Change
in Control" shall mean the happening of any of the following events:

(i) An acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of 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 (1) the then outstanding shares
of common stock of the Corporation (the "Outstanding Corporation Common
Stock") or (2) the combined voting power of the then outstanding voting
securities of the Corporation entitled to vote generally in the election of
directors (the "Outstanding Corporation Voting Securities"); excluding,
however, the following: (1) Any acquisition directly from the Corporation,
other than an acquisition by virtue of the exercise of a conversion
privilege unless the security being so converted was itself acquired
directly from the Corporation, (2) Any acquisition by the Corporation, (3)
Any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Corporation or any corporation controlled by the
Corporation, or (4) Any acquisition by any corporation pursuant to a
transaction which complies with clauses (1), (2) and (3) of subsection
(iii) of this Section 10(b); or

(ii) A change in the composition of the Board such that the
individuals who, as of the effective date of the Plan, constitute the Board
(such Board shall be hereinafter referred to as the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board;
provided, however, for purposes of this Section 10(b), that any individual
who becomes a member of the Board subsequent to the effective date of the
Plan, whose election, or nomination for election by the Corporation's
shareholders, was approved by a vote of at least a majority of those
individuals who are members of the Board and who were also members of the
Incumbent Board (or deemed to be such pursuant to this proviso) shall be
considered as though such individual were a member of the Incumbent Board;
but, provided further, that any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board shall not be so considered as a member of the Incumbent Board; or

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(iii) The approval by the shareholders of the Corporation of a
reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Corporation ("Corporate
Transaction") or, if consummation of such Corporate Transaction is subject,
at the time of such approval by shareholders, to the consent of any
government or governmental agency, obtaining of such consent (either
explicitly or implicitly by consummation); excluding however, such a
Corporate Transaction pursuant to which (1) all or substantially all of the
individuals and entities who are the beneficial owners, respectively, of
the Outstanding Corporation Common Stock and Outstanding Corporation Voting
Securities immediately prior to such Corporate Transaction will
beneficially own, directly or indirectly, more than 60% of, respectively,
the outstanding shares of common stock, and the combined voting power of
the then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Corporate Transaction (including, without limitation, a
corporation which as a result of such transaction owns the Corporation or
all or substantially all of the Corporation's assets either directly or
through one or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Corporate Transaction, of the
Outstanding Corporation Common Stock and Outstanding Company Voting
Securities, as the case may be, (2) no Person (other than the Corporation,
any employee benefit plan (or related trust) of the Corporation or such
corporation resulting from such Corporate Transaction) will beneficially
own, directly or indirectly, 20% or more of, respectively, the outstanding
shares of common stock of the corporation resulting from such Corporate
Transaction or the combined voting power of the outstanding voting
securities of such corporation entitled to vote generally in the election
of directors except to the extent that such ownership existed prior to the
Corporate Transaction, and (3) individuals who were members of the
Incumbent Board which approved the agreement providing for the Corporate
Transaction will constitute at least a majority of the members of the board
of directors of the corporation resulting from such Corporate Transaction;
or

(iv) The approval by the stockholders of the Corporation of a complete
liquidation or dissolution of the Corporation.

(c) Change in Control Price. For purposes of the Plan, "Change in Control
Price" means the higher of (i)the highest reported sales price, regular way, of
a share of Common Stock in any transaction reported on the New York Stock
Exchange Composite Tape or other national exchange on which such shares are
listed or on NASDAQ during the 60-day period prior to and including the date of
a Change in Control or (ii) if the Change in Control is the result of a tender
or exchange offer or a Corporate Transaction, the highest price per share of
Common Stock paid in such tender or exchange offer or Corporate Transaction;
provided, however, that (x) in the case of a Stock Option which (A) is held by
an optionee who is an officer or director of the Corporation and is subject to
Section 16(b) of the Exchange Act and (B) was granted within 240 days of the
Change of Control, and (C) the exercise or surrender of such Stock Option would
not be an exempt transaction under Section 16(b), then the Change in Control
Price for such Stock Option shall be the Fair Market Value of the Common Stock
on the date such Stock Option is exercised or deemed exercised and (y) in the
case of Incentive Stock Options and Stock Appreciation Rights relating to
Incentive Stock Options, the Change in Control Price shall be in all cases the
Fair Market Value of the Common Stock on the date such Incentive Stock Option or
Stock Appreciation Right is exercised. To the extent that the consideration paid
in any such transaction described above consists all or in part of securities or
other noncash consideration, the value of such securities or other noncash
consideration shall be determined in the sole discretion of the Board.

SECTION 11. TERM, AMENDMENT AND TERMINATION

The Plan will terminate 10 years after the effective date of the Plan.
Under the Plan, Awards outstanding as of such date shall not be affected or
impaired by the termination of the Plan.

The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would (i) impair the rights of
an optionee under a Stock Option or a recipient of a Stock Appreciation Right,
Restricted Stock Award or Performance Unit Award theretofore granted without the
optionee's or recipient's consent, except such an amendment made to cause the
Plan to qualify for the

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exemption provided by Rule 16b-3, or (ii) disqualify the Plan from the exemption
provided by Rule 16b-3. In addition, no such amendment shall be made without the
approval of the Corporation's shareholders to the extent such approval is
required by law or agreement.

The Committee may amend the terms of any Stock Option or other Award
theretofore granted, prospectively or retroactively, but no such amendment shall
impair the rights of any holder without the holder's consent except such an
amendment made to cause the Plan or Award to qualify for the exemption provided
by Rule 16b-3.

Subject to the above provisions, the Board shall have authority to amend
the Plan to take into account changes in law and tax and accounting rules as
well as other developments, and to grant Awards which qualify for beneficial
treatment under such rules without stockholder approval.

SECTION 12. UNFUNDED STATUS OF PLAN

It is presently intended that the Plan constitute an "unfunded" plan for
incentive and deferred compensation. The Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver Common Stock or make payments; provided, however, that unless the
Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.

SECTION 13. GENERAL PROVISIONS

(a) The Committee may require each person purchasing or receiving shares
pursuant to an Award to represent to and agree with the Corporation in writing
that such person is acquiring the shares without a view to the distribution
thereof. The certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.

Notwithstanding any other provision of the Plan or agreements made pursuant
thereto, the Corporation shall not be required to issue or deliver any
certificate or certificates for shares of Common Stock under the Plan prior to
fulfillment of all of the following conditions:

(i) Listing or approval for listing upon notice of issuance, of such
shares on the New York Stock Exchange, Inc., or such other securities
exchange as may at the time be the principal market for the Common Stock;

(ii) Any registration or other qualification of such shares of the
Corporation under any state or federal law or regulation, or the
maintaining in effect of any such registration or other qualification which
the Committee shall, in its absolute discretion upon the advice of counsel,
deem necessary or advisable; and

(iii) Obtaining any other consent, approval, or permit from any state
or federal governmental agency which the Committee shall, in its absolute
discretion after receiving the advice of counsel, determine to be necessary
or advisable.

(b) Nothing contained in the Plan shall prevent the Corporation or any
subsidiary or Affiliate from adopting other or additional compensation
arrangements for its employees.

(c) Adoption of the Plan shall not confer upon any employee any right to
continued employment, nor shall it interfere in any way with the right of the
Corporation or any subsidiary or Affiliate to terminate the employment of any
employee at any time.

(d) No later than the date as of which an amount first becomes includible
in the gross income of the participant for federal income tax purposes with
respect to any Award under the Plan, the participant shall pay to the
Corporation, or make arrangements satisfactory to the Corporation regarding the
payment of, any federal, state, local or foreign taxes of any kind required by
law to be withheld with respect to such amount. Unless otherwise determined by
the Corporation, withholding obligations may be settled with Common Stock,
including Common Stock that is part of the Award that gives rise to the
withholding requirement. The

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<PAGE> 57

obligations of the Corporation under the Plan shall be conditional on such
payment or arrangements, and the Corporation and its Affiliates shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment otherwise due to the participant. The Committee may establish such
procedures as it deems appropriate, including making irrevocable elections, for
the settlement of withholding obligations with Common Stock.

(e) Reinvestment of dividends in additional Restricted Stock at the time of
any dividend payment shall only be permissible if sufficient shares of Common
Stock are available under Section 3 for such reinvestment (taking into account
then outstanding Stock Options and other Awards).

(f) The Committee shall establish such procedures as it deems appropriate
for a participant to designate a beneficiary to whom any amounts payable in the
event of the participant's death are to be paid or by whom any rights of the
participant, after the participant's death, may be exercised.

(g) In the case of a grant of an Award to any employee of a subsidiary of
the Corporation, the Corporation may, if the Committee so directs, issue or
transfer the shares of Common Stock, if any, covered by the Award to the
subsidiary, for such lawful consideration as the Committee may specify, upon the
condition or understanding that the subsidiary will transfer the shares of
Common Stock to the employee in accordance with the terms of the Award specified
by the Committee pursuant to the provisions of the Plan.

(h) The Plan and all Awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Delaware,
without reference to principles of conflict of laws.

SECTION 14. EFFECTIVE DATE OF PLAN

The Plan shall be effective as of the date it is approved by at least a
majority of the outstanding shares of Common Stock of the Corporation.

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EXHIBIT C

1997 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS

1. NAME OF PLAN. This plan shall be known as the "American Stores Company
1997 Stock Plan for Non-Employee Directors" and is hereinafter referred to as
the "Plan."

2. PURPOSE OF PLAN. The purpose of the Plan is to enable American Stores
Company, a Delaware corporation (the "Corporation"), to attract and retain
qualified persons to serve as directors, to enhance the equity interest of
directors in the Corporation, and to solidify the common interests of its
directors and stockholders in enhancing the value of the Corporation's common
stock, par value $1.00 per share (the "Common Stock"). The Plan seeks to
encourage the highest level of director performance by providing such directors
with a proprietary interest in the Corporation's performance and progress by
crediting them with Common Stock annually as part of their annual retainer.

3. EFFECTIVE DATE AND TERM. The Plan shall be effective as of July 1,
1997, subject to approval by Common Stock present or represented and entitled to
vote at a meeting of shareholders of the Corporation not later than July 1,
1997, and shall remain in effect until amended or terminated by action of the
Board.

4. ELIGIBLE PARTICIPANTS. Each member of the Board on the date of the
1997 Annual Shareholders' Meeting and from time to time thereafter who is not a
full-time employee of the Corporation or any of its subsidiaries shall be a
participant ("Participant") in the Plan. Each credit of shares of Common Stock
pursuant to the Plan shall be evidenced by a written agreement duly executed and
delivered by or on behalf of the Corporation and a Participant, if such an
agreement is required by the Corporation to assure compliance with all
applicable laws and regulations.

5. CREDIT OF SHARES. (a) On July 1, 1997, each Participant shall be
credited with a number of shares of Common Stock set forth opposite his or her
name on Exhibit "A" attached hereto (the "Retirement Stock"), as full payment
for the Participant's interest in the American Stores Company Retirement Plan
for Non-Employee Directors, which will be terminated on the effective date of
the Plan. The Retirement Shares shall be subject to the provisions of Section 6.

(b) Commencing July 1, 1997, as part of the retainer payable to each
Participant for service on the Board, each Participant shall become
entitled to receive shares of Common Stock subject to any applicable
restrictions set forth in Section 6 hereof. Subject to paragraph (c) below,
each Participant shall be credited each year for service on the Board with
1,000 shares of Common Stock (the "Stock Retainer"). The Stock Retainer for
each year shall be credited as of July 1 of each year during the term of
the Plan, commencing July 1, 1997 (the "Grant Date").

(c) Any person who becomes a non-employee director following July 1 of
any year during the term of the Plan, whether by appointment or election as
a director or by change in status from a full-time employee, shall be
credited, upon becoming a non-employee director, as a portion of the
compensation to be paid to such Participant until the next Annual Meeting
of Shareholders, with a number of shares of Common Stock equal to the
product of 1,000 times a fraction, the numerator of which is the number of
full weeks remaining until June 30 of the following year and the
denominator of which is 52; provided that no fractional shares shall be
credited and the number of shares of Common Stock to be credited pursuant
to this paragraph (b) shall be rounded up to the next whole number.

6. DELIVERY OF SHARES. (a) All Retirement Stock and Stock Retainers
credited to a Participant, together with the "Dividend Equivalent Amount" (as
defined in paragraph (c) below) with respect thereto, shall be delivered to the
Participant or the Participant's estate or legal guardian on, or beginning on,
the Delivery Date (as defined in paragraph (b) below), in accordance with this
Section 6; provided, however, that in the case of Stock Retainers, all rights
thereto shall be forfeited if the Participant terminates service as a director
prior to the first annual shareholders' meeting at which directors are to be
elected occurring after the Grant Date.

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(b) The "Delivery Date" means the first date upon which one of the
following events occurs:

(i) Death of the Participant;

(ii) In the case of the Retirement Stock, the later of the date (i)
the Participant attains age 65, or (ii) ceases to serve as a Director,
if no Installment Delivery Election is in effect or, if such election is
in effect, the date specified therein;

(iii) Change in Control (as hereinafter defined); or

(iv) In the case of Stock Retainers, the first anniversary of the
Grant Date if no Installment Delivery Election is in effect or, if such
election is in effect, the date specified therein.

(c) The "Dividend Equivalent Amount" for a given dividend or
distribution means a number of shares of Common Stock having a value, as of
the date such Dividend Equivalent is credited to a Participant's account,
equal to the amount of cash, plus the fair market value on the date of
distribution of any property, that is distributed with respect to one share
of Common Stock pursuant to such dividend or distribution; such fair market
value to be determined by the Committee in good faith.

(d) If a Participant's Delivery Date is described in clause (i) or
(iii) of paragraph (b), all Stock Retainers and Retirement Stock and all
Dividend Equivalent Amounts with respect thereto shall be delivered at one
time, as soon as practicable after the Delivery Date. A Participant may
make an Installment Delivery Election pursuant to paragraph (e) below to
have the Retirement Stock, Stock Retainers and Dividend Equivalent Amounts
with respect thereto delivered in a lump sum or in installments over a
specified period (the "Applicable Delivery Period"). If the Participant has
a valid Installment Delivery Election in effect, then the Retirement Stock
and/or Stock Retainers, together with the Dividend Equivalent Amounts with
respect thereto, shall be delivered in a lump sum or in installments over
the Applicable Delivery Period, with the first such installment being
delivered on the first anniversary of the Deferred Delivery Date; provided,
that if in order to equalize such installments, fractional shares would
have to be delivered, such installments shall be adjusted by rounding to
the nearest whole share. If any Retirement Stock, Stock Retainers and
Dividend Equivalent Amounts of a Participant are to be delivered after the
Participant has died or become legally incompetent, they shall be delivered
to the Participant's estate or legal guardian, as the case may be, in
accordance with the foregoing schedules; provided, that if the Participant
dies with a valid Installment Delivery Election in effect, and the legal
representatives of the Participant's estate so request, the Committee (as
defined in Section 13 below) may (but shall not be obligated to) deliver
all remaining undelivered Retirement Stock, Stock Retainers and Dividend
Equivalent Amounts to the Participant's estate immediately. References to
the Participant in this Plan shall be deemed to refer to the Participant's
estate or legal guardian, where appropriate.

(e) An Installment Delivery Election means a written election by a
Participant, on such form as may be prescribed by the Committee (as defined
in Section 13 below), to receive delivery of Retirement Stock, Stock
Retainers and Dividend Equivalent Amounts in a lump sum or in installments
over a specified period, as more fully described in paragraph (d) above.
Once made, an Installment Delivery Election may be superseded by another
Installment Delivery Election or revoked in writing by a Participant.
However, in order for any initial or superseding Installment Delivery
Election or revocation thereof to be valid, it must be received by the
Committee (i) before a Delivery Date described in clause (i) of paragraph
(b) above, and (ii) at least one year before a Deferred Delivery Date
described in clause (iv) of paragraph (b) above. In the case of multiple
Installment Delivery Elections and/or revocations by any Participant, the
most recent valid Installment Delivery Election or revocation in effect as
of the Delivery Date shall be controlling.

(f) The Corporation may, but shall not be required to, create a
grantor trust or utilize an existing grantor trust (in either case, the
"Trust") to assist it in accumulating the shares, cash and other property

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needed to fulfill its obligations under this Section 6. On each date when a
Stock Retainer is credited to a Participant, the Corporation shall
contribute such Stock Retainer to the Trust. However, Participants shall
have no beneficial or other interest in the Trust and the assets thereof,
and their rights under the Plan shall be as general creditors of the
Corporation, unaffected by the existence or nonexistence of the Trust,
except that deliveries of Stock Retainers and payments of cash and other
property to Participants from the Trust shall, to the extent thereof, be
treated as satisfying the Corporation's obligations under this Section 6.

7. STOCK OPTIONS. Commencing July 1, 1997, as part of the retainer
payable to each Participant for service on the Board, each Participant who
satisfies the Minimum Ownership Requirement (as defined below) shall be entitled
to receive a stock option grant entitling the Participant to acquire 600 shares
of the Corporation's Common Stock ("Options"), which Options shall be granted at
an exercise price equal to the fair market value of the Common Stock subject
thereto on the date of grant. Such Options shall have a term of ten years and
shall become exercisable in two equal annual installments of 300 shares each
commencing on the date of the next Annual Shareholders' Meeting at which
directors are elected. On the date a Participant ceases to be a director of the
Company, any unvested options shall be forfeited. The Options for each year
shall be granted as of July 1 of each year during the term of the Plan,
commencing July 1, 1997; provided, that if July 1 is not a business day on which
the New York Stock Exchange is open for trading, the Options shall be granted as
of the first such business day following July 1. The Options shall be
nonqualified stock options and shall be subject to the terms and conditions of
the American Stores Company 1997 Stock Option and Stock Award Plan as if set
forth in their entirety herein; provided, that if and to the extent that such
terms and conditions are inconsistent with the terms and conditions of the Plan,
the Plan shall be controlling. The Minimum Stock Ownership Requirement shall be
3,000 shares of the Corporation's Common Stock; provided, that persons first
becoming directors of the Corporation on or after February 2, 1997 shall have a
period of 36 months from the date they become a director in which to satisfy the
Minimum Stock Ownership Requirement and shall be granted stock options during
such period even if the Minimum Stock Ownership Requirement is not satisfied.
Any person who becomes a non-employee director after July 1 of any year during
the term of the Plan will be granted a number of Options equal to the product of
600 times a fraction, the numerator of which is the number of full weeks
remaining until June 30 of the following year and the denominator of which is
52; provided that options will not be granted with respect to fractional shares
and the number of Options to be granted pursuant to this paragraph (b) shall be
rounded up to the next whole number.

8. SHARE CERTIFICATES; VOTING AND OTHER RIGHTS. The certificates for
shares delivered to a Participant or the trustee of the Trust, if any (the
"Trustee"), pursuant to Section 6 above shall be issued in the name of the
Participant or the Trustee, as the case may be, and the Participant or the
Trustee, as the case may be, shall be entitled to all rights of a shareholder
with respect to Common Stock for all such shares issued in his name, including
the right to vote the shares, and the Participant or the Trustee, as the case
may be, shall receive all dividends and other distributions paid or made with
respect thereto.

9. CHANGE IN CONTROL. A "Change in Control" shall be deemed to have
occurred if any of the following events shall have happened:

(i) An acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of 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 (1) the
then outstanding shares of common stock of the Corporation (the
"Outstanding Corporation Common Stock") or (2) the combined voting power
of the then outstanding voting securities of the Corporation entitled to
vote generally in the election of directors (the "Outstanding
Corporation Voting Securities"); excluding, however, the following: (1)
Any acquisition directly from the Corporation, other than an acquisition
by virtue of the exercise of a conversion privilege unless the security
being so converted was itself acquired directly from the Corporation,
(2) Any acquisition by the Corporation, (3) Any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by the Corporation, or (4) Any

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acquisition by any corporation pursuant to a transaction which complies
with clauses (1), (2) and (3) of subsection (iii) of this Section 9; or

(ii) A change in the composition of the Board such that the
individuals who, as of the effective date of the Plan, constitute the
Board (such Board shall be hereinafter referred to as the "Incumbent
Board") cease for any reason to constitute at least a majority of the
Board; provided, however, for purposes of this Section 9, that any
individual who becomes a member of the Board subsequent to the effective
date of the Plan, whose election, or nomination for election by the
Corporation's shareholders, was approved by a vote of at least a
majority of those individuals who are members of the Board and who were
also members of the Incumbent Board (or deemed to be such pursuant to
this proviso) shall be considered as though such individual were a
member of the Incumbent Board; but, provided further, that any such
individual whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are used
in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board shall not be so considered as a
member of the Incumbent Board; or

(iii) The approval by the shareholders of the Corporation of a
reorganization, merger or consolidation or sale or other disposition of
all or substantially all of the assets of the Corporation ("Corporate
Transaction") or, if consummation of such Corporate Transaction is
subject, at the time of such approval by shareholders, to the consent of
any government or governmental agency, obtaining of such consent (either
explicitly or implicitly by consummation); excluding however, such a
Corporate Transaction pursuant to which (1) all or substantially all of
the individuals and entities who are the beneficial owners,
respectively, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities immediately prior to such
Corporate Transaction will beneficially own, directly or indirectly,
more than 60% of, respectively, the outstanding shares of common stock,
and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may
be, of the corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a result of such
transaction owns the Corporation or all or substantially all of the
Corporation's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Corporate Transaction, of the Outstanding
Corporation Common Stock and Outstanding Company Voting Securities, as
the case may be, (2) no Person (other than the Corporation, any employee
benefit plan (or related trust) of the Corporation or such corporation
resulting from such Corporate Transaction) will beneficially own,
directly or indirectly, 20% or more of, respectively, the outstanding
shares of common stock of the corporation resulting from such Corporate
Transaction or the combined voting power of the outstanding voting
securities of such corporation entitled to vote generally in the
election of directors except to the extent that such ownership existed
prior to the Corporate Transaction, and (3) individuals who were members
of the Incumbent Board which approved the agreement providing for the
Corporate Transaction will constitute at least a majority of the members
of the board of directors of the corporation resulting from such
Corporate Transaction; or

(iv) The approval by the stockholders of the Corporation of a
complete liquidation or dissolution of the Corporation.

10. GENERAL RESTRICTIONS. (a) Notwithstanding any other provision of the
Plan or agreements made pursuant thereto, the Corporation shall not be required
to issue or deliver any certificate or certificates for shares of Common Stock
under the Plan prior to fulfillment of all of the following conditions:

(i) Listing or approval for listing upon notice of issuance of such
shares on the New York Stock Exchange, Inc., or such other securities
exchange as may at the time be the principal market for the Common
Stock;

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which the Committee shall, in its absolute discretion upon the advice of
counsel, deem necessary or advisable; and

(iii) Obtaining any other consent, approval, or permit from any
state or federal governmental agency which the Committee shall, in its
absolute discretion after receiving the advice of counsel, determine to
be necessary or advisable.

(b) Nothing contained in the Plan shall prevent the Corporation from
adopting other or additional compensation arrangements for the
Participants.

(c) No Common Stock received by a Participant pursuant to the Plan may
be sold until at least six months after the date such Common Stock was
granted.

11. SHARES AVAILABLE. Subject to Section 12 below, the maximum number of
shares of Common Stock which issued pursuant to the Plan is 250,000. Shares of
Common Stock issuable under the Plan shall be taken from authorized but unissued
or treasury shares of the Corporation as shall from time to time be necessary
for issuance pursuant to the Plan.

12. CHANGE IN CAPITAL STRUCTURE. In the event of any change in the Common
Stock by reason of any stock dividend, stock split, combination of shares,
exchange of shares, warrants or rights offering to purchase Common Stock at a
price below its fair market value, reclassification, recapitalization, merger,
consolidation or other change in capitalization, appropriate adjustment shall be
made by the Committee (as defined in Section 13 below) in the number and kind of
shares subject to the Plan and any other relevant provisions of the Plan, whose
determination shall be binding and conclusive on all persons.

13. ADMINISTRATION; AMENDMENT. (a) The Plan shall be administered by a
committee consisting of the Chief Executive Officer, the President and the Chief
Financial Officer of the Corporation (the "Committee"), which shall have full
authority to construe and interpret the Plan, to establish, amend and rescind
rules and regulations relating to the Plan, and to take all such actions and
make all such determinations in connection with the Plan as it may deem
necessary or desirable.

(b) The Board may from time to time make such amendments to the Plan
as it may deem proper and in the best interest of the Corporation without
further approval of the Corporation's stockholders.

(d) Notwithstanding any other provision of the Plan, neither the Board
nor the Committee shall be authorized to exercise any discretion with
respect to the selection of persons to receive grants under the Plan or
concerning the amount or timing of grants under the Plan.

14. MISCELLANEOUS. (a) Nothing in the Plan shall be deemed to create any
obligation on the part of the Board to nominate any director for reelection by
the Corporation's shareholders or to limit the rights of the shareholders to
remove any director.

(b) The Corporation shall have the right to require, prior to the
issuance or delivery of any shares of Common Stock pursuant to the Plan,
payment by a Participant of any taxes required by law with respect to the
issuance or delivery of such shares.

15. GOVERNING LAW. The Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Delaware.

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EXHIBIT A TO 1997 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS

SCHEDULE OF RETIREMENT SHARES

- ---------------
(1) The term of office for Messrs. Callister and Holbrook will not continue
beyond June 17, 1997.

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PROXY

AMERICAN STORES COMPANY
This Proxy is Solicited on Behalf of the Board of
Directors for the Annual Meeting on June 17, 1997

The undersigned hereby constitutes and appoints Teresa Beck, Kathleen E.
McDermott, J. Greg Spencer and each of them, his/her true and lawful agents and
proxies with full power of substitution in each, to represent the undersigned at
the Annual Meeting of Shareholders of AMERICAN STORES COMPANY to be held at
10:00 AM, local time on June 17, 1997, at the Little America Hotel, 500 South
Main Street, Salt Lake City, Utah, and at any postponements or adjournments
thereof, on all matters coming before such meeting.

Nominees: Pamela G. Bailey, Henry I. Bryant, Arden B. Engebretsen, James B.
Fisher, Fernando R. Gumucio, Leon G. Harmon, Victor L. Lund, John E. Masline,
Barbara S. Preiskel, J. L. Scott, Arthur K. Smith

You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations. Your shares cannot be voted unless
you sign this card on the reverse and return it to the Company.

(change of address/comments)

- ------------------------------------------

SEE REVERSE SIDE

<PAGE> 65

X Please mark your votes as in this example.
- ----

This proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR election of directors and
FOR Proposals 2, 3, 4, 5, 6 and 7.

The Board of Directors recommends a vote FOR election of directors and
FOR proposals 2, 3, 4, 5, 6 and 7.

FOR WITHHELD
1. Election of
Directors _______ ________
(see reverse)

For, except vote withheld from the following nominee(s):

- ------------------------------------------------------

2. Amendment to Article THIRD of the Company's Restated Certificate of
Incorporation to permit the Company to engage in any lawful business.

FOR AGAINST ABSTAIN

- ---------- ---------- ----------

3. Proposal to amend Article FOURTH of the Restated Certificate of Incorporation
to increase the number of authorized shares of common stock from 325,000,000 to
700,000,000.

FOR AGAINST ABSTAIN

- ---------- ---------- ----------

4. To approve the American Stores Company Key Management Annual Incentive Plan.

FOR AGAINST ABSTAIN

- ---------- ---------- ----------

5. To approve the American Stores Company 1997 Stock Option and Stock Award
Plan.

FOR AGAINST ABSTAIN

- ---------- ---------- ----------

6. To approve the American Stores Company 1997 Stock Plan for Non-Employee
Directors.

FOR AGAINST ABSTAIN

- ---------- ---------- ----------

7. Approval of Ernst & Young as independent certified public accountants, for
the Company's 1997 fiscal year.

FOR AGAINST ABSTAIN

- ---------- ---------- ----------

8. In their discretion upon such other matters as may properly come before this
meeting.

I PLAN TO ATTEND THE 1997 ANNUAL MEETING __________

CHANGE OF ADDRESS/COMMENTS ON REVERSE SIDE __________

SIGNATURE(S)__________________________________________ DATE ______________ 1997
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.