SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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/ X / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Fred Meyer, Inc.
- -----------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Fred Meyer, Inc.
- -----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
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FRED MEYER, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS, JUNE 27, 1995
To the Shareholders of Fred Meyer, Inc.:
The annual meeting of the shareholders of Fred Meyer,
Inc., a Delaware corporation, will be held on Tuesday, June 27,
1995 at 1:00 p.m., Pacific Time at the Red Lion Inn (East),
Jantzen Beach, 909 N. Hayden Island Drive, Portland, Oregon for
the following purposes:
1. to elect a Board of Directors for the ensuing year;
2. to vote on approval of proposed amendments to the
Company's 1990 Stock Incentive Plan, as amended, to
increase the number of shares of Common Stock
reserved for issuance under the Plan and make certain
other changes; and
3. to transact such other business as may properly come
before the meeting and at any adjournment thereof.
Only shareholders of record at the close of business on
Monday, May 1, 1995 will be entitled to vote at the Annual
Meeting.
You are respectfully requested to date and sign the
enclosed proxy and return it in the postage prepaid envelope
enclosed for that purpose. You may attend the meeting in person
even though you have sent in your proxy, since retention of the
proxy is not necessary for admission to or identification at the
meeting.
By Order of the Board of Directors
Roger A. Cooke
Senior Vice President, General Counsel
and Secretary
Portland, Oregon
May 5, 1995
PROXY STATEMENT
The mailing address of the principal executive offices of
the Company is P.O. Box 42121, Portland, Oregon 97242. The
approximate date this proxy statement and the accompanying proxy
form are first being sent to shareholders is May 17, 1995.
UPON WRITTEN REQUEST TO ROGER A. COOKE, SENIOR VICE
PRESIDENT, GENERAL COUNSEL AND SECRETARY, ANY PERSON WHOSE PROXY
IS SOLICITED BY THIS PROXY STATEMENT WILL BE PROVIDED WITHOUT
CHARGE A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K.
SOLICITATION AND REVOCABILITY OF PROXY
The enclosed proxy is solicited on behalf of the Board of
Directors of Fred Meyer, Inc., a Delaware corporation, for use at
the Annual Meeting of Shareholders to be held on June 27, 1995
and at any adjournment thereof. The Company will bear the cost
of preparing and mailing the proxy, proxy statement, and any
other material solicited by use of the mails. Officers and
employees of the Company may also solicit proxies by telephone or
personal contact. Copies of solicitation materials will be
furnished to fiduciaries, custodians and brokerage houses for
forwarding to beneficial owners of the stock held in their names.
Any person giving a proxy in the form accompanying this
proxy statement has the power to revoke it at any time before its
exercise. The proxy may be revoked by filing with the Company,
attention Roger A. Cooke, Senior Vice President, General Counsel
and Secretary, an instrument of revocation or a duly executed
proxy bearing a later date. The proxy may also be revoked by
affirmatively electing to vote in person while in attendance at
the meeting. However, a shareholder who attends the meeting need
not revoke his proxy and vote in person unless he wishes to do
so. All valid, unrevoked proxies will be voted at the annual
meeting.
2
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
The Common Stock is the only authorized voting security
of the Company currently outstanding. The record date for
determining holders of Common Stock entitled to vote at the
Annual Meeting is May 1, 1995. On that date there were
26,702,580 shares of Common Stock outstanding entitled to one
vote per share. The Common Stock does not have cumulative voting
rights.
The following table shows ownership of shares of Common
Stock of the Company on March 1, 1995 by the only persons who, to
the knowledge of the Board of Directors, beneficially owned more
than 5% of the Common Stock, and by all officers and directors as
a group:
Number of Approximate
Name Shares(1) Percent
- ---- ------------- -----------
KKR Associates 10,700,038(2) 38.0%
9 West 57th Street
New York, NY 10019
19 Officers and 11,722,984(3) 40.9%
Directors as a group
_______________
<FN>
(1) Shares held directly with sole voting and sole investment
power unless otherwise indicated.
(2) KKR Associates is a limited partnership of which Paul E.
Raether, Michael W. Michelson and Saul A. Fox, directors of
the Company, are three of twelve general partners. Jerome
Kohlberg, Jr., a director of the Company, is a limited
partner of KKR Associates. Shares shown as owned by KKR
Associates are owned of record by FMI Associates Limited
Partnership ("FMI Associates"), of which KKR Associates is
the sole general partner and as to which it possesses 100%
of the voting power and investment power. Messrs. Raether,
Michelson and Fox beneficially own an additional 11,000;
4,000; and 6,000 shares, respectively. Shares shown as
beneficially owned by KKR Associates include 1,566,441
shares which FMI Associates has the right to acquire
pursuant to a presently exercisable option. See "Certain
Transactions."
(3) Includes 2,046,304 shares subject to options that are
currently exercisable or become exercisable within 60 days
of March 1, 1995. Includes 9,159,069 shares for which
beneficial ownership is disclaimed.
3
ELECTION OF DIRECTORS
The directors of the Company are elected at the Annual
Meeting in June to serve for one year and until their successors
are elected. The nominees for director are listed below together
with certain information about each of them.
Name and Principal Number of
Year Occupation or Shares Held
Elected Position with on March 1, Approximate
to Board Company Age 1995(1) Percent
- --------------------- ------------------- ----- --------------- -------------
Saul A. Fox General Partner, 41 10,706,038(2) 38.0%
(1986) Kohlberg Kravis
Roberts & Co.
A. M. Gleason Retired Chief 64 7,208(3) less than
(1992) Executive Officer 1%
of PacifiCorp
Jerome Kohlberg, Jr. General Partner, 69 --(2) --
(1981) Kohlberg & Co.
Roger S. Meier President, 69 19,508(4) less than
(1985) AMCO, Inc. 1%
Michael W. Michelson General Partner, 43 10,704,038(2)(5) 38.0%
(1981) Kohlberg Kravis
Roberts & Co.
Robert G. Miller Chairman of the 50 283,967(6) 1.1%
(1991) Board and Chief
Executive
Officer of the
Company
Paul E. Raether General Partner, 48 10,711,038(2)(7) 38.0%
(1986) Kohlberg Kravis
Roberts & Co.
_______________
<FN>
(1) Shares held directly with sole voting and sole investment
power unless otherwise indicated. Includes shares subject
to options that are currently exercisable or become
exercisable within 60 days of March 1, 1995.
(2) See "Voting Securities and Principal Shareholders."
(3) Includes 1,205 shares subject to the Non-Employee Directors
Stock Compensation Plan.
(4) Includes 5,000 shares owned by Mr. Meier's spouse and 2,500
shares owned by a family partnership of which Mr. Meier is
general partner. Beneficial ownership is disclaimed as to
such shares. Also includes 1,205 shares subject to the
Non-Employee Directors Stock Compensation Plan.
(5) Includes 2,334 shares owned by a family trust. Also
includes 1,666 shares owned by a family trust as to which
ownership is disclaimed.
(6) Includes 1,125 shares owned by Mr. Miller's son. Beneficial
ownership is disclaimed as to such shares.
(7) Ownership is disclaimed as to 11,000 shares, which are owned
by a family trust.
4
Mr. Fox became a general partner of Kohlberg Kravis
Roberts & Co. ("KKR") in 1990 and prior to that time had been an
executive of KKR since June 1984. Mr. Fox is a director of
American Re Corporation and Union Texas Petroleum Holdings, Inc.
Mr. Gleason was until May 1, 1995 Vice Chairman of the
Board of Directors of PacifiCorp, a diversified public utility.
He is also a former president and chief executive officer of
PacifiCorp and Pacific Telecom, Inc., a telecommunications
company. Mr. Gleason is a director of Tektronix, Inc., Blount,
Inc. and Comdial Corporation.
Mr. Kohlberg was a general partner of KKR from its
organization in 1976 until 1987 when he became a limited partner.
He has been a general partner of Kohlberg & Co., a privately
owned merchant banking enterprise, since its organization in
1987. Mr. Kohlberg is a director of ABT Building Products
Corporation.
Mr. Meier has been president and chief executive officer
of AMCO, Inc., a privately owned investment enterprise, for more
than the last five years. Mr. Meier is a director of Key Bank of
Oregon and Red Lion Properties, Inc., a general partner of Red
Lion Inns Limited Partnership and a trustee of Acorn Investment
Trust.
Mr. Michelson has been associated with KKR since July
1981 and has been a general partner since January 1987.
Mr. Michelson is a director of Auto Zone, Inc., Owens-Illinois,
Inc., Owens-Illinois Group, Inc., Union Texas Petroleum Holdings,
Inc. and Red Lion Properties, Inc. and a general partner of Red
Lion Inns Limited Partnership.
Mr. Miller became Chairman of the Board and Chief
Executive Officer of the Company in August 1991. Prior to that
time he was employed by Albertson's Inc., where his most recent
positions were Executive Vice President of Retail Operations from
1989 to 1991 and Senior Vice President and Regional Manager from
1985 to 1989. Mr. Miller is a director of PacifiCorp.
Mr. Raether has been a general partner of KKR since April
1986. Mr. Raether is a director of Duracell International Inc.,
IDEX Corporation, The Stop & Shop Companies, Inc., Flagstar
Companies, Inc. and Flagstar Corporation.
Further information with respect to Messrs. Fox,
Kohlberg, Michelson and Raether is set forth in "Voting
Securities and Principal Shareholders" and "Certain
Transactions."
The Board of Directors met five times during the last
fiscal year. Each director (except for Messrs. Fox and Kohlberg)
attended at least 75% of the aggregate number of meetings of the
Board of Directors and any committee of which the director was a
member for the period during which such director served.
Directors who are not employees of the Company receive an annual
fee of $22,500 unless such director participates in the
Non-Employee Directors Stock Compensation Plan. Directors who
participate in the Non-Employee Directors Stock Compensation Plan
receive an annual fee of $10,000. Under the Non-Employee
Directors Stock Compensation Plan, the balance of the current
annual fee is paid in the Company's Common Stock. Participants
are awarded $62,500 worth of the Company's Common Stock every
five years. Participants having fewer than five years of service
remaining before reaching retirement age receive stock awards
equivalent to $12,500 for each remaining year. Shares awarded
under this plan are subject to forfeiture over the five-year
period following the award (or shorter period to retirement) if
the recipient ceases to be a director. The shares awarded under
the plan are purchased in the market with funds supplied by the
Company, and the certificates are then held by the Company until
the forfeiture restrictions lapse. Directors have voting and
dividend rights with respect to the shares.
Directors who are not employees of the Company also
receive a fee of $500 per board or committee meeting attended.
The current standing committees of the Board of Directors are as
follows:
-- The Board of Directors has an Executive Committee
consisting of Robert G. Miller (Chairman), Roger S. Meier
and Michael W. Michelson. There were no meetings of the
Executive Committee held in 1994. The Executive
Committee has the authority to act for the Board of
Directors of the Company between meetings of the Board to
the full extent permitted by the Delaware General
Corporation Law.
5
-- The Board of Directors has an Audit Committee consisting
of A. M. Gleason (Chairman) and Roger S. Meier. The
Audit Committee met three times during 1994. It reviews
the planned scope and results of the annual audit,
confers with the independent auditors and reviews their
recommendations with respect to accounting, internal
controls and other matters, and confers with Company
finance, accounting and internal audit personnel.
-- The Board of Directors has a Compensation Committee
consisting of Roger S. Meier (Chairman), Saul A. Fox and
Michael W. Michelson. It met five times during 1994.
The Board of Directors has delegated the authority to
administer the Company's stock incentive plans and other
compensation matters to the Compensation Committee.
The shares represented by each proxy will be voted with
respect to the election of the nominees in accordance with the
instructions specified in the proxy form. If no instructions are
given, proxies will be voted for the election of the nominees and
in accordance with this proxy statement on any other business
that may properly come before the meeting. If for some
unforeseen reason any of the nominees should not be available as
a candidate for director, the number of directors constituting
the Board of Directors may be reduced prior to the meeting or the
proxies may be voted for such other candidate or candidates as
may be nominated by the Board of Directors, in accordance with
the authority conferred in the proxy.
Directors are elected by a plurality of the votes cast by
holders of the shares entitled to vote at the Annual Meeting if a
quorum is present. Abstentions and broker non-votes are counted
for purposes of determining whether a quorum exists at the Annual
Meeting, but have no effect in the determination of whether a
plurality exists with respect to a given nominee.
6
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation paid to the
Chief Executive Officer of the Company and the other four most
highly compensated executive officers of the Company for services
in all capacities to the Company and its subsidiaries during each
of the last three fiscal years.
Annual Compensation Long Term Compensation
----------------------------------- -----------------------------------------------------
Awards Payouts
----------------------- ---------------------------
Long-Term
Name and Other Restricted Securities Incentive All
Principal Annual Stock Underlying Plan Other
Position Year Salary(1) Bonus(1) Compensation Awards Options Payouts Compensation(2)
- ---------------------- ---- --------- -------- ------------ ---------- ---------- --------- ---------------
Robert G. Miller 1994 $555,481 -- $ 3,380(3) -- -- -- $63,831
Chairman of the 1993 531,634 $212,654 55,008(3) -- -- -- 51,566
Board and Chief 1992 505,610 409,251 53,941(3) -- -- -- 21,354
Executive Officer
Cyril K. Green 1994 306,258 -- -- -- -- -- 47,135
President and 1993 297,875 83,405 -- -- -- -- 48,117
Chief Operating 1992 288,882 164,299 -- -- -- -- 15,260
Officer
Curt A. Lerew, III 1994 249,327 6,000 -- -- -- -- 41,898
Senior Vice 1993 242,006 60,859 -- -- -- -- 18,923
President 1992 229,362 103,499 120,419(4) -- -- -- 8,309
Mary F. Sammons 1994 251,635 -- -- -- -- -- 40,497
Senior Vice 1993 225,481 43,100 -- -- -- -- 32,312
President 1992 202,912 100,435 705 -- -- $10,600(5) 10,553
Ronald J. McEvoy 1994 219,538 -- -- -- -- -- 39,486
Senior Vice 1993 211,538 54,546 -- -- -- -- 14,798
President 1992 204,053 85,161 210,933(6) -- -- -- 7,120
___________________
<FN>
(1) Includes compensation deferred at the election of the executive
under the Company's Profit Sharing Plan and under the Company's
Excess Deferral Plan. Under the Company's Profit Sharing Plan,
officers and other employees of the Company may elect to defer
up to the lesser of $9,240 or 15% of their compensation,
subject to limitations under the Internal Revenue Code.
Amounts under the Profit Sharing Plan are generally paid to
employees upon retirement.
(2) Amounts shown for the fiscal year 1994 consist of: (i) Company
contributions of $32,761, $16,631, $13,325, $12,565 and $11,705
to the above-named executive officers, respectively, under the
Profit Sharing Plan and Excess Deferral Plan, (ii) $6,070,
$5,504, $3,573, $2,932, and $2,781 paid by the Company to the
above-named executive officers, respectively, as premiums under
its Long-Term Disability Plan and (iii) $25,000 for each named
executive officer paid by the Company for life insurance under
the Supplemental Income Plan.
(3) The Company has agreed to pay certain benefits to Mr. Miller
in connection with his employment, including (i) use of an
automobile and payment of all operating expenses associated
with its use; (ii) reimbursement of reasonable relocation expenses
(which in 1993 amounted to $54,420); (iii) reimbursement of the
cost of one club membership (which in 1992 included a $39,042
7
initiation fee and dues); and (iv) certain death, disability,
retiree medical and retirement benefits. In the event of
his termination for any reason other than cause, death or
permanent disability, Mr. Miller is entitled to payment of
two years of compensation at his then-current, annual salary
(payable without interest). Assuming Mr. Miller retires at
age 62, he will be entitled to receive an additional monthly
retirement benefit of $10,805 for the remainder of his life.
(4) The Company paid amounts to Mr. Lerew in 1992 as reimbursement
for reasonable relocation expenses in connection with his
employment.
(5) Amount represents a payment pursuant to a cash incentive award
of 2,000 units, based upon an amount per unit equivalent to the
increase in book value over five years of a share of common
stock for the period the unit was outstanding, adjusted to
exclude certain items. The award was granted in fiscal year
1985 in lieu of stock options and was paid in three equal
installments during the fiscal years 1992, 1991 and 1990.
(6) The Company paid amounts to Mr. McEvoy in 1992 as reimbursement
for reasonable relocation expenses in connection with his
employment.
STOCK OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES.
The following table indicates (i) stock options exercised by
certain executive officers during 1994, including the value realized
on the date of exercise, (ii) the number of shares subject to
exercisable (vested) and unexercisable (unvested) stock options as
of January 28, 1995, and (iii) the value of "in-the-money" options,
which represents the positive spread between the exercise price of
existing stock options and the year-end price of the Common Stock.
Number of Value of
Securities Underlying Unexercised In-the-Money
Unexercised Options Held Options Held
at January 28, 1995 at January 28, 1995
Shares Acquired ----------- ------------- -------------- ----------------
Name on Exercise Value Realized Exercisable Unexercisable Exercisable(1) Unexercisable(1)
- --------------------- --------------- -------------- ----------- ------------- -------------- ----------------
Robert G. Miller -- -- 100,000 200,000 $1,087,500 $2,175,000
Cyril K. Green -- -- -- -- -- --
Curt A. Lerew, III -- -- 60,000 40,000 577,500 385,000
Mary F. Sammons -- -- 79,796 -- 1,495,076 --
Ronald J. McEvoy -- -- 40,000 25,000 625,000 390,625
_______________
<FN>
(1) Calculated based on the January 27, 1995 stock price of $32.625.
8
LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR
The following table provides information regarding incentive
awards granted to the executive officers under the Company's Capital
Bonus Plan (the "Capital Bonus Plan") for 1994. Under the Capital
Bonus Plan, 20% of the annual bonus an individual officer would earn
at the Company's budgeted goals for pre-tax income, operational
income, and/or departmental expenses are deferred and held in a
Company account, to be paid to the officer based upon a defined
distribution formula that compares actual retail cash flows to
projected retail cash flows for new stores and major remodels with
capital expenditure budgets that exceed $1,000,000 each. The amount
paid out will be based on actual results achieved, measured by the
aggregate cash flow for all projects, plus interest earnings based
on the Company's average borrowing rate.
Estimated Future Payouts
under Non-Stock Price-Based Plans
----------------------------------------------
Number of Performance
Shares, Units or Other Period
or Other Until Maturation
Name Rights or Payout(1) Threshold(2)(5) Target(3)(5) Maximum(4)(5)
- ------------------- ------------- ---------------- --------------- ------------ -------------
Robert G. Miller -- 4/98 $0 $27,808 $55,615
4/99 0 27,807 55,615
Cyril K. Green -- 4/98 0 10,694 21,388
4/99 0 10,694 21,388
Curt A. Lerew, III -- 4/98 0 7,558 15,115
4/99 0 7,557 15,115
Mary F. Sammons -- 4/98 0 7,558 15,115
4/99 0 7,557 15,115
Ronald J. McEvoy -- 4/98 0 6,152 12,303
4/99 0 6,151 12,303
_______________
<FN>
(1) Payments will be made after the end of the second and third
full years' operations after a remodel/new store is in service.
Fifty percent (50%) of the participant's investment in the
deferred account will be paid out in the third year following
the year in which the investment was set aside and the balance
will be paid out in the fourth year.
(2) Cash flows of 90% of the projected cash flow entitle the
officer to a 50% payout; the Board of Directors has discretion
to determine payouts when cash flows are less than 90%, which
could be zero.
(3) The target award is 20% of a participant's annual bonus earned
at budgeted pretax income, operational income, and/or
departmental expense determined by multiplying the individual's
base salary by a pre-approved bonus percentage.
(4) Cash flows of 120% of the projected cash flow entitle the
participant to a 200% payout.
(5) Excludes the amount of interest earned, which will be
determined based on the Company's average borrowing rate.
9
RETIREMENT PLAN.
The Company has adopted a nonqualified Supplemental Income
Plan to provide supplemental retirement and death benefits to key
executive employees. The plan is administered by the Compensation
Committee. Any key executive of the Company who holds a position of
Senior Vice President or higher is eligible to participate in this
plan. The Committee selects participants from those eligible
employees recommended by the Company's Chief Executive Officer. A
participant is entitled to receive full benefits under the Company's
plan upon normal retirement by termination of employment after age
62. A participant is also entitled to receive reduced benefits if
the participant voluntarily terminates his or her employment, is
terminated without cause or dies before age 62. The normal
retirement benefit is a projected annual amount, to be paid in equal
monthly installments for 15 years, based upon the estimated cash
surrender value, less the premiums paid and other expenses of the
Company, of a Company-owned life insurance policy purchased on the
life of the executive. The actual benefit will vary from the
projected benefit based on actual dividend experience. The Company
guarantees each participant a minimum benefit equal to at least 60
percent of the projected benefit. Based on certain assumptions, the
projected annual benefits payable to Messrs. Miller, Lerew and
McEvoy and Ms. Sammons upon retirement at normal retirement age
would be $63,000, $102,400, $102,400 and $96,250, respectively. In
lieu of the monthly installments over 15 years, upon Mr. Green's
retirement, the Company will assign to Mr. Green his life insurance
policy.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION.
The Compensation Committee of the Board of Directors (the
"Committee") is composed of three outside directors and, pursuant to
authority delegated by the Board, determines the compensation to be
paid to the Chief Executive Officer and each of the other executive
officers of the Company.
The Company's objectives for executive compensation are to
(i) attract and retain key executives important to the long term
success of the Company; (ii) reward executives for performance and
enhancement of shareholder value; and (iii) align the interests of
the executive officer with the success of the Company by making a
portion of the compensation based upon corporate performance.
Section 162(m) of the Internal Revenue Code of 1986 limits to
$1,000,000 per person the amount that the Company may deduct for
compensation paid to certain of its most highly compensated
officers. The levels of salary and bonus paid by the Company for
fiscal 1994 did not exceed this limit. The $1,000,000 cap on
deductibility will not apply to compensation that qualifies as
"performance-based compensation." Under proposed regulations,
performance-based compensation includes compensation received upon
the exercise of an incentive stock option or a non-statutory stock
option that meets certain requirements. The option exercise
compensation is equal to the excess of the market price at the time
of exercise over the option price and, unless limited by Section
162(m), is generally deductible by the Company. It is the Company's
current policy generally to grant options that meet the requirements
of the proposed regulations. The Company's Stock Incentive Plan is
proposed to be amended to meet those requirements. See "Proposal to
Amend the Stock Incentive Plan."
Section 11 of the Stock Incentive Plan is also proposed to be
amended to permit certain cash and stock compensation to qualify as
"performance-based compensation" under the proposed regulations.
The Company's Bonus Plan described below is being implemented
pursuant to the terms of Section 11 of the Stock Incentive Plan and
is intended to qualify under the regulations. However, in light of
the recent adoption of Section 162(m) and the lack of final
regulations thereunder, the Committee may implement other bonus
arrangements that do not qualify as performance based compensation
under the regulations.
The Company's executive officers are also eligible to receive
stock bonuses based on the Company achieving superior performance
levels as approved in advance by the Compensation Committee. The
number of shares paid as a bonus, which would vest one-third per
year over a three-year period, is based on the increase in
shareholder value added as a percent of total assets.
Executive Officer Compensation Program. The primary
--------------------------------------
components of the Company's executive officer compensation program
are base salary, annual bonus plan, and long term incentive
compensation in the form of stock options and capital bonus plan.
10
Base salary levels for the Company's executive officers are
set relative to companies of similar size in the retail industry and
other companies in the Pacific Northwest. In determining salaries,
the Company also takes into account individual experience, job
responsibility and performance.
The Company's Bonus Plan is an annual incentive program for
executive officers, department and group managers and other selected
employees of the Company. The purpose of the Bonus Plan is to
provide a direct financial incentive in the form of an annual cash
bonus to executives to achieve predetermined departmental and
Company financial goals. Target bonuses are set for each executive
officer as a percentage of base compensation. The target bonus
percentage depends upon level of responsibility within the Company.
In fiscal 1994, the financial measure of performance under the Plan
for the Company was pretax income. Department performance is
determined in relation to pre-established budgets for store
contribution income and for departmental operational income or
expense. Generally, no bonus is paid under the Bonus Plan if
threshold levels for Company, store or department performance are
not achieved. Twenty percent of the annual bonus payable to each
executive officer at budgeted pretax income, operational income,
and/or departmental expense is withheld pursuant to the Company's
Capital Bonus Plan. The Capital Bonus Plan provides for amounts to
be paid to executive officers based upon the comparison of actual
cash flow to projected cash flow for new stores and major remodeling
projects over the three years following construction. Depending
upon cash flow results, officers may receive nothing or up to twice
the amount withheld under the Capital Bonus Plan, plus earnings on
the deferred amount. The Company's executive officers are also
eligible to receive stock bonuses based on the Company achieving
superior performance levels as approved in advance by the
Compensation Committee. The number of shares paid as a bonus, which
would vest one-third per year over a three-year period, is based on
the increase in shareholder value added as a percent of total
assets. For fiscal 1994, threshold levels for most executive
officers were not achieved as a result of the impact of labor
disputes on the Company's earnings. The Compensation Committee
determined to award executive officers bonuses equal to the greater
of the amount determined in accordance with the Bonus Plan and the
amount that would have been withheld pursuant to the Company's
Capital Bonus Plan if threshold levels had been achieved. In the
latter case the entire amount of the award was withheld for the
Capital Bonus Plan.
The Company's stock option program is intended as a long term
incentive plan for executives, managers and selected salaried
employees of the Company. The objectives of the program are to
align employee and shareholder long term interests by creating a
strong direct link between compensation and shareholder value. The
Company's Stock Incentive Plan authorizes the Committee to award
stock options to executive officers and other employees of the
Company. Stock options are granted at an option price equal to the
fair market value of the Company's Common Stock on the day preceding
the date of grant. Options generally become exercisable to the
extent of 25 or 20 percent of the grant on the anniversary date of
the grant for the four or five succeeding years. Stock options
generally have 10-year terms and terminate shortly after termination
of employment. The amount of stock option grants for an individual
depends upon his/her level of responsibility and position in the
Company.
Compensation of the Chief Executive Officer. The
-------------------------------------------
compensation of the Chief Executive Officer of the Company was
determined by negotiation of an employment agreement at the time of
his employment in September 1991. The agreement was amended in
1994. The employment agreement provides that Mr. Miller receive an
annual salary and be eligible for an annual bonus in an amount up to
100 percent of his annual salary based upon the achievement of
financial objectives approved by the Board of Directors. The
employment agreement also provides for disability, pension, and
severance benefits, the amount of which will depend upon the term of
Mr. Miller's employment with the Company. Pursuant to the
employment agreement, the Compensation Committee of the Board of
Directors reviewed and increased the Chief Executive's base salary
in 1992, 1993 and 1994. The Chief Executive's current annual base
salary is $575,000. The factors considered by the Committee in
approving the increases were (1) the achievement of the goals that
the Board had established for the Company's management, including
goals for operating profit, performance relative to competitors and
new and remodeled store development, (2) the contribution made by
the Chief Executive in establishing the long-term strategic and
business plan of the Company, including the establishment and
achievement of organizational and management development goals, (3)
enhancement of shareholder value during the prior year and
(4) levels of compensation paid to other senior executives in the
industry.
Roger S. Meier, Chairman
Saul A. Fox
Michael W. Michelson
11
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
The following graph provides a comparison of the five year
cumulative total shareholder return on (i) the Company's Common
Stock, (ii) the S&P Retail Stores Composite Industry Index, in each
case assuming the reinvestment of any dividends, and (iii) the S&P
500 Index.
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
FRED MEYER, INC. $100.00 $ 88.52 $178.69 $213.11 $240.98 $213.11
S&P 500 INDEX 100.00 108.39 132.99 147.06 166.00 166.88
S&P RETAIL STORES COMPOSITE INDEX 100.00 117.33 163.95 195.70 188.61 174.65
The graph assumes that $100 was invested on January 31, 1990
in Company Common Stock, the S&P 500 Index and the S&P Retail Stores
Composite Industry Index, and that all dividends were reinvested.
12
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's directors and executive officers and persons who own
more than ten percent of a registered class of the Company's equity
securities, to file with the Securities and Exchange Commission (the
"SEC") initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than ten-percent
shareholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the
copies of such reports furnished to the Company and representations
that no other reports were required, the Company believes that
during the fiscal year ended January 28, 1995 all Section 16(a)
filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were complied with,
except that Robert G. Miller, Chief Executive Officer of the
Company and Chairman of the Board, filed a late report on
January 27, 1995 concerning a transfer of shares on December 23,
1994 and Roger S. Meier, a director of the Company, filed a late
report on April 14, 1995 concerning purchases of shares on
September 9 and 12, 1994.
CERTAIN TRANSACTIONS
RELATIONSHIP WITH PROPERTIES
At January 28, 1995, the Company leased or subleased 24 of
its locations (land, buildings, and improvements) from Real Estate
Properties Limited Partnership (formerly Fred Meyer Real Estate
Properties, Ltd.), an Oregon limited partnership ("Properties"). At
March 21, 1995, Cyril K. Green, President of the Company held
approximately .7% of the aggregate Class A limited partnership
interests in Properties, and Metropolitan Life Insurance Company
(the "Institutional Investor") held approximately 70.9% of the Class
A limited partnership interests in Properties. Class A limited
partners are entitled to a cumulative 10.25% annual return on their
adjusted capital contributions; an annual distribution of 45% of
certain funds of Properties available after payment of certain
expenses, interest on indebtedness, and the fixed current return to
the Class A limited partners; 45% of other distributions (other than
Properties' final distribution), including distributions of the net
proceeds realized by Properties from any sale of its properties
after payment of a pro rata share of returns of capital; and
allocations for income tax purposes of various items arising from
the operation of Properties.
Mr. Green also holds approximately 5% of the limited
partnership interests in FMGP Associates, an Oregon limited
partnership, and the general partner of Properties. KKR Associates
holds 66% of the limited partnership interests in FMGP Associates,
and the general partner of FMGP Associates, FMGP Incorporated, holds
1% of the partnership interests in FMGP Associates. Messrs. Raether,
Michelson, and Fox are three of the eight general partners, and
Mr. Kohlberg is a limited partner of KKR Associates. Messrs. Raether,
Michelson, and Kohlberg are shareholders of FMGP Incorporated, a
Delaware corporation. See "Voting Securities and Principal
Shareholders." As general partner of Properties, FMGP Associates is
entitled to an annual distribution of 15% of certain funds of
Properties available after payment of certain expenses, interest on
indebtedness, and the fixed current return to the Class A limited
partners; 15% of other distributions (other than Properties' final
distribution), including distributions of the net proceeds realized
by Properties from any sale of its properties after payment of a pro
rata share of returns of capital; and allocations for income tax
purposes of various items arising from the operations of Properties.
KKR Associates is entitled to 99% and FMGP Incorporated is entitled
to 1% of an annual priority allocation and special distribution,
which for calendar year 1994 was $402,628, and which will remain at
that level for subsequent years.
The following table sets forth the approximate cash
distributions and allocations of taxable income and losses
(including priority allocations) from Properties to its partners for
the 1994 partnership year (including certain amounts paid after
year-end relating to such year):
13
Calendar Year 1994
------------------
Cash distributions:
Total $12,402,600
Mr. Green 118,000
KKR Associates and KKR 1,367,900
The Institutional Investor 4,916,500
Allocation of taxable income:
Total $11,562,900
Mr. Green 83,000
KKR Associates and KKR 1,030,200
The Institutional Investor 3,855,800
Net lease payments made by the Company to Properties for the
year ended January 28, 1995 were approximately $17,545,000. Leases
between the Company and Properties require the Company to pay all
property taxes and certain other amounts relating to the right to
use the properties leased to the Company. Such property taxes paid
by the Company during the year ended January 28, 1995 amounted to
approximately $2,362,000.
The Company leased certain properties directly from two
companies controlled by Properties for the year ended January 28,
1995. Rents and property taxes paid under these leases for the year
totalled approximately $2,189,000 and $280,000, respectively.
The Institutional Investor owns 36 properties which are
leased to the Company. The Institutional Investor is an investor in
FMI Associates and a limited partner of Properties and purchased
these 36 properties from Properties in 1986 and 1987. At March 1,
1995 the Institutional Investor held a 29.1% Class 1 limited
partnership interest and all of the Class 2 partnership interest in
FMI Associates. The FMI Associates partnership agreement provides
generally that (i) each Class 1 limited partner is entitled to a pro
rata distribution upon the sale of the Company's Common Stock by FMI
Associates determined on the basis of the shares sold plus
approximately 85% of the gain realized on the sale of the shares and
(ii) the Class 2 limited partner, upon the sale of the FMI
Associates option or option shares, is entitled to a distribution in
an amount equal to the basis of the option or option shares plus 85%
of the gain realized on the sale of the option or option shares.
See "Voting Securities and Principal Shareholders." Under the
leases for the 36 properties purchased from Properties in 1986 and
1987, the Company paid approximately $46,070,000 during the year
ended January 28, 1995. Property taxes paid by the Company under
these leases during this period were approximately $5,803,000.
In December 1981, the Company and Properties agreed to
guarantee certain of the other's liabilities assumed from the
predecessor of the Company. This guarantee remains outstanding;
however, to date the Company has not been required to make payment
on any obligations assumed by Properties. The transactions
discussed herein were on terms believed by the Board of Directors of
the Company to be fair to the Company and no less favorable than the
Company could have obtained with an unrelated party. The
renegotiation, from time to time, of leases by the Company is in the
ordinary course of the Company's business.
PROPOSAL TO AMEND THE 1990 STOCK INCENTIVE PLAN
In 1990, the Board of Directors adopted and the shareholders
approved the 1990 Stock Incentive Plan (the "Incentive Plan"). The
Incentive Plan initially provided for the reservation of 1,000,000
shares of Common Stock of the Company (subject to adjustment for
changes in capitalization) for issuance pursuant to its terms, plus
any shares available for grant under the 1983 Stock Option Plan (the
"1983 Plan"), or that subsequently became available for grant under
such plan through the expiration, termination, forfeiture or
cancellation of awards under such plan. In 1992, the Board of
Directors adopted and the shareholders approved an amendment to the
Incentive Plan, reserving an additional 1,000,000 shares of Common
Stock for issuance thereunder. The Incentive Plan provides for the
grant of incentive stock options, non-statutory stock options, stock
appreciation rights, cash bonus rights and performance units, the
award of stock bonuses and the sale of restricted stock. At
March 27, 1995, 2,279,013 shares were subject to outstanding options
under the plans and unvested stock bonuses and 28,551 shares were
available for future grants.
14
PROPOSED AMENDMENTS
The Board of Directors believes that the availability of stock
options and related incentives is an important factor in the
Company's ability to attract and retain experienced and competent
employees and to provide an incentive for them to exert their best
efforts on behalf of the Company. The Incentive Plan provides
flexibility in determining the nature of the incentives to be awarded
employees. Because at March 27, 1995 there were only 28,551 shares
of Common Stock available for future grants under the Incentive Plan,
the Board of Directors has proposed an amendment to the Incentive
Plan which, if approved by shareholders, would reserve an additional
2,000,000 shares of Common Stock of the Company (subject to
adjustment for changes in capitalization) for future grants under the
Incentive Plan. Historically, the Company has used stock options and
annual bonuses as incentives for pay-for-performance awards. The
Compensation Committee has no current intention to immediately
utilize all the other types of awards available under the Incentive
Plan, but will have the flexibility through the Incentive Plan to
grant such incentives in the future.
In addition, in response to the proposed regulations under
new Section 162(m) of the Internal Revenue Code of 1986, the Board
of Directors has proposed amendments to the Incentive Plan which, if
approved by shareholders, would (i) establish per-employee limits on
grants of options and stock appreciation rights under the plan of
500,000 shares for new hires and 200,000 shares annually otherwise,
and (ii) permit the grant of stock and dollar awards that will
qualify as "performance-based compensation" under the proposed
regulations. See "Tax Consequences."
Certain provisions of the Incentive Plan are summarized
below. The complete text of the Incentive Plan, as proposed to be
amended, is attached to this proxy statement as Appendix A.
DESCRIPTION OF INCENTIVE PLAN
ELIGIBILITY. All salaried employees, including employees who
are officers or directors of the Company and its subsidiaries, are
eligible to participate in the Incentive Plan. Also eligible are
nonemployee agents, consultants and advisors to the Company or any
subsidiary.
ADMINISTRATION. The Incentive Plan is administered by the
Compensation Committee of the Board of Directors. If the Committee
ceases to administer the Incentive Plan, the administrative action
described below will be taken by the Board of Directors. The
Committee may promulgate rules and regulations for the operation of
the plan and will generally supervise the administration of the
plan. The Committee determines the persons to whom grants, awards
or sales will be made under the Incentive Plan, and the price and
terms of any such grant, award or sale.
TERM OF PLAN. The Incentive Plan will continue until all
shares available for issuance under the plan have been issued and
all restrictions on such shares have lapsed. The Board of Directors
may suspend or terminate the Incentive Plan at any time. The Board
of Directors may also modify or amend the Incentive Plan at any
time.
STOCK OPTIONS. The Committee determines the persons to whom
options are granted, the option price, the number of shares to be
covered by each option, the term of each option, the times at which
options may be exercised and whether the option is an incentive stock
option ("ISO") or a non-statutory stock option. An ISO is intended
to meet all of the requirements of an Incentive Stock Option as
defined in Section 422 of the Internal Revenue Code of 1986, as
amended. If the option is an ISO, the option price cannot be less
than the fair market value of the Common Stock on the date of grant.
If an optionee of an ISO at the time of grant owns stock possessing
more than 10 percent of the combined voting power of the Company, the
option price may not be less than 110 percent of the fair market
value of the Common Stock on the date of grant. If the option is a
non-statutory stock option, the option price cannot be less than 50
percent of the fair market value of the Common Stock on the date of
the grant. As proposed to be amended, the Incentive Plan will
provide that no person may be granted options or stock appreciation
rights under the Incentive Plan for more than an aggregate of 500,000
shares in connection with hiring the individual or 200,000 shares in
any fiscal year otherwise. The Incentive Plan limits the amount of
ISOs that may become vested under the Incentive Plan in any year to
$100,000 per optionee, based on the fair market value on the grant
date of shares covered by such options. For purposes of options and
stock appreciation rights, the fair market value of Common Stock is
deemed to be the closing price of the shares as reported in the NYSE
Composite Transactions in The Wall Street Journal, or such other
reported value of the Common Stock as shall be specified by the
Committee, on the trading day preceding the date for which the fair
15
market value is determined. No monetary consideration is paid to the
Company upon the granting of options. On April 28, 1995, the closing
price of the Common Stock as reported in the NYSE Composite
Transactions in The Wall Street Journal was $31.25 per share.
Options granted under the Incentive Plan generally continue
in effect for the period fixed by the Committee, except that ISOs
are not exercisable after the expiration of 10 years from the date
of grant. Options are exercisable in accordance with the terms of
an option agreement entered into at the time of grant and are
nontransferable except on death of a holder. Options may be
exercised only while an optionee is employed by the Company or a
subsidiary or within 12 months following termination of employment
by reason of death or disability or three months following
termination for any other reason. The Incentive Plan provides that
the Committee may extend the exercise period for any period up to
the expiration date of the option and may increase the number of
shares for which the option may be exercised up to the total number
underlying the option. The purchase price for shares purchased
pursuant to exercise of options must be paid in cash, including cash
which may be the proceeds of a loan from the Company, in shares of
Common Stock valued at fair market value, in restricted stock, in
performance units or other contingent awards denominated in either
stock or cash, in deferred compensation credits or in other forms of
consideration, as determined by the Committee. Upon the exercise of
an option, the number of shares subject to the option and the number
of shares available under the Incentive Plan for future option
grants are reduced by the number of shares with respect to which the
option is exercised, less any shares surrendered in payment or
withheld to satisfy tax withholding obligations.
STOCK APPRECIATION RIGHTS. Stock appreciation rights
("SARs") may be granted under the Incentive Plan. SARs may, but
need not, be granted in connection with an option grant or an
outstanding option previously granted under the Incentive Plan. A
SAR gives the holder the right to payment from the Company of an
amount equal in value to the excess of the fair market value on the
date of exercise of a share of Common Stock of the Company over its
fair market value on the date of grant, or if granted in connection
with an option, the option price per share under the option to which
the SAR relates. The holder does not pay the Company anything upon
grant or exercise of a SAR (other than tax withholding amounts upon
exercise).
A SAR is exercisable only at the time or times established by
the Committee. If a SAR is granted in connection with an option it
is exercisable only to the extent and on the same conditions that
the related option is exercisable. No SAR granted to an officer or
director can be exercised during the first six months after the date
of grant. Payment by the Company upon exercise of a SAR may be made
in Common Stock of the Company valued at its fair market value, in
cash, or partly in stock and partly in cash, as determined by the
Committee. The Committee may withdraw any SAR granted under the
Incentive Plan at any time and may impose any condition upon the
exercise of a SAR or adopt rules and regulations from time to time
affecting the rights of holders of SARs. If a SAR is not exercised
prior to the expiration, termination or cancellation of the SAR, the
unused shares subject to the SAR are again available for issuance
under the Plan. Cash payments for SARs do not reduce the number of
shares reserved for issuance under the Plan.
The existence of SARs, as well as certain bonus rights
described below, would require charges to income over the life of
the right based upon the amount of appreciation, if any, in the
market value of the Common Stock of the Company over the exercise
price of shares subject to exercisable SARs or bonus rights.
STOCK BONUS AWARDS. The Committee may award Common Stock of
the Company to employees as a stock bonus under the Incentive Plan.
The Committee may determine the employees to receive awards, the
number of shares to be awarded and the time of the award. Stock
received as a stock bonus is subject to the terms, conditions and
restrictions determined by the Committee at the time the stock is
awarded. Stock bonus shares which are forfeited to the Company are
again available for issuance under the Plan.
RESTRICTED STOCK. The Incentive Plan provides that the
Company may issue restricted stock to employees in such amounts, for
such consideration, subject to such restrictions and on such terms
as the Committee may determine. Restrictions may include
restrictions concerning transferability and forfeiture of the
shares. No restricted stock may be issued for consideration of less
than 50 percent of the fair market value of the stock at the time of
issuance. Restricted shares which are forfeited to or repurchased
by the Company are again available for issuance under the Plan.
CASH BONUS RIGHTS. The Committee may grant cash bonus
rights under the Incentive Plan in connection with (i) options
granted or previously granted, (ii) SARs granted or previously
granted, (iii) stock bonuses awarded or previously awarded, and
(iv) shares sold or previously sold under the Incentive Plan. Bonus
16
rights may be used to provide cash to employees for the payment of
taxes in connection with awards under the Incentive Plan. Bonus
rights granted in connection with options entitle the optionee to a
cash bonus if and when the related option is exercised or terminates
in connection with the exercise of a SAR related to the option. If
the shares are purchased on the exercise of an option and the
optionee does not exercise a related stock appreciation right, the
amount of the bonus shall be determined by multiplying the excess of
the total fair market value for the shares to be acquired upon the
exercise over the total option price for the shares by the
applicable bonus percentage. If an optionee exercises a related
stock appreciation right in connection with the termination of an
option, the amount of the bonus shall be determined by multiplying
the total fair market value of the shares and cash received pursuant
to the exercise of the stock appreciation right by the applicable
bonus percentage. The bonus percentage applicable to any bonus
right is determined by the Board of Directors but may in no event
exceed 75 percent. Bonus rights granted in connection with stock
bonuses entitle the recipient to a cash bonus, in an amount
determined by the Board of Directors, at the time the stock is
awarded or at such time as any restrictions to which the stock is
subject lapse. Bonus rights granted in connection with restricted
stock purchases entitle the recipient to a cash bonus in an amount
determined by the Board of Directors, payable when the shares are
purchased or restrictions, if any, to which the stock is subject
lapse. Bonus rights granted in connection with restricted stock
purchases or stock bonuses terminate in the event that restricted
stock is repurchased by the Company or forfeited by the holder
pursuant to the restrictions. The payment of a cash bonus does not
reduce the number of shares reserved under the Plan.
PERFORMANCE-BASED AWARDS. As proposed to be amended, the
Incentive Plan will include, in place of the previous section
authorizing performance units, a new Section 11 on awards
("Performance-based Awards") designed to respond to the proposed
regulations under new Section 162(m) of the Internal Revenue Code of
1986, as amended. Under this proposed amendment, the Committee may
grant Performance-based Awards denominated either in Common Stock or
in dollar amounts. All or part of the awards will be earned if
performance goals established by the Committee for the period
covered by the award are met and the employee satisfies any other
restrictions established by the Committee. The performance goals
will be expressed as one or more targeted levels of performance with
respect to one or more of the following objective measures with
respect to the Company or any subsidiary, division, store or other
unit of the Company: departmental expense performance, earnings per
share, total shareholder return (stock price increase plus
dividends), return on equity, return on assets, revenues, operating
income, income before taxes, net income, inventories, inventory
turns, cash flows, expenses, capital expenditures, increase in
shareholder value as a percentage of assets employed, other
financial return ratios, market performance, customer satisfaction
or any of the foregoing before the effect of acquisitions,
divestitures, accounting changes, and restructuring and special
charges. Performance-based Awards may be paid in cash or Common
Stock and may be made as awards of restricted shares subject to
forfeiture if performance goals are not satisfied, as determined by
the Committee. No employee may receive in any fiscal year
Performance-based Awards denominated in Common Stock under which
more than 100,000 shares may be issued. No employee may receive in
any fiscal year Performance-based Awards denominated in dollars
under which more than $1,500,000 may be paid. The payment of a
Performance-based Award in cash will not reduce the number of shares
reserved under the Plan. The Bonus Plan described under "Executive
Compensation - Compensation Committee Report on Executive
Compensation" is being implemented pursuant to the terms of Section
11 of the Stock Incentive Plan and is intended to qualify as
"performance-based compensation" under the proposed IRS regulations.
With respect to the five named executive officers for fiscal 1995,
target bonus amounts have been set as a percentage of salary as
follows: Mr. Miller - 50%, Mr. Green - 35%, Mr. Lerew - 30%, Ms.
Sammons - 30% and Mr. McEvoy - 28%, with the maximum amount that can
be earned under the bonus plan being twice the foregoing
percentages. In the event that the proposal to amend the Incentive
Plan is not approved by shareholders, the Bonus Plan will not be
implemented for 1995. In such event, the Compensation Committee may
provide for other bonus arrangements for its executive officers that
would not qualify as performance-based awards under Section 162(m)
of the Internal Revenue Code.
CHANGES IN CAPITAL STRUCTURE. The Incentive Plan provides
that if the outstanding Common Stock of the Company is increased or
decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another
corporation by reason of any recapitalization, stock split or
certain other transactions, appropriate adjustment will be made by
the Committee in the number and kind of shares available for awards
under the Plan. In addition, the Committee will make appropriate
adjustments in outstanding options and SARs. In the event of
dissolution of the Company or a merger, consolidation or plan of
exchange affecting the Company, in lieu of so providing for options
and SARs, the Committee may, in its sole discretion, provide a 30-day
period prior to such event during which optionees shall have the
right to exercise options and SARs in whole or in part without any
limitation or exercisability and upon the expiration of which 30-day
period all unexercised options and SARs shall immediately terminate.
17
ACCELERATION IN CERTAIN EVENTS. The Incentive Plan provides
for accelerated vesting of options and SARs granted under the
Incentive Plan in the event an optionee's employment by the Company
terminates within one year after a change in control of the Company
or the occurrence of certain events indicating an imminent change in
control of the Company as specified in the Incentive Plan. The
special acceleration provision may, in certain circumstances, have
the effect of discouraging attempts of a Company takeover.
TAX CONSEQUENCES
Certain options authorized to be granted under the Incentive
Plan are intended to qualify as ISOs for federal income tax
purposes. Under federal income tax law currently in effect, the
optionee will recognize no income upon grant or exercise of the ISO.
If an employee exercises an ISO and does not dispose of any of the
option shares within two years following the date of grant and
within one year following the date of exercise, then the gain will
be realized upon subsequent disposition of the shares. If an
employee disposes of shares acquired upon exercise of an ISO before
the expiration of either the one-year holding period or the two-year
waiting period, any amount realized will be taxable for federal
income tax purposes in the year of such disqualifying disposition to
the extent that the lesser of the fair market value of the shares on
the exercise date or the fair market value of the shares on the date
of disposition exceeds the exercise price. The Company will not be
allowed any deduction for federal income tax purposes at either the
time of the grant or exercise of an ISO. Upon any disqualifying
disposition by an employee, the Company will be entitled to a
deduction to the extent the employee realized income.
Certain options authorized to be granted under the Incentive
Plan will be treated as nonstatutory stock options for federal
income tax purposes. Under federal income tax law presently in
effect, no income is realized by the grantee of a nonstatutory stock
option pursuant to the Incentive Plan until the option is exercised.
At the time of exercise of a nonstatutory stock option, the optionee
will realize income, and the Company will be entitled to a
deduction, in the amount by which the market value of the shares
subject to the option at the time of exercise exceeds the exercise
price. The Company's deduction is conditioned upon withholding on
the income amount. Upon the sale of shares acquired upon exercise
of a nonstatutory stock option, the excess of the amount realized
from the sale over the market value of the shares on the date of
exercise will be taxable.
An employee who receives stock in connection with the
performance of services will generally realize taxable income at the
time of receipt unless the shares are substantially nonvested for
purposes of Section 83 of the Internal Revenue Code of 1986, as
amended. Absent an election under Section 83(b), an employee who
receives substantially nonvested stock in connection with
performance of services will realize taxable income in each year in
which a portion of the shares substantially vest. The Company will
be entitled to a tax deduction in the amount includable as income by
the employee at the same time or times as the employee recognizes
income with respect to the shares. The Company's deduction is
conditioned upon withholding upon the income amount. A participant
who receives a cash bonus right under the plan will generally
recognize income equal to the amount of a cash bonus paid at the
time of receipt, and the Company will generally be entitled to a
deduction equal to the income recognized by the participant.
Section 162(m) of the Internal Revenue Code of 1986 limits
to $1,000,000 per person the amount that the Company may deduct
for compensation paid to certain of its most highly compensated
officers. Under proposed regulations, compensation received
through the exercise of an option or stock appreciation right or
through other performance-based awards will not be subject to the
$1,000,000 limit if the option, stock appreciation right or other
award and the Plan meet certain requirements. One such
requirement for options and stock appreciation rights is that
shareholders approve per-employee limits on the number of shares
as to which options and stock appreciation rights may be granted
which are set forth in Section 11 of the Incentive Plan. For
other performance-based awards, shareholders must approve the
performance criteria upon which award payouts will be based and
the maximum amount payable under awards, both of which are set
forth in the proposed new Section 11 of the Incentive Plan on
Performance-based Awards. Another requirement for options and
stock appreciation rights is that the exercise price be not less
than fair market value of the Common Stock on the date of grant.
Other requirements of the proposed regulations for Performance-
based Awards are that objective performance goals and the amounts
payable upon achievement of the goals be established and that no
discretion be retained to increase the amount payable under the
awards. Lastly, a requirement for all awards is that the award
be granted by a committee consisting solely of outside directors
and at least two such directors. The Company believes that if
this proposal is approved by shareholders, compensation received
on exercise of options and stock appreciation rights granted at
fair market value or on vesting or receipt of Performance-based
18
Awards granted under the Incentive Plan in compliance with all of
the above requirements will not be subject to the $1,000,000
deduction limit.
RECOMMENDATION OF BOARD OF DIRECTORS
The Board of Directors recommends approval of the proposed
amendments to the Incentive Plan. The proposal must be approved by
the holders of at least a majority of the outstanding shares of
Common Stock present, or represented by proxy, and entitled to vote
on the matter at the annual meeting. Abstentions have the effect of
"no" votes in determining whether the amendments to the Incentive
Plan are approved. Broker non-votes are counted for purposes of
determining whether a quorum exists at the annual meeting, but are
not counted and have no effect on the results of the vote. The
enclosed proxy will be voted in accordance with the instructions
specified in the space provided on the proxy form. If no
instructions are given, proxies will be voted for approval of the
proposal.
INDEPENDENT AUDITORS
Deloitte & Touche LLP audited the Company's financial
statements for the year ended January 28, 1995. Representatives of
Deloitte & Touche LLP will be present at the annual meeting, will
have the opportunity to make a statement if they so desire and will
be available to respond to appropriate questions. The Board of
Directors has selected Deloitte & Touche LLP as auditors for the
current fiscal year.
DISCRETIONARY AUTHORITY
While the Notice of Annual Meeting of Shareholders provides
for transaction of such other business as may properly come before
the meeting, the Board of Directors has no knowledge of any matters
to be presented at the meeting other than those referred to herein.
However, the enclosed proxy gives discretionary authority in the
event that any other matters should be presented.
SHAREHOLDER PROPOSALS
Any shareholder proposals to be considered for inclusion in
proxy material for the Company's June 1996 annual meeting must be
received at the principal executive offices of the Company no later
than January 12, 1996.
By Order of the Board of Directors
ROGER COOKE
Roger Cooke
Senior Vice President, General Counsel
and Secretary
May 5, 1995
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APPENDIX A
PROPOSED AMENDED
FRED MEYER, INC.
1990 STOCK INCENTIVE PLAN*
1. PURPOSE. The purpose of this Stock Incentive Plan (the
"Plan") is to enable Fred Meyer, Inc. (the "Company") to attract and
retain the services of selected salaried employees, including
employees who may be officers or directors of the Company or of any
subsidiary of the Company, and selected nonemployee agents,
consultants and advisors to the Company or any subsidiary.
2. SHARES SUBJECT TO THE PLAN. Subject to adjustment as
provided below and in paragraph 12, the shares to be offered under
the Plan shall consist of Common Stock of the Company ("Common
Stock"), and the total number of shares of Common Stock that may be
issued under the Plan shall not exceed [2,000,000] 4,000,000 shares
---------
plus any shares that are available for grant under the Company's
1983 Stock Option Plan, as amended (the "1983 Plan") or that may
subsequently become available for grant under such plan through the
expiration, termination, forfeiture or cancellation of awards under
such plan. The shares issued under the Plan may be authorized and
unissued shares or reacquired shares. If an option, stock
appreciation right or PERFORMANCE-BASED AWARD [performance unit]
granted under the Plan expires, terminates or is cancelled, the
unissued shares subject to such option, stock appreciation right or
PERFORMANCE-BASED AWARD [performance unit] shall again be available
under the Plan. If shares sold or ISSUED [awarded as a bonus] under
the Plan are forfeited to the Company or repurchased by the Company,
the number of shares forfeited or repurchased shall again be
available under the Plan.
3. EFFECTIVE DATE AND DURATION OF PLAN.
(a) EFFECTIVE DATE. The Plan shall become effective as
of June 19, 1990. No option OR [,] stock appreciation right [or
performance unit] granted under the Plan to an officer who is
subject to Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or a director shall become exercisable,
however, until the Plan is approved by the affirmative vote of the
holders of a majority of the shares of Common Stock represented at a
shareholders meeting at which a quorum is present and any such
awards under the Plan prior to such approval shall be conditioned on
and subject to such approval. Subject to this limitation, options
AND [,] stock appreciation rights [and performance units] may be
granted and shares may be awarded as bonuses OR PERFORMANCE-BASED
AWARDS or sold under the Plan at any time after the effective date
and before termination of the Plan.
(b) DURATION. The Plan shall continue in effect until all
shares available for issuance under the Plan have been issued and
all restrictions on such shares have lapsed. The Board of Directors
may suspend or terminate the Plan at any time except with respect to
options, PERFORMANCE-BASED AWARDS [performance units] and shares
subject to restrictions then outstanding under the Plan.
Termination shall not affect any outstanding AWARDS [options], any
right of the Company to repurchase shares or the forfeitability of
shares issued under the Plan.
4. ADMINISTRATION.
(a) BOARD OF DIRECTORS. The Plan shall be
administered by the Board of Directors of the Company, which
shall determine and designate from time to time the individuals
to whom awards shall be made, the amount of the awards and the
other terms and conditions of the awards. Subject to the
provisions of the Plan, the Board of Directors may from time to
time adopt and amend rules and regulations relating to
administration of the Plan, advance the lapse of any waiting
period, accelerate any exercise date, waive or modify any
restriction applicable to share (except those restrictions
imposed by law) and make all other determinations in the judgment
_______________
*Note: Material in boldface is proposed new material; material
in brackets and italics is material proposed to be deleted.
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of the Board of Directors necessary or desirable for the
administration of the Plan. The interpretation and construction of
the provisions of the Plan and related agreements by the Board of
Directors shall be final and conclusive. The Board of Directors may
correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any related agreement in the manner
and to the extent it shall deem expedient to carry the Plan into
effect, and it shall be the sole and final judge of such expediency
(b) COMMITTEE. The Board of Directors may delegate to a
committee of the Board of Directors (the "Committee") any or all
authority for administration of the Plan. If authority is delegated
to a Committee, all references to the Board of Directors in the Plan
shall mean and relate to the Committee except (i) as otherwise
provided by the Board of Directors, (ii) that only the Board of
Directors may amend or terminate the Plan as provided in paragraphs
3 and 15 and (iii) that a Committee including officers of the
Company shall not be permitted to grant options to persons who are
officers of the Company.
5. TYPES OF AWARDS; ELIGIBILITY. The Board of Directors may,
from time to time, take the following action, separately or in
combination, under the Plan: (i) grant Incentive Stock Options, as
defined in Section 422[A] of the Internal Revenue Code of 1986, as
amended (the "Code"), as provided in paragraphs 6(a) and 6(b);
(ii) grant options other than Incentive Stock Options ("Non-
Statutory Stock Options") as provided in paragraphs 6(a) and 6(c);
(iii) award stock bonuses as provided in paragraph 7; (iv) sell
shares subject to restrictions as provided in paragraph 8; (v) grant
stock appreciation rights as provided in paragraph 9; (vi) grant
cash bonus rights as provided in paragraph 10; and (vii) grant
PERFORMANCE-BASED AWARDS [performance units] as provided in
paragraph 11. Any such awards may be made to SALARIED employees,
including employees who are officers or directors, and to other
individuals described in paragraph 1 who the Board of Directors
believes have made or will make an important contribution to the
Company or its subsidiaries; provided, however, that only employees
of the Company shall be eligible to receive Incentive Stock Options
under the Plan. The Board of Directors shall select the individuals
to whom awards shall be made and shall specify the action taken with
respect to each individual to whom an award is made. At the
discretion of the Board of Directors, an individual may be given an
election to surrender an award in exchange for the grant of a new
award. NO INDIVIDUAL MAY BE GRANTED OPTIONS OR STOCK APPRECIATION
RIGHTS UNDER THE PLAN FOR MORE THAN AN AGGREGATE OF 500,000 SHARES
OF COMMON STOCK IN CONNECTION WITH THE HIRING OF THE INDIVIDUAL OR
200,000 SHARES IN ANY FISCAL YEAR OTHERWISE.
6. OPTION GRANTS.
(a) GENERAL RULES RELATING TO OPTIONS.
(i) TERMS OF GRANT. The Board of Directors may
grant options under the Plan. With respect to each option grant,
the Board of Directors shall determine the number of shares subject
to the option, the option price, the period of the option, the time
or times at which the option may be exercised and whether the option
is an Incentive Stock Option or a Non-Statutory Stock Option. At the
time of the grant of an option or at any time thereafter, the Board
of Directors may provide that an optionee who exercised an option
with Common Stock of the Company shall automatically receive a new
option to purchase additional shares equal to the number of shares
surrendered and may specify the terms and conditions of such new
options.
(ii) EXERCISE OF OPTIONS. Except as provided in
paragraph 6(a)(iv) or as determined by the Board of Directors, no
option granted under the Plan may be exercised unless at the time of
such exercise the optionee is employed by or in the service of the
Company or any subsidiary of the Company and shall have been so
employed or provided such service continuously since the date such
option was granted. Absence on leave or on account of illness or
disability under rules established by the Board of Directors shall
not, however, be deemed an interruption of employment or service for
this purpose. Unless otherwise determined by the Board of
Directors, vesting of options shall not continue during an absence
on leave (including an extended illness) or on account of
disability. Except as provided in paragraphs 6(a)(iv), 12 and 13,
options granted under the Plan may be exercised from time to time
over the period stated in each option in such amounts and at such
times as shall be prescribed by the Board of Directors, provided
that options shall not be exercised for fractional shares. Unless
otherwise determined by the Board of Directors, if the optionee does
not exercise an option in any one year with respect to the full
number of shares to which the optionee is entitled in that year, the
optionee's rights shall be cumulative and the optionee may purchase
those shares in any subsequent year during the term of the option.
(iii) NONTRANSFERABILITY. Each Incentive Stock
Option and, unless otherwise determined by the Board of Directors with
respect to an option granted to a person who is neither an officer
nor a director of the Company, each other option granted under the
Plan by its terms shall be nonassignable and nontransferable by
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the optionee, either voluntarily or by operation of law, except by
will or by the laws of descent and distribution of the state or
country of the optionee's domicile at the time of death, and each
option by its terms shall be exercisable during the optionee's
lifetime only by the optionee.
(iv) TERMINATION OF EMPLOYMENT OR SERVICE.
(A) GENERAL RULE. Unless otherwise determined
by the Board of Directors, in the event the employment or service of
the optionee with the Company or a subsidiary terminates for any
reason other than because of physical disability or death as
provided in subparagraphs 6(a)(iv)(B) and (C) or because of a change
in control as provided in subparagraph 6(a)(iv)(D), the option may
be exercised at any time prior to the expiration date of the option
or the expiration of three months after the date of such
termination, whichever is the shorter period, but only if and to the
extent the optionee was entitled to exercise the option at the date
of such termination.
(B) TERMINATION BECAUSE OF TOTAL DISABILITY.
Unless otherwise determined by the Board of Directors, in the event
of the termination of employment or service because of total
disability, the option may be exercised at any time prior to the
expiration date of the option or the expiration of 12 months after
the date of such termination, whichever is the shorter period, but
only if and to the extent the optionee was entitled to exercise the
option at the date of such termination. The term "total disability"
means a mental or physical impairment which is expected to result in
death or which has lasted or is expected to last for a continuous
period of 12 months or more and which causes the optionee to be
unable, in the opinion of the Company and two independent
physicians, to perform his or her duties as an employee, director,
officer or consultant of the Company and to be engaged in any
substantial gainful activity. Total disability shall be deemed to
have occurred on the first day after the Company and the two
independent physicians have furnished their opinion of total
disability to the Company.
(C) TERMINATION BECAUSE OF DEATH. Unless
otherwise determined by the Board of Directors, in the event of the
death of an optionee while employed by or providing service to the
Company or a subsidiary, the option may be exercised at any time
prior to the expiration date of the option or the expiration of 12
months after the date of such death, whichever is the shorter
period, but only if and to the extent the optionee was entitled to
exercise the option at the date of such termination and only by the
person or persons to whom such optionee's rights under the option
shall pass by the optionee's will or by the laws of descent and
distribution of the state or country of domicile at the time of
death.
(D) TERMINATION UPON A CHANGE OF CONTROL. In
the event an optionee's employment by the Company or by any parent
or subsidiary of the Company terminates within one year after a
change in control of the Company for any reason other than
retirement, death, or TOTAL [physical] disability (AS DEFINED IN
PARAGRAPH 6(A)(IV)(B) [within the meaning of IRC Section 105(d)(4)]),
any option held by such optionee may be exercised with respect to all
remaining shares subject thereto, free of any limitation on the
number of shares with respect to which the option may be exercised
in any one year, at any time prior to its expiration date or the
expiration of three months after the date of such termination of
employment, whichever is the shorter period; provided that no option
may be exercised by an officer or director of the Company within six
months of its date of grant. With respect to an option granted less
than six months prior to a change in control of the Company to an
officer or director of the Company, the option shall become
exercisable in full for a period of 30 days following the expiration
of six months after the date of such grant, and this right shall
apply even if the option has otherwise terminated after a change in
control. A "change in control of the Company" shall mean a change
in control of a nature that would be required to be reported in
response to Item 5(f) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934, as amended ("Exchange
Act"), or any successor provision; provided that, without
limitation, such a change in control shall be deemed to have
occurred if (1) any "person" (as such term is used in Sections 13(d)
and 14(d)(2) of the Exchange Act) is or becomes the beneficial
owner, directly or indirectly, of securities of the Company
representing 20 percent or more of the combined voting power of the
Company's then outstanding securities; or (2) during any period of
two consecutive years, individuals who at the beginning of such
period constitute the Board of Directors of the Company cease for
any reason to constitute at least a majority thereof unless the
election, or the nomination for election by the Company's
shareholders, of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were
directors at the beginning of the period. A change in control of
the Company shall not include any change in control (i) pursuant to
a written agreement between the Company and another person, which
agreement is approved and adopted by the Board of Directors of the
Company, (ii) pursuant to any tender offer or exchange offer which the
Board of Directors has in any manner recommended acceptance of to the
A-4
shareholders of the Company, or (iii) pursuant to a distribution of
shares of Common Stock of the Company by FMI Associates to its
partners.
(E) AMENDMENT OF EXERCISE PERIOD APPLICABLE TO
TERMINATION. The Board of Directors, at the time of grant or at any
time thereafter, may extend the three-month and 12-month exercise
periods any length of time not later than the original expiration
date of the option, and may increase the portion of an option that
is exercisable, subject to such terms and conditions as the Board of
Directors may determine.
(F) FAILURE TO EXERCISE OPTION. To the extent
that the option of any deceased optionee or of any optionee whose
employment or service terminates is not exercised within the
applicable period, all further rights to purchase shares pursuant to
such option shall cease and terminate.
(v) PURCHASE OF SHARES. Unless the Board of
Directors determines otherwise, shares may be acquired pursuant to
an option granted under the Plan only upon receipt by the Company of
notice in writing from the optionee of the optionee's intention to
exercise, specifying the number of shares as to which the optionee
desires to exercise the option and the date on which the optionee
desires to complete the transaction, and if required in order to
comply with the Securities Act of 1933, as amended, containing a
representation that it is the optionee's present intention to
acquire the shares for investment and not with a view to
distribution. Unless the Board of Directors determines otherwise,
on or before the date specified for completion of the purchase of
shares pursuant to an option, the optionee must have paid the
Company the full purchase price of such shares in cash (including
cash that may be the proceeds of a loan from the Company) or, in
whole or in part, in Common Stock of the Company valued at fair
market value, or, with the consent of the Board of Directors,
restricted stock, PERFORMANCE-BASED AWARDS [performance units] or
other contingent awards denominated in either stock or cash,
deferred compensation credits, promissory notes and other forms of
consideration. The fair market value of Common Stock provided in
payment of the purchase price shall be the closing price for the
Common Stock as reported IN THE NYSE COMPOSITE TRANSACTIONS [by
NASDAQ] and published in The Wall Street Journal on the trading day
preceding the date the option is exercised, or such other reported
value of the Common Stock as shall be specified by the Board of
Directors. No shares shall be issued until full payment therefor
has been made. Subject to such rules as may be adopted by the Board
of Directors, an optionee may request the Company to apply
automatically the shares to be received upon the exercise of a
portion of a stock option (even though stock certificates have not
yet been issued) to satisfy the purchase price for additional
portions of the option.
Each optionee who has exercised an option shall
immediately upon notification of the amount due, if any, pay to the
Company in cash amounts necessary to satisfy any applicable federal,
state and local tax withholding requirements. If additional
withholding is or becomes required beyond any amount deposited
before delivery of the certificates, the optionee shall pay such
amount to the Company on demand. If the optionee fails to pay the
amount demanded, the Company may withhold that amount from other
amounts payable by the Company to the optionee, including salary,
subject to applicable law. Subject to such rules as may be adopted
by the Board of Directors, an optionee may satisfy this obligation,
in whole or in part, by having the Company withhold from the shares
to be issued upon the exercise that number of shares that would
satisfy the withholding amount due or by delivering to the Company
Common Stock to satisfy the withholding amount. Upon the exercise
of an option, the number of shares reserved for issuance under the
Plan shall be reduced by the number of shares issued upon exercise
of the option, less the number of shares surrendered in payment of
the option exercise or surrendered or withheld to satisfy
withholding obligations.
(b) INCENTIVE STOCK OPTIONS. Incentive Stock Options
shall be subject to the following additional terms and conditions:
(i) LIMITATION ON AMOUNT OF GRANTS. No employee may
be granted Incentive Stock Options under the Plan if the aggregate
fair market value, on the date of grant, of the Common Stock with
respect to which Incentive Stock Options are exercisable for the
first time by that employee during any calendar year under the Plan
and under any other incentive stock option plan (within the meaning
of Section 422[A] of the Code) of the Company or any parent or
subsidiary of the Company exceeds $100,000.
(ii) LIMITATIONS ON GRANTS TO 10 PERCENT
SHAREHOLDERS. An Incentive Stock Option may be granted under the
Plan to an employee possessing more than 10 percent of the total
combined voting power of all classes of stock of the Company or of
any parent or subsidiary of the Company only if the option price
is at least 110 percent of the fair market value of the Common
Stock subject to the option on the date it is granted, as
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described in paragraph 6(b)(iv), and the option by its terms is not
exercisable after the expiration of five years from the date it is
granted.
(iii) DURATION OF OPTIONS. Subject to paragraphs
6(a)(ii) and 6(b)(ii), Incentive Stock Options granted under the
Plan shall continue in effect for the period fixed by the Board of
Directors, except that no Incentive Stock Option shall be
exercisable after the expiration of 10 years from the date it is
granted.
(iv) OPTION PRICE. The option price per share shall
be determined by the Board of Directors at the time of grant. Except
as provided in paragraph 6(b)(ii), the option price shall not be
less than 100 percent of the fair market value of the Common Stock
covered by the Incentive Stock Option at the date the option is
granted. The fair market value shall be deemed to be the closing
price for the Common Stock as reported IN THE NYSE COMPOSITE
TRANSACTIONS [by NASDAQ] and published in The Wall Street Journal on
the day preceding the date the option is granted, or if there has
been no sale on that date, on the last preceding date on which a
sale occurred, or such other value of the Common Stock as shall be
specified by the Board of Directors.
(v) LIMITATION ON TIME OF GRANT. No Incentive Stock
Option shall be granted on or after the tenth anniversary of the
effective date of the Plan.
(vi) CONVERSION OF INCENTIVE STOCK OPTIONS. The
Board of Directors may at any time without the consent of the
optionee convert an Incentive Stock Option to a Non-Statutory Stock
Option.
(vii) LIMITATION ON NUMBER OF SHARES ISSUABLE
UNDER INCENTIVE STOCK OPTIONS. Subject to adjustment as provided in
paragraph 12, the total number of shares of Common Stock that may be
issued under the Plan upon exercise of Incentive Stock Options shall
not exceed 4,000,000 [2,000,000] shares.
---------
(c) NON-STATUTORY STOCK OPTIONS. Non-Statutory Stock
options shall be subject to the following additional terms and
conditions:
(i) OPTION PRICE. The option price for Non-Statutory
Stock Options shall be determined by the Board of Directors at the
time of grant. The option price may not be less than 50 percent of
the fair market value of the shares on the date of grant. The fair
market value of shares covered by a Non-Statutory Stock Option shall
be determined pursuant to paragraph 6(b)(iv).
(ii) DURATION OF OPTIONS. Non-Statutory Stock
Options granted under the Plan shall continue in effect for the
period fixed by the Board of Directors.
7. STOCK BONUSES. The Board of Directors may award shares
under the Plan as stock bonuses. Shares awarded as a bonus shall be
subject to the terms, conditions, and restrictions determined by the
Board of Directors. The restrictions may include restrictions
concerning transferability and forfeiture of the shares awarded,
together with such other restrictions as may be determined by the
Board of Directors. The Board of Directors may require the
recipient to sign an agreement as a condition of the award, but may
not require the recipient to pay any monetary consideration other
than amounts necessary to satisfy tax withholding requirements. The
agreement may contain any terms, conditions, restrictions,
representations and warranties required by the Board of Directors.
The certificates representing the shares awarded shall bear any
legends required by the Board of Directors. The Company may require
any recipient of a stock bonus to pay to the Company in cash upon
demand amounts necessary to satisfy any applicable federal, state or
local tax withholding requirements. If the recipient fails to pay
the amount demanded, the Company may withhold that amount from other
amounts payable by the Company to the recipient, including salary or
fees for services, subject to applicable law. With the consent of
the Board of Directors, a recipient may deliver Common Stock to the
Company to satisfy this withholding obligation. Upon the issuance
of a stock bonus, the number of shares reserved for issuance under
the Plan shall be reduced by the number of shares issued, less the
number of shares surrendered or withheld to satisfy withholding
obligations.
8. RESTRICTED STOCK. The Board of Directors may issue
shares under the Plan for such consideration (including promissory
notes and services) as determined by the Board of Directors
provided that in no event shall the consideration be less than
50 percent of fair market value of the Common Stock at the time
of issuance. Shares issued under the Plan shall be subject to
the terms, conditions and restrictions determined by the Board of
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Directors. The restrictions may include restrictions concerning
transferability, repurchase by the Company and forfeiture of the
shares issued, together with such other restrictions as may be
determined by the Board of Directors. All Common Stock issued
pursuant to this paragraph 8 shall be subject to a purchase
agreement, which shall be executed by the Company and the prospective
recipient of the shares prior to the delivery of certificates
representing such shares to the recipient. The purchase agreement
may contain any terms, conditions, restrictions, representations and
warranties required by the Board of Directors. The certificates
representing the shares shall bear any legends required by the Board
of Directors. The Company may require any purchaser of restricted
stock to pay to the Company in cash upon demand amounts necessary to
satisfy any applicable federal, state or local tax withholding
requirements. If the purchaser fails to pay the amount demanded, the
Company may withhold that amount from other amounts payable by the
Company to the purchaser, including salary; subject to applicable
law. With the consent of the Board of Directors, a purchaser may
deliver Common Stock to the Company to satisfy this withholding
obligation. Upon the issuance of restricted stock, the number of
shares reserved for issuance under the Plan shall be reduced by the
number of shares issued, less the number of shares surrendered in
payment of the restricted stock or surrendered or withheld to satisfy
withholding obligations.
9. STOCK APPRECIATION RIGHTS.
(a) GRANT. Stock appreciation rights may be granted
under the Plan by the Board of Directors, subject to such rules,
terms, and conditions as the Board of Directors prescribes.
(b) EXERCISE.
(i) Each stock appreciation right shall entitle the
holder, upon exercise, to receive from the Company in exchange
therefor an amount equal in value to the excess of the fair market
value on the date of exercise of one share of Common Stock of the
Company over its fair market value on the date of grant (or, in the
case of a stock appreciation right granted in connection with an
option, the excess of the fair market value of one share of Common
Stock of the Company over the option price per share under the
option to which the stock appreciation right relates), multiplied by
the number of shares covered by the stock appreciation right or the
option, or portion thereof, that is surrendered. No stock
appreciation right shall be exercisable at a time that the amount
determined under this subparagraph is negative. Payment by the
Company upon exercise of a stock appreciation right may be made in
Common Stock valued at fair market value, in cash, or partly in
Common Stock and partly in cash, all as determined by the Board of
Directors.
(ii) A stock appreciation right shall be exercisable
only at the time or times established by the Board of Directors;
provided, that the provisions of paragraph 6(a)(iv)(D) shall apply
to the exercise of a stock appreciation right upon termination of
employment of the grantee following a change in control as provided
therein. If a stock appreciation right is granted in connection
with an option, the following rules shall apply: (1) the stock
appreciation right shall be exercisable only to the extent and on
the same conditions that the related option could be exercised;
(2) upon exercise of the stock appreciation right, the option or
portion thereof to which the stock appreciation right relates
terminates; and (3) upon exercise of the option, the related stock
appreciation right or portion thereof terminates. No stock
appreciation right granted to an officer or director may be
exercised during the first six months following the date it is
granted.
(iii) The Board of Directors may withdraw any
stock appreciation right granted under the Plan at any time and may
impose any conditions upon the exercise of a stock appreciation
right or adopt rules and regulations from time to time affecting the
rights of holders of stock appreciation rights. Such rules and
regulations may govern the right to exercise stock appreciation
rights granted prior to adoption or amendment of such rules and
regulations as well as stock appreciation rights granted thereafter.
(iv) For purposes of this paragraph 9, the fair
market value of the Common Stock shall be the closing price for the
Common Stock as reported IN THE NYSE COMPOSITE TRANSACTIONS [by
NASDAQ] and published in The Wall Street Journal, or such other
reported value of the Common Stock as shall be specified by the
Board of Directors, on the trading day preceding the date the stock
appreciation right is exercised.
(v) No fractional shares shall be issued upon
exercise of a stock appreciation right. In lieu thereof, cash may
be paid in an amount equal to the value of the fraction or, if the
Board of Directors shall determine, the number of shares may be
rounded downward to the next whole share.
(vi) Each participant who has exercised
a stock appreciation right shall, upon notification of the
amount due, pay to the Company in cash amounts necessary
to satisfy any applicable federal, state and local
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tax withholding requirements. If the participant fails to pay the
amount demanded, the Company may withhold that amount from other
amounts payable by the Company to the participant including salary,
subject to applicable law. With the consent of the Board of
Directors a participant may satisfy this obligation, in whole or in
part, by having the Company withhold from any shares to be issued
upon the exercise that number of shares that would satisfy the
withholding amount due or by delivering Common Stock to the Company
to satisfy the withholding amount.
(vii) Upon the exercise of a stock appreciation
right for shares, the number of shares reserved for issuance under
the Plan shall be reduced by the number of shares issued, less the
number of shares surrendered or withheld to satisfy withholding
obligations. Cash payments of stock appreciation rights shall not
reduce the number of shares of Common Stock reserved for issuance
under the Plan.
10. CASH BONUS RIGHTS.
(a) GRANT. The Board of Directors may grant cash bonus
rights under the Plan in connection with (i) options granted or
previously granted, (ii) stock appreciation rights granted or
previously granted, (iii) stock bonuses awarded or previously
awarded and (iv) shares sold or previously sold under the Plan.
Cash bonus rights will be subject to rules, terms and conditions as
the Board of Directors may prescribe. The payment of a cash bonus
shall not reduce the number of shares of Common, Stock reserved for
issuance under the Plan.
(b) CASH BONUS RIGHTS IN CONNECTION WITH OPTIONS. A cash
bonus right granted in connection with an option will entitle an
optionee to a cash bonus when the related option is exercised (or
terminates in connection with the exercise of a stock appreciation
right related to the option) in whole or in part. No cash bonus
right granted to an officer or director in connection with an option
may be exercised during the first six months following the date the
bonus right is granted. If an optionee purchases shares upon
exercise of an option and does not exercise a related stock
appreciation right, the amount of the bonus shall be determined by
multiplying the excess of the total fair market value of the shares
to be acquired upon the exercise over the total option price for the
shares by the applicable bonus percentage. If the optionee
exercises a related stock appreciation right in connection with the
termination of an option, the amount of the bonus shall be
determined by multiplying the total fair market value of the shares
and cash received pursuant to the exercise of the stock appreciation
right by the applicable bonus percentage. The bonus percentage
applicable to a bonus right shall be determined from time to time by
the Board of Directors but shall in no event exceed 75 percent.
(c) CASH BONUS RIGHTS IN CONNECTION WITH STOCK BONUS. A
cash bonus right granted in connection with a stock bonus will
entitle the recipient to a cash bonus payable when the stock bonus
is awarded or restrictions, if any, to which the stock is subject
lapse. If bonus stock awarded is subject to restrictions and is
repurchased by the Company or forfeited by the holder, the cash
bonus right granted in connection with the stock bonus shall
terminate and may not be exercised. The amount and timing of
payment of a cash bonus shall be determined by the Board of
Directors.
(d) CASH BONUS RIGHTS IN CONNECTION WITH STOCK PURCHASES.
A cash bonus right granted in connection with the purchase of stock
pursuant to paragraph 8 will entitle the recipient to a cash bonus
when the shares are purchased or restrictions, if any, to which the
stock is subject lapse. Any cash bonus right granted in connection
with shares purchased pursuant to paragraph 8 shall terminate and
may not be exercised in the event the shares are repurchased by the
Company or forfeited by the holder pursuant to applicable
restrictions. The amount of any cash bonus to be awarded and timing
of payment of a cash bonus shall be determined by the Board of
Directors.
(e) TAXES. The Company shall withhold from any cash
bonus paid pursuant to paragraph 10 the amount necessary to satisfy
any applicable federal, state and local withholding requirements.
11. PERFORMANCE-BASED AWARDS. THE BOARD OF DIRECTORS MAY
GRANT AWARDS INTENDED TO QUALIFY AS PERFORMANCE-BASED COMPENSATION
UNDER SECTION 162(M) OF THE CODE AND THE REGULATIONS THEREUNDER
("PERFORMANCE-BASED AWARDS"). PERFORMANCE-BASED AWARDS SHALL BE
DENOMINATED AT THE TIME OF GRANT EITHER IN COMMON STOCK ("STOCK
PERFORMANCE AWARDS") OR IN DOLLAR AMOUNTS ("DOLLAR PERFORMANCE
AWARDS"). PAYMENT UNDER A STOCK PERFORMANCE AWARD OR A DOLLAR
PERFORMANCE AWARD SHALL BE MADE, AT THE DISCRETION OF THE BOARD OF
DIRECTORS, IN COMMON STOCK ("PERFORMANCE SHARES"), OR IN CASH OR IN
ANY COMBINATION THEREOF. PERFORMANCE-BASED AWARDS SHALL BE SUBJECT
TO THE FOLLOWING TERMS AND CONDITIONS:
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(A) AWARD PERIOD. THE BOARD OF DIRECTORS SHALL DETERMINE
THE PERIOD OF TIME FOR WHICH A PERFORMANCE-BASED AWARD IS MADE (THE
"AWARD PERIOD").
(B) PERFORMANCE GOALS AND PAYMENT. THE BOARD OF
DIRECTORS SHALL ESTABLISH IN WRITING AN OBJECTIVE ("PERFORMANCE
GOALS") THAT MUST BE MET BY THE COMPANY OR ANY SUBSIDIARY, DIVISION
OR OTHER UNIT (INCLUDING ONE OR MORE REGIONS OR STORES) OF THE
COMPANY ("BUSINESS UNIT") DURING THE AWARD PERIOD AS A CONDITION TO
PAYMENT BEING MADE UNDER THE PERFORMANCE-BASED AWARD. THE
PERFORMANCE GOALS FOR EACH AWARD SHALL BE ONE OR MORE TARGETED
LEVELS OF PERFORMANCE WITH RESPECT TO ONE OR MORE OF THE FOLLOWING
OBJECTIVE MEASURES WITH RESPECT TO THE COMPANY OR ANY BUSINESS UNIT:
DEPARTMENTAL EXPENSE PERFORMANCE, EARNINGS PER SHARE, TOTAL
SHAREHOLDER RETURN (STOCK PRICE INCREASE PLUS DIVIDENDS), RETURN ON
EQUITY, RETURN ON ASSETS, REVENUES, OPERATING INCOME, INCOME BEFORE
TAXES, NET INCOME, INVENTORIES, INVENTORY TURNS, CASH FLOWS,
EXPENSES, CAPITAL EXPENDITURES, INCREASE IN SHAREHOLDER VALUE AS A
PERCENTAGE OF ASSETS EMPLOYED, OTHER FINANCIAL RETURN RATIOS, MARKET
PERFORMANCE, CUSTOMER SATISFACTION OR ANY OF THE FOREGOING BEFORE
THE EFFECT OF ACQUISITIONS, DIVESTITURES, ACCOUNTING CHANGES, AND
RESTRUCTURING AND SPECIAL CHARGES (DETERMINED ACCORDING TO CRITERIA
ESTABLISHED BY THE BOARD OF DIRECTORS). THE BOARD OF DIRECTORS
SHALL ALSO ESTABLISH THE NUMBER OF PERFORMANCE SHARES OR THE AMOUNT
OF CASH PAYMENT TO BE MADE UNDER A PERFORMANCE-BASED AWARD IF THE
PERFORMANCE GOALS ARE MET OR EXCEEDED, INCLUDING THE FIXING OF A
MAXIMUM PAYMENT (SUBJECT TO SECTION 11(D)). THE BOARD OF DIRECTORS
MAY ESTABLISH OTHER RESTRICTIONS TO PAYMENT UNDER A PERFORMANCE-BASED
AWARD, SUCH AS A CONTINUED EMPLOYMENT REQUIREMENT, IN ADDITION TO
SATISFACTION OF THE PERFORMANCE GOALS. SOME OR ALL OF THE
PERFORMANCE SHARES MAY BE ISSUED AT THE TIME OF THE AWARD AS
RESTRICTED SHARES SUBJECT TO FORFEITURE IN WHOLE OR IN PART IF
PERFORMANCE GOALS OR, IF APPLICABLE, OTHER RESTRICTIONS ARE NOT
SATISFIED.
(C) COMPUTATION OF PAYMENT. AFTER AN AWARD PERIOD, THE
FINANCIAL PERFORMANCE OF THE COMPANY OR BUSINESS UNIT, AS
APPLICABLE, DURING THE PERIOD SHALL BE MEASURED AGAINST THE
PERFORMANCE GOALS. IF THE PERFORMANCE GOALS ARE NOT MET, NO PAYMENT
SHALL BE MADE UNDER A PERFORMANCE-BASED AWARD. IF THE PERFORMANCE
GOALS ARE MET OR EXCEEDED, THE BOARD OF DIRECTORS SHALL CERTIFY THAT
FACT IN WRITING AND CERTIFY THE NUMBER OF PERFORMANCE SHARES EARNED
OR THE AMOUNT OF CASH PAYMENT TO BE MADE UNDER THE TERMS OF THE
PERFORMANCE-BASED AWARD.
(D) MAXIMUM AWARDS. NO PARTICIPANT MAY RECEIVE STOCK
PERFORMANCE AWARDS IN ANY FISCAL YEAR UNDER WHICH THE MAXIMUM NUMBER
OF SHARES OF COMMON STOCK ISSUABLE UNDER THE AWARD EXCEEDS 100,000
SHARES. NO PARTICIPANT MAY RECEIVE DOLLAR PERFORMANCE AWARDS IN ANY
FISCAL YEAR UNDER WHICH THE MAXIMUM AMOUNT OF CASH PAYABLE UNDER THE
AWARD EXCEEDS $1,500,000.
(E) TAX WITHHOLDING. EACH PARTICIPANT WHO HAS RECEIVED
PERFORMANCE SHARES SHALL, UPON NOTIFICATION OF THE AMOUNT DUE, PAY
TO THE COMPANY IN CASH AMOUNTS NECESSARY TO SATISFY ANY APPLICABLE
FEDERAL, STATE AND LOCAL TAX WITHHOLDING REQUIREMENTS. IF THE
PARTICIPANT FAILS TO PAY THE AMOUNT DEMANDED, THE COMPANY MAY
WITHHOLD THAT AMOUNT FROM OTHER AMOUNTS PAYABLE BY THE COMPANY TO
THE PARTICIPANT, INCLUDING SALARY, SUBJECT TO APPLICABLE LAW. WITH
THE CONSENT OF THE BOARD OF DIRECTORS, A PARTICIPANT MAY SATISFY
THIS OBLIGATION, IN WHOLE OR IN PART, BY HAVING THE COMPANY WITHHOLD
FROM ANY SHARES TO BE ISSUED THAT NUMBER OF SHARES THAT WOULD
SATISFY THE WITHHOLDING AMOUNT DUE OR BY DELIVERING COMMON STOCK TO
THE COMPANY TO SATISFY THE WITHHOLDING AMOUNT.
(F) EFFECT ON SHARES AVAILABLE. THE PAYMENT OF A
PERFORMANCE-BASED AWARD IN CASH SHALL NOT REDUCE THE NUMBER OF
SHARES OF COMMON STOCK RESERVED FOR ISSUANCE UNDER THE PLAN. THE
NUMBER OF SHARES OF COMMON STOCK RESERVED FOR ISSUANCE UNDER THE
PLAN SHALL BE REDUCED BY THE NUMBER OF SHARES ISSUED UPON PAYMENT OF
AN AWARD, LESS THE NUMBER OF SHARES SURRENDERED OR WITHHELD TO
SATISFY WITHHOLDING OBLIGATIONS.
[11. PERFORMANCE UNITS. The Board of Directors may grant
performance units consisting of monetary units which may be
earned in whole or in part if the Company achieves certain goals
established by the Board of Directors over a designated period of
time, but not in any event more than 10 years. The goals
established by the Board of Directors may include earnings per
share, return on shareholders' equity, return on invested capital,
and such other goals as may be established by the Board of
Directors. In the event that the minimum performance goal
established by the Board of Directors is not achieved at the
conclusion of a period, no payment shall be made to the
participants. In the event the maximum corporate goal is achieved,
100 percent of the monetary value of the performance units shall
be paid to or vested in the participants. Partial achievement
of the maximum goal may result in a payment or vesting corresponding
to the degree of achievement as determined by the Board
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of Directors. Payment of an award earned may be in cash or in
Common Stock or in a combination of both, and may be made when
earned, or vested and deferred, as the Board of Directors
determines. Deferred awards shall earn interest on the terms and
at a rate determined by the Board of Directors. Each participant
who has been awarded a performance unit shall, upon notification
of the amount due, pay to the Company in cash amounts necessary
to satisfy any applicable federal, state and local tax
withholding requirements. If the participant fails to pay the
amount demanded, the Company may withhold that amount from other
amounts payable by the Company to the participant, including
salary or fees for services, subject to applicable law. With the
consent of the Board of Directors a participant may satisfy this
obligation, in whole or in part, by having the Company withhold
from any shares to be issued that number of shares that would
satisfy the withholding amount due or by delivering Common Stock
to the Company to satisfy the withholding amount. The payment of
a performance unit in cash shall not reduce the number of shares
of Common Stock reserved for issuance under the Plan. The number
of shares reserved for issuance under the Plan shall be reduced
by the number of shares issued upon payment of an award, less any
shares surrendered or withheld to satisfy withholding
obligations.]
12. CHANGES IN CAPITAL STRUCTURE. If the outstanding Common
Stock of the Company is hereafter increased or decreased or changed
into or exchanged for a different number or kind of shares or other
securities of the Company or of another corporation by reason of any
reorganization, merger, consolidation, plan of exchange,
recapitalization, reclassification, stock split-up, combination of
shares or dividend payable in shares, appropriate adjustment shall
be made by the Board of Directors in the number and kind of shares
available for awards under the Plan. In addition, the Board of
Directors shall make appropriate adjustment in the number and kind
of shares as to which outstanding options and stock appreciation
rights, or portions thereof then unexercised, shall be exercisable,
so that the optionee's proportionate interest before and after the
occurrence of the event is maintained. The Board of Directors may
also require that any securities issued in respect of or exchanged
for shares issued hereunder that are subject to restrictions be
subject to similar restrictions. Notwithstanding the foregoing, the
Board of Directors shall have no obligation to effect any adjustment
that would or might result in the issuance of fractional shares, and
any fractional shares resulting from any adjustment may be
disregarded or provided for in any manner determined by the Board of
Directors. Any such adjustments made by the Board of Directors
shall be conclusive. In the event of dissolution of the Company or a
merger, consolidation or plan of exchange affecting the Company, in
lieu of providing for options and stock appreciation rights as
provided above in this paragraph 12, the Board of Directors may, in
its sole discretion, provide a 30-day period prior to such event
during which optionees shall have the right to exercise options and
stock appreciation rights in whole or in part without any limitation
on exercisability and upon the expiration of which 30-day period all
unexercised options and stock appreciation rights shall immediately
terminate.
13. CORPORATE MERGERS, ACQUISITIONS, ETC. The Board of
Directors may also grant options, stock appreciation rights,
PERFORMANCE-BASED AWARDS [performance units], stock bonuses and cash
bonuses and issue restricted stock under the Plan having terms,
conditions and provisions that vary from those specified in this
Plan provided that any such awards are granted in substitution for,
or in connection with, the assumption of existing options, stock
appreciation rights, stock bonuses, cash bonuses, restricted stock
and PERFORMANCE-BASED AWARDS [performance units] granted, awarded
or issued by another corporation and assumed or otherwise agreed to
be provided for by the Company pursuant to or by reason of a
transaction involving a corporate merger, consolidation, acquisition
of property or stock, separation, reorganization or liquidation to
which the Company or a subsidiary is a party.
14. AMENDMENT OF PLAN. The Board of Directors may at any
time, and from time to time, modify or amend the Plan in such
respects as it shall deem advisable because of changes in the law
while the Plan is in effect or for any other reason. Except as
provided in paragraphs 6(a)(iv), 9 and 12, however, no change in an
award already granted shall be made without the written consent of
the holder of such award.
15. APPROVALS. The obligations of the Company under the Plan
are subject to the approval of state and federal authorities or
agencies with jurisdiction in the matter. The Company will use its
best efforts to take steps required by state or federal law or
applicable regulations, including rules and regulations of the
Securities and Exchange Commission and any stock exchange on which
the Company's shares may then be listed, in connection with the
grants under the Plan. The foregoing notwithstanding, the Company
shall not be obligated to issue or deliver Common Stock under the
Plan if such issuance or delivery would violate applicable state or
federal securities laws.
16. EMPLOYMENT AND SERVICE RIGHTS. Nothing in the Plan or any
award pursuant to the Plan shall (i) confer upon any employee any right
to be continued in the employment of the Company or any subsidiary or
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interfere in any way with the right of the Company or any subsidiary by
whom such employee is employed to terminate such employee's employment
at any time, for any reason, with or without cause, or to decrease such
employee's compensation or benefits, or (ii) confer upon any person
engaged by the Company any right to be retained or employed by the
Company or to the continuation, extension, renewal, or modification of
any compensation, contract, or arrangement with or by the Company.
17. RIGHTS AS A SHAREHOLDER. The recipient of any award under
the Plan shall have no rights as a shareholder with respect to any
Common Stock until the date of issue to the recipient of a stock
certificate for such shares. Except as otherwise expressly provided
in the Plan, no adjustment shall be made for dividends or other
rights for which the record date occurs prior to the date such stock
certificate is issued.
FRED MEYER, INC.
Annual Meeting, June 27, 1995
Proxy/Voting Instruction Card
I appoint Robert G. Miller, Kenneth Thrasher and Roger A. Cooke,
individually and together, proxies with full power of substitution, to
vote all of my Fred Meyer, Inc. common stock at the Annual Meeting of
Shareholders to be held at the Red Lion Inn (East), Jantzen Beach, 909 N.
Hayden Island Drive, Portland, Oregon, on Tuesday, June 27, 1995 at 1:00
p.m. and at any adjournment thereof; with all powers that I would possess
if personally present.
YOUR VOTE IS IMPORTANT. PLEASE MARK THIS PROXY AS INDICATED ON THE
REVERSE SIDE TO VOTE ON ANY ITEM. IF YOU WISH TO VOTE IN ACCORDANCE WITH
THE BOARD OF DIRECTORS' RECOMMENDATIONS, PLEASE SIGN THE REVERSE SIDE; NO
BOXES NEED TO BE CHECKED.
- ---------------------------------------------------------------------------
PROXY/VOTING INSTRUCTION CARD / X / Please mark
your votes
_______________ like this
Common
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1 AND 2
Item 1--Election of Directors
NOMINEES: Saul A. Fox, A.M. Gleason, Jerome Kohlberg, Jr.,
Roger S. Meier, Michael W. Michelson, Robert G. Miller and
Paul E. Raether
FOR WITHHELD FOR ALL
/ / / /
To withhold authority to vote for any individual, draw a line through that
nominee's name in the list provided.
Item 2--The amendments to the Company's 1990 Stock Incentive Plan.
FOR AGAINST ABSTAIN
/ / / / / /
Item 3--In their discretion, upon any and all such other matters
as may come before this meeting or any adjournment
thereof.
I PLAN TO ATTEND MEETING / /
COMMENTS/ADDRESS CHANGE / /
Please mark this box if you
have written comments/address
change below
Signature(s) _________________________________________ Date _______________
Please sign exactly as name(s) appear(s) hereon. If acting as an executor,
administrator, trustee, guardian, etc., you should so indicate in signing.
If the shareholder is a corporation, please sign the full corporate name, by
duly authorized officer. If shares are held jointly, each shareholder
named should sign. Date and promptly return this card in the envelope
provided.