<PAGE>
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
AMERICAN STORES COMPANY
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF AMERICAN STORES COMPANY]
AMERICAN STORES COMPANY
299 South Main Street, Salt Lake City, Utah 84111-2203
P.O. Box 27447, Salt Lake City, Utah 84127-0447
----------------
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
----------------
The Annual Meeting of Shareholders of American Stores Company will be held
at the Doubletree Hotel, 255 South West Temple, Salt Lake City, Utah on
Wednesday, June 17, 1998 at 10:00 a.m., local time. At the Annual Meeting, you
will be asked to:
1. Elect twelve directors of the Company;
2. Ratify the appointment of Ernst & Young LLP as independent certified
public accountants for fiscal year 1998; and
3. Transact any other business that may properly be presented at the Annual
Meeting.
If you were a shareholder of record at the close of business on April 24,
1998, you may vote at the Annual 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. Your vote is important. Whether you
plan to attend or not, 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.
Mary V. Sloan
Secretary
May 1, 1998
<PAGE>
AMERICAN STORES COMPANY
299 South Main Street, Salt Lake City, Utah 84111-2203
P.O. Box 27447, Salt Lake City, Utah 84127-0447
----------------
PROXY STATEMENT
----------------
American Stores Company, a Delaware corporation (the "Company"), is
soliciting this proxy on behalf of its Board of Directors for use at the 1998
Annual Meeting of Shareholders to be held on Wednesday, June 17, 1998 at 10:00
a.m. local time, at the Doubletree Hotel, 255 South West Temple, Salt Lake
City, Utah and at any postponements or adjournments thereof. This Proxy
Statement, the proxy card, and the Company's 1997 Annual Report to
Shareholders will be mailed to shareholders beginning on or about May 1, 1998.
Record holders of shares of the Company's common stock, par value $1.00 per
share (the "Common Stock"), at the close of business on April 24, 1998 may
vote at the meeting. Each shareholder has one vote for each share of common
stock they own. At the close of business on April 24, 1998, there were
274,099,529 shares of Common Stock outstanding.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the inspectors of election appointed for the meeting who will also determine
whether or not a quorum is present. Abstentions and broker non-votes are
counted as present for establishing a quorum but as unvoted for determining
the approval of any matter submitted to the shareholders for a vote. A broker
non-vote occurs when a broker votes on some matters on the proxy card but not
on others because he does not have the authority to do so.
Your shares will be voted as you direct on your signed proxy card. If you do
not specify on your proxy card how you want to vote your shares, we will vote
signed returned proxies "for" the Board's nominees and "for" the ratification
of the appointment of Ernst & Young LLP as independent certified public
accountants of the Company for the 1998 fiscal year. The Company does not know
of any other business that may be presented at the Annual Meeting. If a
proposal other than the two listed in the Notice is presented at the Annual
Meeting, your signed proxy card gives authority to Teresa Beck, Kathleen E.
McDermott and J. Greg Spencer to vote your shares on such matters in their
discretion.
PROPOSAL 1--ELECTION OF DIRECTORS
The Board has nominated twelve directors for election at the 1998 Annual
Meeting. Each of the nominees is currently serving as a director of the
Company. If you re-elect them, they will hold office until the next annual
meeting or until their successors have been elected. A majority of the shares
represented at the meeting is required to elect a director. Unless you specify
otherwise, your returned signed proxy will be voted in favor of each of the
nominees. If any of the nominees is unable to serve as a director, your proxy
may be voted for another person nominated by the Board to fill that vacancy,
or the Board may reduce the number of directors to be elected. The following
information concerning each nominee is as of April 1, 1998.
<PAGE>
INFORMATION REGARDING THE NOMINEES STANDING FOR ELECTION IN 1998
PAMELA G. BAILEY Director since 1997
Ms. Bailey, age 49, has been the Chief Executive Officer of The Healthcare
Leadership Council since 1990. She served as President of the National
Committee for Quality Health Care from February 1987 to January 1997.
HENRY I. BRYANT Director since 1992
Mr. Bryant, age 55, retired as Managing Director in the Corporate Finance Unit
of J. P. Morgan & Co. Incorporated, an investment banking firm, on February 1,
1998 after holding that position since August 1994. Prior to that time, he
served as Managing Director of the Financial Institutions Group at J. P.
Morgan from July 1992. (1)
ARDEN B. ENGEBRETSEN Director since 1988
Mr. Engebretsen, age 66, has served as Chairman of the Board of Herpak
Limited, an international financial consulting firm, since January 1991 and
has been a partner in the law firm of Morris, James, Hitchens & Williams since
October 1994. Prior to 1991, he was the Vice Chairman of the Board and Chief
Financial Officer of Hercules Incorporated. Mr. Engebretsen is also a director
of Mellon Bank Delaware and is a member of the National Advisory Council,
University of Utah.
JAMES B. FISHER Director since 1988
Mr. Fisher, age 66, is retired and was the President and a director of J. G.
Boswell Company, an agricultural production, processing and marketing company,
from 1980 to 1984.
FERNANDO R. GUMUCIO Director since 1991
Mr. Gumucio, age 63, is owner and President of The Lafayette Group, a
management consulting company, since 1993. He served as the Chairman of the
Board and Chief Executive Officer of Del Monte USA from 1987 to 1988 and as
its President from 1985 to 1987. Mr. Gumucio is also a director of Basic
Vegetable Products Corporation.
LEON G. HARMON Director since 1982
Mr. Harmon, age 72, is retired and was the President and Chief Executive
Officer of First Interstate Bank of Utah, N.A. from July 1981 to October 1987.
VICTOR L. LUND Director since 1988
Mr. Lund, age 50, has served as Chairman of the Board of the Company since
June 1995 and as Chief Executive Officer since August 1992. He was President
of the Company from August 1992 to June 1995. Mr. Lund is also a director of
Borders Group, Inc.
DAVID L. MAHER Director since 1998
Mr. Maher, age 58, has served as Vice Chairman of the Board of the Company
since March 1998 and as Chief Operating Officer since March 1995. He served as
President from June 1995 to March 1998, and Senior Executive Vice President
and Chief Operating Officer-Drug from March 1993 to March 1995. He also served
as a director of the Company from 1991 to 1992.
JOHN E. MASLINE Director since 1988
Mr. Masline, age 70, is retired and was a partner with the accounting firm of
Ernst & Young from 1967 until 1986.
2
<PAGE>
BARBARA SCOTT PREISKEL Director since 1985
Mrs. Preiskel, age 73, is retired and was Senior Vice President and General
Counsel of the Motion Picture Association of America, a trade association,
from 1977 to 1983. Mrs. Preiskel is also a director of General Electric
Company, Textron, Inc., and The Washington Post Co.
J. L. SCOTT Director since 1987
Mr. Scott, age 68, is retired and was Co-Chief Executive Officer of the
Company from March 1992 to August 1992, Chief Executive Officer from February
1989 to March 1992, and President from September 1990 to August 1992. He
served as Vice Chairman of the Board of the Company from September 1987 to
June 1990. Mr. Scott is also a director of TJ International.
ARTHUR K. SMITH Director since 1992
Mr. Smith, age 60, has served as Chancellor of the University of Houston
System and President of the University of Houston main campus since April
1997. Prior to that, he was President of the University of Utah from August
1991 through March 1997. Mr. Smith is also a director of Shell Exploration and
Production Company, a subsidiary of Shell Oil Company.
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 retired on February 1, 1998 as the Managing Director
of the Southern Region in the Corporate Finance Unit of J. P. Morgan & Co.
Incorporated ("J. P. Morgan"), whose affiliated companies provide
investment banking services to the Company from time to time. In March
1998, the Company launched a medium-term note program for which J. P.
Morgan Securities Inc. acts as one of the agents and receives compensation
on the same terms and conditions as the other agents. 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 30,815,820 shares of the
Company's Common Stock sold by certain selling shareholders and 4,622,372
shares sold by the Company pursuant to the over-allotment option. The
affiliates of J. P. Morgan received customary underwriters fees in
connection with the offering, which were paid by the Company. During the
1997 fiscal year, J. P. Morgan Securities Inc. acted as an underwriter of
$300 million of the Company's debentures, for which the Company paid
customary fees. In March 1997, the Company entered into a $1.5 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 acts as one of four dealers and receives compensation on the
same terms as the other dealers.
3
<PAGE>
BENEFICIAL OWNERSHIP OF SECURITIES
The following table shows, as of January 31, 1998, 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 person or entity is
known to the Company to be the beneficial owner of more than 5% of the
Company's Common Stock as of such date.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
NAME (1) BENEFICIALLY OWNED (2) BENEFICIALLY OWNED (3)
-------- ---------------------- ----------------------
<S> <C> <C>
Pamela G. Bailey................. 2,016 *
Teresa Beck...................... 218,168 *
Henry I. Bryant.................. 14,567 *
Arden B. Engebretsen............. 81,597 *
James B. Fisher.................. 74,077 *
Fernando R. Gumucio.............. 50,879 *
Leon G. Harmon................... 87,005 *
Victor L. Lund (4)............... 1,226,562 *
David L. Maher................... 654,725 *
John E. Masline.................. 63,197 *
Edward J. McManus................ 106,182 *
Barbara Scott Preiskel........... 56,389 *
Martin A. Scholtens.............. 233,612 *
J. L. Scott...................... 81,437 *
Arthur K. Smith.................. 49,071 *
All directors and executive offi-
cers as a group (23 persons).... 3,913,690 1.4%
</TABLE>
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* Does not exceed one percent of the outstanding shares.
(1) Correspondence to all officers and directors of the Company may be mailed
to 299 South Main Street, Salt Lake City, Utah 84111.
(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 of the
1997 fiscal year end: Ms. Beck--91,666; Mr. Lund--195,000; Mr. Maher--
126,666; Mr. McManus--62,983; Mr. Scholtens--91,666; and all directors and
executive officers as a group (23 persons)--875,586; 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, 1997: Ms. Beck--0; Mr. Lund--0; Mr. Maher--
23,339; Mr. McManus--31,629; Mr. Scholtens--0; and all directors and
executive officers as a group (23 persons)--191,559.
(3) On January 31, 1998, there were 273,606,510 shares of Common Stock issued
and outstanding.
(4) Of the total number of shares beneficially owned by Mr. Lund, 249,376
shares are subject to put and call options with a securities broker,
pursuant to which (i) on June 16, 1999 Mr. Lund will have the right to put
124,688 shares of Common Stock to the broker at $21.654 per share, and the
broker will have the right to call 124,688 shares of Common Stock at
$29.065 per share; and (ii) on June 16, 2000 Mr. Lund will have the right
to put 124,688 shares of Common Stock to the broker at $21.654 per share,
and the broker will have the right to call 124,688 shares of Common Stock
at $31.446 per share. The puts and calls will be settled in cash on the
respective settlement dates.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and greater than 10% shareholders to file
reports of ownership and changes in ownership of Common Stock with the SEC and
the New York Stock Exchange and to provide the Company with copies of such
reports. Based solely on a review of these reports and of certifications
furnished to the Company, the Company believes that all of these reporting
persons complied with their filing requirements for the Company's 1997 fiscal
year.
4
<PAGE>
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held a total of ten meetings during fiscal year 1997.
The Board had as standing committees on April 1, 1998, an Audit Committee, a
Compensation and Stock Option Committee, and a Nominating and Board Affairs
Committee. During fiscal year 1997, 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.
Audit Committee
The Audit Committee is composed of seven non-employee directors. It
recommends to the Board the selection of the independent certified public
accountants for the Company, subject to ratification by the shareholders at
the Annual Meeting; reviews the audit activities of the independent certified
public accountants and the Company's internal audit staff, the scope of non-
audit functions to be performed by the independent certified public
accountants and the financial and accounting control policies and practices of
the Company; reviews certain related party transactions; and periodically
meets with the independent certified public accountants, internal audit staff
and management. During fiscal 1997, the Audit Committee met four times. Its
current members are: John E. Masline (Chairman), Pamela G. Bailey, Henry I.
Bryant, Arden B. Engebretsen, Fernando R. Gumucio, J. L. Scott and Arthur K.
Smith.
Compensation and Stock Option Committee
The Compensation and Stock Option Committee is composed of six non-employee
directors. It is responsible for administering the Company's Board and
shareholder approved compensation plans and for setting compensation of
officers. During fiscal 1997, the Compensation and Stock Option Committee met
nine times. Its current members are: Leon G. Harmon (Chairman), Arden B.
Engebretsen, James B. Fisher, Fernando R. Gumucio, John E. Masline and Barbara
S. Preiskel.
Nominating and Board Affairs Committee
The Nominating and Board Affairs Committee is composed of six non-employee
directors. The Committee is responsible for corporate governance functions
including reviewing Board membership, organization, and compensation issues,
and reviewing and evaluating the effectiveness, procedures and practices of
the Board and its members. This Committee also 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 and
Board Affairs 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 and Board Affairs
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 1999 Annual Meeting" on
page 20 hereof. During fiscal 1997, the Nominating and Board Affairs Committee
met five times. The members of the Nominating and Board Affairs Committee are:
Barbara S. Preiskel (Chairman), Henry I. Bryant, James B. Fisher, Leon G.
Harmon, J. L. Scott, and Arthur K. Smith.
Benefit Plans Committee
In addition to the foregoing standing committees of the Board, the Company
has a Benefit Plans Committee composed of two employee directors (Victor L.
Lund and David L. Maher) and six members of management. The members of this
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 Company's bonus plans. The
Benefit Plans Committee held four meetings in fiscal year 1997.
5
<PAGE>
Investment Management Subcommittee
The Investment Management Subcommittee of the Benefit Plans Committee is
composed of four directors, three members of management and four 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. During fiscal 1997, the Investment Management Subcommittee met
twice. The following directors are current members of this Committee: James B.
Fisher, Leon G. Harmon, Victor L. Lund, and John E. Masline.
DIRECTORS' COMPENSATION
Fees
Employee directors receive no additional compensation other than their
normal salary for serving on the Board or its Committees. Until July 1, 1997,
all other directors received an annual retainer fee of $80,000. On July 1,
1997, the cash portion of the annual retainer was reduced from $80,000 to
$40,000, and non-employee directors became entitled to receive stock and
options under the American Stores Company Stock Plan for Non-Employee
Directors, which was approved by the shareholders at the 1997 Annual Meeting.
Under this plan, non-employee directors receive an annual grant of 2,000
shares of the Company's Common Stock (the "Retainer Stock"), which is
forfeited if the non-employee director terminates service prior to the next
shareholders' meeting at which directors are elected. Non-employee directors
also receive an annual grant of options to acquire 1,200 shares of the
Company's Common Stock at the market price for the stock on the date of grant
(the "Retainer Options") if they meet the minimum stock ownership requirement
of 6,000 shares. New directors have three years to meet the minimum stock
ownership requirement. The Retainer Options vest in two equal annual
installments of 600 shares each beginning on the date of the next annual
shareholders' meeting at which directors are elected. 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.
Plans and Programs
Deferred Compensation Plan. Non-employee directors may defer the
compensation they earn for Board service until after they are no longer a
director. Any amounts they defer earn interest during the period of deferral
at a stated fluctuating rate.
Health Program. 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.
Director Stock Plan. At the 1997 Annual Meeting, the shareholders approved
the American Stores Company Stock Plan for Non-Employee Directors (the
"Director Stock Plan"). Under the Director Stock Plan, non-employee directors
receive annual grants of Retainer Stock and Retainer Options, as described
above under the caption "Fees." In connection with the adoption of the
Director Stock Plan, the Retirement Plan for Non-Employee Directors was
terminated, and the non-employee directors were credited with the following
amounts of Common Stock in a deferred stock account under the Director Plan to
compensate them for their respective interests in the terminated plan: Mr.
Bryant--6,500 shares; Mr. Engebretsen--23,000 shares; Mr. Fisher--24,000
shares; Mr. Gumucio--10,000 shares; Mr. Harmon--24,000 shares; Mr. Masline--
23,000 shares; Mrs. Preiskel--24,000 shares; Mr. Scott--8,000 shares; and Mr.
Smith--7,000 shares. Ms. Bailey did not participate in the terminated
retirement plan. The directors are entitled to receive the stock on the later
of the date he or she reaches age 65 or the date he or she ceases to serve as
a director, unless there first occurs a Change of Control (as defined in the
Director Stock Plan) or the director dies.
6
<PAGE>
Directors' Former Stock Purchase Plan. The Board of Directors Stock Purchase
Incentive Plan (the "Directors' Former Stock Plan") was in effect from 1992
through March 21, 1995 and is described in the Company's 1997 proxy statement.
During 1992, certain non-employee directors received full-recourse interest
bearing loans for the purchase of Common Stock pursuant to the terms of the
Directors' Former Stock Plan. Messrs. Engebretsen, Fisher, Gumucio, Harmon and
Masline and Mrs. Preiskel each received a loan in the amount of $348,750.00
with an interest rate of 7.04%. Messrs. Bryant and Smith received loans with
an interest rate of 6.15% for $65,344 and $435,625, respectively. The
Directors' Former Stock Plan also entitled the participating directors to
receive a deferred cash incentive award, which was generally payable at the
end of a five-year performance cycle. The deferred award had to be applied
toward repayment of the loan. During fiscal 1997, the five-year performance
cycle ended and the participating directors each received a deferred award,
which was applied toward repayment of their loans. Messrs. Engebretsen,
Fisher, Gumucio, Harmon and Masline, and Mrs. Preiskel each received a
deferred award in the amount of $351,765 for the performance cycle that ended
in June 1997. Messrs. Bryant and Smith received deferred awards of $57,680 and
$384,530, respectively, for the performance cycle that ended in December 1997.
The after-tax amount of the deferred awards was applied toward repayment of
the directors' loans, and the balance of the loans are payable in three equal
installments on the respective anniversaries of the dates the shares were
purchased. The following directors used personal funds to pay their loans in
full on the indicated dates and for the indicated amounts: Mr. Harmon--June
20, 1997--$152,650; Mrs. Preiskel--June 26, 1997--$287,460. As of January 31,
1998, the aggregate outstanding balance of loans made pursuant to the
Directors' Former Stock Plan was $1,483,264, which includes accrued and unpaid
interest. The largest aggregate amount outstanding during the fiscal year was
$3,827,187.
Other Arrangements
In 1995, the Company entered into a five-year consulting agreement with Mr.
L. S. Skaggs, a director of the Company until April 1997 and Chairman of the
Board until June 1995. The agreement requires Mr. Skaggs to provide consulting
and advisory services to the Company upon request. Mr. Skaggs is paid $750,000
per year under the agreement and is reimbursed for reasonable costs and
expenses in connection with the maintenance and operation of an office, which
totaled $52,365 during the 1997 fiscal year. Mr. Skaggs is also entitled to
receive the same perquisites that are made available to the Company's senior
executive officers in accordance with its policies and practices. Mr. Skaggs
may not disclose the Company's proprietary and confidential information, and
may not perform services in any capacity for any retail grocery or drug store
business until after July 31, 2001 unless the Company's Board of Directors
gives its prior consent. At the beginning of the 1997 fiscal year, the Company
negotiated with Mr. Skaggs for the purchase of the Common Stock owned by Mr.
Skaggs, certain of his family members and certain family and charitable
trusts. The stock transaction was completed on April 8, 1997, following which
Mr. Skaggs resigned as a director and ceased to be affiliated with the
Company. During the 1997 fiscal year, the Company did not ask Mr. Skaggs to
provide consulting services to it, and no such services were provided.
Don L. Skaggs served as a director of the Company from October 1994 until
April 9, 1997 and served as an Executive Vice President of the Company until
June 13, 1997, at which time he resigned as an officer and employee of the
Company and his employment agreement terminated. During 1995, Mr. Skaggs
received a full-recourse interest bearing loan in the amount of $1,533,750
with an interest rate of 7.75% for the purchase of Common Stock pursuant to
the terms of the Key Executive Stock Purchase Incentive Plan (the "Executive
Plan"), which is described in the Company's 1997 proxy statement. On June 18,
1997, Mr. Skaggs received a deferred award of $258,766 under the Executive
Plan, the after-tax amount of which was applied toward repayment of the loan.
Mr. Skaggs used personal funds in the amount of $1,583,381 to pay the
remaining balance of the loan on that date.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table shows compensation paid by the Company to the Chairman
of the Board and Chief Executive Officer and the four other most highly
compensated executive officers at January 31, 1998 for services performed by
such individuals in all capacities in which they served during the last three
fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION (1)
------------------------------
ANNUAL COMPENSATION (1) AWARDS PAYOUTS
---------------------------- -------------------- ---------
RESTRICTED
NAME AND PRINCIPAL OTHER ANNUAL STOCK LTIP ALL OTHER
POSITION AT END OF 1997 SALARY BONUS COMPENSATION AWARDS ($) OPTIONS/ PAYOUTS COMPENSATION
FISCAL YEAR YEAR ($) ($) (2) ($) (3) (4) SARS (#) ($) (5) ($) (6)
----------------------- ---- ------ ------- ------------ ---------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Victor L. Lund.......... 1997 812,500 50,482 99,312 284,526 1,080,000 2,438,816 178,467
Chairman of the 1996 750,000 422,195 -- 0 120,000 138,722 135,047
Board & Chief 1995 750,000 307,175 87,176 0 60,000 384,791 190,011
Executive Officer
Teresa Beck(7).......... 1997 383,333 17,885 -- 124,244 520,000 365,822 69,845
Chief Financial Officer 1996 295,833 125,006 -- 0 40,000 48,141 60,372
1995 266,667 109,218 -- 0 40,000 114,936 32,887
David L. Maher(7)....... 1997 531,667 24,765 -- 188,470 360,000 1,341,349 108,018
President & Chief 1996 512,500 216,439 -- 0 60,000 89,655 121,400
Operating Officer 1995 491,666 201,370 -- 0 50,000 236,464 75,602
Edward J. McManus....... 1997 274,167 12,769 -- 88,015 237,200 0 49,857
Chief Operating Officer 1996 216,320 97,717 -- 0 60,000 31,697 45,635
Procurement & Logistics 1995 177,809 79,743 -- 0 40,000 70,119 38,508
Martin A. Scholtens..... 1997 396,500 18,441 -- 135,588 520,000 365,822 77,410
Chief Operating Officer 1996 366,667 155,017 -- 0 40,000 57,210 68,782
Retail 1995 306,442 121,334 -- 0 40,000 141,950 36,414
</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. The amounts of salary and bonus, which the executives deferred
during fiscal year 1997 to such plans were as follows: Mr. Lund--$224,375;
Ms. Beck--$84,772; Mr. Maher--$99,662; Mr. McManus--$31,563; and Mr.
Scholtens--$109,470.
(2) The bonus amount is payable pursuant to the Company's Key Management
Annual Incentive Plan described in the Compensation Committee Report on
page 14 of this proxy statement. Cash bonuses for services rendered in
fiscal years 1997, 1996 and 1995 have been listed in the year earned, and
were generally paid in April of the following fiscal year. The Company did
not achieve its performance objectives for the 1997 fiscal year, and
bonuses for that year were approximately 15.5% of target.
(3) During the 1997 fiscal year, the Company did not pay or provide
perquisites and other benefits to any named executive officer in an
aggregate amount exceeding $50,000, except Mr. Lund. The perquisites paid
or provided to Mr. Lund included (i) $59,132 for the personal use of
corporate aircraft, the value of which was determined in accordance with
applicable Internal Revenue Service regulations, and (ii) $39,706 as
reimbursement for tax liabilities.
(4) The dollar amount shown equals the number of shares of restricted stock
granted multiplied by the stock price on the grant date. The restricted
shares were granted in lieu of cash awards that would otherwise have been
payable under the Company's Key Management Long-Term Incentive Plans (the
"LTIP Plans") for the three-year performance cycles ending in fiscal 1998
and fiscal 1999, respectively. The amount of the grant was determined by
calculating the estimated cash payout for each of the two plans (based on
actual 1995 and 1996 results and projected results for 1997 and 1998),
increasing such amounts by 15%, and dividing the resulting totals by the
market price for the Company's Common Stock on July 1, 1997, the grant
date. The shares issued in lieu of the cash award under the 1995-96-97
LTIP Plan vested on April 1, 1998, the date the cash bonus would have been
paid, and the shares issued in lieu of the cash award under the 1996-97-98
LTIP Plan will vest on April 1, 1999. During 1997, the LTIP Plans were
replaced by the
8
<PAGE>
Performance Incentive Plan described on page 15. The restricted shares vest
in the indicated amounts on April 1, 1998 and April 1, 1999, respectively:
Mr. Lund: 4,079--7,359; Ms. Beck: 1,668--3,326; Mr. Maher: 2,709--4,867;
Mr. McManus: 1,179--2,359; and Mr. Scholtens: 1,867,--3,583. At the end of
fiscal 1997, the executives' restricted shares had the following market
values: Mr. Lund--$248,776; Ms. Beck--$108,619; Mr. Maher--$164,778; Mr.
McManus--$76,951; and Mr. Scholtens--$118,537. Dividends are paid on the
restricted shares at the same rate payable to Common Shareholders and
therefore are not reflected in the amounts reported under applicable SEC
rules.
(5) The 1997 LTIP payout amounts represent the performance portion of the
deferred cash incentive awards paid at the conclusion of the five-year
performance cycle under the Key Executive Stock Purchase Incentive Plan
described in this proxy statement in the Compensation Committee Report and
the section captioned "Certain Relationships and Related Transactions."
Such awards were determined based on the relative performance of the
Company's Common Stock over the five-year performance cycle and constitute
56.25% of the possible performance awards. The 1996 and 1995 LTIP payout
amounts represent amounts paid pursuant to the Company's former LTIP
Plans.
(6) The compensation reported represents (a) Company contributions under ASRE,
(b) Company contributions under SERP, and (c) the dollar value of Company
paid term life insurance premiums for the executives. The amounts
contributed by the Company during fiscal year 1997 to the executives' ASRE
and SERP accounts, and the insurance premiums paid were as follows: Mr.
Lund--$16,819, $156,675, $4,973; Ms. Beck--$16,819, $50,680, $2,346; Mr.
Maher--$16,819, $87,945, $3,254; Mr. McManus--$16,819, $31,360, $1,678;
and Mr. Scholtens--$16,819, $58,164, $2,427.
(7) On March 17, 1998, the Board of Directors elected Ms. Beck President of
the Company and elected Mr. Maher a director of the Company and Chief
Operating Officer.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
-------------------------------------------------------
% OF TOTAL GRANT
OPTIONS/SARS EXERCISE DATE
OPTIONS/SARS GRANTED TO OR BASE PRESENT
GRANTED EMPLOYEES IN PRICE EXPIRATION VALUE
NAME (#)(2) FISCAL YEAR ($/SH) DATE ($)(3)
---- ------------ ------------ -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Victor L. Lund.......... 772,000 5.85% 22.5000 2/24/06 4,516,200
308,000 2.33% 23.7188 2/24/06 1,866,480
Teresa Beck............. 372,000 2.82% 22.5000 2/24/06 2,176,200
148,000 1.12% 23.7188 2/24/06 896,880
David L. Maher.......... 360,000 2.73% 22.5000 2/24/06 2,106,000
Edward J. McManus....... 170,000 1.29% 22.5000 2/24/06 994,500
67,200 .51% 23.7188 2/24/06 407,232
Martin A. Scholtens..... 372,000 2.82% 22.5000 2/24/06 2,176,200
148,000 1.12% 23.7188 2/24/06 896,800
</TABLE>
- --------
(1) The options generally become exercisable in annual increments of one-
quarter of the total grant beginning on February 2, 2002, however, vesting
may be accelerated based on stock ownership requirements and the
achievement by the Company of performance goals as more fully described on
page 16 under the caption "Stock Option Plans." If a Change of Control (as
defined in the stock option plan(s) under which the options were granted)
were to occur before those dates, however, the options would become
immediately exercisable as long as the stock ownership requirements had
been continuously satisfied.
(2) These options were granted under the Key Executive Equity Program
described on page 16 hereof. The options were granted in two installments:
the first in February 1997 under the 1989 Stock Option Plan and the second
in June 1997 following shareholder approval of the 1997 Stock Option Plan.
(3) Present value determinations were made using the Black-Scholes option
pricing model based on the following assumptions: expected stock-price
volatility factors of 21.5% and 20.8% for the two grants, a risk-free rate
of return of 6.25%, a dividend yield of 1.77%, and the actual option term
of nine 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.
9
<PAGE>
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>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS/SARS
SHARES OPTIONS/SARS AT FISCAL AT FISCAL YEAR END ($)
ACQUIRED ON YEAR END (#) (2)
EXERCISE VALUE ---------------------------- -------------------------
NAME (#) REALIZED ($) EXERCISABLE UNEXERCISABLE(1) EXERCISABLE UNEXERCISABLE
---- ----------- ------------ ----------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Victor L. Lund.......... 0 0 40,000 1,220,000 153,748 881,246
Teresa Beck............. 0 0 13,333 586,667 51,248 485,000
David L. Maher.......... 0 0 20,000 450,000 76,874 631,873
Edward J. McManus....... 6,000 97,031 20,000 317,200 76,874 536,248
Martin A. Scholtens..... 0 0 13,333 586,667 51,248 485,000
</TABLE>
- --------
(1) If a Change of Control (as defined in the stock option plan(s) under which
the options were granted) were to occur before these options otherwise
become exercisable, the options would become immediately exercisable
subject to satisfaction of the stock ownership requirements with respect
to options granted in 1997. Mr. Maher's and Mr. Scholtens' remaining
unvested options vest on April 1, 1999 and April 1, 2000, respectively.
(2) Represents the difference between the closing price of the Company's
Common Stock at 1997 fiscal year-end ($21.75 per share) and the exercise
price of the options.
PENSION PLANS
The following tables show the estimated annual special retirement benefits
payable to the named executive officers other than Mr. Lund pursuant to their
employment agreements with the Company. The executives are entitled to receive
an annual payment from the Company for twenty years beginning at the later of
age 57 or upon termination of employment with the Company. The 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
annual 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 became entitled to the minimum benefit
when they completed three years of service under the employment agreements in
November 1997 and will be entitled to the maximum benefit after they have
completed ten years of service in November 2004. Executives who are terminated
for cause or who voluntarily terminate employment are entitled to a retirement
benefit equal to the amounts vested at that time. Executives who are
terminated without cause or in connection with a change in control will be
deemed to have served for the full ten-year period and will be entitled to the
maximum benefit. If the executive dies, his or her estate will receive a lump
sum payment equal to the present value of the remaining retirement benefit to
which the executive would otherwise be entitled. The employment agreements are
described in more detail under the caption "Employment Agreements" immediately
following this section.
Mr. Lund's annual special retirement benefit is described in the section
below captioned "Employment Agreement with Chief Executive Officer."
10
<PAGE>
The following table illustrates the estimated annual benefit payable to Mr.
Maher, which ranges from 12% to 40% of his two-year average TCO. As of January
31, 1998, Mr. Maher's average TCO for the 1996 and 1997 fiscal years was
$780,278, and he had been credited with three full years of service under his
employment agreement and is entitled to the minimum 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>
$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
</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
TCOs. Mr. Scholtens' agreement provides for a minimum annual payment of
$225,000 if he continues to be employed by the Company through April 1, 2000.
As of January 31, 1998, the two-year average TCOs of Ms. Beck and Mr.
Scholtens for the 1996 and 1997 fiscal years were $505,704 and $566,069
respectively. As of January 31, 1998, each of such persons had been credited
with three years of service under his or her employment agreement and is
entitled to the minimum retirement benefit. Mr. McManus' employment agreement
does not provide for an annual special 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>
$500,000................ 45,000 60,000 75,000 90,000 105,000 120,000 135,000 150,000
$550,000................ 49,500 66,000 82,500 99,000 115,500 132,000 148,500 165,000
$600,000................ 54,000 72,000 90,000 108,000 126,000 144,000 162,000 180,000
$650,000................ 58,500 78,000 97,500 117,000 136,500 156,000 175,500 195,000
$700,000................ 63,000 84,000 105,000 126,000 147,000 168,000 189,000 210,000
</TABLE>
EMPLOYMENT AGREEMENTS
Employment Agreement with Chief Executive Officer
The Company employs Mr. Lund as its Chairman and Chief Executive Officer
under an employment agreement dated November 1, 1994, as amended. The
agreement expires on October 31, 2002 and will be automatically renewed for
additional terms of two years each unless the Company provides notice of
termination three years prior to the termination date.
The agreement provides for compensation in the form of an annual base salary
and participation in the Company's annual and long term bonus plans and other
benefit plans available to senior executive officers. Mr. Lund is also
entitled to a special long-range retirement benefit (SLRRP) commencing the
later of November 1, 2002, or the date Mr. Lund's employment terminates. The
SLRRP benefit vests over an eight-year period ending October 31, 2002 and will
be deemed to be fully vested in certain instances including Mr. Lund's death
or disability, the termination of his employment without cause, or the removal
of Mr. Lund as Chief Executive Officer following a Change in Control (as
defined in the agreement). The SLRRP benefit, which if fully vested would
equal $700,000 as adjusted for inflation through the date his employment
terminates, will be payable to Mr. Lund for life and thereafter to his wife
for her life if he should die before she does. The payments terminate if Mr.
Lund competes with the Company. In certain extraordinary events, the Company
will pay Mr. Lund the present value of the remaining SLRRP benefit on an
after-tax basis together with a gross-up payment as necessary to place Mr.
Lund in the same position as if the payments had been made on an annual basis.
The Company has established an irrevocable grantor trust for Mr. Lund's SLRRP
benefits.
11
<PAGE>
Following the termination of Mr. Lund's employment, the Company will provide
medical benefits for Mr. Lund and his wife and reimburse Mr. Lund for his
reasonable office and secretarial costs for a period of ten years.
If Mr. Lund's employment is terminated other than for "cause" or if he
resigns for "good reason," Mr. Lund will receive a prorated portion of his
annual salary and bonuses through the termination date and will receive a lump
sum payment equal to the value of salary and target bonuses that would have
been payable for the remainder of the term. In such event, Mr. Lund's SLRRP
benefit will also become fully vested.
Mr. Lund is subject to certain confidentiality and non-competition
restrictions under the agreement.
Employment Agreements With Other Named Executive Officers
Ms. Beck and Messrs. Maher, McManus and Scholtens have also entered into
Employment Agreements (the "Agreements") with the Company. A description of
the Agreements, as amended, follows.
Term. The Agreements expire on November 1, 2000 and will be automatically
renewed for additional terms of one year each unless the Company provides
notice of termination two years prior to the termination date
Payments Under the Agreement. The Agreements provide for compensation in the
form of an annual base salary and participation in the Company's annual and
long-term bonus plans and other bonus plans available to senior executive
officers. If an executive is terminated without cause, he or she is entitled
to a lump sum payment in an amount equal to his or her base salary and bonuses
prorated through the termination date and an amount equal to three times his
or her TCO. The executives are subject to certain confidentiality and non-
competition restrictions under the Agreements.
Special Retirement Benefit. The Agreements provide the executives with a
special long-range retirement benefit which is described in detail under the
caption "Pension Plans" immediately preceding this section.
Duties and Job Titles Under the Agreements. 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. However,
the executives must remain officers of the Company or its subsidiaries and
must perform duties of an executive nature equal in status, dignity and
responsibility to their duties at the time the Agreements were entered into.
CHANGE OF CONTROL AGREEMENTS
The Company has entered into Change of Control Agreements with certain
senior officers of the Company and its subsidiaries, including the executive
officers named in the Summary Compensation Table. The Change of Control
Agreements become effective upon a Change of Control (as defined in the Change
of Control Agreements) or in the event of a 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. A Change of Control and an involuntary termination or constructive
termination is required to trigger a severance benefit. 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
12
<PAGE>
severance benefit payable to the named executive officers is three times the
executive's annual TCO and is subject to certain tax reimbursements if the
executive's Change of Control benefit is subject to special excise taxes.
However, any executive whose total severance payment from all sources exceeds
the permitted amount by not more than 10% would not be entitled to
reimbursement for excise tax and would have other severance payments reduced
to the level where it does not trigger the excise tax.
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 six 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 made by the Committee are
reported to the Board.
The Committee's report summarizes the Company's compensation policies for
its executive officers during the 1997 fiscal year.
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 executive officers,
including Mr. Lund:
. 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 all Company
officers, including Mr. Lund and the executives named in the Summary
Compensation Table. In reviewing the individual performance of the executives
whose compensation is detailed in this proxy statement as well as the
Company's other executive officers (other than Mr. Lund), the Committee takes
into account the views of Mr. Lund, other members of management and outside
consultants to the extent deemed appropriate by the Committee. During the 1997
fiscal year, the Company's executives were compensated through base salaries,
bonuses paid in cash under the Annual Bonus Plan, bonuses paid in restricted
stock in lieu of cash bonuses under the Key Management Long Term Incentive
Plan ("LTIP"), the grant of stock options, and, for four of the five named
executive officers, the maturity of the Company's five-year Key Executive
Stock Purchase Incentive Plan (the "Key Executive Plan").
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 Mr. Lund and its
other executive officers that are generally based on median
13
<PAGE>
compensation paid to individuals holding similar positions at other companies
in the retail food and drug industry and companies generating total sales
similar to those generated by the Company. This comparison group includes but
is not limited to some of the companies comprising the Peer Group Index
described on page 18. 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). During 1997, Mr. Lund's bonus target was 60% of his
base salary (40% from the annual bonus plan and 20% from the long-term
incentive plan). 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 or the general economy also
performs well, it is anticipated that executive compensation paid by the
Company's peers and by companies generating similar sales may also increase
above the amounts reflected in the historical surveys. In years such as 1997
when the Company does not meet its targets, the compensation paid to
executives will drop to the low end of the compensation surveys.
Base Salaries
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 industry 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.
In April 1997, the Committee approved an increase in Mr. Lund's annual base
salary to $825,000, which was the first increase in Mr. Lund's base salary
since 1993. The increase in Mr. Lund's salary together with bonuses at the
target rate under the Company's Annual Incentive Plan and Performance
Incentive Plan resulted in a target compensation objective for Mr. Lund,
which, based on the surveys, was within the median range of compensation paid
to CEOs of other companies in the retail food and drug industry and companies
of similar size. However, since the bonus component of Mr. Lund's compensation
is tied to performance and the Company did not meet its target objectives
during 1997, the compensation actually received by Mr. Lund was below such
median range. The Committee believes that the increase in Mr. Lund's target
compensation objective 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 leadership demonstrated by Mr. Lund in connection with the
Company's April 1997 stock repurchase and secondary stock offering, the
Company's results of operations, earnings per share, and strategic plans for
the future. In March 1998, Mr. Lund's annual base salary was increased to
$850,000.
Annual Bonus Plan
The Key Management Annual Incentive Plan is the Company's annual bonus
program (the "Annual Plan") for executive officers and key management. At the
beginning of each year, the Committee establishes minimum, target and maximum
performance goals for the Company on which a bonus will be paid. The Committee
determines the percentage of base salary for the fiscal year that will be
payable as a bonus (the "Target Bonus") to each participant in the Annual Plan
if the Company exactly meets its target. This determination is based on the
individual's job classification and responsibilities. The Target Bonus for Mr.
Lund during 1997 was 40% of his average base salary, and the Target Bonus for
the other four named executive officers was 30% of their respective average
base salary. The amount of the Target Bonus actually paid to the participants
varies based on
14
<PAGE>
the extent to which the Company meets, exceeds or fails to achieve its target.
The Annual 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 less than a stated percentage of the target, and the maximum
bonus is paid if the Company achieves more than a stated percentage of its
target. In March 1998, Mr. Lund's target bonus was increased to 50%.
The Annual Plan for fiscal 1997 established a target based in part on
earnings before tax, and in part on an increase in comparable store sales
above the prior year. During the 1997 fiscal year, the Company achieved only
98.1% of its sales target and 78.6% of its earnings target. As a result, the
Target Bonus paid to Mr. Lund was 6.2% of his base salary for the 1997 fiscal
year or approximately 15.5% of his target bonus. The Target Bonus paid to the
other four executives named in the summary compensation table was 4.6% of each
individual's base salary for the 1997 fiscal year or approximately 15.5% of
their respective target bonuses.
Long-Term Performance Incentive Plan
LTIP, which was in effect prior to 1997, was designed to provide incentive
to key executives who had a significant impact on the long-term results of the
Company. LTIP provided for three-year performance cycles with a bonus being
paid to the participants at the conclusion of each cycle based on the extent
to which the Company met, exceeded or failed to meet its targeted goals.
Target bonuses under LTIP were generally 20% of a participant's annual base
salary.
During 1997, LTIP was replaced by the Performance Incentive Plan discussed
below, and participants in the 1995-96-97 and 1996-97-98 LTIP performance
cycles were given the option of accepting awards of restricted stock in lieu
of the cash awards that would otherwise have been payable at the conclusion of
such cycles. The amount of the award was determined by calculating the
estimated cash payout for each of the two cycles (based on actual 1995 and
1996 results and projected results for 1997 and 1998), increasing such amounts
by 15% (to provide an offset for the loss of benefits resulting from the
payment of the award in stock rather than cash such as the loss of individual
and Company contributions under the Company's 401(k) plan), and dividing the
resulting totals by the market price for the Company's Common Stock on July 1,
1997, the grant date. The shares issued in lieu of the cash award under the
1995-96-97 LTIP vested on April 1, 1998, the date the cash bonus would have
been paid, and the shares issued in lieu of the cash award under the 1996-97-
98 LTIP will vest on April 1, 1999. The performance measurement for the 1995-
96-97 performance cycle was based 100% on an earnings per share target for the
three-year period and on June 17, 1997, the Company was not projected to
achieve its target. As a result, the restricted stock award paid to Mr. Lund
and the other four named executive officers was based on a projected LTIP
payout equal to 13.2% of their annual base salaries or approximately 65.8% of
their respective target bonuses.
Performance Incentive Plan
In February 1997, the 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 that must be held for a period of two years. The
one-year performance period coupled with the two-year holding period results
in a three-year performance cycle similar to that under the Company's previous
LTIP. Under PIP, the Committee establishes certain performance objectives
within three months after the beginning of each fiscal year. At the time the
performance objectives are established, the Committee also establishes 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
establishes 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. If the Company exactly achieves the performance goals,
the participants receive a bonus with a basic dollar value equal to 20%
15
<PAGE>
of their average annual base salary. 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 and are forfeited if the participant's employment terminates. 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 the release of the Company's
annual earnings. The Target Bonus for Mr. Lund and the other four named
executive officers is 20% of their respective average base salary.
The performance target for bonus amounts payable under the 1997 PIP was
based 100% on earnings per share for fiscal 1997. The Company did not achieve
the minimum performance objective and, accordingly, no shares of restricted
stock were awarded for fiscal 1997 to Mr. Lund or the other four named
executive officers under the 1997 PIP.
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 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 1997, the Committee authorized broad-based grants of stock options to
officers of the Company, including Mr. Lund and the four other named executive
officers, in connection with a new stock-based management incentive program
known as the Key Executive Equity Program ("KEEP"). KEEP was designed in part
to provide continuing incentive to those officers whose awards under the Key
Executive Stock Purchase Incentive Plan (the "Key Executive Plan") were
maturing during the 1997 year. KEEP links executive incentive compensation to
shareholder return by providing for the grant of market-priced stock options
that would ordinarily begin to vest on the fifth anniversary of the grant date
but that 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
executive satisfies the foregoing minimum stock ownership requirement and the
Company achieves performance goals that are established annually by the
Committee. The options granted under KEEP to Mr. Maher and Mr. Scholtens
provide that all unvested options will vest on April 1, 1999 and April 1,
2000, respectively. During 1997, the performance goal was not achieved, and,
therefore, the options subject to accelerated vesting based on performance
during 1997 will not vest until February 24, 2002, the fifth anniversary of
the grant date. The named executive officers were granted options under KEEP
pertaining to an aggregate of 2,717,200 shares of the Company's Common Stock
which represented 20.6% of the total number of options granted as shown in the
table on page 9. The options were granted at the market price for the
Company's common stock on the respective grant dates. 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 nor did it reprice any outstanding options or SARs during 1997. The
Committee has adopted a policy against the repricing of outstanding stock
options.
Key Executive Plan
The Key Executive Plan was approved by the shareholders in 1992 and is
described in detail in the Company's 1997 proxy statement. The Key Executive
Plan provided for loans by the Company to participants for the purpose of
purchasing shares of the Company's Common Stock and entitled participants to
receive a deferred cash incentive award payable at the end of a five-year
performance cycle, the proceeds of which would be used to repay the loans.
One-half of the deferred award was based on the participant's continued
service with
16
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the Company during the performance cycle. The other half of the deferred award
was 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. On June
16, 1997, the five-year performance cycle ended for Mr. Lund and three of the
four named executive officers. The Company's total shareholder return versus
the members of the peer group ranked in the 62.5 percentile, and therefore
56.25% of the performance award was earned. The after-tax amount of the
deferred awards received by Mr. Lund and the three executive officers was
applied toward repayment of their loans. The terms of the loans and the
amounts of the deferred awards received by Mr. Lund and the three named
executive officers are described in this proxy statement under the caption
"Certain Relationships and Related Transactions." Mr. McManus, the fifth named
executive officer, was not a participant in the Key Executive Plan.
Other Compensation Plans
The executive compensation program also includes other benefit plans that
are generally available to employees of the Company, including a 423(b)
employee stock purchase plan, 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; however, the
employment agreements of certain key executive officers, including the
executives listed in the Summary Compensation Table, provide such persons with
a special annual retirement benefit. The executives listed in the Summary
Compensation Table are also eligible to participate in a supplemental
executive retirement plan, which is a non-qualified plan intended to provide
benefits where limitations are imposed upon Company contributions to qualified
plans on behalf of certain employees due to limits under the Federal tax laws.
Except for the Company's profit sharing/401(k) pension plan, none of the
foregoing plans is tied to Company performance.
Deductibility of Compensation Under 162(m)
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. Compensation paid to the Company's
executives under the Annual Incentive Plan, the Key Executive Plan and the
Company's stock option and stock award plans, including PIP and KEEP, are
exempt from the deductibility limits of Section 162(m). Compensation payable
under the Company's previous LTIP plans for the 1995-96-97 and 1996-97-98
cycles is not deductible because such plans were implemented in 1995 and 1996,
respectively, and were not submitted to the shareholders for approval in 1997
with the other plans. During the 1997 fiscal year, no named executive officer
other than Mr. Lund was paid more than $1 million in compensation outside of
such plans and none of the compensation paid to such executive officers was
non-deductible. During 1997, $268,090 of the compensation paid to Mr. Lund was
not deductible, which non-deductible amount consisted primarily of the payout
in restricted stock under the 1995-96-97 LTIP and perquisites that were
reportable as income to Mr. Lund.
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.
Submitted by the Compensation and Stock Option Committee of the Board of
Directors of the Company.
Leon G. Harmon, Chairman Fernando R. Gumucio
Arden B. Engebretsen John E. Masline
James B. Fisher Barbara S. Preiskel
17
<PAGE>
AMERICAN STORES COMPANY STOCK PRICE PERFORMANCE
The graph below compares the five-year total return to shareholders (stock
price appreciation plus reinvested dividends) for the Company's Common Stock
with the comparable return of two indices: the Standard & Poor's Composite 500
Stock Index and a group of nine publicly-traded retail food and/or drug
companies (the "Peer Group"). The Peer Group includes the following companies:
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.
During fiscal 1997, Smith's Food & Drug Centers, Inc. and The Vons Companies,
Inc. ceased to be publicly traded and, therefore, no returns for those
companies are included in fiscal 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. The graph assumes that you
invested $100 in the Company's Common Stock and in each of the indices on
January 29, 1993 and that all dividends were reinvested.
[GRAPH APPEARS HERE]
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following non-employee directors served on the Compensation and Stock
Option Committee during fiscal 1997: Leon G. Harmon (Chairman), Arden B.
Engebretsen, James B. Fisher, Fernando R. Gumucio, John E. Masline and Barbara
S. Preiskel. There were no Compensation Committee interlocks with respect to
any member of that Committee during fiscal 1997.
18
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 8, 1997, the Company purchased 24,444,444 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 $22.50 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 30.8 million additional shares of
Common Stock held by the Selling Stockholders. The secondary offering was
completed on April 8, 1997 after the sale of 30,815,820 shares by the Selling
Stockholders and 4,622,372 shares sold 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 1992, Mr. Lund, three of 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 Key Executive Plan,
which is described in the Company's 1997 proxy statement. The loans have
eight-year terms and accrue interest at the Applicable Federal Rate for eight-
year loans with interest compounded annually, as determined under Section
1274(d) of the Internal Revenue Code of 1986, as amended, in effect on the
date they purchased their stock. Interest is payable prior to maturity to the
extent of dividends paid on the shares purchased under the Key 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
Key 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, is payable in three equal installments (plus
interest) on the sixth, seventh and eighth anniversaries of the purchase date.
During fiscal 1997, the performance cycle for Mr. Lund and three of the named
executive officers ended and each received a deferred award in the indicated
amount, which was applied toward repayment of their loans: Mr. Lund--
$6,774,490; Ms. Beck--$1,016,173; Mr. Maher--$3,725,969; and Mr. Scholtens--
$1,016,173. Mr. McManus was not a participant in the Key Executive Plan. As of
January 31, 1998, the outstanding balances of the loans (including accrued and
unpaid interest) made to Mr. Lund and the other three executives were: Mr.
Lund--$5,248,089; Ms. Beck--$787,213; Mr. Maher--$2,886,449; and Mr.
Scholtens--$787,213. As of January 31, 1998, the aggregate outstanding
balances of the loans (including accrued and unpaid interest) made pursuant to
the Key Executive Plan was $15,784,939. The largest aggregate amount
outstanding during the fiscal year was $34,076,583.
In connection with the KEEP program described on page 16, the Company made
loans to 18 participants to assist them in meeting the minimum stock ownership
requirement under such program. The participants were required to sign full
recourse promissory notes, which are for a term of five years and accrue
interest at an initial rate of 8.5%, reset annually at the then current prime
rate. During the term of the loans, 20% of the gross amount of any cash
bonuses to which the participants become entitled will be withheld and applied
first to accrued and unpaid interest and second to the reduction of principal.
During fiscal year 1997, Mr. McManus received a KEEP loan of $209,484. As of
March 31, 1998, Mr. McManus' loan balance was $221,778, which includes accrued
interest.
19
<PAGE>
PROPOSAL 2--TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS FOR FISCAL YEAR 1998
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 30, 1999. This selection is subject to ratification by the
shareholders. A representative of Ernst & Young LLP will attend the Annual
Meeting to answer questions. Ernst & Young has served as the Company's
independent certified public accountants since 1975.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS.
SHAREHOLDERS' PROPOSALS FOR 1999 ANNUAL MEETING
If you wish to submit proposals to be included in the Company's 1999 proxy
statement, we must receive them on or before Friday, January 1, 1999. Please
address your proposals to Corporate Secretary, American Stores Company, 299
South Main Street, Salt Lake City, Utah 84111-2203.
Under our By-laws, if you wish to raise a matter before the shareholders at
the 1999 Annual Meeting:
. You must notify the Secretary in writing by not later than April 17, 1999
but not prior to March 18, 1999.
. Your notice must contain the specific information required in our By-
laws.
Please note that these requirements relate only to matters you wish to bring
before your fellow shareholders at the Annual Meeting. They are separate from
the SEC's requirements to have your proposal included in our proxy statement.
If you would like a copy of our By-laws, we will send you one without
charge. Please write to the Corporate Secretary of the Company.
METHOD OF PROXY SOLICITATION
The Company is soliciting this proxy on behalf of its Board of Directors.
D.F. King & Co., Inc., 77 Water Street, New York, New York 10005 has been
hired to assist in the solicitation of proxies for $8,500 plus out-of-pocket
expenses, which will be paid by the Company. Directors, officers, and
regularly engaged employees of the Company may also solicit proxies without
additional compensation therefor.
A list of shareholders entitled to vote will be available for examination at
the meeting by any shareholder for any purpose germane to the meeting. The
list will also be available on the same basis for ten days prior to the
meeting at our corporate headquarters, 299 South Main Street, Salt Lake City,
Utah.
REVOCABILITY OF PROXY
It is important that you return your signed proxy 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. You may revoke your proxy by filing a written notice of
revocation with the Company. You may also revoke your proxy if you attend the
meeting and decide to vote in person. Your vote is important, and we urge you
to mark, sign, date and mail the enclosed proxy in the envelope provided.
Whether or not you plan to attend the meeting, PLEASE MARK, SIGN, DATE AND
PROMPTLY RETURN THE ENCLOSED PROXY CARD.
20
<PAGE>
P AMERICAN STORES COMPANY
R
O THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
X FOR THE ANNUAL MEETING ON JUNE 17, 1998
Y
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 a.m., local time on June 17, 1998, at the Doubletree Hotel, 255 South West
Temple, 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, David L. Maher, John E.
Maeline, Barbara S. Preiskel, J.L. Scott, Arthur K. Smith
(change of address/comments)
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.
(PLEASE SIGN ON REVERSE SIDE)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
AMERICAN STORES COMPANY
- -----------------------
Dear Shareholder:
You are cordially invited to attend the 1998 Annual Meeting of Shareholders of
American Stores Company, which will be held at the Doubletree Hotel, 255 South
West Temple, Salt Lake City, Utah at 10:00 a.m., on Wednesday, June 17, 1998.
The accompanying Notice of Annual Meeting of Shareholders and Proxy Statement
describe the items to be considered and acted upon by the shareholders.
Whether or not you plan to attend this meeting, please sign, date, and return
your proxy form above as soon as possible so that your shares can be voted at
the meeting in accordance with your instructions. If you attend the meeting, you
may revoke your proxy, if you wish, and vote personally. It is very important
that your stock be represented.
Sincerely,
Victor L. Lund
Chairman of the Board and Chief Executive Officer
<PAGE>
[X] PLEASE MARK YOUR | 1755
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
PROPOSALS 1 AND 2.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE |
FOR PROPOSALS 1 AND 2. |
- --------------------------------------------------------------------------------
FOR WITHHELD | FOR AGAINST ABSTAIN | 3. In their
1. Election [ ] [ ] | 2. Approval of [ ] [ ] [ ] | discre-
of | Ernst & Young | tion
Directors | as independent | upon
(See Reverse) | certified | such
For, except vote withheld | public | other
from the following | accountant | matters
nominee(s): | for the | as may
| Company's | properly
| 1998 fiscal | come
| year. | before
| | the
_________________________ | | meeting.
___________________________|_______________________________________|____________
I PLAN TO ATTEND
THE 1998 ANNUAL MEETING [ ]
CHANGE OF ADDRESS/
COMMENTS ON
REVERSE SIDE [ ]
SIGNATURE(S)________________________________ DATE _______________ 1998
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.
- --------------------------------------------------------------------------------
PLEASE VOTE, SIGN AND RETURN THE ABOVE PROXY
AMERICAN STORES COMPANY
ANNUAL MEETING OF SHAREHOLDERS
DATE: JUNE 17, 1998
TIME: 10:00 A.M.
PLACE: DOUBLETREE HOTEL
255 SOUTH WEST TEMPLE
SALT LAKE CITY, UTAH
