SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
ALBERTSON'S
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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ALBERTSONS
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NOTICE OF 2002
ANNUAL MEETING
AND
PROXY STATEMENT
All persons attending the annual meeting must present an admission card and
picture identification. Please follow the advance registration instructions on
the back cover of this proxy statement to obtain an admission card.
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ALBERTSONS
ALBERTSON'S, INC.
250 PARKCENTER BOULEVARD
P.O. BOX 20
BOISE, IDAHO 83726
MAY 3, 2002
DEAR FELLOW SHAREHOLDER:
IT IS OUR PLEASURE TO INVITE YOU TO ATTEND THE 2002 ANNUAL MEETING OF
SHAREHOLDERS. THE MEETING IS SCHEDULED FOR 9:00 A.M. (PACIFIC DAYLIGHT TIME)
THURSDAY, JUNE 6, 2002, IN THE SIENA BALLROOM, SIENA HOTEL, ONE SOUTH LAKE
STREET, RENO, NEVADA.
THIS YEAR YOU ARE BEING ASKED TO:
o ELECT DIRECTORS;
o RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS FOR THE FISCAL YEAR
THAT ENDS JANUARY 30, 2003;
o APPROVE THE ALBERTSON'S, INC. EXECUTIVE OFFICERS' ANNUAL INCENTIVE
COMPENSATION PLAN; AND
o CONSIDER FOUR SHAREHOLDER PROPOSALS THAT MAY BE PRESENTED AT THE
MEETING.
YOU WILL FIND FURTHER INFORMATION ABOUT THESE ITEMS AND OUR COMPANY IN THE
FOLLOWING PAGES. WE ARE INCLUDING:
o INFORMATION ABOUT THE NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS,
o INFORMATION ABOUT THE AUDITORS WE HAVE APPOINTED,
o INFORMATION ABOUT THE ALBERTSON'S, INC. EXECUTIVE OFFICERS' ANNUAL
INCENTIVE COMPENSATION PLAN, AND
o INFORMATION ABOUT THE FOUR SHAREHOLDER PROPOSALS -- AND WHY YOUR BOARD
OF DIRECTORS OPPOSES EACH OF THEM.
IF YOU PLAN TO ATTEND THE MEETING, PLEASE FOLLOW THE ADVANCE REGISTRATION
INSTRUCTIONS ON THE BACK OF THIS PROXY STATEMENT. AN ADMISSION CARD, WHICH IS
REQUIRED FOR ADMITTANCE TO THE MEETING, WILL BE MAILED TO YOU PRIOR TO THE
MEETING.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED. WE URGE YOU TO VOTE, EVEN IF
YOU CANNOT ATTEND THE MEETING.
VERY TRULY YOURS,
/s/ LARRY JOHNSTON
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LARRY JOHNSTON
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
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TABLE OF CONTENTS
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PAGE
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Notice of the Annual Meeting of Shareholders 5
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Proxy Statement 6
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Appointment of Proxy Holders 6
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Voting Methods 6
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Householding and Electronic Receipt 8
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Voting Securities and Principal Holders Thereof 9
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Shares Beneficially Owned as of March 25, 2002 9
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Board of Directors 11
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Election of Directors (Proposal 1) 12
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Nominees for Election as Class I Directors 12
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Continuing Class II Directors 14
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Continuing Class III Directors 15
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Director Emeritus 16
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Certain Transactions 16
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Committees and Meetings of the Board of Directors 19
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Compensation of Directors 20
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Compensation of Executive Officers 21
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Summary Compensation Table 21
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Option Grants in Last Fiscal Year 22
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Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values 23
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Employment Agreements 23
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Retirement Benefits 27
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Salaried Pension Plan Table 28
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Compensation Committee Report 28
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Performance Graph 31
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Audit/Finance Committee Report 32
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Ratification of Appointment of Independent Auditors (Proposal 2) 33
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Approval of the Albertson's, Inc. Executive Officers' Annual Incentive
Compensation Plan (Proposal 3) 35
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Shareholder Proposal (Proposal 4) 36
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Board of Directors' Statement in Opposition 37
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Shareholder Proposal (Proposal 5) 39
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Board of Directors' Statement in Opposition 41
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Shareholder Proposal (Proposal 6) 42
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Board of Directors' Statement in Opposition 44
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Shareholder Proposal (Proposal 7) 45
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Board of Directors' Statement in Opposition 46
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Other Matters 47
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Deadline for Receipt of Shareholders' Proposals 48
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Attachment A -- Albertson's, Inc. Executive Officers' Annual Incentive Compensation Plan A-1
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Advance Registration Back Cover
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ALBERTSONS
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NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
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TIME: 9:00 a.m. Pacific Daylight Time
DATE: Thursday, June 6, 2002
PLACE: Siena Ballroom
Siena Hotel
One South Lake Street
Reno, Nevada
AGENDA:
o To elect four directors,
o To ratify the Board of Directors' appointment of independent auditors,
o To approve the Albertson's, Inc. Executive Officers' Annual Incentive
Compensation Plan,
o To vote on four shareholder proposals that may be made at the meeting, and
o To transact any other business that may be brought before the meeting in
accordance with the By-Laws.
WHO MAY ATTEND?
o Shareholders of record at the close of business on April 18, 2002
o Representatives of shareholders, if authorized in writing
o Invited guests
If you plan to attend the meeting, please follow the advance registration
instructions on the back of this proxy statement. An admission card, which is
required for admittance to the meeting, will be mailed to you prior to the
meeting.
WHO MAY VOTE?
o Any shareholder of record at the close of business on April 18, 2002
o Any representative of such a shareholder, if authorized in writing
Even if you cannot attend the meeting, we urge you to vote. Please refer to
pages 6-8 of the accompanying proxy statement for Albertson's voting procedures.
By Order of the Board of Directors
Kaye L. O'Riordan
Vice President and Corporate Secretary
May 3, 2002
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YOUR COPY OF THE COMPANY'S ANNUAL REPORT FOR THE
FISCAL YEAR ENDED JANUARY 31, 2002 IS ENCLOSED.
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PROXY STATEMENT
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This proxy statement is being mailed to shareholders on or about May 3, 2002, in
connection with Albertson's solicitation of your vote at its 2002 Annual Meeting
of Shareholders. Please read it carefully because it contains important
information about admission to the meeting, voting procedures and the matters on
which you are being asked to vote.
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APPOINTMENT OF PROXY HOLDERS
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Your Board of Directors asks you to appoint Lawrence R. Johnston, Peter L. Lynch
and Felicia D. Thornton as your proxy holders. As such, they will vote your
shares at the 2002 Annual Meeting of Shareholders as you instruct them. To
appoint them as requested, just sign, date and return the enclosed proxy card in
the pre-addressed, postage-paid envelope provided or use one of the alternate
voting methods described below.
To direct the proxy holders as to how to vote your shares, just mark the boxes
on the proxy card that represent your choices. They will follow your
instructions. On any item for which you do not mark a box, they will vote as
recommended by the Board of Directors.
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VOTING METHODS
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If you are registered on Albertson's stock transfer books as the holder of
record of your shares, you can vote your shares in one of three ways:
o By calling the toll-free telephone number on your proxy card or vote
instruction form on a touch-tone phone. Be sure to have your proxy
card or vote instruction form available to enter your control number.
o By visiting the Internet site at HTTP://WWW.PROXYVOTE.COM.
o By marking, signing, dating and promptly returning the proxy card. We
have enclosed a postage-paid envelope (if mailed in the United States)
for your convenience.
If your shares are held of record in the name of a bank, broker or other holder
of record, you must follow the instructions from the holder of record in order
to have your shares voted. Some banks and brokers may offer telephone and
Internet voting.
Any shareholder of record attending the meeting may revoke his or her prior vote
by voting in person.
If you plan to attend the meeting, please follow the advance registration
instructions on the back of this proxy statement. An admission card, which is
required for admittance to the meeting, will be mailed to you prior to the
meeting.
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ALBERTSONS
If you own shares of record, you may revoke your proxy at any time before the
voting at the meeting. To do so, you must either:
o Write a letter to that effect to the Corporate Secretary, Albertson's,
Inc., 250 Parkcenter Boulevard, P.O. Box 20, Boise, Idaho 83726. Your
correspondence must be received before the meeting.
o Submit a signed proxy card that is dated later than the original proxy
and is delivered by telephone, Internet or mail in a timely manner.
o Vote by ballot at the Annual Meeting.
All shares that have been properly voted -- whether by telephone, Internet or
mail -- will be voted at the meeting according to your instructions unless you
have revoked your instructions. If you sign your proxy card but do not give
voting instructions, the shares represented by that proxy card will be voted as
recommended by the Board of Directors.
At the close of business on the Record Date (April 18, 2002), 406,845,855 shares
of Albertson's common stock were outstanding and entitled to vote at the
meeting. For each share of stock held, the shareholder is entitled to cast one
vote on each matter before the meeting.
A quorum, which is a majority of the outstanding shares as of the Record Date,
must be present to hold the Annual Meeting. We calculate a quorum based on the
number of shares represented at the meeting, either in person or by proxy.
If a quorum is present:
o We will hold an election of directors. Each outstanding share of stock
is entitled to cast one vote for each director position. Each nominee
receiving a plurality of the vote will be elected. Abstentions will be
disregarded; they will have no effect on the outcome of the vote.
o We will vote on ratification of the appointment of the independent
auditors. The appointment will be ratified if approved by a majority
of the shares present and entitled to vote. Abstentions will be
counted; they will have the same effect as a vote against the matter.
o We will vote on the approval of the Albertson's, Inc. Executive
Officers' Annual Incentive Compensation Plan. The Plan will be
approved by a majority of the shares present and entitled to vote.
Abstentions will be counted; they will have the same effect as a vote
against the matter.
o We will vote on each shareholder proposal, if properly brought before
the meeting. Each shareholder proposal will be approved if it receives
the affirmative vote of a majority of the shares present and entitled
to vote. Abstentions will be counted; they will have the same effect
as a vote against the matter. Broker non-votes will be disregarded;
they will not affect the outcome of the vote.
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We have retained Georgeson Shareholder to help in distributing proxy materials
and soliciting proxy voting instructions. Georgeson's estimated fee for this
work is not more than $15,000 plus payment of reasonable out-of-pocket expenses.
The initial solicitation is by mail. In addition, Albertson's directors,
officers or employees may solicit proxies in person or by telephone, facsimile,
telegram or e-mail.
Albertson's will also reimburse brokerage houses and other custodians for their
expenses in sending proxy materials to you.
As a shareholder, you may review a complete list of shareholders entitled to
vote at the meeting. The list will be available at the offices of the Company,
250 Parkcenter Boulevard, Boise, Idaho, during ordinary business hours for the
ten days immediately before the meeting.
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HOUSEHOLDING AND ELECTRONIC RECEIPT
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The Securities and Exchange Commission has adopted new rules that allow us to
deliver a single annual report and proxy statement to a household at which two
or more security holders reside and whom we believe are members of the same
family.
Accordingly, from now on your household will receive only one copy of the Annual
Report to Shareholders and Proxy Statement or any other information statement
unless we receive instructions that you prefer multiple mailings. However, you
will continue to receive individual proxy cards for each registered shareholder
account.
If you prefer to receive copies of the above documents for each registered
shareholder account, please contact our stock transfer agent, American Stock
Transfer & Trust Company, toll-free at 1-888-788-5081, via the Internet at:
www.amstock.com, or in writing at: American Stock Transfer & Trust Company,
Shareholder Services, 59 Maiden Lane, New York, NY 10038. Your delivery
instructions will be perpetual unless revoked, which you may do at any time by
calling American Stock Transfer & Trust Company at the above telephone number or
by writing them at the above address. It may take up to 30 days for you to begin
receiving separate mailings if you choose that alternative.
American Stock Transfer & Trust Company will provide you with a separate copy of
this proxy statement upon request. If your household is currently receiving
multiple copies of the Annual Report to Shareholders and Proxy Statement or any
other information statement from Albertson's and you would like to receive only
a single copy in the future, you may also contact American Stock Transfer &
Trust Company.
In an additional effort to reduce paper mailed to your home and to help lower
the Company's printing and postage costs, we now offer the convenience of
viewing Proxy Statements, Annual Reports to Shareholders and related materials
on-line. With your consent, we can stop sending future paper copies of
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ALBERTSONS
these documents to you by mail. To participate, follow the instructions on your
proxy card or the instructions provided if you vote by Internet or by phone.
These programs should reduce the volume of duplicate information you receive as
well as reduce your Company's operating expenses.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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The following table shows the persons (including any group deemed a "person"
under Section 13(d)(3) of the Securities Exchange Act of 1934) known to the
Company who beneficially own more than 5% of the Company's common stock. It also
shows beneficial ownership of the Company's common stock for each director, for
each nominee for director, for each executive officer named in the Summary
Compensation Table and for the executive officers and directors as a group.
SHARES BENEFICIALLY OWNED AS OF MARCH 25, 20021
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NAME (AND ADDRESS NUMBER OF SHARES
FOR BENEFICIAL BENEFICIALLY PERCENT
OWNERS OVER 5%) OWNED(2) OF CLASS
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Capital Research and Management Company(3) 36,868,400 9.0%
333 South Hope Street
Los Angeles, CA 90071
Markus Stiftung(4) 29,152,800 7.1%
Timmasper Weg
2353 Nortorf
Federal Republic of Germany
Legg Mason, Inc.(5) 28,134,776 6.9%
100 Light Street
Baltimore, MD 21202
FMR Corp.(6) 22,848,901 5.6%
82 Devonshire Street
Boston, MA 02109
Kathryn Albertson 6,000 (7) +
A. Gary Ames 37,116 (7) +
Cecil D. Andrus 17,325 (7) +
Pamela G. Bailey 25,078 (7) +
Teresa Beck 69,901 (8) +
Henry I. Bryant 17,270 (7) +
Paul I. Corddry 38,116 (7) +
Bonnie G. Hill 250 +
Clark A. Johnson 52,966 (7,9) +
Lawrence R. Johnston 399,081 (10) +
Victor L. Lund 5,698 (7,9) +
Peter L. Lynch 447,672 (8,10) +
Beatriz Rivera 28,116 (7) +
J.B. Scott 6,014,629 (7,11) 1.5%
Will M. Storey 35,116 (7) +
Romeo R. Cefalo 123,240 (8,9,10) +
Felicia D. Thornton 12,000 (10) +
Kevin H. Tripp 145,903 (8,10) +
All directors (including nominees) and all
executive officers as a group (28) 8,473,264 (7,8,9,10,11) 2.1%
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+ Indicates that the percentage of shares beneficially owned does not exceed one
percent of the Company's common stock.
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1 Beneficial ownership is determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934. Shares are considered to be "beneficially"
owned if the person has the sole or shared power to vote or direct the voting of
the securities or the sole or shared power to dispose of or direct the
disposition of the securities. A person is also considered to be the beneficial
owner of shares if that person has the right to acquire beneficial ownership of
the shares within 60 days following March 25, 2002.
2 Each director, nominee for director and executive officer disclaims
beneficial ownership of any shares owned by his or her spouse, children or
grandchildren and by trusts for such person, whether or not the director or
officer is a trustee or co-trustee thereof.
3 Share ownership is as of December 31, 2001 as set forth in an amendment to a
Schedule 13G filed with the Securities and Exchange Commission on or about
February 11, 2002. According to that filing, Capital Research and Management
Company, an investment advisor registered under Section 203 of the Investment
Advisors Act of 1940, is deemed to be a beneficial owner as the result of acting
as investment advisor to various investment companies registered under Section 8
of the Investment Company Act of 1940.
4 According to a Schedule 13D filed with the Securities and Exchange Commission
on or about January 18, 1990, Mr. Theo Albrecht is also a beneficial owner of
these shares. Mr. Albrecht's address is the same as that of Markus Stiftung.
5 Share ownership is as of December 31, 2001 as set forth in an amendment to a
Schedule 13G filed with the Securities and Exchange Commission on or about
February 8, 2002. According to that filing, Legg Mason, Inc. is a parent holding
company, in accordance with Section 240.13d-1(b)(ii)(G), of numerous
subsidiaries, all of which are investment advisors with discretion.
6 Share ownership is as of December 31, 2001 as set forth in a Schedule 13G
filed with the Securities and Exchange Commission on or about February 14, 2002.
According to that filing, FMR Corp. is a parent holding company, in accordance
with Section 240.13d-1(b)(ii)(G), of various subsidiaries, including Fidelity
Management & Research Company, which is deemed to be a beneficial owner as a
result of acting as investment advisor to various investment companies
registered under Section 8 of the Investment Company Act of 1940.
7 Includes the following shares that could have been acquired within 60 days
after March 25, 2002 pursuant to stock options awarded under the 1995 Stock
Option Plan for Non-Employee Directors, under the Amended and Restated 1995
Stock-Based Incentive Plan and under options converted from American Stores
Company option plans: 6,000 shares for Ms. Albertson; 28,116 shares for Mr.
Ames; 8,000 shares for Mr. Andrus; 21,628 shares for Ms. Bailey; 1,512 shares
for Mr. Bryant; 28,116 shares for Mr. Corddry; 20,116 shares for Mr. Johnson;
24,116 shares for Ms. Rivera; 6,000 shares for Mr. Scott; and 28,116 shares for
Mr. Storey as well as the following shares that could have been acquired within
60 days after March 25, 2002 pursuant to deferred stock units awarded under the
Amended and Restated 1995 Stock-Based Incentive Plan: 5,225 shares for Mr.
Andrus; 5,225 shares for Mr. Bryant; and 3,867 shares for Mr. Lund.
8 Includes shares credited to the Albertson's Savings & Retirement Estates, the
Albertson's Employee Stock Ownership Plan and the American Stores Company
Employee Stock Purchase Plan accounts of the individuals named and all executive
officers as a group.
9 Includes 3,200 shares for Mr. Johnson, 554 shares for Mr. Lund, 300 shares
for Mr. Cefalo and additional shares as to which certain executive officers
included in all executive officers as a group have sole voting and investment
power but which are held for minor children and relatives and as to which they
disclaim any beneficial interest.
10 Includes the following shares that could have been acquired within 60 days
after March 25, 2002 pursuant to stock options awarded under the 1986
Nonqualified Stock Option Plan, under the Amended and Restated 1995 Stock-Based
Incentive Plan and under options converted from American Stores Company option
plans: 130,215 shares for Mr. Johnston; 192,392 shares for Mr. Lynch; 62,966
shares for Mr. Cefalo; 136,288 shares for Mr. Tripp and 743,147 shares for
certain
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ALBERTSONS
executive officers included in all executive officers as a group as well as the
following shares that could have been acquired within 60 days after March 25,
2002 pursuant to deferrable restricted stock units awarded under the Amended and
Restated 1995 Stock-Based Incentive Plan: 268,866 shares for Mr. Johnston;
238,400 shares for Mr. Lynch; and 12,000 shares for Ms. Thornton.
11 Includes 6,003,600 shares held by Alscott Limited Partnership #1 of which
Alscott, Inc., an Idaho corporation, is the general partner and Mr. Scott is a
limited partner. Mr. Scott is the Chairman of the Board of and has a majority
interest in Alscott, Inc.
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BOARD OF DIRECTORS
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GENERAL
The business and affairs of Albertson's, Inc. are managed under the direction of
the Company's Board of Directors. The Board monitors the overall performance of
the Company and oversees strategic planning, including the Company's capital
expenditures budget. The Board also monitors the Company's financial controls
and reviews and ratifies selection and compensation of senior executives.
Currently, the Board of Directors of Albertson's, Inc. is made up of 14 members,
two of whom are Albertson's, Inc. employees. The Board's Nominating/Corporate
Governance Committee assesses the size and composition of the Board at least
annually.
The Nominating/Corporate Governance Committee recommends prospective directors
to the Board. The Nominating/Corporate Governance Committee will consider
nominees recommended by Albertson's shareholders. To make a recommendation, you
must write to the Corporate Secretary of the Company. You must provide:
o The individual's name,
o Biographical information about that person, and
o Qualifications of that person for the Board.
You may also propose a candidate at the Annual Meeting of Shareholders if you
have written to the Corporate Secretary of the Company to state your intention
to do so and if you have complied with specific requirements in the Company
By-Laws.
Your Board of Directors met at five regular meetings and five special meetings
during Fiscal 2002. All directors attended at least 75 percent of the meetings
of the Board and the committees of which they were members.
The Board has five standing committees: the Audit/Finance Committee,
Compensation Committee, Executive Committee, Nominating/Corporate Governance
Committee and Independent Directors Committee. It also had two other committees
during the fiscal year: the CEO Search Committee and Corporate Governance
Committee. A non-employee director chairs each committee except for the
Executive Committee. The membership and functions of the committees are detailed
in the chart on page 19.
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ELECTION OF DIRECTORS
(PROPOSAL 1)
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The Board of Directors is divided into three classes. Each year, the directors
in one class stand for election. They are elected to three-year terms. The Board
of Directors has nominated four individuals for election as Class I directors
this year. Each is nominated for a term that will expire in 2005. They are:
o Teresa Beck
o Bonnie G. Hill
o Lawrence R. Johnston
o Peter L. Lynch
Each nominee already serves as a director. Teresa Beck was appointed to the
Board in 1999 after the American Stores Company merger. Lawrence R. Johnston was
appointed to the Board in April of 2001. Peter L. Lynch was appointed to the
Board in July of 2001. Bonnie G. Hill was appointed to the Board effective
January 1, 2002.
Unless you specify otherwise, your proxy will be voted for the election of all
these nominees.
You can find information about each nominee and each continuing director below.
Unless otherwise indicated, the directors have been engaged in the same
principal occupation for the last five years. Directors' ages are stated as of
March 25, 2002.
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NOMINEES FOR ELECTION AS CLASS I DIRECTORS
TERM EXPIRING IN 2005
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TERESA BECK President of American Stores Company from March 1998
to June 1999 and Chief Financial Officer from March
Director 1995 to March 1998. Ms. Beck is a director of
since 1999 Lexmark International, Inc., Questar Corporation,
Textron Inc., the Children's Center, the David
Age 47 Eccles School of Business of the University of Utah,
Intermountain Health Care, the Salt Lake Organizing
Committee for the Olympic Winter Games of 2002 and a
member of the International Women's Forum. Member of
the Nominating/Corporate Governance and Independent
Directors Committees.
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BONNIE G. HILL President of B. Hill Enterprises, LLC, a consulting
firm specializing in corporate governance and board
Director organizational and public policy issues, since July
since 2002 2001. President and Chief Executive Officer of The
Times Mirror Foundation from 1997 to July 2001.
Age 60 Senior Vice President, Communications and Public
Affairs of the Los Angeles Times from 1998 to 2001.
Dean of the McIntire School of Commerce at the
University of Virginia from 1993 to 1997. Ms. Hill
is a director of AK Steel Holding Corp., ChoicePoint
Inc., Hershey Foods Corp., The Home Depot, Inc.,
National Grid Group plc, Goodwill Industries of
Greater Los Angeles, the Hollywood Entertainment
Museum, Los Angeles Urban League, Orange County
Performing Arts Center, Police Assessment Resource
Center (PARC) and United Way of Greater Los Angeles.
Member of the Compensation, Nominating/Corporate
Governance and Independent Directors Committees.
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LAWRENCE R. JOHNSTON Chairman of the Board of Directors and Chief
Executive Officer of the Company since April 2001.
Director Chairman of the Executive Committee of the Board of
since 2001 Directors of the Company. President and Chief
Executive Officer, General Electric Appliances
Age 53 Division, a maker of major household appliances and
a division of General Electric Company, a
diversified industrial corporation, from November
1999 to April 2001. President and Chief Executive
Officer of General Electric Medical Systems-Europe,
Middle East and Africa, a maker of medical products
and a subsidiary of General Electric Company, from
1997 to November 1999 and Chairman of General
Electric Company's European Corporate Executive
Council from 1998 to 1999. Vice President, Sales and
Distribution of GE Appliances Division from 1989 to
1997. Mr. Johnston is a director of the Food
Marketing Institute (FMI) and The World Food Forum
(C.I.E.S.).
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PETER L. LYNCH President and Chief Operating Officer of the Company
since March 2000. Executive Vice President,
Director Operations of the Company from June 1999 to March
since 2001 2000. President of Acme Markets, a division of
American Stores Company, from July 1998 to June 1999
Age 50 and Senior Vice President, Operations of Jewel-Osco,
a division of American Stores Company, from January
1997 to June 1998. Mr. Lynch is a director of the
Finance Committee Board of St. Joseph University.
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CONTINUING CLASS II DIRECTORS
TERM EXPIRING IN 2003
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A. GARY AMES President and Chief Executive Officer, MediaOne
International (formerly U S West International), a
Director telecommunications company, from 1995 until
since 1988 retirement in 2000. Mr. Ames is a director of
AT&T-Latin America Corp., etrieve inc., Infowave
Age 57 Software, Inc., Pac-West Telecomm, Inc. and
Tektronix, Inc. Member of the Compensation,
Nominating/Corporate Governance and Independent
Directors Committees.
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HENRY I. BRYANT Managing Director in the Corporate Finance Unit of
J.P. Morgan & Co. Incorporated, an investment
Director banking firm, from February 1987 until retirement in
since 1999 February 1998. Member of the Audit/Finance,
Compensation and Independent Directors Committees.
Age 59
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PAUL I. CORDDRY Senior Vice President, Europe, of H.J. Heinz
Company, a worldwide provider of processed food
Director products and services, until retirement in 1992. Mr.
since 1987 Corddry is a director of the American University in
Cairo, the Corcoran Museum and School of Art, the
Age 65 Philharmonic Center for the Arts and Swarthmore
College. Chairman of the Independent Directors
Committee and member of the Executive and
Nominating/Corporate Governance Committees.
- --------------------------------------------------------------------------------
BEATRIZ RIVERA Cabinet Secretary of the Energy, Minerals and
Natural Resources Department of the State of New
Director Mexico since February 2002. Member of Energy
since 1995 Resource Associates, LLC, a consulting firm working
with Honeywell Power Systems, Inc., from May 1999 to
Age 51 February 2002. Member of the Public Utilities
Commission of the State of New Mexico from 1995
through 1998. Ms. Rivera is a member of the Board of
Trustees of the Tomas Rivera Policy Institute and a
member of the International Women's Forum and the
New Mexico Women's Forum. Chairman of the
Nominating/Corporate Governance Committee and member
of the Executive and Independent Directors
Committees.
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
CONTINUING CLASS III DIRECTORS TERM
EXPIRING IN 2004
- --------------------------------------------------------------------------------
CECIL D. ANDRUS Chairman of the Andrus Center for Public Policy, a
public policy forum located at Boise State
Director University dealing in natural resource issues, since
since 1995 January 1995 and of counsel to the Gallatin Group, a
consulting firm, since February 1995. Governor of
Age 70 the State of Idaho from 1971 to 1977 and then from
1987 until January 1995. Secretary of the Interior
in the Carter Administration from 1977 through 1980.
Mr. Andrus is a director of Coeur d'Alene Mines
Corporation, KeyCorp, PCS Edventures!.com, Inc.,
Rentrak Corporation, the Alaska Conservation
Foundation, the Aucoin Institute and the Science
Advisory Board of the Bureau of Land Management.
Member of the Audit/Finance, Nominating/Corporate
Governance and Independent Directors Committees.
- --------------------------------------------------------------------------------
PAMELA G. BAILEY Chief Executive Officer and President of the
Advanced Medical Technology Association, a worldwide
Director medical technology trade association, since June
since 1999 1999. Chief Executive Officer of The Healthcare
Leadership Council from 1990 to 1999. President of
Age 53 the National Committee for Quality Health Care from
1987 to 1997. Ms. Bailey is President of the Board
of Trustees of the Holton-Arms School and a member
of the International Women's Forum. Member of the
Audit/Finance, Compensation and Independent
Directors Committees.
- --------------------------------------------------------------------------------
J.B. SCOTT Chairman of the Board of Directors of Alscott, Inc.,
real estate and other investments, since 1997 and
Director Chairman of the Board of the J.A. and Kathryn
since 1993 Albertson Foundation, Inc., focusing on education
within Idaho, since 1997. Vice President, Alscott,
Age 48 Inc. and President of the J.A. and Kathryn Albertson
Foundation, Inc. Mr. Scott is a director of Alscott,
Inc., J.A. and Kathryn Albertson Foundation, Inc.
and DSRG, Inc. He is the grandson of Kathryn
Albertson. Member of the Audit/Finance,
Nominating/Corporate Governance and Independent
Directors Committees.
- --------------------------------------------------------------------------------
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15
- --------------------------------------------------------------------------------
WILL M. STOREY Executive Vice President and Chief Financial
Officer, American President Companies, Inc., (APC),
Director a provider of container transportation and servicing
since 1992 North America, Asia and the Middle East, from 1991
until retirement in 1995. Mr. Storey is a director
Age 70 of the St. Luke's Wood River Medical Center and the
State of Idaho Capitol Commission. Chairman of the
Audit/Finance Committee and member of the Executive
and Independent Directors Committees.
- --------------------------------------------------------------------------------
DIRECTOR EMERITUS
- --------------------------------------------------------------------------------
KATHRYN ALBERTSON The Board of Directors of the Company has designated
Mrs. Kathryn Albertson as Director Emeritus of the
Age 93 Company for the rest of her life in recognition of
her position as the widow of the Company's founder,
J.A. Albertson, and her many years of service on the
Board of Directors. As Director Emeritus, Mrs.
Albertson is entitled, but not required, to attend
Board of Directors' meetings but will not vote at,
or be counted in the quorum for, Board of Directors'
meetings. Mrs. Albertson is director emeritus of the
J.A. and Kathryn Albertson Foundation, Inc.,
focusing on education within Idaho. Prior to 1997,
she was President and a director of Alscott, Inc.,
real estate and other investments. She is the
grandmother of J.B. Scott.
- --------------------------------------------------------------------------------
CERTAIN TRANSACTIONS
- --------------------------------------------------------------------------------
During the fiscal year ended January 31, 2002, one store lease and two office
space leases were held by Alscott Real Estate LLC, as landlord, and Albertson's,
Inc., as tenant. Alscott Real Estate LLC is managed by Alscott, Inc., an Idaho
corporation of which J.B. Scott, a director of the Company, is Chairman of the
Board and has a majority ownership interest and of which Thomas J. Wilford, a
member of the Board of Directors during a portion of the fiscal year, is
President and a director. The term of the store lease is for a period of 44
years with the expiration date of the primary term occurring in 2014. The office
space leases are for a 20-year primary term and a 5-year primary term expiring
in 2017 and 2004. The total rentals, common area maintenance fees and taxes paid
by the Company under the leases to this landlord during the fiscal year ended
January 31, 2002 were $1,044,841. During the fiscal year ended January 31, 2002,
8 store leases were held by DSRG, Inc., as landlord, and Albertson's, Inc., or
one of its wholly-owned
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ALBERTSONS
subsidiaries, as tenant, and DSRG, Inc. served as the common area maintenance
director for 8 other stores owned or leased by Albertson's, Inc., or one of its
wholly-owned subsidiaries. DSRG, Inc. is a real estate investment trust of which
J.B. Scott and Thomas J. Wilford are directors and of which Alscott Limited
Partnership owns over 10%. The general partner of Alscott Limited Partnership is
Alscott, Inc., an Idaho corporation of which J.B. Scott is Chairman of the Board
and has a majority ownership interest and Thomas J. Wilford is President and a
director, and the limited partners include J.B. Scott and Thomas J. Wilford. The
store leases are for various primary terms with expirations ranging from 2002 to
2020. The total rentals, common area maintenance fees and taxes paid by the
Company under the leases to this landlord during the fiscal year ended January
31, 2002 were $2,160,830. Also during the fiscal year ended January 31, 2002,
the Company purchased a piece of land from DSRG, Inc. for the purchase price of
$1,950,568 for the remodel expansion of a store.
Cecil D. Andrus, a director of the Company, is of counsel to the Gallatin Group,
a consulting firm. During the fiscal year ended January 31, 2002, the Company
paid the Gallatin Group $165,829 for consulting services.
Fernando R. Gumucio, a director of the Company during a portion of the year, is
a director of Foster Farms Poultry, Inc. During the fiscal year ended January
31, 2002, the Company paid Foster Farms Poultry, Inc. $82,040,848 for food
products purchased for resale in the Company's stores.
Two executive officers of the Company, Lawrence A. Stablein, Executive Vice
President, Marketing and Merchandising, and Ertharin Cousin, Senior Vice
President, Public Affairs, each was previously an officer of American Stores
Company and had full-recourse interest bearing notes outstanding for the
purchase of stock under an American Stores Company stock plan during the fiscal
year ended January 31, 2002. The interest rate on each of the loans was 9% until
April 1, 2001 and 8% thereafter. The highest aggregate outstanding balance of
Mr. Stablein's loan during the fiscal year was $123,562 and the amount of the
loan outstanding at the end of the fiscal year was $123,562. The highest
aggregate outstanding balance of Ms. Cousin's loan during the fiscal year was
$160,973 and the amount of the loan outstanding at the end of the fiscal year
was $160,424.
Lawrence A. Stablein, Executive Vice President, Marketing and Merchandising,
received a loan from the Company in connection with his relocation to Boise,
Idaho. The highest aggregate amount of indebtedness during the fiscal year was
$280,350, the interest rate was zero and the balance of the loan at the end of
the fiscal year was zero.
In the opinion of management, all of the foregoing transactions were fair and
reasonable and were entered into on terms not less favorable than could be
obtained in transactions with responsible third parties.
On August 2, 1998 the Company entered into a Termination and Consulting
Agreement with American Stores Company and Victor L. Lund (the "Consulting
Agreement") in connection with the American Stores Company merger. Mr. Lund
----
17
was Chairman of the Board of American Stores Company and is presently the Vice
Chairman of the Board of Directors of the Company, a non-officer position. The
Consulting Agreement provides that Mr. Lund shall be appointed to the Board of
Directors of the Company for a term or terms extending until the third annual
meeting of the Company following the consummation of the American Stores Company
merger, and that while he is a member of such board, he will serve as its Vice
Chairman. Mr. Lund also agreed to provide specified consulting services of up to
1,000 hours to the Company and American Stores Company for one year following
the termination of his employment upon consummation of the American Stores
Company merger, which occurred on June 23, 1999, for a fee of $850,000. Similar
to certain employment agreements that Mr. Lund had with American Stores Company,
Mr. Lund and his wife are being provided, under the Consulting Agreement, with
certain lifetime health coverage benefits and with additional cash payments if
necessary to make them whole for any taxes imposed on such benefits. Instead of
providing office space and operating services through October 31, 2012, as
required by the previous employment agreements with American Stores Company, Mr.
Lund was paid $39,000 and a lump sum of $1.2 million in satisfaction of this
obligation during the fiscal year ended February 3, 2000. Upon termination of
employment upon consummation of the American Stores Company merger on June 23,
1999, Mr. Lund received title to his company-owned vehicle. During the one-year
consulting term, Mr. Lund received fringe benefits (including expense
reimbursement and transportation) consistent with the fringe benefits afforded
to him immediately before the consummation of the American Stores Company
merger. Mr. Lund is subject to a noncompetition covenant while serving as a
consultant or member of the Company's Board of Directors and to a
confidentiality covenant. Mr. Lund is indemnified by the Company and by American
Stores Company, a wholly-owned subsidiary of the Company, with respect to his
consulting services. As provided in his previous employment agreements with
American Stores Company, Mr. Lund was entitled to an additional payment for any
excise tax on excess parachute payments to which he may be subject and was paid
$475,000, including income tax gross-up, in such payments during the fiscal year
ended February 1, 2001. The Company has agreed to guarantee all payments and
benefits under the Consulting Agreement. The Consulting Agreement also
acknowledged that the consummation of the American Stores Company merger on June
23, 1999 permitted Mr. Lund to terminate his employment and receive the
severance benefits called for by the existing employment agreements with
American Stores Company. The Consulting Agreement acknowledged that upon the
termination of Mr. Lund's employment after the American Stores Company merger,
he was to receive a cash lump sum payment equal to the sum of (i) his base
salary to the extent not already paid; (ii) pro rata bonuses for the year of
termination; (iii) an amount in cash equal to three times his base salary and
bonus amount ($4.3 million); and (iv) a lump sum payment of the then present
value of his "Special Long-Range Retirement Plan" benefit which vested in full
upon consummation of the American Stores Company merger ($11.7 million, based
upon an assumed discount rate of 8.25%). All of such amounts have been paid to
Mr. Lund.
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COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
- ------------------------------------------------------------------------------------------------
COMMITTEES SUMMARY OF COMMITTEE FUNCTIONS
AUDIT/FINANCE COMMITTEE Reviews work of independent auditors
Standing committee and internal auditors and reports to the
Six meetings in Fiscal 2001 full Board. Monitors internal accounting
and financial functions of the Company. Was
the Audit Committee until June 14, 2001.
- ------------------------------------------------
Cecil D. Andrus J. B. Scott Investigates conflicts of interest,
Pamela G. Bailey Will M. Storey* compliance with ethical standards and
Henry I. Bryant compliance with laws and regulations.
- ------------------------------------------------------------------------------------------------
CEO SEARCH COMMITTEE Oversaw the search for a new CEO for
Special committee the Company.
Three meetings in Fiscal 2001
- ------------------------------------------------
Teresa Beck John B. Fery**
Henry I. Bryant Will M. Storey
Paul I. Corddry*
- ------------------------------------------------------------------------------------------------
COMPENSATION COMMITTEE Reviews salaries and bonuses paid to
Standing committee Company executive officers. Selects key
Four meetings in Fiscal 2001 employees to receive stock option grants
and determines the terms of the grants.
Assumed duties of Grantor Trust
Committee effective June 14, 2001.
- ------------------------------------------------
A. Gary Ames Bonnie G. Hill
Pamela G. Bailey Clark A. Johnson*
Henry I. Bryant
- ------------------------------------------------------------------------------------------------
CORPORATE GOVERNANCE COMMITTEE Reviewed the corporate governance of
Standing committee the Company and developed corporate
Four meetings in Fiscal 2001, including governance guidelines; was combined
one joint meeting with Nominating with the Nominating Committee effective
Committee June 14, 2001.
- ------------------------------------------------
Cecil D. Andrus Paul I. Corddry*
Teresa Beck Beatriz Rivera
Henry I. Bryant Will M. Storey
- ------------------------------------------------------------------------------------------------
EXECUTIVE COMMITTEE Exercises the authority of the Board
Standing committee of Directors between meetings of the
One meeting in Fiscal 2001 full Board.
- ------------------------------------------------
Paul I. Corddry Beatriz Rivera
Clark A. Johnson Will M. Storey
Lawrence R. Johnston*
- ------------------------------------------------------------------------------------------------
INDEPENDENT DIRECTORS COMMITTEE Reviews the progress and performance of
Standing committee the Company on a periodic basis.
Four meetings in Fiscal 2001 Replaced Outside Directors Committee in
June 2001.
- ------------------------------------------------
A. Gary Ames Bonnie G. Hill
Cecil D. Andrus Clark A. Johnson
Pamela G. Bailey Victor L. Lund
Teresa Beck Beatriz Rivera
Henry I. Bryant J. B. Scott
Paul I. Corddry* Will M. Storey
- ------------------------------------------------------------------------------------------------
NOMINATING/CORPORATE GOVERNANCE COMMITTEE Selects nominees to fill Board vacancies
Standing committee and to replace retiring Board members;
Four meetings in Fiscal 2001, including Nominating Committee was combined
one joint meeting with Corporate with the Corporate Governance
Governance Committee Committee effective June 14, 2001.
- ------------------------------------------------
A. Gary Ames Bonnie G. Hill
Cecil D. Andrus Victor L. Lund
Teresa Beck Beatriz Rivera*
Paul I. Corddry J. B. Scott
- ------------------------------------------------------------------------------------------------
* Committee chair.
** Retired from Board in June 2001.
- ------------------------------------------------------------------------------------------------
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19
- --------------------------------------------------------------------------------
COMPENSATION OF DIRECTORS
- --------------------------------------------------------------------------------
Albertson's executive officers do not receive additional compensation if they
serve as directors.
Albertson's believes that compensation for non-employee directors should be
competitive and should encourage increased ownership of Albertson's stock.
Each non-employee director receives:
o $10,000 per quarter in cash. The final quarterly payment is made only
if the director has attended 75 percent of the meetings of the Board
and the committees on which he or she serves.
o An annual award of $60,000 in Albertson's common stock. Each director
may choose to receive his or her award in Company stock, deferred
Company stock equivalents or stock options to purchase Company stock
at a ratio of four stock option shares for every share of Company
stock.
Each non-employee director may elect to defer payment of his or her director's
cash compensation into the Company's nonqualified deferred compensation plan for
non-employee directors.
Certain non-employee directors who resigned from the Board of Directors upon the
adjournment of the 2001 Annual Meeting serve as Special Advisors to the Board
until June 2003. They continue to receive the same compensation as a director
and their service is counted as Board service for deferred compensation and
stock award purposes.
Director Emeritus Kathryn Albertson receives an annual fee of $35,000. She does
not receive any stock awards.
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ALBERTSONS
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COMPENSATION OF EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
The following table sets forth the compensation paid for each of the Company's
last three fiscal years to (i) the Chief Executive Officer of the Company and
(ii) the four other most-highly compensated executive officers of the Company
for the last completed fiscal year:
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -------------------------
------------------------------------- RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND FISCAL SALARY(1) BONUS(1) COMPENSATION AWARD(3) OPTIONS COMPENSATION(4)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($)
- ------------------ ------ ----------- ---------- ------------ ----------- ---------- ---------------
Lawrence R. Johnston 2001 $ 980,770 $2,480,000 $ 230,751 $24,548,214 903,380 $ 10,896
Chairman of the Board and
Chief Executive Officer
and a director
Gary G. Michael 2001 453,115 0 -- 0 0 3,348,556
Former Chairman of the 2000 1,100,000 422,400 51,407 0 645,534 402,742
Board and Chief
Executive Officer 1999 1,120,385 672,692 106,936 0 941,541 200,815
Peter L. Lynch 2001 720,077 796,500 60,978 2,880,000 223,614 159,136
President and Chief 2000 460,406 402,321 -- 3,001,550 276,658 98,766
Operating Officer and
a director 1999 299,880 185,127 79,565 0 196,178 38,266
Romeo R. Cefalo 2001 384,943 647,050 -- 0 119,261 114,067
Executive Vice President, 2000 363,039 487,442 -- 1,110,400 138,329 106,248
Operations 1999 -- -- -- -- -- --
Kevin H. Tripp 2001 384,720 663,492 -- 0 29,816 99,540
Executive Vice President, 2000 311,954 447,326 -- 936,900 57,637 90,217
Drug and General
Merchandise 1999 -- -- -- -- -- --
Felicia D. Thornton 2001 247,154 411,482 -- 2,076,000 319,261 0
Executive Vice President
and Chief Financial
Officer
- --------------------------------------------------------------------------------
1 Includes amounts deferred by certain of the named executive officers pursuant
to the Company's deferred compensation programs.
2 This column includes the value for income tax purposes of noncash personal
benefits and amounts reimbursed during the fiscal year for the payment of taxes.
The amounts indicated in Fiscal 2001 for Mr. Johnston and Mr. Lynch include
$78,244 and $56,738, respectively, for the value of personal use of corporate
aircraft, $60,072 for Mr. Johnston in Company reimbursed relocation expenses and
$75,330 for Mr. Johnston for amounts reimbursed for the payment of taxes. The
amount indicated in Fiscal 2000 for Mr. Michael includes $28,903 for the value
of personal use of corporate aircraft and $13,000 for car allowance. The amount
indicated in Fiscal 1999 for Mr. Michael includes $35,511 for the value of
personal use of corporate aircraft and $54,050 for the value of Company provided
automobile and car allowance and for Mr. Lynch includes $78,356 of Company
reimbursed relocation expenses.
3 Includes dollar value of deferrable restricted stock units granted under the
Amended and Restated 1995 Stock-Based Incentive Plan, with cash dividend
equivalents paid quarterly, to Mr. Johnston on April 23, 2001 that vest over
five years and dollar value of units granted to Mr. Johnston on December 3, 2001
that vest over five years. Includes dollar value of units granted on December 6,
2000 that will vest and be payable in stock on December 5, 2003, if the officer
is still employed by the Company on that date as an officer of the Company.
Includes dollar value of additional units granted to Mr. Lynch on April 23,
2001. If Mr. Lynch's employment with the Company is terminated by the Company
without cause prior to December 5, 2003, he will be awarded all of his units in
stock. Includes dollar value of units granted to Ms. Thornton on August 22, 2001
that vest
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21
over four years. The number and value of the units at fiscal year end
(calculated using the closing price of the Company's stock on the New York Stock
Exchange on January 31, 2002) was 834,887 shares valued at $24,003,001 for Mr.
Johnston; 238,400 shares valued at $6,854,000 for Mr. Lynch; 51,200 shares
valued at $1,472,000 for Mr. Cefalo; 43,200 shares valued at $1,242,000 for Mr.
Tripp; and 60,000 shares valued at $1,725,000 for Ms. Thornton.
4 This column includes $10,880 in Fiscal 2001 for Mr. Johnston which was the
premium paid by the Company for term life insurance. The column includes
$3,000,000 paid to Mr. Michael upon his resignation as Chairman of the Board and
Chief Executive Officer on April 23, 2001 and $11,000 in Fiscal 2001 and $22,000
in Fiscal 2000 and 1999 for Mr. Michael, which was a fixed annual amount, in
addition to salary and bonus, contributed by the Company and deferred into the
Company's nonqualified deferred compensation plans. The column includes Company
contributions to the ASRE and the ASRE Makeup Plan defined contribution plans in
the amounts of $138,877 for Mr. Michael, $157,310 for Mr. Lynch, $111,625 for
Mr. Cefalo and $98,959 for Mr. Tripp for Fiscal 2001; $205,328 for Mr. Michael,
$98,217 for Mr. Lynch, $92,792 for Mr. Cefalo and $90,217 for Mr. Tripp for
Fiscal 2000; and $29,072 for Mr. Michael and $38,266 for Mr. Lynch for Fiscal
1999. The remaining amounts consist of interest accrued at above-market rates
(as defined by the rules of the Securities and Exchange Commission) on
compensation deferred pursuant to the Company's nonqualified deferred
compensation programs.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------------------------------
NUMBER OF % OF TOTAL GRANT
SECURITIES OPTIONS DATE VALUE
UNDERLYING GRANTED TO --------------
OPTIONS EMPLOYEES EXERCISE OR GRANT DATE
GRANTED IN FISCAL BASE PRICE EXPIRATION PRESENT VALUE(2)
NAME (#) YEAR ($/SH)(1) DATE ($)
- ---- ------- ------ ----------- ---------- ----------
Lawrence R. Johnston 651,078 14.2% $ 28.80 04/22/11 $3,858,201
Chairman of the Board and 252,302 33.54 12/02/11 1,681,601
Chief Executive Officer
and a director
Gary G. Michael 0 0 0 0 0
Former Chairman of the Board
and Chief Executive Officer
Peter L. Lynch 223,614 3.5 33.54 12/02/11 1,490,394
President and Chief Operating
Officer and a director
Romeo R. Cefalo 119,261 1.9 33.54 12/02/11 794,879
Executive Vice President,
Operations
Kevin H. Tripp 29,816 .5 33.54 12/02/11 198,726
Executive Vice President, Drug
and General Merchandise
Felicia D. Thornton 200,000 5.0 34.60 08/21/11 1,464,868
Executive Vice President 119,261 33.54 12/02/11 794,879
and Chief Financial Officer
- --------------------------------------------------------------------------------
1 The closing market price on the date the option was granted.
2 In accordance with the rules of the Securities and Exchange Commission,
"Grant Date Value" has been calculated using the Black-Scholes model of option
valuation, adjusted to reflect the option term representative of the
individual's grant. The model also assumes: (a) a risk-free rate of return
represented by the interest rate on a U.S. Treasury Bond with a maturity date
corresponding to that of the adjusted option term; (b) expected volatility using
the implied volatility for call options traded on the date of the grant; and (c)
a dividend yield determined by dividing the 2001 cash dividends declared by the
option price. The values which may ultimately be realized by the holder of the
reported option will depend on the market value of the Company's common stock
during the periods during which the option is exercisable, which may vary
significantly from the assumptions underlying the Black-Scholes model.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE+ OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR-END YEAR-END
ACQUIRED ON VALUE+ -------------------------- --------------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- ---- ----------- ---------- ----------- ------------- ----------- -------------
Lawrence R. Johnston 0 0 0 903,380 0 0
Chairman of the Board and
Chief Executive Officer
and a director
Gary G. Michael 645,534 $4,978,681 1,091,541 0 0 0
Former Chairman of the Board
and Chief Executive Officer
Peter L. Lynch 0 0 192,392 562,648 $390,981 $1,563,122
President and Chief Operating
Officer and a director
Romeo R. Cefalo 0 0 62,966 282,878 195,384 781,565
Executive Vice President,
Operations
Kevin H. Tripp 0 0 136,288 128,879 81,409 325,652
Executive Vice President,
Drug and General
Merchandise
Felicia D. Thornton 0 0 0 319,261 0 0
Executive Vice President
and Chief Financial Officer
- --------------------------------------------------------------------------------
+ The dollar values are calculated by determining the difference between the
closing price on the New York Stock Exchange Composite Tape for the Company's
common stock at exercise or at fiscal year-end (January 31, 2002) for
exercisable and unexercisable options and the exercise price of the options.
- --------------------------------------------------------------------------------
EMPLOYMENT AGREEMENTS
- --------------------------------------------------------------------------------
AGREEMENT WITH GARY G. MICHAEL
In December 2000, the Company entered into an agreement with Gary G. Michael
under which Mr. Michael received a severance payment of $3 million upon his
resignation as Chairman of the Board and Chief Executive Officer on April 23,
2001. Mr. Michael has agreed not to become employed by a competitor of the
Company during the two-year period following his retirement and to cooperate
with the Company in connection with certain routine matters.
AGREEMENT WITH LAWRENCE R. JOHNSTON
The Company has entered into an employment agreement with
Lawrence R. Johnston effective April 23, 2001 that retains him as Chairman of
the Board and Chief Executive Officer of the Company until the tenth anniversary
of the commencement date of the agreement. The Board of Directors approved Mr.
Johnston's employment agreement after an extensive search had been conducted by
the Board with the assistance of an executive search firm. In negotiating the
terms of Mr. Johnston's employment agreement, the Board sought advice from
outside legal counsel and independent compensation consultants, and considered
such factors as the competitive levels of Chief
----
23
Executive Officer compensation at other companies of comparable industry and
size, the Company's internal executive compensation practices, and the level of
compensation deemed necessary to induce Mr. Johnston to accept the Company's
offer of employment and restore amounts forfeited by him upon leaving his former
employer.
Pursuant to the terms of his offer of employment, Mr. Johnston received a
sign-on cash bonus of $1,230,000, a deferrable restricted stock unit award for
728,670 shares, and an initial nonqualified stock option award to purchase
651,078 shares of Common Stock at an exercise price of $28.80, which represented
the fair market value of the stock on the date of grant. The deferrable
restricted stock unit award vests as to 123,132 shares on the date of grant,
145,734 shares on each of the first through fourth anniversaries of the date of
grant, and 22,602 shares on the fifth anniversary of grant. The units will not
be distributed in stock until Mr. Johnston ceases to be an executive officer of
the Company or such earlier time as may be approved by the Board of Directors of
the Company. The initial stock option award has a 10-year exercise period and
vests on a ratable basis on each of the first five anniversaries of the date of
grant.
Mr. Johnston's ongoing compensation arrangement provides for an annual base
salary of not less than $1,250,000, an annual target bonus of not less than 100
percent of base salary (and a maximum annual bonus not to exceed 200 percent of
base salary), and an annual stock option award with a Black-Scholes present
value at grant of not less than 285 percent of the sum of his initial base
salary and annual target bonus ($7,125,000). For Fiscal 2001, Mr. Johnston was
guaranteed an annual bonus of $1,250,000 and a stock option award to purchase
not less than 500,000 shares with vesting on a ratable basis on each of the
first five anniversaries of the date of grant. For Fiscal 2001 and future years,
Mr. Johnston may elect to receive up to 50 percent of his annual stock option
award value in the form of a deferrable restricted stock unit award with
equivalent value.
Upon termination of Mr. Johnston's employment with the Company for any reason,
he will be entitled to all compensation and benefits accrued but not paid as of
the termination date, as well as a supplemental retirement benefit in the form
of a life annuity payable at age 62 (or termination of employment, if later)
equal to 50 percent of his average base salary and actual annual bonus from the
highest three consecutive years during the 10 years prior to such termination,
but not less than the sum of his initial base salary and target annual bonus.
The amount of the supplemental retirement benefit is subject to offset by all
qualified and nonqualified pension benefits payable from plans maintained by the
Company or Mr. Johnston's prior employers, and may be further reduced if Mr.
Johnston's employment is terminated prior to age 62 under certain circumstances.
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ALBERTSONS
If Mr. Johnston's employment is terminated by reason of death, all outstanding
stock option awards will become fully vested and exercisable for a period of two
years following the date of death (or the remaining exercise period of the
awards, if earlier), and all outstanding deferrable restricted stock unit awards
shall become vested as to the next two successive vesting dates following the
date of death. If Mr. Johnston's employment is terminated by the Company other
than for cause, by Mr. Johnston for good reason or for any reason during the
seventh month following a change of control of the Company, as such terms are
defined in his employment agreement, Mr. Johnston will be entitled to receive
certain severance benefits in addition to those mentioned above, including: (1)
an amount equal to three times the sum of his base salary and annual bonus, at
the higher of his most recent actual or target award, (2) a pro rata annual
bonus payment based on actual performance results for the year of termination,
(3) continued participation in the Company's welfare and fringe benefit plans
for three years following the date of termination, and (4) full vesting of all
outstanding stock option and deferrable restricted stock unit awards (as well as
any other qualified and nonqualified employee benefits), with stock options
remaining exercisable for a period of five years following the date of
termination (or the remaining exercise period of the awards, if earlier).
In addition to these and other benefits set forth in his employment agreement,
Mr. Johnston is entitled to enhanced vacation and relocation benefits,
supplemental life insurance and disability protection, and personal use of
corporate aircraft for security purposes (with income imputed to him pursuant to
federal tax rules for personal use by his family members). In the event payments
or benefits received by Mr. Johnston pursuant to his employment agreement or
otherwise are subject to federal excise taxes imposed on golden parachute
payments, the Company shall make an additional payment to him to cover any
excise taxes payable by him as well as the income and excise tax on the gross-up
payment and any interest or related penalties.
AGREEMENTS WITH PETER L. LYNCH
In January 2001 the Company entered into an agreement with Peter L. Lynch under
which he will receive his salary, bonus, vesting of deferrable restricted stock
units, moving expenses and benefits for one year if he is terminated without
cause before December 5, 2003. The Company also entered into an agreement with
Mr. Lynch in June 1999 under which the Company agreed to pay him a bonus of
$262,500 per year for three years, payable in June 2000, June 2001 and June
2002, provided that he continues to be employed by the Company. If he is
terminated without cause before June 2002, then the remaining payments will be
paid to him.
AGREEMENTS WITH ROMEO R. CEFALO AND KEVIN H. TRIPP
The Company entered into agreements in June 1999 with Mr. Cefalo and Mr. Tripp
under which the Company agreed to pay each of them a bonus of $397,500 per year
and $378,000 per year, respectively, for three years,
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25
payable in June 2000, June 2001 and June 2002, provided that each of them
continues to be employed by the Company.
AGREEMENT WITH FELICIA D. THORNTON
Pursuant to the terms of her offer of employment, Ms. Thornton received a
sign-on cash bonus of $250,000, a deferrable restricted stock unit award for
60,000 shares, and an initial nonqualified stock option award to purchase
200,000 shares of Common Stock at an exercise price of $34.60, which represented
the fair market value of the stock on the date of the grant. The deferrable
restricted stock unit award vests as to 12,000 shares on the date of grant, and
12,000 shares on each of the first through fourth anniversaries of the date of
grant. The units will not be distributed in stock until Ms. Thornton ceases to
be an executive officer of the Company or such earlier time as may be approved
by the Board of Directors of the Company. The initial stock option award has a
10-year exercise period and vests on a ratable basis on each of the first five
anniversaries of the date of grant.
Ms. Thornton's ongoing compensation arrangement provides for an annual base
salary of not less than $540,000 and an additional stock option award in 2001
that was granted to her as reflected in the Option Grants in Last Fiscal Year
table.
If Ms. Thornton's employment is terminated by the Company other than for cause,
she will receive severance and continuation of benefits, including: (1) for any
such termination occurring prior to the first anniversary of her hire date, a
lump sum payment equal to three times the sum of her base salary and target
bonus as well as continued vesting of stock options and restricted stock and
continued participation in the Company's welfare benefit plans, fringe benefits
and employee perquisites for a period of three years (which shall be concurrent
with any health care continuation benefits under COBRA); (2) for any such
termination occurring after the first anniversary of her hire date but prior to
the second anniversary of her hire date, a lump sum payment equal to two times
the sum of her base salary and target bonus as well as continued vesting of
stock options and restricted stock and continued participation in the benefits
described in (1) above for two years; and (3) for any such termination occurring
after the second anniversary of her hire date, a lump sum payment equal to the
sum of her base salary and target bonus as well as continued vesting of stock
options and restricted stock and continued participation in the benefits
described in (1) above for one year.
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ALBERTSONS
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RETIREMENT BENEFITS
- --------------------------------------------------------------------------------
The Company adopted a 401(k) defined contribution plan, Albertson's Savings &
Retirement Estates ("ASRE"), effective September 26, 1999, which is the
Company's primary retirement plan. To offset the loss of retirement benefits
associated with tax law limitations, the Company also adopted the nonquali-fied
ASRE Makeup Plan on September 26, 1999. Benefits are provided under the ASRE
Makeup Plan for key employees equal to those that would otherwise be lost by
such qualified plan limitations. The contributions made by the executive
officers listed in the Summary Compensation Table to ASRE and the contributions
made by the Company to ASRE and the ASRE Makeup Plan are included in the figures
in the Summary Compensation Table.
The Company continues to maintain two qualified defined benefit plans, the
Albertson's Employees' Corporate Pension Plan and the Albertson's Salaried
Employees' Pension Plan (the "Pension Plan" or "Pension Plans"). The Pension
Plans were amended and "frozen" in 1999, such that as of November 20, 1999, the
Pension Plans will not add any new participants except as required under
collective bargaining agreements. The Pension Plans serve as floor-offset
arrangements for the employees who were participants in one of the Pension Plans
as of August 1, 1999; that is, the participant will receive a combined Pension
Plan and ASRE benefit that is at least as large as the benefit that the Pension
Plan alone would have provided prior to amendment. The Company will first
calculate a base benefit under the Pension Plans as of November 20, 1999 and,
secondly, will calculate the participant's projected benefit under the Pension
Plans as if it had remained in effect without being amended. The Company will
then add the base benefit to the annuity equivalent of the participant's ASRE
profit sharing account. If the projected benefit is higher, the Pension Plan
will pay the difference plus the base benefit. If the base benefit plus ASRE is
higher, the Pension Plan pays only the base benefit. With respect to the
executives listed in the Summary Compensation Table, as of February 1, 2002,
only Mr. Michael is eligible for benefits under the Pension Plan.
The amount of benefit under the Pension Plan is based on credited years of
service and the participant's compensation. The compensation used in determining
the benefit consists of the employee's salary and deferred compensation and does
not include bonus and noncash compensation. The table on the next page gives the
estimated annual benefit payable upon retirement for participants in the Pension
Plan, including benefits payable under the Executive Pension Makeup Plan (as
defined below) for those individuals who were covered as of August 1, 1999. The
estimates assume normal retirement at age 62 for employees at specified
compensation levels (based on average earnings for the highest five consecutive
years of service out of the last ten years) with various years of service with
the Company and are expressed as single life annuities.
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27
SALARIED PENSION PLAN TABLE
YEARS OF SERVICE
------------------------------------------------------------------
REMUNERATION 20 25 30 35 40 45
- ------------ -------- -------- -------- -------- -------- --------
$ 100,000 $ 27,000 $ 33,750 $ 40,500 $ 47,250 $ 54,000 $ 60,750
200,000 54,000 67,500 81,000 94,500 108,000 121,500
300,000 81,000 101,250 121,500 141,750 162,000 182,250
400,000 108,000 135,000 162,000 189,000 216,000 243,000
500,000 135,000 168,750 202,500 236,250 270,000 303,750
600,000 162,000 202,500 243,000 283,500 324,000 364,500
700,000 189,000 236,250 283,500 330,750 378,000 425,250
800,000 216,000 270,000 324,000 378,000 432,000 486,000
900,000 243,000 303,750 364,500 425,250 486,000 546,750
1,000,000 270,000 337,500 405,000 472,500 540,000 607,500
1,100,000 297,000 371,250 445,500 519,750 594,000 668,250
As of February 1, 2002, Mr. Michael was credited with 36 years of service. Also
as of that date, Mr. Michael's covered compensation for the last fiscal year was
$470,039.
To offset the loss of Pension Plan benefits associated with tax law limitations,
the Company adopted a nonqualified Executive Pension Makeup Plan effective June
1, 1988 ("Pension Makeup Plan"). Benefits are provided under the Pension Makeup
Plan for key employees equal to those that would otherwise be lost by such
qualified plan limitations. All amounts for any benefits Mr. Michael accrued
under the Pension Makeup Plan are included in the figures in the Summary
Compensation Table.
- --------------------------------------------------------------------------------
COMPENSATION COMMITTEE REPORT
- --------------------------------------------------------------------------------
The Compensation Committee of the Board of Directors (the "Committee") is
comprised solely of directors who are not current or former employees of the
Company. The Committee is responsible for establishing the compensation policy
and administering the compensation programs for the Company's executive officers
and other key employees. The Committee periodically engages independent
compensation consultants to assist it in this process. In carrying out its
duties, the Committee intends to make all reasonable attempts to comply with the
requirements to exempt executive compensation from the $1 million deduction
limitation under Section 162(m) of the Internal Revenue Code, unless the
Committee determines that such compliance in given circumstances would not be in
the best interests of the Company and its shareholders.
COMPENSATION PHILOSOPHY
The compensation program for executive officers is designed to attract, motivate
and retain talented executives who will strive to attain the Company's strategic
and financial objectives, and thereby increase shareholder value. The principal
elements of the program consist of base salary, short-term incentives under the
annual bonus plan and long-term incentives in the form of stock option and
deferrable restricted stock unit awards. The Company's philosophy
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28
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ALBERTSONS
is to position the aggregate of these elements at a level which is commensurate
with the Company's size and performance relative to other leading wholesale and
retail companies. The Committee periodically reviews the reasonableness of total
compensation levels and mix using public information from comparator company
proxy statements and survey information from credible third-party industry
surveys.
BASE SALARY
The Committee annually reviews and approves base salaries for the Company's
executive officers, considering the responsibilities of their positions, their
individual performance and their competitive position relative to comparator
companies and industry surveys. Salary increases, other than increases due to
promotions, generally occur at the beginning of the fiscal year.
ANNUAL BONUS
Senior operations executive officers are eligible to receive annual incentive
awards under a shareholder approved bonus plan under which threshold levels of
pre-established performance goals must be attained before any awards are paid.
For the most recent fiscal year, these performance goals were based on sales,
earnings per share and return on assets. Once the Committee has certified that
the threshold performance goals are attained for senior operations executive
officers, actual award payments for those officers and for the other executive
officers are based on more aggressive performance goals, weighted to a greater
extent on sales and diluted earnings per share goals and to a lesser extent on
return on assets goals. A portion of the awards may be further adjusted based on
individual or subjective performance criteria.
For fiscal year 2001, target award opportunities for executive officers other
than the Chief Executive Officer ranged from 60 to 80 percent of base salary
paid during the year, and the maximum award opportunity was set at 150 percent
of the target award. During fiscal year 2001, in response to the Company's
recruitment of a new Chief Executive Officer and substantial restructuring
efforts, the diluted earnings per share goal was recalibrated during the year to
emphasize the Company's fourth quarter results. Based on overall Company and
individual performance for the fourth quarter and the entire fiscal year, award
payments for 2001 ranged from 55.54 percent to 74.05 percent of base salary for
executive officers other than the Chief Executive Officer.
LONG-TERM INCENTIVES
The Company's long-term incentive program consists of annual grants of
non-qualified stock option awards and periodic grants of deferrable restricted
stock unit awards. Stock option awards are generally considered annually towards
the end of the fiscal year, and are based on preestablished grant guidelines
with award size further adjusted for individual performance and potential.
Awards granted to executive officers have a 10-year exercise period and vest
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29
on a ratable basis on each of the first five anniversaries of the date of grant.
During fiscal year 2001, the Company began to grant stock option awards to its
store directors and pharmacy managers.
Deferrable restricted stock unit awards are granted on a highly selective basis
to key executives and employees in connection with promotions and for
recruitment and retention purposes. These awards pay cash dividend equivalents
on a quarterly basis and generally vest over a period of three to five years.
During fiscal year 2001, deferrable restricted stock unit awards were granted to
four executive officers in addition to the Chief Executive Officer.
CHIEF EXECUTIVE OFFICER
In December 2000, the Company entered into a severance agreement with Gary G.
Michael under which Mr. Michael received a severance payment of $3 million upon
his resignation as Chairman of the Board and Chief Executive Officer on April
23, 2001. Mr. Michael did not receive a salary increase, an annual bonus
payment, or a stock option or deferrable restricted stock unit award during
fiscal year 2001. Mr. Michael has agreed not to become employed by a competitor
of the Company during the two-year period following his retirement and to
cooperate with the Company in connection with certain routine matters.
On April 23, 2001, the Company hired Mr. Johnston as Chairman of the Board and
Chief Executive Officer. The Board of Directors approved Mr. Johnston's
employment agreement after an extensive search had been conducted by the Board
with the assistance of an executive search firm. In negotiating the terms of Mr.
Johnston's employment agreement, the Board sought advice from outside legal
counsel and independent compensation consultants, and considered such factors as
the competitive levels of Chief Executive Officer compensation at other
companies of comparable industry and size, the Company's internal executive
compensation practices, and the level of compensation deemed necessary to induce
Mr. Johnston to accept the Company's offer of employment and restore amounts
forfeited by him upon leaving his former employer. For fiscal year 2001, the
base salary, annual bonus payment, and stock option and deferrable restricted
stock unit awards for Mr. Johnston were all determined pursuant to the terms of
his employment agreement as set forth under "Employment Agreements--Agreement
with Lawrence R. Johnston" in this proxy statement.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Clark A. Johnson, Pamela G. Bailey
Chairman Henry I. Bryant
A. Gary Ames Bonnie G. Hill
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ALBERTSONS
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PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG ALBERTSON'S, INC., THE S & P 500 INDEX
AND THE S & P FOOD RETAIL INDEX
[PERFORMANCE GRAPH]
Cumulative Total Return
-----------------------------------------------------------
1/97 1/98 1/99 1/00 1/01 1/02
ALBERTSON'S INC. 100.00 138.77 179.55 91.29 87.18 90.66
S&P 500 100.00 126.91 168.14 185.54 183.87 154.18
S&P FOOD 100.00 136.81 185.41 107.90 131.73 112.41
- --------------------------------------------------------------------------------
* $100 invested on January 31, 1997 in stock or index, including reinvestment of
dividends. Fiscal year ending January 31.
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31
- --------------------------------------------------------------------------------
AUDIT/FINANCE COMMITTEE REPORT
- --------------------------------------------------------------------------------
The Audit/Finance Committee of the Board of Directors (the "Committee") is
responsible for monitoring the integrity of the Company's consolidated financial
statements, its system of internal controls and the independence and performance
of its internal and independent auditors. The Committee recommends to the Board
of Directors, subject to shareholder ratification, the selection of the
Company's independent auditors. The Committee is composed of five non-employee
directors and operates under a written charter adopted and approved by the Board
of Directors. Each Committee member is independent as defined by New York Stock
Exchange listing standards.
Management is responsible for the financial reporting process, including the
system of internal controls, and for the preparation of consolidated financial
statements in accordance with accounting principles generally accepted in the
United States of America. The Company's independent auditors are responsible for
auditing those financial statements. The Committee's responsibility is to
monitor and review these processes. However, Committee members are not
professionally engaged in the practice of accounting or auditing and are not
experts in the fields of accounting or auditing, including with respect to
auditor independence. The Committee relies, without independent verification, on
the information provided and on the representations made by management and the
internal and independent auditors.
In this context, the Committee held six meetings during the 2001 fiscal year.
The meetings were designed, among other things, to facilitate and encourage
communication among the Committee, management, the internal auditors and the
Company's independent auditors, Deloitte & Touche LLP. The Committee discussed
with the Company's internal and independent auditors the overall scope and plans
for their respective audits. The Committee met with the internal and independent
auditors, with and without management present, to discuss the results of their
audits and their evaluations of the Company's internal controls.
The Committee has reviewed and discussed the audited consolidated financial
statements for the fiscal year ended January 31, 2002 with management, internal
auditors and Deloitte & Touche.
The Committee also discussed with the independent auditors matters required to
be discussed with audit committees under auditing standards generally accepted
in the United States of America, including, among other things, matters related
to the conduct of the audit of the Company's consolidated financial statements
and the matters required to be discussed by Statement on Auditing Standards No.
61, as amended (Communication with Audit Committees).
The Company's independent auditors also provided to the Committee the written
disclosures and the letter required by Independence Standards Board Standard No.
1 (Independence Discussions with Audit Committees), and the Committee discussed
with the independent auditors their independence from
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32
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ALBERTSONS
the Company. When considering Deloitte & Touche's independence, the Committee
considered whether Deloitte & Touche's provision of services to the Company
beyond those rendered in connection with their audit and review of the Company's
consolidated financial statements was compatible with maintaining auditor
independence.
Based on our review and these meetings, discussions and reports, and subject to
the limitations on the Committee's role and responsibilities referred to above
and in the Audit/Finance Committee Charter, the Committee recommended to the
Board of Directors that the Company's audited consolidated financial statements
for the fiscal year ended January 31, 2002 be included in the Company's Annual
Report on Form 10-K. The Committee has also recommended the selection of the
Company's independent auditors, and, based on this recommendation, the Board has
selected Deloitte & Touche as the Company's independent auditors for the fiscal
year ending January 30, 2003, subject to shareholder ratification.
AUDIT/FINANCE COMMITTEE OF THE BOARD OF DIRECTORS
Will M. Storey, Henry I. Bryant
Chairman J.B. Scott
Cecil D. Andrus
Pamela G. Bailey
- --------------------------------------------------------------------------------
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS (PROPOSAL 2)
- --------------------------------------------------------------------------------
As recommended by the Audit/Finance Committee, the Board of Directors has
reappointed Deloitte & Touche LLP ("Deloitte") as independent auditors for
fiscal year 2002. As independent auditors, Deloitte will audit the books,
records and accounts of Albertson's, Inc. and its subsidiaries. The Board asks
that the shareholders ratify this appointment.
Deloitte's services to be performed for fiscal year 2002 include:
o Audit of annual financial statements,
o Limited review of quarterly financial information,
o Consultations in connection with various financial reporting,
accounting and income tax matters, and
o Certain consulting services.
The fees billed by Deloitte for services rendered during fiscal year 2001 were
as follows:
o AUDIT FEES. The aggregate fees for professional services rendered by
Deloitte in connection with their audit of our consolidated financial
statements and reviews of the consolidated financial statements
included in our Quarterly Reports on Form 10-Q for the 2001 fiscal
year were approximately $1.6 million.
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33
o FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. There were
no professional services rendered by Deloitte in the 2001 fiscal year
relating to financial information systems design and implementation.
o ALL OTHER FEES. The aggregate fees for all other services rendered by
Deloitte in the 2001 fiscal year were approximately $9.2 million and can
be sub-categorized as follows:
ATTESTATION FEES. The aggregate fees for attestation services
rendered by Deloitte for matters such as comfort letters and
consents related to SEC and other registration statements, audits of
employee benefit plans and consultation on accounting standards or
transactions were approximately $.2 million.
OTHER FEES. The aggregate fees for all other services rendered by
Deloitte totaled approximately $9.0 million and included the
following:
-- Fees related to tax planning and compliance services were
approximately $.9 million.
-- Fees related to actuarial consulting services were approximately
$.4 million. In accordance with the Company's current scope of
services policy, these services were transitioned to another
service provider during 2001.
-- Fees related to projects performed by Deloitte Consulting were
approximately $7.7 million. These strategic planning services
consisted primarily of a project designed to convert the
Company's distribution centers from a "profit center"
methodology to one based on "break even," as it relates to
management reporting. Deloitte has recently announced its intent
to separate Deloitte Consulting from its firm.
Representatives of Deloitte will attend the Annual Meeting of Shareholders. They
will have an opportunity to make a statement, if they desire to do so. They also
will be available to respond to appropriate questions.
It would be difficult and expensive to change auditors in the middle of a fiscal
year. If the shareholders do not ratify the appointment of Deloitte, the Board
of Directors likely would allow the appointment to stand for fiscal year 2002
and the Audit/Finance Committee would recommend a different firm of auditors for
the following year.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 2 TO RATIFY
THE APPOINTMENT OF THE INDEPENDENT AUDITORS.
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[LOGO]
ALBERTSONS
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APPROVAL OF THE ALBERTSON'S INC. EXECUTIVE OFFICERS'
ANNUAL INCENTIVE COMPENSATION PLAN
(PROPOSAL 3)
- --------------------------------------------------------------------------------
ESTABLISHMENT OF PERFORMANCE-BASED ANNUAL INCENTIVE COMPENSATION PLAN INTENDED
TO PRESERVE TAX DEDUCTIBILITY UNDER SECTION 162(M) OF THE INTERNAL REVENUE CODE
The Board unanimously recommends that the shareholders approve the Albertson's,
Inc. Executive Officers' Annual Incentive Compensation Plan (the "Annual Plan")
to establish a performance-based plan for executive officers that provides
annual incentive opportunities linked directly to specific performance measures
and is intended to preserve the tax deductibility of Albertson's compensation
expenses.
A copy of the Annual Plan is set forth in Attachment A to this Proxy Statement
and is incorporated herein by reference. The following is a summary of the
provisions of the Annual Plan. Such summary is qualified in its entirety by
reference to the text of the Annual Plan. Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them in the Annual Plan.
ELIGIBILITY. The Annual Plan would apply to the Chief Executive Officer and each
of the other four most highly compensated executive officers as defined by
Section 162(m) of the Code (the "Covered Employees").
PURPOSE. The Board intends that payments under the Annual Plan will qualify as
performance-based compensation within the meaning of Section 162(m) of the Code.
The Annual Plan has been designed by the Compensation Committee (the
"Committee") to meet these criteria.
AWARDS UNDER THE ANNUAL PLAN. The Annual Plan would establish a performance goal
prohibiting the payment of any annual bonuses to the Covered Employees unless
there are positive "Consolidated Earnings" (as defined below) for the year for
which the bonuses are paid. The maximum amount that may be credited to the fund
(the "Annual Pool") from which bonuses are paid to the Covered Employees is 1.0%
of Consolidated Earnings. The maximum annual bonus that may be payable to an
individual who is Chief Executive Officer would be limited to 30% of the Annual
Pool for such year. The maximum annual bonus that may be payable to the next two
most highly compensated of the other Covered Employees would be limited to 20%
of the Annual Pool for such year. The maximum annual bonus that may be payable
to each of the other Covered Employees would be limited to 15% of the Annual
Pool for such year.
Under the Annual Plan, the Committee does not have discretion to increase any
award beyond the above maximums. The Committee reserves the right to exercise
negative discretion to reduce the amount of, or to eliminate, an award that
would otherwise be payable. The Committee would exercise this
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35
discretion within the above maximums in determining the amount of individual
awards, and may utilize performance factors similar to those discussed on page
29 under the heading Annual Bonus in the Compensation Committee Report,
subjective criteria or other criteria as the Committee deems appropriate in
doing so.
As proposed, "Consolidated Earnings" would mean income from continuing
operations of the Company and its consolidated subsidiaries before deduction of
income taxes and minority interest (if any), as shown on the audited annual
statement of income of the Company, reduced by the pre-tax amount of
non-recurring gains and increased by the pre-tax amount of non-recurring
charges. The amount of the award that each Covered Employee would have received
under the Annual Plan (after the exercise of the Committee's negative
discretion, if applicable), if the Annual Plan had been in effect in 2001, is
the same amount that was actually awarded last year as shown in the Summary
Compensation Table on page 21 in the column labeled Bonus.
FORM AND PAYMENT OF AWARDS. All awards may be paid in cash. Awards under the
Existing Annual Plan have been paid in cash.
ADMINISTRATION. The Annual Plan is administered by the Committee, which is
composed of independent directors who are not eligible to participate in the
Annual Plan.
AMENDMENT. The Board of Directors may amend or terminate the Annual Plan at any
time. However, no amendment shall (1) change the calculation of the Annual Pool;
(2) change the percent of Consolidated Earnings credited to the Annual Pool; (3)
change the maximum Incentive Compensation Award of a Covered Employee; (4)
change the definition of Covered Employee; or (5) change the definition of
Consolidated Earnings, without the consent of the Company's shareholders.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 3 TO APPROVE
THE EXECUTIVE OFFICERS' ANNUAL INCENTIVE COMPENSATION PLAN.
- --------------------------------------------------------------------------------
SHAREHOLDER PROPOSAL
(PROPOSAL 4)
- --------------------------------------------------------------------------------
Gerald R. Armstrong, the holder of 1,914 shares of the Company's common stock,
whose address is 910 Fifteenth Street, No. 754, Denver, Colorado 80202-2984, has
notified the Company that he intends to present the following resolution at the
Annual Meeting. The Board of Directors and the Company accept no responsibility
for the proposed resolution and supporting statement. As required by federal
regulations, the resolution and supporting statement are printed below.
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36
[LOGO]
ALBERTSONS
SHAREHOLDER RESOLUTION:
RESOLUTION:
That the shareholders of ALBERTSON'S, INC. request its Board of Directors to
take those steps necessary to eliminate the classification of terms of its Board
of Directors to require that all Directors stand for election ANNUALLY. The
Board declassification shall be completed in a manner that does not affect the
unexpired terms of previously elected Directors.
SHAREHOLDER SUPPORTING STATEMENT:
In the last two annual meetings, a majority of shares were voted in FAVOR of
this proposal although shareholders did not have confidential voting and all
unmarked proxies were voted against it.
The proponent believes the election of directors is the strongest way that
shareholders influence the direction of any corporation. Currently, ALBERT-SON'S
board is divided into three classes with each class serving staggered one year
terms. Because of this structure, shareholders may only vote on one-third of the
Directors each year. The proponent believes that this is not in the best
interests of shareholders as it can reduce accountability and is an unnecessary
take-over defense.
ALBERTSON'S is to be adopting the excellent practices of General Electric. The
Director leading the changes in 2001 comes from HEINZ. Both GE and HEINZ elect
all of their directors annually.
THE HOME DEPOT stated in its 2000 proxy statement supporting replacing three
year terms with one year terms for all directors:
"We believe that it is in the best interest of . . . . Shareholders to eliminate
the classified Board so that shareholders elect all directors annually. The
amendment . . . . will allow shareholders to review and express their opinions
on the performance of all directors each year. Because there is no limit to the
number of terms an individual may serve, the continuity and stability of the
Board's membership and our policies and long-term strategic planning should not
be affected."
THESE ACTIONS INCREASED SHAREHOLDER VOTING RIGHTS BY 300% -- AND, AT NO COST TO
THE SHAREHOLDERS.
The proponent believes the current system produces only a facade of continuity
which should be displaced; and wants accountability and performance to be
substituted as the basis for re-election to our board of directors. If you
agree, please vote "FOR" this proposal. Your shares will be automatically voted
"against" if your proxy is unmarked.
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION
- --------------------------------------------------------------------------------
Your Board of Directors, with the assistance of its professional advisors, has
given this proposal intensive consideration, particularly in light of the vote
on a
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37
similar proposal at last year's meeting. The Board continues to believe that it
is important that this proposal should not be implemented, and therefore
recommends a vote AGAINST Proposal 4 for the following reasons:
o Your Board of Directors believes that a classified board is an important
part of Albertson's arsenal in resisting a takeover of the Company on
terms that are not advantageous to all shareholders. Absent a classified
board, a potential acquirer could gain control of the Company by
replacing a majority of the Board with its own slate of nominees at a
single annual meeting by a simple plurality of the votes cast, and
without paying any premium to Albertson's shareholders.
o In the absence of classified board provisions, the Board's negotiating
leverage vis-a-vis a potential acquirer would be relatively limited in
the face of a possible wholesale removal by a simple majority vote at a
single annual meeting. Indeed, such an approach can be coupled with a
proposal to have the new Board redeem the Company's shareholder rights
plan, thus eliminating the rights plan as a means to ensure that all
shareholders are treated fairly.
o In a recently concluded contest for corporate control where the company
sought to be acquired had a classified board, the bidder raised its
offer from $48 per share to $55.50, despite the fact that 48% of the
stock was tendered at the $48 price and that all the bidder's nominees
were elected at the annual meeting of shareholders. Your board believes
that if the acquired company did not have a classified board in place,
the bidder would have been able to elect sufficient directors to redeem
the rights plan and to cause the shareholders to receive $48 instead of
the $55.50 per share which was ultimately paid.
o Proponents of declassified boards would have shareholders believe that
the only way to ensure director independence and accountability is to
declassify the board of directors. Your Board is committed to corporate
accountability and believes that such accountability depends on the
selection of responsible and experienced individuals, not on whether
they serve terms of one year or three.
o In considering any takeover effort or other significant development
concerning Albertson's, your Board understands that its duty is to
protect the interests of all of the Albertson's shareholders. The Board
intends to continue to discharge that duty to its utmost ability and
knows that it may not utilize the various defensive devices available to
it to resist any action that is in the best interests of all Albertson's
shareholders.
o A classified board provides enhanced continuity and stability in the
Board's business strategies and policies. In addition, with a classified
board, two-thirds of the directors will have had prior experience and
familiarity with the business and affairs of Albertson's.
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ALBERTSONS
o According to the Investor Responsibility Research Center, roughly half
of the 100 largest corporations in the United States have classified
boards, and the percentage of the Standard & Poor's 500 that have
classified boards is even higher.
The shareholders of the Company adopted the present system of classified
directors at the 1980 Annual Meeting of Shareholders by a vote of 77 percent of
the outstanding shares. Last year more than 56 percent of the outstanding shares
entitled to vote as of the record date were not voted in favor of the proposal
advocating the repeal of the classified board.
FOR THE FOREGOING REASONS, YOUR BOARD OF DIRECTORS CONTINUES TO BELIEVE THAT
THIS PROPOSAL IS NOT IN THE BEST INTEREST OF THE COMPANY AND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE AGAINST PROPOSAL 4.
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SHAREHOLDER PROPOSAL
(PROPOSAL 5)
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Walden Asset Management, the holder of 41,768 shares of the Company's common
stock, whose address is 40 Court Street, Boston, Massachusetts 02108, supported
by the following co-sponsors: Adrian Dominican Sisters, the holder of 150 shares
of the Company's common stock, whose address is 1257 East Siena Heights Drive,
Adrian, Michigan 49221-1793; Missionary Oblates of Mary Immaculate, the holder
of 19,900 shares of the Company's common stock, whose address is 391 Michigan
Avenue, NE, Washington, DC 20017-1516; Sisters of St. Joseph, the holder of 100
shares of the Company's common stock, whose address is Offices of Congregational
Administration, Nazareth, Michigan 49074; and General Board of Pension and
Health Benefits of the United Methodist Church, the holder of common stock of
the Company with a market value of at least $2,000, whose address is 1201 Davis
Street, Evanston, Illinois 60201-4118, have notified the Company that they
intend to present the following resolution at the Annual Meeting. The Board of
Directors and the Company accept no responsibility for the proposed resolution
and supporting statement. As required by federal regulations, the resolution and
supporting statement are printed below.
SHAREHOLDER RESOLUTION:
RESOLVED:
Shareholders request that (unless long-term safety testing demonstrates that
genetically engineered (GE) crops, organisms, or products thereof are not
harmful to humans, animals, and the environment) the Board of Directors adopt a
policy to identify and label (where feasible) all food products manufactured or
sold by the company under the company's brand names or private labels that may
contain GE ingredients.
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39
SHAREHOLDER SUPPORTING STATEMENT:
WHEREAS:
International markets for genetically engineered (GE) foods are threatened by
extensive resistance:
o Many of Europe's larger food retailers have committed to removing GE
ingredients from their store-brand products, as have some U.S.
retailers;
o In the UK, three fast-food giants -- McDonald's, Burger King, and KFC --
are eliminating GE soy and corn ingredients from their menus;
o McCain Foods of Canada announced it would no longer accept genetically
engineered Bt potatoes for their brand-name products (11/99);
o Gerber Products Co. announced in July 1999 that it would not allow GE
corn or soybeans in any of their baby foods;
o Frito Lay, a division of Pepsico, asked farmers that supply corn for
Frito Lay chips to provide only non-genetically engineered corn;
o Since fall of 2000, hundreds of millions of dollars have been spent by
food companies in recalling food containing GE corn not approved for
human consumption;
o Once in effect, the Biosafety Protocol, approved by representatives of
more than 130 countries (1/2000), will require that genetically
engineered organisms (GEOs) intended for food, feed and processing must
be labeled "may contain" GEOs, and countries can decide whether to
import those commodities based on a scientific risk assessment.
There is scientific concern that genetically engineered agricultural products
may be harmful to humans, animals, or the environment:
o For human health and environmental concerns, the European Union has
proposed regulations to phase out by 2005 antibiotic-resistant marker
genes, widely used to develop GE seeds;
o Research has shown that Bt crops are building up Bt toxins in the soil,
with unknown long-term effects on soil ecology;
o The National Academy of Sciences report, GENETICALLY MODIFIED
PEST-PROTECTED Plants, recommends development of improved methods for
identifying potential allergens in genetically engineered pest-protected
plants. The report found the potential for gaps in regulatory coverage.
(4/2000);
o GE-crops grown for pharmaceutical purposes, including contraceptive
effects, may contaminate other crops and soil and adversely effect human
health;
o Uncertainty about the ecological risks of genetically engineered crops
persists. (SCIENCE 12/15/2000);
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In the U.S., a long tradition of citizens' "right to know" is expressed in laws
requiring nutritional labeling of foods:
o Focus groups conducted by the Food and Drug Administration in spring
2000 indicated strong public support for mandatory labeling;
o Over a dozen polls in the U.S. show that about 70-93% of people surveyed
want GE food to be labeled as such;
o Individuals cannot avoid GE-foods for religious or ethical reasons
unless they are labeled;
o The European Union, Japan, New Zealand, South Korea and Australia have
passed regulations that require labeling of GE foods.
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION
Your Board of Directors recommends a vote AGAINST Proposal 5 for the following
reasons:
Albertson's shares and actively supports its customers' interests in food
safety, and believes customers have a right to relevant information about the
food they buy. Your Board of Directors, however, believes that the Food and Drug
Administration and other regulatory authorities that are charged with protecting
the health and safety of the public and the environment are the proper entities
to evaluate and make judgments about the labeling and sale of genetically
engineered products.
The Food and Drug Administration requires labeling of genetically engineered
foods if the food is significantly changed from its traditional form, or if
there is a potential health or safety effect. We believe that the FDA's
regulations in this area are based on sound scientific principles, and that the
FDA possesses the best available safety and risk assessment procedures. It would
not be in the best interest of consumers for Albertson's to take on this
responsibility.
Albertson's complies, and will continue to comply in the future, with all
government food labeling regulations.
Moreover, we believe that this proposal is not practicable because Albertson's
would have serious difficulty determining what constitutes "genetically
engineered crops, organisms, or products thereof." We understand that certain
genetically engineered ingredients are so similar to their unmodified
counterparts that they are virtually undetectable with current testing
techniques.
Further, it would be impracticable for us to identify all genetically engineered
foods in our private label products and to label them accordingly. We do not
believe we could effectively require food manufacturers to test for and label
genetically engineered ingredients that may be used in our private label
products. Therefore, your Board of Directors does not believe it would be
possible for Albertson's to label these products as requested by the proposal.
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ALBERTSONS
We also believe that simply labeling a product to say that it "may contain"
genetically engineered ingredients would not advance the consumer's ability to
make an informed choice. It would, however, create confusion and would likely
place Albertson's products at a competitive disadvantage. Because other products
would not be required to carry the same label information, consumers who are
concerned about genetically engineered ingredients might choose a competing
product which itself might contain genetically engineered ingredients but not be
so labeled.
Your Board of Directors believes that Albertson's shareholders will be better
served by the Company's continuing sensitivity and attention to consumer
concerns, product acceptance, and federal food safety regulations.
FOR THE FOREGOING REASONS, YOUR BOARD OF DIRECTORS BELIEVES THAT THIS PROPOSAL
IS NOT IN THE BEST INTEREST OF THE COMPANY AND UNANIMOUSLY RECOMMENDS THAT YOU
VOTE AGAINST PROPOSAL 5.
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SHAREHOLDER PROPOSAL
(PROPOSAL 6)
- --------------------------------------------------------------------------------
Presbyterian Church (USA), the holder of 200 shares of the Company's common
stock, whose address is 100 Witherspoon Street, Louisville, Kentucky 40202-1396,
has notified the Company that it intends to present the following resolution at
the Annual Meeting. The Board of Directors and the Company accept no
responsibility for the proposed resolution and supporting statement. As required
by federal regulations, the resolution and supporting statement are printed
below.
SHAREHOLDER RESOLUTION:
WHEREAS:
Leaders of industry in the United States now acknowledge their obligation to
pursue superior environmental performance and to disclose information about that
performance to their investors and other shareholders.
The integrity, utility, and comparability of environmental disclosure depend on
using a common format, credible metrics, and a set of generally accepted
standards. This will enable investors to assess environmental progress within
and across industries.
The Coalition for Environmentally Responsible Economics (CERES) -- a ten-year
partnership between large investors, environmental groups, and corporations --
has established what we believe is the most thorough and well-respected
environmental disclosure form in the United States. CERES has also taken the
lead internationally, convening major organizations together with the United
Nations Environment Programme in the Global Reporting Initiative (GRI). The GRI
Guidelines for standardizing environmental disclosure worldwide have been pilot
tested by over 20 companies, and is scheduled for public launch in 2002.
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42
Companies which endorse the CERES Principles engage with shareholders in
transparent environmental management and agree to a single consistent standard
for environmental reporting which is set by the endorsing companies together
with CERES.
The CERES Principles and CERES Report have been adopted by leading firms in
various industries: American Airlines, Bank America, BankBoston, Baxter
International, Coca-Cola, Ford, General Motors, Interface, ITT Industries, Nike,
Northeast Utilities and Sun Company among others. We believe endorsing the CERES
Principles commits a company to prudent oversight of its financial and physical
resources through: 1) protection of the biosphere; 2) sustainable use of natural
resources; 3) waste reduction; 4) energy conservation; 5) risk reduction; 6)
safe products/services; 7) environmental restoration; 8) informing the public;
9) management commitment; 10) audits and reports. (The full text of the CERES
Principles and CERES Report form are obtainable from CERES, 11 Arlington Street,
Boston, Massachusetts 02116, (617) 247-0700/WWW.CERES.ORG).
RESOLVED:
Shareholders request that the company endorse the CERES Principles as a
reasonable and beneficial component of their corporate commitment to be publicly
accountable for environmental performance.
SHAREHOLDER SUPPORTING STATEMENT:
Recent studies show that the integration of environmental commitment into
business operations provides competitive advantage and improves long-term
financial performance for companies. Moreover, the depth of a firm's
environmental commitment and the quality with which it manages its environmental
performance are indicators of prudent foresight exercised by management.
Given investors' needs for credible information about a firm's environmental
performance, and given that numerous companies that have already endorsed the
CERES Principles and adopted its report format, it is a reasonable, widely
accepted step for a company to endorse those CERES Principles in order to
demonstrate its seriousness about superior performance.
Albertson's operations and purchasing policies impact environmental quality.
Clearly, Albertson's prides itself as a leader and a model for others in its
business sector. We believe now is the time for Albertson's to join the ranks of
other major companies whose environmental commitment and leadership is shown by
their endorsement of the CERES Principles. Your vote FOR this resolution serves
the best interests of our Company and its shareholders.
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43
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION
- --------------------------------------------------------------------------------
Your Board of Directors recommends a vote AGAINST Proposal 6 for the following
reasons: Your Board of Directors believes that adopting this proposal would
unduly burden Albertson's and its shareholders while adding nothing to our
environmental efforts. Adoption of the CERES Principles would require a lengthy
and complex annual report and additional administrative costs for programs that
already exist within our Company.
RECYCLING AND REDUCING WASTE:
Recycling is a high priority at Albertson's. The Company has recycling programs
for corrugated cardboard, plastic grocery bags, plastic pallet wrap, aluminum
cans, truck tires, used antifreeze, used motor oil, fluorescent light bulbs,
construction materials, paving materials, photo finish, office supplies and
paper products. Albertson's also works to reduce waste by encouraging vendors to
reduce packaging. The Company uses returnable plastic totes and plastic pallets
where appropriate to reduce waste.
USING ENERGY WISELY:
Albertson's is dedicated to reducing energy use. Wherever possible, low-energy
systems are built into facilities to provide the appropriate levels of light at
reduced energy costs.
MAKING SAFETY A PRIORITY:
Albertson's strives to provide a safe shopping experience for our customers and
a safe place to work for our employees. Every employee is involved in the safety
effort, and each store has environmental programs.
GETTING THE WORD OUT:
Albertson's publishes information regarding its environmental programs on the
Internet at www.albertsons.com and in the company profile. Every store shows our
commitment to recycling and the environment by collecting plastic grocery bags
and other recyclables. Our volunteer efforts in our communities have spread the
word about our proactive efforts to promote environmental programs.
Our Company has been recognized by many local and state government agencies for
our commitment to the environment. In both 1998 and 1999, our Albertson's stores
in California were awarded the California Integrated Waste Board's WRAP award.
Our Fort Worth distribution center was awarded the Fort Worth Clean City, Inc.
Star Award for its recycling efforts. Our ice cream plant was awarded the City
of Boise Enviroguard award.
Albertson's already practices many of the principles suggested by this proposal.
We work to sustain natural resources, reduce waste, promote safety and safe
products, protect the environment, and inform the public about our efforts. The
Company already files numerous environmental reports with fed-
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44
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ALBERTSONS
eral, state and local government agencies. Your Board of Directors believes that
imposing another layer of standards and reports that would be required as a
CERES signatory would be duplicative and would unnecessarily increase costs, and
does not believe any benefit to the environment would result from the additional
administrative effort and cost required by this proposal.
Our shareholders overwhelmingly rejected a similar proposal last year. Your
Board of Directors believes that the shareholders should continue to defeat the
proposal.
FOR THE FOREGOING REASONS, YOUR BOARD OF DIRECTORS BELIEVES THAT THIS PROPOSAL
IS NOT IN THE BEST INTEREST OF THE COMPANY AND UNANIMOUSLY RECOMMENDS THAT YOU
VOTE AGAINST PROPOSAL 6.
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SHAREHOLDER PROPOSAL
(PROPOSAL 7)
- --------------------------------------------------------------------------------
Amalgamated Bank LongView Collective Investment Fund, the holder of 120,821
shares of the Company's common stock, whose address is 15 Union Square, New
York, New York, 10003-3378, has notified the Company that it intends to present
the following resolution at the Annual Meeting. The Board of Directors and the
Company accept no responsibility for the proposed resolution and supporting
statement. As required by federal regulations, the resolution and supporting
statement are printed below.
SHAREHOLDER RESOLUTION:
RESOLVED:
The shareholders request that the Board of Directors of Albertson's, Inc.
("Albertson's" or the "Company") appoint as independent auditors only those
firms that agree not to provide Albertson's with non-audit consulting services
for the term of any appointment.
SHAREHOLDER SUPPORTING STATEMENT:
Independent auditors play a key role in promoting confidence in the integrity of
financial reporting and U.S. capital markets. The Securities and Exchange
Commission requires independent auditors to certify or audit the financial
information that companies file with the SEC. As a result, the work auditors
perform is important not only to companies, but also to investors.
The recent collapse of Enron Corporation has once again shone a spotlight on the
role of independent auditors, as previously happened after disclosures of
accounting fraud at Sunbeam, Cendant and Waste Management. The failure of Enron
Corporation has raised questions about what Enron's auditors knew, when they
knew it, and what facts they saw fit to certify to the SEC and to shareholders.
In our view it is important to eliminate incentives that can undermine an
auditor's objectivity and tough-mindedness. An auditor's independence can
----
45
be compromised in various ways. The provision of certain kinds of non-audit
consulting services to audit clients may create economic incentives that can
lead a firm to devalue the audit services and focus on retaining the client,
even at the cost of making inappropriate audit judgments.
There have been reports in the media about individual auditors being pressured
to "cross-sell" their employer's non-audit services to audit clients. There have
also been reports about auditors submitting "loss leader" bids to provide audit
services as a way to establish a relationship with a company and then try to
sell more lucrative non-audit services.
In recent decades, the proportion of revenues derived from non-audit services,
such as internal audit, information technology, financial advisory and appraisal
and valuation services, has grown steadily. At the five largest public
accounting firms, revenues derived from non-audit services grew from 13% of
total revenues in 1981 to half of total revenues in 2000.
The phenomenon is apparent at Albertson's, which reported that in 2000 the
Company paid Deloitte & Touche $1.7 million for audit fees and an additional $4
million for all other fees -- 235% more than was paid for audit services.
We are concerned that a "mutuality of interest" not conducive to independence
may develop from the provision of certain kinds of non-audit services. For
example, if an auditor discovers a problem with software or an internal audit
system that the auditor's firm designed and installed as part of its "non-audit"
services, the auditor is put in the awkward position of having to advise the
client about the audit firm's error.
We believe that firms retained by Albertson's to provide audit services should
perform only audit services.
We urge you to vote FOR this resolution.
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION
- --------------------------------------------------------------------------------
Your Board of Directors recommends a vote AGAINST Proposal 7 for the following
reasons:
Your Board of Directors, with the assistance of its professional advisors, has
given this proposal intensive consideration. While both the Audit/Finance
Committee and the full Board of Directors agree with the proponent that the
independent accounting firm engaged by the Company to perform audit services
should not also undertake certain consulting services for the Company, the Board
believes that the proposal is too broadly drawn and would prohibit the auditors
from providing certain services described below that, while not technically part
of the audit, should be performed by the same accounting firm
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46
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ALBERTSONS
that performs the audit. Therefore, the Board of Directors recommends a vote
AGAINST Proposal 7 for the following reasons:
o Your Board of Directors believes that, especially in light of recent
events involving alleged accounting irregularities at several major
companies, it is desirable to minimize the amount of certain consulting
services that are provided by the Company's auditors. Our independent
auditors, Deloitte & Touche LLP, also believe that this has become
appropriate and have announced that the consulting arm of Deloitte &
Touche LLP will become a separate entity from the accounting firm. It is
our understanding that details will be announced by June 1, 2002 with
the actual separation occurring as quickly as practicable.
o However, your Board of Directors also believes that the shareholder
proposal is too broadly drawn in that it would restrict the independent
auditors to performing only audit services. There are several services
that, while technically not included under the definition of audit
services, are services that the Board believe make sense for the
independent auditors to provide to the Company. These services include
providing comfort letters to underwriters of the Company's securities,
providing consents to the Securities and Exchange Commission relating to
registration statements, audits of employee benefit plans, assistance in
conducting due diligence in connection with acquisitions, consultation
on accounting standards and their application to transactions being
considered by the Company and consultation relating to tax planning.
o Inasmuch as both the Congress and the Securities and Exchange Commission
have indicated an intention to address the same issues as are covered by
this proposal, the Audit/Finance Committee expects to adopt a definitive
policy to reflect such legislation or regulations once enacted or
adopted.
FOR THE FOREGOING REASONS, YOUR BOARD OF DIRECTORS BELIEVES THAT ADOPTION OF
THIS PROPOSAL IS UNNECESSARY AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE AGAINST
PROPOSAL 7.
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
The Company is not aware of any other matters to be submitted at the Annual
Meeting. If any other matters properly come before the meeting, the proxy
holders intend to vote the shares they represent as the Board of Directors may
recommend.
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47
- --------------------------------------------------------------------------------
DEADLINE FOR RECEIPT OF SHAREHOLDERS' PROPOSALS
- --------------------------------------------------------------------------------
Proposals by shareholders of the Company that are intended to be presented at
the Company's 2003 Annual Meeting of Shareholders pursuant to Rule 14a-8 under
the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), must
be received by the Company at the Company's principal executive offices not
later than December 31, 2002. In order for a shareholder proposal to be eligible
for inclusion in the proxy statement and proxy card for that meeting, the
proposing shareholder must:
o Submit the proposal to the Company in a timely manner,
o Specifically request that it be included, and
o Satisfy the eligibility and procedural requirements of Rule 14a-8 under
the Exchange Act.
In order for shareholder proposals made outside of Rule 14a-8 of the Exchange
Act to be considered "timely" within the meaning of Rule 14a-4(c) of the
Exchange Act, such proposals must be received by the Company at the Company's
principal executive offices not later than March 18, 2003. The Company's By-Laws
require that proposals of shareholders made outside of Rule 14a-8 of the
Exchange Act must be submitted, in accordance with the requirements of the
By-Laws, not later than March 18, 2003 or earlier than February 6, 2003.
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48
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- --------------------------------------------------------------------------------
ATTACHMENT A
ALBERTSON'S, INC.
EXECUTIVE OFFICERS' ANNUAL INCENTIVE COMPENSATION PLAN
- --------------------------------------------------------------------------------
I. PURPOSE
The purpose of the Albertson's, Inc. Executive Officers' Annual Incentive
Compensation Plan (the "Annual Plan") is to attract and retain highly qualified
employees, to obtain from each the best possible performance, to establish a
performance goal based on Consolidated Earnings for Incentive Compensation
Awards for covered executive officers and to underscore the importance to
employees of increasing Consolidated Earnings for Albertson's, Inc.
II. DEFINITIONS
For the purposes of the Annual Plan, the following terms shall have the
following meanings:
A. ANNUAL POOL. The Incentive Compensation Pool established pursuant to
Section IV of the Annual Plan.
B. AWARD PERIOD. An award period under the Annual Plan shall be the
fiscal year of the Company with respect to Incentive Compensation Awards.
C. BOARD OF DIRECTORS. The Board of Directors of Albertson's, Inc.
D. COMMITTEE. The Compensation Committee of the Board of Directors or any
successor thereto.
E. COMPANY. Albertson's, Inc. and its subsidiaries.
F. CONSOLIDATED EARNINGS. Income from continuing operations of the
Company and its consolidated subsidiaries before deduction of income taxes and
minority interest (if any), as shown in the Company's audited annual statement
of income, reduced by the pre-tax amount of non-recurring gains and increased by
the pre-tax amount of non-recurring charges.
G. COVERED EMPLOYEE. An employee who may be deemed to be a "covered
employee" within the meaning of Section 162(m) of the Internal Revenue Code of
1986, as amended, as such section may be amended.
H. DEFERRED COMPENSATION PLAN. The Albertson's, Inc. 2000 Deferred
Compensation Plan.
I. INCENTIVE COMPENSATION AWARD. Any annual award paid to a Covered
Employee from the Annual Pool.
III. EFFECTIVE DATE
The Annual Plan has been adopted as of February 1, 2002 and shall become
effective upon approval by the Company's shareholders at the Company's 2002
Annual Meeting of Shareholders.
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A-1
IV. AMOUNTS AVAILABLE FOR INCENTIVE COMPENSATION AWARDS
A. An Annual Pool shall be established to which will be credited for each
fiscal year an amount equal to 1.0% of Consolidated Earnings for such year.
B. The maximum amount available for Incentive Compensation Awards to
Covered Employees for a fiscal year shall be limited by the total then in the
Annual Pool, and such Incentive Compensation Awards shall be chargeable against
the Annual Pool but need not exhaust such total. Any balance remaining after the
making of Incentive Compensation Awards to Covered Employees will not be
available for future Incentive Compensation Awards to Covered Employees.
V. ELIGIBILITY
Only Covered Employees are eligible to receive Incentive Compensation
Awards under the Annual Plan.
VI. DETERMINATION OF AMOUNTS OF INCENTIVE COMPENSATION AWARDS
The maximum Incentive Compensation Award payable with respect to any fiscal
year to a Covered Employee who is the Chief Executive Officer on the last day of
the fiscal year shall be equal to 30% of the Annual Pool for such year. The
maximum Incentive Compensation Award payable with respect to the next two most
highly compensated of the other Covered Employees for any fiscal year shall be
equal to 20% of the Annual Pool for such year. The maximum Incentive
Compensation Award payable with respect to any fiscal year to each of the other
Covered Employees shall be equal to 15% of the Annual Pool for such year.
Incentive Compensation Awards may be made either at or following the end of
the fiscal year to which they relate; provided, however, that no Incentive
Compensation Awards shall be made to Covered Employees prior to the
certification by the Committee that the performance criteria have been met for
the relevant Award Period.
The final amounts of Incentive Compensation Awards to Covered Employees
will be determined by the Committee. The Committee may exercise negative
discretion to reduce the amount of, or to eliminate, an Incentive Compensation
Award that would otherwise be payable. Such determinations, except in the case
of the Incentive Compensation Award for the Chief Executive Officer, shall be
made after considering the recommendations of the Chief Executive Officer and
such other matters as the Committee shall deem relevant.
VII. FORM OF INCENTIVE COMPENSATION AWARDS
Incentive Compensation Awards under the Annual Plan shall be made in cash.
VIII. PAYMENT OF INCENTIVE COMPENSATION AWARDS
A. Incentive Compensation Awards under the Annual Plan shall be paid
currently, unless the payment is deferred by the Covered Employee or unless the
Committee shall determine that any Incentive Compensation Award shall be
deferred ("Deferred Awards"). Any Deferred Awards shall
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A-2
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ALBERTSONS
be credited to the Covered Employee's account in the Deferred Compensation Plan
and shall be subject to the provisions of the Deferred Compensation Plan.
B. When an Incentive Compensation Award is made, the Company shall cause
the cash to be paid to the individual to whom the Incentive Compensation Award
is made at the time or times specified by the Committee, or, if no time or times
are specified, as soon as practicable after the Incentive Compensation Award is
made, but in no event later than two and one-half months after fiscal year end.
IX. SPECIAL AWARDS AND OTHER PLANS
Nothing contained in the Annual Plan shall prohibit the Company or any of
its subsidiaries from granting special performance or recognition awards, not
chargeable against the Annual Pool, under such conditions and in such form and
manner as it sees fit, to employees (including Covered Employees) for
meritorious service of any nature.
In addition, nothing contained in the Annual Plan shall prohibit the
Company or any of its subsidiaries from establishing other incentive
compensation plans providing for the payment of incentive compensation to
employees (including Covered Employees), not chargeable against the Annual Pool.
X. AMENDMENT AND INTERPRETATION OF THE ANNUAL PLAN
A. The Board of Directors or the Committee shall have the right to amend
the Annual Plan from time to time or to repeal it entirely or to direct the
discontinuance of Incentive Compensation Awards either temporarily or
permanently; provided, however, that (i) no amendment of the Annual Plan shall
operate to annul, without the consent of the Covered Employee, an Incentive
Compensation Award already made hereunder, and (ii) with respect to Incentive
Compensation Awards for Covered Employees, no amendment of the Annual Plan to
change the calculation of the Annual Pool or to change the percent of
Consolidated Earnings credited to the Annual Pool, to change the maximum
Incentive Compensation Award of a Covered Employee, to change the definition of
Covered Employee or to change the definition of Consolidated Earnings, shall be
effective without approval by the shareholders of the Company.
B. The decision of the Committee with respect to any questions arising in
connection with the administration or interpretation of the Annual Plan shall be
final, conclusive and binding.
XI. MISCELLANEOUS
A. All expenses and costs in connection with the operation of the Annual
Plan shall be borne by the Company and no part thereof shall be charged against
the Annual Pool, other than the amounts of Incentive Compensation Awards to
Covered Employees under the Annual Plan.
B. All Incentive Compensation Awards under the Annual Plan are subject to
withholding, where applicable, for federal, state and local taxes.
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A-3
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ALBERTSON'S, INC. 2002 ANNUAL MEETING OF SHAREHOLDERS
9:00 A.M., JUNE 6, 2002
SIENA BALLROOM
SIENA HOTEL
ONE SOUTH LAKE STREET
RENO, NEVADA
- --------------------------------------------------------------------------------
ADVANCE REGISTRATION
In order to enhance security for our meetings, an admission card will be
required to enter the Albertson's Annual Meeting. Please follow the Advance
Registration instructions below and an admission card will be mailed to you.
Upon arrival at the Annual Meeting, you will be asked to present your admission
card and appropriate picture identification to enter the meeting.
Attendance at the Annual Meeting is limited to Albertson's shareholders, members
of their immediate family or their named representatives. We reserve the right
to limit the number of representatives who may enter the meeting.
o IF YOUR ALBERTSON'S SHARES ARE HELD BY YOU DIRECTLY (OF RECORD) and you
plan to attend the Annual Meeting, please follow the Advance
Registration instructions on the bottom portion of your proxy card
included with the proxy statement and annual report sent to you by
Albertson's.
o IF YOUR ALBERTSON'S SHARES ARE HELD FOR YOU IN A BROKERAGE, BANK OR
OTHER INSTITUTIONAL ACCOUNT and you wish to attend the Annual Meeting,
please send an Annual Meeting advance registration request containing
the information listed below to:
Albertson's, Inc.
Corporate Secretary's Department
P. O. Box 20
Boise, Idaho 83726
Please include the following information:
-- Your name, complete mailing address and telephone number
-- The name(s) of any family member(s) who will accompany you
-- If you will be naming a representative to attend the meeting on
your behalf, the name, complete mailing address and telephone
number of that individual
-- Proof that you own Albertson's stock (such as a letter from your
bank or broker or a photocopy of a current brokerage or other
account statement)
If you have questions regarding admission to the meeting, please call
Albertson's Corporate Secretary's Department at 1-208-395-6300.
ATTENDANCE AT ALBERTSON'S 2002 ANNUAL MEETING WILL BE LIMITED TO PERSONS
PRESENTING AN ADMISSION CARD AND PICTURE IDENTIFICATION. TO OBTAIN AN ADMISSION
CARD, PLEASE FOLLOW THE ADVANCE REGISTRATION INSTRUCTIONS ABOVE.
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PRINTED ON RECYCLED PAPER
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ALBERTSONS
250 PARKCENTER BOULEVARD ALBERTSON'S, INC.
P.O. BOX 20 VOTE BY INTERNET - WWW.PROXYVOTE.COM
BOISE, ID 83726 Use the internet to transmit your voting instructions and for
electronic delivery of information up until 5:00 P.M. Eastern
Time on Wednesday, June 5, 2002. Have your proxy card in
hand when you access the web site. You will be prompted to
enter your 12-digit Control Number which is located below to
obtain your records and to create an electronic voting
instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting
instructions up until 5:00 P.M. Eastern Time on Wednesday,
June 5, 2002. Have your proxy card in hand when you call.
You will be prompted to enter your 12-digit Control Number
which is located below and then follow the simple instructions
the Vote Voice provides you.
VOTE BY MAIL -
Mark, sign, and date your proxy card and return it in the
postage-paid envelope we have provided or return it to
Albertson's, Inc., c/o ADP, 51 Mercedes Way, Edgewood,
NY 11717.
TO VOTE, MARK BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS
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THESE INSTRUCTIONS ARE VALID ONLY WHEN SIGNED AND DATED
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ALBERTSON'S, INC.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
NOMINEES FOR DIRECTOR AND FOR PROPOSALS 2 AND 3.
1. ELECTION OF FOUR DIRECTORS TO CLASS I.
01) TERESA BECK FOR WITHHOLD FOR ALL TO WITHHOLD AUTHORITY TO VOTE,
02) BONNIE G. HILL ALL ALL EXCEPT MARK "FOR ALL EXCEPT" AND WRITE
03) LAWRENCE R. JOHNSTON THE NOMINEES'S NAME ON THE LINE BELOW
04) PETER L. LYNCH
2. RATIFICATION OF APPOINTEMNT OF
INDEPENDENT AUDITORS [ ] [ ] [ ] THE BOARD OF DIRECTORS RECOMMENDS A
VOTE AGAINST PROPOSALS 4, 5, 6 AND 7. FOR AGAINST ABSTAIN
3. APPROVAL OR THE EXECUTIVES OFFICERS'
ANNUAL INCENTIVE COMPENSATION PLAN. [ ] [ ] [ ] 4. SHAREHOLDER PROPOSAL TO DECLASSIFY [ ] [ ] [ ]
THE BOARD OF DIRECTORS.
THIS PROXY SHOULD BE SIGNED EXACTLY AS NAME APPEARS
HEREON. EXECUTORS, ADMINISTRATORS, TRUSTEES AND SO 5. SHAREHOLDER PROPOSAL TO LABEL AND [ ] [ ] [ ]
FORTH, SHOULD GIVE FULL TITLE AS SUCH. IF THE SIGNATORY IDENTIFY GENETICALLY ENGINEERED FOOD.
IS A CORPORATION, PLEASE SIGN FULL CORPORATE NAME BY A
DULY AUTHORIZED OFFICIAL. IF A PARTNERSHIP, PLEASE SIGN 6. SHAREHOLDER PROPOSAL TO ADOPT THE [ ] [ ] [ ]
IN PARTNERSHIP NAME BY AN AUTHORIZED PARTY. IF SHARES CERES PRINCIPLES FOR PUBLIC
ARE HELD IN MULTIPLE NAMES, AT LEAST ONE MUST SIGN AS ENVIRONMENTAL ACCOUNTABILITY.
AN AUTHORIZED PARTY.
7. SHAREHOLDER PROPOSAL TO HAVE THE [ ] [ ] [ ]
I hold additional accounts and do not wish to continue COMPANY APPOINT AS AUDITORS ONLY
receiving duplicate copies of Albertson's material. THOSE FIRMS THAT AGREE NOT TO PROVIDE
Please discontinue mailings, other than my proxy, to NON-AUDITING CONSULTING SERVICES.
this account. [ ]
If you plan on attending the meeting, please check box I prefer reviewing your materials electronically.
to the right and complete reverse side. [ ] Please dicontinue mailings to me. My e-mail
address is provided on the reverse side. / /
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Signature [PLEASE SIGN WITHIN BOX] Date
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ALBERTONS
ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, JUNE 6, 2002
9:00 A.M.
SIENA BALLROOM
SIENA HOTEL
ONE SOUTH LAKE STREET
RENO, NEVADA
*FOLD AND DETACH HERE*
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PROXY ALBERTSONS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ALBERTSONS, INC.
The undersigned hereby appoints Lawrence R. Johnston, Peter L. Lynch and Felicia
D. Thornton, and each of them, as proxies for the undersigned, each with full
power of substitution, to represent the undersigned, and to vote all shares of
Common Stock of Albertson's, Inc. (the "Company") that the undersigned is
entitled to vote, in the manner indicated on the reverse side hereof, and with
discretionary authority as to any Other Matters that may properly come before
the Company's 2002 Annual Meeting of Shareholders to be held on Thursday, June
6, 2002, and at any and all adjournments thereof, as set forth under the heading
"Other Matters" in the accompanying proxy statement. If no other indication is
made, at the meeting and at any and all adjournments thereof, the proxyholders
will vote FOR (1) the election of Director Nominees: FOR (2) the ratification of
the appointment of the independent auditors; and FOR (3) the approval of the
executive officers' annual incentive compensation plan and will vote AGAINST
Proposals 4, 5, 6 and 7.
The undersigned, if a participant in the Albertson's Employee Stock Ownership
Plan (ESOP), the Albertson's Employees' Tax Deferred Savings Plan [401(k)], the
Albertson's Payroll Investment Plan (PIP), the American Stores Employee Stock
Purchase Plan (ESPP) or the Albertson's Savings & Retirement Estates (ASRE)(the
"Plans") hereby also directs the Trustees of the respective Plans to vote, in
accordance with the instructions given on the reverse side hereof, the shares of
Albertson's common stock allocated to the account of the undersigned at the
Annual Meeting of Shareholders to be held on Thursday, June 6, 2002. If you
sign, date and send this card and do not mark the reverse side of this card, you
will have instructed the Trustees to vote FOR the election of each of the
nominees for Director, FOR Proposals 2 and 3 and AGAINST Proposals 4, 5, 6 and
7.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE VOTED AS
DIRECTED HEREON. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR, FOR PROPOSALS 2 AND 3 AND AGAINST
PROPOSALS 4, 5, 6 AND 7.
*****
ATTENDENCE AT ALBERTSON'S 2002 ANNUAL MEETING WILL BE LIMITED TO PERSONS
PRESENTING AN ADMISSION CARD AND PICTURE INDENTIFICATION.
IF YOU PLAN TO ATTEND THE MEETING, YOU MUST COMPLETE THE ADVANCE REGISTRATION
REQUEST SET FORTH BELOW. YOUR ADMISSION CARD WILL BE SENT TO YOU.
NAME, COMPLETE MAILING ADDRESS AND TELEPHONE NUMBER:
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NAME(S) OF ANY FAMILY MEMBER(S) WHO WILL ACCOMPANY YOU:
-------------------------
NAME, COMPLETE MAILING ADDRESS AND TELEPHONE NUMBER OF ANY REPRESENTATIVE WHO
WILL BE ATTENDING THE MEETING ON YOUR BEHALF:
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MY E-MAIL ADDRESS IS:
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(PLEASE DATE AND SIGN ON REVERSE SIDE)
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